# EUR-Lex - 52013SC0413 - EN

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# 52013SC0413

**COMMISSION STAFF WORKING DOCUMENT THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 2013 PROGRESS REPORT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2013-2014 /* SWD/2013/0413 final */**

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TABLE
OF CONTENTS

1........... Introduction. 3

1.1........ Preface. 3

1.2........ Context 3

1.3........ Relations between the EU
and the former Yugoslav Republic of Macedonia. 4

2........... Political criteria. 5

2.1........ Democracy and the rule of
law.. 5

2.2........ Human rights and
the protection of minorities. 12

2.3........ Regional issues and
international obligations. 13

3........... Economic criteria. 15

3.1........ The existence of a
functioning market economy. 15

3.2........ The capacity to cope with
competitive pressure and market forces within the Union. 19

4........... Ability to take on the
obligations of membership. 21

4.1........ Chapter 1: Free movement
of goods. 21

4.2........ Chapter 2: Freedom of
movement for workers. 22

4.3........ Chapter 3: Right of
establishment and freedom to provide services. 23

4.4........ Chapter 4: Free movement
of capital 23

4.5........ Chapter 5: Public
procurement 24

4.6........ Chapter 6: Company law.. 25

4.7........ Chapter 7: Intellectual
property law.. 25

4.8........ Chapter 8: Competition
policy. 26

4.9........ Chapter 9: Financial
services. 27

4.10...... Chapter 10: Information
society and media. 28

4.11...... Chapter 11: Agriculture and
rural development 28

4.12...... Chapter 12: Food safety,
veterinary and phytosanitary policy. 29

4.13...... Chapter 13: Fisheries. 31

4.14...... Chapter 14: Transport
policy. 31

4.15...... Chapter 15: Energy. 32

4.16...... Chapter 16: Taxation. 33

4.17...... Chapter 17: Economic and
monetary policy. 34

4.18...... Chapter 18: Statistics. 35

4.19...... Chapter 19: Social policy
and employment 35

4.20...... Chapter 20: Enterprise and
industrial policy. 37

4.21...... Chapter 21: Trans-European
networks. 38

4.22...... Chapter 22: Regional policy
and coordination of structural instruments. 38

4.23...... Chapter 23: Judiciary and
fundamental rights. 39

4.24...... Chapter 24: Justice,
freedom and security. 47

4.25...... Chapter 25: Science and
research. 51

4.26...... Chapter 26: Education and
culture. 52

4.27...... Chapter 27: Environment and
climate change. 52

4.28...... Chapter 28: Consumer and
health protection. 54

4.29...... Chapter 29: Customs union. 56

4.30...... Chapter 30: External
relations. 56

4.31...... Chapter 31: Foreign,
security and defence policy. 57

4.32...... Chapter 32: Financial
control 58

4.33...... Chapter 33: Financial and
budgetary provisions. 58

1. 
Introduction
1.1. 
Preface

The Commission reports regularly to the Council and
Parliament on the progress made by the countries of the Western Balkans region
towards European integration, assessing their efforts to comply with the
Copenhagen criteria and the conditionality of the Stabilisation and Association Process.

This progress report, which largely follows the same
structure as in previous years:

–   briefly describes the relations
between the former Yugoslav Republic of Macedonia and the European Union;

–   analyses the situation in the
former Yugoslav Republic of Macedonia in terms of the political criteria for
membership;

–   analyses the situation in the
former Yugoslav Republic of Macedonia on the basis of the economic criteria for
membership;

–   reviews the former Yugoslav
Republic of Macedonia’s capacity to take on the obligations of membership, i.e.
the acquis expressed in the Treaties, the secondary legislation, and the
policies of the Union.

This report covers the period from October 2012 to
September 2013.[1] Progress is measured on the basis of decisions
taken, legislation adopted and measures implemented. As a rule, legislation or
measures which are under preparation or awaiting parliamentary approval have
not been taken into account. This approach ensures equal treatment across all
reports and enables an objective assessment.

The report is based on information gathered and analysed by
the Commission. Many sources have been used, including contributions from the
government of the former Yugoslav Republic of Macedonia, the EU Member States,
European Parliament reports[2]
and information from various international and non-governmental organisations.

The Commission draws detailed conclusions regarding the
former Yugoslav Republic of Macedonia in its separate communication on
enlargement,[3]
based on the technical analysis contained in this report.

1.2. 
Context

The European Council of December 2005 granted the former
Yugoslav Republic of Macedonia the status of candidate country. The
Stabilisation and Association Agreement between the former Yugoslav Republic of
Macedonia and the EU entered into force in April 2004. In October 2009, the
Commission made recommendations to the Council to open negotiations with the
country and to move to the second phase of SAA implementation. These
recommendations were reiterated in 2010, 2011 and 2012. The Council has not yet
decided on the Commission’s proposals.

1.3. 
Relations between the EU and
the former Yugoslav Republic of
Macedonia

The former Yugoslav
Republic of Macedonia is participating in the Stabilisation and Association
Process.

The country has been
implementing its commitments under the Stabilisation and Association
Agreement (SAA) with the EU, including all those relating to the first
stage of implementation of Title V (‘Movement of workers, establishment, supply
of services, capital’). Council has not yet decided on the Commission’s 2009
proposal on passage to the second stage of the Association, under Article 5 of
the SAA. A Protocol to the SAA to
take account of Croatia’s accession to the EU has been agreed between the EU
and the former Yugoslav Republic of Macedonia and is awaiting ratification.

Regular political and
economic dialogue between the EU and the country has continued through the SAA
structures. Meetings of the Stabilisation and Association Committee and the
Stabilisation and Association Council took place in June and July 2013,
respectively. Experts from the two sides met in seven sub-committees and a
special group on public administration reform. The former Yugoslav Republic of
Macedonia participates in
multilateral economic dialogue with the Commission and the EU Member States to
prepare for participation in multilateral surveillance and economic policy
coordination under the EU’s Economic and Monetary Union.

A High-Level
Accession Dialogue, launched in March 2012, has continued to provide
an impetus to the process of reforms for EU integration, without overriding the
standard pre-accession procedures. It focuses on five key areas: protecting
freedom of expression in the media, strengthening the rule of law and
fundamental rights, reforming public administration, electoral reform, and
developing the market economy. A plenary meeting was held on 9 April to review
progress. Over the past year,
action has been taken in relation to almost all of the targets set in the
framework of the Dialogue. As was reported in the ad hoc report by the
Commission in April, in some areas goals have been achieved, for instance the
decriminalisation of defamation, the introduction of systematic verification of
statements of interest, and improved legislation on the interception of
communications. The focus in 2013 is on achieving the remaining goals, as
detailed in the relevant sections of this progress report.

Visa liberalisation for citizens of the former Yugoslav Republic of
Macedonia travelling to the Schengen area has been in force since December
2009. In the framework of the
post-visa liberalisation monitoring mechanism, the Commission regularly
assesses progress made by the country in the implementation of reforms
introduced under the visa roadmap. This also includes an alert mechanism to
prevent abuses, coordinated by Frontex. Within this framework, the European
Commission has regularly submitted its monitoring reports to the European
Parliament and Council. The next report will be presented by the end of 2013. A readmission agreement between the
European Union and the former Yugoslav Republic of Macedonia has been in force
since January 2008.

Implementation of the enlargement strategy for the former
Yugoslav Republic of Macedonia is supported by financial assistance
under the Instrument for Pre-Accession Assistance (IPA). The Multiannual
Indicative Planning Document (MIPD) for the period 2011 to 2013 identified the
following priority areas for financial support: public administration reform,
justice, home affairs and fundamental rights, private sector development,
agriculture and rural development, transport, environment and climate change
and social development.

Under the last National
Programme within the current IPA component I, the Commission earmarked €56
million for the years 2012 and 2013 and adopted new allocations of €148 million for operational programmes under
components III, IV and V. The former Yugoslav Republic of Macedonia also
continued to benefit from various regional, cross-border cooperation and
horizontal programmes. In the period 2007-2013 the Commission has committed
over €610 million for projects to be implemented in the country, approximately
a quarter of which has been contracted so far. Of this, the national
authorities are directly responsible for managing over €480 million under the
decentralised implementation system (DIS) for four out of five IPA components.
There are, however, concerns that limited national capacity to programme and
absorb IPA funds under the DIS may increase the risk of de-commitments. The
national management and control systems remain uneven and need strengthening. A
number of measures have been taken by the national authorities to improve
capacity and performance and implementation of all IPA programmes is slowly
making progress, but the backlog of projects continues to pose problems. Greater
commitment is required from the authorities to accelerate implementation and
increase the impact of financial assistance. The government and the Commission
are currently preparing a comprehensive Country Strategy Paper for the period
2014-2020, which will provide a coherent and strategic framework for financial
assistance under the new Instrument for Pre-Accession Assistance (IPA II).

The former Yugoslav
Republic of Macedonia participates in the following EU Programmes:
the Seventh Research Framework Programme, Progress, the Competitiveness and
Innovation Programme, Culture, Europe for Citizens, Fiscalis 2013, Customs
2013, and the Intelligent Energy Europe Programme. It also ratified the
memorandum of understanding for participation in the EU's Civil Protection
Mechanism.

2. 
Political criteria

This section examines the progress made by the former
Yugoslav Republic of Macedonia towards meeting the Copenhagen political
criteria, which require stability of institutions guaranteeing democracy, the
rule of law, human rights and respect for and protection of minorities. It also
covers regional cooperation, good neighbourly relations with enlargement
countries and Member States and compliance with international obligations, such
as cooperation with the International Criminal Tribunal for the former
Yugoslavia.

2.1. 
Democracy and the rule of
law

The year was marked by
a political crisis following events in parliament in December 2012. A political
agreement was reached on 1 March, enabling the return of all MPs to parliament,
the holding of local elections, the continuation of relevant reforms, as well
as an explicit commitment to the Euro-Atlantic agenda, the establishment of a
Committee of Inquiry which proposed changes to the parliament’s rules of
procedures to prevent a recurrence and a commitment to restoring dialogue with
journalists.

Constitution

There have been no amendments to the Constitution since
2011, and it is broadly in line with European standards. The
Constitutional Court received over 200 applications challenging laws and other
acts in 2012. In around 15% of its rulings it annulled the provisions
challenged, indicating a need for further improvements in the quality of
legislation at the drafting stage. There is also a need for more systematic and
transparent follow-up by the executive and legislature in cases where the
Constitutional Court has annulled legislation. Although there is an obligation
to propose new provisions, a number of laws are in practice left with gaps,
thereby undermining legal certainty. In December 2012, the Venice Commission
issued an amicus curiae opinion on the Lustration Law at the request of
the President of the Constitutional Court, in view of a pending constitutional
challenge. The Venice Commission raised potential concerns over, among other
things, the initiation of lustration measures a long time after the start of
the democratisation process, the misuse of political, ideological or party
reasons as grounds for lustration measures and the application of lustration
measures to private or semi-private organisations.

Elections

OSCE/ODIHR recommendations following the 2011 parliamentary
elections were partially addressed through changes to the Electoral Code and to
the Law on Financing of Political Parties in November 2012, and thorough
revision of the voter lists. The Venice Commission found the amended Code to be
an improvement especially as regards political party and campaign finance
reporting, but stated that previous recommendations on thresholds for campaign
donations, complaints and appeals procedures and arrangements for
out-of-country voting had not been addressed. The Electoral Code was amended
twice before the local elections to extend the deadline for candidates to
register. Amending the Code so close to an election is not good electoral
practice, but there was cross-party consensus and the extension allowed the
opposition to participate in the elections.

Municipal elections were held in March/April 2013. The
OSCE/ODIHR found that they were efficiently administered. Candidates were able
to campaign freely and the campaign was active. Mayoral candidates in most
regions signed a Code of Conduct for Free and Fair Elections. The election days
were calm and polling well-organised in a majority of the polling stations.
Voters were able to freely express their choice in a calm atmosphere, and the
turnout was high. The OSCE/ODIHR reported, however, that allegations of voter
intimidation and misuse of state resources persisted throughout the election
campaign, and that the distinction between state and political party was
blurred. The media covered the campaign extensively, but several broadcasters,
including the public broadcaster, did not provide balanced coverage of the
campaign. While there was greater confidence in the accuracy of voter lists,
the procedures for compiling and maintaining the lists can be further improved.

Following the local
elections, work on the outstanding OSCE/ODIHR recommendations has continued in
two working groups on the electoral legislation and the voters’ lists. Representatives
from relevant authorities and civil society, assisted by OSCE/ODIHR experts,
participate in the working groups.

Parliament

The forcible removal of
a large number of opposition MPs and journalists from parliament’s plenary hall
on 24 December, during the adoption of the 2013 budget under controversial
circumstances, triggered a political crisis which exposed deep divisions among
political parties and affected the functioning of parliament. The resulting
boycott of parliamentary proceedings and threatened boycott of the municipal
elections by most of the opposition parties were resolved by a political
agreement reached on 1 March, whereby opposition parties agreed to return to
parliament and to participate in the elections. In practice, although it
participated in the Committee of Inquiry, the main opposition bloc took little
part in plenary debates until September.

The political crisis
showed the degree of polarisation and highlighted the need for parties to show
greater political commitment to resolving problems through dialogue and in full
respect of the institutional framework, with both government and opposition
playing constructive roles. The crisis also demonstrated the need for greater
national consensus on how to meet the country’s strategic objectives.

The 1 March political
agreement also required a Committee of Inquiry to be established to look into
the events on and before 24 December, including their constitutionality,
security in and outside of parliament, and revision of the parliamentary rules
of procedure, among other issues. Due to disagreement between the political
parties over its composition, the Committee only began work in mid-June and agreed
a report on 26 August with recommendations about reforms to parliamentary
procedures, a code of ethics for MPs, parliamentary security arrangements and
treatment of journalists. The consensus on the final report showed that
constructive solutions can be found, with political will, through dialogue and
compromise. A cross-party Working Group of the Assembly began work immediately
on implementing the recommendations. The 1 March political agreement also
required the signature of a cross-party Memorandum of Understanding (MoU),
confirming support for the Euro-Atlantic integration agenda, which was signed
on 16 September.

Between 24 December
2012 and 1 March 2013, in the absence of most opposition representatives,
parliament adopted 10 new laws and revised over 80 others, including some
relating to acquis reforms, raising concerns about the inclusivity of
the process. Parliament’s rules of procedure were also revised at that time,
with the aim of limiting committee discussions on future budgets, and should now
be further amended in line with the recommendations of the Committee of
Inquiry.

A joint session of the
Committee for European Affairs and the National Council for EU Integration
(NCEI), chaired by the opposition and including representatives of all segments
of society, was held on 9 April and the chair and co-chair of the NCEI
participated in the High-Level Accession Dialogue meeting that day. Another
NCEI session was held on 24 June. The NCEI has the potential to play an
important and constructive role in assembling a broad national consensus on
European integration. However, during the reporting period, discussions were
affected by party political differences. Under parliament’s oversight system,
civil society organisations and academia were consulted on 6 draft laws, in 14
public debates and in 2 oversight hearings.

The Parliamentary
Institute, set up in 2009 to support the work of Members of parliament, has
finally become operational.

Overall,
parliament’s functioning of was affected by the political crisis which erupted
on 24 December and the subsequent boycott by the main opposition bloc. The work
of the Committee of Inquiry into the events of 24 December 2012 highlighted the
importance of achieving political consensus through constructive dialogue and
compromise. It is essential that work on the implementation of the agreed
recommendations of the Committee of Inquiry continues as it has begun. Dialogue
between the political parties in parliament needs to be improved. The NCEI
should play a greater role in assembling a broad national consensus on European
integration.

Government

The government
coalition has remained stable. Dialogue between the parties in the coalition
continued at all levels. There were two government reshuffles, in February and
May 2013.

The Macedonian
government continued its commitment to the EU accession process, most notably
through the High-Level Accession Dialogue and the implementation of EU-related
reforms. A new revised roadmap for accession was adopted in November
2012, and reports on its implementation were shared with the Commission in
February and April 2013. Regular bi-weekly government discussions on EU
integration were held.

The revised National
Programme for Adoption of the Acquis (NPAA) for 2013 was adopted in December
2012. A first quarterly report was submitted to parliament on 9 May and debated
by the NCEI on 24 June. The revised NPAA provides a useful framework of
government plans but the lack of data on resources (financial and
human), continues to make it difficult to assess its impact and the likelihood
of successful implementation.

The population census,
which did not take place in 2011 due to disagreements about the methodology for
counting citizens abroad, has not yet been carried out. The use of administrative
registries is being considered as a potential alternative solution.

With regard to decentralisation
of government, a key element of the Ohrid Framework Agreement, the second phase
of fiscal decentralisation has still not been completed. Some steps have been
taken to review activities, including a new method of monitoring implementation
of the decentralisation programme and action plan. The share of VAT transferred
to municipalities remains insufficient to fully take on new tasks. Further
efforts are required to ensure the financial sustainability of municipalities
so they can carry out the responsibilities transferred to them. The relevant
laws on regional development have not been fully implemented. The bodies
responsible for regional economic development do not have sufficient resources.
The regional development budget has decreased further.

Overall,
the government has remained stable and has continued its commitment to
EU-related reforms, which remain high on its agenda. There should be a more
consensus-based approach to politics. A greater distinction is needed between
political parties and state structures. Progress needs to be accelerated in the
field of decentralisation of government and regional development, focussing in
particular on full implementation of the relevant legal framework, on ensuring
adequate resources, and on coordination between the relevant bodies.

Public administration

The government has embarked on wide-ranging public
administration reforms with a dedicated forum under the SAA, which is being
replicated elsewhere in the region, for discussion of such issues. The reform
process enjoys political support, and the forum is co-chaired at ministerial
level.

The legal framework for public administration continues to
be fragmented, affecting its unity, transparency and accountability. Despite
several amendments, the scope of the main laws setting out the status, rights,
duties and accountability of people employed by the state remained limited in
terms of the number of institutions covered. Large numbers of public employees
are therefore instead subject to specific legislation and/or general labour law
and collective bargaining. Fragmentation hampers the collection of relevant
data on public administration. Official figures on the total numbers of
employees in the public sector, both permanent and temporary, are still not
available, which makes it difficult to measure progress in achieving
transparency and reform objectives.

Policy improvements at both central and local level are
still needed to combat politicisation. All ongoing recruitment of public
employees, irrespective of civil service status, needs to fully respect the
principles of transparency and accountability and be based on merit. There are
still cases of tailor-made vacancies and irregular recruitment of staff. Some
recruitment has been carried out as a social policy measure, rather than as a
response to institutional needs.

Targets on equitable representation, though largely
achieved for the civil service, have not been met across the entire public
sector. The recruitment procedure for members of non-majority communities still
needs to be harmonised with general recruitment procedures. Efforts to meet
equitable representation targets must be in balance with the real staffing needs
of institutions.

To address the above outstanding issues, the Macedonian
authorities continued work on a new legislative framework that would replace
the main laws on civil and public servants and enshrine the fundamental
principles of transparency, merit and equitable representation.

Work also continued on a new framework for general
administrative procedures, with a policy paper in January 2013 setting out the
main objectives of the new law. Under the current legal framework, the
principle of tacit administrative approval was applied inconsistently, causing
uncertainty and delays for citizens. The state commission for administrative
appeals became operational, but remains insufficiently equipped and staffed.
E-government remains a useful tool in providing services to citizens.

Public awareness of the
right to free access to public information remains low. The number of
complaints received by the National Commission for Protecting Access to
Information (NCPAI) tripled and more than half of the complaints were
successful. Three quarters of the complaints were about public information
holders failing to respond to requests for information in a timely manner.
Enforcement of the Law on Free Access to Public Information is inefficient,
with one third of information holders failing to submit their annual reports to
the NCPAI, penalties not imposed in practice, and political parties excluded
from the obligation to provide information to the public. The administrative
capacity of the NCPAI to execute basic functions needs to be improved.

The State Audit Office
has been increasingly contributing to public administration reform, building a
track record in the area of auditing, including performance auditing. The
quality of the Office’s reports and recommendations has contributed to
identifying reform challenges. While its aggregate annual reports are reviewed
by parliament, there is still limited follow-up of the reports’ findings.

Overall, work has continued on a new legislative
framework for public employment to unify the rules and enshrine fundamental
principles of transparency and merit. Additional efforts are needed to
guarantee the professionalism and independence of the public administration,
and equitable representation. Official figures on the total number of public
and civil employees and temporary positions are still not available.
Transparency and access to public information remains low.

Ombudsman

The Office of the Ombudsman continued its work as an
independent organ for the protection of citizen’s rights, and is now in its
seventeenth year of operation. The Office received 5 220 complaints in
2012 (a 3% increase from the previous year). About a quarter of the cases
handled were confirmed to be violations, most of which related to consumer
rights, pensions and disability insurance, property rights and social rights.
Although the majority of the Ombudsman’s recommendations are respected by the
state bodies to which they are addressed, greater efforts are needed from the
Ministry of Interior, the Ministry of Finance, local self-government units and
second-instance government commissions, which continue to be the least
responsive. In 2013, seven deputy
Ombudspersons were appointed by the parliament for an eight-year term, six of
whom head the respective regional offices of the Ombudsman outside Skopje.
Among them, a Roma deputy Ombudsperson was appointed for the first time. The Office’s role as National Preventive
Mechanism under the Optional Protocol to the Convention against Torture
continued to be pursued actively. The Office is accredited as partly compliant
with the Paris Principles relating to national human rights institutions, but
further improvements are needed as regards its funding and extending its
mandate to human rights promotion as well as protection.

Civil society

An empowered civil society is a crucial component of any
democratic system and is an asset in itself, contributing to building more
accountable and legitimate states, enhanced social cohesion and more open and
deeper democracies.[4]

In that respect, dialogue and cooperation between
government and civil society needs to improve in practice, notably with those
organisations dealing with social reform, gender equality, Roma, and lesbian,
gay, bisexual, transgender and intersex (LGBTI) rights. The government needs to
show greater openness to involving civil society.

Civil society has launched several initiatives for civil
participation. Strengthened civil society coordination and networking for
participation in the work of the National Council for European Integration is a
positive development. Civil society remains underdeveloped in rural areas.

The government has made modest progress in implementing the second
strategy (2012-2017) and action plan for cooperation with civil society
organisations. Administrative capacity is weak. Training on consulting civil
society has been provided, albeit often using donor support or civil society
organisations. Implementation of the code of good practice for participation of
civil society organisations in policy-making processes continues, unevenly,
across institutions. The single Electronic Register of Legislation is being
used more consistently for online stakeholder consultations on draft
legislation but a consistent approach to public participation in
decision-making, including appropriate institutional mechanisms, is needed.

