Opinion of the European Economic and Social Committee on ‘Croatia's Application for EU membership’
Date: 2004-03-31
Institutions: European Economic and Social Committee
Subjects: Croatia, accession to the European Union

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Opinion of the European Economic and Social Committee on ‘Croatia's Application for EU
membership’

(2004/C 112/20)

On 15 July 2003, the European Economic and Social Committee decided to draw up an own-initiative
opinion under Rule 29 of its Rules of Procedure on Croatia's application for EU membership.

The Section for External Relations, which was responsible for preparing the Committee's work on this
subject, adopted its opinion on 9 March 2004. The rapporteur was Mr Rudolf Strasser.

At its 407th plenary session, held on 31 March and 1 April 2004 (meeting of 31 March), the European
Economic and Social Committee adopted the following opinion, with 98 votes in favour and three absten-
tions:

1.

Introduction

1.1
In its relations with the Western Balkan states, the EU
gears its policy towards strengthening democracy in these
states and promoting reconciliation and cooperation. Since
1991 the EU has been providing financial aid, under various
programmes, which, in the case of Croatia, has amounted to a
total of c. EUR 500 m. for the period up to and including
2002. In 1999 the EU proposed the establishment of a Stabili-
the Western
sation and Association Process in respect of
Balkan states.

1.2
At the Zagreb Summit on 24 November 2000, the Euro-
pean Union held out to the Balkan States the prospect of EU
membership and an appropriate programme of
support
measures. This prospect was conditional upon the Balkan
States fulfilling the ‘Copenhagen Criteria’ and meeting the obli-
gations set out under the Treaty on European Union. The
Western Balkan states declared their readiness to accept the
obligations imposed by the EU and to use the Stabilisation and
Association Process (SAP) and, in particular, the Stability and
Association Agreements (SAA), following their signature, as
instruments for preparing the ground for EU accession.

1.3 On 21 February 2003 the Croatian government lodged
its application for membership of
the EU. The Council of
Ministers decided to call upon the European Commission to
proceed in accordance with Article 49 of the Treaty estab-
lishing the European Community and to submit its views on
this application to the Council.

has also had to carry out extensive restructuring in many areas
of its economy as a consequence of severing its links with
Yugoslavia and, above all, as a result of the war.

2.3
Croatia has a total surface area of 56,542 km2 and a
population of some 4.5 million. According to Croatia's 2001
population census, 7.47 % of the population belongs to an
ethnic minority. Serbs form the largest ethnic minority (4.5 %
of the population); the other ethnic minorities are Bosnians,
Italians, Hungarians, Albanians, Slovenians, Roma, etc.

2.4
In the period extending from the end of the war with
Serbia up to the death of the Croatian President, Mr Tudjman
(in 1999) or up to the parliamentary elections in January 2000,
the prevailing influence was exercised by the nationalistic HDZ
(centre-left
Party. The formation of a coalition government
coalition) and the election of Stjepan Mesic as President of
Croatia in 2000 provided the political basis for the necessary
reforms. Following the parliament elections in Croatia on 23
November 2003, the HDZ, which now no longer includes
extreme nationalist forces amongst its membership, topped the
poll and was entrusted with the formation of a government.
The EESC welcomes the fact that the new Croatian government
is also expressly adhering to an integrationalist and reformist
course and is resolutely pursuing the goal of EU membership,
which is supported by a clear majority of the Croatian popula-
tion.

2. General background

Croatia declared its independence from Yugoslavia on 25
2.1
June 1991. The ensuing war with Serbia ended only in 1995
with the signing of the Dayton Peace Agreement. The fighting
resulted not only in severe losses amongst the civil population
and harmful social consequences but also caused major damage
to large parts of the country and led to a huge fall in GNP.

Between 1990 and 1993 real GDP slumped by 36 % (1).
2.2
Industrial production, above all, suffered as a result of the war.
Not only has Croatia had to tackle its conversion from a socia-
list planned economy to an effective market economy, but it

(1) World Bank Report No. 25435 HR.

2.5
The macro-economic indicators have improved consider-
ably, particularly in the period since 2000. There has been
strong economic growth (2001: +4.1 %; 2002 + 5.2 % and, up
to the third quarter of 2003: +3.5 %). The rate of inflation was
brought down from 7.4 % in 2000 to 2.3 % in 2002; by
December 2003 the figure had reached 2.2 %. The main
reasons for this trend are: a high level of domestic demand,
exchange rate stability, trade liberalisation measures, moderate
wage increases, increased production and more competition (2).
The rate of unemployment, on the other hand, has remained
very high (approximately 15 %). In 2003 the balance of trade
deficit rose to a new record high of $7.125 billion and there
has also been a further increase in the level of government
debt.

