COMMISSION STAFF WORKING PAPER CROATIA 2011 PROGRESS REPORT
Date: 2011-10-12
Institutions: European Commission
Subjects: Croatia, accession criteria, pre-accession aid

EUROPEAN COMMISSION 

Brussels, 12.10.2011 
SEC(2011) 1200 final 

COMMISSION STAFF WORKING PAPER 

CROATIA 2011 PROGRESS REPORT 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2011-2012 

{COM(2011) 666 final} 
{SEC(2011) 1201 final} 
{SEC(2011) 1202 final} 
{SEC(2011) 1203 final} 
{SEC(2011) 1204 final} 
{SEC(2011) 1205 final} 
{SEC(2011) 1206 final} 
{SEC(2011) 1207 final} 

 
 
 
 
  
 
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

4.6. 

4.7. 

4.8. 

4.9. 

Introduction .................................................................................................................. 3 

Preface.......................................................................................................................... 3 

Context ......................................................................................................................... 3 

Relations between the EU and Croatia......................................................................... 3 

Political criteria ............................................................................................................ 5 

Democracy and the rule of law .................................................................................... 5 

Human rights and the protection of minorities ............................................................ 5 

Regional issues and international obligations .............................................................. 8 

Economic criteria ....................................................................................................... 16 

The existence of a functioning market economy ....................................................... 16 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 23 

Ability to assume the obligations of membership...................................................... 23 

Chapter 1: Free movement of goods .......................................................................... 25 

Chapter 2: Freedom of movement for workers .......................................................... 26 

Chapter 3: Right of establishment and freedom to provide services ......................... 27 

Chapter 4: Free movement of capital ......................................................................... 28 

Chapter 5: Public procurement................................................................................... 29 

Chapter 6: Company law............................................................................................ 30 

Chapter 7: Intellectual property law........................................................................... 30 

Chapter 8: Competition policy ................................................................................... 31 

Chapter 9: Financial Services..................................................................................... 32 

4.10.  Chapter 10: Information society and media ............................................................... 33 

4.11.  Chapter 11: Agriculture and rural development......................................................... 34 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 35 

4.13.  Chapter 13: Fisheries.................................................................................................. 35 

4.14.  Chapter 14: Transport policy ..................................................................................... 36 

4.15.  Chapter 15: Energy .................................................................................................... 37 

4.16.  Chapter 16: Taxation.................................................................................................. 39 

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4.17.  Chapter 17: Economic and Monetary policy ............................................................. 39 

4.18.  Chapter 18: Statistics.................................................................................................. 40 

4.19.  Chapter 19: Social policy and employment ............................................................... 40 

4.20.  Chapter 20: Enterprise and industrial policy.............................................................. 42 

4.21.  Chapter 21: Trans European Networks ...................................................................... 43 

4.22.  Chapter 22: Regional policy and coordination of structural instruments .................. 44 

4.23.  Chapter 23: Judiciary and fundamental rights ........................................................... 45 

4.24.  Chapter 24: Justice, freedom and security ................................................................. 53 

4.25.  Chapter 25: Science and research .............................................................................. 57 

4.26.  Chapter 26: Education and culture............................................................................. 57 

4.27.  Chapter 27: Environment ........................................................................................... 58 

4.28.  Chapter 28: Consumer and health protection............................................................. 60 

4.29.  Chapter 29: Customs Union ....................................................................................... 61 

4.30.  Chapter 30: External relations.................................................................................... 62 

4.31.  Chapter 31: Foreign, Security and Defence Policy.................................................... 63 

4.32.  Chapter 32: Financial control..................................................................................... 64 

4.33.  Chapter 33: Financial and budgetary provisions........................................................ 65 

Statistical Annex ...................................................................................................................... 66 

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1. 

INTRODUCTION 

1.1. 

Preface 

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

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

–  briefly describes relations between Croatia and the Union; 

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

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

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

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

This report covers the period from October 2010 to September 2011. Progress is measured on 
the  basis  of  decisions  taken,  legislation  adopted  and  measures  implemented.  As  a  rule, 
legislation or measures which are being prepared or awaiting parliamentary approval have not 
been taken into account. This approach ensures equal treatment across all reports and enables 
an objective assessment. 

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

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

1.2. 

Context 

The  June  2004  European  Council  granted  the  status  of  candidate  country  to  Croatia. 
Accession negotiations with Croatia were opened in October 2005 and closed in June 2011. 
The  Stabilisation  and  Association  Agreement  between  Croatia  and  the  EU  was  signed  in 
October 2001 and entered into force in February 2005. 

1.3. 

Relations between the EU and Croatia 

Croatia is participating in the Stabilisation and Association Process. 

Following  the  closure  of  the  remaining  chapters,  accession  negotiations  with  Croatia  were 
closed by a Ministerial Accession conference on 30 June 2011. The Commission has received 
a  strong  mandate  to  closely  monitor  Croatia's  fulfilment  of  the  commitments  undertaken. 

1 
2 

The rapporteur for Croatia is Mr Hannes Swoboda.  
Enlargement Strategy and Main Challenges 2011-2012 - COM(2011) 666. 

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Work on the finalisation of the Treaty of Accession with Croatia is about to be finished and 
should  allow  its  signature  before  the  end  of  the  year,  as  provided  for  by  the  June  2011 
European Council. At the same time as this report is published, the Commission will give its 
formal  favourable  Opinion  on  Croatia's  accession,  in  line  with  Article  49  of  the  Treaty  on 
European  Union.  After  the  European  Parliament  has  given  its  consent,  Council  will  take  a 
decision on the admission of Croatia. After signature, the treaty will need to be ratified by the 
present Member States and Croatia, in line with their constitutional requirements. The target 
date  for  Croatia's  accession  to  the  EU,  as  agreed  by  Member  States  and  included  in  the 
Accession Treaty, is 1 July 2013. 

The  political  and  economic  dialogue  between  the  EU  and  Croatia  has  continued.  Political 
dialogue meetings were held in Brussels in April at ministerial level. Economic dialogue took 
place  in  a  bilateral  meeting  with  the  Commission  and  Croatian  senior  officials  in  May. 
Moreover, the multilateral economic dialogue between the Commission,  EU Member States 
and  Candidate  Countries  in  the  context  of  the  pre-accession  fiscal  surveillance  continued, 
including  a  meeting  at  Ministerial  level  in  May  in  Brussels.  These  meetings  focused  on  the 
main  challenges  posed  to  Croatia  by  the  Copenhagen  political  and  economic  criteria  and 
reviewed the progress made towards fulfilling the Accession Partnership priorities. 

Implementation of the Stabilisation and Association Agreement (SAA) improved markedly. 
Croatia brought its tax regime on coffee into line with its SAA obligations (see also Chapter 
16  -  Taxation)  and  complied  with  State  aid  rules  in  relation  to  the  shipyards  in  difficulty. 
Croatia should also further reduce import tariffs for its agricultural sector to pave the way for 
integration into the EU internal market upon accession. 

The  EU  is  providing  guidance  to  the  authorities  on  reform  priorities  under  the  Accession 
Partnership.  Progress  on  these  reform  priorities  is  encouraged  and  monitored  by  the  SAA 
bodies. The SAA Council met in April 2011 and the SAA Committee in December 2010. Six 
sectoral  sub-committee  meetings  have  been  held  since  November  2010.  Based  on  the 
Accession Partnership, Croatia adopted its national programme for alignment with the acquis 
in February 2011. 

Financial  assistance  is  provided  under  the  Instrument  for  Pre-accession  Assistance  (IPA). 
The 2011 IPA programmes totalled €156.5 million. This assistance is focused on institution-
building  and  preparing  for  implementation  of  the  EU's  common  agricultural  policy  and 
cohesion  policy.  In  addition,  Croatia  continued  to  benefit  from  regional  and  horizontal 
programmes. Overall, Croatia has demonstrated a satisfactory functioning of the decentralised 
in 
implementation  system  under 
implementation.  The  institutional  framework  for  the  implementation  of  EU  cohesion  policy 
will build directly on the existing implementation structures of IPA. Follow-up audits on IPA 
conferral of management confirmed that internal control procedures are broadly satisfactory. 
The  recommendations  made  have  been  or  are being  properly  addressed.  In  order  to  prepare 
for the next phase of decentralisation  of  management  powers, namely the waiver of the EU 
Delegation's  ex  ante  controls  for  IPA  by  the  date  of  accession,  the  country  continued  to 
implement roadmaps with indicative benchmarks.  

IPA,  although  some  delays  were  encountered 

EU financial support has been provided for the development of civil society under the Civil 
Society  Facility.  Croatia's  participation  in  an  increasing  number  of  EU  programmes  (15)  is 
also a valuable opportunity to put civil society dialogue into action.  

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'Competitiveness  and 

Innovation  Framework  Programme' 

Croatia  participates  in  the  following  EU  Programmes:  'Seventh  Research  Framework 
(including 
Programme'; 
'Entrepreneurship  and  Innovation  Programme',  'Information  Communication  Technologies 
Policy Support Programme' and 'Intelligent Energy Europe Programme'); 'Progress'; 'Culture'; 
'Europe for Citizens'; 'Fiscalis 2013'; 'Customs 2013'; 'Civil Protection Financial Instrument'; 
'MEDIA  2007';  'Community  action  in  the  field  of  health';  'Marco  Polo  II';  'Civil  Protection 
Mechanism', 'Life Long Learning, Youth in Action' and 'ISA - Programme on Interoperable 
Solutions for Public Administrations'.  

2. 

POLITICAL CRITERIA 

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

2.1. 

Democracy and the rule of law 

Parliament 

Parliament continued to function in accordance with its constitutional role. However, there is 
scope  for  the  Parliament  to  improve  its  scrutiny  of  the  legislative  process.  In  late  October 
2010, the Parliament adopted the legislation necessary for the implementation of the changes 
to the Constitution voted in July 2010.  

Government 

The  government  continued  to  function  effectively.  A  cabinet  reshuffle  took  place  in 
December 2010. 

Public administration 

Progress can be reported in the field of public administration reform. The Ministry of Public 
Administration  (MoPA)  continued  to  implement  the  State  Administration  Reform  Strategy 
(2008-2011).  The  Civil  Service  Human  Resources  Development  Strategy  (2010-2013)  is 
being  implemented  and  a  new  Code  of  Ethics  was  adopted  regulating  the  role  and 
responsibilities  of  the  ethics  units  and  commissioners  within  the  state  administration.  The 
Civil Service Training Centre under MoPA organised continuous training of civil servants at 
all  levels.  A  State  School  for  Public  Administration  was  established.  However,  it  is  not  yet 
fully operational as the necessary human resources have not yet been provided. Amendments 
to the Civil Service Act were adopted in April 2011: MoPA's authority in the implementation 
of  recruitment  procedures  has  been  broadened  and  civil  servants'  liability  for  minor  and 
serious violation of official duties has been extended. In order to allow full application of the 
General  Administrative  Procedures  Act  (GAPA),  the  process  of  harmonising  the  relevant 
sectoral  legislation  has  continued,  with  the  majority  of  acts  now  adopted  by  the  Croatian 
Parliament.  

However, the legal framework for developing a merit-based professional civil service has still 
to be completed. The drafting of the law on salaries in the public sector, which is expected to 

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cover the public service, state bodies and local and regional self-government, has been further 
delayed.  Dismissal  procedures  need  to  be  further  developed.  The  administrative  capacity  of 
MoPA  to  implement  and  monitor  the  complex  and  demanding  public  administration  reform 
still  remains  insufficient.  Although  new  staff  has  been  recruited  across  the  entire 
administration  to  prepare  for  EU  accession,  persistent  structural  problems  of  turnover  and 
retention were reported. High level political support has to be maintained for the successful 
implementation of the reform.  

Measures  have  been  taken  to  strengthen  the  position  of  the  Ombudsman's  Office  including 
creation  of  a  mechanism  for  improved  follow-up  of  his  recommendations.  Greater  attention 
should therefore be paid to the Ombudsman's recommendations to further enhance his role as 
an 
rights  of  citizens  and  combating 
maladministration. 

institutional  counterweight  defending 

the 

Overall, progress can be reported in the area of public administration reform. Further efforts 
are  needed  in  improving  professionalism  and  ensuring  efficient  implementation  of  the 
relevant legal framework in order to build a modern, reliable, transparent and citizen-oriented 
public service. 

Judicial system (see also Chapter 23 – Judiciary and fundamental rights) 

Good  progress  was  achieved  in  the  area  of  the  judiciary.  Implementation  of  the  judicial 
reform strategy and action plan has continued, with a large volume of legislation adopted. The 
Ministry  of  Justice  underwent  a  major  reorganisation  with  the  aim  of  improving  efficiency 
and  making  decision-making  less  politicised.  However,  Croatia  needs  to  improve  human 
resources planning, including for the long term needs of the judiciary, taking into account the 
impact of many on-going and planned reforms. 

Numerous  measures  have  been  taken  to  strengthen  the  independence,  accountability, 
impartiality and professionalism of the judiciary, in particular through the implementation of 
amendments  to  the  Constitution  in  July  2010  and  further  amendments  to  the  relevant 
legislation. As regards independence of the judiciary, Croatia has reformed and strengthened 
the State Judicial Council (SJC) and State Prosecutorial Council (SPC). Other measures have 
been taken to allow these bodies to function professionally, impartially and without political 
or other interference. A new system for recruiting and appointing judges and state prosecutors 
has been established. Systems for the professional evaluation of judges and prosecutors have 
been  introduced  to  improve  career  management.  As  regards  accountability  of  the  judiciary, 
legal changes adopted in May 2011 provide for improvements in the disciplinary system for 
judicial  officials.  There  has  been  some  progress  as  regards  the  impartiality  of  the  judiciary, 
with the SJC becoming responsible for the system of assets declarations of judges.  

Croatia  needs  to  continue  to  build  up  a  track  record  that  demonstrates  the  recruitment  and 
appointment of judicial officials  based  on  merit.  The  SJC  and SPC should also pro-actively 
apply  the  improved  disciplinary  rules  and  procedures  that  have  been  put  in  place  in  an 
efficient, objective and transparent manner. The systematic and accurate checking of judicial 
officials' declarations of assets also needs to be assured. 

Croatia  has  taken  and  implemented  various  measures  leading  to  improved  efficiency  of  the 
judiciary.  The  merger  of  courts  as  part  of  the  court  rationalisation  process  is  enabling  more 
efficient  allocation  of  resources  for  handling  case  backlogs.  A  number  of  measures  were 
adopted to improve the system of enforcement. Croatia has made progress with the physical 

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infrastructure  and  computerisation  of  courts.  Between  December  2009  and  December  2010, 
the overall number of pending cases before the courts fell from 795,722 to 785,561 cases (-
1.3%)  and  to  781,323  by  31  March  2011  (-1.8%).  The  backlog  of  old  criminal  cases  was 
reduced by 10.6%. However, the backlog of old civil cases increased by 3.8%. The number of 
pending enforcement cases, including old enforcement cases, increased in 2010 and showed a 
slight decline in the first quarter of 2011.  

Croatia has continued to improve the handling of domestic war crimes cases. A new strategy 
on impunity was adopted. Priority cases are being identified at the national and regional level. 
Approximately  two  dozen  trials  were  on-going  in  2010,  similar  to  the  situation  in  2009.  A 
more  balanced  approach  to  trials  has  continued.  Measures  have  been  taken  to  protect 
witnesses with improved witness support services at certain courts. Croatia has continued to 
implement its action plan for the review of in absentia cases. Revised legislation has made the 
four specialised war crimes chambers competent for all new cases, and also facilitates the use 
in Croatian court cases of evidence collected by the ICTY.  

The issue of impunity for war crimes needs to be thoroughly addressed in Croatia, especially 
where victims were ethnic Serbs or where alleged perpetrators were members of the Croatian 
security forces. The majority of crimes have not been pursued in court. Implementation of the 
new  Strategy  on  impunity  will  be  key,  as  well  as  the  systematic  and  effective  use  of  the 
specialised war crimes chambers. 

Overall,  Croatia  has  made  good  progress  regarding  judicial  reform.  The  adoption  of  new 
legislation  further  strengthened  judicial  independence  and  the  overall  case  backlog  was 
further reduced. Some challenges remain, especially relating to the further increase of judicial 
efficiency,  and  to  the  practical  implementation  of  new  measures  relating  to  independence, 
impartiality and accountability of the judiciary, especially in terms of judicial appointments as 
well as disciplinary matters. Croatia has continued to improve the handling of domestic war 
crimes cases. The issue of impunity needs to be thoroughly addressed. 

Anti-corruption policy (see also Chapter 23 – Judiciary and fundamental rights) 

Good progress can be reported in the prevention of corruption. Croatia has taken a number of 
measures  to  strengthen  the  legal  and  institutional  framework.  Measures  are  being 
implemented  in  accordance  with  Croatia's  anti-corruption  action  plan.  Croatia  has  increased 
transparency  and  integrity  in  its  public  administration  and  state  owned  companies. 
Amendments  to  the  law  on  access  to  information  were  adopted,  which  introduce  clearer 
procedures and deadlines for information requests and supervision of the implementation of 
the  law  by  the  Data  Protection  Agency.  Croatia  adopted  a  new  law  on  the  financing  of 
political  activities  and  election  campaigns,  which  improves  transparency  and  independent 
oversight and increases the penalties for non compliance with the law. Changes to the Conflict 
of Interest Act provide for the depolitisation of appointments to supervisory boards of state-
owned companies, as well as of the membership of the conflict of interest commission itself. 
Sanctions in cases of conflict of interest have also been strengthened. Measures were taken to 
raise awareness of potential conflicts of interest, in particular at the local level. Amendments 
to the Labour Act have enhanced protection for whistleblowers. 

Further  progress  is  needed  to  implement  the  newly  adopted  legislation  in  practice.  The 
implementing structures still have to be further strengthened. Given the recent adoption of the 
law  on  access  to  information,  particular  vigilance  is  required  in  terms  of  its  effective 
implementation. Further strengthening of the State Electoral Commission, which is in charge 

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of  the  supervision  and  control  of  the  regular  financing  of  political  parties  and  of  election 
campaigns,  is  required  in  order  to  ensure  full  and  effective  implementation  of  the  new 
legislation.  Effective  implementation  of  the  legislation  on  conflict  of  interest  should  be 
ensured, including more proactive checking of declarations of assets, application of dissuasive 
sanctions in case of irregularities and greater awareness of conflicts of interest in practice. 

As  regards  the  fight  against  corruption,  the  operational  capacity  of  the  Office  for  the  Fight 
against  Corruption  and  Organised  Crime  (USKOK)  has  been  reinforced  and  the  Police 
National Office for the Suppression of Corruption  and Organised  Crime  (PNUSOK) is now 
fully staffed. Interagency cooperation has improved, including through the implementation of 
memoranda of understanding, which has contributed to improved financial expertise. The new 
Police Act was adopted in March 2011 which aimed at making the police a more professional 
service and introducing some depoliticising measures. There are a number of mid and high-
level corruption cases which are currently being investigated or where indictments have been 
issued,  including  against  a  former  Prime  Minister.  There  have  also  been  court  rulings  in 
higher level cases, including in cases involving a former Deputy Prime Minister as well as a 
former Minister of Defence.  

However,  for  most  high  level  corruption  and  public  procurement  cases  the  proceedings  are 
still  on-going  and  they  have  not  yet  reached  the  stage  of  court  rulings.  The  track  record  of 
effective handling of organised crime and corruption cases needs to continue to be built up, 
especially  in  respect  of  high  level  corruption,  local  level  corruption  and  including  cases 
related to public procurement and the judiciary.  

Overall, substantial progress can be reported in the field of anti-corruption, especially as the 
law enforcement bodies are addressing the widespread corruption in Croatia. The track record 
of effective handling of organised crime and corruption cases needs to be further developed, 
especially  in  relation  to  high  level  corruption,  local  level  corruption  and  including  cases 
related to public procurement and the judiciary. Further experience is needed in implementing 
the  newly  adopted  preventive  legal  framework  in  practice  and  the  implementing  structures 
remain to be further strengthened.  

2.2. 

Human rights and the protection of minorities (see also chapter 23 - Judiciary & 
fundamental rights) 

Observance of international human rights law 

Overall, Croatia continued to observe international human rights law. 

During the reporting period, the European Court of Human Rights (ECtHR) delivered 22 
judgments finding that Croatia had violated rights guaranteed by the European Convention on 
Human  Rights  (ECHR).  A  total  of  987  new  applications  were  allocated  to  ECtHR  decision 
bodies  since  October  2010.  In  September  2011,  a  total  of  1,726  allocated  applications 
regarding  Croatia  were  pending  before  the  ECtHR.  Cases  continued  to  mainly  concern  the 
length  of  proceedings  claims,  under  Article  6  of  the  Convention.  Most  of  those  cases  were 
concluded by an amicable settlement between the government and applicants. The Court also 
found violations of Article 8 (right to respect for private and family life), Article 46 (binding 
force  and  execution  of  judgements)  and  article  14  (prohibition  of  discrimination)  in 
conjunction with article 9 (right to freedom of thought, conscience and religion). In the case 
of  the  disappearance  of  a  person  of  Serbian  ethnicity  taken  by  the  Croatian  police  to  the 

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premises of a local police station in late 1991, the Court found a violation of Article 2 of the 
ECHR (right to life).  

As  regards  promotion  and  enforcement  of  human  rights,  Croatia  has  continued  to  take 
various steps to raise public awareness and improve the protection of human rights. Measures 
to  raise  awareness  of  police,  prosecutors  and  courts  about  human  rights  law  are  ongoing. 
However,  enforcement  of  rights  requires  continued  attention,  including  in  terms  of  judicial 
efficiency and access to justice. 

Civil and political rights 

With regard to prevention of torture and ill-treatment, the Croatian Ombudsman continued 
to  receive  complaints  about  police  treatment  of  citizens  including  excessive  use  of  force. 
Under the new Law on Police transparent procedures for establishing police responsibility and 
regulating police activities will be put in place. Implementation of this law will depend on the 
secondary legislation which has yet to be adopted.  

As regards the issue of impunity, there is progress to report in the domestic handling of war 
crimes  cases.  However,  the  issue  of  impunity  for  war  crimes  needs  to  be  thoroughly 
addressed. The majority of crimes have not been pursued in court (see under Judicial system 
above). 

With  regard  to  the  prison  system,  work  related  to  the  expansion  of  existing  detention  and 
treatment facilities has continued and will be finalised in 2012. In the meantime, problems of 
overcrowding and inadequate health protection persist.  

As regards access to justice, there is progress to report with the amendment of implementing 
legislation that will simplify procedures for legal aid. Legislation was amended in July 2011, 
following revocation of provisions of the law by the Constitutional Court. Applications forms 
have  been  made  more  user  friendly  and  fees  for  lawyers  to  take  on  legal  aid  cases  have 
increased.  A  further  review  of  legal  aid  procedures  is  ongoing  with  the  aim  of  reducing 
bureaucracy. The approval rate of legal aid applications is increasing.  

Freedom  of  expression,  including  freedom  and  pluralism  of  the  media,  is  provided  for  in 
Croatian law and is generally respected. A new Media Law provides for greater transparency 
in media ownership. There has been limited progress with investigating cases from previous 
years of intimidation of journalists working on cases of corruption and organised crime. Few 
new cases have been reported, however. Economic pressures in particular are hampering the 
development  of  investigative  reporting.  Problems  with  political  interference  at  local  level 
remain. The public broadcaster HRT continued to face serious difficulties in spite of having 
selected a new supervisory board and programme council, which has been unable to appoint a 
new director general.  

With regard to freedom of  assembly and  association, the  overall situation continued to be 
satisfactory  but  requires  continued  attention,  including  in  terms  of  the  handling  of 
demonstrations by the authorities, to prevent violent incidents such as those occurred during 
the Gay Pride demonstration in Split.  

Civil  society  organisations  (CSOs)  are  playing  an  important  role  for  the  promotion  and 
protection of human rights, democracy and minorities. An umbrella network of 15 NGOs has 
been  very  active  in  monitoring  and  reporting  on  the  state  of  affairs  regarding  justice  and 

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fundamental  rights.  However,  in  particular  at  the  local  level,  the  analytical  and  financial 
capacities of CSOs, for monitoring political developments and government decisions continue 
to  be  weak.  CSOs  tend  to  remain  excluded  from  the  policy-making  process.  Despite  the 
legislation  on  access  to  information,  CSOs  report  continuing  difficulties  in  obtaining  public 
documents. Greater efforts are needed to ensure the independence and sustainability of CSOs. 

There have been no particular problems with exercising the freedom of thought, conscience 
and religion. The ECtHR has ruled that Croatia violated article 14 in conjunction with article 
9 of the ECHR in one case filed by three religious communities in 2007, concerning religious 
education in public schools and nurseries and state recognition of religious marriages. 

Overall, civil and political rights continue to be generally well respected in Croatia. Croatia 
has  made  progress  in  the  area  of  civil  and  political  rights.  There  are  some  remaining 
shortcomings around impunity for war crimes, access to justice and freedom of expression.  

Economic and social rights (see also Chapter 19 – Social policy and employment) 

There  has  been  some  progress  with  women's  rights  and  gender  equality.  Provisions  on 
maternity and parental benefits were amended to bring them into line with EU gender equality 
provisions. The institutional mechanisms for gender equality at central and local government 
levels  are  developing.  The  Ombudsperson  for  Gender  Equality  continued  to  implement  the 
Gender Equality Act. The office has received additional staff members. Legislation adopted in 
September foresees the merger of the Ombudsperson for Gender Equality with the Office of 
the Ombudsman. 

The  legislative  framework  against  domestic  violence  is  being  implemented.  The  police 
continued to strengthen its capacity to act appropriately in cases of family violence. The work 
of social welfare centres has improved slightly. However, the protection of women against all 
forms  of  violence  needs  to  be  strengthened.  The  number  of  registered  cases  of  domestic 
violence  has  decreased  slightly.  Victims  of  family  violence  continue  to  have  insufficient 
access to information on their rights and entitlements.  

There  has  been  no  significant  change  in  the  position  of  women  on  the  labour  market.  The 
percentage of unemployed women remains high and wage differences due to gender persist. 
Fixed-term  contracts  for  women  on  the  labour  market  remain  widespread.  Women  remain 
under-represented in economic and political decision-making bodies.  

There  has  been  limited  progress  with  children's  rights.  The  Ombudsperson  for  Children 
became more active in promoting and protecting children's rights. 2,409 new cases were dealt 
with  in  2010,  predominantly  concerning  family  violence  and  violence  against  children.  The 
Ombudsperson for Children has obtained sufficient office space and has developed regional 
offices  in  three  counties.  Legislation  adopted  in  September  foresees  the  merger  of  the 
Ombudsperson for Children with the Office of the Ombudsman. Cases of peer violence and 
violence  against  children  in  educational  institutions  continued  to  increase  and  are  not  being 
adequately  addressed  by  the  relevant  authorities.  There  is  still  a  lack  of  prevention 
programmes  and  of  professional  training  for  educators.  Shortcomings  in  the  judicial  and 
social welfare systems continue to contribute to the poor enforcement of children's rights.  

There  has  been  some  progress  on  advancing  the  social  inclusion  of  socially  vulnerable 
persons  and/or  persons  with  disabilities,  notably  through  the  adoption  of  a  new  Social 
Welfare Act. The capacity of the Office of the Ombudsman for Persons with Disabilities has 

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been strengthened. Legislation adopted in September foresees the merger of the Ombudsman 
for  Persons  with  Disabilities  with  the  Office  of  the  Ombudsman.  There  is  a  lack  of 
information  on  social  welfare,  health  care  and  pension  insurance  rights  and  entitlements. 
Application of criteria for the establishment of entitlements remains uneven. The legislation 
regulating  specific  rights  is  fragmented.  A  National  Plan  for  de-institutionalisation  and 
transformation  of  social  welfare  homes  has  been  enacted.  The  transition  from  institutional 
care to community-based care services continues to be slow.  

There  is  low  public  awareness  of  the  rights  of  people  with  disabilities,  especially  in  rural 
areas. Regulations ensuring physical access to public buildings for people with disabilities are 
not adequately enforced.  

In  general,  children  with  developmental  difficulties  remain  excluded  from  educational 
institutions.  Support  in  the  form  of  access,  transport  and  teaching  assistants  remains 
insufficient.  Discrimination  against  people  with  disabilities  continues  on  the  labour  market. 
The quotas laid down in the Professional Rehabilitation and Employment Act for people with 
disabilities  are  not  met  by  the  public  sector.  Marginalisation  is  even  greater  in  the  private 
sector with employers lacking information, in particular on the incentives that are available.  

