EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 5.11.2008 
SEC(2008) 2694 
  
COMMISSION STAFF WORKING DOCUMENT 
 
CROATIA 2008 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2008-2009
 
{COM(2008) 674} 
EN 2   EN  
TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 4 
1.1. Preface................................................................................................................... ....... 4 
1.2. Context ................................................................................................................... ...... 4 
1.3. Relations between the EU and Croatia......................................................................... 5 2. Political criteria .......................................................................................................... .. 6 
2.1. Democracy and the rule of law .................................................................................... 6 2.2. Human rights and the protection of minorities ............................................................ 9 2.3. Regional issues and international obligations............................................................ 15 3. Economic criteria ....................................................................................................... 17 3.1. The existence of a functioning market economy ....................................................... 17 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 23 
4. Ability to assume the obligations of membership...................................................... 26 4.1. Chapter 1: Free movement of goods .......................................................................... 26 4.2. Chapter 2: Freedom of movement for workers.......................................................... 28 4.3. Chapter 3: Right of establishment and freedom to provide services ......................... 29 4.4. Chapter 4: Free movement of capital......................................................................... 30 4.5. Chapter 5: Public procurement................................................................................... 31 4.6. Chapter 6: Company law............................................................................................ 32 4.7. Chapter 7: Intellect ual property law........................................................................... 33 
4.8. Chapter 8: Competition policy................................................................................... 34 4.9. Chapter 9: Financial services ..................................................................................... 35 4.10. Chapter 10: Information society and media............................................................... 37 4.11. Chapter 11: Agriculture.............................................................................................. 38 4.12. Chapter 12: Food safety, veteri nary and phytosanitary policy .................................. 39 
4.13. Chapter 13: Fisheries.................................................................................................. 40  
4.14. Chapter 14: Transport policy ..................................................................................... 41 4.15. Chapter 15: Energy .................................................................................................... 42 
EN 3   EN 4.16. Chapter 16: Taxation.................................................................................................. 43 
4.17. Chapter 17: Economic and monetary policy.............................................................. 44 4.18. Chapter 18: Statistics.................................................................................................. 4 5 
4.19. Chapter 19: Social policy and employment ............................................................... 46 4.20. Chapter 20: Enterprise and industrial policy.............................................................. 48 4.21. Chapter 21: Trans-European networks....................................................................... 49 4.22. Chapter 22: Regional policy and coordi nation of structural instruments .................. 49 
4.23. Chapter 23: Judiciary an d fundamental rights ........................................................... 51 
4.24. Chapter 24: Justice, freedom and security ................................................................. 56 4.25. Chapter 25: Science and research .............................................................................. 59 4.26. Chapter 26: Education and culture............................................................................. 60 4.27. Chapter 27: Environment ........................................................................................... 61 4.28. Chapter 28: Consumer and health protection............................................................. 63 4.29. Chapter 29: Customs union........................................................................................ 64 4.30. Chapter 30: External relations.................................................................................... 65 4.31. Chapter 31: Foreign, secur ity and defence policy...................................................... 66 
4.32. Chapter 32: Financial control..................................................................................... 67 4.33. Chapter 33: Financial an d budgetary provisions........................................................ 68 
STATISTICAL ANNEX 
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
CROATIA 2008 PROGRESS REPORT 
1. INTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported regularly to th e Council and the Parliament 
on progress made by the countries of the Western Balkans region. 
This report on progress made by Croatia in prep aring for EU membership largely follows the 
same structure as in previous years. The report: 
briefly describes the relations between Croatia and the Union; 
– analyses the situation in Croatia in term s of the political criteria for membership; 
– analyses the situation in Croatia on the basi s of the economic criteria for membership; 
– reviews Croatia's capacity to assume the obligations of membership, that is, the acquis 
expressed in the Treaties, the secondary legislation, a nd the policies of the Union.  
The period covered by this report is from 1 October 2007 to 3 October 2008. Progress is 
measured on the basis of decisions taken, legisl ation adopted and measures implemented. As a 
rule, legislation or measures which are under preparation or await parliamentary approval 
have not been taken into account. This approach  ensures equal treatmen t across all reports and 
permits an objective assessment. 
The report is based on information gathered and analysed by the Co mmission. In addition, 
many sources have been used, including contri butions from the government of Croatia, the 
Member States, European Parliament reports1, and information from various international and 
non-governmental organisations. 
The Commission draws detailed conclusions rega rding Croatia in its separate communication 
on enlargement2, based on the technical analysis  contained in this report. 
1.2. Context 
The European Council of June 2004 granted th e status of candidate country to Croatia. 
Accession negotiations with Croatia were ope ned in October 2005. The Stabilisation and 
Association Agreement between Croatia and the EU was signe d in October 2001 and entered 
into force in February 2005. 
                                                 
1 The rapporteur for Croatia is Mr Hannes Swoboda. 
2 Enlargement Strategy and Main Challenges 2008-2009. 
EN 5   EN 1.3. Relations between the EU and Croatia 
Accession negotiations with Croatia  have continued. Negotiations  have now been opened  on 
21 out of 35 chapters ( science and research, education and  culture, economic and monetary 
policy, enterprise and industrial policy, custom s, intellectual property rights, services, 
company law, statistics, financia l services, financial control, information society and media, 
consumer and health protection, external re lations, financial and bu dgetary provisions, 
TENs, transport, energy, free movement of wo rkers, social policy and employment, free 
movement of goods) and provisionally closed on four (science and research, education and 
culture ,enterprise and industr ial policy, ext ernal relations ).  
Of the remaining chapters, discussion conti nues in Council on seven draft EU negotiating 
positions ( justice freedom, security, taxation, free mo vement of capital, CFSP/ESDP, regional 
policy and coordination of struct ural instruments and environm ent, food safety, veterinary 
and phytosanitary policy ). The Commission is preparing draft EU negotiating positions in 
three cases ( agriculture and rural development, fisheries and public procurement ). 
Based on the overall good progress being made  by Croatia, in March 2008 European 
Commission President Barroso st ated that in the 2008 Enlargement package, the Commission 
would present an indicative timetable for the technical conclusion  of the negotiations  in 
2009, provided a number of conditions were met by Croatia. The first condition relates to 
Croatia meeting all opening benchmarks by June 2008. This is largely done, with the 
exception of 2 chapters (judiciary and fundame ntal rights; competition policy) As regards 
judiciary and fundamental rights, Croatia must make final efforts to meet the outstanding 
elements of the opening benchmarks . Regarding opening benchmarks for competition policy , 
Croatia must make further efforts, in partic ular as regards shipbuilding. Secondly, Croatia 
must comply with all legal obligations under the Stabilisation and Association Agreement 
(SAA). In this regard, overall compliance is largely assured. Croatia has agreed with the 
Commission a solution for eliminating the discri minatory taxation of cigarettes. The country 
needs to pursue efforts as regards the restru cturing of shipbuilding.  Thirdly, Croatia must 
continue to comply with th e general conditionalities of th e Stabilisation a nd Association 
Process especially concerning war crimes trials, refugee return issues as well as full cooperation with the International Criminal Tr ibunal for the former Y ugoslavia (ICTY). This 
has largely been assured. Fourthly  Croatia urgently needed to improve its management of EU 
financial assistance under the PHARE and IP A programmes. Here, good progress was made, 
which now needs to be translat ed into concrete progress on the ground (see below). Lastly 
Croatia must suspend all aspects of the Ecologi cal and Fisheries Protection Zone, with respect 
to EU vessels. This has been achieved. 
The political and economic dialogue between the EU and Croatia has continued . 
Political 
dialogue meetings were held in Luxembourg in April at ministerial level and in May 2008 in 
Zagreb at senior official level. Economic di alogue meetings were held in Luxembourg in 
April at ministerial level and in July 2008 at seni or official level. These meetings focused on 
the main challenges faced by Croatia under th e Copenhagen political and economic criteria 
and reviewed progress being made towards fu lfilment of Accession Partnership priorities. 
Implementation of the Stabilisation and  Association Agreement (SAA) has largely 
continued without major difficulty. The ma in exceptions have been continued non- 
compliance with certain state ai d provisions, in particular as  regards aid granted to the 
shipbuilding sector, as well as the existence of an excise duty regime for cigarettes 
incompatible with the SAA. In October, Croatia agreed with the Commission a solution for 
EN 6   EN eliminating the discriminatory taxation of  cigarettes. Previous progress improving 
implementation of SAA provisions on access to real estate has not been sustained. An 
Enlargement Protocol to the SAA to take acco unt of the accession of Romania and Bulgaria 
was signed in July 2008. 
The EU provides guidance to the author ities on reform priorities through the  Accession 
Partnership . Progress on these reform priorities is encouraged and monitored through the 
bodies of the SAA. The SAA Associati on Council met in April 2008 and the SAA 
Association Committee in December 2007. Seven s ectoral sub-committees have been held 
since November 2007. Based on the Accession Pa rtnership, Croatia a dopted its national 
programme for EU accession in spring 2008. 
Financial assistance  is provided under the new Instrument for Pre-accession Assistance 
(IPA) from 2007. The 2008 IPA programmes amount ed to €146 million. This assistance is 
concentrated on institution building and preparation for the implementation of the EU's common agricultural policy and cohesion policy. In addition, Croatia continued to benefit 
from regional and horizontal pr ogrammes. Croatia has taken a number of important steps to 
address weaknesses identified by the Commission in Croatia's management of pre-accession 
aid. These steps have led to strengthened mana gement and control bodies . A track record of 
improved implementation is needed.  
As regards support to civil society under IPA, a €3 million grant scheme will be launched to 
support civil society  projects in the following sectors: transparency and accountability of 
public administration and fight against corruption, anti discrimi nation as well as sustainable 
development. In addition, a €20 million contri bution under IPA for cross border cooperation 
with Italy, Slovenia and Hungary as well as pa rticipation in ERDF programmes will promote 
dialogue between local and regional authorit ies. Cross border cooperation has also been 
expanded to Serbia, Montenegro, Bosnia and Herzegovina with a contribution of €4.4 million. 
Participation of Croatia in an increasing number of Community programmes is also an 
important tool to implem ent civil society dialogue. 
2. P
OLITICAL CRITERIA  
This section examines the progress made by Croatia towards meeting the Copenhagen 
political criteria, which require stability of institutions guaranteeing democracy, the rule of 
law, human rights and respect fo r and protection of minorities . It also monitors regional 
cooperation, good neighbourly relations with enla rgement countries and Member States, and 
respect for international obligations, such as cooperation with the UN International Criminal 
Tribunal for the former Yugoslavia. 
2.1. Democracy and the rule of law 
Parliament Parliamentary elections were held in Novemb er 2007. The elections were  free and fair. As 
regards the electoral roll, some legislative improvements are needed to ensure adequate 
verification and updating of residence data, which serves as the basis for entry on the electoral 
roll. 
EN 7   EN The permanent State Election Commission is now  operational at Stat e level. However, 
adequate staff has not yet been recruited at th e local level and further training for all members 
is needed. 
Parliament nominated three new judges to th e Constitutional Court. As with previous 
nominations, the election proce dure was held with limited par liamentary and public scrutiny. 
The Parliament decided to lift the immunity from prosecution of one MP facing serious 
criminal charges. It did not, however, agree to lift his immunity from being held in custody. 
The decision was in contradiction to that of the previous Parliament. This decision was taken 
despite the seriousness of the charges and the potential effects on witnesses' willingness to 
testify. 
Government 
A new government was formed following parl iamentary elections in November 2007. The 
centre-right coalition led by HDZ has a majority  of 83 seats out of 153. For the first time the 
eight minority MPs are official coalition partners  and a member of the Serb party, the SDSS, 
took one of the Deputy Prime Minister pos ts and became a member of the cabinet. 
The Parliament adopted amendments to the ratification of the European Charter on Local 
Self-Government thereby enabling implementa tion of the full scope of the Charter. 
Public administration  
Some progress has been made on public admini stration reform. The government adopted a 
Public Administration Reform Strategy for th e period 2008 – 2011 as well as a proposal for a 
revised General Administrative Procedures Act in September 2008. Further implementing 
legislation for the Law on Civil Service was a dopted. The Civil Service law itself was further 
amended to allow for the planned depoliticisa tion and to introduce wh istleblower protection. 
A new Administrative Inspection Act was adopte d. This Act foresees a higher degree of 
independence and responsibility  of administrative insp ectors as well as improved 
implementation of supervision measures. The number of employees at the Central State 
Office for Administration (CS OA) increased from 114 to 120. The professional skills and 
competences of the staff have been improved by various forms of training. In April 2008 the 
government adopted the 2008 Civil Service Training Plan. Various  e-Government initiatives, 
especially the HITRO.HR (One-stop-shop)  project, and the HITROREZ (Regulatory 
Guillotine) project have been high on the government agenda. 
However, the legal basis for building a mode rn and professional ci vil service is still 
incomplete. Major weaknesses in administrative proced ures remain and an overhaul of the 
relevant legislation is still pending. A new salary system is  required and the draft Law on 
Civil Service Salaries ha s not yet been adopted.  The Civil Service Law is not implemented 
coherently across the state administration due  to varying capacities of the relevant 
departments, the preponderance of agencies and subordinate entiti es with operational 
autonomy, and lack of sufficient supervision and follow-up.  There is a very limited delegation 
of decision-making responsibilities from the manage rial level to civil se rvants. The process of 
de-politicisation of public administ ration is still at an early st age. Weaknesses in management 
and administrative capacity of institutions in ch arge of public administration reform remain. 
The civil service continues to suffer from high staff turnover and a lack of qualified 
personnel. There are insufficient capacities for human resources management. Full 
EN 8   EN effectiveness of various e-government initiative s rely on the correct enforcement of the 
underlying legal framework, which is neith er complete nor properly enforced. 
There have been considerable delays in th e implementation of Croatia's programme for 
decentralisation. Currently there is insufficient capacity of public admi nistration at national, 
regional and local level to manage decentralisati on reforms, and to ensure that such reforms 
actually meet their objectives. The Decentralis ation Commission has not become the driving 
force for the decentralisation process. The lo cal government level is not properly organised 
and their interest organisation – Association of Towns and Municipalities (SAVEZ) – remains 
weak. 
Overall, some progress has been achieved in  the area of public ad ministration reform. 
However, public administration remains weak a nd the required reforms continue to represent 
a major challenge for Croatia. A clear political commitment and further sustained efforts are 
needed. 
Civilian oversight of the security forces 
Reform of the security and intelligence system  has continued. The necessary legislation has 
been adopted and gaps in the existing legal framework have been addressed. With the new legislation adopted, in particul ar the Law on Security Checks, the intelligence services' 
conduct and scope of control has improved. Howeve r, the legitimate intere st of the state to 
protect certain information and the right of the public to have access to it are not yet properly 
balanced. 
Overall, civilian control of the secu rity services is generally assured. 
Judicial system  
Implementation of the  judicial reform strategy has continued even if adequate monitoring of 
its measures has not been possible due to weak  administrative capacity. There has been some 
progress with new legislation such as the adop tion of a new misdemeanour Act and a new Act 
on the seats and jurisdiction of courts, a first step in the court rationalisation process. The 
system of judicial inspection is starting to s how results. A revised Action Plan addressing all 
major reform issues was adopted in June 2008. Ho wever, in certain area s the action plan lacks 
measurable objectives that will allow effec tive monitoring of its implementation. While the 
action plan is a step forward, implementation w ill be crucial and concrete results are needed. 
The case backlog remains large and the length  of judicial proced ures excessive. Court 
rationalisation has not yet begun in earnest a nd the current plans lack ambition. Further 
improvements in the accountabil ity, professionalism and competence of the judiciary are 
required.  
With regard to domestic prosecutions for war crimes, Croatia continues to be active in trying 
war crimes cases on its own initiative, with ar ound thirty trials in th e past year. A more 
balanced approach is slowly  becoming evident with a great er willingness to prosecute 
perpetrators irrespective of ethnicity. Further progress has been made on regional cooperation 
on war crimes matters. The State Attorney issued  instructions to pros ecutors in October 2008 
aimed at addressing the problem of a common standard of cr iminal accountability for war 
crimes not being applied irre spective of ethnicity. Many such crimes remain unprosecuted, 
often due to a combination of a lack of evid ence, unwillingness of witne sses to come forward, 
e.g. due to intimidation, and unwillingness or re luctance of police and prosecutors. The issue 
EN 9   EN of in absentia  verdicts from the 1990s has not yet been adequately addressed. Limited use is 
made of the possibility to tr ansfer cases from local to specialised war crimes courts.  
Overall, reforms in the judiciary continue but only at a relatively slow pace. Significant 
challenges remain. Currently, effective dispensa tion of justice for citi zens is not always 
assured. (See also chapter 23 - Judi ciary & fundamental rights)  
Anti-corruption policy  
There has been some progress in the fight against corruption. The legal framework to combat 
corruption has been further improved. A revi sed Anti-Corruption Strategy accompanied by an 
Action Plan containing specific  measures in a number of fi elds prone to corruption was 
adopted in June 2008. A new inter-ministerial  coordination system for monitoring anti-
corruption efforts is in place.  The Office for the Fight Agai nst Corruption and Organised 
Crime, USKOK, continues to become more ac tive and has issued indictments in some 
important cases. USKOK's role is more widely  acknowledged and reports to it of suspected 
corruption have increased signi ficantly, particularly as rega rds abuse of office cases.  
However, corruption still remains widespread. Th e administrative capacity of state bodies for 
fighting corruption continues to be insufficient. The police need to become more effective in 
the fight against corruption and organised crime. Implementati on of anti-corruption efforts 
has continued to lack strong co-ordinat ion and efficient non-partisan monitoring. While the 
total number of corruption cases investigated so far has increased, the actual number of 
prosecutions remains low. There continues to be  weaknesses in the work of the National Anti-
Corruption Council both in legisl ative and practical terms. There was little progress in 
preventing conflicts of interest. The Committee for the Prevention of Conflict of Interest 
continues to be beset by problems, includi ng the resignation of its chairperson following 
corruption allegations. A culture of political accountability is lacking. Further efforts are 
required in tackling hi gh level corruption.  
(See also chapter 23 - Judi ciary & fundamental rights)  
2.2. Human rights and the protection of minorities 
Observance of international human rights law As regards ratification of human rights instruments, Parliament ratifie d the Council of 
Europe Convention on Suppression of Terrorism . The Additional Protocol to the Convention 
on cybercrime, concerning the criminalisatio n of acts of a racist and xenophobic nature 
committed through computer systems, has also been ratified. 
Parliament ratified the European Convention on the Compensation of Victims of Violent 
Crimes. The convention will enter into force at a later date to be determined on the basis of 
the Law regulating signings and execu tion of the international treaties. 
The European Court of Human Rights  (ECtHR) delivered 29 j udgements in 2007 finding 
that Croatia had violated the ECHR. As in prev ious years, the majority of judgements related 
to the violation of the right to a fair trail a nd the length of the proceedings under Article 6 of 
the European Convention of Hu man Rights (ECHR). The ECtHR f ound violations of the right 
to fair hearing in a number of cases in which the local court failed to issue verdicts following previous judgements on violation of this righ t by the Constitutional Court. The ECtHR court 
continued to condemn Croatia for violation of  Article 3 – inhuman and degrading treatment 
EN 10   EN concerning prison conditions. A total of 636 ne w applications to the ECtHR were made 
during the reporting period. The total number of  pending applications before the Court 
regarding Croatia is 882. 
As regards promotion and enforcement of human rights , Croatia adopted in November 
2007 an Action Plan for the protection an d promotion of human rights 2008-2011. 
Enforcement of rights continued to be negatively affected by shortcomings in the judicial 
system, however. 
Overall, international human rights law is respected in Croatia with some specific 
shortcomings related to the length of trials  and shortcomings of the judicial system. 
Civil and Political Rights 
Concerning the prevention of torture and ill-treatment and fight against impunity, there 
has been an increased number of complaints from citizens regarding the excessive use of force by the police. In this  context, the Ombudsman has called for more transparent 
procedures for the determination of police respon sibility as well as better regulation of police 
actions.  
A prominent case of forced hospitalisation brough t into question the functioning of the police 
and institutions of the health and social system. The case in question constitutes a serious violation of human rights and illustrates the fa ilure of the system on a number of different 
levels. Nobody has suffered any consequences to date for the misconduct as identified by the 
Parliament's human rights committee. 
As regards impunity, many war crimes are s till unprosecuted, especially those where the 
victims are of a minority et hnicity (Serbs). In particular in sm aller towns there is a lack of will 
to prosecute these cases. 
As regards  access to justice, Parliament adopted a new Law on Legal Aid in May 2008 aimed 
at improving the currently limited system. Th e Law requires a significant build up of the 
structures for its implementation as well as the adoption of several by-laws. The actual 
provision of legal aid is fore seen to be available to ci tizens as of 1 February 2009. 
Amendments to the Law on Attorney Service were adopted which envisage Parliamentary 
control over attorneys' tariffs. Currently tariffs are set independently by the Bar Association and are linked to the length of procedure. Thes e tariffs are too high for the majority of citizens 
thus preventing their access to the judicial system. 
With regard to the prison system , first measures have been taken aimed at improving prison 
conditions, in particular the in crease of accommodation capacity. However, there continues to 
be room for improvement. The lack of capacity ha s been exacerbated by st ricter provisions in 
the Criminal Code, providing for longer prison  terms, and the continued backlog of cases 
resulting in a longer pre-trial detention. 
Freedom of expression  including freedom and pluralism of the media is provided for in 
Croatian law and is generally re spected. Further progress has b een made in following up the 
recommendations of the 2004 joint expert mission for changes to the laws on electronic media 
and on Croatian radio and television. (See also Chapter 10 - Information society and media)   
EN 11   EN However, Cases of physical attacks as well as d eath threats against journa lists have gained in 
prominence and require more thorough investig ations. Journalists working on corruption 
cases or organised crime are increasingly ta rgeted. There has been limited success in 
identifying and prosecuting perpetrators. Two journalists have been recently murdered. 
Editors and journalists continue  to report undue political pressu re. This raises  concern about 
freedom of expression, particularly at the local level. 
There have been no particul ar difficulties as regards freedom of assembly and association . 
Civil society organisations  continue to play an importa nt role in the promotion and 
protection of human rights, democracy and protec tion of minorities. However, they continue 
to have difficulty influencing pol icy debate and remain relatively weak in analytical capacity. 
There have been no particular problems in the exercise of freedom of religion . 
Overall, with some specific exceptions, civil and political rights continue to be reasonably 
well respected in Croatia. However, shortcom ings as regards impunity for war crimes and 
access to justice require  further attention. 
Economic and Social Rights 
As regards women's rights  and gender equality, implementation of the national policy for the 
promotion of gender equality continued. Activities to mark 2007 as the year against violence 
against women, including family violence, co ntinued. In December 2007, a national strategy 
for protection against domes tic violence 2008-2010 was adopte d. A new Gender Equality Act 
was adopted in July 2008. In the new parliament  32 members (21%) out of a total number of 
153 are women.  
However, there has been an increase in the repo rted number of acts of fa mily violence. Raised 
public awareness is one explanation. There has been further improvement in police work in 
cases of family violence. Centres for social we lfare did not show such diligence, however and 
do not always promptly exercise their legal authority. They also suffer from lack of qualified 
and trained staff. Croatia remains a country of transit and destination for female victims of 
trafficking.  
Gender equality policy in the field of employment needs more effective implementation, 
especially as regards access to employment  and maternity and child care entitlements. 
Capacity to cover all reported cases of discrimination in empl oyment needs to be improved. 
Weakness in the legal system, especially with regard to the length of proceedings, negatively 
affect the employment rights of women. See also Chapter 19 – Social policy and employment   
As regards children's rights , in October 2007 amendments to the Family Law introduced 
changes regarding adoption, custody and main tenance for children. The main aim is to 
reinforce child maintenance in cases of divorce as well as the support to children born out of 
wedlock. Full implementation will be vital, given the high number of children currently left without financial support. 
The Ombudsman for Children continued to play an important role in the overall promotion 
and protection of children rights in Croatia. The number of indi vidual complaints and general 
initiatives increased in comparison to 2006 by 63%. This increase is probably the 
consequence of improved public visibility of the Ombudsman as well as of the opening of 
three regional offices. 
EN 12   EN However, the increase in cases has stretched ex isting resources. Follow-up by line ministries 
to the inquiries and recomm endations from the Ombudsman is in many cases missing. The 
implementation of measures envisaged under the National Plan of Activities for the rights and 
interest of children for the period of 2006-2012 has been delayed. The main problems 
affecting children continue to stem from viol ence in the family, general parental relations 
connected to the custody and support of ch ildren, but also from weak, understaffed and 
overburdened social welfare institutions and corr ectional facilities. There is a general lack of 
educated experts to provide advice to families. There has been no consolidated approach of the institutions towards the problems regarding child protection issues , including a prevention 
role of the educational institutions. While th e Law on Foster Care strives to improve the 
quality of foster care, it also  brings new restrictions and c onditions for fostering that has 
caused a decline in the number of foster families.  Judicial backlogs and lack of trained judges 
further deteriorate the situation of children, particularly in families at risk of separation or unpaid alimony cases. There is a lack of data on child poverty. 
An Act on the Ombudsman for Persons with Disa bilities entered into force in January 2008. 
The first such Ombudsman was appointed  by Parliament in May 2008. A National 
Implementation Plan on Social Inclusion 2007- 2008 has been produced. However, continued 
efforts are needed as regards socially vulnerable and/ or persons with disabilities . The 
relevant legislation is not sufficiently enfor ced. No tangible progress has been made in the 
field of de-institutionalisati on, including for children with di sabilities, even  though, with 
decentralisation, it is among the priorities set out in the Joint Inclusion Memorandum and the 
related National Implementation Plan. Civil so ciety organisations involved in delivering 
community based services need to be adequately  supported in order to develop sufficiently an 
alternative to institutionalisation.  
With regard to labour and trade union's rights , there has been some progress ( See also 
Chapter 19 – Social policy and employment ). In a difficult socio-economic climate trade 
unions are playing an increasingly prominent role  in public debate. However, workers’ rights 
are still negatively affected by a weak labour inspectorate and a poorly functioning judiciary.  
A comprehensive law on anti-discrimination  was adopted in July 2008, signifying important 
progress. This law is aimed at full alignment with EU acquis . However, anti-discrimination 
legislation has generally not been applied vigorously. To da te there has only been one 
criminal conviction for hate crime. There has b een no conviction for the initiation of racial 
and other hatred. There ha s been limited reaction of the aut horities to various  expressions of 
an extreme nationalist character which could be  considered as incitement to national and 
religious hatred. There are no statistics on judici al cases to track the nature and extent of 
discrimination. Support to the victims of discri mination is marginal. Th e level of protection 
against discrimination in practice and its judicial prosecution is not  in line with EU standards. 
(See also Chapter 19 – Social policy and employment ). 
Property rights  are generally assured. Ho wever, there are outsta nding cases of delayed 
property repossession and problems with compensa tion for the use of private property taken 
under war legislation from the 1990s. The Ombudsma n again warned of the lack of proper 
administrative decisions that should be i ssued for persons applying for housing care and 
compensation for the use of their property. No n-issuance of such administrative decisions 
prevents the claimants pursuing their right to appeal. The process of restitution and 
compensation for property nationalised afte r World War II continues to go slowly. 
EN 13   EN Overall, legal protection for economic and social rights is partially guaranteed. 
Implementation of women's and children's ri ghts and protection against all forms of 
discrimination needs to be fu rther improved in practice. 
Minority Rights, Cultural Rights and Protection of Minorities 
Some progress has been made with regard to  the implementation of the Constitutional Law  on 
National Minorities (CLNM). An Action Plan for implementation of the CLNM was adopted 
in June 2008 which covers all main issues and relevant institutions. A department for national 
minorities was established in the Central Stat e Administration Office (CSAO). The CSAO 
adopted an employment plan for 2008. This plan  foresees the recruitment of 158 members of 
national minorities at the central level and 44 in the offices of the State Administration in the Counties. The capacity of the lo cal councils of nationa l minorities (CNMs) to advise the local 
government on matters of concern for minorities  has improved. Most of the CNMs have been 
provided with premises and funding. In 2008, the State council for national minorities received around €5.7 million from the state budget for national minority associations. This is an increase of 19% compared to 2007. 
However, implementation of the CLNM's provisi ons in practice presents a mixed picture. 
Some provisions are implemented well, others  only to a limited extent. Problems persist, 
particularly in terms of  under-representation of minorities in state admi nistration, the judiciary 
and the police. The plan for employment in the administration at County, Town and Municipality level is still not adequate. A long–term strategy to implement the CLNM 
minority employment provisions is still la cking. Adequate statis tics to allow proper 
monitoring are still missing. No details of impl ementation of the 2007 targets are available. 
Despite increased financial support, CNMs are not  sufficiently recognis ed yet as advisory 
bodies by the majority of local authorities. Mo reover, their independence and influence is 
affected by the fact that they depend on th e budget of the town authority or council. 
With regard to cultural rights, the education pr ovisions of the CLNM a nd other laws relevant 
to minorities are generally being implemented satis factorily. With regard to the perception of 
national minorities in the media, negative ster eotyping has further decreased. There continues 
to be little progress with regard to the production and/or broadcas ting of programmes for 
minorities in their languages by public radio an d TV stations, as envisaged under the CLNM. 
Initiatives promoting greater integration, reconci liation and tolerance as well as joint activities 
within the current system s hould be further encouraged.  
With regard to the Serb minority, there have been some positive developments. For the first 
time, an ethnic Serb has been appointed to one  of the Deputy Prime Minister posts. There 
have been fewer reports of apparently ethnica lly motivated attacks against the Serb minority 
and the Orthodox Church. Police investigations  of such incidents have improved, although 
few cases end in prosecutions. Mo reover, a number of ethnically motivated incidents occurred 
over the summer, which could have a detrimenta l impact on the willingness of refugees to 
return. Members of the Serb minority, includi ng those who remained in Croatia during the 
war, face difficulties concerning access to employme nt, especially in the war affected areas. 
Discrimination continues particularly in the public  sector at the local level. Croatia needs to 
encourage a spirit of tolerance and take appropriate measures to  protect those who may still be 
subject to threats or acts of intimidation.  
EN 14   EN There has been some progress on the various outstanding issues regarding refugees . 
More than 2,100 refugees and 1,100 displaced persons  returned to their place of origin in 
Croatia in 2007. The total number of Croatian Se rbs registered as re turnees to Croatia 
increased to almost 143,000 although the estimate d level of actual return  could be less than 
60% of this figure. An Action Plan for the acc elerated implementation of the Housing Care 
programmes was adopted in June 2008. Rec onstruction of housing has continued. The 
programme to reconnect public in frastructure in certain return  villages is ongoing without 
major difficulties. Mine clearan ce operations have continued. 
However, a number of obstacles to sustainabl e return of Serb refugees remain, principal 
among them being housing, particularly for form er tenancy rights holders. Implementation of 
the Croatian government's housing care programmes within and outside the areas of special 
state concern (ASSC) for the former tenancy ri ghts holders who wish to return to Croatia 
continues to be slow, alth ough implementation has picked up in recent months.  
Outside the ASSC, only around 530 (12%) of 4,560 requests have been solved definitely. 
There are a further 1,360 (30%) positive decisi ons awaiting action. 1,806 are still waiting to 
be processed (40%) and 864 received a negative decision (19%). The target date for full 
implementation outside the areas of special state concern has been  brought forward to 2009. 
Of 8,668 applications inside the ASSC, 4,788 (55%) families have been allocated an 
apartment out of the 6,816 positive decisions, a slight increase on last  year. However, 653 
administrative decisions are still pending and 1,199 were decided negatively. For both inside 
and outside, the negative decisi ons are under revision, with the help of UNHCR, before they 
will be sent to the applicants.  
The Government’s benchmark for 2007 to pr ovide 1,400 accommodation units inside and 
outside the ASSC has been largely met. For the remaining 60 cases, Croatia has introduced 
the possibility of daily compensation payments until the foreseen accommodation is available. 
598 cases of the 2008 target of 1,400 have been solved.  
As regards reconstruction of housing, some 2,700 units were recons tructed in 2007/2008 and 
approximately 1,500 will be r econstructed in 2008/2009. This will leave an estimated 2,500 
housing units still to be reconstructed dependi ng on the outcome of appeals. There remain 
approximately 8,700 outstanding ap peals against negative eligibil ity decisions, many of which 
have been pending for four years. Housing assi stance has also been extended to applicants 
with rejected reconstruction claims. 
54 houses, of which 45 waiting for a court deci sion, remain to be repossessed and handed 
over to their rightful owners. There is still slow progress on repossession of occupied 
agricultural land. The repa ir programme for houses damaged or  looted prior to repossession is 
coming to an end. 
Apart from housing, other key concerns facing returnees are employment, enduring hostility 
in certain localities and "conva lidation", or the validation of working years concerning 
pension rights, of those residing in the parts of  Croatia not under Croatian government control 
during the 1990s. In this regard it is positive that the Government has taken various decisions reopening the possibility for these pension rights to be accessed. 
EN 15   EN The situation of the Roma minority in Croatia continues to improve and the administration is 
developing an increasin gly positive and pro-active approach . Some progress is being made on 
the pre-school education of Roma under the government’s action plan for the Decade of 
Roma Inclusion 2005-2015. Funding is also increasing. The number of Roma children 
completing primary education and pre-schooling has increased. The issue of lack of legal 
status of Roma without citizen ship is being resolved. For th e first time, a member of the 
Roma minority has been elected to the Croatian Parliament. 
However, most Roma remain excluded from ma instream Croatian society and face difficult 
living conditions. Unemployment remains endemic.  Measures with regard to education need 
to be integrated into more systematic policie s. Problems persist also in terms of access to 
employment, adequate housing, social protectio n and healthcare, and in general attitudes in 
society, where discriminatory attitudes prev ail towards Roma and other vulnerable groups. 
Coordination among Roma groups should be e nhanced and their expertise for effective 
implementation should be strengthened. Problems remain regarding the participation of the 
Roma community in the education system, ev en when specific programmes are available. 
Overall, the position of minorities in Croatia continues to improve. However, many problems 
remain for the Serb and Roma minority. Some progress on outstanding refugee return issues 
was made but efforts to ensure sustainability of refugee return need to be accelerated. 
(see also chapter 23 - Judi ciary & fundamental rights) 
2.3. Regional issues and international obligations 
Compliance with the Dayton/Paris and Erdut Peace Agreements  has overall been ensured. 
Croatia continues to cooperate with the International Criminal Tribunal for the former 
Yugoslavia (ICTY) . However, there are some probl ems of access by ICTY to certain 
documents in Croatia. Croatia needs to ensu re a full and proper investigation into the 
whereabouts of the missing files. The ICTY tr ial against Gotovina, Cermak and Markac 
started in March. Before the beginning of the trial, one of the indictees breached on two 
occasions the conditions of his provisional re lease. Upon request of the Tribunal, he was 
arrested and transferred to the ICTY detenti on centre. The indictee's misconduct triggered the 
resignation of the Minister of  Interior, who had accompanied the indictee on a hunting trip 
during one of the above mentioned breaches. 
An initial verdict was reached in the trial against Rahim Ademi and Mirko Norac, the only 
war crimes  case transferred from the ICTY to Cr oatian jurisdiction. After initial problems 
where protected witnesses failed to give their testimony, the system of giving testimonies via 
video link has improved. In May 2008 a conference on regional cooperation in prosecution of 
war crimes was held with the participation of chief prosecutors from Croatia, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Montenegro and the war crimes prosecutor from Serbia. However, there are still obstacles to the transfer of cases and extradition of suspects in cases  of war crimes and crimes ag ainst humanity between Bosnia 
and Herzegovina, Croatia, Montenegro and Serb ia. This exacerbates the problem of impunity. 
Croatia has not concluded any bilateral immunity agreements granting exemptions from ICC 
jurisdiction and its policy regarding the International Criminal Court (ICC)  is aligned with 
the EU Common Positions on the integrity of the Rome Statute as well as related EU guiding principles.  
EN 16   EN Some progress has been made with regard to implementation of the Sarajevo Declaration , 
which aimed to finalise the regional ref ugee return process by the end of 2006.  By reopening 
the possibility for validating pension claims, one of the two main outstanding issues has been 
tackled by Croatia.  Further efforts are needed to resolve the outstanding issues, in particular 
how to deal with compensation claims of t hose who lost occupancy and tenancy rights 
(OTRs) in Croatia.  
Regional cooperation  and good neighbourly relations  form an essential pa rt of the process of 
Croatia's moving towards the European Union. 
A number of bilateral visits, agreements and continued engagement by Croatia in regional 
initiatives have contributed towards the aim of further improvement of relations between 
Croatia and its neighbours. 
Croatia has actively participated in the transitio n from the Stability Pact to a more regionally 
owned framework with the South East Euro pean Cooperation Process (SEECP) and the 
Regional Cooperation Council (RCC). The RCC Secr etariat was formally inaugurated in 
April. A former State Secretary of the Croati an Ministry of Foreign Affairs was appointed 
secretary-general. Croatia actively participates al so in other regional initiatives such as the 
Adriatic-Ionian Initiat ive (chairmanship from June 2007 to May 2008) and the Migration, 
Asylum and Refugees Regional Initiative (MARRI). Croati a is a party to the Energy 
Community Treaty and the Central Europe an Free Trade Agreement (CEFTA) and a 
signatory of the Agreement on the Eu ropean Common Aviation Area (ECAA).  
The application of Croatia's ecological and fi shing protection zone (ZERP) also for EU 
Member States entered into force on 1st January 2008. However, in line with earlier commitments, the Croatian Parliament decided in March 2008 on the susp ension of the zone 
for EU Member States until a common agreem ent between the countri es concerned is found. 
The Croatian Parliament’s decision effectively solves the ZERP issue. 
Croatia accepted the acquis  of the Barcelona process and part icipated in the launch of the 
Barcelona Process: Union for the Mediterranean  in July 2008, thus becoming a full member 
of the process. 
Bilateral relations with other enlargemen t countries and neighbouring member states  
continue to develop. There has been some pr ogress towards finding definitive solutions to 
various open bilateral issues between Croatia and its neighbours, particularly as regards 
settlement of border disputes. 
Croatia continues to ha ve good relations with Albania  and the former Yugoslav Republic of 
Macedonia . 
Bilateral relations with Bosnia and Herzegovina  remain stable. An agreement on police 
cooperation has been concluded. The Croatian Parliament ratif ied the bilateral agreement on 
dual citizenship. There has been no progres s on border issues. Ratification of the 2005 
Agreement on Demarcation of the Land and Ri ver Borders remains on hold. The Peljesac 
bridge project remains an open political issue. There have been no developments on the agreement on the use of the Port of Plo če
. Other unresolved issues  include property and 
refugees.  
Regarding relations with Montenegro, a working group on outstanding issues, including 
property, chaired by the minister s of justice has been created and met twice. Agreements on 
EN 17   EN cooperation in the field of defence and in wa ter management have been signed. Business 
relations have been enhanced. With regard to the open border issue, th e two countries agreed 
to settle border demarcation at Prevlaka through  international arbitratio n at the International 
Court of Justice. A joint commission is being established to prepare the legal framework. The temporary border regime in pla ce continues to function smoothly. 
Relations with Serbia  are stable but have been affected  by Croatia's decision to recognise 
Kosovo
3. The provisional visa-free regime remains in  force. There has been some progress in 
cooperation on missing persons an d on war crimes prosecutions. There has been no progress 
in delimiting the border. Other open matters include property related issues, in particular claims for compensation for lost occupancy and tenancy rights, refugee return, and Croatia’s 
genocide lawsuit before the International Court of Justice, on which hearings began in May 
2008. 
Croatia continues to have good relations with Hungary and Italy . 
Relations with Slovenia , while generally well developed, con tinue to be affected periodically 
by difficulties linked to outstan ding border issues. Croatia a nd Slovenia have in principle 
agreed to involve a th ird party to resolve th e border issue. Joint commissions have been 
established and held their first meetings. Howe ver, there is neither agreement on the body to 
be entrusted with arbitration nor on th e precise subject of  final arbitration.
 There has been no 
progress in resolving the ope n issues of Ljubljanska Ba nka/SFRY Succession Agreement 
(guarantee of foreign currency deposits). Ther e has been some progress on outstanding issues 
related to the Krško nuclear power plant, notab ly through the creation of a special fund by 
Croatia for future decommissioning costs. 
The issue of the non-application of the ecologica l and fishing protection zone in the Adriatic 
to EU Member States is resolved. 
Croatia has received an invitation to join th e North Atlantic Treaty Organisation (NATO), and 
the Protocol of Accession to the Washington Treaty has been signed. 
3. ECONOMIC CRITERIA  
In examining the economic developments in Croatia, the Commission's approach was guided 
by the conclusions of the Eur opean Council in Copenhagen in June 1993, which stated that 
membership of the Union requires the existe nce of a functioning market economy and the 
capacity to cope with competitive pressure  and market forces within the Union. 
3.1. The existence of a functioning market economy 
Economic policy essentials The country participates in the EU Pre-Acces sion Fiscal Surveillance procedure. The Pre-
accession Economic Programme (PEP) 2008-2010, submitted in December 2007, presents a 
coherent medium-term framework for economi c policies. If fully implemented, it would 
improve the functioning of ma rkets and support sustainable gr owth and real convergence. 
Political consensus on the essen tials of market economy has been maintained. However, an 
                                                
