COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 28.10.1998 
COM(1998) 618 final 
Regional Approach to the countries of South-Eastern Europe: 
Compliance with the conditions in the Council Conclusions of 29 April 1997 
COMMISSION COMMUNICATION ON OPERATIONAL CONCLUSIONS 
Bosnia and Herzegovina, Croatia, Federal Republic of Yugoslavia, 
former Yugoslav Republic of Macedonia and Albania 

INTRODUCTION 
In the context of the Regional Approach to the countries of South-Eastern Europe 1, the Council 
established political and economic conditions^ to be fulfilled by these countries, as the basis for a 
coherent and transparent policy towards the development of bilateral relations with these countries in the 
field of trade, financial assistance and economic cooperation, as well as of contractual relations. 
The present Commission Conclusions have been reached on the basis of a factual report^ which reviews 
compliance with these conditions by Bosnia and Herzegovina, Croatia, the Federal Republic of 
Yugoslavia (FRY) - all of which are subject to obligations under the peace agreements - as well as the 
former Yugoslav Republic of Macedonia, and Albania. For each country, compliance has been 
reviewed under the following headings: democratic principles; human rights and the rule of law; respect 
for and protection of minorities; market economy reforms; regional cooperation^; and, in the case of 
Bosnia and Herzegovina, Croatia and the Federal Republic of Yugoslavia, compliance with obligations 
under the Dayton and Erdut Agreements and the Peace Implementation Councils. 
While progress has been made in some areas, the compliance by some countries in the areas of 
democratic reforms, respect for human and minority rights, economic reforms and regional cooperation 
has been less than satisfactory. In particular, for Bosnia and Herzegovina, Croatia and the FRY, 
improvements are necessary with regard to the return of refugees and displaced persons to their place of 
origin, cooperation with the International Criminal Tribunal on former Yugoslavia and the 
implementation of the peace agreements, as well as in the integration of the population of Eastern 
Slavonia (Croatia) and a solution to the Kosovo conflict (FRY). 
At this time, the Commission has therefore concluded that the status quo in relations with the countries 
covered by the Regional Approach should continue. 
1 Conclusions of the General Affairs Council of 26 February 1996, followed by a Commission report on 
common principles for future contractual relations with certain countries in South-Eastern Europe: Report from the 
Commission to the Council and the European Parliament [COM(96)476 final of 2.10.96] 
2 Conclusions of the General Affairs Council of 29 April 1997 
3 Commission Staff Working Paper: Regional Approach to the countries of SouthEastern Europe: 
Compliance with the conditions in the Council Conclusions of 29 April 1997: Bosnia and Herzegovina, Croatia, 
Federal Republic of Yugoslavia, former Yugoslav Republic of Macedonia and Albania [SEC( 1998) ... of ... ! 0.98] 
4 See the Commission Staff Working Paper : Second Report on Economic Relations between the countries of 
SouthEastern Europe concerned by the EU's Regional Approach [SEC(98)381 of 27.2.98] which covers 
developments during 1997 
1 
CONCLUSIONS 
On the basis of the factual report - covering the period to October 1998 - contained in the Commission 
Staff Working Paper on compliance, by the five countries concerned, with the conditions set out in the 
Council Conclusions of 29 April 1997 [SEC (1998) 1727 of 19.10.98], the Commission has reached the 
following conclusions. 
Section 1 
1. BOSNIA AND HERZEGOVINA 
1.1. General assessment 
On democratization and human rights, much work is still ahead. Efforts to favour refugee (in particular 
minority) return are still hampered by the lack of co-operation of BiH authorities, at different levels, in 
the two Entities. Reform of the judiciary is urgent and substantial developments are needed in the fields 
of education, civil society and the fight against fraud. The newly elected BiH authorities should fully 
respect Dayton commitments. 
Certain steps towards market economy reform have been taken (e.g. establishment of a Central Bank, 
introduction of a new currency, Custom code, privatization laws) but major progress is still required for 
the implementation of a transparent and common / harmonized legal and regulatory framework in both 
entities in key sectors such as the monetary and banking system, commercial and tax treatment of private 
companies, and conditions for foreign investment. 
Concerning implementation of the Dayton Accords, basic laws have been adopted and the central 
institutions have been established, under pressure from the High Representative, but these are not yet 
functioning adequately. On freedom of movement, the conditions for a lasting reconciliation have not 
yet been established (independent judiciary; multi-ethnic police; adoption in the RS, and implementation 
in both Entities of property and housing legislation). 
