FROMTHECOMMISSION
ON
MALTA’S
PROGRESSTOWARDS
ACCESSION
***********************
8November2000
2Table of contents
A. Introduction..............................................................................5
a) Preface ............................................................................................................5
b) Relationsbetweenthe EuropeanUnionandMalta.....................................6
Recent developments undertheAssociation Agreement (includingbilateral trade)..6
Accession Partnership / National ProgrammefortheAdoption oftheAcquis...........7Communityassistance.................................................................................................7Twinning.....................................................................................................................8Negotiations / screening..............................................................................................8
B. Criteria formembership..........................................................9
1. Political criteria......................................................................................9
Introduction.................................................................................................................9Recent developments...................................................................................................9
1.1. Democracy andthe rule of law......................................................................9
TheParliament..........................................................................................................10TheExecutive............................................................................................................10TheJudicial System...................................................................................................10Anti-corruption measures..........................................................................................11
1.2. Humanrightsandthe protectionof minorities..........................................11
Civil andpolitical rights............................................................................................11Economic, social and cultural rights.........................................................................12Minorityrights and theprotection ofminorities.......................................................12
1.3. Generalevaluation........................................................................................12
2. Economic criteria.................................................................................14
2.1. Introduction...................................................................................................14
2.2. Economic developments...............................................................................142.3. Assessment intermsof the Copenhagencriteria.......................................16
Theexistenceofafunctioningmarket economy.......................................................16
The capacity to cope with competitive pressure and market forces within theUnion.........................................................................................................................1 9
2.4. Generalevaluation........................................................................................21
3. Ability to assumetheobligations ofmembership.............................23
Introduction...............................................................................................................23
3.1. The chaptersof the acquis............................................................................24
Chapter1: Free movementof goods.............................................................24
Overall assessment....................................................................................................25
Chapter2: Free movementof persons..........................................................26
Overall assessment....................................................................................................26
Chapter3: Freedom to provide services........................................................27
3Overall assessment....................................................................................................27
Chapter4: Free movementof capital............................................................28
Overall assessment....................................................................................................29
Chapter5: Company law...............................................................................29
Overall assessment....................................................................................................30
Chapter6: Competitionpolicy.......................................................................31
Overall assessment....................................................................................................31
Chapter7: Agriculture...................................................................................32
Overall assessment....................................................................................................34
Chapter8: Fisheries.......................................................................................34
Overall assessment....................................................................................................35
Chapter9: Transportpolicy...........................................................................36
Overall assessment....................................................................................................36
Chapter10: Taxation.....................................................................................37
Overall assessment....................................................................................................38
Chapter11: Economic and Monetary Union...............................................38
Overall assessment....................................................................................................39
Chapter12: Statistics.....................................................................................39
Overall assessment....................................................................................................40
Chapter13: Socialpolicy and employment...................................................41
Overall assessment....................................................................................................42
Chapter14: Energy........................................................................................43
Overall assessment....................................................................................................43
Chapter15: Industrialpolicy.........................................................................44
Overall assessment....................................................................................................45
Chapter16:Smalland medium-sized enterprises.........................................45
Overall assessment....................................................................................................46
Chapter17: Science and research.................................................................46
Overall assessment....................................................................................................47
Chapter18: Educationand training.............................................................47
Overall assessment....................................................................................................47
Chapter19: Telecommunicationsand informationtechnologies................48
Overall assessment....................................................................................................48
Chapter20: Culture and audio-visualpolicy................................................49
Overall Assessment...................................................................................................49
Chapter 21: Regionalpolicy and co-ordinationof structuralinstruments.49
Overall assessment....................................................................................................50
Chapter22: Environment..............................................................................51
Overall assessment....................................................................................................52
Chapter23: Consumersand healthprotection.............................................53
Overall Assessment...................................................................................................53
4Chapter24: Co-operationinthe field of justice and home affairs..............54
Overall assessment....................................................................................................55
Chapter25: Customsunion...........................................................................57
Overall assessment....................................................................................................58
Chapter26: Externalrelations......................................................................58
Overall assessment....................................................................................................59
Chapter27: Commonforeignand security policy........................................59
Overall assessment....................................................................................................60
Chapter28: Financialcontrol.......................................................................60
Overall assessment....................................................................................................61
Chapter29: Financialand budgetary provisions.........................................62
Overall assessment....................................................................................................62
3.2. Translationof the Acquisinto nationallanguage.......................................63
3.3. Generalevaluation........................................................................................63
C. Conclusion...............................................................................66
D. Accession Partnership and National Programme for the
Adoptionofthe Acquis:Globalassessment.........................69
1. AccessionPartnership.........................................................................69
Short-term priorities..................................................................................................69
Medium-term priorities.............................................................................................71
2. NationalProgrammefortheAdoptionofthe Acquis......................72
Annexes..........................................................................................73
HumanRights Conventions ratified by the Candidate Countries, September
2000.........................................................................................................74
Statisticaldata................................................................................................75
5A. Introduction
a) Preface
In October 1999, following the February 1999 update of the Commission’s opinion on
Malta’s application for membership, the Commission issued its first Regular Report onMalta’s progress towards accession in viewoftheHelsinki European Council.
This European Council noted that the next regular progress reports will be presented in
good timebeforetheEuropean Council in December2000.
The structure followed by this Regular report on Malta is largely similar to that of the
Commission’s 1999 Opinion and of the subsequent Regular Report; however, it differsfrom that used in previous years on three minor points. Firstly, Part B of the presentReport, assessing Malta’s ability to assume the obligations of membership, has beenstructured to follow the list of twenty-nine negotiating chapters. Secondly, Part B hasbeen broadened to cover also Malta’s administrative capacity to apply the Acquisunder
each of the negotiating chapters (previouslydiscussed in a separate section of the report).Thirdly, the reports includes for the first time a section assessing the progress made byMalta in translating the acquisinto its national language. In line with previous Regular
Reports, thepresent RegularReport:
- describes the relations between Malta and the Union, in particular in the framework
oftheAssociation Agreement;
- analyses the situation in respect of the political conditions set by the European
Council (democracy, ruleoflaw, human rights, protection ofminorities);
- assesses Malta’s situation and prospects in respect of the economic conditions
mentioned bythe European Council (a functioning market economy, capacity to copewithcompetitivepressures andmarket forces withintheUnion);
- addresses the question of Malta’s capacity to assume the obligations of membership,
that is, the Acquisas expressed in the Treaties, the secondary legislation, and the
policies of the Union. It encompasses not only the alignment of legislation, but alsothe development of the judicial and administrative capacity necessary to implementand enforce the Acquis, as requested by the Madrid European Council in 1995. At
Madrid, the European Council underlined the necessity for the candidate countries toadapt their administrative structures so as to guarantee the harmoniousimplementation of Community policies after membership. The Feira EuropeanCouncil in June 2000 emphasised the vital importance of the candidate countries’capability to implement and enforce the Acquis, and added that this required
convincing progress in strengthening their administrative and judicial structures. TheFeira European Council invited the Commission to regularly report to the Council onthematter.
This report takes into consideration progress since the 1999 Regular Report. It covers the
period until 30 September 2000. In some particular cases, however, measures taken afterthat date are mentioned. It looks at whether intended reforms referred to in the 1999Regular report have been carried out and examines new initiatives. Furthermore,
6complementing this assessment of new developments since the last Regular Report, this
report provides also an assessment of the global situation for each of the aspects underconsideration, and sets out for each of these aspects the main steps which remain to betaken byMaltain preparingforaccession.
In accordance with this approach, the assessment of progress in meeting the political and
Acquiscriteria (including Malta’s administrative capacity to implement the Acquis)
focuses on what has been accomplished since the last Regular Report, complementedwith a view of the global situation for each of the aspects discussed. In contrast, theeconomic assessment is based on a longer term evaluation of Malta’s economicperformance.
The report contains a separate section examining the extent to which Malta has addressed
the short-term Accession Partnership priorities, and has started to address the mediumterm priorities set out inthis framework.
As has been the case in previous reports, “progress” has been measured on the basis of
decisions actually taken, legislation actually adopted, international conventions actuallyratified (with due attention being given to implementation), and measures actuallyimplemented. As a matter of principle, legislation or measures which are in variousstages of either preparation or Parliamentary approval have not been taken into account.This approach ensures equal treatment for all the candidate countries and permits anobjective assessment and comparison between countries in terms of their concreteprogress in preparingforaccession.
Thereport draws on numerous sources of information. The candidate countries have been
invited to provide information on progress made in preparations for membership sincethe publication of the last Regular Report. Their National Programmes for the AdoptionoftheAcquis,theinformation provided in thecontext ofthe analytical examination of the
Acquis(screening) and in the negotiations were additional sources of information.
Council deliberations and European Parliament reports and resolutions
1have been taken
into account in the preparations. The Commission has also drawn on assessments madeby various international organisations, and in particular the contributions of the Councilof Europe, the OSCE and the International Financial Institutions, as well as that of non-governmental organisations.
b) Relationsbetweenthe EuropeanUnionandMalta
Recent developments under the Association Agreement (including bilateral
trade)
No particular developments can be reported as far as the implementation of the
Association Agreement is concerned. The establishment of a customs union in two five-year-stages is along-standingobjectivethat up to nowhas not been achieved.
1For the EuropeanParliament the rapporteur isUrsula Stenzel.
7Since the issuing of the Commission's last Regular Report, the Joint Parliamentary
Committee comprising representatives of the Maltese and European Parliaments met inMay2000.
The EC remains Malta's major trading partner (65.4% of Maltese imports come from the
EC). Exports from Malta into the Community accounted for €905 million in 1999 while
imports from the EC amounted to €1,744 million. Malta imports mainly semi-finished
industrial supplies and exports mainlyelectronicequipment.
Malta has started to implement a plan aiming at dismantling all levies on EC imported
products by 2003, except for agricultural products. Following a request from Malta, theCommission is proposing a mandate to negotiate with Malta further trade liberalisationon fish products. A Commission’s proposal for negotiations with Malta for a protocol onmutual administrative assistance in customs matters is under consideration by theCouncil.
Accession Partnership /NationalProgramme forthe Adoption ofthe Acquis
The Council adopted a first Accession Partnership (AP) for Malta on 20 March 2000.The purpose of the Accession Partnership is to set out in a single framework the priorityareas for further work, the financial means available to help Malta implement thesepriorities and theconditions which will applyto that assistance.
Malta has finalised its first National Programme for the Adoption of the Acquis(NPAA).
Following consultations with all interested parties, it was published on 18 September2000. This document, which includes an evaluation of the cost of the different measures,sets out Malta’s planfortheadoptionandimplementationofthe acquis.
Community assistance
Followingarequest bytheCouncil in March 1999 , the Commission proposed in October
1999 a pre-accession regulation for Malta. The Council approved the regulation on theimplementation of operations in the framework of the pre-accession strategyfor Malta on13 March 2000.
It provided for a total pre-accession aid to Malta of €38 million for the period 2000-
2004, to be used mainly for institutional capacity building, as well as for participation inCommunityprogrammes.
In 2000, theprogrammefocused on thefollowingpriorities:
•tax &customs changemanagement project ( €2.33million);
•IntegratedAdministrativeandControl System project inagriculture( €1.0million);
•Technical assistance and administrative co-operation including contribution to TAIEX
(€1.77million); and
•contribution to the participation of Malta in Community education programmes
Socrates, Leonardo and Youth ( €0.9million).
8The implementation of projects financed under 1999 financial co-operation with Malta
started this year, in particular, co-operation with the Central Office of Statistics of Maltaforthealignment ofits statistical procedures.
Twinning
As the regulation on pre-accession assistance was adopted only in March 2000, there areas yet no ongoingtwinningoperations with Malta.
Negotiations/screening
The analytical examination of the acquiswith Malta (bilateral screening) was completed
by the end of January 2000. During the first half of 2000, the screening was updated on23 chapters with due account taken of latest developments in the acquisand recent
progress.
Negotiations were officially opened at the bilateral intergovernmental conference held in
February 2000. In March 2000, substantive negotiations started on 8 chapters of theacquis: Industrial Policy; SMEs; Science & Research; Education and Training;
Telecommunications; Culture and Audio-visual policy; Common Foreign and SecurityPolicyandExternal Relations.
The accession conference held in June 2000 decided to provisionally close all the above-
mentioned chapters with theexception ofCultureand Audio-visual policy.
As recommended by the Commission, the Presidency’s proposal is to open the
negotiations for 9 additional chapters: Free Movement of Capital; Company Law;Competition; Fisheries; Transport; Economic and Monetary Union; Statistics; SocialPolicyand Employment and Consumers and health protection.
9B. Criteria formembership
1. Politicalcriteria
Introduction
The political criteria for accession to be met by the candidate countries, as laid down by
the Copenhagen European Council in June 1993, stipulate that these countries must haveachieved “stability of institutions guaranteeing democracy, the rule of law, human rightsandrespect forandprotectionofminorities.”
In its 1999 Regular Report on Malta’s progress towards accession, the Commission
concluded that:
"… the institutions are functioning smoothly and there are no particular problems on the
human rights front. Malta's public administration has sufficient personnel, but efforts arerequired to make it more effective. The country does not seem to be having any majorproblems in adapting its administrative and governmental structures in preparation forparticipationinCommunityinstitutions."
Below, an assessment is made of developments in Malta since the 1999 Regular Report,
as well as of the overall situation in the country, seen from the perspective of theCopenhagen political criteria. Developments in this context are in many ways closelylinked to developments regardingMalta’s abilityto implement the acquis, in particular in
the domain of justice and home affairs. The section below aims to provide a generalassessment of the situation in Malta from the perspective of the political criteria,including as regards the overall functioning of the country’s executive and its judicialsystem. Specific information on the development of Malta’s ability to implement theacquisin the field of justice and home affairs can be found in the relevant section
(Chapter 24 – Co-operation in the field of justice and home affairs )o fp a r tBo ft h i s
Report.
Recentdevelopments
Like last year, EU accession has remained high on the political agenda of the governingParty,whiletheoppositioncontinues toexpress its dissent.
The Government has been seeking to involve all interested parties and representative
organisations in the decision-making process related to the accession negotiations. Thishas been done both at the technical level and, more formally, in the context of the Malta-EUSteeringandActionCommittee.
1.1. Democracy andthe rule of law
As mentioned in the previous reports, Malta has achieved stability of institutions,guaranteeing democracy and the rule of law. This section focuses on the most significantdevelopments ofthepast year.
10The Parliament
TheParliament continues to function in full respect ofdemocraticprinciples.
Due to a heavier workload brought about in the main by the process of approximating
Maltese legislation with the acquis, the House of Representatives has, since September
1999, increased the number of weekly Parliamentary sessions from three to five, andmore recently to eight. Ongoing discussions on the accession process are also held in theForeign Affairs Committee of the House of Representatives, with the active involvementofboth main parties.
The Executive
In relation with the need to implement the acquis, the Government has started
restructuring and reinforcing some of its Departments. It has also launched 23 qualityservicecharters committingtheGovernment Departments toprovidetheir customers withaservicerespondingto qualitystandards.
Various other measures at different levels have been taken to improve the overall
functioning of the Maltese administration; however, it is too early to assess their impact.Sustained efforts are required for the reform of the public administration aiming atimproving its efficiency and effectiveness, in line with the short-term priority of theAccession Partnership.
The latest round of local elections was held in March 2000 to elect twenty-three Local
Councils. The turnout was 71 per cent. This represented an increase of 9.2 percentagepoints overthe61.8 percent turnout in thecorrespondingelections in 1997.
The JudicialSystem
As already stated in past reports, the principle of separation of powers is fully applied inMalta. The members of the Judiciary are wholly independent of the executive. They maybe removed by the President only in the specific cases provided for by the Constitution(proved inability to perform the functions of their office or upon proved misbehaviour).The independence of the Judiciary is further ensured by the fact that the judges andmagistrates’salaryis bornebyaConsolidated Fund.
In general, however, the slowness of the court system remains a source of concern.
According to a Report of the Ministry of Justice, there were 14,745 pending cases in theCivil Court in April 2000 compared to less than 11,000 in 1995. This large andincreasing backlog of pending cases has highlighted concerns about the judiciary’s abilityto deliver justice within a reasonable time, a right enshrined both in the EuropeanConvention ofHuman Rights ratified byMaltaand in theMalteseconstitution.
The Maltese authorities are trying to tackle this problem through various measures
aiming at reforming the functioning of the justice system, including the revision of theCode of Civil Procedure and the creation of a Commission for the Administration ofJustice. However, thesemeasures havenot yet produced significant results.
11Anti-corruption measures
As pointed out in the last Regular Report, the "Permanent Commission against
Corruption" set up by the Government to fight against corruption in the publicadministrationseems toworkslowlyandits effectiveness couldbeimproved.
The office of the Ombudsman, which investigates allegations of corruption, continues to
function well. The Ombudsman is appointed by a two-thirds majority in Parliament, thusensuring his / her independence. Some 717 cases were received last year and 361 verbalinquiries were dealt with. The number of cases closed during 1999 was higher than theprecedingyearwith astrongreduction in thecaseload at theend oftheyear.
Malta has ratified the Council of Europe’s Convention on Laundering, Search, Seizure
and Confiscation of Proceeds from Crime. However, Malta has not yet signed theCouncil of Europe's Criminal Law Convention on Corruption and the Council ofEurope's Civil Law Convention on Corruption opened for signature in 1999. Neither hasit acceded to the OECD Convention on Combating Briberyof Foreign Public Officials inInternational Business Transactions or to the United Nations’ anti-corruption programmeforDrugControl and CrimePrevention.
1.2. Humanrightsandthe protectionof minorities
As mentioned in the previous regular reports, Malta continues to respect fundamentalhuman rights and freedoms. The following section focuses on subsequent majordevelopments.
Malta has now ratified most of the major human rights instruments, including the
European Social Charter (see Annex). However, it has not yet signed the revisedEuropean Social Charter.
Civiland politicalrights
Over the past year, the Parliament has adopted an act that abolished the last remnants ofthedeath penalty in Maltese legislation. This Act amended the Armed Forces of Malta
Act, which had hitherto included a provision for the imposition of the death penalty intimeofwarincases ofdesertionoraidingtheenemy.
As regards the situation with regard to asylumand the right of refugees, there has been an
improvement since Malta adopted this year an Asylum Act providing a legal frameworkto deal with asylum seekers. However, a reinforcement of human resources dealing withasylum seekers, a strategy to cover the social integration of recognised refugees, suitableaccommodation arrangements, an effective "removals" policy, and adequateinfrastructure are equally needed ( see Chapter 24 - Co-operation in the field of justice
andhomeaffairs ).
The Maltese Government has addressed problems related to the conditions of detention
mentioned in last Regular Report, in relation to the detention of illegal immigrants, bysetting up a new detention centre offering better conditions. The prison conditions aresatisfactoryinMalta.
12Thefreedom of expression is enshrined in the Maltese constitution and continues to be
well respected in practice. Thesameapplies to the freedomof association and assembly .
All persons in Malta continue to enjoy freedom of conscience andfreedom of religion .
Theserights areenshrinedintheMalteseconstitution.
Basic civil and political rights continue to be respected in Malta, although arrangements
for refugees need to be improved. The conclusion of the last Regular Report, that thereare no significant problems regarding the observance of fundamental human rights andfreedoms,is still valid.
Economic, socialand culturalrights
As regards equal opportunities , there is a Department for Women’s Rights in the
Ministry for Social Policy and a Commission for the Advancement of Women. Theprincipal objectives of the Department for Women’s Rights for 1999 included theimplementationofpolicies andprojects promotingeffective equalitybetween women andmen in all strata and in all sectors of Maltese society, in particular in education,employment, public service and politics. Progress in this area is slow since it depends ona change in social attitudes. While the situation is quite satisfactory in the field ofeducation, there is room for improvement as regards gender equality in the field ofemployment and access to political responsibilities.
As regards persons with disability , the Parliament enacted the Equal Opportunities Act in
early 2000. This act prohibits discrimination against persons with disability on the basisof physical and/or mental impairments, and formally sets up and gives a legal identity tothe National Commission for Persons with Disability(see Chapter 13 - Social policy andemployment).
Trade unions are powerful and well organised in Malta and the workers’ right to
undertakecollectiveactions continues to bewell established.
Although there is room for improvements as regards gender equality, the overall situation
withregardtoeconomic,social andcultural rights is satisfactory.
Minority rights and the protection ofminorities
Immigrants, mainly North Africans, constitute approximately 1% of the population ofMalta.Nosignificant problems canbereportedwithrespect totheirstatus andsituation.
Likewise,therearenosignificant problems relatedtoracial discriminationtobereported.
