# EUR-Lex - 52014SC0303 - EN

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# 52014SC0303

**COMMISSION STAFF WORKING DOCUMENT THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 2014 PROGRESS REPORT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Enlargement Strategy and Main Challenges 2014-2015 /* SWD/2014/0303 final */**

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TABLE OF CONTENTS

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

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

1.1......... Context 3

1.2......... Relations between the EU
and the former Yugoslav Republic of Macedonia. 3

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. 20

4............ Ability to take on
the obligations of membership. 22

4.1......... Chapter 1: Free movement
of goods. 22

4.2......... Chapter 2: Freedom of
movement for workers. 23

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

4.4......... Chapter 4: Free movement
of capital 24

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 29

4.12....... Chapter 12: Food safety,
veterinary and phytosanitary policy. 30

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. 34

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. 37

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. 48

4.25....... Chapter 25: Science and
research. 52

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

4.27....... Chapter 27: Environment
and climate change. 53

4.28....... Chapter 28: Consumer and
health protection. 55

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

4.30....... Chapter 30: External
relations. 57

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. 59

Statistical Annex. 60

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 European Union.

This
report covers the period from October 2013 to September 2014. 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[1]
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,[2] based
on the technical analysis contained in this report.

1.1. 
Context

The
European Council granted the status of candidate country to the former Yugoslav
Republic of Macedonia in December 2005. The Stabilisation and Association
Agreement between the former Yugoslav Republic of Macedonia and the EU entered
into force in April 2004.

1.2. 
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’). The 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. The protocol on the
adaptation of the SAA, to take account of Croatia’s accession to the EU, was
signed in July 2014; pending its ratification, the protocol is applied on a
provisional basis with effect from 1 July 2013.

Regular
political and economic dialogue between the EU and the country has continued
through the structures set up by the SAA. Meetings of the
Stabilisation and Association Committee and the Stabilisation and Association
Council took place in June and July 2014, respectively. Experts met in seven
sub-committees and in a special group on public administration reform. The
former Yugoslav Republic of Macedonia is engaging in the reinforced
multilateral economic dialogue with the Commission and with EU Member States,
in order to prepare for participation in multilateral surveillance and economic
policy coordination under the EU’s Economic and Monetary Union. No meetings of
the High Level Accession Dialogue took place during the reporting
period.

Visa
liberalisation for citizens of the former Yugoslav Republic of
Macedonia travelling to the Schengen area has been in force since December
2009. As
part of the monitoring mechanism in place since visa liberalisation, the
Commission has been regularly assessing the progress made by the country in
implementing reforms introduced under the visa roadmap. The monitoring
mechanism also includes an alert mechanism to prevent abuses, coordinated by
Frontex. The Commission has regularly submitted its post-visa liberalisation
monitoring reports to the European Parliament and the Council. The next report
will be presented by the end of 2014. A visa-waiver suspension
mechanism entered into force in January 2014. On this basis, EU Member States
can request the Commission, in an emergency situation and as a measure of last
resort, to examine the possibility of temporarily suspending the visa waiver
for third-country nationals. A readmission agreement between the
European Union and the former Yugoslav Republic of Macedonia has been in force
since 2008.

Over the period
2007-13, the EU provided financial assistance to the former Yugoslav
Republic of Macedonia under the Instrument for Pre-accession Assistance
(IPA). It has allocated a total of € 610 million to the country,
complemented by IPA multi-beneficiary programmes. The 2012-13 IPA National
Programme, worth € 56 million, will help to modernise the country in a
several areas that are critical to its accession process, including the justice
system, the economy, the agricultural sector and the environment.

Of this overall
amount, the national authorities are directly responsible for managing about € 470
million under the decentralised implementation system. There have,
however, been delays in procurement under that system, resulting in the loss of
more than € 21 million by the end of 2013. There continue to be concerns
that limited national capacity to programme and absorb IPA funds under the
decentralised implementation system (DIS) may cause further losses in the
future. The authorities therefore need to demonstrate greater commitment to
increasing the capacity of the administration, in order to accelerate
implementation and increase the impact of financial assistance.

Under
IPA II, the country will continue to benefit from pre-accession assistance over
the period 2014-20, with total indicative funding of € 664 million. The
Commission drafted an indicative strategy paper for this timeframe, in
consultation with the national authorities and other stakeholders, which was
adopted in August 2014. IPA II assistance will be directed towards supporting
reform efforts in the areas of the rule of law and governance, and
competitiveness and growth. Bilateral IPA II assistance will continue to be
complemented by IPA II multi-beneficiary assistance. The National
Programme for 2014 addresses the sectors of democracy and governance, rule of
law and fundamental rights, competitiveness and innovation, transport and
environment and agriculture.

The
former Yugoslav Republic of Macedonia participates in the following EU
programmes: the Seventh Research Framework Programme, Progress, the
Competitiveness and Innovation Framework Programme, Culture, Europe for
Citizens, Customs, and Fiscalis. The country has also recently concluded or is
in the process of concluding new agreements for a number of programmes,
including: Horizon 2020, Erasmus+, Competitiveness of Enterprises and Small and
Medium-sized Enterprises, Creative Europe, and Employment and Social
Innovation.

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, respect for human rights
and respect for and protection of minorities. It also covers regional
cooperation, good neighbourly relations with other 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

Since
independence in 1991, democracy has been consolidated. Inter-ethnic relations,
which remain fragile, continue however to pose a challenge for the country. The
Ohrid Framework Agreement, which brought to an end the conflict of 2001,
provides the framework for preserving the multi-ethnic character of the
society. There continues to be a lack of trust between the communities,
however, and further initiatives to proactively promote an inclusive
multi-ethnic society are needed. In recent years, an increasingly divisive
political culture has resulted in two political crises and a breakdown in
political dialogue. Parties in government have also blurred the line between
the state and party, thus eroding trust in public institutions. There are
serious concerns about government control over public institutions and the
media. Issues — which also feature in last year’s report — about freedom of
expression and the media, independence of the judiciary and quality of justice
need to be addressed.

Constitution

In July 2014,
the government proposed to the parliament a package of seven constitutional
changes in a broad range of areas. These included the expansion of the system
of constitutional complaint and the safeguarding of the independence of the
Central Bank and the State Audit Office. However, the package of amendments was
prepared in a very short time and without the necessary implementing
legislation. Its compatibility with the EU acquis and European standards
is being assessed. Moreover, any amendments to the Constitution need to be
based on broad consensus.

In November
2013, a majority of the Constitutional Court judges elected a new President
from among their number, following the retirement of the incumbent President.
The Constitutional Court also moved into fully equipped, modern premises. Its
work remains hampered, however, by inadequate human resources, in particular a
shortage of expert associates. The number of constitutional challenges received
and handled annually remained on a par with previous years, but there have
still not been any steps taken to improve legal certainty as regards
legislation which has been annulled due to unconstitutionality, and this often
creates gaps in the legal framework. The executive and legislative branches
need to ensure a more systematic follow-up procedure to address this. There are
also concerns that changes in the composition of the Constitutional Court in
recent years have affected its independence, and that it has started to delay
and compromise on decisions. In January 2014, it rejected an initiative to
examine the constitutionality of the controversial 2013 budget, only after
considerable delay and on technical grounds. In April 2014, the Constitutional
Court rejected an initiative to examine the constitutionality of the
controversial Lustration Law, despite having already asked for, and received,
the opinion of the Venice Commission.

Elections

Presidential
elections took place in April, together with early parliamentary elections.

In
the presidential elections, President Ivanov, from the ruling
party VMRO-DPMNE,[3]
was re-elected for a second five-year term. He won the second round with 55 %
of the vote against 41 % for the candidate from the main opposition party,
SDSM.[4]
Two ethnic Albanian parties, one in government (DUI[5]) and
one in opposition (NDR[6]),
contested his legitimacy. DUI had proposed to have a ‘consensual’ presidential
candidate, acceptable to all communities and, when this was not accepted,
exerted what the OSCE’s Office for Democratic Institutions and Human Rights
(OSCE/ODIHR) considers undue pressure on its voters not to vote. These parties
and SDSM, were absent from the President’s inauguration.

Parliamentary
elections were held alongside the second round of presidential polls on 27
April, 14 months before the end of the government term. The VMRO-DPMNE led
coalition won 61 seats (out of a total of 123), DUI 19 seats, the SDSM-led
coalition 34 seats, DPA[7]
seven seats, minor parties GROM[8]
and NDR one seat each. As polls closed, the main opposition party SDSM
announced that it would not recognise the results of the presidential or
parliamentary elections, alleging a series of irregularities, including vote
buying, intimidation, phantom voters, and bias on the part of the national
broadcaster.

The
results increased the number of seats for both VMRO-DPMNE and DUI, which again
formed a coalition. This reinforced mandate came against the backdrop of
observations by OSCE/ODIHR that both elections were efficiently administered,
that candidates had been able to campaign without obstruction and that freedom
of assembly and association had been respected. They noted, however, that the
governing parties did not provide for a level playing field due to a lack of
adequate separation between the party and state and that allegations of voter
intimidation persisted throughout the campaign. OSCE/ODIHR media monitoring
showed that the majority of monitored media, including the public broadcaster,
was biased in favour of the ruling party, and that the media often failed to
distinguish between the coverage of officials in their capacity as ministers
and as candidates. The State Election Commission met almost all of its
obligations and held regular sessions, but continued to be divided along party
lines on contentious issues. Concerns were also raised about the management and
accuracy of the voters’ list. During summer 2014, two working groups tasked
with the implementation of recommendations of the OSCE/ODIHR resumed their
activities.

Parliament

A new
parliament was formed and took office on 10 May 2014, although without MPs from
the SDSM opposition bloc. The ruling coalition maintained a stable majority. Out
of the 34 MPs from the SDSM-led coalition, 3 have accepted their mandates. The
remaining mandates have not yet been procedurally rejected. At the end of
August, after an altercation between DPA and DUI MPs, DPA temporarily withdrew
from parliament. The absence of most opposition MPs raises concerns about the
inclusive nature of parliament’s work.

The parliament
remained active prior to the elections, adopting legislation, and conducting
debates, including on Euro-Atlantic integration. Opposition parties
participated in the work of the parliament until the elections. There was broad
cross-party consensus on amendments to about 60 laws, including to the
Electoral Code and the Criminal Code, but not on amendments to the laws
relating to the media. The parliament held debates on three motions submitted
by the opposition.

The
working group on the implementation of the recommendations made by the
Committee of Inquiry into the events of 24 December 2012, when a large number
of MPs and journalists were forcibly removed from the plenary hall, was active
until October 2013, when SDSM members suspended their participation in protest
at the arrest of the chair of Skopje Centar municipal council. As a result, the
working group did not manage to complete its work on the Committee’s
recommendations, and in particular on changes to parliament’s rules of
procedure.

The Committee
for EU Affairs reviewed all 19 laws enacted under the National Programme
for the Adoption of the Acquis, and conducted an evaluation of the use
of IPA funds, with the participation of the executive, academia and civil
society organisations. Before the elections, the National Council for EU
Integration met only twice, the Committee on Inter-Ethnic Relations once
and the Permanent Oversight Committee on Human Rights did not meet. Of the 399
laws adopted during the reporting period, the shortened procedure was applied
to 175.

The
Parliamentary Institute provided training and support to the newly elected MPs
(45 out of 123).

Overall, the
functioning of parliament continued to be hindered by the lack of constructive
political dialogue and the ongoing deep divisions between the political
parties. The absence of most opposition MPs from parliament hampered its work
on adopting new reforms, and its ability to provide the necessary checks and
balances on the activities of government. It is the responsibility of both
government and opposition to ensure that political debate takes place primarily
in parliament and to contribute to creating the conditions for its proper
functioning. The
recommendations made by the Committee of Inquiry should be implemented.

Government

The
new government formed in June 2014 is again a multi-ethnic coalition with
VMRO-DPMNE and DUI as the main partners. The government work programme for
2014-18 remains largely the same as under the previous two governments:
increasing economic growth, integration into the EU and NATO, fighting
corruption and economic crime, maintaining good inter-ethnic relations on the
basis of the Ohrid Framework Agreement and investment in education and science.
The government also committed itself to implementing EU-related reform
priorities. In general, the Macedonian government needs to function better as a
unit in order to take proactive joint measures to increase trust between
communities.

With
respect to EU integration activities and EU assistance, the office of the
Deputy Prime Minister for European Affairs plays a key role.

The use of
administrative registries is being considered as an alternative methodology to
a population census, which was not carried out in 2011 due to disagreements
about the methodology for counting citizens abroad. The use of an alternative
methodology would require broad cross-party consensus.

Decentralisation
of government is a central part of the Ohrid Framework Agreement,
but one municipality has still not completed the second phase of fiscal
decentralisation. Some municipalities, such as Centar, were subject to a
disproportionate number of inspections by state inspectorates. There has been
insufficient follow-up by the authorities to the attacks and vandalism on the
buildings of the municipality of Centar.

Extra
efforts are required to ensure the transparent distribution of capital grants
to the municipalities and to ensure that they have the necessary
financial sustainability to carry out the responsibilities transferred to them.
The relevant laws on regional development have not yet been fully implemented.
The regional development budget remains insufficient.

Overall, the
coalition government needs to work in a more integrated, coordinated and
transparent manner, in order to take proactive measures on national,
inter-community and EU-related issues. Actions should be taken to address OSCE/ODIHR
concerns about the blurring of state and governing parties. Adequate resources
are needed to complete the process of decentralisation of government and to
support local development.

Public
administration

The country has
engaged in wide-ranging reforms of public administration. The Special Group on
public administration reform, the oldest in the region, continued its work.
Over the years, the Macedonian public administration has built up skilled staff
who need to be retained. However, politicisation at both central and local
level remains a serious concern. Confidence in the independence of state
institutions is low due to widely-held perceptions that the public
administration is politicised and lacks transparency. As reported by
OSCE/ODIHR, credible allegations have been made that pressure was exerted on
public sector employees during the April elections.

A
public administration reform strategy, in place since 2010, provides a
comprehensive strategic framework for public administration reform. It
aims to improve the legislative and administrative framework, in order to
increase the capacity, efficiency and transparency of public administration and
to improve the service provided to the general public. The Ministry of Information
Society and Public Administration is formally in charge of coordinating this
reform process, while major policy decisions remain with the Prime Minister’s
office.

Procedures
for policy development and coordination across
the sectors are well defined, but are not always efficiently implemented.
Thorough analysis and assessment of policies is often lacking. Procedures for
monitoring and reporting on government performance have also only been
partially implemented. The use of the single Electronic Register of Legislation
has improved.

With regard to public
service and human resources management, employment in the public sector
continued to increase, in particular in public enterprises. The routine
practice of creating new posts on social or political grounds has artificially
inflated the public service, undermining the principle of merit and the overall
goal of an efficient public administration. Prior to the 2014 elections, the
ruling party announced plans to fill a number of vacant posts at all levels,
including managerial, in municipal and public offices and enterprises.

Some
improvement has been seen in the representation of minorities, but smaller
minorities continue to be under-represented. Efforts to meet targets for
equitable representation must also take account of institutions’ real staffing
needs.

A new
legislative framework for civil service and public employment was adopted in
February 2014 and is scheduled to be fully implemented in 2015. This is a step
towards ensuring a unified, transparent and accountable public administration,
by introducing common principles to be respected by all state employees and by
creating a common regulatory framework. The legislative framework streamlines
recruitment for both majority and non-majority communities, putting more
emphasis on merit. The new legislative framework will require detailed data on
public sector employees to be made publicly available, which should contribute
to improving transparency.

The full
assessment of the new laws will only be possible once all implementing rules,
including key regulations on defining and fulfilling targets for equitable
representation, are in place and applied. A number of exceptions allow staff in
some institutions to be partially or totally regulated by special laws or
general labour law and collective bargaining. There continue to be concerns
about the transparency of the staff dismissal and mobility procedures, and
about the methodology of the testing phase in the selection process.

As
part of improving service delivery, the government continued to promote
and develop e-government and one-stop shops as useful tools for providing
services to the general public. The interoperability framework needs to be
completed. The principle of tacit administrative approval continued to be
implemented inconsistently, with complex appeal procedures and fees causing
uncertainty and delays. The state commission for administrative appeals is
still insufficiently equipped and understaffed, despite the scope of its work
and its responsibilities having been increased. The new draft legal framework
on general administrative procedures needs to bring major changes to the
approach taken, to the proceedings themselves, the remedies used in cases where
appeals are upheld and the enforcement of decisions.

With
regard to accountability, the enforcement of the Law on Free Access to
Public Information remains inadequate. A Law on Use of Public Data, adopted in
February 2014, is expected to increase transparency and encourage public
institutions to publish data. The number of complaints received by the National
Commission for Protecting Access to Information, primarily against state
administrative bodies, local authorities and the judiciary, decreased by more
than half in 2013. As was the case in the previous year, three quarters of the
complaints related to the failure to respond promptly to requests. For the law
to be enforced efficiently, the National Commission needs to have the capacity
and the power to impose penalties for misdemeanours.

The
essential elements of the legal framework for public financial management
are in place, but progress in implementation has been limited and patchy. There
is not yet a public financial management reform programme to address
more systematically the necessary reforms in the different parts of the public
financial management system. A public finance review is under way and could be
used as a starting point for preparing such programme. Strategic planning and
budgeting needs to be strengthened and a medium-term budgetary framework
established. To address some of the challenges, compulsory recording of
multiannual commitments in the treasury system has been introduced. Annual
budget planning and execution needs to be improved, in order to avoid cuts in
growth-enhancing investment spending, under-execution of capital expenditure
and an accumulation of arrears. The Law on financial discipline, dealing with
late payments, was amended to extend its scope to the public sector. However,
outstanding arrears from the delayed payment of VAT refunds and obligations for
public contracts still exist. There is a lack of transparency around the full
extent of public debt. The legal framework for awarding public contracts is
relatively advanced but uses lowest price as the main criterion for selection,
as opposed to best value for money, which may have a negative effect on the
quality of public spending. The procedure for awarding contracts needs to be
made more transparent. Implementation of public internal financial control is
still at an early stage. The State Audit Office performs all types of audits,
and performance audit is gradually being developed. Its resources are not
sufficient to fully cover its mandate.

Overall,
public
administration remains fragmented and subject to political influence, despite
progress on legislation. Additional efforts are needed to ensure that the
principles of transparency and accountability, merit and equitable
representation are applied. The basic structure and processes of a public
financial management system are in place, but fiscal transparency needs to
improve. There are also weaknesses in the implementation of public financial
management systems, and a more comprehensive approach to reform is needed.

Ombudsman

The
Office of the Ombudsman was established in 1997 and has built up a significant
practice of monitoring and reporting. It is mandated by the Constitution and
the Law on the Ombudsman to protect citizens’ rights. In 2013, the Office
received 3 780 complaints (a decrease of 27.5 % compared to 2012).
Violations were confirmed in 1 174 cases, most of which concerned the
judiciary, consumer rights and property rights. Increased numbers of violations
were confirmed in the areas of anti-discrimination and prisons, among others.
As in previous years, the level of acceptance and follow-up of the Ombudsman’s
recommendations by state bodies remained high, at around 80 %. More
efforts are still needed from the Ministries of Health and Finance, as well as
local self-government bodies, to follow up on pending recommendations. The
Office continued actively to pursue its role as National Preventive Mechanism
under the Optional Protocol to the Convention against Torture. The Law on the
Ombudsman needs to be amended in order to ensure full compliance with the Paris
Principles relating to human rights bodies, notably to extend the Office’s
mandate to human rights promotion and to secure its financial independence. A
legislative proposal has been presented to the government; however this has not
been acted upon.

Civil
society

An
empowered civil society is a crucial component of any democratic system and
should be recognised and treated as such by the government. There have been
formal improvements in terms of legislation and consultation mechanisms, but
civil society organisations continue to express concern about the difficult
climate in which they operate and the limited government commitment to
dialogue.

The Secretariat
for European Affairs took steps to improve consultation of and coordination
with civil society organisations. The government’s second Strategy and Action
Plan for cooperation with civil society was inadequately implemented, due to a
lack of political commitment, administrative capacity and resources.
Preparations for setting up an advisory council on cooperation with civil
society, one of the main obligations in the government Strategy and the open
government action plan, have not yet started. The code of good practice for
participation of civil society organisations in policymaking processes has been
applied inconsistently, with the result that the consultation process has
largely continued to be a formality.

Granting
of state funds to civil society organisations has not yet been fully regulated,
leaving the sector largely dependent on donor funding. The relevant laws
related to financing and tax incentives for the civil sector remain complex and
inconsistent. The new law on money laundering and financing terrorism no longer
imposes an obligation on civil society organisations to prepare annual programmes,
or stipulates fines disproportionate to their annual budgets. Civil society in
rural areas remains underdeveloped.

Civil
society organisations have started to coordinate more with one another on
specific topics, such as IPA II, and have proposed more structured mechanisms
for consulting with the government, based on the sectoral approach.

Judicial
system

The
legislative framework governing the country’s judiciary, as well as its
physical and technical infrastructure, has developed considerably as a result
of the comprehensive reforms carried out over the past decade. Many of the
overarching issues facing all candidate countries have been tackled, including
the elimination of court backlogs, the establishment of the Academy for Judges
and Prosecutors, the formal independence of the judicial governance body (the
Judicial Council), the introduction of a system of administrative justice and
improvements to both civil and criminal procedure legislation. As a result, the
country is now in an advanced phase requiring more complex and challenging
improvements. These relate to the need to secure not only structural but
functional independence of judges, improving the quality of justice and
standards of service to the citizen, increasing the cost-effectiveness and
value of the court system, better strategic planning, increased use of
non-judicial remedies and alternative dispute resolution and improved access to
justice for more vulnerable members of society.

One
of the main challenges is the growing concern voiced about the selectivity of,
and influence over, law enforcement and the judiciary. The basic rule of law
principle, that justice must not only be done but must also be seen
to be done, is not fully understood or respected by the authorities in
terms of law enforcement actions targeted at specific persons or sectors.
Questions continue to be raised both inside and outside the country about
possible political influence over certain court proceedings. Although the court
structure is formally independent from external influence of the parliamentary
and executive branches, individual judges must also appear to be acting
independently of any form of pressure, otherwise public trust will be lost and
the rule of law called into question. Systemic improvements to the quality of
justice are also needed, notably clearer reasoning and transparency of court
judgments (to increase public trust and address concerns about independence);
greater and more consistent use of superior court and ECHR case-law (to improve
the predictability and legal certainty for individuals and businesses using the
courts) and more widespread implementation of the existing Codes of Ethics.
Strengthened safeguards are also needed to ensure that judicial appointments
and promotions are merit-based.

