Source: EURLEX
Language: en
Format: md

_**•ft**_ _*****_

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 08.09.1995

COM(95)362 final

## **REPORT OV THE COORDINATION** **OF ACTIVITIES IN FAVOUR** **OF SMEs AND THE CRAFT SECTOR**

**SUMMARY**

This report on the coordination of activities in favour of SMEs and the craft sector, drawn up
in accordance with article 5 of Council Decision 93/379/EEC [1] of 14 June 1993, seeks to
respond to the Council's request while taking into account the framework proposed by the
Commission in its Integrated Programme in favour of SMEs and the Craft Sector [2] . Since the
Integrated Programme was adopted, the Commission has reaffirmed the contribution of small
and medium-sized enterprises (SMEs) to providing more employment, in its White Paper on
European Social Policy [3] and also as part of the work on new areas of employment and local
development initiatives [4] . In addition, it has emphasized the role of SMEs in the development
of the information society [5] and of industrial competitiveness policy of the European Union [6] .

The aim of coordination between the different Community programmes is, on the one hand,
to ensure that the SME dimension is integrated into the definition and implementation of
Community policies so that better account can be taken of the individuality of SMEs and, on
the other hand, to increase their involvement in Community programmes.

Hence the report presents a comprehensive view of the measures taken, under both enterprise
policy and other Union policies, to improve the business environment (Chapter I) and to
support the development of SMEs (Chapter II). Whereas the first two chapters concentrate
essentially on coordination between the Commission services, Chapter III is devoted to
coordination with the Commission's partners: the Member States, the professional
organizations and the other European institutions.

**INTEGRATED PROGRAMME IN FAVOUR OF THE** SMEs **AND** THE CRAFT SECTOR

Within the framework of the objectives of the White Paper on Growth, Competitiveness and
Employment, the Integrated Programme in favour of SMEs and the Craft Sector aims to
reinforce coordination of national, regional and Community intervention in favour of SMEs.
Two forms of action are proposed: concerted actions and contributions the Union intends to
make to the development of SMEs under its policies.

Council Decision of 14 June 1993, OJ No L 161 of 02.07.1993, p. 71.

COM(94)207 of 03.06.1994 and Council Resolution of 10.10 1994, OJ No C 294 of 22.10.1994, pp.

6-8.

European Social Policy - A way forward for the Union - COM(94) 333, 27.07.1994.

Inventory of Community action to support local development and employment - SEC (94) 2199,

19.12.1994 and Local development and employment initiatives (An investigation in the European
Union) - SEC (94) 564, 04.04.1994.
Europe's way to the information society, an action plan - COM (94) 347, 19.07.1994.

An industrial competitiveness policy for the European Union - COM(94) 319, 14.09.1994.

Conceited actions

Concerted actions target the promotion of mutual consultation between Member States and
coordination between them as required. First of all, they relate to improvement and
simplification of the business environment with a view to reducing burdens on businesses and
unlocking their potential to create jobs. To achieve this, a committee to improve and simplify
the business environment, set up in December 1994, has the task of identifying best practice
for simplifying the formalities affecting enterprises and improving the legislative framework
within which they operate. In this context, a forum was organized in June 1995 in Paris to
examine legislation and constraints confronting businesses during setting up and their first few
years of existence. Concerted actions also target support measures for businesses at national
or regional level. The Commission has proposed the creation of concertation forums within
which Member States can present their best practice in terms of support to SMEs, and also
the launch of a concerted action with SME intermediaries to stimulate SME demand for

information, training and advice.

A second forum is scheduled for October 1995 in Madrid on the subject of support
arrangements for setting up enterprises and back-up for enterprises in their first few years of
business life (see Introduction).

The contributions of the Union

The actual contributions of the Union to the development of SMEs relate to action taken
specifically within the framework of enterprise policy and under other Union policies.
Coordination of all these interventions takes place through inter-service work.

The Integrated Programme in favour of SMEs does not contain any new expenditure but
brings together all the actions under other policies which can contribute towards the
development of SMEs, like the Structural Funds, research and technological development and
vocational training. The financing of the new actions proposed consequently relies essentially
on the established instruments. It is by means of these instruments that the Union contributes
to the development of SMEs.

**IMPROVING THE BUSINESS ENVIRONMENT**

The Commission has presented several proposals for action in the area of improving the
business environment which should have a positive influence on SMEs.

A draft document covering the adoption of a definition of SMEs is aimed at making the
implementation of Community policies more coherent. I* provides, on the one hand, for a
recommendation to the Member States in line with the partnership advocated by the Integrated
Programme and, on the other, a draft Commission decision on programmes it runs as a
Community contribution.

Three recommendations relating respectively to taxation of SMEs, transfer of businesses, and
payment delays in commercial transactions, form part of the enlarged partnership with the
Member States. By this means, the Commission identifies best practice within the Union and
invites Member States which have yet to make comparable arrangements to draw inspiration
from this and take the appropriate measures (see points 1.1.1.4 and 5 and 1.1.2.2.).

The evaluation of the impact of legislative proposals on SMEs has allowed account to be
taken of the needs of SMEs during the legislative process as in the case of directives relating
to the environmental audit and the eco-label. Furthermore, the proposal for a regulation on
the protection of Community design has made it possible to achieve a balance between the
divergent interests of spare parts manufacturers on the one hand, and motor manufacturers on
the other. Another relevant example relates to the proposal for a directive on cross-border
payments (see point 1.2.1.2.1.).

As regards competition, the Commission's traditionally favourable attitude towards state aid
for SMEs is expressed in a specific framework which allows Member States to grant aid
intended to encourage investment by SMEs and encourage them to improve their skills
through advice and training. Furthermore, to simplify the administrative procedures, the
framework has introduced a "de minimis" rule which exempts Member States from notifying
the Commission of small amounts of aid. Finally, to take into account the special position
of SMEs, higher aid thresholds are authorized (generally 10 points above the permitted
ceiling). This position has again been included in the new Community framework for state
aid for the protection of the environment (see point 1.2.2.2.).

**PROGRAMMES AND SUPPORT MEASURES FOR SMEs**

In the area of support measures for SMEs, the Union has established new instruments and
programmes directly geared to SMEs.

As part of its enterprise policy, the Commission assists the development of SMEs through the
business information network (the EURO-INFO-CENTRES), the trans-national cooperation
networks and programmes (the BC-NET, BCC networks, the EUROPARTENARIAT and
INTERPRISE programmes and action for sub-contracting) and pilot schemes
(EUROMANAGEMENT, Venture Capital, Commerce 2000) aimed at improving SME
management, financing and know-how. Most of this action is being taken in direct
cooperation with other Commission services (see point II. 1).

Under other policies, support for SMEs takes place principally through the Structural Funds
and research and technological development programmes, vocational training and international
cooperation but also in other Community programmes like the Fifth Environmental Action
Programme, special attention is given to SMEs.

The Community SME initiative, part of the follow-up to the White Paper on Growth,
Competitiveness and Employment naturally links with the Integrated Programme measures,
but according to the methods and procedures of the Structural Funds. With a budget of one
billion ECU, principally for objective 1, 2 and 5b regions, the SME initiative should make
a significant contribution to making SMEs more competitive by improving their know-how
and helping them become more international. By taking up three previous Community
initiatives, the Community SME initiative is contributing to a simpler presentation of
Community programmes in favour of SMEs. The Community initiative, ADAPT, which
targets adaptation to industrial change and improving the competitiveness of enterprises (ECU
1.4 Billion), provides a number of measures in favour of SMEs. It will be coordinated with
the SME initiative so as to avoid any dual use of funds and to strengthen their
complementarity (see points II.2.1.2.2. and 2.1.3.2.).

The Structural Funds in general will benefit SMEs in the context of the operational
programmes adopted for 1994-1999. The Commission will monitor the programmes very
closely so that SMEs can effectively benefit from the amounts of aid intended for them (see
point II.2.1).

The new financial instruments put in place following the Edinburgh and Copenhagen Councils

- subsidized EIB loans for job-creating SMEs and European Investment Fund guarantees for
SMEs - are now in place (see point II.2.1.1.).

The implementation of the 4th Framework Programme for Research and Technological
Development should see an appreciable increase in participation by SMEs, notably through
the introduction, across 10 programmes, of technological stimulation measures for SMEs and
a budget of ECU 700 million for SMEs. Over and above these measures, SMEs can also
participate in other actions not specifically earmarked for them in the programmes (see point
II.2.2.3.). New simplified procedures for the submission and evaluation of the SME proposals
have been put in place.

In the field of vocational training, the new LEONARDO programme, with a budget of ECU
620 million for 1995-1999, comprises actions targeting SMEs, in particular to allow them to
acquire qualifications and skills to adapt to industrial changes, the evolution of systems of
production, and the spread of new technologies. It also targets management training for
SMEs, language audits and new training methods in SMEs (see point II.2.3.4.). Taking up
several earlier programmes in a single programme, LEONARDO contributes to simpler
presentation of actions that can benefit SMEs.

Concerning, international cooperation, coordination between enterprise policy and the
cooperation programmes with third countries like PHARE, TACIS or MED-INVEST has
allowed these countries to benefit from acquired expertise as regards enterprise policy as well
as existing intermediary networks and European SMEs to be better informed of opportunities
on offer in third countries thanks to Community programmes (see point H.2.4.4.).

**COORDINATION WITH PARTNERS**

In the context of the social dialogue, a significant number of organisations representing SMEs
have now been consulted ana are participating in the Standing Committee on Employment.
So representation of the interests of SMEs is progressively becoming a reality, thanks also to
cooperation agreements concluded between a certain number of them.

The other Union institutions have made a significant contribution to the development of
SMEs: the European Parliament, the Economic and Social Council and the Committee of the
Regions, as well as the EIB and the EIF. The Commission intends to pursue this excellent
collaboration.

Finally, coordination with the various partners has not only influenced programmes with a
budgetary impact (like the Structural Funds, research or vocational training), but also policies
which could have an impact on the SME environment (like the single market, fiscal policy
or competition).

However, by virtue of the principle of subsidiarity and bearing in mind that SME policy is
principally the responsibility of national and regional authorities, the Commission's policy
coordination role is limited to stimulating or organizing mutual consultation and cooperation
between themselves and with the Commission with a view to ensuring more effectiveness and
higher profile for the actions.

In future, the Commission will continue its efforts to ensure coordination at the internal level
as well as with all its partners - the Member States, the European institutions, the professional
organizations - so that the efforts of the Union in favour of SMEs are transformed into
growth, competitiveness and employment.

FINANCIAL INSTRUMENTS, COMMUNITY P R O G R A M M E S AND SMEs

Community inteiventions Amount

allotted to

SMEs (in

ecus)

Financial Instmiucnts

Number of SMEs SMEs' paiticipation

rate across **the**

projects as a whole

36000

SMEs' **paiticipation rate in**

**te mis** **of the overall budget**

4 5 % of financing **allotted to**
industry **and services**

**100%**

1 0 % on average

14%

5 8 %

100%

22%

3 0 %

3 1 %

9%

100%

100%

3 8 %

EIB - Global losuis 90-94

SME Facility - Global loans with interest

subsidy 1994

EIF (guarantees)

Structural Funds (94-99)

ERDF (94-99) *

ESF (94-99) *

EAGGF 5a (91-93)

Community Initiatives (94-99)

SME

ADAPT : 1.4 MM

III Framewoik Programme forRDT (91-94)

AU programmes taken together:

of which Biite Eurani II

and ESP1UT

SPRINT (89-94)

THERMIE (90-94)

IN' Fmmcwoik Programme for RDT (94-98)

Specific measures in 12 programmes

Vocational training

EUROTECNET (90-94)

COMETT (90-94)

FORCE (91-94)

International cooperation

PHARE -SME (90-93)

T A O S -SME (92-94) .

MED-INVEST (93-95)

A L-IN VEST (93-95)

ECIP(1994)

Environment

Financial instiument LIFE

MM = 1000 Million

9.4 MM

1 MM

165 M

6 MM

705 M

1 MM

1035 MM

219 M

459 M

700 M

320 M

51 M

12.2 M

18.5 M

17 M

2100

(end April 1995)

6368

3427

1250

162500

46 projects

10000 (direct)

40000 (indirect)

**2250**

**43**

100%

6 5 %

100%

5 6 %

2 7 %

60%

18%

7 5 %

**73%**

100%

100%

84%

N.B. : Since this table groups together Community inteiventions of different types (subsidies, loans, guanuitecs) covering different peiiods, the

amounts listed cannot be added together.

The figure shown is an estimate of SMEs' anticipated paiticipation.

**TABLE OF CONTENTS**

**INTRODUCTION**

**CHAPTER** **I. IMPROVING THE SME ENVIRONMENT**

**1.** **Improving the SME environment in terms of enterprise policy**

**1.1.** **Administrative,** **legal and fiscal environment**

**1.1.1.** **Inter-service consultations relating to legislative proposals**

**1.1.2.** **Evaluation of the impact** of legislative proposals on SMEs
1.1.3. Guidelines **on regulatory** policy
1.1.4. **Recommendation,** **on taxation** of SMEs
1.1.5. Recommendation on transfer of SMEs

1.2. Financial environment

1.2.1. Banks-SME partnership
1.2.2. Recommendation on payment terms for commercial transactions
1.2.3. Mutual guarantees
1.2.4. The European capital market
1.2.5. Other initiatives with an impact on the SME financial environment
1.2.6. New financial instruments for SMEs

**2.** **Improving the SME environment under other Union policies**

2.1. The Internal Market Programme

2.1.1. Impact on the legal environment for SMEs

2.1.1.1. Findings of studies
2.1.1.2. Compatibility rules
2.1.1.3. Protection of intellectual and industrial property
2.1.2. Impact on the financial environment for SMEs

2.1.2.1. Cross-border payments
2.1.2.2. Insurance sector

2.1.2.3. Stock exchanges

2.2. Competition policy

2.2.1. Impact on the legal environment: rules of competition applicable to
enterprises
2.2.2. Impact on the financial environment: state aid

2.3. Energy policy

2.4. Environmental policy

**CHAPTER** **H. PROGRAMMES AND SUPPORT MEASURES FOR** SMEs

**1.** **Programmes and support measures for SMEs under enterprise policy**

1.1. The Euro-Info-Centres network

1.1.1. The EICs as disseminators of useful information targeted on enterprises
1.1.2. The EICs as organizers of feedback

1.1.3. The EICs as partners at the local level

1.2. Networks and cooperation programmes

1.3 Pilot schemes

1.3.1. The craft sector and small enterprises

1.3.2. Euromanagement
1.3.3. Start-up capital pilot scheme
1.3.4. Commerce and distribution : Action COMMERCE 2000

1.3.5. Cooperatives, mutual societies, associations
1.3.6. Statistics
2. Programmes and support measures tinder other Union policies

2.1 The Union's financial instruments (EIB and Structural Funds) and the SMEs

2.1.1. The EIB, the EIF and SMEs
2.1.1.1. Global EIB loans

2.1.1.2. The SME facility
2.1.1.3. The European Investment Fund
2.1.2. Specific regional policy actions in favour of SMEs
2.1.2.1. Community Support Frameworks
2.1.2.2. Community initiatives
2.1.2.3. Innovatory forms of intervention
2.1.3. The European Social Fund and the SMEs
2.1.3.1. Community Support Frameworks
2.1.3.2. The ADAPt Community initiative
2.1.3.3. Local development and employment
2.1.4. The EAGGF-Guidance and SMEs

2.1.5. The Common Fisheries Policy and SMEs
2.1.6. Coordination between enterprise policy and the Union's financial
instruments

2.2. Research and technological development policy and the SMEs

2.2.1. SME **definition**

**2.2.2.** **Overview of** SME **participation under the Third Framework Programme**
2.2.2.1. Statistics

2.2.2.2. BRITE-EURAM

2.2.2.3. Research into information and telecommunications technologies
(ESPRIT)
2.2.2.4. Research results optimization programmes (VALUE)
2.2.3. SME specific actions under the Fourth Framework Programme (FP IV)
2.2.4. Innovation and technology transfer programme (SPRINT)
2.2.4.1. European innovation services infrastructure
2.2.4.2. Intra-Community dissemination of technological resources

2.2.4.3. Better knowledge of innovation and greater concertation
between the Member States and the Commission

2.2.5. EUROTECH CAPITAL action

2.2.6. THERMIE programme
2.2.6.1. THERMIE programme 1990-1994
2.2.6.2. THERMIE programme 1995-1998
2.2.7. Research into transport

2.3. Vocational training programmes

2.3.1. EUROTECNET programme
2.3.2. COMETT programme
2.3.3. FORCE programme
2.3.4. New LEONARDO programme

24 Other Community programmes

2.4.1. Environmental policies
2.4.1.1. The LIFE financial instrument

2.4.1.2. Environmental audit

2.4.2. Hygiene, safety and health in the workplace
2.4.3. The information market

2.4.3.1. The IMPACT Programme
2.4.3.2. The TEDIS Programme
2.4.4. International cooperation
2.4.4.1. Cooperation with European Economic Area countries (EEA)
2.4.4.2. Cooperation with central and eastern European countries
(CEEC)
2.4.4.3. Cooperation with the CIS and Mongolia
2.4.4.4. Cooperation with developing countries in Asia, Latin America
and the Mediterranean

2.4.4.5. Cooperation with China
2.4.4.6. Promotion of Community exports to Japan
2.4.4.7. Conclusion
2.4.5. Development policy for ACP countries

**10**

**CHAPTER** **m.** **COORDINATION WITH THE PARTNERS**

**1.** **Consultation with professionals**

**2.** **Social dialogue**

**3.** **Partnership with the Member States**

**4.** **Collaboration with other institutions**

**CONCLUSION**

**11**

INTRODUCTION

Article 5 of Council Decision 93/379/EEC of 14 June 1993 [7] on the multiannual programme
1993-1996 in favour of small and medium-sized enterprises (SMEs) states that the
Commission shall submit to the European Parliament, the Council and the Economic and
Social Committee, during the first half of 1995, a report _on "coordination between the_
_**different**_ _**Community**_ _**programmes manifestly in the interests of SMEs and craft industries but**_
_**not covered by this Decision and on the initiatives taken in pursuance of this Decision".**_

Since then, the Commission has adopted, on 25 May 1994, the Integrated Programme in
favour of SMEs and the Craft Sector [8] - implementation of which was agreed by the Council
in its resolution of 10 October 1994 [9] . It aims to assemble the various initiatives - existing and
new - into a global framework, with a view to ensuring their coherence and giving them a
high profile. It proposes a strengthened partnership between all the parties concerned in the
development of SMEs [10] - at the Community, national and regional levels - in order to achieve
greater convergence of actions.

The Integrated Programme includes two types of action: concerted actions and the
contributions the Union intends to make to the development of SMEs.

Concerted actions arising from article 130, paragraph 2, of the Treaty on European Union are
aimed at encouraging mutual consultation between Member States and coordination between
them as required.

One of the first concerted actions with the Member States concerns the improvement and
simplification of the environment for enterprises. A committee for the improvement and
simplification of the environment for enterprises was created in December 1994 in order to
identify the best measures for simplifying the formalities which enterprises have to comply
with, and to improve the legislative framework in which they operate. There was consultation
on legislative and administrative provisions of Member States which hinder the creation,
growth and transfer of enterprises. In this context, a forum was organized in June 1995 in
Paris during which the legislation and formalities burdening enterprises during their creation
and their first few years of existence were examined.

**7**

**9**

**10**

Council Decision on a multiannual programme of Community measures to intensify the priority areas and
to ensure the continuity and consolidation of policy for enterprise, in particular small and medium-sized
enterprises, in the Community, OJ No L 161, 02.07.1993, p. 71.

COM(94) 207 of 03.06.1994.

Council Resolution of 10.10.1994, OJ No C 294, 22.10.1994, pp. 6-8.
Given that enterprise policy applies to any enterprise whatever its sector of activity or legal form and
including cooperatives, mutual societies, associations and foundations.

12

The other concerted actions relate to the improvement and strengthening of the effectiveness
of support measures for SMEs and the craft sector. To this end, the Commission has
proposed organizing themed forums allowing the Member States and the Commission to
present and compare best practice in terms of support for SMEs. The exchange of
experiences between Member States will relate to support measures for SMEs which exist at
every level. In fact, the majority of the provisions on support for SMEs are the responsibility
of the States and the regions, but certain pilot schemes have also been floated at Community
level, and a good exchange of best practice should have a positive effect on the
implementation of Community, national or regional measures. In this context, a second forum
will cover support provisions for the creation of enterprises and the accompaniment of
enterprises during the first few years of their existence. To stimulate SMEs' demand for
information, training and advice, the Commission has also proposed a concerted action with
SME intermediaries with the aim of raising the profile of the support services offered to
SMEs and encouraging them to make greater use of these services. For resource reasons, the
Commission has had to put back the start of the preparatory work.

This report takes account both of the requirements of the Council and the framework proposed
by the Commission in its Integrated Programme which includes the Community actions in
favour of SMEs. It relates to the contributions the Union intends to make to the development
of SMEs under both enterprise policy and its other policies.

This report hinges on 2 axes relating, on the one hand, to the improvement of the environment
of enterprises (Chapter I) and, on the other hand, to the programmes or measures of support
to SMEs (Chapter II). Chapter III is devoted to coordination with the Commission's partners
which are the Member States, the professional organizations and the other European
institutions while the first two chapters essentially cover coordination between Commission
services.

This report on coordination between the various Community activities seeks to present and
analyze the way in which the SME dimension has been integrated into the definition and the
implementation of Community actions in order to take greater account of the individuality of
SMEs and facilitate their participation in Community programmes.

**13**

**CHAPTER I. IMPROVING THE SME ENVIRONMENT**

**1.** **IMPROVING THE SME ENVIRONMENT IN TERMS OF ENTERPRISE POLICY**

**1.1.** **ADMINISTRATIVE, LEGAL AND FISCAL ENVIRONMENT**

**1.1.1.** **INTER-SERVICE** **CONSULTATIONS** **RELATING** **TO** **LEGISLATIVE**

**PROPOSALS**

The role of the Commission service in charge of enterprise policy (DG XXIII) in inter-service
consultations on legislative proposals is to ensure that the Commission is taking appropriate
account of the impact on enterprise, and in particular on SMEs which might often be
disproportionately burdened by regulation if account of their size and scarce resources is not
appropriately taken. Account should be taken not only of the compliance costs and other
burdens of the regulation itself, but also the administrative procedures or requirements which
stem directly from the regulation. DG XXIII's responsibility is to consider the regulation
itself and to ensure that the views of the SME business organisations have been taken into
account. In addition, where it is appropriate for a business impact assessment to be
completed, then DG XXIII has to give its approval.

Although the number of proposals for legislation coming forward from other Directorates
General slowed down in 1994, reflecting in part the fact that the Internal Market Legislative
Programme is almost complete, there were a number of issues where DG XXIII was
particularly involved, both in the inter-service consultation, and to ensure that business impact
assessments were properly completed.

In the field of environmental regulations for example, such as those on Environmental
Management and Audit Systems (EMAS)", and the Eco-labelling scheme [12], DG XXIII has
been able, in close cooperation with DG XI, to ensure that the particular concerns of SMEs
are taken into account. While both these schemes are voluntary the pressure to participate
may be overwhelming in practice as businesses strive to maintain and improve their
competitive position, or as subcontractors find they need such environmental credentials in
order to win contracts. On the whole SMEs lack the human and financial resources to take

an active part in these schemes which is compounded by the fact that so far European
standards have not been established, which would help SMEs comply. Such issues as the
environmental criteria which need to be satisfied in order to qualify for an Eco-label need to
be established in such a way, particularly in respect of testing and certification requirements,
so that SMEs have a reasonable chance of taking part. Recognizing the need for positive
action to facilitate participation by SMEs in EMAS, DG XXIII is considering launching a new
Euromanagement Project in 1995, specifically to help SMEs in this area.

11 Regulation 1836/93 of 29.06.1993, OJ No L 168, 10.07.1993.
12 Regulation 880/92 of 23.03.1992, OJ No L 99, 11.04.1992, pp. 1-7.