The former RS government had made some progress regarding conditionality, especially in the economic 
field. 
1.2 Operational Conclusions 
Bosnia and Herzegovina continues to benefit from the autonomous trade preferences extended by the 
European Community. 
Bosnia and Herzegovina is not eligible for full PHARE assistance as the relevant conditions have not 
been met. Projects in direct support of the peace agreements, targeted at reconstruction, institution 
building and refugee return (in accordance with the Council Conclusions of 29 April 1997) receive 
PHARE support. A progressive start of full PHARE will depend La. on the will of the newly elected BiH 
authorities, at State and Entity level, to respect the relevant conditionality criteria. 
While the EU Declaration on Bosnia and Herzegovina adopted on 8 June confirmed aspirations 
regarding closer relations, it is still too early, however, to begin negotiations on a Cooperation 
Agreement with the Community. 
2. Croatia 
2.1 General Assessment 
Progress in the different areas has been varied. As in the previous reports, a considerable discrepancy 
persists between official statements and practice on the ground. There has been little or no progress in 
démocratisation or respect for human rights - most notably as regards media and electoral reform. There 
have been some positive developments in preparations for refugee return with the adoption of the Return 
Programme - though it is to be regretted that the adoption process was so difficult. It is too early to 
judge the success of the Return Programme as full implementation is necessary (as with the Programme 
for the Reestablishment of Trust). This will be closely monitored, particularly as actions in this area 
have repercussions beyond Croatia. Respect for Dayton and Erdut obligations - including respect for 
minority rights in Eastern Slavonia - remains problematic. There has been substantial progress in 
cooperation with neighbouring countries. Regarding market economy reform, there has been progress 
in some areas such as privatisation and foreign direct investment, while in particular banking supervision 
remains to be considerably improved. 
2.2 Operational Conclusions 
Croatia continues, at present, to benefit from the autonomous trade preferences extended by the 
European Community. 
While some progress has been made in relation to a few of the relevant conditions, Croatia has not yet 
fulfilled the conditions for additional progress in its relations with the Community, in particular the 
lifting of the suspension of its eligibility for PHARE. Assistance under other Community programs -
including reconstruction - will continue. Notwithstanding that conditions do not exist at present for 
PHARE assistance, the EC has already given substantial assistance (humanitarian assistance, support for 
démocratisation and independent media, and reconstruction) and remains willing to provide more -
paf*ica1aiiy i©f, the return process. Discussion of the possible opening of negotiations on a 
Cooperation Agreement is, at this stage, premature. Progress in relation to the relevant criteria will be 
closely monitored. 
3. Federal Republic of Yugoslavia 
3.1 General Assessment 
The picture is again mixed, with contrasting developments in Serbia and Montenegro. 
The Kosovo issue, which has now resulted in open conflict, dominates developments in Serbia in 
relation to démocratisation, human and minority rights, economic reform and relations with neighbours. 
In terms of respect for democratic principles, the gap between theory and practice remains as wide as 
ever. Human and minority rights are clearly not respected - dramatically so in Kosovo. There have 
been no efforts at economic reform - in fact there has even been back-tracking on a number of policy 
areas such as WTO accession. Relations with neighbouring countries vary, with the potential for further 
deterioration in relations with those bordering Kosovo. 
Measures currently in force against Serbia include an arms embargo, a visa ban, a supply-ban on 
equipment which could be used for terrorism or police repression, a moratorium on export credit, a 
freeze on Serbian / FRY Government funds held abroad, a prohibition on new investment, and a flight 
ban on FRY-registered airlines. 
In Montenegro, by contrast, the positive impulsion towards democratic reform has continued (despite 
continuous pressure from the federal level), with well-conducted elections, increased media freedom, 
respect for minority rights, moves towards economic reform, improving relations with neighbouring 
countries. The welcome provided to displaced persons from Kosovo, and the cooperation of the 
Montenegrin authorities with international aid organisations has been notable. However, there has been 
a recent decision to refuse entry to further internally displaced persons from Kosovo. 
3.2 Operational Conclusions - . 
The FRY, at federal level, has not fulfilled the conditions relating to inclusion in theautonomous trade 
regime, eligibility for the PHARE programme or for the opening of negotiations on a Cooperation 
Agreement. Given the present state of relations with the FRY, and the continuing conflict in Kosovo, 
discussion of any of these would be inappropriate. 
