Förslag till RÅDETS BESLUT om principerna, prioriteringarna och villkoren i det europeiska partnerskapet med f.d. jugoslaviska republiken Makedonien {SEK(2004) 373}

(framlagt av kommissionen)

MOTIVERING

Vid sitt möte i Thessaloniki den 19-20 juni 2003 gav Europeiska rådet åter uttryck för sin beslutsamhet att fullt ut och effektivt stödja ett europeiskt perspektiv för länderna på västra Balkan och angav att de länderna "kommer att bli en integrerad del av EU när de uppfyller de uppställda kriterierna". Europeiska rådet ställde sig också bakom rådets slutsatser av den 16 juni 2003 om västra Balkan, inklusive bilagan "Thessalonikiagendan för västra Balkan: i riktning mot en europeisk integration", vilken syftar till att - bl.a. genom upprättande av europeiska partnerskap - ytterligare förstärka förbindelserna mellan EU och västra Balkan, varvid även erfarenheterna av utvidgningsprocessen skall utnyttjas. Kommissionen har uppmanats att lägga fram den första omgången europeiska partnerskap för beslut av rådet tillsammans med de kommande årsrapporterna om stabiliserings- och associeringsprocessen vilka skall läggas fram i slutet av mars 2004.

Det europeiska partnerskapet med f.d. jugoslaviska republiken Makedonien bygger på bestämmelserna i rådets förordning (EG) nr 533/2004. I partnerskapet anges prioriteringarna på kort och medellång sikt för f.d. jugoslaviska republiken Makedoniens förberedelser för en närmare integrering i Europeiska unionen, vilka framgår av kommissionens årsrapport 2004, och det fungerar som en checklista mot vilken framstegen kan mätas. Det europeiska partnerskapet med f.d. jugoslaviska republiken Makedonien återspeglar det stadium i vilket landet för närvarande befinner sig i sina förberedelser och är särskilt utformat efter dess behov. F.d. jugoslaviska republiken Makedonien förväntas i gengäld utarbeta en plan med en tidsplan för och närmare uppgifter om hur landet ämnar ta itu med prioriteringarna i det europeiska partnerskapet. Kommissionen kommer regelbundet att övervaka framstegen i genomförandet av prioriteringarna, särskilt i samband med årsrapporterna om, och genom de strukturer som inrättats inom ramen för, stabiliserings- och associeringsprocessen.

Prioriteringarna i det europeiska partnerskapet bör utgöra grunden för programplaneringen av de ekonomiska resurser som gemenskapsstödet består av och som liksom tidigare kommer att utgöras av det stöd som tillhandahålls inom ramen för de befintliga finansiella instrumenten, i synnerhet rådets förordning (EG) nr 2666/2000 av den 5 december 2000 (Cards).

Förslaget till rådsbeslut får inga konsekvenser för budgeten.

Kommissionen föreslår med hänvisning till ovanstående att rådet antar det bifogade beslutet.

Förslag till RÅDETS BESLUT om principerna, prioriteringarna och villkoren i det europeiska partnerskapet med f.d. jugoslaviska republiken Makedonien

EUROPEISKA UNIONENS RÅD HAR BESLUTAT FÖLJANDE

med beaktande av Fördraget om upprättandet av Europeiska gemenskapen,

med beaktande av rådets förordning (EG) nr 533/2004 om upprättandet av europeiska partnerskap inom ramen för stabiliserings- och associeringsprocessen [1], särskilt artikel 2 i denna,

[1] EUT L

med beaktande av kommissionens förslag, och

av följande skäl:

(1) Vid sitt möte i Thessaloniki den 19-20 juni 2003 ställde sig Europeiska rådet bakom "Thessalonikiagendan för västra Balkan: i riktning mot en europeisk integration" i vilken utarbetandet av europeiska partnerskap nämns som ett sätt att intensifiera stabiliserings- och associeringsprocessen.

(2) Enligt rådets förordning (EG) nr 533/2004 skall rådet med kvalificerad majoritet och på kommissionens förslag besluta om de principer, prioriteringar och villkor som skall ingå i de europeiska partnerskapen och om alla senare anpassningar av dessa.

(3) Det anges i rådets förordning (EG) nr 533/2004 att genomförandet av de europeiska partnerskapen kommer att följas upp genom de mekanismer som inrättats inom ramen för stabiliserings- och associeringsprocessen, särskilt årsrapporterna.

(4) I kommissionens årsrapport 2004 görs en analys av f.d. jugoslaviska republiken Makedoniens förberedelser för en närmare integrering i Europeiska unionen och utpekas ett antal prioriterade områden inom vilka ytterligare insatser bör göras.

(5) För att förbereda för en närmare integrering i Europeiska unionen bör f.d. jugoslaviska republiken Makedonien utarbeta en plan med en tidsplan för och uppgifter om vilka åtgärder landet avser vidta i detta syfte.

HÄRIGENOM FÖRESKRIVS FÖLJANDE.

Artikel 1

Principerna, prioriteringarna och villkoren för det europeiska partnerskapet med f.d. jugoslaviska republiken Makedonien anges, i enlighet med artikel 1 i rådets förordning (EG) nr 533/2004, i bilagan till detta beslut vilken utgör en integrerad del av beslutet.

Artikel 2

Genomförandet av det europeiska partnerskapet skall granskas genom de mekanismer som inrättats för stabiliserings- och associeringsprocessen.

Artikel 3

Detta beslut träder i kraft den tredje dagen efter det att det har offentliggjorts i Europeiska unionens officiella tidning.

Utfärdat i Bryssel [...]

På rådets vägnar

Ordförande

BILAGA

1. Inledning

I Thessalonikiagendan fastställs olika tillvägagångssätt för hur stabiliserings- och associeringsprocessen skulle kunna förstärkas. Upprättandet av europeiska partnerskap anges som ett möjligt tillvägagångssätt.

Syftet med det europeiska partnerskapet med f.d. jugoslaviska republiken Makedonien är att, på grundval av kommissionens årsrapport, fastställa vilka åtgärder som skall prioriteras för att inom en sammanhängande ram hjälpa landet att närma sig Europeiska unionen. Prioriteringarna är anpassade till f.d. jugoslaviska republiken Makedoniens särskilda behov och till det stadium i vilket landet befinner sig i sina förberedelser och kommer vid behov att uppdateras. Det europeiska partnerskapet ger också vägledning när det gäller ekonomiskt stöd till f.d. jugoslaviska republiken Makedonien.

F.d. jugoslaviska republiken Makedonien förväntas anta en plan med en tidsplan för och uppgifter om hur landet ämnar ta itu med prioriteringarna i det europeiska partnerskapet. Det bör i denna plan också anges hur man avser att fullfölja Thessalonikiagendan, de prioriteringar för bekämpning av organiserad brottslighet och korruption som utpekades vid konferensen i London 2002 och vid ministermötet i Bryssel den 28 november 2003 inom ramen för forumet på hög nivå mellan EU och länderna på västra Balkan samt de åtgärder som vart och ett av länderna på västra Balkan lade fram vid mötet i Belgrad den 5 november 2003 som en uppföljning av konferensen i Ohrid om integrerad gränsförvaltning.

2. Principer

Stabiliserings- och associeringsprocessen fortsätter att utgöra ramen för länderna på västra Balkan på deras väg mot EU ända fram till deras framtida anslutning.

De prioriteringar som främst utpekats för f.d. jugoslaviska republiken Makedonien rör landets förmåga att uppfylla de kriterier som fastställdes av Europeiska rådet vid dess möte i Köpenhamn 1993 och de villkor som fastställts för stabiliserings- och associeringsprocessen, särskilt de villkor som rådet utpekade i sina slutsatser av den 29 april 1997 och den 21-22 juni 1999, innehållet i slutförklaringen från toppmötet i Zagreb den 24 november 2000 och Thessalonikiagendan.

3. Prioriteringar

I kommissionens årsrapport görs en bedömning av de framsteg som gjorts och konstateras på vilka områden landet måste göra ökade insatser. Prioriteringarna i det europeiska partnerskapet har valts ut mot bakgrund av att f.d. jugoslaviska republiken Makedonien realistiskt sett kan förväntas genomföra dem eller göra betydande framsteg under de närmaste åren. Man skiljer mellan prioriteringar på kort sikt, vilka förväntas bli genomförda inom ett eller två år, och prioriteringar på medellång sikt, vilka förväntas bli genomförda inom tre till fyra år.

I det europeiska partnerskapet anges på grundval av analysen i årsrapporten 2004 de främsta prioriterade områdena när det gäller f.d. jugoslaviska republiken Makedoniens förberedelser för en närmare integrering i Europeiska unionen. När det gäller lagstiftning bör det erinras om att införlivandet av gemenskapens regelverk med den nationella lagstiftningen inte är tillräckligt i sig, utan man måste också förbereda dess fullständiga genomförande.

3.1. Prioriteringar på kort sikt

POLITISK SITUATION

Demokrati och rättsstat

* Se till att de statliga institutionerna fungerar i hela landet.

* Genomföra Ohrid-ramavtalet - Genomföra den lagstiftning som redan antagits för att genomföra ramavtalet. Anta resten av den lagstiftning som krävs enligt ramavtalet, i synnerhet anta och genomföra lagarna om territoriell organisation, kommunala finanser och staden Skopje. Göra snabba framsteg med genomförandet av decentraliseringsprocessen så att riktiga lokalval kan hållas såsom planerat, i synnerhet stärka kommunernas kapacitet inom finansförvaltning och förvaltning av överförda befogenheter och tillgångar genom utbildning, rådgivning och tillhandahållande av utrustning. Samtidigt stärka de administrativa resurserna att övervaka och underlätta decentraliseringsprocessen, även på central nivå, i synnerhet hos ministeriet för lokalt självstyre och finansministeriet när det gäller skattedecentralisering och hos fackministerierna vad avser deras sakområden. Se till att det anslås tillräckligt med budgetmedel för att garantera en smidig överföring av befogenheter. Anta en strategi på medellång sikt för rättvis representation av minoriteter och anslå tillräckliga budgetmedel för den samt se till att den genomförs snabbt. Vidta ytterligare åtgärder för att se till att ramavtalets bestämmelser om val av språk och om samhällssymboler genomförs. Förbättra övervaknings- och utvärderingskapaciteten på central förvaltningsnivå. Öka ansträngningarna att åstadkomma en återhämtning i tidigare krisområden.

