Making a success of enlargement - Strategy Paper and Report of the European Commission on the progress towards accession by each of the candidate countries [SEC (2001) 1744 to 1753]
Date: 2001-11-13
Institutions: European Commission
Subjects: accession to the European Union, economic situation, enlargement of the Union, political situation, social situation

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.11.2001
COM(2001) 700 final

Making a success of

enlargement

Strategy Paper

and

Report of the European Commission
on the progress towards accession
by each of the candidate countries

[SEC (2001) 1744 to 1753]

I. The overall context..............................................................................................................5

1. Introduction ........................................................................................................................5

2. Public opinion and enlargement ..........................................................................................8

3. The enlargement process and neighbouring countries..........................................................8

a) The Western Balkans..........................................................................................................9

b) The EFTA countries ...........................................................................................................9

c) The Newly Independent States............................................................................................9

d) The Mediterranean ...........................................................................................................10

II. Progress by the candidate countries in meeting the membership criteria ...........................11

1. Political criteria ................................................................................................................11

a) Overall development.........................................................................................................11

b) Conclusions......................................................................................................................14

2. Economic criteria..............................................................................................................14

a) Overall Developments ......................................................................................................14

b) Conclusions......................................................................................................................18

3. Other obligations of membership ......................................................................................19

a) Adoption, implementation and enforcement of the acquis .................................................19

b) Sector overview and conclusions ......................................................................................19

c)

EMU and the EURO ...............................................................................................21

III. Making a success of enlargement ....................................................................................21

1. Following the road map - the remaining chapters .............................................................22

a) The financial framework and related chapters ...................................................................23

b) Other chapters ..................................................................................................................24

2. Action plan for administrative and judicial capacity..........................................................25

a) Reinforcing Institution Building Actions ..........................................................................26

b) Enhanced Monitoring .......................................................................................................27

c) Administrative capacity beyond accession ........................................................................28

3. Turkey’s pre-accession strategy – towards a new phase ....................................................29

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4. The next steps...................................................................................................................30

a) Meeting the accession criteria...........................................................................................30

b) The first accessions ..........................................................................................................30

c) Other negotiating candidate countries - towards an updated road map..............................31

IV. Conclusions....................................................................................................................32

Annexes34

Annex 1: Conclusions of the Regular Reports.......................................................................34

Bulgaria...............................................................................................................................34

Cyprus.................................................................................................................................37

Czech Republic ...................................................................................................................39

Estonia ................................................................................................................................43

Hungary ..............................................................................................................................46

Latvia ..................................................................................................................................49

Lithuania.............................................................................................................................53

Malta ...................................................................................................................................56

Poland .................................................................................................................................58

Romania ..............................................................................................................................61

Slovakia...............................................................................................................................65

Slovenia ...............................................................................................................................68

Turkey.................................................................................................................................71

Annex 2: Candidate countries: main statistical indicators (2000) ..........................................76

Annex 3: The pre-accession strategy.....................................................................................78

Annex 4: Human Rights Conventions ratified by the Candidate Countries, 30

September 2001 ......................................................................................................83

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Annex 5: Twinning projects in 1998-2001 ............................................................................84

Annex 6: State of Play of the Negotiations on 26 October 2001Error! Bookmark not defined.

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I. The overall context

1. Introduction

Over almost half a century, the European Union has helped put an end to the conflicts of
the past and to strengthening peace, security, justice and well being throughout Europe.
Since the invitation to the candidate countries to become part of the European Union,
the enlargement process has contributed decisively to achieving political stability,
economic progress and social justice. Stable institutions, changes of government on the
basis of free and democratic elections, reinforced protection of human rights, including
rights of minorities, and market economy principles are now common features. The
enlargement process makes Europe a safer place for its citizens and contributes to
conflict prevention and control in the wider world.

Enlargement will benefit not only existing and new Member States but also
neighbouring countries, with which the European Union has close ties. No new dividing
lines will be drawn across our continent. Each new Member State will bring to the EU
its own political, economic, cultural, historical and geographical heritage, thus enriching
Europe as a whole.

A strong and united Europe is more important than ever before, against the background
of the terrorist attacks of 11 September and subsequent developments. The candidates
for European Union membership have aligned themselves with the EU’s condemnation
of terrorism and associated themselves immediately and fully with the Conclusions and
Plan of Action of the extraordinary European Council on 21 September 2001.

The Commission renews its commitment to making a success of enlargement. This will
enhance security and stability not only in Europe but also in neighbouring regions and
further afield. The next year will be crucial for the successful completion of the ongoing
accession negotiations and for the candidates’ preparations for membership.

This year’s progress reports and proposals for revised Accession Partnerships identify
the areas where further efforts are most needed. Together with the road map, set out by
the Commission last November and endorsed by successive European Councils, these
provide a guide to the successful completion of the accession process with the countries
concerned. The Commission will give its evaluation of the readiness of each candidate
to assume the rights and obligations of membership in next year’s progress reports.
Provided their efforts are sustained, it should be possible to conclude the accession
negotiations by the end of 2002 with those countries which fulfil the accession criteria.
On this basis these countries would be ready to become members of the EU in 2004, in
accordance with the objective set out by the European Parliament and by the European
Council.

The principles for this process remain unchanged. The Berlin European Council has set
out a clear framework for the financial aspects of enlargement. This framework
provides a sufficient basis for the accession of up to ten new Member States in 2004.
The European Council of Nice has defined the framework for the institutional reform
necessary for enlargement. Negotiations are conducted on the basis of the existing
acquis, applying the principles of own merits and catching-up, and will be concluded
with those candidates that fulfil the criteria for membership. These are the necessary and

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sufficient conditions defined at the outset for accomplishing the first accessions. Any
discussions within the European Union on the reform of policies or institutions should
be clearly separated and not hinder or slow down the accession negotiations.

The pace of the negotiations with each candidate reflects, above all, the pace of its own
preparations for membership. The application of the principle of differentiation based
on each candidate country’s own merit,
together with the vigorous pursuit of
preparations for membership backed up by the EU’s pre-accession instruments, is also
enabling candidates which began negotiations at a later stage to catch up. The
enlargement strategy now in place provides a sound basis for completing the
negotiations, on schedule, with the candidates that are sufficiently prepared.

The conditions for membership, set out by the Copenhagen European Council in 1993
and further detailed by subsequent European Councils, provide the benchmarks for
assessing each candidate’s progress. These conditions remain valid today and there is
no question of modifying them. In the present phase of the accession process, however,
it is necessary to focus as much on the candidates’ capacity to implement and enforce
the acquis as on its transposition into law. For this reason, particular attention is now
being given to the candidates’ administrative and judicial capacity. By means of an
action plan, the Commission will increase support for institution building and monitor
closely the fulfilment of undertakings made in the negotiations and the achievement of
priorities set out in the Accession Partnerships.

The European Union will continue to lend its full support to the preparations for
membership by candidates that are not in a position to complete negotiations within
the timetable indicated above. Negotiations will be pursued with them, on the basis of
the principles that have guided the accession process from the beginning. In its 2002
Enlargement Strategy Paper, the Commission will set out an updated road map, and, if
necessary, a revised pre-accession strategy, for such candidates, taking into account the
progress made in the next year and the conclusions of the Göteborg European Council.

for

countries

candidate

intensify preparations

To
being
enlargement,
increasinglyassociated with EU programmes and activities. Pre-accession economic
programmes have been designed bearing in mind the requirements for economic and
monetary union and national employment strategies are being developed. The
Göteborg European Council conclusions invited the candidate countries to translate the
Union’s economic, social and environmental objectives into their national policies.
The candidate countries should be associated as far as possible to the Lisbon process,
which focuses on the strategic goal for the Union to develop a sustainable, highly
competitive, knowledge-based economy.

are

Co-operation in justice and home affairs will become increasingly important, both in
view of the fight against terrorism and organised crime and the longer-term discussions
on the possible creation of common border control arrangements. The Schengen
system will apply to all new Member States. Full participation in it will be based on a
two-step process. The new Member States will first need to achieve a high level of
external border control upon accession whereas the lifting of internal border controls
with current Member States will take place only at a later stage, subject to a separate
decision by the Council.

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identical with joining the euro. Whereas
Joining the European Union is not
participation in the single currency is part of the acquis, candidate countries will have
to conform to the convergence criteria for participation in the euro. This will be
decided at a later stage, after accession, following assessment of the achievement of a
high degree of sustainable convergence, as was the case for the initial participants in
the euro zone. The first priority for each candidate must, however, now be to comply
with the Copenhagen economic criteria.

Candidate countries will be increasingly involved in the discussion of the future of
Europe including the Convention, which will prepare the way for
the next
Intergovernmental Conference. The work of the Convention and the IGC is capital for
the future of Europe; it does not, however, constitute a new condition for enlargement.

As the debate on Europe’s future advances and the date for enlargement nears, citizens
in existing and future Member States will increasingly wish to understand the likely
effects of enlargement. The Commission, working closely with the European
Parliament, is ready to respond to this demand and to back up the efforts of political
leaders in the countries concerned to explain to the public the issues involved.

It would be an inspiration for Europe as a whole, and for the world at large, if the
whole of Cyprus was able to enter the European Union together on the basis of a
settlement taking into account the interests and concerns of the respective parties. It is
disappointing that the Turkish Cypriot leadership is not presently engaged in the
process conducted under the auspices of the United Nations. All parties concerned
should take full advantage of the window of opportunity before the completion of the
accession negotiations to achieve a settlement. If, however, a settlement has not been
reached by the completion of the accession negotiations, the Council will take its
decision on accession, without this being a pre-condition, in accordance with the
Helsinki European Council conclusions.

The Helsinki European Council concluded that Turkey is a candidate whose
application will be judged on the basis of the same criteria as applied to other
candidate countries. The pre-accession strategy, called for in those conclusions, is now
well underway. The Commission welcomes the political and economic reforms which
have been initiated. Turkey needs to ensure that these reforms are effective, especially
with respect to the protection of human rights, and to contribute actively to efforts to
resolve the Cyprus problem and the differences that have arisen over the European
Security and Defence Policy.

The forthcoming enlargement of the European Union is being thoroughly prepared by
means of the strategy set out in this document. It is founded on clear principles, which
have been enunciated by successive European Councils, and on a transparent and
objective method set out by the Commission in Agenda 2000 and applied each year in
its Progress Reports. The present document, and the accompanying Reports, provide
an analysis of the stage reached in the enlargement process in Autumn 2001 and point
the way to ensuring that the next and decisive phase of the process is successful.

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2. Public opinion and enlargement

In preparing the present round of enlargement, political and economic leaders in the
European Union need to engage in a dialogue with the public about enlargement, and
to contribute to the discussion of the Union in the candidate countries.

Opinion polls, and Eurobarometer, show that in the existing Union information and
understanding about the implications of enlargement need to be improved. In the
candidate countries, public support for accession is generally high, but can vary as a
result of different factors, including developments in the accession negotiations.

In May 2000 the Commission launched a communication strategy to make available
information about the enlargement process. To succeed, it requires that the European
institutions, but also elected representatives, political leaders, governments, economic
and social partners and civil society in general participate in the dialogue.

The Commission is developing its communication strategy on a decentralised basis,
taking account of the particular needs and conditions of the Member States and the
candidate countries. The Commission’s representations in the 15 Member States, and
its delegations in the 13 applicant countries, have the responsibility for drawing up
programmes adapted to needs. At the regional level, priority is being given to regions
of the existing Union bordering the candidate countries. In developing the strategy the
Commission is working closely with the offices of the European Parliament.

The Commission will keep the Council and Parliament informed of the results.

3. The enlargement process and neighbouring countries

When the EU enlarges it will acquire new neighbours and its relations with them will
evolve to reflect the new situation. The EU has developed specific policies for each
neighbouring region – the Stabilisation and Association process for the Western
Balkans, the Barcelona process for the Mediterranean and the Partnership and Co-
operation framework for Russia, Ukraine and other Newly Independent States (NIS).
These complement the close and integrated relationship developed with the countries
of European Free Trade Agreement and the European Economic Area.

These policies foresee the creation of a free trade area encompassing the EU and its
neighbours in which democracy and respect for human rights and the rule of law
prevail.

As the EU enlarges, the range of common interests of the EU and its new neighbours
will expand. This will create new opportunities, acting as a stimulus for growth and
investment. Enlargement will eventually create an internal market of over 500 million
consumers.
It will be in the mutual interest of the EU and its new neighbours to
continue to work together to consolidate economic reform and strengthen business by
creating a transparent regulatory environment. Progressive alignment with the rules of
the EU’s internal market and regulatory framework will facilitate trade and attract
investment in the neighbouring regions. This will bring benefits to business in all the
countries concerned.

Enlargement will also bring new challenges. It will heighten the need for the EU and
its neighbours to work closely on issues such as justice and home affairs. The EU is

8

likely to attract migrants from its neighbours and will want to develop with them ways
of planning for legal migration while combating illegal migration and trafficking in
human beings. Border management will take on increased importance with close co-
operation in areas ranging from customs and veterinary/phyto-sanitary controls to
combating organised crime and drugs trafficking.

The enlarged Union will need to deepen its relationships with its immediate
neighbours and to develop further a common approach. The enlarged EU is likely to
see an interest in linking together common elements of the three geographic policies
currently in place. The future borders of the Union must not become a new dividing
line. A well-designed proximity policy, building on the present policy framework, will
ensure that the enlarged EU and its neighbours deepen their common interests and
activities.

a) The Western Balkans

2001 has witnessed the consolidation of democracy in the Western Balkans region.
Following the election of a new democratic leadership in the Federal Republic of
Yugoslavia (FRY), the countries of the region have pushed ahead with political,
economic and administrative reforms. Progress has not been even however and a
resurgence of violence in the southern regions of the FRY and in the former Yugoslav
Republic of Macedonia represents a set-back in the pursuit of peace and stability in the
region. The challenge for the EU is to respond effectively to volatility in the region
while progressing towards the goal of integration of the countries of the region into the
EU, in line with the Feira European Council conclusions.

The Stabilisation and Association Process (SAP) provides a framework within which
new contractual relationships and an assistance programme (CARDS) help each
country to progress, at its own pace as potential candidates for EU membership.
Regional co-operation is critical for
the consolidation of stability and a vital
in Southeastern Europe. This will require
component of the EU’s commitment
additional efforts. All the countries in the region need to be assisted in their attempts to
synchronise regional co-operation efforts with the requirements of EU integration. The
Stabilisation and Association process, Stability Pact and financial assistance each play
a complementary role in this respect.

b) The EFTA countries

The new Member States will accede to the Union’s agreements with the members of
the European Free Trade area (EFTA). The acceding countries will need to apply to
join the European Economic Area (EEA), in accordance with Article 128 of the EEA
Agreement. With this in view, the Commission keeps the EFTA partners informed of
the progress of the accession negotiations.

c) The Newly Independent States

The EU is building a stronger partnership with Russia to take mutual advantage of the
benefits of enhanced co-operation in areas such as energy, foreign policy, justice and
home affairs and environment. The Partnership and Co-operation Agreement (PCA)
with Russia provides a basis for political dialogue and wide-ranging co-operation
The
including work related to Russia’s application for WTO membership.

9

development of EU-Russia relations within the PCA framework was given new
momentum at the EU-Russia Summit in October 2001 when agreement was reached
on a High Level Group to develop a concept for a Common European Economic
Space.

Russia welcomes EU enlargement and expects the EU to consider carefully its impact
on Russia. Such issues are discussed in the Partnership and Co-operation Agreement
institutions with a view to resolving any problems that might arise before enlargement.
The case of Kaliningrad has been raised in this context. The Commission tabled a
discussion paper in 2001 which examines the impact of enlargement on Kaliningrad
and which also looks at other issues of mutual interest such as protection of the
It is in the EU’s and Russia’s mutual interest to
environment in the Baltic Sea region.
ensure that Kaliningrad can gain from the beneficial economic consequences of
enlargement. Practical issues like visas and border formalities for travel between
Kaliningrad and the rest of Russia need to be discussed with a view to finding
constructive solutions within the acquis.

The EU also has Partnership and Co-operation Agreements with Ukraine and Moldova
and is committed to helping these two countries in their process of political and
economic transition and progressive alignment with European laws and practice. They
have both been invited to participate in the European Conference and are active in
regional and sub-regional groups involving EU Member States, candidate countries
and the countries participating in the Stabilisation and Association process. Belarus
also borders on the future EU but relations are limited on account of the country’s poor
record on democracy, human rights and the rule of law.

d) The Mediterranean

EU relations with the countries of the Mediterranean take place within the Barcelona
process which brings together the EU 15 with 12 countries of the Mediterranean
littoral for co-operation on political and security matters, economic co-operation
leading to free trade, and social and cultural co-operation A series of regional co-
operation initiatives and a network of bilateral relationships underpin this framework.
Although the process is affected by the lack of a lasting peace in the Middle East, it
has been effective in maintaining dialogue since it was established in 1995 and
provides a forum where Israel and the Arab states continue to meet.

Association agreements have entered into force between the EU and Morocco, Tunisia,
Israel and the Palestinian Authority. Such Agreements have also been signed with
Jordan and with Egypt, with the first, at least, due to enter into force very soon.
Negotiations are proceeding with Algeria, Lebanon and Syria with a good prospect of
concluding the first two before the end of 2001. The remaining three partners (Cyprus,
Malta and Turkey) are covered by pre-existing agreements and are themselves on the
accession path. In addition, the Barcelona process provides for the conclusion of free
the EU has
trade agreements between the partners (“South-South-Agreements”);
therefore strongly welcomed, and offered its support to, the Agadir process launched
on 8 Mai 2001 in which Morocco, Tunisia, Egypt and Jordan have agreed to establish
free trade with each other.

In November 2000,
the 27 foreign ministers agreed to re-invigorate Euro-
Mediterranean co-operation and set ambitious new targets to carry forward the

10

Barcelona process. Work has since been stepped up. The tragic events of 11 September
2001, however, have shown that there is a need for still closer co-operation, not least in
social, cultural and educational areas. The Barcelona process provides an excellent
framework for this purpose.

II. Progress by the candidate countries in meeting the membership criteria

As in previous years, this year’s Regular Reports highlight legal measures actually
adopted rather than those under preparation. The Commission has examined whether,
since October 2000, announced reforms have in fact been carried out. For each of the
29 chapters of the European Union’s acquis, the reports analyse the progress made by
each candidate in adopting the acquis and in ensuring its implementation and
enforcement through the necessary administrative structures. Each chapter includes not
only an assessment of progress achieved since last year’s report, but also an
assessment of overall progress.

The assessment is based initially on information provided by the candidate countries
themselves. The Commission has also drawn upon information provided in the context
of the accession negotiations as well as in meetings held under the Association
Agreements. It has compared information from these sources with that contained in the
new National Programmes for the Adoption of the Acquis, which were transmitted to
the Commission in the first part of 2001. The Commission has drawn on the reports of
the work of
the European Parliament, evaluations from the Member States,
international organisations,
in particular the Council of Europe and OSCE, and
international financial institutions, European business associations as well as non-
governmental organisations.

1. Political criteria

The Copenhagen European Council stated that “membership requires that
the
candidate country has achieved stability of institutions guaranteeing democracy, the
rule of law, human rights, and the respect of and protection of minorities.” Article 6 of
the Treaty of the European Union indicates that “The Union is founded on the
principles of liberty, democracy, respect for human rights and fundamental freedoms
and the rule of law.” These principles were emphasised in the Charter of Fundamental
rights of the European Union, which was proclaimed at the Nice European Council in
December 2000.

a) Overall development

In the 2000 Reports,
the Commission concluded that all negotiating countries
continued to fulfil the political criteria, and that the overall record in strengthening
democratic institutions, in respecting the rule of law and in protecting human rights
had improved since the previous year. The Commission drew attention, however, to
the need to accelerate the reform or reinforcement of the judiciary, and to tackle the
problem of corruption. Furthermore, the Commission called for vigorous measures in
fighting the growing problem of trafficking in women and children, and emphasised
the need for sustained efforts to improve the situation of the Roma. The Commission
urged Turkey to take the necessary decisions to translate its intentions concerning the
protection of human rights into concrete measures.

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Since the last Regular Reports, the candidate countries have continued to strengthen
the functioning of their democratic systems of government. National or local
elections were held in Bulgaria, Cyprus, the Czech Republic, Estonia, Latvia, Malta,
Poland, and Romania. Those elections were free and fair.

Considerable further efforts were made to ensure the independence, transparency,
accountability and effectiveness of the public administration. In several countries the
legal framework for the civil service was reinforced, and training of civil servants and
the modernisation of the public administration continued. These efforts need to be
sustained.

Further progress was made in reforming and strengthening the judicial system, as a
vital element in ensuring respect for the rule of law and in the effective enforcement of
the acquis. Several countries advanced in adopting basic legislation, strengthening
human resources and improving working conditions. Efforts in this area need to be
further stepped up, with particular attention to ensuring the independence of the
judiciary.

Previous reports identified corruption as a serious problem “exacerbated by low
salaries in the public sector and extensive use of bureaucratic controls in the
remains largely valid, although several positive
economy.”
This assessment
In most countries anti-corruption bodies have been
developments have taken place.
in such areas as public
strengthened, and progress has been made in legislation,
procurement and public access to information. Encouraging developments in several
countries as regards the reform of public administration also contribute to the fight
against corruption. Notwithstanding these efforts, corruption, fraud and economic
crime remain widespread in many candidate countries, where they contribute to a lack
of confidence by the citizens and discredit reforms. Continued, vigorous measures are
required to tackle this problem.

the Commission had underlined the problem of childcare
In previous years,
institutions in Romania.
The Romanian authorities have taken a number of
legislative, administrative and financial measures, supported by PHARE. These
efforts must be continued, so as to ensure tangible and long-lasting improvement in the
living conditions of the children and families concerned, to prevent abuses and to
address the problem of street children.

The alarming trend identified in last year's Reports as regards the trafficking in
women and children has regrettably been confirmed this year. Several candidate
countries remained countries of origin, transit and destination, and there are no signs
that the problem is abating. Vigorous measures are required to counter this trend, with
due respect for the rights of victims.

Limited improvement can be noted in the problems surrounding pre-trial detention in
several countries. These are primarily related to the excessive duration of the
detention,
in some cases, maltreatment. These
problems need to be addressed.

lack of access to a lawyer and,

Further progress was made in several countries in ensuring gender equality, both in
terms of legislation and the institutional framework. However, further efforts are
needed to promote the economic and social equality of women. The steps taken in a

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number of countries to assist victims of violence are welcome developments, which
should be accompanied by appropriate preventive measures.

As regards minorities, a number of encouraging developments can be noted. Estonia
and Latvia further progressed in the integration of non-citizens, and continue to fulfil
all OSCE recommendations regarding citizenship and naturalisation.
In both
countries, due care will need to be taken to ensure that the implementation of existing
language legislation takes place in full respect of the principles of proportionality and
justified public interest. In several countries, further steps were taken to strengthen the
legal and institutional frameworks for the protection of minorities.
In Bulgaria,
Slovakia and Romania minorities are playing an important role in national political life

In all countries with sizeable Roma communities, national action plans are now in
place to tackle discrimination, which remains widespread, and improve living
conditions that continue to be extremely difficult.
In most cases implementation of
these action plans is underway and, in some countries, national budgetary resources
have been reinforced. PHARE funding continues to be made available to support these
actions. Further efforts are required to ensure that
the various programmes are
implemented in a sustained manner, in close co-operation with Roma representatives,
and that appropriate budgetary support is made available in all countries.

In its 2000 Report,
the Commission concluded that Turkey did not meet
Copenhagen political criteria. Despite a number of positive developments,
assessment still remains valid and further efforts are needed.

the
this

Turkey’s national programme for the adoption of the acquis set the scene for a major
constitutional reform package, building on the work of the Parliament's Conciliation
Commission. This package was adopted in record time on 3 October 2001 with an
overwhelming majority, showing the Parliament’s determination to bring Turkey
closer to EU standards.

This is a significant step towards strengthening guarantees in the field of human rights
and fundamental
the
freedoms and limiting capital punishment.
amendments have narrowed the grounds for introducing limitations to freedom of
expression and communication, freedom of the press and freedom of association.
Attention has now turned to the effective implementation of these important changes.
Implementing legislation is under preparation.