Each of these forms of bilateral relations with the European Community applies to the state (Federal 
Republic of Yugoslavia) as a whole. As these instruments can not therefore be used for the benefit of 
Montenegro, continuing assistance to that republic will be by means of other Community instruments 
e.g. reconstruction assistance (in the fields of agriculture, transport, education and public administration) 
Section 2 
4. Former Yugoslav Republic of Macedonia 
,—<—- ° *• 
4.1. General assessment 
The former .Yugoslav Republic of Macedonia clearly presents a picture of political maturity and is a 
positive example of stability in the region, respecting fully basic democratic principles and the principle 
of regional cooperation. The constructive stance of the former Yugoslav Republic of Macedonia with 
regard to the Kosovo issue is much appreciated, as is the fact that the former Yugoslav Republic of 
Macedonia will actively facilitate the Kosovo Verification Mission, but more attention should be paid to 
the reception of refugees from that conflict. Notable achievements and a credible commitment can be 
observed in the fields of human rights and the rule of law, respect for and protection of minorities, 
market economy reform. Continued attention should be paid to these fields, particularly in the following 
specific areas: public administration reform including the judiciary, law enforcement and local 
government; education for the Albanian minority; minority representation in the security forces; use of 
minority languages; private sector development including the completion and enforcement of the 
appropriate legal framework: the banking sector. 
4.2. Operational conclusions 
The country will continue to benefit from Community assistance, notably in the framework of PHARE 
with a view to achieving further progress in all fields. It is important that all agreed programmes are fully 
implemented, including for public administration reform, private sector development and agriculture. In 
addition to support the pedagogical faculty at Skopje University under the Tempus programme, the 
Commission intends to propose to the authorities of the former Yugoslav Republic of Macedonia, that 
the possibilities of specifically contributing through PHARE to further improvement of inter-ethnic 
relations in the country should be examined jointly, namely in the framework of the public 
administration reform programme or the Municipal Regeneration Fund. 
Regarding contractual relations with the Community, the Cooperation Agreement (including the 
Protocol on Financial Cooperation) and the Agreement in the Field of Transport will continue to be fully 
implemented. Relations will develop on this basis, including in the framework of working parties 
established at the first Cooperation Council of 20/21 March 1998 and Political Dialogue. A possible 
upgrading of relations between the Community and the former Yugoslav Republic of Macedonia will be 
considered at a later stage, taking into account the state of play both of relations under the Cooperation 
Agreement and of assistance under PHARE, as well as developments in the country inter alia in the 
above-mentioned areas. 
5. Albania 
5.1. General assessment 
The process of stabilization, recovery and democratization in the countryand continues to develop rather 
unevenly and is still confronted with severe problems. Political life remains highly confrontational and 
public order rather volatile as highlighted by renewed turmoil in September 1998 followed by a new 
government in October 1998. Progress, in terms of macro-economic stabilization, was confirmed 
throughout 1998, but economic development is vulnerable to continuing political instability and lack of 
public order and security. Continuous efforts are also needed to fully implement ongoing major reforms 
in the financial sector. First steps with respect to institutions and public administration are encouraging 
but should be confirmed and completed by sustained efforts in the fight against fraud and corruption. 
Law enforcement and progress in the field of individual civil rights will also require the effective 
strengthening of the judiciary. Additional effort is also required regarding electronic media. Compliance 
with the principle of regional cooperation is satisfactory. 
5.2. Operational conclusions 
PHARE assistance will be continued with a view to achieving further progress in stabilization, recovery 
and démocratisation in the country, and to enhancing regional cooperation. The implementation of 
agreed programmes, in particular in the fields of public administration reform, agriculture, large 
infrastructure and local community development is of crucial importance. In this context, it is important 
that Albania provides the necessary conditions in terms of public order and security. The stabilization 
and recovery process also presupposes continued efforts to reform the financial sector and to stabilize 
political life. 
Contractual relations with the Community are based on the 1992 Trade and Cooperation Agreement 
and the connected Declaration on Political Dialogue. Relations will develop on that basis. As a follow-
up action to the Joint Committee of 23/24 March 1998, the Commission considers it appropriate to 
examine the possibility of an upgrade of the bilateral trade regime towards a preferential regime 
comparable with regional standards in order to promote the development of exports. To this end a formal 
proposal complementing the existing Trade and Cooperation Agreement would be required. Further 
progress, especially in those political and economic areas where significant problems remain, is urgently 
needed before consideration can be given to more substantial intensification of relations with the EU. 

ISSN 0254-1475 
COM(98) 618 final 
DOCUMENTS 
EN 11 13 02 06 
Catalogue number : CB-CO-98-626-EN-C 
Office for Official Publications of the European Communities 
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