 
3 Under UNSCR 1244/1999 
EN 18   EN ad-hoc approach to economic policies has ofte n prevailed and a deepening of structural 
reforms has not figured among the governments' t op priorities. The structural reform agenda 
has moved slowly and there has often been a gap between legisla tive intent and actual 
implementation. Policy coordination within th e government as well as the government's 
communication with the Croatian National Bank (C NB) has not been systematically enforced. 
Overall, consensus on the fundamentals of a ma rket economy has been maintained, but the 
government's approach to economic policy and reform has sometimes lacked a strategic medium-term orientation.  
Macroeconomic stability 
In 2007, annual GDP growth showed a marked  acceleration to 5.6%, up from 4.8% in 2006, 
but started to slow in the last quarter of the year. Growth continued to  be fuelled by strong 
domestic demand. Private consumption in 2007 r ecorded the highest growth rate since 2002 
and accelerated strongly to 6.2%, from 3.5% a year before. It remained driven by strong, but 
slowing credit growth and debt repayments to  pensioners, the latter amounting to 1.2% of 
GDP. The growth of public cons umption also increased markedly to 3.4%, to a large extent 
resulting from pre-election spending increases. Both private and public investment slowed 
and total investment growth decelerated from 10. 9% to a still robust 6.5% . Both the growth of 
exports and imports declined to 5.7% and 5.8 %, respectively, and the contribution of net 
exports to GDP growth remained negative. On the supply side, the industrial sector added the 
strongest contribution to  growth. Also, the good performance of some services, in particular 
financial intermediation, retail trade and t ourism supported the economic expansion. In the 
first half of 2008, economic growth decelerated markedly to 3.8% year-on-year, down from 
6.8% in the same period a year ago, partly du e to slowing exports. At the same time, some 
rebalancing took place, as consumption mode rated amid stronger investment activity. 
Average per-capita income in 2007 ro se to 55% of the EU-27 average
4 from 52% in 2006. 
Overall, the economic performance remained  robust amid some moderation of growth. 
The current account deficit continued to wide n, from 7.9%of GDP in 2006 to 8.7% in 2007 
and to 10.5% in the four quarters to June 2008, main ly due to a rising trade deficit. Relatively 
strong domestic demand and imports, higher wo rld commodity prices as well as a recent 
decline in export growth resulted in a widening of the trade gap to 26.3% of GDP5. As in 
previous years, roughly two thirds  of the trade gap were covere d by the surplu s in services, 
mainly tourism and transport. The deficit in  the income balance dropped somewhat due to 
higher income on equity investments and on foreign exchange reserves. The surplus in 
transfer payments declined, mainly due to lo wer government revenues from abroad. In sum, 
despite strong tourism revenues and higher inco me from abroad, exte rnal deficits have 
continued to widen, on the back of str ong import demand, higher world commodity and 
energy prices and lower export growth. 
FDI remained the main source of foreign financi ng. In the four quarters to June, the value of 
net FDI inflows declined by 13.5% year-on- year, representing 7.7% of GDP and thus 
financing a still large part of the current account deficit. Net inflows were largely driven by 
the recapitalisation of banks as well as by i nvestments in wholesale trade and the insurance 
sector, while greenfield investments remained  shallow. Owing to continued net capital 
inflows, official foreign reserves increas ed to around € 9.3 billion by end-December 2007, 
and further to € 9.8 million in August 2008, equiva lent to around 5.5 months of total imports. 
                                                 
4 In purchasing power standards. 
5 In the 12 months to June 2008 
EN 19   EN The stock of external debt continued to incr ease markedly by 14% in the twelve months to 
August 2008, but the share of short-term debt re mained relatively low at 13.2%. The external 
debt ratio reached 87.8% of GDP at end-20076, up from 85.5% a year before. The share of the 
domestic banking sector in total external debt  declined, as banks re duced their outstanding 
external obligations dur ing 2007, also in response to central  bank measures aimed to contain 
banks' foreign borrowing. The corporate sector  increased its external indebtedness 
significantly, partly reflecting the circumstance  that domestic banks were encouraging their 
corporate clients to borrow dir ectly from parent banks abroa d, thus circumventing their own 
borrowing restrictions. The increased exposure of  the domestic non-tradable corporate sector 
to foreign borrowing has become a cause for concern and warrants careful monitoring. In 
sum, capital inflows remained strong and extern al debt continued to rise, driven by strong 
foreign borrowing by the corporate sector. 
So far, the international financial crisis has only mildly affected the Croatian economy and its 
financial sector. However, a wi dening current account deficit a nd a high level of external 
indebtedness create important external financin g needs requiring signifi cant capital inflows. 
To that extent, the external imbalances re nder the Croatian economy vulnerable to possible 
disruptions in capital flows. The risk of a sudden stop or reversal of capital flows seems 
limited, but the pace of cross bo rder lending, which has become an important financing source 
for the domestic corporate sector, could be a ffected. Higher risk premiums and refinancing 
costs have already started putting some pressure  on the external side. The comfortable foreign 
exchange reserve position serves as an impor tant cushion in the event of slowing capital 
inflows. The Croatian authorities lifted the marginal reserve requirement for banks' foreign 
borrowing to boost their foreign exchange liquid ity. Moreover, the deposit insurance law was 
amended by Parliament, leading a fourfold in crease of the guaranteed amount of household 
deposits (to € 56,000).  
Positive trends on the labour market continued.  Data from the labour force survey confirm 
strong employment growth of 2.7% in 2007, which contributed to an increase in the average 
employment rate to 57.1%, up from 55.6% in 2006. The unemployment rate (ILO) fell from 
11.1% in 2006 to 9.6% in 2007. Unemployment declined for all age groups, but still remained high for the young population (at around 24%). Th e long-term unemployment rate decreased 
to 5.9% (2006: 6.7%). The officially registered  unemployment rate decl ined to 12.4% in July 
2008, compared to 13.7% in July 2007. Labour market developments continued to be characterised by a relatively lo w job turnover, suggesting ri gidities and limited employment 
restructuring. The growth of average gross wages stayed at 6.2% in  2007, as in 2006, and 
accelerated to 7.1% in the firs t half of 2008. Average real wa ge growth declined, however, 
due to rising inflation. Overall, the labour ma rket performance continued to improve, but high 
youth and long-term unemployment and limited job turnover remain a cause for concern. 
No major changes occurred with respect to monetary policy. Following the positive 
experience of previous years in stabilising inflation expectations through a stable exchange rate, the tightly managed float remained in place. Exchange rate stabilisation has also 
contributed to mitigating significant balance sh eet risks under a highly euro-ised financial 
system. In the last quarter of 2007 and in 2008, th e CNB intervened three times in the foreign 
exchange market and purchased euro for a total amount of around EUR 712 million. Despite a 
continued surge in capital inflows, the nominal exchange rate of the kuna vis-à-vis the euro 
                                                
 
6 According to a new reporting system of the CNB, starting in December 2007, the external debt-to-GDP 
ratio amounted to 88.6% at end-2007. 
EN 20   EN has been kept stable. The average daily exchange  rate fluctuated within a very small range 
between 7.16 and 7.35 kuna per euro and appreciated by 2.4% in the twelve months to end-September 2008. Overall, the stable exchange rate policy has served  the country well and 
remained a factor of moneta ry and financial stability.  
Reacting to stronger inflationary  pressures the CNB gradually increased its marginal repo rate 
from late 2007 onwards. Moreover, the CNB continued to rely on administrative and prudential measures in order to  contain strong capital infl ows and rapid credit growth. 
Marginal reserve requirements  on banks' foreign borrowing as  well as credit controls 
remained in place.
7 They were partly adjusted in late  2007 and 2008 to more effectively raise 
domestic banks' borrowing costs. Partly as a re sult of these measures, the annual growth of 
domestic credit to the private sector deceler ated from around 23% in 2006 to 15% in 2007 and 
to 11.2% in August 2008. Both the growth of lending to private households and to the 
corporate sector dropped. The moderation of le nding to the corporate sector, however, also 
reflects ongoing financial disinter mediation of lending, as some co rporations turned to direct 
borrowing from abroad. Overall, in an attempt to contain rapid credit growth, monetary policy 
continued to rely on administrativ e measures and credit controls. 
Average annual inflation decrea sed slightly in 2007 to 2.9%, down from 3.2% in 2006. This 
was due to low carry-over effects from 2006 and low inflation throughout the first half of the 
year. However, inflation accelerated significant ly in the second half of 2007 to 5.8% year-on-
year in December, and further to 6.4% in  September 2008, compared to 2.1% in December 
2006. This acceleration was mainly due to supply shocks linked to considerable increases in 
the prices of agricultural, food and energy produ cts. Moreover, big increases in administered 
utility prices, most of whic h are controlled by local governments, also added to higher 
inflation. To some extent, increases in househol d disposable incomes, arising in particular 
from pension debt repayments and higher government transfers,  added to price pressures. 
There is evidence that rising inflation has led to second-round effects. Core inflation 
accelerated to 6.5% in August 2008, compared to  3% a year before, and producer price 
inflation reached one of the highest levels ev er recorded (11%). Overall, inflation has 
increased markedly on the back of higher comm odity and energy prices  and strong domestic 
demand. 
Fiscal developments in 2007 and in the first ha lf of 2008 benefited fr om a growing economy 
and strong revenues, which increased by 13% a nd 11.5% year-on-year, respectively. Current 
spending recorded an increase of 10.8% in 2007 and 10.2% in the first half of 2008, fuelled 
by a strong rise in spending on goods and services as well as on subsidie s. In 2007, the 
general government deficit was reduced as planned, to 1.6% of GDP , down from 2.5% in 
2006 (in ESA 95 terms). However, fiscal acco unts do not include a number of off-budget 
operations, such as debt repayments to pensio ners (1.2% of GDP in 2007) and quasi-fiscal 
activities of the State Development Bank (HBOR) . Therefore, the actual fiscal policy stance 
has been more expansionary than the headli ne budget figures suggest . A revised budget for 
2008 was adopted in July and foresees a budget defi cit that is s lightly lower than originally 
planned (1.3% instead of 1.6% of GDP), altho ugh the main reason for this is the ad-hoc 
exclusion of the public motorway company fr om the general government accounts. As in 
previous years, the revised budget provides for higher than or iginally project ed revenues. 
They are again used to repay health sector arr ears, but also to compensate private households 
                                                 
