EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 14.10.2009 
SEC(2009) 1333 
COMMISSION STAFF WORKING DOCUMENT 
 
CROATIA 2009 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2009-2010
 
{COM(2009) 533 final} 
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 .......................................................................................................... .. 7 
2.1. Democracy and the rule of law .................................................................................... 7 2.2. Human rights and the protection of minorities .......................................................... 11 2.3. Regional issues and international obligations............................................................ 16 3. Economic criteria ....................................................................................................... 18 3.1. The existence of a functioning market economy ....................................................... 18 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 24 
4. Ability to assume the obligations of membership...................................................... 27 4.1. Chapter 1: Free movement of goods .......................................................................... 27 4.2. Chapter 2: Freedom of movement for workers.......................................................... 29 4.3. Chapter 3: Right of establishment and freedom to provide services ......................... 30 4.4. Chapter 4: Free movement of capital......................................................................... 31 4.5. Chapter 5: Public procurement................................................................................... 32 4.6. Chapter 6: Company law............................................................................................ 33 4.7. Chapter 7: Intellect ual property law........................................................................... 34 
4.8. Chapter 8: Competition Policy................................................................................... 35 4.9. Chapter 9: Financial Services..................................................................................... 36 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 4.16. Chapter 16: Taxation.................................................................................................. 43 4.17. Chapter 17: Economic and Monetary Union ............................................................. 44 
EN 3   EN 4.18. Chapter 18: Statistics.................................................................................................. 4 5 
4.19. Chapter 19: Social Policy and Employment .............................................................. 45 4.20. Chapter 20: Enterprise and Industrial Policy ............................................................. 47 4.21. Chapter 21: Trans European Networks...................................................................... 48 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.................................................... 65 
4.32. Chapter 32: Financial Control.................................................................................... 66 4.33. Chapter 33: Financial an d Budgetary Provisions....................................................... 67 
STATISTICAL ANNEX .......................................................................................................... 69 
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
Croatia 2009 Progress Report 
1. INTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported re gularly to the Council and Parliament on 
progress made by the countries of  the Western Balkans region. 
This report on progress made by Cr oatia in preparing 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 member ship, that is, the acquis expressed 
in the Treaties, the secondary legisl ation, and the policies of the Union. 
The period covered by this report is from early October 2008 to mid- September 2009. Progress is 
measured on the basis of decisions taken, legislat ion adopted and measures implemented. As a rule, 
legislation or measures which are under prepara tion or awaiting parliamentary approval have not 
been taken into account. This a pproach ensures equal treatment acr oss all reports and permits an 
objective assessment. 
The report is based on information gathered an d analysed by the Commission. In addition, many 
sources have been used, includi ng contributions from the governme nt of Croatia, the EU Member 
States, European Parliament reports1, and information from various international and non-
governmental organisations. 
The Commission draws detailed co nclusions regarding 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 the stat us of candidate country to Croatia. Accession 
negotiations with Croatia were opened in Oc tober 2005. The Stabilis ation and Association 
Agreement between Croatia and the EU was signe d in October 2001 and en tered into force in 
February 2005. 
                                                 
1 The rapporteur for Croatia is Mr Hannes Swoboda.  
2 Enlargement Strategy and Main Challenges 2009-2010 (COM(2009) 533 of 14.10.2009). 
EN 5   EN 1.3. Relations between the EU and Croatia 
Croatia is participating in the St abilisation and Association Process. 
Accession negotiations with Croatia  have continued. Negotiations have been opened  on 28 out of 
35 chapters ( science and research; education and culture; economic and monetary policy; 
enterprise and industrial policy; customs union; intellectual property rights; right of establishment 
and freedom to provide services; company law; statistics; financi al services; financial control; 
information society and media; c onsumer and health protection; external relations; financial and 
budgetary provisions; TENs; transport; energy; fr ee movement of workers; social policy and 
employment; free movement of goods; public procurem ent; justice, freedom and security; taxation; 
free movement of capital; regi onal policy; food safe ty, veterinary and phyto sanitary policy; 
agriculture and rural development ) and provisionally closed on twelve ( science and research; 
education and culture; enterprise and indus trial policy; external  relations; EMU; IPR;  information 
society; TENs; customs union; company la w; statistics; free movement of workers ).  
In addition, there are currently six draft EU  negotiating positions in Council. Of these  three are 
opening positions ( environment; foreign, security  and defence policy; fisheries ) and three are 
closing positions ( consumer and health protection , financial services, energy ). 
In its communication on enlarg ement strategy adopted on 5 November 2008, the Commission 
proposed an indicative road map for reaching the fi nal stage of accession negotiations with Croatia. 
The Commission stated that it should be possibl e to reach this final stage by the end of 2009, 
provided Croatia fulfils all the n ecessary conditions. Croatia has ma de good overall progress in line 
with the roadmap. The roadmap has successfully galvanised efforts in Croatia aimed at meeting the 
benchmarks in order to open and close the chapte rs according to the indi cative timetable of the 
roadmap.  
However, the border issue between Slovenia and Croatia held back the accession negotiations 
such that a substantial number of chapters could not be opene d or closed until October 2009, 
although technically finalised earlier.  The Commission has provided its fa cilitation services to settle 
this dispute, which should remain a bilateral issue. Intensive efforts by the Commission, supported 
by the Trio of Presidencies, have been made over  six months, which paved the way for a political 
agreement between the two part ies reached in September 2009.  The Commission welcomes the 
recent progress that led to a substantial number of  chapters being opened and closed at the Inter-
governmental conference in Octo ber. Bilateral issues should not hold back the accession 
negotiations. 
Moreover, delays in Croatia itself in certain areas mean certain chapters have not progressed in line 
with the roadmap. This concerns in pa rticular the opening of chapters on the judiciary and 
fundamental rights  and competition , but also the closing of chapters such as transport .  
Notwithstanding this, overall the progress achieved in Croatia in numerous chapters means that 
technical preparations in the negotiati ons are now nearing their final phase.  
The political and economic dialogue between the EU and Cr oatia has continued. Political dialogue 
meetings were held in Luxembourg in April at mi nisterial level and in Brussels in June 2009 at 
senior official level. Economic dialogue meetings were held in Luxembourg in April at ministerial 
level and in July 2009 at senior o fficial level. These meetings focu sed on the main challenges faced 
by Croatia under the Copenhagen political and econom ic criteria and reviewed progress being made 
towards fulfilment of Accession Partnership priorities. 
EN 6   EN Implementation of the Stabilisation and  Association Agreement (SAA) has been uneven. Positive 
developments in the shipbuilding and taxation ar ea have been recently accompanied by measures 
creating difficulties for EU operators wh en exporting to Croatia. With regard to State aid 
provisions, in particular as regards aid granted to the shipbuilding sector, the issue has now been 
largely resolved with the publication of tenders for the shipyards in difficulty with a view to their 
restructuring through privatisati on. Croatia has also eliminated the discriminatory taxation of 
cigarettes (see Chapter 16). Following the entry in to force of amended legislation in February 2009, 
EU nationals are now entitled to acquire ownership rights over real estate under the same conditions 
as Croatian nationals, in line with the obligations under the S AA. Following turbulence in the 
global financial markets, Croatia has applied the sa feguard clause of Article  60(4) to postpone the 
liberalisation of certain short-te rm capital movements. In recent months, a number of measures 
applied by Croatia have resulted  in increased import duties on a number of products exported from 
the EU. Discussions are ongoing to address thes e issues in the framework of the SAA. 
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 Association Council met in April 2009 and the SAA Association Committee in 
December 2008. Seven sectoral sub-committee mee tings have been held since November 2008. 
Based on the Accession Partnership, Croatia adopt ed its national programme for EU accession in 
spring 2009. 
Financial assistance  is provided under the new Instrument  for Pre-accession Assistance (IPA) from 
2007. The 2009 IPA programmes amounted to € 151 milli on. This assistance is concentrated on 
institution building and preparation for the implem entation of the EU’s comm on agricultural policy 
and cohesion policy. In addition,  Croatia continued to benef it from regional and horizontal 
programmes. Croatia has taken a number of import ant steps to address weaknesses identified by the 
Commission in Croatia’s management of pre-acce ssion aid. These steps ha ve led to conferral on 
Croatia of decentralised management powers fo r IPA components I to IV. A track record of 
improved implementation is needed.  
EU financial support has been provided to civil society development under the Civil Society 
Facility. A € 2.5 million grant scheme was set up under IPA 2009 with the aim of providing civil 
society organisations with the knowledge and sk ills to enhance their role in the fields of 
democratisation, human rights and refugee return, as well as promoting innovative social service 
delivery programmes. In addition, a € 16 million contribution under the Cross Border Cooperation programmes with Italy, Slovenia, Hungary, Serbia , Montenegro, and Bosnia and Herzegovina as 
well as participation in ERDF programmes w ill promote dialogue with local and regional 
authorities. Croatia’s participation in an increasi ng number of Community prog rammes (11) is also 
an important tool to implement civil society dialogue. 
In response to the economic crisis, an IPA crisis package  has been created, comprising €200 
million for the Western Balkan region which are expected to leverage investments of at least €1 billion, co-financed by the partner financial institu tions. The country will benefit from a share of 
multi-beneficiary funds for competitiveness, SMEs, energy efficiency and banking sector 
regulation. As a candidate countr y, Croatia has been benefiting si nce 2007 from funding under IPA 
component III (roughly € 142 million cumulated since that year) for reinforcing the competitiveness of the economy – thus helping to cope with the cr isis – through major infrastr ucture projects in the 
fields of transport (railway and inland waterway  infrastructure), environment (treatment and 
disposal of solid waste, waste wa ter), as well as support to SMEs. 
EN 7   EN 2. POLITICAL CRITERIA  
This section examines the progress made by Cr oatia towards meeting the Copenhagen political 
criteria, which require stability of institutions guaranteeing democracy, the rule of law, human 
rights and respect for and protection of minorities.  It also monitors regional cooperation, good 
neighbourly relations with enlargem ent countries and Member States, and respect for international 
obligations, such as cooperation with the Interna tional Criminal Tribunal for the former Yugoslavia 
(ICTY). 
2.1. Democracy and the rule of law 
Parliament  Parliament generally functioned we ll, fulfilling its constitutional role. However, there is scope for 
improving the level of parliamentary sc rutiny in the legislative process.  
The Administrative Court annulled in February 2009 parliament’s c ontroversial appointment of a 
Constitutional Court judge, ruling that the judge  had not fulfilled the n ecessary professional 
requirements. The Constitutional Court subsequently overruled the Administrative Court decision such that parliament’s appointment became final. 
Parliament lifted the immunity from detention of a Member of Parliament convicted of war crimes 
charges. This was only after the first instance verd ict was issued. However, the delay in taking the 
decision allowed the Member of Parliament to ab scond the country once he had been sentenced and 
found guilty. 
Government  
The Government generally remained stable and c ontinued to function normally, despite occasional 
political differences in the coalit ion, including the departure of th e Pensioners' Party (one Member 
of Parliament) from the coaliti on in August, cabinet reshuffles  and the appointment of a new 
Government under Prime Minister Jadranka Kosor following the resignation in July 2009 of the 
then Prime Minister Ivo Sanader.  
In October 2008 the then Mini ster of the Interior and Minister of Justice, as  well as the Head of 
Police, were all replaced. This was prompted by the killings of a lawyer and a journalist in Zagreb. 
The new ministers, who remained in the new Government after July 2009, are not members of 
ruling coalition parties and are considered experts in their fields.  
Local elections were held in May, including for the first time direct elections of City Mayors and 
County Prefects. The elections were held in an  orderly manner with an increased turnout.  
Public administration  
Some progress has been made on public admini stration reform, which is a key Accession 
Partnership priority. A new La w on General Administrative Procedures (LGAP) was adopted, 
aimed at supporting the establishment of service-or iented and professional administrative practice. 
Following the appointment of a new cabinet in July  2009, a new post of Minist er for Administration 
was created. The capacity of the newly created Mi nistry of Administration (formerly the Central 
State Office for Administration) has further im proved. Following the Amendments to the Civil 
Service Code of Ethics, the role and the re sponsibilities of the Ethics Committee and the 
competences of Ethics Co mmissioners were defined.
 The Government adopted a National Training 
EN 8   EN Strategy for Officials and Servants in Local  and Regional Self-Government Units 2009-2013. It 
aims to improve the capacities of  local self-government in provi ding decentralised services to 
citizens.  
However, public administration reform has so far not received sufficient political attention. The 
appointment of a Minister for Administration pr ovides an opportunity to inject the necessary 
political impetus into the reform process. Major weaknesses in administrative procedures remain 
and implementation of the new LGAP has not yet begun. The legal basis for building a modern and 
professional civil service is still incomplete. The draft Law on Civil Service Salaries has still not 
been adopted and a merit–based system of promo tion and remuneration is missing. The civil service 
continues to suffer from many shortcomings, such as politicisation, low sa laries (which fail to 
attract and retain sufficient numbers of qualified civ il servants), lack of cl ear performance appraisal 
indicators, and weak human resources planning and management. Civil service salaries have been 
further cut to mitigate the effects of the fina ncial crisis and a recruitment freeze introduced. 
Decision-making continues to be highly centralised with limited delegation of powers to middle and 
lower level management, leading to in efficiencies. The lack of an eff ective civil service registry still 
needs to be addressed. The law on  the Ombudsman needs to be pr operly implemented so as to 
increase the effectiveness of the Ombudsman's recommendations. Anti-cor ruption measures and 
ethical principles remain to be embedded in public administration and the cooperation between 
different public stakeholders improved. With re gard to the employment  of national minorities, 
employment records in local and regional se lf-government units are not yet completed.  
The Decentralisation Strategy has not been adopted, due to a lack of engage ment at the political 
level. Overall coordination involving  the line ministries at both pol itical and techni cal levels is 
lacking, as is a dialogue among central and local governments. Training and improvement of the 
professional skills and knowledge of the Croatian au thorities at central, regional and local level is 
not satisfactory.  
Overall , some progress has been achi eved in the area of public administration reform. Further 
efforts have to be made to substantially impr ove administrative procedur es and to establish a 
professional, depoliticised civil service, able to fully respect the rule of law and with sufficient capacity to deliver quality services.  
Following the appointment of a new Head of Po lice in October 2008 ther e were considerable 
changes in the staffing of the police, many of wh ich were aimed at depoliticising key posts and 
improving professionalism. A number of persons in key positions were replaced, with the new 
appointments contributing to improvements at the ma nagerial level. However, the Head of Police 
appointed in October 2008 was removed from hi s post in June 2009 and appointed as a State 
Secretary in the Ministry of Interior. Other ke y positions were also refilled. The reforms evident 
since October 2008 need to continue.  
Civilian oversight of the security forces 
Reform of the security and intelligence system has continued. With the necessary legislation in 
place and implemented, the intelligence services’ conduct and scope of control has further improved. However, the legitimate interest of the St ate 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 security services is generally assured.  
Judicial system  
EN 9   EN Implementation of the  judicial reform strategy has continued and a la rge volume of new legislation 
was adopted, in line with the key Accession Partnership priority in this area. The Ministry of Justice 
was reorganised and the direct orate for strategic development reinforced. A new selection 
procedure for judicial trainees was introduced . The backlog of cases was reduced by 8.4% to 
887,000 in December 2008. Good progress was made on reducing the number of old civil and 
criminal cases by 31% and 52% to 102, 430 and 4,408 respectively. The new law on 
misdemeanours, the new civil procedure code, and th e amended law on courts  have contributed to 
reducing the inflow of new cases . New provisions of the criminal  procedure code substantially 
modify the judicial investigation, transferri ng competence to the St ate Prosecutor. The new 
provisions apply from July 2009 for organised crim e and corruption cases and as of 2011 for other 
cases. Special chambers for dealing with organise d crime and corruption cases have been set up in 
four County Courts. Steps were taken to rationa lise the court ne twork. The number of municipal 
courts was formally reduced from 108 to 67 and th e number of State Attorney's Offices from 71 to 
55. The judicial academy continued to carry out its in–service prof essional training programme, and 
initial training programmes for judicial trainees and advi sers started in April 2009.  
However, the selection procedure for judges and prosecutors remains deficient, lacking 
transparency and the application of uniform, objective criteria. Th e overall case backlog and the 
number of unresolved cases older th an three years remain high and th e length of judicial procedures 
excessive. Problems with the enforcement of cour t rulings constitute a major obstacle to the 
efficiency of the judicial system. Court rationali sation has not yet begun in earnest, with very few 
physical mergers. Current plans lack ambition and clear budgeting. The draft law foreseeing the 
reduction in the number of misdemeanour courts from 114 to 61 has been  pending approval in 
parliament for one year. There is still no unified  statistical system of case management in the 
judiciary. Introduction of th e integrated case management syst em is delayed. Further improvements 
in the accountability, independence, professiona lism and competence of the judiciary are also 
required. The potential for undue political influen ce over the judiciary rema ins. The independence 
of the judiciary needs to be increa sed, and the role of the executive a nd parliament in issues such as 
judicial appointments reviewed. The judici al academy remains understaffed, without either 
permanent premises or an adequate budget to perfor m its duties. Initial training for future judges 
and prosecutors is still missing. The handling of administrative cases as well as the use of 
alternative dispute resolution co ntinues to face particular cha llenges. Adequate monitoring of 
reform measures has not been possible due to co ntinued limits on administrative capacity. There is 
only limited assessment of the impact of new measures. 
With regard to domestic prosecutions for war crim es, Croatia continues to be active in trying war 
crimes cases on its own initiative, with around thirty trials in the past year. A more balanced approach is slowly becoming evident with a greater willingness to prosecute perpetrators 
irrespective of ethnicity. This is  a key Accession Partnership priority. Further progress has been 
made on regional cooperation on war crimes matters . The State Attorney issued instructions to 
prosecutors in October 2008 aimed at addressing the problem of a common standard of criminal 
accountability for war crimes not being applie d irrespective of ethnicity. The issue of in absentia  
verdicts from the 1990s has been partially a ddressed through an amendment to the criminal 
procedure code allowing wider possibilities to review cases. 
However, impunity for war crimes remains a probl em, especially where victims were ethnic Serbs 
or perpetrators were allegedly members of th e Croatian armed forces. Many crimes remain 
unprosecuted, often due to a combination of lack of evidence, unwillingness of witnesses to come 
forward, e.g. due to intimidation, and unwilli ngness or reluctance of police and prosecutors, 
particularly in certain localities. There has been no further transfer of  cases from local to specialised 
war crimes courts. Where cases are brought, judgment s often take the convicted person’s role in the 
EN 10   EN defence of the homeland as a mitigating factor, wh ich creates a clear ethnic bias in sentencing for 
comparable crimes. There is so far only a limited track record of implementation of new review provisions for in absentia  cases from the 1990s.  
Overall,  reforms in the judiciary continue but the im pact of various newly introduced measures 
remains to be tested in practice. Significant challenges remain, particularly as regards judicial independence and the lack of tran sparent selection procedures fo r judges and prosecutors and as 
regards judicial efficiency, not least the length  of proceedings and enforcement of decisions.  
(See also Chapter 23 — Judiciary and fundamental rights) 
Anti-corruption policy  
There has been some progress in the fight against corruption . Implementation of the Anti-
Corruption Strategy and related Action Plan has c ontinued, which is a key Accession Partnership 
priority in this area. The legal framework to combat organised crime and corruption has been 
further improved. Amendments to the Criminal Code introduced new rules on confiscation of assets 
which reverse the burden of proof for persons convi cted for organised crime or corruption offences. 
The National Council for monitoring the anti-co rruption strategy has beco me more proactive, 
regularly holding public debates and hearings. A national anti -corruption campaign for the general 
public was launched. A National Police Office for the Fight Against Corruption and Organised 
Crime (PNUSKOK) has been operational within th e General Police Directorate since February 
2009. The Office for the Fight Against Corruption a nd Organised Crime (USKOK) continues to be 
active and has issued indictments in some important  cases. It has begun to investigate possible high 
level corruption, initia ting an investigation of a case involvi ng a former government minister. There 
have been the first verdicts in some importa nt cases brought by USKOK. In the second ‘Maestro’ 
trial, the Zagreb County Court issued prison sent ences against two former vice-presidents of the 
Croatian Privatisation Fund (HFP). 
However, corruption is st ill prevalent in many areas. The rece ntly upgraded legal and administrative 
structures remain to be tested in practice. While the total number of corrupti on cases investigated so 
far has increased, the actual numb er of prosecutions remains low.
 There has been limited 
investigation of high-level corrup tion, the prosecution of which is fr ustrated by political influence. 
A culture of political accountability for the corru ption being uncovered by USKOK is lacking. The 
administrative capacity of State bodies for fighting corruption c ontinues to need improvement. 
Overall coordination of implementation of anti-cor ruption efforts still faces shortcomings. There 
has been no progress in preven ting conflicts of interest. The Committee for the Prevention of 
Conflicts of Interest (CPCI) was re-established af ter a period of interruption but has not established 
a strong preventive role for itself. While this body has issued guideline s for State officials, there has 
been little progress in preventing conflicts of interest. Efficient non-partisan monitoring of anti-
corruption efforts is still not established.  
On the prosecution front, in order to be able to conduct complex fina ncial investigati ons in the field 
of organised crime and corrupti on USKOK as well as PNUSKOK need to improve their expertise 
on financial issues as well as further enhance th eir cooperation with other bodies. In order to 
prevent corruption, greater transpar ency in public administration is  required. Shortcomings remain 
as regards the financing of political parties and election campaigns. Implementation of the law on access to information needs further improvement. P ublic procurement remains a major source of 
corruption. Significantly improved scrutiny of act ual execution of contr acts is essential. (See also 
Chapter 23 — Judiciary and fundamental rights)  
EN 11   EN Overall,  anti-corruption efforts continue and are pr oducing initial results, but corruption remains 
prevalent in many areas and tool s are not being deploye d with sufficient vi gour, especially on 
political corruption. 
2.2. Human rights and the protection of minorities 
Observance of international human rights law There were no new ratifications of human rights instruments , as Croatia had ra tified already in 
previous years most of the UN and Council of Eur ope core instruments. The Criminal Code has 
been amended with the aim of further aligning with the Council Framework Decision on combating 
Terrorism and the Council of Europe (CoE ) Convention on suppression of Terrorism.  
As of September 2009, there were 873 cas es against Croatia pending before the European Court of 
Human Rights  (ECtHR). The ECtHR delivered 19 judgments  finding that Croati a had violated the 
European Human Rights Convention. As in previous years, the Court conti nued to find violations 
regarding the right to a fair trial and the le ngth of the proceedings under Article 6 of the 
Convention. That has also incr easingly encompassed the length of  enforcement proceedings. The 
Court has also found violations of  Article 13 — lack of an effec tive remedy in cases where local 
courts failed to issue verdicts following previous judgments on viol ations of the right to a fair 
hearing/length of proceedings by the Constitutional Court. The ECtHR concluded that in those particular cases remedies provided in the do mestic legal system through recourse to the 
constitutional court were not effective.  
The European Court of Human Right s has also condemned Croatia for different aspects of Article 6 
regarding the dismissal of the form er President of the Supreme Cour t of the Republic of Croatia. It 
has been established that the procedures before the State Judicial Council did not ensure the fairness 
of the proceedings.  
The promotion and enforcement of human rights  is often compromised by the overall 
shortcomings in the administration of justice. This relates especially to the length of proceedings in 
the judicial system. 
Civil and political rights 
With regard to prevention of torture and ill-t reatment and the fight against impunity  the 
Ombudsman continued to receive a number of compla ints regarding the exce ssive use of force by 
the police. In this context, the Ombudsman repeat edly called for more transparent procedures for 
the determination of police res ponsibility as well as better  regulation of police actions. 
There has been no proper follow-up  regarding the prominent case of forced hospitalisation reported 
on in the 2008 Progress Report. 
As regards impunity, many war crimes  are still unprosecuted, especial ly those where the victims are 
ethnic Serbs. According to the State Prosec utor, there are still some 600 cases to be 
investigated/prosecuted. In addition, there are se veral hundred cases which have yet to reach the 
Prosecutor due to lack of  initial police investig ation. Convicted persons are on occasion able to 
escape and shelter within the region due to dual ci tizenship and a lack of extradition agreements. 
As regards access to justice , the Law on Legal Aid began to be implemented in February 2009. The 
necessary implementing legislation has been adopted  and several legal NGOs have been registered 
with the Ministry of Justice. The institutiona l framework set up for implementation of the law 
EN 12   EN comprises a Department for Free Legal Aid within the Ministry of Justice, 20 State administration 
offices in counties and 13 branch offices as well as a Legal Aid Co mmission. However, the 
complexity of the procedure, low fees for lawyer s relative to their normal tariffs and significant 
reductions in the budget for legal aid provision mi ght not guarantee proper access to justice. 
Effective implementation of the free legal aid syst em is also jeopardised by the unequal territorial 
distribution of NGO legal providers.  
With regard to the prison system , further measures have been ta ken to improve pr ison conditions, 
in particular the management of the prison sy stem. The Law on enforcement of prison terms was 
adopted in 2008, providing for the expansion of exis ting facilities and improved health care. 171 
additional staff were recruited and trained. However, Croatian prisons remain overcrowded, with 
the number of detainees increasing due to longer pr ison sentences introduced in the Criminal Code. 
Probation remains to be introduced as  an alternative to detention. Th ere is still a lack of trained 
prison staff. There have been cases of abuse of  office and corruption among prison staff that have 
favoured certain prisoners. First efforts ha ve been made to ad dress this issue. 
Freedom of expression , including freedom and pluralism of th e media, is provided for in Croatian 
law and is generally respected. However, threats against journalists worki ng on cases of corruption 
and organised crime have been increasing. Th ere has been limited success in identifying and 
prosecuting perpetrators and inst igators of certain physical attacks on journalists. Editors and 
journalists continue to  report undue political pressure. Concerns about  freedom of expression 
persist, including at the local level. 
There have been no particul ar difficulties as regards freedom of assembly and association . 
Civil society organisations  play an important role in the prom otion and protection of human rights, 
democracy and protection of minori ties. However, they continue to have difficulty influencing 
policy debate, partly due to th e government tending not to incl ude them in the policy-making 
process. With a few notable exceptions, NGOs rema in 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 polit ical rights continue to be reasonably well 
respected in Croatia. However, shortcomings as regards impunity for war crimes, access to justice 
and freedom of expression require further attention. 
Economic and social rights 
There has been some progress in the area of women’s rights and gender equality.  
Implementation of the new Gender Equality Act and of the national policy for the promotion of 
gender equality continued. Implementation of the national strategy for protection against domestic violence 2008-2010 has improved. There has been furthe r progress in police work in cases of family 
violence. The Ombudsman for Gender Equality makes use of all available instruments and reports 
by public bodies and enterprises respond in a satis factory manner. There ha s been good cooperation 
between the authorities and the Ombudsman, especially on the new anti-discrimination legislation. 
The political participa tion of women improved following the local elections held in May 2009.  
However, the situation of women on the labour market remained unchanged. Women are affected 
disproportionately by the widespread  use of fixed term contracts. This discourages them from 
complaining about discrimination. The professionalis m of social welfare centres and staff training 
in cases of domestic violence needs further improve ment. Despite provisions of the Gender Equality 
EN 13   EN Act requiring all public administra tion bodies, at the central , local and regional level, as well as 
other institutions to collect, process and present da ta disaggregated by gender, such data is still 
missing.  
(see also Chapter 19) 
There has been little progress in the area of  children’s rights . The Ombudsman for Children 
continued to be effective in his role in the overa ll promotion and protection of children’s rights. In 
2008, the Ombudsman for Children dealt with 2,075 ne w cases. He noted a small decrease in 
reports of violence in the family. There has b een good cooperation between the authorities and the 
ombudsman, especially on the new anti-discrimi nation legislation. A National Programme for 
Young People 2009-2013 has been adopted. 
However, violence among and against children in  educational institutions has increased. Social 
welfare institutions and correc tional facilities remain understa ffed and overburdened. The number 
of children in institutions has increased. Implementation of measures envisaged under the national plan of activities for the rights and interests of childre n for the period of 2006-2012 has been further 
delayed. There is poor c oordination between ministries with re gard to children’s rights. Judicial 
backlogs and the lack of trai ned judges have a negative impact on the situation of children, 
particularly in cases of family separation and in unpaid alimony cases. Amen dments to the family 
law from 2007 have not produced the expected re sults in terms of reducing the non-payment of 
alimony. 
Progress has been good in the area of socially vulnerable andpersons with disabilities . 
The Office of the Ombudsman for Persons with Di sabilities (OPD) was inaugurated in November 
2008 and was adequately staffed in April 2009. Th e OPD has been successful in carving out a 
visible role for itself. Public bodies and priv ate enterprises are responsive to recommendations 
received by the OPD. A good indicator for concrete  improvement is that today, almost all new 
buildings under constructi on take into account the need for accessi bility of the building to disabled 
persons. The office in practice deals more with requests for information than with individual 
complaints. The media have been very cooperative in disseminating awarene ss-raising information. 
There has been good cooperation between the aut horities and the ombudsman, especially on the 
new anti-discrimination legislation. 
However, more progress is needed in the field of  de-institutionalisation, including for children with 
disabilities. This is among the pr iorities set out in the Joint In clusion Memorandum (JIM) and the 
related National Implementation Plan. Despite the prov isions of the JIM, data on exclusion is still 
missing. Civil society organisations involved in de livering community-based services need to be 
adequately supported in order to de velop sufficiently community-based services as an alternative to 
institutionalisation. In general, serious inade quacies in the social welfare system remain. (see also 
Chapter 19 – Social policy and employment) 
With regard to labour and trade union rights , there has been some progress ( see also Chapter 19 
— Social policy and employment ). Against a challenging economic background, the trade unions 
are increasingly gaining the ability to influen ce government policy and decision making. However, 
the monitoring and follow-up by the State Inspectorat e and the judicial system of violations of 
workers’ rights remains weak. 
The new anti-discrimination  law is in an early phase of  implementation. The Ombudsman has 
started to exercise his new responsibilities. Ho wever, proper implementation of the new law is 
jeopardised by recent budget cuts. Discrimination against minorities remains a particular problem 
EN 14   EN (see below). There has been no progress with imple mentation of hate crime legislation. There has 
been no conviction for the criminal offence of the initiation of racial and other hatred. More needs 
to be done to tackle discrimination on grounds of  sexual orientation. Lesbian, gay, bisexual and 
transgender people are subjected to threats and a ttacks. Many cases are not followed-up adequately 
by the police and prosecutors, or remain unreported. 
The level of protection against discrimination in practice and the judicial prosecution of acts of 
discrimination is not in li ne with EU standards.  
Property rights  are generally assured. The outstanding ca ses of delayed prope rty repossessions and 
problems with compensation for the use of private property taken under the war legislation from the 
1990s continue to be present.  
Overall,  legal protection for economic a nd social rights is partiall y guaranteed. Implementation of 
women’s and children’s rights and pr otection against all forms of disc rimination needs to be further 
improved in practice. 
Minority rights, cultural right s and protection of minorities 
There has been some progress in the area of  minority rights, cultural rights and protection of 
minorities . 
High-level public expressions of commitment to th e rights of minorities, rea ffirming their place in 
Croatian society, have continued. The eight minority MPs are in th e governing coalition. The Roma 
minority has continued to receive attention, with im provements particularly in pre-school education. 
Round tables and public discussion s have been held on the cons titutional law on the rights of 
national minorities (CLRNM), in particular c oncerning minority employment in the State 
administration and judiciary. With regard to cultu ral rights, the education provisions of the CLRNM 
and other laws relevant to minor ities generally continue to be implemented satisfactorily. With 
regard to the perception of national minorities in the media, negative stereotyping has further decreased. 
However, many problems remain for minorities. Minorit ies continue to face pa rticular difficulties in 
the area of employment, both in  terms of under-representation in the State administration, the 
judiciary and the police as well as in the wider p ublic sector. Limited progress has been made with 
regard to the implementation of the CLRNM, wh ich is a key Accession Partnership priority. The 
implementation of the recruitment plan for national minorities has not seen a significant increase in 
minority employment in the State administration. Pl ans for employment in the administration at 
county, town and municipality le vel are still not adequate. A l ong–term strategy to implement the 
CLRNM minority employment provisions is lacking. Adequate statistics to  allow proper monitoring 
are not available.  
Despite increased financial s upport, the Councils for National Minorities (CNMs) are not 
sufficiently recognised yet as adviso ry bodies by the majority of lo cal authorities. Moreover, their 
independence and influence is a ffected by the fact that they depend on the budget of the town 
authority or council. 
Legal provisions and programmes n eed to be implemented with more determination, and adequate 
monitoring assured, especially in th e area of employment. There contin ues to be little progress with 
regard to the production and/or broadcasting of programmes for mi norities in their languages by 
public radio and TV stations, as  envisaged under the CLRNM.  
EN 15   EN With regard to the Serb minority , there have been fewer reports of ethnically motivated attacks. 
Police investigations of such incidents have improved, althou gh few cases end in prosecution. Many 
cases remain unreported due to a lack of confid ence in the authorities and the occurrence of 
negative sentiment in the wider public towards Serbs. Members of the Serb minority, including those who remained in Croatia during the war, face difficulties concerning access to employment, 
especially in the war-affect ed areas. Discrimination continues, part icularly in the public sector at the 
local level. Croatia needs to encourage a spirit of tolerance towards the Serb minority and take 
appropriate measures to protect t hose who may still be s ubject to threats or act s of discrimination, 
hostility or violence.  
There has been some progress on the various outstanding issues regarding refugees . 
Around 1,345 refugees and 380 displaced persons returned  to their place of origin in Croatia in 
2008-2009. The total number of Serb minority returns to Croatia now stands at 108,466 in addition 
to 23,231 internally displaced Serbs who have returned to their home towns and villages. There has 
been progress in provid ing housing solutions to returning re fugees. The programme to reconnect 
public infrastructure in certain return villages and mine clearance operations have continued. 
Despite significant progress in recent years in the ar ea of return and (re)inte gration in the signatory 
countries of the Sarajevo Declar ation, a total of some 80,000 Croatia n Serbs are still registered as 
refugees in the region, the va st majority in Serbia.  
A number of obstacles to sustainable return of Serb refugees remain, the main one being housing, 
particularly for former tenancy rights holders . Implementation of the Croatian government’s 
housing care programmes (HCP) within and outside the Areas of Special State Concern (ASSC) for 
former tenancy rights holders who wish to return to Croatia has progressed well over the past year 
but is lagging behind the planned timetable. Defin itively settling all cases in this area is a key 
Accession Partnership priority. 
In total, as of September 2009, 13,695 HCP applications had b een filed. Out of this number 8,888 
had been positively decided, of which 6,198 cases had received housing assistance. 2,567 cases 
were decided negatively, resul ting in some 686 appeals. 2,240 cas es were not yet completed.  
In terms of government planning for the allocation of apartments under the HCP, implementation of 
the self-imposed benchmark for 2007 (allocati ng 1,400 housing units) has been met. As for the 
2008 benchmark (an additional 1,400 housing units) good progress has been made, with more than three quarters of cases having been finally resolv ed. In addition, many cases have been transferred 
to reconstruction schemes, with contract s for organised recons truction signed, though 
implementation is not yet complete. The government  has reduced its objective for 2009 from 2,496 
to 2,100 housing units, due in part to postponed or cancelled applications. Implementation is at an 
early stage. In addition to th e pending cases from the 2008 and 2009 benchmarks, it is estimated 
that anywhere up to 2,000 housing units will need  to be provided in 2010 and possibly beyond to 
returning refugee families under the HCP. Figur es will, however, depe nd on the results of 
processing the 2-3,000 pending requests and appeals, on the number of new a pplications and on the 
number of cases to be transferred from the reco nstruction scheme to the housing care programme. 
Croatia should ensure that budget cuts necessary in  the context of the economic crisis do not weigh 
negatively on refugee return issues.  
Reconstruction of housing has continued. However,  around 8,000 appeals are still pending, most of 
which for more than four years. Property reposse ssion is largely complete. There has been progress 
in returning previously occupied agricultural land plots to the pre-war possessors and rightful 
owners.  
EN 16   EN Apart from housing, other key con cerns facing returnees are em ployment, enduring hostility in 
certain localities and ‘convalidation’, or the valida tion of working years for the purpose of pension 
rights, of those residing in th e parts of Croatia not under Croati an government control during the 
1990s. Lodged claims for convalidation amount to 17,586. Of this number, 9,610 have been 
processed, with 52% receiving a positive decision. The decision to revise all negative decisions in 
an internal audit is a positive development; ne vertheless, measures aimed at ensuring a more 
uniform and fair application process notably at the first instance level should continue. 
Good progress has been made as regards inclusion of the Roma  minority, building upon the 
willingness of Croatia to addr ess the problems of this group. It has launched a number of 
infrastructure programmes with EU financial suppor t in Roma settlements. There has been progress 
as regards enrolment of Roma children in pre-sc hool, as well as primary and secondary education. 
Funding for Roma projects is also increasing. Some special language classes which resulted in de 
facto segregation of Roma children have been  integrated into ma instream programmes. 
However, most Roma remain excluded from main stream Croatian society and face difficult living 
conditions. Unemployment remains endemic. Measur es with regard to education need to be 
integrated into more systematic policies. Progress on successful completion of primary and secondary education is relativel y modest so far. Problems pers ist also in terms of access to 
employment, adequate housing, social  protection and healthcare, and in  general attitude s in society, 
where discriminatory viewpoints prevail. Coordi nation among Roma groups is limited as is their 
expertise for effective implementation, and should be  strengthened. The lack of personal documents 
and/or civil registration continues to hinder the integration of Roma into existing communities and 
their access to employment, health and other rights . Problems remain regarding the participation of 
the Roma community in the education system, even when specific programmes are available. 
Overall,  the position of minorities in Croatia con tinues to improve. However, many problems 
remain for the Serb and Roma minorities. Some pr ogress on outstanding refugee return issues was 
made but efforts to provide housing solutions and ensu re sustainability of refugee return need to be 
accelerated. 
(See also Chapter 23 — Judici ary and 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) . This is a key Accession Partnership priority. However, problems of access for 
ICTY to important documents in Croatia continue  to exist. These documents are required in the 
ongoing ICTY trial against generals Gotovina, Cermak and Markac. S ubsequent to an order of the 
Trial Chamber of September 2008, Croatia was require d to provide a detailed report specifying the 
efforts undertaken to obtain  the requested documents. However, in  his June address to the Security 
Council, the ICTY Chief Prosecutor stated that progress in Croatia’s investigation into the fate of 
the missing documents had been limited  and that the large majority of the military documents 
sought had not been submitted to the Tribunal . In the same month, Croatia submitted a motion 
requesting the Trial Chamber to decide whether Cr oatia had complied with its order of September 
2008. Croatia needs to ensure all necessary st eps are taken to settle this issue.  
There has been improved cooperation regarding the exchange of eviden ce and the transfer of some 
war crimes cases between the prosecutors from  Croatia, Bosnia and Herzegovina and Serbia. 
Obstacles to the extradition of su spects in cases of war crimes a nd crimes against humanity between 
EN 17   EN the countries of the region continue to exist, ho wever. This exacerbates the problem of impunity, as 
has been demonstrated in one high- profile case where a convicted wa r criminal was able to escape 
from Croatia to Bosnia and Herzegovina on the ba sis of having previously acquired citizenship of 
the latter from where he cannot be extradited. As re gards the possibili ty of serving the sentence in 
Bosnia and Herzegovina, the exis ting agreement on mutual recognitio n of sentences requires the 
convicted person’s consent for the sentencing to be served in the other countries. Croatia, together 
with its neighbours, should address the regional  impunity gap, including by taking steps towards 
extradition agreements covering war crimes cases.  
Croatia's policy regarding the International Criminal Court (ICC)  is aligned with the EU 
Common Positions on the integrity of the Rome Stat ute as well as related EU guiding principles.  
There has been little progress in the Sarajevo declaration  process, which aimed to finalise the 
regional refugee return proce ss by the end of 2006. While Croa tia continued to work on its 
roadmap, there has been limited discussion on impl ementation issues on either a bilateral or a 
regional basis. Further efforts are needed to reso lve the main outstanding issue not yet addressed, 
namely how to deal with the compensation claims of those who lost occupancy and tenancy rights 
in Croatia. 
Regional cooperation and good neighbourly relations form an essential part of the process of 
moving towards the European Union. Croatia c ontinued to participat e actively in regional 
initiatives, including the South-East Eur opean Cooperation Process (SEECP), the Regional 
Cooperation Council (RCC), the Central European Free Trade Agreement (CEFTA), the Energy 
Community Treaty and the Agreement on the Eu ropean Common Aviation Area (ECAAA). Croatia 
joined the North Atlantic Treaty Organisation (NATO) in April 2009. 
Bilateral relations with other enlargement countries and neighbouring EU Member States  
continue to develop. However, progress towards finding definitive solutions to various open 
bilateral issues between Croatia and its neighbours,  particularly as regard s settlement of border 
disputes, has been uneven. This is a key Accessi on Partnership priority. There has been some 
progress towards reconciliation among citizens in  the region, which is also a key Accession 
Partnership priority. More needs to be done to pursue efforts in this area. 
Croatia continues to ha ve good relations with Albania  and  the former Yugoslav Republic of 
Macedonia .  
Bilateral relations with Bosnia and Herzegovina  remain stable. However, relations have been 
burdened by various trade disputes, in part icular following the imposition by Bosnia and 
Herzegovina of import restrictions on agricult ural products which are contrary to CEFTA 
obligations. There has been no progress on borde r issues. Ratification of the 2005 Agreement on 
Demarcation of the Land and River Borders re mains on hold. Moreover, the dispute over two 
islands –Veliki Skoj and Mali S koj – remains unresolved, as does the issue of the border along the 
River Una. The Peljesac bridge project remains an op en political issue. There have been no 
developments on the agreement on the use of the Port of Plo če. The Interstate Cooperation Council 
has not met over the reporting period. Other unr esolved issues include property and refugees. 
Relations with Montenegro have continued to improve . Progress has been achieved towards settling 
the bilateral border issue concerning Prevlaka and both countries have  been co-operating on 
preparing their submission to the International Court of Justice. An agreement on th e protection of 
minorities was signed. The temporary border regime in place continues to function smoothly. The 
EN 18   EN joint working group on re solving property issues  and the council on econom ic relations both held 
meetings. An agreement on cooperation in science and technology was signed. 
There has been progress in relations with Serbia, in particular following the visit of the Croatian 
Prime Minister to Belgrade in March 2009. There have  been several other senior bilateral meetings. 
The Serbian Ambassador, recalled after Croa tia recognised the independence of Kosovo3, returned 
in November 2008. The visa-free arrangement betw een the two countries continues to function 
well. Croatia and Serbia signed an agreement on police cooperation, an agreement on readmission 
of illegal migrants and on cooperation in the fiel d of European integration. There has been some 
progress in cooperation on the 2,000 cases of missing persons from the war. However, there has 
been no progress towards a border agreement, nor  has the bilateral commission met. Other open 
matters include property-related issues, in partic ular claims for compensation for lost occupancy 
and tenancy rights, refugee return  and the genocide lawsuits befo re the International Court of 
Justice. Relations were particularly strained amid  harsh rhetoric from both sides concerning the ICJ 
case at the end of 2008. Economic cooperation is  growing although there are limited Serbian 
investments in Croatia compared to  the level of Croatian investments in Serbia, possibly due in part 
to reluctance in Croatia to  accept Serbian investments.  
Croatia continues to have good relations with Hungary and Italy . 
Relations with Slovenia  have been affected by the outstanding border issue. The border issue 
between the two countries held back the accession negotiations such that a substantial number of 
chapters could not be opened or closed until October 2009, although techni cally finalised earlier. 
The Commission has provided its facil itation services to settle this dispute. Intensive efforts by the 
Commission, supported by the Trio of  Presidencies, have been made over six months, which paved 
the way for a political agreement between the two parties reached in September 2009. There has 
been no progress in resolving the open issues concerning the Ljubljanska  Banka/SFRY Succession 
Agreement (guarantee of foreign currency deposits). 
Overall , Croatia continues to cooperate with ICTY, although problems concerning access to 
important documents persist. Croatia continues to  participate actively in regional cooperation. Good 
neighbourly relations have prev ailed, although there ar e shortcomings on addressing outstanding 
issues, especially concerning the settlement of bo rder disputes, property issues and refugee return. 
3. ECONOMIC CRITERIA  
In examining the economic developments in Cr oatia, the Commission’s appr oach was guided by the 
conclusions of the European Counc il in Copenhagen in June 1993, wh ich stated that membership of 
the Union requires the existence of a functioning market economy and the capacity to cope with 
competitive pressure and market forces within the Union. 
3.1. The existence of a functioning market economy 
Economic policy essentials The country participates in the EU Pre-Accession Fiscal Surveill ance procedure. The Pre-accession 
Economic Programme (PEP) 2009-2011, submitted in January 2009, presented a sufficiently comprehensive and consistent macroeconomic a nd fiscal framework for economic policies. The 
                                                