Section45oftheMalteseConstitutionspecificallyprohibitsanyacts of discrimination onthe grounds of race. However, Maltese criminal law does not prohibit racialdiscrimination as required by the UN Convention on the Elimination of All Forms ofRacial Discrimination, ratified byMalta, and should bebrought in line.
1.3. Generalevaluation
Malta continues to fulfil the Copenhagen political criteria. Its institutions are democraticand function smoothly and there are no particular problems with regard to human rights.
13Basic civil and political rights continue to be respected. The overall situation with regard
toeconomic,social andcultural rights is satisfactory.
However, special attention should be devoted to the issue of the backlog of civil judiciary
cases. Malta should also pursue and reinforce the implementation of its policies withrespect to the treatment of refugees and gender equality, as well as the reform of itspublicadministration.
142. Economiccriteria
2.1. Introduction
In its 1999 Opinion on Malta’s application for EU membership, the Commission
concluded:
“Malta will need to build up a track record in the establishment of a stable and sound
macroeconomic environment and implementation of reform and liberalisation. Given thesmall size of its economy, Malta should be able to address these issues in an appropriatewayand hencebecomesuccessfullyintegrated with theEuropean economy”.
This finding was confirmed in the 1999 Regular Report. In its 1999 Regular Report, the
Commissionfoundthat:
“Malta is a functioning market economy, and should be able to cope with competitive
pressure and market forces within the Union provided it takes the appropriate measures,in particularbycontinued industrial restructuring.”
In examining the economic developments in Malta since the Opinion, the Commission’s
approach is guided by the conclusions of the European Council in Copenhagen in June1993 which stated that membership oftheUnion requires:
•Theexistenceofafunctioningmarket economy;
•Thecapacitytocopewithcompetitivepressureandmarket forces withintheUnion.
In the analysis below, the Commission has followed the methodology applied in the
Opinion,as well as intheprevious RegularReport.
2.2. Economic developments
After some years of deceleration of the performance of the Maltese economy, the firstindications of an economic improvement became visible from the end of 1999. Positivesigns stemmed from high GDP growth, good export performance and a slight recoveryofdomestic demand. Although unemployment increased during the last years, it remainslow compared with the EU average and has decreased in the second quarter of 2000. In1999, the government’s medium-term fiscal programme generated the first decrease inthe public deficit in four years. Preliminary data for the first half of 2000 confirm thistrend. However, the deficit remains very high and fiscal consolidation, so far, has beenmainly based on additional revenues. The current account balance is worsening after agood performance in 1999, due to a sharp increase in imports for industry and higherprices for imported oil. Inflation remains at low levels although it is subject to upwardpressures,mainlyfrom importedinflationandtheshort-term effects ofhighertaxes.
15Malta 1996 1997 1998 1999 2000 latest
Real GDP growth rate per cent 4.0 4.9 3.4 4.2 3.8 Jan-June
Inflation rate( RPI)
- annualaverage- December-on-Decemberper cent
per cent3.1
2.52.8
3.13.0
2.41.9
2.12.6 Jan-Aug
2.7 Aug
Unemploymentrate, end-year
percent 4.4 5.0 5.1 5.3 4.4 Sept
Generalgovernmentbudgetbalance2
per cent ofGDP -7.7 -6.6 -11 -8.5 :
Currentaccountbalance percentofGDP
million €-10.8
–281-6.2
-180-5.6
-174-3.5
-119-9.7 Jan-June
-178
Foreign debt- de bte x por tr a t i o
3
- gross foreign debtper cent
million €81.8
1,866110.0
2,757229.4
6,301234.5 E
7,273 E:
:
Foreign direct investment in flow- balance ofpayments data per cent ofGDP
million €8.4
2182.4
717.7
23824.4
8305.8 Jan-June
106
E=Estimates
The government is undertaking a number of important structural reforms that are being gradually
implemented . At the end of 1999, an industrial restructuring programme was launched, including
measures to remove protective instruments for Maltese industry. It is envisaged that import levies onmanufactured products will be phased out in 2003. The sale of Mid-Med Bank to a foreign bank in 1999and thegradual liberalisation ofremainingcapital controls, aimed to beaccomplished at theend of 2002,are creating the basis for a more efficient and diversified financial sector. In addition, a far-reachingprivatisation programme has been approved in 1999 which identified a group of enterprises, includingutilities, for privatisation in the next five years. Trade liberalisation and industrial restructuring areprogressing, albeit at aslowpace.
2Excludinglocal authorities.
3Seriesbreakin1998:more complete definition.
16Main indicators of EconomicStructurein 1999
Population (average) thousand 388
GDP perhead4PPS- € -
Percent ofEU
average-
Shareofagriculture5in:
- gross valueadded- employmentpercent
percent2.5
1.8
Investment-to-GDPratio
6percent 22.8
Gross foreigndebt/GDP
7percent 214.1
Exports ofgoods &services/GDPpercent 91.3
Stock offoreign direct
investmentmillion €
€per head:
:
2.3. Assessment intermsof the Copenhagencriteria
The existence ofafunctioningmarketeconomy
As set out in Agenda 2000, the existence of a functioning market economy requires that
prices, as well as trade, are liberalised and that an enforceable legal system, includingproperty rights, is in place. Macroeconomic stability and consensus about economicpolicy enhance the performance of a market economy. A well-developed financial sectorand theabsenceofanysignificant barriers to market entryand exit improve the efficiencyoftheeconomy.
Generally there is a broad consensus concerning Malta’s commitment to the principles
of a functioning market economy. The government is committed to implementing the
required reforms in order to improve the competitiveness of Malta’s industry. However,there has been a lack of political consensus on economic policy choices in recent years,e.g. on taxation policyand theintroduction ofVAT.
4Figures have been calculated using the population figures from National Accounts, which may differ from
those used indemographic statistics.
5Agriculture, hunting, forestryand fishing.
6Data refer to Grossfixed capital formationas% ofGDP.
7The 1999 data for foreigndebtare estimates.
17Real GDP growth has expanded by 4.2% in 1999. Preliminary figures for the first half of
2000 show an increase of 3.8% in comparison with the first half of 1999 . Higher exports
of goods and services, driven by the pick-up of EU and world economies, wereresponsibleformost ofthegrowth. Domesticdemand has been weak during the last yearsbut is showing signs of a slight recovery since the last months of 1999. Although importgrowth of capital and consumer goods in 2000 confirms this recovery, the short-termeffects of enterprise restructuring and stricter fiscal policy appear to be moderatingdomesticdemand.
Unemployment remains at a relatively low level, although it has been increasing in
recent years . Registered unemployment continued a steady upward trend and reached
5.3% of the labour force in 1999, but decreased to 4.6% in July 2000. The main reasonfor the recent improvement is the higher employment created bythe private sector, whichoffset a high non-seasonal increase in labour supply during the first months of the year.Employment also increased in the public sector. Nevertheless, unemployment might besubject to upward pressureas aresult ofenterpriserestructuring.
External deficits have increased during the first half of 2000 . Although the current
account deficit improved during 1999, down to 3.5% of GDP from 5.6% in 1998, itwidened during the first quarter of 2000. The main reason was a steep increase of thevisible trade gap. This was mainly due to strong growth in imports, driven by inputs forindustry and capital goods imports for the electronics and paper industries, higherdemand for motor vehicles, and the higher oil bill due to international oil price increases.The services account surplus decreased due to lower tourist arrivals, while the incomeaccount surplus contracted somewhat. Trade figures up to June 2000 confirm theincreasing trend in imports, leading to a further increase of the visible trade gap.Nevertheless, the export performance remains strong, with machinery and transportequipment goods leading the trend. Foreign direct investment easily financed the currentaccount deficit in 1999, but remained low if one disregards privatisation proceeds andcapital and reserveinflows from international banks.
Inflation remained low at 2.1%in 1999, although it started to increase during the first
half of 2000. Relatively weak domestic demand, the appreciation of the Maltese lira
against the euro and low wage increases contributed to the decreasing trend in 1999. Taxchanges, such as the introduction of VAT on oil products and telephone services, thereduction of subsidies on bread and bus transport, and the slight recovery in consumerdemand have been the main reasons for the pick-up of inflation in the first months of2000. However as the price of oil has been kept constant and has not reflected the higherworldprices foroil,theinflationrateis artificiallylow.
The main monetary policy objective of the Central Bank continues to be exchange rate
stability, as an instrument to guarantee low levels of inflation and maintain exportcompetitiveness . The Maltese lira is linked to a basket consisting of the euro (56.8%), the
US dollar and the British pound (21.6% each) .As a result, from March 1999 to March
2000, the Maltese lira appreciated by 5.7% against the euro but depreciated by 5.5%against sterlingand by7.1%against thedollar. TheCentral Bank ofMaltacontinued withthe gradual liberalisation of interest rates. The discount and the central intervention rateswere cut several times during 1999, reducing both rates to 4.75%. The Central Bank wasable to lower the rates because of lower international interest rates, low inflation andrelativelylowdomesticdemand.
18The general government deficit decreased to 8.5% of GDP in 1999 from 11% in 1998 .
The government aims at a budget deficit of 7.2% of GDP in 2000. The medium-termfiscal plan, which was agreed in late 1998, has succeeded in increasing revenues, but notyet in decreasing expenditure. Preliminary figures for the state budget for the first sevenmonths of 2000 show an increase of 8.5% in ordinary revenue, whereas recurrentexpenditure increased by 6.2%. The higher ordinary revenue is mainly the result of newfiscal measures, comprising mainly higher income taxes, increases in social securitycontribution rates and a wider VAT base. An improvement in tax collection alsoaccounted for a large part of the increased revenues. Recurrent expenditure increased dueto increases in wages, salaries and personal emoluments together with higher socialsecurity benefits and one-off compensations for the abolition of some product subsidies.Capital expenditure decreased during the same period by4.4%. Despite the positive trendof the public deficit initiated in 1999, further efforts are necessary to decreaseexpenditure in order to achieve medium-term fiscal sustainability. Although aCommission on Welfare Reform was created to propose measures for reforming thesocial securitysystem, no agreement has been reached so far.
Government debt continues to increase as a result of the high level of the government
deficit. Government debt as a percentage of GDP was 58.1% at the end of 1999, up from
56.1% in 1998. Significant privatisation receipts have contained the debt increase in1999. Up to June 2000, government debt increased faster again to about 60% of GDP. Inaddition to the recorded government debt, guaranteed loans and parastatal borrowing arevery substantial in Malta .The largest part of the debt is funded locally through treasury
bills and government bonds, with onlyabout 5%funded through foreign borrowing.
Trade liberalisation is a key element in the government’s economic policy, even though
some sectors still remain very protected . Import levies on manufactured products will be
fully phased out by 2003, with the exception of some levies on agricultural products.Although some levies have already been removed (in October 1999 and January 2000),the bulk of import levy reductions will only start in 2001. In general, the domesticallyorientedenterprisesectorinMaltais still adaptingtothereductionofprotection.
The Maltese economy is generally characterised by the free interplay of market forces,
although the price mechanism includes a system of price controls . This applies to both
imported and locally manufactured products and comprises maximum margins of profitas well as the regulation of prices through price orders on some essential commodities. Anumber of services offered bypublic companies such as the energycompanyEnemalta orthe Water Services Corporation are subject to direct price controls by the government.Social and political pressures have been important factors in price decisions by utilityproviders. Enemalta has kept energy prices fixed despite the international oil priceincreases, bearing a cost that endangers its profitability. The weight of essentialcommodities – except for energy, water and tobacco products – that are subject to pricecontrols amounts to less than 5%oftheretail priceindex.
A privatisation process was announced in 1999, following the publication of a White
Paper on privatisation . The government has set up a plan to privatise a number of public
enterprises in the period up to 2005. It includes the privatisation of Malta InternationalAirport, Malta Freeport Terminal, Libyan Arab Maltese Holding Company, Air Malta,the Public Lotto Department and the remaining public stake in Maltacom and Bank ofValetta. Most public utilities are likely to be privatised around the end of the period. The
19Mid-Med bank was sold in 1999, but no specific privatisation plans have been released
duringthefirst halfof2000.
Maltese company law incorporates most of the requirements of the EC Directives .
Property rights are clearly established in Malta. Bankruptcy laws have been in place andimplemented for a long time. There is a competent and independent judiciary system,corruption remains limited and the entrepreneurial and investment climate is excellent inthat respect.
The financial sector is developing more rapidly as a result of the liberalisation of capital
markets and the privatisation of the main banks . A gradual shift from traditional deposits
to investment funds is taking place and a few banks are now starting to deal with long-term products. The securities market is developing as well and there is a more efficientuse of human resources within the sector. The banking regulatory framework has beenstrengthened. More competition will be introduced in banking since the Central Bankissued two licences to foreign institutions. New licenses were issued as well forinvestment servicecompanies.
Malta is a functioning market economy. Nevertheless, there is a need to reduce the very
large government deficit in order to stabilise the macro economy in an increasingly openenvironment. The consolidation of public finances, including the reform of the socialsecurity system, is required to ensure medium term fiscal sustainability. The completionof price liberalisation is also required, as the system of price controls distorts relativeprices and produces an inefficient allocation of resources. Overall, the influence of thestate in the economy needs to be further scaled back through the completion of trade andcapital liberalisation, the further reduction of state aids, the introduction of morecompetition in a number of sectors and the implementation of the authorities’privatisationplans.
The capacity to cope with competitive pressure and market forces within the
Union
As set out in Agenda 2000, Malta’s abilityto fulfil this criterion depends on the existence
of a market economy and a stable macroeconomic framework, allowing economic agentsto make decisions in a climate of predictability. It also requires a sufficient amount ofhuman and physical capital, including infrastructure. State enterprises need to berestructured and all enterprises need to invest to improve their efficiency. Furthermore,the more access enterprises have to outside finance and the more successful they are atrestructuring and innovating, the greater will be their capacity to adapt. Overall, aneconomy will be better able to take on the obligations of membership the higher thedegree of economic integration it achieves within the Union prior to accession. Both thevolume and the range of products traded with EU Member States provide evidence ofthis.
Malta is a functioning market economy with a sufficient degree of macroeconomic
stability for economic agents to make decisions in a climate of predictability .T h e
ongoing process of restructuring and privatising state enterprises is paving the way formore efficient public and private sectors. The liberalisation of prices, trade and capitalcontrols is leading to a more efficient allocation of human and physical resources,reflectedinemployment growthinthecompetitivesectors andlowercapital costs.
20Malta has a well-educated work force and a good telecommunication and transport
infrastructure, which provide a good basis for new and competitive economic activity .
The highly educated Maltese work force has been one important factor for theestablishment and furtherexpansion ofenterprises in theinformation technologysector inMalta. Low-skilled workers are the most likely to be hit by industrial restructuring andspecial attention should be granted to training activities for this category of workers. Asregards infrastructure, the government is currently focusing on increasing thecompetitiveness of the port by improving logistics and increasing productivity up to thelevels ofcompetingports. MaltaFreeport has been recentlyexpanded byanew terminal.
Thegovernment alsoplans torestructure the shipbuilding industry, although the industry
continues to be highly subsidised . It is planned that the two public shipyards will be
merged and restructured and that specialised sections for repair, shipbuilding and otheractivities will be created, with the aim of increasing productivity and guaranteeingcommercial viability. The government acknowledges that due to the infrastructureinvestments required, theseplans will onlybeimplemented overthemedium term.
Foreigndirect investment depends largely on privatisation . Other than privatisation deals
and capital and reserve inflows of international banking institutions, it remains lowerthan expected. The sale of government shares in Mid-Med Bank in 1999, and a sharpincrease in own capital inflows and reserves received by other newly established smallinternational banks from their parent companies accounted for most foreign directinvestment inflows in the last two years. However, because these banks have not been setup to be very active in Malta, such capital and reserve inflows from internationalfinancial institutions have almost no effect on the Maltese economy. The government isaware that the quantity and quality of foreign direct investment is too low and isreviewing the package of investment incentives issued in 1988, hoping that newinvestments will bring more added value to the country. As the country's economyliberalises, becomes more open and integrates with that of the EU and prospects foraccession intensify, these factors are likely to have a positive effect on the confidence offoreign investors, graduallyincreasingforeign direct investment.
As regards government policy influencing the competitiveness of the Maltese economy,
state aids within several sectors remain high . Aids are granted to shipbuilding,
agriculture, fisheries, production and distribution of water resources, and tourism. Themanufacturing industry also receives state aid through the package of incentives forinvestment administered by the Malta Development Corporation. The main recipients ofstate aid are the Water Services Corporation, Malta Drydocks and Shipbuilding, coveringboth operational and restructuring costs. The government has already started arestructuring process for the last two companies, but there are no prospects ofprivatisation for the time being. The Ministry for Economic Services set up a State AidMonitoring Board in June 2000 that will help to develop an inventoryof state aids and todetermine whether they are compatible with EC legislation. In addition the governmentinfluences competitiveness through price controls. The most telling case concerns energyprices. There is clear distortion of relative prices, putting Maltese producers at acomparative price advantage with respect to other countries. The price difference paid byEnemeltais equivalent to asubsidyto energyusers.
Malta is well integrated in terms of trade with the Union since the EC accounts for
around 49% of Malta’s exports and 65% of imports . The export base of the economy is
concentrated strongly in a few sectors, mainly in electronics, machinery and transport
21equipment, which generated over 70% of total exports in the period between the first
quarters of 1999 and 2000. A single semiconductor company, ST Microelectronics,accounts for over 50% of manufactured exports. Although the small size of Malta isclearly a limitation, efforts to attract higher and more diversified foreign and localinvestment would help to guarantee sustained growth. Due to the composition of theMaltese lira basket, the competitiveness of Malta’s exports towards the EC is influencedbythevalueofthedollarandpoundsterling.
About 99% of enterprises are SMEs in Malta, most of them employing less than ten
employees and operating within the services sectors . Roughly 11% of the working
population are self-employed persons. The Institute for the Promotion of SmallEnterprises (IPSE)is launching some programmes specificallyfor SMEs and carrying outstudies on the impact of the removal of levies and adoption of EC legislation in SMEs.The assistance provided by IPSE comprises enhancing management, productdevelopment, environmental protection, promoting innovation, human resources, andother areas. In order to improve access to finance, the Malta Development Corporationcan now grant loan guarantees to back bank loans to SMEs that would not be granted tothem without such guarantees, and an “Alternative Companies Market” for SMEs hasbeen introduced in the Malta Stock Exchange, allowing smaller public enterprises thatcannot be privatised via the stock market to be listed. As a wayto increase efficiencyanddecrease red tape, the government is currentlytesting a system to offer public service on-line and a Small Business Efficiency Unit has been established to facilitate interactionbetween entrepreneurs and the public administration and private service providers, and tofacilitate communication and provide education to small businesses and self-employed(seealso chapter16 – Small and medium sized enterprises).
Malta should be able to cope with competitive pressure and market forces within the
Union. Nevertheless, remaining market distortions need to be removed and the structuralreforms envisaged need to be completed in due time. Malta is well integrated in terms oftrade with the EU, although, as it is a very small economy, its export performance relieson a limited number of sectors. Considerable progress has been made in developingenterprise restructuring and privatisation programmes and initiatives for entrepreneurshippromotion, but their implementation is slow, especially as regards the restructuring ofloss-makingpublicenterprises.
2.4. Generalevaluation
Malta is a functioning market economy and should be able to cope with competitivepressureand market forces within theUnion.
The Maltese economyis showing the first signs of stronger macroeconomic performance.
Thegovernment’s medium-term fiscal programme generated a first decrease in the publicdeficit. Progress has been made in developing restructuring and privatisation programmesandinitiatives forentrepreneurship.
However, the government deficit remains very high and needs to be further reduced in
order to improve the macroeconomic environment. The remaining price controls distortrelative prices and produce an inefficient allocation of resources. The influence of thestate in the economy is still too high in some areas. The implementation of therestructuringofpublicutilities and loss-makingpublicenterprises remains slow.
22The authorities need to complete the consolidation of public finances, including the
reform of the social securitysystem, in order to ensure medium term fiscal sustainability.Market distortions need to beremoved and the envisaged structural reforms need to moveinto the implementation phase. The influence of the state in the economy needs to befurther scaled back through the completion of trade and capital liberalisation plans, thefurther reduction of state aids, the introduction of more competition in a number ofsectors,andtheimplementationoftheauthorities’privatisationplans.
233. Abilitytoassumetheobligationsofmembership
Introduction
This section aims to update the Commission’s 1999 regular report on Malta’s ability to
assume the obligations of membership - that is, the legal and institutional framework,known as the acquis,by means of which the Union implements its objectives. Alongside
an evaluation ofrelevant developments sincethe1999 regularreport, this section seeks toprovide an overall assessment of Malta’s ability to assume the obligations ofmembership, and of what remains to be done. This section has been structured to followthe list of twenty-nine negotiating chapters, and incorporates also an assessment ofMalta’s administrative capacity to implement the acquisin its various aspects (in
previous regular reports this had been covered in a separate section). Furthermore, for thefirst time, a separate section has been included assessing progress made by Malta intranslatingthe acquisintoits official language.