7 However, on 10 October 2008, the central bank revoked the application of the Decision on Marginal 
Reserve Requirements in an attempt to boost foreign exchange liquidity of the banking sector. 
EN 21   EN for higher energy prices, and to provide addition al funds for regional development as well as 
for science and education. The stock of genera l government debt stood at 37.8% of GDP at 
end-2007, down from 40.8% a year before, a nd fell further to 34% by June 2008. However, 
adjustments for the stock of issued State guar antees and the debt of  the State Development 
Bank (HBOR) would raise the st ock of debt by around 10 percenta ge points of GDP. Overall,  
deficit reduction continued as planned, but actual fiscal policy has been more expansionary 
than the reported figures suggest. Stronger expend iture restraint remains essential in view of 
higher inflation and widening external imbalan ces and as a way to better support monetary 
policy.  
The rationalisation of public spending rema ined a key public finance objective. The 
implementation of the social benefits reform  strategy adopted in (A pril) 2007 continued. Its 
aim is to reduce the number of benefits and to achieve a better targeting of social welfare. 
However, means- and income-tested benefits as  a share of total benefits have remained 
relatively small while categorical benefits s till account for the large majority of social 
benefits. Although some instituti onal progress has been made with the establishment of a 
personal identification number and one-stop shops, the social welfare system remained 
burdened by complex eligibility criteria and inefficien t administration. No new measures have 
been taken to effectively address the health sector's financial difficulties and arrears continued to accumulate. In particular, the reform of co-payment exemptions through a wider use of 
means- and income-testing has made little progress. In the context of the 2008 budget 
revision, the government - as in th e previous year - bailed out h ealth sector payments arrears. 
No measures have been taken to reform the pension system's first pillar. Overall, limited progress has been achieved in terms of in creasing the efficiency of public spending. 
The government declared itself committed to a comprehensive Treasury Reform Strategy as a 
sound basis for improving expenditure management  and budget control systems. The role of 
the Ministry of Finance in th e budget preparation pr ocess has been stre ngthened. Continued 
progress was achieved in enha ncing institutional and analytical capacity for setting up 
medium-term macroeconomic and fiscal framew orks. However, public finances still suffer 
from the absence of a real medium-term expenditure framework which links defined policy priorities to the budget planning process. Some progress has been made in enhancing public 
debt management capacity, but a fully-fledged strategy is still lacking. Tr ansparency of the 
issuance policy has remained weak and rais es concerns about asymmetric access to 
information by potential market participants. Efforts were made to reconcile current budget 
statistics with ESA 95 standa rds, but important qua si-fiscal operations as well as local 
governments remained unrecorded, seriously undermining budget transparency. Overall, 
analytical and institutional capacity in public  finance has been further strengthened, but 
strategy-based budget planning and debt ma nagement remained generally weak. 
The direction of macroeconomic  policies has, on the whole, been appropriate to contain 
potential external vulnerabilities. Given the limited scope for monetary policy discretion 
under heavy financial euro-isation, the onus of c ontaining the savings-investment gaps in the 
economy has remained largely on fiscal policy. Fiscal consolidation has so far benefited 
markedly from strong revenue growth. However, a credible and sustainable fiscal adjustment 
process requires much more efforts in accelera ting social benefit, health care and pension 
reforms to bring down the relativ ely high public spending ratio.  
EN 22   EN Interplay of market forces 
The state continued to graduall y withdraw from the productive sector. The sale of 7% of 
shares of the national oil company INA was successfully completed in late 2007. In June 
2008, the government sold 4.2% of Hrvatski Telekom (HT) and 12.5% of a fertilizer 
company. In all three cases shar es were sold to current and former employees. However, the 
privatisation of assets held by the State Privatisation Fund made only limited progress. A major corruption investigation into the Fund in  2007 led to a de facto suspension of the 
privatisation process. In early  2008, the government appointed a new head, as well as a new 
Fund management board, and changed decision making procedures to lend a new impetus to 
the process. Up until September 2008, the State Privatisation Fund had sold or liquidated some 30 companies and the remaining portfolio  still comprised around 891 companies, with 
the State keeping a majority holding in 97 of them. A number of tenders did not succeed in attracting the interest of potential investors.  The private sector’s share in output and 
employment has risen to slightly  above or close to 70%, resp ectively. Overall, progress in 
privatisation has been uneven and continued to be undermined by institutional weaknesses. 
Market entry and exit 
Company registration procedures have been fu rther simplified. The average time and number 
of procedures needed to set up a business, as well as average registration costs, have been 
reduced further. The number of ne wly registered companies grew by 1.4%
8 and the stock of 
active businesses increased by 13% year-on-year in March. An e-register of national regulations has been pro duced, allowing all regulations to be  found in one place. On the other 
hand, Croatia's performance continues to be rela tively unsatisfactory in several measures of 
the quality of the business environment. Lim ited progress has been made in advancing the 
"Regulatory Guillotine" project aimed at simp lifying or eliminating regulations that are 
deemed unnecessary. Doing business in variou s sectors remained hampered by lengthy and 
cumbersome procedures for obtaining licences or  authorisations at th e national and municipal 
level. Overall, further progre ss has been made in simplifying company registration, but the 
business environment continued to suffer from excessive regulations and ad-hoc 
requirements. 
Legal system 
Further progress was made in reducing the back log of cases before Croatian courts. During 
2007, the backlog was reduced by 6.1% compared to 2006. However, there is still a large 
backlog (969,100 cases at end-2007) and the judici al system has remained inefficient. The 
weaknesses of the judicial system may discour age economic actors from taking cases to court 
and undermine effective enforcement of creditor and property rights. 
Development of the financial sector 
The financial sector, still dominated by banks, re presented around three quarters of total assets 
at end-2007. Some 95% of banks are privatel y owned and the share of foreign ownership 
remained high at 90%. The number of banks wa s unchanged at 33, which is relatively high in 
relation to the market size. The degree of mark et concentration has remained at a moderate 
level and has generally not been an impediment  to market competition. The five largest banks 
                                                
 
8 Last quarter 2007 and first quarter 2008 compared to same period a year before 
EN 23   EN together accounted for a market share of ar ound 68% at the end of 2007, down from 72% in 
2006. The spread between the weighted averag e of new kuna-denominated loans and new 
kuna-denominated deposits did not change significantly. Domestic private credit rose to 73% 
of GDP in 2007, up from 69% in 2006. Overall,  the largely private and foreign-owned 
banking sector remained the key play er in financial intermediation.  
The banking sector has become more resilient  as a result of a number of prudential and 
supervisory measures that have been ta ken to address potential macro-financial 
vulnerabilities. Additional capital requirements were imposed on fast-growing banks, and risk weights on un-hedged foreign currency loans were  increased. Banks' capital adequacy, asset 
quality and profitability  remained at comfortable levels. The share of non-performing assets 
remained at a relatively low level of 3.2%  in June 2008, although this indicator may 
underestimate portfolio risks during periods of  strong asset growth. However, the banking 
system still has to contend with interest and exchange rate induced credit risks, as the majority of loans are based on variable interest rate s and linked to foreign exchange. Very good 
progress has been made in the central bank in  fostering the analytical capacity to produce 
forward-looking financial sector stability assess ments. Overall, additional prudential measures 
served to make a generally sound banking system  even more resilient and reduced potential 
macro-financial risks. 
The share of non-banking financial sector assets in  total financial sector assets increased from 
23.4% at end-2006 to 26 % by end-2007, also due to  the strong asset growth of investment 
funds and mandatory pension funds. In 2007, domestic stock markets generally benefited 
from the strong growth of non-bank institutional  investors and increased interest from the 
general public in equity investments, although th e turnover remained low. This resulted in a 
strong increase in the stock market inde x by 60%, taking market capitalisation to around 
128% of GDP at end-2007, as against 79% in 2006. Since the start of th e year, the Croatian 
stock market has been rather volatile and the Zagreb stock exchange index lost around 50% in 
the first ten months. Market cap italisation had declined to 90 % of GDP in June 2008. Bond 
market capitalisation amounted to 13% of GDP  in June 2008, slightly  lower than a year 
before, as the market capitalisation of the co rporate sector declined . The supervision and 
regulation of the non-banking fi nancial sector has gradually  improved. The previously 
unregulated leasing sector ha s been brought under the oversi ght of the non-bank supervisor 
HANFA. Also, HANFA and the Croatian stock exchange have adopted the Croatian 
Corporate Governance Codex, which, if properl y applied, should enhan ce the transparency 
and efficiency of the capital market. In genera l, notwithstanding the gr owth of some market 
segments, capital markets remained shallow, with little turnover.  
3.2. The capacity to cope with competitiv e pressure and market forces within the 
Union 
Existence of a functioning market economy Macroeconomic stability has b een largely maintained and ha s allowed economic agents to 
make decisions in a climate of stability and predictability, thus supporting the functioning of 
market mechanisms. However, significant state interventions in the economy as evidenced by a high spending ratio and high subsidies, as we ll as prevailing obstacles to private sector 
development, continued to partly undermine a more growth-oriented a llocation of resources, 
constraining the potential for hi gher productivity and catching-up.  
EN 24   EN Human and physical capital  
Reforms in the education sector have con tinued under the Education System Development 
Plan for 2005-2010. Further steps we re taken to improve the quality  of education at all levels. 
A national programme aims to increase the rate  of enrolment in and completion of secondary 
education and to reduce the percen tage of early school leavers. However, the education sector 
continued to suffer from out-dated curricula and poor equipment. The joint assessment of 
employment priorities was signed by the Commission and the Croatian authorities. The 
government continued to implement active labour market policies. These include training and 
employment subsidies for young people without work experience, the long-term unemployed, 
older persons and vulnerable groups. However,  although there was a slight increase in 
employment and participation rates, the leve ls remained relatively low - at 57% and 63.2% 
respectively in 2007. Overall, the labour market continued to suffer from mismatches between 
supply and demand. 
Investment continued to be robust in 2007 and 2008, albeit growing at a slower pace, and the 
fixed investment ratio remained high at ar ound 30% of GDP in 2007 . Total spending on 
research and development remained at the relatively high level of around 0.9% of GDP. 
Public investment in transport remained str ong. In particular, investments in new highways 
amounted to 1.9% of GDP and resulted in a furt her expansion of the network. Most of the 
core main lines of the rail network are suffi ciently well maintained to allow a competitive 
freight transport business. FDI continued to pl ay a significant role. The total stock of FDI 
reached EUR 17.6 billion (47% of GDP). The largest share of cumulative FDI inflows is accounted for by the financial sector (36%), followed by manufacturing (27%), and post and 
telecommunications (10%). Ther e has still been little greenf ield investment, and private 
investments in the processing and manufacturi ng industry have remained relatively low, 
limiting technological change and export potential. To conclude, strong levels of investment 
continued to be concentrated  in transport infrastructure  and the services sector. 
Sector and enterprise structure 
The loss-making, state-owned aluminium compa ny (TLM) was sold following lengthy tender 
procedures and negotiations. Subsequently, the new owner submitted a restructuring 
programme to the government. Following the pr ivatisation of the two steel mills, the 
government adopted a revised National Restructuri ng Plan for the steel indu stry. In the area of 
shipbuilding, the government adopt ed revised individual restructur ing plans, as well as taking 
a decision to restructure six sh ipyards through a proc ess of privatisation. The privatisation 
process is expected to start immediately and to be comple ted by the end of 2009. However, 
details concerning methods and conditions for sale  have not yet been agreed. Overall, there 
has been mixed progress with the restruct uring of large loss-making companies.  
The restructuring of the loss-ma king large railway carrier has made very limited progress. The 
objectives of the business plan for 2007, in part icular significant sta ff reductions and a wage 
freeze, were not met. The envisaged reducti on of the working ratio in 2007 did not 
materialise, and the ratio even started to wo rsen in 2008. The railway sector continued to 
require high levels of budget support (above 1%  of GDP in 2007). Low productivity and high 
unit labour costs continue to undermine its long- term viability, necessitating vigorous action, 
including staff lay-offs and the closure of non-profitable lines. F our railway subsidiaries were 
tendered for privatisation, but have not ye t been sold. The liberalisation of the 
telecommunication industry continued. The Croatian Telecommunications Agency continued with activities aimed to stimulate market competition by improving market access to new 
EN 25   EN service providers. This led to further price reduct ions and to a larger c hoice of tariff packages 
for customers. New fixed line competitors raised their market share further from 13% to a still modest 19%, but the incumbent Croatian Telecom remained by far the dominant operator. The liberalisation of the energy sector continued to advance gradually w ith the opening of the 
electricity market to private households as of  1 July 2008. While this  marks an important 
formal step towards more competition, the la rge public energy company HEP remained de 
facto the only energy supplier. Moreover, the restructuring of HEP has not seen any progress. 
Overall, the reform of networ k industries made headway, but the railway sector needs much 
deeper restructuring in order to ensure its long-term viability  and competitiveness. 
The already large service sector increa sed its share of total output to 63%.  Agriculture's share 
of output declined further to 6.8% in 2007. The share of construction and industry together 
accounting for around 32%, remained unchange d. Agriculture's declining share of 
employment fell to 13%, while i ndustry and construction rose to  above 30% and the services 
sector maintained its share of around 56%. Given the already large servi ce sector, there were 
only marginal shifts in the sector structure of the economy. 
The small and medium-sized ente rprise (SME) sector continued to grow in 2007, representing 
more than 40% of the corporate sector's tota l assets, 66.2% of total employment and 65% in 
total investment. SMEs generated more than  45% of GDP and accounted for an increasing 
share (above 40%) of total exports. The govern ment decided to extend the existing support 
schemes for SMEs by adopting a new medium -term programme (2008-2012). However, the 
sector continued to suffer from a cumbersome  regulatory framework a nd inefficiencies in 
public administration. Access to longer-term fina ncing remained difficult, particularly for 
newly established businesses. Overall, the SME sector has gained in importance, despite the remaining administrative obstacles. 
State influence on competitiveness  
The government has taken short-term measures to  alleviate the impact of higher energy prices 
on households, such as increasing income tax allowances and granting subsidies to the 
electricity company. However, as  price subsidies are linked to the level of consumption, it 
remains doubtful whether these meas ures will be effective in ta rgeting the most vulnerable 
parts of the population. Also, they may risk dist orting necessary price signals. The role of the 
Competition Agency in monitoring and controlli ng State aid has been further strengthened, 
but the relatively low staffing levels continued to be an urgent problem. The total amount of 
subsidies in the 2007 and 2008 ge neral government budgets  remained high - at 2.6% of GDP - 
and a large share has still been  provided to loss-making comp anies. Horizontal aid accounts 
for only a small share of total subsidies. Overa ll, state intervention in the enterprise sector 
remained substantial. 
Economic integration with the EU 
Croatia is an open economy with  total trade in goods and serv ices representing more than 
100% of GDP. Apart from the export of tr ansport equipment (mainly ships), tourism 
continued to be the biggest source of expor t revenue, representing almost 18% of GDP in 
2007. The EU has continued to be the most important trading pa rtner, although its share in 
total Croatian exports and imports fell by a few percentage points to 60.9% and 64.8%, 
respectively. At the same time, Croatia has expanded its trade with neighbouring countries, 
also reflecting ongoing regional tr ade integration. Around 97% of FDI inflows originate from 
EN 26   EN EU Member States. Overall, integration with the EU in the areas of trade and investment 
remained very high, and trade with nei ghbouring countries has continued to grow. 
The average growth in real wages stood at around 3% in 2007, and re mained in line with 
estimated changes in average labo ur productivity, with the result  that real unit labour costs 
remained largely unchanged. The nominal effec tive exchange rate of the kuna appreciated by 
3.2% as a result of strong upward movement agai nst the US dollar. In real effective terms9, 
the kuna appreciated at a somewhat higher rate (3.8%), refl ecting a slightly faster growth of 
domestic producer prices relative to producer pr ices abroad. Overall, standard indicators do 
not point to significant changes in export price competitiveness. 
4. ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP  
This section examines Croatia’s ability to assume the obligations of membership – that is, the 
acquis  as expressed in the Treaties , the secondary legislation and the policies of the Union. It 
also analyses Croatia’s administ rative capacity to implement the acquis . The analysis is 
structured in accordance with the list of 33 acquis  chapters. In each sector, the Commission's 
assessment covers progress achieved during the reporting period, and summarises the 
country's overall level of preparations. 
4.1. Chapter 1: Free movement of goods 
Good progress can be reporte d regarding alignment on general principles . Croatia adopted in 
November 2007 an Action Plan for compliance with  Articles 28 to 30 of the EC Treaty, which 
defines specific tasks for compliance, sets up target dates for national and local authorities, and defines the necessary institutional structures to enable the removal of all measures having an equivalent effect to quant itative restrictions on imports and exports. This was a key 
element in the accession negotiations on this chapter.  
Good progress can also be reported in the area of horizontal measures . Key horizontal 
legislation and the Strategy for the implementation of the acquis in the field of free movement 
of goods were adopted in November 2007. Th e Strategy provides for a comprehensive 
framework for effective implementation of EC  legislation, complemented by realistic 
milestones and measures to enhance administra tive capacities. Nevertheless, particularly the 
Law on Technical Requirements for Products  and on Conformity Assessment and other 
relevant horizontal legi slation still need furt her alignment with the acquis , especially with the 
new framework acquis  relating to the ma rketing of products. 
As regards standardisation,  by the end of August 2008 the Croatian Standards Institute 
(HZN) had transposed 10,695 harmonised Europ ean standards. The number of HZN staff has 
increased to 61 as of September 2008. HZN is  an affiliate member of the European 
Committee for Standardisation (CEN) and th e European Committee for Electrotechnical 
Standardisation (CENELEC). Further efforts ar e needed on the part of HZN to ensure the 
timely adoption of its strategies and action plans,  as well as European standards, in order to 
complete the preparations for CEN/CENELEC membership by December 2008. The reorganisation of the infrastr ucture of the technical comm ittees is underway with 154 
restructured committees as of end-August. 
                                                