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

Fight
against corruption

The legal and
institutional framework is in place and the country is steadily building a
track record of investigations, prosecutions and convictions. Data has been
gathered on several hundreds of corruption cases initiated since 2009 and over
30 high-level corruption cases initiated since 2004, all of which are now
subject to continuous monitoring from investigation until final sentencing.
However, more concrete results need to be seen in practice, both in terms of
reduction and deterrence of corruption. The human and financial resources of
the various enforcement bodies and supervisory agencies remain weak and their
powers, status, independence and visibility need to be strengthened in order to
engage in effective operations. Inter-agency cooperation and communication
still needs to improve further and data exchange and sharing is limited.
Problems include the lack of IT interconnectivity between the courts and the
prosecution service and the absence of a central register of public officials,
which hampers the supervisory work of the State Commission for the Prevention
of Corruption. The lessons learned from past anti-corruption policies and
measures need to be put to use much more effectively. There is currently little
strategic planning in this area, and future policies should be better targeted
towards the real problem areas, including public procurement, political
corruption and high-level corruption. Awareness-raising measures and greater
political commitment are urgently needed. Claims of selective enforcement and
political influence in this area persist, and a more proactive stance is needed
to eliminate these serious concerns. Public trust in anti-corruption bodies
remains low. As is the case elsewhere in the region, corruption remains
prevalent in many areas and continues to be a serious problem.

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
legal and institutional framework is in place and there is active regional and
international cooperation, including through Eurojust and Europol. The country
gained access to Europol’s SIENA platform in 2013, which considerably
strengthened information exchange with EU law enforcement bodies. As
was the case in previous years, a number of successful police operations
against organised groups were carried out, notably cutting off international
routes for drug trafficking and smuggling of migrants. A track record
has been developed of all organised crime and corruption cases initiated by the
Ministry of Interior (Department for Suppression of Organised and Serious
Crime) since 2008, but more efforts are needed to monitor all cases from
investigation until final sentencing, including through improved feedback and
information exchange between law enforcement, the prosecution service and the
courts. The capacity to fight organised crime remains hampered by the fact that
neither the National Coordination Centre for the Fight against Organised Crime
nor the National Intelligence Database has yet become operational, and delays
persist in setting up the Investigative Centres foreseen under the new Law on
Criminal Procedure.

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

The
overall framework for the protection of fundamental rights is in place but more
focus needs to be placed on its effective implementation.

The situation as
regards freedom of expression continues to be highly problematic. This
is in spite of the introduction of comprehensive new media legislation at the
end of 2013, following extensive public consultations and advice from
international organisations.

There is
indirect state control of media output through government advertising and
government-favoured (and favourable) media outlets. The public broadcaster does
not fully play its role as the provider of balanced and informative media
content, and its political bias was noted by OSCE/ODIHR during both this year’s
and last year’s elections. This results in a scarcity of truly independent
reporting and a lack of accurate and objective information being made available
to the public by the mainstream media. Poor journalistic standards and ethics
contribute to the situation. A positive development has been the establishment
of a self-regulatory body, set up in December 2013 by media actors themselves.
This should be supported in order to become operational as soon as possible. In
September 2014, the government made data on government advertising, including
partial figures, publicly available; however it is still unclear which media
outlets are the primary beneficiaries of such campaigns and according to what
criteria public funds are disbursed. Defamation actions continued to be raised
by journalists against other journalists (highlighting the low level of
solidarity within the profession), by politicians against journalists (creating
a chilling effect on the freedom of expression) and by politicians against
other politicians (in the place of open public debate). Court judgments upholding
claims of defamation have been relatively low in number and have been relatively
conservative in their award of damages; however there are exceptions, including
cases involving public figures. This sends a damaging message, both as regards
the freedom of expression and the impartiality of the courts. Non-judicial
means for resolving such cases should be developed and strongly promoted by the
government and by journalists and public figures should lead by example.

As
regards the rights of lesbian, gay, bisexual, transgender and intersex (LGBTI)
persons, the violent incidents against the LGBTI Support Centre have not been
repeated. Nevertheless, the perpetrators of these incidents are yet to be
prosecuted. Considerable efforts are needed to increase awareness of and
respect for diversity within society, and to counteract the intolerance
perpetuated through the media and social networks. 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. The Law on Prevention and Protection
against Discrimination still needs to be aligned with the EU acquis as
it does not prohibit discrimination on the grounds of sexual orientation.

Progress
on the protection of minorities continues to be hampered by insufficient
financial and human resources and inadequate cooperation between the
authorities concerned. A more proactive approach is needed to guarantee the
ethnic, cultural and linguistic identities of all communities.

The
Roma community continues to live in deep poverty and to suffer from poor social
and economic conditions. Prejudice and discrimination against Roma persists,
particularly in the area of employment. Projects are ongoing in several
priority areas, but they are driven mainly by donor funding as state budget
allocations remain unchanged. A new Roma strategy was adopted recently by the
government.

The
main priorities of the Ohrid Framework Agreement continued to provide a
basis for inter-community relations. There is room for improvement in the areas
of non-discrimination, fair representation, and the use of languages and
education. The Law on Use of Languages and the Law on Use of Flags of the
Communities have still not been properly implemented. Local committees for
relations between the communities are suffering from a lack of resources. A
review of the implementation of the Ohrid Framework Agreement is still
incomplete and the resulting recommendations have not yet been published. The
budget of the Secretariat for the implementation of the Ohrid Framework
Agreement has been increased, mostly to take account of the salaries of around
1 700 civil servants who are yet to be assigned to the state
administrative bodies. The Secretariat and the Secretariat General continued
recruiting civil servants from non-majority communities, but without specifying
defined posts or job descriptions, often at the expense of the principle of
merit. In 2013, the overall proportion of civil servants coming from
non-majority communities increased slightly to reach 19 %. Measures to
address the underrepresentation of smaller minorities, such as the Roma, Turks
and others, remain inadequate. Increased political support and state funding
are necessary for efficient implementation of the Strategy on Integrated
Education.

Major protests
by the ethnic Albanian community started in July after the court verdict on the
so-called ‘Monster’ case relating to murders carried out in 2012. The murder of
a teenager in the Skopje municipality of Gjorče Petrov in May, while not
ethnically motivated, triggered protests and increased inter-ethnic tension,
again exposing the lack of trust between communities. The coalition partners
made joint efforts to calm the protests but some political leaders from both
communities continued to use ethno-centric and divisive language, particularly
during election campaigns. More effort is needed, under the Ohrid Framework
Agreement, to proactively promote positive inter-community relations.

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. 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. In doing so, it is not
complying 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.

As of
1 January 2014, there were a total of 2 074 refugees in the former
Yugoslav Republic of Macedonia, of which 955 were Roma refugees from Kosovo* and
229 internally displaced persons. In 2013, 82 persons were voluntarily
repatriated to Kosovo and Serbia. The Ministry of Employment and Social Policy
continues to provide financial support to families for rented housing and
utilities, in accordance with the Strategy for Integration and the Law on
Asylum and Temporary Protection. A committee was formed to represent Roma
refugees. Some social housing units were provided. Roma refugees continue to
live in poverty, in substandard living conditions, with a high level of
unemployment. Access to education, housing, health and employment continues to
be a concern. Court procedures concerning internally displaced persons, in
relation to claims for damages resulting from the 2001 conflict, are still
ongoing and the majority of those affected remain housed with host families.

Regional
cooperation and good neighbourly relations form an
essential part of the country’s process of
moving towards the EU. The country has continued to actively
participate in regional initiatives, including the South-East European
Cooperation Process, the Regional Cooperation Council, the Energy Community
Treaty, the European Common Aviation Area Agreement and the Central European
Free Trade Agreement, which it is chairing in 2014. The country is continuing
to contribute to the EUFOR ALTHEA mission in Bosnia and Herzegovina.

On 29
September 2014, the former Yugoslav Republic of Macedonia, Bosnia and
Herzegovina, Montenegro and Serbia signed an agreement on reducing the prices
of roaming services on public mobile communications networks.

The
former Yugoslav Republic of Macedonia has continued to play a generally
constructive role as regards bilateral relations with other enlargement
countries and neighbouring EU Member States. A bilateral convention
on regional cooperation, under Article 12 of the SAA, has not yet been
concluded with Serbia.

Good
bilateral relations with Albania continued. Short-lived tensions
following demonstrations and statements in July due to the verdict in the ‘Monster’
case did not interrupt the frequent high-level bilateral visits, which
continued throughout the year. In March, the two countries signed a memorandum
of cooperation in the field of tourism.

Relations
with Bosnia and Herzegovina continued to develop well. Amendments to a
number of agreements were ratified. Rescue teams were sent and funds collected
to support relief efforts following the May floods.

Cooperation
with Montenegro was further strengthened. The countries signed an
agreement on sharing diplomatic and consular services and a protocol on
cooperation in the area of military training. The former Yugoslav Republic of
Macedonia also signed agreements on legal assistance in civil and criminal
matters, on mutual enforcement of court rulings, and on cooperation in the
field of information and communication technologies with both Montenegro and
Serbia.

Relations with Serbia
remained good. A joint centre for police cooperation was opened at the
Tabanovce border crossing point and a protocol on cooperation between
Ministries of the Interior was signed. The two countries also signed agreements
on the exchange and mutual protection of classified information, on mutual
recognition of diplomas, and on mutual sharing of premises for diplomatic and
consular offices. They also signed a protocol for cooperation in the field of
tourism. The dispute relating to the Orthodox churches in both countries remained
unresolved but did not prevent closer political cooperation. Rescue teams were
sent and funds collected to support relief efforts following the May floods.

Cooperation
with Kosovo continued to improve. Agreements on mutual recognition of
pensions and on strengthening cultural cooperation entered into force. An
agreement for the opening of a new joint border crossing point at
Belanovce-Stančik was ratified.

Close
relations with Turkey were maintained. The countries ratified agreements
on cooperation in the fields of employment, social security and employment, and
on activities linked to setting up cultural centres. Foreign direct investment
from Turkey has grown steadily in the past few years, reaching 4 % of the
country’s total FDI stock in 2013.

Relations
with Bulgaria remain affected by differences primarily concerning
interpretation of history. A number of high-level visits took place. In
December, consultations on EU-related issues were held at official and expert
level. Negotiations on a bilateral agreement on good neighbourly relations
continued. There was also an exchange of letters between Presidents Ivanov and
Plevneliev on this subject. However, open issues remain. The countries
continued to cooperate on defence issues, and cross-border, sectoral and trade
relations continued, with good cooperation including on infrastructure
priorities. People to people contacts continued normally.

Good
relations with Croatia continued, promoted by high-level visits. An
agreement on the Euro-Atlantic Partnership entered into force. Amendments to
the agreement on economic cooperation and trade were signed, as was the joint
declaration on the adoption of the regional strategy for research and
innovation development for the period 2014-20.

Relations
with Greece continued to be affected by the name issue. Formal talks on
the name issue, under the auspices of the UN and led by the UN Secretary
General’s Personal Envoy Matthew Nimetz, included visits to both Athens and
Skopje, and three rounds of talks in New York, but did not bring a resolution
of the dispute. High-level visits took place including a visit by Foreign
Minister Venizelos, in his capacity as chair of the Council of Ministers of the
EU. The respective Ministries of Defence signed a cooperation protocol. Economic
and trade relations continued normally.

Overall,
the
former Yugoslav Republic of Macedonia is participating actively in regional
cooperation and further developing bilateral relations with its neighbours. The
name issue continues to affect relations with Greece. 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 challenges with neighbours is important and actions and statements
which 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.

Monitoring of
the economic criteria needs to be seen in the context of the increased role of
economic governance in the enlargement process, as welcomed by the General
Affairs Council of 17 December 2013. To this end, the ECOFIN Council in May
adopted targeted policy guidance for the country, based on its Pre-accession
Economic Programme.

3.1. 
The existence of a functioning market economy

Driven by a
strong external sector and foreign direct investment, the economic recovery
progressed and external imbalances declined somewhat. Yet, structural
rigidities continue to impede the proper functioning of the labour market, and
fiscal discipline and transparency suffer from being driven by short-term, ad
hoc concerns. While the involvement of the state in the economy remains
moderate, in terms of its share in productive capital and its intervention in
price setting, the development of a competitive private sector is hampered by
difficult contract enforcement, frequent legal changes without adequate
consultation of stakeholders, and uneven enforcement of regulatory compliance
requirements. Implementation of reforms to improve the business environment
remains sluggish. The development of the domestic economy depends on building
better linkages between foreign investment companies and local businesses
which, in turn, requires government and local businesses to work on better
skills-matching and investment in higher-productivity activities. Improvements
in market entry and exit would also help.

Economic
policy

The government
remains committed to growth and employment-enhancing policies focusing on
foreign investment and the development of the domestic private sector. The
labour market situation improved somewhat, but unemployment remains persistently
high, in particular among the young. Fiscal discipline and transparency
deteriorated further, affecting growth-enhancing capital spending. In January
2014, the authorities submitted the eighth Pre-accession Economic Programme
(PEP), outlining key economic, fiscal and structural reforms for the period
2014-2016. Its macroeconomic and fiscal framework is somewhat optimistic with
gradually increasing growth averaging close to 4 %, driven by domestic
demand, and a gradual reduction in the general government deficit ratio to 2.6 %
in 2016. The country would need to step up its efforts, in line with the
Conclusions of the Ministerial Dialogue between the Economic and Finance
Ministers of the EU and the Candidate Countries from May 2014, in order to strengthen
medium-term budget planning and execution and to improve the employability of
workers. In line with the same Conclusions, further efforts will be needed to
improve the business environment, in particular market exit procedures and
access to finance. Overall, the political consensus on the fundamentals
of a market economy was maintained, but economic policy and public expenditure
management remain driven by ad hoc concerns rather than the long-term
requirements of the economy.

Macroeconomic
stability

The
economic recovery that began cautiously in the second half of 2012 has gained
firmer ground. Driven by the external sector, output expanded by 2.9 % in
real terms in 2013. Growth increased to 3.9 % year-on-year in the first
half of 2014. Investment activity slowed down considerably in 2013, improving
temporarily in the first quarter of 2014, before slowing thereafter. Private
consumption contributed positively to GDP growth in 2013, and remained
resilient in 2014. Industrial production has picked up significantly since the
fourth quarter of 2013, mainly due to a strong recovery in manufacturing. GDP
per capita remains at about 35 % of the EU average.

The current
account deficit narrowed in 2013 to 1.8 % of GDP, as the merchandise trade
balance improved, and in spite of a drop in current transfers. In the same
period, foreign direct investment (FDI) inflows strengthened– in 2013, they
accounted for 3.5 % of GDP, and stayed at the same level in the first half
of 2014. For the same period the current account deficit declined, by 1.7 %
in annual terms, on the back of a renewed pick-up in transfers, and in spite of
a widening deficit in foreign trade. Increased government borrowing abroad and
a surge in foreign loans to public enterprises were the main forces behind the
gradual increase of gross external debt. At the end of the first quarter of
2014, it stood at 66 % of projected GDP, and increased further since then,
as a result of the government’s € 500 million Eurobond issue in July.
Looking ahead, as transfer inflows are expected to remain volatile, foreign
investment and government external borrowing will have to carry the brunt of
financing the current account deficit, which is likely to widen somewhat in the
short term, given the substantial import needs arising from public
infrastructure projects and the establishment of the new foreign entities. This
is expected to be followed by a pick-up in export activity starting in 2015,
when the new capacities are taking up operations. Overall, output growth
needs to be more broadly based, and external imbalances are likely to widen
again temporarily in view of investment-related imports.

Labour
market conditions improved marginally, but remained challenging. The
unemployment rate fell gradually, to 28.2 % in the second quarter of 2014,
from an average of 29 % in 2013. However, youth unemployment remains at
over 50 %, and four out of five registered unemployed have been so for a
year or more. In 2013 employment rate remained relatively low at 50.3 %
while labour force participation rate was 70.4 %. While employment was 1.3 %
higher in the second quarter of 2014 than a year earlier, a large share of the
new jobs, as in previous years, was in low-productivity sectors in the informal
economy and — spurred by public subsidies — in agriculture, as well as in the
public sector, aided by a significant increase in active labour market
measures. More recently, the employment impact of the new foreign entities
became visible in a pick-up in manufacturing jobs. Although complete
information on public sector employment has not been provided or published, it
is estimated that its share of total employment remained at about 20 %.
The labour market remains marked by structural rigidities such as low labour
force participation, a lack of mobility of workers between sectors, a skills
mismatch and slow reforms of the training and education system, subdued
innovation activity by firms, and low labour productivity. Overall,
reforms to tackle the structural rigidities of the labour market have made only
limited progress. The employability of workers should be improved through
structural measures as well as through better targeting of the active labour
market measures.

Monetary policy
remained successful in defending the currency peg. The inflation environment
remained benign, creating room for monetary policy to stimulate sluggish credit
growth. The increase in the consumer price index (CPI) averaged 2.8 % in
2013, down by about 0.5 percentage points since 2012 and fell further in spring
2014, mainly due to declining prices for food and housing and utilities.
Following a three-month long deflation, consumer prices rose again in July, as
regulated electricity prices for households were raised and food prices stopped
falling. After several cuts in the key monetary policy rates in January and
July 2013, and an adjustment of reserve requirements to incentivise bank
lending in local currency, the Central Bank reduced remuneration on banks’
required reserve deposits to zero in November 2013, but loan and deposit rates
declined only slowly.

Fiscal
discipline and the quality of public spending deteriorated further in 2013 and
2014. In both years, the government was again forced to adopt a supplementary
budget due to pressures arising from revenue shortfalls and repayment of
accumulated arrears owed to private companies in the first half of the year.
The 2013 central government deficit target was raised from 3.6 % to 3.9 %
of GDP, accounting for a substantial increase in pension payments and for the
arrears, while the actual deficit, at 4.1 %, exceeded even the revised
target. With a budget rebalance the planned budget deficit for 2014 was raised
from 3.5 % of GDP, to 3.9 %. Spending was heavily concentrated in the
pre-electoral period, and by end-July about 85 % of the original deficit
target had been reached. Furthermore, capital expenditure makes up a relatively
small part of overall spending — it accounted for 12 % of total
expenditure in the 2013 supplementary budget — and is prone to under-execution,
with only four fifths of budgeted sums executed.

The government’s
medium-term strategy for 2014-2016 foresees a gradually declining general
government deficit, to reach 2.6 % in 2016. However, the government’s
stated goal of current expenditure-based consolidation is not sustained by
policy measures. Pensions and agricultural subsidies were raised in spring
2014, and increases in public wages are planned. Deficiencies in public
financial management led to a marked decline in fiscal transparency and fiscal discipline
in recent years. To address these shortcomings, government budget users have
been required, since January 2014, to record multi-year liabilities and to
respect multi-year expenditure ceilings. In July, the government proposed the
introduction of constitutionally-anchored ceilings on the central government
deficit and on public debt, but did not provide adequate implementation details
ensuring a sound, rules-based application of these provisions. An amendment to
the Law on financial discipline, dealing with late payments, extended the law’s
scope to the public sector, which could possibly alleviate the problems of
government payment arrears to the private sector. However, the law contains a
number of derogations and delayed entry into force for government entities,
thus impeding its effectiveness. Overall, fiscal discipline needs to be
improved, and there is significant scope for enhancing fiscal transparency. The
government’s fiscal consolidation plans need to be underpinned by concrete
measures.

The
general government debt ratio, still comparatively moderate, has been rising
continuously since 2008, mainly on account of increasing primary budget
deficits. Central government debt stood at 40.8 % of GDP at end-July 2014 —
before the launch of the Eurobond — compared to 34.1 % at end-2012 and
20.6 % at end-2008. Debt accumulated by public enterprises, and related
contingent government liabilities due to debt guarantees — estimated at some 8 %
of GDP — are a particular concern, as the government has shifted a large share
of its spending on road construction off-budget to a new public enterprise.
Hence, total public debt stands at close to 50 % of GDP, and is likely to
rise further in the short- to mid-term, given the considerable financing needs
related to planned investment projects. Overall, the continued increase
in the levels of government and public debt gives rise to concern about its
long-term sustainability. The government needs to take steps to stabilise debt
levels.

Interplay
of market forces

The economic
importance of the public sector remained largely unchanged, with the private
sector share in total assets of the economy at 85 %. While the overall
number of enterprises with government participation decreased by 2, the number
of enterprises in full state ownership remained unchanged, at 15, as did the
level of capital in the five companies — mainly public utilities — with the
largest share of state participation. In addition a Public Enterprise for State
Roads started operations in January.

Administered and
regulated prices account for some 13 % of the CPI basket. Regulated prices
— about 12 % of the basket — usually cover production costs. Administered
prices, such as for water and waste, account for only about 1 % of the
basket and usually do not cover costs. Overall, the state’s share in the
economy’s assets and in price setting remains moderate.

Market
entry and exit

The ‘regulatory
guillotine’ project of the government has made some progress in facilitating
market entry, focusing on the reduction of administrative burdens and on
measures for small and medium enterprises. However, business still faces
difficulties in obtaining licenses and permits — the ‘one-stop shop’ procedure
is advancing only slowly, and needs to be extended to business activities
beyond construction permits. Obstacles to setting up a private business are a
particular concern, as they tend to hamper the establishment of (import
substituting) supply chains between the more technologically advanced foreign
entities, and the domestic private economy. Improvements in market exit
procedures remain even more limited. The number of bankruptcy procedures and
deletions from the trade registry decreased in 2013 — between September 2013
and May 2014 it was lower by over 40 % compared to a year earlier. Despite
previous reforms to speed up proceedings, only 20 % of bankruptcy
procedures were concluded in 2013, significantly less than in 2012 (35 %).
In order to further strengthen market exit procedures, the legislation was
amended to introduce shorter deadlines for bankruptcy procedures and allow
out-of-court settlement in case of insolvency.

Regarding the
free economic zones, domestic companies do not enjoy a level playing field with
foreign companies as regards incentives. Conditions for obtaining public
support implicitly favour (bigger) foreign firms, as local firms can rarely
meet the required investment size. Government arrears still pose a problem for
business’ liquidity, despite the recently tightened legal requirements. Overall,
while setting up a business has become slightly easier, difficulties remain as
regards obtaining permits. Market exit remains lengthy, although the government
has taken some reform steps in the right direction.

Legal
system

The government
continued to implement judicial reforms aimed at speeding up procedures and
improving capacities, notably by upgrading information and electronic delivery
systems. At the end of 2013, the number of pending cases had been reduced by 9 %.
Contract enforcement remains difficult for private companies, with lengthy and
costly legal procedures, inefficient licensing procedures, and often uneven
application of laws. The large size of the informal economy continues to hamper
competition and the development of a formal private sector. There is little
available information on the Labour Ministry’s 2013 action plan for reducing
the shadow economy, and the Minister presented a similar plan for 2014 without
clear evidence of a results-based assessment of previous measures.

Business is still
burdened by frequent new legislation without sufficient public consultation. Only
44.5 % of draft laws were published on the national electronic register in
2013 as opposed to 61.3 % in 2012. Overall, the
legal system for a functioning market economy is largely in place, but
inefficiencies arise in practice from lengthy procedures hampering enforcement
of laws. Frequent changes of laws create legal uncertainty.