 
3 Under UNSCR 1244/99. 
EN 19   EN programme and its assumptions became however quickly outdated due to the impact of the 
international crisis. The fiscal notification submitted in April 2009 wa s an important step in further 
aligning fiscal reporting to ESA 95 standards, although wea knesses remain. Broad political 
consensus on the key essentials of a market economy has been maintained. Transparency on 
economic policy issues and in decision making was improved by the setting-up of an economic 
council comprising major stakeholders. Howeve r, economic policy making was often based on ad 
hoc decisions and economic reforms sometimes lacked a strategic medium-term orientation. 
Overall , consensus on the fundamentals of a market economy has been maintained, but Croatia 
lacks a medium-term and structural reform strategy.  
Macroeconomic stability 
The global financial and economic crisis started to affect the Croatian econo my more severely in 
the last quarter of 2008, when GDP growth dropped markedly to 0.2% year-on-year. For the whole 
year of 2008, annual GDP growth slowed to 2.4% , down from 5.5% in 2007. In particular, private 
and public consumption growth slowed considerably  in the course of 2008, while real investment 
growth accelerated (from 6.5% in 2007 to 8.2% in 2008), mainly on the back of strong activity in 
non-housing construction. The growth of exports d eclined to 1.7% (from 4.3%  in 2007), while total 
imports decelerated to 3.6% (6.5%), and the cont ribution of net exports to growth remained 
negative.  On the supply side, growth was mainly driv en by the still robust performance of some 
services, including financial in termediation, construction and tr ansport. Economic performance 
deteriorated significantly in the first half of 2009. Real GDP dec lined by 6.5% year-on-year, on the 
back of sharp drops in priv ate consumption (-9.7% year-on- year) and investments (-12.6%). 
Industrial production declined by 9. 1% year-on-year in July, indica ting further drops in output in 
the third quarter. At the same time the tourism sector performed better than expected during summer, somewhat cushioning the recession. Average pe r-capita income in 2008 rose to 63% of the 
EU-27 average, from 61.1% a year before. Overall , the global crisis has led to a significant 
economic downturn.  
In 2008, the current account deficit widened to 9.4% of GDP, up from 7.6% in 2007. This was 
partly driven by a deterioration of the trade bala nce. Higher oil prices and declining growth of 
exports to the main trading partners in the EU  pushed the trade deficit up to 22.9% of GDP, from 
22% a year before. As in previous years, roughly two thirds of the trade gap was covered by the surplus in services, mainly tourism and transport. The deficit of the income balance increased markedly, from 2.6% in 2007 to 3.3 % in 2008, mainly reflecting higher debt servicing costs in an 
environment of tighter external financing constrai nts and lower foreign revenues. In the first seven 
months of 2009, the trade and current account defic its gradually declined, as merchandise imports 
dropped more strongly (-26.8% year- on-year) than exports (-20.7%). In  the twelve months to June 
2009, the current account deficit shrank to 6% of GDP. Overall , the current account deficit has been 
declining in line with slowing domestic demand. 
While net capital inflows remained relatively strong in the first three quarter s of 2008, they came to 
a temporary halt during the last quarter. For the year as a whole, they reached 11.6% of GDP (somewhat higher than in 2007) an d were again largely driven by foreign borrowing of banks and 
companies. In the context of tighter external financing condi tions in late 2008, even some 
temporary capital outflows occurred, as private agents increased their foreign currency deposits 
abroad. Private banks started drawing down their external reserves to increase their foreign 
financing and to service outstandi ng external obligations. In the fi rst half of 2009, total net capital 
inflows halved compared to the same period a year before.Net FDI remained an important source of foreign financing, although net infl ows fell from 8.7% of GDP in th e first half of  2008 to 3.9% of 
GDP in the first half of 2009. Net FDI covered ar ound one third of the curr ent account deficit, 
EN 20   EN compared to 45% in the same period a year before . The structure of FDI c ontinued to be dominated 
by equity investments, including moderate recapita lisations in the banking sector as well as the 
takeover of parts of the domestic oil company. Overall , despite slower net capital inflows due to the 
crisis, a sufficient amount of external  financing could still be ensured.  
The heavy external debt burden continued to in crease, by €5.9 billion in  2008, and a further €1.6 
billion in the first half of 2009. At end-2008, the stock of debt am ounted to €39.1 billion, equivalent 
to around 82.6% of GDP, up from 77.6% at end-2007. The rise in external i ndebtedness was mainly 
due to intensive corporate sector borrowing which slowed however in late 2008 as a consequence of 
the crisis. Domestic banks managed to secure the roll- over of liabilities vis-à- vis parent banks in the 
last quarter of 2008, and in creased their extern al debt in 2009. The relativ ely large exposure of the 
domestic non-tradable corporate sector, whic h accounts for around 40% of  gross foreign debt, 
remains a cause for concern and warrants careful monitoring. A high external debt level, large 
exposure of the non-tradable  sector and large debt obligations maturing over th e short term continue 
to represent key extern al vulnerabilities of  the Croatian economy. 
According to data from the labour force survey, th e unemployment rate further declined from 9.6% 
in 2007 to 8.4% in 2008. In the first quarter, it stood at 9.4%, compared to 10% a year ago. 
However, registered data confirm that the eco nomic downturn has alrea dy taken its toll on the 
labour market. Total employment declined by 3.7% in the twelve months to July 2009. In the same period, the officially registered unemployment  rate rose from 12.2% to 14%. Moreover, the 
Croatian labour market continues to  suffer from structural problems, such as low participation and 
employment rates as well as high rates of yout h and long-term unemployment. The effective 
retirement age remained low and significant labour supply disincentives persis ted, such as generous 
early retirement rules and the pr edominance of categorical  social welfare bene fits. Stronger labour 
demand remained hampered by relatively rigid empl oyment protection systems.  As a result, labour 
turnover remained low, suggesting limited employmen t restructuring. The growth of average gross 
wages accelerated to 7.1% in 2008, up from 6.2% in 2007, and declined to 4% in the first half of 
2009. Average real wage growth picked up somewhat  recently, as inflation started to subside. 
Overall , labour market performance de teriorated as a result of the crisis and major structural 
weaknesses persist. 
The monetary and foreign exchange system of a tightly managed floa t with a very limited degree of 
exchange rate flexibility remained in place as a ma in device to anchor inflation expectations. It has 
also helped mitigate potential exchange rate-i nduced credit risks in a highly euroised economy. 
Under conditions of a less benign external environm ent, tighter external financing constraints and 
higher lending spreads, the central bank released significant foreign exchange liquidity to the 
domestic banking system through a set of subseque nt measures. This included the abolition of 
marginal reserve requirements on banks’ foreign borrowing as well as a relaxation of reserve and 
liquidity requirements, effectively unfreezing banks’ foreign currency holdings. Moreover, the 
central bank intervened twice in the foreign exchange market by selling euros for a total amount of 
around € 513 million
4. As a result of monetary policy meas ures, official fore ign reserves, which 
stood at € 9.3 billion at end-2007, st arted to drop in the second half  of 2008. They temporarily fell 
to € 8.6 million in February 2009, and recovered to  €9.1 billion by June, equivalent to around 5 
months of imports. The average daily exchange ra te fluctuated within a relatively small range 
between 7.11 and 7.49 kuna per euro and depreci ated by 3.1% between October 2008 and mid-
                                                 
