EUROPEAN COMMISSION Strasbourg, 17.4.2018 SWD(2018) 154 final COMMISSION STAFF WORKING DOCUMENT The former Yugoslav Republic of Macedonia 2018 Report Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions 2018 Communication on EU Enlargement Policy {COM(2018) 450 final}

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Table of Contents 1.Introduction 1.1.Context 1.2.Progress on meeting the conditions for opening accession negotiations 1.3.Summary of the report 2.Fundamentals first: political criteria and rule of law chapters 2.1.Functioning of democratic institutions and Public Administration Reform 2.1.1.Democracy9 2.1.2.Public Administration Reform14 2.2.Rule of law and fundamental rights18 2.2.1.Chapter 23: Judiciary and fundamental rights18 2.2.2.Chapter 24: Justice, freedom and security33 3.Fundamentals first: Economic development & competitiveness43 3.1.The existence of a functioning market economy43 3.2.The capacity to cope with competitive pressure and market forces within the Union48 4.Regional issues and international obligations51 5.Ability to assume the obligations of membership53

5.1.Chapter 1: Free movement of goods53 5.2.Chapter 2: Freedom of movement for workers55 5.3.Chapter 3: Right of establishment and freedom to provide services55 5.4.Chapter 4: Free movement of capital56 5.5.Chapter 5: Public procurement57 5.6.Chapter 6: Company law59 5.7.Chapter 7: Intellectual property law59 5.8.Chapter 8: Competition policy60 5.9.Chapter 9: Financial services61 5.10.Chapter 10: Information society and media62 5.11.Chapter 11: Agriculture and rural development63 5.12.Chapter 12: Food safety, veterinary and phytosanitary policy64 5.13.Chapter 13: Fisheries65 5.14.Chapter 14: Transport policy66 5.15.Chapter 15: Energy67 5.16.Chapter 16: Taxation69 5.17.Chapter 17: Economic and monetary policy70 5.18.Chapter 18: Statistics71 5.19.Chapter 19: Social policy and employment72 5.20.Chapter 20: Enterprise and industrial policy74

5.21.Chapter 21: Trans-European networks75 5.22.Chapter 22: Regional policy and coordination of structural instruments76 5.23.Chapter 25: Science and research77 5.24.Chapter 26: Education and culture77 5.25.Chapter 27: Environment and climate change79 5.26.Chapter 28: Consumer and health protection81 5.27.Chapter 29: Customs union82 5.28.Chapter 30: External relations83 5.29.Chapter 31: Foreign, security and defence policy84 5.30.Chapter 32: Financial Control85 5.31.Chapter 33: Financial and budgetary provisions87 Annex I - Relations between the EU and the former Yugoslav Republic of Macedonia89 Annex II – Statistical annex91



1. Introduction 1.1.Context The Stabilisation and Association Agreement between the former Yugoslav Republic of Macedonia and the 4EU entered into force in April 2004. Since 2009, the Commission has recommended to the Council to open accession negotiations with the former Yugoslav Republic of Macedonia, a candidate country since 2005. The recommendation was made conditional, in 2015 and 2016, on the continued implementation of the "Pržino Agreement", which was facilitated by the Commissioner for European Neighbourhood Policy and Enlargement Negotiations and three Members of the European Parliament in 2015, and on substantial progress in the implementation of the "Urgent Reform Priorities". Following the early parliamentary elections in December 2016, which resulted in the change of government in May 2017, the country has finally overcome its deep political crisis. The new government has shown commitment and political will to advance the EU reform agenda. Most elements of the "Pržino agreement" have been continuously and largely implemented or are, by now, overtaken by subsequent events. Substantial progress has been made in the implementation of the "Urgent Reform Priorities". 1.2.Progress on meeting the conditions for opening accession negotiations

Pržino Agreement The "Pržino Agreement" was a major breakthrough. It was reached against a background of increasing polarisation and state capture, affecting the functioning of democratic institutions and key areas of the society. SDSM, as opposition party, returned to Parliament in September 2015 and chaired the Committee of Inquiry, created to establish the political accountability of the wiretaps as well as the existing parliamentary committees on intelligence oversight and interception of communications. The Special Prosecutors' Office was also created to establish the legal accountability for the wiretaps. A meeting of the High Level Accession Dialogue took place in September 2015. The party leaders agreed, at Pržino, to the unprecedented step of a sitting government and Prime Minister, with a secure electoral majority, stepping down to be replaced by a technical government, including opposition party members as Ministers and Deputy Ministers. An agreement was also reached on early parliamentary elections in December 2016, with a new composition of the State Election Commission. Whatever the challenges, the political resilience involved in reaching, and then implementing, the "Pržino Agreement" should not be underestimated as it enabled the country to overcome a deep political crisis and return to its EU path. As part of the "Pržino agreement", the early parliamentary elections were held in December 2016 and resulted in a change of government in May 2017. Politics and society are undergoing significant change, with a renewed spirit of hope and openness. Steps are being taken to address state capture, to consolidate democracy, restore the rule of law and trust in institutions. Efforts are being made to ensure the inclusiveness of reforms by reaching out to the opposition, to civil society organisations, businesses and other stakeholders. The transparency of decision-making has increased and proper checks and balances on the power of the executive by Parliament and civil society are gradually being restored. The harsh rhetoric, pressure and targeted investigations against civil society have receded. In their September 2017 report, the Senior Experts' Group on systemic Rule of Law issues made clear that the mistakes of the past should not be repeated. Positive progress was made in regard to relations with neighbouring Member States and bilateral relations were improved, in particular with Bulgaria and Greece (see regional issues and international obligations). In a few months, the country has become a factor of stability in the region. Relations with the EU have intensified as the new government immediately committed to implement urgent and overdue reform commitments, as a serious partner. The Urgent Reform Priorities In light of the revelations in the wiretaps, in summer 2015, the Commission tasked a group of independent senior rule of law experts to prepare a report and concrete recommendations, which fed into the Commission’s "Urgent Reform Priorities" . The same senior rule of law experts prepared a second report, in September 2017, assessing implementation of their previous recommendations and providing guidance to the new government. Significant progress has been made by the new government to address the "Urgent Reform Priorities" and the recommendations of the Senior Experts' Group on systemic Rule of Law issues since mid-2017. Decisive steps have been taken to start restoring the independence of the judiciary and reverse the backsliding of previous years. The most notable step was the adoption of a credible new judicial reform strategy, which aims to address the "Urgent Reform Priorities" and the recommendations of the Venice Commission. Its implementation is underway and the relevant Venice Commission recommendations concerning the discipline and dismissal system for judges were addressed through the adoption of the first set of amendments to the law on the Judicial Council and the abolition of the Council for Determining Facts. Implementing the planned reforms is a long term process and requires a continuous change in behaviour. For more details, see chapter 23. Since mid-2017, work is ongoing to address the "Urgent Reform Priorities" related to the interception of communications. From a legal point of view, work is well underway with sets of amendments having been enacted by Parliament and remaining laws are in parliamentary procedure. These legal steps pave the way for the establishment of a new institution, which will be an intermediation body, removing this function from the Bureau of Security and Counterintelligence (UBK) and its access to the switches enabling the activation of interception of communications. Its establishment aims at removing the possibility for a recurrence of the abuse, which led to the wiretapping scandal. Steps have also been taken to strengthen internal control within the UBK and reinforce civilian and parliamentary oversight mechanism. For more details, see chapter 24. The priority is to secure the legally defined autonomy of the independent regulatory, supervisory and oversight bodies, not only in theory but also in practice. The Law on the Ombudsman was amended in 2016 with a view to fulfilling the Paris principles. The Parliament approved in November 2017 a set of measures for implementing recommendations of the Ombudsman's 2016 report and the government committed to their timely implementation. For more details, see chapter 23. The work of the Special Prosecutor's Office is an important contribution to the fight against high-level corruption. There are now several high level corruption cases before the courts. While a track record on corruption cases was created years ago, more efforts should be made on investigation, prosecution and conviction on such cases. Following consultation of the Venice Commission, the Law on the protection of whistle-blowers was adopted. Law enforcement authorities and relevant agencies should continue to tackle corruption, which would contribute to restore citizens’ trust in one rule of law for all. For more details, see chapter 23. Action was taken to end lustration in August 2015 and the new government has committed to annulling the measures taken against individuals who were lustrated. Concerning public administration reform, there was good progress over the reporting period. The Public Administration Reform Strategy and Action Plan for 2018-2022 and the Public Financial Management Reform Programme 2018-2021 were both adopted. This increased commitment on public administration reform should contribute to strengthening the principle of merit-based recruitment and tackling the depoliticisation of public administration. Civil society and other stakeholders are increasingly being involved in the policy-making and legislative processes. Access to information, for the public as well as journalists, is improving, with a presumption of accessibility unless data is specifically classified. Government agendas and minutes are now published online. Amendments to the Law on administrative servants were adopted in January 2018. See section 2.1.2. Public Administration Reform. Following the early parliamentary elections in December 2016, the Office for Democratic Institutions and Human Rights of the Organisation for Security and Cooperation in Europe (OSCE/ODIHR) concluded that, as a result of the "Pržino Agreement", significant improvements had been made to the electoral legislation, addressing most of the OSCE/ODIHR and Venice Commission recommendations. Confidence in the voters' list has also increased. Work should continue, well in advance of the next election cycle, to address the remaining recommendations from OSCE/ODIHR and Venice Commission. See section 2 on Elections. Although overshadowed now by the more serious attack on Parliament on 27 April 2017, there was an earlier incident on 24 December 2012. Work on the recommendations of the crossparty Committee of Inquiry, established with EU expert support, has restarted. See section 2 on Parliament. The climate for media freedom and freedom of expression has improved, with more open political debate and critical media reporting. There has been a decrease in pressure on journalists. Reporting on both recent electoral campaigns has been more balanced, as acknowledged by the OSCE/ODIHR and other observers. Government advertising has ended. Further efforts are needed to improve the independence of the public broadcaster. It is essential that the authorities demonstrate zero tolerance towards all incidents of physical and verbal abuse or threats against journalists and that these are effectively followed up by the relevant authorities. There has been extensive stakeholder consultation on changes to media legislation. For more details, see chapter 23. 1.3.Summary of the report Concerning the political criteria, the country has finally overcome its most severe political crisis since 2001. The difficult process of government formation reached a critical point during the 27 April 2017 attacks in Parliament, which were condemned in the strongest terms by the international community. Since May 2017, the new reform-oriented government has taken steps to address state capture by gradually restoring checks and balances, strengthening democracy and rule of law. The country is undergoing fundamental changes in a more inclusive and open political atmosphere. The municipal elections in October 2017 confirmed the support of citizens for the EU-oriented policies of the government coalition. The Parliament has continued functioning with opposition parties chairing key committees. The Parliament needs to enhance its oversight and legislative functions, including by limiting the extensive use of shortened procedures. While the inter-ethnic situation was fragile, the situation remained calm overall. The review of the implementation of the Ohrid Framework Agreement, which ended the 2001 conflict and provides the framework for the inter-ethnic relations, needs to be followed up in a transparent and inclusive manner. The government has shown commitment to increase trust among communities. Civil society continued to play a constructive role in supporting democratic processes and ensuring greater checks and balances. Since the second half of 2017, the climate in which civil society organisations operate has improved and the government has shown commitment to dialogue and inclusion. The country is moderately prepared with the reform of its public administration. Good progress has been made with the adoption of the public administration reform strategy and the public financial management reform programme. Concrete efforts have been made towards increasing transparency and accountability and involving external stakeholders in policymaking. The capacity of the Ministry of Information Society and Administration to drive and coordinate public administration reform needs to be improved. Strong political commitment to guarantee the professionalism of the public administration, especially on senior management appointments, and the respect for the principles of transparency, merit and equitable representation in line with the spirit and the letter of the law, remains essential.

