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International Labour Conference

86th Session
Geneva, June 1998

 

Report of the Committee on Job Creation
in Small and Medium-sized Enterprises

Discussion in Plenary
Draft Recommendation

1. The Committee on Job Creation in Small and Medium-sized Enterprises was set up by the International Labour Conference at its first sitting on 3 June 1998. It was originally composed of 179 members (75 Government members, 56 Employer members and 48 Worker members). To achieve equality of voting strength, each Government member with the right to vote was allotted 112 votes, each Employer member 150 votes and each Worker member 175 votes. The composition of the Committee was modified six times during the session and the number of votes attributed to each Member was adjusted accordingly.(1)

2. The Committee elected its Officers as follows:

Chairperson: Mr. M. Pliszkiewicz (Government member, Poland);

Vice-Chairpersons: Mr. A. Jeetun (Employer member, Mauritius) and Mr. C.A. Appiah Agyei (Worker member, Ghana);

Reporter: Mr. J. Djupvik (Government member, Norway).

3. At its 11th sitting, the Committee appointed a Drafting Committee composed of the following members: Mr. C. Bryant (Government member, Canada), Mr. A. Jeetun (Employer member, Mauritius), Ms. D. Drijfhout (Worker member, the Netherlands) and Mr. J. Djupvik (Government member, Norway) as Reporter.

4. The Committee held 13 sittings. The Committee had before it Reports IV(1), IV(2A) and IV(2B), prepared by the Office on the fourth item of the agenda of the Conference: General conditions to stimulate job creation in small and medium-sized enterprises.

Introduction

5. Mr. Ishida, the representative of the Secretary-General, recalled the substantial and enthusiastic debates during the Committee's meetings a year earlier. He noted that 37 countries had responded to the text distributed after the 85th International Labour Conference. Their comments had been incorporated into Reports IV(2A) and IV(2B). Unfortunately, some additional comments had been received too late to be taken into account in these texts.

6. Many respondents had indicated that the proposed text formed a satisfactory basis for discussion. While there was a need to avoid excessive detail, there were still some areas where a greater focus might be required. These included human resource development, innovation and free competition. Clearly, a balance had to be achieved between economic development and social issues.

7. The representative of the Secretary-General reviewed the changes in the global economy since the last Conference, particularly the crisis in Asia and the resulting unemployment. A recently held Regional Tripartite Meeting of the ILO in Asia had concluded that small and medium-sized enterprises (SMEs) had an important role to play in overcoming the effects of the crisis.

8. The representative of the Secretary-General also reminded the Committee that the proposed Recommendation, once adopted, would not be a legally binding instrument. Rather it should be considered as a set of flexible and meaningful guidelines. He ended by mentioning that the ILO was launching the International Small Enterprise Programme (ISEP) to assist member States in implementing the provisions of the Recommendation.

9. In his opening statement, the Chairperson mentioned that the challenge of job creation could be considered as the most important one at the global level. While recent changes in the global economy had been favourable in many respects, they had also led to some distortions, for example in the unequal distribution of incomes. The social consequences were a concern of the ILO, particularly since many of the issues involved were interdependent.

10. The Chairperson noted the potential of SMEs to create new employment opportunities. However, the precarious conditions of many SMEs required an additional focus on the quality of jobs in SMEs. The Recommendation should help SMEs both to be more competitive and to improve their working conditions.

11. In conclusion, the Chairperson referred to the very high level of unemployment in Central and Eastern Europe following the transition from a centrally planned to a market economy. In this context, SMEs had played a vital role in reducing unemployment in Poland, from 20 per cent at the start of the 1990s to its current level of about 10 per cent. Indeed, the Government of Poland considered the issue of such importance that it had created the post of Under-Secretary of State for SME development.

General discussion

12. In his opening statement the Employer Vice-Chairperson recalled the lengthy discussion held the year before, which resulted in the unanimous adoption of the Proposed Conclusions. He expressed hope that this year's discussion would be equally fruitful and would lead to an instrument that would promote conditions conducive to SME development.

13. The proposed Recommendation put emphasis on general conditions and job creation. The framework must therefore be flexible to attain the objectives of the Recommendation. Otherwise the development of SMEs might be constrained. He referred to the high unemployment levels in developed and developing countries alike. One of the options to address this problem was for people to set up their own small business.

14. SMEs could create productive jobs, contribute to economic growth, higher per capita income and improve living conditions. To achieve this they had to be competitive and flexible, especially in a period of globalization, and improve quality and productivity. This had to be reflected in a flexible instrument. Each member State should develop an enterprise culture. The role of governments was to set policy and facilitate SME development. The social partners had their own responsibilities to optimize the potential of SMEs.

15. The Employer Vice-Chairperson concluded his statement by calling on the Committee to be forward-looking, flexible and innovative in its discussion of the proposed Recommendation.

16. In his opening statement, the Worker Vice-Chairperson stressed the importance of the proposed Recommendation. It was particularly timely in the wake of the Asian crisis, which would have global implications on employment.

17. The Workers considered the draft Recommendation a great improvement over the text discussed a year earlier. For instance, it now referred to issues and concerns such as those related to child labour and discrimination against women. While it had not been possible to introduce a separate section dealing with wages, job security, social protection, working conditions and safety and health, these concerns were to some extent incorporated elsewhere.

18. The Workers would like to see the discussions address the issue of social safety nets in SMEs. They objected to special legal treatment of SMEs. This could lead to a two-tier labour market. What was needed was a level playing field for all enterprises.

19. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union (Belgium, Denmark, Finland, France, Greece, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom), congratulated the ILO for the attention being given to SME development. SMEs were the backbone of the economies of all European Union Member States. The European Union promoted SMEs by fostering an enterprise culture, which encouraged people to start SMEs, including women, those with disabilities and ethnic minorities. It also encouraged member States to create a supportive legal and regulatory environment for SMEs and to provide practical support to meet the diverse needs of SMEs. The speaker also emphasized the important role of the social partners in SME development.

20. The Government member of the United States stated that SMEs played a crucial role in the creation of jobs in his country. They employed more than half the workforce and contributed more than half of the private GDP. He noted that the creation and maintenance of good jobs depended on a business environment in which successful firms could grow.

21. The Government member of Japan pointed out that enterprises in Japan were undergoing restructuring in the face of current economic problems. Unemployment had reached 4.1 per cent. The Government was allocating additional resources for the promotion of SMEs so that they could contribute better to job creation. He emphasized that the issues involved in SM7E development were not just labour issues, but social and economic issues as well. It would not be appropriate therefore to have rigid rules applying to all member States. What was needed was a flexible Recommendation.

22. The Government member of Brazil stated that SMEs played a very important role in the Brazilian economy. His Government had adopted various measures for the further development of SMEs. He felt that the proposed Recommendation should serve as a source of inspiration for setting up policies and programmes for the promotion of SMEs.

23. The Government member of South Africa, in general terms, supported the draft Recommendation. However, he noted that micro-enterprises should be specifically mentioned in the title and text of the Recommendation as they played an important role in job creation. He also made some suggestions to improve the text of certain parts of the draft Recommendation. The Chairperson then asked him to submit these suggestions in writing as amendments.

24. The Government member of Australia stated that the draft Recommendation provided a useful set of guidelines for governments to promote job creation in SMEs. The development of SMEs was a priority for her Government. A Recommendation was the appropriate form of instrument for this topic given the wide variety of national conditions and circumstances.

25. The Government member of Norway remarked that 72 per cent of the enterprises in his country employ less than 100 workers. This reflected the significance of SMEs for job creation and their relative flexibility in relation to larger enterprises. Recognizing that research and development capacities of SMEs are often limited, he stressed that education and training were of the utmost importance.

26. The Government member of Morocco felt that the Committee should clarify the differences between formal and informal SMEs. While SMEs in the formal sector were subject to regulation of working conditions and social security provisions, SMEs operating in the informal sector very often avoided such regulation.

27. A representative of the World Association for Small and Medium Enterprises (WASME), an NGO with 109 members, informed the Committee of the activities of his organization. He also mentioned that WASME was keen to explore possibilities to work with the ILO in joint projects.

28. A representative of the International Federation of University Women (IFUW) expressed the opinion that women should not be referred to as a "traditionally disadvantaged group" in the Recommendation. Rather, the proposed Recommendation should emphasize gender equality. She also noted that statistical data on SMEs should always distinguish by gender. Finally, she felt that NGOs and academic institutions were important partners in international cooperation and should be mentioned in the Recommendation.