4 Following those two interventions, the central bank bought euros in a third intervention to mitigate 
appreciation pressures.  
EN 21   EN September 2009. Overall , monetary policy has managed to reli eve external financing pressures by 
regulatory measures and thus cont ributed to preserving stability.  
The current monetary framework required a relative ly tight monetary stance, directed at limiting 
domestic kuna liquidity in line with available foreign exchange resources in order to ensure exchange rate and financial stability. Open mark et operations (repo auctions ) were undertaken at a 
set rate of 6%, which effectively led to rationing , weaker market transparency and an increase in 
market rate volatility. Mo reover, to allow for a more restri ctive policy stance during periods of 
elevated depreciation pressures the authorities tightened collateral requirements. Domestic 
monetary and credit aggregates have been largely affected by th e financial crisis, the economic 
slowdown and the monetary policy re sponse. Annual growth of domestic  credit to the private sector 
further decelerated from around 15% in 2007, but was still around 10% in 2008 and 4.3% in July 
2009. In particular, the growth of lending to priv ate households dropped more strongly than lending 
to the corporate sector. Domestic firms have increasingly shifted towards domestic sources of 
financing as a reaction to lower and more costly  access to foreign capital. At the same time, the 
structure of outstanding credit has changed mark edly due to a strong increase in government 
borrowing since December 2008. Overall , credit growth has fallen and the structure of credit has 
shifted towards government financing.  
In 2008, average annual inflation increased sign ificantly to 6.2%, up from 2.9% in 2007. This 
resulted from strong increases in oil and food pri ces in the first seven m onths and large carry-over 
effects from 2007. Following its peak in July 2008, annual inflation declined  to 2.8% at end-2008 
with lower energy and commodity prices and a slowdown in economic activity and private 
consumption growth. During the first quarter of 2009, inflation picked up temporarily to 3.8%, 
mainly resulting from adjustments in regulated ga s prices, an increase in  excise duties on tobacco 
and a seasonal increase in vegetable prices. In  August, annual inflation came down to 1.4%. Core 
inflation decelerated to 4.1% at end-2008 and further to 3.4 % in mid-2009. Overall , as a result of 
falling world prices of commodities annual inflat ion has come down from its peak in 2008 with 
some temporary upward pressures in early 2009 main ly due to adjustments in regulated prices.  
Public finances have come under increasing pr essure since the fourth  quarter of 2008, when 
revenues started to underperform in line with a deceleration of economic activity. The authorities 
reacted swiftly by adjusting current  spending at short notice in the last months of 2008, and thereby 
managed to maintain the general government defi cit for the year as a whole at 1.4% of GDP. 
However, revenue performance continued to w eaken significantly in early 2009, forcing the 
government to increase domestic borrowing. Th e budget financing situation was temporarily 
alleviated by a successful € 750 million government  eurobond issue in May. In the first half of 
2009, state budget revenues declined by 8.6% year-o n-year while expenditures increased by 7.9%. 
The central budget balance turned in to a deficit, equivalent to 2.2%  of projected GDP, compared to 
a surplus in the same period a year before. A bl eaker economic outlook and worsening fiscal trends 
led the authorities to ad opt a series of budget revisions. The firs t revision in April included a wage 
freeze for civil servants and public employees; it was however still based on optimistic growth 
assumptions. Considerable risks to the 2009 budge t execution materialised  quickly. A stronger-
than-expected economic downturn and rapidly falli ng revenues forced the authorities to adopt a 
second, and shortly thereafter a third budget revision, in early and mid-July, respectively. The 
revisions included some cuts on spending and a num ber of measures to compensate for falling 
revenues, such as a special tax on income, a VAT increase of one pe rcentage point, and increases in 
excises. Despite those adjustments, the revised planned general governmen t deficit increased to 
3.3% of GDP, thus pushing up financing require ments of the government sector and related 
financing risks. Moreover, risks of further declining revenues and higher spending aiming at 
combating the current crisis remained high. The st ock of general government debt stood at 33.5% of 
EN 22   EN GDP at end-2008, only slightly hi gher than a year before (33.1 % of GDP), but it went up 
considerably in the first half of  2009. Adjustments for the stock of issued state guarantees and the 
debt of the State Development Bank (HBOR) would raise the stock of debt  by around 10 percentage 
points of GDP. Overall , in reaction to mounting fiscal pressu res, efforts were made to re-balance 
the budget. However, the policy re sponse came late, revealing wea knesses in budget planning, and 
the fiscal deficit increased significantly.  
The rationalisation of public sp ending has made limited progress.  This is a key Accession 
Partnership priority. Some health reform measur es were enacted as an important step towards 
addressing the sector’s financial difficulties, incl uding a more effective system of co-payments. No 
further reforms have been undertaken to achieve be tter targeting of social  support, as envisaged 
under the social benefits reform strategy adopted b ack in 2007. Categorical benefits still account for 
the large majority of social spending. There ha s been no progress on reforming the mandatory 
pension system. Overall , apart from important initial health care financing reforms, little progress 
has been achieved in terms of increasi ng the efficiency of  public spending. 
The implementation of a comprehensive treasury reform strategy has continued with a view to 
further improving expenditure management and budge t control systems. A new Budget Act came 
into effect, improving the legal basis for stra tegic and multi-annual budget planning. Continued 
progress was achieved in enhancing institutional and analytical cap acity for setting up medium-term 
macroeconomic and fiscal frameworks. However,  further progress in streamlining procedures 
would be needed to more effectively link define d policy priorities to the budget planning process. 
Further substantial efforts were undertaken to  bring budget reporting more  in line with ESA 95 
standards. Fiscal transparency remains a concer n, also due to the non-in clusion in the general 
government accounts of some quasi-fiscal ope rations (State Development Bank, Motorway 
Company) and a large numb er of municipalities. Overall , analytical and institutional capacity in 
public finance has improved, but strategy-based budge t planning needs to be further strengthened.  
Overall , the macroeconomic policy response has by and la rge been appropriate to address the spill-
overs from the global economic and financial crisis. Within its given limits that ensue from the high 
degree of euroisation, monetary po licy contributed successfully to  preserving fina ncial stability 
mainly through regulatory changes alleviating forei gn exchange liquidity pressures. In reaction to 
mounting fiscal pressures, efforts were made to re-balance the budget. However, the gradual 
deterioration of the fiscal balance in combinat ion with tight financing would have required a 
somewhat more timely and comprehensive fiscal res ponse. The design of a cred ible fiscal strategy 
aimed at reducing budget rigidities and enhancing the efficiency of  public spending remains a key 
challenge.  
Interplay of market forces 
The privatisation process progressed slowly. The onl y major transaction was the sale of additional 
assets of the national oil company to a foreign i nvestor. The privatisation of assets held under the 
State Privatisation Fund made only limited progre ss. Up until June 2009, the State Privatisation 
Fund had sold or liquidated shares  in some 103 companies, mainly consisting of minority shares. A 
total number of 29 tenders were published for the privatisation of companies in majority state ownership, but only 4 companies were actually sol d. A number of issued tenders have not been 
successful, partly due to a lack of interest among potential invest ors and, in some cases, rather 
unrealistic sale conditions. The remaining portfo lio of the Privatisation Fund still comprised 835 
companies, with the State keeping a majority holdi ng in 85 of them. Thus, th e portfolio of the Fund 
has virtually remained unchanged. No progress has been achieved with the implementation of a new 
privatisation model under which state assets would be  transferred to investment funds. The private 
EN 23   EN sector’s share in employment has remained at  around 70%; the private se ctor share of GDP is 
estimated at around 70-80%. Overall , very limited progress has been achieved in reducing the role 
of the State in the real  sector of the economy.  
Market entry and exit 
Company registration procedures have been furt her simplified, also by th e introduction of on-line 
registration for limited liability companies. Pre liminary data indicate that the number of newly 
registered companies declined by 27%5 and the stock of active busin esses increased by 5.4% year-
on-year in June, compared to a growth rate of 8%  a year before. The government’s project to reduce 
the regulatory burden by streamlining legisla tion and eliminating unnecessary regulations 
(‘regulatory guillotine’) started off well in 2007, but its implementation slowed. The investment 
climate remains hampered by difficu lties in obtaining necessary licen ces, building permits and other 
authorisations. A large nu mber of para-fiscal taxes at the national and local level do seem to add 
significantly to the tax burden of entrepreneurs. The business environment is also affected by petty 
corruption and an inefficient public administration. Overall , further progress has been made in 
simplifying company registration, but the investme nt climate continued to suffer from a heavy 
regulatory burden and numerous para-fiscal taxes. Improving the business environment is a key 
Accession Partnership priority. 
Legal system 
Further progress was made in reducing the backl og of cases before Croa tian courts. During 2008, 
the backlog was reduced by 8.4% compared to 2007. However, there is still a large backlog 
(887,000 cases at end-2008). The length of proceedi ngs before the courts remains generally 
excessive and major problems continue to exist with the enforcement of court decisions. The 
weaknesses of the judicial system continue to  undermine effective enfo rcement of creditor and 
property rights. Land registration has improved, but remains incomplete in parts of the country. 
Investors still suffer from lengthy pr ocedures to register a property. Overall , improvements to the 
judicial system have been made, but majo r inefficiencies in the judiciary remain. 
Financial sector development  
The financial sector remained dominated by banks , representing around 77% of total assets of 
financial intermediaries in mid-2009. The banking sect or is almost complete ly privatised with a 
90% share of foreign ownership in terms of net assets. Out of 33 banks, two banks remained state-
owned. The degree of market conc entration has remained at a mode rate level and has generally not 
been an impediment to market competition. The four  largest banks together kept a market share of 
around 65% by mid-2009. Banking sector assets continue d to grow, but at a slower pace, and the 
structure of assets changed considerably. This is  due to a reduction of banks’ foreign assets and 
reserves with the central bank, resulting from regulatory changes. Total credit growth slowed, reflecting lower demand and higher risk awareness of banks in the context of the global financial 
crisis, but lending to the government sector increased strongly. In terms of GDP, total bank lending 
continued to rise, from 68.8% in 2007 to 72% of  GDP in 2008, and further to 74.6% in mid-2009. 
Overall , the largely private and fore ign-owned banking sector remain ed the key financial sector 
player with a moderate degr ee of market concentration.  
As a result of a number of prude ntial and supervisory measures th at had been ta ken earlier to 
address potential macro-financial vulnerabilities, the banking sector remain ed well capitalised, and 
                                                