At national level,
implementation of the code of good practice for financial support to
associations and foundations continues, but the system for allocating state
funds to civil society has still not been standardised so the sector remains
heavily dependent on donor funding. Local government lacks sufficient capacity
to ensure standardised cooperation and financing of local civil society
organisations. Lack of progress in harmonising tax legislation (limiting access
to tax benefits and to certain types of economic activities) hampers the
development of an enabling environment for civil society as intended by the Law
on Association and Foundations. For the same reason, the government commission
for public benefit status (established in 2011) is not fully operational. The
Ministry of Justice has not made progress on the amendments to the Law on
Donations and Sponsorships in Public Activities that were expected to have been
adopted.

The Law on the
Prevention of Money Laundering and Terrorism Financing is not in line with the
relevant UN guidelines, e.g. as regards the disproportionate fines relating to
the obligation on civil society organisations to draft annual programmes.

Judicial system

The country’s judicial
reform was carried out from 2004 to 2010 and included significant changes to
the Constitution, the Law on Courts and the Judicial Council, the establishment
of the Academy for Judges and Prosecutors, the introduction of stricter professional
requirements, the establishment of an Administrative Court and High
Administrative Court, the shift towards enforcement of court judgments by
professional bailiffs, the elimination of court backlogs, the introduction of
legal aid and mediation, the establishment of an automated case management
system and e-justice, as well as the complete overhaul of the criminal
procedure legislation and reform of the police. The key long-term reforms in
this area have therefore already been completed over the course of the last
decade, in line with European standards. Nevertheless, there are concerns about
how the courts currently operate in practice, which need to be addressed. These
relate to the independence of the courts (and law enforcement in general) as well
as the general quality of justice overall.

As regards
independence, there are claims of selective justice, indirect political
pressure, judgments which are unusually expedited in terms of outcome or speed,
as well as the content of judgments sometimes having direct consequences for
the career of the judge concerned, particularly in high-profile or politically
sensitive cases. Given that justice must not only be done, but it must also be
seen to be done, the fact that such doubts persist in itself constitutes a
problem for the independence of the judiciary and for public confidence in it.

As regards quality of
justice, improvements are needed to ensure that the way in which the court
system and the career structure of judges are organised does not drive them
towards formalistic decision-making in order to reach short-term productivity
targets, rather than actually solving disputes, building a stable
jurisprudence, issuing clear, well-reasoned judgments and providing long-term
legal certainty in the interest of the citizen. The quality of justice also
depends on the competence and training of judges, and the principle of
merit-based recruitment to the judiciary therefore needs to be implemented in
full. There is still a problem of excessively long court proceedings, including
repeatedly quashed judgments and remittals for re-trial or re-hearing by higher
courts to lower courts. The number of complaints by citizens to national and
international bodies remains high. Tackling this requires training and
attitudinal change at the level of individual judges but also at the level of
the bodies shaping the development of the judiciary, in particular the Judicial
Council and the Supreme Court.

For a detailed analysis of the developments in the judicial
system, see Chapter 23 — Judiciary and fundamental rights.

Fight against corruption

In the area of anti-corruption policy, the legislative
framework is largely in place and has undergone repeated rounds of GRECO
evaluation between 2002 and 2012. Numerous national bodies and agencies are
involved in combating corruption and administrative capacity is being
strengthened. A track-record of criminal investigations, prosecutions and
convictions by law enforcement and courts is being developed, as are the
corruption-prevention activities of the State Commission for the Prevention of
Corruption. However, corruption remains prevalent in many areas and continues
to be a serious problem, indicating that the implementation of existing
legislation has yet to make a concrete impact and the effectiveness of existing
measures has to be improved. At present, too many prosecutions fail to reach
the judgment and sentencing stage, or take too long to do so due to repeated
re-trials. Penalties intended to prevent corruption are not used to their full,
deterrent effect. The general capacity of courts and law enforcement to deal
with corruption cases, in particular high-level cases, must be improved and
concerns about selective justice must be dealt with. Enforcement agencies and
supervisory bodies need to become more visible and proactive, and to improve
cooperation with each other. Problem areas such as corruption in public
procurement and transparency of political party funding need to be given
special attention. The country needs to demonstrate tangible results in the
reduction and deterrence of corruption in practice.

For a detailed analysis
of the developments in the area of anti-corruption policy, see Chapter 23 —
Judiciary and fundamental rights.

Fight against organised crime

The necessary legal framework is in place, including a new
Law on Criminal Procedure, which enters into force at the end of 2013 and aims
to improve the capacity to tackle complex organised crime and corruption cases
by strengthening the role of the public prosecutor, establishing a judicial
police, streamlining the investigation phase and introducing new investigative
techniques. The competence and professionalism of the relevant institutions, in
particular the Centre for Suppression of Organised and Serious Crime and the specialised
Public Prosecution Office for Organised Crime and Corruption, is relatively
high. Regional and international cooperation is good. Capacity to implement
legislation, however, needs to be further strengthened, notably as regards
inter-disciplinary training, the use of special investigative techniques and
investigation of complex financial crimes.

For a detailed analysis of the developments in the fight
against organised crime, see Chapter 24 — Justice, freedom and security.

2.2. 
Human rights and the protection
of minorities

Despite legislative
progress in the area of freedom of expression, the country’s reputation in
relation to media freedom has continued to deteriorate, both domestically and
internationally. Trust between the
government and media representatives was seriously damaged by the events of 24
December 2012. The Media Dialogue, which had served as a positive example for
the region since its launch in 2011, was interrupted. The media environment
remains highly polarised. During local elections in March, both the
Broadcasting Council and the OSCE/ODIHR reported a lack of balanced coverage by
several broadcasters, including the public service broadcaster. Extensive
consultations were held with both international experts and stakeholders on the
preparation of two new draft media laws, however key differences remained
unresolved. There are continued
concerns about government advertising spending, which is claimed by many to be
directed only towards pro-government media, giving them a significant financial
advantage. High-quality investigative journalism and the public’s access to
balanced reporting and a wide variety of views need to be strengthened. A system of self-regulation for the media and a
coherent, profession-driven strategy for raising journalistic standards, have
yet to be developed. Further efforts are needed in all of these areas in order
to improve the media environment.

There have been signs of increased intolerance towards
LGBTI people, such as repeated physical attacks on the LGBT Support Centre in
Skopje and homophobic media content. While the police have reacted
appropriately to violent incidents, full investigations need to be carried out
and far more needs to be done by public officials and by media professionals,
owners and organisations to publicly denounce intolerance and ignorance.

Progress on respect for and protection of minorities
remains hampered by limited financial resources, inadequate cooperation between
authorities concerned and a significant need for more proactive implementation
of the relevant policies, notably the Roma strategy.

With regard to inter-community relations, the Ohrid
Framework Agreement (OFA) has been in force in 2001, but progress is still
needed on systemic issues relating to decentralisation, non-discrimination,
equitable representation, use of languages and education. Monitoring of issues
such as the use of languages and the implementation of the Law on Use of Flags
of the Communities is lacking, and the local committees for relations between
the communities continue to be under-resourced, with ill-defined roles and
competencies in relation to the municipal councils, leading to their
under-utilisation. State funding has yet to be allocated for the implementation
of the Strategy on Integrated Education. The trend of separation along ethnic
lines in schools and incidents of inter-ethnic violence continues.

The first phase of the
review of the implementation of the OFA was published on 11 April. Workshops,
open to the public, involving experts, academia and civil society
organisations, were organised. The conference to present the final outcome of
the review, and its recommendations has not yet taken place and these should,
when presented, be implemented. Coordination between the Secretariat for the Implementation
of the Ohrid Framework Agreement (SIOFA) and other relevant institutions,
including the Agency for the Protection of Minorities Representing less than
20% of the Population and the Minister without Portfolio in charge of
implementing the Roma Strategy, needs to be improved. Although SIOFA’s budget
increased in 2013, this was not matched by efforts to strengthen its capacity
and internal functioning. In 2012, the overall representation of civil servants
from non-majority communities increased slightly to one third of the total, but
a large number (some 1 500) have not yet been assigned to any state
administrative body. Roma, Turks and other smaller communities continue to be
underrepresented in the public administration, notably at senior level. At the
same time, the merit principle needs to be strengthened in the recruitment of
non-majority members in state institutions.

The issue of social benefits for some of the participants
in the 2001 conflict (the security forces, known as ‘defenders’) remains a
serious point of contention between the members of the governing coalition and
between communities.

There were some inter-ethnic incidents during the reporting
period. Incidents between young people continued to strain inter-community
dialogue and trust. Hate speech during sports events, violence in public spaces
and demonstrations increased tensions, exacerbated by often biased reporting by
the media. Initiatives to promote inter-community harmony are scarce. The
OSCE/ODIHR found that ethnically divisive rhetoric heightened tensions in some
municipalities during the local elections in March.

The coalition partners
made joint efforts to alleviate inter-ethnic tensions. The authorities and
community leaders took rapid and effective action to prevent escalation of a
number of protests at the appointment, in a government reshuffle, of a former
member of the National Liberation Army as Defence Minister. The political
leaders should continue to deal with inter-ethnic challenges in a spirit of
mutual respect and tolerance.

For a detailed analysis of developments in the area of
human rights and the protection of minorities, see Chapter 23 — Judiciary
and fundamental rights. For developments in the areas of trade union
rights, anti-discrimination and equal opportunities, see also Chapter 19 —
Social policy and employment.

2.3. 
Regional issues and
international obligations

The former Yugoslav Republic of Macedonia continued to
cooperate fully with the International Criminal Tribunal for the former
Yugoslavia (ICTY). There are no remaining cases or appeals pending in The
Hague.

The former Yugoslav Republic of Macedonia still maintains a
2003 bilateral immunity agreement with the United States, granting exemptions
for US citizens from the jurisdiction of the International Criminal Court.
This does not comply with the EU Common Positions on the integrity of the Rome
Statute or with the related EU guiding principles on bilateral immunity
agreements. The country needs to align with the EU position.

In March 2013, there
were 2 240 refugees and internally displaced persons (IDPs) in the
former Yugoslav Republic of Macedonia, of whom 1 043 were Roma from Kosovo*. 59 persons were voluntarily repatriated to
Kosovo and Serbia in 2012 and 2013. The unresolved legal status of the majority
of the refugees limits their access to basic services and full local
integration. Court procedures concerning IDPs relating to damages claims from
the 2001 conflict are still ongoing and the majority are still housed in
collective centres.

Regional cooperation and good neighbourly relations form an
essential part of the country’s progress towards the European Union. The
country has continued to actively participate in regional initiatives,
including chairing the South East European Cooperation Process (SEECP) from
June 2012 to 2013 and hosting the Fifth Annual Meeting of the Regional
Cooperation Council (RCC), the Central European Free Trade Agreement (CEFTA),
the Energy Community Treaty and the European Common Aviation Area Agreement.
The country continued to contribute to the EUFOR Althea mission in Bosnia
and Herzegovina.A regional conference ‘Sustainable reforms – towards EU 2020
objectives‘ was held in Skopje in November 2012.

The former Yugoslav Republic of Macedonia continues to play
a generally constructive role as regards bilateral relations with other
enlargement countries and neighbouring EU Member States, with no
outstanding border demarcation issues. A bilateral convention, under Article 12
of the SAA, should be concluded with Serbia following the recent entry into
force of its SAA.

Relations with Albania continued to develop. A
celebration of the 100th anniversary of Albania’s independence, hosted in
Skopje, was attended by both the Albanian and Kosovan Prime Ministers. A
bilateral agreement on mutual recognition of driving licences was signed
and a new joint border crossing point was
opened.

Relations with Bosnia and Herzegovina continued to
be good. Agreements on cooperation in the field of health and medical sciences
entered into force.

Cooperation with Montenegro was further strengthened.
Agreement on police cooperation entered into force, while the agreements on the
conditions for travel by nationals of the two countries and on readmission of
persons residing without authorisation were ratified. An agreement on
cooperation and mutual assistance on customs issues entered into force.

Relations with Serbia
were further upgraded. A first joint government session was held in
Belgrade in June, at which agreements were signed on health and interior issues
and mixed committees on minorities and economic cooperation were set up. An
agreement on legal assistance in civil and criminal matters entered into force.
An agreement on mutual enforcement of court decisions in criminal cases was
ratified, and an agreement on cooperation on EU integration entered into force.
There were no developments regarding the dispute between the Orthodox churches
in the two countries, which both Prime Ministers signalled in January should
not be an obstacle to deeper cooperation.

The wide-ranging contractual framework for cooperation with
Kosovo has continued to develop with the ratification of agreements on
mutual recognition of pensions, and on advancement and intensification of
cultural cooperation. Joint monitoring patrols along the border need to tackle
illegal trafficking of goods and illegal migration. A trade dispute took place
with Kosovo in September 2013. The manner in which the situation at the border
escalated over a number of days before being resolved bilaterally, outside of
CEFTA procedures, is a matter of concern.

Close relations with Turkey continued. An agreement
on setting up cultural information centres in the two countries was signed in
December 2012.

Relations with Bulgaria have been affected by differences
primarily concerning interpretations of history. High-profile contacts
intensified during the reporting period. Negotiations took place on a bilateral
agreement on good neighbourly relations, although open issues remain. As
detailed in the April 2013 Report, consultations take place at official and
expert level on EU-related issues. Cross-border, sectoral and trade relations
and defence cooperation continued. People-to-people contacts continue normally.

Relations with Croatia continued to be good, including
sharing of experience. A Euro-Atlantic partnership was signed on 31 May.

Relations with Greece continued to be affected by
the name issue. Formal talks on the name issue, under the auspices of the UN,
led by the United Nations Secretary General’s Personal Envoy Matthew Nimetz,
included visits to both Athens and Skopje and talks in New York on the proposal
presented to the parties in April 2013. Mr Nimetz reported, following a visit
to both Athens and Skopje in early September, that gaps remained between the
parties’ positions. He has invited the representatives of the parties to New
York in late October with a view to narrowing differences and to seek further
convergences. As detailed in the April 2013 Report, official and expert-level
contacts continued on the economy, trade, police, customs and military
cooperation, as well as cooperation on EU issues between the two foreign
ministries and people-to-people contacts continue normally. High-level visits
also took place during the reporting period.

Overall, the
former Yugoslav Republic of Macedonia is participating actively in regional
cooperation and further developing bilateral relations with its neighbours.
Although steps have been taken in relation to the name issue, it remains
unresolved. Maintaining good neighbourly relations, including a negotiated and
mutually acceptable solution to the name issue, under the auspices of the UN,
remains essential. Open issues remain in the negotiation of a bilateral
agreement with Bulgaria. A constructive approach to relations with neighbours
remains important and actions and statements which could negatively impact good
neighbourly relations should be avoided.

3. 
Economic criteria

In examining economic developments in the former
Yugoslav Republic of Macedonia, the Commission’s approach was guided by the
conclusions of the European Council in Copenhagen in June 1993, which stated
that membership of the Union requires the existence of a functioning market
economy and the capacity to cope with competitive pressure and market forces
within the Union.

3.1. 
The existence of a
functioning market economy

Economic policy essentials

Domestic consensus on
the fundamentals of economic policies was broadly maintained, even though the
parliament adopted the 2013 central government budget under controversial
circumstances. Macroeconomic stability was preserved against the background of
a continuously challenging external environment and high unemployment.

The 2013 Pre-accession Economic Programme (PEP) for the
period 2013-2015 was submitted in January 2013 and outlines key economic,
fiscal and structural policies and planned reform measures. The key objectives
remain promotion of growth and employment. The World Bank accorded €155 million
under the Public Expenditure Policy based guarantee programme in January 2013,
to help the country secure a foreign commercial loan for the financing of the
2013 central government budget deficit. Cooperation with the international
financial institutions continued as planned. The country’s two-year arrangement
under the IMF’s Precautionary and Liquidity Line ended on 18 January 2013. Overall,
a broad consensus on the fundamentals of economic policies was maintained.

Macroeconomic
stability

The economy has
gradually returned to growth, after the economic situation had deteriorated
somewhat during 2012. The output declined by 0.2% in 2012, mainly due to lower
private consumption and a worsening merchandise trade balance, while investment
growth continued to be strong. The economy has recovered gradually since the
third quarter 2012, and in the second quarter 2013 GDP growth reached 3.9%
compared to a year earlier. This was carried by strong increases in investment,
even though its growth slowed down, from an average 16% in 2012, to an average
8.2% in the first half of 2013. Private consumption contributed to growth in
the second quarter, for the first time since the beginning of 2012, as did the
trade balance, through strong exports of goods of newly established foreign
investors. Encouraging signals emerged from industrial production, which
increased by 2.2% in the first seven months of the year, compared to the same
period a year earlier, after a 2.8% drop in 2012. Average per capita income in
purchasing power standards stayed at 35% of the EU-27 level. Overall,
the renewed growth of the economy remains narrowly based on investment, with
only gradual strengthening of the external sector and also marginal support
from private consumption.

External imbalances
increased in 2012, with the difficult global environment leaving its mark on
the current account deficit, which increased to 3.9% in 2012, up from 3% in
2011. This was mainly due to a widening merchandise trade deficit, which
reached 24% of GDP. Its financing relied increasingly on foreign credit, as net
foreign direct investment (FDI) inflows declined by about two thirds in 2012 to
1.4% of GDP, on account of large outflows of intercompany loans. Private
transfers remained strong at some 21% of GDP, with the share of workers’
remittances resilient. In the first half of 2013, FDI inflows picked up again,
reaching 2.7% of GDP, 21% higher than in the same period a year earlier (how
much). However, private transfers declined by 11% to about 18% of GDP.

Gross external debt
rose to 65% of GDP at the end of the first quarter 2013, from 62% a year
earlier. The increase was driven mainly by government external financing, which
raised public external debt to 27.3% of GDP, compared to 24.4% a year earlier.
Private external debt, including intercompany lending, increased by 0.9
percentage points to 38.4%. The international reserve position weakened
slightly. At the end of August, foreign reserves amounted to €2.1 billion or
about 26% of GDP, compared to 30% of GDP a year earlier. The reserves covered
about 4 months of prospective imports of goods and services, which is slightly
less than a year earlier. Overall, there is at present limited risk to
macroeconomic stability from the external side. The current account balance has
been gradually improving with a pick-up in export activity, yet it is
increasingly relying on foreign credit financing, with uncertain prospects for
the development of private transfers.

Unemployment remained
persistently high, in particular youth and long-term unemployment, pointing to
deep-rooted structural impediments in the labour market. There was some gradual
improvement in the official employment and unemployment rates. In June 2013,
total unemployment stood at 28.8% of the labour force, having declined by 2.4
percentage points compared to a year earlier. For workers aged 15 to 24 years,
the unemployment rate reached 51.7%, down from 54.9% a year earlier. The
employment rate increased to 40.7%, compared to 38.8% a year earlier. The
recorded employment creation derives to a large part from an increase in
part-time and self-employed occupations, and from a rise in public sector
employment. Overall, in spite of some incremental improvement in the
official labour market figures, labour market policy had limited success in
addressing the persistently high unemployment. Structural challenges in the
labour market remain to be tackled.

Monetary policy
remained consistent and adequate given the economic environment and the
situation of the domestic banking sector. The exchange rate policy and the de
facto peg to the Euro continued to be an integral part of the central bank’s
strategy targeting price stability. In order to support the economic recovery
and combat sluggish credit growth, the central bank relaxed monetary conditions
at several occasions since the beginning of 2013. It lowered two key policy
rates: the maximum rate on central bank bill auctions, from 3.75% to 3.25%; and
the 7-day deposit rate, from 2% to 1.50%%. The interest rate on overnight
deposits was reduced from 1% to 0.75%. It also eased reserve requirements for
loans to net exporters and to energy producers. Consumer price inflation was
markedly higher than a year before, with an average inflation in the first
eight months of 2013 of 3.5%, compared to 2.5% in the same period a year
earlier. Higher prices for electricity and food, but also higher administrative
prices were the main drivers bringing year-on-year inflation to above 4% in the
last months of 2012. As of July, regulated electricity prices for households
were lowered. With energy costs abating, more recent inflationary pressures
derived mainly from domestic factors, in particular adverse climate conditions
impacting on food prices. Overall, monetary policy remained
stability-oriented. Energy costs and food prices were the main drivers of
rising inflation.

Fiscal discipline was
relaxed in 2012, and the quality of public spending deteriorated further. The
general government budget deficit reached 3.8%, thus overshooting even the
revised deficit target, which the authorities had raised by 1 percentage point
to 3.5% in autumn. Another budget rebalancing reduced mainly investment
spending, due to severe revenue shortfalls. Total expenditure as share of GDP
rose from 31% in 2011 to 34% in 2012, and is estimated to reach 35% in 2013.
The primary government budget deficit rose to 3.1% of GDP in 2012, compared to
1.7% in 2011. Capital spending was almost unchanged in 2012 compared to 2011,
at 12% of total expenditure, or just over 4% of GDP, projected to decline to
11.3% of total expenditure in 2013, or 3.9% of GDP. The share of social
transfers in total expenditure declined slightly in 2012, to 44.7% from 45.2% a
year earlier, and is projected to stay largely unchanged in 2013. As a share of
GDP, social transfers increased somewhat, to 15% of GDP, up by 0.4 percentage
points.

The 2013 budget
foresees a slight reduction in the deficit, to 3.5%, based on rather optimistic
expectations of strong growth of revenues, which are projected to be 7.2%
higher than in 2012. Yet, after the first seven months of 2013, the central
government budget deficit amounted to over 80% of the targeted full-year
deficit. This was mainly on account of repayment of arrears in VAT returns,
contracted works, and social benefits, which led to an increase in expenditures
in the first seven months of about 6% compared to the same period 2012. The
government started settling the outstanding amounts as of September 2012.

Even though government
debt is still at a moderate level, the increases over the last years give rise
to concern. Central government debt stood at 33.6% of GDP by the end of July
2013, compared to 27.8% at end-2011. Moreover, as the budget of the newly
created public enterprise for state roads was excluded from the central budget
as of 2013, its debt is no longer included in central government debt. Overall,
fiscal governance and fiscal discipline deteriorated and would benefit from the
implementation of a medium-term strategy.

The policy mix slightly
deteriorated. While monetary policy provided key support for macroeconomic
stability, fiscal discipline weakened and the debt ratio further increased.
Public finance could make a bigger contribution to stability, for example by
better aligning spending priorities with structural challenges, and by focusing
on growth-enhancing capital expenditure. Furthermore, the fast rise in mainly
foreign financed debt increases the country’s vulnerability.

Interplay of market forces

The role of the public
sector in the economy remained largely unchanged. In terms of value added, the
private sector accounted for about 85%, as in 2012. The asset value of fully or
partly state-controlled enterprises increased to 15.7% of GDP in mid-2013,
compared to 12.7% a year earlier, due to capital increases in public companies.
The number of fully-owned state companies increased from 12 to 15, due to
restructuring in the public sector. The majority of state capital is
concentrated in five companies, which are mainly public utilities. The share of
public sector employment in total employment remained stable at about 25%.
Administered and regulated prices continued to account for some 13% of the
Consumer Price Index (CPI) basket. In general, regulated prices, which account
for about 12% of the CPI basket, usually cover costs, while administered
prices, such as for water supply and waste disposal, usually do not fully cover
costs. Overall, the economy is mainly driven by the private sector, with
the role of the state remaining limited, even though share of the public
ownership increased slightly.