(2) It should be noted that Croatia's per capital GDP is only about one

third of the corresponding figure for Slovenia.

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2.6
Although the unemployment figure has once again fallen
slightly, the high level of unemployment of c. 15 % (1) repre-
sents one of the major social and political problems facing
Croatia. In the EESC's view, an issue which prompts particular
criticism is the fact that the level of unemployment is as high
as 40 % in individual regions of Croatia. In this context,
it
should be borne in mind that Croatia has an unemployment
rate of barely 50 %, which is very low when measured against
the EU figure of over 60 %. In this context, the EESC draws
attention to the fact that Croatia has a large shadow economy.
Curbing the level of the shadow economy, inter alia, by intro-
ducing general conditions which are business-friendly, will be
one of the key challenges facing the Croatian government.

2.7
Croatia's aggregate public debt has been criticised by the
European Commission, the IMF and the World Bank. Despite
Croatia's very high tax ratio (latest figure: 48.4 %), the country's
level of external debt, expressed as a percentage of GDP,
jumped from 44.8 % in 1998 to 74.3 % in 2003 (2). One of the
main reasons for this sharp increase was also the considerable
post-war need for investment
in infrastructure and public
installations. The EESC does, however, regard the high level of
private debt, brought about by a marked expansion of
consumption, as representing a further problem.

In its annual report (4), the Commission draws attention
3.2
to the fields in which considerable efforts have still to be made.
In its appraisal of the situation in the fields of the administra-
tion of justice, enforcement of the law and the rule of law, the
Commission criticises the following aspects:

— the way in which the judiciary operates (the Commission
highlights problems such as procedural delays which are
jeopardising the rule of law, a shortage of qualified staff,
and a backlog of documents);

— the way in which constitutional rules are observed in the

execution of sentences;

— shortcomings in the measures to combat corruption;

— the unsatisfactory way in which asylum applications are

dealt with;

— lack of certainty as regards the dispensation of justice.

A World Bank study (3) has criticised the fact that in
2.8
Croatia expenditure on public administration, which amounted
to 11.2 % of GDP, was substantially higher than in the acceding
states, where the average figure was 7.2 %. Similar observations
may be made in the case of transfer payments.

At the end of 2002, the Croatian government presented
3.3
a Green Paper on the reform on the judiciary. Some initial
important steps along the road to reform have been taken by
setting up a Judicial Academy and by handing over tasks to
notaries and judicial officers. The EESC hopes that
further
essential reform measures will be rigorously implemented.

3. Democracy and the rule of law

3.1
In its annual report for 2003 on the Stabilisation and
Association Process, the European Commission points out that:

— the democratic institutions are working well; the political
dialogue between the government and the opposition is,
problems
however,
frequently eclipse the international agenda;

arduous

because

internal

often

— the parliament is exercising its powers without hindrance
and the opposition is able to play its role to the full in the
work of the parliament;

— it has been possible to speed up legislative work.

The EESC welcomes the progress made in the above field as
this is a key prerequisite for Croatia's participation in the
process of European integration. It is in Croatia's interest to
the outstanding shortcomings
tackle, as soon as possible,
standing in the way of the achievement of a fully viable democ-
racy and hampering the rule of law.

(1) Figure based on the ILO method of calculation. The corresponding
figure issued by the Croatian National Statistical Office is, however,
22.5 %.

(2) European Economy, Occasional Papers, No. 5, January 2004.
(3) World Bank Report No. 25434-HR.

3.4
The shortage of qualified staff and the lack of adequate
technical equipment still constitute a major problem at the
present time. In the EESC's view, the delays in court proceed-
ings and the consequent backlog of documents is resulting is a
lack of
legal certainty and consequently also impeding the
necessary reforms.

3.5
Croatia is similar to a number of the acceding states in
that it has a long tradition of maintaining a land register. As
it is
the register has not been updated for several decades,
frequently very difficult to establish real ownership of property.
This represents an impediment to the necessary privatisations.
The EESC believes that the setting-up of a modern, effective
land register is a vital requirement, above all also in the context
of preparing for possible accession to the EU. One important
step forward has been the establishment of a valuer's office.