 
5 Last quarter 2008 and first half of 2009 compared to the same period a year earlier. 
EN 24   EN profitability indicato rs stayed at rather comfor table levels in 2008, before th ey slightly worsened in 
the first half of 2009. The share of non-performi ng loans increased from 4.9% at end-2008 to 6.1% 
in June 2009 under a less favourable economic environment. Moreover, the banking system remained confronted with considerable interest- and currency-induced credit risks, as the majority of loans are based on variable in terest rates and denominated in or indexed to foreign exchange. 
Financial sector stability developments have b een kept under close watch by the central bank, 
which further enhanced its institutional and analyt ical capacity to produce fo rward-looking financial 
sector stability assess ments of high quality. Overall , the banking sector remained resilient to shocks, 
but significant risks are related to  largely un-hedged balances of the non-financial private sector.  
The share of non-banking financial sect or assets in total financial se ctor assets declined from 26% 
at end-2007 to 23% in mid-2009, largely due to poor performance of investment funds, which 
experienced significant share price declines and money withdrawals in the context of the global 
financial crisis. At the same time, leasing companies and the insurance sector gained in absolute and relative terms. The domestic stock and bond markets also suffered from the deepening international 
crisis. The stock market index lost  almost 70% in 2008, and market capit alisation of shares listed on 
the Zagreb stock exchange fell from 128% to 42% of GDP. Stock markets started to recover 
somewhat in March 2009, and the index gained some  15% in the fist half of the year. In 2008, bond 
markets registered the lowest turnover since 2 003, and market capitalisat ion of all listed bonds 
declined from 15% to 10% of GDP, resulting from falling bond prices, ma turing bonds and limited 
new bond issues. Overall , notwithstanding the gr owth of some market  segments, financial 
intermediation by the non-banking sector rema ined shallow and stock and bond markets 
experienced significant losses followi ng the outbreak of the crisis.  
3.2. The capacity to cope with competitive pre ssure and market forces within the Union 
Existence of a functioning market economy The policy response to the global financial crisis  has by and large been conducive to preserving 
macro-financial stability, although fiscal risks remain significant.  A prudent response by monetary 
authorities as well as efforts to re-balance the budget helped an chor expectations of economic 
agents and supported the functioning  of market mechanisms. However, the slow pace of economic 
restructuring and prevailing obstacles to private s ector development continued to partly undermine a 
more growth-oriented allocation of resources, co nstraining the potential for higher productivity and 
catching-up over the medium term. 
Human and physical capital  
Reforms in the education sector have continued under the education system development plan for 
2005-2010. Further steps were taken to improve the quality of education at all levels, including 
through the provision of educational programmes for t eachers. Additional efforts have been made in 
the development of a national qua lifications framework. Higher educ ation has been further aligned 
with the principles of the Bologna process, but  the tertiary education sector suffers from 
inefficiencies, poor governance and a lack of funding.  
The government continued to implement labour ma rket policies on the basis of the National 
Employment Promotion Plan. Measures include training and employment subsidies for young people without work experience, the long-term unemployed, older persons and vulnerable groups. 
A new Law on the Restructuring of Unemployment  Benefits was adopted. It leads to higher 
replacement rates in the first three months follo wed by a gradual decrease thereafter, and offers 
financial incentives for the unemployed to participate in educational measures. Wage subsidies 
EN 25   EN were introduced in the context of the introduction of a 32 hour wo rking week. Structural problems 
persisted as the rate of yout h and long-term unemployment remained high at 22% and 5.3%, 
respectively. Moreover, a slowing economy has led to a drop in empl oyment and participation rates. 
From an already low level, they dropped slight ly to 56.5% and 62.6%, respectively, in the first 
quarter. Overall , low employment rates and structural  mismatches between labour supply and 
demand remain important challenges. 
Further progress has been made in developing a knowledge-based economy. The ICT infrastructure 
is rather well developed, with high internet a nd broadband penetration rates. The share of the 
business sector in total spending on research and development has increased. Investment continued 
to be relatively robust in  2008, mainly due to construction activiti es, keeping the investment ratio at 
around 28% of GDP. Private investment accounted for the bulk of it (22% of GDP). However, 
private investments in the proces sing and manufacturing industry ha ve remained low, constraining 
prospects for faster technological change, a more diversified produc tion structure and higher export 
potential. Public investment rema ined also relatively strong. In particular, inve stments in new 
highways resulted in a further expansion of the ne twork. FDI continued to play a significant role. 
The total stock of FDI reached € 21.4 billion (44% of GDP). The largest share of cumulative FDI 
inflows is accounted for by the financial sector (38%), follo wed by manufacturing (23%) and 
wholesale and retail trade (15%). However, ther e has still been little greenfield investment. Overall,  
investment continued to be con centrated in transport infrastructure and the services sector.  
Sectoral and enterprise structure 
The government decided to restruct ure the loss-making shipyards thr ough a process of privatisation 
and started the necessary preparations. This is a key Accession Partnership priority. An agreement 
was reached with the Commission on the arrangements  for the privatisation, enabling international 
tenders to be launched for the six yards in difficulty. The implementation of the National 
Restructuring Programme (NRP) for the steel s ector has been disrupte d by the global economic 
crisis. Therefore, the NRP as well as individua l business plans will have  to be revised. The 
restructuring of the large loss-making railway carrier and the privatisation of subsidiaries has made 
very limited progress. The objectives of the business plan for 2008 were not fully met, despite some correction of earlier wage increases. The envisage d reduction of the working ratio in 2008 did not 
materialise and the railway se ctor continued to receive hi gh levels of budget support. Overall , good 
progress has been made in particular as regards the tendering of the yards with a view to their 
restructuring through privatisation. However, sustained efforts are re quired to complete the 
restructuring of the steel and railway sectors to en sure their long-term viability and competitiveness. 
Liberalisation of the telecommuni cation industry continued. Th e Croatian Telecommunications 
Agency continued with activities aimed to s timulate market competition by improving market 
access to new service providers. This led to further pr ice reductions and to a larger choice of tariff 
packages for customers. Fixed line competitors raised  their market share further from 19% to a still 
modest 24%. Liberalisation of the energy sector continued gra dually and networ k rules for the 
transport and distribution of gas have been enac ted. However, gas and elec tricity markets remain 
dominated by single suppliers, undermining effectiv e competition. The restructuring of the large 
electricity company has not advanced. Overall , despite further legal and regulatory adjustments, 
competition in network industries remains cons trained by dominant incumbent suppliers.  
The already large service sector maintained it s share in total output at around 65% in 2008. The 
share of construction increased, from 7.7% to 8.3%  of total output, as a result of buoyant activity, 
while the share of industry declined . The share of the industrial sect or and of construction in total 
employment remained unchanged at around 19% a nd 9% respectively. Agriculture’s share of 
EN 26   EN employment increased from 12.8% to 13.2%, and that of the services sector  dropped accordingly. 
The already large service sector accounts for two thirds of the econo my and the share of 
construction in total output increased. 
In 2008, the SME sector represented around 40% of the corporate sector’s total assets, 66.2% of 
total employment and 65% of total investment. SM Es generated 44% of GDP and more than 40% 
of total exports. Those indicators  remained virtually unchanged comp ared to the previous year. In 
order to support the small and medium-sized en terprise (SME) sector the government adopted a 
new operational plan for 2009. The State Devel opment Bank (HBOR) has been financially 
strengthened, also through EIB loans, to increase lending to the SME sector on favourable terms. On the other hand, the sector continued to suffe r from a cumbersome regulatory framework and 
inefficiencies in public administration. Access to longer-term financing remained difficult, 
particularly for newly establishe d businesses. Commercial lending to the SME sector is further 
restricted by the presence of seve ral subsidised government programmes. Overall , while the SME 
sector continued to benefit from large-scale gove rnment support, its share in the overall economy 
has not increased. 
State influence on competitiveness  
The government adopted a set of ten anti-rece ssion measures, including reduction of the cost 
burden, financial strengthening of the State De velopment Bank (HBOR), and support for tourism, 
SMEs and the real estate market. The implementa tion of the anti-crisis programme has been slow 
and its impact on competitiveness remains uncertai n, in particular as rega rds subsidies for real 
estate loans, liquidity injections  into public companies and import c ontrols. There has been a lack of 
progress in reducing the large numb er of levies and fees, mostly at local level, which put a 
significant financial burden on the business sector. The role of the Competition Agency in monitoring and controlling state ai d has been further strengthened, but administrativ e capacity and 
enforcement of competition policy n eeds to be enhanced. The total am ount of subsidies in the 2008 
and 2009 general government budgets remained high — at around 2.4% of GDP — and a large 
share has still been provided to loss-making companies. Although horizontal aid has increased 
relative to sector aid, it still accounts for only a small share of total subsidies. Overall , state 
intervention in the enterprise sector remained substantial and has been further increased by the set of anti-recession measures. 
Economic integration with the EU 
Croatia is an open economy with  total trade in goods and serv ices representing around 92% of 
GDP. Apart from the export of machinery and transport equipment (mainly ships), tourism 
continued to be the biggest source of export revenue, representing almost 20% of GDP in 2008. The EU has continued to be the largest trading partne r. Its share in total Croatian exports and imports 
remained at around 61% and 64% re spectively. However, in the firs t six months of 2009, the share 
of the EU in Croatian imports and exports decreas ed slightly, as trade w ith developing countries 
dropped more slowly than trade with the EU. CE FTA countries represente d 10.9% of all Croatian 
trade in 2008. In the first six month of 2009, the sh are slightly decreased to 9.9%. In this period, 
CEFTA countries made 4.8% of total imports in to Croatia and 20.1% of all Croatian exports.  
Around 93% of FDI inflows originate from EU Member States. Overall , integration with the EU in 
the areas of trade and in vestment remained high.  
The average growth in real wages decelerated si gnificantly to 1% in 2008, due to an increase in 
average inflation. However, wages have increase d more strongly than es timated average labour 
productivity, with the result that un it labour costs have slightly gone  up. Indicators of export price 
EN 27   EN competitiveness have slightly improved as the kuna  weakened somewhat vis-à-vis the euro and the 
US dollar. In the nine months to June 2009, the exchange rate of the kuna depreciated by 3.2% 
against a basket of currencies in nominal terms. In real effective terms, corr ected for consumer price 
developments, the kuna weakened by a lower rate of  0.6%, as a result of relatively higher inflation 
in Croatia. 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, th e secondary legislation and the policies of the Union. It also 
analyses Croatia’s administrati ve 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 repo rting period, and summarises th e country's overall level of 
preparations.  
4.1. Chapter 1: Free movement of goods 
Progress can be reported  regarding alignment on general principles . Croatia has continued 
implementing its Action Plan for compliance with Articles 28 to 30, by amending or annulling legal 
acts containing restrictions to free movement of  goods and by introducing the mutual recognition 
clause.  
In the area of horizontal measures , good progress can be reporte d. Croatia has continued 
implementing its Strategy for the implementation of the acquis communautaire  in the field of free 
movement of goods, which was adopted in Novemb er 2007. Approximation in the field of technical 
requirements has continued with the adoption of the new Act on technical requirements for products 
and on conformity assessment, which aims to furt her align the Croatian legal framework with the 
new horizontal EU acquis .  
As regards standardisation,  good progress can be reported. By the end of June 2009 the Croatian 
Standards Institute (HZN) had transposed 21,368Europ ean standards (ENs). The HZN is an affiliate 
member of the European Committee for Standardis ation (CEN) and of the European Committee for 
Electrotechnical Standardisation (CENELEC) and a pplied for full membership of both in June 
2009. New internal rules have been set up at the HZ N, creating a fast track procedure for adopting 
European standards in fields that are not covered by HZN mirror committees and providing for 
regular public enquiries on variou s groups of harmonised ENs. The reorganisation of the existing 
technical committees has b een completed. As of April 2009, 164 committees were active, covering 
65% of the scope of international and European technical committees.  
Concerning conformity assessment , no progress can be reported. 
In the area of accreditation , good progress can be reported. Th e Law on Accreditation and the 
Statute of the Croatian Accreditat ion Agency (HAA) have been amended to take into account the 
new horizontal acquis  of 2008. The HAA has been promo ting accreditation among government 
institutions responsible for harmonisation of  legislation under the new and old approach acquis . The 
HAA signed Cooperation Agreements with the Minist ry of the Sea, Transport and Infrastructure 
and with the Ministry of the Interior in 2009. By July 2009, the HAA had accredited a total of 145 
conformity assessment bodies. The HAA increased its staff to 24 permanent employees, 63 lead 
EN 28   EN assessors (HAA employees and external associat es), 98 technical assessors (mostly external 
associates) and 148 experts (externa l associates) in eight different accreditation sche mes. European 
cooperation for Accreditation (EA) ha s continued the evalua tion process for granti ng the status of 
signatory of its multilateral agr eement to the HAA. Preparations in this area are well advanced. 
As regards metrology , the Law ratifying the Metre Conven tion was adopted by Parliament in 
December 2008. Even though the National Metrology Inst itute (NMI) has been established legally 
since June 2008, the setting-up of its  infrastructure has been delaye d in comparison with the Action 
Plan. Two laboratories in the fiel d of chemistry have been designa ted as conformity assessment 
bodies. A National Laboratory for Humidity and a National Laboratory for I onising Radiation have 
also been designated. The Laboratories of the St ate Office for Metrology ha ve been equipped with 
instruments for testing precious metals, for measurement comparisons within EURAMET and for testing flow meters for liquids othe r than water. Alignment with the acquis  in the area of metrology 
is advanced. The preparations for transferring res ponsibility for scientific metrology to the NMI are 
essential to move the chain of traceability at national level thr ough accredited testing laboratories to 
industry, in time for accession.  
Regarding market surveillance , there has been significant progr ess with regard to the State 
Inspectorate’s administrative capacity and enfor cement measures. A new State Inspectorate Law on 
the organisation and role of the State Inspectorate was adopted by the Parliament, abolishing pre-
market approval requirements and conferring necessary powers on the market surveillance 
inspectors. A new Regulation on the System fo r Rapid Exchange of Information on products 
presenting risks for consumer health and safety  was adopted, stipulating the nature and the 
operation of the Rapid alert system for measures relating to products posing a serious risk to the 
health and safety of consumers, and establishing the RAPEX contact point at the State Inspectorate. 
Further measures are still needed to fulfil all the market surveillance requirements of the EC 
Regulation 765/2008. Coordination a nd cooperation between the different market surveillance 
authorities have been set up in July 2009 w ith the establishment of the Commission for 
Coordination a nd Communication.  
In terms of administrative capacity in the Mini stry of the Economy, Labour and Entrepreneurship 
(MELE) some progress can be reported in the Depa rtment for Internal Market Coordination, with 
the recruitment of two additional staff members. 
Overall, as regards horizontal measures, basic stru ctures for harmonisation with EU legislation are 
in place. Further, adequate capacity-building m easures are required to enable Croatian institutions 
to become full members of the relevant European organisations. 
There has been some progress in relation to the old approach acquis , with the adoption of 
regulations in the fields of medicinal products, veterinary medicinal pr oducts, cosmetic products, 
pre-packaging, aerosol dispensers, motor vehicles, emissions of gaseous and particulate pollutants 
from engines installed in non-road mobile m achinery, textiles, footwear, chemicals, drug 
precursors, and detergents. A National Strategy for Chemical Safety was adopted in November 
2008. Alignment with the acquis  in the area of the old approach is advanced but further efforts are 
needed to reach full legislative alignment and to ensure the necessa ry administrative capacity, with 
particular regard to pharmaceuticals and cosmetics. 
Alignment with the new approach  acquis  has been advancing, with th e adoption of regulations in 
the areas of low voltage equipment, machinery, lifts, recreational craft, radio equipment and 
EN 29   EN telecommunications terminal equipment, electro magnetic compatibility, cableway installations, 
pressure equipment and simple pressure vessel s, noise emissions by equipment for use outdoors, 
pyrotechnic articles, construc tion products and medical de vices. Alignment with the acquis  in the 
area of the new and global approach is well on tr ack, but further efforts are still needed, with 
particular regard to equipment and protective sy stems intended for use in potentially explosive 
atmospheres, safety of toys, and eco-desi gn requirements for energy-using products.  
Concerning procedural measures , some progress can be re ported. A new Regulation on 
notification procedures in the field of standa rds, technical regulations and regulations on 
information society services was adopted in 2009, thus transposing Directive 98/34/EC as amended 
by Directive 98/84/EC. Alignment in the field of procedural measures is advanced, but further 
efforts are still needed to fully transpose Directive 91/477/EEC as amended by Directive 
2008/51/EC. 
Conclusion 
Good progress has been made in the field of the free movement of goods. Alignment with the 
acquis  in this chapter has further progressed and is well advanced, but some elements are not yet 
fully in place, notably with regard to conform ity assessment, metrology and market surveillance. 
Croatia needs to continue efforts to fully align with the acquis  and to build the necessary capacity to 
ensure its effective implementation and enforcement upon accession.  
4.2. Chapter 2: Freedom of movement for workers 
Croatia already largely fulfils the acquis  requirements in the area of access to the labour market .  
Good progress can be reported on future participation in the EURES  (European Employment 
Services) network. The organisational structure of  the Croatian Employment Service (CES) is being 
adjusted and administrative capacity strengthened as regards services related to mobility and free 
movement of labour. This is a key element for th e accession negotiations in this chapter. Language 
skills of potential EURES advisers  are being improved and the CES has become acquainted with 
the requirements related to connect ion to the EURES Job Mobility Portal upon accessi on to ensure 
that all job vacancies handled by the public employ ment services are displayed on its public website 
and can therefore be made available for publicati on on the Portal. Various training activities in 
relation to EURES have been carried out, among othe rs in the regional employ ment offices. In this 
area, Croatia is well on track. 
There has been good progress on coordination of social security systems . Sufficient 
administrative capacity is being developed to apply the acquis  in this field. This is a key element for 
the accession negotiations in this chapter. A wide range of professional traini ng in all branches of 
social security as well as language courses have  been offered for the State administration bodies. 
Preparations in this area are well on track. 
Preparations are ongoing for the introduction of the European Health Insurance Card as from 
accession. 
Conclusion  
Good progress has been made on this chapter. A satisfactory level of legal alignment has been 
reached. However, sustained efforts are needed to develop the necessary administrative capacity, 
EN 30   EN notably for carrying out a potentially wider range of tasks in the area of coordination of social 
security systems. 
4.3. Chapter 3: Right of establishment and freedom to provide services 
Progress can be reported on the right of establishment , although further work is needed to ensure 
full alignment with the acquis . The Act amending the Aliens Act eliminated the requirement of a 
business or work permit for EU and EEA citizens, as from the date of accession. The amended law on the temporary residence tax intr oduced equal treatment of Croatia n and EU citizens  with regard 
to the payment of the tax on secondary residences. The amendments to the Healthcare Act, the Act 
on Humanitarian Landmine Clearance, the Act on Performing the Activities of Design, Building 
Surveillance and Construction a nd the Act on Geodetic Activity wa ive Croatian citizenship and 
excessive language knowledge requirements as of  the day of Croatia’ s accession. The Act on 
Libraries and the Act on Archives and Archival Inst itutions provide for free  establishment of such 
institutions by domestic and foreign natural and lega l persons, as of Croatia ’s accession to the EU. 
However, a number of restrictions on the right of establishment continue to exist in several sectors, 
in the form of authorisation regimes and the one-office-rule.  
Some progress has been made regarding the freedom to provide cross-border services . The new 
Law on Private Detectives enabled certified detectiv es from the EU Member States to provide their 
services in Croatia upon its accession to the EU. A working group has been established to work on 
the alignment with the Services Directive. However, several provisions in the national legislation are still not in line with Article 43 of the EC Tr eaty and the preparations for the implementation of 
the Services Directive are at an early stage. Administrative capacity  in the area of coordination and 
alignment with the acquis as regards freedom to provide serv ices requires further efforts.  
Further progress has been made in the field of post al services, where legisl ative alignment with the 
acquis  is well advanced. The Postal Services Act was adopted in Ju ly. Amendments to the primary 
legislation already envisage impl ementation of most of the regulat ory elements of the 3rd Postal 
Directive and lay down a detailed  timetable for gradual market  opening (full market opening 
envisaged for 31 December 2012) a nd confer extensive regulatory and supervisory powers on the 
National Regulatory Authority for the postal sector. However, full alignment with the postal acquis 
(mainly provisions of the 3rd Post al Directive) has not yet been achieved. Implementing legislation 
laying down conditions for the provis ion of postal services and rule s on the postal system of the 
public operator was amended. 
The capacities of the Council of the Croatian Post and Electronic Communications Agency 
(HAKOM) have been strengthened , as three new members were appointed. The addition of two 
further resources to the Postal Services  Department of HAKOM has brought the administrative 
capacity of the office to a satisfactory level. At  the same time the Croatian Post, the designated 
universal service provider, adopted a strategic framework to prepare for future full market opening.  
Some progress has been made on the mutual recognition of professional qualifications . However, 
the minimum training requirements for the medical pr ofessions (doctors, dent ists, 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 new Act on Regulated Professions 
and the Recognition of Foreign Prof essional Qualifications regulates  both the recognition of foreign 
professional qualifications and creates a legal basis to ensure that the minimum training 
requirements of the acquis will become applicable  as from the day of accession. Administrative 
capacity to deal with the mutual recognition of qualifications needs to be strengthened. Preparations 
in the field of mutual recognition of pr ofessional qualifications are advancing.  
EN 31   EN Conclusion 
Progress has been made in this chapter, in pa rticular on the mutual r ecognition of professional 
qualifications and postal services, and overall alignment with the acquis  is at a reasonable level. 
Further work is required in order to complete a lignment. The remaining obs tacles to the right of 
establishment and freedom to provide services need to be removed and further efforts are needed in 
the area of mutual recognition of  professional qualifications. Admi nistrative capacity needs to be 
reinforced. 
4.4. Chapter 4: Free movement of capital 
Some progress can be reported concerning the free movement of capital . As regards real estate, the 
Act on Ownership and other Real Rights was amended and entered in to force in February 2009. 
According to this Act and in line with the obligations under the SAA,  EU nationals are now entitled 
to acquire ownership rights over real estate under the same conditions as Croatian nationals. Moreover, procedures which had been initiated by citizens of EU  Member States for acquiring 
property ownership in Croatia but were not fi nalised before 1 February 2009 have been 
discontinued ex officio . However, restrictions on acquisiti on of agricultural land and nature-
protected land remain in place. 
As regards other capital movement s, amendments to the Deposit In surance Act eliminated as of 
January 2009 privileged access of the public sector to financial institutions. However, a number of 
restrictions remain. Due to th e global financial situation, Cr oatia decided to postpone the 
liberalisation of certain remaining capital moveme nts. The liberalisation of short-term financial 
loans to non-residents has been postponed until February 2010. The liberalisation of transfers 
abroad, relating to gifts and gran ts, transactions with derivatives, the use of loans from abroad 
through accounts abroad, payments and collection in  foreign cash, taking cash into and out of the 
country, transfer into or out of the country of materia lised securities and tr ansactions in foreign 
exchange markets abroad, was postponed until Janua ry 2010. Some discriminatory provisions still 
remain in Croatian legislation, in particular conc erning the use of assets in  building societies. The 
special rights or ‘golden shares’ that the government  has retained in certain privatised companies 
will need to be abolished by the da y of Croatia’s accession to the EU.  
With regard to payment systems , no progress can be reported. 
As regards anti-money laundering  (AML), a new AML law providing for improved alignment 
with the acquis  entered into force in Ja nuary 2009. Relevant implemen ting legislation has been 
adopted. There has been a gradual reduction in the number of suspicio us transactions reported to the 
Croatian Financial Intelligence Unit (FIU). This followed changes in the reporting system aimed at providing the FIU with notificati ons of a higher quality. The Criminal Code has been amended in 
order to widen the definition of the money launde ring offence and to bring it into line with the 
requirements of both the Vienna and the Palermo Conventions. The confisca tion regime has been 
extended to all property related to a perpetrator of organised crime or corruption offences; the 
possibility of reversal of the burden of proof has been introdu ced. The scope of the terrorist 
financing offence has been extend ed and public incitation to terrorism, recruitm ent and training for 
terrorism can also now be prosecuted. The FIU has been further strengthened through an increased 
number of staff.  
Monitoring and supervision of repo rting entities remains inadequate, however, especially outside 
the banking sector, and the enforcement record (i ncluding convictions, confiscations, seizures and 
asset freezing) is still weak. Th e notification system itself has led to only limited prosecutions 
EN 32   EN and/or conviction. Implementation continues to be affected by poor  functioning of the judiciary. 
There remains a backlog of cases concerning AM L offences in courts. Moreover, inter-agency 
cooperation, albeit improved, still leaves  considerable room for improvement. 
Conclusion 
There has been some progress in this chapter, main ly as regards liberalisation of the real estate 
market and legislative changes in  the anti-money laundering area . Overall, a reasonable level of 
alignment has been achieved. Further efforts will be needed, especially with implementation and enforcement of AML legislati on, including inter-agency cooperation, and with completing 
liberalisation of capital m ovements and alignment with the payment services acquis . 
4.5. Chapter 5: Public procurement 
Good progress can be reported as regards general principles . The amendments to the Public 
Procurement Law and relevant implementing legislat ion were adopted, aligning to a large extent the 
Croatian legal framework with the acquis . The new Concessions Law and the Public-Private 
Partnerships (PPPs) Law entered into force in  January 2009. The Strategic Framework for the 
Development of Public-Private Partnerships (PPPs) was adopted and relevant manuals in the area of 
PPPs were issued. The Concessions Register was esta blished within the Minist ry of Finance and is 
fully operational. In lin e with the ‘Roadmap for harmonisati on of special regulations governing 
concessions with the Concessions Law’, several pieces  of sectoral legislati on have been amended.  
With regard to administrative capacity , the Department for the Public Procurement System (DPPS) 
successfully ensured that a coherent public procur ement policy was adopted at the institutional and 
legislative level. The work of the DPPS is po sitively perceived by both economic operators and 
contracting authorities. Cooperation between State bodies engaged in public procurement issues has 
significantly improved. An Implementation Mon itoring Committee was established to oversee 
progress as regards the Strategy for the Devel opment of the Public Procurement System. The 
capacities of the Ministry of Finance were stre ngthened by two extra employees dealing with 
concessions and fiscal aspect s of PPPs. A new Agency for P ublic-Private Partnership was 
established as a body responsible for evaluation and approval of  PPP project proposals, tender 
documents and final draft contracts pursuant to th e provisions of the PPP Law. The agency employs 
12 people.  
However, the Guide for Concessions, the alignm ent of the sectoral legislation regulating 
concessions and the elaboration and implementa tion of methodological to ols for fostering the 
administration of the new PPP legisl ation is still to be completed.  The Department for the Public 
Procurement System has yet to enhance its monito ring capacities to prevent irregularities in PP 
procedures. 
Good progress has been made in the area of  award of public contracts . All contract notices above 
70,000 Croatian Kuna are published in th e Official Gazette, thus ensu ring transparency. Contracting 
authorities and entities are generally familiar with  the procurement procedures. Open procedures are 
the most commonly used, usually together with the lowest price award criterion. A new rule has 
been introduced which will require that as of Ja nuary 2010 at least one member of the selection 
committee is certified as a public procurement specialist. 
Numerous training courses have been provided at central and local level for both economic 
operators and contracting authorities. The trai ning covered in particular the areas of public 
contracts, concessions and PPPs, le gal protection and the issue of et hics and conflicts of interest. 
However, within contracting author ities, the overall level of sensitivity as regards potential conflicts 
EN 33   EN of interest and integrity is low. Further training activities are required for contracting 
authorities/entities on conflicts of interest, and to  get them used to applying award criteria other 
than the lowest price.  
Some progress can be  reported in the  remedies system . The competences of the State Commission 
were expanded to cover remedies on concessi ons and PPPs. The Law on the State Commission for 
the Supervision of Public Procurement Procedures  has yet to be amended. The State Commission 
takes an active part in traini ng contracting author ities and bidders in the field of legal 
protection.Due to changes in legisl ation widening the scope of possi ble request for review, the total 
number of complaints increased considerably as  compared to the previous reporting period. The 
State Commission has increased it s capacity to deal with them and its decisions are issued on 
average within 38 days. However, its administrative capacity — especially in view of an expected 
further increase in the number of cases — is no t sufficient. Judicial re view of State Commission 
decisions by the Administrative Courts takes on average several y ears, which is problematic in 
terms of an effective remedies system. 
Administrative capacity and coor dination mechanisms of the main stakeholders in the public 
procurement system still need further strengthe ning, in particular as regards anti-corruption 
activities and integrity. The scope for corruptio n remains wide. The capacity of the procuring 
entities to apply the public procurement legislation correctly, efficiently and transparently needs to 
be enhanced in order to reduce the potential for irregularities, including fraud and corruption in 
public procurement procedures. Significantly impr oved scrutiny of actual ex ecution of contracts is 
essential.  
Conclusion 
Good progress can be reported under this chapter in particular as regards completion of the 
necessary institutional set-up. Overall,  preparations are at an advan ced stage. However, legislative 
alignment still needs to be completed. Practical gui des for implementing the legislation need to be 
further developed. Administrative capacity needs to  be further enhanced at all levels of the 
procurement system, in particular with a view to effectively fighting corruption and tackling 
irregularities.  
4.6. Chapter 6: Company law 
Progress has been recorded in the field of company law , where the legislati on is largely aligned 
with the acquis  and work is ongoing with a view to complete the alignment.  
New instructions were issued on methods and conditions of electronic communication with the 
Court Register competent for registration of lim ited liability companies. A pilot project on 
electronic communication with the Court Register  for limited liability companies was extended. 
Online registration is now possible in 10 commercial courts, but not yet in Zagreb. Code systems of 
the Court Registers and instructions on thei r keeping remain to be further regulated. 
Relevant departments within the Mi nistry of Justice are understaffed. 
There has been some progress in the field of corporate accounting . The legislation is to a large 
extent aligned with the acquis . Several pieces of implementing legislation were adopted, including 
on the structure and content of the annual fi nancial accounts of investment companies. 
EN 34   EN A Handbook on the Implementation of Croatian Fi nancial Reporting St andards (CFRS) was 
published. The CFRS Committee continued transl ating and publishing in ternational accounting 
standards and related interpreta tions issued by the Internationa l Accounting Standards Board.  
The Register of Annual Accounts is accessible via the internet and maintained by the Financial 
Agency FINA. FINA received 79,065 annual accounts, 36,918 of which were published.  
There has been good progress in the field of auditing . The amendments to the Audit Act aligning 
the legislation with the 8th Company Law Directive were adopted and entered into force.  These set 
up an external quality assurance system and public  oversight processes for the auditing profession. 
The Audit Public Oversight Committee started ope rating but is not yet fully functional. The 
Croatian Chamber of Auditors hired one additional expert, but further streng thening is needed to 
ensure proper quality assurance checks. The Minist ry of Finance has estab lished a Department for 
Financial Reporting for issues of public policy in auditing and accounting, but overall resources remain to be allocated. Only two employees are currently working in the Department.  
Conclusion 
Overall, some progress can be reported in this chapter. Alignment with the acquis is on track. More 
remains to be done in the area of auditing as rega rds the implementation of the new legal provisions 
and the strengthening of administrative capacity. 
4.7. Chapter 7: Intellectual property law 
There has been little progress in the field of copyright and neighbouring rights , where Croatian 
legislation is largely in line with the acquis . The new Criminal Procedure Act aligned Croatian 
legislation with the Convention on  cyber crime as regards copyrig ht and related rights. Following 
the publication of the Tourism Action Plan, which recommended a reduction of copyright fees for 
authors, performers and phonogram producers during the tourism season, the copyright holders’ 
association agreed a 10% reduction of the fees in  favour of the hotel oper ators’ association. Such 
intervention of the nationa l authorities, albeit in the form of a recommenda tion, may be contrary to 
the exclusive rights of au thors and to the right to  equitable remuneration of  performing artists and 
phonogram producers.  
Some progress can be reported in the area of industrial property rights , where Croatian legislation 
is already highly aligned with the acquis . The outstanding minor change s to bring the legislation 
fully into line with the acquis  in the field of patents, trade ma rks, industrial design and topographies 
were adopted. The provisions on th e cut-off date for Supplementary Protection Certificates (SPCs) 
and exhaustion of patent rights in the field of biotechnology were also amended and aligned with 
the acquis . The Croatian Chamber of Registered Pa tent and Trademark Representatives was 
formally established in July. 
Some, but uneven, progress can be  reported in the field of enforcement . Efforts to protect right 
holders and consumers have been put in place in most enforcemen t bodies, in particular at the 
Customs Administration. A new re gulation was adopted to fully harmonise the procedure for the 
renewal of the protection of rights by Customs with the EU acquis  and to strengthen inter-agency 
cooperation. Intellectual property crime is of gr owing concern for the health and safety of 
consumers and on account of the increasing involv ement of organised crime groups. Management 
and training efforts need to be stepped up and in ter-agency cooperation has to be further enhanced. 
Further efforts are needed to strengthen the cap acity of police and prosecutors in the field of 
protection of intellectual propert y rights, including by allowing the use of enhanced  investigation 
powers, such as technical surveillance, to detect IP crimes.  
EN 35   EN As regards administrative capacity, the State Inte llectual Property Office (SIPO) has been further 
strengthened with 25 new staff and a self-fin ancing model has been introduced. The Board of 
Appeal, providing the right to a ppeal against first instance decisi ons of SIPO, started operations 
from 1 June 2008 and issued decisions at a satisf actory rate. Out of 72 app eals received during its 
first 9 months of operations (June 20 08 to March 2009), 48 were adjudicated. 
Conclusion 
Progress can be reported as regard s both legislative alignment and enforcement. Alignment with the 
acquis  has reached a very high level. Further efforts are required to strengthen the overall awareness 
of intellectual property rights in society at large, including with regard to the dangers for health and 
safety. Attention should be given to the increas ing involvement of organised crime groups in 
intellectual property righ ts-related offences.  
4.8. Chapter 8: Competition Policy 
Significant progress can be reported in the field of antitrust, including mergers . The Croatian 
Competition Agency (CCA) has hired new staff but more remains to be done to further strengthen 
the Agency’s administrative capacity. A new Co mpetition Act was adopted, in line with the acquis . 
The Act empowers the Agency to impose fines and to conduct a leniency programme, thereby 
strengthening the Agency’s deterrent effect and enforcement policy, in particular against cartels. 
With regard to the protection of the rights of defence, the Act introduces the obligation for the 
Agency to submit statements of objection to the parties. It also makes CCA decisions subject to 
review by the High Administrative Court of Croatia.  
The CCA took 41 decisions in antitrust and merg er including 19 merger cases, 3 on restrictive 
agreements, 3 on cases of abuse of a dominant position and 16 advocacy cases. However, the CCA 
did not take any decision ag ainst hardcore cartels.  
In the field of transport, one airport was found to have abused its dominant position as service 
provider. In the field of energy, the CCA concluded that a firm ha d abused its dominant position in 
the market of gas supply. On its own initiative, the CCA conc luded that one of the leading 
companies in telecom services had used prohibited agreements to set the minimum reselling prices. 
The CCA has continued to provide the government w ith assessments of draft laws as well as other 
expert opinions. Preparations in  the field of antitrust, includi ng mergers, are well on track.  
There has also been some progress in the field of state aid . The CCA issued 36 opinions and 
decisions. In one of its opinions, the CCA concl uded that the Croatian Broadcasting Act, which 
governs the financing of Croatian National Television, was not in line with the SAA State aid rules 
and the Croatian State Aid Act. This is a key elemen t in the accession negotiations in this chapter. 
The CCA has stepped up its efforts to improve the notification rate by aid grantors in national, 
regional and local governments. But more remains to be done on competition advocacy, particularly 
at the regional and local levels.  
The restructuring of the steel and shipyard sectors in Croatia are key elements in the accession 
negotiations in this chapter. With regard to the shipbuilding sector, Croatia has made substantial progress. The launch of international privatisation tenders for the six yards in difficulty marked the 
beginning of a restructuring proce ss through privatisation. The tender documentation is in line with 
the requirements of the SAA State aid rules and th e acquis. Croatia’s steel industry faced difficulties 
due to the global economic and financial crisis. Production in Željezara Split was brought to a halt 
in mid-April. At the steel mill of CMC Sisak, a de viation from the original plan occurred while at 
the same time new investments were launched. The National Restructuri ng Plan and Individual 
EN 36   EN Business Plans adopted by the government in June 2008 have become obsolete and will need to be 
revised.  
Conclusion 
Significant progress has been achiev ed on this chapter in particul ar as regards adoption of the 
Competition Act and the tendering of the shipyards in  difficulty with a view to their restructuring 
through privatisation. Overall, a reasonable leve l of alignment has been  achieved. However, 
sustained efforts are required in order to complete  the restructuring of the shipyards. Furthermore, 
work remains to improve the CCA’s enforcement record against cartels, to align the Croatian 
Broadcasting Act, and in the steel sector.  
4.9. Chapter 9: Financial Services 
There has been good progr ess in the field of banks and financial conglomerates . Croatia adopted 
legislation implementing the Credit Institutions  Act, thus further aligning Croatian banking 
legislation with the acquis , in particular the Capital Requir ements Directive (CRD), which is 
currently under review at EU level. Implementation of the Credit Institutions  Act provisions relating 
to capital adequacy was postponed until 31 Marc h 2010. The Law on Financial Conglomerates was 
adopted, providing for the additional supervision of regulated entities, which have been authorised 
to operate based on laws regulating activities of credit institutions, investment companies, insurance 
and reinsurance companies and companies forming a financial conglomerate. The law is already in force except for the provisions regulating activities and supervision of financ ial conglomerates that 
have their registered office in the EU, which w ill enter into force upon Croatia’s accession to the 
EU. The framework for risk-based supervisi on was adopted, and a new working group for 
implementation of the CRD was set up. Home-hos t supervisory coordination has improved. Work 
still needs to be done on cross- sector cooperation and cross-bo rder coordination for crisis 
preparedness and management. The process of tr ansforming savings and lo an cooperatives into 
credit unions or savings banks was completed at  the end of 2008. As a response to the global 
financial crisis, the Croatian National Bank perf ormed a quantitative impact assessment on banks’ 
capital adequacy in line with the recommendations  of the Financial Stability Forum. Moreover, the 
Deposit Insurance Act was amended and the level of guaranteed bank deposits was substantially 
increased. 
Some progress can be reported with regard to  winding-up  procedures.  More details on offences and 
penalties related to the winding- up of credit unions and on supervision of saving and loan 
cooperatives in a process of  winding-up were included in the Law on Credit Unions.  The Ministry 
of Finance has issued implementing legislation regulating the inspection and supervision of the 
winding-up of savings and loan cooperatives.  
The Croatian Financial Services Supervisory Ag ency (HANFA) and the Croatian National Bank 
(HNB) adopted the ordinances establishing the layout  and the content of annua l accounts for entities 
under their supervision. The Croa tian National Bank has signed Memo randa of Understanding with 
the French Banking Commission and the German S upervisory Agency, regulating cooperation in 
banking supervision.  
Further progress can be reported in the field of insurance , where a good level of alignment has 
already been reached. Legislation in the area of compulsory motor insurance has been further 
improved. By amending the Insurance Act and a dopting the related implementing legislation, 
Croatia has aligned its legisla tion in the outstanding areas of  non-life insurances, insurance 
mediation and supervision of rein surance companies. Croatia has al so aligned its legislation with 
EN 37   EN the EU acquis  in the area of investment restrictions concerning tech nical reserve coverage of 
insurance undertakings and calculati on of the solvency margins in the Life and Non-Life Insurance 
Directives. Provisions of the acquis  concerning certain investment rules were also transposed and 
will become applicable upon Croa tia’s accession to the EU. Alig nment with the Directive on 
supervision of insurance groups was also completed with the adoption of amendments to the 
Insurance Act as well as relevant implementing legislation in the Ordi nance on supplementary 
supervision of insurance groups. Fu rther efforts are still required to reach full alignment with the 
pension insurance acquis  and life and non-life insurance legisl ation, as well as to guarantee the 
proper functioning of the insurance a nd occupational pensions markets. 
There has been some progress concerning the financial market infrastructure . Croatia adopted 
regulations implementing the Law on Settlement Finality in payment systems and in systems for settlement of financial instruments.  
Progress can be repor ted in the area of securities markets and investment services , where a good 
level of alignment has been already reached. Croa tia adopted the legislative framework regulating 
special criminal offences against the capital  market. HANFA has also adopted implementing 
legislation stemming from the Capi tal Market Act. Amendments to the Capital Market Act to fully 
align with the MAD and Prospectus Directive were  adopted in July. Alignment with the collective 
investments acquis  — UCITS Directive (2007/16/EC) — has also been achieved. HANFA, all four 
mandatory pension funds and the four largest companies managing open-ended investment funds 
have jointly established the Fund for Protection of Investors.  
As regards administrative capacity , the Financial System Department  in the Ministry of Finance, 
responsible for drafting financia l legislation, employs 21 people.  Administrative strengthening 
through additional training and addi tional staff would be advisable.  The National Bank’s Prudential 
Regulation and Bank Supervision De partment hired 8 additional st aff. HANFA has continued to 
strengthen its administrative capacity, by employi ng 2 new staff (reaching 124 in total) and by 
providing training programmes on ri sk-based supervision. HANFA was also active in educating the 
broader public and investors, as we ll as professionals, police, state attorneys and journalists. Croatia 
should continue its efforts to strengthen HANFA’ s administrative capacity and to improve its 
arrangements for consultation with the private sector.  
Conclusion 
Significant progress can be reported on this chapter,  both as regards alignm ent of legislation and 
strengthening of administrative cap acity. Legislative alignment is ve ry advanced, but further efforts 
are needed regarding implementa tion. Efforts need to continue to strengthen the supervisory 
authorities’ capacity to perform th eir supervision functi on and improve consulta tive interaction with 
the financial sector.  
4.10. Chapter 10: Information society and media 
Good progress has been made in the field of electronic communications and information 
technologies . Following the adoption of the Electroni c Communications Act, the necessary 
implementing legislation has been adopted. Liberali sation of the sector ha s continued to progress 
significantly, in particular in the broadband market. As of January 2009, the fixed broadband 
penetration rate was 11.80%, mainly through xDSL  technology, with the in cumbent holding 89% of 
the market. Mobile penetration has reached around 130%. There is a significant number of UMTS 
subscribers, but few active users of mobile internet (around 6% of fixed broadband users). 
Legislative and policy improvements have taken pl ace with the aim of fac ilitating the building of 
EN 38   EN mobile infrastructure. However, further efforts ar e needed to achieve concrete results. Market 
analysis procedures and regulati ons are well under way, but one crit ical aspect relates to costing 
methodology to be applied to dominant operators. A recent governmental initiative has been to 
introduce a ’crisis tax’ on mobile services: this measure goes against the current EU strategy to 
promote Europe’s digital economy as one re sponse to the present economic downturn. 
