Source: EURLEX
Language: en
Format: md

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# 52012SC0338

**COMMISSION STAFF WORKING DOCUMENT COMPREHENSIVE MONITORING REPORT ON CROATIA accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Comprehensive Monitoring Report on Croatia’s state of preparedness for EU membership /\* SWD/2012/0338 final \*/**

  

TABLE OF CONTENTS

1........... Introduction. 4

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

3........... Economic criteria. 10

3.1........ The existence of a
functioning market economy. 10

3.2........ Capacity to cope with
competitive pressure and market forces within the Union. 12

4........... Commitments and
requirements arising from the accession negotiations. 13

4.1........ Chapter 1: Free movement
of goods. 14

4.2........ Chapter 2: Freedom of
movement for workers. 15

4.3........ Chapter 3: Right of
establishment and freedom to provide services. 15

4.4........ Chapter 4: Free movement
of capital 16

4.5........ Chapter 5: Public
procurement 17

4.6........ Chapter 6: Company law.. 18

4.7........ Chapter 7: Intellectual
property law.. 19

4.8........ Chapter 8: Competition
policy. 19

4.9........ Chapter 9: Financial
services. 20

4.10...... Chapter 10: Information
society and media. 21

4.11...... Chapter 11: Agriculture and
rural development 22

4.12...... Chapter 12: Food safety,
veterinary and phytosanitary policy. 23

4.13...... Chapter 13: Fisheries. 24

4.14...... Chapter 14: Transport
policy. 25

4.15...... Chapter 15: Energy. 26

4.16...... Chapter 16: Taxation. 27

4.17...... Chapter 17: Economic and
monetary policy. 28

4.18...... Chapter 18: Statistics. 28

4.19...... Chapter 19: Social policy
and employment 29

4.20...... Chapter 20: Enterprise and
industrial policy. 30

4.21...... Chapter 21: Trans-European
networks. 31

4.22...... Chapter 22: Regional policy
and coordination of structural instruments. 31

4.23...... Chapter 23: Judiciary and
fundamental rights. 32

4.24...... Chapter 24: Justice,
freedom and security. 37

4.25...... Chapter 25: Science and
research. 41

4.26...... Chapter 26: Education and
culture. 42

4.27...... Chapter 27: Environment and
climate change. 43

4.28...... Chapter 28: Consumer and
health protection. 45

4.29...... Chapter 29: Customs union. 46

4.30...... Chapter 30: External
relations. 47

4.31...... Chapter 31: Foreign,
security and defence policy. 47

4.32...... Chapter 32: Financial
control 48

4.33...... Chapter 33: Financial and
budgetary provisions. 49

1.
Introduction

Accession negotiations with Croatia were
closed in June 2011. After the Commission’s favourable opinion, the European
Parliament’s assent and the Council decision on the admission of Croatia, the
Accession Treaty was signed on 9 December 2011. Croatia will become a Member of
the European Union on 1 July 2013, subject to the Accession Treaty being
ratified by all Member States. As an acceding country, Croatia has active
observer status during the interim period before accession.

In the course of the negotiations, Croatia
has agreed to a number of commitments, which have to be implemented by the date
of accession, at the latest, unless specific transitional arrangements have
been agreed.

Article 36 of the Act of Accession requires
the Commission to closely monitor all commitments undertaken by Croatia in the
accession negotiations, focusing in particular on competition policy, judiciary
and fundamental rights, and freedom, security and justice. Moreover, as an
integral part of its regular monitoring tables and reports the Commission is to
issue six-monthly assessments up to accession on the implementation of
Croatia’s commitments in these areas. The Commission adopted a Monitoring
Report on Croatia’s accession preparations in April 2012[1] and Croatia developed an action
plan to follow up on its recommendations. The Act further provides for the
Commission to present a Comprehensive Monitoring Report to the European
Parliament and the Council in autumn 2012.

In line with Article 36 of the Act of
Accession, this Comprehensive Monitoring Report assesses the progress made by
Croatia in its preparations for accession in the period October 2011 to
September 2012, provides an overall assessment of the level of preparedness for
membership and highlights the areas in which further efforts are necessary in
order for Croatia to be ready for membership on 1 July 2013.

Furthermore, Article 36 of the Act of
Accession provides that if issues of concern are identified during the
monitoring process and not remedied by Croatia, the Commission will, if
necessary, address early warning letters to the Croatian authorities and may
propose to the Council that all appropriate measures be taken even before
accession. In addition, as in the previous enlargement, the Act of Accession
contains a general economic safeguard clause, an internal market safeguard
clause and a safeguard clause on justice, freedom and security.

The report contains three main parts:

–
The first part briefly describes the situation
with regard to compliance with the political criteria.

–
The second part describes the situation with
regard to compliance with the economic criteria.

–
The third part gives an overview of where
Croatia stands in terms of fulfilling all of the commitments and requirements arising
from the accession negotiations for each acquis chapter, both in terms
of legislation and implementation, as well as the overall level of preparedness
for each acquis chapter.

This assessment is based on information
gathered and analysed by the Commission, including input provided by Croatia,
and information shared by Member States and international and civil society
organisations in their regular contacts with the Commission. The assessment is
also based on the Commission’s findings in its updated Monitoring Tables, a
working tool aimed at following up in detail on all of Croatia’s commitments in
the context of the negotiations.

Through this report, the Commission also
aims to assist Croatia in its further preparations for membership.

In this context,
Croatia must ensure that the EU acquis is translated into Croatian. Of
the nearly 144 000 pages of acquis, Croatia has already translated about
114 000 pages. However, about 50% of these already translated pages have still
to be revised by the national authorities before they can be submitted to the
EU institutions.

Croatia should
further increase its capacity to ensure the completion of the translation and
revision of the acquis in time for accession. The Commission calls on
the Croatian authorities to maintain focus on this issue, which is essential in
order to ensure legal certainty in the implementation of EU legislation. With regard to financial assistance, the
2012 Instrument for Pre-accession Assistance (IPA) programmes totalled € 156
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 that the decentralised implementation system under the IPA
functions satisfactorily, although some delays were encountered in
implementation. The Court of Auditors issued a report on EU pre-accession
assistance in Croatia in February 2012. The findings of the Court will be
followed up by the Commission and addressed in bi-annual reports by Croatia.
Croatia has submitted to the Commission its request to waive ex ante controls
by the date of accession, in accordance with the provisions in the Accession
Treaty. A transition facility has been agreed for the first year following
accession to strengthen judicial and administrative capacity.

The Commission has drawn conclusions
regarding Croatia in its separate Communication on Croatia’s state of
preparedness for EU membership[2],
based on the technical analysis contained in this report.

2.
Political criteria

This section examines Croatia’s compliance
with 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).

Issues relating to the judiciary,
corruption and human rights are dealt with in more detail under Chapter 23 –
Judiciary and fundamental rights, which also addresses cooperation with the
International Criminal Tribunal for the former Yugoslavia (ICTY) and war
crimes.

Parliament
/ Election issues

Parliamentary elections were held in
December 2011 and a new government appointed thereafter. Elections took place
in a pluralistic environment and were administered in an efficient and
transparent manner. However, improvements are necessary with regard to
maintenance of the voters’ list and work has been initiated in this respect.
This needs to be addressed as a matter of urgency, with a view to local
elections and the election of Croatia’s members to the European Parliament
scheduled for spring 2013.

Public
administration

The implementation of the State
Administration Reform Strategy (2008-2011) has been finalised. No follow
up strategy has been developed. The Civil Service Human Resources Development
Strategy (2010-2013) is being implemented. Amendments
to the Civil Service Act entered into force, providing for increased mobility
among civil servants. The process of harmonising the
relevant sectoral legislation with the General Administrative Procedures Act
has continued and almost reached completion. The legal framework on salaries,
necessary to ensure merit-based promotion and reward mechanisms and to attract
and retain qualified personnel, still remains to be finalised.

The administrative capacity to implement
and monitor public administration reform requires further attention, in
particular at local level. Further efforts are needed with regard to training
staff of the Ministry of Public Administration and other line ministries, in
particular with a view to their role in the future management of the Structural
Funds. The State School for Public Administration needs to be further
strengthened. Increased efforts are required to strengthen administrative
capacity for the future implementation of cohesion policy and to develop a
mature project pipeline.

Further efforts are needed to improve the
professionalism of the public service. Efficient implementation of the relevant
legal framework is necessary in order to continue building a modern, reliable,
transparent and citizen-oriented public administration. In view of the recent
substantial restructuring of the public administration, and taking into account
the additional responsibilities of EU membership, Croatia should address
without delay the administrative capacity constraints identified in this
Comprehensive Monitoring Report and ensure that the completion of preparations
for EU membership is not affected.

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

Implementation of the judicial reform
strategy and action plan has continued, along with efforts to strengthen the
independence, accountability, impartiality and professionalism of the
judiciary. The reformed State Judicial Council (SJC) and State Prosecutorial
Council (SPC) have continued to function independently. Both bodies have
continued to appoint judicial officials based on transparent, uniform and
objective criteria. Efforts are needed to improve their functioning especially
in order for them to carry out their increased tasks. Improvements are needed
in the procedures leading to the selection and assignment of new judges and
prosecutors. Croatia has continued to implement various measures aiming at
improving the efficiency of the judiciary. While the backlog of old criminal
cases continues to fall, the number of old civil cases has increased over the
last 18 months. This general trend of increase of unresolved cases, mainly
civil, commercial, misdemeanours and enforcement cases is a matter of concern.
The merger of courts as part of the court rationalisation process is
continuing, as is the functional rationalisation of the state prosecutor’s
offices. The revised enforcement system needs to be adopted and implemented in
order to lead to further concrete results.

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

An adequate
legal and institutional framework remains in place and a track record of
implementation continues to be developed. Law enforcement bodies remain
proactive, especially on higher-level cases. Local-level corruption needs
attention, particularly in public procurement. Croatia has improved its track
record of strengthened prevention measures by means of a number of legal
instruments. However, Croatia has not fully implemented the conflict of
interest legislation and has overturned the previous provisions on the criteria
for membership of supervisory and management boards of public companies. Some
initial steps have been taken for the setting up of the Conflict of Interest
Commission, with the publication of the request for expression of interests for
the selection of the Commission’s members. The Commission needs to be
established and start operating without delay. The scope and implementation of
access to information legislation requires attention. As regards the financing
of political parties and election campaigns, the State Electoral Commission,
the supervisory body, was strengthened and the new rules from 2011 were applied
without major difficulties, with only a few shortcomings identified.

Human
rights and the protection of minorities (See
also Chapter 23 – Judiciary and fundamental rights)

Human rights continue to be generally well
respected. The general Ombudsman and specialised ombudspersons continue to play
an important role in human rights protection. However, there has been no proper
follow-up of the Ombudsman’s recommendations. The gay pride events in Split and
Zagreb took place without major incidents, with strong commitment from the
Croatian government to their smooth organisation. Lesbians, gays, bisexual and
trans-gender (LGBT) people still face discrimination and even threats and
attacks.

Protection of minorities has continued to
improve, through the continued implementation of measures including the
Constitutional Act on the Rights of National Minorities. However, the minority
employment in the state administration and judiciary remains below the level
required by the act. In line with the Constitution, eight representatives of
national minorities were elected in the parliamentary elections of December
2011. Croatia needs to foster a spirit of tolerance towards minorities, in
particular Croatian Serbs and to take measures to protect those who may still
be subjected to threats or acts of discrimination, hostility or violence. 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.

The situation with regard to refugee return
issues has improved and the implementation of the housing care programmes
continues, although at a slower pace. Conditions for sustainable refugee return
need to be further developed.

Freedom of expression, including freedom
and pluralism of the media is provided for in Croatian law and is generally
respected. A new law on the public broadcaster was adopted in July 2012.
Continued efforts are needed to ensure the independence of the public service broadcaster
and to increase its transparency.

ICTY and
war crimes (See also Chapter 23 - Judiciary and
fundamental rights)

Croatia continues to cooperate with the
International Criminal Tribunal for the former Yugoslavia (ICTY). Croatia has
continued to process war crimes cases including the priority cases identified
at the national and regional level linked to the 2011 strategy on impunity.
More cases were transferred to the specialised chambers. However, efforts to
address impunity for war crimes should be intensified, as the majority of
crimes have yet to be successfully prosecuted. Measures need to be taken to
facilitate the attendance of witnesses at trial, especially in cases relocated
to specialised chambers.

Regional
cooperation

Croatia has continued the dialogue with
neighbouring countries in order to address open bilateral issues. The
Declaration of the Croatian Parliament of October 2011 on promoting European
values in south-east Europe emphasised Croatia’s firm commitment to supporting
the other countries of the region on their path to EU integration.

Croatia continued to engage in cooperation
on war crimes at bilateral and regional level and cooperation between judicial
authorities, in particular prosecutors, continued to be good. Discussions are ongoing
with Serbia on a cooperation agreement, aimed also at addressing the
potentially negative implications of the Law on invalidation of certain
legal acts of the judicial bodies of the Former Yugoslav National Army, the
former Socialist Federal Republic of Yugoslavia and of the Republic of Serbia
adopted in October 2011.

Croatia has continued to contribute
actively to the Sarajevo Declaration Process. A ministerial declaration was
signed in November 2011 in Belgrade renewing political commitment to bringing
this chapter to a close. An international donors’ conference was held in April
2012 in Sarajevo to secure funding for a durable solution for all refugees in
the region who were displaced as a result of the armed conflicts in the former
Yugoslavia in the 1990s. Croatia needs to allocate the necessary additional
funding.

The unresolved fate of missing persons from
the conflicts in the 1990s remains a humanitarian concern in the Western
Balkans. As of August 2012, there were still approximately 13,250 people
missing from the conflicts in the region. Of these, some 9,550 were
related to the conflict in Bosnia and Herzegovina, approximately 1,900 to the
conflict in Croatia and over 1,800 to the conflict in Kosovo\*. In
the past year approximately 1,100 remains were identified at regional level. A
comprehensive process to review the cases of missing persons needs to be
carried out as an important step in the reconciliation process in the region.

Bilateral
relations with other enlargement countries and neighbouring EU Member States

Relations with other enlargement countries
and neighbouring EU Member States are continuing to improve. A number of
bilateral and regional issues, including succession issues, remain to be
addressed.

The second informal meeting of the
Presidents of Croatia, Serbia and the Bosnia and Herzegovina Presidency took
place in February 2012, focusing on the fight against organised crime and
economic cooperation.

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

Relations with Bosnia and Herzegovina
have intensified. A number of meetings have taken place to address the
implications for bilateral relations of Croatia’s accession to the EU. In this
context, discussions have continued with regard to the outstanding issues on
border management, with limited progress. The local border traffic agreement
and the agreement on free transit through the port of Ploče, in Croatia, and
the Neum corridor, in Bosnia and Herzegovina, should be aligned with the EU acquis
and ready before accession (See Chapter 24 – Justice, freedom and security).
Urgent attention should be paid to complete preparations for border inspection
posts (See Chapter 12 – Food safety, veterinary and phytosanitary policy).
Limited progress was achieved in resolving outstanding issues, including
property issues and border demarcation. The Croatian government has announced
its intention to initiate the procedure for the ratification of the 1999 Border
Agreement.

Croatia continues to have good relations
with Montenegro. The temporary agreement on Prevlaka continues to
function smoothly. There has been no further progress in the procedure for
submitting the border demarcation to the International Court of Justice.

Relations with Serbia are stable,
regardless of a number of outstanding issues (border demarcation, missing
persons). The two countries are working on a bilateral agreement on war crimes
prosecution, aiming at addressing potentially negative implications of the Law
on invalidation of certain legal acts of the judicial bodies of the former
Yugoslav National Army, the former Socialist Federal Republic of Yugoslavia and
the Republic of Serbia, which has been challenged by the Croatian President
at the Constitutional Court. There have been no tangible results with regard to
border demarcation concerning the Danube. The Serbian government submitted its written
pleadings supporting its counter-suit against Croatia before the International
Court of Justice on genocide allegations in November 2011. A Protocol on the
return to Croatia of cultural assets taken during the war in the 1990s was
signed, thus resolving an outstanding bilateral issue.

Relations with Kosovo have been
further developed. High-level visits continue to take place.

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 continued to
improve. The procedure on the international border arbitration between Croatia
and Slovenia has started. The Arbitral Tribunal held its first procedural
meeting on 13 April 2012, when it was decided that the parties’ first memorials
would be simultaneously submitted on 11 February 2013, the counter-memorials
would be simultaneously submitted on 11 November 2013, and a hearing would be
held in the spring of 2014. Concerning the Ljubljanska Banka case (guarantee of
foreign currency deposits), Croatia has reconfirmed its commitment to resuming
negotiations under the auspices of the Bank for International Settlements. Two
experts have been nominated by the parties with the aim of finding a mutually
acceptable way forward to resolve the issue.

As in previous years, Croatia continues to
fulfil the political criteria for membership. In all areas covered by the
political criteria (stability of institutions guaranteeing democracy, the rule
of law, human rights and respect for and protection of minorities) work has
continued and results are becoming tangible. Further efforts are needed to
continue strengthening the rule of law, by improving public administration and
the justice system and by fighting and preventing corruption effectively.
Croatia needs to intensify its efforts to address impunity for war crimes. In
the area of human rights and the protection of minorities, further efforts are
needed. Croatia needs to continue to foster a spirit of tolerance towards
minorities, in particular Croatian Serbs. The Roma minority continues to face
particularly difficult living conditions. Regional cooperation and bilateral
relations with neighbouring EU Member States and other enlargement countries
have continued to improve. A number of bilateral issues remain to be addressed.

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’s
Pre-accession Economic Programme (PEP) for 2012-2014, submitted in March 2012,
presented a comprehensive, though optimistic, macroeconomic and fiscal
framework for economic policies. The government plans to consolidate public
finances by reining in expenditures while stimulating economic growth through
infrastructure-oriented investments by publicly owned companies. Monetary
policy continues to be conducted within the framework of exchange rate
stability vis-à-vis the euro. The consensus on the fundamentals of a market
economy was maintained.