14

**1.1.2. EVALUATION** **OF THE** **IMPACT OF LEGISLATIVE PROPOSALS ON** THE SMEs

All the legislative proposals - some fifteen in 1994 - likely to have an impact on businesses
in terms of cost or extra administrative processes are the subject of an impact file. The
quality of business impact assessments completed by Directorates General has gradually
improved although there is still room for further improvement. In 1994 there was a wide
range of legislative proposals covering various sectors which were likely to impact on
business, particularly on SMEs, and for which impact assessments were required. A number
of legislative proposals scheduled for adoption by the Commission in 1994 had business
impact assessments drafted into them, but were delayed until 1995.

The business impact assessment completed for the Commission proposal on cross-border
payments [13] (see point 1.2.1.2.1.) is a good example of a comprehensive assessment and
demonstrates the full extent of the consultation procedures undertaken by the Commission.
The assessment suggests that going ahead with the proposal would be overwhelmingly
positive in terms of benefit. SME business organisations were specifically consulted and were
strongly in favour of the principles of the proposal, but would have preferred self-regulation
provided that its effects could have been measured in the short term. SMEs would also have
preferred the value ceiling for payments covered by the proposal to be removed, but the
Commission felt that the threshold of ECU 10,000 afforded SMEs reasonably suitable
coverage, without having any significant impact on the banking sector.

The Commission proposal for a Council regulation on the protection of Community design [14 ]

is a good example.of where the business impact assessment sets out the often conflicting
interests of different business sectors. While on the one hand enterprises will only need to
acquire a single Community registration for each design, on the other, it was argued by a
number of SME business organisations, representing the producers of automobile spare parts,
that the criteria for individual character and novelty could lead to a lower protection threshold
than was envisaged. The Commission felt that a reasonable balance had been struck in its
final proposal between the need to protect car manufacturers and at the same time allowing
the independent spare parts manufacturers competitive access to the market. The result of all
the negotiations was that the Commission decided on a "repair clause" which gives any third
party the right, after three years of the marketing of a car, to manufacture the spare parts
which will restore a damaged vehicle to its original state. This business impact assessment
set out the various issues on which both the Commission, and subsequently the Council and
European Parliament, would be able to make a decision in the light of the impact that the
proposal was likely to have.

The Commission's proposal for a Council directive on packaging and packaging waste when
originally put forward by the Commission in July 1992 [15], contained an impact assessment
which not only set out the difficulties that some industry sectors might have in meeting
recovery and recycling targets, but also the particular problems for SMEs in the retail sector.

COM(94) 436 final of 18.11.1994.

COM(93) 342 final of 03.12.1993.

COM(92) 278 final of 15.07.1992.

15

The Council have only just reached agreement on a proposal which has substantially modified
target levels reflecting the strength of concern felt by a number of industry sectors. Member
States are required to consider the problems that SMEs would have in complying with the
directive, including the need to provide detailed data.

Other examples of legislative proposals where business impact assessments were completed
include :

amendment to Directive 89/655/EEC on the minimum safety and health requirements for
the use of equipment by workers [16] which deals with the dangers inherent in certain types
of equipment. The assessment dealt with such issues as the principles for in-service
inspection of equipment, and the requirement for Member States to take measures to
facilitate implementation by enterprises, particularly SMEs.

proposal for a Council Directive on energy efficiency requirements for household electric
refrigerators and freezers [17] . Amongst other issues the concern of some appliance
manufacturers for voluntary agreements to be considered emerged from this business
impact assessment, but ultimately it was not accepted. It was felt that the concerns of
SMEs about the new investment costs necessary would be eased by an adaptation period
of three years.

proposal for a Council Directive on Statistical returns in respect of carriage of goods and
passengers by sea [18] . The impact assessment showed that detailed consultation had taken
x, place with business from an early stage including ship and port owners. The concerns of
SMEs were taken into account through the ability of Member States to exempt certain
operations carried out by small vessels or to require only summary statistics at the
smallest ports.

proposal for a Council Directive on cableway installations designed to carry passengers [19] .
Most enterprises covered by this proposal are small companies and the impact assessment
refers to consultations with a number of business organizations who were broadly content
with the proposals.

COM(94) 56 final of 14.03.1994.

COM(94) 521 final of 07.12.1994.

COM(94) 275 final of 04.07.1994.

COM(93) 646 of 31.01.1994.

16

**1.1.3.** **GUIDELINES ON REGULATORY POLICY**

The services are currently collaborating to draw up guidelines for the Community legislative
process and examining the possibilities of improving the impact file system, particularly
through the introduction of more complete assessment techniques including, where
appropriate, cost-benefit analysis. For certain specific subjects this collaboration between the
Directorates-General began at the conceptual stage of the work.

**1.1.4.** **RECOMMENDATION ON TAXATION OF SMEs**

Two documents, produced in close collaboration between the services dealing with taxation
and the services responsible for enterprise policy, and adopted by the Commission in 1994,
target improvement of the fiscal environment for enterprises and for SMEs in particular. In
its communication on the improvement of the fiscal environment for SMEs [20], the Commission
identifies three priority problems of SMEs: their capacity to attract adequate financial
resources, their capacity to respond to administrative complexity and finally the problem of
change of proprietor. The recommendation on the taxation of SMEs [21] aims, on the one hand,
to ensure greater equity in the fiscal treatment of retained or reinvested profits between sole
traders, partnerships and limited companies and, on the other hand, to lift the fiscal obstacles
inherent in the transformation from sole trader or partnership to limited company.

1.1.5. RECOMMENDATION ON TRANSFER OF SMEs

With the aim of ensuring the survival of enterprises and the jobs attached to them, the
Commission adopted a recommendation on 7 December 1994 on the transfer of small and
medium-sized enterprises [22] . Drawn up in coordination with the services dealing with taxation
and company law, this recommendation is the result of wide consultation amongst companies
and the Member States, on the Commission's guidelines contained in its communication on
the transfer of enterprises: actions in favour of SMEs [23] . The Commission recommends that
the Member States encourage actions on awareness and information for heads of enterprises,
offer them a financial environment favourable to the success of the transfer as well as the

legal tools to allow them to prepare effectively for this operation, promote transfers to third
parties and finally reduce the fiscal burden on inheritance or gift.

**20**

**21**

**22**

**23**

COM(94) 206 final of 25.05.1994

C(94) 1305 final of 25.05.1994, published in OJ No L 177 of 09.07.1994.
C(94) 3312 of 07.12,1994, see also OJ L 385 of 31.12.1994, p. 14. for the legal instrument and OJ C 400
of 31.12.1994, p. 1. for the Explanatory Memorandum.
C(94) 1491 of 29.06.1994, published in OJ No C 204 of 23.07.1994.

17

**1.2.** **FINANCIAL ENVIRONMENT**

**1.2.1.** **BANKS-SME** **PARTNERSHIP**

A Round Table of Senior Bank Officials was created in 1993 on the initiative of the
Commissioner in charge of enterprise policy. Composed of senior representatives of financial
institutions and organizations representing SMEs, it had the task of issuing recommendations
geared to creating a more effective partnership between the financial institutions and SMEs.
These recommendations are contained in the final report that the Round Table delivered to
the Commission on 19 May 1994 and they are addressed to the financial institutions, the
SMEs, the Member States and the European Union.

The Round Table recommended that the European Union should look to better utilization in the interests of the SMEs - of its financial instruments such as the activities of the

European Investment Bank and those of the European Investment Fund. It also advocates
examining the possibilities of using certification tools relating to management quality in
enterprises. On 28 October 1994 the Commission adopted a Communication [24] in which it
commented on the Round Table's final report.

1.2.2. RECOMMENDATION ON PAYMENT TERMS **FOR** COMMERCIAL

TRANSACTIONS

After wide consultation of interested parties, the various Commission services concerned and
committees made up of representatives of the Member States regularly consulted by these
services, on 12 May 1995 the Commission adopted a recommendation on payment terms for
commercial transactions [25] . Addressed to the Member States, this recommendation aims to
combat delays in payment by providing a legal framework that is sufficiently dissuasive of
bad payers and to ensure the maintenance of reasonable payment terms for transactions where
contractual relations between partners are not in balance (public contracts in particular).

In this context, the Commission has given thought to encouraging the development of
integrated cash flow management software. The purpose of this action is to urge heads of
enterprises to manage their cash flows better and software suppliers to offer suitable products
which integrate accounting, financial analysis and management control.

24 COM(94) 435 final of 28.10.94.
25 C(94) 3283 of 30.11.1994, see also OJ L 127 of 10.06.1995, p. 19 for the legal instrument and OJ C 144
of 10.06.1995, p. 3. for the Explanatory Memorandum.

18

1.2.3. MUTUAL GUARANTEES

In accordance with the guidelines set out in its communication on the role of mutual
guarantee societies in the financing of SMEs [26], the Commission encourages the promotion,
development and extension of mutual guarantee societies in the European Union. Specifically,
it collaborates with the European Mutual Guarantee Association (EMGA-AECM) which
includes in its operations support for a cooperation project with Portugal where the first
mutual guarantee society was created in 1994 (this project will later be supported in the
framework of the Structural Funds), improvement in the weighting of risks and qualification
for guarantee offered by the mutual guarantee societies under European banking law and the
organization of mutual guarantee awareness seminars. Finally, the EMGA-AECM has also
been active in the context of establishing the EIF, which should accept several projects
relating to reinsurance of national mutual guarantee systems. It should be recalled that in its
opinion of 29 April 1992 [27] the Economic and Social Committee supported the efforts of the
Commission to give new impetus to mutual guarantees. It recommended that the Commission
present its ideas and proposals for action on the financing of SMEs.

1.2.4. THE EUROPEAN CAPITAL MARKET

In the context of its enterprise policy and the encouragement of employment, the Commission
supported the launching of a feasibility study into the creation of a European Capital Market
more suited to the needs of growing, entrepreneurially managed companies. This led to the
formation of the EASD (European Association of Securities Dealers) which, in conjunction
with other members of the financial community, is preparing the ground for the early
launching of the EASDÂQ (European Association of Securities Dealers Automated Quotation)
stock market.

1.2.5. OTHER INITIATIVES WITH AN IMPACT ON THE SME FINANCIAL

ENVIRONMENT

Other initiatives have been taken to improve the SME financial environment, such as the
proposal for a directive relating to cross-border payments (see point 1.2.1.2.1.) and the
application of the third directives on the coordination of insurance (see point 1.2.1.2.2).

1.2.6. NEW FINANCIAL INSTRUMENTS FOR SMES

After the Edinburgh and Copenhagen Councils two new financial instruments were put in
place: subsidized loans for job-creating SMEs and the European Investment Fund (see point
II.2.1.1.).

**26**

**27**

COM(91) 1550 of 05.09.1991.

Opinion of 29.04.1992 on the role of mutual guarantee systems in the financing of SMEs, rapporteur Mr
E. Muller, published in OJ No C 169 of 06.07.1992, p.7.

19

**2.** **IMPROVING THE SME ENVIRONMENT UNDER OTHER UNION POLICIES**

**2.1** **THE INTERNAL MARKET PROGRAMME**

On the whole, the Internal Market should be regarded as an "enabling programme" which
opens up commercial opportunities for companies previously confined to one Member State
market, and thereby offering them new avenues for growth. In general, the Internal Market
is expected to deliver proportionately greater benefits to SMEs than to larger firms, especially
in those sectors where there was a high incidence of non-tariff barriers in markets and in
those regions where markets were artificially divided by trade barriers. SMEs will also
benefit in their capacity as purchasers of inputs through access to a wider range of competing
suppliers. However, it would be a mistake to regard the Internal Market as an initiative
capable, in itself, of solving all the problems confronting Community enterprises. In practice,
the most pronounced impact of the Internal Market programme will be felt in approximately
40 manufacturing industries (accounting for 50% of industrial output), and a small number
of important service sectors. Furthermore, measures to complete the single market must be
complemented by appropriate actions and policies at national and Community level, notably
as regards implementation and enforcement, and in the application of competition and
industrial policy.

**2.1.1.** IMPACT ON **THE** LEGAL ENVIRONMENT FOR SMES

**2.1.1.1.** **Findings** of **studies**

On the basis of the responses to a questionnaire sent in 1993 by the SME Observatory [28] to a
selection of SME experts in all EU Member States, it can be concluded that the Internal
Market programme is seen as having a positive effect on the business environment of SMEs.
It is also seen as providing a stimulus to overall demand, resource and business development,
and as allowing for a reduction in average production costs as a result of market expansion particularly in those Member States with a lower proportion of SMEs. On the other hand,
the Internal Market programme is perceived as leading to keener competition, and placing
greater pressure on costs and price as factors in competitiveness. On the whole, the
completion of the Internal Market programme may occasion a certain amount of restructuring
in the short-run while the positive effects materialize in the medium to longer-term.

While the above analysis states the case for an Internal Market in rather abstract terms, the
benefits for the individual company can take very concrete form. The manner in which the
generalized advantages of Internal Market integration translate into direct cost improvements
for small and medium-sized companies was illustrated in a survey undertaken in late 1993 early 1994.

**28** The European Observatory for SMEs, Second Annual Report of 31.03.1994, point 4-6.

20

In order to gain an impression of the effects of the Internal Market from the grass-roots level,
the Commission launched a Communitv-wide study of business experience of the Internal
Market which covers 1993 and 1994 [29] . To date 240 companies have responded. The study
provides a useful picture of the reality for business, albeit through companies which perhaps
already had a significant European awareness. It focused on SMEs as perhaps more
vulnerable to trade barriers, not having the resources required to overcome them. But the
results, presented here, show that both SMEs and larger companies have much to gain from
the opportunities the Single Market affords.

Findings of case-studies of the experience of individual companies :

Cross-border shipments : moving goods from place to place has become much easier with
the Single Market - almost every respondent agreed that intra EC transactions are now
both faster and cheaper. With the abolition of frontier controls border delays were greatly
reduced, and firms are no longer constrained by customs opening hours. Return of
defective goods is also now much easier. However it was interesting that some companies
in both Greece and the UK were unaffected by these improvements, as they exported
largely by air. Competition in the transport sector appears to have been particularly
successful in forcing down costs (some firms quote reductions of up to 50%). But in
those Member States where transport costs were already well below the EC average, EC
carriers are still more expensive than local ones. The new customs declaration system has
saved time and money for many, although some firms, from countries where the
information was not collected through an existing procedure, have found some small
countervailing costs.

Access to cheaper and better inputs : on the financial side, several companies welcome
greater flexibility in the insurance market - for instance British companies report taking
up French insurance for a better deal. But many regret that the Internal Market in
insurance is not yet complete. Improved access to capital markets was widely welcomed,
with several companies making use of foreign capital. Some had centralised cash flow
activities in production countries to avoid currency movement costs. It seems that in
many cases benefits from bank liberalisation have yet to feed through. Some firms report
reduced transaction costs while others find no change, although those which mention them
consider that credit transaction costs are reducing. But the most common complaint about
the financial aspect of the Single Market concerned not the failure of an existing structure,
but the lack of one essential requirement - Economic and Monetary Union.

**29** IP(94) 228 du 17.03.1994, "Companies Start to notice the difference, a short report on the effect of the
Internal Market on business". The findings of this study will be published in 1995.

21

3. Technical harmonization : for many, progress in technical harmonization had made
exporting significantly easier, as well as producing savings in the testing and certification
field - a Belgian company cited a saving of more than 50%. Several firms had adopted
the EN 29000 standard with significant financial and other benefits - it was particularly
useful in providing a common reference for companies wishing to develop new contacts.
A few firms reported that the need to switch to European standards was delaying the
expected decrease in production costs, but this is of course only temporary. In some areas
unharmonized national requirements were still causing problems, and European standards
were often requested as a solution. And somewhat disturbingly, experience of mutual
recognition was somewhat mixed - as many complained about its failure as benefitted
from it. The results of the EUROMANAGEMENT pilot action in this field (see point
II. 1.3.2.) show that there was an even more negative attitude on the part of SMEs to
standards and the standards-making process, combined with a lack of information on the
basic mechanisms of the Single Market and the benefits to be gained from harmonised
standards.

4. Public procurement : there are also reports of greater success in penetrating foreign public
procurement markets, and benefits gained from the EC information systems on tender
opportunities. Some problems remain - with regard to, for example : information on
contracting opportunities, contract awards and tight tender response times. However
several companies are minimising remaining problems by developing a local presence
through partnership arrangements and other links. And as one company pointed out, the
mere fact of having competed for a tender in another Member State gives a Europe-wide
v view and experience.

5. Business strategy and reactions : this EC dimension to the export market has had a
profound effect on business activity. Almost all companies perceive that competition has
become fiercer, and many have as a result been spurred to innovate new products and
improve efficiency. One British company was forced to develop more advanced and
efficient versions of its product, for instance, and won back a lost contract as a result.
Competitive expansion into other Member States is common and takes many forms partnerships with companies in other EC countries, licensing and agency agreements,
distribution agreements with firms in other countries and sub-contracting arrangements are
only some of the measures employed. In one case a French and Italian company created
a joint subsidiary to enter a new market; in another a Belgian firm used a partnership with
another EC company to increase exports from 0% to around 60% of turnover. Another
company has seen its EU business rise from virtually nothing before 1992 to around half
its export total now. And in one of the key trends, several firms commented that the new
"export mentality" and know-how gained in the Internal Market gives them the vision and
the edge to compete internationally - new opportunities are promoting changes in business
culture which can only be beneficial to the European economy.

Perhaps the crucial lesson to be learned from the survey is that the Single Market is not
a panacea for all problems facing European firms, but rather is all about seizing
opportunities. As a French businessman put it : "The Single Market cannot itself
stimulate companies to invest and expand, if the determination isn't there. Rather, it
provides an environment in which dynamic, innovative and competitive businesses can
perform to their maximum effectiveness, reaping in full the rewards of their own efforts".

**22**

**2.1.1.2. Accountancy Rules**

Directives 78/660/EEC (annual accounts) [30], 83/349/EEC (consolidated accounts) [31] and
84/253/EEC (account controllers) [32] provide the Member States with the option of exempting
small and medium-sized enterprises which do not exceed certain turnover limits from some
of their obligations. Article 53 § 2 of Directive 78/660/EEC provides for these turnover
limits to be revised every five years, as a function of the economic and monetary evolution
in the Union.

The last of these revisions took place in March 1994. Council Directive 94/8/EC of 21 March
199433 ra j sec j t n e aforesaid turnover limits by 25%, thus giving the Member States the option
of allowing a larger number of firms to benefit from the exemptions mentioned in the
previous paragraph.

2.1.1.3. Protection of intellectual and industrial property

In 1995, The Commission intends to prepare a Green Paper dealing with the question of the
need for harmonization of legislation relating to utility models - "Intellectual Property Rights"
(IPR) are the ownership rights vested in the generation of an original idea. These utility
models are a particular form of protection of innovation which, because of their specificity,
are of special interest to SMEs. This is a flexible form of protection, not very costly and well
adapted to active SMEs in certain sectors of innovation. The Commission has also proposed
a Regulation on the protection of Community design [34] which is potentially of great interest
for SMEs (see point 1.1.1.2.).

30 OJ No L 222 of 14.08.1978, p. 11.
31 OJ No L 193 of 18.07.1983, p. 1.
32 OJ No L 126 of 12.05.1984, p. 20.
33 OJ No L 82 of 25.03.1994, p. 33.
34 COM(93) 342 of 03.12.1993.

**23**

**2.1.2.** **IMPACT ON THE SME FINANCIAL ENVIRONMENT**

**2.1.2.1.** **Cross-border payments**

An in-depth case-study of a proposed Community Directive, foreseen in the Commission's
Strategic Programme on the Internal Market, provides **a** useful insight into how Community
legislation can benefit SMEs, and the extent to which SME interests are borne in mind when
preparing Internal Market legislation. Attempts to bring about reductions in the level of
commission charged for cross-border payments and in the extent of double-charging, through
voluntary codes of good practice, did not work. The Commission therefore tabled a proposal
for a Commission Directive to tackle this problem [35] . The business impact assessment
completed for this proposal is part of the document adopted by the Commission [36] . This
indicates the expected costs and benefits of the measure, particularly for SMEs, describes the
consultation procedures carried out, and the analysis which has prompted the Commission to
come forward with this proposal.

**2.1.2.2. The insurance sector**

On 1 July 1994 the Third Directives on coordination relating to insurance came into force,
completing the Internal Market in the financial sector [37] . Conditions of access to insurance
markets as well as operating conditions have been simplified by the introduction of the
"European passport" system. This makes access to the various national insurance markets
much easier and less expensive. An increase in competition between insurance companies
and greater innovation in insurance products should also be expected.

This should allow SMEs to have access to insurance products existing in the European Union
and thus procure for themselves the insurance cover they consider best adapted to their
specific needs, at the best prices. The favourable climate produced by the elimination of
national frontiers in the insurance sector encourages the appearance of insurance products
adapted to the special risks cover which often concerns SMEs (bio-technology, computers,
electronics, etc.). In fact,; insurers are aware of the importance of SMEs in the economic and
industrial fabric of the Member States and they are increasingly setting up products adapted
to the very particular needs of SMEs, both as regards company risks themselves and as
regards contingency provision and supplementary social security.

35 COM(94) 436 final of 18.11.1994.
36 COM(94) 436 final of 18:11.1994.
37 Life assurance OJ No L 360 of 09.12.1992 and non-life insurance OJ No L 228 of 11.08.1992.

**24**

**2.1.2.3.** **Stock exchanges,**

One area of action of the Commission services in the field of stock exchanges has a particular
bearing on SMEs. Point 5 of Article 1 § 1 of Directive 94/18/EC (the "EUROLIST
Directive") adopted on 30 May 1994 [38] allows companies in regulated junior markets to
become officially listed without publishing new listing particulars, under certain
circumstances. This is a simplification of previous rules and represents a saving for the SMEs
involved.

**2.2.** **COMPETITION POLICY**

**2.2.1.** **IMPACT ON THE LEGAL ENVIRONMENT: RULES OF** **COMPETITION**

**APPLICABLE TO ENTERPRISES**

Under article 85 of the EC Treaty on agreements between enterprises, SMEs are the principal
beneficiaries of the Commission communication on agreements of minor importance [39] . At the
same time as reinforcing legal security, this communication has contributed to freeing SMEs
from unnecessary administrative burdens and has thus facilitated cooperation between SMEs.
In fact, cooperation agreements - which should normally be prohibited by virtue of article 85
paragraph 1 of the Treaty - are permitted and need no longer be notified if the firms
concerned have a market share of less than 5% and if their total turnover for one financial

year does not exceed ECU 200 million. This threshold was raised to ECU 300 million in
1994 [40 ]

Furthermore, the Commission communication on agreements, decisions and joint practices
relating to cooperation between firms [41] lays down that agreements whose only purpose is the
exchange of views and experiences, the completion of joint studies and the establishment of
common statistics and calculation systems do not restrict competition. Furthermore, the
Commission communication on the assessment of subcontracting agreements [42] provides that
certain restrictions relating to the execution of subcontracting agreements are not covered by
article 85.

Clearly the aforesaid provisions open up development possibilities for small and medium-sized
enterprises.

**38**

**39**

**40**

**41**

**42**

OJ No L 135 of 31.05.1994, p. 1.

OJ No C 231 of 12.09.1986, p. 2.

JO C 368 of 23.12.1994, p. 20.

OJ No C 75 of 29.07.1968, p. 3.

OJ No C 1 of 03.01.1979, p. 2.