Financial
sector development

The
country’s financial system is dominated by the banking sector, about 89 %
of the system’s total assets, while the insurance sector, including
fully-funded pensions, represents roughly 4 % of total assets. The size of
banks’ financial intermediation is important, with the assets-to-GDP ratio
having risen gradually over recent years to about 80 % by the end of the
first quarter 2014. On the positive side, concentration in the banking sector
diminished somewhat, though 60 % of total assets are still owned by the
three largest institutions. Banks are mainly funded by deposits, which recorded
a sound annual growth rate of 7 % in the first quarter.

Financial
stability indicators are resilient. Regulatory capital has diminished slightly,
but is still far above levels required by banking regulation, and liquidity of
banks remains ample. Profitability indicators point to strong performance, in
particular in the second half of 2013 and beyond. The quality of loan
portfolios has improved gradually since summer 2013, yet the ratio of
non-performing to total loans to non-financial entities remains elevated, at
11.1 % at the end of March 2014. However, non-performing loans do not
appear to pose a systemic risk, and are fully provisioned for. Private sector
credit growth picked up again since the summer of 2013, after having declined since
May 2012. Loan growth to companies began increasing only towards the end of
2013. Even though the share of domestic currency in total loans is increasing,
about 50 % of loans are still denominated in foreign currency, posing
potential market risks in case of adverse foreign exchange developments. A
further risk might arise, in the mid-term, from potential parent-led
restructuring, with negative impact on two of the biggest banks in the country,
which together account for about 40 % of the sectors’ assets. The
capacities of supervisory bodies were strengthened through amendments, in March
2014, to the Law on Insurance Supervision and to the Securities Law, tightening
selection criteria for members of the supervisors’ decision-making bodies. Overall,
the financial system remains stable, and supervisory capacities have been
further strengthened. However, access to finance continues to be difficult, and
the non-banking segments of the market need to be further developed, with a
view to widening funding opportunities for the private sector. Measures should
continue to be taken to repair the bank lending channel, including by fostering
the clean-up of non-performing loan portfolios.

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

Human
and physical capital endowment

Low labour
market participation, in particular of women, and limited job opportunities in
advanced industrial sectors restrict the opportunities for developing the
skills of the workforce. The level of education and training of the workforce
does not correspond adequately to the needs of the economy. Recent improvements
in access to education have produced good results, as the number of early
school leavers dropped, and the rate of pre-school enrolment increased. The
number of graduates from tertiary institutions dropped in 2013, but the overall
share of workers with tertiary education has risen by 4pp to some 18 % of
the workforce between 2009 and 2013. However, one quarter of them is
unemployed, as most of the job creation in recent years took place in
low-productivity sectors.

Labour
productivity remains low at about 18.4 % of the EU average and has not
recovered since the crisis-related drop in 2008/2009, in particular in
manufacturing. The sectoral structure of employment is stagnant — the economy
remains focused on agriculture (19 % of total employment) and trade, the
much-needed transition to higher-earnings jobs has not yet taken place. Foreign
companies, many of which are active in higher-end manufacturing activities,
often face difficulties in finding the necessary skills in the workforce or set
up supply chains with local companies to substitute for imports. The government
continues to address the labour market challenges primarily through a wide
variety of active labour market measures, including subsidised employment
schemes and grants for start-ups. These measures are insufficiently prioritised
on the basis of performance evaluation, and do not adequately address the
underlying structural causes of unemployment. The variety of measures and the
number of workers covered by these schemes has increased significantly in 2014.
While the government has adopted a number of strategies addressing structural
rigidities in the labour market, such as a vocational training plan, actual
implementation is lagging.

Capital
investment remains modest — in 2013, gross capital formation amounted to about
29 % of nominal GDP, which is below the levels of the preceding two years.
There is an emerging dichotomy in the country’s capital stock, with foreign
investment increasingly focused on higher-productivity, technology-intensive
sectors, while the capital stock in the local economy remains low and
relatively outdated. The state of transport and energy infrastructure hampers
economic development in many areas — the government is addressing this obstacle
through large-scale public investment projects, co-financed by international
donors and commercial banks. The share of foreign direct investment in GDP
remained relatively low, and only 40 % of the inflows took the form of
greenfield investment in 2013. The overall stock of FDI is also relatively low
at about 50 % of GDP. Yet its recent change in structure — from services
and utilities to machinery and transport equipment — makes a small, but
positive contribution to updating the capital stock. Overall, the
government has made some progress in addressing the prevalent shortcomings in
the country’s human and physical capital endowment, but the challenges of the
investment required to accelerate labour productivity growth and the structural
transformation of the economy remain very large. The government should continue
to improve the composition of spending, by prioritising investment projects
according to their productive potential on the basis of cost-benefit
evaluations.

Sector
and enterprise structure

There was no
notable change in the sectoral structure of the economy. At 36 %, trade,
together with automotive-related services, dominated the enterprise sector. The
share of agricultural output in the economy remains stagnant at about 10 %.
Mainly due to the hesitant recovery of the manufacturing sector in 2013, the
share of mining, manufacturing and utilities declined from about 21 % in
2011 to 16 % in 2013. The construction industry gained in importance,
accounting for about 10 % of gross value added in 2013, up from 7 %
in 2011, driven to some extent by public infrastructure investment, and by
foreign investment.

In terms of
size, the economy remains dominated by micro- and small enterprises, which
accounted for more than 98 % of all companies in 2013. The number of large
companies more than doubled, induced by the establishment of companies with
foreign investment, even though their share remained well below 1 %. Small
and medium enterprises accounted for over 80 % of total employment, with
the share of large companies diminishing slightly to below 20 %. Overall,
the sectoral and enterprise structure of the economy remains stagnant and
focused on low-productivity activities. The recent increase in the number of
large companies suggests that the share of more advanced manufacturing
activities in the economy might strengthen somewhat in the coming years, but a
genuine sectoral transformation remains elusive.

State
influence on competitiveness

The state’s
ownership of economic assets remained relatively moderate at about 15 % of
GDP. The legal framework for state aid was strengthened by the adoption of
regulations on regional aid, horizontal aid and Services of General Economic
Interest, transposing the relevant EU legislation into national law. There is
limited reporting on state aid. In the course of the second phase of the
deregulation of the electricity market, which began in April 2014, 222 medium
and large companies and started to purchase electricity on the open market.
However, notwithstanding these developments, there is a wide range of policy
instruments through which the government increasingly has an impact on the
economy’s — and on different sectors’ and companies’ — competitiveness, such as
direct subsidies and tax exemptions, in particular for foreign investors;
on-site firm inspections and fines; involuntary rescheduling of payment
contracts; public guarantees for loans to state-owned enterprises; public
infrastructure projects; and active labour market programmes. Overall,
against the overall background of a low share of the state in the economy’s
assets, improved state aid legislation, and further deregulation of the
electricity market, the state’s influence on competitiveness through the
implementation of other policy instruments seems to have increased.

Economic
integration and convergence with the EU

Total trade in
goods and services remained high at about 126 % of GDP with exports
totalling 54 % of GDP. In 2013, about 70 % of total exports went to
the EU, some 7 % more than in 2012, and some 60 % (+2pp) of imports
originated there. CEFTA was the second most important trading partner, at some
20 % of exports — less than in 2012 — and some 12 % of imports.
Exports remain highly concentrated — 48 % of exports consisted of iron and
steel, chemicals, and clothes. Yet, diversification continued, mainly on
account of foreign investors, supporting a gradual shift to higher value-added
products, such as machinery and transport equipment — its share in total trade
increased to more than 13 % in 2013, from less than 5 % in 2008.
Companies from the EU accounted for some 80 % of total FDI stock at end
-2013. GDP per capita remained at about 35 % of the EU average in 2013. Overall,
trade linkages with the EU have increased further in 2013, both on the export
and import side, and the EU continues to account for the bulk of foreign direct
investment.

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 European Union.
It also analyses the country’s administrative
capacity to implement the acquis. The analysis is structured according
to the list of 33 acquis chapters. For each of these, the Commission
assesses the progress achieved during the reporting period and summarises the
country’s
overall level of preparation.

4.1. 
Chapter 1: Free movement of goods

As
concerns general principles, three additional measures relating to
fulfilment of Articles 34 to 36 of the Treaty on the Functioning of the
European Union were implemented. A further nine legislative amendments (out of
a total of 42 identified as necessary) still need to be made.

Regarding
preparations for an Agreement on Conformity Assessment and Acceptance of
industrial products (ACAA), further efforts are required.

With
regard to horizontal measures for standardisation, the country
continued to adopt European standards, maintaining the high volume of the
previous year. The Institute of Standardisation issued 25 773 standards
and standardisation documents (as compared with 22, 552 a year earlier) of
which 23 110 are European standards. Five national standards (for waste,
geotechnical equipment, gas equipment and tobacco products and liquid petroleum
gas) were issued. The capacity of the Institute is sufficient and six
additional staff members were appointed. The Institute operates 26 technical
committees all of which act as observers in EU standardisation bodies. Six
legal entities conduct conformity assessments in regulated areas, mainly
of lifts, pressure equipment, machines and cable transport devices.

In
accordance with the new national legal framework on accreditation, all
public administration bodies were obliged to introduce quality management
systems based on international or local standards. The ISO 9001 standard is a
minimum requirement. The Law on Accreditation, however, only recognises
certificates issued by bodies accredited by the relevant national institute,
and not those issued by EU certification bodies, which distorts competition and
raises concerns about the implementation of the obligations under the
Multilateral Agreement on Mutual Recognition of Certifications. The capacity of
the Institute of Accreditation is sufficient. The Institute had accredited a
total of 136 conformity assessment bodies and has withdrawn 13 accreditations.
The Institute started the accreditation procedure for a medical laboratory in
accordance with the new standard, ISO 15189:2010. The capacity of the Metrology
Office was significantly strengthened by the appointment of 9 new employees, a
30 % increase in staff numbers.

During
2013, the State Market Inspectorate conducted 147 market surveillance inspections
relating to the Law on Product Safety (less than half as many as in 2012) and
360 inspections relating to the Law on Construction Products (an almost
four-fold increase on the previous year). These inspections identified,
respectively, five and 23 misdemeanours. A total of 978 inspections were
conducted relating to the application of the Law on Metrology and 87 abuses
were identified.

In
the area of ‘Old Approach’ product legislation, a list of prohibited
chemicals and a list of high concern chemicals were published. There were some
new developments regarding the ‘New and Global Approach’ product
legislation and procedural measures, where the country is already at
an advanced stage, with 58 Eurocodes endorsed and translated.

Conclusion

Little
progress was made in this chapter. The creation of a legal framework for the
introduction of ISO quality systems in the public administration is the most
notable development. There are concerns over the limits imposed on the
recognition of certificates, as this distorts competition. Overall, preparation
in the area of free movement of goods remains at an advanced stage.

4.2. 
Chapter 2: Freedom of movement for workers

As
regards access to the labour market, EU citizens are still not permitted
to occupy public service posts. Preparations have begun for participation in
the cooperation network European Employment Services. The time allowed for the
Employment Agency to issue its opinion on a foreign worker’s request for a work
permit was reduced from 45 to five days.

In the area of coordination
of social security systems, an agreement with Kosovo on the contribution
period entitling individuals to pension rights came into force in November
2013. Negotiations were launched with Slovakia on a bilateral social security
agreement and with Hungary on the use of the European Health Insurance Card.

Conclusion

Some
progress has been made in the area of freedom of movement for workers. Overall,
preparations are still at an early stage.

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

With
regard to the right of establishment, an electronic online application
system for registration of companies is increasingly being used. Waiting times
for obtaining permits were shortened and costs reduced. All
construction-related permits for companies are issued electronically by the
Ministry of Transport.

As regards freedom
to provide cross-border services the regulations on veterinary medicine,
private education, construction, tourism and regulated professions still
contain restrictions that are not in line with the acquis.

Liberalisation
of the universal postal services was postponed until 2017. The national
regulatory authority has sufficient capacity and systematically monitors the
quality of universal services, including delivery times and complaint handling.
There continue to be concerns over the unlimited period set for designating the
universal service provider and over the financing of the net costs of the
universal service obligation.

A number of
authorising bodies still do not apply the principle of mutual recognition of
professional qualifications as required by the Professional Qualifications
Directive. Legislation on commercial agents and professional use of toxic
products has not yet been aligned with the acquis.

Conclusion

Limited
progress was made in this chapter. Further action is needed to fully align
national legislation with the acquis, particularly as regards the mutual
recognition of professional qualifications and the services directive. Overall,
in the areas of the right of establishment and freedom to provide services the
country remains on track.

4.4. 
Chapter 4: Free movement of capital

The
country already meets the requirements of the first stage of the Stabilisation
and Association Agreement in the field of capital movements and payments.
There are, however, restrictions on capital movements not allowed by the EU acquis.
EU citizens are not allowed to purchase agricultural land. Further
liberalisation of capital movements and payments is foreseen after the
transition to the second stage of the SAA.

The
National Payment System Council adopted an action plan for the implementation
of the 2013-17 strategy for the development of payment systems and the
working groups in the area of payment card operations have stepped up their
activities.

As
regards the fight against money laundering, the Law on the Prevention of
Money Laundering and Financing of Terrorism was amended, improving compliance
with the recommendations of the Financial Action Task Force. The number of
suspicious transactions referred to the Financial Intelligence Unit fell from
239 in 2012 to 169 in 2013, which represents a drop of 29 %. In 2013 the
Financial Intelligence Unit submitted to law enforcement institutions 25
notifications relating to money laundering and financing of terrorism, which is
31 % less than the previous year. There were 3 prosecutions against 25
persons for money laundering and final convictions in 4 cases against 41
persons.

Conclusion

Limited
progress was made in this chapter. The main developments were related to
payment systems and to the institutional capacity for combating money
laundering and financing of terrorism. Overall, preparations in the area of
free movement of capital remain on track.

4.5. 
Chapter 5: Public procurement

As concerns general
principles, the 2014-18 strategy for public procurement systems was
adopted. The Law on Public Procurement has been amended on a number of
occasions to bring the requirements for providers and subcontractors of
transport services into line with the acquis. National legislation has
not yet been aligned with the EU Directive on Defence and Sensitive Security
Procurement.

Legislation
on the awarding of public contracts requiring tender documents to be
published in an electronic form and free of charge has increased the
transparency of the public procurement process. A new oversight body, the
Public Procurement Council, became operational. The Law on Public Procurement
stipulates that, in general, the ‘lowest price’ criterion must be used when
awarding contracts. The most economically advantageous tender can only be
chosen with the approval of the Public Procurement Council. This system is not
in line with the acquis. The obligation for contracting authorities to
obtain consent from the Public Procurement Council prior to publishing a
contract notice creates an unnecessary administrative burden. Irregularities
were also suspected in the ‘Skopje 2014’ project, a government-funded urban
project. The municipality of Centar, where the project is mainly located,
commissioned a report, which found the decisions taken on works tenders to have
been biased. To date, neither the State Audit Office, nor the State Commission
for Prevention of Corruption or the Public Prosecutor’s Office has taken any
action in response to the findings of the report. Supplements to works
contracts are very frequent, as the Law on Public Procurement does not make
technical dialogue a mandatory requirement prior to awarding contracts. Tender
requirements do not facilitate wide participation on the part of small and
medium-sized enterprises. The administrative capacity of the Ministry of
Economy remains insufficient to ensure effective implementation of the Law on
Concessions and Public-Private Partnerships. The Public-Private Partnership
Council is not yet operational.

The human and
financial resources of the State Appeals Commission, part of the remedies
system, remain insufficient. The total number of cases further decreased from
585 in 2012 to 553 in 2013; resolution rate remains stable at 95 %.
Contracting authorities placed about 40 economic operators on the negative
reference list in 2013, of which 11 submitted an appeal. The use of the
negative reference list has not yet been aligned with Case C-465/11 of the
Court of Justice of the EU. Prison sentences from one to five years were
introduced for illegal profits and professional misconduct. Where violations of
procurement procedures were identified, these were not followed up systematically,
and resulted in only one conviction for abuse of public procurement or
public-private partnership procedures. National legislation has not yet been
fully aligned with the EU Directive on Remedies.

Conclusion

Progress
in the area of public procurement was only limited during the reporting period.
There are concerns about the overall quality of implementation of the laws.
Greater efforts need to be made to ensure that the use of public funds is
efficient and transparent. From a legislative point of view,
preparations remain at an advanced stage.

4.6. 
Chapter 6: Company law

The legislative
framework for company law was further amended to enforce mandatory
submission of annual accounts by inactive companies and to introduce mandatory
e-submission of annual accounts by large and medium-sized companies. The
e-registration system established by the Central Registry was made mandatory
for start-ups, and there are now around 200 registration agents. In 2013, the
Academy for Judges and Prosecutors provided training courses to 176 judges in
the area of company law and to 45 judges in the area of international company
law. Specialised training was given to 15 newly appointed judges dealing with
civil matters and business-related disputes. Alignment with the Directive on
cross-border mergers remains to be completed.

As
regards corporate accounting, the validity of temporary certificates for
accountants and certified accountants was extended from 24 to 48 months. Some 3 000
permanent and 7 300 temporary licences were issued by the Ministry of
Finance. The Institute of Chartered Accountants is not yet operational and
responsibility for licensing remains with the Ministry of Finance. There have
also been delays in providing continuous training to professional accountants.

With
regard to auditing, the Institute of Chartered Auditors became a full
member of the International Federation of Accountants. The Council for Audit
Promotion and Supervision adopted the implementing legislation on recognition
of auditors’ qualifications obtained abroad, and those qualifications were
recognised by the institute.

Conclusion

Good
progress was made in the area of company law, especially as regards auditing.
The Institute of Chartered Auditors joined the International Federation of
Accountants. Recognition of auditors’ qualifications obtained abroad was
regulated. The Council for Audit Promotion and Supervision is operational, but
the Institute of Chartered Accountants has not yet assumed its
responsibilities. Overall, preparations in the area of company law are
advanced.

4.7. 
Chapter 7: Intellectual property law

The Law on copyright
and neighbouring rights was amended to regulate phonogram rights and to
ensure alignment with the World Intellectual Property Organisation Performances
and Phonograms Treaty. The government appointed the members of the commission
for mediation in the field of copyright and neighbouring rights. The capacity
of the unit for copyright and neighbouring rights (part of the Ministry of
Culture) remains insufficient. Cooperation among the institutions responsible
for industrial property needs to improve.

The
Law on industrial property rights was amended to regulate intellectual
property rights, in accordance with the Strategy on Innovation. A system for
electronic filing of patent applications became operational. In 2013, the
Academy for Judges and Prosecutors delivered nine training programmes to 205
members of the judiciary on protection of intellectual property rights. The
State Office for Industrial Property does not have sufficient staff to ensure a
quality service vis-à-vis businesses and to support innovations. Training for
small and medium-sized enterprises on protection and enforcement of
intellectual property rights is limited.

As regards enforcement,
the Coordination Body for Intellectual Property launched 16 actions in 2013 and
seized approximately 2, 000 counterfeit items. There were 24 criminal
prosecutions and 11 charges for misdemeanours relating to intellectual
property rights. The State Market Inspectorate carried out around
120 inspections. Only 1 % of the fines imposed were collected in 2013. The
Agency for Audio and Audiovisual Media Services issued 18 banning orders to
broadcasters to prevent further violations of copyright and neighbouring
rights. Cooperation between the Ministry for the Interior and Interpol on
uncovering regional counterfeit channels resulted in the seizure of 70 000
counterfeit items, closure of a number of factories producing counterfeit goods
and detention of 330 people. The overall number of controls and seizures is
falling however, and commitment to combating violations of intellectual
property rights is not improving. Counterfeit foodstuffs,
cosmetics, toiletries, medicines, toys, technical and electronic equipment
continued to be sold on stalls in streets markets and in outlets. Awareness of
violations of intellectual
property rights and of the threats to health and safety remains
limited. Training
for small and medium-sized enterprises on protection and enforcement of
intellectual property rights is limited. The three public
laboratories are not legally authorised to detect counterfeit medicines and
their analyses are not accepted as expert evidence by the courts.
Counterfeiting is not considered to be organised crime and efforts to combat it
remain insufficient. Data on investigations, prosecutions and trials for
offences relating to intellectual property rights have
been collected systematically since 2013, but the State Statistical Office has
not yet produced a reliable enforcement record.

Conclusion

Some
legislative progress was made in the area of intellectual property law.
Enforcement efforts by all institutions continue, but the complexity of the
enforcement system impedes effective protection of intellectual property
rights. A track record of investigations, prosecutions and trials for offences
relating to intellectual property rights is not yet available and public
awareness remains limited. Overall, preparations in this area are at a
moderately advanced stage.

4.8. 
Chapter 8: Competition policy

In the area of anti-trust
and mergers, the Commission for the Protection of Competition took two
decisions on anti-competitive agreements, four on abuses of dominant position
and 18 on market concentrations. A further nine procedures are ongoing. The
Administrative Court overruled seven decisions made by the Commission for the
Protection of Competition for procedural reasons, six of which were
subsequently confirmed by the Higher Administrative Court. The Criminal Code
was brought into line with the Law on Protection of Competition, allowing
leniency measures to be applied. Guidelines on vertical restraints and on
horizontal agreements were adopted, ensuring further alignment of the
competition acquis. A market analysis of the banking sector was carried
out in 2013. The Commission for the Protection of Competition, in cooperation
with the Academy for Judges and Prosecutors, delivered training in specialist
areas to judges and court staff of both the Administrative and the Higher
Administrative Courts. Since 2012, the Commission for the Protection of
Competition has not issued any rulings on cartels. Its operational budget
remains limited and it continues to make insufficient use of administrative
capacity in the area of anti-trust and mergers.

The Commission
for the Protection of Competition adopted six decisions approving the granting
of state aid (for both schemes and individual aid), of which two were
for regional state aid. The capacity of the state aid department was further
strengthened and staff numbers remain adequate. Awareness among state aid
providers of the systems for reporting on its use remains low, undermining the
monitoring mechanisms which are in place. The de minimis
threshold of € 200 000 is too high and disproportional to the country’s
market and presents a risk for competition distortion. Overall, the legislative
framework on state aid remains stable, but transparency regarding the details
and amounts of state aid granted needs to be improved.

Conclusion

Good
progress was made in the field of competition policy. Legislation was further
aligned with the acquis and the Criminal Code was brought into line with
the Law on Protection of Competition. The country maintained its record in
terms of enforcing laws. The Commission for the Protection of Competition
continues to operate with an insufficient budget, while staff numbers are
sufficient. Overall, preparations in this area are at an advanced stage.

