Communication from the Commission to the European Parliament and the Council - Enlargement Strategy and Main Challenges 2009-2010 {SEC(2009) 1333} {SEC(2009) 1334} {SEC(2009) 1335} {SEC(2009) 1336} {SEC(2009) 1337} {SEC(2009) 1338} {SEC(2009) 1339} {SEC(2009) 1340}
Date: 2009-10-14
Institutions: European Commission
Subjects: Albania, Croatia, Iceland, Montenegro, North Macedonia, Türkiye, Western Balkans, 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 
COM(2009) 533 final 

COMMUNICATION FROM THE COMMISSION TO  
THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2009-2010 

{SEC(2009) 1333} 
{SEC(2009) 1334} 
{SEC(2009) 1335} 
{SEC(2009) 1336} 
{SEC(2009) 1337} 
{SEC(2009) 1338} 
{SEC(2009) 1339} 
{SEC(2009) 1340} 

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COMMUNICATION FROM THE COMMISSION TO  
THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2009-2010 

1. 

INTRODUCTION 

The fifth enlargement of the EU has helped to consolidate democracy and the rule of law in 
Europe.  It  has  enhanced  economic  opportunities  and  increased  the  weight  of  the  EU  in 
tackling  global  challenges  such  as  climate  change,  competitiveness  and  the  regulation  and 
supervision of financial markets. Over the last five years, the enlarged EU has demonstrated 
its capacity to work together to address the important challenges it faces. Enlargement is one 
of the most effective foreign policy instruments of the EU. 

The European Union’s current enlargement process takes place against the background  of a 
deep  and  widespread  recession.  The  crisis  has  affected  both  the  EU  and  the  enlargement 
countries. Over the same period, the EU has received three new applications for membership 
by  Montenegro  (December  2008),  Albania  (April  2009)  and  Iceland  (July  2009).  These 
applications  further  demonstrate  the  EU’s  power  of  attraction  and  its  role  in  promoting 
stability, security and prosperity. 

Progress  with  reforms  in  the  enlargement  countries  has  allowed  them  to  move  through 
successive  stages  in  the  accession  process.  Accession  negotiations  with  Croatia  are  nearing 
the  final  phase.  Accession  negotiations  with  Turkey  have  reached  a  more  demanding  stage 
requiring a new impetus for reform. The former Yugoslav Republic of Macedonia has made 
significant progress in meeting  key challenges.  The  Commission is preparing an opinion on 
the  application  for  membership  from  Montenegro.  It  is  also  preparing  an  opinion  on  the 
application of Iceland. It stands ready to prepare an opinion on the application from Albania, 
once  invited  to  do  so  by  Council.  For  all  the  Western  Balkans  countries  concerned,  further 
progress  could  result  in  the  countries  being  granted  candidate  status  when  they  have 
demonstrated their readiness. 

The countries of the Western Balkans and Turkey have still, to different degrees, substantial 
work  ahead  in  meeting  the  established  criteria  and  conditions.  The  pace  of  reform  is  often 
slow. The international economic crisis adds to the strains. In several cases, bilateral questions 
unduly affect the accession process. 

In  the  light  of  these  challenges,  the  renewed  consensus  on  enlargement,  as  agreed  by  the 
December 2006 European Council, continues to provide the way forward. This policy is based 
on the principles of consolidation of commitments, fair and rigorous conditionality and good 
communication with the public, combined with the EU’s capacity to integrate new members. 
The  EU  has  improved  the  quality  of  the  enlargement  process.  In  particular,  greater  focus  is 
now given at an early stage to the rule of law and good governance. 

The accession process provides strong encouragement for political and economic reform. It is 
in the EU’s strategic interest to keep up the momentum of this process, on the basis of agreed 
principles and conditions. 

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The  EU’s  enlargement  policy  allows  for  a  carefully  managed  process  where  candidates  and 
potential  candidates  approach  the  EU  in  line  with  the  pace  of  their  political  and  economic 
reforms as well as their capacity to assume the obligations of membership in accordance with 
the  Copenhagen  criteria.  In  the  Western  Balkans,  regional  cooperation  remains  key  and 
constitutes a central element of the Stabilisation and Association Process. 

The  Treaty  of  Lisbon  reforms  the  enlarged  Union’s  institutions  to  enable  it  to  adapt  its 
policies to a fast-moving world. In particular in relation to enlargement, the Treaty will ensure 
an institutional framework that should allow a smooth adaptation of the Union’s institutions 
once a new Member State joins the EU, and will amend the accession procedure, whereby the 
European  Parliament  and  national  parliaments  will  be  notified  of  applications  for 
membership. 

The  establishment  of  a  visa-free  regime  for  the  former  Yugoslav  Republic  of  Macedonia, 
Montenegro and Serbia at the beginning of 2010, based on the  Commission's proposal, will 
demonstrate  that  reforms  bring  tangible  benefits  for  citizens.  The  Commission  will  table 
similar  proposals  for  Albania  and  Bosnia  and  Herzegovina  by  mid-2010,  provided  these 
countries meet the conditions set. 

As  regards  the  Cyprus  issue,  the  leaders  of  the  Greek  Cypriot  and  Turkish  Cypriot 
communities  are  entering  a  decisive  phase  of  negotiations  on  a  comprehensive  settlement 
under the auspices of the United Nations. The Commission supports their efforts and provides 
technical advice on issues within EU competence.  

The  present  communication sets  out the progress made and the key challenges faced by the 
countries  engaged  in  the  enlargement  process.  It  outlines  the  Commission’s  approach  to 
guiding  and  supporting  their  efforts  in  the  coming  year.  In  addition,  in  an  accompanying 
document,  the  Commission  sets  out  a  path  for  Kosovo1,  to  further  progress  towards 
integration with the EU, in line with the European perspective of the region. 

2. 

KEY CHALLENGES 

The following section addresses key issues that currently affect the enlargement process. The 
EU,  through  its  enlargement  policy,  can  help  tackle  these  challenges  but  the  prime 
responsibility remains with the countries concerned. 

Economic crisis 

The global recession has affected, to different degrees, the economies of the Western Balkans 
and Turkey. The EU is assisting the enlargement countries to alleviate the impact of the crisis 
and  pave  the  way  for  sound  recovery,  in  coordination  with  the  International  Financial 
Institutions (IFIs). 

Economic activity in the Western Balkans and Turkey has contracted sharply since the second 
half of 2008, following reduced demand for their exports, less foreign direct investment and 
lower  cross-border  lending.  Fiscal  positions  deteriorated  in  all  economies.  Unemployment, 
already  high  in  several  countries,  started  to  rise  further.  The  economic  downturn  in  the 
Western Balkans and  Turkey  in  2009 is of the same  magnitude as the EU  average, but less 

1 

Under UN Security Council Resolution 1244/99. 

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severe than in the EU Member States that were most affected. However, in all countries the 
macroeconomic situation remains fragile. 

The  Western  Balkan  countries  have  limited  scope  for  a  strong  domestic  macroeconomic 
policy response to the crisis. There are significant constraints on monetary and fiscal policy 
measures  because  of  previous  pro-cyclical  fiscal  stances,  foreign  currency  denominated 
credits and mortgages and large external imbalances. In these circumstances, the response to 
the crisis has by and large been appropriate in most countries of the region despite in some 
cases an initial lack of acknowledgement of the severity of the challenge. The perspective of 
EU accession has helped to retain confidence in the economies in the Western Balkan region 
and provided an anchor for economic policies in the recent turbulent period. At the same time 
some  enlargement  countries  were  able  to  reap  the  benefits  of  structural  reforms  introduced 
over  recent  years,  which  helped  to  attenuate  the  crisis.  Improved  financial  regulation,  for 
example in Croatia and Turkey, contributed to banking sector stability and resilience. Serbia 
and Bosnia and Herzegovina obtained IMF support, as in both countries external imbalances 
widened and public finances were particularly affected, due to previous expansionary policies. 

The  unfolding  of  the  crisis  in  the  enlargement  countries,  particularly  its  impact  on  the  real 
economy, including on the employment and social situation, is continuing. Recovery will take 
time,  as  economic  activity  in  the  main  trading  partners  is  projected  to  pick  up  only  slowly. 
Capital  inflows  to  stimulate  domestic  demand  are  likely  to  remain  subdued.  Short-term 
measures have been taken to mitigate the social impact of the crisis for the most vulnerable 
parts  of  society.  In  the  medium  term,  ensuring  a  sound  fiscal  policy  is  of  great  importance, 
with  emphasis  on  more  efficient  and  effective  public  spending  and  on  investment. 
Employment  policies  and  social  protection  measures  are  needed  to  address  structural 
unemployment and protect vulnerable groups. 

The response to the crisis needs to take into account the need for sustainable development and 
the  challenge  posed  by  climate  change  and  give  priority  to  measures  leading  to  a  safe  and 
sustainable low-carbon economy. EU related reforms contribute to enhanced competitiveness 
and  openness  and  to  a  legal  framework  conducive  to  trade  and  investment.  Measures  to 
consolidate the rule of law, including the fight against corruption, are essential for improving 
the business climate. 

Regarding  the  EU's  support,  pre-accession  assistance  has  been  programmed  to  support  the 
banking sector, infrastructure projects, SMEs and job creation, including in rural areas. € 200 
million in grants from the Instrument for Pre-accession Assistance (IPA) have been allocated 
for this purpose, which will leverage investments for at least € 1 billion, co-financed by IFI 
loans.  The  Commission  has  proposed  that  the  co-financing  requirement  for  beneficiary 
countries  in  IPA  assistance  be  reduced.  The  Commission  provided  direct  budget  support 
through IPA to Serbia to mitigate the effects of the financial and economic crisis. In addition, 
the Commission proposed to the Council to approve a macro-financial assistance in the form 
of a € 200 million loan to Serbia. These possibilities are open to the other countries, if needed. 
In  both  cases  the  financial  assistance  is  conditional,  including  upon  an  agreement  with  the 
IMF on sound macroeconomic policies. The Commission works closely with the IFIs, which 
have  committed  themselves  to  increase  their  lending  to  the  Western  Balkans  and  Turkey  to 
more than € 5 billion in 2009. 

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Rule of law 

The Western Balkans and Turkey continue to face major challenges related to the rule of law, 
in  particular  the  fight  against  corruption  and  organised  crime.  These  issues  are  key  for  a 
functioning  democracy  and  economy  and  largely  condition  the  EU  accession  process.  They 
also  affect,  sometimes  in  a  disproportionate  way,  public  perceptions  of  enlargement  in  the 
EU. Substantial efforts are being made in the enlargement countries to address the problems. 
The Commission will continue to use the full potential of the enlargement process to support 
this work and monitor closely the results. 

Corruption  is  prevalent  in  many  areas  and  affects  the  every-day  life  of  citizens  and  the 
business  environment.  Areas  which  require  particular  attention  include  public  procurement 
and  privatisation,  the  judiciary,  the  financing  of  political  parties  and  transparency  in  public 
administration  and  government.  An  independent  and  impartial  judiciary  and  prosecutors 
specialised  in  the  fight  against  corruption  and  related  crimes  are  essential,  as  are  a 
depoliticised and professional police and administration. Well drafted legislation and effective 
implementation are needed in areas such as public procurement, intellectual property rights, 
financial control, audit, and the fight against fraud.  

Additional  efforts  are  needed  to  fight  against  organised  crime  which  remains  a  problem 
throughout the region. Law enforcement agencies will have to become more effective and to 
work together in order to overcome international criminal organisations. 

In line with the renewed consensus on enlargement and taking into account experience from 
the  fifth  enlargement,  the  rule  of  law  is  a  key  priority  which  needs  to  be  addressed  by  the 
countries  concerned  at  an  early  stage  of  the  accession  process.  With  EU  assistance,  some 
progress  has  been  made  in  putting  into  place  effective  legislation  and  structures  to  fight 
corruption  and  organised  crime  but  rigorous  implementation  and  enforcement  of  laws  are 
necessary to achieve tangible results. Some € 80 million of IPA assistance in 2009 have been 
allocated  for  strengthening  the  judiciary  and  law  enforcement.  The  Commission  has 
conducted  peer  assessment  missions  with  Member  State  experts  on  the  judiciary,  the  fight 
against  corruption  and  organised  crime  in  candidate  countries  and  will  intensify  such 
missions.  The  use  of  benchmarks  in  the  accession  negotiations  and  the  visa  liberalisation 
dialogue has provided incentives for reform. 

The  Commission  has  continued  its  support  for  regional  judicial,  police  and  prosecutor 
cooperation  in  the  fight  against  organised  crime  and  corruption.  The  Western  Balkan 
countries  need  to  enhance  judicial  cooperation  within  the  region  to  ensure  an  efficient 
functioning  of  their  justice  systems.  In  this  regard,  addressing  the  problem  of  impunity  for 
war  crimes  and  other  serious  crimes  is  of  particular  importance.  To  this  end,  the  countries 
should  review  the  existing  restrictions  in  their  legal  frameworks  for  extraditions  of  own 
nationals and transfer of proceedings. 

The Commission will continue to support partner countries in the fight against corruption and 
organised  crime.  However,  effective  and  sustainable  results  can  only  be  achieved  with  the 
necessary  political  will  and  real  commitment  by  the  authorities  in  the  countries  concerned. 
The  Commission  will  rigorously  monitor  the  progress  achieved  on  the  ground,  focusing  on 
results. 

In most enlargement countries, freedom of expression remains an issue of concern. In general, 
while the main elements of the legal framework for protecting freedom of expression and the 

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media  are  in  place,  undue  political  pressure  on  media  and  the  rising  number  of  threats  and 
physical  attacks  against  journalists  as  well  as  some  remaining  legal  obstacles  give  rise  to 
serious concern. These issues need to be addressed as a matter of urgency. 

Bilateral questions 

Bilateral  questions,  including  border  issues,  are  increasingly  affecting  the  enlargement 
process. Bilateral issues should be resolved by the parties concerned and should not hold up 
the accession process. 

During  the  reporting  period,  the  border  issue  between  Slovenia  and  Croatia  held  back  the 
accession negotiations with Croatia. 

The negotiating frameworks with Croatia and Turkey, agreed by all Member States, stipulate 
that the EU expects candidate countries to resolve any border disputes in conformity with the 
principle  of  peaceful  settlement  of  disputes  in  accordance  with  the  United  Nations  Charter, 
including  if  necessary  jurisdiction  of  the  International  Court  of  Justice.  Finding  mutually 
acceptable  solutions,  and  concluding  agreements,  on  outstanding  issues  with  neighbouring 
countries is also part of the Stabilisation and Association Process. 

The  Commission  expects  all  parties  concerned  to  make  every  effort  towards  solving 
outstanding  bilateral  issues  with  their  neighbours  along  these  lines.  Where  appropriate,  the 
Commission  is  ready  to  facilitate  the  search  for  solutions,  at  the  request  of  the  parties 
concerned.  The  agreement  in  principle  between  Croatia  and  Montenegro  to  settle  border 
demarcation at Prevlaka through the International Court of Justice is encouraging. 

All  parties  involved  in  such  bilateral  disputes  have  the  responsibility  to  find  solutions  in  a 
spirit  of  good  neighbourliness  and  bearing  in  mind  the  overall  EU  interests.  This  will 
reinforce the effectiveness of the renewed consensus on enlargement which confirms that the 
pace of a country's progress towards the EU is determined by the pace of its reforms. 

Regional cooperation 

In recent years regional cooperation in South-East Europe has made important progress and 
the region has assumed increased ownership of the process. However, regional cooperation is 
not  working  as  well  as  it  should.  Bilateral  disputes  and  disagreements  relating  to  Kosovo 
unduly  affect  regional  cooperation.  The  efficiency  of  regional  structures  and  initiatives  also 
needs to be improved. 

Disagreements  relating  to  the  participation  of  Kosovo  in  regional  meetings,  initiatives  and 
agreements  are  becoming  an  obstacle  to  regional  cooperation.  The  normal  functioning  of 
important  structures  such  as  the  Central  European  Free  Trade  Agreement  (CEFTA),  the 
Regional  Cooperation  Council  (RCC)  or  the  Regional  School  for  Public  Administration 
(ReSPA) could be jeopardised, if present practices do not change. The Commission strongly 
encourages all parties concerned to seek practical and pragmatic solutions in order to ensure 
the inclusiveness of regional cooperation, without prejudice to the differing positions on the 
status  issue.  The  track  record  in  pursuing  regional  cooperation  is  assessed  as  part  of  the 
Stabilisation and Association Process conditionality in all stages of the enlargement process. 

The RCC has been functioning for more than a year as the regionally-owned successor of the 
Stability Pact operating under the political umbrella of the South-East European Cooperation 
Process (SEECP). The RCC now needs to enhance its efforts to deliver concrete results. The 

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RCC has a strategic role in developing regional cooperation and in identifying and addressing 
needs  in  regional  activities  and  structures.  It  also  has  a  role  to  play  in  the  programming  of 
Community assistance related to regional cooperation. The Commission supports the work of 
the  RCC  and  finances  a  third  of  the  Secretariat’s  budget  for  the  period  2008-2010.  The 
Commission  has  engaged  in  a  dialogue  with  the  RCC  Secretariat  on  the  organisation’s 
priorities,  improvement  of  its  functioning  and  further  development.  It  is  also  exploring  the 
arrangements  for  future  assistance  and  how  this  could  best  be  used  to  improve  the  RCC’s 
efficiency. 

Regional trade is particularly important in the Western Balkans' economic development and 
for reconciliation. It can also contribute to addressing the impact of the economic crisis. The 
role of the regional free trade area established through CEFTA is key. Further important steps 
in  trade  liberalisation,  notably  in  agricultural  trade,  have  been  successfully  negotiated  in 
CEFTA but are not in force yet, while work is under way on removing technical barriers to 
trade. Provisions on diagonal cumulation between the EU and some Western Balkan countries 
have taken effect, enhancing regional trade integration. However, there is a risk of paralysis of 
CEFTA due to disagreements over the Kosovo status issue, which is already preventing the 
adoption of the protocol on agricultural trade liberalisation. Protectionist pressures as a result 
of  the  international  crisis  are  on  the  increase  leading  to  the  adoption  of  certain  measures  in 
breach of contractual obligations. This trend should be opposed and such breaches need to be 
removed. 

Regional  cooperation  has  made  progress  in  the  areas  of  energy  and  transport.  The  Energy 
Community is promoting energy sector reform and improving security of supply in the region, 
while  integrating  the  region  into  the  Community  energy  market.  Negotiations  to  establish  a 
Transport Community between the EU and the Western Balkans are continuing and should be 
concluded by the end of this year. The European Common Aviation Area Agreement (ECAA) 
contributes to the growth of air traffic between the EU and the Western Balkans and gradually 
integrates them into the EU’s internal air transport market. Regional cooperation in the fields 
of environment and justice and home affairs is being intensified. 

The Regional School of Public Administration (ReSPA) has increased its training activities. 
Ratification  of  the  International  Agreement  that  establishes  its  legal  personality  needs  to  be 
pursued as a matter of priority in order to make the school fully operational. 

The  Commission,  in  the  context  of  the  Ljubljana  process,  supports  the  rehabilitation  of 
cultural  heritage  as  an  important  means  for  reconciliation  also  contributing  to  the 
development  of  local  economy.  At  the  forthcoming  ministerial  conference  in  Ljubljana  in 
November 2009 the Commission will promote further rehabilitation activities. 

The  Commission  will  prepare  an  EU  strategy  for  the  Danube  region  by  the  end  of  2010, 
following the European Council conclusions of June 2009. The enlargement countries as well 
as organisations concerned will be closely involved in this exercise. Regarding the Black Sea 
region Turkey is committed to cooperation in the region and is part of the Black Sea Synergy 
framework.  The  Commission  supports  Turkey's  participation  in  the  Black  Sea  basin  co-
operation programme under the European Neighbourhood and Partnership Instrument (ENPI). 

The Commission will continue its support for regional cooperation activities and structures in 
the Western Balkans, including through greater involvement of the region in the planning and 
programming of the multi-beneficiary programme of IPA. 

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3. 

PRE-ACCESSION INSTRUMENTS: ADDRESSING THE KEY PRIORITIES 

Achieving visa-free travel 

The  process  of  visa  liberalisation  for  the  Western  Balkan  countries,  in  line  with  the 
Thessaloniki Agenda commitment, has entered its decisive phase. Visa facilitation agreements 
have  been  implemented  with  all  countries  concerned  since  January  2008,  in  parallel  with 
readmission agreements. The roadmaps adopted in 2008 for each country in the context of the 
visa  liberalisation  dialogue  proved  to  be  successful  drivers  for  accelerating  reforms  in  the 
relevant  areas,  notably  document  security,  border  and  migration  management,  and  the  fight 
against corruption and organised crime. 

Taking account of progress achieved by each country in meeting the relevant benchmarks for 
visa  liberalisation,  the  Commission  proposed  in  July  2009  that  a  visa-free  regime  be 
established  for  the  former  Yugoslav  Republic  of  Macedonia,  Montenegro  and  Serbia. 
Establishing a visa-free regime by the beginning of 2010 will be an important contribution to 
people-to-people  contacts  demonstrating  to  the  citizens  of  the  countries  concerned  that 
reforms  linked  to  the  European  perspective  provide  tangible  benefits.  The  Commission  will 
table  proposals  for  Albania  and  Bosnia  and  Herzegovina,  by  mid-2010,  provided  these 
countries  meet  the  conditions  set.  The  study  on  Kosovo  to  be  adopted  together  with  this 
Communication proposes that visa facilitation should continue to be promoted and a process 
should  be  launched  for  Kosovo,  aiming  at  eventual  visa  liberalisation  when  the  necessary 
reforms will have been undertaken and the conditions met. 

Ensuring the quality of pre-accession preparations 

Continued  efforts  have  been  made  as  part  of  the  renewed  consensus  on  enlargement  to 
improve  the  quality  of  the  process.  The  rigorous  benchmarks  laid  down  as  conditions  for 
opening and closing negotiating chapters have proved to be a powerful instrument to ensure 
compliance with existing contractual commitments and to steer difficult economic, legal and 
administrative  reforms  in  the  negotiating  countries,  thereby  contributing  to  their  early 
preparations for accession. A study on the financial impact of the accession of Croatia to the 
EU  is  under  preparation.  Future  opinions  on  applications  for  membership  will  include 
estimates  of  the  impact  of  accession  of  the  applicant  on  key  EU  policy  areas.  Intensive 
political  dialogue  is  being  conducted  with  the  countries  to  monitor  progress,  with  the 
Partnerships as main reference documents. Economic dialogue was further intensified in the 
context of the crisis. 

On  their  side,  enlargement  countries  need  to  ensure  that  new  legislation  is  thoroughly 
prepared,  following  the  necessary  consultations  with  stakeholders,  and  is  properly 
implemented.  An  independent,  merit-based,  transparent  and  accountable  civil  service  is 
necessary in order to facilitate the effective implementation of the acquis. 

Bringing citizens and administrations closer to the EU 

Increased participation of civil society organisations strengthens the quality of democracy and 
contributes to reconciliation. Their involvement in the reforms undertaken in the enlargement 
countries  contributes  to  the  quality  of  the  accession  process,  as  well  as  to  sustaining  public 
support  for  accession.  The  Commission,  through  the  implementation  of  the  civil  society 
facility under IPA, financed the setting up of technical support offices in each beneficiary and 
an  increasing  number  of  short-term  visits  to  EU  institutions  as  well  as  the  participation  of 
some  800  people  in  workshops  in  the  Western  Balkans  and  Turkey.  The  Commission  will 

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continue  to  support  civil  society  partnerships  giving  priority  to  sectors  such  as  culture, 
minorities and business associations. 

Participation  in  Community  programmes  and  agencies  has  proved  useful  in  bringing 
institutions and citizens of partner countries closer to the EU. The Commission has increased 
its support for Community agencies to prepare enlargement countries for their participation. 
Following  the  introduction  of  enhanced  possibilities  for  Community  co-financing,  potential 
candidate  countries  joined  new  programmes.  The  Commission  will  continue  to  support 
partner  countries  in  building  the  necessary  capacities  and  resources  to  ensure  successful 
participation in Community programmes and agencies. 

In line with the focus on basic governance issues, the Commission will continue to pay close 
attention  to  the  existence  of  a  professional  and  functioning  public  administration.  It  will 
further  encourage  the  exchange  of  best  practices  and  the  sharing  of  expertise  between 
countries  in  the  field  of  public  administration  reform.  To  this  end  it  will  make  use  of  all 
available instruments, including Twinning, TAIEX and SIGMA2, and enhance contacts with 
other  international  organisations  and  national,  regional  and  European  training  institutes  for 
public administration. 

Supporting the enlargement countries through financial assistance 

In 2009, assistance continued to be provided to the Western Balkans and to Turkey through 
the  Instrument  for  Pre-accession  Assistance.  € 1.5  billion  will  be  committed  in  2009. 
Particular  emphasis  is  given  to  state  building,  good  governance,  the  rule  of  law,  and  civil 
society development. IPA has continued to support cross-border cooperation and sustainable 
development  in  border  areas,  contributing  to  reconciliation  and  good  neighbourly  relations, 
and  to  EU  accession  preparations.  The  Commission  will  continue  to  focus  its  assistance  to 
support pre-accession preparations based on the partnership priorities. 

Candidate  countries  have  made  progress  on  the  decentralised  management  of  funds.  The 
decentralisation process is well under way with Croatia and Turkey and both countries need to 
focus  their  work  to  fulfil  all  conditions  attached  to  it.  In  the  former  Yugoslav  Republic  of 
Macedonia,  the  decentralisation  of  the  IPA  regional  development  and  human  resources 
components  has  been  achieved,  but  more  work  needs  to  be  done  before  further 
decentralisation can take place. The Commission continues to provide the necessary support 
to  candidate  countries  to  help  them  comply  with  the  requirements  for  the  decentralised 
management of EU funds, targeting also regional, human resources and rural development. 

In  other  enlargement  countries  Commission  delegations,  which  are  now  all  at  full  strength 
following  the  closure  of  the  European  Agency  for  Reconstruction,  are  responsible  for 
implementing EU assistance and working with the beneficiaries to ensure that EC assistance 
is used efficiently and effectively. Decentralised assistance remains a medium-term objective, 
particularly in order to prepare for future management of cohesion policy instruments. 

2 

Medium-term assistance covering acquis-related areas is provided via Twinning projects that establish a 
framework for cooperation between administrations in the beneficiary countries and their counterparts 
in  Member  States.  On-call  assistance  is  provided  by  TAIEX  (Technical  Assistance  and  Information 
Exchange),  whose  activities  are  implemented  by  Member  State  officials.  Short-term  assistance  in  the 
field  of  horizontal  governance  issues  and  public  administration  reform  is  delivered  through  SIGMA 
(Support  for  Improvement  of  Governance  and  Management),  an  OECD  programme  supported  by  the 
Commission in the enlargement context. 

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The  Commission  is  supporting  the  development  of  sector  strategies  by  the  beneficiary 
countries, in order to facilitate a more strategic, programme-based approach to the delivery of 
assistance and help improve aid effectiveness. 

As provided for in the IPA Regulation, the Commission has strengthened the process of donor 
coordination involving EU Member States, IFIs and other donors. This entails the setting and 
coordination of priorities and the regular monitoring of implementation on the spot. 

The  Commission,  partner  IFI  partners  and  Member  States  are  finalising  the  terms  for 
establishing  a  Western  Balkans  Investment  Framework  (WBIF).  This  is  a  major  step  which 
will facilitate support to investments in infrastructure, SMEs and energy efficiency. It aims to 
pool  resources  from  the  Commission,  the  partner  IFIs,  the  Member  States  and  other  donors 
and  to  link  these  grant  resources  with  loans  from  international  financial  institutions  for 
financing priority projects in the sectors covered. To this effect, the Commission has set aside 
more than € 100 million in grants making it the largest contributor. Overall the WBIF should 
generate loans totalling more than € 1 billion over the next years. 

Working together on climate change 

The  EU  will  strengthen  its  regular  dialogue  on  climate  change  with  candidate  and  potential 
candidate  countries,  in  particular  through  the  future  Regional  Environmental  Network  for 
Accession  (RENA).  The  Commission  expects  all  enlargement  countries  to  support  the  EU's 
objective  of  reaching  an  ambitious  and  comprehensive  agreement  at  the  Copenhagen 
Conference  on  climate  change  at  the  end  of  2009.  Over  the  last  years,  the  Commission  has 
provided  € 120  million  of  grants  to  IFI  facilities  which  will  generate  investments  of  about 
€ 600  million  into  energy  efficiency  projects,  thereby  helping  the  Western  Balkans  and 
Turkey  to  reduce  greenhouse  gas  emissions.  The  Commission  will  continue  to  support 
initiatives relating to climate change in the enlargement countries. 