**25**

**Furthermore, in its resolution of 10 October 1994** **[43]** **, the Council invited the Commission to**
**examine possibilities for cooperation between SMEs (for example cooperation in networks for**
**joint purchases and sales) in the light of Community competition law.**

**As regards the application of competition rules in specific sectors of activity, such as**
**distribution and sales and after sales service in respect of motor vehicles, Regulation** **123/85** **[44 ]**

**was amended to include a number of provisions aimed at ensuring that dealers - who are in**
**the vast majority of cases SMEs - enjoy a greater degree of commercial independence vis-à-**
**vis manufacturers.** **This amendment also served to redress the imbalance between**

**manufacturers and distributors of spare parts on the one hand and car** **manufacturers** **on the**
**other.**

**In the area of research and** **development** **[45]** **,** **specialization** **[46]** **,** **patent licensing** **[47]** **and know-how**
**licensing** **[48]** **,** **in 1992** **[49]** **the Commission amended the relevant exemption regulations with the**
**intention of facilitating the use of these provisions, in particular during transfer of technology**
**or RTD projects and which contain thresholds designed to take account of the smallest**
**restrictive effect on competition in** **rgreements** **concluded between enterprises which do not**
**have small shares in the market, which should be favourable to SMEs. In addition, on 30**
**June 1994 the Commission published a draft regulation aimed at facilitating certain categories**
**of technology transfer agreements, inviting those involved to send in their comments** **[50]** **.**

**As regards control of concentrations, the thresholds provided by regulation** **4064/89** **[51]** **defining**
**the Community dimension of concentration operations, exclude SMEs from its field of**
**application. Finally, article 86 protects SMEs from abuse of dominant position by larger**
**competitors.**

```
43

44

45

46

47

48

49

50

51

```

OJ No C 294 of 22.10.1994, p. 7.
OJ No L 15 of 18.01.1985, p. 16, amended by C(95) 1447 approved by the Commission on 21.06.1995.

OJ No L 53 of 22.02.1985, p. 5.

OJ No L 53 of 22.02.1985, p. 1.

OJ No L 219 of 16.08.1984, p. 15, corrigendum: OJ No L 280 of 22.10.1985, p. 32.

OJ No L 61 of 04.03.1989, p. 1.

O J N o L 2 1 of 29.01.1993, p. 8.
OJ No C 178 of 30.06.1994, p. 3.

OJ No L 395 of 30.12.1989, corrigendum: OJ No L 257 of 21.09.1990.

26

**2.2.2.** **IMPACT ON THE FINANCIAL ENVIRONMENT:** STATE **AID**

The Commission's traditionally favourable attitude to state aid for SMEs was formalized by
the adoption, in 1992, of a specific framework [52] which will be reexamined in 1995. This
framework provides Member States with the option of granting aid, within certain set limits,
designed to encourage investment by SMEs (that is, enterprises with less than 250 employees
and turnover below ECU 20 million, which are not 25% or more owned by a large enterprise),
and to encourage them to improve their competence through advice and information. In order
to simplify the administrative procedures in the interest of SMEs, the framework introduces,
for the first time, a "de minimis" rule which dispenses Member States from notifying the
Commission of very small sums of aid which it considers to have a negligible impact on trade
between Member States and on competition. At the same time, the Commission has
published a communication [53] which extends the field of application of the accelerated
authorization procedure for aid systems of minor importance to all SMEs (outside of specific
sectors) as defined in the framework.

Finally, in the control of state aid, the Commission takes general account of the special
position of SMEs. This is expressed in the authorization of a higher aid threshold (generally
10 points higher than the normally permitted ceilings) or more relaxed conditions when the
beneficiaries are SMEs. This position has been confirmed recently in the new Community
framework on state aid for environmental protection adopted in 1993 [54], as well as the
Community guidelines on state aid for rescuing and restructuring firms in difficulty adopted
in 1994"

2.3. ENERGY POLICY

The objectives of the Union's energy policy have a direct effect on the development and
operation of SMEs, since they are aimed at meeting the needs of individual and industrial
users at less cost, under circumstances which ensure security of supply and environmental
protection.

52 OJNoC213of 19.08.1992, p. 2.
53 OJ No C 213 of 19.08.1992, p. 10.
54 OJ No C 72 of 10.03.1994, p. 3.
55 OJ No C 368 of 23.12.1994, p. 12.

**27**

**Of these three** **objectives,** **improving the overall competitiveness of the economy is the most**
**directly linked to expanding SMEs. The availability of energy at the best prices and on the**
**best terms is a determining factor in strengthening the overall competitiveness of the**
**economy, and that of SMEs in particular. The second objective, i.e. security of supply,**
**should also have a great effect on SMEs, since the possibility of guaranteeing in the** **future**
**that essential energy needs can be met guarantees that prices of the various forms of energy**
**will continue to fall and that the quality of user service will be maintained. The third**
**objective concerns developing sustainable and non-inflationary growth while protecting the**
**environment. Progress towards sustainable development means finding balanced solutions**
**which take account of the cost/effectiveness aspect, so as to avoid any distortions in the**
**development of the competitiveness of Community industry** _**vis-à-vis**_ **the outside world and**
**also** _**vis-à-vis**_ **SMEs.**

**The objectives of energy policy must be attained in the context of the Single Market and**
**therefore the completion of the single market for energy is a** _**sine qua non.**_

**The growth of trade and the internationalization of markets expose the world of the SMEs to**
**increased competition. In this process of reinforcing competition, containing production costs**
**obviously plays an essential role if SMEs are** **to** **survive in a world market.**

**Energy costs, which for some of these enterprises represent a large proportion of total costs,**
**must also be contained. Accordingly, industry is taking an interest in the completion of the**
**single market for energy. It is important to maintain the competitiveness of all industry, and**
**thus of SMEs, to guarantee access to energy at competitive prices in the immediate future.**
**Consumers must be able to choose between the various sources of supply and a greater**
**number of suppliers.**

**At present, transboundary trade in energy and competition between producers is somewhat**
**limited, because of technical, legal (because of** **national monopolies)** **and fiscal barriers.**

**In all these fields, progress has already been made over the past few years, in particular**
**through standardization and the first phase of liberalizing the electricity and gas sectors** **[56]** **.**

56 Council Directive 90/377/EEC of 29.06.1990 concerning a Community procedure to improve the
transparency of gas and electricity prices charged to industrial end-users, OJ L 185 of 17.07.1990, Council
Directive 90/547/EEC of 29.10.1990 on the transit of electricity through transmission grids, OJ L 313 of
13.11.1990, Council Directive 91/296/EEC of 31.05.1991 on the transit of natural gas through grids, OJ
L 147 of 12.06.1991.

**28**

Other proposals [57] have been forwarded to give customers a greater choice of sources of supply
and of suppliers.

The second phase of liberalizing the electricity and gas markets proposed by the Commission
provides for the reinforcement of competition in the production sector and access for third
parties to the network, which would give the major industrial consumers and the distributors
a greater choice of suppliers in the Union.

It is through the distributors (who will pass on the benefits to their customers) that, in this
second phase, the SMEs will be able to take advantage of the opportunities offered by this
increased competition, which will reinforce security of supply and give more competitive
prices on the market. In the third phase, access could be extended to other industrial
consumers (by lowering the consumption threshold), so that some SMEs could negotiate their
supply contract freely with a supplier in the Union.

**2.4.** **ENVIRONMENTAL POLICY**

In the review of the 5th. Action Programme, of November 1994, mention is made of the
British, Danish, German and Dutch governments' initiatives to assist SMEs with consultants
advice and financial incentives to upgrade environmental performance and to install clean
technology. In the UK, industry has set up a Committee to help the scaling down of cleaner
technology developed for large enterprises for SME use.

In November 1994, the Commission also presented a Communication on "Economic Growth
and the Environment". The Communication strongly underlines the need for market based
instruments in the area of environmental policies, in particular economic and fiscal
instruments like eco-labelling, eco-auditing, voluntary agreements, tax rebates for green
investments, etc. A shift is proposed away from a "command and control" policy towards
more market based instruments, so that companies are able to integrate environmental
considerations in their policies in a more flexible way. This form of "deregulation" is of
special importance for SMEs."

57 Draft Directives concerning common rules for the internal market in natural gas and electricity,
COM(93) 643 of 07.12.1993.

29

**CHAPTER H. PROGRAMMES AND SUPPORT MEASURES FOR SMEs**

**1.** **PROGRAMMES AND SUPPORT MEASURES FOR SMEs UNDER ENTERPRISE**

**POLICY**

**1.1. THE EURO-INFO-CENTRES NETWORK**

Because of their special position at local level, the EICs can contribute to raising interest
amongst enterprises in their region in the various Community programmes and policies. They
provide information to heads of firms and feed information back to the different Commission
services so that they can take account of the special problems of SMEs.

A deepening of the EICs' information mission has been achieved largely thanks **to** the **special**
**relationship which has been developed between the Commission services and the EICs in the**
**framework of the special working groups.** Thus, specialized groups have been set up, since
1992, in the following main areas (which have themselves been divided into sub-groups):
Internal Market (Information on the markets of other Member States, public tenders, VAT and
quality), RTD, external relations and Community programmes (environment, training and
Structural Funds). Essentially these are sectors which have been difficult for SMEs to access
up to now. This growing specialization by the EICs allows information monitoring actions
to be increased and facilitates the exchange of good practice.

**1.1.1. THE** EICs AS **DISSEMINATORS OF** USEFUL **INFORMATION TARGETED ON**

**ENTERPRISES**

Anxious to respond to the real needs of firms, the EICs increasingly tend to offer an "infoservice", that is, a full personalized service of diagnostics, advice and monitoring which
identifies through research the optimum solutions for the firm.

During 1994, the EICs contributed greatly to the organization of Internal Market Weeks which
took place in all the Member States of the European Union and met with great success
amongst SME participants.

As regards public tenders, the EICs have been particularly active in circulating information
about calls for tender, thanks notably to the TED database. Software programs (TENNIS and
TED AUTOMATA) have been developed as a function of the specific needs of SMEs allowing
them better to understand and exploit these very complex markets.

**30**

**Thanks to the support of the Commission services involved, the EICs have played an active**
**role in the promotion of Community RTD programmes, most notably CRAFT, with SMEs.**
**They have particularly made them aware of** **the** **new opportunities which arise from the Fourth**
**Framework Programme through training seminars or brochures, including a guide to project**
**management.**

**On transport, the Commission services have collaborated to carry out an awareness action**
**exclusively for SMEs in the transport sector, which resulted in the publication of a leaflet in**
**August 1994. In addition to a brief description of services and programmes available to**
**SMEs from the Commission** **(EIC,** **BC-NET, BRE and EUROPARTENARIAT), notably with**
**a view to promoting trans-national cooperation, the leaflet provides a concrete example for**
**each of these, involving one or more transport firms as well as a list of useful addresses by**
**country.**

**t.**

**On the environment, the EICs have been chosen by the Commission services to carry out an**
**information and awareness campaign for SMEs on environmental questions with a view to**
**encouraging them to adopt the voluntary regulations on environmental management and the**
**eco-audit (EMAS - '"Eco-Management and Audit Scheme").** **In practical terms, the**
**contribution of the** **EICs** **has consisted in drawing up a self-evaluation guide (on paper and**
**on disk) to environmental performance for heads of firms, and in particular SMEs, most of**
**which have not yet adopted a particular** **strategy** **in this area because they see in it more**
**threats than potential opportunities.**

**1.1.2. THE EICs AS ORGANIZERS OF FEEDBACK**

**The Commission services are, increasingly aware that the information and advice mission**
**fulfilled by the EICs puts them** **in** **a special position to understand the particular problems**
**encountered** **by SMEs** **in thé** **implementation of legislation or in participating in certain**
**Community programmes. This feedback is particularly valuable because it gives a better idea**
**of the reality on the ground and eventually can help adapt the legislation or programmes in**
**question.**

**Up to now, the Commission services have structured this feedback by directly consulting EICs**
**or having them carry out specific studies based on questionnaires circulated to SMEs in their**
**region.**

**In the first case, the most significant example is the participation of certain EICs on the**
**Listening Committee on VAT. The EICs have participated actively in the meetings and have**
**also been asked to carry out a study on the impact of the transitional VAT regime.**

**An identical step has been undertaken on the Internal Market. This has made it possible to**
**collect,** **from a questionnaire and structured interviews carried out with the economic**
**operators, both quantitative and qualitative information about the impact of the Internal**
**Market, as well as numerous SME success stories (see point** **1.2.1.1.).**

**31.**

The analysis of this data has served as a basis for drawing up the Annual Report on the
Internal Market [58] and has been taken into account in completing the Strategic Programme [59] .

Greater cooperation with other Commission services is also under study for the transmission
of complaints, in order to improve the procedures for enterprises.

```
1.1.3. THE EICs AS PARTNERS AT THE LOCAL LEVEL

```

This double function of dissernination of information and organization of feedback for the
various Commission services therefore stands the EICs in good stead as a valuable channel
of direct contacts with economic circles and the other actors in local development and
illustrates in a concrete way the application of the principle of subsidiarity.

The partnership relations which the EIC has developed with all the parties concerned at local
level, whether public or private (Chambers of Commerce and Trades Councils, Regional
Councils and organizations promoting/spreading technologies), make it possible to offer a
more complete service to economic operators. It is thus possible for the EICs to relay
technical documents to more specialized organizations. Furthermore, certain EICs have
succeeded in coordinating, even co-piloting, community initiative programmes financed in the

context of the Structural Funds.

In other sectors the Commission services have preferred to use information /advice and
enterprise cooperation services which the EIC network can offer them rather than establishing
their own network, both for reasons of effectiveness and credibility on the ground. So in
RTD, certain EICs have been designated as Value Relay Centres with the function of ensuring
promotion of the transfer of innovations resulting from Community programmes towards

SMEs.

The various Commission services have also called on the EICs as members of a well
established network in the European Union, and soon in the European Economic Area, which
has established correspondents in the countries of central and eastern Europe and the
Mediterranean. Currently the Commission services also envisage the possibility of using
organizations located in third countries (in Asia or in Latin America, for example) which have
already established a working relationship with certain EICs to the benefit of European firms
in the search for market opportunities and outlets.

58 COM(94) 55 final of 14.03.1994

59 COM(93) 632 final of 22.12.1993.

**32**

**1.2.** **NETWORKS AND COOPERATION PROGRAMMES**

One of the priority areas in enterprise policy concerns inter-enterprise cooperation. The
Commission has established partner search networks, the Business Cooperation Network (BCNET) and the Business Communication Centre (BCC) as well as the Europartenariat and
Interprise programmes.

In 1994, **the 461 correspondents in the BCC network generated 7,629 cooperation profiles.**
As regards the regions eligible under objectives 1, 2 and 5b, the activity of the network is
distributed as follows:

    - Objective 1 92 correspondents have generated 919 cooperation profiles;

    - Objective 2 : 142 correspondents have generated 2,156 cooperation profiles;

    - Objective 5b : 15 correspondents have generated 184 cooperation profiles.

**The 533 BC-NET advisers have generated 10,349 cooperation profiles.** For the regions
eligible under objectives 1, 2 and 5b, the activity is distributed as follows:

Objective 1
Objective 2
Objective 5b

96 correspondents have generated 1,085 cooperation profiles;
142 correspondents have generated 3,624 cooperation profiles;
28 correspondents have generated 560 cooperation profiles.

49 INTERPRISE events were organized in 1994, 31 of which (63%) have related to objective
1, 2 and 5b regions.

The Europartenariat held in Bilbao in 1994 allowed 479 selected enterprises from 7 Spanish
regions to meet over 2,000 enterprises at 9,000 meetings.

Furthermore, the various Commission services cooperate to encourage international
cooperation thanks to the opening of partnership programmes for third countries. This is how
enterprise policy makes available to the other policies of the Union its tools and know-how,
notably allowing the countries of central and eastern Europe, Mediterranean third countries
and other third countries to benefit (see point II.2.4.4).

As an example the European Union/Middle East Partenariat event which was held in Cairo
in December 1994 brought together 600 enterprises in the region (Egypt, Israel, Palestinian
territories and Jordan) and more than 400 enterprises from Europe. **It is estimated that about**
**10,000 scheduled meetings and 5,000 spontaneous meetings took place between enterprises.**

In 1994, three Med-Interprise events took place in the Mediterranean countries of Morocco,
Lebanon and Cyprus. The enterprise policy services ensure technical assistance under the
cooperation section of the Med-Invest programme, the finance contributed by the services in
charge of external relations.

**33**

On subcontracting, the enterprise policy services are cooperating with the industrial policy
services, notably for the organization of European forums like those organized in 1994 in the
sectors of clothing and construction and for the cooperation actions targeting the
competitiveness of firms.

In this context, in accordance with the Council's request (in its resolution of 22 November
1993 [60] ) and the proposals of the Integrated Programme, the Commission has tested the
meetings formula known as "reverse salons" organized on the initiative of the clients to
contact subcontractors in the context of new inter-industrial partnership relations. Thus
VETIS was organized in Turin in November 1994 making meeting areas available to
purchasing and technical departments of manufacturers and large suppliers to the motor
industry to play host to suppliers of components or services. This action was aimed at
establishing permanent relations to their mutual advantage between manufacturers, suppliers
and subcontractors in the areas of quality ("zero fault"), service to clients, price (affordable
and competitive) and time ("Just in Time, Time to Market").

Furthermore, the Integrated Programme provides for the reinforcement of support measures
to enterprises notably in the area of cooperation. The members of the network (BC-NET and
BCC), as local operators in direct contact with firms, are required to play a fundamental role
in the implementation of the proposed actions which affect 3 areas: stimulating cooperation
between SMEs by support beyond the initial partner stage, access to public markets and new
information technologies.

**1.3** **PILOT** SCHEMES

Under enterprise policy, the Commission is carrying out a certain number of actions in
particularly sensitive areas such as access to research and technological development (RTD),
access to public contracts, standardization and certification, commerce and distribution and,
finally, the craft sector and small enterprises. These actions are carried out through interservice cooperation in the majority of cases.

As an example, in RTD, an inter-service working group has been created for better

coordination of actions in favour of SMEs. This coordination has been effective in the

context of Euromanagement RTD II and above all the 4th RTD Framework Programme which
has made it possible to extend the CRAFT procedures and the feasibility premiums to all
RTD programmes (see point II.2.2.3.). In the context of Euromanagement RTD II, DG XXIII
has, for the first time, associated the Member States in the selection of participants and
beneficiary SMEs, as well as the management of the action. This collaboration makes it
possible to encourage the Member States to establish similar actions in the future themselves.

60 OJ No C 326 of 03.12.1993, p. 1.

**34**

**1.3.1** **THE CRAFT SECTOR AND SMALL ENTERPRISES**

As regards the craft sector, following a call for tenders launched in 1994, the Commission
will support the creation of 7 cross-border offices to help the craft sector and small enterprises
develop cross-border activities and help them overcome existing barriers. It has also
commissioned a series of studies on the problems of border areas.

In order to lay the ground for the Second European Conference on the Craft Sector, 12
subject-specific preparatory conferences were organized in the Member States with a view to
stimulating discussion and an exchange of experiences on the role of small enterprises and
craft businesses within the Single Market. At the end of this Second European Conference
on the craft sector and small enterprises, which took place in Berlin on 26 and 27 September
1994 around the common theme of "craft and small enterprises : the key to growth,
innovation and employment", conclusions were presented as regards new actions aimed at
ensuring that these enterprises benefit fully from the advantages of the Single Market and
from Community programmes. The Commission intends to act on the recommendations
formulated at the Council's request in its Resolution of 10 October 1994 [61] by presenting a
communication on follow-up measures before the end of 1995.

Finally, in October 1994 the Commission published a call for proposals to support transnational cooperation" with the help of intermediaries. The Commission aims via this action
to support partnerships between small businesses and craft enterprises in two Member States
by ensuring that they are accompanied by intermediaries who facilitate their moves towards
cooperation.

**1.3.2.** **EUROMANAGEMENT**

On standardization, certification, quality and safety in the workplace, the Commission
launched a Euromanagement action in 1993 which ended in 1994 and **made it possible to**
**audit 842** SMEs. The report produced by the coordinator of the action, AFNOR (Association
Française pour Normalisation), shows that the principles of the single market and
standardization (through European directives and standards) are generally very poorly
understood, for reasons relating to the difficulties of gaining access to information and the low
participation rate of SMEs in the work on European and even national standards (one of the
reasons seems to be the lack of human and financial resources). As to quality, a good number
of SMEs have commented that they are looking for an improvement in their organization and
their competitiveness from the quality assurance systems. However, these are harder to
establish in SMEs than in large enterprises. The report shows that SMEs have difficulty in
understanding and applying EN ISO 9000 and in particular in formalizing their quality
procedures. Since they are unfamiliar with the language of standards, they feel that they are
dependent on outside consultation and often do not know how to avoid making over-complex
interpretations of the standards and setting up systems which are too clumsy and expensive.

61 OJC 294 of 22.10.1994, p. 6.
62 OJ No C 282 of 08.10.1994, p. 14.

**35**

**As regards certification, the report notes that there** is **still** much work to be done on
completing **the** single market, in particular on mutual recognition. SMEs stress in **their**
**comments that they expect substantial benefits. However, SMEs are often unfamiliar with EC**
**markings and see the cost of obtaining certificates as a problem (for products and/or quality**
**systems). Lastly, on health and safety in the** workplace knowledge amongst SMEs is low.
**About one** in five SMEs are in a position **to** quote the existing standards on safety of
employees.

**1.3.3.** **START-UP CAPITAL PILOT SCHEME**

The Commission (in particular the. services responsible for enterprise policy and those
**concerned** **with** **regional policy) launched a pilot** scheme in 1989 **to** "stimulate the creation
of start-up capital funds". In this context, it has supported the establishment of 23 "start-up
funds" whose essential mission consists in making capital available to firms in the embryonic
stage of existence which generally have enormous difficulty in obtaining this on the market.

As **at 1 January 1995, the 23 funds had raised ECU 41 million in capital, of which ECU 27**
**million have been invested in 228 new enterprises (average rate of capital paiticipation** of
**26%),** **generating 2,085 direct jobs.**

It is costing the Commission ECU 1 260 to take part in a job creation scheme under the pilot
plan. For ECU 8.76 million invested by the Commission in the form of reimbursable advances
(ECU 6.085 million) and contributions to the capital (ECU 2.675 million), a capital sum of
ECU 41 million has been raised by the pilot plan funds (58% of which is from private
sources), which represents a substantial lever effect.

**1.3.4.** **COMMERCE AND DISTRIBUTION : ACTION COMMERCE 2000**

The European conference on strategies for a modern distribution network in Europe, which
was held in Athens on 2 and 3 June 1994, has invited the Commission to pursue and intensify
the Commerce 2000 pilot programme. This programme aims to encourage the promotion of
cooperation relations between SMEs by establishing modern methods of management and new
technologies. A second call for tenders launched at the end of 1993 was used to select, in
1994, 52 feasibility study projects and 6 pilot projects, the results of which should become

available in the course of 1995.

**36**

**1.3.5.** **COOPERATIVES, ASSOCIATIONS, MUTUAL SOCIETIES**

The Community multi-annual programme of work for cooperatives, mutual societies,
associations and foundations in the European Union [63], adopted by the Commission in February
1994, received the consent of the European Parliament in March 1995. This programme
provides a formal framework for Community action based on innovation, partnership,
networking and the trans-national dynamic. It aims to preserve diversity in the sector, to
encourage solidarity and to help cooperative enterprises to respond to the dual objective of
economic development and social progress in the European Union.

Cooperative enterprises are involved under various headings in the process of allocation of
structural funds at the European, national, regional and local level. However, their inclusion
in partnerships, as well as their experience, remains very scattered. Exchange of best practice
is encouraged, so as to maximize the contribution of SMEs to the creation of employment,
occupational training, regional development, local initiative and urban reconversion.

The various actions supported include the Euro-Info-Centre for the social economy known as
ARIES, the European financial mechanism SOFICATRA for financing enterprises in this
sector from own funds, the European training network for the third sector and the network of
experts on proximity services.

Recognizing the growing importance of associations in Europe, the Commission is also
preparing a White Paper on Associations and Foundations. Associations have been
increasingly involved in providing services that were hitherto provided by public authorities,
and in a number of key European programmes.

