Source: EURLEX
Language: en
Format: md

*._ i COMMISSION OF THE EUROPEAN COMMUNITIES

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Brussels, 14.03.1995

COMMUNICATION FROM THE COMMISSION

TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

**INDUSTRIAL COOPERATION WITH THE COUNTRIES OF**
**CENTRAL/EASTERN EUROPE**

**INDUSTRIAL** **COOPERATION** **WITH THE COUNTRIES OF CENTRAUEASTERN**

**EUROPE**

**Communication of the Commission to the Council and the European Parliament**

**Executive summary** **II**

**1.** **Industrial cooperation in the framework of the Union's**
**pre-accession** **strategy:** **The European Union's main goals and role** **1**

Priority objectives (1) - the European Union's role in industrial
cooperation (2)

**2.** **Industrial situation in Central/Eastern Europe: a brief survey** **4**

Industry privatisation and restructuring (4) - foreign direct investment (5) framework conditions for industrial development and investment (6)

**3. Past and present European Union action** **6**

**4. European Union initiatives for future cooperation** **8**

**A. The Europe Agreements and the Union's assistance policy** **7**

Exploiting the institutional set-up of the Europe Agreements (8)
development of regulatory framework and approximation of laws (8) quality management: standards/certification (9) - investment framework
(9) - privatisation, restructuring, modernisation of industry (10) - business
links and investment promotion (11)     - cross-border cooperation (12) competition (13) - trade (13) - environment (14) - energy (15)     - training
(15)

**B. Scientific and technological cooperation** **16**

Research and development (16) - information infrastructure and
Information Society (16)

**C. Mobilisation of European industry** **17**

Dialogue with European industry (17) - inter-industry dialogue (17)

**Annexes**

**I** **- Industrial production and unemployment in Central/Eastern Europe**

**- Foreign Direct Investment in Central/Eastern Europe**

**- Steel industry:** a **case of successful cooperation**

**- Information Society:** a **case for developing cooperation**

**- Selective survey of EU assistance and RDT cooperation**
**II** **- Financial Sheet**

## **_e_**

**II**

**EXECUTIVE** **SUMMARY**

The European Council in Copenhagen (June 1993) had agreed that the associated
countries that so desire shall become members of the Union, as soon as they are able
to assume the obligations of membership. In April 1994, Hungary and Poland introduced
their application for membership. Other countries in Central/Eastern Europe have
declared their intention to do so.

The perspective of accession of the associated Central/Eastern European countries to
the Union implies a qualitative shift in the relations with the region. The fundamental
decisions taken by the European Council in Essen (December 1994) illustrate the
dimension of the tasks ahead: It adopted the _pre-accession strategy_ to prepare
associated countries for membership.

A main element of the strategy is to prepare these countries for integration into the
internal market of the Union, and the Commission will present a White Paper on this
subject to the next European Council. This strategy also deals with investment
promotion, in which the need for an increased volume of foreign investment is
acknowledged. The programme covers continued support for investment promotion
agencies, the creation of a Business Advisory Council and continued support, through
the PHARE programme, for initiatives such as the restructuring and modernisation of
production capacities and the development of small enterprises, as well as contributing
to the financing of infrastructure investments. In this context, industrial cooperation has
a key role to play in the promotion of private investment.

In April 1994, the Industry Council invited the Commission to prepare communications
on industrial cooperation with certain third countries, and took note of the Commission's
intention to present, in the first half of 1995, a communication on industrial cooperation
with Central/Eastern Europe (further communications on industrial cooperation with
other third countries are to follow). On two previous occasions, the Commission
prepared communications on the subject [1], and the Council adopted a resolution [2 ]

supporting the Commission's general approach and orientations.

The perspective of accession has changed the overall context fundamentally. In
response, this communication intends to reflect upon the industrial implications of
Central/Eastern Europe's progressive integration into the global European economy,
and in particular, how industrial cooperation can contribute to the facilitation of this

process.

Therefore, this document focuses on those Central/Eastern European countries which
have already concluded Europe Agreements with the Union or which are shortly
expected to do so: Poland, Hungary, the Czech Republic and Slovakia, Romania,

1 SEC (90) 1213 final of 13 July 1990 and SEC (92) 363 final of 13 March 1992

2 OJC 178 of 15 July 1992

##### **_3_**

**Ill**

Bulgaria, the three Baltic Republics and Slovenia. Although the stage of development,
e.g. in terms of industry privatisation/modernisation, is very different from one country to
another, overall the Central/Eastern European industry continues to have very
considerable restructuring/modernisation needs, which are unlikely to be satisfied
without foreign investment, transfer of technology and know-how in cooperation with EU
industry, aiming at the development of an environmentally sustainable industnal sector.

_**The European Union has already**_ _**made**_ _**an important**_ _**contribution**_ _**to the transition**_
_**process through:**_

- Europe Agreements with Central/Eastern European countries which _inter alia_ aim at
free trade and offer a broad platform for cooperation in virtually all areas affecting the

economy

- the Essen European Council conclusions, which notably aim to encourage the regional
cooperation between the associated countries for the promotion of their economic
progress: a programme has been adopted to stimulate cooperation e.g. in trade

- European Union assistance and industrial and R&D cooperation which have been
launched to help to exploit and develop the industrial and R&D potential of
Central/Eastern European countries.

_**The future strategy should**_ _**continue**_ _**to follow**_ _**three**_ _**priority objectives:**_

_•_ the improvement of framework conditions for industrial development

- the privatisation, restructuring and modernisation of industry

- the promotion of investment (e. g. through synergies with other operators, like
EBRD and EIB).

The proposed orientations start from existing instruments and consider useful
adaptations and additional action.

_**Three types of instruments should be**_ _**used**_ _**in priority**_ _**to**_ _**achieve these objectives:**_

1. The Europe Agreements provide the basic orientation for _the_ _**Union's assistance**_
_policy,_ within which technical and financial assistance under PHARE will increasingly
be a major tool to pave the way for cooperation and ultimately integration. Main areas of
action will include

    - the exploitation of the institutional set-ups of the Europe Agreements (e.g. the
mixed committees)

    - the White Paper on the preparation of the associated Central/Eastern
European countries for the integration into the internal market

    - quality management (standards/ certification) infrastructures

    - the legal/administrative framework for investments !,,, ^ ?     -,

_•_ support to the privatisation, restructuring and modernisation of industry ^

     - the promotion of business links, investment and cross-border/inter-regional
cooperation

    - competition policy, trade, environment and training. _\_ L••:

*****

**IV**

**2.** _**Scientific**_ _**and technological**_ _**cooperation**_ **should be** **further** **promoted and**
**Central/Eastern** **European** **countries** **should be encouraged to participate in the move**
**towards the** **Gtobal** **Information Society.**

**3. Stronger** _**mobilisation of EU industry**_ **is considered to be another key element to**
**achieve industry modernisation in** **Central/Eastern** **Europe.**

###### **3**

**1.** **INDUSTRIAL** **COOPERATION** **IN THE FRAMEWORK OF THE UNION'S**

**PRE-ACCESSION** **STRATEGY: THE** **UNION'S** **MAIN GOALS AND ROLE**

**The European Council in Copenhagen (June 1993) had agreed that the associated**
**countries that so desire shall become members of the Union, as soon as they are able**
**to assume the obligations of** **membership.** **In** **April 1994, Hungary and Poland introduced**
**their application for membership. Other countries in Central/Eastern Europe have**
**declared their intention to do** **so.**

**The perspective of accession of the associated Central/Eastern European countries to**
**the Union implies a qualitative shift** **in** **the relations with the region. The** **fundamental**
**decisions taken by the** **European** **Council in** **Essen** **(December 1994) illustrate the**
**dimension of the tasks ahead: It adopted** _**the**_ _**pre-accession**_ _**strategy**_ **to** **prepare**
**associated countries for membership.**

**PRIORITY** **OBJECTIVES**

**In response to this qualitative change, this communication intends to reflect upon the**
**industrial implications of Central/Eastern Europe's progressive integration into the global**
**European economy, and in particular, how industrial cooperation can contribute to the**
**facilitation of** **this** **process.**
**A brief survey of the industrial situation will show that Central/Eastern European industry**
**is** **still** **facing considerable restructuring and modernisation needs. An additional**
**challenge** **is the promotion of sustainable** **development,** **an important element of both**
**the 5th Action Programme "Towards Sustainability" and the White Paper on Growth,**
**Competitiveness and Employment, through, inter alia, the integration of environmental**
**objectives and** **criteria** **into** **industrial** **cooperation activities. Furthermore, the**
**development of a competitive industrial sector will need to include a high level of**
**consumer protection, through appropriate quality and security standards.**

**Therefore, three** **priority** **objectives need to be pursued:**

**•** _**the improvement of**_ _**framework conditions**_ _**for**_ _**industrial**_ _**development**_

**•** _**the restructuring**_ _**and modernisation**_ _**of**_ _**industry**_ _**itself**_

**•**
_**the promotion of investment.**_

_**Industrial**_ _**cooperation**_ _**will have to play a key role in**_ _**all**_ _**areas. Of**_ _**course,**_ _**a large**_
_**part of the resources needed to accomplish the process of industry**_
_**modernisation, has to be provided by the transition countries themselves. In**_
_**addition, Western public financial**_ _**assistance**_ _**supports the**_ _**transition.**_ _**However,**_ _**it**_
_**must**_ _**be recognised that the industry privatisation, restructuring and**_
_**modernisation process cannot succeed without the broad mobilisation of EU**_
_**industry,**_ _**for**_ _**investment**_ _**and**_ _**the**_ _**transfer of**_ _**technology**_ _**and**_ _**knowhow.**_ _**This role of**_
_**EU**_ _**industry**_ _**in the**_ _**transition process**_ _**will gain relative importance, compared to**_
_**the other**_ _**elements,**_ _**the**_ _**more**_ _**the process**_ _**advances.**_

THE EUROPEAN **UNION'S** ROLE IN INDUSTRIAL COOPERATION

In September 1994, the Commission has adopted a Communication on an Industrial
Competitiveness Policy [3], which develops further the key features of its industrial policy.
The promotion of industrial cooperation - both inside the Union and with third countries is considered to be one of the priority action areas of the Union's industrial policy.
Regarding Central/Eastern Europe, the promotion of _industrial cooperation_ should
serve the double _purpose_ and interest of strengthening the economies of these
countries with a view of integrating them into the Union and of strengthening the
European industry's presence on expanding markets, thus enhancing the
competitiveness of industry throughout Europe.