In particular,

Despite these changes, restrictions on the exercise of fundamental freedoms remain.
The extent to which individuals in Turkey will actually enjoy an improvement in the
exercise of fundamental freedoms will depend on the interpretation given to the
constitutional amendments, the details of implementing legislation and the practical
application of the law by the authorities.

The Commission strongly encourages Turkey to bring about substantial improvements,
not only in the constitutional provisions and the laws concerning the protection of
human rights, but above all in the human rights situation in practice. This requires
reform of many existing structures and practices. The Commission welcomes the fact
that the moratorium on the death penalty has continued and that constitutional reform
has limited the death penalty but reminds Turkey that capital punishment itself should
be abolished to bring Turkey into line with the principles of the European Union. The

13

Commission urges Turkey to ensure that particular attention is devoted to improving
significantly the situation in Southeast Turkey.

b) Conclusions

The Copenhagen political criteria continue to be met by all presently negotiating
candidate countries. Turkey still does not meet these criteria.

The requirements set by the Copenhagen political criteria, and the Commission’s
regular assessment of progress achieved in meeting them, have continued to serve as
important incentives for the candidate countries. Since the 1997 Opinions and the
in consolidating and deepening
subsequent Regular Reports, overall progress
democracy and respect for the rule of law, human rights and the rights of minorities
has been considerable. Building on this progress, the past year has generally seen
further positive developments, and the overall record in strengthening democratic
institutions, in respecting the rule of law, and protecting human rights has further
improved.

these should be further accelerated and reinforced,

However, while efforts to reform or strengthen the judiciary are slowly starting to bear
in particular to ensure
fruit,
effective enforcement of the acquis. The fight against corruption should be further
stepped up. Tangible results in this domain are needed to respond to public concern
and help ensure a transparent business environment.

Continued problems related to pre-trial detention in certain countries should be
addressed. The trafficking of women and children from,
through or into several
candidate countries remains a serious cause of concern, requiring vigorous measures.
Further efforts are needed in ensuring gender equality and non-discrimination. It is also
very important to sustain efforts to improve the situation of the Roma.

Turkey should take the necessary measures to ensure that
constitutional amendments translate into concrete progress concerning human rights.

the recent

important

The conclusions of each Regular Report are contained in Annex 1. The list of Human
Rights conventions ratified by the candidate countries is in Annex 4.

2. Economic criteria

a) Overall Developments

This year’s assessment of progress made by candidate countries in meeting the
Copenhagen economic criteria takes place at a time of rapidly deteriorating global
economic conditions. However over 2000, and the first half of 2001, growth in the
candidate countries was relatively strong.

The year 2000 showed the best growth performance since the introduction of the
Regular Reports. Average real GDP growth for the candidate countries was around
5%, much above the 1999 outcome of zero growth. The average performance of the 10
CEEC countries was 3.6%, considerably higher than the 2.2% achieved in the previous
year. Growth resumed the in the Czech Republic, Estonia, Lithuania and Romania, and
8 countries exhibited higher rates of growth. The exceptions were Poland and
Slovenia, where growth weakened slightly, although it remained solid at 4% for

14

Poland and 4.6% for Slovenia. On average, the Mediterranean candidate countries
outperformed the transition economies with real GDP growth rates of 5% for Cyprus
and Malta, and 7.2% for Turkey. By contrast, average real GDP growth for the EU was
3.3%, indicating that catching up, although small, was higher than in the previous
years.

In the first half of 2001, with a deteriorating EU economic performance, there has
been, on average, a deceleration of GDP growth in the candidate countries. So far,
countries that have been on a higher and more stable average growth path are more
affected. Countries just returning to more normal output growth after having been in
recessions, such as the Czech Republic and Romania, appear to be holding better.
Similarly the Baltic states that went through a cyclical diminution of growth in 2000,
seem to be withstanding the current slowdown, partly supported by the external
demand pull of higher growth in Russia and the NIS. Poland is going through a
stronger slowdown, largely the result of a poorly co-ordinated policy-mix combined
with the deteriorating external environment and domestic political uncertainty.
Turkey’s growth performance has turned sharply negative. Two deep financial crises
occurred at the end of 2000 and the beginning of 2001, taking their toll on GDP
growth, but at the same time leading the government to take much needed reform and
corrective measures.

GDP per capita as a percentage of the EU average, and measured in purchasing
power standards (PPS), went up to 39% in 2000, against 38% in 1999 for the CEEC-
10. For all thirteen candidate countries it stood unchanged at the previous year’s level
of 35%. The closing of the existing large income gap is a medium to long-term project
that requires relatively higher average rates of growth over time. Comparing the
situation in 2000 with that prevailing in 1995, 9 candidate countries have made gains
over this period, while 3 (Bulgaria, Czech Republic and Romania) have not and
Turkey remains essentially at the same level. Estonia, Latvia, Hungary, Poland and
Slovenia have made very good gains. The income distribution has tended to become
more unequal, particularly in the CEEC-10. This outcome is to be expected, first
because under the old regimes the income distribution was rather egalitarian; secondly,
because of uneven growth pushing the demand for certain labour skills in some areas
and sectors ahead of others. However the rising level of income should benefit many.
Inequality is still lower than in the EU.

Despite the relatively healthy overall growth factors in all candidate countries, except
Turkey, many imbalances have widened and macroeconomic conditions across
countries remain mixed.

The 2001 Regular Reports present two figures for the government balance. One is
based on the most commonly used national concept, and the other is calculated
according to the European System of Accounts (ESA 95), which was reported by the
candidate countries for the first time this year. On average, the ESA 95 general
government deficit has deteriorated somewhat from about 3% of GDP to 3.5%. Large
one-off increases were recorded in Czech Republic and Slovakia, due mainly to the
fiscal cost of cleaning-up a number of banks, which, under ESA 95 rules, has to be
taken into account in the general government net balance, the year it is incurred.

A number of countries are experiencing difficulties implementing reforms which are
key to medium-term fiscal sustainability. Some non-transparent fiscal practices are

15

returning in Hungary. Poland’s municipal reform has not been accompanied by a
realistic plan to pay for the costs of municipal services. In some countries the reform of
social security is too timid or still at an early stage, such as the Czech Republic,
Slovakia and Slovenia.

Overall, inflation rates are on the increase in many candidate countries and the
CEEC-10 average, at over 15%, is considerably higher than last year’s of around 10%.
The main immediate cause of inflation has been the high increases in oil prices.
Particularly worrying are cases where the monetary policy framework and the pass-
through structural features are largely contributing to inflation inertia. In this sense,
there are positive developments in Hungary and Poland, with their new exchange rate
and monetary framework while Slovenia is lagging behind. Romania and Turkey have
failed, for another year, to bring inflation under control, but have recently adopted
stabilisation programmes with the IMF. Slovakia’s high inflation is the result of much
needed, and delayed, increases in administered prices. Bulgaria’s rising inflation, in the
context of the currency board arrangement, needs to be closely watched.

Despite the good growth performance, unemployment in the CEEC-10, at 12.5%, has
continued to increase from just below 11%, pointing to the still negative impact of
structural labour shedding reforms and high productivity growth. Exceptions are
Hungary and Slovenia, with declining unemployment. Participation rates are generally
stable, but remain low in some cases. Labour market rigidities and skill mismatches
are putting a lower limit to unemployment even in high growth economies. Cyprus and
Malta can be said to be close to full employment levels.

There has been, for the CEEC-10, an improvement of the current account deficit
from 5.6% of GDP to just about 5%, in spite of a deterioration in the terms of trade.
The correction has been substantial in Latvia and Lithuania, whose exposure had been
too high. Malta had a marked deterioration of its current account deficit with a large
one-off component. The recovery has brought about a deterioration of the external
balance in the Czech Republic, which needs to stand ready to take corrective measures.
In almost all cases, foreign direct investment (FDI) has contributed significantly to
finance the external
imbalance. The component of FDI, often stemming from
privatisation, still seems to dominate total inflows in all candidates. Therefore, the
level of external debt remains at past year's levels, except in Turkey. Turkey, due to the
sharp depreciation of its currency caused by the financial crisis, is in a more precarious
situation as the domestic value of its relatively large external debt has greatly
increased. The level of FDI in Turkey remains significantly below its potential.

Candidate counties, with the exception of Cyprus and Malta, are still facing some
difficulties in setting-up some elements of the legal and institutional framework
needed for the functioning of a market economy, including enforcement of judicial
decisions. The extent of the difficulties varies from the severe case of Romania and, to
a lesser extent, Bulgaria, to countries where there are no significant barriers to market
like Estonia and
entry and exit and where the degree of legal certainty is high,
Hungary. The main problem remaining is the implementation of bankruptcy laws.
Progress in this area is crucial before accession.

Privatisation of manufacturing enterprises is almost completed in many CEEC-10,
with the exception of Romania, where the privatisation agenda is still large, and to a
to devise viable privatisation and
lesser extent Bulgaria. Poland still needs

16

restructuring strategies for some important traditional sectors. Privatisation strategies
have moved into sectors such as the utilities,
transport and energy and are
accompanied by efforts to restructure these sectors. In the financial sector, the bank
privatisation agenda is completed in a number of candidates such as Estonia, Hungary,
Latvia and the Czech Republic. It has advanced in Lithuania, Romania, Poland and
Slovakia and is lagging considerably behind in Slovenia. Concerning the state-owned
banks not intended for privatisation, it is important that governments do not interfere
with their operating practices and credit policies. For other parts of the financial sector,
progress in privatisation is hesitant and uneven across candidates. The completion of
land reform with the creation of a functioning land market lingers in many CEEC-10.
This is hindering the development of land and housing markets and of construction,
with unfavourable implications for the labour markets and financial intermediation.

Financial intermediation is still overall at a low level in the CEEC-10 economies.
The sector contributes little to the financing of investment in what should be a growing
private sector. Intermediation is particularly low and inefficient in Bulgaria, Romania
and Lithuania. In general, further progress is needed before accession, as a proper
working of the transmission mechanism for monetary policy would require higher
levels of more efficient intermediation. The expansion of the financial sector has been
accompanied by improved supervision in the banking sector, but supervision of the
other parts needs to improve, not only on regulations but also on the administrative
capacity and independence of supervisors.

Cumulative progress on economic integration of candidate countries in the EU has
mainly taken place through the two channels of trade and capital flows, essentially
foreign direct investment.

As to trade integration, in 2000, candidate countries on the average, sent about 62%
of their exports to the EU and 58% of their imports came from the EU. Excluding
Turkey, the shares are about 65% for exports and 62% for imports. Each of the CEEC-
10 has over the period 1995 to 2000 increased its share of exports to the EU. Also as a
group, they have increased their EU market share. Over the past decade, the CEEC-10
region shows the fastest growth in trade with the EU and accounted in 2000 for about
11 percent of total EU trade with third countries up from 6 percent in 1992. In the EU,
the effects are greatest in the EU Member States closest to the region. The trade
between candidate countries remains comparably low, although it slightly increased for
several of the CEEC-10 in 2000 compared to the previous year.

As to financial integration, two thirds of net capital flows in the 1990s originated
from the EU Member States. Most net capital inflows to the candidates have been FDI
flows. Because of privatisation, nearly half of the FDI flows have been directed to non-
tradable sectors such as financial
institutions (banks) and public utilities (e.g.
telecommunications). Greenfield investments are increasing in some countries, and for
instance represent over half of FDI in Bulgaria and dominate in Hungary. In the
tradable sector, one fifth of total FDI has occurred in relatively labour-intensive
industries such as textiles, clothing, electrical machinery and motor vehicles. In the
context of transition and real economic convergence, FDI has, and will continue, to
contribute to replace the outdated capital stock and to introduce new technology and
management skills.

17

b) Conclusions

The progress of each country has been assessed according to the sub-criteria of the
Copenhagen economic criteria – the existence of a functioning market economy and
the capacity to withstand competitive pressure and market forces within the Union.
These sub-criteria were defined in the Commission Communication on Agenda 2000.

The existence of a functioning market economy requires that prices, as well as trade,
are liberalised and that an enforceable legal system, including property rights, is in
place. Macroeconomic stability and consensus about economic policy enhance the
performance of a market economy. A well-developed financial sector and the absence
of any significant barriers to market entry and exit improve the efficiency of the
economy. The second criterion (‘capacity to withstand competitive pressure and
market forces within the Union’) depends on the existence of a market economy and a
stable macroeconomic framework, allowing economic agents to make decisions in a
climate of predictability. It also requires a sufficient amount of human and physical
capital,
including infrastructure. State enterprises need to be restructured and all
enterprises need to invest to improve their efficiency. Furthermore, the more access
enterprises have to outside finance and the more successful they are at restructuring
and innovating, the greater will be their capacity to adapt. Overall, an economy will be
better able to take on the obligations of membership the higher the degree of economic
integration it achieves with the Union before accession. Both the volume and the range
of products traded with EU Member States provide evidence of this.

Taking the two criteria together, it can be said that Cyprus and Malta have confirmed
that
they are functioning market economies and should be able to cope with
competitive pressure and market forces in the Union.

The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and
Slovenia are functioning market economies. There are substantial economic
differences among these countries, but provided they continue with, and in some cases
reinforce, a number of differing measures detailed in each Regular Report, they should
be able to cope with competitive pressure and market forces within the Union in the
near term.

Bulgaria is close to being a functioning market economy. Provided it continues
implementing reforms and intensifies the effort to remove persistent difficulties, it
should be able to cope with competitive pressure and market forces within the Union
in the medium term.

Romania does not yet meet either criterion but has, for the first time, made decisive
progress towards this objective.

Turkey has been unable to make further progress towards achieving a functioning
market economy, notably given the recent crises. Considerable parts of its economy
are, however, already competing in the EU market, under the framework of customs
union with the EC.

The detailed conclusions on the fulfilment of each sub criterion in each Regular Report
can be found in Annex 1; main statistical indicators in Annex 2.

18

3. Other obligations of membership

The Copenhagen European Council indicated that membership requires ‘the ability to
take on the obligations of membership, including adherence to the aims of political,
economic and monetary union’.

a) Adoption, implementation and enforcement of the acquis

The ability to take on the obligations of membership requires the adoption,
implementation and enforcement of the acquis. The importance that candidate
countries implement and enforce the acquis was underlined by the European Council
In Madrid in 1995, the European Council highlighted the
on a number of occasions.
importance of adjusting the candidate countries’ administrative structures in order to
create the conditions for their gradual and harmonious integration. In 2000, the Feira
European Council
recalled that “progress in the negotiations depends on the
incorporation by the candidate countries of the acquis in their national legislation and
especially on their capacity to effectively implement and enforce it”, by strengthening
their administrative and judicial structures.
In June 2001, the Göteborg European
Council stressed again the importance that candidate countries make continued
progress in transposing, implementing and enforcing the acquis, and that they pay
particular attention to putting in place adequate administrative structures and to
reforming their judicial systems and their civil service.

implementing and applying the acquis is not only a matter

Transposing,
for
government and administration, but also for business, regional and local bodies and
professional organisations. The European Parliament,
the Economic and Social
Committee and the Committee of Regions have called for the closer involvement of
civil society in the process. The candidate countries’ national authorities need to
enhance dialogue with representative institutions to explain the acquis and to facilitate
its countrywide implementation.

b) Sector overview and conclusions

Overall this year’s Regular Reports again note significant progress in the adoption of
legislation for alignment with the acquis in most candidate countries and for most
areas. In a number of areas such as transport1, telecommunications, energy and justice
and home affairs, however, important elements of new Community legislation have
been or will be adopted shortly, in most cases building on previous Community law.

Some countries still have difficulties in transposing parts of the acquis. Nevertheless,
despite the progress made over the past year, the major need now consists of building
up adequate administrative structures and strengthening of administrative capacity to
implement the acquis.

For most or all of the candidate countries, the Regular Reports and the proposed
revised Accession Partnerships identify:

1 The White Paper on European Transport Policy for 2010: Time to decide (COM (2001) 370 fin)
advocates moreover a better regulation of competition between the modes of transport by
giving rail and other environmentally friendly modes of transport
the means to become
competitive alternatives to road transport.

19

• in the field of the internal market, the need to establish or reinforce horizontal
administrative
accreditation,
related
certification, conformity assessment, market surveillance, mutual recognition of
qualifications,
financial services and to strengthen the
enforcement of industrial and intellectual property rights;

the supervision of

standardisation,

infrastructures

to

•

in the field of competition, the need to develop or strengthen enforcement capacity
for state aid rules and anti-trust provisions;

• in the field of transport and energy, the need to strengthen or set up appropriate
regulatory structures (also in view of forthcoming new acquis) and inspection
arrangements, in particular to ensure road and maritime safety;

• in the field of telecommunications and culture and audio-visual policy the need to
set-up or strengthen independent regulatory structures, for telecommunications
especially also in view of the forthcoming new acquis;

• in the field of environment,

the need to further strengthen administrative,
monitoring and enforcement capacity, in particular in the field of waste, water and
chemicals;

• in the field of social policy and employment, the need, in particular, to ensure the
enforcement of occupational health and safety rules and to strengthen labour
inspectorates;

• in the field of justice and home affairs, the overall need to strengthen the judicial
system, the need to strengthen border management, most urgently at future EU
external borders, and to prepare for the participation in the Schengen information
system, as well as the need to ensure better co-operation of all actors to fight
organised crime;

• in the field of customs and taxation, the need to develop IT-systems to allow for
the exchange of electronic data with the Community and its Member States and
the capacity of the tax and customs administration to enforce and control
Community legislation, including external border controls;

• in the field of agriculture, the need to upgrade inspection arrangements according
to veterinary and phyto-sanitary legislation, in particular to ensure food safety, and
the capacity to implement and enforce the management mechanisms of the
in particular the Integrated Administration and
Common Agricultural Policy,
in the field of rural
Control System and the Paying Agency
development, the respective SAPARD agency may be a precursor);

(for which,

• in the field of structural policy, the need to strengthen administrative capacity in
key ministries and to build up the appropriate administrative structures for
programming, managing and controlling structural funds;

• in the field of financial control, the need to strengthen administrative capacity for

public internal financial control and for the fight against fraud.

20

In a number of other areas, individual candidate countries equally need to improve
administrative capacity. This can be the case in the chapters mentioned above, for
example the need, for a number of countries, to establish or reinforce independent
supervisory authorities for data protection, or in other chapters such as, for instance,
fisheries, statistics or economic and monetary union. These priorities are
specifically identified in each Regular Report and taken up in the proposed revised
Accession Partnerships for each candidate country.

The Regular Reports also identify those chapters which do not pose major difficulties
of administrative capacity, either because,
little
administrative capacity needed for the implementation of the acquis, or because the
countries’ preparedness can in general be considered adequate.

in those chapters,

there is

The conclusions of the Regular Reports, country by country, are contained in Annex 1.

c)

EMU and the EURO

Candidate countries need to prepare for participation in the multilateral surveillance
and economic policy co-ordination procedures currently in place as part of Economic
the economic priorities of previous Accession
and Monetary Union. One of
Partnerships was the establishment of an annual pre-accession fiscal surveillance
procedure. It consists of two elements: the fiscal notification and the Pre-accession
Economic Programme (PEP), which are discussed in a multilateral setting with
Member States.

The framework of exchange rate strategies for the candidate countries has been
clarified. Three successive stages in the transition process towards adoption of the
euro, namely, the pre-accession stage, the stage following accession and the adoption
of the euro are identified. Any unilateral adoption of the single currency by means of
“euroisation” would run counter to the underlying economic reasoning of EMU in the
Treaty, which foresees the eventual adoption of the euro as the endpoint of a structured
convergence process within a multilateral
framework. Therefore, unilateral
“euroisation” would not be a way to circumvent the stages foreseen by the Treaty for
the adoption of the euro.

Regarding the ERM-II, some time after accession, new Member States will be
expected to join the ERM II. The ERM II could accommodate the main features of a
number of exchange rates regimes, provided their commitments and objectives are
credible and in line with those of the ERM II. The only clear incompatibilities vis-à-vis
the ERM II that can be identified already at this stage are fully floating exchange rates,
crawling pegs and pegs against anchors other than the euro.

III. Making a success of enlargement

The Göteborg European Council has set a high level of ambition. It concluded that
“provided that progress towards meeting the accession criteria continues at an
unabated pace, the road map should make it possible to complete the accession
negotiations by the end of 2002 for those candidate countries that are ready. The
objective is that they should participate in the European Parliament elections of 2004
as members”.

21

Meeting these objectives will require efforts from both the Union and the candidate
countries. The Union should define common positions within the timeframe provided
by the road map. The candidate countries must continue preparations to meet fully the
accession criteria, with particular attention to enhancing their administrative capacity
to implement the acquis. Indeed, progress in the negotiations is based on convincing
progress in adopting, implementing and enforcing the acquis.

1. Following the road map - the remaining chapters

Considerable progress has been achieved in the negotiations. Candidate countries have
communicated their positions with respect to the acquis under the various negotiating
chapters, including their requests for transitional measures. In many cases where
candidates have provided sufficient commitments to apply the acquis, chapters have
been provisionally closed (see Annex 6). The number of provisional closures of
chapters, however, does not always give an accurate picture of
the state of
negotiations. In some cases under negotiation, only few issues of political importance
remain; these can be solved if the necessary political decisions are taken.

The road map has proved to be useful in ensuring that all negotiating parties commit
themselves to a realistic timetable. The Commission’s report to the European Council
in Ghent has reviewed the track record and outlined a number of issues where
decisions still need to be taken during the Belgian presidency2. The paper identified a
number of issues at stake on which the EU needed to define a position in the context of
the chapters on transport, taxation, agriculture, justice and home affairs and energy.
The Commission has in the meantime, where possible, forwarded negotiating positions
on these chapters to the Council and the Belgian Presidency is swiftly advancing in
the
defining negotiation positions. In the context of the last mentioned chapter,
Communication underlined the need to examine the positions of the candidate
countries on the EU recommendations on nuclear safety and that “concerning non-
upgradable units [of nuclear power plants] – Ignalina (Lithuania), Bohunice-V1
(Slovakia) and certain units of Kozluduy (Bulgaria)- closure commitments must be
respected, and therefore duly included in the Accession Treaties.”

The commitment of the Union to define common positions within a certain time frame,
also in areas where there are particular difficulties, has sent a positive signal to the
candidate countries. In doing so, the Union has shown the necessary flexibility in
taking positions that are important in terms of public acceptability, both in the Union
and in the candidate countries. This approach should be maintained.

According to the road map for the first half of 2002, the Union will define common
positions with a view to closing provisionally the last group of chapters: agriculture,
regional policy, financial and budgetary provisions, institutions and ‘other matters’.
The Commission will submit the necessary proposals to the Council in good time. In
preparing its proposals, the Commission will be guided by the approach outlined
below.

2 Communication of the Commission: Information Note to the European Council on a mid-term review

of the implementation of the enlargement strategy, COM (2001) 553 final of 2 October 2001.

22

a) The financial framework and related chapters

The chapters of the negotiations concerning agriculture and regional policy have
important budgetary components and are related to the chapter concerning financial
and budgetary provisions. Negotiations on these three chapters must therefore be
conducted within a coherent overall framework.

The Berlin European Council in March 1999 agreed the financial framework for the
period 2000-2006, including arrangements for enlargement based on the assumption
that 6 new members would accede in 2002. The results were laid down in an inter-
institutional agreement between the Parliament, the Council and the Commission.

The comprehensive agreement reached in Berlin covered at the same time policy
reform and the reservation of the necessary funds for pre-accession and accession,
including:

•

•

•

•

a maximum ceiling for total payments (set at 1.27% of GNP) and absolute ceilings
for annual budgetary commitments for each category of expenditure (the Financial
the absolute ceilings were
Perspective for the period 2000-2006). Together,
including after
expected to stay well below the maximum ceiling of 1.27%,
enlargement;

the reform of the common agricultural policy, structural and cohesion funds;

the doubling of pre-accession support for the candidate countries (
year3);

€

3.1 billion per

amounts reserved for the financing of accession, gradually increasing from
billion in 2002 to

16.8 billion in 2006.

