CZECH REPUBLIC: ACCESSION PARTNERSHIP (98/C 202/02)

1. INTRODUCTION

In the opinion which it submitted to the Council in July 1997, in accordance with the provisions of Article O of the Treaty, the Commission recommended that negotiations for accession should be opened with the Czech Republic. This recommendation derives from the analysis contained in the opinion in which the Commission is of the view that the Czech Republic (i) presents stable institutions, guarantees the rule of law, human rights and the protection of minorities, (ii) can be regarded as a functioning market economy able to cope with the competitive pressure and marked forces within the Union in the medium term, and (iii) should be capable in the medium term of applying the acquis provided it continues its efforts on its transposition and intensifies its work on its implementation.

The Europe Agreement will remain the basis for the European Union's relations with the Czech Republic. However the pre-accession strategy will be reinforced to enable assistance to be directed towards the specific needs of each applicant so as to provide support for overcoming particular problems identified in the opinion. As the Commission indicated in Agenda 2000: 'The reinforced pre-accession strategy has two main objectives. First, to bring together the different forms of support provided by the Union in a single framework, the Accession Partnerships, and to work together with the applicants, within this framework, on the basis of a clearly defined programme to prepare for membership, involving commitments by the applicants to particular priorities and to a calendar for carrying them out. Second, to familiarise the applicants with Union policies and procedures through the possibility of their participation in Community programmes.`

At its meeting in Luxembourg in December 1997 the European Council decided that the Accession Partnerships would be the key feature of the enhanced pre-accession strategy, mobilising all forms of assistance to the applicant countries within a single framework. This Accession Partnership has been decided by the Commission, after consulting the Czech Republic and on the basis of the principles, priorities, intermediate objectives and conditions which have been decided by the Council.

2. OBJECTIVES

The purpose of the Accession Partnership is to set out in a single framework the priority areas for further work identified in the Commission's opinion on the Czech Republic's application for membership of the European Union, the financial means available to help the Czech Republic implement these priorities and the conditions which will apply to that assistance. This Accession Partnership provides a framework for a number of policy instruments which will be used to help the candidate countries in their preparations for membership. These will include, inter alia, the National Programme for the Adoption of the Acquis to be adopted by the Czech Republic, the Joint Assessment of Economic Policy Priorities, the Pact against Organised Crime and the internal market road maps. Each of these instruments is different in nature and will be prepared and implemented according to specific procedures. They will not be an integral part of this Partnership but the priorities they contain will be compatible with it.

3. PRINCIPLES

The main priority areas identified for each candidate country relate to their ability to assume the obligations of meeting the Copenhagen criteria which state that membership requires:

- that the candidate country has achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities,

- the existence of a functioning market economy, as well as the capacity to cope with competitive pressure and market forces within the Union,

- the ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union.

At its meeting in Madrid, the European Council stressed the need for the candidate countries to adjust their administrative structures to ensure the harmonious operation of Community policies after accession and at Luxembourg it stressed that incorporation of the acquis into legislation is necessary, but not in itself sufficient; it is necessary to ensure that it is actually applied.

4. PRIORITIES AND INTERMEDIATE OBJECTIVES

The Commission's opinions and the Council's examination of these have highlighted the extent of the efforts which still have to be made in certain areas by the candidate countries to prepare for accession and took the view that none of these countries fully satisfies all of the Copenhagen criteria at the present time. This situation will require the definition of intermediate stages in terms of priorities, each to be accompanied by precise objectives to be set in collaboration with the countries concerned, the achievement of which will condition the degree of assistance granted and the progress of the negotiations under way with some countries and the opening of new negotiations with the others. The priorities and intermediate objectives have been divided into two groups - short and medium term. Those listed under the short term have been selected on the basis that it is realistic to expect that the Czech Republic can complete or take them substantially forward by the end of 1998. In view of the short time span, and taking into account the administrative capacity required to achieve them, the number of priorities selected for the short term has been limited. The priorities listed under the medium term are expected to take more than one year to complete although work may and should also begin on them during 1998.

The Czech Republic will be invited to draw up a National Programme for the Adoption of the Acquis (NPAA) by the end of March which should set out a timetable for achieving these priorities and intermediate objectives and, where possible and relevant, indicate the necessary staff and financial resources.

