Position Paper April 2012 On draft Regulation of the European Parliament and of the Council establishing a Programme for the Competitiveness of Enterprises and small and medium-sized enterprises (2014-2020) (COSME) COM(2011)834 final EUROCHAMBRES The Association of European Chambers of Commerce and Industry represents over 20 million enterprises in Europe 93% of which are SMEs through members in 45 countries and a European network of 2000 regional and local Chambers
Introduction EUROCHAMBRES strongly advocated the continuation and refinement of a programme aimed at supporting small and medium sized enterprises (SMEs) during the preparation of the Commission s proposal for the 2014-2020 Multiannual Financial Framework (MFF) in early 2011. Chambers therefore welcomed the inclusion of a budget line for the development of the Programme for the Competitiveness of Enterprises and SMEs 2014-2020 (COSME) in the MFF package. This paper contains specific comments on the budget and content of the subsequent proposal. Executive summary 1. Budget: EUROCHAMBRES regrets that only 0.2% of the proposed Multiannual Financial Framework package is allocated specifically to COSME. Chambers consider this figure unacceptably low given the frequently cited pivotal role of SMEs in the delivery of the EU s jobs and growth agenda and the ambitious programme objective of strengthening the competitiveness and sustainability of SMEs. 2. Coherence: EUROCHAMBRES is concerned by a lack of coherence between the objectives, targets and indicators of the programme and in certain areas between COSME objectives and those of other new EU programmes, such as Erasmus for All and Horizon 2020. 3. Business transfer: Given the important role of business transfer in preserving employment and strengthening the competitiveness of the enterprises, explicit references to support of business transfer via access to finance and entrepreneurship promotion instruments should feature in the text. 4. Access to finance: EUROCHAMBRES fully endorses the initiative to improve access to equity and debt financing. Chambers particularly support the proposed debt platform for loan guarantee instruments. EUROCHAMBRES advocates the removal of thresholds for loan guarantees and stresses the importance of the COSME financial instruments ability to leverage equity and credit sources for SMEs from larger programmes such as the structural funds and Horizon 2020. The financial instruments under COSME should apply not only to start-up and growth phases, but also support transfer of business. Complementarity between financial instruments under COSME and other Multiannual Financial Framework 2014-2020 programmes should, moreover, be ensured. 5. Access to markets: EUROCHAMBRES supports the central role of the Enterprise Europe Network (EEN) in helping SMEs to access new markets within and beyond the EU. Nonetheless, improved complementarity with other market access initiatives at EU and national level is vital and must be a central and underlying principle of the COSME programme s access to market initiatives. 6. Enterprise Europe Network: EUROCHAMBRES welcomes the central role of the EEN in the delivery of COSME and indeed Horizon 2020 to SMEs. The budget allocated to the network for the 2014-20 period must reflect this, as well as the network s new responsibilities in relation to access to finance, Horizon 2020 and potentially sustainability. An appropriate governance structure must also be put in place, with the host structures prominent in strategic decisions. 2
Specific comments 1. Objectives, targets and indicators of COSME 1.1. General objectives (Article 2) General objectives 2. Encourage an entrepreneurial culture and promote the creation and growth of SMEs EUROCHAMBRES proposal 2. Encourage an opportunity-driven entrepreneurial culture and promote the creation, growth and transfer of SMEs 1.1.1. Sustainability While competitiveness and sustainability are increasingly interlinked, the former does not guarantee the latter, so the inclusion of sustainability in the general objective of the programme must be reflected in COSME s specific objectives, actions, targets, indicators. This is not currently the case. 1.1.2. Business transfer Chambers believe that the successful transfer of economically sound companies is an essential component of a healthy private sector and that measures at EU level can enhance this often prohibitively complex and expensive process. Business transfer should therefore be an integral element of the programme and referred to in the general objectives and recitals of COSME. 1.1.3 Opportunity-driven entrepreneurship EUROCHAMBRES believes that a competitive business environment, access to financing and information about market opportunities (e.g. cooperation partners) would promote the development of the opportunity-driven entrepreneurship. 1 Bearing in mind that countries dominated by opportunity-driven entrepreneurship have a lower rate of early-stage business failure than those with higher proportions of necessity-driven entrepreneurship 2, Chambers recommend that COSME should include as an objective the development of opportunity-driven entrepreneurial culture. 1.2. Specific objectives (Article 3) EUROCHAMBRES calls for specific targets and indicators to be included in Annex I that correlate with the sustainability objectives contained in Article 3.2 (on coherence between objectives, targets and indicators please also see Point 1.3. below). 1.3. The coherence between Objectives, Targets and Indicators (Article 2, Article 3, Annex I) EUROCHAMBRES considers that the list of impact and result indicators in order to achieve the general and specific objectives is incomplete and should be reviewed in consultation with SME representatives. Chambers argue that long term targets should be more ambitious and in line with the best practices to ensure competitiveness of the business environment in the Union. EUROCHAMBRES also proposes to reconsider the benchmarks applied in relation to competitiveness. For example, EUROCHAMBRES underlines that starting a business as mentioned in COSME is only one indicator for measuring the competitiveness of economy. 1 See data on opportunity-driven vs necessity-driven entrepreneurship at survey Entrepreneurship in the EU and beyond (p68) http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/eurobarometer/fl283_en.pdf 2 See Minniti, M., W. Bygrave and E. Autio. 2006. Global Entrepreneurship Monitor: 2005 Executive Report. London: London Business School. 3