4.9. 
Chapter 9: Financial services

In
the area of banks and financial conglomerates, the Central Bank
developed a new methodology for assessment of Bank’s Internal Capital Adequacy
Assessment Process (ICAAP). Regulations on capital adequacy requirements were
amended to include performance guarantees and to align with the EU Regulation
on prudential requirements for credit institutions and investment firms. The
amended legislation on the credit registry expanded the use of IT tools to
improve availability of information. The scope of external audit of banks was
expanded to comply with Basel principles for external audit of banks.
Guidelines on liquidity risk management allow the establishment of funds to
support longer-term lending. The modest number of complaints submitted indicates
a low level of awareness of consumer rights, which remains a concern.

New
regulations on standards for statistics and IT systems in insurance and
reinsurance companies were adopted. New stickers certifying the registration
and insurance of vehicles were introduced. The Ministry for the Interior has
still however not produced reliable data on uninsured vehicles. Reliable data
is needed in order to keep a better record of the enforcement of measures taken
to combat uninsured driving. The planned liberalisation of the motor insurance
market was postponed to protect the insurance industry. Current legislation,
which authorises the Ministry of Finance to set premiums for motor vehicle
insurance, is not in line with the EU acquis and prevents competition in
the largest segment of the insurance market.

Amendments
to the Law on Fully-Funded Pension Schemes further upgraded the requirements
for pension funds agents. The relevant agency continued to increase its
overall enforcement capacity, and thus its leverage over the institutions it
supervises. The 50 % limit on investing in non-domestic securities is not
in line with the EU acquis.

The
legislation on financial market infrastructure is only partially aligned
with the Financial Collateral Directive (2003/47/EC), while alignment with the
Settlement Finality Directive (98/26/EC) has not yet begun.

In
the area of securities markets and investment services, the Securities
Law was amended to extend the definition of private offers of securities and to
extend the reporting obligations placed on securities depositories so as to
include shareholders owning more than 5 % of shares in a company. The
capacity of the Securities and Exchange Commission to regulate and supervise
has improved.

Conclusion

Overall,
there was some progress in the area of financial services. Legislation relating
to banks, securities, investment funds, and fully-funded pension schemes has
been improved. Good quality statistics are needed in order to keep a record of
measures taken to combat uninsured driving. Legislation on the financial
market infrastructure has not yet been aligned with the acquis. The
regulatory and supervisory capacity of both the Agency for Supervision of Fully-Funded
Pension Schemes and the Securities and Exchange Commission has improved.
Preparations in the area of financial services are at a moderately advanced
stage.

4.10. 
Chapter 10: Information society and media

In the area of
electronic communications and information and communications technologies a
new Law on Electronic Communications was adopted in February, in order to align
national legislation with the 2009 EU regulatory framework. New regulations
were adopted to increase competition and improve consumer rights. The
regulator, the Agency for Electronic Communications, established minimum
network quality principles and 4G network access became available. It is now
equipped with quality measurement and radio frequency spectrum monitoring
equipment enabling it to monitor the quality of services provided by operators
more closely. Fixed broadband penetration reached a level of 16 % of the
population in 2013, as compared with the EU average of 29 %. The regulator
issued a manual, which sets internet-broadband targets. The administrative
charges and fees imposed on operators are still above the level necessary to
finance the functioning of the regulator. The use of the regulator’s surplus
funds for purposes other than development of electronic communications
continued, undermining its credibility. Coordination between the regulator and
the competition authority over the imposition of sanctions is poor. The
administrative capacity of the Ministry of Information Society and
Administration remains insufficient. The 112 emergency phone number has not yet
been introduced.

As regards information
society services, the Law on the Academic Research Network was amended to
allow it to become the regulator of domain names, and eight companies signed
contracts to act as registrars of the national domain. This completes the
process of liberalisation of the domain name market. The process for setting up
a national computer emergency response team continued.

In the field of audiovisual
policy, the Laws on Audio and Audiovisual Media Services was adopted, in
part in order to align national legislation with the Audiovisual Media Services
Directive. Setting up the institutional framework required by the new law is
underway and it remains to be seen whether these will function effectively in
practice. Amendments to the law were adopted in July and September with only
limited consultation with stakeholders.

The renamed
media regulatory authority, the Agency for Audio and Audiovisual Media
Services, continued monitoring the content of programmes, media ownership and
market concentration. It extended its monitoring activity to include regional
television. There continue to be concerns about the fairness, objectivity and
transparency of its approach. Its political and financial independence and that
of the public service broadcaster is not yet firmly established. (see
Chapter 23 — Judiciary and fundamental freedoms)

Conclusion

Good
progress was made as regards the alignment with the acquis in the area
of information society and media. New legislation on electronic communications
and audiovisual policy are in place. Steps need to be taken to guarantee the
independence of the public broadcaster and the media regulator. Overall,
preparations in this area are on track.

4.11. 
Chapter 11: Agriculture and rural development

As concerns horizontal
issues, the preparations for establishing an integrated administration and
control system are at an advanced stage. The land parcel identification system
(LPIS) was further developed and digitisation of agricultural parcels
completed. The land parcel identification system is now ready to be used for
monitoring national area-based direct payments. Understaffing of the unit
responsible for the system is putting the regular maintenance, updating and
overall quality of the system at risk. The agricultural market information
system has become the exclusive source of market data. The quality of the data
from the farm accountancy data network still needs to be improved.

A Law
on Consolidation of Agricultural Land Parcels was enacted, providing for the
implementation of land consolidation programmes. Access to quality advisory
services for farmers and small agricultural businesses needs to be further
improved, particularly in view of the strategic importance of this issue.
Effective use and maintenance of irrigation facilities remains an area of concern.

The
2014 budget for agriculture and rural development was fixed at a level similar
to that of 2013 (approximately € 155 million), representing 5 % of
the national budget. Approximately two thirds of this amount represent direct
payments to farmers. For some agricultural products, financial support remains
linked to production. The impact of these direct payments on
the viability, productivity and competitiveness of the farms remain to be
assessed. Cross-compliance requirements have been partially introduced.

There
has been limited progress on common market organisation for commodities.

The
national programme for rural development was implemented in 2013,
through seven public calls for applications. The budget for this programme
increased substantially in 2014 (by 125 % as compared with the 2013
budget). The capacity of the Agency for Financial Support of Agriculture and
Rural development was strengthened.

In
2013, a total of € 11.5 million of funding awarded by the Instrument for
Pre-accession Assistance for Rural Development (IPARD) remained unused and was
returned to EU budget. The overall design of the programme — from the
eligibility and financing rules and the types of investment allowed through to
the monitoring stages — needs to be improved. An external evaluation of the
programme was launched in order to identify specific recommendations for its
overall improvement. National authorities made progress in fulfilling
conditions for accreditation of ‘technical assistance’ activities under IPARD.
The eighth public call was issued following the fourth modification of IPARD,
allowing for the purchase of tractors. The number of applications submitted
increased substantially.

Preparations
are on track in the area of organic farming and quality policy,
and the focus should be now on implementation. In December
2013, the 2013-20 national plan for organic production was adopted. Provisions
were introduced to financially support farmers who had signed up to organic
production schemes. The administrative capacity to manage organic farming needs
to be strengthened.

Conclusion

Some
progress was made in the area of agriculture and rural development, especially
in the fields of integrated administration and control systems, rural
development, organic production and quality protection. Improvements in the
structure of farms and in the provision of advisory services are necessary to
increase competitiveness. The inefficient implementation of the pre-accession
rural development programme is an area of serious concern. Overall,
preparations remain at a moderately advanced stage.

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

As regards general
food safety, the institutional capacity of the Food and Veterinary Agency
has been strengthened, with additional employees being appointed in accordance
with the staffing plan, but remains insufficient.

In
the area of veterinary policy, implementing legislation has been adopted
in order to bring national regulation further into line with the acquis.
The legislation focused on the improvement of animal health status in
aquaculture and on monitoring programmes, the trade of live animals, semen, ova
and embryos; on control measures of animal diseases; on prohibited substances
and on the monitoring of residues from veterinary drugs. Control systems for
imports and import requirements for live animals and animal products have been
regularly updated by the Food and Veterinary Agency. Four risk-based monitoring
plans for consignments during import were adopted and are being implemented.
Rulebooks were issued on the identification and registration of bees, ovine and
caprine animals. A system for identification and registration of pigs has not
yet been set up. Systems for checking animal identification, registration and
movement still need to be more effectively implemented. The Food and Veterinary
Agency continues to implement the programme for oral vaccination of foxes
against rabies. Delays in payments to authorised private veterinary practices
continue to cause problems for the implementation of the animal health
programme.

Rulebooks
were issued on animal by-products, with the aim of bringing national
legislation on the placing on the market of food, feed and animal
by-products into line with the relevant EU legislation. The necessary
collection and treatment systems have not yet been set up.

The
implementing legislation on ionising radiation and on food contact material was
revised in accordance with the changes made to the acquis. The annual
monitoring programme for food safety was not fully implemented due to
lack of funds. The risk-based classification of food establishments dealing
with food of non-animal origin has been further developed and the planning of
inspections has also progressed. The human resources capacity of the food
inspectorate remains insufficient.

Some
implementing legislation on specific rules for feed was adopted.

In
the area of phytosanitary policy, monitoring programmes for harmful
organisms and plant protection products were adopted, but have only been
partially implemented. Implementing legislation has been adopted on plant
health and on the quality of seeds and propagation equipment. Plans for
conducting official controls on import, registration, labelling and the use of
plant protection products have not been adopted. Staff numbers, training and
expertise are still insufficient. Coordination between the competent
authorities in the sector remains poor and ineffective. The capacity of the
State Phytosanitary Laboratory was strengthened, and the volume of sampling and
analysis performed has increased, but is still insufficient to provide reliable
results. A phytosanitary information system has not yet been established.
Preparations in this area are not advanced.

Further
implementing legislation was adopted on genetically modified organisms
(GMOs).

Conclusion

Further
progress was made in the area of food safety and veterinary policy, notably as
concerns the efforts made by the Food and Veterinary Agency to implement the
applicable laws, and the upgrading of the risk-based system for official
checks. Preparations in the area of food safety and veterinary policy are at an
advanced stage. Preparations in the phytosanitary area remain at an early
stage.

4.13. 
Chapter 13: Fisheries

Fish production
is based on aquaculture and commercial fishing in lakes, therefore, a large
proportion of the acquis on resources and fleet management,
inspection and control, is only marginally applicable.

New
procedures relating to the concessions awarded for commercial fishing were
prepared. The law relating to inspection supervision was modified in order to
increase efficiency. The number of checks carried out doubled in 2013, as
compared with 2012.

The
unit of
the Ministry of Agriculture, Forestry and Water Economy, responsible for
fisheries and aquaculture, regularly updates databases related to market
policy on production and trade in fresh fish and fish reproductive
materials.

As
regards state aid, the 2014 allocation for financial support for
fisheries and aquaculture remains stable at € 1.5 million.

There
are no formal international agreements. Informal working arrangements
with Greece and Albania cover management of resources in the three lakes they
share.

Conclusion

A
large proportion of the acquis in the area of fisheries is not relevant
for landlocked countries. Progress has been made in the area of inspection of
aquaculture and commercial fishing in lakes.

4.14. 
Chapter 14: Transport policy

In
the area of road transport, road safety legislation needs further
alignment with the acquis. Road safety campaigns by the Road Safety
Council focused on reducing child fatalities. Further strengthening of the
administrative and operational capacity is also needed.

In
the field of rail transport, the Law on the Railway System was amended
in November 2013, further regulating the certification of rolling stock,
railway inspectors and railway transport. One rulebook was adopted in December
2013, in order to further align national legislation with the acquis.
Additional efforts are needed to bring infrastructure charges for international
freight to competitive levels. The railway market remains closed for licensed
operators. However, amendments to the railway law allow for licensed railway
undertakings to operate for own purposes and transit. The Rail Safety Authority
continued to carry out inspections, but its capacity needs to be strengthened.
Procedures for safety certification were improved slightly. The Accident
Investigation Committee remains understaffed. The cross-border agreement with
Serbia has not yet been concluded.

As
regards inland waterways transport, the Law on Inland Waterway
Navigation was amended in November 2013, further regulating the recognition of
certification and transportation of goods in inland waterways. The safety
inspections plan has not yet been fully implemented. The licensing process is
pending finalisation.

In
the area of intermodal transport, a strategic study on multi-modal nodes
was completed in January 2014, and one potential location has been selected. The
country needs to recognise the development of a balanced
environmentally-friendly and competitive transport and mobility system with
special focus on de-carbonising the economy as a priority.

In
the field of air transport, one rulebook on air traffic inspections was
adopted, bringing national legislation further into line with the acquis.
Further steps need to be taken to align national legislation with the revised
Annex I to the European Common Aviation Area (ECAA) Agreement. A national
provision allowing the financing of air operators by providing for a financial
incentives scheme for airlines is a point of concern for the application of
requirements under phase I of the Agreement. The air navigation services
provider signed a loan agreement with the European Bank for Reconstruction and
Development (EBRD) to finance the improvement and strengthening of its
technical and administrative capacity. The work of the body responsible for
investigating aviation accidents and incidents is not yet sufficiently
transparent.

Conclusion

Some progress
was made in the area of transport policy. Road safety and railway legislation
needs further alignment with the acquis. The railway market remains
closed to EU railway undertakings except transportation for own purposes. The
administrative capacity of both the Rail Safety Authority and the Accident
Investigation Committee for rail transport needs to be strengthened. Overall,
preparations in this area are moderately advanced.

4.15. 
Chapter 15: Energy

In
the area of security of supply, oil reserves increased slightly, and are
now equivalent to 57 days’ average consumption. The Law on Compulsory Oil
Reserves, adopted in September 2104, aims at aligning with the EU acquis
in this area. A loan of € 25 million was secured from the European Bank
for Reconstruction and Development for modernisation of the Bitola-Florina
(Greece) section of the electricity transmission network. Tendering procedures
for the construction of two large hydropower facilities, Lukovo Pole and Boškov
Most are underway, raising some concerns about the potentially detrimental
effect on the environment. The Intergovernmental Agreement (IGA) signed with
Russia in 2013 regarding the South Stream pipeline is not compatible with the acquis. The
former Yugoslav Republic of Macedonia has contributed
to the energy security stress test carried out by the European Commission in
the framework of the European Energy Security Strategy.

The 2014-18 energy
balance for the internal energy market projects significant growth in
the consumption of natural gas and geothermal energy. The electricity market
for medium-size consumers was opened up to competition on 1 April 2014, and a
full market opening for all consumers, including households, is scheduled for 1
January 2015. New electricity market rules, a tariff system, and rules for
purchasing electricity to cover network losses entered into force. The
electricity distribution grid code was amended to allow market opening. Changes
to bring legislation into line with the third Internal Energy Market package
are ongoing. The most vulnerable households continue to benefit from subsidies.

The Energy
Regulatory Commission established market rules for the natural gas market and
amended the rulebook on regulated prices for transmission, distribution and
supply of natural gas, necessary for further opening up of the natural gas
market. The government adopted decisions to start activities for public-private
partnerships for constructing supply and distribution gas networks. The
state-owned gas transmission operator signed an agreement for construction of
the gas transmission pipeline, Klečovce-Štip–Kavadarci. The government launched
a tender procedure for a public-private partnership for the distribution and
supply of gas to companies and small consumers in the city of Skopje. A dispute
over the ownership of the gas transmission pipeline has not been resolved,
holding back the development of the sector. The market for the distribution and
supply of natural gas remained highly concentrated, although two new public
enterprises were licensed.

The national
action plan for renewable energy sources has not been adopted by the
government and the deadline for submission to the Energy Community has not been
met. National legislation has not yet been amended to reflect the Energy
Community’s binding target of 28 % of gross final consumption from
renewable sources, or the requirements for cooperation mechanisms. Award of
concessions for small hydropower plants in 80 locations is underway. The
maximum allowed capacity for feed-in tariffs for electricity produced from
biogas was increased from 2 MW to 7 MW, but criteria for the
sustainable production and import of liquid biofuels have not been implemented.
Changes to national legislation to align it with the EU Directive on Renewable
Energy need to be accelerated.

As regards energy
efficiency the second energy efficiency action plan was drafted and
discussed with stakeholders, but still needs to be adopted by the government. The
2013 target commitment of 4 % energy savings was not met. The national
Energy Agency adopted implementing legislation on the energy performance of
buildings and on energy audits. The first group of trained and licensed energy
auditors started work. Four new members of staff have been appointed to
the Energy Agency but its capacity remains insufficient.

The Radiation
Safety Directorate adopted the 2014-16 strategic plan on nuclear safety and
radiation protection, and prepared a report on the implementation of the
code of conduct on the safety and security of radioactive sources.

Conclusion

Some
progress has been made in the energy sector, notably as concerns the further
opening of the electricity market, the efforts to open up and widen the natural
gas market and the action taken to improve security of supply. Measures related
to renewable energy sources and energy efficiency have not been fully
implemented and the 2013 targets were not met. The regulator needs to have more
power to enforce its decisions and licensed businesses need to better meet the
obligations placed on them. Efforts to fully transpose and implement the Third
Energy Package need to be reinforced. Preparations in this area are moderately
advanced.

4.16. 
Chapter 16: Taxation

In the area of indirect
taxation, the value added tax (VAT) Law was amended to introduce the
reverse charge system. The VAT rate for animal food, baby products and school
supplies was decreased from 18 % to 5 %. Regarding excises,
the rates increased; however, some still remain lower than the minimum required
by the acquis. Further alignment is required in this area.

In
the area of direct taxation, the Law on Personal Income Tax was
amended to introduce the concept of self-assessment for sole traders and the
self-employed, and clarified procedures for the application of double taxation
agreements. The system for taxing gains from games of chance and betting was
also simplified. The Law on Special Zones for Technological and Industrial
Development is not compliant with the EU Code of Conduct for Business Taxation.

As
regards administrative cooperation and mutual assistance, the double
taxation agreement with Bosnia and Herzegovina was ratified and the Phase 2
Peer Review Report, part of the peer review process set up by the OECD Global
Forum on Transparency and Exchange of Information for Tax purposes, was published.

In
the field of operational capacity and computerisation the use of electronic
filing of tax returns and electronic services was further extended, improving
the operational capacity of the tax administration in these areas. The Public
Revenue Office has not yet conducted an analysis of gaps and needs regarding EU
interconnectivity and interoperability. The mandate of the Office was
further extended to include supervision of the implementation of the Law on
Fiscal Discipline for late payment in commercial transactions and forensic
analysis of financial accounting. The Office published several guidelines and
procedures for strengthening implementation. Inspections further increased, in
particular on issuance of fiscal receipts and enforced collections. The Office
has started publishing a list of unpaid debts and late-paying debtors. Reducing
the size of the informal economy remains a challenge. There continue to be delays
in the payment of VAT refunds, which can affect the liquidity of businesses.

Conclusion

Some
progress has been made in the area of taxation. Legislation on both direct and
indirect taxation needs to be aligned more closely with the acquis. More
needs to be done by way of preparation for interconnectivity and
interoperability with the EU. The Law on Special Zones for Technological and
Industrial Development is not yet compliant with the EU Code of Conduct for
Business Taxation. The country needs to develop a good track record of paying
out VAT refunds promptly. Further efforts are needed to combat tax fraud, tax
evasion, and the informal economy. IT infrastructure needs to be improved. On
the whole, preparations in the area of taxation are at a moderately advanced
stage.

4.17. 
Chapter 17: Economic and monetary policy

On monetary
policy, the Central Bank strengthened its mechanism for liquidity
management in the banking sector and took further steps to increase compliance
with the requirements of the European System of Central Banks.

The
2014-16 Pre-accession Economic Programme was submitted on time. The range of
information in the macroeconomic and fiscal frameworks is good, but it is
unclear how the planned economic policy targets would be achieved.
Inconsistencies in the data presented, non-compliance with the European System
of Accounts (ESA) standards and the lack of fiscal notification create
obstacles to using this pre-accession economic programme as a central policy
document. The structural reform agenda needs to be compatible with the fiscal
strategy and to address the structural constraints on growth. The fiscal
strategy was not adopted within the legal deadline. The transparency and
management of public finances need to be improved through the preparation of a
medium-term budgetary framework and by updating the public investment plan.
Some steps were taken to improve the institutional capacity of central
government, but capacity for strategic policy formulation and implementation
capacity needs to be substantially improved at all levels of administration in
order for effective results to be delivered. Significant efforts will be needed
to align national legislation with Directive 85/2011 on the requirements for budgetary frameworks of
Member States, including the requirement that a fiscal rule be
introduced.

Conclusion

Limited
progress was made in the area of economic and monetary policy. Tackling
structural problems in the economy will require a significant improvement in
institutional capacity in the field of economic policy formulation and
implementation. The transparency and quality of public financial management
remain a concern. Overall, preparations in the area of economic and monetary
policy are at an advanced stage.

4.18. 
Chapter 18: Statistics

In
the field of statistical infrastructure, an amendment of the law on
statistics defining the selection and appointment procedure of the head of the
State Statistical Office was adopted. Improvements to the IT systems at the State
Statistical Office and the Central Bank have improved secure storage and data
collection and management. The State Statistical Office conducted pilot surveys
on innovations, real import-export prices, the environmental costs of passenger
mobility and organic production. Six statistical surveys had to be postponed
due to lack of resources at the State Statistical Office. The volume of data
transmitted to Eurostat increased and procedures for providing secure access to
micro-data for scientific and research purposes were defined.

In
the area of classifications and registers, further progress
was made in the transition to the NACE Rev. 2 statistical classification of economic
activities. The system for nomenclature of territorial units was aligned with
the national territorial organisation.

As regards sectoral
statistics, national accounts statistics were brought more closely into
line with the acquis. Historical national accounts data were revised. The
first estimation of seasonal adjustments of quarterly and annual national
accounts data was prepared for the period 2004-2013. An action plan for
implementing ESA 2010 (European System of Accounts) was elaborated and the State
Statistical Office published first data series according to ESA2010. However,
further, significant efforts are necessary to comply with the new requirements
and should proceed according to the action plan agreed with Eurostat. The
Central Bank made improvements to its statistics on interest rates and to its
external statistics, and to the statistics used in the compilation of financial
accounts. Balance of payments and international investment position statistics
have been aligned with the new Balance of Payment Manual (BPM6) and annual,
quarterly and monthly time series for 1998 -2014 data have been published.
Regional agricultural statistics were published and labour force data were
revised. Alignment with the acquis improved as regards social statistics
through implementation of the Survey on Income and Living Conditions (SILC) and
transmission of data to Eurostat. The lack of up-to-date population data
continues to have a negative impact on statistical accuracy in a wide range of
areas.

Conclusion

Good
progress was made in the field of statistics, especially in statistical
infrastructure and in the alignment of sectoral statistics with the acquis.
Insufficient human and financial resources have, however, slowed progress in
this area. Preparations in the field of statistics are at an advanced stage.

4.19. 
Chapter 19: Social policy and employment

There has been
limited progress as regards labour law. Cooperation between the relevant
institutions charged with the enforcement of employment law has not improved.