The level of cooperation between Croatia and the Inter-
3.6
national War Crimes Tribunal for the Former Yugoslavia also
poses a very serious political problem. As a result of the inade-
quate level of cooperation up to now, EU Member States have
not been prepared to ratify the Stability and Association Agree-
ment. The EESC takes the view that it would be very disadvan-
tageous for Croatia if Commission recommendations on this
politically very sensitive issue were in reality not acted upon.
The EESC hopes that the Croatian government will give the
to applications for extradition from the
necessary support
Tribunal in The Hague.

(4) COM(2003) 139 final of 26.3.2003.

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The question of

3.7
the return of refugees and expelled
persons is a matter of major political importance to Croatia
and undoubtedly represents an intractable problem, which
involves some 250,000. Problems arise in connection with the
rebuilding of property which has been destroyed, the reassign-
ment of ownership of property, the lack of accommodation
and shortage of job opportunities. Under the Dayton Peace
Agreement, Croatia entered into a series of commitments with
regard to the return of refugees. The EESC recognises that the
necessary fulfilment of these commitments imposes a consider-
able burden on Croatia but expects that this problem will be
resolved as soon as possible.

3.8
In December 2002 the Croatian parliament adopted a
constitutional act to safeguard the rights of minorities. This act
is designed to provide minorities with appropriate representa-
tion not only in elected bodies but also in the administration of
justice and other parts of the State administrative apparatus.
The EESC points out that, as is the case in other legal areas,
what is of decisive importance is, in the final analysis, how the
laws are implemented and administered. The EESC assumes
that
the
in the case of elections,
remaining discrimination against the Roma will be removed.
The EESC welcomes the efforts made recently in this field.

for example,

in future,

3.9
In its own-initiative opinion on promoting the involve-
ment of civil society organisations in South-East Europe (1), the
EESC stated that:
free and strong media are
among the most important prerequisites for a healthy and
stable democracy, with a public well-informed enough to play
an active and important role in the governance of
their
country’.

‘Independent,

3.10
The EESC recognises the efforts which Croatia has
made up to now in order to make the media more independent
freedom. The EESC
and to enable them to have greater
welcomes the fact that Croatia has a broad spectrum of inde-
pendent print media which is able to reflect the diversity of
opinion in the country and the diversity of its cultural and
linguistic minorities. The EESC hopes that when the reform,
which has been decided upon, of the state radio and telecom-
munications entity is implemented, steps will be taken fully to
safeguard the independence of these key media and also to
comply with the need to ensure the diversity of opinion and
population diversity.

economic reconstruction is also unsatisfactory. In the course of
2003, the Croatian Privatisation Fund (HFP) did indeed carry
out further privatisations in a number of areas, such as the
in the
banking sector, but not to the requisite extent. It is,
EESC's view, important that the new government presses ahead
- prudently - with the requisite privatisation process, particu-
larly in the following sectors: industry, tourism and agriculture.
Use should also be made of
the possibilities provided by
public-private partnerships.

The EESC takes the view that it is also necessary for
4.1.1
account to be taken, when carrying out privatisations, of the
interests of the employees directly concerned. In order to avoid
damaging social consequences as far as possible, supporting
labour-market measures, e.g.
in the form of measures to
promote retraining, should be introduced. In this context, the
EESC draws attention to the fact that recommendations of the
World Bank and the IMF focusing on liberalisation, privatisa-
tion and deregulation must also take account of the social
dimension.

4.2
In the context of government debt, too, the Croatian
State has been widely criticised for continuing to pay significant
levels of aid to loss-making state-owned enterprises. Between
1996 and 2000 the number of employees in state-owned enter-
prises fell by 27 %, whereas the corresponding figure for priva-
tised enterprises was 14 %. Employment in private-sector enter-
prises, on the other hand, increased by 50 % (2). In the view of
the Croatian social partners, the fact that too few new manufac-
in particular SMEs, are being established,
turing enterprises,
also poses an employment problem.
In the EESC's view,
improvements in training and further training and investments
in technical equipment for educational establishments should
be seen as an important first step towards tackling the employ-
ment issue.

4.3
Industry in Croatia currently accounts for just over 23 %
of GDP and provides employment for c. 300,000 persons (i.e.
about 25 % of the total labour force) (3). Many enterprises are
loss-making and some are heavily in dept. As a result of a
shortage of capital, many enterprises continue to employ obso-
lete technology, as a result of which their products are not
always sufficiently competitive in comparison with production
at international
level. With a view to making the Croatian
economy more competitive, the EESC underscores the need for
the country to devote more resources to R & D (2001: 1.09 %
of GNP) (4) and also to provide incentives for the establishment
of new enterprises, in particular SMEs, whilst removing admin-
istrative obstacles which stand in the way of this requirement.