It is clear that industrial cooperation has to be defined and carried out by the economic
operators themselves, in ail the different forms it may take, ranging from distribution and
licensed production arrangements to subcontracting, outward processing, joint ventures
and equity stakes.
The main role of public administration is to create favourable framework conditions and
to facilitate the active participation of EU companies in the development of industrial
cooperation, e.g. through

- the creation of appropriate structures for horizontal support to business operations

- the organisation of contact fora bringing together industry and administration and

- concrete cooperation projects (example: the consumer electronics [1] components project

with Japan).

Industrial-cooperation should also involve the social partners, according to the objective
of promoting the social dialogue.

The Commission's and the Member States' actions should be complementary.
Furthermore, increased synergy should be achieved with the activities of other
institutions such as the EBRD and World Bank. Thus, mutual information and - to the
extent possible - coordination are essential.

A major _task for the Commission_ is to ensure that in the overall EU relations with third
countries, action continues to be based on the respective industrial situation and
national priorities, and is coherent with EU industrial cooperation and industrial policy
purposes. This applies notably to commercial relations (e.g. cumulative rules of origin),
technical assistance actions, and financial support including through the EIB and the
EBRD, in which the Union participates. For example, in cases where the privatisation,
creation, modernisation or conversion of production capacities in Central/Eastern
Europe affects sectors where EU industry is itself in a restructuring process, the Union's
concerns need to be taken into account, through e.g. a dialogue and exchange of views
between the parties.

3 COM (94) 319 final

#### **_?_**

This example refers to a broader issue: _The integration process and the industrial_
_transition in Central/Eastern Europe will certainly lead to new patterns of division_
_of labour among Central/Eastern Europe and the_ Eli. This is already taking place,
e.g. in the textiles sector for which Central/Eastern Europe is highly important as a
market and as cooperation partner (outward processing trade - OPT). EU industry
needs to be present on growth markets: this is one of the key objectives of EU industrial
policy. The cooperation in the field of OPT which has started already some time ago
between Central/Eastern European countries and certain Member States is now going
to be extended and intensified by almost all Member States of the Union.
Central/Eastern European countries have become the most important partners for the
Union's clothing industry's production and are essential for its competitiveness. By
granting duty-free entry of OPT imports from Central/Eastern European countries from
January 1994 and the necesssary quota increases, the Union has further encouraged
such cooperation.

For certain industry sectors this process involves delicate issues of employment and
ongoing restructuring in Western Europe. While support measures have to be based on
the priorities and needs of the partner countries, these issues have also to be taken into
account in the design of assistance, to ensure the overall coherence with other Union
policies (e.g. in the field of competition). A main criterion should be the effect on
industrial competitiveness.

The integration process and industrial transition in Central/Eastern Europe should lead
to the development of new economic activities based on complementary sets of
competitive advantage. In order to ensure that these activities are mutually beneficial
wherever possible, it will be necessary to identify those areas in which possibilities exist
for repatriating to Europe activities which are wholly or partially sourced off-shore.
Integration through the reconstitution of production chains has the added benefit of
providing Central/Eastern European countries with both technology and a source of
hard currency income with which to purchase the investment goods required for their
development. Possibilities for combining the advantages of Central/Eastern Europe in
highly qualified manpower and lower operating costs with EU technology, capital and
managerial capacity to create competitive enterprises in new growth markets on which
European firms are currently insufficiently represented should also be examined.

_Industrial cooperation represents an effective way of implementing such an_
_approach, since it aims at a long term strategic partnership between economic_
_operators based around the mutual interest of both sides._ By actively identifying
new possibilities and ensuring that potential partners are aware of these possibilities,
but leaving actual implementation and a maximum of the financing of cooperation to the
interested partners, public authorities can play an active role without intervening in the
efficient allocation of resources by markets.

**2.** **INDUSTRIAL SITUATION IN CENTRAUEASTERN EUROPE:**

**A BRIEF SURVEY**

Following decades characterized by state ownership of production means and by
central planning, the transition countries of Central/Eastern Europe inherited an
economic and industrial set-up which is generally characterised by serious
_**weaknesses:**_ First of all, this relates to badly maintained and obsolete capital
equipment, as well as out-dated production techniques with low productivity, waste of
energy and bad environmental performance. Distorted incentives resulted in resource
mis-allocation in production and investment decisions, with for example, an overemphasis on heavy industries. While management was often inefficient, business
support services have been weak, and the mandatory standardization and conformity
assessment procedures inadequate.

At the start of the reform process, industrial production, for the economies in transition
as a whole, declined sharply by 30% during the period 1990-1993. The GDP contracted
by roughly a quarter (1989-1993, weighted average for Central/Eastern Europe). The
decline of production inevitably had negative consequences for the population in terms
of a decrease in real income. Inflation devalorised savings, and unemployment which
was almost unknown under the former central planning regime, increased in most of the
countries (see table in annex). As from 1993, a certain stabilization or even slight
growth took place in some of the countries, while others do not yet show significant
signs of sustainable recovery.

The Central/Eastern European industry can draw on some _strengths,_ which have not
yet been exploited to their full extent, mainly a good level of technical qualification in
many sectors and relatively low labour costs. These strengths will have a stronger effect
the more the governments realise their intentions to complete privatisation, to
restructure industries and place companies on a sounder financial footing.

Thus, privatisation, intense restructuring, investment (both domestic and foreign),
stronger exposure to competition and training will be needed to address the inherited
weaknesses of the industrial landscape and to penetrate highly competitive Western
markets.

**INDUSTRY PRIVATISATION AND RESTRUCTURING**

Given the economic, social and political importance of the state-owned enterprise sector
in most Central/Eastern European countries, privatisation and restructuring are among
the authorities' top priorities for ensuring a durable transformation from a planned to a
market economy.

Major successes have been achieved in privatisation, with the private sector reaching a
level of 55% to 65% of GDP in the most advanced transition countries (source EBRD).
However, this overall success should not hide the remaining problems. While the
privatisation and the restructuring of large state-owned enterprises (mainly in the
energy, mechanical, metals, agro-food and chemical sectors) has been sometimes

**<?**

delayed, the transformation of smaller-scale companies (retail trade, agriculture,
services to companies, tourism, etc.) has progressed well.

There are great disparities between the Central/Eastern European countries in the
degree to which they have created the base for a market economy, especially
concerning the sequence at which privatisation and financial restructuring take place.
Two broad alternative policy approaches to restructuring and privatisation can be
identified: priority on early privatisation leaving most of restructuring to private owners,
and priority on comprehensive financial restructuring before launching privatisation. The
second strategy targets high-quality owners for enterprises through comprehensive
financial restructuring before the sale takes place. The advantage of the first approach
lies in its higher speed, compared to the second. However, both approaches might not
always ensure high quality of corporate governance and the necessary modernisation.

Apart from the degree of privatisation and restructuring achieved, further major
differences concern the creation of the basic institutions which are necessary for the
functioning of a market economy, the introduction of competition and the elimination of
subsidies, the progress in price liberalisation and the development of an effective
banking and financial sector. This implies that the instruments which should be used to
promote transition, need to be adapted to the specific situation of the country
concerned.

**FOREIGN DIRECT INVESTMENT**

The success of recovery in Central/Eastern Europe depends first of all on the countries'
progress in macro-economic reform, but then needs to be supported by sustained high
rates of investment (and, as a necessary corollary, "immaterial investment" - the
transfer of technology, know-how and modern management techniques). Domestic
savings will have to be the main source of investment, but they presently remain at a
level that will not permit a rapid catch-up close to that of the EU. _Foreign direct_
_investment should thus be of considerable importance in the current reform_
_phase._

Inward investment flows have been on the whole disappointing in the region (see table
in annex), despite of the particular importance given by the economies in transition to
the establishment of favourable conditions to attract investment. Indeed, the legal
framework has made considerable progress in some of the countries, while in others, it
is far from congruent with the political statements of principle in support of the
liberalisation of the economy. However, in all countries, a main shortcoming of the legal
and institutional system are the difficulties of the administrations to apply the
regulations.

Experience in the past years has shown that decisions on the location of investment
often follow and strengthen prevailing trends. This explains to a large extent the
successes of Hungary, Poland and the Czech Republic (ie the early start-ups) which
keep attracting a lion's share of ail inward investment in the region.

**FRAMEWORK CONDITIONS FOR INDUSTRIAL DEVELOPMENT AND INVESTMENT**

The success of industrial development relies very much on _macroeconomic_ _**progress**_
towards a full market economy. In this respect, the Central/Eastern European countries'
reforms towards market-based pricing systems and exchange rates are particularly
important for industrial development.