The country’s judicial system has reached some level of preparation and good progress was made, notably in the latter part of the reporting period. The backsliding of previous years has started to be reversed through decisive steps taken in recent months, notably to start restoring the independence of the judiciary. The country adopted a credible new judicial reform strategy which lays the basis for further reform in this field, and key pieces of legislation have been amended in line with recommendations of the Venice Commission and the "Urgent Reform Priorities". The Special Prosecutor's Office faces less obstruction from the courts, allowing it to work more effectively. To address outstanding recommendations and to ensure the judiciary can function without undue influence will require sustained efforts. As regards the fight against corruption, the country has achieved some level of preparation. The legislative and institutional framework is in place, as well as a track record on both prevention and prosecution, although final court rulings on high level corruption cases remain limited. Corruption remains prevalent in many areas and continues to be a serious problem. The capacity of institutions to effectively tackle corruption has shown structural and operational deficiencies. Political interference remains a risk. In the fight against organised crime, the country has reached some level of preparation. The legislative framework is broadly in line with European standards, and efforts to implement strategies must continue. The country has taken steps towards reforming the system of interception of communications and to address the related "Urgent Reform Priorities". More needs to be done to effectively fight certain forms of crime such as money laundering and financial crimes. Coordination among all relevant stakeholders is essential. A track record on investigations, prosecutions and convictions in the fight against organised crime needs to be improved. The number of convictions remains low. The legal and institutional framework for protection of fundamental rights is largely in place and reforms have enhanced compliance with European human rights standards. Full implementation requires sustained efforts. It is positive that the country ratified the Convention on preventing and combating violence against women and domestic violence (also known as the Istanbul Convention), initiated the necessary legal reforms for establishing an external oversight mechanism of the law enforcement authorities and that the amendments to the framework for non-discrimination were prepared in an inclusive manner. The situation in prisons and psychiatric institutions must be addressed, cases of hate crime and hate speech must be followed up and bodies involved in protecting and promoting human rights must be strengthened. More efforts are needed as regards Roma inclusion. As regards freedom of expression, the country has achieved some level of preparation and made good progress, notably through an improved climate for the media and decreased pressure on journalists. The country needs to address remaining challenges, including reform of the public broadcaster. With regard to regional cooperation, the country maintained its good relations with other enlargement countries and participated actively in regional initiatives. Decisive steps have been taken to improve good neighbourly relations, including through the entry into force of the bilateral treaty with Bulgaria. The "name issue" needs to be resolved as a matter of urgency. Talks on the "name issue" have intensified under the auspices of the United Nations. Constructive discussions at Prime Ministerial and Foreign Minister levels positively assessed progress in the implementation of the confidence building measures. The joint announcement by the Prime Ministers of Greece and the former Yugoslav Republic of Macedonia in January 2018, involving the renaming of Skopje airport and a highway and proceeding with some delayed EU initiatives, were concrete signs of strengthening mutual trust. As regards the economic criteria, the former Yugoslav Republic of Macedonia has made some progress and is at a good level of preparation in developing a functioning market economy. Despite the political stalemate in the first half of the year, noteworthy improvements took place, in particular in public finance management and transparency. Key weaknesses of the economy remain. These include shortcomings in the business environment, such as weak contract enforcement and a large informal economy. Structural problems of the labour market are reflected in low activity and high unemployment rates. The macroeconomic environment deteriorated in the first half of 2017, as the lengthy political crisis took a toll on investment. Fiscal policy is geared towards short-term measures and lacks a durable consolidation plan. The economy has made some progress and is moderately prepared to cope with competitive pressures and market forces within the EU. Further progress was made towards diversification of exports and higher-value added output in the manufacturing sector. Trade and investment relations with the EU continued to intensify. The economy still suffers from weaknesses in education curricula, low innovation rates and important investment gaps including in particular public infrastructure. As regards its ability to assume the obligations of membership, the country is moderately prepared in most areas, including in the areas of competition, transport and energy. The country shows a good level of preparation in areas such as company law, customs union, trans-European networks and science and research. Further efforts are needed across the board, in particular in those few areas where the country is at an early stage of preparation, such as freedom of movement of workers. More focus is also needed on administrative capacity and effective implementation. The country has continued to improve its alignment with the EU declarations and Council decisions on Common Foreign and Security Policy. The former Yugoslav Republic of Macedonia continued to manage the effects of the migration and refugee crisis. The country is in the process of negotiating with the European Union the status agreement on actions to be carried out by the European Border and Coast Guard Agency in the country. The former Yugoslav Republic of Macedonia has made efforts to improve its legal framework. Work on amending the Law on Foreigners is ongoing. The country continued to implement its Resolution on Migration Policy. The country maintained its efforts to improve its asylum system and migration management. Systematic registration of migrants and protective-sensitive profiling, to guarantee that those individuals' needs are addressed, is still needed. In this context, the former Yugoslav Republic of Macedonia needs to put in place a return mechanism for irregular migrants, which is in line with the EU acquis, as well as to align its visa policy progressively with the EU’s. The country continued to cooperate with neighbouring countries and Member States, in particular at technical level, and made substantial efforts to provide shelter and humanitarian supplies, primarily with EU support. 2.Fundamentals first: political criteria and rule of law chapters 2.1.Functioning of democratic institutions and Public Administration Reform The country has finally overcome its deep political crisis, which arose from the 2015 revelations of widespread illegal interception of communications (wiretaps). The political agreement (also called "Pržino Agreement") has been largely implemented and substantial progress has been made in the implementation of the "Urgent Reform Priorities". 2.1.1.Democracy The period following early parliamentary elections in December 2016 ("Pržino Agreement") was marked by a tense atmosphere and negative rhetoric, mainly from senior officials of VMRO-DPMNE, who criticised the State Election Commission and accused some civil society organisations and some representatives of the international community of interference. The transition of power was delayed by the refusal of President Ivanov to give the mandate to form a government to the leader of SDSM, who had the support of the majority in the Parliament, due to political and legalistic considerations. This delayed the election of the new President of the Parliament until 27 April 2017. His election triggered violent attacks in Parliament, which were strongly condemned by the international community. The new government was finally elected by Parliament on 31 May 2017. In July 2017, the European Commission sent again the independent Senior Experts' Group to assess progress in addressing its previous findings. The Group also formulated recommendations to enable the new government and other institutions to address persistent shortcomings in several rule of law areas. The new government has taken steps to address state capture, restore proper checks and balances, and consolidate democracy and rule of law. The country is undergoing changes in a more open political atmosphere. Efforts have been made to restore a culture of compromise by reaching out to all stakeholders, including the opposition, in an inclusive and transparent manner. The government has taken noticeable steps to advance the implementation of the "Urgent Reform Priorities", including through its "3-6-9 plan" for the initial phase of reforms. It has shown political will to bring the country firmly back on its EU path. Elections Some progress has been made on addressing the recommendations of the Office for Democratic Institutions and Human Rights of the Organisation for Security and Cooperation in Europe (OSCE/ODIHR) and restoring citizens' trust in electoral processes ("Urgent Reform Priorities"). The State Election Commission (SEC) should be formed in a timely manner. It should be provided with the mandate and resources to carry out its work in an impartial, professional and transparent manner in view of increasing public confidence. The remaining recommendations of OSCE/ODIHR and Venice Commission should be addressed well ahead of the next election cycle. The Electoral Code would further benefit from a complete review, in an inclusive, transparent and timely manner, to ensure the coherence of the electoral legal framework. Despite growing confidence in the voters’ list ("Urgent Reform Priority"), the state institutions and bodies, notably the Ministry of Interior and the State Election Commission, should ensure its sustainable updating. More efforts are needed to prevent and fully investigate any form of intimidation of voters. Early parliamentary elections were held on 11 December 2016 following the decision reached by the political parties in July and August 2016 on the further implementation of the "Pržino Agreement". OSCE/ODIHR assessed that the elections were an important step in resolving the serious political crisis. Prior to the elections, the main political parties agreed to institutional and legal arrangements for providing a level playing field. Underlying issues (e.g. the updating of the voters' list and media coverage of the electoral campaign) need to be addressed in a more sustainable manner. The campaign was assessed as competitive, but it took place in an environment characterised by public mistrust in the political establishment and institutions and by allegations of voter intimidation. The work of the State Election Commission encountered some delays, but the election day was generally well administered and took place without major incidents. Voter turnout was high (66.8 %). VMRO-DPMNE, DUI and DPA lost seats, whereas SDSM saw an increase as well as BESA and Alliance for Albanians. Following the replacement of Members of Parliament (MPs) who became mayors or ministers, the number of women MPs rose to 45 (37.4 %), 3 more than in the previous Parliament. The ethnic representation of elected Members of Parliament largely reflects the ethnic composition of the population. Delays in the process of government formation led to the postponement of the municipal elections to 15 October 2017. The Electoral Code was amended accordingly. The mandate of the municipal councillors ended before these elections and those of the mayors were limited, which affected services provided by municipalities to citizens.