4. Market economy and structural reforms

In its annual report, the Commission highlights the fact
4.1
that the switch to a market economy has already made further
progress in Croatia than is the case in other Western Balkan
states. The Commission does, however, point out
the
privatisation process started to falter in 2002. The World Bank,
for its part, notes in its report that the privatisation process is
not yet by any means completed and that progress made with

that

(1) REX 123 – OJ No. C 208 of 3.9.2003, page 82.

4.4
Croatia has an efficient pharmaceutical and chemical
industry. The situation in the textile industry is difficult. Heavy
industry in Croatia, in particular ship-building, continues to be
essentially in the hands of state-run enterprises and is heavily
in deficit.

(2) World Bank Report, p. 87 et seq.
(3) Croatian National Statistical Office.
(4) See the replies to the questionnaire drawn up by the European

Commission.

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4.5
Tourism is of particular importance to the Croatian
economy as it accounts for over 20 % of GDP and provides
almost 6 % of the total number of jobs. Tourism also brings in
about on third of the country's total foreign exchange revenue.
The EESC highlights the problem that a very high percentage
of the tourist enterprises continue to be state-owned. In the
field of tourism, in particular, forging ahead with privatisation
could result in more effective use being made of the available
potential. It would also be desirable to open the market to
foreign investment in this sector.

4.6
Following the resolution of the banking crisis in 1998, a
number of state-owned banks were sold off to foreign inves-
tors,
thereby bringing greater security and stability to the
banking sector. Productivity and the range of services provided
were considerably improved. This is, in the EESC's view, a key
prerequisite for the successful
introduction of the necessary
structural measures in the Croatian economy. The EESC high-
lights the fact that the necessary investment is being hampered
by the cost of loans, which continues to be excessively high.

4.7
The State administration is called upon to provide
support for the implementation of the vitally necessary struc-
tural reforms and the improvement of Croatia's economic
competitiveness. The EESC is of the opinion that the public
administration, as currently structured in Croatia, is not effi-
cient enough to enable it to do full justice to the tasks and
requirements which have been set. The EESC assumes that the
various supporting programmes, such as SIGMA (1), will make
a helpful contribution towards implementing the necessary
reforms. It is of crucial importance that the planned decentrali-
sation leads to the optimal allocation of tasks between central
bodies and local authorities.

Croatia has a comparatively well developed social
4.8
security system. A reform of the pension system was carried
out in 2001 with a view to reducing the burden on the state
budget, on the one hand, and stimulating economic develop-
ment, on the other hand. This reform was endorsed by the
majority of the Croatian population. Reform of the labour
market, with the view, inter alia, of achieving greater flexibility,
should go hand-in-hand with the introduction of corresponding
social protection measures and measures to promote safety
underpinned by an effective system of jurisdiction in labour
matters.

4.9 Much also needs to be done in the field of agriculture.
Agriculture in Croatia consists predominantly of smallholdings
with an average size of 5 ha. In its report, the World Bank
noted that 30 % of agricultural land continues to be owned by
the state and that, in the case of 40 % of agricultural
land,
ownership has not been resolved and would take a further 15
years to resolve. The agricultural sector in Croatia is currently
uncompetitive. Agriculture, which employs approximately 8 %
of the labour force in Croatia, accounts for a relatively high
percentage of the country's GDP (9 %). One of the conse-

(1) Support

for

Improvement

in
Central and Eastern European countries (established as a joint
venture between the OECD and the EU).

in Governance and Management

quences of Croatia's low level of competitiveness is that the
relatively efficient Croatian food industry has to import raw
materials.

Three-quarters of the agricultural

4.10
land in Croatia is
managed by the many small farms, the remainder continues to
be managed by a small number of large agrarian combines. A
lot of productive agricultural land can still only be used to a
limited extent because of war damage (e.g. the laying of land-
mines). Whilst the small privately-owned farms had already
attained the 1990 level of production once again by 1998, the
large agrarian combines, which remain in state ownership, are
unable to cope with the new economic conditions.

in the agricultural

4.11 Ongoing uncertainty over the ownership of agriculture
holdings in many cases greatly impedes the necessary structural
reforms
in Croatia. The same
problems arise in connection with the procurement of loans
for modernising farms. Because of the high risks involved,
banks are not keen to make funding available for investments
in agriculture.

sector

4.12 A new support programme for agriculture came into
effect in 2003. The EESC hopes that the attendant reforms will,
on the one hand, make agriculture in Croatia more competitive
and, on the other hand, facilitate moves to draw nearer to the
EU. In the EESC's view,
in the course of the
modernisation of the agricultural sector in Croatia, not only to
make the necessary improvements to training and advisory
services but also to establish without delay an effective, politi-
cally independent, system of representation of interests.

it is essential,

5.