Among the most important factors for investment are framework conditions such as
**adequate** _**infrastructures**_ _**(telecommunications,**_ _**transport and energy)**_ **as well as**
_**business services**_ _**(Insurance,**_ _**banks,**_ _**business**_ _**consulting,**_ _**accountancy,**_ _**chambers**_ _**of**_
_commerce, industry associations),_ which play an increasingly important role for the
economy as a whole. Their availability and cost have a large horizontal impact on
industrial activity. In the energy sector for example, the European Energy Charter is an
important EU initiative to create a favourable investment climate for the sector, and
signatories of the Charter Treaty include the Central/Eastern European countries.

Prospering _**trade**_ relations are another indispensible framework condition for industrial
development, both in terms of input supply and export revenues. Moreover, the potential
for trade is a major criterion for investment decisions. Traditional trade relations within
Central/Eastern Europe and the Former Soviet Union have virtually collapsed, and
supply-production chains have been disrupted. In fact, market reforms and economic
transition in Central/Eastern Europe Were then supported by an unprecedented
expansion of trade between the Union and these countries. Coinciding with the very
rapid expansion of EU imports from the Central/Eastern European countries has been a
radical trade liberalisation by the EU towards them, formalised in the signing of the
Europe Agreements. One of the striking features of the trade between the Union and
the associated countries is the high degree of intra-industry trade, which has been
growing significantly in the recent years, indicating a greater convergence of industrial
structures between the Union and the region: Associated countries are becoming
mature for industrial cooperation.

_**In conclusion, despite positive developments in macroeconomic reform,**_
_**privatisation and investment growth (from low level),**_ _**overall**_ _**investment in the**_
_**region still remains too low: It does not meet the persisting industrial**_
_**restructuring and modernisation needs, and it does not permit the rapid growth**_
_**necessary if these countries are to catch up at least partially with the EU. This**_
_**situation cannot be overcome without further increased**_ _**trade,**_ _**foreign investment**_
_**and industrial and technological**_ _**cooperation**_ _**with the European Union. The Union**_
_**has thus an essential role to play in the process of**_ _**privatisation,**_ _**modernisation**_
_**and integration of**_ _**the**_ _**Central/Eastern**_ _**European**_ _**industries.**_

**3. PAST AND PRESENT EUROPEAN UNION ACTION**

The Union has constantly and progressively improved contractual relations with
Central/Eastern European countries, has developed comprehensive technical and
financial assistance programmes and scientific & technological cooperation with the

region (a more detailed description of assistance and S&T cooperation is given in
annex).

The Union's consistent policy of rapidly granting market access to imports from
Central/Eastern European countries is a very substantial contribution to a favourable
framework for industrial development. As far as industrial products are concerned, the
process of liberalisation by the EU begun with the conclusion of the Europe Agreements
in 1991/2 is nearly complete. The dismantling of EU tariff and quantitative restrictions
was accelerated at the Copenhagen European Council in June 1993 and the terms of
the Europe Agreements with Romania and Bulgaria were aligned with those of the other
Central/Eastern European countries at the Essen European Council in December 1994.
Consequently, for industrial products there remain only some tariffs on steel items until
1 January 1996 and on textiles until 1 January 1997. The last quotas on textile products
will disappear by January 1998. In the case of the Baltic States, under the terms of the
Free Trade Agreements in force, all industrial imports into the EU except for textiles are
already completely liberalised from 1 January 1995.

The Union's assistance is first of all related to the development of framework conditions,
such as the legal and administrative framework e.g. for investment and competition,
through the approximation of laws. This also includes quality management: A
normalisation/certification system may either constitute new trade barriers or facilitate
exchanges: Without an appropriate normalisation/certification system, Central/Eastern
European industry will be unable to ensure sufficient product quality, to develop its
export opportunities and to launch cooperation with EU industry. The objective of mutual
recognition of conformity assessment will also be harder to achieve.
Furthermore, assistance has been provided to the process of privatisation and
restructuring of companies, to the development of business links, investment promotion
and training. In addition to the assistance, action has been started to bring industry
representatives into direct contact to explore the cooperation possibilities (Round-Table
conference in Riga 1994, with high-ranking industry and administration representatives
from the EU and the three Baltic states).

Scientific and technological cooperation has been developed with Central/Eastern
Europe, to maintain the RDT potential of these countries as a source for industry
modernisation. Activities have now been integrated into the 4th Framework Programme.

**4. EUROPEAN UNION INITIATIVES FOR FUTURE COOPERATION**

_Past and present action have already provided a substantial contribution to the_
_transition process. The proposed orientations for the future start from existing_
_instruments_ _and consider useful adaptations and additional action, to take_
_account of the_ _pre-accesslon_ _context._ The implementation of the overall horizontal
approach will have to take into account the specific situation of the country and
industrial sectors concerned on a case-by-case basis. A regional approach, to stimulate
cooperation among the Central/Eastern European countries themselves, is important in
many of the following areas of action (e.g. trade, cross-border cooperation, sectoral
industry reviews.)

**A. The Europe Agreements and the Union's assistance policy: paving the way to**
**cooperation and integration**

The **Europe Agreements** provide the overall framework for a very close cooperation
covering practically all areas of economic activity including industrial cooperation, and
they contain specific provisions which aim to improve the business environment. Thus,
they provide a basic orientation for PHARE and other instruments. In the perspective of
progressing transition and future membership, following the Essen European Council,
the PHARE technical and financial assistance and other assistance measures will
increasingly assume the role of a major tool to prepare associated Central/Eastern
European countries for accession.

**EXPLOITING THE INSTITUTIONAL SET-UP OF THE EUROPE AGREEMENTS**

The Europe Agreements offer an institutional set-up (besides a general joint committee
e.g. contact groups for steel, mining, raw materials; sub-committees on economic
cooperation) which may serve as a vehicle for cooperation.

_STARTING_ _AN_ _INDUSTRIAL_ _PQUCY_ _DIALOGUE_
An industrial policy dialogue should be started with Central/Eastern Europe, using this

institutional set-up. This would serve two purposes:

- Administrations of the two sides should consider together which initiatives should be
taken to better exploit the potential for industrial cooperation, and which solutions
should be adopted to remove the obstacles which industry has experienced in
cooperation projects.

- The European Union has developed further its industrial policy in view of enhancing
the competitiveness of its industry and, in the White Paper on Growth and
Competitiveness, adopted an approach on how to promote change in the economy
in order to face the future challenges, such as sustainable development and the
information society. Central/Eastern Europe will very much be confronted with the
same challenges. Thus, the dialogue should include the exchange of views on this
adjustment process.

**DEVELOPMENT OF REGULATORY FRAMEWORK AND APPROXIMATION OF LAWS**

The _**White Paper**_ on the preparation of associated Central/Eastern European countries
for integration into the internal market is a core element of the pre-accession strategy,
as endorsed by the Essen European Council. Its purpose is to provide these countries
with a guide to those areas of the _acquis communautaire_ which are essential to the
maintenance of the integrity of the internal market to facilitate integration. It will propose
a logical sequence of adaptation of internal market legislation, but without attempting to
set a timetable for action.

Not only will the White Paper list the legislative core acquis on the internal market, but it
will equally describe the organisational and institutional structures and infrastructures
needed to enable effective application of EU legislation. Technical assistance would
then be provided under PHARE according to each country's specific needs.

With these indications, _**the White**_ _Paper will_ _**facilitate future industrial cooperation.**_

It will be tabled to the European Council in Cannes.

QUALITY MANAGEI&LNT: STANDARDS/CERTIFICATION

In principle, the Union could follow the assistance already given to some
Central/Eastern European countries as a model for further action, ie a bilateral
approach to satisfy the needs of the respective country, completed with a regional
approach combining a number of countries to create a "regional quality management
infrastructure", which would encourage intra-regional trade.
Technical assistance should be based on two principles:

- It should be linked to a political commitment of the beneficiaries to adopt norms,
technical regulations and certification systems based on European and international
models.

- The participation of these countries in the European norms, certification and quality
organisations (CEN, CENELEC etc.) should imply that they are subject to the same
rights and obligations as their European partners. This would largely facilitate the
conclusion of mutual recognition agreements.
In this context, consideration should be given to strengthening cooperation, in particular
in sectors where mutual recognition agreements would be appropriate.

INVESTMENT FRAMEWORK (LEGAL AND ADMINISTRATIVE SYSTEM)

As a corollary to the promotion of investment projects, the framework for investments
needs improvement. This relates in the first place to the legal and regulatory framework
which the Central/Eastern European countries have to develop themselves. While much
progress has been achieved, this differs substantially from one country to the other, in
particular in terms of more or less effective implementation and enforcement of laws
and regulations. Other common problems are related to the need to consolidate legal
decision-making and the existing legislation, and to the remaining inconsistencies (e.g.
definition of responsibilities between administrations - from national to local level involved in foreign investment and the cooperation between them; complicated
administrative procedures). A major effort will also have to be made to enhance the
transparency and stability of the legislative and regulatory framework, e.g. potential
investor's access to information.

In the discussion on the investment framework, too many parallel efforts should be
avoided. To achieve a certain homogenity, framework principles should be elaborated
together with the Central/Eastern European countries, on the basis of the Europe
Agreements. In addition, other fora should continue to play a role in this respect (such
as OECD/lnvestment Advisory Group, World Trade Organisation). The Commission has
adopted a Communication [4] on the importance of establishing worldwide uniform rules
on Foreign Direct Investment, to strenghten the levels of transparency of rules, and the
liberalisation and protection of investment flows: Acceptance by Central/Eastern

4 COM (95) 42

_**yf(/**_

10

European countries of **multilateral rules** would **help** to increas the confidence of
Western investors.