1.3.6. STATISTICS

With a view to improving the statistical information which is available, Eurostat, in
conjunction with the NSIs of the Member States, has begun to collect all the financial
information available on enterprises, so as to highlight the importance of SMEs as regards
production in the Member States and employment. In conjunction with DG XXIII, Eurostat
has published at regular intervals the report "Enterprises in Europe", the third edition, of
which is from 1994. This report contains detailed information by sector of economic activity
and by payroll size classes on all the enterprises in the European Union, viz. their number,
number of employees and turnover.

63 COM(93) 650 of 16.02.1994.

**37**

**2.** **SUPPORT PROGRAMMES AND MEASURES FOR SMEs UNDER OTHER UNION**

**POLICIES**

It has to be recognized that the majority of Community support is provided largely in the
context of the Union's financial instruments and, in particular, the structural funds, as well as
Community programmes, such as the research and technological development and
occupational training programmes.
Here close coordination between policies is essential in order to facilitate effective
participation by SMEs in these programmes.

**2.1.** **THE UNION'S FINANCIAL INSTRUMENTS (EIB AND STRUCTURAL FUNDS)**
**AND THE SMEs**

**2.1.1.** **THE** **EUROPEAN INVESTMENT BANK,** **THE** **EUROPEAN INVESTMENT FUND**
**AND SMEs**

Created in 1958 to facilitate, with funds borrowed on the capital markets, the funding of
investments to promote balanced development of the Community and European integration,
the European Investment Bank participates actively in the support of Community policies.
It also contributes to cooperation policies towards third countries (the African states, the
Caribbean and the Pacific, the countries of the Mediterranean basin and the countries of
central and eastern Europe.

The EIB finances investments supporting regional development as a priority. It contributes
regularly to strengthening European communications networks, the protection of the
environment and the improvement of the life context as well as the competitiveness of
industry.

To strengthen the international competitiveness of industry and promote its integration at the
Community level, the EIB finances large-scale investments through individual loans and
modest ones,«in particular those of small and medium-sized enterprises, indirectly through its
global loans.

**2.1.1.1.** **The** **EIB's** **global loans**

The global loans are concluded with financial intermediaries, operating at the national,
regional or even local level, and used in agreement with the Bank and according to its
economic, technical and financial criteria. This decentralized procedure, closer to the local
reality, puts the **EIB in a position to support small and medium-sized investments made**
**mainly by SMEs,** which it would not be able to finance by individual loans, for reasons of
management efficiency. Currently the EIB is collaborating with over one hundred partners,
financial institutions or commercial banks.

**38**

The field of application of global loans has been progressively increased in order to adapt to
the development of needs and the diversification of Community policies. They usually
respond to several Community policy objectives and concern :

investments of small and medium-sized enterprises in industry, services (notably tourism)
and agriculture;
small-scale infrastructure contributing to Community objectives in the areas of regional
development, environmental protection, energy or transport.

The figures presented in Table No 1 indicate the importance of the role of the EIB in support
to the investments of SMEs.

**39**

**Table No 1**

**THE EUROPEAN INVESTMENT BANK**

**The** EBB **in figures** :
EIB loans amounted to :

1994 : ECU 19.9 billion including ECU 17.7 billion in the Community and ECU 2.2
billion in the context of cooperation policies relating to third countries;
1993 : ECU 19.6 billion;

1992 : ECU 17 billion.

The EIB **and** regional development :

1994 : ECU 12 billion (88% in regions eligible for the Structural Funds - objectives 1,

2 et 5b);
1993 : ECU 12.5 billion;
1992 : ECU 11.8 billion.

From 1989 to 1994, EIB finance in favour of regional development amounted to ECU 59
billion of which ECU 54 billion in Structural Fund zones (objectives 1, 2 and 5b)

The EIB and the SMEs :

In 1994, the EIB concluded global loans in a total amount of ECU 3.281 million
compared with ECU 3.598 million in 1993. During the year 7 712 credits were granted
on current global loans in an amount of 2.763 million (6 023 credits and 3.258 million in
1993).

60% of this amount was devoted to supporting 6 776 SMEs, nine-tenths of which
employed less than 50 people and benefited from more than 60%> of the credits granted.
About 70%) of these SMEs are located in regional development zones.

Some 35%o of the credits relate to small or medium-sized investments in the infrastructure

sector (environment, communications, energy) usually made by local communities. The
balance consists of investment by SMEs to improve the environment and promote the
rational use of energy.

Finance granted in the Community by the EIB to support the competitiveness of
enterprises amounted to :

1991 : ECU 3.3 billion of which ECU 2.3 billion for 9 548 SMEs;
1992 : ECU 2.6 billion of which ECU 2.1 billion for 7 223 SMEs;
1993 : ECU 2.7 billion of which ECU 1.5 billion for 5 257 SMEs.

1994 : ECU 1.8 billion of which ECU 1.7 billion for 6 776 SMEs. Italy (ECU 595
million), France (ECU 947 million), Germany (ECU 342 million) and Belgium
(ECU 116 million) have benefitted most from credits on global loans. In
addition, the EIB supports investments of SMEs relating to environment or
rational use of energy.

**40**

**Since 1990, the EIB has provided significant support to the financing of SMEs. Thus**
**nearly 36,000 SMEs have benefitted from credits in a total amount of over ECU 9.4**
**billion, or some 45% of the financing granted to industry and services. Over 4/5 of**
**them are enterprises employing** **less** **than 50 people and** **97%** **less than 250. More than**
**23,000 operations (ECU 6.2 billion in credits) relate to investments in the aided areas**
**and some 13,000 projects outside these areas.**

The experience of the EIB in financing SMEs and its close relations with the European
banking system led the European Council of Edinburgh (December 1992) and
Copenhagen (June 1993) to ask it to strengthen its activities in this area.

In the context of the growth initiative, the EIB was invited not only to accelerate the
financing of infrastructure, and notably the trans-European networks, but also to help
job-creating SMEs.

**2.1.1.2 The** **SME** **facility : subsidized loans for** **job-creating** **SMEs**

A mechanism for interest subsidies on budgetary resources of the European Union
relating to ECU **1 billion in global EIB loans** in favour of the SMEs was approved in
April 1994 by the Council of Ministers [64] . An agreement was signed between the
European Commission and the EIB on 14.6.1994 on the implementation by the latter
of the interest subsidy mechanism. The Commission adopted a report on the
implementation of this decision on 19.11.1994".

This mechanism is open to SMEs with net fixed assets of a maximum of ECU 75
million and with staff not exceeding 500 persons; however, at least 60%> of the
beneficiaries will be SMEs with less than 250 employees and an annual turnover of
a maximum of ECU 20 million or a total payroll under ECU 10 million.

**The interest subsidy of** **2%** **per year** is applied for 5 years on a maximum loan amount
of ECU 30,000 per job created, which comes out at a subsidy of ECU 3,000 over 5
years per job created. The payment will be made as from 1.8.1995, when the
beneficiary has proved that the new jobs have been in existence for at least 6 months.
The SME facility should allow 30,000 jobs to be created.

After decision of the Council, this mechanism was implemented in September 1994
and at the end of April 1995, **48%** **of the one billion of global loans had been allocated**
to **some 2 100 businesses** **and** **more than 23 000 new jobs were planned. 96% of the**
**volume of loans were granted to SMEs with less than 250 employees.** The number
of EIB intermediaries in the implementation of this mechanism varies by Member State
from 1 to 25 In Italy). An information leaflet has been widely circulated, notably
through the Euro-Info-Centres. The relevant Commission services are monitoring the
implementation of this mechanism closely.

**64**

**65**

Council Decision 94/217/EC of 19.04.1994, OJ No L 107 of 28.04.1994, p. 57.

COM(94) 434 final of 19.11.1994, report by the Commission on the implementation of the decision
regarding the provision of Community interest subsidies on loans for small and medium-sized enterprises
extended by the EIB to the SMEs under its temporary leading facility (the SME facility).

41

**2.1.1.3.** **The European Investment Fund : loan guarantees granted to SMEs**

At the Edinburgh Council it was decided, in the context of the European growth
initiative, to create a **European Investment Fund** aimed at granting loan guarantees for
projects relating to the trans-European networks and for the SMEs. With **a** capital of
ECU 2 billion subscribed by the EIB (40%), the Commission (30%) and some sixty
financial institutions (30%), this instrument can extend guarantees for a total amount
which can eventually reach rise to eight times its paid-up capital, or ECU 16 billion.
Later, the EIF will be able to take shares in the capital of enterprises specializing in
the financing of SME capital.

The EIF focuses its attention on those areas where it can be complementary to existing
sources of finance. It follows sound banking principles in offering two main types of
financial products :

financial guarantees : the level and extent of guarantees depend on the nature of
the project; variations in the risks involved are reflected in differentiated rates of
guarantee commissions. Guarantees may be provided not only to projects financed
by EIF shareholders but also for those of third parties. In general, these guarantees
will not cover more than half of the project cost and may be given in conjunction
with other guarantors;

equity : in the case of SMEs, the EIF will provide equity or quasi-equity only
through competent intermediaries (indirect facility). The Fund could however take
small direct participations in Trans-European Networks (TENs) projects during the
start-up phase. During its two-year start-up period, the EIF's activities will consist
of providing guarantees. It will take equity participations only after further study
and a decision by the General Meeting.

the initial ceiling on the overall commitments of the Fund has been set at 3 times
its subscribed capital. This may be raised, by decision of the Fund's bodies, first
to 5 times and then up to a maximum of 8 times subscribed capital once adequate
reserves have been established.

The Fund will not normally provide direct guarantees to individual SMEs. It will
rather work through appropriate financial intermediaries in the Member States, offering
guarantee lines to underwrite selected portfolios of SME projects or guarantees on the
sources of funding used by the intermediaries for their SME loans (i.e. EIB global
loans, bond issues).

As of 2.2.1995, the Fund has approved 4 guarantee operations in favour of SMEs (in
addition to 8 in favour of TENs), one of which has been signed. These SME lines,
to with financial institutions in Portugal and France, amount to over ECU 165 million
to be drawn down during the next 1-3 years. Further operations are under examination
including with mutual guarantee schemes which would not only facilitate access to
credit through guarantees but would also increase the volume of loans granted to
SMEs.

**42**

**2.1.2.** **SPECIFIC REGIONAL POLICY ACTIONS IN FAVOUR OF** SMEs

Aware of the role of the SMEs in achieving economic and social cohesion, the
Commission is implementing a real policy of support to enterprise, targeting regional
economic development. The 1988 reform has made it possible to strengthen action in
favour of local development both in traditional forms and innovative forms of
intervention. Article lc of the ERDF regulation [66] in fact gives this fund a mission of
"development of the endogenous potential of the regions for measures of promotion
and support for initiatives of local development and activities of SMEs".

This section concentrates on presenting the Commission's main guidelines for the
programming period 1994-1999, supplementing earlier reports which have dealt
exhaustively with the Community's major principles on structural action for the benefit
of the SMEs, their instruments and their financing methods as well as the balance
sheet for the period 1989-1993 [67] .

**2.1.2.1.** **The Community Support Frameworks**

Within the new Community Support Frameworks (CSF) and Single Programming
Documents (DOCUP), on average **10%** **of the total resources of the ERDF are devoted**
**specifically to measures dealing with the promotion and improvement of the economic**
**environment centred on the** SMEs. Given that the budgetary envelope of the ERDF
has been doubled for 1994-1999, this percentage constitutes a virtual doubling in value
relative to the period 1989-1993. This quantitative progress is largely due to the
efforts of the Commission during negotiations. The increase is certainly more tangible
in objective 2 (industrial decline) and 5b (rural) areas - where **the** percentage is
**between** 15 **and** 20% **on** average - than in the objective 1 areas. In these areas it does
not appear to exceed 8% except in the case of Portugal, thanks mainly to the
programme to modernize the Portuguese economic fabric (notably PEDOP II), the
commerce modernization programme (PROCOM) and the programmes of rural and
local development and regional aid, and in the cases of French and Belgian Hainaut,
Flevoland and the United Kingdom regions concerned (notably the Highlands and
Islands and Merseyside). It should be noted that the programme in favour of Greek
industry includes sub-programme for SMEs.

Operators can obtain information on the operational programmes either from the
European Commission or directly from the competent national or regional authorities,
or from the Euro-Info Centres.

66 Council Regulation (EEC) No 2083/93 of 20.07.1993, OJ No L 193 of 31.07.1993, p. 34.
67 COM(94) 221 final of 07.09.1994 and 5th annual report on the implementation of the reform of the

Structural Funds COM(95) 30 of 20.03.1995

43

ERDF interventions cover two broad categories of action :

support to the encouragement of demand for services by SMEs through cofinancing of national or regional aid procedures with a regional aim : subsidies to
investment that creates jobs, youth employment, equipment forming part of the
context of modernization of a firm or of environmental protection are thus the
principal measures co-financed by the Union. Small economic infrastructure
projects (industrial zones, technology parks, small business parks, enterprise
facilities in general) can also be supported;

support to the supply of services to SMEs consistent with creating, developing or
supporting structures improving their non-material working environment.

Hence, finance is available for arrangements responding to the principal needs
expressed by the SMEs.

Advice and innovation : technological centres, management shops, Enterprise and
Innovation Centres, certification and standardization bodies, the "enterprise"
services of Chambers of Commerce and of Industry, consultancy organizations;
Financing : financial engineering mechanisms [68] in the most varied forms :
guarantee funds, start-up capital, risk capital, participatory loans, mutual guarantee
societies, hire-purchase, factoring;
Internationalization : support measures for international actions by SMEs under
collective (group participation in fairs and shows, common export services) or
individual form (bringing a product up to standard or packaging a product,
specialized advice or market studies).

The guidelines advocated by the Commission clearly give preference to interventions
in favour of the offer of services, by insisting on the need for extended integration :
advice and accompaniment do in fact considerably improve the rate of survival of
newly created SMEs and the performance of developing SMEs. So they are in the end
closely linked to access of SMEs to credit and its cost, the latter depending directly
on the appreciation of the risk run by the financing bodies.

2.1.2.2. Community initiatives

The Commission uses its right of initiative to propose several "Community Initiatives"
specially geared towards the SMEs and to which they can have access via the relevant
authorities at regional or national level, charged with collecting and selecting projects
covered by the general guidelines of the operational programmes.

See the guide to financial engineering techniques used in the context of regional policies, available on
demand from the European Commission.

**44**

**The SME Community initiative** **[69]** **,** allocated ECU 1 billion for the period 1994-99 including ECU 800 million for objective 1 regions, is naturally linked with all the
enterprise actions under the Integrated Programme in favour of SMEs and the Craft
Sector, always according to the methods and procedures of the Structural Funds. This
initiative notably groups together the earlier initiatives TELEMATIC, PRISMA and
STRIDE.

Considering, on the one hand, the potential creation of jobs and the competitiveness
gains of SMEs and, on the other hand, the particular characteristics of these enterprises
in the objective 1 regions, the aim of the Community SME initiative, in accordance
with the guidelines of the White Paper on Growth, Competitiveness and Employment,
is to contribute to the internationalization of the SMEs and promote improvements in
their level of competitiveness.

For this purpose, seven priority areas have been identified : improvement of production
and organization systems, environment and rational use of energy, cooperation with
research centres, access to new markets, cooperation networks, strengthening vocational
qualifications, improved access to the financial system.

This initiative must contribute, in a significant way, to making the SMEs of the Union
more competitive by improving their environment and their know-how. The proposals
submitted by the Member States contain measures both in the area of cooperation
between SMEs - notably targeting their internationalization and better access to
domestic markets as well as to public markets - and in subcontracting, adoption of
total quality strategy, cooperation with research centres, access to new technologies,
marketing, finance, better organization and management of enterprises and ' also
management of the environment. The programmes, which target SMEs in the
industrial and service sectors, explicitly include the commercial sector for some, with
specific programmes as for Spain and Portugal. They also contain proposals targeting
micro-enterprises (Portugal) or small enterprises (Ireland).

The 12 other Community initiatives (INTERREGII, LEADER II, REGIS II, EMPLOI,
ADAPT, RECHAR II, RESIDER II, KONVER, RETEX, TEXTILE-PORTUGAL,
URBAN and PESCA) ;on which the Communications to the Member States were
published on 1 July 1994 [70] can also contribute to the development of the SMEs. For
example:

REGIS : which is principally concerned with the diversification of the productive
fabric of the most peripheral regions of the European Union in a perspective of full
participation of their SMEs in the single market.

RETEX: which is designed to assist enterprises in the textiles sector in the regions
most affected by international competition by improving their competitiveness with
a view to the full participation of SMEs in the large internal market.

**69**

**70**

OJ No C 180 of 01.07.1994, pp. 10-14.

OJNoC 180 of 01.07.1994.

**45**

URBAN : with the objective of revitalizing degenerated urban areas by a global
and coordinated strategy. The programmes proposed often contain measures
intended to support and create jobs by encouraging the establishment of industrial
and service SMEs, notably commercial ones with a view to ensuring
satisfactory commercial facilities for the population.

ADAPT : which targets adaptation to industrial change and improving the
competitiveness of firms (see point II.2.1.3.2). The Commission attaches particular
importance to the coordination of this relevant initiative of the European Social
Fund with the SME initiative.

**2.1.2.3.** **Innovative forms of intervention**

Innovative forms of Community intervention include global subsidies and pilot
schemes.

a) The global development subsidy introduced as from 1988 [71] is granted by the
Community to an existing or newly established body, described as an "intermediary
body", for carrying out a territorial development strategy which it has designed,
formalized, negotiated with the Commission in the context of a contractual
agreement, and which it will implement under its own responsibility.

Article 6 of the ERDF regulation [72] states that this instrument should preferably be
used in the context of the CSFs, in favour of local development initiatives in order,
notably, to establish a propitious environment for the development of SMEs.

This financing technique experienced a relatively sustained spread during the
period 1988-1993 when 31 agreements were established for a total combined
amount of ECU 687 million. 22 of these subsidies have involved intermediary
bodies in the Italian Mezzogiorno, largely backing up support services to the SMEs
of these regions. The new programming period should see increased development
of this form of intervention, notably in Italy and Spain where 9 agreements are
currently being prepared compared with two in the preceding period.

b) Community pilot schemes include tested programmes:

The "European Enterprise and Innovation Centres" (EEICs), launched in 1984 are
public-private partnership structures for identifying and selecting entrepreneurs and
projects which offer the most complete range of services to enterprise and
accompany the firm during the start-up period. Today the EEICs, of which 70 are
fully operational on Community territory, have already contributed to the creation
of more than **2,800 enterprises representing 16,000 direct jobs.** This network is
grouped into the "European Business & Innovation Centres Network" (EC-BIC).

**71**

**72**

Council Regulation (EEC) 2081/93 of 20.07.1993, OJ No L 193 of 31.07.1993, p. 9 and
Council Regulation (EEC) 2082/93 of 20.07.1993, OJ No L 193 of 31.07.1993, p. 25.
Council Regulation (EEC) 2083/93 of 20.07.1993, OJ No L 193 of 31.07.1993, p. 37.

**46**

On inter-enterprise cooperation, Europartenariat - organized jointly by the Commission
services responsible for enterprise policy and regional policies - constitutes an initiative
resolutely centred on SMEs. In effect, it establishes contacts between SMEs in the
"host region" (Ireland in 1988, Andalusia in 1989, Wales in 1990, Portugal and the
new Lander in 1991, Greece and the Mezzogiomo in 1992, North-East France and
Scotland in 1993, Poland and 7 "Atlantic Corniche" regions of Spain in 1994) and the
SMEs of other regions of the Community, so that they can conclude agreements at the
technical, commercial and financial level : in this way **several thousand** enterprises
have **already established mutual relations through the** **Europartenariat,** resulting in
many cooperation agreements.

This tried and tested method is also used in the context of more sectoral or
regionalized operations, like the "DOM-Interpartenariat" in June 1994, also organized
into an inter-service partnership.

Other inter-enterprise pilot schemes target :

groupings of regional producers including craft businesses and linking them with
actors in the distribution sector (marketing of quality regional products);
cooperation between large enterprises and networks of sub-contractors, including
those involved in large infrastructure projects, as well as the support of industrial
clustering (Eurospin).
lastly, the new proposed guidelines on pilot projects (Article 10 of the ERDF
Regulation) favour in a general way supporting the development of the latent
potential of the regions, while stressing that enterprises, and in particular SMEs,
should have access to R & DT and to the possibilities offered by the information
society. The pilot projects concerned with interregional cooperation will stress the
provision of common resources to give SMEs in the regions better access to the
Single Market, in particular by supporting the supply of common services and their
concerted actions on international promotion.

2.1.3. THE EUROPEAN SOCIAL FUND AND THE SMEs

2.1.3.1. Community Support Frameworks

Small and medium-sized enterprises are recognised as being a major source of new
employment. The creation of new SMEs and the development of existing SMEs is
crucial in the search for new jobs. The Commission is therefcre paying particular
attention to such issues as the contribution of different kinds of enterprises to job
creation and the encouragement of entrepreneurial activity to stimulate the creation of
more SMEs.

**47**

The far-reaching revision of the ESF regulation in July 1993" has made the ESF a
much more flexible and policy driven instrument. The Community Support
Frameworks now agreed or proposed in relation to the various objectives pursued by
the Structural Funds reflect **a** more coherent and strategic approach to human resources
development and improvement of the labour market. Account has been taken of the
three priorities for the ESF formulated by the Commission in the White Paper on
Social Policy [74] :

improving access to and the quality of education and initial training, and boosting
human potential in research, science and technology;

increasing competitiveness and preventing unemployment by adapting the
workforce to the challenge of change through a systematic approach to continuing
training;

improving the employment opportunities of those exposed to long-term
unemployment and exclusion through the development of a package of measures
which form a pathway to integration.

Emphasis has been put on establishing or improving in-firm training systems including
the drawing up of company training plans, management development and mechanisms
to anticipate labour market trends. The particular **difficulties faced by SMEs in**
**addressing their training needs in-house** has also been highlighted and encouragement
given to improving the quality and relevance of external training supply and to the
promotion of distance training techniques to open up cost efficient and flexible training
possibilities. In Greece, for example, decentralised accredited training centres are
being set up to provide continuing training.

Thus both the important role to be played by SMEs in generating jobs and the
particular difficulties they face in developing their personnel are widely recognised.
The promotion of a more systematic approach to continued training is planned to make
up approximately ECU **6 Billion during the period 1994-1999 or some 14% of total**
**Social Fund allocations.** Actions are to a large extent, but not exclusively,
concentrated in regions lagging behind, in terms of general economic development, or
seriously affected by industrial or rural decline (Objectives 1, 2 and 5b). Other
measures are applied throughout the Union with a view to facilitating the adaptation
of workers to industrial change and to changes in production systems (Objective 4 and
Community Initiatives).

The new Objective 4 of the European Social Fund intends to "facilitate the adaptation
of workers of either sex, particularly those threatened with unemployment, to industrial
change and to changes in the production systems". The actions aim to take into
account specifically the particular needs of small and medium-sized enterprises.

**73** Council Regulation (EEC) 2084/93 of 20.07.1993, OJ No L 193 of 20.07.1993, p. 39.
74 COM(94) 333 of 27.07.1994.

**48**

There are three main areas of action :

the anticipation of labour market trends and vocational training requirements;
vocational training and retraining, guidance and counselling;

assistance for the improvement and development **of** appropriate training systems.

Objective 4 actions are applicable right across the European Union. The approach is
"horizontal" rather than favouring a particular economic sector. Objective 4 also
promotes the "extended partnership" approach, that is the involvement **of** the relevant
economic and social partners, and training bodies. The level and degree of partner
involvement depends on the institutional practice in the respective Member States.

One of the common measures that Member States have decided is to **develop the**
**capacity of managers within** SMEs **to manage change** (new technologies, processes,
markets). Another main theme developed by Member States is the reskilling of
workers whose skills have become obsolete. This leads to the development of training
programmes that support "multi-skilling" of workers and their active participation at
several points of production and organization within an enterprise.

