Source: EURLEX
Language: en
Format: md

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# 52012SC0332

**COMMISSION STAFF WORKING DOCUMENT THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 2012 PROGRESS REPORT accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2012-2013 /\* SWD/2012/0332 final \*/**

  

TABLE OF CONTENTS

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

1.1........ Preface. 4

1.2........ Context 4

1.3........ Relations between the EU
and the former Yugoslav Republic of Macedonia. 4

2........... Political criteria. 6

2.1........ Democracy and the rule of
law.. 6

2.2........ Human rights and the
protection of minorities. 13

2.3........ Regional issues and
international obligations. 18

3........... Economic criteria. 20

3.1........ The existence of a
functioning market economy. 20

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

4........... Ability to take on the
obligations of membership. 26

4.1........ Chapter 1: Free movement
of goods. 26

4.2........ Chapter 2: Freedom of
movement for workers. 27

4.3........ Chapter 3: Right of
establishment and freedom to provide services. 28

4.4........ Chapter 4: Free movement
of capital 29

4.5........ Chapter 5: Public
procurement 30

4.6........ Chapter 6: Company law.. 31

4.7........ Chapter 7: Intellectual
property law.. 32

4.8........ Chapter 8: Competition
policy. 33

4.9........ Chapter 9: Financial
services. 33

4.10...... Chapter 10: Information
society and media. 35

4.11...... Chapter 11: Agriculture and
rural development 36

4.12...... Chapter 12: Food safety,
veterinary and phytosanitary policy. 38

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

4.14...... Chapter 14: Transport
policy. 40

4.15...... Chapter 15: Energy. 41

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

4.17...... Chapter 17: Economic and
monetary policy. 43

4.18...... Chapter 18: Statistics. 44

4.19...... Chapter 19: Social policy
and employment 45

4.20...... Chapter 20: Enterprise and
industrial policy. 47

4.21...... Chapter 21: Trans-European
networks. 48

4.22...... Chapter 22: Regional policy
and coordination of structural instruments. 48

4.23...... Chapter 23: Judiciary and
fundamental rights. 49

4.24...... Chapter 24: Justice,
freedom and security. 55

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

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

4.27...... Chapter 27: Environment and
climate change. 61

4.28...... Chapter 28: Consumer and
health protection. 62

4.29...... Chapter 29: Customs union. 64

4.30...... Chapter 30: External
relations. 65

4.31...... Chapter 31: Foreign,
security and defence policy. 65

4.32...... Chapter 32: Financial
control 66

4.33...... Chapter 33: Financial and
budgetary provisions. 67

1.
Introduction
1.1.
Preface

Since March 2002, the Commission has
reported regularly to the Council and the Parliament on progress made by the countries
of the Western Balkans region. This report on progress made by the former
Yugoslav Republic of Macedonia in preparing for EU membership largely follows
the same structure as in previous years. The report:

–          briefly
describes the relations between the former Yugoslav Republic of Macedonia and
the Union;

–          analyses
the situation in the former Yugoslav Republic of Macedonia in terms of the
political criteria for membership;

–          analyses
the situation in the former Yugoslav Republic of Macedonia on the basis of the
economic criteria for membership;

–          reviews
the former Yugoslav Republic of Macedonia’s capacity to take on the obligations
of membership, i.e. the acquis expressed in the Treaties, the secondary
legislation, and the policies of the Union.

This report
covers the period from October 2011 to September 2012. Progress is measured on
the basis of decisions taken, legislation adopted and measures implemented. As
a rule, legislation or measures which are under preparation or awaiting
parliamentary approval have not been taken into account. This approach ensures
equal treatment across all reports and enables an objective assessment.

The report is
based on information gathered and analysed by the Commission. Many other
sources have also been used, including contributions from the government of the
former Yugoslav Republic of Macedonia, the EU Member States, European
Parliament reports[1]
and information from various international and non-governmental organisations.

The Commission draws detailed conclusions
regarding the former Yugoslav Republic of Macedonia in its separate
communication on enlargement[2],
based on the technical analysis contained in this report.

1.2.
Context

The European Council of
December 2005 granted the status of candidate country to the former Yugoslav
Republic of Macedonia. The Stabilisation and Association Agreement (SAA)
between the former Yugoslav Republic of Macedonia and the EU was signed in
April 2001 and entered into force in April 2004. In October 2009, the
Commission made recommendations to the Council to open negotiations with the
country and to move to the second phase of SAA Implementation. These
recommendations were reiterated in 2010 and 2011. The Council has not yet
decided on the Commission’s proposals.

1.3.
Relations between the EU and the former Yugoslav
Republic of Macedonia

The former Yugoslav
Republic of Macedonia is participating in the Stabilisation and Association
Process.

The Stabilisation
and Association Agreement (SAA) remained at the core of the relationship
between the EU and the former Yugoslav Republic of Macedonia. The country has
been implementing its commitments under the SAA with the EU, including all those
relating to the first stage of implementation of Title V (Movement of workers,
establishment, supply of services, capital). The Commission’s 2009 proposal on passage
to the second stage of the Association, under Article 5 of the SAA, has been
under consideration by the Council.

Regular political and
economic dialogue between the EU and the country has continued through the SAA
structures. Meetings of the highest joint bodies, namely the Stabilisation and
Association Committee and the Stabilisation and Association Council, took place
in October 2011 and January and July 2012. Experts from both sides have met in
seven sub-committees and a special group on public administration reform.
Multilateral economic dialogue between the Commission, the EU Member States and
candidate countries on pre-accession fiscal surveillance continued, and
included a ministerial meeting in Brussels in May. In December 2011, the
government adopted its annual revision of the national programme for the
adoption of the acquis.

A High Level
Accession Dialogue (HLAD) was launched by the government and the Commission
on 15 March 2012. The purpose of the HLAD is to inject new dynamism into the EU
accession reform process, thereby strengthening confidence and boosting the
country’s European prospects. It does not override the standard pre-accession
procedures. The HLAD focuses on five key areas: protecting freedom of
expression in the media; strengthening the rule of law; reforming public
administration; improving the election process; and developing the market
economy. It also discussed good neighbourly relations. Political-level meetings
were held on 15 March, 7 May and 17 September. These reviewed progress in
reforms on the basis of agreed targets and actions and a government roadmap. Technical
consultations on various topics continued throughout the year. There has been
good overall progress. The targets and actions are assessed in detail within
the relevant sections of the Progress Report.

Visa liberalisation for citizens of the former Yugoslav Republic of
Macedonia travelling to the Schengen area has been in
force since December 2009. The Commission set up a post-visa-liberalisation
monitoring mechanism to assess whether the implementation of all the reforms
introduced by the country was consistent with the visa roadmap and sustainable.
This was complemented by an alert mechanism to avoid abuses. The Commission presented its second monitoring report to
the European Parliament and the Council in December 2011 and adopted the third in
August 2012. A readmission agreement between the European Union and the
former Yugoslav Republic of Macedonia has been in force since January 2008.

Financial assistance is provided through the Instrument for
Pre-Accession Assistance (IPA). The revised Multiannual Indicative Financial
Framework for 2012-13 allocates a total EU contribution of € 215 million
to the country. The last national programme under the current IPA Component I
was submitted to the Commission in July 2012 with a total EU allocation of € 56
million for the years 2012 and 2013. In addition, the country continued to
benefit from various regional, cross-border cooperation and horizontal
programmes. Implementation of all IPA programmes on the ground is slowly taken
off. The government should, however, streamline and strengthen planning and
horizontal coordination of policies, particularly in view of the forthcoming
IPA 2014-2020 programming period.

Since 2007 the
Commission has committed over € 490 million for projects to be implemented
in the country, including € 101 million in 2012. This assistance focuses
on further strengthening administrative capacity (with particular emphasis on
the judiciary and public administration sectors), regional economic development,
customs reforms, alignment with the EU acquis and technical support to
ensure sound and efficient management of EU funds. In the context of
pre-accession, since December 2010, the national authorities have been directly
managing over € 250 million under the Decentralised Implementation System
(DIS) for four out of five IPA components. There have been encouraging elements
regarding the reinforcement of capacities across the administration in 2012,
although further strengthening of the national management and control systems
is still needed in order to ensure higher effectiveness, impact and absorption
of EU funds.

Civil society has received extensive financial support from
the EU under the IPA Civil Society Facility and national programmes, as well as
through the European Instrument for Democracy and Human Rights. The programmes
currently being implemented provide significant support for NGO management and
resource mobilisation, for institutional cooperation between CSOs and central
and local authorities as well as networking at regional level. Furthermore, under
the DIS, civil society is involved in monitoring the implementation of EU aid,
particularly the assistance given under the Transition and Institution-Building
Component, via participation in the biannual IPA Monitoring Meetings. The first
one was held in Skopje on 16 July 2012.

The former Yugoslav
Republic of Macedonia actively participates in the following Union
Programmes: the Seventh Research Framework Programme, the Entrepreneurship
and Innovation Programme, ‘Progress’, ‘Culture’, ‘Europe for Citizens’, ‘Fiscalis
2013’, ‘Customs 2013’, and (since December 2011) the Intelligent Energy Programme.

2.
Political criteria

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

2.1.
Democracy and the rule of law

Parliament

The functioning of
Parliament and political dialogue have been maintained. Dialogue needs to be
further strengthened, including on inter-ethnic issues.

All parties supported
the High Level Accession Dialogue (HLAD) as an opportunity to inject new
dynamism into the EU accession process. The Parliament adopted several laws
related to EU accession, in particular as regards the reform targets of the
HLAD.

The parliament is
discussing government proposals for improvement of the legislative framework
for elections, following the OSCE/ODIHR recommendations on the 2011 elections. The
proposals aim to strengthen the Electoral Code, in particular by increasing
transparency of campaign and political party financing and addressing gaps and
ambiguities in the existing Code. The government has also proposed amendments
of the Law on financing of political parties. The Voters’ List is in the
process of being revised. On-going efforts will be necessary to fully address
the recommendations of the OSCE/ODIHR, in particular as regards the separation
of state and political parties, prevention of intimidation of voters and audit
of the Voters’ List.

The Parliamentary
Committee on EU Affairs (CEA) and the National Council on EU Integration
(NCEI), which is chaired by the opposition and includes civil society
representatives, held joint sessions on key EU topics. They debated the 2011
Progress Report, the annual revision of the National Programme for the Adoption
of the Acquis (NPAA) and the HLAD roadmap for reforms. The CEA and NCEI consulted
with the Commission as part of the HLAD meeting of 7 May and 17 September in
Skopje. The two bodies held regular sessions and public hearings.

Agenda items proposed
by the opposition were discussed in plenary, in line with the 2009 Law on Parliament
and 2010 amendments to the rules of procedure.

Fourteen further public
hearings, one public discussion and two oversight hearings were held. The
legislative process involved consultations with civil society organisations and
academia.

The 2011 amendments to
the Law on Languages were implemented. The Committee on Inter-ethnic Relations continued
its activities and held five sessions, including one on inter-ethnic incidents
and tensions which arose in the first half of the year. The Committee on Labour
and Social Policy continues to discuss the scope of the government proposed Law
on Defenders concerning support to victims of the 2001 conflict. A mutually
satisfactory solution should be found which facilitates reconciliation, on the
basis of the recent government report on the Ohrid Framework Agreement.

The Code of Ethics for
MPs was not adopted. The Committee of Inquiry set up to investigate the
incident in the Parliament in 2010 has not come to any conclusions.

The Parliamentary
Institute, established by the 2009 Law on Parliament in order to support the
work of Members of Parliament, has not become operational. Further efforts are
needed to resolve administrative blockages, such as delays in staff recruitment
procedures.

Parliamentary oversight
of the interception of communications has been strengthened by amendments to
the legal framework. Oversight of intelligence and counter-intelligence
services also need to be strengthened. There is insufficient cooperation
between the two parliamentary committees responsible and the Ministry of the Interior.

Overall, the functioning of the parliament and
political dialogue have been maintained. The parliament has consistently
supported the accession process, including the High Level Accession Dialogue.
The implementation of the Law on Languages and of the rules of procedure has progressed.
The government has adopted proposals to for improvement of the framework for
elections which are being considered by Parliament. On-going efforts will be
needed to fully address the recommendations of the OSCE/ODIHR. Continued
efforts are needed to develop the capacity of the parliament and political dialogue
needs to be strengthened.

Government

The Macedonian government
has deepened its commitment to the EU reform process by engaging fully with the
High Level Accession Dialogue. On this basis, it adopted an ambitious roadmap
for reforms in April 2012 and regularly reviewed its implementation at ministerial
level. Civil society organisations were consulted, in an inclusive spirit. Through
this dialogue, the EU accession process regained a central position in the
political agenda of the country.

The revised National
Programme for the Adoption of the Acquis for 2012 was adopted in December 2011.
This would benefit from clearer deadlines, staffing requirements and budgetary
implications. Implementation of some of the measures was affected by the cuts
to the state budget.

In the first half of
2012 there were a number of incidents and killings in the country. Joint
efforts by the coalition partners played an important role in alleviating the
inter-ethnic tensions triggered by these incidents (See Respect for and
protection of minorities, cultural rights). Relations in the government
were affected by different points of view concerning the status of victims of
the 2001 conflict. The coalition partners should pursue their dialogue in order
to find solutions and ensure stability.

In October 2011, 10
days after the beginning of the census, the State Census Commission resigned
due to disagreements concerning the methodology
established by the State Statistical Office, notably the
method for counting citizens working abroad. The coalition partners agreed to
interrupt the census.

Decentralisation of
government, a key element of the Ohrid Framework Agreement, continued. A
programme for implementing decentralisation and local self-government for
2011-2014 and the corresponding action plan were adopted. All but one of the 85
municipalities entered the second phase of fiscal decentralisation, enabling a
more substantial transfer of responsibilities and financial management to the
local level. Under the Law on Financing the Units of Local Self-Government, the
share of VAT transferred to municipalities increased to 4%, thus enhancing
their financial capacity to take on new tasks. The provisions of the Law on
Regional Development on financial allocations through the responsible bodies
are not fully implemented. Capacity-building programmes are being implemented
to assist municipalities.

Progress in meeting the
objectives of decentralisation needs to be accelerated, driven in particular by
the Ministry of Local Self-Government (MoLSG) and Ministry of Finance. Mechanisms
for addressing the significant disparities in delivery of public services are
limited, and rural and small municipalities are especially disadvantaged. Financial sustainability of municipalities remains the main
challenge. Although there has been some increase in
the collection of local taxes and fees, some municipalities have difficulties
ensuring the collection of property tax.

The financial and legal
framework for the implementation of all responsibilities transferred to
municipalities needs to be developed with the participation of the local
self-government units. Also, more transparency and coordination of central
funding for municipal projects is needed.

Overall, cooperation within the government coalition
has continued and has been successful in putting the accession process at the
centre of the political agenda. The government has effectively coordinated the
implementation of the HLAD on the basis of its own Roadmap. The government
responded with maturity to inter-ethnic tensions and needs to build on this to
further strengthen inter-ethnic relations and reconciliation, including on the
status of victims of the 2001 conflict. The coalition partners should pursue
their dialogue in order to find solutions and ensure stability. In the field of
local government, progress on decentralization needs to be accelerated, in
particular as regards the financial framework.

Public administration

Some progress was made
in the area of public administration. The High Committee on Public
Administration, led by the Prime Minister, maintained its overall coordination
and political responsibility for public administration reforms. The
administrative and operational capacity of the Ministry of Information Society
and Administration (MISA) for managing public administration improved, and
administrative inspection was reinforced with new staff and training. Additional
efforts and resources are needed to further improve the MISA’s administrative
capacity and administrative inspection to effectively cope with tasks
throughout the country.

The Laws on Civil and Public
Servants were amended, postponing until January 2013 the application of some
staff appraisal methods previously criticised by EU experts. The mobility of
civil and public servants has been partially improved. The registry of public
servants is now operational, albeit with incomplete data from some institutions.
The Constitutional Court excluded certain categories of staff from the scope of
the Law on Public Servants retaining only those clearly exercising public
authority. The recruitment and dismissal procedures for institutions finding
themselves outside the public servants law are now governed by general labour
law provisions and collective bargaining. The area of civil and public service
therefore remains fragmented. To consolidate regulation in this area and to
address persisting shortcomings regarding in particular the recruitment,
promotion and termination of employment, preparations for a new comprehensive
Law on Administration have commenced.

Eligibility criteria for
recruiting staff remain inconsistent. While some progress has been observed in
eliminating tailor-made vacancies, concerns remain that the principle of
merit-based recruitment is not always respected. The regulations on hiring
temporary staff remain unaligned with general recruitment procedures for civil
and public servants. The Government has not made available official figures on
existing or transferred temporary positions.

Regarding equitable
representation, approximately one quarter of all newly employed civil servants came
from the non-majority communities. The co-ordination of the recruitment
process, in particular by the Secretariat for Implementation of the Ohrid
Framework Agreement (SIOFA), needs substantial improvement. The trend of
recruiting employees on a quantitative basis without sufficient regard to the
real needs of the institutions continued. Most of the recruits have not reached
their designated institutions while already receiving remuneration by SIOFA. The
recruitment procedure for non-majority members is not harmonised with the general
recruitment procedures and remains vulnerable to undue political influence.

The salary framework remains
fragmented. The practice continued of paying ad hoc allowances to public
servants for certain duty-related tasks without giving a transparent
justification.

The Parliament
introduced the principle of tacit approval in administrative proceedings (‘silence
is consent’) by amending over 130 laws in line with recent amendments to the
Law on General Administrative Procedures. A complex appeals procedure seriously
undermines the application of this principle. To address this and other issues,
preparations for a contemporary Law on General Administrative Procedures have
commenced.

The Parliament
appointed members of the Second Instance State Commission for appeals
administrative procedures. The State Commission is not yet fully operational
and lacks administrative capacity.

MISA continued efforts
to improve the services offered to citizens. E-government is promoted as a tool
to increase transparency and prevent petty corruption. The ‘scoreboard’ grading
system for use by citizens has been expanded to additional institutions. Responsibility
for management of regulatory impact assessment (RIA) and the Single Electronic
Register of Legislation (ENER) shifted from the Secretariat General to MISA. Steps
have been taken to improve the legislative drafting process through RIA. It has
not, however, been applied systematically. Public awareness of the citizens’
charter offering satisfaction surveys needs to be increased.

As regards financial
management, managerial accountability is not yet fully taking into account the
principles of public internal financial control. The reports of the State Audit
Office repeatedly draw attention to various shortcomings with regard to the
application of procurement rules and human resources policy. The quality of
strategic planning in central and local institutions needs to be enhanced.

The Constitutional Court annulled
provisions of nearly 15% of laws that were challenged at the Court in the
course of 2011, a decrease compared to 2010.

The number of
complaints received by the National Commission for Protecting Access to
Information (NCPAI) fell by 25% in 2011. The majority of the complaints were made
against state administrative bodies for administrative silence. More than half
of the complaints resulted with the submission of the requested information. No
sanctions were imposed. The administrative capacities of the NCPAI have not
improved and the state funding was reduced. The NCPAI continued to hold
frequent training sessions to increase the awareness of the right to free
access to public information.

The Ombudsman Office’s
recommendations continued to be respected by the public bodies in the majority
of cases (78%). The least responsive bodies in this regard remained the second-instance
government commissions, followed by the Ministry of Finance, the Ministry of the
Interior and local self-government units. The majority
of violations concerned consumer rights, property rights, labour rights and
prisons.

