Communication from the Commission - Hungary: Accession Partnership
Date: 1998-06-29
Institutions: European Commission
Subjects: EU aid, EU programme, Hungary, accession to the European Union, cooperation policy, financial aid

29.6.98

EN

Official  Journal  of  the  European  Communities

C 202/33

HUNGARY:  ACCESSION  PARTNERSHIP

(98/C 202/04)

1.

INTRODUCTION

recommended 

the  Commission 

In  the  opinion  which  it  submitted  to  the  Council  in  July
1997,  in  accordance  with  the  provisions  of  Article  O  of
the  Treaty, 
that
negotiations 
for  accession  should  be  opened  with
Hungary. This recommendation derives from the analysis
contained  in  the  opinion  in  which  the  Commission  is  of
the  view  that  Hungary  (i)  presents  stable  institutions,
guarantees  the  rule  of  law,  human  rights  and  the
protection  of  minorities,  (ii)  can  be  regarded  as  a
functioning  market  economy  able  to  cope  with  the
competitive  pressure  and  market  forces  within  the  Union
in  the  medium  term,  and  (iii)  should  be  capable  in  the
medium term of applying the acquis provided it continues
its  efforts  on  its  transposition  and  intensifies  its  work  on
its  implementation.

The  Europe  Agreement  will  remain  the  basis  for  the
European  Union’s  relations  with  Hungary.  However  the
pre-accession  strategy  will  be  reinforced  to  enable
assistance  to  be  directed  towards  the  specific  needs  of
each  applicant  so  as  to  provide  support  for  overcoming
particular  problems  identified  in  the  opinion.  As  the
Commission  indicated  in  Agenda  2000:  ‘The  reinforced
pre-accession  strategy  has  two  main  objectives.  First,  to
bring together the different forms of support provided by
the  Union 
the  Accession
Partnerships,  and  to  work  together  with  the  applicants,
within  this  framework,  on  the  basis  of  a  clearly  defined
programme 
involving
commitments  by  the  applicants  to  particular  priorities
and  to  a  calendar  for  carrying  them  out.  Second,  to
familiarise  the  applicants  with  Union  policies  and
procedures  through  the  possibility  of  their  participation
in  Community  programmes.’

for  membership, 

in  a  single 

to  prepare 

framework, 

that 

At  its  meeting  in  Luxembourg  in  December  1997  the
European  Council 
the  Accession
decided 
Partnerships  would  be  the  key  feature  of  the  enhanced
pre-accession  strategy,  mobilising  all  forms  of  assistance
to  the  applicant  countries  within  a  single  framework.
This  Accession  Partnership  has  been  decided  by  the
Commission,  after  consulting  Hungary  and  on  the  basis
of  the  principles,  priorities,  intermediate  objectives  and
conditions  which  have  been  decided  by  the  Council.

financial  means  available  to  help  Hungary  implement
these  priorities  and  the  conditions  which  will  apply  to
that  assistance.  This  Accession  Partnership  provides  a
framework for a number of policy instruments which will
in  their
be  used  to  help  the  candidate  countries 
preparations  for  membership.  These  will  include,  inter
alia,  the  National  Programme  for  the  Adoption  of  the
Acquis  to  be  adopted  by  Hungary,  the  Joint  Assessment
of  Economic  Policy  Priorities,  the  Pact  against  Organised
Crime  and  the  internal  market  road  maps.  Each  of  these
instruments  is  different  in  nature  and  will  be  prepared
and  implemented  according  to  specific  procedures.  They
will  not  be  an  integral  part  of  this  Partnership  but  the
priorities  they  contain  will  be  compatible  with  it.

3. PRINCIPLES

The  main  priority  areas  identified  for  each  candidate
country relate to their ability to assume the obligations of
meeting 
that
membership  requires:

the  Copenhagen  criteria  which  state 

— that  the  candidate  country  has  achieved  stability  of
institutions  guaranteeing  democracy,  the  rule  of  law,
human  rights  and  respect  for  and  protection  of
minorities,

— the  existence  of  a  functioning  market  economy,  as
well as the capacity to cope with competitive pressure
and  market  forces  within  the  Union,

— the  ability  to  take  on  the  obligations  of  membership,
including adherence to the aims of political, economic
and  monetary  union.

At  its  meeting  in  Madrid,  the  European  Council  stressed
the  need  for  the  candidate  countries  to  adjust  their
administrative  structures  to  ensure  the  harmonious
operation  of  Community  policies  after  accession  and  at
Luxembourg  it  stressed  that  incorporation  of  the  acquis
into  legislation  is  necessary,  but  not  in  itself  sufficient;  it
is  necessary  to  ensure  that  it  is  actually  applied.