**PRIVATISATION, RESTRUCTURING, MODERNISATION OF INDUSTRY**

_**Regarding further**_ _**assistance**_ _**to industry**_ _**sectors,**_ _**priority should be given to:**_

_**Transparency of Central/Eastern European industries:**_ Sectoral industry reviews
should be done where important sectors have not yet been covered and where an
operational value of such reviews is ensured. To avoid any duplication, Commission
services have started to explore with industry sectors, Member States and other
organisations (OECD, UN...) which data are already available. It is equally important to
ensure, to the greatest extent possible, that much more than in the past, existing studies
are made available to the industries concerned, so that they may base future action on
this information.

_Feasibility/viability_ _**reviews of concrete sectoral projects:**_ Within its privatisation/
restructuring branch, PHARE should also encourage Central/Eastern European
countries to pursue projects designed to examine the feasibility and viability of
restructuring and modernising Central/Eastern European companies, with an immediate
operational value to facilitate investments and cooperation with EU companies
(example: establishment of business plans, search for appropriate investors). Positive
examples for such projects are the study (financed by the PHARE- COOPME facility) on
the situation of the food, drink and tobacco industries in six associated countries and on
potential cooperation with EU industry, and the viability reviews of some 15-20
Central/Eastern steel companies made following the national restructuring programmes.
As the example of the ECSC loan facility for Central/Eastern European countries shows,
in some cases such technical assistance can be combined with specific loan
instruments with a view to supporting the restructuring of particular sectors.
Conversion into civil production is not only an important politicai goal, but in some
sectors (such as aerospace) also a valuable cooperation tool. The information
technology sector offers a considerable (R&D and industrial) potential for conversion,
which should be Increasingly exploited (e.g. in the areas of microelectronics,
optoelectronics and microsystems).
_Socio-regional_ _accompanying measures,_ similar to RESIDER, RETEX, RECHAR etc,
should be considered for industries characterised by excess supply of labour and strong
regional concentration, in order to facilitate, as soon as possible, the creation of
alternative employment opportunities. In fact, regional reconversion and development
programmes are being implemented in certain countries (Poland, the Czech and Slovak
Republics in particular). The Polish STRUDER programme, for example, is clearly
based on EU programmes and experience, including a grant scheme for investments
and a risk capital company. The Union has a large experience with structural
programmes. Central/Eastern European countries should draw from the Union's
experience in the design of such programmes supporting the building up of a
competitive industry.

11

**B U S I N E S S** **L I N K S A N D I N V E S T M E N T** **P R O M O T I O N**

Future action should consider the areas of **partnering events and subcontracting.**
Regarding _partnering_ _events,_ the question arises in view of the interest expressed by
Central/Eastern European countries in extending the participation of their firms in
partnering events with those from the EU whether more such events should be
organised in the Central/Eastern European countries. Merely extending existing
schemes to Central/Eastern Europe would not appear an appropriate response to the
specific needs for industrial cooperation of the region.
_A more productive_ _**approach**_ _could be to develop_ _specific_ _cooperation_
_instruments_ _with_ _**the**_ _Central/Eastern_ _**European countries based on**_ _existing_
_formulas._ A precedent already exists with the Med-lnvest and Al-lnvest schemes,
which provide under their facility one for the organisation of PARTENARIATS and
INTERPRISES in these countries. Bearing in mind the experience with the pilot action
"Doing business with Central/Eastern Europe" and with existing EURO PARTENARIATS,
which are becoming very large, an innovatory approach could be developed. For
instance, it would be possible to conceive a new "CEEC PARTENARIAT". Such events
could further specific models of regional integration between European regions. They
could cover groups of inter-related industries, both manufacturing and services, instead
of many different industries, as in the case of EUROPARTENARIATs, or narrowly
defined ones, as in the case of regular INTERPRISES.

In the area of _subcontracting,_ with regard to participation in events organised in the
EU, the technique of "Salons Inversés" where assemblers meet potential suppliers
lends itself to participation from firms from Central/Eastern European countries.
In addition to participating in existing actions, a specific action to develop subcontracting amongst the Central/Eastern European countries and with assemblers from
the EU would be warranted. It could comprise four types of measure:

1. interconnection of data bases/exchanges^established in these countries for subcontracting with those in the EU;
2. evaluation of the current situation of sub-contracting in Central/Eastern Europe;
3. pilot actions in specific sectors;
4. training of technicians and enterprises in the principles of total quality
management and implementation of certification procedures and accredited
laboratories.
As with the development of special partnering events, sufficient resources would be
required to run such a specific programme.

The Essen European Council has confirmed the increasingly important role of PHARE
in the areas of _investment support_ for both infrastructure and SME development.
The JOPP programme has an important role to play, in particular for projects with
smaller amounts of investment which are less likely to be considered by institutions
such as the EBRD. An external evaluation of JOPP is currently underway, the results of
which will be taken into consideration when considering any changes that need to be
made to the programme. The evaluation will look at e.g. the use of facility three (support
for productive investment), the response to investment needs and the appropriate size
of companies to be supported.

_**Further increased**_ _synergies_ _shouid_ ...,'•:'.-...."'Î _to_ _**be sought with organisations**_
_**involved in investment, notably**_ _the EBRD and_ _**the EIB,**_ as it is the case in existing
PHARE operations where EBRD and PHARE finances are combined to provide
technical assistance, training and capital for industrial restructuring. One example
concerns the Project Preparation Committee, which has been set up (following the
Ministerial conference "Environment for Europe" in 1993) to improve coordination
between international financial institutions and donors in the area of environmental
investments in Central/Eastern Europe.
On the basis of the experiences made with the ECSC loan facility adopted in favour of
Central/Eastern European countries in 1990, the possibilities of lending instruments
which are linked to some sort of industrial cooperation between EU and Central/Eastern
European companies should be explored further.

**CROSS-BORDER** COOPERATION

As the Essen European Council has confirmed, a regional approach is important to
stimulate cross-border and inter-regional action among Central/Eastern European
countries and among them and the Union. This will also help to ensure that in future
investments, duplications and misuse of scarce financial resources are avoided. While
current actions (PHARE-cross border cooperation, PHARE INTERREG and
INTERREG) are already important contributions, a further strengthening should be
considered.
There is considerable scope for developing industrial cooperation between craft and
small firms in border areas. The combination of INTERREG and PHARE programmes
opens the specific dispositions of these programmes to cross-border cooperation. Since
after the current round of enlargement all Central/Eastern European countries with the
exception of Romania possess a common border with the EU, possibilities for this local
integration can be pushed forward as the basis for subsequent wider internationalisation
of firms and broader forms of cooperation. It will be necessary to ensure that crossborder agencies be grouped in a network with other similar existing or planned agencies
in the EU in order to ensure the transfer of best practice and to promote further
transfers of business opportunities.
The closure of missing links in the infrastructures will strongly promote cross-border
cooperation. As the Essen European Council acknowledged, the integration of
Central/Eastern European countries into the Trans-European networks is a key element
in strengthening their ties with the Union. In the framework of EU work on TransEuropean Networks, concepts such as interoperability are being further developed and
their impact on the transport industry assessed. In a context of progressive integration
of the Central/Eastern European countries, the initiation of a dialogue with them to
explore possibilities of industrial cooperation in transport would be particularly helpful in
ensuring that their transport systems are compatible with developments in the European
Union.

**13**

**COMPETITION**

The establishment of a viable competition and state aid control system is an essential
condition for the development of the market economy and a healthy industrial sector in
the transition countries. The implementation of competition rules comprising rules on
monopolies and undertakings with special or exclusive rights is needed to avoid public
monopolies being replaced by private monopolies and to ensure that market structures
will become pro-competitive, whereas obvious public finance reasons speak for a strict
state aid control. Even more importantly, transparency in the field of state aids and their
control are essential elements in the process of transition towards a market economy
which is open to international competition. While state ownership should not be seen as
inherently unacceptable, state-owned companies should be carefully scrutinised, e.g.
regarding their way of investment financing, to ensure that normal private sector
investment criteria apply. Hidden subsidies would lead to serious distortions of
competition.
The efforts of harmonisation of legislation undertaken so far under the _**Europe**_
_**Agreements**_ still need to be pursued further in order to ensure that competitors may
operate under the same conditions without undue advantages for some, in a
competitive environment. The _**White Paper**_ will also include an analysis of the Union's
competition rules which form an essential element of the basic fabric of the internal
market. The Commission will set up a competition policy training programme which will
draw on the experience and expertise of the Commission's and the Member States'
competition authorities.
in addition Central/Eastern European countries should be encouraged to adhere to
relevant international disciplines aiming at normal competitive conditions such as the
OECD agreement on shipbuilding.