€

€

6.5

The assumptions underlying the Berlin agreement have changed, notably as regards
possible dates for accession and the potential number of new Member States.

However, if it is assumed that the first accessions will take place in 2004 instead of
2002 and that more than 6 and up to 10 new Member States will join, the updated cost
of enlargement in each of the years 2004-2006 would stay below the amounts agreed
in Berlin. This takes into account updated information on agricultural production and
consumption data in the 10 candidates.

The annual amounts reserved for accession in the Financial Perspectives increase
substantially from 2002 to 2006. Since the first accessions will take place later, the
annual amounts needed for the corresponding years are smaller than if the first
accessions had taken place in 2002. This allows the Berlin figures to accommodate a
larger number of up to 10 new Member States.

The Commission will present proposals to the Council for common negotiation
positions in the fields of agriculture, regional policy and budgetary issues on the basis
in the Berlin agreement. The
of the existing acquis and the principles inherent

3 All amounts are commitment appropriations in constant 1999 prices.

23

accession negotiations can thus be concluded independently of decisions for financing
the EU after 2006.

The Commission will ensure that the budgetary implications of its proposals for
common negotiation positions are in line with the expenditure ceilings agreed in Berlin
for the period until 2006, incorporating the foreseen necessary adjustments for the
potential number of new Member States. In particular, the Commission will, without
prejudicing future decisions for the financing of the EU:

•

•

•

in the agriculture chapter, examine how to tackle the issues of direct payments and
supply management instruments in the negotiations;

in the area of structural policy,
identify the organisational and institutional
conditions to be met by the various countries for provisionally closing the
negotiations in this chapter as well as explain the method for the allocation of the
structural funds to new Member States until 2006;

as to the budget chapter, examine possible transitional arrangements.

The Commission will ensure that the Council can debate these issues in a common
framework early in 2002, with a view to preparing the further pursuit of the accession
negotiations in line with the road map.

b) Other chapters

The chapters ‘Institutions’ and ‘Other matters’ have not yet been opened with any of
the candidates. Following the road map, the Union should also define its positions on
these chapters in the first half of 2002.

The institutions chapter concerns the inclusion of new Member States in the Union’s
institutional framework. As the Union emphasised at the opening of the accession
negotiations, membership involves both rights and obligations. The Union expects new
members to comply with the obligations of membership, subject to the conditions
agreed in the accession negotiations. The new members will exercise their rights, on
the same terms as other Member States, through participation in the EU institutions.
Traditionally, the chapter ‘Institutions’ has been handled in accession negotiations
after all the other chapters relating to the acquis.

In the present negotiations, the chapter ‘Institutions’ will be based principally on the
conclusions of the Intergovernmental Conference at Nice in December 2000, and in
particular on:

-

-

the provisions set out in the Treaty of Nice, including particularly the dispositions
for adjustment of the institutions in the perspective of enlargement;

the provisions set out in the Declarations of the Intergovernmental Conference,
including particularly Declaration no. 20 on the common positions to be adopted in
the accession negotiations in matters relating to the distribution of seats in the
Parliament, the weighting of votes in the Council, and the composition of the
Economic and Social Committee and the Committee of the Regions.

24

The conclusion of the new Treaty at Nice reaffirmed the Union’s firm commitment to
the enlargement process. It is now in the process of ratification by the Member States.
The Commission notes that the Treaty has been ratified by three Member States and in
most other cases ratification is proceeding satisfactorily. In the case of Ireland,
following the referendum in June 2000, the Irish government is organising a national
convention to clarify the issues related to the Treaty.

The Commission hopes that Member States will complete the process of ratification,
as planned, in the course of 2002. The Commission will liaise with the Presidency
concerning the appropriate timing and procedure to be envisaged for the institutional
chapter, taking account of progress in the ratification of the Nice Treaty.

The final chapter of the negotiations, as in the case of previous accession negotiations
is ‘Other matters’. This chapter serves as a framework for questions not covered in the
preceding chapters – notably, problems which are not directly related to the acquis. In
the preceding accession negotiations, for example, discussions under the chapter
‘Other matters’ led to a number of declarations on transparency, the status of ‘certain
territories’, etc., which were subsequently annexed to the Accession Treaty. It will
become clear in the course of 2002 what questions may need to be handled under this
chapter in the present negotiations.

2. Action plan for administrative and judicial capacity

Member States need an adequate level of administrative and judicial capacity to
implement and enforce the acquis. This is why successive European Councils have
insisted on institution building in the run up to accession.

A stable public administration with an independent civil service is a common
objective for all candidate countries. Most have made impressive efforts in the field of
public administration reform and have implemented civil service reforms. Some have
taken steps to attract good staff and to improve their quality by training and better
remuneration. Nevertheless, as reflected in the Regular Reports much remains to be
done. In addition, a number of candidate countries need to intensify the fight against
corruption.

A predictable and efficient judicial system is also essential for the citizen and
business. Work has progressed on the reform of the judiciary in most candidate
countries but in a number of countries the strengthening of the independence of the
judiciary, the improvement of remuneration and working conditions as well as the
training of judges still need to be further pursued.

In a number of chapters related to the acquis, the major challenges have been identified
above (section II 3 b). They concern the administrative capacity to ensure:

• First, a smooth functioning of the internal market. This often requires appropriate
authorities,
implementation of

as
regulators or

effective
and
telecommunications,
appropriate information technologies.

competition

energy or

authorities

regulatory

transport

such

• Secondly, sustainable living conditions in the European Union. This needs to be
ensured, inter alia by assuring application of environmental standards, imposing

25

appropriate levels of health and safety at the work place, ensuring a high level of
nuclear safety and improving transport safety. These measures require a number of
inspection arrangements.

• Thirdly, the overall protection of the European Union’s citizens. This needs to be
ensured, inter alia, by securing borders for a variety of purposes, adequate market
surveillance for consumer protection, enforcing sufficient levels of food safety and
co-operation in the field of justice and home affairs. These measures require
various inspection and law enforcement arrangements

• Fourthly, the proper management of Community funds. This requires appropriate
structures in central and regional administrations for application of public
procurement rules, financial control, audit, fight against fraud and corruption.

The Regular Reports and the proposed revised Accession Partnerships identify in
detail the areas where actions needs to be undertaken by each candidate country in
order to achieve an adequate level of administrative capacity.

To identify the next steps, the Commission will establish an action plan. It will
their approach to
analyse with each of the candidate countries, early in 2002,
implement these priorities and, if necessary, their intentions to reinforce efforts for
institution building. Furthermore, the Commission will undertake specific monitoring
actions, where appropriate together with Member States and the candidate countries.

The action plan will:

•

•

•

be based on the priority areas identified in the revised Accession Partnerships, the
Regular Reports and commitments made in the negotiations;

identify actions already under way to build administrative capacity and mobilise
such as
further means to reinforce such efforts (using established mechanisms
twinning or TAIEX - see Annex 3 and 5);

confirm or initiate monitoring mechanisms such as monitoring reports, peer
reviews etc which will ascertain the state of preparation of each candidate country.

The action plan will, as the Regular Reports and the proposals for revised Accession
Partnerships, reflect each negotiating country’s situation and take into account the
accession dates envisaged by them.

a) Reinforcing Institution Building Actions

Substantial Community assistance is already being provided to the candidate countries
to help them develop adequate administrative capacity to implement and enforce the
acquis. Altogether up to two thirds of national PHARE programmes has been
earmarked for institution building and related investment. Programming has been
accelerated and national annual assistance programmes should be adopted much earlier
in 2002 than in previous years.

Moreover,
identified in 1999 for each of the 10 PHARE countries, allocate up to

the Commission will, over and above the yearly budgetary envelope
250 million

€

26

from the existing PHARE programme to additional institution building efforts in 2002.
This supplementary institution building facility constitutes an offer to candidate
countries that should be taken up and programmed by Summer 2002. Similar weight
could,
if necessary, be put on the allocation of the pre-accession assistance for
institution building in the case of Malta and Cyprus.

The Commission will analyse with the candidate countries the need to continue with
additional institution building efforts in the 2003 programming exercise. Institution
building projects could then, under the usual Commission rules on contracting and
disbursement, continue on the ground at least for three more years.

These efforts are supplementary to the major efforts each candidate country is making,
often assisted by PHARE and by bilateral actions of the Member States, international
organisations and international financial institutions.

b) Enhanced Monitoring

Monitoring actions are already underway. The Commission regularly provides the
Council with detailed monitoring tables and reports that look at the way commitments
undertaken in the framework of negotiations have been implemented. These also
concern commitments on building up adequate administrative capacity.

The Commission does not always have the relevant expertise to judge the readiness of
the candidate countries’ administrations since implementation is largely up to Member
States. This is why in a number of areas peer reviews have been established. Peer
reviews allow candidate countries to involve experts from Member States and the
Commission in the evaluation of administrative capacity. Peer reviews have already
started or are being considered in the field of financial services, justice and home
affairs, budget, agriculture, nuclear safety and environment. The Commission will
provide practical support in particular through the Technical Assistance Information
Exchange Office (TAIEX) or through other mechanisms (for example SIGMA).

The Commission will inform the Council of peer reviews or any other relevant action
to assess administrative capacity in candidate countries by Spring 2002. This will
allow the results of these actions to be taken up in the single framework of the
accession negotiations.

Peer reviews are not a panacea. They complement the ongoing monitoring process.
They should only be used where appropriate and should focus on areas of particular
concern identified by the Regular Reports, proposals
revised Accession
Partnerships or in the course of the negotiations.

for

These activities will contribute to the monitoring of commitments made by candidate
countries during the accession negotiations. The Commission will report on its action
plan, including on the monitoring of these commitments, by the time of the Seville
European Council in June 2002

The 2002 Regular Reports will then closely examine what has been done and whether,
in the different areas of the acquis, the candidate countries will be able to have the
adequate structures in place to implement and enforce the acquis by accession.

27

c) Administrative capacity beyond accession

Member States are expected to adjust regularly their administrative capacity to the
evolving needs of the acquis. Building up an adequate administrative capacity is a
process that will not end with the conclusion of the negotiations; indeed, the process
will continue up to accession and beyond.

During the period between the signature of accession treaty and the actual accession of
the countries concerned, the Commission will continue to follow developments on
issues identified in the course of the accession negotiations. In addition, it will also
follow developments on economic issues identified in the assessment of the economic
criteria. It will report accordingly to the Council.

Pre-accession programmes will continue to operate during that period. For the first
acceding countries, 2003 may be expected to be the last year in which pre-accession
funds are programmed. Training of civil servants may become one of the most
important needs in this period. Implementation will normally continue for up to three
years. Transitional arrangements for the management and eventual closure of the
programmes in the first years after accession need to be defined.

For the period after accession, the Commission will check, in its role as guardian of the
Treaties, how the acquis is implemented by the new Member States, using the same
mechanisms applied to existing Member States. Such mechanisms include periodic
Commission reports to the Council on the application of Community law, infringement
proceedings, and dialogue between the Commission and the Member States on
implementation problems (such as the internal market problem-solving network or co-
ordination centres).

Benchmarking and peer pressure are increasingly used inside the Union in order to
develop interoperable and compatible administrative structures. The participation of
candidate countries in Community programmes and agencies already contributes to the
effective integration of the candidate countries. The e-Europe initiative, national
employment strategies or activities in the context of the EMU have already been
extended to the candidate countries through e-Europe plus, the Joint Assessment of
Employment Policy Priorities in preparation for their participation in the European
Employment Strategy and the pre-accession economic programmes. Candidate
countries should continue on this road towards integration into existing policies and
mechanisms of the EU.

In addition, the new Member States will benefit from any new mechanisms that may
be introduced in order to improve the implementation of Community law. In its White
Paper on Governance, the Commission has indicated that it will propose in 2002
twinning arrangements between national administrations to share best practice in
implementing measures, drawing on the experience with candidate countries, and
promote the knowledge of Community law with national courts and lawyers. The
introduction of such twinning between Member States would allow candidate countries
to continue to benefit from such arrangements after accession. This would contribute to
a better implementation of the acquis in an enlarged Union.

28

3. Turkey’s pre-accession strategy – towards a new phase

The implementation of the pre-accession strategy, defined by the Helsinki European
Council, is now well underway. By the end of this year, all elements of this strategy
will be in place. In the next phase, attention will turn to a more detailed preparation for
EU membership requirements.

In this new phase, Turkey is encouraged to intensify and accelerate the process of
political and economic reforms in line with the Accession Partnership priorities. This
entails further constitutional, legislative, administrative and judicial reforms aimed at
bringing Turkey closer to EU standards. The recent constitutional reform and the
implementation of the new economic plan are a promising start of this process.

Fuller use should be made of the enhanced political dialogue to further stimulate
progress on key issues which are priorities of the Accession Partnership, such as
human rights, Cyprus and the peaceful settlement of border disputes.

The support Turkey has expressed in the political dialogue for the UN Secretary
General’s efforts to find a comprehensive solution of the Cyprus problem should now
be followed by concrete steps by Turkey to facilitate a solution.

On European Security and Defence policy (ESDP), Turkey should be forthcoming in
solving the issue of the modalities for participation in decisions on EU-led operations
in view of the decision to be taken by the Laeken European Council, in accordance
with the Nice European Council conclusions.

A number of confidence building measures in the context of Greek-Turkish relations
are being further developed and implemented. This should create a climate conducive
to the peaceful settlement of border disputes in line with the Helsinki European
Council conclusions.

Financial assistance will be used to help Turkey meet Accession Partnership priorities.
Turkey is invited to strengthen its administrative capacity for project design and
management in keeping with the de-centralised approach followed with all candidate
countries. The Commission will mobilise advice and assistance from Member State
experts to support Turkey’s efforts. On the basis of the framework agreement to be
signed between the EU and Turkey on Turkey’s participation in Community
the
programmes, Turkey is invited to put
management of these programmes, in particular in the field of education.

into place effective structures for

The negotiations on the extension of the Customs Union in the area of public
procurement and public services are to be finalised as a matter of priority.

The Feira European Council asked the Commission to report on progress in preparing
the process of the analytical examination of the acquis. This report is annexed to the
Regular Report 2001.

On the basis of experience to date and of the gaps that have been identified in Turkish
legislation and administrative preparations for membership, it is now recommended
that a new phase starts in the pre-accession strategy. This will involve detailed scrutiny
of Turkey’s legislation and its timetable for alignment with the acquis. In this phase,

29

particular attention will also be given to the capacity of the Turkish administration and
judiciary to implement and enforce the acquis effectively.

Henceforth, the EU and Turkey will engage in a more detailed dialogue on the
requirements for the transposition, implementation and enforcement of the acquis,
focussing on precise sectoral issues to be examined by the relevant experts in the
existing fora. Sub–committee agendas will therefore focus on detailed priorities for
action. Turkish officials will receive additional and more detailed information on
specific parts of the acquis. EU experts will review draft legislation under preparation
in Turkey. Workshops on selected issues will be organised by TAIEX.

Turkey will be invited to contribute actively to the Commission’s database on the
approximation of legislation to permit detailed and continuos monitoring of progress.

It is recommended that the EC-Turkey Association Committee at its next meeting
should establish the subjects on which this process will focus and the schedule of
meetings.

4. The next steps

a) Meeting the accession criteria

Accession requires that candidates fulfil the conditions for membership, that is the
political and economic criteria, and the ability to take on the obligations of
membership. The Commission will give a favourable recommendation on the
accession of a country if it is convinced that it will be able to meet the criteria by
accession.

This year’s Regular Reports and the present stage of the accession negotiations do not
yet allow the Commission to conclude that the conditions for accession are fulfilled by
any of the candidate countries. However, given the present pace of negotiations and the
progress made so far, the Commission should be able to make recommendations on
which candidate countries are ready for accession on the basis of its 2002 Regular
Reports. Among the twelve negotiating countries, ten have target dates of accession
compatible with the Göteborg timeframe.

The reforms still needed in each country are identified in this year’s Regular Reports
and revised Accession Partnerships. In its 2002 Regular Reports, the Commission will
complement its assessment of progress made on the implementation of these remaining
reforms with an evaluation of each country's track record since the Opinions. The
Union should, thus, be prepared to conclude the accession negotiations by the end of
the Danish Presidency in 2002 with countries meeting the necessary conditions and in
view of their accession in 2004.

b) The first accessions

The conclusions of the accession negotiations will be embodied in a treaty of
accession, bringing together, probably as in past accessions in one legal instrument, the
results of the separate accession conferences. The drafting of the legal texts requires
technical preparation, which has already started.

30

For the last enlargement, this legal instrument – consisting of a brief treaty and a
lengthy Act of Accession mainly devoted to the technical adaptations of secondary
legislation necessary for the accession of the four applicant countries concerned. It also
included a provision for adaptation of the treaty in the event that a candidate country
failed to ratify; this permitted the treaty to come into force in spite of the rejection of
ratification in Norway.

For the next accession treaty, work on drafting should start in the first half of 2002
within the framework of the Council and the accession conferences. The Commission
will assist by making the necessary technical proposals. It will also identify those parts
of the acquis which require technical adaptations and will provide the Council with an
the information
inventory of all such technical adaptations,
collected from each candidate country.

taking into account

Enlargement will be subject to approval on the Union’s side by the Council and by the
European Parliament, taking account of the final Opinion which the Commission will
submit on the outcome of the negotiations. The Treaty resulting from the accession
negotiations will then be formally signed by the parties concerned (Member States and
candidate countries) and submitted for ratification by the contracting States in
accordance with their respective constitutional requirements.

c) Other negotiating candidate countries - towards an updated road map

For those negotiating candidate countries which will not form part of the first
accession, the Commission will continue to issue Regular Reports, until the overall
level of preparation allows them to fulfil the criteria for accession. The European
Union will continue to lend its full support to the preparations for membership by these
candidates.

Negotiations will be pursued with them, on the basis of the principles that have guided
the accession process from the beginning. The opening of all 29 acquis related
negotiating chapters should be possible next year, provided the candidates are
sufficiently prepared.

In its 2002 Enlargement Strategy Paper, the Commission will set out an updated road
map, and, if necessary, a revised pre-accession strategy, for such candidates, taking
into account the progress made in the next year and the conclusions of the Göteborg
European Council.

31

IV. Conclusions

In the light of the above the European Commission recommends to the European
Council to conclude on the basis of the following elements:

1) The Regular Reports show that all negotiating countries have made substantial
progress over the last year in implementing the accession criteria, which, together
with the road map, has permitted considerable advances in the negotiations.

2) The principles for this process remain unchanged. The Berlin European Council
has set out a clear framework for the financial aspects of enlargement. This
framework provides a sufficient basis for the accession of up to ten new Member
States in 2004. The European Council of Nice has defined the framework for the
institutional reform necessary for enlargement. Negotiations are conducted on the
basis of the existing acquis and will be concluded with those candidates that fulfil
all the criteria for membership, applying the principles of own merits and catching-
up. These are the necessary and sufficient conditions defined at the outset for
accomplishing the first accessions.

3) To this end, the road map should be followed as foreseen. The EU will now have to
determine common positions for the remaining chapters. The Commission will
ensure that the Council can debate financial issues in a common framework early
in 2002 and will present proposals to the Council the fields of agriculture, regional
policy and budget on the basis of the existing acquis and the principles inherent in
the Berlin agreement. The accession negotiations can be concluded independently
of decisions for financing the EU after 2006.

4) This year’s Regular Reports and the present stage of the accession negotiations do
not yet allow the Commission to conclude that the conditions for accession are
fulfilled by any of the candidate countries. Given the present pace of negotiations
and the progress made so far,
the Commission should be able to make
recommendations on those candidate countries ready for accession on the basis of
its 2002 Regular Reports. Among the twelve negotiating countries, ten have target
dates of accession compatible with the Göteborg timeframe. The Union should
therefore be prepared to conclude accession negotiations by the end of the Danish
Presidency in 2002, in view of accession in 2004, with all countries meeting the
necessary conditions. Necessary administrative preparations inside the Institutions
are already under way and should be continued.

5)

if necessary,

In the framework of an action plan, the Commission will analyse by early 2002
with each of the candidate countries their on-going efforts for institution building
their intentions to reinforce them, using a supplementary
and,
inform the Council on
institution building facility.
monitoring actions including peer reviews by Spring 2002, so that they can be
taken up in the single framework of the accession negotiations. The Commission
will, by the time of the Seville European Council in June 2002, report on its action
plan including on the monitoring of commitments made by the candidate countries
during the accession negotiations. The 2002 Regular Reports will examine whether

The Commission will

32

the candidate countries will have, by accession, adequate administrative capacity to
implement and enforce the acquis.

6) Negotiations will be pursued with those candidates, which will not form part of the
first accessions, on the basis of the principles that have guided the accession
process from the outset. The opening of all 29 acquis related negotiating chapters
should be possible next year, if the candidates are sufficiently prepared. In its 2002
Enlargement Strategy Paper, the Commission will set out an updated road map,
and, if necessary, a revised pre-accession strategy, taking into account the progress
made in the next year and the conclusions of the Göteborg European Council.

7) All candidate countries should be associated as far as possible to the Lisbon
process. Candidate countries will be involved in the discussions on the future of
Europe and in the Convention which will prepare the way for
the next
Intergovernmental Conference.

8) The parties involved in efforts to resolve the Cyprus problem need to take full
advantage of the window of opportunity before the completion of the accession
negotiations to achieve a settlement. Provided the necessary political will is shown,
a settlement reflecting the concerns of the respective parties is attainable through
the process under the auspices of the United Nations. It is particularly important
that the Turkish Cypriot leadership should re-engage in the UN process. The
provisions of a political settlement can be accommodated within EU accession
arrangements for Cyprus in line with the principles on which the EU is founded.
However, as decided by the European Council in Helsinki, if a settlement has not
been reached before the completion of the accession negotiations, the Council will
take its decision on accession, without this being a pre-condition, in accordance
with the Helsinki European Council conclusions.

9) By the end of this year, all elements of the pre-accession strategy for Turkey,
decided by the European Council in Helsinki, will be in place. The pre-accession
strategy should move into a new, more intense phase, with the detailed scrutiny of
Turkey’s legislation and preparation for alignment with the acquis. Turkey is
encouraged to pursue the process of political and economic reform, in order to
make further progress towards satisfying the Copenhagen criteria and the
Accession Partnership priorities.
term, particular importance is
attached to improving the respect for human rights in practice and to creating the
conditions for economic stability and growth. Turkey should be forthcoming in
working towards a solution of the Cyprus problem. Furthermore, Turkey should
contribute actively to overcome the differences that have arisen over the European
Security and Defence Policy.

In the short

10) To ensure that the public in Member States and in candidate countries is well
informed about the process of enlargement,
its implications and its potential
benefits, the communication strategy will be pursued with the full assistance of
Member States and the European Parliament. Indeed, it is imperative that the
historical process of re-unifying the European Continent is strongly rooted in the
support of its people.

33

Annexes

Annex 1: Conclusions of the Regular Reports

Bulgaria

In its 1997 Opinion, the Commission concluded that Bulgaria fulfilled the political
time, Bulgaria has made considerable progress in further
criteria. Since that
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Bulgaria continues to fulfil
the Copenhagen political criteria.

Since last year, further progress has been made in public administration reform. Many
employees have civil servant status and there is now a Code of Ethics for Civil
Servants. The Law on Access to Public Information is a positive step, but needs further
clarification to ensure effective implementation. Further steps are needed to ensure an
efficient, transparent and accountable public administration.

The recent adoption by the government of two strategies, one on judicial reform and
the other on combating corruption, is a significant development. The challenge now is
to implement these. The judicial system remains weak and there is as yet no reason to
change the assessment made last year that further efforts are needed for it to become
strong, independent, effective and professional and able to guarantee full respect for
the rule of law as well as effective participation in the internal market. Corruption has
continued to give serious cause for concern. Enforcing the legal framework effectively
presents a challenge and greater focus is needed on prevention of corruption.

Some progress has been made on human rights training of police and on combating
trafficking of human beings. However, there is a need to address police behaviour,
notably as regards reported cases of ill-treatment. continues to give cause for serious
concern.