The European Council in Madrid in December 1995 referred to the need to create the
conditions for the gradual, harmonious integration of the candidates, particularly throughthe adjustment of their administrative structures. Taking up this theme, in Agenda 2000the Commission underlined the importance of incorporating Community legislation intonational legislation effectively, and the even greater importance of implementing itproperlyin the field, via the appropriate administrative and judicial structures. This is anessential pre-condition for creating the mutual trust indispensable for future membership,whichhas becomeacentral issueinthenegotiationprocess.
The European Council in Feira in June 2000 recalled the link between progress in the
negotiations and the candidate countries’ capacity to effectively implement and enforcetheacquis, and added that this called for important efforts by the candidate countries in
strengthening their administrative and judicial structures. The Feira European Councilinvited the Commission to report to the Council on its findings on the matter. Buildingon the assessment of Malta’s administrative capacity provided in the 1999 regular report,the present report seeks to add further depth and detail, focusing on the mainadministrative structures which are required for implementing the acquisin its various
aspects.
In the1999 regularreport, theCommission concluded that :“Since the Commission’s last Report in February 1999 there has been little additional
progress in the internal market area. Malta should adopt a programme for alignment inthis area as a matter of urgency. There has been progress in public procurement wherethe national preference clause was abolished but deficiencies remain in the area ofstandardisation and certification. There is a need to accelerate alignment in areas such asprotection of intellectual property and data protection. The re-introduction of VAT in1999 was a positive step although further alignment is still needed. The continuingimposition of levies on imports from the EC is an anomaly which should be removedimmediately.
There is quite a high degree of alignment in the area of anti trust legislation although
there is no merger law in Malta and undertakings with special or exclusive rights are stillnot subject to competition rules. There is no systematic control of state aids and no legalframework. Alignment in this area should be given priority, particularly in the areas of
24aid to ship building and ship repair. The state continues to play an important role in
agriculture and there has been little recent progress in preparing the sector for thecommon agricultural policy. In the transport sector there is a need for greater alignementespecially in the areas of maritime safety and pollution control. Malta needs to adopt anoverall strategy for alignment in the environment sector and to strengthen itsimplementation and enforcement capacity. In the area of justice and home affairs Maltashould adopt a law on asylum and lift its geographic reservation. There is a need tostrengthencapacityinareas such as immigration control, data protection, the fight againstdrugs and organised crime.
Institutions still have to be set up in the areas of environment, customs, consumer policy,
fisheries, maritime transport and regional policy. Administrative capacity needs to bestrengthened across theboard.”
3.1. The chaptersof the acquis
As indicated, the review of Malta’s ability to assume the obligations of membership that
is provided below has been structured in accordance with the list of twenty-ninenegotiating chapters. Accordingly, this section opens with an assessment of progressrelated to the so-called “four freedoms”, the cornerstones of the internal market, andcontinues with a systematic review of progress on each of the chapters, to cover theacquisin all its various aspects: sectoral policies, economic and fiscal affairs, economic
and social cohesion, innovation, qualityof life and environment, justice and home affairs,external policies, and financial questions.
Chapter1: Free movementof goods
Since the last Regular Report, little progress has been made in the area of free movementofgoods.
As regards horizontal and procedural measures , a new Standards Authority Act
providing the basis for implementing the acquisin the area of standardisation was
adopted. The setting up of independent functional directorates, bringing a separation ofroles between standardisation and testing has represented some progress in the
administrative capacity of the Standards Authority. The responsibility for testing wastransferred to the Malta National Laboratory, which has been registered as a limitedliability company. This latter has benefited from new equipment purchased and installedwith the assistance of the European Community. However, no other progress can bereported as regards the new and global approach, the notification procedure and theinterchangeofdatabetweenadministrations.
As regards sector specific legislation and non-harmonised areas , no progress has been
made. In the field of pharmaceuticals, the administrative procedures related to veterinarymedicinal products arebeingintroduced.
No legislative progress has been completed as regards Public Procurement .The
Department of Contracts, which is an autonomous entity within the Ministry of Finance,is responsible for the application and enforcement of the different aspects of the publicprocurement legislation(26persons).TheGeneral Contracts Committee is enabled bythePublic Service (Procurement) Regulations to become a Committee of Review to hear anddecide on complaints submitted by aggrieved tenderers, acting as an arbiter between the
25recommending Department/Corporation and the tenderers concerned. In addition, there is
legal redress inthecommercial courts.
Overallassessment
AlthoughMaltahas progressedinaligningwith the acquis, important work is still needed
as regards thenew approach and specificsectorlegislation.
As regards the horizontal and procedural measures, the new Standards Authority Act
provides a basis for the alignment with the acquisin the area of standardisation. It should
allowtheMaltaStandards Authorityto becomeaCENELEC associatemember.
A final list of CEN standards is being prepared as a catalogue; however no specific
information has been made available on the number of European harmonised standardstransposed orendorsed bytheMalteseauthorities.
Further work in order to complete the legal framework for the implementation of the EC
principles on accreditation, metrology and market surveillance should be undertaken aswell as fortheset upanefficient conformityassessment system.
Important institutional arrangements regarding the implementation of the new approach,
need to be undertaken in particular in the area of market surveillance. As regards safetychecks on products at external borders, Malta still needs to establish appropriate customsand market surveillance infrastructure as well as effective administration co-operationbetweencompetent authorities.
As regards sector specific legislation, regulations for the transposition of Directives on
construction products, lifts, medical devices and active implantable medical devices needto be published. Directives related to pressure equipment, toys, recreational craft,metrology and pre-packaging, mechanical devices, personal protective equipment andappliances burning gas, motor vehicles, chemicals, arms control and restitution ofcultural objects must still betransposed.
Mandatory Orders aiming at transposing the Directives on wood in the rough, crystal
glass, footwear, cosmetics, detergents and textile names still have to be published by thegovernment.
As regards food safety, there is a good level of alignment with respect to labelling, food
additives, nutrition, food control and hygiene, and foodstuffs for particular nutritionaluse. A new Food Act, replacing the Food, Drugs and Drinking Water and the QualityControl Act still has to be adopted. Laboratoryfacilities in charge of official control needto beupgraded.
Amendments should also be made to the laws regulating exports of cultural goods in
ordertobringthem inlinewiththe acquisinthis sector.
Maltese legislation conforms partially to the acquisin the field of Public Procurement.
Further fine-tuning is needed as regards the procuring entities covered - local Councilsand someprivatecompanies with exclusiverights areoutsidethescope.
26As regards the remedies system, an Appellate Board chaired bya legal person who would
otherwisequalifyforappointment as magistratemust beestablished.
The administrative capacity as far as public procurement is concerned appears adequate
for Government Departments. Particular attention should, however, be paid to theappropriatetrainingofstaff. With regard to bodies governed bypublic law, local councilsand public undertakings (for utilities), Malta will have to ensure that the existingstructures are strengthened to assume the responsibility for supervising and monitoringtheapplication ofprocurement rules bythosebodies which would besubject to EC rules.
Chapter2: Free movementof persons
No significant development can be reported on any of the fields in this area, i.e. mutual
recognition of professional qualifications ,citizen’s rights ,free movement of workers
and preparations with aviewto thefuture co-ordination of social security matters .
Overallassessment
On the whole, a sustained effort will be necessary to ensure compliance with the acquis.
Particular attention should be given to linguistic requirements (use of Maltese languageincertainregulatedprofessions).
Efforts will need to be stepped up in order to ensure that there are no provisions in
Maltese legislation which contradict Community rules, in particular with respect tonationality and residence requirements. This is the case in the field of free movement ofworkers, where legislation is only partially aligned and efforts are required to ensure thatsuch provisions areremoved.
For theacquisin the area of mutual recognition of professional qualifications ,legislation
needs to be monitored to ensure that it distinguishes between academic and professionalrecognition. Malta is partly aligned with the acquisin this area. Legislative changes are
needed in the near future concerning the strengthening of the professional regulatoryinfrastructure and the setting up of formal infrastructure for the recognition of specialisttraining. Another outstanding issue relates to the question of the need to master theMalteselanguageinordertoexercisecertainregulatedprofessions.
Further alignment to the acquisis still needed on the issue of the voting rights of all EU
citizens within the Union. The issue of rights of residence is regulated in Malta by theImmigration Act of 1970. An amendment to the Immigration Act, which would take intoconsideration the requirement of the acquison the right of establishment, still has to be
adopted.
In the field of free movement of workers, Maltese legislation is only partly aligned with
theacquis. Maltahas ratified theEuropean Social Charter.
Efforts will have to be continued to strengthen public employment services with a view
tofutureparticipationintheEuropeanEmployment System (EURES)network.
Malta has a bilateral agreement with the UK (as of 20/6/96) covering aggregation of
insurance periods. Such agreements facilitate Malta’s compliance with the regulations, as
27theyrelyon the principles of the social securityco-ordination regulations, and familiarise
theadministrationwiththeprocedures.
Chapter3: Freedom toprovide services
Since the last Regular Report, Malta has made some progress in this area, mainly in thefield offinancial services.
I nt h ea r e ao f freedom of establishment and freedom to provide services ,n on e w
developments havetaken placeoverthepast year.
In the field of financial services , no new legislation has been finalised with respect to
bankingand the area of investment services and securities markets (deposit protection
schemes and investors’ compensation schemes, insider dealing). In the insurance sector a
number of regulations relative to prudential provisions and to accounting rules wereissued in June2000 (entryinto forceJanuary2001).
No progress can yet bereported as regards legislation on the protection of personal data
and the free movement of such data , an area which has been identified as a short-term
priorityintheAccessionPartnership,norinthefieldof information societyregulations .
Overallassessment
AlthoughMaltais progressingintheadoptionofthe acquisinthis area,furtheralignment
is still required.
As far as the freedom of establishment and the general principles of the freedom to
provide services are concerned, the Maltese Government has recognised the urgent needto simplify and streamline procedures for permits and licences. In many areasdiscriminatoryprovisions vis-à-vis EUcitizens will alsohavetobeabolished.
In the field of financial services, legislation to bring Maltese banking and investment
laws in line with the acquismust still be adopted. This concerns in particular deposit
protection schemes and investors’compensation schemes, as well as insiderdealing.
Malta follows the main principles of the Community prudential legislation and the
Banking sector is also assessed against the Basle Core Principles for BankingSupervision. It still needs to set up a deposit guarantee scheme. The Netting DirectiveandtheconsolidatedsupervisionDirectiveremaintobefullytransposed.
The recent adoption of regulations relative to insurance companies’ prudential and
accounting rules has resulted in a significant alignment to the acquisin the insurance
field and further implementation can be achieved through secondary legislation.Although much of the Community acquisconcerning investment services and security
markets is already incorporated in the Maltese legislation, the UCITS
8Directive, the
8Undertakingsfor Collective Investment inTransferable Securities.
28Post-BCCIDirective9and provisions of the Investment Services Directive still have to be
transposed. Maltaalso needs set up an investor-compensation fund.
As far as administrative capacity is concerned, the Malta Financial Services Centre
(MFSC) regulates insurance and investment services operators, collective investmentschemes and offshore companies while the Central Bank of Malta regulates andsupervises credit and financial institutions. 66 officials work at the MFSC. The MFSCissues licences and may suspend, cancel or restrict licences in case of wrongdoing, maycarry out investigations and issue public statements. Subject to resource availability, onan ongoing basis, both on-site and off-site compliance inspections are carried out.Investigations are also carried out where necessary. The Insurance and InvestmentServices sectors are assessed with international norms. In fact manyoperators in Malta inthis field are branches or agents of international companies and are therefore subject tointernational regulation via their parent companies. Main institutions are in place tocorrectly implement the acquis.However, reinforcement of resources of MFSC in some
areas ofsupervision would beneeded.
In the field of the protection of personal data and the free movement of such data, new
legislation aimed at achieving alignment still has to be enacted. A public supervisoryauthority acting independently to monitor the correct application of the data protectionprovisions is yet tobeestablished.
Concerning the information society regulations, the legislation on electronic commerce
and computermisusestill has to beadopted.
Chapter4: Free movementof capital
Substantiveliberalisationmeasures havebeentakensincethelast report.
As regards capital movement and payments , in autumn 1999, the Government initiated
a three-stage approach to abolishing remaining restrictions by 2002, with the first stageenacted bythebeginningof2000, announced through thebudget process.
Within that context, remaining controls on current payments were removed. Concerning
capital movements, for non-residents , all exchange controls relating to inward direct
investments were abolished (restrictions stemming from sector regulation were, however,maintained). For residents, outward direct investments in non-financial companies were
liberalised, provided the investor has a controlling interest in the company. Furthermore,outward investments in real estate and portfolio investments are now free up to an annualallowance of, respectively, Lm 50 000 and Lm 15 000 (the allowance has been increased)and the holding of accounts in foreign currency in local banks has become largelyfacilitated. Furthermore, the allowances for loans between residents and non-residentshavebeen increased.
As regards cross border credit transfer , an Executive Payment Systems Committee was
set up earlier this year to take over the payment task force to formulate rules andregulations for the payment systems. No further progress can be reported since in thisfield..
9Directive onthe reinforcement ofprudential supervisioninthe financial services.
29As for the related acquisonmoney laundering , since last Regular Report the list of
predicateoffences in terms of the Act has been widelyextended to conform to recognisedstandards. In December 1999, the Central Bank instructed all credit institutions to closeany remaining bearer deposit accounts by 30 June 2000, which therefore allows allaccounts owners to be identified. This reinforces Maltese legislation in this area, whichwas alreadylargelyinlinewithEC legislation.
Overallassessment
In spite of the progress in the alignment with the acquisthat Malta has accomplished
during the last twelve months, it still has a rather comprehensive system of exchangecontrols and otherrestrictions on Capital movements.
With regard to acquisition of real estate, under the present legislation foreigners may be
allowed to purchase immovable property in Malta provided that the said property is usedas a personal primary residence or for business purposes deemed to benefit Malta.Foreigners arealso allowed to purchasesecondaryresidences as longas thepriceis abovecertain thresholds. Outward medium-term capital transactions are free up to the annualallowances.
The success for the three-stage programme largely depends on how far Malta progresses
in its liberalisation efforts through the 2001 budget process, enabling Malta, according toplans, to complete the dismantling of the restrictions by 1/1/2002. The acquisition ofcertain types of real estate by non-residents and inward direct investments in certainsectors remain issues ofconcern as regards theadoption ofthe acquis.
Malta has not yet finalised legislation which corresponds to Directives on cross border
credit transfers and on settlement finality. Further efforts are required to implement theECacquisinthisarea.
The Central Bank of Malta, on delegation by the Ministry of Finance, regulates and
supervises credit and financial institutions, operates exchange control and oversees thepayment system. It has a staff of 329 officials. The Central Bank and the Ministry ofFinance are deemed to have appropriate competence and capacityto administer the three-stage liberalisation scheme and to initiate the flanking policies needed to implement aregimeoffreecapital movements.
Malta has not yet set up a separate financial intelligence unit, replacing the current
structurewheretheeconomiccrimes unit in the Maltese police is responsible for the fightagainst money laundering. The administrative capacity should be reinforced in thatrespect.
Chapter 5: Company law
Sincethelast RegularReport, Maltahas madesubstantial progress in this area.
In particular as regards the protection of intellectual and industrial property rights ,a
field which has been identified as a short-term priority in the Accession Partnership, anumberofnewlaws wereadopted.
30In the field of Intellectual Property Rights, the Copyright Act adopted in February 2000
incorporates the provisions of the acquisin this area with the exception of the provisions
related to inter-Member State cable retransmission. The Customs Act dealing with borderenforcement was also approved byParliament in February2000.
In the field of Industrial PropertyRights, A new Patents Act (Act XVII) has been adopted
and should enter into force in September 2000. The Act inter alia incorporates the
substantive provisions of the European Patent Convention but does not howeverincorporate the recent amendments to the EPC dealing with biotechnological inventions.The Trademarks Act (XVI) has been adopted and will enter into force in September. TheAct enables the Minister to issue (by regulations) provisions to extend the effect of theCommunityTrademark in Maltaon its accession to theEU.
With regard to company and accounting law , no further developments have been
reported.
Overallassessment
Following recent progress, Malta has achieved high level of alignment in the area ofcompanylaw. However, theadministrativecapacityneeds to bestrengthened.
The 1995 Companies Act incorporates most of the requirements of the EC Directives on
Company law. However the Directives on co-ordination of safeguarding of employees’rights in theevent oftransfers ofundertakings, businesses or parts of businesses still haveto be transposed. The Registryof Companies is responsible for the implementation of theEC Company law. It operates within the structure of the Malta Financial Services Centreand oversees companies incorporated under the Companies Act, 1995 and partnershipsunder the Commercial Partnerships Ordinance, 1962. With a staff of 25 people, theRegistry of Companies is fully computerised and the existing administrative structureshould beadequateto implement and enforcethe acquis.
Thesameassessment is validforaccountinglaw,whereMalta’s legislation is alreadyto a
large extent in line with the acquis, but minor adjustments are still needed, inter alia, as
regards consolidated accounts, voting rights and disclosure requirements for branches. Inthis field, the Ministry of Finance is responsible for the application of legislationconcerningAccountancy. Auditors are answerable to the AccountancyBoard (MinistryofFinance). The administrative set up to implement the acquisin this area is the
Accountancy Board in the Ministry of Finance, but its human resources need to beincreased.
Joining the Brussels and Rome Conventions
10will be possible only after accession. In the
meantime, Malta is interested in joining the Lugano Convention, which is equivalent tothe Brussels Convention and open to third countries. With respect to the RomeConvention, Malta has to prepare the necessary legislation in order to allow for swiftimplementation of the convention after accession, specifically in relation to the courts,which maybedesignated forthat purpose.
10Brussels Convention on jurisdiction and enforcement of judgements in civil and commercial matters;
Rome Conventiononthe lawapplicable to contractual obligations.
31Following recent progress, Malta is now close to alignment with the acquisin the field of
industrial and intellectual property rights. Concerning pharmaceutical products, patent
protection has been provided in Malta since 1900. Malta still has to adopt legislation onSupplementary Protection Certificates as well as legislation transposing the Communityacquison Designs and protection of biotechnological inventions. Regarding
administrative capacity, the Industrial Property Office is responsible for approvingregistration of trademarks, patents and for designing records assignments. Once goodshave been released on the local market, the Economic Crimes Unit of the Police Forceenforces intellectual property rights. The Unit carries out regular investigations at retailoutlets and on the open markets. The Investigations Section of the Customs Authority isresponsible for border enforcement. As far as Intellectual Property is concerned, there isno court specialised in Intellectual Property Rights Cases. Cases are dealt with in theCivil Courts. Two collective societies for the management of copyrights exist in Malta:ThePerformers’Rights Societyand theKopjamalt-ReprographyRights Society.
The Industrial Property Office would need to be reinforced. Extensive training should be
given to Police and Customs Authorities in charge of the enforcement of the IntellectualProperty Rights. Border enforcement and the co-operation of the enforcement authoritieswith the right holders should be further organised and developed. It should be noted thatveryfew judges and prosecutors are familiar with Intellectual PropertyRights legislation,and training, as well as development ofacourt practice, would beneeded in that respect.
Chapter6: Competitionpolicy
Sincethelast RegularReport,Maltahasmadelimitedprogressinthisarea.
I nt h ea r e ao f State Aid , Malta set up a State Aid Monitoring Board in the summer of
2000. The main task of the Monitoring Board is to supervise State aids (i.e. to assess thecompatibilityofstateaids withthecriteriaarisingfrom therelevant EC acquis).
No furtherdevelopments can bereported in thefield of anti-trust .
The authorities to enforce competition rules (rules on restrictive agreements, abuse of
dominant position and the control of mergers), the Office for Fair Competition(investigates) and the Commission for Fair Competition (takes final decision) are bothindependent from the Ministry of Economic Services. The Office for Fair Competitionhas recently been reinforced with the recruitment of additional technical staff and nowhasastaffof7.It hasexaminedanumberofcasesmainlyonthebasisofcomplaints.
Overallassessment
While Malta’s antitrust legislation is largely in line with the acquis, much remains to be
donewith respect to StateAid.
Malta is at the very beginning of developing a proper State Aid control system. The first
step has been taken with the establishment of the State Aid Monitoring Board in thesummerof2000.
