Commission staff working document - Croatia 2009 progress report accompanying the Communication from the Commission to the European Parliament and the Council - Enlargement Strategy and Main Challenges 2009-2010 {COM(2009) 533 final}
Date: 2009-10-14
Institutions: European Commission
Subjects: Croatia, accession to the European Union, enlargement of the Union, pre-accession strategy, report

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.10.2009 
SEC(2009) 1333 

COMMISSION STAFF WORKING DOCUMENT 

CROATIA 2009 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2009-2010 

{COM(2009) 533 final} 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

4.6. 

4.7. 

4.8. 

4.9. 

Introduction .................................................................................................................. 4 

Preface.......................................................................................................................... 4 

Context ......................................................................................................................... 4 

Relations between the EU and Croatia......................................................................... 5 

Political criteria ............................................................................................................ 7 

Democracy and the rule of law .................................................................................... 7 

Human rights and the protection of minorities .......................................................... 11 

Regional issues and international obligations ............................................................ 16 

Economic criteria ....................................................................................................... 18 

The existence of a functioning market economy ....................................................... 18 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 24 

Ability to assume the obligations of membership...................................................... 27 

Chapter 1: Free movement of goods .......................................................................... 27 

Chapter 2: Freedom of movement for workers .......................................................... 29 

Chapter 3: Right of establishment and freedom to provide services ......................... 30 

Chapter 4: Free movement of capital ......................................................................... 31 

Chapter 5: Public procurement................................................................................... 32 

Chapter 6: Company law............................................................................................ 33 

Chapter 7: Intellectual property law........................................................................... 34 

Chapter 8: Competition Policy................................................................................... 35 

Chapter 9: Financial Services..................................................................................... 36 

4.10.  Chapter 10: Information society and media ............................................................... 37 

4.11.  Chapter 11: Agriculture.............................................................................................. 38 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 39 

4.13.  Chapter 13: Fisheries.................................................................................................. 40 

4.14.  Chapter 14: Transport policy ..................................................................................... 41 

4.15.  Chapter 15: Energy .................................................................................................... 42 

4.16.  Chapter 16: Taxation.................................................................................................. 43 

4.17.  Chapter 17: Economic and Monetary Union ............................................................. 44 

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4.18.  Chapter 18: Statistics.................................................................................................. 45 

4.19.  Chapter 19: Social Policy and Employment .............................................................. 45 

4.20.  Chapter 20: Enterprise and Industrial Policy ............................................................. 47 

4.21.  Chapter 21: Trans European Networks ...................................................................... 48 

4.22.  Chapter 22: Regional Policy and Coordination of Structural Instruments ................ 49 

4.23.  Chapter 23: Judiciary and fundamental rights ........................................................... 51 

4.24.  Chapter 24: Justice, Freedom and Security................................................................ 56 

4.25.  Chapter 25: Science and Research ............................................................................. 59 

4.26.  Chapter 26: Education and Culture ............................................................................ 60 

4.27.  Chapter 27: Environment ........................................................................................... 61 

4.28.  Chapter 28: Consumer and Health Protection............................................................ 63 

4.29.  Chapter 29: Customs Union ....................................................................................... 64 

4.30.  Chapter 30: External Relations .................................................................................. 65 

4.31.  Chapter 31: Foreign, Security and Defence Policy.................................................... 65 

4.32.  Chapter 32: Financial Control.................................................................................... 66 

4.33.  Chapter 33: Financial and Budgetary Provisions....................................................... 67 

STATISTICAL ANNEX.......................................................................................................... 69 

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COMMISSION STAFF WORKING DOCUMENT 

Croatia 2009 Progress Report 

1. 

INTRODUCTION 

1.1. 

Preface 

Since  March  2002,  the  Commission  has  reported  regularly  to  the  Council  and  Parliament  on 
progress made by the countries of the Western Balkans region. 

This report on progress made by Croatia in preparing for EU membership largely follows the same 
structure as in previous years. The report: 

–  briefly describes the relations between Croatia and the Union; 

–  analyses the situation in Croatia in terms of the political criteria for membership; 

–  analyses the situation in Croatia on the basis of the economic criteria for membership; 

–  reviews Croatia’s capacity to assume the obligations of membership, that is, the acquis expressed 

in the Treaties, the secondary legislation, and the policies of the Union. 

The period covered by this report is from early October 2008 to mid- September 2009. Progress is 
measured on the basis of decisions taken, legislation adopted and measures implemented. As a rule, 
legislation  or  measures  which  are  under  preparation  or  awaiting  parliamentary  approval  have  not 
been  taken  into  account.  This  approach  ensures  equal  treatment  across  all  reports  and  permits  an 
objective assessment. 

The  report  is  based  on  information  gathered  and  analysed  by  the  Commission.  In  addition,  many 
sources have been used, including contributions from the government of Croatia, the EU Member 
States,  European  Parliament  reports1,  and  information  from  various  international  and  non-
governmental organisations. 

The  Commission  draws  detailed  conclusions  regarding  Croatia  in  its  separate  communication  on 
enlargement2, based on the technical analysis contained in this report. 

1.2. 

Context 

The European Council of June 2004 granted the status of candidate country to Croatia. Accession 
negotiations  with  Croatia  were  opened  in  October  2005.  The  Stabilisation  and  Association 
Agreement  between  Croatia  and  the  EU  was  signed  in  October  2001  and  entered  into  force  in 
February 2005. 

1 
2 

The rapporteur for Croatia is Mr Hannes Swoboda.  
Enlargement Strategy and Main Challenges 2009-2010 (COM(2009) 533 of 14.10.2009). 

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1.3. 

Relations between the EU and Croatia 

Croatia is participating in the Stabilisation and Association Process. 

Accession negotiations with Croatia have continued. Negotiations have been opened on 28 out of 
35  chapters  (science  and  research;  education  and  culture;  economic  and  monetary  policy; 
enterprise and industrial policy; customs union; intellectual property rights; right of establishment 
and  freedom  to  provide  services;  company  law;  statistics;  financial  services;  financial  control; 
information society and media; consumer and health  protection;  external  relations;  financial  and 
budgetary  provisions;  TENs;  transport;  energy;  free  movement  of  workers;  social  policy  and 
employment; free movement of goods; public procurement; justice, freedom and security; taxation; 
free  movement  of  capital;  regional  policy;  food  safety,  veterinary  and  phytosanitary  policy; 
agriculture  and  rural  development)  and  provisionally  closed  on  twelve  (science  and  research; 
education and culture; enterprise and industrial policy; external relations; EMU; IPR; information 
society; TENs; customs union; company law; statistics; free movement of workers).  

In  addition,  there  are  currently  six  draft  EU  negotiating  positions  in  Council.  Of  these  three  are 
opening  positions  (environment;  foreign,  security  and  defence  policy;  fisheries)  and  three  are 
closing positions (consumer and health protection, financial services, energy). 

In  its  communication  on  enlargement  strategy  adopted  on  5  November  2008,  the  Commission 
proposed an indicative road map for reaching the final stage of accession negotiations with Croatia. 
The  Commission  stated  that  it  should  be  possible  to  reach  this  final  stage  by  the  end  of  2009, 
provided Croatia fulfils all the necessary conditions. Croatia has made good overall progress in line 
with the roadmap. The roadmap has successfully galvanised efforts in Croatia aimed at meeting the 
benchmarks  in  order  to  open  and  close  the  chapters  according  to  the  indicative  timetable  of  the 
roadmap.  

However,  the  border  issue  between  Slovenia  and  Croatia  held  back  the  accession  negotiations 
such that a  substantial  number  of  chapters  could  not  be  opened  or  closed  until  October  2009, 
although technically finalised earlier. The Commission has provided its facilitation services to settle 
this dispute, which should remain a bilateral issue. Intensive efforts by the Commission, supported 
by the Trio of Presidencies, have been made over six months, which paved the way for a political 
agreement between  the  two  parties  reached  in  September  2009.  The  Commission  welcomes  the 
recent progress that led to a substantial number of chapters being opened and closed at the Inter-
governmental  conference  in  October.  Bilateral  issues  should  not  hold  back  the  accession 
negotiations. 

Moreover, delays in Croatia itself in certain areas mean certain chapters have not progressed in line 
with  the  roadmap.  This  concerns  in  particular  the  opening  of  chapters  on  the  judiciary  and 
fundamental rights and competition, but also the closing of chapters such as transport.  

Notwithstanding  this,  overall  the  progress  achieved  in  Croatia  in  numerous  chapters  means  that 
technical preparations in the negotiations are now nearing their final phase.  

The political and economic dialogue between the EU and Croatia has continued. Political dialogue 
meetings  were  held  in  Luxembourg  in  April  at  ministerial  level  and  in  Brussels  in  June  2009  at 
senior official level. Economic dialogue meetings were held in Luxembourg in April at ministerial 
level and in July 2009 at senior official level. These meetings focused on the main challenges faced 
by Croatia under the Copenhagen political and economic criteria and reviewed progress being made 
towards fulfilment of Accession Partnership priorities. 

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Implementation of the Stabilisation and Association Agreement (SAA) has been uneven. Positive 
developments  in  the  shipbuilding  and  taxation  area  have  been  recently  accompanied  by  measures 
creating  difficulties  for  EU  operators  when  exporting  to  Croatia.  With  regard  to  State  aid 
provisions,  in  particular  as  regards  aid  granted  to  the  shipbuilding  sector,  the  issue  has  now  been 
largely resolved with the publication of tenders for the shipyards in difficulty with a view to their 
restructuring  through  privatisation.  Croatia  has  also  eliminated  the  discriminatory  taxation  of 
cigarettes (see Chapter 16). Following the entry into force of amended legislation in February 2009, 
EU nationals are now entitled to acquire ownership rights over real estate under the same conditions 
as  Croatian  nationals,  in  line  with  the  obligations  under  the  SAA.  Following  turbulence  in  the 
global financial markets, Croatia has applied the safeguard clause of Article 60(4) to postpone the 
liberalisation  of  certain  short-term  capital  movements.  In  recent  months,  a  number  of  measures 
applied by Croatia have resulted in increased import duties on a number of products exported from 
the EU. Discussions are ongoing to address these issues in the framework of the SAA. 

The  EU  provides  guidance  to  the  authorities  on  reform  priorities  through  the  Accession 
Partnership. Progress on these reform priorities is encouraged and monitored through the bodies of 
the SAA. The SAA Association Council met in April 2009 and the SAA Association Committee in 
December  2008.  Seven  sectoral  sub-committee  meetings  have  been  held  since  November  2008. 
Based  on  the  Accession  Partnership,  Croatia  adopted  its  national  programme  for  EU  accession  in 
spring 2009. 

Financial assistance is provided under the new Instrument for Pre-accession Assistance (IPA) from 
2007.  The  2009  IPA  programmes  amounted  to  €  151  million.  This  assistance  is  concentrated  on 
institution building and preparation for the implementation of the EU’s common agricultural policy 
and  cohesion  policy.  In  addition,  Croatia  continued  to  benefit  from  regional  and  horizontal 
programmes. Croatia has taken a number of important steps to address weaknesses identified by the 
Commission  in  Croatia’s  management  of  pre-accession  aid.  These  steps  have  led  to  conferral  on 
Croatia  of  decentralised  management  powers  for  IPA  components  I  to  IV.  A  track  record  of 
improved implementation is needed.  

EU  financial  support  has  been  provided  to  civil  society  development  under  the  Civil  Society 
Facility. A € 2.5 million grant scheme was set up under IPA 2009 with the aim of providing civil 
society  organisations  with  the  knowledge  and  skills  to  enhance  their  role  in  the  fields  of 
democratisation,  human  rights  and  refugee  return,  as  well  as  promoting  innovative  social  service 
delivery programmes. In addition, a € 16 million contribution under the Cross Border Cooperation 
programmes  with  Italy,  Slovenia,  Hungary,  Serbia,  Montenegro,  and  Bosnia  and  Herzegovina  as 
well  as  participation  in  ERDF  programmes  will  promote  dialogue  with  local  and  regional 
authorities. Croatia’s participation in an increasing number of Community programmes (11) is also 
an important tool to implement civil society dialogue. 

In  response  to  the  economic  crisis,  an  IPA  crisis  package  has  been  created,  comprising  €200 
million  for  the  Western  Balkan  region  which  are  expected  to  leverage  investments  of  at  least  €1 
billion,  co-financed  by  the  partner  financial  institutions.  The  country  will  benefit  from  a  share  of 
multi-beneficiary  funds  for  competitiveness,  SMEs,  energy  efficiency  and  banking  sector 
regulation. As a candidate country, Croatia has been benefiting since 2007 from funding under IPA 
component III (roughly € 142 million cumulated since that year) for reinforcing the competitiveness 
of the economy – thus helping to cope with the crisis – through major infrastructure projects in the 
fields  of  transport  (railway  and  inland  waterway  infrastructure),  environment  (treatment  and 
disposal of solid waste, waste water), as well as support to SMEs. 

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2. 

POLITICAL CRITERIA 

This  section  examines  the  progress  made  by  Croatia  towards  meeting  the  Copenhagen  political 
criteria,  which  require  stability  of  institutions  guaranteeing  democracy,  the  rule  of  law,  human 
rights  and  respect  for  and  protection  of  minorities.  It  also  monitors  regional  cooperation,  good 
neighbourly relations with enlargement countries and Member States, and respect for international 
obligations, such as cooperation with the International Criminal Tribunal for the former Yugoslavia 
(ICTY). 

2.1. 

Democracy and the rule of law 

Parliament  

Parliament generally functioned well, fulfilling its constitutional role. However, there is scope for 
improving the level of parliamentary scrutiny in the legislative process.  

The  Administrative  Court  annulled  in  February  2009  parliament’s  controversial  appointment  of  a 
Constitutional  Court  judge,  ruling  that  the  judge  had  not  fulfilled  the  necessary  professional 
requirements.  The  Constitutional  Court  subsequently  overruled  the  Administrative  Court  decision 
such that parliament’s appointment became final. 

Parliament lifted the immunity from detention of a Member of Parliament convicted of war crimes 
charges. This was only after the first instance verdict was issued. However, the delay in taking the 
decision allowed the Member of Parliament to abscond the country once he had been sentenced and 
found guilty. 

Government  

The Government generally remained stable and continued to function normally, despite occasional 
political differences in the coalition, including the departure of the Pensioners' Party (one Member 
of  Parliament)  from  the  coalition  in  August,  cabinet  reshuffles  and  the  appointment  of  a  new 
Government  under  Prime  Minister  Jadranka  Kosor  following  the  resignation  in  July  2009  of  the 
then Prime Minister Ivo Sanader.  

In  October  2008  the  then  Minister  of  the  Interior  and  Minister  of  Justice,  as  well  as  the  Head  of 
Police, were all replaced. This was prompted by the killings of a lawyer and a journalist in Zagreb. 
The  new  ministers,  who  remained  in  the  new  Government  after  July  2009,  are  not  members  of 
ruling coalition parties and are considered experts in their fields.  

Local elections were held in May, including for the first time direct elections of City Mayors and 
County Prefects. The elections were held in an orderly manner with an increased turnout.  

Public administration  

Some  progress  has  been  made  on  public  administration  reform,  which  is  a  key  Accession 
Partnership  priority.  A  new  Law  on  General  Administrative  Procedures  (LGAP)  was  adopted, 
aimed at supporting the establishment of service-oriented and professional administrative practice. 
Following the appointment of a new cabinet in July 2009, a new post of Minister for Administration 
was  created.  The  capacity  of  the  newly  created  Ministry  of  Administration  (formerly  the  Central 
State  Office  for  Administration)  has  further  improved.  Following  the  Amendments  to  the  Civil 
Service  Code  of  Ethics,  the  role  and  the  responsibilities  of  the  Ethics  Committee  and  the 
competences of Ethics Commissioners were defined. The Government adopted a National Training 

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Strategy  for  Officials  and  Servants  in  Local  and  Regional  Self-Government  Units  2009-2013.  It 
aims  to  improve  the  capacities  of  local  self-government  in  providing  decentralised  services  to 
citizens.  

However,  public  administration  reform  has  so  far  not  received  sufficient  political  attention.  The 
appointment  of  a  Minister  for  Administration  provides  an  opportunity  to  inject  the  necessary 
political  impetus  into  the  reform  process.  Major  weaknesses  in  administrative  procedures  remain 
and implementation of the new LGAP has not yet begun. The legal basis for building a modern and 
professional  civil  service  is  still  incomplete.  The  draft  Law  on  Civil  Service  Salaries  has  still  not 
been adopted and a merit–based system of promotion and remuneration is missing. The civil service 
continues  to  suffer  from  many  shortcomings,  such  as  politicisation,  low  salaries  (which  fail  to 
attract and retain sufficient numbers of qualified civil servants), lack of clear performance appraisal 
indicators, and weak human resources planning and management. Civil service salaries have been 
further  cut  to  mitigate  the  effects  of  the  financial  crisis  and  a  recruitment  freeze  introduced. 
Decision-making continues to be highly centralised with limited delegation of powers to middle and 
lower level management, leading to inefficiencies. The lack of an effective civil service registry still 
needs  to  be  addressed.  The  law  on  the  Ombudsman  needs  to  be  properly  implemented  so  as  to 
increase  the  effectiveness  of  the  Ombudsman's  recommendations.  Anti-corruption  measures  and 
ethical  principles  remain  to  be  embedded  in  public  administration  and  the  cooperation  between 
different  public  stakeholders  improved.  With  regard  to  the  employment  of  national  minorities, 
employment records in local and regional self-government units are not yet completed.  

The  Decentralisation  Strategy  has  not  been  adopted,  due  to  a  lack  of  engagement  at  the  political 
level.  Overall  coordination  involving  the  line  ministries  at  both  political  and  technical  levels  is 
lacking,  as  is  a  dialogue  among  central  and  local  governments.  Training  and  improvement  of  the 
professional skills and knowledge of the Croatian authorities at central, regional and local level is 
not satisfactory.  

Overall,  some  progress  has  been  achieved  in  the  area  of  public  administration  reform.  Further 
efforts  have  to  be  made  to  substantially  improve  administrative  procedures  and  to  establish  a 
professional,  depoliticised  civil  service,  able  to  fully  respect  the  rule  of  law  and  with  sufficient 
capacity to deliver quality services.  

Following  the  appointment  of  a  new  Head  of  Police  in  October  2008  there  were  considerable 
changes  in  the  staffing  of  the  police,  many  of  which  were  aimed  at  depoliticising  key  posts  and 
improving  professionalism.  A  number  of  persons  in  key  positions  were  replaced,  with  the  new 
appointments  contributing  to  improvements  at  the  managerial level. However, the Head of  Police 
appointed  in  October  2008  was  removed  from  his  post  in  June  2009  and  appointed  as  a  State 
Secretary  in  the  Ministry  of  Interior.  Other  key  positions  were  also  refilled.  The  reforms  evident 
since October 2008 need to continue.  

Civilian oversight of the security forces 

Reform  of  the  security  and  intelligence  system  has  continued.  With  the  necessary  legislation  in 
place  and  implemented,  the  intelligence  services’  conduct  and  scope  of  control  has  further 
improved. However, the legitimate interest of the State to protect certain information and the right 
of the public to have access to it are not yet properly balanced. 

Overall, civilian control of the security services is generally assured.  

Judicial system  

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Implementation of the judicial reform strategy has continued and a large volume of new legislation 
was adopted, in line with the key Accession Partnership priority in this area. The Ministry of Justice 
was  reorganised  and  the  directorate  for  strategic  development  reinforced.  A  new  selection 
procedure  for  judicial  trainees  was  introduced.  The  backlog  of  cases  was  reduced  by  8.4%  to 
887,000  in  December  2008.  Good  progress  was  made  on  reducing  the  number  of  old  civil  and 
criminal  cases  by  31%  and  52%  to  102,430  and  4,408  respectively.  The  new  law  on 
misdemeanours, the new civil procedure code, and the amended law on courts have contributed to 
reducing  the  inflow  of  new  cases.  New  provisions  of  the  criminal  procedure  code  substantially 
modify  the  judicial  investigation,  transferring  competence  to  the  State  Prosecutor.  The  new 
provisions apply from July 2009 for organised crime and corruption cases and as of 2011 for other 
cases. Special chambers for dealing with organised crime and corruption cases have been set up in 
four  County  Courts.  Steps  were  taken  to  rationalise  the  court  network.  The  number  of  municipal 
courts was formally reduced from 108 to 67 and the number of State Attorney's Offices from 71 to 
55. The judicial academy continued to carry out its in–service professional training programme, and 
initial training programmes for judicial trainees and advisers started in April 2009.  

However,  the  selection  procedure  for  judges  and  prosecutors  remains  deficient,  lacking 
transparency  and  the  application  of  uniform,  objective  criteria.  The  overall  case  backlog  and  the 
number of unresolved cases older than three years remain high and the length of judicial procedures 
excessive.  Problems  with  the  enforcement  of  court  rulings  constitute  a  major  obstacle  to  the 
efficiency of the judicial system. Court rationalisation has not yet begun in earnest, with very few 
physical  mergers.  Current  plans  lack  ambition  and  clear  budgeting.  The  draft  law  foreseeing  the 
reduction  in  the  number  of  misdemeanour  courts  from  114  to  61  has  been  pending  approval  in 
parliament  for  one  year.  There  is  still  no  unified  statistical  system  of  case  management  in  the 
judiciary. Introduction of the integrated case management system is delayed. Further improvements 
in  the  accountability,  independence,  professionalism  and  competence  of  the  judiciary  are  also 
required. The potential for undue political influence over the judiciary remains. The independence 
of the judiciary needs to be increased, and the role of the executive and parliament in issues such as 
judicial  appointments  reviewed.  The  judicial  academy  remains  understaffed,  without  either 
permanent  premises  or  an  adequate  budget  to  perform  its  duties.  Initial  training  for  future  judges 
and  prosecutors  is  still  missing.  The  handling  of  administrative  cases  as  well  as  the  use  of 
alternative  dispute  resolution  continues  to  face  particular  challenges.  Adequate  monitoring  of 
reform measures has not been possible due to continued limits on administrative capacity. There is 
only limited assessment of the impact of new measures. 

With regard to domestic prosecutions for war crimes, Croatia continues to be active in trying war 
crimes  cases  on  its  own  initiative,  with  around  thirty  trials  in  the  past  year.  A  more  balanced 
approach  is  slowly  becoming  evident  with  a  greater  willingness  to  prosecute  perpetrators 
irrespective  of  ethnicity.  This  is  a  key  Accession  Partnership  priority.  Further  progress  has  been 
made  on  regional  cooperation  on  war  crimes  matters.  The  State  Attorney  issued  instructions  to 
prosecutors  in  October  2008  aimed  at  addressing  the  problem  of  a  common  standard  of  criminal 
accountability for war  crimes not being applied irrespective  of ethnicity. The issue of  in  absentia 
verdicts  from  the  1990s  has  been  partially  addressed  through  an  amendment  to  the  criminal 
procedure code allowing wider possibilities to review cases. 

However, impunity for war crimes remains a problem, especially where victims were ethnic Serbs 
or  perpetrators  were  allegedly  members  of  the  Croatian  armed  forces.  Many  crimes  remain 
unprosecuted, often due to a combination of lack of evidence, unwillingness of witnesses to come 
forward,  e.g.  due  to  intimidation,  and  unwillingness  or  reluctance  of  police  and  prosecutors, 
particularly in certain localities. There has been no further transfer of cases from local to specialised 
war crimes courts. Where cases are brought, judgments often take the convicted person’s role in the 

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defence of the homeland as a mitigating factor, which creates a clear ethnic bias in sentencing for 
comparable  crimes.  There  is  so  far  only  a  limited  track  record  of  implementation  of  new  review 
provisions for in absentia cases from the 1990s.  

Overall,  reforms  in  the  judiciary  continue  but  the  impact  of  various  newly  introduced  measures 
remains  to  be  tested  in  practice.  Significant  challenges  remain,  particularly  as  regards  judicial 
independence  and  the  lack  of  transparent  selection  procedures  for  judges  and  prosecutors  and  as 
regards judicial efficiency, not least the length of proceedings and enforcement of decisions.  

(See also Chapter 23 — Judiciary and fundamental rights) 

Anti-corruption policy  

There  has  been  some  progress  in  the  fight  against  corruption.  Implementation  of  the  Anti-
Corruption  Strategy  and  related  Action  Plan  has  continued,  which  is  a  key  Accession  Partnership 
priority  in  this  area.  The  legal  framework  to  combat  organised  crime  and  corruption  has  been 
further improved. Amendments to the Criminal Code introduced new rules on confiscation of assets 
which reverse the burden of proof for persons convicted for organised crime or corruption offences. 
The  National  Council  for  monitoring  the  anti-corruption  strategy  has  become  more  proactive, 
regularly holding public debates and hearings. A national anti-corruption campaign for the general 
public  was  launched.  A  National  Police  Office  for  the  Fight  Against  Corruption  and  Organised 
Crime  (PNUSKOK)  has  been  operational  within  the  General  Police  Directorate  since  February 
2009. The Office for the Fight Against Corruption and Organised Crime (USKOK) continues to be 
active and has issued indictments in some important cases. It has begun to investigate possible high 
level corruption, initiating an investigation of a case involving a former government minister. There 
have been the first verdicts in some important cases brought by USKOK. In the second ‘Maestro’ 
trial,  the  Zagreb  County  Court  issued  prison  sentences  against  two  former  vice-presidents  of  the 
Croatian Privatisation Fund (HFP). 

However, corruption is still prevalent in many areas. The recently upgraded legal and administrative 
structures remain to be tested in practice. While the total number of corruption cases investigated so 
far  has  increased,  the  actual  number  of  prosecutions  remains  low.  There  has  been  limited 
investigation of high-level corruption, the prosecution of which is frustrated by political influence. 
A culture of political accountability for the corruption being uncovered by USKOK is lacking. The 
administrative  capacity  of  State  bodies  for  fighting  corruption  continues  to  need  improvement. 
Overall  coordination  of  implementation  of  anti-corruption  efforts  still  faces  shortcomings.  There 
has  been  no  progress  in  preventing  conflicts  of  interest.  The  Committee  for  the  Prevention  of 
Conflicts of Interest (CPCI) was re-established after a period of interruption but has not established 
a strong preventive role for itself. While this body has issued guidelines for State officials, there has 
been  little  progress  in  preventing  conflicts  of  interest.  Efficient  non-partisan  monitoring  of  anti-
corruption efforts is still not established.  

On the prosecution front, in order to be able to conduct complex financial investigations in the field 
of organised crime and corruption USKOK as well as PNUSKOK need to improve their expertise 
on  financial  issues  as  well  as  further  enhance  their  cooperation  with  other  bodies.  In  order  to 
prevent corruption, greater transparency in public administration is required. Shortcomings remain 
as regards the financing of political parties and election campaigns. Implementation of the law on 
access  to  information  needs  further  improvement.  Public  procurement  remains  a  major  source  of 
corruption.  Significantly  improved  scrutiny  of  actual execution of contracts is essential. (See also 
Chapter 23 — Judiciary and fundamental rights) 

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Overall,  anti-corruption  efforts  continue  and  are  producing  initial  results,  but  corruption  remains 
prevalent  in  many  areas  and  tools  are  not  being  deployed  with  sufficient  vigour,  especially  on 
political corruption. 

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law 

There were no new ratifications of human rights instruments, as Croatia had ratified already in 
previous  years  most  of  the  UN  and  Council  of  Europe  core  instruments.  The  Criminal  Code  has 
been amended with the aim of further aligning with the Council Framework Decision on combating 
Terrorism and the Council of Europe (CoE) Convention on suppression of Terrorism.  

As of September 2009, there were 873 cases against Croatia pending before the European Court of 
Human Rights (ECtHR). The ECtHR delivered 19 judgments finding that Croatia had violated the 
European Human Rights Convention. As in previous years, the Court continued to find violations 
regarding  the  right  to  a  fair  trial  and  the  length  of  the  proceedings  under  Article  6  of  the 
Convention.  That  has  also  increasingly  encompassed  the  length  of  enforcement  proceedings.  The 
Court has also found violations of Article 13 — lack of an effective remedy in cases where local 
courts  failed  to  issue  verdicts  following  previous  judgments  on  violations  of  the  right  to  a  fair 
hearing/length  of  proceedings  by  the  Constitutional  Court.  The  ECtHR  concluded  that  in  those 
particular  cases  remedies  provided  in  the  domestic  legal  system  through  recourse  to  the 
constitutional court were not effective.  

The European Court of Human Rights has also condemned Croatia for different aspects of Article 6 
regarding the dismissal of the former President of the Supreme Court of the Republic of Croatia. It 
has been established that the procedures before the State Judicial Council did not ensure the fairness 
of the proceedings.  

The  promotion  and  enforcement  of  human  rights  is  often  compromised  by  the  overall 
shortcomings in the administration of justice. This relates especially to the length of proceedings in 
the judicial system. 

Civil and political rights 

With  regard  to  prevention  of  torture  and  ill-treatment  and  the  fight  against  impunity  the 
Ombudsman continued to receive a number of complaints regarding the excessive use of force by 
the  police.  In  this  context,  the  Ombudsman  repeatedly  called  for  more  transparent  procedures  for 
the determination of police responsibility as well as better regulation of police actions. 

There has been no proper follow-up regarding the prominent case of forced hospitalisation reported 
on in the 2008 Progress Report. 

As regards impunity, many war crimes are still unprosecuted, especially those where the victims are 
ethnic  Serbs.  According  to  the  State  Prosecutor,  there  are  still  some  600  cases  to  be 
investigated/prosecuted.  In  addition,  there  are  several  hundred  cases  which  have  yet  to  reach  the 
Prosecutor  due  to  lack  of  initial  police  investigation.  Convicted  persons  are  on  occasion  able  to 
escape and shelter within the region due to dual citizenship and a lack of extradition agreements. 

As regards access to justice, the Law on Legal Aid began to be implemented in February 2009. The 
necessary implementing legislation has been adopted and several legal NGOs have been registered 
with  the  Ministry  of  Justice.  The  institutional  framework  set  up  for  implementation  of  the  law 

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comprises a Department for Free Legal Aid within the Ministry of Justice, 20 State administration 
offices  in  counties  and  13  branch  offices  as  well  as  a  Legal  Aid  Commission.  However,  the 
complexity  of  the  procedure,  low  fees  for  lawyers  relative  to  their  normal  tariffs  and  significant 
reductions  in  the  budget  for  legal  aid  provision  might  not  guarantee  proper  access  to  justice. 
Effective implementation of the free legal aid system is also jeopardised by the unequal territorial 
distribution of NGO legal providers.  