OSCE/ODIHR assessed that, despite some irregularities, both rounds of the municipal elections (15 October and 29 October) were competitive, and the respect for fundamental freedoms contributed towards the conduct of democratic elections. Progress was made towards a more balanced media reporting compared to the previous elections. Efforts were made to facilitate the participation of people with disabilities in the elections, notably with the availability of braille ballots in many polling stations. There were cases of voting across ethnic lines. SDSM and DUI cooperated in some municipalities. For the second round, the Alliance for Albanians and BESA announced that they would support each other's candidates in some municipalities. Overall, the election days were well managed. SDSM saw an increase in support, DUI stabilised its votes, whereas VMRO-DMNE lost support in a large number of municipalities. Six female mayors were elected (out of a total of 81). The number of women councillors remains however very low. Before the announcement of the results, the leadership of VMRO-DPMNE stated that the party will not recognise the elections due to perceived allegations of irregularities, some of which were not substantiated. Their mayors and councillors, however, did not return their mandates. In December 2017, all members of the State Election Commission, except the BESA representative, resigned following public criticisms and accusations of nontransparent and unethical behaviour. Parliament The violence perpetrated in Parliament in April 2017 was an attack on democracy. The accountability for those who have orchestrated these incidents should be established. Security related issues in Parliament need to be addressed as a matter of urgency. Despite the challenges it has faced, the new Parliament has made efforts to gradually restore checks and balances on the executive power, to focus its activities on long overdue reforms, to enhance its oversight capacity and increase its transparency. Parliament has continued functioning with opposition parties chairing key committees. Its work has been marked by filibustering and occasional interruption of parliamentary activities by the main opposition party. Parliament still needs to improve its performance as a forum for constructive political dialogue and enhance its legislative function by limiting the extensive use of shortened legislative procedures. A credible track record on the functional oversight of the work of government and the intelligence services, as well as the capacity to monitor the protection of human rights and fundamental freedoms in the country should be improved. Any form of obstruction or abuse of procedures, which prevent Parliament from functioning properly, should be avoided. Political parties also need to enhance their internal democratic processes, which could lead to more democratic political processes in the country. After summer 2017, Parliament has gradually restored its legislative and oversight functions, continued with appointments under its competences and maintained international contacts. The institution has shown resilience, despite the political events that hampered its work until the second half of 2017. The election of the President of the Parliament was delayed by the refusal of President Ivanov to recognise the existing parliamentary majority and the filibustering of VMRO-DPMNE in Parliament. The first ethnic Albanian President of the Parliament was elected on 27 April 2017. This triggered violent attacks by people demonstrating in front of the Parliament, who were allowed to enter the building by some Members of Parliament and physically assaulted politicians, including leaders of political parties, and journalists. The law enforcement authorities failed to prevent these attacks and provide adequate protection to the Parliament and its Members. Disciplinary procedures against police officers were launched of whom 11 were dismissed. 28 people were indicted by the Public Prosecutor’s Office, including five VMRO-DPMNE MPs, whose immunity was lifted on 1 December 2017 (charges against a sixth suspected MP were dropped). VMRO-DPMNE criticised the actions of law enforcement authorities, in particular before the lifting of immunity. The Ombudsman raised the issue in his 2017 annual report. In reaction to these developments and the following court decisions, VMRO-DPMNE has suspended its parliamentary activities from December 2017 to April 2018. During this period, the party was engaged in the work of Parliament on certain occasions such as the President Ivanov's address, international visits and important legislation. The work is well underway on establishing a Code of Ethics of the Parliament, which is a GRECO requirement, and revising the Rules of Procedures involving all political parties. Work on the recommendations of the committee of inquiry into the events of 24 December 2012 ("Urgent Reform Priority") has restarted. The preparations are ongoing for the holding of the "Jean Monnet Dialogue", initiated by the European Parliament, aiming as strengthening the culture of compromise among the Members of the Parliament. The law making process has been delayed, including by the filibustering of the main opposition party, which created 10 political groups. The opposition chairs 10 committees out of 21 and maintains a majority in 6 committees. While the number of laws adopted in shortened or urgent procedure has decreased from around 67 % in 2016 to 60 % in 2017, it remains still high. Some progress was made by Parliament in holding the new executive accountable through regular weekly question and answer sessions. The opposition chairs the committees for Protection of Civil Freedoms and Rights, for supervising the work of the Security and Counterintelligence Bureau and the Intelligence Agency and for oversight of the interception of communications ("Pržino agreement") – see Chapters 23 and 24. Technical assistance by the Geneva-based Centre for Democratic Control of Armed Forces (DCAF) has been provided to the relevant committees to strengthen their expertise in the area of interception of communications. Parliamentary oversight over government spending could be improved, including by monitoring the budgetary impact of government proposals and making full use of the State Audit Office’s external reports. All appointments under the responsibility of the Parliament need to be completed in a timely manner, in line with the law as well as the principles of transparency and meritocracy. Political parties are cooperating on the implementation of the GRECO recommendations on transparency of party funding. Further efforts are needed to fully implement these recommendations. The legislation provides for a pluralistic political environment. Governance Democratic governance has improved. The new government has taken steps to address state capture by gradually restoring proper checks and balances and increasing the transparency of its work. It has shown its political will to advance the EU reform agenda, in an inclusive and transparent manner. Independent, regulatory, supervisory and advisory bodies have begun to carry out their functions more effectively. The inter-ethnic situation remained fragile. The situation continued to be calm overall, but occasional incidents and statements fuelled tensions. The new government has committed to addressing the challenges, improving the overall inter-ethnic situation and implementing the Ohrid Framework Agreement. The new Macedonian government was elected by Parliament on 31 May 2017 and is composed of 5 Deputy Prime Ministers, 20 Ministers and 15 Deputy Ministers. Following the municipal elections, the Alliance for Albanians left the government. The total representation of women in the appointed functions and decision-making, management and governing bodies is 13 %, out of which 4 Ministers (16 %). The new government has made significant progress in moving forward the EU reform agenda, including the "Urgent Reform Priorities", by reaching out to the opposition, civil society and other stakeholders. Its "3-6-9 plan" prioritises measures to be adopted in the initial phase of reforms, ahead of this enlargement package. Challenges remain for coordinating the reform processes. Inter-ethnic relations remained fragile, but the situation continued to be calm overall. The joint declaration of ethnic Albanian parties created controversies. The new government continued to pursue good relations among communities. The Ohrid Framework Agreement (OFA), which ended the 2001 conflict, provides the framework for preserving the multi-ethnic character of society. The review on social cohesion of the OFA, completed in 2015 with international support, needs to be followed up. Ethnic Albanian political parties consider the law on the use of languages as an important legislative element contributing to the implementation of OFA. Following the refusal of President Ivanov to sign the decree for its promulgation, this law was adopted again by Parliament in March 2018, amid tense scenes. Decentralisation has been a commitment since the OFA was signed in 2001. A dialogue between authorities to address lack of funding and lack of local public delivery of services has been strengthened, including a 6.4% increase in the 2018 budget transfer to municipalities. The government adopted an Action Plan for decentralisation and regional development 2018-2020. The funds dedicated for regional development have further increased. Civil society The environment in which civil society operates has substantially improved under the new government. Good progress has been made in consulting civil society organisations (CSOs) and involving them in policy making and legislative processes. Both governmental and nongovernmental actors should ensure that safeguards are in place to restore proper checks and balances. An improved legal, financial and policy framework is still needed to provide an enabling environment for civil society. An empowered civil society is a crucial component of any democratic system and should be recognised and treated as such by state institutions. The difficult environment and the climate of fear in which CSOs operated culminated in December 2016 with calls for the process of "de-Sorosoisation" of society by the former leader of VMRO-DPMNE. At that time, civil society became increasingly polarised. Some civil society organisations reported increased pressure, inspections and investigations by law enforcement agencies between December 2016 and in 2017. Since the formation of the new government, the involvement of civil society in dialogue, policy development as well as legislative drafting has increased and the transparency of the process has improved. The progress made should be translated into more structured, comprehensive and predictable consultative process, involving all stakeholders. CSOs have also played an important role in identifying the priorities of the "3-6-9 plan". Some civil society activists took up posts in the new government. In November 2017, the Decision for establishing the Council for cooperation between government and civil society was amended through inclusive consultations, as one of the main objectives of 2012-2017 Strategy for cooperation with civil society. This included cancelling the previous selection of Council members from civil society and launching a new public call with a view to a more transparent selection.