29. The Government member of Italy noted the importance which her country attached to SME development. Concerning female entrepreneurs Italy, which had proposed the introduction of a reference to this subject together with the other countries of the European Union, appreciated the text as formulated by the secretariat and supported the respective references in Paragraphs 15, 16 and 18. It was also necessary to promote SME associations, especially in the handicraft sector, so that these could contribute to a social dialogue at the national and international levels. She assured the Committee that the Recommendation would be actively followed up by her Government once adopted.

30. The Government member of the Syrian Arab Republic noted the importance of the proposed Recommendation. He reiterated the endorsement which his Government had given to the text during the previous session of the Committee.

31. The Government member of Kenya underlined the need to address the challenge of unemployment worldwide. This challenge was particularly important in developing countries, where often there was no formal social security system and rapid economic changes were being experienced. He informed the Committee that 2.6 million jobs had been created by SMEs in Kenya during 1996 and 1997. This represented an increase of 18 per cent. He further outlined the steps being taken by his Government to promote SMEs, making particular reference to the economic participation of women.

32. The Government member of China felt that the proposed Recommendation should lay down a general framework. All governments should be able to adapt the Recommendation to their respective situation. In China, SMEs received support to help them enter into new markets and through preferential policies.

33. The Government member of Swaziland emphasized that SME development should be undertaken within the context of overall national development strategies. He also felt that the proposed Recommendation should recognize the importance of providing assistance to SMEs in business opportunity identification and research.

34. The Government member of the Philippines considered SMEs an important means of survival, particularly in the face of the current economic crisis in Asia. In the Philippines the emphasis was on improving SME productivity. He also mentioned that the tripartite partners in his country were committed to stimulating investments in SMEs.

35. The Government member of Zambia indicated that the importance of SMEs was increasingly recognized in his country. Comprehensive social security coverage was being extended to workers in SMEs and legislation related to SME development was being harmonized.

36. The Government member of Turkey cited the importance of SMEs in the Turkish economy and expressed support for the draft Recommendation.

37. The Employer Vice-Chairperson repeated that the Recommendation should be flexible, universally acceptable and administratively and economically feasible. This would ensure its wide dissemination and use.

38. A Worker member, speaking on behalf of the Workers, mentioned that in her country (the Netherlands) the word flexibility was always used in conjunction with the word security. She hoped therefore that it would be possible for the Recommendation to strike an appropriate balance between economic and social concerns.

Consideration of the proposed Recommendation
concerning general conditions to stimulate job creation
in small and medium-sized enterprises

A. Preamble

39. The Worker Vice-Chairperson introduced an amendment proposing to insert the words "productive, sustainable and quality" at the beginning of the Preamble to describe the jobs that should be created in SMEs. It was necessary to be clear that the objective was not to create just any type of job. The Employer Vice-Chairperson objected that the concern for quality jobs was already reflected in other parts of the draft Recommendation. After some discussion, agreement was reached on a subamendment proposed by the Government member of Canada to insert a new preambular paragraph: "Understanding the special value of productive, sustainable and quality jobs,".

40. The Government member of the United States introduced an amendment to include a reference to the higher purposes of the proposed Recommendation. The amendment was seconded by the Government members of Belgium and Canada. It received support from the Employer Vice-Chairperson as well as from a number of Governments. Following an objection to the amendment by the Worker Vice-Chairperson, the Government member of Kenya proposed a subamendment to insert a new preambular paragraph: "Recognizing the need for the pursuit of economic, social and spiritual well-being and development of individuals, families, communities and nations,". The amendment, as subamended, was then adopted.

41. The Government members of Spain and Venezuela requested the secretariat to replace in the Spanish text the word "avance" with the word "desarrollo".

42. The Employer Vice-Chairperson introduced an amendment to include a reference to the role of the market in economic growth. The amendment was supported by the Government member of the United States. Other Government members expressed doubts as to the need to include the reference.

43. The Worker Vice-Chairperson reiterated his opposition to the amendment. During the discussion which followed the Government members of Canada and the United States supported the amendment. At the request of the Employer Vice-Chairperson, Mr. Henriques, the deputy representative of the Secretary-General, noted that the Governments of Canada, Cuba, Finland, Norway and Switzerland had indicated in their replies to Report IV(1) that the reference to market economies should be deleted. The Employer Vice-Chairperson then withdrew the amendment.

44. The Employer Vice-Chairperson introduced an amendment to note that the role of SMEs in creating jobs was increasing. The Worker Vice-Chairperson expressed some doubt as to the need for the amendment but did not oppose it. The amendment was then adopted.

45. The Government member of the United States introduced an amendment to include a reference to innovation, entrepreneurship and human progress. The Government member of the Netherlands seconded the amendment. The amendment was supported by the Employer Vice-Chairperson. The Worker Vice-Chairperson opposed the amendment.

46. The Government member of the Netherlands mentioned the personal growth which he had observed in people who became self-employed. The Government member of Canada proposed a subamendment to address the concern of the Worker Vice-Chairperson, indicating that SMEs could help to create an environment for innovation and entrepreneurship. The Worker Vice-Chairperson supported the subamendment. The amendment, as subamended, was then adopted.

47. The Worker Vice-Chairperson introduced an amendment which called on member States to take measures to improve working conditions in SMEs. The Employer Vice-Chairperson, while agreeing with the importance of the issues raised, said that such concerns were adequately covered by the succeeding two Paragraphs. The Preamble should reflect general principles rather than specific courses of action. The Government members of Belgium, Canada, the Democratic Republic of Congo, Gabon, Kenya, the Philippines, and the United Kingdom (the latter speaking on behalf of the Government Members of the Committee Member States of the European Union) supported the view that the Preamble was not the proper place to refer to the issues raised by the amendment. They should be reflected in the body of the Recommendation. In view of the opinions expressed, the Worker Vice-Chairperson withdrew the amendment, reserving the right to raise the issues in the appropriate places later on.

48. The Chairperson suggested to deal simultaneously with three similar amendments which each proposed to include a reference to the Equal Remuneration Convention, 1951. After a brief discussion, the Committee agreed that the respective reference should be included in the Recommendation in a place corresponding to the chronological order of the other instruments mentioned.

49. The Worker Vice-Chairperson introduced an amendment to modify the reference to child labour. After some discussion the Worker Vice-Chairperson withdrew the amendment. The Government member of the United States then decided to withdraw his own amendment concerning child labour.

50. The Worker Vice-Chairperson introduced an amendment to insert the words "productive, sustainable and quality" to describe the jobs to be created in SMEs. The Employer Vice-Chairperson opposed the amendment recalling that a new Paragraph had been adopted earlier to this effect. The Government member of Canada also opposed the amendment. He felt that the repeated insertion of the qualifying words was superfluous. The Government members of Australia and the United States were of the same view. The Worker Vice-Chairperson then withdrew the amendment. He asked however that the Committee's report duly reflected the Workers' concern.

51. The Employer Vice-Chairperson introduced an amendment to include a reference to initiatives by other institutions in the field of SME development. The Worker Vice-Chairperson opposed the amendment. He felt that an ILO instrument should refer only to the initiatives of the ILO. The Government members of Bahrain, Canada and Kenya supported the view of the Workers. The Employer Vice-Chairperson then withdrew the amendment.

52. In view of the earlier discussion, the Worker Vice-Chairperson withdrew an amendment to introduce another reference to "productive, sustainable and quality" to describe job creation in SMEs.

53. The Preamble, as amended, was then adopted.

B. Paragraph 1

54. The Worker Vice-Chairperson introduced an amendment calling on member States to arrive at a definition of SMEs in consultation with the most representative employers' and workers' organizations. The Employer Vice-Chairperson and the Government members of the Democratic Republic of Congo and Morocco supported the amendment. The amendment was then adopted.

55. The Government member of South Africa withdrew an amendment to include a reference to micro-enterprises.

56. Paragraph 1, as amended, was then adopted.

C. Paragraph 2

57. In view of the earlier discussion the Government member of Belgium withdrew an amendment to include a reference to micro-enterprises.

58. The Government member of the United States introduced a two-part amendment, which was seconded by the Government member of Canada. The first part which proposed to replace the words "react flexibly" with "react with flexibility" was adopted. After some discussion the Government member of the United States subamended his amendment by proposing to withdraw the second part. The amendment, as subamended, was then adopted.

59. The Employer Vice-Chairperson introduced an amendment to clarify the reference to investment. Following a brief discussion on the grammatical aspects involved, the Employer Vice-Chairperson withdrew the amendment.

60. The Government member of Belgium, seconded by the Government member of Portugal, introduced an amendment to include a reference to "local employment". Since the ensuing discussion showed that this term could lead to confusion, he then withdrew the amendment.