With regard to the prison system, further measures have been taken to improve prison conditions, 
in particular the management of the prison system. The Law on enforcement of prison terms was 
adopted  in  2008,  providing  for  the  expansion  of  existing  facilities  and  improved  health  care.  171 
additional  staff  were  recruited  and  trained.  However,  Croatian  prisons  remain  overcrowded,  with 
the number of detainees increasing due to longer prison sentences introduced in the Criminal Code. 
Probation  remains  to  be  introduced  as  an  alternative  to  detention.  There  is  still  a  lack  of  trained 
prison staff. There have been cases of abuse of office and corruption among prison staff that have 
favoured certain prisoners. First efforts have been made to address this issue. 

Freedom of expression, including freedom and pluralism of the media, is provided for in Croatian 
law and is generally respected. However, threats against journalists working on cases of corruption 
and  organised  crime  have  been  increasing.  There  has  been  limited  success  in  identifying  and 
prosecuting  perpetrators  and  instigators  of  certain  physical  attacks  on  journalists.  Editors  and 
journalists  continue  to  report  undue  political  pressure.  Concerns  about  freedom  of  expression 
persist, including at the local level. 

There have been no particular difficulties as regards freedom of assembly and association. 

Civil society organisations play an important role in the promotion and protection of human rights, 
democracy  and  protection  of  minorities.  However,  they  continue  to  have  difficulty  influencing 
policy  debate,  partly  due  to  the  government  tending  not  to  include  them  in  the  policy-making 
process. With a few notable exceptions, NGOs remain relatively weak in analytical capacity. 

There have been no particular problems in the exercise of freedom of religion. 

Overall,  with  some  specific  exceptions,  civil  and  political  rights  continue  to  be  reasonably  well 
respected in Croatia. However, shortcomings as regards impunity for war crimes, access to justice 
and freedom of expression require further attention. 

Economic and social rights 

There has been some progress in the area of women’s rights and gender equality.  

Implementation  of  the  new  Gender  Equality  Act  and  of  the  national  policy  for  the  promotion  of 
gender equality continued. Implementation of the national strategy for protection against domestic 
violence 2008-2010 has improved. There has been further progress in police work in cases of family 
violence. The Ombudsman for Gender Equality makes use of all available instruments and reports 
by public bodies and enterprises respond in a satisfactory manner. There has been good cooperation 
between the authorities and the Ombudsman, especially on the new anti-discrimination legislation. 
The political participation of women improved following the local elections held in May 2009.  

However, the situation of women on the labour market remained unchanged. Women are affected 
disproportionately  by  the  widespread  use  of  fixed  term  contracts.  This  discourages  them  from 
complaining about discrimination. The professionalism of social welfare centres and staff training 
in cases of domestic violence needs further improvement. Despite provisions of the Gender Equality 

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Act  requiring  all  public  administration  bodies,  at  the  central,  local  and  regional  level,  as  well  as 
other  institutions  to  collect,  process  and  present  data  disaggregated  by  gender,  such  data  is  still 
missing.  

(see also Chapter 19) 

There  has  been  little  progress  in  the  area  of  children’s  rights.  The  Ombudsman  for  Children 
continued to be effective in his role in the overall promotion and protection of children’s rights. In 
2008,  the  Ombudsman  for  Children  dealt  with  2,075  new  cases.  He  noted  a  small  decrease  in 
reports of violence in the family. There has been good cooperation between the authorities and the 
ombudsman,  especially  on  the  new  anti-discrimination  legislation.  A  National  Programme  for 
Young People 2009-2013 has been adopted. 

However,  violence  among  and  against  children  in  educational  institutions  has  increased.  Social 
welfare institutions and correctional facilities remain understaffed and overburdened.  The  number 
of children in institutions has increased. Implementation of measures envisaged under the national 
plan of activities for the rights and interests of children for the period of 2006-2012 has been further 
delayed.  There  is  poor  coordination  between  ministries  with  regard  to  children’s  rights.  Judicial 
backlogs  and  the  lack  of  trained  judges  have  a  negative  impact  on  the  situation  of  children, 
particularly in cases of family separation and in unpaid alimony cases. Amendments to the family 
law  from  2007  have  not  produced  the  expected  results  in  terms  of  reducing  the  non-payment  of 
alimony. 

Progress has been good in the area of socially vulnerable andpersons with disabilities. 

The Office of the Ombudsman for Persons with Disabilities (OPD) was inaugurated in November 
2008  and  was  adequately  staffed  in  April  2009.  The  OPD  has  been  successful  in  carving  out  a 
visible  role  for  itself.  Public  bodies  and  private  enterprises  are  responsive  to  recommendations 
received  by  the  OPD.  A  good  indicator  for  concrete  improvement  is  that  today,  almost  all  new 
buildings under construction take into account the need for accessibility of the building to disabled 
persons.  The  office  in  practice  deals  more  with  requests  for  information  than  with  individual 
complaints. The media have been very cooperative in disseminating awareness-raising information. 
There  has  been  good  cooperation  between  the  authorities  and  the  ombudsman,  especially  on  the 
new anti-discrimination legislation. 

However, more progress is needed in the field of de-institutionalisation, including for children with 
disabilities. This is among the priorities set out in the Joint Inclusion Memorandum (JIM) and the 
related National Implementation Plan. Despite the provisions of the JIM, data on exclusion is still 
missing.  Civil  society  organisations  involved  in  delivering  community-based  services  need  to  be 
adequately supported in order to develop sufficiently community-based services as an alternative to 
institutionalisation. In general, serious inadequacies in the social welfare system remain. (see also 
Chapter 19 – Social policy and employment) 

With regard to labour and trade union rights, there has been some progress (see also Chapter 19 
—  Social  policy  and  employment).  Against  a  challenging  economic  background,  the  trade  unions 
are increasingly gaining the ability to influence government policy and decision making. However, 
the  monitoring  and  follow-up  by  the  State  Inspectorate  and  the  judicial  system  of  violations  of 
workers’ rights remains weak. 

The  new  anti-discrimination  law  is  in  an  early  phase  of  implementation.  The  Ombudsman  has 
started  to  exercise  his  new  responsibilities.  However,  proper  implementation  of  the  new  law  is 
jeopardised by recent budget cuts. Discrimination against minorities remains a particular problem 

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(see below). There has been no progress with implementation of hate crime legislation. There has 
been no conviction for the criminal offence of the initiation of racial and other hatred. More needs 
to  be  done  to  tackle  discrimination  on  grounds  of  sexual  orientation.  Lesbian,  gay,  bisexual  and 
transgender people are subjected to threats and attacks. Many cases are not followed-up adequately 
by the police and prosecutors, or remain unreported. 

The  level  of  protection  against  discrimination  in  practice  and  the  judicial  prosecution  of  acts  of 
discrimination is not in line with EU standards.  

Property rights are generally assured. The outstanding cases of delayed property repossessions and 
problems with compensation for the use of private property taken under the war legislation from the 
1990s continue to be present.  

Overall, legal protection for economic and social rights is partially guaranteed. Implementation of 
women’s and children’s rights and protection against all forms of discrimination needs to be further 
improved in practice. 

Minority rights, cultural rights and protection of minorities 

There  has  been  some  progress  in  the  area  of  minority  rights,  cultural  rights  and  protection  of 
minorities. 

High-level public expressions of commitment to the rights of minorities, reaffirming their place in 
Croatian society, have continued. The eight minority MPs are in the governing coalition. The Roma 
minority has continued to receive attention, with improvements particularly in pre-school education. 
Round  tables  and  public  discussions  have  been  held  on  the  constitutional  law  on  the  rights  of 
national  minorities  (CLRNM),  in  particular  concerning  minority  employment  in  the  State 
administration and judiciary. With regard to cultural rights, the education provisions of the CLRNM 
and  other  laws  relevant  to  minorities  generally  continue  to  be  implemented  satisfactorily.  With 
regard  to  the  perception  of  national  minorities  in  the  media,  negative  stereotyping  has  further 
decreased. 

However, many problems remain for minorities. Minorities continue to face particular difficulties in 
the  area  of  employment,  both  in  terms  of  under-representation  in  the  State  administration,  the 
judiciary and the police as well as in the wider public sector. Limited progress has been made with 
regard  to  the  implementation  of  the  CLRNM,  which  is  a  key  Accession  Partnership  priority.  The 
implementation of the recruitment plan for national minorities has not seen a significant increase in 
minority  employment  in  the  State  administration.  Plans  for  employment  in  the  administration  at 
county, town and municipality level are still not adequate. A long–term strategy to implement the 
CLRNM minority employment provisions is lacking. Adequate statistics to allow proper monitoring 
are not available.  

Despite  increased  financial  support,  the  Councils  for  National  Minorities  (CNMs)  are  not 
sufficiently recognised yet as advisory bodies by the majority of local authorities. Moreover, their 
independence  and  influence  is  affected  by  the  fact  that  they  depend  on  the  budget  of  the  town 
authority or council. 

Legal provisions and programmes need to be implemented with more determination, and adequate 
monitoring assured, especially in the area of employment. There continues to be little progress with 
regard  to  the  production  and/or  broadcasting  of  programmes  for  minorities  in  their  languages  by 
public radio and TV stations, as envisaged under the CLRNM.  

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With  regard  to  the  Serb  minority,  there  have  been  fewer  reports  of  ethnically  motivated  attacks. 
Police investigations of such incidents have improved, although few cases end in prosecution. Many 
cases  remain  unreported  due  to  a  lack  of  confidence  in  the  authorities  and  the  occurrence  of 
negative  sentiment  in  the  wider  public  towards  Serbs.  Members  of  the  Serb  minority,  including 
those who remained in Croatia during the war, face difficulties concerning access to employment, 
especially in the war-affected areas. Discrimination continues, particularly in the public sector at the 
local  level.  Croatia  needs  to  encourage  a  spirit  of  tolerance  towards  the  Serb  minority  and  take 
appropriate measures to protect those who may still be subject to threats or acts of discrimination, 
hostility or violence.  

There has been some progress on the various outstanding issues regarding refugees. 

Around  1,345  refugees  and  380  displaced  persons  returned  to  their  place  of  origin  in  Croatia  in 
2008-2009. The total number of Serb minority returns to Croatia now stands at 108,466 in addition 
to 23,231 internally displaced Serbs who have returned to their home towns and villages. There has 
been  progress  in  providing  housing  solutions  to  returning  refugees.  The  programme  to  reconnect 
public  infrastructure  in  certain  return  villages  and  mine  clearance  operations  have  continued. 
Despite significant progress in recent years in the area of return and (re)integration in the signatory 
countries of the Sarajevo Declaration, a total of some 80,000 Croatian Serbs are still registered as 
refugees in the region, the vast majority in Serbia.  

A number of obstacles to sustainable return of Serb refugees remain, the main one being housing, 
particularly  for  former  tenancy  rights  holders.  Implementation  of  the  Croatian  government’s 
housing care programmes (HCP) within and outside the Areas of Special State Concern (ASSC) for 
former tenancy rights holders who wish to return to Croatia has progressed well over the past year 
but  is  lagging  behind  the  planned  timetable.  Definitively  settling  all  cases  in  this  area  is  a  key 
Accession Partnership priority. 

In total, as of September 2009, 13,695 HCP applications had been filed. Out of this number 8,888 
had  been  positively  decided,  of  which  6,198  cases  had  received  housing  assistance.  2,567  cases 
were decided negatively, resulting in some 686 appeals. 2,240 cases were not yet completed.  

In terms of government planning for the allocation of apartments under the HCP, implementation of 
the  self-imposed  benchmark  for  2007  (allocating  1,400  housing  units)  has  been  met.  As  for  the 
2008 benchmark (an additional 1,400 housing units) good progress has been made, with more than 
three quarters of cases having been finally resolved. In addition, many cases have been transferred 
to  reconstruction  schemes,  with  contracts  for  organised  reconstruction  signed, 
though 
implementation is not yet complete. The government has reduced its objective for 2009 from 2,496 
to 2,100 housing units, due in part to postponed or cancelled applications. Implementation is at an 
early  stage.  In  addition  to  the  pending  cases  from  the  2008  and  2009  benchmarks,  it  is  estimated 
that anywhere up to 2,000 housing units will need to be provided in 2010 and possibly beyond to 
returning  refugee  families  under  the  HCP.  Figures  will,  however,  depend  on  the  results  of 
processing the 2-3,000 pending requests and appeals, on the number of new applications and on the 
number of cases to be transferred from the reconstruction scheme to the housing care programme. 
Croatia should ensure that budget cuts necessary in the context of the economic crisis do not weigh 
negatively on refugee return issues.  

Reconstruction of housing has continued. However, around 8,000 appeals are still pending, most of 
which for more than four years. Property repossession is largely complete. There has been progress 
in  returning  previously  occupied  agricultural  land  plots  to  the  pre-war  possessors  and  rightful 
owners.  

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Apart  from  housing,  other  key  concerns  facing  returnees  are  employment,  enduring  hostility  in 
certain localities and ‘convalidation’, or the validation of working years for the purpose of pension 
rights,  of  those  residing  in  the  parts  of  Croatia  not  under  Croatian  government  control  during  the 
1990s.  Lodged  claims  for  convalidation  amount  to  17,586.  Of  this  number,  9,610  have  been 
processed, with 52% receiving a positive decision. The decision to revise all negative decisions in 
an  internal  audit  is  a  positive  development;  nevertheless,  measures  aimed  at  ensuring  a  more 
uniform and fair application process notably at the first instance level should continue. 

Good  progress  has  been  made  as  regards  inclusion  of  the  Roma  minority,  building  upon  the 
willingness  of  Croatia  to  address  the  problems  of  this  group.  It  has  launched  a  number  of 
infrastructure programmes with EU financial support in Roma settlements. There has been progress 
as regards enrolment of Roma children in pre-school, as well as primary and secondary education. 
Funding for Roma projects is also increasing. Some special language classes which resulted in de 
facto segregation of Roma children have been integrated into mainstream programmes. 

However, most Roma remain excluded from mainstream Croatian society and face difficult living 
conditions.  Unemployment  remains  endemic.  Measures  with  regard  to  education  need  to  be 
integrated  into  more  systematic  policies.  Progress  on  successful  completion  of  primary  and 
secondary  education  is  relatively  modest  so  far.  Problems  persist  also  in  terms  of  access  to 
employment, adequate housing, social protection and healthcare, and in general attitudes in society, 
where  discriminatory  viewpoints  prevail.  Coordination  among  Roma  groups  is  limited  as  is  their 
expertise for effective implementation, and should be strengthened. The lack of personal documents 
and/or civil registration continues to hinder the integration of Roma into existing communities and 
their access to employment, health and other rights. Problems remain regarding the participation of 
the Roma community in the education system, even when specific programmes are available. 

Overall,  the  position  of  minorities  in  Croatia  continues  to  improve.  However,  many  problems 
remain for the Serb and Roma minorities. Some progress on outstanding refugee return issues was 
made but efforts to provide housing solutions and ensure sustainability of refugee return need to be 
accelerated. 

(See also Chapter 23 — Judiciary and fundamental rights) 

2.3. 

Regional issues and international obligations 

Compliance with the Dayton/Paris and Erdut Peace Agreements has overall been ensured. 

Croatia  continues  to  cooperate  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia (ICTY). This is a key Accession Partnership priority. However, problems of access for 
ICTY  to  important  documents  in  Croatia  continue  to  exist.  These  documents  are  required  in  the 
ongoing ICTY trial against generals Gotovina, Cermak and Markac. Subsequent to an order of the 
Trial Chamber of September 2008, Croatia was required to provide a detailed report specifying the 
efforts undertaken to obtain the requested documents. However, in his June address to the Security 
Council, the ICTY Chief Prosecutor stated that progress in Croatia’s investigation into the fate of 
the  missing  documents  had  been  limited  and  that  the  large  majority  of  the  military  documents 
sought  had  not  been  submitted  to  the  Tribunal.  In  the  same  month,  Croatia  submitted  a  motion 
requesting the Trial Chamber to decide whether Croatia had complied with its order of September 
2008. Croatia needs to ensure all necessary steps are taken to settle this issue.  

There has been improved cooperation regarding the exchange of evidence and the transfer of some 
war  crimes  cases  between  the  prosecutors  from  Croatia,  Bosnia  and  Herzegovina  and  Serbia. 
Obstacles to the extradition of suspects in cases of war crimes and crimes against humanity between 

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the countries of the region continue to exist, however. This exacerbates the problem of impunity, as 
has been demonstrated in one high-profile case where a convicted war criminal was able to escape 
from Croatia to Bosnia and Herzegovina on the basis of having previously acquired citizenship of 
the latter from where he cannot be extradited. As regards the possibility of serving the sentence in 
Bosnia  and  Herzegovina,  the  existing  agreement  on  mutual  recognition  of  sentences  requires  the 
convicted person’s consent for the sentencing to be served in the other countries. Croatia, together 
with  its  neighbours,  should  address  the  regional  impunity  gap,  including  by  taking  steps  towards 
extradition agreements covering war crimes cases.  

Croatia's  policy  regarding  the  International  Criminal  Court  (ICC)  is  aligned  with  the  EU 
Common Positions on the integrity of the Rome Statute as well as related EU guiding principles.  

There  has  been  little  progress  in  the  Sarajevo  declaration  process,  which  aimed  to  finalise  the 
regional  refugee  return  process  by  the  end  of  2006.  While  Croatia  continued  to  work  on  its 
roadmap,  there  has  been  limited  discussion  on  implementation  issues  on  either  a  bilateral  or  a 
regional basis. Further efforts are needed to resolve the main outstanding issue not yet addressed, 
namely how to deal with the compensation claims of those who lost occupancy and tenancy rights 
in Croatia. 

Regional  cooperation  and  good  neighbourly  relations  form  an  essential  part  of  the  process  of 
moving  towards  the  European  Union.  Croatia  continued  to  participate  actively  in  regional 
initiatives,  including  the  South-East  European  Cooperation  Process  (SEECP),  the  Regional 
Cooperation  Council  (RCC),  the  Central  European  Free  Trade  Agreement  (CEFTA),  the  Energy 
Community Treaty and the Agreement on the European Common Aviation Area (ECAAA). Croatia 
joined the North Atlantic Treaty Organisation (NATO) in April 2009. 

Bilateral  relations  with  other  enlargement  countries  and  neighbouring  EU  Member  States 
continue  to  develop.  However,  progress  towards  finding  definitive  solutions  to  various  open 
bilateral  issues  between  Croatia  and  its  neighbours,  particularly  as  regards  settlement  of  border 
disputes,  has  been  uneven.  This  is  a  key  Accession  Partnership  priority.  There  has  been  some 
progress  towards  reconciliation  among  citizens  in  the  region,  which  is  also  a  key  Accession 
Partnership priority. More needs to be done to pursue efforts in this area. 

Croatia  continues  to  have  good  relations  with  Albania  and  the  former  Yugoslav  Republic  of 
Macedonia.  

Bilateral  relations  with  Bosnia  and  Herzegovina  remain  stable.  However,  relations  have  been 
burdened  by  various  trade  disputes,  in  particular  following  the  imposition  by  Bosnia  and 
Herzegovina  of  import  restrictions  on  agricultural  products  which  are  contrary  to  CEFTA 
obligations.  There  has  been  no  progress  on  border  issues.  Ratification  of  the  2005  Agreement  on 
Demarcation  of  the  Land  and  River  Borders  remains  on  hold.  Moreover,  the  dispute  over  two 
islands –Veliki Skoj and Mali Skoj – remains unresolved, as does the issue of the border along the 
River  Una.  The  Peljesac  bridge  project  remains  an  open  political  issue.  There  have  been  no 
developments on the agreement on the use of the Port of Ploče. The Interstate Cooperation Council 
has not met over the reporting period. Other unresolved issues include property and refugees. 

Relations with Montenegro have continued to improve. Progress has been achieved towards settling 
the  bilateral  border  issue  concerning  Prevlaka  and  both  countries  have  been  co-operating  on 
preparing their submission to the International Court of Justice. An agreement on the protection of 
minorities was signed. The temporary border regime in place continues to function smoothly. The 

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joint working group on resolving property issues and the council on economic relations both held 
meetings. An agreement on cooperation in science and technology was signed. 

There  has  been  progress  in  relations  with  Serbia,  in  particular  following  the  visit  of  the  Croatian 
Prime Minister to Belgrade in March 2009. There have been several other senior bilateral meetings. 
The Serbian Ambassador, recalled after Croatia recognised the independence of Kosovo3, returned 
in  November  2008.  The  visa-free  arrangement  between  the  two  countries  continues  to  function 
well. Croatia and Serbia signed an agreement on police cooperation, an agreement on readmission 
of  illegal  migrants  and  on  cooperation  in  the  field  of  European  integration.  There  has  been  some 
progress  in  cooperation  on  the  2,000  cases  of  missing  persons  from  the  war.  However,  there  has 
been  no  progress  towards  a  border  agreement,  nor  has  the  bilateral  commission  met.  Other  open 
matters  include  property-related  issues,  in  particular  claims  for  compensation  for  lost  occupancy 
and  tenancy  rights,  refugee  return  and  the  genocide  lawsuits  before  the  International  Court  of 
Justice. Relations were particularly strained amid harsh rhetoric from both sides concerning the ICJ 
case  at  the  end  of  2008.  Economic  cooperation  is  growing  although  there  are  limited  Serbian 
investments in Croatia compared to the level of Croatian investments in Serbia, possibly due in part 
to reluctance in Croatia to accept Serbian investments.  

Croatia continues to have good relations with Hungary and Italy. 

Relations  with  Slovenia  have  been  affected  by  the  outstanding  border  issue.  The  border  issue 
between  the  two  countries  held  back  the  accession  negotiations  such  that  a  substantial  number  of 
chapters  could  not  be  opened  or  closed  until  October  2009,  although  technically  finalised  earlier. 
The Commission has provided its facilitation services to settle this dispute. Intensive efforts by the 
Commission, supported by the Trio of Presidencies, have been made over six months, which paved 
the  way  for  a  political  agreement between  the  two  parties  reached  in  September  2009.  There  has 
been no progress in resolving the open issues concerning the Ljubljanska Banka/SFRY Succession 
Agreement (guarantee of foreign currency deposits). 

Overall,  Croatia  continues  to  cooperate  with  ICTY,  although  problems  concerning  access  to 
important documents persist. Croatia continues to participate actively in regional cooperation. Good 
neighbourly  relations  have  prevailed,  although  there  are  shortcomings  on  addressing  outstanding 
issues, especially concerning the settlement of border disputes, property issues and refugee return. 

3. 

ECONOMIC CRITERIA 

In examining the economic developments in Croatia, the Commission’s approach was guided by the 
conclusions of the European Council in Copenhagen in June 1993, which stated that membership of 
the  Union  requires  the  existence  of  a  functioning  market  economy  and  the  capacity  to  cope  with 
competitive pressure and market forces within the Union. 

3.1. 

The existence of a functioning market economy 

Economic policy essentials 

The country participates in the EU Pre-Accession Fiscal Surveillance procedure. The Pre-accession 
Economic  Programme  (PEP)  2009-2011,  submitted  in  January  2009,  presented  a  sufficiently 
comprehensive  and  consistent  macroeconomic  and  fiscal  framework  for  economic  policies.  The 

3 

Under UNSCR 1244/99. 

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programme  and  its  assumptions  became  however  quickly  outdated  due  to  the  impact  of  the 
international crisis. The fiscal notification submitted in April 2009 was an important step in further 
aligning  fiscal  reporting  to  ESA  95  standards,  although  weaknesses  remain.  Broad  political 
consensus  on  the  key  essentials  of  a  market  economy  has  been  maintained.  Transparency  on 
economic  policy  issues  and  in  decision  making  was  improved  by  the  setting-up  of  an  economic 
council comprising major stakeholders. However, economic policy making was often based on ad 
hoc  decisions  and  economic  reforms  sometimes  lacked  a  strategic  medium-term  orientation. 
Overall,  consensus  on  the  fundamentals  of  a  market  economy  has  been  maintained,  but  Croatia 
lacks a medium-term and structural reform strategy.  

Macroeconomic stability 

The  global  financial  and  economic  crisis  started  to  affect  the  Croatian  economy  more  severely in 
the last quarter of 2008, when GDP growth dropped markedly to 0.2% year-on-year. For the whole 
year of 2008, annual GDP growth slowed to 2.4%, down from 5.5% in 2007. In particular, private 
and public consumption growth slowed considerably in the course of 2008, while real investment 
growth accelerated (from 6.5% in 2007 to 8.2% in 2008), mainly on the back of strong activity in 
non-housing construction. The growth of exports declined to 1.7% (from 4.3% in 2007), while total 
imports  decelerated  to  3.6%  (6.5%),  and  the  contribution  of  net  exports  to  growth  remained 
negative.  On  the  supply  side,  growth  was  mainly  driven  by  the  still  robust  performance  of  some 
services,  including  financial  intermediation,  construction  and  transport.  Economic  performance 
deteriorated significantly in the first half of 2009. Real GDP declined by 6.5% year-on-year, on the 
back  of  sharp  drops  in  private  consumption  (-9.7%  year-on-year)  and  investments  (-12.6%). 
Industrial  production  declined  by  9.1%  year-on-year  in  July,  indicating  further  drops  in  output  in 
the  third  quarter.  At  the  same  time  the  tourism  sector  performed  better  than  expected  during 
summer, somewhat cushioning the recession. Average per-capita income in 2008 rose to 63% of the 
EU-27  average,  from  61.1%  a  year  before.  Overall,  the  global  crisis  has  led  to  a  significant 
economic downturn.  

In  2008,  the  current  account  deficit  widened  to  9.4%  of  GDP,  up  from  7.6%  in  2007.  This  was 
partly  driven  by  a  deterioration  of  the  trade  balance.  Higher  oil  prices  and  declining  growth  of 
exports to the main trading partners in the EU pushed the trade deficit up to 22.9% of GDP, from 
22% a year before.  As  in  previous  years, roughly two thirds of the trade gap was  covered by the 
surplus  in  services,  mainly  tourism  and  transport.  The  deficit  of  the  income  balance  increased 
markedly, from 2.6% in 2007 to 3.3% in 2008, mainly reflecting higher debt servicing costs in an 
environment of tighter external financing constraints and lower foreign revenues. In the first seven 
months of 2009, the trade and current account deficits gradually declined, as merchandise imports 
dropped more strongly (-26.8% year-on-year) than exports (-20.7%). In the twelve months to June 
2009, the current account deficit shrank to 6% of GDP. Overall, the current account deficit has been 
declining in line with slowing domestic demand. 

While net capital inflows remained relatively strong in the first three quarters of 2008, they came to 
a  temporary  halt  during  the  last  quarter.  For  the  year  as  a  whole,  they  reached  11.6%  of  GDP 
(somewhat higher than in 2007) and were again largely driven by foreign borrowing of banks and 
companies.  In  the  context  of  tighter  external  financing  conditions  in  late  2008,  even  some 
temporary  capital  outflows  occurred,  as  private  agents  increased  their  foreign  currency  deposits 
abroad.  Private  banks  started  drawing  down  their  external  reserves  to  increase  their  foreign 
financing and to service outstanding external obligations. In the first half of 2009, total net capital 
inflows halved compared to the same period a year before.Net FDI remained an important source of 
foreign financing, although net inflows fell from 8.7% of GDP in the first half of 2008 to 3.9% of 
GDP  in  the  first  half  of  2009.  Net  FDI  covered  around  one  third  of  the  current  account  deficit, 

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compared to 45% in the same period a year before. The structure of FDI continued to be dominated 
by  equity  investments,  including  moderate  recapitalisations  in  the  banking  sector  as  well  as  the 
takeover of parts of the domestic oil company. Overall, despite slower net capital inflows due to the 
crisis, a sufficient amount of external financing could still be ensured.  

The heavy external debt burden continued to increase, by €5.9 billion in 2008, and a further €1.6 
billion in the first half of 2009. At end-2008, the stock of debt amounted to €39.1 billion, equivalent 
to around 82.6% of GDP, up from 77.6% at end-2007. The rise in external indebtedness was mainly 
due to intensive corporate sector borrowing which slowed however in late 2008 as a consequence of 
the crisis. Domestic banks managed to secure the roll-over of liabilities vis-à-vis parent banks in the 
last quarter of 2008, and increased their external debt in 2009. The relatively large exposure of the 
domestic  non-tradable  corporate  sector,  which  accounts  for  around  40%  of  gross  foreign  debt, 
remains  a  cause  for  concern  and  warrants  careful  monitoring.  A  high  external  debt  level,  large 
exposure of the non-tradable sector and large debt obligations maturing over the short term continue 
to represent key external vulnerabilities of the Croatian economy. 

According to data from the labour force survey, the unemployment rate further declined from 9.6% 
in  2007  to  8.4%  in  2008.  In  the  first  quarter,  it  stood  at  9.4%,  compared  to  10%  a  year  ago. 
However,  registered  data  confirm  that  the  economic  downturn  has  already  taken  its  toll  on  the 
labour market. Total employment declined by 3.7% in the twelve months to July 2009. In the same 
period,  the  officially  registered  unemployment  rate  rose  from  12.2%  to  14%.  Moreover,  the 
Croatian labour market continues to suffer from structural problems, such as low participation and 
employment  rates  as  well  as  high  rates  of  youth  and  long-term  unemployment.  The  effective 
retirement age remained low and significant labour supply disincentives persisted, such as generous 
early retirement rules and the predominance of categorical social welfare benefits. Stronger labour 
demand remained hampered by relatively rigid employment protection systems. As a result, labour 
turnover remained low, suggesting limited employment restructuring. The growth of average gross 
wages accelerated to 7.1% in 2008, up from 6.2% in 2007, and declined to 4% in the first half of 
2009.  Average  real  wage  growth  picked  up  somewhat  recently,  as  inflation  started  to  subside. 
Overall,  labour  market  performance  deteriorated  as  a  result  of  the  crisis  and  major  structural 
weaknesses persist. 

The monetary and foreign exchange system of a tightly managed float with a very limited degree of 
exchange rate flexibility remained in place as a main device to anchor inflation expectations. It has 
also  helped  mitigate  potential  exchange  rate-induced  credit  risks  in  a  highly  euroised  economy. 
Under conditions of a less benign external environment, tighter external financing constraints and 
higher  lending  spreads,  the  central  bank  released  significant  foreign  exchange  liquidity  to  the 
domestic  banking  system  through  a  set  of  subsequent  measures.  This  included  the  abolition  of 
marginal reserve requirements on banks’ foreign borrowing as well as a relaxation of reserve and 
liquidity  requirements,  effectively  unfreezing  banks’  foreign  currency  holdings.  Moreover,  the 
central bank intervened twice in the foreign exchange market by selling euros for a total amount of 
around  €  513  million4.  As  a  result  of  monetary  policy  measures,  official  foreign  reserves,  which 
stood at € 9.3 billion at end-2007, started to drop in the second half of 2008. They temporarily fell 
to  €  8.6  million  in  February  2009,  and  recovered  to  €9.1  billion  by  June,  equivalent  to  around  5 
months  of  imports.  The  average  daily  exchange  rate  fluctuated  within  a  relatively  small  range 
between  7.11  and  7.49  kuna  per  euro  and  depreciated  by  3.1%  between  October  2008  and  mid-

4 

Following  those  two  interventions,  the  central  bank  bought  euros  in  a  third  intervention  to  mitigate 
appreciation pressures.  

