Small and Medium Sized Enterprises

Kenneth Dyson

• Publisher: Routledge
• Year: 2005
• Print ISBN: 9781138419063
• eBook ISBN: 9781134956869
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The single European market after 1992 presents a major challenge to small and medium-sized companies in the Community. Whether it is developing exports and/or fighting off new imports, Europe's entrepreneurs will have to `think European'. Moreover, the European Community institutions themselves have developed special policies designed to promote the interests of Europe's smaller companies. This volume explains how the EC's policies towards small and medium-sized enterprises have developed and what they currently entail. It guides the reader through the various EC policy initiatives and the new legislation - including that in the `1992' package - relevant to the smaller business company. It offers summaries of the key EC documents concerned, and presents a full listing of all the other relevant proposals and policies. Like the others in this series, the volume is both comprehensive and up-to-date: it discusses not only what the EC has done which is relevant to small businesses, but also what it is proposing to do in the future.

Section II Summaries of Key European Community Programmes on SMEs

Promoting External Business and Trade

DOI: 10.4324/9780203991176-2

Community's General Export Promotion Programme

This programme has been developing since 1983 and aims to target specific markets where Community promotion can facilitate market access and trade development by EC companies. Close co-operation with the export promotion agencies of the Member States is pursued through the Trade Promotion Group where their representatives agree specific action under the chairmanship of DG I (External Relations). Targets have been: Japan, Brunei, China, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand. A co-ordinated programme is updated twice annually and involves co-subsidy from the Commission and from the national export promotion agencies. The four major activities supported are:

1. Trade Fairs. Exhibitors receive financial assistance (towards costs of exhibition space and design) and are supported by a Commission information stand and publicity if they exhibit together in an EC pavilion under EC colours.
2. Trade Missions. Where it can be demonstrated that EC firms enjoy a comparative advantage over competitors, sectoral missions can be supported.
3. Market Studies. National export promotion agencies will make available sectoral and public purchasing studies.
4. Technical Seminars. Seminars can be sponsored when they promote new developments in EC technologies.

Technical seminars in particular have been specifically directed at SMEs which can also expect to benefit from the whole range of these activities.

Commission Contact: DG I/C/3, 1 Avenue Cortenberg, B-1040 Brussels, tel: [phone].

In 1989 DG I/C/3 is publishing guides on exporting for SMEs: tel: [phone].

Exports to Japan

This programme has been developing since 1979 and aims to encourage EC firms, especially SMEs, to export to Japan. Of the five activities promoted by the European Commission, the most important is the Training Programme in Japan for Young Community Executives. By the end of the ninth training programme (ETP9) in December 1990 nearly 300 places will have been awarded on the long-term, 18-month programme; fifty-two in ETP9. 80% of the young trainees who took part in previous ETPs now work for EC firms in Japan or EC export services to Japan. The objective is to form a reserve of EC executives capable of successfully handling their firms’ business relations with Japan. A greater number of participants from SMEs has been noticeable, across a spread of industrial and commercial sectors. The programme involves a one-year intensive language course in Japanese, followed by a six-month period of on-the-job training in selected Japanese companies, and a parallel programme of conferences and seminars. Participants must be between 25 and 35 years of age and have received a university-level education or equivalent. They must be citizens of an EC country and be employed by EC firms oriented towards export and interested in the Japanese market. The trainees receive a monthly allowance. Language classes and costs related to the programme are paid for by the Commission. Firms must seek to ensure that trainees are later employed in a post that is actively involved in export business to Japan. The Commission contact is: DG I/F/1, Division Japan, 200 rue de la Loi, B-1049 Brussels, tel: [phone].

Short-Term Visits to Japan. This programme comprises two trips a year of three weeks duration and is organized and financed by the Japanese External Trade Organization (JETRO). Of the fifteen to twenty EC executives normally involved, some ten are selected by the Commission. The Commission contact is: DG I/F/1, tel: [phone].

Sectoral Measures. The EC undertakes sectoral market studies (available free of charge e.g. ceramics, beverages, milk products, electrical household goods, advanced medical materials) and helps to finance commercial missions (where firms come from a representative selection of EC states and normally have the support of EC industrial federations). The Commission contact is: DG I/F/1, tel: [phone].

General Action. The Commission may subsidize courses for senior executives on Japanese markets and sponsor study trips to Japan on specific themes (e.g. technology transfer). It also publishes a list of EC companies operating in Japan that are prepared to help SMEs enter the Japanese market and monitors calls for public tender in Japan (made available through the ‘S’ series of the Official Journal and its computerized equivalent TED). The Commission contact is: DG I/F/1, tel: [phone].

EC/Japan Industrial Co-operation Centre. The objective of this pilot action (June 1987—March 1989), is to provide businessmen and engineers from SMEs with practical information on Japanese industrial management and engineering techniques. The scheme is co-financed by the Commission and by Japan’s MITI (Ministry for International Trade and Industry), and firms are expected to pay travel and accommodation costs. The Industrial Co-operation Centre provides information services on establishing companies in Japan or funding partners for joint ventures; and offers professional training for, on average, four to six months in Japan. The Commission contact is: DG III (Internal Market and Industrial Affairs), 200 rue de la Loi, B-1049 Brussels, tel: [phone].