The Accession Partnership indicates that the Czech Republic will have to address all issues identified in the opinion. The annex provides a summary checklist of these. Incorporation of the acquis into legislation is not in itself sufficient; it will also be necessary to ensure that it is actually applied to the same standards as those which apply within the Union. In all of the areas listed below there is a need for credible and effective implementation and enforcement of the acquis.

Drawing on the analysis of the Commission's opinion and the Council's examination of this, the following short and medium-term priorities and intermediate objectives have been identified for the Czech Republic.

4.1. Short term (1998)

- Economic reform: establishment of medium-term economic policy priorities and joint assessment within the framework of the Europe Agreement; implementation of policies to maintain both internal and external balance; improvement of the framework for corporate governance, in particular by accelerating the restructuring of certain industrial sectors such as steel as well as of banks, by implementing the laws regulating the financial sector (banks and investments companies), and by enforcing the supervision by the new Securities and Exchange Commission.

- Reinforcement of institutional and administrative capacity: improving capacity in banking supervision securities, and insurance sectors, internal financial control, environment, agriculture, reinforcement of phytosanitary and veterinary administrations, particularly as regards facilities at external borders, begin to set up structures needed for regional and structural policy.

- Internal market: including in the areas of intellectual property rights (legislation and enforcement), and certification and standardisation (further alignment of legislative measures and conclusion of a European Conformity Assessment Agreement), amendment of anti-trust law, further development of the legislative framework for State aid control and increased transparency through submission of additional State aid inventory.

- Justice and home affairs: development of effective border management.

- Environment: continue transposition of framework legislation, establishment and implementation of detailed approximation programmes and implementation strategies related to individual acts. Planning and commencement of implementation of these programmes and strategies.

4.2. Medium term

- Political criteria: further work on the integration of the Roma. Strengthening of laws which guarantee press freedom. Further attention to ensuring equal access to public services.

- Economic policy: regular review of the joint assessment of economic policy priorities, within the Europe Agreement framework, focusing on satisfying the Copenhagen criteria for membership of the Union and the acquis in the area of economic and monetary policy (coordination of economic policies, submission of convergence programmes, avoidance of excessive deficits); while the Czech Republic is not expected to adopt the euro immediately on accession, it is expected to pursue policies which aim to achieve real convergence in accordance with the Union's objectives of economic and social cohesion, and nominal convergence compatible with the ultimate goal of adoption of the euro.

- Reinforcement of institutional and administrative capacity: continue public administration modernisation policy; improved operation of the judicial system, training for the judiciary in Community law and its application; customs, establishment of independent bodies for supervision of data protection and for consumer protection; reinforcement of justice and home affairs institutions (ensuring sufficient and properly trained personnel, in particular police, border guards, ministries and courts), strengthening of nuclear safety authority, completion of alignment of financial control capacity, reform of customs and tax administrations to ensure readiness to apply the acquis and the reinforcement of food control administration.

- Internal market: including alignment of public procurement legislation, accounting legislation, data protection, financial services, indirect taxation, audiovisual, consumer protection, further development of standardisation and conformity assessment bodies and establishment and operation of a market surveillance system, technical legislation on industrial products strengthening of competition authorities, completion of alignment and effective enforcement of competition law, promotion of enterprise development, including SMEs, alignment with the acquis in the fields of telecommunications, consumer protection and the internal energy market.

- Justice and home affairs: development of effective border management and implementation of migration policy and reforms of asylum procedures as well as the fight against drugs, organised crime (in particular money laundering, drugs and trafficking in human beings) and corruption, more effective operation of the judiciary and law enforcement, and to align visa policy with that of the European Union and to complete alignment to international conventions, notably in view of the Schengen acquis.

- Agriculture: including alignment with the agricultural acquis (including veterinary and phytosanitary matters, in particular external border controls), attention to environmental aspects of agriculture and biodiversity. Development of the capacity to implement and enforce the common agricultural policy, in particular the fundamental management mechanisms and administrative structures to monitor the agricultural markets and implement structural and rural development measures, adoption and implementation of the veterinary and phytosanitary requirements, upgrading of certain food-processing establishments and testing and diagnostic facilities, restructuring of the agri-food sector.