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September 2009. Overall, monetary policy has managed to relieve external financing pressures by 
regulatory measures and thus contributed to preserving stability.  

The  current  monetary  framework  required  a  relatively  tight  monetary  stance,  directed  at  limiting 
domestic  kuna  liquidity  in  line  with  available  foreign  exchange  resources  in  order  to  ensure 
exchange rate and financial stability. Open market operations (repo auctions) were undertaken at a 
set  rate  of  6%,  which  effectively  led  to  rationing,  weaker  market  transparency  and  an  increase  in 
market  rate  volatility.  Moreover,  to  allow  for  a  more  restrictive  policy  stance  during  periods  of 
elevated  depreciation  pressures  the  authorities  tightened  collateral  requirements.  Domestic 
monetary  and  credit  aggregates  have  been  largely  affected  by  the  financial  crisis,  the  economic 
slowdown and the monetary policy response. Annual growth of domestic credit to the private sector 
further decelerated from around 15% in 2007, but was still around 10% in 2008 and 4.3% in July 
2009. In particular, the growth of lending to private households dropped more strongly than lending 
to  the  corporate  sector.  Domestic  firms  have  increasingly  shifted  towards  domestic  sources  of 
financing  as  a  reaction  to  lower  and  more  costly  access  to  foreign  capital.  At  the  same  time,  the 
structure  of  outstanding  credit  has  changed  markedly  due  to  a  strong  increase  in  government 
borrowing  since  December  2008.  Overall,  credit  growth  has  fallen  and  the  structure  of  credit  has 
shifted towards government financing.  

In  2008,  average  annual  inflation  increased  significantly  to  6.2%,  up  from  2.9%  in  2007.  This 
resulted from strong increases in oil and food prices in the first seven months and large carry-over 
effects from 2007. Following its peak in July 2008, annual inflation declined to 2.8% at end-2008 
with  lower  energy  and  commodity  prices  and  a  slowdown  in  economic  activity  and  private 
consumption  growth.  During  the  first  quarter  of  2009,  inflation  picked  up  temporarily  to  3.8%, 
mainly resulting from adjustments in regulated gas prices, an increase in excise duties on tobacco 
and a seasonal increase in vegetable prices. In August, annual inflation came down to 1.4%. Core 
inflation decelerated to 4.1% at end-2008 and further to 3.4 % in mid-2009. Overall, as a result of 
falling  world  prices  of  commodities  annual  inflation  has  come  down  from  its  peak  in  2008  with 
some temporary upward pressures in early 2009 mainly due to adjustments in regulated prices.  

Public  finances  have  come  under  increasing  pressure  since  the  fourth  quarter  of  2008,  when 
revenues started to underperform in line with a deceleration of  economic activity. The authorities 
reacted swiftly by adjusting current spending at short notice in the last months of 2008, and thereby 
managed  to  maintain  the  general  government  deficit  for  the  year  as  a  whole  at  1.4%  of  GDP. 
However,  revenue  performance  continued  to  weaken  significantly  in  early  2009,  forcing  the 
government  to  increase  domestic  borrowing.  The  budget  financing  situation  was  temporarily 
alleviated  by  a  successful  €  750  million  government  eurobond  issue  in  May.  In  the  first  half  of 
2009, state budget revenues declined by 8.6% year-on-year while expenditures increased by 7.9%. 
The central budget balance turned into a deficit, equivalent to 2.2% of projected GDP, compared to 
a surplus in the same period a year before. A bleaker economic outlook and worsening fiscal trends 
led the authorities to adopt a series of budget revisions. The first revision in April included a wage 
freeze  for  civil  servants  and  public  employees;  it  was  however  still  based  on  optimistic  growth 
assumptions.  Considerable  risks  to  the  2009  budget  execution  materialised  quickly.  A  stronger-
than-expected  economic  downturn  and  rapidly  falling  revenues  forced  the  authorities  to  adopt  a 
second,  and  shortly  thereafter  a  third  budget  revision,  in  early  and  mid-July,  respectively.  The 
revisions  included  some  cuts  on  spending  and  a  number  of  measures  to  compensate  for  falling 
revenues, such as a special tax on income, a VAT increase of one percentage point, and increases in 
excises.  Despite  those  adjustments,  the  revised  planned  general  government  deficit  increased  to 
3.3%  of  GDP,  thus  pushing  up  financing  requirements  of  the  government  sector  and  related 
financing  risks.  Moreover,  risks  of  further  declining  revenues  and  higher  spending  aiming  at 
combating the current crisis remained high. The stock of general government debt stood at 33.5% of 

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GDP  at  end-2008,  only  slightly  higher  than  a  year  before  (33.1%  of  GDP),  but  it  went  up 
considerably in the first half of 2009. Adjustments for the stock of issued state guarantees and the 
debt of the State Development Bank (HBOR) would raise the stock of debt by around 10 percentage 
points of GDP. Overall,  in  reaction  to  mounting  fiscal  pressures,  efforts  were  made  to  re-balance 
the budget. However, the policy response came late, revealing weaknesses in budget planning, and 
the fiscal deficit increased significantly.  

The  rationalisation  of  public  spending  has  made  limited  progress.  This  is  a  key  Accession 
Partnership  priority.  Some  health  reform  measures  were  enacted  as  an  important  step  towards 
addressing the sector’s financial difficulties, including a more effective system of co-payments. No 
further  reforms  have  been  undertaken  to  achieve  better  targeting  of  social  support,  as  envisaged 
under the social benefits reform strategy adopted back in 2007. Categorical benefits still account for 
the  large  majority  of  social  spending.  There  has  been  no  progress  on  reforming  the  mandatory 
pension system. Overall, apart from important initial health care financing reforms, little progress 
has been achieved in terms of increasing the efficiency of public spending. 

The  implementation  of  a  comprehensive  treasury  reform  strategy  has  continued  with  a  view  to 
further  improving  expenditure  management and budget control systems. A new  Budget Act came 
into  effect,  improving  the  legal  basis  for  strategic  and  multi-annual  budget  planning.  Continued 
progress was achieved in enhancing institutional and analytical capacity for setting up medium-term 
macroeconomic  and  fiscal  frameworks.  However,  further  progress  in  streamlining  procedures 
would be needed to more effectively link defined policy priorities to the budget planning process. 
Further  substantial  efforts  were  undertaken  to  bring  budget  reporting  more  in  line  with  ESA  95 
standards.  Fiscal  transparency  remains  a  concern,  also  due  to  the  non-inclusion  in  the  general 
government  accounts  of  some  quasi-fiscal  operations  (State  Development  Bank,  Motorway 
Company)  and  a  large  number  of  municipalities.  Overall,  analytical  and  institutional  capacity  in 
public finance has improved, but strategy-based budget planning needs to be further strengthened.  

Overall, the macroeconomic policy response has by and large been appropriate to address the spill-
overs from the global economic and financial crisis. Within its given limits that ensue from the high 
degree  of  euroisation,  monetary  policy  contributed  successfully  to  preserving  financial  stability 
mainly  through  regulatory  changes  alleviating foreign exchange liquidity pressures. In reaction to 
mounting  fiscal  pressures,  efforts  were  made  to  re-balance  the  budget.  However,  the  gradual 
deterioration  of  the  fiscal  balance  in  combination  with  tight  financing  would  have  required  a 
somewhat more timely and comprehensive fiscal response. The design of a credible fiscal strategy 
aimed at reducing budget rigidities and enhancing the efficiency of public spending remains a key 
challenge.  

Interplay of market forces 

The privatisation process progressed slowly. The only major transaction was the sale of additional 
assets of the national oil company to a foreign investor. The privatisation of assets held under the 
State  Privatisation  Fund  made  only  limited  progress.  Up  until  June  2009,  the  State  Privatisation 
Fund had sold or liquidated shares in some 103 companies, mainly consisting of minority shares. A 
total  number  of  29  tenders  were  published  for  the  privatisation  of  companies  in  majority  state 
ownership,  but  only  4  companies  were  actually  sold.  A  number  of  issued  tenders  have  not  been 
successful,  partly  due  to  a  lack  of  interest  among  potential  investors  and,  in  some  cases,  rather 
unrealistic  sale  conditions.  The  remaining  portfolio  of  the  Privatisation  Fund  still  comprised  835 
companies, with the State keeping a majority holding in 85 of them. Thus, the portfolio of the Fund 
has virtually remained unchanged. No progress has been achieved with the implementation of a new 
privatisation model under which state assets would be transferred to investment funds. The private 

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sector’s  share  in  employment  has  remained  at  around  70%;  the  private  sector  share  of  GDP  is 
estimated at around 70-80%. Overall, very limited progress has been achieved in reducing the role 
of the State in the real sector of the economy.  

Market entry and exit 

Company registration procedures have been further simplified, also by the introduction of on-line 
registration  for  limited  liability  companies.  Preliminary  data  indicate  that  the  number  of  newly 
registered companies declined by 27%5 and the stock of active businesses increased by 5.4% year-
on-year in June, compared to a growth rate of 8% a year before. The government’s project to reduce 
the  regulatory  burden  by  streamlining  legislation  and  eliminating  unnecessary  regulations 
(‘regulatory  guillotine’)  started  off  well  in  2007,  but  its  implementation  slowed.  The  investment 
climate remains hampered by difficulties in obtaining necessary licences, building permits and other 
authorisations.  A  large  number  of  para-fiscal  taxes  at  the  national  and  local  level  do  seem  to  add 
significantly to the tax burden of entrepreneurs. The business environment is also affected by petty 
corruption  and  an  inefficient  public  administration.  Overall,  further  progress  has  been  made  in 
simplifying  company  registration,  but  the  investment  climate  continued  to  suffer  from  a  heavy 
regulatory  burden  and  numerous  para-fiscal  taxes.  Improving  the  business  environment  is  a  key 
Accession Partnership priority. 

Legal system 

Further progress was made in reducing the backlog of cases before Croatian courts. During 2008, 
the  backlog  was  reduced  by  8.4%  compared  to  2007.  However,  there  is  still  a  large  backlog 
(887,000  cases  at  end-2008).  The  length  of  proceedings  before  the  courts  remains  generally 
excessive  and  major  problems  continue  to  exist  with  the  enforcement  of  court  decisions.  The 
weaknesses  of  the  judicial  system  continue  to  undermine  effective  enforcement  of  creditor  and 
property  rights.  Land  registration  has  improved,  but  remains  incomplete  in  parts  of  the  country. 
Investors still suffer from lengthy procedures to register a property. Overall, improvements to the 
judicial system have been made, but major inefficiencies in the judiciary remain. 

Financial sector development  

The  financial  sector  remained  dominated  by  banks,  representing  around  77%  of  total  assets  of 
financial  intermediaries  in  mid-2009.  The  banking  sector  is  almost  completely  privatised  with  a 
90% share of foreign ownership in terms of net assets. Out of 33 banks, two banks remained state-
owned. The degree of market concentration has remained at a moderate level and has generally not 
been an impediment to market competition. The four largest banks together kept a market share of 
around 65% by mid-2009. Banking sector assets continued to grow, but at a slower pace, and the 
structure  of  assets  changed  considerably.  This  is  due  to  a  reduction  of  banks’  foreign  assets  and 
reserves  with  the  central  bank,  resulting  from  regulatory  changes.  Total  credit  growth  slowed, 
reflecting lower demand and higher risk awareness of banks in the context of the global financial 
crisis, but lending to the government sector increased strongly. In terms of GDP, total bank lending 
continued to rise, from 68.8% in 2007 to 72% of GDP in 2008, and further to 74.6% in mid-2009. 
Overall,  the  largely  private  and  foreign-owned  banking  sector  remained  the  key  financial  sector 
player with a moderate degree of market concentration.  

As  a  result  of  a  number  of  prudential  and  supervisory  measures  that  had  been  taken  earlier  to 
address potential macro-financial vulnerabilities, the banking sector remained well capitalised, and 

5 

Last quarter 2008 and first half of 2009 compared to the same period a year earlier. 

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profitability indicators stayed at rather comfortable levels in 2008, before they slightly worsened in 
the first half of 2009. The share of non-performing loans increased from 4.9% at end-2008 to 6.1% 
in  June  2009  under  a  less  favourable  economic  environment.  Moreover,  the  banking  system 
remained confronted with considerable interest- and currency-induced credit risks, as the majority 
of  loans  are  based  on  variable  interest  rates  and  denominated  in  or  indexed  to  foreign  exchange. 
Financial  sector  stability  developments  have  been  kept  under  close  watch  by  the  central  bank, 
which further enhanced its institutional and analytical capacity to produce forward-looking financial 
sector stability assessments of high quality. Overall, the banking sector remained resilient to shocks, 
but significant risks are related to largely un-hedged balances of the non-financial private sector.  

The share of non-banking financial sector assets in total financial sector assets declined from 26% 
at  end-2007  to  23%  in  mid-2009,  largely  due  to  poor  performance  of  investment  funds,  which 
experienced  significant  share  price  declines  and  money  withdrawals  in  the  context  of  the  global 
financial crisis. At the same time, leasing companies and the insurance sector gained in absolute and 
relative terms. The domestic stock and bond markets also suffered from the deepening international 
crisis. The stock market index lost almost 70% in 2008, and market capitalisation of shares listed on 
the  Zagreb  stock  exchange  fell  from  128%  to  42%  of  GDP.  Stock  markets  started  to  recover 
somewhat in March 2009, and the index gained some 15% in the fist half of the year. In 2008, bond 
markets  registered  the  lowest  turnover  since  2003,  and  market  capitalisation  of  all  listed  bonds 
declined from 15% to 10% of GDP, resulting from falling bond prices, maturing bonds and limited 
new  bond  issues.  Overall,  notwithstanding  the  growth  of  some  market  segments,  financial 
intermediation  by  the  non-banking  sector  remained  shallow  and  stock  and  bond  markets 
experienced significant losses following the outbreak of the crisis.  

3.2. 

The capacity to cope with competitive pressure and market forces within the Union 

Existence of a functioning market economy 

The  policy  response  to  the  global  financial  crisis  has  by  and  large  been  conducive  to  preserving 
macro-financial stability, although fiscal risks remain significant. A prudent response by monetary 
authorities  as  well  as  efforts  to  re-balance  the  budget  helped  anchor  expectations  of  economic 
agents and supported the functioning of market mechanisms. However, the slow pace of economic 
restructuring and prevailing obstacles to private sector development continued to partly undermine a 
more growth-oriented allocation of resources, constraining the potential for higher productivity and 
catching-up over the medium term. 

Human and physical capital  

Reforms in the education sector have continued under the education system development plan for 
2005-2010.  Further  steps  were  taken  to  improve  the  quality  of  education  at  all  levels,  including 
through the provision of educational programmes for teachers. Additional efforts have been made in 
the development of a national qualifications framework. Higher education has been further aligned 
with  the  principles  of  the  Bologna  process,  but  the  tertiary  education  sector  suffers  from 
inefficiencies, poor governance and a lack of funding.  

The  government  continued  to  implement  labour  market  policies  on  the  basis  of  the  National 
Employment  Promotion  Plan.  Measures  include  training  and  employment  subsidies  for  young 
people without work experience, the long-term unemployed, older persons and vulnerable groups. 
A  new  Law  on  the  Restructuring  of  Unemployment  Benefits  was  adopted.  It  leads  to  higher 
replacement  rates  in  the  first  three  months  followed  by  a  gradual  decrease  thereafter,  and  offers 
financial  incentives  for  the  unemployed  to  participate  in  educational  measures.  Wage  subsidies 

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were introduced in the context of the introduction of a 32 hour working week. Structural problems 
persisted  as  the  rate  of  youth  and  long-term  unemployment  remained  high  at  22%  and  5.3%, 
respectively. Moreover, a slowing economy has led to a drop in employment and participation rates. 
From  an  already  low  level,  they  dropped  slightly  to  56.5%  and  62.6%,  respectively,  in  the  first 
quarter.  Overall,  low  employment  rates  and  structural  mismatches  between  labour  supply  and 
demand remain important challenges. 

Further progress has been made in developing a knowledge-based economy. The ICT infrastructure 
is  rather  well  developed,  with  high  internet  and  broadband  penetration  rates.  The  share  of  the 
business sector in total spending on research and development has increased. Investment continued 
to be relatively robust in 2008, mainly due to construction activities, keeping the investment ratio at 
around  28%  of  GDP.  Private  investment  accounted  for  the  bulk  of  it  (22%  of  GDP).  However, 
private investments in the processing and manufacturing industry have remained low, constraining 
prospects for faster technological change, a more diversified production structure and higher export 
potential.  Public  investment  remained  also  relatively  strong.  In  particular,  investments  in  new 
highways resulted in a further expansion of the network. FDI continued to play a significant role. 
The total stock of FDI reached € 21.4 billion (44% of GDP). The largest share of cumulative FDI 
inflows  is  accounted  for  by  the  financial  sector  (38%),  followed  by  manufacturing  (23%)  and 
wholesale and retail trade (15%). However, there has still been little greenfield investment. Overall, 
investment continued to be concentrated in transport infrastructure and the services sector.  

Sectoral and enterprise structure 

The government decided to restructure the loss-making shipyards through a process of privatisation 
and started the necessary preparations. This is a key Accession Partnership priority. An agreement 
was reached with the Commission on the arrangements for the privatisation, enabling international 
tenders  to  be  launched  for  the  six  yards  in  difficulty.  The  implementation  of  the  National 
Restructuring  Programme  (NRP)  for  the  steel  sector  has  been  disrupted  by  the  global  economic 
crisis.  Therefore,  the  NRP  as  well  as  individual  business  plans  will  have  to  be  revised.  The 
restructuring of the large loss-making railway carrier and the privatisation of subsidiaries has made 
very limited progress. The objectives of the business plan for 2008 were not fully met, despite some 
correction of earlier wage increases. The envisaged reduction of the working ratio in 2008 did not 
materialise and the railway sector continued to receive high levels of budget support. Overall, good 
progress  has  been  made  in  particular  as  regards  the  tendering  of  the  yards  with  a  view  to  their 
restructuring  through  privatisation.  However,  sustained  efforts  are  required  to  complete  the 
restructuring of the steel and railway sectors to ensure their long-term viability and competitiveness. 

Liberalisation  of  the  telecommunication  industry  continued.  The  Croatian  Telecommunications 
Agency  continued  with  activities  aimed  to  stimulate  market  competition  by  improving  market 
access to new service providers. This led to further price reductions and to a larger choice of tariff 
packages for customers. Fixed line competitors raised their market share further from 19% to a still 
modest  24%.  Liberalisation  of  the  energy  sector  continued  gradually  and  network  rules  for  the 
transport  and  distribution  of  gas  have  been  enacted.  However,  gas  and  electricity  markets  remain 
dominated  by  single  suppliers,  undermining  effective  competition.  The  restructuring  of  the  large 
electricity  company  has  not  advanced.  Overall,  despite  further  legal  and  regulatory  adjustments, 
competition in network industries remains constrained by dominant incumbent suppliers.  

The  already  large  service  sector  maintained  its  share  in  total  output  at  around  65%  in  2008.  The 
share of construction increased, from 7.7% to 8.3% of total output, as a result of buoyant activity, 
while the share of industry declined. The share of the industrial sector and of construction in total 
employment  remained  unchanged  at  around  19%  and  9%  respectively.  Agriculture’s  share  of 

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employment increased from 12.8% to 13.2%, and that of the services sector dropped accordingly. 
The  already  large  service  sector  accounts  for  two  thirds  of  the  economy  and  the  share  of 
construction in total output increased. 

In  2008,  the  SME  sector  represented  around  40%  of  the  corporate  sector’s  total  assets,  66.2%  of 
total employment and 65% of total investment. SMEs generated 44% of GDP and more than 40% 
of total exports. Those indicators remained virtually unchanged compared to the previous year. In 
order  to  support  the  small  and  medium-sized  enterprise  (SME)  sector  the  government  adopted  a 
new  operational  plan  for  2009.  The  State  Development  Bank  (HBOR)  has  been  financially 
strengthened, also through EIB loans, to increase lending to the SME sector on favourable terms. 
On  the  other  hand,  the  sector  continued  to  suffer  from  a  cumbersome  regulatory  framework  and 
inefficiencies  in  public  administration.  Access  to  longer-term  financing  remained  difficult, 
particularly  for  newly  established  businesses.  Commercial  lending  to  the  SME  sector  is  further 
restricted by the presence of several subsidised government programmes. Overall, while the SME 
sector continued to benefit from large-scale government support, its share in the overall economy 
has not increased. 

State influence on competitiveness  

The  government  adopted  a  set  of  ten  anti-recession  measures,  including  reduction  of  the  cost 
burden, financial strengthening of the State Development Bank (HBOR), and support for tourism, 
SMEs and the real estate market. The implementation of the anti-crisis programme has been slow 
and  its  impact  on  competitiveness  remains  uncertain,  in  particular  as  regards  subsidies  for  real 
estate loans, liquidity injections into public companies and import controls. There has been a lack of 
progress  in  reducing  the  large  number  of  levies  and  fees,  mostly  at  local  level,  which  put  a 
significant  financial  burden  on  the  business  sector.  The  role  of  the  Competition  Agency  in 
monitoring and controlling state aid has been further strengthened, but administrative capacity and 
enforcement of competition policy needs to be enhanced. The total amount of subsidies in the 2008 
and  2009  general  government  budgets  remained  high  —  at  around  2.4%  of  GDP  —  and  a  large 
share  has  still  been  provided  to  loss-making  companies.  Although  horizontal  aid  has  increased 
relative  to  sector  aid,  it  still  accounts  for  only  a  small  share  of  total  subsidies.  Overall,  state 
intervention in the enterprise sector remained substantial and has been further increased by the set 
of anti-recession measures. 

Economic integration with the EU 

Croatia  is  an  open  economy  with  total  trade  in  goods  and  services  representing  around  92%  of 
GDP.  Apart  from  the  export  of  machinery  and  transport  equipment  (mainly  ships),  tourism 
continued to be the biggest source of export revenue, representing almost 20% of GDP in 2008. The 
EU has continued to be the largest trading partner. Its share in total Croatian exports and imports 
remained at around 61% and 64% respectively. However, in the first six months of 2009, the share 
of  the  EU  in  Croatian  imports  and  exports  decreased  slightly,  as  trade  with  developing  countries 
dropped more slowly than trade with the EU. CEFTA countries represented 10.9% of all Croatian 
trade in 2008. In the first six month of 2009, the share slightly decreased to 9.9%. In this period, 
CEFTA  countries  made  4.8%  of  total  imports  into  Croatia  and  20.1%  of  all  Croatian  exports. 
Around 93% of FDI inflows originate from EU Member States. Overall, integration with the EU in 
the areas of trade and investment remained high.  

The  average  growth  in  real  wages  decelerated  significantly  to  1%  in  2008,  due  to  an  increase  in 
average  inflation.  However,  wages  have  increased  more  strongly  than  estimated  average  labour 
productivity, with the result that unit labour costs have slightly gone up. Indicators of export price 

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competitiveness have slightly improved as the kuna weakened somewhat vis-à-vis the euro and the 
US  dollar.  In  the  nine  months  to  June  2009,  the  exchange  rate  of  the  kuna  depreciated  by  3.2% 
against a basket of currencies in nominal terms. In real effective terms, corrected for consumer price 
developments, the kuna weakened by a lower rate of 0.6%, as a result of relatively higher inflation 
in  Croatia.  Overall,  standard  indicators  do  not  point  to  significant  changes  in  export  price 
competitiveness. 

4. 

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 

This  section  examines  Croatia’s  ability  to  assume  the  obligations  of  membership  –  that  is,  the 
acquis as expressed in the Treaties, the secondary legislation and the policies of the Union. It also 
analyses  Croatia’s  administrative  capacity  to  implement  the  acquis.  The  analysis  is  structured  in 
accordance with the list of 33 acquis chapters. In each sector, the Commission's assessment covers 
progress  achieved  during  the  reporting  period,  and  summarises  the  country's  overall  level  of 
preparations. 

4.1. 

Chapter 1: Free movement of goods 

Progress  can  be  reported  regarding  alignment  on  general  principles.  Croatia  has  continued 
implementing its Action Plan for compliance with Articles 28 to 30, by amending or annulling legal 
acts  containing  restrictions  to  free  movement  of  goods  and  by  introducing  the  mutual  recognition 
clause.  

In  the  area  of  horizontal  measures,  good  progress  can  be  reported.  Croatia  has  continued 
implementing its Strategy for the implementation of the acquis communautaire in the field of free 
movement of goods, which was adopted in November 2007. Approximation in the field of technical 
requirements has continued with the adoption of the new Act on technical requirements for products 
and on conformity assessment, which aims to further align the Croatian legal framework with the 
new horizontal EU acquis.  

As regards standardisation, good progress can be reported. By the end of June 2009 the Croatian 
Standards Institute (HZN) had transposed 21,368European standards (ENs). The HZN is an affiliate 
member of the European Committee for Standardisation (CEN) and of the European Committee for 
Electrotechnical  Standardisation  (CENELEC)  and  applied  for  full  membership  of  both  in  June 
2009. New internal rules have been set up at the HZN, creating a fast track procedure for adopting 
European  standards  in  fields  that  are  not  covered  by  HZN  mirror  committees  and  providing  for 
regular public enquiries on various groups of harmonised ENs. The reorganisation  of the  existing 
technical committees has been completed. As of April 2009, 164 committees were active, covering 
65% of the scope of international and European technical committees.  

Concerning conformity assessment, no progress can be reported. 

In  the  area  of  accreditation,  good  progress  can  be  reported.  The  Law  on  Accreditation  and  the 
Statute of the Croatian Accreditation Agency (HAA) have been amended to take into account the 
new  horizontal  acquis  of  2008.  The  HAA  has  been  promoting  accreditation  among  government 
institutions responsible for harmonisation of legislation under the new and old approach acquis. The 
HAA  signed  Cooperation  Agreements  with  the  Ministry  of  the  Sea,  Transport  and  Infrastructure 
and with the Ministry of the Interior in 2009. By July 2009, the HAA had accredited a total of 145 
conformity  assessment  bodies.  The  HAA  increased  its  staff  to  24  permanent  employees,  63  lead 

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assessors  (HAA  employees  and  external  associates),  98  technical  assessors  (mostly  external 
associates) and 148 experts (external associates) in eight different accreditation schemes. European 
cooperation for Accreditation (EA) has continued the evaluation process for granting the status of 
signatory of its multilateral agreement to the HAA. Preparations in this area are well advanced. 

As  regards  metrology,  the  Law  ratifying  the  Metre  Convention  was  adopted  by  Parliament  in 
December 2008. Even though the National Metrology Institute (NMI) has been established legally 
since June 2008, the setting-up of its infrastructure has been delayed in comparison with the Action 
Plan.  Two  laboratories  in  the  field  of  chemistry  have  been  designated  as  conformity  assessment 
bodies. A National Laboratory for Humidity and a National Laboratory for Ionising Radiation have 
also been designated. The Laboratories of the State Office for Metrology have been equipped with 
instruments for  testing precious metals,  for  measurement  comparisons within  EURAMET and for 
testing flow meters for liquids other than water. Alignment with the acquis in the area of metrology 
is advanced. The preparations for transferring responsibility for scientific metrology to the NMI are 
essential to move the chain of traceability at national level through accredited testing laboratories to 
industry, in time for accession.  

Regarding  market  surveillance,  there  has  been  significant  progress  with  regard  to  the  State 
Inspectorate’s administrative capacity and enforcement measures. A new State Inspectorate Law on 
the organisation and role of the State Inspectorate was adopted by the Parliament, abolishing pre-
market  approval  requirements  and  conferring  necessary  powers  on  the  market  surveillance 
inspectors.  A  new  Regulation  on  the  System  for  Rapid  Exchange  of  Information  on  products 
presenting  risks  for  consumer  health  and  safety  was  adopted,  stipulating  the  nature  and  the 
operation  of  the  Rapid  alert  system  for  measures  relating  to  products  posing  a  serious  risk  to  the 
health and safety of consumers, and establishing the RAPEX contact point at the State Inspectorate. 
Further  measures  are  still  needed  to  fulfil  all  the  market  surveillance  requirements  of  the  EC 
Regulation  765/2008.  Coordination  and  cooperation  between  the  different  market  surveillance 
authorities  have  been  set  up  in  July  2009  with  the  establishment  of  the  Commission  for 
Coordination and Communication.  

In terms of administrative capacity in the Ministry of the Economy, Labour and Entrepreneurship 
(MELE) some progress can be reported in the Department for Internal Market Coordination, with 
the recruitment of two additional staff members. 

Overall, as regards horizontal measures, basic structures for harmonisation with EU legislation are 
in place. Further, adequate capacity-building measures are required to enable Croatian institutions 
to become full members of the relevant European organisations. 

There  has  been  some  progress  in  relation  to  the  old  approach  acquis,  with  the  adoption  of 
regulations  in  the  fields  of  medicinal  products,  veterinary  medicinal  products,  cosmetic  products, 
pre-packaging, aerosol dispensers, motor vehicles, emissions of gaseous and particulate pollutants 
from  engines  installed  in  non-road  mobile  machinery,  textiles,  footwear,  chemicals,  drug 
precursors,  and  detergents.  A  National  Strategy  for  Chemical  Safety  was  adopted  in  November 
2008. Alignment with the acquis in the area of the old approach is advanced but further efforts are 
needed to reach full legislative alignment and to ensure the necessary administrative capacity, with 
particular regard to pharmaceuticals and cosmetics. 

Alignment with the new approach acquis has been advancing, with the adoption of regulations in 
the  areas  of  low  voltage  equipment,  machinery,  lifts,  recreational  craft,  radio  equipment  and 

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telecommunications  terminal  equipment,  electromagnetic  compatibility,  cableway  installations, 
pressure  equipment  and  simple  pressure  vessels,  noise  emissions  by  equipment  for  use  outdoors, 
pyrotechnic articles, construction products and medical devices.  Alignment with the  acquis in the 
area  of  the  new  and  global  approach  is  well  on  track,  but  further  efforts  are  still  needed,  with 
particular  regard  to  equipment  and  protective  systems  intended  for  use  in  potentially  explosive 
atmospheres, safety of toys, and eco-design requirements for energy-using products.  

Concerning  procedural  measures,  some  progress  can  be  reported.  A  new  Regulation  on 
notification  procedures  in  the  field  of  standards,  technical  regulations  and  regulations  on 
information society services was adopted in 2009, thus transposing Directive 98/34/EC as amended 
by  Directive  98/84/EC.  Alignment  in  the  field  of  procedural  measures  is  advanced,  but  further 
efforts  are  still  needed  to  fully  transpose  Directive  91/477/EEC  as  amended  by  Directive 
2008/51/EC. 

