Communication from the Commission - 2005 enlargement strategy paper {SEC(2005) 1433 } {SEC(2005) 1421 } {SEC(2005) 1422 } {SEC(2005) 1423 } {SEC(2005) 1424 } {SEC(2005) 1426 } {SEC(2005) 1428 }
Date: 2005-11-09
Institutions: European Commission
Subjects: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Serbia and Montenegro, Türkiye, accession criteria, accession to the European Union, enlargement of the Union

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 9.11.2005 
COM (2005) 561 final 

COMMUNICATION FROM THE COMMISSION 

2005 enlargement strategy paper 

{SEC(2005) 1433 } 
{SEC(2005) 1421 } 
{SEC(2005) 1422 } 
{SEC(2005) 1423 } 
{SEC(2005) 1424 } 
{SEC(2005) 1426 } 
{SEC(2005) 1428 } 

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1. 

THE EU’S ENLARGEMENT POLICY  

Enlargement  is  one  of  the  EU’s  most  powerful  policy  tools.  The  pull  of  the  EU  has  helped 
transform Central and Eastern Europe from communist regimes to modern, well-functioning 
democracies.  More  recently,  it  has  inspired  tremendous  reforms  in  Turkey,  Croatia  and  the 
Western  Balkans.  All  European  citizens  benefit  from  having  neighbours  that  are  stable 
democracies and prosperous market economies. It is vitally important for the EU to ensure a 
carefully  managed  enlargement  process  that  extends  peace,  stability,  prosperity,  democracy, 
human rights and the rule of law across Europe.  

After generations of division and conflict, the EU is peacefully creating a united Europe. Ten 
new  members  joined  in  2004,  and  the  EU  signed  an  accession  treaty  with  Bulgaria  and 
Romania  in  April  2005.  In  October  2005,  the  Union  opened  accession  negotiations  with 
Turkey  and  Croatia,  and  negotiations  on  a  Stabilisation  and  Association  Agreement  with 
Serbia  and  Montenegro.  Each  of  these  events  was  justified  by  the  countries’  progress  in 
meeting the relevant conditions. 

The  Western  Balkans  is  a  particular  challenge  for  the  EU.  Enlargement  policy  needs  to 
demonstrate  its  power  of  transformation  in  a  region  where  states  are  weak  and  societies 
divided. A convincing political perspective for eventual integration into the EU is crucial to 
keep their reforms on track. But it is equally clear that these countries can join only once they 
have met the criteria in full. 

Enlargement policy is defined by Article 49 of the Treaty on European Union, which states 
that  any  European  State  which  respects  the  EU’s  fundamental  democratic  principles  may 
apply to become a member of the Union.1 The EU has set political and economic criteria for 
membership,  as  well  as  criteria  related  to  the  obligations  of  membership  and  the 
administrative capacity to implement and enforce the EU’s laws and policies.2 The three basic 
principles of the Commission’s approach to enlargement are consolidation, conditionality and 
communication. 

Consolidating the EU’s commitments on enlargement 

Enlargement  has  always  been  an  essential  part  of  the  European  project.  The  EU  cannot 
abandon  its  responsibilities  to  ensure  security,  stability  and  prosperity  on  its  own  continent 
and further afield. The current enlargement agenda is the Balkans and Turkey, according to 
the decisions of the EU’s heads of state and government. The European perspective has driven 
the significant progress achieved by these countries in recent years, but the reform process is 
still  fragile.  Important  challenges  lie  ahead,  such  as  the  resolution  of  Kosovo’s  status,  in 
which the EU will play a central role.  

The  Commission  is  convinced  that  a  carefully  managed  accession  process  contributes 
positively to the European project. A well-functioning Union is in the interests of both present 
and  future  members.  The  Union’s  capacity  to  absorb  new  members,  while  maintaining  the 

1 Articles 49 and 6 of the Treaty on European Union. 
2 As stated in the conclusions to the European Councils at Copenhagen in 1993 and Madrid in 1995. 

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momentum  of  European  integration,  is  an  important  consideration  in  the  general  interest  of 
both the Union and the candidate countries.3  

There  is  no  further  enlargement  with  a  large  group  of  countries  at  the  same  time  in  view. 
Accession negotiations with Turkey are a long-term process. The Western Balkans contains 
smaller countries at different stages on their road towards the EU. Future enlargements will go 
at  the  pace  dictated  by  each  country’s  performance  in  meeting  the  rigorous  standards,  to 
ensure the smooth absorption of new members. 

The  pace  of  enlargement  has  to  take  into  consideration  the  EU’s  absorption  capacity. 
Enlargement is about sharing a project based on common principles, policies and institutions. 
The  Union  has  to  ensure  it  can  maintain  its  capacity  to  act  and  decide  according  to  a  fair 
balance within its institutions; respect budgetary limits; and implement common policies that 
function well and achieve their objectives.  

For over three decades, the EU has successfully absorbed a very diverse set of countries. By 
developing its policies and institutions, the Union has managed to respond positively to new 
circumstances – such as the fall of dictatorships, the collapse of communism, and the rise of 
globalisation. Enlargement has proved to be a successful instrument in this process. 

Applying fair and rigorous conditionality 

The  EU  must  remain  rigorous  in  demanding  fulfilment  of  its  criteria,  but  fair  in  duly 
rewarding progress. Aspirant countries can only proceed from one stage of the process to the 
next once they have met the conditions for that stage. Moreover, the Commission is prepared 
to  recommend  the  suspension  of  progress  in  case  of  a  serious  and  persistent  breach  of  the 
EU’s fundamental principles, or if a country fails to meet essential requirements at any stage. 
Such  requirements  include  cooperating  with  the  International  Criminal  Tribunal  for  the 
former Yugoslavia (ICTY). 

The  EU  will  remain  firm  in  demanding  that  aspiring  members  fulfil  all  the  requirements 
before  they  join.  The  Commission  will  assist  the  countries  and  monitor  their  progress  to 
ensure proper implementation and enforcement. 

In both the Balkans and Turkey, the effectiveness of conditionality in driving reforms depends 
on  maintaining  a  credible  political  perspective  for  eventual  integration  into  the  Union. 
Aspirant countries can best sustain public support for bold and often painful reforms when the 
EU supports them, works with them, and keeps its own promises. 

The  perspective  of  moving  to  the  next  stage  in  relations  with  the  Union  is  a  powerful 
incentive  for  countries  to  transform  themselves  and  to  adopt  EU  standards  and  values.  The 
journey towards membership has value in itself, even in cases where accession is many years 
away. This journey is often difficult, so it is essential for the EU to stay engaged throughout 
the  process,  and  committed  to  the  outcome.  This  paper  outlines  below  a  road-map  for 
realising the European perspective of the Western Balkan countries, setting out the stages and 
the conditions attached to each stage. 

3 As set out by the European Council at Copenhagen in June 1993. 

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Communicating enlargement policy 

Broad public support is essential to sustain the enlargement policy. The Commission is aware 
of  the  concerns  of  EU  citizens  about  European  integration  in  general,  and  enlargement  in 
particular. The EU needs to communicate better the objectives and challenges of the accession 
process  and  how  it  deals  with  the  countries.  This  is  particularly  important  in  a  context  of 
public  concern  about  the  challenges  of  globalisation  and  the  debate  about  the  future  of 
Europe.  The  Union  has  to  respond  directly  to  the  concerns  of  its  citizens.  In  particular,  it 
needs to offer a clear strategy for future accessions that is based on objective conditions and 
realistic commitments. Better communication about previous enlargements is vital to ensure 
support for future accessions.  

The latest enlargement was a remarkable success. Before 1 May 2004, the largest enlargement 
in  the  EU’s  history  was  widely  predicted  to  provoke  major  problems,  such  as  institutional 
deadlock and massive flows of migrant workers. But in fact the adjustments have been limited 
and  manageable.  Twenty-five  Member  States  are  participating  fully  in  the  institutions.  The 
EU citizens working outside their home countries have made a positive economic contribution 
in the Member States which have opened their labour markets. 

Meanwhile, the new Member States have brought in economic dynamism, helping to maintain 
and create jobs across the whole EU. Increased trade and investment have boosted the Single 
Market. All European citizens are benefiting from the application of European standards, for 
example in environmental protection, in the new Member States. 

However,  this  success  has  not  been  communicated  well.  This  requires  a  co-ordinated  joint 
response. Member States must bear their responsibility to explain and defend the policies they 
have  agreed  unanimously.  The  Commission  will  complement  this  effort  by  using  a  wide 
variety  of  routes  to  communicate  its  enlargement  policy  and  counter  misconceptions  with 
evidence. It will seek to engage in a dialogue with key actors in politics, the media, academia, 
business and social partners in order to promote a better informed debate about both past and 
future  enlargements.  A  vital  part  of  the  Commission’s  communications  strategy  is  the  civil 
society dialogue, which aims to reinforce links between civil society in the EU and candidate 
countries in order to improve mutual understanding, address concerns, and encourage a high-
quality debate.4 

*** 

This paper first deals with the candidate countries, Croatia and Turkey, and then the Western 
Balkan  potential  candidate  countries.5  Detailed  Progress  Reports  on  each  country  are 
published  alongside  this  paper.  However,  the  analysis  on  the  former  Yugoslav  Republic  of 
Macedonia  is  included  in  the  Opinion  on  the  application  from  this  country  for  EU 
membership, also delivered on 9 November. 

4  See  Commission  Communication  on  Civil  Society  Dialogue  between  the  EU  and  the  Candidate  Countries 

(COM (2005) 290). 

5 The Commission reported on 25 October 2005 on its monitoring of Bulgaria’s and Romania’s progress (see the 

Commission Communication COM (2005) 534) 

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2. 

TURKEY AND CROATIA 

2.1. 

Progress made by Turkey 

Political  transition  is  ongoing  in  Turkey  and  the  country  continues  to  sufficiently  fulfil  the 
Copenhagen political criteria. Important legislative reforms have now entered into force and 
should lead to structural changes in the legal system, particularly in the judiciary. However, 
the  pace  of  change  has  slowed  in  2005  and  implementation of  the  reforms  remains  uneven. 
Although  human  rights  violations  are  diminishing,  they  continue  to  occur  and  there  is  an 
urgent need both to implement legislation already in force and, with respect to certain areas, 
to  take  further  legislative  initiatives.  Significant  further  efforts  are  required  as  regards 
fundamental freedoms and human rights, particularly freedom of expression, women’s rights, 
religious freedoms, trade union rights, cultural rights and the further strengthening of the fight 
against  torture  and  ill-treatment.  In  particular,  Turkey  should  integrate  better  the  reform 
process  into  the  work  of  all  public  authorities.  Turkey’s  commitment  to  further  political 
reforms  should  be  translated  into  more  concrete  achievements  for  the  benefit  of  all  Turkish 
citizens regardless of their origin. 

Turkey has made fundamental progress in the economic field and can now be regarded as a 
functioning market economy, as long as it firmly maintains its recent stabilisation and reform 
achievements.  Turkey  should  also  be  able  to  cope  with  competitive  pressure  and  market 
forces within the Union in the medium term, provided that it firmly maintains its stabilisation 
policy and takes further decisive steps towards structural reforms. 

As  regards  the  adoption  and  implementation  of  the  EU  legal  order  (the  acquis),  Turkey’s 
alignment has progressed in several areas but remains at an early stage in most areas. Further 
work  is  required  in  all  areas,  new  legislation  should  not  move  away  from  the  acquis,  and 
discrimination against non-Turkish service providers or products, or different treatment of EU 
Member  States,  should  be  discontinued.  Commitments  deriving  from  the  customs  union 
should  be  respected.  Administrative  and  judicial  capacity  must  be  reinforced  to  apply  EU 
rules as they are introduced in the country. 

2.2. 

Progress made by Croatia 

Croatia  faces  no  major  difficulties  in  meeting  the  political  requirements  for  membership. 
There  has  been  progress  in  most  areas  but  important  efforts  are  still  needed  to  reform  the 
judicial  system,  including  the  unbiased  prosecution  of  war  crimes,  to  fight  corruption,  to 
improve  the  situation  of  minorities  and  to  facilitate  refugees’  return.  There  has  been  good 
progress  on  regional  cooperation,  both  in  terms  of  bilateral  relations  with  neighbouring 
countries  and  in  terms  of  regional  initiatives.  The  lack  of  full  cooperation  with  the 
International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY)  prevented  the  EU  from 
opening  accession  negotiations  as  envisaged  in  March  2005;  full  cooperation  has  now  been 
established and must be maintained.  

Regarding the economic criteria, Croatia can be regarded as a functioning market economy. It 
should be able to cope with competitive pressure and market forces within the Union in the 
medium  term,  provided  that  it  continues  to  implement  its  reform  programme  to  remove 
remaining weaknesses.  

As  regards  the  adoption  and  implementation  of  the  EU  legal  order,  Croatia  has  made  some 
progress,  mainly  in  terms  of  legislative  alignment.  Croatia  needs  to  continue  legislative 

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alignment across the board while at the same time  strengthening administrative and judicial 
capacity  to  enforce  the  acquis.  In  many  cases  enforcement  is  weak  and  administrative 
capacity remains uneven.  