- Transport: further efforts on alignment with acquis in particular in road transport (market access, safety rules and taxation) and rail transport, and to provide necessary investment for transport infrastructure, notably extension of trans-European networks.

- Employment and social affairs: development of appropriate labour market structures and joint review of employment policies as preparation for participation in European Union coordination; alignment of labour and occupational health and safety legislation and development of enforcement structures, in particular early adoption of the framework Directive on health and safety at work; enforcement of equal opportunities between women and men; further development of active, autonomous social dialogue; further development of social protection, undertake steps to bring public health standards into line with European Union norms.

- Environment: development of monitoring and implementation control structures and capacities, continuous planning of approximation programmes related to individual legal acts. Particular emphasis should be given to air, water and the waste sector. Environmental protection requirements and the need for sustainable development must be integrated into the definition and implementation of national sectoral policies.

- Regional policy and cohesion: establishment of a legal, administrative and budgetary framework for an integrated regional policy in order to participate in European Union structural programmes after membership.

5. MAIN INSTRUMENTS FOR COMMUNITY TECHNICAL AND FINANCIAL ASSISTANCE

5.1. Programming of financial resources

The Phare allocation for the period 1995 to 1997 has totalled ECU 224 million. Subject to the approval of the Phare budget for the remaining period, the Commission will confirm the allocations for 1998 and 1999. Financial proposals will be submitted to the Phare Management Committee as provided for in Council Regulation (EEC) No 3906/89. Joint financing by the applicant countries will be systematically required for all investment projects. The Commission will work with the Czech Republic, the EIB and international financing institutions, in particular the EBRD and World Bank, with a view to facilitating the co-financing of projects relating to pre-accession priorities. Financial assistance from the year 2000 onwards will comprise aid for agriculture and a structural instrument which will give priority to measures similar to the Cohesion Fund. In addition the Czech Republic will have access to funding from multi-country programmes directly related to the acquis.

The Phare programme is the main financial instrument of the reinforced pre-accession strategy. Phare's prime objective is to help prepare Central and East European countries for accession by focusing the assistance it provides on the adoption of the Community acquis and in particular on the priorities identified in this Accession Partnership and in the National Programme for the Adoption of the Acquis. Each year the Commission will sign a financing memorandum with the Czech Republic in which the Czech Republic will undertake to meet a number of the priorities identified in this Accession Partnership and the Commission will undertake to contribute financially to their realisation. Programming of Community financial assistance will take into account the priorities and timetable of the NPAA.

In addition, the subsequent allocation of financial assistance will be closely tied to the respect by the Czech Republic's Government of the commitments made in the NPAA. Certain pre-accession activities can be reinforced now (e.g. support for institution building) but others, such as the financing of major investment projects designed to meet the requirements of the acquis in areas such as environment and nuclear safety will have to be programmed over a period of five to six years.

From 1998 Phare assistance will be channelled through the following types of actions:

- Institution building (around 30 %), which involves the strengthening of democratic institutions, rule of law, public administration and all entities responsible for public services in order to establish the necessary institutional and administrative structures and train the people required to apply the acquis. Institution building support will be implemented, inter alia, through, training actions, technical assistance and twinning of institutions and administrations in the Czech Republic with relevant bodies in the Member States. Initially this twinning will focus on priority areas such as finance, agriculture, environment, justice and home affairs.

- Investment support (around 70 %), in order to make the necessary investments possible for the adaptation of the Czech Republic's infrastructure to the Community acquis. This support will concentrate on: (i) structural actions, covering in particular agricultural restructuring, regional development and investment in human and intellectual capital, which could include Phare contributions to participation in the research and technological development framework programme; (ii) compliance with Community norms, in particular as regards environment, agriculture, industry, occupational safety and health, transport and telecommunications; (iii) co-financing of large scale infrastructure (1) and (iv) small and medium-sized enterprises development (2).

5.2. Role of international financial institutions

Cooperation between the Czech Republic and the international financial institutions will receive a new impetus and a new focus through the Accession Partnership. The grant resources made available under the Accession Partnership will serve as seed money and a catalyst for larger amounts of development finance from the IFIs. This process will be developed by the Commission in liaison with the candidate countries, the EIB and the IFIs, in particular the EBRD and the World Bank with a view to facilitating the co-financing of projects relating to pre-accession priorities.