Macroeconomic
stability

In 2011, annual
GDP is estimated to have stagnated (-0.0%) in real terms compared to 2010. GDP
still declined in the first quarter, then started to expand in the second and
third quarters, before contracting again in the final quarter. Final domestic
demand continued to contract in 2011, particularly due to a further drop in
investment activity (-7.2%). Private consumption was slightly positive (+0.2%),
but this was partly offset by lower public consumption (-0.3%). The level of
real GDP was held up by inventory accumulation, which contributed 1.1
percentage points to growth. Net exports added 0.4 percentage points to GDP
growth as exports of goods and services expanded faster than imports. GDP per
capita in purchasing power terms remained unchanged from 2010 at 61% of the
EU-27 average.

The renewed
output decline accelerated in the first seven months of 2012. Following a 0.4%
contraction in the fourth quarter of 2011, GDP declined by 1.3% year-on-year in
the first quarter and by 2.2% in the second quarter of 2012. In July, the
monthly indicators of economic activity were all sharply lower in real
year-on-year terms: retail sales by -5.1%, industrial production by -5.5% and
construction output by -9.7%. The current account
deficit narrowed from 1.1% of GDP in 2010 to 0.9% in 2011 before widening again
in the first quarter of 2012. Like in the preceding year, Croatia’s trade
performance in 2011 indicated a lack of international competitiveness. Market
share was lost as exports of goods and services increased by 2.0% in volume
terms while the weighted export market grew by 5.4%. Imports of goods and
services in volume terms increased by 1.2% although domestic demand contracted
by 0.6%. Inflows of foreign direct investment were € 1 billion, which was
far below the pre-recession level, but 3 times higher than in 2010. Gross
external debt declined slightly from a revised 105% of GDP at the end of 2010
to 103% at the end of 2011 before returning to 105% in mid-2012. Gross
international reserves increased from 24.1% of GDP at the end of 2010 to 25.2%
at the end of 2011 and further to 26.1% at the end of July 2012 helped by a
large foreign-bond issue by the government in April. Despite a significant
stock of international reserves, the high level of gross external debt remains
a key vulnerability of the Croatian economy.

The labour
market continued to deteriorate in 2011. Unemployment was high at 13.5%, a 1.7
percentage point increase on the previous year. Employment fell by 3.2%. The
rising trend of unemployment continued into 2012. In July the registered unemployment
rate was 0.7 percentage points higher year-on-year. There has only been little
progress in reducing the structural weaknesses of Croatia’s labour market,
which are reflected in low employment and participation rates and high rates of
youth and long-term unemployment. In 2011, the employment rate declined to
52.4%, the participation rate fell to 60.8%, while youth unemployment increased
to 36.1%.

Consumer price
inflation increased from 1.1% in 2010 to 2.3% in 2011, mainly as a result of
higher international prices for energy and food commodities and their
pass-through to related domestic prices. A small depreciation of the domestic
currency contributed also to the rise in the price level. Due to the slack in
resource utilisation, not least in the labour market, underlying inflationary
pressures have remained low on the domestic side. However, a 2 percentage point
increase in the general VAT rate and increases in administered energy prices
have pushed up the year-on-year increase of consumer prices to 2.8% in the
first eight months of 2012.

Monetary policy
succeeded in preserving exchange rate and financial stability. It remained
oriented towards a tightly managed kuna/euro exchange rate with little
variability, but without a formal peg to the euro. This monetary framework
anchors inflation expectations and reduces exchange rate-related credit risks
in the highly euroised economy. The kuna appreciated by 1.4% against the euro
between the beginning of October 2011 and 19 September 2012. In this period, the
central bank stabilized the kuna/euro rate by selling € 724.4 million and
by buying € 58.1 million in the foreign exchange market. On two occasions
the central bank supported the domestic currency by raising the reserve
requirement rate for banks, but was able to reverse most of these increases
when the kuna was strengthening. Foreign exchange liquidity was expanded by
lowering the rate of minimum required foreign exchange currency claims of banks
relative to their foreign currency liabilities. Overall, monetary policy was
able to maintain an appropriately accommodative stance in a context of
persisting recessionary conditions.

Fiscal policy
has, to some extent, contained the negative budgetary consequences of the
continuing recession. In 2011 total expenditures of general government were
held unchanged year-on-year in nominal terms as stipulated by the Croatian
parliament in August 2010. The share of social transfers in total expenditures
was reduced somewhat, but huge scope remains for increasing the efficiency of
public spending through better targeting of social support. Total revenues
declined by 0.6%, mainly as a result of changes in the tax legislation in the
preceding year. Net borrowing by general government increased from a revised
5.0% of GDP in 2010 to 5.1% of GDP in 2011. This outcome is significantly below
the budgeted deficit (5.6% of GDP) mainly because realised public investment
expenditure was 0.5 percentage points of GDP below budget. General government
consolidated gross debt increased from 42.2% of GDP at the end of 2010 to 50.5%
at the end of June 2012 (excluding outstanding state guarantees and the debt of
the State Development Bank). A tax reform in February
2012 included an increase in the general VAT rate from 23% to 25% and a
reduction in the employers’ contribution to the compulsory health insurance
from 15% to 13%. The Ministry of Finance projects a
general government fiscal deficit of 3.9% of GDP in 2012. Revenues are budgeted
to increase by 1.7% while expenditures are projected to decrease by 1.2%. In
the first half of 2012, net borrowing of general government amounted to 2.0% of
projected full-year GDP. The Ministry’s current budgeting is based on the
optimistic assumption of stagnating real GDP in 2012. Overall, the budgetary
process continued to show weaknesses. The efficiency of public spending needs
to be enhanced in order to ensure medium-term fiscal sustainability.

Interplay
of market forces

The private sector’s share of GDP and
employment has remained at around 70% of the overall economy. In the twelve
months to the end of June 2012, the Government Asset Management Agency (GAMA)
reduced its holdings from 693 to 649 companies. The proceeds of the sales were
relatively modest since many of the companies were liquidated in the process.
GAMA’s remaining portfolio consists predominantly of highly indebted and often
loss-making companies. Overall, little 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 did not change
significantly in the reporting period. The average number of active legal
entities in 2011 was 9.4% lower than in 2010. The investment climate remained
hampered by difficulties in obtaining the necessary licences, building permits
and other authorisations; by uncertainties arising from changes in the legal
environment; and by the lack of certainty and uniformity of public
administration decisions and the length of the related procedures, particularly
at local level. A large number of non-tax fees at national and local levels
continue to be a significant burden for entrepreneurs although their number and
rates have been reduced. Overall, lengthy procedures and numerous non-tax fees
hamper business start-ups and the business environment in general.

Legal
system

The weaknesses
of the judicial system continue to hinder the effective enforcement of creditor
and property rights. The length of court proceedings remains generally
excessive and problems persist with the enforcement of court decisions.
Investors still face problems regarding the registration of property. The
business environment continues to suffer from inefficiencies in the public
administration.

Financial
sector development

The financial
sector continued to be dominated by banks, which held 75% of the total assets
of financial intermediaries at the end of June 2012. Market concentration has
remained moderate, with the four largest banks continuing to hold about two
thirds of total banking assets. Banking sector assets were 1.9% higher
year-on-year at the end of July 2012 and amounted to 122% of GDP. The sector
has remained stable and well capitalised with the capital adequacy ratio
increasing to 20.2% at the end of June 2012. Bank profitability has generally
remained depressed since 2009. There was a slight improvement in the return on
equity for banks in 2010 and 2011 followed by a renewed decrease in the first
half of 2012. The quality of bank loans continued to deteriorate, with the
share of non-performing loans in total loans rising by 1.4 percentage points
year-on-year to 13.3% at the end of June 2012. The largely unhedged foreign
exchange liabilities of the non-financial private sector remain a significant
risk.

3.2.
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 monetary policy stance has remained appropriate
given the existing constraints imposed by the very high level of external debt
while fiscal policy has contained the rise of the budget deficit under
recessionary conditions.

Human and
physical capital

Further steps
were taken to improve the quality of education at all levels. The government continued its programme of
active labour market policy measures, but rigidities in the labour market
remain a major challenge.

Investment fell
for a third consecutive year in 2011, again mainly due to a drop in
construction activity. As a share of GDP, investment declined from 21.6% in
2010 to 19.8% in 2011. Foreign direct investments, particularly greenfield
investments, remained scarce. The 30 public-sector investment projects (mainly
in energy, tourism, water management and transport infrastructure) which the
government announced in late 2010 have not materialised. The new government’s
Investment Cycle Plan schedules investments by publicly-owned companies, mainly
through public-private partnerships and with funds from international financial
institutions. These projects focus predominantly on energy, infrastructure and
education.

Sector
and enterprise structure

The services
sector increased its share of total gross value added slightly, from 69.3% in
2010 to 69.7% in 2011. The share of industry rose from 18.4% to 18.8% while the
share of agriculture, forestry and fishing fell from 5.5% to 5.4%. These gains
were made at the expense of construction, whose share of total gross value
added further declined, from 6.8% in 2010 to 6.1% in 2011. Small and
medium-sized enterprises (SMEs) continued to account for around 50% of GDP,
their share of total exports amounted to around 40%, and they employ more than
63% of all employed people. The government continued to support SMEs through
the Croatian Agency for SMEs (HAMAG Invest) and the State Development Bank
(HBOR).

State
influence on competitiveness

State aid
amounted to 2.8% of GDP in 2010 and preliminary data indicate that it was in
the range of 2.6–2.8% of GDP in 2011. Sector-specific aid, including for
agriculture and fisheries, represented 87% of overall State aid in 2010, with
the remainder going to horizontal aid (research and development, employment,
SMEs, environmental protection, training, etc.). There has been little change
in the share of horizontal aid in total State aid in the period 2008-2010.

Trade
integration

Croatia is an
open economy with total trade in goods and services accounting for around 82%
of GDP in 2011, up from 77% in 2010. The EU has continued to be Croatia’s
largest trading partner. Its shares of total Croatian exports and imports of
goods remained relatively stable in 2011 at 60% and 62% respectively. 91% of
all FDI stocks stemmed from EU Member States. Overall, integration with the EU
in the areas of trade and investment remained high.

The kuna
depreciated slightly in real effective terms in 2011. The depreciation amounted
to 2.4% year-on-year on the basis of consumer prices, 1.4% on the basis of
producer prices, and 0.9% on the basis of unit labour costs. Unit labour costs
decreased due to rising labour productivity. Overall, standard indicators
point, on balance, to a slight improvement in Croatia’s international price
competitiveness in 2011.

4.
Commitments and requirements arising from the
accession negotiations

This section
examines Croatia’s ability to take on 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
Croatia’s overall level of preparedness for accession and the respect of
commitments taken in the accession negotiations. Where appropriate, reference
is made to transitional arrangements agreed during accession negotiations.

4.1.
Chapter 1: Free movement of goods

Croatia has largely aligned its legislation
as regards the general principles. It has almost completed implementing
its action plan for compliance with Articles 34 to 36 of the Treaty on the
Functioning of the European Union (TFEU). Urgent attention must be paid to the
requirements imposed by Croatia for additional intermediate storage of imported
petroleum products, which constitute a measure having an effect equivalent to
quantitative restrictions, not in line with the acquis.

As regards horizontal measures,
Croatia has largely aligned its legislation with the acquis. A further
revision of the Act on technical requirements for products and on conformity
assessment is necessary for further alignment the Croatian legislation with the
acquis.

As regards standardisation, the
Croatian Standards Institute (HZN) has transposed nearly all European standards
(ENs). The HZN was chosen as a notification body for the implementation of the
Agreement on Technical Barriers to Trade (WTO/TBT).

As regards conformity assessment,
the Croatian legislation is advanced but needs some further amendments to align
it with the new legislative framework.

In the field of accreditation,
European cooperation for Accreditation (EA) completed in December 2011 the
re-assessment of the Croatian Accreditation Agency (HAA) with a successful
outcome. At the 18 April 2012 meeting of the EA MAC (Multi-Lateral
Agreement Council) it was decided that the HAA remains an EA
MLA signatory in all accreditation fields (calibration, testing, inspection and
certification management systems, products and persons). So far the HAA
has accredited a total number of 314 bodies and publishes a list of these with
the detailed scope of their accreditation on the official website (www.akreditacija.hr).

Alignment with the acquis in the
area of metrology is advanced, but finishing the transfer of
responsibility for scientific metrology to the National Metrology Institute
(NMI) remains the main outstanding issue in this field.

Alignment with the acquis in the
field of market surveillance is well advanced. The State Inspectorate’s
enforcement measures have been improved. The State Inspectorate ensured
coordination between market surveillance institutions and carried out eight
joint inspection programmes.

Legislative alignment has further advanced
as regards the ‘Old Approach’ product legislation, where a number of
regulations have been adopted such as on chemicals and good laboratory practice
in pharmaceuticals. Further efforts are needed to achieve full alignment in
particular as regards data exclusivity in pharmaceutical products, veterinary
medicinal products and pre-packaging. Further efforts are needed to build up
the necessary administrative capacity to ensure proper implementation of the
legislation. Croatia continues to provide
periodic reports to the Commission on the implementation of the transparency of measures regulating the prices
of medicinal products for human use and their inclusion in the scope of
national health insurance systems.

In accordance with the transitional
arrangement granted, Croatia is committed to upgrading market
authorisations for medicinal products granted before accession, to comply with
the level of quality, efficacy and safety stipulated by the Directive on
medicinal products, at the latest four years after accession.

Croatia has further advanced as regards
alignment with the ‘New and Global Approach’ product legislation. Safety
of toys regulation has been adopted. Further efforts are still needed,
particularly on construction products, civil explosives, eco-design
requirements for energy-related products, gas appliances, measuring
instruments, non-automatic weighing instruments, pressure equipment, simple
pressure vessels and medical devices.

Croatia has further advanced in aligning
its legislation in the area of procedural measures, and alignment is
almost complete. The transposition of Directive 98/34/EC on the provision of
information in the field of technical standards and regulations has yet to be
completed. Croatia has transposed the acquis governing acquisition and
possession of weapons in June 2012.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of free
movement of goods and is expected to be in a position to implement the acquis
as of accession. Further efforts are required, in particular in the field of
horizontal measures, as well as New and Old Approach product legislation, in
order to ensure that Croatia completes its preparations for membership by the
date of accession. Urgent attention must be paid to the requirements imposed by
Croatia for additional intermediate storage of imported petroleum products.

4.2.
Chapter 2: Freedom of movement for workers

In the field of access to the labour
market, Croatia has completed alignment with the acquis. A
transitional arrangement has been agreed whereby for the first two years
following accession, current Member States will apply national measures, or
bilateral agreements, to regulate the access of Croatian workers to their
labour markets. These arrangements may continue for up to a maximum of seven
years. Croatia may apply equivalent measures to any current Member State
applying restrictions.

In the area of future participation in the EURES
(European Employment Services) network, Croatia is well prepared.
Preparations have continued with a view to connecting the Croatian Employment
Service to the European Job Mobility Portal.

In the area of coordination
of social security systems, Croatia is well prepared. Administrative
capacity is being strengthened. Training has been provided to staff of the
state administration on topics such as pension insurance, health insurance and
family benefits. The required estimate of the additional financial costs of
health care to be taken into account in internal budgetary planning is still
pending.

Preparations in relation to the European
Health Insurance Card (EHIC) are reaching completion. A Regulation on EHIC
was adopted in December 2011 determining the period of validity of the
card (one year for all insured persons, if necessary longer for posted workers and
their family members), the form of the card (it will be issued as a separate
card), and all other necessary details needed for its issuance.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of freedom of
movement for workers and is in a position to implement the acquis as of
accession.

4.3.
Chapter 3: Right of establishment and freedom to
provide services

In the area of the right of
establishment and freedom to provide cross-border services Croatia
has largely aligned its legislation with the acquis. The main principles
of the Services Directive have been transposed into a horizontal law, while
several sector-specific legislative alignments are pending.

Preparations for the functioning of the
Point of Single Contact (PSC) have progressed and need to continue in order to
have a fully operational PSC before accession.

Continuous efforts are needed to strengthen
the administrative capacity of all institutions working on implementing the
Services Directive and on improving their cooperation with the relevant
ministries. The Section for Internal Market Service Development at the Ministry
of Economy currently employs 4 people out of 7 persons. The Section is
constantly undertaking training activities for its own staff and the staff of
other relevant institutions working on services, in particular those of the
Croatian Chamber of Economy, i.e. staff working on the PSC.

Legislative alignment in the area of postal
services is almost completed. However, the recent administrative practice
raises some concerns as to its compatibility with the postal acquis,
notably on the regulatory treatment of value added services. Further
legislative efforts are still needed to ensure full transposition of the Third
Postal Directive. The national regulator, the Croatian Post and Electronic
Communications Agency (HAKOM), has continued to strengthen its overall
administrative capacity and regulatory expertise. In particular, it is
currently actively working on a cost accounting separation method and on a
manual for accounting separation. This is of utmost importance in view of
regulatory significance of separate cost accounts and recently raised concerns
about unjustified pricing practices by the national postal operator.The
Croatian Post, the designated universal service provider, adopted a new
business plan for 2012, to prepare for full liberalisation of the postal
services market. Work on a new central logistic centre for the public operator
is advancing. Further efforts are needed to modernise the national postal
operator, to fully establish separate cost accounting and to ensure adequate
supervision by the regulator.

Croatia is on track to meeting its
commitments in the field of mutual recognition of professional qualifications.
Croatia has considerably aligned its legislation with the EU acquis for
the four sectorial professions of doctors, dental practitioners, nurses
responsible for general care and midwives. Few issues, notably regarding the
nurses responsible for general care and midwives and some minor legal drafting
issues regarding basic medical doctors and medical specialists, still remain to
be addressed before accession.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of the right
of establishment and freedom to provide services and is expected to be in a
position to implement the acquis as of accession. Further efforts are
needed particularly for alignment with the Services Directive and in the field
of mutual recognition of professional qualifications in
order to ensure that Croatia completes its preparations for membership by the
date of accession.

4.4.
Chapter 4: Free movement of capital

Preparations are almost completed in the
field of payment systems, but some further legislative alignment
is needed to ensure direct application of the cross-border payment Regulation.