Administrative capacity has been  strengthened in the Directorat e for Electronic Communications 
and the Postal Service within the Ministry of th e Sea, Transport and Infrastructure. The level of 
competence at the Croatian Post and Electroni c Communications Agency has been further 
enhanced. A new director has been appointed afte r an open recruitment procedure. Measures have 
been taken to increase the level of transparency  of the work of the regulator and improve the 
accessibility of the relevant information to the public.  The Telecommunications Users Council has 
been replaced by the Consumer Protection Un it of the regulator as  its advisory body. 
Representatives of consumer protection associati ons have been appointed to this advisory body. 
Preparations in this area are well advanced. 
Some progress has been made in the area of information society services  and electronic 
commerce. Further amendments to the Electronic Commerce Act have been adopted aimed at completing legal alignment in this field. An  e-Government Strategy for the period 2009–2012 has 
been adopted. Preparations in this area are reaching completion. 
Some progress can be re ported in the field of audiovisual policy . Preparations for the introduction 
of digital television ar e under way. The Croatian A udiovisual Centre has be en established, and it 
has joined European Film Promotion. However,  some interference in the media landscape by 
mainly economic and partly political interest gr oups has continued. Also, anticompetitive State aid 
to the national broadcaster has con tinued. Nevertheless, preparations in this area are well advanced. 
Conclusion 
Good progress has been made in this chapter. A good level of legal alignm ent has been reached. 
Efforts need to continue to strengthen the capac ity of the two national regulators to implement 
correctly the legal framework, in cluding on mobile infrastructure development. Efforts from all 
levels of government are necessary to sustai n liberalisation of all segments of electronic 
communications, and to ensure a le vel playing field in the audiovi sual markets. The recent tax 
measures on mobile services are rath er counterproductive in that respect. 
4.11. Chapter 11: Agriculture 
Progress was achieved as regards horizontal issues . Croatia adopted the Act on State Support for 
Agriculture and Rural Development as a first step in reforming the sector. However, substantial 
effort is still needed to fully align the agricu ltural support system with the Common Agricultural 
Policy (CAP). As regards the Paying Agency (PA) , Croatia adopted the Act on the establishment of 
the Paying Agency (PA) and appointed the Ag ency’s managing board. Substantial efforts are 
needed to make the PA operational, as well as the Integrated Administra tion and Control System 
(IACS)/Land Parcel Identification System (LPI S), which are key elements in the accession 
negotiations in this chapter. Sufficient and timely staffing of the PA as well as the allocation of 
budgetary resources are of crucial importance. Efforts are needed  to implement the LPIS at national 
level. A good level of acquis  alignment has been achieved for the collection and processing of 
agricultural data. Progress can be  reported on the implementation of the Farm Accountancy Data 
Network (FADN) with a requirement to further s ecure necessary human and budgetary resources.  
EN 39   EN As regards common market organisation (CMO) , progress is ongoing as a result of several 
activities regarding different sect ors and horizontal aspects of the single CMO. Continued efforts 
are essential to implement the CMO, which is a key element of the accession negotiation in this chapter. Legislation on wine as well as the vineyard register needs to be adjusted to the new 
implementing regulation. A new Ordinance on spirit dr inks has been adopted; its alignment with the 
acquis remains to be confirmed. 
In the field of rural development , Croatia is in the process of completing the SAPARD 
programme. Preparations are well advanced for th e implementation of certain rural development 
measures under the Instrument for Pre-Acce ssion (IPARD). Further strengthening of the 
administrative structures and capacity is needed to correctly and successfully implement rural 
development programmes. Timely implementati on of the IPARD programme remains a crucial 
factor for its success. 
Croatia continued alignment with EU legislation in the areas of quality policy and organic 
farming . 
Conclusion 
Progress can be reported in this chapter, in par ticular regarding the collection and processing of 
agricultural data, the common mark et organisation and rural devel opment. Alignment continued in 
the field of quality policy and organic farming. Ov erall, preparations ar e moderately advanced. 
Croatia needs to adjust legislation and structures  regarding the acquis for wine. Substantial efforts 
are still required to establish the paying agency  and the Integrated Administration and Control 
System as well as the Land Parcel Identification System. Preparations need to be accelerated and 
plans prepared on the basis of r ealistic expectations. Further ali gnment of the support schemes with 
the CAP is essential to prepare for a smooth tran sition to the CAP. In rural development, the 
absorption capacity for EU pre-accession funds needs to be improved. 
4.12. Chapter 12: Food safety, veterinary and phytosanitary policy 
Good progress can be reported in the implementation of the strategy for transposition, 
implementation and enforcement of the acquis  for food Safety, veterinary  and phytosanitary policy. 
Further progress can be noted as regards general food safety , where Croatia adopted implementing 
legislation based on the already aligned Food Act. Continued e fforts are required to finalise 
transposition and ensure implementation of th e new legislation as well as the necessary 
administrative and control capacity. 
Good progress has continued in the veterinary fi eld with the adoption of several implementing 
regulations based on the Veterinary Act, which is  in accordance with EU requirements. A compliant 
system for financing of veterinary inspections ha s been established. The recruitment of additional 
official veterinaries has started. Preparations fo r construction and fitting-out of Border Inspection 
Posts (BIPs) have started. Implementation of the id entification of animals a nd the registration of 
their movements continues. Croatia continued implementing the action plan for control and 
eradication of Classical Swine Feve r. Additional administrative efforts are needed to secure a fully 
EU-compliant control system, which is a key element of the accession negotiations.  
In the area of placing on the market of food and feed , good progress can be re ported. The national 
programme for the upgrading of establishments for food and feed of animal origin, which is a key 
element of the accession negotiations, is being finalised. A system to control raw milk  has been put 
in place. Procedures are in place to control and improve milk quality  and to prevent the use of non-
EN 40   EN compliant milk. However, efforts remain to be made  to increase the reliability of the control system. 
Increased effort is needed to finalise  upgrading plans for all establishments. 
In the area of animal by-products (ABP) , deficiencies need to be addressed regarding official 
controls and establishments to ensure that ABP are handled  in line with EU legislation. 
Croatia has made progress in sett ing up a system for controls of animal welfare  standards. 
Administrative capacity and procedures have  improved. Efforts are needed to improve 
implementation of controls. 
Good progress continued in the area of phytosanitary  issues, with the adoption of implementing 
legislation in the fields of plan t health, plant protection, seeds and planting material as well as the 
registration of varieties of agricultu ral plants. Transposition of the EU acquis  into national 
legislation is advanced as re gards the placing on the market of plant protection products and 
maximum residue limits of pesticides. Preparati ons for construction and fitting-out of BIPs have 
started. Additional training for staff is needed.  
Conclusion 
Good progress has been made, in particular with  the passing of implementing legislation and its 
implementation. Overall, preparations are advan ced. Continued efforts are required to finalise 
transposition and impl ementation of the EU acquis , in particular regarding implementation of the 
national programme for the upgrading of establishments for food and fe ed of animal origin and the 
securing of the necessary administrative and control capacity. 
4.13. Chapter 13: Fisheries 
Good progress can be reported in the areas of resource and fleet management  and inspection and 
control . Croatia started to implement legislation on landing declarations and sales notes. The 
programme for the fishing vessel re gister is functional. Installatio n of the satellite-based vessel 
monitoring system (VMS) on board the vessels concerned is well advanced. The fisheries 
monitoring centre (FMC) is established and sta ffing continues. Equipment and administrative 
capacity of the fisheries inspection services has improved. As for fish stat istics, a high level of 
acquis  alignment has been achieved for the collection a nd processing of fisheries data and statistics 
on fishing vessels. However, the regi ster of all commercial  fishing vessels needs to be finalised and 
subsistence fishing vessels addre ssed. An entry-exit scheme is s till lacking. Administrative and 
operational inspection capacity, which is a key el ement of the accession nego tiations, needs further 
strengthening, in particular concerning the recruitm ent and training of additi onal fisheries inspectors 
to carry out controls at the coast. 
Limited progress can  be reported on market policy . Collection of informati on on species, quantities 
and prices has started. While wholesale fish ma rkets have been developed in Rijeka and Pore č, the 
latter is still not in full use. Increased effort is needed regard ing the establishment of producers’ 
organisations and alignment of marketing standards. 
There has been some progress on structural action  and State aid . Croatia started designating and 
strengthening the administrative structures necessary to implem ent the European Fisheries Fund. 
Effort is still needed to strengthen the institut ional framework and to finalise the national fishery 
strategy. Croatia needs to align State aid with the acquis . 
In the area of international agreements, Croatia is taking steps to implement the recommendations 
of the International Commission fo r the Conservation of Atlantic Tuna (ICCAT) regulating catches, 
EN 41   EN farming and trading of tuna. However, more progre ss needs to be made regarding adjustment of the 
fleet and farming capacity. 
Conclusion 
Croatia has made good progress in th e field of fisheries. Overall, preparations are well advanced. 
Croatia will need to step up its e fforts to close the remaining gaps in the areas of fleet management, 
inspection and control, stru ctural action and state aid. 
4.14. Chapter 14: Transport policy 
Good progress can be reported in the field of road transport . The National Security Policy for 
digital tachographs has been adopted by ERCA and the card issuing aut hority has been set up, 
which constitute important elements in this chapter. New inspectors are being employed, the necessary equipment for performing checks is being procured and pr ofessional qualification courses 
are ongoing in order to develop adequate administra tive capacity to enforce the rules relating to the 
road transport acquis , including roadside checks. However, targ eting of checks should be revised in 
order to increase the contro l over national hauliers.  
There has been some progress in the area of rail transport . The law on the railw ay regulatory body 
has been amended in order to im prove its functioning. The board of  the rail regulator has assumed 
its functions and has taken a numbe r of decisions related to staff measures. The derailment of a 
passenger train near Split at which several persons were killed in July 2009 resulted in the dismissal 
of the infrastructure management company's CEO. Croatia reinforced its legal framework in June 
2009 to foresee the application of a set of crite ria aimed at ensuring the independence of the 
infrastructure manager from the railway undert akings, despite both being under one holding.  
There has been some progress in the area of inland waterways transport . The basic legislative 
framework has been aligned, but the relevant mini sterial regulations still remain to be enacted. 
Shortcomings related to combined transport remain. 
Good progress can be reported in the area of air transport . The new Aviation Act was adopted in 
June 2009. An independent Civil Av iation Agency was established and has started to function. 
Relations between the Croatian Civil Aviation Ag ency and EASA have been put on a formal 
footing by a working arrangement signed in July  2009. Nevertheless, an assessment performed in 
September 2009 by the European Aviation Safety Agen cy indicates that Phas e 1 of the European 
Common Aviation Agreement, which is one of the key elements in this chapter, is not yet fully implemented, in particular in the area of aviati on safety. Progress has been  made as regards the 
Single European Sky legislation a lthough further efforts are needed to ensure its full compliance. 
Further acquis  alignment is required in the area of air traffic management as regards the 
certification and designation of the air navigation service provide r, the nomination of a notified 
body, complete transposition of the air traffic cont roller directive and of the interoperability 
implementing rules, and the implementation of the flexible use of airspace regulation. Legislation 
on ground handling and slot allocation still need to be aligned with  the relevant Community rules 
and there is a need to take the necessary steps to enact the ban on Chapter 2 aircraft. 
Some progress can be re ported in the area of maritime transport . Implementation of the Vessel 
Traffic Monitoring Information System (VTMIS) is  ongoing. The detention rate of Croatian-flagged 
vessels in the Paris MOU area decreased from  7.7% in 2007 to 4.1% in 2008. A maritime safety 
verification mission was conducted in March 2009. It id entified several important shortcomings that 
hamper Croatia’s ability to implement the EU acquis , in particular the role of the Croatian Register 
EN 42   EN and its relationship with the mar itime administration. Croatia needs to  strengthen flag and port State 
capabilities, make progress on VTMIS and ensure proper development of por t reception facilities. 
Legislation on maritime cabotage is not in line with the acquis. Further alignment is also required as 
regards maritime security . 
As regards State aid  in this sector Croatia has not yet fully aligned its legislation. 
Croatia intends to take part in  the activities of the Galileo satellite navigation  programme when 
operational. 
Conclusion 
There has been some progress in this chapter . Overall, there is a reasonable level of alignment. 
Croatia needs to continue its efforts to improve administrative capacity in the maritime transport 
sector, in the Civil Aviation Agency, in particular  in view of aviation safety, and in the railway 
regulatory authority, in particul ar through training of staff. Th e new provisions concerning the 
independence of the rail infrastructure manage r have to be further implemented under the 
supervision of the regulatory body in  every day practice. Further legi slative alignment is needed not 
least in the aviation and maritime cabotage sectors.  
4.15. Chapter 15: Energy 
There has been some progress in the area of security of supply . Croatia adopted the rules for usage 
of the gas storage system. Croa tia has taken important steps to wards achieving the mandatory 90 
days of emergency oil stocks. There are no developmen ts in relation to the establishment of a crisis 
management body or intervention plans. Under th e new Mining Act, which was adopted in June 
2009, authorisations for prospecti ng, exploration and production of hydrocarbons will be granted on 
the basis of a non-discriminatory  principle in line with the acquis . In the area of security of supply 
Croatia partially meets its targets. 
Progress in the area of the internal energy market  has been good. Implementing legislation 
relating to the organisation of th e gas market and network rules fo r gas transport a nd distribution 
have been enacted. The Energy Law and the Electr icity Market Law have been amended. New rules 
on allocation of cross-border capacity for electric ity have been adopted and were in force as of 
January 2009, foreseeing that as of 2010 the yearly allocation of capacity will  be in full compliance 
with the acquis. The legal framework in Croatia complies with the acquis  of the second internal 
energy market package. However, single suppliers continue to dominate the electricity and gas markets . Croatia will now need to focus on implemen ting the requirements of  the recently adopted 
third internal energy market package. Pr eparations in this area are advanced. 
The regulator is fully functional and continues to recruit additional staff. However, no progress has 
been made towards a clear distinction and sepa ration of tasks between the regulator and the 
Ministry.  
Little progress can be reported in the area of renewable energy sources (RES). Amendments have 
been made to implementing legislation on incentiv e fees for the producti on of electricity from 
renewable sources. The Act on Biof uels for Transport was adopted in May 2009 and aims to fully 
align Croatian energy legislation with the previous Biofuels Directive. It also takes into account 
some elements of the recently adopted Renewables Directive. However, Croa tia will not be able to 
achieve its 2010 target for elec tricity production from incentivis ed renewable energy sources. 
Alignment with the acquis  in the area of RES is advanced but substantial efforts will be required if 
Croatia is to achieve the necessary concrete results. 
EN 43   EN Progress has been made in the field of energy efficiency . Legislation on energy end-use efficiency 
has been enacted. A National Energy Efficiency Ac tion Plan has been prepared Progress has been 
made in the transposition of the acquis  relating to the energy perfor mance of buildings with the 
adoption of implementing legislation on auditing the energy certification of buildings. Croatia still needs to ensure compliance in the area of high-e fficiency cogeneration (C HP) and energy services. 
Alignment with the acquis  is advanced. Administrative capacity  in both energy efficiency and RES 
needs significant strengthening. 
Good progress has been made in the field of nuclear safety and radiation protection . 
Implementing legislation relating to the provision of  funds to cover Croatia’s  liabilities concerning 
the decommissioning of the Krško Nuclear Power Plan t, including the disposal of radioactive waste 
and spent nuclear fuel, has been adopted. Cr oatia adopted in July 2009 a Nuclear Waste 
Management Strategy 2009-2019 covering the manage ment of operational waste, decommissioning 
waste and spent fuel.  
A new organisational structure for the State Office for Nuclear Safety, and actions to further align 
the legislation on radiat ion protection with the acquis , are under way. In addi tion, the Government 
adopted in July 2009 a document committing Croatia to streamline administrative structures responsible for nuclear safety  and radiation protection to strengthen the efficiency and 
independence of operations. However the role of the Ministry of Health and Social Welfare in the 
inspection of facilities and devices generating ionising radiation needs to be clarified.  
The licensing of a new facility for the storage of institutional radioactive wa ste remains a key safety 
issue that needs to be addresse d by the Croatian authorities.  
Conclusion 
There has been good progress in this chapter. Overall, alignment with the acquis  is well advanced. 
Efforts are still needed for adequate implementation of the priorities related to the functioning of the 
electricity and gas markets and for the promotion of  renewable energy sources, particularly in view 
of meeting the EU's 2020 RES target. Further e fforts are also needed to further empower and 
improve the functioning of the regulatory authority.  
4.16. Chapter 16: Taxation 
Some progress can be reported in the area of indirect taxation . Croatia’s adopted a new VAT law 
which is significantly increasing the level of alignment with the acquis . Further efforts in this area 
are needed,, in particular with regard to the scope of the reduced rates and of exemptions, the 
exclusion of free zones from the tax territory, an d adding provisions for special schemes for travel 
agencies and investment gold. On excise duties, Croatia finally intr oduced a single ra te of excise 
duty for cigarettes as from 1 June  2009, thus complying with its obligations under the SAA; a new 
Excise Act was adopted in July  2009, improving significantly the level of alignment with the 
acquis . However, further alignment of the excise legi slation remains necessary, notably with regard 
to chargeability of duty on coal, gas and elec tricity, minimum rates a nd small producers. The 
provisions applicable to car taxati on have to be aligned with the acquis . 
Good progress has been made in the area of direct taxation . The Act amending the Profits Act has 
transposed EU Directives 90/ 4343/EEC, 90/435/EEC and 2003/49/EC, with entry into force as from 
the date of Croatia’s accession to the EU.  
EN 44   EN Good progress can also be reported on administrative cooperation  and mutual assistance . 
Following the adoption of the Act on the Personal Identification Number, a single tax identification 
number for taxpayers has been established since 1 January 2009 and will be used for exchanging tax 
information. Croatia has transposed  the EU legal framework for ad ministrative cooperation with EU 
Member States, with entry into force as from the date of accession. The prep arations for putting into 
operation of the Central Liaison Of fice (in the Tax Administration) and the Excise Liaison Office 
(in the Customs Administratio n) are very advanced.  
There was some progress with operational capacity and computerisation . The Tax and Customs 
Administrations have continued working on IT inte rconnectivity projects to develop the mandatory 
VAT Information Exchange System and the Excise  Movement Control System, completing the first 
phase of development for both systems. Attention s hould be given to reinforcing the IT capacity of 
the tax and customs administrations , which remain dependent on extern al expertise in IT matters.  
Conclusion 
Good progress was made in this chapter, not l east on legislative alignm ent. The abolition of 
differentials in excise duties on cigarettes has eliminated all discriminatory elements, thus bringing full compliance with the SAA. Taking into acc ount the provisions which were adopted but will 
enter into force upon accession, the le gislation in the field of direct  and indirect ta xation has been 
aligned to a large extent with the EU acquis . Nevertheless, efforts are st ill required to align Croatian 
legislation, most notably in the field of VAT, where significant di screpancies remain. Efforts need 
to continue to strengthen administrativ e capacity, including IT interconnectivity. 
4.17. Chapter 17: Economic and Monetary Union 
Significant progress can be repo rted on alignment with the acquis governing monetary policy . 
Good progress has been made regarding the elimina tion of the legislative provisions granting public 
authorities privileged access to financial institutions . Overall, preparations in the field of monetary 
policy remain well on track, but more remains to be done to consolidate the independence of the 
Central Bank in the Constitution.  
In the area of economic policy , Croatia has made some progre ss regarding alignment with the 
acquis , particularly in improving the institutional a nd technical capacity for setting up medium-term 
macroeconomic and fiscal frameworks. The Pre-accession Economic Programme (PEP) 2009-2011, 
submitted in January 2009, presented a sufficiently  comprehensive and consistent macroeconomic 
and fiscal framework for economic policies. Due to  the rapidly changing external environment, it 
retained only limited relevanc e as a core document for econo mic policy-making. Considerable 
further efforts were undertaken to bring fiscal reporting to ESA95 standards, although weaknesses 
remain. Broad political consensus on the essent ials of a market economy has been maintained. 
Transparency on policy-making was enhanced thr ough the establishment of the Economic Council. 
However, an ad hoc approach to economic polic ies has often continued to prevail. Overall, 
consensus on the fundamentals of a market econo my has been maintained, but Croatia lacks a 
medium-term structural reform strategy.  
Conclusion 
There has been significant progress in the area of  economic and monetary policy. Overall alignment 
with the acquis in this area is very advan ced. However, work on anchor ing the indepe ndence of the 
EN 45   EN central bank in Croatia's legisl ation needs to be completed. Furt her efforts are required concerning 
policy coordination. 
4.18. Chapter 18: Statistics 
Good progress can be re ported concerning the statistical infrastructure . A new organisational 
structure of the Central Bureau of  Statistics (CBS) has been adopted by the Government. This will 
increase the number of posts. The staff increase will focus on key areas such as agricultural and business statistics. The Act on Official Statistics has been amended with th e aim of integrating the 
regional statistical offices into the CBS structure. This will increase efficiency of data collection. 
The Accession Partnership priority has been met. In  addition the objectives of the statistical master 
plan have been so far achieved.  A dissemination strategy of stat istics is being developed. The 
situation in the IT department has somewhat impr oved. Preparations in this  area are well on track. 
Progress can be reported in the field of classifications  and registers . Implementation of the NACE 
Rev.2 classification has started. The coverage a nd quality of the business register is being 
improved. Preparations in this field are on track. 
Significant progress has been made in the area of sector statistics . Substantial progress has been 
made in the area of agricultural statistics, in particular with a view to obtaining comparable 
agricultural structure, agromone tary and animal production data. In the area of macro-economic 
statistics, a major revision has been completed, representing a significant  step towards aligning 
Croatia’s national accounts with  EU standards. Key nationa l accounts indicators and the 
methodology used are now larg ely in line with the  acquis (ESA 95). Revised GDP figures have 
been published. These are, together with agricu ltural statistics, key elements for the accession 
negotiations on this chapter. The st ructural business statistics are be ing revised with the objective of 
providing data on all sectors, includin g at regional level. However, in social statistics, the Survey of 
Income and Living Conditions (SILC) is not yet im plemented on an annual ba sis. Preparations in 
this area are well advanced.  
Conclusion 
Substantial progress has been made on modernisi ng the statistical infras tructure. A good level of 
legal alignment has been reached. However, effo rts should continue to further align Croatian 
statistics with EU requirements.  
4.19. Chapter 19: Social Policy and Employment 
There has been some progress in the area of labour law . Administrative capacity has been 
somewhat strengthened in the Directorate for Labour  and the Labour Market of the Ministry of the 
Economy, Labour and Entrepreneurship (MoELE) as well as in the State In spectorate. Work is 
underway to make the Wage Guarantee Agency ope rational and to establish a liaison office for 
posting of workers within the MoELE. However, in ge neral, a number of shortcomings continue to 
persist as regards legal alignment and administra tive capacity. The amendmen t of the Labour Act is 
still outstanding. This is a key element for the acce ssion negotiations on this chapter. Preparations 
in this area are on track. 
Good progress can be repor ted in the field of health and safety at work . Further amendments to 
the Occupational Safety and Hea lth Act have been adopted with  the aim of completing legal 
alignment. This is a key element for the accession negotiations on this chapter. A National Programme for Occupational Health and Safe ty 2009–2013 has been adopted. Implementation and 
enforcement capacity has substantially improved. The Institute for Occupational Health has been 
EN 46   EN restructured and now operates in new premises as the Institute for Health Protection and Safety at 
Work. The capacity of the Institute for Occupa tional Health and Safety  Insurance has been 
substantially strengthened through an increase of staff from 32 to  111. The State Inspectorate has 
moved to new premises and has adequate manageme nt structures, as well as systems to recruit, 
train, appoint, authorise and monitor inspection staff. Recruitment of labour inspectors has 
continued, and attention has been paid to the mob ility of the Labour Inspect orate. Preparations in 
this area are well advanced. 
As regards social dialogue , there has been some progress. Tripar tite social dialogue  continues to be 
relatively well developed, and the in fluence of social dialogue on the decision-making process and 
policy design has continued to improve. Sectoral social dialogue has improved: there are now seven 
sectoral agreements signed. However, representativene ss criteria for participat ion of trade unions in 
collective bargaining have not been adopted yet and bipartite social dialogue is not yet sufficiently 
developed. Also, the capacity of social partners con tinues to be somewhat weak. Preparations in this 
area are on track. 
Progress has been made in the area of employment policy . Two Joint Assessment of Employment 
Policy Priorities (JAP) follow-up conferences have been held. A National Employment Plan (2009–
2010) and the first Follow-up Repo rt on the implementation of the JAP have been adopted, 
providing the basis for launching a new cycle of active employmen t measures. An anti-recession 
package has been adopted. As it does not directly focus on the labour market, it can be expected to 
have only a limited effect on unemployment. The lo w employment rate remains a concern, as well 
as rates for youth and long-term unemployment. ( see also section on economic criteria ). The link 
between the supply of human reso urces by the education system and demand on the part of the 
labour market is weak, and skills forecasting remains to be strength ened. Also regional disparities 
and the mismatch between demand and supply of labour are still consider able, although they are 
being adequately addressed. Prepara tions in this field are on track. 
There has been significant progre ss in the preparations for the European Social Fund . The 
Operating Structure responsible for the Operat ional Programme for IPA component IV (Human 
Resources Development) has been establishe d and accredited by the European Commission. 
Workload analysis and training plans for 2009–2010 ar e being developed. The current structure will 
be responsible for managing future implementation of the ESF. This is a key element for the accession negotiations on this chapter. Prepar ations in this field are well on track. 
Good progress can be repor ted in the field of social inclusion . A third Joint Inclusion Memorandum 
(JIM) follow-up seminar was held in Zagreb. Governance, partners hip and visibility of the JIM 
follow-up process for all stakeholders has been s ubstantially reinforced. Pr eparations in further 
analysing community-based services and supporti ng innovative models of social services are 
ongoing. However, progress in the field of administ rative and fiscal decentralisation of social 
services has been more limited and there is s till a need to develop proper certification and 
accreditation system for social service providers. C ontinued progress can be reported in the process 
of de-institutionalisation for part icular targeted groups, namely el derly, while prog ress for children 
and children with disabilities has been limited. The use of a coherent monitoring and evaluation 
system to assess policy reforms in this field remain s to be strengthened. In general, overall progress 
in meeting the priorities and implementing the m easures set out in the JIM document is slowly 
improving. As regards administrative capacity, the pos ition of the Director of the Department for 
Social Welfare at the Ministry of Health and Social Welfare has been filled. Concerning people 
with disabilities, the office of the Ombudsman for Persons with Disa bilities has become functional 
with an adequate number of staff. Accessibility  to new buildings under construction has improved. 
Government cooperation with civil society orga nisations to create an adequate network of 
EN 47   EN community-based services has improved. However, budgetary constraints co ntinue to limit the 
scope of the rights of people with disabilities to health and special care and their social integration 
(see Political criteria — Economic and social rights ). Preparations in this area are on track. 
Some progress can be re ported in the field of social protection . Reforms in the pension and health 
care systems are ongoing. The monthly social welfare benefit has in creased. Preparations for the 
development of a concept and strategy for social housing for the most vulnerable groups are 
ongoing. 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 r eceiving pensions remain 
a concern, even if social pensions are foreseen  for these categories by 2011. Preparations in this 
field are on track. 
There has been good progress in the field of anti-discrimination . The Ombudsman’s office has 
been transformed into an independent Equa lity Body. Administrative capacity has been 
strengthened for this purpose by bringing the nu mber of staff from 16 to 31. Awareness-raising 
activities in this area are ongoing. However, some  aspects of the level of protection against 
discrimination in practice and th e judicial prosecution of acts of  discrimination are still being 
brought in line with EU standards.  
Vulnerable groups and ethnic minoriti es, particularly the Serb and th e Roma minorities, continue to 
face discrimination in economic and social life ( See Political criteria — Economic and social 
rights ). The limited statistics currently available stil l do not allow monitoring of discrimination on 
different grounds, as required by the acquis . Development of a system fo r statistical monitoring of 
discrimination cases has started, but is facing budgetary constraints. Prep arations in this field are on 
track. 
Good progress can be reported on equal opportunities . The office of the Ombudsman for Gender 
Equality has been transformed into an independ ent Equality Body. However, budgetary constraints 
have put at risk the necessary staffing to monitor the relevant legislation.  County commissions have 
been established with the task of monitoring the implementation of the Gender Equality Act at local 
and regional levels. Awareness-rais ing activities on gender equality have continued in different 
areas. However, effective implementation of th e National Policy for the Promotion of Gender 
Equality is not entirely ensured ( see Political criteria — Economic and social rights ). Preparations 
in this field are well advanced. 
Conclusion 
Good progress has been made on this chapter. Over all, a good level of le gal alignment has been 
reached although some gaps remain, especially as regards labour la w. 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 
Some progress can be re ported in the field of enterprise  policy . Croatia continues to implement the 
actions and guidelines of the European Charter fo r Small Enterprises. Stea dy progress was made in 
entrepreneurial learning activities and enterprise  skills development. A Public-Private Dialogue 
Committee was established under the umbrella of  the Ministry of the Economy, Labour and 
Entrepreneurship (MELE). It is meeting regularly which represents a signi ficant progress. Croatia 
participated in the activities of the European SME Week.  
EN 48   EN Steady progress was made in entrepreneurial learni ng activities and enterprise skills development, 
through plans for more developed and systematic intelligence on human capita l within enterprises. 
Further efforts were made to strengthen the SM E Development Agency (HAM AG) and to refine its 
role vis-à-vis that of the MELE, but cooperati on between the two author ities remains to be 
improved. Although good results were achieved in the implementation of the SME policy, MELE's 
role as SME policy coordinator at govern ment level remains to be strengthened.  
However, regulatory impact assessment (RIA) is not applied to new legislation on the business 
sector. A department for RIA in  the MELE remains empty. Furtherm ore, the central coordination 
office for RIA closed in August due  to budgetary constraints, brin ging the RIA implementation to a 
halt. There are no developments regarding the s ilence-is-consent principle. The impact of the 
financial crisis is amplifying some issues such as illiquidity, particularly due  to delays in payments 
by public companies and institutions.  
Croatia completed the review of the current legisl ation concerning the business environment, as part 
of the ‘regulatory guillotine’ process, and made progress in streamlining and eliminating 
unnecessary legislation. However, effort s are still needed in this area.  
As regards the business environment, some pr ogress has been made in speeding up company 
registration through online registration ( See Chapter 6 — Company law ). However, over-regulation, 
numerous para-fiscal taxes, an inefficient judi ciary and public administ ration as well as petty 
corruption all severely hamper the business environment.  
Croatia made good but uneven progress on enterprise and industrial policy instruments . Croatia 
is an active member of the Enterprise Europe Netw ork and participates in all three pillars of the 
Community Programme CIP. The alignment of Croatian legislation with the Directive on 
combating late payments is still not completed.  
There has been some good progress in the field of sectoral policies , especially as regards 
shipbuilding. In the steel sector, the implementa tion of the national restru cturing programme (NRP) 
has been disrupted by the economic crisis. As a result, the individual bu siness plans and the NRP 
will have to be revised ( see Chapter 8 — Competition policy ). Further progress was achieved in 
improving the strategic and legal fram ework in the field of tourism.  
Conclusion 
Some progress was achieved on this chapter. Overall, alignment with the acquis  in this chapter is 
very advanced. However, further efforts are need ed to put into practice the regulatory impact 
assessment of new legislation. The current pace of reforms to impr ove the business and notably the 
SME environment should continue in line with the Small Business Act. Further efforts are required 
in the steel and shipbuilding sectors.  
4.21. Chapter 21: Trans European Networks 
There has been good progress in the development of transport networks . Croatia has continued to 
actively participate in the implementation of the 2004 Memorandum of Understanding on the 
development of the South East Europe Core Re gional Transport Network and in the South East 
Europe Transport Observatory, particularly by updating and implementi ng the Multi-annual Plan 
2009-2013 .  
EN 49   EN 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 future Croatian investments in upgrad ing the relevant infrastructure to the TEN-T 
standards. Further infrastructure upgrades have been made towards this aim during the past 12 
months. The Trans-European Network in Croatia will consist in a multimodal network including 
main road, rail, inland waterway, river port, seap ort and airport infrastructures in the country. 
As regards energy networks , Croatia has continued to be ac tive in developing interconnections 
between its electricity network and those of neighbouring countries and EU Member States. 
There has been progress on tel ecommunications networks. 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 ‘IC T Policy Support Programme (ICT PSP) of the 
Competitiveness and Innovation Framework Programme  (2007 to 2013)’ has been in force as of 
2008 and Croatia has become a full member of the ICT PSP. 
Conclusion 
Croatia has made good progress rega rding the development of its tr ansport and energy networks in 
line with the design and objectives of the TE N–Transport network and TEN–Energy network. 
Overall, alignment with the acquis is well advanced.  
4.22. Chapter 22: Regional Policy and Coordi nation of Structural Instruments 
There has been some progress with regard to the legislative framework . The new Budget Law 
entered into force in January 2009. This law introduces multi-annual budgetary planning and budget flexibility, desirable in relation to regulatory re quirements of Community cohesion policy. It does 
away with the limit on the borrowing  capacity of local self-government  units for co-financing of EC 
projects. It is a tool that will contribute to clear coordina tion between the Ministry of Finance 
(MFIN) and the Central State O ffice for Coordination of EU Funds  (CODEF) on the preparation of 
the three-year Government Programmes Strategy. There was also progre ss in alignment with 
Community legislation in other areas: public procurement (concessions and PPPs); competition, 
State aid and the environment. Croatia  needs to ensure that all releva nt legislation and strategies in 
the context of regional development are fully in  line with the EC cohesion policy framework and 
negotiations under this chapte r. Preparations in this area are fairly advanced. 
There has been good progress with the institutional framework . The Commission conferred 
management powers on the relevant Croatian aut horities for IPA (Instrument for Pre-Accession 
Assistance) components II (CBC), III (Regiona l Development) and IV (Human Resources 
Development), all precursors of the Structural  Funds. Croatia needs to legally formalise the 
institutional set-up for managing structural instru ments, building on the existing system. This is a 
key element for the accession negotiations in this chap ter. Preparations in this area are moderately 
advanced. 
There has been some progress in the area of administrative capacity . Croatia has undertaken a 
systematic analysis of the organisational, staff a nd training needs for IPA and the Structural Funds 
and is preparing Organisational Development Strategies for all key bodies involved in cohesion 
policy management and/or implementation. An ove rall Institution Deve lopment and Capacity 
Building/Training Strategy is being prepared. This is one of the key elements for the accession 
negotiations in this chapter. Croatia needs to fu rther strengthen considerab ly its administrative 
capacities in the implementation of pre-accession f unding under Phare/ISPA and IPA. This includes 
the availability and retention of adequate qualifie d and trained staff in existing IPA structures for 
EN 50   EN which a structural solution is necessary. Particul ar effort is also needed in ensuring proper 
management and coordination of various ongoing (a nd planned) technical as sistance actions and 
training activities aiming at enhancement of admi nistrative capacity. Administrative capacity needs 
to be significantly increased in order for Croatia to achieve ab sorption under IPA and the future 
Structural Funds. Preparations in this area are not very advanced. 
Progress has been made with respect to  programming . Croatia has completed programming under 
IPA, including submission of Op erational Identifica tion Sheets for components III and IV. The 
drafting and consultations for the National Strategic Referen ce Framework have started. A 
coordination body for the National Strategic Reference Framework under the Central State Office 
for Development Funds (CODEF) was established a nd analysed a first draft of the document. The 
accompanying operational programmes are also being pr epared. This is one of the key elements for 
the accession negotiations in this chapter.  
However, in the programming documents Croatia  will have to demonstrate that national and 
sectoral strategies have been in corporated and that relevant Mini stries have full ownership of the 
programming process. Croatia needs to further its efforts in addressing the coordination and quality 
participation of all stakeholders during the prep aration of programming documents. It needs to 
significantly increase its efforts towards preparing a comprehensive and quality project pipeline for 
implementation of IPA as well as for the Struct ural Funds/Cohesion Fund. Pa rticular efforts are 
needed to prepare sufficient number of good qualit y and mature projects in the environment and 
transport sectors. As regards the Structural Funds, the id entification of projects has only started and 
project preparations are still at a very early stage.  Preparations in this area are advancing slowly. 
There has been good progress in the area of monitoring and evaluation  of the IPA operational 
programmes. The third and fourth regular sectoral monitoring committee (SMC) meetings to monitor implementation of the OPs took place  in December 2008 and June 2009. The respective 
Operating Structures have satisfactorily prepar ed and co-chaired the SMC meetings. The second 
meeting of the joint IPA Monito ring Committee (all components) was held in July 2009. Croatia 
has also begun addressing its needs for establis hing monitoring and evaluation systems for the 
Structural Funds. It has prepared  a plan and timetable for setti ng up a monitoring and evaluation 
system, including its electronic monitoring system (MIS). This is a key element for negotiations 
under this chapter. The Croatian au thorities are currently  testing the functioni ng of the electronic 
monitoring system (MIS) for IPA III and IV. Croatia plans to build on its IPA MIS to meet the 
requirements of the MIS for the Structural Funds. Croatia needs to formulate technical 
specifications and obtain technical assistance for se tting up its system to meet the requirements of 
the Structural Funds. Prepara tions are making good progress. 
Some progress can be reported in the area of financial management and control (see also Chapter 
32 — Financial control ). The Croatian National Fund (Ministry of Finance) has submitted draft 
roadmaps for waiving ex-ante controls under IPA,  under which financial management and control 
systems are to be strengthened. However, Croatia still has a long way to go in establishing its financial management and control systems for th e future Structural and Cohesion Funds. Croatia 
needs to build up its capacity in these fields. Preparations  in this area are advancing. 
Conclusion 
Some progress has been made under this chapter, notably in preparing imple mentation of those IPA 
components which serve as pre-cursors to the Structur al Funds. Croatia is pa rtially aligned with the 
acquis. Further efforts are needed to meet th e regulatory and operationa l requirements stemming 
from the Community’s cohesion po licy. Croatia needs to complete its institutional set-up for the 
EN 51   EN Structural Funds/Cohesion Funds. It needs to subs tantially increase admi nistrative capacity in 
existing IPA structures and adequately prepare th em for the future. The project pipeline for both 
IPA and the Structural Funds needs to be strengt hened to ensure absorp tion of funds. Programming 
of the National Strategic Reference Framework a nd Operational Programmes for the Structural 
Funds needs to be undertaken in a quality and ti mely manner. Financial management and control 
systems as well as an effective MIS need  to be set up for the Structural Funds.  
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 progress. An amended Law on 
Trainees in Judicial Bodies and the Bar Exam  entered into force in January 2009. This law 
introduces an improved selection procedure wh ereby candidates are ra nked by points based on 
various criteria. The bar exam has also  been made more practice-oriented.  
However, the selection procedure for judges and prosecutors remains deficient, lacking 
transparency and the application of uniform, ob jective criteria. A strategic study adopted by the 
government in December 2008 proposes the introducti on of a competitive exam for entry to a new 
school for judicial officials. Ho wever the relevant legislation ha s not yet been passed. Particular 
attention will be needed to see that the selection procedure ensures the constitutionally guaranteed independence of the judiciary.  
The Courts Act amended in October 2008 introduced the obligation on the Mi nister of Justice to 
conduct preliminary interviews in  the procedure of appointing pr esidents of courts. While the 
declared aim to focus on managerial competence is  laudable, the involvement  of the Minister of 
Justice in the appointment of the pr esidents of courts as such rema ins problematic from the point of 
view of judicial independence. A clearer separa tion between administrative and judicial functions 
should be strived for.  
The five-year probation period for judges remains in place. The provisions on penal immunity for 
judges have also not been change d in order to ensure transparen cy and accountability within the 
judiciary.  
As regards the impartiality  of the judiciary, the St ate Judicial Council ha s continued to conduct 
disciplinary proceedings initiated by court presid ents and the Ministry of Justice. In 2008, there 
were eleven disciplinary proceedings resulting in one reprimand, one fine and one dismissal of a judge. Eight cases are ongoing. However, disciplin ary proceedings against attorneys and judges 
continue to lack transparency. Th ere are still no means for the Minist ry of Justice to systematically 
check the accuracy of de clarations of assets by judges and prosecutors. 
The appointment procedures for the State Judici al Council (SJC) and th e State Prosecutorial 
Council (SPC) should be reviewed in order to ensu re their independence and to reduce the potential 
for political interference. The SJC does not currently  have sufficient capacity to carry out it key 
functions.  
Some progress has been made as regards professionalism and competence  in the judiciary. The 
Judicial Academy continued to ca rry out its in–service professi onal training programme. Initial 
training programmes for judicial trainees and advisers st arted in April 2009. However, initial 
training for future judges and pros ecutors is still missing. Administra tors have been recruited for 
each of the regional centres, but the Judicial  Academy remains understaffed, without either 
permanent premises or an adequa te budget to perform its duties. 
EN 52   EN Progress has been made in relation to the efficiency of the judiciary. The backlog of cases was 
further reduced by 8.4% to 887,000 in December  2008. Good progress was made on reducing the 
number of old civil and criminal cases by 31% and 52% to 102,430 and 4,408 respectively. In 
addition, the new Law on Misdemeanours, the new Civil Procedure Code, and the amended Law on 
Courts seem to have contributed to reducing the infl ow of new cases into courts. Thanks also to the 
use of accelerated procedures the number of pending misdemea nour cases was reduced by about 
one third. 
However the overall backlog as well  as the number of unresolved cas es older than 3 years remains 
high. Without more far-reaching reform, continued reduction of the backlog may not be sustainable, especially if judges have focused on ‘easier’ cases  to meet output targets. Moreover, problems with 
the enforcement of court rulings constitute a major obs tacle to the efficiency of the judicial system. 
The number of enforcement cases in the backlog remains high. Reform of the enforcement procedure remains long overdue, although a strategi c study on enforcement was adopted in July 
2009 which foresees the introduction of a new system  of enforcement officers. There is still no 
unified statistical system of cas e management in the judiciary.  
Special chambers for dealing with organised crim e and corruption cases (USKOK cases) have been 
set up in the four County Courts in Zagreb, Split,  Osijek and Rijeka. The 60 judges that will work in 
these chambers have not been relieved of thei r previous duties. This suggests that the much 
warranted increased focus on cases of organised cr ime and corruption may come at the expense of 
other categories of cases.  
The handling of administrative cases  continues to face particular challenges. Finalisation of the 
Law on Administrative Court Disputes  has been delayed. The Administ rative Court still needs to be 
made a court of full jurisdiction  in the meaning of Article 6 of the European Convention on Human 
Rights.  
There has been some progress in the rationalisation of the court network . As of January 2009, the 
number of municipal courts was formally re duced from 108 to 67. However, so far only six 
municipal courts have been physic ally merged into three courts. A laws regulating the reduction in 
