SPEECH/97/211

Speech by M. Christos PAPOUTSIS responsible for Enterprise Policy

“Developing Entrepreneurship and an Enterprise Culture in the ”

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UNICE Fifth Annual “SME” Conference Brussels, 13 October 1997 Main points

(..) “The concept of enterprise, and its contribution to the overall wealth of our society, is still regrettably undersold. We seem, in many cases, to have difficulty to exploit, to our best advantage, the opportunities and talents available inside the Union.” (...)

(..) “I am happy to say that we are currently developing a new financial instrument to provide support for the creation of cross-border joint ventures by SMEs within the European Union.” (...)

(...) “Access to information is the key for accessing new markets. Several new markets will be introduced through the information society. In the new global market place, information will become the most traded commodity, already by 2000.” (...)

(...) “To meet the challenges of newly emerging markets inter-enterprise collaboration should become more effective. I call upon UNICE and other business organisations to take their own responsabilities, and help European businesses to take the lead in international subcontracting.” (...)

(...) “I would like to stress today the setting out of a new agenda, in terms of improving and simplifying the business environment. This should be done in the context of a framework, which encourages entrepreneurship, and stimulates an enterprise culture in Europe.” (...)

(...) “Firstly, we need to support entrepreneurial activity. We must stimulate business start-ups, and increase the survival rate of those businesses already in operation. (...) Secondly, in Europe we should more actively encourage an enterprise culture. The challenge of stimulating a truly entrepreneurial culture requires a clear commitment to the education and training of entrepreneurs. (...) Thirdly, I feel that there is hidden potential, which needs unlocking in particular sectors. For example, take the social economy sector, including foundations and co-operatives of small businesses. (...) Fourthly, we need to identify those sectors, where SMEs can play a significant role through their innovation. (...) Moreover, we should pay particular attention to those sectors, which traditionally have large numbers of employees, but are changing structurally to meet consumer demand. Such sectors include retail and distribution, tourism, office and maintenance services, as well as health care and retirement.” (...)

(...) “Enterprises and the social partners should join their efforts with the aim to make enterprises productive and competitive, and in order to achieve the required balance between flexibility and security in the labour market.” (...)

(...) “We need urgently to review our policies. But, we also need dynamic innovative and stable enterprises, with an international outlook. I believe that together we can create a new business environment. A European enterprise culture, in which SMEs can become increasingly competitive, and provide the jobs that Europe needs.”

2 Full text

Mr President, Ladies and Gentlemen,

I would like to thank you for your invitation to speak to you today. I would also like to congratulate President Perigot on his presentation of UNICE’s priorities for SMEs in Europe. Your priorities are very much in line with the Commission’s thinking.

Mr President, the timing for this event is very opportune. Europe and its political leaders are increasingly recognising the important role that SMEs can play in growth and job creation.

The concept of enterprise, and its contribution to the overall wealth of our society, is still regrettably undersold. We seem, in many cases, to have difficulty to exploit, to our best advantage, the opportunities and talents available inside the Union.

There have been significant changes in the way enterprises are structuring themselves over the last two decades. While many large companies have been losing jobs, the smaller business sector has actually been increasing jobs in net terms.

Enterprises with fewer than 100 employees have contributed to all the job creation, at a rate of over 250 thousand net jobs per year, over the period 1988- 1995.

Unfortunately, however, more than 50% of small companies do not survive beyond three years. We must do something about that. Enterprising businessmen do start-up new businesses. But, we need to improve the business environment, so that many more entrepreneurs can get started.

We recognise that 18 million unemployed in the European Union is unacceptable, but we should not be too pessimistic about the future. Latest estimates from Eurostat indicate that growth in the European Union is improving.

This growth is not due entirely to exports, which is still a dynamic force, but also to an upturn in private consumption.

How can we build on this base of growth within the European Union and, at the same time, create more sustainable jobs ?

The major role for both the Commission and the Member States is to concentrate on the environment in which business, particularly small business, can operate without burdens and barriers.

3 We are seeing a fundamental change in enterprise policy objectives. As you know, the 3rd Multiannual Programme for SMEs from 1997 takes us into the new century, and contains several support measures for SMEs. Business support services will always have to provide information for business, and assistance in respect of co-operation opportunities with other businesses.

An area which requires immediate and urgent attention is access to finance. The success or failure of a business relies very much on sound financial management, and the availability of finance. The cash flow continues to be a crucial problem area for many businesses.

We are currently intensifying our efforts to reduce the late payment problems. The overwhelming support we received last week at the public hearing demonstrates the urgent need to prepare a Directive. A Directive will help to overcome the late payment problems in commercial transactions by both the private and the public sector.

We are also trying to stimulate further the development of secondary capital markets for growing companies. We have nothing like the United States NASDAQ market, but the initial experience with EASDAQ is encouraging.

But we also need more venture capitalists across Europe; more venture capital funds. I am happy to say that we are currently developing a new financial instrument to provide support for the creation of cross-border joint ventures by SMEs within the European Union.

With the introduction of the single currency on 1 January 1999, the reduction in exchange rate uncertainty, and the cost of borrowing, will stimulate trans-border business.

SMEs also have a need for proper skills and management training, and in accessing research and technology transfer, which can be translated into new products.

By looking at the environment, in which business has to operate, we in the Commission are dealing primarily with the activities of public administrations, at European, national, regional and local level.

And in the past we concentrated on Community-wide measures aimed at all small businesses in the European Union, who need both stimulation and support.

Access to information is the key for accessing new markets. Several new markets will be introduced through the information society. In the new global market place, information will become the most traded commodity, already by the year 2000.