COSME (Annex I): General Objective Impact indicator Long term target and milestone (2020) Strengthen the competitiveness and sustainability of the Union s enterprises, including in the tourism sector. Change of administrative burden on SMEs (Number of days to set-up a new enterprise) Reduction of number of days to setup a new SME: 3 working days in 2020 EUROCHAMBRES proposal: General Objective Impact indicator Long term target and milestone (2020) Strengthen the competitiveness and growth/sustainablity of the Union s enterprises Change of administrative burden on SMEs Reduction of administrative burden on starting a business: - Time 1 working day 3 - Costs - below OECD high income average - Procedures below OECD high income average Reduction of administrative burdens on existing businesses, with the main focus on the following areas: - Dealing with permits; - Accessing utilities - Registering property - Securing credit - Protecting investors - Paying taxes - Trading across the Union s borders - Enforcing contracts - Resolving insolvency Clear coherence between objectives, targets and indicators should be ensured also in relation to other specific points, such as sustainability (Point 1.1.1.) and promotion of entrepreneurship (point 3 below). 2. Budget (Article 4) The European Commission in numerous EU policy documents and public messages reiterates the decisive role of SMEs in the competitiveness, creation of new jobs and dynamism of the European economy. It is therefore regrettable that the political importance attached to SMEs is not reflected in the negligible budget allocated to the COSME programme. EUROCHAMBRES considers a budget of about 2,5 billion EUR for COSME, constituting 0.2% of the overall MFF, inadequate to achieve the competitiveness and sustainability objectives of the programme and to reinforce SMEs ability to contribute to the broader policy objectives of Europe 2020. Considering the above, EUROCHAMBRES strongly recommends significantly increasing the financial envelope for COSME in order to contribute to favourable conditions for EU SMEs. 3 According to the information as provided at the SME Envoys meeting on January 27, 2012, the United Kingdom reduced the average time to start a company to 7 hours and in Estonia in most of cases a company can be registered within 1 hour. Also several countries outside EU offer registration of companies in one business day (see Doing Business index). 4
3. Actions to promote entrepreneurship (Article 7) COSME defines the promotion of entrepreneurship as one of the specific objectives, but EUROCHAMBRES advocates more precise measures/indicators to evaluate the progress of the development of the entrepreneurial culture, e.g. by including measures addressed to specific target groups, entrepreneurship education at school/university, B2B training organized by SME organizations etc. Also, referring to the Point 1.1.3 business transfer above, EUROCHAMBRES calls for inclusion of a reference to business transfer in Article 7, thus integrating support to business transfer and second chance (re-start) initiatives. Article 7 Actions to promote entrepreneurship COSME 1. The Commission shall contribute to promoting entrepreneurship by improving framework conditions affecting the development of entrepreneurship. The Commission shall support a business environment favourable to enterprise development and growth. 2. Particular attention shall be paid to young entrepreneurs, new and potential entrepreneurs and female entrepreneurs, as well as specific target groups. 3. The Commission may support Member States' measures to build-up entrepreneurial education, skills and attitudes, in particular among potential and new entrepreneurs. EUROCHAMBRES proposal 1. The Commission shall contribute to promoting entrepreneurship by improving framework conditions affecting the development of entrepreneurship. The Commission shall support a business environment favourable to enterprise development, growth and transfer. 2. Particular attention shall be paid to young entrepreneurs, new and potential entrepreneurs, and female entrepreneurs, as well as specific target groups, including entrepreneurs taking or handing over an established business. 3. The Commission may support Member States' measures to build-up entrepreneurial education, skills and attitudes, in particular among potential and new entrepreneurs. 