 
9 As measured on the basis of producer prices 
EN 27   EN Concerning conformity assessment , the ordinance on the form, content and graphic symbol of 
the conformity marking (CE) for products confirming compliance w ith the prescribed 
technical requirements ente red into force in May 2008. 
In the area of accreditation , the Croatian Accreditation Agency (HAA) has in July 2008 
adopted its development strategy for 2008 – 2010. It has continued to promote accreditation 
among governmental institutions responsible for harmonisation under the new and old approach acquis . By August 2008 HAA had accredited a to tal of 123 conformity assessment 
bodies. HAA has 22 permanent employees, 59 lead  assessors (HAA employees and external 
associates), 88 technical assessors (mostly ex ternal associates) and 117 experts (external 
associates). European Co-operation for Accr editation (ECA) has star ted a pre-evaluation 
process in June 2008 for granting the signatory status of its multilateral agreement to HAA. 
As regards metrology , the National Strategy in the fi eld of metrology (2007-2013) was 
adopted at government level in May 2008. This lays the foundation for the setting up of the new metrology infrastructure, in cluding the National Metrology Inst itute, and for financing its 
development. A regulation on the establishment of  the institute has been passed in June 2008, 
and preparations for its setting-up have started. 
Regarding market surveillance , there is some progress to report with regard to the State 
Inspectorate's administrative capacity and en forcement measures. The Regulation on the 
internal organisation of the State Inspector ate was amended in December 2007. This reform 
allows recruitment of new market inspectors. It  also introduced new depa rtments, such as the 
Department for European Integration, and expande d the scope of work of others, such as the 
Departments for Conformity Testing and fo r Consumer Protection. Within the latter 
department, two new sections were created: the S ection for the Control of  the Sale of Products 
and Supply of Services, and the Section for Pr oducts Notification and Information Exchange 
(Rapid alert system for non-food products - RA PEX), for which the National Contact Point 
was established. Guidelines for the control of  the trade in and labelling of textiles and 
footwear and guidelines for the placing on the market of pers onal protective equipment have 
also been produced. 
In terms of administrative capacity in the Mi nistry of Economy, Labour and Entrepreneurship 
(MELE), there has been progress in the Department for Intern al Market Coordination. The 
department is responsible for alignment and implementation of technical legislation, overall 
policy coordination with other mini stries and agencies and for the application of Articles 28 to 
30 of the EC Treaty. In the firs t quarter of 2008 the new organi sation of the Department was 
adopted and the number of staff was increased to 20. 
Overall, as regards horizontal measures, basic structures for harmonisation with EU 
legislation are in place. Further, appropriate cap acity building measures are required to enable 
Croatian institutions to become full members of the relevant European organisations. 
There has been some progress in sectors covered by the old approach acquis , most notably in 
the field of motor vehicles, textiles and me dicinal products for human  use and veterinary 
medicinal products. Two Ordinances, on the prici ng of medicinal products  and on the criteria 
for including products on the li st of medicines respectively, were adopted in June 2008. 
However, they seem to need amending to be fully compatible with the acquis
. Further efforts 
are needed in order to reach full legislative alignment and necessary administrative capacity, 
particularly with regard to pharmaceuticals,  chemicals, cosmetics and motor vehicles. 
EN 28   EN Although the legislative alignment with the new and global approach  acquis  has been 
advancing, many of the national alignment measures  have still to be ve rified. Further efforts 
are still needed, particularly with regard to low voltage equipment, toys, machinery, 
equipment and protective systems intended for use in potentially explosive atmospheres, 
construction products, gas appliances, pressure  equipment and simple pressure vessels, 
cableway installations, noise em issions by outdoors equipment, emissions of pollutants from 
non-road mobile machinery engines, and eco-d esign requirements for energy-using products. 
As regards procedural measures , there is some progress to report. In June 2008, Croatia 
adopted a Regulation laying down procedures for the provision on notification in the field of 
standards, technical regulations  and conformity assessment pro cedures and of regulations on 
information society services which aims at transposing Directive 98/34/EC as amended by 
Directive 98/48/EC. Secondary legislation ha s been adopted as regards acquisition and 
possession of weapons. 
Conclusion 
Good progress has been made on alig nment of legislation with the acquis  on free movement 
of goods. Although alignment with the acquis  in this chapter is well underway, some elements 
are not yet in place. Adjusting the conform ity assessment infrastructure and market 
surveillance activities remains a major challenge. Croatia needs to make considerable efforts 
and continue the process of alignment with the acquis  and its effective implementation and 
enforcement, and develop before accession, polic ies and instruments that are as close as 
possible to those of the EU . 
4.2. Chapter 2: Freedom of movement for workers 
Some progress has been made in the area of access to the labour market . Amendments to 
the Act on Pension Insurance Companies and the Payment of Pensions Based on 
Individualised Capital Savings were adopted in October 2007 aiming at enabling cross-border 
payment of pension benefits in the supplementary pension scheme. 
Some progress can be reported on future participation in the EURES  network. Amendments 
to the Act on Employment Mediation and Unem ployment Rights were adopted in July 2008 
aiming at ensuring equal treatment of EU migran t workers and Croatian citizens as regards 
assistance by the national employment office.  The organisational structure of the Croatian 
Employment Service is being adjusted and ad ministrative capacity strengthened as regards 
services related to mobility a nd free movement of labour. Gaps remain in the language skills 
of potential EURES advisers and, with a view to the required connection to the EURES Job 
Mobility Portal upon accession, in ensuring that all job vacancie s of the Public employment 
services are displayed on its public website and can  therefore be made available for 
publication on the Portal. In this area, Cr oatia is already moderately advanced. 
There has been no significant progress on co-ordination of social security systems . 
Sufficient administrative capacity has not  yet been devel oped to apply the acquis  in this field. 
Preparations are ongoing fo r the introduction of the European Health Insurance Card as 
from accession. 
EN 29   EN Conclusion  
Some progress has been made on this chapter. A satisfactory level of legal alignment has been 
reached. However, Croatia’s legislation is not yet in line with the EU rules on access to the 
labour market. Sustained efforts are also need ed to develop the necessary administrative 
capacity, notably for the co-ordination of social security systems, which is a key element for 
the accession negotiations in this chapter. 
4.3. Chapter 3: Right of establishment and freedom to provide services 
Limited progress can be reported on the right of establishment . The new Veterinary Act 
adopted in 2007 removed certain restrictions, such as a re quirement to hold Croatian 
citizenship in order to exercise in private practi ce, and will apply with e ffect from the date of 
accession. The Law on pre-school education was ame nded in order to remove the distinction 
between Croatian and foreign physical and legal en tities for the purpose of authorisation to set 
up kindergartens in Croatia. Under the amended La w on institutions, with effect from the date 
of Croatia's accession to the EU, Croatian and foreign legal and physical persons will have equal right of establishment of institutions.  
Numerous restrictions on the right  of establishment still exist in  many sectors, in the form of 
citizenship, residence and di sproportionate language requirements, plus a mandatory 
minimum duration (six months uninterrupted) for certain economic activities and the one-
office rule.  
There has been some progress regarding the freedom to provide cross-border services . The 
amendments to the Company Law (which were  adopted in October 2007 and entered into 
force in April 2008) introduced a distinction between provision of se rvices on a temporary 
basis and permanent establishment, hence ma king it possible for fore ign entrepreneurs to 
provide cross-border services without estab lishing a branch office. Cross-border company 
mergers have been regulated, but the amendments will not become applicab le until the date of 
accession. However, several restrictions that hamper cross-border provision of services 
remain in both general and sectoral acts. The amendments to the Act on physical planning and 
construction introduced some potentially discrimi natory measures as regards EU companies. 
Some progress has been made in the field of postal services, where the level of legislative 
alignment is already relatively hi gh. The Strategy for Postal Services Market Development in 
the Republic of Croatia and the Action Plan fo r implementation of the Strategy were adopted 
in March 2008. The Strategy proposes a timefra me for further libera lisation of the postal 
services market in Croatia. The amendments to the Postal Act, which entered into force in 
July 2008, strengthened the supe rvisory power of the regulatory body. With the adoption of 
the Law on Electronic Communications the Council for Postal Services was merged together 
with the Croatian Agency for Telecommunications  into single Agency for Post and Electronic 
Communications. The tasks and objectives regardi ng the regulation of posta l sector in Croatia 
did not change with this transformation. Prov isions on further liberalisation of the postal 
market will not enter into force until 1 Ja nuary 2010, when the price limits and reduced 
reserved area for items of correspondence up to 50 g will be in line with the EU acquis . 
According to the above mentioned Strategy it is  envisaged that the postal market would be 
fully liberalized by the end of 2012. However, the exclusive rights in the postal sector in 
Croatia are broader than provided for in the acquis  and there is not yet any possibility for a 
natural person to apply for a licence.  
EN 30   EN Some progress has been made on mutual recognition of professional qualifications, but 
improvement still needs to be made. The Legal Profession Act was amended in September 2008, aligning with the acquis  by allowing upon accession EU lawyers to provide legal 
services and to dispense legal counsel in Croatia, including in the form of law firms, and to establish subsidiaries. A new law has been adopted with the aim to align with commercial agents' directive. The minimum training require ments for the medical professions (doctors, 
dentists, midwives, nurses, pharmacists) are still not in line with the acquis. As regards dentists, the professional and academic title (" stomatology") used is not recognised under the 
acquis. The nurses training at secondary and higher school level, the midwifery secondary 
level education and the in-service training at the 5
th year for pharmacists, all fall short of the 
requirements set out in Direct ive 2005/36/EC. Legal or admini strative provisions laying down 
the minimum training requirements to be respect ed by all training institutions are still 
missing.  
In September 2008, amendments to several acts in  the health sector were adopted to waive 
Croatian citizenship requirements and to bring language requirements in line with the aquis. 
These changes will be applicab le as of the accession date.  The administrative capacity of the 
authorities dealing both with mutual recognition  of qualifications and with coordination and 
alignment with the acquis  as regards freedom to provide se rvices needs to be strengthened. 
However, the preparations in th e field of mutual recognition of  professional qualifications are 
well on track. 
Conclusion 
Some progress has been made on this chapter,  notably on the right of establishment and 
freedom to provide cross-border services. However, further substantial work is required in 
order to align Croatia's legislation fully with the acquis in this chapter, as various obstacles to 
the right of establishment and freedom to provide  services remain in both the general and the 
sectoral legislation. Over all, alignmen t with the acquis is at a reasonable  level, although 
considerable efforts are still  required in some areas. Strengthening of the related 
administrative capacity is required. 
4.4. Chapter 4: Free movement of capital 
Some progress can be reported concerning capital movements.  As regards real estate, the 
administrative capacity of the Ministry of Just ice was reinforced in order to expedite the 
processing of applications from foreigners for permission to purchase. This has resulted in a 
substantial reduction of the backlog of pending requests from EU nationals. Procedures have 
been speeded up for all applicants, applications  have been processed on a non-discriminatory 
basis and transparency of the process has improved. However, in recent months a slowdown 
in the processing of applications was noted. As regard s other capital movements, some 
discriminatory provisions still remain in Cr oatian legislation, in particular concerning 
institutional investors, including “golden shares”, and the use of assets in building societies. 
Clauses that are not in line with the acquis have even been introduced in privatisation 
contracts concluded duri ng the reporting period. 
There has been some progress in the area of payment systems. External payment operations 
were further liberalised by allowing resident s to freely accept payments from non-residents 
and to allow payments to non -residents in domestic curren cy without any limitations. The 
rules on statistical reporting of credit transacti ons with non-residents we re modified in order 
to remove capital restrictions. 
EN 31   EN As regards anti-money laundering  (AML), the Croatian government adopted a 
comprehensive action plan aimed at reinforci ng the legal and institutional framework. A new 
AML law was adopted in July 2008 and will en ter into force in January 2009. It constitutes a 
major step forward in strengthening Croatia' s AML regime by aligning it substantially with 
the acquis and Financial Action Task Force recommendations. Some marginal amendments to 
the AML legislation will be necessary to achie ve full alignment. Croa tia ratified the Council 
of Europe Convention on Laundering, Search, Se izure and confiscation of the proceeds of 
crime and on financing of terrorism. However, institutional capacity needs to be strengthened. Monitoring and supervision of re porting entities remains inade quate, especially outside the 
banking sector, and the enforcement record (inc luding convictions, confiscations, seizures and 
asset freezing) is still weak Moreover, furt her efforts are required in improving anti-money 
laundering legislation, ensuring effective implementation, strengthening the FIU and 
improving inter-agency cooperation. 
Conclusion 
There has been some progress in this chapter, ma inly as regards the proc essing of applications 
for permission to acquire real estate by EU nationals  and the adoption of an action plan and 
new legislation in the area of anti-money laundering . Overall a reasonable level of alignment 
has been achieved, although further efforts will be  needed especially with implementation and 
enforcement. 
4.5. Chapter 5: Public procurement 
Good progress can be reported in the area of improving the overall public procurement 
system, including general principles  deriving from the Treaty. The new Public Procurement 
Act entered into force in Janua ry 2008. This law brought Croatian legislation further in line 
with the acquis in terms of the award of public contract and remedies. Implementing 
regulations were also adopted. Further amendmen ts to the Public Procurement (PP) Act were 
adopted in October. A New Concessions Act wa s also adopted. In June 2008 the Government 
of Croatia adopted a Comprehensive strategy on the development of the public procurement 
system (including concessions and Public Private Partnerships) and an Action Plan outlining a clear timeframe for each of the actions needed for public procurement reform, which is being 
implemented according to its timeframe. 
As regards award of public contracts , E-procurement regulations and their implementation 
require further development in order to increas e the transparency and efficiency of public 
procurement. The level of knowledge of Pub lic Procurement legislation remains low and 
further development of administ rative capacity is required both at  central and local level. In 
particular the procuring entitie s do not have enough knowledge of  the legislation and of the 
procurement procedures. However the strategy adopted in June 2008 includes a comprehensive training programme in cluding all involved stakeholders. 
Besides the relevant parts under the Public Procurement Act there has been no further 
development on legislative alignment in the area of remedies . The competence of the State 
Commission for the Supervision of Public Pr ocurement Procedures does not yet cover 
remedies on concessions. The State Commissi on has established a good reputation over the 
last years. It has made some necessary staff recruitments during the past 12 months and shows 
a good track record in solving cases. To incr ease transparency all decisions of the State 
Commission have been published on its web-site since April 2008. 
EN 32   EN Regarding administrative capacity a government decision of March 2008 tasked the Ministry 
of Economy, Labour and Entrepreneurship (MELE)  with the responsibility for coherent 
policy making, coordination and implementation of  the public procurement system. In MELE, 
the Directorate for Public Procurement System has been set up to replace the former Public 
Procurement Office. In order to ensure cohere nce, MELE closely cooperates, both on political 
and technical level, with other stakeholders of the procuremen t system: Ministry of Finance 
(concessions), PPP Sector at the Trade an d Investment Promotion Agency (TIPA) 
(implementation of PPP projects) and State Commission for the Supervision of Public 
Procurement Procedures (independent review  body). Since the government decision, all the 
affected state authorities (M ELE, Ministry of Finance, State Commission, TIPA) have 
increased their staff. 
Conclusion 
Good progress can be reported in this chapter in particular in term s of establishing the 
necessary institutional set-up cap able of managing the public procurement policy and in terms 
of a adoption of a comprehensive strategy. Howeve r, further legislative alignment is needed 
and administrative capacity remains to be improve d at all levels of the procurement system. 
Emphasis should now be put on the proper and e ffective implementation of the new Public 
Procurement Act. Anti-corruption measures also  need to be embedded at all levels of the 
system covering both the legal framework and its functional application ensuring greater 
transparency and efficiency. 
4.6. Chapter 6: Company law 
Further progress has been recorded in the field of company law , where Croatian legislation is 
largely aligned with the acquis . The Act on Amendments to the Companies Act entered into 
force in April 2008 except for the provisions of  Article 142, which will en ter into force on the 
date of accession of Croatia to the EU. The Court Register Act was amended at the same time 
in order to be in line with the provision s of the First Company Law Directive. A new 
application connecting court registries into a si ngle database of registered entities has been 
operational since April 2008. 
The Bankruptcy Act, the Act on the Introduction of the Societas Europea (SE) and European 
Economic Interest Group (EEIG) were enacted in October 2007 and will come into force as of 
the day of accession. An alignment with Co uncil Directive 2001/86/EC supplementing the 
Statute for a European Company with regard to the involvement of employees is still 
outstanding.  
The Act on Takeover of Joint Stock Companie s was published in Octo ber 2007 and ensures 
the implementations of the provisions of the 13th Company Law Directive. 
There has been good progress in the field of corporate accounting . The new Accounting Act, 
which had been adopted in October 2007, entere d into force in January 2008. The provisions 
regulating the application of the Interna tional Accounting Standards (IAS) and the 
International Financial Reporti ng Standards (IFRS) and the pr ovisions regulating audit of 
annual financial reports (mandatory for all larg e and medium-sized enterprises and all other 
listed companies or companies that are prepared to  be listed) will be applicable as of Croatia's 
accession to the EU. In March 2008 the new Croatian Financial Reporting Standards were adopted. Ordinances on the layout and conten t of annual accounts and on register of new 
EN 33   EN accounts were also adopted). Overall, the level of approximation with the acquis  in the area of 
accounting seems satisfactory. 
The Tax Administration as the institution in charge for enforcement of the new accounting 
Law received some training. However, the number of staff remained unchanged. 
There has been limited progress in the field of auditing.  Work on the new Audit Act is at the 
final stage. The Chamber of Auditors needs furt her strengthening to be able to ensure proper 
implementation of financial reporting standards. 
Conclusion 
Overall, some progress can be reported in this chapter. Alignment with the acquis  in the area 
of company law is on track, but  continued efforts are requir ed for implementation of the 
recently adopted amendments regulating accoun ting and strengthening of administrative 
capacity.  
4.7. Chapter 7: Intellectual property law 
There has been good progress in the field of copyright and neighbouring rights . In January 2008 
Croatia became a full member of the European Pa tent Office (EPO). An interpretative 
statement on collective rights management soci eties has been adopted, thus providing for 
further alignment with the EU acquis .  
The amendments to the Civil Procedure Act shor tened civil procedures. Croatia still needs to 
align its criminal procedural law with the Convention on cyber-crime concerning copyright 
and related rights. There ha s been some progress on industrial property rights , as 
implementing legislation was adopted to comple te the legislative framework. Minor changes 
to legislation on patent, trade marks and topogra phies of semiconductors are still needed to 
achieve full alignment with the acquis. 
Good progress can be reported on enforcement . The State Intellectual Property Office (SIPO) 
has developed the methodology for collection of sta tistical data on enfor cement, which will be 
used for the annual reporting. In comparison with th e previous reporting period, there was a 
significant increase in the numbe r of misdemeanour proceedings  launched in  response to 
investigations by the State Inspectorate. The Bo ard of Appeal within SIPO was appointed in 
June 2008. Although numerous workshops and semina rs on protection of intellectual property 
rights have been held for judge s and State attorneys, further specialised training for the 
judiciary and overall awarene ss raising is still needed. 
As regards administrative capacity, guidelines fo r applicants were published by SIPO and an 
information centre (INCENTIV) was opened in January 2008. Esp@cenet – an on-line 
searchable patent, trademark a nd industrial design database av ailable to the public – was 
completed in April 2008. As regards inter- institutional cooperation, the Customs Agency 
started to notify the Ministry of Justice and the State Inspectorate regularly in the event of reasonable suspicion of IPR infringements rela ted to goods subject to customs procedures. 
However, further efforts are n eeded to improve cooperation betw een all authorities engaged in 
IPR enforcement.  
EN 34   EN Conclusion 
Good progress can be reported both on legislativ e alignment and on enforcement. Alignment 
with the acquis  is at a very high level. However, some minor change s are still needed. Further 
efforts are required to strengthe n the administrative capacity for enforcement of IP rights and, 
especially, to raise awareness am ongst stakeholders. Continued atte ntion has to be paid to the 
fight against piracy a nd counterfeit goods.  
4.8. Chapter 8: Competition policy 
There has been no further alignment of Croatian legislation with the acquis  in the field of 
anti-trust including  mergers . 
As regards administrative capacity, in 2008 15 economists and lawyers out of 45 employees 
of the Croatian Competition Agency (CCA) we re dealing with competition cases. Although 
new personnel have been employed, there have al so been staff losses. There is a need to 
increase CCA administrative capacity. 
In the course of 2007 the CCA brought 56 substan tial decisions in the fi eld of antitrust and 
mergers and in the first quarter of 2008 9 deci sions were brought. . Of these there were 25 
concentration cases, 24 of which were approved unconditionally. One concentration was conditionally approved in the retail and press di stribution sector. In addition, one prohibited 
agreement was identified in the bus transport s ector. Two cases of abuse of dominant position 
were confirmed in telecommunications and press distribution markets. In both abuse cases the 
remedies imposed by the CCA were fulfilled by the undertakings within the given deadlines. 
In addition, the CCA has dealt with 27 cases pe rtaining to the promotion of the culture of 
competition. In the first quarter of 2008 anothe r 9 substantial decisions were adopted, seven 
of which concerned mergers that were approved in the first phase. In the second quarter of 
2008, 16 decisions were adopted including 7 unc onditional approvals of mergers. The CCA 
has continued to provide the Government with assessments of draft laws as well as other 
expert opinions. 
The Misdemeanour Court in Zagreb has comp leted proceedings against one undertaking 
entering into a prohibited agreement with anothe r. For the first time a significant fine was 
imposed both against the company and the responsible persons. Ho wever, an efficient system 
for imposing fines to allow CCA decisions to have a deterrent effect but also leniency and judicial control have not been remedied. 
Progress has been made in the area of state aid . 
Croatia completed in June its state aid inventor y and provided data for all state aid measures 
for the remaining sectors of aluminium, metal,  textiles, leather and shoes, automobiles and 
tourism. 
An action plan with a clear timetable for alignm ent of the aid schemes identified in the state 
aid inventory as incompatible with the obligat ions resulting from the SAA was submitted to 
the Commission in June. 
With regard to the state aid enforcement r ecord, between 1 January and September 2008, the 
CCA took 26 decisions and initiated ex officio monitoring proceedings to control that state 
aid has been granted in compliance with the applicable rules and schemes. 
EN 35   EN In April 2008 the CCA expressed its positive opinion on the sc heme of a regional state aid 
map in accordance with its compliance with the acquis . The map was adopted by the 
Government in May 2008. This adoption facilitat es the phasing out of incompatible aid 
schemes and their replacement with compatible support measures. This is in particular the 
case with the Investment Promotion Act and its  implementing provisions that entered into 
force in 2007, and a series of incompatible fiscal aid measures for which full alignment with the acquis  was achieved in June 2008. 
In the shipbuilding sector, the CCA carried out in February 2008 an analysis of six proposed 
restructuring plans for the time period from 2007 to 2012. The CCA conc luded that it was not 
possible, on the basis of these plans, to establish any prospe cts for long-term viability under 
market conditions. This assessment was submitted to the Ministry of Economy, Labour and Entrepreneurship (MELE) which revised the restructuring plans and submitted new ones to the CCA and to the Commission in May 2008. In the same month, the government adopted a Decision to privatise all Croatian shipyards. St eps taken thus far by Croatia do not provide a 
sufficient basis for ensuring compliance with EU and SAA rules.  
In the case of the steel industry, good progress ha s been achieved in the privatisation process 
of the two steel mills. On the basis of indivi dual business plans submitted by the mills and 
assessed by the CCA, the National Restructuring Pl an for the steel industry was revised and 
adopted by the government on 30 June 2008. Provided  that some minor adjustments are made, 
the National Restructuring Plan for steel of 30 June 2008 is acceptable in terms of Protocol 2 
to the Stabilisation and Association Agreement.  
Conclusion 
Some progress has been achieved on this chapter, in particular as  regards state aid to the steel 
sector as well as the drawing up of a regional aid map and the a lignment of fiscal aid schemes 
However, significant efforts are required in part icular as regards restructuring aid to the 
shipyards, which must be addressed in th e context of their foreseen privatisation. 
4.9. Chapter 9: Financial services 
There has been substantial progress in the field of banks and financial conglomerates . The 
Credit Institutions Act and the Act on Electro nic money were adopted in September 2008 and 
related regulations are expected to be completed by the end of 2008. The Acts and expected 
subordinate legislation aim to fully ali gn Croatian banking legislation with the acquis , in 
particular with the Capital Requirements Direc tive. The Acts will enter into force as of 
January 2009; however credit institutions should adjust their operations to the requirements of 
the new law by 1 July 2009, while some provisions will become applicable only upon accession. The framework for risk-focused supe rvision is still evol ving, but the current 
supervisory techniques and risk management pr ocesses do not appear to pose any risks for 
successful Basel II implementation. Home-host supervisory coordinatio n has been improved, 
although more emphasis needs to be put on cross-sector coopera tion and cross-border 
coordination for crisis preparedness and mana gement. The process of transforming savings 
and loan co-operatives into credit unions or savings ba nks continued at a good pace. 
The Croatian Financial Services Supervisor y Agency (HANFA) and the Croatian National 
Bank (HNB) are in the process of adoption of  appropriate ordinances for layout and the 
content of annual accounts for en tities under their supervision. 
EN 36   EN There has been some progress on financial market infrastructure . The Law on Settlement 
Finality in Payment Systems and in Systems for Settlement of Financial Instruments was 
adopted in September 2008 with the aim to align with the acquis . . Insolvency and finality 
rules were aligned with the acquis . The Act will enter into force in January, although 
provisions relating to allowing the provision of services by EU credit institutions by means of 
the EU passport will be applicable upon accession. 
Some progress can be s een in the field of insurance , where Croatia's legislation already 
complies to a large extent with the EU acquis . New Insurance Act was adopted in July 2008 
with the aim of ali gning in particular with the reinsurance acquis . In October 2007 the Law on 
Pension Insurance Companies and Payment of Pe nsion Annuities on the Basis of Individual 
Capitalised Savings was amended. It introduces provisions allowing a Member State entity, as 
sponsor, to procure their pension insurance fo r employees in Croatia and voluntary pension 
funds of MS to operate in Croatia, as of th e date of Croatia’s accession to the EU. It also 
enables pension payments to be made from Croatia into EU Member States without limitation and regulates in more detail the protection of the right to a pension after membership of a 
pension fund is terminated. The Law also allows an intermediary to be insured by an insurer from an EU Member State and the European Ec onomic Area, as from the date of Croatia’s 
accession to the EU. HANFA continues to adopt n ecessary secondary legislation to complete 
new legal framework. 
Some progress can be reported in the area of securities markets and investment services . 
The new Capital Markets Act was adopted in Ju ly 2008 and will enter into force on 1 January 
2009, except for some provisions th at come effective as of Cr oatia’s accession into the EU. 
The law aims at full alignment with the acquis and foresees the establ ishment of the Fund for 
the protection of investors, which would incl ude all investment companies. HANFA has also 
adopted a number of implementing measures. 
As regards administrative capacity , the National Bank’s Prudential Regulation and Bank 
Supervision Department continued to increase staff numbers (reaching 105 in total). HANFA 
has strengthened its supervision department, by adding 10 new staff over the last year; it now 
has 122 employees, most of whom deal with su pervisory tasks. Monitoring of trade on the 
Zagreb Stock Exchange was improved with th e implementation of a new trading platform. 
HANFA has taken robust enforcement action in  several cases, including the suspension of 
dubious trading in shares of a high profile company. Transparen cy of the insurance market 
was increased: all insurance companies were oblig ed to make their data available online for a 
period covering the previous three years. The Register of Leasing Objects, incorporating data 
on approximately 140,000 leasing objects (vehicles,  vessels, aircrafts, machines and other 
equipment) became operational in October 20 07 and is available on HANFA’s web site. 
Nevertheless, some weaknesse s remain. Disclosure of financial statements by listed 
companies remains inadequate. The rules to pr event market abuse are not always clear, and 
enforcement of these rules needs to be furthe r strengthened. Pursuant to changes in the 
Misdemeanour Act and in both insurance and securities legisla tion, HANFA can not only 
propose but also directly impose pecuni ary sanctions. More generally, HANFA's 
administrative capacity and its arrangements for consultation with the private sector need 
further strengthening. 
Conclusion 
Good progress can be reported on this chapter. Legislative a lignment is well underway, but 
additional attention is needed regarding its pr oper implementation. Both of the supervisory 
EN 37   EN authorities, i.e. the CNB and the HANFA, need to intensify their efforts to improve their 
supervision function and consultativ e interaction with the sector. 
4.10. Chapter 10: Information society and media 
There has been significant progress in the field of electronic communications and 
information technologies . An Electronic Communications Ac t was adopted in June 2008. It 
is a significant step forward towards completing alignment with the acquis  in this field, which 
is a key element for the accession negotiations in th is chapter. Liberalisation of the sector has 
progressed significantly, in par ticular in the broadband market (growth of 53.7 % in 2007 
compared to 2006 with a notable increase in unbundled loops), as well as in the fixed market with some emerging competition. Ported numbers in the fixed and in the mobile markets have also increased significantly. As a result of this , a general decrease of prices for private and 
business users has been observed. However,  although the mobile market continues to 
represent the driving force be hind the development of telecommunication services in the 
country with a penetration rate of about 120% at the end of the second quarter of 2008, the 
issue of construction permits and site sharing continues to create difficulties. This could 
endanger the future expansi on of the mobile market. 
The Croatian Telecommunications Agency has e nhanced its capacity and organisation, among 
others through the crea tion of a new Section for Consumer  Protection and Network Security 
in November 2007. Since July 2008, after a merg er with the Postal Services Council, it 
operates as the Croatian Post and Electronic Communications Ag ency. However, there is not 
sufficient transparency in enforcing regulatio ns for securing competitive safeguards to 
alternative operators, including cost account ing and accounting separation obligations 
imposed on dominant operators. Preparat ions in this area are well advanced. 
Substantial progress has been made in the area of information society services  and electronic 
commerce. An Act on Amendments to the Electronic Commerce Act was adopted in 
May 2008 and an Act on Amendments to the Electronic Signature Act in July 2008. The new 
Law on Electronic Media ensures protection of conditional access services in line with the 
acquis . A Strategy for the Development of Elec tronic Businesses for the period 2007–2010 
was adopted by the Government in December 2007 and a Strategy from switching from analogue to digital broadcasting of TV programme s in July 2008. Preparations in this area are 
reaching completion. 
Good progress can be reported also in the field of audiovisual policy . The remaining 
amendments to the Law on Electronic Media were adopted in March 2008 bringing it in line with the Television without Frontiers Directive and allowing the participation of Croatia in 
the Media 2007 programme. The Law introduced also some improvement s in the regulatory 
framework including some safeguards against polit ical interference and the promotion of self-
regulation in the media. Public debate on me dia legislation, held during spring 2008, ended 
with a conclusion that the present legislativ e framework provides fo r a professional and 
independent functioning of the HRT Program me Council and the Elect ronic Media Council. 
Nevertheless, some interference in the me dia landscape by mainly economic and partly 
political interest groups has continued. As re gards administrative capacity, a Media Desk was 
established within the Audiovisual Centre at th e Ministry of Culture as  a support structure for 
the implementation of Media Programme 2007 (2007–2013) . Preparations in this area are well 
on track. 
EN 38   EN Conclusion  
Substantial progress has been made  in this chapter, especially as regards legal alignment. 
Important steps have been taken towards libe ralisation of the electronic communications 
market and towards media reform. However, although a good level of alignment with the 
acquis in this chapter has been reached, the subs tantial progress already made in regulation 
needs to be sustained for due functioning of the electronic co mmunications market. 
4.11. Chapter 11: Agriculture 
Limited progress was achieved as regard horizontal issues . The implementation of the 
Integrated Administrative a nd Control System (IACS) is st ill at an early stage. A 
comprehensive strengthening of administra tive capacity, including staff recruitment and 
training as well as establishment of appropriate administrative procedures, is needed in order 
to ensure that direct payments for farmers can be handled correctly from  the day of accession. 
A National Programme for the development of th e Land Parcel Identifi cation System (LPIS) 
was adopted in November 2007. Currently, prepar atory activities for the implementation of 
LPIS in the whole territory of Croatia are in  progress, but efforts need to be enhanced. 
Preparations for the Paying Agency are at an ear ly stage. A project is on-going as regards the 
Farm Accountancy Data Network (FADN), but the preparation for further alignment with EU 
methodology needs to be accelerated. 
As regards common market organisation , some progress can be re ported on the preparation 
of certain sectors. The present system for supporting and regulating agriculture in Croatia 
differs substantially from the reformed Comm on Agricultural Policy as coupled direct 
payments still constitute the largest part of national aid. Enhanced preparations are required as regards the administration of quot as, price reporting, monitoring and in particular the EU's 
system of de-coupled direct payments. Some  progress has been made in preparing the 
vineyard register. 
A national strategy for  rural development  has been adopted in May 2008, which foresees 
the implementation of a national investment support scheme compleme ntary to EU funds 
provided under SAPARD and IPARD. Croatia has continued to make progress to absorb EU 
funds under the SAPARD programme. However, it still faces difficulties  regarding validation 
of implementing procedures. A rural developm ent programme under the Instrument for pre-
accession, IPARD, has been approved by Comm ission Decision in February 2008. Based on 
experience from SAPARD, progress has been ma de concerning the sett ing-up of a monitoring 
system, the legislative framework for operating the managing authority as well as the appointment of the managing personnel. However, substantial effort will still be necessary in 
order to achieve the accreditati on of the IPARD Agency and c onferral of management powers 
by the Commission which is expected in the first half of 2009. The implementation of 
SAPARD and IPARD creates a good basis for the setting up of the admi nistrative structures 
for rural development that will be required afte r accession. It is however crucial that these 
preparations are enhanced. 
Croatia is well prepared for accession in the areas of quality policy and organic farming . A 
new Act has been adopted for the transpos ition of Council Regulation (EC) 510/2006 on the 
protection of geographical indicatio ns and designations of origin for agricultural products and 
foodstuffs. 
EN 39   EN Conclusion 
Progress in this chapter has been very uneven. In the areas of quality policy and organic 
farming the situation is already well advanc ed. In rural development, good experience has 
been gained in the context of pre-accession assistance. However,  the capacity of absorption of 
EU funds under pre-accession Ru ral Development programmes n eeds to be improved. Efforts 
need to be substantially intensified in relation to horizontal issues especially with regards to 
the Paying Agency and IACS including the LPIS . The present system in Croatia for support 
linked to production differs from the reformed CAP. This issue should be addressed urgently 
and alignment of the support system commenced in order to prepare a smooth transition to the 
CAP. 
4.12. Chapter 12: Food safety, veterinary and phytosanitary policy 
The Strategy for Transposition, Impl ementation and Enforcement of the acquis  for Food 
Safety, Veterinary and Phytosanitary Polic y, adopted in March 2008, provides a framework 
with detailed time schedules and action pl ans and is a key element for the accession 
negotiations in this chapter. It will be an inst rument for the comprehensive work that is still 
required to ensure full compliance in this field before the day of accession. 
As regards general food safety, Croatia has made good progress in adopting implementing 
ordinances based on the Food Act that is al ready in compliance with EU requirements. 
Substantial efforts are however still required to prepare seconda ry food safety legislation. 
Further efforts are required to ensure the necessary administrativ e and control capacity. 
Good progress has continued in the veterinary  field based on the Veterinary Act that is 
already in accordance with EU requirements. With regard to animal identification and 
registration of animal movements, which are key elements for the accession negotiations, 
measures have been adopted with a view to en sure a compliant system for identification and 
registration of bovines. Implem enting activities have started for pigs, ovine and caprine 
animals. 
Good progress has been made in the control of  Classical Swine Fever by the adoption of an 
action plan for control and eradication based on a non-vaccination approach. The action plan 
which is a key element for the accession nego tiations contains all necessary elements 
including reinforcement of the administrative capacity of the diagnostic laboratories and intensified controls. Substantial well-targeted ef forts will be required to ensure the correct 
implementation of the action plan. 
Good progress can be reported with regard to the  placing on the market of food and feed . 
Croatia carried out a first assessment of all food establishments with regard to their 
compliance or non-compliance with EU standards.  This was a key element for the accession 
negotiations and will enable the setting up of  a national programme for the upgrading of 
establishments for food of animal origin, such  as slaughterhouses, meat processing plants, 
dairies, and fish. The large majority of these establishments (includi ng those for animal by-
products) do at present not fulfil EU structur al requirements and comprehensive efforts are 
required to bring them into compliance with EU  structural requirements at accession. Efforts 
are also required as rega rds the quality of raw milk. 
In the field of animal welfare , only limited progress has been made. 
EN 40   EN Good progress continued in the area of phytosanitary  issues with the adoption of secondary 
legislation and the start of implementing activ ities notably for a plant passport system and 
authorisation of plant protection products. Prog ress has continued in the sector of plant 
protection products. Regi stration of products as required by the acquis  commenced in late 
2007. A strategy was adopted for the Institute for Plant Protection in Agriculture and Forestry. Work has continued to enhance th e capacity of phytosanitary in spectors and the necessary IT-
systems. In the seed sector programmes relating to the testing for Distinctness Uniformity and Stability (DUS) of varieties registered in the Croatian list of agricultural varieties have been set up. Substantial efforts are st ill required in the phytosanitary fi eld, in particular as regards 
adoption of implementing legislation and th e strengthening of administrative capacity. 
Conclusion 
Good progress has been made overall in par ticular with the passing of implementing 
legislation. Further efforts are re quired in particular as regard s animal welfare, as well as 
strengthening of the administ rative and inspection capacity. 
4.13. Chapter 13: Fisheries 
Some progress can be reported in the areas of resource and fleet management  and 
inspection and control . Implementing legislation concerni ng landing declarations and sales 
notes entered into force in January and June , respectively. The Fisheries Directorate was 
restructured in March to cover the main ar eas of the Common Fisheries Policy better and a 
three-year employment plan was adopted. The newly established coast guard service has 
taken on certain responsibilities for fisher ies inspection. Some differences from the acquis 
remain in Croatia's technical measures for re source management. Gaps in fleet management 
include the absence of an entry-exit scheme. Installation of the satellite based vessel 
monitoring system (VMS) on board of the ve ssels concerned and establishment of the 
fisheries monitoring centre (FMC) need to be  completed. The administrative capacity and 
equipment of the fisheries inspection services  require substantial st rengthening. Overall, 
preparations in the area of resource and fleet  management and inspection and control have 
started. 
Limited progress can be reported on market policy . Wholesale fish markets have been 
developed in Rijeka and Pore č. Croatia does not yet have producers' organisations and 
currently uses different marketing standards. Pr eparations in this area have only just started. 
There has been no particular progress on structural action  and state aid . Croatia still needs 
to set up and strengthen the institutional framew ork to implement the EU's structural policy 
and to prepare the required stra tegy documents. It will also ha ve to end state aid which is 
incompatible with the acquis, such as the current fleet modernisation programme. 