As regards the fight against money
laundering, preparations are almost completed. The Croatian Financial
Intelligence Unit (FIU) and other supervisory bodies continued their training
activities for the reporting entities. The Financial Inspectorate strengthened
its administrative capacity with the recruitment of 6 new employees. Croatia
still has to keep up its efforts in this area. The administrative capacity of
all bodies dealing with anti-money laundering should be further strengthened.
Croatia should continue to co-ordinate criminal and
financial investigations. Croatia has stepped up efforts in identifying money
laundering offences, resulting in increased number of investigations. There is good level of interagency
cooperation. Special attention is needed with respect
to designated non-financial business and professionals (DNFBP).

In the area of free movement of capital
Croatia has achieved a good level of alignment with the acquis. Further
attention must be paid to the amendments to the Act on the Privatisation of INA
and the Act on the Privatisation of Telecom concerning special government
rights and to the amendments of the provisions for acquisition of land in areas
covered by the Nature Protection Act to explicitly eliminate existing
restrictions.

In accordance
with the transitional arrangement granted, Croatia is committed to removing
restrictions on the acquisition of agricultural land by EU/EEA nationals at the
latest before the seventh year after accession.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of the free
movement of capital and is expected to be in a position to implement the acquis
as of accession. Further efforts are required, in particular as regards
amendments to the Acts on the Privatisation of INA and of Telecom as well as
the Nature Protection Act and the continued implementation of the action plan
against money laundering, in order to ensure that Croatia completes its
preparations for membership by the date of accession.

4.5.
Chapter 5: Public procurement

Legislative
alignment as regards the general principles has further advanced and is
almost complete. The new Public Procurement Act (PPA) entered into force in
January 2012 and a number of implementing acts were adopted. The defence
procurement act was adopted and in force since August 2012. The Act on the
establishment of the State Commission for supervision of public procurement
procedures needs to be amended in order to be harmonised with the new PPA
Croatia has decided to draft a new law on Concessions. The sector regulating
legislation needs to be aligned with the law once adopted. Efforts need to
focus primarily on the implementation of the new PPA, especially at local
level, also with a view to the future management of the Structural Funds.

Croatia has
further advanced as regards the award of public contracts;
administrative capacity needs to be enhanced to ensure appropriate
implementation. New Act on Public Private Partnership was adopted on 6 July;
full alignment of the final text with the acquis remains to be
confirmed. The new e-Notices platform has been in operation since January 2012
but a strategy on e-procurement together with a concrete Action Plan have to be
prepared and implemented.

With regard to administrative capacity, the
Department for the Public Procurement System (DPPS) at the Ministry of Economic
Affairs has continued to steer enforcement of the PPA. The Department for the
Public Procurement System (DPPS) at the Ministry of Economic Affairs together
with the other key institutions in the sector continued the work to improve the
transparency and accountability of the system. Sustained effort is needed to
ensure coordination in the sector and efficient prevention of corruption, fraud
and irregularities in public procurement. Following the adoption of the new
PPA, intensive training activities were organised involving civil servants,
economic operators and contracting authorities at central and local level.
Their capacities still need to be enhanced further, especially with regard to
avoiding conflicts of interest in public procurement procedures, corruption,
fraud and irregularities.

In the area of concessions, the
administrative capacity of the Ministry of Finance needs to be enhanced by
further developing the professional skills not only of its staff but also of
concession grantees. The Concessions and Public Private
Partnerships (PPP) Service has been established following the adoption of the
new Decree on the internal structure and functions of the Ministry of Finance.
The Concessions and PPP Service comprises a department for registration of
concessions and a department for PPPs. Seven of the 13 planned employees have
been recruited. Sustained efforts are needed to maintain coordination between
the Ministry of Finance and the Agency for Public Private Partnerships (APPP)
to ensure efficient implementation of concessions and PPP projects in the
country. Additional efforts are needed in order to stimulate private sector
investments through PPPs.

The APPP continued to improve its capacity
to evaluate and approve PPP project proposals, tender documents and final draft
contracts pursuant to the provisions of the PPP Act. New methodological tools
have to be devised and further efforts invested, especially in building up the
capacities of economic operators to develop high-quality projects and
effectively apply the PPP guides and manuals.

As regards the remedies system, the
legislative alignment has advanced moderately. The functioning of the State
Commission for supervision of public procurement procedures needs to be
enhanced. The State Commision needs to improve its internal organisation and
structure. Even if most of the registered cases were solved during the 12-month
period, the growing numer of appeals, the increasing length of time required
for issuing the Commission’s decisions (70 days instead of the mandatory 15 days),
and the lack of a legally binding statute and rules on internal organisation
cause some concern. Further efforts are needed in order to improve the quality
of the decisions taken, especially with a view to the preparations for future
Structural Funds management and given the key role of the State Commission as
the main supervisory body in the area of remedies after accession.

The State Office for Central Public
Procurement achieved good results in implementing the centralised public
procurement procedures. Its current staffing is 16. Further efforts are needed
to improve its efficiency.

Conclusion

Croatia is meeting the requirements and
commitments arising from the accession negotiations in the field of public
procurement and is expected to be in a position to implement the acquis
as of accession. Further efforts are required, in particular for implementation
of the new public procurement act, especially at local level, also with a view
to the future management of the structural funds, in order to ensure that
Croatia completes its preparations for membership by the date of accession.
Improvements concerning the system of remedies are required. Administrative
capacity of different bodies in the public procurement area should be
strengthened.

4.6.
Chapter 6: Company law

In the field of company law,
Croatia’s legislation is largely in line with the acquis. Some
inconsistencies still have to be addressed, in particular with regard to
shareholders’ rights.

In the field of corporate accounting,
legislation is largely in line with the acquis. The Croatian
Financial Reporting Standards Board continues to publish translations of the
International Accounting Standards, the International Financial Reporting
Standards (IFRS) and interpretations of the International Financial Reporting
Interpretations Committee (IFRIC).

In the field of auditing,
legislation is largely in line with the acquis. The Audit Public
Oversight Committee (APOC) and the Quality Assurance Team (QAT) performed
satisfactorily over the period. The QAT within the Croatian Audit Chamber is
fully functional with five full-time staff members.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of company
law and is in a position to implement the acquis as of accession.

4.7.
Chapter 7: Intellectual property law

Croatia has aligned its legislation in the
field of copyright and neighbouring rights and industrial property
rights.

With
regard to enforcement, in September 2011, a Memorandum of Understanding
on cooperation between the Office for Harmonisation in the Internal Market
(OHIM) and the State Intellectual Property Office (SIPO) was signed, followed
by the signature of two further cooperation agreements on specific activities
relating to trademarks. New joint information website of the enforcement bodies
was launched in April 2012.

As
regards intellectual property, further emphasis needs to be placed on
developing the capacity of the police and prosecutors to handle more complex
cases and on raising public awareness of intellectual property rights. The
State Intellectual Property Office (SIPO) has sufficient administrative
capacity.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of intellectual
property law and is in a position to implement the acquis as of
accession.

4.8.
Chapter 8: Competition policy

Croatia has
largely aligned its legislation in the fields of anti-trust and mergers and
of State aid. It has also kept up its efforts to build a positive
enforcement record. Croatia’s Competition Agency (CCA) is fully operational and
functionally independent; it carries out its duties in line with the
legislation in force. A proper system of merger and State aid control is
in place.

In the field of
anti-trust and mergers, since 1 October 2011, the CCA issued 29
decisions and 25 opinions. The CCA continued to provide the government with
assessments of draft laws and other expert opinions.

In the field of
State aid, the CCA took 30 decisions, of which 13 involved aid schemes
and 17 concerned individual aid measures.

With regard to
Croatia’s reporting obligations in the steel sector, the first reports were
submitted to the Commission on 15 December 2011 and 18 June 2012 in line with
the requirements agreed during the negotiations.

Sisak has yet
to reimburse the aid received. In October 2011, the owners decided to close and
sell the steel mill, resulting in production being completely halted. The
owners of CMC Sisak sold the steel mill to a new investor, the Italian group
Danieli.

The reports
also provide updated information on the bankruptcy proceedings concerning the
other steel mill, Željezara Split.

With regard to
Croatia’s obligations to report on the shipbuilding industry, on 16 January 2012
it submitted the first six-monthly report on the restructuring of the Croatian
shipyards in difficulty as required by Annex VIII of the Act of Accession. The
report contains data on the measures taken to return to viability, aid used,
own contribution and production capacity, following the methodology for
monitoring implementation by Croatia agreed with the Commission. The report
also provides details on the agreements regulating property law in the context
of expropriation in the maritime domain. On 16 July 2012 Croatia submitted its
second six monthly report on the restructuring of the Croatian shipbuilding
industry. In addition, Croatia submitted the first Report on the Annual Output
of the Shipyards under Restructuring.

In March 2012,
the bid for the shipyard Brodosplit was accepted. Its restructuring plan
had to be revised in light of the changes that occurred after the original
acceptance of the plan in February 2011, namely the substantial increase of the
aid received by the yard. According to the Act of Accession, the Commission
must accept any amendments to the restructuring plans. The Commission accepted
the revised plan on 16 August 2012. Croatia has indicated that the
privatisation contract will be signed without delay. The bids for the shipyards
Kraljevica and Brodotrogir were rejected by the government and
the bid for the shipyard 3.Maj was withdrawn by the potential investor.
The government has decided to initiate bankruptcy proceedings for Kraljevica
and to sell Brodotrogir to a new investor. As regards 3. MAJ, Croatia has
decided to seek a new privatisation and restructuring arrangement.

As regards
existing aid, Croatia has provided the Commission with a list of 11 aid
measures that it wishes to be considered as existing aid at the date of accession.
Seven of these measures have been included in the Act of Accession. Croatia
needs to provide further information on the remaining ones for the Commission
to complete its assessment.

Conclusion

Croatia is
generally meeting the commitments and requirements arising from the accession
negotiations in the field of competition policy and should be in a position to
implement the acquis as of accession. Increased efforts must be paid to
the signature of the contracts for privatising the shipyards in difficulty.

4.9.
Chapter 9: Financial services

In the field of banks and financial
conglomerates Croatia has largely aligned its legislation. Further
alignment is required to fully implement the latest the Capital Requirements
Directive (CRD III). Preparations are pending for the implementation of CRD IV.
Croatian National bank experts started to participate in the working bodies of
the European Systemic Risk Board and European Banking Authority as observers.
In general terms Croatia is well advanced on banking legislation and
supervision.

Croatia has largely aligned its legislation
in the area of insurances and occupational pensions. Croatia now fully
complies with Directive 2003/41/EC on the activities and supervision of
institutions for occupational retirement provision. Preparations for the
implementation of the Solvency II Directive are on-going. The Croatian
Financial Services Supervisory Agency (HANFA) has been cooperating with the
European Securities and Markets Authority (ESMA) and the European Insurance and
Occupational Pensions Authority (EIOPA) on technical details regarding the
participation of HANFA representatives in the work of both European regulators.

In the area of financial market
infrastructure legislative alignment with the acquis is almost completed
with the adoption of the legislation aimed at the full implementation of
Directive 2009/44/EC on settlement finality. Further efforts are needed to
implement Directive 2010/78/EU (Omnibus I).

As regards securities markets and
investment services legislative alignment is almost completed. Further
efforts are needed to implement the Prospectus Directive 2010/79/EU and the
UCITS IV Directive 2009/65/EC.

As regards administrative capacity, both
regulators, the Croatian National Bank and HANFA, continued with the
educational programmes for their staff and the staff of supervised entities.
They also kept up their cooperation with domestic and foreign regulators, in
particular from the EU Member States. HANFA increased the number of its
employees from 134 to 138. Its internal organisation has been changed through
the creation of the new position of Secretary General, to whom executive powers
were transferred. Also, the president and members of HANFA’s Management Council
were appointed. It remains to be seen how this will affect HANFA’s supervisory
function and its independence. Strong administrative capacity of both
supervisory institutions needs to be maintained.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of financial
services and is in a position to implement the acquis as of accession.

4.10.
Chapter 10: Information society and media

Legislative alignment in the field of electronic
communications and information and communications technologies (ICT) to
allow competition and to achieve a higher level of consumer protection has
further advanced and is almost complete. The Act on the fee for the provision
of services in mobile communications, re-introduced in January 2012 as a
temporary measure, was abolished again in July. At the same time, however, a
new Ordinance that entered into force in August 2012 has increased the
one-off spectrum licence fee on mobile operators. Implementation of competitive
safeguards and market analysis procedures is well advanced. Activities have
continued related to the project to develop a cost accounting model. The
broadband penetration rate has increased slightly, reaching 26% at the end of
2011. While mobile broadband is well developed by EU standards, the overall broadband
take-up by households needs to be improved. A project on broadband services in
non-profit areas (islands and mountains) has been launched in order to bring
broadband internet access e.g. to schools and hospitals. Measures have also
been taken to improve access to electronic communications services for people
with disabilities. Croatia needs to focus now to ensure sustainable
competition, including improved access to rights-of-way, and to make finalising
the cost accounting model one of its priorities. The incumbent continues to
retain a strong position in fixed broadband access and in fixed voice markets.

Administrative capacity of the Croatian
Post and Electronic Communications Agency (HAKOM) is considered sufficient,
with a staff of more than 170. Continuous efforts are needed to further develop
the Agency’s strategic and operational capacities.

In the area of information society
services, Croatia has completed alignment with the acquis. Amendments
to the Electronic Commerce Act were adopted in November 2011 to align with
the acquis. A new Strategy for the development of broadband
access 2012–2015, along with an implementation plan, was adopted in
October 2011 based on the Digital Agenda for Europe (DAE). Establishment
of a coordination body involving all stakeholders is ongoing, while the
Ministry of Administration has taken over responsibility for information
society policy. A Decision establishing eGovernment development goals in the
state administration for 2011–2015 was adopted in October 2011. Croatia is
advanced in the area of e-health. Croatia plays an active role in many of the
related EU initiatives. However, no overall national strategy for developing
the information society is in place.

In the field
of audiovisual policy, Croatia has completed alignment with the acquis.
The Electronic Media Act and the implementing legislation governing the
electronic media continue to be applied. A new Croatian Radio and Television
Act was adopted in July 2012. Amendments to the Criminal Code adopted in October 2011
confirmed the decriminalisation of defamation. The administrative capacity of
the Electronic Media Agency has been strengthened. Continued efforts are needed
to ensure the independence of the public service broadcaster and to increase its
transparency, in particular through proper implementation of the legislative
framework.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of the
information society and media and is in a position to implement the acquis
as of accession.

4.11.
Chapter 11: Agriculture and rural development

In the field of
horizontal issues, Croatia has reached a good level of alignment with
the acquis and preparations are on track. In accordance with the
transitional arrangements agreed, Croatia is committed to prepare for the
phasing in of direct payments as of 2013, including direct payments for demined
land put into agricultural use. Croatia amended the Act on State Aid to
Agriculture and Rural Development, and published the Ordinance on Direct
Payments and Rural Development for 2012, although it is only partially aligned
with the acquis. Consequently, the 2012 national campaign based on an acquis-compatible
direct payments system was launched. Croatia still needs to fully align its
legislation on direct payments with the acquis and to implement it to
prepare for the 2013 applications for direct payments. Croatia needs to ensure
that accreditation of the paying agency is completed by the end of 2012 and
that the paying agency is fully functioning in line with the acquis as
of January 2013 in order to benefit from reimbursement of direct payments in
2013 from EU budget. The capacity of the Competent Authority needs to be
further strengthened. In accordance with transitional arrangements granted,
Croatia is committed to use only up to 20% of the annual rural development
funds in 2014, 2015 and 2016 to finance complementary national direct payments.

Implementation of the plan for establishing
an integrated administration and control system and setting up a paying agency
is on track. The capacity of the Paying Agency has been further strengthened by
completing the software for the management of EU direct payments and training
of staff. The land parcel identification system has been continuously updated.
Software for the implementation of rural development measures was developed and
will later have to be adapted to the future Croatian Rural Development
Programme for 2014-2020. Croatia will need to avoid any delay in restructuring
of the regional offices and the recruitment of additional staff.

Croatia continued the farm accountancy data
network (FADN) pilot surveys. Under the new act on agricultural advisory
services, the implementation of FADN will be ensured by the Croatian Agricultural
Extension Institute. Human and financial resources in that sector need further
strengthening. Croatia needs to prepare for due reporting of 2013 accounting
year data in FADN.

Alignment of legislation in the area of the
common market organisation is ongoing. Implementation of the plan to
prepare for the application of the Single Common Market Organisation by the
time of accession is on track. Croatia adopted several implementing regulations
related to the fruit and vegetables, sugar, milk and milk products sectors.
Marketing standards for fruit and vegetables are being implemented. Croatia
will need to further strengthen human resources in order to meet the EU
reporting requirements.

In the area of rural development,
preparations are moderately advanced. Croatia continued implementing the
Instrument for Pre-Accession Assistance for Rural Development (IPARD). Despite
improvements, the absorption capacity needs to be stepped up. In accordance
with the transitional arrangement granted, Croatia is committed to continue
IPARD during 2013 and to implement a post-accession rural development programme
as of 2014. Croatia will need to speed up the preparation of the future rural
development programme and partnership contract for the funds covered by the Common
Strategic Framework. The development of measures on agri-environment and
organic farming as well as the payment scheme for areas facing natural
constraints will need special attention. Croatia will need to ensure the
continuity of the staff as well as their training.

Alignment in the fields of quality
policy and organic farming is advanced. Croatia adopted implementing
regulations on aquaculture, the labelling of designations of origin,
geographical indications and traditional specialities and published guidelines
for their registration. In accordance with the transitional arrangement
granted, Croatia is committed to submit applications for the registration at EU
level of agricultural products as designations of origin, geographical
indications or traditional specialities guaranteed not later than
1 July 2014. In the area of organic farming, Croatia will need to
ensure that an efficient control system including supervision by a competent
authority is in place as of accession.

Conclusion

Croatia is generally meeting the
commitments and requirements arising from the accession negotiations in the
field of agriculture and rural development and should be in a position to
implement the acquis as of accession. Increased efforts are needed in
the area of direct payments and rural development, in order to ensure that
Croatia completes its preparations for membership by the date of accession.

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

Croatia has completed aligning its
legislation in the field of general food safety. It moved closer towards
full implementation and enforcement of the aligned legislation. Continued
efforts will be needed to ensure even implementation over the entire Croatian
territory.