* Förbättra den offentliga förvaltningens sätt att fungera - Genomföra lagen om offentliganställda tjänstemän i dess helhet. Vidareutveckla tjänstemannabyrån. Utarbeta lämpliga strategiska planer och se till att medel anslås för detta i samtliga ministerier och på regeringsnivå. Genomföra generalsekretariatets strategiska utvecklingsplan. Slutföra pågående verksamhetsanalyser i alla offentliga organ och vidta åtgärder för att genomföra deras rekommendationer, med beaktande av decentraliseringsprocessen. Förbättra förvaltningens öppenhet och anta en lag om allmänhetens tillgång till information. Reformera lagarna om förvaltningsförfaranden och förvaltningstvister på ett sådant sätt att medborgarnas rättigheter kan tillvaratas bättre. Genomföra lagen om ombudsmannen från 2003 i dess helhet och fullfölja reformen av ombudsmannaämbetet. Se till att ombudsmannens rekommendationer följs. Främja utvecklingen av det civila samhället, bl.a. arbetsmarknadsorganisationerna och deras aktiva deltagande i beslutsprocessen.

* Stärka rättsväsendet - Förbereda en övergripande reform av rättsväsendet. Se över det nuvarande systemet för urval, tillsättning och befordran av domare och åklagare i syfte att uppnå politiskt oberoende, domares oavsättlighet och en karriärutveckling som grundar sig på meriter. Förbereda nödvändiga författnings- och lagändringar för att garantera oavhängighet för det organ som ansvarar för deras urval och karriärutveckling. Förenkla domstolsprocesserna. Förbättra verkställandet av domstolarnas avgöranden. Införa alternativa mekanismer för att lösa tvister, bl.a. skiljedom och förlikning i brottmål. Se till att äganderätten och domstolsavgöranden på civilrättens område på lämpligt sätt upprätthålls respektive verkställs. Stärka den institutionella kapaciteten att utbilda domare och åklagare samt förbereda inrättandet av ett nationellt utbildningsinstitut för domare i lägre instanser. Tillhandahålla lämplig grund- och vidareutbildning.

* Förbättra bekämpningen av korruption - Genomföra strategin för bekämpning av korruption. Utöka den institutionella kapaciteten att undersöka och väcka åtal vid korruption. Förbättra samordningen och säkerställa samarbete mellan de rättsvårdande organen och den statliga kommissionen för förebyggande av korruption. Förbättra utbytet av information vad avser fall av korruption mellan de organ som ansvarar för att upptäcka, undersöka och åtala sådana fall. Stärka och genomföra reglerna för tjänstemäns deklarationer av tillgångar, intressekonflikter, öppenhet vid offentlig upphandling samt intern och extern kontroll av förvaltningen. Anta lämplig lagstiftning om finansiering av politiska partier.

Mänskliga rättigheter och skydd av minoriteter

* Se till att de rättsvårdande organen i större utsträckning respekterar de mänskliga rättigheterna - Se till att Europeiska konventionen om de mänskliga rättigheterna, konventionen om förhindrande av tortyr eller omänsklig eller förnedrande bestraffning eller behandling och andra relevanta internationella konventioner följs helt och hållet. Genomföra etikkoden och se till att oegentligheter åtalas. Se till att tidigare fall av misshandel åtalas. Förbättra interna kontroller och efterlevnaden av yrkesetiska regler inom alla rättsvårdande organ, rättsväsendet samt kriminalvården. Respektera regler om anhållande före rättegång. Verka för att polisen, domare, åklagare och andra rättsvårdande organ blir medvetna om sina skyldigheter när det gäller mänskliga rättigheter och se till att skyldigheterna fullgörs i enlighet med internationella krav.

* Främja yttrandefrihet och mediernas frihet - Se över rättsreglerna för radio- och TV-sändningar för att förhindra politisk inblandning. Vidta konkreta åtgärder för att garantera att tillsynsorganen för medierna är oberoende. Se över lagstiftningen om ärekränkning så att den återspeglar europeiska normer och praxis från Europeiska domstolen för mänskliga rättigheter.

* Se till att minoriteters rättigheter respekteras - Se till att processen med att inrätta ett tredje statligt universitet i Tetovo fullföljs på ett sätt som skapar synergi med det sydösteuropeiska universitetet och ger akademiska normer som överensstämmer med Bolognaförklaringen.

Regionalt och internationellt samarbete

* Främja regionalt samarbete - Uppfylla kraven enligt stabiliserings- och associeringsprocessen och Thessalonikiåtagandena när det gäller regionalt samarbete. Se till att alla regionala frihandelsavtal genomförs. Fortsätta att sluta avtal med grannländer om bl.a. gränsöverskridande samarbete vid bekämpningen av organiserad brottslighet, illegal handel och smuggling, rättsligt samarbete, gränsförvaltning, miljö och energi samt se till att avtalen genomförs på ett effektivt sätt.

* Se till att stabiliserings- och associeringsavtalet genomförs på ett korrekt sätt när det gäller regionalt samarbete - Slutföra förhandlingarna med Kroatien om den bilaterala konventionen om regionalt samarbete.

* Anta lämplig lagstiftning för samarbete med den internationella krigsförbrytartribunalen för f.d. Jugoslavien.

* Fullfölja internationella avtal som slutits av f.d. jugoslaviska republiken Makedonien - Garantera att f.d. jugoslaviska republiken Makedoniens åtaganden när det gäller förbindelserna med EU respekteras.

Ekonomisk situation

Fri marknadsekonomi och strukturreformer

* Understödja makroekonomisk stabilitet - Upprätthålla en stabil makroekonomisk ram i enlighet med Internationella valutafondens program. Sluta avtal om ett uppföljningsprogram.

* Fortsätta med ekonomiska reformer - Genomföra övergripande marknadsorienterade reformer med syfte att begränsa statens roll i ekonomin och skapa lika förutsättningar för alla ekonomiska aktörer, så att de kan verka i en stabil och förutsägbar miljö. Klargöra äganderätten, bl.a. i samband med privatisering, och se till att äganderätt kan göras gällande.

* Förbättra företagsklimatet - Anta och genomföra en förbättrad bolagsrättslig lagstiftning. Förbättra effektiviteten i förvaltning och rättsväsende och rationalisera konkursförfaranden. Utarbeta ett program för att förenkla och begränsa tillståndsförfaranden och förbättra öppenheten i alla förvaltningsförfaranden som berör företag.

* Arbetsmarknadspolitik - Utarbeta och genomföra en övergripande strategi för att främja sysselsättningen och minska arbetslösheten, särskilt genom yrkesutbildning och arbetsmarknadsreformer, med deltagande av alla relevanta aktörer.

* Respektera grundläggande arbetsnormer och se till att de verkligen följs (bl.a. föreningsfriheten, rätten till kollektiva förhandlingar och förbudet mot diskriminering vid anställning och i yrkesutövning).

Förvaltning av de offentliga finanserna

* Förbättra förvaltningen av de offentliga finanserna - Genomföra en skattedecentralisering. Vidga lönespannet i den offentliga förvaltningens lönestruktur. Stärka kapaciteten för intern kontroll och revision i finansministeriet och utvidga kontrollerna av den offentliga förvaltningen som helhet. Se över lagen om statlig revision så att den anpassas till EU:s normer och stärka det statliga revisionsorganet i dess egenskap av oavhängig statlig institution med egen budget. Utöva noggrannare kontroll och övervakning när det gäller utgifter som ligger utanför budgeten. Inrätta en effektiv marknad för statliga värdepapper.

Europeiska standarder

Inre marknad och handel

* Slutföra förhandlingarna med EU om ett protokoll till stabiliserings- och associeringsavtalet så att avtalet anpassas till den förestående EU-utvidgningen före den 1 maj 2004.

* Rörlighet för varor - Göra ytterligare framsteg när det gäller att anta europeiska tekniska normer och standarder. Genomföra lagstiftningen från 2002 om certifiering av standarder, metrologi och bedömning av överensstämmelse, inbegripet antagande av tillämpningsbestämmelser och stärkande av den offentliga förvaltningens förmåga så att efterlevnaden av bestämmelserna kan säkras. Göra framsteg när det gäller användningen av Kombinerade nomenklaturen.

* Finansiella tjänster - Förbättra försiktighetsreglerna för och tillsynen av denna sektor.

* Skydd av personuppgifter - Anpassa lagstiftningen om skydd av personuppgifter till EU:s normer och inrätta en oberoende myndighet som skall övervaka lagstiftningens genomförande.

* Tull - Uppnå väsentliga resultat i bekämpningen av bedrägeri, smuggling och illegal handel. Ytterligare stärka tullförvaltningen och se till att den fungerar tillfredsställande så att EU:s normer uppnås. Fortsätta reformprocessen och se till att den strategiska planen för 2004-2008 genomförs på ett korrekt sätt. Särskilt se till att den nya enheten för yrkesetiska regler fungerar korrekt och att fall av korruption inom tullen åtalas. Stärka det administrativa samarbetet i tullsektorn. Stärka de organ som är inblandade i genomförandet av handelsavtal, i synnerhet när det gäller kontroller med anknytning till ursprungsregler för förmånsbehandling.

* Beskattning - Börja se över gällande skattelagstiftning och förvaltningsförfaranden i syfte att säkra en effektiv och icke-diskriminerande tillämpning av skattelagstiftningen. Avskaffa de olika punktskattesatser för tobaksprodukter beroende på varornas ursprung (inhemska eller importerade) som nu tillämpas. Fortsätta den pågående reformen av skatteförvaltningen och i synnerhet stärka dess förmåga på lokal nivå att uppbära och kontrollera skatt som skall betalas. Ta itu med problemet med det ökande antalet försenade mervärdesskatteåterbetalningar. Åta sig att tillämpa principerna i uppförandekoden för företagsbeskattning och se till att nya skatteåtgärder överensstämmer med principerna.

* Konkurrens och statligt stöd - Anta lagstiftning om begränsningar av konkurrensen. Förse konkurrensmyndigheten med tillräckliga medel så att den direkt kan övervaka efterlevnaden av lagen och förordna om påföljder. Främja öppenhet och grundläggande genomförande av principerna för statligt stöd. Understödja konkurrenspolitiken genom att verka för liberalisering, förbättra förfarandena för offentlig upphandling och sörja för ett konkurrensfrämjande tillvägagångssätt vid privatisering. Anta tillämpningsbestämmelser om statligt stöd och stärka den offentliga förvaltningens förmåga att genomföra lagstiftningen.