Market entry and exit

The business
environment was further improved through the simplification of business
registration and operation, for example by the establishment of a one-stop shop
system for domestic and foreign investors. While companies enjoy a low level of
taxation, corporate liquidity suffered in 2012 from the accumulation of
government arrears for VAT refunds and contracted works. Implementation of the
third (reduction of administrative burdens) and fourth phase (SME measures) of
the ‘regulatory guillotine’ project continued, and procedures for obtaining
construction licenses were simplified.

There has been more
limited progress on reforming market exit procedures. The deletion from the
central registry of companies that were not operational for a long time has
started. However, improving exit options through facilitated bankruptcy
procedures proves more challenging. In May 2013, an amendment to the Law on
Bankruptcy was adopted, which foresees an acceleration of proceedings. Yet, the
number of bankruptcy procedures between October 2012 and July 2013 was lower by
29% compared to a year earlier. The average duration of voluntary company liquidation
diminished only slightly. Overall, while business registration and
operation was further facilitated, weaknesses in bankruptcy and liquidation
procedures continue to pose a significant impediment to investment and access
to finance.

Legal system

The legal system was
further strengthened in some parts, notably the clearance rates of courts at
all levels improved and there are no significant backlogs remaining. However,
the overall duration of court proceedings remains a concern.
The registration of real estate property is finalised and the land register
covers 100% of the country’s territory. The authorities implemented a number of
reforms to reduce the work load of courts, in particular through the transfer
of enforcement cases to private bailiffs. While the legal and financial independence of some
regulatory and supervisory bodies has been further strengthened in formal
terms, the impact on the business environment has remained limited.
Institutional and administrative capacities, such as insufficiently skilled
human resources and insufficient physical resources continue to hamper the
proper functioning of some of these agencies like the State Appeals Commission
for Public Procurement and the State Audit Office. Overall, the legal
system for a functioning market economy is largely in place, yet weaknesses
related to lengthy procedures, contract enforcement and corruption remain.

Financial sector development

The economic weight of
the banking sector remained stable, with total assets of commercial banks
amounting to about 87% of GDP. The sector remains highly concentrated, with two
thirds of total assets owned by the three largest banks, the biggest bank alone
accounting for about a quarter of total assets.

Liquidity and solvency
of the banking sector proved resilient to the subdued global economic and
market environment. The average ratio of liquid to total assets improved
throughout 2012, and stood at 29.6% at the end of the first quarter 2013,
compared to 26.5% a year earlier. Liquid assets cover just over half of
household deposits, slightly less than a year earlier. Regulatory capital in
relation to risk-weighted assets stood at a comfortable 17.3% at the end of the
second quarter.

The credit growth
continued to decelerate. Annual growth of credit to the private sector has been
declining since May 2012 reaching 3.5% at end-July 2013. Growth was driven
almost entirely by loans to households, which increased by 7.8%. Credit growth
to corporates declined to 0.5%, against the backdrop of a further deteriorating
quality of corporate loan portfolios. The share of non-performing loans
(households and corporates) in total loans stood at 12.3% at the end of June
2013, compared to 10% a year earlier, with the largest share accounted for by
corporate loans. Given the easing of monetary policy earlier this year, it
appears that impediments to faster credit growth lie outside the transmission
mechanism of monetary policy, and are possibly rooted in a combination of
strong adverse risk perceptions of lenders, and a lack of quality investment
projects on the demand side. In spite of the deteriorating portfolio quality,
banks managed to avoid significant losses in profitability. Performance was
somewhat weaker in the second quarter 2013 than a year earlier, as manifested
by the decline in the return on assets (0.2%, compared with 0.4% a year
earlier) and in the return on equity (1.8% compared with 3.2%). Lending in
foreign currency decreased somewhat, but still accounts for close to 40% of
total loans outstanding, which poses a potential stability risk given the de
facto currency peg.

The relevance of
non-banking financial intermediaries is generally low, at just over 10% of
total sector assets, or 8% of GDP. Pension funds hold just over 4% of total
assets and experienced strong asset growth in the reporting period. Assets in
the mandatory fully funded pension insurance grew by 30% between February 2012
and February 2013, and those of the voluntary fully funded pension insurance by
about 66%. The insurance sector continued to account for less than 4% of total
assets. 4 new insurance brokers and 3 new agencies entered the market in 2012.
While gross written premiums increased by over 3%, their share in GDP was
almost unchanged, at over 1.4%, compared to 2011. The insurance sector remained
well capitalised, solvent, and even improved its technical provision coverage
from 96% in 2011 to 103%.

Overall,
the financial sector remained well capitalised and liquid. However, credit
growth was sluggish and non-performing loans increasingly pose a challenge.

3.2. 
The capacity to cope with
competitive pressure and market forces within the Union

Existence of a functioning market economy

While persistently high
unemployment points to serious difficulties to the functioning of the labour market,
overall macroeconomic stability has been maintained. The quality of public
finance planning and management has deteriorated further, with productive
investment remaining below needs. Market entry procedures have improved, while
the reform of market exit procedures still needs to gain pace. Enforcement of
contracts remains difficult, which impacts negatively on the business
environment.

Human and physical capital endowment

Further steps were
taken towards improving the infrastructure and the quality of education at all
levels, such as the recruitment of about 250 additional teachers for primary
and secondary schools for the academic year 2012/13; investment in the
education infrastructure; and a reinforced focus of secondary school curricula
on entrepreneurial skills. Yet, the general qualification of the workforce
remains low, and matching the skills of graduates with the needs of potential
employers remains a major challenge. A strategy for vocational training reform
was adopted, and practical experience during education was made mandatory.
There was little progress in implementing the adopted reforms.

The country’s capital
stock remains low and relatively outdated given the underinvestment of the
past. Gross fixed capital formation was strong in the last quarter of 2012, at
36% of GDP, partly due to a boost in public capital spending, but fell to 26%
of GDP in the first half of 2013. Public investment stayed at over 5% of GDP in
2012. It was concentrated on transport and utilities infrastructures, with some
investment also in the physical infrastructure of education. Its impact on
growth and employment is, however, difficult to assess due to lack of recent
disaggregated data and implementation details. Spending is not sufficiently
focused on building a knowledge-based society, but is used for less productive
purposes, such as the decoration of the capital. Weak implementation capacity
continues to impede the authorities’ efforts to add to, and to modernise the
public capital stock. Foreign direct investment, which in the past was more
evenly distributed among manufacturing and services sectors, shifted towards
more traditional manufacturing sectors recently. The stock of foreign
investment amounted to just below 50% of GDP in mid-2013, down from 53% a year
earlier. Overall, there was some gradual progress in addressing reform needs in
the education system. The capital stock remains modest and public spending was
not sufficiently focussed on growth-enhancing activities.

Sector and enterprise structure

In 2012, the economic
activity shifted slightly from the industrial sectors to services activities.
The share of the mining, manufacturing and utilities sectors in total value
added declined from 21.3% in 2011 to just under 20% in 2012, while the share of
financial and community, social and personal services rose from 18.9% to 19.6%.
The enterprise structure remained largely unchanged in 2012. The share of SMEs
(national definition) in total private sector employment increased slightly
compared to 2011. Access to finance was eased somewhat by the use of the credit
line from the European Investment Bank. However, SME development continues to
be impeded by poor access to financing. Competition in the network industries
remains constrained by the small number of incumbent suppliers. In spite of
some improvements in employment registration, the informal sector remains
sizeable and poses a challenge for policymakers, as it reduces the tax base and
the efficiency of economic policies. Overall, the enterprise structure
remained largely unchanged, with further SME development hampered mainly by
difficult access to finance. There has been limited progress in tackling the
large informal sector.

Some further progress
towards diversification into manufacturing activities with higher value added
is evidenced by the export structure, partly reflecting the new operations of a
few foreign investors. The share of machinery and transport equipment in total
exports amounted to 9.9% in 2012, an increase by 2 percentage points compared to
2011. Still, clothing, chemicals, and manufactured iron and steel products
account for almost half of exports. Overall, in 2012, 70% of total exports were
accounted for by 15 products. Overall, some gradual, further
diversification of economic production is visible in terms of value added and
exports.

State influence on competitiveness

Government’s influence
on the economy’s competitiveness remains limited and is mainly exerted through
direct subsidies to and tax exemptions for companies, including in particular
foreign investors, and through active labour market programmes. Official data
points to a decline in state aid in 2012 to about 0.1% of GDP, from about 0.4%
in 2011. Reporting on state aid and comparability with EU standards remain
limited. The legal framework for state aid was strengthened by the adoption of
regulations on regional aid, horizontal aid and Services of General Economic
Interest. Yet, their impact remains limited given the low reporting awareness
in state aid providers. Overall, while state aid laws have been
strengthened, there is a lack of transparency about implementation details and
amounts due to shortcomings in reporting.

Economic integration and convergence with the EU

The country’s total trade in goods and services remained largely
unchanged in 2012, at about 128% of GDP. Trade integration with the EU
progressed further: over 73% of total exports were destined to the EU in the
first half of 2013, compared to 65% a year earlier. FDI from the EU accounts
for close to 80% of total FDI stock, with the Netherlands, Austria, Slovenia
and Greece as the biggest foreign investors, providing over half of the total
foreign investment stock. Labour productivity declined by 1% in 2012.
Price competitiveness also remained broadly unchanged: the real effective
exchange rate, adjusted by the consumer price index, appreciated slightly, on
average, by about 0.2 percentage points. Wage developments were not conducive
to a pick up in private consumption: in the first quarter 2013, real net wages
dropped by an average 2.3% on the year. Overall, trade integration with
the EU is quite advanced. The export structure continues to improve, even
though traditional manufacturing products still dominate. International price
competitiveness remained largely unchanged.

4. 
Ability to take on the obligations of
membership

This
section examines the former Yugoslav Republic of Macedonia’s ability to take on
the obligations of membership — that is, the acquis as expressed in the
Treaties, the secondary legislation and the policies of the Union. It also
analyses the former Yugoslav Republic of Macedonia’s administrative capacity to
implement the acquis. The analysis is structured in accordance with the
list of 33 acquis chapters. In each sector, the Commission’s assessment
covers progress achieved during the reporting period and summarises the country’s
overall level of preparations.

4.1. 
Chapter 1: Free movement of
goods

In the area of general principles, reforms to align
the law with Articles 34 to 36 of the Treaty on the Functioning of the European
Union continue. By September 2013, 30 out of 42 identified legal acts had been
amended.

As concerns horizontal
measures, in the field of standardisation a total of 22 552
European standards and standardisation documents had been adopted as national
standards by September 2013 compared to 16 500 a year earlier. The
Institute of Standardisation (ISRM) adopted 18 317 EU standards, i.e. more
than 98% of CEN/CENELEC standards, as national standards and issued two
national standards. The European Committee for Standardisation and the European
Committee for Electrotechnical Standardisation were regularly notified about
nationally adopted standards. The Assembly of the ISRM had 114 members,
compared to 97 a year earlier, and 26 technical committees.

In the area of the new legislative framework for conformity
assessment ten authorised conformity assessment bodies operate in the
regulated area. The Ministry of Economy issued a new list of standards through
the application of which the product is considered to be safe to be placed in
the market.

In the area of accreditation, the Institute of
Accreditation accredited a total of 113 conformity assessment bodies and had
withdrawn 11 accreditations by September 2013. The Institute signed an
agreement in October 2012 for mutual recognition of accreditations in the area
of testing and calibration with the International Organisation for
Accreditation of Laboratories. The institute still needs to establish capacity
in new fields. A new accreditation scheme for medical laboratories following
ISO 15189:2010 was developed.

A national strategy and an action plan for the development
of the Bureau of Metrology 2013-2015 were adopted. The bureau introduced fully automated electronic processing of
documents on the verification of measuring instruments and vehicles. The number
of calibration and verification certificates issued by the bureau continues to
increase and its laboratory for electric measurements served as a pilot
laboratory in the inter-regional comparison exercise.

Concerning market surveillance, in 2012 the State
Market Inspectorate conducted 338 inspections following the Law on Product
Safety and 98 inspections following the Law on Construction Products, an
increase of 15% on 2011. Subsequently, the Inspectorate initiated 16
administrative procedures and 1 misdemeanour procedure. A national programme
for coordination and execution of measures for market supervision for 2013-2014
was adopted.

In the area of ‘Old Approach’ product legislation, a
rulebook on methods for quantitative analysis of two-component fibre and a
rulebook on approval of biocides, aligning national legislation with the
corresponding acquis, were adopted. Local stakeholders received training
on liabilities deriving from the new Law on Chemicals and the EU Chemicals
Regulation. Preparations in the area of ‘old approach’ product legislation are
advanced.

In the area of ‘New and Global Approach’ product
legislation, four local bodies were designated for conformity assessment
under the Law on Construction Products. Only three national annexes to
Eurocodes have been developed and adopted. Preparations in the area of ‘New and
Global Approach’ product legislation are advanced.

As regards procedural measures, a new decree was
issued on procedures for notifying the European Commission of draft technical
non-harmonised acts, technical specifications and standards, transposing the
relevant EU directives. With the exception of articles on notification by the
Institute for Standardisation, the decree applies as from EU accession or the
signing of the Agreement on Conformity Assessment and Acceptance of Industrial
Products (ACAA). Preparations in this area are advanced.

Conclusion

Some progress was made
in the field of free movement of goods. The country is close to fully complying
with Articles 34 to 36 of the Treaty on the Functioning of the European Union.
The number of European standards adopted as national standards continues to
increase. However, the national annexes to all Eurocodes need to be adopted.
Certain areas of the framework horizontal acquis are still not
harmonised. Preparations in the area of free movement of goods are advanced.

4.2. 
Chapter 2: Freedom of
movement for workers

In the area of access to the labour market,
the legislation does not allow EU citizens access to posts in the public
service.

There were no developments as regards preparation for
participation in the EURES (European Employment Services) network. As
regards coordination of social security systems, there are 19 bilateral agreements
on coordination of social security systems, of which 11 are with EU Member
States. Ratification/signature of agreements with Denmark, Hungary and Italy is
pending. Negotiations on relevant agreements with Kosovo and Albania are
ongoing. The government adopted a draft decision of the Stabilisation and
Association Council on the coordination of social security systems. In this
area, the country is moderately advanced.

An agreement on the use of the European Health Insurance
Card was signed with Austria and entered into force, bringing the number of
agreements to eight. Preparations in this area are slowly progressing.

Conclusion

Little progress was
made in the area of freedom of movement for workers during the report period.
Preparations in the area of free movement of workers are still at an early
stage.

4.3. 
Chapter 3: Right of
establishment and freedom to provide services

As
regards the right of establishment, a single database was set up,
creating a single database for all licences and permits.

As regards the freedom
to provide cross-border services, the Law on Lawyers was amended to enable
them to provide permanent, cross-border services. Shortcomings remain in
service sectors including veterinary medicine, private education, construction,
tourism and the regulated professions. Preparations in this area are on track.

In the area of postal
services, the level of alignment and administrative capacity is already
very high. The regulator issued new general authorisations to provide postal
services to businesses. Shortcomings remain as far as the period for
designation of the universal service provider, a separate accounting system and
the financing of the net costs of the universal service obligation are
concerned. The administrative capacity of the Postal Agency is satisfactory.

In the area of mutual
recognition of professional qualifications, regulations were adopted to
establish and manage records and registers for professional qualifications for
sectoral professions and regulated professions. Full alignment of the Law on
Recognition of Professional Qualifications with the acquis remains to be
achieved as regards directives on layers, commercial agents and professional
use of toxic products. Alignment with the acquis in the area of mutual
recognition of professional qualifications is moderately advanced.

Conclusion

Overall, there was
little progress in the areas of the right of establishment and freedom to
provide services. In the area of postal services, the level of alignment
is advanced. There is not yet full alignment with the acquis,
particularly as regards mutual recognition of professional qualifications, free
movement of services and establishment.

4.4. 
Chapter 4: Free movement of
capital

In
the area of capital movements and payments, the country already meets
the requirements of the first stage of the Stabilisation and Association
Agreement (SAA). Further liberalisation is scheduled after the transition to
the second stage of the SAA. Nationals are still not allowed to buy foreign
securities or to buy real estate abroad, and opening foreign bank accounts is
restricted. EU citizens are not allowed to buy agricultural land. Restrictions
remain on the amounts that non-residents can transfer through their local and
foreign currency accounts. Preparations in the area of capital movements and
payments are moderately advanced.

As regards payment
systems, the Law on Payment Operations was amended to regulate
micro-payment operations, bringing it closer into line with the Directive on
Payment Services (2007/64/EC). The National Payment System Council adopted a
strategy for the development of the payment system 2013-2017, which provides
for further harmonisation of national legislation with European and
international standards and convergence of payment instruments. Most of the
charges for cross-border electronic payment transactions remain
disproportionate to those for domestic electronic payment transactions. In the
area of payment systems, the country partially meets its targets.

Preparations for the fight
against money laundering are moderately advanced. Inter-institutional
coordination is gradually being strengthened within the framework of the
Council on Combating Money Laundering and Financing of Terrorism. Co-operation
with foreign financial intelligence units, investigative and prosecuting bodies
continues to improve. In order to address the inadequate level of reporting and
operational efficiency, the Financial Intelligence Unit (FIU) is implementing a
new reporting and analytical IT system. The number of reports on suspicious
transactions increased by 53% in 2012 to 239, from 156 in 2011. The FIU sent 36
notifications relating to money laundering and financing of terrorism to law
enforcement institutions. However, there were only two new prosecutions and
four convictions in 2012.

Conclusion

In the area of free
movement of capital, there was limited progress during the last year. Preparations
are on track and gradual harmonisation of the regulatory framework for payment
systems is under way. Preparations are being made to strengthen institutional
capacity to combat money laundering and terrorism financing. Further
liberalisation of capital movements and payments is scheduled after the
transition to the second stage of the SAA.

4.5. 
Chapter 5: Public
procurement

As regards general principles, the Public
Procurement Bureau continued to provide training, which is mandatory for
contracting authorities only. A qualification system for public procurement was
introduced for entities operating in the energy sector. Out of 14 sectoral
laws, 13 were harmonised with the Law on Concessions and Public-Private
Partnerships (PPPs). The relevant unit in the Ministry of Economy has limited
capacity to ensure effective implementation of the Law on Concessions and PPPs.
A PPP council was set up. Economic operators continue to be excluded from
participation in future tenders for 1 to 5 years because of grave professional
misconduct; the negative reference list is not yet aligned with Case C-465/11
of the Court of Justice of the EU. The EU Directive on Defence and Sensitive
Security Procurement has not yet been transposed. As regards general
principles, the country is well on track.

As regards the award of public contracts, the use of
e-procurement system was expanded to include concessions and PPP contract
notices. A register of contracts awarded is still not set up by the Ministry of
Economy. Concerns remain over the transparency, confidentiality and equity of
e-auctions. The ‘lowest price’ award criterion is widely used in e-auctions,
which could lead to lower quality rather than value for money; prior public
opening of bids entails a risk of collusive behaviour. Data on budget savings
from mandatory use of e-auctions shows savings of 13%. Some of the criteria,
including amounts, for the work contracts under ‘Skopje 2014’ were repeatedly
amended. Tender requirements have yet to ensure wider participation by small
and medium-sized enterprises in public procurement. With regard to the award of
public contracts, the country is moderately advanced.

As regards the remedies system, the total number of
State Appeals Commission (SAC) cases further decreased from 690 in 2011 to 585
in 2012; 96% were resolved. Appeals against tenders launched dropped from 14%
in 2011 to 5% in 2012. The SAC publishes all of its decisions online, which has
helped to reduce the number of appeals. The SAC dealt with 5 cases in the field
of concessions and PPP. The administrative court overruled 17 decisions by the
SAC, more than in the previous year; court proceedings are lengthy. Some
economic operators were withdrawn from the negative reference list following
SAC decisions but the right to appeal against the list per se has yet to
be safeguarded in the Law on Public Procurement. Comparative court statistics
on public procurement-related cases are available and the methodology for their
collection has been improved. Enforcement is gaining momentum with 13 people
convicted in 2012 for abuse of public procurement or PPP
procedures (there were no convictions in 2011); 8 court decisions became final.
The SAC remains severely understaffed and under-budgeted, with a large number
of vacant posts. The professional requirements for president of the SAC were
reduced and aligned with those of first-instance courts. Full
alignment with the amended EU Directive on Remedies has yet to be achieved. As
regards the remedies system, the country is advanced.

Conclusion

Good progress was made
in the area of public procurement. There is a medium-term strategy for the
public procurement system. Legislation on concessions and public-private
partnerships is almost harmonised at sector level but its implementation has
been delayed. The negative reference list has yet to be aligned with the acquis,
including on the right of economic operators to appeal against their inclusion.
Administrative capacity in the public procurement field is sufficient, with the
exception of concessions and PPPs. Overall, preparations in the area of public
procurement are advanced.

4.6. 
Chapter 6: Company law

In the area of company law, a new law on
takeovers of companies with shareholders, aiming at transposing Directive
2004/25/EC on Takeover Bids, was enacted in May 2013. Company law was amended
in May 2013 to allow the Central Registry to automatically delete long-term
inactive companies. In 2012, the Academy for Judges and Prosecutors provided
training for 201 judges from all court instances, including judges dealing with
business-related disputes. Article 16 of the Tenth Company Law Directive on
cross-border mergers has yet to be transposed. Overall, in this area the
country remains on track.

As regards corporate
accounting, the legislative framework required by the Law on Accounting to
regulate performance of accounting activities is complete. Implementing
legislation relating to the Law on Performing Accounting Activities was enacted
and enabled the certification of more than 4 000 accountants. Chartered
accountants were empowered to perform procedures for registering a company.

An Institute for
Chartered Accountants was established and its supervisory board was set up.

As regards auditing, the work of the Institute for
Chartered Auditors is now supervised by the Council for Audit Promotion and
Supervision. The staff of the Institute increased from three to four but
remains insufficient to perform effective quality control. Overall, in the area
of corporate accounting and auditing the country is moderately advanced.
Chartered auditors’ qualifications obtained abroad are not yet recognised.

Conclusion

Good progress was made
in the area of company law. A Council for Audit Promotion and Supervision was
put in place as a regulatory body independent of the Ministry of Finance. An
Institute for Chartered Accountants became operational and the number of staff
was further increased. Qualifications obtained abroad by chartered auditors
have not yet been recognised. Overall, preparations in the area of company law
as a whole are moderately advanced.

4.7. 
Chapter 7: Intellectual
property law

The law on copyright and neighbouring rights is
not aligned with the World Intellectual Property Organisation (WIPO)
Performances and Phonograms Treaty. The exclusion of phonogram rights and
several disputes impeded the work of the two licensed collective rights
management societies. The head of unit for copyright and neighbouring rights in
the Ministry of Culture was dismissed, reducing the capacity of the unit, and
co-operation between the unit and relevant institutions remains limited.