There was moderate progress
in police reform with ongoing implementation of the Act of Systematisation
aimed at strengthening the efficiency of police services. Additional human
resources are needed to implement the act, especially in regional police
commands. There is a need for continued training, professionalization and
depoliticisation of police personnel. To that end, an independent oversight
mechanism for law-enforcement agencies is needed to combat impunity and ensure democratic
and accountable policing services. The Law on Interception of Communications
was amended, strengthening the efficiency and transparency of this special
investigative measure.

Overall, there was some progress as regards public
administration. Services to citizens were improved and e-government has been
gradually introduced. Steps on fundamental reforms of the administrative framework
and public and civil service have been launched. Additional efforts are needed
to guarantee the transparency, professionalism and independence of the public
administration. In particular, respect for the principle of merit-based
recruitment together with the principle of equitable representation needs to be
ensured.

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

The main bodies tasked with ensuring the independence,
impartiality, accountability and professionalism of the judiciary
continued to carry out their functions.

The Judicial Council appointed 63 judges to
courts of all levels in 2011, and 6 new court presidents. When appointing first
instance judges, it continued to give preference to applicants who had not
graduated from the Academy for Judges and Prosecutors (AJP), despite the
legislative requirement that 50% of such appointments should be AJP graduates.
This raises concerns about the credibility of the current recruitment
provisions and the Judicial Council’s commitment to merit-based recruitment.
The Judicial Council initiated 4 dismissal procedures during 2011 (down from 12
the previous year) and 1 disciplinary procedure. There are at present numerous
grounds for the dismissal of judges, but the one which is used in most cases is
broad and general (unprofessional, untimely or inattentive exercise of judicial
office). Efforts are needed to further safeguard the security of tenure of judges
by ensuring that the grounds for dismissal are clear, precise and predictable,
and that the application of the rules respects the principle of proportionality.
The Judicial Council completed the professional evaluation of 612 judges for
the year 2011: 77% were rated as very good, 20% as good, 2.45% as satisfactory
and 0.49% (3 judges) as unsatisfactory. The assessment criteria applied by the
Judicial Council under the current legislation are predominantly quantitative
rather than qualitative, and no link is made between the professional
evaluation of judges and identification of their future training needs.

The Council of Public Prosecutors appointed
18 prosecutors in 2011. No prosecutors were dismissed. The Council service remains
understaffed. It is financially dependent on a budget line from funds allocated
to Public Prosecutor’s Office and is accommodated in rented offices.

The principle of equitable representation
and gender balance continues to be observed in both the judiciary and the
prosecution service.

The Academy for Judges and Prosecutors
(AJP) continued to provide both initial training for future judges and
prosecutors and ongoing training for the members and staff of the judiciary,
law enforcement agencies and other institutions and bodies. However, the fifth
annual intake of candidate judges and prosecutors scheduled for autumn 2011 was
postponed and combined with the autumn 2012 intake. This delay resulted from
uncertainty over the newly introduced integrity component of the entrance exam for
the AJP, which was partly annulled by the Constitutional Court in February
2012. Of the 80 candidates who have successfully graduated from the AJP since
January 2009, 56 have so far been recruited as judges and prosecutors, while 24
remain to be appointed in their first posts.

As regards efficiency, progress is
being made to reduce the overall backlogs in the court system as a whole. The
global number of pending cases in national courts at all levels at the end of
2011 was 295,769 (as compared with 678,670 in 2010). A significant number of
enforcement cases and non-contentious cases (around 330,000) were removed from
the court system in the second half of 2011 as a result of a transfer of
competences to professional bailiffs and notaries. However, the main reason for
the reduction in backlogs was the high clearance rate of the basic courts over
the last three years (up to 170% in 2011), due to greater procedural discipline
and monitoring at the level of individual judges. Only the Supreme Court and
the Administrative Court continued to accumulate backlogs rather than
progressively reduce them, and urgent attention needs to be given to adequate
distribution of human resources in order to address this problem. While the
improvement in the efficiency of justice is an important achievement, care
needs to be taken that the quality of justice is given equally high priority.

Following on from the significant reforms
of the justice sector between 2004 and 2010, there is currently no
comprehensive judicial reform strategy or action plan in place. The Courts
Budget Council completed a project to determine the average cost of court
proceedings, with a view to establishing the human and budgetary resources
needed by the national courts. The 2011 methodology for judicial statistics is
not yet being implemented systematically and there has not been adequate
training or awareness-raising among courts on how to use new statistical tools.
The 2011-2013 strategy determining the number of judges and prosecutors does
not contain any analysis which would inform the management or distribution of
existing resources to make it more efficient across the court network, nor does
it project future needs in terms of clear, verifiable indicators. The IT
strategy for the judiciary still remains to be fully implemented and extended
to the prosecution service. Efforts are needed to either improve the
implementation of individual strategies, or to develop an overall strategy
which brings these together in a coherent way and focuses on the remaining
challenges within the judicial sector. The Council for Judicial Reform should
intensify its work and take a lead in defining the new strategic framework for
continuation of the judicial reform.

Overall as
regards the judiciary, legislative and institutional safeguards are in place,
but further efforts are needed to guarantee independence and impartiality in
practice. Progress has been made, notably in reducing the backlog of cases.
Further efforts are needed to create clear and transparent grounds ensuring
proportionate dismissal procedures and to improve significantly the
implementation of merit-based judicial appointment and career development. The
AJP should be further supported in its key role in the development of a
professional and highly-skilled judiciary and prosecution service.

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

Further amendments were made to the legal
framework. Changes were made to the Law on Financing of Political Parties and
the Law on Prevention of Conflicts of Interests, which improved the
verification and enforcement powers of the relevant authorities. New State
Programmes for Prevention and Repression of Corruption and for Prevention and
Reduction of Conflict of Interest were adopted by the State Commission for the
Prevention of Corruption (SCPC), along with a corresponding Action Plan for
2011-2015. However, weak preparation for the entry into force of the new Law on
Criminal Procedure has meant further delays in its implementation, with entry
into effect now postponed until December 2013.

Stricter sentences for corruption-related
offences were imposed by the courts in comparison with 2010. However, orders for
the seizure and confiscation of assets remain exceptional. A track record of
investigations, prosecutions and convictions, including the full use of
available enforcement means and special investigative techniques, has yet to be
established. The general capacity of the judiciary to deal with corruption
cases remains low. Only a handful of high-level corruption cases have been
prosecuted, and almost all of them remain in the court system after many years,
having been returned for retrial following appeals, due to inadequate
examination of evidence by the first instance court.

The Law on the Financing of Political
Parties was amended in October 2011 to strengthen the system for controlling
party and campaign funding. However the State Audit Office (SAO) remains
ill-equipped to carry out its new functions under the legislation. Implementation
of the rules on party financing needs to improve significantly, especially
taking into account GRECO recommendations. The SAO has so far audited 11
political parties’ financial statements for 2010 and has not yet audited any
for 2011. It has not taken measures against any political parties for breaches
of the reporting obligation, despite having received financial statements from
only 16 out of over 40 registered parties for 2011.

Following the 2011 elections, in May the
Court of Appeal upheld the conviction of an opposition party leader who was
sentenced to 5 years imprisonment for illegal financing of election campaign
and misuse of position. This has raised questions about selectivity.

The number of police officers subjected to
disciplinary proceedings remained steady, while the Customs Administration
strengthened its internal control system, doubling the number of disciplinary
procedures initiated against customs officers.

Corruption in public procurement continues
to be a serious problem. The institutional framework and measures taken remain
ill-suited to effectively addressing this phenomenon. Existing legislation
requires further improvement to address corruption risks and increase
transparency in public procurement. The internal control system in central and
local administration remains weak. Effective whistle-blowing mechanisms in the public
and private sectors have yet to be established. There
are few criminal prosecutions for abuse of
public procurement.

There is a lack of analysis of corruption
and ways to tackle it. Operational cooperation and information sharing between
institutions needs to be further strengthened. Supervision and enforcement of
the law by the SAO, the SCPC and other bodies is hampered by the lack of any
coordinated system of follow-up concerning the outcome of those misdemeanour or
criminal proceedings which are initiated. The statistics system for monitoring
anti-corruption policies is underdeveloped. Public anti-corruption awareness
remains low. Resources to ensure effective action against corruption remain
insufficient.

Overall, the
legislative framework is in place and capacity has been strengthened slightly,
but greater efforts are needed as regards implementation of existing laws.
Steps have been taken to improve verification capacities and enforcement powers
of the authorities. However, there has been little visible progress in terms of
end-results. A track record of handling high-level corruption cases has yet to
be established. A more proactive and coordinated approach by supervisory bodies
and enforcement agencies is needed. Collection and analysis of statistical data
should be improved to focus efforts where they are most needed. Corruption
remains prevalent in many areas and continues to be a serious problem.

2.2.
Human rights and the protection of minorities (See also Chapter 23 – Judiciary and
fundamental rights)

Observance of international human rights law

Progress was made as regards international
human rights instruments, with the ratification of the revised European
Social Charter and the UN Convention on the Rights of Persons with Disabilities
and the corresponding Optional Protocol. The European Charter for Regional or Minority
Languages has not yet been ratified.

During the reporting
period, the European Court of Human Rights
(ECtHR) delivered judgements on seven applications finding that the country had
violated rights guaranteed by the European Convention on Human Rights (ECHR). A
total of 341 new applications have been submitted to the ECtHR since September
2011, bringing the total of pending applications to 969.

Limited progress can be reported in the promotion
and enforcement of human rights. Efforts were made to strengthen the
implementation of the legal framework, and increase staff in institutions. The
Ombudsman still needs a full mandate to promote and protect human rights in
compliance with the Paris Principles.

Civil and political rights

The Ombudsman’s Office’s national
prevention mechanism remains an important tool for the prevention of torture
and ill-treatment. The Ministry of the Interior’s Sector for Internal Control
and Professional Standards further improved the professionalism of its staff
members and its regular monitoring of police work continues; however, the
results remain limited. Efforts were made to increase police officers’
knowledge of European standards and to enforce safeguards against ill-treatment
in police stations. Gaps remain, in practice, as regards the implementation of
formal safeguards against ill-treatment, including the zero-tolerance strategy
for ill-treatment. Weaknesses in the complaints system and the related
data-collection system remain a concern. Efforts were made to improve the
procedures for and treatment of detained persons, including an Action Plan for the
renovation of detention facilities; however, conditions in a number of
detention facilities remain below required standards.

There was no response to the European
Parliament’s recommendation of 2007 on follow-up of the Khaled El-Masri case of
alleged extra-judicial detention.

There was some
progress as regards the prison system. Prison reconstruction and
training of prison staff continued. Standardised procedures for management and
risk assessment were adopted. However, the prison system remains seriously
underfunded and understaffed. Poor management, poor material conditions,
limited health care provision, a lack of educational and rehabilitation
activities, in particular for juveniles, and the lack of an independent
inspection mechanism to address violations and punish perpetrators remain
matters of concern. Overcrowding continues at an average of 20%.

Access to justice recorded a positive trend in providing legal aid via counselling by
the Ministry of Justice to 24 out of 85
citizens. Asylum seekers are also eligible for legal aid.

Some progress has been made in the field of
freedom of expression and the media. The overall constitutional and
legal framework protecting freedom of expression is generally in place. The
roundtable process of dialogue between the government and the Association of
Journalists has proved an important forum for addressing key challenges relating
to the media. A memorandum of understanding was signed, which identified five
areas to be discussed, including the decriminalisation of defamation and ‘insult’,
the strengthening of the public broadcaster, transparency of government
advertising and improving journalists’ and editors’ respect for professional
standards. In September 2012, the government adopted proposals for a new Law on
Civil Liability for Insult and Defamation aiming at alignment with relevant
ECHR principles. The Criminal Code needs to be revised in line with this
approach. Training of the judiciary on Article 10 of the European Convention on
Human Rights has been conducted, and translations made of key European Court of
Human Rights judgments. Further efforts are needed to ensure that these
standards are consistently applied. Professional standards in journalism also
need to be strengthened. At the same time, there are continued concerns about
lack of pluralism and self-censorship. There is currently no active self-regulatory
body for the media.

The Broadcasting Council improved its
enforcement record as regards illegal concentration of ownership and conflicts
of interest, and a number of television channels were required to amend their
ownership structure. The Broadcasting Council also revoked the licence of the
television channel A2 TV on the grounds that the programming content was not in
line with the licence requirements. The Broadcasting Council needs to
demonstrate that it is following a non-discriminatory and transparent approach.
There continues to be concern that a large share of government-funded advertising
campaigns is being directed to media supportive of the government. The State
Labour Inspectorate should continue to enforce the labour rights of media
workers to ensure job security and independence.

Freedom of
assembly and association are generally ensured.
There were no cases of misuse of the legislation or prohibited registration.

A new Strategy for Cooperation with Civil
Society (2012-2017) and Action Plan (2012-2014) were adopted in June 2012. A
Council for Cooperation with Civil Society is proposed under the strategy, while
a legally binding framework will standardise rules for state financing for civil
society organisations. The new strategy aims to ensure that all measures
carried forward from the previous strategy are implemented. Preparation of the
new strategy was broadly participatory.

The Government Commission for Public
Benefit Status set up in September 2011 has yet to become fully operational.
Tax legislation is still not in line with the Law on Associations and
Foundations, preventing access to tax benefits and certain types of economic
activity. The system for allocating state financing to civil society
organisations needs to be improved and standardised. Civil society
organisations remain heavily dependent on foreign funding. Existing government
systems for implementing the Strategy for Cooperation with Civil Society needed
further strengthening, including the NGO Cooperation Unit in the General
Secretariat. No measures have been taken to develop civil society in rural
areas and/or at municipal level. Local self-government units lack sufficient
capacity in this area to ensure standardised cooperation with and financing of
local civil society organisations.

The new law on lustration enacted in June
replaces the previous law which was contested twice by the Constitutional
Court. The period covered by the law goes beyond 1991, as in the previous laws.
Furthermore the new law allows for publication of the names of former
collaborators of the secret service as well as of the supporting evidence. The
scope of application includes journalists, academics, past holders of public
office, members of civil society organisations and individuals who made a
profit during the privatisation process. Concerns have been raised about the
proportionality and constitutionality of the law.

With regard to freedom of thought, conscience
and religion, two more religious entities were registered under the Law on
the Legal Status of Churches, Religious Communities and Religious Groups,
bringing the total number to 30. Two applications for registration were
rejected. The Bektashi community from Tetovo remains unregistered. It has filed
a case with the European Court of Human Rights relating to restitution of
property.

Overall,
civil and political rights are broadly respected and some further progress was
made. The ongoing reform of the prison system needs to be pursued. Significant
efforts are needed to improve management of the prisons, in particular for
juveniles. The dialogue between the government and journalists on issues
relating to freedom of expression was deepened. The government adopted a
proposal to decriminalise defamation through a Law on Civil Liability for
Insult and Defamation. The Criminal Code needs to be revised in line with this
approach. The Broadcasting Council has begun to enforce legal provisions
against concentration of ownership and conflicts of interest with the political
sphere. There are widespread concerns about lack of pluralism and
self-censorship and the Broadcasting Council needs to demonstrate that it is
following a non-discriminatory and transparent approach. Continued efforts are
necessary to address related challenges such as transparency of government
advertising and the labour rights of journalists.

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

As regards women’s
rights and gender equality, discriminatory customs, traditions and
stereotypes are widespread and undermine women’s basic rights, especially those
of women in rural areas. Active participation by women in political life
remains low, particularly at local level. Women are also under-represented on
the labour market. Some very limited actions targeting Roma women were
implemented. Institutions do not appropriately exercise their role in ensuring
better integration of the gender perspective into other
policy areas. There is no strategic approach to
implementing national strategies and action plans.

Some limited progress was made in the area
of children’s rights. Amendments to the Juvenile Justice Law provide for
more rights and better protection of child victims and introduce special
protection measures for child witnesses. Juvenile justice professionals from
all relevant institutions benefited from comprehensive training. Collection of
statistical data on juvenile justice has improved. Eleven municipal councils for
the prevention of juvenile delinquency were set up. The relevant institutions
remained underfunded and understaffed as regards administration of juvenile
justice. Leadership and coordination of the reform process need to be
strengthened.

Juvenile detention conditions in police
stations fail to meet legal requirements. Free legal aid was not systematically
provided to juveniles. The programme to compensate juvenile victims is not
operational. The situation in the educational‑correctional facility in Veles
remains a matter of serious concern, in particular with regard to the treatment
of juveniles in the closed wing, provision of external healthcare, education
and rehabilitation services. The number of specialist staff such as
psychologists and social workers remains insufficient.

Prevention, protection, outreach and care
services still lack sufficient financial and human resources notably with
reference to children with disabilities, street children, children using drugs
and children who are victims of domestic violence, sexual abuse or trafficking.

Some limited progress can be reported in
the treatment of the socially vulnerable and/or persons with disabilities.
The UN Convention on the Rights of Persons with Disabilities was ratified. Social services are slowly being deinstitutionalised and civil
society is slowly increasing its provision of social care services. However,
the fiscal and administrative decentralisation of social services is still
limited. The implementation of adopted policies is slow. Poor material
conditions and inhumane and degrading treatment in psychiatric institutions
need to be addressed. Social integration of people with disabilities is very
limited. The poverty rate remains very high.

Some progress can
be reported in the area of anti-discrimination policies. The Commission
for Protection against Discrimination became an observer member of the European
Network of Equality Bodies. It was active in processing complaints, mainly in
the areas of labour relations, social security, the judiciary and
administration. The overall capacity of the Commission remains weak and its
public visibility and accessibility levels are low. Public awareness of the
need for non-discrimination is very limited. The Anti-Discrimination Law is
still not fully in line with the acquis; discrimination on the grounds
of sexual orientation is still omitted. The Lesbian, Gay, Bisexual and
Transgender (LGBT) community continue to suffer from discrimination and
stigmatisation.

There has been
progress as regards labour and trade unions rights. The Economic and
Social Council (ESC) continued to meet regularly. The ESC agreed on the minimum
wage and Parliament adopted the Law on the Minimum Wage. Training on peaceful
settlements in labour disputes and for negotiators and mediators were provided
to the relevant stakeholders. Bipartite social dialogue remains weak,
particularly in the private sector. The capacity of social partners remains
weak as trade unions lack stable finances and management capacity.

As regards property rights, progress
was made. The process of returning property confiscated under the Socialist
Federal Republic of Yugoslavia has so far resulted in the resolution of 30,744
cases filed between May 2000 and December 2007. About 10% of the decisions
taken were dealt with at second instance or by the Administrative Court.
Property which could not be returned was compensated for in the form of bonds
and 11 issues worth € 301 million were made during the period 2001-2011.

Overall,
some progress can be reported in the strengthening of social and economic
rights. The Macedonian institutions have taken a more proactive role on behalf
of children’s rights, notably juvenile justice and street children. Social
dialogue has developed through the Economic and Social Council. The Commission
for Protection against Discrimination is engaged in processing complaints
although its resources are limited. The Anti-Discrimination Law needs to be
fully aligned with the acquis, notably as regards discrimination on
grounds of sexual orientation. There is a need for better protection of the rights
of women, including those in vulnerable groups, as well as further efforts to
increase their participation in the labour market and in political life. Social
integration of people with disabilities remains weak.

Respect
for and protection of minorities, cultural rights

In the first half of
2012, there were a number of incidents and killings in the country, which led
to heightened tension between ethnic communities and public protests. The government
responded in a calm and measured way. Political leaders also made statements
calling for restraint and mutual respect. This approach needs to continue in
order to avoid politicising the incidents. It is crucial that the judiciary and
law enforcement agencies conduct rigorous and objective investigations in order
to ensure that the perpetrators of any crime committed are brought to justice.