2. OBJECTIVES

The purpose of the Accession Partnership is to set out in
a  single  framework  the  priority  areas  for  further  work
identified  in  the  Commission’s  opinion  on  Hungary’s
application  for  membership  of  the  European  Union,  the

4. PRIORITIES  AND  INTERMEDIATE  OBJECTIVES

and 

The  Commission’s  opinions 
the  Council’s
examination  of  these  have  highlighted  the  extent  of  the
efforts which still have to be made in certain areas by the
candidate countries to prepare for accession and took the
view  that  none  of  these  countries  fully  satisfies  all  of  the
Copenhagen  criteria  at  the  present  time.  This  situation

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29.6.98

will  require  the  definition  of  intermediate  stages  in  terms
of priorities, each to be accompanied by precise objectives
to  be  set  in  collaboration  with  the  countries  concerned,
the  achievement  of  which  will  condition  the  degree  of
assistance  granted  and  the  progress  of  the  negotiations
under  way  with  some  countries  and  the  opening  of  new
the  others.  The  priorities  and
negotiations  with 
intermediate  objectives  have  been  divided 
into  two
groups — short and medium term. Those listed under the
short  term  have  been  selected  on  the  basis  that  it  is
realistic  to  expect  that  Hungary  can  complete  or  take
them  substantially  forward  by  the  end  of  1998.  In  view
of  the  short  time  span,  and  taking  into  account  the
administrative  capacity  required  to  achieve  them,  the
number  of  priorities  selected  for  the  short  term  has  been
limited.  The  priorities  listed  under  the  medium  term  are
expected  to  take  more  than  one  year  to  complete
although  work  may  and  should  also  begin  on  them
during  1998.

Hungary  will  be 
invited  to  draw  up  a  National
Programme  for  the  Adoption  of  the  Acquis  (NPAA)  by
the  end  of  March  which  should  set  out  a  timetable  for
achieving these priorities and intermediate objectives and,
where  possible  and  relevant,  indicate  the  necessary  staff
and  financial  resources.

The  Accession  Partnership  indicates  that  Hungary  will
have  to  address  all  issues  identified  in  the  opinion.  The
annex  provides  a 
these.
summary 
Incorporation of the acquis into legislation is not in itself
sufficient;  it  will  also  be  necessary  to  ensure  that  it  is
actually  applied  to  the  same  standards  as  those  which
apply  within  the  Union.  In  all  of  the  areas  listed  below
there  is  a  need  for  credible  and  effective  implementation
and  enforcement  of  the  acquis.

checklist  of 

Drawing  on  the  analysis  of  the  Commission’s  opinion
and  the  Council’s  examination  of  this,  the  following
short  and  medium-term  priorities  and 
intermediate
objectives  have  been  identified  for  Hungary.

4.1. Short  term  (1998)

— Economic  reform:  review  and  update  the  country’s
medium-term  economic  policy  priorities  within  the
framework  of 
the  Europe  Agreement;  advance
structural  reforms  (particulary  with  regard  to  the
health  care  system).

— Reinforcement  of 

institutional  and  administrative
capacity:  in  particular  in  the  areas  of  veterinary  and
phytosanitary 
regards
facilities  at 
the  external  borders)  environment,
customs policy, internal financial control and regional
development.

(particularly  as 

controls 

— Internal  market: 
standardisation 

including 

certification 

(further  alignment  of 

and
legislative

measures  and  conclusion  of  a  European  Conformity
Assessment  Agreement),  State  aids  (adoption  of
legislative  framework,  definition  of  role  and  powers
of  monitoring  authority,  enforcement)  and  increased
transparency  through  improvement  of  aid  inventory.
intellectual  property  rights  and
Enforcement  of 
further  alignment  of  company 
law.  Complete
alignment  and 
transparency  of  public
procurement  legislation  to  cover  fully  utilities  sector.

increased 

— Justice  and  home  affairs: 

implementation  of
appropriate  refugee  legislation  consistent  with  1951
Geneva  Convention,  development  of  effective  border
management.

— Environment:  continue  transposition  of  framework
legislation,  establishment  and  commencement  of
approximation
implementation 
programmes  and  implementation  strategies  related  to
individual  acts.  Planning  and  commencement  of
implementation  of  these  programmes  and  strategies.

detailed 

of 

4.2. Medium  term

— Political  criteria:  further  efforts  to 

improve  the

integration  of  the  Roma.

— Economic 

reform:  continue 

the
conditions  for  strong  investment  growth  through  the
sustained  implementation  of  prudent  macroeconomic
policies  and  the  advancement  of  structural  reforms.

to  consolidate 

— Economic  policy: 

the 

regular 

review  of 

joint
assessment  of  economic  policy  priorities,  within  the
Europe  Agreement  framework,  focusing  on  satisfying
the Copenhagen criteria for membership of the Union
and the acquis in the area of economic and monetary
policy  (coordination  of  economic  policies,  submission
of  convergence  programmes,  avoidance  of  excessive
deficits);  while  Hungary  is  not  expected  to  adopt  the
euro  immediately  on  accession,  it  is  expected  to
pursue policies which aim to achieve real convergence
in accordance with the Union’s objectives of economic
and  social  cohesion,  and  nominal  convergence
compatible  with  the  ultimate  goal  of  adoption  of  the
euro.