Communicating enlargement 

Better  communication  with  the  public  is  a  key  principle  of  the  renewed  consensus  on 
enlargement. For the EU’s enlargement process to succeed, it is essential to listen to citizens 
and  address  their  concerns  and  questions.  EU  public  opinion  on  future  enlargement  is 
influenced  by  perceptions  of  past  enlargements.  The  Commission  presented  a  study  on  the 
economic achievements and challenges of the fifth EU enlargement on the occasion of its fifth 
anniversary  which  assessed  that  enlargement  contributed  to  growth  and  made  the  EU  a 
stronger  player  in  the  world  economy.  The  Commission  is  promoting  an  informed  public 
debate on its impact and has organised a series of events to mark the anniversary of the fifth 
enlargement  which  coincided  with  the  20th  anniversary  of  the  fall  of  the  iron  curtain.  It  has 
launched a dedicated website and has co-produced audio-visual material. 

Ensuring  public  support  remains  a  crucial  goal  for  the  EU’s  enlargement  policy  and  the 
Commission  will  continue  to  implement  an  active  communication  policy  in  this  regard.  In 
particular,  it  will  support  and  supplement  efforts  by  Member  States,  which  have  a  key 
responsibility  in  this  regard,  as  well  as  partner  countries  and  it  will  target  communication 
activities at opinion formers, in particular civil society organisations and journalists, as well as 
at youth. Particular efforts will be undertaken to foster awareness in the EU about the cultures 
and ways of life of the enlargement partners. 

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4. 

PROGRESS IN THE ENLARGEMENT COUNTRIES AND AGENDA FOR 2009-2010 

4.1. 

Steering the candidate countries and potential candidates towards the EU 

The Western Balkans have moved closer to EU membership over the past year, as the region 
made progress, albeit unevenly, in reforms and in meeting established criteria and conditions. 
Substantial  progress  was  made  towards  visa  liberalisation,  leading  to  the  Commission's 
proposal  of  July  2009  to  lift  the  visa  obligation  for  the  former  Yugoslav  Republic  of 
Macedonia,  Montenegro  and  Serbia.  The  network  of  Stabilisation  and  Association 
Agreements  has  been  extended  further.  Two  membership  applications  have  been  received 
from the region. 

For all the Western Balkans countries concerned, further progress could result in the countries 
being  granted  candidate  status  when  they  have  demonstrated  their  readiness.  A  satisfactory 
track record in implementing obligations under the SAA, including trade-related provisions, is 
an essential element for each country's progress towards EU membership.  

The  following  section  summarises  progress  and  sets  out  the  agenda  for  2009-2010  for  the 
enlargement countries. 

Croatia 

Croatia  continued  to  make  progress  on  key  political  reforms.  Croatia  continues  to  meet  the 
political criteria and made progress in most areas, including intensified efforts in the field of 
rule of law. The Accession Partnership priorities have been largely addressed. 

its  communication  Enlargement  Strategy  and  Main  Challenges  2008-20093 
In 
the 
Commission  presented  an  indicative  road  map  for  reaching  the  final  stage  of  accession 
negotiations.  The  roadmap  has  galvanised  efforts  in  Croatia  to  meet  the  benchmarks  for 
opening and closing chapters according to the indicative timetable of the roadmap. Delays in 
Croatia  in  certain  areas  meant  that  some  chapters  have  not  progressed  in  line  with  the 
roadmap.  Nonetheless,  preparations  have  advanced  substantially  across  the  board  so  that 
technical negotiations are now nearing their final phase. 

Croatia was strongly affected by the economic crisis but its impact has been mitigated by a 
resilient  banking  sector  and  strong  foreign  reserves.  Enhanced  structural  reforms  and  the 
adoption  of  a  credible  medium-term  fiscal  strategy  would  be  essential  to  improve  its 
competitiveness. 

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 or provisionally closed at the accession conference in October. Bilateral issues should 
not hold back the accession negotiations. 

3 

COM(2008) 674. 

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Croatia will need to step up reform efforts in the area of judiciary and fundamental rights, in 
particular  as  regards  the  independence  and  efficiency  of  the  judiciary,  the  fight  against 
corruption  and  organised  crime,  minority  rights,  including  refugee  return,  and  war  crimes 
trials. Public administration reform requires particular attention. Croatia also needs to ensure 
that all necessary steps are taken by the Croatian government to settle the issue of access for 
ICTY  to  important  documents.  The  Commission  is  preparing  a  financial  package  for  the 
accession of Croatia. Croatia needs to enhance efforts to establish required instruments for the 
management and control of Community financial instruments. The Commission recommends 
that the Council set up the ad-hoc technical working group for the drafting of the Accession 
Treaty,  on  the  basis  of  texts  prepared  by  the  Commission.  If  Croatia  meets  all  outstanding 
benchmarks  in  time,  the  accession  negotiations,  including  on  any  transitional  arrangements, 
could be concluded next year. 

The former Yugoslav Republic of Macedonia 

Since the adoption of the Commission's opinion4 and achieving candidate status in 2005 the 
former  Yugoslav  Republic  of  Macedonia  has  consolidated  the  functioning  of  its  democracy 
and  ensured  the  stability  of  institutions  guaranteeing  the  rule  of  law  and  respect  of 
fundamental rights. This work needs to be continued. 

The country has substantially addressed the key priorities of the accession partnership5. The 
conduct of the presidential and local elections of March and April 2009 was in line with most 
international standards. The functioning of parliament has improved, in particular through the 

4 

5 

In its opinion - COM(2005) 562 - on the country’s application for membership adopted in November 
2005,  the  Commission  concluded  the  following:  ‘The  former  Yugoslav  Republic  of  Macedonia  is  a 
functioning democracy, with stable institutions, generally guaranteeing the rule of law and respect of 
fundamental rights. The country signed a Stabilisation and Association Agreement (SAA) in 2001 and, 
since then has generally fulfilled the related obligations in a satisfactory manner. The former Yugoslav 
Republic  of  Macedonia  has  successfully  implemented  the  legislative  agenda  of  the  Ohrid  Framework 
Agreement  which  contributed  to  major  political  and  security  improvements  in  the  country.  This 
legislation now needs to be fully enforced. The country remains committed to regional cooperation. The 
former Yugoslav Republic of Macedonia needs to make additional efforts in particular in the fields of 
electoral process, police reform, judiciary reform and the fight against corruption. On the basis of the 
overall progress of reforms achieved, the Commission considers that the country is well on its way to 
satisfy the political criteria set by the Copenhagen European Council in 1993 and the Stabilisation and 
Association Process.’ 
The  key  priorities  of  the  accession  partnership  with  the  former  Yugoslav  Republic  of  Macedonia 
("benchmarks") are the following:   
-  Ensure  proper  implementation  of  all  commitments  undertaken  in  the  Stabilisation  and  Association 
Agreement. 
- Promote a constructive and inclusive dialogue, in particular in areas which require consensus between 
all political parties, in the framework of the democratic institutions. 
- Ensure effective implementation of the law on police. 
-  Establish  a  sustained  track  record  on  implementation  of  judiciary  reforms  and  strengthen  the 
independence and overall capacity of the judicial system. Implement the reform of the prosecution and 
finalise the appointment of the Judicial Council. 
- Establish a sustained track record on implementation of anti-corruption legislation. 
-  Ensure  that  recruitment  and  career  advancement  of  civil  servants  is  not  subject  to  political 
interference, further develop a merit-based career system and implement fully the law on civil servants. 
-  Reduce  impediments  to  employment  creation  and  address  in  particular  youth  and  long  term 
unemployment. 
-  Enhance  the  general  business  environment  by  further  improving  the  rule  of  law,  strengthening  the 
independence  of  regulatory  and  supervisory  agencies,  speeding  up  legal  procedures  and  continuing 
registration of property rights. 

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introduction of parliamentary rules of procedure and a new Law on Parliament. The Law on 
Police  has  been  implemented,  notably  through  the  appointment  of  regional  and  local  police 
commanders, and police reform has been further pursued through the adoption of the Law on 
Internal  Affairs.  The  legislative  part  of  the judicial  reform  strategy  has  been  completed,  the 
new  courts  and  judicial  bodies  are  operational  and  overall  efficiency  has  been  improved. 
Good  progress  has  been  made  in  the  fight  against  corruption,  through  prosecution  of  high-
level  cases,  strengthening  of  the  legal  framework  notably  through  the  adoption  of  the 
amended  Law  on  Financing  Political  Parties  and  enhancing  the  capacity  of  anti-corruption 
institutions. The Law on the Civil Service has been amended to strengthen the authority of the 
civil-service agency and is an additional step towards a merit-based career system. In the field 
of  employment  active  labour  market  measures  have  been  stepped  up  and  the  business 
environment was improved, including by strengthening regulatory agencies. 

The country fulfils the commitments under the Stabilisation and Association Agreement. On 
this basis, the Commission in October made a proposal on the transition to the second stage of 
the Association, pursuant to article 5 of the SAA. 

The country was affected by the economic crisis but the slow-down of growth was mitigated 
by  a  stable  banking  sector  and  sustained  private  consumption.  Sound  fiscal  policy  and 
addressing structural unemployment would improve the competitiveness of the economy. 

The name issue with  Greece  remains  unresolved. The country is engaged in talks under the 
auspices of the UN on resolving it. Actions and statements which could negatively affect good 
neighbourly relations should be avoided. Maintaining good neighbourly relations, including a 
negotiated and mutually accepted solution to the name issue,  under the auspices of the UN, 
are essential.  

Montenegro 

Political  reforms  have  continued  in  Montenegro  and  the  parliamentary  elections  of  March 
2009 met almost all international standards but remaining shortcomings need to be addressed. 
Some progress  was  achieved  regarding judiciary reform. The  implementation of the Interim 
Agreement is progressing smoothly on the whole. 

Montenegro  was  affected  by  the  economic  crisis  but  its  impact  was  mitigated  by  a  good 
tourist  season  and  anti-crisis  measures.  The  continuation  of  structural  reforms  is  key  for 
further improving competitiveness. 

Montenegro  applied  for  EU  membership  in  December  2008  and  in  April  2009  the  Council 
invited  the  Commission  to  submit  its  opinion.  Work  on  the  preparation  of  the  opinion  is 
ongoing. Montenegro will need to demonstrate concrete results regarding consolidation of the 
rule  of  law,  particularly  on  judicial  reform  and  the  fight  against  corruption.  Administrative 
and enforcement capacity require further strengthening. 

Albania 

Albania has made progress on key political reforms. The parliamentary elections of June 2009 
met  most  international  standards  but  further  efforts  are  needed  to  address  the  shortcomings 
identified. The implementation of the Stabilisation and Association Agreement, which entered 
into force this year, is progressing smoothly on the whole. 

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Albania has been so far affected by the economic crisis only to a limited extent. Continuing 
the  country's 
the 
with  structural  reforms  and  upgrading 
competitiveness. 

infrastructure 

is  key  for 

Albania  applied  for  EU  membership  in  April  2009.  In  July  2009,  the  Council  stated  that  it 
would  return  to  Albania's  application  for  membership  once  the  Albanian  election  procedure 
had been completed. The Commission stands ready to start preparations on its opinion once 
invited  by  Council.  Albania  needs  to  make  progress,  in  particular  regarding  the  rule  of  law 
and notably the fight against corruption, as well as the proper functioning of state institutions, 
especially the independence of the judiciary. Administrative and enforcement capacity require 
further strengthening. 

Bosnia and Herzegovina 

In  Bosnia  and  Herzegovina  the  implementation  of  the  Interim  Agreement  has  been 
satisfactory, overall. However, the country’s progress in addressing key reforms has remained 
very  limited.  The  domestic  political  climate  has  deteriorated,  and  challenges  to  the  proper 
functioning of institutions as well as inflammatory rhetoric have continued. The requirements 
for  a  smooth  transition  from  the  Office  of  the  High  Representative  (OHR)  towards  a 
reinforced  EU  presence  in  the  country  have  not  been  fully  met.  In  this  context,  the  EU  has 
agreed  to  arrangements  for  strengthening  the  office  and  the  mandate  of  the  EU  Special 
Representative  (EUSR)  and  is  considering  a  'personal  union/double-hatting  arrangement'  of 
the EUSR and the Head of the Commission Delegation, in accordance with the Treaties and 
respecting the institutional balance. 

Bosnia  and  Herzegovina  urgently  needs  to  speed  up  key  reforms.  A  shared  vision  on  the 
overall  direction  of  the  country  by  its  leadership  and  the  political  will  to  meet  European 
integration requirements are necessary if progress is to be made. Bosnia and Herzegovina also 
needs to meet the conditions which have been set for the closure of the OHR. The European 
Union  would  not  be  able  to  consider  an  application  for  membership  by  Bosnia  and 
Herzegovina until the OHR has been closed. 

Bosnia  and  Herzegovina  will  need  to  reform  its  constitutional  framework  to  permit  its 
institutions  to  function  effectively  before  the  Commission  can  recommend  the  granting  of 
candidate  country  status.  In  particular  the  country  will  need  to  be  in  a  position  to  adopt, 
implement and enforce the laws and rules of the EU. The Commission calls upon Bosnia and 
Herzegovina to proceed with the necessary constitutional amendments without further delay. 
The Commission stands ready to support the efforts of Bosnia and Herzegovina in achieving 
the  evolution  of  its  constitution  and  the  implementation  of  other  key  reforms,  which  would 
allow the country to advance in its accession process. 

Bosnia and Herzegovina was strongly affected by the economic crisis and turned to the IMF 
for financial assistance. The country needs to resume structural reforms in the economy and 
ensure sound public finances. 

Serbia 

Serbia has demonstrated its commitment to bringing the country closer to the EU by building 
a track record in implementing the provisions of the Interim Agreement with the EU and by 
undertaking  key  political  reforms  in  line  with  European  standards.  Serbia  has  also  made 
efforts  to  implement  an  ambitious  programme  for  European  integration.  Serbia  has  the 
administrative capacity to make substantial progress towards the EU. This needs to be used to 

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press  ahead  with  the  reform  agenda,  leading  to  tangible  results  in  priority  areas  such  as 
strengthening the rule of law. 

Serbia  was  strongly  affected  by  the  economic  crisis  and  turned  to  the  IMF  and  the  EU  for 
financial  assistance.  The  country  needs  to  accelerate  economic  reforms  and  ensure 
sustainability in the public finances. 

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) has 
further improved but Ratko Mladić and Goran Hadžić who have been indicted remain at large. 
In light of sustained cooperation with the ICTY and the renewed commitment of Serbia to the 
European  integration  process,  the  Commission  considers  that  the  Interim  Agreement  should 
now  be  implemented  by  the  EU.  Serbia  needs  to  demonstrate  a  more  constructive  attitude 
towards  Kosovo’s  participation  in  regional  trade  and  cooperation.  Cooperation  with  the 
EULEX  rule  of  law  mission  has  begun  but  these  efforts  need  to  be  further  strengthened, 
especially with respect to the operation of EULEX in the north of Kosovo. 

Kosovo 

In Kosovo stability has been maintained but remains fragile. Following the reconfiguration of 
the  international  presence,  the  EU’s  rule  of  law  mission  EULEX  has  been  deployed 
throughout Kosovo and is fully operational. The authorities have facilitated the deployment of 
EULEX in Kosovo. Recent incidents that resulted in damage to EULEX property give rise to 
concerns. Kosovo needs to ensure continuing support for EULEX's work. Kosovo has joined 
the  IMF  and  the  World  Bank.  Kosovo  adopted  some  key  legislation.  However,  major 
challenges remain, including the rule of law, the fight against corruption and organised crime, 
the strengthening of administrative capacity, the protection of the Serb and other minorities, 
and  enhancing  dialogue  and  reconciliation  between  the  communities.  The  EU  encourages 
Kosovo  Serbs  to  participate  in  Kosovo’s  institutions  and  in  the  municipal  elections  in 
November.  Kosovo  needs  to  take  a  constructive  approach  towards  regional  cooperation, 
including its participation in regional trade. 

Following the 2008 Donor Conference, Kosovo benefits from significantly increased financial 
assistance.  Through  IPA  almost  €500  million  has  been  earmarked  for  Kosovo  for  the  years 
2007-2011.  Kosovo  was  moderately  affected  by  the  economic  crisis.  It  is  essential  that 
Kosovo’s  authorities  deliver  on  their  commitments  as  regards  fiscal  discipline,  public 
expenditure management and economic and social policy reform. 

The EU supports the economic and political development of Kosovo through a clear European 
perspective, in line with the European perspective of the region. Improving living conditions 
is crucial for the well-being of Kosovo’s population and stability in the wider region. Against 
this background, and in line with the 2008 Enlargement Strategy and the Council conclusions 
of December 2008, the Commission, in parallel with the present Strategy Paper, has approved 
a  Communication  entitled  "Kosovo*  –  Fulfilling  its  European  Perspective".  This  study 
identifies the Community instruments the EU can mobilise to promote Kosovo’s political and 
socio-economic  development.  In  particular,  it  proposes  a  structured  approach  to  bring 
Kosovo's citizens closer to the EU, including through a visa dialogue with the perspective of 
eventual visa liberalisation. The Commission furthermore proposes to extend the autonomous 
trade  measures  and,  once  Kosovo  meets  the  relevant  requirements,  will  propose  negotiating 
directives for a trade agreement in due time. 

*  

Under UN Security Council Resolution 1244/99 

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Turkey 

Turkey has continued to express its commitment to the EU accession process. Free and fair 
local  elections  have  been  held.  Positive  steps  have  been  taken  in  the  areas  of  the  judiciary, 
with the adoption of the judiciary reform strategy and action plan, civil-military relations and 
cultural  rights.  In  particular,  parliament  amended  legislation  to  allow  civilian  courts  to  try 
military  personnel  in  peace  time.  The  government  has  opened  a  wide-ranging  public  debate 
with  a  view  to  addressing  the  Kurdish  issue,  and  the  public  television  started  operating  a 
channel which broadcasts entirely in the Kurdish language. 

Regarding the accession negotiations, additional chapters have been opened. Turkey adopted 
a National Programme for the Adoption of the Acquis. The appointment of a full-time Chief 
Negotiator should help streamline the efforts of the government in the context of EU-related 
reforms.  This  is  especially  important  as  the  accession  negotiations  reach  a  more  demanding 
phase  requiring  Turkey  to  step  up  its  efforts  in  meeting  benchmarks  to  allow  for  further 
progress in the opening of chapters. 

Turkey  was  strongly  affected  by  the  economic  crisis  but  its  impact  was  mitigated  by  a 
resilient  banking  sector  and  anti-crisis  measures.  The  continuation  of  structural  reforms 
combined with a prudent fiscal policy is essential to further enhance its competitiveness. 

The  investigation  of  the  alleged  criminal  network  Ergenekon  has  led  to  serious  criminal 
charges,  involving  military  officers  and  nationalist  circles.  This  case  is  an  opportunity  for 
Turkey  to  strengthen  confidence  in  the  proper  functioning  of  its  democratic  institutions  and 
the rule of law. It is important that proceedings in this context fully respect the due process of 
law, in particular the rights of defendants. 

The pace of reforms now needs to be significantly stepped up. Concerns remain in a number 
of  areas,  including  freedom  of  expression,  freedom  of  the  press,  freedom  of  religion,  trade 
union rights, civilian oversight of the military and women's rights and gender equality. Much 
more needs to be done regarding impunity for those involved in torture and ill-treatment. The 
government initiative on the Kurdish issue should lead to concrete measures guaranteeing the 
Turkish  citizens,  irrespective  of  their  origin,  full  rights  and  freedoms  and  significantly 
improve  the  situation  in  the  South-east.  Better  dialogue  among  political  parties  will  be 
beneficial to the reform process, including the work on Constitutional reform. 

Turkey  has  expressed  support  for  the  ongoing  negotiations  under  UN  auspices  between  the 
leaders  of  the  Greek  Cypriot  and  Turkish  Cypriot  communities  to  reach  a  comprehensive 
settlement  of  the  Cyprus  problem.  However,  there  has  been  no  progress  towards 
normalisation  of  bilateral  relations  with  the  Republic  of  Cyprus.  Turkey  has  not  fully 
implemented the Additional Protocol to the Association Agreement and has not removed all 
obstacles to the free movement of goods, including restrictions on direct transport links with 
its  obligation  of  full  non-discriminatory 
Cyprus.  It 
implementation  of  the  Additional  Protocol  and  makes  progress  towards  normalisation  of 
bilateral relations with the Republic of Cyprus. The EU will continue to follow up and review 
progress  made  on  issues  covered  by  the  Declaration  of  21  September  2005,  in  accordance 
with the Council Conclusions of 11 December 2006. 

that  Turkey  fulfils 

is  urgent 

A considerable number of formal complaints were made by Greece about continued violations 
of its airspace by Turkey, including flights over Greek islands. 

Good neighbourly relations remain key. 

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Turkey  plays  a  key  role  in  regional  security  and  the  promotion  of  dialogue  between 
civilisations.  Turkey  has  taken  initiatives  to  contribute  to  stabilisation  in  the  Southern 
Caucasus, the Middle East and other regions. It participates in a number of EU peace-keeping 
missions.  Significant  diplomatic  efforts  to  normalise  relations  with  Armenia  were  made, 
resulting  in  the  historic  signature  of  protocols  for  the  normalisation  of  relations  in  October 
2009. It is important that these protocols are swiftly ratified by both countries. 

In July 2009  Turkey  signed  the  Intergovernmental Agreement on the Nabucco gas pipeline. 
This project is an important strategic step towards closer energy cooperation between the EU, 
Turkey and other States in the region as well as towards the diversification of energy sources. 
The 
the  swift 
the  Southern  Gas  corridor, 
implementation  of  the  Nabucco  Intergovernmental  Agreement,  remains  one  of  the  EU's 
highest energy security priorities. 

timely  completion  of 

through  notably 

The  EU  accession  process  provides  a  strong  incentive  for  Turkey  to  pursue  reforms, 
strengthen  democracy  and  human  rights  and  further  modernise  the  country.  The  pace  of 
reforms in Turkey continues to be the key consideration in taking forward this process. 

4.2. 

Iceland 

Iceland applied for EU membership on 16 July 2009 and on 27 July the Council invited the 
Commission  to  prepare  its  opinion.  Iceland’s  application  will  be  assessed  according  to  the 
principles set out in the Treaty, the criteria defined by the Copenhagen European Council in 
1993 as well as the December 2006 European Council conclusions on the renewed consensus 
for enlargement, which provide for rigorous and fair conditionality, based on the own merits 
principle. 

Iceland is a well-established democracy. It has been severely affected by the global economic 
and financial crisis. It is largely integrated into the internal market through its participation in 
the  European  Economic  Area.  It  is  also  a  member  of  the  Schengen  Area.  Iceland  is  an 
important partner for the EU in the framework of the Northern dimension and in view of the 
developing Arctic policy. The Commission will take account of these elements in its opinion. 
Iceland’s track record in implementing its obligations under the EEA Agreement will be an 
essential  element  of  the  Commission’s  assessment.  The  Commission  is  preparing  an 
amendment to the IPA-Regulation to include Iceland as a beneficiary country 

5. 

CONCLUSIONS AND RECOMMENDATIONS 

Based  on  the  above  analysis,  the  Commission  puts  forward  the  following  conclusions  and 
recommendations: 

1. 

2. 

The accession process gives strong encouragement to political and economic reform 
in the enlargement countries and reinforces peace and stability in Europe. It is in the 
EU’s interest to keep up the momentum of the enlargement process, on the basis of 
the principles and conditions agreed and the renewed consensus on enlargement. 

The  enlargement  countries  have  not  escaped  the  effects  of  the  global  economic 
recession. The EU is helping them to alleviate the impact of the crisis and prepare for 
sound recovery. The implementation of EU-related reforms underpins this. 

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3. 

4. 

5. 

6. 

7. 

8. 

The  rule  of  law,  in  particular  the  fight  against  corruption  and  organised  crime,  but 
also  strengthening  administrative  capacities,  remains  a  major  challenge  which  the 
enlargement  countries  need  to  address.  The  Commission  will  continue  to  use  all 
instruments  of  the  enlargement  process  in  order  to  support  them  in  this  endeavour. 
Problems affecting the freedom of expression and the media need to be tackled as a 
matter of urgency. 

Bilateral issues should not hold up the accession process. Bilateral disputes need to 
be resolved by the parties concerned, who have the responsibility to find solutions in 
a spirit of good neighbourliness and bearing in mind the overall EU interests. 

Regional  cooperation  in  South-East  Europe  has  improved,  with  countries  in  the 
region  assuming  increased  ownership  of  the  process.  However,  the  efficiency  of 
regional  structures  and  initiatives  needs  to  be  improved.  Disagreements  over 
Kosovo6 should not obstruct regional cooperation. 

The  establishment  of  a  visa-free  regime  for  the  former  Yugoslav  Republic  of 
Macedonia,  Montenegro  and  Serbia  at  the  beginning  of  2010,  based  on  the 
Commission's  proposal,  will  demonstrate  that  reforms  bring  tangible  benefits  for 
citizens.  The  Commission  will  table  proposals  for  Albania  and  Bosnia  and 
Herzegovina  by  mid-2010,  provided  these  countries  meet  the  conditions  set  in  the 
roadmaps. Free movement of persons and exchanges, in particular young citizens and 
students,  are  essential  for  helping  Kosovo  to  build  viable  economic  structures. 
Against  this  background  visa  facilitation  should  continue  to  be  promoted  and  a 
process should be launched for Kosovo, aiming at eventual visa liberalisation when 
the necessary reforms will have been undertaken and the conditions met. 

Croatia  has  made  good  progress  in  meeting  the  benchmarks  set  in  the  accession 
negotiations. This progress was noted by the Accession Conference in October 2009, 
following the political agreement of September 2009 between Slovenia and Croatia 
on the handling of the border issue. This was a significant step forward giving new 
impetus  to  the  accession  negotiations.  Croatia  needs  to  pursue  reform  efforts,  in 
particular on the judiciary and public administration, the fight against corruption and 
organised crime, minority rights, including refugee return, war crimes trials. Croatia 
needs  to  settle  the  issue  of  access  to  documents  for  ICTY.  If  Croatia  meets  all 
outstanding conditions, the accession negotiations could be concluded next year. 

The  former  Yugoslav  Republic  of  Macedonia  has  substantially  addressed  the  key 
priorities  of  the  accession  partnership.  On  this  basis,  and  in  view  of  the  overall 
progress  of  reforms,  the  Commission  considers  that  the  country  sufficiently  fulfils 
the  political  criteria  set  by  the  Copenhagen  European  Council  in  1993  and  the 
Stabilisation  and  Association  Process.  The  country  has  moved  closer  towards 
becoming a functioning market economy and has made progress in a number of areas 
linked to its ability to take on the obligations of membership. 

In the light of the above considerations and taking into account the European Council 
conclusions  of  December  2005  and  December  2006,  the  Commission  recommends 
that  negotiations  for  accession  to  the  European  Union  should  be  opened  with  the 

6 

Under UN Security Council Resolution 1244/99. 

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9. 

10. 

11. 

12. 

13. 

former Yugoslav Republic of Macedonia.   

Maintaining  good  neighbourly  relations,  including  a  negotiated  and  mutually 
accepted solution to the name issue, under the auspices of the UN, remains essential. 

Montenegro  applied  for  EU  membership  in  December  2008  and  in  April  2009  the 
Council invited the Commission to submit its Opinion. Parliamentary elections met 
almost  all  international  standards  but  some  shortcomings  remain  to  be  addressed. 
Strengthening administrative capacity and consolidating the rule of law remain major 
challenges for Montenegro. 

Albania applied for EU membership in April 2009 and the Commission stands ready 
to prepare its Opinion, once invited to do so by the Council. Parliamentary elections 
met most international standards but shortcomings remain to be addressed in future 
elections. Strengthening the rule of law and ensuring the proper functioning of state 
institutions remain major challenges. 

Bosnia and Herzegovina urgently needs to speed up key reforms. A shared vision of 
the  overall  direction  of  the  country  by  its  leadership,  and  the  political  will  to  meet 
European  integration  requirements,  are  necessary  if  progress  is  to  be  made.  Bosnia 
and  Herzegovina  also  needs  to  meet  the  conditions  which  have  been  set  for  the 
closure  of  the  OHR.  The  European  Union  would  not  be  able  to  consider  an 
application  for  membership  by  Bosnia  and  Herzegovina  until  the  OHR  has  been 
closed. Bosnia and Herzegovina will need to reform its constitutional framework to 
permit  its  institutions  to  function  effectively  before  the  Commission  could 
recommend  the  granting  of  candidate  country  status.  In  particular  the  country  will 
need  to  be  in  a  position  to  adopt,  implement  and  enforce  the  laws  and  rules  of  the 
EU. 