A review of the implementation
of the Ohrid Framework Agreement has been launched by the Secretariat for the
Implementation of the Ohrid Framework Agreement (SIOFA) and the government
adopted a report for the first time since the signature of the Agreement. The
report covers all aspects of the Agreement, showing where there has been
progress and highlighting the main challenges. The report provides an important
tool for strengthening inter-community dialogue. The review needs to be
continued and the recommendations should be followed up in a concrete manner.

Relations in the
government were affected by different points of view concerning the status of
victims of the 2001 conflict. The coalition partners should pursue their
dialogue in order to find solutions and ensure stability. The parliamentary Committee
on Labour and Social Policy continues to discuss the government proposed Law on
Defenders which aims to provide support to the victims of the 2001 conflict. A
mutually satisfactory solution should be found which facilitates
reconciliation, on the basis of the recent government report on the Ohrid
Framework Agreement.

The SIOFA recruited new
senior staff. Nonetheless, further significant efforts are necessary to
strengthen the capacity of the SIOFA.

The agency for
protecting the rights of minorities which represent less than 20% of the
population increased its visibility, for example through participative fora
with other institutions and civil society. However, the agency was not able to
carry out many of its tasks due to limited resources.

The Ministry of
Education and Science promoted access to education for the communities, for
instance through the development of relevant textbooks. Access to education in
the languages of the smaller communities remains uneven due to the limited
numbers of qualified teachers and teaching material.

Committees for
relations between communities continued to exist in many municipalities.
However, their potential to lead inter-community dialogue at local level is not
fully used.

The law on languages
continued to be implemented well in the Parliament. Its scope was widened to
include officials elected or appointed by the Parliament. An evaluation and
monitoring mechanism needs to be established.

Regarding the Ministry
of Education and Science’s strategy on integrated education, donors funded some
activities but no state budget was allocated to implement the strategy.
Segregation in schools along ethnic and language lines remains widespread. There
have been repeated cases of inter-ethnic violence in secondary schools.

As regards equitable
representation, the overall proportion of civil servants from non-majority
communities is satisfactory and remains at approximately 29%. However, the
distribution between ministries is uneven and equitable representation at
senior level remains insufficient. Some of the small communities, in particular
the Roma and the Turks, remain underrepresented.

Some progress was made regarding
the Roma. The strategy on social inclusion of Roma 2012-2014 was
adopted, along with an action plan. Despite budgetary restrictions, financial
support for Roma programmes was maintained at the 2009 and 2011 level. The
country presided over the Decade of Roma Inclusion and organised several
regional conferences and seminars. It has undertaken to
implement the operational conclusions of the July 2011 social inclusion seminar
on Roma. The Roma health mediator programme started in
16 municipalities. Requests for the legalisation of illegal houses were
submitted to the municipalities in line with the legislation and the process is
ongoing. To address the problem of persons without documents, new Roma
information centres were opened. Education projects continued to be implemented
and the enrolment rates of Roma children in secondary education increased slightly.

Recent legislative
changes aiming to address the overrepresentation of Roma children in special
schools have not been implemented. Access to basic health services remains
difficult. Roma have above average rates of infant mortality and many children
are either not fully vaccinated or not vaccinated at all. High unemployment
rates persist and access to unemployment benefits remains problematic.
Discrimination against Roma persists, including continued stereotyping in the
media and in social networks on the internet. Roma women and Roma with
disabilities face precarious living conditions because of double
discrimination.

In July 2012 there were
1,162 refugees and internally displaced persons (IDPs) in the country,
the majority of whom are Roma from Kosovo\*.
257 persons were voluntarily repatriated to Kosovo and Serbia in 2011. The
government continued to implement integration policies for Roma refugees.
Access to the public health service and active market labour measures was formalised
and access to housing was improved.

The number of
internally displaced persons (IDPs) decreased from 611 in 2010 to 474 in 2011.
Most of the complaints lodged by IDPs against the state for damages from the
2001 conflict are still before the courts.

Overall, some progress was achieved in the area of
cultural rights and minorities. A review of the Ohrid Framework Agreement was launched
which includes recommendations for addressing the on-going challenges. This
momentum needs to be maintained through concrete follow up. Tension between
communities following violent incidents caused concern. The government
responded with maturity and needs to build on this by further strengthening
inter-ethnic relations and reconciliation. Concerning the Roma, several measures
were taken, notably to address the issue of persons without documents and to
integrate IDPs and Roma refugees. However, implementation of existing
strategies and interinstitutional cooperation needs to be significantly
strengthened. Several institutions mandated to promote the rights of the
communities lack financial and administrative resources.

2.3.
Regional issues and international obligations

The former Yugoslav
Republic of Macedonia continued to cooperate fully with the International
Criminal Tribunal for the former Yugoslavia (ICTY). There are no remaining
cases or appeals pending in The Hague. Of the four cases that the ICTY
transferred to the national authorities in 2008, one was dismissed in 2011 by
the domestic court system and the other three were dismissed in 2012, at the
request of the public prosecution and on the basis of the Amnesty Law.

The former Yugoslav
Republic of Macedonia still maintains a 2003 bilateral immunity agreement with
the United States granting exemptions for US citizens from the jurisdiction of
the International Criminal Court. This does not comply with the EU
Common Positions on the integrity of the Rome Statute or the related EU guiding
principles on bilateral immunity agreements. The country needs to align with
the EU position.

Regional cooperation and good neighbourly relations form an
essential part of the country’s progress towards the European Union. The
country has continued to actively participate in regional initiatives,
including the South East European Cooperation Process (SEECP), the Regional
Cooperation Council (RCC), the Central European Free Trade Agreement (CEFTA),
the Energy Community Treaty and the European Common Aviation Area Agreement.
The country took over the Chairmanship-in-Office of the SEECP in June 2012. The
seat of the Secretariat of the South-Eastern European Health Network (SEEHN)
was established in Skopje. The country continued to contribute to the
EUFOR Althea mission in Bosnia and Herzegovina.

The former Yugoslav
Republic of Macedonia has maintained an overall constructive role as regards bilateral
relations with other enlargement countries and neighbouring EU Member States.

Relations with Albania continued to develop, with
the entry into force of agreements on travel by citizens between the two
countries and on cooperation as part of EU accession process. An agreement was
signed on setting up a joint centre for the exchange of information between their
respective border and migration police corps.

Relations with Bosnia
and Herzegovina continued to be good. Several agreements on judicial
cooperation and on cooperation in the areas of health and of education were
signed.

Relations with Croatia
continued to be good, leading to regular bilateral high-level visits.

Cooperation
with Montenegro was further strengthened. The extradition agreement
entered into force, as did agreements on economic cooperation and on the EU
accession process. Agreements on readmission of persons residing without
authorisation and on police cooperation were signed.

Relations with Serbia remained good. There were
reciprocal presidential visits in December 2011 and January 2012, which took
place in a positive atmosphere. Agreements on travel conditions and on
compensation for health protection were signed. There were no developments
regarding the dispute between the Orthodox churches in the two countries.

Cooperation with Kosovo
continued to develop with the entry into force of an agreement on railway
transport border regulations, and with the signing of an agreement on joint
border control and supervision. The joint monitoring patrols along the border
with Kosovo need to address the challenge of illegal trafficking of goods and
illegal migration.

Close relations with Turkey
further advanced in the diplomatic, economic and cultural fields. An agreement
on regular air traffic between the two countries entered into force.

There continue to be
close ties with Bulgaria, notably in the economic sphere. Developments
during the reporting period highlighted the need for more dialogue to overcome
possible misunderstandings and different perceptions concerning historical, cultural
and ethnicity based issues. Recent statements at the highest level have
confirmed the willingness to move forward.

Relations with Greece
continued to be close, notably in the economic sphere and tourism. However,
relations between the two countries remained affected by the name issue. The
International Court of Justice adopted a judgment concerning the Interim
Agreement with Greece. The country has kept engaged in talks under the auspices
of the UN and in direct contacts with Greece. The talks under the UN auspices
for a negotiated and mutually acceptable solution should be pursued with
increased vigour, as should direct bilateral meetings and contacts. Actions and
statements which could negatively impact on good neighbourly relations should
be avoided.

Overall, the former Yugoslav Republic of Macedonia is
participating actively in regional cooperation and further developing bilateral
relations with its neighbours. The name issue continues to affect relations
with Greece. A constructive approach to challenges with neighbours is
important.

3.
Economic criteria

In examining economic developments in the
former Yugoslav Republic of Macedonia, 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

A broad consensus has been maintained on
the fundamental features of the country’s economic policy set-up. The
medium-term policy framework was described in various programmes, such as the
sixth pre-accession economic programme (PEP), covering the period 2012-2014, the
labour market strategy for 2015 and the national employment action plan for
2011-2013. In addition, the authorities embarked on a high-level accession
dialogue (HLAD) with the EU, which provided another platform for accelerating
accession-related reforms in the economy. Cooperation with the IFIs, such as
the World Bank and the IMF continued, although the IMF’s second review of the
current financial arrangement could not be completed yet. Structured dialogue
with the business community continued. Overall, a broad political
consensus has been maintained on the fundamentals of economic policy.

Macroeconomic stability

The economy grew by about 3% in 2011, but
shrank by about 1% year-on-year in the first half of 2012, compared with growth
of nearly 5% in the first half the year before. Rather resilient private
consumption helped to prevent a sharper slowdown, while the reduction in public
consumption had a negative contribution to growth. Indicators on domestic
production point to a marked year-on-year deceleration during the reporting
period, with industrial production being on average nearly 9% lower since
October 2011 than in the same period the year before. Average per capita GDP
improved in relation to the EU average, increasing from 35% of the EU average in
2010 to 36% in 2011. Overall, economic activity has decelerated since
autumn 2011, although private consumption and investment remained rather
resilient in view of the markedly weaker international environment.

External imbalances declined, but their financing
deteriorated. In the first half of 2012, the current account deficit was at
about -2.8% of the estimated full-year GDP, compared to -3.5% of GDP the year
before. The most important factor for the improvement was a further increase of
current transfers to about 10% of the estimated full-year GDP. The trade
balance of goods and services deteriorated slightly, reaching ‑12% of estimated
full-year GDP, compared to ‑11% of GDP the year before, mainly as a result of
weaker export revenues. The capital and financial account surplus shrank to a
similar extent, declining to about 2.6% of GDP by June 2012, compared to a
surplus of 4% a year before. FDI inflows and other investment declined to about
1% of the estimated full-year GDP and 0.6% of GDP respectively, compared to 2%
of GDP and 4% of GDP a year before. As a result, the financing of the current
account deficit was less based on investment inflows but on external credits.

Gross external debt rose slightly to 61.2%
of GDP in the first quarter of 2012, compared to 59.7% a year before. The main
reason for this increase was public external debt, which rose by 2.2 percentage
points of GDP, while private debt declined by 0.7 percentage points. Foreign
reserves stood at € 2.1 billion (about 30% of GDP) in
July, compared with € 1.8 billion (29% of GDP) the year before. The
coverage of prospective imports by reserves improved slightly, reflecting not
only an increase in the level of foreign reserves, but also expected lower
imports. Overall, the current account deficit shrank.
However, the financing of the deficit increasingly relied on foreign loans,
leading to an increase in public gross external debt.

Unemployment was very high at 31.2% and
remained largely unchanged year-on-year in the second quarter of 2012, while
during winter it had been about 1 percentage point higher than in the year
before. Employment was about 1% higher than a year before but its impact on
unemployment was limited, as most newly employed persons appear not to have
been registered in the labour market before. The main sectors with employment
growth in the second quarter of 2012 were education, the textile industry and
municipal services. Youth unemployment increased slightly, from 54.6% in the second
quarter of 2011 to 54.9% in the second quarter of 2012. The young account for
about 10% of the labour force, but their share in unemployment rose from 18.5%
in the second quarter of 2011 to 18.8% in the second quarter of 2012.
Unemployment among the less-well educated, who make up nearly 30% of the labour
force, has declined, from 39% in the second quarter of 2011 to 36% in the
second quarter of 2012. Employment in the public sector increased by about 1%
year-on-year, mainly in the education sector. However, as a share in total
employment the share of public sector employment has declined from 22% in
mid-2011 to 21% in mid-2012. Overall, the situation in the labour market
remains weak. Unemployment continues to be very high, particularly among the
young and less educated.

Monetary policy cautiously supported the
gradual recovery, while the exchange rate policy remained geared to maintaining
price stability and the de facto peg to the euro. The Central Bank has
slightly lowered its key policy rate, from 4% to 3¾%. In order to support the
lending activities of the financial sector, the Central Bank amended the rules
on minimum reserve requirements and collateral. It also introduced a number of
measures to stimulate financial market activity, such as establishing new
monetary instruments, a new overnight deposit facility and a one-week deposit
facility, a standing 7-day repo facility and by lowering the interest spreads
between overnight deposit rates and Central Bank bills. Overall, the
exchange rate and monetary policies have remained sound.

Inflation was markedly lower than a year
before, with an average inflation in the first eight months of 2012 of 2.4%,
compared to 4.4% the same period a year before. However, during recent months,
inflationary pressures have increased. The main sources for the increase lie in
higher energy prices, but also rising food prices and rent costs. Prices for
food and beverages account for about 40% of the consumer basket. Core
inflation, which excludes the impact of energy and food prices on the overall
price level, remained fairly stable and below 2%.

The published central government deficit
for 2011 was in line with the 2.5% of GDP target. Revenue, which accounts for
some 30% of GDP, was some 7.5% lower than initially expected. In order to meet
the deficit target, spending was reduced by about 7%, mainly on purchases of
goods and services, which were kept some 19% below their initial budget target.
Capital investment was also kept some 16% lower than originally planned. However,
as a share of GDP capital spending rose, from 3.5% in 2010 to 3.8% in 2011,
while overall spending declined from 32.0% of GDP to 31.2%. In 2012, revenues
have so far remained below forecasts and dropped by 3% in real terms. To
compensate for the shortfall, the authorities adopted a supplementary budget
and raised the deficit target for 2012 from -2.5% of GDP to -3.5%. So far, the
main area of spending cuts was again capital spending, accounting in July for
about 1.8% of the estimated full-year GDP, compared to 2.4% a year before. In
the first seven months of 2012, published data point to a deficit of about 2%
of the estimated full-year GDP, which is a similar level as the year before.
The government debt ratio rose to about 30% of GDP in July 2012, compared to
around 25% the year before, mainly due to increased domestic lending. In spite
of existing legal obligations, neither the fiscal and public debt strategy nor
the Public Investment Programme have been updated yet for the period 2012-2014.
Furthermore, the authorities did not submit a Fiscal Notification, which should
present central government data in a format comparable to EU standards.

Fiscal decentralisation has continued. By
mid-2012, 84 of the 85 municipalities had advanced to the second stage of
decentralisation. Furthermore, municipalities’ share of revenue allocation has
increased. The efficiency of the local units in charge of financial management
still needs to be strengthened by improving management and competences, by
ensuring adequate staffing levels and shortening administrative procedures.

Fiscal policy remained geared to meeting
the deficit target, although due to a weaker-than-expected revenue performance
the fiscal target had to be raised in autumn 2012. Budgetary planning and
execution have deteriorated and the quality of public spending continues to be
low. The budgetary process continues to be plagued by overly optimistic revenue
estimates, a lack of medium-term planning, short-term oriented spending
decisions and a deterioration in public spending management, resulting in
increasing payment arrears, a further reduced transparency of spending
decisions and weakened reliability of public sector accounts. This not only
blurs the information on the countries’ fiscal position, but also has negative
knock-on effects on the liquidity situation of the private sector

Overall, the
policy mix continued to be directed towards stability. Monetary conditions were
supportive to growth, while taking into account the country’s policy of a de
facto peg to the euro. Public spending was kept largely in line with
revenue. However, budgetary planning and the management of public expenditure
have deteriorated markedly and the quality of public spending has remained
weak. Unemployment continues to be very high, in particular among the young,
posing a persistent major policy challenge. Macro-fiscal risks are mainly
related to external shocks, such as a further decline in external demand,
higher import prices and/or a drop in current transfers.

Interplay of market forces

Privatisation is largely completed and the
economy is mainly driven by market forces. The role of the private sector
increased slightly from 82% of total value added in 2010 to 82.4% in spring
2012, mainly as a result of an increase in value added in construction and
trade. The government took some decisions which increased the state’s role in
the economy, such as agreeing to a debt-equity swap with a few troubled
companies. At the same time, the government scheme to sell state land generated
revenue, but also lowered the level of state assets. Attempts to privatise
several state-owned companies failed. Overall, the asset value of fully or
partly state-controlled property remains largely unchanged at some 13% of GDP.
The majority of state capital — nearly 80% — is concentrated in five companies,
mainly public utilities. The public sector employs some 20% of the labour force
and public procurement accounts for about 11% of GDP. The share of administered
and regulated prices in the CPI basket remained unchanged at 13.1%. Regulated
prices, which account for about 12% of the CPI basket, usually cover costs.
However the electricity prices are still distorted as a result of persistently
high technical losses and non-cost covering input prices. Administered prices,
such as for water supply and waste disposal which account for about 1.4% of the
CPI basket, usually are not cost recovering. Overall, the role of the
state has remained largely unchanged and limited.

Market
entry and exit

The government has continued its efforts to
facilitate market entry and exit. However, partly due to the less supportive
international economic environment, the number of newly established companies
has declined to slightly below 10% of the total number of enterprises. Limited access
to finance is still impeding the growth of many companies, in particular of
small and medium-sized enterprises (SMEs). The third phase of the ‘regulatory
guillotine’ project, which focuses on reducing administrative burdens, is being
implemented and the fourth phase, concentrating on measures for SMEs, has
started. Further progress has been made towards closing down non-operating
companies. In the period October 2011 and August 2012, the number of bankruptcy
procedures was some 32% higher than a year before. The average duration of
company liquidation has been reduced. Overall, some further progress was
made on facilitating market entry and exit.

Legal system

The
legal system for a functioning market economy is largely in place. Real estate
property registration is practically completed. The authorities adopted a
number of reforms to increase the efficiency and transparency of courts, and to
expedite legal procedures. The number of pending commercial court cases
declined, from 5,782 at the end of 2011 to 2,152 cases in mid-2012. The
duration of court proceedings remained largely unchanged. About one third of
the cases are resolved within three months and about 60% within six months. The
share of cases taking more than five years fell further, from 1.2% in 2010 to
0.8% in 2011. Despite simplified procedures and introduction of new legal
instruments strengthening payment discipline, contract enforcement is still
difficult, hampering the business environment, in particular for SMEs.
Sometimes, the legislative process suffers from insufficient discussion with
the stakeholders, leading to the need of frequent revisions of recently adopted
legislation. Implementation of existing legislation needs to be further
strengthened.

The
legal and financial independence and the resource endowment of some regulatory
and supervisory bodies has been strengthened. However, in some cases such as
the Agency for
supervision of fully-funded pension insurances (MAPAS), the
State Appeals Commission for Public Procurement and the State Commission for
Prevention of Corruption, the endowment with human and IT resources and/or the
leverage are still insufficient. The quality of the decisions of the Commission
for Protection of Competition needs to be further improved. The follow-up of the
State Audit Office (SAO), reports by the Parliament is inadequate and
government mechanisms to deal with systemic shortcomings identified in SAO’s
reports are lacking.