the number of State Attorney's Offices from 71 to 55 has also been adopted. The draft law 
foreseeing the reduction in the number of misdem eanour courts from 114 to 61 has been pending 
approval in parliament for one ye ar. A new department supervisi ng the rationalisation process has 
been set up in the Ministry of Justice. Howeve r, this department is understaffed and it remains 
unclear how court rationalisation will be financed and implemented in practice. The timetable for 
physical mergers remains unclear and unambitious. No steps were taken to rationalise the county 
courts and commercial courts.  
With regard to the infrastructure and equipment of courts , there has been limited progress. The 
integrated case management system (ICMS) is r unning in nine courts and a special case tracking 
system was also developed for prosecution offices. However, the planned rollout of the ICMS to the 
other courts is still behind schedule. Misdemeanour courts continue to suffe r from a shortage of 
equipment and a very low standard of premises. 
The system of judicial inspections  has shown good results. The Minist ry of Justice has reinforced 
the inspection team with twenty part-time inspectors for all types of courts. In 2008 about eleven 
inspections were performed resulting in the rem oval of the two court pr esidents, disciplinary 
procedures and internal court re organisation. However, staff shorta ges have led to few inspections 
being carried out in 2009. The prosecution offices  remain outside the scope of the judicial 
inspections. No information is available on their internal inspections.  
EN 53   EN The new  Criminal Procedure Code was adopted in December 2008. The new law substantially 
modifies the judicial investigati on, transferring competence from the investigative judge to the State 
Prosecutor, in close cooperation with the police.  While training measures  for judges, police and 
prosecutors have begun, se veral regulations and the provision of further training are still required 
for full entry into force of the new Code. The new provisions apply from July 2009 for organised 
crime and corruption cases and as of 2011 for other cases. 
The use of alternative dispute resolution  has continued.  The new Civil Procedure Code has 
introduced mediation centres in all first instance courts, adding to the medi ation possibilities in the 
commercial courts and in eight mu nicipal courts. The law on mediation amended in June foresees 
improvements in the independence and competence  of mediators. Howeve r, the high number of 
mediation cases is burdening the cour ts, resulting in delays and back logs. In addition the new civil 
procedure code excludes the possibility of referral by a judge to an out-of-court mediation centre. The mediation strategy adopted in May 2009 does not  focus sufficiently on out-of court mediation. 
Further streamlining of court procedures is necessary. 
Implementation of the  judicial reform strategy  has continued. A large vol ume of new legislation 
was adopted. The Ministry of Justice was reorgani sed and the directorate fo r strategic development 
reinforced. However, adequate monitoring of re form measures has not been possible due to 
continued limits on administrative capacity. There is  only limited assessment of the impact of new 
measures. Legislation is often amended on such a regular basis that reforms do not become properly 
embedded in the system. Post-legislative scrutiny is practical ly non-existent.  
(See also 2.1. Democracy and Rule of law)  
There has been some progress in the fight against corruption . Implementation of the anti-
corruption strategy and related action plan has continued. The legal framework to combat 
corruption has been further improved. Amendments to the Criminal Code introduced new rules on 
confiscation of assets. From now on, where the orig in of certain assets held by persons convicted 
for organised crime or corruption is in questio n, the burden of proof is reversed. The National 
Council for monitoring the anti-corr uption strategy has become more proactive, regularly holding 
public debates and hearings. A national anti-c orruption campaign for the general public was 
launched. 
A National Police Office for the Suppression of Corruption and Organise d Crime (PNUSKOK) has 
been established within the General Police Director ate. It comprises four regional centres, in line 
with the structure of the Office for the Fight Against Corruption and Organised Crime (USKOK), 
and is in charge of complex police investiga tions and actions against organised crime and 
corruption at the national level. Special chambers for dealing with  organised crime and corruption 
cases have been set up in the four County C ourts in Zagreb, Split, Osijek and Rijeka. 
The Office for the Fight Against Corruption a nd Organised Crime (USKOK) continues to be 
increasingly active. It has be gun to investigate possible high level corruption, initiating an 
investigation of a case involving a former governme nt minister. USKOK has issued indictments in 
some other important cases. It issued an indi ctment against a High Commercial Court judge and a 
judge from the Zagreb Municipal Court for corr uption and abuse of power. Further indictments 
were issued in the ‘Indeks’ case concerning corrupt ion at universities, in cluding against a deputy 
dean of the Zagreb Faculty of Transport and Tra ffic Engineering and nine professors. There have 
been the first verdicts in some  important cases brought by USKOK. In the second ‘Maestro’ trial, 
the Zagreb County Court issued at the first in stance prison sentences against two former vice-
presidents of the Croatia n Privatisation Fund (HFP).  
EN 54   EN However, corruption still remains widespread. The recently upgraded legal and administrative 
structures remain to be tested in practice. While the total number of corrupti on cases investigated so 
far has increased, the actual number of prosecutions remains low. The ratio between investigated 
cases and indictments also remains low. Ther e has been limited investigation of high-level 
corruption, the prosecution of which is frustrated by political considerations . There are indications 
that indictments are often overly narrow and unamb itious. A culture of political accountability for 
the corruption being uncove red by USKOK is lacking.  
The administrative capacity of State bodies for fi ghting corruption continues to need improvement. 
Overall coordination of the implementation of anti -corruption efforts has improved but still faces 
shortcomings. Further administ rative support needs to  be provided to bot h the National Anti-
Corruption Council and the Committee for the Preventi on of Conflicts of Inte rest (CPCI). There has 
been limited progress in preventing conflicts of inte rest. The CPCI was re-established after a period 
of interruption but has not secure d a strong preventive role for itse lf. While the CPCI has issued 
guidelines for public officials, the concept of conflict of interest re mains little understood or 
wilfully ignored across the wider public administ ration. Efficient non-partisan monitoring of anti-
corruption efforts is still to be established. Seri ous implementation of anti- corruption practices by 
the public administration is lacking, with many bodies only paying lip service to the centrally 
coordinated anti-corruption drive.  
On the prosecution front, in orde r to be able to conduc t complex financial investigations USKOK as 
well as PNUSKOK need to improve their expertise on financial issues as well as further enhance their cooperation with other bodies. In order to pr event corruption, greater transparency in public 
administration is required. Shortcomings remain as regards the financing of political parties and election campaigns. Implementation of the La w on Access to Information needs further 
improvement. Public procurement remains a majo r source of potential and actual corruption. In 
view of future EU funds to be allocated to Croa tia after accession, particular attention to fighting 
corruption in this area is requi red. Significantly improved scrutiny of actual execution of contracts 
is essential  
(See also 2.1. Democracy and Rule of law)  
As regards  fundamental rights , there have been some developments.  
As regards the right to protection of personal data , the Data Protection Agency has been further 
strengthened with additional st aff to cover new activities such  as Schengen and Eurojust. The 
number of supervision and control activities remains low, however. Full alignment with the Data 
Protection Directive and the C ouncil of Europe instruments remains to be completed.  
Some progress was made as regards prisons.  The Law on Enforcement of Prison Terms was 
adopted in 2008, providing for the expansion of exis ting facilities and improved health care. 171 
additional staff were recruited and trained. However, Croatian prisons remain overcrowded, with 
the number of detainees increasing due to longer pr ison sentences introduced in the Criminal Code. 
As an alternative to imprisonment, a probation syst em should be introduced. There is a lack of 
trained prison staff.  
Freedom of expression , including freedom and pluralism of the media, is provided for in Croatian 
law and is generally respected. However, there ha s been an increase threats against journalists 
working on cases of corruption and organised crime. There has been  limited success in identifying 
and prosecuting perpetrators and in stigators. Undue political pre ssure is on occasion exerted on 
editors and journalists. Concerns about freedom of expression persist, includ ing at the local level. 
EN 55   EN As regards access to justice, the ne w Law and implementing regulations on legal aid  entered into 
force in February 2009. The institutional framewor k set up for implementation of the law comprises 
a Department for Free Legal Aid within the Ministry  of Justice, 20 State administration offices in 
counties and 13 branch offices as well as a Lega l Aid Commission. The system remains to be fully 
tested in practice. However, the complexity of the procedure, low fees for lawyers relative to their normal tariffs and the significant reductions in  the budget for legal aid provision might not 
guarantee proper access to justice.  
There has been some progress with regard to minorities . High-level public expressions of 
commitment to the rights of minoriti es, reaffirming their place in Cr oatian society, have continued. 
All eight minority MPs remain in the governing coalition. The Roma minority has continued to 
receive attention, with improvement s particularly in pre-school e ducation. Round tables and public 
discussions have been held on the Constituti onal Law on the Rights of National Minorities 
(CLRNM), in particular concerni ng minority employment in the Stat e administration and judiciary.  
However, many problems remain for minorities. Croatia needs to encourage a spirit of tolerance 
towards the Serb minority and take  appropriate measures to protec t those who may s till be subject 
to threats or acts of discriminatio n, hostility or violence. Minorit ies continue to face particular 
difficulties in the area of employment, both in term s of under-representation in State administration, 
the judiciary and the police as well as in the wi der public sector. Implementation of the recruitment 
plan for national minorities has not seen a signifi cant increase in minority employment in the State 
administration. Funding for mino rities was cut in the revise d budget. Legal provisions and 
programmes need to be implemented with more determination, and adequa te monitoring assured, 
especially in the area of employment. 
The Roma minority still faces particularly difficu lt living conditions and challenges remain in the 
areas of education, social protection, health car e, employment and access to personal documents. 
There has been some progress on refugee retu rn issues. The government's self-imposed 2007 
benchmark for the provision of housing care to fo rmer occupancy and tena ncy rights holders has 
been met. Good progress has been made towa rds meeting the 2008 benchmark of providing 1,400 
accommodation units; though this remains to be fully met. Work on meeting the 2009 target is still 
at an early stage. Several thousand housing units still need to be made available to returning 
refugees. Moreover, some 8,000 appeals for hous ing reconstruction still remain pending. 
Implementation of the decision on validating pensi on rights has been varie d. The current rejection 
rate of over 50% of applications a nd inconsistent approach by regiona l offices mean that in practice 
people are often not able to avail themselves of  their rights. Efforts to create the economic and 
social conditions necessary for the sustainabil ity of refugee return need to be accelerated. 
As regards citizens rights , Croatia has amended the Act on Al iens to align with Directive 
2004/38/EC on the right of citizens of the Union a nd their family members to move and reside 
freely within the territory of the Member States but further efforts are required to achieve full alignment.  
(See also 2.2.  Human rights and the protection of minorities) 
Conclusion  
Croatia has made some progress on this chapter. Reforms in th e judiciary have continued but 
significant challenges remain, pa rticularly concerning judicial independence and efficiency. Anti-
corruption efforts have produced initial results, bu t corruption remains widespread and tools are not 
being deployed with sufficient vi gour, especially against politic al corruption. Le gal provisions on 
EN 56   EN fundamental rights are in general adequate, but despite some progress, a number of important 
challenges remain in terms of implementation, esp ecially for minorities. Pa rticular vigilance is 
required as regards freedom of expre ssion and threats ag ainst journalists. 
4.24. Chapter 24: Justice, Freedom and Security 
In the field of migration,  amendments to the Aliens Act facilitate family reunification for persons 
under subsidiary protection. There has been no increase in the number of staff at the Ministry of the 
Interior dealing with illegal mi gration. Training of existing sta ff has continued. A Memorandum of 
Understanding was signed in November 2008 between  Albania, Bosnia and Herzegovina, Croatia, 
the former Yugoslav Republic of Macedonia, Monteneg ro and Serbia with a view to establishing a 
system for the exchange of statistical data on ille gal migration and particip ating in a regional early 
warning system.  
The number of illegal migrants continued to fall (2,013 in 2008 compared to 4,000 in 2007) and, as 
a result, the number of forced returns decr eased by 45% in 2008 as compar ed to the previous year. 
The deportation centre at Ježevo accommodated 773 illegal migrants waiting for deportation and 
did not suffer from overcrowding, as in previous y ears. There is a lack of  specific treatment, 
including separate facilities, a nd protection for minors, who are subject to risks of abuse and 
exploitation. A readmission agr eement with Montenegro was ra tified in February 2009 and a 
readmission agreement with Serbia to bring it in to line with the EU agreement has been signed.  
Significant progress can be reported in the field of asylum . The practice of the authorities towards 
asylum-seekers has improved compared to previous years. However, the legislation needs to be 
brought fully into line with the acquis . An educational manual has been developed, continuous 
education of existing and newly hired staff (7 new staff) has been ensured, manuals for staff at the 
reception centre and for caseworkers at the Ministry of the Interior, as well as a Eurodac and Dublin 
implementation plan and operational manual have been prepared.  
The number of asylum seekers decreased to 155 in 2008 from 170 in 2007. The majority of 
applications for asylum continue to be reje cted as manifestly unfounded. The exclusion of 
interviews in the accelerated procedure remains a concern, even though in practice the Asylum 
Commission has so far interviewed all asylum s eekers. The fact that the Asylum Commission 
overturned four first instance decisi ons taken by the Asylum Unit of th e Ministry of th e Interior can 
be considered as a positive sign. However, the Commission still lacks guarantees of full independence, given the oversight ro le of the authorities in the appointment process and the lack of 
separate premises from the Ministry. The Administ rative Court (which can review decisions of the 
Asylum Commission) does not provide an effective legal re medy and cannot suspend an expulsion 
decision. The fact that asylum seekers continue to be charged with the offence of illegal entry 
remains a matter of concern. Reco gnised refugees face difficultie s and discrimination in accessing 
their rights due to their status. The Kutina as ylum reception centre is reaching its maximum 
capacity. Croatia is still perceived as  a country of transit, but the situ ation is likely to change upon 
its accession to the EU and Croatia needs to build up its  capacity to deal with this expected increase.  
Some progress has been made as regards visa policy . As regards amendments to the positive and 
negative lists, the visa requirement for citizen s from Serbia and Montenegro has again been 
suspended, until the end of 2009, and for citizens fr om Russia and Ukraine it has been suspended 
for the period 1 May to 31 October 2009. 
Further amendments to the Aliens Act ente red into force in March 2009 and introduced 
requirements for travel insurance and for collecti ng biometric identifiers. The latter of these 
EN 57   EN provisions are to enter into force upon accession to  the EU. New Croatian visa stickers have been 
introduced in order to al ign with the acquis. IKOS, the informa tion system which forms the basis of 
the future Croatian Visa Database, has now been implemented in all but two Croatia's diplomatic 
missions and consular posts. Croatia needs to prepare for the implementation of the Visa 
Information System.  
Concerning document security, the legislation intr oducing biometric identifie rs (facial image and 
fingerprints) in passports and travel documents has entered into force and the issuance of biometric 
passports started in July 2009 for diplomatic passports. 
There has been some progress with regard to external borders and Schengen . The revised 
Integrated Border Management Action Plan was a dopted in March 2009 togeth er with a Strategy for 
Integrated Border Management. The Report of the Working Group proposi ng the reduction and re-
classification of Border Crossing Points (BCP s) has been adopted and Croatia has started 
negotiating with neighbouring coun tries on such proposals. The to tal staff of the border police 
remained roughly at the same level as in the prev ious period, and remains insufficient since some 
BCPs are severely understaffed and surveillance activities are often suffe ring. Training of border 
police has continued and both basic and specialised training programmes have  been established as 
well as training of trainers. The encrypted comm unication system (Tetra) now covers all Border 
Crossing Points.  
Although some progress has been made, there is stil l a lack of equipment,  notably for second-line 
checks, surveillance and for the detection of forg ed documents. Infrastructure in several BCPs is 
poor. The National Border Management Informati on System (NBMIS) is being deployed to BCPs 
at a slow pace and it still covers only 9 BCPs. Ro llout of the NBMIS system  should be speeded up 
to cover the whole border and prepare for the implementation of the national system for the 
Schengen Information System (SIS II). Croatia needs to finalise preparations for setting up a SIRENE Office. An Annex to the Agreement on Cooperation on Integrated  Border Management 
has been signed to strengthen inter-agency cooperation.  
Cross-border cooperation continues to work we ll. Since November 2008 Cr oatia and Bosnia and 
Herzegovina have been conducting joint patrols along some parts of  the border. In December 2008, 
an annex to the working arrangement between FR ONTEX and the Ministry of the Interior was 
signed on data to be exchanged between agencies. The implementation of the working arrangement has started and Croatia is participating in joint border control operations. The concept of a risk 
analysis system has been introduced but still needs to be developed.  
As regards  judicial cooperation in civil and criminal matters , there has been some progress. 
Croatia amended its Criminal Code in D ecember 2008 to withdraw the exception to the  ne bis in 
idem principle . The Law on Courts and the Law on Enforcement were amended in order to align 
with the European arrest warrant and the Europ ean enforcement order. However, central bodies 
have to be set up in the county courts and the Cons titution has to be amended to allow extradition of 
Croatian citizens to EU Member States in order to  complete alignment. Croatia is a party to the 
Council of Europe Convention on th e Transfer of Sentenced Persons (1983), but it has not signed or 
ratified the Additional Protoc ol to the Convention (1997).  
Regarding the status of victims in criminal proc eedings, the Law on compensation of the victims of 
violent crimes was adopted in October 2008. However, Croatia ha s to align further with the 
Framework Decision on the standing of victims in criminal proceedings in a number of areas. These 
include notifying the injured party that the perpetra tor has been released after serving the sentence, 
acquiring testimonies by means of devices for picture and sound transmi ssion (video and phone 
EN 58   EN conferences), establishing a service for assistance to victims of criminal offences and training of 
staff. Croatia has not aligned with the Framewor k Decision on the execution in the EU of orders 
freezing property and evidence or with the Fram ework Decision on the application of mutual 
recognition of financial penalties. Croatia has not adopted the relevant legislation to be able to 
implement the Directive on combating late payment in commercial transact ions. The Croatian legal 
order does not allow direct commun ication between judicial authoriti es, nor does it allow the direct 
execution of foreign decisions without the need for the exequatur  procedure. This means, in 
practice, that recognition and enfo rcement of decisions by foreign courts has to go through the 
exequatur  process at the municipal or commercial co urts. The recognised decision is enforced 
according to Croatian law, which remains slow and inefficient. The Ministry of Justice has no statistical data on the recognition/enforcement of such decisions.  
Concerning cooperation in civil matters, Croa tia has signed and ratified the Convention on 
Jurisdiction, Applicable Law, R ecognition, Enforcement and Co-ope ration in respect of Parental 
Responsibility and Measures for the Protection of Children but still has to ratify the Hague 
Convention on the Taking of Evidence abro ad in Civil and Commercial Matters.  
Good progress has been made as regards police cooperation . The agreement with Europol is being 
implemented and since a Croatian liaison officer was st ationed at Europol last year there has been a 
significant increase in cooperati on between Croatia and Europol. Agreements on police cooperation 
have been signed with Hungary, Germany and Serb ia. Cooperation with Se rbia has produced some 
important results, including identifying and arrest ing the alleged perpetra tor of the killing in 
October 2008 of a prominent journalist in Zagreb. The Agreement with France entered into force. 
A new Act on police duties was adopted in June  2009. The duties and power s of the police are 
extended and better defined. A Strategy and an Action Plan for reforming human resource 
management in the Ministry of the Interior for 2009-2011 was adopted.  
Some progress has been made in the area of organised crime . The National Police Office for the 
Suppression of Corruption and Organised Crime (PNUSKOK) was established within the General 
Police Directorate and became operational in February  2009. It also comprise s four regional centres 
in Zagreb, Split, Osijek and Rijeka. Based on the National Threat Assessment (NTA), the Ministry 
of the Interior developed a Plan of Priorities in the Suppression of Organised Crime, which it is 
implementing together with USKOK. An additiona l Protocol on inter-mini sterial exchange of 
information from December 2008 specifies which data are to be exchanged. Good cooperation was 
established between the Ministry of the Interior and USKOK. Efforts in this respect need to be 
continued. In addition, Croatia will  need to increase its efforts in meeting the challenge of illegal 
proceeds of the crimes being invested in societ y in a more developed manner, as well as the 
tendency of criminals using more sophi sticated methods for money laundering. 
Good progress has been made with regard to the trafficking of human beings . In November 2008, 
the government adopted a protocol for the identifi cation of, assistance to and protection of victims 
of human trafficking which sets out in detail the national referral mechanism and the obligations of 
the various responsible authorities . A three-year programme to comb at trafficking in persons was 
adopted by the government in March 2009.  
As part of the implementation of the protoc ol on cooperation between the various Croatian 
authorities involved in the system of suppression of trafficking (a dopted in June 2008), training was 
given to police officers, employees of the social we lfare system and of family centres, health care 
staff, workers in tourism and representatives of civil society organisations (450 persons in total). 
Further efforts should be made in terms of id entifying potential vict ims of trafficking and 
EN 59   EN developing a protocol for the retu rn of victims of trafficking. 
Progress can be reported in the fight against  terrorism . In November 2008 Croatia adopted the 
National Strategy for the Prevention and Suppression of  Terrorism, and the Act on the Prevention of 
Money Laundering and Financing of  Terrorism entered into force in January 2009. Croatia has 
amended its legislation in order to align with th e EU definition of terrorism. Training of police 
officers on anti-terrorism operations has continued. Croatia needs to continue to strengthen its 
administrative capacity in the fight against terr orism, among other things by developing inter-
agency coordination. 
Progress has been made in the field of the fight against  drugs . In February 2009, the National 
Action Plan on drugs for the period 2009-2012 was adopt ed on the basis of the objectives set by the 
National Drug Control Strategy for 2006-2012. The Ac tion Plan focuses on reinforcing cooperation 
between central and local levels as  well as with civil so ciety and enhancing the role of schools in 
the field of prevention. The National Focal Point (NFP) delivered its second Annual Report to the 
European Monitoring Centre for Drugs and Dr ug Addiction (EMCDDA) in December 2008 and 
was able to report on four out of  the EMCDDA’s five indicators. The NFP suffers from a shortage 
of staff and financial resources. Standards for therapeutic communities have been drawn up but the implementing legislation has not been adopted. Th e model for partnership cooperation adopted last 
year between the National Drug Office and the di stricts helped strengthen cooperation between 
central and local levels as well as exchange s of good practice amongst districts. Prevention 
programmes on drugs in general, and at schools in particular, lack qua lity evaluation to assess their 
impact. The police recorded 7,882 criminal cases i nvolving drugs in 2008 (w hich is comparable 
with the level of each of the pa st six years). The agreement for Croatia’s participation in the 
EMCDDA was initialled in July 2009. The agreemen t now needs to be ratified before Croatia can 
participate in the EMCDDA’s work.  
No progress can be reported in the field of  customs cooperation . 
For counterfeiting of the euro see chapter 32 – financial control. 
Conclusion 
Croatia has made some progress in this chapter, particularly as regards the fight against drugs, 
dealing with trafficking of human beings, and the management of exte rnal borders. However, 
Croatia needs to step up its efforts in order to ensure that EU requirements are met upon accession. Efforts to develop the necessary administrative capacity in this chapter require significant upscaling. Croatia needs to develop its infrastruc ture, equipment and resources to ensure the 
effective management of its external border as from accession.  
4.25. Chapter 25: Science and Research 
Good progress has been made in research policy . Amendments to the Act on the National 
Foundation for Science, Higher Education and T echnological Development have been adopted, 
setting in place a transparent and independent system for evaluating and monitoring national 
research grants. An Act on Quality Assurance in  Science and Higher Education has also been 
adopted assigning the Agency for Science and Highe r Education an independent quality assurance 
role through the accreditation, ev aluation and audit of public and private scientific and higher 
education institutions. 
Good progress has been made on  participation in the 7th Framework Programme  for Research 
and Technological Development (FP7).  An Action Plan to further strengthen Croatia’s absorption 
EN 60   EN capacity for the period 2009–2010 has been adopt ed. Efforts are ongoing to strengthen 
administrative capacity, including further traini ng of the appointed na tional contact points. 
Additional financial support has been made ava ilable for preparing EU projects and reward the 
successful Croatian applicants. The procedure to  associate Croatia to the Seventh Euratom 
Framework Programme is ongoing with the aim of making the associati on effective in the course of 
2010. 
Progress has also been made with respect to Croatia’s association to the European Research Area : 
implementation of the ‘National 3% Action Plan ’ is regularly assessed and updated by the Council 
for the National Innovation System. Measures ha ve been taken to stim ulate private sector 
investment in research, including tax reliefs for private investment in research and development. 
Implementation of the Plan needs, however, to be  ensured. As regards mobility of researchers, the 
Croatian Researchers’ Mobility Network Euraxess has been established as well as local contact points. An Action Plan for the mobility of res earchers has been adopted. However, the number of 
young people attracted to science remains low. 
Conclusion 
Good progress has been made on this  chapter, and preparations ar e well advanced. Further efforts 
remain necessary, however, to ensure association a nd full participation of Croatia in the European 
Research Area. 
4.26. Chapter 26: Education and Culture 
Good progress has been ach ieved in the field of education, training and youth . The education 
reform process has continued under the E ducation System Development Plan for 2005–2010. 
Croatia is participating in the EU Education an d Training 2010 Work Progr amme. Croatia performs 
very well in the EU benchmarks concerning ear ly school leavers and uppe r secondary completion 
rates, but participation in pre- school education and adult particip ation in lifelong le arning are very 
low. Additional efforts have been made in the development of a national qualifications framework 
(NQF). The Plan of Activities until 2012 has been  adopted. Implementation of the Bologna process 
in higher education has continued. Future challenges include structur al reform of universities and 
reforming the tuition fees, regulating the status  and remit of the quality assurance agency, 
implementing a learning outcomes approach and improving recognition of prior learning. The Law 
on Quality Assurance in Higher Education has been  adopted. The reform of vocational education 
and training has continued thr ough adoption of the Law on Vocational Education and Training, 
which incorporates the principl e of non-discrimination in access to  education for EU citizens. 
Legislation implementing the Adult Education Ac t as well as a National Youth Programme 2009–
2013 have also been adopted. 
Good progress has been made in th e preparations for the manageme nt of the Community Lifelong 
Learning and Youth in Action Pr ogrammes. The National Agency has started to implement 
preparatory measures, including sta ff training and launch of pilot pr ojects. The respective Accession 
Partnership priorities in the fi eld of education, training and yo uth have been partially met. 
Good progress can also be reported in the field of culture . Efforts have continued to facilitate 
deeper participation in the Culture and Europe for Citizens Programmes.  
Conclusion 
Good progress has been made in the area of ed ucation, training, youth and culture. A good level of 
legal alignment has been achieved. Croatia shoul d continue its efforts to prepare for the 
EN 61   EN management of Life Long Learning and Youth in Action programmes. Due at tention also needs to 
be paid to adult education. 
4.27. Chapter 27: Environment 
Some progress has been made in the area of horizontal legislation . The transposition process is 
well advanced in this sector. However, the Directive on environmental liability is still not fully transposed or implemented. A Sustainable Devel opment Strategy has been adopted. The Protocol 
on Strategic Environmental Assessment (SEA) to the Convention on Environmental Impact 
Assessment in a Transboundary C ontext (Espoo Convention) was ratified. Efforts to implement the 
SEA need to be stepped up. Implementation of pr ovisions relating to publi c participation and access 
to justice in environmental matters remains weak. In this respect, cooper ation with the judiciary 
should be strengthened. 
Good progress has been achieved in  the area of climate change. Implementing legislation on Kyoto 
flexible mechanisms has been enacted. The Nati onal Allocation Plan for greenhouse gas emissions 
allowances was adopted for the period 2010-2012. Preparations for c onnection to the EU Emissions 
Trading Scheme (EU ETS) are well advanced. The national GHG emission registry remains 
outstanding. Preparations in this area are proceeding well. 
Croatia participates in the Community Civil Protection Mechanism. There has been good progr ess in the field of air quality . The Directive on national emission 
ceilings for certain atmospheric pollutants is no w fully transposed. Legislation on designation of 
zones and agglomerations according to categories of  air quality was adopted. Establishment of the 
air quality monitoring and manageme nt system is entering its operational phase. The Plan for the 
Reduction of SO
2, NO x and Dust Emissions from Large Com bustion Plants and Gas Turbines has 
been adopted. Further, the National Plan for the Implementation of the Stockholm Convention on 
Persistent Organic Pollutants has been adopte d. Although implementing legislation on limit values 
for emissions of pollutants into the air from stati onary sources and on the quality of liquid fuels has 
been amended, an annual quantity of fuel that doe s not conform to prescribed quality standards is 
still placed on the market. The ad justment of petrol stations a nd terminals and modernisation of 
refineries is ongoing. Tran sposition of the new acquis  related to ambient air quality and cleaner air 
for Europe is pending. Preparations in this area are progressing well. 
Some progress has been made in the area of waste management . Implementing legislation relating 
to the management of waste from extractive i ndustries and the management of polychlorinated 
biphenyls (PCB) and polychlorinated terphenyls (PCT) was adopted. Amending legislation on the 
classification of waste and on s upervision of the transboundary movement of waste was also 
adopted. Sustained efforts in remediation of  existing landfills and hot-spots and further 
establishment of systems for colle ction and management of different  categories of waste are needed. 
Preparations in this ar ea are progressing well. 
There has been little progress in the water sector . The new Water Act and Act on Water 
Management Financing have not be en enacted yet. This hampers the expected restructuring of the 
sector and continuation of th e transposition process, which is slow at the moment.  
Boundaries of river basins have been determined and implementing legislation relating to hazardous 
substances in waters and waste water has been enacted. Significant efforts have to be made to 
increase investments in this sector. Monitoring  and reporting activitie s need to be improved. 
Significant efforts are stil l needed in this area. 
EN 62   EN There was some progress in the field of nature protection . Further efforts are needed to achieve 
full alignment with the acquis , in particular Directives 92/ 43/EC and 79/409/EEC. The Strategy and 
Action Plan for Conservation of Biological and La ndscape Diversity were adopted and the Nature 
Protection Act was amended to ensure further alignment with the acquis . A draft list of proposed 
Natura 2000 sites has been discussed with relevant stakeholders. However, Croatia will need to step 
up efforts to finalise the list of Natura 2000 sites. Administrative capacity for the implementation 
and enforcement of the acquis  needs further strengtheni ng, especially within the State Institute for 
Nature Protection and at local level. In the area of  nature protection Croatia is not yet sufficiently 
prepared. 
There has been significant progress in the area of industrial pollution control and risk 
management . Implementing legislation relating to the integrated pollution prevention and control 
(IPPC) and the Seveso II Directiv es has been enacted. Registries of installations falling under the 
IPPC and the Seveso II Directives have been es tablished. Efforts have been made in further 
developing the European Releas e and Transfer Register (EPRTR ). Significant efforts will be 
required to ensure sufficient administrative capacity in this sector. Preparations in this area are 
proceeding well. 
Good progress can be reported on chemicals . Implementing legislation on active substances in 
biocidal products and on safety data sheets has been enacted. Full transposition of the acquis in 
relation to the packaging and labelling of chemicals and the e xports and imports of chemicals as 
well as biocides was achieved. 
Some progress can be reported in the area of genetically modified organisms (GMOs) . 
Notification and the requirements for labelling and packaging of GMOs have been further regulated 
through implementing legislation. Further efforts w ill be required for achieving full alignment with 
the acquis . Laboratories and administrative capacity need  to be further strengthened in order to 
implement and enforce the legislation. Prepar ations in GMOs are moderately advanced. 
Good progress can be reported in the noise  sector. Full transposition ha s been achieved with the 
adoption of the Noise Protection Act. Adoption of noise maps fo r towns and municipalities is 
progressing well. Preparations in  this area are well on track. 
In the forestry  sector, activities related to the implementation of the existing Croatian legal 
framework have been continued.  
Administrative capacity  has overall further progressed across the sectors. However, the number of 
staff recruited is generally lower than what wa s planned in the action pl an for setting up the 
necessary administrative capacities at national, re gional and local level. Ar eas of concern include 
the nature protection and IPPC sectors. There is  a clear need for instit utional strengthening and 
capacity building at the local level.  Given the high level of fragment ation of the environment sector 
across ministries and public bodies, improved c oordination mechanisms and decision-making 
procedures are required. 
Conclusion 
There has been good progress in this chapter, esp ecially in the areas of  air quality, industrial 
pollution control and risk management, and climat e change. Overall, Croatia's preparations are 
advancing well. However, considerable efforts ar e still needed in the water sector and nature 
protection, especially as rega rds implementation of the Wate r Framework Directive and the 
designation of Natura 2000 sites. Implementation of the horizontal acquis,  not least strategic 
environmental assessment and access to justice in  environmental matters, needs to be improved. 
EN 63   EN Administrative capacity needs further strengthening both at na tional and at local level.  
4.28. Chapter 28: Consumer and Health Protection 
There has been some progress in the field of consumer protection . As regards administrative 
capacity, two new officials have been hired in the Consumer Protection Department in the Ministry 
of the Economy, Labour and Entrepreneurship, bringing the total number of staff to 10. 
Government funding for regional co unselling centres has continued, as  well as activities for raising 
awareness on consumer protection. As for cons umers’ access to justice, the new Consumer 
Protection Act introduces the system of out-of-c ourt settlement of consumer disputes. A special 
record of consumer disputes has been establis hed, and training of judges is ongoing. However, 
administrative capacity needs to be further st rengthened, especially as regards the State 
Inspectorate, the consumer movement needs to be further supported and consumers’ access to 
justice further improved. Preparations in this field are advanced. 
Good progress can be reported in the field of product-safety related issues . The General Product 
Safety Act has been amended, which is a key element for the accession negotiations in this chapter. A Regulation on a rapid information exchange system  for products posing a ri sk to the health and 
safety of consumers has been adopted. However, it needs to be amended to bring it into line with 
the acquis . Also coordination between the RAPEX central  contact point and lo cal authorities as 
well as due enforcement of measures on ge neral product safety need to be ensured.  Preparations in 
this field are well advanced. 
Good progress has been made in the area of non-safety related issues . The Consumer Protection Act 
has been amended, which is a key element for the acces sion negotiations in this chapter. It aims to 
ensure further alignment in many areas of the consumer protection acquis , among other things by 
establishing an appropriate enforcement mechanism ag ainst unfair terms in consumer contracts. An 
Act on Unpermitted Advertising has been adopted, aimed at aligning with the acquis  on 
misleading/comparative advertising, as well as a Consumer Credit Act aiming at completing legal 
alignment in this area. Preparations in this field are reaching completion. 
Good progress can be reported in the area of public health . 
Substantial progress has been made in the area of tobacco . Legislation has been adopted completing 
legal alignment in the fields of tobacco advertising and tobacco pr oducts. This is a key element for 
the accession negotiations on this chapter. In  this area, Croatia is in line with the acquis . 
Some progress has been made in the field of communicable diseases . The Act on protection of the 
population against communicable diseases has been further amended and to a large extent brought 
into line with the acquis  in this field as well as with the International Health Regulations. However, 
further legal adjustments are nece ssary in particular due to the current epidemiological situation 
concerning Influenza A(H1N1). Preparati ons in this field are well advanced. 
Good progress can be reported in the area of blood, tissues and cells . Legislation has been adopted 
in the field of tissues and cells (including repro ductive cells) aimed at completing legal alignment, 
inter alia with respect to reporting of serious ad verse events and reactions  for all non-reproductive 
tissues and cells. This is a key element for the accession negotiations on this chapter. As regards 
administrative capacity, a Department for the In spection and Monitoring of Blood, Tissues and 
Cells has been established in the Ministry of Health and Social Welfare. However, quality 
management of all blood transfusion centres is not  yet ensured, and facili ties for handling tissues 
and cells have not yet been upgraded, restructured  and licensed in accordance with the EU technical 
requirements. Preparations in this field are well under way. 
EN 64   EN No progress can be reported in the field of mental health . A Mental Health Promotion Strategy is 
being drafted. However, community-based servic es remain insufficiently developed as an 
alternative to institutionalisation, and financial resources allocated to mental health care are still 
scarce. The Accession Partnership priority in this fi eld has therefore not been  met. Preparations in 
this field are at an early stage. 
Some progress has been made in the field of drug  abuse prevention where an Action Plan to 
Combat Drug Abuse 2009–2012 has been adopted. Action Plans on nutrition  and alcohol  have been 
drawn up. In the area of cancer screening , preparations are under way for starting the National 
Programme for early detection of cervical cancer. Preparations in  these areas are well on track.  
Conclusion 
There has been good progress in th e area of consumer and health  protection. Overall, a good level 
of legal alignment has been reached. Sustained efforts are necessary for further strengthening administrative capacity in order to implement and en force legislation effectiv ely in both areas. This 
is a key element for the accession negotiations on this chapter.  
4.29. Chapter 29: Customs Union 
Good progress has been made in the area of customs legislation . On 1 January 2009, the new 
Regulation on the customs tariff fo r 2009 entered into force, there by aligning the Croatian tariff 
with the 2009 Combined Nomenclature. The Act amending the Act on the Customs Tariff abolished 
the remaining customs fees, which were due on the cu stoms declaration, thus aligning with the EU 
legislation in the area. So me discrepancies with the acquis  remain in allocation of quotas, duty 
relief, duty exemptions for passengers and the intern al transit arrangements. Overall, alignment of 
the customs rules with the acquis is very high.  
Good progress can also be reported on administrative and operational capacity . The Customs 
Administration has adopted and started to implement an Anti-corruption Programme. An anti-
corruption awareness campaign has been launched within Customs and a policy of systematic 
rotation of staff developed. Work has continue d on computerisation and interconnectivity. The 
Interoperability and Interconnectivity Strategy wa s updated in February 2009. The national domain 
of NCTS 3.2 has been completed and local tes ting performed successfully. Development of the 
NCTS Trader Module, Export Control System (ECS),  and ITMS sub-systems started at the end of 
2008. The Croatian customs administration still has very limited in-house capa city to guarantee the 
continuity of its IT services and remains heavily dependent on external companies. Overall, in the area of administrative and operation al capacity, Croatia has consiste ntly addressed its targets and 
priorities.  
Conclusion  
Good progress has been made overall. Croatian cust oms legislation is well aligned with the acquis 
and additional alignment was achieved during the period. Croatia has also continued to make progress on its administrative capacity, and started to implement a coherent anti-corruption policy 
within Customs. Progress has also continue d in the area of IT interconnectivity, where 
implementation of the IT strategy has continued stead ily. Efforts need to continue in the remaining 
areas of legislative alignment, in implementing the Anti-Corruption Strategy and in IT interconnectivity. 
EN 65   EN 4.30. Chapter 30: External Relations 
There has been good progress in the field of the common commercial policy . Croatia continued to 
cooperate and coordinate closely with the Commi ssion and to align with the policies and positions 
of the EU towards third countries and within in ternational organisations, particularly the World 
Trade Organisation. 
In June 2009, Croatia imposed an erga-omnes provi sional safeguard measure on semi-hard cheese 
and cheese supplements in breach of the WTO rule s. Measures were imposed two months before 
the initiation of an investigation and no eviden ce showing that the conditions required for the 
imposition of measures has been be provided. Thus these legally  unwarranted measures have 
already negatively affected the EU exports and Croa tia needs to address this  issue as a matter of 
urgency. 
In relation to dual-use goods, Croa tia continued to align with the revised list of dua l-use items and 
technology. Croatia simplified the procedure for i ssuance of export and import permits for dual-use 
goods, strengthened provisions on the fight agains t illicit exports and st arted various training 
activities in order to enhance admi nistrative capacity. It needs to cont inue to work on the remaining 
adjustments and on further enhancing its administra tive, control and reporting capacity for dual-use 
goods, in particular, on the training of customs offi cers. Overall, preparations in the area of the 
common commercial policy are well on track. 
In the area of bilateral trade and investment agreements with third countries , Croatia actively 
participates in the work of the Central Eur opean Free Trade Agreement (CEFTA). Croatia 
continued implementing its action plan by bringing international agreements into line with the acquis . Croatia needs to continue implementing the Ac tion Plan, as adopted. Preparations in this 
area are well advanced. 
Some progress can be reported on development policy  and humanitarian aid . A National Strategy 
for Development Cooperation for the period 2009-2014 has been adopted. The department 
responsible its implementation is now operational. Croatia will need to complete the required legal 
framework in this area. Generally, preparations in this area are well advanced. Following the 
adoption of laws for development policy and humanitarian aid, greater financial and human 
resources are required to en sure their progression.  
Conclusion 
Croatia has made some progress in this chapte r. Provided Croatia con tinues preparations as 
scheduled and improves its administrative cap acity, it should be able to apply the acquis  and 
participate in the common commercial policy upon accession. However, Croatia needs to respect its international obligations when resorting to trad e defence measures. Efforts are still needed with 
regard to development 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 
section 2.3 under Political criteria. ) 
As regards the common foreign and security policy (CFSP) , Croatia has continued to 
systematically align itself with  all relevant EU common positions, declarations and statements. 
Croatia has continued to develop its administrative capacity to work within the EU CFSP structures. 
EN 66   EN The post of Political Director in the Ministry fo r Foreign Affairs and European Integration remains 
to be formally established. 
A new Act on international restrictive measures  aimed at comprehensive and more efficient 
application of sanctions regimes was passed in November 2008. Inter-agency coordination has 
improved. 
As regards non-proliferation , the Government of Croatia adopted in September 2009 a National 
Strategy and Action Plan for the Control of Small Arms and Li ght Weapons. Public awareness 
activities have continued, includi ng measures to collect and de stroy weapons. Croatia signed and 
ratified the Convention on Cluster Munitions. Howe ver, while the legislative framework for arms 
control is satisfactory, there remains a need to further strengthen implementation and enforcement 
capacity as well as transparency  of arms-related information.  
With regard to cooperation with international organisations , Croatia has, as a member of the UN, 
the OSCE and the Council of Europe, been fu lly involved in the policy-making of these 
organisations. In 2009, Croatia began the second year  of its mandate as a non-permanent member of 
the Security Council. Croatia became a memb er of NATO in April 2009. As regards the 
International Criminal Court, see Political criteria — Re gional issues and in ternational obligations . 
There have been no particular developments with regard to security measures (classified 
information) . 
Croatia has remained committed to the developmen t of the European security and defence policy 
(ESDP). Administrative capacity-building measures  have continued, including training and greater 
participation of Croatian officials in various fora with EU counterparts. Cr oatia further reinforced 
its participation in EU missions. Croatia joined th e EU’s military operation in Chad and the Central 
African Republic (EUFOR TCHAD/ RCA) with a 15-member reconna issance team. In April 2009 
the Croatian Parliament adopted a decision on the pa rticipation of five memb ers of Croatia’s armed 
forces in the EU operation off the Somali co ast (EU NAVFOR Somalia – ATALANTA). Croatia 
continued to provide logistical (host nation) support to the EUFOR Althea mission in Bosnia and 
Herzegovina.  
Croatia continued to support EU civilian missions. Croatia participates in the EU Rule of Law 
Mission in Kosovo (EULEX Kosovo)  and the EUPOL Mission in Af ghanistan with four police 
officers in total. Croatia has continued to take part in international peacekeeping efforts with, as of September 2009, 145 members of the armed forces and 9 police officers taking part in 10 UN 
missions.
  