People with mental health problems generally remain in psychiatric institutions which are not 
professionally  regulated  or  adequately  equipped.  Assistance  to  enable  a  greater  number  of 
patients to stay with their families or live independently is lacking.  

Croatia has begun developing a track record of implementing the Anti-Discrimination Law 
and  legislation  on  hate  crimes.  Various  steps  have  been  taken  to  raise  awareness  of  this 
legislation  among  both  the  public  and  law  enforcement  bodies.  The  Office  of  the 
Ombudsman, which plays a key role in implementing anti-discrimination legislation, is being 
reinforced. A new mechanism was introduced, giving responsibility to the Government Office 
of  Human  Rights  to  monitor  follow-up  by  the  administration  of  the  Ombudsman's 
recommendations.  Legislation  adopted  in  September  foresees  the  merger  of  the  specialised 
Ombudspersons functions with the Office of the Ombudsman. Law enforcement bodies have 
started a number of cases under hate crime legislation.  

The track record of implementing anti-discrimination and hate crime legislation needs to be 
further  developed.  Public  awareness  regarding  the  scope  of  the  anti-discrimination  law  and 
proposed  remedies  has  not  increased  significantly.  There  is  still  a  small  number  of 
discrimination  complaints,  few  of  which  have  so  far  reached  the  courts.  Lesbians,  gays,  bi-
sexual  and  trans-gender  people  (LGBT)  have  continued  to  face  threats  and  attacks,  in 
particular during the gay pride event in Split, with limited follow-up by the authorities. More 
needs to be done to address homophobic and xenophobic sentiment in society. The process of 
merging  the  specialised  Ombudspersons  functions  with  the  Office  of  the  Ombudsman  will 
need to be carefully managed to ensure a more effective system of human rights protection in 
practice.  

With regard to labour and trade unions rights, the establishment of a specialised court for 
work-related  disputes  in  Zagreb  represents  significant  progress  towards  a  more  efficient 
resolve of labour conflicts. Following the renewed participation of trade union organisations, 
the Economic and Social Council has resumed its work after ten months. Strengthening social 
dialogue  within  the  decision-making  process  and  in  policy  design,  as  well  as  capacity-
building of social partners, remain key issues to be addressed.  

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Property  rights  are  generally  protected.  However,  there  remain  some  cases  of  delayed 
repossessions  and  problems  with  compensation  for  the  use  of  private  property  confiscated 
under the war legislation from the 1990s. 

Overall,  legal  protection  for  economic  and  social  rights  is  widely  guaranteed.  Croatia  has 
made some progress in the area of economic and social rights. However, implementation of 
women's  and  children's  rights  and  protection  against  all  forms  of  discrimination  demand 
further attention. 

Respect for and protection of minorities, cultural rights 

There  has  been  progress  as  regards  the  protection  of  minorities  and  cultural  rights.  The 
commitment to the rights of minorities, reaffirming their place in Croatian society, continues 
to  be  expressed  at  the  highest  level.  Cooperation  between  the  political  representatives  of 
minorities  and  the  government  remains  good.  The  level  of  funding  available  for  minority 
organisations  has  been  decreased  by  only  1.25%,  despite  more  extensive  cuts  elsewhere. 
Conditions for the effective implementation of the constitutional act on the rights of national 
minorities (CARNM) have improved. A plan for minority employment for the period 2011-
2014 under the CARNM was adopted in May 2011. Financial support to the local Councils 
for National Minorities increased and training was provided for local authorities. Awareness 
of the extent of rights stemming from the CARNM has been raised among civil servants, law 
enforcement officials and minorities. The number of reported racist or xenophobic incidents 
has  been  fairly  limited,  in  particular  compared  to  previous  years.  Where  incidents  have 
occurred, the response at the political and law enforcement level has generally been adequate.  

In  July  2011  elections  to  the  advisory  minority  councils  took  place  in  187  counties  and 
municipalities. Voter turn-out was very low. 

Despite  the  ongoing  effort  to  improve  conditions  for  minorities,  some  persistent  problems 
remain. The CARNM and minority action plans need to be implemented. Due largely to the 
general ban on recruitment in the civil service, there has been no tangible improvement in the 
level  of  employment  of  national  minorities  in public  sector  employment.  Significant  further 
strengthening  of  the  monitoring  of  the  employment  action  plan  is  required.  Further  work  is 
needed  in  the  area  of  schooling,  including  implementation  of  planned  general  human  rights 
education and in particular a review of the role of schooling in reconciliation efforts through 
reviewing teaching material and the portrayal of minorities. 

With  regard  to  the  Serb  minority,  reports  of  ethnically  motivated  attacks  have  decreased. 
However,  cases  of  vandalism  against  monuments  for  war  victims  have  continued.  Police 
investigations into such incidents have improved, but few cases have ended in a prosecution. 
Many cases remain unreported due to lack of confidence in the authorities. Members of the 
Serb  minority,  both  returnees  and  those  who  remained  in  Croatia  during  the  war,  face 
difficulties  in  gaining  access  to  employment,  especially  in  the  war-affected  areas.  Cases  of 
discrimination continue, particularly in the public sector at local level.  

As  for  the  Roma  minority,  there  have  been  some  further  improvements  in  education, 
particularly  in  pre-school  education.  Improvements  to  the  infrastructure  of  some  Roma 
settlements  have  continued.  However,  the  Roma  still  face  discrimination,  particularly 
regarding  access  to  education,  social  protection,  health,  employment  and  adequate  housing. 
Segregation persists in some schools. Progress towards ensuring that Roma children complete 
primary  and  secondary  education  has  been  modest.  Extremely  high  unemployment  persists, 

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despite measures such as adult vocational training for young Roma women. There is scope for 
improved  take-up  by  the  Roma  of  measures  in  their  favour.  For  many  Roma  there  is  the 
persistent  problem  of  their  unresolved  status  (residence  and  citizenship),  which  creates 
difficulties when it comes to the provision of services, notably access to education, health care 
and free legal aid.  

There  has  been  good  progress  on  refugee  return  issues.  Refugees  continued  to  return  to 
Croatia,  with  the  Croatian  authorities  having  registered  over  132,872  returnees  in  total 
belonging  to  the  Serb  minority,  which  corresponds  to  approximately  half  of  those  who  fled 
the  country  up  until  1995.  It  is  estimated  that  54%  of  returnees  have  remained  in  Croatia. 
Progress was made with regard to housing issues. Housing care programmes for returnees are 
being  implemented.  A  purchase  option  under  favourable  conditions  for  housing  care 
beneficiaries and the possibility of new applications in areas not directly affected by the war 
have  been  introduced.  Regional  cooperation  under  the  Sarajevo  process  has  been 
reinvigorated. Croatia has implemented its Action Plan on the Housing Care Programme for 
returning refugees/former tenancy rights holders. It has met the target for 2008. The target for 
2009  under  the  action  plan  for  the  provision  of  2,070  flats  has  also  been  met.  Croatia  has 
strengthened  the  administrative  capacity  for  handling  rejected  applications  for  housing 
reconstruction,  principally  by  recruiting  legal  experts.  The  backlog  of  appeals  has  been 
reduced. Progress has been made in reconstructing the remaining properties. Implementation 
of the decision on validating pension rights has continued.  

Croatia  needs  to  make  continued  progress  in  providing  accommodation  to  other  successful 
applicants beyond the 2009 target. A plan was prepared in March 2011 setting out, inter alia, 
the  financial  requirements  necessary  to  deal  with  the  remaining  2,500  or  so  applications. 
Efforts  to  create  the  economic  and  social  conditions  necessary  for  sustainable  returns  of 
refugees need to be accelerated. 

Overall,  the  position  of  minorities  in  Croatia  is  continuing  to  improve,  although  problems 
remain  for  the  Serb  and  Roma  minorities.  Good  progress  was  made  on  outstanding  refugee 
return issues, but the efforts to provide housing and ensure the sustainability of returns need to 
continue. 

2.3. 

Regional issues and international obligations 

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

Croatia  continues  to  cooperate  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia  (ICTY).  The  government's  inter-agency  task  force  has  explored  important  new 
avenues  in  its  investigations  aimed  at  locating  or  determining  the  fate  of  missing  military 
documents requested by the Office of the ICTY Prosecutor. Croatia has been unable to fully 
account for the missing documents; its efforts should continue. The verdicts of the ICTY of 
15  April  2011  against  Croatian  Generals  Gotovina  and  Markač  led  to  protests  in  the  major 
Croatian  cities.  There  have  been  a  number  of  occasions  in  which  public  declarations  in 
Croatia, including on a high political level, have not been conducive to the efforts to create a 
climate in Croatia more fertile for reconciliation and dealing with the legacy of the 1990s.  

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

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Croatia continued to engage in cooperation on war crimes cases at the bilateral and regional 
levels.  Good  cooperation  between  judicial  authorities,  in  particular  prosecutors,  continued. 
Although there are continuing problems with the extradition of own nationals in the region, 
practical  steps  have  been  taken  to  overcome  them.  Cases  have  been  transferred  between 
Croatia and Serbia so that both Croatia and Serbia have been able to pursue cases against their 
own  citizens  sought  under  war  crimes  charges  originally  brought  in  the  other  country. 
However,  draft  legislation  proposed  by  the  government  in  September  2011,  if  adopted  by 
parliament, would complicate further cooperation with Serbia in this area. The first cases have 
been pursued under an agreement with Bosnia and Herzegovina whereby persons sentenced 
for war crimes in Croatia who fled to Bosnia and Herzegovina can serve their sentence there. 

Significant  progress  was  made  with  regard  to  the  Sarajevo  Declaration  Process,  launched 
through  the  Sarajevo  Declaration  of  31  January  2005.  Bosnia  and  Herzegovina,  Croatia, 
Montenegro and Serbia cooperate within this process to find solutions for refugees who were 
displaced  as  a  result  of  the  armed  conflicts  in  ex-Yugoslavia  between  1991  and  1995. 
Countries  have  continued  to  make  progress  on  a  number  of  outstanding  issues  such  as  data 
exchange,  civil  documentation,  public  information,  pensions  and  trust  fund  mechanisms,  in 
the  framework  of  the  established  regional  working  groups.  Following  the  meetings  of  June 
and September 2011, Bosnia and Herzegovina, Croatia, Montenegro and Serbia agreed on a 
number  of  issues,  including  on  the  text  of  a  joint  declaration  to  be  signed  at  a  ministerial 
conference  in  November  2011  in  Belgrade.  A  regional  multi-year  programme  aimed  at 
addressing  the  needs  of  the  most  vulnerable  refugees, has also been  agreed,  together  with a 
donors' conference to be held in the first half of 2012 in Sarajevo.  

As  regards  missing  persons,  as  of  September  2011,  there  were  still  approximately  14,000 
people  missing  from  the  conflicts  in  the  region.  Of  these,  some  10,000  were  related  to  the 
conflict  in  Bosnia  and  Herzegovina,  2,000  to  the  conflict  in  Croatia  and  over  1,800  to  the 
conflict in Kosovo. Positive developments were noted in relation to the process of resolving 
the  cases  of  missing  persons  in  Croatia.  During this reporting period, around  40 cases were 
solved,  some  35  bodies  were  exhumed  from  these  gravesites  and  other  such  exhumations 
were announced which could result in resolving over 300 cases. However, there still a large 
number  of  unidentified  human  remains  in  the  morgues.  A  comprehensive  process  to  review 
these  cases  needs  to  be  carried  out  so  as  to  enable  identification  and  closure.  Solving  the 
remaining missing cases in an expeditious manner is important for the reconciliation process 
in the region.  

Regional  cooperation  and  good  neighbourly  relations  form  an  essential  part  of  Croatia's 
process  of  moving  towards  the  European  Union.  In  July,  the  Croatian  government  adopted 
and  transmitted  to  Parliament  for  adoption  a  declaration  on  promoting  European  values  in 
Southeast Europe stating a firm commitment from Croatia that bilateral issues, such as border 
issues, must not obstruct the accession of candidate countries to the EU from the beginning of 
the accession process until the Accession Treaty comes into effect. 

Croatia continued to participate actively in regional initiatives, including the EU Strategy for 
the  Danube  Region,  the  South-East  European  Cooperation  Process  (SEECP),  the  Regional 
Cooperation  Council  (RCC),  the  Central  European  Free  Trade  Agreement  (CEFTA),  the 
Energy Community Treaty and the European Common Aviation Area Agreement. In March, 
within the framework of the SEECP, Croatia endorsed the Regional Strategic Document and 
Action Plan on Justice and Home Affairs 2011-2013. Croatia continues to actively support the 
Igman  initiative  on  reconciliation,  which  brings  together  NGOs  from  Bosnia  and 
Herzegovina, Croatia, Serbia and Montenegro, and the RECOM initiative. 

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Bilateral  relations  with  other  enlargement  countries  and  neighbouring  EU  Member 
States are continuing to improve. 

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

Relations  with  Bosnia  and  Herzegovina  intensified.  President  Josipovic  and  PM  Kosor 
adopted  a  joint  statement  on  Croatia's  support  for  Bosnia  and  Herzogovina's  European 
integration.  The  Presidency  of  Bosnia  and  Herzegovina  visited  Croatia  in  January  2011. 
Croatia and Bosnia and Herzegovina signed an agreement on police cooperation in combating 
cross-border crime which provides for the exchange of information on investigations and the 
appointment of police liaison officers. However, limited progress was achieved regarding the 
outstanding issues (border demarcation, the use of the port of Ploce, refugee return, property 
relations,  dual  citizenship).  The  inter-state  Commission  for  Borders  continued  to  meet  but 
failed  to  agree  on  the  outstanding  border  demarcation  issues.  Two  agreements  linked  to  the 
Sava  river  were  signed.  A  readmission  agreement  with  a  shorter  procedure,  which  replaced 
the  previous  agreement  from  2002,  was  signed.  The  first  meeting  of  a  joint  working  group 
was  held  in  April  2011  in  Sarajevo  to  discuss  the  revision  of  the  Local  Border  Traffic 
Agreement and the Agreement on free transit through the port of Ploce and the coastal town 
of Neum in Bosnia and Herzegovina.  

Croatia continues to have good relations with Montenegro. Croatia and Montenegro signed an 
agreement  on  the  extradition  of  citizens  sentenced  for  corruption  and  organised  crime.  A 
number of technical meetings have been held to prepare the joint submission of the Prevlaka 
border  delimitation  to  the  ICJ,  but  no  substantial  progress  has  been  achieved  to  date.  The 
temporary agreement on Prevlaka continues to function smoothly, but achieving a permanent 
solution is necessary. 

Relations with Serbia have further improved. The respective visits of the Presidents of Serbia 
and  Croatia  opened  a  new  page  in  Croatian-Serbian  relations.  However,  the  issue  of 
investigation  and  prosecution  of  war  crimes  against  citizens  of  the  other  country  have 
periodically  burdened  bilateral  relations.  There  have  been  no  tangible  results  with  regard  to 
border  demarcation  concerning  the  Danube.  The  Serbian  government's  counter-suit  against 
Croatia before the International Court of Justice on genocide allegations remains pending.  

Relations  with  Kosovo3  have  been  further  developed.  Visits  took  place  at  different  levels, 
including  at  the  level  of  Prime  Minister  and  Foreign  Minister.  Croatia  and  Kosovo  signed 
agreements on cooperation regarding European integration and road transport. 

Relations with Turkey continue to be good and high-level meetings between the two countries 
were held. 

Croatia continues to have good relations with neighbouring EU Member States Hungary and 
Italy. 

Relations  with  Slovenia  have  improved  further.  The  Arbitration  Agreement  on  the  border 
entered into force on 29 November 2010 and was jointly submitted for registration with the 
Secretariat of the UN on 25 May 2011. Concerning the Ljubljanska Banka/SFRY Succession 
Agreement (guarantee of foreign currency deposits), Croatia agreed to continue negotiations 

3 

Under UNSCR 1244/1999 

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on  the  issue  at  the  Bank  of  International  Settlements  in  Basel.  Croatia  and  Slovenia  have 
agreed on a solution for the future exchange of fishing rights in coastal waters. 

Overall, Croatia is continuing to cooperate with the ICTY as well as to play an active part in 
regional  cooperation.  At  the  same  time,  political  leaders  should  avoid  statements  and 
measures that could call into question the importance of reconciliation and the need to serve 
justice  through  the  prosecution  of  war  crimes.  Relations  with  neighbouring  countries  have 
improved,  although  outstanding  issues  in  particular  settlement  of  border  disputes,  property 
issues and return of refugees remain to be solved.  

3. 

ECONOMIC CRITERIA 

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

3.1. 

The existence of a functioning market economy 

Economic policy essentials 

Croatia  is  participating  in  the  EU  pre-accession  fiscal  surveillance  procedure.  The  Pre-
accession Economic Programme (PEP) for 2011-2013, submitted in January 2011, presented a 
sufficiently comprehensive and consistent macroeconomic and fiscal framework for economic 
policies.  Progress  was  achieved  in  some  of  the  main  areas  of  the  'Economic  Recovery 
Programme', a package of fiscal measures and comprehensive structural reforms launched in 
April  2010.  Overall,  consensus  on  the  fundamentals  of  a  market  economy  was  maintained, 
but efforts need to be intensified to implement the necessary structural reforms. 

Macroeconomic stability 

The  global  financial  and  economic  crisis  caused  a  protracted  recession  in  Croatia  which 
continued through the first quarter of 2011. In 2010 as a whole, real GDP declined by 1.2% 
after a 6.0% contraction in 2009. GDP per capita in purchasing power terms fell from 65% of 
the EU-27 average in 2009 to 61% in 2010. Investment continued to fall at a double-digit rate 
(-11.3%) while the decline in private consumption diminished markedly (by -0.9% compared 
with -8.5%). Public consumption also declined (-0.8%) in contrast to a small increase in 2009 
(0.2%). In the context of the economic recovery in the EU and in other export markets, export 
volumes increased by 6.0% in 2010 following the sharp contraction in the preceding year (-
17.3%). The decline in import volumes, however, continued, albeit at a much slower speed (-
1.3% in 2010 against -20.4% in 2009). The contribution by net exports to real GDP growth 
remained at 3.0%. The mild decline in economic activity continued throughout the winter of 
2010/11 and output was 0.8% lower, year on year, in the first quarter of 2011. Available data 
indicate a slight upturn of economic activity in the second quarter. GDP was 0.8% higher year 
on  year  according  to  the  preliminary  estimate.  Industrial  production  started  to  trend  upward 
and  its  volume  level  was  0.9%  higher  year  on  year  in  July.  Retail  sales  have  increased 
consistently  on  a  year-on-year  basis  since  April  and  were  0.9%  higher  in  July.  Exports  of 
goods were 6.3% higher in nominal terms in April-July compared to the corresponding period 
in 2010. Physical indicators of tourism have increased significantly in the first seven months 
of 2011 compared to the previous year. Overall, economic recovery had not yet taken hold in 

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early spring 2011, but there are indications that economic activity has started to increase since 
April. 

The  government  launched  the  Economic  Recovery  Programme  in  April  2010,  when  the 
economy was not yet recovering from the recession and fiscal trends were more unfavourable 
than expected. Apart from some fiscal measures which were quickly adopted, the programme 
is  a  package  of  structural  reforms  seeking  to  address  the  structural  weaknesses  of  the 
economy  and  create  an  environment  encouraging  sustainable  economic  growth.  It 
encompasses basically all existing strategy papers and development documents and provides a 
new basis for economic policy in the country. The programme includes 131 measures in ten 
areas to be implemented over ten years. Among other things, it aims at reducing the number 
of public-sector employees, privatising State-owned enterprises and cutting non-tax fees, but 
it  also  includes  a  vast  number  of  measures  in  other  fields  such  as  labour  market  policy, 
education and science policy, social security, export and investment promotion, government 
asset  management,  environmental  protection,  etc.  Progress  has  been  made  on  implementing 
the  planned  structural  reforms  in  some  of  the  main  areas  like  pension  laws,  unemployment 
benefits, civil service employment and non-tax fees. But fundamental structural reforms have 
not been achieved so far. Overall, the measures which have been taken under the Economic 
Recovery Programme so far have not contributed decisively to improving the growth potential 
and international competitiveness of the economy. 

The current account deficit narrowed to 1.2% of GDP in 2010 from 5.3% in 2009 continuing 
a cyclical trend which started with the onset of the recession. As in the preceding year, it was 
again  driven  by  an  improving  balance  of  trade  in  goods.  Imports  of  goods  and  services 
declined, but at a much slower rate than in 2009. At the same time, the trade balance benefited 
from a turnaround to growth in exports, as the recovery took hold in major foreign markets. 
As  a  consequence,  the  trade  deficit  in  goods  fell  from  16.2%  of  GDP  in  2009  to  12.9%  in 
2010.  The  trade  surplus  for  services  (mainly  tourism  and  transport)  increased  slightly  from 
12.6% of GDP in 2009 to 12.8% in 2010. The deficit on income and transfer payments fell 
from  1.7%  of  GDP  in  2009  to  1.2%  in  2010.  The  improvement  in  the  current  account  was 
sustained  in  the  first  quarter  of  2011  as  continued  subdued  domestic  demand  prevented 
imports from rising more markedly. Overall, the current account deficit has been narrowing, 
mainly as a result of subdued demand for imported goods, but also thanks to rising exports.  

Net  capital  inflows  receded  in  2010  as  a  corollary  of  the  declining  current  account  deficit. 
Excluding changes in international reserves, they fell from 9.6% of GDP in 2009 to 3.3% in 
2009. More than half of this decline is accounted for by a sharp fall in inward foreign direct 
investment (FDI). FDI fell to 0.9% of GDP in 2010 from 4.6% in 2009. After net FDI flows 
had financed only half of the current account deficit in 2009, they covered close to 100% of 
the much smaller deficit in 2010 despite dropping sharply. The total stock of FDI in Croatia 
stood  at  €24.5  billion  (around  53%  of  GDP)  at  the  end  of  2010,  about  1  percentage  point 
higher than at the end of 2009. Overall, in the context of a declining current account deficit, 
sufficient external financing was secured by net FDI inflows. 

The  heavy  external  debt  burden  continued  to  increase  in  2010.  The  stock  of  gross  external 
debt went up by €1.2 billion to €46.5 billion, which amounts to 102.6% of GDP.4 The general 
government  increased  its  foreign  debt  by  around  €0.8  billion  in  the  course  of  2010  to 

4 

This  level of  external  debt  includes debt  arising from  transactions  that  were previously  considered  as 
round trip transactions and therefore excluded. 

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€6 billion which is equivalent to about 13% of Croatia's gross external debt. The fact that the 
non-tradable  sector  accounts  for  around  40%  of  gross  foreign  debt  remains  a  cause  for 
particular  concern.  Overall,  the  high  and  growing  level  of  external  debt  and  the  relatively 
large exposure of the non-tradable sector to currency risks remain key external vulnerabilities 
of the Croatian economy. 

On the labour market the average annual unemployment rate increased from 9.1% in 2009 to 
11.8%  in  2010  according  to  the  labour  force  survey.  The  rising  trend  of  unemployment 
continued  into  2011.  In  the  first  quarter  the  unemployment  rate  rose  to  14.3%  which  is  3.1 
percentage points higher, year on year. The registered unemployment rate was 0.4 percentage 
points higher in July 2011 than a year earlier, but this year-on-year increase has declined from 
2% last winter. Annual average employment was 4.0% lower in 2010 after a 1.8% decline in 
2009. The Croatian labour market continues to suffer from major structural weaknesses, such 
as  low  employment  and  participation  rates  along  with  high  rates  of  youth  and  long-term 
unemployment. In 2010 the employment and participation rates declined to 54.1% and 61.5% 
respectively, while youth unemployment surged to 34.4% from 25.1% in 2009. The effective 
retirement age remained low as there are transitional arrangements on equalising pensionable 
age.  Significant  labour  supply  disincentives  persisted.  Employment  has  been  negatively 
affected  by  Croatia's  limited  progress  on  effectively  implementing  the  objective  of  the 
Economic Recovery Programme to make the labour market more dynamic and by the lack of 
incentives structures and the combination of flexibility and security on the labour market. As 
a  result,  labour  turnover  remained  low,  suggesting  limited  reallocation  of  labour  resources. 
Wage movements reflected the weakening of the labour market to some extent. Average gross 
wages  increased  by  1.1%  year  on  year  in  the  first  half  of  2011  in  nominal  terms  and  were 
1.2% lower in real terms. Overall, the labour market situation continued to deteriorate. Major 
structural weaknesses persist in the labour market (see also Chapter 19). 

Monetary policy continued to be directed towards a tightly managed kuna/euro exchange rate 
with little variability, but without a formal peg to the euro. This monetary policy framework 
anchors  inflation  expectations  and  reduces  exchange  rate-related  credit  risks  in  a  highly 
euroised economy. In spite of a slight downward trend of the kuna against the euro, monetary 
policy  was  able  to  maintain  an  accommodating  stance  in  persisting  recessionary  conditions. 
As an additional incentive to bank  lending, the central bank released €850  million worth of 
additional  euro  liquidity  into  the  banking  system  in  early  March  2011  by  lowering  the 
minimum reserve requirement on banks' foreign exchange liabilities from 20% to 17%. In the 
foreign exchange market the kuna depreciated 2.9% against the euro between the beginning of 
October  2010  and  mid-September  2011,  viz.  from  7.30  to  7.52  kuna  per  euro.  The  central 
bank  intervened  on  four  occasions  to  counter  depreciation  pressures,  twice  in  November 
2010,  once  in  July  2011  and  once  in  September  2011,  selling  a  total  of  €770  million. 
Nevertheless, overall foreign exchange operations increased gross international reserves from 
€11,154  million  at  the  end  of  September  2010  to  €11,233  million  at  the  end  of  July  2011 
which  is  equivalent  to  around  seven  months  of  imports  of  goods  and  services.  Overall,  the 
central bank maintained an accommodating monetary policy stance in the context of subdued 
economic activity, while maintaining exchange rate and financial stability. 

Following a slight contraction in 2009 domestic credit to the private sector increased by 6.9% 
in  2010  (or  3.6%  excluding  exchange  rate  effects  primarily  arising  from  the  sharp 
appreciation  of  the  Swiss  franc).  This  credit  expansion  was  roughly  maintained  in  the  first 
five months of 2011 with an annualised increase of 6.6%. It was exclusively driven by bank 
lending to the corporate sector which expanded by 9.6% in the course of 2010 and accelerated 
to an annualised rate of 11.8% in the first five months of 2011. By contrast, lending to private 

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households  (adjusted  for  exchange  rate  effects)  fell  by  1.4%  in  2010  and  this  decline 
continued into 2011. Bank credit to general government increased by 13.8% in the course of 
2010 and accelerated to 27.0% in the first five months of 2011. The government's programme 
to stimulate corporate financing via the State Development Bank (HBOR) had only a limited 
impact on bank lending. Overall, credit to private households has contracted slightly, lending 
to  the  corporate  sector  has  recovered  moderately,  and  the  structure  of  credit  has  continued 
shifting towards government financing. 

Average annual inflation fell from 2.4% in 2009 to 1.1% in 2010, continuing the trend from 
the preceding year. The disinflationary process was driven primarily by the growing slack in 
use of resources transmitted to price- and wage-setting. Since late 2010, however, disinflation 
has  been  replaced  by  a  mild  upturn  in  inflation.  Higher  energy  and  food  prices  pushed  up 
headline inflation from 1.2% in November to 2.0% in August. Higher commodity prices have 
spilled  over  into  areas  like  transport  and,  particularly,  processed  food.  Consequently,  the 
central bank's measure of core inflation increased from -0.2% year on year last November to 
1.8% in May. Overall, the recession-induced decline in inflation has been followed by a mild 
upturn stemming mainly from rising commodity prices. 