Legislative
alignment in the field of veterinary policy has further advanced
and is almost completed. Croatia has continued with the adoption of
implementing legislation. Control capacity has improved as, in addition to
official veterinarians, some control bodies employing authorised veterinarians
were accredited. The accreditation process is still ongoing. In accordance with
the transitional arrangement granted, Croatia can exceptionally maintain and
not more than 12 months after accession non-EU compliant cages for laying hens
already in lay at the date of accession. Croatia will need to ensure that eggs
from such cages are identified with a special mark and are only placed on the
Croatian market. Croatia needs to speed up work on building and fitting out the
agreed border inspection posts. In accordance with the arrangement agreed,
Croatia is committed to operate as of accession a regime for the transiting of
products of animal origin through the territory of Bosnia and Herzegovina at
Neum (‘Neum corridor’) allowing such consignments to be exempted from required
veterinary checks before they re-enter EU territory. Croatia will need to have
fully equipped and staffed points of entry to the north and south of the
corridor in place as well as effective technical surveillance systems to ensure
efficient controls.

Alignment with the acquis in the
field of placing on the market of food, feed and animal by-products
has further advanced. Croatia continued to implement its plan for upgrading
establishments for food and feed of animal origin. Close monitoring of the national
upgrading plan remains necessary. In accordance with the transitional
arrangement agreed, establishments for milk, meat, fish and animal-by products
must comply with the acquis on food safety by the end of 2015. Croatia
will need to step up its efforts with a view to setting up intermediate plants
for the handling of high-risk animal by-products.

Legislative alignment in the fields of the food
safety rules and the specific rules for feed has further advanced
and is almost completed. Croatia needs to ensure that sufficient administrative
and control capacity is in place.

Legislative
alignment in the field of phytosanitary policy has further
advanced and is almost completed. Additional implementing legislation has been
adopted in the areas of plant health and plant protection products. Croatia
needs to keep up its efforts, in particular with regard to setting up border
inspection posts and further strengthening administrative capacities. In
accordance with the transitional arrangement granted, Croatia is committed to
cease by the end of 2014 the marketing of seeds of certain varieties of beet,
cereals, oil and fibre plants, fodder plants, vegetables and seed potatoes
which have not yet passed the Distinctness, Uniformity and Stability (DUS)
examinations. Croatia will need to ensure that such plants and seeds may not be
marketed in EU territory during the transitional period.

Croatia will
need to ensure alignment of its bilateral veterinary and phytosanitary
agreements with the acquis by accession.

Croatia has progressed in alignment with
the acquis on genetically modified organisms (GMOs). It has
developed new procedures and carried out reporting and monitoring activities.
Continuous efforts are still required in this field.

Conclusion

Croatia is generally meeting the
commitments and requirements arising from the accession negotiations in the
field of food safety, veterinary and phytosanitary policy and should be in a
position to implement the acquis as of accession. Increased efforts are
needed in the area of the animal by-products sector, the upgrading and the
monitoring of establishments, and in particular with regard to border
inspection posts. Continued attention needs to be paid to the further
strengthening of administrative capacity in this area.

4.13.
Chapter 13: Fisheries

In the areas of resource and fleet
management, Croatia has generally aligned its legislation with the acquis.
Croatia continued adopting implementing legislation in the fields of commercial
fishing, fishing licences and data collection. The fisheries monitoring centre
is continuing operation. Croatia started preparing the management plans
required under the Mediterranean Regulation and in accordance with the
transitional arrangement agreed, allowing it to continue certain fishing methods
until 30 June 2014. Croatia is progressing in the finalisation of the fleet
register and to fully establish the entry-exit scheme. It will need to ensure
that commitments are met according to plan in order to enable the necessary
fleet data to be transmitted by accession. Croatia will need to speed up the
process of phasing out the category of subsistence fisheries in order to
complete it by the end of 2014 as agreed under the transitional arrangement.

Legislation is generally aligned in the
fields of inspection and control and preparations are progressing. Improvement
of the administrative and control capacity continued, but further strengthening
is needed, in particular concerning the recruitment of fisheries inspectors at
sea and on land. Croatia will need to complete the satellite-based vessel
monitoring system.

In the field of structural actions,
alignment is moderately advanced. The administrative bodies to implement the
European Fisheries Fund are in place. Croatia will need to agree the national
strategic plan and prepare the operational programmes without delay. A reliable
management and control system ensuring sound and efficient implementation of
the operational programmes needs to be set up. Croatia will need to accelerate
the preparation for the partnership contract for the funds covered by the
Common Strategic Framework and for the implementation of the future European
Maritime and Fisheries Fund.

Croatia has generally aligned its
legislation with the acquis in the fields of market policy and
State aid. Collection of information on species, quantities and prices has
been further improved. Croatia will need to step up efforts to establish
producers’ organisations and to align marketing standards.

In the area of international agreements,
alignment is moderately advanced. Croatia continued to implement all the
recommendations of the International Commission for the Conservation of
Atlantic Tunas (ICCAT) regulating catches, farming and trading. Concerning the
General Fisheries Commission for the Mediterranean (GFCM), Croatia continues
aligning its national legal framework with GFCM recommendations. It will need
to ensure timely alignment with the acquis in this area by the date of
accession.

Conclusion

Croatia is generally meeting the
commitments and requirements arising from the accession negotiations in the
field of fisheries and should be in a position to implement the acquis
as of accession. Increased efforts are needed in the area of fleet and resource
management, inspection and control and structural policy, in particular as
regards the preparation of the management plans, the phasing out of the
category of subsistence fisheries and the completion of the satellite based
vessel monitoring system.

4.14.
Chapter 14: Transport policy

Alignment in the area of road transport is
almost completed. Croatia amended its legislationt to ensure compliance
with the acquis on driving licences, qualification and training of
drivers and road infrastructure safety management. Implementing legislation
still needs to be adopted, and the on-going efforts to ensure effective
enforcement the road safety acquis need to be further sustained.

Legislative alignment in the field of rail
transport is at an advanced level, but efforts will need to be increased in
certain areas to fully align with the acquis. The Rail Market Regulatory
Agency took steps against the lack of the independence of the infrastructure
manager. Furthermore, the financial viability of the infrastructure manager and
the passanger operator without support from public funds remains problematic.
With respect to the Croatian Railway Safety Agency, an action plan was adopted
for strengthening its administrative capacity. However, current staffing level
and the available facilities remain inadequate. Necessary ordinances for the
functioning of the Agency are still to be adopted, and vehicle authorisation
has not yet been transferred from the ministry to the agency. The agency has
stepped up its cooperation at EU level, notably with the European Railway
Agency. The agency awarded the authorisations for HZ Infrastruktura recently
and work on the vehicle register has started. As regards the established of a
multi-modal accident investigation body, the law has yet to be adopted and
implemented.

As regards inland waterways transport preparations
are advanced. Implementation of the River Information System (RIS) in Croatia
is ongoing, with construction and installation of equipment to be completed by
the date of accession. The RIS is planned to be fully implemented on the Danube
River by the date of accession; implementation of the RIS on the entire length
of the Sava River has been postponed to 2015 to achieve coordinated RIS
implementation with the other countries crossed by this waterway.

Concerning combined
transport preparations are advanced, but the relevant law still needs to be
revised in order to comply fully with the acquis.

In the area of air transport, alignment
with the acquis is well advanced, in particular with regard to
implementation of the European Common Aviation Area Agreement and the Single
European Sky initiative. Croatia needs to keep up efforts to ensure full
alignment of the Civil Action Act and related bylaws with the acquis, as
well as make the necessary updates following the establishment of the multi-modal
accident investigation body.

With regard to maritime transport preparations
are almost complete, as Croatia has established a Vessel Traffic Monitoring and
Information System (VTMIS), and the system is planned to be fully operational
at the beginning of 2013. The Croatian flag continued to remain in 2011 on the
White List of the Paris MoU. Particular attention needs to be paid to ensuring
non-discriminatory market access in maritime agreements and establishment of an
independent accident investigation body.

With respect to
satellite navigation preparations are complete. Following
accession Croatia will participate in the Galileo programme as an EU
Member State.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of transport
policy and is expected to be in a position to implement the acquis by
the date of accession. Further efforts are required, in particular to
strengthen the administrative capacity and to ensure the independence of the
yet to be established joint accident investigation body, in order to ensure
Croatia completes its preparations for membership by the date of accession.

4.15.
Chapter 15: Energy

In the field of security of supply
preparations are advanced. As regards the mandatory 90 days of emergency
oil stocks, Croatia has established the reserve targets in line with the acquis.
It needs to continue efforts to establish its own storage.

In the field of the internal energy
market alignment is moderately advanced. Croatia has adapted implementing
legislation to bring it further into line with the acquis. The alignment
with the third energy package is significantly delayed compared to Croatia’s
original timetable and remains to be achieved. Further efforts are needed to
improve competition in the electricity and gas markets, in particular by
ensuring the cost-reflectivity of regulated energy tariffs and the
predictability and transparency of tariff setting measures. Temporary price
caps for eligible customers, which have become a regular practice, remain to be
removed. In addition, the energy regulatory authority needs to play a more
assertive and independent role, which will require it to be de-politicised. The
tariff for the procurement of gas by suppliers to tariff customers needs to be
removed.

In the areas of renewable energy sources
and energy efficiency, preparations are moderately advanced.
Investments have been increasing, but are still below the targets set by the acquis.
Although the issue of complicated and lengthy administrative procedures for RES
projects has been addressed in 2012 further efforts are needed in this regard.
Investments in the transmission and distribution network will also be necessary
to accommodate an increasing uptake of intermittent electricity in the system.
The Act on Energy End-Use Efficiency and the Act on Physical Planning and
Adoption have been amended. Full alignment will require the adoption of
implementing legislation, in particular regarding energy performance of
building.

In the area of nuclear energy, nuclear
safety and radiation protection, Croatia has largely aligned its
legislation with the acquis. Implementing legislation relating to
the physical security of radioactive sources, nuclear material and nuclear
facilities has been enacted. The previous different regulatory authorities, now
merged under the State Office for Radiological and Nuclear Safety (SORNS),
function as a single entity, but further attention is needed to ensure its
independence and to continue improving its administrative capacity. The Euratom
Directives on public information and on shipment of radioactive waste and
substances have not yet been transposed. A draft national emergency plan for
nuclear accidents has been developed and an Emergency Preparedness and Review (EPREV)
mission has been carried out by the IAEA. Implementing legislation on certain
aspects, such as control of high-activity sealed radioactive sources and orphan
sources, has not yet been enacted. Furthermore, Croatia needs to establish a
national programme for the management of spent fuel and radioactive waste from
generation to disposal, including radioactive waste and spent fuel from the
Krško Nuclear Power Plant, which is in compliance with the recently adopted
Directive 2011/70/EURATOM.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of energy and
is expected to be in a position to implement the acquis as of accession.
However, further efforts are required, in particular to align to the third
internal energy market package and ensure the development of a competitive
market for electricity and gas. Croatia also needs to continue efforts to meet
the 2020 requirements regarding the promotion of energy efficiency and
renewable energy, as well enhance administrative capacity, especially in the
Sector for Energy of the Ministry of Economy, in order to ensure that Croatia
completes its preparations for membership by the date of accession.

4.16.
Chapter 16: Taxation

Legislative alignment in the field of indirect
taxation has further advanced and is almost completed. New legal provisions
were adopted on the introduction of an electronic system for supervising
movements of excise goods. Legal alignment in the area
of excise duties and VAT needs to be completed, with special reference to the
scope of the reduced rates, tobacco products, exemptions and special schemes.

In accordance
with the transitional arrangement granted, Croatia is committed to remove the
exemption from VAT regarding the supply of building
land, whether or not built on, by the end of 2014.
Similarly, in accordance with the transitional arrangement, Croatia is
committed to remove by the end of 2017 the excise
duties on cigarettes that are lower than the minimum level set in the acquis.

Legislative alignment in the field of direct
taxation has further advanced and is almost completed. In November 2011 and
February 2012 legislation implementing the Profit Tax Act was adopted which is
in line with the acquis on direct taxation.

Alignment in the field of administrative
cooperation and mutual assistance has further advanced and is almost complete. Further efforts to
prepare staff of the Central Liaison Office and the Excise Liaison Office for
administrative cooperation and mutual assistance tasks are required. An IT
application for the exchange of information as regards the acquis on
taxation of savings needs to be developed. Further efforts are needed to reduce
the backlog of appeals suspending the payment of taxes, as this has a
significant impact on the collection of national revenues (and likewise of EU
own resources after accession). (See also Chapter 33 — Financial and
budgetary provisions)

Alignment in the field of operational capacity and computerisation has further advanced and is almost complete. Both the Tax
Administration and the Customs Directorate (in charge of collection of excise
duties) updated their business strategies for the period up to and after
accession, together with some of the associated sector strategies, e.g. for human
resources and IT. Further efforts are required to implement these strategies in
practice, especially through developing concrete action plans and further
sector strategies for particular core areas (including controls and risk
management). The personal identification number (PIN) has been made fully
operational and access to the electronic system for declaring taxes has been
broadened. Further attention must be given to the need for Croatia to ensure
that all relevant IT systems are in place and to be able to exchange
information with the EU institutions and other Member States from the day of
accession. Efforts need to continue to launch the Excise Movement and Control
System (EMCS) at national level in March 2013.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of taxation
and is expected to be in a position to implement the acquis as of
accession. Alignment with the acquis is almost
complete with the exception of some areas of excise duties and VAT. Further efforts are required to ensure that
all relevant IT systems are in place and to be able to exchange information
with EU institutions and other Member States as from the day of accession, in order to ensure Croatia completes its preparations for
membership by the date of accession.

4.17.
Chapter 17: Economic and monetary policy

Legislative alignment has been completed in
the field of monetary policy.

In the area of economic
policy Croatia has further advanced and has almost completed fulfilling the
commitments and requirements arising from the accession negotiations.
Improvement of the institutional and technical capacity for developing
medium-term macroeconomic and fiscal frameworks continued. The Fiscal
notification and the Pre-accession Economic Programme (PEP) 2012-2014 was
submitted in March 2012 and presented a comprehensive,
though optimistic, and consistent macroeconomic and
fiscal framework for economic policies. Overall, broad political consensus on
the fundamentals of a market economy was maintained.

Implementation of the necessary structural
reforms needs to be stepped up. Alignment of fiscal reporting with ESA95
standards needs to be further enhanced.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of economic
and monetary policy and is in a position to implement the acquis as of
accession.

4.18.
Chapter 18: Statistics

Legislative alignment in the field of statistics
has further advanced and is almost complete.

The responsibilities of the Croatian Bureau
of Statistics (CBS) have increased and it is gradually taking the leading
methodological role in the compilation of Excessive Deficit notifications.

Croatia has further advanced in the field
of classifications and registers, where the Croatian Bureau of
Statistics (CBS) is steadily working on improving the coverage the Statistical register of business entities and the statistical farm
register.

Croatia has advanced in the area of sectoral
statistics. Publication of the annual GDP data according to the EU
requirements has been completed. Increased efforts are needed to provide all
data in accordance with the ESA95 transmission programme, a complete GNI
Inventory and a complete set of government deficit and debt statistics (EDP).

Concerning agriculture statistics, the 2010
Farm structure survey (FSS) data and Survey on Agricultural Production Methods
(SAPM) data were transmitted to Eurostat in April 2012. The use of
administrative data in producing agricultural statistics is constantly
increasing.

A pilot survey for Intrastat was carried
out. Testing the Intrastat methodology and related applications in CBS and in
the Customs Administration (CA) is on-going.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of statistics
and is in a position to implement the acquis as of accession.

4.19.
Chapter 19: Social policy and employment

Croatia has largely aligned its legislation
in the field of labour law. A new Aliens Act transposing the acquis on
posting of workers was adopted in October 2011. Legal alignment still needs to
be completed, notably as regards working conditions of mobile workers engaged
in interoperable cross-border services in the railway sector and on the
European Works Council Directive. Strengthening the administrative capacity of
the Wage Guarantee Agency needs to continue. A municipal court for work-related
disputes in Zagreb has been operational since January 2012. Training of judges
in the area of labour law needs to continue.

Croatia has largely aligned its legislation
in the field of health and safety at work. Legal alignment still remains
to be completed as regards the Occupational Safety and Health Act. As regards
administrative capacity, training of labour inspectors has continued. The
number of labour inspectors (111) still falls short of the requirements of the
State Inspectorate Act (139).

In the area of social dialogue,
Croatia is well prepared. Regular meetings of the Economic and Social Council
have continued following the constitution of the new government, with strategic
reform issues being debated in plenary. Representativeness criteria for the
participation of trade unions in collective bargaining were adopted in
July 2012. Two bipartite sectoral councils (social councils for road and
railway transport) have been established in addition to the two already
established tripartite sectoral councils. Training has been provided for
mediators in collective labour disputes. Capacity building of social partners
to assume their responsibilities for social dialogue at EU level needs to
continue.

As regards employment policy,
Croatia is sufficiently prepared. Amendments to the Law on Contributions were
adopted in February 2012 with the aim of making the labour market more
competitive. An employment incentive package focusing on providing long-term
traineeships for young people has been adopted; providing a quality framework
in implementation will be essential. Funds for active labour market policies
have been increased. The situation on the labour market has further
deteriorated, with the young and the long-term unemployed particularly hard
hit. So far, effects to make the labour market more dynamic and overcome its
structural weaknesses have been limited. Low participation and employment rates
still need to be addressed (See Economic criteria). Employment
policy also needs to be subject to regular monitoring and evaluation. The
mismatch between demand and supply and skills forecasting still needs to be
addressed. A full-fledged strategy for lifelong learning still needs to be
adopted. As regards undeclared work, more efforts are needed to address the
issue, in terms of both policy targets and implementation.

As regards preparations for the European
Social Fund, Croatia is well prepared. Recruitment and training of staff
are ongoing. Further capacity building of relevant structures needs to continue
to allow sufficient absorption of the future funds under the ESF.