Conclusion 

Good  progress  has  been  made  in  the  field  of  the  free  movement  of  goods.  Alignment  with  the 
acquis in this chapter has further progressed and is well advanced, but some elements are not yet 
fully  in  place,  notably  with  regard  to  conformity  assessment,  metrology  and  market  surveillance. 
Croatia needs to continue efforts to fully align with the acquis and to build the necessary capacity to 
ensure its effective implementation and enforcement upon accession.  

4.2. 

Chapter 2: Freedom of movement for workers 

Croatia already largely fulfils the acquis requirements in the area of access to the labour market.  

Good  progress  can  be  reported  on  future  participation  in  the  EURES  (European  Employment 
Services) network. The organisational structure of the Croatian Employment Service (CES) is being 
adjusted  and  administrative  capacity  strengthened  as  regards  services  related  to  mobility  and  free 
movement of labour. This is a key element for the accession negotiations in this chapter. Language 
skills  of  potential  EURES  advisers  are  being  improved  and  the  CES  has  become  acquainted  with 
the requirements related to connection to the EURES Job Mobility Portal upon accession to ensure 
that all job vacancies handled by the public employment services are displayed on its public website 
and  can  therefore  be  made  available  for  publication  on  the  Portal.  Various  training  activities  in 
relation to EURES have been carried out, among others in the regional employment offices. In this 
area, Croatia is well on track. 

There  has  been  good  progress  on  coordination  of  social  security  systems.  Sufficient 
administrative capacity is being developed to apply the acquis in this field. This is a key element for 
the accession negotiations in this chapter. A wide range of professional training in all branches of 
social  security  as  well  as  language  courses  have  been  offered  for  the  State  administration  bodies. 
Preparations in this area are well on track. 

Preparations  are  ongoing  for  the  introduction  of  the  European  Health  Insurance  Card  as  from 
accession. 

Conclusion 

Good  progress  has  been  made  on  this  chapter.  A  satisfactory  level  of  legal  alignment  has  been 
reached.  However,  sustained  efforts  are  needed  to  develop  the  necessary  administrative  capacity, 

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notably  for  carrying  out  a  potentially  wider  range  of  tasks  in  the  area  of  coordination  of  social 
security systems. 

4.3. 

Chapter 3: Right of establishment and freedom to provide services 

Progress can be reported on the right of establishment, although further work is needed to ensure 
full alignment with the acquis. The Act amending the Aliens Act eliminated the requirement of a 
business or work permit for EU and EEA citizens, as from the date of accession. The amended law 
on the temporary residence tax introduced equal treatment of Croatian and EU citizens with regard 
to the payment of the tax on secondary residences. The amendments to the Healthcare Act, the Act 
on  Humanitarian  Landmine  Clearance,  the  Act  on  Performing  the  Activities  of  Design,  Building 
Surveillance  and  Construction  and  the  Act  on  Geodetic  Activity  waive  Croatian  citizenship  and 
excessive  language  knowledge  requirements  as  of  the  day  of  Croatia’s  accession.  The  Act  on 
Libraries and the Act on Archives and Archival Institutions provide for free establishment of such 
institutions by domestic and foreign natural and legal persons, as of Croatia’s accession to the EU. 
However, a number of restrictions on the right of establishment continue to exist in several sectors, 
in the form of authorisation regimes and the one-office-rule.  

Some progress has been made regarding the freedom to provide cross-border services. The new 
Law on Private Detectives enabled certified detectives from the EU Member States to provide their 
services in Croatia upon its accession to the EU. A working group has been established to work on 
the  alignment  with  the  Services  Directive.  However,  several  provisions  in  the  national  legislation 
are still not in line with Article 43 of the EC Treaty and the preparations for the implementation of 
the Services Directive are at an early stage. Administrative capacity in the area of coordination and 
alignment with the acquis as regards freedom to provide services requires further efforts.  

Further progress has been made in the field of postal services, where legislative alignment with the 
acquis is well advanced. The Postal Services Act was adopted in July. Amendments to the primary 
legislation  already  envisage  implementation  of  most  of  the  regulatory  elements  of  the  3rd  Postal 
Directive  and  lay  down  a  detailed  timetable  for  gradual  market  opening  (full  market  opening 
envisaged for 31 December 2012) and confer extensive regulatory and supervisory powers on the 
National Regulatory Authority for the postal sector. However, full alignment with the postal acquis 
(mainly provisions of the 3rd Postal Directive) has not yet been achieved. Implementing legislation 
laying  down  conditions  for  the  provision  of  postal  services  and  rules  on  the  postal  system  of  the 
public operator was amended. 

The  capacities  of  the  Council  of  the  Croatian  Post  and  Electronic  Communications  Agency 
(HAKOM)  have  been  strengthened,  as  three  new  members  were  appointed.  The  addition  of  two 
further  resources  to  the  Postal  Services  Department  of  HAKOM  has  brought  the  administrative 
capacity  of  the  office  to  a  satisfactory  level.  At  the  same  time  the  Croatian  Post,  the  designated 
universal service provider, adopted a strategic framework to prepare for future full market opening.  

Some progress has been made on the mutual recognition of professional qualifications. However, 
the minimum training requirements for the medical professions (doctors, dentists, midwives, nurses, 
pharmacists) are still not in line with the acquis. As regards dentists, the professional and academic 
title (‘stomatology’) used is not recognised under the acquis. The new Act on Regulated Professions 
and the Recognition of Foreign Professional Qualifications regulates both the recognition of foreign 
professional  qualifications  and  creates  a  legal  basis  to  ensure  that  the  minimum  training 
requirements  of  the  acquis  will  become  applicable  as  from  the  day  of  accession.  Administrative 
capacity to deal with the mutual recognition of qualifications needs to be strengthened. Preparations 
in the field of mutual recognition of professional qualifications are advancing.  

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Conclusion 

Progress  has  been  made  in  this  chapter,  in  particular  on  the  mutual  recognition  of  professional 
qualifications  and  postal  services,  and  overall  alignment  with  the  acquis  is  at  a  reasonable  level. 
Further  work  is  required  in  order  to  complete  alignment.  The  remaining  obstacles  to  the  right  of 
establishment and freedom to provide services need to be removed and further efforts are needed in 
the  area  of  mutual  recognition  of  professional  qualifications.  Administrative  capacity  needs  to  be 
reinforced. 

4.4. 

Chapter 4: Free movement of capital 

Some progress can be reported concerning the free movement of capital. As regards real estate, the 
Act  on  Ownership  and  other  Real  Rights  was  amended  and  entered  into  force  in  February  2009. 
According to this Act and in line with the obligations under the SAA, EU nationals are now entitled 
to  acquire  ownership  rights  over  real  estate  under  the  same  conditions  as  Croatian  nationals. 
Moreover,  procedures  which  had  been  initiated  by  citizens  of  EU  Member  States  for  acquiring 
property  ownership  in  Croatia  but  were  not  finalised  before  1  February  2009  have  been 
discontinued  ex  officio.  However,  restrictions  on  acquisition  of  agricultural  land  and  nature-
protected land remain in place. 

As  regards  other  capital  movements,  amendments  to  the  Deposit  Insurance  Act  eliminated  as  of 
January 2009 privileged access of the public sector to financial institutions. However, a number of 
restrictions  remain.  Due  to  the  global  financial  situation,  Croatia  decided  to  postpone  the 
liberalisation  of  certain  remaining  capital  movements.  The  liberalisation  of  short-term  financial 
loans  to  non-residents  has  been  postponed  until  February  2010.  The  liberalisation  of  transfers 
abroad,  relating  to  gifts  and  grants,  transactions  with  derivatives,  the  use  of  loans  from  abroad 
through accounts abroad, payments and collection in foreign cash, taking cash into and out of the 
country,  transfer  into  or  out  of  the  country  of  materialised  securities  and  transactions  in  foreign 
exchange markets abroad, was postponed until January 2010. Some discriminatory provisions still 
remain in Croatian legislation, in particular concerning the use of assets in building societies. The 
special  rights  or  ‘golden  shares’  that  the  government  has  retained  in  certain  privatised  companies 
will need to be abolished by the day of Croatia’s accession to the EU.  

With regard to payment systems, no progress can be reported. 

As  regards  anti-money  laundering  (AML),  a  new  AML  law  providing  for  improved  alignment 
with  the  acquis  entered  into  force  in  January  2009.  Relevant  implementing  legislation  has  been 
adopted. There has been a gradual reduction in the number of suspicious transactions reported to the 
Croatian Financial Intelligence Unit (FIU). This followed changes in the reporting system aimed at 
providing the FIU with notifications of a higher quality. The Criminal Code has been amended in 
order  to  widen  the  definition  of  the  money  laundering  offence  and  to  bring  it  into  line  with  the 
requirements of both the Vienna and the Palermo Conventions. The confiscation regime has been 
extended  to  all  property  related  to  a  perpetrator  of  organised  crime  or  corruption  offences;  the 
possibility  of  reversal  of  the  burden  of  proof  has  been  introduced.  The  scope  of  the  terrorist 
financing offence has been extended and public incitation to terrorism, recruitment and training for 
terrorism can also now be prosecuted. The FIU has been further strengthened through an increased 
number of staff.  

Monitoring  and  supervision  of  reporting  entities  remains  inadequate,  however,  especially  outside 
the banking sector, and the enforcement record (including convictions, confiscations, seizures and 
asset  freezing)  is  still  weak.  The  notification  system  itself  has  led  to  only  limited  prosecutions 

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and/or  conviction.  Implementation  continues  to  be  affected  by  poor  functioning  of  the  judiciary. 
There  remains  a  backlog  of  cases  concerning  AML  offences  in  courts.  Moreover,  inter-agency 
cooperation, albeit improved, still leaves considerable room for improvement. 

Conclusion 

There  has  been  some  progress  in  this  chapter,  mainly  as  regards  liberalisation  of  the  real  estate 
market  and  legislative  changes  in  the  anti-money  laundering  area.  Overall,  a  reasonable  level  of 
alignment  has  been  achieved.  Further  efforts  will  be  needed,  especially  with  implementation  and 
enforcement  of  AML  legislation,  including  inter-agency  cooperation,  and  with  completing 
liberalisation of capital movements and alignment with the payment services acquis. 

4.5. 

Chapter 5: Public procurement 

Good  progress  can  be  reported  as  regards  general  principles.  The  amendments  to  the  Public 
Procurement Law and relevant implementing legislation were adopted, aligning to a large extent the 
Croatian  legal  framework  with  the  acquis.  The  new  Concessions  Law  and  the  Public-Private 
Partnerships  (PPPs)  Law  entered  into  force  in  January  2009.  The  Strategic  Framework  for  the 
Development of Public-Private Partnerships (PPPs) was adopted and relevant manuals in the area of 
PPPs were issued. The Concessions Register was established within the Ministry of Finance and is 
fully  operational.  In  line  with  the  ‘Roadmap  for  harmonisation  of  special  regulations  governing 
concessions with the Concessions Law’, several pieces of sectoral legislation have been amended.  

With regard to administrative capacity, the Department for the Public Procurement System (DPPS) 
successfully ensured that a coherent public procurement policy was adopted at the institutional and 
legislative  level.  The  work  of  the  DPPS  is  positively  perceived  by  both  economic  operators  and 
contracting authorities. Cooperation between State bodies engaged in public procurement issues has 
significantly  improved.  An  Implementation  Monitoring  Committee  was  established  to  oversee 
progress  as  regards  the  Strategy  for  the  Development  of  the  Public  Procurement  System.  The 
capacities  of  the  Ministry  of  Finance  were  strengthened  by  two  extra  employees  dealing  with 
concessions  and  fiscal  aspects  of  PPPs.  A  new  Agency  for  Public-Private  Partnership  was 
established  as  a  body  responsible  for  evaluation  and  approval  of  PPP  project  proposals,  tender 
documents and final draft contracts pursuant to the provisions of the PPP Law. The agency employs 
12 people.  

However,  the  Guide  for  Concessions,  the  alignment  of  the  sectoral  legislation  regulating 
concessions  and  the  elaboration  and  implementation  of  methodological  tools  for  fostering  the 
administration  of  the  new  PPP  legislation  is  still  to  be  completed.  The  Department  for  the  Public 
Procurement  System  has  yet  to  enhance  its  monitoring  capacities  to  prevent  irregularities  in  PP 
procedures. 

Good progress has been made in the area of award of public contracts. All contract notices above 
70,000 Croatian Kuna are published in the Official Gazette, thus ensuring transparency. Contracting 
authorities and entities are generally familiar with the procurement procedures. Open procedures are 
the  most  commonly  used,  usually  together  with  the  lowest  price  award  criterion.  A  new  rule  has 
been  introduced  which  will  require  that  as  of  January  2010  at  least  one  member  of  the  selection 
committee is certified as a public procurement specialist. 

Numerous  training  courses  have  been  provided  at  central  and  local  level  for  both  economic 
operators  and  contracting  authorities.  The  training  covered  in  particular  the  areas  of  public 
contracts,  concessions  and  PPPs,  legal  protection  and  the  issue  of  ethics  and  conflicts  of  interest. 
However, within contracting authorities, the overall level of sensitivity as regards potential conflicts 

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of  interest  and  integrity  is  low.  Further  training  activities  are  required  for  contracting 
authorities/entities  on  conflicts  of  interest,  and  to  get  them  used  to  applying  award  criteria  other 
than the lowest price.  

Some progress can be reported in the remedies system. The competences of the State Commission 
were expanded to cover remedies on concessions and PPPs. The Law on the State Commission for 
the Supervision of Public Procurement Procedures has yet to be amended. The State Commission 
takes  an  active  part  in  training  contracting  authorities  and  bidders  in  the  field  of  legal 
protection.Due to changes in legislation widening the scope of possible request for review, the total 
number  of  complaints  increased  considerably  as  compared  to  the  previous  reporting  period.  The 
State  Commission  has  increased  its  capacity  to  deal  with  them  and  its  decisions  are  issued  on 
average within 38 days. However, its administrative capacity — especially in view of an expected 
further  increase  in  the  number  of  cases  —  is  not  sufficient.  Judicial  review  of  State  Commission 
decisions  by  the  Administrative  Courts  takes  on  average  several  years,  which  is  problematic  in 
terms of an effective remedies system. 

Administrative  capacity  and  coordination  mechanisms  of  the  main  stakeholders  in  the  public 
procurement  system  still  need  further  strengthening,  in  particular  as  regards  anti-corruption 
activities  and  integrity.  The  scope  for  corruption  remains  wide.  The  capacity  of  the  procuring 
entities to apply the public procurement legislation correctly, efficiently and transparently needs to 
be  enhanced  in  order  to  reduce  the  potential  for  irregularities,  including  fraud  and  corruption  in 
public procurement procedures. Significantly improved scrutiny of actual execution of contracts is 
essential.  

Conclusion 

Good  progress  can  be  reported  under  this  chapter  in  particular  as  regards  completion  of  the 
necessary institutional set-up. Overall, preparations are at an advanced stage. However, legislative 
alignment still needs to be completed. Practical guides for implementing the legislation need to be 
further  developed.  Administrative  capacity  needs  to  be  further  enhanced  at  all  levels  of  the 
procurement  system,  in  particular  with  a  view  to  effectively  fighting  corruption  and  tackling 
irregularities.  

4.6. 

Chapter 6: Company law 

Progress  has  been  recorded  in  the  field  of  company  law,  where  the  legislation  is  largely  aligned 
with the acquis and work is ongoing with a view to complete the alignment.  

New  instructions  were  issued  on  methods  and  conditions  of  electronic  communication  with  the 
Court  Register  competent  for  registration  of  limited  liability  companies.  A  pilot  project  on 
electronic  communication  with  the  Court  Register  for  limited  liability  companies  was  extended. 
Online registration is now possible in 10 commercial courts, but not yet in Zagreb. Code systems of 
the Court Registers and instructions on their keeping remain to be further regulated. 

Relevant departments within the Ministry of Justice are understaffed. 

There  has  been  some  progress  in  the  field  of  corporate  accounting.  The  legislation  is  to  a  large 
extent aligned with the acquis. Several pieces of implementing legislation were adopted, including 
on the structure and content of the annual financial accounts of investment companies. 

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A  Handbook  on  the  Implementation  of  Croatian  Financial  Reporting  Standards  (CFRS)  was 
published.  The  CFRS  Committee  continued  translating  and  publishing  international  accounting 
standards and related interpretations issued by the International Accounting Standards Board.  

The  Register  of  Annual  Accounts  is  accessible  via  the  internet  and  maintained  by  the  Financial 
Agency FINA. FINA received 79,065 annual accounts, 36,918 of which were published.  

There has been good progress in the field of auditing. The amendments to the Audit Act aligning 
the legislation with the 8th Company Law Directive were adopted and entered into force. These set 
up an external quality assurance system and public oversight processes for the auditing profession. 
The  Audit  Public  Oversight  Committee  started  operating  but  is  not  yet  fully  functional.  The 
Croatian  Chamber  of  Auditors  hired  one  additional  expert,  but  further  strengthening  is  needed  to 
ensure proper quality assurance checks. The Ministry of Finance has established a Department for 
Financial  Reporting  for  issues  of  public  policy  in  auditing  and  accounting,  but  overall  resources 
remain to be allocated. Only two employees are currently working in the Department.  

Conclusion 

Overall, some progress can be reported in this chapter. Alignment with the acquis is on track. More 
remains to be done in the area of auditing as regards the implementation of the new legal provisions 
and the strengthening of administrative capacity. 

4.7. 

Chapter 7: Intellectual property law 

There has been little progress in the field of copyright and neighbouring rights, where Croatian 
legislation  is  largely  in  line  with  the  acquis.  The  new  Criminal  Procedure  Act  aligned  Croatian 
legislation with the Convention on cyber crime as regards copyright and related rights. Following 
the publication of the Tourism Action Plan, which recommended a reduction of copyright fees for 
authors,  performers  and  phonogram  producers  during  the  tourism  season,  the  copyright  holders’ 
association agreed a 10% reduction of the fees in favour of the hotel operators’ association. Such 
intervention of the national authorities, albeit in the form of a recommendation, may be contrary to 
the exclusive rights of authors and to the right to equitable remuneration of performing artists and 
phonogram producers.  

Some progress can be reported in the area of industrial property rights, where Croatian legislation 
is  already  highly  aligned  with  the  acquis.  The  outstanding  minor  changes  to  bring  the  legislation 
fully into line with the acquis in the field of patents, trade marks, industrial design and topographies 
were adopted. The provisions on the cut-off date for Supplementary Protection Certificates (SPCs) 
and exhaustion of patent rights in the field of biotechnology were also amended and aligned with 
the  acquis.  The  Croatian  Chamber  of  Registered  Patent  and  Trademark  Representatives  was 
formally established in July. 

Some,  but  uneven,  progress  can  be  reported  in  the  field  of  enforcement.  Efforts  to  protect  right 
holders  and  consumers  have  been  put  in  place  in  most  enforcement  bodies,  in  particular  at  the 
Customs  Administration.  A  new  regulation  was  adopted  to  fully  harmonise  the  procedure  for  the 
renewal of the protection of rights by Customs with the EU acquis and to strengthen inter-agency 
cooperation.  Intellectual  property  crime  is  of  growing  concern  for  the  health  and  safety  of 
consumers and on account of the increasing involvement of organised crime groups. Management 
and training efforts need to be stepped up and inter-agency cooperation has to be further enhanced. 
Further  efforts  are  needed  to  strengthen  the  capacity  of  police  and  prosecutors  in  the  field  of 
protection  of  intellectual  property  rights,  including  by  allowing  the  use  of  enhanced  investigation 
powers, such as technical surveillance, to detect IP crimes.  

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As  regards  administrative  capacity,  the  State  Intellectual  Property  Office  (SIPO)  has  been  further 
strengthened  with  25  new  staff  and  a  self-financing  model  has  been  introduced.  The  Board  of 
Appeal,  providing  the  right  to  appeal  against  first  instance  decisions  of  SIPO,  started  operations 
from 1 June 2008 and issued decisions at a satisfactory rate. Out of 72 appeals received during its 
first 9 months of operations (June 2008 to March 2009), 48 were adjudicated. 

Conclusion 

Progress can be reported as regards both legislative alignment and enforcement. Alignment with the 
acquis has reached a very high level. Further efforts are required to strengthen the overall awareness 
of intellectual property rights in society at large, including with regard to the dangers for health and 
safety.  Attention  should  be  given  to  the  increasing  involvement  of  organised  crime  groups  in 
intellectual property rights-related offences.  

4.8. 

Chapter 8: Competition Policy 

Significant  progress  can  be  reported  in  the  field  of  antitrust,  including  mergers.  The  Croatian 
Competition Agency (CCA) has hired new staff but more remains to be done to further strengthen 
the Agency’s administrative capacity. A new Competition Act was adopted, in line with the acquis. 
The  Act  empowers  the  Agency  to  impose  fines  and  to  conduct  a  leniency  programme,  thereby 
strengthening  the  Agency’s  deterrent  effect  and  enforcement  policy,  in  particular  against  cartels. 
With  regard  to  the  protection  of  the  rights  of  defence,  the  Act  introduces  the  obligation  for  the 
Agency  to  submit  statements  of  objection  to  the  parties.  It  also  makes  CCA  decisions  subject  to 
review by the High Administrative Court of Croatia.  

The  CCA  took  41  decisions  in  antitrust  and  merger  including  19  merger  cases,  3  on  restrictive 
agreements, 3 on cases of abuse of a dominant position and 16 advocacy cases. However, the CCA 
did not take any decision against hardcore cartels.  

In  the  field  of  transport,  one  airport  was  found  to  have  abused  its  dominant  position  as  service 
provider. In the field of energy, the CCA concluded that a firm had abused its dominant position in 
the  market  of  gas  supply.  On  its  own  initiative,  the  CCA  concluded  that  one  of  the  leading 
companies in telecom services had used prohibited agreements to set the minimum reselling prices. 
The CCA has continued to provide the government with assessments of draft laws as well as other 
expert opinions. Preparations in the field of antitrust, including mergers, are well on track.  

There  has  also  been  some  progress  in  the  field  of  state  aid.  The  CCA  issued  36  opinions  and 
decisions.  In  one  of  its  opinions,  the  CCA  concluded  that  the  Croatian  Broadcasting  Act,  which 
governs the financing of Croatian National Television, was not in line with the SAA State aid rules 
and the Croatian State Aid Act. This is a key element in the accession negotiations in this chapter. 
The  CCA  has  stepped  up  its  efforts  to  improve  the  notification  rate  by  aid  grantors in national, 
regional and local governments. But more remains to be done on competition advocacy, particularly 
at the regional and local levels.  

The  restructuring  of  the  steel  and  shipyard  sectors  in  Croatia  are  key  elements  in  the  accession 
negotiations  in  this  chapter.  With  regard  to  the  shipbuilding  sector,  Croatia  has  made  substantial 
progress. The launch of international privatisation tenders for the six yards in difficulty marked the 
beginning of a restructuring process through privatisation. The tender documentation is in line with 
the requirements of the SAA State aid rules and the acquis. Croatia’s steel industry faced difficulties 
due to the global economic and financial crisis. Production in Željezara Split was brought to a halt 
in mid-April. At the steel mill of CMC Sisak, a deviation from the original plan occurred while at 
the  same  time  new  investments  were  launched.  The  National  Restructuring  Plan  and  Individual 

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Business Plans adopted by the government in June 2008 have become obsolete and will need to be 
revised.  

Conclusion 

Significant  progress  has  been  achieved  on  this  chapter  in  particular  as  regards  adoption  of  the 
Competition Act and the tendering of the shipyards in difficulty with a view to their restructuring 
through  privatisation.  Overall,  a  reasonable  level  of  alignment  has  been  achieved.  However, 
sustained efforts are required in order to complete the restructuring of the shipyards. Furthermore, 
work  remains  to  improve  the  CCA’s  enforcement  record  against  cartels,  to  align  the  Croatian 
Broadcasting Act, and in the steel sector.  

4.9. 

Chapter 9: Financial Services 

There has been good progress in the field of banks and financial conglomerates. Croatia adopted 
legislation  implementing  the  Credit  Institutions  Act,  thus  further  aligning  Croatian  banking 
legislation  with  the  acquis,  in  particular  the  Capital  Requirements  Directive  (CRD),  which  is 
currently under review at EU level. Implementation of the Credit Institutions Act provisions relating 
to capital adequacy was postponed until 31 March 2010. The Law on Financial Conglomerates was 
adopted, providing for the additional supervision of regulated entities, which have been authorised 
to operate based on laws regulating activities of credit institutions, investment companies, insurance 
and reinsurance companies and companies forming a financial conglomerate. The law is already in 
force except for the provisions regulating activities and supervision of financial conglomerates that 
have their registered office in the EU, which will enter into force upon Croatia’s accession to the 
EU.  The  framework  for  risk-based  supervision  was  adopted,  and  a  new  working  group  for 
implementation of the CRD was set up. Home-host supervisory coordination has improved. Work 
still  needs  to  be  done  on  cross-sector  cooperation  and  cross-border  coordination  for  crisis 
preparedness  and  management.  The  process  of  transforming  savings  and  loan  cooperatives  into 
credit  unions  or  savings  banks  was  completed  at  the  end  of  2008.  As  a  response  to  the  global 
financial crisis, the Croatian National Bank performed a quantitative impact assessment on banks’ 
capital adequacy in line with the recommendations of the Financial Stability Forum. Moreover, the 
Deposit  Insurance  Act  was  amended  and  the  level  of  guaranteed  bank  deposits  was  substantially 
increased. 

Some progress can be reported with regard to winding-up procedures. More details on offences and 
penalties  related  to  the  winding-up  of  credit  unions  and  on  supervision  of  saving  and  loan 
cooperatives in a process of winding-up were included in the Law on Credit Unions. The Ministry 
of  Finance  has  issued  implementing  legislation  regulating  the  inspection  and  supervision  of  the 
winding-up of savings and loan cooperatives.  

The  Croatian  Financial  Services  Supervisory  Agency  (HANFA)  and  the  Croatian  National  Bank 
(HNB) adopted the ordinances establishing the layout and the content of annual accounts for entities 
under their supervision. The Croatian National Bank has signed Memoranda of Understanding with 
the  French  Banking  Commission  and  the  German  Supervisory  Agency,  regulating  cooperation  in 
banking supervision.  

Further  progress  can  be  reported  in  the  field  of  insurance,  where  a  good  level  of  alignment  has 
already  been  reached.  Legislation  in  the  area  of  compulsory  motor  insurance  has  been  further 
improved.  By  amending  the  Insurance  Act  and  adopting  the  related  implementing  legislation, 
Croatia  has  aligned  its  legislation  in  the  outstanding  areas  of  non-life  insurances,  insurance 
mediation  and  supervision  of  reinsurance  companies.  Croatia  has  also  aligned  its  legislation  with 

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the  EU  acquis  in  the  area  of  investment  restrictions  concerning  technical  reserve  coverage  of 
insurance undertakings and calculation of the solvency margins in the Life and Non-Life Insurance 
Directives. Provisions of the acquis concerning certain investment rules were also transposed and 
will  become  applicable  upon  Croatia’s  accession  to  the  EU.  Alignment  with  the  Directive  on 
supervision  of  insurance  groups  was  also  completed  with  the  adoption  of  amendments  to  the 
Insurance  Act  as  well  as  relevant  implementing  legislation  in  the  Ordinance  on  supplementary 
supervision  of  insurance  groups.  Further  efforts  are  still  required to  reach  full  alignment  with  the 
pension  insurance  acquis  and  life  and  non-life  insurance  legislation,  as  well  as  to  guarantee  the 
proper functioning of the insurance and occupational pensions markets. 

There  has  been  some  progress  concerning  the  financial  market  infrastructure.  Croatia  adopted 
regulations  implementing  the  Law  on  Settlement  Finality  in  payment  systems  and  in  systems  for 
settlement of financial instruments.  

Progress can be reported in the area of securities markets and investment services, where a good 
level of alignment has been already reached. Croatia adopted the legislative framework regulating 
special  criminal  offences  against  the  capital  market.  HANFA  has  also  adopted  implementing 
legislation stemming from the Capital Market Act. Amendments to the Capital Market Act to fully 
align with the MAD and Prospectus Directive were adopted in July. Alignment with the collective 
investments acquis — UCITS Directive (2007/16/EC) — has also been achieved. HANFA, all four 
mandatory  pension  funds  and  the  four  largest  companies  managing  open-ended  investment  funds 
have jointly established the Fund for Protection of Investors.  

As  regards  administrative  capacity,  the  Financial  System  Department  in  the  Ministry  of  Finance, 
responsible  for  drafting  financial  legislation,  employs  21  people.  Administrative  strengthening 
through additional training and additional staff would be advisable. The National Bank’s Prudential 
Regulation  and  Bank  Supervision  Department  hired  8  additional  staff.  HANFA  has  continued  to 
strengthen  its  administrative  capacity,  by  employing  2  new  staff  (reaching  124  in  total)  and  by 
providing training programmes on risk-based supervision. HANFA was also active in educating the 
broader public and investors, as well as professionals, police, state attorneys and journalists. Croatia 
should  continue  its  efforts  to  strengthen  HANFA’s  administrative  capacity  and  to  improve  its 
arrangements for consultation with the private sector.  

Conclusion 

Significant  progress  can  be  reported  on  this  chapter,  both  as  regards  alignment  of  legislation  and 
strengthening of administrative capacity. Legislative alignment is very advanced, but further efforts 
are  needed  regarding  implementation.  Efforts  need  to  continue  to  strengthen  the  supervisory 
authorities’ capacity to perform their supervision function and improve consultative interaction with 
the financial sector.  

4.10.  Chapter 10: Information society and media 

Good  progress  has  been  made  in  the  field  of  electronic  communications  and  information 
technologies.  Following  the  adoption  of  the  Electronic  Communications  Act,  the  necessary 
implementing  legislation  has  been  adopted.  Liberalisation  of  the  sector  has  continued  to  progress 
significantly,  in  particular  in  the  broadband  market.  As  of  January 2009,  the  fixed  broadband 
penetration rate was 11.80%, mainly through xDSL technology, with the incumbent holding 89% of 
the market. Mobile penetration has reached around 130%. There is a significant number of UMTS 
subscribers,  but  few  active  users  of  mobile  internet  (around  6%  of  fixed  broadband  users). 
Legislative and policy improvements have taken place with the aim of facilitating the building of 

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mobile  infrastructure.  However,  further  efforts  are  needed  to  achieve  concrete  results.  Market 
analysis  procedures  and  regulations  are  well  under  way,  but  one  critical  aspect  relates  to  costing 
methodology  to  be  applied  to  dominant  operators.  A  recent  governmental  initiative  has  been  to 
introduce  a  ’crisis  tax’  on  mobile  services:  this  measure  goes  against  the  current  EU  strategy  to 
promote Europe’s digital economy as one response to the present economic downturn. 