In the area of industrial property rights, WIPO’s
electronic document management system was customised for the State Office for
Industrial Property and linked with the automated court case management
information system applied in all courts. In 2012, the Academy for Judges and
Prosecutors trained 218 members of the judiciary on protection of intellectual
property rights (IPR). In the area of industrial property rights, the country
is on track.

As regards enforcement, a methodology for collecting
data on was adopted; the improved statistics on IPR enforcement will be
available from 2013 onwards. The Law on Customs Measures for the Protection of
IPR was amended in May 2013 to introduce fines for counterfeit recidivism and
to allow use of seized counterfeit clothing items for disaster recovery or
social assistance packages. A user manual for the platform of the World Customs
Organisation for IPR infringements was adopted, allowing recognition of
originality of products. The Coordination Body for Intellectual Property
undertook 25 coordinated actions in 2012, twice as many as in 2011; co-operation
with the Agency for Managing Confiscated Property continued. In 2012, a total
of 126 court proceedings were brought for violations of IPR. Courts imposed
some 15 prison sentences and a number of fines for criminal offences on
individuals. Counterfeit foodstuffs, cosmetics, hygiene products, medicines,
toys, technical and electronic equipment are still widely available and
awareness of their threats to health and safety is limited. Laboratory results
confirming that medicines are counterfeit are not allowed as court evidence,
which hampers the prosecution of counterfeiters. The IPR enforcement system
remains complex rather than effective. Counterfeiting is not considered
organised crime and efforts to combat it are insufficient. Co-operation at both
national and international level has yet to be promoted. Preparations in this
area are moderately advanced.

Conclusion

Some progress was made
in the area of intellectual property law. A track record on investigation,
prosecution and trial for IPR offences has been established. There are
shortcomings in the procedures for prosecuting counterfeiters, with laboratory
results on counterfeit medicines excluded as court evidence. There is no legal
basis for collective management of phonogram rights. Awareness of IPR among
institutions and the public remains low. Overall, preparations in the field of
IPR are moderately advanced.

4.8. 
Chapter 8: Competition
policy

In the area of anti-trust and mergers, the
enforcement record of the Commission for Protection of Competition (CPC)
slightly deteriorated. The CPC adopted two decisions on prohibited agreements,
one on abuse of dominant position and 20 on concentrations. The CPC helped to
draft secondary legislation in the broadcasting and energy sectors and the
national strategy for development of the public procurement system. CPC staff
participated in various workshops and training, which strengthened already good
basic skills, but would benefit from more advanced training. However, staff
dealing with anti-trust and mergers is not used efficiently. The operational
budget of the CPC remains limited. Effective implementation of the leniency
measures provided for in the Law on Protection of Competition remains limited
because of conflicting provisions in the criminal code. Enforcement of
CPC decisions in misdemeanour cases is suspended on appeal until a final
decision is taken by the Administrative Court. The number of decisions upheld
by the Administrative Court has increased from six in 2012 to seven by
September 2013. Judges of the Administrative Court received additional training
on anti-trust and mergers. Preparations in the area of anti-trust, including
mergers, are at an advanced stage.

The legal framework in the field of state aid has improved
with the adoption of decrees on regional aid, horizontal aid and services of
general economic interest. The CPC took five decisions on compatibility of
state aid by September 2013, which is a decrease compared with 11 in 2012. The
administrative capacity of the state aid department was strengthened through
IPA twinning assistance for state aid control, including some specialised
training, workshops and study visits for CPC staff. The number of staff dealing
with state aid is adequate. In the area of state aid, the country is on track.

Conclusion

Good progress was made
in the field of competition policy. The legislative framework is in place and
the enforcement record continued to improve. The budgetary resources of the CPC
remain limited. The number of staff is adequate but they need to be used more
efficiently. Overall, preparations in this area are advanced.

4.9. 
Chapter 9: Financial
services

In the field of banks and financial conglomerates,
the Banking Law was amended, with the aim of aligning it with Directive
2006/48/EC on the taking-up and pursuit of the business of credit institutions,
and with the three pillars of Basel II. Savings societies are to be
restructured either by closure, transformation into financial companies, or
continuation as saving societies but under the same conditions as banks. The
central bank further upgraded the regulations on credit risk management and
introduced an internal capital adequacy assessment process. It introduced a
procedure for determining the banking stability index and developed a
methodology for identifying systemically important banks. The bank also set up
a special team to deal with consumer complaints but its administrative capacity
(three employees) needs to be reinforced; consumer protection remains a
challenge. Preparations in the areas of banks and financial conglomerates are
well on track.

In the fields of insurance and occupational pensions,
preparations for implementing the Solvency II Directive (2009/138/EC) are
ongoing. The capacity of the Insurance Supervisory Agency and its cooperation
with the supervisory authorities of insurance companies that have local
subsidiaries are adequate. Capital and solvency margins are still well above
the levels required and the guarantee fund against insurer insolvency is
sufficient. The Ministry of the Interior estimates the number of uninsured
vehicles at 10%, but no solid data is available. Initiatives for improving the
enforcement record on combating offences committed by uninsured drivers are
launched, but enhanced efforts are needed to tackle uninsured driving. The Law
on Compulsory Insurance of Road Vehicles still authorises the Ministry of
Finance to set premiums for motor vehicle insurance, which is a barrier to
competition between insurance companies and is not in line with the EU acquis.

The Agency for Supervision of Fully Funded Pension
Insurance (MAPAS) implements and enforces risk-based supervision. The 50% limit
on investing in non-domestic securities remained, which is contrary to the EU acquis.
Parliament appointed new management and MAPAS moved to new premises. Its
overall enforcement capacity and leverage over the institutions it supervises
improved. In the area of insurance and occupational pensions, the country is
moderately advanced.

As regards financial market infrastructure,
alignment with the Financial Collateral Directive (2003/47/EC) is partial and
alignment with Settlement Finality Directive (98/26/EC) has not begun.

In the area of securities markets and investment
services, the Securities Law was amended to increase protection of smaller
shareholders and boost stock exchange trading. The management structure of the
Securities and Exchange Commission was changed and parliament appointed new
members. Preparations in the areas of securities markets and investment
services are well advanced.

Conclusion

There was, overall, progress in financial services. Laws on
banks and on securities were amended. MAPAS reinforced its capacity and
leverage over the institutions it supervises. The measures taken to combat
uninsured driving should be pursued further. Alignment with key parts of the acquis
on financial market infrastructure has not yet been achieved. In the area
of financial services, alignment with the acquis is moderately advanced.

4.10. 
Chapter 10: Information
society and media

In the area of electronic
communications and information and communications technologies (ICT) the
Agency for Electronic Communications, as the regulator, introduced
cost-oriented prices for access to wholesale services in the electronic
communications market. It strengthened its complaints system to protect
consumer rights and continued with the second round of market analyses. The
Agency’s use of surplus funds for purposes other than for the development of
electronic communications continued to be of concern, undermining its
credibility. The Rules on the
manner of calculation of the annual fee for the use of radio frequencies were
amended to reduce the annual fees for the digital dividend in the band 790 –
862 MHz. The Agency also announced a 20% reduction in the frequency fees for
other bands from 2015. Authorisations were given for the use of the radio frequency bands
790-862 MHz and 1710-1880 MHz to provide public mobile communication networks
and services from the fourth generation networks. The introduction of the 112
emergency phone number was further delayed. The capacity of the Ministry of
Information Society and Administration in the field of electronic
communications and the information society has yet to be strengthened. The
fixed broadband penetration reached 14.4% of the population according to the
latest available data, compared to the EU average of 28.2%. In the area of information
society services, initiatives were launched to facilitate and enhance
companies’ use of online channels, especially for SMEs. Preparations were
launched for liberalising the internet domain name market, with the
introduction of a system of multiple registrars. The process for setting up a
national body for dealing with computer incidents was started. Barriers to
internet trading remain.

As regards audiovisual
policy, draft laws on Media and on Audiovisual Media Services include
provisions to align national legislation with the audiovisual media services
Directive. The draft laws were published on the internet and made available for
comments and relevant international organisations were consulted. A number of
stakeholders continued to raise concerns that the proposed laws might be used
to restrict media freedom. The Broadcasting Council adopted guidelines on
promoting media pluralism, on enforcement of sanctions, and on fair competition
in the media sector. The council improved its capacity for monitoring of
content and oversight of media ownership and concentration; such efforts need
to continue. Concerns with regard to its independence remain. The public
service broadcaster improved its offer in terms of content, but providing
pluralistic and balanced news coverage is not yet embedded in its policies and
practices, as seen in the lack of balanced coverage during the 2013 municipal election
campaign. A digital multiplex (DVB-T) operator was selected and digital
transmission of national and regional commercial television began on 1 June
2013

Conclusion

Progress was made in this area, implementing national
legislation in the fields of electronic communications and audiovisual policy
and preparing new legislation aiming at alignment with EU acquis.
Alignment with the acquis on electronic communications remains a
priority. Overall, preparations in this area are on track.

4.11. 
Chapter 11: Agriculture and
rural development

Preparations in the
area of horizontal issues are advanced. As regards the setting up of an
integrated administration and control system (IACS), the land parcel
identification system (LPIS) is operational. Registration of land parcels
continues and now extends to the majority of declared holdings. While
interconnection capacity has improved, full compatibility between data
registers has not yet been achieved. Institutional capacity to manage and
maintain a functioning IACS is insufficient.

The national support
programme for agricultural and rural development for the period 2013–2017 was
adopted. The 2013 allocation for financial support for agriculture further
increased. Direct aid payments account for more than three quarters of the
budget, including area and headage payments, premium payments and input
subsidies for strategically important products, and non-commodity-based
payments. There was a substantial increase in the allocation for rural
development measures, for which preparations are on track.

Implementing
legislation was enacted relating to agricultural and rural development support
policy and quality of agricultural products. Despite additional staffing,
institutional capacity remains a significant concern. Steps have been taken to
improve the capacity of the Agency for Financial Support for Agriculture and
Rural Development, responsible for both national support schemes and measures
under the Instrument for Pre-accession Assistance for Rural Development
(IPARD). Staffing and equipment are still insufficient.

As regards sustainable
agricultural information system and farm accountancy data network, data quality
and reliability have been continuously improved. As regards common market
organisation, a strategy for improvement and monitoring of milk quality
(2013-2020) was adopted, as was implementing legislation for cereals and rice.
Preparations in this area are at an early stage.

In the area of rural
development, implementing legislation on local action groups, on local strategies
for development of rural areas and on cross-compliance were adopted, as was a
Law on Agricultural Cooperatives. The institutional capacity of the IPARD
Managing Authority in the Ministry of Agriculture, Forestry and Water Economy
was strengthened. Implementation of the IPARD programme under component V
continues. Progress in preparing for implementation of other IPARD measures
(technical assistance and rural infrastructure) has been limited and efforts
have to be intensified. Absorption capacity for component V remains a
significant concern. An unused €7.39 million was de-committed from the
allocations of the IPARD programme for the year 2009.

As regards quality
policy, implementing legislation to establish labels of origin, geographical
indication and the mark for traditional speciality guaranteed products was
introduced. Preparations in this area are on track.

As regards organic
farming the national strategy for organic production and the action plan for
2013-2020 were adopted. Organic producers receive top-up payments worth an
additional one third of conventional production. Despite the payments, organic
production capacity declined. Administrative capacity remains insufficient.
Preparations in this area are on track.

Conclusion

Some progress was achieved
in the area of agriculture and rural development. The integrated administration
and control system has been further developed. Absorption capacity for the
implementation of IPARD remains a concern and has to be improved.
Administrative capacity throughout the sector needs to be strengthened.
Overall, preparations remain moderately advanced.

4.12. 
Chapter 12: Food safety,
veterinary and phytosanitary policy

As regards general food safety, a new food safety
strategy (2013–2015), an internal audit plan (2012-2016) and a general crisis
management plan were adopted by the Food and Veterinary Agency. The government
established National Council for Food and Animal Feed Safety to perform an
advisory function. Preparations in this area are on track.

In the area of veterinary policy, the Agency
continued to provide regular updates on control systems of imports and import
requirements for live animals and animal products. The system of reduced
frequency of checks on consignments at the border inspection posts has yet to
be implemented. A system for identification and registration of pigs has not
been set up yet. The animal identification, registration and movement control
is not always implemented correctly and does not produce reliable data.
Rulebooks were issued on identification and registration of equidae and pet
animals.

As regards control measures for animal diseases, the Agency
continues to implement the programme for oral vaccination of foxes against
rabies and issued an eradication rulebook. The FVA also continues mass
vaccination of domestic pigs against classical swine fever and will increase
monitoring of the wild boar population from 2013. The quality of the rabies
laboratory improved, allowing the Commission to authorise it to perform blood
tests for rabies. Implementing legislation on zootechnical issues and trade in
semen, ova, and embryos was adopted. Significant delays in payments to
authorised private veterinary stations remain a problem for the implementation
of the animal health programme. In the area of veterinary policy, preparations
are advanced.

As regards the placing on the market of food, feed and
animal by-products, a rulebook was issued on control of trichinella in
meat, aiming at harmonisation with the relevant EU legislation. A strategy for
improvement and monitoring of milk quality (2013-2020) was adopted. The
Commission authorised the rabies laboratory to perform rabies serological blood
tests in recognition of its improved quality.

Determining suitable locations for disposal or processing
remains the biggest obstacle to management of animal by-products.

In the area of food safety rules, implementing
legislation aimed at alignment with the acquis was adopted, on the
safety of quick-frozen foodstuffs, food contact materials, natural mineral waters,
and vegetable oils and fats

The annual monitoring programme for food safety is in
place. Risk-based classification of food establishments dealing with food of
non-animal origin and inspection planning has been established. The capacity of
the food inspectorate remains insufficient in terms of human resources.
Preparations in this area are on track.

As regards specific rules for feed, some
implementing legislation and guidelines and manuals for official controls were
adopted. Preparations in this area are on track.

In the area of phytosanitary policy, some
implementing legislation was adopted on plant health and on quality of seeds
and propagation material but no action was taken to implement international
standards, in particular on surveillance, export certification and determining
pest status. Control of marketing places of plant production products continues
on a random basis only. Coordination between the competent authorities has not
improved. The administrative capacity of the Phytosanitary Directorate remains
weak.

The State Phytosanitary Laboratory remains under-used due
to its undefined role in the food safety monitoring system and the lack of
samples received on a regular basis. Preparations in the area are not very
advanced.

As regards genetically modified organisms (GMOs),
further implementing legislation was adopted.

Conclusion

Good progress was made
in the area of food safety and veterinary policy, in particular regarding the
implementation efforts of the Food and Veterinary Agency and the introduction
of the risk-based system for official controls. Preparations in the area of
food safety and veterinary policy are well on track. Preparations in the
phytosanitary area are at an early stage.

4.13. 
Chapter 13: Fisheries

EU requirements on resource and fleet management and
inspection and control do not apply to inland fishing, except for
control of marketing and traceability of fishery products.

The administrative capacity of the unit for fisheries and
aquaculture in the Ministry of Agriculture, Forestry and Water Economy and of
the relevant unit in the Agricultural Inspectorate remains insufficient.
Preparations in this area are at an early stage.

As regards structural action for small-scale
commercial fisheries and inland fisheries, the country does not have an
operational fisheries programme to serve as a basis for structural measures.

In the field of market policy, databases and
registers relating to production of and trade in fresh fish and fish
reproductive materials are regularly updated.

As regards state aid, the 2013 allocation for
financial support for fisheries and aquaculture increased by one fifth (to €1.46
million).

There are no formal international agreements. The
government is actively seeking informal working arrangements with Albania and
Greece regarding the management of resources in Lakes Ohrid, Prespa and Dojran.

Conclusion

There was limited progress
in the area of fisheries. Administrative capacity remains insufficient. A large
proportion of the fisheries acquis is not relevant as the country is
landlocked.

4.14. 
Chapter 14: Transport policy

As regards road transport, the Law on Public Roads
was amended and a new public enterprise for state roads set up, replacing the
agency for state roads. Further alignment of implementing legislation
with the acquis on digital tachographs continued and progress was made
in the area of transport of dangerous goods. The number of fatal road accidents
fell. The administrative and operational capacity of the state transport
inspectorate still needs to be increased. Further alignment with the road
safety acquis is necessary. Preparations in the road transport sector
are advanced.

As regards rail transport, two rulebooks on railway
transport infrastructure were adopted to align further with the acquis.
High track-access charges and market closure further constrain the income of
the infrastructure manager without having resulted in the tangible effects on
the state operator or the transport sector as the government had hoped for. The
rail market remains closed to licensed EU operators until accession. Safety
Authority inspections were stepped up, but its administrative capacity still
needs to be strengthened. Procedures for safety certification remain lengthy.
An EU transport company obtained a licence to set up a training centre for
train drivers. The establishment of a new accident investigation entity in the
Government Secretariat-General is not yet complete. Further alignment with the
railway acquis is necessary as the railway market remains closed to
competition.

In the field of inland waterways transport, the Law
on Inland Waterway Navigation was amended, further regulating the recognition
of certification and transportation of goods in inland waterways. A plan for
safety inspections was prepared and the licensing process is ongoing.
Preparations in this area are advanced.

In the area of combined transport, preparation of a
strategic study for multi-modal nodes continued.

As regards air transport, the Law on Aviation was
amended and two rulebooks adopted to align further with the aviation acquis.
Implementation of the first phase of the European Common Aviation Area Agreement
(ECAA) is not yet complete. Although some progress was made in the field of
safety and social legislation as well as market access issues, further
alignment with the ECAA requirements in this area is still needed. A provision
providing a financial incentives scheme for airlines is a subject of concern
and is currently being investigated by the services of the Commission. The
capacity of the air navigation services provider needs strengthening. A
committee to investigate aviation accidents and serious incidents has been set
up, but is not fully operational. No progress was made in rectifying the
findings of the European Aviation Safety Agency (EASA) corrective action plan
especially in the airworthiness field.

The national
authorities intend to take part in the Galileo satellite navigation
programme.

Conclusion

There was little new progress in the field of transport
policy. Further alignment of the road safety and railway legislation with the acquis
is needed. The railway market remains closed. The administrative capacity of
the Rail Safety Authority still needs to be strengthened. An Accident
Investigation Committee for rail transport needs to be set up. Overall,
preparations in the area of transport policy are moderately advanced.

4.15. 
Chapter 15: Energy

As regards security of supply, the programme for
implementing the national strategy for energy development 2013-2014 was adopted
in May. A second security of supply statement was submitted to the Energy
Community Secretariat. By September 2013, oil stock reserves stood at 56 days’
average consumption. Funds for reconstruction of the largest thermal power
plant in the country were secured. The budget for energy cost subsidies for the
most vulnerable households was halved. In September, an agreement with the
Russian Federation on a section of the South Stream natural gas pipeline was
ratified, which raises concerns regarding its compatibility with the Energy
Community obligations. In the area of security of supply, the country is on
track.

In the field of the internal energy market, the Energy
Balance 2013-2017 was adopted, estimating the annual average rate of growth of
final consumption at about 3.3%. Domestic production of electricity remains
insufficient to cover local demand and imports of electricity are growing at an
average annual rate of 3.8%.

A set of implementing acts under the Energy Law were
adopted or amended, concerning procurement of electricity to cover losses in
the network. Amendments were adopted to the rulebooks on regulated maximum
income, tariff systems and prices for electricity, the rules on the supply of
electricity, the tariff and prices for the supply of electricity and natural
gas by the last-resort supplier, as well as new tariffs for transport,
management and distribution of natural gas. Several implementing acts on the
electricity and gas network rules still remain to be adopted. According to the
Energy Law and the market rules, all consumers of electricity and natural gas,
other than small companies and households, became eligible consumers and
started purchasing electricity on the open market as of January 2013. However,
opening of the electricity market for medium-sized companies was postponed
until January 2014 due to government concerns over the impact on consumer
prices. The customers connected to the distribution network have no access to
the competitive market. The average regulated price of electricity for tariff
consumers was decreased by 4.48%.

In the gas sector, a dispute related to the ownership of
the gas transmission pipeline remains unsolved, to the detriment of the sector’s
development. The development of the gas distribution network is ongoing. Market
opening remains limited, of the four eligible consumers one has switched
supplier. Rulebooks on tariffs on sale prices and sale of gas to supplier of
last resort were adopted in January 2013. The founding capital of the
state-owned gas transmission operator was increased. The producer and supplier
of district heating in Skopje was sold to a foreign investor. A new rulebook on
prices for district heating systems was issued by the Energy Regulatory
Commission (ERC), together with one on the Commission’s organisational
structure, following an increase in staff. The capacity of the energy
department of the Ministry of Economy needs to be strengthened. In the area of
the internal energy market, the country is moderately advanced.

In the area of energy efficiency, the Energy Law was
amended in June 2013 to bring it further in line with acquis on energy
performance of building and energy audits. Rulebooks on energy efficiency of
buildings and on energy audits were adopted in 2013. A rulebook which
transposes the framework Directive on energy labelling was adopted in August
2013. The Ministry of Economy and the national distributing company set up a
platform for energy efficiency to educate the public in ways to save energy. In
the area of energy efficiency, the country is on track.

As regards renewable energy, a new feed-in tariff
was adopted for electricity produced from biomass, and the national renewable
energy action plan was prepared. A feasibility study on use of wind potential
at five locations is being drafted. The number of water concessions for
construction of small hydropower plants increased to 70 but there were no
tenders for new concessions. The government continues to run a programme for
subsidies to households for installing solar collectors. The renewable energy
potential in the country remains under-exploited and complex administrative
procedures and regulated electricity prices still limit more intensive
investment in this area. Sustained efforts are needed in order to meet the
Energy Community obligation of full implementation of the renewable energy
directive by the beginning of 2014.

In the area of nuclear safety and radiation protection,
the administrative capacity of the Radiation and Safety Directorate is still
insufficient to execute its legal responsibilities properly and its financial
independence has not been strengthened. As the country has not set up a licensed
storage facility for radioactive waste, it was excluded from the EU-funded
regional programme for management of radioactive sources.

Conclusion

There was some progress in the area of energy, in
particular on energy efficiency and the regulatory framework of the electricity
and natural gas market. Progress towards an effectively functioning energy
market was stalled by the postponement of further market opening. Preparations
in this area are moderately advanced.

4.16. 
Chapter 16: Taxation

As regards indirect
taxation, the Law on Value Added Tax (VAT) was amended in December 2012 but
some of the reduced VAT rates
(5%) made permanent through this revision — e.g. for the import of personal
computers, PC components, software and thermal solar systems — are not in line with the acquis. The Law
on Excise Tax was amended: it increases the excise duty on alcoholic beverages,
while the increase for cigarettes and tobacco will be gradually applied over
ten years. However, some rates for excise remain lower than the minimum
required by the acquis.