2.3. 

Accession strategy 

Conducting accession negotiations  

Relations between the EU and Turkey and Croatia entered a new and historic phase with the 
opening  of  accession  negotiations  on  3  October  2005.  The  EU  has  met  its  commitments  in 
this  regard.  The  negotiations  will  offer  both  countries  the  opportunity  to  demonstrate  their 
resolve  and  ability  to  complete  the  necessary  transformation  and  meet  all  requirements  for 
membership.  

The  signature  of  the  Additional  Protocol  to  the  Ankara  Agreement  this  summer  was  a 
condition  to  start  accession  negotiations  with  Turkey.  The  EU  will  monitor  closely  the 
implementation  of  this  Protocol  and  will  evaluate  this  in  2006,  in  particular  whether  all 
restrictions on the free movement of goods, including on means of transport, have been lifted.  

The ICTY Chief Prosecutor’s assessment that Croatia is now fully cooperating paved the way 
for  the  Council  to  launch  accession  negotiations.  Sustained  full  cooperation  with  the  ICTY 
will  remain  a  requirement  for  progress  throughout  the  accession  process.  Less  than  full 
cooperation with ICTY at any stage will affect the overall progress of negotiations and could 
lead to the suspension of the negotiations.  

The negotiations will be conducted on the basis of clear and rigorous negotiating frameworks 
agreed by the Council, which set out the method and guiding principles.6 The negotiations will 
be based on the countries’ own merits and their pace will depend on the countries progress in 
meeting the requirements for membership. The Union expects both countries to comply fully 
with  the  political  criteria  and  to  work  towards  their  further  improvement  throughout  the 
negotiations.  In  case  of  serious  and  persistent  breach  by  either  country  of  the  principles  of 
liberty, democracy, respect for human rights and fundamental freedoms and the rule of law on 
which the Union is founded, accession negotiations may be suspended. In order to become a 
Member State, both countries will have to accept the acquis of the Union. As in all previous 
accession negotiations, specific arrangements may be agreed.  

The Union will specify benchmarks for the provisional closure and where appropriate also for 
the opening of individual chapters. Among the benchmarks to be considered for chapters in 
the  economic  field,  the  Commission  will  pay  particular  attention  to  the  fulfilment  of 
contractual  obligations  to  the  Union  and  to  all  its  Member  States  under  the  association 
agreements, including for Turkey the customs union and the Additional Protocol, and of the 
criterion of being a functioning market economy. If the Commission at a later stage concludes 
that  a  candidate  country  no  longer  fulfils  these  obligations  or  criteria,  the  Commission  may 
propose  to  the  Member  States  that  accession  negotiations  on  the  relevant  chapters  be 
suspended.  

The  first  step  of  the  negotiations  was  the  start  of  the  analytical  examination  (called 
‘screening’)  of  the  EU  acquis  on  20  October  2005.  The  screening  exercise  brings  together 

6  The  negotiating  frameworks  are  published  at  http://europa.eu.int/comm/enlargement/turkey/docs.htm  and 

http://europa.eu.int/comm/enlargement/croatia/key_documents.htm.  

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experts from Turkey and Croatia and from the Commission to explain EU rules and examine 
each country’s plans for adopting and implementing them. It is expected to take until autumn 
2006 to screen all the acquis chapters. After a chapter has been screened the EU will decide, 
on a proposal from the Commission, whether it can be opened or which benchmarks need to 
be met before opening it.  

Supporting reforms 

A  pillar  of  the  Commission’s  strategy  for  Turkey  is  its  active  support  of  the  process  of 
political reforms. The regular monitoring of the political criteria has intensified with frequent 
meetings at political and experts level to review in detail all the issues and problems arising 
under the various headings of the political criteria. The main outstanding issues will need to 
be  addressed  in  the  early  stages  of  the  accession  negotiations,  including  through  the 
benchmarking of necessary actions under relevant negotiating chapters, if the momentum of 
the negotiations is to be maintained. 

The Commission has continued to provide active support to the process of political, economic 
and other reforms linked to the accession process in Croatia, particularly in the context of the 
Stabilisation and Association Agreement which entered into force in February 2005.  

For  both  countries,  the  Commission  proposes  Accession  Partnerships  reflecting  the  main 
priorities  identified  in  the  Progress  Reports.  They  translate  the  conditionality  for  progress 
towards  the  EU  into  concrete  actions.  EU  assistance  projects  are  designed  around  the  same 
priorities.  

After  becoming  a  candidate  country,  Croatia  became  eligible  for  all  three  pre-accession 
financial instruments: Phare for institution-building and economic and social cohesion, ISPA 
for  environment  and  transport  infrastructures  and  SAPARD  for  agricultural  and  rural 
development. Croatia also remains eligible for the CARDS Regional Programme in 2005 and 
2006. Pre-accession financing amounts to EUR 105 million in 2005 and EUR 140 million in 
2006. Croatia can also participate in Community Programmes. 

The  2005  pre-accession  financial  assistance  programme  for  Turkey  consists  of  a  national 
programme  and  associated  expenditure  on  multi-country  programmes,  communication  and 
management, bringing the overall total to EUR 300 million in 2005 and 500 million in 2006. 
The key priorities for the 2005 programme reflect the EU’s priorities relating to the political 
criteria, economic and social cohesion, the implementation of the acquis in key areas, and the 
EU-Turkey political and social dialogue. This also includes financing to prepare Turkey for 
the implementation of large-scale infrastructure and measures resembling the structural funds 
from 2007. 

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3. 

THE WESTERN BALKANS 

3.1. 

Progress  made  by  Albania,  Bosnia  and  Herzegovina,  the  former  Yugoslav 
Republic of Macedonia,7 Serbia and Montenegro and Kosovo8  

Political developments 

The  overall  political  situation  is  improving  but  considerable  challenges  remain.  Albania  is 
politically  more  stable,  as  demonstrated  by  the  smooth  transition  to  a  new  government  in 
July/August  2005;  however,  governance  still  needs  to  improve  significantly.  Bosnia  and 
Herzegovina has made considerable progress in implementing the priorities in the Feasibility 
Study,  but  its  complex  constitutional  structures  often  lead  to  blockages  and  inefficiency  in 
decision-making.  The  former  Yugoslav  Republic  of  Macedonia  has  displayed  a  strong 
commitment  to  the  implementation  of  the  Ohrid  Framework  Agreement  and  has  made 
important progress since 2001, strengthening the country’s stability. Serbia and Montenegro 
suffers  from  structural  weaknesses  and  coordination  difficulties,  particularly  in  areas  where 
competences are shared between the State Union and the republics. Kosovo’s institutions still 
lack  the  political  maturity  necessary  to  build  a  truly  democratic,  secure  and  multi-ethnic 
society.  

The functioning of the democratic institutions is generally improving. The countries need to 
complete  their  electoral  reforms.  Election  standards  have  improved.  The  parliaments  are 
becoming  more  effective  across  the  region,  but  a  lack  of  resources  and  an  unconstructive 
political  atmosphere  in  some  countries  hamper  their  work.  Public  administrations  are 
vulnerable to political interference and suffer from weak administrative and implementation 
capacities. The countries need to intensify reform efforts. They also need to develop a highly 
qualified and independent civil service which can manage the European integration process.  

The  judicial  systems  are  being  reformed  and  legal  frameworks  have  improved.  However, 
judiciaries  generally  remain  weak  and  lack  independence.  Inefficiency,  lack  of  resources, 
backlogs  of  cases,  and  weak  implementation  and  enforcement  of  legislation  are  commonly 
shared problems. In Kosovo, recruitment from minority populations to the judicial system is a 
key priority. Although legal frameworks for the protection of human rights and minorities are 
in place in almost all countries, there remains discrimination in practice.  

Reform  of  police  services  needs  to  continue,  to  ensure  that  they  operate  without  political 
interference  and  that  they  are  organised  according  to  technical  and  professional  criteria. 
Organised  crime  and  corruption  remain  significant  problems  throughout  the  region.  The 
countries’  anti-corruption  strategies  need  to  be  refined  and  updated  with  realistic  objectives 
and timetables. 

The  number  of  people  still  registered  as  refugees  or  internally  displaced  persons  has 
decreased, mainly as a result of a re-registration of refugees and internally displaced persons 
in Serbia and Montenegro and in Bosnia and Herzegovina. The violent events in Kosovo in 
March 2004 were a serious setback to the return process and the dialogue between Belgrade 
and Pristina on this issue remains problematic. 

7  Progress  made  by  the  former  Yugoslav  Republic  of  Macedonia  is  covered  in  the  Commission  Opinion 

published separately (COM (2005) 562). 

8 Kosovo is currently governed under the auspices of UN Security Council Resolution 1244. 

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Bosnia  and  Herzegovina  and  Serbia  and  Montenegro  have  made  significant  progress  in 
cooperation with the ICTY, with many transfers of indictees to the Hague, but they still need 
to achieve full cooperation. Nearly all of the countries have aligned with the Council Decision 
on the freezing of assets of natural persons indicted by the ICTY.9  

Increasing  regional  cooperation  is  important  for  further  stabilisation  and  reconciliation.  It  is 
an  indication  of  a  country’s  ability  to  cope  with  more  advanced  relations  with  the  EU.  The 
recent  apology  of  the  Serbian  President  for  war  crimes  committed  by  his  countrymen  in 
Bosnia  and  Herzegovina  was  an  encouraging  sign  of  a  deepening  reconciliation  process. 
Cooperation on refugee return has improved and it is increasing in the area of justice, liberty 
and security, including in combating organised crime.  

Over the past six years, the Stability Pact has made a valuable contribution, but the premises 
for  its  work  are  changing.  The  region  is  gradually  assuming  ownership  of  regional 
cooperation,  for  example  through  the  South-East  Europe  Cooperation  Process.  A  reformed 
Stability Pact could gradually and adequately transfer its key functions to the region, in order 
to maintain the momentum in regional cooperation. 

Economic developments 

Macroeconomic stability has been further strengthened overall. This contributed to sustained 
growth  rates  and  moderate  inflation.  However,  high  current  account  deficits  remained  a 
source of vulnerability.  

Structural  reforms  progressed  unevenly.  The  process  of  privatisation  and  restructuring  is  at 
different  stages.  Enforcement  of  property  rights  and  contracts  is  still  difficult.  The  large 
informal sector remained a source of uneven competition and tax evasion. Trade liberalisation 
was advanced by the completion of a regional network of free trade agreements. In order to 
establish functioning market economies, the countries need to ensure further macro-economic 
stabilisation  and  structural  reforms,  including  liberalisation  and  privatisation.  This  process 
requires appropriate regulatory frameworks and structures of corporate governance.  

3.2. 

Pre-accession strategy 

Realising the perspective of membership: a road-map 

All the Western Balkan countries have been given the prospect of EU membership once they 
fulfil  the  necessary  conditions.10  The  EU  will  stand  by  this  commitment.  Each  country  will 
advance  towards  this  goal  on  its  own  merits,  depending  on  its  progress  in  meeting  the 
requirements.  The  countries  are  at  different  stages  along  their  path  towards  the  EU,  but  all 
will be able to realise their European perspective by following the road-map explained below. 

As  potential  candidate  countries,  the  Western  Balkans  already  have  access  to  a  number  of 
instruments  also  available  to  help  candidate  countries.  These  include  access  to  Community 
programmes  (such  as  education,  science  and  research),  help  to  reach  EU  standards,  trade 
preferences  for  their  products,  regular  reporting  by  the  Commission,  and  policy  priority-
setting by the EU.  

9 Council Decision 2004/767/CFSP implementing Common Position 2004/694/CFSP. 
10 European Council at Thessaloniki in June 2003. 

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Each country can establish a far-reaching Stabilisation and Association Agreement (SAA) 
with  the  EU.  These  agreements  help  to  prepare  Western  Balkan  countries  for  future 
membership  by  introducing EU  rules in various fields well in advance of accession. So far, 
Croatia and the former Yugoslav Republic of Macedonia have SAAs in force. Albania is close 
to  finalising  such  an  agreement,  while  Serbia  and  Montenegro  has  just  opened  SAA 
negotiations, and Bosnia and Herzegovina will do so shortly. 

Before  opening  SAA  negotiations,  the  EU  examines  whether  the  basic  conditions  are  in 
place. A sufficient degree of stabilisation is a pre-condition for opening negotiations.  

The EU supports the further stabilisation of the region through a number of instruments under 
the  Common  Foreign  and  Security  Policy,  including  EU  Special  Representatives,  the  EU 
Monitoring  Mission,  the  EU  Military  Force  in  Bosnia  and  Herzegovina  and  EU  Police 
Missions in Bosnia and Herzegovina and in the former Yugoslav Republic of Macedonia. The 
nature  of  the  EU’s  presence  will  need  to  adapt  as  the  countries  stabilise  and  make  progress 
towards European integration. The Union has made an important step in 2005 by appointing 
the  same  person  as  Head  of  the  Commission  Delegation  and  EU  Special  Representative  in 
Skopje. 