61. Paragraph 2, as amended, was then adopted.

D. Paragraph 3

62. The Chairperson proposed to consider simultaneously two amendments submitted by the Workers and by the Government member of Canada. The amendments recommended the deletion of the words ", where appropriate,". A Worker member, speaking on behalf of the Workers, noted that fundamental issues of worker protection were at stake and that these should not be qualified. After some discussion, agreement was reached on a subamendment proposed by the Government member of Canada to delete only the commas and the word "where". The amendment, as subamended, was then adopted.

63. Paragraph 3, as amended, was then adopted.

E. Paragraph 4

64. The Employer Vice-Chairperson introduced an amendment to replace the words "all types of enterprises" with "all types of small and medium-sized enterprises". He felt that this was more appropriate given the title of the proposed Recommendation. A Worker member, speaking on behalf of the Workers, supported the amendment which was then adopted.

65. The Employer Vice-Chairperson subamended an amendment submitted by his group to change "i.e." in the last part of the Paragraph to "e.g.", rather than deleting the last part of the Paragraph altogether, as proposed in the amendment. The amendment, as subamended, was then adopted.

66. Paragraph 4, as amended, was then adopted.

F. Paragraph 5

67. The Government member of Brazil, seconded by the Government member of Portugal, introduced an amendment to delete the word "business". The Employer and Worker Vice-Chairpersons having no objection, the amendment was then adopted.

68. The Government member of Australia, seconded by the Government member of Canada, introduced an amendment to refer to an "optimal", rather than "stable", economic environment. The Employer and Worker Vice-Chairpersons having no objection, the amendment was then adopted.

69. Seconded by the Government members of Australia and the United States, the Government member of Canada introduced an amendment to include a reference to intellectual property rights. The Employer Vice-Chairperson supported the amendment. The Worker Vice-Chairperson opposed it. Following expressions of support for the amendment by the Government members of Belgium, Canada, Peru, the United Kingdom and the United States the Worker Vice-Chairperson withdrew his opposition. The amendment was then adopted.

70. Seconded by the Government member of Norway, the Government member of Australia introduced an amendment to insert the words "of establishments" after the word "location". The Employer and Worker Vice-Chairpersons supported the amendment. The Government member of the United States asked if the term "establishments" was intended to be broader than the term "enterprises". The Government member of Australia indicated that this was not the case. The amendment was then adopted.

71. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to include a reference to competition in view of the importance of providing a "level playing field" for SMEs. After some discussion, the Employer Vice-Chairperson proposed a subamendment to rather refer to "fair competition". The Worker Vice-Chairperson supported the subamendment. The amendment, as subamended, was then adopted.

72. Seconded by the Government members of Kenya and Norway, the Government member of Australia introduced an amendment to replace the word "legislation" by the word "standards" in clause (b). She felt that this reference would be more appropriate. The Employer and Worker Vice-Chairpersons preferred the original text. The Government member of Australia then withdrew the amendment.

73. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to add a new clause (c) concerning legal and policy obstacles faced by potential entrepreneurs.

74. A long discussion followed concerning the general idea behind the amendment and a more appropriate wording. Finally, the Committee reached agreement on a subamendment proposed by the Government member of the United Kingdom as follows: "improve the attractiveness of entrepreneurship by avoiding policy and legal disadvantages in the treatment of those who wish to become entrepreneurs". The amendment, as subamended, was then adopted.

75. Paragraph 5, as amended, was then adopted.

G. Paragraph 6

76. Seconded by the Government member of Japan, the Government member of the Philippines introduced an amendment to include the words "where appropriate" after the word "ensure". He immediately subamended his amendment by deleting the word "where".

77. The Employer Vice-Chairperson preferred the original amendment, while the Worker Vice-Chairperson strongly opposed both the amendment and the subamendment.

78. During a long discussion on the merits of the amendment, most Government members who took the floor as well as the Worker Vice-Chairperson indicated that they preferred the text in the draft Recommendation. After some further discussion the Committee agreed to a proposal by the Government member of Belgium to replace the word "equal" by the word "non-discriminatory". This was acceptable to the Employer and Worker Vice-Chairpersons.

79. The amendment, as subamended, was then adopted.

80. In view of the earlier discussions the Government member of Canada withdrew an amendment to introduce a reference to equal access to employment legislation.

81. The Employer Vice-Chairperson withdrew a similar amendment.

82. The Employer Vice-Chairperson introduced an amendment to delete a reference to raising the quality of employment in SMEs. He felt that this would be more consistent with the style of the Paragraph. The Worker Vice-Chairperson indicated his preference for the original text. The Government member of France pointed out that the particular phrase had just been adopted as part of an earlier amendment. In view of this, the Employer Vice-Chairperson then withdrew the amendment.

83. The Government member of South Africa withdrew an amendment to introduce a reference to the high transaction costs and compliance burden faced by SMEs.

84. The Employer Vice-Chairperson introduced an amendment to include the words "in particular" to make clear that the list in subparagraph (2) was not exhaustive. The Worker Vice-Chairperson agreed. The amendment was then adopted.

85. Seconded by the Worker Vice-Chairperson, the Government member of Brazil proposed an amendment to reflect the fact that SMEs faced difficulties of access rather than insufficient access to credit. The Employer Vice-Chairperson agreed. The amendment was then adopted.

86. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to include a reference to the need to remove the constraints SMEs faced in accessing capital markets. She explained that SMEs, particularly growth-oriented ones, needed access to a variety of financial markets. Both the Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

87. The Worker Vice-Chairperson introduced an amendment to include a reference to the transport and communications constraints faced by SMEs in developing countries. The Employer Vice-Chairperson supported the amendment which was then adopted.

88. Seconded by the Government member of Canada, the Government member of the United States introduced an amendment to add the word "inappropriate" in clause (2)(g). The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

89. An amendment submitted by the Government member of Brazil was not seconded. The amendment was therefore not considered.

90. Seconded by the Government member of the United States, the Government member of Canada introduced an amendment to include a reference to the level of conditions of employment. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted. An amendment with the same text submitted by the Workers then became superfluous.

91. Seconded by the Government member of Australia, the Government member of Canada introduced an amendment to highlight the importance of research and development to SMEs. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

92. Seconded by the Government member of Peru, the Government member of South Africa introduced an amendment to include a reference to the need to remove constraints faced by SMEs in public procurement opportunities. A number of Government members pointed to the unclear wordings of the French and Spanish translations of the amendment.

93. Following some further discussion on the terminology of the amendment, the Government member of the United States introduced a subamendment referring to difficulties SMEs faced in access to both public and private procurement opportunities. The subamendment was supported by the Employer and Worker Vice-Chairpersons. The amendment, as subamended, was then adopted.

94. The Employer Vice-Chairperson introduced an amendment to replace the word "measures" in subparagraph (3) by the word "incentive". He felt that incentives were more likely to contribute to the upgrading of informal sector enterprises. The Worker Vice-Chairperson submitted a subamendment to include both words in the text. This was acceptable to the Employer Vice-Chairperson. The amendment, as subamended, was then adopted.

95. Paragraph 6, as amended, was then adopted.

H. Paragraph 7

96. The Employer Vice-Chairperson introduced an amendment to delete the word "adequate" in subparagraph (1). The Worker Vice-Chairperson agreed. The amendment was then adopted.

97. The Government member of Canada withdrew an amendment he no longer considered logical.

98. The Chairperson proposed to deal simultaneously with two similar amendments submitted by the Workers and the Government member of Brazil. To avoid confusion, the amendments proposed for governments to consult only with the most representative employers' and workers' organizations. The amendments were then adopted.

99. The Worker Vice-Chairperson introduced an amendment to delete clause (3)(a). He felt that the reference to legislation to meet the special needs of SMEs might contribute to development of a two-tiered labour market. The Employer Vice-Chairperson preferred the existing text which anyway included a reference to worker protection issues. Several Government members also favoured the existing text. The Worker Vice-Chairperson then introduced a subamendment to delete only the word "special" from the clause. This was acceptable to the Employer Vice-Chairperson. The amendment, as subamended, was then adopted.

100. The Worker Vice-Chairperson introduced an amendment to include specific examples of social security measures in clause (3)(c). The Employer Vice-Chairperson opposed the amendment. He felt that it was too detailed and changed the style of the Paragraph. The Government members of Canada, the United Kingdom and the United States spoke in support of the amendment. The Government members of Australia, China, Senegal and Zimbabwe opposed it.