Implementation of the Stabilisation and Association
Agreement (SAA) and use of support programmes

5.1
Implementation of the SAA has a decisive role to play in
preparing Croatia for EU membership. The ratification process
by the Community and the Member States has not yet been
completed. An Interim Agreement has been introduced in the
meantime as a transitional measure (see point 3.6).

In October 2001 the Croatian government adopted an
5.2
action plan for implementing the Agreement. A series of
measures have already been put into effect. The aim is for
Croatia to be ready for EU membership by the end of 2006. In
order to enable these ambitious goals to be achieved, a ‘coordi-
nator for European integration issues’ was appointed in all the
various government authorities.

In December 2002 a government programme was
5.3
adopted for 2003 in respect of Croatia's integration into the
EU. The programme's priorities were as follows:

— economic adjustment;

— alignment of Croatian law on EU law;

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— making the administration more efficient;

— a strategy for informing the public in Croatia; and

issues. This is, in the EESC's view, a key prerequisite which has
to be met before appropriate use can be made of the various
EU programmes, such as INTERREG.

— the adjustment of legal provisions to comply with the obli-

gations under the SAA.

According to information received from the Croatian authori-
ties, more than 109 legislative measures in the above fields
were introduced by the end of 2003. In January 2004 the
second integration programme
for conforming with the
existing body of EU law was adopted. The requisite imple-
menting regulations are being adopted in 2004. The EESC
recognises the efforts made by Croatia but is aware that there
are difficulties in the way of
implementing measures in a
number of fields (e.g. harmonisation measures to come into
line with EUROSTAT criteria) brought about by the lack of
administrative capacity.

5.4
The CARDS support programmes for Croatia have a
vital role to play in the implementation of the SAA. These
programmes will undoubtedly make a key contribution to the
processes of modernisation and democratisation and towards
the successful implementation of the necessary environmental
measures. The EESC assumes that, if the European Commission
endorses Croatia's application for EU membership, the support
programmes set up for the acceding states (ISPA, SAPARD,
Phare, TAIEX, etc.) will also be made available to Croatia.

If the Croatian economy is to successfully cope with the
5.5
conditions applying in the EU's internal market, it is essential
that the necessary reforms, liberalisation measures and adjust-
ments to comply with EU law receive the support of civil
society. Key prerequisites in this context are that the Croatian
population is kept adequately informed of the importance and
the impact of Croatia's integration into the EU and that repre-
sentative civil society organisations are involved in the political
decision-making processes.

6. Regional problems

There are, in some cases, very considerable disparities in
6.1
levels of economic development and prosperity between indivi-
dual urban conurbations and rural areas in Croatia. Further-
more, a considerable number of both smaller and larger areas
were particularly badly affected by the war, which has very
greatly hampered their economic development (this was parti-
cularly the case with regard to, for example, the regions of
Slavonia and Lika-Senj).

In February 2002 a fund was set up to provide assistance
6.2
to disadvantaged areas with the aim of supporting, above all,
areas which suffered particularly badly from the effects of the
war, areas affected by depopulation and areas suffering from
other disadvantages, such as individual
islands and upland
areas.

6.3
In its Annual Report for 2003, the European Commis-
sion criticised, on the one hand, the fact that no decision had
yet been taken on the criteria for allocating funding and, on
the other hand, the lack of clear provisions defining the respon-
sibilities for the processing of applications for funding. The
EESC urges that rapid solutions be found to the outstanding

7. Environmental issues

7.1
In its report, the World Bank describes the situation as
regards the natural environment in Croatia as ‘good’, when
compared with the situation in other central European states.
Major investments are, however, still required in the fields of
the supply of drinking water and the disposal of sewage and
refuse, in order to comply with EU standards.

7.2
Because of the importance of coastal areas as regards
tourism and in the light of international obligations to keep the
Mediterranean clean, sewage purification in these areas is
almost on a par with the level in the EU. In the other areas,
however, major investments still have to be made in the fields
situation
of sewage collection and purification. A similar
applies in the case of the collection and disposal of refuse, in
particular hazardous waste. The EESC notes that, in its efforts
to improve its legal provisions in this field, Croatia is broadly
following EU directives and has already made progress accord-
ingly.