In the area of direct taxation, the Law on Personal
Income Tax was amended, postponing the application of taxation on capital gains
from the sale of securities until 2016 and delaying the application of taxation
of interest on deposits until accession. Alignment with the relevant directives
(the Parent-Subsidiary Directive, the Merger Directive and the Interest and
Royalties Directive) has yet to be addressed. The law on special zones for
technological and industrial development needs to be aligned with the EU Code
of Conduct for Business Taxation.

As regards administrative cooperation and mutual
assistance, electronic data exchange between the public revenue office and
the financial police intensified. A double taxation agreement with Luxembourg
was ratified, bringing the number of agreements concluded with EU Member States
to 24. These agreements do not cover debt recovery or the automatic exchange of
information.

In the field of operational capacity and
computerisation, voluntary compliance and enforced collection improved and
electronic services were extended. Mandatory registration of cash payments was
further extended. Electronic submission of VAT and profit tax returns was made
compulsory. While the processing of VAT refunds improved, substantial efforts
are required to reduce delays and build up a good track record of compliance
with legal deadlines. A forensic laboratory has been set up to fight
high-risk tax fraud, but is not yet operational. The action plan for reducing
the informal economy was updated. However, the fight against tax evasion and
the informal economy remains a challenge. Operational capacity and IT
infrastructure, in particular, need to be improved.

Conclusion

Overall, there was some progress during the reporting
period. Further efforts are required to align the direct and indirect tax
legislation with the acquis and to achieve and maintain a good track
record for processing VAT refunds within legal deadlines. The fight
against tax fraud and tax evasion and efforts to combat the grey economy need
to be further intensified. On the
whole, preparations in the area of taxation are moderately advanced.

4.17. 
Chapter 17: Economic and
monetary policy

In the area of monetary
policy, the central bank improved its capacity notably in management of
foreign exchange reserves and further developed non-standard monetary policy
measures. A comprehensive set of targets for further progress towards
compliance with the European System of Central Banks
requirements was identified.

In the area of economic
policy, the pre-accession economic programme (PEP) for 2013-2015 was
submitted on time, with more explicit information on the macroeconomic and
fiscal frameworks. Its usefulness is considerably limited by the low quality of
forecasting, non-compliance with (European System of Accounts) ESA 95 standards
and lack of fiscal notification. Consistency and transparency in the area of
fiscal policy deteriorated. Strategic policy formulation and implementation
capacity remain inadequate at all levels of the administration. Economic and
fiscal policy priorities are not aligned with specific structural reform
challenges. Although the Law on the Budget was amended to increase the
consistency of strategic planning and budgeting, a medium-term budget framework
is still lacking. The fiscal strategy 2014-2016 was not adopted as required by
law and the public investment plan was not adopted. Institutional capacity
varies greatly between the central and local levels.

Conclusion

Overall, only limited progress was made during the
reporting period. Institutional capacity for economic policy remains
insufficient and the quality of the PEP still needs to be strengthened. The
fiscal discipline and sustainability of public spending need to be improved. On
the whole, preparations in the area of economic and monetary policy are
advanced.

4.18. 
Chapter 18: Statistics

In the area of statistical
infrastructure, the Law on State Statistics was amended to strengthen the
role of the State Statistical Office as the principal coordinator of official
statistics, improve the implementation of surveys and enhance the quantity and
quality of data provided by the administration. The Office’s Strategic Plan
(2013-2015) was adopted. The new programme for statistical surveys 2013-2017
provides for improved implementation and harmonisation of surveys across the
national statistical system. The resource situation of the SSO remains a
concern. Overall, preparations in this area are advanced.

As regards classifications
and registers, groups of business entities were introduced in the business
register. Procedures for updating the register of agricultural holdings were
enhanced. The new International Classification of Education (ISCED 2011) is
being applied. Preparations in this area are moderately advanced.

As regards sectoral
statistics, in the area of national accounts, further progress was made in
the integration of sector accounts and publication of quarterly GDP data. Data
on GDP broken down by region and sector account were published according to
NACE rev 2. More efforts are needed to achieve full alignment with ESA 95
standards. The second farm structure survey was conducted and the design of the
Labour Force Survey was improved. Further progress was achieved in business,
agricultural and environmental statistics. The central bank improved the
production of financial accounts and harmonisation of capital investment
statistics and financial sector statistics with international standards. The
number of data transmissions to Eurostat continued to increase. Data on quarterly balance of payments, annual
international trade in services, the Structure
of Earnings Survey and the Job Vacancy Survey were sent for the first time. The use of administrative
registers to derive population data is being considered.

Conclusion

There was good progress in several areas, in particular
statistical infrastructure and sectoral statistics. Greater efforts are needed
to speed up alignment with the acquis and to enhance the quality and
availability of data, particularly population data. Preparations in the field
of statistics are advanced.

4.19. 
Chapter 19: Social policy
and employment

As regards labour law, amendments were made to the
Laws on Labour Relations and on Employment and Insurance against Unemployment,
to improve labour records. Three ILO technical conventions were ratified in
the areas of collective bargaining, labour relations and labour
administration. Effective enforcement of labour law is slow and
cooperation between the relevant institutions has not improved. Alignment with
the acquis in this area remains at an early stage.

The law on health and safety at work was amended to
regulate the costs to employers of services provided by authorised occupational
health and safety experts. Some rulebooks were adopted to further align
legislation with the acquis. Inspection capacity for health and safety
at work has not improved. Implementation of the strategy for occupational
health and safety and the action plan for 2012-2013 is slow. Coordination
between the relevant authorities has not improved. The National Council for
Occupational Health and Safety met only sporadically. Alignment with the acquis
in this area remains moderately advanced.

As regards social dialogue, the Economic and Social
Council strengthened its role as a forum for tripartite social dialogue, with regular
meetings. The local Economic and Social Councils set up in a few municipalities
are not yet very active. The right to strike was challenged when a strike by
medical workers was suspended. Social dialogue in the private sector remains
weak, especially for collective bargaining. Participation by social partners in
the policy-making process remains limited. The capacity of trade unions is
still weak.

In the area of employment policy, the Law on Records
in the Field of Labour was amended to harmonise it with recently enacted
amendments to the Law on Employment and Insurance against Unemployment and the
Law on Labour Relations. This will enable a distinction between active job
seekers and other unemployed and also changes to the method of calculating the
unemployment rate. Consequently, the unemployment rate somewhat decreased, but
was still very high in the second quarter of 2013 at 28.8%. An action plan on
youth employment 2012-2015 was adopted. In December 2012, the government
adopted the 2013 operational plan for active employment programmes and
measures. National capacity to monitor and evaluate employment policy was
reinforced. Labour market participation is still very low. Long-term
unemployment, high youth unemployment and very low labour market participation
by women all need more attention. The public sector remains the largest
employer. The national budget allocated to the active labour market programme
remains inadequate and decreased slightly. The implementation of active labour
market policy is still a challenge for the Employment Service Agency, which has
started a long-term modernisation process. Employment in the grey economy has
not diminished, and cooperation and coordination between enforcement bodies is
weak.

As regards preparations for participation in the
European Social Fund, procurement of IPA co-financed projects is
ongoing. A lack of strategic planning and weak administrative capacity and
interinstitutional cooperation are hampering project and programme management
and implementation.

As regards social inclusion, the revised national
strategy for alleviating poverty and social exclusion was endorsed in March,
setting provisional national targets for indicators such as the employment rate
in line with Europe 2020. Progress in implementing the strategy has been
limited. Poverty remains high and implementation of existing policies and
strategic plans is unsatisfactory, hindered by a lack of institutional capacity
and financial resources. Ownership and commitment to reform is limited, and
their implementation is often challenged due to lack of an integrated approach
among the relevant bodies. Implementation of the Strategy for Roma Inclusion
for 2012–2014 is slow. Discrimination against and separation of Roma pupils in
schools continues. The drop-out rate for Roma children from primary education,
despite legal obligations, remains significant. The problems of Roma without
personal documents remain an issue - in more than 400 recorded cases, less than
one quarter obtained documents.

As regards people with disabilities, a National
Coordinating Body to monitor the implementation of the UN Convention on the
Rights of People with Disabilities was set up. Limited progress was made on
implementing the national strategy on equal rights for people with disabilities
2010-2018. People with disabilities face prejudice and stereotyping preventing full access to the labour market.

As regards social protection, provisions supporting
the employment of orphans and introducing special allowances for blind people
were included in the amended Law on Social Protection. Reform of the pension
system is ongoing; the total pension budget increased by 5%. The administrative
capacity of institutions in charge of implementing the Law on Social Protection
is insufficient.

In the area of anti-discrimination,
implementation of the action plan 2011-2015 of the Commission for Protection
from Discrimination is progressing. Its communication strategy 2013-2015 was
adopted. The commission has insufficient human and financial resources to
fulfil its mandate properly, and its cooperation with other relevant bodies
needs to be improved. The anti-discrimination unit in the Department for Equal
Opportunities, in the Ministry of Labour and Social Policy, is seriously
understaffed. The Law on Anti-Discrimination is still not in line with the acquis
as it does not explicitly prohibit discrimination on grounds of sexual
orientation in employment and occupation. Systematic data collection and
analysis are still not in place. Awareness-raising on equality and
non-discrimination is extremely limited. (See also Chapter 23 — Judiciary
and Fundamental rights)

As regards equal
opportunities, a strategy for gender equality (2013–2020) was adopted, and
implementation of the national action plan for gender equality (2013-2016)
began. The female employment rate remains very low compared to the EU average.
The mechanism in place to deal with complaints of unequal treatment does not
function properly. There is still a tendency to confuse equal opportunities
with anti-discrimination issues. The Department for Equal Opportunities lacks
appropriate resources. The activities and capacity of local equal opportunity
commissions remain limited, with little improvement in the situation of women
in rural areas or of Roma women. Discriminatory customs, traditions and
stereotypes remain significant, capitalising on underlying regressive trends in
society. (See also Chapter 23 — Judiciary and Fundamental rights)

Conclusion

Little progress was
made in the area of social policy and employment. Unemployment is very high and
limited progress was made in achieving an efficient and inclusive labour
market. Long-term unemployment, high youth unemployment, very low participation
of women in the labour market and high levels of informal employment remain
major challenges. The capacity of social partners needs to be further
strengthened. Measures in favour of people with disabilities and other socially
excluded people are insufficient. To tackle discrimination against Roma,
implementation of the Strategy for Roma Inclusion should improve. Overall,
preparations in this area are at an early stage.

4.20. 
Chapter 20: Enterprise and
industrial policy

As regards enterprise
and industrial policy principles, the government has shown good results in
simplifying current legislation and has implemented the measures of the third
phase of the regulatory guillotine. The country is implementing the Small and
Business Act principles. It has also made progress in implementing regulatory
impact analysis (RIA).

Concerning enterprise
and industrial policy instruments, the company registration system is
organised as a one-stop shop and companies are assigned a single identification
number, valid for all interactions with the public administration. Access to
finance for SMEs remains an issue. There are currently no public credit
guarantee schemes in operation and other sources of finance, such as leasing
and risk capital, have declined due to the unfavourable environment. Measures
taken by the Ministry of Economy and the SME Agency to develop the private
sector are still limited in volume and scope. An SME portal was created,
providing information on various national, EU and other donor programmes to
support local companies. The government adopted a strategy for innovation for
the period up to 2020, and an action plan for its implementation from 2013 to
2015. Construction permits are now issued only online, and two more
technological industrial development zones have started up, making a total of
four. The government has several programmes to support export promotion,
largely co-financed by international donor community. A strategy specifically
supporting the export of IT services was adopted Acts were adopted to alleviate
the fiscal burden on companies in distress. Preparations in the area of policy
instruments are moderately advanced

As regards sector policies, a Law on the
Establishment of Free Zones for Tourism was enacted and a Special Committee for
Tourism, chaired by the Prime Minister, was set up.

Conclusion

There was some progress
in the field of enterprise and industrial policy. While progress has been made
in policy making, challenges remain in the provision of SME support services,
innovation and access to finance. Preparations in this area are moderately
advanced.

4.21. 
Chapter 21: Trans-European
networks

In the area of transport
networks, implementation of the memorandum of understanding on the
development of the South-East Europe Regional Transport Network continued. The
authorities actively participated in and contributed to the activities of the
South-Eastern Europe Transport Observatory. Construction of the motorway
section from Demir Kapija to Smokvica, along Corridor X, co-financed by IPA
funds, is under way. The IPA-funded tender for drafting technical documentation
for the connections with Albania and Bulgaria is ongoing. Preparations for
introducing the European Train Control System (level 1) and the Global System
for Mobile Communications – Railway along Corridor X are ongoing.
Administrative and technical capacity still needs to be strengthened.
Preparations in the area of transport networks are advanced.

There were no
developments as regards energy networks. The country is moderately
advanced in the area of electricity networks.

As regards
telecommunications networks, for budgetary reasons, the country cancelled its
participation in the ‘Information and communication technologies, policy
support’ programme of the Competitiveness and Innovation Framework Programme.

Conclusion

Some progress was made in the area of trans-European
networks. There was active participation in the South-East Europe Transport
Observatory and the Energy Community. Overall, development of transport
networks is continuing. Preparations in this area are advanced.

4.22. 
Chapter 22: Regional policy
and coordination of structural instruments

As regards the legislative
framework, the regional development plans (2009-2013) confirmed that the
provisions of the Law on Regional Development on channelling funds from the
central budget for regional economic development activities through the
relevant bodies have still not been implemented. More transparent allocation of
government capital investment in ministry-run projects is needed. Capacity to co-finance
EU projects remains limited at all levels. The country is not yet sufficiently
prepared for future use of the Structural Funds. Preparations in
this area are still at an early stage.

As regards the institutional
framework, the necessary structures are in place but significant
improvements are needed to speed up the preparation and implementation of
EU-funded projects, particularly in the area of the environment. Shortcomings
include lack of cooperation within and between institutions and insufficient
technical expertise at both national and local level. There was some progress
in preparing participatory instruments and methods to involve municipalities,
civil society and the private sector in the programming and implementation of
projects. Preparations in this area are moderately advanced.

In the area of administrative capacity,
training and the provision of technical assistance to strengthen all the
institutions involved in implementing the IPA has continued. Weak capacity has
resulted in slow tendering and low contracting rates for IPA since management
powers were granted. There is an urgent need to further strengthen the project
management capacity of the relevant institutions to ensure effective and
efficient management of EU funds. Weak capacities and coordination endanger
full utilisation of IPA environmental funds. An effective staff retention
policy is needed. Preparations in this area are still at an early stage.

As concerns programming,
the lack of strategic planning, insufficiently diverse project pipelines in the
environment and transport sectors, the low quality of tender documents and
lengthy procurement processes have resulted in delays, consequently increasing
de-commitment risks. Preparations for IPA II programming began in January.
Closer coordination and active
participation by all stakeholders in the programming process is needed. In the area of monitoring and evaluation, the
capacity of the national authorities in this area should be strengthened.
Enhanced use of the management information system should be ensured;
recommendations made by the IPA Sectoral Monitoring Committees are not yet
systematically followed up. Transparency on the use of IPA funds needs to be
increased. Preparations in the area of monitoring and evaluation are moderately
advanced.

In the area of financial
management, control and audit, improvements in management and control
systems are needed to ensure continuation of operations and payments under IPA
components III and IV. Non-respect of principles of equal treatment and
proportionality led to the cancellation of a major tender under IPA component
III. Systematic monitoring, on-the-spot checks, and internal and external
audits are needed to prevent any repetition of shortcomings and irregularities
found.

Conclusion

Limited progress was
made in the area of regional policy and coordination of structural instruments.
Contracting need to be accelerated to address very significant delays in
implementing IPA programmes. Urgent efforts are needed to overcome shortcomings
in the capacity of the relevant institutions to carry out programming tasks and
to demonstrate commitment to financial management, control and audit functions.
Overall, preparations in the area of regional policy and coordination of
structural instruments are not very advanced.

4.23. 
Chapter 23: Judiciary and
fundamental rights

Judicial system

The country’s judicial
reform strategy and related action plan were implemented between 2004 and 2010.
The main reforms in this area have therefore already been largely completed.
However, improvements are needed in practice to ensure the correct
implementation of European standards relating to independence and quality of
justice.

As regards independence
and impartiality, several issues should be addressed in order to
safeguard the independence of judges, in particular their security of tenure. The legislation governing the dismissal of judges
still needs to be amended in order to make it precise and predictable.
Safeguards are needed to ensure that disciplinary measures are applied in a
more proportionate way by the Judicial Council. The tendency to impose
dismissal rather than a less severe disciplinary sanction continues, as does
the use of the catch-all dismissal ground ‘unprofessional
and un-conscientious exercise of judicial office’ in almost all cases. In
addition, the current system of
evaluation and promotion of judges places more emphasis on productivity and
targets than on quality and problem-solving, which can encourage formalistic
rather than independent decision-making. The direct link between performance
evaluation and dismissal, which should only be used to punish serious
disciplinary breaches, needs to be removed.

In the area of professionalism and competence
of the judiciary, the Academy for
Judges and Prosecutors (AJP) continued to play a central role in providing
life-long training for the judiciary and prosecution service. Its continuous in-service training programme
was attended by over 7 000
participants, including around 4 000 judges, 1 000 public prosecutors and 1 000 expert
associates, as well as civil servants and other participants. The AJP further
developed its decentralised training system by holding 76 of its 232 training
activities in cities outside the capital, and the system of e-learning is also
being continuously developed through the AJP’s dedicated training web portal. Amendments to the Law on Courts entered into force, requiring all newly appointed first-instance judges to have graduated
from the AJP’s 2-year initial training programme. Minimum requirements of prior
judicial experience were also introduced for appeal court and Supreme Court
judges (four and six years respectively). However, the Judicial Council
continued to ignore the legislative requirements, appointing 39 first instance
judges in 2012, only 4 of whom were AJP graduates, and 13 in the first half of
2013, only 1 of whom was an AJP graduate. At the same time, 13 of the 80
candidate judges and prosecutors who have graduated since 2009 are still
waiting to be appointed to their first post. This calls into question the
effectiveness of the new legislation and the commitment to the principle of
merit-based recruitment. It also has the negative effect of demotivating
potential future candidates from applying to the AJP. Despite information
campaigns, repeated calls for applications and an increase in the stipend of
AJP candidates during initial training, there were insufficient numbers of new
applicants for the AJP’s 2013 initial training programme and it remains to be
seen when the next round of initial training will begin. Preparatory classes
for the AJP entrance exam and collaboration with universities are steps in the
right direction towards ensuring that new stricter entrance requirements can be
met by candidates. Measures targeted at encouraging more candidates from
non-majority communities to enter into professional training should also be
considered. The AJP’s 2013 budget
was decreased, it lacks sufficient numbers of staff and its premises are
inadequate given the scope of its activities. Greater efforts are needed to support the work of the AJP, to
attract high-calibre candidates to the judicial and prosecutorial professions
and to safeguard the principle of merit-based recruitment.

As regards accountability,
three judges were dismissed in 2012 and their dismissals were upheld on appeal
by the Supreme Court. In addition, one judge’s judicial function was terminated
upon conviction of a criminal offence. The Judicial Council considered 879
complaints filed against judges and courts during 2012. The highest number of
complaints continues to concern the length of court proceedings. The Ministry
of Justice received 509 complaints. The Supreme Court continued to receive
applications for compensation for unreasonably lengthy court proceedings (1 906
in 2012, a slight increase from the previous year). In 2012, it upheld 203
applications and awarded almost €158 000 in compensation and costs, an
increase from 2011. In 2012 the country also paid out over €157 000 in
friendly settlements to applicants who had claimed damages before the European
Court of Human Rights in similar cases.

As regards the efficiency of justice, the
majority of courts at all levels
were able to process as many cases as they received, or more, during 2012.
There are now no courts with significant backlogs. New software was installed in all courts, as well as the
Judicial Council, in order to generate improved statistical data on their
performance. The enforcement of
judgments by professional bailiffs continued smoothly and almost all old
enforcement cases have now been transferred out of the court system. However, there is still no reliable information
on the average overall duration of court proceedings from start to finish,
including all instances, and there is no monitoring mechanism to identify and
give priority to ‘old cases’ which have been in the court system for many
years. Greater efforts are needed to ensure that the monthly targets imposed on
judges, concerning the number of cases to be processed, do not result in a
general lowering in the quality of justice and lead to more lengthy proceedings
in the long-term.

The court budget for
2013 is €29.6 million (or 0.4% of GDP), of which a majority of around 80% is
still spent on the salaries of judges and administrative staff. The total
number of judges (670) remains more than 50% higher than the European average
in relation to the size of the population. There is a need to assess the
sustainability of this spending and to start planning a gradual rationalisation
of the court system. The budget of the Public Prosecutor’s office is around €6.6
million, of which a majority of around 75% is spent on salaries, while the
remainder is insufficient to cover the necessary IT infrastructure upgrade for
the prosecution service. A
longer-term strategy to ensure the correct distribution of human resources
within the justice system still needs to be developed.

As regards access to
justice, the legal aid budget for 2013 is €50 000. 244 lawyers and 8
NGOs are now registered to provide legal aid. A total of 146 requests for free
legal aid were submitted in 2012, of which 57 were approved. The majority of
cases concerned property disputes, victims of domestic violence and protection
of children and minors. Cases concerning social security and labour disputes
are still under-represented and the lack of systematic legal aid for juveniles
is a concern. Some improvements are still needed to make the work of courts
more accessible to the public, including locating information desks at the
entrances of court houses and introducing user-friendly search functions for
judgments published on court websites.

Anti-corruption policy

The Criminal Code was
amended to remove the possibility for courts to return a bribe to a bribe-giver
who declares the offence before it is uncovered. The Law on Financing of
Political Parties and the Election Code were further amended with a view to
addressing GRECO and ODIHR recommendations.

The administrative
capacity of the relevant institutions was strengthened slightly, however both
the State Commission for the Prevention of Corruption (SCPC) and the
Anti-Corruption Unit of the Ministry of Interior remain inadequately staffed
and funded (6 out of 18 planned posts in the Anti-Corruption Unit are still
vacant). The State Audit Office (SAO) is also understaffed and underfunded in
the light of its new functions of financial supervision of political parties
and election campaigns. The limited powers of the SCPC are hampering its
development into an effective anti-corruption body. The dismissal of the former
president of the SCPC without a clear legal basis raised concern. One new
prosecutor was employed in 2013 in the Basic Public Prosecutor’s Office for the
fight against organised crime and corruption, but both human and material
resources still need to be significantly strengthened within the prosecution
service in order to meet the challenges of the new Law on Criminal Procedure
which is due to enter into effect in December 2013.