TRADE

Not as a substitute, but as a complement to the Union's opening, increased efforts
should be undertaken to multilateralize the region's trade. These efforts should be
directed at two main areas.
_**Promotion of**_ _**intra-regional**_ _**trade:**_ Domestic markets of the Central/Eastern European
countries are often undersupplied because of local production being exported to more
accessible (infrastructures, networks) and better paying (hard currencies) foreign
markets, normally in the Union, despite the establishment of intra-regional agreements
such as CEFTA [5] . The closer economic integration of markets in the region therefore
needs to be encouraged, in order both to strengthen and diversify the trading
relationships and the division of labour between the countries themselves.
_**Promotion of a convertible trading environment ("Aid for Trade"):**_ Assistance
should continue to be given, when needed, to the development of reliable and effective
banking and payments systems in Central/Eastern Europe. In particular, aid should be

3 CEFTA: Central European Free Trade Area, agreement concluded between the Visegrad countries in
December 1992

_**<12**_

**14**

**directed towards the establishment of payment clearing systems and export credit**
**mechanisms, in order to facilitate the growth of trade and to support the objective of**
**closer economic integration already** **mentionned** **earlier. Export credit mechanisms**
**would have to fulfil the same standards as those laid down in international rules (ie**
**OECD) and those applied** **in** **the Member** **States,** **which are part of** **the** **EU state aid rules**
**and are therefore applicable under** **the** **Europe Agreements.**
_**Rules of**_ _**origin**_ **play an important role for growth and direction of trade flows. Following**
**the decisions taken by the Essen European Council, the impact of the proposed rules of**
**origin strategy** **[6]** **wifi** **be carefully examined from an industry/trade point of view.**
**Similarly, agreements on the** _**mutual recognition of conformity assessment**_ **can**
**stimulate trade. Efforts must therefore be made to identify areas where mutual**
**recognition agreements could be feasible with individual** **Central/Eastern** **European**
**countries, and within particular** **sectors,** **during the pre-accession phase.**
**An initiative to promote intra-regional trade is being launched under PHARE, following**
**the Essen European Council. This will include support for the introduction of** **modem**
**trade legislation, transfer of know-how for export promotion and for the development of**
**export insurance and guarantee schemes.**

**ENVIRONMENT**

**The envisaged accession of Central/Eastern European countries to international**
**standardisation** **bodies** **(CEN,** **CENELEC) allows for adapting environmental**
**requirements in this region. The creation of the Trade and Environmental Committee**
**within the World Trade Organisation provides a platform to discuss the questions of**
**environmental, technical and non-technical, standards in relation with trade.**
**The situation of infrastructure in the field of environmental services (waste and waste**
**water treatment, air pollution control) needs to be assessed.** **According** **to OECD,**
**Central/Eastern European countries might reach growth rates up to 25% by the year**
**2000.** _**Industrial cooperation therefore would be an important instrument to**_
_**ensure that essential requirements are introduced in this region with a view to**_
_**both leading to better**_ _**environmental**_ _**performance and providing industry a level-**_
_**playing**_ _**field.**_
**Action should also include practical measures to contribute to sustainable development:**
**Industry holds a main responsibility to ensure a high level of environmental protection,**
**and the industry active in Central/Eastern Europe should adhere to an environmental**
**code of conduct on the basis of the "Guiding Principles on the Environment, Industry**
**and Investment Decisions in Central/Eastern Europe" (Budapest 1991). In addition to**
**the technical assistance provided under PHARE environmental programmes for clean-**
**up operations, priority action should also** **be** **given to cleaner industrial production in**
**both the private and public** **sectors.** **In** **particular, there is a need to increase information,**
**to those who can implement cleaner production** **solutions,** **about both the technology**

6 SEC (94) 1897 final. The strategy proposes (i) to extend diagonal cumulation with the Union to all
Central and Eastern European countries, (ii) to integrate EFTA countries into this cumulation, (iii) to
introduce full cumulation into all agreements

**Y<?**

**15**

involved and the environmental tools which industry needs to make cleaner production
assessments of its activities and products. The improved access to information should
be complemented through technical assistance, demonstration projects and training.

**ENERGY**

Implementation of SYNERGY, the energy cooperation programme with third countries
including Central/Eastern Europe, in coordination with other technical assistance is of
considerable importance. It aims e.g. at the implementation of the European Energy
Charter and transboundary projects. The THERMIE programme on the transfer of
innovative energy technologies, has set up Energy Centers which play an important role
as a link between EU and Central/Eastern European industries.

**TRAINING**

_**Investments and technology transfer will only achieve their objectives if at the**_
_same_ _**time,**_ _a_ _**massive effort will be undertaken to**_ _improve_ _**the managerial know-**_
_how_ _**of Central/Eastern European company personnel in all areas of company**_
_**operation under**_ _**transitional**_ _**and**_ _**market**_ _**economy**_ _**conditions**_ (such as organisation,
cost planning and control, optimisation of production process, marketing/distribution,
quality control). This should also include training of trainers, to facilitate dissemination.
Training should as well include the environmental components, which are essential for
the establishment of a sustainable market economy (e.g. cleaner production,
environmental legislation).

In the field of adult training and especially management training, the newly established
_European Training_ _**Foundation**_ is considering specific measures to foster the
cooperation between organisations and institutions responsible for training in
Central/Eastern Europe and their counterparts in the Union. The aim will be further to
encourage the development of local structures, to improve their links with the industrial
world and to orient curricula towards professions and labour structures relevant to the
new market conditions. The activities to be developed by the Foundation will draw on
the experience with the Community action programmes FORCE and, in the future,
LEONARDO.
The dialogue with EU industry should be used as well to explore opportunities and to
mobilise a broad range of EU host companies for traineeships offered to
Central/Eastern European managers (e.g. in the Industrial Training Attachments
Programme). Account should be taken of training initiatives set up by individual
industries (examples: shipbuilding, clothing, chemicals, steel; energy) independently.
Furthermore, more efforts should be taken regarding the training of Central/Eastern
European administration officials, in particular those who deal with the legal framework
conditions and restructuring programmes in their countries (e.g. traineeships in EU
administrations and companies). This would help to enhance legal security and a stable
framework, which are crucial for the attraction of investment.

Finally, the experience acquired by the Union in the framework of industrial restructuring
measures and redeployment of workers can also benefit the Central/Eastern European
countries. The Union has established networks for the purpose-of identifying sound
experience in these areas and disseminating it to other organisations in the Member

###### **_<&?_**

**16**

**States.** **Research and assessment work has led to recommendations widely publicised**
via **these networks, to interested parties at** **local** **and regional level.**

**B.** **Scientific and technological cooperation**

_**Future action should pursue the**_ _**following**_ _**priorities:**_

_**RESEARCH**_ _**AND DEVELOPMENT**_
Industry modernisation relies, _inter alia,_ on effective implementation of R&D results.
Thus, industrial cooperation should build upon and valorise scientific and technological
**cooperation** **with,** **and where appropriate supported by, the Union. Cooperation between**
**researchers and industrial companies should be** strengthened **by appropriate use of** ail
the available instruments, including the 4th Framework Programme and the agreements
with Central/Eastern Europe, bearing in mind the ultimate objective of strengthening the
scientific and technological base of **the** Union's industry, and the commitment to
encourage its international competitiveness. In that context, the Union's efforts to
promote RDT cooperation aim at a stronger relationship between EU and
Central/Eastern European research communities to. their mutual benefit.
Central/Eastern European researchers should be encouraged to stronger participate in
EU RDT initiatives and programmes, particularly in areas where their expertise and
know-how will add value to the results of cooperative work, and they should be helped
to maintain contact with their EU partners after participation in joint projects.
Dissemination and valorisation of RDT results, although not covered by "activity 2" of
the 4th Framework Programme, should also be encouraged.

_INFORMATION INFRASTRUCTURE AND INFORMATION SOCIETY_
Europe and other major players are moving towards the Global Information Society.
This implies to modernise the physical telecom infrastructure, to develop and
disseminate new information services for business and individuals, to promote
information technology applications and user skills and to enlarge the use of electronic
data interchange (EDI). The Union will ensure that the process will indeed be global and
will graduately extend all its relevant programmes to Central/Eastern Europe, to bring it
into the realm of the Information Society. This will also help to assess the likely impact
of the Global Information Society on Central/Eastern European industry. The G-7
Ministerial Conference (Brussels, February 1995) has underlined the revolutionary
impact of the Information Society on business and individuals, has recognised the
necessity of worldwide cooperation for its achievement and has identified 11 pilot
projects which should help to support the objective of an international consensus on
common principles of the Information Society. The pilot projects will be open to third
countries.

The Commission plans to organise an informal Forum on the Information Society, at
ministerial level, with 10 Central/Eastern European countries, in 1995.

C. **Mobilisation** of **European** **industry**

To stimulate the private sector's closer involvement in the transition process in
Central/Eastern Europe, the Commission should envisage a partnership with the private

##### **_Z(_**

**17**

**sector as a complement to its assistance programmes. The objective would be to yield**
**more complementarity and synergy for example in market development strategies,**
**through an exchange of information and experience.**

**DIALOGUE** **WITH** **EUROPEAN** **INDUSTRY**

**To explore the opportunities of and the obstacles to** **industrial** **cooperation, the**
**European industry** **needs** **to be more closely implied in a** _**constant information and**_
_**consultation**_ _**process with the Commission.**_ **Most importantly, the Commission**
**should continue to discuss with Community industry sectors, in a concrete country- and**
**sector-specific** **way, which problems industry has encountered when launching**
**cooperation projects, and which are the reasons behind the slow pace of investment in**
**many Central/Eastern European countries. The "Maritime Forum" is an example of an**
**instrument for permanent dialogue which could be** **used** **in other sectors.**
**Dialogue with industry should also explore** **the** **usefulness of different forms of**
**investment promotion. For example, consideration should be given to the possibility of**
**improving** **existing instruments and seeking solutions which may partially guarantee**
**investment, in order to stimulate specific projects for which there is demand in the**
**partner** **countries (in Central/Eastern Europe) and which businesses in the European**
**Union have the capacity to meet (energy saving, water purification, telecommunications,**
**transport schemes, etc.). Such an initiative could be based on an analysis of existing**
**guarantee schemes (e.g. Member State and other schemes such as the World Bank's**
**Multilateral** **Investment Guarantee Agency), to** **ensure** **that action taken by the Union**
**genuinely provides added value.**

**INTERHNDUSTRY DIALOGUE**

**Contact between** **Central/Eastern** **European and EU industries should be promoted in**
**different forms and at various levels.**

**-** _**ADVISORY**_ _**BUSINESS**_ _**COUNCIL**_

**The pre-accession strategy adopted by the European Council in December 1994**
**includes the establishment of an Advisory Business Council, to provide advice to the**
**Commission and the associated Central/Eastern European countries' authorities on**
**support to economic recovery and especially the promotion of foreign investment.**