* Offentlig upphandling - Anpassa gällande lagstiftning om offentlig upphandling till gemenskapens regelverk och inrätta ett organ för offentlig upphandling som kan övervaka att lagstiftningen tillämpas.

* Immateriella, industriella och kommersiella rättigheter - Anta tillämpningsbestämmelser för lagen om industriella rättigheter och genomföra lagen. Fortsätta förbättra lagstiftningen om upphovsrätt och närstående rättigheter.

Sektorspolitik

* Industri och små och medelstora företag - Anta programmet för omstrukturering och omställning av stålindustrin i överensstämmelse med gemenskapens regelverk på konkurrensområdet så att effektiva och konkurrenskraftiga företag kan skapas. Genomföra principerna i Europeiska stadgan för små företag och förverkliga de mål som angivits för 2004. Förbättra små och medelstora företags tillgång till finansiella tjänster och andra tjänster. Fortsätta förberedelserna för en nationell garantifond.

* Energi - Utveckla den nyinrättade energitillsynskommissionen så att EU:s riktlinjer uppfylls och en monopolsituation inom energisektorn kan undvikas. Ändra energilagen så, att en transmissionssystemoperatör införs och skyldigheterna beträffande allmännyttiga tjänster beaktas.

* Telekommunikation - Se till att sektorn för elektronisk kommunikation liberaliseras på ett effektivt sätt, stärka regleringsorganen och anta lämpliga lagar och strategier för sektorn.

* Miljö - Anta lagar om miljö, avfallshantering, vattenhantering, skydd av naturtillgångar och luftkvalitet som överensstämmer med EU:s normer.

Samarbete på området för rättsliga och inrikes frågor

* Gränsförvaltning - Följa upp den regionala konferensen i Ohrid om gränssäkerhet och gränsförvaltning, som hölls i maj 2003, genom att genomföra de åtgärder på kort sikt som antogs av regeringen och som lades fram vid ministermötet om rättsliga och inrikes frågor den 28 november 2003 inom ramen för forumet på hög nivå mellan EU och länderna på västra Balkan. Genomföra den strategi för integrerad gränsförvaltning som antogs i december 2003 i samarbete med de berörda organen. Stärka samordningen mellan inrikesministeriet och försvarsministeriet så att överföringen av gränskontrollbefogenheter till gränspolisen underlättas och institutionell utveckling av gränspolisen säkras.

* Migrations- och asylpolitik - Genomföra asyllagen från 2003. Inrätta en oberoende och öppen instans för omprövning och överprövning av asylärenden. Anta tillämpningsbestämmelser för genomförande och utveckling av strategier för mottagande av asylsökande och för anordnande av mottagningsanläggningar. Se över migrationslagstiftningen, i synnerhet lagstiftningen om legal och illegal invandring och om människohandel. Upprätta en gemensam strategi för att bekämpa illegal invandring och människohandel som även beaktar de regionala aspekterna. Anta en ny utlänningslag.

* Polisen - Se till att polisen, i synnerhet insatsstyrkorna, agerar i enlighet med internationella normer och internationell praxis. Klargöra inrikesministeriets och försvarsministeriets respektive roller vid krissituationer så att de överensstämmer med europeisk praxis. Anta och genomföra en handlingsplan för reform av polisväsendet, med beaktande av en rättvis representation på alla nivåer, och planera för de nödvändiga medlen för genomförandet. Skyndsamt vidta åtgärder för att reformera personalpolitiken. Förbättra samarbetet med rättsväsendet. Förbättra utbildningsmöjligheterna och se till att polisskolan fungerar tillfredsställande, vilket innebär att tillräckliga budgetmedel måste anslås. Begränsa korruption och oegentligheter inom polisen. Främja samarbetet med Interpol och andra internationella rättsvårdande organ, i synnerhet genom förbättrade möjligheter att använda deras databaser.

* Organiserad brottslighet, illegal handel, narkotika, penningtvätt och terrorism - Genomföra de handlingsinriktade åtgärder som regeringen antagit och som lades fram vid ministermötet om rättsliga och inrikes frågor i november 2003 mellan EU och länderna på västra Balkan. Fullfölja ratificeringen av FN-konventionen från 2002 om organiserad brottslighet och därtill hörande protokoll om handeldvapen, människohandel och människosmuggling, och se till att de genomförs. Förbättra samordningen mellan rättsvårdande organ som bekämpar organiserad brottslighet. Förbättra informations- och riskanalyser och inrätta en central brottsbekämpande underrättelseenhet som skall samarbeta med alla rättsvårdande organ. Anta de lagändringar som krävs för att särskilda undersökningsmetoder skall kunna användas. Utarbeta program för skydd av vittnen. Utöka kapaciteten att bekämpa illegal handel med narkotika. Utveckla en nationell strategi för narkotikafrågor i överensstämmelse med EU:s narkotikastrategi och åtgärdsplan för narkotikafrågor. Klargöra vilka roller direktoratet för bekämpning av penningtvätt respektive finanspolisen har och uppgradera direktoratet till en finansiell underrättelseenhet i överensstämmelse med europeiska normer. Vidta nödvändiga åtgärder för att förbereda ett avtal med Europol. Öka det internationella samarbetet och genomföra relevanta internationella konventioner om terrorism. Förbättra samarbetet och utbytet av information mellan polisen och underrättelsetjänsten såväl i landet som med andra stater. Förhindra finansiering och förberedelse av terroristhandlingar.

3.2 Prioriteringar på medellång sikt

Politisk situation

Demokrati och rättsstat

* Genomföra Ohrid-ramavtalet - Genomföra den strategiska planen om rättvis respresentation av minoriteter. Se till att den offentliga förvaltningen på decentraliserad nivå fungerar tillfredsställande. Stödja ansträngningarna att åstadkomma en återhämtning i tidigare krisområden.

* Ytterligare förbättra förvaltningens sätt att fungera - Ytterligare främja förvaltningens oberoende, öppenhet vid anställningsförfaranden och en karriärutveckling grundad på meriter, yrkeskunnighet och rättvis representation av alla grupper. Fortsätta reformen av den offentliga förvaltningen, i synnerhet med hänsyn till resultatet av "verksamhetsanalysen". Ytterligare utveckla ministeriernas förmåga att utföra en rad gemensamma funktioner som är nödvändiga för att understödja generalsekretariatets och andra centrala organs samordnande roll (politikutformning, strategisk planering, finansiell förvaltning, personaladministration, informationsteknik). Se till att de sektorer inom den offentliga förvaltningen som är ansvariga för genomförandet av stabiliserings- och associeringsavtalet får den utrustning som behövs för att de skall kunna utföra sina uppgifter. Ytterligare främja utvecklingen av det civila samhället, bl.a. arbetsmarknadsorganisationerna och deras deltagande i beslutsprocessen.

* Ytterligare stärka rättsväsendet - Genomföra en övergripande reform av rättsväsendet, inbegripet nödvändiga författnings- och lagändringar, och stärka den samlade kapaciteten inom rättsväsendet. Se till att det nationella utbildningsinstitutet för domare i lägre instanser fungerar effektivt. Förbättra utbildningen i EU-rätt och gränsöverskridande samarbete i brottmål och brottmålspraxis. Minska balanserna av icke avgjorda mål i samtliga domstolar. Se till att lämplig utrustning och välutbildad och specialiserad personal i passande ställning tillhandahålls. Se till att det finns tillräckligt med budgetmedel för att garantera tillgång till domstolar och rättshjälp. Höja lönerna.

* Ytterligare förbättra bekämpningen av korruption - Uppnå avsevärda, konkreta resultat i bekämpningen av korruption på alla nivåer genom tillräcklig lagstiftning på området och ett korrekt genomförande av det nationella programmet för bekämpning av korruption.

Mänskliga rättigheter och skydd av minoriteter

* Se till att de rättsvårdande organen respekterar de mänskliga rättigheterna - Se till att polisen, domare, åklagare och andra rättsvårdande organ är fullt medvetna om sina skyldigheter och att de fullgör dem. Se till att den mänskliga värdigheten respekteras i häkten och fängelser.

* Ytterligare främja yttrandefrihet och mediernas frihet - Se till att lagarna i mediesektorn överensstämmer med europeiska normer och genomförs på ett korrekt sätt.

* Ytterligare främja principen om icke-diskriminering och rättvis representation - Främja arbetstillfällen för alla etniska grupper och underlätta tillgång till utbildning. Verka för högre utbildning för minoriteter och se till att högre utbildning på albanska överensstämmer med de europeiska normer som fastslagits i Bolognaförklaringen.

Regionalt och internationellt samarbete

* Ytterligare främja regionalt samarbete - Upprätthålla en konstruktiv och väl avvägd regionalpolitik som främjar dialog, stabilitet, goda grannskapsförhållanden och samarbete. Genomföra samförståndsavtalet rörande sydöstra Europas (SEE) huvudnätverk för regional transport. Fullgöra de åtaganden som gjorts inom ramen för samförståndsavtalet i Aten 2003 om den regionala energimarknaden i sydöstra Europa och förbereda upprättandet av den integrerade regionala energimarknaden.

* Fullfölja internationella avtal som slutits av f.d. jugoslaviska republiken Makedonien - Till fullo genomföra internationella avtal och konventioner som ratificerats av f.d. jugoslaviska republiken Makedonien, framför allt konventioner som rör rättsliga och inrikes frågor, mänskliga rättigheter, minoriteters rättigheter och handel.

Ekonomisk situation

Fri marknadsekonomi och strukturreformer

* Se till att de ekonomiska reformerna blir hållbara.

* Ytterligare förbättra företagsklimatet - Se till att de viktigaste internationella normerna och gemenskapsnormerna inom bolagsrätt, redovisning och revision genomförs på ett effektivt sätt. Ytterligare förbättra effektiviteten i förvaltnings- och rättssystemen, till fullo genomföra programmet för att förenkla och begränsa tillståndsförfaranden samt förbättra öppenheten i alla förvaltningsförfaranden som berör företag. Se till att fordringsägares rättigheter kan göras gällande, genom klara rättsregler och reform av företagsregistret. Främja genomförandet av riktlinjer för företagsstyrning.

* Arbetsmarknads- och socialpolitik - Utveckla en socialpolitik som främjar social samhörighet och effektiva sociala trygghetssystem, förbättra den sociala standarden och bekämpa fattigdom och social utslagning. Fortsätta utarbetandet av en arbetsmarknadspolitik, med deltagande av alla relevanta aktörer.