Serbia  has  demonstrated  its  commitment  to  EU  integration  by  building  up  a  track 
record in implementing the provisions of the Interim Agreement with the EU and by 
undertaking  key  political  reforms  in  line  with  European  standards.  Given  Serbia's 
sustained cooperation with the ICTY and its renewed commitment to the European 
integration  process,  the  Commission  considers  that  the  Interim  Agreement  should 
now  be  implemented  by  the  EU.  Strengthening  the  rule  of  law  and  accelerating 
to  demonstrate  a  more 
economic  reforms  remain 
important.  Serbia  needs 
constructive  attitude 
trade  and 
cooperation. Cooperation with the EULEX rule of law mission has begun but further 
efforts are needed, especially with respect to the operation of EULEX in the north of 
Kosovo. 

towards  Kosovo’s  participation 

in  regional 

Stability  has  been  maintained  in  Kosovo  but  remains  fragile.  The  EU’s  rule  of  law 
mission  EULEX  has  been  deployed  throughout  Kosovo  and  is  fully  operational. 
Kosovo faces major challenges, including the rule of law, the fight against corruption 
and organised crime, the strengthening of administrative capacity, the protection of 
Serb  and  other  minorities,  and  enhancing  dialogue  and  reconciliation  between  the 
communities.  Kosovo  needs  to  take  a  constructive  approach  towards  regional 
cooperation and to ensure continuing support for EULEX's work. The Commission is 
proposing  ways  to  mobilise  Community  instruments  to  further  Kosovo’s  political 
and  socio-economic  development,  notably  in  the  areas  of  visas  and  trade,  and  to 
progress,  in  line  with  the  European  perspective  of  the  region,  towards  integration 

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14. 

15. 

16. 

with the EU in the context of the Stabilisation and Association Process. On trade, the 
Commission  proposes  to  extend  the  autonomous  trade  measures  and,  once  Kosovo 
meets  the  relevant  requirements,  will  propose  negotiating  directives  for  a  trade 
agreement in due time. 

Turkey needs to build on the renewed political reform efforts which have begun. The 
accession  negotiations  have  reached  a  more  demanding  stage  requiring  Turkey  to 
step up its efforts in meeting relevant conditions. The EU accession process provides 
a  strong  incentive  for  Turkey  to  strengthen  democracy  and  human  rights,  further 
modernise  the  country  and  bring  the  country  closer  to  the  EU.  Turkey  plays  a  key 
role  in  regional  security,  energy  supply  and  the  promotion  of  dialogue  between 
civilisations. Significant diplomatic efforts to normalise relations with Armenia were 
made,  resulting  in  the  historic  signature  of  protocols  for  the  normalisation  of 
relations  in  October  2009.  Turkey  needs  to  ensure  full,  non-discriminatory 
implementation  of  the  Additional  Protocol  to  the  Association  Agreement  and  to 
make  progress  towards  the  normalisation  of  relations  with  the  Republic  of  Cyprus. 
The EU will continue to follow up and review progress made on the issues covered 
by  the  Declaration  of  21  September  2005,  in  accordance  with  the  Council 
Conclusions of 11 December 2006. Good neighbourly relations remain key. 

As  regards  the  Cyprus  issue,  the  leaders  of  the  Greek  Cypriot  and  Turkish  Cypriot 
communities  are  entering  a  decisive  phase  of  negotiations  on  a  comprehensive 
settlement under the auspices of the United Nations. The Commission supports their 
efforts  and  provides  technical  advice  on  issues  within  EU  competence.  It  calls  on 
both  leaders  to  strengthen  their  efforts  to  bring  the  settlement  talks  to  a  successful 
end  as  soon  as  possible  and  on  Turkey  to  contribute  in  concrete  terms  to  such  a 
comprehensive settlement of the Cyprus issue. 

Iceland has applied for EU membership and the Commission is preparing the opinion 
requested  by  Council.  Iceland’s  application  will  be  assessed  according  to  the 
principles set out in the Treaty and the criteria defined by the Copenhagen European 
Council in 1993, as well as the December 2006 European Council conclusions on the 
renewed  consensus  for  enlargement.  Iceland  is  closely  integrated  with  the  EU  in 
several  areas,  through  its  membership  of  the  European  Economic  Area  and 
Schengen. 

17. 

Public  support  for  enlargement  is  crucial.  It  is  important  for  the  authorities  in  the 
member  states,  partner  countries  and  EU  institutions  to  foster  public  understanding 
of the EU's enlargement policy. 

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ANNEX 

Conclusions on Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav 
Republic of Macedonia, Montenegro, Serbia, Kosovo7, Turkey 

Albania 

The  Stabilisation  and  Association  Agreement  (SAA)  entered  into  force  in  April  and 
implementation  is  progressing  smoothly  on  the  whole.  Albania  has  continued  to  make 
progress  in  addressing  the  political  criteria  in  line  with  the  European  Partnership.  The 
parliamentary  elections  in  June  were  assessed  by  the  OSCE/ODIHR  as  meeting  most 
international  standards  but  further  efforts  are  needed  to  address  recommendations  in  future 
elections. Tangible progress took place on voter registration and in the legal framework but 
shortcomings on vote counting procedures were noted. Electoral reform was completed and a 
new Electoral Code adopted in time for the elections. Improved voters' lists were compiled on 
the  basis  of  the  new  civil  registry,  thus  meeting  to  a  large  extent  this  key  European 
Partnership priority. The distribution of ID cards, to enable citizens without passports to vote, 
was  largely  completed.  However,  the  culture  of  dialogue  between  the  main  political  parties 
deteriorated  during  the  electoral  period.  The  political  dialogue,  a  key  European  Partnership 
priority, needs to get back on track. 

There  was  some  progress  on  strengthening  democracy  and  the  rule  of  law.  The  main 
OSCE/ODIHR  recommendations  from  previous  elections  were  largely  addressed  as  part  of 
the overall electoral reform. Parliament adopted a number of important laws to approximate 
the EU acquis. However, the culture of dialogue took backstage to party-political agendas and 
key reforms were delayed. Albania has made some progress in strengthening its government 
structures to coordinate European integration. Nevertheless, further strengthening of capacity 
and strategic planning remains necessary. In the area of public administration, appointments 
in breach of the civil service law continued, mainly through the use of temporary contracts. 
The  lack  of  transparency  and  accountability  in  appointments  remain  a  key  European 
Partnership  priority  to  be  addressed.  Significant  efforts  are  needed  to  establish  an 
independent,  efficient  and  merit-based  civil  service,  free  of  political  interference.  Full 
enforcement of the civil service law, strengthening of institutional capacity at the Department 
of Public Administration and implementation of the strategy for public administration reform 
will be key to progress. 

Little  progress  took  place  in  reforming  the  judicial  system.  The  private  bailiff  system  was 
established.  However,  a  comprehensive  reform  strategy  for  the  judiciary  remains  to  be 
adopted. The lustration law was adopted without full consultation and consensus by a simple 
majority vote in parliament. The implementation of the lustration law was then suspended by 
the  Constitutional  Court.  The  legal  framework  for  judicial  reform  has  not  been  completed. 
The adoption of major legislative acts on the functioning of the High Court of Justice and the 
administrative courts is pending. The problem of backlogs continues and court infrastructure 
remains  inadequate.  Attempts  by  the  executive  to  limit  the  independence  of  the  judiciary 
remain a serious concern. The postponement on procedural grounds of high-level cases, such 
as  the  Gërdec  trial,  raised  questions  about  the  impartiality  of  the  judiciary.  Overall,  the 
judiciary  continued  to  function  poorly  and  much  remains  to  be  done  to  meet  this  key 
European Partnership priority by ensuring its independence, transparency and efficiency. 

7 

Under UN Security Council Resolution 1244. 

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The government has continued its efforts to prevent and fight corruption. The implementation 
of  the  anti-corruption  strategy  and  action  plan  started,  which  is  a  key  European  Partnership 
priority.  Legislation  was  introduced  requiring  the  use  of  on-line  electronic  procedures  for 
public procurement. Efforts have been made to increase transparency in some sectors such as 
education. These are positive developments. However, corruption remains prevalent in many 
areas and is a particularly serious problem. More political will, including as regards high-level 
cases,  is  needed  to  uproot  the  culture  of  impunity  which  continues  to  prevail.  Overall,  the 
institutional  arrangements  and  inter-agency  coordination  in  the  fight  against  corruption 
require further strengthening. Much work is still needed on all aspects of the issue, including 
judicial accountability and transparency of political party funding.  

Some  progress  has  continued  regarding  human  rights  and  the  protection  of  minorities, 
where the legal framework is broadly in place. However, further efforts are needed to improve 
the enforcement of existing legislation in a number of fields. 

As regards civil and political rights, action was taken to address cases of ill treatment in pre-
trial  detention.  New  prisons  and  pre-trial  detention  centres  for  juveniles  and  mental  health 
patients  have  been  built.  The  probation  system  is  operational.  However,  poor  detention 
standards,  exacerbated  by  overcrowding  remain  a  serious  concern,  particularly  in  older 
the 
prisons.  Further  efforts  are  required 
recommendations  of  the  People's  Advocate.  Regarding  access  to  justice,  access  to  legal  aid 
for vulnerable groups and some minorities remains a concern.  

to  protect  human  rights  and 

implement 

The  legal  framework  to  protect  the  freedom  of  expression  is  in  place.  However,  pressure 
against some media operators took place including their eviction from premises owned by the 
government.  The  legal  framework  on  media  policy  remains  to  be  completed  and  existing 
legislation  needs  to  be  implemented.  Significant  efforts  are  needed  to  complete  the  legal 
framework, improve the transparency of media ownership and to strengthen the independence 
of  the  public  broadcasting  regulator.  The  respect  of  the  freedom  of  assembly  and  religion 
remains  satisfactory.  The  government  stepped  up  its  efforts  to  provide  support  for  civil 
society.  Efforts  have  been  made  to  involve  civil  society  in  the  drafting  of  key  legislation. 
However,  the  participation  of  civil  society  organisations  in  policy-making  requires  further 
strengthening. 

Progress  has  been  limited  in  the  area  of  economic  and  social  rights.  There  has  been  some 
progress on strengthening women's rights. The Electoral Code includes a 30% gender quota 
which  was  enforced  by  most  political  parties  in  the  June  elections.  A  National  Council  on 
gender  equality  was  established.  However,  existing  legislation  to  protect  women  against  all 
forms  of  violence  is  not  fully  implemented.  Domestic  violence  remains  an  issue  of  serious 
concern.  There  has  been  continued  progress  on  children's  rights.  The  application  of 
alternative  sentencing  for  juveniles  has  increased.  However,  more  efforts  are  needed  to 
address  child  labour  and  school  drop-out  rates,  particularly  for  Roma  children.  Support 
mechanisms  for  socially  vulnerable  and  persons  with  disabilities  remain  limited.  Better  co-
ordination of government agencies is needed. Further efforts are needed to strengthen labour 
and trade union rights. Lack of progress in amending labour legislation continues to hamper 
the  development  of  social  dialogue.  Moreover,  the  anti-discrimination  law  remains  to  be 
adopted. 

There  has  been  little  progress  on  consolidating  property  rights,  a  key  European  Partnership 
priority.  Land  valuation  maps,  which  are  needed  to  compensate  former  owners,  have  been 
completed for the whole country. However, much more effort is needed on all aspects of this 

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issue. Unresolved property issues continue to undermine the development of a functional land 
market,  to  keep  foreign  investment  below  potential  and  to  provide  opportunities  for 
corruption. The adoption of a comprehensive strategy addressing legal and institutional issues 
will be key in this area. 

Progress  has  continued  regarding  the  protection  of  minorities.  Efforts  have  been  made  to 
recruit  persons  belonging  to  minorities  in  the  police.  However,  the  implementation  of  the 
Council of Europe Framework Convention needs to be stepped up. There continues to be no 
accurate  data  on  minorities.  The  next  population  census,  while  respecting  international 
standards  on  data  protection,  will  be  key  to  address  this  issue.  The  legal  framework  on 
minority protection needs to be further developed and clarified to enable all minorities to fully 
enjoy their cultural rights. Some steps have been taken to improve the situation of the Roma, 
but the implementation of the Roma Strategy is slow. The Roma minority continues to face 
very difficult living conditions and discrimination. 

Regarding  regional  issues  and  international  obligations,  Albania  has  continued  to  play  a 
constructive  role  in  maintaining  regional  stability  and  fostering  good  relations  with  other 
Western Balkan and neighbouring EU countries. The country participated actively in regional 
cooperation, including the South East European Cooperation Process (SEECP), the Regional 
Cooperation  Council  (RCC)  and  the  Central  European  Free  Trade  Agreement  (CEFTA). 
Bilateral  relations  with  other  enlargement  countries  and  neighbouring  EU  Member  States 
continued to be positive. As regards the International Criminal Court, the bilateral immunity 
agreement with the United States does not comply with the relevant EU Common Positions 
and guiding principles. Albania needs to align with the EU position. 

The economy of Albania maintained macroeconomic stability against the background of the 
international financial and economic crisis. Throughout 2008 economic growth continued to 
accelerate, but it slowed down in 2009 as a consequence of reduced exports, remittances and 
credit growth. Monetary policy remained sound and price stability was maintained. However, 
an  expansionary  fiscal  policy,  while  including  much  needed  public  works  on  the  road 
network,  resulted  in  a  high  budget  deficit.  Shortcomings  in  the  rule  of  law,  poor  level  of 
infrastructure and the informal economy remain challenges to economic development and the 
business environment. 

As  regards  the  economic  criteria,  Albania  has  made  good  progress  towards  establishing  a 
functioning  market  economy.  In  order  to  enable  it  to  cope  over  the  medium  term  with 
competitive  pressure  and  market  forces  within  the  Union,  Albania  needs  to  reform  and 
strengthen its legal system and address weaknesses in infrastructure and human capital. 

The government reacted to the international crisis using the full range of monetary and fiscal 
instruments,  as  well  as  regulatory  measures.  Strong  capital  inflows,  partly  driven  by  the 
accelerated  privatisation  process,  were  more  than  sufficient  to  finance  the  current  account 
deficit.  The  continued  implementation  of  tax  administration  reform  broadened  the  tax  base, 
increased  overall  tax  compliance,  and  helped  reduce  the  informal  sector.  More  efficient  tax 
collection contributed to a surplus in the primary budget balance and improved the policy-mix 
in  2008.  The  level  of  state  ownership  in  the  economy  was  further  reduced,  notably  in  the 
energy  and  telecommunication  sectors.  Market  entry  was  further  facilitated  and  market 
participants benefited from improved property and credit registries. In a difficult international 
environment,  the  banking  sector  remained  well-capitalised  and  liquid.  Large  scale  public 
works improved the road network. 

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However,  the  expansionary  fiscal  policy  during  the  election  period  resulted  in  high  budget 
deficit  in  2008  and  the  forecasted  deficit  for  2009  remains  high.  Additional  efforts  in 
consolidating public  finances  are  necessary. Bankruptcy  procedures  are  still not being used. 
Weak  administrative  capacity  undermines  the  authority  and  acceptance  of  the  legal  system. 
Informal  methods  of  contract  enforcement,  by-passing  the  legal  system,  continue  to  be 
widespread.  Unresolved  property  issues  continue  to  undermine  the  development  of  a 
functional land market and keep investments below potential. The informal sector remains an 
important challenge. Unemployment remains high. The education system is in need of major 
reform.  Transport  infrastructure  remains  poor  and  security  of  electricity  supply  is  still  not 
fully  ensured  due  to  the  lack  of  diversification  of  generation  and  poor  interconnection 
capacity. 

Albania  has  made  progress  in  aligning  its  legislation,  policies  and  capacity  with  European 
standards.  Progress  has  been  made  in  most  areas,  albeit  unevenly.  Progress  continued  in 
areas  such  as  free  movement  of  goods,  energy  and  SME  policy.  In  other  areas,  such  as 
intellectual  property  rights,  audiovisual  policy,  agriculture  and  veterinary/phytosanitary 
control,  progress  has  been  limited.  Overall,  further  efforts  are  needed  to  improve 
administrative capacity and to enhance effective implementation of legislation.  

There has been progress in some internal market fields. As regards free movement of goods, 
good progress continued in adopting European standards and in the areas of accreditation and 
metrology.  However,  enforcement  capacity  needs  to  be  strengthened.  The  legislative 
framework  on  movement  of  capital  improved  with  the  revision  of  the  regulation  on  foreign 
exchange  activity.  The  regulatory  framework  on  consumer  protection  improved  with  the 
establishment of consultative and decision-making bodies. 

Progress continued on customs' computerisation and infrastructure but further approximation 
to  European  standards  and  strengthening  of  administrative  capacity  are  required.  Custom 
officials do not have civil servants status. There has been continued progress in taxation. The 
performance of the tax administration improved and computerisation of tax offices is nearing 
completion. However, overall tax collection is still low. The taxation on imports of used cars 
and  printed  materials  in  not  in  line  with  the  Stabilisation  and  Association  Agreement 
commitments.  

Progress  continued  in  the  area  of  competition  in  both  anti-trust  and  state  aid  areas.  The 
legislative  framework  is  largely  in  line  with  the  acquis,  but  further  efforts  are  needed  to 
implement it.  

Some  progress  can  be  reported  as  regards  public  procurement.  Electronic  procedures  have 
been  extended  to  most  public  contracts.  However,  further  legislative  approximation  is  still 
pending  on  concessions,  utilities  and  review  procedures.  The  capacity  of  the  Public 
Procurement Agency improved, but requires further strengthening. There was some progress 
as  regards  intellectual  and  industrial  property  rights.  The  number  of  infringement  cases 
brought  to  court  increased.  However,  considerable  further  efforts  are  still  required. 
Enforcement remains poor, and the capacities of the Patent and Copyright offices as well as 
the experience and qualifications of the judiciary remain weak. 

There  has  been  little  progress  on  social  policies  and  employment.  The  budget  for  social 
protection  increased  and  the  strategy  for  occupational  health  and  safety  was  approved. 
However, occupational health and safety standards remain poor and the capacity of the labour 
inspectorate  is  still  weak. Legislative  approximation to the EU standards continued in some 

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public  health  fields.  However,  administrative  capacity  remains  weak.  There  has  been  some 
progress on European standards in the fields of education and research policy. 

Progress  can  be  reported  on  some  sectoral  policies.  Regarding  industry  and  SMEs,  good 
progress has been made in implementing the European Charter for Small Enterprises. There 
was some progress on agriculture, as regards the legislative and institutional framework, but 
structural  weaknesses  remain.  Laboratory  capacity  improved  in  the  area  of  food  safety, 
veterinary  and  phytosanitary  policy  but  compliance  with  EU  standards  remains  poor  and 
hampers  Albania's  capacity  to  export.  Progress  continued  in  the  area  of  fisheries  regarding 
horizontal  legislation,  inspection  and  international  cooperation.  However,  catch  and  landing 
controls remain weak. 

Regarding  environment,  there  have  been  some  improvements  on  waste  management  and 
nature  protection.  However,  policy-making  capacities  and  implementation  and  enforcement 
require further strengthening. On transport, the legislative framework improved in the air and 
maritime sectors. However, substantial improvements are needed overall. 

There was progress in the energy sector. The distribution arm of the electricity company was 
privatised.  Measures  to  improve  electricity  generation  and  interconnection  capacities  are  in 
progress.  However,  the  energy  sector  remains  weak.  Security  of  electricity  supply  is  still 
uncertain. Efforts need to continue to reduce losses and to increase bill collection.  

Limited  progress  can  be  reported  regarding  information  society  and  media.  Market 
liberalisation continued in the area of electronic communications but is still held back by lack 
of  instruments  to  safeguard  competition.  Administrative  capacity  remains  weak  particularly 
within  the  Council  of  the  regulatory  agency.  There  was  limited  progress  on  audiovisual 
policy. Further efforts are required to implement the action plan on media reform. Regarding 
financial  control,  there  has  been  moderate  progress,  but  the  legal  framework  and 
implementation capacity need to be further strengthened. Progress has continued in the field 
of statistics.  

In  the  field  of  justice,  freedom  and  security,  progress  has  taken  place  in  most  areas,  albeit 
unevenly. In the framework of the visa liberalisation dialogue, steps have been taken to fulfil 
the benchmarks set in the visa liberalisation roadmap and key reforms have been introduced 
in the area of justice, freedom and security. Progress in the area of visa policy has continued. 
Steps were taken towards fulfilling the benchmarks set in the road-map for visa liberalisation. 
The  Law  on  foreigners  entered  into  force  and  implementing  legislation  was  adopted.  A 
reliable civil registry and address system became operational and ID cards were distributed. 
The pace of delivery of biometric passports has been stepped up. However, further efforts are 
required  for  alignment  with  European  standards.  Implementation  of  the  readmission 
agreement between the European Community and Albania continued.  

Some progress was made in the area of border management. Implementation of the integrated 
border  management  strategy  has  continued.  However,  further  efforts  are  required  to 
effectively  implement  inter-agency  coordination  and  to  provide  adequate  training,  human 
resources  and  equipment  at  border  posts.  The  Law  on  State  Border  Control  remains  to  be 
effectively implemented. Cross-border cooperation needs to be enhanced. Good progress can 
be  reported  with  regard  to  asylum.  The  Law  on  Asylum  was  revised.  However,  a  range  of 
implementing measures still needs to be adopted to complete the legal framework. Progress 
continued  in  the  area  of  migration.  Implementation  of  the  National  migration  strategy  is 
ongoing. Further efforts are needed to combat illegal migration.  

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Moderate progress has been made in preventing money laundering. The legal framework and 
the administrative capacity have improved. However, investigation resources and enforcement 
capacity to confiscate assets need to be strengthened. Cooperation between the police and the 
judiciary remains poor. Limited progress can be reported in the fight against drugs. Results in 
this  area  remain  insufficient  and  in  particular  inter-agency  cooperation  needs  strengthening. 
Drug trafficking remains a serious concern. 

Some progress continued on policing, with the implementation of the new police law. Some 
improvements were made as regards staffing. However, further efforts are needed to increase 
investigative  capacity,  enhance  cooperation  with  the  prosecution  and  to  improve  human 
resources management. Police management, staffing, training, and internal control structures 
need to be further strengthened. More efforts are needed to develop reliable crime statistics. 

Limited progress continued to be made in the fight against organised crime, which remains an 
issue  of  serious  concern.  Measures  were  taken  to  improve  witness  protection  but  remain 
insufficient.  Co-operation  with  Interpol  has  improved,  allowing  a  number  of  international 
arrest warrants  to  be executed.  However, efforts to combat  organised  crime are undermined 
by  corruption,  poor  witness  protection  and  insufficient  use  of  criminal  intelligence. 
Difficulties  in  cooperation  between  police  and  prosecutors  continued  to  reduce  the 
effectiveness of investigations. 

Some progress can be reported in the area of combating trafficking in human beings. The on-
line  database  on  victims  became  operational.  The  administrative  capacity  of  the  anti-
trafficking coordinator and National Referral Mechanism has improved. However, additional 
resources and better inter-agency coordination are needed for the implementation of the anti-
trafficking strategy, particularly in terms of victim protection. Albania remains a country of 
origin  for  trafficking  in  human  beings.  Internal  trafficking  of  women  and  children  is  on  the 
increase. 

Progress  has  continued  on  the  protection  of  personal  data.  The  legal  framework  is  in  place 
and  an  independent  data  supervisory  authority  has  been  appointed.  However,  adequate 
resources including training, need to be ensured for the office of the Commissioner for Data 
Protection to work effectively. Further efforts are needed to ensure proper implementation of 
existing legislation and to strengthen administrative capacity. 

Bosnia and Herzegovina 

Bosnia and Herzegovina has made very limited progress in addressing political criteria. The 
domestic  political  climate  has  deteriorated,  and  challenges  to  the  proper  functioning  of  the 
institutions and inflammatory rhetoric have continued. Reform implementation has been slow, 
due to a lack of consensus and political will, and to the complex institutional framework. A 
shared vision by the political leaders on the direction of the country and on  key EU-related 
reforms  remains  essential  for  further  progress  towards  the  European  Union.  Meeting  the 
objectives  and  conditions  which  have  been  set  for  the  closure  of  the  Office  of  the  High 
Representative  (OHR)8  is  essential.  The  European  Union  would  not  be  able  to  consider  an 

8 

These cover five objectives: 1) Acceptable and sustainable resolution of the issue of apportionment of 
property  between  State  and  other  levels  of  government;  2)  Acceptable  and  sustainable  resolution  of 
defence  property;  3)  Completion  of  the  Brcko  final  awards;  4)  Fiscal  sustainability  (promoted  by  an 
agreement  on  a  permanent  ITA  coefficient  methodology  and  establishment  of  a  National  Fiscal 
Council); and 5) Entrenchment of the rule of law (demonstrated by adoption of a National War Crimes 

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application  for  EU  membership  until  the  OHR  has  been  closed.  The  reform  of  Bosnia  and 
Herzegovina's  constitutional  framework  to  permit  its  institutions  to  function  effectively  is 
necessary  before  the  Commission  can  recommend  the  granting  of  candidate  status.  To  this 
effect, the country's political leaders have engaged in a joint EU/US-led initiative, started on 
8/9  October  in  Sarajevo.  This  now  needs  to  be  converted  into  concrete  results  that  will 
unblock  Bosnia  and  Herzegovina's  progress  towards  the  EU  through  constitutional  changes 
and a renewed domestic consensus. 

Regarding  democracy  and  the  rule  of  law,  there  has  been  little  progress  towards  creating 
more  functional  and  efficient  state  structures  and  towards  constitutional  reform,  which  is  a 
key  priority  of  the  European  Partnership.  The  constitution  of  Bosnia  and  Herzegovina  was 
amended  for  the  first  time  to  regulate  the  status  of  the  Brčko  District,  which  constituted  a 
major development and step forward. However, the High Representative has recently needed 
to use its executive powers to ensure progress towards the end of the District's international 
supervision.  

Bosnia  and  Herzegovina's  system  of  governance  continues  to  involve  an  international 
presence.  The  country  has  made  some  progress  towards  meeting  the  requirements  for  the 
closure of the OHR and the transition to a reinforced EU presence. However, the process has 
been hindered by insufficient political commitment. Urgent action is now needed to address 
the  outstanding  objectives,  namely  the  apportionment  of  property  between  the  state  and  the 
other  levels  of  government,  the  defence  property  issue,  and  on  ensuring  a  stable  and 
constructive political environment in the country. 

The  functioning  of  the  state-level  executive  and  legislative  bodies  has  been  deficient.  The 
Parliament of Bosnia and Herzegovina is still hampered by inadequate technical and human 
resources,  and  cooperation  with  the  Council  of  Ministers  and  with  the  Parliaments  of  the 
entities has remained poor. The number of European integration-related laws adopted by the 
Parliament has been low. The government institutions, at all levels, continued to be affected 
by  internal  political  tensions  and  fragmented  and  uncoordinated  policy-making.  The 
authorities have often proven unable to quickly appoint high-level officials. The work of the 
Directorate for European Integration has been hindered by the overall political climate and the 
absence of a director for most of the reporting period. Preparatory steps towards a census in 
2011 have been carried out, but a state-level census law, which is crucial to the process, has 
not been adopted. 

Some progress has been made in the area of public administration, but continued efforts are 
needed.  The  public  administration  reform  strategy,  which  is  a  key  European  Partnership 
priority,  is  being  implemented,  albeit  slowly.  The  fund  established  to  support  the  public 
administration  reform  is  operational  and  a  number  of  projects  are  being  implemented. 
Nonetheless, coordination between the various administrations within the country needs to be 
further improved. Sustained efforts remain necessary to prevent political interference, to limit 
the role played by ethnic identity and political affiliation in appointments, and to establish a 
professional, impartial, accountable, transparent and efficient civil service based on merit and 
competence.  The  state-level  Ombudsmen  have  been  appointed,  but  they  are  not  yet  fully 
operational due to the reluctance of the entities to phase out the existing entity-level offices.  

Strategy, of a Law on aliens and asylum and of a National Justice Sector Reform Strategy), as well as 
two specific conditions: 1) signing of the SAA and 2) a stable political situation. 

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Bosnia  and  Herzegovina  has  made  limited  progress  in  improving  the  judicial  system.  New 
legislation has been adopted and some action has been taken to reduce the backlog of cases. 
Progress has been made in equipping courts with adequate information technology. However, 
implementation of the National Strategy for Development of the Justice Sector and the War 
Crimes  Strategy  has  been  poor  and  needs  to  be  accelerated.  The  complexity  of  the  legal 
framework,  the  fragmentation  of  the  judicial  system  and  the  absence  of  a  single  budget 
continue to be major obstacles to reform in this area. Political interference remains frequent. 
The  absence  of  a  Supreme  Court  with  countrywide  jurisdiction  is  a  serious  handicap. 
Problems persist with the prosecution of organised crime. Bosnia and Herzegovina's political 
authorities have failed to address the request of the judicial authorities for the extension of the 
mandates of international judges and prosecutors. Prosecution of war crimes by the state court 
has  continued  to  be  satisfactory  overall,  but  it  needs  to  improve  in  the  entities  and  cantons. 
The  independence,  accountability  and  efficiency  of  the  judicial  system  need  to  be  further 
enhanced.  The  authorities  of  Republika  Srpska  have  increasingly  questioned  the  legality, 
jurisdiction and competences of the state-level police and judicial agencies to operate in their 
territory. This is a serious cause for concern. 