There were 123 convictions for corruption-related offences
in 2012, most of which related to abuse of public office. Bribery offences
still account for a low number of overall convictions. The SCPC received
177 complaints in 2012, a drop of 33% compared to 2011. It filed 13 requests to
the public prosecutors’ offices to initiate criminal proceedings. The overall
capacity of the courts to deal with corruption cases remains weak, in
particular as regards high-level cases, where proceedings are lengthy and
inefficient. Requests sent by the SCPC to the public prosecutor to initiate
criminal proceedings are not effective, as they rarely lead to successful
prosecutions. Orders for seizure and confiscation of assets remain rare and
special investigative measures are not used systematically to detect and
investigate corruption offences. It remains to be seen whether the new Law on
Criminal Procedure will improve the general implementation of the
anti-corruption framework in practice.

The corruption prevention activities of the SCPC in 2012
included both the random verification of asset declarations and the newly
introduced systematic verification of statements of interest of appointed and
elected officials, as well as checks carried out ex officio or on the
basis of external complaints. In 30 cases the SCPC asked the Public Revenue
Office to conduct an asset examination procedure and, as a result, 6 officials
were charged the 70% tax rate on their undeclared income. The SCPC also
initiated misdemeanour proceedings against 10 officials who had failed to
submit asset declarations. As regards conflicts of interest, 483 statements submitted by MPs, ministers,
deputy ministers and officials elected or appointed by parliament were verified by the SCPC in 2012. During the verification exercise, 123 officials were
found not to have submitted statements and as a result misdemeanour proceedings
were initiated in 26 cases in early 2013. However, the absence of a registry of
elected and appointed officials continued to hamper effective control of assets
and conflicts of interest of these officials.

In 2012, the Sector for Internal Control and Professional
Standards in the Ministry of Interior started disciplinary procedures against
347 police officers (an increase from 228 in 2011). It also raised criminal
proceedings in 10 corruption-related cases. The customs administration further
strengthened its integrity system with measures relating to transparency, human
resources and financial management. 72 disciplinary procedures were initiated
against customs officers in 2012; however none were directly
corruption-related. Criminal charges were brought against 2 customs officers
for taking a bribe. The internal control system in central and local
administration remains weak and effective whistle-blowing mechanisms in the
public and private sectors are yet to be set up.

The implementation of the legal framework on political
party funding remains deficient. The lack of transparency and accountability of
political parties for breaches of the legislation on party funding remains a
concern. In spite of legislative amendments, limited action has been taken as regards
measures to inform political parties about their reporting obligations and a
more streamlined and proactive supervision and sanctioning system is needed.
The OSCE/ODIHR reported widespread allegations of misuse of state resources
during the 2013 local elections and the failure of the relevant institutions to
counter them raised serious concerns. The SCPC’s public announcement about the
irregularity of the asset declaration of an opposition mayoral candidate, a few
days before election day, called its impartiality into question.

Corruption in public procurement continues to be a serious
concern. While reports of violations of public procurement law and corruption
in public procurements are widespread, there is currently no institution
assigned to ensure effective and timely control and supervision of public
procurements, including concessions and public-private partnerships, and of the
execution of contracts. No administrative sanctions are foreseen for violations
of the administrative regulations and criminal investigations and convictions
for abuse of public procurement rules, while on the increase, are still
relatively rare. The institutional framework and measures taken need to be
expanded to effectively address this problem.

The Law on Free Access
to Public Information and its implementation remain deficient. The legal
penalties are still not imposed in practice and political parties remain
excluded from the list of holders of information, releasing them from the
obligation to provide information to the public and from the penalty regime.
The transparency and accountability of public institutions and enterprises, and
of public expenditure, continue to be insufficient. (see also 2.1 - Public
administration).

In 2012, the SCPC and the Academy for Judges and
Prosecutors carried out 32 anti‐corruption training activities, reaching more
than 800 participants. The collection of data on the implementation of 2011‐2015
state programmes for the prevention and suppression of corruption and on
conflicts of interest improved with the introduction of new software in the
SCPC. Representatives of the police,
financial police, customs administration, Public Revenue Office, public
prosecutor’s offices and courts, as well as the SCPC, cooperated in a working group to set up a unified statistical system for anti-corruption
policy. However, much remains to be done as regards awareness-raising. The enforcement of anti-corruption policy was
largely invisible to the public. The number of complaints to the SCPC is
falling year on year. Operational cooperation between institutions still
remains weak, and the law enforcement and supervision agencies engaged in the
fight against and prevention of corruption are insufficiently proactive.

Fundamental rights

The country is already
party to most of the international human rights instruments and further
progress was made with the ratification of the Convention on the Protection of
Children against Sexual Exploitation and Sexual Abuse and the signing of the
Third Optional Protocol to the Convention on the Rights of the Child. The
European Charter for Regional or Minority Languages, which has been signed, has
yet to be ratified.

During the reporting period, the European Court of Human Rights (ECtHR) delivered
judgements on 6 applications, finding that the country had violated rights
guaranteed by the European Convention on Human Rights (ECHR). In the El
Masri case, the Court ruled that the country had breached the applicant’s
rights under, among others, Article 3 (prohibition of torture and inhumane or
degrading treatment). The country has been held by the ECtHR to provide an
effective remedy in cases relating to unreasonably lengthy domestic court
proceedings. However, it still needs to follow up on the execution of over 50
older ECtHR judgments in which it was found in the past to have violated the
right to be heard within a reasonable time (Article 6). An inter-ministerial
commission for the execution of ECtHR judgments was set up in November 2012 but
its impact remains to be seen. Efforts should be made without delay to satisfy
the Committee of Ministers of the Council of Europe that execution has been
completed in all cases of violation of the ECHR, and that the necessary
systemic improvements have been made. Greater efforts are also needed to ensure
that any orders for pre-trial detention and extensions thereof are in line with
the ECHR and the jurisprudence of the ECtHR concerning Article 5 (right to
liberty and security). 511 new applications have been submitted to the ECtHR
since September 2012, bringing the total number of pending applications to 593.

With regard to the prevention
of torture and ill-treatment and the fight against impunity, the number of
complaints filed with the Ombudsman’s Office on excessive use of force by the
police fell in 2012, although the number of overall complaints about the work
of the police rose. The Ombudsman’s annual report noted the persistence of such
cases, particularly involving Special Units, and the need to strengthen the
independence and effectiveness of the Ministry of Interior’s Sector for
Internal Control and Professional Standards in cases of use of force. Allegations
of violence against inmates by prison officers persisted. In 2012, out of 88
complaints filed with the Directorate for Execution of Sanctions against prison
staff, 12 cases related to torture or ill-treatment. One employee at Idrizovo
prison was suspended and placed under house arrest for excessive use of force.
Shortcomings remain as regards the implementation of formal safeguards,
including the zero-tolerance strategy for ill-treatment in prisons and police
stations. Weaknesses in the complaints system and the related data-collection
mechanisms of police and prisons continue to be a concern. Mechanisms for
detailed examination of all alleged cases of torture or ill-treatment of
persons deprived of their liberty have yet to be set up. Efforts are still
needed to improve the material conditions for detained persons as degrading
conditions persist in a number of detention facilities.

As regards the prison
system, a health-care strategy was adopted for penitentiary institutions,
together with an action plan for 2012-2014 and practical guidelines. A
treatment programme for inmates addicted to drugs and other psychotropic
substances was developed. A strategy for the development of a probation service
was adopted by the government. Internal control guidelines for penitentiary
institutions were introduced. The annual budget for the penitentiary system was
increased by 7% in 2013. A pilot education programme for juveniles was
implemented in the educational-correctional facility in Veles. Inmates
submitted fewer complaints to the Ombudsman’s Office in 2012 (278, compared
with 352 in 2011). The problem of overcrowding in prisons is being addressed,
with the construction of a new prison in Kumanovo completed in 2013 and
preparations under way for construction work at Idrizovo and Skopje prisons, as
well as the juvenile facility in Tetovo. However, the prison system remains
seriously underfunded and understaffed, which hampers its sustainable
functioning in line with international human rights standards. Overcrowding of
20 to 35% persisted during the reporting period. Treatment programmes for
vulnerable groups are yet to be implemented in practice. Adequate healthcare is
not systematically ensured and inhumane material conditions persist in some
facilities, including all pre-trial and juvenile facilities. The right of
juveniles to basic education is still not ensured. Systematic training of
prison staff still needs to be set up. Allegations of corruption among prison
staff and inter-prisoner violence remain to be addressed. Care needs to be
taken that new facilities are not only built but also fully equipped, well
managed and maintained in the long term. A national strategy for the
penitentiary service has yet to be developed. Reform and development of the
prison system continues to suffer from insufficient managerial and
administrative capacity.

In the area of freedom of expression and the
media, the Criminal Code was
amended to decriminalise defamation and insult. A new Law on Civil Liability
for Insult and Defamation was adopted, among other things setting out maximum
levels of damages which could be awarded in civil cases. In 2012, over 200 judges, lawyers, journalists
and other practitioners participated in training on freedom of expression and
by September 2013, 161 civil court judges competent to deal with defamation had
undergone a specific training programme. 70 key judgments of the European Court of Human Rights
relating to Article 10 (freedom of expression) have been translated and made
available on the websites of the Ministry of Justice and the Academy for Judges
and Prosecutors, to act as a training tool. New draft laws on media and on audio-visual
media services were prepared which also include provisions on freedom of
expression and the media; however during the consultation phase these were
criticised by some stakeholders as potentially open to abuse. There are
continued concerns about the lack of transparency of government advertising and
self-censorship due to economic pressures exerted on journalists and media
owners. Polarisation of the media and poor professional standards hamper the
public’s right of access to diverse viewpoints and accurate information. (see also 2.2 - Human rights and the protection
of minorities).

In the area of freedom
of assembly and association, the overall situation is satisfactory. There
were no cases of misuse of the legislation or prohibitions on registration.

Freedom of thought,
conscience and religion is generally ensured. A further religious entity
was registered, bringing the number to 31. The Constitutional Court rejected a
complaint based on protection of religious freedom, made by the Bektashi
community from Tetovo, concerning the courts’ decision to reject their
registration.

Concerning women’s rights and gender equality, a
strategy for gender equality for 2013-2020 was adopted by the parliament,
together with a national action plan for gender equality for 2013-2016.
Participation by women in the local elections increased. Women’s participation
in the labour market remains very low. The capacity of some local commissions
on equal opportunity was strengthened, but their overall expertise and
activities remain limited. The Sector for Equal Opportunities Policy in the
Ministry of Labour and Social Policy still lacks adequate resources.
Discriminatory customs, traditions and stereotypes remain significant and are
open to exploitation and the fostering of regressive trends in society.
Implementation of the 2012-2015 national strategy for combating and preventing
domestic violence is slow.

In the area of children’s
rights, a new Law on Child Protection was adopted, focusing the system and
organisation of child protection around the rights of the child. The database
on vulnerable children in the Centres for Social Work started operating and was
connected to the State Statistical Office, although there is still a lack of a
systematic collection and analysis of data with particular reference to
children with disabilities. They remain the most vulnerable group, and their
social inclusion continues to be hampered by stigma, discrimination, and a lack
of appropriate infrastructure and social services. There are still only an
estimated 15% of children with disabilities in the education system, mainly in
specialised institutions. Street children have become less visible in the
reporting period and no accurate data is currently available. The Centres for
Social Work remain seriously underfunded and understaffed. A programme for the
compensation of juvenile victims was established; however, its initial budget
of €8150 is insufficient and needs to be substantially increased. In 2012 the
members of the National Council for the prevention of juvenile delinquency
started receiving remuneration for their work. Ad hoc training for juvenile
justice professionals continued. However, there are still insufficient
financial and administrative resources and poor coordination between the authorities
involved in juvenile justice. The adoption of the new Law on Justice for
Children was delayed. The conditions in the educational‐correctional facility
in Veles and the juvenile prison in Ohrid remain a matter of serious concern
and most police stations fail to meet the legal requirements applicable to
detention and interrogation of juveniles. Free legal aid is not systematically
provided to juveniles and there is still no systematic education provided to
juveniles deprived of their liberty.

As concerns the
treatment of the socially vulnerable and/or persons with disabilities, a
national coordinating body was set up to monitor the implementation of the UN
Convention on the Rights of Persons with Disabilities. Currently 69 people with
disabilities are housed in the communal housing units set up as part of the
de-institutionalisation process. Integration of people with disabilities
remains very limited and their poverty rate very high. Implementation of the
national strategy on equality of rights of people with disabilities 2010-2018
remains slow.

In the area of anti-discrimination
policies, the Commission for Protection Against Discrimination became a
member of the European Network of Equality Bodies. In 2012, the commission
received 75 complaints and processed 43. Since its establishment in 2011, the
Commission has identified discrimination in 11 cases, mainly on the grounds of
ethnicity and belonging to marginalised groups. The Commission’s
recommendations have so far been respected in all but one case. Concerns remain
about the Commission’s independence, given its persistent lack of financial and
human resources. There is a significant need for more awareness-raising
activities and campaigns to prevent discrimination and to promote understanding
of the Law on Anti-Discrimination and the work of the Commission. The Law on
Anti-Discrimination is not fully aligned with the acquis, as it does not
prohibit sexual orientation as grounds for discrimination, but in practice the
Commission also handles complaints based on sexual orientation and has already
issued several findings in this connection. Data on the reporting,
investigation and prosecution of hate speech and hate crime is not collected
systematically and training of law enforcement, prosecutors and judges needs to
be stepped up.

As regards protection
of the rights of lesbian, gay, bisexual, transgender and intersex
(LGBTI) persons, the situation
has worsened. Reports of violent attacks, including against the LGBT Support
Centre in Skopje, need to be fully investigated by law enforcement authorities.
Further efforts, including awareness-raising and promotion of tolerance, are
needed from the authorities at all levels. Homophobic media content persists
and media professionals and owners need to take greater responsibility in
combating ignorance and intolerance.

As regards labour and trade union rights, social
dialogue is functioning well. The right to strike was challenged in the case of
a strike by medical workers. Bipartite social dialogue has not improved. The
capacity of trade unions is still weak.

In the area of property rights, the land register
now covers 100% of the country’s territory and a new Law on Cadastre was
adopted, regulating its maintenance. The E-cadastre system became operational
in all 29 branches of the Cadastre Office and includes web-based updating of
property rights by notaries and bailiffs and electronic issuing of
cadastre-related data. The Law on Expropriation was amended to limit
reimbursement for expropriated property with a market value of over €5 million
and €25 million to periods of five and eight years respectively. The Law on
Denationalisation was amended to provide for compensation instead of
restitution on certain grounds including defence and the public interest.
Property which could not be returned continued to be compensated through the
issue of government bonds. In 2012 the twelfth bond issue had a total value of €12
million. In 110 out of 272 property complaints lodged with the Ombudsman’s
Office, most of which related to denationalisation, a breach of property rights
was confirmed. Some cases have remained at the first-instance stage for over a
decade. There is a lack of consistency in property decisions taken at second
instance and by the Administrative Court, which needs to be addressed in order
to secure legal certainty.

As regards the respect for and protection of minorities
and cultural rights, the Agency for the Protection of Minorities Representing
less than 20% of the Population visibly increased its cooperation with civil
society and donors. It is still hampered by limited financial resources and
some of its work is mainly funded by donors. No new staff were assigned. Both
the directorate for education in communities’ languages, in the Ministry of
Education and Science, and the directorate for the promotion of culture of the
communities in the Ministry of Culture, continue to face difficulties in
fulfilling their mandates due to limited resources and the lack of a stable,
pre-determined budget. The number of textbooks and qualified teachers in
communities’ languages are limited. No state funding was allocated to the
implementation of the Strategy on Integrated Education. The trend of separation
along ethnic lines in schools, and incidents of inter-ethnic violence in
secondary schools continued.

There was an increase in state allocations for the
implementation of the Roma strategy, related to the construction of an
educational facility in Šuto Orizari; however the overall implementation of the
Roma strategy has slowed. The sustainability of ongoing projects in the area of
health, education, employment, housing and social welfare is at risk, as they
are mainly donor funded. Evaluation and monitoring mechanisms are weak and
ineffective. The unit for implementation of the Roma strategy in the Ministry
of Labour and Social Policy remains understaffed. Segregation of Roma in
schools still persists. No comprehensive measures have been taken to address
the overrepresentation of Roma children in special schools, nor to mainstream
street children into education. Open discrimination against the Roma continues,
particularly in employment. Legislative measures still need to be taken to
address civil registration and personal identity documentation. The Roma
continue to live in a cycle of poverty and unemployment, and in substandard
living conditions.

The Directorate for Personal Data Protection’s
inspections more than doubled in 2012 compared with the previous year. The
number of complaints rose from 319 in 2011 to 399 in 2012, while the number of cases
where a violation was confirmed by the Directorate decreased from 87 in 2011 to
56 in 2012. Misdemeanour and criminal procedures were initiated as a result.
Cooperation with the public and private sectors improved, and visibility at
international events increased. The Directorate carried out training for
different entities. However, sector-specific legislation is not harmonised with
data protection legislation and the Directorate is not consulted systematically
on policies and drafts. Amendments to the Law on Data Protection to further
align it with the acquis still need to be adopted. Various media, especially internet media, do not
respect the right of individuals to privacy.

Conclusion

Some progress has been
made in the field of the judiciary, notably with the introduction of stricter
professional requirements for judges and the elimination of remaining backlogs
in the courts. Further improvements are needed to ensure the independence of
the judiciary in practice, notably as regards the systems for evaluation and
dismissal, as well as to ensure that all judicial appointments are based on
merit and to address the problem of lengthy court proceedings. In the area of
corruption, the legislative framework is in place and steps have been taken to
develop and consolidate the country’s enforcement track record. Efforts are
needed to ensure proper follow-up of cases referred to the public prosecution
service and improve the effectiveness of courts both in terms of sanctioning
and speed of proceedings. As regards fundamental rights, progress was made on
the rights of the child, the protection of property rights and data protection.
However, overall efforts in this area are hampered by a persistent lack of
funding and capacity, and all relevant institutions need to become more
proactive in promoting and safeguarding fundamental rights in practice. Serious
efforts are needed to address concerns in the area of freedom of expression.

4.24. 
Chapter 24: Justice, freedom
and security

Some developments took
place in the field of migration. The Law on Foreigners was amended,
simplifying the procedure for foreigners, employed by businesses of crucial
importance to investment in the country, to obtain a permit for temporary stay.
The database on foreigners covering asylum, migration and visas, is
still in the testing phase. In 2012, 682 irregular migrants were detected in
the country, with the highest numbers continuing to be detected at the border
with Serbia. The strategic capacity for managing migration flows is
insufficient, in terms of staff and equipment, to cope with the increasing
numbers of migrants transiting the country. Border controls have not been
effective in detecting irregular migration into the country from Greece and
onward transit from the country towards Serbia. In 2012, 1067 people were
returned under the EU readmission agreement and it continues to be implemented
well. Readmission agreements with Montenegro and Switzerland entered into
force. In this area, the legislative and institutional framework is in place,
but significant efforts are needed to improve both implementation and strategic
planning.

As regards asylum,
the Law on Asylum and Temporary Protection was amended with a view to further
alignment with the acquis laying
down minimum standards for reception conditions for asylum seekers and on
procedures for granting and withdrawing refugee status. The amendments extending the Law on Free Legal Assistance
and the Law on Health Insurance Guarantees to asylum seekers entered into
force. The centre for integration, which provides services to recognized
refugees and persons under subsidiary protection, continued to build its
capacity by extending its premises. In 2012, 527 new applications for asylum
were made, a decrease from 740 in 2011. In 504 cases (95%) the asylum procedure
had to be stopped due to the applicants leaving the reception centre
prematurely. Efforts should be stepped up to prevent asylum centres from being
targeted and used by organised crime groups involved in smuggling of migrants.
The capacity of the asylum unit in the Ministry of Interior was improved
slightly by the addition of two more staff. Some progress was made on speeding
up the process of providing asylum seekers with ID papers, with more than
double the number of persons being issued with documentation during this
reporting period, compared with the previous one. Difficulties persist in
providing access to interpreters during interviews with asylum seekers. In this
area, the country is advanced.

In the area of visa
policy, the country has been well advanced for a number of years. There is
already a high degree of alignment with the EU ‘positive list’ and ‘negative
list’, with some further efforts needed to align fully by the date of
accession. All diplomatic and consular missions are linked with the national
visa system N-Vis and the Visa Centre at the Ministry of Foreign Affairs.
Secondary legislation entered into force allowing citizens of foreign countries
where there is no consular representation to make a visa application through any
of the country’s diplomatic or consular missions abroad.

The implementation of
the visa-free regime with the EU progressed smoothly overall. The national
authorities continued to cooperate in counteracting the phenomenon of unfounded
asylum applications in EU and Schengen countries. Nevertheless, the number of
citizens making unfounded asylum applications abroad is still high. Public
campaigns including leaflets, posters, media events and information talks in
municipalities and high schools have continued, in order to inform citizens of
the consequences of abusing the visa-free regime. Since the introduction in
2011 of a new criminal offence relating to facilitation of abuse of the visa-free
regime, 447 controls have been carried out on tourist agencies and passenger
transport companies and criminal charges have been brought against 20 persons.
Border controls, surveillance patrols and risk analysis have been enhanced.
However, long-term policies to improve the social and economic inclusion of the
most vulnerable groups of the population most likely to migrate, remain
underdeveloped and underfunded, and need to be stepped up in order to make a
practical impact on the situation. Further systematic efforts in all of these
areas need to continue. The Commission will submit its regular report to the
European Parliament and Council by the end of 2013.

As concerns external
borders and Schengen, the Law on Border Control and implementing
legislation continued to be harmonised with the Schengen Border Code. Travel
documents containing fingerprints started to be issued. A joint contact centre
with Albania was opened. Mixed patrols continued to be carried out at the
borders with Kosovo, Bulgaria and Albania and also started to be carried out
with Serbia; in 2012, there were over 280 mixed patrols with neighbouring
countries. Good cooperation with Frontex continued in the form of joint operations and
training, as well as through the Western Balkans Risk Analysis Network (WBRAN).
The staffing, training and equipping of the inland mobile unit set up at
central level continued. Further progress was achieved in equipping the border
police, notably with surveillance equipment and equipment for detecting forged
documents. Reconstruction and renovation of police stations for border
surveillance were completed, meaning that all 20 now meet operational
standards. Ten police stations for border surveillance are connected to the
central database of the Ministry of Interior and the connection of another six
is under way. The TETRA radio communications network has reached mobile
coverage of 87% of the country and hand-held coverage of 60%. The institutional
and functional capacity of the National Coordination Centre for border
management (NCCBM), the governmental body responsible for monitoring and
implementation of the integrated border management strategy and action plan,
remains very weak and it has limited human resources. Significant improvements
are needed in the management of the NCCBM, as well as improved internal
coordination and cooperation with related Ministries. The follow-up to the 2003
national integrated border management (IBM) strategy and the 2009 strategy for
further development of the existing IBM system is being planned and will cover
the period 2014-19. It should take full account of the EU IBM concept.
Preparations in the area of external borders and Schengen are well advanced.