Public finances worsened again in 2010 mainly as a consequence of the continuing recession. 
A budget revision in August 2010 lowered projected general government revenue by 4.5% of 
GDP  and  increased  expenditure  by  0.3%  of  GDP  compared  with  the  original  budget.  The 
projection for the general government deficit in 2010 was raised by 1.9 percentage points to 
5.2%  of  GDP  compared  with  a  deficit  of  4.1%  of  GDP  in  2009.  The  preliminary  outturn 
shows  a  lower  than  planned  deficit  of  4.9%  of  GDP.  This  has  only  been  made  possible  by 
keeping  public  investment  expenditure  some  0.5  percentage  points  of  GDP  below  budget 
appropriations.  The  stock  of  general  government  consolidated  gross  debt  increased 
significantly  from  35.2%  of  GDP  at  the  end  of  2009  to  41.2%  at  the  end  of  2010.  Adding 
outstanding State guarantees and the debt of the State Development Bank (HBOR), the level 
of  public  debt  totalled  57.1%  of  GDP  at  the  end  of  2010.  The  2011  budget  is  based  on  the 
assumption  of  1.5%  real  GDP  growth  and  2.1%  inflation  in  2011.  Revenue  is  projected  to 
decline by 0.8% in nominal terms compared with 2010. This is primarily a consequence of the 
phased repeal of the special crisis tax on salaries, pensions and other receivables which had 
been imposed in mid-2009. Another reason is last year's change in income tax rates and tax 
brackets  which  lowered  annual  revenue  by  an  estimated  0.3%  of  GDP.  Expenditure  is 
budgeted to stay at the same level in nominal terms in accordance with a decision adopted by 
parliament in August 2010. The overall deficit is projected at 5.5% of GDP. According to the 
Ministry of Finance, the deficit equalled 2.6% of annual GDP in the first six months of 2011. 
In an ad hoc response to rising oil prices, the government reduced excise taxes on petrol and 
diesel fuel in March 2011, which will lower revenue by close to 0.1% of GDP on an annual 
basis.  The  contraction  in  output  in  the  first  quarter  implies  a  risk  of  lower-than-projected 
economic growth and tax revenue and, therefore, a higher-than-projected deficit in the 2011 
budget. Overall, the authorities made efforts on the expenditure side of the budget to contain 
the continuing rise of the fiscal deficit. Ensuring medium-term fiscal sustainability remains a 
key challenge. 

Limited  progress  has  been  made  on  rationalisation  of  public  spending.  Some  further  health 
reforms  have  been  adopted  as  a  major  step  towards  addressing  the  sector's  financial 
difficulties.  These  include  streamlining  of  the  administration  of  the  hospital  network  and  of 
the  supplementary  health  insurance  system.  Some  cuts  to  privileged  pensions  have  been 
adopted, but in general little progress has been made towards better targeting of social support 

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in  spite  of  the  action  announced  in  the  Economic  Recovery  Programme.  Overall,  little 
progress has been made towards increasing the efficiency of public spending.  

Strategy-based  budget  planning  has  improved  with  the  adoption  of  a  Fiscal  Responsibility 
Law  on  23  November  2010.  This  law,  which  came  into  force  on  1  January  2011,  aims  to 
ensure medium- and long-term sustainability, transparency and discipline for public finances 
and applies to all general government bodies. It contains fiscal rules aiming to stabilise and 
reduce  the  ratio  of  public  debt  to  GDP.  They  stipulate  that  total  general  government 
expenditure will be reduced by a minimum of 1% of GDP annually. Once the primary fiscal 
balance  has  been  brought  back  to  zero,  it  has  to  be  kept  in  balance  (or  in  surplus)  in 
cyclically-adjusted  terms.  The  fiscal  rules  have  to  be  applied  for  the  first  time  in  the  public 
budgets  for  2012.  The  law  also  contains  general  provisions  on  financial  control,  including 
presentation of  annual statements of  fiscal accountability. Responsibility for enforcement of 
the  law  lies  mainly  with  the  Ministry  of  Finance,  but  in  March  2011  the  government 
established  a  Fiscal  Policy  Committee,  consisting  of  non-governmental  experts,  to  monitor 
implementation  of  the  fiscal  rules.  Overall,  the  Fiscal  Responsibility  Law  has  improved 
strategy-based  budget  planning  and  can  be  used  as  an  instrument  to  rein  in  the  high  budget 
deficit. 

Implementation  of  a  comprehensive  treasury  reform  strategy  has  continued  with  a  view  to 
further improving expenditure management and budget control systems. In February 2011 the 
government adopted the Public Debt Management Strategy for 2011-2013. Its objectives are 
to  stabilise  the  share  of  public  debt  to  GDP,  to  extend  the  repayment  period  (currently 
averaging around five years), to introduce a currency risk protection clause especially for debt 
denominated  in  US  dollars,  to  develop  the  domestic  securities  markets  and  to  achieve  a 
balanced  distribution  of  public  debt  between  foreign  and  domestic  markets.  Fiscal 
transparency remains a concern, due to the non-inclusion in the general government accounts 
of  some  quasi-fiscal  operations  (the  State  Development  Bank  and  the  Motorway  Company) 
and  a  large  number  of  municipalities.  More  progress  is  required  to  bring  fiscal  reporting 
closer  into  line  with  ESA95  standards.  Further  progress  is  also  required  on  linking  policy 
priorities to the budget planning process more effectively. Overall, analytical and institutional 
capacity  on  public  finance  has  continued  to  improve,  but  strategy-based  budget  planning 
could be strengthened further. 

Overall, the macroeconomic policy stance has, by and large, been appropriate to address the 
macro-economic  challenges  given  the  existing  constraints.  Monetary  policy  maintained 
exchange  rate  and  financial  stability  while  remaining  appropriately  accommodating  in  a 
context  of  subdued  economic  activity.  Fiscal  policy  has,  to  some  extent,  contained  the 
negative budgetary consequences of the continuing recession. To achieve medium-term fiscal 
sustainability,  key  challenges  remaining  are  to  improve  the  budgetary  process  further,  to 
strengthen fiscal discipline and to enhance the efficiency of public spending. 

Interplay of market forces 

The private sector's share of employment has remained at around 70% and its share of GDP is 
also estimated at around 70%. Only limited progress was made with privatisation of publicly-
held  assets.  In  the  period  between  15  September  2010  and  30  June  2011  a  total  of  83 
companies  were  privatised,  including  through  bankruptcy  and  winding-up  procedures.  The 
proceeds of the sales were relatively modest (about €11 million) since many of the companies 
were  liquidated  in  the  process.  The  remaining  portfolio  comprises  693  companies,  with  the 
State  holding  majority  ownership  of  92  of  them.  The  portfolio's  nominal  value  was  set  at 

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around €7.7 billion at the end of June 2011, up by about 3% since mid-September 2010. Since 
the  remaining  holdings  consist  predominantly  of  highly  indebted  and  often  loss-making 
companies,  finding  strategic  partners  is  a  lengthy  process,  requiring  several  stages  prior  to 
declaring  bankruptcy  or  liquidation.  As  regards  the  shipbuilding  sector,  which  generates 
revenue equivalent to about 2.5% of GDP, restructuring and privatisation continued (See also 
Chapter  8).  In  December  2010  parliament  adopted  a  Law  on  State  property  management 
which  created  the  Government  Asset  Management  Agency  by  merging  the  Croatian 
Privatisation  Fund  with  the  Central  Administrative  Office  for  State  Property  Management. 
This consolidation should allow better management of all State property and easier access to 
State  property  for  potential  investors  by  allowing  new  sales  models.  Overall,  very  limited 
progress has been made towards reducing the large role of the State in the economy. 

Market entry and exit 

The  legal  framework  for  companies  entering  and  leaving  the  market  was  improved  by  the 
adoption  of  a  number  of  laws  (on  forfeiture,  litigation  procedures,  bankruptcy  and  court 
registering).  Preliminary  data  indicate  that  the  number  of  newly  registered  companies 
declined  by  8.6%  in  2010,  year  on  year,  and  the  total  number  of  registered  businesses 
declined by 1.9%. A bill on regulatory impact assessment has been enacted by parliament in 
July 2011. A regulatory impact assessment strategy has been drafted and three pilot projects 
are under way. The investment climate still suffers from difficulties in obtaining the necessary 
licences,  building  permits  and  other  authorisations,  as  well  as  from  the  unpredictability  of 
administrative  decisions,  in  particular  at  local  level.  A  large  number  of  non-tax  fees  at 
national  and  local  levels  still  burden  entrepreneurs  although  they  have  been  reduced,  on 
average,  by  about  25%  as  part  of  the  Economic  Recovery  Programme.  Overall,  further 
progress  has  been  made  on  simplifying  company  registration,  but  the  investment  climate 
continues  to  suffer  from  a  heavy  regulatory  burden,  unpredictability  of  administrative 
decisions and numerous non-tax fees. 

Legal system 

Further  progress  was  made  in  speeding  up  court  procedures.  However,  the  length  of 
proceedings  before  the  courts  remains  generally  excessive  and  problems  persist  with 
enforcement of court decisions. The weaknesses of the judicial system continue to undermine 
effective  enforcement  of  creditor  and  property  rights.  Land  registration  has  improved,  but 
remains incomplete in parts of the country. Investors still suffer from lengthy procedures to 
register  property.  Corruption  is  being  tackled  more  vigorously  but  is  still  affecting  the 
business  environment,  which  also  continues  to  suffer  from  inefficiencies  in  the  public 
administration.  Foreign  direct  investment  is  held  back  by  the  various  shortcomings  in  the 
business environment. Overall, the judicial system has been improved, although enforcement 
of property rights is still weak. Improving the business environment should remain a priority 
in the accession process. 

Financial sector development 

The financial sector continued to be dominated by banks, which held 75.3% of the total assets 
of financial intermediaries at the end of 2010. The foreign-owned banks had a market share 
(i.e.  share  of  total  banking  assets)  of  90.5%.  The  banking  sector  is  almost  completely 
privatised with only two out of 32 banks remaining State-owned, together holding a combined 
market  share  of  4.2%.  There  were  23  small  banks  with  market  shares  below  1%,  three 
medium-sized banks with a share of between 1 and 5% and six large banks with market shares 

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above  5%.  The  market  share  of  the  four  largest  banks  remained  practically  unchanged  and 
added up to 65.6% at the end of 2010. Market concentration has remained moderate and has 
generally not hindered market competition.  

Banking  sector  assets  increased  by  5.2%  in  2010  compared  with  only  2.7%  in  2009.  About 
half of the rise was due to increased lending to the private corporate sector and about one third 
stemmed from increased lending to the government sector. The rise in household lending was 
due solely to the rising value of the Swiss franc which increased the size of residential loans 
to the household sector. In terms of GDP, total bank lending rose from 75.8% at the end of 
2009  to  81.3%  at  the  end  of  2010.  Overall,  the  largely  private  and  foreign-owned  banking 
sector remained the dominant part of the financial sector as a whole, with a moderate degree 
of market concentration. 

The  banking  sector  remained  well  capitalised  as  a  result  of  previous  prudential  and 
supervisory  measures  to  address  potential  macro-financial  vulnerabilities.  The  capital 
adequacy ratio remained high at 18.4% at the end of 2010, only slightly down from 19.2% in 
mid-2010.  Subsequently  it  has  climbed  back  up  to  19.1%  at  the  end  of  March  2011.  The 
profitability of banks recovered somewhat in 2010 after the deterioration in the previous year. 
The return on average equity increased to 7.0% after having declined from 9.9% in 2008 to 
6.4% in 2009. High provisioning costs continued to weigh on banks' profits. The share of non-
performing loans continued to increase rapidly in 2010 reaching 11.2% at the end of the year, 
up from 7.8% at the end of 2009. In the course of the first quarter of 2011 it increased further 
to 11.5%. The main driving force behind this rise was the deteriorating quality of household 
loans against the background of deteriorating labour market conditions and the Swiss franc's 
appreciation  against  the  kuna.5  The  upward  trend  in  the  share  of  non-performing  loans 
continued  into  2011  (11.5%  as  of  31  March  2011)  as  the  banking  system  continued  to  face 
considerable  interest- and currency-related credit risks since the majority of loans are based 
on  variable  interest  rates  and  denominated  in  (or  indexed  to)  foreign  currencies, 
predominantly the euro. Developments affecting the stability of the financial sector have been 
kept  under  close  watch  by  the  central  bank,  which  built  up  its  institutional  and  analytical 
capacity  to  produce  assessments  of  the  stability  of  the  sector.  Overall,  the  banking  sector 
remained  relatively  resilient  to  shocks,  but  significant  risks  are  posed  by  largely  unhedged 
liabilities of the non-financial private sector. 

The  share  of  non-banking  financial  sector  assets  in  total  financial  sector  assets  remained 
largely unchanged in 2010 on 23.3% at the end of the year. The stock market index rose by 
5.3% over the year 2010, following a gain of 16% in 2009, but was still about 60% below the 
peak in 2007. Market capitalisation of shares listed on the Zagreb stock exchange increased 
from 40.9% at the end of 2009 to 42.1% at the end of 2010. Market capitalisation of all listed 
bonds rose from 11.0% of GDP at the end of 2009 to 15.8% in the course of 2010, mainly due 
to the new domestic bonds issued by the Croatian government. Overall, notwithstanding the 
growth  of  some  market  segments,  financial  intermediation  by  the  non-banking  sector 
remained  relatively  modest.  The  stock  market  has  only  partially  recovered  from  the  heavy 
losses during the financial crisis. 

5 

The Swiss franc appreciated 13.4% against the kuna between 1 October 2010 and 19 September 2011). 
It represented 16% of all foreign-currency-indexed or –denominated bank loans in the first quarter of 
2011 (and 12% of all bank lending). 

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3.2. 

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

Existence of a functioning market economy 

Croatia is a functioning market economy. The macro-economic policy stance to cope with the 
continuing recession has, by and large, been appropriate given the constraints on both fiscal 
and monetary policy. Prudent measures by the monetary authorities and efforts, albeit limited, 
to contain the fiscal deficit have helped to anchor the expectations of economic operators and 
supported market mechanisms.  

Endowment with human and physical capital 

Educational reforms have continued under the 2005-2010 development plan for the education 
system. Further steps were taken to improve the quality of education at all levels, including in 
the  form  of  training  of  teachers.  The  process  of  referencing  the  Croatian  Qualifications 
Framework to the European Qualification Framework is ongoing. Higher education has been 
further  aligned  with  the  principles  of  the  Bologna  process,  although  tertiary  education 
generally  continues  to  suffer  from  inefficiencies,  poor  governance  and  lack  of  funding.  The 
ICT infrastructure is relatively well developed, with high internet and broadband penetration 
rates. 

The government continued to implement labour market policies on the basis of the Economic 
Recovery  Programme  and  the  National  Employment  Promotion  Plan.  Measures  include 
training and employment subsidies for young people without work experience, the long-term 
unemployed, older persons and vulnerable groups. Structural problems persisted on the labour 
market, as indicated by the high youth unemployment and low employment and participation 
rates. Overall, structural weaknesses in the labour market remain major challenges. 

Investment continued to fall sharply in 2010, mainly due to a drop in construction activity. As 
a  share  of  GDP,  investment  fell  from  24.9%  in  2009  to  21.6%  in  2010.  The  decline  in 
investment  in  processing  and  manufacturing  industry  has  harmed  the  prospects  for  faster 
technological  change,  a  more  diversified  production  structure  and  higher  export  potential. 
Public  investment  slowed  down  a  little,  but  remained  significant,  in  particular  in  the 
motorway network. The largest share of cumulative FDI inflows (over the period 2003-2010) 
is  accounted  for  by  the  financial  sector  (37%),  followed  by  manufacturing  (21%)  and 
wholesale and retail trade (17%). The long-standing shortage of greenfield FDI continues. In 
October 2010 the government put forward a catalogue of 30 public-sector investment projects 
worth  €13.85  billion.  The  projects  should  be  carried  out  by  public  companies  and  local 
authorities in the areas of energy, tourism, water management and transport infrastructure. It 
remains  unclear  when  work  on  these  projects  will  begin,  since  the  government  has  secured 
only a small amount of the financing needed. Overall, investment declined in the context of 
the recession and continued to concentrate on transport infrastructure and the services sector. 

Sector and enterprise structure 

Restructuring  the  shipyards  in  difficulty  is  a  key  priority  in  the  accession  process.  The 
privatisation of the yards is in its final stage. One shipyard out of five reimbursed the State aid 
received since March 2006 and is no longer considered a shipyard in difficulty under State aid 
rules.  Implementation  of  the  National  Restructuring  Programme  (NRP)  for  the  steel  sector 
was disrupted by the global economic crisis and is no longer needed. One of the steel mills is 

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currently  subject  to  a  bankruptcy  procedure.  The  private  investor  in  the  other  steel  mill  has 
decided  to  reimburse  the  aid  (See  Chapter  8).  There  has  been  only  limited  progress  on 
restructuring  the  State-owned  railway  company  (staff  reductions)  and  privatising  its 
subsidiaries. The railways continue to receive high levels of budget support. Overall, although 
privatisation of the shipyards has proceeded, further efforts are now required to complete the 
process. Sustained efforts are required to complete the restructuring of the railways to secure 
their long-term viability and competitiveness.  

The  telecommunications  industry  was  further  liberalised.  The  Croatian  Telecommunications 
Agency  continued  activities  with  the  aim  of  stimulating  competition  by  improving  market 
access for new service-providers. This led to further price reductions and to a larger choice of 
tariff  packages  for  customers.  Liberalisation  of  the  energy  sector  continued  gradually  and 
rules  for  the  gas  transport  and  distribution  network  have  been  enacted.  However,  gas  and 
electricity  markets  remain  dominated  by  single  suppliers,  preventing  effective  competition. 
The restructuring of the large electricity company has not advanced. Overall, despite further 
legal  and  regulatory  adjustments,  competition  in  network  industries  remains  constrained  by 
dominant incumbent suppliers. 

The  already  dominant  services  sector  increased  its  share  of  total  gross  value  added  from 
68.2%  in  2009  to  68.8%  in  2010.  The  share  of  industry  rose  from  18.4%  to  19.0%  and  the 
share  of agriculture, forestry and  fishing from 5.4% to 5.5%.  These gains were made at the 
expense of construction whose share of total gross value added declined from 8.0% in 2009 to 
6.7% in 2010. The share of construction in total employment decreased from 8.8% in 2009 to 
7.5%  in  2010  and  the  share  of  industry  from  19.5%  to  19.0%,  whereas  agriculture's  share 
increased from 13.9% to 14.9%.  

In the first three quarters of 2010, small and medium-sized enterprises (SMEs) accounted for 
67.2%  of  total  employment  and  52.2%  of  total  investment.  SMEs  generated  51%  of  gross 
profit and more than 45% of total exports. Except for gross profits, where their share declined, 
all their indicators improved compared with the previous year. The State Development Bank 
(HBOR)  was  further  strengthened  financially  to  enable  it  to  increase  lending  to  SMEs  on 
more favourable terms. Still, the sector continued to suffer from the cumbersome regulatory 
framework  and  inefficiencies  in  public  administration.  Access  to  longer-term  financing 
remained  difficult,  particularly  for  newly  established  businesses.  Overall,  the  government 
continued to support the SME sector, whose relative share in the overall economy increased. 

State influence on competitiveness 

The  Competition  Agency  has  been  given  a  stronger  role  in  the  antitrust  and  mergers  field. 
Administrative capacity and enforcement of competition policy continued to improve. Public 
subsidies remained unchanged at the high level of 2.4% of GDP in 2010 and a large share still 
went to loss-making companies. Horizontal aid continued to account for only a small share of 
total subsidies, although it increased relative to sector-specific aid. Overall, State intervention 
in the enterprise sector remained substantial. 

Economic integration with the EU 

Croatia is an open economy with total trade in goods and services accounting for around 77% 
of  GDP  in  2010.  Although  this  ratio  is  2  percentage  points  higher  than  in  2009,  it  is  still 
significantly below the level of 92% in 2008. Apart from exports of machinery and transport 
equipment (mainly ships), tourism remained the biggest source of export revenue, generating 

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an  unchanged  14%  of  GDP  in  2010.  The  EU  has  continued  to  be  Croatia's  largest  trading 
partner. Its shares of total Croatian exports and imports remained relatively stable in 2010 at 
61%  and  60%  respectively.  CEFTA  countries  accounted  for  10.3%  of  all  Croatian  trade  in 
2010, slightly below their share in 2009. 94% of all FDI stocks stemmed from EU Member 
States. Overall, integration with the EU in the areas of trade and investment remained high.  

The  average  real  effective  exchange  rate  deflated  by  consumer  prices  fell  by  1.4%,  year  on 
year,  in  2010,  mainly  due  to  the  nominal  depreciation  of  the  kuna  against  a  basket  of 
currencies  of  major  trading  partners  and  partly  to  a  smaller  increase  in  domestic  than  in 
foreign  consumer  prices.  However,  the  average  real  effective  exchange  rate  deflated  by 
producer  prices  increased  slightly  year  on  year  (0.2%),  despite  the  nominal  effective 
depreciation.  Using  unit  labour  costs  as  the  deflator,  the  kuna  depreciated  by  4.9%  year  on 
year in real effective terms in the first three quarters of 2010. Unit labour costs decreased due 
to  the  stronger  fall  in  employment  than  in  GDP  and  falling  compensation  per  employee. 
Overall, standard indicators point, on balance, to some improvement in Croatia's international 
price competitiveness in 2010. 

4. 

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 

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

4.1. 

Chapter 1: Free movement of goods 

Good  progress  can  be  reported  towards  alignment  on  general  principles.  Although  Croatia 
has made headway in the implementation of its action plan for compliance with Articles 34 to 
36  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU),  reporting  to  the 
Commission needs to be improved. 

In the area of horizontal measures, good progress can be reported. The human resources of 
the  Internal  Market  Co-ordination  Department  of  the  Ministry  of  Economy,  Labour  and 
Entrepreneurship  have  been  strengthened  with  two  additional  employees.  A  further  revision 
of  the  Act  on  technical  requirements  for  products  and  on  conformity  assessment  is  under 
preparation  in  order  to  align  the  Croatian  legal  framework  fully  with  the  new  horizontal 
acquis.  

As  regards  standardisation,  good  progress  can  also  be  reported.  The  Croatian  Standards 
Institute  (HZN)  has  transposed  nearly  all  European  standards.  HZN  was  chosen  as  the 
notifying authority referred to in the Agreement on Technical Barriers to Trade (WTO/TBT).  

In the field of conformity assessment, some progress can be reported in adopting the relevant 
ordinances on the CE marking and designation of conformity assessment bodies.  

In  the  field  of  accreditation,  there  has  also  been  good  progress.  The  Croatian  Accreditation 
Agency  (HAA)  has  prepared  all  necessary  documents  required  for  the  regular  re-evaluation 
by the European co-operation for Accreditation (EA) which will be taking place during 2011. 
So far the HAA has accredited a total number of 247 conformity assessment bodies. 

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Alignment  with  the  acquis  in  the  area  of  metrology  is  advanced.  Transferring  responsibility 
for scientific metrology to the National Metrology Institute (NMI) is still the main outstanding 
issue  in  this  field.  The  Statute  of  the  Croatian  Metrology  Institute  (HMI)  was  adopted  in 
March 2011, but the Director has not been appointed yet.  

Regarding  market  surveillance,  there  has  been  further  progress  with  the  State  Inspectorate's 
administrative  capacity  and  enforcement  measures.  Alignment  in  the  field  of  market 
surveillance is advancing. 

Overall,  as  regards  horizontal  measures,  adequate  structures  for  harmonisation  with  EU 
legislation are in place.  

There has been good progress in relation to the 'Old Approach' product legislation, with a 
number  of  regulations  being  adopted.  Further  efforts  are  needed  in  order  to  achieve  full 
alignment and implementation of the legislation, in particular in the fields of data exclusivity 
and  absence  of  financial  interest  in  the  pharmaceutical  industry  by  the  employees  of  the 
Agency for medicinal products and medical devices; clinical trials for medicinal products for 
human use; good laboratory practice and aerosol dispensers.  

Alignment with the 'New and Global Approach' product legislation is well on track. New 
or  revised  transpositions  have  been  adopted  in  many  product  sectors  (e.g.  electromagnetic 
compatibility, explosive substances, machinery and safety  of  toys). However, further efforts 
are  still  needed,  particularly  on  construction  products,  medical  devices,  pressure  equipment, 
simple pressure vessels and gas appliances.  

Some  progress  has  been  achieved  on  procedural  measures,  where  alignment  is  advanced. 
The  central  contact  point,  established  within  the  Ministry  of  Economy,  Labour  and 
Entrepreneurship  to  facilitate  cooperation  between  the  Ministry  and  other  central  State 
departments and operators, needs to be reinforced. Further efforts are still needed in order to 
transpose fully the acquis governing acquisition and possession of weapons.  

Conclusion 

Good  progress  has  been  made  in  the  field  of  free  movement  of  goods.  Alignment  with  the 
acquis in this chapter is well advanced. However, further efforts are necessary, particularly on 
the remaining revisions of the horizontal legislation, as well as the 'New' and 'Old Approach' 
product legislation, in order for the national legislation to be fully in line with the acquis.  

4.2. 

Chapter 2: Freedom of movement for workers 

Croatia largely fulfils the acquis requirements on access to the labour market.  

Continued  progress  can  be  reported  towards  future  participation  in  the  EURES  (European 
Employment  Services)  network.  The  organisational  structure  of  the  Croatian  Employment 
Service  (CES)  has  been  adjusted,  its  administrative  capacity  strengthened  and  its  IT  system 
adapted  to  connect  to  the  European  Job  Mobility  Portal  upon  accession.  Various  training 
activities  for  EURES  advisers  have  been  organised.  The  CES  has  opened  two  new  Migrant 
Information  Centres  in  cross-border  regions  and  is  intensifying  their  activities.  In  this  area, 
preparations are nearing completion.  

Good progress has continued in the area of coordination of social security systems. Further 
efforts  have  been  made  to  strengthen  the  administrative  capacity  to  apply  the acquis  in  this 

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field.  The  inter-institutional  working  group  meets  on  a  monthly  basis.  Croatia  continues  to 
participate as an observer in the preparations for the EESSI project (on electronic exchanges 
of data under the new EU regulations) and has taken the necessary technical decisions to be 
able to join the EESSI as from accession. Training is systematically provided to staff from the 
State administration. The required estimate of the additional financial costs of health care to 
be taken into account in the internal budgetary planning is still expected. Preparations in this 
area are well advanced. 

Preparations  continue  for  the  introduction  of  the  European  health  insurance  card  upon 
accession. 

Conclusion 

Continued  progress  has  been  made  in  the  field  of  freedom  of  movement  for  workers,  and 
preparations  to  apply  the  acquis  are  on  track.  Continued  attention  must  be  paid  to  the 
strengthening  of  administrative  capacity  with  regard  to  the  coordination  of  social  security 
systems. 

4.3. 

Chapter 3: Right of establishment and freedom to provide services 

Some progress can be reported in the area of right of establishment and freedom to provide 
cross-border  services.  In  particular,  work  on  transposition  of  the  Services  Directive  into 
national  legislation  is  progressing  according  to  the  related  Action  Plan,  although  further 
efforts on the implementation of the Directive are still needed. 

The preparation of a horizontal law transposing the main principles of the Services Directive 
is  completed.  The  Services  Act  was  adopted  and  entered  into  force  in  July  2011.  The 
screening  of  national  legislation  is  completed,  although  several  legislative  amendments  on 
sector-specific  legislation  to  the  Services  Directive  are  still  pending.  Preparations  for  the 
establishment  of  the  Point  of  Single  Contact  (PSC)  required  by  the  Services  Directive  have 
been initiated.  

The  administrative  capacity  of  institutions  working  on  the  implementation  of  the  Services 
Directive  and  cooperation  need  constant  upgrading  and  strengthening  respectively.  Most  of 
the competent authorities have appointed delegated coordinators for services. As regards the 
administrative capacity of the Department for Internal Market Service Development, it is fully 
staffed  in  accordance  with  the  current  organisational  structure  of  the  Ministry  of  Economy, 
Labour  and  Entrepreneurship  (MELE).  The  Department  is  making  efforts  to  train  its  own 
personnel  and  the  personnel  of  other  relevant  institutions  working  on  services,  in  particular 
those of the Croatian Chamber of Economy, i.e. staff working on the PSC. 

As  regards  the  alignment  of  sector-specific  legislation  with  Articles  49  and  56  TFEU  (and 
with the Services Directive when relevant), some measures have been taken by Croatia. The 
Law  on  the  Legal  Profession  has  been  amended,  regulating  in  more  detail  the  special 
responsibility  of  members  of  a  company  of  attorneys  when  it  is  established  as  a  limited 
liability  company.  The  Amendments  to  the  Law  on  the  Legal  Profession  also  redefine  the 
article regulating  cross-border  provision of  attorney's services. Those provisions  apply as of 
the EU accession. However, several restrictions affecting the exercise of the legal profession 
for  both  established  and  cross-border  lawyers  remain  in  the  final  text  adopted,  such  as 
requirements of legal form and the six-months and the one-office rules. The Law on Private 
Protection was also amended. 