Bosnia  and  Herzegovina  has  achieved  little  progress  in  the  fight  against  corruption,  which 
remains prevalent in many areas and a serious problem. A new strategy and action plan for the 
period  2009-2014  has  been  adopted,  but  the  implementation  of  the  2006-2009  strategic 
framework  was  poor.  Little  progress  has  been  made  in  meeting  the  recommendations 
formulated  by  the  Group  of  States  against  Corruption  (GRECO).  Prosecution  remains 
deficient,  with  a  very  limited  number  of  convictions.  Bosnia  and  Herzegovina  needs 
strengthened commitment and determined action against corruption. 

There has been limited progress regarding human rights and protection of minorities. Bosnia 
and Herzegovina has ratified the major international human rights conventions, but sustained 
efforts  are  necessary  to  ensure  better  implementation.  Enforcement  of  domestic  rulings, 
including  those  of  the  Constitutional  Court  of  Bosnia  and  Herzegovina,  needs  to  improve. 
Incompatibilities  between  Bosnia  and  Herzegovina's  constitutional  framework  and  the 
European  Convention  for  Human  Rights  need  to  be  addressed  urgently,  prior  to  the  2010 
elections and the entry into force of the Stabilisation and Association Agreement (SAA). 

Civil and political rights are broadly respected. Some progress has been made in relation to 
unifying practice of criminal sanctions between the state and the entities. A state level law on 
legal  aid  in  criminal  proceedings  has  been  adopted.  However,  access  to  justice  in  civil  and 
criminal  trials  needs  to  be  improved,  and  equality  before  the  law  needs  to  be  ensured.  Ill-
treatment  of  detainees  continues  to  be  a  matter  of  concern.  The  planned  construction  of  a 
state-level prison is experiencing serious delays. 

The  state  and  the  entity  constitutions  provide  for  the  freedom  of  expression  and  media,  the 
freedom  of  assembly  and  association  and  the  freedom  of  religion.  However,  better 
implementation  of  the  existing  legislation  is  required.  Alleged  cases  of  harassment  of 
journalists have increased. Ethnic orientation of media is increasing. The implementation of 
the public broadcasting reform, which is a key European Partnership priority, is being delayed 
by insufficient harmonisation and slow implementation of the legal framework, in particular 
in the Federation. The executive needs to make further efforts to enhance dialogue with the 
civil  society  sector  and  to  support  its  development.  The  authorities  need  to  ensure  that 
allocation  of  funding  to  non-governmental  organisations  is  conducted  in  an  objective  and 
transparent manner.  

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There  has  been  limited  progress  in  the  area  of  economic  and  social  rights.  Bosnia  and 
Herzegovina's legal framework includes provisions to protect economic and social rights, but 
implementation remains poor overall. A comprehensive state-level antidiscrimination law has 
been  adopted  but  its  scope  is  rather  limited.  Sustained  efforts  are  still  needed  regarding  the 
protection of women against all forms of violence. As regards children, problems in the fields 
of  health,  social  protection,  education  and  domestic  violence  remain.  Inadequacies  in  social 
welfare systems adversely affect the conditions of vulnerable groups, including the mentally 
ill.  The  ratification  of  the  revised  European  Social  Charter  was  a  positive  development,  but 
implementation needs to improve. The complex system of government and the fragmentation 
of legislation continue to hamper social dialogue across the country.  

There has been some limited progress in the area of cultural rights and minority rights. The 
network of National Minorities Councils has been completed through the establishment of the 
Federation's Council, even though it is not yet fully operational. The strategy and action plans 
to support the Roma minority are slowly being implemented. Nonetheless, further steps need 
to be taken to improve the implementation of the Law on national minorities, and the state-
level Constitution needs to be changed to allow access of minorities to all political functions. 
Separation of children within schools along ethnic lines remains an issue. Despite an increase 
of financial resources for the implementation of the Roma strategy, this minority continues to 
face  very  difficult  living  conditions  and  discrimination.  The  lack  of  civil  registration 
continues to hinder their access to basic social and economic rights.  

Concerning refugees and internally displaced persons, the security situation remained stable, 
but little additional progress has been achieved in improving the socioeconomic integration of 
those who have returned. A country-wide strategy aimed at supporting the return process and 
ensuring  proper  implementation  of  Annex  VII  of  the  Dayton/Paris  Peace  Agreement  needs 
still to be adopted. 

As regards regional issues and international obligations, implementation of the Dayton/Paris 
Peace Agreement has continued. Cooperation with the International Criminal Tribunal for the 
former  Yugoslavia  (ICTY)  has  remained  satisfactory.  However,  statements  by  Republika 
Srpska's political leadership challenging the veracity of war-time massacres involving civilian 
population are particularly worrying. 

Bosnia and Herzegovina, together with its neighbours, should address the regional impunity 
gap, including by taking steps towards extradition agreements covering war crimes cases. 

As regards the International Criminal Court, the bilateral immunity agreement with the United 
States does not comply with the EU Common Positions and guiding principles. The country 
needs to align with the EU position. 

Bosnia  and  Herzegovina  has  continued  to  participate  actively  in  regional  cooperation 
initiatives,  including  the  South  East  European  Cooperation  Process  (SEECP),  the  Regional 
Cooperation Council (RCC) and the Central European Free Trade Agreement (CEFTA). 

Bosnia  and  Herzegovina's  relations  with  its  neighbours  have  remained  stable,  but  there  has 
been little action to promote reconciliation and to resolve outstanding matters, which is a key 
priority  of  the  European  Partnership.  In  particular,  trade  and  border-related  issues  with 
neighbouring countries remain open. 

The economy of Bosnia and Herzegovina slowed down significantly in the fourth quarter of 
2008  when  the  global  crisis  began  to  impact  on  the  real  economy.  This  trend  continued  in 

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2009, pushing the country into a recession. Unemployment remained at very high levels. The 
quality of public finances further deteriorated, characterised mainly by a dramatic increase in 
current  expenditure.  The  country  called  for  an  IMF  programme  and  a  three-year  stand-by 
arrangement  was  negotiated.  Despite  some  progress  in  state-wide  coordination  of  economic 
policy, the commitment to structural reforms remained uneven across the country.  

As  regards  the  economic  criteria,  Bosnia  and  Herzegovina  has  made  little  further  progress 
towards a functioning market economy. Further considerable reform efforts must be pursued 
with determination to enable the country to cope over the long term with competitive pressure 
and market forces within the Union. 

Financial  and  monetary  stability  was  preserved,  as  the  central  bank  reacted  appropriately  to 
repercussions  from  the  international  financial  crisis.  The  currency  board  arrangement 
continued  to  enjoy  a  very  high  degree  of  credibility.  In  line  with  international  price 
developments,  inflation  rates  have  come  down  significantly.  External  imbalances  have 
decreased,  mainly  driven  by  a  rapidly  adjusting  trade  balance.  While  the  expansion  of 
financial  intermediation  has  slowed  down,  the  banking  sector  has  so  far  weathered  well  the 
impact of the global crisis. Some limited improvements in the business environment can be 
recorded,  especially  in  the  areas  of  construction  permits,  transfer  of  property,  business 
registration, and market exit.  

However, the quality and sustainability of public finances have further deteriorated. Current 
expenditures, especially on wages and social benefits, increased dramatically in 2008, and the 
share of general government in GDP remained high. Restructuring of public enterprises, the 
liberalisation of network industries and the privatisation have not proceeded further. The weak 
productive capacity and structural rigidities – high social contribution rates, distorted wage-
setting  mechanisms,  high  and  poorly  targeted  social  transfers  and  low  labour  mobility  – 
continue  to  hamper  job  creation  and  the  functioning  of  the  labour  market.  Unemployment 
continues  to  be  very  high  and  the  informal  sector  remains  an  important  challenge.  The 
business environment is still affected by administrative inefficiencies. Lower FDI and public 
investment slowed down the upgrading of infrastructures 

Bosnia and Herzegovina has made limited progress in aligning its legislation and policies with 
European  standards.  Some  progress  has  been  made  in  areas  such  as  transport,  customs, 
taxation, education and culture, and a number of justice, freedom and security-related matters. 
Particular  efforts  remain  necessary  as  regards  movement  of  goods,  persons  and  services, 
social and employment policies, state aids, energy and environment. 

On  the  whole,  the  implementation  of  the  Interim  Agreement  (IA)  has  been  satisfactory. 
Nonetheless,  preparations  for  meeting  requirements  under  the  IA  and  the  Stabilisation  and 
Association  Agreement  (SAA)  –  a  key  priority  of  the  European  partnership,  need  to  be 
accelerated. Bosnia and Herzegovina's administrative capacity has to be further strengthened 
in order to achieve a strong track record of SAA implementation. The country also needs to 
make further efforts to achieve a fully functional single economic space within its territory, as 
required by the European Partnership. 

Bosnia  and  Herzegovina  has  made  some  progress  in  addressing  European  Partnership 
priorities in areas of the internal market. As regards free movement of goods, limited progress 
has  been  made  in  the  fields  of  standardisation,  accreditation,  metrology  and  market 
surveillance. Continued efforts remain necessary in order to approximate the legal framework 
to EU legislation in this area and to develop the necessary administrative capacity. 

EN 

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Limited progress has been made as regards services, the right of establishment and company 
law.  Entity  legislation  on  leasing  has  been  harmonised,  but  a  single  state-level  supervisory 
agency for banking remains to be established. Legislative initiatives by the entities in this area 
remain insufficiently coordinated. 

There have been some developments in the area of free movement of capital. Legislation on 
foreign currency operations has been adopted in Republika Srpska. Some progress has been 
made  in  the  field  of  customs,  even  though  legislative  alignment  and  administrative  capacity 
need to improve. Customs strategies – especially for human resources management, training 
and  information  technology  –  still  need  to  be  defined.  In  the  area  of  taxation,  a  new  excise 
law has been adopted to improve fiscal sustainability.  

As  regards  competition,  Bosnia  and  Herzegovina  made  moderate  progress  in  the  field  of 
antitrust.  No  tangible  progress  has  been  made  in  the  field  of  state  aid.  The  adoption  of 
adequate state aid legislation and the establishment of an operationally independent state aid 
authority  remain  pending.  Further  efforts  are  necessary  to  ensure  proper  implementation  of 
public procurement procedures across the country. Limited progress has been made regarding 
the  enforcement  of  intellectual  property  rights,  even  though  additional  international 
conventions have been ratified. The legislative framework in this area needs to be completed 
and enforcement capacity further strengthened. 

Little progress was made on social and employment policies and public health policy. Social 
and  employment  legislation  and  policies,  as  well  as  public  health  legislation,  remain  very 
fragmented. Lack of cooperation between the various levels of government continues to be a 
serious handicap to the development of the necessary co-ordinated approaches. 

Some progress has been made on European standards in the field of education and culture. In 
particular, Bosnia and Herzegovina ratified the 2005 UNESCO Convention on the Protection 
and  Promotion  of  the  Diversity  of  Cultural  Expressions.  The  Conference  of  Ministers  of 
Education  has  contributed  to  ensure  basic  coordination  between  the  fourteen  competent 
ministries in the country. However, harmonisation of legislation at entity and canton-level has 
not  been  completed  and  implementation  across  the  country  has  been  uneven.  The 
administrative  capacity  of  various  education  agencies  needs  to  be  reinforced.  As  regards 
research,  Bosnia  and  Herzegovina  became  associated  to  the  Seventh  EC  Framework 
Programme for Research and Development but with respect to improve the research capacity 
at national level substantial efforts are still necessary. 

Negotiations to join the WTO have continued, but the process has not yet been completed. 

Bosnia  and  Herzegovina  has  made  some  limited  progress  in  addressing  European  standards 
on a number of sectoral policies. 

There  has  been  little  progress  in  the  area  of  industry.  A  comprehensive  industrial  policy 
remains  to  be  developed.  As  regards  small  and  medium  enterprises  (SME)  a  countrywide 
strategic framework has been adopted. It needs now to be implemented.  

Some progress has been made in the area of agriculture and fisheries. A strategic framework 
for  the  harmonisation  of  agriculture  and  rural  development  has  been  adopted.  However, 
implementation  of  the  state-level  Law  on  agriculture,  food  and  rural  development  has  been 
slow.  There  has  been  no  progress  on  setting  up  the  state-level  Ministry  of  Agriculture, 
competences in agriculture remain at entity level. There has been limited progress in the fields 

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of  food  safety,  veterinary  and  phytosanitary  policies.  Problems  remain  due  to  inadequate 
human and financial resources and weak coordination between state and entity services.  

Bosnia and Herzegovina's preparations  in  the  field  of environment remain  at  an  early stage. 
No  significant  progress  has  been  made  during  the  reporting  period.  A  state-level 
environmental  law  to  create  the  framework  for  a  countrywide,  harmonised  environmental 
protection remains to be adopted, and no state-level environment agency has been established.  

Bosnia  and  Herzegovina  has  made  some  progress  in  the  transport  sector.  There  have  been 
some  developments  regarding  the  trans-European  transport  networks  and  transit  traffic,  but 
progress  has  been  rather  limited  in  the  road,  rail  and  inland  waterways  sectors.  Bosnia  and 
Herzegovina  has  become  a  full  member  of  the Joint Aviation  Authorities (JAA). Continued 
efforts  are  necessary  to  consistently  apply  the  European  Common  Aviation  Area  (ECAA) 
Agreement. Further action is needed to complete the reorganisation of the institutional set-up 
and to ensure adequate conditions for market opening in all transport modes. 

No  progress  has  been  made  in  the  field  of  energy.  As  a  party  to  the  Energy  Community 
Treaty, Bosnia and Herzegovina needs to implement the relevant EU energy legislation, but it 
is significantly lagging behind in a number of energy-related areas. Reforms in the gas sector 
are particularly delayed. The development of the electricity sector continues to be hampered 
by various factors. The operation of the national transmission company (TRANSCO) has been 
seriously  undermined  by  political  interference  and  poor  management.  No  comprehensive 
energy strategy has been developed. Very limited energy reserves are available in case of an 
emergency. 

Progress in the areas of information society and media has been scarce. The harmonisation of 
the  legal  framework  for  public  broadcasting  in  Bosnia  and  Herzegovina  has  not  been  fully 
achieved  and  the  reform  of  the  public  broadcasting  system  has  been  delayed.  The 
independence  of  the  Communications  Regulatory  Authority  (CRA)  remains  seriously 
weakened by the absence of a properly appointed director general and Council. Challenges to 
the CRA's independence remain.  

Limited  progress  has  been  made  in  the  area  of  financial  control.  Policy  papers  at  the  state-
level and by the entities have been prepared, but they remain to be adopted. Stronger efforts 
are necessary to improve public internal financial control and the follow-up of audit reports. 

Some  technical  progress  has  been  made  in  the  area  of  statistics.  However,  co-operation 
between  the  country's  statistical  institutions  at  state  and  entity  level  remains  insufficient. 
Production of statistics and their quality need to improve, with particular attention on national 
accounts and statistics in key sectors, including trade, business and agriculture. A population 
census in 2011 remains crucial. 

In  the  area  of  justice,  freedom  and  security,  additional  progress  has  been  made.  In  the 
framework  of  the  visa  liberalisation  dialogue,  steps  have  been  taken  to  fulfil  all  the 
benchmarks  set  in  the  visa  liberalisation  roadmap  and  key  reforms  have  been  introduced  in 
the  area  of  justice,  freedom  and  security.  In  the  area  of  visa  policy,  progress  continued. 
Bylaws were adopted to specify procedures for the issuance of visas provided in the Schengen 
acquis.  The  testing  phase  for  the  issuing  of  new  biometric  passports  has  started.  A  new, 
dedicated agency has been established to ensure the secure and effective management of the 
system  of  personal  identification  documents.  However,  further  efforts  are  required  for 

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alignment  with  European  standards.  Implementation  of  the  readmission  agreement  with  the 
EC has continued to take place smoothly.  

Some  concrete  action  has  also  been  taken  in  the  fields  of  border  management,  asylum  and 
migration. A national strategy on asylum and migration has been adopted and the migration 
profile  of  Bosnia  and  Herzegovina  has  been  established.  A  new  integrated  border 
management  (IBM)  strategy  is  under  implementation  and  initiatives  have  been  taken 
regarding cooperation with neighbouring countries. Nonetheless, more clarity is necessary as 
regards  the  division  of  responsibilities  at  the  border  crossing  points  and  the  posts' 
management. 

Some additional progress has been made on preventing money laundering. A new law on anti-
money  laundering  has  been  adopted  and  cooperation  at  international  level  has  continued.  A 
national  strategy  and  action  plan  for  the  fight  against  and  prevention  of  money  laundering 
have  been  adopted  Domestic  legislation  remains  to  be  harmonised,  both  internally  and  with 
international  conventions.  Legislation  on  the  confiscation  of  assets  is  not  in  line  with 
international standards and not harmonised within the country. 

Some positive steps have been taken in the fight against drugs. The national strategy on illicit 
drugs has been adopted and the corresponding action plan has been adopted. The Commission 
on  Narcotic  Drugs  has  started  to  operate.  Nonetheless,  drug  trafficking  remains  a  serious 
problem that requires sustained efforts. 

Little  progress  has  been  made  with  regard  to  the  operation  of  the  police  and  the 
implementation  of  the  police  reform,  which  is  a  key  European  Partnership.  The 
implementation  of  the  legislation  adopted  in  2008  has  been  slow  and  not  all  the  state  level 
agencies  provided  for  in  these  laws  are  operational.  The  fragmentation  of  Bosnia  and 
Herzegovina's police forces continues to undermine efficiency and results. 

With the support of the EU Police Mission (EUPM), Bosnia and Herzegovina has taken some 
initiatives regarding the fight against organised crime, which nonetheless remains a matter of 
serious concern, affecting the rule of law and the business environment. A new strategic and 
legal  framework  to  combat  organised  crime  has  been  adopted,  but  effective  prosecution  of 
criminal  organisations  has  to  improve.  Bosnia  and  Herzegovina  is  implementing  the  2008-
2012  national  action  plan  against  trafficking  in  human  beings.  However,  better  results  are 
necessary  in  terms  of  prosecution  and  sentences.  In  this  regard,  the  adoption  and 
implementation of an adequate witness protection law is essential. As regards data protection, 
the state agency for data protection has become operational, but it is not properly staffed yet 
and its operation needs to improve. 

Croatia 

Croatia  continues  to  meet  the  political  criteria.  Progress  has  been  made  in  most  areas  and 
efforts intensified in the field of rule of law. However, the reform effort needs to be sustained, 
particularly in areas such as judicial and administrative reform, the fight against corruption, 
minority  rights  and  refugee  return.  The  Accession  Partnership  priorities  have  been  largely 
addressed. 

Democracy  and  the  rule  of  law  have  been  further  strengthened.  Both  government  and 
parliament  have  generally  functioned  well.  However,  significant  improvements  in  the 
judiciary,  in  the  public  administration  and  in  the  fight  against  corruption  are  essential,  not 

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least  to  create  a  solid  basis  for  full  implementation  of  the  acquis.  Police  reform,  including 
depoliticising key posts and improving professionalism, needs to continue. 

Some  progress  has  been  made  on  public  administration  reform.  A  new  Law  on  General 
Administrative  Procedures  (LGAP)  was  adopted.  A  new  post  of  Minister  or  Administration 
was established. The capacity of the newly created Ministry of Administration (formerly the 
Central  State  Office  for  Administration)  has  further  improved  and  training  measures  have 
continued.  However,  important  weaknesses  in  administrative  procedures  remain  and 
implementation  of  the  new  LGAP  has  not  yet  begun.  The  civil  service  continues  to  suffer 
from  many  shortcomings,  such  as  politicisation,  low  salaries,  and  weak  human  resources 
management.  In  addition,  civil  service  salaries  have  been  cut  to  mitigate  the  effects  of  the 
financial  crisis  and  a  recruitment  freeze  introduced.  Anti-corruption  measures  and  ethical 
principles  remain  to  be  embedded  in  public  administration  and  the  cooperation  between 
different  public  stakeholders  improved.  A  professional,  merit-based,  accountable  and 
transparent civil service still needs to be established.  

Implementation  of  the  judicial  reform  strategy  has  continued  and  a  large  volume  of  new 
legislation was adopted. The directorate for strategic development in the Ministry of Justice 
was reinforced. A new selection procedure for judicial trainees was introduced. The backlog 
of cases was further reduced. Steps were taken to rationalise the court network. Professional 
training programmes were further expanded. Ethnic bias in war crime cases is being reduced. 
The issue of in absentia verdicts from the 1990s has been partially addressed.  

However,  the  selection  procedure  for  judges  and  prosecutors  remains  deficient.  The  overall 
case backlog remains high and the length of judicial procedures excessive. Problems with the 
enforcement of court rulings remain. Court rationalisation is at a very early stage. Monitoring 
of reform measures is still not adequate. Further improvements in case management and in the 
accountability,  independence,  professionalism  and  competence  of  the  judiciary  are  also 
required.  Impunity  for  war  crimes  remains  a  problem,  especially  where  victims  were  ethnic 
Serbs. Many crimes remain unprosecuted. There is as yet no track record of implementation 
of new review provisions for in absentia cases. Overall, reforms in the judiciary continue but 
concrete results are only slowly appearing.  

There has been some progress in the fight against corruption. The legal framework to combat 
corruption has been further improved, including as regards confiscation of assets. A national 
police office for the fight against corruption and organised crime became operational. Special 
anti-corruption  departments  in  four  key  courts  were  established.  The  office  for  the  fight 
against corruption and organised crime continues to be active and has issued indictments and 
secured  verdicts  –  notably  in  the  Croatian  Privatisation  Fund  (Maestro)  case  -  in  some 
important  cases.  It  has  also  begun  to  investigate  possible  high  level  corruption  involving  a 
former  government  minister.  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 and convictions remains low. There has been limited investigation of high level 
corruption.  A  culture  of  political  accountability  is  lacking.  The  administrative  capacity  of 
state  bodies  for  fighting  corruption  continues  to  need  further  improvement.  There  has  been 
little progress in preventing conflicts of interest. 

Some progress has been made in the area of human rights and the protection of minorities. 
Human rights protection is broadly ensured but certain important challenges remain in terms 
of implementation. Sustained efforts are needed on minority rights and refugee return. 

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The Law on Legal Aid began to be implemented. However, access to justice is frustrated by 
many implementation problems, including the complexity of the application procedure itself. 
Further steps were taken to address shortcomings in prison conditions. However, a shortage of 
prison  staff  and  capacity  persists.  As  regards  ill-treatment,  the  Ombudsman  continued  to 
receive a number of complaints regarding the excessive use of force by the police. 

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.  Editors  and  journalists  continue  to 
report undue political pressure. 

As regards women’s and children’s rights, handling of domestic violence cases has improved. 
The ombudsmen have continued to play an important role. However, the situation of women 
on  the  labour  market  remained  difficult;  data  by  gender  is  still  missing,  thereby  hampering 
monitoring  of  gender  equality  legislation.  Implementation  of  measures  regarding  the 
protection of children's rights needs to be accelerated.  

The  new  Office  of  the  Ombudsman  for  Persons  with  Disabilities  has  been  successful  in 
carving out a visible role for itself. Public bodies and private enterprises have been responsive 
to  its  recommendations.  However,  continued  efforts  are  needed  as  regards  the  socially 
vulnerable  and  persons  with  disabilities.  More  progress  is  needed  in  the  field  of  de-
institutionalisation, including in cases of mental health and for children with disabilities.  

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 (see below). In practice the level of protection against discrimination and its judicial 
prosecution is not yet in line with EU standards.  

Some  progress  has  been  made  with  regard  to  minorities.  High  level  public  expressions  of 
commitment to the rights of minorities have continued. The Roma minority has continued to 
receive  attention,  with  improvements  particularly  in  preschool  education.  However,  many 
problems remain for minorities. 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. Legal provisions and programmes need to 
be implemented with more determination, and adequate monitoring assured. 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. 
The Roma minority still face difficult living conditions and challenges remain in many areas.  

There  has  been  some  progress  on  refugee  return  issues.  Progress  has  been  made  towards 
meeting the government’s targets for the provision of housing care for former occupancy and 
tenancy  rights  holders,  with  many  apartments  being  made  available.  Although  not  yet  fully 
met,  good  progress  was  made  towards  meeting  the  2008  target  of  providing  1,400 
accommodation  units.  However,  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 
remain  pending. 
Implementation of the decision on validating pension rights has been uneven. Efforts to create 
the economic and social conditions necessary for the sustainability of refugee return need to 
be  accelerated.  Croatia  should  ensure  that  budget  cuts  necessary  in  the  context  of  the 
economic crisis do not weigh negatively on refugee return issues.  

reconstruction  still 

for  housing 

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As regards regional issues and international obligations, co-operation with the International 
Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY)  has  continued.  However,  problems  of 
access for ICTY to important documents in Croatia have still not been resolved. Croatia needs 
to ensure all necessary steps are taken to settle this issue.  

Croatia has continued to participate actively in regional initiatives, including the South East 
European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council  (RCC)  and  the 
Central European Free Trade Agreement (CEFTA). Progress has been made towards settling 
the  bilateral  border  issue  between  Croatia  and  Montenegro.  Both  countries  have  been  co-
operating on preparing their submission to the International Court of Justice on delimiting the 
border at Prevlaka. However, further progress is required towards finding definitive solutions 
to the various bilateral issues which remain open, particularly as regards borders. Efforts are 
needed to further develop co-operation and good neighbourly relations. Croatia, together with 
its  neighbours,  should  address  the  regional  impunity  gap,  including  by  taking  steps  towards 
extradition agreements covering war crimes cases. 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.  The 
Commission welcomes the recent progress that led to a substantial number of chapters being 
opened or provisionally closed at the accession conference in October. 

The economy of Croatia has been increasingly hit by the global crisis. The country entered 
into recession in the first half of 2009 and unemployment increased. Macro-economic stability 
has been preserved by a prudent monetary policy. Some efforts to rebalance the budget were 
made,  but  the  fiscal  deficit  increased  significantly.  The  banking  sector  remained  sound  and 
resilient  to  the  crisis.  A  high  level  of  external  indebtedness  and  large  short-term  repayment 
obligations are key vulnerabilities of the economy. The process of economic restructuring and 
privatisation has remained slow and limited improvements in the business environment have 
been made.  

As regards the economic criteria, Croatia is a functioning market economy. It should be able 
to  cope  with  competitive  pressures  and  market  forces  within  the  Union,  provided  that  it 
further  implements  its  comprehensive  reform  programme  with  determination  in  order  to 
reduce structural weaknesses.  

The macroeconomic policy response has by and large been appropriate to address spill-overs 
from the crisis. In particular, monetary policy contributed successfully to preserving financial 
stability  mainly  by  alleviating  foreign  exchange  liquidity  constraints  through  regulatory 
changes.  In  reaction  to  mounting  fiscal  pressures,  some  adjustments  in  spending  as  well  as 
measures to compensate for falling revenues were adopted in the context of successive budget 
revisions.  The  legal  basis  for  strategic  and  multiannual  budget  planning  and  reporting  was 
improved. A health reform was adopted to improve the financial situation of the health sector. 
External  imbalances  have  narrowed,  exchange  rate  stability  has  been  preserved,  and 
inflationary  pressures  have  subsided.  The  banking  sector  remained  resilient  to  shocks  and 
credit growth has declined. Croatia's economy is well integrated with the EU.  

However,  the  government's  economic  policy  has  sometimes  lacked  a  clear  medium-term 
orientation. Policy coordination within the government and between the government and the 

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central bank is sometimes weak. Structural reforms have generally advanced at a slow pace, 
in  particular  with  respect  to  the  restructuring  of  loss-making  enterprises.  The  labour  market 
suffers  from  low  employment  and  participation  rates,  which  have  worsened  with  the  crisis. 
Only  limited  progress  has  been  achieved  with  reforms  aimed  at  addressing  labour  market 
rigidities. In the context of the crisis, significant risks of higher spending and further declines 
in  revenues  have  materialised.  The  fiscal  deficit  increased  significantly.  The  late  policy 
response  revealed  weaknesses  in  the  budget  planning  process.  Moreover,  little  progress  has 
been achieved in increasing the efficiency of public spending. Social transfers remained high 
and not well-targeted and a large number of public and state-owned enterprises continued to 
receive  state  support  through  subsidies  and  guarantees.  Therefore,  the  design  of  a  credible 
fiscal  strategy  aimed  at  reducing  budget  rigidities  and  enhancing  the  efficiency  of  public 
spending  remains  a  key  challenge.  Further  progress  has  been  made  in  facilitating  business 
registration  procedures,  but  the  investment  climate  continued  to  suffer  form  a  heavy 
regulatory burden and numerous para-fiscal taxes. 