The improvement of training systems within firms is also emphasized. Certain
countries, for example, have decided to promote mutual cooperation between firms,
with the aim (amongst others) of developing training plans for the workers.

If the concept of anticipation, and the involvement of at least some big companies is
developing in France and Germany, the approach is less advanced in other Member
States. France, for example, is intending to spend about ECU 228 million of a total
Objective 4 allocation of ECU 300 million on training workers within enterprises.
70% **of this allocation for training (ECU 160 million) will be** **aimed** **at workers within**
SMEs. Precise spending allocations for most countries are not yet available. It is,
however, expected that SMEs **will benefit from a substantial proportion** _**of**_ **the**

**resources.**

The total Community expenditure for Objective 4, outside of regions lagging behind
(Objective 1), is just over ECU 1 billion for the period 1994-1996. At global level,
it is foreseen that private enterprise, Member States and the Community will each
contribute one-third to the financing of measures (thus multiplying the one billion by
three).

**49**

**2.1.3.2. The Adapt Community Initiative**

ADAPT is a new trans-national Community Initiative specifically designed to help the
labour force respond to the changing needs of the labour market. ADAPT focuses on
developing companies' human capital through training and qualification schemes, thus
helping to increase the competitiveness of industry, services and commerce. The
beneficiaries of ADAPT will, **to a great** **extent,** **be small and medium-sized enterprises**
**and their labour force.** Under ADAPT four main fields of action should be retained

training, counselling and guidance;
forward planning, promotion of networking and new employment opportunities
(employment and industrial change, qualification and training needs);
adaptation of support structures and systems;
information, dissemination and awareness raising.

The actions of ADAPT will be complementary to those of the SME Community
initiative. The SME initiative, like ADAPT, is fundamentally about promoting
adaptation to industrial change, however, the SME initiative's focus is on the
introduction of new production and organisation systems into enterprises (see point
II.2.1.2.2.).

During the first half of 1995 each Member State should have the framework of
national programmes in place. Project selection, which is the responsibility of the
national governments, should take place during the second half of 1995.

There is a total of ECU 1.4 billion available for the ADAPT Community Initiative
financing over the period 1995-1999. Of this money, ECU 400 million will be
reserved for actions within regions lagging behind (Objective 1). Measures under
ADAPT are co-financed by the Community: with the "additional" money of Member
States and private business, the global amount spent on ADAPT should be at least
triple. By **the** very nature of ADAPT **a** large proportion of expenditure should go to
the **benefit** of SMEs.

**50**

**2.1.3.3.** **Local development and employment**

Community actions in favour of local development and employment **often concern**
**SMEs, particularly micro-enterprises and craft** **businesses** **[73]** **.**

At the June 1994 European Council particular stress was laid on local development and
the role of the SMEs, micro-enterprises and craft businesses in the development of
employment [76] . This led the Commission, at the Essen European Council in December
1994, to present an inventory of Community action to support local development and
employment [77] . This report presents the tools made available by the European Union
together with an evaluation of the use of these instruments. It sets out proposals to
improve the effectiveness and coherence of Community actions based on
experimentation, the transfer of good practice and the strengthening of European
information and cooperation networks. Finally, it proposes initiating debate and
exchange of views at the European level with a view to re-establishing the partnership
between the Member States and the Union to benefit local initiatives. This report was
complemented by a survey within the European Union on local development and
employment initiatives [78] .

Lastly, on the basis of a Commission proposal [79], The Essen European Council (in
addition to the decisions taken by the two preceding Councils in Brussels and Corfu)
defined five broad areas of priority actions on employment [80] based on the White Paper
on Growth, Competitiveness and Employment, which were intended to assist SMEs to
develop, viz.:

1. improving employment opportunities for the labour force by promoting investment
in vocational training;

2. increasing the employment-intensiveness of growth, in particular by:

more flexible organization of work in a way which fulfils both the wishes of
employees and the requirements of competition;
a wage policy which encourages job-creating investment;
the promotion of initiatives, particularly at regional and local level, that create
jobs which take account of new requirements, e.g. in the environmental and

services spheres;

75 A detailed presentation of the ELI and ELDA is contained in report COM(94) 221 of 07.09.1994, point

III.5.
76 EC Bulletin 06/1994, point 1.6, p. 10.
77 SEC(94) 2199 of 19.12.1994.
78 SEC(95) 564 of 04.04.1995.
79 "Actions to convert growth into employment" - Brussels action plan (phase 2) of 28.11.1994.

**80** EC Bulletin 12/1994, point 1.3.

**i** **5 1**

3. reducing non-wage labour costs extensively enough to promote the engagement of
workers, particularly non-skilled workers;

4. improving the effectiveness of labour-market policy;

5. measures to help groups which are particularly hard hit by unemployment, such as
young people, the long-term unemployed, older employees and unemployed

women.

To implement these conclusions, the Commission has recently forwarded to the
Council a communication on establishing a European instrument to support and
promote employment (ESSEN), which, _inter_ _alia,_ deals with supporting the
development of local development and employment initiatives, including the role of
micro-enterprises and "économie sociale" enterprises [80A] .

The Essen Initiative recognizes the need to stimulate the creation of jobs in the
following areas, which will partly be taken up by SMEs : home help services, child
care, new information and communication technologies, assistance to young people
facing difficulties, better housing, security, local public transport services, revitalisation
of urban public areas, local shops, tourism, audiovisual services, the cultural heritage,
local cultural development, waste management, water services, protection and
conservation of natural areas, and the control of pollution.

2.1.4. **THE** EAGGF-GUIDANCE **AND** SMEs

The interventions of the EAGGF-Guidance section relate to objectives 1,5b and 5a.

As regards objective 1 regions, the EAGGF Guidance Section intervenes principally
in the form of operational programmes, supported by one or more funds, and
Community initiatives, including LEADER. The commitment appropriations for 1993
are ECU 866 million for operational programmes (excluding the amounts allocated to
objective 5a horizontal measures).

As regards the next period, it is still too soon to identify the measures to assist SMEs,
since a large number of operational programmes have yet to be approved.

The structural appropriations for LEADER II [81] amount to ECU 1.4 thousand million,
which includes 900 million for objective 1 regions for 1994-1999. As negotiations are
currently in progress, it is not possible to indicate the share that will be reserved for
the SMEs. **However, it is probable, that as in LEADER I, the SMEs will be**
**beneficiaries of the interventions on a large scale.**

80A COM(95) 250 of 13.6.1995.
81 OJ No C 180 of 01.07.1994, p. 48.

**52**

As to objective 5b, it covers 50 areas in .9 Member States. It covers 5% of the
population and 17% of the Community's territory. 73 operational programmes have
been approved for this objective, amounting to ECU 2 607 million. On 31 December
1993 all the appropriations for this objective had been committed. A detailed analysis
of Community actions under objective 5b for the period 1989-1993 is contained in the
report COM(94) 221 of 7 September 1994 (1.1.1.). The appropriations available for
objectives 5b for the next period - 1994-1999 - amount to ECU 6 667 million. This
budgetary envelope covers a population of 28.523 million inhabitants, or 8.24% of the
population of the Union. It should be noted that the population in these areas has
grown by 72% compared with the coverage for the period 1989-1993. The
programming stage is not yet completed for these zones, so the measures in favour of
SMEs cannot yet be identified.

In the context of objective 5a, EAGGF-Guidance intervenes to accelerate the
adaptation of agricultural structures and to improve the conditions of processing and
marketing of agricultural and forestry products, viz.:

a) aids to modernize agricultural holdings

Community regulations provide for the possibility of granting aids to farmers or groups
of farmers. In 1993 the commitments of the European Agriculture Guidance and
Guarantee Fund (Guidance Section) were of the order of ECU 1 059 million and
covered the cofinancing of three sectors mainly, viz.:

investment aids, at the rate of 50 000 new farm workers each year, promoting
diversification of activities and more care for the environment;

compensatory payments in badly affected regions affect over 1.2 million
agricultural workers and 55% of the Union's territory;

installation and investment aids for young farmers (indispensable for making the
farm population younger, with an average of 20 000 installations _per annum)._

These measures have been successful when applied to viable holdings and young
farmers, and in the countries which have been using them only a little while, such as
Spain and Portugal for modernizing their agricultural sector.

**53**

b) aids for modernizing the processing and marketing of agricultural and forestry
products

Two Regulations provide for Community support for investment in the processing and
marketing of agricultural products (Regulation (EEC) No 866/90) and forestry products
(Regulation (EEC) No 867/90). During the period 1991-1993, **some 65% of projects**
**co-financed under these Regulations related to SMEs, which obtained nearly 58% of**
**the total EAGGF assistance of ECU 1 217 million.** While SMEs form the majority
of the beneficiaries as regards the number of projects, their projects are smaller and
consequently the EAGGF assistance is proportionally less for SMEs than for large
enterprises. In addition, the size of the projects presented by SMEs varies appreciably
from one Member State to another, from 33% of the projects in Denmark to 100% in
Spain and Greece, for example. The average Community contribution per project
carried out.by SMEs was ECU 304 600 (ranging from ECU 65 649 in the Netherlands
to ECU 559 838 in Ireland).

**2.1.5.** **THE COMMON FISHERIES POLICY AND SMEs**

**The fisheries and aquaculture sector is essentially made up of** SMEs. Thus 95% of the
Community fleet consists of vessels under 24 m, 65% under 12 m, the latter employing
40% of the labour force, with 1 or 2 seamen per boat [82] . Likewise, according to a
recent study carried out on behalf of the European Commission [83], the fisheries and
aquaculture products processing industry employs more than 90,000 people in some
2240 establishments or a Community average of 40 people per enterprise.

The SMEs are thus the principal beneficiaries of Community structural interventions
in favour of fisheries. Since January 1994, the structural side of the common fisheries
policy (CFP), forms an integral part of the Community Structural Funds arrangements,
the two preceding financial instruments [84] having merged to give birth to the Financial
Instrument for Fisheries-Guidance (FIFG) [85] . As for the other Structural Funds, the
principle of multi-annual global programming is the rule, this programming forming
the subject of negotiations in the context of partnership with the Member States.

**82**

**83**

**84**

**85**

Source: Index of the Community fleet.

Statistical study of the fisheries and aquaculture product processing sector in the European Community,
April 1993.
Council Regulation (EEC) 4028/86 and Council Regulation (EEC) 4042/89.
Council Regulation (EEC) 2080/93 of 20.07.1993, defining the criteria and conditions for Community
interventions for structural purposes in the fisheries and aquaculture sector as well as the processing and
marketing of their products.

**54**

Respecting the requirements of the Common Fisheries Policy, in particular the fleet
restructuring objectives defined in the Multi-annual Guidance Programmes (MGP), the
FIFG participates in the financing of investments and actions in the following areas:

restructuring and renewal of the fishing fleet;
modernization of the fishing fleet;
improvement of conditions of transformation and marketing of fisheries and
aquaculture products;
development of aquaculture and development of coastal marine areas;
equipment of fishing ports;

market research.

The FIFG also contributes to the implementation of measures for the adaptation of
capacities and to the setting up of temporary associations of firms and mixed
companies.

Investments eligible for the FIFG relate, in particular, to operating conditions on board
ship, improved selection of techniques and fishing tackle, improvement of product
quality, bringing product hygiene, health and safety in the workplace and
environmental protection up to Community standards.

Community participation can reach 75% of public expenditure in the regions covered
by Structural Funds objective 1 and 50% in the other regions. These percentages are
50 and 30% respectively for productive investments. The FIFG has a financial
envelope of some ECU 2.7 billion for the period 1994-1999.

It is also appropriate to highlight the adoption of the Community initiative PESCA [86 ]

supplementing the FIFG. The originality of PESCA resides in the fact that it aims to
create very targeted projects to aid the fisheries sector to change successfully and to

revitalize the socio-economic fabric of the coastal zones. The PESCA initiative has

an allocation of ECU 250 million (of which ECU 125 million for the objective 1
regions) for the period 1994-1999.

Finally, at the request of the Council, the Commission has presented a report on the
socio-economic accompaniment measures linked to the restructuring of the fisheries
sector [87] .

**86**

**87**

Notice to the Member States published in OJ no C 180 of 01.07.1994, p. 1.

COM(95) 55 of 20.03.1995.

**55**

**2.1.6.** **COORDINATION BETWEEN ENTERPRISE POLICY AND THE UNION'S**

**FINANCIAL INSTRUMENTS**

As regards the new financial instruments of the Union, that is, the EIB's subsidized
loans for SMEs and the European Investment Funds, the enterprise policy services
cooperate with the financial affairs services and the EIB so that the SMEs can take full
advantage of these opportunities.

The services dealing with enterprise policy collaborate with the services responsible
for the Structural Funds in the context of the implementation of the Community
Support Frameworks (1994-1995) and the operational programmes that accompany
them as well as the Community initiatives, in particular the SME and ADAPT
initiatives in order to make support for SMEs effective and visible. In this context,
they participate in inter-service work as well as negotiations with the Member States.
They are members of the monitoring committees for the programmes of greatest
interest to the SMEs like the programmes relating to industry and to services (Ireland,
Italy, Greece and Portugal) or local development (Ireland, Portugal) and naturally the
same will apply to the programmes relating to the SME initiative. 1995 will be
marked by the completion of negotiations with the Member States with a vi-ew to
adopting operational programmes relating to the SME and ADAPT initiatives which
should have a major impact on the development of the SMEs.

While during the 1989-1993 period substantial amounts were provided to support
industry and services in the Community Support Frameworks (CSFs) (about 20% of
the financial envelope), the SMEs did not always benefit fully [88] . The new CSFs
adopted for the period 1994-1999 accord greater importance to the development of the
SMEs. The operational programmes already adopted provide in fact for significant
amounts in favour of the SMEs, sometimes proposing SME sub-programmes (Greece),
or a programme for commerce (Portugal). In future the monitoring committees should
ensure the concrete implementation of these measures in favour of SMEs.

In conclusion, closer cooperation between the Commission services has been
established which allows the SME dimension to be better taken into account in the

programmes. It allows the interventions to be better coordinated to strengthen their
coherence, their visibility and their effectiveness. Nevertheless, because of the
decentralization of the management of the programmes, the role of the Commission
is limited, once the programmes have been adopted, to monitoring and checking .on
their implementation. So, by virtue of the partnership, the Member States, the regional
and local authorities, and the economic and social partners need to be made aware of
the importance of the role of SMEs in the achievement of economic and social
cohesion.

In its report on the coordination of Community actions in favour of SMEs and craft businesses of
07.09.1994, the Commission analyzes the way in which the SMEs have been able to benefit from the
support of the Structural Funds and puts forward a certain number of recommendations to increase and
improve the use of these funds by the SMEs, COM(94) 207, point 1.1.5.

56

**2.2** **RESEARCH AND TECHNOLOGICAL DEVELOPMENT POLICY AND**

**THE** SMEs

Increased efforts have been made in the context of the 4th Framework Programme for
Research and Technological Development [89] to facilitate the participation of SMEs in
Community research programmes, thanks to close coordination between enterprise
policy and RTD policy. This chapter, in addition to a retrospective analysis of the
participation of SMEs in the 3rd Framework Programme, presents the significant
innovations introduced in the 4th Framework Programme to facilitate participation by
SMEs.

**2.2.1.** **SME DEFINITION**

While there is no formal definition of SMEs in the field of the Commission's Research

Programmes, the definition used for the CRAFT action under the third Framework
Programme (FP III) is maintained as a provisional definition to determine the
eligibility of enterprises for the SME specific "technology stimulation" measures
implemented under the fourth Framework Programme (FP IV). According to this
provisional definition, an enterprise is considered as an SME if it satisfies the
following conditions :

has no more than 500 employees;
has an annual turnover of no more than ECU 38 million;
is no more than 1/3 owned by an organisation larger than an SME (based ort
turnover and number of employees) unless it is a financial investor such as a bank
or venture capitalist.

In the future, this provisional definition could be revised in order to introduce a
coherent definition of SMEs in all Community programmes. In particular, the
Commission will closely monitor the participation of SMEs in the category of less than
250 employees in order to determine whether its programmes take sufficient account
of the needs of these enterprises, which represent 99.8% of all enterprises in the
European Union. In fact, the CRAFT Programme has shown that 90% of SME
participants have fallen into the category of less than 250 employees.

**89** 4th FPRTD, OJ No L 126 of 18.05.1994, p. 1.

**57**

**2.2.2.** **OVERVIEW** **OF** **SME** **PARTICIPATION** **UNDER** **THE** **THIRD**

**FRAMEWORK PROGRAMME**

**2.2.2.1.** **Statistics**

Table No 2 gives a summary of participation rates by SMEs in the programmes of FP
III and the corresponding EC financial contribution on **a** programme by programme
basis. **Overall, the total number of SMEs participating was 6 368, which represents**
**a budgetary commitment of** **ECU** **1 035 million, equal to** **22%** **of** **the** **total Community**
**financial commitment**

The data in table No 2 must be used with caution since they include all enterprises
with less than 500 employees irrespective of any other criteria for turnover or
ownership (i.e. subsidiaries of large companies are included).

**58**

**Table No 2**

**SME participation in programmes of the 3rd RTD Framework Programme'**

**% of** **total** **EC**

**financial**

**commitment**

30%

24%

100%
100% [ 91 ]

100%

31%

34%

23.6%

21%

12%

3%

4%

7%

3%

1%

3%

1%

1%

**Number of SME**

**participations***

**% of total**

**participations***

**EC fînancial**

**commitment**

**(MECU)**

139

5

67

8

459

185

86

49

5

6

2.5

7

10

2

1

2

2

Industrial&Materials Technologies:BriteEuram II

- Industrial and focused fundamental research

- CRAFT (Step 1)

- CRAFT (Step 2)

- Feasibility Awards

ESPRIT

RACE

Telematics and TIDE

Non Nuclear Energy
Measurement and Testing
Agriculture and Agro-Industry
Aeronautics

Marine S&T

Environment

Biotechnology
Nuclear Fission

Biomedicine and Health

Human Capital

3427 56% 219

652 24%

1304 95%

1203 70%

268

1250

585

411

341

44

59

37

52

80

20

22

7

33

27%

41%

20.3%

17%

13%

10%

9%

7%

3%

2%

2%

1%

<1%

24%

95%

70%

100%

 - The same SME participating in two different projects is counted as two participations

Source: Directorate-General for RTD.

**90** Statistics for contracts signed up to 01.11.1994.

Although most RTD work is carried out by R&D performer organisations, the results are entirely for the benefit of the SME proposers.

59

2.2.2.2. BRTTEEURAM

a) CRAFT **and** Feasibility Awards

Within the Brite-Euram programme (Industrial and Materials Technologies) the
Commission introduced **two SME specific schemes, Feasibility Awards** **(1989)** **and**
**CRAFT (1991)** in order to increase both quantitatively and qualitatively SME
participation in the Framework Programme. Feasibility Awards were aimed at SMEs
with RTD capacity who wished to prepare themselves to take a major or leading role
in a large multi-partner project, while CRAFT targeted SMEs with little or no RTD
means, enabling them to engage third party organisations with adequate RTD means
to carry out RTD work on their behalf.

The total figures for Brite Euram in table 2 have been broken down to show the effect
of the SME specific actions. Furthermore, when normalised to the size of the budget
available (i.e. EC budgetary commitment) the participation figures reveal the strong
multiplier effect resulting from the SME specific nature of the actions.

For CRAFT Step 1, the 1304 SME participations correspond to 391 outline proposals
selected for expansion, 83% of which followed through with a full research proposal.
Altogether, a total of 165 Step 2 CRAFT (Co-operative research) proposals were
selected for funding involving, as indicated, over 1200 SMEs. This achievement of
CRAFT is all the more notable since the greater majority of these SMEs (80%) are
total newcomers to EC **RTD** with 50% having no previous **RTD** co-operation
experience at all.

The CRAFT action has made it possible to triple the number of SMEs participating
in the BRITE-EURAM programme. The nature of the "co-operative research" projects
supported under CRAFT has made it particularly popular with traditional industrial
sectors such as textiles, materials processing, leather, mechanical engineering,
construction, or wood and furniture. Many of the projects tackle problems to do with
the modernisation of production and processes via adaptation of existing technologies.

Given the profile of the types of companies thus involved, the success of CRAFT is
owed to a sustained information dissemination and SME stimulation campaign which
was implemented largely via a European wide network of officially appointed CRAFT
National Focal Points (NFPs). Apart from ad-hoc focused SME stimulation actions
conducted on a sectoral/transnational basis, the NFPs and their associated sub-networks
have acted as decentralized sources of information and advice responding to specific
requests as well as undertaking promotional activities on their own initiative, all aimed
at helping SMEs in the process of setting up and submitting proposals.

**60**

**Feasibility Awards recipients and all other SME participations in the various specific**
**programmes listed mostly represent the** _**high-tech**_ _**end**_ **of the SME population. While**
**such SMEs tend to be better equipped and informed regarding EC RTD opportunities,**
**they still suffer from disadvantages of scale when compared to large companies. In**
**fact, a study carried out in the context of the BRITE-EURAM programme revealed**
**that SMEs derive a lot less benefit from participating in collaborative industrial**
**research projects than large companies or SME subsidiaries of large companies. This**
**has had clear implications for the type of improvements that have been made in the**
**SME specific actions to be implemented under FP** **IV.**

**Both these schemes in their present forms have come to an end in 1994 as the Third**
**Framework Programme (FP III) draws to a close and the Fourth Framework**
**Programme (FP IV) comes on-stream. However, this changeover between framework**
**programmes marks an important milestone for SME specific research actions. Based**
**on the success under Brite-Euram II of the CRAFT action, the decision has been taken**
**to deploy a new improved CRAFT action, which integrates the Feasibility Award**
**concept, to all specific programmes of industrial relevance under FP IV (see point**
**H.2.2.3.).**

**b) Concrete examples of typical CRAFT projects in** **BRITE-EURAM H**

**"Obtaining smooth ceramic glazes with improved wear resistance and**
**hardness"**

**Réf.** **CR -** **1001-91**
**This project has been running since February 1993. Its objective is to develop**
**new formulations for glossy and mat ceramic floor tile glazes with improved**
**hardness and abrasion resistance, thereby reducing their dirt retention**
**characteristics. A total of eight SMEs are involved (2 German, 2 British, 2**
**Spanish, 1 Irish and 1 Italian), six of which are involved in manufacture and**
**distribution of ceramic tiles, one is a glaze manufacturer and one is involved in**
**construction. Two research centres, one in Belgium and one in Spain, are**
**carrying out the research work for the SME proposers.**

**"Development and Characterisation of Surface treatments eliminating**
**nickel-induced** **allergies"**
**-** **Ref.** **CR** **- 1076-91**

**This project, which has been running since December 1993 is developing a**
**procedure for coating the surface of nickel to avoid the allergy problems nickel**
**causes when it** **cornes** **in contact with the skin.** **The project, which is of**
**particular relevance to the jewellery and watch making industries, involves a**
**total of 14 SMEs from three countries (7 French, 2 Spanish and 5 Italian).**
**Eight of these SMEs are electro-platers, two are instrumentation manufacturers,**
**one is a material supplier and three are jewellery makers. Three research**
**organisations (one each in France, Spain and Italy) are carrying out the research**
**on behalf of the SMEs.**

**61**

**2.2.2.3.** **Research into information and telecommunications technologies (ESPRIT)**

The Information Technology programme ESPRIT III, with a budget of ECU 1,532
million for the period 1991-1994, covers the following areas: micro-electronics,
advanced treatment of, information, calculation and high performance networks,
advanced information systems for the firm and the initiative on micro-processor open
systems, integrated computer-assisted production and, finally, basic research.

a) **Implementing ESPRIT** **m**

The RTD actions have been implemented through some 710 projects carried out by
consortia grouping together large, medium-sized or small enterprises as well as
universities teams or research centres. **About 920 separate SMEs,** belonging to
different Member States, have participated. About a third of these SMEs took part in
more tan one project. They **carry out about** **31%** **of the total of the relevant work of the**
**programme.** The various efforts made by the programme in favour of the SMEs have
been crowned with success, because this rate of participation is growing rapidly
compared to that obtained during the previous phase of the programme (ESPRIT II,
ECU 1,600 million, 1987-1991) when it was 21%.