— Reinforcement  of 

improved  operation  of  the 

institutional  and  administrative
capacity:  development  of  anti-fraud  unit  and  State
audit  office, 
judicial
system,  training  for  the  judiciary  in  Community  law
and its application; reinforcement of justice and home
affairs  institutions  (ensuring  sufficient  and  properly
trained  personnel,  in  particular  police,  border  guards,
ministries  and  courts),  reform  of  customs  and  tax
administrations  to  ensure  readiness  to  apply  the

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the 

control
acquis, 
administration and strengthening of the nuclear safety
authority.

reinforcement 

food 

of 

protection,  undertake  steps  to  bring  public  health
standards  into  line  with  European  Union  norms.

— Internal  market:  including  further  development  of
standardisation and conformity assessment bodies and
establishment  and  operation  of  a  market  surveillance
system, alignment of technical legislation on industrial
products,  further  alignment  of  competition  law,  in
particular  for  State  aid,  reinforcement  of  monitoring
authorities  both  for  competition  and  State  aids,
alignment  of  capital  liberalisation,  financial  services,
consumer  protection,
audiovisual  policies  and 
including
promotion  of  enterprise  development, 
SMEs,  alignment  with  the  acquis  in  the  fields  of
telecommunications,  consumer  protection  and  the
internal  energy  market.

— Justice and home affairs: including implementation of
migration policy and asylum procedures as well as the
fight  against  organised  crime  (in  particular  money
laundering,  drugs  and  trafficking  in  human  beings)
and  corruption,  and  clarification  of  admission
provisions  for  immigrants,  and  to  align  visa  policy
with  that  of  the  European  Union  and  to  complete
alignment  to  international  conventions,  notably  in
view  of  the  Schengen  acquis.

the 

— Agriculture:  including  alignment  with  the  agricultural
(including  veterinary  and  phytosanitary
acquis 
in  particular  external  border  controls),
matters, 
attention  to  environmental  aspects  of  agriculture  and
biodiversity.  Development  of 
to
implement  and  enforce  the  common  agricultural
policy,  in  particular  the  fundamental  management
mechanisms  and  administrative  structures  to  monitor
the agricultural markets and implement structural and
rural 
and
implementation  of  the  veterinary  and  phytosanitary
requirements,  upgrading  of  certain  food-processing
establishments  and  testing  and  diagnostic  facilities,
restructuring  of  the  agri-food  sector.

development  measures, 

adoption 

capacity 

— Transport: further efforts on alignment with acquis in
particular 
in  rail  and  road  transport  (technical
controls),  and  to  provide  necessary  investment  for
transport 
extension  of
trans-European  networks.

infrastructure,  notably 

as 

policies 

preparation 

employment 

— Employment  and  social  affairs:  development  of
appropriate labour market structures and joint review
of 
for
coordination;
in  European  Union 
participation 
alignment  of  labour  and  occupational  health  and
safety  legislation  and  development  of  enforcement
structures, 
the
framework  Directive  on  health  and  safety  at  work;
enforcement  of  equal  opportunities  between  women
and  men;  further  development  of  active,  autonomous
social
social  dialogue; 

in  particular  early  adoption  of 

further  development  of 

— Environment: 

the 

planning 

including 

capacities, 

development 

of
monitoring  and  implementation  control  structures
and 
and
continuous 
implementation of approximation programmes related
to  individual  legal  acts.  A  particular  emphasis  should
be  given  to  the  waste  water,  waste  management,  air
pollution  and  integrated  industrial  pollution  control
and  risk  management.  Environmental  protection
requirements 
sustainable
development  must  be  integrated  into  the  definition
and  implementation  of  national  sectoral  policies.

need 

and 

the 

for 

— Regional  policy  and  cohesion:  further  strengthen
budgetary 
instruments,
monitoring  and  control  mechanisms  in  order  to
participate  in  European  Union  structural  programmes
after  membership.

procedures, 

financial 

5. MAIN  INSTRUMENTS  FOR  COMMUNITY

TECHNICAL  AND  FINANCIAL  ASSISTANCE

5.1. Programming  of  financial  resources

The  Phare  allocation  for  the  period  1995  to  1997  has
totalled  ECU  282  million.  Subject  to  the  approval  of  the
Phare  budget  for  the  remaining  period,  the  Commission
will confirm the allocations for 1998 and 1999. Financial
proposals  will  be  submitted  to  the  Phare  Management
Committee  as  provided  for  in  Council  Regulation  (EEC)
No  3906/89.  Joint  financing  by  the  applicant  countries
will be systematically required for all investment projects.
The  Commission  will  work  with  Hungary,  the  EIB  and
international  financing 
in  particular  the
EBRD  and  World  Bank,  with  a  view  to  facilitating  the
to  pre-accession
co-financing  of  projects 
priorities.  Financial  assistance  from  the  year  2000
onwards  will  comprise  aid 
for  agriculture  and  a
structural instrument which will give priority to measures
similar  to  the  Cohesion  Fund.  In  addition  Hungary  will
have  access  to  funding  from  multi-country  programmes
directly  related  to  the  acquis.

