Regional Approach to the countries of South-Eastern Europe: Compliance with the conditions in the Council Conclusions of 29 April 1997 - Commission communication on operational conclusions - Bosnia and Herzegovina, Croatia, Federal Republic of Yugoslavia, former Yugoslav Republic of Macedonia and Albania
Date: 1998-10-28
Institutions: European Commission
Subjects: Central and Eastern Europe, EU relations, cooperation policy, regional policy, terms for aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  28.10.1998 
COM(1998) 618 final 

Regional Approach  to the countries of South-Eastern  Europe: 
Compliance with  the conditions in the Council Conclusions of 29 April  1997 

COMMISSION COMMUNICATION ON OPERATIONAL  CONCLUSIONS 

Bosnia  and Herzegovina,  Croatia,  Federal  Republic  of  Yugoslavia, 
former  Yugoslav  Republic  of Macedonia  and  Albania 

INTRODUCTION 

In  the  context  of  the  Regional  Approach  to  the  countries  of  South-Eastern  Europe 1,  the  Council 
established  political  and  economic  conditions^  to  be  fulfilled  by  these  countries,  as  the  basis  for  a 
coherent  and  transparent  policy  towards  the  development  of  bilateral  relations  with  these  countries  in  the 
field  of trade, financial  assistance  and  economic  cooperation,  as well  as of contractual  relations. 

The  present  Commission  Conclusions  have  been  reached  on  the  basis  of  a  factual  report^  which  reviews 
compliance  with  these  conditions  by  Bosnia  and  Herzegovina,  Croatia,  the  Federal  Republic  of 
Yugoslavia  (FRY)  -  all  of  which  are  subject  to  obligations  under  the  peace  agreements  -  as  well  as  the 
For  each  country,  compliance  has  been 
former  Yugoslav  Republic  of  Macedonia,  and  Albania. 
reviewed  under  the  following  headings:  democratic  principles;  human  rights  and  the  rule  of  law;  respect 
for  and  protection  of  minorities;  market  economy  reforms;  regional  cooperation^;  and,  in  the  case  of 
Bosnia  and  Herzegovina,  Croatia  and  the  Federal  Republic  of  Yugoslavia,  compliance  with  obligations 
under  the  Dayton  and  Erdut  Agreements  and  the  Peace  Implementation  Councils. 

While  progress  has  been  made  in  some  areas,  the  compliance  by  some  countries  in  the  areas  of 
democratic  reforms,  respect  for  human  and  minority  rights,  economic  reforms  and  regional  cooperation 
has  been  less  than  satisfactory. 
In  particular,  for  Bosnia  and  Herzegovina,  Croatia  and  the  FRY, 
improvements  are  necessary  with  regard  to  the  return  of  refugees  and  displaced  persons  to  their  place  of 
origin,  cooperation  with 
the 
International  Criminal  Tribunal  on 
implementation  of  the  peace  agreements,  as  well  as  in  the  integration  of  the  population  of  Eastern 
Slavonia (Croatia)  and  a  solution  to the Kosovo  conflict  (FRY). 

former  Yugoslavia  and 

the 

At  this  time,  the  Commission  has  therefore  concluded  that the  status  quo  in  relations  with  the  countries 
covered  by the  Regional  Approach  should continue. 

1 
Conclusions  of  the  General  Affairs  Council  of  26  February  1996,  followed  by  a  Commission  report  on 
common  principles  for  future  contractual  relations with certain  countries  in South-Eastern  Europe: Report from  the 
Commission to the Council and the European Parliament [COM(96)476 final  of 2.10.96] 
2 
Conclusions of the General  Affairs  Council of 29 April  1997 
3 
Commission  Staff  Working  Paper:  Regional  Approach  to  the  countries  of  SouthEastern  Europe: 
Compliance with the conditions  in the Council Conclusions of 29 April  1997:  Bosnia and  Herzegovina, Croatia, 
Federal Republic of Yugoslavia, former  Yugoslav Republic of Macedonia and Albania [SEC( 1998) ...  of  ...  ! 0.98] 
4 
See the Commission Staff  Working Paper : Second Report on Economic Relations between the countries of 
SouthEastern  Europe  concerned  by  the  EU's  Regional  Approach  [SEC(98)381  of  27.2.98]  which  covers 
developments during  1997 

1 

CONCLUSIONS 

On  the  basis  of the  factual  report  - covering  the  period  to October  1998 - contained  in the  Commission 
Staff  Working  Paper  on  compliance,  by the  five  countries  concerned,  with  the  conditions  set  out  in the 
Council  Conclusions of 29 April  1997 [SEC (1998)  1727 of  19.10.98], the Commission  has reached  the 
following  conclusions. 