No particular developments can  be reported in the area of international agreements . Croatia 
is generally implementing the recommendations i ssued by the relevant international fisheries 
organisations, such as the GFCM and ICCAT. 
Conclusion 
Croatia has made some progress in  the field of fisheries. Overal l, preparations have started. 
Gaps remain in the areas of fleet management , inspection and control, structural action and 
state aid. Croatia will need to step up its efforts to close these gaps. 
EN 41   EN 4.14. Chapter 14: Transport policy 
Some progress can be re ported in the field of road transport . The Law on Road Traffic 
Safety and the Law on Maximum Working Time , Compulsory Breaks for Mobile Workers 
and Road Transport Recording Equipment was adopted in May 2008.  
The Government adopted the decree to increase th e staff of the Ministry of the Sea, Transport 
and Infrastructure by 350 new employees, but the administrative capacity to enforce the rules 
relating to road transport acquis , including roadside ch ecks is inadequate. 
There has been some progress in the area of rail transport . Croatia signed the "Addendum to 
the Memorandum of Understanding on the Deve lopment of the South East Europe Core 
Regional Transport Network for a South East  European Railway Transport Area" in 
December 2007. The railway network statem ent has been published in December 2007. 
Subordinate regulations remain to be drafte d in order to achieve alignment with the acquis  on 
safety and interoperability. Following the adopti on of the Railway transport safety act in 2007 
the Ministry has formed working groups for drafting the necessary implementation rulebooks. 
The Croatian Parliament adopted in Ma rch 2008 the National programme for railway 
infrastructure, covering the pe riod of 2008-2012. Certain aspects of the railway reform as 
regards the railway institutions and full independence of the esse ntial functions remain to be 
completed. 
There has been some progress in the area of inland waterways transport . The Act on 
navigation and inland waters harbours was adopted in October 2007. In May 2008 Croatian 
parliament adopted the Inland waterways tran sport strategy for the period 2008-2018. The act 
addresses the recognition of EU vessel and boat masters' certificates, as well as access to the 
market. The first stage for deploying river in formation services has been completed and 
further preparations in this area are underwa y. While relevant Minist erial regulations still 
remain to be enacted, the basic legi slative framework has been aligned. 
No progress can be reported in the field of  combined transport . 
Some progress can be re ported in the area of air transport . The Act amending the Act on 
obligatory and property legal relations in ai r traffic was adopted in May 2008. Croatia has 
also ratified in May 2008 th e European Common Aviation Agreement (ECAA), whose first 
transitional phase remains to be implemented. This will require some efforts and structural changes in the Ministry/Civil Aviation Authority
. Furthermore the  Civil Aviation Agency 
capable of effectively enforcing the acquis  has not yet been operationally established, a 
supervisory authority for air traffic control ha s not yet been designated, the Single European 
Sky legislation has still to be enforced, as well as the ban on Chapter 2 aircraft, legislation on 
ground handling and slot allocatio n has not yet been aligned w ith the relevant Community 
rules. 
Good progress can be reported in the area of maritime transport, in particular regarding 
safety issues. However, the detention rate of Croatian flagged vessels following port State 
controls in the area cove red by the Paris Memorandum of  Understanding remains high. 
Croatia has adopted in July 2008 the amendments to the maritime code as regards registration 
of ships and yachts. The maritime transport market remains largely closed. Legislation on maritime cabotage remains unaligned with the acquis.  
As regards the state aid  in this sector Croatia has not ye t aligned its legislation with the 
relevant case law of the Court of Justice. 
EN 42   EN Croatia intends to take part in  the activities of the Galileo satellite navigation  programme 
when operational. 
Conclusion 
Overall, there has been progress on alignment with the acquis.  Croatia needs to establish a 
competent and effective railway regulatory body. It ha s to separate the essential functions 
from the entity providing transport services. A safety authority as well as investigation and 
notified bodies need to be set up as early  as possible. Further alignment with EU acquis  on 
road transport and on the establishment of common rules for certain types of combined 
transport of goods is needed. An action plan fo r the rapid implementation of the EU aviation 
legislation including reinforcing administrative capacity is required as well as alignment of 
the remaining legislation with that of the acquis . 
4.15. Chapter 15: Energy 
There has been little progress in the area of security of supply . The mandatory 90-day 
average of stocks has not b een reached. The Compulsory St ocks Agency is in operation. 
There are no developments in relation to the establishment of a crisis management body or 
emergency plans. There have been limited de velopments in relation to legislation on 
authorisation for prospection, explor ation and production of hydrocarbons. 
There has been progress  in the area of the internal electricity market . Since July 2008 the 
electricity market has been opened for all cust omers. However, in practice HEP remains the 
only supplier of electricity on th e market. There have been no developments in relation to 
HEP’s privatisation. With Croatia's entry into  the inter-TSO compensation mechanism, all 
transit fees have been abolished. Prep arations in this area are advancing. 
As regards  the state aid  Croatia has not yet aligned its legislation with the relevant acquis  in 
this area. 
Only limited progress can be reported in the area of renewable energy sources (RES). The 
2008 target of biofuels for 2008 ha s been set at 1.21% of the ove rall fuel consumption on the 
domestic market. 
Administrative capacity in energy efficien cy and RES needs significant strengthening. 
There has been progress regarding gas markets . Implementing legislation related to liquefied 
petroleum gas (LPG) has been adopted. INA rema ins the only supplier of natural gas in the 
country. 
Limited progress has been made in the field of energy efficiency . Implementing legislation 
related to energy labelling of household applian ces has been enacted. Croatia still needs to 
ensure compliance related to high-efficiency cogeneration (CHP), energy end-use efficiency 
and energy services. No pr ogress has been made in  transposition of the acquis  related to the 
energy performance of buildings. 
Progress has been made in the field of nuclear energy.  A fund for covering Croatia's 
liabilities in connection with the decommissioning of the Krško Nuclear Power Plant, including the disposal of radioactive waste and spent nuclear fuel, has been established. 
Implementing legislation related to the dispos al and management of  radioactive waste, 
protection of citizens and the environment, mo nitoring of imports and exports of materials 
EN 43   EN which may contain radioactive sources has been en acted. However, the disposal of all types of 
radioactive waste is still a pending issue. 
Progress has also been achieved in the area of nuclear safety and radiation protection. In 
the area of radiation protecti on, the National Plan and progra mme of protection from ionising 
radiation has been adopted. Implementing legisla tion related to the monitoring of radioactive 
substances in the environment, food, residentia l and working environmen ts has been adopted. 
In addition, implementing legislation in th e measurement and protection of workers and 
citizens exposed to ionising radiation, quality assurance an d other issues related to 
radiological and physical safety of sources of ionising radiation has b een ratified. Progress in 
this area is advancing well. 
A new organisational structure for the State Offi ce for Nuclear Safety, and actions to further 
align the legislation on radiati on protection with the acquis, are underway. However, further 
efforts are required to strengthen administrative capacity of the nuclear regulatory bodies and 
to ensure adequate division and coordination of responsibili ties between the Ministry of 
Health and Social Welfare and the two St ate Offices for Nuclear Safety (SONS) and 
Radiation Protection (SORP). 
Overall, alignment with the acquis  is well advanced. 
Conclusion 
Overall, there has been good progress. However, significant efforts are still needed to align 
with the acquis , particularly in energy efficiency. Sust ained efforts will also be needed for 
meeting Accession Partnership priorities related to  the strengthening and the independence of 
the regulatory authority and administrative capac ity, in particular in energy efficiency and 
renewable energy sources. 
4.16. Chapter 16: Taxation 
No progress can be reported in the area of indirect taxation . Croatia's legislation on VAT  
remains partially in line with the acquis . Substantial changes are ne eded, in particular as 
regards reduced or zero rates, the scope of th e reduced rates and of exemptions, the exclusion 
of free zones from the fiscal te rritory, the special schemes and the lack of legislation on VAT 
refunds to non-established traders. On excise duties substantial change s are needed on product 
coverage, rates and duty suspensions. In Oc tober, Croatia agreed with the Commission a 
solution for eliminating the discriminatory elements  of its excise duty sy stem for cigarettes, so 
to address its incompatibility w ith the SAA. In the area of i ndirect taxation Croatia has not 
addressed the Accession Partnership priorities. 
No progress has been made in the area of direct taxation, where Croatia has not addressed 
the Accession Partnership priorities. 
No progress can be reported on administrative cooperation  and mutual assistance . 
There was some progress with operational capacity and computerisation . The excise 
department in the customs administration was re-organised into four units, to mirror the 
structure of the EU legislation. Attention shou ld be paid to adequate staffing of this 
department, with a view to establishing the system for movement under suspension. Work on 
IT interconnectivity has progresse d, albeit with some delays, a nd projects to develop the VAT 
information exchange system and the excise mo vement control system have started. Both the 
EN 44   EN tax and customs administrations remain heavily dependent on external expertise on IT matters 
and in need of reinforcement of their internal capacity. 
Conclusion 
There has been very limited progress on this chapter. No progress was made on legislative 
alignment. Even though the overall structure of the tax legislati on is similar to the acquis , 
substantial efforts are required in all areas. Cr oatia has agreed with the Commission a solution 
for eliminating the discriminatory taxation of ci garettes. Substantial fu rther efforts are also 
required to strengthen the administrative cap acity, including regardi ng IT interconnectivity. 
4.17. Chapter 17: Economic and monetary policy 
Significant progress can be re ported on alignment with the  acquis  governing  monetary 
policy . Croatia adopted a revised Law on the Croatian National Bank (CNB) aimed at full 
alignment to the relevant acquis . The new Law provides for the full independence of the 
central bank, in particular by clarifying the issue of accountability of the central bank. The 
new law also regulates its future integration into the European System of Central Banks. 
Furthermore, the new legal framework strengthens the institutional, financial and personal independence of the CNB.   
Good progress was made regarding the eliminati on of the legislative provision providing for 
privileged access for public autho rities to financial institutions . In March 2008, amendments 
to the Act on the Croatian War Veterans and their Family Members Fund were adopted. As of the date of Croatia’s ac cession into the EU, the Fund may invest its assets  not only into debtor 
securities of the Republic of Croatia and secur ities the Republic of Croatia is guaranteeing but 
also into securities issued by the EU or OECD  member states without restrictions. However, 
some provisions that give rise to privileg ed access for public authorities to financial 
institutions still remain in Croatian legisl ation, notably in the Deposit Insurance Act. 
In March 2008 the Croatian National Bank (CNB ) issued a Decision providing the legal 
basisfor establishing a Nationa l Centre for Fight Against Count erfeiting, a National Centre for 
Analysis of Bank Notes and a National Centre fo r Analysis of Coins, within the CNB. The 
purpose of these centres will be to undertake a nd implement measures for the prevention of 
counterfeiting and detection of counterfeited co ins and bank notes. Curr ently these tasks are 
performed by a unit in the Ministry  of Interior. Overall, preparat ions in the field of monetary 
policy remain well on track. 
In the area of  economic policy , the country has made some progr ess in its alignment with the  
acquis, particular in improving the institutional a nd technical capacity for setting up medium-
term macroeconomic and fiscal frameworks. Croatia submitted its fourth Pre-Accession 
Economic Programme, covering the period 20 08-2010, in December 2007. It presents a 
largely sound and coherent medium-term macr oeconomic and fiscal framework and a broad 
agenda for structural reforms. Croatia submitte d its fourth fiscal notification in March 2008. 
Reporting of fiscal data on the basis of ES A 95 has improved. However, with respect to 
policy implementation, an ad-hoc approach to  economic policies has often prevailed and a 
deepening of structural reforms has not figur ed among the governments' top priorities. The 
structural reform agenda has moved slowly and there has often been a gap between legislative 
intent and actual implementation. Policy coordi nation within the government as well as the 
government's communication with the Croatian National Bank (CNB) has not been 
systematically enforced. Overall, in the fiel d of economic policy Croatia has made further 
EN 45   EN progress in designing medium-t erm economic policy strategies, but the actual implementation 
of core reforms has often been weak.. 
Conclusion 
There has been significant progress in the ar ea of economic and monetary policy. Overall 
alignment with the  acquis  in the area of economic and m onetary policy is well advanced. 
4.18. Chapter 18: Statistics 
Good progress can be re ported concerning the statistical infrastructure . The Central Bureau 
of Statistics (CBS) has been placed  under the direct responsibility of the Prime Minister. This 
will strengthen its coordinating role. Also the budget of the CBS for 2008 has been substantially increased. The Annua l Implementation Plan for Sta tistical Activities in 2008 and 
a programme of statistical activities covering 2008–2012 (mid-ter m plan) were adopted in 
May 2008. Cooperation between the CBS and the othe r main producers of official statistics 
has improved. As regards administrative capacit y, a new Director General of the CBS was 
finally appointed in May 2008. Individual traini ng plans for CBS staff are being developed. 
However, there has been only little progress in the actual increase of staff. Most of the new 
posts have not been yet filled . Notably the IT department ha s suffered a high rate of 
departures of skilled staff and has a lot of problems in recruiting new staff. Moreover, the reorganisation of the regional statistical offices has not yet taken place, and the preparation of 
a dissemination strategy of stat istics is advancing only modera tely. The Accession Partnership 
priority has been partially met. Prep arations in this area are on track. 
Little progress can be reported in the field of classifications  and registers. The classification 
according to NACE Rev.2 has not been implemente d due to IT staff shortages. The quality of 
the business register is being im proved but remains far from satisfa ctory. Preparations in this 
field are only moderately advanced. 
Good progress has been made in the area of sectoral statistics . As regards social statistics, a 
national methodology for a survey on income and living conditions is being developed. Good 
progress has been achieved in labour force stat istics, government finance statistics, external 
trade statistics and in the timely transmission of data to Eurostat. Concerning agricultural 
statistics, some progress has been made, in pa rticular with a view to obtaining comparable 
agricultural structure, agromonetary and dairy data. Nevertheless, the methodology and 
organisational set-up for collecting agricultural statistics are not yet in line with the acquis . In 
the area of macro-economic sta tistics, key national accounts indicators and the methodology 
used are still not in line with the  acquis (ESA 95). These are, together with agricultural 
statistics, key elements for the accession negotia tions on this chapter. The structural business 
statistics are being revised w ith the objective of pr oviding data on all s ectors, including at 
regional level. However, a full alignment of the business statis tics with the acquis  has not yet 
been completed. The Accession Partnership priority  has been partially met. Preparations in 
this area are well on track. 
Conclusion 
Overall, good progress has been made on mode rnising the statistical infrastructure. A 
satisfactory level of legal alignment has been reached. However, gaps remain in terms of 
strengthening the administrative capacity fo r producing statistics. As regards sectoral 
statistics, the key areas of ag ricultural and macro-economic and business statistics are not yet 
EN 46   EN in line with the acquis. Continued efforts are re quired to align legislation with the acquis and 
to implement and enforce it effectively. 
4.19. Chapter 19: Social policy and employment 
There has been limited progress in the area of labour law . Amendments to the Act on 
Employment Mediation and Unemployment Right s were adopted in July 2008 aiming at 
addressing shortcomings in the field of part-tim e work. Legislation aimi ng at transposing the 
acquis  in the areas of European Works Council, the European Company, the European 
Cooperative Society and the protec tion of employees in the event of the insolvency of their 
employer has been adopted. As regards admini strative capacity, a new Regulation on the 
internal organisation of the Ministry of Economy, Labour and Entrepreneurship (MoELE) 
was adopted in March 2008 in vi ew of strengthening the organisation of the Directorate for 
Labour and the Labour Market and hiring additiona l staff, but its implementation is lagging 
behind. In general, shortcomings persist as regards legal alignment and administrative 
capacity. The amendment of the Labour Act is s till outstanding. This is a key element for the 
accession negotiations on this chapter. The State Inspectorate is lacking appropriate resources. 
Preparations in this area are on track. 
Good progress can be reported in the field of health and safety at work . The Act on 
Amendments to the Occupational Safety and H ealth Act was adopted in July 2008. This is a 
key element for the accession negotiations on this chapter. Legal alignment has continued also 
with the adoption of legislat ion aiming at transposing the acquis  on use of work equipment, 
on minimum requirements for work on board fi shing vessels, on noise, on electromagnetic 
fields and on temporary or mobile constr uction sites. However, implementation and 
enforcement capacity is still not sufficien tly developed, and sufficient funding of 
implementation remains a problem. The Labour Insp ectorate is not sufficiently mobile either. 
In order to remedy the situati on, the Regulation on the intern al organisation of the State 
Inspectorate was amended in December 2007 allo wing for an additional hiring of 53 labour 
inspectors (27 in the area of labour relations  and 26 in the area of safety at work). 
Preparations in this area are well underway. 
As regards social dialogue , there has been some progress. Tr ipartite social dialogue is already 
well established, and the influence of social  dialogue on the decisi on making process and 
policy design has slightly improved. Trip artite social dialogue has resulted, inter alia , in the 
Act on minimum wage. Awareness-ra ising and training activities have continued, especially 
as regards mediation of labour disputes. However, the existing autonomous collective 
bargaining still takes place mainly at company leve l. Sectoral social dialogue continues to be 
poor, and agreements at this level are rare. Re presentativeness criteria for participation of 
trade unions in collective bargaining have not been adopted yet. The capacity of social partners continues to be w eak. Preparations in this area are moderately advanced. 
Good progress has been made in the area of employment policy . The Joint Assessment of 
Employment Policy Priorities (JAP) was signed in May 2008. It examines the main strengths 
and challenges for the Croatian labour market  with a view to EU accession and Croatia’s 
future participation in the EU employment strategy. In the framework of the National 
Employment Action Plan for 2005–2008, funds earma rked for the implementation of active 
labour market measures under the 2007 Annual Programme for Employme nt Incentives have 
been increased. The fight against undeclared wo rk has continued allowing a continuing rise in 
the employment rate (57 % in 2007 compared to 55.4 % in 2006). The unemployment rate has 
continued to fall (9.6 % in 2007 compared to 11.2 % in 2006). Howeve r, youth and long-term 
EN 47   EN unemployment remain persistent challenges. Also  regional disparities are still considerable, 
and the qualification and skills levels of the Cr oatian labour force are lo wer than in the EU. 
Preparations in this field are well on track. 
There has been some progress in the preparations for the European Social Fund . Activities 
are ongoing to refine the internal procedures and to complete th e setting up of administrative 
capacities in the Operating Structure. Traini ng plans are being developed. In March 2008, a 
Directorate for International Cooperation in th e Field of Labour and Social Security was 
established in the MoELE to perform the tasks of the body responsible for the Operational 
Programme for IPA component IV  (Human Resources Development) and for priorities and 
measures. However, administrative and mana gement capacity is not yet sufficiently 
developed with a view to the future implementa tion of the ESF. This is a key element for the 
accession negotiations on this chap ter. Preparations in this fi eld are moderately advanced. 
Some progress can be re ported in the field of social inclusion . A second Joint Inclusion 
Memorandum (JIM) follow-up seminar was he ld in March 2008 in Zagreb. A National 
Implementation Plan for Social Inclusion (2007–2008) was adopted by the Government in 
April 2008 and the National Implementation Re port on the JIM follo w-up process 2007–2008 
was adopted in July 2008. A strategy on decentr alisation of social services has been 
developed, and some activities have been undertak en in the first phase of a long process in 
securing de-institutionalisation for particul ar target groups, namely the elderly.  
However, the overall progress in meeting the prio rities and measures se t out in the JIM has 
been slow, and the use of a coherent mon itoring and evaluation system to assess policy 
reforms in this field continues to be weak.  
As regards administrative capacit y, the Regulation on the internal organisati on of the Ministry 
of Health and Social Welfar e was adopted in Ma rch 2008 establishing two new departments 
in the Ministry related to social inclusion. However, the position of the Director of the Department for Social Welfare at the Ministry has not yet been filled. As regards people with 
disabilities, an Ombudsman for Persons with Di sabilities was appointed by the Parliament in 
May 2008 and its office is being set up. A Civ il Service Recruitment Plan for 2008 was 
adopted in March 2008 aiming at the employment  of 128 persons with disabilities. However, 
budgetary constraints continue to limit the scope of the rights of people with disabilities to 
health and special care and their social integr ation. The cooperation of the Government with 
the civil society organisations is  not sufficient to create an ad equate net of community-based 
services. ( See Political criteria – Economic and social rights ) Preparations in this area are 
moderately advanced. 
Limited progress can be re ported in the field of social protection . Reforms in the pension and 
health care systems are ongoing. As regards pensions, progress is being made in extending the effective working life and in decreasing the share of retire ment contributions in GDP. 
However, universal coverage and adequacy of pensions is not yet ensured. Poverty among the 
elderly as well as the large number of women of pensionable age not receiving pensions 
remain a concern. Preparations in this field have started. 
There has been good progr ess in the field of anti-discrimination . An anti-discrimination act 
was adopted in July 2008 aimed at completing le gal alignment in this field. This is a key 
element for the accession negotiations on this  chapter. A National Programme for the 
Protection and Promotion of Human Right s 2008–2011 was adopted in November 2007, and 
the National Plan to Combat Discriminatio n in September 2008. However, the level of 
EN 48   EN protection against discrimination in practice and its  judicial prosecution is still not in line with 
EU standards. Vulnerable groups and ethnic minor ities, particularly the Serb and the Roma 
minorities, continue to face significant disc rimination in economic and social life ( See 
Political criteria – Economic and social rights ). The Ombudsman’s office has not yet been 
transformed into an independent Equality Body. The limited statistics cu rrently available do 
not allow monitoring of discrimination on different grounds, as required by the acquis . 
Preparations in this field are on track. 
Good progress can be reported on equal opportunities . A new Gender Equality Act was 
adopted in July 2008 after the Constitutional C ourt issued a decision in January 2008 to 
abrogate the former Act on the grounds of its formal non-compliance with the Constitution of 
Croatia. This is a key element for the accession negotiations on this chapter. Legislation was also adopted in March 2008 aiming at transposing the acquis on statutory social security as 
well as in July 2008 in the fiel d of parental leave. Awarene ss-raising activities on gender 
equality have continued in different areas . However, the Ombudsman’s office has not yet 
been transformed into an independent Equali ty Body. Also the effective implementation of 
gender equality policies is not always ensured (See Political criteria – Economic and social 
rights ). Preparations in this  field are well advanced.  
Conclusion  
Good progress has been made on this chapter.  A good level of legal alignment has been 
reached. Gaps remain in relation to completing legal alignment. Strengthening the administrative capacity in good time before accession to ensure proper implementation and enforcement of the acquis  in this field remains the key element for the accession negotiations 
on this chapter. 
4.20. Chapter 20: Enterprise and industrial policy 
Substantial progress has been made in the area of enterprise and industrial policy principles. 
Croatia adopted a comprehensive industrial strategy in line with the acquis.  
As regards SME policy, Croatia continues to implement the actions and guidelines of the 
European Charter for Small Enterprises. Overall,  it has made considerable progress in al areas 
of the Charter. The implementation capability in  this field is relatively well structured and 
resourced and framed in a concise set of SME strategies and operationa l plans. There is a 
better distribution of roles be tween the Ministry of Economy, labour and Entrepreneurship 
(MELE) and the SME agency (HAMAG), whilst HAMAG should increasingly be taking on a 
much broader role in SME policy implementa tion. Croatia has made progress in further 
aligning with the EU SME definition but fu ll alignment still needs to be ensured. 
As regards the business environment, the HITRO.HR initiative to speed up company 
registration, and HITRO.REZ to cut regulatory burdens on SME's are encouraging and require 
further strengthening. Despite these initiatives, Croatia still has to make further efforts in 
order to reduce costs and time of registra tion and licensing. The development of online 
registration for crafts (e-crafts) is positive and could be extended to all types of companies. 
Croatia has made substantial progress on enterprise and industrial policy instruments . 
Croatia joined the CIP Community Framew ork programme in October 2007 and it has 
submitted a successful bid under the Enterpri se Europe Network which the programme 
finances. Croatia has made progress in further aligning its legislation with the Directive on 
combating late payments but the alignment still needs to be completed. Croatia is advancing 
EN 49   EN with the introduction of  online-applications and e-services, for various payments and 
applications, a smart card for business services  and a web-based “busin ess navigator”. There 
is recognition of the importan ce of a further push in the fields of competitiveness and 
innovation. 
Croatia has made progress with regard to sectoral policies . It has developed sectoral 
approaches and strategies in ke y sectors, such as the textile industry, leather and leather 
products, the chemical industry, and wood pro cessing industry. Croatia has successfully 
privatised its steel sector; the national restru cturing plan for the steel sector and individual 
business plans require full implementation. Croa tia has taken the decision to privatise its 
shipbuilding industry, but further significant effort s will be needed to fully restructure it ( see 
competition policy chapter ). 
Conclusion 
Croatia has made good progress on this chapte r. There has been good progress on SME policy 
as well as with the industrial st rategy and restructuring of the steel industry. In other sectors, 
such as shipbuilding, significant efforts are required.  
4.21. Chapter 21: Trans-European networks 
Croatia has made good progress in the development of the transport networks . In July 2008 
Croatia and the European Commission came to an agreement on the future Croatian TEN-T 
network and priority projects of European Interest  in the framework of this network. This will 
be the focus of the future Croatian investments in upgrading the relevant infrastructure to the 
TEN-T standards. 
The Trans-European Network in Croatia will co nsist in a multimodal network including main 
road, rail, inland waterwa y, river ports, seaport and airports of the country. 
As regards energy networks , Croatia has been active in de veloping interconnections of its 
electricity network with those of nei ghbouring countries and EU Member States. 
There has been progress on tel ecommunications networks. The Croa tian Parliament ratified in 
March 2008 the Memorandum of Understanding between the Republic of Croatia and the 
European Community on the participation of the Republic of Croatia in the Community Programme “ICT Policy Support Programme  (ICT PSP) of the Competitiveness and 
Innovation Framework Programme (2007 to 2013)” and it entered into force in May 2008. 
Conclusion 
Overall, Croatia has made good progress regard ing the development of the transport and 
energy networks in line with the design and ob jectives of the TEN – Transport network and 
TEN – Energy network. 
4.22. Chapter 22: Regional policy and coordi nation of structural instruments 
Some progress can be reported on the legislative framework. In March 2008, the Croatian 
Government adopted an Action Plan for mee ting EU cohesion policy requirements as key 
element in the accession negotiation under this chap ter. The action plan describes the state of 
play of preparations, sets out al l the measures that Croatia need s to take before its accession 
and demonstrates its recognition of the main challenges and key issues to be addressed. 
EN 50   EN Progress can also be noted as regards alignmen t of national legislation with Community rules 
in the areas of public procurement, – with the new Public Procurement Act in force since January 2008 – competition, stat e aid and the environment. ( See also the relevant Chapters. ) 
However, Croatia still needs to pursue its efforts in order to meet the regulatory requirements for cohesion policy, mainly by amending the Budget Act to ensure full multi-annual budget programming and budget flexibili ty and by adopting the Regiona l Development Act that will 
provide a broad legal framework for implementa tion of the regional policy. Preparations in 
this area are fairly advanced. 
There has been good progress with the institutional framework. An application to the 
Commission for the accreditation of the institutional set up for the implementation of the structural funds precursor instrument IP A (Instrument for Pre-Accession Assistance) 
components III and IV after formal designation of  the structures was submitted in April. An 
Audit Authority, as a separate and independent agency, was a ppointed in June. Croatia has 
also identified the coordinati ng authority, certifying author ity, audit authority and the 
managing authorities and intermediate bodies that will be responsible for managing 
operational programmes under the future Structur al and Cohesion Funds. Croatia needs to 
formalise (by legal act) this designation of institutional structures; it needs to ensure an adequate separation of functions  in particular within minist ries, as applicable between 
Managing Authorities and intermediate bodies. Croatia also needs to complete the full 
designation of structures notably as regards regional level implementation structures but also 
as regards the intermediate bodies. 
As regards territorial organisa tion, Croatia has introduced a cl assification esta blishing three 
statistical and planning regions at Nomenclature of Territorial Units for Statistics (NUTS) II 
level, in line with the relevant regula tions and with the Commission's suggestions. 
Preparations in this area are advancing. There has been some progress in the area of administrative capacity . Croatia is carrying out 
a systematic analysis of the organisational, sta ff and training needs for the IPA and Structural 
Funds. A training strategy for the Structural Funds preparations wa s prepared in June. 
However, capacity building needs remain large in some ministries and strengthening administrative and absorption capacity remains a priority for Croatia. The current lack of 
institutional capacity has directly influenced absorption capacity with respect to ISPA. In 
order to successfully absorb IPA and Structural  Funds in the future, significant strengthening 
is required. Project prepara tion and strengthening of the or ganisational and managerial 
capacities of future beneficiaries also needs to be increased at all levels, including the local 
government level. Ownership should be develo ped and ensured at all appropriate levels, 
especially at local level. Prepara tions in this area are advancing. 
Some progress can be reported in the area of programming.  Inter-ministerial  working groups 
under the coordination of the Ce ntral State Office for Development Strategy have drawn up a 
Strategic Coherence Framework 2006-2013 and 4 Operational Programmes, which were adopted by the Commission in November/Decemb er 2007. Croatia's Action Plan for meeting 
EU cohesion policy requirement s defines practical steps to prepare the National Strategic 
Reference Framework along with eight sets of operational programmes. Efforts need to be 
made to ensure that national and sectoral strategies are c oordinated within programming 
documents. Croatia needs to considerably improve  its capacity for the timely preparation of 
good quality and mature project proposals subm itted under Phare programmes as well as for 
IPA component III and IV operational programmes.  Preparations in this area are advancing. 
EN 51   EN Progress was made in the monitoring and evaluation  of the operational programmes. 
Operating structures have set up sectoral monitoring committees (SMC) to monitor the 
implementation of OPs. The first two SMC m eetings for each OP were held in December 
2007 and June 2008. The membership and rules of procedure of the SMCs have been agreed 
with the Commission. The first meeting of the (all components) joint IPA committee was held 
in July 2008. Croatia is still at an early stage of establishing its electr onic monitoring system. 
Substantial work still lies ahead. It still need s to define functionalities of the system, 
formulate technical specificati ons, obtain technical assistance for setting up its system and 
make it operational. Preparations  in this area are advancing. 
Although some progress can be reported in the area of financial management and control 
(see also chapter 32 – Financial control ), Croatia is still at an early stage of establishing its 
financial management and control systems fo r the future Structural and Cohesion Funds. 
Croatia needs to build up its capacity in these fiel ds. Preparations in this  area are at an early 
stage. 
Conclusion 
Some progress can be reported in this chapter. Croatia still need s to make efforts to establish 
the institutional and administrative capacity nece ssary to meet the regulatory and operational 
requirements stemming from Community cohe sion policy. Overall, Croatia is partially 
aligned with the acquis in this chapter. 
4.23. Chapter 23: Judiciary a nd fundamental rights 
There has been some prog ress in the area of the judiciary . 
As regards the independence of the judiciary , there has been some progr ess. The State Judicial 
Council’s (SJC) capacity to manage the selecti on of judges has been marginally improved. 
However, the capacity to systematically in terview candidates remains limited. Amendments 
to the Courts Act and a new Act on Trainees in Judicial Bodies and the Bar Exam were passed 
which foresee the introduction of improvement s to the procedure for the appointment of 
judges and judicial trainees. Cu rrently, the selection procedure for judges and prosecutors, 
judicial trainees, and court advisors remains deficient, lacking transparency and the 
application of uniform, objectiv e criteria. The provisions on penal immunity for judges have 
not been re-assessed in line with the need for transparency and accountability within the 
judiciary. 
The evaluation of the work of judges has improved, based inter alia  on the methodology for 
assessing judges' performance adopted in September 2007. The work of the judges is 
evaluated annually and non-fulfilment of the quot a of decisions may lead to disciplinary 
procedures. This methodology is also used to evaluate the performance of judges under the 
five year probation period, which remains in place. So far, only four judges were not 
appointed permanently 
As regards the impartiality  of the judiciary, the State Judi cial Council has continued to 
conduct disciplinary procedures initiated by court presidents and the Mini stry of Justice. In 
2007, there were nineteen discipli nary proceedings resulting in two reprimands, four fines and 
one acquittal. Four cases were suspended or withdrawn and eight  cases are on- going. Further 
information on the legal grounds of the cases is  not available. A new code of ethics for 
attorneys was adopted in February 2008. The c ode introduced an annual reporting obligation 
on disciplinary procedures conducted by the St ate Prosecutor Council. This should improve 
EN 52   EN the transparency of disciplinary proceedings against attorneys, which has hitherto been 
lacking . 
As regards professionalism and competence  in the judiciary, a full time Director of the 
Judicial Academy was nominated in Ma y 2008. The Judicial Academy’s budget was 
increased. The Judicial Academy, supported by an  Advisory Board and Programming Council 
has developed a training policy. This introduc es regular training needs assessments and 
adaptation of the training programmes to up-co ming legislation and EU acquis. However the 
Judicial Academy still lacks staff. The Regional Centres of the Judicial Academy still lack 
resources and adequate premises.  
In relation to the efficiency of the judiciary , the Supreme Court contin ues to monitor closely 
the backlog and supports the tran sfer of non-disputed enforcemen t cases to public notaries as 
well as mainly civil cases to less burdened c ourts. Changes to the Misdemeanour Act entered 
into force in January 2008 aime d at relieving misdemeanour courts of minor cases by 
transferring work to administra tive bodies. The backlog of pendi ng cases before all courts has 
been reduced by around 7% to 937,000 cases. Efforts have been made to accelerate the solving of old cases and establish mo re reliable statis tics on the backlog. 
However, statistical tools have principally been  improved in relation only to municipal court 
cases. Previous reductions in the backlog have not been sustained and the number of old cases 
remains high. The roots of the backlog and lengthy proceedings have not been tackled 
adequately. The reform of civ il procedure started in 2003 has not shown clear results. While 
further amendments to the civi l procedure code were adopted in July, there has been no 
proper assessment of the previous measures ’ impact on case duration. Misdemeanour cases 
account for 37% of the backlog. Mo re than half of these cases are dismissed because of the 
statute of limitation. Changes to the Misdemea nour Act extended the statute of limitation for 
misdemeanour cases from two to four years. While this will lead to the expiry of the statute of 
limitation in fewer cases, it could have a negative impact on the case backlog. The handling of 
administrative cases also continues to face par ticular challenges. The Administrative Court 
still needs to be made a court of full jurisdiction.  
One of the main problematic areas remains en forcement cases, out of which approximately 
50% fail because of the lack of a proper notification system to the parties. Reform of the system of enforcement of court decisions has begun. However, this continues to constitute a 
major obstacle to the efficien t functioning of the courts.  
There continues to be limited progress in the rationalisation of the c ourts network and many 
issues remain open. Steps taken so far are unambitious. The law on the seat and jurisdiction of courts adopted by Parliament in  July 2008 foresees full rationalisation of municipal courts by 
2019 with a reduction from 108 to 67 munici pal courts. It remains unclear how this 
rationalisation will be implemented in practice. There is no plan for the rationalisation of 
other types of court: commerc ial courts, misdemeanour cour ts, county courts or state 
prosecution offices. 
With regard to the infrastructure and equipm ent of courts, there has been limited progress. 
The pilot testing of the integrated case mana gement system (ICMS) was finalised in four 
courts and testing has begun in se veral other courts. However, th e foreseen roll -out of ICMS 
to 60 courts by 2009 is behind sc hedule. Misdemeanour courts continue to suffer from a 
shortage of equipment and a very low standard of premises. 
EN 53   EN The system of judicial inspections has show n good results. However the inspections have 
been carried out mainly in municipal courts an d not in other courts or prosecution offices. 
With only five part-time inspectors, the Minist ry of Justice does not have the capacity to 
enlarge the inspections to other courts. 
The introduction of court-mediation in the Comm ercial court has been successful. The same 
concept was introduced at 8 municipal courts  in 2007. However the number of mediation 
cases has been increasing rapidly and judges have difficulty in dealing with them. The 
incentive to deal with mediation cases is l acking and the backlog of cases has started to 
increase, especially at Zagreb Municipal court.  There is no proper mediation strategy in order 
to focus ADR out-of court. 
Implementation of the  judicial reform strategy  has continued even if adequate monitoring of 
its measures has not been possible due to weak  administrative capacity. A revised Action Plan 
addressing all major reform issues was adopted  in June 2008. However, in certain areas it 
lacks measurable objectives that will allow effective monitoring of its implementation. The 
Strategic Planning unit in the Ministry of Justic e has become a Directorate in charge of the 
monitoring of the reform of justice and anti–cor ruption strategy and has been reinforced with 
additional staff. However, there is no statistical  department nor a Directorate for IT issues to 
cover the roll-out of the case management system in the courts. There has been a lack of leadership and ownership in reform implementation. 
There has been some progress in the area of anti-corruption policy and measures. 
A revised anti-corruption strategy as well as an action plan containing specific measures in a 
number of fields prone to corruption was a dopted in June 2008. A new coordination system 
based on a working group at the level of State Secretary is no w in place aimed at improving 
coordination of all Ministries and other bodies  involved in the implementation of the plan. 
The Strategic Unit which had been created at the Ministry of Ju stice in order to follow the 
implementation of the previous plan has been  up-graded to the level of Directorate and 
strengthened with additional staff. The new st rategy and action plan ar e an improvement on 
the previous national anti-corruption programme  and its mini action plans. However, the 
action plan lacks measurable objectives that  will allow an effective monitoring of its 
implementation. It is too early to evaluate the concrete impact of administrative strengthening 
of the Ministry of Justice. 
New members of the National Council to mon itor the implementation of the plan were 
appointed after the November 2007 elections. It s new Chairman declar ed the intention to 
break with the previous practice and to increase the pro-active approach of the Council. The 
structure of the Council will be strengthened with  administrative staff. However, the concrete 
effects of the guiding role wh ich the Council should have with in the anti-corruption policy 
have not yet materialised. 
The legal framework to combat corruption is largely in place. Amendments to the law on 
Conflict of Interest further strengthen the legal tools to fight corruption, including a limited increase in sanctions. However, an adequate syst em to deal with conflicts of interest remains 
to be put in place. The principle of conflict of interest  is little unde rstood at all le vels of public 
administration. There are still no public written, interp retive guidelines for public officials. 
The Committee for the Prevention of Conflict of Interest continues to be beset by problems, 
including the resignation of its chairperson fo llowing corruption allegations. Due to the lack 
of administrative capacity, this committee c onducted only a limited number of conflict of 
EN 54   EN interest proceedings. The discussion on conflict of interest remains a partisan issue with a 
consequent negative impact on its policing. There is insufficient supervision and control with 
regard to the implementation of  asset declarations. Although a Law on Financing of Political 
Parties is in place, the important issue of fina ncing of election campaigns has not been fully 
addressed. The Government  established a working group in Se ptember to analyse the existing 
law.  
In terms of suppression of co rruption, the anti-co rruption body, USKOK, has continued to 
become more active. The number of USKOK inve stigations has increased and indictments 
issued in some important cases. USKOK's role is more widely acknowledged and reports to it 
of suspected corruption have in creased significantly, particularly  as regards abuse of office 
cases. However, few actual prosecutions have followed. Law enforcement agencies and other 
state bodies involved in the fi ght against corrupti on continue to be more reactive than 
proactive. Further efforts are required in tack ling high level corruption as  well as in the field 