Croatia has improved its ability to take on the obligations of membership. Preparations for 
meeting  EU  requirements  have  continued  to  progress  well  and  there  is  a  good  degree  of 
alignment  with  EU  rules  in  most  sectors.  In  most  areas  there  has  been  good  progress, 
principally  in  terms  of  legislative  alignment  but  also  as  regards  administrative  capacity 
building. However, further efforts lie ahead, in particular as regards further reinforcement of 
the administrative structures and capacity necessary for proper implementation of the acquis. 
Also, vigilance is required to ensure the budget cuts necessary in the context of the economic 
downturn do not disproportionately affect preparations for EU accession.  

Good  progress  has  been  made  in  the  field  of  free  movement  of  goods.  Alignment  is  well 
advanced,  but  some  elements  are  not  yet  fully  in  place,  notably  with  regard  to  conformity 
assessment,  metrology  and  market  surveillance.  Continued  efforts  are  needed  to  complete 
alignment with the acquis and to build the necessary implementation capacity. Good progress 
has been made on the free movement of workers. A satisfactory level of legal alignment has 
been reached. However, sustained efforts are needed to develop the necessary administrative 
capacity, in particular for the coordination of social security systems. 

Some  progress  has  been  made  with  regard  to  the  right  of  establishment  and  freedom  to 
provide services. Overall, there is a reasonable level of alignment with the acquis. However, 
further efforts on alignment are needed. Administrative capacity also needs to be reinforced.  

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

There has been good progress in public procurement, in particular as regards completion of 
the  necessary  institutional  set-up.  Overall,  preparations  are  at  an  advanced  stage.  However, 
legislative alignment has still to be completed and administrative capacity further enhanced at 
all  levels  of  the  procurement  system,  in  particular  with  a  view  to  effectively  fighting 
corruption and tackling irregularities and potential political interference.  

Some progress was made in the field of company law. Alignment with the acquis is well on 
track. More remains to be done in the area of auditing as regards the implementation of new 

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legal provisions and the strengthening of administrative capacity. Progress can be reported in 
the field of intellectual property law, both as regards legislative alignment and enforcement. 
Alignment  with  the  acquis  is  at  a  very  high  level.  The  overall  awareness  of  intellectual 
property rights in society needs to be increased and attention should be given to the increasing 
involvement of organised crime groups in intellectual property rights-related offences.  

Significant  progress  has  been  achieved  on  competition  policy  in  particular  as  regards  the 
adoption of the Competition Act and the publication of tenders for 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.  Work  also  remains  to  improve  the  Competition  Agency's 
enforcement  record  against  cartels,  to  align  the  Croatian  Broadcasting  Act,  and  in  the  steel 
sector.  

Significant  progress  can  be  reported  on  financial  services.  Legislative  alignment  is  very 
advanced,  but  further  efforts  are  needed  regarding  implementation.  Efforts  are  needed  to 
further strengthen  the supervisory  authorities' capacity to perform  their supervision  function 
and improve consultative interaction with the financial sector.  

Good progress has been made in the field of information society and media. A good level of 
alignment has been reached. Efforts need to continue to strengthen the capacity of the national 
regulators to implement correctly the legal framework, as well as to sustain liberalisation of 
the electronic communications market. 

There  has  been  progress  on  agriculture  and  rural  development,  in  particular  regarding  the 
collection and processing of agricultural data. Overall preparations are moderately advanced. 
However,  substantial  efforts  are  still  required  to  establish  the  paying  agency  and  Integrated 
Administration and Control System/Land Parcel Identification System. Further alignment of 
the support schemes with the Common Agricultural Policy (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. 

Good  progress  has  been  made  on  food  safety,  veterinary  and  phytosanitary  policy,  in 
particular  with  implementation  of  new  legislation.  Overall,  preparations  are  advanced. 
Continued efforts are required to finalise the transposition and implementation of the acquis 
in  particular  regarding  the  implementation  of  the  national  programme  for  the  upgrading  of 
establishments for animal origin and the securing of the necessary administrative and control 
capacity. 

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. 

There  has  been  some  progress  in  the  transport  field.  Overall,  there  is  a  reasonable  level  of 
alignment.  Further  improvement  of  administrative  capacity  is  needed  in  the  maritime 
transport sector, in the Civil Aviation Agency in particular in view of aviation safety, and in 
the  railway  regulatory  authority.  Further  legislative  alignment  is  needed  in  particular  in  the 
aviation and maritime cabotage sectors. There has been good progress on the energy chapter. 
Alignment with the acquis is well advanced. Efforts are still needed to enhance administrative 
capacity,  to  improve  the  functioning  of  the  electricity  and  gas  markets  and  to  meet  the 
renewable energy targets.  

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   EN 

Good  progress  was  made  on  taxation,  notably  on  legislative  alignment.  The  discriminatory 
excise duties on cigarettes have been repealed and legislation further aligned to the EU acquis 
in the field of direct taxation, excise duties and VAT. Nevertheless, efforts are still required to 
further align Croatian legislation, most notably in the field of VAT. Efforts should continue to 
strengthen administrative capacity, including IT interconnectivity. 

There  has  been  significant  progress  in  the  area  of  economic  and  monetary  policy.  Overall 
alignment with the acquis in this area is very advanced. Work on anchoring the independence 
of the central bank in Croatia's legislation needs to be completed. Further efforts are required 
concerning policy co-ordination.  

On  statistics,  substantial progress  has been  made.  A  good level of legal alignment has been 
reached.  However,  efforts  should  continue  to  further  align  Croatian  statistics  with  EU 
requirements. 

Good  progress  has  been  made  on  social  policy  and  employment.  A  good  level  of  legal 
alignment  has  been  reached,  although  some  gaps  remain,  especially  as  regards  labour  law. 
Further  efforts  are  required  in  order  to  strengthen  the  administrative  capacity  in  good  time 
before accession to ensure proper implementation and enforcement.  

Some progress was achieved on enterprise and industrial policy. 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  and  to  improve  the  SME 
environment.  

Good progress was made regarding the development of the transport and energy networks in 
line  with  the  design  and  objectives  of  the  TENs  –  Transport  network  and  Energy  network. 
Overall, alignment with the acquis is well advanced.  

Some  progress  has  been  made  on  regional  policy,  notably  in  preparing  implementation  of 
those IPA components which serve as pre-cursors to the Structural Funds. Overall, Croatia is 
partially  aligned  with  the  acquis.  Further  efforts  are  needed  to  meet  the  regulatory  and 
operational  requirements  of  the  Community's  cohesion  policy.  In  addition  to  enhancing  the 
administrative  capacity  and  preparing  the  project pipeline,  Croatia  needs  to  further  build  its 
financial management and control ability.  

Croatia  has  made  some  progress  on  judiciary  and  fundamental  rights.  Reforms  in  the 
judiciary  have  continued  but  significant  challenges  remain,  particularly  relating  to  judicial 
independence  and  efficiency.  Anti-corruption  efforts  have  produced  initial  results,  but 
corruption remains prevalent in many areas and tools are not being deployed with sufficient 
vigour,  especially  on  political  corruption.  Legal  provisions  on  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. 

Croatia has made some progress in the chapter justice, freedom and security, particularly as 
regards the fight against drugs, dealing with trafficking of human beings, and management of 
external  borders.  However,  Croatia  needs  to  step  up  its  efforts  in  order  to  ensure  that  EU 
requirements are met upon accession, notably in developing administrative capacity, fighting 
organised  crime  and  developing  the  infrastructure,  equipment  and  resources  to  manage 
effectively the external border.  

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

Good  progress  has  been  made  in  the  area  of  education  and  culture.  A  good  level  of  legal 
alignment  has  been  achieved.  Croatia  should  continue  its  efforts  to  prepare  for  the 
management  of  Life  Long  Learning  and  Youth  in  Action  programmes.  Due  attention  also 
needs to be paid to adult education.  

Good  progress  has  been  made  on  the  environment,  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  reaching 
alignment  with  the  acquis  in  the  water  sector  and  nature  protection.  Implementation  of  the 
horizontal  acquis,  not  least  strategic  environmental  assessment  and  access  to  justice  in 
environmental  matters,  needs  to  be  improved.  Administrative  capacity  needs  further 
strengthening both at national and local level.  

There has been good progress in the area of consumer and health protection. A good level of 
legal  alignment  has  been  reached.  However,  sustained  efforts  are  necessary  to  further 
strengthen administrative capacity.  

Croatia  has  made  good  progress  in  the  field  of  customs  union,  where  its  legislation  is  well 
aligned  with  the  acquis.  Croatia  has  improved  its  administrative  capacity  and  IT 
interconnectivity,  and  has  started  to  implement  a  coherent  anti-corruption  policy  within 
Customs.  Efforts  need  to  continue  in  the  remaining  areas  of  legislative  alignment,  in 
implementing the Anti-Corruption Strategy and in IT interconnectivity. 

Croatia  has  made  some  progress  in  the  area  of  external  relations.  Preparations  for  the  EU's 
common  commercial  policy  are  well  on  track.  However,  Croatia  should  respect  its 
international  obligations  when  resorting  to  trade  defence  measures.  Efforts  are  still  needed 
with regard to development policy and humanitarian aid. 

Croatia has made good progress and reached overall a good level of alignment in the area of 
Foreign,  Security  and  Defence  Policy.  Croatia  continues  to  participate  in  several  EU  ESDP 
missions. Croatia now 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. 

Progress  has  been  made  on  financial  control.  Continued  efforts  are  needed  to  ensure 
sustainable  development  of  the  overall  PIFC  system  on  both  central  and  local  government 
level.  The  functional  and  financial  independence  of  the  State  Audit  Office  needs  to  be 
anchored in the Constitution. 

There  has  been  good  progress  in  the  area  of  financial  and  budgetary  provisions,  with 
improvements  in  institutional  capacity.  Overall,  Croatia  has  reached  a  good  level  of 
alignment,  except  for  sugar  levies  Preparations  to  apply  the  own  resources  rules  need  to 
continue. 

The former Yugoslav Republic of Macedonia 

The presidential and local elections of 2009 met most international standards and most of the 
recommendations  of  the  OSCE/ODIHR  from  previous  elections  have  been  implemented. 

EN 

40 

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Political dialogue has improved: the governing coalition is stable, the political climate is more 
cooperative  and  the  parliament  is  more  effective.  The  key  Accession  Partnership  priorities 
regarding  the  reform  of  the  police,  the  judiciary,  public  administration  and  corruption  have 
been substantially addressed. On this basis, and in view of the overall progress of reforms, the 
Commission considers that the country sufficiently fulfils the political criteria.  

The  implementation  of  the  Ohrid  Framework  Agreement  remains  an  essential  element  of 
democracy and the rule of law in the country. There has been progress on implementing the 
law  on  languages,  on  decentralisation  and  equitable  representation.  On  this  basis,  further 
efforts in a constructive spirit are needed to fulfil the objectives of the Agreement. 

The conduct of the presidential and local elections in 2009 met most international standards. 
The  election  days  were  peaceful,  the  political  climate  was  calm  and  the  conduct  of  voting 
showed  a  marked  improvement  over  the  2008  parliamentary  elections.  The  shortcomings 
identified  by  the  OSCE/ODIHR  need  to  be  addressed.  Political  dialogue,  which  is  a  key 
priority  of  the  Accession  Partnership,  has  improved.  The  coalition  government  has  been 
stable. The National Council for European Integration is chaired by the main opposition party. 
The  functioning  of  parliament  has  been  strengthened,  notably  through  the  introduction  of 
rules of procedure, and a law on parliament has been adopted. Continued efforts are needed, 
in particular to enhance the role of the parliament. 

Some  progress  was  made  in  public  administration  reform,  including  reform  of  the  civil 
service, which is a key priority of the Accession Partnership. The amendments to the law on 
the  civil  service  adopted  in  September  strengthened  the  provisions  aiming  to  ensure  merit 
based  recruitment  and  promotion  of  civil  servants.  Further  efforts  to  ensure  transparency, 
professionalism  and  independence  of  public  administration  are  required.  Respect  for  the 
provisions  and  the  spirit  of  the  law  needs  to  be  ensured  in  practice.  Reform  of  the  police, 
which  is  a  key  priority  of  the  Accession  Partnership,  has  made  further  progress.  The  new 
system  of  commanders  at  local  and  regional  level  is  fully  functional,  management  has 
improved  and  the  law  on  internal  affairs  has  introduced  a  career  system  into  the  police 
service. Police officers have been barred from holding office in political parties. 

Further progress has been made on judicial reform, which is a key priority of the Accession 
Partnership.  The  first  graduates  from  the  Academy  of  Judges  and  Prosecutors  have  been 
appointed,  the  new  courts  and  judicial  bodies  are  being  staffed  and  are  taking  up  their 
activities, and the budget has been increased very significantly. Continued efforts are needed 
to  ensure  the  independence  and  impartiality  of  the  judiciary,  in  particular  through  the 
implementation of the provisions regarding appointments and promotions. 

Good  progress  has  been  made  in  strengthening  and  implementing  the  anti-corruption 
framework, which is a key priority of the Accession Partnership. The electoral code and the 
law  on  financing  of  political  parties  were  amended  to  strengthen  transparency,  there  were 
further  indictments  and  convictions  in  high-level  cases  and  cooperation  among  law 
enforcement agencies improved. Nevertheless, corruption remains prevalent and continues to 
be  a  serious  problem  in  many  areas.  Continued  efforts  are  needed,  in  particular  as  regards 
implementation of the legal framework.  

The legal and institutional framework for human rights and the protection of minorities is 
broadly  in  place.  Nevertheless,  further  efforts  are  needed  to  improve  implementation  in  a 
number of fields. 

EN 

41 

   EN 

Allegations of ill-treatment by the police fell significantly following the disbanding of special 
police units, the conduct of thorough investigations and the taking of disciplinary measures. 
However, an independent external mechanism to monitor cases of police misconduct, in line 
with  ECHR  jurisprudence,  has  not  yet  been  established.  An  action  plan  for  the  overhaul  of 
prison infrastructure has been adopted but important short term measures to tackle inhuman 
and degrading conditions have  still not been  taken.  Professional  management of  the  prisons 
remains to be established. 

With regard to freedom of expression, overall the situation is satisfactory. However, there are 
ongoing concerns regarding political interference in the media.  

As  regards  women's  rights,  the  strategy  against  domestic  violence  has  begun  to  be 
implemented.  However,  further  efforts  are  needed  to  develop  administrative  capacity  on 
gender  equality.  Concerning  children's  rights,  school  attendance  has  increased;  almost  all 
primary school pupils go on to attend secondary school. The law on juvenile justice entered 
into force in June. 

Regarding cultural and minority rights, there has been some further progress in implementing 
the strategy for equitable representation, in line with the Ohrid Framework Agreement, with 
the  number  of  civil  servants  from  the  non-majority  ethnic  communities  increasing  toup  to 
26% at central level by September 2009. The Law on Languages, which provides for greater 
use  of  Albanian,  has  begun  to  be  implemented  in  parliament.  A  specialised  agency  for 
protecting the rights of the smaller communities was set up but is not yet operational.  

The high schools in Struga municipality partly restored ethnically mixed education at the start 
of the 2009-10 school year. However, the authorities need to make further efforts to promote 
integration of the ethnic communities of the country, particularly in education. The concerns 
of the smaller ethnic minorities continue to be insufficiently addressed.  

Little progress can be reported regarding the Roma. The four action plans in the framework of 
the 2005-15 Decade of Roma Inclusion continued to be implemented slowly, although state 
funds were allocated to implement the action plans. The administrative capacity of the office 
of  the  Roma  minister  without  portfolio  and  of  the  unit  for  implementation  of  the  Roma 
strategy  requires  significant  strengthening.  Roma  continue  to  face  very  difficult  living 
conditions and discrimination.  

Regarding  regional  issues  and  international  obligations,  the  former  Yugoslav  Republic  of 
Macedonia  maintained  full  co-operation  with  the  International  Criminal  Tribunal  for  the 
former Yugoslavia (ICTY). The domestic legal system is processing the four cases referred by 
the ICTY back to the national authorities. 

As regards the International Criminal Court, the bilateral immunity agreement with the United 
States does not comply with the EU Common Positions and guiding principles. The country 
needs to align with the EU position. 

The country has continued to participate actively in regional cooperation initiatives, including 
the  South  East  European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council 
(RCC) and the Central European Free Trade Agreement (CEFTA). 

The former Yugoslav Republic of Macedonia has generally good relations with countries in 
the region. However, relations with Greece continued to be affected by the unresolved name 
issue. The country is engaged in talks under the auspices of the UN on resolving it. Actions 

EN 

42 

   EN 

and  statements  which  could  negatively  impact  on  good  neighbourly  relations  should  be 
avoided.  Maintaining  good  neighbourly  relations,  including  a  negotiated  and  mutually 
acceptable solution to the name issue, under the auspices of the UN, remains essential.  

The  economy  of  the  former  Yugoslav  Republic  of  Macedonia  slowed  down  and  slightly 
contracted in 2009, as the international environment deteriorated. Inflation declined markedly, 
mainly  due  to  lower  international  energy  and  commodity  prices.  Some  progress  has  been 
achieved in addressing structural unemployment and in reducing impediments to employment. 
However, the still very high unemployment, in particular among young and poorly educated, 
remains  a  major  cause  of  concern.  Weaknesses  in  the  administration  and  the  rule  of  law 
continue to have a negative bearing on the business climate. 

As  regards  the  economic  criteria,  the  former  Yugoslav  Republic  of  Macedonia  is  well 
advanced. It has continued to move closer towards becoming a functioning market economy. 
It should be able to cope with competitive pressures and market forces within the Union in the 
medium term, provided that it vigorously implements its reform programme in order to reduce 
significant structural weaknesses. 

is 

trade 

liberalisation  has  been 

largely  completed.  Price  and 

The  country  has  maintained  a  broad  consensus  on  the  essentials  of  economic  policies. 
Privatisation 
largely 
accomplished.  Market  entry  and  registration  has  been  further  improved  and  the  regulatory 
framework  has  been  further  simplified.  Bankruptcy  procedures  have  been  further  shortened 
and  property  registration  is  well  advanced.  The  authorities  have  increased  their  efforts  in 
addressing structural unemployment and measures have been taken to reduce the tax burden 
on  labour.  Financial  independence  of  supervisory  and  regulatory  agencies  has  been 
strengthened. Financial intermediation has declined slightly but the sector as a whole has so 
far  weathered  well  the  international  financial  crisis.  Further  measures  have  been  taken  to 
improve the quality of human capital.  

However,  in  the  context  of  the  election  period  and  the  global  economic  crisis,  the  overall 
policy  mix  has  deteriorated.  The  quality  of  public  finances  has  declined,  with  a  strong 
increase  in  public  spending,  notably  in  income  transfers  and  subsidies  and  pensions,  which 
rose well above inflation. This contributed to a sharp increase in external imbalances, while 
the public sector financing needs crowded out funds for private investment. Public sector debt 
has increased, but is still relatively low. FDI inflows decelerated markedly, largely due to the 
deteriorated  international  environment.  Funds  for  addressing  structural  unemployment  have 
remained limited, while unemployment remained very high. Institutional weaknesses and the 
rule  of  law  need  to  be  improved  to  allow  for  smooth  functioning  of  the  market  economy. 
Further  efforts  are  needed  to  strengthen  public  administration  and  the  judiciary,  in  order  to 
improve  legal  certainty  and  improve  business  environment.  Regulatory  and  supervisory 
agencies  sometimes  still  lack  the  sufficient  independence  and  resources  to  fulfil  their 
functions effectively. Despite efforts to reduce the unregistered economy, the issue remains an 
important challenge. 

The former Yugoslav Republic of Macedonia has made good progress in improving its ability 
to assume the obligations of membership, in particular as concerns transport, customs and 
taxation and justice, freedom  and security. Less progress has been achieved  in  certain  other 
areas such as energy, the environment and employment and social policy. Overall, there was 
further  progress  in  the  fulfillment  of  the  priorities  of  the  Accession  Partnership.  However, 
sustained efforts are needed to strengthen administrative capacity for the implementation and 
enforcement of legislation. In line with the relevant key priority of the Accession Partnership, 

EN 

43 

   EN 

commitments  undertaken  in  the  Stabilisation  and  Association  Agreement  have  been 
implemented. 

Some progress has been achieved in the area of free movement of goods. A significant part of 
the horizontal and sectoral acquis has yet to be transposed. There has been some progress in 
the area of freedom of movement for workers, where alignment with the acquis remains at an 
early stage. Progress on right of establishment and freedom to provide services was uneven. 
There is a lack of coordination between the various bodies responsible for authorising cross-
border services. Progress in the area of free movement of capital was mainly confined to the 
fight  against  money  laundering.  The  obligations  stemming  from  the  first  stage  of  the  SAA 
were met in 2008. 

Good progress has been made in the area of public procurement, where significant steps have 
been  taken  towards  aligning  the  legislation  with  the  acquis.  Further  work  is  required  to 
enhance  the  administrative  capacity  at  all  levels.  Good  progress  has  been  made  also  in  the 
area of company law, although alignment of the legal framework for accounting and auditing 
is lagging behind. Some progress has been made towards strengthening the legal framework 
and enhancing administrative capacity and institutional cooperation in the area of intellectual 
property law. Enforcement, though improving, is not yet satisfactory. 

Some progress was made in the area of competition. A credible enforcement record has been 
built up, in particular in the field of concentrations, although the fight against cartels should 
be  strengthened.  The  number  of  ex  ante  State  aid  decisions  increased.  The  human  and 
financial resources of the competition authority are still inadequate. 

There has been some progress in the area of financial services, mainly related to legislative 
developments  on  the  banking  sector,  securities  markets,  investment  services  and  pensions. 
However, the insurance market is not yet properly regulated and supervised. 

Progress  was  made  in  the  field  of  electronic  communications  and  information  society 
services. Competition on the electronic communications markets increased as a result of the 
liberalisation  process,  to  the  benefit  of  consumers.  In  the  area  of  audiovisual  policy,  the 
Broadcasting  Council  and  the  public  service  broadcaster  continue  to  be  subject  to  political 
interference. Overall, preparations in the area of information society and media are advanced. 

Progress  has  been  achieved  in  the  field  of  agriculture  and  rural  development.  The 
administrative capacity of the paying agency and the operational structures responsible for EU 
pre-accession  funds  have  been  strengthened,  although  in  other  areas  administrative  capacity 
remains  weak.  Alignment  with  the  acquis  requires  further  sustained  efforts  in  particular 
regarding thorough implementation of adopted legislation. There has been some progress in 
the  area  of  food  safety,  veterinary  and  phytosanitary  policy,  mainly  regarding  legislative 
preparedness. However, the administrative capacity, in terms of both the number and skills of 
staff, is still insufficient to ensure proper implementation of the acquis.  

Good  progress  has  been  made  in  the  area  of  transport  policy,  in  particular  as  regards 
transport,  including  road  charging.  In  general,  legislative  alignment  is  advancing  in  all 
sectors. However, the administrative capacity in every sector of transport is insufficient, both 
in  numbers  and  in  terms  of  qualifications.  Independent  regulatory  bodies  and  safety 
authorities have yet to be established for air and rail transport.  

Some progress has been made in the energy sector. However, amendments to the Energy Law, 
as  well  as  a  correct  implementation  of  the  legislation,  are  necessary  in  order  to  meet  the 

EN 

44 

   EN 

obligations  under  the  Energy  Community  Treaty.  An  effectively  functioning  electricity 
market has yet to be established. The degree of independence of the energy regulator and the 
radiation protection regulator needs to be further improved. 

Good progress was made on taxation. The level of legislative alignment in indirect taxation is 
well advanced. Further efforts are required as regards direct taxation. The operational capacity 
of the Public Revenue Office has been strengthened and tax collection has improved. 

Some progress has been made in legislative alignment and administrative capacity in the area 
of  the  economic  and  monetary  policy.  Overall,  preparations  in  this  area  are  on  track.  Good 
progress  has  been  made  on  improving  sector  statistics  and  aligning  classifications  with  the 
acquis. The statistical infrastructure has been strengthened, but the resource situation remains 
weak. 

Limited progress has been made in the area of social policy and employment. An effective and 
representative  social  dialogue  is  still  lacking.  The  administrative  capacity  has  slowly  been 
strengthened,  but  remains  insufficient  to  implement  properly  the  legislation  and  policies 
adopted. Good, but uneven, progress has been made in the field of enterprise and industrial 
policy.  The  financial  resources  and  administrative  capacity  of  public  bodies  for 
implementation  of  enterprise  and  industrial  policy  instruments  are  modest.  Alignment  with 
the acquis in this chapter is moderately advanced. 

Progress  was  made  in  the  area  of  trans-European  networks.  Preparations  in  this  area  are 
advanced. Some progress can be reported in the area of regional policy and coordination of 
structural  instruments,  notably  in  the  form  of  enhanced  efforts  and  preparations  for  the 
implementation  of  the  components  of  IPA  serving  as  pre-cursors  to  the  Structural  Funds. 
Overall, alignment with the acquis in this area is advancing. 

As  regards  judiciary  and  fundamental  rights,  there  has  been  good  progress  on  combating 
corruption and some progress on the reform of the judiciary and on safeguarding fundamental 
rights.  The  newly  established  institutions  and  increased  budgetary  resources  have  improved 
the  overall  efficiency  of  the  judiciary,  but  continued  efforts  are  needed  to  secure 
independence.  As  regards  anti-corruption,  further  progress  can  be  reported  on  prosecuting 
high-level  cases,  on  strengthening  the  institutional  framework  and  on  cooperation  between 
law  enforcement  agencies.  The  electoral  code  and  the  law  on  financing  of  political  parties 
were  amended  to  strengthen  transparency.  Nonetheless,  corruption  remains  prevalent 
continues  to  be  a  serious  problem  in  many  areas.  Efforts  need  to  be  pursued.  Most  of  the 
legislative and policy measures relating to fundamental rights are in place, but implementation 
is uneven, and further efforts are required.  

In  the  area  of  justice,  freedom  and  security,  the  country  has  continued  to  address  key 
challenges.  Regarding  visa  liberalisation,  the  country  has  made  important  progress  in  the 
areas  covered  by  the  roadmap  and  fulfilled  the  benchmark  criteria.  On  the  basis  of  the 
progress achieved, the Commission proposed in July 2009 the lifting of the visa obligation for 
the citizens of the former Yugoslav Republic of Macedonia9. Good progress can be reported 
on  asylum,  the  fight  against  organised  crime  and  drugs,  as  well  as  on  external  borders  and 
Schengen. Administrative capacity to implement the police reform has improved, but is still 
constrained  by  the  not  fully  developed  human  resources  management.  Regarding  the  fight 
against  organised  crime,  the  use  of  special  investigative  techniques,  witness  protection  and 

9 

COM(2009) 366. 

EN 

45 

   EN 

                                                 
intelligence-led policing has improved. Further efforts are necessary, in particular to establish 
an  integrated  intelligence  system.  The  country  has  achieved  a  greater  degree  of  alignment 
with  the  acquis  for  both  its  legislative  and  administrative  capacity.  Overall,  preparations  in 
this area are on track. 

Some progress has been made in the area of science and research. Administrative capacity to 
support  participation  in  the  Framework  Programmes  is  not  sufficiently  developed.  Overall, 
preparations in this area are on track. Some progress has been made in the areas of education, 
training, youth and culture, in particular as regards participation in Community programmes. 
However,  the  budget  for  education  remains  insufficient  to  implement  the  national  reform 
strategy. Overall, preparations in the area of education and culture are advanced. 

Progress  has  been  made  towards  further  transposing  the  EU  acquis  in  the  field  of  the 
environment,  in  particular  in  the  cases  of  horizontal  legislation  and  waste  management. 
Implementation of the legislation remains a considerable challenge. Administrative capacity is 
weak  at  both  national  and  local  levels.  Significant  further  efforts  are  still  needed  to  further 
align  with  the  EU  acquis  in  this  sector  and,  moreover,  to  ensure  the  required  investments. 
Overall, preparations in the field of environment are moderately advanced.  

Some  progress  has  been  made  in  the  area  of  consumer  and  health  protection.  As  regards 
consumer policy, there is still no effective and transparent market surveillance system. In the 
field  of  public  health,  the  human  and  financial  resources  available  are  not  yet  sufficient  to 
ensure proper implementation of legislation, strategies and action plans. 

Progress  in  the  area  of  customs  union  has  been  substantial,  in  particular  as  regards 
administrative  and  operational  capacity.  The  customs  legislation  is  sufficiently  aligned  with 
the  acquis,  except  in  the  case  of  transit.  The  administrative  capacity  of  the  customs 
administration  to  implement  legislation  and  to  tackle  cross-border  crime  is  continuing  to 
improve. Preparations in this area are on track. 

There  has  been  some  progress  in  the  alignment  with  the  EU's  external  relations  policy. 
Overall,  preparations  in  this  area  are  on  track.  There  has  been  some  progress  in  the  area  of 
foreign security and defence policy, in particular in terms of strengthening the administrative 
capacity.  The  country  aligned  with  most  EU  declarations  and  common  positions  and  has 
shown continued commitment to participation in ESDP operations. 