Section 1 

1.  BOSNIA  AND  HERZEGOVINA 

1.1.  General  assessment 

On democratization  and  human  rights, much  work  is still  ahead.  Efforts  to favour  refugee  (in  particular 
minority)  return  are  still  hampered  by the  lack  of co-operation  of  BiH  authorities,  at  different  levels, in 
the two  Entities. Reform  of the judiciary  is urgent and  substantial  developments  are needed  in the  fields 
of  education,  civil  society  and  the  fight  against  fraud.  The  newly  elected  BiH  authorities  should  fully 
respect Dayton  commitments. 

Certain  steps  towards  market  economy  reform  have  been  taken  (e.g.  establishment  of  a  Central  Bank, 
introduction  of a new currency, Custom  code, privatization  laws) but  major  progress  is still  required  for 
the  implementation  of a transparent  and  common  /  harmonized  legal  and  regulatory  framework  in  both 
entities in key sectors such as the monetary and banking system, commercial  and tax treatment  of private 
companies, and conditions for foreign  investment. 

Concerning  implementation  of  the  Dayton  Accords,  basic  laws  have  been  adopted  and  the  central 
institutions  have  been  established,  under  pressure  from  the  High  Representative,  but  these  are  not  yet 
functioning  adequately.  On  freedom  of  movement,  the  conditions  for  a  lasting  reconciliation  have  not 
yet been established  (independent judiciary; multi-ethnic  police; adoption  in the  RS, and  implementation 
in both  Entities of property and housing  legislation). 

The former  RS government had made some progress regarding conditionality, especially  in the economic 
field. 

1.2  Operational  Conclusions 

Bosnia  and  Herzegovina  continues to benefit  from  the autonomous  trade  preferences  extended  by the 
European  Community. 

Bosnia  and  Herzegovina  is  not  eligible  for  full  PHARE  assistance  as  the  relevant  conditions  have  not 
been  met.  Projects  in  direct  support  of  the  peace  agreements,  targeted  at  reconstruction,  institution 
building  and  refugee  return  (in  accordance  with  the  Council  Conclusions  of  29  April  1997)  receive 
PHARE support. A progressive start of full  PHARE will depend La. on the will of the newly elected  BiH 
authorities, at State and Entity level, to respect the relevant conditionality  criteria. 

While  the  EU  Declaration  on  Bosnia  and  Herzegovina  adopted  on  8  June  confirmed  aspirations 
regarding  closer  relations,  it  is  still  too  early,  however,  to  begin  negotiations  on  a  Cooperation 
Agreement with the Community. 

2. 

Croatia 

2.1 

General Assessment 

Progress  in the different  areas  has  been  varied.  As  in the  previous  reports, a considerable  discrepancy 
persists between  official  statements and practice on the ground.  There has been  little or no progress in 
démocratisation or respect for human  rights - most notably as regards media and electoral  reform.  There 
have been some positive developments  in preparations for refugee  return with the adoption  of the  Return 
Programme  -  though  it  is to  be  regretted  that  the  adoption  process  was  so  difficult. 
It  is  too  early  to 
judge the success of the Return  Programme as full  implementation  is necessary (as with the  Programme 
for  the  Reestablishment  of  Trust).  This  will  be  closely  monitored,  particularly  as  actions  in  this  area 
have  repercussions  beyond  Croatia.  Respect  for  Dayton  and  Erdut  obligations  -  including  respect  for 
minority  rights  in  Eastern  Slavonia  -  remains  problematic.  There  has  been  substantial  progress  in 
cooperation  with  neighbouring  countries.  Regarding market  economy  reform,  there  has  been  progress 
in some areas such as privatisation  and foreign  direct investment, while in particular  banking supervision 
remains to be considerably  improved. 