Malta has also embarked on the task of completing a state aid inventory as well as
preparing a state aid report, which was a short-term priorityof the Accession Partnership.Malta now needs to introduce a framework for the effective application and enforcement
32of the Community state aid rules, including the alignment of existing aid measures (in
particular the system of tax incentives which is currently being reviewed). This was ashort-term priority of the Accession Partnership. State aid in the shipbuilding and shiprepairindustrywill haveto beadjusted accordingly.
Malta’s anti-trust legislation is largelyin line with the acquis. Amendments to the current
Competition Act are still needed to ensure that all public undertakings and those grantedspecial or exclusive rights are covered by the anti-trust rules. With a view to ensuringproper competition on the market, Malta has undertaken to further improve existingmerger control. Further alignment is still necessary, especially in view of developmentsoftheacquison vertical restraints.
The main challenge now is to ensure the effective application and implementation of the
anti-trust rules and to give priority to cases concerning the most serious distortions ofcompetition.
Chapter 7: Agriculture
Agriculture in Malta accounted for 2.5% of GDP11in 1999, thus remaining at almost the
samelevel as in 1998 (2.7%). Also, employment in agriculturehas remained stable with ashare of 1.8% in total employment. The Maltese agricultural sector is characterised by alimited agricultural land surface (approx. 12.000 ha) and by limited productivity andefficiency due to scarce water resources, land availability and natural disadvantagesassociated with an island setting. Agriculture has, however, a multi-functional role inmaintainingenvironment,landscape,traditionandsocial structure.
Agricultural production has increased steadilyoverthepast ten years
12and did not change
significantly in comparison to last year. The most important agricultural sectors in Maltaarefruit and vegetables, togetherwith potatoes.
In 1999, EC imports of agricultural products originating in Malta increased byabout 16%
amounting to €5.9 million. EC exports to Malta increased by 5% amounting to €185
million. The trade balance in favour of the Community amounted to €179 million in
1999, compared to €171millionin1998.
13
Since the last Regular Report, Malta has not taken major steps as regards its agricultural
policy. Overall objectives of Malta's agricultural policy remain the production of highquality products at a reasonable price for consumers but providing an adequate and justincome for farmers and the preservation and enhancement of the rural environment. Anevaluation of trends has lead to the formulation of two programmes to prepare Malteseagriculture for the increased competition due to the single market and for theimplementationoftheCAP.
Malta has a fragmented farm structure (12,958 farm holdings), holdings are mostly in
privateownership. Thereareno specificland consolidation measures.
11Source: The source ofall agricultura statisticsisEUROSTAT unlessotherwise specified.
12Source: FAO
13Source: Uruguay Round Agreement definition of agricultural products, figures taken from
EUROSTAT COMTEXT (see Agriculture in the European Union - statistical and economicinformation1998-1999 VolumeI).
33Horizontal issues
As regards the implementation of measures related to the handling of the European
Agricultural Guidance and Guarantee Fund (EAGGF), Malta has no experience in
managing such a system. No progress can be reported on this issue. Only for theestablishment ofaPayingAgencyis aworkingmodel beingelaborated.
Preparations are under wayto establish an Integrated Administration and Control System
(IACS),based as much as possible on existing elements (e.g. farm registration, databases
of veterinary service on livestock farms and movements of animals). First steps in thisdirection have been the setting up of a Geographical Information System for therecording of holdings. Also, in March/April of 2000, the Central Office of Statisticsstarted to takeaerial photos ofthewholecountryto identifyland useand cover.
In relation to quality policy , no standards for labelling or rules for indication of origin
currentlyexist in Malta, but a legal framework is in place establishing a public mark andallowingtherecognition oftraditional products and quality.
No progress on organicfarmingcould beidentified.Concerning preparations for Malta’s participation in the Farm Accountancy Data
Network, farm accountancy data are not systematically collected in Malta. Only large
operators keep accounts, and there is presentlyno legislation obliging small farmers to doso.
Common MarketOrganisations
Since the last Regular Report, Malta has not made substantial progress as regards the
introduction of a legal framework and administrative structures for the establishment ofCommon Market Organisations . As regards the adoption of specific regulations
organisingthedifferent markets covered bytheEC acquis, no progress can bereported.
Rural developmentand forestry
No progress can be reported in this area as no specific measures have been set or
prepared to enhancerural development.
Forests cover only a very small part of Malta's territory (32 ha) and are mostly situated
within nature conservation zones. Preservation and maintenance are assured bythe Urbanand Rural Landscaping Unit of the Department of Agriculture, which runs also a forestrynursery. Though the forest is stronglythreatened , no further measures to maintain and/orincreaseforests havebeen programmed, in particularto protect them against fire.
Veterinary and phytosanitary issues
Since the last Regular Report, limited progress has been made in the veterinary sector,
mainlyas regards animal health . In thephytosanitarysector, no progress can bereported.
A veterinary health-monitoring programme has been introduced. Some of the Maltese
testing standards are being put into conformity with EC requirements. However,slaughterhousewastedisposal is not inlinewiththe acquis.
34Overallassessment
Since the last Regular Report, Malta has made limited progress as regards the
introduction of a legal framework and of administrative structures for the implementationof the Common Agricultural Policy. The horizontal issues related to the mechanisms oftheCommon Agricultural Policyand theEAGGFarehardlytackled.
Preparatory legislative work in the field of Common Market Organisation is limited to
the wine sector and the establishment of producer associations as well as standards forfruit and vegetables. Alignment to the acquistherefore needs reinforced efforts.
Administrative management of the Common Market Organisations has not yet beenspecified. Implementation of trade mechanisms related to Common Market Organisationis, however, prepared at theadministrativelevel.
Efforts concentrateonthesetting-upoftheIntegrated Administration and Control System
forwhich preparatorywork has gathered agood pace.
In the field of quality policy, the legal framework needs adjustment to Community
definitions for quality designations and preparation of institutional framework forregistration and control. No progress on organicfarmingcould beidentified.
There has been no drafting of multi-annual programmes for rural development and
forestry, ashort-term priorityoftheAccession Partnership. Whileless-favoured areas andafforestation schemes would be important rural development measures for Malta, andimplementation of agri-environmental measures is mandatory upon accession, nopreparations fortheseschemes havebeen started yet.
Continuing of alignment of veterinary and phytosanitary legislation and upgrading of
inspection arrangements, in particular at future external borders, were identified as short-term priorities in Malta’s Accession Partnership. A lot of work remains to be done in thatsector.
As regards administrativecapacityinthis field,theveterinaryservice staff includes 4 vets
and 7 auxiliaries. These services control all relevant activities from the issuing oflicences, certificates for importation/exportation and regular inspections in farms andslaughterhouses to agri-food processing establishments and retail outlets. TheDepartment can induce sanctions in case of non-compliance with regulations. As far asphytosanitary issues are concerned, Malta must still transpose the acquis. Capacity
building is needed to tackle new phytosanitary aspects and reinforce other areas. Threefully functional laboratories – Chemistry, Biology and a Virology Laboratory – areavailable within the Plant Health Division. A project for the upgrading of the facilitiesavailablein thelaboratories is currentlyin progress.
With respect to control measures , Malta has an emergencyplan which is generallyin line
withCommunityrules.
Chapter8: Fisheries
Since the last Regular Report, no major legislative developments have taken place in thisdomain.
35Malta still has to finalise a fish marketing scheme in order to align with the EC Markets
policy, in particular in the field of private storage aid, carry-over and rules on
withdrawal.
No significant progress has been made as regards resources management, inspection
and control .
In the field of structural actions (including fleet registration), data collection was
finalised in July 2000 .The database will serve as a basis for new licenses, which were
first issued in the3rd quarterof2000.
Though limited, State aid to the fisheries sector currently exists in Malta. Whereas
grants are rarely given for the improvement of the fishing fleet, port facilities andmarketingschemes aresupported and cold storagefacilities areprovided.
No developments can bereported as regards international fisheries agreements .
Overallassessment
The current reforms in Malta to match Common Fisheries Policy requirements still need
to be completed. They cover in particular inspection and control (including introductionofsatellitesurveillance),structural policy,andfishingvessel registration.
The enabling Act on Fisheries Conservation and Management, which is currently before
Parliament, must be adopted and Malta should strengthen the staffing of inspectors in theDepartment of Fisheries and Aquaculture. Malta needs to align the current fishparameters withtheEC marketingstandards.
In order to safeguard stocks, Malta has the intention to maintain the fisheries
conservation zonewithin the25 nautical milelimit it has set since1971. The extension ofthe fisheries conservation zone beyond the 12 nautical miles limit is an issue currentlynot inlinewiththeEC acquis.
Malta does not have any bilateral fisheries agreements but is an active member in the
General Fisheries Commission for the Mediterranean (GFCM) and observer in ICCAT
(International Commission for the Conservation of Atlantic Tunas) .Malta has signed but
not yet ratified the UN Agreement on Conservation and Management of straddling andhighlymigratoryfishstocks.
The Ministry of Agriculture and Fisheries through its Department of Fisheries and
Aquaculture is responsible for the fisheries sector and acts as a Fisheries MonitoringCentre. The Department of Fisheries and Aquaculture is divided into two units: Fisheries(18 people)and Aquaculture(25 people). TheFisheries unit has regulatoryfunctions withits executive, operative and security staff totalling eighteen people. The Aquaculture unitis more oriented towards experiments and training. The health aspect of the Aquacultureindustryfalls within theresponsibilities oftheVeterinaryServices.
36Chapter9: Transportpolicy
In the field of transport policy, some progress can be reported since the last Regular
Report.
Concerning land transport , thePublic Transport AuthorityBill providing the framework
forsubsidiarylegislation has recentlybeen adopted.
As regards air transport , whilst the air safety situation is advanced, no legislative
developments can yet be reported. There has been some strengthening of the DepartmentofCivil Aviationthroughtherecruitment ofadditional professional/technical staff.
As regards maritime transport , amendments to the Merchant Shipping Act were passed
in July 2000 for which the objective is to align Maltese legislation with the Communityacquison crew qualifications and other maritime standards. Adoption of the maritime
transport acquiswas identifiedas ashort-term priorityintheAccessionPartnership.
Although the Malta Maritime Authority is putting effort into capacity building with the
recruitment of 15 additional inspectors, taking the total to 90, the enforcement ofregulations andstandards is amajorweakness andremains aproblem.Particularattentionhas to be paid to the implementation and enforcement of international maritime safetyand pollution standards as key safety requirements in the field of maritime transport.Malta has given priority to Flag State inspections over Port State Control, and hasconsequentlyincreased its efforts in this domain.
Overallassessment
On the whole despite some progress in the maritime and road transport fields, Malta stillhas to progress in all areas of the transport acquisbefore full alignment can be achieved.
Efforts are also needed to improve the administrative capacity to implement the acquis,
inparticularinthemaritimesafetyfield.
Malta has made some progress in the adoption of the Community road transport acquis
but aconsiderablebodyoflegislation remains to betransposed.
Amendments to the Public Transport Authority Act, which partially align the Maltese
legislation with the Community land transport acquis, were adopted by the Parliament in
August 2000, as were acquisprovisions for driving licences. Requirements for
roadworthiness appear now to be in line with the Community acquis. Further efforts have
tobemadetotransposetheremaining acquis, in particularon theissues ofmarket access,
fiscal harmonisation, transport ofdangerous goods and speed limiters.
Due to the size of the country and the limits of the road network on the islands, Malta
maywish to make full use of the possibilities for derogations and exemptions with regardto social aspects of the land transport acquis, e.g. driving hours and rest periods and
tachographs.
Amendments to the Maltese Civil Aviation Act still need to be adopted in order to bring
it fully in line with the acquis, in particular with regard to slot allocation and ground
handling. Appropriatelegislation on denied boarding, aircraft noise, computer reservation
37systems, air traffic control equipment, Eurocontrol standards and air accident
investigation has been prepared but still need to beadopted.
Through the adoption of the amendments to the Merchant Shipping Act in July 2000,
Malta has aligned its legislation with the acquison crew qualifications and on certain
other maritime safetystandards. New legislation expected to be enacted before the end ofthe year will also incorporate safety rules for passenger ships. EC rules on maritimecabotagestill needtobetransposed.
Malta has also made limited progress with regard to the fleet’s safety record. A full
register of vessels under Maltese flag is now established and statistics are continuallybeing improved. Vessels exceeding 25 years old are no longer accepted as new entrantsontotheMalteseregister.Howeversignificant efforts are still required on maritime safetyin order to meet commitments for full implementation ahead of accession. Particularefforts are necessary in order to fulfil Community rules on Port State Controls and FlagState inspections. Efforts on Port State Control are necessary in order to reach the targetof controlling 25% of the vessels entering port in Malta ahead of accession. Care shouldbe taken that there is a sufficient number of trained inspectors to apply the acquis.
Improving the frequency of flag state inspections and the establishment of a frameworkof co-operation with the classification societies are also necessarysince the detention ratefor inspected ships in Maltese register was 10.6% in 1999 as compared with an averageof3.6%forships underEUflags.
With regard to horizontal aspects , Malta should assess its transport infrastructure needs
to prepareits participation in theTrans-European Networks.
Chapter10: Taxation
Since the last Regular Report, Malta has made some progress in this area, mainly in the
field ofVAT.
The main efforts relate to the taxation of motor vehicle fuel (petrol and diesel) and cable
telephony, which since23 November1999 and 1 January2000 respectively, havebecometaxable at the standard rate of 15%. This has resulted in an amendment of the right ofdeduction of input VAT for motor vehicle fuel for commercial vehicles as of 23November 1999. By 21 December 1999 the provisions on VAT refunds to personsenjoying diplomatic status were amended and of 1 January 2000 the scope of taxablepersons has been broadened, with the public corporation “Enemalta Corporation”responsibleforenergybeingconsidered as ataxableperson.
In the field of excise duties the main progress relates to an increase in the duty rate for
certain types of cigarettes with the objective of aligning it with the acquis.T h i sh a s
resulted in meeting the Community’s minimum incidence of excise duty of 57% for thisspecific category of cigarettes. Furthermore, the definition of volumes for calculating theexcisedutyonmineral oils was brought inlinewiththat ofthe acquisbyOctober1999.
Ondirect taxation , Malta has as of January 2000 abolished the indirect duty of 0.4% on
the raising of capital, and its legislation in this area should now fully comply with that oftheacquis.
38The Inland Revenue Department, the Value Added Tax Department and the Customs and
ExciseDepartment, all ofthem part of the Ministryof Finance, are the bodies responsibleinthefieldoftaxation.
Concerning administrative capacity, Malta has appointed as of 1 January 2000 six new
Assistant Directors within the VAT Department. At the same time an Internal Audit Unithas been established as well as a Customer Care Unit to improve the quality of theservice to taxpayers. Moreover, in May 2000 a Director for EU matters for the CustomsDepartment was appointed with a brief of co-ordinating and monitoring theimplementation of Customs related business strategy for accession. He will form part ofthe Pre-Accession Unit, to be established during 2000, which will be responsible for thesuccessful implementation of the Business Change Management Plan for Customs andTaxation.
Overallassessment
Overall, Malta has achieved a reasonable level of alignment with the acquisin the area of
taxation,but substantiveefforts arestill required.
VAT was re-introduced in Malta in January 1999. It provides the necessary framework
for the transposition of the acquis. However, substantive further alignment is still
required. The main discrepancies between the Maltese VAT legislation and that of theCommunity relate to the application of rates and the scope of exempt transactions. Inparticular the excessive application of zero-rating gives rise to significant concern. Asfull alignment in these areas is most likely to have a significant impact on consumerprices, it is important that Maltaestablishes astructured pre-accession strategy.
Since1995 Malteseexciselegislation has undergonemajorchanges, which brings it more
in line with the Community acquis. However, significant efforts are still required both as
regards the taxable scope, the level of duty rates and the tax structure. Although theCommunity’s minimum duty rate level of 57% has been reached for cigarettes exceeding75 mm in length this is not the case for cigarettes below 75 mm in length. Furthermore,the combined (specific/ad valorem) duty structure for all categories of cigarettes remainsto be introduced. No progress has been made as regards the duty rate levels on therequired alcoholic beverages and mineral oils. Moreover, in contradiction with therequirements of the acquis, Malta continues to tax leaded petrol at a higher rate than
unleaded petrol and to zero-ratecigars, cigarillos, pipetobacco and beer.
As far as administrative capacity is concerned, the main structures required for the
implementation, control and enforcement of the acquisappear to be in place. However,
the implications, including those related to computerisation, of adhering to the acquis
remainachallenge.”
Chapter 11: Economic and Monetary Union
A detailed assessment of Malta’s economic policy in its various aspects has been givenabove, in the Chapter discussing the economic criteria (B-2). Therefore, the presentsection is limited to a discussion of those aspects of the Economic and Monetary UnionAcquis--as defined by title VII of the EC treaty and the other relevant texts--which
candidate countries should implement before accession, i.e. the prohibition of directpublic sector financing by the central bank, the prohibition of privileged access of the
39public sector to financial institutions, and independence of the national central bank. As
to the process of liberalisation of capital movements, upon the completion of whichcompliance with the EMU Acquisis conditional, this aspect has been covered above, in
thesectionon Chapter 4 – Freemovement of capital .
Sincethelast Regular Report, Malta has made some progress in the adoption of the EMU
acquis.
The Minister of Finance removed the possibility for direct public sector financing by
the Central Bank . This had the effect of abolishing the Government's overdraft facilities
at the Central Bank. Although the Government had not borrowed directly through thisfacility since the beginning of 1995, the elimination of this possibility was required toalignwiththis part oftheEMU acquis.
In April 2000, the Central Bank of Malta removed the provision relating to the maximum
rate of interest that banks could charge on loans and advances on residential units. This
provision could have been considered as a case of privileged access of the public sector
to financial institutions , and its removal represents therefore a substantial progress in
theadoptionofthis part oftheEMU acquis.
No furtherprogress can bereported in ensuringthe independenceof theCentralBank .
Overallassessment
Malta will participate in EMU upon accession with the status of a country with a
derogation under article 122 of the EC treaty. It will need to implement the necessarychanges to its institutional and legal framework bythedateofaccession.
Overall, Malta has adopted substantial parts of the EMU acquis.However, Malta has not
yet aligned its legislation with the requirements of the Treaty concerning theindependenceoftheCentral Bank.
Malta has made progress on the issues of the prohibition of direct financing of the public
sector and the prohibition of privileged access of the public sector to financialinstitutions. However, the Central Bank of Malta is also the market maker for thegovernment debt, and can, in this capacity, subscribe to government debt instruments inthe primary market. Amendments to the Central Bank of Malta Act to explicitly prohibitthe Central Bank from all forms of direct financing of the public sector still have to beadopted.
As regards the independence of the Central Bank, whilst members of the Board of
Directors are not to receive or accept directions from any person or authorities under thecurrent legal framework, the Minister of Finance may still, in exceptional circumstances,give directions to the Central Bank on the conduct of monetary policy. Malta needs tomakefurtherprogress in ensuringthefull independenceoftheCentral Bank.
Chapter 12: Statistics
Since the last Regular Report, Malta has made good overall progress in the area ofstatistics.
40Concerning the statistical infrastructure , the Central Office of Statistics (COS) is
responsible for the compilation of statistical data under the Statistics Act of 1955.
Presently the COS is a Department within the Ministry of Economic Services. Its personnel has
been substantially reinforced since the last Regular Report and two new statistical units
dealingwith Environment and Transport statistics havebeen set up.
Concerning classifications , CPA and GEONOM have been adopted, and full compliance
withNACEis achieved.
As regards demographic and social statistics , a first Labour Force Survey that
incorporated all of Eurostat’s recommendations and the latest acquiso nt h ea r e aw a s
carried out in May 2000. This provides the basis for the implementation of the acquisin
this area.
Concerning regionaland geographic information, a NUTS geographical classification for
Malta has been devised together with land area and population data (see paragraph onregional policy).
Regarding macro-economic statistics , work on the introduction of ESA 1995 is ongoing
and covers GDP deflation procedures, GDP estimates and improvement of GDPcoverage.
As from this year, the balance of international payments of Malta is being compiled,
presented and published in accordance with the fifth edition of the Balance of PaymentsManual oftheInternational MonetaryFund.
The COS now produces data within the European Comparison Programme for
PurchasingPowerParity(PPP)purposes .
As regards business statistics , as from January this year, the COS introduced its short-
term indicators programme on manufacturing and construction. Much work still needs tobedonein theareaofstructural business statistics.
Concerning transport statistics , the COS is in full compliance with most of the
requirements forstatistics on transport ofgoods byroad and sea.
The COS has provided Eurostat with external trade statistics which are broadly in line
withtheacquisrequirements.
In the field of agriculture , Malta has already achieved quite a good situation as regards
agricultural structures. For crops and animal production, only minor extensions areneeded.