A child protection agency and a national advisory council for child protection have
been set up. Further steps need to be taken to make the Child Protection Agency
operational. On child welfare, there is not yet a significant change in the number of
children in institutions. Poor conditions in some homes for children with mental
disabilities are cause for concern.

Roma continue to suffer from widespread social discrimination. Political commitment
from the government to remedy their problems has still not been matched by concrete
action. One more positive development is that some NGOs have pursued projects on
desegregation of Roma schools.

Very little further progress has been made to meet the Accession Partnership priority to
start
implementation of the Roma Framework Programme, and to strengthen the
National Council on Ethnic and Demographic Issues.

Concerning other related Accession Partnership priorities, Bulgaria has made further
progress to implement the Civil Service Law. However, the priority of strengthening
the judiciary has not yet been met.

34

Bulgaria is close to being a functioning market economy. It should be able to cope
with competitive pressure and market forces within the Union in the medium term,
provided it continues implementing reform and intensifies the reform effort to remove
persistent difficulties.

The Bulgarian macroeconomy is going into its fourth year of stable conditions, having
established a satisfactory track record of macroeconomic performance. Good progress
has been made in privatisation, especially as regards banks, and with structural reform,
setting the microeconomic basis for sustained growth.

However, inflation has risen considerably in 2000. Investment remains insufficient.
Financial intermediation continues to be low and inefficient. Specific deficiencies
remaining in the land market affect the performance of this market and of other
economic sectors. The authorities should give priority to strengthening the judiciary
and the enforcement of the regulatory framework. Administrative obstacles to private
sector development, affecting enterprise creation, their development and their closing
down,
eliminated. A sustained
implementation of these reform measures and higher levels of private and public
and building up
investment
competitiveness.

including bankruptcy procedures, must

are key requirements

sustainable growth,

for

be

Bulgaria has continued a good pace of alignment of legislation with the acquis but still
needs to pay more attention to how this will be implemented and enforced. Progress on
public administration reform has continued and is a positive sign. This needs to be
sustained to ensure public administration is prepared for its role at EU accession.
However, little has been done to prepare the judicial system, which needs to be
modernised and strengthened, in particular to ensure effective enforcement of the
acquis.

Regarding the internal market, Bulgaria has made further progress in most areas. In
free movement of goods progress continued with membership of European
Accreditation as a major achievement. Reinforcement of administrative infrastructure
for standardisation and certification, and of market surveillance systems,
is still
necessary. On financial services, Bulgaria has developed sound banking supervision
practices. Company law has been further aligned and the legal framework for
protecting intellectual and industrial property rights improved, but further steps are
needed to ensure this is enforced. On state aids, Bulgaria is at last starting to develop
and implement a framework for state aids but this is not yet compatible with the
acquis. Bulgaria still lacks a legal framework on data protection compatible with the
acquis.

In agriculture, Bulgaria has continued generally good progress on approximation of
legislation but implementing the acquis poses a significant challenge. Veterinary and
phytosanitary inspection arrangements
partial
accreditation of SAPARD is a noteworthy success. Progress on fisheries has
accelerated compared to previous years.

upgrading. The

further

need

Whilst progress has been made to amend labour law towards alignment with the
acquis, progress on equal treatment legislation remains slow. Whilst administrative
capacity of the general
the capacity to
implement the acquis on occupational health and safety will need to be increased.

labour inspectorate has been reinforced,

35

Concerning regional policy, Bulgaria has made little further progress and much more
attention needs to be paid to preparation for implementing structural policies.

Bulgaria has continued its positive efforts on transposition of the EC environmental
acquis but implementation and the cost of alignment remain a challenge.

The pace of progress on transport has been pursued both on adoption and creation of
implementing structures. There has also been an increase in investments.

The restructuring of the energy sector has progressed at a very slow pace throughout
2001 following delays in the planned revision of the legislative framework. These
delays have hindered efficiency improvement and preparation for privatisation. As
regards nuclear energy, Bulgaria must respect the de-commissioning commitments of
the Memorandum of Understanding and ensure a high level of nuclear safety.

In justice and home affairs, further progress has been made in most areas in terms of
legislation but progress on strengthening administrative capacity was not as strong as
required. Some progress has been made on control of external borders; however, there
is scope for further improvement, in particular in inter-agency co-operation.

In external policies, Bulgaria’s performance remains strong, continuing to make a
substantial contribution to regional stability and following the path of
trade
liberalisation with the EC and its preferential partners.

For customs and taxation, Bulgaria will need to develop IT systems that allow for
exchange of data with the EC.

Further progress has been made to strengthen financial control and on improving
public expenditure management and control. Efforts should be pursued.

the acquis and on public administration reform,

Whilst some progress can be noted on establishment of the institutions necessary to
implement
the capacity of the
Bulgarian administration remains limited. Further sustained progress and allocation of
the necessary resources will be necessary to meet the challenges ahead. Further efforts
are also required in establishing the necessary administrative capacity to ensure the
sound, efficient and controllable management of EC funds.

Whilst work on public administration is progressing, the slow pace of preparation of
the judicial system to enforce the acquis is worrying. Progress on judicial reform needs
to be substantially accelerated.

Bulgaria has fulfilled partially and made progress since last year on all of the short-
term Accession Partnership priorities relating to the acquis. Concerning administrative
capacity, Bulgaria has moved forward on priorities, with the exception of that of
strengthening the judiciary, where little progress has been made. The implementation
of the recently adopted strategy for judicial reform should make a difference.
Bulgaria has started to address the majority of medium-term Accession Partnership
priorities.

36

Cyprus

Cyprus continues to fulfil the Copenhagen political criteria. Further efforts have been
made to prepare the administration for operation within the EU, and the authorities’
record on democratic and human rights remains generally good.

Cyprus is a functioning market economy. It should be able to cope with competitive
pressure and market forces within the Union.

The macroeconomic situation has continued to be robust with high GDP growth, low
inflation and unemployment. The fiscal consolidation plan introduced in 1999 is
successfully addressing some important structural deficiencies in public finances.
Progress has been made in structural reforms, notably within the financial sector, the
environment, and healthcare. Both the financial sector and the capital account took
major steps towards greater liberalisation.

the

current

account deficit

However,
increased significantly. The welcome
liberalisation of the financial sector and the capital account pose new challenges to the
economy. Cypriot authorities should ensure a proper and uniform supervision of the
financial sector, including the co-operative banking sector. In cases where prices are
regulated, a more market-based approach should be adopted. Cyprus must continue to
prepare its private sector to operate in the single market environment that integration in
the EU implies, by opening key sectors to foreign competition.

During the period covered by this Regular Report, Cyprus has achieved substantive
progress in different areas of the acquis and has continued at steady pace with further
legislative alignment as well as with the setting up and upgrading of the necessary
administrative institutions. The alignment process has gradually accelerated. However,
there remain still a considerable number of laws to be adopted.

Over the last year, there has been progress in important areas of the internal market.
Concerning free movement of goods,
the adoption of EN standards has been
accelerated and new legislation was passed as regards sector specific legislation.
However, continuing serious efforts are required to transpose and implement
the
acquis, in particular as regards the framework law on the new and global approach
principles and subsequent regulations for the transposition of the New Approach
Directives. Furthermore, an overall strategy for better co-ordination of the authorities
responsible for market surveillance should be developed. Although Cyprus has
undertaken certain measures to abolish inconsistencies with the acquis in the area of
free movement of persons in particular as regards the co-ordination of social security
systems, important legislative work remains to be done before accession. Concerning
financial services good legislative progress can be reported, and the overall standard of
supervision appears to be satisfactory. Particular importance should be given to the
restructuring of the co-operative and saving societies sector. The liberalisation of
capital movements has continued and should be maintained to ensure a proper
functioning of the markets upon accession. Significant measures to combat money
laundering have been undertaken e.g. with the inclusion of lawyers and accountants
within the scope of application of the relevant legislation. Cyprus has also tightened its
measures relating to the identification of account holders and reporting of transactions
in accordance with the recommendations of various
fora. The
harmonisation process should be accelerated with regard to intellectual and industrial

international

37

property rights. The effective application and enforcement of state aid rules, including
the alignment of existing aid schemes as regards in particular the tax regime for the
off-shore sector, should be ensured.

Partial progress has been made in the field of agriculture but substantial elements and
mechanisms of the acquis remain to be applied as regards in particular the Common
Market Organisations and the veterinary and phytosanitary sectors.

In the field of fisheries the reinforcement of the administrative capacity has continued.
Additional progress is needed with regard to the current and planned structure of the
fishing fleet under Cypriot flag. Significant progress has been made in nearly all
sectors of transport policy particularly as regards maritime transport where safety
controls have been improved. The performance of the classification societies should be
monitored.

While recognising the efforts made and the initiatives taken to further align the tax
legislation with the acquis by way of e.g. the scheduled tax reform, concerns remain
on the harmonisation of the level of indirect taxation and the special regime of direct
taxation for off-shore companies.

Concerning telecommunications, there is a considerable delay in the adoption of
legislation and the preparation of secondary regulatory instruments to transpose key
parts of the acquis.

On environment, good progress can be reported. Cyprus has continued with
harmonisation measures both as regards legislative alignment as well as strengthening
attention should now be paid to proper
administrative capacity. Particular
implementation and enforcement.

In the area of justice and home affairs progress has been made in particular in the
fields of border control, migration and in the fight against corruption and fraud. On
asylum, although the administrative capacity has been strengthened with the setting up
of a refugee authority, no legislative progress can be reported. In the light of increasing
numbers of application alignment should be accelerated as regards in particular the
criteria for applications and the setting up of an independent appeal authority.

Cyprus has achieved considerable progress in the field of customs, leaving only some
in particular as regards temporary
areas where further alignment
importation, customs procedures with an economic impact and cultural goods.

is necessary,

As regards financial control, Cyprus’ financial control system is sound and consistent
with European standards; efforts should be undertaken as to the internal control of
revenues and the proper management of pre-accession funding and structural funds.

Over the last year, Cyprus has continued sustained efforts to further strengthen its
administrative capacity. Training programmes have been organised in different
sectors, such as co-ordination of social security systems, maritime safety, and justice
and home affairs. Furthermore, additional staff has been recruited in key areas such as
fisheries,
financial services, company law, veterinary and phytosanitary issues,
transport, taxation, social policy and employment, telecommunications, environment
and justice and home affairs. This allowed Cyprus to reinforce market surveillance

38

systems in the field of free movement of goods, to improve the due supervision of
financial services,
to upgrade the inspection arrangements in the veterinary and
phytosanitary field and to strengthen its labour inspectorates.

New administrative structures have been set up in order to efficiently apply the acquis.
Among these are an authority to settle disputes as foreseen in the credit border transfer
Directive, a state aid monitoring authority, a new unit within the Department of Road
Transport to deal with market access, a Statistical Council, a special group of officials
to examine in detail the new structures of the government with regard to equal
treatment of men and women, and finally a refugees authority. In other cases, the
powers of the existing enforcement bodies have been increased, such as in the case of
the Unit for Combating Money
the Securities and Stock Exchange Commission,
Laundering (MOKAS) and the Commission for the Protection of Competition. Finally,
there are plans to set up a new body on pharmaceuticals (Drugs Price Control
Committee). In the field of customs, Cyprus has recently started to introduce an
updated version of the IT system so as to allow for the exchange of computerised data
with the Community.

it

is advisable to reinforce the administrative

infrastructure for
In future,
standardisation and certification to enhance the free movement of goods. Further
efforts should also be made to strengthen enforcement capacity in the field of
intellectual property rights, especially as regards border controls and fight against
piracy and counterfeiting. Although progress has been made both in the fields of anti-
trust and state aid, the infrastructure, staff, and the rather weak enforcement record of
the anti-trust legislation should be improved. As regards taxation, Cyprus should
develop IT systems, so as to allow exchange of electronic data with the Community
and its Member States. Following the expected nomination of the Independent
Regulator in the telecommunications sector his newly established authority should start
working soon. An upgrading of the border management in the field of justice and
home affairs is imperative. Further efforts are also required in establishing the
necessary administrative capacity to ensure the sound, efficient and controllable
management of EC funds.

Overall, the administrative capacity of Cyprus is already largely in place to implement
the different aspects of the acquis.

Over the last year Cyprus has met the short–term priorities of its Accession Partnership
with regard to free movement of capital, environment and financial control. In most
other areas the priorities were partially fulfilled. Cyprus has continued to make
progress in addressing the medium-term Accession Partnership priorities, and has
partially fulfilled a number of them, such as justice and home affairs, regional policy
and co-ordination of structural instruments and issues relating to the internal market.

Czech Republic

In its 1997 Opinion, the Commission concluded that the Czech Republic fulfilled the
political criteria. Since that time, the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. The Czech Republic
continues to fulfil the Copenhagen political criteria.

39

The government has also taken steps to improve the functioning of the central and
regional administration. However, it is regrettable that the Czech Republic continues
to lack a Civil Service Act for its public administration;
this is essential for
establishing independence, professionalism and stability.

The reform of the judiciary has gained significant momentum. Work in the area of
civil law has made good progress whilst efforts continue on criminal law as well as the
organisation of the courts and self-government of the judiciary. In particular, a radical
reform of the Criminal Proceedings Code has been adopted which aims to increase the
capacity to investigate effectively and bring cases efficiently to trial.

Some additional measures to fight against corruption and economic crime have been
taken.
Nonetheless, corruption and economic crime remain a serious cause for
concern, as evidenced by a governmental report which calls on support from the
political forces to address the issue.

The Czech Republic has consolidated its internal institutional framework in the field of
human rights. However, increased efforts are necessary to better fight the persistent
trafficking of women and children.

Considerable efforts have been made by the Czech government as regards Roma and
other minorities. However, further measures to combat widespread discrimination are
needed, in line with the government policy for the Roma of June 2000. The central
government should ensure that all levels of administration, including regional and
local, fully abide by and implement the legislation in place as regards minority rights
and that the financial resources necessary to do so are available.

Some progress has been made in addressing the Accession partnership priorities
although continued efforts are necessary. The government has proposed a Civil Service
Law to the Parliament but
this has not been adopted and implementation of a
comprehensive reform has thus not started. Continued and encouraging progress has
been made on the reform of the judiciary. The majority of the tasks contained in the
government’s resolution of 1997 concerning the Roma have been fulfilled and the
government has adopted a long-term policy towards the Roma. However, further
efforts are needed to implement measures to fight discrimination.

The Czech Republic is a functioning market economy. Provided that it makes further
progress towards medium-term fiscal consolidation and completes the implementation
of structural reforms, it should be able to cope with the competitive pressure and
market forces within the Union in the near term.

The macroeconomic performance has improved overall. Growth has resumed and
broadened, while the favourable performance on inflation has been maintained. Efforts
are being made to increase the transparency of the public accounts. Sustained high
engendered substantial
domestic and,
restructuring and high productivity growth in the corporate sector. Further progress has
been made on the restructuring of banks and privatisation of this sector is complete.

investment has

in particular,

foreign,

the current account deficit has widened and the budget deficit has
However,
considerably risen, driven by transformation related one-off
and an
accommodating cyclical stance. In addition, the medium-term sustainability of public

costs

40

finances is not yet assured. Further improvements of the legal framework for market
entry and exit, as well as a forceful implementation of the prudential regulations for the
financial sector are essential. The authorities should resume the process of disposing of
bad loans after the restructuring of banks. Their efforts to privatise or restructure the
remaining large state-owned enterprises should be pursued actively so as to strengthen
corporate governance and efficiency.

The Czech Republic has made further significant progress in a wide variety of chapters
of the acquis. Nevertheless, further efforts remain necessary in a number of areas.
There has also been progress in strengthening administrative capacity, although this
remains hampered by the absence of a legal framework for public administration.

Alignment on the single market is overall well advanced, although the remaining gaps
need to be filled. On free movement of goods, there has been progress, except for
public procurement, and the bodies responsible for standards and certification continue
to function well. As regards free movement of persons, transposition needs to be
accelerated, in particular as regards mutual recognition of professional qualifications.
In the area of free movement of services, alignment with the financial services acquis
should be pursued. The capacity of the Securities Commission has been reinforced
although stronger regulatory powers would be welcome to improve supervision of
financial services. As regards free movement of capital, existing anonymous accounts
remain to be abolished.

Concerning competition, legislation is now largely in line with the acquis, and the
enforcement record in the anti-trust and state aid fields is reasonably good.
In the
latter, rigorous and transparent enforcement needs to be demonstrated as regards the
steel and financial sectors. The Office for the Protection of Economic Competition is
overall well staffed and trained. As regards company law, there is a high degree of
compatibility with the acquis; however, the enforcement and monitoring capacity of
the relevant authorities in the field of IPR, such as customs authorities, police,
judiciary and trade inspection should be further strengthened.

On Economic and Monetary Union, overall a significant part of the acquis has been
adopted but further efforts are needed to complete alignment as regards central bank
independence. Only limited progress has been made on taxation, and a number of
important issues remain to be tackled on the approximation of VAT and excise duty
rates. Also, more concrete progress is needed to ensure the proper and efficient
functioning of the tax administration upon accession.

There has been little recent progress on telecommunications although overall
alignment is satisfactory. The technical conditions need to be put into place to permit
the foreseen liberalisation to take place. There has been a significant improvement in
legislative alignment on audiovisual policy.

Further progress has been made on sectoral policies. As regards transport, road
transport legislation has been aligned further, and the Czech Republic has become a
member of the Joint Aviation Authority. However, there has been no significant
progress in the railways sector.
In the energy sector, considerable progress has been
made in preparing for entry into the internal energy market for electricity and gas. On
industrial policy, a fresh impetus is needed to take forward the restructuring of
enterprises.

41

In the area of economic and social cohesion, progress on legal transposition has
continued. As regards social policy and employment, alignment has progressed on
equal treatment, labour law and health and safety at work. On regional policy, the
legal framework for the future implementation of the structural funds has been further
completed. However, additional efforts are needed to ensure that the administrative
bodies responsible are fully functional, trained and well co-ordinated in order to be
ready for implementation of the structural funds upon accession.

In the field of agriculture, there has been good legislative progress in the phytosanitary
field. However, further work on alignment, for example in the veterinary area, will
need to continue across the range of issues of this extensive Community policy. Good
progress has been made in setting up the State Agricultural Intervention Fund but
further efforts are needed, particularly in the reorganisation of the Ministry of
Agriculture.

In
Good progress has been achieved in transposition of the environmental acquis.
particular, the adoption of the Act on Environmental Impact Assessment was a major
development. Co-ordination amongst the relevant government bodies needs to be
improved, with particular attention to the implications of the ongoing process of
decentralisation.

In the field of Justice and Home Affairs, progress has been made in particular aligning
visa policy, migration policy and on strengthening the legal framework for police and
judicial co-operation. The adoption of a high-quality Schengen Action Plan is a
positive development. However, significant further efforts are needed to implement
government policies for combating organised crime and ‘white collar’ crime via
effective policing strategies and organisational measures. As regards border control,
whilst checks have improved at official crossings, there are still significant difficulties
in intercepting illegal immigrants at the green borders with Slovakia in particular.

A high level of compatibility has been achieved with the customs acquis, although the
amendment to the Customs Act remains to be adopted, and operational capacity has
been improved. Nonetheless, further efforts are needed to ensure that EC-compatible
IT systems are fully functional before accession.

Concerning financial control, progress has been made in legislative alignment as
regards public internal financial control and external audit, although further efforts are
needed to develop a comprehensive system of control.

Overall, the administrative capacity of the Czech Republic is being strengthened and
efforts in this direction need to be pursued, in particular as regards agriculture, the
environment, regional policy and border controls. Further efforts are also required to
establish the necessary administrative capacity for sound, efficient and controllable
management of EC funds.

The large majority of Accession Partnership priorities have been addressed and overall
satisfactory progress has been achieved in meeting them. The short term priorities
relating to the single market have generally been met although further efforts are
needed in some areas. Limited progress has been made on taxation. The priorities
relating to agriculture, the environment and Justice and Home Affairs have been
partially met.

42

As regards the medium term priorities, those relating to the single market have been
met
to a large extent, except as regards public procurement. The priorities on
economic and monetary union and on taxation have not been met. Some progress has
been achieved in meeting the medium term priorities in the remaining fields, which
have generally been partially met.

Estonia

time,

In its 1997 Opinion, the Commission concluded that Estonia fulfilled the political
criteria. Since that
the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Estonia continues to fulfil
the Copenhagen political criteria.

Progress has been made in the modernisation of the public administration by moving
to a more results based system and improving public access to information. Efforts
have continued to modernise the legal system and improve the functioning of the
judiciary through training, court reorganisation and development of I.T. systems. There
is however a need to continue the implementation of the public administration reform
programme,
to improve transparency in personnel matters and
coordination across different bodies. As regards the judicial system, Estonia needs to
continue to improve the efficiency in dealing with court cases whilst at the same time
improving the quality and enforcement of court decisions. There is also a need to
further improve citizen’s access to justice, in particular by widening the availability of
legal aid.

in particular

the integration of non-citizens. An important positive development

Estonia has continued to make progress with the implementation of concrete measures
for
is the
strengthening of the administrative capacity of the Legal Chancellor's office, including
the establishment of branch offices in the north-eastern part of the country. Estonia
should maintain the momentum of the integration process. This includes ensuring the
efficiency of the naturalisation process, providing access to language training, and
raising awareness of the issue across the entire spectrum of Estonian society. Estonia
should ensure that the implementation of language legislation respects the principles of
justified public interest and proportionality, Estonia's international obligations and the
Europe agreement.

Estonia continues to address both the short and medium-term priorities set out in the
1999 Accession Partnership. Specifically, Estonia is implementing concrete measures
for the integration of non-citizens including the provision of language training for non-
Estonian speakers.
Looking forward, meeting these priority objectives requires
sustained efforts over time and continued investment of financial resources in order to
build upon the positive work that has already been achieved.

Estonia is a functioning market economy. Provided that it continues with and fully
implements its reform programme, it should be able to cope with the competitive
pressure and market forces within the Union in the near term.

43

Estonia has returned to high growth and made further progress in strengthening its
macroeconomic performance and stability, restructuring the enterprise sector, and in
implementing structural reforms in the utilities and energy sectors. The pension reform
has been adopted. The legal, institutional and regulatory framework is in place and
enforcement is largely adequate.

Nevertheless, the current account deficit remains high. The labour market is highly
segmented leading to high unemployment combined with labour shortages. Initiatives
to improve the response of the labour market to economic growth, with a focus on
improving education, training and labour market mobility, need to be developed. The
restructuring of the oil-shale industry has only just started and should be accelerated.
Although partly hampered by lack of effective demand in rural areas, an acceleration
of land registration would benefit
the functioning of land markets. Estonia must
continue to focus on fiscal policy, also in order to keep the current account deficit
sustainable.

Overall, Estonia has continued to make good progress in both adopting and
implementing the acquis. As regards the capacity to implement and effectively enforce
the acquis, Estonia has most of the necessary institutions in place. These institutions
need to be further strengthened and continued efforts are required in specific sectors to
further develop administrative capacity.

Concerning the internal market, progress has been made in free movement of goods in
aligning public procurement legislation and adopting standards although there is still a
need to harmonise sectoral legislation. For free movement of persons, new legislation
now ensures the mutual recognition of professional qualifications. In competition
policy there has been further alignment of legislation which is now largely in line with
the acquis in anti-trust and state aid. For consumers and health protection, good
progress has been made in aligning legislation with the acquis. As regards freedom to
provide services, free movement of capital and company law where it was reported last
year that preparations were already advanced, there has been some further progress in
the alignment with the acquis. Nevertheless, attention needs to continue to be given to
the fight against piracy and control of counterfeit goods.

Concerning agriculture important steps have been taken in preparing for the Common
Agricultural Policy,
including the partial accreditation of the SAPARD agency.
Progress has also been made in the phytosanitary sector. Considerable efforts still
need to be made, particularly in the veterinary field. Raising food quality standards to
EU levels is still a significant challenge.
In fisheries, administrative structures have
been reorganised and work has continued in setting up the Vessel Monitoring System.
Further work is necessary, in particular to develop the Fishing Vessels Register, in the
area of market policy, and to establish the legislative framework for EC structural aid.
Inspection capacity needs to be reinforced.