Regarding judicial cooperation in civil and criminal
matters, regional cooperation was further developed. In 2012 the country
received 1255 requests for mutual legal assistance in civil matters and 2235
requests in criminal matters. It sent 767 requests to other countries for
mutual legal assistance in civil matters and 597 in criminal matters. A
bilateral extradition agreement with Croatia entered into force, as did three
bilateral agreements with Serbia, on legal assistance in civil and criminal
matters, extradition and enforcement of criminal court judgments. Three
agreements were signed with Bosnia and Herzegovina, amending existing ones on
legal assistance in civil and criminal matters, extradition and enforcement of
criminal court decisions. In the framework of its agreement with Eurojust the
country cooperated with Germany, Austria and the Netherlands on the
investigation and prosecution of organised crime groups involved in drug
trafficking and in September 2012 an agreement was also signed on the
establishment of Joint Investigative Teams with these countries. Preparations
in this area are advanced.

In the area of police
cooperation and the fight against organised crime, regional and
international law enforcement cooperation through Europol and Interpol
continued to be good. 149 international arrest warrants were issued in the
country in 2012. Preparations have been made to launch the SIENA
connection for secure exchange of sensitive and operational data with Europol.
A liaison officer still needs to be assigned to Europol.

Amendments to the Law
on Police were adopted, in order to align it with the new Law on Criminal
Procedure, but there are some concerns about the lack of clear rules on
deprivation of liberty and on the collection and storage of data. Further
efforts are needed to prepare for the implementation of the new Law on Criminal
Procedure which enters into effect as of December 2013. Training of police and
public prosecutors is ongoing, but the Investigative Centres and Judicial
Police provided for in the new law still need to be set up. New amendments to the Law on Private Security
introduced detailed criteria on the use of force by private security personnel
and set higher standards for founding and operating private security companies.
However, some provisions of the law create room for potential infringements of
citizens’ freedom of movement and increase the potential impunity of security
personnel by making the abuse of their powers subject only to fines, rather
than criminal prosecution. Amendments
to the Law on Interception of Communications, removing the direct involvement
of the Minister of Interior in authorising interceptions, entered into force
but the secondary legislation regulating its enforcement in detail and
safeguarding against undue influence in the execution of interception orders,
remains to be adopted. The Law on Electronic Communications still needs to be amended
to take into account the Constitutional Court’s annulment of certain articles
which imposed overly broad obligations on operators to provide access to
communications networks.

Basic training started
for the 330 police cadets who were recruited to the Police Training Centre in
2012. Implementation of the Training Strategy is advancing slowly.
Professionalization of human resources and a rigorously merit-based recruitment
policy should be a priority within the police. An independent and robust
external oversight mechanism for the police force is still missing.

The institutional
framework for the fight against organised crime is well established, including
specialised entities and departments within the police, the prosecution service
and the court system. A track record of investigations, prosecutions and
convictions continued to be built up steadily. In 2012 the Centre for
Suppression of Organised and Serious Crime submitted over 40 charges against
195 persons to the Basic Public Prosecutors Office for Organised Crime and
Corruption. A number of police operations were carried out against organised
groups involved in drug trafficking, cybercrime and smuggling of migrants.

Staffing of the Centre
for Suppression of Organised and Serious Crime has continued to improve slowly
(63.7% of the posts are filled, a slight increase from last year). The National
Criminal Intelligence Database is not yet operational and the National
Coordination Centre for the fight against organised crime has still to be
established. Both of these tools would provide valuable support for more
proactive investigation of organised crime. Coordinated efforts by the relevant
law enforcement agencies in the fight against organised crime (the Ministry of
Interior, the Public Prosecutor’s Office, the Customs Administration and the
Financial Police) should be intensified. The use of special investigative
measures needs to be increased, as does the systematic use of financial
investigations. The Customs Administration’s and Financial Police’s capacity to
apply special investigative measures remains limited and needs to be upgraded.
As elsewhere in the region, organised crime remains a serious concern.

In 2012, the Financial Intelligence Unit (FIU) reported 29
cases of suspicious transactions related to money laundering and 121 related to
other types of economic and financial crime to investigating authorities and
the prosecution service. Most of the cases processed continue to relate to tax
evasion. A total of 36 persons were prosecuted in six cases during 2012. Eleven
persons were convicted in four cases, an increase on last year. The level of
reporting remains weak and the investigation and prosecution of money
laundering and financial crime needs to become more proactive and efficient.

Regarding trafficking of human beings, 8 victims were
identified, down from 11 in the previous year. Efforts are needed to ensure
that the Centre for Victims of Human Trafficking has the sustained ability to
provide comprehensive care. In 2012, 24 people were charged on suspicion of
trafficking (compared with 35 in 2011) and 20 were convicted (compared with 17
in 2011), of whom 14 received prison sentences. In addition, the appeal courts
upheld 7 previous convictions sentencing offenders to 8, 6 and 4 years’ imprisonment
respectively. Mixed teams for early identification of victims were formed at
local level. A public campaign was launched on the need to combat trafficking
in human beings. A comprehensive, multi-disciplinary and victim-oriented
approach to trafficking still needs to be developed and identification of
victims needs to be improved. The country remains a source, destination and
transit country for trafficking in human beings for sexual and labour
exploitation. The national authorities in cooperation with civil society should
ensure that victims have unhindered access to assistance, support and
protection, including re-integration into society. Prevention efforts aimed at
effectively curbing the demand for trafficking in human beings should also be
stepped up.

As regards cybercrime,
the Cybercrime Convention and its Additional Protocol were ratified in 2004 and
2005 respectively and the Criminal Code penalises among other things the misuse
of personal data, online distribution of child pornography, online grooming,
creation and distribution of computer viruses, cyber fraud and cyber forgery.
Offences related to hacking, online scams, phishing, identity theft,
distributed denial of service attacks and online child pornography have been
prosecuted in the courts. There is a dedicated Cybercrime Unit since 2010,
currently located within the Centre for Suppression of Organized and Serious
Crime. The Forensic Department of the Ministry of Interior includes a lab for
analysis of IT equipment. In 2012, the government adopted a decision to
establish a national Computer Emergency Response Team (CERT) and in January
2013 a National Programme and Action Plan were adopted for the prevention and
protection of children and young people from involvement in illegal internet activities
and content.

The country is well
advanced in the field of police cooperation and the fight against organised
crime.

As concerns the fight
against terrorism, the FIU submitted seven notifications of suspicious
transactions regarding financing of terrorism to law enforcement agencies and
the prosecution service in 2012. Preparations in this area are already well
advanced.

In the field of cooperation
in the field of drugs, good cooperation on common projects continued
between the national focal point and the European Monitoring Centre for Drugs
and Drug Addiction (EMCDDA). Experts from the country actively participated in
the different training sessions organised by the EMCDDA. In 2012, the quantity
of drugs seized on the country’s territory increased slightly in relation to
2011. Cooperation between the police and customs administration on drugs
seizures improved and several successful international police operations to cut
drug trafficking channels took place. The country is on the main Balkans drug
trafficking routes and continued and sustained efforts are needed from the
Customs Administration to detect and seize narcotics at the borders. The human
resources capacity of the Illicit Drugs Department in the Ministry of Interior
also needs to be strengthened. A higher level of data exchange with partners
including Europol would facilitate the fight against organised crime groups
involved in drug trafficking in the region. The country broadly meets acquis
requirements in this area.

Regarding customs cooperation, the customs
administration took part in a number of international operations and projects
to detect illicit trade in counterfeit goods, drugs, explosives, high-risk
chemicals and pharmaceuticals. Cooperation and exchange of intelligence with
the customs authorities of neighbouring countries intensified, as did
cooperation with the relevant UN agencies. Cooperation with the regional
intelligence liaison offices of the World Customs Organisation continued.
Preparations in this area are on track. (See also Chapter 29 — Customs
union)

For measures against counterfeiting
of the euro, see Chapter 32 — Financial control.

Conclusion

Progress has been made
in the area of justice, freedom and security, notably on external borders,
judicial cooperation in civil and criminal matters and cooperation in the field
of drugs. Further efforts are needed to improve the efficiency of the asylum
system, increase the proactive investigation and prosecution of money
laundering and financial crime and prepare for the implementation of the new
Law on Criminal Procedure, in particular through training of police and public
prosecutors. Overall, preparations in this area are advanced.

4.25. 
Chapter 25: Science and
research

As regards research and innovation policy, the Law
on Innovation, the national strategy on innovation 2012-2020 and the national
programme for scientific and research activities for 2013-2017 were all
adopted. The level of investment in research stagnated at around 0.20% of GDP.

The level of participation in the Seventh Framework
Programme (FP7) continued to increase. Efforts to link industry and
academia resulted in an increase of SMEs in research projects. The
administrative capacity in the Ministry of Education and Science was
strengthened. A memorandum of understanding with the European Commission’s
Joint Research Centre (JRC) was signed, which will offer more cooperation with
the JRC institutes. The country is successful under the COST and EUREKA
programmes. Preparations to become associated to the EU’s next research and
innovation programme Horizon 2020 have started, but overall further efforts are
needed to strengthen the administrative capacity and participate in research on
societal challenges.

As regards the European Research Area, the adoption
of the national programme for scientific and research activities 2013-2017 aims
at further integrating into the European Research Area by identifying research
priorities in line with EU priorities and strengthening cooperation between
academy and industry. A target of 1.8% of GDP investment in research by 2020
has been set with 50% coming from the private sector. In 2013, the research
budget increased slightly but for technological development the budget
decreased. The innovation strategy adopted in October 2012 aims at stimulating
competitiveness and economic development based on knowledge and innovation.
Serious efforts are required to implement the strategy and reliable statistics
to monitor progress. The adoption of the Law on Innovation and a newly set-up
innovation and technological development fund are steps in the right direction.

Conclusion

Good progress was made in the area of science and research
especially as regards legislative developments and strategic documents.
Participation in FP7 continued to increase. Administrative capacity improved
but efforts are still needed to strengthen the research capacity and prepare
for Horizon 2020. Overall preparation in the area of science and research are
on track.

4.26. 
Chapter 26: Education and
culture

As regards European standards on education, training and
youth, laws on primary, secondary and higher education were amended.
Strategies were developed to minimise the ‘brain drain’ of the highly educated
and to reduce school violence. An action plan for introducing new kindergartens
in rural areas was prepared, as access to pre-school education has remained
limited to urban areas. A strategy for vocational education 2013-2020 was
adopted. Adult education activities continued with new training programmes. A
council for higher education reforms was created to ensure that the university
curricula reflect the needs of the labour market. The national qualifications
framework remains to be developed. A programme for the development of sports
until 2017 was adopted.

The country continued to improve its performance in the
areas where EU level benchmarks were set for 2020. In 2012, the country
performed better than the EU average as regards early school leaving, and
reduced the gap with the EU in other areas such as adult participation in
lifelong learning and tertiary educational attainment. Enrolment rates and
graduation from universities have increased. However, participation in
pre-school education decreased since 2010, and performance in science tests is
unsatisfactory. National targets have yet to address education and training
priorities. Regional disparities in education infrastructure remain high. The
administrative capacity of the Ministry of Education and Science remains
insufficient. There is no transparent educational data collection method.

As regards access to
the ‘Lifelong learning’ and ‘Youth in action’ programmes, the legal basis for
the management of post-2013 programmes by the National Agency was adopted. In
order for the country to participate fully in the future Erasmus+ programme,
the Ministry of Education and Science is to submit to the Commission an ex-ante
compliance assessment on the national agency for European educational
programmes and mobility. In the area of culture, the country continued
to participate in the ‘Culture’ and ‘Europe for citizens’ programmes.
Amendments to the laws on culture and on cultural heritage allow public private
partnerships. The network of bilateral cultural agreements was extended.
Alignment in the area of culture is advanced.

Conclusion

Some progress was made in the areas of education, training,
youth and culture. Improving the country’s performance in relation to the ‘Education
and training 2020’ common benchmarks and preparing the compliance assessment
for full participation in the future Erasmus+ programme remain a priority.
Preparations in the areas of education and culture are moderately advanced.

4.27. 
Chapter 27: Environment and climate change

As regards the environment, in the area of horizontal
legislation the national environmental strategy has not yet been adopted.
Administrative capacity for implementing the Environmental Impact Assessment
(EIA) and Strategic Environmental Assessment (SEA) Directives was improved, but
remains insufficient, notably at local level. A coordination body has been set
up for cooperation and dialogue with civil society. The access to information
and public consultation need to be improved in connection with the
implementation of the EIA and SEA directives.

In the area of air quality alignment with the acquis
continued, with the adoption of implementing legislation. Most of the air
quality monitoring system was made operational.

In the area of waste management, alignment with the acquis
continued, with the adoption of implementing legislation. Steps were taken to
set up an integrated regional waste management system. Investment in this area
is far from sufficient and needs to be increased with a focus on waste
separation and recycling.

In the area of water
quality, the national water strategy was adopted, together with amendments
to implementing legislation. Alignment with the acquis in this area is
still lagging behind and administrative capacity remains insufficient at both
central and local levels. Further steps were taken towards drafting river basin
management plans, and the protection and restoration water resources. River
basin management structures are not yet operational. The lack of coordination
between the competent authorities in the water sector continues to hamper
implementation of the legislation. There was no progress in addressing the gaps
in the water monitoring system. The 2013 programme for water resources provides
limited financial allocations for infrastructure investment. Preparation for
infrastructure investment is lagging behind and funding is low compared with
the needs of the sector. No progress was made in applying the ‘polluter pays’
principle or on establishing an appropriate water pricing system. This lack of
progress continued to hamper the operation of water treatment facilities and
put at risk investment in the sector.

In the area of nature protection, amendments to the
implementing legislation led to limited increased alignment with the acquis.
Management plans for protected areas were drafted. Requirements for public
consultation with stakeholders are still not properly applied. Implementation
of these plans is still inadequate due to the lack of sustainable financing and
insufficient monitoring.

With regard to industrial
pollution control and risk management, work on alignment with and
implementation of Seveso II Directive is progressing, with amendments to the
Environmental Law. The integrated pollution prevention and control permitting
process is behind schedule. The requirements for public consultation with
stakeholders are still not properly applied.

In the area of chemicals, some progress was made on
the implementation of the Regulation on Registration, Evaluation, Authorisation
and Restrictions of Chemicals (REACH) and on alignment with the Biocides
Directive. In the area of noise, preparations remain at an early stage.

Good progress was made in the area of civil protection
with participation in the IPA-funded civil protection cooperation project. The
Directorate for Protection and Rescue participated in a number of regional
meetings and training events in the framework of the Disaster Preparedness and
Prevention Initiative for South-Eastern Europe.

Regarding climate change, the country does not yet
have a comprehensive countrywide climate policy or strategy. Substantial efforts
are required in order to integrate climate change into other sectoral policies
and strategies. The country regularly associated itself with EU positions in
the international context. It has also previously associated itself with the
Copenhagen Accord, but has not yet put forward a mitigation commitment by 2020.
The country should consider making mitigation commitments consistent with those
of the EU and its Member States for the purpose of the post-2020 climate
agreement to be reached by 2015. It is also invited to start reflecting on its
climate and energy framework for 2030 in line with the European Commission’s
Green Paper ‘A 2030 framework for climate and energy policies‘.

As regards alignment with the climate acquis,
implementing legislation on consumer information on fuel consumption and CO2
emissions for new passenger cars was adopted. The country identified 40 installations for the purpose of
future implementation of an emissions trading system. Significant efforts are
required to strengthen the country’s monitoring, reporting, and verification
capacity. The country participated regularly in climate work under the Regional
Environmental Network for Accession (RENA). Efforts to raise awareness and
promote cooperation between stakeholders should be intensified.

There was little effort made to strengthen administrative
capacity for implementing and enforcing environmental and climate change
legislation. It remains largely insufficient, both at national and at local
level. Coordination between administrative bodies is not yet effective.
Stakeholders are insufficiently involved in the decision-making process. The
environmental monitoring and information system needs further development.
Investment in the sectors continues to be extremely low in relation to needs.
Full utilisation of external funding requires strengthening of capacities and
prioritisation of the sector. Environmental protection and climate change
requirements are still not well integrated into policy making and policy
implementation in other areas.

Conclusions

Limited progress was made in the fields of environment and
climate change. Further progress was made in legislative alignment with the EU environment acquis, in particular on
horizontal legislation, waste management and air quality. There was limited
progress in alignment with the EU climate acquis. Significant efforts
are needed to implement the legislation, especially in the areas of water
management, industrial pollution control, nature protection and climate change.
Significant strengthening of administrative capacity, both at central and local
level, is of the utmost importance. Investment needs to be significantly
increased, especially in the waste and water sectors. Overall, preparations in
the field of the environment are moderately advanced while preparations in the
field of climate change remain at an early stage.

4.28. 
Chapter 28: Consumer and
health protection

In the field of consumer protection, as regards horizontal
aspects, a new consumer protection programme 2013-14 was adopted. The
regulatory framework and enforcement record have improved. The Organisation of
Consumers (OC) continued to raise awareness, educate and provide advice to
consumers, and to build the capacity of professionals in market inspectorates,
consumer organisations and the relevant ministries. However, effective
implementation of consumer protection policies was limited by the continued
lack of administrative and financial resources.

As regards product safety-related issues,
information campaigns were held and brochures distributed on toy, food and
elevator safety. Consumer complaints can now be addressed not only to consumer
organisations but also to market inspectorates, public bodies’ dedicated
offices and the Ombudsman. Amendments to the Law on Product Safety were drafted
to improve alignment with the acquis.

As regards non-safety-related issues, following the
entry into force of the Law on Consumer Protection governing agreements on
consumer credit, relevant information campaigns were organised on that and on
unfair commercial practices. Consumer complaints about public utilities
and telecommunications increased. Market inspectorates need further training in
order to ensure effective consumer protection. Preparations in the area of
consumer protection are advanced.

In the area of public health, regarding horizontal
aspects, the Law on Healthcare was amended to secure funding for the public
health programs from the excise duty on beer and alcohol. 17 public health
programmes were adopted in accordance with the Law on Healthcare. The overall
budget increased compared to 2012 and the purchase of medical equipment
continued, as did preparations for the refurbishment of public health
institutions. The use of e-health cards continued to expand. Efforts continued
to develop human resources, including training programmes for health
professionals. Proper and timely planning of human resources in community
healthcare is a priority area for reform. However, capacity to plan and
implement public health programmes at local and regional level remains weak and
this limits effective decentralisation in the health sector. It also hampers
equal access to healthcare and reduces mother and child health indicators.

In the area of tobacco control, enforcement of the
Law on Protection against Smoking remains at satisfactory, especially
in urban areas.

In the area of communicable diseases, activity under
the national strategy for containment of antimicrobial resistance 2012-2016
continued. The national strategy on immunisation 2012-2020 was adopted. An
action plan for implementation of the International Health Regulations was
adopted. Action to prevent the spread of West Nile virus was successfully
taken, including awareness-raising activities and disinfection. Several
training courses were held for health professional dealing with communicable
diseases. The annual programme on HIV/AIDS and the national strategy for
fighting HIV/AIDS 2013-2017 were adopted. Preparations in this area are
ongoing.

In the area of blood, technical assistance to the
staff of blood centres aimed at full implementation of the acquis. In
the area of tissues, cells and organs, the Law on Transplantation was
amended to further align the regulatory framework with the acquis.
Preparations for implementation of the acquis in this area are ongoing.

In the field of mental health, a working
group for preparation of the new national strategy covering the period to 2020
was set up. The annual programme on healthcare for people with mental
disabilities was adopted but funds remain insufficient. Mental health
facilities remain understaffed and without adequate financial resources. No
progress has been made towards the creation of community-based mental
healthcare as an alternative to institutions. The sustainability of existing community
mental health centres is a serious concern. Preparations in this area are at an
early stage.

In the field of drug abuse prevention, an evaluation
of the national strategy regarding illicit drugs until 2012 was completed to
prepare ground for a new strategy covering 2014-2020.

As regards health inequalities, training on
implementation of international conventions on the rights of people with
disabilities was given through TAIEX for health professionals working in this
area. Under the Decade of Roma Inclusion 2005-2015, Roma health
mediators continued to provide health counselling to Roma people, which has so
far resulted in about 1 200 Roma families being covered by essential
health and social services. The yearly national programme for treatment of rare
diseases has been adopted but the budget is still low.

As regards cancer screening, a new yearly programme
for early detection of malignant diseases was adopted. Screening for early
detection of breast, colorectal and cervical cancers was provided. The cancer
registry is still only partly operational. Awareness-raising activities are
regularly carried out but additional funding is needed. Preparations in these
areas are ongoing.

Conclusion

There was some progress in the area of consumer and health
protection. Further progress in this area is undermined by the limited
financial resources available and weak operational structures, particularly in
the field of consumer protection. The sustainability of the healthcare system,
including financial resources, remains a challenge. Overall, preparations in
this area are moderately advanced.

4.29. 
Chapter 29: Customs union

As regards customs legislation, the 2013 customs
tariff was adopted in line with the latest changes in the EU Combined
Nomenclature (October 2012). Customs duties on some 120 tariff lines were
abolished or reduced as part of anti-crisis measures. Preparations in this area
are advanced.

As regards administrative
and operational capacity, the customs administration is developing a new
customs declaration and processing system and integrated tariff environment
system. A new transit application, compatible with the new computerised transit
system (NCTS), is under development through an IPA-funded project. However, the
project faces implementation difficulties, which might delay significantly the
process of accession to the Convention on a common transit procedure. The
national project plan for the NCTS has not been regularly updated. The
single-window system for issuing authorisations was upgraded with additional
functionalities and the number of economic operators using it has increased.
The project management and quality assurance capacity needs to be strengthened
in order to minimise the risks associated with parallel implementation of IT
development projects and improve performance and sustainability.

Operational capacity for customs controls and combating
cross-border crime were enhanced. The sector for control and investigations was
restructured and strengthened. Professional and integrity standards and
internal control measures were implemented systematically. The risk management
system at border crossings was further developed and new applications for risk
analysis were introduced. Several international channels for drug
trafficking were interrupted and significant seizures of drugs and other
illicitly trafficked goods were made. Sustainable financial resources for
operation and maintenance of the customs control equipment have yet to be
secured.

The customs
administration took part in the work of the business advisory body as a forum
for consulting chambers of commerce and economic operators. Cooperation with
the customs administrations of the neighbouring countries and the wider region
intensified, with a number of agreements signed and bilateral meetings held.
Preparations in this area are advanced.

Conclusion

There was some progress in the area of customs union. The administrative capacity of the customs
administration to implement legislation, inter-agency cooperation and capacity
to tackle cross border crime continued to improve. Further strengthening of the
institutional and management structure is needed, including greater
sustainability and continuity of financial and human resources. Preparations in
this area are advanced.