Förvaltning av de offentliga finanserna

* Ytterligare förbättra de offentliga finanserna och förvaltningen av dem - Förbättra intern och extern finansiell kontroll inom den offentliga sektorn. Avlägsna de största hindren för utvecklingen av den andra pelaren i pensionssystemet, i synnerhet finansieringen av övergången från ett system som bygger på solidaritet till ett obligatoriskt ackumuleringssystem.

* Bedrägeri - Införa effektiva förfaranden för att upptäcka, behandla och följa upp fall av (misstänkt) bedrägeri och andra oegentligheter som berör nationella och internationella medel.

Europeiska standarder

Inre marknad och handel

* Rörlighet för varor - Förbättra regeringens förmåga att genomföra stabiliserings- och associeringsavtalet, i synnerhet genom uppbyggnad av intern sakkunskap som kan bedöma om utkast till lagar överensstämmer med gemenskapens regelverk.

* Finansiella tjänster - Se till att oberoende och välutbildade tillsynsmyndigheter sörjer för ett effektivt genomförande i enlighet med internationellt erkända normer.

* Skydd av personuppgifter - Fortsätta den institutionella förstärkningen av myndigheten med ansvar för skydd av personuppgifter, i överensstämmelse med EU:s normer och praxis.

* Tull - Ytterligare stärka tullförvaltningen och se till att den fungerar tillfredsställande så att EU:s normer uppnås. Genomföra den strategiska planen för 2004-2008.

* Beskattning - Fortsätta att stärka skatteförvaltningen, särskilt när det gäller uppbörd och kontroll, och se till att den fungerar tillfredsställande så att EU:s normer uppnås. Utarbeta en revisionsstrategi och lämpliga IT-system.

* Konkurrens och statligt stöd - Genomföra lagstiftningen om begränsningar av konkurrensen. Ytterligare stärka konkurrensmyndigheten genom att ge den befogenhet att övervaka efterlevnaden av lagen och förordna om påföljder. Verka för ytterligare öppenhet vid statligt stöd.

* Offentlig upphandling - Uppnå fullt fungerande strukturer för offentlig upphandling som garanterar att förfarandena för offentlig upphandling tillämpas i strikt överensstämmelse med lagstiftningen och principerna i stabiliserings- och associeringsavtalet.

* Immateriella rättigheter - Se till att lagstiftningen om immateriella och industriella rättigheter genomförs.

Sektorspolitik

* Industri och små och medelstora företag - Genomföra programmet för omstrukturering och omställning av stålindustrin. Fullborda genomförandet av strategin för att genomföra Europeiska stadgan för små företag. Främja möjligheterna för små och medelstora företag att få tillgång till krediter. Ytterligare utveckla erfarenheterna av icke-finansiellt stöd till små och medelstora företag (t.ex. företagsgrupperingar - "kluster" - och teknikparker). Genomföra FIAS handlingsplan för undanröjande av hinder för investeringar.

* Telekommunikation - Införliva och genomföra EU:s nya lagstiftning om elektronisk kommunikation.

* Jordbruk - Anta och genomföra strukturella reformer på jordbruksområdet. Anta och genomföra en allsidig reform som inbegriper inspektioner såväl vid gränsen som internt samt praxis beträffande växt- och djurhälsa, analyser av strategier och program, sektoriella informationssystem och sektorsstatistik samt samordningsuppgifter för befintliga institutioner och tjänster i den offentliga och den privata sektorn.

* Miljö - Ytterligare tillnärma lagstiftningen till europeiska normer. Genomföra den antagna lagstiftningen. Förbättra miljöövervakningen och fortsätta att bygga upp den offentliga förvaltningens förmåga. Integrera miljöhänsyn i politiken på olika områden, i synnerhet genom att utarbeta miljökonsekvensbedömningar i överensstämmelse med europeiska normer.

Samarbete på området rättsliga och inrikes frågor

* Gränsförvaltning - Fullborda genomförandet av strategin för integrerad gränsförvaltning i samarbete med behöriga organ.

* Migrations- och asylpolitik - Stärka utarbetandet av nationella asylstrukturer som överensstämmer med internationella och europeiska normer så att asylsökande och flyktingar tillförsäkras lämpligt skydd och bistånd. Genomföra strategin för bekämpning av illegal invandring och människohandel.

* Polisen - Fullborda genomförandet av reformen av polisväsendet. Förbättra utbildningen när det gäller att bekämpa nya former av brottslighet, bl.a. databrott och gränsöverskridande brott. Ytterligare förbättra polisens informationssystem.

* Organiserad brottslighet, illegal handel, narkotika och penningtvätt - Uppnå väsentliga resultat i bekämpningen av organiserad brottslighet. Se till att FN:s instrument för bekämpning av organiserad brottslighet genomförs. Ytterligare förbättra statens förmåga att förhindra och bekämpa brottslighet genom samordning mellan rättsvårdande organ och rättsväsendet, ökad analytisk kapacitet att hantera uppgifter om brottslighet och ytterligare utbildning i nya former av brottslighet. Minska antalet olagliga små handeldvapen och lätta vapen. Se till att den finansiella underrättelseenheten fungerar helt och fullt i överensstämmelse med europeiska normer. Genomföra den nationella narkotikastrategin. Stärka bekämpningen av ekonomisk och finansiell brottslighet (bl.a. penningtvätt och sedelförfalskning) och bedrägeri samt förbättra den relevanta nationella lagstiftningen.

4. Programplanering

Gemenskapsstödet till länderna på västra Balkan inom ramen för stabiliserings- och associeringsprocessen kommer att tillhandahållas via de befintliga finansieringsinstrumenten, särskilt rådets förordning (EG) nr 2666/2000 [2]; Det här beslutet får således inga konsekvenser för budgeten. F.d. jugoslaviska republiken Makedonien kommer dessutom att få tillgång till finansiering från program som omfattar flera länder och från övergripande program. Kommissionen samverkar med Europeiska investeringsbanken (EIB) och de internationella finansiella instituten, särskilt Europeiska banken för återuppbyggnad och utveckling och Världsbanken, i syfte att underlätta samfinansiering av projekt med anknytning till stabiliserings- och associeringsprocessen.

[2] EGT L 306, 7.12.2000, s. 1.

5. Villkorlighet

Gemenskapsstödet till länderna på västra Balkan inom ramen för stabiliserings- och associeringsprocessen ges på villkor att det görs ytterligare framsteg när det gäller att uppfylla de politiska Köpenhamnskriterierna och i synnerhet när det gäller att genomföra de särskilda prioriteringarna i detta europeiska partnerskap. Om dessa allmänna villkor inte uppfylls kan rådet komma att vidta lämpliga åtgärder på grundval av artikel 5 i rådets förordning (EG) nr 2666/2000.

För gemenskapsstödet skall också gälla de villkor som fastställdes av rådet i dess slutsatser av den 29 april 1997 och den 21-22 juni 1999, särskilt vad gäller mottagarländernas åtagande att genomföra demokratiska, ekonomiska och institutionella reformer.

6. Övervakning

Uppföljningen av det europeiska partnerskapet ombesörjs genom de mekanismer som inrättats inom ramen för stabiliserings- och associeringsprocessen, särskilt genom årsrapporten om stabiliserings- och associeringsprocessen.

COMMISSION STAFF WORKING PAPER - Former Yugoslav Republic of Macedonia - Stabilisation and Association Report 2004

{COM(2004) 204 final}

Former Yugoslav Republic of Macedonia

Stabilisation and Association Report

1. Executive Summary

While constrained by a difficult budgetary and economic situation, the former Yugoslav Republic of Macedonia has made efforts in 2003 to progress in the Stabilisation and Association process. In many areas, the reform process is still in its infancy and will need further efforts to be converted into concrete changes and bring the expected benefits.

The political situation has remained generally stable, building on the process initiated in 2001 at Ohrid which remains crucial to ensure the development of the former Yugoslav Republic of Macedonia as a unitary and multiethnic State. The support of the international community, in particular through the EU led military operation "Concordia" and the new Police Mission "Proxima", has been critical in supporting gradual stabilisation. Consolidating stability calls for continued effort from the Government to implement fully the Framework Agreement and to strengthen the rule of law, as well as for commitment and sense of responsibility from all components of the population. Preparatory efforts need to be accelerated and enhanced for the implementation of the decentralisation process.

Many challenges still lie ahead, whether on decentralisation, good governance, reform in the security sector or rule of law. Implementing the reforms will also imply strengthening administrative capacity, by transforming the public administration into a modern and accountable public service. Remaining on track in facing these challenges should enable the country to shift progressively its focus from stabilisation to association.

The former Yugoslav Republic of Macedonia has been successful in maintaining a stable macro-economic framework and joined the World Trade Organisation. However, the economic situation, and notably serious weaknesses in the functioning of the economy, business climate, competitiveness and enforcement of property rights, is increasingly a challenge for the country's successful transition. Foreign direct investment has been particularly low, and is likely to increase significantly only if institutional and political stability continue to improve and reforms are pushed forward. Serious progress in establishing the rule of law will also be crucial.

The Stabilisation and Association process has benefited from the support of all political parties and efforts have been made to make it a framework for Government actions. A National Action Plan to follow up the recommendations set in last year's report has confirmed the will to go ahead. Further efforts and resources are needed to sustain reform. The entry into force of the Stabilisation and Association Agreement will lead to a greater co-operation between the EU and the country. The presentation by the EU of a European Partnership should provide the basis for focussing efforts to move forward on the reform agenda.

2. Political situation

2.1. Democracy and rule of law

The Government has made concrete efforts to implement the Ohrid Framework Agreement and most signatories of the Agreement have kept to their pledge to support it. Willingness to compromise on a number of sensitive issues, including on the creation of a new State University in Tetovo, has strengthened the coalition and should ease inter-ethnic mistrust. However, some opposition representatives have questioned the very principles of the Agreement. 2004 will be decisive in consolidating the return to full stability and the reform process. New legislation and action plans, especially on decentralisation and security-related reforms, now need to be followed up with implementation and enforcement. The reform of the judicial system, the rule of law and the fight against corruption remain areas where energetic measures are needed. Constructive commitment by all political parties, co-operation among the institutions, and a sense of ownership at different levels of government are needed to accelerate the pace of reform.