Administrative  capacity  has  been  strengthened  in  the  Directorate  for  Electronic  Communications 
and  the  Postal  Service  within  the  Ministry  of  the  Sea,  Transport  and  Infrastructure.  The  level  of 
competence  at  the  Croatian  Post  and  Electronic  Communications  Agency  has  been  further 
enhanced. A new director has been appointed after an open recruitment procedure. Measures have 
been  taken  to  increase  the  level  of  transparency  of  the  work  of  the  regulator  and  improve  the 
accessibility of the relevant information to the public. The Telecommunications Users Council has 
been  replaced  by  the  Consumer  Protection  Unit  of  the  regulator  as  its  advisory  body. 
Representatives  of  consumer  protection  associations  have  been  appointed  to  this  advisory  body. 
Preparations in this area are well advanced. 

Some  progress  has  been  made  in  the  area  of  information  society  services  and  electronic 
commerce.  Further  amendments  to  the  Electronic  Commerce  Act  have  been  adopted  aimed  at 
completing legal alignment in this field. An e-Government Strategy for the period 2009–2012 has 
been adopted. Preparations in this area are reaching completion. 

Some progress can be reported in the field of audiovisual policy. Preparations for the introduction 
of  digital  television  are  under  way.  The  Croatian  Audiovisual  Centre  has  been  established,  and  it 
has  joined  European  Film  Promotion.  However,  some  interference  in  the  media  landscape  by 
mainly economic and partly political interest groups has continued. Also, anticompetitive State aid 
to the national broadcaster has continued. Nevertheless, preparations in this area are well advanced. 

Conclusion 

Good  progress  has  been  made  in  this  chapter.  A  good  level  of  legal  alignment  has  been  reached. 
Efforts  need  to  continue  to  strengthen  the  capacity  of  the  two  national  regulators  to  implement 
correctly  the  legal  framework,  including  on  mobile  infrastructure  development.  Efforts  from  all 
levels  of  government  are  necessary  to  sustain  liberalisation  of  all  segments  of  electronic 
communications,  and  to  ensure  a  level  playing  field  in  the  audiovisual  markets.  The  recent  tax 
measures on mobile services are rather counterproductive in that respect. 

4.11.  Chapter 11: Agriculture 

Progress was achieved as regards horizontal issues. Croatia adopted the Act on State Support for 
Agriculture  and  Rural  Development  as  a  first  step  in  reforming  the  sector.  However,  substantial 
effort  is  still  needed  to  fully  align  the  agricultural  support  system  with  the  Common  Agricultural 
Policy (CAP). As regards the Paying Agency (PA), Croatia adopted the Act on the establishment of 
the  Paying  Agency  (PA)  and  appointed  the  Agency’s  managing  board.  Substantial  efforts  are 
needed  to  make  the  PA  operational,  as  well  as the  Integrated  Administration  and  Control  System 
(IACS)/Land  Parcel  Identification  System  (LPIS),  which  are  key  elements  in  the  accession 
negotiations  in  this  chapter.  Sufficient  and  timely  staffing  of  the  PA  as  well  as  the  allocation  of 
budgetary resources are of crucial importance. Efforts are needed to implement the LPIS at national 
level.  A  good  level  of  acquis  alignment  has  been  achieved  for  the  collection  and  processing  of 
agricultural  data.  Progress  can  be  reported  on  the  implementation  of  the  Farm  Accountancy  Data 
Network (FADN) with a requirement to further secure necessary human and budgetary resources.  

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As  regards  common  market  organisation  (CMO),  progress  is  ongoing  as  a  result  of  several 
activities  regarding  different  sectors  and  horizontal  aspects  of  the  single  CMO.  Continued  efforts 
are  essential  to  implement  the  CMO,  which  is  a  key  element  of  the  accession  negotiation  in  this 
chapter.  Legislation  on  wine  as  well  as  the  vineyard  register  needs  to  be  adjusted  to  the  new 
implementing regulation. A new Ordinance on spirit drinks has been adopted; its alignment with the 
acquis remains to be confirmed. 

In  the  field  of  rural  development,  Croatia  is  in  the  process  of  completing  the  SAPARD 
programme.  Preparations  are  well  advanced  for  the  implementation  of  certain  rural  development 
measures  under  the  Instrument  for  Pre-Accession  (IPARD).  Further  strengthening  of  the 
administrative  structures  and  capacity  is  needed  to  correctly  and  successfully  implement  rural 
development  programmes.  Timely  implementation  of  the  IPARD  programme  remains  a  crucial 
factor for its success. 

Croatia  continued  alignment  with  EU  legislation  in  the  areas  of  quality  policy  and  organic 
farming. 

Conclusion 

Progress  can  be  reported  in  this  chapter,  in  particular  regarding  the  collection  and  processing  of 
agricultural data, the common market organisation and rural development. Alignment continued in 
the  field  of  quality  policy  and  organic  farming.  Overall,  preparations  are  moderately  advanced. 
Croatia needs to adjust legislation and structures regarding the acquis for wine. Substantial efforts 
are  still  required  to  establish  the  paying  agency  and  the  Integrated  Administration  and  Control 
System  as well as the  Land Parcel  Identification System. Preparations need to be accelerated and 
plans prepared on the basis of realistic expectations. Further alignment of the support schemes with 
the  CAP  is  essential  to  prepare  for  a  smooth  transition  to  the  CAP.  In  rural  development,  the 
absorption capacity for EU pre-accession funds needs to be improved. 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy 

Good  progress  can  be  reported  in  the  implementation  of  the  strategy  for  transposition, 
implementation and enforcement of the acquis for food Safety, veterinary and phytosanitary policy. 
Further progress can be noted as regards general food safety, where Croatia adopted implementing 
legislation  based  on  the  already  aligned  Food  Act.  Continued  efforts  are  required  to  finalise 
transposition  and  ensure  implementation  of  the  new  legislation  as  well  as  the  necessary 
administrative and control capacity. 

Good  progress  has  continued  in  the  veterinary  field  with  the  adoption  of  several  implementing 
regulations based on the Veterinary Act, which is in accordance with EU requirements. A compliant 
system for financing of veterinary inspections has been established. The recruitment of additional 
official  veterinaries  has  started.  Preparations  for  construction  and  fitting-out  of  Border  Inspection 
Posts  (BIPs)  have  started.  Implementation  of  the  identification  of  animals  and  the  registration  of 
their  movements  continues.  Croatia  continued  implementing  the  action  plan  for  control  and 
eradication of Classical Swine Fever. Additional administrative efforts are needed to secure a fully 
EU-compliant control system, which is a key element of the accession negotiations.  

In the area of placing on the market of food and feed, good progress can be reported. The national 
programme for the upgrading of establishments for food and feed of animal origin, which is a key 
element of the accession negotiations, is being finalised. A system to control raw milk has been put 
in place. Procedures are in place to control and improve milk quality and to prevent the use of non-

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compliant milk. However, efforts remain to be made to increase the reliability of the control system. 
Increased effort is needed to finalise upgrading plans for all establishments. 

In  the  area  of  animal  by-products  (ABP),  deficiencies  need  to  be  addressed  regarding  official 
controls and establishments to ensure that ABP are handled in line with EU legislation. 

Croatia  has  made  progress  in  setting  up  a  system  for  controls  of  animal  welfare  standards. 
Administrative  capacity  and  procedures  have 
improve 
implementation of controls. 

improved.  Efforts  are  needed 

to 

Good  progress  continued  in  the  area  of  phytosanitary  issues,  with  the  adoption  of  implementing 
legislation in the fields of plant health, plant protection, seeds and planting material as well as the 
registration  of  varieties  of  agricultural  plants.  Transposition  of  the  EU  acquis  into  national 
legislation  is  advanced  as  regards  the  placing  on  the  market  of  plant  protection  products  and 
maximum  residue  limits  of  pesticides.  Preparations  for  construction  and  fitting-out  of  BIPs  have 
started. Additional training for staff is needed.  

Conclusion 

Good  progress  has  been  made,  in  particular  with  the  passing  of  implementing  legislation  and  its 
implementation.  Overall,  preparations  are  advanced.  Continued  efforts  are  required  to  finalise 
transposition  and  implementation  of  the  EU  acquis,  in  particular  regarding  implementation  of  the 
national programme for the upgrading of establishments for food and feed of animal origin and the 
securing of the necessary administrative and control capacity. 

4.13.  Chapter 13: Fisheries 

Good progress can be reported in the areas of resource and fleet management and inspection and 
control.  Croatia  started  to  implement  legislation  on  landing  declarations  and  sales  notes.  The 
programme  for  the  fishing  vessel  register  is  functional.  Installation  of  the  satellite-based  vessel 
monitoring  system  (VMS)  on  board  the  vessels  concerned  is  well  advanced.  The  fisheries 
monitoring  centre  (FMC)  is  established  and  staffing  continues.  Equipment  and  administrative 
capacity  of  the  fisheries  inspection  services  has  improved.  As  for  fish  statistics,  a  high  level  of 
acquis alignment has been achieved for the collection and processing of fisheries data and statistics 
on fishing vessels. However, the register of all commercial fishing vessels needs to be finalised and 
subsistence  fishing  vessels  addressed.  An  entry-exit  scheme  is  still  lacking.  Administrative  and 
operational inspection capacity, which is a key element of the accession negotiations, needs further 
strengthening, in particular concerning the recruitment and training of additional fisheries inspectors 
to carry out controls at the coast. 

Limited progress can be reported on market policy. Collection of information on species, quantities 
and prices has started. While wholesale fish markets have been developed in Rijeka and Poreč, the 
latter  is  still  not  in  full  use.  Increased  effort  is  needed  regarding  the  establishment  of  producers’ 
organisations and alignment of marketing standards. 

There has been some progress on structural action and State aid. Croatia started designating and 
strengthening  the  administrative  structures  necessary  to  implement  the  European  Fisheries  Fund. 
Effort  is  still  needed  to  strengthen  the  institutional  framework  and  to  finalise  the  national  fishery 
strategy. Croatia needs to align State aid with the acquis. 

In the area of international agreements, Croatia is taking steps to implement the recommendations 
of the International Commission for the Conservation of Atlantic Tuna (ICCAT) regulating catches, 

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farming and trading of tuna. However, more progress needs to be made regarding adjustment of the 
fleet and farming capacity. 

Conclusion 

Croatia has made good progress in the field of fisheries. Overall, preparations are well advanced. 
Croatia will need to step up its efforts to close the remaining gaps in the areas of fleet management, 
inspection and control, structural action and state aid. 

4.14.  Chapter 14: Transport policy 

Good  progress  can  be  reported  in  the  field  of  road  transport.  The  National  Security  Policy  for 
digital  tachographs  has  been  adopted  by  ERCA  and  the  card  issuing  authority  has  been  set  up, 
which  constitute  important  elements  in  this  chapter.  New  inspectors  are  being  employed,  the 
necessary equipment for performing checks is being procured and professional qualification courses 
are ongoing in order to develop adequate administrative capacity to enforce the rules relating to the 
road transport acquis, including roadside checks. However, targeting of checks should be revised in 
order to increase the control over national hauliers.  

There has been some progress in the area of rail transport. The law on the railway regulatory body 
has been amended in order to improve its functioning. The board of the rail regulator has assumed 
its  functions  and  has  taken  a  number  of  decisions  related  to  staff  measures.  The  derailment  of  a 
passenger train near Split at which several persons were killed in July 2009 resulted in the dismissal 
of the infrastructure  management  company's CEO. Croatia reinforced its legal  framework in June 
2009  to  foresee  the  application  of  a  set  of  criteria  aimed  at  ensuring  the  independence  of  the 
infrastructure manager from the railway undertakings, despite both being under one holding.  

There  has  been  some  progress  in  the  area  of  inland  waterways  transport.  The  basic  legislative 
framework has been aligned, but the relevant ministerial regulations still remain to be enacted. 

Shortcomings related to combined transport remain. 

Good progress can be reported in the area of air transport. The new Aviation Act was adopted in 
June  2009.  An  independent  Civil  Aviation  Agency  was  established  and  has  started  to  function. 
Relations  between  the  Croatian  Civil  Aviation  Agency  and  EASA  have  been  put  on  a  formal 
footing by a working arrangement signed in July 2009. Nevertheless, an assessment performed in 
September 2009 by the European Aviation Safety Agency indicates that Phase 1 of the  European 
Common  Aviation  Agreement,  which  is  one  of  the  key  elements  in  this  chapter,  is  not  yet  fully 
implemented,  in  particular  in  the  area  of  aviation  safety.  Progress  has  been  made  as  regards  the 
Single  European  Sky  legislation  although  further  efforts  are  needed to ensure its  full  compliance. 
Further  acquis  alignment  is  required  in  the  area  of  air  traffic  management  as  regards  the 
certification  and  designation  of  the  air  navigation  service  provider,  the  nomination  of  a  notified 
body,  complete  transposition  of  the  air  traffic  controller  directive  and  of  the  interoperability 
implementing rules, and the implementation of the flexible use of airspace regulation. Legislation 
on ground handling and slot allocation still need to be aligned with the relevant Community rules 
and there is a need to take the necessary steps to enact the ban on Chapter 2 aircraft. 

Some  progress  can  be  reported  in  the  area  of  maritime  transport.  Implementation  of  the  Vessel 
Traffic Monitoring Information System (VTMIS) is ongoing. The detention rate of Croatian-flagged 
vessels in the Paris MOU area decreased from  7.7%  in  2007  to  4.1%  in  2008.  A  maritime  safety 
verification mission was conducted in March 2009. It identified several important shortcomings that 
hamper Croatia’s ability to implement the EU acquis, in particular the role of the Croatian Register 

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and its relationship with the maritime administration. Croatia needs to strengthen flag and port State 
capabilities, make progress on VTMIS and ensure proper development of port reception facilities. 
Legislation on maritime cabotage is not in line with the acquis. Further alignment is also required as 
regards maritime security. 

As regards State aid in this sector Croatia has not yet fully aligned its legislation. 

Croatia  intends  to  take  part  in  the  activities  of  the  Galileo  satellite  navigation  programme  when 
operational. 

Conclusion 

There  has  been  some  progress  in  this  chapter.  Overall,  there  is  a  reasonable  level  of  alignment. 
Croatia  needs  to  continue  its  efforts  to  improve  administrative  capacity  in  the  maritime  transport 
sector,  in  the  Civil  Aviation  Agency,  in  particular  in  view  of  aviation  safety,  and  in  the  railway 
regulatory  authority,  in  particular  through  training  of  staff.  The  new  provisions  concerning  the 
independence  of  the  rail  infrastructure  manager  have  to  be  further  implemented  under  the 
supervision of the regulatory body in every day practice. Further legislative alignment is needed not 
least in the aviation and maritime cabotage sectors.  

4.15.  Chapter 15: Energy 

There has been some progress in the area of security of supply. Croatia adopted the rules for usage 
of  the  gas  storage  system.  Croatia  has  taken  important  steps  towards  achieving  the  mandatory  90 
days of emergency oil stocks. There are no developments in relation to the establishment of a crisis 
management  body  or  intervention  plans.  Under  the  new  Mining  Act,  which  was  adopted  in  June 
2009, authorisations for prospecting, exploration and production of hydrocarbons will be granted on 
the basis of a non-discriminatory principle in line with the acquis. In the area of security of supply 
Croatia partially meets its targets. 

Progress  in  the  area  of  the  internal  energy  market  has  been  good.  Implementing  legislation 
relating to the organisation of the gas market and network rules for  gas transport and distribution 
have been enacted. The Energy Law and the Electricity Market Law have been amended. New rules 
on  allocation  of  cross-border  capacity  for  electricity  have  been  adopted  and  were  in  force  as  of 
January 2009, foreseeing that as of 2010 the yearly allocation of capacity will be in full compliance 
with  the  acquis.  The  legal  framework  in  Croatia  complies  with  the  acquis  of  the  second  internal 
energy  market  package.  However,  single  suppliers  continue  to  dominate  the  electricity  and  gas 
markets. Croatia will now need to focus on implementing the requirements of the recently adopted 
third internal energy market package. Preparations in this area are advanced. 

The regulator is fully functional and continues to recruit additional staff. However, no progress has 
been  made  towards  a  clear  distinction  and  separation  of  tasks  between  the  regulator  and  the 
Ministry.  

Little progress can be reported in the area of renewable energy sources (RES). Amendments have 
been  made  to  implementing  legislation  on  incentive  fees  for  the  production  of  electricity  from 
renewable sources. The Act on Biofuels for Transport was adopted in May 2009 and aims to fully 
align  Croatian  energy  legislation  with  the  previous  Biofuels  Directive.  It  also  takes  into  account 
some elements of the recently adopted Renewables Directive. However, Croatia will not be able to 
achieve  its  2010  target  for  electricity  production  from  incentivised  renewable  energy  sources. 
Alignment with the acquis in the area of RES is advanced but substantial efforts will be required if 
Croatia is to achieve the necessary concrete results. 

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Progress has been made in the field of energy efficiency. Legislation on energy end-use efficiency 
has been enacted. A National Energy Efficiency Action Plan has been prepared Progress has been 
made  in  the  transposition  of  the  acquis  relating  to  the  energy  performance  of  buildings  with  the 
adoption of implementing legislation on auditing the energy certification of buildings. Croatia still 
needs to ensure compliance in the area of high-efficiency cogeneration (CHP) and energy services. 
Alignment with the acquis is advanced. Administrative capacity in both energy efficiency and RES 
needs significant strengthening. 

Good  progress  has  been  made  in  the  field  of  nuclear  safety  and  radiation  protection. 
Implementing legislation relating to the provision of funds to cover Croatia’s liabilities concerning 
the decommissioning of the Krško Nuclear Power Plant, including the disposal of radioactive waste 
and  spent  nuclear  fuel,  has  been  adopted.  Croatia  adopted  in  July  2009  a  Nuclear  Waste 
Management Strategy 2009-2019 covering the management of operational waste, decommissioning 
waste and spent fuel.  

A new organisational structure for the State Office for Nuclear Safety, and actions to further align 
the legislation on radiation protection with the acquis, are under way. In addition, the Government 
adopted  in  July  2009  a  document  committing  Croatia  to  streamline  administrative  structures 
responsible  for  nuclear  safety  and  radiation  protection  to  strengthen  the  efficiency  and 
independence of operations. However the role of the Ministry of Health and Social Welfare in the 
inspection of facilities and devices generating ionising radiation needs to be clarified.  

The licensing of a new facility for the storage of institutional radioactive waste remains a key safety 
issue that needs to be addressed by the Croatian authorities.  

Conclusion 

There has been good progress in this chapter. Overall, alignment with the acquis is well advanced. 
Efforts are still needed for adequate implementation of the priorities related to the functioning of the 
electricity and gas markets and for the promotion of renewable energy sources, particularly in view 
of  meeting  the  EU's  2020  RES  target.  Further  efforts  are  also  needed  to  further  empower  and 
improve the functioning of the regulatory authority.  

4.16.  Chapter 16: Taxation 

Some progress can be reported in the area of indirect taxation. Croatia’s adopted a new VAT law 
which is significantly increasing the level of alignment with the acquis. Further efforts in this area 
are  needed,,  in  particular  with  regard  to  the  scope  of  the  reduced  rates  and  of  exemptions,  the 
exclusion of free zones from the tax territory, and adding provisions for special schemes for travel 
agencies  and  investment  gold.  On  excise  duties,  Croatia  finally  introduced  a  single  rate  of  excise 
duty for cigarettes as from 1 June 2009, thus complying with its obligations under the SAA; a new 
Excise  Act  was  adopted  in  July  2009,  improving  significantly  the  level  of  alignment  with  the 
acquis. However, further alignment of the excise legislation remains necessary, notably with regard 
to  chargeability  of  duty  on  coal,  gas  and  electricity,  minimum  rates  and  small  producers.  The 
provisions applicable to car taxation have to be aligned with the acquis. 

Good progress has been made in the area of direct taxation. The Act amending the Profits Act has 
transposed EU Directives 90/4343/EEC, 90/435/EEC and 2003/49/EC, with entry into force as from 
the date of Croatia’s accession to the EU.  

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Good  progress  can  also  be  reported  on  administrative  cooperation  and  mutual  assistance. 
Following the adoption of the Act on the Personal Identification Number, a single tax identification 
number for taxpayers has been established since 1 January 2009 and will be used for exchanging tax 
information. Croatia has transposed the EU legal framework for administrative cooperation with EU 
Member States, with entry into force as from the date of accession. The preparations for putting into 
operation of the Central Liaison Office (in the Tax Administration) and the Excise Liaison Office 
(in the Customs Administration) are very advanced.  

There was some progress with operational capacity and computerisation. The Tax and Customs 
Administrations have continued working on IT interconnectivity projects to develop the mandatory 
VAT Information Exchange System and the Excise Movement Control System, completing the first 
phase of development for both systems. Attention should be given to reinforcing the IT capacity of 
the tax and customs administrations, which remain dependent on external expertise in IT matters.  

Conclusion 

Good  progress  was  made  in  this  chapter,  not  least  on  legislative  alignment.  The  abolition  of 
differentials in excise duties on cigarettes has eliminated all discriminatory elements, thus bringing 
full  compliance  with  the  SAA.  Taking  into  account  the  provisions  which  were  adopted  but  will 
enter into force upon accession, the legislation in the field of direct and indirect taxation has been 
aligned to a large extent with the EU acquis. Nevertheless, efforts are still required to align Croatian 
legislation, most notably in the field of VAT, where significant discrepancies remain. Efforts need 
to continue to strengthen administrative capacity, including IT interconnectivity. 

4.17.  Chapter 17: Economic and Monetary Union 

Significant  progress  can  be  reported  on  alignment  with  the  acquis  governing  monetary  policy. 
Good progress has been made regarding the elimination of the legislative provisions granting public 
authorities privileged access to financial institutions. Overall, preparations in the field of monetary 
policy  remain  well  on  track,  but  more  remains  to  be  done  to  consolidate the  independence  of  the 
Central Bank in the Constitution.  

In  the  area  of  economic  policy,  Croatia  has  made  some  progress  regarding  alignment  with  the 
acquis, particularly in improving the institutional and technical capacity for setting up medium-term 
macroeconomic and fiscal frameworks. The Pre-accession Economic Programme (PEP) 2009-2011, 
submitted in January 2009, presented a sufficiently comprehensive and consistent macroeconomic 
and fiscal framework for economic policies. Due to the rapidly changing external environment, it 
retained  only  limited  relevance  as  a  core  document  for  economic  policy-making.  Considerable 
further efforts were undertaken to bring fiscal reporting to ESA95 standards, although weaknesses 
remain.  Broad  political  consensus  on  the  essentials  of  a  market  economy  has  been  maintained. 
Transparency on policy-making was enhanced through the establishment of the Economic Council. 
However,  an  ad  hoc  approach  to  economic  policies  has  often  continued  to  prevail.  Overall, 
consensus  on  the  fundamentals  of  a  market  economy  has  been  maintained,  but  Croatia  lacks  a 
medium-term structural reform strategy.  

Conclusion 

There has been significant progress in the area of economic and monetary policy. Overall alignment 
with the acquis in this area is very advanced. However, work on anchoring the independence of the 

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central bank in Croatia's legislation needs to be completed. Further efforts are required concerning 
policy coordination. 

4.18.  Chapter 18: Statistics 

Good  progress  can  be  reported  concerning  the  statistical  infrastructure.  A  new  organisational 
structure of the Central Bureau of Statistics (CBS) has been adopted by the Government. This will 
increase  the  number  of  posts.  The  staff  increase  will  focus  on  key  areas  such  as  agricultural  and 
business statistics. The Act on Official Statistics has been amended with the aim of integrating the 
regional  statistical  offices  into  the  CBS  structure.  This  will  increase  efficiency  of  data  collection. 
The Accession Partnership priority has been met. In addition the objectives of the statistical master 
plan  have  been  so  far  achieved.  A  dissemination  strategy  of  statistics  is  being  developed.  The 
situation in the IT department has somewhat improved. Preparations in this area are well on track. 

Progress can be reported in the field of classifications and registers. Implementation of the NACE 
Rev.2  classification  has  started.  The  coverage  and  quality  of  the  business  register  is  being 
improved. Preparations in this field are on track. 

Significant  progress  has  been  made  in  the  area  of  sector  statistics.  Substantial  progress  has  been 
made  in  the  area  of  agricultural  statistics,  in  particular  with  a  view  to  obtaining  comparable 
agricultural  structure,  agromonetary  and  animal  production  data.  In  the  area  of  macro-economic 
statistics,  a  major  revision  has  been  completed,  representing  a  significant  step  towards  aligning 
Croatia’s  national  accounts  with  EU  standards.  Key  national  accounts  indicators  and  the 
methodology  used  are  now  largely  in  line  with  the  acquis  (ESA  95).  Revised  GDP  figures  have 
been  published.  These  are,  together  with  agricultural  statistics,  key  elements  for  the  accession 
negotiations on this chapter. The structural business statistics are being revised with the objective of 
providing data on all sectors, including at regional level. However, in social statistics, the Survey of 
Income and Living Conditions (SILC) is not yet implemented on an annual basis. Preparations in 
this area are well advanced.  

Conclusion 

Substantial  progress  has  been  made  on  modernising  the  statistical  infrastructure.  A  good  level  of 
legal  alignment  has  been  reached.  However,  efforts  should  continue  to  further  align  Croatian 
statistics with EU requirements.  

4.19.  Chapter 19: Social Policy and Employment 

There  has  been  some  progress  in  the  area  of  labour  law.  Administrative  capacity  has  been 
somewhat strengthened in the Directorate for Labour and the Labour Market of the Ministry of the 
Economy,  Labour  and  Entrepreneurship  (MoELE)  as  well  as  in  the  State  Inspectorate.  Work  is 
underway  to  make  the  Wage  Guarantee  Agency  operational  and  to  establish  a  liaison  office  for 
posting of workers within the MoELE. However, in general, a number of shortcomings continue to 
persist as regards legal alignment and administrative capacity. The amendment of the Labour Act is 
still outstanding. This is a key element for the accession negotiations on this chapter. Preparations 
in this area are on track. 

Good progress can be reported in the field of health and safety at work. Further amendments to 
the  Occupational  Safety  and  Health  Act  have  been  adopted  with  the  aim  of  completing  legal 
alignment.  This  is  a  key  element  for  the  accession  negotiations  on  this  chapter.  A  National 
Programme for Occupational Health and Safety 2009–2013 has been adopted. Implementation and 
enforcement  capacity  has  substantially  improved.  The  Institute  for  Occupational  Health  has  been 

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restructured and now operates in new premises as the Institute for Health Protection and Safety at 
Work.  The  capacity  of  the  Institute  for  Occupational  Health  and  Safety  Insurance  has  been 
substantially strengthened through an increase of staff from 32 to 111. The State Inspectorate has 
moved  to  new  premises  and  has  adequate  management  structures,  as  well  as  systems  to  recruit, 
train,  appoint,  authorise  and  monitor  inspection  staff.  Recruitment  of  labour  inspectors  has 
continued, and attention has been paid to the mobility of the Labour Inspectorate. Preparations in 
this area are well advanced. 

As regards social dialogue, there has been some progress. Tripartite social dialogue continues to be 
relatively well developed, and the influence of social dialogue on the decision-making process and 
policy design has continued to improve. Sectoral social dialogue has improved: there are now seven 
sectoral agreements signed. However, representativeness criteria for participation of trade unions in 
collective bargaining have not been adopted yet and bipartite social dialogue is not yet sufficiently 
developed. Also, the capacity of social partners continues to be somewhat weak. Preparations in this 
area are on track. 

Progress has been made in the area of employment policy. Two Joint Assessment of Employment 
Policy Priorities (JAP) follow-up conferences have been held. A National Employment Plan (2009–
2010)  and  the  first  Follow-up  Report  on  the  implementation  of  the  JAP  have  been  adopted, 
providing  the  basis  for  launching  a  new  cycle  of  active  employment  measures.  An  anti-recession 
package has been adopted. As it does not directly focus on the labour market, it can be expected to 
have only a limited effect on unemployment. The low employment rate remains a concern, as well 
as rates for youth and long-term unemployment. (see also section on economic criteria). The link 
between  the  supply  of  human  resources  by  the  education  system  and  demand  on  the  part  of  the 
labour market is weak, and skills forecasting remains to be strengthened. Also regional disparities 
and  the  mismatch  between  demand  and  supply  of  labour  are  still  considerable,  although  they  are 
being adequately addressed. Preparations in this field are on track. 

There  has  been  significant  progress  in  the  preparations  for  the  European  Social  Fund.  The 
Operating  Structure  responsible  for  the  Operational  Programme  for  IPA  component IV  (Human 
Resources  Development)  has  been  established  and  accredited  by  the  European  Commission. 
Workload analysis and training plans for 2009–2010 are being developed. The current structure will 
be  responsible  for  managing  future  implementation  of  the  ESF.  This  is  a  key  element  for  the 
accession negotiations on this chapter. Preparations in this field are well on track. 

Good progress can be reported in the field of social inclusion. A third Joint Inclusion Memorandum 
(JIM)  follow-up  seminar  was  held  in  Zagreb.  Governance,  partnership  and  visibility  of  the  JIM 
follow-up  process  for  all  stakeholders  has  been  substantially  reinforced.  Preparations  in  further 
analysing  community-based  services  and  supporting  innovative  models  of  social  services  are 
ongoing.  However,  progress  in  the  field  of  administrative  and  fiscal  decentralisation  of  social 
services  has  been  more  limited  and  there  is  still  a  need  to  develop  proper  certification  and 
accreditation system for social service providers. Continued progress can be reported in the process 
of de-institutionalisation for particular targeted groups, namely elderly, while progress for children 
and  children  with  disabilities  has  been  limited.  The  use  of  a  coherent  monitoring  and  evaluation 
system to assess policy reforms in this field remains to be strengthened. In general, overall progress 
in  meeting  the  priorities  and  implementing  the  measures  set  out  in  the  JIM  document  is  slowly 
improving.  As  regards  administrative  capacity,  the  position  of  the  Director  of  the  Department  for 
Social  Welfare  at  the  Ministry  of  Health  and  Social  Welfare  has  been  filled.  Concerning  people 
with disabilities, the office of the Ombudsman for Persons with Disabilities has become functional 
with an adequate number of staff. Accessibility to new buildings under construction has improved. 
Government  cooperation  with  civil  society  organisations  to  create  an  adequate  network  of 

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community-based  services  has  improved.  However,  budgetary  constraints  continue  to  limit  the 
scope of the rights of people with disabilities to health and special care and their social integration 
(see Political criteria — Economic and social rights). Preparations in this area are on track. 