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Some progress has been made as regards postal services, where legislative alignment with the 
acquis continues to be well advanced. Although the Croatian Parliament has ratified several 
international  agreements  in  the  area  of  postal  services,  further  legislative  efforts  are  still 
needed in order to complete alignment with the acquis, especially in relation to amendments 
introduced by  the  Third  Postal  Directive.  Furthermore, there  is  a  need  for  legal  certainty  as 
regards  the  application  of  the  existing  national  legislation  for  the  benefit  of  licensed  postal 
services. 

Based on its strategic framework, the Croatian Post, which is the designated universal service-
provider, adopted a new business plan for 2011, aimed at preparing for full liberalisation of 
the postal services market. Administrative capacity, in terms of the number and qualifications 
of  personnel,  of  the  Postal  Services  Department  within  the  Croatian  Post  and  Electronic 
Communications  Agency  (HAKOM)  is  at  satisfactory  level.  However,  further  training  of 
HAKOM  staff  is  necessary,  in  particular  on  very  specific  regulatory  issues  such  as  cost 
accounting separation and cost allocation.  

Good  progress  has  been  observed  in  the  field  of  mutual  recognition  of  professional 
qualifications.  Several  Acts  have  been  amended  in  order  to  align  them  with  the  acquis, 
including  the  Act  on  Regulated  Professions  and  Recognition  of  Foreign  Professional 
Qualifications,  the  Midwifery  Act,  the  Nursery  Act  and  the  Legal  Professions  Act. 
Furthermore,  considerable  progress  has  been  made  with  respect  to  training  curricula,  in 
particular  by  the  University  of  Zagreb.  However,  other  training  programmes  need  further 
work. The Act on Architectural and Engineering Tasks requires further amendments. 

Conclusion 

Further progress has been made in this chapter, where, in general, alignment with the acquis 
is  satisfactory.  Continued  work  is  needed  in  the  area  of  mutual  recognition  of  professional 
qualifications and on transposition of the Service Directive in order to reach full alignment. 
Continued  strengthening  of  administrative  capacity  of  the  postal  services  regulator  and  all 
institutions implementing the Services Directive is required. 

4.4. 

Chapter 4: Free movement of capital 

Further progress has been made on the free movement of capital, where Croatia's legislation 
is already largely aligned with the acquis. Croatia liberalised deposit transactions by residents 
abroad  as  of  January  2011.  However,  restrictions  remain  on  acquisition  of  agricultural  land 
and land in protected nature reserves by EU nationals, and on special government rights.  

Good progress can be reported as regards payment systems. The new Payment Systems Act 
and  implementing  legislation  entered  into  force  in  January  2011,  with  the  exception  of 
provisions regulating the functioning of the Croatian payment system as an EU Member State, 
which will apply as of accession. The new Electronic Money Act transposing the Electronic 
Money  Directive  (Directive  2009/110/EC)  entered  into  force  in  January  2011.  Relevant 
secondary legislation was adopted in March 2011. 

Some  progress  can  be  reported  on  anti-money-laundering  measures.  Cooperation  between 
the Croatian Financial Intelligence Unit (FIU) and reporting entities has been increased. Joint 
training  activities  with  the  reporting  entities  continued.  (See  also  Chapter  24—  Justice, 
freedom and security) 

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Conclusion 

Further progress has been made in the field of free movement of capital as regards payment 
services,  the  liberalisation  of  capital  movements  and  anti-money-laundering.  Overall, 
legislative  alignment  is  almost  complete.  Continued  efforts  are  needed  to  complete 
liberalisation of capital movements and to further consolidate the enforcement of anti-money-
laundering legislation. 

4.5. 

Chapter 5: Public procurement 

Some progress has been achieved as regards general principles. In July 2011 Croatia adopted 
the new Public Procurement Law (PPL) completing its alignment to the relevant acquis. Apart 
from the Act on the Maritime Domain and Seaports, all the necessary sector regulating acts in 
the area of concessions have been adopted. 

With  regard  to  administrative  capacity,  the  Department  for  the  Public  Procurement  System 
(DPPS) at the Ministry of Economy, Labour and Entrepreneurship (MELE) together with the 
other key institutions continued to efficiently implement the public procurement policy. The 
up-dated Action Plan of the Strategy for the Development of the Public Procurement System 
was  successfully  implemented.  The  transparency  and  accountability  of  the  system  has  been 
enhanced through improved co-ordination mechanisms and training events for key players in 
the sector. Contracting authorities and entities (in particular the state-owned companies) and 
economic operators need to further improve capacities and implement procedures efficiently 
at all levels. 

The  Ministry  of  Finance  maintained  the  Concession  Registry  efficiently  and  continued  to 
implement  the  related  roadmap.  Further  efforts  are  needed  in  order  to  finalise  the 
harmonisation  of  secondary  legislation  linked  to  the  Concessions  Act  and  to  improve  the 
administrative capacity of the Concessions Department.  

The process of strengthening the Agency for Public-Private Partnership (APPP) continued. In 
December  2010  the  Ordinance  to  set  up  the  PPP  Registry  was  adopted.  In  addition,  a  PPP 
Guide has been drawn up and published in line with the new legislative system. The APPP 
staff participated in training courses in the field of concessions and PPP in co-operation with 
the other key institutions in the sector. 

During its first year of activity, the Central Procurement Office (CPO) gradually built up its 
capacities.  Co-ordination  agreements  have  been  signed  with  several  institutions  and 
academics to streamline co-operation and improve the efficiency of procedures. Currently, the 
CPO  employs  14  civil  servants  (two  of  whom  are  temporarily  assigned).  However,  the 
administrative  capacity  should  be  further  enhanced  and  the  quality  of  the  tender  documents 
should be improved.  

The State Commission for the Supervision of Public Procurement Procedures (SC) continued 
its efforts in improving the management of the remedies system in Croatia. The transparency 
and  accountability  of  the  SC  was  improved  with  a  new  up-dated  website.  In  April,  the  SC 
employed  three  new  legal  advisors.  The  SC  staff,  in  co-operation  with  DPPS  and  MELE, 
actively participated in numerous training workshops and seminars. Further efforts are needed 
to build up capacities of the SC.  

Conclusion 

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Overall,  progress  has  continued  in  the  field  of  public  procurement.  The  alignment  with  the 
acquis  is  on  track  and  nearing  completion.  Special  attention  should  be  paid  to  aligning  the 
secondary  legislation  with  the  new  Public  Procurement  Law,  maintaining  the  co-ordination 
mechanisms,  and  enhancing  the  capacities  of  the  institutions  in  the  sector  by  means  of  the 
continuous training and professional development of their staff. 

4.6. 

Chapter 6: Company law 

There has been some progress in the field of company law. Croatia's legislation is largely in 
line with the acquis. The Companies Act was amended to align the Croatian legislation with 
the  acquis  in  this  area.  However,  some  inconsistencies  remain,  in  particular  regarding 
shareholders' rights.  

There  has  been  progress  in  the  field  of  corporate  accounting.  The  legislation  is  largely  in 
line with the acquis. The Croatian Financial Reporting Standards Board continues to publish 
the translated versions of the International Accounting Standards, the International Financial 
Reporting  Standards  (IFRS)  and  interpretations  of  the  International  Financial  Reporting 
Interpretations Committee (IFRIC) and the Accounting Regulatory Committee (ARC).  

There has been good progress in the field of auditing. The Audit Public Oversight Committee 
(APOC)  and  the  Quality  Assurance  Team  (QAT)  continue  to  make  progress  in  their 
respective  fields.  The  QAT  proceeded  from  questionnaires  to  all  audit  firms  to  performing 
initial on-site visits, again to all firms. More selective, regular on site audits will follow after 
this general review. The QAT now has four highly skilled inspectors and the recruitment of a 
fifth inspector is ongoing.  

The  Department  for  Financial  Reporting  in  the  Ministry  of  Finance,  which  is  providing 
technical support to APOC, has three employees. In January 2011, the European Commission 
recognised the equivalence of the audit oversight system in Croatia. Member States can now 
choose to rely on the supervisory work of the Croatian oversight system.  

Conclusion 

Overall, progress can be reported in the field of company law. Alignment with the acquis is 
well on track. All institutions need to pursue their tasks and continue to develop their skills 
and performance. 

4.7. 

Chapter 7: Intellectual property law 

Croatia  already  largely  fulfils  the  acquis  requirements  in  the  field  of  copyright  and 
neighbouring rights and industrial property rights.  

Very  good  progress  can  be  reported  in  the  field  of  enforcement.  The  inter-agency  co-
operation is now ongoing and shows particular progress in the field of public awareness. This 
is  in  line  with  the  best  European  practice  in  the  field.  The  co-operation  platform  is  also 
making an effort to sustain and develop the collection and analysis of enforcement statistics 
and  operational  co-operation.  The  individual  enforcement  bodies  have  stepped  up  training 
activities as well as regional and international co-operation in their respective areas.  

As regards intellectual property, further emphasis should be put on the capacity of the police 
and prosecutors to build larger cases and on raising public awareness of intellectual property 
rights.  The  State  Intellectual  Property  Office  (SIPO)  has  good  administrative  capacity. 

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However, the resources and particularly the funding of the first instance Board of Appeal still 
need strengthening in order to prevent delays.  

Conclusion 

Further progress has been achieved in the field of Intellectual property law. Alignment with 
the  acquis  in  the  field  of  intellectual  property  law  has  reached  a  very  high  level.  Public 
awareness of intellectual property rights still needs to be further strengthened. 

4.8. 

Chapter 8: Competition policy 

Progress can be reported in the field of antitrust, including mergers. The new Competition 
Act  which  entered  into  force  in  October  2010  provides  new  tools  for  the  Croatian 
Competition  Agency  (CCA)  to  enforce  competition  rules  in  Croatia.  A  number  of 
implementing regulations were adopted, in particular the Regulation on the criteria for setting 
fines and the Regulation on immunity from fines and reduction of fines. With 55 employees, 
the  CCA  has  a  good  administrative  capacity,  but  it  can  be  further  strengthened  through 
management  and  training,  particularly  in  the  fight  against  cartels  and  abuse  of  a  dominant 
position.  

Since  1  October  2010,  the  CCA  has  adopted  37  decisions  in  antitrust  and  merger  cases, 
including 7 on agreements, 3 on a dominant position, 12 on concentrations and 15 opinions. 
The CCA has continued to provide the government with assessments of draft laws and other 
expert  opinions.  Progress  has  been  made  in  relation  to  competition  and  State  aid  advocacy. 
Preparations in the field of antitrust, including mergers, are on track.  

There has been some progress in the field of State aid. The CCA resolved 73 cases, of which 
21  involved  aid  schemes,  10  concerned  individual  aid  measures,  4  covered  legal  acts 
involving  aid  and  38  covered  advocacy  cases.  The  main  procedural  principles  of  State  aid 
control are in place and in line with the acquis.  

The new Croatian Broadcasting Act entered into force in December 2010. This Act ensured 
the  compliance  of  the  financing  of  the  public  broadcaster  HRT  with  EU  State  aid  rules,  in 
particular on  the definition of public service, and the respect of market principles by public 
service broadcasters.  

Regarding  the  steel  sector,  one  of  the  two  steel  mills  under  State  aid  rules,  Željezara  Split, 
ceased  production  and  has  filed  for  bankruptcy.  The  other  steel  mill,  CMC  Sisak,  has 
voluntarily  agreed  to  reimburse  the  State  aid  it  has  received.  The  detailed  arrangements  for 
reimbursement are still being negotiated with the Croatian authorities 

In  the  shipbuilding  sector,  Croatia  has  made  good  progress.  Restructuring  plans  for  all  the 
shipyards in difficulty were drafted and accepted both by the CCA and the Commission. As 
regards  the  Uljanik  yard,  the  Commission  concluded  that  it  was  no  longer  a  shipyard  in 
difficulty. The restructuring plan for Brodosplit and BSO were accepted by the CCA and the 
European  Commission  in  February  2011.  In  June  2011  both  the  CCA  and  the  Commission 
accepted the restructuring plans for the Brodotrogir, Kraljevica and 3. Maj yards. However, 
none of the privatisation contracts has been signed yet. 

Conclusion 

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Substantial progress has been achieved in the field of competition policy, in particular by the 
approval  of  acceptable  restructuring  plans  for  the  shipyards  in  difficulty.  However,  none  of 
the  privatisation  contracts  has  been  signed.  A  high  level  of  alignment  has  been  achieved. 
Further  efforts  are  required  in  order  to  continue  developing  the  CCA's  enforcement  record 
against cartels following the entry into force of the new Competition Act.  

4.9. 

Chapter 9: Financial Services 

Further progress has been made in the field of banks and financial conglomerates. Croatia 
adopted the Electronic Money Law and the implementing legislation, which entered into force 
in  January  2011,  except  for  the  EU  membership-related  provisions  that  shall  apply  by 
accession.  As  the  alignment  of  the  legislation  on  winding-up  procedures  is  satisfactory,  no 
further progress is to be reported in this field. Work on alignment with the latest modification 
of the Capital Requirements Directive (CRR) III is in progress. Overall, legislation in this area 
has reached a high level of alignment. 

Further  progress  has  been  achieved  in  the  area  of  insurance  and  occupational  pensions, 
where  the  level  of  legislative  alignment  with  the  acquis  is  already  quite  high.  Croatia  has 
amended  the  Law  on  Mandatory  and  Voluntary  Pension  Funds  in  line  with  the  relevant 
acquis. The amendments have reduced restrictions on investments by pension insurance funds 
and  created  conditions  for  cross-border  activities  of  closed-end  pension  funds.  They  also 
allowed  sponsors  of  closed-end  pension  funds  to  choose  the  fund's  manager  and  custodian 
from  other  EU  countries,  and  allowed  companies  managing  pension  funds  and  financial 
institutions  which  act  as  their  custodians,  and  are  headquartered  in  Croatia,  to  offer  their 
services  to  sponsors  of  closed-end  pension  funds  in  other  EU  Member  States.  Those 
provisions are applicable by the time of accession.  

In the area of financial market infrastructure Croatia's legislation already fulfils the acquis 
requirements.  

Some progress can be reported as regards securities markets and investment services. The 
legislative  alignment  in  this  area  is  already  very  advanced.  Croatia  continued  to  adopt  the 
implementing legislation. HANFA (Croatian Financial Services Supervisory Agency) issued 
several Ordinances and Decisions specifying the requirements set out in the Capital Markets 
Act and other legislation.  

Following  the  review  of  the  Prospectus  Directive,  Croatia  will  need  to  implement  Directive 
2010/73/EU  amending  Directive  2003/71/EC  and  continue  to  work  on  the  ongoing  and 
upcoming reviews of several directives on securities markets that remain to be conducted in 
order to transpose amending directives. 

As  regards  administrative  capacity,  the  Croatian  National  Bank  (CNB)  continued  with 
educational  programmes  for  its  staff  and  personnel  of  supervised  entities,  in  particular  as 
regards  CRD.  HANFA  continued  its  efforts  to  strengthen  its  administrative  capacity,  by 
means of training schemes and an increase in personnel (currently 134 employees, including 8 
trainees,  as  compared  to  125  at  the  beginning  of  2010).  It  also  prolonged  its  campaign  of 
raising  public  awareness  and  educating  the  public.  The  CNB  and  HANFA  have  continued 
their  cooperation  with  domestic  and  foreign  regulators  by  implementing  numerous 
Memoranda  of  Understanding  (MoU).  In  2010,  HANFA  also  signed  a  new  MoU  with  the 
Insurance  Supervision  Agency  of  the  former  Yugoslav  Republic  of  Macedonia.  Continued 
strengthening of the administrative capacity of both regulators should be maintained.  

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Conclusion 

Good  progress  has  been  made  in  the  field  of  financial  services,  both  on  alignment  of 
legislation and on strengthening of administrative capacity. Alignment is at a high level. 

4.10.  Chapter 10: Information society and media 

Croatia has made good progress with aligning its policy, legislation and regulations with the 
acquis  on  electronic  communications  and  information  technologies.  Amendments  to  the 
Electronic  Communications  Act  were  adopted  in  July 2011  aimed  at  aligning  with  the  EU 
2009  electronic  communications  reform  package.  The  switchover  to  digital  television 
broadcasting  took  place  according  to  plan  and  was  completed  in  October  2010.  Market 
analysis  procedures  and  regulations  are  well  advanced.  However,  repeated  delays  in 
introducing cost-model based prices are raising concerns.  

Croatia  has  now  reached  a  broadband  penetration  rate  of  25.52%  (18%  in  fixed,  mainly 
ADSL, and 7.5% in mobile), which compares well with the EU average. While companies of 
all categories are well connected, especially those with mobile broadband, households are still 
slightly below the EU average. The incumbent retains a strong position, which is shown for 
instance by its 79% of the broadband market revenues.  

The  'crisis  tax'  introduced  in  2009  on  mobile  operators'  revenue  remains  in  force.  It  mainly 
affects the latest  entrant  on  the market, as well as any possible new entrants on the market. 
Despite requests, no analysis of its non-detrimental effects on market liberalisation has been 
published  for  public  review.  Procedures  to  obtain  building  permits  for  mobile  infrastructure 
continue to be slow, despite past efforts on the issue. 

Further progress has been made on strengthening the administrative capacity and transparency 
of  the  Croatian  Post  and  Electronic  Communications  Agency.  Training  has  been  provided, 
and significant investment in the further education and training of the employees is planned in 
the course of 2011. However, continuous management efforts are needed in order to develop 
the agency into a strategic player endorsing the policy goals of a level playing field, including 
increased  transparency  and  stakeholder  dialogue.  Overall  preparations  in  this  area  are  well 
advanced. However, major efforts are needed in order to increase competition, in particular on 
the internet broadband market. 

Preparations in the area of information society services are well advanced. Croatia plays an 
active  role  in  many  of  the  related  EU  initiatives.  An  electronic  business  council  was 
established to provide private sector input into government policies. Furthermore, a national 
structure to monitor and implement national actions relating to the European Digital Agenda 
is  being  developed.  Interest  in  organising  a  'going  local'  initiative  has  been  expressed. 
Identified  shortcomings  in  the  legal  alignment  with  the  e-commerce  acquis  need  to  be 
remedied.  

Good  progress  can  be  reported  in  the  field  of  audiovisual  policy.  A  new  Croatian  Radio-
Television Act was adopted in December 2010, in line  with EU State  aid rules. Several by-
laws  implementing  the  Electronic  Media  Act  have  been  adopted  by  the  Electronic  Media 
Council. Amendments to the Media Act and to the Electronic Media Act, aimed at ensuring 
transparency of ownership in the media, were adopted in July 2011. Also amendments to the 
Act  on  Audiovisual  Activities  were  adopted  in  July 2011,  introducing  a  new  financial 
incentive  for  the  production  of  audiovisual  works  in  Croatia  as  a  production  site.  The 

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administrative  capacity  of  the  Electronic  Media  Agency  has  been  strengthened  through  the 
recruitment of new expert staff. Continued efforts are also necessary to ensure and promote 
the independence of the public service broadcaster and to increase its transparency. Attention 
must also be paid to maintain the decriminalisation of defamation.  

Conclusion 

Croatia  has  made  good  progress  in  the  field  of  information  society  and  media  and  has 
achieved a high level of alignment with the acquis in this chapter. Further efforts are needed 
to  sustain  liberalisation  of  all  segments  of  electronic  communications  markets,  to  further 
facilitate  the  development  of  an  information  society  and  to  promote  competition  on  the 
broadcasting market and the independence of the public service broadcaster.  

4.11.  Chapter 11: Agriculture and rural development  

Good  progress  can  be  reported  regarding  horizontal  issues.  Croatia  complemented  the 
legislative  framework  related  to  agricultural  payments,  enabling  the  2011  campaign  to  use 
some  procedures  aligned  with  the  acquis.  Additional  efforts  are  needed  to  complete  the 
legislative framework in order for Croatia to meet its commitment to implement a system of 
national direct payment similar to the Common Agricultural Policy in 2012.  

Good  progress  can  be  reported  regarding  the  development  of  the  capacity  of  the  paying 
agency,  as  well  as  the  establishment  of  the  integrated  administration  and  control  system 
including  a  land  parcel  identification  system  though  there  is  some  delay  in  recruitment  of 
staff. Efforts are still needed in order to prepare for the implementation of a rural development 
programme,  in  particular  with  regard  to  procedures,  technical  specifications  and  software. 
Progress  can  be  reported  regarding  the  farm  accountancy  data  network  (FADN).  Croatia 
needs  to  increase  human  and  financial  resources  so  as  to  ensure  full  implementation  of  the 
FADN. 

Good progress was made in the area of the common market organisation (CMO). Croatia 
further  aligned  the  Act  on  the  organisation  of  the  market  in  agricultural  products  with  the 
action  plan  for  harmonisation  with  the  CMO.  Croatia  needs  to  continue  its  efforts  to  put  a 
fully operational system in place as of accession. Croatia established a vineyard register. 

In  the  area  of  rural  development,  Croatia  started  implementing  additional  measures  under 
the  Instrument  for  Pre-Accession  Assistance  for  Rural  Development  (IPARD).  However, 
Croatia needs to improve its absorption capacity to allow full use of pre-accession funds and 
continue its preparations for the implementation of a rural development programme after EU 
accession. 

Croatia is making progress in the alignment with the acquis in the areas of quality policy and 
organic farming. 

Conclusion 

Good progress can be reported in the field of agriculture and rural development, in particular 
on  the  establishment  and  implementation  of  the  paying  agency  and  of  the  integrated 
administration  and  control  system  and  on  the  common  market  organisation.  Overall, 
preparations are on track. Croatia needs to sustain efforts in all these areas in order to have 
fully  operational  and  compliant  systems  in  place.  Additional  efforts  are  also  necessary 
concerning the alignment of the agricultural support system with the acquis and to prepare for 

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the  implementation  of  rural  development  programmes  after  EU  accession.  Croatia  needs  to 
improve the absorption capacity for rural development funds without delay. 

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

Good  progress  continued  in  the  field  of  general  food  safety.  The  transposition, 
implementation  and enforcement  of  the acquis for food safety, veterinary and phytosanitary 
policy is on track. Alignment with the acquis is well advanced in all areas of food safety. The 
the 
proper 
administrative and control capacity. 

legislation  entails  a  sustained 

implementation  of  new 

improvement 

in 

Good  progress  can  be  reported  in  the  veterinary  sector  with  the  adoption  of  implementing 
legislation  in  numerous  fields.  Additional  official  veterinarians  were  recruited  and  training 
was provided. Croatia decided to delegate certain official control tasks to approved veterinary 
organisations.  Preparations  for  construction  and  equipping  of  the  agreed  border  inspection 
posts are under way. However, Croatia needs to continue its efforts, in particular with regard 
to the setting up of border inspection posts as well as finalising the organisation of the official 
controls. 

Progress was made in the area of placing on the market of food and feed. The national plan 
for the upgrading of establishments for food and feed of animal origin is being implemented. 
Close monitoring of the completion of the individual upgrading plans in line with the initial 
timetable is important. Significant efforts remain in the animal by-products sector in particular 
with regard to intermediate plants and for the handling of high risk materials. 

Transposition and implementation of the food safety rules and the specific rules for feed is 
well on track. 

Good progress continued on phytosanitary issues. Implementing legislation has been adopted 
in  the  areas  of  plant  health  and  plant  protection  products.  Croatia  needs  to  maintain  these 
efforts,  in  particular  with  regard  to  setting  up  border  inspection  posts  and  strengthening 
administrative capacities. 

Some  progress  can  be  reported  in  relation  to  genetically  modified  organisms  (GMOs). 
Croatia adopted implementing legislation authorising entities to carry out risk assessments for 
the release of GMOs into the environment. 

Conclusion 

Good overall progress can be reported in the field of food safety, veterinary and phytosanitary 
policy,  in  particular  concerning  the  transposition  of  EU  legislation  and  the  adoption  of 
implementing  legislation.  Transposition  of  legislation  is  reaching  completion  in  several 
sectors.  Preparations  are  well  advanced.  Continued  efforts  are  necessary  with  regard  to  the 
upgrading of establishments and its monitoring, the setting up of the border inspection posts 
and the animal by-products sector. Sustained improvement of the administrative and control 
capacity is important. 

4.13.  Chapter 13: Fisheries 

Croatia  continued  its  good  progress  in  the  areas  of  resource  and  fleet  management  and 
inspection and control. Croatia adopted implementing legislation in the fields of commercial 
fishing,  fishing  licences,  fleet  register  as  well  as  data  collection.  The  fisheries  monitoring 

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centre  continues  to  be  operational  and  additional  staff  has  been  recruited.  Registration  of 
commercial  fishing  vessels  is  reaching  completion.  Croatia  needs  to  maintain  efforts  with 
regard  to  the  completion  of  the  satellite  based  vessel  monitoring  system  and  the  entry-exit 
scheme. In particular, the preparation of the required management plans as well as the phasing 
out  of  the  category  of  subsistence  fisheries  require  additional  attention.  The  administrative 
and control capacity is improving, but needs further strengthening, in particular with regard to 
the recruitment and training of additional fisheries inspectors to carry out checks at sea and on 
land.  

Good  progress  has  been  made  regarding  structural  action.  The  administrative  bodies  to 
implement  the  European  Fisheries  Fund  are  in  place.  Croatia  is  finalising  the  national 
fisheries strategy. The operational programme requires additional work. 

Good  progress  can  be  reported  on  market  policy.  Collection  of  information  on  species, 
quantities and prices has been further improved. Efforts are needed on establishing producers' 
organisations and aligning marketing standards. Croatia has aligned its rules on State aid with 
the acquis.  

In  the  area  of  international  agreements,  Croatia  continued  to  implement  all  the 
recommendations  of  the  International  Commission  for  the  Conservation  of  Atlantic  Tunas 
(ICCAT) regulating catches, farming and trading. As far as the General Fisheries Commission 
for the Mediterranean (GFCM) is concerned, Croatia continues to work towards the alignment 
of its national legal framework with the recommendations adopted by the GFCM. 

Conclusion 

Croatia  continued  its  good  progress  in  aligning  with  the  acquis  in  the  field  of  fisheries. 
Overall,  preparations  are  well  advanced.  The  implementation  of  the  legislation  requires 
continued effort, in particular with regard to fleet and resource management, inspection and 
control and structural policy.  

4.14.  Chapter 14: Transport policy 

Progress  can  be  reported  on  road  transport.  Amendments  to  the  Act  on  working  time  and 
mandatory  rest  periods  of  mobile  workers  and  recording  equipment  in  road  transport  have 
been adopted, furthering the alignment with the acquis. In addition, Croatia has been working 
on the enhancement of inspection capacity. Croatia needs to further improve its administrative 
capacity  for  implementing  the  road  safety  acquis.  Currently,  Croatia  applies  national  rules 
concerning admission to the occupation of road transport operator, which Croatia committed 
itself to repeal after accession, as the relevant EU regulation will be then directly applicable. 

Good progress has been achieved in the case of rail transport. The administrative capacity of 
the railway  regulatory body, which is  operational, has been further increased.  Croatia's new 
safety  authority  needs  to  develop  as  a  matter  of  urgency  the  administrative  capacity  to 
implement procedures related to safety certificates of railway undertakings, in particular the 
approval  of  safety  management  systems  needed  to  extend  these  certificates,  vehicle 
authorisation,  train  driver  licences  and  registers,  the  inventory  of  national  safety  rules  and 
their  reporting  to  the  NOTIFID  databank  of  the  European  Railway  Agency.  The  accident 
investigation  body  is  not  yet  operational.  The  functional  separation  between  HZ's 
Infrastructure company and HZ Holding is still incomplete, and it continues to pose risks to 
market  access  and  fair  competition.  The  rail  market  is  fully  open  to  Croatian  undertakings 

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only, with access for operators licensed in the EU to be granted on the date of accession. Rail 
access  to  the  maritime  and  inland  waterways  ports  still  remains  open  only  to  the  existing 
state-run railway.  

There  has  been  progress  in  inland  waterways  transport,  following  Croatia's  development 
plan for inland waterways (2007-2012). Croatia is participating in the implementation of the 
Danube Strategy and in the development of the Sava River. In particular, Croatia is working 
on  the  alignment  of  river  banks  and  other  technical  matters  in  close  cooperation  with  the 
SAVA  Commission.  Progress  has  been  achieved  in  the  implementation  of  the  River 
Information System.  

The new Law on combined transport needs to be revised slightly in order to comply with the 
acquis. 

There  has  been  good  progress  in  the  area  of  air  transport.  The  Civil  Aviation  Agency  is 
functioning well. Implementation of the first phase of the European Common Aviation Area 
(ECAA) Agreement has been completed, and work on the second phase is continuing. In the 
air  traffic  management  field,  Croatia  has  made  good  progress  in  transposing  most  of  the 
Single  European  Sky  legislative  framework  and  is  participating  in  the  integration  of  its 
airspace into the Functional Airspace Block Central Europe. The amendments to the Aviation 
Act were adopted by Parliament, ensuring the alignment with the acquis.  