The Information Technologies Programme plays an essential role vis-à-vis SMEs
wishing to carry out an RTD in information technologies or to have access to results
at the cutting edge of technology. Besides the financial aid contributed, the SMEs
participate in consortia uniting the required critical niass at the level of size and
necessary competence. They benefit from a rigorous system of evaluation and piloting
of projects which assures them of the validity of the work carried out. Finally, the
programme allows the SMEs to form trans-national links with other partners. It is
important to emphasize that the SMEs are generally very concerned to put the RTD
effort they have made to good account. So they play a visible and significant role in
industrial exploitation of the results obtained by these projects.

**62**

**b) Concrete examples of the impact of the programme on SMEs**

_**SMEs and**_ _**tlte**_ _**European Systems and Software Initiative (ESSI)**_

_ES_ _SI is an accompanying measure to the specific research and technological_
_development_ _programme for information technologies_ _(J_ _990 to_ _1994)._ _Its main_
_goal is to promote_ _**Software Best Practice**_ _in all industries, so as to achieve_
_greater efficiency, higher quality and greater economy._

_70% of all European software development is now carried out in_ _.non-_
_information technologies sectors of industry, with significant participation by_
_SMEs. It follow s that SMEs form_ _**a**_ _substantial part of the_ _ES_ _SI target_ _group._
_Moreover, within the Information technologies industry itself the great majority_
_of suppliers of software-based process improvement technology are SMEs._

_The pilot phase_ _ofESSI_ _was._ _started in_ _1993_ _to test the perceived relevance of_
_the programme and the effectiveness of the implementation mechanism. The_
_amount allocated was ECU 30 million. 45% of all accepted proposals have had_
_SMEs as prime proposers. In addition, SMEs make up a significant number of_
_the partners, subcontractors and suppliers in the remaining accepted proposals._
_Overall SMEs are present either_ _as_ _lead_ _users_ _or_ _as tecltnology_ _suppliers in more_
_than 90% of the_ _ESSI_ _pilot phase projects._

_There are several_ _reasons_ _for the high profile of SMEs within ESSI_ _First, as_
_indicated, SMEs are a major target for this initiative. Secondly, this initiative_
_has a broader industrial appeal than_ _traditional_ _RTD activities and is specifically_
_targeted at practitioners and_ _users._ _Consequently simpler, more flexible and_
_"lighter" methods of implementation have been developed, thus making it more_
_attractive to smaller organisations with more limited_ _resources._ _This applies in_
_particular to the preparation of proposals. Thirdly, the method of funding, based_
_upon the principle of 100% marginal costing, can be seen as being particularly_
_attractive to organisations with lower_ _overheads,_ _such as SMEs._

**63**

_HPCN_ _contribution_ _to European industrial_ _competitiveness_

**+**

_Goods and services sectors rely increasingly on Information_ _technology,_ _as a_
_component_ _and as a tool._ _HPCN_ _(High Performance_ _Computing_ _and_
_Networking)_ _provides_ _a_ _level of functionality_ _and_ _performance_ _not_ _previously_
_attainable_ _or_ _viable._ _It opens up new opportunities_ _for_ _faster, more efficient and_
_more reliable design, manufacture, quality control and_ _information_ _storage and_
_retrieval._ _Strategically, HPCN is central to increasing the competitiveness_ _of_
_European industry and Europe must maintain a leading position_ _in HPCN_
_technologies._ _ESPRIT,_ _and the new Information_ _Technology programme,_ _aim_
_to promote the development_ _of'the_ _HPCN technology in Europe, and its adoption_
_by European industry as a competitive_ _weapon._ _SMEs are central in this_ _regard,_
_as both technology developers and users._

_GP-MIMD_ _and DESIRE, are examples of projects in_ _which_ _HPCN_ _technology_
_is being developed._ _GP-MIMD aims to support development_ _of hardware and_
_software_ _environments_ _for parallel computers. It is based on architecture_ _which_
_allows modular interconnection of up to thousands of processors._ _Processing_
_power_ _can thus exceed hundreds of_ _Giga-flops._ _This_ _advanced_ _technology_ _is_
_now pioneered_ _in Europe by a number of SMEs including Meiko,_ _Parsys,_
_Parsytech and Telmat._ _ESPRIT has contributed to their success by_ _providing_
_funding_ _for_ _their technology,_ _and a framework_ _for_ _the establishment_ _of_
_partnerships._ _Moreover ESPRIT is a showcase allowing greater visibility_ _of_
_results and facilitating_ _their_ _dissemination._

_The sales by Meiko of their CS-2 machine to the US Energy Department_ _(the_
_first sale of a super computer to a U.S. government_ _laboratory by a_ _non-U.S._
_company),_ _and to the CERN laboratory for Particle Physics in Geneva (the first-_
_ever such sale by a European company)_ _are recent examples of_ _European_
_successes arising from this project._

_As part of the DESIRE project, an SME, Mental Images, uses parallel_ _computers_
_in CAD applications_ _to provide_ _better visual feedback_ _and photo_ _realistic_
_rendering and visualisation than was hitherto possible._ _(Rendering makes a_
_computer image more realistic by simulating surface textures and reflections and_
_shades on the object displayed)._ _A typical application is in the design of car_
_bodies, simulating_ _a metallic finish_ _and reflective windscreen._ _The_ _SME-_
_developed_ _rendering technology in this project has been sold to major industrial_
_end users such as BMW_ _andMercedez-Benz._ _Agreements_ _with Dassault and_
_Softimage, a Canadian subsidiary of Microsoft's Advanced Technology_ _Division_
_specialized in 3D and visualisation software, testify to the_ _worldwide_ _reputation_
_won_ _by this SME._

**64**

**c) The new Information Technologies Programme**

In the new Information Technologies Programme covering the period 1994-1998 [92], **the**
**programme's** **effoit** **to adapt to the specificities of SMEs will be continued** **and**
**amplified, both in the technical content of the programme and in procedures.**

First of all, the accent will be on several actions which are of special interest to SMEs
and also respond to the objectives of the programme, in particular contributing to
building the information society. Thus, in the area of components and systems
technology, an action is planned in favour of the "first use" of integrated circuits in
specific and innovatory applications.

In the field of software technologies, a first series of actions has been put in place
experimentally during ESPRIT III under "best practice" to promote the use of the most
advanced software technologies in concrete applications. Given the success of this
experiment, notably for SMEs, this type of action will be developed strongly in the new
Information Technologies Programme, which will allow a vast range of SMEs and
users to be reached and the know-how acquired to be circulated.

As regards procedures, several new provisions are included as presented in the chapter
on the specific actions in favour of SMEs within the 4th Framework Programme for
RTD, viz : cooperative type projects, exploratory premiums and the two-stage
procedure (see point II.2.2.3. below).

**2.2.2.4. Research results optimization programme (VALUE)**

The VALUE programme is aimed at promoting the spread and effective use of the
results of the research into science and technology in order to contribute to
strengthening the competitiveness of European industry and notably of the SMEs. The
support provided to the contracting parties participating in Community research, and
notably the SMEs, involves the financing of market studies, feasibility studies, the
preparation of business plans for SMEs seeking risk capital or other forms of finance.
VALUE I (1989-1993) with ECU 38 million and the centralized action VALUE II
(1992-1994) [93] with ECU 66 million are reaching the end of their implementation [94] .

Table No 3 on the participation of SMEs in VALUE shows that **the SMEs have been**
**involved 69% as contractor, 39% as partner and 38% as participant.**

**92**

**93**

**94**

SEC(94 1917 of 15.11.1994.

Council Decision 92/272/EEC of 29.04.1992, OJ No L 141 of 23.05.1992, p. 1.
These programmes are the subject of a detailed presentation in report COM(94) 221 of 07.09.1994, see
point II. 3.

**65**

Table No 3

Programme

VALUE I

VALUE II

### Participation of SMEs in VALUE Programme

Commitment
Appropriations

###### 7.276.890 9.950.000

Appropriations*al

lotted

to SMEs

###### 2.910.156 4.079.500

Projects**

Partners***

Participations* - * 

 

40

41

Total

109

143

%

50

69

%

47

39

SME

55

98

SME

101

180

%

49

38

Total

197

429

SME

93

166

Total

205

469

***T* *T* *T***

Extrapolation from available data to cover all projects
Number of contracts

Partners : there can be several SME partners in a single project
Participation : one SME can participate in several projects

Source : Directorate General for telecommunications, the Information Market and the Optimization of Research

**66**

**2.2.3.** **SME SPECIFIC ACTIONS UNDER** **THE** **FOURTH FRAMEWORK PROGRAMME**
**(FPIV)**

**Based on the experience of the Brite-Euram programme, technology stimulation measures for**
SMEs have been introduced in 12 RTD programmes under FP IV using the following general
schemes:

Proposals can be submitted and evaluated in 2 stages : Outline proposals submitted
at Stage 1 may give rise to an exploratory award to help cover the cost of preparing
a complete proposal for submission at Stage 2;

A standard project called "co-operative research" is available under most programmes
exclusively for SMEs with little or no RTD capability; co-operative research proposals
may be submitted directly or through the two stage procedure when appropriate;

Co-operative research and exploratory award proposals are implemented via a
continuously open call - i.e. proposals can be submitted at any time;

Decentralised information, advice and assistance are available at national and regional
levels to SMEs from a Network of Focal Points.

These measures are well underway and the first proposals have been submitted in early 1995.

Furthermore, there is an **information package on** **"technology** **stimulation measures for SMEs"**
which is common to 10 programmes and **a new SME Unit** within the Commission services
responsible for RTD to ensure the harmonized implementation of the SME specific measures
between all the relevant programmes. **Specific budgets have been allocated within the**
**different programmes for specific SME measures and the total amount is over ECU 700**
**million, which represents 9% of the total budget for these programmes.**

In addition, however, the share of the FP IV budget which will benefit SMEs will be greater
than ECU 700 million as SMEs will also participate in other actions within the mainstream
research programmes.

In conclusion, great progress has been achieved to facilitate access of SMEs to Community
RTD programmes.

**67**

**2.2.4. INNOVATION AND TECHNOLOGY TRANSFER PROGRAMME (SPRINT)**

The implementation of the strategic programme for innovation and technology transfer
(SPRINT) was extended up to 31 December 1994 [9i] . The measures adopted aim to stimulate
innovation and technology transfer, notably in the SMEs. Continuity of these measures will
be assured in the context of the third action provided for in the Fourth Framework Programme
of RTD [96] . The budget allocated to SPRINT for the period 1989-1994 was ECU 113 million.

The activities promoted by SPRINT relating to SMEs are covered by three sets of actions :

**2.2.4.1.** **European innovation** services infrastructure

In 1994, the actions consisted in consolidating the networks rather than developing them.
Innovation in SMEs has been stimulated by the following networks:

a) Networks of consultants in technology and innovation management

These networks aim to promote trans-national technological cooperation between their SME
clients. By the end of 1994, SPRINT had subsidized more than 150 networks which include
over 350 bodies. Definite technological agreements made, each involving two SMEs, have
been estimated at 750. These agreements cover the various contractual forms of transfer of
technology like: patent or know-how licences, industrial franchise, technical cooperation,
technical assistance and the creation of joint ventures.

SPRINT also laid stress in 1994 on the exchange of experiences and the dissemination of
good practice in the area of technology brokerage with SMEs. A mobilization campaign
covering all the Member States reinforced the SPRINT series of 20 Technology Transfer Days
for SMEs and increased awareness amongst over 2000 SMEs and technological advisoiy
bodies.

b) Network of research and technology organizations (RTO)

Over 60 RTO networks linking 300 members have been supported. The work programmes
in these projects aim to disseminate technologies to the SMEs, both in the traditional
industries (building, textiles or wood) and in diffusion technologies such as laser or
CAD/CAM for example. It has been estimated that some 50,000 SMEs have benefitted from
the technology dissemination activities earned on by these networks.

**95**

**96**

O J N o L 6 o f 08.01.1994, p. 25.
Council Decision 94/917/EC of 15.12.1994 relating to the specific programme of dissemination and
optimization of the results of activities in the field of research and technological development,
including demonstration, OJ No L 361 of 31.12.1994, p. 101.

68

**2.2.4.2.** **Intra-Community** **dissemination of technological resources**

**a)** **Intra-Community** **innovation transfer**

Specific projects for intra-Community innovation transfer have been promoted. Of the fortyodd projects that have received financial support during their definition stage, twenty-one
projects had been set in motion by the end of 1994. Their objective is to adapt and transfer
finished technologies from one region to another, or from one sector to another.

**b)** SME **awareness actions on innovation management**

The growing complexity of technology entails profound changes in enterprises. The use of
management techniques (such as quality, industrial design, value analysis or intellectual
property management) facilitate the integration of new technologies within enterprises. In
order to make SMEs more aware of access and the use of new innovation management
techniques, SPRINT launched the MINT initiative. MINT (Managing the Integration of New
Technologies) has been prepared as a Community experimental advice and diagnostic
programme, **providing financial support to about 1500 SMEs** in the Member States as well
as in certain EFTA countries forming part of the European Economic Area. These enterprises
will receive advice designed to facilitate their adoption of new technologies thanks to
integrated use of management techniques.

In parallel with the MINT programme, several initiatives have been launched to promote the
exchange of experiences between professionals in the European Union in the key areas linked
to **innovation management** as **well as the dissemination of these techniques with the SMEs.**

Amongst these initiatives, the organization of the 4th European Design Prize should be
highlighted. **The very high number of entrants from SMEs (over 1200)** demonstrates the
success of this initiative to make SMEs more aware of the advantages of design as a
management technique.

The activities to promote quality and value analysis (publication of success stories or drawing
up users' manuals) affect **over 10,000 SMEs every year, notably in the traditional industries**

**sector.**

**c)** **Innovation financing activities**

Two programmes relating to innovation financing have been launched by SPRINT. The first,
entitled "Trans-national Investment Forums", brings together entrepreneurs from innovative
and rapidly growing SMEs, seeking sources of finance, and financiers seeking investment
opportunities. A dozen forums have been planned for 1994 and 1995, bringing together **some**
**500 innovative SMEs and more than 1000 contributors of capital,** largely risk capital
companies, from all over the Union.

The second, known as the Technology Performance Financing Plan (TPF) aims to facilitate
the acquisition of new technologies by enterprises, and notably SMEs by improving their
liquidity and by strengthening the competitiveness of European suppliers of new technologies.

**69**

**2.2.4.3.** **Better knowledge of** **innovation** **and greater concertation between the Member**
**States and the Commission**

The European Innovation Observatory (EIMS) under the SPRINT programme has established
a knowledge base and a research capacity on innovation and technology transfer at
Community level.

Notable amongst the studies in progress in 1994 affecting SMEs is the Community Innovation
Survey (CIS), a joint SPRINT and EUROSTAT initiative which has created a database on
**40,000 enterprises, mainly** **SM*Es,** covering 200 variables in each enterprise. This research
will permit the analysis of capacities and innovative strategies of European SMEs as well as
the dissemination of technologies and innovation management techniques.

Beyond the various studies launched by the EIMS in 1994 to provide an **analytical and**
**empirical** **outline** **of the current state of innovation in European** SMEs, SPRINT has promoted
a series of forums in 1994 on certain key issues in innovation policies for SMEs (regional
innovation infrastructure, innovation financing, Research and Technology Organizations'
development strategies, participation of workers in innovation, and finally, innovation policy
themes).

Table No 4 shows the estimated number of enterprises that have directly benefitted from the
SPRINT programme, by type of measure. Altogether **162,600 SMEs have benefitted from the**
**SPRINT programme,** either purchasing, testing or keeping themselves informed of the new
technologies, notably thanks to the trans-national networks.

**2.2.5. EUROTECH CAPITAL ACTION**

The purpose of the EUROTECH CAPITAL action is to encourage the financing by private
capital of High-Technology Transnational Projects. Accordingly, the commission has approved
European financial units specializing in supplying their own funds to SMEs. These financial
units, which have a minimum investment capacity of ECU 50 million, agree to reserve **at** **least**
**20%** **for participation in SMEs** which develop High-Technology Transnational Projects or
which use environmentally-friendly technologies.

In 1994 the EUROTECH CAPITAL network comprised 13 members, covering the majority
of the Member States, who **had undertaken to invest an overall total of ECU 202 million in**
**High-Technology Transnational Projects, which in relation to the Community budget has a**
**leverage effect of 2** **500%.**

**70**

TABLE No 4

ESTIMATE OF THE NUMBER OF SMES WHICH HAVE DIRECTLY BENEFITTED FROM SPRINT

I European innovation services infrastructure

1.1. Trans-national technological cooperation between SMEs through transnational networks of consultants in technology and innovation
management and technology transfer days (since 1989)

  - 750 agreements forged each involving two SMEs.

Examples of such agreements : production or distribution licences,
joint R&D and production agreements

  - for each agreement concluded, an average of 10 SMEs have assessed
or tested the technology

  - for each agreement concluded, some 30 SMEs have become aware of
the new technology

  - SMEs participating in technology transfer days
1.2. Dissemination of new technologies through networks of research and
technology organizations.
300 research and technology organizations with on average 750 SME
clients, took part in this action

   - 2 % of SME clients have acquired a new technology as a direct

result of the activities of this network

   - 8 % of SME clients have assessed or tested a new technology as a

direct result of the activities of this network

   - 20 % of SME clients have become aware of the new technology

II. Intra-Community dissemination of technological resources

2.1. Specific projects designed for the intra-Community transfer of
innovations (21 projects of this type each involve 5 SMEs) :
SMEs participating in specific projects;
SMEs will will be made aware of the new technology during the
dissemination of specific projects.
2.2. Awareness actions with SMEs on innovation management

MINT programme

SMEs made aware of the advantages of innovation management
techniques

2.3. Innovation financing activities

12 forums each bringing together some 40 innovative SMEs from
different countries seeking finance

III EIMS- Community innovation survey

TOTAL

Number of

SMEs which

have

acquired a

new tech
nology or

other

resources

1.500

4.500

Number of

enter-prises

directly

involved

100

1.500

500

**8.100**

Number of

SMEs which

have tested/

assessedthe

new tech
nology

7.500

18.000

**25.500**

Number of

SMEs which

have become

aware of the

new tech
nology

22.000

2.000

45.000

10.000

N 10.000

40.000

**129.000**

Source : Directorate General of Telecommunications, the Information Market and the Optimization of Research

71

**2,2.6.** **THE THERMIE PROGRAMME**

**Given the importance of the role of SMEs in the economic development of the European**
**Union, they constitute a special target for energy policy. The THERMIE programme, one of**
**the pillars of this policy, responds effectively to the needs of SMEs in terms of innovative and**
high performance energy **technologies** by establishing continuity of research **and** development
activities in the market by demonstration.

**2.2.6.1.** **The THERMIE Programme 1990-1994**

After the first oil shock in 1973, the Commission implemented programmes to support energy
demonstration and hydrocarbons technologies to respond effectively to the effects of the crisis,
particularly on SMEs, which were faced at the time with the double challenge of maintaining
their competitiveness and controlling their production costs. **From 1974 to 1989, 50% of the**
**projects supported by these programmes involved SMEs in a total of 2450 projects; this**
**represents** **ECU** **1.2 billion of financial** **support** .

In 1990, the THERMIE Programme [97], with funding of ECU 700 million over five years, was
adopted, ensuring the continuity of the earlier programmes and adding three new dimensions:

- better coordination and complementarity with similar programmes in Member States,

- broad dissemination of information on innovative energy technologies already developed
and ready to penetrate the market,

- subsidiary priority projects in which SMEs participate.

This programme supports a wide group of technologies aimed both at production and
processing and at energy use in the following areas :

- Rational use of energy in industry, buildings and transport,

- Renewable energies,

- Solid fuels,

- Hydrocarbons.

From 1990 to 1994, the THERMIE programme supported 713 projects at a cost of ECU 573
million. **60% of the projects involved SMEs which were included as a selection** **criterion** **in**
**the evaluation of technological tenders.** This marks an important development by comparison
with the 1973-1989 period and shows the interest of the THERMIE Programme in SMEs.

**97** Council Regulation (EEC) 2008/90 of 29.06.1990, OJ No L 185 of 17.07.1990, p. 1.

72

The THERMIE Programme has also permitted the implementation of associated measures to
accompany the technological projects and promote energy technologies amongst users and
notably SMEs. These measures are largely carried out through the OPET network
(Organizations for the Promotion of Energy Technologies") which was launched in 1990 and
which now groups together 49 public and private organizations in Europe. This network has
woven close relations with the industrial world and the SMEs by a whole series of actions on
communication, market studies, seminars, workshops and marketing groups. Providing
information in a form that is as adapted to and receivable by SMEs as possible, is one of the
principal roles of the OPET network.

**2.2.6.2.** **The THERMIE Programme 1995-1998**

For the 1995-1098 period, the THERMIE [98] is part of the Fourth Framework Programme for
Research and Technological Development, including demonstration, in the field of non-nuclear

energy.

THERMIE, with a budget of over ECU 500 million over the period considered, is divided into
two main chapters ;

- financial support to projects implementing innovative energy technologies;

- financial support to a whole series of complementary activities such as:

  - definition of the strategy for energy demonstration;

  - dissemination of energy technologies on the market;

  - support and accompaniment measure;

  - technological stimulation of SMEs.

So this new THERMIE programme provides for support to even more SMEs both at the
project support level and complementary activities including one chapter exclusively devoted
to SMEs. The aim is to encourage and facilitate participation by SMEs in technological
projects by :

- assisting SMEs to identify their needs and find partners;

- adapting newly developed energy technologies to their specific needs;

- training their staff in the new energy technologies;

- assisting SMEs to participate in existing energy demonstration projects.

In addition, in order to complete the activities for market penetration of energy technologies,
the Commission has proposed an additional programme (THERMIE II) for the 1995-1998
period [99], currently under negotiation.

98 Council Decision 94/806/EC of 23.11.1994, p. 87.
99 COM(94) 654 of 20.01.1995.

**73**

**2.2.7. RESEARCH ACTIVITIES IN THE FIELD OF TRANSPORT**

The EURET Programme (EUropean REsearch in Transport) was launched by the Council
Decision of 21 December 1990 [100] . It responds to three objectives : the optimization of the
management of transport networks, the optimization of logistics and the reduction of external
effects. With a budget of ECU 26.8 million, the programme has allowed SMEs to participate,
thanks to the creation of enterprise consortia. While large enterprises have benefitted from
more than half the available funds (51%), **SMEs come second amongst beneficiaries with** **J.9%**
**of the budget (ECU 3.6 million) and 25% of the number of participants.**

The Council Decision adopting a specific programme for research and technological
development, including demonstration in the field of transport (1994 to 1998) [101] also provides
for **technological stimulation geared to encouraging and facilitating the** **participation** **of** SMEs.
The programme will encourage the participation of SMEs by granting a subsidy covering the
exploratory phase, and including the search for partners and an RTD action and through
cooperative research. This subsidy will be granted on the basis of outline proposals which can
be submitted at any time (see point II.2.2.3.).

2.3. VOCATIONAL TRAINING PROGRAMMES **AND THE** SMEs

In the field of vocational training, in addition to the important resources (some ECU 20 billion
for the 1989-1993 period) devoted to the occupational integration of people who have
difficulties on the labour market, thanks to the European Social Fund, the Commission has
implemented a certain number of programmes intended to raise the level of qualifications
throughout the Community in order to master the process of economic, technological, social
and cultural change (COMETT, EUROTECNET, FORCE and PETRA). These programmes
were completed at the end of 1994 and replaced as from 1.1.1995 by the LEONARDO
programme [102] which opens the way to the new generation of professional training programmes
for the 1995-1999 period. This chapter therefore presents, first, an evaluation of the impact
of the earlier programmes on the SMEs [103] and, secondly, the new prospects offered by the
LEONARDO programme.