2.1.1. Assessment of democratic institutions and of attitudes to the state.

Implementation of the Ohrid Framework Agreement: The full implementation of the Ohrid Framework Agreement (FA) remains essential for making progress in the Stabilisation and Association process. Overall, the confidence-building process initiated by the FA is progressively taking root and has been bolstered by the personal commitment of Prime Minister B. Crvenkovski and Mr A. Ahmeti. This consensus on the principles underlying the Agreement should be sustained, and also encompass the opposition. Tangible progress has been made, in particular on the legislative component of the FA and the focus is increasingly on the two complex and far-reaching concepts of decentralisation and equitable representation of minorities in the public administration.

.The implementation of the FA has not been without tensions and difficulties. Furthermore, radical - if isolated - views expressed by some members of the opposition have advocated a reorganisation of the country along ethnic lines, which would reverse the country's course towards European integration. Activities by some extremists, often linked to criminal interests, have sought to undermine the reconciliation process. This led the EU to adopt a common position in February 2004 taking restrictive measures against extremists promoting violence and acting outside the democratic process.

The final results of the Census on the ethnic composition of the resident population were published on 1 December. The final data showed an increase both in the number and in the percentage of the country's ethnic Albanian population - from 22.7 % to 25.17 % - as well as a slight increase in the ethnic Macedonian population, although their percentage of the overall population decreased (to 64.18 % from 1994's tally of 66.6 %). The work done by the State Statistical Office, under the monitoring of the International Census Monitoring mission, was assessed as professional and in accordance with international standards and no substantial criticisms were raised. The completion of the Census enabled further steps in the implementation of the Framework Agreement, in particular in helping to finalise the preparation of the remaining decentralisation laws and in providing a basis for further efforts on equitable representation in public administration.

Following up the Plan adopted by the Government in spring 2003, which set intermediate objectives to ensure the equitable representation of minorities in the public administration as foreseen by the FA, initial measures have been undertaken, and there has been some progress in particular in the security sector. The mid-term objectives of the Government (14 %) have not yet been met, except in specific sectors, and increased efforts will be needed. This process needs to be reconciled with the obligations to foster competence and to base careers on merit, and therefore needs to be part of a clear and comprehensive strategy. The budget 2004 has foreseen limited resources to address this issue. The strategy to be defined should include increased budgetary resources to gradually reach the objectives set by the Framework Agreement, further targeted training and changes in the regulations affecting employment in the public sector.

The use of language(s) in the public administration and the use of community symbols are two other sensitive areas where further measures need to be adopted. As regards the former, there has been some progress. Since May identity cards have been available in the Macedonian and Albanian languages upon request. This needs to be extended to all identity documents (passports, driver's licenses, travelling documents, birth certificates, etc.). At a broader level, further measures are needed to facilitate the full implementation of the FA provisions in the whole public sector.

President of the Republic: Despite occasional political confrontations with the Government, President Trajkovski has played a constructive role in building consensus on issues of national importance, including European integration and security matters, as well as the implementation of the Framework Agreement. Various initiatives in the area of regional co-operation have contributed to promoting good neighbourly relations and joint projects among the countries in South-East Europe in the economic, political and cultural field. President Trajkovski was victim on 26 February of a plane accident, leaving as one of his main legacy for the country his personal commitment to bringing it closer to the European Union family.

Anticipated presidential election will take place on 14 April. All efforts should be displayed to make the election a successful test for the country's democracy.

Parliament: After the Government's reshuffle in November, Mr. Shaqiri (Democratic Union for Integration) - a former National Liberation Army commander - was elected Vice President of the Parliament.

Parliamentary debate has to a large extent been dedicated to legislation needed to complete the implementation of the Framework Agreement. Nearly all the legislative changes related to the FA have now been adopted, except for those related to the decentralisation process submitted by the Government in December and under consideration. The Parliament has also refined its role in the debate on EU integration related issues, and outlined its role in the Stabilisation and Association Process in a declaration adopted in June.

Progressively, the structures needed to improve the capacity of the Parliament to play its role in the Stabilisation and Association process are being put in place. The Committee for Relations among the Communities, established in December 2002, started its work in September 2003. The Parliamentary Committee on EU Affairs held its constitutive session at the end of November. Whilst the actual role the Parliament will be able to play is going to depend on its capacity to make its working structures fully operational so that it can effectively contribute to the debate, it will also depend on the will of the Government to engage in a political debate on most fundamental reforms.

There have been tensions in the Parliament, especially in relation with the creation of a new State University in Tetovo and on the decentralisation laws. The boycott by the Democratic Party of Albanians of all parliamentary activities, ended in September after several months of absence from Parliament, was a blow to the functioning of the parliamentary representation. There is an open issue related to the use of language(s) which continues to impede proper working of the Parliament. While a constructive solution has been found relating to the application of the rules on language in most of the parliamentary committees, problems still occur in the work of some. The refusal by some opposition members to chair the committees of which they are in charge in the Macedonian language has been hindering the regular work of those committees for more than a year.

Executive: The Government has established itself as a functioning coalition. Relations between the two main parties in power have been strained at times by the lack of co-ordination or transparency between governmental partners, in particular during a security related crisis in September, but confidence in the coalition appears now to have been re-established.

The 2003 Government programme was ambitious. While this first year in power was marked by a number of important achievements in the security and macro-financial areas, the pressure to achieve tangible results improving the daily life of citizens is increasing. Limited resources mean the Government will have to remain attentive to setting reasonable objectives and well-defined priorities.

New advisory bodies have been set up to help the Government to take its EU objectives into account in its work. The members of the Economic and Legal Councils of the Government were appointed in August and September respectively. Some of the actions announced at the beginning of 2003 (i.e. the establishment of departments for: strategic thinking, planning and monitoring; policy analysis and co-ordination; and public administration reform, at the General Secretariat of the Government) are still in an early phase of implementation.

Public Administration: Some progress has been made since last year's report through the progressive implementation of the reform of the General Secretariat. In early 2003 and ahead of the Budget preparation, the Government prepared a document establishing strategic guidelines and setting clear expenditure ceilings for the various ministries, which were enforced by the Ministry of Finance, thus linking strategic planning and budgeting. The functional analysis of Government activities was launched in almost all ministries and should now be completed and translated into actual measures. The Agency for Civil Servants has been consolidating its structure and working on personnel management procedures. However, the full implementation of the Law on Civil Servants remains to be ensured and the Agency for Civil Servants needs to be further strengthened. The politicisation of the public administration and the changes in the administration after each election or Government reshuffle remain serious impediments to transforming the public administration into a competent, merit based, sustainable and efficient administration serving the needs of citizens. Policy formulation has to be improved and policy-related budgeting has to be systematised in all ministries. The protection of the citizen and citizens' capacity to appeal should be improved, calling for the upgrading of the Administrative Procedures and Administrative Disputes legislation.

Local government: Decentralisation is a key challenge the country must tackle to enhance the quality of its governance and its democracy. The decentralisation process has two key objectives: to bring government closer to the people and to improve the delivery of public services. Its success depends on rationalising the size and number of municipalities in order to increase fiscal and managerial capacity and on transferring to the municipal level the competencies listed in Article 22 of the Law on Local Self-Government, passed after the signing of the Ohrid Framework Agreement. The government's Operational Programme, including the three critical laws (the Law on Territorial Organisation, the Law on the City of Skopje and the Law on Municipal Finance) is proceeding through Parliament. The decentralisation process is being co-ordinated with other reforms in the social and administrative sectors through an inter-ministry Decentralisation Working Group and a Co-ordinating Body of State Secretaries. The rationalisation and the transfer of competencies should take place so that the new decentralised set-up can begin to function on 1 January 2005. Progress is now dependent on effective co-ordination within central government, parliamentary approval of the required legislative acts, training of the municipal administrations and clarification of the situation with regard to municipal debt.

Civil society: The strengthening of civil society has been supported by the Government's efforts to favour the development of non-governmental organisations (NGO). This included a higher degree of co-operation between NGOs and Government. However, additional measures are needed to achieve the aim of a participative civil society, and the definition of a new level of decision-making in the framework of the coming decentralisation will also imply further developing NGOs and associations at local level.

The development of professional organisations and civic associations is still hampered by the lack of financial resources and remains predominantly dependant on external resources, public or foreign. Additional Government initiatives to support civil society development, such as tax incentives and better structured co-ordination remain necessary. Existing projects for the development of platforms for the latter are a step in the right direction. A higher degree of transparency in the criteria applied to the beneficiaries of public support would reduce the risk of abuse and would also improve the overall perception of their role by the wider public. This may imply the revision of the 1998 Law related to associations.

Armed Forces: Aspiration to NATO membership has led the Government to present a Security and Defence Concept which was adopted by the Parliament in June. The Law on Service in the Army was amended in October to facilitate the reduction and the reform of the structure of the army by 2007. First measures have been taken to transfer the responsibility for border control from the Ministry of Defence to the Ministry of Interior.

Developing the State's capacity to manage crises in an efficient and democratic way requires a more precise definition of the concepts and an appropriate legislative and regulatory framework. A balanced approach has to be found, aiming to strengthen security safeguards especially regarding the army's role and the preventive action of the police and law enforcement institutions. Civilian leadership must be ensured, complemented by the definition of processes that offer transparency as well as full compliance with the principles of the rule of law.

International presence: The presence of the international community has remained a guarantee for the country's continued progress towards full stabilisation. The role of the representatives of the international community in Skopje, in particular of the EU Special Representative in good coordination with the US representative, has been critical in supporting the implementation of the Ohrid Framework Agreement. The Commission Delegation is playing an increasing role in supporting the reform process.

On 15 December a significant shift took place with respect to the EU security presence in the country with the completion of the first ever EU military mission "Concordia" and the launching of the EU Police Mission "Proxima". Since taking over from the NATO military presence in April, "Concordia" had been active on the ground throughout the former crisis areas, monitoring the security situation and implementing confidence building measures. Development in the security situation led to the assessment that international military presence in the field was no longer necessary but that further steps were necessary before the rule of law could be considered fully established in the former crisis areas

In order to further improve the security situation and stabilisation of the country, the General Affairs Council upon the invitation of the former Yugoslav Republic of Macedonia authorities, adopted on 29 September a Joint Action establishing a European Union Police Mission. Police officers have been deployed since December within the Ministry of Interior and in police stations throughout the country (Tetovo, Gostivar, Kumanovo, Debar, Ohrid, Ki?evo and Struga).

NATO has maintained an assistance mission and continues to play an important role in security sector reform. The OSCE has also continued to play an active role to help implementing some bids of the Framework Agreement.