Overall, the functioning of the legal
system has continued to gradually improve. However, weaknesses related to
lengthy procedures, corruption and difficult contract enforcement are
continuing to hamper the business environment.

Financial
sector

The significance of the financial sector
and its intermediation function have both improved further. Despite the
international financial crisis, the sector’s assets rose slightly from 71% of
GDP the end of September 2011 to 72% at the end of June 2012. Deposits remained
largely unchanged at about 50%. Gross loans rose from 44% of GDP to 47%, mainly
due to increased lending of medium-sized banks. Deposits remain the sector’s
main source of liquidity, covering more than 112% of outstanding loans. The
sector continues to be owned predominantly by foreign companies, with 13 out of
17 banks dominated by foreign owners. The share of foreign ownership rose to
75% of GDP in mid-2012, compared to 73% a year before. The share of state
ownership in the sector remains low, at some 7% of the sector’s assets. The
main state assets in this sector are still its majority share in the country’s
only development bank and a limited number of remaining minority shares. Market
concentration remains high, but decreased slightly. The assets of the five
biggest banks in terms of their share of total assets declined slightly, from
67% in mid-2011 to 66% in mid-2012. The efficiency of the banking sector has
improved slightly. The profitability of the sector as a whole recovered
slightly in the second quarter of 2012. Credit growth has recovered since
autumn last year, reaching some 8.5% in the first seven months of 2012.
Private-sector weighted lending rates declined to some 8.4% in July, while
deposit rates dropped slightly faster, to some 5%. As a result, spreads widened
slightly to 3.4 percentage points. Financial stability has been maintained,
with sound liquidity, solvency and capital adequacy ratios. The share of
non-performing-loans increased slightly in the case of large and small-sized
companies, while in the group of medium-sized banks, the loan performance
improved. The sectors average ratio of non-performing loans remained close to
10% with provisions still exceeding the amount of identified non-performing
loans.

Banking regulation and supervision are
largely in line with international standards. The relevance of non-banking
financial market intermediaries continues to be limited, with assets equivalent
to some 10% of the financial sector’s assets or around 8% of GDP. Insurance
institutions account for some 4% of the sector’s assets and leasing companies
and pension funds for about 3% each. The value of the capital market accounts
has continued is decline to about 30% of GDP.

Overall, the trend towards further deepening and widening of the financial
sector continued. However, the levels of financial intermediation and competition
in the market are still low, constraining more dynamic growth in the private
sector, particularly for SMEs. Furthermore, some regulatory and supervisory
agencies continued to be impeded by insufficient levels of resource endowment
and leverage.

3.2.
The capacity to cope with competitive pressure
and market forces within the Union

Existence of a functioning market economy

Overall, macroeconomic stability has been
maintained. Market entry and exit procedures have improved. Some steps have
been taken to strengthen the rule of law. However, so far, those measures have
not had significant impact yet. The quality of public finance planning and
management has deteriorated and the quality of spending has remained low.
Unemployment remains very high, particularly among the young. The business
environment continues to suffer from institutional and administrative
weaknesses, difficult contract enforcement and corruption.

Human and physical capital endowment

The level of human capital endowment is
still low. The authorities continued to improve the physical infrastructure for
education, to increase the numbers of teachers and to modernise the curricula.
The number of teachers rose by 1.5% in the school-year 2011-12, after an
increase by 4.4% the year before. As in the previous year, the increase was
mainly due to additional recruitments in primary and lower-secondary schools.
Measures have been taken to raise enrolment rates, although in some areas this
policy faced difficulties. Budget allocations for education rose marginally in
2011, from 4.6% of GDP in 2010 to 4.7% of GDP, while for 2012 the budget
envisages a decline to 4.5% of GDP. Despite continued efforts, the overall
level of education of the labour force is still relatively low and the mismatch
of skills is still substantial. There is significant room for improving the
efficiency of public spending on education and for raising the quality of
education. Overall, measures to improve qualification levels have
continued. However, the still low level of education calls for further
sustained efforts in order to improve the country’s human capital endowment.

The country’s
capital endowment remains relatively low and its quality is hampered by decades
of underinvestment in the past. Public investment increased to some 3.8% of GDP
in 2011. However, there is very limited information on the actual spending
priorities. Gross fixed capital formation was still high at some 36% of GDP in
the last quarter of 2011, but dropped to 22% in the first quarter of 2012. The
authorities do not provide recent disaggregated gross investment data, which
would allow a better understanding of the driving factors behind the investment
decisions. Some limited steps have been taken to improve the country’s
transport infrastructure. The stock of foreign investment increased from 51.5%
of GDP in mid-2011 to 53% in mid-2012. Overall, spending on strengthening the knowledge-based economy has remained low.
The efforts to increase the public capital stock continue to be impeded by weak
implementation capacity, but also by use of funds for less productive purposes,
such as the decoration of the capital. Overall, the country’s
capital stock remains low.

Sectoral
and enterprise structure

There were no major changes in the area of
restructuring enterprises. Network industries are dominated by a very small
number of incumbent suppliers, which often undermines effective competition.
SMEs continue to be by far the biggest group of companies, providing more than
80% of private-sector employment or nearly 60% of total employment. Access to
finance improved, partly thanks to additional international credit facilities,
primarily provided by the European Investment Bank (EIB). Furthermore, the
government continues to subsidise interest costs for SME loans, although on a
declining scale in the 2012 budget.

The informal sector, fuelled by weaknesses
in tax and expenditure policies and in law enforcement, remains a major
challenge. It reduces the tax base and the efficiency of economic policies.

Overall,
structural change towards diversification and activities with higher value
added has remained limited. Competition in network industries remains
constrained by dominant incumbent suppliers. SMEs still face difficulties in
accessing capital and markets, despite increased support.

State influence on competitiveness

The
overall level of systematic state intervention is limited. The data available
suggest a relatively low level of State aid, i.e. less than 1% of GDP. However,
this figure is not comparable with the State aid data compiled in accordance
with EU standards. The Competition Commission is in place. However, the quality
of its decisions should be further improved and the reporting awareness of
state-aid providers is not sufficiently developed. Overall, state influence
on competitiveness remained limited.

Economic integration with the EU

The country is a small, open economy, with
total trade in goods and services accounting for about 120% of GDP in 2011.
Trade integration with the EU is advanced. About 64% of all exports currently
go to the EU-27 and about 56% of imports originate there. The country’s second
largest trading area is the CEFTA, which accounts for around 24% of exports and
around 11% of imports. The export structure has improved, with an increase in
the share of higher unit-value commodities, such as car emission catalysts.
However, textiles, clothing and manufactured iron products still account for
more than one third of total exports. FDI accounts for about 50% of GDP, with
80% of the investment stock coming from the EU. The exchange rate against the
euro has remained stable in nominal terms. Price competitiveness has remained
largely unchanged. This is reflected in the largely unchanged real effective
exchange rate, which in mid-2012 was some 1% lower than a year before. Overall,
trade integration with the EU is well advanced. The commodity composition of
exports has improved, although traditional products, such as textiles, clothing
and steel, still predominate. International price competitiveness remained
largely unchanged.

4.
Ability to take on the obligations of membership

This section
examines the former Yugoslav Republic of Macedonia’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 the former Yugoslav Republic of Macedonia’s administrative capacity to
implement the acquis. The analysis is structured in accordance with the
list of 33 acquis chapters. In each sector, the Commission’s assessment
covers progress achieved during the reporting period and summarises the country’s
overall level of preparations.

4.1.
Chapter 1: Free movement of goods

Limited progress can be reported in the
area of general principles. Implementation of the action plan to align
with Articles 34 to 36 of the Treaty on the Functioning of the European Union
is progressing as 26 legal acts (out of identified 42) were amended.

There was progress on horizontal
measures. Quality infrastructure was improved following the strategic plan
for implementation of the acquis in the area of free movement of goods.
As regards standardisation, good progress can be reported. The Law on
standardisation was amended to improve the organisational set up of the
Institute of Standardisation (ISRM). A total of 16,500 European standards (ENs)
have been adopted as national standards. Out of them, 3,210 are so called
harmonised ENs in the meaning of the ‘new approach’ directives. All Yugoslav
standards and conflicting standards were withdrawn. The ISRM became a full
member of the European Committee for Standardisation (CEN) and of the European
Committee for Electrotechnical Standardisation (CENELEC). The membership of the
ISRM assembly expanded to 97 stakeholders. The administrative capacity of the
ISRM was improved with a new document/standards management system which also
allowed electronic sale of standards. The ISRM was certified in line with the
EN ISO 9001:2009 standard.

In the area of conformity assessment,
little progress can be reported. The number of designations issued to the
conformity assessment bodies increased by one to nine. Product certification is
at an early stage of development. Full alignment of the Law on Product Safety
with the horizontal acquis of 2008 (New Legislative Framework) has yet
to be ensured. A national regulation on common framework for placing goods on
the market and notification to the EC was adopted. This regulation aims to take
on board horizontal elements of the sui generis Decision 768/2008/EC,
but alignment remains to be confirmed.

There was some progress in the area of accreditation.
The Institute of Accreditation (IARM) has adequate capacity for management of
the current scope of accreditations. It has accredited a total of 107
conformity assessment bodies, which is a significant increase from 76 one year
earlier. However the IARM should establish or upgrade its accreditation
capacities in new fields. The IARM signed the Multilateral Agreement for
testing laboratories, calibration laboratories, inspection bodies and product
certification bodies with European Cooperation for Accreditation (EA-MLA) and
Mutual Recognition Agreement with International Laboratory Accreditation
Cooperation (ILAC-MRA).

Good progress can be reported on metrology.
The Law on Metrology was amended to simplify issuing of certificates and to
provide a legal basis for inspection and supervision of measuring instruments.
The number of calibration and verification
certificates issued by the Bureau of Metrology (BoM) increased by 43% in 2011
compared with 2010. The equipment of the BoM’s various laboratories was
re-calibrated and laboratories for weight, temperature, volume, flow and
pressure were accredited by the national accreditation body. However, the
capacity of the BoM for calibration of measuring instruments is under-used.

Little further progress can be reported
with market surveillance. In 2011 the coordination body for market
surveillance performed a total of 390 coordinated inspections and 340 surveillance
actions, most of which (80%) were related to the legislation on the safety of
toys. The State Market Inspectorate recruited four inspectors for product
safety surveillance activities. The human and financial resources are
insufficient to conduct comprehensive checks on technical compliance of
products. Preparations in the area of horizontal measures are advanced, but
full alignment of the Law on market surveillance with the acquis remains
to be achieved.

Progress was achieved on the ‘old
approach’ product legislation. To implement the Law on Chemicals, the list
of high-risk substances and the rulebook on methods for testing and
registration of chemicals were adopted. In October 2011, reports on the status
of chemicals and the national action plan for a strategic approach to chemical
management were also adopted. The intra-sectoral body for coordination of
activities related to the Law on Chemicals was established. Staff from the
State Sanitary and Health Inspectorate received specialised training.
Preparations in the area of the ‘old approach’ product legislation are
advanced.

Some progress can also be reported on the ‘new
and global approach’ product legislation. Amendments were adopted to
rulebooks on machinery, cables, lifts, pressure equipment, simple pressure
vessels, and other to allow application of the Multilateral Agreement for
European Cooperation for Accreditation (EA-MLA). Further harmonisation with
relevant EU Directives was achieved for machinery, toys, medical devices and
low voltage equipment electromagnetic compatibility; alignment with the acquis
remains to be confirmed. Three national annexes on Eurocodes EC1, EC7 and
EC8 for the structural design of construction works were adopted. In the area of ‘new and global approach’ product
legislation, the country is advanced.

In the case of procedural measures,
some progress can be reported. The Decree on notification to the European
Commission of technical and non–harmonised regulations and technical standards
was amended. However, full alignment has not yet been achieved. The country is
advanced in this area.

Conclusion

In the area of free movement of goods, good
progress can be reported, particularly on standardisation, accreditation and
metrology. Certain areas of the framework horizontal acquis remain to
be fully harmonised. Alignment with the Articles 34 to 36 of the Treaty on the
Functioning of the European Union remains to be achieved. Preparations in the
area of free movement of goods are advanced.

4.2.
Chapter 2: Freedom of movement for workers

Some progress
can be reported as regards access to the labour market. The Law on
Public Servants remains to be amended to give EU citizens access to posts in
the public sector.

No progress was
made towards preparing for participation in the EURES (European
Employment Services) network.

Little progress
can be reported in the area of coordination of social security systems.
The bilateral agreement with Canada for coordination of social security systems
came into force and negotiations for signing agreements with Italy and Albania
continued. Work to resolve social insurance issues with Kosovo also continued.
Preparations in this area are moderately advanced.

There has been
some progress in the area of the European health insurance card (EHIC).
Hungary and Romania accepted the inititive of the health Insurance Fund to
start negotiations on EHIC. Agreements on lump sum compensation of the
costs for health protection with Montenegro and Serbia were signed.
Preparations in this area are moderately advanced.

Conclusion

Some progress
has been made in the area of freedom of movement for workers. Alignment with
the acquis is at an early stage.

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

There was some progress on the right of
establishment. Efforts to simplify the procedures and decrease the costs of
establishment and permits continued. The portal for electronic submission of
applications for establishment came into operation. However, awareness about
electronic establishment remains low. Efforts continue on establishment of a
one-stop shop (register) system for domestic and foreign investors, which is
equivalent to the ‘point of single contact’ under the Services Directive.

Some progress can be reported in alignment
with the Services Directive, concerning both establishment and cross-border
services. Screening of national legislation is continuing as part of the action
plan for harmonisation with the Services Directive. The Ministry of Economic
Affairs ensures coordination between the authorising bodies. However, requirements
prohibited by the Services Directive remain in several service sectors,
including veterinary medicine, private education, tourism and regulated
professions. Awareness of the Services Directive remains low and the
administrative capacities of various authorising bodies should be strengthened.
The minimum tariffs set by the Law on Construction are not in line with the acquis.
Preparations in the area of the right of establishment are on track.

Little progress can be reported on freedom
to provide cross-border services. The requirement for permanent
establishment remains the general rule for foreign operators providing services
in the country. This is not in line with the acquis. For some services
the establishment requirement has been removed, but this will apply as of the
date of accession of the country to the EU. In the area of freedom to provide
cross-border services the country has partly met its priorities.

There was good progress on postal
services. The existing Law on Postal Services is largely in line with the acquis.
However, full harmonisation has yet to be completed as far as the period
for designation of the universal service provider and the financing of the net
costs of the universal service obligation are concerned. Principles of the method
of conducting a separate accounting and cost accounting of the universal
service provider were regulated. In its capacity as the national regulatory
authority, the Postal Agency continued to adopt implementing legislation on
regulation of the postal market. Market supervision and oversight rules were
adopted and general conditions for providing the universal service and for
access to that service were established. The regulator’s inspection service
came into operation. The provider of the universal service is under an
obligation to allow other providers of postal services access to the postal
network. Quality standards for services covered by the universal service were
decided and the method to be applied by the universal service provider in this
respect was adopted. However, the universal service provider has yet to
establish separate accounting for its universal service. New notification
procedures encouraged growth of the postal market, with many operators active
on the market. However, it remains to be consolidated. The volume of items
posted increased. The regulator adopted a rulebook on obligations for postal service providers. The performance of
the universal postal service provider holding the monopoly over services for
consignments weighing below 50 grams is weak. There is no progress concerning
the privatisation of the state-owned universal postal service provider.
Regarding administrative capacity, the Postal Agency has a sufficient number of
staff to carry out its tasks. The policy-making capacity of the Ministry of
Transport and Communications in the field of postal services remains
insufficient. Preparations in the area of postal services are well on track.

Some progress can be reported on mutual
recognition of professional qualifications. An inter-sectoral coordination
group, bringing together representatives of different authorising bodies, was
formed and defined its mandate. The organisational framework is developed, with
clear roles and responsibilities for the individual institutions and a
stakeholder analysis was provided. A national coordinator for recognition of
professional qualifications was nominated, as required by the Professional
Qualifications Directive. However, the administrative capacity of the various
bodies remains weak. The Law on Recognition of Professional Qualifications is
still not fully aligned with the acquis. Alignment with the specific
sectoral directives on lawyers, commercial agents and professional use of toxic
products remains to be achieved. Preparations on mutual recognition of
professional qualifications are moderately advanced.

Conclusion

Some progress can be reported in the areas
of the right of establishment and freedom to provide services, particularly in
the case of postal services. Further efforts are needed to align the
legislation with the acquis, notably with a view to implementation of
the Services Directive, establishment of the single point of contact and mutual
recognition of professional qualifications. Overall, in the areas of the right
of establishment and freedom to provide services the country is moderately
advanced.

4.4.
Chapter 4: Free movement of capital

The country met
the requirements of the first stage of the Stabilisation and Association
Agreement (SAA) in the field of capital movements and payments in 2008.
Recent progress was limited to relaxing some of the restrictions on opening and
holding accounts abroad, but only for residents temporarily staying there.
Further liberalisation of capital movements and payments is conditional on the
transition to the second stage of the SAA, pending a decision by the SA
Council. Nationals are still not allowed to buy foreign securities, to open
accounts in foreign banks or to purchase real estate abroad. EU citizens are
not allowed to purchase agricultural land. Restrictions remain on the amounts
that non-residents can transfer through their local and foreign currency
accounts. In the area of capital movements and payments, preparations are
moderately advanced.

There was limited progress in the area of payment
systems. Within the National Council on Payment Systems, preparations for
alignment with the Payment Services Directive and for implementation of single
euro payments area (SEPA) standards and the direct debit scheme progressed.
Most of the charges for cross-border electronic payment transactions remain
disproportionate to those for domestic electronic payment transactions. The
country partly meets its targets in the area of payment systems.

Some progress was achieved in the fight
against money-laundering. The Law on Prevention of Money-Laundering and
Financing of Terrorism, incorporating the revised Financial Action Task Force
(FATF) recommendations, was amended. The government adopted the national
strategy for combating money-laundering and financing of terrorism for
2012-2014 and established the Council on Combating Money-Laundering and
Financing of Terrorism. The strategy sets out the activities of all
institutions involved in order to meet objectives covering legislation,
capacity-building, international and interinstitutional cooperation and
awareness-raising. The Council is chaired by the Director of the Financial
Intelligence Unit (FIU) — formerly called the Office for
Prevention of Money-Laundering and Terrorism Financing — and made up of
representatives of 14 reporting institutions and of investigative and
prosecuting bodies. It coordinates and monitors activities specified in the
strategy and reports to the government. The Council provides a platform for
strengthening interinstitutional cooperation. The FIU is upgrading IT systems
to improve data collection, processing and analysis. However, the level of
reporting remains unsatisfactory and points to persistent deficiencies in
implementation. In 2011, the number of suspicious transaction reports submitted
to the FIU decreased by 32% to 165. The number of court cases and sentences
remains very low (two indictments and one conviction). Preparations for
combating money-laundering are moderately advanced.

Conclusion

There was some progress in the area of free
movement of capital, notably on improving the institutional framework for the
fight against money-laundering. Implementation of anti-money-laundering
policies is weak. Further liberalisation of capital movements and payments is
planned after the transition to the second stage of the SAA. Preparations in
the area of free movement of capital are on track.