Rulebooks
were adopted on risks related to electromagnetic fields and on establishing a
price list for services related to health and safety at work. The
implementation of the strategy and associated action plans for occupational
health needs to be speeded up. Coordination between the relevant authorities
also needs to be improved. The National Council for Occupational Health and
Safety remains inefficient, meeting irregularly and without a follow-up. There
were no improvements in the capacity for carrying out inspections concerning
health and safety at work.

The
Economic and Social Council has continued to lead the tripartite social
dialogue between the government, employers and trade unions. Tripartite
social dialogue is only modestly developed at local level. General awareness of
the importance of the bipartite social dialogue is poor, with both trade unions
and employers’ organisations struggle to attract new members. Some trade unions
report difficulties in establishing a presence in some companies. Overall, the
capacity of social partners remains weak and their participation in the
policymaking remains limited.

Unemployment
is still high despite a marginal decrease in the second quarter of 2014. Some
specific measures have been adopted to tackle youth unemployment as part of the
country’s employment policy, but their effect is yet to be seen.
The public sector remains the main employer. Labour market participation
remains very low, especially among women and Roma. The government adopted the
2014 operational plan for active employment programmes and measures. The
national budget for active employment programmes and measures has somewhat
decreased in 2014 however, and is not sufficient to meet the needs of the
labour market. Little progress was made on the long-term process of modernising
the Employment Service Agency. Some steps were made by the Ministry of Labour
and Social Policy responsible for fighting informal economy in order to reduce
the level of undeclared work.

IPA
co-financed projects preparing the country for participation in the European
Social Fund continue to be implemented. Local institutions with a lead role
in managing IPA funds are lacking motivation and commitment. Weak
administrative capacity and insufficient cooperation between institutions have
both been detrimental to the implementation of projects. (See
Chapter 22 — Regional policy and coordination of structural instruments).

The government
action on social inclusion included the employment, in the State
administration, of 1600 beneficiaries of social assistance and 300 people with
disabilities. The real impact of this employment raises questions, however,
about adequate preparation, such as training, for their integration in the
workplace as well as about the principle of merit (See Political criteria —
Public Administration Reform). Progress in implementing the revised
national strategy for alleviating poverty and social exclusion and the
corresponding action plan for 2014 was limited. The poverty rate remains high
and the institutions responsible for implementing policies and strategic
actions do not have sufficient capacity. Data on poverty, including child
poverty, has not been regularly updated, making it difficult to ensure the
poverty reduction target. Actions were taken to reduce the drop-out rate from
primary education among Roma children, but this remains an issue. The number of
Roma without official personal identification documents continues to be a
problem, with more than 530 cases recorded to date in 2014, out of which only
about one quarter obtained documents. Administrative capacity in the field of
social inclusion has not been improved, and is most notably inadequate at local
government level. Coordination among the institutions involved in implementing
social inclusion policies remains inadequate.

Limited progress
was made in implementing the 2010-18 national strategy on equal rights for
people with disabilities. New communal houses providing social services for
people with disabilities were opened, as were new day-care centres for children
with disabilities. The existing policies for improving labour market access for
vulnerable groups, including people with disabilities, are still insufficient.
The national coordinating body responsible for monitoring implementation of the
UN convention is inactive.

The
amended Law on Social Protection increased benefits by 5 % and gave
vulnerable groups additional rights to claim benefits. Benefit administration
has been simplified and improved. Reform of the pension system continued. Legislation
was amended to provide for a linear increase in pensions of 5 % per annum,
starting in March 2014. The administrative capacity of the institutions in
charge of implementing the Law on Social Protection has not been improved.

Implementation
of the 2011-15 anti-discrimination strategic plan is progressing with
mostly promotional and publication activities. Implementation of the actions to
raise awareness set out in the 2013-15 communication strategy has started with
a number of public debates held on selected topics. The Commission for
Prevention and Protection against Discrimination signed memoranda for
cooperation with the Secretariat for Implementation of Ohrid Framework
Agreement, and with the Association for Social and Multicultural Development of
Women. It engaged in promotion activities by publishing guidance and reports on
different topics and organising press conferences. It continues, however, to
have insufficient financial and human resources to properly fulfil its mandate.
The Law on Anti-Discrimination is still not in line with the acquis, as
it does not explicitly prohibit discrimination on the ground of sexual
orientation in the area of employment and occupation. Data collection and
analysis has improved, but is still limited. (See Chapter 23 — Judiciary and
fundamental rights).

Additional
funds were allocated to the Ministry responsible for equal opportunities,
in order to provide an operational budget for measures relating to gender
equality. The Law on Conditions of Employment was amended to give employees
additional rights to unpaid leave for childcare. The inter-sectoral
consultative and advisory group for equal opportunities for women and men is
now active. The capacity of local commissions for equal opportunities has
improved. The Commission for Prevention and Protection against Discrimination,
responsible for dealing with complaints, has continued its work focused
primarily on gender equality issues. The female participation and employment
rates remain very low compared with the EU average, and despite some
improvement, the Department for Equal Opportunities still lacks appropriate
resources. Measures targeting Roma women were limited. Discriminatory customs,
traditions and stereotypes remain widespread, notably in rural areas. (See
Chapter 23 — Judiciary and fundamental rights).

Conclusion

Limited
progress was made in the area of social policy and employment. The unemployment
rate has fallen somewhat but remains very high. The major challenges of
long-term unemployment, high levels of youth unemployment, very low
participation of Roma and women in the labour market and high levels of
informal employment still need to be addressed. Social dialogue and the
capacity of social partners need to be further strengthened. Social inclusion strategies
have to be better implemented. In the area of social policy and employment,
preparations are moderately advanced.

4.20. 
Chapter 20: Enterprise and industrial policy

Developments
relating to enterprise and industrial policy principles included the
creation of the National Council for Entrepreneurship and Competitiveness. The
country continued to implement the principles of the Small Business Act. The
Agency for Promotion of Entrepreneurship remains poorly funded and is not fully
integrated into government initiatives for private sector development.

Concerning enterprise
and industrial policy instruments, the Law on financial discipline was
amended, in order to encourage prompt payment of liabilities and to improve
businesses’ liquidity. Alignment with the Late Payment Directive remains to be
confirmed. The Law on Out-of-Court Reconciliation introduced shorter
out-of-court procedures for debtors’ liabilities, which can be used before
bankruptcy proceedings are formally initiated. A fund for innovation and technological
development was set up with a budget of € 9 million for the first four
years. The Council of Foreign Investors and the Agency for Foreign Investments
and Export Promotion signed a cooperation agreement to improve communication
and coordinate activities. A unit has been set up within the Agency for Foreign
Investments and Export Promotion to offer additional services to foreign
investors. It has begun implementing programmes linking up foreign investors
with local businesses. The budget allocated to the implementation of the
innovation strategy and the national policy for attracting foreign investors
was increased. An agreement on participation in the EU Programme ‘Competitiveness
of Enterprises and Small and Medium-sized Enterprises (COSME) was signed. More
still needs to be done to facilitate access to finance for all businesses, and
for small and medium-sized enterprises in particular, and to keep them well
informed about changes to legislation.

As
regards sector policies, the budget for the Agency for Tourism,
including subsidies for attracting foreign tourists, was significantly
increased in 2014. The total number of tourists increased by 5.8 % in
2013, as compared with the previous year.

Conclusion

Little
progress was made in the field of enterprise and industrial policy. Measures
were adopted to improve financial discipline and encourage prompt payment of
liabilities. Funding for attracting foreign investors and developing tourism
was increased. More needs to be done to improve access to finance. Preparations
in this area are at a moderately advanced stage.

4.21. 
Chapter 21: Trans-European networks

In the area of transport
networks, the country continued to participate in the development of the
South-East Europe Regional Transport Network, in accordance with the memorandum
of understanding on this project. Attention should be paid to the development
and prioritisation of projects on the routes defined in the indicative
extension of the TEN-T to the Western Balkans region. Upgrading road and rail
links included in the South-East Europe Transport Observatory (SEETO)
comprehensive network remains a priority.

The
government adopted the 2013-17 road investment programme. The construction
work, co-financed by IPA funds, on the motorway section located along Corridor
X of the South-East Europe Transport Observatory network is progressing.
Construction of the rail Corridor VIII towards Bulgaria began in March 2014,
financed by a loan from the European Bank for Reconstruction and Development
and by the Western Balkans Investment Framework. The administrative and
technical capacity of all of the institutions and bodies involved needs to be
further strengthened.

In the area of
energy networks, construction work continued on the 400 KV electricity
interconnection Štip-Niš (Serbia). Funding was obtained from the Western Balkan
Investment Framework for the preparation of technical documents relating to the
transmission line Bitola-Elbasan (Albania). A loan of € 25
million was secured from the European Bank for Reconstruction and Development
for modernisation of the Bitola-Florina (Greece) section of the electricity
transmission network. The state-owned gas transmission
operator signed an agreement for the construction of the gas transmission
pipeline Klečovce-Štip-Kavadarci.

As
regards telecommunications networks, the 4G network became available at the
beginning of 2014, in a limited area.

Conclusion

Some
progress was made in the area of trans-European networks. The country continued
to participate actively in the South-East Europe Transport Observatory and the
South-East Europe Energy Community. Overall, development of transport, energy
and telecommunications networks is progressing. Preparations in this area are
advanced.

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

As
regards the legislative framework, the provisions on channelling funds
from the central budget, as set out in the Law on Regional Development, have
still not been fully implemented. Capital investments of ministry-run projects
need to be made more transparent. The capacity for co-financing EU-funded
projects at local level needs to be improved. The introduction of
a medium-term budgetary framework would allow flexibility in setting budgets,
and multiannual programming.

Improvements
are needed in the preparation and implementation of programmes relating to the institutional
framework. Interministerial coordination and stakeholder consultations also
need to be improved. Management and monitoring systems need to be strengthened
in order to ensure effective implementation within the timeframes allowed.

The
institutions involved in implementing the IPA still lack the necessary administrative
capacity to absorb the available EU funds and to ensure their efficient and
effective management. Motivation and retention of staff and working conditions
remain an issue.

The
capacity for programming and project preparation needs to be further
improved. The development of mature projects needs to be completed in order to
mitigate the increasing risk of de-commitment and recoveries of funds.

Management
procedures for monitoring and evaluation, used alongside the regular IPA
Sectoral Monitoring Committees, were improved and a good track record of
implementation is being developed. The Management Information System needs to
be exploited fully. More needs to be done to ensure that evaluation
recommendations and project and programme indicators are acted upon, and that
results are sustainable. Communication around and visibility of the IPA needs
to be improved.

Administrative
capacity in the area of financial management, control and audit needs to
be further improved (see Chapter 32 — Financial control). Efforts need
to be made to further strengthen the financial management, audit and control
procedures by means of improvements to operating structures. The country needs
to further develop its capacity in this field, in order to ensure sound
financial management of EU funds.

Conclusion

Limited
progress was made in the area of regional policy and coordination of structural
instruments. There continue to be concerns around the functioning of the
decentralised implementation system as a whole. If problems are not addressed
as a matter of urgency, the risk of de-commitment of EU funds will increase
further. Greater efforts are needed to ensure that procurement procedures
involving EU funds are carried out correctly and within the stipulated
timeframes. Overall, preparations in this area are not very advanced.

4.23. 
Chapter 23: Judiciary and fundamental rights

Judicial system

The
main reforms in this area have already been largely completed, but improvements
are needed to ensure the correct implementation of European standards relating
to independence and quality of justice.

Defects
in the current career system for judges have still not been addressed, despite
the potential threat they pose to judges’ independence. Security of
tenure needs to be more robustly safeguarded by amending the legislation
relating to discipline and dismissal, which is overly complex and insufficiently
precise and predictable. The practice of the Judicial Council in relation to
discipline and dismissal proceedings needs to be more proportionate and
transparent. Poor performance by judges should be addressed through remedial
measures such as organisational improvements and training, rather than
resulting in dismissal. Dismissal should be limited to serious and persistent
misconduct and should only be imposed following recourse to less severe
disciplinary penalties, such as warnings and salary reductions, which are
rarely used at present.

In
the area of impartiality, the provisions relating to conflicts of
interest contained in the civil and criminal procedure legislation continue to
function smoothly. Judges in the basic courts and appeal courts made 2 419
requests to recuse themselves in cases of potential conflicts of interest, of
which 1 818 were accepted. The Judicial Council received 77 complaints
from parties alleging biased court proceedings, but none were sufficiently well
founded to trigger a disciplinary procedure. Claims of indirect political
influence on the conduct and outcome of high-profile court proceedings persist,
especially in respect of organised crime and corruption prosecutions, as well
as cases involving political personalities and the media.

As
regards professionalism and competence, amendments to the Law on Courts,
which entered into force in 2013, have not in practice led to any significant
strengthening in the merit-based recruitment and promotion of judges. In 2013,
the Judicial Council failed to comply with the legal requirement that all new
first instance judges must have completed the training of the Academy for
Judges and Prosecutors, by appointing numerous candidates who had not. The
legal requirement for higher court judges to have prior judicial experience was
also circumvented by a number of appointments being made immediately before the
amendment entered into force and even ignored in some appointments made after
its entry into force. This continues to cast doubt on the commitment to
merit-based recruitment. The appointment process of the Judicial Council, in
particular the evaluation of candidates’ respective merits, needs to be made
more transparent.

The
Academy for Judges and Prosecutors continues to play a central role in
promoting the competence and lifelong learning of judges, prosecutors and court
staff. It further expanded its in-service training activities in 2013 to
include 4 151 judges, 1 256 prosecutors and 1 929 expert
associates and other participants. The number of training programmes increased
to 272, including 63 provided outside the capital through the decentralised
training system. A new generation of 13 candidate judges and prosecutors
started their 2-year pre-service training in December 2013. This is the
fifth generation of candidates to participate in the Academy’s initial training
programme since 2009, but also one of the smallest. Of the 80 candidates who
have graduated in the last five years, 76 have been appointed as judges or
prosecutors. Despite numerous publicity campaigns and preparatory measures
undertaken during the past year, the 29 available places for the current
academic year could not be filled. Improvements have been made, including
introducing preparatory training for the entrance exam, a new exam-question
structure and method of assessment. Sustained efforts should continue,
including close cooperation with universities, to bring more candidates up to a
sufficient level that they are able to fulfil the entrance requirements. It
also remains difficult to motivate young professionals to view the judiciary
and prosecution service as an attractive career option and the relevant
authorities need to examine the underlying reasons for the current low level of
interest and to address the fear of nepotism, excessive productivity pressures
and political interference, which may be dis-incentivising potential
candidates.

The
annual evaluation procedure for judges requires urgent review, as it is having
a detrimental effect on both the independence and the quality of justice.
It is used primarily as a tool for monitoring the productivity of judges rather
than their competence and integrity, the quality of their work, and their
service to the citizen and to the profession. It acts as a precursor to either
dismissal or career advancement, based on purely quantitative criteria. The
system places unnecessary pressure on judges and deprives them of the autonomy
to manage their caseloads in the optimal way, indirectly fostering negative
working methods. Evaluation should be separated from the disciplinary and
dismissal system, and should focus more on appraising judges’ core
competencies, such as legal drafting and reasoning, organisational skills,
participation in training activities and level of specialisation. The
quantitative criteria currently used (number of cases processed, number of
judgments overturned on appeal and number of procedural deadlines met) are more
suitable for evaluating the justice system as a whole, rather than individual
judges. A coherent system of quality evaluation and customer satisfaction for
the courts still needs to be developed.

The accountability
of state judicial bodies is monitored by means of multiple complaints
mechanisms available to citizens. The Judicial Council, the Ministry of Justice
and the Ombudsman’s Office received 1 061, 339 and 732 complaints
respectively in 2013, relating to the work of the judiciary. The most common
grounds for complaint are the length of court proceedings, but increasingly
also lack of impartiality or equal access to justice. The Supreme
Court continued to receive claims for compensation for unreasonably lengthy
court proceedings. It received 434 such claims (down from 676 in 2012)
and awarded over € 116 000 in compensation and costs. The country
also agreed to pay out over € 445 000 in friendly settlements, to
applicants who had made claims before the European Court of Human Rights, most
of which also related to the excessive length of court proceedings. As regards
individual accountability, five judges were dismissed so far in 2014, on the
catch-all grounds of ‘unprofessional or unconscientious exercise of judicial
office’ and one judge resigned during an ongoing dismissal procedure. The
Council of Public Prosecutors dismissed two prosecutors on the grounds of
incompetence. Two high-level corruption investigations were concluded in autumn
2013 with the prosecution, conviction and imprisonment of a judge, two
prosecutors, a former judge, a former investigative judge, an employee of the
prosecution service and a lawyer. The State Commission for the Prevention of
Corruption also initiated misdemeanour proceedings against 32 judges for
failure to submit legally-required statements of interest.

As
regards the efficiency of the court system, 23 out of the country’s 27
basic courts maintained a positive clearance rate (meaning that they managed to
process more cases during 2013 than they received) as did the four appeal
courts, the Administrative Court and the Supreme Court. In terms of case-flow
management, there are no backlogs to speak of. However, the equally serious
issue of lengthy court proceedings still needs to be addressed. Whereas
individual stages of the court procedure are generally concluded within the
legal deadlines, the overall length of proceedings from initiation to final
judgment remains one of the main causes of complaints and requests for
compensation by citizens. The robust steps taken in recent years
to address court backlogs, including the imposition of monthly targets and
heavy emphasis on productivity in the annual evaluation process, risks a
deterioration in the quality of justice, as a result of judges’ limited ability
to devote appropriate time and attention to preparing sound, fully reasoned
judgments based on all available evidence. Rather than speeding up the overall
proceedings, this may on the contrary be contributing to the long-standing
problem of repeated re-examinations and re-trials, and to longer overall
proceedings. The
Law on Mediation provides a legal framework for alternative dispute resolution,
but in practice the system is still underdeveloped and more awareness-raising
measures are needed to bring it into the mainstream. In early 2014,
the Judicial Council and the Ministry of Justice took steps to identify ‘old
cases’ using the courts’ automated case management system. Across all court
instances, 3 155 cases were identified as having been in the court system
for more than three years, of which 822 cases were more than five years old and
56 cases more than 10 years old. However, this review has thus far been limited
to around 88 000 contentious cases and needs to be extended to cover the
entire caseload of the courts, including procedural and non-contentious cases,
which currently stands at around 180 000.

The
2014 court budget is € 30.83 million and the Public Prosecutor’s Office’s
budget is € 7.25 million; both slightly increased from last year. The Academy
for Judges and Prosecutors receives only €0.68 million from the court budget,
which given the scope of its training activities and its central role in the
professionalism of the judiciary, should be increased. By far the largest part
of the court budget is still spent on salaries and the ratio of the
total number of judges to the size of the population remains over 50 %
higher than the European average. At the same time, the total number of court
cases currently in active proceedings before the national courts has reduced
drastically in the last four years, from almost 1 million at the end of 2009 to
around 180 000 at the end of 2013, due to the reorganisation of
competences in areas such as enforcement and succession. These factors
underline the growing need for a rationalisation of the court system and a more
efficient redistribution of financial and human resources.

As
regards access to justice, the annual legal aid budget allocation has
remained at € 50 000 and the number of lawyers registered to provide
legal aid rose to 251. Of the 227 requests for legal aid submitted in 2013, 95
were granted so far while 128 were inadmissible. The highest numbers of
requests were made in cases involving property issues, victims of family
violence and child protection. Further improvements are needed to make the work
of courts more accessible to the public. No steps have been taken to locate
information desks at the entrances of courthouses. Physical access to Skopje II
Basic Court, the busiest in the country, is inadequate, as there are no lifts
and no provision made for people with special needs. No steps have been taken
to introduce a user-friendly search function for judgments published on the
court websites. Despite the legal obligation to ensure transparency by
publishing all court judgments online within two days of drafting and signing,
the most significant or controversial judgments, liable to be of public
interest, do not appear to be published at all, which can lead to a lack of
publicly verifiable information and distorted media reporting.

Anti-corruption policy

The
Electoral Code was amended to address shortcomings highlighted by OSCE/ODIHR in
relation to the financing of election campaigns, and the Criminal Code was
amended to introduce the new criminal offence of illegal disbursement of state
funds during elections. The Law on Management of Confiscated Assets was
extended in scope to cover misdemeanour and administrative cases, and the rules
on management of seized and confiscated assets were refined. GRECO carried out
a fourth round of evaluation in late 2013, covering corruption prevention in
relation to members of parliament, judges and prosecutors. The OECD Convention
on Combating Bribery of Foreign Public Officials in International Business
Transactions has not yet been ratified.

Administrative
capacity
was strengthened slightly, including through the employment of 34 legal and
administrative support staff in the Public Prosecution Offices (PPOs) across
the country and 5 new junior auditors in the State Audit Office’s Unit for
supervision of political party and election campaign financing. The chief
Public Prosecutor’s Office, Skopje Basic PPO and the Skopje High PPO were all
relocated to a new building with modern facilities. However, the relevant
enforcement bodies and supervisory institutions remain understaffed,
under-resourced and inadequately equipped in light of their responsibilities
and workload, which presents a serious challenge to the effective fight against
corruption. The Ministry of Interior’s Anti-Corruption Unit was upgraded to the
Sector for the Fight against Corruption but its status remains weak; only 19
posts are allocated to it, of which over a third still have to be filled.
Substantial human and material resources are still needed in order for the
prosecution service to ensure full implementation of the new Law on Criminal
Procedure. Some basic PPOs still work in inadequate premises with insufficient
IT support. The Investigative Centre within the PPO for the Fight against
Organised Crime and Corruption, although formally established in 2011, has yet
to become operational, and no further Investigative Centres have been set up. Only
around 40 % of the 45 posts foreseen within the State Commission for the
Prevention of Corruption (SCPC) have been filled and it remains hampered by its
limited powers. Although the Ministry of Interior’s Sector for Internal Control
and Professional Standards (SICPS) has been granted new powers in the area of
integrity, it still lacks independence.

As
regards enforcement activities, there was a 50 % drop in
convictions for corruption-related offences in 2013 (63 compared to 123 in
2012); 56 of the convictions related to abuse of public office, while only 3
related to bribery. 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. The need for further improvements to
the criminal procedure should be considered, in particular to counteract
deliberate delay tactics by accused persons and their representatives. The fact
that amendments, aimed at preventing repeated remittals of cases by appeal courts
to lower courts for re-trial, are only applicable to new cases significantly
hampers their effectiveness. The SCPC continued to receive low numbers of
citizen complaints (201 in 2013, 177 in 2012). It filed 9 requests to the PPO
to initiate criminal proceedings in 2013. Cases referred by the SCPC to the PPO
have rarely led to successful prosecutions, and the PPO needs to provide more
feedback on cases referred to it, to ensure a higher success rate. There was a
sharp drop in confiscations of assets in corruption cases (10 cases in 2013
compared to 70 in 2012) and the use of special investigative measures in
corruption cases remains rare.