Conclusion 
Croatia has made good progress in this chapter.  Overall, Croatia has reached a good level of 
alignment in the area of foreign, security and de fence policy. Croatia conti nues to participate in 
several EU ESDP missions. In order to be fully prepared for accession, Croatia needs to strengthen 
implementation and enforcement of arms cont rol including transparency of arms-related 
information, and to further improve capacity for full implementation of CFSP-ESDP. 
4.32. Chapter 32: Financial Control 
Progress can be reported in the area of public internal financial control (PIFC) . The revised 
Internal Audit Manual was adopted in No vember 2008. The new Budget Law, removing 
EN 67   EN inconsistency with the provision s of the PIFC Law, entered into force on 1 January 2009. A new 
PIFC Development Strategy for the period 2009-2011 was adopted by the Government in September.  
With regard to the institutional framework, th e Central Harmonisation Unit (CHU) was reorganised 
in February 2009. However, strength ening of training facilities need s to be continued by gradually 
shifting the CHU’s focus from training towards coaching and monitoring activities. Also, the 
strengthening of overall capacity of all budget users at central and local levels needs to be 
continued, including through developm ent of a risk management approach. The focus of audit work 
has been on auditing EU funds, with limited resources  available for the audit of national funds. The 
internal audit profession need s further strengthening, including increased focus on system-based 
and performance audits.  
In the area of external audit no progress can be mentioned concerning the consolidation of the State 
Audit Office’s (SAO) functional and financ ial independence in the Constitution. The 
implementation of the SAO’s Strategic Deve lopment Plan for the period 2008-2012 is ongoing. 
Continued efforts are required to train auditors  in modern audit techniques, especially on 
performance audit and audit of EU funds, and m oving towards a systems-based audit approach. The 
annual procedure for reporting to Parliament needs reconsideration to allow the SAO’s annual 
report to contribute to the budget discharge procedure.  
Progress has been made on the protection of the EU’s  financial interests. As per the new rules of 
procedure of the Ministry of Finance, the De partment for Combating Irregularities and Fraud 
(AFCOS) was established as  an independent department under the direct supervision of the Minister 
of Finance. As the central contact unit of the AF COS network, the department is expected to have 
sufficient capacity in the field of fraud prev ention, detection and follow-up to act as the unit 
coordinating with OLAF. The drafting of the Anti- fraud Strategy and Action Plan is well under way 
and a consultation process was launched in June  2009. There has been improvement in the reporting 
of irregularities. The Croatian authorities ha ve achieved more effec tive compliance with the 
reporting requirements. However, follow-up (especia lly with regard to recoveries) needs to be 
further enhanced. 
Progress has been made in harmonising the Criminal Code with PIF instruments, as the Act 
amending the Criminal Code entered into force as  from January 2009. Some further clarifications 
are required to remove ambiguities from the Croatian Criminal Code and to establish its precedence in matters relating to protection of the EU’s financial interests. 
Some progress can be reported on protection of the euro against counterfeiting . The National 
Counterfeit Centre (NCC), the National Analysis Centre (NAC) and the Coin National Analysis 
Centre (CNAC) within the Cr oatian National Bank became opera tional as from March 2009. The 
National Central Office (NCO) has been establishe d in accordance with the requirements of the 
International Convention for the S uppression of Counter feiting Currency.  
Conclusion 
Croatia has made progress under this chapter. Con tinued efforts are needed to ensure sustainable 
development of the overall PIFC system at both cen tral and local government level. The functional 
and financial independence of the SAO need s to be anchored in the Constitution.  
4.33. Chapter 33: Financial and Budgetary Provisions 
There has been good progress in this chapter. The unit for the coordination and management of the 
EN 68   EN own resources system in the Ministry of Finance has continued to develop its capacity to play the 
coordination role required of it from accession. The capacity of the relevant institutions responsible 
for the system of own resources has improved. An action plan for th e implementation of the system 
of administration of the EU’s own resources ha s been adopted and implementation is under way.  
As regards traditional own resources (TOR), Croa tia is in the process of upgrading its existing 
information and accounting systems and simulations of the ‘A’ and ‘B’ accounts have been carried 
out. However, Croatia needs to speed up the development of the TOR IT application for 
establishing customs duties in the A and B a ccounts and the automatic production of A and B 
account statements used to make duties available to the EU budget. Also, Croatia has to further 
strengthen the independent intern al control and external  audit of the collect ion and accounting of 
TOR. Post-clearance control at traders’ premises should be further strengthened. Croatia still needs 
to put in place a system for sugar levies and a wr ite-off system for irrecoverable debts in line with 
the EU rules. The competent departments for OWNR ES reporting need to be  designated and their 
working procedures established.  
In the area of VAT-based own resources, a simula tion of the VAT base was carried out, covering 
the collection of revenue, compensation calculati ons and the analysis and processing of data 
necessary for the calculation of the Weighted Average Rate (WAR).  While the basic principles are 
well understood, more detailed statistical data w ill still be required for the WAR calculation and 
capacity building should continue.  
As regards the GNI-based resource, applicatio n of the ESA95 methodology and definitions has 
improved significantly. Continued efforts will, howev er, be needed to further improve the quality 
and exhaustiveness of the nationa l accounts and GNI calculations.  
Croatia needs to continue its efforts in underlying policy areas linked to the application of the own 
resources system, in particular customs, taxation, statistics and financial c ontrol. This includes 
setting up effective instruments to combat cust oms duty and VAT fraud so that the financial 
interests of the EU can be protected. 
Conclusion 
There has been good progress in this chapter, not ably the further devel opment of institutional 
capacity for applying own resources rules. Overal l, Croatia has reached a good level of alignment 
with and capacity to implement the acquis , except for sugar levies. Croa tia should now continue to 
implement its action plan, further develop administrative capacity and put in place rules and procedures.
 