In transport policy, Estonia has continued to make progress in both aligning and
implementing legislation. The necessary separation of accounts and the role of the
railways regulatory body need to be clarified. In energy limited progress has been
made. Efforts need to be made in this area particularly as regards the electricity
market. Estonia also needs to further develop administrative structures and strengthen
the energy market regulator.

44

For social policy and employment, Estonia has made good progress in terms of legal
transposition. Further work is required on implementation. There is also a need to
actively promote social dialogue.
The business environment continues to be
favourable to small and medium sized enterprise development. In regional policy some
progress has been made. However, Estonia needs to substantially step up preparations
for its administrative capacity to implement EC regional policy after accession.

In science and research and education and training, Estonia continues to participate in
relevant EC programmes. In telecoms and IT and culture and audiovisual policy
alignment of legislation is largely complete.

In the environment sector, further progress has been made in relation to both alignment
and implementation of environmental legislation. Estonia needs to continue these
efforts and strengthen administrative capacity, particularly at
level. Also,
enforcement of environmental legislation needs to be improved.

local

Estonia has made further progress in justice and home affairs including the adoption of
the new Penal Code. Work needs to be continued to ensure implementation of
legislation, to improve internal coordination and to extend cooperation with external
organisations. Particular attention should be paid to strengthening capacity to fight
organised crime including drug trafficking.

In taxation, progress has been made in aligning VAT and excise duty levels. This
needs to be continued. In the field of the customs union, Estonia has introduced a new
Customs Code. However, there is still a need to align and effectively implement tariff
and tariff-related measures. Substantial efforts are still required to develop the
administrative and operational capacity to implement the acquis. Estonia must ensure
interconnectivity of both its tax and customs IT systems with those of the EC.

In external relations, Estonia has made good progress but needs to further align its
legislation. In common foreign and security policy, Estonia has continued to align its
foreign policy with that of the EU and has participated constructively in the framework
of the CFSP.

In financial control further progress has been made in implementing internal financial
controls which now has to be completed. There is also a need to introduce legislation
on external financial control.

Looking across all sectors, it is important to reiterate Estonia’s progress in terms of the
development of its administrative capacity. Estonia has continued to take steps to
improve implementation and effectively enforce the acquis which should be
recognised as often being more difficult, more expensive and time consuming than the
transposition of legislation. As highlighted above, positive steps taken include the
establishment of the unified financial supervisory authority, accreditation of the
SAPARD agency, reorganisation of the fisheries administration, merger of business
support
financial control departments in
ministries. Specific areas to which further attention should be paid include
reorganisation of the market surveillance system and reinforcing the fight against
piracy and counterfeit goods, in preparations for the Common Agricultural Policy and
in raising the quality of food. There is also a need for investment in compliance and
enforcement in the environment sector, preparing for EC structural funds, improving

foundations and the establishment of

45

coordination between law enforcement bodies, and in developing sufficient operational
capacity to implement
the customs acquis. Further efforts are also required in
establishing the necessary administrative capacity to ensure the sound, efficient and
controllable management of EC funds.

Estonia has continued to address aspects of all
the short-term 1999 Accession
Partnership priorities. Estonia is now tackling many aspects of the medium term
priorities including those priorities in the internal market, agriculture, fisheries,
transport, employment and social affairs, environment and justice and home affairs.

Hungary

time,

In its 1997 Opinion, the Commission concluded that Hungary fulfilled the political
criteria. Since that
the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the past
year, further efforts have been made in this direction. Hungary continues to fulfil the
Copenhagen political criteria.

In the area of public administration reform, positive steps were taken with the
introduction of a new legal framework increasing accountability and efficiency of the
administration. In addition, better salaries and career possibilities have made the civil
service more attractive. Efforts also continued in the area of training, which has
become an important element of the career structure.

Within the judiciary,
the overall efficiency of Courts further improved after the
introduction of additional measures in the area of institution building, notably the
modernisation of IT systems, procedures, continued training and new staff. However,
the continued overloading of the Supreme Court reduces its ability to provide guidance
to lower courts and to unify the Courts’ practice. The scarce budgetary resources make
it difficult to implement the remaining elements of the judicial reform.

The fight against corruption remained high on the political agenda and new legislation
on asset declaration and more severe punishment was adopted to address the issue.
Corruption however remains a problem, and the new measures would need to be
implemented quickly to make the fight more effective.

As regards human rights and freedoms, progress can be reported with regard to
asylum, where the situation considerably improved due to faster and better procedures
and more appropriate reception facilities. However, there is a need to address police
behaviour, notably with regard to reported cases of ill-treatment. In the area of public
service media, a solution needs to be found regarding the composition of the
Supervisory Boards of Trustees.

New policy instruments and measures were adopted for the Roma minority. This
process was accompanied by a significant increase of budgetary means for the further
implementation of the medium-term action programme, already adopted by the
Government in 1999. Support measures in 2001 mainly focused on the areas of
education, employment, social policy, legal protection and culture. In this context, it
will be important to enhance efforts to fight against widespread discrimination and to

46

fully implement and enforce the legislation already in place. The Roma minority
should also be given the possibility to participate more actively in public life.

Hungary had implemented the short- and medium-term priorities of the 1999
Accession Partnership priorities which related to the continued implementation of the
medium-term action programme for the Roma and the increase of budgetary means for
this purpose, as well as the further reform of public administration and of the judiciary.

it fully maintains and
Hungary is a functioning market economy. Provided that
implements its reform programme in a consistent manner, it should be able to cope
with the competitive pressure and market forces within the Union in the near term.

The macroeconomic situation continues to be sound, with high GDP growth
underpinned by a rising investment share,
further declining unemployment and
favourable current account development. Railway restructuring continued through a
major bailout and debt restructuring. It has adopted a more appropriate monetary and
exchange rate framework, which is contributing to lower inflation.

However, fiscal policy has become expansionary in 2001. Together with recent non-
transparent fiscal practices, the uncertainty over the further reform of the pension
system and the delays in the reform of the health care system have raised some concern
about the continuation of consolidation and the medium-term sustainability of public
finances. The authorities will need to maintain fiscal discipline to ensure that fiscal
policy supports the new monetary policy framework and the external balance. This
would contribute to lower inflation. The health care reform should be undertaken
swiftly.

Hungary continued to make progress in aligning and implementing the acquis in many
areas. In the reporting period, the country has moved steadily towards achieving a
degree of administrative capacity needed to satisfactorily implement the acquis.

Continued good progress could be noted concerning the internal market. In this area,
the major part of the acquis has been gradually adopted, and basic administrative
structures are in place. As regards the free movement of goods, the alignment process
has continued in respect of harmonised and “new approach” product legislation, and
Hungary has been able to apply for full membership in the European standard bodies
CEN and CENELEC. Work should be continued to ensure a coherent and
comprehensive market surveillance system. With regard to public procurement, efforts
will be needed to achieve full alignment and to ensure transparency and enforcement
of the current rules at all levels of government and in all sectors, in particular in
motorway construction. In the field of services, banking and insurance legislation has
to be working
largely been aligned, and the supervisory authority appears
satisfactorily. Capital movements were almost fully liberalised. The adoption of an
important new law on the fight against money laundering, which aims at, inter alia,
phasing out anonymous savings books in order to meet the recommendations of the
Financial Action Task Force (FATF), is pending at Parliament. In the field of company
law, the Hungarian legislation with regard to industrial and intellectual property rights
is already largely in line with the acquis; Hungary has a relatively good enforcement
record. In competition policy, substantial and procedural rules for state aid control
were further aligned with the acquis. Further efforts are needed to align state aid

47

schemes, in particular the fiscal aid schemes. Both anti-trust and state aid enforcement
bodies are working satisfactorily.

Alignment of VAT and excise duty levels continued in the area of taxation. However,
appropriate IT systems allowing for the exchange of electronic data with the
Community and the Member States have still to be developed. In the area of customs,
in particular, the administrative and operational capacity was strengthened through
training and modernisation of the equipment. Hungary still needs to work on the
compatibility of its IT system with the EC customs computerised systems in order to
ensure interconnectivity by the time of accession. In the area of economic and
monetary union, the independence of the National Bank was consolidated with the
adoption of a new law. With regard to industrial policy and small and medium-sized
enterprises, Hungary made further progress by the adoption and implementation of the
Széchenyi Plan. The issue of the restructuring of the Hungarian steel industry has
progressed in the reporting period.

Significant progress was also made in the area of environment, notably through the
adoption of legislation on Environmental Impact Assessment, on water, waste,
industrial pollution control and risk management, on chemicals and on radiation
protection. The administrative capacity in this sector was also improved, but needs
further strengthening, in particular as regards the clear distribution of tasks between the
ministries involved.

As to agriculture, progress in the reporting period was limited to the food safety and
veterinary sectors, while the inspection arrangements in the veterinary and phyto-
sanitary areas still need to be updated. Further efforts are needed to establish in time
the necessary procedures and structures for Hungary’s participation in the Common
Agricultural Policy. Legal alignment needs to be sustained in the area of transport, and
efforts are needed to carry out the restructuring of the rail sector that is indispensable
to prepare for the implementation of the market access acquis. In addition, appropriate
institutions will have to be set up in order to enforce the acquis adequately. In the
energy sector, only limited progress was made. The necessary legal framework for the
participation of Hungary in the internal energy market still needs to be created. No
progress could be noted with regard to the audio-visual sector.

Considerable progress was made in the area of social policy and employment, notably
through the adoption of the revised Labour Law. As to social dialogue, confidence-
building measures are needed to enhance real dialogue.

In relation to regional policy, Hungary has been making good progress in preparing for
programming Structural Funds and in defining the implementation structures, but
administrative capacity as well as financial and budgetary procedures need to be
further strengthened. Effective inter-ministerial co-ordination mechanisms should also
be set up, and an even wider application of the principle of partnership should be
ensured.

The progress made in legal terms in the telecommunications sector needs to be
followed up by appropriate enforcement measures.

In the area of Justice and Home Affairs, significant progress was achieved through
further alignment with the acquis in the fields of visa policy, migration and asylum.

48

The fight against fraud, corruption, money laundering and organised crime was made
more efficient
legislation and reinforced
institutional structures. As regards external borders, a strategy on the integrated
development of border crossing points was adopted. The Schengen Action Plan
addresses the main issues of the acquis.

through the adoption of additional

In the area of common foreign and security policy, some of the provisions laid down in
the Law on Hungarian minorities living in neighbouring countries apparently conflict
with the prevailing European standard of minority protection. Hungary should
therefore find an agreement with its neighbouring countries with a view to complying
with the recent findings of the Report of the ‘Venice Commission’. Also, as foreseen
in its Article 27 (2), the Law will need to be aligned with the Community acquis at the
latest upon accession, since it is currently not in accordance with the principle of non-
discrimination laid down in the Treaty.

As to financial control, some progress has been made both as regards external audit
and public internal financial control. However, the administrative capacity in general
and the functional independence of the auditors in the internal audit sector should be
further strengthened. As to financial and budgetary provisions, further efforts continue
to be needed in order to meet Community requirements with regard to co-financing
and multi-annual programming.

Hungary made further progress in building up its administrative capacity to apply the
acquis in most areas. However, with regard to the administrative and judicial capacity,
further efforts will have to be made in particular in areas such as state aid control,
audio-visual, market surveillance, transport and agriculture. Further efforts are also
required in establishing the necessary administrative capacity to ensure the sound,
efficient and controllable management of EC funds.

Hungary has continued to address its short-term Accession Partnership priorities with
the exception of certain items in the field of agriculture, audio-visual policy, free
movement of goods and competition policy. In addition, Hungary has implemented a
number of medium-term priorities in the areas of social policy and employment,
environment and Justice and Home Affairs (on asylum matters and visa policy).

Latvia

time,

In its 1997 Opinion, the Commission concluded that Latvia fulfilled the political
criteria. Since that
the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Latvia continues to fulfil the
Copenhagen political criteria.

During the last year, the government remained committed to reforming the Public
Administration and the judiciary, as well as to fighting against corruption. Strategic
documents on Public Administration Reform and Corruption Prevention were adopted,
as was framework legislation on public agencies, and practical measures were pursued
in all three areas. It will now be necessary to maintain the momentum of Public
Administration Reform with the completion of
framework and the
development of a stable civil service, including through the introduction of pay reform.

the legal

49

In parallel, the reform of the judicial system must be carried on, with particular
attention to the legal framework, speeding up and enforcing court decisions, and
addressing the issue of pre-trial detention. Measures to combat corruption, which
remains a source of concern, need to continue with a view to achieving concrete results
on a broad scale.

Further important steps were taken to promote the integration of non-citizens into
Latvian society, notably measures to facilitate the naturalisation procedure and the
adoption of both a more elaborate Society Integration Programme and the legal basis
for the future Social Integration Foundation. The ongoing efforts to support the
integration of non-citizens need to be sustained through the implementation of the
comprehensive Society Integration Programme in all its aspects, including activities to
encourage naturalisation and the expansion of Latvian language training. Latvia should
ensure that the implementation of the Language Law respects the principles of justified
public interest and proportionality, Latvia’s international obligations and the Europe
Agreement.

Latvia has achieved progress towards meeting the short-term priorities of the
Accession Partnership in the areas of the Language Law and language training, as well
as administrative and judicial capacity. Some progress has also been made towards
meeting the medium-term priorities in the areas of further integrating non-citizens,
developing the civil service and improving the capacity of the public administration;
however, these efforts need to continue.

Latvia is a functioning market economy. Provided that it makes further substantial
efforts in maintaining the pace of, and completing, its structural reforms, it should be
able to cope with the competitive pressure and market forces within the Union in the
near term.

Latvia has preserved macroeconomic stability. Further progress has been made on
structural reform, the last steps of the pension reform, a new framework for financial
supervision and a new regulatory authority for public utilities have been introduced.
The legislative framework for a market economy is, for the most part, in place, and
market entry and exit mechanisms continue function in a satisfactory manner. The
financial sector, although small, is gradually consolidating.

However, the authorities must continue a policy of fiscal discipline, within a medium
term fiscal framework, in order to keep the budget deficit and the current account
deficit sustainable over
the medium term. Privatisation of the remaining large
enterprises has advanced more slowly than anticipated and should be completed. The
privatisation of land and the development of the land market should be advanced.
Measures to improve the business environment have been introduced, and this process
should continue, in particular through the removal of the remaining regulatory and
administrative constraints to enterprise development. Unemployment remains at high
levels and labour market flexibility should be enhanced.

50

Latvia has kept up a steady pace in aligning its legislation with the acquis in most
areas. The need to strengthen the administrative capacity to manage and enforce the
acquis has been recognised, even though this process continues to represent
considerable challenges. Efforts during the last year included both re-organisation of
existing structures and the creation of several specialised bodies with a view to
complying with the various requirements of the acquis.

Preparations for the Internal Market advanced further. As concerns movement of
goods, the transposition of European standards accelerated, and the institutions for
accreditation and standardisation have been further strengthened. The new Market
Surveillance Council became operational, but the reform of the market surveillance
system needs to continue. Further legislation was also adopted in the area of public
procurement, but the Public Procurement Surveillance Bureau has not yet been created.
In the area of free movement of persons, framework legislation on mutual recognition
of professional qualifications was adopted. In the area of freedom to provide services,
two new bodies, the Financial and Capital Market Commission and the Stata Data
Inspectorate started to function, even though further improvements of the legislative
basis of the latter will be necessary. Further legislation was also adopted concerning
the movement of capital, in particular on security services and cross-border credit
transfers. In the area of company law, the enforcement of legislation remains a matter
of concern. Delays in the entry into force of the Commercial Code and the effective
protection of intellectual and industrial property rights constitute a serious challenge.
The adoption of legislation related to state aid represents an important step towards
meeting requirements of competition policy; Latvia’s enforcement record in this area
has also developed but efforts to ensure the full implementation of anti-trust and state
aids rules should continue.
In the area of customs, progress was made in alignment
and in upgrading the administrative structures, which were also strengthened for
taxation. For both areas, the development of IT systems so as to allow for the
exchange of electronic data with the Community and its member states needs to be
carried forward.

Encouraging efforts were undertaken in the area of agriculture,
in particular
concerning veterinary and phytosanitary matters, as well as food safety. Achievements
include the adoption of amendments to the Law on Agriculture, the adoption of an
implementation plan for common market organisations, the entry into force of a new
Law on Veterinary Medicine and the restructuring and strengthening of
the
administration. Important challenges still lie ahead, both in completing alignment and
in introducing and upgrading the necessary structures and mechanisms, including the
paying agency, the integrated administration and control system, common market
organisations and inspection arrangements.

Alignment also continued for road and railways transport, and the ongoing efforts to
improve maritime safety have shown some first
results. A significant step in
transposing the social policy and employment acquis was reached with the adoption of
the Labour Code and the Law on Labour Protection. To ensure the proper
implementation of legislation, the administrative capacity should be reinforced, in
particular
further
strengthening of the State Labour Inspectorate. Further alignment was achieved in the
areas of energy and environment. For energy, this needs to continue with special
emphasis on the electricity and gas directives, as well as oil stocks; for the area of
environment, alignment needs to be completed as concerns access to environmental

concerning occupational health and safety,

including the

51

information, waste management and chemicals. Several specialised bodies were set up,
including the Energy Inspectorate,
the Radiation Safety Centre and the Latvian
Environment Agency, and, but further efforts to upgrade the administrative structures
are needed.

The transposition of most of the requirements for telecommunications is still pending.
Considerable progress was made in aligning to the culture and audiovisual acquis. For
justice and home affairs, progress could be noted on data protection, visas and border
control, including also the adoption of a Schengen Action Plan. These efforts need to
be maintained, and alignment
in the areas of migration and asylum completed.
Upgrading the capacity and infrastructure for border management also remains a
priority. The fight against organised crime, drug trafficking, money laundering, fraud
and corruption also needs to be reinforced.

As to regional policy and the co-ordination of structural
the basic
legislation remains to be adopted. Progress is also needed on programming, monitoring
and evaluation capacities. The decision to entrust the Ministry of Finance with the
future responsibility for Structural Funds represents an important step. Although
further legislation on Public Internal Financial Control and external audit remains to
be adopted, some advancements in this area could be noted, in particular as concerns
the strengthening of the administrative structures; this process needs to continue.

instruments,

Preparing its administration for EU membership remains one of the greatest challenges
Latvia faces. With a view to the responsibilities Latvia will have to assume in
managing and enforcing the acquis upon accession, a substantial portion of the
necessary institutions and bodies have been re-structured or created. This process
needs to continue, including the setting up of further new bodies and mechanisms, for
example a Public Procurement Surveillance Bureau, agricultural market intervention
mechanisms and the Guarantee Fund for the Protection of Employees in the Event of
Insolvency of Their Employer. Furthermore, it will be vital to provide all institutions
with sufficient resources to ensure the reliable implementation and enforcement of the
acquis, for example, the new Public Services Regulation Commission, which will have
important acquis-related regulatory responsibilities in the areas of railways, energy and
telecommunications. Continued efforts will also be necessary to ensure sound, efficient
and controllable management of EC funds.

Latvia has made progress on all the short-term Accession Partnership priorities.
Achievements included for example the areas of free movement of goods, social policy
and employment as well as environment, where the process is close to completion. All
the medium-term priorities have been addressed, and progress is well underway for
most of them. Major steps forward could be noted for the free movement of persons,
audiovisual legislation and customs. However, work towards all priorities should
continue, with particular attention on those areas where important legislation still
needs to be adopted, such as energy, telecommunications, and economic and social
cohesion, or the administrative structures strengthened, such as agriculture, fisheries
and the control of EC funds.

52

Lithuania

time,

In its 1997 Opinion, the Commission concluded that Lithuania fulfilled the political
criteria. Since that
the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Lithuania continues to fulfil
the political criteria.

Lithuania has made some progress in reforming the public administration and the
judiciary, where the administrative court system has been re-organised. The legal
system has improved with the entry into force of the new Civil Code. The capacity to
fight corruption has been strengthened. The active role of the ombudsman in the field
of equal opportunities and, more recently, children’s right is noteworthy.

Sustained efforts are required to further advance the process of reform of the public
administration, covering all different sectors of the administration, while creating the
conditions for the necessary continuity and stability of the administration. Adequate
financial resources should be secured, inter-departmental co-ordination must be further
reinforced and training should become more systematic. As regards the judicial
system, the new Law on Courts urgently needs to be adopted. Adequate budgetary
resources and the managerial competencies which are necessary for the administration
of the court system need to be secured. The adoption of the Code of Criminal
Procedure must be speeded up in order to allow for the implementation of the new
Criminal Code.

In the field of the fight against corruption, the efforts made over the past year should
be sustained and reinforced, through the adoption of the National Anti-Corruption
Strategy and its Implementation Programme by the Parliament, and with the adoption
of a new Law on Corruption Prevention. As regards the continued concern over
administrative corruption, further progress in ensuring the transparent application of
administrative procedures is required, and the co-ordination among the agencies
combating corruption should be further strengthened.

It has made limited progress

Lithuania has made progress towards meeting the accession priorities related to the
political criteria.
in implementing the public
administration law and the civil service law. The Government has approved the
National Anti-Corruption Strategy which now needs to be adopted by the Parliament
and implemented. A training programme for judges, covering various aspects of EC
law and acquis enforcement, has started and needs to be continued.

Lithuania is a functioning market economy. Provided that it makes further substantial
efforts to continue with the vigorous implementation of
reform
programme, it should be able to cope with the competitive pressure and market forces
within the Union in the near term.

its structural

Lithuania has preserved macroeconomic stability, improved the fiscal and external
imbalances and reduced state interference. The privatisation of banking, other sectors
and land is nearing completion. New bankruptcy and enterprise restructuring laws
finally came into force.

53

However, unemployment remains high and the structural problems on the labour
markets will have to be addressed. While important laws to restructure and liberalise
the energy market were adopted, further acts need to be adopted and effective
implementation needs to be ensured. Financial intermediation continues to be low and
inefficient. Domestic and foreign investment remains at relatively low levels. The
authorities need to properly implement
the new legal framework for business,
specifically the bankruptcy laws. The planned pension reform must be advanced and
implemented. Fiscal discipline must continue and the sustainability of public finances
in the medium-term must be ensured, also to keep the current account deficit under
control in the context of currency board.

Lithuania has made significant progress in terms of transposition and implementation
in most areas of the acquis. While the degree of progress varies, the gaps are being
reduced and in some areas Lithuania has achieved a high level of alignment. The areas
where considerable efforts are still required are notably those related to the use of EC
funds. Overall, the administrative capacity has improved, although in some areas
where administrative structures have been changed over the past year it has been
challenging to re-build the necessary capacity.

In the field of the internal market, Lithuania has continued to make progress as regards
the free movement of goods in terms of transposition of the acquis and strengthening of
the institutions (especially for standardisation and accreditation). While alignment on
public procurement remains to be completed, there has been progress in implementing
the existing legislation. The administrative capacity of the Public Procurement Office
has improved, although it needs further strengthening. As regards free movement of
persons, the legislation on citizen’s rights is largely in line with the acquis and the
progress made concerning the mutual recognition of professional qualifications needs
to be continued. In the area of freedom to provide services advancement of legislative
alignment has been accompanied by concerted efforts to strengthen administrative
capacity, particularly in the financial services sector. Further progress has taken place
in the area of free movement of capital, where Lithuania had already achieved a high
degree of liberalisation. In the area of competition policy, the quality of the alignment
achieved is reflected in an enforcement record of the Lithuanian Competition Council
which has so far been reasonably successful. As regards company law, whereas good
progress has been made notably in terms of legislative alignment on the protection of
intellectual and industrial property rights, the effective enforcement of this legislation
needs to be considerably improved.

In the area of economic and monetary Union, Lithuania, through the adoption of the
new law on the Central Bank, has achieved a high level of alignment. As regards
taxation, Lithuania has made progress in the alignment with the acquis on indirect
taxation and has improved the administrative capacity. Further modernisation of the IT
systems of the Tax Inspectorate is needed to allow for the interconnection with the EC
systems. Good progress on alignment has taken place in the area of Customs union but
this needs to be accompanied by a considerable strengthening of administrative and
operational capacity, notably as regards the development of IT systems to allow for the
interconnection with the EC customs systems.