101. The Government member of Algeria noted the need for flexibility. The Worker Vice-Chairperson emphasized that the Paragraph already contained the words "where appropriate". It was therefore already quite flexible. The Government members of Belgium, Kenya, the Philippines and Zambia also supported the amendment. The Government members of El Salvador and Senegal spoke against the amendment. The Government member of Italy preferred the text of the draft Recommendation since it reflected more closely the reality of the SMEs in her country. The Government member of the United States considered that the text of the amendment could be simplified. The Government member of Zambia then proposed a subamendment to avoid the repeated use of the word "benefit". This was accepted by the Employer and Worker Vice-Chairpersons. The amendment, as subamended, was then adopted.

102. The Worker Vice-Chairperson introduced an amendment to include a paragraph which called on governments to provide social safety nets to workers in SMEs during periods of economic downturn. He said that the lessons of the Asian economic crisis pointed strongly to the need for social safety nets particularly for the most vulnerable groups. The Employer Vice-Chairperson opposed the proposed amendment. He said that the measures listed in the amendment were already covered elsewhere. He also emphasized that it was precisely during periods of economic downturn that governments were not in a financial position to implement measures of this kind. During the discussion which followed many Government members expressed the view that there was no need to refer to social safety nets since these were already covered in the amended clause (3)(c). They also felt that the Recommendation should remain general.

103. The Government members of Peru and Portugal mentioned that precisely during a period of economic difficulties governments should take measures to stimulate employment in SMEs.

104. The Worker Vice-Chairperson then submitted a subamendment calling on governments to provide strong and effective assistance to SMEs and their workers including through provision of adequate social safety nets. The Employer Vice-Chairperson sub-subamended the amendment to delete the words "including through provision of adequate social safety nets". The Worker Vice-Chairperson accepted this in a spirit of conciliation and tripartism. The amendment, as subamended, was then adopted.

105. Paragraph 7, as amended, was then adopted.

I. Paragraph 8

106. Seconded by the Government member of Gabon, the Government member of South Africa introduced an amendment to include a reference to capacity-building in subparagraph (2). The Employer and Worker Vice-Chairpersons supported the amendment. The amendment was then adopted. The Chairperson requested that the Drafting Committee determine the appropriate place of the reference within the subparagraph.

107. Paragraph 8, as amended, was then adopted.

J. Paragraph 9

108. Seconded by the Government member of the United States, the Government member of Canada introduced an amendment to qualify the word "initiative" with the word "entrepreneurial". This better reflected what he thought to be the focus of the Paragraph. The Worker Vice-Chairperson opposed the amendment since the qualification might imply that other forms of initiatives, such as those of governments or workers' or employers' organizations, were not included. He also reminded the Committee that it had discussed a similar amendment a year earlier and had then agreed upon the text in the draft Recommendation. The Government members of Belgium, Finland, Kenya and Peru also preferred retaining the existing text. The Government member of Canada then withdrew the amendment.

109. The Employer Vice-Chairperson withdrew an amendment to change the wording of the Paragraph.

110. Seconded by the Government member of the Philippines, the Government member of Japan introduced an amendment to insert the words "where appropriate". The Employer Vice-Chairperson supported the amendment, but the Worker Vice-Chairperson opposed it. The Government member of Japan then withdrew the amendment.

111. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to refer to "all levels of education". The Employer Vice-Chairperson supported the amendment, but the Worker Vice-Chairperson preferred the original text. The Government member of the United Kingdom then withdrew the amendment.

112. The Employer Vice-Chairperson introduced an amendment to add entrepreneurship to the list of programmes which could be used to promote the development of entrepreneurial attitudes. The Worker Vice-Chairperson had no objection. The amendment was then adopted.

113. Seconded by the Government member of Belgium, the Government member of Senegal introduced an amendment, which he immediately subamended, to move part of subparagraph (1) to subparagraph (2). The Government members of Algeria, Canada, Ghana, Kenya and Morocco, as well as the Employer Vice-Chairperson, supported this. The Worker Vice-Chairperson felt that subparagraph (1) would lose some of its strength this way. He therefore opposed the subamendment. After considerable debate the Government member of Senegal withdrew the proposed amendment.

114. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to add a subparagraph after subparagraph (1) "to encourage a more positive attitude towards business failure". It was important not to look down on those who failed in business. Rather, business failures should be considered learning experiences and entrepreneurs should be encouraged to try starting businesses again. The Employer Vice-Chairperson supported the amendment. The Worker Vice-Chairperson opposed the proposed amendment as it gave the impression of encouraging failures. What should be encouraged were successful experiences. Furthermore, the proposed amendment did not make reference to the rights of workers in failed enterprises.

115. After a long debate, the Committee arrived at a consensus that it would indeed be useful to include a reference to business failures. Following some further debate it agreed to the text of a subamendment submitted by the Government member of Norway, seconded by the Government member of the United Kingdom and sub-subamended by the Employer Vice-Chairperson. This text included references to risk-taking and business failures as well as to the rights of workers in failed enterprises.

116. The amendment, as subamended, was then adopted.

117. Seconded by the Government members of Gabon and Portugal, the Government member of Brazil introduced an amendment to add the words "in small and medium-sized enterprises" to subparagraph (2). The Worker Vice-Chairperson opposed the amendment. Workers in large companies also needed lifelong learning especially if they had to become entrepreneurs themselves when made redundant. The Employer Vice-Chairperson agreed. The Government member of Brazil then withdrew the amendment.

118. Two amendments submitted by the Government member of Brazil and one submitted by the Government member of Gabon were not seconded. The amendments, all three concerning subparagraph (3), were therefore not considered.

119. Paragraph 9, as amended, was then adopted.

K. Paragraph 10

120. The Worker Vice-Chairperson withdrew an amendment to insert the words "productive, sustainable and quality".

121. The Worker Vice-Chairperson introduced an amendment to add the words "and accessibility" after the word "availability". The Employer Vice-Chairperson supported the amendment. The amendment was then adopted.

122. The Worker Vice-Chairperson introduced an amendment, to include a reference to workers' rights, working conditions and vocational training. He also noted that in the English version of the amendment the word "implementation" should read "improvement". The Employer Vice-Chairperson opposed the amendment, on the grounds that the issues raised were already addressed elsewhere in the draft Recommendation.

123. The Government member of South Africa proposed a subamendment, to add only the words "and their workers". The Government members of Canada and the United States as well as the Employer and Worker Vice-Chairpersons all spoke in support of the subamendment. The amendment, as subamended, was then adopted.

124. The Worker Vice-Chairperson introduced an amendment to replace the words "such as" with the words "to include". He considered the change important and noted that this was in the text agreed to the previous year. The Employer Vice-Chairperson supported the amendment. The amendment was then adopted.

125. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to place the clauses in a more logical order. The amendment also proposed adding and reformulating clauses concerning assistance in business pre-start-up, information and communication technologies, and finance and credit management. The Employer and Worker Vice-Chairpersons had no objection to the proposed order of the clauses.

126. The proposed new clauses were then discussed one by one. The Employer and Worker Vice-Chairpersons both agreed to the proposed new clauses. Following some discussion the Employer Vice-Chairperson proposed a drafting change for the clause on finance management. This subamendment found general support. The amendment, as subamended, was then adopted.

127. Another amendment to change the order of the clauses was withdrawn by the Government member of Canada.

128. Seconded by the Government member of Peru, the Government member of Senegal introduced an amendment to replace the words "quality testing and measurement" with "quality management". This would make the text broader in scope. The Employer Vice-Chairperson accepted the introduction of the concept of quality management but preferred to also retain the mention of quality testing and measurement. The Worker Vice-Chairperson agreed. The amendment, as subamended, was then adopted.

129. Seconded by the Government member of Norway, the Government member of Brazil introduced an amendment to improve the text of a clause referring to "domestic and international trade opportunities". The Employer and Worker Vice-Chairpersons supported the change. The amendment was then adopted.

130. The Government member of Canada withdrew an amendment to delete a clause on business incubators.

131. The Worker Vice-Chairperson introduced an amendment to add a new clause as follows "support for training in occupational health and safety". The Employer Vice-Chairperson supported the amendment. He noted some inaccuracies in the French translation. The Government member of the Philippines strongly supported the proposed amendment. The amendment was then adopted.

132. The Government member of Canada, seconded by the Government members of Australia, Norway and the United States, introduced an amendment to add three new clauses. The proposed clauses referred to support in business plan development and follow-up, development of "one stop" business service centres, and assistance in upgrading the literacy, numeracy, computer competence and basic education levels of managers and employees. Following some discussion, the Government member of Canada proposed a subamendment dropping the second clause since "one stop" business service centres were covered in Paragraph 11. The Employer and Worker Vice-Chairpersons accepted the subamendment. The amendment, as subamended, was then adopted.