4.5.
Chapter 5: Public procurement

Some progress was made as regards
general principles. The Law on public procurement (LPP) was amended to
introduce inter alia mandatory publication of contract notice for
contracts below € 5,000, technical dialogue for contracts above € 130,000
and 6 months’ time suspension to relaunch annulled tenders. A negative
reference list of economic operators who are to be excluded from participation
in future tenders for 1 to 5 years was introduced; alignment with the acquis
has yet to be confirmed. Six pieces of implementing legislation were issued,
including a Code of conduct for public procurement. The national programme for
prevention of corruption 2011-2015 outlined safeguards in the area of public
procurement. A new Law on concession and public-private partnerships (LCPPP)
was enacted and is in line with the acquis. Implementing legislation was
adopted, but 16 sectoral laws have yet to be harmonised with the LCPPP. The
capacity of the unit in the Ministry of Economy dealing with concessions and
PPP is insufficient to respond to the increased competences for implementation
of the LCPPP. The EU directives on defence and sensitive security procurement
as well as the late payment directive have yet to be transposed. As regards
general principles, the country is well on track.

Some progress was made on the award of
public contracts. The use of e-auction for published contract notices was
increased from 70% to 100%. The e-procurement system was extended to include
also concessions and PPP contract notices and the negative reference list.
Training of contracting authorities and economic operators decelerated. The
number of tender cancellations increased from 20% in 2010 to 29% in 2011 and
the use of negotiated procedures without publication of a contract notice rose.
Tailor-made trainings for contracting authorities on quality criteria, tender
specifications and contract management have yet to be developed. With regards
to the award of public contracts, the country is moderately advanced.

Progress can be reported as regards the
remedies system. The competencies of the State Appeals Commission (SAC)
were expanded to also cover appeals in the field of concessions and PPP. About
14% of all the tenders launched in 2011 were the subject of appeal. The total
number of cases of the SAC decreased from 868 in 2010 to 690 in 2011. The SAC
maintained the level of case resolution of above 95%. In four cases the
Administrative court overruled the decisions of the SAC. 33 posts in the SAC
remain unoccupied and the budget of the SAC decreased in 2012. The right of
appeal for the economic operators that were put on the negative reference list
is not safeguarded in the LPP. Full alignment with the amended EU Directive on
Remedies has yet to be achieved. Court statistics on public procurement related
cases are partially available, and the methodology for their collection is not
comprehensive. In 7 out of 45 cases received, the State Commission for
Prevention of Corruption suspected corruptive behaviour while spending public
funds and recommended the Public Prosecutor’s Office to press criminal charges.
The enforcement of the articles of the criminal code related to public
procurement resulted in one conviction in the first half of 2012. As regards the remedies
system, the country is moderately advanced.

Conclusion

Overall, some progress was made in the area
of public procurement. Alignment of the legislation on concessions and
public-private partnerships with the acquis is advanced, with exception
of remedies and defence procurement. Use of e-auctions is mandatory.
Administrative capacities in the field of remedies and of concessions and
public-private partnerships remain weak. Overall, preparations in the area of
public procurement are advanced.

4.6.
Chapter 6: Company law

Good progress
can be reported in the area of company law. Law on European Economic
Interest Grouping was adopted. It will be applicable only upon the country’s
entry into the EU. The extension of the one-stop shop to include also Agency
for Insurance Supervision, Public Revenue Office and Agency for Supervision of
Fully Funded Pension Insurance is underway. Central Registry employs 300 people
country-wide which is a sufficient level of staffing. Some of the rules on
employee participation were transposed under the concept of Societas
Europaea; however article 16 of the Tenth Company Law Directive on
cross-border mergers has yet to be transposed. The legal department of the
Ministry of Economy staffed with 13 people is now responsible for alignment of
the company law with the acquis. In the area of company law the country
remains well on track.

Good progress
was made on corporate accounting. The Law on performing accounting
activities was enacted to define criteria for the accountancy profession,
introduce disciplinary measures in case of breach of the Code of ethics of
International Federation of Accountants (IFAC) and establish the Institute of accountants
and certified accountants as a professional chamber responsible to issue
licences and deliver continuous training to professional accountants. The
International Financial Reporting Standards (IFRS) for small and medium-sized
enterprises were translated and are now being applied.

Little progress
can be reported as regards auditing. The Council of Audit Promotion and
Supervision was established to promote the audit profession, ensure quality
control and supervise the Institute for Chartered Auditors (ICA); meetings were
held regularly. The ICA conducts exams for certified auditors and delivers
lectures for continuous professional improvement. The number of staff in ICA
increased to 3 people, but remains insufficient to perform an effective quality
assurance control. Chartered auditors’ qualifications obtained abroad are not
yet recognised. Overall, in the area of corporate accounting and auditing the
country is moderately advanced.

Conclusion

Good progress
was made in company law, particularly by adopting legislation on European
economic interest groups. The administrative capacity of the Institute for
Chartered Auditors is weak. Chartered auditors’ qualifications obtained abroad
have yet to be recognised. Overall, preparations in the area of company law are
moderately advanced.

4.7.
Chapter 7: Intellectual property law

Some progress
was made in the area of copyright and neighbouring rights. The amount of
single equitable remuneration for reproduction for private use of written
works, phonograms and videograms was regulated; the compliance with the acquis
remains to be confirmed. The commission for mediation in the field of copyright
and neighbouring rights is now the institution responsible to provide opinion
on the tariff schemes of the collective rights management (CRM) societies that
are to obtain licences. Two CRM societies are currently active. The cooperation
of the unit responsible for copyright in the Ministry of Culture with the
relevant institutions was limited. In this area, the country is advanced.

Further progress was made in the area of
industrial property rights. The London Agreement on the application of
Article 65 of the European Patent Convention that aims at reducing the costs
for patent translation was ratified. A license regime for chartered valuators
in the area of industrial property was set up. Implementing legislation on
registration of designation of origin and geographical indications of
agricultural products was adopted. The State Office for Industrial Property
(SOIP) continued the cooperation with the World Intellectual Property
Organization, European Patent Office, European Patent Academy and other
relevant bodies. Trainings and public awareness raising activities related to
intellectual property rights (IPR) continued. In 2011, Academy for Judges and
Prosecutors delivered 16 trainings on protection of IPR, including training of
trainers, to 328 members of the judiciary as part of the continuous training.
The National Strategy for intellectual property has yet to be updated. In the area
of industrial property rights, the country remains well advanced.

Some progress can be reported as regards enforcement.
The Law on customs measures for protection of IPR was amended to allow for
processing of requests for such measures free of charge. The 2011-2013 Strategy
for customs measures for protection of IPR was adopted. The increased
competencies of the State Market Inspectorate (SMI) when seizing counterfeit
items have had a positive impact. 49 police inspectors from the Ministry of
Interior (MoI) deal with infringements of IPR. The Bureau on Pharmaceuticals
(BP) seized counterfeit life-style medicines that were being sold in
pharmacies, but there is no awareness as regards the threats posed by
counterfeit medicines to the health and safety of the consumers. The
Coordination Body for Intellectual Property (CBIP) undertook 12 coordinated
actions in 2011, which is a drop by half compared to 2010. Cooperation of the
CBIP with the Agency for Managing Confiscated Property continued, but the
number of goods publicly destroyed decreased significantly in 2011.
Competencies for IPR are spread across many law enforcement institutions (CBIP,
SMI, MoI, BP, Customs administration, Ministry of Justice etc.) which creates a
complex, rather than effective system IPR protection. In 2011, a total of 126
court procedures were initiated for violations of IPR. About 15 prison
sentences and a number of fines on criminal offences were issued to individuals
by the specialised IPR departments of the courts. Development of a methodology
for collecting and exchanging statistical data on IPR is at an early stage;
however the exchange of data between the law enforcement institutions is not
systematic. Awareness that counterfeit affects also foodstuffs, cosmetics,
hygiene products, medicines, toys, technical and electronic equipment is low
and such goods are being sold in the streets and green markets. The trade in
counterfeit medicines and fake products via the internet is still not subject
of criminal prosecution. The cooperation between authorities to trace
counterfeit channels and tackle the ‘counterfeit pyramid’ is limited, both at
national and international level.

Conclusion

Some progress was made in the area of
intellectual property regarding both the legislative framework and
administrative capacity. Implementation remains a challenge and the collective
rights management system is still underdeveloped. A solid track record on
investigation, prosecution and trial of IPR-related cases has yet to be
established, as violations of IPR continue. The level of awareness of IPR among
the institutions and public remains low. Overall, preparations in the field of
IPR are moderately advanced.

4.8.
Chapter 8: Competition policy

Good progress
can be reported in the area of anti-trust, including mergers. Guidelines
on restrictions related to concentrations and several implementing regulations
were adopted. Compared with 2011, the enforcement record of the Commission for
Protection of Competition (CPC) has improved in terms of both quantity and
quality. Since 1 October 2011, the CPC has adopted three decisions on
prohibited agreements, three on abuse of dominant position and 23 on
concentrations. The CPC is increasingly investigating economically important
areas, particularly telecommunications and broadcasting. The staff dealing with
anti-trust and mergers should be used more efficiently. CPC staff have acquired
good basic skills, but would benefit from more advanced training. The general
budget of the CPC for 2012 remained around 30% less than in 2009 and, hence,
inadequate. Effective implementation of the leniency measures provided for in
the Law on Protection of Competition is limited because of conflicting
provisions in the criminal code. In addition, if an appeal is lodged,
enforcement of the decisions taken by the CPC on misdemeanour procedures is
suspended until the final decision of the Administrative Court, which weakens
the effectiveness of the decisions of the CPC. The number of decisions
confirmed by the Administrative Court has increased from 3 in 2011 to 6 in
first 9 months of 2012, thus strengthening enforcement. The judges of the
Administrative Court received some training on anti-trust and mergers.
Preparations in the area of anti-trust, including mergers, are at an advanced
stage.

There was some
progress in the field of State aid. Implementation of the Law on State
Aid is satisfactory. In the first 9 months of 2012 the CPC took
eleven decisions in the field of State aid, including ex-officio
decisions, which is an increase compared with 2011. The quality of some
of them could be improved. The number of staff dealing with State aid is
adequate. In the area of State aid the country is on track.

There is no
progress to report in the field of market liberalisation.

Conclusion

Good progress
was made on competition. The implementing legislation adopted has improved the
legislative framework. The enforcement record continued to improve in terms of
both quality and quantity. The CPC does not have adequate budgetary resources.
The number of staff is adequate but needs to be used more efficiently. Overall,
preparations in this area are advanced.

4.9.
Chapter 9: Financial services

There has been
good progress in the areas of banks and financial conglomerates. The Law
on Supplementary Supervision of Financial Conglomerates was enacted, with the
aim of aligning with the Financial Conglomerates Directive. The law lays down
the rules for supplementary supervision of banks, insurance undertakings and
brokerage firms which are part of a financial conglomerate. In the field of
consumer protection, the central bank (NBRM), started addressing issues
raised in complaints by performing general checks on banks. Implementation of
the banking legislation on protection of consumers is improving. However,
protection of consumers remains a challenge and needs to be properly addressed.

The NBRM
further upgraded the regulations on capital requirements for credit risk. A new
methodology was issued on the capital requirements for covering market, credit,
currency and operational risks. It is partly aligned with the Capital Adequacy
Directive. Cooperation with the supervisory authorities of the countries whose
banks own some of the largest banks in the country is good. With a total of 53
staff working in the banking supervision department, the capacity of the NBRM
is satisfactory for proper implementation and enforcement of regulations.
Application of the standardised approaches of pillar 1 of the Basel II Accord
began in July 2012. The advanced approaches will be introduced from 2013, for
which additional capacity will be needed. The country is well on track in the
areas of banks and financial conglomerates.

There was good, but uneven, progress in the
fields of insurance and occupational pensions. The Insurance Supervisory
Agency (ISA) issued implementing legislation on accounting and financial
reporting, risk-based supervision and consumer protection, thus almost
completing the legal framework on insurance supervision. The preparations for
the implementation of the Solvency II Directive (2009/138/EC) are ongoing. New
software for off-site supervision was installed. Based on the checks performed,
the ISA imposed supervision measures on insurance undertakings. The capacity of
the ISA and its cooperation with the supervisory authorities of the insurance
companies that have local subsidiaries are adequate. The ISA participated in
three supervisory colleges for partner countries and performed two joint
controls with home-country insurance regulators. It is represented in the supervision
forum with the International Association of Insurance Supervisors. The capital
and solvency margins are still well above the levels required and the guarantee
fund against insolvency of insurers is sufficient. New registration plates were
introduced to combat uninsured driving, however uninsured driving remains a
challenge and the enforcement record on combating offences committed by
uninsured drivers is weak. The Ministry of the Interior estimates that the
number of uninsured vehicles has dropped from 17% to 10%. The provisions in the
Law on Compulsory Insurance of Road Vehicles authorising the Ministry of
Financial Affairs to set the premiums for motor vehicle insurance are an
effective barrier to competition between insurance companies and is not in line
with the EU acquis.

The Law on
Payment of Pensions from both the mandatory (second pillar) and voluntary
(third pillar) fully funded pension insurance funds was enacted. The Agency for
Supervision of Fully Funded Pension Insurance (MAPAS)
adopted new risk-based supervision manuals modelled on International
Organisation of Pension Supervisors (IOPS) best practices for
defined-contributions pension schemes. The limit of 50% on investing in
non-domestic securities, which is contrary to the principles of EU law,
remained. New legal provisions were introduced prohibiting pension funds to
invest in bonds and other securities issued and guaranteed by the state that
are not traded on the domestic market. The Law on Fully Funded Pension
Insurance was amended to ensure the full independence of the MAPAS. However,
its overall enforcement capacity is insufficient. The MAPAS still has limited
leverage over the institutions it supervises. In the area of insurance and
occupational pensions, the country is not yet sufficiently aligned with the acquis.

There was
little progress on financial market infrastructure. All financial
services regulators amended legislation introducing risk analysis based on
international credit rating agencies’ assessments, instead of EU and OECD
membership criteria. Alignment with the Settlement Finality Directive
(98/26/EC) and the Financial Collateral Directive (2003/47/EC), as both amended
by Directive 2009/44/EC, remains pending. In the area of financial
market infrastructure, the country is
not yet sufficiently aligned with the acquis.

There has been
some progress in securities markets and investment services. The
national legislation on market abuse, markets in financial instruments,
investor compensation schemes, transparency and prospectuses, is largely in
line with the corresponding acquis. The preparations for alignment with
Directive 2007/16/EC and other developments in the acquis relating to
activities for collective investment in tradable securities (UCITS IV package)
were launched. The Securities and Exchange Commission adopted by-laws with a
view to full implementation of the legislation. The frequency with which the
supervisory regulations are amended has undermined legal stability for the
market participants. The SEC continued cooperating with the capital
market regulators from the region, with the aim of establishing a common
platform for listing, trading, transparency and settlement. The number of SEC
staff is sufficient for the current workload. The SEC and the Central Bank improved
cooperation, exchange of information and coordination in the area of
supervision of trading in securities. In the area of securities markets and
investment services the country is well advanced.

Conclusion

Progress was
made in the field of financial services, particularly on banking, insurance and
securities markets. Alignment of the legal framework on insurance supervision
with the acquis is very advanced. The Law on Payment of Pensions from
the fully funded pension insurance funds was enacted and the MAPAS attained
full legal and financial independence. However, uninsured driving remains a
challenge and the enforcement record on combating offences committed by
uninsured drivers is weak. Alignment with key acquis in the area of
financial market infrastructure remains to be achieved. Overall, in the area of
financial services, alignment with the acquis is moderately advanced.

4.10.
Chapter 10: Information society and media

Good progress can be reported in the field
of electronic communications and information and communications technologies.
The Law on Electronic Communications was amended and regulations were adopted
within the reporting period with the aim of improving competition in the
market. The 2009 EU regulatory framework is yet to be transposed into national
legislation. Responsibilities for legislation and policy-making for electronic
communications and the information society were transferred to the new Ministry
of Information Society and Administration (MISA). The capacity of the new
ministry needs to be strengthened. The role and responsibilities of the Agency
for Electronic Communications (AEC), as the national regulatory authority, were
clarified in legislation. The AEC published a five-year regulatory strategy
(2012–2016) and introduced regular public consultations, including on its
annual plan. Progress was made with implementing competitive safeguards, such
as cost-accounting obligations for fixed and mobile networks and
next-generation access networks. The AEC designated universal service providers
and built up its capacity on protection of consumer rights. The regulator also
developed an electronic register of electronic communications infrastructure.
Amendments were made to the legislation in order to adjust the regulatory fees
on operators and on use of surplus funds. However, these still need to be
implemented. Transferring the regulator’s surplus funds to areas that fall
outside the remit of electronic communications undermines the regulator’s
authority. The coordination of measures imposed by both the AEC and the
national competition authority needs to be improved. A public call to award the
development of the fourth generation of mobile telephony was made. The
emergency number 112 was not introduced due to financial constraints. Preparations
in the area of electronic communications and information technologies are
advanced.

There was some progress in information
society services. Further electronic government projects were initiated to
expand the opportunities for citizens and businesses to interact with the
public administration. A method for assessment of the value of information
technology was adopted. Work on interconnection of registers and databases
between state institutions is continuing. Two certification service providers
are still issuing qualified electronic signature certificates. However, there
is little demand for the certificates, and market access has been made
difficult as the implementing legislation requires, in practice, prior
registration before certificates can be issued. The internet domain name market
is not liberalised, and MARNet, remains the only domain name registry in the
country. While internet penetration has grown and online social networks are
becoming increasingly influential, there are still barriers to e-commerce,
including the ‘threshold’ imposed on internet trading by the customs authority.
Preparations in the area of information society are advanced

Little progress can be reported in audiovisual
policy. Parliament enacted amendments to the Broadcasting Law that provide
for higher broadcasting fees and extend advertising times in the public service
broadcaster’s programmes. Collection rates for the broadcasting fee has started
to increase and provide for proper funding of the public service broadcaster
and of the Broadcasting Council. The Broadcasting Council increased its
monitoring activities and the transparency of its work, but concerns about its
independence remain. The total number of cases of illicit media concentration
investigated increased. Efforts were made to enforce legislation on copyright
and on media ownership and concentration, but these still remain insufficient.
The removal of the licence for the TV station A2 did raise questions and
identified weaknesses in the legal framework and practice for imposing
sanctions. The Broadcasting Council needs to review its practices and legal
framework in order to address these concerns. The Broadcasting Council lacks
resources to monitor and enforce the law at regional and local levels. Content
monitoring activities remain weak and insufficient.

The independence of the public service
broadcaster (MRTV) is provided for in the Law on Broadcasting Activity. MRTV
has initiated some reforms under new management to increase its efficiency and
quality of the offer. Further significant efforts remain to be undertaken to
ensure that the MRTV fulfils the public service mission, inter alia by
providing balanced and pluralistic news coverage. The drafting process of new
media legislation, aligning it with the audiovisual media services directive
advanced, but the inclusiveness and transparency of the process still need to
be ensured.

Preparations continued for the digital
switchover to be achieved in 2013. Amendments were made to the Law on
Electronic Communications, regulating the digitalisation process. There is
little coordination of the switchover plan between institutions and there is no
permanent mechanism for planning and supervising the digital switchover, with
the participation of all stakeholders. The DVB-T network was built with the aim
of broadcasting and transmitting the programmes of the public service
broadcaster. A separate DVB-T multiplex operator has yet to be selected. This
will digitally broadcast the programmes of the commercial television channels.
Preparations in the area of audiovisual policy are at an early stage.

Conclusion

Progress can be reported on the information
society and media, notably in the area of electronic communications and
information society services. In the case of audiovisual policy, the activities
of the Broadcasting Council increased, but a non-discriminatory approach needs
to be ensured. Adoption of a media law in line with EU acquis remains a
priority. The country partly meets its priorities in the area of the information
society and media. Overall, preparations in this area are moderately advanced.