In the area of social inclusion,
Croatia is sufficiently prepared. A new Social Welfare Act was adopted by the
parliament in March 2012, aimed at rationalising social benefits and advancing
the fiscal and administrative decentralisation of social services. Decentralisation of social services is still at an early stage.
Further efforts are needed to make the labour market more inclusive and to
provide adequate pensions or income support for the elderly. Particular
attention needs to be paid to the employment of minorities in the state
administration. Challenges remain in terms of reducing health and regional
inequalities and in terms of inclusive rural development. Implementation of
measures envisaged under the Master Plan on De-institutionalisation 2011–2016
needs to be speeded up.

People with disabilities continue facing
discrimination on the labour market, and children with disabilities still 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. Attention needs to be paid also to the
implementation of regulations ensuring physical accessibility.

In the area of social protection,
Croatia is sufficiently prepared. New legislation regulating the second and third
pension system pillars entered into force in October 2011. Efforts need to
continue to ensure the adequacy and sustainability of pensions, and to reduce
further the system of privileged pensions. More efforts to improve employment
of older workers and to protect elderly people without income are needed.
Efforts need to continue to implement a comprehensive reform of health care to
ensure that it is efficient and sustainable.

Croatia has aligned its legislation in the
area of anti-discrimination through adoption of amendments to the
Anti-discrimination Act in September 2012. Measures aimed at developing a
comprehensive system of monitoring of cases of discrimination are ongoing. A
number of measures have been taken to raise the awareness of anti-discrimination
efforts and to train relevant stakeholders. These efforts need to continue, in
particular at local and regional levels, with a particular focus on remote and
rural areas. Implementation of the Plan for Employment of National
Minorities in State Administration
Bodies for the period 2011–2014
needs to continue. As regards administrative capacity, a new Law on Ombudsman
was adopted in June 2012 providing for the existence of a general
Ombudsman Office and other specialised Ombudsmen’s offices.

Croatia has largely aligned its legislation
in the field of equal opportunities. Legal alignment of the Occupational Safety and Health Act with Directive 92/85/EEC, on the
introduction of measures to improve safety and health of pregnant workers and
workers who have recently given birth or are breastfeeding in the workplace, still needs to be completed. Follow-up and evaluation of measures envisaged under the National Policy for the Promotion of Gender Equality 2011–2015 need
to continue. Employment rates for women remain much lower than those for men.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of social
policy and employment and is expected to be in a position to implement
the acquis as of accession.

Further efforts are required, in particular
to complete legal alignment in the field of equal opportunities, address the
structural weaknesses on the labour market, better target social welfare, and
to strengthen administrative capacity, in order to ensure that Croatia
completes its preparations for membership by the date of accession.

4.20.
Chapter 20: Enterprise and industrial policy

In the field of enterprise and
industrial policy principles alignment has further advanced and is almost
complete.

Excessive regulation in some areas and the
cost of registration prevent expansion of the SME sector. Administrative and
judicial weaknesses continue to affect the business environment. Croatia needs
to continue taking action to further improve the conditions for doing business,
by increasing the predictability of the business environment, such as by
implementing the regulatory impact assessment, and increasing transparency of
decision making, particularly at local level.

Croatia has further advanced in developing
administrative capacity in enterprise policy. Alignment of the definition of
SMEs with the EU recommendation has been completed with the amendment of the
Act on SME Support, which was adopted in April 2012. Other acts mentioning the
definition of SMEs (e.g. the Accounting Act) remain to be aligned with the EU
recommendation. Croatia needs to complete alignment with the EU Directive on
combating late payment in commercial transactions.

In the area of enterprise and industrial
policy instruments, Croatia has established appropriate instruments and is
in advanced stage of implementation. Croatia continues to play an active part
in the EU’s Competitiveness and Innovation Programme (CIP).

Croatia has made some progress in the field
of sector policies, notably in the wood and shipbuilding sectors.
(See Chapter 8 — Competition policy)

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of enterprise
and industrial policy and is expected to be in a position to implement the
acquis as of accession. Efforts are necessary to improve the business
environment and to start the enforcement of the regulatory impact assessment.
Further work is needed to align the legislation as regards combating late payment
in commercial transactions.

4.21.
Chapter 21: Trans-European networks

In the field of trans-European transport
and energy networks, Croatia has completed alignment with the
acquis.

As regards the development of transport
networks, the ISPA measure ‘Vinkovci to Tovarnik to State Border Railway
Rehabilitation’ was completed and the section was opened to traffic at the end
of 2011. However, for another major project, ‘Zagreb Main Railway Station
Signalling and Interlocking System’, there are some delays in implementation
due to necessary works unforeseen in the initial planning.

Croatia has actively participated in the
development of new network development plans by the European Network of
Transmission System Operators for Electricity (ENTSO-E) and in the first phase
of the North-South Interconnection Initiative. The feasibility study for the
first phase of an LNG terminal (1-2 bcm/year) is on-going.

Further efforts are needed to ensure the
necessary expertise and capacity for developing and implementing complex infrastructure
projects so as to maximise absorption of the currently available IPA funds and
future cohesion and structural funds in this area.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of
trans-European networks, and is in a position to implement the acquis
as of accession.

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

As regards the legislative framework
necessary to ensure that operations financed by the Structural and Cohesion
Funds are fully compatible with EU policies, alignment with the acquis is largely in place. A new law on public
procurement together with legislation on the supervision of its implementation
came into force in January 2012. Implementing legislation in the area of public
procurement needs to be completed.

Preparations with regard to the institutional framework have further
advanced and are now almost complete. Following the reorganisation of the
institutions involved in the implementation of EU funds, a revised decision
regarding the management and control structures for post-accession programmes
has been adopted in July 2012 and is to be submitted to the Commission.
Croatia’s institutional framework for implementing the EU cohesion policy will
largely build on the existing implementation structures for IPA.

Preparations are moderately advanced in the
field of administrative capacity. Some delays have occurred in
building up staffing levels as shown by delays in the implementation of IPA.
Following a workload assessment, the Government adopted a decision in July to
recruit 232 staff by October in view of preparation for the Structural Funds
and the Cohesion Fund. Increased efforts are needed to enhance capacity in line
with the Institutional Development and Capacity Building Strategy and the
Action Plan for Implementation for the period 2010-2013. Croatia needs to
accelerate measures in building up the required administrative capacity for
managing the Structural Funds and the Cohesion Fund.

Croatia is at an advanced stage in
preparations in relation to programming requirements. The finalised
National Strategic Reference Framework and the Structural Funds Operational
Programmes for the whole period 2007-2013 are to be submitted to the Commission
by end 2012. Sustained and increased efforts are required to build up a high
quality and mature project pipeline with a view to swift absorption of regional
policy funds.

Preparations are moderately advanced in the
field of monitoring and evaluation. Based on the set-up and experience
under IPA, the development of a Monitoring and Evaluation System and an
electronic management and information system for structural and cohesion funds
continued. An evaluation strategy was adopted in March 2012 that provides a
coherent framework for evaluations under the cohesion policy. The interim
evaluation of current Operational Programmes (OPs) and ex ante evaluations of
future OPs has started. Continuous efforts are needed to complete the
establishment of the required system and ensure that it is fully functioning.

Croatia’s
preparations in the field of financial management, control and audit
are moderately advanced (See also Chapter 32 — Financial control).
Requests for the waiver of ex ante controls under IPA were sent to the
Commission and are being assessed. Waiver of ex ante controls for IPA
components preparing for structural and cohesion funds should facilitate
compliance assessment, which is a precondition for payments of structural and
cohesion funds. 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 Fund and the Cohesion Fund.

Conclusion

Croatia is generally meeting the
commitments and requirements arising from the accession negotiations in the
field of regional policy and coordination of structural instruments and
should be in a position to implement the acquis as of accession.

Increased efforts are required to
strengthen the administrative capacity for future cohesion policy
implementation and to develop a high quality and mature project pipeline, with
a view to swift absorption of regional policy funds, building on the recent
report of the European Court of Auditors.

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

Croatia
is generally meeting the commitments and requirements arising from the
accession negotiations in the field of the judiciary and fundamental rights and
should be in a position to implement the acquis as of accession, as
outlined in the 10 areas set out in Annex VII of the Act of Accession. However,
increased efforts are needed to continue strengthening the rule of law and to
fight and prevent corruption effectively. Prosecution of domestic war crimes,
respect for human rights and the protection of minorities requires continuous
attention.

1) To
continue to ensure effective implementation of its Judicial Reform Strategy and
Action Plan

Implementation of the judicial reform
strategy and action plan has continued generally in line with the deadlines
set, and included legislative fine-tuning in a number of areas. Working groups
have been established and are active to further improve specific legislation
and to increase coordination of legal instruments. Human resources planning,
including for the long-term needs of the judiciary, remains to be improved. The
budget available for the judiciary remained stable at around € 337
million, or 0.7% of GDP. A council for monitoring the implementation of the
Judicial Reform Strategy was established in February 2012, focusing in
particular on the efficiency of court proceedings. Amendments to the State
Judicial Council Act were adopted in October 2011 to further increase scope for
transferring judicial staff according to needs.

2) To
continue to strengthen the independence, accountability, impartiality and
professionalism of the judiciary

Implementation of the various measures
taken in 2010 and 2011 to strengthen the independence, accountability,
impartiality and professionalism of the judiciary has continued. The reformed
State Judicial Council (SJC) and State Prosecutorial Council (SPC) have
continued to function independently.

Both bodies have continued to appoint
judicial officials based on transparent, uniform and objective criteria. Since
2011 63 judges have been appointed. Improvements in the implementation of the
transitional system of appointing judges and prosecutors have been introduced,
including greater transparency in marking interviews, with attention paid to
ensuring equal treatment of all candidates. This is important in the final
months of implementation of the transitional system, up to December 2012. Lessons
learned from the implementation of the transitional system should be applied to
the implementation of the new system of appointments through the State School
for Judicial Officials, which will start in January 2013. This experience
should also be taken into account in upgrading the selection procedure for
transferring judges to different positions. The first intake of candidates for
the State School for Judicial Officials is finishing the second school year.
However, enrolment of the second annual intake of 55 candidates was
substantially delayed, with candidates being selected only in July for the
programme to start in September.

The SJC has begun implementation of the new
system of asset declarations for judges. Disciplinary measures are being taken
in cases of wrongdoing by judicial officials. Both SJC and SPC became more
proactive. However, the track record of implementation of the new system of
disciplinary proceedings needs to be further developed.

The SJC and SPC need to be provided with
further administrative resources to function more effectively and need to
demonstrate independence and accountability in carrying out their increased
tasks, including systematic and accurate checking of asset declarations and
proactive application of disciplinary procedures.

Secondary legislation remains to be amended
to limit judges’ immunity, thereby completing the legislative framework in this
field, and further guidance should be provided on the application of the code
of conduct.

The Judicial Academy continued to work
well. Professional training programmes, including initial training, have
continued. Training on EU law has been stepped up. The involvement of the
Judicial Academy in Europe-wide activities has increased and Croatia has signed
a Memorandum of Understanding with the Commission on participation in the EU
Civil and Criminal Justice Programmes. However, budget limitations (a cut of
approximately 28% in the 2012 budget compared to 2011) affected the functioning
of the Academy. Attention has to be paid to fully preparing judges to apply EU
law and jurisprudence as of accession.

3) To
continue to improve the efficiency of the judiciary

Croatia has continued to implement various
measures aiming at improving the efficiency of the judiciary. In the first semester
2012 the backlog of criminal cases continued to fall by around 12%, and the
number of old civil cases decreased by around 5%. However, a bigger effort is
needed to reduce the number of unresolved civil and commercial cases further.
Slightly more new cases entered the system in the first semester 2012 (844,218)
than were resolved (836,160).

Also the number of enforcement cases
increased by around 5% in the first semester 2012, although the enforcement
system for monetary claims run by the financial agency FINA worked well. In
July 2012 the government submitted to Parliament proposals for new enforcement
legislation, which no longer provides for the introduction of public bailiffs.
The new system, once adopted, will have to demonstrate its capacity to ensure
the enforcement of court decisions and writs of executions and to reduce the
backlog of enforcement cases. Further attention needs to be paid to ensuring
that higher courts, including the Supreme Court, are adequately equipped to
handle the disproportionate increase as cases advance through the system. The
new system of administrative justice came into force in January 2012, albeit
with some delays in appointing the necessary staff. Croatia needs to continue
to implement efficiency measures with vigour, in particular to ensure improved
rates of case handling and reductions in the number of old cases.

Some progress has been made with the
physical infrastructure and computerisation of courts. The merger of courts as
part of the court rationalisation process is continuing. The roll-out of the
integrated case management system (ICMS) in 33 municipal courts is underway.
Once it is finished, it will cover almost all courts in Croatia. However, the
system should be applied to all courts, including the High Commercial Court
and, for case management of misdemeanours, the High Misdemeanour Court.
Moreover, further improvements are still needed in statistical data collection
and analysis and in the monitoring of the overall length of proceedings. In
general, misdemeanour courts need better equipment and premises. Further
efforts are needed to increase mobility of judges and to develop the framework
criteria for assessing their productivity.

4) To
continue to improve the handling of domestic war crimes cases

Croatia has continued to process domestic
war crimes cases. Implementation of the strategy for addressing impunity has
started and a number of priority cases identified at national and regional
level have been addressed, with further arrests, indictments and court rulings.
However, the majority of crimes have not yet been pursued in Court. A more
balanced approach to trials has continued, with further cases being transferred
to the four specialised courts (87). Measures have been taken to protect
witnesses with improved witness support services at certain courts.The war
crimes database should be upgraded to enable more analytical information
searches and should be effectively used by county prosecutors. Courts should
further specialise in war crimes trials, through specific training of dedicated
judges, and should prepare for an increasing number of cases. Croatia needs to
give continuous attention to the issue of witness protection and attendance of
witnesses in war crimes trials, especially in cases relocated to the
specialised chambers. The review of cases tried in absentia should
continue. The Law on invalidation of certain legal acts of the judicial
bodies of the Former Yugoslav National Army, the former Socialist Federal
Republic of Yugoslavia and of the Republic of Serbia adopted in October
2011 gave rise to concerns about future bilateral cooperation with Serbia in
war crimes cases. The law has been challenged by the Presidentin the
Constitutional Court on procedural grounds. Croatia has made contact with Serbia
to address the possible adverse effects of the law, and has started technical
negotiations with Serbia on an agreement on cooperation in this field.

Further efforts have to be made to tackle
impunity especially as the majority of cases have yet to reach final verdict or
are still to be investigated. Croatia needs to give continuous attention to the
issue of witness protection and attendance of witnesses in war crimes trials,
especially in cases relocated to the specialised chambers.

5) To
continue to ensure a sustained track record of substantial results based on
efficient, effective and unbiased investigation, prosecution and court rulings
in organised crime and corruption cases at all levels including high level
corruption, and in vulnerable sectors such as public procurement

An adequate legal and institutional
framework remains in place for the fight against corruption and organised crime
and a track record of implementation continues to be developed. Law enforcement
bodies remain proactive, especially in higher-level cases. Developments include
guilty verdicts against a former manager of a state-owned company, a city mayor
and a County Court judge for abuse of office and indictment of a political
party for corruption. While the law enforcement bodies continue to focus on
more complex, higher-level cases, the overall number of cases being handled is
falling.

Local-level corruption needs attention,
particularly in public procurement. The legal framework for the seizure and
confiscation of assets needs to be better implemented across the board.

Further attention should be paid to the
system for checking on dismissals of criminal cases by the prosecutor. The
current system does not provide for independent checks on decisions by State
prosecutors to dismiss reports of crime.

A number of senior appointments to the
police were made. The implementation of the Law on the Police should be
ensured, in particular to depoliticise the police and increase professionalism
of the police.

6) To
continue to improve its track record of strengthened prevention measures in the
fight against corruption and conflict of interest

Croatia improved its track record of
strengthened prevention measures in the fight against corruption by means of a
number of legal instruments, e.g. on the financing of political parties and
electoral campaigns, access to information and public procurement. However,
Croatia has not efficiently implemented all legal measures to prevent conflict
of interest.

As regards the financing of political
parties and election campaigns, the State Electoral Commission, which is the
supervisory body, was strengthened and new rules were applied to the general
elections in December 2011 without major difficulties and with few reported
shortcomings. A working group was set up to draw on lessons learnt in preparing
for the local elections planned for 2013. Continuous efforts are needed to
effectively control the financing of political parties, including outside the
election period.

New rules on access to information are
being applied, with the first appeals reaching court. However, general
monitoring by the Data Protection Agency, which is in charge of implementing
the law, is difficult because in 2011 less than half of the institutions
concerned submitted a report to the agency. In 2011, no public interest test
was applied to classified data. The current practice of the Administrative
Court is to confirm the existence of such data and deny access to it. The
practice of applying the public interest test to classified information needs
to be developed, including through legislative changes.

The new public procurement legislation in
force since January 2012 provides for increased transparency, including
publication of information on the actual execution of contracts. The effective
implementation of this legislation is key.

Improved and stricter conflict of interest
legislation was adopted in early 2011; however, the new Conflict of Interest
Commission has still not been appointed, and this has delayed the
implementation of the law. Some initial steps have been taken for the setting
up of the Commission, with the publication by the Parliament of the request for
expressions of interest for the selection of the Commission’s members in August
2012. The system for checking on asset declarations and unjustified wealth
needs to be strengthened and effectively implemented.

Provisions of the previous legislation on
criteria for membership of the supervisory and management boards of public
companies have been overturned. Croatia needs to ensure that a strong
system is in place to prevent corruption in state-owned companies. The
Conflict of Interest Commission needs to be established without delay. The
concept of political accountability and zero tolerance of corruption needs to
continue being developed.

7) To
continue to strengthen the protection of minorities, including through
effective implementation of the Constitutional Act on the Rights of National
Minorities (CARNM)

Implementation of the Constitutional Act on
the Rights of National Minorities continues. Eight members of parliament
representing national minorities were elected in December 2011. Some steps have
been taken by the government to implement the May 2011 plan for minority
employment for the period 2011-2014. The level of employment of minorities in
the state administration and judiciary remains below the requirements set by
the Constitutional Act on the Rights of National Minorities. While this may be
partially explained by relatively few new recruitments due to the general
economic crisis, more efforts should be made to ensure implementation of this
plan, including increased monitoring efforts.