Overallassessment
There has been important progress across most of the statistical areas. Malta is on a goodtrack to be fully in line with the acquisin this area, provided it pursues the important
efforts that it has undertaken. The quantitative reinforcement of the Central Office ofStatistics, as well as the training received by its staff, gives Malta an appropriateadministrativecapacitytoimplement the acquisinthisarea.
41The law that would turn the Central Office of Statistics into an autonomous body
corporateshould beenacted bytheParliament.
Chapter13: Socialpolicy and employment
Furtherprogress has beenmadebyMaltainthis areasincethelast regularreport.
Inthefieldof Labourlaw ,nolegislativeprogress canbereported.
In the field of equality of treatment , Malta enacted the Equal Opportunities (Persons
with Disability) Act in January 2000 and it will be in effect on 1 October 2000. The Actwill prohibit discriminationagainst persons withadisabilityinall spheres oflife.
The National Commission on Persons with Disability(NCPD) has been set up, as has the
Equal Opportunities Unit, within the NCPD, with a view to investigating alleged acts ofdiscrimination against disabled persons. The NCPD has already begun investigating actsof discrimination on an informal level and will proceed with more formal proceedingsonce the Act enters into force. All building permits are now being assessed bythe NCPDin order to ascertain whether the building will be compliant with accessibility standardsestablishedbetweenthePlanningAuthorityandtheCommissionitself.
As regards Health and safety , regulations on Signs at Work Places came into force on 1
July 2000. Regulations on Protection of Maternity at Work Places and on the Protectionof Young Persons at Workplaces were enacted in April 2000, to come into force on 1January2001 and 1 January2002 respectively.
Inthefieldof PublicHealth ,Maltais fullycommitted to participatingin the surveillance
and control of communicable diseases and is well prepared to collaborate in theCommunity Network for the Epidemiological Surveillance and Control ofCommunicable Diseases. Malta is currently participating in preparatory meetings of theNetwork Committee. In respect of notifications, the main concern regards foodpoisoning, as therehavebeen alargenumberofsuch notifications oflate.
There are two main Ministries responsible for public health in Malta: the Ministry for
Social Policy and the Ministry of Health. The latter is responsible for severalDepartments that includepublichealth, health promotion and health information.
Social dialogue is well established in Malta. There are various mechanisms that are
intended to promote social dialogue. The Government has established, by administrativedecision, the Malta Council for Economic Development (MCED), composed ofrepresentatives of various constituted bodies and Government entities, to provide a forumfor broadly based consultation between all social partners. Also, representatives of thesocial partners maysit ontheBoardof various Government entities, like the Employmentand Training Corporation, the National Employment Authority, the Commission for thePromotion of Occupational Health and Safety, the Labour Board, and the SocialAssistance Board and the Panel of Assessors. The new legislation also ensuresrepresentation of the social partners in the Occupational Health and Safety Authority. Inaddition, there is an ongoing social dialogue in both public administration and in stateenterprises.
42This reinforcement of the Social Dialogue supports social partners’ capacity-building
efforts to develop and implement the acquis,which was a short-term priority in the
Accession Partnership.
Theemployment rate is tabled at rather low level of 52.7% but the female employment
rate was very low (30.8%) compared to the male rate (74.3%) in 1999. Unemploymentdecreased from 5.3 %in the last quarter of 1999 to 4.6% in the second quarter of 2000, as
the upward trend observed in recent years has been halted by the rise in labour demand.Work on the Joint Employment Policy Review has started in 2000 ,aiming at the
adoption of a Joint Assessment Paper in the first half of 2001. An intervention Unit wasset up by the Employment and Training Corporation (ETC), the Malta DevelopmentCorporation (MDC) and the Institute for the Promotion of Small Enterprises (IPSE) toserve as an early warning system for collective or less substantial redundancies resultingfrom the restructuring process. Labour market oriented training is provided both by theETC and by other institutions. The Employment and Training Corporation (ETC) hasalso started its preparation for participation in European Employment System (EURES),and is alreadyadvertisingjob vacancies overtheInternet.
Malta recognises the importance of acceptable social protection and is aware of the
principles set out in related Council Recommendations. Malta is a signatory to theEuropean Social Charter of the Council of Europe and is committed to an adequate levelofsocial protection and health care.
Overallassessment
Although significant progress has been made in terms of legal transposition in manyareas, much legislative work remains to be done before conformity is achieved in areaslike labour legislation, occupational health and safety, and equality of treatment betweenwomenandmen.
In the area of social dialogue, it is important for the state to encourage workers' and
employers' representatives to develop an autonomous social dialogue betweenthemselves, in particularat sectoral level.
Malta is engaged in a consultation process with the social partners to review its existing
labour legislation with a view to alignment with the EC acquis. Following the current
discussions with the Malta Council for Economic Development (MCED), Malta shouldadopt legislation related to a substantial number of areas like the Organisation ofWorking Time, Collective Redundancies, Transfer of undertakings, Written Statements,European Works Councils and Postingofworkers.
With regard to health and safety, Malta is carrying out an economic impact assessment,
the results of which should make it possible to establish a timetable for the adoption oflegislation on thenumerous EC provisions in this areathat havenot yet been transposed.
In the field of Public Health, Malta still has to adopt legislation on the labelling of
tobacco products and the maximum tar yield of cigarettes. It is awaiting the adoption bytheCouncil and theEuropean Parliament ofthenewdirectiveon this subject.
The overall public health situation is satisfactory in Malta. Maltese health indicators and
infrastructurecomparewell with thosein theEU.
43Malta has the essential enforcement structures, which the government plans to strengthen
further. This will in particular be needed with regard to labour inspection servicesmonitoringhealth and safetyat work, labourlawand equalityoftreatment.
For the implementation of future ESF-type measures, the administrative capacity of the
MinistryforSocial Policyneeds to bestrengthened.
So far, there have not been significant problems associated with racism and xenophobia.
However, as mentioned in section B.1.2, there is as yet no prohibition of racialdiscrimination in Maltese criminal law, as required by the International Convention onthe Elimination of all Forms of Racial Discrimination. Legislation transposing the ECDirective based on Art. 13 of the Treaty relative to discrimination on the grounds of raceorethnicorigin will haveto beintroduced and implemented.
Chapter14: Energy
Since the last Regular Report, no major legislative developments have taken place with
regard to security of supply ,competitiveness and internal energy market ,a n denergy
efficiency . Measures to transpose the acquison hydrocarbons licensing have recently
been adopted and will take effect from the end of the year. No further progress can bereported in this area.
Overallassessment
Onthewhole,Maltastill has totransposemost ofthe acquisrelated to Energy.
As far as security of supply is concerned, Malta still does not have legislation
compatible with the acquisin terms of minimum oil stocks, nor does it have oil supply
crisis management legislation. Since it is necessary to keep stocks of different products,sometankbuildingmayalsobenecessary.
In terms of competitiveness and the internal energy market, most of the acquisstill
needs to be adopted with regard, in particular, to the elimination of price distortions. Theseparation oftheregulatoryand serviceproviderfunctions has to beenacted.
Enemalta, which is the sole producer and distributor of electricity in Malta, continues to
act as the Regulator, since it can grant permission to generate electricity, and it is theprovider of licences for the connection of other electricity producers to the network.Legislation establishing a Regulator and dealing with other aspects of the internalelectricitymarket has been prepared but is awaitingfinal adoption.
The Department of Economic Services is the body responsible for all aspects of energy
regulation, except in the case of energy efficiency issues, where the Department ofConsumer Affairs, together with the Department of Industry, are the competentauthorities.
There are no natural gas or solid fuel markets in Malta. Malta has a small energy market
andconsidersitselfasasmall isolatedsystem withinthetermsofthe acquis.
44With regard to the acquisonenergy efficiency , Malta still needs to implement this fully.
Appropriate structures to follow-up the implementation of the relevant policies, togetherwith promotion and training, need to becreated.
Malta does not use nuclear energy for power generation and has no plans for future
development of nuclear energy. Malta has ratified a number of IAEA Conventions andhas a safeguards agreement with the IAEA. Malta is not part of any bilateral agreementsinthis field.
Although Malta does not operate nuclear power plants, due attention should be given to
preparing theimplementation ofEuratom safeguards.
Chapter 15: Industrialpolicy14
Since the last Regular Report, Malta has made good progress in the area of Industrialpolicy.
As regards Industrial strategy , the Government published in December 1999 the White
Paper ‘Prosperity in Change – Challenges and Opportunities for Industry’. It provides astrategic overview for future industrial development and looks at the principal issuesinvolved, namely attracting foreign direct investment, expanding export activity,developing high value-added sectors, generating new employment opportunities andpromoting joint ventures. A draft industrial policy document has been presented to theMaltaCouncil forEconomicDevelopment.
The Ministry for Economic Services, which is responsible for the formulation and
administration of the national industrial strategy, is enhancing its capacity to meet theresponsibilities explicit and implicit in EU membership. An Operations Review of themain entities that support industry in the Ministry has been concluded in order tostrengthen the Ministry’s administration of national industrial strategy and the enterprisepolicyas awhole.
Regarding privatisation and restructuring, the White Paper ‘Privatisation – a Strategy
for the Future’, published in November 1999, provides an outline of Government’sprivatisation programmeoverafive-yearperiod. Thecompanies to be privatised over thisperiod have already been identified. Its aim is to modernise and bring about efficiency inState-owned enterprises while improving the competitiveness of the Maltese economy.This will be implemented through wider adoption of modern technologies, formation ofstrategic partnerships with international operators and stronger management structuresand practices.
The programme for the dismantling of the import levy regime is being implemented and
the levies on the first and second group of products were removed as scheduled inOctober 1999 and January 2000, respectively. The industrial restructuring programmecontinues to beimplemented with theaim ofboostinglocal industry’s competitiveness.
14Developments in Industrial policy should be seen in relation to developments in the context of SME
policy(see chapter16 – Smalland medium-sized enterprises ).
45The Institute for the Promotion of Small Enterprises (IPSE) has finalised a study on the
furniture sector and tabled an action programme for the sector in July 2000. It is nowworkingon studies fortheprintingindustryand thebuildingmaterials industry.
In March 2000, IPSE also launched the ‘Partners in Business’ Initiatives. It includes
“Business Network”, which promotes networking, “Business Connect” which involvessubcontractingbetweenlargerandsmallerenterprises,and the “Business Links” initiativewhich encourages local enterprises eligible for IPSE’s programmes of assistance to seekandform strategicbusiness alliances withforeignenterprises.
The Ministry of Finance established a Privatisation Unit, which has the responsibility of
overseeingand implementingtheproposed privatisation process.
Overallassessment
Most of the measures taken by the Maltese Government are recent and it is not yetpossible to assess their efficiency. Malta has moved forward with the formulation of anindustrial strategythat addresses themain restructuringchallenges and identifies the maindriving forces to developing the competitiveness of Maltese industry. The White Paper‘Prosperity in Change – Challenges and Opportunities for Industry’ that forms the basisfor the industrial strategy currently under elaboration is in conformity overall with theprinciples and objectives ofEC industrial policy.
Theproblem ofthestateaids to theshipyards remains serious and has not yet been solved
(seealsochapter6-Competition)
The administrative capacity, i.e. relevant Departments in the Ministry for Economic
Services and IPSE, seems adequate.
Chapter 16:Smalland medium-sized enterprises15
In the field of SME policy , the Maltese Government took steps to further develop
policies aiming at improving the business environment. In parallel to the work on theindustrial strategy, a strategyfor entrepreneurship is being developed as announced in theWhite Paper “Prosperity in Change, Challenges and Opportunities for Industry” of 1999.Thefocus is onincreasingthecompetitiveness ofMalteseSMEs.
Concerning the Business environment , simplifying and reducing legal and
administrative barriers to enterprise is one of the key priorities of the strategy forentrepreneurship that is being developed as announced in the White Paper “Prosperity inChange, Challenges and Opportunities forIndustry”of1999.
A Small Business Unit has been set up within the Ministryof Economic Services. Its role
is two-fold. It acts as a one-stop-shop for individual businesses in their dealings with the
15Developments in policy towards small and medium sized enterprises should be seen in relation to
developmentsinthe context ofindustrial policy( seeChapter15 – Industrialpolicy ).
46administration. It also analyses the existing legal and administrative framework with a
viewto proposingmeasures to simplifyand reducelegal and administrativeburden.
Overallassessment
Malta’s SME policy is overall in line with the principles and objectives of EC enterprisepolicy.
Thecreation oftheSmall Business Unit is astep in theright direction. It should provide a
good basis for improvements to the business environment, one of the key objectives ofthe enterprise policy currently under elaboration, provided that it is given the necessaryresources andrecognitionwithintheadministration.
The Institute for the Promotion of Small Enterprises (IPSE) continues to provide its
specific programmes earmarked for SMEs. These programmes target restructuring smallenterprises as well as new start-ups and expansions and provide enhanced assistance tosuch restructuring enterprises. It is also undertaking other measures including anextensive training programme in business planning and related areas and introduction ofthe concept of Business Incubation through a comprehensive strategy, this in support ofnew business start-ups. There are also several other SME development programmes withobjectives such as increasing management skills and internationalisation, run bydifferentimplementing organisations. Co-ordination between the implementing bodies of thedifferent SMEs programmes, as well as the new Small Business Unit, is important toavoid overlaps and promotesynergies.
Maltabenefits from Communityinitiatives such as aEuro Info CorrespondenceCentres.It is essential that the Business Promotion Act under preparation is developed in
conformity with Community guidelines on state aid for small and medium-sizedenterprises.
Malta has no single definition of SMEs. However, the definitions used by the different
agencies that support SMEs are more restrictive than the Commission’srecommendations.
Chapter17: Science and research
There has been progress since the last Regular Report as Malta has formally requestedfull association from 2001 with the 5
thFramework Programme (FP5). Calls for proposals
closingin September2000 and beyond areopen to Malteseparticipants.
Since April, the European Union Programme Unit within the Ministry of Education has
been responsible for the promotion, administration and evaluation of Malta'sparticipationinEUeducational,cultural andresearchprogrammes.
The Malta Council for Science and Technology is the
Government agency responsible for
the management and co-ordination of Malta's participation in the FP5. It has set up asystem ofNational Contact Points (NCP) foreach ofthe7 thematicactions.
47Overallassessment
Overall, Malta is making important efforts to participate in FP5 and the situation is
satisfactoryin that respect.
Successful implementation of the acquisin this area relates directly to the
implementation of the Fifth Framework Programme. The NCP for FP5 needs a moreeffective supporting infrastructure. In this respect, it aims to take on the facilitating roleof a “bridging institute” to achieve a higher degree of co-operation and therefore researchand technological development (RTD) and innovation potential and to improve linksbetween academia and research institutes, and industry and SMEs. Malta is currentlyreviewing its statistics relative to gross domestic expenditure on research & developmentas a share of GDP, in order to align them with the Community methodology. SMEinvolvement and SMEs’ role in technology transfer are minimal. Malta has been amemberofCOSTsince1997.
Chapter 18: Educationand training
Since the last Regular Report, Malta has made progress in the field of education andtraining,mainlyas regards its participationinCommunityEducationprogrammes.
In June 2000, Malta initialled an agreement on its participation in the Education ,
Training andYouth programmes . This agreement is the legal basis for Malta’s full
participation in the second generation of the European Communityprogrammes, Socratesand Leonardo da Vinci as from the year 2000, and the “Youth” Community ActionProgramme as from 2001. The agreement was signed on 29 September 2000 and enteredinto force the same day. In January 2000, the Ministry of Education established theEuropean Union Programmes Unit (EUPU), a national mechanism aimed at ensuring aco-ordinated approach to the management of the Community Education and TrainingProgrammes. As regards Vocational Education and Training, both the Ministryfor SocialPolicy (through the ETC - Employment and Training Corporation) and the Ministry forEducation (through the EUPU) are responsible for its implementation. Two new staffmembers will strengthen the EUPU. Co-ordinating committees have been set up forSocrates and Leonardo, and oneis beingformallyestablished forYouth
There has been no progress as regards the question of the education of children of
migrant workers and the non-discrimination against EU citizens in the field of
education.
Nomajordevelopment canbereportedwithrespect totheeducationsystem.
Overallassessment
On the whole, Malta’s education system is of a good quality and Malta is well prepared
toparticipateintheCommunityeducationprogramme.
Arrangements and administrative capacity for participation in Community Programmes
and Agencies seem adequate.
48Malta still has to enact legislation on education of children of migrant workers, as well as
on the setting of National Council of Occupational Qualifications, that will provide fornon-discrimination towards EUcitizens in thefield ofeducation.
Chapter19: Telecommunicationsand informationtechnologies
During the past year, Malta has made further progress in adopting the acquisunder this
area.
The National Plan for the liberalisation of the telecommunications market has been
approved by the Parliament, under which the liberalisation will be completed by 1January 2003. An important contribution to the implementation of the acquisin the field
of market liberalisation was the award of a second licence for GSM mobile telephony.The company is a 100% subsidiary of Maltacom (also with 40% private ownership) andexpects to start operations at thebeginningof2001.
Regulations amending the Telecommunication Act with respect to the licensing regime
wereadopted in July2000.
The Ministry of Economic Services exercises the ownership function of the state in
relation to the public network operator Maltacom. The regulatory functions wereseparated from the Ministry of Transports and Communications and exercised by theOffice of the Telecommunications Regulator (OTR) till the adoption of the MaltaCommunicationAuthorityAct inJuly2000.
This Act creates the new Malta Communications Authority (MCA) which will be
composed of 3 directorates dealing with telecommunications, data protection andelectroniccommerce. It will enjoymore independence than the OTR and will regulate thecommunicationservices andmonitorcompetitioninthemarket.
The Telecommunications Appeals Board settles any dispute between the regulator and
operator(s). It consists of a Chairperson and two other members appointed by theMinisterforTransport and telecommunications.
The operational responsibilities in respect of postal services are with Maltapost, whose
majority shareholding rests with the Ministry for Economic Services. The Post MasterGeneral, at present the Permanent Secretary within the Ministry of Transport andCommunications, is the Administrative Head of the Postal Services and exercises theregulatory functions. Under the Malta Communication Authority Act, the regulatoryfunction forthepostal services will eventuallybeexercised bytheMCA.
Overallassessment
Although Maltese telecommunications legislation still is not fully in line with theCommunity acquis, the necessary framework for the transposition of the acquisinto
Maltese law is now in place. Draft regulations which would bring Maltese legisation inline with Community acquisin areas like licensing, interconnection, universal service
obligations and numbering still have to be adopted. This applies also to regulationsrelatedtodataprotectionintelecommunications.
49The amendments to the Telecommunication Act adopted by the Parliament in July 2000
haverendered thelicensingregime more objective, non-discriminatory, proportionate andtransparent.
The new regulatory authority has yet to demonstrate its independence from Government
and its efficiency by preparing regulation and licenses ,and by monitoring competition.
The regulatoryfunction needs to be improved through recruitment of additional qualifiedstaffand furtherprovision oftraining.
Further alignment will be needed in relation to Postal Services to bring Maltese
legislationinlinewiththeCommunityPostal ServicesDirective.
Chapter 20: Culture and audio-visualpolicy
Significant progress has been madesincethelast RegularReport.
As regards audio-visual policy , in June 2000, the Parliament adopted an Amendment to
theBroadcastingAct of1991, aimingat bringingit into linewith the acquis.
The amendments to the Broadcasting Act introduce a system whereby administrative
sanctions replace the penal sanctions used previously in respect of offences bybroadcasters.
In October, Malta ratified the Protocol to the Council of Europe Convention on
TransfrontierTelevision,towhichit is alreadyaparty.
OverallAssessment
On the whole, Malta has made significant progress but still has to finalise somesecondarylegislation to achievealignment with theCommunity acquis.
The amended Broadcasting Act is in line with the acquis.However, Malta’s legislation
on audio-visual policy is still not fully aligned, since a number of issues, includingjurisdiction, promotion of European and independent works, protection of minors andadvertisingrules,will beregulatedthroughimplementingRegulations, which have still tobe adopted. Thus, the short-term priority in the Accession Partnership for alignment withtheaudio-visual acquiswaspartiallymet.
The Maltese authorities have provided adequate assurances that Malta’s commitments
under the WTO/GATS will not pose obstacles to progressive alignment and full adoptionoftheaudio-visual acquisbythedateofaccession.
The administrative capacity in the field of culture and audio-visual seems adequate with
regardtotheimplementationofthe acquis.
Chapter 21: Regionalpolicy and co-ordinationof structuralinstruments
Since the last Regular Report, progress in this area has been limited. As regards the
territorial organisation (adoption of provisional NUTS classification), Malta does not
have a regional structure and there is no intermediate level between national Government
50and the 67 municipalities. Gozo (with Comino) has a separate ministry and specific aid
programmes.