institutions, 

relating 

The Phare programme is the main financial instrument of
the  reinforced  pre-accession  strategy.  Phare’s  prime
objective  is  to  help  prepare  Central  and  East  European
countries  for  accession  by  focusing  the  assistance  it
provides  on  the  adoption  of  the  Community  acquis  and
in  particular  on  the  priorities  identified  in  this  Accession
Partnership  and  in  the  National  Programme  for  the
Adoption  of  the  Acquis.  Each  year  the  Commission  will

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sign  a  financing  memorandum  with  Hungary  in  which
Hungary  will  undertake  to  meet  a  number  of  the
priorities  identified  in  this  Accession  Partnership  and  the
Commission  will  undertake  to  contribute  financially  to
their  realisation.  Programming  of  Community  financial
assistance  will  take  into  account  the  priorities  and
timetable  of  the  NPAA.

In  addition,  the  subsequent  allocation  of  financial
assistance  will  be  closely  tied  to  the  respect  by  the
Hungarian  Government  of  the  commitments  made  in  the
NPAA.  Certain  pre-accession  activities  can  be  reinforced
now  (e.g.  support  for  institution  building)  but  others,
such  as  the  financing  of  major  investment  projects
designed  to  meet  the  requirements  of  the  acquis  in  areas
such  as  environment  and  nuclear  safety  will  have  to  be
programmed  over  a  period  of  five  to  six  years.

From  1998  Phare  assistance  will  be  channelled  through
the  following  types  of  actions:

— Institution  building  (around  30 %),  which  involves
the  strengthening  of  democratic  institutions,  rule  of
law,  public  administration  and  all  entities  responsible
for  public  services  in  order  to  establish  the  necessary
institutional  and  administrative  structures  and  train
the  people  required  to  apply  the  acquis.  Institution
building  support  will  be  implemented,  inter  alia,
through,  training  actions,  technical  assistance  and
twinning  of 
in
Hungary  with  relevant  bodies  in  the  Member  States.
Initially this twinning will focus on priority areas such
as finance, agriculture, environment, justice and home
affairs.

institutions  and  administrations 

in 

covering 

particular 

— Investment  support  (around  70 %),  in  order  to  make
the  necessary  investments  possible  for  the  adaptation
of Hungarian infrastructure to the Community acquis.
This  support  will  concentrate  on:  (i)  structural
actions, 
agricultural
restructuring, regional development and investment in
human  and  intellectual  capital,  which  could  include
Phare  contributions  to  participation  in  the  research
and 
framework
programme;  (ii)  compliance  with  Community  norms,
in  particular  as  regards  environment,  agriculture,
industry,  occupational  safety  and  health,  transport
and  telecommunications;  (iii)  co-financing  of  large
and
scale 
medium-sized  enterprises  development (2).

infrastructure (1) 

technological 

development 

small 

and 

(iv) 

(1) Concerning  investment  projects  in  general,  Hungary  will  be
required  to  fulfil  the  principle  of  complementarity  by  means
of  contributing  a  minimum  amount  of  25 %  to  jointly
financed  projects.

(2) A horizontal facility for SMEs will be available to remedy the
shortage  of  investment  capital  available  to  small  enterprises.

5.2. Role  of  international  financial  institutions

Cooperation  between  Hungary  and  the  international
financial  institutions  will  receive  a  new  impetus  and  a
new  focus  through  the  Accession  Partnership.  The  grant
resources made available under the Accession Partnership
will  serve  as  seed  money  and  a  catalyst  for  larger
amounts  of  development  finance  from  the  IFIs.  This
process  will  be  developed  by  the  Commission  in  liaison
with  the  candidate  countries,  the  EIB  and  the  IFIs,  in
particular the EBRD and the World Bank with a view to
facilitating  the  co-financing  of  projects  relating  to
pre-accession  priorities.

Under  a  new  lending  mandate  covering  the  period  1997
to  1999,  the  EIB  can  make  available  ECU  3 520  million
in  Central  and  Eastern  Europe.  The  new  pre-accession
facility  approved  by  the  EIB’s  governors  in  early  1998
increases this amount to ECU 7 billion. EIB loans shall be
used  in  all  sectors  eligible  for  EIB  financing  to  facilitate
the  accession  process.

6. CONDITIONALITY

steps 

further 

Community  assistance  will  be  conditional  on  respect  by
the  Europe
its  commitments  under 
Hungary  of 
Agreement, 
the
Copenhagen  criteria  and  progress  in  implementing  this
Accession  Partnership.  Failure  to  respect  these  general
conditions could lead to a decision by the Council on the
suspension of financial assistance on the basis of Article 4
of  Council  Regulation  (EC)  No  622/98.

satisfying 

towards 

7.