of public procurement. The police need to b ecome more effective in the fight against 
corruption and organised crime. Inter agency cooperation requires further improvement.  
Overall, corruption at the political, economic an d institutional level, including the judiciary, 
as well as the general tolerance of petty corr uption remains widespread and poses a serious 
problem. Corruption in Croatia is aided by a lack of good governance,  transparency and 
accountability in public administration and by a l ack of ethics codes and codes of conduct in 
the public and private sectors. A culture of polit ical accountability is lacking. There has been 
some progress with the promotion of integrity within the public administration but this needs to be further strengthened. Awareness-raising activities coordinated between all bodies involved in the national anti corruption progr amme also need to be further pursued. 
As regards  fundamental rights , there have been some developments.  
As regards the right to protection of personal data , the Parliament passe d amendments to the 
Data Protection Act in March 2008 aimed at aligning  it with the acquis , in particular the 
establishment of personal data protection officers. However, full alignment with the Data 
Protection Directive and the C ouncil of Europe instruments remains to be completed.  
Some steps were taken to address shortcomings in prison conditions . A shortage of prison 
staff and capacity remains, however. 
Freedom of expression including freedom and pluralism of th e media continue to be provided 
for in Croatia. However, editors and journalist s continue to report und ue political pressure. 
There have been cases of threats and attacks agai nst journalists, particul arly those working on 
corruption cases or organised crime.  
The Office of the Ombudsman for Persons with  Disabilities was created and a National 
Implementation Plan on Social Inclusion 2007-2008 produced. However, continued efforts 
are needed as regards socially vulnerable and/or persons with disabilities . In the area of 
mental health, the policy of providing care thro ugh community-based services instead of in 
institutions has shown no tangible progress. 
A comprehensive law on anti-discrimination  was adopted in July 2008, signifying important 
progress. However, the level of protection agai nst discrimination in pr actice and its judicial 
prosecution is not yet in line with EU standard s. The functioning of the police and institutions 
of the health and social system  displayed certain weaknesses. 
EN 55   EN Plans aimed at improving women’s and children’s rights  have continued to raise awareness. 
However, further improvements in implementation need to be made. Implementation measures regarding the protec tion of children's rights also have to be accelerated.  
A new Law on Legal Aid as well as legislation on attorneys' tariffs were adopted aimed at 
improving access to justice , which has been hampered over th e past year by limits of the 
existing system of legal aid, high lawyers' fees and weaknesses in the judicial system. 
Provision of free legal aid under the new sy stem is foreseen as of February 2009. 
Implementation of the law will require new admi nistrative structures to  be set-up, including 
the employment of 53 new civil servants. In addition, several by-laws are to be adopted 
including those rega rding the remuneration for attorneys.  
Some progress has been made with regard to minorities . An action plan for implementation of 
the Constitutional Law on Nati onal Minorities (CLNM) was a dopted as was a recruitment 
plan for 2008 for minorities in the State ad ministration. Funding for minorities was further 
increased. The Roma minority has continued to receive attention, with improvements in pre-
school education. All eight minor ity MPs are in the governing coalition, and a Serb has been 
appointed to one of the De puty Prime Minister posts.  
However, many problems remain for minorities.  Croatia needs to encourage a spirit of 
tolerance towards the Serb minority and take ap propriate measures to protect those who may 
still be subject to threats or act s of discrimination, hostility or violence. Minorities continue to 
face particular difficulties in the area of employm ent, both in terms of under-representation in 
state administration, the judiciar y and the police as well as in  the wider public sector. The 
Roma minority faces particularly difficult living conditions and challenges remain in the areas 
of education, social protection, health ca re, and employment. Legal provisions and 
programmes need to be implemented with mo re determination, and adequate monitoring 
assured, especially in the area of employment.  
There has been some progress on refugee return  issues. An action plan for the accelerated 
implementation of housing care programmes was adopted with a target completion date of 
end 2009. Important decisions were taken openi ng up the possibility of  validating pension 
rights. Reconstruction of housing has con tinued. The target for 2007 to provide 1,400 
accommodation units out of a total of 12,500 applications under the housing care programmes for former tenancy rights holders has been la rgely met. However, implementation of these 
programmes remains weak. The Government’s implementation targets are behind schedule. 
Only 12% of cases have been resolved definitively in the urban areas. Efforts to create the economic and social conditions necessary for the su stainability of refugee return need to be 
accelerated. 
As regards EU citizens' rights, amendments to the Aliens' Act were pass ed aimed at aligning 
with the acquis . However, further legislative cha nges will be needed to achieve full 
alignment.  
Conclusion :  
Croatia has made some progress on this chapter. Reforms in the judiciary continue but at only 
a relatively slow pace. Significant challenges rema in. Most tools are in place to fight against 
corruption but, given the scale of the problem , these are not being deployed with sufficient 
vigour. Legal provisions on fundamental rights are in general adequate, but despite some 
progress, a number of impor tant challenges remain in terms of implementation. 
EN 56   EN 4.24. Chapter 24: Justice, freedom and security 
There has been some progress in the field of migration . The Action Plan for the 
implementation of the migration policy was adopted by the Government in May 2008. It covers a short period (2007-2008) and tackles issues such as legal and illegal migration, 
protection of asylum seekers and other refug ees, and suppression of trafficking in human 
beings. The new Aliens Act, entered in to force in January 2008. It restricts inter alia  the 
conditions for a temporary residence permit an d for family reunification for non-Croatian 
citizens.  
The illegal migration  deportation centre at Ježevo rema ins overcrowded. The number of 
illegal migrants fell in 2007 to about 4,000 compared to 5,564 in 2006. However, there has been an increase in illegal unaccompanied minors,  who make up 12% of to tal illegal migrants 
in 2007. There are no specific treatment and accommodation facilities for minors and vulnerable groups. The number of forced re turns has increased by 3% (2,439 cases in 2007 
compared to 2,348 in 2006). There has been no incr ease in the number of staff at the Ministry 
of Interior for dealing with for ced return and illegal migrants. 
Croatia has 24 readmission agreements in force. Se ven of these still have to be aligned with 
the EU model. Further readmission agreements ar e to be finalised with Serbia, Montenegro, 
Slovakia, Ukraine, Moldova and Cyprus. 
Some progress can be re ported in the field of asylum , as the new Asylum Act  entered into 
force in January 2008. The Commission for asyl um (second instance appeal body replacing 
the former Government Commission for asyl um) was formed in April 2008. A full-time 
president of the Commission was appointed, toge ther with four part-time members, two of 
whom come from civil society and the academic  world. Although this is a step in the right 
direction, there is st ill concern regarding the independence of th is Commission, given the 
oversight role of the authorities in the appointment process. In March 2008, five 
implementing acts for the Ministry of the Interior were adopted  covering accommodation 
forms and data collection; le gal aid, financial ai d, and medical examinations. However, 
further alignment of the legislation with the acquis  in this area is needed. 
The case workers in the Ministry of the Inte rior have received tr aining on the Refugees 
Convention and the EU acquis , as well as a manual on case handling, the direct outcome of 
which is the improved quality of the procedure for determining refugees' status. On the other 
hand, the restricting of personal interviews in the accelerated procedure for asylum seekers is 
a matter of concern. 
The number of asylum seekers in Croatia con tinues to increase, with 170 procedures in 2007 
(compared to 105 in 2006) and already 50 for the first quarter of 2008. Croatia granted asylum 
status in two cases. Even if Croatia is still a transit country (50% of the asylum seekers leave 
Croatia before their case is settled), the increase in applications is likely to expand after Croatia's accession to the EU. Current staffing le vels are not adequate to meet this future 
demand. 
To date, a number of asylum seekers applyi ng at the border or at the illegal migrants' 
detention centre of Jezevo have  been detained and convicted of illegal entry. This shows a 
very restrictive interpretation of the new law.  
Some progress has been made concerning Visa policy . Following the new Aliens Act, a new 
Regulation on the Visa Regime entered into force in May 2008, which further aligned with 
EN 57   EN EU rules. The visa requirement for citizens from Serbia and Montenegro has again been 
suspended, until end of 2008. IKOS, the informa tion system which forms the basis of the 
future Croatian Visa Database , has now been implemented in 68 of the 72 diplomatic 
missions and consular posts and should be completed. 
The number of visas issued at the borders in creased again in 2007, reaching over 8,300 visas - 
a 60% increase over 2006. Croatia should aim to minimise the issu ing of visas at the border to 
exceptional cases. Currently there is limited equipm ent available at the borders to detect false 
or forged documents. The system for issuing vi sas is also still not unified or consistent. 
Croatia also needs to step up its preparations for the introduction of biometric identifiers in passports and travel documents.  
There has been some progress with regard to External borders and Schengen the revised 
Integrated Border Management Action Plan was adopted in December 2007. The Coast Guard 
Law was adopted at the end of 2007, making th e Navy responsible for the Coast Guard, and 
dividing responsibilities between  the Coast Guard (outer wate rs), and Maritime Police (inner 
waters). An Inter-Ministerial Committee propose d a slight reduction in the number of Border 
Crossing-Points (BCPs) from 189 to 173, by elim inating some sea border crossing points, but 
no decision has been taken on this issue. The to tal staff of the Border Police has remained 
broadly unchanged at just over 5,000, and is well below the statutor y staffing figure. A 
competition to hire 1,400 new police officers, of whom 800 were to be assigned to the Border 
Police, was held in May 2008. Th e installation of an encrypted communication system (Tetra) 
has been extended to the BCPs at the sea borde r, the islands and in Zagreb. The National 
Border Management Information System (NBMIS ) is being deployed to  some further BCPs, 
albeit at a slow pace owing to some techni cal problems, and it now covers nine BCPs. 
Cross-border co-operation works well on a local  level at all borders. Cross-border co-
operation at national level continues to be c onstrained by the absence of formal bilateral 
agreements with countries at the future extern al border. Croatia signe d a working arrangement 
with FRONTEX in April 2008 which provides a good basis for cooperation. Inter-service 
cooperation at the border should be strengthened. 
Efforts to train Border Police staff have con tinued. However, the Border Police is still 
hampered by several shortcomings, such as a seri ous shortage of staff, limitations in general 
and specialised training, lack of equipment and poor infrastructure both at headquarters and at 
BCPs. In particular, further efforts are needed in  establishing an overall management policy of 
BCPs, starting from a decision on their total amount and locati on. Croatia should also speed 
up the roll-out of the NBMIS syst em to cover the whole border. 
As regards judicial cooperation in criminal and civil matters, there is only limited 
progress. The Agreement on Co-operation with  EUROJUST was signed in November 2007, 
but it needs to be ratified by the Parliament. Further alignment as regards protection of 
personal data is needed before the agreement wi ll be able to enter into force. Judicial 
cooperation is currently based on  the conventional approach. This  means, in practice, that 
recognition and enforcement of decisions by fore ign courts has to go through the "exequatur" 
process at the Municipal or Commercial c ourts. The recognized decision is enforced 
according to Croatian law, which is slow and ine fficient. Direct execution of foreign decisions 
is not possible. Croatia has not aligned with the Framework Decision on the execution in the 
EU of orders freezing property and eviden ce or with the Framework Decision on the 
application of mutual recogniti on of financial penalties. The Croatian legal order does not 
allow direct involvement betw een judicial authorities.  
EN 58   EN Furthermore, in Croatia every offence which has been committed in the territory of Croatia 
may be retried in Croatia, irrespective of a fore ign judgment. This excepti on to ne bis in idem 
applies even if the offence was committed partly in Croatia and partly in a foreign State which 
has already delivered a judgment. The conditio ns to implement the Framework Decision on 
the European Arrest Warrant are not in place,  as Croatia’s Constitution does not allow it to 
extradite Croatian citizens. Croatia is a part y to the Council of Europe Convention on the 
Transfer of Sentenced Persons (1983). It ha s not signed the Additi onal Protocol to the 
Convention (1997). Croatia has not yet acceded  to the Hague Convention on Jurisdiction, 
applicable law, recognition, enforcement and co- operation in respect of parental responsibility 
and measures for the protection of children. 
Regarding the status of victims in criminal pr oceedings, Croatian law is not aligned with the 
Framework decision in a number of areas. These include notifying the in jured party that the 
perpetrator has been released after serving the sentence, ac quiring testimonies by means of 
devices for picture and sound transmission (v ideo and phone conferences), establishing a 
service for assistance to victims of criminal offences and as regards training of staff.  
Some progress has been made as regards police cooperation. Since February 2008, a 
Croatian liaison officer has been stationed at Europol. Agreements on police cooperation have 
been signed with France and Austria. Croatia is actively i nvolved in regiona l co-operation 
initiatives, including SECI. Reorganisation of th e Criminal Police has started, but needs to be 
fully implemented. 
However, within the Ministry of  Interior decision making continues to be very complex and 
highly centralised. The human reso urces system of the police rema ins inadequate in terms of 
career development and resource management. There is no overall strategy or a Mission 
Statement for the Croatian police force. 
While significant progress has been made, Croatia still needs to fully complete its institutional 
response to the issue of sma ll arms and light weapons, by improving in particular the 
effectiveness of the arms tr ansfer licensing system.  
Some progress has been made in the area of organised crime.  A high level inter-sectoral 
group within the police has adopted a national intelligence model, which in turn led to the preparation of the first-ever National Thr eat Assessment (NTA) which was adopted by the 
Ministry of Interior in la te 2007 and has been shared wi th Europol. The NTA has been 
instrumental in the significant increase in intelligence reports and in developing police work in 2008. This signifies a marked shift of strate gy and philosophy for the Croatian Police. An 
IT system for inter-Ministerial exchange of  information has been completed (iCIS). A 
Protocol on Co-operation was concluded with the Ministry of Finance to enhance inter-
agency cooperation, exchange of informa tion, crime prevention and training. The co-
operation protocol with US KOK, which entered into fo rce in early 2007, is being 
implemented. The number of in vestigations is increasing. Ho wever, concrete results are 
needed in the fight against organised crime,  which is a matter of concern. Improvements 
introduced are yet to lead to significant convictions. The police need to become more effective. Weaknesses in the judi cial system also negatively affect the authorities' ability to 
effectively tackle organised crime. 
Good progress has been made with regard to the trafficking of human beings.  An Action 
Plan to combat trafficking in persons was adopted by the Government in December 2007. A new standard operating procedure (SOP) has b een jointly elaborated by the Ministry of 
EN 59   EN Interior, the State Prosecutor, a nd Ministry of Social Services. A new protocol has also been 
drawn up and signed between the Ministry of Inte rior, the Ministry of Social Services and 
their NGO partners. Several work shops and awareness initiativ es were organised over the 
period, including at regional  level. Thirteen victims were discovered in 2007. 
Limited progress can be reported in the fight against terrorism.  Croatia signed the Council of 
Europe Convention on laundering, search, seizure and confiscation of th e proceeds of crime 
and on the financing of terrorism, but this has ye t to be ratified. Croatia needs to continue to 
strengthen its capacity in the fight against terrorism, in particular by continuing alignment of its legislation, strengtheni ng its administrative capacity  and developing inter-agency 
coordination. 
Good progress has been made in  the field of fight against drugs. Croatia signed the 
Agreement on Illicit Traffic by Sea, thus im plementing Article 17 of the 1988 UN Convention 
against illicit traffic in narcotic drugs and psychotropic substances. The National Focal Point 
(NFP) became operational and delivered the fi rst Annual Report to the European Monitoring 
Centre for Drugs and Drug Addiction (EMCDDA)  in January 2008. Standa rds for therapeutic 
communities and a model for precu rsor control have been ela borated and adopted. A model 
for partnership co-operation betw een the national drug office and the districts has also been 
adopted. The Police recorded 7,900 criminal cases involving drugs in 2007 (which is 
commensurate with the level of  each of the past 5 years). 
Limited progress can be reported in the field of customs co-operation. In October 2007 
Croatian Customs became a full member of MARINFO. 
Conclusion 
Croatia has made some progress in  this chapter, particularly as regards the fight against drugs 
and dealing with trafficking of human beings. Ho wever, significant efforts are needed in the 
area of external borders, in terms of human, financial and technical resources, in order to 
ensure that EU requirements are met upon accession. Also, concrete results are needed in the 
fight against organised crime, which is a matter of concern. Croatia needs to step up its efforts 
to ensure the necessary administrative cap acity to implement and enforce the EU acquis  upon 
accession.  
4.25. Chapter 25: Science and research 
Good progress has been made in research policy . Two new bodies, the Strategic and 
Technology Council and the Council for the Na tional Innovation System, were created in 
April 2008. This should allow for taking fully into account the innovation dimension in the 
research policy. Organisational ch anges at the level of the Minist ry of Science have also taken 
place in view of strengthening administrative ca pacity. However, a fully transparent system 
for evaluation and monitoring of national research  grants remains to be ensured in order to 
increase scientific excellence. 
Good progress has been made on participation in the EC Framework Programmes . The 
grants awarded under the 7th Framework Pr ogramme for Research and Technological 
Development (FP7) continue to demonstrat e Croatia’s increased absorption capacity. 
However, full participation in  the thematic collaborative cooperation has not yet been 
reached. The national contact points function well, but still lack administrative capacity. 
Croatia has confirmed its interest in becoming associated also to the Seventh Euratom 
Framework Programme. 
EN 60   EN With a view to further integration into the European Research Area , a “National 3 % Action 
Plan” was adopted in April 2008. This was a si gnificant development. It includes a list of 
objectives and measures and envisages the establis hment of a system of indicators in view of 
increasing investments into science and research to 3 % of the GDP. Steps have been taken to 
increase the administrative capacity for the im plementation of the Action Plan. However, the 
entities responsible for implementation of the specific measures are not yet clearly defined. 
Steps have also been undertaken to ensure mobility of researchers. However, the share of the private sector in investment in resear ch is low and there are not enough young people 
attracted to science. 
Conclusion 
Good progress has been made on this chapter,  but further efforts remain necessary. The 
research capacity at national level needs to be strengthened which in turn will lead to 
increased participation under the FP7. Implemen tation of research policy and related action 
plans needs to be ensured in order to further integrate into  the European Research Area. 
4.26. Chapter 26: Education and culture 
Good progress has been achieved in the field of education, training and youth . The 
education reform process has continued under the Education System Development Plan for 
2005–2010. Croatia is participating in the EU  Education and Training 2010 Work 
Programme. Additional efforts have been made in the development of a national 
qualifications framework (NQF). Implementation of the Bologna process in higher education 
has continued. The Law on primary and sec ondary Education, adopted in July 2008, 
incorporates the principle of non-discriminati on in access to education for EU citizens and 
provisions for alignment with the acquis  on education of children of migrant workers. A 
Strategy for Development of the Vocational Education System in the Republic of Croatia 2008–2013 was adopted in July 2008. As regards administrative cap acity, staff and budgetary 
resources of the Agency for Vocational Education and Training and the Agency for Adult 
Education have been further increased. Howeve r, implementing legislation related to the 
Adult Education Act is still pending. 
Good progress has been made in the preparat ion for the management of the Community 
Lifelong Learning and Youth in Action Progr ammes. The legal framework has been 
completed. Work plans for preparatory measures to be implemented in the second semester of 2008 and in 2009, including adequate training for the National Agency, have been submitted. 
The respective Accession Partnership priorities in the field of education, training and youth 
have been partially met. 
Good progress can also be reported in the field of culture . Croatia has made efforts to 
facilitate deeper participation in the Cu lture Programme. Croatia has ratified the 
Memorandum of Understanding on it s participation in the Eur ope for Citizens Programme.  
Conclusion 
Good overall progress has been made in the ar ea of education, training, youth and culture. A 
good level of legal alignment has been achiev ed. Croatia should con tinue its efforts for 
preparing for the management of Life Long Learning and Youth in Action programmes. 
EN 61   EN 4.27. Chapter 27: Environment 
There has been some progress with the horizontal legislation. Full transposition of the 
environmental impact assessment (EIA) and strategic environmental assessment (SEA) 
directives was achieved through the adoption of implementing regulations. Implementing 
legislation related to the rules for subsidies in environmental protection was also adopted. 
Directive on environmental liability is still not  fully transposed. Enforcement of its existing 
provisions remains low. Work on the establishment of the Environmental Protection Information System (EPIS) is ongoing. The Act on Ratification of the Memorandum of 
Understanding on Croatia's participation in the Community Civil Protection Financial 
Instrument was adopted. 
Some progress has been achieved in the area of climate change. An action plan for the 
implementation of the United Nations Fram ework Convention on Climate Change (UN 
FCCC) and its Kyoto protocol has been ad opted. The national i nventory reports on 
greenhouse gas (GHG) emissions for 2007 and 2008 have been s ubmitted to the Convention 
Secretariat. Further work is required in the areas of GHG emission allowance trading, establishment of a national GHG registry and Cr oatia’s participation in the EU Emissions 
trading scheme (EU ETS). 
Good progress can be repor ted in the field of air quality . The Air Protection Act has been 
amended to ensure further alignment with the acquis . Further Protocols to the Long-Range 
Transboundary Air Pollution Convention (LRTAP ) have been ratified. In addition, the 
National Air Quality Protection and Improve ment Plan for the Period 2008-2011 has been 
adopted. Implementing legislation related to the use of organi c solvents, fuel economy and 
CO
2 emissions of new passenger vehicles, as well as to establishment of zones and 
agglomerations by air category was also adopted. Work on the establishment of the national 
air quality monitoring and mana gement system is ongoing. The programme for monitoring the 
quality of liquid fuels for 2008 has been ad opted. The government continues to decide 
annually on the quantity of fuel on the market  that does not comply with the prescribed 
quality standards. Transposition of the new acquis  related to ambient air quality and cleaner 
air for Europe and emission ceilings related to atmospheric pollutants is required. Preparations 
in this area are progressing well. 
There has been some progress with waste management. The Waste Act has been amended. 
Implementing legislation related to manageme nt of construction waste, categories and 
operating conditions for landfills and the manageme nt of sewage sludge in agriculture have 
been enacted. The Environmental Protection an d Energy Efficiency Fund is financing the 
remediation of illegal landfills and sites containing hazardous waste. Ten further landfills have been remedied. Full alignment with the acquis  in management of waste from extractive 
industries, hazardous waste and shipments and trans-boundary movement of waste is still 
required. Preparations in this area are advancing. 
Little progress can be reported in the water sector . The Water Management Strategy has been 
adopted. The national monitoring programme is being prepared. A progr amme of monitoring 
bathing water quality has been launched. A doption of the new Water Act, the new Water 
Management Financing Act and of implementing le gislation is still pending. Preparations in 
this area require substantial efforts. 
Some progress can be re ported in the field of nature protection with the enactment of 
implementing legislation related to the establis hment of the ecological network. This provides 
EN 62   EN the administrative framework for the designatio n of actual protected areas under Natura 2000. 
Designation of protected areas has not taken place yet. Additional efforts are needed in the sector to be in line with the acquis . 
Some progress has been achieved in the area of industrial pollution control and risk 
management. Progress in the alignment with the inte grated pollution prevention and control 
(IPPC) and Seveso II directives  is advancing slowly. The Prot ocol on Pollutant Release and 
Transfer Registers has been ratified. The lega l basis for the implementation of the pollutant 
register has been enacted but the register rema ins to start operating in practice. Activities on 
the reconstruction of one oil refinery in orde r to improve air and fuel quality are underway. 
Coordinated inspections of IPPC installations are starting to take  place. Investments related to 
the alignment of industrial facili ties with the air quali ty and large combustion plants directives 
need to be increased. The clean-up of sites contaminated with asbestos is continuing. 
Significant efforts will be required to align with the acquis and build up administrative 
capacity in this area. 
Good progress can be reported on chemicals and genetically modified organisms (GMOs). 
The Chemicals Act has been amended to  ensure further alignment with the acquis  and the law 
implementing REACH has been enacted. Implemen ting legislation related to labelling and 
packaging, and sorting of chemicals has been enacted. Further alignment with the acquis  has 
been achieved by amending the Biocides Act. The National Chemicals Strategy has been 
adopted. In relation to GMOs, implementing le gislation has been adopted related to the 
keeping of the Register of GMOs and risk  assessment for placing GMOs on the market. 
Preparations in these areas are progressing well. 
Little progress can be reported in the noise sector. Preparations in this  area are still at an early 
stage. 
There has been progress related to forestry.  Implementing legislation related to data 
collection, observation and register s related to forest fires has been enacted. Preparations in 
this area are advancing. 
Progress has been made to increase administrative capacity . The Action plan for setting up 
the necessary administrative capacities at na tional, regional and local level and required 
financial resources for implementing the acquis  has been adopted. However, capacity for the 
implementation of the acquis  remains overall weak, particularly at the local level. There is a 
particular need for training in the implementation of new legislation to both the administration 
and economic operators which wi ll be obliged to comply with the new legislation. Due 
consideration should also be given to impr oving the coordination mechanisms between all 
institutions/bodies involved in environmental protection. 
Conclusion 
Overall, good progress has been achieved in the environment chapter, especially in the areas 
of air quality, chemicals and GMOs. Considerable efforts will be needed to further align with 
and implement the acquis  in the water, indus trial pollution control and risk management, 
climate change and horizontal sectors. Substan tial efforts will be needed in the forthcoming 
period to meet the requirements of  the environment chapter especially as regards investments. 
EN 63   EN 4.28. Chapter 28: Consumer and health protection 
There has been some progress in the field of consumer protection . As regards administrative 
capacity, the Consumer Protection Department in  the Ministry of Economic Affairs, Labour 
and Entrepreneurship is being re organised into four sections and staff being increased up to 
17. In February 2008, the National Consumer Pr otection Council became an advisory body to 
the Government. The Council comp rises representatives of st ate administrative bodies in 
charge of consumer protection, representati ves of Croatian Chamber of Economy, Croatian 
Chamber of Trades and Crafts, consumer prot ection associations and independent consumer 
protection specialists which are appointed for four years. Government funding for consumer 
organisations has further increased and support for regional counselling ce ntres has continued. 
Activities for raising awareness on consumer prot ection have continued in the context of the 
2007 Year of Consumer Education in Croatia.  As for consumers’ access to justice, the 
mechanisms for out-of-court settlement of consum er disputes are not sufficiently developed or 
known by consumers. As a consequence, they treat only a small percentage of possible 
consumer protection cases. Preparati ons in this field are advanced. 
Some progress can be re ported in the field of product-safety related issues . RAPEX contact 
point has been established within the State In spectorate. The underlying  network of local and 
sectoral authorities responsible for market surv eillance as well as th eir interconnection is 
under construction. Legal alignment of the Croatian  general product safety legislation with the 
acquis is at an advanced stage. However, coor dination between the RAPEX central contact 
point and local authorities as well as due enfo rcement of measures on general product safety 
remain outstanding.  Preparations in this field are well on track. 
Good progress has been made in the area of non-safety related issues . Amendments to the 
Civil Obligation Act were adopted in March 200 8 aiming at completing legal alignment in the 
fields of the sale of consum er goods and associated guarantees  as well as package travel. 
However, shortcomings remain as regards le gal alignment. In particular, an effective 
enforcement mechanism against unfair terms in consumer contracts is outstanding.  
Preparations in this field are well advanced. 
Some progress can be reported in the area of  public health . 
Good progress has been made in the area of tobacco . The WHO Framework Convention on 
Tobacco Control was ratified in March 2008. Le gislation was adopted in October 2008 aimed 
at completing legal alignment in the fields of tobacco advertising and tobacco products. This 
is a key element for the accession negotiations on th is chapter. Preparations in this field are 
reaching completion. 
Some progress has been made in the field of communicable diseases . The Act on the 
protection of the population against communicable  diseases was amended in September 2008. 
A manual on definitions of infectious diseas es to be reported was published by the Croatian 
National Institute of Public H ealth in December 2007. Contact pers ons and institutions for the 
Early Warning and Response System (EWRS) have been appointed. Preparations in this field 
are well advanced. 
Some progress can be re ported in the area of blood . As regards restru cturing of blood 
transfusion services, a basic transfusion network is being established since December 2007, 
and the number of blood collection and proce ssing units is being reduced from 21 to 9. 
Provision of software and hardware to all bl ood transfusion centres has started. However, 
EN 64   EN administrative capacity is not yet sufficiently deve loped, especially in the Ministry of Health 
and in inspection departments, a serious advers e events and reactions reporting system is not 
operational, and quality management of all blood transfusion centres is not ensured. 
Preparations in this field are well advanced. 
Limited progress can be reported in the field of tissues and cells . Legal alignment in the field 
of reproductive cells is  still outstanding. This is a key el ement for the accession negotiations 
on this chapter. Administrative capacity is not yet sufficiently developed, especially in the Ministry of Health and in inspection departme nts. A serious adverse events and reactions 
reporting system is not in place. Facilities fo r handling tissues and cells have not yet been 
upgraded, restructured and license d according to the EU technical  requirements. Preparations 
in this field are underway. 
No progress can be reported in the field of mental health . A Mental Health Promotion 
Strategy is being drafted. However, commun ity-based services remain insufficiently 
developed as an alternative to institutionalisation, and financial resources allocated to mental 
health care are still scarce. The Accession Partne rship priority in this field has therefore not 
been met. Preparations in  this field are starting. 
Good progress has been made in  the field of colorectal cancer  screening, and legislation has 
been adopted aiming at completing legal alignm ent in the area of elec tromagnetic fields. A 
focal point for the area of non-ioni sing radiation has been appointed  in the Ministry of Health. 
Preparations in these areas are well on track.  
Conclusion 
Overall, some progress has taken place in the area of consumer and health protection. A good 
level of legal alignment has been reached. Howe ver, legislation in the fields of consumer 
product safety and public health, in  particular on reproductive ti ssues and cells, is not yet in 
line with the acquis . Continued efforts are required, also to implement and enforce legislation 
effectively. In the area of c onsumer product safety, Croatia should focus on establishing a 
proper interconnection between RAPEX central contact point and competent local and 
sectoral authorities. In the field of public health, attention should be paid to adequate 
administrative capacity, serious adverse events  and reactions reporting systems as well as 
upgrading and restructuring of f acilities for handling blood, tissues and cells in order to meet 
EU technical requirements. 
4.29. Chapter 29: Customs union 
Good progress has been made in the area of customs legislation . The Regulation on the 
customs tariff for 2008 entered into force in Ja nuary 2008 and ali gned the Croatian tariff with 
the 2008 Combined Nomenclature. Duty relief a pplies to all pharmaceutical products. The 
Act amending the Customs Act and its implemen ting regulation entered into force in July 
2008 and aligned the provisions regulating non-pref erential origin, the guarantee in transit 
procedures, entry of debt in accounts, the time limits for payment of customs debt and 
deferred payment and other privileges. The list of narcotic drugs, psychotropic substances and plants was adopted in April 2008 and aligne d with the classifica tion laid down by the acquis . 
Most of the fees charged by the customs author ities have been abolished; the others will 
remain in force until 31 December 2008. 
EN 65   EN Some discrepancies with the acquis remain in allocation of quotas, duty relief, duty 
exemptions for passengers and the internal tran sit arrangements. Overa ll, alignment of the 
customs rules with the acquis is well on track. 
Good progress can also be reported on administrative and operational capacity . The 
internal audit department has been reinforced and now has a staff of 17 officials; relevant 
auditing procedures have been adopted, including for compulsory reporting and 
implementation of recommendations emerging from the audits. The IT-based centralised risk analysis system was rolled out to all customs offices . As it is still in its initial phase, it needs 
continuous upgrading to keep it effective. The strengthening of the audit department, 
combined with deployment of the centralised sy stem of risk analysis and with improved post-
clearance controls, has ensured more uniform application of customs procedures across all 
customs offices, which was a requirement in the accession negotiations. Work has continued, 
albeit with some delays, on computerisation a nd interconnectivity, another key requirement in 
the accession negotiations. The Croatian cust oms administration still has very limited in-
house capacity to guarantee the continuity of its IT services and remain s heavily dependent on 
external companies. Areas where progress was uneven were the fight ag ainst corruption, with 
a very limited number of cases reported, and detection of in fringements of intellectual 
property, illegal arms and protected species, which remained weak and concentrated in 
specific customs offices. Overall, in the ar ea of administrative and operational capacity, 
Croatia has consistently addre ssed its targets and priorities. 
Conclusion 
Croatia has made good progress on legislative alignment as well with its administrative 
capacity by developing the conditions for uniform application of custom s rules. Progress has 
also continued in the area of IT  interconnectivity. Efforts need to continue in the remaining 
areas of legislative alignment, to fight against corruption, to create the conditions for effective 
implementation of customs rules and to make  further progress on IT interconnectivity. 
4.30. Chapter 30: External relations 
There has been good progress in the field of the common commercial policy . In May 2008, 
Croatia adopted an action plan for the remaini ng preparations in terms of legislation and 
bringing international agreements into conform ity with the acquis which is a key element for 
the accession negotiations in this chapter. This action plan also foresees continuous training in 
all relevant areas. A revised Trade Act pr eparing for the application of the common 
commercial policy was adopted in July 2008. Croatia needs to continue to cooperate and coordinate closely with the Commission and to align with the policies and positions of the EU 
towards third countries and within international organi sations, particularly the World Trade 
Organisation . 
With regard to export insurance, Croatia ha s further aligned its legislation with the acquis  and 
published rules on State aid for short-term  export loans insurance. In relation to dual-use 
goods , Croatia continued to align to with the revised list of  dual-use items and technology. 
Croatia simplified the procedure for issuance of export and import permits for dual-use goods, strengthened provisions on the fight against illicit exports and st arted various training 
activities in order to enhance administrative capacity. It needs to continue to work on the 
remaining adjustments and on further enhanci ng its administrative, control and reporting 
capacity for dual-use goods. Over all, preparations in the area of the common commercial 
policy are well on track. 
EN 66   EN In the area of bilateral agreements with third countries , Croatia actively participates in the 
work of the Central European Free Trade Agreement (CEFTA), which entered into force for all signatory parties in Nove mber 2007. Croatia signed a trade and cooperation agreement as 
well as an investment agreement with Vietnam.  Croatia also signed bilateral investment 
agreements with Lithuania and Azerbaijan. Croatia  has analysed all its existing agreements, in 
particular all investment and trade-related agreements in order to bring them, upon accession, 
into conformity with the acquis . Croatia will now need to continue implementing the Action 
plan as adopted to this effect. Prepar ations in this ar ea are well advanced. 
Some progress can be reported on development policy and humanitarian aid . A new 
department responsible for developmental coopera tion was established within the Ministry of 
Foreign Affairs and European Integrations in November 2007. Croatia currently does not 
collect statistics on development and humanitari an aid in line with OECD/ODA standards, 
however, progress has been made towards meeting the standard. Croatia will need to establish the required legal framework in this area. Ge nerally, preparations in this area are well 
advanced. 
Conclusion 
Croatia has made further progress in this chapte r. Provided Croatia continues preparations as 
scheduled and improves its administrative capacity, it should be able to apply the acquis and 
participate in the common commercial pol icy upon accession. Continued efforts are also 
needed in the areas of developm ent policy and humanitarian aid.  
4.31. Chapter 31: Foreign, security and defence policy 
The regular political dialogue  between the EU and Croatia has continued to cover foreign 
policy issues. ( Concerning neighbourly relations with  other enlargement countries and 
member states, see the section 2.3 under Political criteria.) 
Concerning Common Foreign and Security Policy (CFSP) , Croatia has continued to 
systematically align itself with EU common positions, declarations, and statements. With 
regard to administrative capacity, further trai ning activities have take n place in order to 
develop future capacity to work  with the EU CFSP structures. Th e post of "Political Director" 
in the Ministry for Foreign Affairs and Eur opean Integration remains to be formally 
established. 
In the area of restrictive measures , legislative alignment remains advanced. However, a 
continued strengthening of intera gency coordination is required. 
As regards non-proliferation , the legislative framework for arms control is satisfactory. 
However, there remains a need to further strengthen implementation and enforcement capacity as well as transparency of arms related information. A comprehensive National 
Strategy for the Control of Small Arms and Light Weapons remains to be adopted. 
With regard to the cooperation with international organisations , Croatia has, as a member of 
the UN, OSCE and the Council of Europe, been fully involved in the policy making of these 
organisations. Since January, Croatia has been  a non-permanent member of the UN Security 
Council. As regards the International Criminal Court, see Political  criteria – Regional issues 
and international obligations . 
EN 67   EN There have been no particular developments with regard to security measures  or classified 
information). 
Croatia has remained committed to the development of the European Security and Defence 
Policy (ESDP) including through further training a nd administrative capacity building. 
Croatia has made further commitments to activel y participate in civilia n operations within the 
ESDP in order to strengthen the EU’s crisis  management capacity, in particular in Kosovo10. 
Croatia has continued to take part in intern ational peacekeeping efforts and has increased to 
41 its personnel currently participating in  nine UN peacekeeping missions. Moreover, 200 
Croatian armed forces personnel are deployed in Afghanistan (ISAF). 
Conclusion 
Croatia has continued to make progress in this chapter. Over all, Croatia has reached a good 
level of alignment in the area of Foreign, Secur ity and Defence Policy. In order to be fully 
prepared for accession, Croatia needs to strength en implementation and enforcement of arms 
control including transpar ency of arms-related information, and to further improve capacity 
for full implementation of CFSP-ESDP. 
4.32. Chapter 32: Financial control 
Good progress can be reported in the area of public internal financial control (PIFC ). 
As regards the regulatory framework, in Nove mber 2007 the Croatian government adopted an 
independent development strategy on PIFC fo r local and regional self-government units. A 
Code of Ethics for Internal Auditors was a pproved in January 2008. Furthermore, the Internal 
Auditors' Charter and the rulebooks on internal  audit of budget users and on public financial 
management and control were updated in Ma rch 2008. In July 2008 the new Budget Law was 
adopted, removing inconsistency wi th provisions of the PIFC law. Furthermore, the financial 
inspection was made compatible with the PIFC approach with the new Regulation on 
Budgetary Control in July 2008. 
As regards the institutional framework, the work and responsibilities of the Central 
Harmonisation Unit (CHU) have been further streamlined and enhanced. However, the 
capacity of the CHU and all budget users at centra l and local levels need s to be strengthened 
and there is a need for more sustainable traini ng arrangements that would allow the CHU to 
better focus on PIFC methodology de velopment and co-ordination. 
There has been little progress in the area of external audit , a key element for the accession 
negotiations in this chapter. Although the ne w Strategic Plan for 2008-2012 was adopted in 
December 2007 and the relevant work program for 2008 is being implemented together with 
continuous training for external auditors, the ca pacity of the SAO to perform audit activities 
needs to be enhanced, especially in the field of  auditing of EU funds. Cr oatia also has to make 
appropriate proposals on how to comply with th e need to consolidate the independence of the 
SAO. 
Some progress has been made on protection of the EU's financial interests,  a key element 
for the accession negotiations in this chapte r. Although two regulations were adopted in 
March 2008, including provisions on irregularity reporting on EU  funds and on the scope of 
                                                 