Once stabilisation is sufficiently ensured, the Commission can recommend to the Council in a 
Feasibility Report whether and under what conditions SAA negotiations can start. Given the 
importance  of  having  a  contractual  relationship,  the  Commission  considers  it  a  priority  to 
negotiate  and  then  conclude,  as  soon  as  possible,  SAAs  with  the  remaining  countries.  SAA 
negotiations with Serbia and Montenegro were opened in October 2005. Also in October, the 
Commission recommended to the Council the opening of SAA negotiations with Bosnia and 
Herzegovina. 

SAA negotiations can be concluded once the country has made sufficient overall progress in 
the reform areas essential for implementation of the agreement. Once signed, the agreement is 
subject to ratification by the EU side and by the future associated country. In the meantime, 
the  trade-related  provisions  of  the  SAA  are  applied  by  means  of  an  interim  agreement. 
Following ratification, the agreement enters into force. 

Croatia  and  the  former  Yugoslav  Republic  of  Macedonia  have  SAAs  in  force.  Albania  has 
made sufficient progress in the development of the legislative and institutional framework and 
the  administrative  capacity  required  for  the  proper  implementation  of  the  future  agreement; 
this paves the way for the conclusion of SAA negotiations.  

The Commission considers that it should be possible to conclude the SAA negotiations with 
Serbia and Montenegro and with Bosnia and Herzegovina within a year of opening. This is an 
ambitious  timetable,  which  will  depend  on  concrete  progress  on  political,  economic  and 
institutional reforms. 

The successful negotiation and conclusion of an Agreement allows a country to demonstrate 
that it is able to sustain more advanced relations with the EU. Proper implementation of the 
Agreement is therefore the best basis on which to assess a country’s readiness to move to the 
next  phases  of  candidate  status  and  then  accession  negotiations.  A  country’s  satisfactory 
track-record in implementing its SAA obligations (including the trade-related provisions) will 
therefore be an essential element for the EU to consider any membership application. 

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Following a membership application, and on the basis of the Commission’s Opinion, the EU 
may  decide  to  grant  an  applicant  country  candidate  status.  This  status  is  a  political 
recognition  of  a  closer  relationship  with  a  country  on  its  way  towards  membership.  In 
practice,  it  implies  that  EU  assistance  can  be  used  in  all  areas  relevant  to  the  ability  of  the 
country  eventually  to  assume  the  obligations  of  membership,  such  as  preparation  for  the 
implementation of the structural funds. However, it does not mean any automatic increase in 
the  overall  sum  of  assistance  allocated  to  the  country.  Candidate  status  implies  that  the 
country concerned opens a new stage in its relationship with the EU, and it will benefit from 
more intense political dialogue and economic cooperation with the Commission and Member 
States.  

Candidate  status  is  necessary  but  insufficient  for  opening  accession  negotiations.  Before 
accession  negotiations  can  be  opened,  the  country  needs  to  reach  a  sufficient  degree  of 
general  compliance  with  the  Copenhagen  criteria.  The  political  criteria  must  be  met,11 
including  full  cooperation  with  the  ICTY  where  relevant.  The  country  has  to  have  made 
significant  progress  towards  meeting  the  economic  criteria  and  the  obligations  of 
membership. The Commission examines the degree of overall compliance in its Opinion on 
the  country’s  application  for  membership,  and  reports  on  progress  regularly  thereafter.  The 
European  Council  decides  whether  and  when  negotiations  can  be  opened,  based  on  a 
taken,  an 
recommendation  from 
intergovernmental conference is convened on the basis of a negotiating framework adopted by 
the Council following a Commission proposal. 

that  decision  has  been 

the  Commission.  Once 

As spelled out in the negotiating framework for Croatia, the fulfilment of the specific criteria 
in  the  Stabilisation  and  Association  Process  (SAP)  and  implementation  of  the  SAA  must 
continue right up until accession. Weaknesses in fulfilling these requirements will affect the 
pace of the negotiations. Based on previous experience, the accession negotiations can last for 
widely varying numbers of years, depending on the country. By their very nature, negotiations 
are an open-ended process. Once concluded, the results of the negotiations are reflected in an 
Accession Treaty. This Treaty allows for accession to the Union, once it has been approved 
by the European Parliament, and ratified by all Member States and the acceding country.  

Supporting reforms 

The  European  Partnerships  guide  the  countries’  reform  efforts  and  indicate  the  concrete 
actions  needed  to  achieve  progress  through  the  road-map.  They  identify  the  short  and 
medium-term  priorities  for  each particular  stage  of  the  pre-accession  process.  The  countries 
should  respond  to  the  priorities  proposed  by  the  EU  with  their  own  corresponding  Action 
Plans without delay. To make the most of this instrument, the countries need to integrate the 
Partnership  priorities  fully  into  their  domestic  policy  agenda,  including  not  only  legislative 
but  also  budgetary  and  administrative  planning.  The  European  Partnerships  will  continue  to 
be the basis for the CARDS assistance programme to the Western Balkans.12 

The Union supports the reform agenda contained in the European Partnerships with a range of 
instruments.  EU  assistance 
the  Western  Balkans  comprises  an  allocation  of 
EUR 539 million  in  2005  alone,  including  support  to  the  regional  programme  for  which 
Croatia  remains  eligible.  This  assistance  focuses  on  the  challenges  identified  within  the 

to 

11 As specified by the European Council at Helsinki in December 1999. 
12 CARDS = Community Assistance for Reconstruction, Development and Stabilisation. 

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framework  of  the  European  Partnerships.  Most  new  EU  support  instruments  agreed  at  the 
2003  Thessaloniki  Summit  have  now  been  put  in  place.  The  countries  have  been  given  the 
possibility of participating in Community programmes, in order to familiarise them with EU 
policies  and  working  methods.  The  Commission  envisages  making  a  proposal  shortly 
concerning the application of diagonal cumulation of origin in trade between the countries of 
the region which have a free trade agreement with the EU. Separately, the Commission has 
proposed a five-year extension of the countries’ free access to the EU market essentially for 
all  products.  Progress  towards  the  conclusion  of  agreements  on  readmission  and  visa 
facilitation  will  signal  mutual  commitment  to  further  cooperation  on  justice,  liberty  and 
security. 

4. 

(1) 

(2) 

(3) 

(4) 

(5) 

CONCLUSIONS AND RECOMMENDATIONS 

The  Commission's  enlargement  policy  is  based  on  consolidation,  conditionality  and 
communication.  A  carefully  managed  enlargement  process  extends  peace,  stability, 
prosperity, democracy and the rule of law across Europe. The Union will stand by the 
commitments it has made once the countries fulfil the strict conditions for accession. 
Each  country  will  be  assessed  on  its  own  merits.  The  Commission  will  assist  the 
implementation  and 
countries  and  monitor 
enforcement.  At  the  same  time,  the  EU  as  a  whole  has  to  communicate  better  the 
objectives and the challenges of the accession process. 

to  ensure  proper 

their  progress 

The  opening  of  accession  negotiations  with  Turkey  and  Croatia  on  3  October  has 
begun a new phase of political and economic integration. The Accession Partnerships 
set  out  the  key  tasks  each  country  has  to  undertake  to  progress  through  the 
negotiations. 

The future of the Western Balkans lies in the EU. The Western Balkan countries are 
moving from stabilisation and reconstruction to sustainable development, association 
and integration into European structures, achieving the aims set out at the Thessaloniki 
European Council in 2003. The Commission aims to ensure that all the countries sign 
Stabilisation  and  Association  Agreements  (SAAs)  with  the  EU,  to  establish  a  sound 
contractual  relationship.  A  country’s  satisfactory  track-record  in  implementing  its 
SAA obligations (including the application of its trade-related provisions in the form 
of  an  Interim  Agreement)  will  be  an  essential  element  for  the  EU  to  consider  any 
membership application. 

The  Commission  recommended  this  year  that  the  EU  open  SAA  negotiations  with 
Serbia  and  Montenegro,  and  with  Bosnia  and  Herzegovina.  Depending  on  their 
progress in making political, economic and institutional reforms, it should be possible 
to  conclude  these  SAA  negotiations  within  a  year  of  opening.  Albania  has  made 
sufficient overall progress in the reform areas essential for implementation of its future 
SAA; this paves the way for the conclusion of negotiations. 

The  EU  is  ensuring  that  Kosovo  benefits  from  the  key  instruments  offered  to  the 
region. The opening of status discussions is a challenge for the entire region, and for 
the international community. The strong commitment of all parties to a multi-ethnic, 
stable and democratic Kosovo will be essential to achieve a sustainable settlement that 
reinforces  the  security  and  stability  of  the  region,  and  to  ensure  its  further  progress 
towards the EU. 

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(6) 

In its Opinion, the Commission recommends that the European Council should grant 
the  status  of  candidate  country  to  the  former  Yugoslav  Republic  of  Macedonia. 
Accession  negotiations  should  be  opened  once  the  country  has  reached  a  sufficient 
degree  of  compliance  with  the  membership  criteria.  The  Commission  will  present  a 
report  to  the  Council  no  later  than  the  end  of  2006  on  the  progress  of  the  former 
Yugoslav Republic of Macedonia.  

Annex: Conclusions of the Progress Reports on Albania, Bosnia 
and Herzegovina, Croatia, Serbia and Montenegro and Kosovo, 
Turkey 

Albania 

As regards the political situation, Albania has made progress in reinforcing its democratic, 
judicial  and  public  administration  institutions,  but  needs  to  implement  strategies  and  laws 
with  more  vigour  to  further  improve  their  functioning.  Efforts  have  been  made  to  fight 
corruption  and  improve  human  rights.  Further  commitment  is  needed  to  achieve  significant 
results. Albania has continued to play a positive political and commercial role in the region. 

The Parliament has remained the centre of political exchange and has passed a considerable 
amount of important legislation. Overly marked political confrontation has hindered political 
consensus  on  reform  issues,  slowing  progress.  New  internal  parliamentary  rules,  and  in 
particular  the  strengthened  European  Integration  Committee,  could  help  foster  constructive 
consensus. The July 2005 parliamentary elections were fundamentally sound and resulted in a 
smooth  transfer  of  power,  but  showed  shortcomings  which  demonstrated  a  need  for  further 
electoral reform. 

The  government  has  developed  major  new  strategies  and  co-ordination  tools  relevant  to 
Albania’s EU progress. In many cases further energy and commitment is needed to use them 
to  achieve  concretely  improved  results.  The  Ministry  of  European  integration  has  been 
strengthened, but needs further resources in order to improve its leadership and co-ordination 
on EU issues. The merging of several ministries could improve co-ordination in related policy 
areas but care will be needed to ensure appropriate checks and balances. 

Albania has improved the oversight, recruitment and training of its public administration and 
taken  steps  to  enhance  its  legal  framework.  It  now  needs  to  ensure  an  appropriate  division 
between  its  political  and  administrative  levels,  and  improve  assessment  procedures  and 
conditions of employment for its civil servants. 

Progress has been made in improving the functioning of Albania’s judicial system. Training 
for judges and prosecutors has been improved and should now be followed by further steps to 
ensure  their  independence  and  better  employment  conditions  for  other  judiciary  staff. 
Measures to increase judicial transparency and  co-ordination  have  been  taken,  but  more  are 
needed.  Although  more  judgements  are  now  executed,  the  level  of  execution  remains 
relatively low. New legal tools and regional agreements should now be used to achieve better 
concrete results in fighting organised crime and terrorism. 

Some  efforts  have  been  made  to  fight  corruption:  work  has  continued  in  international  fora, 
new  conflict  of  interest  legislation  has  been  adopted,  more  public  officials  have  been 

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prosecuted  for  corruption,  and  strong  action  has  been  taken  against  police  corruption. 
Nonetheless  tangible  results  remain  limited:  considerable  further  efforts  are  required  to 
enforce  current  legislation  and  adopt  new  measures  in  line  with  Albania’s  anti-corruption 
action plan, GRECO recommendations and international anti-corruption conventions. 

In  the  field  of  human  rights,  Albania  has  made  some  efforts  to  improve  conditions  for 
prisoners,  with  a  new  code  of  conduct  and  internal  control  law  for  prisons,  but  inadequate 
infrastructure  means  physical  conditions  remain  poor.  Knowledge  and  enforcement  of 
domestic  law  and  international  conventions  on  treatment  of  prisoners  should  be  improved. 
Little concrete progress has been made in improving media freedom. Legislative progress has 
been  made  in  reinforcing  property  rights,  but  implementation  must  be  greatly  accelerated. 
Albania  is  an  example  of  religious  tolerance,  but  requires  further  progress  to  reach 
international standards in human and minority rights. 

Albania has continued to play a positive role in the region, actively pursuing the deepening of 
political  and  commercial  relations  with  its  neighbours  through  free  trade  agreements  and 
regional multilateral initiatives, and maintaining a constructive policy towards Kosovo.  