Good progress can be reported in the area of maritime transport. Physical implementation of 
the vessel traffic monitoring information system (VTMIS) is completed, but is still not fully 
operational. Croatia is on the 'white list' of the Paris Memorandum of Understanding (MoU). 
Croatia made good progress regarding administrative capacity for maritime safety. However, 
the transfer of the flag state functions to the line Ministry, currently being undertaken by the 
Croatian Register of Shipping, has not yet been finalised.  

Croatia intends to take part in the Galileo satellite navigation programme. 

Conclusion 

Further  progress  has  been  achieved  and,  overall,  the  level  of  alignment  in  the  field  of 
transport policy is good. Additional efforts are still needed, in particular to continue work on 
the second phase of the ECAA Agreement to complete alignment of the aviation legislation 
and  to  ensure  the  full  functioning  of  the  railway  safety  authority  and  full  operation  of  the 
vessel traffic monitoring information system (VTMIS).  

4.15.  Chapter 15: Energy 

There  has  been  progress  in  the  area  of  security  of  supply.  As  regards  building  up  the 
mandatory 90 days of emergency oil stocks, Croatia is preparing for the investments needed 
to implement its plan for security, formation and replenishment of mandatory stocks of oil and 
oil  products,  and  for  their  storage  and  regional  distribution.  Bilateral  intergovernmental 
agreements for storing compulsory crude oil and petroleum products stocks have been signed 
with  Germany  and  Hungary.  As  regards  the  security  of  supply  of  natural  gas,  Croatia  has 
established a new gas interconnector with Hungary, connecting the gas transportation systems 
of  the  two  countries.  In  addition,  preparations  are  underway  for  the  construction  of  a 
Liquefied  Natural  Gas  terminal  on  Krk  Island.  Croatia  continued  the  construction  of  the 

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natural gas supply network toward the south, with the inauguration of the second section of a 
gas supply corridor from Lika to Dalmatia.  

There has been good progress in connection with the internal energy market.  

The alignment of energy-related legislation to the EU acquis has continued and the legislation 
aimed  at  transposing  the  third  internal  energy  market  package  is  at  the  stage  of  stakeholder 
consultations. Amendments to the Oil and Petroleum Products Market Act were approved and 
the amendments to the Energy Act, the Act on the Regulation of Energy Activities, the Gas 
Market Act and the Electricity Market Act are in the process of adoption. Croatia adopted the 
methodology  for  performing  electricity  balancing  services.  The  electricity  and  gas  markets 
continue  to  be  dominated  by  single  suppliers,  but  there  are  now  five  active  electricity 
suppliers in Croatia. As required by the Energy Community Treaty, Croatia is implementing 
joint  yearly,  monthly  and  daily  auctioning  of  cross-border  capacities  with  Slovenia  and 
Hungary.  Negotiations  with  Serbia  and  Bosnia  and  Herzegovina  regarding  similar  joint 
auctioning are ongoing. There have been no developments in relation to the establishment of 
regional  coordination  for  capacity  allocation  and  congestion  management  in  electricity. 
Croatia needs to strengthen the independence and powers of the regulator. 

Some  progress  can  be  reported  in  the  area  of  renewable  energy  sources.  The  government 
amended  implementing  legislation  related  to  the  incentives  for  electricity  generated  from 
renewable energy sources and cogeneration. The law on biofuels has been amended in order 
to align it with the 2009 renewable energy directive. Implementing legislation relating to fees 
for  non-placement  of  biofuels  on  the  market  has  been  enacted.  Croatia  has  made  limited 
progress  towards  its  2010  target  for  electricity  production  from  renewable  energy  sources 
covered by incentives. Implementing legislation amending the minimal share of incentivised 
electricity generated from renewable energy sources and cogeneration has been adopted. The 
complex  and  lengthy  administrative  procedures  are  still  a  disincentive  to  increasing 
investment  in  renewable  energy  sources.  Alignment  of  the  legislation  is  advanced,  but 
substantial  efforts  will  be  required,  particularly  with  regard  to  improving  the  administrative 
procedures,  if  Croatia  is  to  achieve  its  target  of  meeting  20%  of  final  energy  consumption 
from renewable sources by 2020. 

Some progress can be reported in energy efficiency. Implementation of legislation on energy 
audits  of  buildings  and  authorisations  for  energy  audits  of  buildings  has  continued,  in 
particular  as  regards  the  training  and  accreditation  of  experts.  However,  the  lack  of 
administrative  capacity  remains  a  problem  for  both  the  promotion  of  energy  efficiency  and 
renewable energy. 

Progress has been made on nuclear energy, nuclear safety and radiation protection. The 
regulatory  authorities,  which  were  formally  merged  under  the  State  Office  for  Radiological 
and Nuclear Safety (SORNS), have started to function as a single institution. However, some 
aspects  of  inspection  are  still  assigned  to  the Ministry  of  Health  and  Social  Welfare,  which 
calls  into  question  the  independence  of  the  regulatory  body  for  radiation  protection.  The 
Euratom  directives  on  public  information  and  on  shipment  of  radioactive  waste  and 
substances have not yet been transposed. The national emergency plan for nuclear accidents 
remains  to  be  developed.  Several  regulations,  in  particular  on  medical  exposure  and 
occupational exposure, have not yet been implemented. SORNS staff increases for 2011 have 
been  approved  and  partially  implemented,  and  further  increases  are  foreseen  for  the  period 
2012-2013.  Croatia  should  envisage  relocating  its  existing  radioactive  waste  storage  facility 
as the existing facility at the Rudger Bosković Institute does not meet international standards.  

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Conclusion 

Overall,  some  progress  has  been  made  in  the  field  of  energy,  and  the  level  of  alignment  is 
high. Further efforts are needed, in particular regarding the opening of the electricity and gas 
markets, meeting the EU's targets for renewable energy sources and energy efficiency, as well 
as nuclear safety. Administrative procedures related to renewable energy projects need to be 
simplified and administrative capacity strengthened. 

4.16.  Chapter 16: Taxation  

Some progress can be reported in the area of indirect taxation, with the entry into force of 
the new Act on excise duties for coffee on 1 April 2011, which brought the tax into line with 
the  Stabilisation  and  Association  Agreement.  Croatia's  legislation  is  largely  in  line  with  the 
EU acquis, but further alignment is required in the field of VAT, notably on the scope of the 
reduced  rates  and  of  exemptions,  free  zones  and  special  schemes,  and  in  the  field  of  excise 
duties  with  regard  to  chargeability  of  duty  on  coal,  gas  and  electricity  and  minimum  rates. 
Croatia has also to bring the provisions applicable to car taxation into line with the acquis. 

Some  progress  can  be  reported  in  the  area  of  direct  taxation.  Croatia  has  initiated  the 
procedure  with  a  view  to  entering  into  bilateral  agreements  with  dependent  and  associated 
territories to implement Directive 2003/48/EC.  

Limited progress can be reported on administrative cooperation and mutual assistance. A 
revised  Tax  Administration  Strategy  for  the  period  2011  -  2015  was  adopted  in  May  2011. 
The  preparations  for  administrative  cooperation  and  mutual  assistance  with  Member  States 
are largely in place, including with regard to the setting up of the Central Liaison Office and 
the  Excise  Liaison  Office.  Training  of  the  staff  to  be  assigned  to  the  two  departments  has 
continued. Croatia needs to further develop its control capacity in the area of excise duties, in 
order to be able to effectively implement the recently adopted national excise legislation. 

Croatia made limited progress on operational capacity and computerisation. The Common 
Communication  Network  and  Common  System  Interface  (CCN/CSI)  was  installed  and 
became operational in December 2010 (see also Chapter 29 – Customs union). Croatia is well 
advanced in its preparations for IT interconnectivity, but should continue strengthening the IT 
capacity of the tax and customs administrations.  

Conclusion 

Some  progress  was  made  in  the  field  of  taxation.  Croatia's  level  of  legislative  alignment  is 
very high, but some further efforts are needed, most notably in the field of VAT and excise 
duties.  Croatia  should  continue  strengthening  its  administrative  capacity,  including  IT 
interconnectivity. 

4.17.  Chapter 17: Economic and Monetary policy 

No  further  progress  can  be  reported  in  the  field  of  monetary  policy,  since  the  legislative 
alignment has been completed.  

Some  progress  has  been  observed  in  the  area  of  economic  policy.  The  institutional  and 
technical  capacity  for  developing  medium-term  macroeconomic  and  fiscal  frameworks  is 
continuously  improving.  The  Pre-accession  Economic  Programme  (PEP)  for  2011-2013 
presents a comprehensive and consistent macroeconomic and fiscal framework for economic 

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policies.  Broad  political  consensus  on  the  fundamentals  of  a  market  economy  has  been 
maintained, but efforts to implement the necessary structural reforms need to be intensified. 
Alignment of fiscal reporting with ESA95 standards needs to be further enhanced. Continued 
efforts to improve economic policy criteria would be beneficial. 

Conclusion 

There has been some progress in the area of economic and monetary policy and, overall, the 
alignment  with  the  acquis  in  this  area  has  been  completed.  Continued  efforts  in  improving 
economic policy coordination would be beneficial.  

4.18.  Chapter 18: Statistics 

Progress  can  be  reported  concerning  statistical  infrastructure.  Recruitment  of  additional 
staff is ongoing. Overall, preparations in this area are well advanced. The responsibilities of 
the Central Bureau of Statistics (CBS) in the compilation of the Excessive Deficit Notification 
should  be  significantly  increased  and  CBS  should  be  encouraged  to  take  the  leading 
methodological role in this exercise. 

Further progress can be reported in the field of classifications and registers. CBS is working 
on  quality  improvements  of  the  business  register,  particularly  by  extending  the  coverage  of 
local  units  and  to  a  lesser  extent  by  improving  the  coverage  of  the  enterprise  groups.  A 
National Classification of Occupations harmonised with ISCO08 was published. Preparations 
in this field are on track. 

Good progress has been made in the sector statistics. The population census was carried out 
successfully  and  according  to  international  standards  in  April  2011.  The  first  preliminary 
results were published in June. As regards social statistics, data on job vacancy statistics have 
been collected and transmitted to Eurostat, and a pilot survey on the structure of earnings has 
been carried out. A survey of income and living conditions has also been carried out. Work on 
preparing the implementation of Intrastat is well under way. In the area of short-term business 
statistics work on improving compliance is ongoing. Indices for total industrial output prices 
and non-domestic output prices have been compiled for the first time. Progress has been made 
in  the  area  of  agricultural  statistics,  in  particular  in  farm  registry,  fishery  statistics,  and 
economic accounts for agriculture. Agricultural price indices have been calculated for the first 
time. In the field of science and technology statistics, further alignment with EU regulations 
has been achieved. Preparations in this area are well advanced.  

Conclusion 

Good  progress  has  been  made  in  the  area  of  statistics.  A  good  level  of  alignment  has  been 
achieved.  Efforts  need  to  continue  in  order  to  fully  align  Croatian  statistics  with  the  EU 
requirements.  

4.19.  Chapter 19: Social policy and employment  

There  has  been  some  progress  in  the  area  of  labour  law.  Amendments  to  the  Labour  Act 
primarily  on  working  time  provisions  have  been  adopted.  Alignment  of  the  legislation  is 
advanced, but needs to be completed, mainly in areas falling outside the scope of the Labour 
Act.  The  administrative  capacity  of  the  Wage  Guarantee  Agency  is  being  strengthened.  A 
county court for work-related disputes has been established in Zagreb.  

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Limited progress can be reported in the field of health and safety at work. There has been a 
slight decrease in the number of occupational accidents resulting in death and a decrease in 
the  number  of  work-related  injuries.  The  current  number  of  labour  inspectors  dealing  with 
health  and  safety  still  falls  short  of  the  requirements  of  the  State  Inspectorate  Act.  Labour 
trained  on  safety  of  work  equipment  and  on  protection  against 
inspectors  were 
electromagnetic radiation. 

Some  progress  can  be  reported  with  regard  to  social  dialogue.  The  Economic  and  Social 
Council  (ESC)  has  resumed  its  work  after  ten  months  of  suspended  activities.  A  sectoral 
social  council  for  the  forestry  and  wood  processing  industry  has  been  set  up.  However, 
strengthening social dialogue within the decision-making process and in policy design, as well 
as  capacity-building  of  social  partners,  remain  key  questions  to  be  addressed.  The 
representativeness  criteria for the participation of trade unions in collective bargaining  have 
not yet been adopted.  

Some  progress  has  been  made  in  the  area  of  employment  policy.  A  National  Employment 
Promotion  Plan  2011–2012  has  been  adopted.  The  follow-up  to  the  Joint  Assessment  of 
Employment  Policy  Priorities  (JAP)  is  largely  satisfactory.  The  mismatch  between  demand 
and  supply  and  skills  forecasting  is  being  addressed.  However,  the  Economic  Recovery 
Programme has so far had only limited effects in making the labour market more dynamic and 
in  overcoming  its  structural  weaknesses,  including  actions  to  address  high  long-term 
unemployment  and  youth  unemployment,  which  have  increased  substantially  (See  also 
Economic  criteria).  The  2011  budget  for  active  labour  market  measures  is  lower  than  last 
year.  An  independent  evaluation  of  active  labour  market  measures  has  not  been  introduced 
yet. A strategic framework for lifelong learning has not been adopted, and there has been no 
further development in applying the flexicurity principle. As regards undeclared work, an Act 
on the Prohibition and Prevention of Engagement in Unregistered Activities has been adopted. 

Good  progress  has  been  made  in  the  preparations  for  the  European  Social  Fund.  The 
operating structure responsible for the Operational Programme for IPA component IV (human 
resources  development)  continues  to  work  well.  Adequate  training  has  been  provided,  and 
administrative  capacity  has  been  strengthened.  However,  major  efforts  should  be  made  to 
ensure that adequate capacities are in place as soon as possible, especially having in mind that 
the scope of funding will significantly increase with ESF. 

Some progress can be reported on the social inclusion of disadvantaged groups. The follow-
up to the Joint Inclusion Memorandum (JIM) is largely satisfactory. A Social Welfare Act has 
been  adopted  aimed  at  promoting  active  inclusion,  a  closer  link  between  employment  and 
social welfare services, and development of a quality framework on social services, including 
development  of  quality  community-based  services.  A  Strategy  for  Social  Welfare 
Development 2011–2016 has been adopted indicating as priorities increased effectiveness of 
the social benefits system and decentralisation of the social welfare system. A National Plan 
for  de-institutionalisation  has  also  been  adopted.  However,  the  share  of  employment  of 
national  minorities  in  the  public  sector  has  decreased.  Attention  needs  to  be  paid  to 
employment of minorities in the state administration. Preparations for a coherent monitoring 
and  evaluation  system  to  assess  policy  reforms  and  results-oriented  monitoring  of  the 
implementation  of  the  National  Plan  for  Social  Inclusion  2011  are  still  at  an  early  stage. 
Progress  in  the  field  of  administrative  and  fiscal  decentralisation  of  social  services  remains 
limited. Significant challenges remain in terms of reducing health and regional inequalities, as 
well as in terms of inclusive rural development.  

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The  capacity  of  the  Office  of  the  Ombudsman  for  Persons  with  Disabilities  has  been 
somewhat strengthened. However, in general, people with disabilities still face discrimination 
on the labour market, and children with disabilities still continue to face problems in access to 
education. In the public sector, employment quotas are not being met. Public awareness of the 
rights of people with disabilities remains low, especially in rural areas. Regulations ensuring 
physical accessibility are not being implemented.  

There  has  been  some  progress  in  the  area  of  social  protection.  With  the  adoption  of  the 
Social  Welfare  Act,  social  spending  is  being  rationalised.  The  Pension  Insurance  Act  was 
amended to increase the penalty for early retirement, to increase the old-age pension for those 
who  want  to  stay  longer  at  work  and  to  equalise  the  pension  age  between  women  and  men 
over  a  20-year  transitional  period.  Some  progress  has  also  been  made  in  the  process  of 
bringing privileged pensions back into the general system. However, more efforts are needed 
to improve employment of older workers and to protect the elderly without income, as well as 
to ensure both adequate and sustainable pensions. In the area of health care, re-organisation of 
out-of-hospital emergency medical assistance and primary health care is ongoing. 

Limited progress can be reported in the field of anti-discrimination. Further alignment with 
the  acquis  is  required  with  regard  to  the  exceptions  to  the  principle  of  non-discrimination. 
Some  steps  have  been  taken  to  ensure  adequate  staffing  and  funding  of  the  Ombudsman's 
office,  but  public  awareness  regarding  the  scope  of  the  Anti-discrimination  Act  and  the 
proposed  remedies  has  not  increased  significantly.  Training  of  judges  in  this  area  is  also 
necessary,  especially  as  regards  cases  on  sexual  orientation.  Monitoring  of  cases  of 
discrimination  has  been  established,  but  needs  fine-tuning.  National  minorities  are  still  not 
proportionally represented in public bodies or services, including at local and regional levels.  

There has been some progress in the field of equal opportunities. The Act on maternity and 
parental benefits was amended to bring it in line with the acquis. Alignment still needs to be 
completed in the case of the Act on occupational safety and health. A new National Policy for 
the Promotion of Gender Equality 2011–2015 has been adopted. The capacity of the office of 
the  Ombudsperson  for  Gender  Equality  has  been  somewhat  strengthened.  However, 
conditions for the employment of women are still unfavourable.  

Conclusion 

Some progress has been made in the area of social policy and employment. There is a good 
level  of  alignment  with  the  acquis.  However,  some  gaps  remain  in  alignment  of  the 
legislation, notably on transposing labour law directives outside the scope of the Labour Act, 
and in the fields of anti-discrimination and gender equality. Due attention should be paid to 
addressing structural weaknesses on the labour market, as well as to the functioning of social 
dialogue and capacity-building of social partners. Administrative capacity requires continuous 
strengthening across all areas.  

4.20.  Chapter 20: Enterprise and industrial policy 

Some  progress  was  made  with  regard  to  enterprise  and  industrial  policy  principles. 
However, the financial and economic crisis had a negative impact on the implementation of 
the  Industrial  Policy  Strategy.  Alignment  of  Croatia's  definition  of  'SME'  with  the  EU- 
recommended definition is not yet completed. Further progress has been made in the area of 
business  registration,  especially  in  the  form  of  introduction  of  the  e-register  online 

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application, but is not yet fully functioning. Administrative and judicial weaknesses continue 
to adversely affect the business environment. 

The  Government  Legislation  Office  (GLO)  has  taken  steps  in  order  to  be  able  to  conduct 
regulatory impact assessments with more rigour. 

Industrial  policy  measures  were  taken  to  alleviate  the  effects  of  the  crisis  through  the 
Economic  Recovery  Programme  adopted  by  the  government  in  2010,  which  includes 
measures to improve the business environment and to create a competitive economy (see also 
Economic criteria).  

In the area of enterprise and industrial policy instruments, Croatia has made some progress 
and  played  an  active  part  in  the  EU's  Competitiveness  and  Innovation  Programme  (CIP). 
Croatia participates in the Europe Enterprise Network.  

There has been some progress in the field of sector policies, such as in the wood processing 
industry, with the adoption of the new four-year Operating Plan. Also, good progress has been 
made in the shipbuilding industry with the approval of the individual restructuring plans (see 
Chapter 8 – Competition policy). 

Conclusion 

Croatia made  some progress in the field of enterprise and industrial policy. Alignment with 
the  acquis  in  this  chapter  is  very  advanced.  Further  sustained  efforts  need  to  focus  on 
improving  the  business  environment,  by  reducing  the  administrative  burden,  and  on 
innovation  and  skills.  Alignment  of  the  definition  of  SMEs  with  the  EU  recommendation 
needs  to  be  completed.  Efforts  to  restructure  the  shipbuilding  industry  need  to  be  further 
pursued.  

4.21.  Chapter 21: Trans European Networks 

There has been good progress as regards the development of transport networks. Croatia has 
maintained  an  active  role  in  cooperation  under  the  Memorandum  of  Understanding  on 
development of the South-East Europe Core Regional Transport Network and has continued 
implementation  of  the  multi-annual  development  plan  for  2011-2015  for  the  South-East 
Europe  Transport  Observatory  (SEETO).  Croatia  made  some  progress  on  ISPA  and  IPA 
railway  and  inland  waterway  projects,  but  implementation  needs  to  be  accelerated.  Croatia 
has  continued  to  prepare  the  Transport  Operational  Programme  for  the  Cohesion  and 
Structural Funds.  

In  the  case  of  energy  networks  good  progress  can  be  reported.  The  new  double  400  kV 
Ernestinovo-Pécs  (HU)  electricity  line  is  operating  on  a  trial  basis.  Construction  of  the 
Croatia-Hungary  gas  interconnector  was  finalised,  and  the  connection  was  inaugurated  in 
August  2011.Preparations  for  the  Adria  LNG  terminal  on  the  Krk  Island  are  continuing. 
Progress is also being made on the construction of the gas transmission pipeline on the coast, 
part of the Energy Community Gas Ring concept, and it will connect the Croatian gas system 
of  Lika  and  Dalmatia  (Bosiljevo  –  Split  –  Ploče)  with  the  announced  project  of  the  Trans-
Adriatic Pipeline.  

Conclusion 

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Croatia  has  made  further  progress  in  the  field  of  trans-European  networks,  with  the 
development  of  its  transport  and  energy  networks.  Alignment  with  the  acquis  has  been 
completed. 

4.22.  Chapter 22: Regional policy and coordination of structural instruments 

The legislative framework necessary to ensure full compatibility of operations financed by 
the Structural and Cohesion funds with EU policies is largely in place. A new law on public 
procurement,  aiming  at  full  alignment  with  the  acquis,  was  adopted  in  July  2011  and  will 
enter into force in January 2012. Full implementation of the legislative framework at all levels 
needs to be ensured by further building up administrative capacity. 

Good  progress  has  been  made  with  the  institutional  framework  which  is  largely  in  place. 
Implementation  structures  for  EU  Cohesion  Policy  in  Croatia  build  significantly  on  the 
existing  operating  structures  for  IPA.  Cohesion  policy  implementation  structures  include 
horizontal bodies and the structures for each operational programme.  

Further  progress  can  be  reported  in  the  area  of  administrative  capacity.  An  Institutional 
Development  and  Capacity  Building  Strategy  was  adopted  by  the  Croatian  Government  in 
December  2010,  together  with  its  Action  Plan  for  Implementation  in  the  period  2010-2013. 
Amendments to the Civil Service Regulation adopted in January 2011 establish an appropriate 
rewarding  mechanism  for  civil  servants  dealing  with  EU  funds.  A  Government  Decision 
adopted in March 2011 provides for actual staff increases in various bodies. Full and timely 
implementation  of  these  government  decisions  related  to  building  up  and  strengthening 
administrative  capacity  needs  to  be  pursued  in  order  to  bring  the  capacity  of  all  relevant 
bodies to the required level before accession. The track record of implementation under IPA 
has  further  improved,  in  spite  of  some  delays  encountered  due  to  an  initial  lack  of  quality 
projects and tender documentation.  

Good  progress  has  been  made  with  regard  to  programming.  Croatia  has  prepared  an 
advanced  and  comprehensive  draft  of  the  National  Strategic  Reference  Framework  (NSRF) 
for the programming period until 31 December 2013 and has undertaken public consultations 
on  draft  operational  programmes  for  structural  and  cohesion  funds.  Further  efforts  are 
required in order to ensure the timely development of a pipeline of high quality and mature 
projects for the implementation of the cohesion policy. 

Croatia  continued  to  make  progress  in  the  field  of  monitoring  and  evaluation.  A  detailed 
plan  and  timetable  for  setting  up  a  Monitoring  and  Evaluation  System  for  Structural  and 
Cohesion  Funds  by  Croatia,  including  the  setting-up  of  an  electronic  management  and 
information system, was submitted to the Commission in September 2010 and is considered 
appropriate. The monitoring and evaluation system under the Structural and Cohesion Funds 
will largely build on the system set up for IPA, while upgrading certain aspects of the existing 
structures and capacities. 

Progress  can  be  reported  in  establishing  and  implementing  an  adequate  financial 
management and control system (See Chapter 32 — Financial control). Follow-up audits on 
IPA  conferral  of  management  confirmed  that  internal  control  procedures  are  broadly 
satisfactory. The implementation of roadmaps to further strengthen financial management and 
control systems is continuing. Croatia needs to further strengthen its capacity in these fields so 
as to comply, upon accession, with the specific financial control provisions applicable to the 
Structural and Cohesion funds. 

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Conclusion 

Good  progress  was  made  in  the  field  of  regional  policy  and  coordination  of  structural 
instruments,  and  in  all  areas  Croatia  is  at  an  advanced  stage  of  preparations  for 
implementation of the cohesion policy. Further sustained efforts need to focus on effectively 
implementing  Croatia's  plans  to  increase  administrative  capacity  for  future  cohesion  policy 
implementation and to develop a mature project pipeline. 

4.23.  Chapter 23: Judiciary and fundamental rights (see also Political criteria) 

There has been good progress in the area of the judiciary. Judicial reform has continued. A 
new  Judicial  Reform  Strategy  has  been  adopted  covering 
the  period  2011-2015. 
Implementation  of  the  strategy  and  action  plan  has  continued,  with  a  large  volume  of 
legislation  adopted.  The  budget  available  for  the  judiciary  remained  more  or  less  stable  at 
approximately  €368  million,  or  0.8%  of  GDP.  The  Ministry  of  Justice  organised  and 
adequately staffed the Department for the implementation of the judicial reform strategy and 
reinforced the Council for monitoring the implementation of the judicial reform strategy. The 
new mechanisms that were introduced to ensure improved post legislative scrutiny now need 
to be implemented. Croatia also needs to improve human resources planning, including for the 
long  term  needs  of  the  judiciary,  taking  into  account  the  impact  of  many  on-going  and 
planned reforms. 

There has been good progress as regards the independence of the judiciary, which has been 
further strengthened through  the  implementation of amendments to the Constitution  and the 
laws  on  courts,  the  State  Judicial  Council,  the  State  Attorneys  Offices  and  the  Judicial 
Academy,  and  the  adoption  of  the  necessary  secondary  legislation.  A  new  State  Judicial 
Council  (SJC)  and  a  new  State  Prosecutorial  Council  (SPC)  were  constituted  in  February 
2011 according to the new Constitutional provisions. These bodies comprise eleven members: 
seven  judges/prosecutors  elected  by  peers,  two  law  professors  and  two  members  of 
Parliament.  Both  bodies  have  been  strengthened  administratively  and  are  carrying  out  their 
key tasks based on the new legislation (see below). However, the capacity of the SJC and SPC 
to  carry  out  their  new  tasks  should  be  further  developed.  Overall,  it  is  important  that  these 
bodies  demonstrate  independence  and  accountability,  especially  when  performing  their  key 
functions in the area of appointments, discipline (including declaration of assets verifications) 
and career management, so that effective self regulation of the judicial profession is ensured.  

Progress was also made towards implementing uniform, transparent, objective and nationally 
applicable  criteria  for  the  appointment  of  judges  and  prosecutors.  The  first  intake  of  60 
candidates  for  the  position  of  judge  and  prosecutor  was  admitted  to  the  State  School  for 
Judicial  Officials  in  January  2011,  with  first  appointments  expected  on  completion  of  the 
school programme and examinations in 2013. From that date, entry to the profession will be 
exclusively  through  the  school.  For  appointments  in  the  meantime,  the  procedure  for  the 
selection of new judges and prosecutors was further revised in order to improve the selection 
criteria and the detailed procedures of the written and oral exams to be conducted by the SJC 
and  SPC.  Since  October  2010,  99  judges  and  60  prosecutors  have  been  appointed.  A 
procedure for appointing a further 71 judges and 34 prosecutors is underway. While this track 
record  needs  to  be  further  developed,  the  systemic  provisions  are  in  place.  Croatia  should 
ensure  the  continued  proper  functioning  of  the  State  School,  as  well  as  the  full  and  proper 
implementation  of  the  transitional  provisions  for  the  recruitment  and  appointment  of  judges 
and prosecutors by the SJC and SPC. As regards career management, Croatia should ensure 

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that the professional evaluation of judges takes sufficient account of criteria related to quality 
of justice and that it is not predominantly based on quantitative assessment criteria. 

There  has  been  some  progress  as  regards  the  impartiality  of  the  judiciary,  with  the  SJC 
becoming responsible for the system of assets declarations of judges. The requisite systematic 
and accurate checking of judicial official declarations of assets needs to be assured. 