Under a new lending mandate covering the period 1997 to 1999, the EIB can make available ECU 3 520 million in Central and Eastern Europe. The new pre-accession facility approved by the EIB's governors in early 1998 increases this amount to ECU 7 billion. EIB loans shall be used in all sectors eligible for EIB financing to facilitate the accession process.

6. CONDITIONALITY

Community assistance will be conditional on respect by the Czech Republic of its commitments under the Europe Agreement, further steps towards satisfying the Copenhagen criteria and progress in implementing this Accession Partnership. Failure to respect these general conditions could lead to a decision by the Council on the suspension of financial assistance on the basis of Article 4 of Council Regulation (EC) No 622/98.

7. IMPLEMENTATION OF PRE-ACCESSION ASSISTANCE

The provision of financial assistance to the Czech Republic will depend on the maturity of projects proposed by the the Czech Republic's Government for inclusion in a financing memorandum. Where projects need to be tendered the Commission will only finance those projects which are ready for tendering at the stage of the signature of the financing memorandum. In addition any previous/existing commitments in the same sector must have been fully contracted or be on track. In order to ensure efficient implementation, projects to be financed must not, in principle, fall below a threshold of ECU 2 to 3 million, in particular in the case of infrastructure projects. If these principles lead to a situation where the Czech Republic cannot absorb its full indicative allocation, the allocation will be reduced accordingly. The difference between the indicative and final allocation will be transferred to the horizontal SME and/or the large scale infrastructure facility. No subsequent compensation of this amount will be made.

The Government of the Czech Republic is invited to put in place an implementation structure which ensures coherence and complementarity between all types of European Union financial assistance and national resources. A national coordinator will be responsible for ensuring a close link between the general accession process and the programming of the Community financial assistance.

The Government of the Czech Republic will establish (preferably in the Ministry of Finance) during 1998 a national fund for investment promotion and institution building functioning under the responsibility of a National Authorising Officer (NAO). As the central entity through which Phare and other forms of Community financial assistance will be channelled, the national fund will be responsible for the management of these funds under decentralised implementation in order to increase transparency and reduce dispersion of funds. It will have overall responsibility for management of funds including respect of provisions of the financing memorandum and be accountable to the Commission for the use of the funds. It will also ensure and supervise the flow of national and other co-financing resources as set out in the financing memorandum. The detailed functions and responsibilities of the national fund will be set out in the individual financing memoranda.

In cooperation with the Government of the Czech Republic, the Commission will pursue a policy of further decentralisation of the implementation of the financial assistance where certain pre-conditions are met, and to the extent permitted by the European Communities' Financial Regulation, in particular Article 105(3). This will be done with the intention to establish, within limits and in a gradual manner, a relationship between the Commission and the Czech Republic where responsibility is shared along the lines of the relationship existing with the Member States for implementing the Structural Funds.

In this context, the possibility of applying national procurement procedures in the tendering and contracting of Phare projects may be explored by the Commission, if so requested by the Government of the Czech Republic, in particular in the field of investment. The Commission's decision on this matter will be taken following, inter alia, examination of the the Czech Republic's national procurement law for respect of and compatibility with the basic provisions of the European Community's public procurement rules and its Financial Regulation, including equal participation in tenders and the provisions of Article 118. Any decision on the use of national procurement rules will be taken by the Commission on a case-by-case basis and will be confirmed in the individual financing memoranda.

The monitoring of programme implementation shall be carried out jointly with the Commission through procedures established in the individual financing memoranda. In order to ensure effective monitoring of implementation of assistance under the Phare programme, each Phare programme will incorporate quantified physical and financial objectives which will be specified in the financing memorandum. In order to gauge their effectiveness all operations financed under the Phare programme will be subject to ex-post evaluation to appraise their impact with respect to their objectives.

8. MONITORING

The implementation of the Accession Partnership will be monitored in the framework of the Europe Agreement. This will commence in 1998 before the Commission presents its first regular report to the Council reviewing the progress made by the Czech Republic including implementation of the Accession Partnership.