2.2 

Operational  Conclusions 

Croatia  continues,  at  present,  to  benefit  from  the  autonomous  trade  preferences  extended  by  the 
European  Community. 
While  some progress  has been  made  in relation  to a few  of the  relevant  conditions, Croatia  has not yet 
fulfilled  the  conditions  for  additional  progress  in  its  relations  with  the  Community,  in  particular  the 
lifting  of the  suspension  of  its eligibility  for PHARE.  Assistance  under other  Community  programs -
including  reconstruction  -  will  continue.  Notwithstanding  that  conditions  do  not  exist  at  present  for 
PHARE assistance, the EC has already given  substantial  assistance (humanitarian  assistance, support  for 
démocratisation  and  independent  media,  and  reconstruction)  and  remains  willing  to  provide  more  -
paf*ica1aiiy  i©f, the  return  process. 
Discussion  of  the  possible  opening  of  negotiations  on  a 
Cooperation Agreement  is, at this stage, premature.  Progress  in relation  to the relevant criteria will be 
closely  monitored. 

3. 

Federal  Republic  of  Yugoslavia 

3.1 

General  Assessment 

The picture is again mixed, with contrasting developments  in Serbia and  Montenegro. 

The  Kosovo  issue,  which  has  now  resulted  in  open  conflict,  dominates  developments  in Serbia  in 
relation  to démocratisation, human  and  minority  rights, economic  reform  and  relations  with  neighbours. 
In  terms  of  respect  for  democratic  principles, the  gap  between  theory  and  practice  remains  as  wide  as 
ever.  Human  and  minority  rights  are  clearly  not  respected  -  dramatically  so  in  Kosovo.  There  have 
been  no efforts  at  economic  reform  -  in  fact  there  has  even  been  back-tracking  on  a  number  of  policy 
areas such as WTO accession.  Relations with neighbouring countries vary, with the potential  for  further 
deterioration  in relations with those bordering Kosovo. 

Measures  currently  in  force  against  Serbia  include  an  arms  embargo,  a  visa  ban,  a  supply-ban  on 
equipment  which  could  be  used  for  terrorism  or  police  repression,  a  moratorium  on  export  credit,  a 
freeze  on  Serbian  /  FRY  Government  funds  held  abroad,  a prohibition  on  new  investment,  and  a  flight 
ban on FRY-registered  airlines. 

In  Montenegro,  by  contrast,  the  positive  impulsion  towards democratic  reform  has  continued  (despite 
continuous  pressure  from  the  federal  level),  with  well-conducted  elections,  increased  media  freedom, 
respect  for  minority  rights,  moves  towards  economic  reform,  improving  relations  with  neighbouring 
countries. 
The  welcome  provided  to  displaced  persons  from  Kosovo,  and  the  cooperation  of  the 
Montenegrin  authorities with  international  aid organisations has been  notable.  However, there has been 
a recent decision to refuse  entry to further  internally displaced  persons from  Kosovo. 

3.2 

Operational Conclusions 

- 

. 

The  FRY, at federal  level, has not fulfilled  the conditions  relating to  inclusion  in theautonomous  trade 
regime,  eligibility  for  the PHARE  programme  or  for  the  opening  of  negotiations  on  a  Cooperation 
Agreement.  Given  the present  state of relations with the  FRY, and the continuing conflict  in Kosovo, 
discussion  of any of these would be inappropriate. 

Each  of  these  forms  of  bilateral  relations  with  the  European  Community  applies  to  the  state  (Federal 
Republic  of  Yugoslavia)  as a whole.  As these  instruments  can  not  therefore  be  used  for  the  benefit  of 
Montenegro,  continuing  assistance  to that  republic  will  be  by  means  of  other  Community  instruments 
e.g. reconstruction  assistance (in the fields of agriculture, transport, education  and public administration) 

Section 2 

4. 

Former  Yugoslav  Republic  of  Macedonia 

, — < —- 

° 

*• 

4.1. 

General  assessment 

The  former .Yugoslav  Republic  of  Macedonia  clearly  presents  a  picture  of  political  maturity  and  is  a 
positive  example  of  stability  in the  region,  respecting  fully  basic democratic  principles  and  the  principle 
of  regional  cooperation.  The  constructive  stance  of  the  former  Yugoslav  Republic  of  Macedonia  with 
regard  to  the  Kosovo  issue  is  much  appreciated,  as  is  the  fact  that  the  former  Yugoslav  Republic  of 
Macedonia  will actively  facilitate  the  Kosovo Verification  Mission,  but more attention  should  be paid to 
the  reception  of  refugees  from  that  conflict.  Notable  achievements  and  a  credible  commitment  can  be 
observed  in  the  fields  of  human  rights  and  the  rule  of  law,  respect  for  and  protection  of  minorities, 
market  economy  reform.  Continued  attention  should  be paid to these fields, particularly  in the  following 
specific  areas:  public  administration  reform 
including  the  judiciary,  law  enforcement  and  local 
government;  education  for  the  Albanian  minority;  minority  representation  in  the  security  forces;  use of 
minority  languages;  private  sector  development  including  the  completion  and  enforcement  of  the 
appropriate  legal  framework: the banking sector. 