IMPLEMENTATION  OF  PRE-ACCESSION  ASSISTANCE

The  provision  of  financial  assistance  to  Hungary  will
depend  on  the  maturity  of  projects  proposed  by  the
Hungarian  Government  for  inclusion  in  a  financing
memorandum.  Where  projects  need  to  be  tendered  the
Commission  will  only  finance  those  projects  which  are
ready  for  tendering  at  the  stage  of  the  signature  of  the
financing memorandum. In addition any previous/existing
commitments  in  the  same  sector  must  have  been  fully
contracted  or  be  on  track.  In  order  to  ensure  efficient
implementation,  projects  to  be  financed  must  not,  in
principle, fall below a threshold of ECU 2 to 3 million, in
particular  in  the  case  of  infrastructure  projects.  If  these
principles  lead  to  a  situation  where  Hungary  cannot
absorb its full indicative allocation, the allocation will be
reduced  accordingly.  The  difference  between 
the
indicative  and  final  allocation  will  be  transferred  to  the

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horizontal  SME  and/or  the  large  scale  infrastructure
facility. No subsequent compensation of this amount will
be  made.

The Government of Hungary is invited to put in place an
implementation  structure  which  ensures  coherence  and
complementarity  between  all  types  of  European  Union
financial  assistance  and  national  resources.  A  national
coordinator  will  be  responsible  for  ensuring  a  close  link
the
the  general  accession  process  and 
between 
programming  of  the  Community  financial  assistance.

and 

institution 

promotion 

The Government of Hungary will establish (preferably in
the Ministry of Finance) during 1998 a national fund for
investment 
building
functioning  under  the  responsibility  of  a  National
Authorising Officer (NAO). As the central entity through
which  Phare  and  other  forms  of  Community  financial
assistance  will  be  channelled,  the  national  fund  will  be
responsible  for  the  management  of  these  funds  under
decentralised 
increase
transparency  and  reduce  dispersion  of  funds.  It  will  have
overall  responsibility  for  management  of  funds  including
respect  of  provisions  of  the  financing  memorandum  and
be  accountable  to  the  Commission  for  the  use  of  the
funds.  It  will  also  ensure  and  supervise  the  flow  of
national  and  other  co-financing  resources  as  set  out  in
the  financing  memorandum.  The  detailed  functions  and
responsibilities of the national fund will be set out in the
individual financing memoranda.

implementation 

in  order 

to 

a 

of 

policy 

pursue 

In  cooperation  with  the  Government  of  Hungary,  the
Commission  will 
further
decentralisation  of  the  implementation  of  the  financial
assistance  where  certain  pre-conditions  are  met,  and  to
the  extent  permitted  by  the  European  Communities’
Financial  Regulation,  in  particular  Article  105(3).  This
will be done with the intention to establish, within limits
and  in  a  gradual  manner,  a  relationship  between  the
Commission  and  Hungary  where  responsibility  is  shared
along  the  lines  of  the  relationship  existing  with  the
Member  States  for  implementing  the  Structural  Funds.

its 

Financial  Regulation, 

of  the  European  Community’s  public  procurement  rules
and 
equal
participation in tenders and the provisions of Article 118.
Any  decision  on  the  use  of  national  procurement  rules
will  be  taken  by  the  Commission  on  a  case-by-case  basis
individual  financing
and  will  be  confirmed 
memoranda.

including 

in  the 

individual 

jointly  with 
in 

the  Commission 
the 

The  monitoring  of  programme  implementation  shall  be
through
carried  out 
procedures  established 
financing
memoranda.  In  order  to  ensure  effective  monitoring  of
implementation 
Phare
assistance 
programme,  each  Phare  programme  will  incorporate
quantified physical and financial objectives which will be
specified  in  the  financing  memorandum.  In  order  to
gauge their effectiveness all operations financed under the
Phare programme will be subject to ex-post evaluation to
appraise  their  impact  with  respect  to  their  objectives.

under 

the 

of 

8. MONITORING

The  implementation  of  the  Accession  Partnership  will  be
monitored  in  the  framework  of  the  Europe  Agreement.
This  will  commence  in  1998  before  the  Commission
presents  its  first  regular  report  to  the  Council  reviewing
the  progress  made  by  Hungary  including  implementation
of  the  Accession  Partnership.

in 

the  appropriate 

The relevant sections of the Accession Partnership will be
discussed 
subcommittee.  The
Association Committee will discuss overall developments,
progress  and  problems  in  meeting  its  priorities  and
intermediate  objectives  as  well  as  more  specific  issues
referred  to  it  from  the  subcommittees.  The  Association
Committee  will  report  to  the  Association  Council  on  the
implementation  of  the  Accession  Partnership.

The  Phare  Management  Committee  will  ensure  that
financing  decisions  are  compatible  with  the  Accession
Partnerships.