Progress has been made as regards the accountability of the judiciary. An improved system of 
disciplinary  proceedings  has  been  adopted  for  both  SJC  and  SPC,  which  provides  for  an 
extended catalogue of disciplinary offences, broader sanctions and the possibility of a separate 
investigation  commission. However, a track record of implementation of the new system of 
disciplinary proceedings needs to be further developed. It is important that the SJC and SPC 
pro-actively  apply  the  improved  disciplinary  rules  and  procedures  in  an  efficient,  objective 
and transparent manner. 

Progress has been made as regards the professionalism and competence of the judiciary. The 
Judicial  Academy  is  functioning  well.  Professional  training  programmes,  including  initial 
training and covering matters of EU law, have continued. The Judicial Academy is currently 
managing  and  implementing  the  programme  for  the  first  year  of  the  School  for  Judicial 
Officials. A new system for publication of case law is now in operation. This work needs to 
continue. 

Progress has been made in relation to the efficiency of the judiciary. Between December 2009 
and December 2010, the overall number of cases pending before the courts fell from 795,722 
to  785,561  (-1.3%)  and  to  774,718  by  30  June  2011  (-2.6%).  The  backlog  of  old  criminal 
cases  has  been  reduced  substantially.  The  percentage  share  of  old  civil  cases  in  total 
municipal  court  cases  is  falling  slowly.Croatia  has  adopted  and  implemented  various 
measures  leading  to  improved  efficiency  of  the  judiciary.  Reform  of  criminal  procedures  is 
being  implemented.  The  Civil  Procedures  Act  was  amended  in  May  2011  as  a  first  step 
towards further amendments to prevent repeated or extensive referrals of cases from second to 
first  instance  courts.  The  municipal  courts  of Zagreb and Split are being reinforced through 
the  recruitment  of  additional  judges,  court  clerks  and  court  advisors.  Croatia  terminated  a 
number  of  proceedings  for  old  cases  of  small  value  where  the  Republic  of  Croatia  is  the 
plaintiff. The new Law on Enforcement of Financial Assets entered into force. 

The backlog of old civil cases remains little changed at around 125,571 cases. Some courts, 
for  example  the  municipal  courts  in  Zagreb,  Split  and  Zadar,  continue  to  suffer  from 
disproportionately large numbers of old civil cases. Problems with the enforcement of court 
rulings continue to hamper the efficient working of the judicial system. The new enforcement 
system that was established by the adoption of the new Law on Enforcement and the Public 
Bailiff Act will be fully applicable in 2012.  

There has been good progress in the functional rationalisation of the court network. Physical 
mergers of the municipal and misdemeanour courts are moving forward in line with existing 
planning. To date, in the case of municipal courts, 31 courts have been physically merged into 
13. In the case of misdemeanour courts, so far 12 courts have been physically merged into 6. 
Amendments  to  the  Act  on  the  Territorial  Jurisdiction  and  Seats  of  Courts  adopted  in 
December 2010 reduced the number of county courts (and state attorneys' offices) from 21 to 
15 and the number of commercial courts from 13 to 7, with effect from 30 December 2010. In 
all  cases  the  physical  mergers  will  take  place  gradually  until  2019.  According  to  new 

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legislation which entered into force in September, the number of municipal State Attorney's 
offices is reduced from 55 to 34.  

There has been some progress with regard to the infrastructure and equipment of courts. The 
integrated  case  management  system  (ICMS)  is  now  fully  in  place  in  70  of  the  planned  103 
courts,  and  will  be  rolled-out  to  the  remainder  in  2012.  Croatia  has  introduced  a  unified 
statistical system for the monitoring of cases by connecting the ICMS with other IT systems. 
However, further improvements are necessary in order to enable improved case management, 
monitoring of the overall length of proceedings and analysis of the general efficiency of the 
judicial  system,  and  the  productivity  of  judicial  officials.  Misdemeanour  courts  continue  to 
suffer from a shortage of equipment and a very low standard of premises. 

As regards the promotion of Alternative Dispute Resolution (ADR), the mediation system has 
been  simplified  with  the  adoption  of  a  new  Mediation  Act  in  January  2011.  However,  the 
effect of this law remains to be seen. In any event, greater attention should be paid to out-of-
court mediation and to ensuring that in-court mediation is not seen as a disincentive in terms 
of performance indicators for judges. 

The system of judicial inspections has produced good results. The number of inspectors has 
increased from four to eight, and they are responsible for monitoring the work of courts and 
state attorney's offices. 

There has been continuing progress with the application of the new Criminal Procedure Code, 
which  was  further  fine-tined  in  July  2011.  Applied  to  organised  crime  and  corruption  cases 
since 2009, the new criminal procedure has accelerated the investigation and the prosecution 
stages,  with  better  cooperation  between  the  police  and  prosecution  services  leading  to  more 
indictments.  Preparations  for  the  enforcement  of  the  new  code  for  all  other  criminal  cases 
from September 2011 continued. Additional police resources had been deployed to deal with 
the stricter deadlines for interviewing suspects. However, some of these deadlines need to be 
revised slightly in order to facilitate the work of the police and prosecutors.  

Croatia has continued to improve the handling of war crimes cases, with approximately two 
dozen  trials  on-going  in  2011.  A  more  balanced  approach  to  trials  has  continued  in 
2010/2011.  Cases  involving  Croat  perpetrators,  including  members  of  the  Croatian  armed 
forces, were pursued.  

In February 2011, a new strategy on impunity was adopted. Priority cases are being identified 
at  the  national  and  regional  level,  with  special  investigative  teams  being  established  in 
particularly sensitive cases. The strategy recognises the existence of many hundreds of as yet 
un-investigated  and  un-prosecuted  crimes  involving  thousands  of  victims.  In  June  2011, 
criminal  charges  were  raised  in  84  such  cases.  The  ICC  law  was  amended  in  May  2011  to 
allow systematic use of the four specialised war crimes chambers for new cases, as well as the 
use  of  ICTY  evidence  in  Croatian  courts.  Staffing  of  the  specialised  chambers  has  been 
reinforced, with 16 investigative judges and 38 trial judges dealing with war crimes cases at 
the  four  chambers.  In  total,  120  police  officers  and  60  State  Attorneys,  their  deputies  and 
advisors  are  working  on  war  crimes  cases.  The  State  Prosecutor  completed  his  review  of 
potentially  questionable  in  absentia  verdicts  from  the  1990s.  Re-trials  were  requested  in  15 
cases, of which 13 were granted, involving 94 people convicted in absentia. Measures have 
been  taken  to  protect  witnesses  by  means  of  improved  witness  support  service  at  certain 
courts. There have been some attempts to remedy misapplication of the Amnesty Law in cases 
which could be considered war crimes.  

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However, impunity for war crimes remains a problem and needs to be thoroughly addressed, 
especially where the victims were ethnic Serbs or the alleged perpetrators were members of 
the  Croatian  security  forces.  Many  hundreds  of  cases  remain  to  be  investigated  and 
prosecuted, despite intensified efforts by the police and prosecutors. The majority of crimes – 
almost  80%  of  around  1,100  war  crimes  files  -  have  not  been  pursued  in  court.  Regional 
discrepancies  remain,  especially  when  it  comes  to  cases  in  areas  such  as  Sisak,  Gospić  and 
Požega.  Croatia  should  fully  implement  the  strategy  of  February  2011  and  make  speedier 
progress  with  investigations  and  prosecutions  so  as  to  ensure  a  sustainable  track  record  of 
handling war crimes cases. Priority cases should be pursued without delay. Implementation of 
the new Strategy on impunity will be key, as well as the systematic and effective use of the 
specialised  war  crimes  chambers,  including  for  most  pending  cases,  which  are  not 
automatically  transferred.  Cases  overturned  by  the  Supreme  Court  should  be  automatically 
transferred.  Croatia  should  continue  to  implement  the  provisions  of  the  Criminal  Procedure 
Code  on  in  absentia  cases  and  on  renewal  of  proceedings,  and  deploy  other  legal  remedies 
such as protection of legality. 

There has been substantial progress in the fight against corruption.  

Implementation  of  the  anti-corruption  strategy  and  the  related  action  plan  has  continued, 
including  implementation  of  the  specific  anti-corruption  programme  for  State-owned 
companies.  Overall  coordination  of  the  implementation  of  anti-corruption  efforts  has 
improved  further,  with  regular  meetings  of  the  governmental  coordination  committee  being 
chaired  by  the  Prime  Minister.  The  national  council  for  monitoring  the  anti-corruption 
strategy  continued  to  be  proactive  and  held  regular  public  debates  and  hearings.  However, 
coordination  of  anti-corruption  efforts  needs  to  be  further  strengthened.  The  MoJ  anti-
corruption sector is still understaffed, and proactive follow-up of implementation issues still 
needs to be strengthened.  

The domestic legal anti-corruption framework has been further improved, including through 
legislative fine-tuning of the law on the Office for the Fight against Corruption and Organised 
Crime  (USKOK),  extending  its  competence  to  tax  fraud  cases  and  introducing  a  more 
transparent  mechanism  to  control  the  dismissal  by  the  State  Prosecutor  of  criminal  reports. 
Confiscation  of  pecuniary  gains  from  crime  increased  significantly,  albeit  from  a  low  base. 
The  adoption  of  a  new  act  on  the  procedure  of  seizure  and  confiscation  of  the  proceeds  of 
crime and misdemeanours enables effective management of confiscated assets. 

The  main  legal  framework  for  the  prevention  of  corruption  has  been  either  heavily  revised 
(Law on Access to Information) or replaced by new legislation (Law on Financing of Political 
Activities  and  Electoral  Campaigns;  Conflict  of  Interest  Act).  The  Law  on  Access  to 
Information  has  been  amended  in  line  with  the  new  Constitutional  right  on  access  to 
information.  The  new  law  introduces  clearer  procedures  and  deadlines  for  information 
requests  and  supervision  of  the  implementation  of  the  law  by  the  Data  Protection  Agency 
(DPA),  which  becomes  the  first  instance  appellate  body.  So  far,  the  DPA  has  received  52 
appeals.  All  cases  can  also  be  appealed  in  the  Administrative  Court,  which  can  carry  out  a 
proportionality test in cases where State bodies have classified certain information. The DPA 
has been strengthened by the recruitment of four additional staff members, with one more to 
be recruited by the end of 2011.  

The  legislation  on  financing  of  political  activities  was  further  amended  in  May  2011.  It 
improves transparency and independent oversight, and increases penalties for non-compliance 
with  the  law.  Supervision  and  control  of  the  regular  financing  of  political  parties  and  of 

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election  campaigns  will  be  carried  out  by  the  State  Electoral  Commission  (SEC).  Audit  of 
regular annual financing of political parties and the audit of election campaigns will be carried 
out  by  the  State  Audit  Office  (SAO).  In  terms  of  administrative  capacity,  the  SEC,  which 
currently  has  three  staff  members  working  in  this  area,  should  be  strengthened  by  the 
imminent recruitment of two new staff members. The new Conflict of Interest Act provides 
for  the  depoliticisation  of  appointments  to  supervisory  boards  of  state-owned  companies  as 
well as depoliticisation of the membership of the conflict of interest commission (CIC) itself. 
Provisions exclude companies from participating in tenders where the head of the procuring 
entity (or his/her family members) has a 0.5% or greater share in the company. Penalties for 
conflict  of  interest  have  also  been  strengthened.  The  law  provides  for  more  rigorous 
verification  of  declarations  of  assets  by  public  officials.  There  has  been  an  increase  in 
transparency  and  integrity  in  public  administration,  state-owned  companies  and  in  the 
execution of public procurement contracts. 

Further experience is needed in the practical implementation of the newly adopted preventive 
legal framework and the implementing structures still need to be further strengthened. Croatia 
needs to pay special attention to the strengthening of the Data Protection Agency, and ensure 
that the relevant staff are in place, trained and able to rule on the merit of all cases, including 
those where information was classified. The SEC administrative capacity needs to be further 
strengthened.  As  regards  conflict  of  interest,  the  professional  and  administrative  support 
available to the Conflict of Interest Commission, and its effective operation, need to be further 
strengthened.  Moreover, delays in the appointment of the new commission itself need to be 
urgently  overcome.  Full  implementation  of  the  system  for  monitoring  and  verification  of 
assets  declarations  of  public  officials  and  judges,  including  dissuasive  sanctions  for  non-
compliance, needs to be ensured. 

As  regards  the  suppression  of  corruption,  USKOK  continued  to  be  active  and  issued 
indictments  in  some  important  cases.  While  the  majority  of  corruption  cases  concern  petty 
corruption, many more serious cases were pursued, including a number of mid and high-level 
corruption cases in which investigations are underway or indictments have been issued. There 
are  cases  involving  senior  political  figures  and  former  Government  ministers,  including  a 
former  Prime  Minister,  as  well  as  former  mayors,  heads  of  local  administrations,  judicial 
officials  and  state-owned  companies  There  have  also  been  court  rulings  in  such  cases, 
including in cases involving a former Deputy Prime Minister as well as a former Minister of 
Defence.  The  four  specialised  USKOK  chambers  at  the  County  Courts  have  been 
strengthened by increasing the number of judges dealing with corruption and organised crime 
cases from 54 to 64 and by taking on more administrative staff. The overall number of court 
verdicts has also increased. The operational capacity of USKOK has been further reinforced 
by  the  recruitment  of  four  additional  deputy  prosecutors,  bringing  the  total  to  28.  The 
National Police Office for the Fight against Corruption and Organised Crime (PNUSKOK) is 
now fully staffed. The newly adopted Police Act has introduced a new transparent system of 
evaluation,  promotion,  transfer  and  training  in  the  police  service,  and  some  depoliticisation 
measures. Inter-agency cooperation has improved.  

However,  for  most  high  level  corruption  and  public  procurement  cases  the  proceedings  are 
still on-going and they have not yet reached the stage of court rulings. The courts' ability to 
handle  the  increased  number  and  complexity  of  cases  has  yet  to  be  fully  tested.  The  track 
record  of  effective  handling  of  organised  crime  and  corruption  cases  needs  to  be  developed 
further,  especially  in  relation  to  high  level  corruption,  local  level  corruption  and  including 
cases related to public procurement and the judiciary.  

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There has been good progress on fundamental rights. 

Some progress was made with regard to the prison system. Work relating to the expansion of 
existing detention and treatment facilities has continued and will be finalised in 2012. In the 
meantime,  problems  of  overcrowding  and  inadequate  health  protection  persist.  Prison 
occupancy stands at 155%.  

There has been some progress regarding access to justice. In the area of administrative justice, 
preparatory steps to ensure full implementation of the Administrative Dispute Act have been 
taken, including for the introduction from January 2012 of four first instance courts and of a 
Higher  Administrative  Court  as  courts  of  full  jurisdiction  within  the  meaning  of  Article  6 
ECHR and Article 47 of the Charter of fundamental rights.  

Implementation  of  legal  aid  system  has  improved,  including  by  means  of  simplified 
application  procedures  and  a  narrowing  of  the  gap  between  legal  aid  and  normal  lawyers' 
tariffs.  The  Constitutional  court  revoked  some  provisions  of  the  Law  on  Legal  Aid  in  April 
2011.  Provisions  concerning  the  formulation  of  eligibility  criteria,  determination  of 
beneficiaries  for  legal  aid;  apportioning  of  the  budget  for  free  legal  aid  and  the  refusal  by 
attorneys to take on legal aid cases were subsequently amended in July 2011.  

However,  further  improvements  to  the  system  are  needed,  including  in  terms  of  facilitating 
access to legal aid as well as fostering the role of NGOs. Implementation of the new system of 
administrative justice needs to be speeded up.  

Freedom  of  expression,  including  freedom  and  pluralism  of  the  media,  is  provided  for  in 
Croatian  law  and  is  generally  respected.  A  new  Media  Law  makes  provision  for  greater 
transparency  in  media  ownership.  There  has  been  limited  progress  with  investigating  cases 
from  previous  years  of  intimidation  of  journalists  working  on  cases  of  corruption  and 
organised  crime.  Few  new  cases  have  been  reported,  however.  Economic  pressures  in 
particular are hampering the development of investigative reporting. Problems with political 
interference at local level remain. The public broadcaster HRT continued to face managerial 
difficulties  in  spite  of  the  appointment  of  a new  supervisory  board  and  programme  council, 
which has been unable to appoint a new director general.  

There  has  been  some  progress  with  women's  rights  and  gender  equality.  Institutional 
mechanisms  for  gender  equality  are  being  developed  at  central  and  local  level.  The 
Ombudsperson for Gender Equality has continued to implement the Gender Equality Act. The 
number  of  registered  domestic  violence  cases  has  decreased  only  slightly,  the  position  of 
women in the labour market has not changed significantly and women continue to be under-
represented in economic and political decision-making bodies. 

There  is  limited  progress  to  report  with  regard  to  children's  rights.  The  Ombudsperson  for 
Children  became  more  active  in  promoting  and  protecting  children's  rights  and  obtained 
appropriate  office  space  and  developed  regional  offices  in  three  counties.  However,cases  of 
peer  violence  and  violence  against  children  in  educational  institutions  continued  to  increase 
and  are  not  being  adequately  addressed  by  the  relevant  authorities.  There  is  still  a  lack  of 
prevention  programmes  and  of  professional  training  for  educators.  Shortcomings  in  the 
judicial  and  social  welfare  systems  continue  to  contribute  to  the  poor  enforcement  of 
children's rights.  

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There  has  been  limited  progress  in  advancing  the  social  inclusion  of  socially  vulnerable 
groups  and/or  persons  with  disabilities.  The  capacity  of  the  Office  of  the  Ombudsman  for 
Persons  with  Disabilities  has  been  strengthened.  However,  information  on  rights  and 
entitlements in the area of social welfare, health  care and pension insurance is lacking. The 
criteria  for  establishing  entitlements  are  not  applied  equally,  and  the  legislative  provisions 
regulating  specific  rights  are  fragmented.  The  transition  from  institutional  care  services  to 
community-based care services continues to be slow.  

Croatia  has  begun  developing  a  track  record  of  implementing  the  2009  Anti-Discrimination 
Law and legislation on hate crimes. Various measures were taken to raise awareness of this 
legislation among both the general public and law enforcement bodies. Measures have been 
taken to strengthen the position of the Ombudsman Office as the central body in charge for 
implementing  the  Anti-discrimination  law,  including  by  increasing  the  budget  and  staffing 
complement.  Legislation  adopted  in  September  foresees  the  merger  of  the  specialised 
Ombudspersons functions with the Office of the Ombudsman.  

However,  the  track  record  of  implementing  anti-discrimination  and  hate  crime  legislation 
needs to be further developed. There is still a small number of discrimination complaints, few 
of  which  have  so  far  reached  the  courts.  Lesbians,  gays,  bi-sexual  and  trans-gender  people 
(LGBT) have continued to be subjected to threats and attacks. Croatia's legislation is not fully 
aligned  with  the  Framework  Decision  of  the  Council  2008/913/JHA  on  combating  certain 
forms  and  expressions  of  racism  and  xenophobia by  means  of  criminal  law.  The  process  of 
merging  the  specialised  Ombudspersons  functions  with  the  Office  of  the  Ombudsman  will 
need to be carefully managed to ensure a more effective system of human rights protection in 
practice.  There  has  been  some  progress  with  regard  to  minorities.  High-level  public 
expressions  of  commitment  to  the  rights  of  minorities,  reaffirming  their  place  in  Croatian 
the  political 
society,  have  continued.  There  has  been  good  cooperation  between 
representatives of minorities and the government. Conditions for the effective implementation 
of the constitutional act on the rights of national minorities (CARNM) have improved. A plan 
for minority employment for the period 2011-2014 under the CARNM was adopted in May 
2011.  Croatia  increased  financial  support  to  the  local  Councils  for  National  Minorities  and 
provided  training  to  local  authorities.  Elections  were  held  in  July  2011  for  members  of 
national minority councils and representatives of national minorities at local and regional self-
administration units. Training has been provided both for the media and for the police, aimed 
at  improving  the  portrayal  of  minorities  and  raising  awareness  of  the  relevant  legislation 
respectively. The number  of  reported racist or xenophobic incidents has been fairly limited, 
especially  compared  to  previous  years.  Where  incidents  have  occurred,  the  response  at  the 
political  and  law  enforcement  level  has  generally  been  adequate,  although  few  cases  end  in 
prosecution.  The  Roma  minority  has  continued  to  receive  attention,  with  improvements  in 
pre-school education in particular.  

In  July  2011  the  Constitutional  Court  declared  as  unconstitutional  the  2010  amendments  to 
the  CARNM.  These  amendments  introduced  a  new  model  for  election  of  minority 
representatives in the parliament including double votes for small minorities.  

Despite the ongoing effort to improve conditions for minorities, some problems persist. The 
CARNM  and  minority  action  plans  need  to  be  implemented.  Due  largely  to  the  general 
recruitment  ban  in  the  civil  service,  there  has  been  no  tangible  improvement  in  the  level  of 
employment  of  national  minorities  in  public  sector  employment,  where  minorities  are 
underrepresented. Significantly stronger monitoring is required in this area. Croatia needs to 
continue to foster a spirit of tolerance towards minorities, in particular Croatian Serbs, and to 

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take  appropriate  measures  to  protect  those  who  may  still  be  subjected  to  threats  or  acts  of 
discrimination,  hostility  or  violence.  Further  work  is  needed  in  the  area  of  schooling, 
including  implementation  of  the  planned  general  human  rights  education  and  reviewing  the 
role  of  schooling  in  reconciliation  efforts,  including  teaching  materials  and  the  portrayal  of 
minorities.  The  Roma  minority  faces  particularly  difficult  living  conditions,  and  challenges 
remain  in  the  areas  of  education,  social  protection,  health  care,  employment  and  access  to 
personal documents. 

There  has  been  good  progress  on  refugee  return  issues.  Refugees  continued  to  return  to 
Croatia,  with  the  Croatian  authorities  having  registered  over  132,872  returnees  in  total 
belonging  to  the  Serb  minority,  which  corresponds  to  approximately  half  of  those  who  fled 
the  country  up  until  1995.  Progress  was  made  with  regard  to  housing  issues.  Housing  care 
programmes (HCP) for returnees are being implemented. Croatia has largely implemented its 
Action Plan on the HCP for returning refugees/former occupancy and tenancy rights holders. 
It has now met the target for 2008. The target for 2009 under the action plan for the provision 
of 2,070 flats has also been met. Accommodation in 88 cases has been made available beyond 
the  2009  target.  A  plan  was  prepared  in  March  2011  setting  out,  inter  alia,  the  financial 
requirements  necessary  in  the  period  2011-2014  to  deal  with  the  approximately  2,350  cases 
remaining  for  implementation.  In  order  to  further  facilitate  return  and  reintegration,  new 
purchase  options  under  favourable  conditions  for  certain  housing  care  beneficiaries  and  the 
possibility for new applications in areas not directly affected by the war have been introduced. 
Good  progress  was  made  with  the  reconstruction  of  damaged  houses,  as  well  as  with 
processing the backlog of appeals against rejected applications for reconstruction assistance. 
Implementation of the decision on validating pension rights has continued, and monitoring to 
address inconsistencies between different regional offices has improved. 

However, additional efforts are needed to help refugees and returnees. Croatia needs to make 
continued progress in providing accommodation to all remaining successful applicants under 
the  HCP.  The  estimated  2,350  cases  need  to  be  fully  processed  without  delay  and  housing 
units  made  available  to  the  returnees.  Some  50  appeals  for  housing  reconstruction  are  still 
pending.  The  current  rejection  rate  of  convalidation  applications  -  at  44%  -  remains  high. 
Problems persisted with cases of owners facing claims for unsolicited investments when they 
seek to take possession of their property. Full implementation of new legal provisions in this 
area should now be assured. According to this legislation from June 2011, the State takes over 
the  responsibility  for  claims  by  temporary  occupants.  Efforts  to  create  the  economic  and 
social conditions necessary for sustainable returns of refugees need to be accelerated. 

There has been good progress concerning the protection of personal data. The Data Protection 
Agency  has  increased  its  supervision  and  control  activities.  However,  Croatia  still  needs  to 
fully align its legislation with the Data Protection Directive.  

As regards citizens' rights, Croatia adopted legislation on the right to vote for EU citizens in 
European Parliament and local elections in Croatia, as well as amendments to the Aliens Act 
in order to fully align its provisions with Directive 2004/38/EC on the right of citizens of the 
Union and their family members to move and reside freely within the territory of the Member 
States from accession. 

Conclusion  

Croatia  has  made  substantial  progress  on  judiciary  and  fundamental  rights.  Reform  of  the 
judiciary  has  continued  with  the  adoption  of  new  legislation  further  strengthening  judicial 

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independence  and  a  further  reduction  of  the  case  backlog.  Judicial  reform  requires  constant 
attention,  especially  concerning  judicial  efficiency  and  the  practical  implementation  of  new 
measures  relating  to  independence,  impartiality  and  accountability  of  the  judiciary.  Croatia 
has continued to improve the handling of domestic war crimes cases. The issue of impunity 
needs to be thoroughly addressed. Anti-corruption efforts have been accelerated with positive 
results,  in  particular  as  regards  improved  legislation  and  the  strengthening  of  the  relevant 
authorities.  The  track  record  of  effective  handling  of  corruption  cases  needs  to  be  further 
developed, especially in relation to high level corruption, local level corruption, and including 
cases  related  to  public  procurement  and  the  judiciary.  Further  experience  is  needed  with 
implementing  the  newly  adopted  preventive  legal  framework  in  practice.  Protection  of 
fundamental  rights  has  been  strengthened,  but  it  needs  to  be  further  improved  in  practice, 
especially for minorities and refugees.  

4.24.  Chapter 24: Justice, freedom and security 

In  the  field  of  migration,  progress  can  be  reported.  In  2010,  1,946  irregular  migrants  were 
apprehended,  which  is  a  20%  increase  over  the  previous  year.  Good  cooperation  with 
Montenegro and Serbia  regarding  the  application  of  readmission  agreements  with  these  two 
countries  can  be  noted.  271  irregular  minors  were  apprehended  in  2010  (almost  twice  the 
number from the previous year). Despite an adequate legal framework, the support scheme for 
unaccompanied  irregular  minors  outside  the  asylum  procedure  needs  to  be  strengthened.  A 
planned  special  facility  for  minors  at  Jezevo  remains  to  be  built.  Special  attention  to  the 
treatment  and  accommodation  of  this  vulnerable  group  is  needed.  A  readmission  agreement 
with Bosnia and Herzegovina, aligned with the EU acquis, entered into force in August 2011. 
Negotiations  have  started  with  Kosovo.  Concerning  legal  migration,  Croatia  has  already 
transposed  part  of  the  acquis  in  this  area,  but  needs  to  make  further  efforts  to  ensure  full 
alignment  with  the  acquis  on  legal  migration  notably  on  conditions  of  admission  of  third-
country nationals for the purposes of studies. Preparations in this area are well advanced. 

Croatia  continued  to  make  good  progress  in  the  field  of  asylum.  Implementing  legislation 
stemming from the Act on Amendments to the Asylum Act was adopted, notably with regard 
to  free  legal  aid  in  asylum  procedures,  accommodation  of  asylum  seekers  and  subsidiary 
protection. The Asylum Commission was strengthened, with an additional member taking up 
duties  and  through  the  provision  of  adequate  premises  with  proper  technical  and 
administrative  support.  The  Commission  will  function  as  a  second-instance  body  until  the 
Administrative Courts become fully operational in January 2012, thus aligning with relevant 
European standards. 

The  new  Asylum  Act  provides  for  several  rights  in  favour  of  refugees  and  persons  under 
subsidiary  protection,  such  as  the  right  to  accommodation,  to  health  insurance,  to  education 
and  vocational  training.  However,  the  implementation  of  these  rights  in  practice  remains 
uneven.  

In 2010, the number of asylum requests increased significantly to 259 applications related to 
290  asylum  seekers,  and  the  trend  continued  in  2011  (285  applications  for  323  asylum 
seekers, as of 30 June. In May 2011, the Ministry of Interior (MoI) and the Croatian Railways 
signed  an  agreement  to  use  the  hotel  'Porin',  near  Zagreb,  as  an  additional  location  for 
accommodation  of  150  asylum  seekers.  Training  of  Ministry  of  Interior  (MoI)  staff  and  of 
border  police  officers  on  asylum  has  continued.  Croatia  needs  to  continue  training  border 
police  officers  and  Administrative  Court  staff  in  the  asylum  procedures.  Croatia  is  well 
advanced in this area. 

