3.1.2004 Official Journal of the European Union L1/1 (Acts whose publication is obligatory) COMMISSION REGULATION (EC) No 1/2004 of 23 December 2003 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises active in the production, processing and marketing of agricultural products THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (), and in particular Article 1(1)(a)(i) thereof, Having published a draft of this Regulation (3), Having consulted the Advisory Committee on State aid, Whereas: (1) Regulation (EC) No 994/98 empowers the Commission to declare, in accordance with Article 87 of the Treaty, that, under certain conditions, aid to small and medium- sized enterprises is compatible with the common market and not subject to the notification requirement of Article 88(3) of the Treaty. (2)  Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enter- prises () does not apply to activities linked to the production, processing or marketing of products listed in Annex I to the Treaty. (3)  The Commission has applied Articles 87 and 88 of the Treaty to small and medium-sized enterprises active in the production, processing and marketing of agricultural products in numerous decisions and has also stated its policy, most recently in the Community guidelines for State aid in the agriculture sector (*) (hereafter referred to as the ‘agriculture guidelines). In the light of the Commission's considerable experience in applying those Articles to small and medium-sized enterprises active in the production, processing and marketing of agricultural products, it is appropriate, with a view to ensuring effi- cient supervision and simplifying administration without 1 () OJ L 142, 14.5.1998, p. 1. (*) OJ C 194, 15.8.2003, p. 2. () OJL 10, 13.1.2001, p. 33. () OJ C 28, 1.2. 2000, p. 2. (Corrected version O] C 232, 12.8.2000, p-19) weakening Commission monitoring, that the Commis- sion should make use of the powers conferred by Regu- lation (EC) No 994/98 also for small and medium-sized enterprises active in the production, processing and marketing of agricultural products, insofar as Article 89 of the Treaty has been declared applicable to such products. Due to the specificities of the agricultural sector, a Regulation covering only small and medium- sized enterprises active in this sector is justified. This Regulation is without prejudice to the possibility for Member States to notify aid to small and medium- sized enterprises active in the production, processing and marketing of agricultural products. Such notifica- tions will be assessed by the Commission in the light of this Regulation and on the basis of the agriculture guide- lines. Notifications pending on the date of entry into force of this Regulation should be assessed first in the light of this Regulation and, if the conditions it lays down are not fulfilled, then on the basis of the Agri- culture Guidelines. It is appropriate to lay down transi- tional provisions for aid which was granted before the entry into force of this Regulation and was not notified in breach of the obligation in Article 88(3) of the Treaty. Over the coming years, agriculture will have to adapt to new realities and further changes in terms of market evolution, market policy and trade rules, consumer demand and preferences and the enlargement of the Community. These changes will affect not only agri- cultural markets but also local economies in rural areas in general. Rural development policy should aim at restoring and enhancing the competitiveness of rural areas and, therefore, contribute to the maintenance and creation of employment in those areas. Small and medium-sized enterprises play a decisive role in job creation and, more generally, act as a factor of social stability and economic drive. However, their devel- opment may be limited by market imperfections. They often have difficulties in obtaining capital or credit, given the risk-shy nature of certain financial markets and the limited guarantees that they may be able to offer. Their limited resources may also restrict their access to information, notably regarding new technology and potential markets. Having regard to those considerations, the purpose of the aid exempted by this Regulation should be to facilitate the development of the economic activities of small and medium-sized enterprises,