The relevant sections of the Accession Partnership will be discussed in the appropriate subcommittee. The Association Committee will discuss overall developments, progress and problems in meeting its priorities and intermediate objectives as well as more specific issues referred to it from the subcommittees. The Association Committee will report to the Association Council on the implementation of the Accession Partnership.

The Phare Management Committee will ensure that financing decisions are compatible with the Accession Partnerships.

The Accession Partnership will be amended as necessary in accordance with Article 2 of Regulation (EC) No 622/98. The Commission will propose a review of this partnership before the end of 1999 and at regular intervals thereafter. These reviews will include consideration of the need to further specify intermediate objectives in the light of the progress made by the Czech Republic in meeting the objectives set out in this partnership.

(1) Concerning investment projects in general, the Czech Republic will be required to fulfil the principle of complementarity by means of contributing a minimum amount of 25 % to jointly financed projects.

(2) A horizontal facility for SMEs will be available to remedy the shortage of investment capital available to small enterprises.

ANNEX

The Czech Republic will have to address all issues identified in the opinion. The purpose of this Annex is to provide a summary checklist of these issues mentioned in the opinion on the Czech Republic. These are formulated as recommendations for action. They are listed in the order in which they appear in the opinion without any ranking in terms of importance or urgency. The priority areas for action by each candidate are set out as priorities and intermediate objectives in the Accession Partnership itself.

1. Political criteria

The remaining weaknesses in laws governing freedom of the press must be addressed. Particular attention needs to be paid to the conditions governing any further extension of a law excluding from public service members of the former security service and active members of the Communist regime. Efforts need to be made to end the overloading of courts in particular through improvements in experience and qualifications of judges. The fight against corruption must be intensified. The problem of discrimination affecting the Roma, notably through the operation of the citizenship law, needs to be addressed.

2. Economic criteria

Measures should be taken to restore external and internal macroeconomic balance. In particular the country should take both structural and macroeconomic measures to control the deficit of the balance of payments.

One of the key priorities should be to continue to take measures to improve the framework for corporate governance, particularly with a view to accelerating enterprise restructuring. In this respect, the remaining State-owned banks should be privatised. Recent changes to laws governing banking and investment should be implemented fully.

Measures need to be taken to strengthen the financial sector in the Czech Republic, as well as to improve transparency and restore investor confidence. In particular, the new Securities and Exchange Commission should be allowed to have a strong regulatory role. The banking sector should also be strengthened, and banking supervision enhanced.

3. Ability to assume the obligations of membership

3.1. Internal market without frontiers

The four freedoms

General framework - further work is required, notably in the area of public procurement, intellectual property protection and the implementing structures for personal data protection. Efforts of a lesser degree are required in the field of company law and accounting to bring Czech legislation fully into line with EC legislation.

Free movement of goods - the framework legislation which will enable the Czech Republic to implement the European Union system has been adopted. Full alignment with EC legislation needs to be completed. Completion of alignment of new approach legislation, strengthening of the conformity assessment infrastructure, completion of harmonisation of legislation on chemicals and pharmaceuticals, improvement of legislation on foodstuffs and acceleration of the harmonisation of legislation on motor vehicles and establishment of a market surveillance mechanism are now necessary. The Czech Republic should maintain this quick pace of approximation of legislation on industrial products so as to fully adopt the European Union system.

Free movement of capital - laws need to be amended to allow for acquisition of domestic real estate by non-residents.

Free movement of services - considerable further efforts need to be made in the financial services sector. Banking supervision needs to be strengthened. Legislation on securities, the stock exchange, investment companies and funds must be fully aligned. Implementation of measures in the Internal Market White Paper (first stage Directives) in the insurance field must be accelerated.

Free movement of persons - further efforts must be made to ensure the necessary legislative and enforcement measures as regards mutual recognition of diplomas and qualifications. Further efforts must be made to ensure the necessary legislative and enforcement measures as regards the coordination of social security schemes.

Competition

Anti-trust rules must be completed and further aligned with Community law. In the field of State aid, additional efforts are necessary to ensure full transparency. In particular, information should be made available on all existing direct and indirect aid measures granted by the State, regional or local authorities or through public resources in order to establish and continuously update a more comprehensive State aid inventory on the same basis as in the Community. Moreover, the necessary legal framework for the granting of State aid in accordance with European Community State aid legislation must be created. The State aid monitoring authority should be given sufficient powers and qualified staff and the necessary procedures and practical tools to implement the monitoring. As to sectors traditionally subject to monopolies, the policy of liberalising and opening up to competition should be continued.