In  this  context,  the  possibility  of  applying  national
procurement  procedures  in  the  tendering  and  contracting
of Phare projects may be explored by the Commission, if
so  requested  by  the  Government  of  Hungary, 
in
particular  in  the  field  of  investment.  The  Commission’s
decision on this matter will be taken following, inter alia,
examination  of  the  Hungarian  national  procurement  law
for respect of and compatibility with the basic provisions

The  Accession  Partnership  will  be  amended  as  necessary
in  accordance  with  Article  2  of  Regulation  (EC)
No  622/98.  The  Commission  will  propose  a  review  of
this  partnership  before  the  end  of  1999  and  at  regular
intervals 
include
consideration  of  the  need  to  further  specify  intermediate
objectives  in  the  light  of  the  progress  made  by  Hungary
in  meeting  the  objectives  set  out  in  this  partnership.

thereafter.  These 

reviews  will 

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29.6.98

ANNEX

Hungary will have to address all issues identified in the opinion. The purpose of this Annex is to provide a
summary  checklist  of  these  issues.  These  are  formulated  as  recommendations  for  action.  They  are  listed  in
the order in which they appear in the opinion without any ranking in terms of importance or urgency. The
priority  areas  for  action  by  each  candidate  are  set  out  as  priorities  and  intermediate  objectives  in  the
Accession  Partnership  itself.

1.

Political criteria

Efforts  will  have  to  be  made  to  build  on  the  measures  taken  by  the  government  to  ensure  justice  and
protection  for  the  Roma.  Particular  measures  must  be  taken  to  streamline  the  operation  of  the  judicial
system, to train judges to a higher standard, and to ensure stability in the Constitutional Court. In addition,
the  fight  against  corruption  needs  to  be  made  more  effective.

2.

Economic criteria

Hungary should consolidate the conditions for sustainable growth, maintaining a sound budgetary position
and  continuing  to  implement  sound  macroeconomic  policies.

The  reform  of  the  social  security  system  needs  to  be  completed  to  underpin  macroeconomic  stability.
Further steps should be taken to strengthen the regulatory mechanisms which enable a market economy to
function effectively. Hungary must implement a comprehensive range of policies to ensure that inadequacies
in  the  functioning  of  the  labour  market  do  not  hamper  Hungary’s  ability  to  withstand  competition  in  the
Single Market.

3.

Ability  to  assume  the  obligations  of  membership

3.1.

Internal  market  without  frontiers

The  four  freedoms

G e n e r a l   f r a m e w o r k   —   efforts  must  be  made  to  approximate  and  enforce  legislation  in  the  fields  of
intellectual  property,  company  law,  accounting,  data  protection,  and  public  procurement,  in  particular  the
utilities  sector  (energy,  telecommunications,  water  and  transport).

F r e e   m o v e m e n t   o f   g o o d s   —   the  framework  legislation  which  will  enable  Hungary  to  implement  the
basic principles of the European Union system has been adopted. The conformity assessment infrastructure
needs to be strengthened and a market surveillance mechanism set up. The approximation of new approach
Directives  should  be  accelerated.  As  regards  other  sectoral  legislation,  alignment  of  pharmaceuticals
legislation should be finalised, and approximation of Directives on chemicals and motor vehicles should be
completed. Hungary needs to maintain its quick pace of approximation of legislation on industrial products
so  as  to  fully  adopt  the  European  Union  system.

F r e e   m o v e m e n t   o f   c a p i t a l   —   further  efforts  are  still  required  especially  in  liberalising  outward
movements  and  removing  investment  restrictions  on  institutional  investors.

F r e e   m o v e m e n t   o f   s e r v i c e s   —   progress  in  transposing  legislation  must  be  accompanied  by  concrete
implementing  measures  as  well  as  the  consolidation  of  the  administration.  Recent  legislation  in  the  field  of
banking  and  insurance  allowing  the  establishment  of  branches  by  foreign  companies  needs  to  be  fully
implemented.

F r e e   m o v e m e n t   o f   p e r s o n s   —   as  regards  mutual  recognition  of  professional  qualifications,  efforts
must be made to ensure the necessary legislative and enforcement measures. Further efforts must be made to
ensure  the  necessary  legislative  and  enforcement  measures  as  regards  the  coordination  of  social  security
schemes.

Competition

In  respect  of  State  aid,  further  efforts  are  necessary  to  ensure  full  transparency,  in  particular  through  the
establishment and updating of a comprehensive State aid inventory in accordance with Community practice.
Moreover, the legal framework for the granting of State aid must be aligned with EC State aid legislation. It
is  necessary  to  review  all  existing  aid  measures  and  modify  or  abolish  those  measures  which  are  not

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compatible  with  the  Europe  Agreement.  The  necessary  powers  and  procedures  must  be  established  for  the
State aid monitoring authority to implement the monitoring of new aid on a systematic basis. As to sectors
traditionally  subject  to  monopolies,  the  policy  of  liberalising  and  opening  up  to  competition  should  be
continued.

3.2.

Innovation

Research  and  technological  development

Improvements  must  be  made  in  the  level  of  innovation  in  the  economy  as  well  as  in  the  links  between
research  institutes,  industry  and  small  and  medium-sized  enterprises.

Telecommunications

Additional regulatory efforts are needed to comply with European Union Directives, in particular in the field
of  interconnection.  At  the  same  time,  the  acquis  now  requires  governments  to  ensure  that  a  modern
telephone  service  is  available  everywhere  at  an  affordable  price.  Meeting  this  obligation  will  require
significant  investment  in  the  system.