Some progress can be reported in the field of social protection. Reforms in the pension and health 
care  systems  are  ongoing.  The  monthly  social  welfare  benefit  has  increased.  Preparations  for  the 
development  of  a  concept  and  strategy  for  social  housing  for  the  most  vulnerable  groups  are 
ongoing. However, universal coverage and adequacy of pensions is not yet ensured. Poverty among 
the elderly as well as the large number of women of pensionable age not receiving pensions remain 
a  concern,  even  if  social  pensions  are  foreseen  for  these  categories  by 2011.  Preparations  in  this 
field are on track. 

There  has  been  good  progress  in  the  field  of  anti-discrimination.  The  Ombudsman’s  office  has 
been  transformed  into  an  independent  Equality  Body.  Administrative  capacity  has  been 
strengthened  for  this  purpose  by  bringing  the  number  of  staff  from  16  to  31.  Awareness-raising 
activities  in  this  area  are  ongoing.  However,  some  aspects  of  the  level  of  protection  against 
discrimination  in  practice  and  the  judicial  prosecution  of  acts  of  discrimination  are  still  being 
brought in line with EU standards.  

Vulnerable groups and ethnic minorities, particularly the Serb and the Roma minorities, continue to 
face  discrimination  in  economic  and  social  life  (See  Political  criteria  —  Economic  and  social 
rights). The limited statistics currently available still do not allow monitoring of discrimination on 
different grounds, as required by the acquis. Development of a system for statistical monitoring of 
discrimination cases has started, but is facing budgetary constraints. Preparations in this field are on 
track. 

Good progress can be reported on equal opportunities. The office of the Ombudsman for Gender 
Equality has been transformed into an independent Equality Body. However, budgetary constraints 
have put at risk the necessary staffing to monitor the relevant legislation. County commissions have 
been established with the task of monitoring the implementation of the Gender Equality Act at local 
and  regional  levels.  Awareness-raising  activities  on  gender  equality  have  continued  in  different 
areas.  However,  effective  implementation  of  the  National  Policy  for  the  Promotion  of  Gender 
Equality is not entirely ensured (see Political criteria — Economic and social rights). Preparations 
in this field are well advanced. 

Conclusion 

Good  progress  has  been  made  on  this  chapter.  Overall,  a  good  level  of  legal  alignment  has  been 
reached  although  some  gaps  remain,  especially  as  regards  labour  law.  Strengthening  the 
administrative  capacity  in  good  time  before  accession  to  ensure  proper  implementation  and 
enforcement  of  the  acquis  in  this  field  remains  the  key  element  for  the  accession  negotiations  on 
this chapter. 

4.20.  Chapter 20: Enterprise and Industrial Policy 

Some progress can be reported in the field of enterprise policy. Croatia continues to implement the 
actions and guidelines of the European Charter for Small Enterprises. Steady progress was made in 
entrepreneurial  learning  activities  and  enterprise  skills  development.  A  Public-Private  Dialogue 
Committee  was  established  under  the  umbrella  of  the  Ministry  of  the  Economy,  Labour  and 
Entrepreneurship (MELE). It is meeting regularly which represents a significant progress. Croatia 
participated in the activities of the European SME Week.  

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Steady progress was made in entrepreneurial learning activities and enterprise skills development, 
through plans for more developed and systematic intelligence on human capital within enterprises. 

Further efforts were made to strengthen the SME Development Agency (HAMAG) and to refine its 
role  vis-à-vis  that  of  the  MELE,  but  cooperation  between  the  two  authorities  remains  to  be 
improved. Although good results were achieved in the implementation of the SME policy, MELE's 
role as SME policy coordinator at government level remains to be strengthened.  

However,  regulatory  impact  assessment  (RIA)  is  not  applied  to  new  legislation  on  the  business 
sector. A  department for RIA in the MELE remains empty. Furthermore, the central coordination 
office for RIA closed in August due to budgetary constraints, bringing the RIA implementation to a 
halt.  There  are  no  developments  regarding  the  silence-is-consent  principle.  The  impact  of  the 
financial crisis is amplifying some issues such as illiquidity, particularly due to delays in payments 
by public companies and institutions.  

Croatia completed the review of the current legislation concerning the business environment, as part 
of  the  ‘regulatory  guillotine’  process,  and  made  progress  in  streamlining  and  eliminating 
unnecessary legislation. However, efforts are still needed in this area.  

As  regards  the  business  environment,  some  progress  has  been  made  in  speeding  up  company 
registration through online registration (See Chapter 6 — Company law). However, over-regulation, 
numerous  para-fiscal  taxes,  an  inefficient  judiciary  and  public  administration  as  well  as  petty 
corruption all severely hamper the business environment.  

Croatia made good but uneven progress on enterprise and industrial policy instruments. Croatia 
is  an  active  member  of  the  Enterprise  Europe  Network  and  participates  in  all  three  pillars  of  the 
Community  Programme  CIP.  The  alignment  of  Croatian  legislation  with  the  Directive  on 
combating late payments is still not completed.  

There  has  been  some  good  progress  in  the  field  of  sectoral  policies,  especially  as  regards 
shipbuilding. In the steel sector, the implementation of the national restructuring programme (NRP) 
has been disrupted by the economic crisis. As a result, the individual business plans and the NRP 
will  have  to  be  revised  (see  Chapter  8  —  Competition  policy).  Further  progress  was  achieved  in 
improving the strategic and legal framework in the field of tourism.  

Conclusion 

Some progress was achieved on this chapter. Overall, alignment with the acquis in this chapter is 
very  advanced.  However,  further  efforts  are  needed  to  put  into  practice  the  regulatory  impact 
assessment of new legislation. The current pace of reforms to improve the business and notably the 
SME environment should continue in line with the Small Business Act. Further efforts are required 
in the steel and shipbuilding sectors.  

4.21.  Chapter 21: Trans European Networks 

There has been good progress in the development of transport networks. Croatia has continued to 
actively  participate  in  the  implementation  of  the  2004  Memorandum  of  Understanding  on  the 
development  of  the  South  East  Europe  Core  Regional  Transport  Network  and  in  the  South  East 
Europe  Transport  Observatory,  particularly  by  updating  and  implementing  the  Multi-annual  Plan 
2009-2013.  

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Croatia  and  the  European  Commission  came  to  an  agreement  on  the  future  Croatian  TEN-T 
network and priority projects of European interest in the framework of this network. This will be 
the  focus  of  future  Croatian  investments  in  upgrading  the  relevant  infrastructure  to  the  TEN-T 
standards.  Further  infrastructure  upgrades  have  been  made  towards  this  aim  during  the  past  12 
months.  The  Trans-European  Network  in  Croatia  will  consist  in  a  multimodal  network  including 
main road, rail, inland waterway, river port, seaport and airport infrastructures in the country. 

As  regards  energy  networks,  Croatia  has  continued  to  be  active  in  developing  interconnections 
between its electricity network and those of neighbouring countries and EU Member States. 

There  has  been  progress  on  telecommunications  networks.  The  Memorandum  of  Understanding 
between the Republic of Croatia and the European Community on the participation of the Republic 
of  Croatia  in  the  Community  Programme  ‘ICT  Policy  Support  Programme  (ICT  PSP)  of  the 
Competitiveness  and  Innovation  Framework  Programme  (2007  to  2013)’  has  been  in  force  as  of 
2008 and Croatia has become a full member of the ICT PSP. 

Conclusion 

Croatia has made good progress regarding the development of its transport and energy networks in 
line  with  the  design  and  objectives  of  the  TEN–Transport  network  and  TEN–Energy  network. 
Overall, alignment with the acquis is well advanced.  

4.22.  Chapter 22: Regional Policy and Coordination of Structural Instruments 

There  has  been  some  progress  with  regard  to  the  legislative  framework.  The  new  Budget  Law 
entered into force in January 2009. This law introduces multi-annual budgetary planning and budget 
flexibility, desirable in relation to regulatory requirements of Community cohesion policy. It does 
away with the limit on the borrowing capacity of local self-government units for co-financing of EC 
projects.  It  is  a  tool  that  will  contribute  to  clear  coordination  between  the  Ministry  of  Finance 
(MFIN) and the Central State Office for Coordination of EU Funds (CODEF) on the preparation of 
the  three-year  Government  Programmes  Strategy.  There  was  also  progress  in  alignment  with 
Community  legislation  in  other  areas:  public  procurement  (concessions  and  PPPs);  competition, 
State aid and the environment. Croatia needs to ensure that all relevant legislation and strategies in 
the context of regional development are fully in line with the EC cohesion policy framework and 
negotiations under this chapter. Preparations in this area are fairly advanced. 

There  has  been  good  progress  with  the  institutional  framework.  The  Commission  conferred 
management  powers  on  the  relevant  Croatian  authorities  for  IPA  (Instrument  for  Pre-Accession 
Assistance)  components  II  (CBC),  III  (Regional  Development)  and  IV  (Human  Resources 
Development),  all  precursors  of  the  Structural  Funds.  Croatia  needs  to  legally  formalise  the 
institutional set-up for managing structural instruments, building on the existing system. This is a 
key element for the accession negotiations in this chapter. Preparations in this area are moderately 
advanced. 

There  has  been  some  progress  in  the  area  of  administrative  capacity.  Croatia  has  undertaken  a 
systematic analysis of the organisational, staff and training needs for IPA and the Structural Funds 
and  is  preparing  Organisational  Development  Strategies  for  all  key  bodies  involved  in  cohesion 
policy  management  and/or  implementation.  An  overall  Institution  Development  and  Capacity 
Building/Training  Strategy  is  being  prepared.  This  is  one  of  the  key  elements  for  the  accession 
negotiations  in  this  chapter.  Croatia  needs  to  further  strengthen  considerably  its  administrative 
capacities in the implementation of pre-accession funding under Phare/ISPA and IPA. This includes 
the availability and retention of adequate qualified and trained staff in  existing IPA  structures for 

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which  a  structural  solution  is  necessary.  Particular  effort  is  also  needed  in  ensuring  proper 
management  and  coordination  of  various  ongoing  (and  planned)  technical  assistance  actions  and 
training activities aiming at enhancement of administrative capacity. Administrative capacity needs 
to  be  significantly  increased  in  order  for  Croatia  to  achieve  absorption  under  IPA  and  the  future 
Structural Funds. Preparations in this area are not very advanced. 

Progress has been made with respect to programming. Croatia has completed programming under 
IPA,  including  submission  of  Operational  Identification  Sheets  for  components  III  and  IV.  The 
drafting  and  consultations  for  the  National  Strategic  Reference  Framework  have  started.  A 
coordination body for the National Strategic Reference Framework under the Central State Office 
for Development Funds (CODEF) was established and analysed a first draft of the document. The 
accompanying operational programmes are also being prepared. This is one of the key elements for 
the accession negotiations in this chapter.  

However,  in  the  programming  documents  Croatia  will  have  to  demonstrate  that  national  and 
sectoral  strategies  have  been  incorporated  and  that  relevant  Ministries  have  full  ownership  of  the 
programming process. Croatia needs to further its efforts in addressing the coordination and quality 
participation  of  all  stakeholders  during  the  preparation  of  programming  documents.  It  needs  to 
significantly increase its efforts towards preparing a comprehensive and quality project pipeline for 
implementation  of  IPA  as  well  as  for  the  Structural  Funds/Cohesion  Fund.  Particular  efforts  are 
needed  to  prepare  sufficient  number  of  good  quality  and  mature  projects  in  the  environment  and 
transport sectors. As regards the Structural Funds, the identification of projects has only started and 
project preparations are still at a very early stage. Preparations in this area are advancing slowly. 

There  has  been  good  progress  in  the  area  of  monitoring  and  evaluation  of  the  IPA  operational 
programmes.  The  third  and  fourth  regular  sectoral  monitoring  committee  (SMC)  meetings  to 
monitor  implementation  of  the  OPs  took  place  in  December  2008  and  June  2009.  The  respective 
Operating  Structures  have  satisfactorily  prepared  and  co-chaired  the  SMC  meetings.  The  second 
meeting  of  the  joint  IPA  Monitoring  Committee  (all  components)  was  held  in  July  2009.  Croatia 
has  also  begun  addressing  its  needs  for  establishing  monitoring  and  evaluation  systems  for  the 
Structural  Funds.  It  has  prepared  a  plan  and  timetable  for  setting  up  a  monitoring  and  evaluation 
system,  including  its  electronic  monitoring  system  (MIS).  This  is  a  key  element  for  negotiations 
under  this  chapter.  The  Croatian  authorities  are  currently  testing  the  functioning  of  the  electronic 
monitoring  system  (MIS)  for  IPA  III  and  IV.  Croatia  plans  to  build  on  its  IPA  MIS  to  meet  the 
requirements  of  the  MIS  for  the  Structural  Funds.  Croatia  needs  to  formulate  technical 
specifications and obtain technical assistance for setting up its system to meet the requirements of 
the Structural Funds. Preparations are making good progress. 

Some progress can be reported in the area of financial management and control (see also Chapter 
32  —  Financial  control).  The  Croatian  National  Fund  (Ministry  of  Finance)  has  submitted  draft 
roadmaps for waiving ex-ante controls under IPA, under which financial management and control 
systems  are  to  be  strengthened.  However,  Croatia  still  has  a  long  way  to  go  in  establishing  its 
financial  management  and  control  systems  for  the  future  Structural  and  Cohesion  Funds.  Croatia 
needs to build up its capacity in these fields. Preparations in this area are advancing. 

Conclusion 

Some progress has been made under this chapter, notably in preparing implementation of those IPA 
components which serve as pre-cursors to the Structural Funds. Croatia is partially aligned with the 
acquis.  Further  efforts  are  needed  to  meet  the  regulatory  and  operational  requirements  stemming 
from  the  Community’s  cohesion  policy.  Croatia  needs  to  complete  its  institutional  set-up  for  the 

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Structural  Funds/Cohesion  Funds.  It  needs  to  substantially  increase  administrative  capacity  in 
existing  IPA  structures  and  adequately  prepare  them  for  the  future.  The  project  pipeline  for  both 
IPA and the Structural Funds needs to be strengthened to ensure absorption of funds. Programming 
of  the  National  Strategic  Reference  Framework  and  Operational  Programmes  for  the  Structural 
Funds needs to  be undertaken  in  a quality and timely manner. Financial  management and control 
systems as well as an effective MIS need to be set up for the Structural Funds.  

4.23.  Chapter 23: Judiciary and fundamental rights 

There has been some progress in the area of the judiciary. 

As regards the independence of the judiciary, there has been some progress. An amended Law on 
Trainees  in  Judicial  Bodies  and  the  Bar  Exam  entered  into  force  in  January  2009.  This  law 
introduces  an  improved  selection  procedure  whereby  candidates  are  ranked  by  points  based  on 
various criteria. The bar exam has also been made more practice-oriented.  

However,  the  selection  procedure  for  judges  and  prosecutors  remains  deficient,  lacking 
transparency  and  the  application  of  uniform,  objective  criteria.  A  strategic  study  adopted  by  the 
government in December 2008 proposes the introduction of a competitive exam for entry to a new 
school  for  judicial  officials.  However  the  relevant  legislation  has  not  yet  been  passed.  Particular 
attention will be needed to see that the selection procedure ensures the constitutionally guaranteed 
independence of the judiciary.  

The  Courts  Act  amended  in  October  2008  introduced the  obligation  on  the  Minister  of  Justice  to 
conduct  preliminary  interviews  in  the  procedure  of  appointing  presidents  of  courts.  While  the 
declared  aim  to  focus  on  managerial  competence  is  laudable,  the  involvement  of  the  Minister  of 
Justice in the appointment of the presidents of courts as such remains problematic from the point of 
view of judicial  independence. A clearer separation between administrative and judicial functions 
should be strived for.  

The five-year probation period for judges remains in place. The provisions on penal immunity for 
judges  have  also  not  been  changed  in  order  to  ensure  transparency  and  accountability  within  the 
judiciary.  

As  regards  the  impartiality  of  the  judiciary,  the  State  Judicial  Council  has  continued  to  conduct 
disciplinary  proceedings  initiated  by  court  presidents  and  the  Ministry  of  Justice.  In  2008,  there 
were  eleven  disciplinary  proceedings  resulting  in  one  reprimand,  one  fine  and  one  dismissal  of  a 
judge.  Eight  cases  are  ongoing.  However,  disciplinary  proceedings  against  attorneys  and  judges 
continue to lack transparency. There are still no means for the Ministry of Justice to systematically 
check the accuracy of declarations of assets by judges and prosecutors. 

The  appointment  procedures  for  the  State  Judicial  Council  (SJC)  and  the  State  Prosecutorial 
Council (SPC) should be reviewed in order to ensure their independence and to reduce the potential 
for  political  interference.  The  SJC  does  not  currently  have  sufficient  capacity  to  carry  out  it  key 
functions.  

Some  progress  has  been  made  as  regards  professionalism  and  competence  in  the  judiciary.  The 
Judicial  Academy  continued  to  carry  out  its  in–service  professional  training  programme.  Initial 
training  programmes  for  judicial  trainees  and  advisers  started  in  April  2009.  However,  initial 
training  for  future  judges  and  prosecutors  is  still  missing.  Administrators  have  been  recruited  for 
each  of  the  regional  centres,  but  the  Judicial  Academy  remains  understaffed,  without  either 
permanent premises or an adequate budget to perform its duties. 

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Progress  has  been  made  in  relation  to  the  efficiency  of  the  judiciary.  The  backlog  of  cases  was 
further reduced by 8.4% to 887,000 in December 2008. Good progress was made on reducing the 
number  of  old  civil  and  criminal  cases  by  31%  and  52%  to  102,430  and  4,408  respectively.  In 
addition, the new Law on Misdemeanours, the new Civil Procedure Code, and the amended Law on 
Courts seem to have contributed to reducing the inflow of new cases into courts. Thanks also to the 
use  of  accelerated  procedures  the  number  of  pending  misdemeanour  cases  was  reduced  by  about 
one third. 

However the overall backlog as well as the number of unresolved cases older than 3 years remains 
high. Without more far-reaching reform, continued reduction of the backlog may not be sustainable, 
especially if judges have focused on ‘easier’ cases to meet output targets. Moreover, problems with 
the enforcement of court rulings constitute a major obstacle to the efficiency of the judicial system. 
The  number  of  enforcement  cases  in  the  backlog  remains  high.  Reform  of  the  enforcement 
procedure  remains  long  overdue,  although  a  strategic  study  on  enforcement  was  adopted  in  July 
2009  which  foresees  the  introduction  of  a  new  system  of  enforcement  officers.  There  is  still  no 
unified statistical system of case management in the judiciary.  

Special chambers for dealing with organised crime and corruption cases (USKOK cases) have been 
set up in the four County Courts in Zagreb, Split, Osijek and Rijeka. The 60 judges that will work in 
these  chambers  have  not  been  relieved  of  their  previous  duties.  This  suggests  that  the  much 
warranted increased focus on cases of organised crime and corruption may come at the expense of 
other categories of cases.  

The  handling  of  administrative  cases  continues  to  face  particular  challenges.  Finalisation  of  the 
Law on Administrative Court Disputes has been delayed. The Administrative Court still needs to be 
made a court of full jurisdiction in the meaning of Article 6 of the European Convention on Human 
Rights.  

There has been some progress in the rationalisation of the court network. As of January 2009, the 
number  of  municipal  courts  was  formally  reduced  from  108  to  67.  However,  so  far  only  six 
municipal courts have been physically merged into three courts. A laws regulating the reduction in 
the  number  of  State  Attorney's  Offices  from  71  to  55  has  also  been  adopted.  The  draft  law 
foreseeing the reduction in the number of misdemeanour courts from 114 to 61 has been pending 
approval in parliament for one year. A new department supervising the rationalisation process has 
been  set  up  in  the  Ministry  of  Justice.  However,  this  department  is  understaffed  and  it  remains 
unclear how court rationalisation will be financed and implemented in practice. The timetable for 
physical  mergers  remains  unclear  and  unambitious.  No  steps  were  taken  to  rationalise  the  county 
courts and commercial courts.  

With  regard  to  the  infrastructure  and  equipment  of  courts,  there  has  been  limited  progress.  The 
integrated  case  management  system  (ICMS)  is  running  in  nine  courts  and  a  special  case  tracking 
system was also developed for prosecution offices. However, the planned rollout of the ICMS to the 
other  courts  is  still  behind  schedule.  Misdemeanour  courts  continue  to  suffer  from  a  shortage  of 
equipment and a very low standard of premises. 

The system of judicial inspections has shown good results. The Ministry of Justice has reinforced 
the inspection team with twenty part-time inspectors for all types of courts. In 2008 about eleven 
inspections  were  performed  resulting  in  the  removal  of  the  two  court  presidents,  disciplinary 
procedures and internal court reorganisation. However, staff shortages have led to few inspections 
being  carried  out  in  2009.  The  prosecution  offices  remain  outside  the  scope  of  the  judicial 
inspections. No information is available on their internal inspections.  

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The  new  Criminal  Procedure  Code  was  adopted  in  December  2008.  The  new  law  substantially 
modifies the judicial investigation, transferring competence from the investigative judge to the State 
Prosecutor,  in  close  cooperation  with  the  police.  While  training  measures  for  judges,  police  and 
prosecutors have begun, several regulations and the provision of further training are  still  required 
for full entry into force of the new Code. The new provisions apply from July 2009 for organised 
crime and corruption cases and as of 2011 for other cases. 

The  use  of  alternative  dispute  resolution  has  continued.  The  new  Civil  Procedure  Code  has 
introduced mediation centres in all first instance courts, adding to the mediation possibilities in the 
commercial courts and in eight municipal courts. The law on mediation amended in June foresees 
improvements  in  the  independence  and  competence  of  mediators.  However,  the  high  number  of 
mediation cases is burdening the courts, resulting in delays and backlogs. In addition the new civil 
procedure code excludes the possibility of referral by a judge to an out-of-court mediation centre. 
The mediation strategy adopted in May 2009 does not focus sufficiently on out-of court mediation. 
Further streamlining of court procedures is necessary. 

Implementation  of  the  judicial  reform  strategy  has  continued.  A  large  volume  of  new  legislation 
was adopted. The Ministry of Justice was reorganised and the directorate for strategic development 
reinforced.  However,  adequate  monitoring  of  reform  measures  has  not  been  possible  due  to 
continued limits on administrative capacity. There is only limited assessment of the impact of new 
measures. Legislation is often amended on such a regular basis that reforms do not become properly 
embedded in the system. Post-legislative scrutiny is practically non-existent.  

(See also 2.1. Democracy and Rule of law) 

There  has  been  some  progress  in  the  fight  against  corruption.  Implementation  of  the  anti-
corruption  strategy  and  related  action  plan  has  continued.  The  legal  framework  to  combat 
corruption has been further improved. Amendments to the Criminal Code introduced new rules on 
confiscation of assets. From now on, where the origin of certain assets held by persons convicted 
for  organised  crime  or  corruption  is  in  question,  the  burden  of  proof  is  reversed.  The  National 
Council for monitoring  the anti-corruption  strategy  has  become  more proactive, regularly holding 
public  debates  and  hearings.  A  national  anti-corruption  campaign  for  the  general  public  was 
launched. 

A National Police Office for the Suppression of Corruption and Organised Crime (PNUSKOK) has 
been  established  within  the  General  Police  Directorate.  It  comprises  four  regional  centres,  in  line 
with the structure of the Office for the Fight Against Corruption and Organised Crime (USKOK), 
and  is  in  charge  of  complex  police  investigations  and  actions  against  organised  crime  and 
corruption at the national level. Special chambers for dealing with organised crime and corruption 
cases have been set up in the four County Courts in Zagreb, Split, Osijek and Rijeka. 

The  Office  for  the  Fight  Against  Corruption  and  Organised  Crime  (USKOK)  continues  to  be 
increasingly  active.  It  has  begun  to  investigate  possible  high  level  corruption,  initiating  an 
investigation of a case involving a former government minister. USKOK has issued indictments in 
some other important cases. It issued an indictment against a High Commercial Court judge and a 
judge  from  the  Zagreb  Municipal  Court  for  corruption  and  abuse  of  power.  Further  indictments 
were  issued  in  the  ‘Indeks’  case  concerning  corruption  at  universities,  including  against  a  deputy 
dean of the Zagreb Faculty of Transport and Traffic Engineering and nine professors. There have 
been the first verdicts in some important cases brought by USKOK. In the second ‘Maestro’ trial, 
the  Zagreb  County  Court  issued  at  the  first  instance  prison  sentences  against  two  former  vice-
presidents of the Croatian Privatisation Fund (HFP).  

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However,  corruption  still  remains  widespread.  The  recently  upgraded  legal  and  administrative 
structures remain to be tested in practice. While the total number of corruption cases investigated so 
far  has  increased,  the  actual  number  of  prosecutions  remains  low.  The  ratio  between  investigated 
cases  and  indictments  also  remains  low.  There  has  been  limited  investigation  of  high-level 
corruption, the prosecution of which is frustrated by political considerations. There are indications 
that indictments are often overly narrow and unambitious. A culture of political accountability for 
the corruption being uncovered by USKOK is lacking.  

The administrative capacity of State bodies for fighting corruption continues to need improvement. 
Overall  coordination  of  the  implementation  of  anti-corruption  efforts  has  improved  but  still  faces 
shortcomings.  Further  administrative  support  needs  to  be  provided  to  both  the  National  Anti-
Corruption Council and the Committee for the Prevention of Conflicts of Interest (CPCI). There has 
been limited progress in preventing conflicts of interest. The CPCI was re-established after a period 
of  interruption  but  has  not  secured  a  strong  preventive  role  for  itself.  While  the  CPCI  has  issued 
guidelines  for  public  officials,  the  concept  of  conflict  of  interest  remains  little  understood  or 
wilfully ignored across the wider public administration. Efficient non-partisan monitoring of anti-
corruption efforts is still to be established. Serious implementation of anti-corruption practices by 
the  public  administration  is  lacking,  with  many  bodies  only  paying  lip  service  to  the  centrally 
coordinated anti-corruption drive.  

On the prosecution front, in order to be able to conduct complex financial investigations USKOK as 
well as PNUSKOK need to improve their expertise on financial issues as well as further enhance 
their  cooperation  with  other  bodies.  In  order  to  prevent  corruption,  greater transparency  in  public 
administration  is  required.  Shortcomings  remain  as  regards  the  financing  of  political  parties  and 
election  campaigns.  Implementation  of  the  Law  on  Access  to  Information  needs  further 
improvement.  Public  procurement  remains  a  major  source  of  potential  and  actual  corruption.  In 
view of future EU funds to be allocated to Croatia after accession, particular attention to fighting 
corruption in this area is required. Significantly improved scrutiny of actual execution of contracts 
is essential  

(See also 2.1. Democracy and Rule of law) 

As regards fundamental rights, there have been some developments.  

As  regards  the  right  to  protection  of  personal  data,  the  Data  Protection  Agency  has  been  further 
strengthened  with  additional  staff  to  cover  new  activities  such  as  Schengen  and  Eurojust.  The 
number  of  supervision  and  control  activities  remains  low,  however.  Full  alignment  with  the  Data 
Protection Directive and the Council of Europe instruments remains to be completed.  

Some  progress  was  made  as  regards  prisons.  The  Law  on  Enforcement  of  Prison  Terms  was 
adopted  in  2008,  providing  for  the  expansion  of  existing  facilities  and  improved  health  care.  171 
additional  staff  were  recruited  and  trained.  However,  Croatian  prisons  remain  overcrowded,  with 
the number of detainees increasing due to longer prison sentences introduced in the Criminal Code. 
As  an  alternative  to  imprisonment,  a  probation  system  should  be  introduced.  There  is  a  lack  of 
trained prison staff.  

Freedom of expression, including freedom and pluralism of the media, is provided for in Croatian 
law  and  is  generally  respected.  However,  there  has  been  an  increase  threats  against  journalists 
working on cases of corruption and organised crime. There has been limited success in identifying 
and  prosecuting  perpetrators  and  instigators.  Undue  political  pressure  is  on  occasion  exerted  on 
editors and journalists. Concerns about freedom of expression persist, including at the local level. 

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As regards access to justice, the new Law and implementing regulations on legal aid entered into 
force in February 2009. The institutional framework set up for implementation of the law comprises 
a Department for Free Legal Aid within the Ministry of Justice, 20 State administration offices in 
counties and 13 branch offices as well as a Legal Aid Commission. The system remains to be fully 
tested in practice. However, the complexity of the procedure, low fees for lawyers relative to their 
normal  tariffs  and  the  significant  reductions  in  the  budget  for  legal  aid  provision  might  not 
guarantee proper access to justice.  

There  has  been  some  progress  with  regard  to  minorities.  High-level  public  expressions  of 
commitment to the rights of minorities, reaffirming their place in Croatian society, have continued. 
All  eight  minority  MPs  remain  in  the  governing  coalition.  The  Roma  minority  has  continued  to 
receive attention, with improvements particularly in pre-school education. Round tables and public 
discussions  have  been  held  on  the  Constitutional  Law  on  the  Rights  of  National  Minorities 
(CLRNM), in particular concerning minority employment in the State administration and judiciary.  

However,  many  problems  remain  for  minorities.  Croatia  needs  to  encourage  a  spirit  of  tolerance 
towards the Serb minority and take appropriate measures to protect those who may still be subject 
to  threats  or  acts  of  discrimination,  hostility  or  violence.  Minorities  continue  to  face  particular 
difficulties in the area of employment, both in terms of under-representation in State administration, 
the judiciary and the police as well as in the wider public sector. Implementation of the recruitment 
plan for national minorities has not seen a significant increase in minority employment in the State 
administration.  Funding  for  minorities  was  cut  in  the  revised  budget.  Legal  provisions  and 
programmes  need  to  be  implemented  with  more  determination,  and  adequate  monitoring  assured, 
especially in the area of employment. 

The Roma minority still faces particularly difficult living conditions and challenges remain in the 
areas of education, social protection, health care, employment and access to personal documents. 

There  has  been  some  progress  on  refugee  return  issues.  The  government's  self-imposed  2007 
benchmark  for  the  provision  of  housing  care  to  former  occupancy  and  tenancy  rights  holders  has 
been met. Good progress has been made towards meeting the 2008 benchmark of providing 1,400 
accommodation units; though this remains to be fully met. Work on meeting the 2009 target is still 
at  an  early  stage.  Several  thousand  housing  units  still  need  to  be  made  available  to  returning 
refugees.  Moreover,  some  8,000  appeals  for  housing  reconstruction  still  remain  pending. 
Implementation of the decision on validating pension rights has been varied. The current rejection 
rate of over 50% of applications and inconsistent approach by regional offices mean that in practice 
people  are  often  not  able  to  avail  themselves  of  their  rights.  Efforts  to  create  the  economic  and 
social conditions necessary for the sustainability of refugee return need to be accelerated. 