The EUROTECNET, COMETT and FORCE programmes have achieved significant and
concrete results laying the basis of trans-national cooperation and demonstrating the
importance accorded throughout the European Union to vocational training as a policy
fundamental to economic growth. Particular attention has been accorded to the participation
of SMEs in the actions supported by these programmes. Table No 5 gives the figures for
SME participation in these three programmes.

100

101

102

103

Council Decision 91/11/EEC of 21.12.1990, OJ No L 8 of 11.01.1991, p. 6.

OJ No L 361 of 31.12.1994, p. 56.

OJ No L 340 of 29.12.1994, p. 8.

This part consists of an update of the information in the report COM(94) 221 final of 07.09.1994, point
III. The Commission report on the coordination of activities in favour of SMEs presents a detailed
analysis of these programmes together with examples of projects.

**74**

**Table No 5**

**i i l I l î O N A L** **TRAINING**

**ACTIONS IN FAVOUR OF S M E S IN THE**

**EUROTECNET, COMETT AND FORCE PROGRAMMES**

PROGRAMMES 1993-1994

EUROTECNET (1990-1994)

. Budget (MECU) 7,5 MECU
Total number of projects in the network 284
Total number of projects targeting SMEs 46
% of projects targeting SMEs 18 %

FOKCE (1991-1994)

. Budget 91-94 83,1 MECU
Total number of projects 716
(call for tenders, 91 to 93)
Number of SMEs contracting or coordinating 253
projects, of which groups of SMEs
SME beneficiaries Several thousand, groups of SMEs able to

   - directly assemble many members, sometimes several

   - through groups hundred,
of enterprises

   - through business, sectoral federations
Number of enterprises involved
of which groups of SMEs

(contracting, coordinators, partners) 3.100
Number of SMEs directly involved of which
groups of SMEs (contracting,
coordinators, partners) 2.250
Rate of direct participation
SMEs, groups of SMEs
all firms 73 %

**75**

**PROGRAMMES** **1993-1994**

COMETT **(1990-1994)**
Budget (excluding EFTA) (MEClf)(90-92:121)(93-94:79)

EFTA Budget

**Number** of SMEs directly **benefitting, of** which:

   - SMEs receiving students on placement

   - SME employees receiving training courses

   - SME staff using training products

Number of SMEs involved as partners in a project, of
which:

   - Number of SMEs < 50 employees

   - Number of SMEs with 50 to 200 employees

   - SMEs in university-enterprise training partnerships

   - SMEs in exchange projects

   - SMEs as partners in education and continuing
training projects

Percentage of COMETT projects including at least 1 SME
as partner

Estimate of rate of participation of SMDEs (<500
employees) amongst all participating enterprises

Source : Commission Services DG XXII

**76**

200 MECU

30 MECU

- 40.000-+/- 200.000 employees

      - 15.000

+/- 100.000

+/- 70.000

        - 10.000

       - 5.000

       - 3.000

       - 3.000

       - 4.000

       - 2.500

>2.000 (80%)

+ /- 75%

**2.3.1.** **THE EUROTECNET PROGRAMME**

The EUROTECNET programme [104] (1990-1994) aimed to promote innovation in the field
of **vocational training resulting from** technological change. The Council Decision
stipulated **that it is appropriate to ensure that small and medium-sized enterprises**
**participate in the implementation of the programme and the dissemination of the results**
**obtained.** EUROTECNET **therefore** attached particular importance to projects which have
an impact on innovative solutions in the development of human resources in the SMEs.
At the outcome of the selection procedures in the 12 Member States, 284 demonstration
projects were selected to constitute the network of EUROTECNET projects of which **46**
**(or 18% of the total) relate to initial or continuing vocational training in SMEs or for**
**SMEs.**

**2.3.2.** **THE COMETT PROGRAMME**

The COMETT programme (1990-1994) [105] was a programme of intra-Community
cooperation between university and enterprise on initial and continuing training in the
field of technologies, notably advanced technologies. One of its general objectives was
to respond to the needs for specific qualifications for SMEs. The global budget was ECU
230 million (including the EFTA contribution).

SMEs have been able to benefit from the COMETT programme as partner in a project,
as direct beneficiary of the results of a project (e.g. by going on a course) or as indirect
beneficiary (by gaining access to the training resulting from analysis of needs supported
by the programme).

A detailed analysis of SME participation in the COMETT programme shows that **about**
**75%** **of enterprises involved as partners in one or more COMETT projects are** SMEs **(less**
**than 500 employees), reaching a figure of 10,000 SMEs in 1994 and possibly rising to**
**15,000 by the end of 1995.** Of these 10,000 SMEs participating directly, **5,000 (or half)**
**employ less than 50 people and 3,000 (or a third) have between 50 and 200 employees.**

**80%** **of COMETT projects include at least one SME.** The UETA (University Enterprise
Training Association) and the universities have made it possible to involve SMEs in
COMETT projects. The role of the UETA has grown continuously thanks to the network
and the system of bringing partners
together. 40% of the manufacturing enterprises entered COMETT through a university
compared with 5% through training enterprises.

Of the SMEs which have participated in COMETT, 33% participate in the
UETA, 40% in trans-national exchanges and about 25% in joint continuing training
projects.

104 Council Decision 89/657/EEC of 18.12.1989, OJ No L 393 of 30.12.1989, p. 30.
105 Council Decision 89/27/EEC, OJ No L 13 of 17.01.1989, p. 28.

**77**

Altogether, it is estimated that **40,000 SMEs will** **have** **benefitted directly from**
**COMMETT** **H,** including at least 15,000 which have received students on placements
from different countries. As regards the measures for continuing training, it is currently
estimated that some **200,000 SME employees** have taken a training course or are using
training materials. Finally, it should be noted that over **one thousand SME intermediary**
**organizations** (Chambers of Commerce or trade associations) have participated in the
COMETT partnerships with a multiplier effect on SMEs.

**2.3.3.** **THE FORCE PROGRAMME**

The FORCE programme [106] (Continuing Vocational Training in the European Community)
had the objective of encouraging enterprises, notabiy SMEs, to invest in continuing
vocational training. For this purpose the trans-national measures of the FORCE
programme supported the achievement of synergy in innovation, European sectoral
surveys, analysis of contractual policy and forecasts of the development of qualifications
and skills.

During the years 1991, 1992 and 1993, 716 projects were selected (164 in 1991, 263 in
1992 and 289 in 1993). **2250 SMEs or groups of SMEs participated in this as partners**
**in more than two-thirds of the projects,** directly or indirectly via associations, chambers
or inter-enterprise training organizations.

As an example, the retail sector was chosen as a field of investigation to identify the new
trends in this sector where the links between vocational training and the organization of
work are traditionally weak. Thus a programme of distance learning for the employees
of commercial SMEs belonging to a form of cooperation between shopkeepers in 3
Member States was supported.

**2.3.4.** **THE NEW LEONARDO da Vinci PROGRAMME (1995-1999)**

On the proposal of the Commission, the Council adopted a Decision establishing a
programme of action for implementing a continuing vocational training programme in the
European Community known as LEONARDO da Vinci [107] . The programme will run from
1.1.1995 to 31.12.1999, with a budget of ECU 620 million.

The LEONARDO programme aims to promote quality in vocational training and
innovative capacity in this field. For this purpose, it establishes a Common Framework
of objectives, qualitatively describing the eighteen objectives for vocational training
defined at Community level. The Community measures described below will be
implemented on the basis of this common framework of objectives.

106 Council Decision 90/267/EEC of 29.05.1990, OJ No L 156 of 21.06.1990, p. 1.
107 Council Decision of 6.12.1994, OJ No L 340 of 29.12.1994, p. 8.

**78**

**LEONARDO takes up the three main types of trans-national cooperation measure initiated**
**in the earlier programmes :**

**pilot cooperation projects;**
**exchange programmes for different publics;**
**surveys and analysis.**

**It includes an important innovation. In fact, all the proposals included in these three**
**types of measure should have a trans-national character and a stronger accent is put on**
**the dissemination and breaking-down of the results.**

**The measures are distinguished according to their purpose, in three sections:**

**Section I :** **Support to improvement of systems and arrangements for vocational**
**training in the Member States;**
**Section II :** **Support to improvement of vocational training actions, including**
**through university-enterprise cooperation relating to enterprises** **and**
**workers;**
**Section III :** **Support to development of language skills, knowledge and**
**dissemination of innovations in the field of vocational training.**

**In each section specific priorities are defined. As regards the trans-national pilot projects**
**in section II, and without prejudice to the procedure laid down by article 6 of the**
**Decision, these priorities must include, amongst others :**

**the acquisition of the qualifications and skills required for adapting to industrial**
**change, the development of production systems and the dissemination of new**
**technologies, notably in small and medium-sized enterprises and the traditional**
**sectors of industry;**
**the** **development** **of training of enterprise management in the transfer of**
**technological innovations and the training of directors and heads of small and**
**medium-sized enterprise.**

**Furthermore, in the context of section III and in particular of cooperation with a view to**
**the improvement of language skills, Community support is planned for the conception of**
**trans-national pilot projects targeting the completion of linguistic audits for enterprises,**
**and notably small and medium-sized enterprises and the socio-economic actors.**

**Equally, in the context of surveys and analyses in the area of vocational training,**
**Community support is planned on a trans-national basis with a view to analyzing new**
**training** **methods** **intended for small and medium-sized enterprises in order to increase**
**access for their workers to** **appropriate** **training.**

**79**

All fields of vocational training are covered : initial training and transition to working
life, continuing training, university-enterprise cooperation in particular with SMEs and
with a view to supporting the transfer of technological innovations (section II). Through
the notion of continuum, LEONARDO is advancing the objective of transverse
cooperation between areas corresponding to the policy objective of the development of
life-long learning.

All the players in vocational training are involved in the measures : public authorities,
enterprises, notably SMEs, the social partners at the national level and the Community
level, public and private training organizations, universities. An important point is that
the partnerships between the various players are researched with a view to increasing the
quality of training by better adjustment of **supply to the needs of enterprises and in**
**particular the SMEs.** Each project will be presented by its coordinator and will identify
clearly the associated partners in the various Member States.

LEONARDO lays particular stress on coordination with other Community actions [108] . The
actions supported in the context of LEONARDO essentially bear on the preparation of
training actions, product conception and innovative methods, dissemination and demultiplication of results. The LEONARDO programme must not target support for
carrying out training actions as such in a marginal way, hence the search for
**complementarity** between this action programme and the finance allocated in the context
of the Structural Funds, notably under the heading of the Community initiative ADAPT
(see point II.2.1.3.2.) **where the SMEs will be widely involved and the Community** SME
**initiative** (see point II.2.1.2.2.) **where they are directly targeted.**

In addition, the services charged to Education, Training and Youth seek increased
coordination with those of enterprise policy to ensure that the implementation of the
LEONARDO programme is coherent with the Integrated Programme in favour of the
SMEs (see Introduction to this report).

**2.4** **THE OTHER COMMUNITY PROGRAMMES**

**2.4.1.** **ENVIRONMENTAL POLICY**

**2.4.1.1.** **The LIFE financial instrument**

Since 1992, the SMEs can be supported in the context of the LIFE financial instrument
for the environment, created by EEC Regulation No 1973/92 of 21.5.1992 [109] .

In 1993, 99 demonstration projects in the Member States have been co-financed in the
context of this programme from total assistance of ECU 44,653,159.

108 Article 8, paragraph 2 of Council Decision 94/819/EC, OJ No L 340 of 29.12.1994, p. 13.

109 OJ No L 206 of 22.07.1992, p. 1.

**80**

**Amongst these projects it is estimated that 43 concern SMEs which have consequently**
**benefitted from co-financing of ECU 16,983,627, or 38% of the total granted.** The
sectors involved are mainly as follows :

Own technologies sector.

- Treatment of surfaces

- Textiles

- Tannery

- Paper

- Agri-food

4 projects
3 projects
5 projects
3 projects
3 projects

2. Waste treatment sector, notably by recycling : 17 projects

3. Rehabilitation of contaminated sites : 5 projects

4. Water sector : 2 projects

As regards the impact on employment, estimation is difficult because when pilot
demonstration projects are involved it is generally a matter of temporary employment or
employment already present in the enterprise.

However it is estimated that there would be between 4 and 6 jobs per project, which leads
to the view that **about 200 to 250 jobs in SMEs have been** **suppoited** **by LIFE.**

**2.4.1.2.** **Environmental audit**

In addition, like large enterprises, the SMEs are subject to national and Community
regulations on environmental protection. The environmental policy services have made
a group of specialized Euro-Info-Centres responsible for preparing a self-analysis tool and
for increasing the awareness of the SMEs of the system of management and
environmental audit (see point II. 1.1.1.).

Moreover, the Commission (DGXI) financed 23 pilot projects involving SMEs in 1994,
aimed at facilitating participation of small enterprises in the EC Environmental
Development and Audit Scheme.

**2.4.2.** **HYGIENE, SAFETY AND HEALTH** **EST** **THE WORKPLACE**

The European Year of Hygiene, safety and health in the Workplace observed in 1992
constituted a special occasion for informing about and improving health and safety in the
SMEs [110], notably through good cooperation between the Commission services. Since then
a certain number of actions have been pursued in this area (cf. EUROMANAGEMENT
pilot action, II. 1.3.2.).

See COM(94) 221 of 07.09.1994, point IV.2.

81

The Commission services (DG XXIII and DG V) have drawn up a document on risk
assessment in the workplace [1] ", in collaboration with the Consultative Committee on
Safety, Hygiene and the Protection of Health in the Workplace. Its objective is to inform
employees, workers and other parties interested in the practical aspects of implementing
the directions on risk assessment set by Council Directive 89/391/EEC [112] concerning the
introduction of measures aimed at promoting the improvement of the safety and health
of employees at work. Although this document deals primarily with risk assessment, it
also examines certain aspects of risk management. One part is **particularly devoted to the**
**needs of small and medium-sized enterprises in this area**

Furthermore, the self-audit method for health and safety at work prepared by the
Commission services offers **support to the heads of SME** during their assessments and
their decision-making in the field of protection of health and safety in the workplace.
This method will be disseminated in the form of a **self-audit manual for the** use **of** SMEs.

In coordination with the World Health Organization and the International Labour
Organization, the Commission services are developing safety cards on chemical
substances. These cards, mainly intended for SMEs, should provide information on the
characteristics, toxic potential and typical reactions of certain chemical substances used
in the workplace. The preparation of a CD-ROM version of these cards is also envisaged.

In liaison with the Health and Safety Authority, the Commission services organized a
conference entitled "Taking risks and working safely" in Dublin on 9 and 10 March 1995.
**This conference was principally geared to health and safety in small and medium-sized**
**enterprises.**

The European Agency for Safety and Health at Work was established by the Council on
18 July 1994 [113] . Its mission, inter alia, is to provide technical, scientific and economic
information on the methods and tools designed for carrying out preventative activities,
**with particular attention to the specific problems of small and medium-sized enterprises.**
The Commission will particularly press for this Agency to come into operation in 1995.

The Commission has recently proposed a Fourth Programme on safety, hygiene and health
at work in which two of the basic principles are : the need to ensure that actions
undertaken on health and safety are designed to support the competitiveness of
enterprises, particularly SMEs and that improved education, training and information are
essential towards achieving better health and safety at work and in assisting SMEs in
doing so [113a] .

One of the actions in this proposed Programme is the SAFE Programme (Safety Action
for Europe). SAFE will support projects of a practical nature intended to demonstrate:
the promotion of improvements in the work place specially directed at safety, hygiene and
health at work, particularly for SMEs, and the improvement in the organisation of work
practice and to influence attitudes towards safety and health at work in order to reduce
accidents at work and occupational diseases.

**m**

**m** Work is in progress on the publication of this document.

112 OJ No L 183 of 29.06.1989, p. 1.

113 EEC Regulation No 2062/94, OJ No L 216 of 20.08.1994, p. 1.

113a COM(95) 282 of 12.7.1995.

112

113

**82**

**2.4.3.** **THE INFORMATION MARKET**

**2.4.3.1.** **The IMPACT Programme**

The IMPACT programme (1991-1995), targeting the single market for information
services, has undertaken several actions in favour of SMEs. In 1994, this programme
implemented over 700 actions on awareness and promotion of electronic information
services, through a specialist network of national partners. **Most of these addressed**
SMEs, which need advanced methods of access to and processing of information to
become and remain competitive. Secondly, **the productive industry of electronic**
**information services is itself largely composed of SMEs.** Consequently, the shared cost
projects for developing new information products and services supported by the IMPACT
programme have been implemented by organizations **75%** **of which are SMEs.** Finally,
the set of projects which were supported following **a** call for proposals in 1994
specifically targeted information intended for industry and commerce taking account more
particularly of the needs of SMEs.

**2.4.3.2. The TEDIS** **Programme**

Electronic Data Interchange, EDI, is a powerful tool towards helping modernize the
European economy and to implement European Union policies for business and, in
particular SMEs. The TEDIS (Trade Electronic Data Interchange Systems) programme
was launched in 1988 and entered in its second phase in 1991 " [4] . Out of the 160 contracts
signed **half of the prime contractors are** SMEs. TEDIS promotes EDI standards and
raises awareness of EDI within enterprises to use in their commercial transactions and in
their contacts with administrations, and has application on standards, intellectual property,
and telecommunications. TEDIS also co-ordinates sectoral groups and has developed a
network of 40 awareness centres in various European regions to stimulate the knowledge
and use of EDI to help SMEs.

A recommandation has been adopted on an EDI Interchange Agreement [115] which is
intended to simplify the establishment of EDI based transactions and to help SMEs
wishing to trade electronically with large companies and administrations. TEDIS has
encouraged the use of electronic signatures for EDI messages as a means towards simple
and cost-effective solutions for EDI software adapted for SMEs.

In telecommunications, TEDIS has developed interconnection solutions for EDI related
telecom services, such as a One Stop Administration (the EDIRA project), which
simplifies electronic contacts between small businesses and administrations.

Council Decision n° 91/385/EEC of 22.07.1993, JO L 208 of 30.07.1991, p. 66.
Recommandation n° 94/820/EC of 19.10.1994, JO L 338 of 28.12.1994, p. 98.

**83**

Most small businesses by industry sectors are represented in the various pan-European
EDI communities coordinated by TEDIS. TEDIS is also active in several international
cooperative ventures where EDI and SMEs are involved, either with developed countries,
eg Canada and G7 pilot projects, ("Global Marketplace for SMEs"), or with
Mediterranean countries, eg Tunisia, or more recently with Eastern and Central European
countries.

TEDIS has also inspired a project for Electronic Commerce in the Commission services
themselves, called PECANEC (Pilot Experiment in Canada and EC on electronic
Commerce). This project is based on a TEDIS project called Fortius whose objective is
to set up a network of "Electronic Commerce Centers" where an electronic catalogue of
goods and services offered by small firms is presented, and which can be ordered,
delivered and paid for through EDI by purchasers in their own language and currency.
In the case of PECANEC, the purchasers are the administrations themselves and the
products available in the electronic catalogues include furniture, computers, office
supplies and data processing expertise. The goal is to demonstrate that public
procurement can be opened up to small enterprises and that they can operate in
international markets by using EDI and modern but simple technology.

In conclusion, TEDIS, based on commercially available technologies, is well adapted to
SMEs, helps modernize business transactions and supports various European policies
developed in favour of SMEs.

```
2.4.4. INTERNATIONAL COOPERATION

```

Cooperation between enterprises is one of the priorities of enterprise policy.
This chapter presents the cooperation programmes which have been established to
stimulate and support cooperation between Community enterprises and the enterprises of
non-Community countries, viz : the countries of EFTA, central and eastern Europe, the
CIS and Georgia and those of Asia, Latin America and the Mediterranean.

2.4.4.1. Cooperation with the European Economic Area countries (EEA)

With the entry into force of the European Economic Area (EEA) on 1 January 1994, the
countries which were members of the European Free Trade Association (EFTA) with the
exception of Switzerland and Liechtenstein (Austria, Sweden, Finland, Norway and
Iceland) are participating in Community activities in the context of enterprise policy and
tourism. These countries contributed ECU 2.5 million in 1994 to participate in all
enterprise policy activities. Thus correspondence centres were established in these
countries and became fully fledged Euro-Info-Centres in June 1994. The member
countries of the EEA form part of the Committee known as "article 4" by virtue of
Council Decision 93/379/EEC of 14.6.1993 [116] without voting rights.

116 OJ No L 161 of 02.07.1993.

**84**

**2.4.4.2.** **Cooperation** **with the central and eastern European countries** : **(CEECs)**

In the context of the PHARE programme, the Commission has set up **sub-programmes**
**for the development of** SMEs by providing technical assistance to the following countries
: Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Albania, Slovenia, Rumania,
Lithuania, Latvia and Estonia. In this context, between 1990 and 1993, the European
Union made a contribution of ECU 320 million distributed by country and by measure
as shown in Table No 6. The support provided is concentrated on 3 types of measure :
assistance services **to** SMEs (advice, information and training), financial instruments
(banking services) and guidelines for formulating an enterprise policy. These programmes
are managed in a decentralized way by a management unit established in each country.

**Table No 6**

**Distribution of Community aid to SMEs in the CEECs**

Country

Estonia

Latvia

Lithuania

Poland

Czech Republic

Slovak Republic

Hungary

Romania

Bulgaria

Slovenia

Albania

TOTAL

Programme, preparation, monitoring and
evaluation

EU organisations

JOPP

TOTAL

Total

MECU

**3**

**3**

**6**

**91**

35.5

**22**

**59**

**10**

**25**

**1**

**6.5**

**262**

**5.5**

**5**

47.5

**320**

Know
how

MECU

**2**

**2**

**3**

33.7

**13.5**

**8.7**

27.6

**7.6**

**6**

**1**

**2.4**

**107.5**

**5.5**

**5**

**118**

Financial

instruments

MECU

**1**

**1**

**3**

57.3

**22**

13.3

31.4

**2.4**

**19**

**-**

**4.1**

**154.5**

**154.5**

Programme
started

01/1993

01/1993

01/1993

01/1991

01/1992

01/1992

12/1990

02/1993

09/1991

01/1993

01/1992

12/1991

**48.3%** **of PHARE support to SME development between 1990 and 1993 has been**
**committed to financial instruments,** **36.9%** **for transfer of know-how and** **14.8%** **for JOPP.**

**85**

The services responsible for enterprise policy are closely associated with the establishment
of measures in favour of SMEs in the context of the PHARE programme. This
coordination is carried out at several levels, notably through technical assistance to the
development of SMEs in these countries, contributing to the definition, monitoring and
evaluation of calls for tender, as well as joint organization of seminars.

In addition, these services contribute to the **progressive integration of new partners from**
**the CEECs into the network of information and cooperation between SMEs, that is the**
**EICs and BC-NET, to the organization of a EUROPARTENARIAT in Gdansk in Poland**
**in 1994** and finally, to the development of cooperation and the inter-enterprise partnership
in the context of the JOPP programme (Joint Venture PHARE Programme) [117] .

The JOPP programme is a specific programme within the PHARE programme which aims
to develop support actions to the creation of joint enterprises in the CEECs between
Community SMEs and partners in these countries. The actions supported relate to
feasibility studies, participations in the capital of the joint enterprise, the training of its
staff and the information necessary for its creation.

JOPP initially had ECU 20 million available for the period 1991-1993 of which ECU 17
**million directly benefit the** SMEs. An additional amount of ECU 27.5 million was later
allocated to the JOPP programme to allow it to face up to the continuing growth in
requests from the SMEs.

The measures implemented have essentially permitted Community SMEs to carry out
feasibility studies of their joint enterprise projects, thus reducing the administrative,
financial and legal constraints which are holding back the development of joint
enterprises. After these studies, a certain number of SMEs have already effectively
created the joint enterprises envisaged with assistance from appropriations from the JOPP

programme.