**-** _**INDUSTRY**_ _**ROUND-TABLES**_

**Apart from general macro- and microeconomic obstacles to investment and other**
**cooperation, specific obstacles appear in individual industry sectors (example: specific**
**importance of intellectual property protection in pharmaceuticals). Industry Round-**
**Tables are an effective instrument to identify and discuss them, and they can offer a**
**useful informal complement to the official contact fora between administrations created**
**under the Europe Agreements.**
**The Commission should initiate further Round-Tables involving EU and Central/Eastern**
**European industries as well as the appropriate interlocutors in the Central/Eastern**
**European administrations, following the model of the Round-Table organised in Riga**

**18**

**with the Baltic states in 1994. In order to** **avoid** **duplication of other bilateral or**
**international fora** **already** **in place (e.g. OECD Investment Advisory Group),** **these**
**Round-Tables should avoid a too large and heterogenous participation and should rely**
**on agendas of immediate operational value. They should not be perceived as**
**permanent institutions: Organised on an ad-hoc basis when the two sides deem it**
**useful,** **they** **can help to** **initiate** **a cooperation process which should then be carried** **on**
**by the economic operators** **themselves.**

**-** _**INDUSTRY-SECTOR SPECIFIC ACTIVITIES**_

**Depending on specific opportunities and the state of mutual knowledge/cooperation**
**already achieved,** _**sector-specific inter-industry**_ _**contacts**_ **should take the form** **that**
**fits best: Examples include the agro-food industry trade fair envisaged in 1995 and a**
**Round-Table on consumer electronics industries.**

**Where** **appropriate,** **EU** **companies** **could conclude** **sponsorship** **(parrainage)**
**arrangements with Central/Eastern European enterprises, e.g. in view of training, or**
**further-reaching cooperation such as distribution arrangements.**
**Another area should be the** _**inter-industry follow-up to technical assistance**_ **actions:**
**To** **increase the impact particularly of restructuring assistance, the establishment of**
**inter-industry contacts could provide an operational follow-up. Such contacts could take**
**the form e.g. of seminars to discuss the appropriate consequences of assistance**
**actions/restructuring studies with** **Central/Eastern** **European and EU industries, including**
**the design of cooperation projects.**

**Finally,** _**concrete cooperation projects**_ **should** **be** **developed where they meet demand**
**from the industries of both sides. An example is the pilot programme to improve**
**competitive subcontracting for the consumer electronics industry in the EU. This project**
**has allowed in the past three years European suppliers of components to visit factories**
**in Japan and then to design and implement improvement programmes in their own**
**companies. Programme participants are in favour of extending participation to suppliers**
**in** **Central/Eastern Europe, which is seen as an increasingly important market and**
**production location. Consideration should be given to projects demonstrating that**
**"pollution prevention pays", ie that no-cost or low-cost measures can reduce the use of**
**resources and pollution while yielding economic benefits.**

**-** _**"INSTITUTION BUILDING": INTERLOCUTORS FOR INDUSTRY**_

**The creation of industry associations in Central/Eastern Europe should be further**
**encouraged: This growing network - in addition to the other business services supported**
**by PHARE - will provide the competent advice which EU industry needs for the**
**development of cooperation. EU industry associations can help to broaden the process.**

##### **_?3_**

**19**

_**The financing of the envisaged actions relies first of all on PHARE, for the**_
_**assistance**_ _**part,**_ _**on the 4th framework**_ _**programme,**_ _**particularly its international**_
_**cooperation**_ _**part,**_ _**and on the Information Society budget line.**_ _**In**_ _**particular,**_
_**existing actions under PHARE will be developed further and new initiatives**_
_**launched**_ _**to**_ _**facilitate industrial**_ _**cooperation**_ _**with**_ _**PHARE**_ _**financing on the basis of**_
_**the Central/Eastern European countries' own priorities and demand.**_ _**Inter-**_
_**industry dialogue initiatives will be**_ _**financed,**_ _**to the**_ _**extent**_ _**possible, by both the**_
_**PHARE-COOPME**_ _**facility**_ _**and through the industry budget for industrial**_
_**cooperation. To that aim, a minimum of**_ _**budgetary resources**_ _**is envisaged in the**_
_**industry budget line, in order to broaden both the**_ _**dialogue**_ _**with EU industry and**_
_**the inter-industry dialogue (notably through the organisation of Round-Tables**_
_**and other ad-hoc inter-industry contact fora), and in order to facilitate concrete**_
_**inter-industry projects such as the extention of the consumer electronics**_
_**programme described above. While any duplication with PHARE needs to be**_
_**avoided and additionality ensured between these financing sources, the added**_
_**value would be to facilitate**_ _**accompanying actions directly**_ _**involving industries of**_
_**the two sides.**_

_**<?(/**_

**ANNEXES**

**Table:** **Industrial** **Production and Unemployment in** **Central/Eastern** **Europe**

1993

-8.5

15.9

 - 28.4

1.7

4.0

12.1

-39.6

5.3

-46.0

1.6

7.9

16.1

1.3

10.2

-5

3

-14

14

-2.8
15.4

1994

- 4.8 (Jan - May)
13.4 (June)

2.1 (June)
7.8 (Jan - April)
11.0 (June)

32.4 (Jan - June)

3.2 (June)
9.9 (Jan - June)
16.6 (June)

-1.8 (Jan - May)
10.8 (June)

4.6 (June)
3.0 (June)

3 (February)
13.9 (May)

5.8 (Jan - May)
14.6 (April)

# **zr**

1992

-7.0

15.6

-38.7

1.5
-9.8

12.2

-35.1

2.3

-51.6

1.0

4.2

13.6

-21.8

8.4

-11

3

-13

1

-13.2
13.3

Bulgaria

Estonia

Hungary

Latvia

Lithuania

Poland

Romania

Czech Republic

Slovak Republic

Slovenia

Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)
Industrial Production (a)
Unemployment rate in % (b)

(a) percentage change compared to previous year

(b) end of period

Source: European Economy
No. 8/9 August/September 1994

**Table:** **Foreign Direct** **Investment** **in Central/Eastern Europe**

Foreign Direct Investment in transition countries 1990-1994: cumulative total

(cash basis)

**Level** (million US$)

FDl

per
capita

17

242

558

28

0

9

83

130

139

30

13

n/a

n/a

n/a

**1992**

101

1951

3442

494

1187

120

210

152

58

43

10

1556

3424

n/a

1993

157

2519

5781

1074

n/a

207

354

263

218

82

50

2053

5576

762

June

1994

182

2820

6316

1365

n/a

323

_390_

292

337

112

_70_

2490

6383

792

**1991**

60

947

1971

210

509

40

110

41

0

0

0

595

2107

n/a

Bulgaria

Czech Republic

Hungary

Poland (cash)

Poland (BOP)

Romania

Slovakia

Slovenia

Estonia

Latvia

Lithuania

**Stocks** of **FDl** (off.
estimates)

Czech Republic

Hungary

Slovenia

**1990**

**4**

436

512

**93**

218

**0**

**28**

**n/a**

**0**

**0**

**0**

**72**

569

**n/a**

Source: UN/ECE; figures in italic are UN/ECE estimates; "0" means no or a négligeable amount of
investment occured; per capita figures are in US S

**Ill**

STEEL INDUSTRY: A CASE OF SUCCESSFUL COOPERATION

In many Central/Eastern European countries, the steel industry represents a major industrial
sector which requires an enormous technical and managerial restructuring, in order to survive. At
the same time, and considering the ongoing structural adjustment of this sector in Europe as a
whole, steel trade is creating certain tensions which can best be solved through cooperation and
better mutual understanding.

Due to traditional contacts with the countries of Central/Eastern Europe in the steel sector and to
internal EU restructuring experience, Commission services were able to help to establish rapidly a
strategy and implement cooperation, with PHARE support. The approach has been worked out in
close cooperation with both government representatives and the industry of the countries
concerned and then been implemented by experienced consultants and with the assistance of
experts from the EU-steel industry. The assistance usually starts with a steel restructuring study
to provide an overview of the future of the steel industry in the country concerned. In parallel,
training programmes are organized to transmit specific experience in such areas as marketing,
cost accounting, personnel, etc. from the EU steel industry (for example, training programmes for
Central/Eastern European managers in EU steel companies). Finally, exchange programmes
were set up, pooling the experience of managers of steel companies from both regions. In
addition, Central/Eastern European steel companies have the possibility to apply for loans under
the ECSC Art. 95 loan facility adopted in 1990, provided that the project implies cooperation with
a EU partner and does not have disruptive effects on the market of the product concerned.

These types of programmes are successfully progressing in seven countries of Central/Eastern
Europe and will be started in Russia and in the Ukraine, with a slightly different approach
considering both the different industry size and the historical background. In Central/Eastern
Europe, the cooperation will have to take account of future accession, requiring assistance in
adapting to the rules and norms of the European Union and the ECSC, and exchange of
experience with their counterparts in the European Union.

The project Global Study Steel was set up in 1992. It brings together all steel producing countries
of Central/Eastern Europe under the guidance of a Steering Committee composed of the
European Commission, the EBRD, the World Bank, the United Nations and IISI. This regional
approach ensures that the restructuring is not done on a purely national basis without taking
account- of the Central/Eastern European and CIS regional implications and the world steel
situation, and helps to favour foreign investments and possible joint ventures. Regular meetings
allow an open exchange of experience, bringing together the people responsible for steel in
Europe. A first study under this guidance looked at demand and capacity in the year 2000, thus
helping in the individual restructuring concepts. A second study has just started, dealing with the
possibilities, advantages and requirements for regional cooperation, synergies and opportunities
in this sector.