10 Under UN Security Council Resolution 1244 
EN 68   EN the work of the Budget Supervision Sector wi thin the State Treasury of the Ministry of 
Finance, acting as the AFCOS, the above-m entioned legal framework should be further 
improved to cover the overall mechanism of the anti-fraud coordination system to be 
established in the country. In this regard, an Anti-Fraud Stra tegy together with a detailed 
Action Plan covering the specific ro le and responsibilities of a ll bodies involved in the system 
is required. The administrative capacity of  the AFCOS needs to be further enhanced, 
especially with regard to coordinating procedures for recove ry of EU funds a nd their role in 
SF management after accession. Pub lic awareness of anti-fraud i ssues should be raised, based 
on establishment of an efficient system for fraud prevention, detection and follow-up. 
Good progress can be reported on protection of the euro  against counterfeiting , which is a 
key element for the accession negotiations in this chapter. In November 2007, the Croatian National Bank adopted a decision  on medals and tokens simila r to euro coins which lays 
down the procedures for handling suspicious ba nknotes and coins and for protection against 
counterfeiting. It also signed cooperation agreements on preven tion of counterfeiting of the 
euro with the Ministry of the Interior, th e European Central Bank and the European 
Commission (OLAF). In March 2008, the Croati an National Bank endorsed the Decision on 
establishment of the National Counterfeit Ce ntre, the National Analysis Centre and the 
National Coin Analysis Centre that will ente r into force on 1 March 2009. However, further 
efforts are needed to ensure efficient implementation of the regulations and to strengthen the capacity of the new centres. 
Conclusion 
Overall, some progress has been made by Croatian authorities towards fulfilling their 
obligations under this chapter. Continued efforts are needed to establish a strong and adequate 
PIFC system, covering the institutional fram ework. In particular, improvements are still 
needed in the legal basis for the functiona l independence of the SAO and in anti-fraud 
strategy. Moreover, the overall capacity of the CHU and of all budget users at central and 
local levels needs to be further enhanced. 
4.33. Chapter 33: Financial and budgetary provisions 
There has been some progress on this chapter.  The unit for the coordination and management 
of the own resources  system in the Ministry of Finance is  gradually developing its capacity to 
play the coordination role required of it from  accession. The relevant institutions responsible 
for the system of own resources have been defined and an info rmal working group comprising 
representatives of all key inst itutions has been established. 
Although the acquis  in this area does not require transposition, Croatia will need to build the 
capacity of its coordination unit, further deve lop cross-institutional cooperation and adopt 
implementing rules so as to ensure from accessi on the correct calculation, collection, payment 
and control of own resources and repor ting to the EU in line with the acquis . As regards 
traditional own resources, A&B accounts and OWNRES-reporting need to be developed, a 
system for sugar levies and for writing-off i rrecoverable debts introduc ed and post clearance 
control improved. 
The capacity to calculate the VAT base, espe cially the Weighted Average Rate, required 
significant strengthening. The conc rete tasks, responsibilities a nd relations of key institutions 
in the own resources system require furt her streamlining through the development and 
implementation of working procedures, guidelines and manuals. 
EN 69   EN For the GNI resource, further implementation of the ESA 95 concept is needed, together with 
enhancing the exhaustiveness of nati onal accounts and GNI calculations.  
Croatia needs to continue its efforts in underlyi ng policy areas linked to the application of the 
own resources system, in particular customs, taxation, statistics and financial control. This 
includes setting up effective instruments to co mbat customs duty and VAT fraud so that the 
financial interests of th e EU can be protected. 
Conclusion 
There has been some progress in this chapte r, notably the development of a coordination 
structure for own resources. Overall, Croatia ha s reached a good level of alignment with and 
capacity to implement the acquis . Administrative capacity of the coordination structure needs 
to be further built up and rules and procedures  for implementing own resources put in place. 
 