133. Paragraph 10, as amended, was then adopted.

L. Paragraph 11

134. Seconded by the Government member of Australia, the Government member of Japan introduced an amendment to clarify the introductory statement of the Paragraph. The Worker Vice-Chairperson preferred the original wording. The Government member of Japan then withdrew his amendment.

135. The Employer Vice-Chairperson introduced an amendment to include the word "effective" after "integrated range of". The Worker Vice-Chairperson supported the amendment which was then adopted.

136. Seconded by the Government member of Canada, the Government member of the United States introduced an amendment to clause (f) to emphasize the potential employment creation benefits to SMEs. The Employer and Worker Vice-Chairpersons supported the amendment which was then adopted.

137. Paragraph 11, as amended, was then adopted.

M. Paragraph 12

138. Seconded by the Government members of Australia and Botswana, the Government member of Canada introduced an amendment to delete the words "and other" in reference to approaches that might promote efficiency in enterprise competitiveness. The Worker Vice-Chairperson preferred the original text noting that there might be other valid approaches in addition to those concerning productivity enhancement. The Government member of Canada then withdrew the amendment.

139. Paragraph 12 was then adopted.

N. Paragraph 13

140. Seconded by the Government members of Australia and the United States, the Government member of Canada introduced an amendment to place greater emphasis on the importance of private sector finance for SMEs. The Employer and Worker Vice-Chairpersons noted that in many developing countries only very limited private sector finance was available to SMEs. The amendment was therefore unrealistic. The Government member of Canada then withdrew the amendment.

141. Seconded by the Government member of the United States, the Government member of Canada introduced an amendment to clarify that mutual guarantee associations referred to loan granting institutions. The Employer Vice-Chairperson explained that other types of guarantee associations existed. The Government member of Canada then withdrew the amendment.

142. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced a new subparagraph (4) to indicate the importance of venture capital for SMEs. The Government member of Canada proposed adding the words "and other" following the words "venture capital", noting that other forms of finance might also be important. The Employer and Worker Vice-Chairpersons supported this view. The amendment, as subamended, was then adopted.

143. Paragraph 13, as amended, was then adopted.

O. Paragraph 14

144. Seconded by the Government member of Gabon, the Government member of the Philippines introduced an amendment to insert the word "appropriate" before the word "policies" as this strengthened the flexibility of the Paragraph. The Employer and Worker Vice-Chairpersons supported the amendment which was then adopted.

145. The Worker Vice-Chairperson introduced an amendment to include a reference to working conditions, social protection, freedom of association and labour inspection. The Employer Vice-Chairperson opposed the amendment. He recalled that the existing text was the result of lengthy debate the previous year. At the request of the Government member of the United States, the deputy representative of the Secretary-General read out paragraph 192 of the Provisional Record of the Committee's deliberations in 1997, which covered that debate.

146. The Government member of Gabon considered that in Paragraph 7, subparagraph (3), did already address the concerns of the Worker Vice-Chairperson quite adequately. The Worker Vice-Chairperson replied that Paragraph 7, subparagraph (3), appeared in a different section of the draft Recommendation. There was therefore a need to refer again to these issues in the current section. The Employer Vice-Chairperson wondered whether this Paragraph belonged in the section at all.

147. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced a subamendment to instead refer to "all aspects of employment in SMEs by ensuring the equitable application of protective labour and social legislation". The Worker Vice-Chairperson objected to the term "equitable". The Employer Vice-Chairperson proposed that it be replaced with the term "without discrimination" at the end of the Paragraph. The Worker Vice-Chairperson accepted this proposal. The amendment, as subamended, was then adopted.

148. The Government member of Canada withdrew an amendment to replace the word "equal" with the words "fair and balanced".

149. The Employer Vice-Chairperson withdrew an amendment to replace the word "equal" with the word "fair".

150. The Worker Vice-Chairperson introduced an amendment to list some examples of areas covered in labour and social legislation. The Employer Vice-Chairperson opposed the amendment. He felt that the reformulated Paragraph 14 adopted earlier was broad enough to cover the areas mentioned in the amendment. The Government members of Australia, Canada, France, the United Kingdom and the United States agreed. The Government members of the Philippines and Portugal supported the amendment. After considering the various views expressed, the Worker Vice-Chairperson withdrew the amendment.

151. Paragraph 14, as amended, was then adopted.

P. Paragraph 15

152. The Worker Vice-Chairperson introduced an amendment to replace the word "organizations" by the word "institutions". This was a broader concept and would make subparagraph (1) clearer. The Employer Vice-Chairperson introduced a subamendment which would retain both the words "organizations" and "institutions". He mentioned that many small enterprise development organizations had the word "organization" in their title. The Worker Vice-Chairperson agreed. The amendment, as subamended, was then adopted.

153. The Worker Vice-Chairperson introduced an amendment to add the words "and of their workers" at the end of subparagraph (2). This would indicate that the interests of workers in SMEs should also be safeguarded. A similar amendment had been submitted by the Government members of the Committee -- Belguim, Denmark, Finland, France, Greece, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom. The Employer Vice-Chairperson supported the amendments, which were then adopted.

154. The Government member of Canada withdrew two amendments to introduce references to trade consortia, business networks and "cluster formations".

155. The Government member of Brazil, seconded by the Government member of Portugal, introduced an amendment to clarify that cooperatives were not just service cooperatives but could be production cooperatives as well. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

156. The Employer Vice-Chairperson introduced an amendment to include the word "incentives" in subparagraph (4). The Worker Vice-Chairperson supported the amendment. The amendment was then adopted.

157. The Government member of Belgium, seconded by the Government member of the Philippines, proposed an amendment to add the phrase "without jeopardizing the viability of the small and medium-sized enterprises" at the end of the first sentence of subparagraph (4). While selected categories of the population needed special support it was important to keep in mind the need to promote viable SMEs. The Employer Vice-Chairperson supported the amendment. The Worker Vice-Chairperson opposed the proposed amendment since it appeared discriminatory. The Government member of Zimbabwe was of the same view. To clarify the intention of the amendment, the Government member of Canada submitted a subamendment to place the proposed qualifying reference at the start of the subparagraph. The Employer Vice-Chairperson and the Government members of Belgium, the Philippines, South Africa and Uruguay supported the subamendment. The Worker Vice-Chairperson maintained that even the subamendment sounded discriminatory. The Government members of France and Portugal expressed a preference to retain the existing text. The Government member of Belgium then withdrew the amendment and the Government member of Canada withdrew his subamendment.

158. Seconded by the Government member of Canada, the Government member of the United States introduced an amendment to add the word "special" in reference to measures to improve communication between governments and SMEs. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

159. Seconded by the Government members of the Netherlands, Peru and Slovakia, the Government member of the United States introduced an amendment concerning subparagraph (5) to drop the words "organizations of" before "small and medium-sized enterprises". This would bring more clarity as communication should be directly with such enterprises rather than mainly through their organizations. The Employer Vice-Chairperson introduced a subamendment to cover both direct and indirect ways of communication. The Government member of Senegal suggested to also refer to "relations" in the subparagraph. A revised text was agreed upon accordingly and the amendment, as subamended, was then adopted.

160. Paragraph 15, as amended, was then adopted.

Q. Paragraph 16

161. An amendment to improve the drafting of the introductory phrase, submitted by the Government member of Brazil, was not seconded.

162. The Employer Vice-Chairperson introduced an amendment to delete a reference to the policy and legal framework in clause (a) as it restricted the scope of activities of employers' and workers' organizations. The Worker Vice-Chairperson concurred and the amendment was then adopted.

163. Seconded by the Government members of Botswana and Gabon, the Government member of Senegal introduced an amendment to add the words "as well as with intergovernmental regional organizations" in clause (c). This was to reflect the increasing importance of regional economic groupings. The Employer and Worker Vice-Chairpersons did not object and the amendment was then adopted.

164. The Government member of Brazil, seconded by the Government member of Portugal, introduced an amendment to insert the word "vocational" before "training" in clause (c). The Employer and Worker Vice-Chairpersons felt that this was too restrictive since all forms of training were concerned. The Government member of Brazil then withdrew the amendment.

165. An amendment to delete the word "important" in clause (d) submitted by the Government member of Brazil was not seconded.

166. Seconded by the Government member of Australia, the Government member of Canada introduced an amendment to encourage employers' and workers' organizations to actively participate in the development of socially progressive restructuring. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

167. The Worker Vice-Chairperson introduced an amendment to delete the word "commercial" in clause (f). The Employer Vice-Chairperson supported the amendment, which was then adopted.