After five years of industrial cooperation in the steel sector, the first results are not only a better
knowledge of the sectoral situation in this region, but also reasonable restructuring efforts.
Secondly, an exchange of experience is taking place with direct cooperation between managers
and government representatives from all over Europe, leading to the first joint ventures or other
partnership arrangements and better mutual understanding. This has been possible due to the
involvement of EU steel producers. In the future as part of the technical assistance programme, it
should be possible to deepen the cooperation further. For this reason and in a period of growing
steel trade, trade tension has lessened so that in fact nearly all barriers to imports from
Central/Eastern Europe have been eliminated in steel.

**IV**

**I N F O R M A T I O N** **S O C I E T Y :** **A** **C A S E** **F O R** **D E V E L O P I N G** **C O O P E R A T I O N**

Information and communication technologies are generating a new industrial revolution, critical to
the future of European society. For Central/Eastern Europe, the emergence of the Information
Society is one of the keys to industrial, economic and social renewal. These countries have highly
qualified human resources and significant industrial equipment in the fields involved. The global
nature of the issue calls for proper coordination mechanisms at an international level and for
cooperation in the whole of Europe.

Involving Central/Eastern Europe in the building of the European Information Society is crucial to
reinforce social, economic and political cohesion in the whole of Europe, and to reach the critical
mass which is going to allow the Union to compete more efficiently With the USA and Japan. Also,
cooperation is essential for the achievement of key elements in the development of advanced
information and communications infrastructure, in particular those related to standardisation,
protection of intellectual property rights, interconnection of networks and interoperability of
services and applications. Cooperation can play a fundamental role in favouring a rapid
penetration of information and communication technologies and the dissemination of know-how in
Central/Eastern Europe, and open at the same time opportunities for investment in this market by
EU industrial and service companies. This involves the removal of obstacles related to a number
of regulatory aspects.

The European Commission is organising an informal Forum on the Information Society with ten
Central/Eastern European countries in 1995, in order to start a joint reflection and to launch
selected cooperation projects. The Forum will bring together the competent ministers and
representatives of telecom industries and operators from Central/Eastern European countries
interested in actively participating in the dialogue on the Information Society, which has been
started notably in the G-7 Ministerial Conference organised by the Commission in February 1995
Initiatives such as the trans-European public administration network, telematic services for SMEs
etc. could greatly facilitate the integration of these countries into the Internal Market and the
overall E.U. structures.

In a side-look at Russia, Article 77 of the Partnership and Cooperation Agreement between the
European Communities and their Member States and the Russian Federation mentions various
aspects regarding possible cooperation in the area of communication, informatics and information
infrastructure. The Commission and the Presidential Committee of the Russian Federation for
Informatisation Policy will start a dialogue to exchange their views on the development of the
global information society.

A substantial effort is to be put on co-operative research and development, to share advances
and expertise, to promote the interoperability of networks, services, systems and applications, to
preserve the research excellency and human resources in Central/Eastern Europe, and to help
creating small knowledge-intensive companies and revitalising larger enterprises. Several joint
projects have already been undertaken under E.U. programmes such as COPERNICUS. More
will certainly be initiated under the Fourth Framework Programme, since its specific programmes
"Information Technologies", "Telematics applications of common interest", "Technologies for
Advanced Communications Services" and "International Cooperation" are now open to the
participation of Central/Eastern European organisations. Because of the strong reduction of funds
available to Central/Eastern European countries under the 4th Framework Programme and
because some expensive Information Society-related activities are not research-oriented,
mobilisation of other Commission programmes and funds for this area should be considered.

**Selective survey of EU assistance and RDT cooperation**

Under the Europe Agreements, special working groups on **approximation of laws** have
been established and are addressing, on a regular basis, priority areas. The PHARE
general technical assistance facility also provides support to approximation of laws,
notably for the regulatory framework for investment. Other specific programmes cover
areas of importance to business development, such as customs and statistics.

Adequate and effective protection of intellectual property is essential to encourage
R&D and to stimulate foreign direct investment. In order to facilitate the compliance with
the provisions of the Europe Agreements (legal obligation undertaken by the
Central/Eastern European states to provide in five years time a level of protection
similar to that in the Union), two specific regional programmes were set up in the
framework of PHARE. RIPP (Regional Industrial Property Programme) started in 1993
and will continue until the end of 1996. It concerns especially patents, marks and
industrial designs. The second programme called "Intellectual Property" started in 1994
and concerns copyright and neighbouring rights.

Quality management covers certification and normalisation, which are of high
importance for industrial development: Examples are pharmaceuticals (e.g. registration,
recognition of testing), aerospace and motor vehicles (harmonisation of technical
legislation to Western standards).
The European standardisation bodies (CEN, CENELEC, ETSI) have granted the status
of affiliated member or corresponding member to the national standardisation bodies in
certain Central/Eastern European countries, without obliging them, when they adopt
European standards, to withdraw their divergent national norms.
The Union has developed assistance programmes under PHARE (programme of
assistance for quality assurance) to help to adapt quality infrastructures to the new
market environment, in the areas of approximation of legislation and of standardisation.
Certain partner countries continue to adopt rules or standards which are not compatible
with EU standards/regulations, which then lead to new trade obstacles. Ad-hoc groups
on certification are being created, under the Europe Agreements, to help the
Central/Eastern European authorities to align their certification system with the Union's
and to avoid in future the creation of new trade barriers.

PHARE provides comprehensive assistance for privatisation and enterprise
restructuring (250 million ECU 1990-93). In the first phase of transition, characterised
by macro-economic stabilisation and the establishment of a legal, regulatory and
institutional framework, assistance concentrated on support to emerging (mainly public)
institutions and on traditional instruments such as studies, training and provision of
expertise. Major privatisation and restructuring programmes have been funded in almost
all the countries, adapted to the governments actions and country needs. Support has
been given horizontally (to privatisation ministries/agencies), to sectors and to individual
companies being privatised.
In addition to these actions, projects with strong cooperation components have been
undertaken in a number, of industry sectors, such as steel (see separate text in this

**VI**

annex). Furthermore, some support has already been provided to facilitate the
conversion of military companies into civilian production.

In terms of the provision of information on possibilities for **developing business links,**
the Commission will have completed the extension of correspondence centres for the
Euro-Info centre network to the Central/Eastern European countries by the end of 1995.
This network can act as the first point of contact for a EU firm interested in
Central/Eastern Europe and for firms from this region wishing to internationalise towards
the Union by direct exchange between members of the network without the need to
pass through Brussels.
The Commission is also in the process of extending its networks for industrial
cooperation to Central/Eastern Europe. The non confidential Bureau de Rapprochement
des Entreprises (BRE) has already been implemented in most of Central/Eastern
Europe, whereas the more elaborate and fee-paying BC-Net has been extended to five
countries. Experience with those countries where BRE is already operational shows that
this non-confidential partner search network is well suited to many Central/Eastern
European countries. Firms from Central/Eastern Europe also participate in the various
partnering events organised by the Commission. These include the big
EUROPARTENARIAT events held on a regional basis twice a year and smaller scale
INTERPRISE events which bring together three or more regions usually on a sectoral
basis.
Regional cooperation is encouraged by PHARE-CBC (cross-border cooperation), by
actions undertaken along the Union's external borders under INTERREG, as well as by
PHARE-INTERREG and by the OUVERTURE/ECOS programme which aim at
interregional cooperation between the Union and Central/Eastern European countries.

Regarding investment **promotion,** PHARE has supported the establishment of
investment promotion agencies in Central/Eastern Europe. Furthermore, financial
assistance has been provided through JOPP (JOint ventures Phare Programme), which
supports the creation of joint ventures among EU and Central/Eastern European (mostly
small and medium-size) companies, from the feasibility to the operational stages.
Considerable PHARE funds have been used to set up **financial schemes** (including
regional investment companies, credit lines, guarantee funds and privatisation funds)
and to co-financing with the EBRD.

in view of regional **trade promotion,** the Commission has already taken measures to
assist the creation of a private payment and settlement system in these countries. In
April 1994 a new clearing and settlement system for payments in hard currencies
among Central/Eastern European commercial banks (ABC ECU-linked Clearing and
Settlement System) became operative in its first stage.

Environmental degradation in many Central/Eastern European regions is severe. The
Europe Agreements acknowledge the need for **environmental cooperation.** In the
framework of PHARE, environmental programms were launched and an "Environmental
sector strategy for Central/Eastern Europe" (adopted in 1991) identified the transfer of
information and technology as one of the policy objectives and ' priorities. Moreover,

#### **50**

**Vf?**

"Environment and Industry" is on the agenda of the Sofia iViinisterial Conference in
October 1995, part of the "Environment for Europe" process.
Through the Europe Agreements and PHARE, exchanges of views take place related to
issues of environmental protection.

Support to **training** activities is being provided under PHARE and other programmes.
Apart from assistance to the education systems of beneficiary countries, many
horizontal and sectoral privatisation/restructuring projects contain training elements:
The "Industrial Training Attachments Programme" sets an example for cooperative
training schemes: It supports professional traineeships for Central/Eastern European
managers in EU companies, to provide insight into production and working methods of
companies in a market economy environment. The TEMPUS programme (cooperation
in higher education) provides support to Central/Eastern European universities to
strenghten their links with enterprises, to develop degrees and courses which are in
tune with the needs of industry and to increase their capacities to provide continuing
education. The opening-up of the LEONARDO and SOCRATES programmes to the
associated Central/Eastern European countries provides significant new opportunities to
pursue constructive cooperation in these areas between them and the Union.