Some progress has been made towards aligning and implementing the legislation in the area 
of  financial  control.  The  administrative  capacity  of  the  responsible  institutions  has  been 
further  strengthened.  There  was  some  progress  as  concerns  financial  and  budgetary 
provisions. Improvements were made to the operational capacity of the customs authority and 
the Public Revenue Office, particularly in combating customs and VAT fraud. 

Montenegro 

Montenegro has continued to make progress in addressing the political criteria. In line with 
the  European  Partnership,  it  further  pursued  the  completion  of  its  legal  framework  and 
strengthened  administrative  and  institutional  capacity.  The  constitution  was  on  the  whole 
implemented  effectively.  Judicial  reform  continued  and  started  to  produce  results.  Yet 
political influence on the judiciary and the prosecution persists. The fight against corruption 
and organised crime needs to be pursued with determination. Strengthening of administrative 
capacity remains a major challenge. Political consensus on EU-related issues remains strong. 

EN 

46 

   EN 

Parliament's  capacity  to  scrutinise  legislation  and  monitor  the  implementation  of  reforms 
needs to be enhanced. 

Democracy and the rule of law continued to be strengthened. Overall, the implementation of 
the constitution  proceeded  well.  However, some key laws remain to be aligned  with it. The 
functioning  of  state  institutions  has  improved  in  particular  in  the  areas  related  to  European 
integration.  The  need  for  greater  political  will  in  the  fight  against  corruption,  in  particular 
high-level corruption, remains.  

There  has  been  some  progress  in  the  functioning  of  the  parliament.  Legislative  activity 
continued to be intense and its administrative capacity was strengthened. However, parliament 
needs  to  substantially  enhance  its  efficiency  as  a  legislative  body  and  its  capacities  of 
oversight. Parliamentary elections held in March 2009 met almost all OSCE and Council of 
Europe  commitments.  However,  OSCE-ODIHR  identified  a  number  of  challenges  and 
shortcomings which remain to be addressed. Electoral legislation needs to be aligned with the 
constitution. 

The  government  continued  to  set  up  new  administrative  structures  following  the  country's 
independence.  The  framework  for  coordination  of  European  integration  improved  and 
continued  to  function  smoothly.  Some  progress  has  been  made  in  reforms  of  the  public 
administration through the adoption of key legislation, upgrading of administrative capacity 
and  improved  human  resources  management.  However,  lack  of  human  and  financial 
resources,  along  with  structural  weaknesses  and  corruption  continue  to  hamper  the  overall 
effectiveness  of  the  public  administration.  Administrative  capacity  remains  limited. 
Significant efforts are required to establish a professional, accountable and merit-based civil 
service,  free  of  political  interference.  Most  of  the  opinions  and  recommendations  issued  by 
the  Ombudsman's  office  have  been  followed  up.  However,  the  Law  on  the  Ombudsman 
remains  to  be  fully  aligned  with  the  constitution  and  the  office's  capacities  require  further 
strengthening. 

Greater efforts are needed to establish and empower independent, supervisory and regulatory 
bodies that operate effectively. 

Montenegro has made moderate progress in judicial reform. The legal framework was further 
strengthened by the adoption of a new Criminal Procedure Code. However, further efforts are 
required to ensure the independence of the judiciary and the autonomy of the prosecution. The 
capacity  of  the  prosecution  to  undertake  its  new  tasks  under  the  Criminal  Procedure  Code 
must be enhanced. Further consolidation of the accountability, integrity and efficiency within 
the judicial system is required.  

There has been good progress in building the legal and administrative framework for the fight 
against corruption. Progress has been made on further enhancing preventive and investigative 
anti-corruption bodies. However, corruption remains prevalent in many areas and continues to 
be  a  particularly  serious  problem.  There  are  concerns  over  the  comprehensiveness  and 
effective  implementation  of  legislation  in  this  area.  While  there  is  a  positive  trend, 
investigation capacities and co-ordination of law-enforcement agencies are weak, resulting in 
low  numbers  of  convictions.  There  is  insufficient  supervision  in  the  areas  of  financing  of 
political parties and conflict of interests.  

There  has  been  further  progress  in  the  area  of  human  rights  and  protection  of  minorities, 
where Montenegro is broadly in line with European standards.  

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Overall,  there  has  been  some  progress  in  the  area  of  civil  and  political  rights.  However, 
further efforts are required to improve implementation of laws in the areas of torture and ill-
treatment, the prison system and access to justice.  

Freedom  of  expression  remains  a  concern.  Investigations  of  violence  against  journalists 
marked  progress.  However,  new  incidents  have  been  reported.  Intimidating  statements  by 
state officials on the role of media and NGOs are a cause of concern. The government needs 
to  engage  constructively  with  civil  society  representatives.  The  respect  of  freedom  of 
assembly  and  religion  remains  overall  satisfactory.  However,  restitution  of  church  property 
remains  to  be  addressed  and  state  bodies  should  remain  impartial  in  relation  to  disputes 
between the Serbian and Montenegrin Orthodox churches in Montenegro.  

Sustained  efforts  are  needed  in  the  area  of  women's  rights,  particularly  related  to  the 
insufficient protection of women against all forms of violence, as domestic violence remains 
widespread.  Key  legislation  such  as  a  law  on  the  protection  from  violence  in  the  family 
remains to be adopted. Major legislation such as an anti-discrimination law has not yet been 
adopted. Determined efforts to proceed with the implementation of legislation and strategies 
on  improving  children's  rights  and  socially  vulnerable  groups  are  required.  Regarding 
property  rights,  there  have  been  fewer  complaints  concerning  property  rights  in  2008. 
However, concerns persist over the implementation of restitution legislation. 

Montenegro made some progress with implementing the framework for minority protection. 
Minority  Councils  became  operational  and  were  allocated  funding.  Some  steps  have  been 
taken to improve the situation of the Roma, Ashkali and Egyptian (RAE) communities. Inter-
ethnic  relations  continue  to  be  smooth.  However,  the  social  and  economic  situation  of 
displaced persons and the RAE population remains a matter of serious concern. They continue 
to face very difficult living conditions and discrimination. Implementation of legislation and 
strategies  must  be  pursued  with  more  determination.  Increased  financial  resources  are  also 
required.  The  Law  on  Minority  Rights  and  Freedoms  has  not  yet  been  harmonised  with  the 
Constitution regarding minority representation.  

Regarding displaced persons from Bosnia and Herzegovina and Croatia, a legal framework to 
address their status has been put into place but its effective implementation still needs to be 
ensured. Montenegro must resolve the status of displaced persons from Kosovo and work on 
improving their access to economic and social rights, which remains limited. Their situation 
continues to be a cause for concern. 

Regarding regional issues and international obligations, cooperation of Montenegro with the 
is  satisfactory. 
International  Criminal  Tribunal  for 
Investigation and court proceedings in Montenegro's limited number of domestic war crimes' 
cases  have  made  headway.  Cooperation  with  neighbouring  countries  in  this  field  has 
improved. The case of the survivors and families of deported Bosnian civilians in 1992 was 
settled out of court.  

the  former  Yugoslavia  (ICTY) 

As regards the International Criminal Court, the bilateral immunity agreement with the United 
States does not comply with the relevant EU Common Positions and guiding principles. The 
country needs to align with the EU position. 

Montenegro has continued to participate actively in regional cooperation initiatives, including 
the  South  East  European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council 
(RCC)  and  the  Central  European  Free  Trade  Agreement  (CEFTA).  Montenegro  holds  the 

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chairmanship  of  CEFTA  during  2009.  The  Regional  School  for  Public  Administration 
(ReSPA) in Danilovgrad near Podgorica has become operational. 

Relations with other enlargement countries and neighbouring Member States have continued 
to improve and bilateral cooperation in specific fields has intensified. In particular, progress 
has been achieved towards settling bilateral border issues between Montenegro and Croatia, 
who  have  been  co-operating  on  preparing  their  submission  to  the  International  Court  of 
Justice on the Prevlaka border issue. 

The economy of Montenegro decelerated markedly in 2009. As a result, public finances came 
under severe pressure and public debt further expanded. However, the economy did not slip 
into  a  deep  recession,  and  the  external  financing  risks  did  not  fully  materialise.  Despite  the 
economic crisis, the government pushed forward a series of structural reforms. Enhancing the 
rule of law and upgrading infrastructures remain key challenges for economic development. 

As regards the economic criteria, the country has made further progress towards establishing 
a  functioning  market  economy.  In  order  to  enable  it  to  cope  in  the  medium  term  with 
competitive pressure and market forces within the Union, it should continue comprehensive 
reforms to reduce structural weaknesses.  

External  imbalances  and  inflation  were  reduced  as  a  result  of  the  deceleration  of  economic 
activity.  Labour  market  indicators  continued  to  improve,  despite  the  slow  down  in  growth. 
Foreign  parent  banks  sustained  financing  to  their  local  subsidiaries,  thus  supporting  the 
stability  of  the  financial  system  in  the  absence  of  a  lender  of  last  resort.  The  budget  deficit 
was  reduced  by  curtailing  spending  and  by  receipts  from  the  privatisation  of  large  network 
systems. Public debt grew, but remained at moderate levels. Legislation to enhance certainty 
about  property  rights  has  been  adopted.  Legislative  simplification  proceeded  in  view  of 
removing business barriers and the backlog in bankruptcy cases decreased. The state’s role in 
the  economy  increased,  in  response  to  the  unfolding  crisis,  but  it  was  limited  to  providing 
loans and loan guarantees for key sectors of the economy.  

However, conditions for Montenegro’s manufacturing sector deteriorated sharply, as it was hit 
by  contracting  external  demand  and  by  falling  international  prices  for  steel  and  aluminium. 
Restructuring  of  the  aluminium  and  steel  plants  remain  a  considerable  challenge.  The 
financial  system  suffered  a  severe  liquidity  crunch  at  the  end  of  2008  and  early  2009  as  a 
result of large deposits withdrawals. Interest rates remained high despite liquidity injections in 
the banking system. Public finances came under severe pressure while government guarantees 
on loans piled up. The capital markets went through a severe correction, suffering substantial 
losses. A mismatch persists between labour supply and demand, forcing employers to resort to 
foreign  workers  even  though  unemployment  is  high.  The  informal  sector  remains  an 
important challenge. 

Montenegro  made  further  progress  in  aligning  with  European  standards.  The  Interim 
Agreement  continued  to  be  smoothly  implemented  and  the  country's  track-record  in 
implementing  its  obligations  under  the  SAA  is  being  built.  Good  progress  was  achieved  in 
consumer protection and research and in some areas of internal market and justice, freedom 
and security. Some progress was achieved in free movement of capital, customs and taxation, 
employment,  agriculture  and  rural  development,  energy,  statistics  and  in  remaining  areas 
under  justice,  freedom  and  security.  Further  sustained  efforts  are  needed  in  these  fields. 
Particular  efforts  are  needed  to  improve  implementation  capacity.  Progress  in  environment, 
transport, information society and media has been uneven. Limited progress can be reported 

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in  accreditation  and  conformity  assessment,  metrology,  market  surveillance  and  industrial 
policy. 

As  regards  the  internal  market,  Montenegro  has  made  some  progress  in  addressing  related 
European Partnership priorities. Preparations in the area of free movement of goods continued. 
Good  progress  was  achieved  in  consumer  protection  implementation.  Market  surveillance 
needs further development. Improvement of institutional and administrative capacities, inter-
institutional cooperation and transposition of product-specific acquis is needed. 

In  the  areas  of  free  movement  of  persons,  services  and  right  of  establishment,  Montenegro 
partially  meets  alignment  priorities.  The  Law  on  Employment  and  Work  of  Foreigners  was 
adopted, foreseeing work permits and quotas for labour force and cross-border services. The 
liberalisation  of  the  services  market  further  advanced.  The  institutional  framework  for  the 
supervision of the banking and non-banking financial sector continued to improve but further 
strengthening is needed. A strategy for the postal services sector has been adopted. New rules 
for  business  reporting  and  supervision  requirements  increased  accounting  transparency  and 
auditing  effectiveness.  However,  further  efforts  to  consolidate  progress  are  need  in  these 
areas. 

Progress in the area of free movement of capital was achieved by the adoption of the Law on 
Property  Relations  and  the  Law  on  State  Property.  Equal  treatment  is  not  yet  granted  to 
foreigners  as  regards  the  purchase  of  agricultural  land,  for  which  the  new  law  provides  the 
option of long-term leasing. 

The  alignment  of  customs  and  taxation  legislation  with  the  acquis  is  on  track.  However, 
further alignment is needed in the areas of origin, transit and simplified procedures, customs 
valuation  and  fees.  The  fight  against  corruption  and  tackling  the  informal  economy  remain 
major challenges. 

In the area of competition, alignment with the acquis continued. Further strengthening of the 
competition  framework  and  upgrading  of  administrative  capacities  are  required,  especially 
with reference to state aid control.  

In  the  area  of  public  procurement  Montenegro  continued  to  align  its  legislation  with  the 
acquis.  Training  and  awareness-raising  activities  were  carried  out.  However,  further 
alignment of legislation and strengthening of administrative capacity are needed.  

Some  progress  can  be  reported  in  the  area  of  intellectual  property  rights.  The  new  Law  on 
Patents  strengthened  the  legislative  framework.  The  procedure  of  recognition  of  rights  at 
national level was improved. However, preparations are at an early stage, and institutional and 
enforcement capacity and public awareness need further development. 

Montenegro  continued  to  make  progress  in  the  area  of  social  policies  and  employment. 
However,  legislation  still  need  to  be  further  aligned  towards  European  standards  and  the 
administrative  capacity  in  the  area  of  social  policies  and  employment,  in  particular  to 
effectively implement new legislation needs to be enhanced. Further efforts are also required 
to strengthen administrative and institutional capacity in the area of public health policy. 

Further progress has been made in the areas of education and culture. There has been good 
progress  on  research,  particularly  on  strengthening  the  institutional  framework  and  through 
participation in the Seventh Framework Programme for Research and Development. 

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Montenegro  adopted  the  necessary  legislation  with  a  view  to  acceding  to  the  World  Trade 
Organisation.  

As regard sectoral policies, in the area of industrial policy Montenegro has started to address 
alignment  priorities  while  it  partially  meets  them  as  regards  SMEs  policy.  Further  effort  is 
required to remove existing business barriers, speeding up licences and permits, and to fully 
implement measures, such as SME credit guarantees, incubators and clusters.  

Some progress  can be reported in the area of  agriculture  and  rural development, as well as 
fisheries,  as  regards  the  reform  of  legislation  and  the  adoption  of  national  programmes  and 
strategies. However, implementation needs to be enhanced. As regards food safety, veterinary 
and  phytosanitary  policy,  there  has  been  some  progress  mainly  on  strengthening  the 
legislative  framework,  however  an  integrated  food  safety  system  is  yet  to  be  established. 
Progress on strengthening the administrative capacity of the Ministry for Agriculture, Forestry 
and Water Management remains limited and needs upgrading also in view of its preparation 
for IPARD. 

Progress  in  the  area  of  environment  remains  uneven.  While  progress  can  be  reported  on 
adoption  of  horizontal  legislation,  implementation  and  enforcement  need  to  be  further 
strengthened. The Environmental Protection Agency needs to be equipped with the necessary 
resources to perform its functions. Insufficient environmental protection, especially in coastal 
areas and national parks, remains a cause for concern. 

As for transport policy, preparations are moderately advanced in road and railway but still at 
an early stage in air and maritime transport. Progress on safety aspects of all transport modes 
has been limited. Montenegro should develop a coherent strategy for the development of its 
transport  sector.  Considerable  efforts  are  required  to  establish  adequate  administrative 
capacity. 

Some  progress  can  be  reported  in  some  energy  sectors.  There  have  been  steps  towards 
meeting  the  requirements  of  the  Energy  Community  Treaty,  but  further  efforts  are  needed. 
The promotion of energy efficiency and renewable energy resources need to be prioritised. 

Some  progress  has  been  made  on  information  society  and  media  with  the  agency  for 
electronic  communications  and  postal  services  becoming  operational.  However,  concerns 
remain  on  the  independence  of  the  Electronic  Communications  Agency  and  delays  in  the 
implementation  of  the  Law  on  Electronic  Communications.  The  relevant  Montenegrin 
authorities need to urgently address and resolve the issue of the competence and procedure for 
the allocation of broadcasting frequencies. Legislation and practice need to be brought in line 
with European standards in this area. 

Montenegro's preparations in Public Internal Financial Control (PIFC) and external audit are 
at  an  early  stage  of  implementation.  Basic  legislation  on  PIFC  has  now  been  adopted. 
Qualified state auditors and audits are increasing and the State Audit Institution is developing 
its administrative capacities. 

The  2009-2012  government  strategy  for  statistics  gives  the  statistical  office  of  Montenegro 
the  coordinating  role  for  developing  the  statistical  system  in  compliance  with  the  European 
Statistics Code of Practice. Progress was made in sector and macroeconomic statistics, while 
it  was  limited  for  classifications  and  registers.  Legislative  framework  and  administrative 
capacity need further improvement. 

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In  the  area  of  justice,  freedom  and  security,  Montenegro  has  continued  to  address  key 
challenges.  However,  sustained  efforts  to  carry  through  implementation  of  reforms  are 
required.  Regarding  visa  liberalisation,  Montenegro  has  made  significant  efforts  in  all  areas 
included in the roadmap. On the basis of the progress achieved, the Commission proposed in 
July 2009 lifting the visa obligation for Montenegrin citizens, on condition that Montenegro 
meets the outstanding roadmap benchmarks before the Council takes its decision.  

Some  progress  has  been  made  in  the  area  of  visa  policy.  Implementation  of  the  visa 
facilitation and readmission agreements has proceeded. A new Law on Foreigners and a new 
Visa Regulation based on the Schenghen rules have entered into force. However, Montenegro 
should  make  further  efforts  to  improve  its  own  visa  regime  and  to  bring  it  in  line  with 
European  standards.  Its  administrative  and  technical  capacities  for  issuing  visas  need  to  be 
substantially reinforced.  

Regarding  border  management,  Montenegro  has  made  good  progress  in  the  area  of  border 
control.  It  has  continued  to  implement  its  integrated  border  management  strategy.  Some 
improvement has been noted in terms of equipment at border crossing points. However, new 
legislation  on  state  border  control,  including  border  surveillance,  remains  to  be  adopted. 
Linking  all  border  crossing  points  into  an  online  network  with  access  to  the  national  and 
Interpol database needs to be addressed as a priority. 

Some progress can be reported in the areas of asylum and migration. In the field of asylum the 
legislative and institutional framework is almost complete. However, proper implementation 
of legislation must be ensured. In the area of migration, key legislation has been adopted. A 
detention centre for illegal migrants is still to be constructed. Further efforts are required to 
implement  legislation.  Administrative  capacity  and  institutional  co-operation  need  to  be 
enhanced. The status of displaced persons must be addressed.  

Montenegro continued to make some progress in the area of money laundering, however the 
reduction  in  the  number  of  investigations  and  suspicious  transaction  reports  is  of  concern. 
Determined efforts are required to enhance the  competencies and investigative  capacities of 
the  authorities,  in  particular  of  the  financial  intelligence  unit.  Money  laundering  remains  a 
serious cause for concern and further efforts are needed to prevent and combat it. 

Montenegro has made some progress in anti-drugs policy. The national strategic response to 
narcotics and the associated action plan are being implemented. The institutional framework 
for  fighting  drug  crime  has  been  strengthened  and  seizure  levels  have  increased.  However, 
drug trafficking by organised crime groups remains a matter of serious concern. Montenegro 
needs to intensify its efforts in the area of anti-drugs policy. 

Some progress can be noted in the area of policing, through the continuation of police reform 
and the establishment of a track record in the area of internal control. However, professional 
capacity, equipment and infrastructure need to be further improved.  

The institutional, legal and administrative capacity to fight against organised crime has been 
strengthened. However, organised crime remains a matter of serious concern which affects the 
rule  of  law  and  business  environment.  Investigation  and  prosecution  capacities  remain 
insufficient, resulting in rare final convictions in cases of organised crime. Enhancing human 
resources and strengthening inter-agency cooperation must be addressed as a priority. There 
has  been  good  progress  in  the  fight  against  trafficking  of  human  beings.  Montenegro 
continues  to  be  used  primarily  as  a  transit  country.  Investigations  of  cases  concerning 

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trafficking in human beings have been conducted and convictions have been passed. Further 
measures  are  necessary  to  enhance  the  capacity  of  the  responsible  authorities  to  identify 
potential victims. 

Some progress in the area of personal data protection was achieved with the adoption of the 
legal  framework.  However,  the  law  is  not  fully  in  line  with  the  acquis  and  the  supervisory 
authority has not yet been established. 

Serbia 

Serbia  has  made  progress  in  meeting  the  political  criteria  and  addressing  key  European 
Partnership  priorities.  The  government  has  demonstrated  its  commitment  to  bringing  the 
country  closer  to  the  European  Union  by  undertaking  a  number  of  initiatives  including  the 
implementation  of  provisions  of  the  Interim  Agreement.  Cooperation  with  the  International 
Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY)  has  further  improved,  however  ICTY 
indictees Ratko Mladić and Goran Hadžić are still at large.  

A number of initiatives were taken to consolidate democracy and the rule of law. However, 
further reforms are needed to ensure that the new constitutional framework is implemented in 
line with European standards, particularly in the area of the judiciary.  

Parliament revised its rules of procedure and this has led to improvements in its work and the 
legislative process. The adoption of a new Law on Political Parties has, moreover, established 
clearer and stricter rules for party registration. Election legislation, however, has not yet been 
revised to bring it fully in line with European standards. Parliament has not sufficiently used 
its  powers  of  oversight  over  the  executive  and  the  capacity  of  parliamentary  committees 
remains weak.  

The government has demonstrated a high degree of commitment to European integration and 
has been active in preparing legislation across a range of areas and implementing a national 
programme  on  European  integration.  However,  insufficient  attention  has  been  paid  to 
effective  implementation  of  existing  laws  and  impact  assessment.  Planning  of  government 
work needs to be strengthened and greater coordination between ministries ensured.  

The public administration has good overall capacity. The Serbian European Integration Office 
has  been  functioning  well  however  administrative  capacity  on  European  integration  within 
line  ministries  needs  to  be  strengthened.  Overall  reform  has  been  slow.  Transparency, 
impartiality professionalism and accountability have to be improved and greater priority given 
to  fighting  corruption  and  supporting  the  work  of  independent  bodies.  Independent  and 
regulatory  bodies  function  relatively  well,  within  the  constraints  imposed  by  limited 
resources. 

There has been some progress in terms of civilian oversight of the security forces, with more 
involvement of the parliamentary committee for security and defence. Legislative reform has 
however still to be completed.  

As regards the judicial system, a package of laws was adopted, introducing a broad reform of 
the  judiciary  and  a  reorganisation  of  the  court  system.  Two  new  bodies  –  the  High  Judicial 
Council  and  the  State  Prosecutorial  Council  –  were  established.  However,  there  remain 
concerns about the way in which the reappointment procedure for all judges is being carried 
out  and  the  risk  that  the  lack  of  transparency  could  lead  to  long  term  politicisation  of  the 

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judicial  system.  The  backlog  of  court  cases  has  not  been  reduced  and  court  procedures  still 
need to be streamlined and an efficient court management system introduced.  

Serbia  made  progress  in  the  fight  against  corruption.  The  law  enforcement  authorities  have 
shown  higher  commitment  to  fighting  corruption,  leading  to  the  arrests  of  several  suspects, 
and  a  number  of  high-profile  cases  have  been  opened.  Parliament  has  elected  the  executive 
board  of  the  new  Anti-Corruption  Agency  which  will  become  operational  in  2010. 
Corruption, however, remains prevalent in many areas and continues to be a serious problem. 
Public procurement and privatisation are particularly vulnerable sectors. Final convictions in 
corruption cases are rare. There are shortcomings in the Law on the Anti Corruption Agency 
and  there  is  insufficient  supervision  of  the  financing  of  political  parties  and  of  cases  of 
possible conflict of interest.  

The legal and institutional framework for human rights and the protection of minorities is in 
place and civil and political rights are broadly respected. However, existing constitutional and 
legal guarantees need to be fully enforced.  

There  has  been  some  improvement  in  the  prevention  of  torture  and  ill-treatment.  The  State 
Ombudsman  reported  a  decrease  in  the  number  of  cases  of  ill-treatment.  However,  some 
allegations  against  the  police  have  not  been  fully  investigated.  As  regards  access  to  justice, 
there was no progress in adopting legislation and establishing a comprehensive system of free 
legal  aid.  Regarding  prison  system  reform,  initial  steps  were  taken  to  introduce  a  system  of 
alternative  sanctions  however  the  practical  effects  of  these  measures  have  been  limited. 
Overcrowding, violence and drug abuse remain a concern.  

Freedom  of  expression  is  generally  protected  under  the  Constitution  and  hate  speech  is 
prohibited. In practice, there have been incidents involving hate speech, threats and physical 
attacks  against  journalists,  human  rights  defenders  and  the  lesbian,  gay,  bisexual  and 
transgender  (LGBT)  population,  and  the  perpetrators  have  not  been  brought  to  justice.  As 
regards the media, the Law on Public Information was amended introducing additional media 
regulation.  Concerns,  however,  have  been  expressed  by  professional  associations  and 
international organisations over the lack of transparency and lack of public consultation prior 
to  the  adoption  of  the  amendments.  There  are  concerns,  moreover,  that  some  of  the  new 
provisions,  such  as  the  severity  of  penalties  for  violating  professional  norms,  may  have  the 
effect  of  infringing  on  media  freedom.  The  right  to  freedom  of  assembly  and  association  is 
provided  for  in  the  Constitution  and  has  been  further  enhanced  by  the  new  Law  on 
Associations.  These  freedoms  are  generally  protected  however  a  planned  Belgrade  Pride 
Parade  had  to  be  cancelled  in  September  2009  at  the  last  minute  amid  threats  of  violence 
against the organisers and participants by extremist groups.  

Civil  society  continues  to  play  an  active  part  in  the  social,  economic  and  political  life  of 
Serbia. The new Law on Associations has clarified the legal status of NGOs. There have been 
some efforts within the Serbian administration to improve cooperation with civil society but 
this needs to further developed.  

There  are  constitutional  guarantees  in  place  allowing  for  freedom  of  religion,  and 
discrimination on religious grounds is prohibited. However, the implementation of the 2006 
Law on Churches and Religious Communities has produced discriminatory effects regarding 
the registration of so-called "non-traditional communities".  

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The  legal  provisions  on  the  protection  of  economic  and  social  rights  are  largely  in  place. 
Greater emphasis now needs to be paid to ensuring more effective enforcement of legislation. 
A national strategy to improve the position of women and promote gender equality has been 
adopted and discrimination based on gender is prohibited. However, a specific law on gender 
equality has not yet been adopted and the protection of women against violence needs to be 
considerably strengthened. Concerning children’s rights, a national strategy for the protection 
of children from violence was adopted. More concerted efforts are needed to be taken in order 
to  increase  awareness  of  the  situation  of  socially  vulnerable  groups  and  persons  with 
disabilities  and  ensure  that  their  rights  are  protected.  A  Law  on  the  Prohibition  of 
Discrimination  was  adopted  which  further  develops  the  legal  framework  for  the  protection 
against  discrimination.  In  practice,  however,  there  is  ongoing  discrimination,  particularly 
against vulnerable groups such as Roma, persons with disabilities and the LGBT population.  

As regards property rights the lack of a clear legal basis for property restitution continues to 
prevent the proper launching of this process.  

The  legal  framework  is  in  place  providing  for  minority  rights  and  cultural  rights.  The  new 
Law  on  National  Minority  Councils  has  also  been  adopted.  The  Ministry  for  Human  and 
Minority  Rights  has  played  an  important  role  in  raising  awareness  and  promoting  minority 
rights, as has the state and provincial ombudsmen. In addition to the Constitution, new anti-
discrimination legislation explicitly prohibits the discrimination against ethnic minorities.  

As regards Vojvodina no agreement  has  been reached at national level on the adoption of a 
new  Statute.  An  agreement  on  the  restructuring  of  the  Government  Coordination  Body  for 
southern  Serbia  was  reached.  However  the  situation  in  southern  Serbia  deteriorated  in  July 
2009 following a number of attacks on the Serbian gendarmerie. The situation in Sandžak is 
volatile; divisions within the Muslim community have continued and there have been several 
outbreaks of violence. 

The number of refugees and internally displaced persons (IDPs) in Serbia remains high. The 
situation  for  IDPs  continues  to  be  very  difficult  and  they  are  faced  with  many  obstacles  in 
exercising their social rights.  

During the Serbian Presidency of the Roma decade, Serbia adopted a national strategy for the 
improvement of the status of the Roma. However, further efforts are needed to ensure its full 
implementation. The Roma population continues to endure very difficult living conditions and 
frequent discrimination.  