The presence of the International Community on the ground has also been requested by local authorities and the Government to assist in carrying out the weapons collection process from 1 November to 15 December. The fact that no incidents marked the weapons collection process and the positive involvement of the local authorities and the population have positively contributed to further stability. A rather limited number of weapons was surrendered, however, (7,571 small arms and light weapons), and the high number of small arms illegally in private hands remains an issue.

2.1.2. Assessment of judicial system, law enforcement and respect for the rule of law.

Judicial system: Reform in the judicial system is making very slow progress. Initial steps have been taken, mainly with the adoption of a law on an independent judiciary budget. The principle of equitable representation in the election of judges was also introduced. However, the serious weaknesses affecting the functioning of the judicial system stressed in last year's report remain. There is a very low level of public confidence in the judicial system.

The weaknesses and inconsistencies of the existing system of the selection and dismissal of judges and prosecutors place severe constraints on the development of an independent judiciary and a merit-based career system. One key issue is the politicisation of the Republic Judicial Council and the politicisation of the judiciary system. This issue must be promptly addressed, including, if necessary, by amending the constitutional framework.

There were also cases of alleged corruption, conflict of interest or nepotism reported and reviewed by the State Commission for the Prevention of Corruption. Criminal actions should be taken against those for whom there is sufficient evidence of corruption.

The continuing lack of management tools, the overloading of courts with misdemeanour cases and with administrative tasks, and the resulting huge backlog of cases still hamper the efficiency of the judiciary, and the whole process needs to be rationalised. Despite the fact that the problems have been well identified, for example in the Supreme Court Report on lower Courts, recommendations have not been followed up. The working procedures of the courts lack transparency, and court decisions suffer from unjustified delays. The proper delivery of court decisions is an elementary but major concern. The lack of efficiency and the non-application of the rules open the way to political influence and to corruption. Proper co-operation between the prosecution and the police is also failing and this has led in many cases to the incapacity to deal effectively with crime or corruption cases.

General training needs to be upgraded, notably through the setting up of a national school for judges and prosecutors. Specific training on EU law and on organised crime and new forms of crime also need to be enhanced.

Prison system: Problems persist in relation with the training of prison staff, with the material conditions in the prisons, and with the treatment and rehabilitation of various categories of inmates needing special treatment (for example specific treatment for indicted drug abusers). Although the capacity of the prison system seems to be sufficient, old buildings need to be renovated and special units to be built.

Respect for the rule of law: The former Yugoslav Republic of Macedonia has made slow progress in strengthening the rule of law, mainly due to the structural weaknesses of the law enforcement and judicial institutions, politicised and poor public administration, corruption and organised crime. The legislative, the executive and the judiciary should co-ordinate their actions in order to find solutions to bring the rule of law into line with European standards.

The high level of corruption and the mistrust towards institutions it generates remain a major deterrent factor to growth and investment, and beyond this, to the success of many reforms which have been initiated to accelerate the transition of the country towards a modern democracy and economy. The weaknesses of the institutions and the lack of transparency in public decisions are key issues to be addressed. In general terms the institutional capacity to investigate and prosecute corruption must be increased and the co-operation among law enforcement bodies upgraded, as committed to by the Government in the list of action-oriented measures against organised crime it adopted in November.

The Government has taken preliminary measures, in particular through supporting the State Commission for the Prevention of Corruption, which has been given a central role - despite limited resources - in defining a comprehensive approach to fighting corruption. The State Commission started its work by collecting reports on the assets of public office holders, and thirty-nine judicial procedures have been initiated for failure to report. It also presented a State Programme for Prevention and Repression of Corruption. In June the Government approved this text which should be followed up by appropriate budget allocations and a realistic implementation plan. The full co-operation of the public administration, which is sometimes problematic, will remain essential. Another weakness in the strategic approach towards an effective fight against corruption is the lack of clear concepts for co-ordination in identifying and prosecuting corruption, and failures in the exchange of intelligence between the criminal police, the financial police, the prosecution and the State Commission for the Prevention of Corruption.

2.2. Human rights and protection of minorities

The implementation of the Framework Agreement and confidence-building measures are progressively reducing ethnic tensions. The reform process has started to benefit not only minorities but society as a whole and contributes to the strengthening of democracy and better governance. Tensions have not however completely disappeared, and provocations or incidents must be kept under constant monitoring so that they do not to escalate. Effort is still needed to ensure that police misconduct is efficiently prevented or, if it occurs, duly sanctioned. In the field of higher education, the process of establishing a third State University in Tetovo has also been a highly symbolic development. Great care must be taken to ensure that this process undertaken ensures that democratic and academic standards are met. More generally education is an area where much remains to be done. The development of the country's democracy will also depend on the development of professional media. Further efforts are needed to ensure the greater independence and the upgrading of the broadcasting services. Greater professionalism in the media would also contribute to furthering democracy.

2.2.1. Civil, political, economic, social and cultural rights

Human rights: Human rights and fundamental freedoms are guaranteed by the Constitution. The European Convention on Human Rights entered into force in the former Yugoslav Republic of Macedonia in 1997. However, as underlined by the Ombudsman's reports, while the rights of citizens are in principle respected, the situation is still far from being fully satisfactory and the functioning of protective mechanisms should be improved as part of the reform of the public administration. Although citizens' awareness of their rights is increasing (60 % increase in the number of complaints to the Ombudsman in the latest period), it has not yet reached a high level.

Cases of mistreatment by the police have decreased since the 2001 crisis, but misconduct or violation of procedures remains an issue which deserves due attention . A few incidents linked to police operations have once again raised the question of the appropriate planning and training of the police forces. There have been cases of unlawful arrest or detention, violation of the custody rule and of the right of family members to be informed, or violation of the right not to be forced to make a statement during police and court procedures. These violations of due process must be dealt with. In particular, due attention should be paid to ensuring the application of procedural rules on pre-trial detention in conformity with Article 5 of the European Convention on Human Rights, which stipulates that an arrested person should be promptly brought before a judge.

Observers still express concerns on the lack of thorough investigation into serious allegations of human rights violations in past reports. The Professional Standards Unit of the Ministry of Interior has been strengthened and has improved its investigations. Twenty criminal reports have been drawn up, but only disciplinary measures have been taken so far.

Judicial and police reform, the implementation of the code of police ethics adopted in January, measures to fight corruption and organised crime, as well as the empowerment of the Ombudsman's office should, if enhanced, allow improvement of the overall situation. Continued attention must be paid to the specific measures to prevent police ill-treatment and combat impunity from disciplinary action, as identified in the January 2003 Anti-torture Committee Report of the Council of Europe which the Government has started to implement.

Freedom of expression and media: Freedom of expression is guaranteed formally and is put into practice. Some initiatives in support of reform have been undertaken in the media sector, such as the creation of a television channel broadcasting programmes in minority languages, and initial measures have been undertaken to reform the public broadcasting company.

There are however a number of problems in this sector, relating to the current legal framework, the lack of resources, the lack of professionalism and the fact that the media, being split along ethnic lines, often fail to set an agenda reflecting a collective interest. Proper mechanisms are needed to ensure the independence of the media, in particular a strengthened and independent Broadcasting Council. The law on broadcasting should be reviewed to address shortcomings in the functioning of the public broadcasting company (MRTV).

As regards the work of journalists, the absence of a proper legal framework for access to information is proving to make proper reporting more difficult. The legal definition of defamation should also be reviewed so that it is decriminalised. Professionalism in the media needs to be substantially improved through the development of training programmes and the reform of education in journalism.

Ombudsman's office: The role of the Ombudsman in the reform of the public administration and in defending citizens' rights is increasingly understood. A new law enhancing his role was enacted in September, in compliance with the Ohrid Framework Agreement and Amendment XI of the Constitution. The review and adoption of the 2002 Ombudsman's Annual Report by Parliament was a positive move. It needs to be followed up, however, starting with the full establishment of the Operational Programme for Implementation of the new law. The co-operation and assistance provided by the various administrations to the Ombudsman remains an area where improvement is needed. Non-co-operative attitudes should be tackled decisively. In particular the Parliament could, where possible, insist on the responsibility of public function holders so that they are held accountable.

Gender equality: The principle of equal salaries and of equal treatment of men and women concerning employment, training, career advancement, and working conditions has been introduced. The Government has also adopted a National Action Plan for Gender Equality. The role of NGOs is also acknowledged and should continue to be valued. Activities aiming to strengthen women's participation in the Government's decision-making structures are progressively being implemented. In addition initiatives have been undertaken to strengthen the socioeconomic position of women in society. Domestic violence remains a problem and the Criminal Code does not contain articles that relate to family violence.

Disabled persons: While the law prohibits discriminations on the basis of disability, this provision remains to be fully implemented. The Parliament has adopted a Declaration on Protection and Promotion of the Rights of Persons with Special Needs, which will have to be duly implemented.

Education: Substantial progress has been made in the reform of higher education in the Albanian language. After lengthy debate, the Government proved its capacity to compromise on a sensitive issue and succeeded in laying down the legislative conditions enabling the establishment of State University in Tetovo. However, there are open questions which need to be addressed carefully regarding the standards to be reached by the University's curricula and the need to avoid undue duplication with curricula proposed by the South East Europe University. As regards the latter, its continuous development and wide impact across various communities has confirmed it as a viable, forward looking, and academically sound educational institution. At the end of the four year cycle this year, Albanian students will represent over 14 % of all higher education students in the country (4.8 % in 2000/2001).

Little progress has been made however on the reform of the education system which has suffered from a lack of continuity with the various plans made by successive Governments. A challenge is the lack of embeddedness of Vocational and Education Training reform elements in existing national structures and practices.

Incidents and protests with racist connotations at the reopening of schools illustrated a worrying politicisation of the education issue. In addition, there is a danger of growing separation along ethnic lines. Over-politicising the education issue may well put at risk progress in a key area for the future of the country.

Freedom of religion: Co-operation between various religious communities in the preparation of the draft Law on Churches and Religious Communities should be examined as religious dialogue can usefully contribute to the relaxation of cultural and ethnic tensions. Recent tensions between the Macedonian Orthodox Church and the Serbian Orthodox Church resulting in legal actions have raised a risk of politicising an issue which should be dealt with first at a private level and between churches.