Since the last Regular Report, no progress has been made as regards the legislative
framework (general, and territorial, administrative, and financial aspects) , and with
respect tothe preparation forprogramming,evaluation and monitoringsystem.
The Maltese Government has set up a Euro-Assistance Task Force to co-ordinate pre-
accession funding. It programs and co-ordinates the requests of the different spendingministries as well as thesocial/economicpartners andotherinterestedparties.
The Office of the Prime Minister has been designated as having overall responsibility for
regional policy (with the technical support of other Departments, particularly theEconomic Planning and Central Office of Statistics). The Maltese Government hascommissioned areport to identifytheappropriatesupportingstructures forMalta’s needs.
Limited progress has been made since last Regular Report with respect to administrative
co-ordination whether this concerns inter-ministerial co-ordination, distribution of
competencies ortheapplicationof partnershipprinciple.
As far as financial management is concerned, an Internal Audit Directorate, within the
Cabinet Secretariat of the Office of the Prime Minister, has been set up to function, inter
alia, as a domestic interlocutor with OLAF and DG Audit. Part of its functions will be
the implementation of the acquisreferring to the protection of the EC’s financial
interests. No progress can be reported on the budgetary procedures in relation with
Regional Policy.
No statistical dataconcerningGDP percapitain PPS has been published yet.
Overallassessment
Overall, very limited progress has been made in preparing for managing structural funds,
and urgent and substantial efforts are required, in particular to set up appropriatestructures and to train thestaffconcerned.
A NUTS geographical classification has been requested by the Commission and should
be made available as soon as possible. Also, GDP per capita in PPS should be publishedas soon as possible.
Onthelegislativeside,thereis a need to define the framework within which the Regional
Policywill operate, both institutionallyand from abudgetarypoint aview.
On the administrative side, there is an urgent need to define the arrangements for the
programming of the structural policy, and for an appropriate co-ordination within theGovernment. In that respect, it should be noted that the Euro-Assistance Task Force isseriously understaffed with only two senior officials and would need to be urgentlyreinforced.
Then there is a need to start preparing appropriate arrangements for programming,
monitoring and evaluation of the structural funds, with an emphasis on the elaboration of
51monitoring and evaluation indicators. Training for those officials responsible for
implementingprojects withinthespendingministries is alsoneeded.
Chapter 22: Environment
Since the last Regular Report, Malta has made very little progress in the area ofenvironment.
In the field of horizontal legislation , Malta adopted the Civil Protection Act in
November 1999. This facilitates the implementation of the acquisrelated to Civil
Protection.
No legislativeprogress can bereported concerning natureprotection.
Malta regulates trade in endangered species since it is party to the Washington
Convention on trade in endangered species (CITES). Malta is also a party to the BernConvention on the Conservation of European Wildlife and Natural Habitats but has areservation and exception undertheconvention in relation to thehuntingseason.
Withregardto waterquality , no progress has been made.
In theair quality field, no progress can be reported. Malta has signed and ratified the
Convention on Climate Change and signed but not yet ratified the Kyoto Protocol. Maltais not part of Annex I of the Convention, but has the status of “a small island developingState”. This does not exclude Malta from the obligation to comply with the CouncilDecision related to monitoringand reporting of CO2 and other greenhouse gas emissions,which is part oftheCommunityenvironmental acquis.
Concerning waste, no legislative progress can be reported. Malta has ratified the Basle
Convention on the Transboundary Movement of Hazardous Waste. Legislation toimplement theobligations oftheConvention is alreadyin place.
No legislative progress can be reported as regards Industrial Pollution Control and
Risk Management andNoisefromVehicles and Machinery
.
There has been no legislative progress on Chemicals or onGenetically Modified
Organisms.
No progress can be reported with regard to Radiation Protection (see Chapter 14 -
Energy).
As regards administrative capacity, the Ministry for Environment, through its
Environment Protection Department (EPD) is responsible for the drafting andimplementation of most of the legislation related to the acquis. The EPD covers
horizontal legislation, nature protection, water and air quality, waste management andIndustrial Pollution control and Risk Management. Its capacity is being strengthened.Two new Environment Officers havebeen recruited to strengthen the Waste ManagementSection within the Department, while two Legal officers and two Environment Officerswill be engaged shortly for the Legal Office and Biodiversity and Protected SpecifiesSection respectively. Since the adoption of the Civil Protection Act in November 1999,the staff of the Civil Protection Department has been strengthened by an additional 50employees, bringing it to a total of 230 employees. 20 of these employees work in the
52Pollution Control Co-ordination Unit (PCCU), which is responsible for the monitoring
and assessment of air and water quality. The Malta Resources Authority Act wasapproved by Parliament in September. This independent authority will assume theregulatoryfunctions currentlyheld bythe Water Services Corporation in connection withmanagement ofwaterresources.
The Ministry of Home Affairs, through the Planning Authority (PA), is responsible for
the land use and deliveryof environment permits, with the advice of the EPD which doesthe environmental impact assessments. The Civil Protection Department in the Ministryof Home Affairs is responsible for civil protection and for marine pollution in co-ordinationwiththePCCU,theMaltaMaritimeAuthorityandtheMaltaArmedForces.
The Air Pollution Monitoring Programme has been extended by the introduction of a
fullyoperational mobile Air Monitoring Station and monitoring is being carried out in 31localities. The bathing water quality programme has been extended by including physio-chemical parameters as indicated in the Bathing Water Directive. This programmemonitors 36 different sites.
Overallassessment
The existing level of alignment with the acquisis very low in Malta. There is no sector
where transposition is really advanced. Substantial efforts will be necessary to adopt andimplement the acquisin this field. Harmonisation of national legislation with the
Community environmental acquiscould progress at a quicker pace if the new
Environmental Protection Act is adopted; which still has to bedone.
Malta has not yet adopted a strategy and a directive-specific programme for the
transposition, the implementation and the enforcement of the EC environmental acquis,a
short-term priorityin theAccession Partnership also mentioned in last RegularReport.
Malta still has to adopt horizontal legislation on environmental impact assessments -also
ashort-term priorityin theAccession Partnership-, access to information and reporting.
Extensive legislative transposition is necessary in practical all areas of waste
management legislationinordertocomplywiththeCommunity acquis.
Legislation transposingthe acquisrelated to airqualitystill has to beadopted.
With regard to water quality, Malta still has to transpose most of the Community
legislation, in particular in relation with discharges of dangerous substances into theaquatic environment, nitrates, bathing water and drinking water (at present Malta hasonly one wastewater treatment plant). The sewage sludge from this plant, along with theremaining collected wastewater (85% of the total), is discharged untreated into the seathrough two outlets).
Withregardtonatureprotection,most oftheCommunitylegislation has to be transposed,
inparticularthewildbirds andthehabitat directives.
Malta still has to adopt legislation with regard to industrial pollution control and risk
management.
53Malta still has to transpose directives on the contained use and the deliberate release of
genetically modified organisms, as well as the regulations on the import and export ofcertain dangerous chemicals, and on the evaluation and control of the risks of existingsubstances.
Legislation related to noiseand to radiation protection still has to beadopted.ThenewEnvironment ProtectionAct will,whenenacted,provideforthesettingup of the
Environment Protection Authoritythat will act as the competent authorityas envisaged intheenvironmental acquis.
A separation of the regulatory functions from service provision functions with regard to
water and drainage services as well as mineral extraction will now be enacted due to thenewMaltaResources AuthorityAct.
Following the reinforcement of the EPD in the Ministryfor Environment, it is difficult at
this stage to assess whether further quantitative strengthening will be needed. In all casesnew competencies will be needed to deal with the different sectors and issues covered bytheacquis,andat least acomprehensivetrainingwill benecessaryinthat respect.
The investments needed to implement the acquisin the different sectors are certainlyof a
large scale, in particular with regard to waste management, water quality, natureprotection (habitat) and Industrial Pollution Control and Risk Management. This makes itparticularly important for the Maltese Government to develop a plan for financinginvestments (directive specific) based on estimations of costs of alignment, a short-termpriorityin theAccession Partnership.
Chapter 23: Consumers and healthprotection
No further progress has been made in terms of legal alignment, although new legislationin this areais underpreparation.
The Department of Consumer Affairs within the Ministry of Economic Services is the
authority responsible in the field of consumer policy. A Consumer Affairs Council,grouping under its umbrella two consumer associations, is an autonomous structure, withan advisory and consultative role. The Standardisation Authority is autonomous andresponsible for standards and ancillary matters. The Consumer Claims Tribunal allowsspeedyand cheap legal redress foraggrieved consumers.
TheMaltaTourism Authorityhas anewenforcement directorate, which is responsible for
theenforcement andtheadministrationofthetravel packageandtimesharelegislation.
Under the Health Department , there is an Inspectorate for food safety in restaurants and
hotels.
OverallAssessment
The existing Maltese consumer protection policy is not in line with the acquis, but
transposition has started. Malta still has to enact a draft bill amending its existinglegislation with regard to misleading advertising, comparative advertising, doorstepselling, product liability and unfair contract terms. Provisions concerning the sale of
54consumer goods, associated guarantees and injunctions and product liability rules should
also beincluded.
Malta still has to finalise and adopt subsidiary Legislation on Travel Packages and
Timeshares.
The existing administrative structures provide a good framework for the implementation
of theacquisbut they need to be strengthened. This applies in particular to the
Department of Consumer Affairs. An operations review of the structures responsible fortheimplementationofconsumerpolicieshasbeencommissioned.
Chapter 24: Co-operationinthe field of justice and home affairs
Since the last Regular Report, Malta has made some progress in the area of justice andHomeAffairs.
No progress can yet be recorded on data protection , a short-term priority of the
Accession Partnership, norin thefield of visapolicy .
Concerning border control , the passport system has been upgraded and now includes
several newsecurityfeatures includingdigitisedimages andmachine-readablepassports.
MaltaInternational Airport has preparedadetailedfeasibilitystudyon the implications of
the implementation of the Schengen Agreement at the air terminal. The Malta MaritimeAuthorityis carryingout a similar exercise with respect to the sea terminal, which will beconstructed overthenext two years.
In the field of migration , the Malta Citizenship (Amendment) Act adopted this year
allows non-nationals marrying Maltese nationals to apply for Maltese citizenship onlyafter5 years ofmarriage, thus actingas adeterrent formarriages ofconvenience.
As regards asylum, the Asylum Act was enacted by the Parliament in July 2000, thus
partially fulfilling one of the short-term priorities of the Accession Partnership. The newact is largely in line with the acquisin this area and with international obligations under
the Geneva Convention on Refugees. Until now, in the absence of an administrativeinfrastructure, Malta has accepted the UNHCR’s decisions on asylum and requests havebeen processed through a non-governmental organisation, the local Migrants’Commission.
Notice has been given to the High Commissioner of the UNHCR that Malta will be
lifting its geographical reservation to the Geneva Convention on Refugees. Thisreservationmust beliftedinordertocomplywiththe acquis.
No significant progress can be reported in the area of police co-operation since last
RegularReport.
The inspection squads engaged in the fight against fraud and corruption , have been
strengthened sincethelast RegularReport, increasingthestafffrom 15 to 24 members.
As regards drugs, the Dangerous Drugs Ordinance has also been amended so that the
Maltese Government is now in a position to ratify, in accordance with the acquis,t h e
55Agreement on Illicit Traffic by Sea. This was a short-term priority of the Accession
Partnership.
Co-operation Agreements in the fight against illegal trafficking of drugs and organised
crime were concluded with Cyprus, Israel and Turkey in 1999 and Slovakia and Hungaryin2000.
In the field of money laundering , in March 2000 Malta ratified the Council of Europe
convention on Money Laundering, Search, Seizure and Confiscation of the Proceeds ofCrime,whichwas oneoftheshort-term priorities oftheAP.
I nt h ea r e ao f customs co-operation , the Customs Department has created a Directorship
on EU matters, in order to co-ordinate, communicate and monitor the implementation oftheacquisrelating to Customs under this area. A gaps and needs analysis has been done
and provides the basis for a Customs change project including the development of anintegrated computersystem.
Concerning judicial co-operation in criminal and civil matters , legislation to enable
Malta to ratifythe Convention on the Civil Aspects of International Child Abduction andthe Convention on Recognition and Enforcement of Decisions Concerning Custody ofChildren and Restoration of Custody of Children was enacted in the last quarter of 1999.Malta has now ratified these Conventions and is in line with the acquisconcerning
international obligations related to the custodyof children as well as the enforcement andrecognitionofdecisions relatingthereto.
Overallassessment
On the whole, Malta has achieved a reasonable level of alignment in field of Justice andHomeAffairs.
New legislation on data protection and privacy , published in a white paper in May
2000, remains to be adopted bythe Parliament. A general law on data protection is a pre-condition for participation of Malta in Europol. It is one of the short-term priorities of theAccession Partnership.
In the field of visa policy , at present there are no Direct Airside Transit Visas (DATV) as
required in the acquisfor people not leaving the airport terminal. However, there are
transit visas fornon-national passengers who will arriveand depart within 24 hours.
Many countries on the Common Visa List (CVL) do not require visas to enter Malta.
Furtheralignment is thereforerequired in this regard.
Concerning border control , the Police controls air and sea entrance. At sea, the Armed
Forces act on behalf of the Police, informing the latter. Good co-ordination exists amongcompetent authorities. The structure of the border control branch/immigration branch ofthe Police, including certain units of the Malta Armed Forces (MAF), is sufficientlyeffective. However, at present, the maritime squad will not be able to guarantee fullcontrol of pleasure boats or/and domestic fishing boats on their way to the archipelago ofMalta.
56Compared to present Schengen standards, equipment is still poor and generally needs to
be improved, particularly the control line equipment and ship- and land-basedsurveillancedevices.
The current immigration legislation is broadly in line with the acquis. However, the
legislation covering specific groups temporarily resident in Malta (e.g. students anddependent family members) is not in line with the acquis. Amendments are therefore
required in this regard.
While the new Act on asylumputs Malta largly in line with the acquisin this field,
aspects like the taking of fingerprints from asylum seekers will have to be taken intoaccount. Areinforcement ofhuman resources in this area, a training strategy, a strategytocover the social integration of recognised refugees, suitable accommodationarrangements, an effective"removals"policyand adequateinfrastructurearestill needed.
Maltahas no readmission agreements with anyothercountry.
Regarding police co-operation , Malta joined Interpol in 1970. The Malta Police force
has set up an Interpol office to deal with all related requests. Malta wishes to participatein Europol but it must adopt a law on personal data protection before it can do so. AEuropol liaison office is still to be set up. Malta has to prepare for the setting-up of theSchengenInformationSystem.
Agreements on the fight against organised crime have been made with many countries:
Italy (1991), France (1998), Spain (1998), Russian Federation (1993), Libya (1995),Egypt (1997), Israel (1998), Cyprus (1999), Turkey(1999).
In the field of the fight against fraud and corruption , The Maltese law is not yet fully
in line with the standards set by the Convention on the protection of the financial
interests of the European Communities . There is a "Permanent Commission against
corruption" set up by the Government to protect citizen's rights. However it does notappear to be very active. The Internal Audit Department in the Ministry of Finance willalso function as the Anti-Fraud Unit, thereby serving as an appropriate interlocutor forofficials investigatingsuspicions offraud against financial interests oftheEC (OLAF).
Malta has so far not acceded to the OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions, which was one of the short-termpriorities of the AP. Nor has it joined the United Nations anti-corruption programme forDrugControl and CrimePrevention.
Concerning money laundering , a new Computer Misuse Bill, published in a white paper
in May 2000, remains to be adopted by the Parliament. It is needed to provide the penalframework necessaryto prevent and fight computer-related offences.
The Economic Crime Unit should be reinforced in order to deal with the information that
will be available from the future Financial Intelligence Unit. This was a short-termpriorityoftheAccession Partnership.
As regards customs co-operation , Malta still has to develop an integrated computer
system. An agreement on mutual assistancestill has to beapproved bytheCouncil.
57In the field of judicial co-operation , Malta has to amend its legislation in order to be in
linewiththe acquis, mainlyforcivil matters.
Overall, Malta must continue its efforts to harmonise its legislation with the acquis.I n
particular, a law on data and privacyprotection, the alignment of Malta’s visa policywiththeEU visa common list and the ratification of number of conventions for civil and penaljudiciaryco-operation, arenecessary.
It must also reinforce its capacityto implement the acquisin the JHA field. In particular,
the building-up of a capacity to deal with asylum seekers, the updating of equipment forborder controls and police co-operation and the reinforcement of the Economic CrimeUnit must beconsidered.
A training programme on EC legislation for judges, judiciary staff and lawyers would
also benecessary.
Chapter 25: Customs union
Maltahas madesomeprogress in this areaduringthereferenceperiod.
I nt h ea r e ao f Customs Code and its implementing provisions , the new Intellectual
Property (Cross Border) Act entered into force on 23.2.2000. It relates to importation,exportation and re-exportation ofgoods in contravention ofIntellectual Propertyrights.
Act XIX of 1999 amending the Import Duty Act entered into force on 1.1.2000. It
Implements the WTO Agreement on Customs Valuation and is almost completelyin linewiththeE.U. acquis.
Legal Notice 66 entered into force on 14.4.2000. It sets up a Binding Tariff Information
system compatiblewiththerelevant provisions oftheE.U.Customs Code.
Regarding customsacquisoutside the Customs Code , since 1.2.2000 Malta's Customs
Tariff has incorporated the subheadings of the Combined Nomenclature (seventh andeighthdigits).
Concerning administrative capacity , Malta has prepared a Business Change
Management Plan based on the EC Customs Blueprints. The aim of the document is toanalyse the current structures as well as related training needs as part of the plan toupgrade and strengthen existing administrative structures. A Pre-Accession Unit (PAU)will be responsible for the successful implementation of the Plan. In May2000 a DirectorforEUMatters fortheCustoms Department was appointed.
Ongoing training is provided to Customs Department personnel and traders in the use of
new IT systems and in the implementation of new operational provisions, systems,procedures and EC policies.
According to the Maltese authorities, the human resource capacities at the Customs
Department are being consolidated and upgraded, most notably in the areas of postclearance audit, systems of tariff quotas, ceilings and suspensions, counterfeit/piratedgoods, dual purposegoods, transit and bordercontrols and otherprocedures.
58Preparatory work has started on the setting-up of a CAP Unit within the Customs
Department to deal with customs-related aspects of the Common Agricultural Policy(CAP).
A Quality Service Charter for the Customs Administration, to improve trade facilitation
and relations with Business has been drafted.
The computerisation of the Customs Department includes the setting up of an Integrated
Customs Information System based on ASYCUDA ++ and other complementary ITsystems able to interface with EC systems. The project document to make ASYCUDAfully compatible with EC computerised applications will be finalised by the third quarterof2000.
Overallassessment
Despite some progress in this area, much remains to be done both to align Maltesecustomslegislationandtodeveloptheadministrativecapacitytoimplement it.
The work on the introduction of the Single Administrative Document, on the
implementation of customs procedures with economic impact, on the drafting of aconsolidated customs code as well as all the other priorities identified by the MalteseCustoms Authorities (eg. simplified procedures, free zones, duty relief), should becompleted as planned. It is of paramount importance that the Business ChangeManagement Plan, including computerisation, is implemented as scheduled and that thePre-Accession Unit starts workingas soon as possible.
Chapter 26: Externalrelations
As regards the Common Commercial Policy , since 1999 there has been some progress
in alignment of Maltese tariffs with those of the EC. The tariffs Malta applied in 1999averaged 7.6% on all products, 7.1% on agricultural products, 3.9% on fishery productsand 8.0% on industrial products. By comparison the EC tariffs in 1999 stood at 5.3% onall products, 9.4% on agricultural products, 12.4% on fishery products and 4.2% onindustrial products. Upon accession Malta will be required to align tariffs with the EC’sCommon External Tariff.
The Intellectual Property Rights (Cross Border Measures) Act was enacted in February
2000 in order to implement provisions emanating from the WTO TRIPS (Trade RelatedIntellectual PropertyServices)agreement.
While Malta’s external commercial policy is within the responsibilities of the Ministry
for Economic Services, Malta's relations with the WTO are conducted by the Ministry ofForeign Affairs, in co-ordination with the ministries concerned. An InternationalEconomic Relations Directorate has been set up within the Ministry of EconomicServicestostrengthenitscapacitytodeal withWTOmatters.
Malta has conducted a study on its bilateral agreements with third countries in order
to verify whether they are in line with the acquis. According to the Maltese authorities,
minor amendments will have to be made to some Investment Guarantee Agreements thatarein force.