The state needs to strengthen the enabling environment for civil society with relevant legal, financial, policy and administrative frameworks. The 2012-2017 Strategy for cooperation with civil society was partially implemented. As of 2018 onwards, the government needs to build a long term strategic framework for cooperation with civil society as well as binding rules for state financing of CSOs. 2.1.2.Public Administration Reform The country is moderately prepared with the reform of its public administration. There was good progress over the reporting period as some of the European Commission's 2016 recommendations were implemented. The public administration reform strategy and the public financial management reform programme were both adopted. Concrete efforts were also made to increase transparency, accountability and the involvement of external stakeholders in policy-making. The capacity of the Ministry of Information Society and Administration to drive and coordinate public administration reform needs to be improved. In summer 2017, the government dismissed or ended the mandates of all public board members and top managers in 85 public institutions on the grounds of obstructing the transfer of power and taking procurement decisions which potentially damaged the budget. The appointment of new managers of those institutions with a full mandate began in January 2018. Strong political commitment to guarantee professionalism of the public administration, especially on senior management appointments, and the respect for the principles of transparency, merit and equitable representation remains essential. In the coming year, the country should in particular: → ensure full respect of merit-based recruitment for public service positions; → avoid the use of excessive temporary, service or other types of recruitments that bypass the merit principle and use instead open competitions for all recruitments; → start to implement the public administration reform strategy and the public financial management reform programme, and ensure a coordinated monitoring and reporting system, which systematically engages with external stakeholders; → provide extensive training to central and local government administrations and raise public awareness to ensure implementation of the Law on General Administrative Procedures. Policy development and coordination The political will to embark on EU-related reforms has been restored by the new government ("Pržino Agreement" and "Urgent Reform Priorities"). The legal framework and institutional structures for a coherent policy-making system are in place. This policy-making system is sufficiently developed to manage the process of EU integration. However, policy implementation suffers from lack of proper coordination among the key institutions. Both policy planning and central coordination need to be improved. There are no minimum requirements or guidance for sector planning by ministries. As a result, sector planning remains weak, as also demonstrated by incomplete and only on paper financial planning. The quality of the European integration coordination system for both policy measures and assistance implementation remained low. Data gathering and data quality continue to be a major shortcoming. This shortcoming hampers proper evidence-based policy and the drafting of laws. Also, the government has made extensive use of shortened legislative procedures, which limit the quality of draft laws. While the response time for public consultations on policies and legislation was increased from 10 days to 20 days, no institution is responsible for the quality control of the public consultation process. This is a critical weakness. The obligatory inter-ministerial consultations have remained a formality, as there is no minimum duration requirement. Also, institutions do not need to prepare any overview of comments received during consultation. Regulatory impact assessments are well regulated, their use has slightly increased and their quality has started to improve. Financial impact assessments for some laws are either missing or they are not comprehensive. There is still a problem of institutions either not responding to impact-assessment comments or being unwilling to incorporate feedback from the impact assessments. Public scrutiny over government work has improved in the second part of 2017, as the government publishes the agendas and the minutes from its meetings. The number of published government reports and documents has increased. However, these reports still focus more on quantitative outputs than on qualitative assessment of achieved policy objectives. Public financial management The public financial management reform programme was adopted in December 2017, following a government-led inclusive policy dialogue. The programme identified several areas where improvements are needed. These areas include strengthening the fiscal framework, revenue mobilisation and budget planning. Other goals identified by the programmes include establishing an integrated financial IT system, improving the efficiency and effectiveness of public investment and public procurement systems, reducing the amount of payment arrears and strengthening public internal control, and improving external oversight and fiscal transparency. Preparations for a medium-term budgetary framework are advanced. Under the previous government, the 2017-2018 fiscal strategy and the 2017 budget did not undergo sufficient parliamentary debate. However, the new government improved significantly the communication on its draft budget for 2018. Budget transparency under the new government also improved with the publication of a citizens' budget (providing simple word explanation on what budgetary resources are spent on) and publication of more budgetary data. Public service and human resources management The 2015 Law on Administrative Servants is not systematically applied to ensure meritbased recruitment and promotion of civil servants. There are even some laws, for example the Law on Internal Affairs, which have been adopted after the Law on Administrative Servants that allow employees to be excluded from the application of the Law on Administrative Servants. This results in inconsistent rules for public-sector employees and should be remedied. The recent amendments to the 2015 Law on Administrative Servants have led to some changes in merit-based recruitment and promotion procedures. Psychological and integrity tests are no longer required for employment in the public service. Also, the amendments have introduced a "fast track" possibility for an administrative servant to be rapidly promoted and move up several grades on the career ladder at once, which might be problematic in terms of increased subjectivity and lack of transparency. Middle management positions were reintroduced in many ministries, hence a number of these positions were filled with internal transfers following this amendment. There is no clarity on the extent of the use of temporary, service or other types of recruitments in the public administration which raises concerns over the application of the merit principle. The government has not provided statistics on all recruited administrative servants and temporary and service contracts since 1 January 2017. The representation of women has increased in the public service, including at middle and senior management level (54 %). Figures on equitable representation remained largely unchanged, but are not balanced across the public sector. The lack of gender balance is especially visible in institutions where the head of the institution is from the biggest non-majority community. Smaller communities of ethnic minorities are still underrepresented in the public service. There is a long-standing situation where a large number of state employees is paid without showing up for work. Fair representation of men, women and ethnic groups should be applied across the public sector. The criteria for appointment of senior management positions are not clearly regulated. A large number of dismissals and appointments of new managers followed both the parliamentary and the local elections. The grounds for dismissal need to be made more transparent and be better substantiated. In addition, the appointments of top managerial positions and other highranking public officials need to be done in open competition. Government and senior officials need to lead by example and prevent any recruitment that is not based on merit.