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Limited  additional  progress  was  made  as  regards  visa  policy.  A  new  Aliens  Act,  aimed  at 
transposing the EU Visa Code, was prepared. As for visa requirements, the 'positive' list was 
aligned to the corresponding EU visa waivers adopted in 2010. The Croatian Visa Database 
was rolled out to all Diplomatic Missions and Consular Posts. The database is also available 
at all international Border Crossing Points where visas can be issued. 

Croatia's  'negative'  list  remains  partially  aligned.  The  government  adopted  a  Decision  on 
temporary liberalisation of the visa regime for citizens of the Russian Federation, Ukraine and 
Kazakhstan for transit through or staying for up to 90 days from 1 April to 31 October 2011 
even  though  these  countries  are  on  the  'negative  list'  of  Regulation  539/2001.  For  the  same 
limited period, the government adopted another Decision facilitating entry for the purposes of 
tourism to Croatia for nationals of China, Jordan, Qatar, Kuwait, Oman and the United Arab 
Emirates in possession of a valid Schengen visa. Croatia is well advanced in this area. 

There has been good progress with regard to external borders and Schengen. The Integrated 
Border  Management  (IBM)  Action  Plan  was  revised  in  April  2011  and  complemented  with 
the operational Concepts for the Green Border Surveillance, for the Compensation Measures 
and for the Technical Solutions at the most sensitive locations of the future external border. 
The  Government  also  adopted  the  Strategy  for  the  Maritime  Police  Development  that 
envisages the establishment of the National Maritime Centre by the end of 2012. Delays in the 
preparations for the Centre and for the 'interim' solution to ensure awareness at sea need to be 
overcome rapidly. Cooperation with Frontex was enhanced by harmonising the Risk Analysis 
Model.  Discussions  with  Bosnia  and  Herzegovina  on  bringing  bilateral  agreements  in  line 
with  the  acquis  have  started.  Discussions  with  Serbia  on  revising  the  Local  Border  Traffic 
Agreement have yet to start.  

Croatia  has  continued  to  strengthen  the  Border  Police  by  adding  a  further  100  staff,  thus 
bringing the total as of May 2011 to 6,026, of which 4,658 are at the future external border. A 
further 127 officers are due to be hired by the end of 2011. Basic and specialist training for 
the border police continued, including with extensive use of multipliers in the field of vehicle 
smuggling and forged documents. The Common Core Curriculum was partly introduced at the 
Police Academy. 481 of the senior officers remain to complete the specialised border police 
training.  The  acquisition  of  equipment  as  required  in  the  IBM  Action  Plan  is  ongoing,  but 
some delays have occurred. Roll-out of the National Border Management Information System 
(NBMIS)  continued  and  as  of  May  2011  it  was  operational  at  38  international  Border 
Crossing Points, 31 of which are located at the future external border.  

Attention needs to be directed at the timely implementation of the actions provided for in the 
revised  IBM  Action  Plan  and  the  related  strategies  and  concepts.  An  interim  solution  to 
increase the Border Police awareness at sea needs to be implemented, while preparations for 
the establishment of the National Maritime Centre are continuing. Training needs to continue. 
Croatia also needs to continue working towards ensuring the full application of the Schengen 
Borders  Code  by  accession,  especially  at  the  Neum  corridor.  Preparations  in  the  area  are 
advanced. 

As regards judicial cooperation in civil and criminal matters, there has been progress. The 
extradition agreement signed with Montenegro entered into force and there has been one case 
of  extradition  towards  Montenegro.  In  March,  Croatia  attended  the  meeting  of  the  contact 
points of the European Judicial Network in civil and commercial matters in Budapest  as an 
observer.  Cooperation  facilitated  by  the  cooperation  agreement  and  liaison  officer  with 

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Eurojust  is  good.  Croatia  used  the  services  of  Eurojust  to  deal  with  the  recent  high  level 
corruption cases. Preparations in this area are well advanced. 

Some  progress  was  made  as  regards  police  cooperation  and  good  progress  as  regards  the 
fight against organised crime. Agreements were ratified with Slovakia and Montenegro, and 
signed  with  Bulgaria  and  Italy.  The  Agreement  with  Slovenia,  Austria  and  Hungary  on  the 
common  Police  Cooperation  Centre  in  Dolga  Vas  was  ratified.  An  Agreement  on  enhanced 
cooperation in combating serious crime was signed with the United States. An International 
Law Enforcement Coordination Unit was established in the Ministry of Interior. Croatia has 
deployed a further four liaison officers to Serbia, Austria, Israel and the Interpol headquarters. 
Croatia has continued to have good cooperation with Europol. The new Police Law entered 
into force in April 2011 to ensure a transparent organisation and depolitisation of the Police. 
However, several pieces of implementing legislation are still missing, which could help with 
the delayed implementation of the Strategy for the Human Resource Management at the MoI. 
Croatia's  contribution  to  Europol's  assessment  of  the  threat  of  organised  crime  needs  to  be 
improved. 

The revised law on confiscation has entered into force in 2011. The new Criminal Procedural 
Code  facilitated  the  swift  investigations  of  the  Office  for  the  Fight  against  Corruption  and 
Organised  Crime  (USKOK),  which  also  targeted  high-level  cases.  Financial  investigations 
improved  and  allowed  provisional  confiscation  of  assets,  including  outside  Croatia  on  the 
basis  of  international  cooperation.  USKOK  filled  the  four  vacant  prosecutors'  posts.  The 
National Police Office for the Suppression of Corruption and Organised Crime (PNUSKOK) 
completed  its  target  staffing  in  spring  2011.  Training  in  several  areas  has  continued. 
PNUSKOK drafted the 2011 Organised Crime Threat Assessment for Croatia.  

Further efforts are needed in improving the track system of USKOK and Courts to establish 
the average length of the cases. No progress was recorded in establishing a second instance 
body  to  dismiss  cases  for  offences  against  the  public  administration.  PNUSKOK  needs  to 
consider  introducing  a  flexible  monitoring  mechanism  allowing  accelerated  closure  and 
opening  of  activities,  checking  the  backgrounds  of  new  market  actors,  assessing  the 
proportion  between  investments  and  profits,  and  focusing  on  certain  operators  (lawyers, 
accountants, notaries, casinos,  etc.) that are barely reporting on suspicious transactions. The 
four  regional  PNUSKOK  departments  are  in  need  of  adequate  working  facilities  and 
equipment.  

Some  progress  can  be  reported  on  anti-money-laundering  (AML)  measures.  Inter-agency 
cooperation  has  improved,  and  an  agreement  was  signed  between  the  FIU  and  USKOK.  At 
the same time, administrative capacity still requires further strengthening (see also Chapter 4 
– Free movement of capital). 

Some progress can be reported in the fight against trafficking of human beings. A Protocol on 
the  integration  of  victims  of  human  trafficking  has  been  adopted  in  May  2011.  A  multi-
disciplinary  approach,  involving  all  relevant  actors  across  all  policy  areas  including  the 
private sector, needs to be further developed. Identification of victims needs to be improved, 
especially of children victims of trafficking. In 2010, only 7 victims of trafficking have been 
identified (one less than last year), including one for labour exploitation. Until July 2011, 12 
victims of trafficking have been identified.  Efforts to identify victims of labour exploitation 
and to tackle trafficking need to be intensified. Training sessions delivered by police officers, 
judges  and  labour  inspectors  to  judicial  academy  and  health  employees  continued.  Training 
sessions  for  State  attorneys  would  be  beneficial  in  prosecuting  cases  of  labour  exploitation. 

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Regional  cooperation  with  neighbouring  countries  and  interdisciplinary  cooperation  to 
identify victims of human trafficking should be stepped up. Preparations in the area of police 
cooperation and fight against organised crime are advanced. 

Good progress can be reported in the fight against terrorism. The action plan for prevention 
and suppression of terrorism was adopted in April 2011. Substantial progress has been made 
in strengthening the capacities of the bomb disposal experts, with specialised bomb-disposal 
training introduced, multipliers being trained and additional equipment procured. Specialised 
training  was  provided  on  several  anti-terrorism  topics.  Croatia  needs  to  complete  the  re-
examination  of  the  storage  facilities  for  explosives  and  ammunition  in  line  with  the  acquis 
and to replace old equipment. Preparations in this area are well advanced. 

Croatia  has  continued  to  make  good  progress  on  cooperation  in  the  field  of  drugs.  In 
December  2010,  Croatia  signed  the  agreement  enabling  its  participation  in  the  European 
Monitoring  Centre  for  Drugs  and  Drug  Addiction  (EMCDDA).  In  April  2011,  the 
implementation  programme  of  the  Action  Plan  on  Combating  Drugs  Abuse  in  Croatia  was 
adopted.  The  Law  on  Combating  Drug  Abuse  was  adopted  in  July  2011,  allowing  the 
National  Contact  Point  to  transmit  drug  samples  and  data  exchange  on  profiling  synthetic 
drugs, and the utilisation of the single administrative document to travel within the EU with 
drugs for treatment purposes.  

In 2010, 7,782 offences related to drugs were reported, 5,423 persons were reported and 5,982 
seizures of drugs were made (14% more than for 2009). During the first quarter of 2011, the 
number of criminal offences involving drugs was 23% higher compared to the same period of 
the previous year; the number of drug seizures was 28% higher and the number of reported 
persons was 36% higher. This increase was partly due to the stronger focus put by the police 
on  simple  possession  of  drugs.  Croatia  has  a  good  track  record  of  cooperation  in  cases  of 
tackling international drug smuggling, and sharing information with other countries to enable 
better  seizures.  Training  of  police  officers  and  provision  of  the  necessary  equipment  have 
continued.  The  Forensic  centre  has  been  accredited  for  nine  new  methods  of  work.  The 
cooperation  between  police  and  customs  in  the  fight  against  drugs  needs  to  be  further 
improved. 

The  national  focal  point  (NFP)  for  drugs  has  delivered  its  fourth  annual  report  to  the 
EMCDDA and this year launched the first general population survey. The NFP has initiated 
the  development  of  a  database  on  drug  demand  reduction  programmes  in  Croatia,  aimed  at 
increasing  their  quality  as  well  as  at  identifying  the  better  ones  for  co-financing  and 
registration in the EMCDDA database. Preparations in this area are well advanced. 

No progress can be reported in the field of customs cooperation. Preparations in this area are 
well advanced.  

For the fight against counterfeiting of the euro, see chapter 32 –Financial control. 

Conclusion 

Good progress can be reported in the field of justice, freedom and security, where the overall 
level  of  alignment  with  the  acquis  is  advanced.  On  asylum,  the  legal  framework  was 
strengthened.  Attention  needs  to  be  paid  to  improving  the  integration  of  persons  granted 
protection  in  Croatia,  and  to  the  protection  of  minors  among  irregular  migrants.  Alignment 
with the EU acquis on  visas needs  to continue.  Progress  has  been  made  as  regards  external 

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borders.  Strengthening  of  the  Border  Police  has  continued  with  regard  to  staffing  and 
equipment. Croatia needs  to focus  on the  timely implementation of the revised IBM Action 
Plan. Progress has been made in the field of judicial cooperation in civil and criminal matters. 
Good progress can also be reported in the fight against organised crime and against drugs. 

4.25.  Chapter 25: Science and research 

Further  progress  has  been  made  with  respect  to  research  policy,  where  the  overall  level  of 
alignment is already high. However, further efforts are required in order to increase the level 
of  investment  in  research,  in  particular  by  the  private  sector.  The  conditions  for  enhanced 
cooperation between the private and public sectors need to be further encouraged. 

Croatia  continued  to  participate  actively  in  the  Seventh  EU  Research  Framework 
Programme  (FP7)  with  a  good  level  of  administrative  capacity  and  good  knowledge. 
Participation in the FP7 continues to increase, but the success rate in the Specific Programme 
'People' remains low. The level of collaborative research with EU partners and of research to 
help address global challenges should be further improved. 

As  regards  Croatia's  integration  into  the  European  Research  Area  (ERA),  alignment  with 
the  targets  and  actions  of  the  ERA  has  made  further  progress.  With  respect  to  mobility  of 
researchers, a step forward was made with the adoption of a new Action Plan for Mobility of 
Researchers for 2011–2012, which aims to increase the number of researchers and to ensure 
better  rights  for  researchers  in  line  with  the  recommendations  of  the  European  Charter  for 
Researchers and the Code of Conduct for the recruitment of researchers. The full use of the 
national  EURAXESS  web  portal  also  facilitates  effective  mobility  of  researchers.  Some 
actions  were  also  taken  to  stimulate  innovation  and  prepare  for  the  Innovation  Union. 
However, the level of investment in research and development has stagnated at less than 1% 
(average of 0.91% of GDP over the last five years).  

Conclusion 

Progress in the field of science and research has continued, the level of alignment is high, but 
efforts remain necessary with respect to the key EU research policy objectives related to the 
level of investment in research and to quality researchers and their rights. Preparations for the 
Innovation  Union  should  be  duly  considered  and  the  recommendations  of  the  European 
Charter for Researchers and the Code of Conduct for the recruitment of researchers (Charter 
& Code) further implemented.  

4.26.  Chapter 26: Education and culture 

Good  progress  has  been  made  in  the  field  of  education,  training  and  youth.  Croatia 
continues to participate in the strategic framework for European cooperation in education and 
training,  ET  2020.  As  regards  early  school-leavers  and  upper  secondary  completion  rates, 
Croatia's performance remains above the EU-level benchmarks. However, Croatia continues 
to  perform  below  the  EU  average  for  tertiary  education  attainment  and  participation  in  pre-
school education, and it lags behind as regards the participation of adults in lifelong learning. 
A National Team of Bologna experts has been set up to provide a pool of expertise to promote 
and  enhance  progress  towards  higher  education  reform.  National  secondary  school-leaving 
exams  continue  to  be  carried  out.  Implementation  of  a  learning  outcomes  approach  at  all 
levels of education remains a challenge. Discussions with a broad range of stakeholders have 
started  on  the  implementation  arrangements  for  the  Croatian  Qualifications  Framework 

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(CROQF). The process of referencing the CROQF to the European Qualifications Framework 
is  ongoing.  The  reform  of  vocational  education  and  training  and  adult  education  has 
continued.  

There has been significant progress in the participation of Croatia in EU programmes. Croatia 
has fulfilled the requirements for participation in the Lifelong Learning and Youth in Action 
programmes and became a fully-fledged participant in both programmes as of January 2011. 
The possibility for cooperation with the EU Member States in the field of education therefore 
increased considerably. The Accession Partnership priorities in the field of education, training 
and youth have been met. 

Progress  can  also  be  reported  in  the  field  of  culture.  There  has  been  a  steady  increase  in 
particular in Croatia's participation in the Culture Programme. Also, the total amount of funds 
absorbed  through  the  Europe  for  Citizens  Programme  and  the  number  of  implemented 
projects have increased substantially. 

Conclusion 

Good progress has been made in the areas of education, training, youth and culture. There is a 
good  level  of  alignment  with  the  acquis.  Croatia  has  participated  fully  in  the  Lifelong 
Learning  and  Youth  in  Action  programmes  since  January  2011.  Vocational  education  and 
training and adult education require continuous attention. 

4.27.  Chapter 27: Environment 

As  regards  the  environment,  some  progress  has  been  made  on  horizontal  legislation.  The 
transposition  process  is  almost  completed  in  this  sector.  The  law  on  the  right  to  access  of 
information  has  been  amended.  However,  implementation  of  the  law,  especially  as  regards 
procedures,  remains  insufficient.  The  public  consultation  procedure  was  improved,  but 
insufficient consideration was given to input from the public. Cooperation with the judiciary 
will require further strengthening to enable access to justice in environmental matters. Efforts 
to implement strategic environmental assessments (SEA) need to be increased.  

There  has  been  progress  in  the  field  of  air  quality.  Croatia  has  enacted  implementing 
legislation relating to technical standards for the reduction of emissions of  Volatile Organic 
Compounds from petrol stations.  

Croatia has made progress in waste management. The waste management plan for the period 
2007-2015  has  been  amended  to  improve  financing  and  implementation.  Implementation  of 
activities  aimed  at  remediation  of  existing  landfills  and  the  construction  of  new  waste 
management  centres  are  ongoing.  Sustained  efforts  are  needed  for  the  management  of 
hazardous waste. 

There  has  been  significant  progress  in  the  field  of  water  quality.  Croatia  adopted  a  plan  of 
measures for sudden and unforeseen cases of water pollution. In addition, a set of legislation 
aimed  at  further  improving  the  implementation  of  the  new  Water  Act  and  the  Water 
Management Financing Act has been adopted. The draft river basin management plan is going 
through public consultation.  

There  has  been  some  progress  in  the  field  of  nature  protection  with  the  adoption  of 
implementing legislation on the establishment of the Mura-Drava regional park. Gaps remain 
in  the  administrative  capacity  for  implementing  and  enforcing  the  acquis  in  this  field, 

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especially  in  the  State  Institute  for  Nature  Protection  and  at  local  level.  A  number  of 
implementing legislative acts have been adopted in the forestry sector.  

Some  progress  can  be  reported  in  the  field  of  industrial  pollution  control  and  risk 
management,  in  particular  as  regards  implementing  legislation  on  Large  Combustion  Plants 
and integrated pollution prevention and control installations. There has been good progress in 
the adoption of legislation on chemicals. The administrative capacity at the Ministry of Health 
and Social Welfare requires significant strengthening for the implementation and enforcement 
of the acquis related to chemicals. Cooperation with the industrial sector and other ministries 
also needs strengthening. 

Further progress is needed in order to implement legislation in the field of noise. Noise maps 
for towns are still to be developed. 

Croatia is progressing well in its preparations of civil protection and is part of the European 
Civil Protection Mechanism.  

Croatia continues to have a stable policy framework in place in the field of climate change.  

At the international level, Croatia has put forward a pledge for the post-2012 climate regime 
of a 5 per cent emission reduction by 2020 compared to 1990 levels. In view of the UNFCCC 
Conference to be held in Durban, Croatia in August submitted a letter declaring it withdraws 
its appeal against the decision of the compliance committee. Croatia associated itself regularly 
with the EU positions in international negotiations. Croatia participated actively in the climate 
work under the Regional Environmental Network for Accession (RENA).  

Croatia  continued  to  take  steps  towards  compliance  in  so  far  as  the  EU  Monitoring 
Mechanism is concerned. 

Regarding emissions trading, in October 2010 Croatia amended its implementing legislation 
on emission quotas and the detailed procedures of trading emission units to further align with 
the  acquis.  However,  further  steps  are  needed  to  complete  the  transposition  and 
implementation  of  the  revised  EU  ETS  and  aviation  Directives,  in  particular  in  the  areas  of 
aviation,  free  allocation  and  registries  and  auctioning.  Croatia  continued  to  take  steps  to 
prepare  for  legislative  alignment  and  implementation  of  the  EU  Effort-Sharing  Decision. 
Further capacity building is needed.  

Regarding  fuel  quality,  Croatia  adopted  implementing  legislation  related  to  the  quality  of 
liquid  fuels  in  February  2011.  The  transposition  of  the  implementing  legislation  on  the 
specification of petrol, diesel and gas-oil, and the introduction of a mechanism to monitor and 
reduce greenhouse gas emissions still needs to be completed. 

As  regards  emissions  from  road  transport,  Croatia  needs  to  transpose  and  implement  the 
acquis on emission standards for new cars and vans.  

Croatia continued to prepare for the transposition and implementation of the Directive on the 
geological storage of carbon dioxide.  

Croatia continues to implement the Montreal Protocol, but needs to take the remaining steps 
to align with acquis on ozone-depleting substances and fluorinated gases, by adopting a new 
regulation  on  these  substances.  Croatia  has  associated  itself  with  the  Declaration  adopted  at 

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the 22nd Meeting of the Parties to the Montreal Protocol on the global transition away from 
HCFCs and CFCs.  

Significant  efforts  to  strengthen  Croatia's  administrative  capacity  are  still  needed,  in 
particular in the Ministry of Culture and the Croatian Environment Agency, especially for the 
areas of climate change and nature protection. Substantial efforts have been made to improve 
implementation  and  enforcement  of  legislation.  Coordination  between  ministries  and  bodies 
on environmental protection needs to be further improved.  

Conclusion 

There has been progress in the area of environment. Overall, Croatia's preparations in the field 
of environment are nearing completion with regard to both alignment and implementation of 
legislation,  in  particular  in  the  areas  of  water  quality  and  chemicals.  Implementation  of  the 
horizontal  acquis,  and  in  particular  effective  public  participation  and  access  to  justice  in 
environmental  matters,  need  to  be  improved.  Significant  efforts  are  still  required  to  further 
strengthen administrative capacity, especially as regards nature protection and climate change. 
Regarding  climate  change,  significant  further  efforts  are  still  necessary  to  complete  the 
legislative alignment and to ensure implementation, in particular in the areas of aviation, free 
allocation, registries and auctioning.  

4.28.  Chapter 28: Consumer and health protection 

There  has  been  continuous  progress  in  the  field  of  consumer  protection.  Government 
funding for regional counselling centres has continued. However, the system for out-of-court 
settlement  of  consumer  disputes  is  still  underused:  only  2%  of  cases  are  resolved  through 
mediation,  mostly  because  public  awareness  of  existing  mechanisms  is  still  low.  New 
initiatives from the private sector, such as the creation of the Banking Mediation Centre, are 
encouraging, but the public sphere needs to provide more support.  

The  support  for  the  consumer  movement  needs  to  be  continued  and  consumers'  access  to 
justice further  improved with the aid  of effective implementation of the National Consumer 
Protection Programme.  

Good progress can be reported in the field of product safety-related issues. Legal alignment 
has been completed through the adoption of amendments to the General Product Safety Act, 
the  RAPEX  (Union's  Rapid  Alert  System)  guidelines,  and  also  legislation  implementing 
dangerous imitations acquis and the Commission decisions relating to products containing the 
biocide  dimethylfumarate,  and  child-resistant  and  novelty  lighters.  The  Government's 
reported  level  of  activity  in  terms  of  market  surveillance  action  is  satisfactory,  with  many 
checks carried out on a wide variety of products.  

No  developments  can  be  reported  in  the  area  of  non-safety-related  issues.  The  Consumer 
Credit Act is not yet fully aligned with the acquis.  

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

There  has  been  some  progress  in  the  area  of  tobacco  through  measures  taken  to  promote 
smoke-free environments and prevention of smoking. 

Good progress can be reported in the field of communicable diseases through the adoption of 
a National Generic Integrated Plan for Coordination Action in Public Health Emergencies and 

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the  Programme  for  the  Prevention  of  HIV/AIDS 2011–2015  as  well  as  through  revision  of 
national legislation on the basis of new acquis. 

There  has  been  some  progress  in  the  areas  of  blood,  tissues  and  cells.  An  Institute  for 
Biomedicine  and  Transplantation  has  been  established  inside  the  Ministry  of  Health  and 
Social Welfare as the Competent Authority for blood, organs, tissues and cells. Licensing of 
tissue banks has advanced, and a Plan for Tissue Banking Development has been published. 
However, due to the lack of an approved timeline for the planned reorganisation of the blood 
transfusion services, their quality management is still not ensured within a national framework 
of  standards.  Legislation  transposing  the  blood  acquis,  including  by-laws,  needs  to  be 
reviewed in order to achieve full  alignment with  the acquis, in particular with regard to the 
role  of  the  Competent  Authority.  Hospital-based  procurement  of  blood  needs  a  clear  legal 
demarcation  from  the  hospital  use  of  blood  in  order  to  avoid  conflict  between  principles  of 
product  liability  and  ensure  protection  of  consumer  rights.  An  appropriate  national 
haemovigilance  system  needs  to  be  in  place,  with  clear  lines  of  responsibility  between  the 
central  and  regional  levels.  In  the  area  of  tissues  and  cells,  continued  efforts  are  needed  in 
order to upgrade, restructure and license facilities for handling tissues and cells in accordance 
with the EU technical requirements. As concerns administrative capacity, a fully operational 
National Competent Authority structure still needs to be established. 

Limited  progress  can  be  reported  in  the  field  of  mental  health.  A  Programme  for  the 
Prevention  of  Suicide  among  Children  and  Youth  has  been  adopted.  However,  community-
based  services  remain  insufficiently  developed  as  an  alternative  to  institutionalisation. 
Financial resources allocated to mental health care are still scarce.  

In  the  area  of  cancer  screening,  efforts  have  been  made  to  raise  awareness  of  the  early 
detection  of  cervical  cancer,  but  the  cervical  cancer  screening  programme  has  yet  to  be 
implemented.  Further  efforts  are  also  needed  to  reach  full  implementation  of  breast  and 
colorectal cancer screenings. 

Conclusion 

There has been some progress in the area of consumer and health protection. Alignment with 
the acquis and preparations in the area of consumer protection are well advanced. Sustained 
efforts are necessary in order to further strengthen the administrative capacity to implement 
and  enforce  the  legislation  and  to  address  the  remaining  outstanding  issues  in  the  area  of 
public health.  

4.29.  Chapter 29: Customs Union 

Some progress has been made in the area of customs legislation. The Croatian Customs tariff 
for 2011 has been aligned with the 2011 EU Combined Nomenclature. Further alignment has 
also been achieved with regard to the summary declarations on entry/exit, the registration of 
economic  operators  and  certain  provisions  on  internal  transit.  Overall,  alignment  of  the 
customs rules with the acquis is very high, but some minor discrepancies still remain in the 
quota  allocation  system,  inward/outward  processing  authorisation,  end-use  and  the  internal 
transit arrangements. Croatia should also abolish the fees charged for access to  the customs 
service at cargo terminals where the Customs offices are located. 

Croatia continued to strengthen its administrative and operational capacity. The Customs 
Administration started to implement its new Business Strategy for 2010-2012, and continued 

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to  implement  its  Anti-Corruption  Programme.  The  operational  capacity  has  been  reinforced 
with  the  deployment  of  new  equipment  for  customs  controls.  Further  efforts  are  needed  to 
ensure a sufficient number of qualified personnel for internal controls, mobile teams and post-
clearance controls. The construction of the new customs laboratory premises was completed. 
Work has continued on the upgrade of the automated risk management system. Nevertheless, 
further efforts are needed, by adopting an overall strategy for controls, further developing risk 
management  modules  and  tools,  monitoring  of  the  performance  of  the  risk  system  and 
aligning  its  practice  on  selectivity  to  the  EU.  Croatia  started  to  use  the  New  Computerised 
Transit System (NCTS v4.0) at national level in August 2011. The Common Communication 
Network  and  Common  System  Interface  (CCN/CSI)  has  been  fully  operational  since 
December 2010. The Croatian customs administration still has only limited in-house capacity 
to guarantee the continuity of its IT services and remains dependent on external companies. 
Overall,  in  the  area  of  administrative  and  operational  capacity,  Croatia  has  consistently 
addressed its targets and priorities. 

Conclusion 

Croatia continued to make good progress in the field of customs union. Legislative alignment 
in  this  field  is  very  high  and  further  alignment  was  achieved  during  the  period.  Croatia  has 
continued to reinforce its administrative and operational capacity, upgrading its equipment for 
physical  checks  and  improving  its  risk  analysis  capability.  Preparations  are  also  well 
advanced in the area of IT interconnectivity. Croatia should continue to align its legislation, to 
reinforce its administrative capacity in the areas of internal controls, post-clearance and risk 
management, and to prepare for IT interconnectivity. 

4.30.  Chapter 30: External relations 

Croatia continued to make progress in the field of the common commercial policy. Croatia 
continued  to  cooperate  and  coordinate  with  the  Commission  with  the  aim  of  aligning  itself 
with EU policies and positions towards third countries and within international organisations, 
including the World Trade Organisation (WTO). The amendments to Protocol 4 to the SAA 
which  enable  Croatia  to  join  the  system  of  diagonal  cumulation  of  origin  have  come  into 
force. 

Croatia continued to align to the EU list of dual-use items, to raise awareness of operators to 
the  issue  of  dual-use  goods  and  to  train  Customs  officers  in  this  field.  The  Ministry  of 
Economy, Labour and Entrepreneurship has set up a website providing relevant information 
on dual-use goods. Croatia has reached a very advanced stage of preparations in this area, but 
should  continue  to  reinforce  its  administrative,  control  and  reporting  capacity  for  dual-use 
goods. 

Good  progress  has  been  made  in  bringing  bilateral  trade  and  investment  agreements  with 
third countries into line with the acquis. Croatia continues to actively participate in the work 
of  the  Central  European  Free  Trade  Agreement  (CEFTA).  The  Croatian  Parliament  ratified 
the Additional Protocol to the CEFTA Agreement, enabling further liberalisation of trade in 
agricultural and food products between interested parties. Croatia has intensified its efforts to 
bring bilateral trade, investment and economic cooperation agreements in line with the acquis, 
but further progress is required.  