7.3
Air quality in Croatia has improved over the last decade;
this can be attributed in part to the declining level of industrial
production linked to the effects of the war and economic diffi-
culties. In urban areas poor air quality continues to be a major
problem. Once the expected economic upturn gets under way,
measures will have to be taken to cut emissions in both the
transport sector and the energy-generating sector.

7.4
The relatively large area covered by protected zones
(approximately 10 %) matches the high level of bio-diversity
and the large number of ecosystems and unique landscapes.
Some of these features have been placed under the protection
of UNESCO.
the abovementioned protective
measures, pressure on bio-diversity is increasing. The existing
protective measures and conservation areas are unable to meet
the demands placed upon them.

In spite of

7.5
The EESC highlights the fact that, in line with the situa-
tion in the majority of the acceding states, there is a consider-
able need for investment in Croatia in order to comply with
the EU environmental standards. It is, in the EESC's view, essen-
tial that adequate support be provided to Croatia to back up its
efforts to improve the situation.

8.

International cooperation and relations with neigh-
bouring states

8.1
A key prerequisite for Croatia's successful participation
in the process of European integration is that it should fulfil
the obligations which it entered into under the Dayton and
Paris Peace Agreements and the obligations attendant upon its
membership (since 1996) of the Council of Europe. The EESC
notes that the Croatian government has expressly committed
itself to meeting these obligations but that the necessary rigour
is, however, still lacking in some fields.

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requirement. The EESC notes

8.2
If the inhabitants of adjacent countries are to live peace-
fully side by side, good relations between neighbouring coun-
tries are an essential
that
economic cooperation between Croatia and its direct neigh-
bours has been more positive than political relations between
Croatia and individual, neighbouring countries. There is, in the
EESC's view, inter alia, an urgent need to find a rapid solution
to the unresolved issue of
the maritime border between
Slovenia and Croatia. This problem is being further exacerbated
by the decision of
to unilaterally
extend its maritime rights by establishing a ‘Protected Ecolo-
(PEFZ) (1)
gical and Fishing Zone’
In this
context, the EESC highlights the need to comply with the obli-
gations under international maritime law.

the Croatian parliament

in the Adriatic.

8.3
Croatia's accession to the WTO in 2000 represented an
important step on the road towards the internalisation of the
Croatian economy.

8.4
The Interim Agreement (signed on 29 October 2001)
under the SAA came into force at the beginning of 2002. This
agreement introduced extensive trade concessions. Croatia has
been a member of the Central European Free Trade Agreement
(CEFTA) since 1 March 2003. Croatia has a total of 35 free
trade partners (including the EU Member States). 90 % of Croa-
tia's external trade is at present already subject to preferential
treatment and, after the transitional period provided for under
the SAA, more than two-thirds of Croatia's foreign trade will
be exempt from customs duty. In 2003 the value of goods
exported by Croatia was US$5.65 billion, whilst in the same
year,
it imported goods worth US$12.77 billion; it therefore
had a balance of trade deficit of US$7.12 billion.

9. Organised civil society

9.1 Organised civil society has an important role to play
both in Croatia's conversion to a market economy and in its
EU accession process. There are more than 20,000 NGOs in
Croatia. The Freedom of Assembly and Freedom of Association
Act came into force on 1 January 2002. This law introduced
more liberal provisions in respect of freedom of association
and the supervision of the activities of NGOs.

9.2
In its opinion on civil society in South-East Europe, the
EESC highlighted the following requirements as key prerequi-
sites for ensuring stability and prosperity, namely the need:

— for civil society organisations to become strong and for
participatory democracy to become part of the culture of
the countries concerned;

— for civil society organisations to be autonomous bodies
within a participatory democracy; there is, however, still
little overall understanding of the need for this measure;

— to improve the social dialogue;

— for a broadly-based civil dialogue to take place, with a view,
inter alia, to promoting greater awareness of the environ-
ment.

In its opinion, the EESC expressly welcomed the statement
made by the Croatian authorities to the effect that the develop-
ment of civil society was a matter of top priority for the
government.

(1) This footnote is not applicable to the English version.