The
SCPC continued to carry out its corruption prevention activities. It
initiated misdemeanour proceedings against 36 public officials in 2013 for
failure to submit legally-required asset declarations and 9 officials were
subsequently fined by the courts. The SCPC requested the Public Revenue Office
to conduct asset examinations in 30 new cases in 2013, and the latter charged
three officials with the 70 % tax rate on undeclared assets, following the
completion of asset examination procedures which had been initiated in previous
years. As regards conflicts of interest, the SCPC received 1 459
statements of interests in 2013. It also carried out a systematic verification
of the judiciary sector and initiated misdemeanour proceedings against 32
judges for failure to submit statements of interest. A total of 196 cases of
potential conflict of interest were processed by the SCPC in 2013, and in 15
cases officials were given a public reprimand. The SCPC is not empowered to
impose any other penalties for conflicts of interest, following annulment of
parts of the Law on Conflicts of Interest by the Constitutional Court in 2010.
The absence of a registry of elected and appointed officials continues to
hamper effective control of assets and conflicts of interest. In cases where
the SCPC initiates misdemeanour proceedings for failure to submit asset
declarations or statements of interest, the courts’ weak application of the
available penalties undermines its work and fails to send a sufficiently
deterrent message to public officials who abuse the rules.

The
SICPS of the Ministry of Interior initiated corruption-related disciplinary
proceedings against 12 police officers in 2013 and 6 were fined as a
result. It also initiated criminal proceedings in 6 corruption-related cases.
The Customs Administration enhanced internal control measures, adopted a new
code of conduct and organised anti-corruption training for staff. No corruption-related
disciplinary proceedings were initiated against customs offices in 2013, but
criminal charges were brought against two customs officers for smuggling. The
Customs Administration needs to step up efforts to fight corruption and should
acquire the technical capacity to independently carry out special investigative
measures, which fall within its legal mandate.

As
regards political party and election campaign funding, shortcomings
persist in both the legislation and its implementation. The powers and
resources of the State Audit Office need to be enhanced to enable effective
control of the origin of donations. Rules on expenditure verification should be
further strengthened. The closure of campaign bank accounts and the treatment
of campaign debts are yet to be regulated to prevent abuse. Penalties for
breaches of the relevant legislation have started being imposed in practice,
but a credible track record has yet to be developed in this field and the lack
of transparency and accountability of political parties in relation to party
funding remains a concern.

Convictions
under the Criminal Code for abuse of public procurement procedures
dropped to just 6 in 2013, compared to 12 in the previous year. The Law on Public
Procurement was amended to include criminal penalties (imprisonment) for
violations of tender procedures, however their positive impact on the integrity
of the procurement system, as well as their proportionality and enforceability,
have yet to be demonstrated in practice. No administrative penalties are yet
foreseen for milder violations of the law. There is still no institution
assigned to ensure effective and timely control and supervision of public
procurements, concessions, public-private partnerships and the execution of
contracts. Corruption in public procurement remains a serious concern.

The
Law on Free Access to Public Information and its implementation remain
deficient. The enforcement mechanism for breaching this law is inefficient and
penalties are not imposed in practice. Political parties remain excluded from
the list of holders of information, releasing them from the enforcement regime.
Public awareness of the National Commission for the Protection of the Right to
Free Access to Public Information remains low. Transparency and accountability
of public institutions and enterprises, and of public expenditure, continue to
be insufficient.

In
2013, the SCPC and the Academy for Judges and Prosecutors organised
anti-corruption training activities reaching more than 700 participants.
However, much remains to be done as regards capacity building and raising
citizens’ awareness. The enforcement of anti-corruption legislation and its
results remain largely invisible to the public. The internal control system in
central and local administration remains weak and whistle-blowing mechanisms in
public and private sectors have yet to be set up. The relevant anti-corruption
bodies need to be more proactive and to focus on the systemic problems. Public
trust in their effectiveness and independence needs to be improved to encourage
citizens to resist and expose corruption, and greater independence of the
judiciary and media freedom would reinforce anti‐corruption efforts.

Fundamental rights

The
country is already party to most of the international human rights
instruments. Further progress was made with the ratification of the Third
Additional Protocol to the European Convention on Extradition. The European
Charter for Regional or Minority Languages has not yet been ratified. The
UN General Assembly elected the country to be a member of the UN Human Rights
Council for the period 2014-16.

During
the reporting period, the European Court of Human Rights (ECtHR) found
that the country had violated the European Convention on Human Rights (ECHR) in
6 cases, mainly concerning the right to fair trial and equality of arms,
procedural rights relating to arrest and deprivation of liberty, as well as the
reasonableness of pre-trial detention. In the same period, 407 new applications
were allocated to a decision-making body. A draft action plan for
implementation of the judgment in the El Masri case was submitted to the
Committee of Ministers of the Council of Europe. The Bureau for Representation
of the country before the ECtHR developed an action plan for execution of some
50 older judgments against the country, mainly concerning the excessive
duration of court proceedings. However, a total of 92 judgments finding
violations have still not been executed. The staff of the Bureau continued to
provide training in the framework of the Academy for Judges and Prosecutors’
training programmes. More attention needs to be paid to safeguarding procedural
rights connected to arrest, detention and fair trial, in accordance with the
country’s obligations under the ECHR. Orders for pre-trial detention and
extensions thereof need to be fully reasoned, in line with the case-law of the
ECtHR. The new amendments to the Criminal Code, providing for chemical
castration of repeat offenders convicted of child sex abuse, should be
accompanied by appropriate safeguards ensuring that treatment is given on a
purely voluntary and informed basis, in accordance with the prohibition on
inhuman or degrading treatment or punishment.

The
Ombudsman’s Office continued to exercise its function of national prevention
mechanism (NPM); playing a central role in the prevention of torture and
ill-treatment. Although under-resourced, the NPM maintained a robust
approach to identifying inhuman or degrading conditions in places of detention,
and also integrated civil society organisations into its work. The NPM made 32
preventive visits in 2013 and warned against poor detention conditions in a
number of facilities. However there has been limited follow-up to the
recommendations made and degrading conditions persist. In 2013, there were 18
complaints filed with the Ombudsman’s Office concerning ill-treatment or
excessive use of force by the police, while the Ministry of Interior’s SICPS
received 57 complaints of excessive use of force by the police (compared with
73 in 2012). Criminal charges were raised against one policeman for
ill-treatment. Concerns remain over the low number of completed investigations
in ill-treatment cases. There is continued impunity relating to the actions of
the security forces. As far as prisons are concerned, the number of inmates’
complaints submitted to the Ombudsman Office continued to decrease with 247
complaints submitted in 2013 (278 in 2012), although 93 violations were
confirmed, as compared to 84 in 2012. One prison officer was convicted of
serious bodily harm and sentenced to prison, in a case initiated by the
Ombudsman.

As
regards the prison system, the Law on Execution of Sanctions was
amended, introducing public-private partnerships and transforming the prison
security service into a new body (the prison police). The duty to provide
healthcare in penitentiary facilities was transferred from the Directorate for
Execution of Sanctions to the national health care system in line with the recommendations
of the European Prison Rules. The prison system’s annual budget increased by 11 %
in 2014 and large-scale prison construction continued, however some prisons
received reduced funding despite growing inmate populations and were unable to
cover their basic maintenance costs. Staffing in the Directorate for Execution
of Sanctions and in several penitentiary facilities increased slightly. Ad hoc
training activities continued while initial and continuous programmes for
prison staff are being prepared. The prison system remains seriously
underfunded and understaffed. Despite the opening of the new Kumanovo prison,
increases in the overall prison population mean that the system continues to
suffer from overcrowding. Substandard conditions persist in some facilities,
with juvenile facilities being of particular concern. More use needs to be made
of alternative sanctions and non‐custodial pre-trial measures. Limited
financial and human resources are hampering the provision of healthcare and
there is an urgent need to ensure proper access to psychiatric services for
prisoners suffering from severe mental illness. The managerial and
administrative capacity of prisons remains weak. Effective inspection
procedures, which could help to address persistent violations, have not yet
been established. The powers of the Directorate for Execution of Sanctions
should be expanded to ensure effective management and supervision of the prison
system. Adequate measures to fight corruption among prison staff and
inter-prisoner violence have yet to be taken. A national strategy for the
prison system is yet to be developed. The probation service still needs to be
introduced.

In the area of freedom
of expression and the media, a new Law on Media entered into force in
December 2013, regulating basic obligations, protections and freedoms relating
to the media. The widespread use of defamation actions continues to impinge on
the freedom of expression. Since the decriminalisation of defamation in late
2012, around 580 civil defamation claims have been raised in the courts,
including against journalists and by politicians against other politicians,
sending a negative message to the public and media alike. Many court actions
are initiated and then subsequently dropped, raising concern about defamation
actions being used as a means of exerting pressure. Both the Law on Civil
Damages for Insult and Defamation and the new Law on Media contain negligible
provisions for non-judicial remedies such as the right of reply or correction.
Alternative mechanisms for solving these kinds of disputes need to be developed
and promoted, in order to improve the media culture. Labour rights are still
inadequately enforced in relation to media outlets, also contributing to the
continuing problem of self-censorship. As regards public advertising, the
transparency provisions in the Law on Audio and Audiovisual Media Services
should be respected in full and greater care needs to be taken to ensure that
public funds are used to provide information of genuine public interest, rather
than to promote government activities. A self-regulatory body was established
in December 2013 by media actors themselves, in the form of the Media Ethics
Council, run by a seven-member board with broad representation of the media,
media associations and the public, but it has yet to become operational and
start considering complaints from the public. Investigative reporting is still
weak and needs to be fostered through continuous education and training of
journalists, including exposure to best practices in other countries. There
were no reported incidents of violence against journalists in the reporting
period. The media currently plays a negligible role in investigating and
exposing corruption and organised crime.

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

Freedom
of thought, conscience and religion is generally
guaranteed by law and enforced. The number of registered religious entities
remains at 31.

In
the field of women’s rights and gender equality, progress was
made on the implementation of the 2013-16 national action plan for gender
equality. The staff of the unit for gender equality in the Sector for Equal
Opportunities Policy in the Ministry of Labour and Social Policy was increased
slightly and the capacity of the local equal opportunity commissions was
strengthened. There is increasing awareness in society of the need to combat
and prevent domestic violence. However, much remains to be done to ensure a
long-term impact on gender equality. Discriminatory customs, traditions and
stereotypes persist, and socially regressive trends in society are fuelled by
some parts of the media, as well as by some national policies and initiatives.

As regards children’s
rights, the Law on Child Protection was amended, among other things
introducing professional exams for kindergarten staff. The Law on Justice for
Children was adopted, replacing the Law on Juvenile Justice and strengthening
protection in line with international standards, especially as regards the
treatment of child victims and witnesses, alternative sanctions and free legal
aid for juvenile offenders. In spite of improvements in the legal framework,
the poor material conditions, lack of basic education and systematic
rehabilitation services for juveniles deprived of their liberty continues to be
a matter of serious concern. The Centres for Social Work, working with juvenile
offenders, remain seriously underfunded and understaffed. Although some
training has been held for juvenile justice professionals, permanent continuous
training programmes still need to be introduced. Insufficient attention is
given to monitoring and to systematic data collection and analysis in the area
of children’s rights. Further efforts are still needed to improve children’s
health and nutrition, with Roma children being a particular concern. More also
needs to be done to improve the inclusion of disadvantaged children, in
particular children with disabilities, in the educational and social systems.
Children with disabilities and children from the Roma community suffer the most
from stigma, discrimination and segregation. Further efforts are needed to
provide national institutions with the qualified staff and the appropriate
infrastructure necessary to support the process of inclusion.

Inclusion
of the socially vulnerable and/or persons with disabilities has not
improved. Almost one third of the population are facing poverty. The national
coordinating body set up to monitor the implementation of the UN Convention on
the Rights of Persons with Disabilities has not met in 2014. Communal housing
units for people with disabilities, which form part of the
de-institutionalisation process, currently accommodate over 70 people.
Implementation of the 2010-18 national strategy on equal rights for people with
disabilities remains inadequate.

In the area of anti-discrimination
policies, a review carried out by the Ministry of Labour and Social Policy
confirmed the need to amend the anti-discrimination law. The professionalisation
of the Commission for protection against discrimination, including the
establishment of its technical secretariat, and the shifting of the burden of
proof were identified as the most pressing issues. The Commission received 84
complaints in 2013. It made findings of discrimination in 4 cases on the
grounds of ethnic origin, political affiliation, personal and social status and
belonging to marginalised groups. The ongoing lack of funding and staff
shortages continues to hinder its effectiveness. The Commission’s work on
processing complaints should be complemented by awareness-raising activities
aimed at prevention and protection against discrimination and promoting better
understanding of its work and of anti-discrimination policy in general.

As regards the rights
of lesbian, gay, bisexual, transgender and intersex (LGBTI) persons, the
violent incidents of the previous reporting period have not been repeated.
Nevertheless, the perpetrators of these incidents are yet to be prosecuted.
Continued efforts are needed to increase awareness of and respect for diversity
within society and to counteract intolerance perpetuated through the media.

Labour and trade
union rights are generally respected. Trade unions have
reported difficulties in becoming established in some companies. Both trade
unions and employers’ organisations struggle to attract new members and
increase their influence.

Over
a quarter of complaints filed with the Ombudsman’s Office in 2013 (70 out of
261) related to property rights, relating both to the actions of the
administrative bodies and the Administrative Court. Breaches of property rights
were confirmed in 109 cases in 2013. 7 % of the fees charged by the
Cadastre Office are not in line with the legally applicable rates and greater
transparency is needed as regards the charging of administrative taxes.

Progress
in relation to the protection of minorities and cultural rights has been
hampered by insufficient financial and human resources, and inadequate
cooperation between the authorities concerned. The Agency for the Protection of
Minorities Representing less than 20 % of the Population increased its
staff numbers and continued to cooperate with the relevant state administrative
bodies and civil society organisations; however, its activities remain limited
due to the lack of state funding. There is also a persistent lack of funding
for staff in the directorate for education in communities’ languages within the
Ministry of Education and Science, and for the directorate for the promotion of
culture of the communities within the Ministry of Culture. Systemic measures to
ensure the enjoyment of the ethnic, cultural and linguistic rights of all
communities are insufficient and remain mainly donor-funded. The implementation
of the Strategy on Integrated Education is also hampered by limited funding.
Separation along ethnic lines in schools, and incidents of inter-ethnic
violence in secondary schools, have continued. Ethnically divisive internet
postings, as well as chanting at sports events and demonstrations continued,
sometimes aggravated by unbalanced media reporting.

The
unit for implementation of the Roma Strategy within the Ministry of
Labour and Social Policy was reinforced with new staff; however coordination
between the relevant authorities remains inadequate. Municipal action plans for
the Roma are hampered by limited financial resources. Active labour market
measures targeting the Roma population are ineffective due to administrative
requirements that Roma cannot fulfil. Prejudice and discrimination against Roma
persist, particularly in the area of employment. Curricula on Roma language and
culture for elementary education were developed during the last year and
textbooks were printed, however separation of Roma in schools continues and the
number of Roma children in special schools is disproportionally high.
Stereotyping occurs on social networks. Although projects in several priority
areas are ongoing, they are driven mainly by donor funding as state budget
allocations remain unchanged. In March 2014, the fourth follow-up meeting to
the 2011 seminar on Roma and Roma refugees issued a comprehensive review of the
policy recommendations and provided an opportunity for greater coordination of
efforts and sharing of information. Little progress has been made since, to
implement the meeting’s operational conclusions, notably in the area of the
legalisation and provision of social housing. Legislative changes are also
needed to address issues relating to civil registration and obtaining personal
identity documents for those rejected in the past.

The Directorate
for Personal Data Protection further increased the number of inspections
carried out, of which 60 % were conducted in the private sector and 40 %
in the health sector and judiciary. Almost half of these inspections confirmed
violations. The number of complaints to the Directorate remained stable at 404
in 2013, of which 62 % related to the abuse of data on social networks.
Overall, the number of detected and confirmed violations increased almost
five-fold, from 56 in 2012 to 254 in 2013 as a result of the Directorate’s
proactive approach. Public awareness-raising activities also continued,
resulting in a 30 % increase in visitors to the Directorate’s website. The
number of data protection controllers and officers has increased and their
training has been improved, but four staff also left. The Directorate submitted
its first report to Eurojust on personal data protection in the public
prosecution system. Sector-specific legislation is still not harmonised with
data protection legislation and far greater efforts need to be made to ensure
that the Directorate is systematically consulted on any new policies and draft
legislation. Some further fine-tuning of the data protection legislation is
also needed to bring it fully into line with the acquis.

Conclusion

The
country has already completed the majority of reforms and has established the
necessary legal and administrative structures in this area. However, there is a
risk of back-sliding in some areas, including the judiciary and the fight
against corruption. Further efforts are needed to safeguard the independence of
judges, to improve quality of justice and to facilitate access to justice. Far
more focus needs to be placed on effective implementation of the existing
fundamental rights framework, notably as regards funding, staffing, awareness
raising, inter-agency cooperation and strategic planning, in particular in the
areas of prisons, children’s rights, anti-discrimination, LGBTI rights and the
Roma. The situation as regards the freedom of expression remains problematic
and greater efforts are needed to improve the media culture.

4.24. 
Chapter 24: Justice, freedom and security

In
the area of migration, the Law on Foreigners has been further aligned
with the EU acquis, notably on common standards and procedures for
readmission of third-country nationals, the right to family reunification,
long-term residence and the conditions for admission of third-country nationals
for the purposes of scientific research. The database on foreigners, covering
asylum, migration and visas, has now been established and training has been
given to end-users and administrators with a view to becoming operational
during the autumn. Border controls have been strengthened and the number of
irregular migrants detected increased by 66 % in 2013 (to a total of 1 132),
as compared with 2012 (682). The number of detected smuggling attempts also
increased, by around 44 %. The highest numbers of cases were detected at
the border with Greece. Further efforts are still needed, especially at the
borders with Greece and Serbia, which is the main onward transit route for
illegal migration. In 2013, 1 328 persons were returned under the
readmission agreement with the EU, which continues to be implemented smoothly.
As regards accommodation and infrastructure, the physical conditions and
administrative capacity of the Centre for Foreigners remain insufficient to
cope with the increasing numbers of migrants transiting through the country.
The capacity to develop migration policy remains weak, and further systematic
efforts and proper strategic planning are still needed to manage migration
flows. The
country has insufficient capacity to detain and identify un-documented
irregular migrants. This often thwarted the initiation of return procedures in
the past, which has reduced the deterrent effect of border surveillance
measures.

In
2013, 1 323 applications for asylum were made (a significant
increase from 527 in 2012); however in 1266 cases (96 %) the asylum
procedure was discontinued because the applicants were considered to have
implicitly withdrawn their application by leaving the reception centre. The
refurbishment of the Centre for asylum is underway and its capacity has been
improved slightly by the appointment of three additional members of staff. It
continues to be targeted by organised crime groups involved in the smuggling of
migrants, and more robust measures are needed to counteract this phenomenon.
Cooperation between the asylum unit of the Ministry of Interior and the Centre
for asylum needs to be strengthened in order to improve access to the asylum
procedure. The Centre operates reception hours during which asylum-seekers can
meet with the designated representative of the asylum unit, however these are
limited to two hours twice weekly and there is no permanent representative
within the Centre. The establishment of a database verifying the personal data,
photographs and fingerprints of asylum-seekers is still progressing very slowly
and difficulties still persist in providing interpretation during interviews
with asylum-seekers. The Administrative Court continues to process asylum
appeals largely on technical rather than substantive grounds. The asylum
recognition rate remains very low. In 2013, refugee status was granted to 1
person, and in the first half of 2014 to 10 persons, all coming from Syria.
There are currently 543 persons under subsidiary protection. As regards the availability
of services, the asylum unit provided 54 asylum-seekers with identification
documents in 2013 (an increase from 31 the previous year) and information
brochures on the asylum procedure and reception have been prepared. A programme
for integrating beneficiaries of international protection has been adopted and
the Centre for integration of refugees and foreigners continued to implement
the Integration Strategy, including through the construction of 20 social
housing units. In 2013, 340 persons, including both recognised refugees and
persons granted subsidiary protection, used the right to free healthcare
granted under the amended Law on Health Insurance. However, no asylum-seekers
have yet been granted legal aid under the amended Law on Free Legal Assistance.

In
the area of visa policy, the country has been well advanced for a number
of years. The legislation is largely aligned and the link between diplomatic
and consular missions, the national visa system N-Vis and the Visa Centre at
the Ministry of Foreign Affairs has been operational since 2009.

The
implementation of the visa-free travel regime with the EU has continued
smoothly overall, but irregular migration flows increased in 2013. The
national authorities continue to cooperate to tackle unfounded asylum
applications made to Schengen members and associated countries. In addition to
running public information campaigns, the authorities continued to carry out
proactive border controls, surveillance patrols and risk analysis, as well as
stepping up investigative measures and activities. In June 2014, the
Constitutional Court ruled parts of the Law on Travel Documents, which provided
for the revocation of travel documents of forcibly returned persons in certain
circumstances, to be unconstitutional. During the reporting period, criminal
charges were brought against 8 persons under the criminal provisions relating
to facilitation of abuse of the visa-free regime. In spite of these activities,
the
number of asylum applications rose by 15 % between 2012 and 2013. Long-term
policies and measures addressing the root causes of this phenomenon still
require structural efforts and the investment of proper resources, particularly
to improve the social and economic inclusion of the most vulnerable groups. In
September 2014, the German parliament adopted amendments to the
national asylum legislation for the inclusion of the country in the safe
country of origin list.

As
concerns external borders and Schengen, a joint contact centre was
opened with Serbia and 404 joint patrols were carried out on the borders with
Kosovo, Bulgaria, Albania and Serbia in 2013. Good cooperation and exchange of
best practices with Frontex continued, including through joint operations for
green border security, combating crime activities related to stolen vehicles
and illegal migration, and the Western Balkans Risk Analysis Network (WBRAN).
The staffing of the inland mobile unit was completed, and training and
equipping improved. The border police were provided with additional surveillance
equipment, however, six police stations for border surveillance still need to
be connected to the central database of the Ministry of Interior. Further
efforts are still needed to strengthen the management capacity of the National
Coordination Centre for border management (NCCBM) as internal coordination and
cooperation with related Ministries remains weak.

In the area of judicial
cooperation in civil and criminal matters, the Third Additional Protocol to
the European Convention on Extradition was ratified and entered into force on 1
March 2014. Also ratified were amendments to three bilateral agreements with
Bosnia and Herzegovina on enforcement of criminal court decisions, extradition
and legal assistance in civil and criminal matters. Two agreements were signed
with Montenegro on mutual legal assistance in civil and criminal matters and on
enforcement of criminal court judgments. In 2013, there were 1 809
requests made to the country for mutual legal assistance in criminal matters
and 1 734 requests in civil matters. Requests were sent to other countries
in 1303 criminal matters and 931 civil matters. The country issued 114
extradition requests and received 12, as well as processing a total of 19
requests for transfers of sentenced persons. The country cooperated with
Belgium, Hungary, Slovenia, Slovakia, Romania and Sweden in the framework of
its cooperation agreement with Eurojust.