Croatia also needs to continue to foster a
spirit of tolerance towards minorities, in particular Serbs, and to take
appropriate measures to protect those who may still be subjected to threats or
acts of discrimination, hostility or violence. 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.

8) To
continue to address outstanding refugee return issues

Housing Care programmes for returning
refugees continue to be implemented, although at a slower pace. Under the March
2011 plan for dealing with the approximately 2,350 remaining applications, by
August 2012, 259 were settled, out of which 139 families took over the keys. By
August 2012, 1,305 positive approvals for housing care above the benchmark for
housing care have been given. 106 appeals for housing reconstruction are still
pending. The decision on validating pension rights continues to be implemented.
Croatia has also continued to engage with the other countries of the region in
the Sarajevo Declaration Process, in which progress is being made, particularly
on the regional housing project. There has been limited implementation of the
new purchase options under favourable conditions for housing care beneficiaries
and no significant progress with regard to the 15 unsolicited investment cases.
Conditions for sustainable refugee return need to be further developed.

9) To
continue to improve the protection of human rights

Human rights continued to be generally well
respected. However, existing legal provisions need to be applied with more
vigour. The general Ombudsman and specialised ombudspersons continue to play an
important role in human rights protection. However, the follow-up of the
Ombudsman’s recommendations needs to be ensured. The Constitutional Court
revoked a law on the merger of the Ombudsman’s offices with the Centre for
Human Rights and with the three specialised Ombudspersons for gender equality,
for children and for disabled persons, due to procedural reasons. New
legislation, which no longer foresees the merger of the offices, was adopted in
July 2012. The Ombudsman offices need to be strengthened to further improve the
human rights protection system. This includes providing adequate financing and
office premises, and setting up a joint database.

Croatia has further developed its track record
of implementation of the Anti-discrimination Act and legislation on hate
crimes. This needs to continue to develop, with attention paid to ensuring that
dissuasive sanctions are applied. Amendments to the Anti-discrimination Act
were adopted by the Parliament in September 2012. The gay pride events in Split
and Zagreb took place without major incidents, with strong commitment from the
Croatian government to their smooth organisation. Lesbians, gays, bisexual and
trans-gender (LGBT) people still face threats and attacks. The legal framework
for free legal aid has to be improved to enable better access to legal aid and
to foster the role of NGOs as legal aid providers.

10) To
continue to cooperate fully with the International Criminal Tribunal for the former
Yugoslavia

Croatia continues to cooperate with the
International Criminal Tribunal for the former Yugoslavia (ICTY). There have
been no particular developments with respect to Croatia’s investigations aimed
at locating or determining the fate of missing military documents requested by
the Office of the ICTY Prosecutor. Croatia’s request to act as amicus curiae
in the appeal against the verdict of 15 April 2011 in the case of Croatian
Generals Gotovina and Markač was rejected by the Court. The ICTY Chief
Prosecutor has issued a positive report on Croatia’s cooperation with the ICTY.

4.24.
Chapter 24: Justice, freedom and security

In the field of
migration, Croatia has further aligned with the acquis and
preparations in this area are almost complete. The number of irregular migrants
apprehended in 2011 increased to 3,461. Over the same period, 552 unaccompanied
irregular minors were identified (their number is almost twice as high as the
previous year). Good cooperation with the other countries of the region in the
field of readmission can be noted; the agreement with Bosnia and Herzegovina
entered into force in April 2012. A similar agreement was signed with Germany
in March 2012. Work is on track to build the facility for minors and other
vulnerable groups of illegal migrants in Jezevo. Further efforts are needed to
start building two additional transit reception centres for irregular migrants.
On legal migration, the new Aliens Act entered into force in January 2012,
further aligning the national legislation with the acquis in this field.
The preparation of a new migration strategy needs to continue without delays.
Croatia will need to implement the legal framework on unaccompanied minors, by
developing for them appropriate assistance and start building the new reception
centres for irregular migrants before accession. Alternative temporary
solutions, taking into account the growing number of migrants entering the
country, especially in the border areas, need to be considered.

In the field of asylum Croatia has
almost completed alignment with the acquis. Preparations need to ensure
sufficient institutional capacity in this field, in terms of sufficient and
trained personnel, taking due account of the steady increase in the number of
asylum seekers in the country. Implementing legislation in the field of free
legal aid during the asylum procedure was adopted in March 2012. The
administrative courts took over responsibility for second-instance asylum cases
as of January 2012. Following a three-month transitional period, the commission
for asylum ceased its work in March 2012. An initial number of posts for judges
and administrative staff of the new courts were filled; training on asylum for
the staff began. Refugees still face difficulties in securing access in practice
to the rights granted to them by national law. The recruitment and training of
the administrative courts’ judges and employees need to continue. The number of
asylum seekers increased sharply, from 290 in 2010 to 807 in 2011. The Ministry
of the Interior has stepped up its efforts to offer certain services to asylum
seekers, with the support of local NGOs, but the involvement of all the other
ministries needs to be ensured. Preparations for implementing the Dublin and
Eurodac Regulations have continued, including by providing the personnel of the
Ministry of the Interior and the border police with relevant training. Croatia
will need to ensure that refugees enjoy full access to their rights before
accession.

Legislative alignment is moderately
advanced as regards visa policy and needs to progress, to reach full
alignment with the acquis on visa issuance and travel documents. The new
Aliens Act entered into force in January 2012; the related implementing
legislation has not yet been adopted. On visa requirements, Croatia has fully
aligned its legislation with the EU positive list of Regulation 539/2001.
Further alignment is required with the uniform procedure for issuing visas and
the EU visa code. The list of countries whose nationals require a visa to enter
Croatian territory is not yet fully aligned with that of the EU. The government
adopted a decision temporarily liberalising the visa regime for citizens of the
Russian Federation, Ukraine and Kazakhstan for transit through or staying up to
90 days from 1 April to 31 October 2012, which is not in line with the acquis;
the decision will cease to apply as of November. Biometric passports are
compliant with EU standards; the old ID cards issued before 2003 are still in
circulation but in August 2012 the Government adopted the decision that they
cannot be used as valid travel documents.

As regards
requirements to be met as of accession to the Schengen area, further alignment
is necessary on the procedure for issuing visas in line with the EU visa code.

With regard to external
borders and Schengen, legislative alignment with the acquis has
progressed moderately and needs to continue for Croatia to be prepared to take
over control of the EU external borders. The State Border Control Act and its
implementing legislation were amended at the end of 2011. The Integrated Border
Management (IBM) Action Plan was revised in April 2012. The National Maritime
Centre in Zadar has started to be operational; yet its interconnectivity with
relevant Ministries has to be ensured. The cooperation with Frontex was
enhanced and includes Croatia’s participation in different activities and joint
operations. Regular coordination meetings take place with neighbouring
countries, as do joint patrols of the borders; those with Serbia and with
Montenegro need to be enhanced. A common contact point with Serbia was
established at the border crossing point (BCP) of Bajakovo-Batrovci and it is
fully operational. A first coordination meeting with the authorities of Bosnia
and Herzegovina, to implement the mutual agreement on state border control, was
held in December 2011. Discussions with both countries, and with Montenegro, to
bring bilateral agreements on local border traffic in line with the acquis
are advancing and need to be finalised before accession. The Free Transit
Agreement with Bosnia and Herzegovina (‘Neum agreement’) needs to be brought in
line with the acquis before accession.

Staffing
targets for the border police set for 2011 were almost completely met; 308 new
officers were hired in 2011. The total number as of May 2012 is 6,017, of which
4,647 are at the future external border. The recruitment needs to continue to
reach the Schengen standards. Basic and specialised training continued; full
alignment with the programme of the Common Core Curriculum needs to be ensured,
with the specialised training systematically included in the curricula of the
border police.

The IBM Action
Plan was partly implemented; certain activities planned in 2011, relating to
the procurement of technical equipment and to infrastructures, have been
postponed to 2012. Delays in these areas need to be properly monitored and
addressed, particularly with regard to the Neum corridor. The construction of
the BCPs at the Neum corridor needs to be finalised such that they are
operational upon accession. The installation of the National Border Management
Information System (NBMIS) has continued but the new system is not yet
installed at all BCPs. As of August 2012, it was operational at 81 BCPs. The
preparation and the relevant training need to continue. Efforts need to be made
to conclude the interministerial agreement and to continue recruitment,
purchase of equipments and trainings, with a view to making the National
Maritime Centre in Zadar fully operational. Inter-agency cooperation on IBM
issues has continued, but a joint risk analysis is missing. Croatia will need
to address the delays in implementing the IBM Action Plan, especially those
related to infrastructures. All bilateral agreements need to be brought in line
with the acquis before accession.

Croatia has
continued to align its legislation in the field of judicial cooperation in
civil and criminal matters and the preparation is almost completed. An
agreement on mutual execution of criminal judgments with Montenegro, and an
extradition agreement with the former Yugoslav Republic of Macedonia, were
signed in October 2011. A working group has been set up and met several times
to prepare the new Act on International Private Law. Cooperation with the
European Judicial Network in civil and commercial matters has progressed; a
network of national contact points is being developed in this regard.

Croatia will
need to continue strengthening interinstitutional coordination on judicial
cooperation.

As regards police
cooperation and the fight against organised crime, activities
have continued with the aim of bringing the national legislation into line with
the acquis and coping with the future challenges of fighting organised
crime within the EU. In this area, the country is advanced, but needs to remain
vigilant given the important challenges as regards organised crime activities
in the region.

A number of
bilateral agreements in the field of police cooperation and organised crime
were signed; those with Bulgaria and with Poland were ratified. Good
cooperation with Europol has continued. Two new liaison officers have been
appointed, respectively for Europol and for Bosnia and Herzegovina. The
technical preparation and staff training to establish the Supplementary Information
Request at the National Entry (SIReNE) Office and the National Office for the
Schengen Information System (SIS) have progressed; yet the regulatory framework
for the SIS office is still missing. A decision on the premises, staff and the
budgetary allocation destined to the SIReNE office needs to be taken.

Both the legal
framework and the institutions in charge of combating organised crime have
effectively contributed to counteracting this phenomenon, at both national and
international level, taking into account the good level of alignment with the
EU standards achieved in this area. Training and activities to improve police
performance continued. The government decided not to revise the Law on Police
currently in force; part of the legislation implementing the Police Act is
still missing and needs to be prepared without delay. The Ministry of the
Interior needs to develop IT support to ensure transparent implementation of
the Strategy for its Human Resources Management. The track record on organised
crime cases has continued to develop, not least on drug trafficking.
Implementation of the legal framework on the seizure and confiscation of assets
needs to be consolidated, as does the coordination between criminal and
financial investigations. The total level of assets seized and confiscated is
relatively low and further efforts are necessary in this regard. A monitoring
system to fight corruption in border management is in place. The equipment and
the premises of PNUSKOK’s regional office in Split would still need to be
upgraded; operational guidelines and specialised training for the newly
employed staff of the office need to be introduced. The second-instance body which
reviews cases of offences against the public administration remains to be
strengthened.

Inter-agency
cooperation in exchanging data on transactions suspected of involving money
laundering or terrorist financing is now facilitated by the signature of an
annex to the protocol on cooperation between authorities dealing with
corruption, organised crime and the associated crimes of money laundering and
terrorist financing. Training on anti-money laundering measures and on the
fight against cybercrime has continued. Administrative capacities in the
anti-money laundering field need to be improved (see also Chapter 4 — Free
movement of capital), as well as the capacities of the law enforcement
authorities to conduct financial investigations.

The new
Criminal Code, adopted in October 2011, splits the criminal offence of
trafficking in human beings and slavery, introducing new types of exploitation.
The national action plan against trafficking in human beings for the period
2012-2015 was adopted in February 2012; a new national committee for action
against trafficking was set up in March 2012. Implementation of the legislative
framework on trafficking needs to be strengthened, as does public awareness, to
ensure better identification and protection of the victims. The new national
committee for action against trafficking has not yet met, since the beginning
of 2012. In 2011, only 14 victims were identified (7 in 2010). Further measures
need to be put in place to ensure their rehabilitation and compensation. The
training for judges, prosecutors and other civil servants dealing with
trafficking needs to be improved, as the level of sentencing in cases of human
trafficking is very low compared to other types of organised crime.

Croatia will
need to complete a number of steps in this field before accession. These
include putting in place the regulatory framework for the SIS office and making
the SIReNE’s one fully operational, upgrading police equipment and the
facilities of PNUSKOK, increasing the level of seized and confiscated assets
and better coordinating criminal and financial investigations. In the fight
against trafficking in human beings, attention needs to be paid to
implementation of the relevant legal framework and to the overall definition of
policies in this area.

With regard to
internal border control, a decision on the application of the relevant Schengen
acquis in Croatia shall be taken by the Council, in accordance with the
applicable Schengen procedures and while taking into account a Commission
report confirming that Croatia continues to fulfil the commitments undertaken
in its accession negotiations that are relevant for the Schengen acquis.

Alignment is
moderately advanced in the fight against terrorism and will require
further attention, especially to implement the Action Plan for the prevention
and suppression of terrorism and the Maritime anti-terrorism plan. Experts from
the police attended various training sessions on topics related to
anti-terrorism, such as counter-explosive protection and measures to protect
against ionising radiation. The Ministry of the Interior completed the examination
of the Murat storage facility for explosives and ammunition, in line with the acquis;
additional efforts need to be made to complete the work at a similar location
near Djakovo. Safety studies for the areas where ammunition is to be destroyed
have yet to be prepared. The protocol on cooperation between the Interior and
Defence Ministries for the destruction of explosives and ammunition needs to be
adopted. Croatia needs to step up its efforts in implementing the action plans
relating to anti-terrorism and in completing the examination of ammunition and
explosive storage sites, to bring them into line with the acquis.

Legislative
alignment in cooperation in the field of drugs has achieved significant
progress and is almost complete; Croatia is ready to face the challenges in the
fight against drug trafficking within the EU. The new National Strategy on
Combating Drug Abuse, for the period 2012-2017, was prepared taking account of
the evaluation of the previous Strategy (2006-2012). A first national survey on
the use of drugs and other addictive substances in the general population was
conducted in 2011, with a view to improving reporting to the European
Monitoring Centre for Drugs and Drug Addiction (EMCDDA). The number of drug
offences and drug offenders identified in 2011 remained quite stable compared
to last year; 7,767 drugs-related offences were reported (7,782 in 2010), 5,269
for the purpose of possession or use and 2,498 for the purpose of trafficking
or production. A total of 5,715 offenders were reported. Croatia’s regional and
international cooperation in the field of drug smuggling and trafficking has
continued to be very good. With a view to improving its national Early Warning
System on New Psychoactive Substances, the Office for Combating Drug Abuse set
up an expert group to improve the reporting and sharing of data on drugs and
drug trends with other countries. The office set up a database to take stock of
the projects in Croatia in the fields of prevention, treatment, harm reduction
and social reintegration; the best programmes will receive a joint quality
certificate from the National Office and the EMCDDA, giving them priority
access to the funds available at national level. Croatia needs to keep up its
efforts to implement the acquis in this field by accession.

Preparations in
the field of customs cooperation are well advanced.

For the fight
against counterfeiting of the euro, see Chapter 32 — Financial
control.

Conclusion

Croatia is
generally meeting the commitments and requirements arising from the accession
negotiations in the field of justice, freedom and security and should be in a
position to implement the acquis as of accession.

Attention must
be given to further legislative alignment across the board, including with
regard to new acquis, in order to ensure that Croatia will be fully
aligned as from the date of accession. Specific efforts are required to
complete the alignment with the EU visa regime.

In the area
of border management, continued attention needs to be paid to timely implementation
of the relevant action plan, including by filling the vacant positions
according to the schedule; efforts are still needed on equipment and
infrastructures. The country needs to make sure sufficient financial allocation
is made available in this field already before accession. Croatia should also
continue developing a track record of cases in the fight against organised
crime. Further efforts are needed in the implementation of the legal framework
on the seizure and confiscation of assets.

4.25.
Chapter 25: Science and research

In the area of research and innovation
policy, Croatia is sufficiently prepared. It has continued to participate
successfully in the Seventh EU Research Framework Programme (FP7) and has taken
several measures to reform the national research landscape with a view to
further integration into the European Research Area. Measures have been taken
also to stimulate innovation and to contribute to the Innovation Union
flagship.

In the area of the Seventh EU Research
Framework Programme (FP7), Croatia is well prepared. Participation in FP7
has continued to increase. Croatia has a good level of administrative capacity
and a good knowledge of cooperation with EU partners and the region. In a
number of important FP7 programmes, participation is insufficient; in
particular, the number of successful Marie Curie grants is still very low, the
number of SMEs participating in FP7 is weak and no grants have been obtained
from the European Research Council. This remains to be addressed, in particular
in preparation for the next Research and Innovation programme
Horizon 2020. Croatia needs to also consider more actively research
opportunities on nuclear research under the Seventh Euratom Framework
Programme 2011–2013.

As regards preparations for integration
into the European Research Area, Croatia is sufficiently prepared.
Implementation of the Action Plan for Mobility of Researchers has continued and
steps have been taken to host foreign researchers in Croatia. Croatia actively
participates in EURAXESS network. Thematic evaluation of public research
institutes has been concluded with a view to boosting scientific excellence.
There has been no increase in the level of investment in research, which is
still rather low (less than 1% of GDP, compared to an EU average of 2%).
Conditions for enhanced cooperation between the private and public sectors need
to be encouraged. Further measures such as establishing a national roadmap for
research infrastructure and transfer of technology management have to be
further considered in order to be fully in line with EU standards and targets.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of science
and research and is in a position to implement the acquis as of
accession.

4.26.
Chapter 26: Education and culture

In
the field of education, training and youth, Croatia has completed
alignment with the acquis. Amendments
to the Act on Primary and Secondary Education were adopted by the Parliament in
July 2012 providing inter alia for the establishment of a National
Education Council in charge of monitoring quality and elaborating
recommendations for early, primary and secondary education system, and of
facilitating students who completed a three-year VET programme to continue or
to complete four-year VET programmes. Also reform of higher education and of
vocational education has continued through application of a learning outcomes
approach. The process of self-assessment of vocational education schools has
continued. Reform of adult education has also continued. Croatia actively takes
part in the EU open method of coordination activities. As regards the
benchmarks that the EU has set itself in the context of the strategic framework
for European cooperation in education and training (ET 2020), Croatia continues
to perform below the EU average for tertiary education attainment and
participation in pre-school education. It lags behind also as regards the
participation of adults in lifelong learning.