The Ministry of Information Society and Administration, as a central coordination body, does not have sufficient capacity and leverage to support and monitor the management of human resources across the public administration. The human resources information system does not work properly. This is due to a lack of commitment by employees in the human resource services to fill in the requested data. The report on employees in the public sector (one of the "Urgent Reform Priorities") published in March 2017 provided more analysis on public employments, but lacked data and clarity on temporary, service and other types of recruitments. The remuneration system across the public sector remained non-uniform, leading to inconsistent levels of pay and reduced mobility. Professional development of public servants is limited to classroom type of training. A centralised database of the training offered by various institutions is not yet established. The amended legislation on appraisals does not impose any requirements on the minimal percentages of staff that will be awarded for excellent appraisals or penalised for poor appraisals. Integrity in the public service is sufficiently regulated, but there is no data available on how integrity mechanisms are implemented in practice. Accountability of the administration Organisation of the state administration is fragmented. This is because the Law on the Organisation and Operation of State Administrative Bodies does not provide a clear distinction between different types of institutions. The lines of accountability between and within institutions are not clear. Managerial accountability within institutions is not systematically implemented and there is little delegation of responsibility to middle management. Numerous agencies are directly subordinate to the Parliament. Some state institutions continue to report in parallel both to their "line" ministry (the ministry responsible for their activities) and government. At present, 67 state institutions (out of a total of 1 291 institutions) mainly at local level, operate with less than five employees. As part of the new public administration reform strategy, the government should prepare and implement a review to assess the effectiveness of the organisation of the Macedonian public administration. (See Chapter 32 — Financial control) The internal and external oversight mechanisms ensuring citizens’ right to good administration are in place, but their quality and impact needs to improve. The Ombudsman continued to work efficiently, but the first attempt in the Parliament to ensure systemic follow-up to his repeated recommendations did not obtain the necessary votes and it was only passed on the second attempt ("Urgent Reform Priority"). Citizens’ right to access public information is safeguarded in legislation, but broad exceptions hamper efficient implementation of this right. The government declassified and published several documents and agreements signed with foreign investors. This declassification and publication had been one of the European Commission’s "Urgent Reform Priorities". Fees charged to the public to receive public information were also decreased, and public information provided electronically is now free of charge. Although there has been a slight drop in the volume and quality of information published by local government, each ministry and other state institutions are now required to more proactively publish standard sets of information. The Commission that reviews appeals does not have sufficient capacity to monitor compliance with the requirement for proactive disclosure of information. It must be given the power to impose penalties and to encourage public information providers to systematically enforce the relevant legislation. On the right to administrative justice, the appeals procedure is still complex and lengthy, comprising several appeal layers. There are still delays in enforcing Administrative Court rulings. There is a right to seek compensation and public authorities are liable in cases of wrongdoing. However, there is no data available on compensation for damages. Service delivery to citizens and businesses User-oriented administration has not been developed in the past few years. This is mainly due to a lack of coordinated efforts and political commitment for government-wide reforms. The interoperability framework functions with only a few state institutions. There has been more focus on digitalisation of services for businesses than for the public. Very few services are provided to the public through the country’s e-government portal. Equal access to public services is not in place. Some quality management tools are being implemented, but user satisfaction surveys are not systematically used to ensure that services respond to user needs. The Law on General Administrative Procedures, which entered into force in August 2016, has aimed to simplify administrative procedures. However, it is not systematically applied by the administration, even though considerable efforts were made to harmonise 169 special laws with the law. The Ministry of Information Society and Administration has so far not provided systematic training or organised public awareness campaigns to inform people of their rights and obligations. Strategic framework for public administration reform A comprehensive 2018-2022 public administration reform strategy and a sequenced action plan to implement this strategy were adopted in February 2018 after an inclusive consultation process. The strategy sufficiently addresses all core areas of public administration, including depoliticisation and professionalisation of the public administration. The government should now focus on implementing the strategy. A key concern is the capacity of the Ministry of Information Society and Administration to efficiently coordinate and monitor implementation of the strategy with other state institutions affected by the strategy. The government established a high-level Public Administration Reform Council in December 2017 to ensure political support and strategic guidance for the reforms. Strong political commitment from the highest political leadership is necessary to ensure full understanding and enforcement of the reform priorities. The reform also needs to be made more financially sustainable, as the costing of the strategy is not reflected in the 2018 annual budget and the medium-term expenditure framework. Implementation of the reform strategy relies heavily on external donor funding. 2.2.Rule of law and fundamental rights 2.2.1.Chapter 23: Judiciary and fundamental rights The EU’s founding values include the rule of law and respect for human rights. A proper functioning judicial system and an effective fight against corruption are of paramount importance, as is the respect for fundamental rights in law and in practice. The country has some level of preparation to apply the acquis and European standards in this area. The new government has shown political will to address the "Urgent Reform Priorities", recommendations of the Venice Commission and the Senior Experts’ Group on systemic Rule of Law issues. This led to good progress in addressing the recommendations of 2016, through the adoption of strategic documents and amendments to the legal framework, particularly in the area of judiciary, to address police impunity and improve the climate for freedom of expression and the media. The obstruction faced by the Special Prosecutor’s Office (SPO) has diminished following the change in political environment and the dismissal of the former State Public Prosecutor. This enabled the office to successfully file several indictments and have a first judgement handed down in one of its cases. Beyond the SPO, other relevant institutions need to demonstrate a much more proactive attitude to effectively fight corruption. Fundamental rights continue to be largely enshrined in law, but as in all other areas, implementation will require sustained commitment to reforms. Competent independent and regulatory bodies need to be further strengthened, with adequate budget and skilled staff. The functional independence of these bodies must be guaranteed in practice. In the coming year, the country should in particular: → adopt and implement measures envisaged in the judicial reform strategy, including by reforming the systems for appointment, promotion, discipline and dismissal of judges and prosecutors, and demonstrating that the independence of the judicial system is respected and promoted at all levels; → adopt and implement measures to strengthen the institutions in charge of preventing and fighting corruption and encourage, from the highest political level, a more proactive attitude on the part of all actors engaged in this area; → take concrete steps to improve the situation in prisons and other places of detention and take measures to promote an enabling environment for freedom of expression to foster professionalism and accurate reporting, including through strengthened independence of the public broadcaster.

Functioning of the judiciary The country’s judicial system has some level of preparation. There has been good progress in this area, with a notable improvement in the latter part of the reporting period. The backsliding of previous years has started to be reversed through decisive steps taken in recent months to start restoring the independence of the judiciary. The most notable progress was the adoption of a credible new judicial reform strategy and action plan and the amendment of certain key pieces of legislation in line with the recommendations of the Venice Commission and the "Urgent Reform Priorities". There was also an improvement in the work of courts and in the follow-up to the work of the Special Prosecutor’s Office. In general, sustained efforts are needed to fully implement the strategy and address outstanding recommendations so that the judiciary can function free of undue external and internal influence. Implementing the planned reforms will take time and require a change in behaviour. A sustainable solution must be adopted to ensure legal accountability for criminal offences surrounding and arising from the content of the wiretaps. The country has fulfilled the recommendations from 2016 regarding the Special Prosecutor, reform of the discipline and dismissal system for judges and the justice reform strategy. The strategy itself foresees measures to address outstanding recommendations. In the coming year, the country should in particular: → adopt and implement measures included in the judicial reform strategy on appointment and promotion systems in the judiciary, and shield the judiciary from political interference; → adopt and implement reforms to the Judicial Council and Council of Public Prosecutors, ensuring that they fulfil their respective roles in protecting the independence of judges and prosecutors; → ensure that all reforms, notably those concerning institutions, are based on robust analyses of gaps and needs, that they are properly planned, sequenced, budgeted and follow an inclusive process of consultation with all relevant stakeholders. Strategic documents The government adopted a strategy for judicial reform (2017-2022) and related action plan in November 2017, following consultations that included outreach across party lines. The strategy’s measures aim, in particular, to address the "Urgent Reform Priorities" and pending recommendations by the Venice Commission and the Senior Experts’ Group on systemic Rule of Law issues. The process of amending key pieces of legislation, as envisaged by the strategy, is underway. Compliance with outstanding Venice Commission recommendations is expected to increase with further changes to the Law on Courts and to the Law on the Judicial Council envisaged in the judicial reform strategy. Timely allocation of financial resources is key for the successful implementation of all reforms. Management bodies The judicial reform strategy envisages reform of the management bodies to address their structural shortcomings, including as regards the professionalism and independence of their members. There was strong criticism of the work of the Judicial Council in the 2017 report of the Senior Experts’ Group on systemic Rule of Law issues. The group recommended a review of the role and accountability of the Judicial Council, covering its composition, introduction of a non-renewable mandate and whether it should remain a full-time body. Changes in this vein, to be applied to the Judicial Council and the Council of Public Prosecutors, are included in the judicial reform strategy. The Council of Public Prosecutors remains underfunded and understaffed and it lacks both appropriate IT support and a website. The State Public Prosecutor exercises a hierarchical role over the prosecutorial system and his powers undermine the independence of the Council of Public Prosecutors. The role and nomination procedure of the State Public Prosecutor will, in due time, need to be revised to bring them into line with European standards. It is essential that both councils do not wait for the outcome of legislative reforms to address criticisms and show independence and a pro-active approach to improve their performance. Independence and impartiality A positive step towards restoring separation of powers was taken with the Constitutional Court's decision in November 2017 to revoke the law on determining the level of sentences which interfered with the independence of the judiciary. However, further efforts are needed to reverse the effects of the past period and guarantee the full independence of the judiciary in practice. The risks of political interference in the judiciary persist. It is particularly crucial that the Judicial Council effectively fulfils its mandate to protect judges’ independence and shield them from undue external and internal pressure. The judicial reform strategy envisages to increase specialisation of judges and to limit the possibility of reassigning judges to different departments within courts, a practice that has been frequently used in Skopje Basic Court I and in the Supreme Court. The Association of Judges took an active role in preparing the reforms and was vocal in advocating for the independence of judges. The practice of selective justice in certain politically sensitive cases, which also saw some judges avoiding such cases due to the pressure they might come under, has declined in recent months. The Special Prosecutor’s Office (SPO) continued its work and filed several indictments and the first judgement on a case brought by the SPO was handed down in November 2017. Up to a certain period, the SPO continued to face resistance from criminal courts when it came to granting precautionary measures and admitting wiretaps as evidence. However, this changed in recent months, with the court approving all indictments but two. The Court of Appeal in Skopje accepted the admissibility of wiretaps as evidence. For the first time, the Ministry of Justice took the initiative to carry out an inspection of the application of the automated court case management information system (ACCMIS). This was a result of concerns expressed, inter alia by the Senior Experts' Group on systemic Rule of Law issues, and indications that the random assignment of cases was not systematically used. This inspection was carried out in Basic Court Skopje I, the Skopje Court of Appeal and the Supreme Court. The resulting report was sent to the Judicial Council and the Public Prosecutor's Office for further processing. The inspection needs to be rolled out and the envisaged audit conducted on a regular basis. Swift appropriate legal action needs to be taken should any manipulation of the system be proven. Accountability The duty of the Judicial Council is to protect the independence of the judiciary as a whole by performing functions such as appointments, evaluations and disciplinary proceedings in accordance with the law. Currently, its members cannot be held to account by any institution should they fail to perform these duties responsibly. The curriculum of the Academy for Training of Judges and Prosecutors includes courses on ethics and deontology. A new Council on Judicial Ethics was established in January 2018. Monitoring of compliance with the codes of ethics for judges and prosecutors needs sustained attention. In 2017, the Academy of Judges and Prosecutors organised 5 training sessions on ethics, ethical behaviour, preventing conflicts of interests and anti-corruption measures for presidents of the courts, public prosecutors, judges, and judicial officers and prosecution expert associates. The Council for Determining Facts was abolished in January 2018 and the Law on Judicial Council amended to restore the Judicial Council’s responsibilities over discipline and dismissal of judges, in line with the 2015 Venice Commission opinion. Following these changes, it will be essential to build up a track record of impartial decisions on breaches of integrity rules and disciplinary cases free from political considerations. The Judicial Council lifted the immunity of five judges from the Administrative Court implicated in cases of the Special Prosecutor's Office for their alleged involvement in irregularities during 2013 local elections. Out of 4 dismissal procedures initiated in 2017, one decision for dismissal was handed down but is not final yet, one was stopped and two are underway. A new State Public Prosecutor was appointed in December 2017 following the Parliament's dismissal of the previous office holder for inapt performance of duty in August 2017. Public awareness of existing complaint mechanisms should be further raised.