Audiovisual

Amendments  to  audiovisual  legislation  must  be  completed  to  ensure  full  alignment  with  Community
requirements.  Structural  adaptations  of  the  industry  should  be  pursued.

3.3. Economic  and  fiscal  affairs

Economic  and  monetary  union

Central Bank legislation must be made fully compatible with Community rules and the stability orientation
of  current  monetary  and  exchange  rate  policies  should  be  maintained.

Taxation

Additional adjustments must be made to bring VAT legislation completely into line with the requirements of
the  Community  acquis.  Particular  efforts  need  to  be  made  as  regards  the  scope  of  the  VAT  rate  structure
and  the  special  VAT  scheme  for  farmers.

Significant discrepancies between the Hungarian excise regime and European Community requirements need
to  be  addressed.  In  the  field  of  excise  duties  particular  attention  should  be  given  to  the  setting  up  of  a
warehousing  system  for  the  movement  of  goods  under  duty  suspension  arrangements.  Tax  structures  and
the  level  of  excise  rates  need  to  be  aligned  with  the  Community  model.  Control  procedures  must  be
strengthened  to  combat  fraud.

Statistics

Efforts  must  be  made  to  clarify  the  issues  of  impartiality  and  confidentiality  for  Hungary  to  be  able  to
comply  with  European  Union  requirements  for  official  statistics  within  the  next  few  years.  Hungary  must
make  improvements  in  sectors  such  as  external  trade  and  business  statistics.  A  systematic  link  between
business  surveys  and  the  national  accounts  must  also  be  established.

3.4. Sectoral  policies

Industry

To enhance competitiveness, further efforts should be made to pursue policies aimed at promoting open and
competitive markets and taking on the instruments which make up European Community industrial policy,
relating  both  to  the  operation  of  markets  (product  specification  and  market  access,  trade  policy,  State  aids
and  competition  policy)  and  measures  related  to  industry’s  capacity  to  adapt  to  change  (stable
macroeconomic  environment,  technology,  training,  etc.).

Agriculture

Substantial  efforts  must  be  made  to  ensure  the  alignment  of  Hungarian  legislation  with  European  Union
requirements.  With  regard  to  veterinary  and  phytosanitary  requirements,  special  attention  must  be  paid  to
the  upgrading  of  establishments  and  the  inspection  and  control  arrangements  for  protecting  the  European

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29.6.98

Union’s external borders. Administrative structures must be strengthened to ensure the implementation and
enforcement  of  the  policy  instruments  of  the  common  agricultural  policy  including  import  arrangements.
The  agri-food  sector  must  be  further  restructured  to  ensure  its  competitive  capacity.

Energy

Current efforts for alignment must be maintained, in particular with regard to the adjustment of monopolies
including  import  and  export,  access  to  networks,  energy  pricing,  State  interventions  in  the  solid  fuels  and
uranium sectors, and the development of energy efficiency and fuel quality standards. Special attention must
be  given  to  timely  implementation  of  nuclear  safety  programmes  in  order  to  bring  all  the  nuclear  reactors
into line with safety objectives generally accepted in the European Union. In addition, longer term solutions
for  nuclear  waste  need  attention.  Attention  needs  to  be  paid  to  the  strengthening  of  the  nuclear  safety
authority.

Transport

Efforts must be made to ensure the full adoption of the necessary European Community legislation and its
effective  implementation  in  domestic  road  haulage  (access  to  the  sector,  social  rules  and  safety),  and  for
technical  checks  on  passenger  cars.  Financial  transparency  and  access  rights  must  be  provided  in  the  rail
sector.  Steps  must  be  taken  to  provide  the  domestic  resources  needed  to  ensure  the  future  extension  of  the
trans-European  network.  Inspection  bodies,  in  particular  for  transport  safety,  should  be  strengthened.  At  a
national  level  there  is  a  need  to  develop  specific  strategies  for  transport  infrastructure  development  and
financing.

Small  and  medium-sized  enterprises

Efforts  should  continue  to  create  an  SME-friendly  legal  administrative  environment,  with  the  aim  of
strengthening  SME  development.

3.5. Economic  and  social  cohesion

Employment  and  social  affairs

Legislation  must  be  aligned  with  European  Union  requirements  in  such  areas  as  health  and  safety  and
labour law. Social reform must be further developed and the health system should be improved. An active,
autonomous social dialogue and social protection must be developed. The administrative structures must be
strengthened  to  ensure  the  effective  implementation  of  legislation.

Regional  policy  and  cohesion

Remaining  reforms,  in  particular  the  setting  up  of  the  necessary  instruments  of  financial  control  must  be
implemented  to  ensure  that  Hungary  is  ready  to  apply  Community  rules  and  to  channel  funds  from  the
European  Community  structural  policies  effectively  after  membership.