59No furtherpreferential tradeagreements havebeen notified.
TodateMaltahas no developmentand humanitarian aid policy.
Overallassessment
When it joins the EU, Malta will have to renounce its status as a developing country and
will have to subscribe to the multilateral WTO agreements to which the Community is aparty.
In view of the fact that Malta will be required to align its tariffs with those of the EC
upon accession, progress towards full alignment in this area should be pursued.Furthermore, Malta should amend, where necessary, its bilateral agreements to bringthem fullyinlinewiththe acquis.
The EU and Malta have established a framework for co-operation regarding WTO issues
both at ministerial and at departmental level. Malta has been supportive of EU policiesand positions within the WTO framework. As regards the new round, Malta concurs withthe EU on the need to launch a comprehensive trade round as soon as possible and sharesthe view that the results of work under the built-in-agenda would be less substantial in itsabsence. As regards export of dual-use goods, Malta’s legislation still has to be adaptedto provide the necessaryadministrative structures and regulations. Malta still has to alignits legislationonexport credits withthe acquis.
Malta is a signatory to the Information Technology Agreement (ITA). However, Malta
still needs to become a signatory to the plurilateral WTO agreements on GovernmentProcurement and Civil Aircraft.
As regards the WTO Agreement on Trade in Textiles and Clothing, Malta needs to use
the third stage of integration under the ATC to align its integration programmes on thoseoftheEC, whilenotablyavoidingintegrating products not yet integrated bythe EC. Also,further co-ordination is necessary in order to consolidate the adjustment of the Malteselist ofcommitmentsinGATS withtheEC commitmentsandMFNexemptions.
Malta's administrative capacityto implement the acquishas been strengthened and would
appeartobesatisfactory,inparticularinrelationwithWTOandcommercial issues.
Chapter27: Commonforeignand security policy
Since the last Regular Report, Malta has continued to align its policies with those of theEUinthis area.
As regards participation in the political dialogue , in June 1999, Malta resumed the
multilateral political dialogue with the associated Central European countries and Cypruswithin the framework of the Common Foreign and Security Policy, at the level ofDirectors, European Correspondents and Working Groups. Malta continues to orient itsforeign and securitypolicytowards theUnion.
60Malta follows the developments of the European Security and Defence Policy as part of
CFSP and has actively participated in the exchanges in this context with the EU in EU +15 format.
Malta strives to contribute to regional stability in the framework of the Euro-
Mediterranean Dialogue. It has established strong co-operation with its Mediterraneanneighbours.
As regards alignment with EC statements and declarations , Malta has regularly
aligned its positions with those of the Union and when invited to do so has associated
itself with the Union’s joint actions and common positions . The United Nations Act of
1993 was amended in February 2000 in order to empower the Maltese Government toadopt sanctions which do not originatefrom theUnited Nations SecurityCouncil.
Overallassessment
The overall alignment of Malta with the acquisin the CFSP is satisfactory.As the acquis
in the field of foreign policy and security develops further, Malta should maintain theorientationofits foreignpolicyinlinewiththat oftheUnion.
Malta contributes to regional stability in the framework of the Euro-Mediterranean
Dialogue. It has established strongco-operation with its Mediterranean neighbours.
Malta is willing to abide by the EU's code of conduct on arms export. It still has to enact
subsidiary legislation that will provide for the necessary mechanisms concerning theexport ofdual-usegoods.
Malta is engaged in bilateral co-operation on technical matters in order to strengthen its
capacityinthefieldofexport control.
Concerning the administrative capacity to implement the provisions relating to CFSP,
Malta has the capacity to effectively participate in the Associated Correspondents’Network both in terms of staffing allocations and in terms of the appropriate informationsystems.
Chapter 28: Financialcontrol
Sincethelast RegularReport, Maltahas madesubstantial progress in this area.
ThePublic Financial Control System has been enhanced by the setting-up of the
General Internal Audit Board (GIAB) within the Cabinet Secretariat of the Office of thePrime Minister (July 2000). This board replaces the Internal Audit MonitoringCommittee of the Ministry of Finance and ensures complete functional independence forthe Governments' internal auditors. Its executive branch is the Internal Audit Directorate(IAD), which is at present in the process of recruiting staff. The IAD will be the nationalcontact point for the relevant Commission services, in respect of both ex ante control andinternal audit functions. The IAD will be responsible for harmonising the methodologyofex antecontrol and internal audit standards.
61A plan has been adopted with the aim of establishing Internal audit services in line
ministries which will be directly responsible to the IAD. Their tasks still have to bedeterminedandtrainingprovided.
Theex antecontrol functionwill betheresponsibilityoftherelevant lineministries.These changes contribute to the strengthening of the public internal financial control
system in Malta and to the independence of the internal audit function. Once achieved,theywill fulfil threeoftheshort-term Accession Partnership priorities underthis chapter.
External financial control is the responsibility of the National Audit Office. The Auditor
General is proposed by Parliament and appointed by the President of Malta. Theindependence of the National Audit Office is entrenched in the Constitution. It reportsdirectlyto the Parliament on the adequacyand procedures of the Government's budgetaryincome and expenditure. The NAO has recently substantially reinforced its staff and hasbeen restructured into sections dealing with regularity, value for money andinvestigations. The NAO has accepted the INTOSAI standards and prepared a draft codeofethics forits officials.
As regards the structural action expenditure andprotection of financial interests of
the EC, the changes made to the internal audit better prepare Malta for the control of
structural action expenditure upon accession. The IAD will be the Certifying Body oninternal control systems and procedures ofPayingAgencies.
The IAD will also function as the Anti-Fraud Unit, thereby serving as an appropriate
interlocutor for officials investigating suspicions of fraud against financial interests of theEC (OLAF).
Overallassessment
The recent changes in the Public Internal Financial Control systems represent asignificant improvement that provides a good framework for financial control in Malta.However, the establishment of internal audit services in Government spending centreshas not yet been finalised and the harmonisation function of control and auditmethodology by the IAD has yet to be developed. In this respect it will be necessary tostart developing financial management and control manuals for the spending centres aswell as audit manuals for the internal audit services (including audit trails). It will also beimportant to give attention to the ex ante control function within the Government'sspending centres. Finally, relevant control and audit staff will have to follow suitabletrainingprogrammes.
In view of the decentralisation of the implementation of pre-accession assistance, the
Maltese authorities should start developing, in co-operation with the relevantCommission services, a plan for the financial management and control/audit of EC pre-accession funds. This is oneoftheshort-term priorities oftheAccession Partnership.
Finally, the National Audit Office will need to provide its staff with appropriate training
to allowit to perform accordingto therequirements ofthe acquis.
62Chapter 29: Financialand budgetary provisions
Since the last Regular Report, there has been progress, in particular in strengthening the
administrativecapacityinthisarea.
As regards national budget and EC co-financed measures , the Public Chart of
Accounts, which underlies the budget, has been reformed in order to ensure compliancewith the European System of Accounts (ESA95). It provides for the inclusion of separatecommitments within the Government budget, for the separation in the budgetpresentation ofEC funds from national funds and foraccountingand control.
An Accruals Accounting Task Force has been set up to introduce an accruals accounting
system in Government by 2005. Auditors have been contracted to compile a new set offinancial standards to support thenewsystem.
Additional personnel have been recruited within the Budget Office and within the
Treasurywith the aim of implementing respectively the acquisin connection with public
financial planning, and the acquisconcerningGovernment accountingsystems.
New Offices of Review have been established as part of a pilot project on public
management output performance systems. This partly addresses one of the AccessionPartnership short-term priorities. These offices are centrally co-ordinated by aManagement EfficiencyUnit withintheOfficeofthePrimeMinister.
As regards own resources andadministrative infrastructures , significant progress has
been achieved bythe Central Office of Statistics (COS) - in collaboration with Eurostat -for the harmonisation of its GNP estimates in line with ESA 95 norms, which fulfilsanothershort-term priorityoftheAccession Partnership.
Overallassessment
Budgetary legislation in Malta seems broadly in line with the standards found in the EU.The procedures for multi-annual budgeting, within a comprehensive medium-termfinancial framework, should be strengthened. The work already done for introducing apublic management output performance system and value-for-money practices should becontinued and progressively extended to all government entities, including themanagement ofEC funds.
The Financial Administration and Audit Act must still be amended to take account of the
separateroles oftheauthorisingand controllingofficerforGovernment financepurposes.
As regards the Community’s Own Resources, there is currently no provision in Maltese
law with regard to the levies on trading in and warehousing of sugar. Further alignmentforthecalculation oftheVAT resourceis also necessary.
There is a need to set up and strengthen the central co-ordination for the proper
collection, monitoring and payment of funds to and from the EC budget. Theadministrative capacity should be strengthened in the context of the relevant policy areassuchas Agriculture,Customs,andRegional Policy.
63The harmonisation of statistics will need to be pursued, in particular as regards VAT
revenues.
3.2. Translationof the Acquisinto nationallanguage
Applicant countries are to translate the various legal texts constituting the acquisinto
their national languages by the time of their accession. The acquis, consisting of primary
and secondary binding legislation, represents at present a considerable volume of acts,roughly estimated at 60,000-70,000 pages of the Official Journal. To help the candidatecountries in this process, assistance is being provided under the pre-accessionprogrammes. TAIEX may support the candidate countries who wish so to create acentralisedTranslationCo-ordinationUnit.
The Constitution of Malta stipulates (Article 6) that “the National Language of Malta is
the Maltese language” and that “the Maltese and the English are both official languagesof Malta and the administration may for all official purposes use any of such languages”.It also stipulates (Article 74) that “Save as otherwise provided by Parliament, every lawshall be enacted in both the Maltese and English languages and, if there is any conflictbetweentheMalteseandtheEnglishtexts ofanylaw,theMaltesetext shall prevail.”
No part ofthe acquishas been translated.
3.3. Generalevaluation
Since the last Regular Report, the process of aligning legislation with the acquishas
gained momentum in Malta, and progress has been significant in most areas, althoughuneven across the different fields. Malta has also speeded up efforts to strengthen itsadministrative capacity with a view to accession, and the first results are becomingvisible.
There has been some progress with respect to the internal market acquis. Considerable
further progress has been made in aligning with the acquison industrial and intellectual
property, and in the area of company law Malta is now close to full alignment. Malta hasadopted a new Standardisation Act, but more work is required to align its legislation withthe New and Global Approach, and to transpose sector specific directives. Some furtheradjustments are also needed to put the public procurement legislation in line with theacquis. Despite some progress on free movement of capital and services, much remains
to be done to align Maltese legislation in these areas. As regards free movement ofpersons, efforts should be stepped up to ensure that there are no provisions in Malteselegislation which contradict Community rules. With respect to competition, substantialefforts arestill neededtodevelopaproperstateaidcontrol system.
The publication of two White Papers on industrial development and privatisation, as well
as the setting up of the Institute for the Promotion of Small Enterprises, have created asuitable framework for the development of an industrial and SME policy. However, theimplementationoftheprivatisationprogrammeremains slow.
While Malta has made progress in the area of social policy, further alignment is still
needed in this field, in particular with respect to labour legislation and occupationalhealth and safety.
64In the field of taxation, the framework for the alignment of taxation legislation has been
created with the re-introduction of VAT; however, further efforts are required withrespect to both VAT and excise duties. Despite some progress in the area of customs,continued efforts are needed, not only to align Maltese customs legislation with theacquisinthisdomain,but alsotodeveloptheadministrativecapacitytoimplement it.
Notable progress has been made in the areas of telecommunications and culture and
audio-visual policy. If efforts are pursued, alignment with the acquisin these areas,
through secondarylegislation, maybereached in theshort-term.
In statistics, the Central Office of Statistics of Malta has made considerable progress and
is pursuing its efforts to fully align its methodologies with EC standards. In the field offinancial control, the reinforcement of the National Audit Office and the reform of theinternal audit system within the Maltese Government have provided Malta with anadequate institutional framework. This progress should be further consolidated throughappropriatestafftraining.
In the field of justice and home affairs, there has been significant progress in particular
with the adoption of the new Asylum Act. Efforts are still needed with respect to dataprotection, immigration, visa policy and judiciary co-operation, as well as to strengthenadministrativecapacity.
In the areas of agriculture, the environment and regional policy, progress has been very
limited. Malta still has to adopt most of the extensive agriculture and environmentacquis. As regards the environment in particular, an overall strategy for the adoption
and implementation of the environmental acquisremains to be developed. As far as
regional policy is concerned, Malta has not yet taken the necessary steps to prepare itselffor managing structural funds. Substantial efforts in these three areas are needed as amatterofpriority.
While the Maltese administration appears to be adequately staffed, considerable
restructuring and staff training is still needed for it to be able to implement the acquisin
many areas. Efforts in this direction have started. Over the past year, the administrativecapacity in the areas of statistics and financial control has been considerably improved.Important projects have been launched to reinforce the agriculture administration bysetting up an Integrated Administrative Control System, as well as to strengthen the taxand customs administrations. Work in theseareas must becontinued.
Overall, Malta's administrative capacity still needs to be significantly reinforced with
respect to market surveillance and certification, the enforcement of intellectual andindustrial property rights, and in the area of maritime transport and safety. Considerableefforts are required also in the fields of environment and regional policy. Concerningjustice and home affairs, administrative capacity should be strengthened in particular forthe handling of Asylum cases, borders control and in the area of police co-operation.Particular attention should be paid to ensuring the adequate functioning of the newlycreated State Aids Monitoring Board and the Regulatory Authority forTelecommunications.
The majority of the Accession Partnership short-term priorities have been either partially
or completely fulfilled. Progress has been particularly significant in the areas of
65industrial policy and justice and home affairs. Further efforts are required in particular
withregardtostateaids andintheareaoftheenvironment.
Maltahas alreadystartedtoaddress anumberofmedium-term priorities.
66C. Conclusion
Malta continues to fulfil the Copenhagen political criteria. Its institutions are democratic
and function smoothly and there are no particular problems with regard to human rights.Basic civil and political rights continue to be respected. The overall situation with regardtoeconomic,social andcultural rights is satisfactory.
However, special attention should be devoted to the issue of the backlog of civil judiciary
cases. Malta should also pursue and reinforce the implementation of its policies withrespect to the treatment of refugees and gender equality, as well as the reform of itspublicadministration.
Malta is a functioning market economy and should be able to cope with competitive
pressureand market forces within theUnion.
The Maltese economyis showing the first signs of stronger macroeconomic performance.
Thegovernment’s medium-term fiscal programme generated a first decrease in the publicdeficit. Progress has been made in developing restructuring and privatisation programmesandinitiatives forentrepreneurship.
However, the government deficit remains very high and needs to be further reduced in
order to improve the macroeconomic environment. The remaining price controls distortrelative prices and produce an inefficient allocation of resources. The influence of thestate in the economy is still too high in some areas. The implementation of therestructuringofpublicutilities and loss-makingpublicenterprises remains slow.
The authorities need to complete the consolidation of public finances, including the
reform of the social securitysystem, in order to ensure medium term fiscal sustainability.Market distortions need to beremoved and the envisaged structural reforms need to moveinto the implementation phase. The influence of the state in the economy needs to befurther scaled back through the completion of trade and capital liberalisation plans, thefurther reduction of state aids, the introduction of more competition in a number ofsectors,andtheimplementationoftheauthorities’privatisationplans.
Since the last Regular Report, the process of aligning legislation with the acquishas
gained momentum in Malta, and progress has been significant in most areas, althoughuneven across the different fields. Malta has also speeded up efforts to strengthen itsadministrative capacity with a view to accession, and the first results are becomingvisible.
There has been some progress with respect to the internal market acquis. Considerable
further progress has been made in aligning with the acquis on industrial and intellectualproperty, and in the area of company law Malta is now close to full alignment. Malta hasadopted a new Standardisation Act, but more work is required to align its legislation withthe New and Global Approach, and to transpose sector specific directives. Some furtheradjustments are also needed to put the public procurement legislation in line with theacquis. Despite some progress on free movement of capital and services, much remains
to be done to align Maltese legislation in these areas. As regards free movement ofpersons, efforts should be stepped up to ensure that there are no provisions in Maltese
67legislation which contradict Community rules. With respect to competition, substantial
efforts arestill neededtodevelopaproperstateaidcontrol system.
The publication of two White Papers on industrial development and privatisation, as well
as the setting up of the Institute for the Promotion of Small Enterprises, have created asuitable framework for the development of an industrial and SME policy. However, theimplementationoftheprivatisationprogrammeremains slow.
While Malta has made progress in the area of social policy, further alignment is still
needed in this field, in particular with respect to labour legislation and occupationalhealth and safety.
In the field of taxation, the framework for the alignment of taxation legislation has been
created with the re-introduction of VAT; however, further efforts are required withrespect to both VAT and excise duties. Despite some progress in the area of customs,continued efforts are needed, not only to align Maltese customs legislation with theacquisinthisdomain,but alsotodeveloptheadministrativecapacitytoimplement it.
Notable progress has been made in the areas of telecommunications and culture and
audio-visual policy. If efforts are pursued, alignment with the acquisin these areas,
through secondarylegislation, maybereached in theshort-term.
In statistics, the Central Office of Statistics of Malta has made considerable progress and
is pursuing its efforts to fully align its methodologies with EC standards. In the field offinancial control, the reinforcement of the National Audit Office and the reform of theinternal audit system within the Maltese Government have provided Malta with anadequate institutional framework. This progress should be further consolidated throughappropriatestafftraining.
In the field of justice and home affairs, there has been significant progress in particular
with the adoption of the new Asylum Act. Efforts are still needed with respect to dataprotection, immigration, visa policy and judiciary co-operation, as well as to strengthenadministrativecapacity.
In the areas of agriculture, the environment and regional policy, progress has been very
limited. Malta still has to adopt most of the extensive agriculture and environmentacquis. As regards the environment in particular, an overall strategy for the adoption
and implementation of the environmental acquisremains to be developed. As far as
regional policy is concerned, Malta has not yet taken the necessary steps to prepare itselffor managing structural funds. Substantial efforts in these three areas are needed as amatterofpriority.
While the Maltese administration appears to be adequately staffed, considerable
restructuring and staff training is still needed for it to be able to implement the acquisin
many areas. Efforts in this direction have started. Over the past year, the administrativecapacity in the areas of statistics and financial control has been considerably improved.Important projects have been launched to reinforce the agriculture administration bysetting up an Integrated Administrative Control System, as well as to strengthen the taxand customs administrations. Work in theseareas must becontinued.
Overall, Malta's administrative capacity still needs to be significantly reinforced with
respect to market surveillance and certification, the enforcement of intellectual and
68industrial property rights, and in the area of maritime transport and safety. Considerable
efforts are required also in the fields of environment and regional policy. Concerningjustice and home affairs, administrative capacity should be strengthened in particular forthe handling of Asylum cases, and in the area of police and judicial co-operation.Particular attention should be paid to ensuring the adequate functioning of the newlycreated State Aids Monitoring Board and the Regulatory Authority forTelecommunications.
The majority of the Accession Partnership short-term priorities have been either partially
or completely fulfilled. Progress has been particularly significant in the areas ofindustrial policy and justice and home affairs. Further efforts are required in particularwithregardtostateaids andintheareaoftheenvironment.
Maltahas alreadystartedtoaddress anumberofmedium-term priorities.
69D. Accession Partnership and National Programme for the
Adoptionofthe Acquis:Globalassessment
ThepurposeoftheAccession Partnership is to set out in asingleframework:
•thepriorityareas forfurtherworkidentifiedintheCommission’s regularreport;
•thefinancial means availableto help candidatecountries implement thesepriorities;
•theconditions which will applyto this assistance.
Each candidate has been invited to adopt a National Programme for the Adoption of the
Acquis. This sets out how the country in question envisages to deal with the Accession
Partnership, the timetable for implementing the Partnership’s priorities, and implicationsin terms of human and financial resources. Both the Accession Partnerships and theNational Programmes for the Adoption of the Acquisare revised on a regular basis, to
takeaccount ofprogress made, and to allowfornewpriorities to beset.
1. AccessionPartnership
In the following assessments the main sub-headings are indicated in bold type and furtherkeyconcepts taken from theAccession Partnership highlighted in italics.
16
Short-term priorities
Economic criteria: The Maltese government has established and started to implement a
medium-term plan for the creation of a stable and sound macroeconomic environmentinvolving a restoration of public finances, a new taxation policyand a restructuring of theindustry.The new taxation policy includes in particular the reintroduction of VAT and the
setting-up of a Tax Compliance Unit to bring previously unrecorded activity within the
tax net. Several programmes have been launched to help restructure SMEs with, in
particular, the creation of the Institute for the Promotion of Small Enterprises (IPSE), andaprivatisationplanhasbeeninitiated.