In the area of police
cooperation and the fight against organised crime, regional and
international law enforcement cooperation through Europol and Interpol
continued. Some 225 international arrest warrants were issued in 2013. The
SIENA connection for secure exchange of sensitive and operational data with
Europol became operational. A liaison officer has been assigned to Europol. Preparations
for a formal Working Arrangement with the European Police College (CEPOL) are
well advanced, with a view to making it possible for national law enforcement
bodies to benefit from CEPOL’s learning products.

Amendments to
the Law on Internal Affairs introduced a merit-based career system for the
police, based on job competencies. A strategy on human resources management and
a merit-based recruitment policy were adopted. The Public Security Bureau at
the Ministry of Interior was reorganised to strengthen capacities, improve
police performance and to implement European standards. The reorganisation
introduced a national intelligence model implementing criminal intelligence
analysis at all levels applying the 5x5x5 methodology. A pilot project for the
national intelligence model is being run by the Sector for Internal Affairs
Skopje. New standard operating procedures and guidelines were issued in order
to improve the standard of investigations carried out at regional, local and
central level, and to ensure more effective and efficient sharing of
information. New procedures for the submission of requests for special
investigative measures were issued. The Law on Electronic Communications was
amended, taking into account the Constitutional Court’s 2010 annulment of
certain articles relating to access to communication networks. In the framework
of the new Law on Criminal Procedure, which started being applied from the end
of 2013, training of police and public prosecutors has continued. A Protocol for
cooperation in criminal procedures was signed between the Ministry of Interior,
Public Prosecutor and Customs Administration but practical cooperation still
has to be improved. A number of important legal acts related to the Law on
Criminal Procedure have not yet been adopted. Since 2011, one decision
establishing an Investigative Centre has been taken, but has not yet been
implemented. The basic training of 330 police cadets which started in 2012 was
completed with the recruitment of 318 new police officers. At the end of 2013,
the Ministry for Interior appointed a further 400 police cadets, whose training
is now underway. A robust, independent external oversight mechanism for the
police force is still missing.

In 2013, the
Department for the Fight against Organised Crime submitted 85 criminal charges
against 603 persons to the specialised Basic Public Prosecutor’s Office for the
Fight against Organised Crime and Corruption. Staffing of the Department
continued to improve. A number of successful operations were
carried out against organised crime groups involved in drug smuggling,
extortion, smuggling of migrants, facilitating abuse of the visa-free regime,
falsification of passports and money laundering. Four operations succeeded in
cutting off international marijuana trafficking routes and one cut off an
international channel for smuggling migrants, also uncovering the involvement
of a police officer and a resident of the asylum reception centre in Skopje. A
14-member criminal gang including 6 customs officers was detected and charged. In
2013, 271 orders were issued applying special investigative measures in 51
cases. However, the use of such measures by the Customs Administration and
Financial Police still remains limited, partly due to inadequate human and
technical resources. The government has appointed members of the National
Coordination Centre for the fight against organised crime from different law
enforcement bodies. However, it remains to be seen how this coordinating body
will operate in practice. The National Criminal Intelligence Database is still
not operational. Fighting organised crime and corruption is
fundamental to countering criminal infiltration of the political, legal and
economic systems.

In
2013, the Financial Intelligence Unit (FIU) reported 25 cases of suspicious
transactions related to money laundering to investigating authorities
and the prosecution service (compared to 29 in 2012). Also in 2013, convictions
against 41
persons who were prosecuted in previous years became final, upon conclusion of
the judicial proceedings.

A
National Strategy and Action Plan for the fight against trafficking in human
beings were adopted for 2013-2016. They were developed in cooperation with
an inter-agency government working group, civil society organisations and
international organisations, and focus particularly on combating forced labour.
Programmes for the support and integration of victims of trafficking and for
the support and reintegration of child victims of trafficking were adopted in
February 2014. The Ministry of Interior launched a campaign for an integrated
approach to the prevention of labour exploitation in countries of origin and of
destination. The National Commission for the Fight against Trafficking in Human
Beings and Illegal Migration conducted several public campaigns and workshops
to raise awareness, in collaboration with its partner institutions. The
Council of Europe’s Group of Experts on Action against Trafficking in Human
Beings (GRETA) published its first report on the country in 2014, finding that
several important steps had been taken in this field, but that a number of
challenges remain, including developing the multi-disciplinary approach to
victim identification and assistance and further strengthening of the network
of social workers. A total of 15 victims of trafficking were
identified in 2013, an increase from eight the previous year. At local level,
mobile teams responsible for early identification of risks, direct assistance
and support to families continued their activities, including referring two
victims to the Centre for victims of trafficking in human beings. The Centre,
which is run jointly by the government and civil society organisations,
accommodated nine victims in 2013. The current level of funding for medical
care and reintegration is inadequate. The Centre has no facilities dedicated
specifically to children and it does not have the capacity to handle male
victims. In 2013, the Basic Court Skopje I convicted 85 persons of human
trafficking. The country still remains a source, destination and transit
country for human trafficking for sexual exploitation and forced labour. The
national authorities, in cooperation with civil society, need to provide access
to assistance, support and protection, including reintegration of victims into
society.

The Cybercrime
Unit located within the Department for Suppression of Organised and Serious
Crime and the Forensic Department of the Ministry of Interior merged into a
single Cybercrime and Digital Forensic Department, forming a more efficient and
effective investigative unit.

As
concerns the fight against terrorism, the FIU submitted two
notifications of suspicious transactions regarding financing of terrorism to
law enforcement agencies in 2013. The country will need to step up its capacity
to prevent radicalisation, including developing adequate measures to address
the phenomenon of foreign fighters.

As
regards cooperation in the field of drugs, the new National Strategy on
Drugs 2014-2020 and the Action Plan 2014-2017 were adopted in May 2014. Good
cooperation continued between the national focal point and the European
Monitoring Centre for Drugs and Drug Addiction (EMCDDA) including participating
in training. Successful joint cooperation between police and Customs Administration
on drugs seizures have continued. The Illicit Drugs Department in the Ministry
of Interior was reinforced by two new employees. Staffing was also increased at
the local level.

There
were positive developments in the area of customs cooperation. The customs
administration took part in four international operations and two projects to
detect illicit trade in counterfeit goods, drugs, explosives, and high-risk
chemicals. Cooperation and exchange of intelligence with the customs
authorities of neighbouring countries and wider region intensified. (See
Chapter 29 — Customs union).

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

Conclusion

The
country has already reached a high level of legislative alignment in this area,
and the administrative and judicial structures are at an advanced stage.
Further improvements were made in the areas of police cooperation and
combating organised crime and human trafficking. However, in some
sectors progress remains slow as regards improving the infrastructure, capacity
and strategic planning needed for full and effective implementation of existing
policies. These include, in particular, migration and asylum. The absence of an
independent system for external oversight of the police also needs to be
addressed.

4.25. 
Chapter 25: Science and research

The country’s
participation in the EU framework programme for research (FP7) continued
to increase. The overall success rate is 15.9 %,
compared to the EU average of 21.6 %. The number of
small and medium-sized enterprises involved in FP7 research projects increased
but the number of successful applicants for Marie Sklodowska Curie grants is
still very low. The agreement associating the country to the new EU
research and innovation programme Horizon 2020 (covering 2014-20)
was signed in July 2014, allowing for retro-active participation of
entities from the country as from 1 January 2014. Implementation
of the agreement is on track, but increased efforts are necessary to meet the
challenges of cooperation under Horizon 2020.

Very
limited progress was made towards the headline European Research Area
target of 3 % of GDP being invested in research (with the country
currently investing less than 0.30 % of GDP). The 2014-20 national
programme for higher education and scientific and research activities was
adopted. An observer was nominated to the European Research Area Committee.

The country has
developed the capacity to monitor implementation of the national strategy for
innovation, drawn up in accordance with the Innovation Union initiative.
A fund for innovation and technological development was created with the
objective of providing technical assistance for start-up companies, grants for
co-funding spin-offs and stimulating the transfer of technology. The Ministry
for Education and Science has provided grants supporting publication of
scientific articles in international publications. The administrative capacity
to monitor implementation of the National Strategy for Innovation has been put
in place. The country has been active in cooperating at regional level and co-signed
the Western Balkans Regional R&D Strategy for Innovation adopted in October
2013.

Conclusion

Good
progress was made in the area of science and research. The administrative
structure necessary for participation in Horizon 2020 is in place, but capacity
should be strengthened. Further efforts are needed on actions relating to the
European Research Area, and in particular the level of investment in research
needs to be increased. Overall, preparations 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,
implementing legislation on primary and secondary education was revised. Access
to services relating to early childhood development improved significantly as a
result of improvements to institutions and infrastructure. However, progress in
terms of participation remained modest, far below the EU target. Major
discrepancies in early childhood development and pre-school education still
exist between different ethnic groups and between urban and rural areas. The
rate of early school leaving is gradually falling and the rate of completion of
higher education is rising. The process of decentralisation in education is
progressing.

The
implementation of the 2013-20 strategy for vocational education and training
has progressed slowly, but with increasing dynamism. Steps were taken to
establish the institutional setting for the National Qualifications Framework
for lifelong learning. The process of referencing to the European
Qualifications Framework started in May 2014. Launching of new vocational and
educational training programmes based on up-to-date labour market information
continued in 2014, attracting hundreds of students.

The country
signed an agreement with the EU allowing the country to participate fully in
the new Erasmus+ programme. The Youth in Action programme involved an increased
number of young people from the country in international activities.

In July
2014 participation in the new Creative Europe programme for culture (2014
– 2020) was signed. The country’s involvement in the Ljubljana process
continued to be centred on the restoration and revitalisation of its cultural
heritage. An agreement on cultural cooperation was signed with Kosovo.

The
administrative capacity of responsible institutions needs to be strengthened to
ensure efficient implementation of adopted strategies and legislation,
including policy monitoring. Better expenditure planning that takes into
account strategic priorities and needs of participation in EU coordinating
mechanisms is necessary.

Conclusion

Some
progress was made in the areas of education, training, youth and culture.
Access to pre-school education was improved. Both the vocational education and
training centre and the adult education centres benefited from strengthened
human resources. Sustained commitment is necessary to ensure implementation of
the adopted policies. Preparations in the areas of education and culture are at
a moderately advanced stage.

4.27. 
Chapter 27: Environment and climate change

As regards the environment,
in the area of horizontal legislation, the
Law on the National Spatial Data Infrastructure permits further alignment with
the Directive on Infrastructure for Spatial Information in the European
Community. The Law on the Ratification of the Protocol on Strategic
Environmental Assessment was also adopted. Public consultation and coordination
with civil society remain insufficient. Access to environmental information
still needs to be improved.

Only
limited progress has been made to date in implementing the national plan
for the protection of air quality. Air pollution levels (PM10)
significantly above EU limits were recorded during a sustained period last
winter. The lack of sufficient financial resources continues to be an obstacle
to the normal operation and maintenance of the national air quality monitoring
network. Alignment with the acquis continued with the adoption of the
Law on the Control of Volatile Organic Compound Emissions and of implementing
legislation related to air quality assessment and emissions ceilings for
pollutants. The country became a full Party to the Gothenburg Protocol.

Implementation
of the integrated waste management system has begun. Regional waste
management bodies have been set up and preparation of regional waste management
plans has begun. The administrative capacity for implementing the legislation
has been improved, but still remains insufficient at both central and local
level.

Alignment
with the acquis is less advanced in the area of water quality.
Management structures for river basins have been set up, but are still not
operational. The poor coordination between the competent authorities continues
to hamper implementation of the legislation. The country needs to address the
gaps in the water monitoring system. Preparation for infrastructure investment
is lagging behind and the level of funding is insufficient to meet current
needs. Greater efforts are needed in applying the ‘polluter pays’ principle,
and action also needs to be taken to set up an appropriate system for water
pricing. The lack of progress in this area has continued to hamper the
operation of water treatment facilities and puts investment in the sector at risk.

Alignment
with the acquis on nature protection, specifically natural
habitats and wild fauna and flora has been delayed. No progress has been made
on the identification of future Natura 2000 sites. Management plans for
protected areas have been developed and need to be implemented. Some efforts
have been made to improve the financing of the implementation of management
plans, but the measures in place are still insufficient. A national strategy
and associated action plan on nature protection has not been finalised. Cross-border
cooperation continued in relation to lake Dorjan.

Implementing
legislation was adopted to bring national legislation on industrial
pollution control and risk management into line with the Seveso II
Directive. The procedures for integrated pollution prevention and monitoring
are ongoing, but are well behind schedule.

In
the area of chemicals, implementation of the Registration, Evaluation,
Authorisation and Restrictions of Chemicals (REACH) Regulation progressed.
Administrative capacity remains insufficient. New implementing legislation was
adopted in the area of noise. The development and implementation of
strategic noise maps is behind schedule however.

The
country actively participates in the EU Civil Protection Mechanism. The
2014-18 national strategy for rescue and protection was adopted, together with
an action plan for establishing the link with the EU Common Emergency
Communication and Information System. Trilateral cooperation with institutions
from Albania and Kosovo in the area of crisis and emergency situations has
continued.

The
country needs to develop a comprehensive policy and strategy on climate
change, in accordance with the expected EU 2030 policy framework for
climate and energy. The third national communication on climate change was
submitted to the United Nations Framework Convention on Climate Change. The
country regularly associated itself with EU positions in the international
context, but has not yet put forward a mitigation commitment for 2020, as
required by the Copenhagen Accord. The country needs to put forward by the
first quarter of 2015 its intended nationally determined contribution to the
2015 Climate Agreement, consistent with those of the EU and its Member States.

Progress
was made in developing the national adaptation plan: the indicators for
vulnerability to climate change were designed for eight sectors, ten local
authorities drafted their socioeconomic assessments of the vulnerability of the
population and an early warning system for floods was set up. The Law on the
Environment was amended in order to provide for the data collection and
management system used for the preparation of national inventories of
greenhouse gas emissions. Aligning national legislation with the Monitoring
Mechanism Regulation should be a priority. Measures to raise awareness and
promote cooperation between stakeholders were introduced, but need to be
further strengthened.

The
country participated regularly in the Environment and Climate Regional
Accession Network project. The Interinstitutional Climate Change Working Group
needs to be strengthened considerably in order for it to be able to address the
need for more effective action on climate issues in a sustainable manner, not
only on a project-by-project basis.

Negligible
efforts were made to strengthen the administrative capacity for implementation
and enforcement of legislation, which thus continues to be largely
insufficient, both at national and local level. Coordination between the
relevant bodies remains ineffective. Stakeholders are still not sufficiently
involved in decision-making. Enforcement of legislation is not yet efficient.
The environmental monitoring and information system is inadequate. Investment
in the sector remains low relative to current needs. Environmental protection
and climate change requirements are still not sufficiently integrated into
policymaking and policy implementation in other areas.

Conclusion

Little
progress was made in the areas of environment and climate change.
Administrative capacity needs to be strengthened in all areas and the
government needs to cooperate more with civil society and other stakeholders.
Strategic planning and significant efforts are needed in order to ensure that
national legislation is in line with the acquis, and that this
legislation is implemented. Investment needs to be significantly increased,
especially in the waste and water sectors. The country needs to put forward by
the first quarter of 2015 its intended contribution to the 2015 Climate
Agreement. Overall, preparations in the area of environment are at a moderately
advanced stage while preparations in the area of climate change are at an early
stage.

4.28. 
Chapter 28: Consumer and health protection

As part of horizontal
legislation, the budget for the biannual consumer protection
programme was adopted for 2014-15 resulting in increased counselling and higher
awareness on consumer rights throughout the country. The Ministry for the
Economy signed good practice agreements with industry associations representing
different branches with the aim of ensuring competition and protection of
consumers in the respective markets. Local consumer councils were established
in some areas including in Skopje. The Consumer Organisation has been
moderately effective, continuing to offer educational and advisory activities
and raising awareness of consumer issues. The allocation to consumer protection
in the government budget increased by 10 %, but funding is still
insufficient. The lack of administrative and financial resources continues to
hamper effective implementation of consumer protection policies.

All
institutions involved in product safety (the State Sanitary and Health
Inspectorate, the Food and Veterinary Agency and the State Market Inspectorate)
have stepped up their market inspections, both regular inspections and those
conducted following consumer complaints. Information campaigns, seminars and
lectures for school students continued. (See Chapter 1 — Free movement
of goods). The country’s record in enforcing legislation in this area
continued to improve and market supervision has been strengthened.

Some
action has been taken to raise awareness of consumers’ rights in relation to non-safety-related
issues, specifically consumer credit and purchasing of holiday packages,
and to alert consumers to unfair market behaviour. The regulatory bodies
responsible for electronic communications and supervision of the insurance
market are the only market regulators actively involved in consumer protection.
The Consumer Organisation provided advice on services offered by public
enterprises and network industries, the use of guarantees and rights to
free-of-charge repair, banking, insurance and food-related issues. Market
supervisors and other regulatory bodies are still in need of additional
training in order to ensure effective consumer protection.

Legislation
on public health was amended and approximately 800 medical guidelines
were updated. Cooperation and exchange of information between national and
foreign medical institutions has been improved. Investment in new medical
equipment, in refurbishing medical centres, and in training for health
professionals continued. Work was begun on the construction of a new clinical
centre in Skopje. E-health cards, e-prescription and e-appointment system are
in place. Measures have been taken to ensure medical care by professional staff
in rural areas without health centres. Sustainable implementation of the
government’s health policy continues to be held back by insufficient financial
resources and inadequately trained staff. The capacity to plan and implement
public health programmes at local and regional level is still weak, hampering
equal access to healthcare and limiting the effectiveness of decentralisation
in the health sector.

The
Law on Protection from Smoking was amended to allow the police and tax
authorities to monitor the implementation of tobacco control (the
smoking ban) alongside their regular inspections. Enforcement of the law
remains satisfactory, and is generally better in urban areas than elsewhere.

The
country’s plans for crisis and pandemic emergency and response in relation to communicable
diseases were endorsed by the government. The national early warning rapid
alert system became operational. Multi-sector analysis on the preparedness to
respond to health threats in accordance with international health regulations
was prepared. Around 95 % of the population is covered by mandatory
immunisation programmes. The annual programme on HIV/AIDS and the 2013-17
national strategy for fighting HIV/AIDS are being implemented, and molecular
diagnostics tests have been introduced. Protocols for testing susceptibility
were distributed to all microbiological laboratories as part of the national
strategy for containing antimicrobial resistance. Laboratories’ capacity for
testing microbiological resistance should be further improved. Antibiotics are
sold freely without medical prescription, in disregard of the strategic goal of
reinforcing microbiological resistance.

The
2014 transplant programme (applying to tissues, cells and organs) was
adopted. Budgetary funds (almost €0.5 million) will be used for setting up a
central information system for sampling, processing, scrutiny of tissue
matching, storage, replacement, transplantation, equipping of four health
institutions and a public campaign.

Further
efforts are needed to align national legislation with the acquis in the
areas of patients’ rights in cross-border healthcare, the recognition of
medical prescriptions and serious cross-border health threats.

Financial
allocation to pharmaceuticals increased and their administration
improved, but a more strategic approach to their registration is needed.

The
annual programme on healthcare for people with mental health
disabilities was also adopted. It emphasises the importance of
deinstitutionalisation and community-based mental healthcare. Staff levels and
financial resources of mental health facilities remain inadequate. The
sustainability of existing community mental health centres continued to be a
serious concern.

Measures
on prevention of drug abuse have focused particularly on training of
health workers. Legislation on orthopaedic devices has been amended to increase
the rights of people using these devices, as part of reducing health
inequalities. Screening for early detection of breast, colorectal
and cervical cancers has been provided to some of the at-risk age groups. The
cancer registry remains partly operational. Cooperation with the State
Statistical Office on mortality data has not yet been agreed upon. Sustainable
funding for regular cervix, breast and colon screening still needs to be
secured. In the field of healthy environments including prevention of injury,
the assessment of the health risks from air pollution has not yet been
completed, nor has the programme for testing for radon in soil and construction
equipment, or the programme for human bio-monitoring. (See Chapter
27 — Environment and climate change). The capacity for
preventing environmental health risks needs to be improved. There
is limited funding for treatment of rare diseases.

Conclusion

Some
progress was made in the area of consumer and health protection, but the
limited financial resources and the poor operational structures, particularly
in the field of consumer protection, continue to hold back further
developments. Adequate financial resources for the ongoing functioning of the
healthcare system are needed in order to ensure its sustainability. Overall,
preparations in this area are at a moderately advanced stage.

4.29. 
Chapter 29: Customs union

Notable
amendments to customs legislation included the introduction of
provisions on common transit, including for the submission of electronic
transit declarations and transit guarantees, and the application of
internationally developed criteria on risk identification and analysis. The
2014 customs tariff was adopted, in line with the latest changes to the EU’s
combined nomenclature. The first certificate for an authorised economic
operator was issued. In the framework of CEFTA, since 1 April 2014, Serbia,
Albania, Montenegro and the former Yugoslav Republic of Macedonia started
applying the regional Convention on Pan-Euro-Med Preferential Rules of Origin.

As regards administrative
capacity and operational capacity, the new computerised transit
system, a precondition for accession to the Convention on a Common Transit
Procedure, became operational. Maintenance of the system is yet to be secured
and staff also require further training. Development of a new customs
declaration processing system and integrated tariff environment system is still
ongoing. New electronic systems were introduced to simplify customs procedures
for businesses. The electronic exchange of data between the Customs
Administration and the Public Revenue Office has made it possible to introduce
a simplified procedure for submitting VAT returns for imports. The operational
capacity for carrying out customs controls and combating cross-border crime was
improved. Professional and integrity standards and internal control measures
have been implemented systematically. Risk management and inter-agency
cooperation were both further developed. Cooperation with the business
community continued, and cooperation with the customs authorities of
neighbouring countries and in the wider region has also been extended. Customs
facilities at the Blace and Bogorodica entry points were upgraded.

Conclusion

Progress
was made in the area of customs union. The
administrative capacity of the Customs Administration improved, although
greater sustainability of financial resources is still needed. The priorities
for the next year are accession to the Convention on a Common Transit Procedure
and completion of the two IT systems currently under construction. Overall,
preparations in this area are at an advanced stage.

4.30. 
Chapter 30: External relations

With regard to
the common commercial policy, the country continued to coordinate its
positions and align its policies closely with the positions and policies of the
EU, including within the setting of the World Trade Organisation. The country
is chairing the Central European Free Trade Agreement in 2014 and coordinates
the work of its committees.

As
regards bilateral agreements with non-EU countries, the country ratified
an investment protection agreement with Azerbaijan. The number of ratified
bilateral investment protection agreements rose to 39, of which 35 are in force
and 18 are with EU Member States.

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

Conclusion

Progress
was limited 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 EU commercial, development and humanitarian aid
policies. Preparations in the area of external relations as a whole are at a
moderately advanced stage.