Project Opportunities in the Mediterranean Countries

Co-operation agreements with a number of Mediterranean countries cover trade and financial matters (notably free or favourable access for certain products to the EC markets) and open up opportunities for companies, including SMEs, to tender for infrastructural, industrial, energy, agricultural and training projects. These agreements last for an indefinite period and contain five-year renewable financial protocols which define the overall amount of EC aid and how it is to be provided. Under the third financial protocols (1987–92) there is a considerable increase of overall allocation (to take account of inflation) and provision for a maximum of 2% interest subsidy on European Investment Bank (EIB) loans and a fixed amount of risk capital as well as grant aid from the EC budget. Co-operation agreements exist with three groups of countries:

1. Maghreb—Algeria, Morocco and Tunisia
2. Mashraq—Egypt, Jordan, Lebanon, Syria
3. Others—Cyprus, Israel (of limited scope), Malta, Turkey and Yugoslavia.

Support is particularly directed at infrastructural schemes (e.g. water supply and road construction projects), industrial projects for SMEs, rural development projects, technical co-operation schemes in research and training (e.g. tourism promotion, water resources), and energy projects. The major recipients under the third protocol are to be (in order of importance) Egypt (with over 25%), Morocco, Algeria and Tunisia. The procedure involves the formulation of individual indicative programmes for each state, followed by joint agreement on a proposal-by-proposal basis of a financing agreement. Advanced information about projects going out to tender can be gained from_

1. the Mediterranean countries’ own governments
2. the permanent representations of the Member States to the Community.
3. DG I/G (External Relations): for general introduction and names and members of the desk officers for each Mediterranean country, tel: [phone] or (02) 235 22 12.

EC Budget item 9671 indicates that particular priority will be given to small businesses. SMEs should also note the creation of the ‘EC International Investment Partners’ as a financial instrument in 1988 to promote investments by EC companies in a series of Mediterranean, Asian and Latin American developing countries, in the form of joint ventures with local companies (notably combined with a transfer of technology and know-how). The EC acts by co-financing and solely through existing financial intermediaries.

In April 1989 the ‘Mediterranean’ Intergroup of the European Parliament (having some 100 MEPs as members) proposed a global co-operation agreement between the EC and these countries, including the creation of a Council for Mediterranean Co-operation.

Project Opportunities in the Asian and Latin American Developing Countries (ALA). Council Regulation 442/81 L48. 28.2.81

Co-operation and financial agreements between the EC and certain Asian and Latin American countries date from 1976 and are covered by a basic Council regulation of 1981 and by annual guidelines decided by the Council. The basic regulation gives priority to the poorest countries (especially the rural sector); regional projects; and a reserve for post-catastrophe reconstruction. Aid is in the form of grant aid. The large majority of the aid goes to Asia e.g. Bangladesh, Burma, China, India, Indonesia, Laos, Pakistan, Philippines, Sri Lanka, Thailand, Vietnam; examples of Latin American countries are Bolivia, Columbia, Costa Rica, Ecuador, Guatemala, Nicaragua, Paraguay and Peru. Companies, including SMEs, can win contracts if they have advanced information and should cultivate close contacts with the relevant permanent representation of their Member State as well as with DG I/H/3 (External Relations) on economic monitoring and project identification, tel: [phone] and with DG VIII/5 (Development) on project implementation and technical assistance tel: [phone]. Final information about projects subject to open tender can be gained from the ‘S‘series of the Official Journal. See EC Budget item 9315 for encouraging joint ventures and investment in Latin America, particularly with small businesses, and item 9305 for Asia.

See also the ‘EC International Investment Partners’ instrument under the previous section.

Project Opportunities Under the Lomé Convention

Since 1975 the EC provides aid under the Lomé Convention to sixty-six African, Caribbean and Pacific (ACP) States and the Overseas Territories (OCT) of France, the Netherlands and Britain. This aid is made available mainly under the European Development Fund (EDF), which is administered by DG XVIII and also by European Investment Bank (EIB) subsidized loans. The activities are governed by successive five-year conventions (LOME I 1975–9, LOME II 1979–84 and LOME III 1984–90) and by the principle of co-operation with individual ACP states in agreeing jointly an indicative aid programme, followed by individual action programmes and projects, and a financing proposal. DG VIII is responsible for ensuring that aided projects are economically and technically sound and implementation is effective. Total financial aid under Lomé III for ACP/OCT states was 8,620 million ECUs.

As far as SMEs are concerned, it is important to note that the Lomé Convention includes an ACP commitment to create favourable conditions for EC investment and provides for financial and technical co-operation—grants, special loans and risk capital financed by EDF and EIB. They are provided with opportunities to win contracts for works projects (60% of all projects e.g. construction contracts), supply projects (20% of all projects e.g. supplies for agriculture) and service projects (20% of all projects e.g. feasibility studies, consultancy reports, provision of technical staff). Main priorities are agricultural and rural development, fisheries, industrial development, mining and energy, transport and communication, tourism and vocational training.