As regards agriculture, Lithuania has continued to make progress in reforming its
structures in the agricultural field. However important measures remain to be taken in
particular regarding the further strengthening of the land parcel identification system,

54

the enforcement and practical application of the management mechanisms of the
Common Agricultural Policy and the further preparations for the paying agency.
Lithuania has continued to make progress as regards food safety and the veterinary and
phyto-sanitary sectors but still needs to strengthen further
the implementation
structures. Limited progress has taken place as regards upgrading inspection
arrangements at the external border. As regards fisheries, progress has been made, in
particular in terms of administrative capacity, but significant further work is needed in
terms of preparation for the structural actions and market policy.

In the area of transport, Lithuania has made good progress notably as regards road
transport safety, railways restructuring and civil aviation, including strengthening of
the relevant administrative capacity. However, there are still areas where considerable
further progress is required, notably in terms of inspection capacities. As regards the
energy sector, Lithuania has achieved a reasonable level of alignment, but needs to
sustain its efforts, notably in the area of the Internal Energy Market. Further work is
required also in the field of nuclear energy. Lithuania must confirm and implement its
closure commitments and ensure a high level of nuclear safety.

In the field of social policy, Lithuania has made steady progress in transposition and
implementation of the acquis. However, the new Labour Code and Law on Public
Health still need to be adopted. Implementation and enforcement need to be given
further attention. The social dialogue needs to be reinforced.

Lithuania has made further progress in the field of environment, where most of the
framework legislation is in place. Implementation remains a major challenge,
in
particular
investments by private
enterprises.

in areas which require heavy investments or

In the area of telecommunications, some progress has taken place in terms of
alignment of
the regulatory framework. The regulatory authority has become
operational but needs to be strengthened.

In the field of Justice and Home Affairs,
improvements have been made in
strengthening the external border and addressing shortcomings in inter-agency co-
ordination. These efforts need to be sustained. Lithuania has adopted a Schengen
Action Plan.

In the field of regional policy and co-ordination of structural instruments, important
decisions concerning the institutional structure for the management of Structural Funds
have been recently taken. These decisions need to be implemented urgently through
the strengthening of the administrative capacity, the development of effective inter-
ministerial co-ordination and establishment of the framework for programming and
implementing Community support while respecting the principle of partnership.

While some progress has taken place in the area of financial control, Lithuania needs
urgently to strengthen considerably its capacity to implement and enforce the
legislation on public internal financial control. Lithuania has made some limited
progress in the area of financial and budgetary provisions, where the implementation
of the 2000 Law on budget needs to be followed by further considerable efforts.

55

While continuing to pursue a prudent budgetary policy, Lithuania has made progress
as regards the building of the administrative capacity which is necessary to implement
and enforce the acquis. However, this capacity is still fragile and can easily be reduced
if organisational structures are modified without careful attention. Sustained efforts are
required to keep the administrative capacity acquired and to further develop it.

Overall, Lithuania has made satisfactory progress in meeting the short-term and, to a
In particular
lesser extent, the medium term priorities of the Accession Partnership.
Lithuania has largely met several short-term priorities concerning economic criteria,
internal market, energy and environment. Some short-term priorities, notably in the
field of agriculture, remain to be addressed in full. Lithuania has partially met most of
the medium-term priorities, but further efforts remain to be made in particular as
regards the management and control of EC funds.

Malta

Malta continues to fulfil the Copenhagen political criteria. Further efforts have been
made to prepare the administration for operation within the EU, and the authorities’
record on democratic and human rights remains generally good.

There has been further progress as regards the functioning of the justice system with
the reduction of the backlog of judiciary cases and preliminary steps have been taken
to implement the Refugees Act.

Malta is a functioning market economy. It should be able to cope with competitive
pressure and market forces within the Union.

Macroeconomic developments have been favourable in terms of GDP growth,
unemployment, inflation and a significant reduction of the government deficit. The
government’s medium-term fiscal programme generated a further decrease of the
public deficit. Progress has been made in developing restructuring and privatisation
programmes and initiatives for entrepreneurship.

However, despite the decreasing trend, the fiscal deficit remains too high, contributing
further to a very large current account deficit. Although the current account deficit had
a strong one-off component, it will need to be closely monitored. The authorities need
to put public finances in a sustainable medium-term path. The reform of the social
security system needs to be considered in this perspective. The implementation of the
restructuring and privatisation of public utilities and loss-making public enterprises
remains slow. Further efforts to limit the influence of the state in the economy are
needed. A faster implementation of structural reforms and further liberalisation is
crucial to support the sustainability of external balances and external competitiveness
in a more open environment.

Since the last Regular Report, Malta has continued to progress well in aligning its
legislation with the acquis and strengthening its administrative capacity. However,
progress has been uneven across the different fields.

Considerable further progress has been made in aligning with the acquis on Free
Movement of Goods, especially as regards the framework for the New and Global
Approach. Malta must pursue its efforts in the fields of standardisation, certification

56

and market surveillance and also align its public procurement legislation as regards the
remedies system and bodies governed by public law. As regards free movement of
persons, efforts should be pursued to further align Maltese legislation. Malta has
continued to progress on free movement of services and capital, however further
legislative alignment is needed in particular in the fields of banking and investment
services, data protection as well as money laundering. In the area of company law
Malta is close to full alignment. As regards competition, there has been some progress
with the beginning of the enforcement of the State aid rules, but further efforts are
needed to strengthen the administrative capacity in this area and to ensure that public
undertakings are submitted to competition law in line with the acquis.

Malta has made substantial progress in the area of social policy, mainly as regards
labour legislation and occupational health and safety. However efforts are needed in
the area of equal opportunities and to further strengthen the implementation capacity
on occupational health and safety.

In the field of taxation, considerable progress has been achieved as regards excise tax
and some progress with respect to VAT, although progress is needed as concerns the
scope of exempt transactions and the code of conduct on direct taxation. Despite some
progress in the area of customs, continued efforts are needed to align Maltese customs
legislation with the acquis in this domain, and to develop the administrative capacity to
implement it.

Progress has continued in the areas of telecommunications and culture and audio-
visual policy. Malta has also created a suitable framework for the development of
investments and the restructuring of SMEs.

In the statistics area, the Central Office of Statistics of Malta has continued to progress
and is pursuing its efforts to fully align its methodologies with EC standards. In the
field of financial control, the reengineering of the internal audit system within the
Maltese Government has been completed and the National Audit Office has continued
to be strengthened, providing Malta with an adequate internal and external audit
institutional framework. Malta should further consolidate this progress. Substantial
progress has been achieved in the area of regional policy, where the structures needed
to implement the structural and cohesion funds have been set up and strengthened.

In the field of justice and home affairs, little further legislative progress has been
achieved. Progress has been made in preparing the Maltese administration to the
implementation of the Asylum legislation and the control of borders in accordance
with the Schengen requirements, in particular with the preparation of a Schengen
Action Plan. Efforts are still needed with respect to data protection, immigration, visa
policy and judiciary co-operation.

In the area of agriculture, progress has been limited. Malta still has to adopt most of
the extensive agriculture acquis and to prepare its agriculture for the Common
Agricultural Policy. As regards the environment, the adoption of the Environment
Protection Act together with subsidiary legislation represents a significant progress but
Malta is still far from full alignment and the capacity to enforce the legislation remains
the
very weak. An overall strategy for
environmental acquis must also be developed.

the adoption and implementation of

57

Over the past year, efforts to strengthen Malta’s capacity to implement the acquis have
started in the areas of state aids, regional policy and asylum. Capacity building efforts
have been pursued in many areas, in particular in the areas of free movement of goods,
market surveillance,
taxation, social policy, customs, statistics, border
transport,
to continue to reinforce the
control and financial control.
administrative capacity in these areas, in particular as regards the maritime safety
acquis. In both customs and taxation, particular attention must be paid to the
development of IT systems needed for the exchange of computerised data with the EC.
There is a need to further strengthen the administrative capacity in the field of border
management Malta should also step up its efforts to enforce the intellectual property
rights.

important

Its is

The capacity to enforce the acquis remains a source of particular concern in the area of
the environment and it should be strengthened as a matter of priority. Malta should
also significantly strengthen its administrative capacity in the agriculture field, in
particular it has to upgrade inspection arrangements in the veterinary and phytosanitary
fields.

Most of the Accession Partnership short-term and medium-term priorities have been
partially fulfilled. Progress has been particularly significant
in the areas of free
movement of goods and social policy and also in the areas of taxation and
telecommunication. Further efforts are required in particular with regard to agriculture
and the environment, and in the area of free movement of services.

Poland

In its 1997 Opinion, the Commission concluded that Poland fulfilled the political
criteria. Since that time, the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Poland continues to fulfil
the Copenhagen political criteria.

In the area of public administration progress in the implementation of the 1999 Civil
Service Law continues.
Further efforts are required to speed up the pace of
implementation and ensure that an independent, well trained and motivated civil
service is in place by the time of accession.

Poland has continued to make progress in reforming the judiciary and in reducing the
most pressing bottlenecks. The pace of reform needs to be accelerated and issues
relating to judicial immunity further addressed.

Additional steps have been taken, including the adoption of much needed legislation,
in the fight against corruption, which remains a source of serious concern. The focus
implementing the
must now be on ensuring a coherent approach to corruption,
legislation and above all on developing an administrative and business culture which
can resist corruption.

There has been some progress in establishing the legal
opportunities and further work needs to be undertaken in this regard.

framework for equal

58

A new element which has come to light has been the abuse of custody, which has been
reported in certain cases. This needs to be addressed and the first steps have already
been taken in this respect.

The reinforcement of administrative and judicial capacity, improving the operation of
the judiciary and its training in EC law were Accession Partnership priorities. Work is
underway but further efforts are needed.

Poland is a functioning market economy. Provided that it continues and intensifies its
present reform efforts in a consistent policy environment, it should be able to cope
with the competitive pressure and market forces within the Union, in the near term.

In the first part of the reporting period,
it maintained adequate macroeconomic
stability, and its growth performance was again solid, before growth experienced a
significant slowdown starting in the second half of last year. Privatisation continued
and there has been further restructuring in sensitive sectors such as the coal and power
industries. The legal framework for business has been strengthened with the adoption
of the new bankruptcy law and the new Commercial Code.

The sharp decline in growth reflects in large parts problems in the macroeconomic
policy mix – the co-ordination of
fiscal and monetary policy. Already high
unemployment has risen further and the budget deficit is on a rising path. Fiscal
adjustment must take place in order to contribute to a more suitable policy mix and not
to endanger the medium-term sustainability of public finances. This would also help to
reassure markets and boost business confidence. The authorities should speed up
privatisation and restructuring in some key sectors, such as in some traditional
industries or in agriculture. They should proceed with clear plans to remove obstacles
to market exit and indirect state aid in the form of tax or social security arrears, which
hinder the functioning of market forces. The implementation of bankruptcy procedures
must improve. Further measures need to be taken to improve Poland’s infrastructure
and the response of the labour markets to changing economic conditions.

The reporting period has seen intensive work on the adoption of legislation.
In some
areas there have been notable breakthroughs with regard to the adoption of primary
legislation.
In others, there has been a steady consolidation of the achievements of
2000 through the adoption of the necessary secondary legislation on the basis of the
framework laws adopted the previous year. This process of consolidation and putting
flesh on the legislative bones is vital in terms of the future ability to implement the
acquis and one where efforts will have to be further intensified. The need for further
effort applies even more to the strengthening of the administrative capacity to
implement the acquis. There have been further developments in this regard, but the
divergence between progress in this area and in adopting legislation remains great.

With regard to the internal market, efforts in a number of areas have, following the
earlier adoption of the framework legislation, focused on the secondary legislation
necessary to implement
in particular standards and
certification and state aid. Both of these are areas in which Poland's existing
obligations necessitate implementation prior to the date of accession, and where there
In the case of standards and certification considerable
has been limited progress.
efforts are required to develop the necessary administrative capacity. This is not the
case in competition where the capacity exists but where implementation has been

the acquis in these areas,

59

limited. There has been progress in the elements of food safety which relate to the
internal market through the adoption of the framework law but substantial efforts
remain in adopting secondary legislation and developing the administrative capacity.
The industrial property law has been adopted although short term difficulties remain
with regard to data exclusivity arising out of the new pharmaceutical law. While there
has been some improvement in administrative structures, efforts need to be intensified
with an emphasis on enforcement.

Poland’s track record in the free movement of services and capital continues to be
good and further work has been undertaken to strengthen the administrative capacity in
these domains. There has been considerable legislative progress in the area of public
procurement and some progress in terms of the free movement of persons. Further
efforts will be necessary to ensure the smooth integration of Poland into the internal
market.

In the telecommunications area implementation of the existing legislation has been
gradual. There has been limited progress in further aligning rates of indirect taxation
and further work is required to ensure that the systems are in place to allow for the
exchange of computerised data between the EC and Poland.

With regard to EMU, there have been no legislative developments towards reinforcing
the independence of the National Bank.

There has been some progress in industrial policy. Necessary steps have been taken
to resolve outstanding issues in the steel sector but these will need to be followed
through with vigour.

transformation which is needed,

In the agriculture sector, a coherent strategy for the sector is still lacking. The
substantial
legislation and
structures has not yet taken place in either the agriculture or fisheries sectors. In both
sectors there has been some progress with regard to primary legislation, notably in the
case of veterinary legislation for agriculture. The administrative capacity remains
extremely weak for fisheries and weaknesses have become apparent in agriculture in
particular with regard to the Integrated Administration and Control System (IACS) and
border inspection, both in the veterinary and phyto-sanitary fields.

in terms of policy,

In the environment sector significant progress has been made in terms of primary
legislation. The energy and in particular the transport sectors have seen some progress.
In all three sectors considerable further work is also required to strengthen the
administrative capacity. This is particularly the case for the environment where
regional as well as national structures need to be reinforced.

There have been few developments with regard to regional policy. In the social field,
progress has focused on public health legislation, while enforcement remains a matter
of concern most notably concerning occupational health and safety. Additional efforts
are required in this respect, in particular to strengthen the Labour Inspectorates.
Progress continues in justice and home affairs, especially with regard to the border
guards and border management, where the Customs business strategy previously
adopted is being implemented. Efforts have been made to improve the situation with
regard to law enforcement bodies dealing with the fight against organised crime, in
particular the police services. These need to be intensified. Further efforts are

60

required in the customs area to align with the acquis and to ensure the establishment of
an effective implementation capacity. Significant legislative progress has been noted
in terms of internal financial control, the challenge will now be to put in place the
necessary control mechanisms.

Poland has made further progress in aligning its legislation notably through secondary
legislation. As has previously been noted this effort needs to be matched, in order to
adapt and strengthen the structures required with a view to accession. In a number of
sectors the level of administrative capacity lags behind. Further efforts are also
required in establishing the necessary administrative capacity to ensure the sound,
efficient and controllable management of EC funds.

This disparity between progress in the adoption of legislation and the reinforcement of
administrative capacity is reflected in the extent to which the short-term priorities of
the accession partnership have been addressed. There has been further progress in
meeting the acquis based elements. Continued efforts are needed to set up or
strengthen administrative capacities across the board notably on certification,
agriculture, fisheries and regional policy, the social field, customs and justice and
home affairs.

Poland has started to make progress in meeting all
the medium-term priorities.
Progress has been varied, with the most obvious developments relating to the
legislative elements of the priorities. This will provide the basis for the development
of
Efforts
commenced in this regard will need to be intensified.

the necessary administrative capacity to ensure implementation.

Romania

the country has made considerable progress

In its 1997 Opinion, the Commission concluded that Romania fulfilled the political
criteria. Since then,
in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further positive developments have been noted. Romania continues to fulfil
the Copenhagen political criteria.

The efficiency of the legislature has improved considerably as has the overall
functioning of government. The reform of judicial procedures has continued and
effective implementation of new legislation on public procurement should play an
important role in the fight against corruption – although corruption remains a serious
problem that is largely unresolved. Other particular concerns are the lack of progress in
carrying out a strategic reform of the public administration and the need to further
guarantee the independence of the judiciary.

Significant progress has been made in the field of human rights. Reform of the
childcare system is well under way; homosexuality has been decriminalised; and
important new legislation has been passed regarding the restitution of property and the
treatment of asylum seekers and refugees. The introduction of probation represents an
important reform of the penal system and several initiatives have been taken to address
trafficking of human beings. Future reforms should seek to modernise the Penal Code
and increase the public accountability of police officers as well as ensure the

61

proportionality of their actions. Efforts to improve the actual living conditions in
childcare institutions should continue.

New legislation extending the use of minority languages was approved, and a National
Strategy for Improving the Condition of Roma adopted. Efforts now need to focus on
the implementation of the strategy, with the aim of effectively combating widespread
discrimination, and improving living conditions.

Romania has addressed the short-term Accession Partnership priorities related to the
political criteria by improving the conditions of institutionalised children, making
progress with the reform of childcare policy, developing a national strategy for Roma,
and taking measures to provide support to minority programmes. As regards medium-
term priorities, progress has been made towards meeting the medium-term priority
related to childcare, and initiatives have been taken to increase the Roma’s access to
education. However, important actions are still needed in other areas: the Roma
strategy has not yet been implemented; anti-discrimination legislation has been
adopted but it is not yet operational; and the demilitarisation of the police has not yet
started.

Romania has made progress towards establishing a functioning market economy and
although it would not, in the medium term, be able to cope with competitive pressure
and market forces within the Union, it has taken measures that would allow to develop
its future capacity, provided that it keeps to the engaged economic reform path.

Romania has made progress towards macroeconomic stabilisation: growth has
resumed and exports have increased. The government is acutely aware of the need to
implement the programme agreed with the IMF and the Pre-accession Economic
Programme. Structural reforms have been re-launched, most notably in the area of
privatisation and energy price adjustments. The recent privatisations demonstrate a
new commitment towards the establishment of a functioning market economy.

environment,

However,
there are still serious economic imbalances with high inflation and a
widening current account deficit, in a difficult social environment. The still fragile
framework and the poor
the uncertain legal
macroeconomic
administrative capacity hinder the development of the private sector. Large parts of the
enterprise sector have yet to start restructuring or are still in the early stages of the
process. Romania’s reform agenda remains considerable. The authorities should give
priority to securing macroeconomic stability by fighting inflation and halting the
deterioration of the external account. The full implementation of the programme
agreed with the IMF, focusing on reversing the causes of inflation, would permit a
gradual shifting of monetary and exchange rate policy towards inflation reduction.
Enterprises’ financial discipline should be established by halting the accumulation of
inter-enterprise arrears and the provision of state support to inefficient ventures. The
removal of the burden that these practices put on fiscal policy would allow for a better
co-ordination between fiscal and monetary policy. A further priority is to accompany
enterprise restructuring and privatisation with the establishment of sound legal and
institutional foundations of the functioning market economy.

Romania has continued to make progress with the adoption of the acquis. However,
advances in legal transposition have not always been matched by improvements in
administrative capacity.

62

Romania’s progress with internal market legislation has been mixed. Other than the
adoption of new legislation on public procurement, little progress has been made with
the free movement of goods and the framework legislation for the New and Global
Approach has still not been adopted.
The administrative infrastructure for
standardisation, certification and market surveillance should be reinforced. Only
limited progress has been made in aligning with the acquis on free movement of
persons, and while progress has been made with insurance and banking supervision
there has been no progress with transposing the acquis on financial securities markets.
Legislation on the protection of personal data remains inadequate. New Romanian
legislation on money laundering is a welcome development but a comprehensive
system of exchange controls and other restrictions on capital movements still exists.
The supervision of financial services should also be improved. Further progress was
made in aligning with the company law and competition policy acquis – sectors where
Romania has already achieved a high degree of transposition.
the
supervision of intellectual property rights should be further developed as should the
capacity to enforce state aid and anti-trust rules.

This said,

In the field of taxation, Romania has made some progress particularly with regard to
excise duties. However, further alignment is still needed in the area of VAT and much
remains to be done to modernise the tax administration – including the development of
electronic data exchanges with the Community and Member States. Romania’s
adoption of an industrial strategy document is a welcome development and while
some important progress has been made in privatisation considerable further efforts are
still needed. Good progress has been made in promoting the SME sector and a series of
measures have been taken to improve the business environment.

While Romania has made progress in aligning with several aspects of the agricultural
acquis, restructuring of the sector has barely begun. The overall administrative
capacity of the Ministry of Agriculture remains weak and Romania still needs to
the management mechanisms of the Common
develop the ability to implement
Agricultural Policy. Inspection arrangements in the veterinary and phytosanitary fields
also need to be upgraded.
The newly adopted fisheries law brings the Romanian
legislative framework largely in line with the acquis. However, efforts are still needed
to strengthen administrative structures.

can be noted. While

there has been limited progress

Romania has continued to make good progress in harmonising its transport legislation.
Policy related to the energy sector has been inconsistent and therefore only limited
in the
progress
telecommunications sector in terms of transposition, extensive preparatory work has
been carried out that should enable future reforms. Romania has made advances in
aligning itself with the environmental acquis but does not have the administrative
capacity to effectively enforce the newly adopted legislation and insufficient financial
resources are allocated to the sector. Romania has made progress in aligning with
several aspects of the consumer protection acquis but attention will be required to
ensure effective enforcement. Romania has only made limited progress in the audio-
visual sector.

Social policy is a priority for the government, and while progress has been made
further alignment with the acquis is necessary, as are improvements in administrative
capacity (in particular
in the area of occupational health and safety and in
strengthening labour inspectorates). Some progress was made in the area of regional

63

policy during the reporting period - mainly in terms of improving institutional
arrangements. However, the new structures remain fragile and considerable work is
still necessary as regards programming, monitoring and evaluation and developing the
capacity to manage and control public funds.

In the field of justice and home affairs, significant progress has been made in the fields
of visa policy, border control and migration. However, there is still a need to adopt
legislation in some important areas such as data protection and to further upgrade the
capacity and infrastructure for border management.

Romania has increasingly resorted to trade policies that are incompatible with its
international obligations and which represent a move away from the acquis. At the
same time, the management of the OSCE Presidency demonstrated Romania’s capacity
to assume its responsibilities international leadership role in the field of foreign affairs.
Romania has continued to make progress on harmonisation with the customs acquis
although the operational capacity of the customs service should be improved and
efforts should be intensified to develop systems that will allow the exchange of
computerised data between the EC and Romania.

Despite some positive developments, the Romanian authorities have not yet succeeded
in elaborating a comprehensive policy framework for internal financial control over
public funds, and further efforts are needed to strengthen administrative capacity in
this area. Romania has made some progress in reforming national budgetary
procedures but further efforts are required both in relation to the national budget and
own resources.

The overall capacity of the public administration to implement the acquis remains
limited and represents a major constraint on Romania’s accession preparations. While
certain parts of the administration are able to function effectively there are many
important sectors where the weakness of the administration is a serious cause for
concern. These concerns extend beyond adoption of the acquis and also apply to the
management of EC funds. There has been no significant progress in developing
administrative capacity although this issue is beginning to be addressed by the
government.

With regard to meeting short-term Accession Partnership priorities, Romania has met
the priorities related to transport. While progress has been made in the areas of
taxation, customs, and justice and home affairs none of the priorities identified for
these sectors have yet been fully met. Some, limited progress has been made in
addressing the priorities related to the internal market, agriculture, environment,
employment and social affairs and the reinforcement of administrative and judicial
capacity. Romania has started to address some medium-term Accession Partnership
priorities.
In transport and fisheries Romania is close to meeting the medium-term
priorities. However, no substantial progress has been made in the cases of agriculture,
environment, and employment.

64

Slovakia

In its 1999 Regular Report, the Commission concluded that Slovakia fulfilled the
political criteria. Since that time, the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Slovakia continues to fulfil
the Copenhagen political criteria.

Significant progress was achieved with regard to the structure and functioning of the
administration. The legal framework for the decentralisation of public administration
was adopted, and so was the civil service law. Due implementation of the legislation is
now required to ensure that the public administration adequately fulfils the key role it
has to play in a functioning democracy based on the rule of law and in support of the
accession process.