4.11.
Chapter 11: Agriculture and rural development

With respect to horizontal issues, there
was little progress. The national programme for adoption of the acquis
established an ambitious timetable for legislative alignment in this sector. For
2012, a total of € 130 million has been allocated for direct support
schemes. This includes direct area and headage payments, premium payments and
input subsidies for strategically important products, and non-commodity-based
payments, including support for young farmers.

There was an overall increase in staff.
However, only limited implementing legislation, principally of a technical
nature, was enacted in the fields of agricultural and rural development support
policy, quality of agricultural products, and wine. Institutional capacity
remains a significant concern.

Good progress can be reported towards
setting up an integrated administration and control system (IACS). The legal
basis for the land parcel identification system (LPIS) has been established and
the system is in operation. Registration is ongoing and already extends to over
45% of declared holdings. The real estate register is complete for agricultural
land. The farm register, with a supporting automated IT system, is fully
functional. Internet and server capacity remains a concern, particularly at
peak times. Although the farm register is now integrated with LPIS information,
compatibility between data registers has not yet been fully achieved. A national strategy for consolidation of land parcels, including an
operational plan, has been adopted following public debate and consultation. Institutional capacity to manage and maintain a functioning IACS is
insufficient.

The capacity of the paying agency, the
Agency for Financial Support for Agriculture and Rural Development (AFSARD),
remains a cause for concern, given its wide range of responsibilities. Staff
employed in the AFSARD are responsible for both national support schemes and
measures under the Instrument for Pre-accession Assistance for Rural
Development (IPARD). Their number remains insufficient, despite recruitment of
additional staff. Establishment of the reference price database is a positive
development for management of IPARD measures.

Progress has been made with development of
a sustainable agricultural information system, with online data entry
established plus a website that allows access to market data. Pilot farm
accountancy data network (FADN) activities are continuing and now cover a
larger number of farmers and farm types. Preparations in the area of horizontal
issues are advanced.

In the field of common market
organisation, there has been limited progress, principally for commodities
that are of greatest relevance to the country. Harmonisation of legislation
with the acquis is continuing for selected commodities, including
adoption of implementing legislation for carcass classification. The legal
basis exists for implementation of market support measures, such as optional
intervention for a limited number of commodities, consumption promotion and
producers’ organisations. The Law on Wine was amended to ensure closer
alignment with the acquis and implementing legislation was introduced,
principally relating to registration of producers and to grapes and grape
products. Alignment with the acquis in the area of specialised crops is
on track. Compatibility with the EU common market organisation is limited to
poultrymeat and eggs and to milk quality, with an ambitious timetable set for
other products. Preparations in this area are at an early stage.

Little progress can be reported in the area
of rural development. Implementation of the IPARD programme under
component V is continuing for three measures. Five calls for proposals were
completed and a sixth launched, with an associated commitment of
€ 5.32 million of IPA support under component V. The absorption
capacity for component V remains a significant concern. A government action
plan was adopted to improve the management and control of IPARD and support
greater absorption of funds. The institutional capacity of the managing
authority, the Ministry of Agriculture, Forestry and
Water Economy (MAFWE), was strengthened. There has been
very limited progress in preparations for implementation of additional IPARD
measures. Preparations in this area are moderately advanced.

There has been progress in quality
policy. Implementing legislation to establish national marks and
signs related to quality protection and to identify protected species of
various commodities was introduced. Preparations in this area are on track.

There was some further progress with organic
farming. The Law on Organic Production was strengthened, with the aim of
alignment with the acquis. The numbers of registered organic producers
and total organic production are both continuing to increase. A budget of
€ 2.11 million was allocated in 2012 to support organic production,
including top-up payments for organic producers and support for processing and
trading organic products. Administrative capacity remains insufficient to meet acquis
obligations. Preparations in this area are on track.

Conclusion

Some progress was achieved in the area of
agriculture and rural development. Continuing advances have been made towards
setting up the integrated administration and control system. Further alignment
with the acquis is required. Administrative capacity remains a concern
throughout the sector. Overall, preparations remain moderately advanced.

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

Good progress
was made as regards general food safety. The Food and Veterinary
Agency (FVA) adopted a single multiannual national control plan on state
surveillance over food movements, a strategy paper on veterinary and plant
health, and a multiannual training programme. Preparations started on a new
food safety strategy (2013–2015) and a general crisis management plan. An
internal system for control and auditing within the FVA was established.
Preparations in this area are on track.

Good progress
was made in the area of veterinary policy. As regards control systems
for imports and requirements for imports of live animals and animal products,
the FVA provides regular updates following amendments of the relevant acquis
including the latest adopted EU safeguards measures. The system of reduced
checks of consignments at the border inspection posts is not implemented yet.
Activities for establishment of a system for identification and registration
of pigs have been initiated. The database for identification and
registration of animals was upgraded and is a central part of the newly
integrated veterinary information system.

Good progress
was made on measures to control animal diseases. The FVA is implementing
a programme for oral vaccination of foxes against rabies. Surveillance
programmes for rabies and classical swine fever were established. Measures to
control and eradicate swine vesicular disease and certain diseases in aquatic
animals were adopted with the aim of alignment with the acquis. The
contingency plan for eradication of classical swine fever (CSF) was adopted.
The FVA is implementing a programme of mass vaccination of domestic pigs
against CSF. However, there are concerns about the way vaccinations are being
carried out and that the immunity rate is low. The national control plan on
salmonella in hens is being implemented. Some progress was made in the area of intra-Community
trade in live animals, semen, ova and embryos, with the adoption of
implementing legislation transposing the acquis. The European Commission
approved the annual monitoring programme on prohibited substances and residue
control. Some progress was made in animal welfare. Implementing
legislation that further transposes the acquis was adopted. Some
progress was made in the area of zootechnical issues by registration of
livestock breeders and adoption of implementing legislation aiming at alignment
with the acquis. The 2012 budget for veterinary expenditure on animal
health was increased by 45% compared with 2011. However, significant delays in
payment to authorised private veterinary centres for carrying out various FVA
programmes are jeopardising their implementation. The capacity of the
laboratories of the veterinary faculty was strengthened, particularly on rabies
and CSF diagnosis. In the area of veterinary policy, preparations are advanced.

Progress was
made in the placing on the market of food, feed and animal by-products.
Some implementing legislation was adopted on hygiene rules. The existing
legislation transposes the acquis on specific rules for animal products,
controls and specific controls for animal products. The aid schemes for hazard
analysis and critical control points (HACCP) were extended to 2012 and training
was provided for food business operators (FBO). FBOs do not always apply
HACCP-based procedures correctly and official controls are not always conducted
in accordance with the legal requirements. Planned activities for improving the
quality of raw milk are not yet implemented.

Implementing
rules on management of animal by-products (ABP) were adopted and
preparations commenced on the ABP management strategy. The lack of a location
available for disposing of or processing ABPs remains the biggest obstacle to
implementing the strategy.

Progress can be
reported in the food safety rules. Implementing legislation was adopted
on the safety of food supplements, fortified foods, foods for particular
nutritional uses, novel food and mineral waters; alignment remains to be
confirmed. The legislation aims at further alignment with the acquis on
labelling, food additives, extraction solvents, flavourings, food contact
material, quick-frozen foodstuffs, contaminants and ionising
radiation.

The annual
monitoring programme for food safety was adopted and is being implemented.
There are no risk-based criteria for categorisation, neither risk based
criteria for inspection of establishments dealing with food of non-animal
origin. The capacity of the food inspectorate was strengthened but remains
insufficient in terms of control procedures and human resources. Preparations
in this area are on track.

Progress was
made on specific rules for feed. Some implementing legislation was
adopted on feed additives and medicated feed. Preparations in this area are on
track.

Little progress can be reported in phytosanitary
policy. Some implementing legislation was adopted on plant health and on
the quality of seeds and propagation material. No action was taken to implement
the international standards for phytosanitary measures, in particular on
surveillance, export certification and determining pest status in an area.
Control of marketing places of plant production products is done only on a
random basis and no controls of their application are carried out. Coordination
between the various competent authorities for phytosanitary policy has not
improved. The administrative capacity of the Phytosanitary Directorate is weak.

The capacity of
the State Phytosanitary Laboratory remains under-used due to its undefined role
in the national food safety monitoring system and the lack of samples received
on a regular basis. Preparations in this area are not very advanced.

Some progress
was observed in alignment with the acquis on genetically modified
organisms by futher adoption of implementing legislation.

Conclusion

Good progress was made in the area of food
safety and veterinary and phytosanitary policy, in particular with respect to
the institutional strengthening of the Food and Veterinary Agency and
implementation of various animal disease eradication programmes. Preparations
in the area of food safety and veterinary policy are well on track. Little
progress was observed in the area of phytosanitary, where administration and
co-ordination capacity of the competent authorities has not improved. The
implementation of international standards for phytosanitary measures has not
been carried out. Preparations in the area of phytosanitary are at an early
stage.

4.13.
Chapter 13: Fisheries

EU requirements on resource and fleet
management and inspection and control do not apply for inland fishing and are
therefore not applicable, except for control of marketing and traceability
of fishery products.

After
implementing legislation was adopted, commercial freshwater fishing has
restarted after a break to allow restocking with indigenous species following
earlier over-fishing.

The
administrative capacity of the unit for fisheries and aquaculture within the
Ministry of Agriculture, Forestry and Water Economy (MAFWE) and of the relevant unit within the
Agricultural Inspectorate remains insufficient. Preparations in this area are
at an early stage.

Limited
progress was made on structural action. Further implementing legislation
was enacted covering control of, and procedures related to, recreational
fishing.

Limited
progress was achieved in market policy.

The register of
State aid approved in the fisheries sector is operational. However,
national schemes still need to be aligned with the EU’s structural and State
aid policies, in particular with regard to support for
stocking fish waters.

There are no
formal international agreements. Informal working arrangements still
exist with Albania and Greece, covering management of resources in the three
lakes whose waters they share.

Conclusion

There was
limited progress in the area of fisheries. Administrative capacity remains
insufficient. A large proportion of the fisheries acquis is, however,
not relevant as the country is landlocked.

4.14.
Chapter 14: Transport policy

Some progress
can be reported in road transport. Implementation of the legislation on
digital tachographs continued. Implementing legislation was adopted on working
hours, on admission to the occupation of road transport operator and on market
access. Further legislative progress needs to be made concerning access to the
international market for bus services in order to align with the most recent acquis.
The Road Safety Council worked with a reduced budget due to amendments to the
Law on Insurance. As a result, the number of road safety campaigns was reduced.
The administrative capacity for implementing the road safety policy needs
further improvement. The state transport inspections were stepped up, but the
administrative capacity of the state transport inspectorate still needs to be
increased. Further alignment with recent road safety and dangerous goods acquis
is still necessary. Preparations in the road transport sector are advanced.

Little progress
can be reported on rail transport. The level of track-access charges
levied from freight trains still has a negative impact on the competitiveness
of rail against road transport and due to higher levels on the Coridor X line,
discriminates against international traffic. Lengthy procedures for licensing
and safety certification along with ongoing court procedures deterred railway
operators from entering the market. An amendment to the law on railways to
foreclose all but the state-owned rail operator until accession reversed
alignment with acquis achieved in previous years. High charges and
market closure further deteriorate the poor income situation of the
infrastructure manager, without giving the aspired positive social effects on
the State operator. The Safety Authority was established, but its
administrative capacity still needs to be strengthened. The procedure to
establish a new accident investigation entity within the Government
Secretariat-General has not been completed yet. The Joint Border Crossing
Agreement with Kosovo was ratified. Further alignment with the railway acquis
is still necessary.

In the case of inland waterways
transport some progress was made. Safety inspections and licensing are
underway. Preparations in this area are advanced.

Little progress can be reported in the area
of combined transport. Preparation of a strategic study for multi-modal
nodes started in April 2012. Preparations in this area are in progress.

Some progress
can be reported in air transport. The Law on Aviation was amended to
introduce national subsidies for operators with the aim of expanding tourism
and air transport. However, the compatibility of these amendments to the
provisions of the European Common Aviation area are being examined based on
data collected at the 2011 assessment visit. Progress regarding the first phase
of the ECAA agreement is still to be assessed on the basis of these data. Good
progress can be reported as regards air traffic management. The air-navigation
services provider is still understaffed. The Civil Aviation Agency, in its
capacity as the independent regulatory body, continued its activities but human
resources for inspections still need to be strengthened. Three members were
appointed as independent investigators to investigate accidents and serious
incidents. The independence of the accident investigation body still needs to
be confirmed. In the area of air transport preparations are moderately
advanced.

No progress can be reported on satellite
navigation.

Conclusion

There was
little new progress in transport policy. In road transport, there was some
progress on acquis alignment, but road safety needs further improvement.
The railway legislation needs further alignment with the acquis. A legal
amendment to close the railway market for competition until EU accession
reversed already achieved alignment with acquis. The administrative
capacity of the Rail Safety Authority still needs to be strengthened. The
Accident Investigation Committee for rail transport needs to become operational
in order to act as an independent body. Overall, preparations in this area are
moderately advanced.

4.15.
Chapter 15: Energy

Little progress
was made in security of supply. Several by-laws based on the Law on
Energy were adopted, with the aim of further aligning the national legislation
on security of electricity and natural gas supply. At the beginning of 2012,
oil stocks increased slightly, but were still equivalent to only 34 days’
average consumption. In the area of security of supply the country is at an
early stage.

There was some
progress on the internal energy market. The energy balance for 2012-2016
was adopted. To follow up the new Energy Law, the Energy Regulatory Commission
(ERC) adopted a number of rulebooks covering regulated maximum income, tariff
systems and prices for electricity. New market rules were adopted. The foreseen
deadlines for the adoption of secondary legislation on market opening have been
delayed. As a consequence, all non-household customers connected to the
distribution system, who should have been eligible after the adoption of the
Energy Law, remain in the regulated system and have no access to the
competitive market. The electricity prices for tariff customers increased twice
in 2012, in January by about 7,8% and in August by about 9,8%. In 2012, energy
poverty mitigation measures totalling about € 2.4 million will be taken to
subsidise the most vulnerable households. Application of the Law on Enforcement
improved the collection rates for electricity bills. The country needs to start
preparations for alignment with the EU’s ‘third internal energy market package’.

The energy
balance for 2012-2016 estimates a 4.9% increase in consumption of natural gas
in 2012 as a result of the gasification at Kumanovo and Strumica and of the
entry into operation of a combined heat and power facility. Under the new
Energy Law, the ERC adopted rulebooks regulating the tariffs and prices for
transmission, transport, distribution, supply and sale of natural gas.
Following this, tariffs for transmission and operation of the transmission
system were increased by about 7.5%. Further implementing legislation needs to
be adopted. The dispute between the government and the private company about
ownership of the gas transmission pipeline remained unresolved. The
administrative capacity of the Ministry of Economic Affairs remains
insufficient to address all the energy policy challenges. Statistics provided
by the national authorities do not always meet the requirements of the Energy
Community. In the area of the internal energy market the country is advanced.

There was some
progress in the area of renewable energy with the adoption of the
rulebook on the preferential status of producers of electricity from renewable
sources and of the Decree on Feed-in Tariffs for Electricity from Renewable
Sources. In 2012, 21 new concessions for small hydropower plants were granted,
bringing the total number to 68. Hydro power plant ‘Sv Petka’, with
installed capacity of 36,4MWh was put in operation and construction of a
36,8MWh installed capacity wind park started. Funds for construction of the
117.54 GWh ‘Boskov Most’ hydropower plant were secured via a loan from the
European Bank for Reconstruction and Development (EBRD) and supported by a
government guarantee. The low electricity prices for end-users and the
burdensome administrative procedures for authorisation, permitting and
licensing continue to be obstacles to the adequate uptake of renewables in the country.
Preparations in the area of renewable energy are on track although the country’s
renewable energy potential is not efficiently harnessed.

Some progress
was made on energy efficiency. The Ministry of Economic Affairs adopted
a rulebook on energy consumption labelling for various appliances. The
indicative energy-saving target for 2012 is set at 4.04% of the average energy
consumption over the period 2002-2006. The Energy Agency issued guidelines
applying energy-efficiency criteria in public procurement. The national
programme for energy efficiency in public buildings has been drafted and is
discussed with stakeholders. is being prepared. € 100,000 were allocated
for subsidies to households for solar collectors for 2012. Six municipalities
benefited from energy audits and consequent retrofits of a number of buildings.
The Energy Agency has limited administrative capacity to perform all the
assignments under its responsibility. Overall, in the area of energy efficiency
the country has started to address its objectives, but the necessary secondary
legislation still needs to be put in place.

The country has
no nuclear energy.

There was some
progress in the area of nuclear safety and radiation protection. The
Radiation Safety Directorate (RSD) issued a rulebook on the premises,
equipment, qualifications and health conditions of persons working with
ionising radiation sources. The RSD’s strategic plan for 2012-2014 was adopted,
which, inter alia, serve as a guide for the mid-term tasks and
priorities of the RSD, while its implementation is expected to strengthen the
efficiency and transparency of the RSD. A national coordination body for
prevention, reduction and protection from chemical, biological, radioactive and
nuclear arms and materials was established.

Conclusion

Some progress
was made in the energy sector, in particular on enacting legislation
implementing the 2011 Energy Law. A number of implementing acts have still to
be adopted. Full liberalisation of the electricity and natural gas markets is
yet to be achieved. Some progress was made on renewable energy. Preparations in
this area are moderately advanced.

4.16.
Chapter 16: Taxation

There was no progress on harmonisation of
legislation in the area of indirect taxation. Legislation on VAT and
excise is only partially aligned with the acquis. Some rates for excise
remain lower than the minimum required by the acquis. Preparations in
this field remain on track.

No progress was achieved in the area of
direct taxation. Future alignment with the Parent-Subsidiary Directive, the
Merger Directive and the Interest and Royalties Directive, have yet to be
addressed. Some national provisions concerning the special zones for
technological and industrial development are still not in line with the EU Code
of Conduct for Business Taxation. Preparations in this field remain moderately
advanced.

There was some progress in the field of administrative
cooperation and mutual assistance. The Public Revenue Office (PRO) signed a
memorandum of electronic data exchange with the Financial Police and the
Financial Intelligence Unit. Operational instructions were adopted for PRO
employees on the handling of exchange of information with tax authorities from
other countries. The number of agreements concluded with EU Member States remains
at 23. These agreements do not cover debt recovery, nor automatic exchange of
information. Preparations in this area remain on track.

Some progress was made on operational
capacity and computerisation. The mandate of the PRO was extended to cover
financial aspects of the fight against money laundering terrorism as well as
the supervision of gambling activities. The PRO further developed its
electronic tools by extending the e-filing of tax returns for individuals, introducing
the electronic archiving of VAT returns presented on paper and making the
e-filing of VAT and profit tax returns mandatory from 2013. New procedures were
introduced for the sale of confiscated assets. The PRO also adopted new
implementing rules on profit tax, personal income tax and VAT registration of
cash payments. In the area of human resources, new guidelines were issued for
fighting corrupt behaviour by employees of the PRO. Performance appraisal was
extended to all PRO staff. The Tax Academy launched its training programme. However,
staff shortages persist, especially as regards the fight against high-risk tax
fraud and tax evasion. The IT capacity of the tax administration remains weak.
The efficiency of inspections, enforced collection and internal audits needs to
be further strengthened. Preparations in this area remain advanced.