The  economy  of  Albania  operates  to  some  degree  within  the  framework  of  functioning 
market principles. Further vigorous reform efforts are necessary to address the shortcomings 
in competitiveness of the economy. 

Growth remained strong while inflationary pressure remained subdued. The current account 
deficit  has  narrowed.  Fiscal  consolidation  continued  and  the  budget  deficit  has  declined. 
Progress in public administration reform has continued and the administrative capacity of the 
tax  administration  has  improved.  In  the  field  of  public  financial  control  and  internal  audit, 
some progress has been made. Privatisation of small- and medium-sized enterprises has been 
completed.  The  sale  of  the  Savings  Bank  was  completed  in  2004  and  the  privatisation  of 
Albtelecom  has  started  in  early  2005.  Prudential  supervision  has  been  strengthened  through 
the  implementation  of  a  risk-based  supervision process.  The  labour  market  is  considered  as 
relatively flexible. 

However, public sector governance remains to be strengthened and the privatisation of large 
enterprises  has  suffered  delays.  The  performance  of  the  financial  sector  to  channel  savings 
towards  productive  investment  has  recently  been  improving,  but  still  remains  weak.  The 
establishment and enforcement of property rights remain difficult, damaging the potential for 
investment  and  economic  activity.  Enterprise  creation  continued  to  face  obstacles  such  as 
weak  infrastructure,  poor  legislation  and  weak  implementation  of  tax  legislation.  Unfair 
competition  by  businesses  operating  in  the  grey  economy  remains  a  problem.  Educational 
attainment remains relatively low and the supply of skilled labour is limited.  

Albania has made some progress towards meeting European standards. Progress has mainly 
consisted  of  adoption  of  new  legislation  and  the  establishment  of  new  institutions.  Some 
efforts regarding the strengthening of administrative capacity have also been made, but in a 
number of cases more commitment and resources are needed for further progress. 

On  internal  market  issues,  Albania  has  continued  to  make  progress  in  the  area  of  free 
movement  of  goods.  Standardisation  and  certification  has  advanced  satisfactorily,  but  more 
attention  should  be  paid  to  implementing  the  New,  Global  and  Old  Approach  directives. 
There  have  been  no  legislative  developments  in  metrology,  and  equipment  for  testing  is 
deficient. Considerable further legal and administrative progress is required for proper market 

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surveillance. Consumer protection laws should be improved and implemented. As regards the 
movement  of  persons,  services  and  right  of  establishment,  Albania  continues  to  face  a 
problem  of  emigration.  Legislation  on  establishment  is  relatively  open  but  requires 
amendment  to  remove  discrimination  between  national  and  foreign  firms.  Rules  for  the 
provision  of  services  are  fairly  liberal.  No  significant  developments  have  taken  place 
regarding the movement of capital. 

Albania has made considerable progress in the field of customs rules, and revenue collection 
has increased, while progress in other related areas has been more limited and further action is 
needed to address corruption in the customs service. Taxation legislation has been improved, 
benefiting  in  particular  SMEs.  A  positive  development  was  the  transfer  of  the  social  and 
health  insurance  contributions  collection  section  to  the  tax  administration.  Tax  legislation 
should be implemented fairly and transparently and revenue collection should be improved.  

In  the  field  of  competition,  more  work  is  needed  to  increase  understanding  of  its  principles 
among  market  actors.  Particular  progress  has  been  made  on  state  aid,  with  a  state  aid 
department established and new legislation passed. Existing public procurement rules should 
be respected, and related legislation requires considerable work to comply with EU standards. 
New  legislation  on  intellectual  property  rights  was  adopted,  but  its  enforcement  should  be 
enhanced.  Some  progress  has  been  made  regarding  the  statistics  system,  especially  on 
classification  and  the  establishment  of  a  business  registry,  which  should  now  be  expanded. 
Macroeconomic statistics should be improved. 

With regard to sectoral policies, the industry and SME sector showed only limited progress, 
but the abovementioned steps in the field of taxation benefited the sector. Albania should fully 
implement its action plan to reduce administrative barriers and address the informal economy.  

The  agriculture  and  fisheries  sectors  have  made  little  progress.  Agriculture  continues  to 
function  as  economic  and  social  buffer,  reducing  poverty  and  unemployment,  although  its 
share  of  GDP  continues  to  decrease.  Much  needs  to  be  done  to  improve  the  quality  of 
agricultural and fisheries produce, in particular regarding food safety. 

Only limited progress has been made as regards the environment. Some improved legislation 
has  been  adopted,  but  enforcement  continues  to  be  problematic.  Administrative  capacity  to 
implement environmental legislation should be strengthened.  

Some  progress  has  been  made  in  the  transport  sector,  especially  in  legislation  and 
participation  in  international  fora,  but  its  infrastructure  remains  inadequate  and  poorly 
maintained. Albania should implement its transport master plan and improve transport safety 
in  the  various  transport  modes.  Transport  investments  should  be  transparent  and  respect 
procurement rules.  

Albania  has  made  good  progress  in  the  energy  sector,  in  particular  by  implementing  the 
energy  action  plan,  aligning  legislation  and  signing  the  South  East  Europe  Energy 
Community treaty. It must continue to strictly implement the energy action plan in order to 
reduce the still-frequent power cuts and illegal connections. 

Some  progress  has  been  made  in  the  sector  of  information  society  and  media,  in  particular 
through  the  liberalisation  of  the  telecommunications  sector  and  improved  distribution  of 
electronic  communications.  The  privatisation  of  Albtelecom  remains  to  be  successfully 
concluded  and  telecommunications  legislation  should  be  developed  to  attract  further 

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investment.  Further  work  is  needed  to  align  electronic  communications,  information 
technology and audiovisual legislation and to ensure its non-discriminatory implementation. 

Albania  has  drafted  a  Policy  Paper  on  public  internal  financial  control,  but  it  needs  to  be 
further developed. As regards external audit, the Supreme Audit Institution of Albania should 
be improved in line with the INTOSAI guidelines, and its financial independence should be 
ensured. 

In the field of justice, freedom and security, travel documents have been made more secure, 
but progress is needed in computerising the visa system and in bringing visa legislation up to 
EU standards. Albania has considerably improved border control through better management 
and  IT  infrastructure  and  better  co-operation  with  neighbours,  but  trafficking  remains  a 
significant  problem  which  should  be  addressed  through  an  integrated  border  management 
strategy  providing  for  improved  inter-service  co-operation  and  further  resources.  National 
strategies  were  adopted  on  migration  and  asylum,  and  Albania  signed  a  readmission 
agreement with the EU. These now need to be funded and implemented. 

Progress has been made in fighting money laundering, with new implementing legislation and 
steps to improve inter-agency and regional co-operation. These aspects however need further 
work, focusing on results, and the Financial Intelligence Unit, the prosecutor’s offices and the 
police Economic Crime Unit require more resources to function fully effectively. 

Albania  has  made  some  progress  in  the  fight  against  the  illegal  drugs  trade,  approving  a 
National Anti-Drug Strategy, the introduction of special investigative means and asset seizure 
legislation.  Albania  nonetheless  continues  to  be  a  major  transit  country  for  drug  trafficking 
and should give higher priority and funding to the implementation of its anti-drug strategy. It 
should  further  strengthen  enforcement,  improve  co-ordination  both  domestically  and  with 
foreign partners and prevent the obstruction of anti-drug investigations by public servants. 

There  has  been  some  progress  in  enhancing  the  effectiveness  of  the  Albanian  state  police, 
with  the  strengthening  of  departments  dealing  with  organised  crime  and  corruption,  and 
prosecution and dismissal of increased numbers of often senior police officers for corruption. 
Albania must nonetheless further improve the equipment and the management of the police, 
in  particular  as  regards  human  resources,  transparency,  autonomy  and  police  records,  and 
should accelerate efforts to reach an agreement with Europol. 

Albania  has  made  progress  in  the  fight  against  organised  crime  and  terrorism,  adopting  a 
targeted  package  of  laws.  Albania  has  continued  to  implement  the  specific  action-oriented 
measures against organised crime and has upgraded key ministry bodies and improved laws 
on  the  proceeds  of  crime.  Police  intelligence  analysis  has  improved,  and  sea-borne  human 
trafficking has been reduced.  Progress in implementing the action-oriented measures  should 
however  be  accelerated  and  concrete  steps  to  improve  witness  protection  are  urgently 
required. Albania should improve inter-agency co-operation, pursue regional and international 
co-operation  more  vigorously  and  use  its  new  legal  tools  more  determinedly  to  arrest  and 
prosecute  organised  criminals.  The  fight  against 
the 
establishment of a specialist police directorate. Albania has supported international initiatives 
in  the  field,  expelled  suspected  supporters  of  terrorism  and  is  improving  airport  security.  It 
should accelerate implementation of international conventions and further improve security at 
Tirana airport. 

terrorism  was  reinforced  by 

Bosnia and Herzegovina 

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As  regards  the  political  situation,  Bosnia  and  Herzegovina  has  made  progress  in  further 
consolidating the stability of its institutions guaranteeing democracy, the rule of law, human 
rights  and  respect  for  and  protection  of  minorities.  Most  of  the  Council  of  Europe  post-
accession commitments have been fulfilled. Nonetheless, continued efforts remain necessary 
in order to ensure a non-reversible, self-sustaining state able to assume full responsibility for 
government. 

As  regards  democratic  principles,  Bosnia  and  Herzegovina  assumed  full  organisational  and 
financial responsibility for the 2004 municipal elections. Further progress has been made in 
implementing the Law on the Council of Ministers and the Law on Ministries. Efforts need 
now to continue to increase the effectiveness of the executive and legislative bodies, to ensure 
that State-level institutions are properly equipped to implement their tasks and to strengthen 
co-ordination between State and Entities.  

Some  positive  steps  have  been  taken  in  the  field  of  public  administration.  A  Coordination 
Office  for  the  Public  Administration  Reform  has  been  established;  the  Directorate  for 
European Integration has been reinforced; a review of key public administration sectors has 
been  carried  out.  Increased  efforts  are  now  necessary  to  create  a  modern  and  effective  civil 
service.  The  comprehensive  action  plan  for  public  administration  reform  has  not  yet  been 
adopted. Lack of the necessary staff and of adequate premises for the various administrations 
is a recurrent issue. Building up training capacity for civil servants is also crucial.  

Progress  has  been  made  regarding  the  judicial  system.  The  legislation  establishing  a  single 
High Judicial and Prosecutorial Council has been adopted. This legislation has strengthened 
the  independence  of  the  judiciary  throughout  the  country.  Bosnia  and  Herzegovina  is 
progressively 
the 
management of its judicial system. 

taking  over  responsibility  from 

international  community  for 

the 

Further  efforts  are  necessary  to  fight  corruption.  While  prosecution  of  a  number  of  specific 
corruption cases has been ensured, many continue to escape justice. Adequate anti-corruption 
action plans have to be prepared and implemented. The adoption of the law on the conflict of 
interest has been a positive step. Its consistent implementation needs to be ensured. 

Positive developments have taken place regarding the defence reform through the adoption of 
the  legislation  necessary  for  the  establishment of  a  single  smaller  and  professional  army,  in 
line  with  NATO’s  Partnership  for  Peace  requirements.  Regarding  police  reform,  the 
endorsement by the Entity and State Parliaments of an agreement on the restructuring of the 
police  in  accordance  with  EU  requirements  is  welcome.  Proper  implementation  is  now 
required.  

The  outstanding  legislation  supporting  refugee  returns  has  been  adopted  and  the  Refugee 
Return Fund has been made operational. Significant progress has been achieved regarding the 
return of refugees and displaced persons to their pre-war areas. The priority should now be to 
complete  the  process  and  to  work  towards  socioeconomic  integration  of  returnees.  The 
transfer  of  human  rights  bodies  from  international  to  national  responsibility  has  seen 
considerable  developments.  However,  continued  progress  is  necessary  in  order  to  meet 
international standards in the area of human and minority rights. In this respect, due attention 
should  be  paid  to  avoiding  division  of  schools  along  ethnic  lines.  Efforts  should  also  be 
devoted to improve the integration of the Roma minority. 

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Co-operation with ICTY has seen improvements. However, further efforts should be made to 
achieve  full  co-operation  with  the  Tribunal  so  that  all  indictees  be  brought  to  justice. 
Constructive  co-operation  with  neighbouring  countries  has  continued.  Nonetheless,  proper 
implementation  of  the  regional  Free  Trade  Agreements  should  be  ensured.  Bosnia  and 
Herzegovina  should  also  make  efforts  to  meet  the  outstanding  Council  of  Europe  post-
accession requirements, notably regarding elections and education. 

The  economy  of  Bosnia  and  Herzegovina  operates  only  to  a  limited  degree  within  the 
framework of functioning market principles. Further vigorous reform efforts are necessary to 
address the serious shortcomings in competitiveness of the economy. 