Professionalism and competence Measures to change the system of appointment, promotion and professional evaluation, in line with the "Urgent Reform Priorities" and recommendations of the Venice Commission, are included in the new judicial reform strategy. The Judicial Council decides upon the appointments and promotion of judges and public prosecutors are elected by the Council of Public Prosecutors. In 2017, the Judicial Council appointed 5 judges and filled long-standing vacancies for 10 presidents of courts. There have been shortcomings in respect for transparency, procedures and the qualification of candidates in the appointment of some presidents of courts. Meritocracy was not always preserved in the election of judges and public prosecutors. The Council of Public Prosecutors appointed 4 prosecutors and provided its opinion on the merits of 23 candidates for the new State Public Prosecutor. The judicial reform strategy plans to amend the system for appointment of first-time judges upon graduation from the Academy in line with recommendations of the Senior Experts’ Group on systemic Rule of Law issues. It should also remedy the absence of a procedure for the establishment of merit-based criteria or for objective assessment of the quality of candidates. The amendments to the Law on the Judicial Council enacted in December 2017 introduce reasoning in the process of election of candidates to the judicial position. It also introduces the possibility for appeals to be lodged to the Supreme Court. The changes envisaged by the judicial strategy are expected to introduce qualitative criteria in the system of professional evaluation. Up until now this system remains largely based on quantitative criteria. The Academy for Judges and Prosecutors organised a total of 201 in-service training sessions. Quality of justice As recommended by the Senior Experts’ Group on systemic Rule of Law issues, the Academy for Judges and Prosecutors remains the sole point of entry to the judicial profession. Following allegations of forged language proficiency certificates, procedures for the enrolment of 60 candidate prosecutors under reduced merit requirements were delayed and finally cancelled after expiry of the timeframe. The country is an observer in the European Judicial Training Network. The Supreme Court continued its efforts to improve the consistency of judgements. The Supreme Court and Judicial Council, who have the responsibility for reviewing the quarterly and annual reports of the courts, need to be more proactive in following up the systemic challenges identified, in particular with regard to court budgets and human resources management. An IT strategy for the justice sector was adopted in February 2018. The IT situation in public prosecutors’ offices continued to improve. However, the IT system in courts remains largely donor funded, in constant need of renewal and its maintenance is hampered by lack of funds and staff. A new portal for online access to jurisprudence aimed to improve transparency and "searchability", with a view to addressing one of the "Urgent Reform Priorities". However, the information uploaded onto this database differs depending on the court and its consistency, including as regards statistical data available, needs improvement. No further progress was made in improving the reasoning of court judgments. Although the "Urgent Reform Priorities" encouraged secondment to the European Court of Human Rights, none has taken place. It is still the case that parties in disputes rarely resort to alternative dispute resolution, on which more awareness raising and promotion is required. Efficiency Almost all courts have maintained a clearance rate of 100 % or higher and backlogs have not been an issue for several years. Problems with the overall length of court proceedings now only concern a limited number of cases under the old procedural rules. Provisions of the Law on the Special Prosecutor’s Office set a deadline of June 2017 for the SPO to file indictments on the basis of the wiretap material it received in December 2015. While most of its investigations resulted in indictments before the expiry of the deadline, there remains a lack of clarity over its current competencies over the wiretap material. The SPO has continued its analysis of the material and continued to initiate new investigations. A legal solution must be found to ensure legal accountability for criminal offences surrounding and arising from the content of the wiretaps. This requires amending legislation to ensure that the work undertaken by the SPO can be pursued. As reported by the country, the 2017 budgets for courts stand at EUR 14.9 per capita and EUR 3.51 per capita for prosecution offices. These funding levels remain significantly lower than the per capita European average. The country reports that it has 27 judges and 8 prosecutors per 100 000 inhabitants, compared to the 2014 European average of 21 judges and 11 prosecutors per 100 000 inhabitants (as reported by the European Commission for the Efficiency of Justice). Efficiency and appropriate allocation of resources is required for the proper implementation of the new judicial reform strategy. The preliminary work to develop a comprehensive human resources management strategy is being initiated with substantial delay. Following the criticism over the last amendments to the Laws on Notaries and Bailiffs, further changes are planned. The implementation of the new Law on Misdemeanours reduced the number of proceedings before the court. Fight against corruption The country has some level of preparation. The legislative and institutional framework is in place and there is a track record on both prevention and prosecution. However final court rulings on high level corruption cases remain limited. There is some progress on last year’s recommendations. There are several high level corruption cases before the courts and the fact that the Special Prosecutor's Office is being allowed to pursue its role could be a turning point in the fight against high level corruption under certain conditions. The amendments to the Law on the protection of whistle-blowers are also a positive step. Corruption is prevalent in many sectors and remains a serious problem. The capacity of state institutions to effectively tackle corruption has shown structural and operational shortcomings. It is necessary to reform the general institutional framework so the State Commission for Prevention of Corruption has clear powers and sufficient resources and can work in full independence. It is essential that the Public Prosecutor's Office against Organised Crime and Corruption genuinely and systematically conducts investigations. It is also essential that the Special Prosecutor's Office is empowered to continue its work. The mandate and interaction framework for all State institutions have to be precisely set out. In the coming year, the country should in particular: ®reaffirm its political will to fight corruption by providing institutions active in the prevention and repression of corruption with the necessary autonomy, resources and specialised staff hired on the basis of merit; ®further improve its track record on investigations, indictments and final convictions in high level corruption cases, including through financial investigations in line with Financial Action Task Force on money laundering standards and the seizure and confiscation of criminal assets;

®take all necessary measures to integrate the Special Prosecutor Office within the prosecutorial system on a permanent basis to complete the establishment of the legal accountability of the wiretaps. Track record While a track record on corruption cases was created years ago, there has been weak investigation, prosecution or convictions for high-level and political corruption. Until December 2017, 6 investigations had been opened by the Public Prosecutor's Office against Organised Crime and Corruption against officials. Five of these cases were for abuse of official position and authorisation, and one case was for accepting a reward for unlawful influence for which an indictment was issued. Since its establishment in September 2015 as per the "Pržino Agreement", the Special Prosecutor's Office has opened 26 investigations, and indictments were confirmed in 17 cases. On 8 November 2017, a sentence of one and half years' imprisonment was pronounced in one case against one defendant. It has been a challenge for the State Commission for Prevention of Corruption (SCPC) to play a leading role in preventing and fighting corruption, considering criticism about its lack of independence, and its weak mandate and powers. The SCPC was active during the election period by providing interpretations of legal issues. In March 2018, five out of seven members of the SCPC, including its President, resigned following public reactions to the findings of the State Audit Office on alleged financial irregularities. The Public Prosecutor's Office (PPO) is investigating the case. On conflict of interests and verification of assets, figures indicate a slight renewed activity from the SCPC. Apart from systematic verification of statements of interest received from newly elected and appointed officials, the SCPC made regular verifications of 459 statements of interest sent by various categories of public officials between January and November 2017 (against 627 in 2016) and a conflict of interest was established in 67 cases so far (17 cases are still pending final conclusions). A misdemeanour procedure was initiated against 1 official, resulting in a public warning. The procedure for determining the existence of a conflict of interest was launched in 149 cases, 62 upon SCPC initiative (41 in 2016) while the rest was upon requests submitted by officials, their superior or anonymous complainants. A total of 77 cases were closed. In one case the initiative to remove the official from office was launched. The SCPC initiated 4 proceedings for disciplinary proceedings (only 1 in 2016). On verification of assets, the number of requests sent to the Public Revenue Office to check assets discrepancies has slightly increased (20 in 2017 including 18 from the SCPC against 15 in 2016). There are an increasing number of requests by SCPC to the Public Prosecutor's Office to launch misdemeanour proceedings for failure to declare assets (48 in 2017 against 26 in 2016). Between December 2016 and February 2018, 116 criminal proceedings for corruption related offenses were initiated by various institutions such as Ministry of the Interior, financial police or basic public prosecution office. There are no initiatives by the SCPC. The SCPC played a minor role in monitoring election campaign financing together with the State Audit Office, the State Election Commission, the Public Revenue Office and law enforcement bodies. Internal measures are implemented in state institutions to prevent and fight corruption. The Anti-Corruption Programme of the Ministry of the Interior for 2018 was adopted together with an action plan for the implementation of the said programme. It sets up the values, policies and procedures to be applied for detection of corruption in the Ministry of the Interior, and their sanctions. In the course of 2017, the Department for Internal Control, Criminal Investigations and Professional