4.31. 
Chapter 31: Foreign, security and defence policy

The ongoing political
dialogue between the EU and the former Yugoslav Republic of Macedonia on
foreign and security policy issues continued. (For information on relations
with other enlargement countries and EU Member States, see Political
criteria — Regional issues and international obligations).

As
regards the common foreign and security policy (CFSP), the country aligned
itself, when invited, with 33 out of 45 EU declarations and Council Decisions
(73 % alignment). (As regards the International Criminal Court,
see Political criteria — Regional issues and international obligations.)

The country did
not align itself with the Council decisions introducing restrictive measures
in response to Russia’s illegal annexation of Crimea and events in eastern
Ukraine. The country voted in favour of the UN General Assembly Resolution on
the territorial integrity of Ukraine.

As part of
measures on non-proliferation of arms, the country submitted a
report to the UN on the implementation of the UN Programme of Action to
Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light
Weapons. In line with the obligations under the Convention on Cluster
Ammunition (Oslo Convention), and the related government decision, a number of
munitions were destroyed. The country ratified the UN Arms Trade Treaty in
March 2014.

The country
continued to engage actively in cooperation with international
organisations. The country was elected as a member of the UN Human Rights
Council for the period 2014-16. (See Chapter 23 — Judiciary and fundamental
rights).

The
representatives of the Directorate for Security of Classified Information
participated in study visits to their institutional counterparts in the Czech
Republic, Poland and Slovakia.

The country
continued to participate in civil and military crisis management operations
under the common security and defence policy (CSDP). It currently has
156 army personnel deployed in the International Security Assistance Force mission
in Afghanistan, and 11 in the EU military operation in Bosnia and Herzegovina,
EUFOR ALTHEA. The country has been officially contributing to the 2014-20
European Union Battle Group since March 2014 and participated in the exercises
Adjacent Lowlands 2013 and Quick Lion.

Conclusion

The country
continued to participate in civil and military crisis management operations.
The country’s alignment with EU declarations and Council decisions in the field
of foreign and security policy deteriorated as compared with previous years and
needs to be improved. Overall, preparations in this area are on track.

4.32. 
Chapter 32: Financial control

The
2015-2017 policy paper on public internal financial control was adopted
in August 2014. The focus should now be on the implementation of the
corresponding action plan with particular emphasis on enhancing managerial
accountability. Additional efforts are also needed to complete the
certification of internal auditors and to strengthen the implementation of
internal audits. The Financial Management and Control Committee and the
Internal Audit Committee are required to meet on a quarterly basis but have not
met since September 2012. Guidelines for the preparation of risk management
strategies and for their implementation were issued but most institutions have
not yet implemented them. The Law on Financial Inspection also needs to be
implemented. The reform of public internal financial control needs to be
better integrated into the ongoing process of reforming public administration.

The State Audit
Office’s resources for external audit have not been increased adequately
relative to the additional obligations it has received. The strategy for
implementing the standards set by the International Organisation of Supreme
Audit Institutions is in the process of implementation. The State Audit Office’s
independence is not yet safeguarded in the Constitution and its financial
independence, in particular, is not yet guaranteed in practice. The parliament
does not yet have in place a formal procedure for reviewing the Office’s audit
reports. The Office, however, did continue to exercise its duties in a
responsible and professional manner.

The National
Authorising Officer submitted reports on 20 irregularities relating to protection
of the EU’s financial interests, of which two were referred to the Public
Prosecutor for further review. The 2014-16 national strategy for protection of
the financial interests of the EU has not yet been adopted.

In 2013, the
authorities recorded eight cases (266 banknotes) of counterfeiting of the
euro. The central office for preventing money counterfeiting cooperates
with and participates in trainings held by the European Police Office. A new
electronic database on counterfeiting has been set up and is being used by the Ministry
of the Interior, but has yet to be made accessible to all other relevant
institutions.

Conclusion

Some progress
was made in the area of financial control with the adoption of a policy paper
on public internal financial control and in the area of the protection of the
euro against counterfeiting. Implementation of the managerial accountability
principle remains limited in the area of public internal financial control. The
State Audit Office’s independence is not yet safeguarded in the Constitution and
its financial independence, in particular, is not yet guaranteed in practice.
Overall, preparations are at a moderately advanced stage.

4.33. 
Chapter 33: Financial and budgetary provisions

No
progress was made in the areas of traditional own resources, the value
added tax-based resource or the gross national income-based resource.
Some progress was made, however, in the underlying policy areas affecting the
correct application of the financing system. (For developments in these
areas, see Chapters 16 — Taxation; 18 — Statistics; 29 — Customs union; and 32
— Financial control).

Some
progress was made in improving administrative infrastructure in order to
fight tax evasion and fraud and reduce the size of the informal economy,
although addressing these issues remains a significant challenge. The
administrative capacity of the institutions directly involved in the own
resources system (customs, taxation, statistics and financial control) needs to
be further strengthened. A fully operational coordination structure to ensure
correct calculation, accounting, forecasting, collection, payment and control
of own resources and reporting to the EU on the implementation of the EU’s own
resources rules will need to be set up in due course. Preparations in this area
are at an early stage.

Conclusion

Limited
progress was made in this chapter. The administrative framework for applying
the own resources rules needs to be set up. Overall, preparations in the area
of financial and budgetary provisions are at an early stage.

Statistical
Annex

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

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

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

|| Basic data || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Population (thousand) || || 2 031 || 2 049 || 2 053 || 2 057 || 2 060 || 2 062 ||

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

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

|| National accounts || || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross domestic product (GDP) (million national currency) || || 233 840 || 410 734 || 434 112 || 459 789 || 458 621p || 473 019e ||

|| Gross domestic product (GDP) (million euro) || || 3 839 || 6 703 || 7 057 || 7 473 || 7 454p || 7 683e ||

|| GDP (euro per capita) || || 1 890 || 3 269 || 3 434 || 3 630 || 3 651p || 3 726s ||

|| GDP (in Purchasing Power Standards (PPS) per capita) || || 4 955 || 8 453b || 8 866 || 8 994p || 9 045p || : ||

|| GDP (in Purchasing Power Standards (PPS) per capita), relative to the EU average (EU-28 = 100) || || 25 || 36b || 36 || 36 || 35 || 35 ||

|| Real GDP growth rate: change on previous year of GDP volume (%) || || -4.5 || -0.9 || 2.9 || 2.8 || -0.4p || 2.9e ||

|| Employment growth (national accounts data), relative to the previous year (%) || || -1.7 || 2.5 || 1.5 || 3.1 || 0.5p || : ||

|| Labour productivity growth: growth in GDP (constant prices) per person employed, relative to the previous year (%) || 1) || -2.9 || -3.4 || 1.4 || -0.3 || -20.1p || : ||

|| Unit labour cost growth, relative to the previous year (%) || || -0.8 || 9.9 || 1.8 || -6.5 || -0.7p || : ||

|| **3 year change (T/T-3) in the nominal unit labour cost growth index (2005 = 100) || || : || : || : || : || : || : ||

|| Labour productivity per person employed: GDP (in PPS) per person employed relative to EU average (EU-27 = 100) || || 46.5 || 60.2b || 58.3 || : || : || : ||

|| Gross value added by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || || : || : || 11.5 || 10.9 || 10.3p || : ||

|| Industry (%) || || : || : || 21.5 || 21.6 || 17.8p || : ||

|| Construction (%) || || : || : || 6.3 || 7.4 || 7.9p || : ||

|| Services (%) || || : || : || 60.8 || 60.0 || 64.1p || : ||

|| Final consumption expenditure, as a share of GDP (%) || || 94.8 || 95.7 || 93.8 || 93.4 || 93.2p || 94.6 ||

|| Gross fixed capital formation, as a share of GDP (%) || 2) || 14.8 || 19.9 || 19.1 || 20.6 || 23.0p || 24.3e ||

|| Changes in inventories, as a share of GDP (%) || || 4.2 || 6.3 || 5.8 || 5.6 || 6.4p || : ||

|| Exports of goods and services, relative to GDP (%) || || 42.7 || 39.2 || 46.6 || 54.9 || 53.6p || 53.9 ||

|| Imports of goods and services, relative to GDP (%) || || 56.6 || 61.0 || 65.3 || 74.5 || 76.3p || 72.8 ||

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

|| Industry || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Industrial production volume index (2010 = 100) || || 95.9 || 105.1 || 100.0 || 107.0 || 104.1 || 107.4 ||

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

|| Inflation rate and house prices || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Consumer price index (CPI), change relative to the previous year (%) || || 5.5 || -0.8 || 1.6 || 3.9 || 3.3 || 2.8 ||

|| **Annual change in the deflated house price index (2010 = 100) || || : || : || : || : || : || : ||

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

|| Balance of payments || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Balance of payments: current account total (million euro) || 3) || -263 || -457b || -144 || -189 || -226 || -147 ||

|| Balance of payments current account: trade balance (million euro) || 3) || -588 || -1 560b || -1 448 || -1 648 || -1 757 || -1 584 ||

|| Balance of payments current account: net services (million euro) || 3) || -21 || 16b || 37 || 97 || 46 || 78 ||

|| Balance of payments current account: net income (million euro) || 3) || -30 || -47b || -100 || -131 || -148 || -182 ||

|| Balance of payments current account: net current transfers (million euro) || 3) || 377 || 1 133b || 1 367 || 1 494 || 1 632 || 1 542 ||

|| of which government transfers (million euro) || 3) || 55 || 35b || 31 || 77 || 60 || 43 ||

|| **3 year backward moving average of the current account balance relative to GDP (%) || || : || -8.9 || -7.2 || -3.8 || -2.5 || -2.5 ||

|| **Five year change in share of world exports of goods and services (%) || 4) || : || 19.4 || 12.9 || 23.1 || -8.3 || -7.2 ||

|| Net inward foreign direct investment (FDI) (million euro) || || 499.0 || 136.9 || 158.6 || 336.8 || 110.7 || 252.7 ||

|| Foreign direct investment (FDI) abroad (million euro) || || 1.0 || 8.1 || 1.4 || 0.0 || -6.0 || -1.2 ||

|| of which FDI of the reporting economy in the EU-28 countries (million euro) || || : || : || : || : || : || : ||

|| Foreign direct investment (FDI) in the reporting economy (million euro) || 3) || 500 || 145b || 160 || 337 || 72 || 251 ||

|| of which FDI of the EU-28 countries in the reporting economy (million euro) || 5) || : || 135.6 || 139.4 || 218.2 || 83.9 || 175.3 ||

|| **Net international investment position, relative to GDP (%) || || : || -53.9 || -51.4 || -53.1 || -56.1 || -59.5 ||

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

|| Public finance || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| General government deficit / surplus, relative to GDP (%) || || : || -2.6 || -2.4 || -2.5 || -3.8 || -4.1 ||

|| General government gross debt relative to GDP (%) || || 48.8 || 23.8 || 24.2 || 28.0 || 34.1 || 36.0 ||

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

|| Financial indicators || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross foreign debt of the whole economy, relative to GDP (%) || 6) || 44.2 || 56.4b || 58.2 || 64.9 || 69.4 || 67.7p ||

|| Gross foreign debt of the whole economy, relative to total exports (%) || 6) || 108.4 || 148.2b || 127.8 || 120.9 || 131.7 || 127.7 ||

|| Money supply: M1 (banknotes, coins, overnight deposits, million euro) || 7) || 415 || 854b || 933 || 997 || 1 072 || 1 138 ||

|| Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || 7) || 1 145 || 3 040b || 3 277 || 3 523 || 3 540 || 3 545 ||

|| Money supply: M3 (M2 plus marketable instruments, million euro) || 7) || 1 267 || 3 388b || 3 781 || 4 147 || 4 330 || 4 558 ||

|| Total credit by monetary financial institutions to residents (consolidated) (million euro) || || 620 || 2 913b || 3 102 || 3 367 || 3 551 || 3 779 ||

|| **Annual change in financial sector liabilities (%) || || : || : || : || : || : || 1.2 ||

|| **Private credit flow, consolidated, relative to GDP (%) || || : || : || : || : || : || : ||

|| **Private debt, consolidated, relative to GDP (%) || || : || : || : || : || : || : ||

|| Interest rates: day-to-day money rate, per annum (%) || 8) || 11.68 || 6.01b || 3.78 || 2.17 || 2.10 || 1.86 ||

|| Lending interest rate (one year), per annum (%) || 9) || 23.00 || 10.00 || 5.50 || 5.50 || 4.23 || 3.75 ||

|| Deposit interest rate (one year), per annum (%) || 9) 10) || : || : || : || : || 1.00 || 0.75 ||

|| euro exchange rates: average of period (1 euro = ... national currency) || || 60.913 || 61.273 || 61.515 || 61.529 || 61.524 || 61.566 ||

|| Trade-weighted effective exchange rate index (2005 = 100) || 11) || 88.6 || 106.8 || 106.3 || 107.2 || 108.5 || 109.9 ||

|| **3 year change (T/T-3) in the trade-weighted effective exchange rate index, 42 countries (2005 = 100) || || : || : || : || : || : || : ||

|| Value of reserve assets (including gold) (million euro) || || 844 || 1 598 || 1 715 || 2 069 || 2 193 || 1 993 ||

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

|| External trade in goods || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Value of imports: all goods, all partners (million euro) || || 1 884 || 3 616 || 4 130 || 5 034 || 5 068 || 4 969 ||

|| Value of exports: all goods, all partners (million euro) || || 1 290 || 1 930 || 2 528 || 3 201 || 3 115 || 3 213 ||

|| Trade balance: all goods, all partners (million euro) || || -595 || -1 686 || -1 601 || -1 833 || -1 953 || -1 757 ||

|| Terms of trade (export price index / import price index * 100) (number) || 12) || 97 || 110 || 90 || 94 || : || : ||

|| Share of exports to EU-28 countries in value of total exports (%) || || 58.4 || 61.9 || 65.5 || 63.7 || 65.2 || 72.6 ||

|| Share of imports from EU-28 countries in value of total imports (%) || || 62.2 || 54.5 || 55.3 || 56.2 || 60.2 || 62.6 ||

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

|| Demography || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Crude rate of natural change of population (natural growth rate): number of births minus deaths (per thousand inhabitants) || || 5.0 || 2.3 || 2.5 || 1.6 || 1.7 || 1.9 ||

|| Infant mortality rate deaths of children under one year of age (per thousand live births) || || 11.9 || 11.7 || 7.6 || 7.6 || 9.8 || 10.2 ||

|| Life expectancy at birth: male (years) || || 70.9 || 72.3 || 72.9 || 73.1 || 73.0 || 73.2 ||

|| Life expectancy at birth: female (years) || || 75.6 || 76.7 || 77.2 || 77.2 || 76.9 || 77.2 ||

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

|| Labour market || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Economic activity rate for persons aged 20–64: proportion of the population aged 20–64 that is economically active (%) || || : || 70.1 || 70.4 || 70.1 || 69.6 || 70.4 ||

|| *Employment rate for persons aged 20–64: proportion of the population aged 20–64 that are in employment (%) || || : || 47.9 || 48.1 || 48.4 || 48.2 || 50.3 ||

|| Male employment rate for persons aged 20–64 (%) || || : || 58.4 || 58.4 || 57.8 || 57.5 || 59.7 ||

|| Female employment rate for persons aged 20–64 (%) || || : || 37.1 || 37.5 || 38.8 || 38.7 || 40.7 ||

|| Employment rate for persons aged 55–64: proportion of the population aged 55–64 that are in employment (%) || || 27.7 || 34.6 || 34.2 || 35.4 || 35.4 || 37.9 ||

|| Employment by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || || : || : || : || 18.1u || 17.3 || 18.7 ||

|| Industry (%) || || : || : || : || 24.1u || 23.6 || 23.5 ||

|| Construction (%) || || : || : || : || 6.2u || 6.3 || 6.9 ||

|| Services (%) || || : || : || : || 51.6u || 52.7 || 50.6 ||

|| Unemployment rate: proportion of the labour force that is unemployed (%) || || 30.5 || 32.2 || 32.0 || 31.4 || 31.0 || 29.0 ||

|| Male unemployment rate (%) || || 29.5 || 31.8 || 31.9 || 31.8 || 31.5 || 29.0 ||

|| Female unemployment rate (%) || || 32.0 || 32.8 || 32.2 || 30.8 || 30.3 || 29.0 ||

|| Youth unemployment rate: proportion of the labour force aged 15–24 that is unemployed (%) || || 56.1 || 55.1 || 53.7 || 55.3 || 53.9 || 51.9 ||

|| Long-term unemployment rate: proportion of the labour force that has been unemployed for 12 months or more (%) || || 26.5 || 26.3 || 26.7 || 25.9 || 25.5 || 23.9 ||

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

|| Social cohesion || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Average nominal monthly wages and salaries (national currency) || || 10 552 || 19 957 || 20 553 || 20 847 || 20 902 || 21 145 ||

|| Index of real wages and salaries (index of nominal wages and salaries divided by the inflation index) (2000 = 100) || 13) || 98.1 || 158.7b || 160.8 || 157.0 || 152.3 || : ||

|| *Early leavers from education and training: proportion of the population aged 18–24 with at most lower secondary education who are not in further education or training (%) || || : || 16.2 || 15.5 || 13.5 || 11.7 || 11.4 ||

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

|| Standard of living || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Number of passenger cars relative to population size (number per thousand population) || || 152.1 || 137.7b || 151.0 || 152.1 || 146.4 || 168.0 ||

|| Number of mobile phone subscriptions relative to population size (number per thousand population) || || 109.0 || 948.4 || 1 098.2 || 1 104.9e || 1084.6 || 1083.9 ||

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

|| Infrastructure || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Density of railway network (lines in operation per thousand km2) || || 27 || 27 || 27 || 27 || 27 || 27 ||

|| Length of motorways (kilometres) || || 145 || 251 || 251 || 259 || 259 || 259 ||

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

|| Innovation and research || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Public expenditure on education relative to GDP (%) || || 3.6 || 3.6 || 3.7 || 3.5 || 4.0p || : ||

|| *Gross domestic expenditure on R&D relative to GDP (%) || || 0.30 || 0.20 || 0.22 || 0.22 || : || : ||

|| Percentage of households who have internet access at home (%) || || : || 42.0e || 46.0 || 55.0 || 58.3 || 65.1 ||

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

|| Environment || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| *Index of greenhouse gas emissions, CO2 equivalent (1990 = 100) || 14) || 92.6 || 73.6 || : || : || : || : ||

|| Energy intensity of the economy (kg of oil equivalent per 1 000 euro GDP at 2000 constant prices) || || 720.4 || 575.7 || 573.3 || 606.7 || 578.5p || : ||

|| Electricity generated from renewable sources relative to gross electricity consumption (%) || || 9.2 || 15.4 || 28.0 || 15.2 || 11.7p || : ||

|| Road share of inland freight transport (based on tonne-km) (%) || 15) || 87.0 || 89.0b || 89.0 || 91.8 || 93.2 || 92.4 ||

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

|| Energy || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Primary production of all energy products (thousand TOE) || || 1 642 || 1 607 || 1 616 || 1 736 || 1 518p || : ||

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

|| Primary production of hard coal and lignite (thousand TOE) || || 1 419 || 1 293 || 1 194 || 1 410 || 1 246p || : ||

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

|| Net imports of all energy products (thousand TOE) || || 1 011 || 1 273 || 1 271 || 1 435 || 1 450p || : ||

|| Gross inland energy consumption (thousand TOE) || || 2 677 || 2 810 || 2 879 || 3 131 || 2 974p || : ||

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

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

|| Agriculture || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Agricultural production volume index of goods and services (at producer prices) (previous year = 100) || || 90.2 || 102.9 || 107.7 || 96.8 || 94.7 || 103.0p ||

|| Utilised agricultural area (thousand hectares) || || 1 244 || 1 014 || 1 121 || 1 120 || 1 267 || 1 260 ||

|| Livestock numbers: live bovine animals (thousand heads, end of period) || || 265 || 252 || 260 || 265 || 251 || 238 ||

|| Livestock numbers: live swine (thousand heads, end of period) || || 189 || 194 || 191 || 197 || 177 || 167 ||

|| Livestock numbers: live sheep and live goats (thousand heads, end of period) || || 1 286 || 849 || 854 || 839 || 796 || 807 ||

|| Production and utilisation of milk on the farm (total whole milk) (thousand tonnes) || || 201 || 343 || 347 || 376 || 350 || 381 ||

|| Harvested crop production: cereals (including rice) (thousand tonnes) || || 474 || 609 || 541 || 555 || 460 || 562 ||

|| Harvested crop production: sugar beet (thousand tonnes) || || 38 || 0 || 0 || 0 || 0 || 0 ||

|| Harvested crop production: vegetables (thousand tonnes) || || 667 || 804 || 887 || 845 || 704 || 702 ||

: = not available

b = break in series

e = estimated value

p = provisional

u = unreliable

- = Europe 2020 indicator

** = Macroeconomic Imbalance Procedure (MIP) indicator

Footnotes:

1) GDP in constant prices of the previous year.

2) 2013: data concern all gross capital formation, not just gross fixed capital formation.

3) 2001: converted using annual average exchange rates.

4) Data source used for world export of goods and services is the World Economic Outlook Database, April 2014.

5) Data on FDI flows by countries are produced only for the categories Equity capital and the Loans component of Other capital.

6) 2001: partial data coverage.

7) 2001: excluding data for savings houses.

8) The interest rates are calculated as weighted averages. 2001: data cover transactions with all maturities concluded on the Institutionalised Money Market. Other years: data cover bilateral overnight transactions.

9) End of year (31 December).

10) 2012: in 2012, the National Bank of the Republic of Macedonia introduced two deposit instruments for the banks — overnight and 7 day deposit. At the end of year the rate for overnight deposits was 1% and for 7 day deposits was 2%.

11) NEER (nominal effective exchange rate).

12) Index (previous year = 100) of the ratio of Paasche unit value indices.

13) Break in series caused by the introduction of a new concept of gross income.

14) Part of the greenhouse gas inventory prepared in the context of the Third National Communication (UNFCCC).

15) Break in series caused by inclusion of pipeline transport.

[1]               Until 1
July 2014, the rapporteur for the former Yugoslav Republic of Macedonia was
Mr Richard Howitt. The current rapporteur is Mr Ivo Vajgl.

[2]               Enlargement
Strategy and Main Challenges 2014-15, COM(2014) 700.

[3]               Internal
Macedonian Revolutionary Organisation — Democratic Party for Macedonian
National Unity.

[4]               Social
Democratic Union of Macedonia.

[5]               Democratic
Union for Integration.

[6]               National
Democratic Revival.

[7]               Democratic
Party of Albanians.

[8]               Citizen’s
Option for Macedonia.

*               This designation
in no way affects positions on status, and is in line with United Nations
Security Council Resolution 1244/99 and the International Court of Justice
Opinion on the Kosovo declaration of independence.