3.2. Innovation

Education, training and youth

The legal framework needs to be strengthened and refined, with attention to higher education (diversification of financing and supply, improvement of university strategic management, development of the non-university sector) and adaptation of curricula in European Community regulated professions. A more strategic approach needs to be taken to the reform of the vocational training system.

Research and technological development

Improvement must be made in the level of innovation in the economy as well as in the links between research institutes, industry and small and medium-sized enterprises.

Telecommunications

Policy changes will be needed to secure the required independence of the regulatory authority and to enable it to acquire a convincingly pro-competitive nature. New legislation is needed to secure compliance with European Union Directives. At the same time, the acquis now requires governments to ensure that a modern telephone service is available everywhere at an affordable price. Meeting this obligation will require significant investment in the system.

Audiovisual

A major and concerted effort is needed to make Czech audiovisual legislation compatible with European Community legislation. Legislative deficiencies in the areas of freedom of reception, the promotion of European and recent works, independent producers and isolated advertising spots must be addressed.

3.3. Economic and fiscal affairs

Economic and monetary union

Central Bank legislation must be made compatible with European Community rules. Privatisation and restructuring of the banking sector has to continue and bankruptcy procedures should be properly enforced.

Taxation

Particular efforts need to be made as regards the VAT rate structure and the VAT refund scheme applicable to foreign taxable persons and tourists.

In the field of excise duties particular attention should be given to the setting up of a warehousing system for the movement of goods under duty suspension arrangements. Tax structures and the level of excise rates need to be aligned with the Community model.

Statistics

Some issues of transparency and confidentiality still need attention, and there are deficiencies in sectors such as the business register, regional, financial and agricultural statistics.

3.4. Sectoral policies

Industry

To enhance competitiveness, further efforts should be made to pursue policies aimed at promoting open and competitive markets and taking on the instruments which make up European Community industrial policy, relating both to the operation of markets (product specification and market access, trade policy, State aids and competition policy) and measures related to industry's capacity to adapt to change (stable macroeconomic environment, technology, training, etc.). Further restructuring of certain industrial sectors, in particular steel, is required.

Agriculture

Particular efforts are needed to implement and enforce veterinary and phytosanitary requirements, upgrading of establishments to meet European Community standards, strengthen administrative structures to ensure the necessary capacity to implement and enforce the policy instruments of the common agricultural policy and restructure further the agri-food sector to improve its competitive capacity.

Energy

Current alignment efforts must be maintained, in particular with regard to adjustment of monopolies including import and export issues, access to networks, energy pricing, emergency preparedness including the building up of mandatory oil stocks, State interventions in the solid fuels and uranium sectors, and the development of energy efficiency and fuel quality standards need to be closely followed.

Special attention must be given to timely implementation of nuclear safety programmes in order to bring all the nuclear reactors to the safety levels generally accepted in the European Union, and longer term solutions for waste have to be defined. The strengthening of the nuclear safety authority should be supported.

Transport

The Czech Republic must improve the operation of its domestic road haulage market (in particular on market access, safety rules and tax) and the financial transparency of the rail sector. Resources needed to lay the foundations for the future extended trans-European transport network should be made available. At a national level there is a need to develop specific strategies for transport infrastructure development and financing. Administrative structures, and in particular bodies supervising areas such as safety, should be rapidly reinforced.

Small and medium-sized enterprises

Efforts should be made to refine and increase the coherence of SME policy to create a legal and administrative environment supportive of SMEs.

3.5. Economic and social cohesion

Employment and social affairs

Efforts need to be pursued to approximate legislation for the protection of health and safety of workers in specific areas. Labour laws in the areas of protection of employees in case of insolvency of the employer and collective redundancies need to be further aligned. On transfer of undertakings, information of employees on the conditions applicable to the employment relationship and on working time, legislative adaptations are needed. Information and consultation of workers as set out in certain European Community Directives must be further developed. Changes will need to be made to national law to introduce the right to free movement particularly as regards access to employment and treatment free from discrimination on grounds of nationality. Certain technical adaptations will be necessary in the field of social security for migrant workers. European Community Directives on the warning labelling of cigarette packages and the maximum tar content must be transposed. The financing system of the Czech health system needs to be overhauled.