As  regards  citizens  rights,  Croatia  has  amended  the  Act  on  Aliens  to  align  with  Directive 
2004/38/EC  on  the  right  of  citizens  of  the  Union  and  their  family  members  to  move  and  reside 
freely  within  the  territory  of  the  Member  States  but  further  efforts  are  required  to  achieve  full 
alignment.  

(See also 2.2. Human rights and the protection of minorities) 

Conclusion  

Croatia  has  made  some  progress  on  this  chapter.  Reforms  in  the  judiciary  have  continued  but 
significant  challenges  remain,  particularly  concerning  judicial  independence  and  efficiency.  Anti-
corruption efforts have produced initial results, but corruption remains widespread and tools are not 
being  deployed  with  sufficient  vigour,  especially  against  political  corruption.  Legal  provisions  on 

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fundamental  rights  are  in  general  adequate,  but  despite  some  progress,  a  number  of  important 
challenges  remain  in  terms  of  implementation,  especially  for  minorities.  Particular  vigilance  is 
required as regards freedom of expression and threats against journalists. 

4.24.  Chapter 24: Justice, Freedom and Security 

In the field of migration, amendments to the Aliens Act facilitate family reunification for persons 
under subsidiary protection. There has been no increase in the number of staff at the Ministry of the 
Interior dealing with illegal migration. Training of existing staff has continued. A Memorandum of 
Understanding was signed in November 2008 between Albania, Bosnia and Herzegovina, Croatia, 
the former Yugoslav Republic of Macedonia, Montenegro and Serbia with a view to establishing a 
system for the exchange of statistical data on illegal migration and participating in a regional early 
warning system.  

The number of illegal migrants continued to fall (2,013 in 2008 compared to 4,000 in 2007) and, as 
a result, the number of forced returns decreased by 45% in 2008 as compared to the previous year. 
The  deportation  centre  at  Ježevo  accommodated  773  illegal  migrants  waiting  for  deportation  and 
did  not  suffer  from  overcrowding,  as  in  previous  years.  There  is  a  lack  of  specific  treatment, 
including  separate  facilities,  and  protection  for  minors,  who  are  subject  to  risks  of  abuse  and 
exploitation.  A  readmission  agreement  with  Montenegro  was  ratified  in  February  2009  and  a 
readmission agreement with Serbia to bring it into line with the EU agreement has been signed.  

Significant progress can be reported in the field of asylum. The practice of the authorities towards 
asylum-seekers  has  improved  compared  to  previous  years.  However,  the  legislation  needs  to  be 
brought  fully  into  line  with  the  acquis.  An  educational  manual  has  been  developed,  continuous 
education of existing and newly hired staff (7 new staff) has been ensured, manuals for staff at the 
reception centre and for caseworkers at the Ministry of the Interior, as well as a Eurodac and Dublin 
implementation plan and operational manual have been prepared.  

The  number  of  asylum  seekers  decreased  to  155  in  2008  from  170  in  2007.  The  majority  of 
applications  for  asylum  continue  to  be  rejected  as  manifestly  unfounded.  The  exclusion  of 
interviews  in  the  accelerated  procedure  remains  a  concern,  even  though  in  practice  the  Asylum 
Commission  has  so  far  interviewed  all  asylum  seekers.  The  fact  that  the  Asylum  Commission 
overturned four first instance decisions taken by the Asylum Unit of the Ministry of the Interior can 
be  considered  as  a  positive  sign.  However,  the  Commission  still  lacks  guarantees  of  full 
independence, given the oversight role of the authorities in the appointment process and the lack of 
separate premises from the Ministry. The Administrative Court (which can review decisions of the 
Asylum Commission) does not provide an effective legal remedy and cannot suspend an expulsion 
decision.  The  fact  that  asylum  seekers  continue  to  be  charged  with  the  offence  of  illegal  entry 
remains a matter of concern. Recognised refugees face difficulties and discrimination in accessing 
their  rights  due  to  their  status.  The  Kutina  asylum  reception  centre  is  reaching  its  maximum 
capacity. Croatia is still perceived as a country of transit, but the situation is likely to change upon 
its accession to the EU and Croatia needs to build up its capacity to deal with this expected increase.  

Some progress has been made as regards visa policy. As regards amendments to the positive and 
negative  lists,  the  visa  requirement  for  citizens  from  Serbia  and  Montenegro  has  again  been 
suspended, until the end of 2009, and for citizens from Russia and Ukraine it has been suspended 
for the period 1 May to 31 October 2009. 

Further  amendments  to  the  Aliens  Act  entered  into  force  in  March  2009  and  introduced 
requirements  for  travel  insurance  and  for  collecting  biometric  identifiers.  The  latter  of  these 

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provisions are to enter into force upon accession to the EU. New Croatian visa stickers have been 
introduced in order to align with the acquis. IKOS, the information system which forms the basis of 
the future Croatian Visa Database, has now been implemented in all but two Croatia's diplomatic 
missions  and  consular  posts.  Croatia  needs  to  prepare  for  the  implementation  of  the  Visa 
Information System.  

Concerning  document  security,  the  legislation  introducing  biometric  identifiers  (facial  image  and 
fingerprints) in passports and travel documents has entered into force and the issuance of biometric 
passports started in July 2009 for diplomatic passports. 

There  has  been  some  progress  with  regard  to  external  borders  and  Schengen.  The  revised 
Integrated Border Management Action Plan was adopted in March 2009 together with a Strategy for 
Integrated Border Management. The Report of the Working Group proposing the reduction and re-
classification  of  Border  Crossing  Points  (BCPs)  has  been  adopted  and  Croatia  has  started 
negotiating  with  neighbouring  countries  on  such  proposals.  The  total  staff  of  the  border  police 
remained roughly at the same level as in the previous period, and remains insufficient since some 
BCPs  are  severely  understaffed  and  surveillance  activities  are  often  suffering.  Training  of  border 
police has continued and both basic and specialised training programmes have been established as 
well  as  training  of  trainers.  The  encrypted  communication  system  (Tetra)  now  covers  all  Border 
Crossing Points.  

Although some progress has been made, there is still a lack of equipment, notably for second-line 
checks,  surveillance  and  for  the  detection  of  forged  documents.  Infrastructure  in  several  BCPs  is 
poor. The National Border Management Information System (NBMIS) is being deployed to BCPs 
at a slow pace and it still covers only 9 BCPs. Rollout of the NBMIS system should be speeded up 
to  cover  the  whole  border  and  prepare  for  the  implementation  of  the  national  system  for  the 
Schengen  Information  System  (SIS  II).  Croatia  needs  to  finalise  preparations  for  setting  up  a 
SIRENE  Office.  An  Annex  to  the  Agreement  on  Cooperation  on  Integrated  Border  Management 
has been signed to strengthen inter-agency cooperation.  

Cross-border  cooperation  continues  to  work  well.  Since  November  2008  Croatia  and  Bosnia  and 
Herzegovina have been conducting joint patrols along some parts of the border. In December 2008, 
an  annex  to  the  working  arrangement  between  FRONTEX  and  the  Ministry  of  the  Interior  was 
signed on data to be exchanged between agencies. The implementation of the working arrangement 
has  started  and  Croatia  is  participating  in  joint  border  control  operations.  The  concept  of  a  risk 
analysis system has been introduced but still needs to be developed.  

As  regards  judicial  cooperation  in  civil  and  criminal  matters,  there  has  been  some  progress. 
Croatia  amended its Criminal  Code  in December 2008 to withdraw the exception to the ne bis in 
idem principle. The Law on Courts and the Law on Enforcement were amended in order to align 
with  the  European  arrest  warrant  and  the  European  enforcement  order.  However,  central  bodies 
have to be set up in the county courts and the Constitution has to be amended to allow extradition of 
Croatian  citizens  to  EU  Member  States  in  order  to  complete  alignment.  Croatia  is  a  party  to  the 
Council of Europe Convention on the Transfer of Sentenced Persons (1983), but it has not signed or 
ratified the Additional Protocol to the Convention (1997).  

Regarding the status of victims in criminal proceedings, the Law on compensation of the victims of 
violent  crimes  was  adopted  in  October  2008.  However,  Croatia  has  to  align  further  with  the 
Framework Decision on the standing of victims in criminal proceedings in a number of areas. These 
include notifying the injured party that the perpetrator has been released after serving the sentence, 
acquiring  testimonies  by  means  of  devices  for  picture  and  sound  transmission  (video  and  phone 

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conferences),  establishing  a  service  for  assistance  to  victims  of  criminal  offences  and  training  of 
staff.  Croatia  has  not  aligned  with  the  Framework  Decision  on  the  execution  in  the  EU  of  orders 
freezing  property  and  evidence  or  with  the  Framework  Decision  on  the  application  of  mutual 
recognition  of  financial  penalties.  Croatia  has  not  adopted  the  relevant  legislation  to  be  able  to 
implement the Directive on combating late payment in commercial transactions. The Croatian legal 
order does not allow direct communication between judicial authorities, nor does it allow the direct 
execution  of  foreign  decisions  without  the  need  for  the  exequatur  procedure.  This  means,  in 
practice,  that  recognition  and  enforcement  of  decisions  by  foreign  courts  has  to  go  through  the 
exequatur  process  at  the  municipal  or  commercial  courts.  The  recognised  decision  is  enforced 
according  to  Croatian  law,  which  remains  slow  and  inefficient.  The  Ministry  of  Justice  has  no 
statistical data on the recognition/enforcement of such decisions.  

Concerning  cooperation  in  civil  matters,  Croatia  has  signed  and  ratified  the  Convention  on 
Jurisdiction,  Applicable  Law,  Recognition,  Enforcement  and  Co-operation  in  respect  of  Parental 
Responsibility  and  Measures  for  the  Protection  of  Children  but  still  has  to  ratify  the  Hague 
Convention on the Taking of Evidence abroad in Civil and Commercial Matters.  

Good progress has been made as regards police cooperation. The agreement with Europol is being 
implemented and since a Croatian liaison officer was stationed at Europol last year there has been a 
significant increase in cooperation between Croatia and Europol. Agreements on police cooperation 
have been signed with Hungary, Germany and Serbia. Cooperation with Serbia has produced some 
important  results,  including  identifying  and  arresting  the  alleged  perpetrator  of  the  killing  in 
October 2008 of a prominent journalist in Zagreb. The Agreement with France entered into force. 

A  new  Act  on  police  duties  was  adopted  in  June  2009.  The  duties  and  powers  of  the  police  are 
extended  and  better  defined.  A  Strategy  and  an  Action  Plan  for  reforming  human  resource 
management in the Ministry of the Interior for 2009-2011 was adopted. 

Some progress has been made in the area of organised crime. The National Police Office for the 
Suppression of Corruption and Organised Crime (PNUSKOK) was established within the General 
Police Directorate and became operational in February 2009. It also comprises four regional centres 
in Zagreb, Split, Osijek and Rijeka. Based on the National Threat Assessment (NTA), the Ministry 
of  the  Interior  developed  a  Plan  of  Priorities  in  the  Suppression  of  Organised  Crime,  which  it  is 
implementing  together  with  USKOK.  An  additional  Protocol  on  inter-ministerial  exchange  of 
information from December 2008 specifies which data are to be exchanged. Good cooperation was 
established  between  the  Ministry  of  the  Interior  and  USKOK.  Efforts  in  this  respect  need  to  be 
continued. In addition, Croatia will need to increase its efforts in  meeting the challenge of illegal 
proceeds  of  the  crimes  being  invested  in  society  in  a  more  developed  manner,  as  well  as  the 
tendency of criminals using more sophisticated methods for money laundering. 

Good progress has been made with regard to the trafficking of human beings. In November 2008, 
the government adopted a protocol for the identification of, assistance to and protection of victims 
of human trafficking which sets out in detail the national referral mechanism and the obligations of 
the  various  responsible  authorities.  A  three-year  programme  to  combat  trafficking  in  persons  was 
adopted by the government in March 2009.  

As  part  of  the  implementation  of  the  protocol  on  cooperation  between  the  various  Croatian 
authorities involved in the system of suppression of trafficking (adopted in June 2008), training was 
given to police officers, employees of the social welfare system and of family centres, health care 
staff,  workers  in  tourism  and  representatives  of  civil  society  organisations  (450  persons  in  total). 
Further  efforts  should  be  made  in  terms  of  identifying  potential  victims  of  trafficking  and 

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developing a protocol for the return of victims of trafficking. 

Progress  can  be  reported  in  the  fight  against  terrorism.  In  November  2008  Croatia  adopted  the 
National Strategy for the Prevention and Suppression of Terrorism, and the Act on the Prevention of 
Money  Laundering  and  Financing  of  Terrorism  entered  into  force  in  January  2009.  Croatia  has 
amended  its  legislation  in  order  to  align  with  the  EU  definition  of  terrorism.  Training  of  police 
officers  on  anti-terrorism  operations  has  continued.  Croatia  needs  to  continue  to  strengthen  its 
administrative  capacity  in  the  fight  against  terrorism,  among  other  things  by  developing  inter-
agency coordination. 

Progress  has  been  made  in  the  field  of  the  fight  against  drugs.  In  February  2009,  the  National 
Action Plan on drugs for the period 2009-2012 was adopted on the basis of the objectives set by the 
National Drug Control Strategy for 2006-2012. The Action Plan focuses on reinforcing cooperation 
between central and local levels as well as with civil society and enhancing the role of schools in 
the field of prevention. The National Focal Point (NFP) delivered its second Annual Report to the 
European  Monitoring  Centre  for  Drugs  and  Drug  Addiction  (EMCDDA)  in  December  2008  and 
was able to report on four out of the EMCDDA’s five indicators. The NFP suffers from a shortage 
of staff and financial resources. Standards for therapeutic communities have been drawn up but the 
implementing legislation has not been adopted. The model for partnership cooperation adopted last 
year  between  the  National  Drug  Office  and  the  districts  helped  strengthen  cooperation  between 
central  and  local  levels  as  well  as  exchanges  of  good  practice  amongst  districts.  Prevention 
programmes on drugs in general, and at schools in particular, lack quality evaluation to assess their 
impact.  The  police  recorded  7,882  criminal  cases  involving  drugs  in  2008  (which  is  comparable 
with  the  level  of  each  of  the  past  six  years).  The  agreement  for  Croatia’s  participation  in  the 
EMCDDA was initialled in July 2009. The agreement now needs to be ratified before Croatia can 
participate in the EMCDDA’s work.  

No progress can be reported in the field of customs cooperation. 

For counterfeiting of the euro see chapter 32 – financial control. 

Conclusion 

Croatia  has  made  some  progress  in  this  chapter,  particularly  as  regards  the  fight  against  drugs, 
dealing  with  trafficking  of  human  beings,  and  the  management  of  external  borders.  However, 
Croatia needs to step up its efforts in order to ensure that EU requirements are met upon accession. 
Efforts  to  develop  the  necessary  administrative  capacity  in  this  chapter  require  significant 
upscaling.  Croatia  needs  to  develop  its  infrastructure,  equipment  and  resources  to  ensure  the 
effective management of its external border as from accession.  

4.25.  Chapter 25: Science and Research 

Good  progress  has  been  made  in  research  policy.  Amendments  to  the  Act  on  the  National 
Foundation  for  Science,  Higher  Education  and  Technological  Development  have  been  adopted, 
setting  in  place  a  transparent  and  independent  system  for  evaluating  and  monitoring  national 
research  grants.  An  Act  on  Quality  Assurance  in  Science  and  Higher  Education  has  also  been 
adopted assigning the Agency for Science and Higher Education an independent quality assurance 
role  through  the  accreditation,  evaluation  and  audit  of  public  and  private  scientific  and  higher 
education institutions. 

Good  progress  has  been  made  on  participation  in  the  7th  Framework  Programme  for  Research 
and Technological Development (FP7). An Action Plan to further strengthen Croatia’s absorption 

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capacity  for  the  period 2009–2010  has  been  adopted.  Efforts  are  ongoing  to  strengthen 
administrative  capacity,  including  further  training  of  the  appointed  national  contact  points. 
Additional  financial  support  has  been  made  available  for  preparing  EU  projects  and  reward  the 
successful  Croatian  applicants.  The  procedure  to  associate  Croatia  to  the  Seventh  Euratom 
Framework Programme is ongoing with the aim of making the association effective in the course of 
2010. 

Progress has also been made with respect to Croatia’s association to the European Research Area: 
implementation of the ‘National 3% Action Plan’ is regularly assessed and updated by the Council 
for  the  National  Innovation  System.  Measures  have  been  taken  to  stimulate  private  sector 
investment  in  research,  including  tax  reliefs  for  private  investment  in  research  and  development. 
Implementation of the Plan needs, however, to be ensured. As regards mobility of researchers, the 
Croatian  Researchers’  Mobility  Network  Euraxess  has  been  established  as  well  as  local  contact 
points. An Action Plan for the mobility of researchers has been adopted. However, the number of 
young people attracted to science remains low. 

Conclusion 

Good progress has been made on this chapter, and preparations are well advanced. Further efforts 
remain necessary, however, to ensure association and full participation of Croatia in the European 
Research Area. 

4.26.  Chapter 26: Education and Culture 

Good  progress  has  been  achieved  in  the  field  of  education,  training  and  youth.  The  education 
reform  process  has  continued  under  the  Education  System  Development  Plan  for  2005–2010. 
Croatia is participating in the EU Education and Training 2010 Work Programme. Croatia performs 
very well in the EU benchmarks concerning early school leavers and upper secondary completion 
rates, but participation in pre-school education and adult participation in lifelong learning are very 
low. Additional efforts have been made in the development of a national qualifications framework 
(NQF). The Plan of Activities until 2012 has been adopted. Implementation of the Bologna process 
in  higher  education  has  continued.  Future  challenges  include  structural  reform  of  universities  and 
reforming  the  tuition  fees,  regulating  the  status  and  remit  of  the  quality  assurance  agency, 
implementing a learning outcomes approach and improving recognition of prior learning. The Law 
on  Quality  Assurance  in  Higher  Education  has  been  adopted.  The  reform  of  vocational  education 
and  training  has  continued  through  adoption  of  the  Law  on  Vocational  Education  and  Training, 
which  incorporates  the  principle  of  non-discrimination  in  access  to  education  for  EU  citizens. 
Legislation implementing the Adult Education Act as well as a National Youth Programme 2009–
2013 have also been adopted. 

Good progress has been made in the preparations for the management of the Community Lifelong 
Learning  and  Youth  in  Action  Programmes.  The  National  Agency  has  started  to  implement 
preparatory measures, including staff training and launch of pilot projects. The respective Accession 
Partnership priorities in the field of education, training and youth have been partially met. 

Good  progress  can  also  be  reported  in  the  field  of  culture.  Efforts  have  continued  to  facilitate 
deeper participation in the Culture and Europe for Citizens Programmes.  

Conclusion 

Good progress has been made in the area of education, training, youth and culture. A good level of 
legal  alignment  has  been  achieved.  Croatia  should  continue  its  efforts  to  prepare  for  the 

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management of Life Long Learning and Youth in Action programmes. Due attention also needs to 
be paid to adult education. 

4.27.  Chapter 27: Environment 

Some  progress  has  been  made  in  the  area  of  horizontal  legislation.  The  transposition  process  is 
well  advanced  in  this  sector.  However,  the  Directive  on  environmental  liability  is  still  not  fully 
transposed  or  implemented.  A  Sustainable  Development  Strategy  has  been  adopted.  The  Protocol 
on  Strategic  Environmental  Assessment  (SEA)  to  the  Convention  on  Environmental  Impact 
Assessment in a Transboundary Context (Espoo Convention) was ratified. Efforts to implement the 
SEA need to be stepped up. Implementation of provisions relating to public participation and access 
to  justice  in  environmental  matters  remains  weak.  In  this  respect,  cooperation  with  the  judiciary 
should be strengthened. 

Good progress has been achieved in the area of climate change. Implementing legislation on Kyoto 
flexible mechanisms has been enacted. The National Allocation Plan for greenhouse gas emissions 
allowances was adopted for the period 2010-2012. Preparations for connection to the EU Emissions 
Trading  Scheme  (EU  ETS)  are  well  advanced.  The  national  GHG  emission  registry  remains 
outstanding. Preparations in this area are proceeding well. 

Croatia participates in the Community Civil Protection Mechanism. 

There  has  been  good  progress  in  the  field  of  air  quality.  The  Directive  on  national  emission 
ceilings  for  certain  atmospheric  pollutants  is  now  fully  transposed.  Legislation  on  designation  of 
zones and agglomerations according to categories of air quality was adopted. Establishment of the 
air quality monitoring and  management system is entering its operational phase. The Plan for the 
Reduction of SO2, NOx and Dust Emissions from Large Combustion Plants and Gas Turbines has 
been adopted. Further, the National Plan for the Implementation of the Stockholm Convention on 
Persistent Organic Pollutants has been adopted. Although implementing legislation on limit values 
for emissions of pollutants into the air from stationary sources and on the quality of liquid fuels has 
been amended, an annual quantity of fuel that does not conform to prescribed quality standards is 
still  placed  on  the  market.  The  adjustment  of  petrol  stations  and  terminals  and  modernisation  of 
refineries is ongoing. Transposition of the new acquis related to ambient air quality and cleaner air 
for Europe is pending. Preparations in this area are progressing well. 

Some progress has been made in the area of waste management. Implementing legislation relating 
to  the  management  of  waste  from  extractive  industries  and  the  management  of  polychlorinated 
biphenyls (PCB) and polychlorinated terphenyls (PCT) was adopted. Amending legislation on the 
classification  of  waste  and  on  supervision  of  the  transboundary  movement  of  waste  was  also 
adopted.  Sustained  efforts  in  remediation  of  existing  landfills  and  hot-spots  and  further 
establishment of systems for collection and management of different categories of waste are needed. 
Preparations in this area are progressing well. 

There  has  been  little  progress  in  the  water  sector.  The  new  Water  Act  and  Act  on  Water 
Management Financing have not been enacted yet. This hampers the expected restructuring of the 
sector and continuation of the transposition process, which is slow at the moment.  

Boundaries of river basins have been determined and implementing legislation relating to hazardous 
substances  in  waters  and  waste  water  has  been  enacted.  Significant  efforts  have  to  be  made  to 
increase  investments  in  this  sector.  Monitoring  and  reporting  activities  need  to  be  improved. 
Significant efforts are still needed in this area. 

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There was some progress in the field of nature protection. Further efforts are needed to achieve 
full alignment with the acquis, in particular Directives 92/43/EC and 79/409/EEC. The Strategy and 
Action Plan for Conservation of Biological and Landscape Diversity were adopted and the Nature 
Protection Act was amended to ensure further alignment with the acquis. A draft list of proposed 
Natura 2000 sites has been discussed with relevant stakeholders. However, Croatia will need to step 
up efforts to finalise the list of Natura 2000 sites. Administrative capacity for the implementation 
and enforcement of the acquis needs further strengthening, especially within the State Institute for 
Nature Protection and at local level. In the area of nature protection Croatia is not yet sufficiently 
prepared. 

There  has  been  significant  progress  in  the  area  of  industrial  pollution  control  and  risk 
management. Implementing legislation relating to the integrated pollution prevention and control 
(IPPC) and the Seveso II Directives has been enacted. Registries of installations falling under the 
IPPC  and  the  Seveso  II  Directives  have  been  established.  Efforts  have  been  made  in  further 
developing  the  European  Release  and  Transfer  Register  (EPRTR).  Significant  efforts  will  be 
required  to  ensure  sufficient  administrative  capacity  in  this  sector.  Preparations  in  this  area  are 
proceeding well. 

Good  progress  can  be  reported  on  chemicals.  Implementing  legislation  on  active  substances  in 
biocidal  products  and  on  safety  data  sheets  has  been  enacted.  Full  transposition  of  the  acquis  in 
relation  to  the  packaging  and  labelling  of  chemicals  and  the  exports  and  imports  of  chemicals  as 
well as biocides was achieved. 

Some  progress  can  be  reported  in  the  area  of  genetically  modified  organisms  (GMOs). 
Notification and the requirements for labelling and packaging of GMOs have been further regulated 
through implementing legislation. Further efforts will be required for achieving full alignment with 
the  acquis.  Laboratories  and  administrative  capacity  need  to  be  further  strengthened  in  order  to 
implement and enforce the legislation. Preparations in GMOs are moderately advanced. 

Good  progress  can  be  reported  in  the  noise  sector.  Full  transposition  has  been  achieved  with  the 
adoption  of  the  Noise  Protection  Act.  Adoption  of  noise  maps  for  towns  and  municipalities  is 
progressing well. Preparations in this area are well on track. 

In  the  forestry  sector,  activities  related  to  the  implementation  of  the  existing  Croatian  legal 
framework have been continued.  

Administrative capacity has overall further progressed across the sectors. However, the number of 
staff  recruited  is  generally  lower  than  what  was  planned  in  the  action  plan  for  setting  up  the 
necessary  administrative  capacities  at  national,  regional  and  local  level.  Areas  of  concern  include 
the  nature  protection  and  IPPC  sectors.  There  is  a  clear  need  for  institutional  strengthening  and 
capacity building at the local level. Given the high level of fragmentation of the environment sector 
across  ministries  and  public  bodies,  improved  coordination  mechanisms  and  decision-making 
procedures are required. 

Conclusion 

There  has  been  good  progress  in  this  chapter,  especially  in  the  areas  of  air  quality,  industrial 
pollution  control  and  risk  management,  and  climate  change.  Overall,  Croatia's  preparations  are 
advancing  well.  However,  considerable  efforts  are  still  needed  in  the  water  sector  and  nature 
protection,  especially  as  regards  implementation  of  the  Water  Framework  Directive  and  the 
designation  of  Natura  2000  sites.  Implementation  of  the  horizontal  acquis,  not  least  strategic 
environmental  assessment  and  access  to  justice  in  environmental  matters,  needs  to  be  improved. 

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Administrative capacity needs further strengthening both at national and at local level.  

4.28.  Chapter 28: Consumer and Health Protection 

There  has  been  some  progress  in  the  field  of  consumer  protection.  As  regards  administrative 
capacity, two new officials have been hired in the Consumer Protection Department in the Ministry 
of  the  Economy,  Labour  and  Entrepreneurship,  bringing  the  total  number  of  staff  to  10. 
Government funding for regional counselling centres has continued, as well as activities for raising 
awareness  on  consumer  protection.  As  for  consumers’  access  to  justice,  the  new  Consumer 
Protection  Act  introduces  the  system  of  out-of-court  settlement  of  consumer  disputes.  A  special 
record  of  consumer  disputes  has  been  established,  and  training  of  judges  is  ongoing.  However, 
administrative  capacity  needs  to  be  further  strengthened,  especially  as  regards  the  State 
Inspectorate,  the  consumer  movement  needs  to  be  further  supported  and  consumers’  access  to 
justice further improved. Preparations in this field are advanced. 

Good  progress  can  be  reported  in  the  field  of  product-safety  related  issues.  The  General  Product 
Safety Act has been amended, which is a key element for the accession negotiations in this chapter. 
A Regulation on a rapid information exchange system for products posing a risk to the health and 
safety of consumers has been adopted. However, it needs to be amended to bring it into line with 
the  acquis.  Also  coordination  between  the  RAPEX  central  contact  point  and  local  authorities  as 
well as due enforcement of measures on general product safety need to be ensured. Preparations in 
this field are well advanced. 

Good progress has been made in the area of non-safety related issues. The Consumer Protection Act 
has been amended, which is a key element for the accession negotiations in this chapter. It aims to 
ensure further alignment in many areas of the consumer protection acquis, among other things by 
establishing an appropriate enforcement mechanism against unfair terms in consumer contracts. An 
Act  on  Unpermitted  Advertising  has  been  adopted,  aimed  at  aligning  with  the  acquis  on 
misleading/comparative advertising, as well as a Consumer Credit Act aiming at completing legal 
alignment in this area. Preparations in this field are reaching completion. 

Good progress can be reported in the area of public health. 

Substantial progress has been made in the area of tobacco. Legislation has been adopted completing 
legal alignment in the fields of tobacco advertising and tobacco products. This is a key element for 
the accession negotiations on this chapter. In this area, Croatia is in line with the acquis. 

Some progress has been made in the field of communicable diseases. The Act on protection of the 
population against communicable diseases has been further amended and to a large extent brought 
into line with the acquis in this field as well as with the International Health Regulations. However, 
further  legal  adjustments  are  necessary  in  particular  due  to  the  current  epidemiological  situation 
concerning Influenza A(H1N1). Preparations in this field are well advanced. 

Good progress can be reported in the area of blood, tissues and cells. Legislation has been adopted 
in the field of tissues and cells (including reproductive cells) aimed at completing legal alignment, 
inter alia with respect to reporting of serious adverse events and reactions for all non-reproductive 
tissues  and  cells.  This  is  a  key  element  for  the  accession  negotiations  on  this  chapter.  As  regards 
administrative  capacity,  a  Department  for  the  Inspection  and  Monitoring  of  Blood,  Tissues  and 
Cells  has  been  established  in  the  Ministry  of  Health  and  Social  Welfare.  However,  quality 
management of all blood transfusion centres is not yet ensured, and facilities for handling tissues 
and cells have not yet been upgraded, restructured and licensed in accordance with the EU technical 
requirements. Preparations in this field are well under way. 

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No progress can be reported in the field of mental health. A Mental Health Promotion Strategy is 
being  drafted.  However,  community-based  services  remain  insufficiently  developed  as  an 
alternative  to  institutionalisation,  and  financial  resources  allocated  to  mental  health  care  are  still 
scarce. The Accession Partnership priority in this field has therefore not been met. Preparations in 
this field are at an early stage. 

Some  progress  has  been  made  in  the  field  of  drug  abuse  prevention  where  an  Action  Plan  to 
Combat Drug Abuse 2009–2012 has been adopted. Action Plans on nutrition and alcohol have been 
drawn  up.  In  the  area  of  cancer  screening,  preparations  are  under  way  for  starting  the  National 
Programme for early detection of cervical cancer. Preparations in these areas are well on track.  

Conclusion 

There has been good progress in the area of consumer and health protection. Overall, a good level 
of  legal  alignment  has  been  reached.  Sustained  efforts  are  necessary  for  further  strengthening 
administrative capacity in order to implement and enforce legislation effectively in both areas. This 
is a key element for the accession negotiations on this chapter.  

4.29.  Chapter 29: Customs Union 

Good  progress  has  been  made  in  the  area  of  customs  legislation.  On  1  January  2009,  the  new 
Regulation  on  the  customs  tariff  for  2009  entered  into  force,  thereby  aligning  the  Croatian  tariff 
with the 2009 Combined Nomenclature. The Act amending the Act on the Customs Tariff abolished 
the remaining customs fees, which were due on the customs declaration, thus aligning with the EU 
legislation  in  the  area.  Some  discrepancies  with  the  acquis  remain  in  allocation  of  quotas,  duty 
relief, duty exemptions for passengers and the internal transit arrangements. Overall, alignment of 
the customs rules with the acquis is very high.  