168. The Government member of Senegal withdrew an amendment concerning clause (f).

169. An amendment to modify clause (g) submitted by the Government member of Brazil was not seconded.

170. Seconded by the Government member of Portugal, the Government member of Senegal introduced an amendment to broaden the reference to equality in clause (h). The Employer Vice-Chairperson preferred the existing text. The Worker Vice-Chairperson also preferred the original text, but introduced a subamendment to the amendment. This led to a rather inconclusive discussion on the concepts of equality between the sexes and of non-discrimination more in general.

171. The Worker Vice-Chairperson then proposed a subamendment, to include references to both gender equality and "non-discrimination". The Employer Vice-Chairperson as well as the Government members of the United States and Italy supported the subamendment. The amendment, as subamended, was then adopted.

172. Seconded by the Government member of the United States, the Government member of Canada introduced an amendment to disaggregate statistics also by age. This was becoming increasingly important in his country. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

173. Paragraph 16, as amended, was then adopted.

R. Paragraph 17

174. There being no amendments, Paragraph 17 was then adopted unchanged.

S. Paragraph 18

175. The Employer Vice-Chairperson introduced an amendment to refer to the role of the ILO in international cooperation. He noted that the ILO played a key role in the development of SMEs, which he wished to strengthen and reinforce. He also proposed an additional introductory phrase. The Worker Vice-Chairperson opposed the amendment, since the role of the ILO had already been referred to in the Preamble.

176. Following a long discussion, during which various Committee Members proposed subamendments, the Employer Vice-Chairperson indicated his regret that the discussion on such an important point but which should have been easy to deal with, had taken so long. He reminded the Committee that he felt that a clear reference to ILO action in the Paragraph was essential. In view of the circumstances however, he had decided to withdraw the amendment. The corresponding subamendments were then also withdrawn.

177. An amendment submitted by the Government member of the Philippines was not seconded.

178. The Government member of the United Kingdom, speaking on behalf of the Government Members of the Committee Member States of the European Union, introduced an amendment to insert a new clause as follows: "establishment of common approaches to the collection of comparable data, to support policy-making". She noted that harmonization among Member States of the European Union and the OECD had proved to be extremely helpful. The Employer and Worker Vice-Chairpersons supported the amendment. The Worker Vice-Chairperson asked the Office to review the Spanish translation. The amendment was then adopted.

179. Seconded by the Government member of Australia, the Government member of Canada introduced an amendment to clause (a) calling for data to be disaggregated by age. The Employer and Worker Vice-Chairpersons supported the amendment, which was then adopted.

180. Seconded by the Government member of Kenya, the Government member of Senegal introduced an amendment, which he immediately subamended, calling for further disaggregation of the information to be exchanged. The Government member of Belgium proposed to broaden the scope even further. This was supported by the Employer and Worker Vice-Chairpersons. The amendment, as subamended, was then adopted.

181. Seconded by the Government member of Papua New Guinea the Government member of the Philippines introduced an amendment to delete the words "where appropriate" in clause (a). This was supported by the Employer and Worker Vice-Chairpersons. The amendment was then adopted.

182. The Employer Vice-Chairperson withdrew an amendment to add the words "to foster small and medium-sized enterprises" in clause (a).

183. The Government member of Brazil, seconded by the Government member of Senegal, introduced an amendment to replace the word "ideas" with the word "experiences" in subclause (b)(i). It was important to give the subclause a more positive and active sense. The Employer Vice-Chairperson proposed to refer to both ideas and experiences. The Worker Vice-Chairperson supported this. The amendment, as subamended, was then adopted.

184. The Government member of Brazil withdrew an amendment to insert the word "vocational" in subclause (b)(ii).

185. Seconded by the Government members of Australia, Denmark and the United States, the Government member of Canada introduced an amendment to add a reference to age in subclause (b)(iii). The Employer and Worker Vice-Chairpersons agreed. The amendment was then adopted.

186. The Government member of the Philippines, seconded by the Worker Vice-Chairperson, introduced an amendment to delete the words "as appropriate" in subclause (b)(iii). The Employer Vice-Chairperson supported the amendment, which was then adopted.

187. The Government member of Canada withdrew an amendment to insert the word "network" in subclause (b)(iv).

188. Seconded by the Government members of Australia, Norway and Turkey, the Government member of Canada introduced an amendment to include a reference to marginalized and disadvantaged groups at the end of clause (c). This would broaden the scope and intent of the clause. The Government member of Italy opposed the amendment since women should not be considered marginalized or disadvantaged. After some discussion, agreement was reached to include the reference as a separate phrase. The amendment, as subamended, was then adopted.

189. Paragraph 18, as amended, was then adopted.

190. Seconded by the Government members of Australia, the Netherlands, Senegal and the United States, the Government member of Norway introduced an amendment to add a paragraph calling on member States to take into account initiatives by other international development institutions. The Government member of the United States proposed a subamendment adding a reference to the prominent role of the ILO in the promotion of SMEs.

191. The Worker Vice-Chairperson strongly objected to the proposed amendment. It would open the implementation of the Recommendation to the intervention and influence of international development institutions which did not subscribe to the philosophy and principles of the ILO. He reminded the Committee that the Recommendation was an ILO instrument and that the ILO was the only tripartite international organization. The Employer Vice-Chairperson supported the proposed amendment. The reality was that there were many bodies and institutions involved in SME development. It was important to take advantage of the experiences and initiatives of others provided that the philosophy and principles of the ILO were not compromised.

192. The Government member of Canada proposed a different wording to meet the concerns of the Workers. He felt that the ILO was not the only player in the field and that it was important to consider the experiences of others. The Government member of Senegal supported the amendment. The Government member of Kenya objected since the amendment could have unforeseen implications. Rather, the ILO should be more active in influencing other international organizations.

193. The Government member of the Philippines suggested that a reference to the work of non-governmental organizations should be included to recognize their important role in SME development.

194. The Worker Vice-Chairperson once again expressed his opposition to the amendment. The Government member of Norway clarified that the intention of the amendment was not to endorse activities undertaken by other international development institutions but rather to emphasize that the ILO and its member States should be more active in trying to influence the policies of other organizations regarding SME development. In reply the Worker Vice-Chairperson noted that it did not seem realistic to expect countries to influence the policies of organizations like the World Bank. The Government member of Sweden suggested that the Paragraph should have been included in the Preamble. The Government member of Finland suggested the withdrawal of the amendment.

195. The Worker Vice-Chairperson then proposed a subamendment which he indicated was a considerable concession on the part of the Workers. The Employer Vice-Chairperson did not support the subamendment, nor did he consider reference to non-governmental organizations appropriate. He suggested that it might be necessary to vote on the issue. The Worker Vice-Chairperson indicated that he did not feel intimidated by the request of the Employer Vice-Chairperson for a vote. He then suggested another wording of the amendment which was agreed to by the Employer Vice-Chairperson. The amendment, as subamended, was then adopted.

196. A new Paragraph 19 was then adopted.

197. The Government members of Australia and the United Kingdom, as well as the Employer and Worker Vice-Chairpersons, then took the occasion to express their appreciation to the Chairperson, the other members of the Committee, the secretariat, and the interpreters for their cooperation and support in bringing the deliberations of the Committee to a successful end.

198. At its 13th sitting the Committee met to adopt the draft report on its proceedings as well as the draft Recommendation.

199. The Reporter informed the Committee that the Drafting Committee had met for five hours. It had deliberated at length to review both the English and French texts. It had made some minor changes in order to ensure the accuracy of the Committee's decisions. It had also spent considerable time reconciling both versions. This had been done with the assistance of the secretariat and the Legal Adviser.

200. The Government members of Italy and the United States proposed minor changes in respect of their statements during the general discussion. Subject to these changes the Committee adopted the report unanimously.

201. The Committee then proceeded to adopt the draft Recommendation, Paragraph by Paragraph, point by point and in its totality.

202. In his closing statement the Chairperson noted that the discussions of the Committee had been constructive and productive. This was no doubt due to the fact that most controversial issues had already been dealt with by the Committee during its deliberations a year earlier. He thanked member States for their extremely useful observations on Report IV(1) which had been summarized in Report IV(2A). He expressed the view that the draft Recommendation reflected an ideal balance between general principles, flexibility and detail. He was glad to note that the ILO planned an active follow-up through its International Small Enterprise Programme (ISEP). He ended by thanking once again all members of the Committee for their contributions.

203. In his closing statement, the Employer Vice-Chairperson noted that the report reflected the conducive environment in which the Committee had met. He felt that the role of the secretariat in this respect had been important and had made it possible to arrive at consensus. The Committee had been a good example of tripartism since only one vote had been necessary in two years of discussions. He ended by thanking the Chairperson, the Worker Vice-Chairperson, the Government members of the Committee as well as the secretariat and interpreters.

