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The European Commission has approved Danish government’s plans to set-up national Export and Investment Fund with a budget of over €4 billion. The fund is aimed at supporting economic development, competitiveness, innovation and growth for Danish companies. The Commission has approved the fund’s activities for the next six years; in case of further prolongation, the plan shall be additionally reviewed by the Commission.
The EU state aid rules, in particular art. 107(3, c) of the Treaty on the Functioning of the European Union, allow the state aid to facilitate the development of certain economic activities in specific socio-economic areas using various financial means. However, to be effective, these national initiatives have to be approved by the EU competition authorities, as the EU-wide competition policy is the exclusive EU’s competence.
EU competition policy: fruitful cooperation
Competition policy encourages companies to offer consumers goods and services on the most favourable terms. It encourages efficiency and innovation and reduces prices. According to the Treaties, the EU-wide competition rules are guided exclusively by the EU institutions. Competition policy encourages companies to offer consumers goods and services on the most favourable terms; besides, it encourages efficiency and innovation and reduces prices.
The European Commission and the national competition authorities in all EU member states cooperate with each other through the European Competition Network, ECN. This creates an effective mechanism to counter companies that engage in cross-border practices restricting competition. All members of the ECN apply European competition rules and the ECN provides a means to ensure their effective and consistent application.
Through the ECN, the competition authorities inform each other and the Commission of any proposed decisions and exchange comments from the EU states’ competition authorities. In this way, the ECN allows the competition authorities to pool their experience and identify best practices.
The ECN was established as a forum for discussion and cooperation for European competition authorities; it ensures an efficient division of work and an effective application of the EU competition rules.
The ECN-states’ cooperation proceeds in the following way: a) the ECN informs the member states of new cases and envisaged enforcement decisions; b) the ECN coordinates investigations in difficult cases and where it is necessary; c) the SCN is helping the states and the Commission with investigation procedures; d) it provides exchanging of evidences and other competition-wise information.
More on EU competition policy in: https://competition-policy.ec.europa.eu/european-competition-network_en
Danish example
Denmark notified the Commission on its plans to set up an export and investment fund, with an initial capital of about €807 million (DKK 6 billion). The fund is to be established as a new and fully state-owned entity gathering three existing state-owned entities: a) the Danish Growth Fund (‘Vækstfonden’), b) the EKF Denmark’s Export Credit Agency (‘EKF Danmarks Eksportkredit’), and c) the Danish Green Investment Fund (‘Danmarks Grønne Investeringsfond’).
Financial aid and support will take the form of the following “contribution means”: a) €3.3 billion as in-kind contribution to the three existing state-owned entities, b)a capital injection of about €807 million to the mentioned three development entities, c) providing state guarantees of about €1.3 million to export and investment entities per year, and d) the companies are exempt from paying corporate income tax, with an estimated average value of approximately €38.6 million per year.
The established fund will be entrusted with addressing market failures and supporting economic development and investment opportunities. It will intervene to ensure access to financing in areas where companies cannot receive sufficient support from the market structures and facilities.
The fund will operate with a focus on providing funding to small and medium sized companies, in particular in the field of green and sustainable finance, which is already a key concern to all three existing entities.
Danish fund’s expected positive activities
Fund’s creation will provide for the following positive activities in the national socio-economic development:
= facilitating development of certain socio-economic policies in a variety of sectors that face difficulties in obtaining sufficient finance in the market.
= minimizing distortions of competition and trade among the EU states; in particular, the new fund will improve access to finance for sectors or companies in obtaining needed financial sources. Danish fund’ estimated balance sheet remains relatively small compared to those of other promotional institutions in the EU.
= the fund has sufficient safeguards to avoid undue negative effects on competition and trade in Denmark and the EU-27 states. In particular, the fund’s financing activities will be regulated accordingly, to ensure that private investors are not “crowded out”, should they be willing to provide financing to companies.
Commission’s comment
Margrethe Vestager, Executive Vice-President in charge of competition policy noted (12/05/2023) that “the approved initiative will enable the creation of Denmark’s Export and Investment Fund to support small and medium sized companies and boost the growth of the country’s economy. This will strengthen the competitiveness, productivity and sustainability of Danish companies, while ensuring that competition is not unduly distorted”.
Citation from: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_2687