Good  progress  can  also  be  reported  on  administrative  and  operational  capacity.  The  Customs 
Administration  has  adopted  and  started  to  implement  an  Anti-corruption  Programme.  An  anti-
corruption  awareness  campaign  has  been  launched  within  Customs  and  a  policy  of  systematic 
rotation  of  staff  developed.  Work  has  continued  on  computerisation  and  interconnectivity.  The 
Interoperability and Interconnectivity Strategy was updated in February 2009. The national domain 
of  NCTS  3.2  has  been  completed  and  local  testing  performed  successfully.  Development  of  the 
NCTS Trader Module, Export Control System (ECS), and ITMS sub-systems started at the end of 
2008. The Croatian customs administration still has very limited in-house capacity to guarantee the 
continuity of its IT services and remains heavily dependent on external companies. Overall, in the 
area  of  administrative  and  operational  capacity,  Croatia  has  consistently  addressed  its  targets  and 
priorities. 

Conclusion 

Good progress has been made overall. Croatian customs legislation is well aligned with the acquis 
and  additional  alignment  was  achieved  during  the  period.  Croatia  has  also  continued  to  make 
progress on its administrative capacity, and started to implement a coherent anti-corruption policy 
within  Customs.  Progress  has  also  continued  in  the  area  of  IT  interconnectivity,  where 
implementation of the IT strategy has continued steadily. Efforts need to continue in the remaining 
areas  of  legislative  alignment,  in  implementing  the  Anti-Corruption  Strategy  and  in  IT 
interconnectivity. 

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4.30.  Chapter 30: External Relations 

There has been good progress in the field of the common commercial policy. Croatia continued to 
cooperate and coordinate closely with the Commission and to align with the policies and positions 
of  the  EU  towards  third  countries  and  within  international  organisations,  particularly  the  World 
Trade Organisation. 

In June 2009, Croatia imposed an erga-omnes provisional safeguard measure on semi-hard cheese 
and  cheese  supplements  in  breach  of  the  WTO  rules.  Measures  were  imposed  two  months  before 
the  initiation  of  an  investigation  and  no  evidence  showing  that  the  conditions  required  for  the 
imposition  of  measures  has  been  be  provided.  Thus  these  legally  unwarranted  measures  have 
already  negatively  affected  the  EU  exports  and  Croatia  needs  to  address  this  issue  as  a  matter  of 
urgency. 

In relation to dual-use goods, Croatia continued to align with the revised list of dual-use items and 
technology. Croatia simplified the procedure for issuance of export and import permits for dual-use 
goods,  strengthened  provisions  on  the  fight  against  illicit  exports  and  started  various  training 
activities in order to enhance administrative capacity. It needs to continue to work on the remaining 
adjustments and on further enhancing its administrative, control and reporting capacity for dual-use 
goods,  in  particular,  on  the  training  of  customs  officers.  Overall,  preparations  in  the  area  of  the 
common commercial policy are well on track. 

In  the  area  of  bilateral  trade  and  investment  agreements  with  third  countries,  Croatia  actively 
participates  in  the  work  of  the  Central  European  Free  Trade  Agreement  (CEFTA).  Croatia 
continued  implementing  its  action  plan  by  bringing  international  agreements  into  line  with  the 
acquis.  Croatia  needs  to  continue  implementing  the  Action  Plan,  as  adopted.  Preparations  in  this 
area are well advanced. 

Some progress can be reported on development policy and humanitarian aid. A National Strategy 
for  Development  Cooperation  for  the  period  2009-2014  has  been  adopted.  The  department 
responsible its implementation is now operational. Croatia will need to complete the required legal 
framework  in  this  area.  Generally,  preparations  in  this  area  are  well  advanced.  Following  the 
adoption  of  laws  for  development  policy  and  humanitarian  aid,  greater  financial  and  human 
resources are required to ensure their progression.  

Conclusion 

Croatia  has  made  some  progress  in  this  chapter.  Provided  Croatia  continues  preparations  as 
scheduled  and  improves  its  administrative  capacity,  it  should  be  able  to  apply  the  acquis  and 
participate in the common commercial policy upon accession. However, Croatia needs to respect its 
international  obligations  when  resorting  to  trade  defence  measures.  Efforts  are  still  needed  with 
regard to development policy and humanitarian aid. 

4.31.  Chapter 31: Foreign, Security and Defence Policy 

The regular political dialogue between the EU and Croatia has continued to cover foreign policy 
issues. (Concerning neighbourly relations with other enlargement countries and Member States, see 
section 2.3 under Political criteria.) 

As  regards  the  common  foreign  and  security  policy  (CFSP),  Croatia  has  continued  to 
systematically  align  itself  with  all  relevant  EU  common  positions,  declarations  and  statements. 
Croatia has continued to develop its administrative capacity to work within the EU CFSP structures. 

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The post of Political Director in the Ministry for Foreign Affairs and European Integration remains 
to be formally established. 

A  new  Act  on  international  restrictive  measures  aimed  at  comprehensive  and  more  efficient 
application  of  sanctions  regimes  was  passed  in  November  2008.  Inter-agency  coordination  has 
improved. 

As  regards  non-proliferation,  the  Government  of  Croatia  adopted  in  September  2009  a  National 
Strategy  and  Action  Plan  for  the  Control  of  Small  Arms  and  Light  Weapons.  Public  awareness 
activities  have  continued,  including  measures  to  collect  and  destroy  weapons.  Croatia  signed  and 
ratified the Convention on Cluster Munitions. However, while the  legislative framework  for arms 
control is satisfactory, there remains a need to further strengthen implementation and enforcement 
capacity as well as transparency of arms-related information.  

With regard to cooperation with international organisations, Croatia has, as a member of the UN, 
the  OSCE  and  the  Council  of  Europe,  been  fully  involved  in  the  policy-making  of  these 
organisations. In 2009, Croatia began the second year of its mandate as a non-permanent member of 
the  Security  Council.  Croatia  became  a  member  of  NATO  in  April  2009. As  regards  the 
International Criminal Court, see Political criteria — Regional issues and international obligations. 

There  have  been  no  particular  developments  with  regard  to  security  measures  (classified 
information). 

Croatia  has  remained  committed  to  the  development  of  the  European  security  and  defence  policy 
(ESDP). Administrative capacity-building measures have continued, including training and greater 
participation of Croatian officials in various fora with EU counterparts. Croatia further reinforced 
its participation in EU missions. Croatia joined the EU’s military operation in Chad and the Central 
African Republic (EUFOR TCHAD/RCA) with a 15-member reconnaissance team. In April 2009 
the Croatian Parliament adopted a decision on the participation of five members of Croatia’s armed 
forces in the EU operation off the Somali coast (EU NAVFOR Somalia – ATALANTA). Croatia 
continued to provide logistical (host nation) support to the EUFOR Althea mission in Bosnia and 
Herzegovina.  

Croatia  continued  to  support  EU  civilian  missions.  Croatia  participates  in  the  EU  Rule  of  Law 
Mission  in  Kosovo  (EULEX  Kosovo)  and  the  EUPOL  Mission  in  Afghanistan  with  four  police 
officers in total. Croatia has continued to take part in international peacekeeping efforts with, as of 
September  2009,  145  members  of  the  armed  forces  and  9  police  officers  taking  part  in  10  UN 
missions.  

Conclusion 

Croatia  has  made  good  progress  in  this  chapter.  Overall,  Croatia  has  reached  a  good  level  of 
alignment  in  the  area  of  foreign,  security  and  defence  policy.  Croatia  continues  to  participate  in 
several EU ESDP missions. In order to be fully prepared for accession, Croatia needs to strengthen 
implementation  and  enforcement  of  arms  control  including  transparency  of  arms-related 
information, and to further improve capacity for full implementation of CFSP-ESDP. 

4.32.  Chapter 32: Financial Control 

Progress  can  be  reported  in  the  area  of  public  internal  financial  control  (PIFC).  The  revised 
Internal  Audit  Manual  was  adopted  in  November  2008.  The  new  Budget  Law,  removing 

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inconsistency with the provisions of the PIFC Law, entered into force on 1 January 2009. A new 
PIFC  Development  Strategy  for  the  period  2009-2011  was  adopted  by  the  Government  in 
September.  

With regard to the institutional framework, the Central Harmonisation Unit (CHU) was reorganised 
in February 2009. However, strengthening of training facilities needs to be continued by gradually 
shifting  the  CHU’s  focus  from  training  towards  coaching  and  monitoring  activities.  Also,  the 
strengthening  of  overall  capacity  of  all  budget  users  at  central  and  local  levels  needs  to  be 
continued, including through development of a risk management approach. The focus of audit work 
has been on auditing EU funds, with limited resources available for the audit of national funds. The 
internal  audit  profession  needs  further  strengthening,  including  increased  focus  on  system-based 
and performance audits.  

In the area of external audit no progress can be mentioned concerning the consolidation of the State 
Audit  Office’s  (SAO)  functional  and  financial 
the  Constitution.  The 
implementation  of  the  SAO’s  Strategic  Development  Plan  for  the  period  2008-2012  is  ongoing. 
Continued  efforts  are  required  to  train  auditors  in  modern  audit  techniques,  especially  on 
performance audit and audit of EU funds, and moving towards a systems-based audit approach. The 
annual  procedure  for  reporting  to  Parliament  needs  reconsideration  to  allow  the  SAO’s  annual 
report to contribute to the budget discharge procedure.  

independence 

in 

Progress has been made on the protection of the EU’s financial interests. As per the new rules of 
procedure  of  the  Ministry  of  Finance,  the  Department  for  Combating  Irregularities  and  Fraud 
(AFCOS) was established as an independent department under the direct supervision of the Minister 
of Finance. As the central contact unit of the AFCOS network, the department is expected to have 
sufficient  capacity  in  the  field  of  fraud  prevention,  detection  and  follow-up  to  act  as  the  unit 
coordinating with OLAF. The drafting of the Anti-fraud Strategy and Action Plan is well under way 
and a consultation process was launched in June 2009. There has been improvement in the reporting 
of  irregularities.  The  Croatian  authorities  have  achieved  more  effective  compliance  with  the 
reporting  requirements.  However,  follow-up  (especially  with  regard  to  recoveries)  needs  to  be 
further enhanced. 

Progress  has  been  made  in  harmonising  the  Criminal  Code  with  PIF  instruments,  as  the  Act 
amending the Criminal Code entered into force as from January 2009. Some further clarifications 
are required to remove ambiguities from the Croatian Criminal Code and to establish its precedence 
in matters relating to protection of the EU’s financial interests. 

Some  progress  can  be  reported  on  protection  of  the  euro  against  counterfeiting.  The  National 
Counterfeit  Centre  (NCC),  the  National  Analysis  Centre  (NAC)  and  the  Coin  National  Analysis 
Centre (CNAC) within the Croatian  National Bank became  operational as from March 2009. The 
National  Central  Office  (NCO)  has  been  established  in  accordance  with  the  requirements  of  the 
International Convention for the Suppression of Counterfeiting Currency. 

Conclusion 

Croatia  has  made  progress  under  this  chapter.  Continued  efforts  are  needed  to  ensure  sustainable 
development of the overall PIFC system at both central and local government level. The functional 
and financial independence of the SAO needs to be anchored in the Constitution. 

4.33.  Chapter 33: Financial and Budgetary Provisions 

There has been good progress in this chapter. The unit for the coordination and management of the 

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own resources system in the Ministry of Finance has continued to develop its capacity to play the 
coordination role required of it from accession. The capacity of the relevant institutions responsible 
for the system of own resources has improved. An action plan for the implementation of the system 
of administration of the EU’s own resources has been adopted and implementation is under way.  

As  regards  traditional  own  resources  (TOR),  Croatia  is  in  the  process  of  upgrading  its  existing 
information and accounting systems and simulations of the ‘A’ and ‘B’ accounts have been carried 
out.  However,  Croatia  needs  to  speed  up  the  development  of  the  TOR  IT  application  for 
establishing  customs  duties  in  the  A  and  B  accounts  and  the  automatic  production  of  A  and  B 
account  statements  used  to  make  duties  available  to  the  EU  budget.  Also,  Croatia  has  to  further 
strengthen  the  independent  internal  control  and  external  audit  of  the  collection  and  accounting  of 
TOR. Post-clearance control at traders’ premises should be further strengthened. Croatia still needs 
to put in place a system for sugar levies and a write-off system for irrecoverable debts in line with 
the EU rules. The competent departments for OWNRES reporting need to be designated and their 
working procedures established.  

In the area of VAT-based own resources, a simulation of the VAT base was carried out, covering 
the  collection  of  revenue,  compensation  calculations  and  the  analysis  and  processing  of  data 
necessary for the calculation of the Weighted Average Rate (WAR). While the basic principles are 
well  understood,  more  detailed  statistical  data  will  still  be  required  for  the  WAR  calculation  and 
capacity building should continue.  

As  regards  the  GNI-based  resource,  application  of  the  ESA95  methodology  and  definitions  has 
improved significantly. Continued efforts will, however, be needed to further improve the quality 
and exhaustiveness of the national accounts and GNI calculations.  

Croatia needs to continue its efforts in underlying policy areas linked to the application of the own 
resources  system,  in  particular  customs,  taxation,  statistics  and  financial  control.  This  includes 
setting  up  effective  instruments  to  combat  customs  duty  and  VAT  fraud  so  that  the  financial 
interests of the EU can be protected. 

Conclusion 

There  has  been  good  progress  in  this  chapter,  notably  the  further  development  of  institutional 
capacity for applying own resources rules. Overall, Croatia has reached a good level of alignment 
with and capacity to implement the acquis, except for sugar levies. Croatia should now continue to 
implement  its  action  plan,  further  develop  administrative  capacity  and  put  in  place  rules  and 
procedures.

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STATISTICAL ANNEX 

STATISTICAL DATA (as of 14 September 2009) 
Croatia 

Basic data 
Population (thousand) 
Total area of the country (km²) 

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
SI: GDP (in PPS per capita, EU-27=100) 
SI: Growth rate of GDP (national currency, at constant prices, % change on previous year) 
SI: Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
SI: Unit labour cost growth (national accounts, % change on previous year) 
SI: Labour productivity (GDP in PPS per person employed, EU-27=100) 
Gross value added by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

Inflation rate 
SI: Consumer price index (CPI), (total, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 

EN 

Note

1) 

Note
2) 
2) 

2) 
2) 
2) 
2) 
3) 
2) 
2) 
2) 
2) 

Note
4) 

Note

Note

69 

1999 
4 527e 
56 542 

2000 
4 498e 
56 542 

2001 
4 439b 
56 542 

2008 
2005 
2002 
4 445 
4 436 
4 444 
56 542  56 594b 56 594  56 594  56 594  56 594  56 594 

2003 
4 443 

2004 
4 442 

2007 
4 441 

2006 
4 443 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

164 054  176 690 190 796 208 223 227 012 245 550 264 367 286 341 314 223  342 159 
28 112  30 011  32 759  35 725  39 102  42 833  47 370 
21 638 
10 678 
8 043 
6 331 
4 751 
8 800.0e  9 400.0e 9 900.0e 10 700e 11 200e 12 100  12 700  13 800  15 200  15 800 

25 538 
5 752 

23 146 
5 229 

6 759 

7 380 

8 807 

9 656 

49.5e 
-1.5 
-3.3 
1.9 
4.8 
63.3e 

9.1 
23.1 
5.3 
62.5 
85.5 
20.1 
0.6 
36.5 
42.7 

1999 
98.3 

1999 
4.0 

49.2e 
3.0 
4.0 
-0.9 
-3.4 
61.3e 

8.4 
23.4 
4.9 
63.2 
84.6 
18.8 
-0.2 
42.0 
45.3 

50.3e 
3.8 
-5.4 
9.8 
-4.2 
66.5e 

8.4 
22.8 
5.4 
63.4 
82.7 
19.4 
1.7 
43.8 
47.6 

52.3e 
5.4 
4.2 
1.2 
1.3 
66.6e 

8.2 
21.9 
5.5 
64.4 
83.1 
21.2 
4.0 
41.0 
49.4 

54.3e 
5.0 
0.6 
4.3 
-7.3 
68.6e 

6.8 
21.4 
6.6 
65.3 
81.4 
25.0 
1.5 
42.9 
50.8 

55.8 
4.3 
1.7 
2.5 
6.7 
69.5 

7.2 
21.8 
7.1 
63.9 
80.4 
24.6 
1.3 
43.3 
49.6 

56.6 
4.2 
0.8f  
3.4e 
 -0.4e 
70.4e 

58.4 
4.7 
 -0,6f 
5.4e 
 -10.2e 
73.8e 

61.1 
5.5 
3,5f 
1.9e 
 -0.7e 
75.7e 

6.5 
20.9 
7.4 
65.2 
80.2 
24.6 
1.7 
42.6 
49.1 

6.3 
20.6 
7.7 
65.3 
78.9 
26.1 
2.0 
43.4 
50.4 

6.1 
20.4 
7.7 
65.8 
78.7 
26.2 
2.7 
42.8 
50.4 

63.0 
2.4 
1,1f 
1.3e 
1.4e 
76.6e 

6.4 
20.2 
8.3 
65.0 
77.7 
27.6 
3.2 
41.9 
50.3 

2000 
100.0 

2001 
106.0 

2002 
111.8 

2003 
116.3 

2004 
120.6 

2005 
126.7 

2006 
132.4 

2007 
139.8 

2008 
142.1 

2000 
4.6 

2001 
3.8 

2002 
1.7 

2003 
1.8 

2004 
2.1 

2005 
3.3 

2006 
3.2 

2007 
2.9 

2008 
6.1 

1999 
-1 429 
-3 102 

2000 
-568 
-3 492 

2001 
-821 
-4 595 

2002 
-2 099 
-5 958 

2003 
-1 889 
-6 971 

2004 
-1 434 
-6 724 

2005 
-1 976 
-7 518 

2006 
-2 715 
-8 344 

2007 
-3 237 
-9 434 

2008 
-4 438 
-10 866 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
SI: General government debt, relative to GDP (%) 

Financial indicators 
Gross foreign debt of the whole economy, relative to GDP (%) 
Gross foreign debt of the whole economy, relative to total exports (%) 
Money supply: M1 (banknotes, coins, overnight deposits, million euro) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
Interest rates: day-to-day money rate, per annum (%) 
Lending interest rate (one year), per annum (%) 
Deposit interest rate (one year), per annum (%) 
euro exchange rates: average of period - 1 euro = … national currency 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: all goods, all partners (million euro) 
Terms of trade (export price index / import price index) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 

1 545  2 470 
-505 
-465 
959 
594 
-123 
25 
1 304  1 136 

-58 
-21 

-5 
15 

1 363  1 141 
916 
1 186 

1999 
: 
: 

2000 
: 
: 

2000 
1999 
47.0 
53.0 
133.0  130.2 
1 805  2 373 

Note 
5) 

Note 

7.582  7.634 
95.4 
100.0 
3 013  3 783 

1999 
: 
: 
: 
: 
: 
: 

1999 
-1.5 
7.7 

2000 
: 
: 
: 
98.3 
: 
: 

2000 
-1.5 
7.4 

Note 

6) 

Note 

3 303 
-628 
1 099 
65 
1 258 
-210 
-152 
1 467 
1 344 

2001 
-5.6 
34.8 

2001 
53.3 
125.9 
3 216 
: 
: 

3.0 
19.5 
6.6 
7.471 
98.7 
5 334 

2001 
: 
: 
: 
94.4 
: 
: 

2001 
-1.9 
7.7 

3 285 
-578 
1 152 
32 
531 
-607 
-72 
1 138 
1 063 

2002 
-3.6 
34.8 

2002 
53.9 
136.1 
4 148 
: 
: 
15 119 
1.3 
16.5 
5.4 
7.471 
96.5 
5 651 

2002 
11 327 
5 188 
-6 139 
97.8 
66.1 
71.9 

4 933 
-1 095 
1 245 
71 
1 657 
-106 
-7 
1 762 
1 498 

2003 
-4.8 
35.9 

2003 
66.3 
151.3 
4 432 
: 
: 
16 526 
4.3 
15.0 
3.8 
7.564 
93.7 
6 554 

2003 
12 510 
5 439 
-7 071 
97.5 
68.3 
73.3 

4 769 
-670 
1 192 
3 
671 
-279 
-14 
950 
919 

2004 
-3.8 
37.8 

2004 
70.0 
161.0 
4 505 
: 
: 
18 417 
5.9 
14.4 
3.8 
7.496 
90.4 
6 436 

2004 
13 354 
6 454 
-6 901 
109.3b 
65.8 
71.0 

5 318 
-959 
1 184 
10 
1 276 
-192 
-66 
1 468 
1 439 

2005 
-3.5 
38.3 

2005 
72.1 
168.6 
5 263 
: 
: 
22 836 
3.4 
13.1 
3.9 
7.400 
: 
7 438 

2005 
14 950 
7 069 
-7 880 
92.6 
63.3 
67.9 

5 705 
-1 183 
1 107 
-9 
2 557 
-208 
37 
2 765 
3 500 

2006 
-3.0 
35.7 

2006 
74.9 
172.3 
6 606 
: 
: 
27 274 
2.4 
12.1 
4.0 
7.323 
: 
8 725 

2006 
17 105 
8 252 
-8 853 
100.2 
64.3 
67.2 

6 266 
-1 112 
1 043 
-17 
3 483 
-184 
-563 
3 667 
3 702 

2007 
-2.5 
33.1 

2007 
76.9 
179.8 
7 901 
: 
: 
30 863 
5.6 
12.1 
4.2 
7.336 
: 
9 307 

2007 
18 686 
8 855 
-9 832 
97.5 
60.9 
64.8 

6 969 
-1 576 
1 035 
-56 
3 203 
-128 
93 
3 330 
3 144 

2008 
-1.4 
33.5 

2008 
82.6 
197.3 
7 539 
: 
: 
34 756 
6.6 
12.2 
4.8 
7.223 
: 
9 121 

2008 
20 762 
9 342 
-11 420 
96.1 
62.1 
64.2 

2002 
-2.4 
7.0 

2003 
-2.9 
6.3 

2004 
-2.1 
6.1 

2005 
-2.1 
5.7 

2006 
-2.0 
5.2 

2007 
-2.4 
5.6 

2008 
-2.3e 
4.5 

: 
: 

: 
: 
8 587  9 483  11 891 
6.9 
20.6 
8.2 

9.3 
20.9 
9.5 

EN 

70 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

Labour market 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
SI: Employment rate (15-64): share of population aged 15-64 that is in employment (%) 

Share of male population aged 15-64 that is in employment (%) 
Share of female population aged 15-64 that is in employment (%) 

SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in employment 
(%) 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

SI: Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) 
SI: Long-term unemployment rate: share of labour force that is long-term unemployed (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the CPI) (2000=100)
SI: Early school-leavers: share of population aged 18-24 having not completed upper secondary 
education and not currently in education or training (%) 

Standard of living 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
SI: Spending on human resources (public expenditure on education) relative to GDP (%) 
SI: Gross domestic expenditure on research & development, relative to GDP (%) 
SI: Percentage of households who have Internet access at home (%) 

Environment 
SI: Total greenhouse gases emissions, CO2 equivalent (tons, 1990=100) 

: 
: 

1999 
62.6 
53.2 
59.0 
47.8 

70.5 
77.8 

2000 
62.2 
51.3 
57.4 
45.5 

71.1 
78.1 

2001 
62.2 
51.8 
59.0 
44.9 

71.2 
78.3 

2002 
62.9 
53.4 
60.5 
46.7 

71.4 
78.4 

2003 
62.4 
53.4 
60.3 
46.7 

72.0 
79.0 

2004 
63.7 
54.7 
61.8 
47.8 

71.8 
78.8 

2005 
63.3 
55.0 
61.7 
48.6 

72.5 
79.3 

2006 
62.6 
55.6 
62.0 
49.4 

72.3 
79.2 

2007 
63.2 
57.1 
64.4 
50.0 

72.4 
79.6 

2008 
63.2 
57.8 
65.0 
50.7 

25.9 

24.2 

23.7 

24.8 

28.4 

30.1 

32.6 

34.3 

35.8 

36.7 

16.7 
23.9 
6.6 
52.8 
14.5 
13.5 
15.7 
39.2 
7.3 

11.7 
22.7 
5.9 
59.6 
17.0 
15.9 
18.2 
43.1 
9.1 

15.6 
23.1 
6.3 
55.0 
16.3 
14.4 
18.7 
41.7 
10.1 

15.5 
22.6 
7.2 
54.6 
14.7 
13.2 
16.5 
34.4 
8.9 

16.9 
22.1 
8.1 
52.8 
14.1 
12.8 
15.6 
35.8 
8.4 

17.0 
21.4 
8.2 
53.2 
13.6 
12.0 
15.6 
33.8 
7.3 

17.3 
20.5 
8.2 
54.0 
12.6 
11.6 
13.8 
32.0 
7.4 

14.2 
20.9 
8.4 
56.3 
11.1 
9.8 
12.7 
28.8 
6.7 

13.0 
21.8 
8.8 
56.4 
9.6 
8.4 
11.2 
24.0 
5.9 

13.6 
21.6 
8.9 
55.9 
8.4 
7.0 
10.1 
22.0 
5.3 

Note
7) 
7) 
7) 
7) 

7) 

7) 
7) 
7) 
7) 
7) 
7) 
7) 
8) 
9) 

1999 

Note
10)  4 551.0  4 869.0 5 061.0 5 366.0 5 623.0 5 985.0 6 248.0 6 634.0 7 047.0  7 544.0 
121.5 
10) 

106.1 

100.0 

103.2 

112.2 

113.4 

116.6 

120.4 

2000 

2001 

2003 

2004 

2005 

2002 

2006 

2007 

2008 

99.2 

98.4 

8) 

: 

: 

: 

8.3 

8.4 

6.2 

4.8 

5.1 

3.9 

3.7 

Note

11) 

Note

Note

Note

1999 
234.9 
79.7 

2000 
250.1 
247.2b 

2001 
269.3 
390.0 

2002 
280.0 
520.4 

2003 
291.1 
571.0 

2004 
301.1 
638.3 

2005 
311.6 
821.4 

2006 
323.2 
989.2 

2008 
2007 
348.2 
335.7 
1 133.7  1 325.4 

1999 
47.8 
0.4 

1999 
4.2 
1.0 
: 

1999 
83.2 

2000 
47.8 
0.4 

2000 
4.5 
1.1 
: 

2000 
82.7 

2001 
47.8 
0.4 

2001 
4.2 
0.9 
: 

2001 
86.6 

2002 
47.8 
0.5 

2002 
4.3 
1.0 
: 

2002 
89.7 

2003 
47.7 
0.6 

2003 
4.5 
1.0 
: 

2003 
95.4 

2004 
47.7 
0.7 

2004 
: 
1.1 
: 

2004 
95.1 

2005 
47.7 
0.8 

2005 
: 
0.9 
: 

2005 
97 

2006 
47.7 
0.9 

2006 
: 
0.8 
: 

2006 
98.1 

2007 
47.7 
1.0 

2007 
: 
0.8 
41.0 

2007 
103.2 

2008 
47.7 
1.0 

2008 
: 
: 
45.0 

2008 
: 

EN 

71 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP 2004) 
SI: Share of renewable energy in electricity consumption (%) 
SI: Road freight transport as a share of total inland freight transport (modal split of freight transport) 
(%) 

299.9 
45.1 

286.0 
40.0 

280.3 
42.7 

288.1 
33.9 

281.0 
29.4 

269.9 
41.0 

260.8 
58.1 

250.4 
60.5 

247.3 
47.0 

: 
: 

: 

: 

75.9 

76.4 

76.2 

76.6 

76.0 

74.8 

74.0 

76.0 

Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
Primary production of natural gas (thousand TOE) 

Net imports of all energy products (thousand TOE) 
Gross inland energy consumption (thousand TOE) 
Electricity generation (thousand GWh) 

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 

Note 

Note 

1999 
3 570 
1 394 
9 
1 267 
4 427 
7 959 
12.2 

1999 
98.8 
2 032 
438 
1 362 
567 
641 
2 881 
1 114 
537 

2000 
3 562 
1 328 
0 
1 355 
4 174 
7 819 
10.7 

2000 
88.7 
1 169b 
427 
1 234 
608 
626 
2 312 
482 
196 

2001 
3 730 
1 232 
0 
1 642 
4 166 
7 959 
12.2 

2001 
108.5 
1 178 
438 
1 234 
632 
674 
2 829 
965 
208 

2002 
3 689 
1 200 
0 
1 732 
4 967 
8 624 
12.3 

2002 
107.7 
1 181 
417 
1 286 
677 
716 
3 080 
1 183 
218 

2003 
3 727 
1 138 
0 
1 789 
4 985 
8 828 
12.7 

2003 
84.1 
1 196 
444 
1 347 
673 
686 
2 014 
678 
154 

2004 
3 852 
1 079 
0 
1 796 
5 090 
8 842 
13.3 

2004 
111.9 
1 176 
466 
1 489 
848 
708 
3 067 
1 260 
150 

2005 
3 781 
1 017 
0 
1 854 
5 234 
8 902 
13.1 

2005 
91.3 
1 211 
471 
1 205 
931 
813 
3 039 
1 338 
286 

2006 
4 128 
985 
0 
2 204 
4 866 
8 948 
13.0 

2006 
104.4 
1 230 
483 
1 488 
783 
870 
3 034 
1 560 
304 

2007 
4 037 
937 
0 
2 349 
5 315 
9 323 
12.4 

2007 
96.0 
1 202 
467 
1 348 
738 
883 
2 534 
1 583 
281 

2008 
: 
: 
: 
: 
: 
: 
: 

2008 
: 
1 288 
454 
1 104 
727 
828p 
3 724p 
1 270p 
279p 

SI = Structural Indicator 
: = not available 
e = estimate 
f = forecast 
p = provisional 
b = break in series 
1) 
2) 
3) 
4) 
5) 
6) 
7) 
8) 
9) 
10) 
11) 
users. 

Land area, break in series in 2003 due to improved methodology. 
For 2005-2007, data is based on quarterly values. 
For 2005-2007, NPISH is not included. 
Gross series; include NACE sections C to E. 
Privatisation revenues are excluded and reclassified to the financing of the balance. 
Calculated on the basis of export and import values expressed in US dollars; break in series in 2004: change in methodology as of 1 January 2004. 
For 1998-2001, data refer to the second half of the year; in 2007, data refer to the annual average of quarterly data. 
For 1998-2006, data refer to the second half of the year; in 2007, data refer to the annual average of quarterly data. 
For 1998-2001, data refer to the second half of the year and long-term unemployment refers to thirteen months or more; in 2007, data refer to the third quarter. 
From 2004 onwards the number of persons employed in the police and defense-related activities are included. 
Number of subscriptions to cellular mobile telephone services is presented as total sum of GSM and UMTS; break in series: from 2000 onwards data present the number of prepaid and postpaid 

EN 

72 

EN