Standards started 15 individual disciplinary procedures (7 in 2016) including request for removal from office against 7 employees. The Unit also initiated criminal proceedings on 13 corruption-related charges against those (8 criminal charges against 8 employees in 2016). The charges were dropped in one case, fines were pronounced against 6, the remaining proceedings are not completed yet. A decision to establish an external oversight mechanism of the Ministry of the Interior was taken. Institutional framework Prevention measures It is still a challenge for the SCPC to implement a meaningful policy of corruption prevention. Without investigative powers, the SCPC is limited to the administrative verification of data on conflicts of interest and assets. Nevertheless, the SCPC could refer the cases to the Public Prosecutor's Office for further investigation. To facilitate the control of assets and statements of interest, the SCPC may also use the electronic register of elected and appointed officials which finally became operational this year. Establishing a central register of such officials was an "Urgent Reform Priority" but for those who failed to submit statements of conflict of interest or declaration of assets, the verification procedures and the system of penalties is still fragmented and inefficient. The State Programme for prevention and repression of corruption and prevention and reduction of conflict of interest 2016-2019 and the relevant action plan are being implemented albeit hampered by lack of funding. Efforts are currently underway to improve the transparency and accountability of public institutions and state enterprises and public expenditure through the Public Finance Management dialogue. They should be complemented by an effective and timely control mechanism of public procurement, concessions, public-private partnerships and execution of public contracts. This mechanism should include an administrative penalty system. The State Audit Office’s IT infrastructure has been improved but it is still not interconnected with other relevant institutions. In addition, the roles of relevant institutions need to be clarified to enable control of political party donors and assets received and owned by political parties. The track record on control of party and campaign financing remains almost unchanged. Existing penalties under the Law on the prevention of corruption and the electoral code need to be applied in a more systematic and visible manner. Access to public information improved during the reporting period. The National Commission for the protection of the right to free access to public information stated in its annual report that the number of complaints increased to 758 in 2017 (960 in 2015, 619 in 2016). The authorities began to disclose information in areas such as budget expenditure, procurement, the operation of law enforcement authorities and the judiciary. But the National Commission for the protection of the right to free access to public information is still criticised for its lack of functional independence. Law enforcement As regards law enforcement, specialisation exists within the Ministry of the Interior by the department for serious and organised crimes. Reforms are undertaken to strengthen the efficiency of the unit for the fight against corruption. A specialised Public Prosecutor Office against organised crime and corruption exists within the Basic Public Prosecutor's Office. Discussions have begun on how best to integrate the Special Prosecutor's Office (established in 2015 to investigate the illegal wiretaps and their content) into the Basic Public Prosecutor's Office against organised crime and corruption, to strengthen the fight against corruption. The SCPC's activities increasingly focus on training sessions on anti-corruption and conflicts of interest. These training sessions are given to civil servants of different departments, judges, public prosecutors and court administrators. The SCPC has continued to introduce anticorruption content to all levels of education. In cases of repression, it is very often the police who refer the cases to the Public Prosecutor who then leads investigations. But the leading role of the Public Prosecutor needs to be strengthened in a systemic manner through the establishment of investigative centres, as required by the Law on Criminal Procedure. The Public Prosecutor's Office must also be more pro-active in pursuing cases referred by the SCPC, the State Audit Office and other institutions. The electronic case management system at the Public Prosecutor’s Office is in place but must become more efficient. Law enforcement authorities have a credible track record of investigation, prosecutions and convictions against officials, but it is limited or protracted when addressing cases involving senior officials. Investigations of corruption in public procurement and concessions are becoming more frequent due to the SPO’s activities. Financial investigations and asset confiscation are rarely used in investigations. The powers and resources of the police, the Public Prosecutor’s Office, the courts and the Agency for Management of Confiscated Property need to be strengthened to allow seizure and confiscation of criminal assets, including in the early stages of criminal investigations. However, there is a noticeable change due to the commitment and work conducted by the Special Prosecutor's Office. Positive steps have been taken already after the courts significantly changed their approach following the political change and started cooperating more systematically with the SPO. In one case, the court issued the first verdict against 7 defendants including one prison sentence. During the reporting period, 17 indictments raised by the SPO were confirmed by the courts and proceedings are ongoing. There are discussions to include the SPO within the Basic Public Prosecutor Office against Corruption and Organised Crime, which will enshrine these changes in practice, thus strengthening the fight against white collar crime. In the customs administration, control mechanisms have been strengthened: procedures for corruption risk assessment were improved; new methods to report cases of unprofessional and corrupt behaviour have been introduced; new sets of internal rules including a code of conduct were adopted and anti-corruption training sessions were conducted. The customs administration carried out 74 internal investigations. As a result of 16 disciplinary procedures in the reporting period, one customs officer was dismissed for corruption-related violations. No criminal charges for corruption were brought against customs officers. The customs administration still needs to acquire the technical equipment so that it can independently carry out anti-corruption special investigative measures. Legal framework

The legal framework for the fight against corruption is broadly in place. The Criminal Code penalises a wide range of corruption-related offences. To strengthen its effectiveness, it is necessary to clearly lay down the respective control and investigative powers and responsibilities of the State Audit Office, the SCPC, the State Election Commission and law enforcement agencies. Financing of political parties and campaigns is regulated mainly by the 2004 Law on the Financing of Political Parties and the 2006 Electoral Code. The 2015 amendments to the Electoral Code were not sufficient to address all legal shortcomings. Party financing from the state budget has been suspended in a handful of cases since 2014 but this did not have the expected deterrent effect. Amendments must still be made to the Electoral Code on election campaign financing and on political parties to address previous OSCE/ODIHR and GRECO recommendations. The recent amendments to the Law on the protection of whistle-blowers, enacted in 2018 in line with the recommendations of the Venice Commission, could contribute to reinvigorating interest of citizens and civil servants in denouncing corruption. Political parties remained excluded from the list of holders of information about whom information could be requested by the public. Fundamental rights The legal framework is broadly in line with European standards, but further efforts are needed for full and adequate implementation. Reforms have been undertaken to enhance compliance with European human rights standards. The country took an important step towards its gradual alignment with EU standards in the area of fundamental rights by becoming an observer in the Fundamental Rights Agency. The country ratified the Istanbul Convention, improved the climate for media, worked towards upgrading the legislative framework for non-discrimination and started creating the legal conditions for establishing an external oversight mechanism of the police. However, concerns remain over the situation in prisons and psychiatric institutions. There is a need to ensure legal follow-up of cases of hate crime and hate speech, to counter gender stereotyping and strengthen the bodies involved in protecting and promoting human rights. Weaknesses in the implementation of human rights standards and policy documents continue to affect primarily the most vulnerable and marginalised groups in society, including persons with disabilities and Roma. In the coming year, the country should, in particular: → turn commitments to improve the situation in prisons and other places of detention into concrete actions, effectively addressing outstanding recommendations of the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment and ensuring appropriate follow-up of all cases of alleged ill-treatment; → continue reforming the public broadcaster and take measures to encourage the development of an enabling environment for media by promoting objective and accurate reporting; → adopt and start implementing the draft Law on protection and prevention against discrimination, ensure harmonisation of other laws, and improve the follow-up to all cases of discrimination, hate crime and hate speech. The country has ratified most international human rights instruments and in December 2017 it ratified the Council of Europe Convention on preventing and combating violence against women and domestic violence (also known as the Istanbul Convention). The Ombudsman was appointed as an observer to the Fundamental Rights Agency in September 2017, following long delays. Since September 2016, the European Court of Human Rights (ECtHR) has found violations of the European Convention on Human Rights (ECHR) in 8 cases (out of 10) relating mainly to the right to a fair trial, freedom assembly and association, right to life, freedom of expression, and respect for private and family life. During the reporting period, 461 new applications were registered by the Court. On 1 February 2018, the total number of applications pending before the Court was 325. The country has reduced the number of ECtHR judgments still to be executed to 42, of which 2 are under the enhanced monitoring procedure. The Bureau for Representation before the ECtHR has been instrumental in improving execution, despite being insufficiently staffed. The Ombudsman's Office remains the key oversight institution for promotion and enforcement of human rights. Its impact was heightened by Parliament’s approval in November 2017 of measures