4. Improving access to finance (Article 8) EUROCHAMBRES shares the view with the European Commission that access to finance must be improved and Chambers endorse the proposal to allocate about 59 percent of the financial envelope of COSME to the financial instruments in the form of equity and debt. Chambers underline that the overall financial envelope devoted to COSME represents a very small portion of the total financial framework allocation. Notwithstanding EUROCHAMBRES recommendation to increase the COSME budget, the aim of enhancing the complementarity of COSME debt financing instruments with guarantees instruments under JEREMIE and the structural funds is welcomed. While supporting actions related to both equity and debt instruments, EUROCHAMBRES is particularly pleased with the proposed debt platform providing loan guarantee instruments, which will remain a key factor in facilitating SME access to finance from banks in the current highly risk-adverse financing environment. In this respect, EUROCHAMBRES underlines its proposal for the creation of a fully-fledged European Central Guarantee Fund at managed by the EIF. Reflecting previous comments, EUROCHAMBRES firmly believes that COSME should support actions which aim to improve access to finance for SMEs, not only in their start-up and growth phases, but also during business transfer. Chambers believe that the need for financial support to be extended to business transfers and the fact that financing under Horizon 2020 applies specifically to innovative and research projects are both strong arguments to remove thresholds applicable to the loan guarantees under COSME. Such a position is also supported by the fact that current EU-funded support schemes for SME financing are not limited by thresholds and have proved to function effectively. 5
5. Improving access to markets (Article 9) Considering that COSME inter alia is designed to create the conditions for European SMEs to take full advantage of the Single Market's enormous potential, as well as encouraging them to look beyond it 4, the effective market access mechanism should be allocated sufficient funds to deliver on this important yet challenging objective. In seeking to deliver efficient measures to support access to markers, it is important that COSME is not used to finance the creation of structures that duplicate existing actions at European or national level; complementarity is a key factor here too, therefore. 6. Enterprise Europe Network (various articles) EUROCHAMBRES agrees with the conclusion that Enterprise Europe Network (EEN) has proven its added value for European SMEs 5 and thus welcomes the recognition of the EEN as a key business support instrument in facilitating access to markets and innovation activities within and even beyond the EU and candidate countries. EUROCHAMBRES reiterates the position that the network should focus on serving European SMEs and maintaining a clear European profile. Recent initiatives to expand the EEN outside the EU and candidate countries involving non-european partners have created confusion about the profile and ownership of the network. Such activities also risk overlapping with other European and member state internationalization initiatives already implemented in third countries. Considering the above, EUROCHAMBRES calls for a consolidation of the EEN s role in the internationalization of European businesses, built upon the ability of Europe based network members to contribute to and complement EU and member state level internationalization initiatives and to collaborate effectively and coherently with various actors in the EU and third countries. Several other factors need to be taken into account in defining the terms of reference for the EEN under the COSME programme period. The EEN s responsibilities already extend beyond improving access to markets and are set to do so further post 2014, with new tasks relating to access to finance and innovation set out in COSME and Horizon 2020. EUROCHAMBRES urges the Commission to reflect carefully on this growing role and to liaise with existing EEN host structures, SME representatives and other intermediaries before finalizing the call for proposals for the new programming period 6. EUROCHAMBRES also reiterates the need for an enhanced role of the host structures co-owners of the network since they provide 50% of the financing in the governance of the EEN. The budget allocated to the EEN for the 2014-20 period must reflect the central role of the network in the delivery of COSME and indeed Horizon 2020 to SMEs, as well as the network s new responsibilities in relation to access to finance, Horizon 2020 and potentially sustainability. 4 See Explanatory Memorandum of COSME, p3, http://ec.europa.eu/cip/files/cosme/com_2011_0834_proposition_de_reglement_en.pdf 5 see COSME Preamble (13). 6 EUROCHAMBRES is currently preparing a separate paper on the role and responsibilities of the EEN for the 2014-20 period. 6
7. Implementation and monitoring of COSME (Article 12) COSME must avoid imposing burdensome monitoring requirements on those organisations involved in its delivery and on end beneficiaries. This approach is particularly important in relation to access to finance instruments, as bureaucratic procedures will limit their uptake by intermediaries and thus their availability to SMEs. The splitting of the annual work programme (Article 10) in two parts a) financial instruments, and b) support measures should also be considered in order to facilitate voting procedure on the programme. COSME does not provide a clear implementation mechanism involving governments, SME stakeholders and SMEs, i.e. the role of the actors covered by COSME in the implementation/monitoring process remains unclear. EUROCHAMBRES is the sole European body that serves the interests of every sector and every size of European business and the only one so closely connected to business. EUROCHAMBRES has member organisations in 45 countries representing a network of 2,000 regional and local Chambers, with over 19.8 million member companies. Chamber members employ over 120 million people. Further information: Janis Butkevics, Tel. +32 2 282 08 80, butkevics@eurochambres.eu All our position papers can be downloaded from www.eurochambres.eu/content/default.asp?pageid=145 7