Conclusion

Progress has been limited in the field of
taxation. Efforts are still required to harmonise the national legislation with
the acquis, to reinforce the fight against tax fraud and tax evasion and
to address IT and staffing capacity. Overall, preparations in the area of
taxation are moderately advanced.

4.17.
Chapter 17: Economic and monetary policy

In the area of monetary policy, the
country is well aligned with the acquis. Some progress was made on
strengthening the institutional capacity of the Central Bank by introducing
medium-term strategic planning and upgrading the model for macroeconomic
forecasting. The monetary policy instruments used by the Central Bank were
further developed.

No progress can be reported in economic
policy. The pre-accession economic programme (PEP) for 2012-2014 was
submitted on time. The fiscal strategy was geared to shifting the emphasis from
less productive spending to capital investment. However, this intention was reversed
in the 2012 budget rebalance due to significant shortfall in revenues. With the
increased reliance on foreign loans for financing the deficit, the economy
became more vulnerable to external risks. No fiscal notification was submitted
in 2012. The information presented in the PEP needs improvements in the substance,
quantity and quality of data. In particular, more precise information beyond
2012 would add to its relevance as a core medium-term policy document. The
structural part refers to a broad range of reforms, but without translating
them into specific measures set in a clear conceptual framework. In spite of existing legal obligations, the Fiscal and Public Debt
Strategies nor the Public Investment Programme were not updated for the period
2012-2014. The capacity for economic policy formulation
and coordination remains insufficient and differs widely between the central
and local levels. In the area of economic policy, preparations are moderately
advanced.

Conclusion

There was little new progress in economic
and monetary policy. The monetary policy-making capacity of the Central Bank
was further improved. The quality of the pre-accession economic programme
remains to be strengthened. The capacity for economic policy formulation and
implementation still differs widely between the central and local levels. Overall, in the area of economic and monetary policy, the country is
advanced.

4.18.
Chapter 18: Statistics

There was progress as regards statistical
infrastructure. The State Statistical Office (SSO) adopted the strategic
plan for 2012-2014. Further progress was achieved in data dissemination. With
34 new employees, the share of the SSO’s total staff from non-majority ethnic
groups increased to 27%. The overall resource situation in the SSO needs to be
further strengthened. Preparations in this area are advanced.

Progress can be reported on classifications
and registers. Improvements were made to the quality of the statistical farm
register and further progress was achieved towards the transition to NACE rev.
2 in business statistics. However, stronger interinstitutional coordination is
necessary to improve compliance of administrative data with standardised
classifications and definitions. Preparations in this area are moderately
advanced.

Some progress was made in sectoral
statistics. The population and housing census started in October 2011 but
was interrupted and cancelled after the State Census Commission resigned (See
Political criteria, section 2.1. — Democracy and the rule of law). As a
result, there are no recent data on population and households. This has an
impact on the accuracy and availability of a wide range of statistics.

Further harmonisation was achieved in the
area of national accounts, including compilation of excessive deficit procedure
tables, calculation of quarterly GDP and integration of sectoral data.
Agreement was reached to hand responsibility for financial account statistics
to the Central Bank. Coverage of balance of payments statistics was extended
and harmonisation of statistics on external debts improved. Significant
progress can be reported with regard to the production of business statistics,
notably in the quantity and quality of the data transmitted to Eurostat.
Methodological improvements were made in short-term statistics, transport
statistics and agricultural statistics. However, further progress towards
adoption of ESA 95 standards is needed in order to achieve full alignment. In
the area of social statistics, new surveys were introduced. Preparations in the
area of sectoral statistics are moderately advanced but hampered by the lack of
up-to-date census data.

Conclusion

There was progress in the field of
statistics, in particular on harmonisation of sectoral statistics and
transmission of data. Full alignment with the acquis has yet to be
achieved. The cancellation of the population census and the persistent lack of
resources indicate that stronger commitment will be needed in order to make
substantial progress in this chapter. The lack of up to date census data
impacts on the quality and availability of data in sectoral statistics.
Overall, preparations in the field of statistics are moderately advanced.

4.19.
Chapter 19: Social policy and employment

There has been some progress as regards labour
law. The Law on European Works Councils was enacted. Several amendments
were made to the Law on Labour Relations with the aim inter alia of
enhancing the effective enforcement of labour law. However, cooperation between
the relevant institutions remains insufficient. Alignment with the acquis
in this area is at early stage.

Some progress can be reported in the area
of health and safety at work. The Law on Health and Safety at Work was
amended and several rulebooks were adopted to bring the legislation further
into line with the Framework Directive (Directive 89/391/EEC). A campaign was launched to raise awareness about ways to ensure greater safety
for workers in the construction sector. Inspection
capacity in the area of health and safety at work remains insufficient.
Implementation of the strategy for occupational health and safety and of the
action plan for 2011-2012 is slow and lacks coordination between the relevant
authorities. The National Council for Occupational Health and Safety is not
operational. Consolidated recording of data on accidents at work is still
lacking. Alignment with the acquis in this area is moderately advanced.

There has been progress as regards social
dialogue. The role of the Economic and Social Council as a forum for policy
dialogue has been strengthened. Equal numbers of representatives from trade
unions and employers’ associations have been designated in the new composition
of the Committee for Establishing Representativeness of Trade Unions and
Employers’ Associations. The first three local Economic and Social Councils in
municipalities have been established. Bipartite and tripartite social dialogue
has improved slightly, particularly in the private sector and especially for
collective bargaining. Regular participation by social partners in the
policy-making process is limited to labour legislation issues only. The
capacity of social partners remains weak.

Little progress
has been made in employment policy. A minimum wage has been adopted at
national level. Unemployment was very high in 2011 at 31.4% and increased
further to 31.6% in the first quarter of 2012. Employment in the grey economy
has not diminished. The State Labour Inspectorate has taken some measures at
central level to raise awareness of the need to combat undeclared work.
Cooperation and coordination between enforcement bodies have not improved and
labour market participation is still very low. Long-term unemployment, high
youth unemployment and very low participation by women in the labour market are
all causes for great concern. The national budget allocated to the active
labour market programme is low. The Employment Services Agency has difficulties
with implementing active labour market measures. Monitoring and evaluation of
the active labour market programme are weak as they are based almost
exclusively a basic quantitative analytical approach.

There has been little progress in
preparations for participation in the European Social Fund. Procurement
of projects co-financed under the first allocation for the Human Resources
Development Operational Programme (IPA component IV) is in the final stage and
implementation of most of the projects has started. However, weak
administrative capacity is having an adverse impact on the quality of project
and programme management.

Little progress has been made on social
inclusion. Appropriate institutional and financial resources are to be
ensured in order to efficiently implement the policies and strategic plans
already adopted. The national strategy for alleviation of poverty and social
exclusion for 2010–2020 has been adjusted to EU 2020 priorities. However, a
corresponding budget for implementing it is lacking. Financial support has been
provided to selected municipalities to implement their local action plans for
social inclusion. A national body for monitoring and evaluating implementation
of the national strategy for elderly persons for 2010–2020 has been set up. The
country presided over the Decade of Roma Inclusion. The strategy for Roma
inclusion for 2012-2014 was also adopted. Steps were taken to address the
problems of persons without documents, access to housing or education.
Implementation of the national action plans and operational plans on Roma
inclusion is slow.

As regards people with disabilities, the UN
Convention on the Rights of Persons with Disabilities and the Optional Protocol
to the Convention have been ratified. The transition from institutional to
community-based care for people with disabilities has continued; there are now
15 residential units. However, implementation of the national strategy on equal
rights for people with disabilities (for 2010-2018) has not progressed.
Preparations in this area are progressing slowly.

Some progress can be reported on social
protection. The Law on Social Protection was amended, further regulating
inspections and supervision of the social protection system. A system for
continuing education for professionals in institutions for social protection
has been established. Reforms in the pension and healthcare systems are
progressing. Implementation of the law on social protection as well as of the
national programme for development of social protection for 2010-2021 needs to
be stepped up. Administrative capacities need to be strengthened. Preparations
in this area are moderately advanced.

Some progress can be reported on anti-discrimination.
The national strategy on equality and non-discrimination and the strategic
action plan for 2011–2015 of the Commission for Protection from Discrimination
(CPD) has been adopted, proposing measures for improved legal framework,
awareness raising, capacity building and inter-institutional co-operation. The
Commission has entered into formal cooperation with other relevant bodies such
as the Ombudsman, the parliamentary Committee on Equal Opportunities, and the
Academy for Judges and Prosecutors. The human and financial resources of the
Commission and its Secretariat remain insufficient. The staff capacity at the
Department of Equal Opportunities in the Ministry of Labour and Social Policy
is low. The framework law on anti-discrimination does
not explicitly prohibit discrimination on grounds of sexual orientation in
employment and occupation and is therefore not fully in line with the acquis.
A structured and systematic data analysis on
discrimination has not been established. Awareness raising activities on equity
and non-discrimination need to be intensified.

A little progress can be reported on equal
opportunities. Labour market indicators concerning women are stable. The
female employment rate remains very low compared to the EU average. The
mechanism in place within the Ministry of Labour and Social Policy to deal with
complaints of unequal treatment does not function properly. There is a tendency
to confuse equal opportunities with anti-discrimination issues. The national
action plan for gender equality for 2008-2012 is implemented in a piecemeal
approach, depending largely on external financing. The section for equal
opportunities within the Ministry of Labour and Social Policy lacks appropriate
human and financial resources. The capacity of the equal opportunity
commissions at local level remains limited. Little was achieved to improve
women’s situation in rural areas or Roma women’s conditions. Support for
activities to combat discriminatory customs, traditions and stereotypes remains
limited.

Conclusion

Little progress
has been made in achieving an efficient and inclusive labour market. Very high
unemployment remains a major challenge, in particular concerning women and
young people. Social dialogue has improved but the role of social partners
needs to be further strengthened. Poverty remains high and inclusion of Roma,
people with disabilities and other socially excluded people is limited. Further
efforts on anti-discrimination are needed. The overall administrative capacity
needs to be significantly strengthened in order to push implementation forward.
Overall, preparations in this area are not very advanced.

4.20.
Chapter 20: Enterprise and industrial policy

There was some
progress in the area of enterprise and industrial policy principles. The
‘regulatory guillotine’ project continued to focus on simplification of the
operating requirements for craftsmen and small businesses. 80 measures to
improve the competitiveness of the local economy were adopted. Data entry and the
functionality and interoperability of the Central Register were improved. The
national authorities maintained close cooperation with representatives of
business. The National Council for Entrepreneurship and Competitiveness was
established, as a joint body of the public and private sectors. The central
database of all draft legal acts is in operation; however, the level of
reaction to, or comments on, legislative proposals by stakeholders using this
facility remains very low.

Some progress
was achieved in the field of enterprise and industrial policy instruments. Entrepreneurship and innovation were
strongly promoted through the ‘Factory of business ideas’ project. About 120
companies benefited from the subsidised advisory service programme. Three new clusters
were registered, bringing the total to 18. However, the budget allocated for support programmes
under the SME Department and the SME Agency remains insufficient. The Law on
Bills of exchange provided for improved enforcement of contracts, however it is
only applicable in transactions between private entities and not between public
and private. The country still shows a poor record on the number of
applications submitted to, and use of the funds available under the EU
Competitiveness and Innovation programme. A credit line for an additional
€ 100 million for the private sector was agreed with the European
Investment Bank. The government continued to provide subsidies in order to
preserve the low interest rate for companies. The SME portal has yet to
be established, making SME-relevant information difficult to obtain.
Preparations in the area of policy instruments are moderately advanced.

There was some
progress in sector policies. The national strategy for tourism
development was adopted by the government. Intensive promotional campaigns
continued and subsidies were awarded with a view to attracting foreign
tourists. A number of municipalities reduced their local taxes on construction
of hotels, restaurants and other facilities by up to 95%. Local craftsmanship
was supported through subsidies for procurement of equipment. However, the
budget allocated for the craftsmanship strategy is limited. The policy
framework for green growth should be strengthened.

Conclusion

Some progress
can be reported in the field of enterprise and industrial policy. Various
strategies and measures were adopted, showing strong commitment to improving
the business environment. However, implementation remains scattered across a
number of uncoordinated and poorly funded bodies. The measures are yet to be
made fully effective.

4.21.
Chapter 21: Trans-European networks

Some progress
was made in transport networks. The country continued to cooperate
actively under the Memorandum of Understanding on Development of the Core
Regional Transport Network. The authorities contributed to implementation of
the Memorandum of Understanding on the Development of the South-East Europe
Regional Transport Network which was included in the revision of the
trans-European transport network guidelines proposed by the Commission in
October 2011.

Reconstruction
of Ohrid airport and extension of a runway at Skopje airport were completed
under a concession agreement. The contract for construction of the motorway
section along SEETO corridor X, from Demir Kapija to Smokvica, co-financed by
IPA funds was signed and construction work started in September 2012. The
missing link on rail corridor VIII towards Bulgaria, co-financed by WBIF funds,
will go into detailed design phase. Administrative and technical capacity needs
to be strengthened. Preparations in the area of transport networks are
moderately advanced.

There was little progress in the energy
networks. Preparatory activities related to construction of a new 400 kV
electricity interconnection line with Serbia continued. Feasibility studies
were drafted for construction of a new 400 kV electricity grid
interconnection between Bitola and Elbasan and for development of the national
gasification system. The country is moderately advanced in the area of
electricity networks.

Some progress can be reported on
telecommunications networks. The Memorandum of Understanding on the Information
and Communication Technologies Policy Support Programme of the Competitiveness
and Innovation Framework Programme was signed with the EU, opening up access to
the programme.

Conclusion

In the area of
trans-European networks progress was made. Overall, development of the
transport, energy and telecommunications networks is continuing and the country
is actively participating in the South-East Europe Transport Observatory and
the Energy Community. Preparations in this area are moderately advanced.

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

As regards the legislative framework,
no progress was made in securing multi-annual
programming, budget flexibility and co-financing capacity at national and local
levels. Further efforts are needed in order to implement the cohesion policy in
line with the EU rules and policies, in particular in the environment sector.
In this area, preparations are moderately advanced.

There has been limited progress concerning
the institutional framework. Considerable improvements are needed in
order to increase the efficiency of the operating structures to prepare and
implement projects under the precursors of the Structural Funds, IPA components
III and IV. Preparation of environmental projects by the relevant ministry
remains of concern. More efficient management and control systems are needed to
ensure continuation of operations and payments under IPA components III and IV
and prevent repetition of the previously identified deficiencies.
Inter-ministerial coordination within the operating structures needs to be
further strengthened. Preparations in this area are moderately advanced.

In the area of administrative capacity,
limited progress was made. Technical support and training for institutions
involved in IPA implementation have continued. Analysis of training needs was
carried out by the line ministries, the National Fund and the Central Financing
and Contracting Department (CFCD). The training plan was only partially
implemented due to the heavy workload. The staffing situation deteriorated
after management powers were conferred on the relevant institutions in 2009 and
2010. The workload analysis identified a need for substantial strengthening of
the staff capacity to implement pre-accession assistance, including relevant
expertise. An effective retention policy of trained staff is of the utmost
importance. Greater efforts are needed to ensure efficient management and
coordination of all ongoing and planned projects. The country’s administrative capacity in this area
remains insufficient.

As regards programming, some
progress was made. The Human Resources Development
Operational Programme for IPA component IV has been revised to add financial
allocations for 2012-2013. The revision of the Regional
Development Operational Programme for IPA component III has not been completed.
Identification and preparation of mature projects compatible with the
objectives and means of the operational programmes, particularly in the
environmental sector under IPA Component III, remains difficult. Tender
documents and procurement processes need to be improved. Closer coordination
and active participation by all stakeholders in the programming process are
needed. Preparations in this area are advanced.

There was some progress in monitoring
and evaluation. Sectoral
monitoring committees have met regularly. The management information system
(MIS) is in the process of full operational deployment and the relevant manuals
of procedures and guidelines for the operating structures include a reference
to the MIS. Further upgrades and continuous maintenance will be needed. The
manual for programme monitoring
and evaluation compiled by the national IPA coordinator has to be finalised including an efficient line of
reporting. Interim evaluations on IPA components III and IV were completed. The relevant recommendations
have to be followed up. The administrative capacity for monitoring and
evaluation needs to be further strengthened. Preparations in this area are
advancing.

In the area of financial management,
control and audit, some progress was made. The senior management of the IPA
Audit Authority was replaced in May and its budget for 2012 was slightly
increased. Staff shortages in the CFCD are recurrent and need to be urgently
addressed. The capacity for proper financial management will have to be further
strengthened in order to ensure an efficient system for management and control
of EU funds. The internal audit units in the line ministries have been formally
set up and staffed, but suffer from insufficient understanding of IPA
objectives and procedures.

Conclusions

Limited progress can be reported in the
area of regional policy and coordination of structural instruments. Management
of IPA programmes needs to be improved in order to ensure full and timely
absorption of EU funds. Additional efforts are needed to address deficiencies
in management, control and audit systems. In particular, staffing and
qualifications within the operating structures and the CFCD need to be
substantially strengthened. Overall, preparations in this area are moderately
advanced.

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

Progress was made in the area of the judiciary
but key issues remain to be addressed.

Little progress was made as regards the independence
and impartiality of the judiciary. Although basic safeguards are in
place, including the role and composition of the Judicial Council, further
efforts are needed in practice to guarantee independent, high-quality
decision-making by courts. Improvements are needed in the evaluation and
promotion system, where the current emphasis on quantitative rather than qualitative
assessment criteria creates the risk of formalistic decision-making. The
current grounds for dismissal of judges are not sufficiently clear, precise and
predictable, which could pose a potential threat to judicial independence.

As regards the professionalism and
competence of the judiciary, stricter criteria entered into force for admission
to initial training at the Academy for Judges and Prosecutors (AJP), relating
to certified academic performance and knowledge of English. The fourth
generation of nine AJP graduates completed their initial training in January
2012. The AJP also continued to provide continuous in-service training for
judges, prosecutors, court staff and law enforcement, with a total of 290
different training activities being provided during the reporting period,
attended by 9,571 participants. The AJP’s budget for 2012 increased by 10% to
around EUR 425,000; however, it still lacks adequate premises and staff,
in view of the high volume of its activities.

The requirement that all newly-appointed
first instance judges must have graduated from the AJP has still not entered
into force. In spite of the transitional provisions stipulating that 50% of
such appointments should be AJP graduates, the Judicial Council continued to
give greater preference to applicants who had not graduated from the AJP. Out
of 26 available basic court posts advertised during 2011, the Judicial Council
appointed only 2 AJP graduates and 22 non-AJP graduates (while 2 posts were not
filled), despite receiving a healthy rate of applications from AJP graduates
for each post. This raises concerns about the credibility of the current
provisions and the Judicial Council’s commitment to merit-based recruitment.

In the area of accountability, nine
judges were dismissed during 2011 and none were disciplined. There were no
cases of revocation of judicial immunity by the Judicial Council in connection
with criminal proceedings against any judges. The Judicial Council considered
2,081 complaints filed by individuals and companies against judges and courts
during 2011. The most common ground was the length of court proceedings. The
Ministry of Justice received 658 complaints about the length of proceedings (a
decrease from 952 in 2010). The Supreme Court received 1,884 complaints during
2011 regarding unreasonably lengthy proceedings, an increase from 398 in 2010.
In the same period, it upheld 195 complaints and awarded compensation in 180
cases. The total amount paid out was around EUR 136,000. The second instance
council within the Supreme Court, which hears appeals in this type of
proceeding, increased the awarded compensation in 17 cases.