9.3
The former Croatian government drew up a draft bill,
providing for the establishment of a ‘forum’, which would
enable civil society organisations (NGOs) to discuss issues and
draw up opinions on matters of interest to these organisations.
The aim of
the proposed forum is to underpin the civil
dialogue. On 16 October 2003 the ‘National Foundation for
the Promotion of Civil Society’ was established. This body
fulfils the roles of the proposed forum. The representatives of
NGOs are able to exert due influence in the governing body of
the Foundation. This measure,
together with the financial
support provided for the work of NGOs, are seen as positive
developments by the EESC. The EESC also welcomes the fact
that NGOs are able to participate in the work of the working
parties established by the Economic and Social Council;
it
hopes that this collaboration can be further extended.

the

representatives of

9.4
Croatia set up its second Economic and Social Council in
1999. This is a tripartite body which has a total of 15
members. Alongside
government,
employers' organisations and trade unions are also represented.
Institutional representatives of the employers' side are drawn
from a single association (the Union of Croatian Employers);
the institutional representatives of workers are drawn from five
trade union associations (one delegate per association). In line
with the principle of rotation, a new chairman of the Council
is appointed at regular intervals. The work of the Council is
carried out in seven committees; the Council takes its decisions
at plenary sessions, which are generally held every three
months. The administrative tasks are carried out by an office
specially set up for the purpose by the government.

9.5
As is similarly the case in various EU Member States
which have their own Economic and Social Council, the Croa-
tian Economic and Social Council has, inter alia, the task of
addressing fundamental issues relating to economic and social
policy, labour market policy, the budget and privatisation.

9.6
The Croatian Economic and Social Council undoubtedly
has an important role to play in the social dialogue. The EESC
regards the existence of an effective Economic and Social
Council as a key prerequisite for the proper implementation of
the reform measures due to be carried out; such a Council
enables the respective professional groups concerned also to
play a role in this context. It is equally important to promote
an autonomous social dialogue between the parties involved in
collective bargaining.

Representative bodies are still

9.7
in the process of being
established in Croatia. Not all occupational groups have their
own representative bodies.

Trade union membership was virtually obligatory prior
9.8
to 1990. Following the economic changeover, trade unions in
the individual republics which succeeded the Republic of Yugo-
slavia, developed along very different lines. Compulsory trade
union membership was abolished everywhere and the trade
union organisations were completely restructured. Croatia has a
large number of individual trade unions and five trade union
associations which are, by virtue of their strength, also repre-
sented on the Croatian Economic and Social Council.

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9.9
Because of the fragmentation of trade unions into five
national associations, the interests of workers are not always
adequately looked after, e.g.
in the Economic and Social
Council. Efforts are therefore being made to establish an
umbrella organisation for the individual trade union associa-
tions. It would, in the EESC's view, be deplorable if, because of
this situation, the Croatian trade unions were not to be in a
position fully to carry out the role which they have been given
under the new system of labour relations.

10.2
In the last few years there have been considerable poli-
tical and economic changes in Croatia. The democratisation
process has made considerable progress. The macro-economic
indicators have shown a tremendous improvement, particularly
since 2000. In this context, it should be borne in mind that
Croatia has to cope with not only its conversion from the old
system to an effective market economy but, above all, with the
consequences of the war.

The bodies representing employers are the Croatian
9.10
Economic Chamber and the Union of Croatian Employers. The
Economic Chamber is divided into trade and professional and
regional groups. Its most important task is to provide support
for business both inside and outside Croatia, for example by
organising trade fairs and, above all, by providing further
training for
the Economic
its members. Membership of
Chamber is compulsory for all business enterprises registered
in Croatia.

9.11
Up to 1996 the Economic Chamber was responsible
for representing the employers in negotiating collective agree-
ments. This task has now been taken over by the Union of
Croatian Employers, an umbrella body representing twenty-
three occupational associations and based on the principle of
voluntary membership. It is clear that the latter body represents
the interests of only part of the overall number of Croatian
this
enterprises. SMEs also have their own association but
body, too, represents only part of the enterprises concerned. It
is, in the EESC's view, essential for the employers' organisations
to find solutions which will ensure that the interests of all
enterprises are defended in a representative way both on the
Economic and Social Council and vis-à-vis the government.

9.12
There is an existing legal basis for the separate and
independent representation of the interests of agriculture and
forestry but it has, up to now, not been acted upon. The inter-
ests of farmers are to be represented in a separate section of
the Economic Chamber. The EESC shares the view expressed in
the report from the World Bank that the interests of farmers
are not adequately represented, which is seen as a considerable
drawback in the context of preparing Croatia for the adoption
of the CAP. The EESC hopes that the Croatian Farmers' Union,
which has been operating as an association for a number of
years, will be called upon to serve as an interlocutor, will be
involved in appraisal procedures and may soon become estab-
lished as a forceful, independent body representing the interests
of Croatian farmers.

few years, economic development

10.3 Over the last
in
Croatia has been characterised by a welcome high level of
growth and the stabilisation of prices. In contrast to this situa-
tion, however, the level of unemployment, particularly in rural
areas, continues to constitute the major, unresolved social
problem; the balance of trade deficit has also shot up, as has
the level of government debt.