As regards participation of Croatia in EU
programmes, the Croatian National Agency continues to ensure sound and
efficient management of the decentralised actions.

In the area of culture, Croatia is
well prepared. Amendments to the Act on Protection and Preservation of Cultural
Goods were adopted in February 2012, easing the requirements for the payment of
a fee for the use of cultural goods. Good results have continued to flow from
Croatia’s participation in the Culture Programme. Funds absorbed through the
Europe for Citizens Programme and the number of projects implemented remained
at a satisfactory level.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of education
and culture and is in a position to implement the acquis as of
accession.

4.27.
Chapter 27: Environment and climate change

As regards the environment,
legislative alignment in the field of horizontal legislation has further
advanced and is almost complete. Further efforts are needed to implement the
Environmental Impact Assessment (EIA) and Strategic Environmental Assessment
(SEA). In particular, the quality of environmental impact studies as well as
the quality check mechanisms need to be significantly improved. Implementation
of provisions on public participation and access to justice in environmental
matters has improved. Cooperation with the public, NGOs, judiciary and law
enforcement institutions was enhanced during the reporting period.

Legislative alignment in the field of air
quality has further advanced and is almost complete. A new Air Protection
Act has been enacted, incorporating provisions of the new acquis on
ambient air quality and cleaner air for Europe. Investments for implementation
of the acquis are insufficient and need to increase to reach EU targets.

Legislative alignment in the field of waste
management has further advanced but needs further attention, in particular
as regards the Waste Framework Directive and the Restriction of the Use of
Certain Hazardous Substances in Electrical and Electronic Equipment Directive
(RoHS Directive). The new waste management strategy has not yet been adopted.
Considerable efforts are needed to meet the deadlines for full implementation
of the acquis in this area, In particular as concerns the timely
development of a pipeline of mature projects. Transitional arrangements have
been agreed for the remediation of existing landfills and the building of new
waste management centres to comply with the acquis by 31 December 2018,
and by 31 December 2020 concerning the amount of biodegradable municipal waste
to be landfilled.

Croatia has largely aligned its legislation
in the field of water quality. The new draft Water Act due to ensure
further compliance with the acquis was not adopted yet. Transitional
arrangements have been agreed until 31 December for 2023 for urban waste water
collection and treatment systems with intermediate deadlines for part of the
Decision until 31 December 2018 and 31 December 2020, and for the quality of
water intended for human consumption with regard to microbiological parameters
until 31 December 2018. Croatia will as agreed start implementing the new
Bathing Water Directive from the date of accession. Reforms in the water sector
are proceeding slowly. Pending problems linked to insufficient quality of
environmental impact studies for water projects need to be solved. Efforts to
develop and adopt river basin management plans (RBMPs) need to be stepped up.
Croatia needs to speed up investments in infrastructure to comply with the acquis.

The legislative alignment in the field of nature
protection has further progressed and is almost complete. The sector has
been transferred from the Ministry of Culture to the Ministry of Environment
and Nature Protection. Sectoral consultations relating to the establishment of
Natura 2000 have continued. Preparations for the establishment of a list of
marine Natura 2000 sites have progressed and a framework has been enacted in
the field of marine environmental protection. Specific attention needs to be
paid to the quality of Appropriate Assessments as per Art.6(3) of the Habitats
directive. Administrative capacity for enforcement of the acquis nature
protection inspection and technical support by the State Institute for Nature
Protection needs to be strengthened, in particular for the management plans for
Natura 2000 sites at the local level.

Croatia has largely aligned its legislation
in the field of industrial pollution control and risk management (IPPC).
Three transitional periods have been agreed, one with a final implementation
date of 31 December 2017 for the modernisation of existing IPPC installations,
and , a second until 31 December 2017 for the limitation of emissions into the
air of certain pollutants from large combustion plants, and a third until 31
December 2015 for the limitation of emissions of volatile organic compounds due
to the use of organic solvents in certain activities and installations. The
permitting process for existing installations needs to be significantly sped up
and appropriate funding for upgrading such installations needs to be secured.
Administrative capacity in the area of IPPC needs strengthening, especially at
the local level.

Croatia has largely aligned its legislation
in the field of chemicals. An adaptation period of six months after the
accession date has been agreed for the pre-registration of phase-in substances,
registration dossiers and authorisation applications. The Department for
Chemicals and Biocidal Products has been established within the State Sanitary
Inspection Service of the Ministry of Health. The Department needs further
reinforcement of its administrative capacity.

In the field of noise, Croatia has
completed alignment with the EU requirements. The Department for Objects of
Common Usage and Noise Protection was established within the State Sanitary
Inspection Service of the Ministry of Health.

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

The legislative alignment is moderately
advanced in the field of climate change. The Air Protection Act, of
October 2011 represented a step forward. Legislative acts still need to be
adopted to align with the EU acquis on the Monitoring Mechanism
Decision, the EU Emissions Trading System (aviation, monitoring, auctioning and
registries), geological storage of carbon dioxide, and light commercial
vehicles. Croatia has submitted preliminary information on national implementing
measures, on free allocation of allowances, on exclusion of small emitters, and
on new gases and new sectors, which is being assessed by the Commission.

Significant further efforts are needed to
catch up delays which have occurred in transposition and implementation so far,
in particular with respect to the EU Emissions Trading System (monitoring and
reporting as well as aviation) and geological storage of carbon dioxide. This
is particularly important since Croatia will join the third phase of the EU
Emissions Trading System as of 1st of January 2013 in so far as
stationary installations are concerned. In accordance with the transitional
arrangement granted, Croatia will take part in the EU ETS for aviation as of 1
January 2014.

Croatia regularly associated itself with EU
positions in the international context. Following close coordination with the
EU, Croatia submitted in April its provisional quantified emission limitation
or reduction objectives (QELROs) for the second commitment period under the
Kyoto Protocol, which is based on the understanding that it will be fulfilled
jointly with the EU and its Member States, in accordance with Article 4 of the
Kyoto Protocol. The country continues to fulfil its reporting obligations under
the UNFCCC and the Kyoto Protocol.

Croatia participated regularly in climate
work under the Regional Environmental Network for Accession (RENA).

Efforts to strengthen Croatia’s administrative
capacity have further slowed down. Due to the generalised shortage of human
resources within the Ministry and the Agency, and also partly related to high
staff turnover. The administrative capacity is clearly not sufficient to
properly transpose and implement the EU climate acquis. Further,
strengthening of administrative capacity is also needed within the Ministry of
Health in the field of chemicals. Coordination mechanisms between ministries
and administrative bodies need to be further strengthened.

Conclusion

Croatia is generally meeting the
commitments and requirements arising from the accession negotiations and should
be in a position to implement the environment acquis as of the date of
accession. However, increased efforts are needed to properly implement and
enforce legislation. In particular in the field of climate change, urgent steps
need to be taken to be in a position to implement the acquis by the date
of accession. Administrative capacity needs to be strengthened in some sectors,
especially in the fields of climate change, industrial pollution control and
risk management, nature protection and chemicals. Investments need to be
increased across the sectors, but more particularly in the fields of air
quality, industrial pollution control and risk management, water and waste, in
order to ensure that Croatia completes its preparations for membership by the
date of accession. Specific attention needs to be paid to the timely fulfilment
of commitments in the fields of waste and IPPC. The quality of environmental
impact assessment for projects needs to be significantly improved.

4.28.
Chapter 28: Consumer and health protection

In the area of consumer protection,
Croatia is well prepared. Advice given to consumers in the four regional
counselling centres increased by 15% in 2011 as compared to 2010. Various
activities have been carried out with a view to raising public awareness of
consumers’ rights in line with the national consumer protection programme.
Support for the consumer movement needs to continue. Steps have been taken to
develop the system for out-of-court settlement of consumer disputes. Public
awareness of the system needs to be raised, as the existing mechanisms are
still underused.

In the field of product safety-related
issues, Croatia has completed alignment with the acquis. A
conference addressing general product safety was held in Zagreb in
March 2012. Market surveillance continues to be at a satisfactory level. (See
Chapter 1 — Free movement of goods)

Croatia has aligned its legislation in the
field of non-safety-related issues. Amendments to the Consumer
Protection Act were adopted in July 2012 aiming at aligning with the acquis
on timeshare. Legislation on consumer credit was adopted by the Parliament
in September 2012. Technical preparations will be necessary to ensure
timely implementation of the acquis on cooperation between national
authorities responsible for the enforcement of the consumer protection laws by
accession.

As regards public health, Croatia
has completed alignment with the acquis in the field of tobacco
control. Measures have continued to promote smoke-free environments and
smoking prevention.

Croatia meets the requirements in the field
of communicable diseases.

Legislative alignment in the field of blood
has made further progress and is almost complete. Amendments to the Act on
Blood and Blood Components were adopted in October 2011 with a view to
completing legal alignment. Clarity needs to be provided on the status of the
restructuring of blood services and when it is expected to be completed.
Croatia has largely aligned its legislation in the field of tissues, cells
and organs. A new Act on Medically Assisted Fertilisation was adopted by
the Parliament in July 2012. Implementing legislation in this area still
needs to be adopted. Facilities for handling blood, tissues and cells need to
be upgraded and restructured in accordance with the EU technical requirements.
The National Competent Authority needs to become fully operational and staffed.
Capacity building and continuous education of professional staff need to
continue.

In the field of mental health,
Croatia is sufficiently prepared. Community-based services remain
insufficiently developed as an alternative to institutionalisation. Further
efforts are needed to promote socially inclusive treatment and care models and
to promote mental health of children and young people. Financial resources
allocated to mental health care remain scarce, although a strong commitment to
mental health does exist.

In the area of cancer screening,
Croatia is moderately advanced. The National Programme for early detection of
cervical cancer has yet to be implemented. Further efforts are needed to
achieve full implementation of breast and colorectal cancer screening
programmes.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of consumer
and health protection and is expected to be in a position to implement the acquis
as of accession.

Further efforts are required to ensure that
Croatia completes its preparations for membership by the date of accession, in
particular in the area of medically assisted reproduction, where legal
alignment remains to be completed, and in the areas of blood, tissues and
cells, where facilities for handling them need to be upgraded and restructured
in accordance with the EU technical requirements, and as regards staffing of
the National Competent Authority in this field.

4.29.
Chapter 29: Customs union

Legislative alignment in the field of customs
legislation has further advanced and is almost complete. The national customs tariff nomenclature for 2012 was aligned with
the 2012 EU Combined Nomenclature. Alignment with the acquis of the
Croatian provisions on transit and the single administrative document was
completed. In April 2012, Croatia ratified the Convention on a common transit
procedure and the Convention on the simplification of formalities in trade in
goods and joined these Conventions in July 2012. Apart from some minor
discrepancies remaining in the allocation of tariff quotas, and the procedures
used for authorising inward and outward processing, Croatia needs to swiftly
abolish the fees impeding free access to customs services, especially the fees
for access to the terminals where the Customs offices are located.

Alignment in the field of administrative
and operational capacity has further advanced and is almost complete. Croatia adopted an updated customs business strategy and Action Plan
2012-2014. In July 2012, Croatia started as planned to redeploy customs
officers from the future EU internal borders, to further reinforce internal
supervision, mobile teams, the fight against corruption, and its strategy, risk
assessment and planning capacities. Further development and testing of the New
Computerised Transit System (NCTS) at national level ensured full compatibility
with the EU NCTS system from July 2012, when Croatia started to operate under
the Convention on a common transit procedure. Work has continued to upgrade the
automated risk management system in line with EU standards. The NCTS system was
integrated into the risk management system. A new customs laboratory was fully
equipped but needs to be fully staffed. Further efforts are in particular
required in the area of interconnectivity and interoperability with the EU
customs systems.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of customs
union and is expected to be in a position to implement the acquis as of
accession. Further efforts are required to ensure that all relevant IT systems
are in place and able to exchange information with the EU and other Member States
as from the day of accession, in order to ensure Croatia completes its
preparations for membership by the date of accession.

4.30.
Chapter 30: External relations

Legislative alignment in the field of the common commercial policy has further
advanced and is almost complete. Croatia continued to
coordinate and align its positions with those of the EU in international
organisations. A State Office for Trade Policy was established with the aim of
strengthening administrative capacity in the area of trade policy.

As regards dual-use items, legislative
alignment is as complete as possible before accession to the EU when the acquis
in this area, including the Community regime for the control of exports,
transfer, brokering and transit of dual use-items as well as the single market
for dual use items will apply. Training of relevant staff in procedures,
licensing, and control of dual-use items continued under the export control
component of the EU Stability Instrument.

Croatia largely aligned bilateral trade and
investment agreements with third countries with the acquis
but further progress is required in accordance with Croatia’s Action Plan
updated in February 2012. Croatia continued to actively participate in the work
of the Central European Free Trade Agreement (CEFTA). An Additional Protocol to
CEFTA, enabling further liberalisation of trade in agricultural and food
products between interested parties, entered into force in November 2011.
Croatia will need to withdraw before accession from all free trade agreements
with third countries and align with the acquis Bilateral Investment
Treaties (BITs).

Croatia has completed alignment with the acquis
in the field of development policy and humanitarian aid. The
National Strategy for Development Cooperation 2009–2014 continued to be
implemented. Croatia provides humanitarian aid within its financial
capabilities and commitments. Croatia needs to continue to build up its
administrative capacity so as to be able to fully participate in EU development
and humanitarian policies.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of external
relations and is expected to be in a position to implement the acquis as
of accession. Further efforts are required, in particular as regards alignment with the acquis of Croatia’s bilateral investment
agreements with third countries, in order to ensure
that Croatia completes its preparations for membership by the date of accession.

4.31.
Chapter 31: Foreign, security and defence policy

The regular political dialogue with
the EU on foreign policy issues is in place and has continued in all relevant
fora, including through participation in meetings of the EU-27 ministers of
foreign affairs.

As regards the common foreign and
security policy (CFSP), during the reporting period, Croatia aligned
itself, when invited, with 70 out of the 70 relevant Council decisions and EU
declarations (100% alignment). It has continued to actively participate in the
Barcelona Process — Union for the Mediterranean. Croatia has adequate
administrative capacity to work within the EU CFSP structures. As a party to
the Rome Statute establishing the International Criminal Court (ICC), Croatia
continues to fully support the EU Common Position on the ICC (2003/444/CFSP)
and will not sign an agreement with the US on the exemption of American
citizens.

With regard to restrictive measures and
conflict prevention, Croatia adopted the relevant decisions to implement
sanction regimes deriving from UN Security Council Resolutions. Croatia has
continued to implement 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 and its regional component strengthened.
Public-awareness activities and measures to collect and destroy weapons have
continued. Implementation and enforcement capacity has been strengthened, as
has networking with other enlargement countries and Member States.

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.

Preparations are complete with regard to security
measures (classified information).

Croatia continued its participation in EU
missions to support implementation of the common security and defence
policy (CSDP). Regarding civil and military crisis management, it
has been participating in the EU operation Atalanta (Somalia). 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.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of foreign,
security and defence policy and is in a position to implement the acquis
as of accession.

4.32.
Chapter 32: Financial control

Alignment in the field of public internal financial control (PIFC)
has further advanced and is almost complete. The
Central Harmonisation Unit (CHU) at the Ministry of Finance updated and further
developed methodological tools for the transparent and effective management of
public funds in all budget users. Implementation of the action plan of the PIFC
strategy for the period 2009–2011 has been successfully completed. An updated
Action Plan for the period 2012-2013 still needs to be adopted. Training in
financial management and control (FMC) and in internal audit (IA) continued to
be provided by the CHU in cooperation with other public bodies, line
ministries, professional associations, academics, local authorities, the State
Audit Office and the Agency for Audit of EU programmes implementation system
(ARPA). Capacities of budget users, especially at the local level, need to be
further enhanced with a view to preparations for future Structural Funds
management. In addition, the independence of the internal audit function
throughout the public administration needs to be strengthened.

Alignment in the field of external audit has further advanced and
is almost complete. The State Audit Office (SAO) continued to successfully
implement its Strategic Development Plan (2008–2012). Efforts continued to
gradually shift from transaction-based to system-based audits. The parliament adopted a report on the work of the SAO in 2010
together with a report on the audit activity. The SAO drew up an Annual Plan and Work
Programme for 2012. Further improvement
of the follow-up of the SAO’s recommendations by the parliament is needed and
quality control of the SAO’s performance needs to be improved. Training of
external auditors in modern audit techniques as per international standards
needs to continue. Cooperation between the CHU and the SAO needs to be enhanced
as to ensure improved quality of audit performance by internal and external
auditors.

Alignment in
the field of protection of the EU’s financial
interests has further advanced and is almost complete.
The Independent Service for Combating Irregularities
and Fraud at the Ministry of Finance (ISCIF), together with the other bodies of
the Anti Fraud Coordination Structure (AFCOS), continued to successfully
implement the National Anti-fraud Strategy and its Action Plan. The legal basis
for the efficient functioning of the AFCOS structure still needs to be
finalised. ISCIF needs to improve its ability to play a
leading role in the coordination of the AFCOS network on
the basis of its functional independence. Further efforts are needed in streamlining fraud prevention,
detection, reporting and follow-up at all levels of the public service,
especially with a view to preparations for cohesion policy.

Alignment in the field of protection of the euro against counterfeiting has further advanced and is almost
complete. The Croatian National Bank (CNB) improved its
coordination capacity by strengthening cooperation with the Ministry of the
Interior and other institutions involved. The CNB communicated its analysis of
suspicious banknotes and coins on a monthly basis to the European Central Bank
and through quarterly reports to the European Commission. Training was
organised for employees of commercial banks and exchange offices so as to
enhance their fraud detection skills.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of financial
control and is expected to be in a position to implement the acquis as
of accession. Further efforts are required to consolidate the implementation of public internal financial control and the
independence of internal audit at central and local level, to enhance the
impact of external audit, and to improve the functioning of the Anti Fraud
Coordination Structure for protecting the EU’s financial interests, in order to ensure that Croatia completes its preparations for
membership by the date of accession.