4.30. 
Chapter 30: External relations

In the area of the common commercial policy, the
country participated in the work of the Central European Free Trade Agreement
(CEFTA) bodies and continued to closely coordinate and align itself with the
policies and positions of the EU in the WTO.

There were no significant developments regarding export
credits. A new list of dual-use goods and technologies is being
implemented, replacing the 2011 list and aligning with the list of dual-use
goods and technologies in Council Regulation (EC) 388/12.

Preparations in the area of the common commercial policy
remain moderately advanced.

As regards bilateral agreements with third countries,
the country ratified investment protection agreements with Kazakhstan. The
number of ratified bilateral investment protection agreements rose to 38, of
which 33 are in force and 17 are with EU Member States.

Preparations in the areas of development policy and humanitarian
aid are at an early stage.

Conclusion

Limited progress was
made in the area of external relations, notably as regards the common
commercial policy. The country’s institutional capacity is still not sufficient
for full participation in the EU’s commercial, development and humanitarian
policies. Preparations in the area of external relations are moderately
advanced.

4.31. 
Chapter 31: Foreign,
security and defence policy

Foreign policy issues
feature in the regular political dialogue between the EU and the former
Yugoslav Republic of Macedonia. (Concerning relations with other enlargement
countries and Member States, see Political criteria, 2.3 — Regional issues and
international obligations.)

As regards the common
foreign and security policy (CSFP), the country aligned itself, when
invited, with 33 out of 35 EU declarations and Council decisions (94%
alignment). (As regards the International Criminal Court,
see Political criteria, 2.3 — Regional issues and international obligations.)

The country also
aligned itself with sanctions and restrictive measures introduced by
Council decisions and continued to implement restrictive measures during the
reporting period. There were regular meetings of the relevant coordination
body.

There were no
developments concerning conflict prevention.

With regard to non-proliferation,
the National Coordination Body on prevention, risk reduction and protection
against chemical, biological, radiological and nuclear weapons and materials
met twice in the reporting period. The Ministry of the Interior organised
campaigns on misuse of firearms and petards at public events. No campaigns were
run to collect illegal weapons or destroy weapons.

The country continued
to cooperate actively with international organisations (UN, OSCE,
Council of Europe, etc.). It chaired the US-Adriatic Charter and the South-East
European Cooperation Process for most of the reporting period.

With regard to security
measures (classified information), the first round of negotiations with
Spain took place on an Agreement on Exchange and Mutual Protection of
Classified Information.

As regards the common
security and defence policy, the country maintained its ongoing commitment
to participate in EU civil and military crisis management operations. It signed
and ratified the Agreement on establishing the framework for participation of
the country in EU Crisis Management Operations. The country is currently
participating in the ISAF mission in Afghanistan (156 personnel). Two members
of the country’s police force carried out training activities in the Military
Police School in Afghanistan.

The former Yugoslav
Republic of Macedonia also continued
to participate in the EUFOR operation in Bosnia and Herzegovina — ALTHEA — (11
personnel). It also continued to participate in the UNIFIL operation in Lebanon
(one staff officer).

Conclusion

The country has maintained its high level of alignment with
EU declarations and Council decisions and has continued to participate in civil
and military crisis management operations. Overall, preparations in the area of
foreign, security and defence policy are well advanced.

4.32. 
Chapter 32: Financial control

In the area of public
internal financial control (PIFC), the Treasury manual has been amended to
strengthen commitment control by obliging budget users to record multi-annual
commitments from 2014 onwards. Certification of internal auditors in the public
sector has started. The Law on Financial Inspection in the public sector has
been adopted. The government has adopted a revised action plan for the public
administration reform strategy (2010-2015) at the end of 2012, including some
actions relating to PIFC and inspection. The new PIFC Policy Paper remains to
be adopted. There is still insufficient coordination and implementation of PAR
and Internal Control reform plans. Overall, there is insufficient delegation of
responsibilities, which hinders moves towards genuine managerial
accountability.

In the area of external
audit, the State Audit Office (SAO) completed 54 audits in 2012 compared to
77 audits in 2011. The SAO carries out all types of audits, and financial
audits result in a professional audit opinion. Performance audit is being
gradually developed. The SAO has increased cooperation with parliament by
signing a memorandum for appropriate follow-up of the audit reports and
by preparing a manual of procedures for parliament on reviews of reports. Currently,
parliament systematically discusses and approves only the annual SAO report,
but there is no formal review mechanism for individual audit reports. The SAO’s
independence still needs to be safeguarded constitutionally. The SAO’s
budgetary autonomy is not guaranteed in practice, and its operational budget
for 2013 has been reduced by the Ministry of Finance.

As regards the protection
of the EU’s financial interests, the National Authorising Officer has
submitted reports on 78 cases of irregularities, 17 of which have been sent to
the public prosecutor. The Anti-Fraud Coordination Service has set up a working
group for preparation of a national strategy for prevention of fraud and
protection of the EU’s financial interests for the period 2013-15.

As regards protection
of the euro against counterfeiting, the central office for preventing money
counterfeiting cooperates and participates in joint activities with Europol. An
electronic database on counterfeited money is in place, with access for the
Ministry of the Interior, the financial police, the central bank and the
customs administration. The first users from the Centre for Suppression of
Organised Crime have completed training on use of the database.

Conclusion

There has been little progress in the area of financial
control. The linkages between development of PIFC and wider public
administration reform need to be further strengthened. Substantial efforts are
also needed to safeguard the State Audit Office’s independence in the
Constitution and to ensure administrative capacity for the protection of the EU’s
financial interests. Overall, preparations in this area are at an early stage.

4.33. 
Chapter 33: Financial and
budgetary provisions

There were no developments in the areas of traditional
own resources, the VAT resource and the GNI resource. (For
progress in the underlying policy areas see Chapters: 16 — Taxation; 18
— Statistics; 29 — Customs union; and 32 — Financial control.)

In the area of administrative infrastructure, the
institutions for the underlying policy areas directly affecting the own
resources system are largely in place. These institutions will need to be
further strengthened to ensure correct calculation, collection, payment and
monitoring of own resources and reporting to the EU on the implementation of
the EU’s own resources rules.

Appropriate coordination structures to steer and streamline
own resources pre-accession preparations and to establish working procedures
need to be set up. Effective tools to fight tax evasion and fraud and to reduce
the size of the informal economy need to be further developed.

Conclusion

There has been no
progress in the area of financial and budgetary provisions. The institutions
and capacity needed to provide the administrative framework for correct calculation,
forecasting, collection, payment, monitoring and reporting of own resources
will need to be built in due course. Overall, preparations are at an early
stage.

Statistical Annex

STATISTICAL DATA || || || || || || || ||

The former Yugoslav Republic of Macedonia || || || || || ||

|| || || || || || ||

Basic data || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Population (thousand) || || 2 031 || 2 045 || 2 049 || 2 053 || 2 057 || 2 060

Total area of the country (km2) || || 25 713 || 25 713 || 25 713 || 25 713 || 25 713 || 25 713

|| || || || || || ||

National accounts || || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Gross domestic product (GDP) (million national currency) || || 233 840 || 411 728 || 410 734 || 434 112 || 459 789 || 460 587f

GDP (million euro) || || 3 839 || 6 720 || 6 703 || 7 057 || 7 473 || 7 490f

GDP (euro per capita) || 1) || 1 890 || 3 286 || 3 269 || 3 434 || 3 630 || 3 651fp

GDP (in Purchasing Power Standards (PPS) per capita) || 1) || 4 972 || 8 414 || 8 500 || 8 748 || 8 868p || 9 057fp

GDP per capita in PPS (EU-27 = 100) || || 25 || 34 || 36 || 36 || 35 || :

Real GDP growth rate (growth rate of GDP volume, national currency,% change on previous year) || || -4.5 || 5.0 || -0.9 || 2.9 || 2.8 || -0.2e

Employment growth (national accounts,% change on previous year) || || -1.7 || 6.2 || 2.5 || 1.5 || 3.1 || 0.5f

Labour productivity growth: GDP growth per person employed (% change on previous year) || 2) || -2.9 || -1.1 || -3.4 || 1.4 || -0.3 || -0.4f

Real unit labour cost growth (national accounts,% change on previous year) || || -0.8 || -2.0 || 9.9 || 1.8 || -6.5 || -0.7f

Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100) || || 46.5 || 58.5 || 60.2 || 58.3 || : || :

Gross value added by main sectors (%) || || || || || || ||

Agriculture and fisheries || 3) || 11.8 || 11.6 || 11.1 || 11.5 || 10.9 || :

Industry || 3) || 26.1 || 24.1 || 21.8 || 21.5 || 21.6 || :

Construction || 3) || 6.0 || 5.7 || 6.0 || 6.3 || 7.4 || :

Services || 3) || 56.1 || 58.7 || 61.1 || 60.8 || 60.0 || :

Final consumption expenditure, as a share of GDP (%) || || 94.8 || 98.5 || 95.7 || 93.8 || 93.4 || 93.9f

Gross fixed capital formation, as a share of GDP (%) || || 14.8 || 21.0 || 19.9 || 19.1 || 20.6 || :

Changes in inventories, as a share of GDP (%) || || 4.2 || 5.8 || 6.3 || 5.8 || 5.6 || :

Exports of goods and services, relative to GDP (%) || || 42.7 || 50.9 || 39.2 || 46.6 || 54.9 || 53.4f

Imports of goods and services, relative to GDP (%) || || 56.6 || 76.2 || 61.0 || 65.3 || 74.5 || 75.9f

|| || || || || || ||

Industry || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Industrial production volume index (2010=100) || 4) || 95.9 || 115.1 || 105.1 || 100.0 || 106.9 || 104.0

|| || || || || || ||

Inflation rate || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Annual average inflation rate (CPI,% change on previous year) || || 5.5 || 8.3 || -0.8 || 1.6 || 3.9 || 3.3

|| || || || || || ||

Balance of payments || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Balance of payments: current account total (million euro) || || -263 || -862 || -457 || -144 || -224 || -291

Balance of payments current account: trade balance (million euro) || || -588 || -1 763 || -1 560 || -1 448 || -1 682 || -1 784

Balance of payments current account: net services (million euro) || || -21 || 9 || 16 || 37 || 98 || 23

Balance of payments current account: net income (million euro) || || -30 || -94 || -47 || -100 || -121 || -150

Balance of payments current account: net current transfers (million euro) || || 377 || 985 || 1 133 || 1 367 || 1 480 || 1 620

of which government transfers (million euro) || || 55 || 49 || 35 || 31 || 76 || 48

Net foreign direct investment (FDI) (million euro) || || 499 || 409 || 137 || 159 || 337 || 111

Foreign direct investment (FDI) abroad (million euro) || || -1 || 9 || -8 || -1 || 0 || 6

of which FDI of the reporting economy in EU-27 countries (million euro) || || : || : || : || : || : || :

Foreign direct investment (FDI) in the reporting economy (million euro) || || 500 || 400 || 145 || 160 || 337 || 105

of which FDI of EU-27 countries in the reporting economy (million euro) || 5) || : || 264 || 131 || 139 || 210 || 56

|| || || || || || ||

Public finance || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

General government deficit/surplus, relative to GDP (%) || || : || -0.9 || -2.6 || -2.4 || -2.5 || -3.8

General government debt relative to GDP (%) || || 48.8 || 20.6 || 23.8 || 24.2 || 28.0 || 34.1

|| || || || || || ||

Financial indicators || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Gross foreign debt of the whole economy, relative to GDP (%) || 6) || 44.2 || 49.2 || 56.4 || 58.2 || 64.9f || 68.9

Gross foreign debt of the whole economy, relative to total exports (%) || 6) || 108.4 || 97.6 || 148.2 || 127.8 || 121.6 || 131.7

Money supply: M1 (banknotes, coins, overnight deposits, million euro) || || 415 || 881 || 854 || 933 || 997 || 1 072

Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || || 1 145 || 2 913 || 3 040 || 3 277 || 3 523 || 3 540

Money supply: M3 (M2 plus marketable instruments, million euro) || || 1 267 || 3 184 || 3 388 || 3 781 || 4 147 || 4 330

Total credit by monetary financial institutions to residents (consolidated) (million euro) || || 620 || 2 803 || 2 913 || 3 102 || 3 367 || 3 551

Interest rates: day-to-day money rate, per annum (%) || 7) || 11.7 || 4.1 || 6.0 || 3.8 || 2.2 || 2.1

Lending interest rate (one year), per annum (%) || 8) || 23.0 || 8.5 || 10.0 || 5.5 || 5.5 || 4.2

Deposit interest rate (one year), per annum (%) || 9) || : || : || : || : || : || 1.0

euro exchange rates: average of period - 1 euro = ... national currency || || 60.913 || 61.265 || 61.273 || 61.515 || 61.529 || 61.524

Effective exchange rate index (2005=100) || 10) || 88.6 || 100.8 || 106.8 || 106.3 || 107.2 || 108.5

Value of reserve assets (including gold) (million euro) || 8) || 844 || 1 495 || 1 598 || 1 715 || 2 069 || 2 193

|| || || || || || ||

External trade || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Value of imports: all goods, all partners (million euro) || || 1 893 || 4 664 || 3 637 || 4 137 || 5 053 || 5 062

Value of exports: all goods, all partners (million euro) || || 1 293 || 2 698 || 1 937 || 2 535 || 3 215 || 3 114

Trade balance: all goods, all partners (million euro) || || -600 || -1 966 || -1 700 || -1 602 || -1 838 || -1 948

Terms of trade (export price index / import price index) || || 97.1 || 93.1 || 98.3 || 101.5 || 92.7 || :

Share of exports to EU-27 countries in value of total exports (%) || || : || 59.6 || 56.4 || 61.8 || 60.4 || 62.8

Share of imports from EU-27 countries in value of total imports (%) || || : || 48.2 || 52.3 || 53.2 || 54.4 || 58.4

|| || || || || || ||

Demography || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) || || 5.0 || 1.9 || 2.3 || 2.5 || 1.6 || 1.7

Infant mortality rate: deaths of children under one year of age per 1000 live births || || 11.9 || 9.7 || 11.7 || 7.6 || 7.6 || 9.8

Life expectancy at birth: male (years) || || 70.8 || 72.1 || 72.5 || 72.7 || : || :

Life expectancy at birth: female (years) || || 75.6 || 76.3 || 76.7 || 77.0 || : || :

|| || || || || || ||

Labour market || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Economic activity rate (20-64): share of population aged 20-64 that is economically active (%) || || : || 69.4 || 70.1 || 70.4 || 70.1 || 69.6

- Employment rate (20-64): share of population aged 20-64 in employment (%) || || : || 46.3 || 47.9 || 48.1 || 48.4 || 48.2

Employment rate male (20-64) (%) || || : || 56.2 || 58.4 || 58.4 || 57.8 || 57.5

Employment rate female (20-64) (%) || || : || 36.2 || 37.1 || 37.5 || 38.8 || 38.7

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) || || 27.7 || 31.7 || 34.6 || 34.2 || 35.4 || 35.4

Employment by main sectors (%) || || || || || || ||

Agriculture || 11) || 25.0e || 18.9u || 18.5be || 19.1e || 18.1u || 17.3

Industry || 11) || 29.3e || 25.2u || 23.3be || 22.6e || 24.1u || 23.6

Construction || 11) || 6.0e || 6.5u || 6.5be || 6.4e || 6.2u || 6.3

Services || 11) || 39.8e || 49.5u || 51.7be || 51.9e || 51.6u || 52.7

Unemployment rate: share of labour force that is unemployed (%) || || 30.5 || 33.8 || 32.2 || 32.0 || 31.4 || 31.0

Share of male labour force that is unemployed (%) || || 29.5 || 33.5 || 31.8 || 31.9 || 31.8 || 31.5

Share of female labour force that is unemployed (%) || || 32.0 || 34.2 || 32.8 || 32.2 || 30.8 || 30.3

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) || || 56.1 || 56.4 || 55.1 || 53.7 || 55.3 || 53.9

Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) || || 26.5 || 28.7 || 26.3 || 26.7 || 25.9 || 25.5

|| || || || || || ||

Social cohesion || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Average nominal monthly wages and salaries (national currency) || || 10 552 || 16 096 || 19 957 || 20 553 || 20 847 || 20 902

Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) (2000=100) || 12) || 98.1 || 126.9 || 158.7 || 160.8 || 157.0 || 152.3

- Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in further education or training (%) || || : || 19.6 || 16.2 || 15.5 || 13.5 || 11.7

|| || || || || || ||

Standard of living || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Number of passenger cars per 1000 population || || 152.1 || 128.6 || 137.7 || 151.0 || 152.1 || 146.4

Number of subscriptions to cellular mobile telephone services per 1000 population || || 109.0 || 1 223.4 || 948.4 || 1 098.2 || 1 104.9e || :

|| || || || || || ||

Infrastructure || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Density of railway network (lines in operation, per 1000 km2) || || 36.0 || 36.0 || 36.0 || 36.0 || 36.0 || 36.0

Length of motorways (km) || || 145 || 237 || 251 || 251 || 259 || 259

|| || || || || || ||

Innovation and research || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Spending on human resources (public expenditure on education in% of GDP) || || 3.6 || 3.3 || 3.6 || 3.7 || : || :

- Gross domestic expenditure on R&D in% of GDP || || 0.3 || 0.2 || 0.2 || 0.2 || : || :

Percentage of households who have Internet access at home (%) || || : || 29.0e || 42.0e || 46.0 || 55.0 || 58.3

|| || || || || || ||

Environment || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

- Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) || 13) || 92.6 || 83.9 || 73.6 || : || : || :

Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) || || 720.4 || 613.9 || 575.7 || 573.3p || 607.1p || :

Electricity generated from renewable sources in% of gross electricity consumption || || 9.2 || 9.3 || 15.4 || 28.0 || 15.0p || :

Road share of inland freight transport (% of tonne-km) || 14) || 87.0b || 84.3 || 89.0 || 89.0 || 91.8 || 93.2

|| || || || || || ||

Energy || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Primary production of all energy products (thousand TOE) || || 1 642 || 1 624 || 1 607 || 1 616 || 1 744p || :

Primary production of crude oil (thousand TOE) || || 0 || 0 || 0 || 0 || 0 || :

Primary production of hard coal and lignite (thousand TOE) || || 1 419 || 1 378 || 1 293 || 1 194 || 1 418p || :

Primary production of natural gas (thousand TOE) || || 0 || 0 || 0 || 0 || 0 || :

Net imports of all energy products (thousand TOE) || || 1 011 || 1 404 || 1 273 || 1 271 || 1 435p || :

Gross inland energy consumption (thousand TOE) || 15) || 2 677 || 3 023 || 2 810 || 2 879 || 3 133p || :

Electricity generation (thousand GWh) || || 6.4 || 6.3 || 6.8 || 7.3 || 6.9p || :

|| || || || || || ||

Agriculture || Note || 2001 || 2008 || 2009 || 2010 || 2011 || 2012

Agricultural production volume index of goods and services (producer prices, previous year=100) || || 90.2 || 104.5 || 102.9 || 107.7 || 96.8 || 94.7

Total utilised agricultural area (thousand hectare) || || 1 244 || 1 064 || 1 014 || 1 121 || 1 120 || 1 267

Livestock: cattle (thousand heads, end of period) || || 265 || 254 || 253 || 260 || 265 || 251

Livestock: pigs (thousand heads, end of period) || || 189 || 247 || 194 || 191 || 197 || 177

Livestock: sheep and goats (thousand heads, end of period) || || 1 286 || 950 || 849 || 854 || 839 || 796

Production and utilisation of milk on the farm (total whole milk, thousand tonnes) || || 201 || 368 || 343 || 347 || 376 || 350

Crop production: cereals (including rice) (thousand tonnes, harvested production) || || 474 || 613 || 606 || 539 || 552 || 460

Crop production: sugar beet (thousand tonnes, harvested production) || || 38 || 0 || 0 || 0 || 0 || 0

Crop production: vegetables (thousand tonnes, harvested production) || || 667 || 728 || 804 || 887 || 845 || 702

: =
not available

b =
break in series

e =
estimated value

f =
forecast

p =
provisional

u = unreliable
or uncertain data

- =
Europe 2020 indicator

The balance of payments
sign conventions are used for FDI. For FDI abroad a minus sign means investment
abroad by the reporting economy exceeded its disinvestment in the period, while
an entry without sign means disinvestment exceeded investment. For FDI in the
reporting economy an entry without sign means that investment into the
reporting economy exceeded disinvestment, while a minus sign indicates that disinvestment
exceeded investment.

Footnotes:

1)  Mid-year population used in calculation.

2) GDP in constant prices of the previous year.

3) 2001 - 2008, data according to Nace Rev. 1.1.

4) Data are recalculated according to NACE Rev.2 for the period from 2008 to 2010.

5) 2012, data on FDI flows by countries are produced only for the categories Equity capital and the Loans component of Other capital. Data for reinvested earnings and the remaining components of FDI flows, based upon the Annual FDI Survey, are available within t+270 days.

6) 2001, external debt data are calculated on the old methodology, with partial data coverage.

7) Until 2001 data cover transactions with all maturities concluded on the Institutionalized Money Market. The interest rates are calculated as weighted average.From 2008, data cover bilateral transactions over night. The interest rates are calculated as wighted average.

8) End of year.

9) In 2012 NBRM introduced two deposit instruments for the banks, O/N deposit and 7 day deposit. The rate of O/N deposit was 1% and on 7 day deposits was 2% at the end of year.

10) NEER (nominal effective exchange rate).

11) 2001 - 2010, data are provided according to NACE Rev 1.1

12) In 2009 a new concept of the gross income was implemented.

13) 2001, the data are recalculated in the frame of the Third National Communication (UNFCCC); data for the period 2003 - 2009 are  part of the greenhouse gas inventory prepared in the frame of the Third National Communication (UNFCCC). The Communication will be adopted by the Government of the Republic of Macedonia in November 2013.

14) Break in series: 2004-2008 revised data (included transport for own account); break in series: 2005-2010 revised data (included pipeline transport).

15) To compute gross inland energy consumption the primary production, net imports and stock change data were used.

[1]               In April 2013, the
Commission published an ad hoc Report on specific issues on which the
Council had, in December 2012, requested additional information. ‘Report from
the Commission to the European Parliament and the Council: The former Yugoslav
Republic of Macedonia: implementation of reforms within the framework of the
High Level Accession Dialogue and promotion of good neighbourly relations’,
COM(2013) 205 final of 16.04.2013.

[2]               The rapporteur for the
former Yugoslav Republic of Macedonia is Mr Richard Howitt.

[3]               Enlargement Strategy and
Main Challenges 2013-2014, COM(2013) 700.

[4]               Commission Communication ‘The
roots of democracy and sustainable development: Europe’s engagement with civil
society in external relations’, COM(2012) 492, 12.09.2012.

*               This designation is
without prejudice to positions on status, and is in line with UNSCR 1244/99 and
the ICJ Opinion on the Kosovo declaration of independence.