for implementation of recommendations of the 2016 report and the government's commitment to timely implementation of these measures. While nearly all the recommendations of the Office have been 'handled' by the state institutions, the level of effective implementation remains unclear ("Urgent Reform Priority"). Despite its persistent lack of adequate staff, the Ombudsman’s Office is striving to fulfil its mandate as the main institution for protection of human rights. It is essential that the Ombudsman is able to recruit the expert staff needed, notably in light of its foreseen responsibilities to conduct external oversight of the police. The new government has committed itself to addressing the recommendations of the European Committee for the Prevention of Torture and to making progress on the prevention of torture and ill-treatment. A strategy for zero tolerance of ill-treatment was adopted and training sessions took place. Part of the legislative and institutional framework for establishing an external oversight mechanism over the work of the police and the prison police has been enacted, while two draft laws remain in parliamentary procedure. This framework foresees an external oversight role for the Public Prosecutor’s Office, the Ombudsman and civil society organisations. Urgent measures must be taken to remedy the inhumane conditions which persist in a number of penitentiary and detention facilities, police stations, social care facilities and psychiatric facilities. The National Preventive Mechanism against torture is still hampered by a lack of staff. The low number of complaints for ill-treatment filed to the Directorate for Execution of Sanctions is not representative of the true situation and is an indication of the low level of trust in complaint mechanisms. The Ombudsman’s Office received 3 complaints of illtreatment in prison and 11 by police. The Unit for Internal Control and Professional Standards at the Ministry of Interior received 38 complaints, out of which only one was confirmed as justified, while the others were dismissed as being unfounded or lacking evidence. The number of criminal charges against police and prison officers for cases of illtreatment remains very low, strengthening the perception of impunity and lack of accountability. The Strategy for the Development of the Penitentiary System continued to be implemented. However, the situation in the prison system remains critical. It remains heavily underfunded, understaffed and mismanaged, in spite of steps to redress this situation. It is essential that the concern stated by the Prime Minister leads to tangible improvements in prisoners’ human rights. Serious overcrowding continues. The provision of healthcare professionals has started but healthcare in prisons remains largely inadequate and the transfer to the Ministry of Health as legally required is not yet finalised. Probation is being piloted in the territory of Skopje Basic Court I, but there are substantial delays in rolling out probation throughout the country. Developing the use of alternatives to detention is fundamental to alleviate overpopulation. Priority must be given to allocation of adequate human and financial resources and training of judges on probation. By the end of January 2018, the December 2017 Law on Amnesty permitted the release of 795 inmates convicted to imprisonment of up to six months or who benefitted from a 30 % sentence reduction. The law excludes certain categories of convicts such as those serving life sentences or those convicted for murders, election-related crimes or crimes against the state and public order. No risk assessment was carried out and no measures for supervising beneficiaries accompanied their release. There is a crucial need to address the situation of prison overcrowding as there are 4 025 convicted persons currently waiting to serve their sentences. A corruption mitigation plan was adopted in March 2017 to address this endemic phenomenon in penitentiary institutions. Measures have been adopted to address discrimination in prisons and inter-prisoner violence. However, these measures are yet to yield results. Proper education and other re-socialisation services are yet to be provided to prisoners especially juveniles in detention. On protection of personal data, the country has ratified Convention 108 of the Council of Europe on the Protection of Individuals with regard to Automatic Processing of Personal Data and its additional protocol. In 2016, the Directorate for Personal Data Protection received 359 complaints and carried out 308 inspections. Most complaints concerned alleged abuse of personal data on social networks, notably the creation of fake profiles. More use should be made of administrative sanctions in cases of breach of personal data protection legislation. Adequate resources are needed for the effective performance of the Directorate’s tasks. Following past criticism of its slow reaction to the wiretap scandal, the Directorate has been more active. It carried out controls at the Bureau for Security and Counterintelligence in 2016 and 2017 and in July 2017 launched an inspection to check implementation of its recommendations. The Directorate has publicly stated that all its recommendations have been addressed. The Directorate has provided trainings on data protection rules, including to personnel of law enforcement and judiciary on the Police Directive. Further efforts need to be undertaken to align the personal data protection legislation with the General Data Protection Regulation 2016/679 and Directive 2016/680. Freedom of thought, conscience and religion continued to be guaranteed. The overall relations between religious communities remain calm. In November 2017, the European Court for Human Rights found that the state violated Article 11 in light of Article 9 (freedom of assembly and freedom of thought, conscience and religion) of the Convention by refusing to register the Orthodox Ohrid Archbishopric as a separate religious entity.

Freedom of expression The country has some level of preparation in the area of freedom of expression and there was good progress since mid-2017. The legislative framework is broadly aligned with both the acquis and international standards. Amendments to the Law on Audio and Audio-Visual Media Services were prepared in consultation with relevant stakeholders. There is an improved climate for media and journalists are more ready to criticise misbehaviour of officials and censorship. Challenges remain in the sector, and there must be zero tolerance towards physical and verbal abuse or threats against journalists. The public broadcaster in particular needs to be reformed and its independence strengthened. The country has partly addressed the recommendations from the 2016 report, notably by abolishing government advertising and decreased pressure on journalists and media outlets, which allowed for more balanced reporting. In the coming year, the country should, in particular: → continue its reforms of the public broadcaster, strengthening its independence; → take measures to support the promotion of objective reporting and diversity of viewpoints in the mainstream media, encouraging professional conduct of all media stakeholders; → ensure the appropriate follow-up by law enforcement and judicial authorities of all instances of violence against journalists. The situation and the political climate for media improved in the second half of 2017. The government made efforts to be more transparent and journalists are now granted access to information and documents free of charge ("Urgent Reform Priority"). The new government made supportive statements during the October 2017 local elections. This needs to be followed up through measures promoting an enabling environment for freedom of expression. Intimidation of journalists There has been a decrease in pressure on journalists with the improved political climate. The government has concluded an agreement with an association of journalists to conduct follow-up investigations on attacks against them in December 2017. However, registration of attacks on journalists remains inadequate and very few investigations have been launched. It is essential that the authorities demonstrate zero tolerance towards all incidents of physical and verbal abuse or threats against journalists and that these are effectively followed up by the police and Public Prosecutor’s Office. There were 21 new reported cases of intimidation of journalists and 13 court proceedings involving journalists. Several journalists were among those injured during the violent incidents in Parliament on 27 April. The Agency for Audio and Audio-visual Media Services noted unprofessional reporting by the public service broadcaster and a private national television channel with regard to these incidents. Legislative environment Amendments to the Law on Audio and Audio-Visual Media Services adopted by the government in February 2018 following extensive stakeholder consultations are in Parliamentary procedure. However, some stakeholders have expressed their dissatisfaction with some of the amendments to the Law, for instance regarding funding from the state budget. The legal framework on hate speech is generally in line with international standards, but its implementation needs to be improved and online hate speech remains unregulated. Plans to amend the defamation legislation to bring fines down to a symbolic value are included in the action plan of the judicial reform strategy. Implementation of legislation/institutions The Agency for Audio and Audio-visual Media Services has been exercising its supervisory role more efficiently, including in the electoral context. The Agency initiated procedures for unbalanced reporting and violation of limits on paid political advertising. The quality of reporting by some private TV improved, however, low professional standards persisted at some media outlets, undermining objective reporting. The monitoring by the Council of media ethics shows that further work is needed to improve respect for ethical standards. Investigative reporting remained limited. There is a decreasing trend in defamation cases being brought against journalists with 13 new lawsuits registered in 2017. Public service broadcaster The coverage of the electoral campaigns by the public service broadcaster (MRT) was more balanced than in the past and contestants were provided with free air-time. MRT adopted a code of ethics. Additional efforts are needed to improve MRT’s independence and objectivity of reporting. A long-term strategy is also needed to ensure its financial sustainability. A new system was adopted for financing the public broadcaster, the regulator and the broadcasting public enterprise. The broadcasting fee was replaced with a direct contribution from the State budget, amounting to 0.5 %. This percentage is foreseen to increase with the amendments to the Law on Audio and Audio-Visual Media Services. The implementation of reforms needs continuous attention to prevent direct or indirect undue political influence that would undermine independence and to ensure a stable, predictable and sustainable provision of funds. Economic factors The media regulator and other institutions do not have the capacity to identify and prevent collusion between media owners and pol