4.2. 

Operational  conclusions 

The  country  will  continue  to  benefit  from  Community  assistance,  notably  in the  framework  of PHARE 
with a view to achieving  further  progress  in all fields.  It is important that all agreed  programmes are  fully 
implemented,  including  for  public  administration  reform,  private  sector  development  and  agriculture. In 
addition  to  support  the  pedagogical  faculty  at  Skopje  University  under  the  Tempus  programme,  the 
Commission  intends  to  propose  to  the  authorities  of  the  former  Yugoslav  Republic  of  Macedonia,  that 
inter-ethnic 
the  possibilities  of  specifically  contributing  through  PHARE  to  further  improvement  of 
relations 
in  the  country  should  be  examined  jointly,  namely  in  the  framework  of  the  public 
administration  reform  programme or the Municipal  Regeneration  Fund. 

Regarding  contractual  relations  with  the  Community,  the  Cooperation  Agreement  (including  the 
Protocol  on  Financial  Cooperation)  and the Agreement  in the  Field  of Transport  will continue to be  fully 
implemented.  Relations  will  develop  on  this  basis,  including  in  the  framework  of  working  parties 
established  at  the  first  Cooperation  Council  of  20/21  March  1998  and Political  Dialogue.  A  possible 
upgrading  of relations  between  the Community  and the  former  Yugoslav  Republic of Macedonia  will be 
considered  at  a  later  stage,  taking  into account  the  state  of  play  both  of  relations  under the  Cooperation 
Agreement  and  of  assistance  under  PHARE,  as  well  as  developments  in  the  country inter  alia  in  the 
above-mentioned  areas. 

5. 

Albania 

5.1. 

General  assessment 

The process of stabilization,  recovery  and democratization  in the countryand  continues to develop  rather 
unevenly  and  is still  confronted  with  severe  problems.  Political  life  remains  highly  confrontational  and 
public  order  rather  volatile  as  highlighted  by  renewed  turmoil  in  September  1998  followed  by  a  new 
government  in  October  1998.  Progress,  in  terms  of  macro-economic  stabilization,  was  confirmed 
throughout  1998, but economic  development  is vulnerable  to continuing  political  instability  and  lack  of 
public  order  and  security. Continuous efforts  are also  needed  to fully  implement  ongoing  major  reforms 
in the  financial  sector.  First  steps  with  respect  to  institutions  and  public  administration  are  encouraging 
but  should  be  confirmed  and  completed  by  sustained  efforts  in  the  fight  against  fraud  and  corruption. 
Law  enforcement  and  progress  in  the  field  of  individual  civil  rights  will  also  require  the  effective 
strengthening  of the judiciary. Additional  effort  is also required  regarding  electronic media.  Compliance 
with the principle of regional cooperation  is  satisfactory. 

5.2. 

Operational  conclusions 

PHARE  assistance  will  be continued  with  a view to achieving  further  progress  in stabilization,  recovery 
and  démocratisation  in  the  country,  and  to  enhancing  regional  cooperation.  The  implementation  of 
agreed  programmes,  in  particular  in  the  fields  of  public  administration  reform,  agriculture,  large 
infrastructure  and  local  community  development  is of crucial  importance.  In this context,  it  is  important 
that  Albania  provides  the  necessary  conditions  in  terms  of  public  order  and  security.  The  stabilization 
and  recovery  process  also  presupposes  continued  efforts  to  reform  the  financial  sector  and  to  stabilize 
political  life. 

Contractual  relations  with  the  Community  are  based  on  the  1992  Trade  and  Cooperation  Agreement 
and  the connected  Declaration  on Political  Dialogue.  Relations  will  develop on  that  basis. As a  follow-
up  action  to  the  Joint  Committee  of  23/24  March  1998,  the  Commission  considers  it  appropriate  to 
examine  the  possibility  of  an  upgrade  of  the  bilateral  trade  regime  towards  a  preferential  regime 
comparable with regional  standards in order to promote the development of exports. To this end a  formal 
proposal  complementing  the  existing  Trade  and  Cooperation  Agreement  would  be  required.  Further 
progress, especially  in those political  and economic areas where significant  problems  remain,  is urgently 
needed  before consideration can be given to more substantial  intensification  of relations with the EU. 

ISSN 0254-1475 

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