Economic growth rebounded in 2004 and industrial production picked up. Inflation remained 
low  while  inflows  of  foreign  direct  investments  were  significant.  Further  harmonisation 
between  the  Entities  took  place,  in  particular  in  the  area  of  indirect  taxation  where 
competencies  were  transferred  from  the  Entities  to  the  Indirect  Taxation  Authority.  This 
created  a  new  platform  for  cooperation  and  other  efforts  to  increase  fiscal  and  economic 
policy  coordination  were  also  made,  for  example  through  the  establishment  of  a  National 
Fiscal  Council.  Some  steps  to  improve  the  business  climate  were  taken.  Banking 
intermediation deepened further as the regulatory framework continued to improve. 

However,  unemployment  and  external  imbalances  have  remained  very  large  and  fiscal 
challenges have risen. To maintain macroeconomic stability and safeguard the sustainability 
of  the  currency  board  a  prudent  macroeconomic  policy  mix  will  be  imperative.  In  order  to 
strengthen the productive base of the economy, the largely loss-making corporate sector must 
be urgently and profoundly restructured and privatisation be accelerated. In addition, actions 
to  reduce  the  overall  government  interference  in  the  economy  and  to  improve  the  business 
climate  will  be  essential.  The  flexibility  of  the  labour  market  should  be  enhanced  and  the 
judicial  system,  in  particular  the  handling  of  bankruptcies  and  property  rights,  be 
strengthened.  To  successfully  manage  the  fiscal  challenges,  coordination  and  analytical 
capabilities  need  to  be  improved  and  the  size  of  public  expenditures  to  be  reduced  in  real 
terms.  These  demanding  tasks  will  require  swift  action  and  firm  political  commitment  and 
cooperation between different levels of government.  

Since  the  last  report,  Bosnia  and  Herzegovina  has  made  further  progress  towards  meeting 
European standards.  Progress has mainly  consisted in adoption of new legislation and the 
establishment  of  a  number  of  new  institutions.  Some  efforts  regarding  the  strengthening  of 
administrative  capacity  have  also  been  registered.  It  is  now  necessary  to  ensure  sustained 
efforts in order to increase its implementation capacity, in particular with a view to a future 
Stabilisation and Association Agreement. 

Regarding  internal  market,  Bosnia  and  Herzegovina  has  made  some  progress  in  the  area  of 
free  movement  of  goods,  in  particular  through  the  adoption  of  new  legislation  on  standards, 
certification,  conformity  assessment,  general  product  safety  and  market  surveillance. 
However, the new legislation is not yet properly implemented. Human and technical resources 
remain  limited  and  the  non-application  of  conformity  assessment  on  the  local  production 
continues  to  hinder  Bosnia  and  Herzegovina’s  export  capacity.  As  regards  movement  of 
persons, services and right of establishment, some additional progress regarding services and 
establishment  has  been  made,  notably  through  the  adoption  of  legislation  in  the  insurance 
sector and the establishment of a single registry for companies. No significant developments 
have taken place in the area of movement of capital. 

EN 

18 

   EN 

 
Bosnia and Herzegovina has made progress in the field of customs and taxation through the 
adoption of new customs legislation, the establishment of a single customs administration and 
the reorganisation of the customs services. A VAT law has been adopted and preparations for 
implementation  have  been  made.  However,  the  implementation  of  this  law  and  the  actual 
collection  of  VAT  are  still  important  challenges.  Sustained  efforts  are  required  to  increase 
revenue collection, to combat fiscal evasion, corruption and cross-border crime, and to ensure 
that  free  zones,  customs  valuation  and  origin  issues  are  managed  in  accordance  with  EU 
standards.  Specifically  on  customs  valuation,  the  use  of  price  lists  is  of  great  concern.  As 
regards competition the establishment of the Competition Council and the adoption of a new 
competition  Law  have  been  positive  steps.  However,  no  significant  development  can  be 
reported  in  relation  to  state  aids.  The  public  procurement  system  has  seen  further 
approximation.  Further  efforts  need  now  to  be  made  to  establish  the  public  procurement 
agency  and  the  public  procurement  review  body  and  to  make  them  operational.  As  regards 
intellectual,  industrial  and  commercial  property  rights  (IPR),  new  legislation  foresees  the 
establishment  of  a  separate  institute  for  Intellectual  Property.  Bosnia  and  Herzegovina  has 
signed a co-operation agreement with the European Patent Organisation and has carried out 
some  actions  against  piracy.  However,  implementation  and  enforcement  of  IPR  legislation 
remains limited and need to be enhanced. 

Regarding  sectoral  policies,  Bosnia  and  Herzegovina  has  continued  its  efforts  to  remove 
barriers to business and to implement the European Charter for SMEs. However, it has been 
unable  to  develop  appropriate  strategies  for  the  industry  and  SMEs  sectors.  As  regards 
agriculture,  some  improvements  have  been  made  through  the  adoption  of  legislation  in  the 
veterinary,  phytosanitary  and  food  safety  areas,  but  overall  strategic  planning  has  been 
lacking and some of the institutions foreseen by the new legislation have not been established. 
State-Entity  and  inter-Entity  co-ordination  should  also  be  improved.  In  the  area  of 
environment,  some  steps  have  been  taken  by  Bosnia  and  Herzegovina  in  the  air,  water  and 
waste  sectors.  Nonetheless,  implementation  capacity  remains  limited,  due  to  scarce  human 
and  technical  resources.  In  this  context  the  establishment  of  a  well  equipped  State 
Environmental Agency should be a priority.  

In  the  area  of  transport,  efforts  aiming  at  improving  transport  infrastructures  continue. 
Legislation on railways has been adopted. Positive developments have also been registered as 
regards  aviation,  including  in  terms  of  regional  co-operation.  Nonetheless,  sustained  efforts 
are necessary in order to enhance strategic planning, to further improve infrastructure and to 
ensure  the  progressive  alignment,  notably  as  regards  technical  and  safety  standards,  social 
standards  and  market  liberalisation.  As  regards  energy,  positive  developments  have  taken 
place in the field of electricity, notably through the establishment of a State-level regulator, 
and  the  establishment  of  an  Independent  System  Operator  and  a  national  transmission 
company.  Action  plans  for  the  restructuring  of  the  sector  have  also  been  adopted  by  both 
Entities  and  co-operation  for  the  establishment  of  a  regional  energy  market  has  continued. 
Bosnia  and  Herzegovina  should  now  ensure  implementation  of  the  various  Action  Plans, 
consolidate  State  and  Entity  regulatory  bodies,  accelerate  the  reform  of  the  gas  sector  and 
prepare a comprehensive Energy Policy. Bosnia and Herzegovina has signed the South East 
Europe Energy Community treaty. 

Concerning information society and media, some progress has been made. While some steps 
to  strengthen  the  Regulatory  Communications  Agency  have  been  taken,  the  law  for  the 
establishment  of  an  Information  Society  Agency  has  not  been  adopted  and  no  progress  has 
been  made  regarding  the  liberalisation  of  the  oligopoly  fixed-line  services.  The  adoption  of 
the law on the public broadcasting system and the progress made towards the adoption of the 

EN 

19 

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State law on public broadcasting service have been positive developments. The corresponding 
Entity-level legislation should be passed once the public broadcasting service law is formally 
adopted. 

Regarding  justice,  freedom  and  security,  progress  has  been  made  in  relation  to  visa 
requirements,  border  control,  asylum  and  migration.  An  integrated  Border  Management 
Strategy  has  been  adopted  and  efforts  have  been  made  to  reduce  illegal  migration  and  to 
increase  effectiveness  regarding  the  issuing  of  visas.  Asylum-related  responsibilities, 
performed  until  now  by  international  bodies,  are  gradually  being  taken  on  by  the  State 
authorities.  However,  staff  shortcomings  at  the  Ministry  of  Security  endanger  proper 
implementation of tasks. The number of visas issued at the borders should be further reduced. 
As  regards  money  laundering,  the  adoption  of  new  legislation  and  the  establishment  of  the 
necessary structures have been positive steps. Proper implementation and enforcement of this 
legislation should now be ensured. Not much has been achieved in the field of fight against 
drugs.  Bosnia  and  Herzegovina  should  develop  a  State-level  drugs  policy,  adopt  adequate 
legislation on drugs and precursors and establish a State-level office for narcotics in order to 
be more effective in the fight against drugs trafficking. 

There has been some progress in the area of police. In addition to the agreement reached on 
the overall police reform, State-level bodies have been established and are now operational. 
Intelligence  services  have  been  unified.  Training  and  equipment  has  been  provided. 
Concerning the fight against organised crime and terrorism, a strategy against the trafficking 
in  human  beings  has  been  adopted.  Further  steps  have  been  taken  in  terms  of  strategy, 
legislation  and  structures,  and  there  has  been  good  co-operation  with  the  international 
community  in  the  area  of  counter-terrorism.  However,  increased  efforts  are  necessary,  in 
particular  as  organised  crime  is  considered  a  major  threat  for  Bosnia  and  Herzegovina’s 
stability  and  overall  socio-economic  development.  The  legislation  on  data  protection  is  still 
pending  and  should  be  adopted  without  further  delay.  Proper  implementation  of  laws  and 
prosecution of criminals is paramount. 

Croatia 

Croatia faces no major difficulties in meeting the political criteria for membership. Problems 
which had arisen since the Opinion13 with respect to the requirement for full cooperation with 
the International Criminal Tribunal for the former Yugoslavia (ICTY) have meanwhile been 
solved.  Croatia  has  continued  to  make  progress  overall  but  further  sustained  efforts  are 
required in a number of important areas.  

There has been progress in the area of judiciary, including the adoption of a judicial reform 
strategy  and  various  procedural  and  organisational  improvements,  but  the  scope  and 
challenges faced in this field will require continued serious attention in particular as regards 
the  large  overall  case  backlog  and  the  need  to  ensure  proper  enforcement  of  judgements. 
There  have  been  improvements  in  the  prosecution  of  war  crimes  trials,  but  an  ethnic  bias 
against Serb defendants persists. 

Despite  some  progress  in  setting  up  the  necessary  legislative  and  institutional  framework, 
efforts aimed at tackling corruption, which remains a serious problem in Croatia, need to be 
further stepped up. 

13 COM (2004) 257 of 20 April 2004. 

EN 

20 

   EN 

 
                                                 
In  the  area  of  human  rights  and  minorities  an  appropriate  legal  framework  is  in  place.  The 
position  of  minorities  has  in  general  continued  to  improve  since  the  Opinion.  However, 
implementation of the Constitutional Law on National Minorities in particular has been slow. 
Serbs  and  Roma  continue  to  face  discrimination  and  the  need  to  improve  their  situation 
especially with respect to job opportunities and as well as creating a more receptive climate in 
the  majority  community  is  an  urgent  priority.  Implementation  of  a  new  Roma  strategy  has 
begun,  but  major  challenges  lie  ahead.  Particular  attention  should  be  paid  to  ensuring  all 
ethnically motivated incidents are properly investigated and those responsible prosecuted.  

On  regional  issues,  while  there  has  been  good  progress  on  refugee  return  in  terms  of 
repossession  and  reconstruction  of  housing,  a  number  of  foreseen  deadlines  have  not  been 
met.  Progress  has  been  particularly  weak  in  implementing  housing  care  programmes  for 
former tenancy rights holders. On-going efforts to create the economic and social conditions 
necessary for the sustainability of refugee return need to be accelerated. There has been good 
progress  in  the  area  of  regional  cooperation,  both  in  terms  of  improvements  in  bilateral 
relations  with  neighbouring  countries  as  well  as  regional  initiatives.  Croatia  has  signed  the 
South  East  Europe  Energy  Community  treaty.  However,  serious  efforts  are  needed  to  find 
definitive solutions to all pending bilateral issues, particularly as regards border issues as well 
as all open property-related questions. Problems arose since the Opinion with respect to the 
requirement  for  full  cooperation  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia  (ICTY),  contributing  directly  to  the  postponement  of  the  start  of  accession 
negotiations  foreseen  in  March  2005.  The  situation  has  meanwhile  improved,  however, 
allowing the ICTY Chief Prosecutor to conclude in October 2005 that cooperation was full. 
This  subsequently  paved  the  way  for  the  Council  to  conclude  on  3  October  2005  that  the 
outstanding condition for the start of accession negotiations had been met. Negotiations were 
formally launched the same day. In its conclusions, the Council confirmed that sustained full 
co-operation  with  the  ICTY  would  remain  a  requirement  for  progress  throughout  the 
accession  progress.  Less  than  full  cooperation  with  ICTY  at  any  stage  could  lead  to  the 
suspension of negotiations.  