2.2.2. Minority rights and refugees

Several incidents which occurred during 2003 showed that interethnic relations in the former crisis areas are still fragile. Even when aiming to catch well-known criminals, the actions of the security forces can easily escalate, causing interethnic tension, if not properly planned and carried out. However the completion of the implementation of the Framework Agreement, a sense of political responsibility by local authorities, including in the former crisis areas, in addition to the forthcoming implementation of the Ministry of Interior reform, should be key elements to ensure possible future incidents and provocations remain isolated. Efforts made to fully apply European standards, such as the implementation of the Framework Convention for Protection of National Minorities of the Council of Europe, would help to build further confidence and sense of loyalty to the State.

The Law on Citizenship was modified in December and entered into force in March. It will bring clarity to the legal status of a number of people who have thus far been residing in the country without one, following the break-up of the former Yugoslavia.

Significant progress has been made in the return of Internally Displaced Persons (IDPs). There are 2.678 IDPs remaining, meaning that the reintegration of the IDPs in the villages is almost completed. This has been helped in particular by the completion of the housing reconstruction programme. However, the final phase was not without incident (burning, looting, demolishing and vandalism of houses). Local authorities have a role to play in stabilising the situation, and the police must investigate such cases thoroughly. It is expected that the reconstruction of police stations in Matej?e, Ara?inovo and Tearce will contribute to the sustainability of the IDPs return and promote further return. On the other hand, Unresolved property issues, problems with documentation and the poor socio-economic situation also remain obstacles to return. The Government has presented a programme on economic revitalisation in former crisis areas.

The situation of the Roma was highlighted when a group of Roma refugees from Kosovo who lacked proper status protested at the border with Greece from May to July, tryingto obtain asylum in the EU. While the Government has shown flexibility in finding a compromise to clarify the status of these refugees, the issue of further integration of the Roma in the society and fighting against discrimination in the access to social services, education and employment will require a comprehensive approach.

The number of refugees has slightly decreased compared to last year, with fewer than 2.500 refugees in the country (UNHCR figures at 31 December 2003) and 1.568 in Kosovo. Most of them (2.285) are now asylum seekers following the adoption of the Law on Asylum and Temporary Protection in July. Activities are underway to accelerate the return of the refugees presently in Kosovo.

2.3. Regional and International Cooperation

The former Yugoslav Republic of Macedonia remains an active supporter of regional co-operation and has maintained its efforts to develop good neighbourly relations. This is based on the growing understanding of mutual dependency and the need to address common challenges, whether security-related or economic, and needs of the citizens, through co-operation and pragmatism. The Government's position towards the situation in Kosovo has been constructive and this will remain a factor in maintaining regional stability. Cross-border co-operation has also increased and is an area where practical initiatives can be further developed. At international level, the former Yugoslav Republic of Macedonia joined the World Trade Organisation. While the cooperation between the former Yugoslav Republic of Macedonia and the International Criminal Tribunal for the former Yugoslavia has not raised concern, the adoption of a legislation on cooperation would help ensuring the proper interpretation of the Amnesty Law.

2.3.1. Regional cooperation

The former Yugoslav Republic of Macedonia has remained an active participant in the Stability Pact and in the South East European Cooperation Process initiatives. In particular it has initiated the coordination of the countries participating to the SEECP in order to present joint conclusions at the Thessaloniki summit. An example of regional initiatives has also been the conference on border security and management which took place in Ohrid in May, under the auspices of the Stability Pact, the EU, the OSCE and NATO.

Relations between the former Yugoslav Republic of Macedonia and its neighbours have continued to develop. This positively reflects an increasingly well-understood mutual dependence and a shared interest in meeting common challenges. In particular the Government has been active, inter alia in the preparation of the Thessaloniki summit, in contributing to enhancing regional co-operation and co-ordination on EU integration matters. Bilateral memoranda for co-operation on EU integration-related matters, which are providing for contacts both at administrative and political level, were signed with Slovenia, Croatia and Bulgaria.

The signature of a bilateral free trade agreement with Moldova in January was a positive move which completed the network of bilateral FTAs to be established under the Stability Pact Memorandum of Understanding.

Cross-border co-operation is also increasingly on the agenda. It has been developing with Albania and Greece, through the establishment of the Euro-region Prespa-Ohrid, as well as with Bulgaria and Serbia, through the Euro-regions Sofia-Nis-Skopje and with Greece and Bulgaria through the Euro-region Belasica. An agreement was also signed with UNMIK.

An increasingly close relationship has been sought with Albania, as illustrated by numerous meetings taking place at high level. Significant co-operation is being developed in building reaction mechanisms to common security challenges (security, human and drug trafficking, border control and visa regime) and a friendship agreement is under preparation. Several initiatives are underway for the environmental protection of Lake Ohrid. At the same time, the bilateral free trade agreement between the two countries is progressively bringing benefits.

Bilateral relations with Bosnia and Herzegovina have been developing at political and technical levels, and it is likely that a bilateral agreement on economic co-operation will be signed between the two countries.

Common aspirations with Croatia to join the EU have been the main basis for developing co-operation between the two countries at political and technical level. A Memorandum of Co-operation was signed in March 2003, providing for the exchange of experience and expertise and the development of joint initiatives to intensify the process of preparation to future EU membership.

Contacts with Serbia and Montenegro at the level of the Ministries of Foreign Affairs, Defence and Interior have been developing. An agreement was signed on co-operation in the fight against terrorism, organised crime and drug trafficking. Recent tension between the Church of Serbia and the Church of Macedonia has fortunately not affected the relationship between the two countries. By refraining from interfering, both Governments will avoid feeding the religious dispute. As regards Kosovo, the Government has kept a pragmatic attitude. A solution was provided to the problem highlighted in last year's report related to the refusal of preferential status to goods coming from Kosovo. One of the two border crossing points initially planned by the authorities together with UNMIK has been opened. However the local population objected to the opening of the second crossing point. The border areas close to Kosovo remain fragile as illustrated by various security incidents at the end of the summer which stressed the need for further co-operation. After talks with Serbia and Montenegro authorities and UNMIK representatives, an agreement was signed with UNMIK on police co-operation. Meetings now regularly take place to review border security issues. In a wider approach, the direct dialogue between Belgrade and Pristina has been supported by the Government, as was the generally improved atmosphere in the region.

Relations with Bulgaria have also been developing on the basis of the shared objective to prepare for European integration. Two high-profile visits marked this period, with the Prime Ministers of the two countries meeting in Skopje and in Sofia and discussion taking place to adopt a memorandum of co-operation on EU integration. An agreement was signed to enhance co-operation in the area of the fight against crime.

The traditionally close relationship with Slovenia took on a new dimension when a Memorandum of Understanding on Co-operation for Technical Support in the area of European integration was signed in April. This memorandum, aiming to sharing Slovenia's experience in preparing itself to EU membership, is a positive example of the benefits which can be drawn by the region from the experience of the current wave of EU enlargement.

Relations with Greece have been developing positively in the political and economical areas. New consular sections have been opened in Thessaloniki and Bitola with the aim of enhancing co-operation and contacts across the border. The name issue remains open however with discussions have been going under the aegis of the UN.

2.3.2. International cooperation

The co-operation with the International Criminal Tribunal for the former Yugoslavia (ICTY) has so far met no difficulties. ICTY has taken jurisdiction over five cases, and expressly recognised domestic jurisdiction in all other circumstances. To clarify the procedural modalities of cooperation with ICTY and ensure that any domestic prosecution would not violate the Amnesty Law, it is important that appropriate legislation is adopted as soon as possible.

As regards the International Criminal Court, in July the former Yugoslav Republic of Macedonia ratified a bilateral immunity agreement with the USA which regretfully runs contrary to the "EU guiding principles concerning arrangements between a state party to the Rome Statute of the ICC and the United States regarding the conditions of surrender of persons to the court" [3].

[3] The guidelines were adopted by the Council on 30 September 2002.

Work has intensified to prepare for NATO membership and a national programme has been prepared. As an objective shared with other countries in the region, preparation for NATO membership has also fostered regional co-operation. A regional agreement was signed in Tirana by the former Yugoslav Republic of Macedonia, Albania, Croatia and the USA in May to promote further these efforts.

Measures have been undertaken to progress on the fate of kidnapped and missing persons which has still not been clarified. As recommended by the International Commission on Missing Persons (ICMP), which provided expertise and assistance in the setting of a national process, a Government-Parliament Investigation Commission was set up in December. It is important that the process does not become politicised, because it is an issue which, when solved, will contribute to healing still-open wounds.

Following the conclusion of the negotiations in 2002, the former Yugoslav Republic of Macedonia became the 146th member of the World Trade Organisation on 4 April 2003. This important achievement should contribute significantly to economic development.

3. Economic situation

3.1. Current Economic Situation

In 2003, economic growth in the former Yugoslav Republic of Macedonia recovered and inflation remained low. Monetary stability was maintained and the general government deficit was reduced by 4 percentage points compared to the previous year to a low 1.5% of GDP. The most worrying signal came from the persistently high unemployment rate. Moreover, the level of foreign direct investment was lower than the previous year's already low level, reflecting the still high perception of political risk and the difficult business environment. The agreement reached with the IMF in April 2003 on a new 14-month Stand-by Arrangement contributed to the maintenance of a stable macroeconomic and fiscal framework and allowed the release of substantial foreign financial assistance from donors.

According to official statistics, 2003 real GDP growth is estimated to have been around 3%, broadly in line with the initial forecasts of the authorities and the IMF. This level constitutes an improvement against 2001-2002 (-4.5% and +0.7 %, respectively), but remains insufficient to reduce unemployment and substantially improve living standards. Industrial production increased by approximately 7% in the first three quarters of 2003, thanks to the positive performance of a few important sectors, such as the steel and oil industry.

In April 2003, the unemployment rate, according to the Labour Force Survey using ILO standards, increased to around 37% of the labour force, up from 32% in the previous year. This was due to higher participation rates in the labour force, the absence of new job creation and the dismissal of workers linked to the restructuring of large state owned enterprises. While the large size of the grey economy may influence the reliability of the employment statistics, it is undoubtedly a reason for concern that both the percentage and the absolute number of registered unemployed have grown in the first months of 2003. The government put considerable hope in a specific measure aimed at encouraging new hirings by subsidizing payroll contributions (the so-called "Branko's Law", adopted in April 2003).

Inflation continued to be low in 2003, with consumer prices increasing by 1.2% on average, well below the projected 3.0%. Along with a drop in food prices, which had surged in 2002, the downward trend can be explained by the depreciation of the dollar, since the denar is de-facto pegged to the euro. Moreover, a reduction in average import tariffs and prices following the country's WTO accession in April 2003 also may have played a role.