As regards regional issues and international obligations Serbia has made further progress in 
its cooperation with the ICTY. In his address to the UN Security Council in June 2009, the 
ICTY Chief Prosecutor stated that the Serbian authorities have responded adequately and in a 
timely manner to specific requests for assistance and that cooperation must continue and lead 
to  further  concrete  and  positive  results.  A  number  of  search  operations  have  taken  place, 
however ICTY indictees Ratko Mladić and Goran Hadžić are still at large. Full cooperation 
with  the  ICTY  remains  an  international  obligation  and  a  key  priority  of  the  European 
Partnership. 

Serbia, together with its neighbours, should address the regional impunity gap, including by 
taking steps towards extradition agreements covering war crimes cases. 

Serbia  continued  to  actively  participate  in  regional  initiatives,  including  the  South  East 
European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council  (RCC)  and  the 

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Central European Free Trade Agreement (CEFTA). Bilateral relations with other enlargement 
countries and neighbouring EU Member States have improved. However, further progress is 
required  towards  finding  definitive  solutions  to  the  various  bilateral  issues  which  remain 
open, particularly as regards borders. Regional cooperation was, however, affected by Serbia's 
approach to participation by Kosovo in regional fora. 

Serbia contests Kosovo's10 declaration of independence and has pursued legal and diplomatic 
measures to this effect, including through the International Court of Justice (ICJ). The Serbian 
government  does  not  have  official  contact  with  the  Kosovo  authorities,  insisting  on  dealing 
only  with  UNMIK  and  EULEX.  The  government  maintained  parallel  structures  in  Kosovo 
and  held  local  by-elections  while,  at  the  same  time,  discouraging  Kosovo  Serbs  from 
participating in municipal elections organised by the Kosovo authorities. As regards trade, the 
Serbian government does not recognise Kosovo's customs stamps that have been notified to 
the  European  Commission  and  which  are,  according  to  UNMIK,  consistent  with  the 
provisions  of  UNSCR  1244.  Serbia's  refusal  to  recognise  Kosovo's  customs  stamps  raises 
serious concerns. Serbia and Kosovo need to reach pragmatic solutions enabling key regional 
fora to continue fulfilling their role in advancing regional cooperation and development.  

The  Serbian  government  has  taken  first  steps  to  cooperate  with  the  EU  rule  of  law  mission 
(EULEX) but these efforts need to be further strengthened. In September 2009 EULEX and 
Serbia signed a protocol on police cooperation. 

The  economy  of  Serbia  was  severely  hit  by  the  current  global  economic  crisis.  Growth 
slowed down by the end of 2008 and the economy entered into recession in 2009. As a result, 
macro-economic  stability  has  deteriorated.  Moreover,  previously  expansionary  policies  and 
the lack of discipline have led to a significant fiscal deterioration.  

As  regards  the  economic  criteria,  Serbia  made  only  limited  further  progress  towards 
establishing a functioning market economy. Further efforts will be needed to enable Serbia to 
cope  in  the  medium-term  with  the  competitive  pressures  and  market  forces  within  the  EU. 
Structural reforms need to be accelerated.  

The  liquidity  of  Serbian  banking  system  has  been  maintained  and  Serbian  banks  are  well 
capitalised  and  by  and  large  profitable.  On  the  external  side,  the  Serbian  economy  is  going 
through a process of rapid external adjustment. This is reflected in a substantial decrease in 
the  current  account  deficit.  Foreign  exchange  reserves  remained  stable.  Consensus  on  the 
fundamentals of a market economy has been maintained, but the government lacks a medium-
term structural reform strategy. 

In response to the deepening economic crisis, Serbia requested assistance from the IMF and 
the  EU  and  agreed  to  undertake  a  number  of  fiscal  measures  to  reduce  overall  expenditure. 
However, as the crisis aggravated, the IMF programme was revised. Measures to improve the 
medium-term  public  finance  sustainability  are  lacking.  The  monetary  policy  framework  for 
inflation targeting remained difficult to implement and risks undermining the credibility of the 
central bank. Inflation remained relatively high. Some progress was made in privatisation of 
socially-owned  companies,  but  not  with  the  state-owned  companies,  thus  affecting  the 
dynamism in the private sector. Unemployment remains at a persistently high level. Excessive 
administrative requirements  continued to hamper market entry and exit. Legal predictability 

10 

Under UNSCR 1244/99. 

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needs to be improved, in particular with respect to effective enforcement of property rights. 
The informal sector remains an important challenge. 

Serbia has made progress in aligning its legislation and policies to European Standards and 
has  started  to  implement  the  Interim  Agreement  according  to  the  provisions  and  schedules 
established in that agreement. Customs duties were lowered with effect from 30 January 2009, 
and  relevant  measures  were  taken  in  the  areas  of  competition,  state  aid  and  transit  traffic. 
Furthermore,  Serbia  has  adopted  important  legislation  in  a  number  of  areas  including 
agriculture, environment, employment, competition, public procurement and justice, freedom 
and security. Administrative capacity has been improved in key areas for the implementation 
of  the  Stabilisation  and  Association  Agreement.  However,  Serbia  needs  to  make  further 
efforts to ensure effective implementation and enforcement of EU-related legislation.  

With regard to internal market, Serbia has made some progress in aligning its legislation, and 
strengthening  institutional  capacities.  There  has  been  good  progress  in  the  field  of  free 
movement  of  goods;  the  adoption  of  new  legislation  on  standardisation  and  conformity 
assessment has set the basis for further alignment with the acquis. The institutional capacities 
of  the  Standardisation  Institute  and  the  Accreditation  Body  were  improved  and  Serbia  has 
increased the number of adopted European standards. Some progress was made in the field of 
consumer  protection  with  the  adoption  of  legislation  on  product  safety  and  electronic  trade. 
However, administrative capacity needs to be further improved. Legislation on accreditation 
and metrology has not yet been adopted. Serbia needs to step up efforts to establish a market 
surveillance system. New legislation on consumer protection has yet to be adopted. 

Serbia is moderately advanced in the areas of movement of persons, services and the right of 
establishment. Some progress was made in terms of legislative alignment in the area of postal 
services.  With  regard  to  financial  services,  a  roadmap  was  prepared  with  the  aim  of 
implementing new banking regulations. However, a number of laws are missing or are not in 
line with European standards, notably in the areas of banking regulation. In the area of free 
movement  of  capital,  Serbia  needs  to  continue  its  efforts  to  fully  liberalise  current  account 
transactions and lift restrictions on short term credit and portfolio investments.  

Serbia  has  made  good  progress  in  the  area  of  customs.  The  capacity  of  its  customs 
administration  was  enhanced  and  a  set  of  legal  acts  was  adopted  in  order  to  implement  the 
Interim  Agreement.  However,  further  alignment  with  the  EU  Customs  Code  is  required,  in 
particular with regard to transit and risk analysis. Serbia has taken steps to further develop its 
legislative  framework  in  the  area  of  taxation.  Tax  collection  procedures  have  improved  as 
have the enforcement capacities of the tax administration. Serbia has to further improve the 
collection of registered debts and to continue alignment in the area of excise duties and VAT. 

Serbia  has  made  good  progress  in  the  area  of  competition  and  state  aid  by  adopting  new 
legislation.  The  Commission  for  the  Protection  of  Competition  needs  to  strengthen  its 
capacity to carry out economic analysis. Moreover, an independent state aid authority has still 
to be established.  

Serbia has made good progress in the area of public procurement with the  adoption of new 
legislation. However, members of the new Commission for the Protection of Bidders' Rights 
have  still  to  be  appointed.  Serbia  has  continued  to  make  progress  in  the  enforcement  of 
intellectual property rights. The administrative capacity of the Intellectual Property Office has 
improved.  However,  the  questions  on  financial  independence  need  to  be  resolved  and  the 

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problem  of  the  shortage  of  competent  judges  addressed  in  order  to  ensure  effective 
enforcement of intellectual property rights.  

In  the  area  of  employment  policy  good  progress  was  made  with  the  adoption  of  several 
important  laws  and  of  the  National  Strategy  for  Employment  for  2009.  The  record  of 
implementing employment measures and policies has improved, but coordination with other 
policies  needs  to  be  strengthened.  Some  progress  can  also  be  noted  in  the  field  of  social 
policies  although  the  legislative  framework  needs  to  be  developed  further  and  the  existing 
legislation properly implemented. There has been some progress in the field of public health 
policy,  mainly  in  primary  healthcare  reform  and  disease  prevention.  Further  efforts  must  be 
made towards the alignment with European standards. 

Progress  has  been  made  in  the  areas  of  education  and  culture.  In  the  area  of  science  and 
research and innovation Serbia has made important efforts in promoting research cooperation 
and participating in projects under the Seventh EC Framework Programme for Research and 
Development.  However,  substantial  efforts  are  needed  by  Serbia  to  strengthen  its  national 
research capacity and to ensure further integration into the European Research Area.  

Serbia's preparations to join the WTO are well advanced and a number of WTO compatible 
laws have been adopted. 

With  respect  to  sectoral  policies,  in  the  areas  of  industry  and  SMEs,  the  institutional 
framework  has  improved  and  Serbia  has  started  implementing  its  SME  strategy  objectives. 
However,  a  modern  industry  policy  strategy  in  line  with  the  EU  approach  has  not  yet  been 
adopted.  

There  has  been  progress  in  alignment  with  the  acquis  in  the  areas  of  agriculture  and  rural 
development with the adoption of important framework laws. This is also the case with regard 
to food safety however little progress has been made on the upgrading of food and by-food 
establishments. There has been some progress in the veterinary  and phytosanitary areas but 
only limited progress in the upgrading of laboratories for the control of the food chain safety. 

Serbia  has  made  good  progress  in  the  area  of  environment,  notably  with  the  adoption  of  a 
large  package  of  laws  and  with  the  ratification  of  international  conventions.  Institutional 
capacity  and  technical  and  human  resources,  however,  remain  weak,  especially  at  the  local 
level. Further efforts need to be invested in the adoption of water related legislation and the 
overall environmental capacity building.  

In  the  area  of  transport,  a  new  Law  on  Road  Safety  has  been  adopted  and  road  tolls  for 
domestic and foreign vehicles have been harmonised. The European Common Aviation Area 
Agreement  (ECAA),  the  Montreal  Convention  and  the  Horizontal  Agreement  on  Certain 
Aspects of Air Services have been ratified. However, problems have arisen regarding Serbia's 
compliance with market access obligations under the ECAA. More generally, further efforts 
are required to implement the first transitional phase of the ECAA and improve coordination 
between  the  Ministry  of  Infrastructure  and  the  Civil  Aviation  Directorate.  Rail  transport 
remains in need of major restructuring.  

Serbia  has  made  some  progress  in  the  energy  sector.  Further  efforts  are  needed  to  comply 
with  the  Energy  Community  Treaty  requirements,  and  to  address  outstanding  issues  in 
relation to environmental aspects in the energy sector and nuclear safety. As regards security 
of  supply,  some  progress  has  been  made  in  increasing  gas  reserves  however  natural  gas 
interconnections between Serbia and other countries of the region remain limited. 

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In the areas of information society and the media, progress was made through the adoption of 
several  pieces  of  legislation.  Serbia  also  ratified  the  European  Convention  on  Transfrontier 
Television.  Institutional  and  regulatory  capacity  is  still  limited  and  progress  remains 
contingent on the implementation of the legislation.  

Progress was made in the area of financial control. A comprehensive policy paper on public 
internal  financial  control  (PIFC)  was  adopted  by  government.  The  Budget  System  Law, 
which also  includes  the  legal  basis  for  PIFC entered  into  force.  Preparations  for  the 
introduction of a modern and effective system of public financial control however remain at 
an early stage. The recently established State Audit Institution is not yet fully operational.  

A new development strategy for statistics has been adopted. Progress has also been reported 
in  the  field  of  sector  statistics  with  the  preparation  and  conduct  of  surveys  and  censuses. 
However, Serbia still needs to put additional efforts into creating a fully operational business 
register and into further strengthening administrative capacity. 

There has been progress in the area of justice, freedom and security. The visa facilitation and 
readmission  agreements  between  Serbia  and  the  European  Community  continued  to  be 
implemented. Serbia made significant efforts in all areas of the visa liberalisation roadmap, in 
particular  regarding  the  introduction  of  new  biometric  passports.  On  the  basis  of  Serbia's 
progress,  the  Commission  in  July  2009  proposed  lifting  the  visa  obligation  for  Serbian 
citizens,  on  condition  that  Serbia  meets  the  outstanding  criteria  before  the  Council  takes  its 
decision.11 

Implementation of the new law on border control has started, but further efforts are needed to 
improve  the  technical  standards  and  equipment  of  certain  border  crossing  points  and  the 
control of the boundary line with Kosovo. 

Serbia  has  made  little  progress  in  the  area  of  asylum.  Despite  some  weaknesses,  asylum 
procedures are by and large satisfactory. However, there has been little forward planning to 
address the potential increase in the number of applications and there is no coordination body 
for the integration of asylum seekers. Good progress was made in the area of migration with 
the  adoption  of  the  migration  management  strategy  and  the  implementation  of  the  Law  on 
Foreigners. However, further efforts are needed to implement newly adopted strategies and to 
improve the monitoring of migration flows.  

Money laundering continues to be an area of concern. The Law on the Prevention and Fight 
against  Money  Laundering  and  Terrorist  Financing  was  adopted.  However,  reports  on 
suspicious  transactions  are  mostly  limited  to  the  banking  sector  and  the  number  of 
investigations and convictions in money-laundering cases remained low.  

Serbia is a major transit country for the smuggling of drugs to Europe. A strategy for the fight 
against  drugs  was  adopted  as  well  as  an  action  plan.  Enforcement  authorities  seized  a  large 
amount of drugs. However, drug trafficking through Serbia remains of serious concern.  

There was some progress in the reform of the police. Capacity building and training as well as 
international  and  regional  cooperation  increased.  However,  strategic  planning  and  internal 
control need to be improved. A national strategy to fight organised crime has been adopted. 
First  steps  have  been  taken  to  improve  the  institutional  and  legal  framework  for  financial 

11 

COM(2009) 366. 

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investigations and seizure of assets. However, the adoption and entry into force of a revised 
new Criminal Procedure Code has been further delayed. Investigative capacities remain weak, 
leading to a low number of final convictions in this area. Sustained efforts are needed in the 
fight against organised crime which remains a matter of serious concern. 

Serbia made some progress in the fight against trafficking in human beings. The Council of 
Europe Convention against trafficking in human beings  was  ratified and an action plan was 
adopted.  Cooperation  between  various  stakeholders,  including  NGOs,  in  the  fight  against 
trafficking has improved. However, the number of final convictions in this area remains low, 
while the percentage of under-age victims continued to rise. 

Some  progress  has  been  made  in  setting  up  the  legal  and  institutional  framework  for  the 
protection  of  personal  data.  However,  further  efforts  are  needed  to  fully  align  the  existing 
legislation  with  European  standards  and  ensure  proper  implementation  of  the  relevant 
provisions. 

Kosovo 

Kosovo  has  made  some  progress  in  addressing  key  European  Partnership  priorities,  in 
particular  by  strengthening  its  legal  framework  with  respect  to  the  political  criteria.  The 
priority  must  now  be  implementation.  In  the  second  year  following  the  declaration  of 
independence, Kosovo's institutions are in place and fulfil their responsibilities in cooperation 
with  the  relevant  international  organisations.  However,  the  capacity  of  the  public 
administration and of the assembly is particularly in need of strengthening. Sustained efforts 
are  needed  on  judiciary  reform  and  to  step  up  the  fight  against  corruption,  organised  crime 
and  money  laundering.  Cooperation  in  practice  with  the  EU  rule  of  law  mission  (EULEX) 
does not match political commitments and needs to be improved in a number of fields within 
its mandate.  

The security situation in Kosovo is stable but fragile. There have been a number of incidents, 
including vandalisation of EULEX property. Overall, public order has been maintained. The 
Kosovo  authorities  do  not  exercise  full  control  throughout  the  territory  of  Kosovo,  in 
particular  in  the  north.  Parallel  structures  continue  to  operate  and  parallel  municipal  by-
elections  have  been  recently  held.  The  Kosovo  government  needs  to  better  integrate  all 
communities, in particular the Kosovo Serbs, and to consolidate the rule of law, with EULEX 
support.  The  Kosovo  Serb  community  needs  to  engage  more  constructively  with  Kosovo's 
institutions  to  increase  the  benefits  of  EU  support  and  the  European  perspective.  The 
upcoming municipal elections and extended decentralisation will be of particular relevance in 
this  context.  Belgrade's  support  is  expected  in  this  regard.  Further  efforts  for  reconciliation 
would contribute to enhancing stability in the region and to socio-economic development. 

Regarding  democracy  and  the  rule  of  law,  Kosovo's  authorities  have  largely  respected  the 
relevant constitutional provisions in their work. However, there has been limited progress in 
consolidating the rule of law in Kosovo. 

The  assembly  annual  work  plan  for  2009  has  been  adopted  and  is  in  line  with  the 
government’s  legislative  strategy.  However,  the  assembly's  capacity  to  scrutinise  draft 
legislation  and  monitor  its  implementation  after  adoption  is  weak.  Parliamentary  oversight 
over  the  executive  is  limited.  In  particular,  the  capacity  of  the  Committee  on  European 
Integration to oversee the adoption of legislation compatible with EU standards  needs to  be 
enhanced. 

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The  main  structures  of  government  are  in  place  and  political  stability  in  Kosovo  has  been 
maintained.  Some  progress  can  be  noted  in  the  area  of  local  government  administration 
reform. A revised, and improved, European Partnership Action Plan was adopted in August. 
Kosovo  should  now  focus  on  its  implementation  and  further  prioritisation.  Inter-ministerial 
coordination 
to  drive  Kosovo's  European  reform  agenda  remains  weak.  Effective 
administrative  structures  in  this  area  are  essential  for  fulfilling  Kosovo's  European 
perspective.  The  Agency  for  Coordination  of  Development  and  European  Integration  has 
strengthened its coordination capacity, but lacks the high-level political support to pilot a real 
European integration process. 

There  has  been  some  progress  in  public  administration  reform.  The  review  of  tasks  and 
responsibilities  within  the  public  administration  has  been  completed  and  the  majority  of 
recommendations implemented. However, some key legal acts are yet to be adopted. Political 
interference in the civil service and in the process of public appointments remains a concern. 
Sustained efforts are needed to strengthen capacity throughout Kosovo's public administration 
and  to  establish  the  framework  of  a  professional,  accountable,  independent  and  merit-based 
civil  service  capable  of  effectively  implementing  government  policies.  The  Ombudsman 
office needs to be strengthened further. Public administration in Kosovo remains weak. 

There has been limited progress as regards the judicial system. The reform process is still at 
an early stage. The Constitutional Court has been established and its members nominated. The 
new  court  management  information  system  is  operational  in  most  courts.  The  court  in 
Mitrovica  has  been  re-opened  for  criminal  cases,  with  the  support  of  EULEX.  The  Kosovo 
Judicial  Council  has  been  appointed.  There  has  been  some  progress  in  adjudicating  war 
crimes cases.  

However,  major  efforts  are  needed  to  enhance  the  independence  and  professionalism  of  the 
judiciary in Kosovo. There is a considerable backlog of unresolved cases, related to both civil 
and  criminal  justice.  There  is  no  effective  mechanism  for  disciplinary  proceedings  against 
judges. Constructive efforts from the government and from the Kosovo Serb community are 
needed  to  ensure  the  latter's  integration  in  the  judicial  system.  Kosovo's  judiciary  remains 
weak and inefficient. The rule of law is not effective throughout Kosovo, in particular in the 
north.  

The anti-corruption agency is operational and has strengthened its capacity, but its powers are 
limited. Despite certain measures taken, corruption remains prevalent in many areas and is a 
very serious concern. The legislative framework in this area remains incomplete. There is no 
law on the financing of political parties. The anti-corruption strategy and action plan are yet to 
be  adopted.  Cooperation  among  actors  involved  in  the  fight  against  corruption  needs  to  be 
significantly  enhanced.  The  independence  of  the  anti-corruption  agency  needs  to  be 
guaranteed.  Kosovo  needs  to  develop  a  track  record  of  investigations,  indictments, 
prosecutions and convictions in anti-corruption cases. 

The constitution guarantees human rights and the protection of minorities and lists the main 
international  agreements  and  instruments  directly  applicable  in  Kosovo.  However,  further 
efforts are required to ensure these rights are protected in practice, including determined steps 
to integrate all of Kosovo's communities.  

The  reticence  of  the  Kosovo  Serb  community,  in  particular  in  the  north,  to  participate  in 
Kosovo's institutions is a major obstacle. Sustained efforts are needed to address this both by 

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the  government  and  by  the  Kosovo  Serb  community.  A  more  constructive  approach  from 
Serbia is also necessary. 

There has been limited progress on civil and political rights. As regards access to justice, the 
legal  aid  system  is  functioning,  but  requires  further  strengthening.  Some  progress  has  been 
achieved  with  regard  to  prisons  and  other  correctional  facilities.  However,  there  are  still  a 
number  of  challenges,  notably  as  regards  detention  conditions  for  mentally-ill  and  juvenile 
offenders and their reintegration after release. There has been limited progress as regards the 
prevention of torture and ill-treatment and the fight against impunity. 

Freedom of expression is not fully guaranteed in practice. There have been cases of political 
interference in the work of the media. The legal framework as regards freedom of association 
and assembly has been developed further. 

Civil  society  needs  to  be  integrated  better  in  policy  formulation  and  implementation.  There 
has  been  some  progress  as  regards  freedom  of  religion,  notably  in  terms  of  reconstructing 
religious sites. More remains to be done to promote reconciliation between different religious 
communities. There is no law on missing persons. The issue of compensation for the families 
of missing persons needs to be addressed. 

Economic  and  social  rights  are  not  fully  guaranteed.  The  protection  of  women  against  all 
forms  of  violence  needs  to  be  considerably  strengthened.  Child  trafficking  and  child  labour 
remain a concern. Further efforts are needed to guarantee children's rights. The government 
adopted an action plan for people with disabilities. However, the integration and protection of 
socially  vulnerable  groups  and  people  with  disabilities  is  not  fully  ensured.  Discrimination 
remains  an  issue  of  concern  and  needs  more  government  awareness  campaigns.  Laws  and 
strategies are in place but their implementation is poor. The institutional and legal framework 
in  the  area  of  property  rights  has  been  strengthened.  The  inability  of  the  authorities  to 
implement their decisions throughout Kosovo remains a major obstacle to protecting property 
rights. The security of religious property is generally assured.  

As regards minority rights, cultural rights and the protection of minorities, the legislation in 
force  provides  a  highly  protective  environment  for  minority  and  cultural  rights.  However, 
these  are  not  adequately  guaranteed  in  practice.  There  has  been  little  progress  as  regards 
reconciliation between communities. This is a major challenge for the authorities. The number 
of voluntary returns of refugees and internally displaced persons remains low. Disputes over 
contested land between some municipalities and the Serbian Orthodox Church have still not 
been resolved.  

The  Roma,  Ashkali  and  Egyptian  communities  continue  to  face  very  difficult  living 
conditions  and  frequent  discrimination.  Urgent  measures  are  needed  to  relocate  the  Roma 
families  living  in  hazardous  and  unacceptable  conditions  in  lead-contaminated  areas  in 
northern  Kosovo.  The  authorities  need  to  make  further  efforts  to  reach  out  to  all  minorities 
and to ensure their protection and integration. 

Concerning  regional  issues  and  international  obligations,  during  the  reporting  period 
Kosovo  continued  to  cooperate  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia  (ICTY).  The  EU  continues  to  emphasise  that  regional  cooperation  must  be 
inclusive  in  order  to  be  successful  and  regrets  that  disagreements  regarding  the  manner  of 
Kosovo's participation in regional fora have resulted in Kosovo's absence from key regional 
events.  Kosovo  adopted  new  customs  stamps,  which  were  notified  by  the  Special 

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Representative  of  the  UN  Secretary  General  to  the  European  Commission  and  CEFTA 
partners as compliant with UNSCR 1244/99. Serbia has not recognised the validity of these 
stamps, questioning their compliance with UNSCR 1244/99. Kosovo and Serbia need to reach 
pragmatic  solutions  enabling  key  regional  fora  to  continue  to  fulfil  their  role  in  promoting 
regional cooperation and development.  

The  economy  of  Kosovo  has  been  only  moderately  affected  by  the  crisis  so  far.  GDP 
continued growing, albeit from a very low base, but unemployment remained very high. High 
inflation  has  turned  into  deflation,  following  drops  in  the  prices  of  imports.  Economic 
development  continues  to  be  seriously  impeded  by  weak  rule  of  law,  a  very  limited  and 
poorly  diversified  production  capacity,  and  by  a  weak  transport  and  energy  infrastructure. 
Fiscal policies are driven by ad-hoc demands and lack a systematic link to the medium-term 
policy  framework.  The  stability  of  the  energy  supply  improved,  at  the  cost  of  increasing 
subsidies from the budget.  

As regards the economic criteria, Kosovo has made very little progress towards establishing 
a  functioning  market  economy.  Considerable  reforms  and  investments  must  be  pursued  to 
enable it to cope over the long term with competitive pressure and market forces within the 
Union.  

A  broad  consensus  on  free-market  policies  has  been  maintained.  The  use  of  the  euro,  the 
absence  of  significant  amounts  of  external  debt  and  the  very  low  level  of  exports  have 
shielded  the  economy  from  the  negative  effects  of  the  global  recession.  The  banking  sector 
remained  sound,  profitable  and  well  capitalised.  Economic  growth  was  driven  by  the 
continued expansion of credit and by increased foreign assistance. After a significant surplus 
in  the  previous  year,  the  2008  budget  posted  a  small  deficit.  Fiscal  revenues  increased 
slightly. In June, Kosovo joined the International Monetary Fund and the World Bank. 

However,  the  already  large  trade  deficit  continued  to  widen,  notably  due  to  substantial 
imports of machinery and transport equipment for a major road construction programme. Both 
fiscal and external accounts became even less sustainable, mainly as a result of poor policy 
planning and implementation. Exports fell sharply in 2009, from an already very low base, as 
a  consequence  of  the  economic  crisis.  Economic  statistics  remain  inadequate.  The  cost  of 
finance  remained  high,  as  banks  continued  to  attach  high  risk  premiums  to  business  loans. 
Budget subsidies and transfers increased. The weak rule of law, corruption, prevalent in many 
areas,  and  uncertainty  over  property  rights  continued  to  be  major  impediments  to  economic 
development.  Unemployment  remains  very  high.  Little  progress  was  made  towards  an 
increased  integration  of  Kosovo's  young  population  into  the  labour  market.  The  informal 
sector continues to pose an important challenge. 

Progress  in  aligning  Kosovo's  legislation  and  policies  with  European  standards  is  mixed. 
The legal framework has been developed further in the areas of customs, taxation, education, 
and  policing.  Approximation  is  at  an  early  stage  as  regards  environment,  competition, 
intellectual property, energy and the  free movement  of goods,  persons, services and capital. 
The  implementation  of  European  standards  remains  limited  in  the  areas  of  financial  control 
and statistics, data protection and the fight against money laundering and organised crime. 

In  the  area  of  the  EU  internal  market  there  has  been  some  progress  on  free  movement  of 
goods. However, transposition and implementation of European practices and legislation is at 
an early stage. Administrative capacity remains weak. Alignment is insufficient in the areas of 

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free movement of persons, services and right of establishment. Sustained efforts are necessary 
for progress in free movement of capital, notably to strengthen the financial sector regulation. 

Customs revenue increased due to the improved effectiveness of the customs administration. 
The  Customs  and  Excise  Code  has  been  adopted.  The  legal  provisions  on  customs  are 
compatible  with  European  standards.  However,  the  administrative  capacity  needs  to  be 
substantially reinforced and the fight against corruption needs to be intensified in the area of 
customs. Customs duties are still not collected in northern Kosovo. EULEX customs officers 
monitor  the  two  gates  in  the  north,  which  has  reduced  smuggling  activity  there.  The  legal 
framework  as  regards  taxation  has  been  developed  further  and  lower  tax  rates  have  entered 
into  force.  Further  efforts  are  needed  to  increase  administrative  capacity  in  this  area  and  to 
reduce the size of the informal economy. 

Implementing  legislation  for  public  procurement  has  been  largely  completed  and  the 
Procurement Review Body has been established. However, the implementation of the law in 
practice gives rise to serious concerns. The authorities need to investigate effectively cases of 
alleged  corruption.  Monitoring  the  implementation  of  procurement  contracts  needs  to  be 
significantly strengthened. Procurement officers in Kosovo remain vulnerable to interference 
and intimidation. 

There is still no intellectual property rights strategy. Enforcement mechanisms for industrial 
rights, copyrights and related rights are weak. A Competition Commission has been set up and 
has  investigated  cases  of  alleged  breaches  of  competition  rules.  Kosovo's  competition 
legislation is not fully aligned with European standards. 