Although JOPP finance benefits all the CEECs, Poland, the Czech Republic and Hungary
are the principal beneficiary countries. This finance covers all the productive economic
sectors, and the sectors of industrial production and consumer goods have benefitted most,
followed by services and agri-food. **The programme effectively** **prioritizes** **assistance to**
**SMEs, given that 66% of the** **cases-** **approved have been introduced by enterprises with**
**fewer than 100 employees.** By encouraging the creation or extension of joint enterprises
in the CEECs, this programme is intended to **encourage investment in Community** SMEs
abroad. The forecasts for investment amounted at the end of 1994 to ECU 720 million

for a Community budget commitment of ECU 39 million, or a **leverage effect of 1800%**

117 Commission Decision of 30.01.1991 No Z91/01, XXV General Report, No 69, p. 26.

86

**2.4.4.3** **Cooperation** **with the CIS and Mongolia**

The TACIS Programme is a European Union initiative for the Commonwealth of
Independent States (CIS) and Mongolia which fosters the development of harmonious and
prosperous economic and political links between the European Union and these partner
countries. **Within the framework of TACIS, ECU 19 million have been allocated to**
**support small and medium-sized enterprises in 1992, ECU 20 million in 1993 and ECU**
**12 million in 1994 which is ECU 51 million for these 3 years.** The distribution by
country over these years is the following : Armenia: 1.6, Azerbaijan: 1.3, Belarus: 3.4,
Georgia: 3.53, Kazahkstan: 3.8, Moldova: 0.8, Mongolia: 2, Russian Federation: 14.26,
Turkmenistan: 1.0, Ukraine: 3.9, Uzbekistan: 3.32, Inter-State: 11.5.

The TACIS SME programme, to date, has been founded on a strategy based upon the
need to build up intermediary agencies. That is, to put in place, and support through
further technical assistance, organizations which can provide assistance to existing
entrepreneurs and those who wish to set up businesses. As a result of the 1992, 1993 and
1994 SME programme over 40 support centres have been established in the New
Independent States.

Since the launching of the SME TACIS programme, the Commission services responsible
for enterprise policy have been involved in the development of some actions such as the
shortlisting of tendering organizations and the evaluation of tenders. Although the support
centres in the CIS do not form part of the Euro-Info Correspondence Centres, these
Commission Services are providing active help in creating systematic links between the
TACIS support centres and the relay centres, which have been established by some EuroInfo- Centres in the CIS.

Furthermore, the Commission services will progressively include the TACIS Support
centres in the BCC network, starting with the centres in the Russian Federation and
Ukraine. In June 1994 a selected number of CIS entrepreneurs participated in the
Europartenariat in Gdansk/Poland. Since then, TACIS has formalized the CIS
participation. National counsellors have been appointed in almost all CIS republics and
a special training programme has been organized for them. While the Commission
services directly responsible for the TACIS programme are providing the funding for the
national counsellors, the enterprise policy services have included them in all activities
organized for them with regard to the Europartenariat.

Finally, three panels are to be established in Hungary, Russia and Ukraine by the
Committee on Commerce and Distribution with the support of DG XXIII's Distributive
Trade Unit. The objective is to raise awareness in these countries on problems that EU
enterprises wishing to do business there are facing and to provide technical advice and
assistance for developing independent professional federations and efficient distribution
networks in these countries.

In conclusion, there is steady and constructive cooperation between the Commission
services in implementing the TACIS SME programme which enables the Commission
services in charge of TACIS to benefit from the experience gained in the field of SME
policy by the Commission services directly in charge of enterprise policy.

**87**

**2.4.4.4.** **Cooperation** **with developing countries in Asia, Latin American and the**
**Mediterranean**

Specific programmes supporting the development of SMEs have been established in a
certain number of developing countries, in particular the MED-INVEST programme for
Mediterranean third countries, the AL-INVEST programme for Latin American countries
and the ECIP programme.

MED-INVEST is a programme of support to cooperation for development of SMEs in
Mediterranean third countries in association with European SMEs and professional
organizations. Its objective is to promote an environment in Mediterranean third countries
that is favourable to the development of SMEs and to the growth in their competitive
capacity. MED-INVEST, with a budget of ECU 12.2 million for a period of 2 years
(1993-1995), grants non-reimbursable aid to groupings of enterprises, institutions,
organizations or development companies which possess a real competence in the area of
information, inter-enterprise cooperation as well as in support to economic development.

**The Business Cooperation Network (BC-NET) is associated with mis programme to**
**strengthen and extend the network in the 11 Mediterranean third countries** **[118]** as well as to
provide training of members and the necessary accompaniment measures to the economic
players. The Commission services responsible for enterprise policy provide technical
assistance for the creation of partnerships. **Correspondence centres linked to the Euro-**
**Info-Centres network were established in Israel in 1993 and in Jordan, Morocco and**
**Tunisia in 1994.**

AL-INVEST, the programme of industrial cooperation and promotion of investment in the
Latin American countries [119], with a budget of ECU 18.5 million for a duration of 2 years
(1993-1995), aims to facilitate commercial exchanges, technology and know-how transfer
and financing to the mutual benefit of Latin American and European enterprises. **The**
BCC **is also associated with mis programme.**

ECIP (European Communities Investment Partners) is a financial instrument in favour of
the developing countries of Latin America, Asia and the Mediterranean created in 1988
and its legal basis dates from 1992 [120], the date on which it was extended by a new 3-year
trial period and provided with increased finance in view of the success it has experienced
(ECU 39.15 million for 1993).

The principal objective of ECIP is to facilitate the creation of joint enterprises in the
eligible countries so as to contribute to their economic development. Hence it intervenes
in the various stages of the creation of an enterprise : from identification of partners and
potential projects through intermediaries to training and technical assistance, via the
project feasibility study and a contibution to the capital of the joint enterprise. The
maximum amount that can be granted is ECU 1 million for a joint enterprise. ECIP
excludes multinational firms and makes it a condition that the joint enterprise includes at
least one Community partner and a partner from the country concerned.

118 Morocco, Algeria, Tunisia, Jordan, Occupied Territories, Lebanon, Syria, Israel, Turkey, Malta and
Cyprus.
119 Council Regulation No 443/92 of 25.02.1992, OJ No L 52 of 27.02.1992, p. 1.
120 Council Regulation No 319/92 of 03.02.1992, OJ No L 35 of 12.02.1992, p. 1.

**88**

The orientation of the ECIP scheme is towards SMEs (excluding large multinational
undertakings, which are expressly excluded by the Regulation). By their very nature all
the Facility One actions (grants for identification of projects and partners) are oriented
towards SMEs and 84% of **all** Facility Two, Three **and** Four actions in terms of number
**of projects approved in 1994 have concerned beneficiary** SME firms. This reflects the
provisions of the Regulation which provides for SME applications to have a priority status
but without excluding larger firms, most notably in cases concerning particular
development benefits such as technology transfer.

In 1994, 337 projects were approved for a total amount of 42.13 MECU (271 MECU in
1993). This instrument was extended to South Africa according to the conclusions of the
Council of 19 April 1994. The results show that this instrument is playing a role in Asia,
Latin America and in the Mediterranean to help local economic operators to consider the
European Union as a partner in the development of their businesses.

2.4.4.5. Cooperation with China

After a conference organized with the China Council for the Promotion of International
Trade at Antwerp in NovemberT993, two Interprise meetings in Paris and Nanjing were
organized in 1994 to develop contacts between SMEs. Moreover, the last mixed EUChina Commission (Beijing, February 1994) decided to accord the highest priority to
industrial cooperation between enterprises and notably European and Chinese. In this
context, several actions are in preparation to develop a programme of cooperation in this
domain.

2.4.4.6. Promotion of Community exports to Japan

The EXPROM-Japan programme aims to promote Community exports to Japan. In this
context the Commission is implementing :

management training actions in communication in the Japanese business
environment; the Executive Training Programme (ETP) targets medium-sized
enterprises but is also intended for small enterprises which have found a niche on
the Japanese market;
an integrated three-year promotion campaign. "Gateway to Japan", which provides
logistic and financial support to encourage participation in international fairs taking
place in Japan to nine European sectors of activity (essentially industrial) whose
performances in Japan are not yet satisfactory given their competitiveness at the
world level. Small and medium-sized enterprises are naturally invited to benefit
from this campaign, even if only through the access thus provided to them to
sectoral market studies integrating the draconian changes that have recently taken
place in Japan which cannot but encourage them to reconsider this market if they
had renounced it.

concerted actions with the Japanese authorities to introduce small firms into the
Japanese market In the context of the commercial cooperation programme
implemented jointly by the Commission and the Japanese authorities, the
Commission is in particular presenting small and medium-sized enterprises as
candidates for the JETRO (Japan External Trade Organization) Export to Japan
Study Programme.

**89**

**2.4.4.7.** **Conclusion**

Most of the programmes for cooperation with third countries, like TACIS, PHARE,
EXPROM-Japan, MED-INVEST and ECIP encourage the development of SMEs and
notably of joint enterprises. Although the SMEs are the principal beneficiaries directly
or indirectly (through larger enterprises), it should be noted that Community support is
**not specifically geared towards Community SMEs and** that the PHARE and TACIS
programmes, for example, also provide support to **SMEs in the** **countries** **benefitting** from
Community aid. On the other hand, in cases of joint enterprises, the two parties are
guided by common interest which allows them to weave durable economic links between
the Community partners and those of the third countries.

The group of actions of cooperation with third countries are the subject of good
coordination between the various relevant Commission services. They allow these
countries to benefit from acquired expertise in enterprise policy as well as the existing
intermediary networks and give European SMEs better information about the opportunities
available to them in third countries through Community programmes.

**2.4.5.** **DEVELOPMENT POLICY TOWARDS ACP COUNTRIES (AFRICA, THE**
**CARIBBEAN, THE PACIFIC)**

Given the importance of the private sector for the development of African, Caribbean and
Pacific States (ACP), the 4th Lomé Convention [121] provides for a vast range of instruments
which can be used to support SMEs in those countries. **A large part of these programmes**
are of **direct or** **indirect** **interest** to **European** SMEs.

The instruments of the Convention are implemented by the Commission via the indicative
programmes, negotiated and signed with each ACP State, by the EIB or by the Centre for
Industrial Development (CID).

Within the framework of these programmes, private sector projects, of priority interest to
SMEs, currently affect some forty ACP States, representing some ECU 240 million in
technical and financial assistance.

The distribution by ACP region shows the interest of West and East Africa (including the
Horn of Africa), each with 9 countries involved and an allocation of ECU 60 million.
**Programmes centred on** SMEs **have also been implemented or are in preparation with**
**countries in the Caribbean region and in certain countries surrounding South Africa**

121 Lomé IV, OJ No L 229 of 17.08.1991.

90

From the indicative programmes, measures of technical assistance are available as an
example : support to specialized bodies (Chambers of Commerce), the despatch of experts
to banks financing SMEs but also and above all, for the last ten years the promotion of
Investment Forums. First held in West Africa (Dakar) and Central Africa (Libreville),
these Forums bring together hundreds of European investors who identify investment
opportunities through meeting local entrepreneurs.

Recently, sectoral Forums (mining sector in Lusaka) have also been organized by the
Commission. In view,of the difficulties ACP exports experience on world markets,
commercial promotion actions, in agreement with European SMEs, are assisting local
enterprises to improve their competitiveness.

The contribution of resources drawn from these programmes is not limited to technical
assistance alone. **The** Commission also contributes **to the financing of** the SMEs, through
subsidies and indirectly, via lines of credit from local financial intermediaries, import
programmes, and the creation of guarantee funds (recently, participation in a guarantee
fund for loans from banks, notably European, in West Africa).

A special effort is also made to attack the roots of the problems of SMEs, mainly African,
by giving priority to the creation of enterprises and the training of entrepreneurs at work.
A new approach, launched a few years ago in certain Sahel countries, has instigated the
creation of hundreds of micro-enterprises and ensured the employment of several thousand
people. This effort is being applied in other ACP countries in the region.

The resources of the EIB, notably the risk capital, are particularly adapted to financing
SMEs, in view of their great flexibility. Since the 4th Convention, this capital is also
offered to joint European-ACP enterprises in the form of capital participation and
conditional loans (maximum rate 3%). A significant part of the total amount of this risk
capital (about 40%) has been allocated, directly or indirectly, to ACP - or joint EU-ACP SMEs, in cooperation, in certain cases, with the financial institutions of the Member
States.

For some fifteen years, the Centre for the Development of Industry (CDI), created by the
Conventions which govern cooperation between the EU and the ACP countries, has been
supporting cooperation between European industrial SMEs and those of the ACP States,
using instruments like joint-venture, management contract, licensing and subcontracting
backed by a network of local and European antennae and strict cooperation with Member
States' promotion bodies.

The CDI receives some 500 requests for assistance a year and makes use of a budget of
ECU 60 million to launch some 200 direct interventions annually in favour of ACP and
European SMEs.

In view of the complementarity of their respective roles, the Commission, the EIB and the
CDI operate in close cooperation. For example, the CDI selects "bankable" projects
which benefit from easier access to the resources of the EIB; certain EIB global loans to
local SMEs are accompanied by technical assistance offered by the Commission and by
the CDI (e.g. with a regional bank in West Africa). The negotiations in progress for the
second part of the Lomé Convention (1995-2000) are certainly going to reinforce this
inter-institutional cooperation around programmes of support to the private sector, thus
promoting the growth of local enterprises and their collaboration with European SMEs.

**91**

**CHAPTER IE. COORDINATION WITH THE PARTNERS**

**1.** **CONSULTATION WITH BUSINESS ORGANIZATIONS**

The Commission regularly consults and informs associations representative of SMEs, the
craft sector, commerce and the social economy at the European level on Community
activities specifically directed towards SMEs as well as on all subjects that may concern
them (like the Structural Funds, RTD and legislative proposals). In parallel, thèse
organizations inform the Commission on their attitudes to all matters which more
particularly affect them. A good partnership has been established between the
Commission and these organizations which allows the viewpoints of business to be made
known and often taken into account.

The conference organized in June 1994 on "European Enterprises and the final VAT
system", which enabled a wide-ranging and fruitful discussion to take place between the
various parties concerned, and in particular SME organizations, is a good example of the
Commision's strategy.

In the commerce and distribution sector, the Commission systematically consults the
Committee on Commerce and Distribution created in 1981 [122] on all Community measures
likely to concern commerce.

**2.** **SOCIAL DIALOGUE**

On 14 December 1993, the Commission presented to the Council and to the European
Parliament a "Communication concerning the application of the Agreement on social
policy" [123] which notably defines, at Community level, new procedures for consultation
with the social partners as well as the conditions by which these collective agreements
could be concluded.

Paragraph 24 of this communication defines the criteria to be satisfied by organizations
to be consulted, in terms of the provisions of article 3 of the Agreement on social policy.
The list of social partner organizations "corresponding at the present stage to the criteria
defined in paragraph 24", linked to annexe 2 of the Communication, makes explicit
reference to the European Association of Craft, Small and Medium-sized Enterprises
(UEAPME, EUROPMI and other associated organizations), in accordance with the
conclusions of a study undertaken by the Commission services in order to assess the
representativeness of the social partners.

122 Commission Decision 81/428/EC of 20.05.1981, OJ No L 165 of 23.06.1981, p. 24.

123 COM(93) 600 final of 14.12.1993.

92

Furthermore, paragraph 26 of the Communication states that a certain number of
organizations exist which meet the criteria set out in paragraph 24 and could therefore be
included in the consultation. The Commission does not wish to adopt a restrictive
position on this subject but it is also aware of the practical problems posed by the
multiplicity of potential players. Only the organizations themselves can develop their own
dialogue and negotiating structures. The Commission will try to promote the development
of new liaison structures between all the social partners in order to contribute to the
rationalization and improvement of this process. Here, **special attention will be paid to**
**representation of small and medium-sized enterprises.**

In the context of the social dialogue, the Commission services have been in contact,
during 1994, with numerous organizations expressing a particular interest in small and
medium-sized enterprises, both at the interprofessional level and at the sectoral level.

Particular note should be taken of the support provided to the new structure "UEAPMEEUROPMI - Joint Committee on Social Dialogue", which participates in the meetings of
the Permanent Committee on Employment. Before the last meeting of this committee,
which was held on 22 September 1994, the Commission also provided funding for a
preparatory meeting, organized by this SME representative structure.

In the sector of commerce and distribution, over 90% made up of enterprises with less
than 10 people, the Commission, in its communication of 14.12.1993, estimated that
EUROCOMMERCE fulfils the criteria of representativity. The sectoral social dialogue
carried on under the aegis of the Commission between EUROCOMMERCE and
EUROFIET has already permitted joint training projects intended mainly for SMEs to be
carried out in the context of FORCE (see point II.2.3.3.) as well as the conclusion of a
common view on combatting violence in commerce.

In addition, after the Commission's Communication on the Social Protocol, the
Directorates General responsible for the structural funds decided to enlarge the
consultation under article 31 para. 2 of the regulation on the coordination of EEC funds
No 2082/93 to a limited number of professional or specific organizations. As a result, in
the context of the meetings it organized with social partners, the Directorate General
responsible for Regional Policy invited the following organizations, in addition to the
general inter-professional organizations, to the social partners consultation meeting of 21
December 1994: UEAPME, EUROCHAMBRES, COPA, COGECA and EUROPECHE.
This invitation illustrated the Commission's wish to consult business in order to establish

a dialogue propitious to taking into account the needs of small and medium-sized
enterprises in the implementation of the Structural Funds.

**93**

**3.** **PARTNERSHIP WITH THE MEMBER STATES**

In adopting its resolution of 10 October 1994 [124] to give free flight to the dynamic and
innovative potential of SMEs - including the craft sector and micro-enterprises - in a
competitive economy, the Council wanted to make the implementation of the Integrated
Programme a clear political message. So it is endorsing the new approach proposed in
the Integrated Programme (by virtue of article 130 of the Treaty on European Union)
which targets, by mutual consultation and cooperation between the Member States and
between the Member States and the Commission, the inclusion of their actions for the
benefit of the SMEs so that their potential for growth and employment can be.better
mobilized. This innovation in method converts into the implementation of concerted
actions which relate both to the improvement of the environment of SMEs and to
measures of support to SMEs (see Introduction). Thus a new form of partnership with
the Member States is being established through these actions which will be orchestrated
by the Commission with the aim of strengthening the effectiveness of measures in favour
of SMEs.

In its resolution the Council invites the Commission to present a report on the results of
the consultation and the exchange of information as well as concertation on stimulation
of demand for services offered to enterprises. In addition, it invites the Commission
ensure that SMEs obtain better access to the specific research programmes of the 4th RTD
Framework Programme as well as training programmes, and stresses the importance of
coordinating the instruments of the Union.

In the sector of commerce and distribution, the Commission is encouraging consultation
between the Member States and with them notably through meetings of a group of
government experts in internal commerce and directors general of internal commerce.
This concertation is proving useful as a framework for Community actions relating to
commerce and, particularly to commercial SMEs, in the context of the policies conducted
by the Member States.

**4.** **COLLABORATION WITH THE OTHER INSTITUTIONS**

The European Parliament has emphasized that the Integrated Programme is the result of
the good collaboration that it maintains with the Commission and that there is now a
global commitment and a strategy in favour of SMEs. In its resolution of 24 October
1994 [125] on the implementation of the Integrated Programme in favour of SMEs and the
Craft Sector, it gave a favourable welcome to the Commission's proposals, stressing the
need to make the existing programmes in favour of SMEs more transparent, and the
advantages of exchange of good practice. It invited the Commission services responsible
for enterprise policy to strengthen coordination with the other Commission services. The
European Parliament also emphasized its interest in commercial SMEs by creating an
Interparliamentary Group on commerce and distribution.

124 Council Resolution of 10.10.1994, OJ No C 294 of 22.10.1994, pp. 6-8.
125 Harrison Report, EP 184.350, 24.10.1994, OJ C 323 of 21.11.1994, p. 19.

**94**

**The Economic and Social Committee, in its opinion of 15 September 1994** **[126]** **relating to**
**the Integrated Programme, has raised certain questions as to the actual capacity of the**
**Commission to ensure real integration of Community actions in favour of SMEs. The**
**committee considers that, to transform the objectives of the Integrated Programme into**
**concrete terms, a global policy commitment by the Union is necessary. To this end, it**
**proposes carrying out an evaluation of the effectiveness of existing measures and an**
**institutional strengthening according the political weight necessary to implement**
**Community policy in favour of SMEs.**

**On 1 February 1995 the Committee of** **the** **Regions adopted its** **opinion** **[127]** **on the Integrated**
**Programme in which it supported the Commission's proposals and emphasized, inter** **alia,**
**the importance of coordination between the Community programmes so as to facilitate**
**access by SMEs and the craft sector to research and training programmes, thanks notably**
**to an effort of information, a simplification of procedures, greater participation of SME**
**representative organizations and a decentralization of measures to the regional or local**
**level.**

126 ECS 973/94, Report by Mr Lustenhouwer, OJ C 393 of 21.12.1994, p. 221.
127 CR 18/95, Opinion on the Integrated Programme in favour of SMEs and the Craft Sector.

95

**CONCLUSION**

In line with the Council's request, the Commission has attempted in this report to present
the links and coordination between the actions conducted under enterprise policy and
those conducted under other Union policies. The accent has been placed on Community
actions which more particularly concern the SMEs and the craft sector. In the spirit of
the Integrated Programme, the Commission has followed the two great lines of enterprise
policy, viz: improving the environment and support measures to SMEs. In fact,
coordination does not merely cover programmes with a budgetary incidence (like the
Structural Funds, research or vocational training), it also covers policies which may have
an impact on the environment of SMEs (like the completion of the Single Market, taxation
or the rules of competition).

The coordination of Community activities implies several levels : first of all within the
Commission services, then with the Member States and the other European institutions
and finally with business circles.

The Commission will pursue its internal coordination efforts to contribute through its
policies to accompanying the development of SMEs. It should be noted that SMEs are
now effectively targeted in almost all Community programmes. Significant progress has
been made, as the report demonstrates, in the field of the Structural Funds and in
particular through the Community SME initiative, RTD (thanks to the specific measures
in favour of SMEs introduced into the 4th Framework Programme) and vocational training
(notably in the context of the new objective 4, the ADAPT initiative and the new
LEONARDO programme). However the Commission must be sure to monitor the
implementation of programmes so that the declared objectives in favour of greater support
for SMEs are effectively transformed into concrete advantages for the SMEs. The
enterprise policy services cooperate with all the other services both in the conception of
programmes and policies and in their implementation. So it is a question of pursuing the
effort begun to make these programmes more visible and effective.

The other institutions of the Union have also made a significant contribution to the
development of SMEs and are called on to play a determinant role : the European
Parliament, the Economic and Social Council and the Committee of the Regions, as well
as the EIB and the EIF. The Commission intends to pursue good cooperation with these
institutions.

**96**

Nevertheless, by virtue of the principle of subsidiarity, and given that SME policy is
principally incumbent on the national or regional authorities, the role of the Commission
in coordinating the policies of the Member States (Article 130 of the TEU) is limited to
stimulating or organizing and orchestrating mutual consultation and cooperation between
them and with the Commission with a view to ensuring more effectiveness, visibility and
a certain convergence of actions. The Integrated Programme, which introduces the second
generation of enterprise policy, is clearly part of this perspective. The concerted actions
with Member States should contribute to encouraging coordination of actions carried out
at the national, regional or local levels.

Finally, the effectiveness of the measures imply good coordination and a permanent
dialogue with SME representative organizations. Progress has been made on the
Representation of the interests of SMEs and the craft sector, notably in the context of the
social dialogue.

In conclusion, the Commission will reinforce coordination with all its partners, the
Member States, the European institutions, and the business organizations so that the
efforts _o£_ the Union in favour of SMEs are converted into growth, competitiveness and
employment.

**97**

###### **ISSN 0254-1475**

### COM(95) 362 final

# **DOCUMENTS**

##### **EN 08** **Catalogue number : CB-CO-95-386-EN-C** **ISBN 92-77-91887-X**

**Office for Official Publications of** **the** **European Communities**

**L-2985** **Luxembourg**

#### **_7g_**