Tendering procedures differ significantly:

1. For works and supply projects there are five methods:
   1. international competitive bidding (tender specifications are put out to EC/ACP states with preference given to local firms—10% for small works contracts and 15% for supplies);
   2. restricted invitation (selected candidates are invited to tender for emergency aid or an urgent operation);
   3. accelerated tenders for small works contracts (publicity is limited to the ACP state itself or its neighbours);
   4. mutual agreement procedures for urgent or small—scale operations (the ACP state selects the contractor/supplier subject to Commission approval); and
   5. contract executed by the ACP authority (where the estimated cost is less than 4 million ECUs).
2. For technical assistance/consultancy firms must first register with DG VIII for contracts financed by EDF by completing a computerized questionnaire. Contracts are awarded either by restricted invitation to tender (chosen from the file) or (for small operations) by a direct proposal of one or two candidates to the ACP state. In order to realize the project opportunities under the Lomé Convention SMEs need good contacts and advance information, in particular to:
   1. the ACP national authorizing officer in each ACP state (usually a minister or senior official), responsible for the preparation of tenders and placing of contracts;
   2. the EC Commission’s Delegation in the ACP state, responsible for ensuring that the terms of the Convention in respect of tendering and contracts procedures are respected;
   3. DG VIII: for consultancy contracts registration, tel: [phone];
   4. the relevant permanent representation of the Member State in Brussels;
   5. the ACP ‘Courier’ magazine and its equivalent data base (PABLI); and
   6. Official Journal ‘S’ series and its equivalent data base (TED).

Business Co-Operation Between EC and ACP Firms

The Centre for the Development of Industry (CDI) was established in 1977 under the Lomé Convention and is financed under the EDF with the aim of advancing the industrial development of the ACP states. Its activities are particularly concerned to encourage co-operation between EC and ACP firms in the form of long-term contractual arrangements in the following main ways: by acting as a neutral, experienced mediator in negotiations; and by reducing the promotional, preinvestment and implementation costs of establishing new developments in ACP countries. This assistance is mainly directed to SMEs which meet the following criteria:

1. are active in the priority sectors of ACP countries (agro-food, wood, metal processing, leather, energy, paper and printing, building materials);
2. wish to take equity in a joint venture or to enter into a long-term contractual agreement (e.g. licensing, franchising, sub-contracting) with an ACP partner; and
3. can offer financial guarantees.

The advantages for EC firms are:

1. the prospect of restructuring by transferring labour intensive processes or uncompetitive plant to ACP countries;
2. access to ACP raw materials, markets and fiscal incentives; and
3. opportunity to expand by exploiting their know-how in an ACP environment.

To benefit from the wide variety of services to SMEs by getting onto its file, contact: CDI, 28 rue de l’Industriè, B-1040 Brussels, tel: [phone].

Promoting SMES Within the Internal Market Programme

DOI: 10.4324/9780203991176-3

The Removal of Physical Barriers

European Commission (1988). ‘The Economics of 1992’, European Economy, 35, March, pp46–8.

This document identifies customs formalities and resultant paperwork as one of the three major obstacles to trade (the others are technical regulations and public procurement practices) and estimates that they add about 1.5% to 2% to the final cost of products to the consumer. Three factors have made customs procedures more complex and burdensome: the need to handle problems of tax adjustment arising from national differences in VAT and excise duties; health and transport regulations; and compliance with bilateral trade quota regimes. The major component of these costs are administrative costs, totalling about 7.5 billion ECUs; costs associated with frontier delays added about 1–2 billion ECUs to this total.

The cost of customs procedures varied (a) across industries, with the costs being highest in textiles, footwear and clothing, paper, mineral oil refining, rubber products, precision engineering and food; and (b) from country to country, with Belgium having the most ‘open’ and Italy the most ‘closed’ frontier. Of particular importance to this volume, costs per consignment could be as much as 30–40% higher for small firms (less than 250 employees) than for large firms.

In this latter respect SMEs stand to benefit disproportionately from the 1992 programme’s priority to the elimination of frontier controls and border checks: and this, in turn, requires the removal of different national health and transport standards and the harmonization of indirect taxes.

The launch (in January 1988) of the Single Administrative Document (SAD), to cover all the export, transit and import documentation needed for EC and many third co...

Table of contents

• Cover Page
• Half-Title Page
• Front-Chapter
• Title Page
• Copyright Page
• Table of Contents
• Foreword
• The European Community: its role, institutions, and legislation
• Preface
• SECTION I INTRODUCTION: THE EUROPEAN COMMUNITY AND THE DEVELOPMENT OF SME POLICY
• SECTION II SUMMARIES OF KEY EUROPEAN COMMUNITY PROGRAMMES ON SMEs
• SECTION III A Full Listing of the Legislative Items in the Internal Market Programme