Regional policy and cohesion

A legal, administrative and budgetary framework for an integrated regional policy in compliance with European Union rules needs to be established.

3.6. Quality of life and environment

Environment

Gaps in sectoral legislation and in secondary legislation governing economic instruments, implementation and enforcement must be addressed. Particular attention must be given to the quick transposition of framework Directives dealing with air, waste and water and the Integrated Pollution Prevention and Control (IPPC) Directive, as well as the establishment of financing strategies for legislation in the water, air and waste sectors.

Substantive compliance with the acquis is low in certain areas, and focus is needed on efficient implementation and enforcement, including efficiency of economic instruments. Significant investment, both public and at enterprise level, will be needed. Accompanying mechanisms, such as licensing systems or public participation have to be established or improved and institutions involved in enforcement and implementation need to be reinforced.

Consumer protection

Further efforts are needed to align legislation on misleading advertising and unfair contract terms. Legislation needs to be introduced in fields such as sales away from business premises, distance selling, package travel, timeshare property and consumer credit. A few important elements are still missing as regards obligations on general product safety and dangerous imitations. The responsibilities of the different institutional bodies involved in consumer protection need to be coordinated and organised and implementation of legislation ensured. A strong and independent consumer movement, sustained by public authorities, will need to be developed.

3.7. Justice and home affairs

Some important gaps need to be filled in legislation. Work is needed to bring migration flows under control. Institutional resource constraints and lack of expertise with new legislation in the police and the judiciary need to be tackled. The acquis in the field of migration/asylum legislation needs to be adopted. The independence of the judiciary (judges and prosecutors) must be strengthened and its functioning improved. Administrative courts need to be established. Communication within, and cooperation between, the police, border police and the judiciary should be improved. Considerable administrative work in the police and judiciary should be carried out by administrative personnel. Police and border police must follow the Schengen model. Reinforcement of policies for combating the various forms of organised crime, including trafficking in women, money laundering, trafficking in drugs, arms, explosives and nuclear materials is needed. Institutional corruption must be addressed.

Communication systems in the field of border management need to be improved. Effective systems for combating drug trafficking and organised crime need to be developed and maintained.

3.8. External policies

Trade and international economic relations

Preparation must be made for applying, on accession, the Community's various cooperation and preferential agreements, multilateral and bilateral commercial policy commitments and its autonomous commercial defence instruments. At the same time, national legislation in the field must be repealed.

Development

Preparations must be made to apply, on accession, the Lomé trade regime to the ACP States and to participate, together with other Member States, in financing the European Development Fund.

Customs

Customs legislation must be aligned with that of the European Community and the organisation and duties of staff must be aligned with those of a modern customs administration. The Czech authorities must accelerate the dismantling of duty-free shops at the land border with Germany and Austria. An effort must be made to develop computerised systems for full participation in the customs union and the internal market. Particular attention must be paid to preparing the customs administrations for the operation of all the customs procedures with economic impact, the system of tariff suspensions and the administration of tariff quotas and ceilings. Strategic planning will need to take account of the reinforcement of border posts along the external frontier that the Czech Republic will have with countries other than European Union Member States at the time of accession.

3.9. Financial questions

Financial control

Financial management and control mechanisms must be established to ensure satisfactory implementation of Community policies (particularly an independent control). To fight fraud, there is a need to ensure appropriate staffing levels and a unified information system for the exchange of information, and develop an anti-fraud unit to protect Community financial interest.

4. Administrative capacity to apply the acquis

The lack of a central department with general oversight of the civil service and of a civil service law are major structural weaknesses which must be addressed.

In most ministries the units responsible for legal administration are poorly staffed. The shortage of experienced staff in areas such as banking supervision and capital markets, and implementation and enforcement structures in areas such as environmental policy need to be addressed. Rules for recruitment and promotion must be improved, and problems of salaries must be addressed. Efforts are needed to strengthen monitoring and regulatory bodies in the fields of veterinary and phytosanitary controls, food control and consumer protection.

The fight against corruption must be intensified.