It can thereforebeconsidered that thecorresponding priorities havebeen met .
Internal Market: All priorities have been addressed to some extent except the
legislation on data protection .I nt h ef i e l do f Intellectual and Industrial Property Rights ,
a Copyright Act, a new Patents Act and a new Customs Act dealing with borderenforcement adopted this year put the Maltese legislation largely in line with the acquis
in this area. As regards Company law , there has not been progress. Regarding Free
Movement of Goods , the government adopted and started to implement a plan in three
steps for the elimination of levies on goods imported from the EC, except for agricultural
products. However, therehas been no progress as regards the product liabilitydirective .
16For the detailed text of the short and medium term priorities established in the 1999 Accession
Partnership, please refer to Decision2000/249/EC(OJ L78 of29 March2000, p. 17.
70I nt h ea r e ao f Free Movement of Services, no progress has been made as regards data
protection . As regards Free Movement of Capital the government initiated a three-stage
approach to abolishing restrictions on capital flows by 2002, with the first stage enacted
this year. As regards Competition, there has been progress with the setting-up of a State
AidMonitoringAuthority .
However no progress has been made with respect to merger and state aid laws and to the
application of competition rules to public undertakings with special rights; nor has theStateAid Inventorybeen completed.
The Malta Communication Authority was established to act as an independent regulatory
authorityin the Telecommunication sector. With regard to Audio-visual policy, Malta has
almost completed alignment of its legislation and some secondary issues will have to beregulatedthroughimplementingRegulations.
In theTaxation area, although some progress has been registered in the alignment of
VAT, there is no timetable for full legislative alignment of VAT and excise duties
legislation, neitheris there a plan to ensure that new tax measures would complywith the
principles of the Code of Conduct for business taxation . With respect to Customs, only
thetime-table for harmonisation of legislation was adopted and Malta still has to adopt
theCombined Nomenclature including the harmonised rules of origin and to implement
thesingle administrative document . A project for the reinforcement of the administrative
capacityincludingcomputerisation has just started and needs to becompleted.
Overall the priorities related to internal market havebeen partially met.
Agriculture: There has been little progress in alignment of veterinary and phytosanitary
legislation andborder inspection posts have not been sufficientlyupgraded. A project for
an Integrated Administrative Control System aiming at preparing Malta’s administrationfor theCommon Agricultural Policy a n dt ot h e Rural Development Policies will be
launched. Thepriorities in this area havenotbeen met.
Environment: The priorities in this area have not been addressed, regardless of whether
we are talking about a global strategy for the transposition and implementation of the
acquis, a plan for financing investments necessary to implement the acquis,o rt h e
Environmental Impact Assessment Directive .The priorities in this area have not been
met.
Transport: Malta has started the transposition of the maritime transport acquisas well
as the preparation of its implementation. However, no strategy and timetable for the
transposition of the maritime and air transport acquis has been elaborated, contrary to
the priority set .Therefore the priority in this chapter has been met to a limited
extent.
Employment and social affairs: The government has closely involved the social
partners in the accession process, however more could be done to support their capacity
building efforts to implement the acquis . Therefore this priority has been met to a large
extent.
71Industrial Policy: Anindustrial restructuring policy, mainly for SMEs,has been agreed
and its implementation commenced. The same applies to a privatisation programme ,
however it does not yet cover the agri-food sector .Therefore the priority in this area
has been metto a largeextent .
Justice and Home Affairs: Malta has given notice to the High Commissioner of the
UNHCR that Malta will be lifting its geographical reservation to the Geneva Convention
on Refugees (with effective implementation early in 2001) . It has continued its
participation in international co-operation in the field of justice. It has adopted legislation
on Asylum that is largelyin line with the acquisbut it still has to set up structures to deal
with asylum requests . Malta signed the Council of Europe Agreement on Illicit Drug
Trafficking by sea . It has strengthened the staff of the services in charge of the fight
against drugs ,but not yet thoseofthe economic crime squad . It has ratified the European
Convention on laundering of proceeds of crime but not the O E C DC o n v e n t i o no nb r i b e r y
and theEuropean Criminal Law Convention .The priorities in this area have been met
to a largeextent.
Reinforcement of administrative and judicial capacity, including the management
and control of EC funds: Malta has completed the legislative framework for internal
and external financial control. It has set up the Internal Audit Directorate within the
government to harmonise audit and control functions ,a sw e l la s internal audit units in
spending centres . It has introduced ex-ante control andfunctional independence of
auditors at both central and decentralised levels . It has issued an audit manual . It still
has to develop an audit trail for control of EC funds. Malta has taken measures toimprovethe efficiency and effectiveness of its public administration but has not adopted a
comprehensive reform programme in that respect. Finally GDP per capita data has been
produced in accordance with EC methodology. Therefore the priorities in this domain
havebeen metto a largeextent.
Medium-term priorities
Onlythose medium-term priorities of the 1999 Accession Partnership where some degree
ofprogress was madearementioned below.
Economic criteria: Malta has significantly reduced the budget deficit and improved tax
collection . It has continued efforts to improve the conditions for enterprise creation and
development,withparticularattentiontosmall andmedium sizedenterprises.
Free movements of capital: Malta has started to abolish remaining restrictions on
inwardandoutwardcapital movements inordertoachievefull liberalisation.
Telecommunications : Although Malta still has to align in areas such as transparency
obligations, interconnection, universal service obligations, tariff rebalancing, numberingand number portability, and carrier pre-selection ,t h enecessary framework legislation
for the transposition of the telecommunication legislation into Maltese law is now in
place.
Employment and Social Affairs: Malta has started to transpose EC legislation in the
fields ofoccupational health and safety ,.
72Financial control: Malta has strengthened public financial control functions through the
provision of adequate staff and training both to the internal auditors and to the NationalAudit Office, partiallymeetingthecorrespondingpriority.
Statistics : Malta has adopted EC compatible statistical methodologies and practices as
regardsGDPestimation,short-termindicators,social statistics andbalanceof payments .
2. NationalProgrammefortheAdoptionofthe Acquis
Malta recently finalised its NPAA. It was published on 18 September 2000, after
extensive discussion with the social partners in the Malta-EU Steering and ActionCommittee. It was discussed in the Parliament in the second half of September.
Annexes
74HumanRights Conventions ratified by the Candidate Countries,
September2000
Partiesto following conventions
and protocolsBG CY CZ EE HU LV LT MT PL RO SK SV TK
ECHR(European Convention
on Human Rights)XXXXXXXXXXXXX
Protocol1 (rightofpropertyet
al.)XXXXXXXXXXXXX
Protocol4 (freedommovementetal.) OXXXXXXOXXXXO
Protocol6 (deathpenalty) XXXXXXXXOXXXO
Protocol7 (nebisinidem) OXXXXXXOOXXXO
European Convention for
thePrevention of TortureXXXXXXXXXXXXX
European Social Charter OXXOXOOXXOXOX
Revised European Social
CharterXXOXOOOOOXOXO
Additional Protocol to the ESC
(systemofcollective complaints)OXOOOOOOOOOOO
Framework Convention
forNational MinoritiesXXXXXOXXOXXXO
ICCPR (InternationalCovenant
onCivil and Political Rights)XXXXXXXXXXXXO
Optional Protocol to the ICCPR
(rightofindividualcommunication)XXXXXXXXXXXXO
Second Optional Protocol toICCPR(abolitiondeathpenalty) XXOOXOOXOXXXO
ICESCR (International
CovenantonEconomic, Social
and Cultural Rights)XXXXXXXXXXXXO
CAT(Convention against
Torture)XXXXXXXXXXXXX
CERD(Convention on the
EliminationofAll Forms of
Racial Discrimination)XXXXXXXXXXXXO
CEDAW (Convention on the
EliminationofAll Forms of
Discrimination against Women)XXX X XXXXXXXXX
CRC(Convention on the Right
ofthe Child)XXXXXXXXXXXXX
X = Conventionratified
O= ConventionNOT ratified
BG = Bulgaria; CY = Cyprus; CZ = Czech Republic; EE = Estonia; HU = Hungary; LV =
Latvia; LT = Lithuania; MT = Malta; PL = Poland; RO = Romania; SK = Slovakia; SV =Slovenia; TK = Turkey
Statisticaldata
1995 1996 1997 1998 1999
Basic Data in 1000
Population (average)17378 381 384 386 388
in km2
Total area 315,6 315,6 315,6 315,6 315,6
National accounts Mio Malta Lira
Gross domestic product at current prices 1.145,5 1.201,3 1.288,2 1.362,3 1.446,3
1000 Mio ECU/euro
Gross domestic product at current prices 2,5 2,6 2,9 3,1 3,4
ECU /euro
Gross domestic product percapita at current prices 6.600 6.900 7.700 8.100 8.800
%change overthe previous year
Gross domestic product at constant prices (nat. currency) 6,2 4,0 4,9 3,4 4,2
in Purchasing PowerStandards
Gross domestic product percapita at current prices :::::
Structure of production %of Gross Value Added18
-Agriculture 2,9 2,9 2,9 2,7 2,5
-Industry(excluding construction) 25,5 24,8 24,3 25,0 24,8
-Construction 3,3 3,1 3,0 2,8 2,3
-Services 68,3 69,2 69,8 69,5 70,4
Structure of expenditure as %of Gross Domestic Product
-Final consumption expenditure 81,6 85,3 82,9 81,9 82,0
-household and NPISH 61,1 63,7 62,4 62,2 63,2
-general government 20,5 21,6 20,5 19,7 18,8
-Gross fixed capital formation 31,9 28,7 25,3 24,5 22,8
-Stock variation 0,2 0,0 0,2 -0,9 0,6
-Exports of goods and services 93,8 87,0 85,1 87,7 91,3
-Imports of goods and services 107,5 101,0 93,5 93,2 96,7
Inflation rate %change overthe previous year
Consumerprice index 4,0 2,5 3,1 2,4 2,1
17Total population (Maltese + permanent residents of foreign nationality).
18At factorcost.
76Balance ofpayments19Mio ECU/euro
-Current account -274 -281 -180 -174 -119
-Trade balance -553 -601 -579 -555 -581
Exports of goods 1.491 1.395 1.467 1.627 1.891
Imports of goods 2.044 1.996 2.047 2.156 2.429
-Net services 210 233 332 381 414
-Net income 30 9 8 -63 -5
-Net current transfers 39 78 59 63 54
-ofwhich: government transfers 8 45 26 25 21
-FDI (net)inflows 101 218 71 238 830
Public finance in %of Gross Domestic Product
General government deficit/surplus20-3,5 -7,7 -6,6 : :
Financial indicators %of Gross Domestic Product
Gross foreign debtofthe whole economy2160,9 71,2 93,6 201,2 214.1 E
as %ofexports
Gross foreign debtofthe whole economy2264,9 81,8 110,0 229,4 234.5 E
Monetaryaggregates In 1000 Mio ECU/euro
-M1 0,9 1,0 1,1 1,2 1,4
-M2 3,3 3,7 4,2 4,4 5,2
Total credit 2,6 3,2 3,8 4,1 4,8
Average short-term interest rates %perannum
-Lending rate 7,4 7,8 8,0 8,1 7,7
-Deposit rate 4,5 4,5 4,6 4,6 4,5
ECUexchange rates (1ECU/euro=..Malta lira)
-Average of period 0,461 0,458 0,437 0,435 0,426
-End of period 0,463 0,451 0,433 0,442 0,415
1995=100
-Effective exchange rate index 100,0 100,6 103,4 105,1 105,3
Reserve assets million ECU/euro
-Reserve assets (including gold) 1.258 1.232 1.297 1.483 1.820
-Reserve assets (excluding gold) 1.246 1.221 1.294 1.482 1.818
191998 and 1999 data from Central Bank of Malta (provisional figures) except for exports and imports of goods and
government tranfers from IMF source
20Excludes local authorities.
21Series break in 1998: more complete definition.
22Series break in 1998: more complete definition.
77External trade Mio ECU/euro
Trade balance -785 -837 -812 -742 -809
Exports 1.463 1.362 1.438 1.637 1.858
Imports 2.248 2.199 2.250 2.379 2.667
corresponding period of the previous year = 100
Terms of trade23: 97,4 98,2 99,1 99,8
as %oftotal
Exports with EC-15 71,4 56,9 54,3 52,8 48,7
Imports with EC-15 72,7 68,6 71,4 69,3 65,4
Demography per1000 ofpopulation
Natural growth rate 5,1 5,8 5,2 3,8 3,0
Net migration rate (including corrections) 0,1 0,8 1,0 0,6 0,6
per1000 live-births
Infant mortalityrate 8,9 10,7 6,4 5,3 7,2
Life expectancy: atbirth
Males 74,9 74,9 74,9 74,4 74,6
Females 79,5 79,8 80,1 80,1 80,1
Labourmarket (ILOmethodology) %of labourforce
Economic activityrate 47,4 47,6 47,6 47,3 47,7
Unemployment rate, total 3,7 4,4 5,0 5,1 5,3
Unemployment rate of persons<25 years 4,3 5,2 6,4 6,5 7,0
Unemployment rate of persons >=25 years 3,5 4,1 5,1 4,7 4,8
Average employment byNACEbranches %ofgainfullyoccupied
-Agriculture and forestry 1,9 1,9 1,9 1,8 1,8
-Industry(excluding construction) 25 24,1 23,8 23,9 23,5
-Construction 4,3 4,3 4,1 4,0 3,7
-Services 68,8 69,7 70,2 70,3 71,0
Infrastructure in km per1000 Km2
Railwaynetwork 0 0 0 0 0
km
Length of motorways : : 157 157 157
Industryand agriculture previous year= 100
Industrial production volume indices24110,9 95,3 89,1 114,0 107,1
Gross agricultural production volume indices 107,0 102,6 113,1 101,0 99,5
23Exports unit price index/Imports unit price index.
24Indexbased on ISIC. A newindexbased on NACE is being compiled.
78Standard ofliving per1000 inhabitants
Numberof cars25478 436 479 497 520
Telephone subscribers 448 465 483 496 510
Numberof Internet connections26: : 34 59 64
E= Estimates
25Private cars + cars for hire only.
26Based on provisional results of latest COS survey on information society.
MethodologicalNotes
Inflation
Retail Price Index: Laspeyres Index with base 1995=100. The index weights were
derived from a year-long household budget survey held in 1994. The index "basket" iscomposed of some 530 items for which direct and monthly price observations are carriedout by Central Office of Statistics (COS) field officers. The Index is also used for themeasurement oflocal inflation rates.
Finance
Noteon sources:
General government deficit / surplus: Candidate Countries are presently unable to
provide reliable data on a national accounts basis. Eurostat is working closely with thesecountries with the aim of improving these statistics. Given the lack of reliable data, anapproximation for general government deficit / surplus is derived from the IMF’sGovernment FinanceStatistics Yearbook (seeexplanation below).
Gross foreign debt: OECD External Debt Statistics publication has been used as the
source. Datafor1999 areestimates.
Foreign official reserves, monetary aggregates, interest rates, and effective exchange
rates:where possible, Eurostat’s reporting form for Candidate Countries is used. Failing
this,theIMF’s ‘International Financial Statistics’publicationhas beenusedas thesource.
Exchange rates: against the ECU (euro). European Commission data is used for ECU
rates, European Central Bank dataforeuro rates.
Noteon methodology:
General government deficit / surplus: approximation of the national accounts definition,
derived from data based on the IMF’s GFS (government finance statistics) methodology.The general government deficit / surplus is obtained by adding the consolidated centralgovernment deficit / surplus (normally including certain extra-budgetary funds) to thelocal government deficit / surplus. The total is adjusted for net lending / borrowing forspecific policypurposes, which is a financing item in the national accounts. GFS data areon acash basis. ForMalta, thedataexcludelocal government.
Gross foreign debt: of the whole economy; includes both short- and long-term debt.
According to the convention, the stock of outstanding debt is converted from US dollarsinto ECU at end-year exchange rates, whereas GDP is converted into ECU using annualaverage exchange rates. For the ratio of gross foreign debt to exports, the nationalaccounts definition ofexports ofgoods and services is used.
Monetary aggregates: end-year stock data. M1 means notes and coin in circulation plus
bank sight deposits. M2 means M1 plus savings deposits plus other short-term claims onbanks. Total credit means domestic credit to the government (net of deposits, includingnon-financial public enterprises), plus the private non-financial sector, plus other non-monetaryfinancial institutions.
Interest rates: annual average rates. Lending rates generally consist of the average rate
charged on loans granted by reporting banks. Deposit rates generally refer to averagedemandandtimedeposit rates.
80Exchange rates: ECU exchange rates are those that were officially notified to the
European Commission until 1 January 1999, when the ECU was replaced by the euro.Euro exchange rates are reference rates of the European Central Bank, where available.The effective exchange rate index (nominal) is weighted by major trading partners, andcalculated on abaseperiod of1995 (annual average).
Reserve assets : end-year stock data. Theyare defined as the sum of central bank holdings
of gold, foreign exchange, and other (gross) claims on non-residents. Gold is valued atend-yearmarket price.
External trade
Imports and exports (current prices): trade data is based mainly on the general system
although we use also the special system. We exclude transhipment trade (direct re-exports), customs free zones, licences, know-how patents and services. FOB means thatall costs incurred in transport are charged to the seller and CIF means that the purchaserpays the additional costs. The value of imports is in CIF/CF and exports in FOB.Regarding classification, the H.S. coding system is used together with the National Tariffthat is 10-digit code.
Terms of trade: calculated as Unit Value Index of Export divided by Unit value Index of
Imports.
Imports andexports withEC-15 : datadeclared bytheRepublicofMalta.
Labourforce
Economic activity rate (ILO Methodology). Percentage of labour force in the total
population aged 15+. This rate is derived from LFS (Labour Force Survey) observing thefollowingILOdefinitionsandrecommendations:
-Labourforce:employedandunemployedpersonsinthesenseoftheILOdefinitions stated
below.
- The employed: all persons aged 15+, who during the reference period worked at least one
hour for wage or salary or other remuneration as employees, entrepreneurs, members ofcooperatives or contributing family workers. Members of armed forces and women onchild-careleaveareincluded.
- The unemployed: all persons aged 15+, who concurrently meet all three conditions of the
ILOdefinitionforbeingclassifiedastheunemployed:
havenowork,areactivelyseekingajobandarereadytotakeupajobwithinafortnight.Unemployment rate (by ILO methodology): percentage of the unemployed in labour force.
This rate is derived from LFS (Labour Force Survey) observing the ILO definitions andrecommendations(seeILOdefinitionsabove).
Average employment by NACE branches. This indicator is derived observing the ILO
definitionsandrecommendations.
Gainfully Occupied persons: persons in gainful employment, both employed and self
employed, during a period. These have to be registered as such at the Employment andTraining Corporation (ETC) which is the official agency dealing with labour data. By law
81allgainfullyemployedhavetoberegisteredwithETC.Nolabourforcesurveyiscarriedout
sothattheemploymentdataisnotrelatedtoanyreferenceperiod.
Infrastructure
Railway network: all railways in a given area. This does not include stretches of road or
water even if rolling stock should be conveyed over such routes; e.g. by wagon-carryingtrailers or ferries. Lines solelyused for tourist purposes during the season are excluded asare railways constructed solely to serve mines; forests or other industrial or agriculturalundertakings and which arenot open to public traffic. The data considers the constructionlengthofrailways.
Length of motorway : road, specially designed and built for motor traffic, which does not
serveproperties borderingon it, and which:
(a) is provided, except at special points or temporarily, with separate carriageways for
the two directions of traffic, separated from each other, either by a dividing strip notintended fortraffic, orexceptionallybyothermeans;
(b) does not cross at level with anyroad, railwayortramwaytrack, orfootpath;(c) is specially sign-posted as a motorway and is reserved for specific categories of
roadmotorvehicles.
Entry and exit lanes of motorways are included irrespectively of the location of the
signposts. Urban motorways arealso included.
Industryand agriculture
Industrial production volume indices : Industrial production covers mining and quarrying,
manufacturing and electricity, gas, steam and water supply (according to the NACERev.1 Classification Sections C, D, and E).
Gross agricultural production volume indices: Gross agricultural production volume
indices are calculated in constant prices of 1993. The quarter indices are calculation onthebasis oftheprevious quarter.
Standard of living
Number of cars : passenger car: road motor vehicle, other than a motor cycle, intended for
the carriage of passengers and designed to seat no more than nine persons (including thedriver).
The term "passenger car" therefore covers microcars (need no permit to be driven), taxis
and hired passenger cars, provided that they have less than ten seats. This category mayalso includepick-ups.
Sources
Total area, infrastructure, industry and agriculture, external trade, inflation rate, labour
market, demography: National sources.
National accounts, finance: Eurostat.