Important steps were taken to strengthen the independence of the judiciary. In
particular, the constitutional amendment abolished the four-year probationary period
for judges and provided for setting up a Judicial Council. This amendment now needs
to be implemented by primary legislation and at a practical level to guarantee the
judiciary’s professional impartiality and political neutrality.

Further progress can be noticed in the fight against corruption, notably in translating
and implementing the government policy into concrete actions and transposing
international obligations. Corruption, however, remains a serious cause for concern. In
order to continue improving the fight against corruption Slovakia should rigorously
carry on the implementation of the action plans, strictly enforce existing legislation and
complete planned legislation as well as strengthen administrative capacities and co-
ordination among the bodies involved.

The constitutional reform also created the basis for the strengthening of Slovakia's
institutional structure in the field of human rights. However, there is a need to address
police behaviour, notably with regard to reported cases of ill-treatment

Significant efforts in further developing and putting into practice approaches to protect
minority rights were taken in the reference period, notably in implementing relevant
Government strategies. Positive steps were achieved towards enhancing the use and
protection of minority languages. As regards the Roma minority, the implementation
of the Roma strategy, adopted subsequently in 1999 and 2000, should be further
enhanced and the appropriate financial means at national and local level should be
made available. In this context it will be important to improve efforts to fight against
widespread discrimination.

term priorities of

the 1999 Accession Partnership related to the
The short
modernisation and decentralisation of
the public administration were fulfilled.
Important steps were taken in strengthening the independence of the judiciary, which
constituted a short term priority, as well. Despite further positive measures, tangible
improvement of the situation of the Roma minority, another short term priority, was
achieved only to a limited extent. So were the medium term priorities for the political
criteria of the 1999 Accession Partnership, calling for continued implementation of

65

minority language legislation and strengthening policies and budgetary means towards
the Roma minority.

Slovakia is a functioning market economy. Provided that it makes further substantial
efforts in medium term fiscal consolidation and in developing and fully implementing
the announced structural reform programme,
it should be able to cope with the
competitive pressure and market forces within the Union in the near term.

Overall, macroeconomic stability has been maintained. There has been further good
progress in bank privatisation, which is nearing completion. Further progress was also
made in restructuring and towards privatisation of the remaining state-owned utilities
and transport enterprises. Further progress was made in setting the framework for
private sector development.

However, the substantial widening in the current account deficit will require a more
prudent fiscal policy stance. Unemployment is high and rising. Some parts of the legal
and institutional framework for enterprise development are in need of
further
improvements and effective implementation. Financial sector supervision has to be
further strengthened. Steps must be taken to ensure the medium-term sustainability of
targets, by
public finances. The authorities need to comply with their
implementing medium-term public expenditure reforms, in particular in the health,
pension, and subsidy areas. Macroeconomic stabilisation will need to be consolidated
by a continued prudent combination of fiscal and monetary policy. Further progress in
privatisation, in the administrative and legal framework and in financial sector reforms
will set the stage for future private sector development. Growth in employment will
further require fundamental reforms of the labour market.

fiscal

Slovakia has continued to make good progress in legislative alignment with the acquis.
As last year, progress has not been uniform across chapters. Significant progress has
been achieved in areas such as free movement of goods, company law, social policy
and employment as well as customs union. Structural weaknesses have persisted in a
number of sectors, namely in agriculture as well as regional policy and co-ordination
of structural
instruments. While further progress in strengthening administrative
capacities was made, reinforced and sustained efforts are needed across all sectors.

Concerning internal market legislation, further progress has been achieved, notably in
free movement of goods and free movement of services. In the area of free movement of
persons, progress continues to be limited. In company law, with the exception of
trademarks, significant legislative progress has been made, especially through further
alignment with the company law directives and adoption of a new patent
law.
Appropriate strengthening of administrative and judicial bodies involved in all areas of
intellectual and industrial property rights should be continued. In competition policy
the amendment to the Act on State Aid has brought the legislative framework largely
in line with the acquis. In contrast to the anti-trust area, however, the enforcement
record in the field of state aid remains rather sketchy and non-transparent.
Administrative capacities in the internal market domain need reinforcing, in particular
as regards the supervision of financial services.

66

As regards agriculture, overall steps both in aligning and implementing the acquis
have been limited with the exception of veterinary issues, where significant progress
was made. Efforts should be reinforced to establish an Integrated Administration and
Control System, the adoption of specific market regulations should be accelerated,
in the phytosanitary sector speeded up and administrative capacities,
alignment
including border inspection posts, strengthened.

Further legislative alignment was achieved in the field of transport, notably in relation
to land transport. Substantial alignment across all sectors and reinforcement of the
administrative capacities,
the necessary
structures is, however, needed.

including completing the setting-up of

Limited legislative alignment of indirect and direct taxation has been accomplished
and additional efforts are required for adjusting VAT and excise duty rate levels. The
reform of the Slovak tax administration has moved forwards, the measures for its
modernisation should be vigorously pursued. The IT tax information systems allowing
for the exchange of electronic data with the EC and its Member States should be
developed.

Further positive steps have been taken in the energy sector with the decision to
substantially open the domestic electricity market and the launching of
the
privatisation of major energy companies. As regards nuclear energy, Slovakia should
implement its decommissioning commitments, and continue to ensure a high level of
nuclear safety. In industrial policy, Slovakia kept its reform momentum by continuing
privatisation, particularly in banking privatisation, and enterprise restructuring. With
the exception of postal services, Slovakia has reached an overall high degree of
alignment in the area of telecommunications and information technologies. Emphasis
should now be put on the effective implementation and strengthening of administrative
capacities. Legislative alignment in the field of consumers protection, notably on non-
safety related issues, has continued. Efforts to ensure adequate co-ordination and
strengthening of those bodies involved in market surveillance need to be continued.

In the field of social policy and employment, considerable progress has been achieved
notably in further aligning with the acquis in the area of labour law and equal
treatment for women and men. The focus needs to move now to the implementation,
with a particular emphasis on the enforcement of health and safety at work.

Progress in the field of regional policy and co-ordination of structural instruments has
continued to be limited. The lack of sufficient and qualified staff in the relevant
ministries and bodies involved remains a matter of concern.

Concerning environment, legislative alignment – with the exception of water quality,
nature protection and industrial pollution and risk management, has well advanced
although substantial alignment is still lying ahead. The measures to strengthen the
administrative capacities should be rigorously pursued.

In the area of co-operation in the field of justice and home affairs, further progress in
terms of alignment and administrative capacities has been achieved notably with
regard to external border control by, inter alia, adopting a Schengen Action Plan, as
well as in the fields of visa policy and police co-operation. Considerable progress in all

67

relevant areas is needed, including reinforced efforts for strengthening administrative
capacities.

Considerable steps were taken in the area of customs union with the entering into force
of the new Customs Act and the Act on State administration bodies in the field of
customs. IT systems allowing for the exchange of computerised data between the EC
and Slovakia should be developed. Significant progress can be reported in the area of
financial control, where the basic legislative framework for public internal financial
control and external audit is now in place. Particular emphasis should be put on the
area of control over structural action expenditure and protection of EC financial
interests.

transport policy,

As regards administrative capacities, while good progress was made in a limited
number of domains in strengthening the relevant institutions, overall progress in this
regard has been limited. Whereas considerable progress has been achieved in the areas
of free movement of capital and customs union, little progress can be reported notably
in agriculture,
regional policy and co-ordination of structural
instruments as well as co-operation in the fields of justice and home affairs. As regards
enforcement, more efforts should be invested particularly in the areas of company law,
competition policy, as well as social policy and employment. The positive momentum
reached in strengthening administrative capacities in the areas of taxation, energy and
environment should be maintained. The institutions and mechanisms related to the
efficient and controllable management of EC funds needs to be considerably
strengthened.

The decision of the Government to increase the number of staff dealing with EU
integration by approximately 1 200 persons by 2002 is a welcome step necessary to
strengthen the overall still weak administrative capacities.

The short term priorities of the 1999 Accession Partnership have been met to a large
extent in the field of internal market and social policy and employment; they have been
partially met in the area of energy as well as co-operation in the fields of justice and
home affairs and only to a limited extent in agriculture and environment. All medium
term priorities have been partially met, with the exception of transport policy, regional
policy and co-ordination of structural instruments as well as environment, where
priorities were fulfilled only to a limited extent.

Slovenia

time,

In its 1997 Opinion, the Commission concluded that Slovenia fulfilled the political
criteria. Since that
the country has made considerable progress in further
consolidating and deepening the stability of its institutions guaranteeing democracy,
the rule of law, human rights and respect for and protection of minorities. Over the
past year, further efforts have been made in this direction. Slovenia continues to fulfil
the Copenhagen political criteria.

Slovenia has made good progress in judicial reform through adoption of new
legislation and implementation of measures introduced partially already in the previous
year aiming at abolishing the backlog of pending court cases As a result, the number of
pending court cases has been reduced significantly.

68

Overall public administration reform has progressed over the previous year. However,
the Laws on Civil Servants and Public Agencies still remain to be adopted. They are an
important part of the framework legislation for public administration reform providing
for the independence of the civil service and status of public agencies. The efforts in
this area should be continued.

There is a need to address police behaviour notably with regard to certain reported
cases of ill-treatment.

The Accession Partnership of 1999 defines the acceleration of public administration
reform as a short-term priority, which can be considered as having been met. However,
identified as a medium term priority,
adoption of legislation on public agencies,
remains to be implemented. Slovenia has progressed well with fulfilling the medium
term priority concerning improvement of the functioning of the judicial system.
Continuation of efforts to resolve outstanding border issues with Croatia is defined as a
medium-term priority and has now been fulfilled.

Slovenia is a functioning market economy. Provided that it implements the remaining
reforms to increase competition in domestic markets, it should be able to cope with the
competitive pressure and market forces within the Union in the near term.

Macroeconomic developments have continued to be generally favourable, with a
steady GDP growth, low unemployment, and a reduction in the current account deficit.
Remaining restrictions to capital movements are progressively being removed, in the
context of a policy of managed exchange rates.

inflation, linked to widespread indexation in the Slovene
However, the persistent
economy and to the monetary and exchange rate policy framework, remains a concern.
Labour markets are not sufficiently flexible. The functioning of markets could be
improved by decreasing the state’s influence in certain areas of the economy. The
authorities should now progress with the implementation of the announced structural
reforms and privatisation in a number of essential sectors such as banking and
insurance. This would help to attract more foreign investors and provide a better
microeconomic basis for a sustained growth performance in the medium term. These
structural measures will free up monetary and exchange policy to focus on price
stability instead of maintaining external competitiveness. The ongoing financial sector
reform will also provide a more robust environment for completing the liberalisation of
capital movements.

Since the last Regular Report, Slovenia has made good overall progress in
transposition and implementation of the acquis. It has made significant progress in the
areas of company law, agriculture, transport, energy, culture and audio visual and
telecommunications However, only limited progress has been made in other areas,
notably on regional policy, free movement of persons, social policy and employment,
and consumer and health protection. It has continued to strengthen the administrative
capacity, especially in the areas of free movement of goods, telecommunications,
culture and audio-visual, and internal financial control.

in adopting and
Slovenia has made good progress since the last Regular Report
implementing legislation in key areas of the internal market acquis. Substantial
legislative progress has been made in company law and the legislative framework is

69

now nearly complete. Slovenia should now focus on implementing the new provisions
on intellectual and industrial property rights adequately. Good progress has also been
made in completing the legislative framework for free movement of goods, and
attention should now be given to strengthening the institutional set-up, including the
newly created Standardisation Institute and the market surveillance systems. In the
reporting period, Slovenia made substantial progress in removing restrictions to free
movement of capital, but this process remains to be completed according to the
timetable set by the government. Progress has also been achieved in freedom to
provide services and alignment is advanced. The supervisory institutions in this area
should be further strengthened. Although few new developments occurred in the area
of competition policy, Slovenia’s preparations in this area are already advanced and it
should continue to focus on establishing a good track record of enforcement. Little
progress has been made in the reporting period in the area of free movement of persons
and Slovenia should speed up alignment especially on mutual
recognition of
professional qualifications and on citizen’s rights.

Concerning taxation, Slovenia has continued to made steady progress and has now met
its commitment on transformation of the duty free shops. It is important that Slovenia
develops its IT systems to allow for the exchange of electronic data with the
Community and its Member States.

Very good progress has been made in the agriculture area, notably by adoption of the
new veterinary, plant health and plant protection acts. Priorities should now include
strengthening of
the administrative capacity, completion of CAP management
mechanisms, and setting up of adequate phyto-sanitary and veterinary inspections .

Slovenia has made significant progress in legislative alignment in transport though
adoption of the key aviation, maritime and road transport laws. It has continued to
make progress in preparing for accession in the energy sector, especially by opening
up the domestic electricity market.

Slovenia has made very little progress since the last Regular Report in preparing for
accession in the area of regional policy. The preparations for implementation of the
structural funds should be speeded up as a priority. Progress has also been limited in
the reporting period in the area of employment and social affairs where adoption of the
Employment Relations act has been delayed further.

The level of alignment in the environment sector is already high and efforts should
now be focussed on adoption of the remaining key legislation in the areas of water
quality, Genetically Modified Organisms (GMOs), and radiation protection. Little
progress has been made in the reporting period in the area of consumer protection and
substantial efforts are required especially in the area of non-safety related measures.

Slovenia has taken a substantial step forward towards completing legislative alignment
and ensuring the implementation of the acquis in the telecommunications, culture and
audio visual sectors by adopting key legislation and setting up the Agency for
Telecommunications and Broadcasting.

70

Some progress has been made in the field of justice and home affairs, notably though
the adoption of the Schengen Action Plan and reinforcement of staff for processing
asylum applications. Slovenia should continue its efforts to improve its capacity and
infrastructure for border control, create adequate facilities for asylum seekers separate
from the centre for illegal immigrants and adopt the remaining secondary legislation.

Slovenia has already reached a good level of alignment in the customs area and should
its
now focus on completing legislative approximation and strengthening of
administration through the on-going reform, including development of IT systems so
as to allow for the exchange of computerised data between the EC and Slovenia.

through
Good progress has been made in the area of external financial control
adoption of the new law on the Court of Audit and preparations are already advanced
in this area. Attention should now be given to strengthening public internal financial
control.

Slovenia’s administrative capacity for the implementation of the acquis has been
enhanced. Since the last Regular Report, significant progress has been made with the
establishment of the implementing, supervisory, regulatory institutions in the areas of
free movement of goods, telecommunications, culture and audio-visual. Most of the
institutions necessary for the implementation of the acquis are now in place and
attention should now be focussed on providing them sufficient resources to carry out
their work. Administrative capacity needs to be developed in the area of management
of the structural funds. An independent supervisory agency still remains to be
effectively established for data protection. Further efforts are also required in
establishing the necessary administrative capacity to ensure sound, efficient and
controllable management of EC funds.

internal market, agriculture,

Slovenia has met a large part of the short-term Accession Partnership priorities in the
areas of economic criteria,
transport, environment,
In the area of
employment and social affairs, and justice and home affairs.
reinforcement of the administrative and judicial capacity (including the management
and control of EC funds) the priorities have been met partially. It should now focus
especially on the remaining short term priorities, especially related to control of EC
funds. Slovenia has also made good progress in implementing a number of the medium
term priorities. It should speed up its preparations in the area of economic and social
cohesion and ensure fulfilment of priorities especially in the areas of the economic
criteria, internal market, agriculture, and employment and social affairs.

Turkey

The constitutional amendments adopted by the Turkish Parliament on 3 October 2001
are a significant step towards strengthening guarantees in the field of human rights and
fundamental freedoms and limiting capital punishment. The amendments narrow the
grounds for limiting such fundamental freedoms as the freedom of expression and
dissemination of thought, freedom of the press and freedom of association. Attention
has now turned to the effective implementation of these important changes. The
Turkish Government is finalising a package of new draft legislation that is aimed at
implementing a number of constitutional amendments, in particular with respect to
freedom of expression and thought. It should facilitate progress towards satisfying the
Accession Partnership priorities.

71

Despite these changes, a number of restrictions on the exercise of fundamental
freedoms have remained. The extent to which individuals in Turkey will enjoy real
improvement in the exercise of fundamental freedoms will depend on the details of
implementing legislation, and the practical application of the law. It is encouraging
that a general principle of proportionality has been introduced and that the stated
general aim of the reform is effectively to bring to the forefront respect for human
rights and the rule of law.

The moratorium on the death penalty has been maintained. The revised Article 38 of
the Constitution limits the death penalty to cases of terrorist crimes and in times of war
or imminent threat of war. The exception for terrorist crimes is not in line with
Protocol 6 to the European Convention on Human Rights (ECHR) (which does not
permit any reservations), whereas the exception in the case of war crimes is permitted
under Protocol 6. Legislative changes to the Penal Code will be needed to put this
revised Article into effect. This will permit an assessment of whether Turkey is in a
position to sign and ratify Protocol N° 6 to the ECHR.

The reforms related to economic, social and cultural rights contain a number of
positive elements. The provisions forbidding the use of languages prohibited by law, in
Articles 26 and 28, have now been abolished. This could pave the way for the use of
languages other than Turkish and is a positive development. Existing restrictive
legislation and practices will need to be modified in order to implement
this
constitutional reform, as the Turkish authorities have recognised. There has been no
improvement in the real enjoyment of cultural rights for all Turks, irrespective of their
ethnic origin.

A number of substantial prison reforms have been adopted. Turkey is encouraged to
ensure that these reforms are fully implemented. The disproportionate use of force in
breaking up prison protests is to be regretted. The continuing loss of life as a result of
hunger strikes is unacceptable from a humanitarian point of view. Irrespective of the
political motives of those involved, efforts should be stepped up to prevent further
deaths. Free debate on these issues should be allowed.

Reform of the judicial system has begun. The independence of the judiciary, the
powers of State Security Courts and military courts and compliance with rulings of the
European Court of Human Rights remain matters of concern.

A number of initiatives have been taken to increase the awareness of law enforcement
officers and judicial personnel of human rights issues, but it is too early to assess the
practical impact of these.

initiatives to foster more transparency in Turkey's public life,
Despite several
corruption remains a serious problem. The recent signature of important Council of
Europe Conventions on corruption and on money laundering is a positive
development.

Further action needs to be taken to improve the economic situation in the South East to
reduce regional disparities and to enhance economic, social and cultural opportunities
for all citizens. The state of emergency still applies to four provinces in this part of the
country.

72

in Turkey, but a number of
The basic features of a democratic system exist
fundamental issues, such as civilian control over the military, remain to be effectively
addressed.

Despite a number of constitutional, legislative and administrative changes, the actual
human rights situation as it affects individuals in Turkey needs improvement.

Though it is beginning to make progress in some areas, Turkey does not yet meet the
Copenhagen political criteria and is therefore encouraged to intensify and accelerate
the process of reform to ensure that human rights and fundamental freedoms are fully
protected in law and practice, for all citizens, throughout the country.

Fuller use should be made of the enhanced political dialogue to further stimulate
progress on key issues which are priorities of the Accession Partnerships, such as
human rights, Cyprus and the peaceful settlement of border disputes.

Given Ankara’s support for the decision of Mr. Denktash to withdraw from the UN
proximity talks and to decline the UN Secretary General’s invitation to talks in New
York, the support Turkey has expressed in the political dialogue for the UNSG’sefforts
to find a comprehensive solution of the Cyprus problem should now be followed by
concrete steps by Turkey to facilitate a solution.

Confronted with two financial crises, Turkey has been unable to make further progress
towards achieving a functioning market economy. Considerable parts of its economy
are, however, already competing in the EU market, under the framework of the
customs union with the EC.

The two financial crises brought to a halt economy recovery and put an end to the
preceding economic stabilisation programme. Macroeconomic stability has been
shaken, and many macroeconomic imbalances have reappeared. Turkey has adopted,
and has been implementing, an ambitious economic reform programme that addresses
better than its predecessor the risks and vulnerabilities of the domestic financial sector
and seeks to reduce government intervention in many areas of the economy. These
problems were at the heart of the crises.

Priority has to be given to establishing short-term macroeconomic stability, based on
disinflation. However, the authorities must also continue to focus on establishing a
solid basis for sustainable market-based economic development in the medium term.
Significant restructuring is still needed in various sectors, such as banking, agriculture
and in state enterprises, in order to guarantee the medium-term competitiveness of the
in a
economy as a whole. They will need to redefine their budgetary priorities,
in
medium-term perspective,
education, health, social services and public infrastructure across the country.

in order to provide a sufficient

level of investment

Turkey's alignment with the acquis is most advanced in the areas covered by the
Customs Union. Since the last Regular Report, further alignment has taken place in
these areas. In addition, significant legislation was adopted in the field of banking
including on the Central Bank, and in sectors such as telecommunications, energy and
agriculture. However, in some cases newly adopted legislation departed considerably
from the acquis (cosmetics, audio-visual policy, social policy). Major discrepancies

73

between the acquis and Turkish legislation have remained. Progress in strengthening
administrative capacity to implement the acquis has been limited.

Regarding the internal market, various pieces of legislation on free movement of goods
have been adopted including standards. The adoption of a framework for technical
legislation is particularly significant. Further steps need to be taken in a number of
areas. The existing regime of public procurement is not in line with the acquis. No
progress can be reported in the field of free movement of persons. In the field of free
movement of capital important restrictions on foreign investment in various sectors
have remained. Major efforts are required to further align legislation in the field of
non-financial services. The implementation of legislation in the field of money
laundering should be given greater attention. In the area of company law, no progress
has been made in establishing a new commercial code. Important steps have been
taken to align legislation on intellectual property rights with the acquis. Specialised
courts have been set up in the field of intellectual property protection, but
the
enforcement capacity in this field needs to be strengthened. In the field of competition
policy, the application of anti-trust provisions remains satisfactory. Turkey's state aid
policy is not compatible with the acquis. Despite a new law, the situation with respect
to monopoly adjustment on alcohol and tobacco remains a matter of concern.

Turkey has started a substantial reform in the agricultural sector. However, some of
the basic features of the new Turkish direct income policy differ from the current
approach in the EU. Turkey has not established a number of basic mechanisms, such as
a nation wide land register. It should focus on the transposition, implementation and
enforcement of EC legislation in the veterinary and phytosanitary sectors.

On fisheries, no progress has been made in the alignment with the Common Fisheries
Policy. A modernised fleet registration system needs to be established.

As regards transport policy, Turkey should step up the legislative work necessary to
adopt the Community transport acquis. The administrative capacity to apply and
implement the relevant legislation in all sectors should be improved.

On taxation, significant progress is required in particular on approximation of the rates
applied in the VAT system.

In most fields, Turkey's statistical infrastructure is still very different from that of the
EU. No concrete progress can be reported.

Steps have been taken in the field of Social Policy and Employment but not all
conform with the acquis. The new law on the Economic and Social Council, for
fails to create the conditions for a genuine social dialogue. Turkish
example,
legislation remains very different from that of the EC. As regards energy, substantial
progress has been achieved in the field of electricity and gas sectors. The two major
laws adopted this year are important steps in preparing Turkey for the internal energy
market.

In the telecommunications sector, the new regulatory framework should be brought in
to line with the acquis on matters such as universal services and data protection.

74

As regards regional policy, Turkey has made no progress and considerable attention
needs to be paid to prepare the implementation of structural policies.

In the environmental field, further new legislation needs to be adopted including an
important framework law, which is pending before parliament.

In the field of justice and home affairs, Turkey recently signed three important
conventions of the Council of Europe on money laundering and the fight against
corruption. A bilateral agreement with Greece to combat crime has entered into force.
Turkey has taken initiatives to align with the EU's visa policy and to conclude
readmission agreements in the field of migration. Administrative capacity should
strengthened in the field of border controls and the fight against illegal immigration.

In customs, there is almost full alignment.

On financial control, budgetary and financial control mechanisms inside the Turkish
Government should be improved.