204. The Worker Vice-Chairperson expressed his appreciation at the adoption of the draft Recommendation. He felt that it would be an important instrument to improve working conditions in SMEs. He trusted that governments would try to apply it. He was particularly glad to note the references to freedom of association and child labour. He ended by thanking the Chairperson, the Employer Vice-Chairperson, the Government members of the Committee as well as the secretariat and interpreters.

205. The Government member of Kenya, who was accompanied by the Minister of Labour of his country, paid tribute to the Chairperson and the secretariat. He expressed appreciation for the excellent work done by the Committee. He was also glad to note that by launching ISEP the ILO had already taken the necessary step to initiate follow-up.

206. The Chairperson then asked the Employer and Worker Vice-Chairpersons for their agreement to allow a representative of the International Federation of University Women (IFUW) to address the Committee. After obtaining this agreement, the representative of IFUW made a brief statement to remind the Committee of the important role of women entrepreneurs in SMEs.

207. The Chairperson then formally closed the Committee sitting and passed the floor to Mr. Göran Hultin, Assistant Director-General responsible for ILO enterprise activities. Mr. Hultin expressed his appreciation for the work of the Committee which would guide future ILO activities in this area. The deputy representative of the Secretary-General then proceeded with a multimedia presentation of ISEP.

Geneva, 15 June 1998

. (Signed) M. Pliszkiewicz,
Chairperson.

J. Djupvik,
Reporter.

Draft Recommendation concerning general conditions
to stimulate job creation in small and
medium-sized enterprises

adopts this day of June of the year one thousand nine hundred and ninety-eight the following Recommendation which may be cited as the Job Creation in Small and Medium-Sized Enterprises Recommendation, 1998.

I. Definition, purpose and scope

1. Members should, in consultation with the most representative organizations of employers and workers, define small and medium-sized enterprises by reference to such criteria as may be considered appropriate, taking account of national social and economic conditions, it being understood that this flexibility should not preclude Members from arriving at commonly agreed definitions for data collection and analysis purposes.

2. Members should adopt measures which are appropriate to national conditions and consistent with national practice in order to recognize and to promote the fundamental role that small and medium-sized enterprises can play as regards:

(a) the promotion of full, productive and freely chosen employment;

(b) greater access to income-earning opportunities and wealth creation leading to productive and sustainable employment;

(c) sustainable economic growth and the ability to react with flexibility to changes;

(d) increased economic participation of disadvantaged and marginalized groups in society;

(e) increased domestic savings and investment;

(f) training and development of human resources;

(g) balanced regional and local development;

(h) provision of goods and services which are better adapted to local market needs;

(i) access to improved quality of work and working conditions which may contribute to a better quality of life, as well as allow large numbers of people to have access to social protection;

(j) stimulating innovation, entrepreneurship, technology development and research;

(k) access to domestic and international markets; and

(l) the promotion of good relations between employers and workers.

3. In order to promote the fundamental role of small and medium-sized enterprises referred to in Paragraph 2, Members should adopt appropriate measures and enforcement mechanisms to safeguard the interests of workers in such enterprises by providing them with the basic protection available under other relevant instruments.

4. The provisions of this Recommendation apply to all branches of economic activity and all types of small and medium-sized enterprises, irrespective of the form of ownership (for example, private and public companies, cooperatives, partnerships, family enterprises, and sole proprietorships).

II. Policy and legal framework

5. In order to create an environment conducive to the growth and development of small and medium-sized enterprises, Members should:

(a) adopt and pursue appropriate fiscal, monetary and employment policies to promote an optimal economic environment (as regards, in particular, inflation, interest and exchange rates, taxation, employment and social stability);

(b) establish and apply appropriate legal provisions as regards, in particular, property rights, including intellectual property, location of establishments, enforcement of contracts, fair competition as well as adequate social and labour legislation;

(c) improve the attractiveness of entrepreneurship by avoiding policy and legal measures which disadvantage those who wish to become entrepreneurs.

6. The measures referred to in Paragraph 5 should be complemented by policies for the promotion of efficient and competitive small and medium-sized enterprises able to provide productive and sustainable employment under adequate social conditions. To this end, Members should consider policies that:

(1) create conditions which:

(a) provide for all enterprises, whatever their size or type:

(b) ensure the non-discriminatory application of labour legislation, in order to raise the quality of employment in small and medium-sized enterprises;

(c) promote observance by small and medium-sized enterprises of international labour standards related to child labour;

(2) remove constraints to the development and growth of small and medium-sized enterprises, arising in particular from:

(a) difficulties of access to credit and capital markets;

(b) low levels of technical and managerial skills;

(c) inadequate information;

(d) low levels of productivity and quality;

(e) insufficient access to markets;

(f) difficulties of access to new technologies;

(g) lack of transport and communications infrastructure;

(h) inappropriate, inadequate or overly burdensome registration, licensing, reporting and other administrative requirements, including those which are disincentives to the hiring of personnel, without prejudicing the level of conditions of employment, the effectiveness of labour inspection or the system of supervision of working conditions and related issues;

(i) insufficient support for research and development;

(j) difficulties in access to public and private procurement opportunities.

(3) include specific measures and incentives aimed at assisting and upgrading the informal sector to become part of the organized sector.

7. With a view to the formulation of such policies Members should, where appropriate:

(1) collect national data on the small and medium-sized enterprise sector, covering inter alia quantitative and qualitative aspects of employment, while ensuring that this does not result in undue administrative burdens for small and medium-sized enterprises;

(2) undertake a comprehensive review of the impact of existing policies and regulations on small and medium-sized enterprises, with particular attention to the impact of structural adjustment programmes on job creation;

(3) review labour and social legislation, in consultation with the most representative organizations of employers and workers, to determine whether:

(a) such legislation meets the needs of small and medium-sized enterprises, while ensuring adequate protection and working conditions for their workers;

(b) there is a need for supplementary measures as regards social protection, such as voluntary schemes, cooperative initiatives and others;

(c) such social protection extends to workers in small and medium-sized enterprises and there are adequate provisions to ensure compliance with social security regulations in areas such as medical care, sickness, unemployment, old-age, employment injury, family, maternity, invalidity and survivors' benefits.

8. In times of economic difficulties, governments should seek to provide strong and effective assistance to small and medium-sized enterprises and their workers.

9. In formulating these policies, Members:

(1) may consult, in addition to the most representative organizations of employers and workers, other concerned and competent parties as they deem appropriate;

(2) should take into account other policies in such areas as fiscal and monetary matters, trade and industry, employment, labour, social protection, gender equality, occupational safety and health and capacity-building through education and training;

(3) should establish mechanisms to review these policies, in consultation with the most representative organizations of employers and workers, and to update them.

III. Development of an enterprise culture

10. Members should adopt measures, drawn up in consultation with the most representative organizations of employers and workers to create and strengthen an enterprise culture which favours initiatives, enterprise creation, productivity, environmental consciousness, quality, good labour and industrial relations, and adequate social practices which are equitable. To this end, Members should consider:

(1) pursuing the development of entrepreneurial attitudes, through the system and programmes of education, entrepreneurship and training linked to job needs and the attainment of economic growth and development, with particular emphasis being given to the importance of good labour relations and the multiple vocational and managerial skills needed by small and medium-sized enterprises;

(2) seeking, through appropriate means, to encourage a more positive attitude towards risk-taking and business failure by recognizing their value as a learning experience while at the same time recognizing their impact on both entrepreneurs and workers;

(3) encouraging a process of lifelong learning for all categories of workers and entrepreneurs;

(4) designing and implementing, with full involvement of the organizations of employers and workers concerned, awareness campaigns to promote:

(a) respect for the rule of law and workers' rights, better working conditions, higher productivity and improved quality of goods and services;

(b) entrepreneurial role models and award schemes, taking due account of the specific needs of women, and of disadvantaged and marginalized groups.