EN 70   EN STATISTICAL ANNEX  
STATISTICAL DATA (as of 29 September 2008)            
Croatia            
            
Basic data Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Population (thousand)  4 537e 4 527e 4 498e b 4 439e 4 445e 4 443e 4 442e 4 444e 4 443e 4 441e 
Total area of the country (km²) 1) 56 542 56 542 5 498e 56 542 56 542 56 594 56 594 56 594 56 594 56 596 
            
National accounts Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Gross domestic product (GDP) (million national currency) 2) 137 604 141 579 152 519 165 640 181 231 198 422 214 983 231 349 250 590 2 75 078 
GDP (million euro) 2) 19 272 18 677 19 955 22 138 24 448 26 216 28 677 31 263 34 221 37 497 
GDP (euro per capita) 2) 4248e 4125e 4437e 4987e 5501e 5901e 6456e 7035e 7702e 8443e 
GDP (in Purchasing Power Standards (PPS) per capi ta)  7 400e 7 400e 8 200e 8 600e 9 300e 9 800e 10 600e 11 100e 11 700e : 
SI: GDP (in PPS per capita, EU-25=100)  42.0e 40.0e 41.3e 41.8e 43.7e 45.6e 47.0e 47.9e 48.1e : 
SI: Growth rate of GDP (national currency, at constant prices, % change on previous year) 2) 2.5 -0.9 2.9 4.4 5.6 5.3 4.3 4.3 4 .8 5.6 
SI: Employment growth (national accounts, % change on pr evious year)  -3.0 -3.3 4.0 -5.4 4.2 0.6 : : : : 
Labour productivity growth: GDP growth per person employed (% change on previous year)  5.8 2.6 -1.2 10.4 1.6 4.7 : : : : 
SI: Unit labour cost growth (national accounts, % change on previous year)  0.9 4.2 -3.3 -5.3 1.5 2.4 : : : : 
SI: Labour productivity (GDP in PPS per person employed, EU-25=100)  51.8e 52.1e 50.5e 55.3e 55.5e 57.5e 58.4 59.4e 59.1e : 
Gross value added by main sectors (%)                      
Agriculture 2) 9.4 9.6 8.8 9.0 8.7 7.0 7.5 7.3 7.1 6.8 
Industry 2) 25.0 24.6 24.7 24.3 23.0 22.8 23.4 23.8 23.5 23.3 
Construction 2) 6.6 5.3 4.6 4.9 5.3 6.3 6.6 6.5 6.8 6.8 
Services 2) 59.0 60.4 61.9 61.8 63.1 63.9 62.5 62.4 62.6 63.0 
Final consumption expenditure, as a share of GDP (%) 3) 85.5 85.4 84.9 82.1 81.9 79.7 78.3 77.4 76.1 75.9 
Households and NPISH, as a share of GDP (%) 3) 60.1 58.9 60.1 60.1 60.4 58.8 57.9 56.9 56.0 55.8 
General government, as a share of GDP (%) 3) 25.4 26.5 24.8 22.0 21.6 21.0 20.4 20.5 20.1 20.1 
Gross fixed capital formation, as a share of GD P (%) 2) 23.3 23.3 21.8 22.3 24.3 28.6 28.1 28.1 29.9 30.0 
Changes in inventories, as a share of GDP (%) 2) 0.7 -0.3 -1.6 1.6 4.8 2.5 2.5 2.9 2.9 2.8 
Exports of goods and services, relative to GDP (%) 2) 39.6 40.9 47.1 48.4 45.3 47.1 47.5 47.1 47.9 47.7 
Imports of goods and services, relative to GDP (%) 2) 49.2 49.3 52.3 54.5 56.4 57.9 56.4 55.5 56.8 56.3 
            
Industry Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Industrial production volume index (2000=100) 4) 99.8 98.3 100.0 106.0 111.8 116.3 120.6 126.7 132.4 139.8 
            
Inflation rate Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Consumer price index (CPI), (total, % change on pr evious year)  : 4.0 4.6 3.8 1.7 1.8 2.1 3.3 3.2 : 
            
Balance of payments Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Balance of payments: current account total (million euro)  : -1 429 -568 -821 -2 099 -1 889 -1 434 -1 976 -2 696 -3 226 
Balance of payments current account: trade balance (million euro)  : -3 102 -3 492 -4 595 -5 958 -6 971 -6 724 -7 518 -8 344 -9  434 
 
EN 71   EN Balance of payments current account: exports of goods (million euro)  : 4 138 4 977 5 327 5 296 5 575 6 607 7 220 8 464 9 193 
Balance of payments current account: imports of goods (million euro)  : 7 240 8 469 9 923 11 253 12 546 13 331 14 738 16 808 18  626 
Balance of payments current account: net services (million euro)  : 1 545 2 470 3 303 3 285 4 933 4 769 5 318 5 710 6 309 
Balance of payments current account: net income (million euro)  : -465 -505 -628 -578 -1 095 -670 -959 -1 170 -1 144 
Balance of payments current account: net current transfe rs (million euro)  : 594 959 1 099 1 152 1 245 1 192 1 184 1 107 1 043 
of which government transfers (million euro)  : -123 25 65 32 71 3 10 -9 -17 
Foreign Direct Investment (FDI) in the reporting economy (million euro)  : 1 363 1 141 1 467 1 138 1 762 950 1 468 2 745 3 597 
            
Public finance Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
General government deficit/surplus, relati ve to GDP (%) 5) : -7.1 -7.5 -6.8 -4.9 -6.2 -4.8 -4.0 -3.0 -2.6 
SI: General government debt, relative to GDP (%)  : 33.0 40.1 41.3 39.8 40.4 42.2 44.0 40.9 38.1 
            
Financial indicators Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Gross foreign debt of the whole economy, relative to GDP (%)  47.6 54.5 61.4 61.4 61.9 75.8 80.0 82.4 85.5 87.8 
Gross foreign debt of the whole economy, relative to total exports (%)  119.4 133.0 130.2 125.9 136.1 151.3 161.0 168.6 172.2 1 79.2 
Money supply: M1 (banknotes, coins, overnight deposits, million euro)  1 846 1 805 2 373 3 216 4 148 4 432 4 505 5 263 6 606 7 901 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro)  : : : : : : : : : : 
Money supply: M3 (M2 plus marketable instruments, million euro)  : : : : : : : : : : 
Total credit by monetary financial institutions to resident s (consolidated) (million euro)  9 131 8 587 9 483 11 891 15 119 16 526 18 417 22 836 27 274 30 863 
Interest rates: day-to-day money rate, per annum (%)  10.3 9.3 6.9 3.0 1.3 4.3 5.9 3.4 2.4 5.6 
Lending interest rate (one year), per annum (%)  20.1 20.9 20.6 19.5 16.5 15.0 14.4 13.1 12.1 12.1 
Deposit interest rate (one year), per annum (%)  9.6 9.5 8.2 6.6 5.4 3.8 3.8 3.9 4.0 4.2 
euro exchange rates: average of period - 1 euro = … national  currency 6) 7.140 7.580 7.643 7.482 7.413 7.569 7.497 7.401 7.325 : 
Effective exchange rate index (2000=100)  : 95.4 100.0 98.7 96.5 93.7 90.4 89.2 : : 
Value of reserve assets (includi ng gold) (million euro)  2 400 3 013 3 783 5 334 5 651 6 554 6 436 7 438 8 725 9 307 
            
External trade Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Trade balance: all goods, all partners (million euro)  : : : : -6 139 -7 071 -6 901 -7 880 -8 853 -9 832 
Value of exports: all goods, all partners (million euro)  : : : : 5 188 5 439 6 454 7 069 8 252 8 855 
Value of imports: all goods, all partners (million euro)  : : : : 11 327 12 510 13 354 14 950 17 105 18 686 
Terms of trade (export price index / import price in dex) 7) : :   -4.0 3.6 0.4 11.3 -15.3 8.2 4.2 
Share of exports to EU-27 countries in value of total exports (%)  : : : : 66.1 68.3 65.8 63.3 64.3 60.9 
Share of imports from EU-27 countries in value of total imports (%)  : : : : 71.9 73.3 71.0 67.9 67.2 64.8 
            
Demography Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Natural growth rate: natural change (births minus deaths) (per 1000 i nhabitants)  -1.2 -1.5 -1.5 -1.9 -2.4 -2.9 -2.1 -2.1 -2.0 -2.4 
Net migration rate: immigrants minus emigrants (per 1000 i nhabitants) 8) 9.8 4.1 5.3 3.8 1.9 2.7 2.6 1.9 1.6 1.3 
Infant mortality rate: deaths of children under one year of age per 1000 live births  8.2 7.7 7.4 7.7 7.0 6.3 6.1 5.7 5.2 5.6 
Life expectancy at birth: male (years)  : : 70.5 71.1 71.2 71.4 72.0 71.8 72.5 72.3 
Life expectancy at birth: female (years)  : : 77.8 78.1 78.3 78.4 79.0 78.8 79.3 79.2 
 
EN 72   EN             
Labour market Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Economic activity rate (15-64): share of  population aged 15-64 that is economically active (%) 9) 62.8 62.6 62.2 62.2 62.9b 62. 4 63.7 63.3 62.6 63.2 
SI: Employment rate (15-64): share of population aged 15-64 that  is in employment (%) 9) 55.3 53.2 51.3 51.8 53.4b 53.4 54.7 55 .0 55.6 57.1 
Share of male population aged 15-64 that is in employment (%) 9) 61.7 59.0 57.4 59.0 60.5b 60.3 61.8 61.7 62.0 64.4 
Share of female population aged 15-64 that is in employment (%) 9) 49.4 47.8 45.5 44.9 46.7b 46.7 47.8 48.6 49.4 50.0 
SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in 
employment (%) 9) 25.6 25.9 24.2 23.7 24.8b 28.4 30.1 32.6 34.3 35.8 
Employment by main sectors (%)                      
Agriculture 9) 16.5 16.7 11.7 15.6 15.5b 16.9 17.0 17.3 14.2 13.0 
Industry 9) 23.5 23.9 22.7 23.1 22.6b 22.1 21.4 20.5 20.9 21.8 
Construction 9) 6.7 6.6 5.9 6.3 7.2b 8.1 8.2 8.2 8.4 8.8 
Services 9) 53.2 52.8 59.6b 55.0 54.6b 52.8 53.2 54.0 56.3 56.4 
SI: Unemployment rate: share of labour force that is unemployed (%) 9) 11.7 14.5 17.0 16.3 14.7b 14.1 13.6 12.6 11.1 9.6 
Share of male labour force that is unemployed (%) 9) 10.6 13.5 15.9 14.4 13.2b 12.8 12.0 11.6 9.8 8.4 
Share of female labour force that is unemployed (%) 9) 12.9 15.7 18.2 18.7 16.5b 15.6 15.6 13.8 12.7 11.2 
Unemployment rate of persons < 25 years: shar e of labour force aged <25 that is unemployed 
(%) 9) 31.0 39.2 43.1 41.7 34.4 35.8 33.8 32.0 28.8 24.0b 
SI: Long-term unemployment rate: share of labour force that is long-term unemployed (%) 10) 5.4 7.3 9.1 10.1 8.9b 8.4 7.3 7.4 6 .7 5.9 
            
Social cohesion Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Average nominal monthly wages and salaries  (national currency) 11) 4 131.0 4 551.0 4 869.0 5 061.0 5 366.0 5 623.0 5985.0b 6 248.0 6  634.0 7 047.0 
Index of real wages and salaries (index of nom inal wages and salaries divided by the CPI) 
(2000=100) 11) 92.4 98.4 100.0 99.2 103.2 106.1 112.2b 113.4 116.6 120.4 
SI: Early school-leavers: share of popul ation aged 18-24 having not completed upper 
secondary education and not currently in education or training (%) 9) : : : : 8.3 8.4 6.2 4.8 5.1 3.9b 
            
Standard of living Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Number of passenger cars per 1000 population  222.2 233.5 254.1 269.3 280.2 291.3 301.3 311.7 323.4 336.1 
Number of subscriptions to cellular m obile telephone services per 1000 population  39.3 79.3 251.2 389.9 520.9 571.4 638.7 821.7 989.9 1 135.0 
            
Infrastructure Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Density of railway network (lines in operation, per 1000 km²)  47.8 47.8 47.8 47.8 47.8 47.7 47.7 47.7 47.7 47.7 
Length of motorways (thousand km)  0.3 0.4 0.4 0.4 0.5 0.6 0.7 0.8 0.9 1.0 
            
Innovation and research Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Spending on human resources (public expenditure on education) relative to GDP (%)  : 4.2 4.5 4.2 4.3 4.5 : : : : 
SI: Gross domestic expenditure on research & development, relative to GDP (%)  : 1.0 1.2 1.1 1.1 1.1 1.2 1.0 0.9 : 
SI: Percentage of households who have Internet access at home (%)  : : : : : : : : : : 
            
Environment Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Total greenhouse gases emissions , CO2 equivalent (tons, 1990=100)  78.1 81.3 81.2 84.9 88.7 93.8 94.6 : : : 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP 2004)  346.0 345.8 330.1 321.9 330.3 321.1 308.3 29 7.6 285.9 : 
SI: Share of renewable energy in electricity consum ption (%)  38.3 45.1 40.0 42.7 33.9 29.4 41.0 58.1 60.5 : 
SI: Road freight transport as a share of total in land freight transport (modal split of freight 
transport) (%)  : : : 75.9 76.4 76.2 76.6 76.0 74.8 74.0 
 
EN 73   EN SI:Structural Indicator 
e: estimate  
f: forecast 
p: provisional b: break in serie 
1. Land area. 
2. For 2005-2007, data is based on quarterly values. 
3. For 2005-2007, data is based on quartel y values; NPISH is not included. 
4. Gross series; include NACE Sections C to E. 
5. GFS 1986 basis. Privatisation revenues are excluded and reclassified to the financing of the balance. 
6. 1999-2006, source: Eurostat. 
7. Calculated on the basis of exports and impor t values expressed in US dollars; break in series in 2004: change in methodology as  of 1 January 2004. 
8. Total number of migrants includes Croatia n citizens and permanently resident forei gners who reported/unre ported their place of permanent residence in the Republic of Croatia at the Ministry of Interior. 
9. For 1998-2001, data refer to the second half of the year; in  2007, data refer to the annua l average of quartely data. 
10. For 1998-2001, data refer to the second half of the year and long- term unemployment refers to thirteen months or more; in 2007,  data refer to the third quarter.  
11. For the period 1998-2003, the persons employed in crafts, trades and as free-lances, as well as in the police and defense-relat ed activities are excluded; from 2004 onwards the number of persons employed in the 
police and defense-related activities are included. 
12. Since 2005, data is obtained by using the in terview method based on a selected sample.             
Energy Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Primary production of all energy products (thousand TOE)  3 983 3 570 3 562 3 730 3 689 3 727 3 852 3 781 4 128 : 
Primary production of crude oil (thousand TOE)  1 825 1 394 1 328 1 232 1 200 1 138 1 079 1 017 985 : 
Primary production of hard coal and lignite (thousand TOE)  31 9 0 0 0 0 0 0 0 : 
Primary production of natural gas (thousand TOE)  1 282 1 267 1 355 1 642 1 732 1 789 1 796 1 854 2 204 : 
Net imports of all energy products (thousand TOE)  3 991 4 427 4 174 4 166 4 967 4 985 5 090 5 234 4 866 : 
Gross inland energy consumption (thousand TOE)  8 037 7 959 7 819 7 959 8 624 8 828 8 842 8 902 8 948 : 
Electricity generation (thousand GWh)  10.9 12.2 10.7 12.2 12.3 12.7 13.3 13.1 13.0 12.5 
            
Agriculture Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Agricultural production volume index of goods  and services (produc er prices, previous 
year=100)  110.1 98.8 88.7 108.5 107.7 84.1 111.9 91.3 104.4 96.0 
Total utilised agricultural area (thousand hectare) 12)     1 169 1 178 1 181 1 200 1 201 1 185b 1 169 1 201 
Livestock: cattle (thousand heads, end of period)  443 438 427 438 417 444 466 471 483 467 
Livestock: pigs (thousand heads, end of period)  1 166 1 362 1 234 1 234 1 286 1 347 1 489 1 205 1 488 1 348 
Livestock: sheep and goats (thousand heads, end of period)  510 567 608 632 677 673 848b 931 783 738 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes)  653 641 626 674 716 686 708 813 870 883 
Crop production: cereals (including ri ce) (thousand tonnes, harvested production)  3 209 2 881 2 312 2 829 3 080 2 014 3 067 3 039 3 034 2 534 
Crop production: sugar beet (thousand tonnes, harvested pr oduction)  1 233 1 114 482 965 1 183 678 1 260 1 338 1 560 1 583 
Crop production: vegetables (thou sand tonnes, harvested production)  : : 196 208 218 154 150 286 304 281