There  is  further  progress  to  report  on  development  policy  and  humanitarian  aid.  The 
National  Strategy  of  Development  Assistance  for  2011  has  been  adopted  and  is  being 

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implemented.  The  staff  of  the  Department  for  International  Development  Cooperation  has 
been increased to 5 people and is being regularly trained. Efforts to strengthen financial and 
administrative capacity in development policy and humanitarian aid area should continue. The 
alignment of the legal framework in this area is completed. Overall, preparations in this field 
are advanced.  

Conclusion 

Croatia continued to make progress in the field of external relations. Croatia has reached an 
advanced level of alignment in the area of external relations and continues to coordinate and 
align  its  positions  with  those  of  the  EU  in  international  organisations.  However,  Croatia 
should step up its efforts to bring its international agreements into line with the EU acquis and 
continue  strengthening  its  administrative  capacity  in  the  area  of  development  policy  and 
humanitarian aid.  

4.31.  Chapter 31: Foreign, Security and Defence Policy 

The regular political dialogue between the EU and Croatia continued to cover foreign policy 
issues.  (Concerning  relations  with  other  enlargement  countries  and  Member  States,  see 
Political criteria 2.3 – Regional issues and international obligations).  

As  regards  the  common  foreign  and  security  policy  (CFSP),  during  the  reporting  period, 
Croatia aligned itself, when invited, with 66 out of the 67 relevant Council decisions and EU 
declarations  (99  %  alignment).  It  has  continued  to  actively  participate  in  the  Barcelona 
Process  –  Union  for  the  Mediterranean.  Croatia  has  further  developed  its  administrative 
capacity to work within the EU CFSP structures.  

With regard to sanctions and restrictive measures and conflict prevention, Croatia adopted the 
relevant  decisions  to  implement  sanction  regimes  deriving  from  UN  Security  Council 
Resolutions, and has implemented sanctions introduced by the EU. 

As regards non-proliferation, implementation of the National Strategy and Action Plan for the 
Control  of  Small  Arms  and  Light  Weapons  has  continued,  including  public-awareness 
activities  and  measures  to  collect  and  destroy  weapons.  Efforts  to  strengthen  the 
implementation and enforcement capacity are continuing.  

With regard to cooperation with international organisations, Croatia has, as a member of the 
UN, the OSCE, the Council of Europe and NATO, maintained its involvement in the policy-
making  of  these  organisations.  Croatia  continued  to  provide  support  to  a  wide  range  of  UN 
and NATO missions, in particular to the NATO Training Mission to Afghanistan (NTM-A). 
The  Croatian  Parliament  took  a  decision  in  December  2010  to  increase  the  number  of 
members  of  the  armed  forces  engaged  in  Afghanistan  from  320  to  350.  (As  regards  the 
International Criminal Court, see Political criteria 2.3 — Regional issues and international 
obligations.) 

Croatia continued its participation in EU missions to support implementation of the common 
security  and  defence  policy  (CSDP).  It  has  been  participating  in  the  EU  operation 
ATALANTA (Somalia) and contributed actively to the development of the EU battle groups. 
Croatia continued to support EU civilian missions. Croatia is participating in the EU rule of 
law mission (EULEX) in Kosovo and the EUPOL mission in Afghanistan with a total of five 
police officers and one officer dealing with the rule of law.  

EN 

63 

   EN 

 
Conclusion 

Croatia  has  made  further  progress  in  the  field  of foreign  security  and  defence  policy.  It  has 
continued  to  participate  in  several  EU  CSDP  missions.  Overall,  Croatia  has  reached  a  high 
level  of  alignment  in  the  area  of  foreign,  security  and  defence  policy.  Croatia  needs  to 
continue  strengthening  implementation  and  enforcement  of  arms  control,  including  the 
transparency of arms-related information. 

4.32.  Chapter 32: Financial control 

Further progress has been made in the area of implementation of the legal framework related 
to  public  internal  financial  control  (PIFC)  and  the  PIFC  Development  Strategy  (2009-
2011). An Action plan for further development of a financial management and control system 
adopted  by  the  Government  in  December  2010  provides  for  improved  managerial 
accountability  and  a  better  definition  of  the  role  of  the  financial  units.  The  Fiscal 
Responsibility  Act  entered  into  force  in  January  2011  and  aims  to  strengthen  the  overall 
financial  management  and  control  system  in  Croatia.  A  revised  Internal  Audit  Manual  was 
adopted in November 2010, together with the Instruction on continuous professional training 
for  internal  auditors  in  the  public  sector.  The  number  of  internal  auditors  has  increased  and 
the  Central  Harmonisation  Unit  (CHU)  has  organised  regular  training  sessions  for  financial 
controllers  and  internal  auditors,  but  their  professional  skills  need  to  be  further  enhanced 
through practical experience and continuous training.  

Some progress can be reported in the field of external audit. The State Audit Office (SAO) 
continued  to  implement  its  Strategic  Plan  (2008-2012).  A  new  Auditor  General  has  been 
appointed  by  the  Parliament.  The  reporting  of  the  SAO  has  continued  to  improve,  as  the 
SAO's  budget  execution  report  was  submitted  to  the  Parliament  prior  to  the  discharge 
procedure. In addition, there has been a gradual shift from transaction-based to system-based 
audits.  However,  further  efforts  are  needed  in  order  to  develop  the  capacities  of  SAO  in 
executing performance audits efficiently. Co-ordination between the SAO and the Ministry of 
Finance (Central Harmonisation Unit) needs to be strengthened so as to establish a common 
approach to audit practice. A revised law on SAO was adopted by the Croatian Parliament in 
July 2011. While the new law is a noticeable progress towards full INTOSAI compliance, it 
does  not  address  quality  control  on  the  SAO's  performance.  Its  upcoming  strategic 
programme should contain adequate provisions to ensure the necessary internal and external 
assessments. 

Progress  has  been  achieved  in  the  area  of  protection  of  the  EU  financial  interests.  The 
Department for Combating Irregularities and Fraud at the Ministry of Finance together with 
other  bodies  and  institutions  from  the  Anti-Fraud  Coordination  Structure  (AFCOS)  system 
continued  to  implement  the  National  Anti-fraud  Strategy  and  its  Action  Plan.  To  ensure 
sustainability  of  reforms,  the  Department  for  Combating  Irregularities  and  Fraud  at  the 
Ministry of Finance needs to improve its ability to play a leading role in the co-ordination of 
the overall process of fraud prevention, detention, reporting and follow-up. Further efforts are 
required  in  enhancing  the  quality  of  reporting  of  irregularities  and  providing  continuous 
training on anti-fraud issues at all levels of the public administration.  

Some progress can be reported in the field of protection of the euro against counterfeiting. 
The  Croatian  National  Bank  (CNB)  continued  to  analyse  suspicious  banknotes  and  coins 
received from the public bodies and private sources. The CNB submitted monthly reports on 
counterfeit  euro  banknotes  to  the  European  Central  Bank.  With  respect  to  euro  coins,  a 

EN 

64 

   EN 

 
cooperation  agreement  between  OLAF  and  CNB  continued  to  function.  Further  efforts  are 
needed in order to improve the co-ordination between the CNB and the Ministry of Interior. 
Training has to be provided on a more regular basis in order to improve the professional skills 
of Croatian experts at central and local level in detecting and reporting efficiently on cases of 
counterfeiting.  

Conclusion 

Croatia  has  made  further  progress  in  the  field  of  financial  control.  Croatia  has  reached  an 
advanced level of alignment in the area of financial control. Continuous efforts are needed in 
order to improve the overall functioning of the PIFC and external audit in Croatia at central 
and local level.  

4.33.  Chapter 33: Financial and budgetary provisions 

The system of the traditional own resources (TOR) has been further improved through the 
upgrading and continuous  testing  of  the existing  IT application, including  the production of 
automatic  reports.  A  training  plan  and  a  manual  on  TOR  have  been  drawn  up  for  relevant 
staff.  Country-wide  application  of  the  TOR  accounting  module  is  expected  by  mid  2012. 
Instructions on the implementation of procedures for the write-off of TOR are currently being 
updated. However, post-clearance audit requires further strengthening, including the training 
of skilled auditors. Effective instruments for combating customs duty and VAT fraud have to 
be applied in order to protect the financial interests of the EU.  

As  regards  sugar  levies,  various  guidance  manuals  have  been  developed,  but  the  control 
mechanism for sugar levies has to be set up and staff have been trained.  

Some  progress  was  made  with  regard  to  the  VAT-based  own  resources.  However, 
administrative capacity has to be further developed in order to calculate the weighted average 
rate  efficiently.  The  negotiations  on  the  Agreement  implementing  the  Protocol  on  the 
Privileges and Immunities of the EU have progressed and need to be finalised. 

Further progress has been made with regard to the GNI resource, including the compiling of 
better quality national accounts and GNI calculations.  

infrastructure, 

As  regards  administrative 
the  Department  for  Co-ordination  and 
Management of EU Own Resources at the Ministry of Finance (Co-ordination Department) is 
gradually building up its administrative capacity to coordinate efficiently the overall system 
of own resources after accession, including through elaboration of an own resources manual 
and improved links between the various key institutions involved. However, sustained efforts 
are needed in order to further enhance its capacity so as to ensure the correct application of 
the EU financing rules on accession.  

Conclusion 

Good progress can be reported in the field of financial and budgetary provisions. Institutional 
capacity  has  been  further  developed,  and  improvements  have  been  made  with  the  A  and  B 
accounts.  Overall,  there  is  a  good  level  of  alignment  and  administrative  capacity  for 
implementing  the  acquis.  The  co-ordination  department  needs  to  continue  to  build  up  its 
capacity  to  coordinate  the  overall  system  of  own  resources  efficiently  after  accession. 
Capacity building on sugar levies also needs to be stepped up. 

EN 

65 

   EN 

 
Statistical Annex 

STATISTICAL DATA (as of 30.09.2011) 
Croatia 

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

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous 
year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 
Agriculture and fisheries 
Industry 
Construction 
Services 
Final consumption expenditure, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2005=100) 

Inflation rate 
Annual average inflation rate (HICP, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 
of which government transfers (million euro) 

Note

1) 

2000 
2001 
4 498s  4 439s 
56 542  56 542 

2002 
2003 
4 443 
4 445 
56 542  56 594b

2004 
4 442 
56 594 

2005 
4 444 
56 594 

2006 
4 443 
56 594 

2007 
4 441 
56 594 

2008 
4 436 
56 594 

2009 
4 435 
56 594 

2010 
4 426 
56 594 

Note

2003 

2002 

2001 

2000 

2007 
2)  178 118 192 289  208 796 228 932 247 428 266 652 291 044 318 308
43 390 
2) 
9 781 
2) 
15 200 
61 

23 333  25 738 
5 797 
5 272 
10 000 
9 500 
51 
50 

36 034 
33 009 
7 436 
8 112 
12 200  12 800b

39 745 
8 951 
13 700 
58 

30 265 
6 816 
11 300 
55 

28 189 
6 349 
10 700 
52 

2004 

2005 

2006 

57b 

56 

2010 

2008 

2009 
345 015  335 189  334 564 
45 917 
45 669 
47 765 
10 367 
10 311 
10 771 
15 000 
15 100 
15 900 
61 
64 
64 

2) 
2) 
2) 
2) 

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

Note

Note

Note

3.8 
-0.5 
-2.3 
2.4 
61.3e 

6.5 
23.4 
5.1 
65.0 
84.2 
19.0 
0.1 
41.7 
45.0 

2000 
80.7 

2000 
4.5 

3.7 
0.5 
10.1 
-1.6 
66.5e 

6.5 
22.8 
5.6 
65.2 
82.4 
19.5 
2.0 
43.4 
47.4 

2001 
85.5 

2001 
4.3 

4.9 
0.8 
1.9 
8.2 
66.6e 

6.4 
22.0 
5.7 
65.9 
83.1 
21.4 
3.9 
40.9 
49.3 

2002 
89.7 

2002 
2.5 

5.4 
3.9 
4.2 
4.2 
68.6e 

5.2 
21.4 
6.8 
66.6 
80.6 
25.0 
2.2 
42.6 
50.4 

2003 
92.7 

2003 
2.4 

4.1 
1.5 
1.2 
2.5 
69.5e 

5.6 
21.8 
7.3 
65.3 
79.7 
24.8 
2.0 
42.9 
49.3 

2004 
95.6 

2004 
2.2 

4.3 
0.7 
4.9 
2.7 
70.4e 

5.0 
21.0 
7.6 
66.4 
79.2 
24.7 
2.6 
42.3 
48.7 

4.9 
3.9 
4.0 
0.2 
73.8e 

5.2 
20.4 
7.7 
66.7 
77.6 
26.0 
3.4 
42.7 
49.8 

5.1 
3.5 
3.2 
3.2 
75.7e 

4.9 
19.8 
7.7 
67.6 
78.2 
26.2 
3.2 
42.1 
49.8 

2.2 
1.1 
0.8 
3.2 
76.6e 

5.2 
19.5 
8.3 
66.9 
77.6 
27.7 
3.0 
41.7 
49.9 

-6.0 
-1.8 
-4.2 
-1.3 
: 

5.4 
18.4 
8.0 
68.2 
76.9 
24.9 
2.2 
35.4 
39.4 

2005 
100.0 

2006 
104.1 

2007 
109.3 

2008 
110.6 

2009 
100.4 

2005 
3.0 

2006 
3.3 

2007 
2.7 

2008 
5.8 

2009 
2.4 

2000 
-531 
-3 492 
2 508 
-505 
959 
25 

2001 
-776 
-4 595 
3 348 
-628 
1 099 
65 

2002 
-2 030 
-5 958 
3 337 
-561 
1 152 
32 

2003 
-1 818 
-6 971 
4 988 
-1 080 
1 245 
71 

2004 
-1 357 
-6 724 
4 831 
-656 
1 192 
3 

2005 
-1 896 
-7 518 
5 382 
-943 
1 184 
10 

2006 
-2 636 
-8 344 
5 776 
-1 175 
1 107 
-9 

2007 
-3 119 
-9 434 
6 367 
-1 094 
1 043 
-17 

2008 
-4 217 
-10 794 
7 075 
-1 568 
1 071 
-20 

2009 
-2 368 
-7 387 
5 770 
-1 787 
1 036 
-30 

-1.2 
-5.3 
2.9 
4.1 
: 

5.5 
19.0 
6.7 
68.8 
77.1 
21.6 
1.8 
38.3 
38.8 

2010 
99.0 

2010 
1.1 

2010 
-503 
-5 945 
5 887 
-1 523 
1 079 
-42 

EN 

66 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 
of which FDI of the reporting economy in EU-27 countries (million euro) 
Foreign direct investment (FDI) in the reporting economy (million euro) 
of which FDI of EU-27 countries in the reporting economy (million euro) 

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

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

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

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

1 136 
5 
-15 
1 141 
916 

2000 
: 
34.3 

2000 
52.6 
130.2 
2 373 
: 
: 
9 483 
6.9 
20.6 
8.2 
7.634 
100.0 
3 783 

2000 
: 
: 
: 
98.3 
: 
: 

2000 
-1.5 
7.4 
: 
: 

1 258 
210 
152 
1 467 
1 344 

2001 
: 
35.2 

2001 
52.9 
125.9 
3 216 
: 
: 
11 891 
3.0 
19.5 
6.6 
7.471 
97.6 
5 334 

2001 
: 
: 
: 
94.4 
: 
: 

2001 
-1.9 
7.7 
: 
: 

Note

Note
4) 
4) 

Note

5) 

Note

531 
607 
72 
1 138 
1 063 

2002 
-4.1 
34.8 

2002 
53.7 
136.1 
4 148 
: 
: 
15 119 
1.3 
16.5 
5.4 
7.407 
96.2 
5 651 

1 657 
106 
7 
1 762 
1 498 

2003 
-4.5 
35.4 

2003 
65.7 
151.3 
4 432 
: 
: 
16 526 
4.3 
15.0 
3.8 
7.564 
95.3 
6 554 

671 
279 
14 
950 
919 

2004 
-4.3 
37.6 

2004 
69.5 
161.0 
4 505 
: 
: 
18 417 
5.9 
14.4 
3.8 
7.496 
93.5 
6 436 

1 276 
192 
66 
1 468 
1 439 

2005 
-4.0 
38.2 

2005 
71.5 
168.7 
5 263 
: 
: 
22 836 
3.4 
13.1 
3.9 
7.400 
92.6 
7 438 

2 562 
207 
-37 
2 768 
3 500 

2006 
-3.0 
35.4 

2006 
73.7 
172.3 
6 606 
: 
: 
27 274 
2.4 
12.1 
4.0 
7.323 
91.4 
8 725 

3 468 
211 
563 
3 679 
3 687 

2007 
-2.5 
32.9 

2007 
75.9 
179.9 
7 901 
: 
: 
30 863 
5.6 
12.1 
4.2 
7.336 
90.8 
9 307 

3 243 
973 
738 
4 216 
3 242 

2008 
-1.4p 
29.2 

2008 
83.6 
200.7 
7 539 
: 
: 
34 756 
6.6 
12.2 
4.8 
7.223 
89.0 
9 121 

1 190 
875 
530 
2 065 
1 998 

2009 
-4.1p 
35.2 

2009 
97.7 
276.1 
6 458 
: 
: 
34 700 
7.8 
12.6 
5.3 
7.340 
90.0 
10 376 

112 
-115 
-249 
227 
315 

2010 
-4.9p 
41.2 

2010 
102.6 
260.2 
6 655 
: 
: 
36 912 
1.1 
12.7 
4.2 
7.286 
90.9 
10 660 

2005 

2004 

2003 

2002 

2006 
11 327.0 10 378.6 13 354.4 14 949.5 17 104.7 18 691.8 19 021.7  15 144.1  15 076.0 
7 458.5  8 685.9 
5 188.2  5 119.1  6 453.8  7 069.4  8 251.6  9 004.1 
-6 390.1 
-6 138.9 -5 259.4 -6 900.5 -7 880.1 -8 853.1 -9 687.6 -10 056.6  -7 685.6 
100.9 
61.7 
60.3 

109.3b 
65.8 
71.0 

100.2 
64.3 
67.2 

109.2 
60.8 
62.6 

97.8 
66.1 
71.9 

97.5 
71.4 
68.7 

92.6 
63.3 
67.9 

97.5 
60.3 
64.5 

96.1 
63.2 
62.3 

8 965.1 

2007 

2008 

2009 

2010 

2002 
-2.4 
7.0 
71.2 
78.3 

2003 
-2.9 
6.3 
71.1 
78.1 

2004 
-2.1 
6.1 
71.9 
78.8 

2005 
-2.1 
5.7 
71.8 
78.8 

2006 
-2.0 
5.2 
72.5 
79.3 

2007 
-2.4 
5.6 
72.3 
79.3 

2008 
-1.9 
4.5 
72.4 
79.7 

2009 
-1.8 
5.3 
73.0 
79.7 

2010 
-2.0 
4.4 
: 
: 

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

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

6) 
6) 
6) 
6) 

62.2 
51.3 
57.4 
45.5 

62.2 
51.8 
59.0 
44.9 

62.9 
53.4 
60.5 
46.7 

62.4 
53.4 
60.3 
46.7 

63.7 
54.7 
61.8 
47.8 

63.3 
55.0 
61.7 
48.6 

62.6 
55.6 
62.0 
49.4 

63.2b 
57.1b 
64.4b 
50.0b 

63.2 
57.8 
65.0 
50.7 

62.4 
56.6 
62.4 
51.0 

61.5 
54.1 
59.4 
48.9 

EN 

67 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment rate of older workers (55-64): share of population aged 55-64 in employment 
(%) 
Employment by main sectors (%) 
Agriculture 
Industry 
Construction 
Services 
Unemployment rate: share of labour force that is unemployed (%) 
Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 
Unemployment rate of persons < 25 years: share of labour force aged <25 that is 
unemployed (%) 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and 
more (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the 
CPI/HICP) (2000=100) 
* Early school leavers - Share of population aged 18-24 with at most lower secondary 
education and not in further education or training (%) 

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

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

Innovation and research 
Spending on human resources (public expenditure on education in % of GDP) 
* Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Environment 
* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

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

6) 

24.2 

23.7 

24.8 

28.4 

30.1 

32.6 

34.3 

35.8b 

36.7 

38.5 

37.6 

: 
: 
: 
: 
17.0 
15.9 
18.2 

: 
: 
: 
: 
16.3 
14.4 
18.7 

: 
: 
: 
: 
14.7 
13.2 
16.5 

: 
: 
: 
: 
14.1 
12.8 
15.6 

: 
: 
: 
: 
13.6 
12.0 
15.6 

: 
: 
: 
: 
12.6 
11.6 
13.8 

: 
: 
: 
: 
11.1 
9.8 
12.7 

: 
: 
: 
: 
9.6b 
8.4b 
11.2b 

: 
: 
: 
: 
8.4 
7.0 
10.1 

13.9 
20.1 
8.8 
57.2 
9.1 
8.0 
10.3 

14.9 
19.8 
7.5 
57.8 
11.8 
11.4 
12.2 

43.1 

41.7 

34.4 

35.8 

33.8 

32.0 

28.8 

24.0b 

22.0 

25.1 

34.4 

9.1 

10.1 

8.9 

8.4 

7.3 

7.4 

6.7 

5.9b 

5.3 

5.2 

6.8 

6) 
6) 
6) 

7) 

8) 

Note
9) 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

4 869.0 5 061.0  5 366.0  5 623.0  5 985.0b 6 248.0  6 634.0  7 047.0 

2008 
7 544.0 

2009 

2010 

7 711.0  7 782.0 

10) 

100.0 

99.2 

103.2 

106.1 

112.2b 

113.4 

116.6 

120.4 

121.5 

121.3 

121.2 

11) 

: 

: 

8.3 

8.4 

6.2 

4.8 

5.1 

4.9b 

5.3 

5.4 

4.9 

Note

Note

Note

Note

Note

12) 

2000 
250.1 
247.3 

2001 
269.3 
389.9 

2002 
279.9 
526.4 

2003 
291.1 
571.1 

2004 
301.1 
638.4 

2005 
311.6 
821.3 

2006 
323.2 
989.3 

2007 
335.7 
1 133.6 

2008 
346.1 
1 325.4 

2010 
2009 
345.5 
342.4 
1 360.8  1 437.5 

2000 
48.2 
0.4 

2000 
4.5 
1.1 
: 

2000 
82.8 
286.0 
40.0 
: 

2000 
3 562 
1 328 
0 

2001 
48.2 
0.4 

2001 
4.2 
0.9 
: 

2001 
86.7 
280.3 
42.7 
75.9 

2001 
3 730 
1 232 
0 

2002 
48.2 
0.5 

2002 
4.3 
1.0 
: 

2002 
89.9 
288.1 
33.9 
76.4 

2002 
3 689 
1 200 
0 

2003 
48.2 
0.6 

2003 
4.5 
1.0 
: 

2003 
95.1 
281.0 
29.4 
76.1 

2003 
3 727 
1 138 
0 

2004 
48.2 
0.7 

2004 
: 
1.1 
: 

2004 
95.1 
269.9 
41.0 
76.7 

2004 
3 852 
1 079 
0 

2005 
48.2 
0.8 

2005 
: 
0.9 
: 

2005 
96.3 
260.8 
40.4 
75.9 

2005 
3 781 
1 017 
0 

2006 
48.1 
0.9 

2006 
: 
0.8 
: 

2006 
97.5 
250.4 
36.1 
74.8 

2006 
4 128 
985 
0 

2007 
48.1 
1.0 

2007 
: 
0.8 
41.0 

2007 
102.4 
247.3 
25.4 
74.0 

2007 
4 037 
937 
0 

2008 
48.1 
1.0 

2008 
: 
0.9 
45.0 

2008 
98.5 
235.4 
30.3 
76.5 

2008 
3 964 
875 
0 

2009 
48.1 
1.1 

2009 
: 
0.8 
50.0 

2009 
91.8 
238.8 
42.4 
77.7 

2009 
4 057 
821 
0 

2010 
48.1 
1.1 

2010 
: 
: 
57.0 

2010 
: 
: 
: 
76.7 

2010 
: 
: 
: 

EN 

68 

EN 

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

1 355 
4 174 
7 819 
10.7 

1 642 
4 166 
7 959 
12.2 

1 732 
4 967 
8 624 
12.3 

1 789 
4 985 
8 828 
12.7 

1 796 
5 090 
8 842 
13.3 

1 854 
5 234 
8 902 
13.1 

2 204 
4 866 
8 948 
13.0 

2 349 
5 315 
9 323 
12.4 

2 217 
5 491 
9 122 
12.6 

2 197 
4 465 
8 721 
13.2 

: 
: 
: 
: 

2010 

91.8 

1 335p 
444 
1 231 
705 
809 
3 007p 
1 249p 
246p 

Note

97.3 

91.4 

88.7 

2009 

2008 

2007 

2006 

2005 

2004 

2003 

2002 

2001 

2000 

100.1 

108.5 

104.2 

104.7 

106.9 

107.9 

107.4 

13) 
14) 
15) 
15) 
15) 

1 196 
444 
1 347 
673 
686 
2 014 
678 
154 

1 178 
438 
1 234 
632 
674 
2 829 
965 
208 

1 169 
427 
1 234 
608 
626 
2 312 
482 
196 

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

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

1 300 
447 
1 250 
695 
843 
3 442 
1 217 
337 

1 288 
454 
1 104 
727 
848 
3 726 
1 270 
308 

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

1 211b 
471 
1 205 
931 
813 
3 039 
1 338 
286 

1 230 
483b 
1 488b 
783b 
870 
3 034 
1 560 
304 

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous 
year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 
: = not available 
p = provisional 
e = estimated value 
b = break in series 
s = Eurostat estimate 
* = Europe 2020 indicator 
The  balance  of  payments  sign  conventions  are  used  for  FDI.  For  FDI  abroad  a  minus  sign  means  investment  abroad  by  the  reporting  economy  exceeded  its  disinvestment  in  the  period,  while  an  entry 
without sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, while a minus 
sign indicates that disinvestment exceeded investment. 
Footnotes: 
1) 
2) 
3) 
4) 

Land area; break in series due to improved methodology. 
For the period from 2008 until 2010 data are calculated on the basis of the sum of quarterly values. 
Data are provided according to NACE Rev 1.1 
2000–2007, gross foreign debt of the whole economy excluding Special Purpose Entities; 2008, gross foreign debt of the whole economy excluding Special Purpose Entities (in December 2008 
round-tripping transaction related to SPE amounted to 825.7 million euro and in August 2009 round-tripping transaction related to SPE amounted to 666.5 million euro). 
Calculated on the basis of exports and import values expressed in USD; break in series in 2004, change in methodology as of 1 January 2004.  
Data used until 2006 refer to half-year periods (second half of the year) and from 2007 onwards data refer to annual average of quarterly data. 
2000-2001, second half of the year; data used until 2006 refer to half-year periods (second half of the year) and from 2007 onwards data refer to annual average of quarterly data. 
2000-2001, long-term unemployment refers to thirteen months or more; data used until 2006 refer to half-year periods (second half of the year) and from 2007 onwards data refer to annual 
average of quarterly data. 
2000-2003, Persons employed in crafts, trades and as freelancers, as well as in the police and defence-related activities are excluded; from 2004 onwards the number of persons employed in the 
police and defence-related activities are included. 
2000-2003, 2005-2010, persons employed in crafts, trades and as freelancers, as well as in the police and defence-related activities are excluded; from 2004 onwards the number of persons 
employed in the police and defence-related activities are included. 
Data used until 2006 refer to half-year periods (second half of the year) and from 2007 onwards data refer to annual average of quarterly data. 
Croatia closed all coal mines in 1999 and 2000 and therefore, there is no production of coal starting with 2000. 
Volume indices of agricultural production have been calculated on the basis of production data for 65 agricultural products since 1977; the moving average of producer's prices in the last three 
years has been taken as a weighting factor for the calculation of the index. 
Break in series in 2005, up to 2005, data on land areas, number of fruit trees, grapevines, production and home processing by individual family farms were obtained by the estimation method; 
since 2005, data are obtained by using the interview method done by interviewers on a selected sample; data for 2000-2004 are recalculated. 
2000 – 2005, data as on 31 December for legal entities and 15 January for private family farms; from 2006 onwards, data as on 1 December for both legal entities and private family farms. 

69 

EN 

5) 
6) 
7) 
8) 

9) 

10) 

11) 
12) 
13) 

14) 

15) 

EN