EN 69   EN STATISTICAL ANNEX  
STATISTICAL DATA (as of 14 September 2009)            
Croatia            
            
Basic data Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Population (thousand)  4 527e 4 498e 4 439b 4 445 4 443 4 442 4 444 4 443 4 441 4 436 
Total area of the country (km²) 1) 56 542 56 542 56 542 56 542 56 594b 56 594 56 594 56 594 56 594 56 594 
            
National accounts Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Gross domestic product (GDP) (million national currency) 2) 164 054 176 690 190 796 208 223 227 012 245 550 264 367 286 341 314 223 34 2 159 
GDP (million euro) 2) 21 638 23 146 25 538 28 112 30 011 32 759 35 725 39 102 42 833 47 370 
GDP (euro per capita)  4 751 5 229 5 752 6 331 6 759 7 380 8 043 8 807 9 656 10 678 
GDP (in Purchasing Power Standards (PPS) per capita)  8 800.0e 9 400.0e 9 900.0e 10 700e 11 200e 12 100 12 700 13 800 15 200 15 800  
SI: GDP (in PPS per capita, EU-27=100)  49.5e 49.2e 50.3e 52.3e 54.3e 55.8 56.6 58.4 61.1 63.0 
SI: Growth rate of GDP (national currency, at constant prices, % change on previous year)  -1.5 3.0 3.8 5.4 5.0 4.3 4.2 4.7 5.5  2.4 
SI: Employment growth (national accounts,  % change on previous year)  -3.3 4.0 -5.4 4.2 0.6 1.7 0.8f   -0,6f 3,5f 1,1f 
Labour productivity growth: GDP growth per person employed (% ch ange on previous year)  1.9 -0.9 9.8 1.2 4.3 2.5 3.4e 5.4e 1.9e  1.3e 
SI: Unit labour cost growth (national accounts, % change on previous  year)  4.8 -3.4 -4.2 1.3 -7.3 6.7  -0.4e  -10.2e  -0.7e 1. 4e 
SI: Labour productivity (GDP in PPS per person employed, EU-27=100)  63.3e 61.3e 66.5e 66.6e 68.6e 69.5 70.4e 73.8e 75.7e 76.6e  
Gross value added by main sectors (%)                      
Agriculture 2) 9.1 8.4 8.4 8.2 6.8 7.2 6.5 6.3 6.1 6.4 
Industry 2) 23.1 23.4 22.8 21.9 21.4 21.8 20.9 20.6 20.4 20.2 
Construction 2) 5.3 4.9 5.4 5.5 6.6 7.1 7.4 7.7 7.7 8.3 
Services 2) 62.5 63.2 63.4 64.4 65.3 63.9 65.2 65.3 65.8 65.0 
Final consumption expenditure, as a share of GDP (%) 3) 85.5 84.6 82.7 83.1 81.4 80.4 80.2 78.9 78.7 77.7 
Gross fixed capital formation, as a share of GDP (%) 2) 20.1 18.8 19.4 21.2 25.0 24.6 24.6 26.1 26.2 27.6 
Changes in inventories, as a share of GDP (%) 2) 0.6 -0.2 1.7 4.0 1.5 1.3 1.7 2.0 2.7 3.2 
Exports of goods and services, relative to GDP (%) 2) 36.5 42.0 43.8 41.0 42.9 43.3 42.6 43.4 42.8 41.9 
Imports of goods and services, relative to GDP (%) 2) 42.7 45.3 47.6 49.4 50.8 49.6 49.1 50.4 50.4 50.3 
            
Industry Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Industrial production volume index (2000=100) 4) 98.3 100.0 106.0 111.8 116.3 120.6 126.7 132.4 139.8 142.1 
            
Inflation rate Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
SI: Consumer price index (CPI), (tot al, % change on previous year)  4.0 4.6 3.8 1.7 1.8 2.1 3.3 3.2 2.9 6.1 
            
Balance of payments Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Balance of payments: current account total (million euro)  -1 429 -568 -821 -2 099 -1 889 -1 434 -1 976 -2 715 -3 237 -4 438 
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 4 34 -10 866 
 
EN 70   EN Balance of payments current account: net services (million euro)  1 545 2 470 3 303 3 285 4 933 4 769 5 318 5 705 6 266 6 969 
Balance of payments current account: net income (million eur o)  -465 -505 -628 -578 -1 095 -670 -959 -1 183 -1 112 -1 576 
Balance of payments current account: net current transfers  (million euro)  594 959 1 099 1 152 1 245 1 192 1 184 1 107 1 043 1 035 
of which government transfers (million euro)  -123 25 65 32 71 3 10 -9 -17 -56 
Net foreign direct investment (FDI) (million euro)  1 304 1 136 1 258 531 1 657 671 1 276 2 557 3 483 3 203 
Foreign direct investment (FDI) abroad (million eur o)  -58 -5 -210 -607 -106 -279 -192 -208 -184 -128 
of which FDI of the reporting economy in EU-27 countri es (million euro)  -21 15 -152 -72 -7 -14 -66 37 -563 93 
Foreign direct investment (FDI) in the reporting economy (million euro)  1 363 1 141 1 467 1 138 1 762 950 1 468 2 765 3 667 3 330 
of which FDI of EU-27 countries in the reporting economy (million euro)  1 186 916 1 344 1 063 1 498 919 1 439 3 500 3 702 3 14 4 
            
Public finance Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
General government deficit/surplus, rela tive to GDP (%) 5) : : -5.6 -3.6 -4.8 -3.8 -3.5 -3.0 -2.5 -1.4 
SI: General government debt, relative to GDP (%)  : : 34.8 34.8 35.9 37.8 38.3 35.7 33.1 33.5 
            
Financial indicators Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Gross foreign debt of the whole economy, relative to GDP (%)  47.0 53.0 53.3 53.9 66.3 70.0 72.1 74.9 76.9 82.6 
Gross foreign debt of the whole economy, relative to total exports (%)  133.0 130.2 125.9 136.1 151.3 161.0 168.6 172.3 179.8 1 97.3 
Money supply: M1 (banknotes, coins, overnight deposits, mi llion euro)  1 805 2 373 3 216 4 148 4 432 4 505 5 263 6 606 7 901 7 539 
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 resi dents (consolidated) (million euro)  8 587 9 483 11 891 15 119 16 526 18  417 22 836 27 274 30 863 34 756 
Interest rates: day-to-day money rate, per annum (%)  9.3 6.9 3.0 1.3 4.3 5.9 3.4 2.4 5.6 6.6 
Lending interest rate (one year), per annum (%)  20.9 20.6 19.5 16.5 15.0 14.4 13.1 12.1 12.1 12.2 
Deposit interest rate (one year), per annum (%)  9.5 8.2 6.6 5.4 3.8 3.8 3.9 4.0 4.2 4.8 
euro exchange rates: average of period - 1 euro = … national currency  7.582 7.634 7.471 7.471 7.564 7.496 7.400 7.323 7.336 7. 223 
Effective exchange rate index (2000=100)  95.4 100.0 98.7 96.5 93.7 90.4 : : : : 
Value of reserve assets (including  gold) (million euro)  3 013 3 783 5 334 5 651 6 554 6 436 7 438 8 725 9 307 9 121 
            
External trade Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Value of imports: all goods, all partners (million euro)  : : : 11 327 12 510 13 354 14 950 17 105 18 686 20 762 
Value of exports: all goods, all partners (million euro)  : : : 5 188 5 439 6 454 7 069 8 252 8 855 9 342 
Trade balance: all goods, all partners (million euro)  : : : -6 139 -7 071 -6 901 -7 880 -8 853 -9 832 -11 420 
Terms of trade (export price index / import price inde x) 6) : 98.3 94.4 97.8 97.5 109.3b 92.6 100.2 97.5 96.1 
Share of exports to EU-27 countries in value of total exports (%)  : : : 66.1 68.3 65.8 63.3 64.3 60.9 62.1 
Share of imports from EU-27 countries in value of total imports (%)  : : : 71.9 73.3 71.0 67.9 67.2 64.8 64.2 
            
Demography Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Natural growth rate: natural change (births minus deaths) (per 1000 i nhabitants)  -1.5 -1.5 -1.9 -2.4 -2.9 -2.1 -2.1 -2.0 -2.4 -2.3e 
Infant mortality rate: deaths of children under one year of age per 1000 live births  7.7 7.4 7.7 7.0 6.3 6.1 5.7 5.2 5.6 4.5 
 
EN 71   EN Life expectancy at birth: male (years)  : 70.5 71.1 71.2 71.4 72.0 71.8 72.5 72.3 72.4 
Life expectancy at birth: female (years)  : 77.8 78.1 78.3 78.4 79.0 78.8 79.3 79.2 79.6 
            
Labour market Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Economic activity rate (15-64): share of  population aged 15-64 that is economically active (%) 7) 62.6 62.2 62.2 62.9 62.4 63.7  63.3 62.6 63.2 63.2 
SI: Employment rate (15-64): share of population aged 15-64 that  is in employment (%) 7) 53.2 51.3 51.8 53.4 53.4 54.7 55.0 55. 6 57.1 57.8 
Share of male population aged 15-64 that is in employment (%) 7) 59.0 57.4 59.0 60.5 60.3 61.8 61.7 62.0 64.4 65.0 
Share of female population aged 15-64 that is in employment (%) 7) 47.8 45.5 44.9 46.7 46.7 47.8 48.6 49.4 50.0 50.7 
SI: Employment rate of older workers (55-64): shar e of population aged 55-64 that is in employment 
(%) 7) 25.9 24.2 23.7 24.8 28.4 30.1 32.6 34.3 35.8 36.7 
Employment by main sectors (%)                      
Agriculture 7) 16.7 11.7 15.6 15.5 16.9 17.0 17.3 14.2 13.0 13.6 
Industry 7) 23.9 22.7 23.1 22.6 22.1 21.4 20.5 20.9 21.8 21.6 
Construction 7) 6.6 5.9 6.3 7.2 8.1 8.2 8.2 8.4 8.8 8.9 
Services 7) 52.8 59.6 55.0 54.6 52.8 53.2 54.0 56.3 56.4 55.9 
SI: Unemployment rate: share of labour force that is unemployed (%) 7) 14.5 17.0 16.3 14.7 14.1 13.6 12.6 11.1 9.6 8.4 
Share of male labour force that is unemployed (%) 7) 13.5 15.9 14.4 13.2 12.8 12.0 11.6 9.8 8.4 7.0 
Share of female labour force that is unemployed (%) 7) 15.7 18.2 18.7 16.5 15.6 15.6 13.8 12.7 11.2 10.1 
Unemployment rate of persons < 25 years: share of labour forc e aged <25 that is unemployed (%) 8) 39.2 43.1 41.7 34.4 35.8 33.8  32.0 28.8 24.0 22.0 
SI: Long-term unemployment rate: share of l abour force that is long-term unemployed (%) 9) 7.3 9.1 10.1 8.9 8.4 7.3 7.4 6.7 5.9  5.3 
            
Social cohesion Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Average nominal monthly wages and salaries (national currency) 10) 4 551.0 4 869.0 5 061.0 5 366.0 5 623.0 5 985.0 6 248.0 6 634.0 7 0 47.0 7 544.0 
Index of real wages and salaries (index of nominal wages and sa laries divided by the CPI) (2000=100) 10) 98.4 100.0 99.2 103.2 1 06.1 112.2 113.4 116.6 120.4 121.5 
SI: Early school-leavers: share of populati on aged 18-24 having not completed upper secondary 
education and not currently in education or training (%) 8) : : : 8.3 8.4 6.2 4.8 5.1 3.9 3.7 
            
Standard of living Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Number of passenger cars per 1000 population  234.9 250.1 269.3 280.0 291.1 301.1 311.6 323.2 335.7 348.2 
Number of subscriptions to cellular mobile telephone se rvices per 1000 population 11) 79.7 247.2b 390.0 520.4 571.0 638.3 821.4  989.2 1 133.7 1 325.4 
            
Infrastructure Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Density of railway network (lines in operation, per 1000 km²)  47.8 47.8 47.8 47.8 47.7 47.7 47.7 47.7 47.7 47.7 
Length of motorways (thousand km)  0.4 0.4 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.0 
            
Innovation and research Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
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 1.1 0.9 1.0 1.0 1.1 0.9 0.8 0.8 : 
SI: Percentage of households who have Internet access at home (%)  : : : : : : : : 41.0 45.0 
            
Environment Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
SI: Total greenhouse gases emissions, CO2 equivalent (tons, 1990=100)  83.2 82.7 86.6 89.7 95.4 95.1 97 98.1 103.2 : 
 
EN 72   EN  
SI = Structural Indicator 
: = not available 
e = estimate f = forecast 
p = provisional 
b = break in series 1) Land area, break in series in 2003 due to improved methodology.  
2) For 2005-2007, data is based on quarterly values. 
3) For 2005-2007, NPISH is not included. 4) Gross series; include NACE sections C to E. 
5) Privatisation revenues are excluded and recl assified to the financing of the balance. 
6) Calculated on the basis of export and import values expressed in US dollars; break in series in 2004: change in methodology as of 1 January 2004. 
7) For 1998-2001, data refer to the second half of the year; in 2007, data refer to the annual average of quarterly data.  8) For 1998-2006, data refer to the second half of the year; in 2007, data refer to the annual average of quarterly data.  
9) For 1998-2001, data refer to the second half of the year and l ong-term unemployment refers to thirteen months or more; in 20 07, data refer to the third quarter.  
10) From 2004 onwards the number of persons employed in  the police and defense-relat ed activities are included. 
11) Number of subscriptions to cellular mobile telephone services  is presented as total sum of GS M and UMTS; break in series: f rom 2000 onwards data present the number of prepaid and postpaid 
users. SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP 2004)  299.9 286.0 280.3 288.1 281.0 269.9 260.8 25 0.4 247.3 : 
SI: Share of renewable energy in el ectricity consumption (%)  45.1 40.0 42.7 33.9 29.4 41.0 58.1 60.5 47.0 : 
SI: Road freight transport as a share of total inland freight transport (modal split of freight transport) 
(%)  : : 75.9 76.4 76.2 76.6 76.0 74.8 74.0 76.0 
            
Energy Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Primary production of all energy products (thousand TOE)  3 570 3 562 3 730 3 689 3 727 3 852 3 781 4 128 4 037 : 
Primary production of crude oil (thousand TOE)  1 394 1 328 1 232 1 200 1 138 1 079 1 017 985 937 : 
Primary production of hard coal and lignite (thousand TOE)  9 0 0 0 0 0 0 0 0 : 
Primary production of natural gas (thousand TOE)  1 267 1 355 1 642 1 732 1 789 1 796 1 854 2 204 2 349 : 
Net imports of all energy products (thousand TOE)  4 427 4 174 4 166 4 967 4 985 5 090 5 234 4 866 5 315 : 
Gross inland energy consumption (thousand TOE)  7 959 7 819 7 959 8 624 8 828 8 842 8 902 8 948 9 323 : 
Electricity generation (thousand GWh)  12.2 10.7 12.2 12.3 12.7 13.3 13.1 13.0 12.4 : 
            
Agriculture Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Agricultural production volume index of goods and services (producer  prices, previous year=100)  98.8 88.7 108.5 107.7 84.1 111 .9 91.3 104.4 96.0 : 
Total utilised agricultural area (thousand hectare)  2 032 1 169b 1 178 1 181 1 196 1 176 1 211 1 230 1 202 1 288 
Livestock: cattle (thousand heads, end of period)  438 427 438 417 444 466 471 483 467 454 
Livestock: pigs (thousand heads, end of period)  1 362 1 234 1 234 1 286 1 347 1 489 1 205 1 488 1 348 1 104 
Livestock: sheep and goats (thousand heads, end of period)  567 608 632 677 673 848 931 783 738 727 
Production and utilisation of milk on the farm (total  whole milk, thousand tonnes)  641 626 674 716 686 708 813 870 883 828p 
Crop production: cereals (including ri ce) (thousand tonnes, harvested production)  2 881 2 312 2 829 3 080 2 014 3 067 3 039 3 034 2 534 3 724p 
Crop production: sugar beet (thousand tonnes, harvested pr oduction)  1 114 482 965 1 183 678 1 260 1 338 1 560 1 583 1 270p 
Crop production: vegetables (t housand tonnes, harvested production)  537 196 208 218 154 150 286 304 281 279p