We have placed a priority on the introduction of electronic commerce, and from next year we will implement an action plan to this end. I believe that electronic commerce in Europe offers us an opportunity to integrate all our companies into the single market, and also to be able to compete in the global market.

4 Co-operative support measures, such as that between UNICE and DG XXIII on the “Guidelines for Partnership in Industrial Sub-Contracting”, outline opportunities of best practice in sub-contracting. This should help all enterprises, and lead to improvements in standards of commercial behaviour. To meet the challenges of newly emerging markets inter-enterprise collaboration should become more effective. I call upon UNICE and other business organisations to take their own responsabilities, and help European businesses to take the lead in international subcontracting.

Ladies and Gentlemen,

Traditional business support services are important. But, what I would like to stress today, is the setting out of a new agenda, in terms of improving and simplifying the business environment. This should be done in the context of a framework, which encourages entrepreneurship, and stimulates an enterprise culture in Europe.

Now is the time to consider where our priorities are. Employment is the most important issue in Europe. I believe that the promotion of entrepreneurship, and an enterprise culture, will go a long way towards achieving our goals of increasing employment.

I can set out a number of themes which need to be discussed within the European Union by all those interested in the development of SME policy. In some of these you will find an echo of the UNICE priorities, presented by Mr. Perigot.

Firstly, we need to support entrepreneurial activity. We must stimulate business start-ups, and increase the survival rate of those businesses already in operation.

We should look at how we can simplify both legislative and administrative procedures. Mr Perigot talked about reducing the regulatory burden. This of course is true. But it is perhaps more than that.

I am talking not just about the regulations themselves, but the administrative bureaucracy, which surrounds them. This requires a better understanding between business and public administrations, and a more user-friendly approach on the part of public administrations.

We have made a start in the Commission with our Recommendation in April this year on business start-ups.

Our Recommendation concentrates on establishing a single contact point for start-up formalities. Using a single form for company registration. Using a single identification number for enterprises in their official procedures relating to public administration, for example, in relation to tax and social security. Member States should take advantage of this and put it into effect quickly.

5 Secondly, in Europe we should more actively encourage an enterprise culture. The challenge of stimulating a truly entrepreneurial culture requires a clear commitment to the education and training of entrepreneurs.

Entrepreneurship needs to be learned. We need to encourage national education systems to include learning about the role of entrepreneurship and enterprise.

Member States should accept this responsibility and introduce entrepreneurship as a matter of priority into their education systems. Training needs to be reasonably priced, and be provided flexibly, so that busy entrepreneurs and managers can take advantage of it.

Thirdly, I feel that there is hidden potential, which needs unlocking in particular sectors. For example, take the social economy sector, including foundations and co-operatives of small businesses. This is an increasingly important area, with 5 percent of employment, and 6 percent of private enterprises. It needs some encouragement and stimulation in order to achieve its potential for growth and job creation.

Fourthly, we have often talked about the innovative capacity of small businesses along with their flexibility of operation. We need to identify those sectors, where SMEs can play a significant role through their innovation.

Sectors such as energy technology, environment friendly technology, biotechnology, information technology and electronic commerce are all new areas, where there are opportunities and growing markets for SMEs.

Today, enterprises are undergoing a period of fundamental restructuring brought on by new technologies and new market conditions. Enterprises and the social partners should join their efforts with the aim to make enterprises productive and competitive, and in order to achieve the required balance between flexibility and security in the labour market.

Moreover, we should pay particular attention to those sectors, which traditionally have large numbers of employees, but are changing structurally to meet consumer demand. Such sectors include retail and distribution, tourism, office and maintenance services, as well as health care and retirement.

These sectors tend to be made up of small enterprises providing not only opportunities for highly skilled people, but also offer openings for the less skilled and new entrants into the labour market.

It is important that UNICE, and the other business organisations, work together with the Commission and Member States to take these ideas forward.

The 3rd European Conference of Crafts and Small Businesses, which we are organizing in Milan on 20 and 21 November is a good opportunity for developing furhter these ideas. The theme of the Conference is “Employment through Innovation”.

6 Finally, I would like to speak about a recent development, which is at the heart of creating an enterprise culture within the European Union.

The Amsterdam European Council, in June this year, confirmed its strong commitment to the simplification of legal and administrative regulations, in order to reduce the burden on European business.

In the Commission we saw the European Council invitation, to set up a Task Force, as a strategic and motivating activity. An activity, which would involve both entrepreneurs and politicians. And, I have announced the setting up of the Business Environment Simplification Task Force - or BEST as it is known.

The Task Force consists of representatives of both enterprises and officials from public administrations, directly involved in improving the business environment.

The Task Force, apart from entrepreneurship, will have the opportunity of looking at the wider aspects of the business environment, including the different national approaches.

In practice, there are different ways that public administrations provide access to venture capital. Different bureaucracies surrounding access to public funds. Different problems which increase the costs of recruiting additional labour. Different ideas on access of small businesses to adequate training facilities for both management and their employees, at reasonable cost.

All these are vital issues, which we need to resolve within the European Union. We have a challenge now to make changes, and I hope this will be broadly accepted.

BEST itself will want to work closely with business and business organisations. I think your initiative today, with the priorities document for SMEs in Europe, will make a very constructive contribution to the way forward.

Mr. President, Ladies and Gentlemen,

We need urgently to review our policies. That is being done also through meetings, such as this. But, we also need dynamic innovative and stable enterprises, with an international outlook.

I believe that together we can create a new business environment. A European enterprise culture, in which SMEs can become increasingly competitive, and provide the jobs that Europe needs.

Thank you for your attention.

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