IV. Development of an effective service infrastructure

11. In order to enhance the growth, job-creation potential and competitiveness of small and medium-sized enterprises, consideration should be given to the availability and accessibility of a range of direct and indirect support services for them and their workers, to include:

(a) business pre-start-up, start-up and development assistance;

(b) business plan development and follow-up;

(c) business incubators;

(d) information services, including advice on government policies;

(e) consultancy and research services;

(f) managerial and vocational skills enhancement;

(g) promotion and development of enterprise-based training;

(h) support for training in occupational safety and health;

(i) assistance in upgrading the literacy, numeracy, computer competencies and basic education levels of managers and employees;

(j) access to energy, telecommunications and physical infrastructure such as water, electricity, premises, transportation and roads, provided directly or through private sector intermediaries;

(k) assistance in understanding and applying labour legislation, including provisions on workers' rights, as well as in human resources development and the promotion of gender equality;

(l) legal, accounting and financial services;

(m) support for innovation and modernization;

(n) advice regarding technology;

(o) advice on the effective application of information and communication technologies to the business process;

(p) access to capital markets, credit and loan guarantees;

(q) advice in finance, credit and debt management;

(r) export promotion and trade opportunities in national and international markets;

(s) market research and marketing assistance;

(t) assistance in product design, development and presentation;

(u) quality management, including quality testing and measurement;

(v) packaging services;

(w) environmental management services.

12. As far as possible, the support services referred to in Paragraph 11 should be designed and provided to ensure optimum relevance and efficiency through such means as:

(a) adapting the services and their delivery to the specific needs of small and medium-sized enterprises, taking into account prevailing economic, social and cultural conditions, as well as differences in terms of size, sector and stage of development;

(b) ensuring active involvement of small and medium-sized enterprises and the most representative organizations of employers and workers in the determination of the services to be offered;

(c) involving the public and private sector in the delivery of such services through, for example, organizations of employers and workers, semi-public organizations, private consultants, technology parks, business incubators and small and medium-sized enterprises themselves;

(d) decentralizing the delivery of services, thereby bringing them as physically close to small and medium-sized enterprises as possible;

(e) promoting easy access to an integrated range of effective services through "single window" arrangements or referral services;

(f) aiming towards self-sustainability for service providers through a reasonable degree of cost recovery from small and medium-sized enterprises and other sources, in such a manner as to avoid distorting the markets for such services and to enhance the employment creation potential of small and medium-sized enterprises;

(g) ensuring professionalism and accountability in the management of service delivery;

(h) establishing mechanisms for continuous monitoring, evaluation and updating of services.

13. Services should be designed to include productivity-enhancing and other approaches which promote efficiency and help small and medium-sized enterprises to sustain competitiveness in domestic and international markets, while at the same time improving labour practices and working conditions.

14. Members should facilitate access of small and medium-sized enterprises to finance and credit under satisfactory conditions. In this connection:

(1) credit and other financial services should as far as possible be provided on commercial terms to ensure their sustainability, except in the case of particularly vulnerable groups of entrepreneurs;

(2) supplementary measures should be taken to simplify administrative procedures, reduce transaction costs and overcome problems related to inadequate collateral by, for example, the creation of non-governmental financial retail agencies and development finance institutions addressing poverty alleviation;

(3) small and medium-sized enterprises may be encouraged to organize in mutual guarantee associations;

(4) the creation of venture capital and other organizations, specializing in assistance to innovative small and medium-sized enterprises, should be encouraged.

15. Members should consider appropriate policies to improve all aspects of employment in small and medium-sized enterprises by ensuring the non-discriminatory application of protective labour and social legislation.

16. Members should, in addition:

(1) facilitate, where appropriate, the development of organizations and institutions which can effectively support the growth and competitiveness of small and medium-sized enterprises. In this regard, consultation with the most representative organizations of employers and workers should be considered;

(2) consider adequate measures to promote cooperative linkages between small and medium-sized enterprises and larger enterprises. In this connection, measures should be taken to safeguard the legitimate interests of the small and medium-sized enterprises concerned and of their workers;

(3) consider measures to promote linkages between small and medium-sized enterprises to encourage the exchange of experience as well the sharing of resources and risks. In this connection, small and medium-sized enterprises might be encouraged to form structures such as consortia, networks and production and service cooperatives, taking into account the importance of the role of organizations of employers and workers;

(4) consider specific measures and incentives for persons aspiring to become entrepreneurs among selected categories of the population, such as women, long-term unemployed, persons affected by structural adjustment or restrictive and discriminatory practices, disabled persons, demobilized military personnel, young persons including graduates, older workers, ethnic minorities and indigenous and tribal peoples. The detailed identification of these categories should be carried out taking into account national socio-economic priorities and circumstances;

(5) consider special measures to improve communication and relations between government agencies and small and medium-sized enterprises as well as the most representative organizations of such enterprises, in order to improve the effectiveness of government policies aimed at job creation;

(6) encourage support for female entrepreneurship, recognizing the growing importance of women in the economy, through measures designed specifically for women who are or wish to become entrepreneurs.

V. Roles of organizations of employers and workers

17. Organizations of employers or workers should consider contributing to the development of small and medium-sized enterprises in the following ways:

(a) articulating to governments the concerns of small and medium-sized enterprises or their workers, as appropriate;

(b) providing direct support services in such areas as training, consultancy, easier access to credit, marketing, advice on industrial relations and promoting linkages with larger enterprises;

(c) cooperating with national, regional and local institutions as well as with intergovernmental regional organizations which provide support to small and medium-sized enterprises in such areas as training, consultancy, business start-up and quality control;

(d) participating in councils, task forces and other bodies at national, regional and local levels established to deal with important economic and social issues, including policies and programmes, affecting small and medium-sized enterprises;

(e) promoting and taking part in the development of economically beneficial and socially progressive restructuring (by such means as retraining and promotion of self-employment) with appropriate social safety nets;

(f) participating in the promotion of exchange of experience and establishment of linkages between small and medium-sized enterprises;

(g) participating in the monitoring and analysis of social and labour-market issues affecting small and medium-sized enterprises, concerning such matters as terms of employment, working conditions, social protection and vocational training, and promoting corrective action as appropriate;

(h) participating in activities to raise quality and productivity, as well as to promote ethical standards, gender equality and non-discrimination;

(i) preparing studies on small and medium-sized enterprises, collecting statistical and other types of information relevant to the sector, including statistics disaggregated by gender and age, and sharing this information, as well as lessons of best practice, with other national and international organizations of employers and workers;

(j) providing services and advice on workers' rights, labour legislation and social protection for workers in small and medium-sized enterprises.

18. Small and medium-sized enterprises and their workers should be encouraged to be adequately represented, in full respect for freedom of association. In this connection, organizations of employers and workers should consider widening their membership base to include small and medium-sized enterprises.

VI. International cooperation

19. Appropriate international cooperation should be encouraged in the following areas:

(a) establishment of common approaches to the collection of comparable data, to support policy-making;

(b) exchange of information, disaggregated by gender, age and other relevant variables, on best practices in terms of policies and programmes to create jobs and to raise the quality of employment in small and medium-sized enterprises;

(c) creation of linkages between national and international bodies and institutions that are involved in the development of small and medium-sized enterprises, including organizations of employers and workers, in order to facilitate:

(d) international meetings and discussion groups on approaches to job creation through the development of small and medium-sized enterprises, including support for female entrepreneurship. Similar approaches for job creation and entrepreneurship will be helpful for disadvantaged and marginalized groups;

(e) systematic research in a variety of contexts and countries into key success factors for promoting small and medium-sized enterprises which are both efficient and capable of creating jobs providing good working conditions and adequate social protection;

(f) promotion of access by small and medium-sized enterprises and their workers to national and international databases on such subjects as employment opportunities, market information, laws and regulations, technology and product standards.

20. Members should promote the contents of this Recommendation with other international bodies. Members should also be open to cooperation with those bodies, where appropriate, when evaluating and implementing the provisions of this Recommendation, and take into consideration the prominent role played by the ILO in the promotion of job creation in small and medium-sized enterprises.

1.  The following adjustments were made:

(a) 4 June: 189 members (79 Government members with 1,508 votes each, 58 Employer members with 2,054 votes each and 52 Worker members with 2,291 votes each);

(b) 5 June: 180 members (83 Government members with 2,296 votes each, 56 Employer members with 3,403 votes each and 41 Worker members with 4,648 votes each);

(c) 8 June: 174 members (84 Government members with 55 votes each, 55 Employer members with 84 votes each and 35 Worker members with 132 votes each);

(d) 9 June: 174 members (84 Government members with 247 votes each, 52 Employer members with 399 votes each and 38 Worker members with 546 votes each);

(e) 10 June: 165 members (84 Government members with 775 votes each, 50 Employer members with 1,302 votes each and 31 Worker members with 2,100 votes each);

(f) 11 June: 163 members (84 Government members with 725 votes each, 50 Employer members with 1,218 votes each and 29 Worker members with 2,100 votes each);

(g) 15 June: 163 members (84 Government members with 17 votes each, 51 Employer members with 28 votes each and 28 Worker members with 51 votes each).


Updated by VC. Approved by RH. Last update: 26 January 2000.

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