3.6. Quality  of  life  and  environment

Environment

Significant  steps  must  be  taken  to  ensure  the  full  transposition  of  the  environmental  acquis  as  well  as
substantial  progress  in  ensuring  effective  compliance.  The  proposed  Hungarian  environmental  accession
strategy should be applied. Particular efforts must be made to achieve full European Union compatibility of
the waste, water and nature legislation and to ensure the transposition of framework Directives dealing with
urban waste water treatment, drinking water, waste management and air pollution as well as the Integrated
Pollution  Prevention  and  Control  Directive.  Financing  strategies  must  be  made  in  the  water,  air  and  waste
sectors  which  require  major  investments.  The  potential  of  market-based  instruments  as  a  source  of  finance
needs  more  attention.  A  considerable  effort  must  be  made  to  develop  adequate  implementation  and
enforcement  structures.  Public  awareness  of  the  environment  must  be  stimulated.

Consumer  protection

Legislation  must  be  amended  in  such  areas  as  advertising,  sales  away  from  business  premises,  distance
selling,  unfair  contract  terms  and  timeshares.  A  strong  and  independent  consumer  movement,  sustained  by
public  authorities,  will  need  to  be  developed.

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3.7.

Justice  and  home  affairs

Some  important  gaps  need  to  be  filled  in  legislation.  Institutional  resource  constraints  need  to  be  tackled.
Hungary must develop more effective border management systems, especially on the future external borders
of the European Union. The new asylum legislation must be implemented, in full compliance with the 1951
Geneva Convention on the Status of Refugees. Hungary must ensure that effective training and institutional
development programmes are implemented in the key justice and home affairs institutions. Attention needs
to  be  paid  to  visa  policy.  The  fight  against  all  forms  of  organised  crime,  including  drug  trafficking,
trafficking  in  human  beings,  money  laundering,  counterfeiting,  false  documents  and  fraud  must  be
intensified.

3.8. External  policies

Trade  and  international  economic  relations

Remaining balance of payments restrictions need to be phased out prior to accession. Preparations must be
made  for  applying,  on  accession,  the  Community’s  various  cooperation  and  preferential  agreements,
multilateral  and  bilateral  commercial  policy  commitments  and  its  autonomous  commercial  defence
instruments.  At  the  same  time,  national  legislation  in  the  field  must  be  repealed.

Customs

Customs legislation must be aligned with that of the European Community and the organisation and duties
of staff must be aligned with those of a modern customs administration. The scope of activities carried out
in  the  numerous  ‘free  zones’  must  be  examined  in  relation  to  Community  legislation.  An  effort  must  be
made  to  develop  computerised  systems  for  full  participation  in  the  customs  union  and  the  internal  market.
Particular  attention  must  be  paid  to  preparing  the  customs  administrations  for  the  operation  of  all  the
customs procedures with economic impact, the system of tariff suspensions and the administration of tariff
quotas and ceilings. Strategic planning needs to take account of the reinforcement of border posts along the
external  frontier  that  Hungary  will  have  with  countries  other  than  European  Union  Member  States  at  the
time  of  accession.

3.9. Financial  questions

Hungary should implement its plans to establish a financial management system corresponding to that used
by  the  Structural  Funds  of  the  European  Union.  The  existing  accounting  system  as  well  as  the  customs
system  should  be  amended  to  ensure  the  efficient  administration  of  the  ‘own  resources’  system.  The
reliability  of  the  national  accounts  must  be  ensured  with  a  view  to  the  accurate  calculation  of  the  GNP
resource.  Hungary  must  bring  its  VAT  system  fully  into  line  with  the  Community  Directives  in  order  to
accurately  draw  up  the  VAT  own  resources  base.  Further  efforts  must  be  made  to  achieve  full
computerisation and the establishment of a remote data transfer system in order to improve the efficiency of
the  fight  against  the  black  market.

4.

Administrative  capacity  to  apply  the  acquis

To ensure the effective implementation and enforcement of the acquis comprehensive reform efforts must be
made  to  strengthen  Hungary’s  administrative  structures  in  most  European  Union  relevant  sectors.  Special
efforts  must  be  made  to  clarify  certain  issues  within  the  administrative  framework  (e.g.  the  division  of
control,  scope,  tasks,  and  question  of  competence).  For  example,  both  in  the  case  of  agriculture  and
consumer protection there is a need to establish central control bodies. The management and supervision of
local self-government requires significant improvement, while their remit and institutional structure need to
be  better  defined.  Efforts  are  needed  to  strengthen  monitoring  and  regulatory  bodies  in  the  fields  of
veterinary  and  phytosanitary  controls  and  food  control.

Reforms  of  the  judicial  system  recently  adopted  must  proceed  as  intended  to  ensure  the  judicial  system  is
strengthened  in  terms  of  resources  and  relevant  expertise.  A  comprehensive  upgrading  and  training  of
judges,  particularly  in  European  Union  matters,  must  be  carried  out.

For  all  levels  of  the  civil  service  there  is  a  need  to  consolidate  and  improve  overall  professional  standards
including  the  implementation  of  training  measures  (especially  in  management  skills)  and  improvements  in
pay.