Administrative capacity in different areas needs to be strengthened to ensure that the
acquis is implemented and enforced effectively. A significant reform at all levels of
the administration is required. In some cases, this will entail the establishment of new
structures, for example in the field of state aid and regional development. In some
areas, new regulatory bodies have been set up. Their autonomy should be assured
while at the same time sufficient staff and financial resources need to be made
available.

The Accession Partnership with Turkey was adopted in March 2001 and Turkey has
made substantial preparatory efforts for its implementation. Turkey gained greater
understanding of the acquis and the government has started an intensive process of
preparation of new legislation. In the areas of free movement of goods, intellectual
property protection, energy, telecom and customs, the measures taken have partially
met the short term Accession Partnership priorities. Considerable further efforts are
needed to meet the short term Accession Partnership priorities related to the acquis.

75

Annex 2: Candidate countries: main statistical indicators (2000)

Area Population

Density

GDP in P.P.S. (Purchasing Power Standards)(1) (2)

1000
km²

Million
inhabitant
s

Inhab./k
m²

Billion

€

P.P.S.

€
/ inhab. P.P.S.

€
/ inhab. %
EU average

GDP %
Change
%

Agriculture

% gross
added
value

%
employment

Bulgaria
Cyprus
Czech Rep.
Estonia
Hungary
Latvia
Lithuania
Malta
Poland
Romania
Slovakia
Slovenia
Turkey

111
9
79
45
93
65
65
0,3
313
238
49
20
775

8,2
0,8
10,3
1,4
10,0
2,4
3,7
0,4
38,6
22,4
5,4
2,0
65,3

74
82
130
32
108
37
57
1240
124
94
110
98
84

44,3
12,4
135,1
12,1
117,0
15,6
24,3
4,6
337,9
135,4
58,3
32,0
433,3

5400
18500
13500
8500
11700
6600
6600
11900
8700
6000
10800
16100
6400

24
83
60
38
52
29
29
53
39
27
48
72
29

5,8
4,8
2,9
6,9
5,2
6,6
3,3
5,0
4,0
1,6
2,2
4,6
7,2

14,5
3,8
3,9
6,3
4,8
4,5
7,6
2,3
3,3
12,6
4,5
3,2
14,6

n.a.
9,2
5,1
7,4
6,5
13,5
19,6
1,9
18,8
42,8
6,7
9,9
34,9

Sources : Eurostat from national sources.
(1)

(2)

The method for calculating GDP in P.P.S. has been adjusted since last year’s reports.
Data are therefore not comparable.
For the elaboration of GDP per capita, data related to global population are coming from national accounts, they may differ from
demographic statistics.

76

Inflation
rate

Unemployment
rate

Annual
Average

International
Labour
Organisation
Definition
% active
population (5)

General
Government
Spending
Balance in
GDP %

2000

External Trade

Trade balance
exports/imports
in %

Exp(cid:1) EU
in %
total
exports

Imp(cid:220) EU
in
% total
imports

Bulgaria
Cyprus
Czech Rep.
Estonia
Hungary
Latvia
Lithuania
Malta
Poland
Romania
Slovakia
Slovenia
Turkey

10,3
4,9
3,9
3,9
10,0
2,6
0,9
2,4
10,1
45,7
12,1
8,9
54,9

16,4
3,4
8,8
13,7
6,4
14,6
16,0
4,5
16,1
7,1
18,6
7,0
6,6

-0,7
-3,2
-4,2
-0,7
-3,1
-2,7
-3,3
-6,6
-3,5
-3,8
-6,7
-2,3
-11,0

74,1
12,2
90,1
74,5
87,6
58,5
69,8
71,9
64,7
78,8
92,8
86,4
50,9

51,2
47,7
68,6
76,5
75,1
64,6
47,9
33,5
69,9
63,8
59,1
63,8
52,3

44,1
55,9
61,9
62,6
58,4
52,4
43,3
59,9
61,2
56,6
48,9
67,8
48,8

Current
Account

Balance
% G.D.P.

-5,0
-5,2
-4,7
-6,7
-3,3
-6,9
-6,0
-14,5
-6,3
-3,7
-3,7
-3,3
-4,9

Balance
of EU
with the
countries
€
)
(Mio

146
2098
2330
94
1086
118
403
1773
10530
1061
-434
1818
12266

Foreign Direct
Investment
€

Stock

per

capita
(3) (4)

239
n.a.
2213
1980
1790
943
683
n.a.
671
317
1000
1348
n.a.

Net
inflow
%
G.D.P.
(4)

7,1
1,8
9,0
8,0
2,9
5,7
3,4
18,0
5,3
2,8
10,8
1,0
0,5

(3)

Figures have been calculated using the population figures from National Accounts, which may differ from those used in demographic
statistics.
Balance of payments data
for Malta in registered unemployed

(4)
(5)
Sources : Eurostat from national sources.

77

Annex 3: The pre-accession strategy

The pre-accession strategy consists of a combination of priority setting coupled with a number of
instruments including financial assistance, Association Agreements, participation in Community
programmes and agencies. It helps the candidate countries to prepare for their future membership
by aligning with the acquis before accession.

a) Priority setting

The Accession Partnerships are the cornerstone of the pre-accession strategy. The current
Accession Partnerships were adopted in December 1999 for the Central and Eastern European
candidate countries, in March 2000 for Cyprus and Malta and in March 2001 for Turkey. On the
basis of the analysis presented in the Regular Reports, they set out the priorities for each country to
meet
the accession criteria. They also indicate the financial assistance available from the
Community in support of these priorities and the conditions attached to that assistance.

The EU has not had to invoke the conditionality clause of the Accession Partnership Regulation,
which relates to insufficient progress towards meeting the accession criteria or failure to meet
Association Agreement obligations. Achievements and shortcomings in the implementation of the
current Accession Partnership priorities are underlined in each Regular Report.

Proposals to revise the Accession Partnerships are being presented on this occasion by the
Commission to the Council at the same time as the Regular Reports. They identify priority areas
which need to be addressed in 2002 and 2003. These proposals concern all countries except Turkey
where a revision is not necessary due to the recent adoption of the current Accession Partnership.

In response to the Accession Partnership, each candidate country establishes and regularly updates
its National Programme for the Adoption of the Acquis (NPAA), which indicates the human and
financial resources, and the timetable needed to meet the accession priorities. Turkey adopted a
national programme for the first time in 2001 while all other candidate countries have updated their
programmes during the first semester of 2001. In some countries the NPAAs now form part of the
budgetary process. An assessment of each NPAA is included in the corresponding Regular Report.

b) Financial assistance

Central and Eastern European candidate countries have benefited from EC financial assistance since
the beginning of the transition process through the PHARE programme. PHARE is now
complemented by two programmes which help the countries prepare for participation in the
Cohesion and Structural Funds. ISPA allocates over
1 billion a year to investment in environment
and transport infrastructure in preparation of the Cohesion Fund. SAPARD foresees the allocation
of over
500 million a year to agricultural and rural development in preparation of participation in
agriculture and fisheries structural funds.

€

€

€

With an annual budget of over
1.6 billion, the PHARE programme co-finances institution
building together with associated investment in the infrastructure for the implementation of the
acquis and support for economic and social cohesion to help the candidates prepare for the
implementation of Structural Funds after accession. Around one third of the funds are allocated to
each of these three areas.

78

PHARE support for Institution Building helps the candidates’ strengthen their capacity to
implement and enforce the acquis. Twinning is the principal instrument in this respect. It involves
the secondment of practitioners from Member States ministries, regional bodies, public agencies
and professional associations for at least one year to counterpart institutions in the candidate
countries. It has been operational in the Central and Eastern European countries since 1998.

Twinning was extended to Cyprus and Malta in 2001 and will be extended to Turkey as from 2002
under their respective financial instruments. There are now about 500 twinning projects covering
most areas of the acquis (see annex 5 for more detailed information).

As from the beginning of this year, candidate countries are being offered the possibility of drawing
on Member States’ experience for smaller projects of short to medium term duration through a new
mechanism known as “twinning light”. The first projects will start at the end of 2001. In addition,
TAIEX (Technical Assistance Exchange Office) remains a source of short term advice and SIGMA
(PHARE-financed and managed by OECD) provides advice on horizontal government functions in
Central and Eastern European countries, focusing on the reform of the civil service, financial
control and audit.

SAPARD implementation is fully decentralised. On the basis of rural development plans approved
by the Commission, SAPARD co-finances rural development projects selected by the beneficiary
countries. The implementation structure for each country is based on a SAPARD Agency,
responsible for management and payments, which must be accredited by the Commission. This
process has proved to be more complicated but is now under way and has been partially completed
in Bulgaria and Estonia. In view of the difficulties encountered, it needs to be speeded up for the
other candidate countries.

Under ISPA, each country has prepared national strategies for transport and environment, on which
basis the Commission approved projects for the full amount available for the year 2000 with an
almost equal share between the two sectors. A similar outcome is expected in 2001.

The European Investment Bank has a loan potential of over
and Eastern European countries – covering also some non candidates- (
Community budget guarantee,
Actual lending is expected to reach

17 billion for 2000-2007 in Central
8.9 billion with
8.5 billion in a pre-accession facility without this guarantee).
€

3.5 billion in 2001.

€

€

€

The Council adopted in March 2000 a Regulation for both Cyprus and Malta on pre-accession
95 million over the period 2000-2004
operations. It provides for a financial contribution of
€
towards meeting the priorities of the Accession Partnerships. The budgetary allocation for 2000 is
6 million for Malta and
accession facility and to the
Cyprus amounted to

9 million for Cyprus. These two countries are eligible to the EIB pre-
6.425 billion EIB facility for Mediterranean countries. EIB loans to

200 million in 1999.

€

€

€

€

€

Financial grant assistance to Turkey in 2001 is expected to reach
177 million from MEDA and
the two ‘European strategy/ pre-accession strategy‘ regulations. These funds are available for
structural reforms, institution building and investment in the acquis, in line with the approach for
the other candidate countries. The Commission has proposed a new financial assistance regulation
to ensure an accession driven approach in the assistance and to bring management and procedures
closer to those of the PHARE programme. This regulation will provide the legal base for a single
budget line, thus replacing the three existing instruments (although Turkey will remain eligible for
multi-country MEDA programmes).

79

Turkey can obtain EIB loans under the so-called Euromed II Lending Mandate. This amounts to
€
6.425 billion for the period January 2000 to January 2007. Moreover, Turkey was recently
accepted as eligible to benefit from the EIB pre-accession facility (see above). A Special Action
Mandate (for
450 million) is under implementation. In addition, an earthquake reconstruction
facility (TERRA) of
600 million is available. Turkey is, moreover, eligible under a new
‘Mediterranean Partnership Facility’ of

1 billion covering the whole region.

€

€

€

The Association Agreements

The Europe Agreements with the Central and Eastern European candidates provide a framework
for monitoring the adoption of the acquis and the implementation of Accession Partnership
priorities. The analytical examination of the acquis is now conducted mainly in the sub-committees
established under these agreements (see below). There are similar association agreements with the
Mediterranean candidates.

The Europe Agreements with Hungary and the Czech Republic have entered their second stage
respectively in June 2000 and February 2001. In both cases, this means further liberalisation in
particular as regards the provisions on establishment. The Commission is examining the transition
to the second stage by the following other associated countries: Bulgaria, Poland, Romania, and
Slovakia. In the case of Slovenia,
the first stage lasts in principle until 2003. The Europe
Agreements with Estonia, Latvia and Lithuania do not require a transition to the second stage.

By removing tariffs and quantitative restrictions, the Europe Agreements allow reciprocal free trade
in industrial products. In doing so,
they foster higher economic integration with the EU.
Additional trade concessions with the Central and Eastern European candidates in the field of
agricultural products were granted, on an autonomous and reciprocal basis in July 2000 (January
2001 in the case of Lithuania), pending the entry into force of additional protocols to the Europe
Agreements. Negotiations with each of these countries to broaden the scope of the agricultural trade
concessions, and similar negotiations with Cyprus and Malta are being prepared. In parallel,
additional trade concessions on processed agricultural products entered into force in September
2001 with Estonia and in November 2001 with Slovenia. With regard to Bulgaria, Hungary,
Slovakia, Latvia and Lithuania additional trade concessions for these products are in the process of
being decided.

Protocols to the Europe Agreements on European Conformity Assessment (PECA) entered into
force on 1 June 2001 with Hungary and on 1 July 2001 with the Czech Republic. Agreements on
such Protocols were initialled with Latvia and Lithuania; negotiations with Estonia, Slovakia and
Slovenia are underway. The PECAs aim at extending internal market rules on conformity
assessment for manufactured goods to the candidate countries before accession. Under the PECAs,
the candidate countries have to introduce the acquis for selected sectors. The EC and the candidate
country also agree to accept each other’s technical bodies for assessing the conformity of goods
with the legislation, making technical checks at border crossings unnecessary.

As regards Turkey, the implementation of the Customs Union remains the cornerstone of bilateral
relations. The negotiations, opened in April 2000 on an agreement aiming at the liberalisation of
services and at the mutual opening of public procurement, are underway.

80

Participation in Community programmes and Agencies

training, youth, scientific research,

All candidate countries participate, more or less intensively, in Community programmes. Central
and Eastern European countries participate in particular in education, vocational training, youth,
research, culture, audio-visual, energy, the environment, small and medium-sized enterprises and
public health programmes. Cyprus participates in certain programmes in audio-visual, education,
vocational
the environment and small and medium-sized
enterprises, while Malta does so in programmes dealing with scientific research, education,
vocational training and youth. Turkey participates in two Community programmes at project level
only (LIFE and the 5th Framework Programme for Research and Technological Development).
Following the Helsinki European Council conclusions in December 1999, preparations for full
Turkish participation in education, vocational training and youth programmes are ongoing, and
participation in other programmes is under discussion.

As announced in last year’s strategy paper, in order to streamline procedures for the participation of
candidate countries in Community programmes, general Association Council decisions for each
Central and Eastern European country, as well as agreements for Cyprus, Malta and Turkey, are in
the process of being concluded. These new instruments should considerably facilitate such
participation. On the basis of these instruments which establish the general principles for
participation in existing and future programmes, the Commission and the competent authorities of
the candidate countries will negotiate the terms and conditions for participation in individual
programmes. Candidate countries can continue to use pre-accession aid to co-finance the cost of
their participation.

Following the recent ratifications of the relevant agreements, all 13 candidate countries will become
members of the European Environment Agency in 2002. Similar agreements will shortly be
negotiated with interested candidates for their participation in the European Monitoring Centre for
Drugs and Drug-Addiction. Preparations for participation of candidate countries in other
Community agencies are also under way.

Analytical examination of the acquis

The analytical examination of the acquis, ‘screening’, with the negotiating countries, which helped
identify issues to be taken up in the negotiations, was completed in 1999. The new acquis adopted
and published until the end of 2000 has been transmitted to those countries, so as to allow them to
take a position on that new acquis in the context of the negotiations. As explained in last year’s
strategy paper, the Association committees and sub-committees are being used to explain the new
acquis and to discuss its adoption and implementation. In addition, where necessary, meetings to
explain the new acquis have been organised on certain chapters, such as transport, agriculture or
telecommunications.

In 2002, the same procedures will apply with the following exception. To take into account that
negotiations with the most advanced countries will come closer to their conclusion, the new acquis
will be transmitted twice to the negotiating countries: once at the beginning of the year to cover the
new acquis adopted in 2001 and a second time at the beginning of the second semester to cover the
new acquis adopted during the first semester of 2002.

In the same way, with Turkey, the process of analytical examination of the acquis is being prepared
in the context of the eight sub-committees set up under the Association agreement which started
their work in June 2000. Since then, each subcommittee already met twice. A report to the Council
on progress in preparing the process of analytical examination of the acquis, as requested by

81

European Council of Santa Maria da Feira, is being presented by the Commission as an annex to the
Regular Report on Turkey.

The European Conference

The European Conference was created as a forum for political consultation on issues of common
interest to the EU Member States and the candidate countries. Turkey has started to participate in
the European Conference since a meeting held at ministerial level in Sochaux on 23 November
2000. Another conference, held at the level of Heads of State and Government on 7 December
2000, provided an opportunity for discussing the institutional reform and the operation of the Union
in the longer term.

The Nice European Council proposed “that
the countries covered by the stabilisation and
association process and the EFTA countries be invited to attend as prospective members”. The
Göteborg European Council stated that “the European Conference will convene in its current
composition under the Belgian Presidency. With a view to strengthening the Union's partnership
with Ukraine and Moldova, they will subsequently be invited to join the Conference”. At the last
meeting of the European Conference held on 20 October 2001 at ministerial level in Brussels,
terrorism was
which showed a remarkable unity of purpose,
discussed.

the fight against

international

82

Annex
30 September 2001

4:

Human

Rights

Conventions

ratified

by

the

Candidate

Countries,

Adherence to following conventions
and protocols

ECHR (European Convention on
Human Rights)

Protocol 1 (right of property)

Protocol 4 (freedom movement et al.)

Protocol 6 (death penalty)

Protocol 7 (ne bis in idem)

European Convention
Prevention of Torture

for

the

European Social Charter

Revised European Social Charter

Framework
National Minorities

Convention

for

ICCPR (International Covenant on
Civil and Political Rights)

Optional Protocol to the ICCPR (right
of individual communication)

Second Optional Protocol to ICCPR
(death penalty)

ICESCR (International Covenant on
Economic, Social and Cultural rights)

CAT (Convention against Torture)

(Convention

CERD
the
Elimination of All Forms of Racial
Discrimination)

on

BG

CY

CZ

EE

HU

LV

LT

MT

PL

RO

SK

SI

TK

X

X

X

X

X

X

O

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

O

X

X

X

O

X

X

X

X

X

X

X

X

X

O

X

X

X

X

O

X

X

X

X

X

X

X

X

X

X

O

X

X

X

X

X

X

X

X

X

X

X

X

X

O

O

O

X

X

O

X

X

X

X

X

X

X

X

X

O

X

X

X

X

O

X

X

X

X

X

O

X

O

X

X

O

X

X

X

X

X

X

X

X

X

X

X

O

X

X

O

X

X

X

O

X

X

X

X

X

X

X

X

X

O

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

O

X

X

X

X

X

X

X

X

X

X

X

X

X

X

O

X

X

X

O

O

O

X

X

O

O

X

O

X

O

X

O

X

O

X

X

X

O

CEDAW (Convention
Elimination
Discrimination against Women)

on
Forms

of All

X

X

X

X

X

X

X

X

X

X

X

X

X

the
of

O

X

O

X

X

X

O

X

X

X

O

X

O

X

O

X

O

X

O

X

X

X

O

X

O

X

Optional Protocol to the CEDAW

CRC (Convention on the Rights of
the Child)

X = Convention ratified

O = Convention NOT ratified

BG=Bulgaria; CY=Cyprus; CZ=Czech Republic; EE=Estonia; HU=Hungary; LV=Latvia; LT=Lithuania; MT=Malta; PL=Poland; RO=Romania;
SK= Slovak Republic; SV=Slovenia; T=Turkey

83

Annex 5: Twinning projects in 1998-2001

NUMBER OF TWINNING PROJECTS FINANCED UNDER PHARE IN 1998-2001

Candidate
Country

Agriculture
(incl. Veterinary
and
Phytosanitary
projects)

Environment

Public Finance
(incl. Taxation,
Customs,
Internal Market
etc.)

Justice and
Home Affairs

Social Policy

Others

Total

Regional
Development
and
Preparation for
Structual
Funds

Bulgaria
Cyprus

CzechRep.
Estonia
Hungary
Latvia
Lithuania
Malta

Poland
Romania
SlovakRep.
Slovenia

Total

9
---

6
6
7
4
5
1

24
9
7
8

86

11
---

6
3
9
2
2
---

9
4
6
1

53

2
---

9
2
4
2
4
---

5
4
6
1

39

4
---

3
2
4
3
2
1

14
13
2
2

50

2
---

9
2
4
3
9
1

11
6
6
4

57

49
1

60
28
48
24
37
5

104
65
51
30

502

8
---

16
7
8
6
7
1

12
12
14
7

98

13
1

11
6
12
4
8
1

29
17
10
7

119

84

NUMBER OF TWINNING PROJECTS 1998-2001* IN WHICH MEMBER STATES

ARE INVOLVED AS LEADERS OR PARTNERS

A B D DK

E FIN

F GR IRL

I NL P S UK Total

Year

1998

1999

2000

2001*

0

2

1

19

14

8

4

57

9

9

14

38

12

41

0 12

9

4

16

33

7

7

9

1

40

33

32

7

9

3

5

3

4

6

11

13

19

12

12

9

1

3

1

5

0

2

0

0

2

9

27

16

23 209

27 222

30 210

3

9 59

55

89 641**

.

Total

45

3 148

34

65

31

114

20

15

32

47

*) Selection of Twinning partners for 2001 not yet finalised.

**) This total does not correspond to the total number of projects, the majority involve more than one Member State

85

a) Annex 6: State of Play of the Negotiations on 26 October 2001

ACCESSION NEGOTIATIONS : STATE OF PLAY

N°

CHAPTER

CYP

CZECH

EST

HUN

POL

SLO

1 Free movement of goods

2 Free movement of persons

3 Free movement of services

4 Free movement of capital

5 Company law

6 Competition

7 Agriculture

8 Fisheries

9 Transport

10 Taxation

11 EMU

12 Statistics

13 Social policy

14 Energy

15 Industry

16 SMEs

17 Science and research

18 Education and training

19 Telecommunication

20 Culture and audiovisual

21 Regional policy

22 Environment

23 Consumers and health protection

24 Justice and home affairs

25 Customs union

26 External relations

27 CFSP

28 Financial control

29 Financial and budgetary provisions

30 Institutions

31 Other

Chapters opened (1)

Chapters closed (2)

0 : Chapter opened, under negotiation
X : Chapter provisionally closed

X

X

X

X

X

0

0

X

X

0

X

X

X

X

X

X

X

X

X

X

0

X

X

0

X

X

X

X

0

X

X

X

X

X

0

0

X

0

0

X

X

X

0

X

X

X

X

X

X

0

X

X

0

X

X

X

X

0

X

(X)

X

X

X

0

0

X

0

0

X

X

X

0

X

X

X

X

X

X

0

X

X

0

0

X

X

X

0

X

X

X

X

X

0

0

X

0

X

X

X

X

X

X

X

X

X

X

0

0

X

X

0

X

X

X

X

0

29

23

29

21

29

19

29

22

X

(X)

X

(X)

0

0

0

0

0

0

X

X

X

X

X

X

X

X

X

X

0

X

X

0

X

X

X

X

0

29

18

X

(X)

X

X

X

0

0

X

0

0

X

X

X

X

X

X

X

X

X

X

0

X

X

0

X

X

X

X

0

29

21

(X) : Chapter for which the provisional closure proposed in the EUCP has not been accepted by the CC.

* : Chapter opened to negotiations under the Swedish Presidency

** : Chapter to be opened to negotiations under the Belgian Presidency

~ : Chapter not yet opened to negotiations.

BUL

*

0

** 0

*

0

X

X

*

0

~

* X

*

0

** 0

~

X

** 0

**

~

X

X

X

X

X

**

** 0

X

*

*

0

0

X

X

*

0

**

23

12

LAT

* X

* X

X

X

X

0

*

0

X

0

*

0

X

X

* X

*

0

X

X

X

X

*

*

*

X

0

0

0

X

0

X

X

X

0

0

*

*

*

*

LIT

* X

*

(X)

X

X

X

0

*

0

* X

0

*

0

* X

X

X

MAL

* X

* X

* X

0

X

0

**

0

X

*

0

X

X

0

*

0

* X

X

X

X

X

X

X

*

0

X

*

*

*

X

0

0

X

X

*

*

0

0

X

X

X

X

X

X

0

0

X

0

0

X

X

*

*

*

*

* X

*

0

28

18

29

18

29

18

ROM

~

~

~

0

~

0

0

X

0

*

*

*

*

** 0

~

X

** 0

~

~

X

X

X

0

0

~

~

** X

~

*

0

X

X

~

~

17

8

SLK

* X

* X

X

X

* X

0

*

0

X

0

*

0

* X

X

* X

* X

X

X

X

X

X

X

*

*

0

0

X

*

0

X

X

X

0

*

0

29

20