In 2003, fiscal performance has improved very substantially. The general government deficit is estimated at around 1.5% of GDP, against a forecast of 2.7% at the beginning of the year and compared to the 5.7% deficit which was recorded in 2002. The drastic fiscal adjustment in 2003 by 4 percentage points of GDP with respect to the previous year is accounted for by the significant reduction in expenditure from 41% of GDP to 36% of GDP. This was the result of the reduction or elimination of some significant non-recurrent expenditures in 2002 - such as security-related expenditures and the one-off repayment to depositors involved in the TAT pyramid scheme - as well as the low execution of budgeted capital expenditure. As regards the latter, projects were systematically reviewed and often delayed or cancelled, because many budget users were failing to come to terms with stricter procurement procedures. Total revenues (34.5% of GDP) have been in line with the projections, thanks to the overperformance in the collection of social insurance contributions, customs duties and non-tax revenue, compensating for a lower than projected VAT revenue.

On the external side, in 2003 there was a slight decline in the overall trade exchange in nominal (euro) terms. Exports remained stable compared to 2002, reaching around EUR 1200 million, while imports decreased by 6%, totalling about EUR 1900 million. In 2003, the trade deficit is expected to have reached approximately EUR 700 million or 17.2% of GDP, lower than in 2002 in euro terms and as a share of GDP, but widening when measured in dollar terms owing to exchange rate effects.

The 2003 current account deficit is estimated at 6.2% of GDP, including significant foreign assistance amounting to around 2.1% of GDP. Total transfers, private and official, decreased from more than 13% of GDP to more than 11% of GDP. In 2003, the level of Foreign Direct Investments (FDI) was very low, amounting to around 1% of GDP, the same level as in the previous year. Additional donor support, amounting to more than EUR 100 million, contributed to financing the balance of payments deficit and maintain international reserves at a level corresponding to around 4 months of imports. The external debt as ratio to GDP declined by five to six percentage points in the course of 2003 reaching 33% at year-end, in part due to the weakening of the US dollar against the euro.

Over the reporting period, the authorities co-operated with the International Monetary Fund (IMF) and maintained a consistent macroeconomic and fiscal framework, which was a recommendation of the previous SAp report. A long overdue Stand-by Arrangement (SBA) with the IMF of SDR 20 million (around EUR 25 million) was approved on 30 April 2003, allowing the release of substantial foreign financial assistance from other donors. The first review of the SBA was successfully completed in October 2003. The second review is expected to be completed in Spring 2004 and the government has requested the IMF to start negotiations for a successor programme.

In 2003, the World Bank disbursed USD 17 million under the PSMAC (Public Sector Management Adjustment Credit) arrangement and USD 20 million for the second tranche of the FESAL 2 (Financial and Enterprise Sector Adjustment Loan) arrangement. In September, the Board of the World Bank approved a new Country Assistance Strategy. It envisages a - performance based - lending envelope of USD 90 million (base case) over three years, which could reach up to USD 165 million in a strong reform scenario.

In July 2003, the EBRD, with other international shareholders, opened a Micro-Finance Bank - Pro Credit Bank - typically providing loans of up to EUR 100,000. Its rapid procedures for examining credit applications immediately proved very popular with small businesses. In 2003, the EBRD also approved a loan of EUR 8 million to a marble processing company and three other regional projects - involving the former Yugoslav Republic of Macedonia - in support of the energy, transport and food processing sectors, for a total envelope of around EUR 105 million.

3.2. Existence of Free-market Economy and Structural Reforms

The structural reform process regained momentum in the course of 2003. The Action Plan for the restructuring, liquidation or privatisation of 40 large loss-making enterprises, which was launched in 2000, was finally completed. The authorities are now focusing on a new priority: private sector development. In September 2003, the Parliament approved a law setting up the Agency for Promotion of Entrepreneurship. However, the generally poor business environment and, in particular, the inability to enforce effectively contracts and creditors' rights hampers the lending activity of the banks, in turn affecting investment and economic development. Banking supervision in the country is improving, while banks are expected to implement a new regulation on consolidated accounting and banking supervision. The difficulties of a few, mainly small, banks in 2003 did not affect the financial stability of the whole system. Competitiveness and efficiency of the banking sector must improve in order to allow easier access to finance to SMEs. Finally, progress was made in the implementation of the pension reform program.

The privatisation process of small and medium size enterprises (SMEs) is almost complete. As of the end of September 2003, 1,683 enterprises had been privatised, while 81 state companies of those included in the privatisation programme that began in 1993 remained for sale. Besides having met the relevant conditions agreed with the World Bank within the FESAL2 commitments concerning large loss-making public enterprises identified in the Action Plan of 2000, the government succeeded in resolving most of the remaining cases in 2003, with a few exceptions generally due to ongoing legal disputes beyond the control of the authorities. It therefore complied with the recommendation identified in the 2003 SAp report.

In 2003, the Government started focusing on measures and activities to support the development and to enhance the competitiveness of SMEs, and more generally to improve the business environment. In January 2003, it adopted a programme on Small Enterprises Development Support and Entrepreneurship Encouragement and, in September, the Parliament approved a law setting up the Agency for Promotion of Entrepreneurship. The authorities also endorsed the principles of the European Charter for Small Enterprises, and set up a strategy for their implementation. A programme for attracting FDI was approved by the Government in August, and the Agency for Promotion of FDI should start its operations in early 2004. However, as regards the business environment, the inability to effectively enforce contracts and creditors' rights hampers the lending activity of the banks, in turn hampering investment and economic development. The absence of a reliable cadastre and the lack of certainty about property rights is also proving to be a serious impediment to investment. In particular, the lack of clear property rights limits the ability of firms - in particular, small and micro firms - to pledge property as collateral and obtain loans.

Over the reporting period, there have not been major structural changes in the financial sector, which is dominated by the banking sector, with a very limited role of non-bank financial institutions. The soundness of the banking sector has improved over recent years. The three largest banks, accounting for around two thirds of total liabilities and assets, show relatively prudent and sound banking practices. However, the IMF Financial System Stability Assessment report published in December 2003 notes that the financial system remains vulnerable to weak governance in smaller banks and also to weaknesses in the banks' balance sheet, which are reflected in the high percentage of non-performing loans (16% of total portfolio assets as of mid-2003). In 2003, six banks were under enhanced supervision by the National Bank, but the repercussions on financial stability of the whole system were relatively minor, given the small size of these banks. Banking supervision in the country is improving, and banks are expected to implement a new regulation on consolidated accounting and banking supervision.

In 2003, banks continued to hold excessive liquidity and remained conservative in their lending activity. Notwithstanding the drop in the average interest rate on Central Bank bills - the main instrument to control liquidity - commercial banks did not fully pass this decline on to their customers. In December, average lending rates were still high at 14.6% against an average deposit rate of around 7%. The competitiveness and efficiency of the banking sector must improve in order to allow easier access to finance for SMEs. The forthcoming establishment of an independent Banking Association, supported by EU-funded technical assistance, could contribute to the latter objective, providing support for the dissemination of best practices in good governance.

As of December 2003 100 companies were listed on the first-tier market known as the "official" market of the Macedonian Stock Exchange (MSE). In addition, approximately 70 further companies are traded on the second-tier market known as the "unofficial" market. This dramatic change from last year (only 8 companies were listed on the "official" market) results from a decision by the Government to require all companies meeting the listing criteria actually to list their shares on the MSE and file public annual and semi-annual reports, as well as disclosing their shareholder structure. However, the Stock Exchange continues to play a marginal role in the financing of the economy. The Securities and Exchange Commission is heading a working group to draft comprehensive amendments to the securities legislation to bring it in line with principles published by the International Organisation of Securities Commissions.

During 2003, the government made significant progress in the implementation of its pension reform program, but much more work is needed before the new system can begin functioning. Significant accomplishments during 2003 include the creation of the Pension Supervision Agency (PSA), the adoption of key secondary regulations and the restructuring of the Pension and Disability Fund (PDF). Before the new system can begin operating, key tasks for 2004 include capacity building of the PSA, conducting the public tender to hire two Pension Companies in charge of creating pension funds and further administrative reform of the PDF. In parallel with pension reform, it is necessary to develop and support the creation of additional investment instruments that are appropriate for pension funds and possibly allow for greater international diversification. The planned introduction of a new government securities market (see below in section 3.3 'Public expenditure management') and its evolution through more frequent auctions and a wider range of maturities represents an important pre-condition for the development of pension funds.

3.3. Management of Public Finances

The authorities also made progress in public administration reform and management of public finances, initiation of the "functional" analysis in most of the administrative services, setting up a single Treasury account and preparing the establishment of a market for government securities. The decompression of the civil service salary structure, greater control of expenditure in extra-budgetary funds, the introduction of audits throughout the administration, the implementation of the fiscal decentralisation process and, in particular, the strengthening of the capacity of local entities to manage expenditure and collect revenues, remain great challenges.

The reform of public administration, one of the priority areas in the previous report, made some progress in 2003. The process of downsizing public administration began in 2003 with an objective of reducing the number of public employees by 4 %, while taking into account the Framework Agreement obligations (the Law on Civil Servants was amended to improve equitable representation of communities). Some preparatory work for wage decompression in the public administration (i.e. widening the difference of wages between non-qualified and qualified jobs) has been carried out but the actual implementation has been postponed to 2004 because of the extra costs associated with this reform. In spite of a number of lay-offs and early retirements in 2003, the health sector still needs considerable downsizing and other cost-saving measures in order to achieve sustainability, efficiency and effective outcomes. However, total employment showed a net increase from 70.000 to 71.800 at the end of 2003 and remains a critical structural problem, with ramifications that go beyond the public finance aspect, encompassing the commitment of having 'equitable representation' of ethnic minorities in the administration (still under 12% in spite of new hires, mostly in police and army) and capacity issues which are vital for the EU integration process.

Public expenditure management: The implementation of procedures concerning commitment registrations in the Treasury marked a significant improvements, in line with the recommendation of the 2003 SAp report. In 2003, the authorities amended the Budget Law and the Law on Public Procurement and merged separate budget users' accounts into a single account within the Treasury. The single account allows the Treasury to ensure proper supervision and control over line ministries' expenditure commitments and payments arrears. The account includes all central government revenues, without however providing a control mechanism for extra-budgetary funds. Further rationalisation should allow, as far as possible, to keep track of the financial flows connect