4.33.
Chapter 33: Financial and budgetary provisions

Alignment in the field of traditional own resources (TOR) has further advanced and is almost complete. The testing environment for the TOR accounting module (A and B accounts)
has been enhanced and the IT application is now applied throughout the country.
The professional knowledge and skills of customs officers on EU TOR was further
improved. Measures have continued to combat customs duty and VAT fraud.
Effective tools to fight against tax evasion and fraud and to decrease the
informal economy are to be further developed. Continued efforts are needed to
ensure efficient and independent internal and external control and audit of the
collection, accounting and making available of traditional own resources,
including further development of post-clearance control at traders’ premises.
Special attention needs to be paid to the development of criteria for the
evaluation of potential financial liability towards the EU budget in the event
of non-recovery of customs debt.

Croatia has undertaken further measures to
ensure an adequate legislative and institutional framework for the implementation
of sugar levies. Cooperation among all bodies within the network of anti-fraud
coordinating services (AFCOS) continued. Training sessions were held for
customs officials in the fight against fraud and the reporting of
irregularities. The legislative framework was completed and written procedures
are currently elaborated.

Alignment in the field of the VAT
resource has further advanced and is almost
complete. Croatia continued to work on improving the
methodology used in calculating the Weighted Average
Rate. The Agreement implementing the Protocol on the Privileges and Immunities
of the EU was signed by Croatia in November 2011 and by the Commission in June
2012.

Alignment in the field of the GNI resource has further advanced and is
almost complete. Administrative capacity of key bodies in
the field has been improved and relevant methodological tools and procedures
for managing the Own Resources (OR) system have been elaborated. The Croatian
Action Plan to complete own resources preparations was updated in April 2012. The Department for Coordination and Management of EU own resources in the Ministry of Finance needs to continue to build up its
capacity to coordinate the overall system of own resources efficiently after
accession.

Conclusion

Croatia is meeting the commitments and
requirements arising from the accession negotiations in the field of financial
and budgetary provisions and is expected to be in a position to implement the acquis
as of accession. Further efforts are required, in particular to strengthen the
capacity to coordinate the overall system of own resources efficiently after
accession. Modernisation of the customs control strategy, so that it focuses
more on post-clearance controls, needs to be stepped up, in order to ensure
Croatia completes its preparations for membership by the date of accession.

Statistical Annex

STATISTICAL DATA || || || || || || || ||

Croatia || || || || || ||

|| || || || || || ||

Basic data || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Population (thousand) || || 4 437 || 4 441 || 4 436 || 4 435 || 4 426 || 4 412

Total area of the country (km²) || 1) || 56 542 || 56 594 || 56 594 || 56 594 || 56 594 || 56 594

|| || || || || || ||

National accounts || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Gross domestic product (GDP) (million national currency) || 2) || 192 289 || 318 308 || 343 412 || 328 672 || 326 980p || 333 956p

GDP (million euro) || 2) || 25 738 || 43 390 || 47 543 || 44 781 || 44 876p || 44 922p

GDP (euro per capita) || 2) || 5 800 || 9 770 || 10 717 || 10 097 || 10 140p || 10 181p

GDP (in Purchasing Power Standards (PPS) per capita) || || 10 018 || 15 156 || 15 796 || 14 627 || 14 843 || 15 500p

GDP per capita in PPS (EU-27 = 100) || || 51 || 61 || 64 || 64 || 61 || 61

Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) || 2) || 3.7 || 5.1 || 2.1 || -6.9 || -1.4p || 0.0p

Employment growth (national accounts, % change on previous year) || 2) || 0.5 || 3.5 || 1.1 || -1.8 || -5.1p || -2.4p

Labour productivity growth: GDP growth per person employed (% change on previous year) || 3) || 10.1 || 3.2 || 0.8 || -5.2 || 2.7p || 3.3p

Real unit labour cost growth (national accounts, % change on previous year) || 3) || -1.6 || 3.2 || 1.0 || -1.4 || 3.8p || 1.6p

Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100) || 3) || 67.4 || 75.6 || 78.2 || 76.9 || 77.3 || 80.1

Gross value added by main sectors (%) || || || || || || ||

Agriculture and fisheries || 2) || 6.5 || 4.9 || 5.0 || 5.1 || 5.0p || 5.1p

Industry || 2) || 23.1 || 20.0 || 19.2 || 19.5 || 20.1p || 20.5p

Construction || 2) || 5.6 || 8.1 || 8.5 || 7.9 || 6.7p || 6.0p

Services || 2) || 64.8 || 67.1 || 67.3 || 67.4 || 68.2p || 68.4p

Final consumption expenditure, as a share of GDP (%) || 2) || 82.4 || 78.2 || 77.3 || 78.6 || 78.8p || 79.0p

Gross fixed capital formation, as a share of GDP (%) || 2) || 19.5 || 26.2 || 27.4 || 24.5 || 20.6p || 18.8p

Changes in inventories, as a share of GDP (%) || 2) || 1.8 || 2.8 || 3.1 || 0.5 || 1.1p || 2.3p

Exports of goods and services, relative to GDP (%) || 2) || 43.4 || 42.3 || 42.1 || 36.6 || 39.4p || 41.8p

Imports of goods and services, relative to GDP (%) || 2) || 47.2 || 49.5 || 49.8 || 40.1 || 39.9p || 41.9p

|| || || || || || ||

Industry || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Industrial production volume index (2005=100) || || 87.9 || 109.3 || 110.6 || 100.4 || 99.0 || 97.8

|| || || || || || ||

Inflation rate || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Annual average inflation rate (HICP, % change on previous year) || || 4.3 || 2.7 || 5.8 || 2.2 || 1.1 || 2.2

|| || || || || || ||

Balance of payments || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Balance of payments: current account total (million euro) || || -785 || -3 151 || -4 258 || -2 293 || -481 || -437

Balance of payments current account: trade balance (million euro) || || -4 604 || -9 470 || -10 855 || -7 416 || -5 991 || -6 360

Balance of payments current account: net services (million euro) || || 3 348 || 6 367 || 7 075 || 5 886 || 5 987 || 6 371

Balance of payments current account: net income (million euro) || || -628 || -1 090 || -1 548 || -1 799 || -1 566 || -1 601

Balance of payments current account: net current transfers (million euro) || || 1 100 || 1 043 || 1 071 || 1 036 || 1 088 || 1 154

of which government transfers (million euro) || || 65 || -17 || -20 || -30 || -40 || -60

Net foreign direct investment (FDI) (million euro) || || 1 677 || 3 867 || 5 189 || 3 303 || 184 || 1 107

Foreign direct investment (FDI) abroad (million euro) || || 210 || 216 || 970 || 888 || -113 || 32

of which FDI of the reporting economy in EU-27 countries (million euro) || || 152 || 564 || 740 || 529 || -407 || 50

Foreign direct investment (FDI) in the reporting economy (million euro) || || 1 468 || 3 651 || 4 219 || 2 415 || 298 || 1 075

of which FDI of EU-27 countries in the reporting economy (million euro) || || 1 344 || 3 664 || 3 253 || 2 339 || 204 || 995

|| || || || || || ||

Public finance || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

General government deficit/surplus, relative to GDP (%) || || 5.6 || -2.4 || -1.4 || -4.1 || -5.0p || -5.2p

General government debt relative to GDP (%) || || 35.7 || 32.9 || 28.9b || 36.0 || 41.6p || 46.1p

|| || || || || || ||

Financial indicators || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Gross foreign debt of the whole economy, relative to GDP (%) || 4) || 52.9 || 77.7 || 83.6 || 97.7 || 103.6p || 101.8p

Gross foreign debt of the whole economy, relative to total exports (%) || 4) || 126.0 || 184.6 || 200.4 || 268.1 || 262.4 || 243.3

Money supply: M1 (banknotes, coins, overnight deposits, million euro) || || 3 216 || 7 901 || 7 539 || 6 458 || 6 655 || 7 018

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) || || 11 891 || 30 863 || 34 756 || 34 700 || 36 912 || 39 726

Interest rates: day-to-day money rate, per annum (%) || || 3.0 || 5.6 || 6.6 || 7.8 || 1.1 || 1.3

Lending interest rate (one year), per annum (%) || || 10.0 || 7.5 || 9.0 || 9.0 || 9.0 || 6.3

Deposit interest rate (one year), per annum (%) || || - || 0.5 || 0.5 || 0.5 || 0.5 || 0.3

euro exchange rates: average of period - 1 euro = … national currency || || 7.471 || 7.336 || 7.223 || 7.340 || 7.286 || 7.434

Effective exchange rate index (2005=100) || || 97.6 || 90.8 || 89.0 || 90.0 || 90.9 || 92.9

Value of reserve assets (including gold) (million euro) || || 5 334 || 9 307 || 9 121 || 10 376 || 10 660 || 11 195

|| || || || || || ||

External trade || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Value of imports: all goods, all partners (million euro) || || 9 903.0 || 18 692.0 || 19 022.0 || 15 144.0 || 15 137.0 || 14 367.0

Value of exports: all goods, all partners (million euro) || || 5 072.0 || 9 004.0 || 8 965.0 || 7 458.0 || 8 905.0 || 8 437.0

Trade balance: all goods, all partners (million euro) || || -4 831.0 || -9 688 || -10 057.0 || -7 686 || -6 232.0 || -5 931.0

Terms of trade (export price index / import price index) || 5) || 94.4 || 97.5 || 96.1 || 109.2 || 100.9 || 101.3

Share of exports to EU-27 countries in value of total exports (%) || || 68.3 || 60.3 || 63.2 || 60.8 || 61.1 || 62.3

Share of imports from EU-27 countries in value of total imports (%) || || 71.9 || 64.5 || 62.3 || 62.6 || 60.2 || 61.8

|| || || || || || ||

Demography || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) || || -1.9 || -2.4 || -1.9 || -1.8 || -2.0 || :

Infant mortality rate: deaths of children under one year of age per 1000 live births || || 7.7 || 5.6 || 4.5 || 5.3 || 4.4 || :

Life expectancy at birth: male (years) || || 71.1 || 72.3 || 72.4 || 73.0 || 73.5 || :

Life expectancy at birth: female (years) || || 78.1 || 79.3 || 79.7 || 79.7 || 79.6 || :

|| || || || || || ||

Labour market || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Economic activity rate (20-64): share of population aged 20-64 that is economically active (%) || || : || 68.6 || 68.3 || 67.5 || 66.2 || 65.5

\* Employment rate (20-64): share of population aged 20-64 in employment (%) || || : || 62.3 || 62.9 || 61.7 || 58.7 || 57.0

Employment rate male (20-64) (%) || || : || 70.3 || 70.7 || 68.2 || 64.7 || 63.2

Employment rate female (20-64) (%) || || : || 54.5 || 55.2 || 55.4 || 53.0 || 50.9

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) || 6) || 23.7 || 35.8b || 36.7 || 38.5 || 37.6 || 37.1

Employment by main sectors (%) || || || || || || ||

Agriculture || 7) || 15.6u || 10.7u || 11.3u || 11.5u || 12.6u || 13.0u

Industry || 7) || 23.1u || 22.4u || 22.3u || 20.8u || 20.4u || 21.2u

Construction || 7) || 6.3u || 9.1u || 9.1u || 9.1u || 7.8u || 7.3u

Services || 7) || 55.0u || 57.8u || 57.3u || 58.6u || 59.3u || 58.6u

Unemployment rate: share of labour force that is unemployed (%) || 6) || 16.3 || 9.6b || 8.4 || 9.1 || 11.8 || 13.5

Share of male labour force that is unemployed (%) || 6) || 14.4 || 8.4b || 7.0 || 8.0 || 11.4 || 13.8

Share of female labour force that is unemployed (%) || 6) || 18.7 || 11.2b || 10.1 || 10.3 || 12.3 || 13.2

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) || 6) || 41.7 || 24.0b || 21.9 || 25.1 || 32.6 || 36.1

Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) || 8) || 10.1 || 5.7 || 5.3 || 5.1 || 6.7 || 8.6

|| || || || || || ||

Social cohesion || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Average nominal monthly wages and salaries (national currency) || 9) || 5 061.0 || 7 047.0 || 7 544.0 || 7 711.0 || 7 782.0 || 7 796.0

Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) (2000=100) || 9) || 99.2 || 120.4 || 121.5 || 121.3 || 121.2 || 118.7

\* Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in further education or training (%) || 6) || : || 3.9u || 3.7u || 3.9u || 3.7u || 4.1u

|| || || || || || ||

Standard of living || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Number of passenger cars per 1000 population || || 269.4 || 335.7 || 346.1 || 345.6 || 342.4 || 344.1

Number of subscriptions to cellular mobile telephone services per 1000 population || || 390.1 || 1 133.6 || 1 325.4 || 1 360.8 || 1 437.5 || 1 159.3

|| || || || || || ||

Infrastructure || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Density of railway network (lines in operation, per 1000 km²) || || 48.2 || 48.1 || 48.1 || 48.1 || 48.1 || 48.1

Length of motorways (km) || || 429 || 1 156 || 1 199 || 1 244 || 1 244 || 1 254

|| || || || || || ||

Innovation and research || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Spending on human resources (public expenditure on education in % of GDP) || || 4.2 || 4.0 || 4.3 || 4.3 || : || :

\* Gross domestic expenditure on R&D in % of GDP || || 0.9 || 0.8 || 0.9 || 0.9 || 0.7p || :

Percentage of households who have Internet access at home (%) || || : || 41.0 || 45.0 || 50.0 || 56.0 || 60.0

|| || || || || || ||

Environment || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

\* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) || || 86.7 || 102.4 || 98.5 || 91.8 || 91.0 || :

Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) || || 331.0 || 292.0 || 278.2 || 284.3 || 282.7 || :

Electricity generated from renewable sources in % of gross electricity consumption || || 42.9 || 23.0 || 27.9 || 36.9 || 45.4 || :

Road share of inland freight transport (% of tonne-km) || || 78.0b || 75.6 || 72.7 || 73.7 || 71.2 || 74.0

|| || || || || || ||

Energy || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Primary production of all energy products (thousand TOE) || || 3 758 || 4 057 || 3 950 || 4 065 || 4 216 || :

Primary production of crude oil (thousand TOE) || || 1 061 || 773 || 720 || 676 || 623 || :

Primary production of hard coal and lignite (thousand TOE) || 10) || - || - || - || - || - || -

Primary production of natural gas (thousand TOE) || || 1 642 || 2 362 || 2 194 || 2 196 || 2 215 || :

Net imports of all energy products (thousand TOE) || || 6 121 || 8 141 || 8 001 || 7 277 || 4 497 || :

Gross inland energy consumption (thousand TOE) || || 7 995 || 9 330 || 9 082 || 8 726 || 8 575 || :

Electricity generation (thousand GWh) || || 12.1 || 12.2 || 12.3 || 12.8 || 14.1 || :

|| || || || || || ||

Agriculture || Note || 2001 || 2007 || 2008 || 2009 || 2010 || 2011

Agricultural production volume index of goods and services (producer prices, previous year=100) || 11) || 107.4 || 97.3 || 108.0 || 100.1 || 91.8 || 99.0

Total utilised agricultural area (thousand hectare) || 12) || 1 178 || 1 202 || 1 288 || 1 300 || 1 335 || 1 326

Livestock: cattle (thousand heads, end of period) || 13) || 438 || 467 || 454 || 447 || 444 || 447

Livestock: pigs (thousand heads, end of period) || 13) || 1 234 || 1 348 || 1 104 || 1 250 || 1 231 || 1 233

Livestock: sheep and goats (thousand heads, end of period) || 13) || 632 || 738 || 709 || 695 || 705 || 709

Production and utilisation of milk on the farm (total whole milk, thousand tonnes) || || 672 || 881 || 848 || 843 || 809 || 826

Crop production: cereals (including rice) (thousand tonnes, harvested production) || || 2 829 || 2 534 || 3 726 || 3 442 || 3 007 || 2 827

Crop production: sugar beet (thousand tonnes, harvested production) || || 965 || 1 583 || 1 270 || 1 217 || 1 249 || 1 168

Crop production: vegetables (thousand tonnes, harvested production) || || 208 || 282 || 309 || 338 || 234 || 240

: =
not available

- =
not applicable

p =
provisional

e = estimated value

b = break in series

u = unreliable or uncertain data

\* = 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)            Land
area; 2003, break in series due to improved methodology.

2)            For
the period from 2008 to 2009 data are annual; for the period from 2010 to 2011
data are calculated on the basis of the sum of quarterly values and are
provided according to NACE Rev. 1.1

3)            For
the period from 2008 to 2009 data are annual; for the period from 2010 to 2011
data are calculated on the basis of the sum of quarterly values, and are
revised according to the annual GDP calculation (as well, data are provided
according to NACE Rev 2.)

4)            2000
-2007, Gross foreign debt of the whole economy excluding Special Purpose
Entities; 2008-2009, 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 December 2009 round-tripping transaction
related to SPE amounted to 1499.0 million euro); 2000-2007 and 2010-2011, gross
foreign debt of the whole economy does not include round tripping component of
direct investment; from December 2005 external debt statistics include data on
non-resident investment in debt securities issued by Croatian issuers in the
Croatian market.

5)            Calculated
on the basis of exports and import values expressed in US dollars; break in
series in 2004, change in methodology as of 1 January 2004.

6)            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.

7)            Until
2006 data refer to half-year periods; from 2007 onwards, data refer to quarter
periods. Until 2008 employment data are given according to NACE 1.1 sections

8)            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.

9)            Persons
employed in crafts, trades and as free-lances, 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.

10)          Croatia
closed all coal mines in 1999 and 2000 and therefore, there is no production of
coal from 2000 onwards.

11)          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.

12)          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 is obtained by using the
interview method done by interviewers on a selected sample; data for 2000-2004
are recalculated.

13)          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.

[1]               COM(2012) 186 final.

[2]               Comprehensive Monitoring Report on Croatia’s state of
preparedness for EU membership, COM(2012) 601

\*               This designation is without prejudice to positions on
status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo
Declaration of Independence.

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