Scientific **and technological cooperation** with Central/Eastern Europe mainly intends:

- to help safeguarding the scientific and technological potential of these countries in
order to redirect research towards social needs, restore their production system and
improve the quality of life

- to help solving major social, economic and environment problems specific to
Central/Eastern European countries by means of targeted technical, scientific and
socio-economic RDT.
The earlier PECO and COPERNICUS schemes already aimed at industrial cooperation
with Central/Eastern Europe in certain areas. The approach has now been integrated
into the 4th Framework Programme (1994-98), which includes a new international
cooperation programme. 43% of the budget of this international cooperation programme
are devoted to finance cooperation projects with Central/Eastern Europe (and the Newly
Independent States of the Former Soviet Union), representing less than 2% of the 4th
Framework Programmes overall budget.
Within the international cooperation programme, a substantial effort is put on applied
research directed towards industry, particularly in the fields of information technologies,
advanced communications and telematics, materials technology, biotechnology. The
budget for this programme is significantly lower than the corresponding one under the
previous schemes. Indeed, partners from all European countries may now participate in
all programmes of the 4th Framework Programme, but the fact that only limited financial
support by the European Union is available, constrains the potential of this cooperation
policy.

Action has been started to promote direct contact between EU and Central/Eastern
European industries, for example through Round-Table discussions. A first RoundTable has been held in Riga in May 1994. The conference gathered high-ranking
representatives of EU companies and their Baltic counterparts in four sectors
(telecommunication, food processing, wood/paper, maritime industry), high level

**vin**

**representatives of the Commission and the governments of the three Baltic states, to**
**discuss** **the conditions for foreign direct investment and industrial cooperation. Potential**
**cooperation opportunities have been identified, and an appropriate follow-up agenda**
**has been agreed. The occasion has also been used to start the Baltic Information**
**Infrastructure** **Pilot** **Project,** **designed to close some of the bottlenecks in the current**
**information infrastructure and to help to develop some business information services.**
**The setting-up and the development of industry associations, chambers of commerce,**
**SME business centers and similar institutions in Central/Eastern Europe** **has** **been a**
**significant area of support under the relevant PHARE programmes.**

**Z>**
### **_2_**

**COMMUNICATION** **FROM** **THE COMMISSION REGARDING INDUSTRIAL CO-OPERATION**

**WITH THE CENTRAL/EASTERN EUROPEAN COUNTRIES**

**FINANCIAL SHEET**

**1.** **ACTION**

**Industrial** **Co-operation with Central/Eastern European countries**

**2.** **RELEVANT BUDGET LINE**

**See point 7. (below)**

**3.** **LEGAL BASIS**

**- Treaty establishing the European Coal and Steel Community and its**
**transposition in the protocol no. 2 of the association agreements with the**
**Central/Eastern** **European countries**

**- Treaty establishing a European Community and in particular its articles 3 and**
**130,** **heading XIII (Industry), XV (Technological Research** **and** **Development -**
**130 F and ss)** **and** **XII (Trans-European Networks - 129 C)**

**4.** **DESCRIPTION** **OF** **THE ACTION**

**4.1.** **General objective** **of** **the action**

**To develop** **in the** **frame** **of the pre-accession strategy, the industrial** **co-**
**operation between companies in** **the** **European Union and the**
**Central/Eastern European countries with the aim of facilitating integration**
**of these countries** **in** **the internal** **market,** **and for this purpose to:**

**- improve the** **framework** **conditions for** **the** **industrial**
**development of the** **Central/Eastern** **European countries;**

**- encourage** **the** **restructuring** **and** **modernisation of the industry;**

**- promote investments**

**4.2.** **Period covered by the action and the procedures set for its renewal**

**The actions proposed in the Communication are for the most** **part,** **in**
**the frame of continuously pursued activities.**

**V>**

5. CLASSIFICATION OF THE EXPENDITURE

NOE;DA

6. EXPENDITURE TYPE

Expenditure mainly consists of:

funding of actions aiming to facilitate partnerships with the different
parties involved (co-ordination with the ministries of Industry, developing
support services to industries in Central/Eastern European countries)

funding of the operational actions aiming to gather the data needed for a
thorough knowledge of the enterprises and the industrial sectors (punctual
analysis leading to a concrete industrial co-operation action e.g. trade fair)

funding of meetings between industrialists or between professional
associations from both regions (industrial Round-Tables, sectorial
information days...)

financial contributions to the scientific and technological co-operation
activities

7. **FINANCIAL INCIDENCE**

7.1. Launching of concrete industrial co-operation actions (B5-4110
"Industry")

Previsions for 1996

Action : Ecus

a) Information seminars, for example on the activities of the Agencies for the
promotion of investments of the Central/Eastern European countries for support
services of the EU industry 150.000
(following Essen)

b) Round tables/meetings at the time of trade fairs between EU
industrialists and those of Central/Eastern European countries:

multi-sectorial or uni-sectorial actions 350.000

**TOTAL** **500.000**

**- 2 -**

**These** **conciele** **industrial co-operation actions** **wil be developed** **in close relations or**
**even** **as parineEships with** **the action funded in the** **framework** **of other financial resources**
**and in particular of** **the** **PHARE programme** **(budget line** **B7-6000), the sectors covered**
**by the 4th research and development** **framework** **programme** **(B6) and of** **the activities in**
**the field of** **tfee Information** **Society (B5-722).**

**7.2.** **PHARE (line B7-600)**

**The general budget of the European Union forecast for the year 1995 the**
**global amount of 930 MECU on the line** **B7-600.** **The comments on the**
**budget allow for** **the** **development of industrial co-operation actions such**
**as** **those suggested** **in** **the** **Communication** **and especially** **in** **the**
**following fields:**

**• Restructuring, privatisation;**

**• support to the private sector, especially for small and medium size**
**enterprises (e.g. JOPP);**

**• promotion of private investments;**

**• reforms linked to the rehabilitation of the fundamental infrastructure and**
**especially in the sectors related to** **transport,** **environment, energy and**
**human resources;**

**• education, training and research, especially for the actions** **linked** **to**
**industrial development.**

**7.3** **Activities within the 4th Framework Programme on**
**research and technological development (B6-)**

**Research and development activities closely related to industrial**
**co-operation actions will be launched throughout specific programmes,**
**implementing the 4th** **framework** **programme, open to Central/Eastern**
**European countries. Activity 2 of the 4th framework programme**
**concerning the international co-operation directly, forecasts a global**
**amount of 208.98 MECU for the co-operation with the** **CEECs/NIS,** **that is**
**14.64 MECU in 1995 and 59.25 MECU for 1996. The three important**
**fields and objectives forecast in this region are "stabilisation of the**
**research and technological development** **potential"** **(50 MECU),**
**"environment and** **health"** **(79.49 MECU) and "RTD oriented towards**
**industry" (79.49 MECU). The industrial co-operation actions suggested**
**by the Communication envisage the development of close links between**
**the researchers networks and industry which could certainly be part**
**of the field "RTD towards industry".**

**- 3 -**

**V~**

**7.4.** **Activities relating to the development of the Information** Society (B5**722)**

The global amount for this budget line is 10 MECU for 1995. Concrete
projects linked to the development of the Information Society are forecast
by the Communication in the following fields:

        - development of data exchange networks between administrations

        - telematic services for the small and medium enterprises

        - development of information and communication infrastructure
concerning standardisation, protection of intellectual property rights etc.

**8.** **ANTI** **FRAUD** **PROCEDURES** **(AND** **RESULTS** **OF** **THEIR** USE)

The verification of the funding or of the reception of services and ordered
preparatory, feasibility or evaluation studies is undertaken by the Commission
services before payment, taking into account the contractual obligations and the
economical and good financial or global management principles. The anti-fraud
procedures (control, preparing reports, etc.) are included in all the agreements or
contracts signed between the Commission and the payments beneficiaries.

**9.** **Cost efficiency analysis elements**

**9.1.** **Specific quantifiable objectives, target groups** .

a) Specific objectives

    - Develop support services to the Central/Eastern European countries industry
(professional associations, chambers of commerce...)

    - Promote investments (organisation of meetings, forums, sectorial round tables,
information days with the Central/Eastern European agencies for investment
promotion aiming at support services for the EU industry)

    - Improve exchange of expertise regarding the industrial implication of the
technological research development actions (information seminars, use of the
researchers networks)

    - take useful initiatives to promote the co-ordination between administrations
responsible for industry (especially meeting with directors general of
industry).

b) Target groups

**-4**

#### **_V_**

Industrial operators, professional associations, competent public
administrations, international partners of the Community in the industrial
field

**9.2.** **Justification of** _**the**_ **action**

a) Cost

The requested credit will be used to undertake in close collaboration with
DGI/PMARE the Essen summit conclusions that forecast among others:

- The establishment between the associated countries and the European Union
institutions of "structured relations" that will favour mutual trust and that will

provide a framework for the study of questions of common interest;

- a programme to stimulate investments (use of the services of the agencies for the
promotion of investment, the creation of a "Business Advisory Council")

- the development of initiatives such as the modernisation of production
capacities.

The Member States will be informed of the actions launched either through the
PHARE management committees or at meetings of directors general of industry.

b) The following effects can be expected from the launching of such co-operation:

- contribution to the development of a viable industrial structure in view of the
accession of the Central/Eastern countries to the European Union

- better synergy between industrial partners

- development of competitiveness and investment,

**9.3.** **Follow-up** **and** **evaluation of the** **action**

A regular evaluation is foreseen according to the proper modalities of each
concrete industrial co-operation project. Furthermore, the Commission has agreed
to transmit to the Council an annual report on the competitiveness of the
European industry; the industrial co-operation with Central/Eastern Europe will
be one element of this report.

                         - 5 

**TT**

**ISSN 0254-1475**

###### **COM(95) 71 final**

## **DOCUMENTS**

**EN** **U** **10**

**Catalogue number** **:** **CB-CO-95-102-EN-C**

**ISBN** **92-77-86858-9**

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

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