As regards the economic criteria, Croatia can be regarded as a functioning market economy. 
It should be able to cope with competitive pressure and market forces within the Union in the 
medium  term,  provided  that  it  continues  implementing  its  reform  programme  to  remove 
remaining  weaknesses.  The  political  consensus  on  the  fundamentals  of  a  market-based 
economy  appears  to  have  remained.  Stability-oriented  macroeconomic  policies  have 
contributed  to  a  relatively  low  inflation  and  stable  exchange  rate.  Significant  budget  and 
current  account  deficits  have  been  reduced  and  some  measures  have  been  taken  to  enhance 
expenditure  control  in  health  care  and  in  the  pension  system.  The  privatisation  process  has 
regained  some  momentum  in 2005 and business and land registration procedures have been 
simplified.  The  banking  sector  has  continued  to  grow  and  supervision  has  been  further 
strengthened.  Road  infrastructure  has  improved  due  to  strong  investment  in  the  motorway 
network.  Progress  has  been  made  in  liberalising  the  telecommunication  sector  with  positive 
effects  on  infrastructure  development,  following  the  entry  of  private  service  providers. 
Important  initial  steps  have  been  taken  to  restructure  the  loss-making  railway  system. 
Croatia’s  economy  is  already  well  integrated  with  that  of  the  EU  and  regional  trade 
integration has strengthened. 

However, significant external and fiscal imbalances imply potential risks to macroeconomic 
stability.  Therefore,  fiscal  consolidation  needs  to  be  further  strengthened  and  effectively 
backed by structural measures, in particular in the area of subsidies and social transfers. The 
development of a more vivid private sector and foreign direct investment has been hampered 

EN 

21 

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by  complex  rules  and  deficiencies  in  public  administration  and  courts  as  well  as  by  slow 
market entry and exit procedures. The enforcement of property and creditor rights continues 
to  be  undermined  by  an  inefficient  judiciary.  State  interventions  in  the  economy  remain 
significant and little progress has been made with respect to the restructuring of large state-
owned enterprises, in particular in the shipbuilding, steel and energy sector. The strengthening 
of  financial  discipline  of  state-owned  enterprises  remains  a  particular  economic  policy 
challenge. In order to enhance its competitiveness and to improve the prospects for sustained 
investment and growth, Croatia needs to address the identified weaknesses and problems with 
determination.  

As  regards  Croatia’s  ability  to  assume  the  obligations  of  membership,  Croatia  has  made 
some progress since the Opinion, mainly in terms of legislative alignment with the acquis in 
areas such as free movement of goods and public procurement and in the field of information 
society.  Progress  has  also  been  good  in  the  field  of  education  and  culture  and  in  foreign, 
security and defence policy.  

Croatia needs to continue legislative alignment across the board, however, while at the same 
time  strengthening  administrative  and  judicial  structures  that  are  necessary  for  the  effective 
enforcement  of  the  acquis.  In  many  cases  enforcement  is  weak  and  administrative  capacity 
remains uneven. 

In  particular,  increased  efforts  will  be  needed  to  align  legislation  with  the  acquis  and  to 
effectively  implement  and  enforce  in  the  following  fields:  Free  Movement  of  Capital, 
Company Law, Information Society and Media, Fisheries, Transport, Energy, Consumer and 
Health Protection, Customs Union and Financial Control. 

Croatia  will  need  to  make  considerable  and  sustained  efforts  to  align  legislation  with  the 
acquis and to effectively implement and enforce it in the following fields: Free Movement of 
Goods, Public Procurement, Freedom of Movement for Workers, Rights of Establishment and 
Free  Movement  of  Services,  Financial  Services,  Competition  Policy,  Agriculture  and  Rural 
Development,  Food  Safety,  Taxation,  Social  Policy  and  Employment,  Regional  Policy, 
Judiciary and Fundamental Rights, and Justice, Freedom and Security. 

Very  significant  efforts  will  be  required  in  the  area  of  Environment,  including  substantial 
investment and the strengthening of administrative capacity for the enforcement of the acquis. 

Serbia and Montenegro 

As regards the political situation and the state of democracy and rule of law in Serbia and 
Montenegro, constitutional and legal certainty has remained precarious. While the legitimacy 
of the State Union Parliament has been restored and functioning of the Serbian parliament has 
improved with the adoption of new rules of procedures, the overall functioning of democratic 
institutions remains affected by structural weaknesses. No actual progress has taken place as 
regards the revision of the Constitutions of the two Republics. 

Constitutional  issues  in  Serbia  and  Montenegro,  notably  with  respect  to  the  relationship 
between  its  two  constituent  Republics  and  the  functioning  of  the  institutions  of  the  State 
Union,  should  be  addressed  in  a  constructive  spirit  and  in  full  respect  of  the  Constitutional 
Charter  of  Serbia  and  Montenegro.  This  applies  also  to  a  possible  referendum  on 
independence  of  either  Republic.  Such  a  referendum  will  have  to  comply  to  and 

EN 

22 

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internationally 
recommendations of the Venice Commission.  

recognised  democratic  standards, 

in 

the 

light  of 

the 

forthcoming 

There  has  been  progress  in  both  Republics  concerning  the  legal  framework  of  public 
administration reform, but the implementation of this reform is still at a very early stage. No 
progress has taken place as regards the reform of State Union public administration. The level 
of administrative capacity remains generally low. The administrative structures with a view to 
the SAA negotiations have been set up at the level of State Union and the two Republics.  

Defence reform continues to meet serious obstruction, due to insufficient democratic control 
and lack of transparent financial management.  

The  State  Union  Court  has  started  working  although  its  capacity  remains  weak  and  the 
agreement  on  the  scope  of  its  powers  is  still  largely  untested.  The  transfer  of  powers  of 
military justice to civilian courts has been implemented smoothly, with the exception of the 
considerable backlog of the administrative cases. The judiciary has continued to be affected, 
especially  in  Serbia,  by  serious  weaknesses  and  its  independence  is  undermined  by  undue 
political interference.  

Corruption remains a serious concern. Some progress has taken place with the development of 
anti-corruption  strategies  which  now  need  to  be  finalised  –  in  Serbia  -  and  effectively 
implemented. 

As  regards  the  respect  for  human  rights,  Serbia  and  Montenegro  has  made  progress  in 
implementing  the  commitments  undertaken  by  when  joining  the  Council  of  Europe  notably 
with the appointment of Government Agent for the European Court of Human Rights. There 
have been problems with regard to freedom of expression and civil society. Cases of police 
ill-treatment have occurred. Little progress has taken place in relation to the investigation of 
crimes committed during the previous regime. There is no comprehensive anti-discrimination 
legislation yet. Respect for minority rights has continued to see some progress, but incidents 
still occur.  

Serbia  and  Montenegro  achieved  significant  progress  in  co-operation  with  the  ICTY  in  the 
run-up to the Commission Report on the preparedness to start SAA negotiations, in particular 
delivering  a  significant  number  of  indictees  to  The  Hague  Tribunal.  Since  then  there 
continues  to  be  good  co-operation  with  regard  to  waivers  to  witnesses  and  access  to 
documents,  though  this  process  is  still  sometimes  obstructed  by  parts  of  the  administration 
and  the  army.  Serbia  and  Montenegro  has  made  some  further,  though  limited,  progress  to 
bring remaining fugitives to justice. This progress must be continued until full co-operation 
with ICTY is achieved. 

As  regards  the  respect  of  the  United  Nations  Security  Council  Resolution  1244  on  Kosovo, 
Belgrade  has  intensified  dialogue  with  Pristina  on  technical  matters  of  common  interest. 
However,  it  has  not  actively  encouraged  Kosovo  Serbs  to  participate  in  the  Provisional 
Institutions  of  Self-Government.  Belgrade’s  constructive  engagement  on  the  Kosovo  issue 
will help to advance Serbia and Montenegro’s European perspective, while obstruction could 
turn into an obstacle.  

Regional  co-operation  at  the  multilateral  and  bilateral  level  continues  to  improve,  although 
sporadic problems occur. 

EN 

23 

   EN 

 
In  both  Republics,  the  economies  operate  to  some  degree  within  the  framework  of 
functioning  market  principles.  Further  vigorous  reform  efforts  are  necessary  to  address  the 
shortcomings in competitiveness. 

In  Serbia,  economic  activity  remained  relatively  robust  in  the  first  half  of  2005.  Fiscal 
tightening  continued,  reflecting  mainly  strong  domestic  demand  and  improved  tax 
enforcement.  The  trade  deficit  narrowed  in  the  first  half  of  2005  and  international  reserves 
have  improved.  The  completion  of  negotiations  with  the  London  Club  of  commercial 
creditors in 2004 has contributed to the reduction of the level of external debt. Momentum has 
been regained in respect to structural reforms and in particular further progress has been made 
in restructuring and privatisation of the banking system.  

However,  the  government’s  commitment  to  macroeconomic  stabilisation  and  structural 
reform  has  been  mixed.  Inflation  and  wage  pressure have mounted and external imbalances 
remain high. Also labour markets continue to show very significant imbalances. The business 
environment  is  still  hampered  by  bureaucratic  obstacles  and  the  slow  and  inefficient 
functioning of the judiciary system is seriously affecting economic development. The share of 
the private sector in GDP remains relatively modest and the level of competition low. Despite 
progress  in  privatisation,  a  competitive  and  dynamic  private  sector  has  not  yet  been 
established. The government sector still absorbs a large share of resources, undermining the 
free  interplay  of  market  forces  and  hindering  an  efficient  resource  allocation.  Losses  by 
publicly- and socially-owned companies remain a burden on public finances.  

In  Montenegro  economic  growth  strengthened.  Inflation  continued  declining  further  with 
price  liberalisation  almost  complete.  Privatisation  has  further  advanced.  Unemployment 
declined  somewhat.  The  budget  deficit  narrowed  in  2004.  Bank  lending  has  risen  from  low 
levels as confidence in the banking sector has begun to return.  

However, external imbalances widened and external debt increased further. The share of the 
private  sector  is  still  relatively  moderate.  Private  sector  development  is  still  impeded  by 
weaknesses  in  the  judiciary.  High  wage  growth  negatively  affected  export  competitiveness 
and employment levels. 

Serbia and Montenegro has made progress towards meeting European standards. In the area 
of  internal  market,  both  Republics  have  made  overall  some  good  progress.  They  must  now 
continue to make sustained efforts to improve legislative and administrative capacities with a 
view to future SAA obligations. They must also avoid creating new barriers between them.  

Both  Republics  are  making  some  progress  in  the  area  of  free  movement  of  goods.  No 
particular developments can be reported in the field of standardisation and certification. In the 
areas  of  movement  of  persons  and  the  right  of  establishment,  no  substantial  developments 
have  taken  place.  As  for  the  freedom  to  provide  services,  good  progress  can  be  reported  in 
Serbia  which  adopted  a  package  of  new  laws  in  the  area  of  financial  services.  Limited 
developments have been registered in both Republics as regards free movement of capital. In 
Montenegro a new foreign exchange law and a law on foreign current and capital transactions 
further liberalising capital movements were adopted. No progress was made in ensuring the 
free movement of capital within the State Union as the two republican Central Banks have not 
yet completed the agreement on a fully operational system of corresponding accounts.  

Some progress has been reported in the area of customs. Serbia adopted amendments to the 
customs law, and to the customs tariffs law harmonising the tariff nomenclature with the EU 

EN 

24 

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combined  nomenclature.  Montenegro  adopted  amendments  to  the  customs  law  and  to  the 
customs  service  law.  The  administrative  and  operational  capacity  of  the  two  republican 
customs authorities is improving but still needs to be strengthened significantly. In the area of 
competition,  both  Republics  have  adopted  new  anti-trust  legislation  and  have  set  up  basic 
structures to monitor state aid. Further efforts are required to make the republican regimes for 
anti-trust and state aid control operational. In the field of public procurement, no legislative or 
administrative  developments  have  been  registered  in  Serbia.  Montenegro  has  done  some 
limited progress by including State Union institutions within the scope of procurement rules. 
Administrative  capacity  to  implement  and  enforce  procurement  legislation  needs  to  be 
considerably  strengthened,  especially  in  Montenegro.  Both  Republics  should  ensure  that 
operators  from  one  Republic  can  benefit  from  national  treatment  in  the  other  and  that  State 
Union  institutions  are  covered  by  statutory  procurement  rules.  Concerning  intellectual 
property rights, some legislative progress has been registered in both Republics. Montenegro 
adopted a framework law for the implementation of intellectual property rights. Enforcement 
is gradually improving but further actions need to be vigorously pursued. The role of the State 
Union  Intellectual  Property  Office  must  be  fully  recognised  by  the  two  Republics  and  this 
Office needs to be provided with the necessary administrative capacity to perform its tasks.  

As  regards  sectoral  policies,  there  has  been  some  progress,  although  uneven.  In  the  area  of 
industry and small and medium enterprises, both Republics have done some progress with the 
implementation  of  the  European  Charter  for  Small  and  Medium  Enterprises.  Some  progress 
has  been  made  in  the  area  of  agriculture.  In  particular,  Serbia  has  strengthened  the 
administrative  capacity  of  the  Ministry  of  Agriculture  and  has  passed  new  framework 
veterinary  laws.  Concerning  environment,  there  has  been  some  limited  progress  in  both 
Republics. In particular, Montenegro adopted a Law on Integrated Prevention and Control of 
Pollution.  Both  Republics  have  made  some  progress  in  the  transport  field,  in  particular 
through the participation in the South East Europe Core Regional Transport Network. In the 
energy field, both Republics have made progress. In Serbia the Energy Agency has become 
operational  and  energy  development  strategy  for  the  period  up  to  2015  has  been  approved. 
The  unbundling  process  of  the  state  electricity  utility  continues.  In  Montenegro,  some 
progress has been achieved in restructuring the electricity sector. Serbia and Montenegro have 
signed the South East Europe Energy Community treaty. 