10.4
The EESC highlights the role played by the autonomous
social dialogue in promoting the reform process and points out
that, in line with its remit, the Economic and Social Council
should, in future, too, continue to be taken seriously by the
government.

such as

the economy,

In individual areas of

10.5
the
banking sector, Croatia has achieved considerable success in its
privatisation process. From an overall standpoint, however,
Croatia's privatisation process is being pursued less rigorously
than is the case in the acceding states. This is serving to
impede private investment just as much, as for example, the
question of unresolved ownership of property. The EESC hopes
that the new government will not only resolutely press ahead
with privatisation but will also remove other outstanding obsta-
cles to private investment.

If the requisite number of new jobs are to be created in
10.6
Croatia, considerable importance should be attached not only
to providing support for the establishment of new enterprises,
particularly SMEs, but also to improving training and further
training.

10.7 At the Zagreb Summit on 24 November 2000, the EU
held out to the Western Balkan states the prospect of accession
to the EU and the introduction of support programmes. This
prospect was conditional upon fulfilment of the ‘Copenhagen
Criteria’ and the obligations deriving from the EU Treaty.
Croatia was the first of the Western Balkan states to submit its
application for EU membership, which was presented on 21
February 2003. The EESC regards this decision as a positive
development as it indicates that Croatia has opted to participate
in the process of European integration.

10. Summary and recommendations

10.1
Croatia declared itself independent from Yugoslavia on
25 June 1991. There were many victims amongst the civil
population as a result of the ensuing war with Serbia, which
also devastated large parts of
the country and, above all,
damaged, to an enormous extent, Croatia's economic develop-
ment.

The EESC recognises the enormous efforts made by
10.8
Croatia to meet
the prerequisites for EU membership. The
action programme adopted by the Croatian Government with a
view to implementing the Stability and Association Agreement
has an important role to play in this context, as does also the
programme adopted by the government at the end of 2002
with a view to Croatia's integration into the EU.

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10.9
The objectives which have been set out are undoubt-
edly very ambitious. If the conditions for EU membership are
to be met, there is an urgent need to carry out a comprehensive
reform process. It is of decisive importance in this context not
just to introduce the requisite legislative measures, which were
decided upon in 2003, but also to fulfil,
in good time, the
administrative prerequisites for ensuring that these measures
are effectively applied.

in turn,

10.10
In the EESC's view, it is also of key importance to the
success of the project that the necessary reforms, liberalisation
measures and adjustments to comply with EU law receive the
support of the people. This,
is dependant upon the
public being adequately informed of the importance and the
impact of EU membership. The EESC therefore recommends
that organised civil society as a whole – not just a number of
individual occupational associations – be involved in the neces-
sary decision-making processes. These organisations must also
be in a position to provide their members with factually well-
founded information.

10.11
The EESC joins the European Commission in expres-
sing its concern over the ongoing unresolved problems in the
justice, measures to combat
fields of the administration of
corruption, the processing of applications for asylum and, in
particular, unresolved problems in connection with the Interna-

Brussels, 31 March 2004.

tional War Crimes Tribunal for the Former Yugoslavia in The
Hague. The EESC highlights the fact that the resolution of these
problems will be of quite critical importance when it comes to
assessing whether the Copenhagen Criteria can be regarded as
having been met.

The EESC recognises the express intention of

10.12
the
Croatian Government fully to meet the obligations set out
under the Dayton and Paris Peace Agreements. In this context
carrying out the task of repatriating the large number of refu-
gees will pose a considerable challenge.

10.13
In the EESC's view, normalising Croatia's bilateral rela-
tions with its direct neighbours is a very essential aspect of
Croatia's preparations for EU membership.

10.14
The establishment of strong civil society organisations
and an active participatory democracy are also key prerequisites
for the achievement of stability and prosperity. The EESC there-
fore regards it as a positive development that the institutional
prerequisites for the social dialogue and the civil dialogue have
either been put in place or are in the process of being put in
place. A factor of decisive importance in this context is that all
occupational groups should be in a position to bring an influ-
ence to bear through the medium of representative bodies
which are truly representative and well organised.

The President

of the European Economic and Social Committee

Roger BRIESCH