The authorities need to streamline the various strategies addressing employment and to ensure 
their implementation. Legislation in the area of health and safety at work and in the area of 
social  services  and  institutional  care  needs  improvement.  In  the  public  health  sector, 
administrative and institutional capacity needs strengthening to improve the quality of health 
care  services.  Little  progress  can  be  reported  in  the  area  of  social  dialogue.  Alignment  to 
European standards as regards education continues. However, institutional reform in this area 
is yet to be completed and policy recommendations need to be better translated into practice. 
In  the  area  of  research,  the  authorities  have  undertaken  initiatives  to  facilitate  cooperation 
with the EU, such as appointing Kosovo's coordinator for the 7th Framework Programme. 

As regards sectoral policies, the institutional and legal framework in the area of industry and 
SMEs  remains  incomplete.  Efforts  have  been  made  in  agriculture,  with  some  progress  as 
regards  land  consolidation  and  farm  diversification.  However,  the  capacity  to  implement 
policies is insufficient. A number of environment framework laws have been adopted. Major 
efforts are needed to implement them and to meet EU environmental standards. 

In  transport,  Kosovo  has  embarked  on  a  major  road  building  programme,  which  contrasts 
with underinvestment in railways. Kosovo continues to participate actively in the Core Regional 
Transport  Network  and  in  the  South-East  European  Transport  Observatory.  However, 
legislation  incompatible  with  European  standards  has  been  adopted  in  the  area  of  aviation. 
The board of the rail regulator is yet to be appointed. The board of the aviation regulator has 
been appointed, but is not yet operational.  

Several  important  laws  are  yet  to  be  adopted  in  the  energy  sector,  which  continues  to  face 
serious  problems.  Power  cuts  remain  frequent.  Continuing  losses  and  low  levels  of  bill 
collection,  despite  some  improvement,  limit  the  sector's  financial  viability.  The  government 

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took  a  decision  to  build  a  new  lignite-fuelled  power  plant,  which  will  need  to  respect 
European  standards.  Kosovo’s  transmission  system  operator  continues  to  face  difficulties  to 
participate as a full partner in regional commercial mechanisms.  

In the area of information society and media, more efforts are needed to implement existing 
legislation  and  strategies.  The  administrative  capacity  and  financial  and  political 
independence  of  the  regulatory  authorities,  such  as  the  Telecommunications  Regulatory 
Agency and Independent Media Commission, require further strengthening. The board of the 
public service broadcaster needs to be appointed. 

Limited progress can be reported as regards financial control and statistics. Continued efforts 
are  needed  to  improve  internal  and  external  audit  capacities.  The  statistical  infrastructure 
remains weak.  

There  has  been  limited  progress  as  regards  justice,  freedom  and  security.  Coordination 
mechanisms  have  been  established  between  the  relevant  agencies  in  the  area  of  border 
management. However, borders remain porous, and police resources and capacities for border 
and  boundary  management  need  strengthening.  Kosovo's  capacity  to  handle  asylum 
applications  remains  limited.  The  reintegration  of  repatriated  persons  is  still  limited.  An 
appropriate readmission framework needs to be developed. 

The  capacity  of  judicial  and  law  enforcement  authorities  to  tackle  money  laundering  is  still 
weak.  Money  laundering  is  not  defined  as  a  crime  in  the  relevant  legislation.  The  existing 
legislative  framework  is  inadequate  and  is  not  being  fully  implemented.  There  is  no 
permanent  structure  to  coordinate  on  the  fight  against  money  laundering.  Reporting  to  the 
Financial Intelligence Centre is limited. Cooperation between this Centre and the tax authority 
remains insufficient.  

During the reporting period, there has been an increase in the quantities of narcotics seized, in 
the  number  of  cases  investigated  and  in  the  number  of  persons  arrested  and  prosecuted. 
Kosovo  has  adopted  a  strategy  and  an  action  plan  to  combat  drug  trafficking.  However, 
cooperation between law enforcement agencies is still weak in this area. The secure storage of 
seized drugs is not fully ensured. Overall, drug trafficking remains a serious concern. 

The basic legislative  framework  as  regards policing is in place.  Public order functions  have 
been  largely  ensured.  Most  police  officers  from  the  Kosovo  Serb  community  south  of  Ibar 
river,  who  left  the  service  following  the  declaration  of  independence,  have  returned  to  their 
stations. However, there have been a number of violent incidents, including targeted damage 
of  EULEX  property.  The  lack  of  a  multi-ethnic  public  order  police  unit  in  the  Mitrovica 
region diminishes police capability to tackle instance of public disorder in the north. The job 
descriptions for senior management police officers, one of whom is a Kosovo Serb, have been 
delayed. There are serious deficiencies as regards investigation capacities and intelligence-led 
policing. There is no strategy for the collection of weapons from the civilian population. The 
security  of  police  evidence  is  not  fully  ensured.  Further  progress  is  needed  in  granting 
EULEX  access  to  key  databases  in  order  to  enable  the  effective  conduct  of  EULEX 
investigations under its executive mandate. 

Organised  crime  remains  a  serious  concern  and  affects  the  rule  of  law  and  the  business 
environment. A strategy and an action plan to fight organised crime have been adopted, but 
the legislative  framework remains incomplete. The  lack  of a witness  protection law and the 
limited  capacity  to  provide  witness  protection  inhibits  police  efforts  in  this  area.  Kosovo 

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remains a source and a place of transit of organised crime activities. It also continues to be a 
source,  a  destination  and  a  transit  route  for  trafficked  persons.  The  identification  of  victims 
and  the  investigation  of  trafficking  crimes  by  Kosovo  law  enforcement  remain  a  concern. 
Organised  crime  is  a  particular  challenge  throughout  Kosovo,  in  particular  in  the  north. 
Regarding  terrorism,  Kosovo  has  adopted  a  strategy  and  an  action  plan,  but  the  legislative 
framework is not yet in place. 

Kosovo  still  lacks  legislation  in  the  area  of  data  protection.  There  is  no  independent  data 
protection supervisory authority. 

Turkey 

Turkey continues to sufficiently fulfil the political criteria. Free and fair municipal elections 
took place throughout the country. Some progress has been achieved in the areas of reform of 
the judiciary, civil-military relations, and cultural rights. The government has begun a process 
of  broad  consultation  with  political  parties  and  civil  society  with  a  view  to  addressing  the 
Kurdish  issue.  However,  significant  further  efforts  are  needed  in  most  areas  related  to  the 
political criteria, -in particular fundamental rights- and as regards constitutional reforms. 

As regards democracy and the rule of law, the investigation of the alleged criminal network 
Ergenekon has led to serious criminal charges, involving among others military officers. This 
case  is  an  opportunity  for  Turkey  to  strengthen  confidence  in  the  proper  functioning  of  its 
democratic institutions and the rule of law. However, it is important that proceedings in this 
context  fully  respect  the  due  process  of  law,  in  particular  the  rights  of  the  defendants.  The 
Government  reiterated  its  commitment  to  EU-related  reforms,  appointed  a  full-time  Chief 
Negotiator and approved the National Programme for the Adoption of the acquis. However, 
the lack of dialogue and spirit of compromise between political parties  is detrimental to the 
pursuit of reforms. Turkey still needs to bring its legislation on political parties in line with 
European standards. 

As regards public administration reform, considerable further efforts are needed, in particular 
on  the  modernisation  of  civil  service.  Reducing  red  tape  and  promoting  administrative 
simplification,  as  well  as  further  developing  a  professional,  independent,  accountable, 
transparent and merit-based civil service remain priorities. 

As regards civilian oversight of the security forces, some progress has been made in particular 
on limiting the jurisdiction of military courts. However, senior members of the armed forces 
continued  making  statements  on  issues  going  beyond  their  remit,  and  full  parliamentary 
oversight  of  defence  expenditure  needs  to  be  ensured.  The  alleged  involvement  of  military 
personnel  in  anti-government  activities,  disclosed  by  the  investigation  on  Ergenekon,  raises 
serious concerns. 

In  the  area  of  the  judiciary,  the  adoption  by  the  Government  of  the  judicial  reform  strategy 
following  a  process  of  consultation  with  all  stakeholders  is  a  positive  step.  Measures  to 
increase staff and funding are also positive. However, these efforts need to be continued, and 
concerns  remain  with  regard  to  the  independence,  impartiality  and  effectiveness  of  the 
judiciary  such  as  the  composition  of  the  High  Council  of  Judges  and  Prosecutors  and  the 
establishment of the regional courts of appeal. 

The  legislative  framework  designed  to  prevent  corruption  has  been  improved.  However, 
corruption  remains  prevalent  in  many  areas.  Turkey  needs  to  finalise  an  anti-corruption 

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strategy  and  to  develop  a  track  record  of  investigations,  indictments,  prosecutions  and 
convictions.  

Concerning human rights and the protection of minorities, some progress has been made but 
significant  efforts  are  still  needed.  There  was  some  progress  as  regards  the  observance  of 
international human rights law. However, the ratification of the optional protocol to the UN 
Convention  against  Torture  (OPCAT)  and  the  implementation  of  some  ECtHR  judgements 
requiring  legislative  amendments  remain  outstanding.  The  institutional  framework  for 
promoting and enforcing human rights needs to be strengthened. An Ombudsman institution 
remains to be established. 

While the Turkish legal framework includes a comprehensive set of safeguards against torture 
and  ill-treatment,  efforts  to  implement  it  and  fully  apply  the  government's  zero-tolerance 
policy  have  been  limited.  Allegations  of  torture  and  ill-treatment,  and  impunity  for 
perpetrators are still a cause for great concern. In order to assess accurately progress in this 
area it would be helpful that the Turkish authorities promptly authorise the publication of the 
Council of Europe’s Committee for the Prevention of Torture (CPT) report.  

As regards prisons, some progress was made on improving infrastructures and training, and 
recruiting additional staff. However, the problem of overcrowding and the high proportion of 
prisoners on pre-trial detention remain to be addressed. 

Article 301 of the Turkish Criminal Code is no longer used systematically to restrict freedom 
of  expression.  However,  there  are  prosecutions  and  convictions  based  on  a  number  of  other 
articles  of  the  Criminal  Code.  Turkish  law  does  not  sufficiently  guarantee  freedom  of 
expression in line with the European Convention of Human Rights (ECHR) and the ECtHR 
case  law.  Political  pressures  on  the  media  and  legal  uncertainties  affect  the  exercise  of 
freedom of the press in practice.  

Concerning  freedom  of  association,  the  legal  framework  is  broadly  in  line  with  European 
standards.  However,  considerable  progress  needs  to  be  made  as  regards  its  implementation; 
associations face disproportionate scrutiny of their activities which in some cases has led to 
judicial proceedings. 

As regards freedom of religion, implementation of the law on foundations has been smooth. 
The  Government  has  undertaken  a  dialogue  with  the  Alevi  and  non-Muslim  religious 
communities.  However,  their  specific  problems  still  have  to  be  addressed.  The  law  on 
foundations  does  not  address  the  issue  of  properties  seized  and  sold  to  third  parties,  or  of 
properties of foundations merged before the adoption of the new legislation. Attacks against 
minority  religions  still  occur.  A  legal  framework  in  line  with  the  ECHR  has  yet  to  be 
established,  so  that  all  non-Muslim  religious  communities  and  the  Alevi  community  can 
function without undue constraints, including as regards training of clergy. Further efforts are 
needed to create an environment conducive to full respect of freedom of religion in practice. 

The  overall  legal  framework  guaranteeing  women's  rights  and  gender  equality  is  broadly  in 
place. However, further significant efforts are needed to turn the legal framework into reality 
and to narrow the gap  between  men  and women in economic participation and opportunity, 
political empowerment, and access to education. Domestic violence, honour killings and early 
and forced marriages remain serious problems in some areas of the country. There is a need 
for  further  training  and  awareness-raising  on  women's  rights  and  gender  equality,  for  both 
men and women. 

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Efforts need to be stepped up in all areas related to children's rights, including administrative 
capacity,  health,  education,  the  juvenile  justice  system  and  child  labour.  Cases  of  juveniles 
tried  as  adults  under  the  anti-terror  law,  and  facing  disproportionate  sentences  raise  serious 
concerns. 

Legislation is still needed to ensure that trade union rights are fully respected in line with EU 
standards and the relevant International Labour Organisation (ILO) conventions, in particular 
the rights to organise, to strike and to bargain collectively. 

The  situation  with  minority  rights  remains  unchanged.  Some  progress  has  been  made  on 
cultural  rights,  especially  in  the  form  of  starting  a  national  TV  channel  broadcasting  in 
Kurdish. However, restrictions remain, particularly on the use of languages other than Turkish 
in  private  TV  and  radio  broadcasting,  in  political  life,  education,  and  contacts  with  public 
services.  The  legal  framework  on  the  use  of  languages  other  than  Turkish  gives  room  to 
restrictive interpretations, and implementation is inconsistent. There has been no progress in 
the  situation  of  the  Roma,  who  frequently  face  discriminatory  treatment.  Demolitions  of 
Roma districts without provision of alternative housing continue. 

As concerns the East and Southeast, the government has opened a wide-ranging public debate 
-covering cultural, political and economic matters- on the Kurdish issue. It is crucial that this 
debate  be  followed  by  concrete  measures.  The  adoption  of  a  Law  on  the  de-mining  of  the 
Syrian  Border  is  another  positive  step.  However,  the  broad  interpretation  of  anti-terror 
legislation has resulted in undue restrictions on the exercise of fundamental rights. The village 
guard system still needs to be phased out.  

Terrorist attacks by the PKK, which is on the EU list of terrorist organisations, continued and 
claimed many lives.  

Compensation  of  internally  displaced  persons  (IDPs)  has  continued.  However,  the 
government lacks an overall national strategy to address the IDP issue, and needs to step up 
efforts to address IDPs' needs. 

With  regard  to  regional  issues  and  international  obligations,  Turkey  has  expressed  public 
support for the ongoing negotiations under UN auspices to find a comprehensive settlement of 
the Cyprus problem. However, there has been no progress towards normalisation of bilateral 
relations  with  the  Republic  of  Cyprus.  Turkey  has  not  fully  implemented  the  Additional 
Protocol  to  the  Association  Agreement  and  has  not  removed  all  obstacles  to  the  free 
movement of goods, including restrictions on direct transport links with Cyprus. 

As  regards  relations  with  Greece,  further  exploratory  talks  were  held  but  no  agreement 
reached  on  border  disputes.  Further  confidence-building  steps  have  been  taken.  A 
considerable number of formal complaints were made by Greece about continued violations 
of  its  airspace  by  Turkey,  including  flights  over  Greek  islands.  Relations  with  Bulgaria 
remain positive. Good neighbourly relations remain key. 

Turkey continues to play a positive role in the Western Balkans.  

Since  June  2009,  Turkey  holds  the  rotating  Chairmanship  of  the  South  East  European 
Cooperation Process (SEECP). 

The economy of Turkey contracted following the drop of both external and domestic demand, 
in  particular  investment.  However,  the  impact  of  the  crisis  was  largely  limited  to  the  real 

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sector of the economy also due to previous structural reforms and countercyclical measures. 
Macroeconomic stability has been largely preserved. Inflation decreased significantly, mainly 
because  pressures  stemming  from  energy  inputs  and  previously  buoyant  economic  activity 
eased.  Unemployment  increased  significantly.  In  a  difficult  economic  environment,  the 
structural reform process has somewhat decelerated, in particular in the first half of 2009. The 
absence  of  credible  fiscal  plans  and  anchors  added  some  uncertainty  to  the  investment 
climate.  

As regards the economic criteria, Turkey is a functioning market economy. It should be able 
to  cope  with  competitive  pressure  and  market  forces  within  the  Union  in  the  medium  term, 
provided  that  it  continues  implementing  its  comprehensive  reform  programme  in  order  to 
address structural weaknesses. 

The  consensus  on  economic  policy  essentials  has  been  maintained  under  the  current 
challenging  circumstances.  Turkey  accommodated  demands  for  expansionary  policies  to 
counter  the  marked  economic  contraction  and  largely  embedded  them  in  a  broader 
development  strategy  entailing  higher  public  investment,  job  creation  and  sectoral  reforms. 
Some progress was made in upgrading the country's human and physical capital, although the 
economic crisis represents a challenge to this process. Access to external financing remained 
open  and  the  official  reserves  declined  only  moderately  from  a  high  level.  External 
imbalances  were  reduced  significantly  and  inflationary  pressures  subsided.  Privatisation 
continued with  some major operations, in particular in the energy sector. In spite of  several 
bouts  of  global  financial  instability,  the  Turkish  financial  sector  has  shown  remarkable 
resilience.  Turkey  diversified  its  trade  towards  new  markets,  thereby  partly  alleviating  the 
impact of the crisis. 

However, while the anti-crisis fiscal measures cushioned somewhat the economic downturn, 
they  could  put  benefits  from  previous  years  of  fiscal  consolidation  and  medium-term 
sustainable  policies  at  risk  if  they  are  not  withdrawn  timely.  Measures  to  increase  fiscal 
transparency  were  put  on  hold  and  even  reversed  in  some  cases.  Labour  market  conditions 
became  increasingly  challenging  and  unemployment  increased  sharply.  Job  creation 
continued to be hampered, notably by a skills mismatch between labour demand and supply, 
relatively high social contribution rates and by the rigidity of employment practices. In spite 
of various new initiatives by the Turkish government, the economic crisis is complicating the 
access  of  SMEs  to  finance  and  slowing  down  the  sectoral  transformation  of  the  Turkish 
economy. The allocation of state aid continued to lack transparency. While market entry has 
benefited  from  the  adoption  of  new  legislation,  there  are  still  obstacles  in  market  exit.  The 
legal  environment,  and  in  particular  court  procedures,  pose  practical  challenges  and  create 
obstacles  to  a  better  business  environment.  Turkey  adopted  a  comprehensive  action  plan  to 
reduce the informal economy, which remains an important challenge. 

Turkey continued improving its ability to take on the obligations of membership. Progress, 
at times uneven, was made in most areas. Alignment is advanced in certain areas, such as free 
movement  of  goods,  intellectual  property  rights,  anti-trust  policy,  energy,  enterprise  and 
industrial policy, consumer protection, statistics, Trans-European Networks, and science and 
research. Efforts need to continue to pursue alignment in areas such as environment, state aid, 
social policy and employment, company law, public procurement, food safety, veterinary and 
phytosanitary  policies  and  free  movement  of  services.  As  regards  the  Customs  Union  and 
external relations, alignment needs to be completed, particularly with regard to coordination 
of positions in the WTO. A number of longstanding trade irritants remain unresolved and new 
ones  have  been  created.  It  is  essential  that  Turkey  respects  fully  its  commitments  under  the 

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Customs Union. For most areas it is crucial that Turkey improves its administrative capacity 
to cope with the acquis. 

With regards to free movement of goods legislative alignment is quite advanced, but limited 
progress  was  made  in  the  reporting  period.  Trade  has  been  increasingly  hampered  by 
technical  barriers  related  to  conformity  assessment  and  standardisation.  Alignment  in  the 
areas  right  of  establishment  and  the  freedom  to  provide  services  is  at  an  early  stage.  No 
progress  has  been  recorded  in  the  field  of  postal  services,  nor  on  mutual  recognition  of 
professional  qualifications.  As  regards  the  free  movement  of  capital  Turkey  made  some 
progress, in particular concerning the action plans on capital movements and payments and on 
anti-money-laundering.  Turkey  made  progress  on  liberalisation  of  its  insurance  legislation. 
However,  alignment  with  the  acquis  on  capital  movements  and  payments  remains  limited. 
Little progress has been made in the area of freedom of movement for workers. Alignment is 
at an early stage. 

Some progress can be reported in the area of public procurement, in particular with regards to 
administrative  capacity;  some  contracting  authorities  indicate  good  procurement  practices. 
However,  the  strategy  for  the  reforms  necessary  to  ensure  legislative  alignment  and 
institutional capacity-building is still outstanding. Derogations from the general provisions are 
increasing, as are domestic preferences, reducing competition and efficiency in public tenders. 
As regards company law no substantial progress can be noted in the reporting period. The new 
Commercial Code has not been adopted. Alignment on intellectual property law is relatively 
advanced. Coordination and cooperation between the different IPR-related public bodies and 
their  specialisation  improved  further.  However,  enforcement  remains  insufficient.  The 
adoption of the aligned and updated laws regulating intellectual and industrial property rights, 
including criminal sanctions, is crucial.  

Turkey shows a high level of alignment in the field of anti-trust, including its merger control 
rules.  However,  no  further  legal  alignment  in  the  area  of  state  aid  can  be  reported  and  the 
long-awaited state aid law is still pending.  

Some  progress  has  been  made  in  the  area  of  financial  services.  Turkey’s  legislation  is 
partially  aligned  with  the  acquis  in  all  three  sub-areas  of  financial  services.  With  regard  to 
information  society  and  the  media  some  progress  can  be  reported  in  the  area  of  electronic 
communications. However, adoption of implementing legislation is key to ensure an effective 
impact  of  the  primary  law  on  the  market.  There  has  been  little  progress  in  the  area  of 
audiovisual policy.  

In the area of agriculture and rural development alignment with the acquis remains limited. 
Current agricultural support policies and strategic policy-making are increasingly dissociated 
from the CAP, while the slipping timetable for accreditation of the IPARD structures reveals 
difficulties  in  setting  up  functioning  administrative  and  organisational  structures  and 
procedures  for  the  management  of  rural  development  funds  in  line  with  EU  standards. 
Technical barriers to trade in bovine products, in breach of bilateral commitments, remain an 
urgent issue. Overall, progress has been limited in this area. Turkey has made limited progress 
on food safety, veterinary and phytosanitary policy. Efforts continued, but transposition and 
implementation of the acquis in this area is still at an early stage. In fisheries some progress 
has  been  made  on  resource  and  fleet  management  and  implementation  of  international 
agreements. However, no progress has been made on legislative alignment in this chapter.  

Turkey  has  made  limited  progress  on  alignment  in  the  transport  sector.  Implementation 
capacity is lagging behind in the road sector and no progress can be reported in the rail sector. 

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There  has  been  limited  progress  on  air  transport.  The  lack  of  communications  between  air 
traffic  control  centres  in  Turkey  and  the  Republic  of  Cyprus  continues  seriously  to 
compromise  air  safety.  Turkey  remains  outside  the  efforts  to  integrate  European  airspace. 
Progress in the maritime sector has been limited, the move of Turkey to the white list of the 
Paris MoU confirms Turkey's good performance as a flag state. 

There has been some, but uneven, progress in the energy sector. Developments on renewable 
energy, energy efficiency and the electricity market have been encouraging. However, in the 
cases of natural gas, nuclear energy, nuclear safety and radiation protection Turkey needs to 
implement its legislation and strategies.  

On  taxation  there  has  been  progress  towards  legislative  alignment,  in  particular  towards 
reducing the discriminatory taxation on alcoholic beverages. However, several discrepancies 
need to be addressed before achieving full alignment.  

Turkey  has  made  some  progress  on  economic  and  monetary  policy.  Alignment  with  the 
acquis in the field of monetary policy remains incomplete. There are still shortcomings in the 
legal  framework,  for  instance  as  regards  the  full  independence  of  the  Central  Bank, 
prohibition of monetary financing of the public sector and prohibition of privileged access for 
the public sector to financial markets. 

Turkey made limited progress in the field of social policy and employment. The establishment 
of  a  Parliamentary  Commission  on  Equal  Opportunities  for  Men  and  Women  is  a  positive 
step. Preparations for participation in the European Social Fund have accelerated. However, 
the  legislation  on  labour  law,  health  and  safety  at  work  and  on  anti-discrimination  is  not  in 
line with EU standards. There has been no progress towards achieving full trade union rights 
in line with EU standards and ILO Conventions. Women’s participation in the labour market 
is very low. Efforts to combat undeclared work and social exclusion need to be stepped up. 

In the area of enterprise and industrial policy Turkey has made further progress, in particular 
in  preparing  a  new  industrial  strategy  and  new  sectoral  strategies,  which  now  need  to  be 
completed and published. There is also a wider availability of enterprise and industrial policy 
instruments  and  some  improvements  in  the  business  environment.  Turkey  has  achieved  a 
sufficient level of alignment with the acquis in the field of enterprise and industrial policy. 

Turkey has made some progress in the area of trans-European networks. In July 2009 Turkey 
signed  the  Intergovernmental  Agreement  on  the  Nabucco  gas  pipeline.  This  project  is  an 
important strategic step towards closer energy cooperation between the EU, Turkey and other 
States  in  the  region  as  well  as  towards  the  diversification  of  energy  sources.  The  timely 
completion  of  the  Southern  Gas  corridor,  through  notably  the  swift  implementation  of  the 
Nabucco  Intergovernmental  Agreement,  remains  one  of  the  EU's  highest  energy  security 
priorities. Some progress can be reported in the field of regional policy and co-ordination of 
structural instruments. The legislative and institutional framework for implementation of IPA 
components  III  and  IV  was  finalised,  local  and  regional  stakeholders  were  involved  in 
preparing  projects  and  further  development  agencies  were  set  up.  However,  further 
strengthening  of  administrative  capacity  is  needed.  Overall,  Turkey’s  alignment  with  the 
acquis in this chapter remains limited. 

As regards the judiciary, the adoption by the government of the judicial reform strategy is a 
positive step. The measures taken to increase staff and resources are also positive and need to 
be  continued.  However,  concerns  about  the  independence,  impartiality  and  effectiveness  of 
the judiciary have yet to be addressed. With respect to anti-corruption, there has been some 

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progress  on  strengthening  the  legislation  and  institutional  set-up  to  fight  corruption. 
Corruption,  however,  remains  prevalent  in  many  areas.  The  adoption  and  effective 
implementation of the national anti-corruption strategy will be crucial.  

Some, but uneven, progress was made on justice, freedom and security. Turkey has achieved 
limited  progress  on  external  borders  and  Schengen,  as  well  as  in  the  field  of  migration  and 
asylum.  In  the  face  of  a  sharp  increase  of  asylum  seekers  efforts  need  to  continue  to 
reorganise  the  system.  Turkey  recently  accepted  to  resume  formal  negotiations  on  an  EC-
Turkey readmission agreement. 

In  the  area  of  research,  Turkey  has  made  substantial  efforts  in  increasing  its  participation 
under  the  Seventh  EC  Framework  programme  for  Research  and  Development  and  in 
improving its national research capacity. However, further efforts are needed for integration 
into the European Research Area. 

On  environment,  Turkey  has  made  progress  in  the  field  of  chemicals  and  on  horizontal 
legislation  by  signing  the  Kyoto  Protocol.  Some  progress  can  be  reported  on  waste,  air 
quality,  industrial  pollution,  risk  management  and  chemicals.  However,  the  overall  level  of 
alignment  remains  insufficient.  Turkey  has  made  no  progress  in  the  areas  of  water  quality, 
nature protection and GMOs.  

Some  progress  has  been  made  on  consumer  and  health  protection.  However,  as  regards 
consumer protection, more efforts remain necessary, in particular on non-safety-related issues 
and to ensure due enforcement of consumer protection in general. In the area of public health, 
some  progress  can  be  reported,  in  particular  on  tobacco  control  and  on  strengthening  the 
administrative capacity on communicable diseases.  

Turkey has achieved a high level of alignment in the field of customs legislation, thanks to its 
Customs  Union  with  the  EU.  Nevertheless,  further  alignment  with  the  EU  acquis  is  still 
needed in some areas, such as free-trade zones and customs duty relief. Turkey has achieved a 
high  level  of  alignment  in  external  relations,  however,  particularly  with  regard  to 
coordination  of  positions  in  the  WTO,  alignment  needs  to  be  completed.  A  number  of 
longstanding trade irritants remain unresolved and continue to disrupt the proper functioning 
of the Customs Union. 

Turkey’s alignment with the EU’s common foreign and security policy continued. Turkey has 
further strengthened its contribution to the stabilisation of regions such as the South Caucasus 
and  the  Middle  East.  Turkey  has  strengthened  its  diplomatic  relations  with  Iraq,  including 
contacts  with  the  Kurdish  regional  government.  Significant  diplomatic  efforts  to  normalise 
relations with Armenia were made. 

Turkey  is  contributing  substantially  to  ESDP  and  seeking  greater  involvement  in  ESDP 
activities.  However,  Turkey  objects  to  EU-NATO  cooperation  which  would  involve  all  EU 
Member  States.  Turkey  has  not  aligned  with  the  EU  position  on  membership  of  the 
Wassenaar Arrangement. 

Limited progress can be reported in the area of financial control, in which alignment is fairly 
advanced.  Legislation  implementing  the  public  financial  management  and  control  (PFMC) 
law is in place, but a number of amendments relating to internal control are still missing and 
revision of the PIFC policy paper and action plan has not been completed. The External Audit 
Law, which would bring external audits into line with relevant international standards, has not 
been adopted.  The  anti-fraud cooperation structure remains to be developed.  Turkey has re-

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minted  Turkish  coins  to  eliminate  similarities  with  Euro  coins.  Turkey's  alignment  with  the 
basic principles and institutions of the acquis in the area of financial and budgetary provisions 
is well advanced. 

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