Concerning information society and media, some progress has been registered. In Serbia, the 
exclusive monopoly of fixed lines has come to an end but the Telecommunications Agency is 
still not operational due to lack of financing. In Montenegro, the privatisation process of the 
fixed-line telecom provider has been finalised. As regards audiovisual policy, no progress has 
taken  place  in  Serbia  which  amended  its  broadcasting  law  to  extend  of  the  deadline  for  the 
transformation  of  the  Serbian  Radio  Television  from  its  present  government-controlled  role 
into  a  public  broadcasting  service,  as  well  as  to  postponement  of  the  privatization  of 
broadcasters  operated  by  local  governments.  In  Montenegro  the  Broadcasting  Council  has 
implemented a tender for licenses of the use of the spectrum. 

As regards justice, freedom and security, no actual progress has taken place in the areas where 
responsibilities are shared between the State union and the two Republics. The two Republics 
continue to operate different visa regimes. In both Republics, national strategies on integrated 
border control are still in preparation and - in Serbia - the transfer of border control from the 
State  Union  army  to  the  police  has  been  delayed.  In  the  field  of asylum,  the  two  Republics 
have  not  yet  adopted  the  laws  that  are  necessary  for  the  implementation  of  the  State  Union 
framework law. As regards migration, the readmission agreements have to be fully enforced. 

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As regards the areas falling within the remit of the Republics, some legislative progress has 
taken place concerning the fight against money laundering. As regards police reform, progress 
has taken  place  in Montenegro with the adoption of the laws on the police and the national 
security agency. In Serbia, the new legislation on police and security services is still pending. 
Organised crime remains a source of serious concern in both Republics. A strategy on fight 
against corruption and organised crime has been adopted by Montenegro. 

Kosovo 

The political situation in Kosovo remained stable during the parliamentary elections and the 
subsequent establishment of the coalition government, as well as on the occasion of the ICTY 
indictment  and  voluntary  surrender  of  the  former  Prime  Minister.  However,  substantial 
democratic and efficiency deficits weaken the performance of the provisional institutions of 
self-government. 

Relations between Kosovo Serbs and Kosovo Albanians have remained strained. The Kosovo 
Serbs’ boycott of the 2004 elections undermined their capacity to address their community’s 
legitimate  concerns  through  democratic  means.  At  the  same  time,  the  Kosovo  Albanian 
majority failed to create the necessary conditions to facilitate Kosovo Serb participation in the 
political  process.  The  implementation  of  local  self  government  reform  was  significantly 
hampered by this situation. 

Overall, the rule of law needs to be significantly strengthened. One underlying difficulty is the 
legal uncertainty which exists in relation to the laws that govern Kosovo. The administration 
of  justice  continues  to  be  a  major  problem  as  the  backlog  of  cases  increases.  The  judicial 
institutions and the law enforcement agencies need to be substantially improved to be capable 
of  fully  enforcing  the  law,  notably  as  far  as  property  rights  and  fighting  organised  and 
financial  crime  is  concerned.  Corruption  is  widespread  and  there  is  a  lack  of  cohesive  and 
forceful action against it. 

Kosovo’s  administrative  capacity  remains  extremely  weak.  Its  public  administration  is 
inefficient and subject to political interference, and does not always act equitably. Although a 
legal basis for the civil service and for public finance management is in place, there is a lack 
of  transparency  and  accountability.  Government  coordination  must  be  enhanced  and  the 
relationship  between  the  central  and  municipal  level needs to be further  defined. Improving 
basic  public  service  provision  to  all  communities  is  a  priority,  not  least  to  help  reduce  the 
demand  for  services  provided  by  the  parallel  structures  that  continue  to  operate  in  most 
predominately Kosovo-Serb municipalities. 

There has been further progress in enhancing freedom of expression, with the establishment 
of  the  regulatory  framework  for  independent  media  and  the  establishment  of  two  new 
academic institutions to foster quality journalism. An anti-discrimination law was adopted but 
now  needs  to  be  fully  implemented  if  it  is  to  properly  protect  the  rights  of  the  most 
vulnerable, in particular children and women. The ombudsperson institution has continued to 
play a crucial role in safeguarding human rights and the protection of minorities. 

Some outreach efforts have been made on the part of Kosovo’s institution to condemn acts of 
violence against minority groups, to increase minority representation and to encourage return 
of  refugees  but  they  remained  just  declaratory  statements  without  being  translated  into 
practice on the local level. Thus the situation of ethnic minorities continues to be extremely 
difficult. The use of minority languages in central and municipal authorities is insufficient and 

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hinders  participation  into  the  institutions.  Minorities’  access  to  public  services  is  also  a 
problem.  Regarding  the  return  of  refugees  and  internally  displaced  people,  the  number  of 
returnees remains very low. Uncertainty over Kosovo’s future status and fears about security, 
coupled  with  bleak  employment  prospects,  is  discouraging  the  return  of  Kosovo  Serbs  and 
other communities. Particular attention is required to ensuring a sustainable livelihood for all 
minority  communities  already  living  in  Kosovo  but  the  situation  of  Roma,  Ashkalija  and 
Egyptian  communities,  notably  those  living  in  health-hazardous  conditions,  requires  urgent 
action. 

The technical dialogue with Belgrade has resumed and the participation of Kosovo in regional 
co-operation initiatives has enhanced. 

The opening of discussions on Kosovo’s future status is a challenge for the entire region. The 
strong  commitment  of  all  parties  to  a  multi-ethnic,  stable  and  democratic  Kosovo  will  be 
essential  to  achieve  a  sustainable  settlement  that  reinforces  the  security  and  stability  of  the 
region and its further progress towards the EU.  

The  economy  of  Kosovo  operates  within  an  emerging  framework  of  functioning  market 
principles. Further vigorous reform efforts are necessary to address the serious shortcomings 
in competitiveness of the economy. 

Monetary stability continued to be ensured through the use of the euro as the main currency in 
circulation. Inflation turned negative in the second half of 2004 and in early 2005. Structural 
reforms  progressed,  in  particular  the  privatisation  of  socially-owned  enterprises  accelerated 
since  mid-2004.  Two  publicly-owned  enterprises  were  incorporated.  The  authorities 
continued  pursuing  liberal  trade  and  labour  market  policies  and  ensuring  relatively  open 
market  entry  and  a  broadly  favourable  entrepreneurial  environment.  Some  modest  flows  of 
foreign direct investment took place in the context of accelerated privatisation.  

However, economic growth has been rather weak, also affected by the decline in support by 
foreign  donors  and  a  lack  of  dynamism  of  the  economy.  Unemployment  remains  very  high 
and  the  current  account  deficit  continues  to  be  considerable.  The  policy  mix  was  not  fully 
appropriate:  in  particular  considerable  increases  in  expenditure  have  resulted  in  a  sizeable 
budget deficit in 2004. Restructuring of, the electricity utility has been delayed in particular 
by  a  lack  of  resources  to  finance  its  investment  needs.  The  establishment  of  property  rights 
remains  a  challenge.  Legal  uncertainty  and  weaknesses  in  law  implementation  and  contract 
enforcement  continue  to  hinder  private  sector  development  and  investment.  Market  exit 
remains difficult and lengthy owing mainly to weaknesses in the judiciary. Insufficient basic 
infrastructure  continues  to  impede  economic  activity.  Rises  in  real  wages  have  undermined 
Kosovo’s export competitiveness. 

Kosovo  has  made  progress  in  terms  of  alignment  to  European  standards  in  many  areas 
though in an uneven way.  

New legislation and policies are now broadly checked for EU compliance from the phase of 
conception and early stages of drafting in line ministries and through the Office for European 
Integration Processes. Seven ministries have established EU integration units, some of them 
supported  by  external  experts.  The  lack  of  qualified  local  legal  experts  in  EU  law  is  an 
obstacle and difficulties have been encountered in the translation of new legislation. Despite 
this  progress,  neither  of  these  civil  service  structures  are  fully  consolidated,  nor  is  the 

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parliamentary  committee  on  international  cooperation  and  EU  integration  fully  operational 
yet. 

In the area of internal market, some progress was made regarding with the adoption of new 
legislation. The revised law on public procurement is based on EU rules, although still under 
review by the Assembly. No progress can be reported in the area of intellectual property law. 
Positive developments have occurred in the area of customs mainly in the implementation of 
an Integrated Tariff for Kosovo and the Customs Code. Some progress has been made in the 
field  of  taxation  where  a  progressive  alignment  with  the  EU  acquis  is  under  way.  In  2005 
Kosovo  moved  to  a  simplified  system  of  two  types  of  income  taxes.  The  collection  and 
control capacity of tax administration needs to be enhanced and fraud in excise duties tackled. 

As regards development of sector policies, it continued the implementation of the European 
Charter for Small and Medium Enterprises. A law on support to SME has been promulgated. 
Despite its potential, Kosovo’s agriculture remains under-exploited and key challenges such 
as  poor  infrastructure,  property  rights,  inappropriate  credit,  inefficient  quality  control 
mechanisms  and  low  education  need  to  be  tackled.  In  the  area  of  environment  Kosovo  has 
made progress towards approximation to EU acquis with the adoption of legislation on water 
and air quality, and by-laws on environmental impact assessment. The government approved 
an Environmental Protection Strategy while a five year Environmental Action Plan is under 
development. Progress can be reported in the area of transport where Kosovo participates in 
the  regional  transport  initiatives.  Pristina  airport  cam  under  civilian  control  and  was 
incorporated. Kosovo participates in the extension of the European Common Aviation Area to 
South East Europe. Regarding energy, Kosovo is a signatory of the South East Europe Energy 
Community Treaty. In the area of telecommunications and postal services, new postal codes 
became effective in June 2005.  

As  regards  justice,  freedom  and  security,  the  situation  is  still  unsatisfactory.  Some  progress 
has  been  made  in  establishing  the  legal  framework  to  combat  money  laundering  while 
implementing  mechanisms  still  need  to  be  much  improved.  A  comprehensive  anti-drug 
strategy has yet to be established, both in relation to trafficking and the increasing local drug 
abuse.  The  transition  of  power  to  the  Kosovo  Police  Service  is  ongoing.  However,  further 
capacity  building  is  needed,  in  particular  for  investigations  and  management  and  leadership 
skills.  More  progress  is  needed  to  bring  perpetrators  of  crime  to  justice  and  enforce  rule  of 
law.  The  fight  against  organised  crime  and  against  financial  crime  must  be  stepped  up  and 
local capacities developed in view of any future further transfer of powers to local authorities.  

Turkey 

Political  transition  is  ongoing  in  Turkey  and  the  country  continues  to  sufficiently  fulfil  the 
Copenhagen political criteria. Important legislative reforms have now entered into force and 
should lead to structural changes in the legal system, particularly in the judiciary. However, 
the  pace  of  change  has  slowed  in  2005  and  implementation of  the  reforms  remains  uneven. 
Although  human  rights  violations  are  diminishing,  they  continue  to  occur  and  there  is  an 
urgent need both to implement legislation already in force and, with respect to certain areas, 
to  take  further  legislative  initiatives.  Significant  further  efforts  are  required  as  regards 
fundamental freedoms and human rights, particularly freedom of expression, women’s rights, 
religious freedoms, trade union rights, cultural rights and the further strengthening of the fight 
against  torture  and  ill-treatment.  In  particular,  Turkey  should  integrate  better  the  reform 
process  into  the  work  of  all  public  authorities.  Turkey’s  commitment  to  further  political 

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reforms  should  be  translated  into  more  concrete  achievements  for  the  benefit  of  all  Turkish 
citizens regardless of their origin. 

As  regards  democracy  and  the  rule  of  law,  important  structural  reforms  have  been  put  in 
place, particularly in the area of the functioning of the judiciary. The six pieces of legislation 
mentioned  in  the  Commission’s  2004  recommendation  entered  into  force.  However, 
implementation on the ground remains uneven. On the one hand, several judgements suggest 
that the judiciary is increasingly acting in accordance with the case law of the European Court 
of Human Rights. On the other hand, there have been a number of decisions, in particular in 
relation  to  the  expression  of  opinions  on  traditionally  sensitive  subjects,  which  have  led  to 
both  prosecutions  and  convictions.  Reforms  concerning  civil-military  relations  have 
continued, but the armed forces still exert significant influence by issuing public statements 
on political developments and government policies.  

Concerning the protection of human rights and minorities, despite some progress, the picture 
remains mixed. As regards the fight against torture and ill-treatment further provisions have 
entered into  force,  adding to the comprehensive legislative framework already in place, and 
the incidence of such practice is diminishing. Nevertheless, reports of torture and ill-treatment 
remain frequent and those perpetrating such crimes still often enjoy impunity.  

Legislative progress has been achieved with regard to the exercise of fundamental freedoms, 
notably through the entry into force of a new Penal Code and a new Law on Associations, and 
in practice both individuals and civil society organisations enjoy greater freedom than in the 
past. Nevertheless, individuals continue to be prosecuted and convicted for the expression of 
non-violent opinion and certain associations continue to face constraints on their activities. In 
this context court proceedings based on Article 301 will be closely monitored. 

There  are  still  reports  of  the  security  forces  using  disproportionate  force  in  the  context  of 
demonstrations.  As  regards  freedom  of  religion,  despite  some  ad  hoc  measures,  religious 
minorities  and  communities  still  lack  legal  personality.  There  is  an  urgent  need  to  address 
their  problems  through  the  adoption  of  a  comprehensive  legislative  framework  in  line  with 
European  standards.  Greater  attention  is  being  paid  to  women’s  rights,  but  violence  against 
women remains a matter of serious concern.  

Notwithstanding a greater tolerance for the use of languages other than Turkish, the exercise 
of cultural rights is still precarious. No local broadcasting in Kurdish has yet been authorised, 
Kurdish language courses have closed down and politicians continue to be convicted for using 
the Kurdish language in certain contexts. Turkey continues to adopt a restrictive approach to 
minorities and cultural rights. 

Although  there  is  a  growing  consensus  on  the  need  to  address  the  economic,  cultural  and 
social development of the Southeast, little concrete progress has been made and the security 
situation  has  worsened  since  the  resumption  of  PKK  violence.  Internally  displaced  persons 
continue to face a number of difficulties.  

As  regards  regional  issues,  the  Turkish  government  has  stated  on  several  occasions  that  it 
remains committed to a comprehensive settlement of the Cyprus problem in line with the plan 
presented by the UN Secretary General. Turkey signed the Additional Protocol adapting the 
EC Turkey Association Agreement to the accession of 10 new Member States on 29 July. At 
the same time, Turkey issued a unilateral declaration stating that this signature did not amount 
to  formal  recognition  of  the  Republic  of  Cyprus.  The  EU  adopted  a  declaration  on  21 

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September indicating that Turkey’s declaration does not affect Turkey’s obligations under the 
Additional Protocol. The EU declaration stressed that recognition of all Member States was a 
necessary component of the accession process. It also underlined the need for supporting the 
efforts of the Secretary General of the UN to bring about a comprehensive settlement of the 
Cyprus  problem  which  would  contribute  to  peace,  stability  and  harmonious  relations  in  the 
region.  Turkey  has  continued  to  impose  its  veto  on  Cyprus’  membership  to  certain 
international organisations as well as to the Wassenaar Agreement on the Code of Conduct on 
Arms Exports and on Dual Use Goods. Relations between Greece and Turkey have continued 
to  develop  positively.  However,  despite  31  rounds  of  meetings  since  2002,  the  parties  have 
not yet been able to reach a comprehensive settlement of the outstanding border dispute.  

As regards the economic criteria, Turkey can be regarded as a functioning market economy, 
as long as it firmly maintains its recent stabilisation and reform achievements. Turkey should 
also  be  able  to  cope  with  competitive  pressure  and  market  forces  within  the  Union  in  the 
medium  term,  provided  that  it  firmly  maintains  its  stabilisation  policy  and  takes  further 
decisive steps towards structural reforms. 

Further  significant  gains  on  macroeconomic  stabilisation  have  been  achieved  over  the  last 
year.  Due  to  a  rigorous  and  cautious  policy  mix,  fiscal  consolidation  continued,  debt 
dynamics  improved  and  inflation  further  decreased,  while  economic  growth  has  remained 
robust. Considerable progress has been made on improving public financial management and 
control, and as a result fiscal transparency has increased. A significant overhaul of the social 
security and health systems is ongoing. The successive improvements in the supervisory and 
regulatory  framework  of  the  banking  sector  and  the  advances  in  privatisation  are 
progressively  tightening  economic  agents’  financial  discipline  and  improving  Turkey’s 
business and investment climate. Foreign direct investment has picked up . 

To  build  upon  this  progress,  macroeconomic  stabilisation,  based  on  budgetary  restraint, 
should  be  further  pursued.  The  recent  sharp  increase  in  the  current  account  deficit  requires 
careful  monitoring  and  a  readiness  to  take  prompt  actions.  Further  structural  reforms,  in 
particular  aimed  at  strengthening  the  rule  of  law,  enhancing  privatisation  and  enterprise 
restructuring, correcting labour market imbalances and reducing the informal economy should 
underpin  and  strengthen  the  stabilisation  process.  Resources  should  be  more  efficiently 
allocated,  in  particular  by  a  reform  of  key  factor markets. Commitments  to restrict the  total 
wage  bill  should  be  respected.  The  reform  of  public  expenditures  budgetary  procedures 
should be continued and a full implementation of improved regulatory and legal frameworks 
should be ensured. 

As  regards  Turkey’s  ability  to  adopt  and  implement  the  EU  legal  order,  there  has  been 
some,  though  uneven,  progress  since  2004.  Progress  has  taken  place  in  the  area  of  free 
circulation  of  goods,  in  particular  concerning  the  implementation  provisions  covered  by  the 
new approach, including the possibility for Turkey to notify conformity assessment bodies, as 
well as market surveillance. For the other areas, i.e. old approach and non harmonised areas, 
no progress took place. Despite the EC-Turkey Customs Union, circulation of products is not 
yet entirely free. 

Free  movement  of  capital  has  slightly  improved.  Certain  restrictions  have  been  lifted,  but 
foreigners  are  not  allowed  to  acquire  real  estate  and  to  engage  in  certain  economic  sectors. 
Some  progress  has  taken  place  in  the  important  area  of  money  laundering,  but  alignment 
remains incomplete. 

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Some  progress  took  place  concerning  company  law,  in  particular  as  regards  accounting 
standards and auditing. Overall alignment remains limited for this chapter. 

Alignment  concerning  intellectual  property  rights  is  advanced,  and  has  further  improved. 
Also  some  improvement  has  been  made  concerning  enforcement  of  the  legislation,  but  this 
remains the weakest aspect of the system.  

In the area of competition policy, provisions concerning undertakings (anti trust, and merger 
control) are satisfactorily aligned and implemented by the competition authority. On the other 
hand,  on  state  aids,  no  progress  can  be  reported  as  regards  alignment  or  enforcement. 
Therefore alignment remains very limited, despite specific bilateral commitments. Particular 
attention should be devoted to state aids control in the steel sector. 

Some progress has been made concerning financial services, and in particular insurance and 
supplementary  pension  sector.  Progress  in  the  banking  sector  needs  to  be  consolidated. 
Nevertheless, overall alignment in this area is limited, and the administrative capacity needs 
to be reinforced. 

In  the  area  of  information  society  and  media,  some  progress  can  be  recorded  concerning 
electronic communication and information technologies, where liberalisation proceeded, and 
information society services. Effective implementation of the legislation would require further 
development  of  the  administrative  capacity.  In  the  area  of  audiovisual  policy,  both  recent 
progress and overall alignment remain limited.  

Concerning agriculture and fisheries, progress was very limited. Some initiatives have been 
taken  concerning  rural  development  but  these  need  to  be  reinforced.  Overall  the  alignment 
and administrative capacity remain very limited. 

Alignment  in  the  areas  of  food  safety,  veterinary  and  phytosanitary  policy  is  also  fairly 
limited.  Alignment  is  higher  in  certain  specific  sub-sectors  of  general  foodstuff  policy,  but 
still incomplete, and implementation appears difficult. The general framework for veterinary 
policy is not in place. However the administration has started work to identify the problems 
on the ground and the administrative changes necessary to address them. Phytosanitary policy 
shows some limited progress. Administrative structures will need major upgrading. 

Progress  concerning  transport  is  uneven  among  the  various  modes  of  transport.  Some 
progress  took  place  concerning  road  transport,  where  alignment  is  more  advanced,  but 
implementation  remains  incomplete.  Substantial  legislative  and  institutional  reforms  are 
needed in the rail sector. In maritime transport some progress can be reported on legislative 
alignment  and  strengthening  of  administrative  capacity.  With  regard  to  air  transport  some 
progress  can  be  noted  although  overall  alignment  remains  limited.  On energy,  overall  some 
progress  has  been  achieved,  notably  as  regards  security  of  supply  and  renewable  energies. 
While progress remained limited concerning the establishment of the internal energy market, 
there was none concerning state aids in the sector, nor energy efficiency. If Turkey develops a 
nuclear energy generation capacity, administrative capacities must be strengthened to ensure a 
high level of nuclear safety. Some progress has been made concerning radiation protection. 

Progress  in  the  area  of  taxation  is  limited,  as  concerns  both  indirect  taxation,  and  direct 
taxation.  Overall  the  Turkish  fiscal  regime  is  partially  complying  with  the  acquis,  but 
substantial alignment is still required. The size of the informal economy remains an issue. The 
administrative capacity needs extensive upgrading. 

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Some  progress  has  been  recorded  concerning  statistics,  and  in  particular  as  regards 
classifications,  sector  statistics.  The  alignment  with  the  acquis  is  currently  limited,  but  co-
operation between Eurostat and the State Institute of Statistics is continuing. Some progress 
was made in the area of employment and social policy. However, while alignment is relatively 
advanced on  health and safety at work, substantial efforts  are still  required in  areas  such as 
social dialogue, gender equality and antidiscrimination. A major task lies ahead as concerns 
implementation and strengthening of administrative capacity.  

The  Turkish  strategy  concerning  industrial  policy  is  already  largely  in  line  with  the  basic 
principles of the EU. Since the previous Report some additional progress can be reported, in 
particular  for  SME  policy.  Progress  is  uneven  on  regional  policy  and  coordination  of 
structural  instruments.  No  development  took  place  since  the  previous  Report  on  territorial 
organisation,  and  programming.  Progress  has  taken  place  in  the  legislative  framework,  and 
financial  management  and  control.  Considerable  efforts  remain  necessary  to  set  up  the 
institutional  structures.  Administrations  involved  in  regional  policy  should  be  established, 
both at central and regional level, and subsequently upgraded. 

In  the  areas  covered  by  the  judiciary  and  fundamental  rights,  Turkey  has  made  progress  in 
aligning  with  EU  standards  and  practices  concerning  the  judiciary  and  anti-corruption 
measures. However, further steps are needed to ensure the independence and efficiency of the 
judiciary. On corruption, further action is necessary to improve the efficiency of the relevant 
bodies  established  to  combat  corruption  and  to  raise  public  awareness  of  corruption  as  a 
serious criminal offence.  

Turkey  continued  to  align  its  legislation  with  the  acquis  in  the  area  of  justice  freedom  and 
security. Overall, the Turkish legislation is partly in line with the acquis. Further progress is 
necessary  in  a  number  of  areas  such  as  adoption  of  a  law  on  protection  of  personal  data, 
adoption  and  implementation  of  the  National  Action  Plan  on  Border  Management, 
implementation of the National Action Plan on Migration and Asylum, lifting the geographic 
limitation to the Geneva Convention and developing inter-agency co-operation. 

Concerning environment, Turkey has made limited progress. The overall level of transposition 
of  the  acquis  remains  low,  with  the  exception  of  waste  management  and  noise,  where 
transposition is advanced. Weaknesses in the implementation and enforcement are still source 
of  concern.  Turkey  needs  to  take  steps  to  integrate  environmental  policy  into  the  definition 
and implementation of all other policies. 

Alignment in the area of consumers and health protection, is advancing steadily. In particular 
progress was made in the implementation of non-safety related measures. For safety related 
measures, no further progress took place. Some development was recorded concerning public 
health, and in particular concerning tobacco legislation. The administrative capacity should be 
reinforced.  

Provisions  concerning  customs  union  are  aligned  to  a  large  extent,  also  to  comply  with 
bilateral  EC-Turkey  agreements.  However,  further  alignment  of  the  Turkish  Customs  Code 
with  that  of  the  EC  is  still  needed.  Non-customs  legislation  applied  in  free  zones  and  the 
continuation of weaknesses in intellectual property rights enforcement in customs controls is a 
matter of concern 

The commercial aspects of EU policy on external relations are largely followed by Turkey, as 
a  commitment  deriving  form  the  EC-Turkey  customs  union.  In  particular,  new  free  trade 

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agreements with third countries were signed. Turkey managed to align to a large extent with 
the  EC  GSP  regime.  Turkey  has  a  large  degree  of  alignment  with  EU  common  foreign  and 
security policy. Bilateral relations with neighbouring countries, including Greece, have further 
improved.  The  border  with  Armenia  is  still  closed.  Turkey  and  the  EU  have  a  different 
interpretation  of  the  “Berlin  Plus”  agreements  between  EU  and  NATO  which  hampers  EU-
NATO strategic co-operation in crisis management. 

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