As regards the efficiency of
justice, greater efforts are needed to ensure collection and monitoring of the
correct statistical indicators, such as the clearance rate and disposition time
of courts. The 2011 Methodology for court statistics is not yet being
systematically implemented and the related software is not yet operational.
Training and awareness-raising are needed to ensure that all courts are using
the same statistical tools. There is no monitoring mechanism covering the
overall duration of court proceedings, including all stages and instances as
well as enforcement, which now falls under the jurisdiction of professional
bailiffs. This is an essential tool in detecting unreasonable delays and their
causes. There is no system in place to identify and give priority to ‘old cases’
which have been in the court system for several years. Despite changes to
several laws and campaigns promoting mediation, the uptake of alternative
dispute resolution is still very low.

Progress has been made in reducing overall
court backlogs in the country. In the last two years, the 27 first instance
courts and 4 appeal courts have together disposed of a considerably higher
number of cases than they have received. This has been partly due to
organisational measures, such as monthly targets set by the Judicial Council.
However, care must be taken to ensure that productivity is not given priority
over the quality of judgments. Problems still remain at the Supreme Court and
the Administrative Court, which have both been accumulating backlogs for
several years. In April 2012, the Judicial Council temporarily transferred four
judges from the Higher Administrative Court to the Administrative Court in
order to address the problem. The global number of pending cases in national
courts at all levels at the end of 2011 was 295,769. There is currently no
system in place to establish what proportion of these cases actually
constituted backlogs of ‘old cases’ as opposed to ordinary case-flow. In view
of the current disparities in the workload at the different court levels, steps
are needed to ensure more efficient distribution of human resources, including
judges, prosecutors and court staff, where they are most needed. In particular,
future human and financial resource strategies need to take better account of
the actual and projected needs of the court system and to be based on reliable
judicial performance indicators.

The court budget for 2012 is around
EUR 29 million (or 0.4% of GDP), of which 80 to 85% is spent on the
salaries of judges and administrative staff. The current number of judges (678)
is more than 50% higher than the European average in relation to the size of
the population, and the court budget is one of the highest as a percentage of per
capita GDP. Future judicial strategies need to assess the sustainability of
this spending and start planning a gradual rationalisation of the court
network. The budget of the Public Prosecutor’s Office is around EUR 5.3
million. The majority (83%) is spent on salaries, while the remainder is
insufficient to cover the necessary IT infrastructure upgrade of the
prosecution service, notably its link-up to the courts’ automated court case
management information system (ACCMIS), which still needs to be carried out.

The courts at all levels have continued to
publish judgments on their websites (over 90,000 during 2011), which is an
important tool in promoting transparency and access to justice. However, the
system should be made more user-friendly through the classification of
judgments by subject and the inclusion of a search function.

The legal aid budget for 2012 has doubled
from last year to EUR 200,000; 213 lawyers and 4 NGOs are registered to provide
legal aid, however the number of cases is still very low.

There is currently no judicial reform
strategy or action plan in place to follow up the previous one dating from
2004-2009. It would be advisable to develop a new overall strategy in order
facilitate strategic planning, budgeting and monitoring of future developments
in the sector.

Some progress was made in the area of anti-corruption
policy.

Amendments to the Law on the Financing of
Political Parties were adopted, which give the State Audit Office (SAO) a
leading role in the supervision of political financing. Efforts are still
needed in practice to ensure that the SAO takes a proactive approach in
investigation and enforcement, as well as to ensure the mandatory auditing of
political parties’ annual reports and the effective application of sanctions
for violations of the financing rules, in line with GRECO recommendations. The
Law on the Prevention of Conflicts of Interest was amended and a bylaw adopted
which set out the procedure for checking declarations made by elected and
appointed public officials. The Criminal Code still needs to be amended in
order to abolish the possibility for courts to return the bribe to a
bribe-giver who has declared the offence before it is uncovered.

The State Commission for the Prevention of
Corruption (SCPC) adopted State Programmes for Prevention and Repression of
Corruption and for Prevention and Reduction of Conflict of Interest, along with
a corresponding Action Plan for 2011-15, providing for anti-corruption measures
in 11 corruption‑prone areas which include the financing of political parties,
public procurement, health and social services, customs, the mass media and the
judiciary. These programmes have not, however, been adopted or endorsed at
government level, which may detract from their visibility and impact.

The administrative capacity of bodies
tasked with combating corruption improved slightly, with the SCPC gaining one
new recruit and the Ministry of the Interior’s Sector for Internal Control and
Professional Standards gaining 11. The Anti-Corruption Unit of the Centre for
Suppression of Serious and Organised Crime is still operating at only 65% of
capacity (11 out of 17 posts are filled). In 2012, the SCPC’s budget was
increased by around 5% and it also procured new IT equipment.

In 2011, the SCPC received 267 complaints
of corruption (40% less than in 2010), and filed 10 requests with the Public
Prosecutor’s Office (PPO) to initiate criminal proceedings for abuse of an
official position. Following the 2011 election, the SCPC initiated misdemeanour
proceedings against four election campaign organisers for failure to submit
financial reports and three initiatives for criminal investigation of illegal
campaign financing.

There were 125
convictions for corruption-related offences in 2011 and 74 in the first six
months of 2012. Bribery offences account for less than 10% of convictions,
while the majority still relate to abuse of public office. Stricter sentences
for corruption-related offences were imposed by the courts in comparison with
2010. However, orders for the seizure and confiscation of assets remain
exceptional. The Criminal Code provisions on extended confiscation, illicit
enrichment and criminal liability of legal persons have yet to be put into
practice. Special investigative measures are rarely used to detect and
investigate corruption offences. Decisions by public prosecutors not to indict
are still not reviewed by the courts. SCPC and SAO requests to the PPO to start
criminal investigations do not result in convictions, indicating that the
effectiveness of the existing referral mechanisms needs to be improved.
Inadequate statistical data-gathering and sharing between different enforcement
and prevention bodies hampers the identification of problem areas.

The general
capacity of the courts to deal with corruption cases, in particular high-level
ones, needs to be improved. Only a handful of high-level corruption cases have
been prosecuted, and almost all of them remain in the court system after many
years, having been returned for retrial following appeals, due to inadequate
examination of evidence by the first instance court.

The Sector for Internal Control and
Professional Standards in the Ministry of the Interior initiated 15 criminal
proceedings for corruption related offences in 2011. The majority of charges
concerned abuse of official position. The Sector initiated 530 disciplinary
procedures in 2011 (compared to 556 in 2010). The Customs Administration
strengthened its internal control system. In 2011, 42 disciplinary procedures
were initiated against customs officers (compared to 21 in 2010). In 26 cases,
disciplinary measures were applied and in 5 cases, criminal charges were
brought (compared to 1 case in 2010).

As regards
corruption prevention activities, the SCPC continued to conduct random checks
of asset declarations. Following checks carried out in 2011, the SCPC submitted
48 requests to the Public Revenue Office to initiate property examination
procedures. As a result, 10 elected and appointed officials were charged the
70% tax rate on their undeclared income. In 2011, the SCPC received 425
statements of interest. It dealt with 128 cases of possible conflict of
interest, confirmed conflicts in 37 cases and issued a public warning in 8. The
effectiveness of the new implementing legislation on systematic verification
remains to be seen.

The Law on Free
Access to Public Information remains deficient. The exceptions to access to
public information are vaguely worded, leaving scope for arbitrary
interpretation. The sanctions set out in the law are unclear and are not
applied in practice. Political parties are excluded from the list of holders of
information.

In 2011, the Academy for Training of Judges
and Prosecutors carried out 15 training activities for 353 participants on
combating corruption and conflicts of interest. Intensive training on the new
Law on Criminal Procedure continued for judges and prosecutors.

Limited and uneven progress was made in the
area of fundamental rights.

Some progress was achieved with regard to
the prevention of torture and ill-treatment and the fight against
impunity. Staff of the national prevention mechanism in the Ombudsman’s Office
conducted regular visits to detention facilities. However, the Office has yet
to be provided with the necessary budget and human resources. The Ministry of
the Interior’s Sector for Internal Control and Professional Standards increased
its capacity to investigate allegations of ill-treatment, but it has yet to be
given the authority to impose effective sanctions. The lack of independence of
the internal control function for the police remains a concern. In 2011, of 63
complaints concerning disproportionate or unlawful use of physical force by
police officers, all of which were investigated, 8 were considered well founded
and led to the imposition of disciplinary sanctions. Allegations continued
regarding ill-treatment towards persons detained in police custody by crime
inspectors, and by the members of the Alpha unit. In 2011, out of 14 complaints
relating to Alpha unit, 7 were sent to the public prosecutor, and for 8,
disciplinary measures followed.

There was some progress in the area of the prison
system. A number of measures were adopted on re-socialisation of convicted
persons. A risk assessment manual was produced, identifying risks and the needs
of prison inmates. Standardised procedures were adopted regarding the
management of penitentiary facilities, notably the procedures for hygiene
control, admission and treatment of inmates, as well as procedures addressing
violent behaviour, work, escapes and visits to inmates. Numerous training
activities for prison staff took place. The implementation of a large-scale
project to rebuild prisons continued. However, a comprehensive national
strategy for the prison system has yet to be drafted. The administrative
capacity of the Directorate for Execution of Sanctions and the penitentiary
institutions is weak. Specialised treatment programmes for vulnerable groups have
yet to be put into practice. Lack of financial resources continued to restrict
convicted persons’ access to adequate healthcare services. Vocational,
educational and other rehabilitation activities for inmates remain inadequate.

With regard to freedom of expression
and the media, the legal framework is generally in place but attention needs to
be paid to ensuring that its implementation is consistent, transparent and in
line with the case law of the European Court of Human Rights (ECtHR). The
government has adopted proposals to decriminalise defamation through a new Law
on Civil Liability for Insult and Defamation, which aims to align with the
relevant ECHR principles. The Criminal Code needs to be amended in line with
this approach. Training on Article 10 ECHR has taken place for the judiciary
and journalists. Over 40 key ECtHR judgments relating to Article 10 have been
translated and published on the websites of the Ministry of Justice and the
Academy for Judges and Public Prosecutors. Further training of all judges
dealing with defamation cases should continue in order to ensure that ECHR
principles are applied by the courts in practice.

With regard to freedom of assembly and
association, the overall situation is satisfactory. There were no
cases of misuse of the legislation or prohibition of registration.

Freedom of thought, conscience and
religion is generally ensured.

Moderate
progress was made on women’s rights and gender equality. A new Law on
Equal Opportunities was enacted. The Sector for Equal Opportunities Policy in
the Ministry of Labour and Social Affairs still lacks adequate expertise,
personnel and budget. Local commissions on equal opportunities also face a lack
of expertise. There is confusion in practice between the concepts of equal opportunities
and anti-discrimination, which is a matter of concern. Some efforts were made
to address women’s health needs; however, due to financial constraints only a
limited number of women can benefit from improvements. Insufficient support to
the National Action Plan for Roma Women renders its implementation almost
impossible. Women’s participation in decision-making in society remains low,
especially at local level.

Some limited progress was made in the area
of children’s rights. Amendments to the Family Law and the Law on
Pre-School Education provided for a strengthened legislative framework for the
adoption of children and for the inclusion of vulnerable groups in education. A
National Coordinative Body for child protection was established. The Centres
for Social Work were equipped with a new database and case management system to
improve the quality of social services delivered to vulnerable children.
However, it is estimated that only 15% of children with disabilities are in
education, mainly in specialised institutions. The lack of psychologists and
education specialists employed in schools, and the existing discrimination
against children with disabilities, prevent their inclusion in the education
system. The Ministry of Labour and Social Policy started activities to ensure
registration of children without documents. It is estimated that there are
around 1,000 street children, almost exclusively Roma. The number of
reported cases of sexual abuse and paedophilia remained constant. The Ministry
of Labour and Social policy adopted a protocol on dealing with cases of
paedophilia, in cooperation with the World Health Organisation.

Some limited progress can be reported in
the treatment of the socially vulnerable and/or persons with disabilities.
The UN Convention on the Rights of Persons with Disabilities was ratified. The opening of communal housing units as part of the
deinstitutionalisation process for people with disabilities has continued.
However, implementation of the revised national strategy on equality of rights
of people with disabilities 2010-2018 is very slow. Material conditions and
inhumane and degrading treatment in psychiatric institutions have not improved.
Integration of people with disabilities in society remains limited.

Some progress can be reported in the area
of anti-discrimination policy. The Commission for Protection Against
Discrimination became an observer member of the European Network of Equality
Bodies. The Commission signed Memoranda of Cooperation with the
Ombudsman’s Office, the Women’s Lobby and the Academy for Judges and Public
Prosecutors. The Commission issued 34 opinions in 2011, relating to complaints
submitted mainly on the grounds of ethnic, political and social status in the
areas if labour relations, social security and the judiciary. The Commission
still lacks sufficient financial and human resources; the capacity of its
secretariat is particularly weak. Awareness among the population of the
Commission’s work and the principles of the Anti-Discrimination Law remains very
low. A decreasing proportion of its recommendations is accepted by public
authorities and there are concerns over its independence. The
Anti-Discrimination Law is still not fully in line with the acquis as it
does not explicitly prohibit discrimination on grounds of sexual orientation in
employment and occupation. The Criminal Code penalises offences related to
racism and xenophobia. Data on occurrences of hate speech or incitement in the
media is collected by the Broadcasting Council.

As regards property
rights, the land register now covers 99.96% of the country’s territory. A
new Law on Expropriation was adopted which extends the scope of public interest
at both national and local level. Appeals against first instance decisions on
expropriation are now dealt with solely by the Administrative Court. The
E-cadastre system was expanded to a further 21 towns in the country. A national
positioning system (MAKPOS) was put into commercial use. Info-lines were made
available to the land registry office and open days for the public continued to
be held. The process of returning property confiscated under the Socialist
Federal Republic of Yugoslavia has continued. However, 168 complaints lodged
with the Ombudsman’s Office in 2011 for breach of property rights were linked
to the process of denationalisation alone. Delays persist in the enforcement of
final decisions on restitution and the backlog of property disputes continues
to cause delays in the Administrative Court.

Limited progress was made as regards
respect for and protection of minorities and cultural rights. Institutions
promoting the rights of smaller communities increased their activities,
particularly in the area of education. The Government adopted an action plan on
Roma inclusion and some progress was made regarding the education of Roma and
identification of persons without documents. However, the Secretariat for the
Implementation of the Ohrid Framework Agreement continues to suffer from
insufficient strategic planning capacity and internal control standards.
Institutions responsible for promoting the rights of smaller communities and
the Roma remain underfunded, posing a serious obstacle to the implementation of
existing strategies. Inter-institutional cooperation is weak. The pace of
implementation of the Roma Strategy has slowed down in the areas of health and
culture. Concerns over the sustainability of several successful projects, such
as the Roma Information Centres, persist. A series of violent incidents has put
inter-ethnic relations under strain.

Further progress was made on protection
of personal data. The National Strategy for data
protection 2012-2016 and related action plan were adopted. The inspection
capacity of the Directorate for Personal Data Protection (DPDP) increased, and
it gained three new staff. Budget allocations remained
at the same level as in 2011. International cooperation
further improved. Various guidelines were published, targeting data controllers
and processors and the general public. However, the number of confirmed violations
has increased from 176 in 2010 to 319 in 2011, and various
media do not respect individuals’ right to privacy, leading to frequent
violations.

There were no developments in relation to EU
citizens’ rights.

Conclusion

Some progress has been made in the field of
the judiciary, notably in reducing the backlogs of court cases. Further
improvements are needed as regards merit-based judicial appointments, precise
and predictable dismissal grounds and correct use of statistical tools. In the
area of anti-corruption policy, the legislative framework is in place and
capacity has been strengthened slightly but greater efforts are needed to
develop a track record of investigations, prosecutions and convictions as no
progress has been observed in this regard. As regards fundamental rights, some
progress was made in the area of freedom of expression, notably towards the
decriminalisation of defamation. The relevant institutions need to become more
effective in promoting and safeguarding fundamental rights in practice. The
Ohrid Framework Agreement remains an essential element for democracy and rule
of law in the country. Preparations in the field of the judiciary and
fundamental rights are moderately advanced.

4.24.
Chapter 24: Justice, freedom and security

Little progress was made in the field of migration.
Establishment of the database for foreigners, covering asylum, migration and
visas, advanced slowly and is still in the testing phase. In 2011, 469
irregular migrants were detected in the country. A high concentration of
irregular migrants was reported at the border with Serbia. Strategic capacity
for managing migration flows is insufficient to cope with the increasing
numbers of migrants transiting through the country. A readmission agreement
with Serbia entered into force and another was signed with Montenegro. The
readmission agreement with the EU continues to be implemented well. In 2011,
1,022 persons were returned under the EU readmission agreement. In this area,
the country is well advanced.

Some progress has been made in the field of
asylum. The Law on Free Legal Assistance was amended to include asylum
seekers. An amendment to the Law on Health Insurance guarantees access to the
public health system for persons who are granted asylum. An integration
programme was adopted for 2012, ensuring state funding for housing support to
persons who are granted asylum. The centre for integration continued to build
up its capacity to provide services to persons granted asylum. The reception
capacity of the asylum centre in Vizbegovo improved. Access to information
about asylum procedures and social rights increased slightly. In 2011, 740
applications for asylum were made, a sharp increase from 180 in 2010. In this
context, the capacity of the asylum unit in the Ministry of Interior remains
insufficient. The asylum procedure, in particular for first instance asylum
decisions, is slow and unsatisfactory. The appeal system in relation to
determination of refugee status continued to improve, although decisions are
still issued on procedural rather than substantive grounds. No progress was
made on speeding up the process for providing asylum seekers with ID papers.
Interpretation remains an obstacle. The legislative and institutional framework
is overall satisfactory but implementation needs to improve. Given the recorded
increase in the number of asylum seekers, more efforts are needed on strategic
planning. In this area, the country is advanced.

Progress was made on visa policy.
Implementation of the visa free regime with the EU improved. The number of
asylum applications lodged by the citizens of the country in the EU decreased
from 7,550 in 2010 to 5,545 in 2011. However, long-term policies to improve
social and economic inclusion of the most vulnerable groups of the population most
likely to migrate remain underdeveloped and underfunded. Continuous training on
forged documents was provided for staff of diplomatic and consular missions.
There is already a high degree of alignment with the EU positive list. Further
efforts need to be made with a view to alignment with the EU negative list by
the date of accession. In this area, the country is well advanced.

There was good
progress in the area of external borders and Schengen. Legislation
implementing the Law on Border Control was adopted. Protocols were signed for
the establishment of joint contact centres for police cooperation with Serbia,
Kosovo and Albania. Protocols on joint border patrols were implemented by mixed
patrols with Bulgaria, Kosovo and Albania. Good cooperation with Frontex
continued. A rulebook on risk analysis in the area of organised cross-border
crime and illegal migration is being implemented. Training programmes for field
officers and a specific training programme for senior and mid-level police
officers has continued to be implemented. The central database for false and
genuine documents and specimen travel documents was updated regularly. Further
efforts are needed to complete the human resources capacity of the inland
mobile unit set up at central level. Competences were transferred to an
inter-agency body, the National Coordination Centre for border management,
which includes a newly established National Advisory Body for Integrated Border
Management, responsible for monitoring and implementation the IBM strategy and
action plan. Significant additional efforts are needed to strengthen the
institutional and functional capacity of these bodies, particularly for
strategic planning and human resources management. Further efforts are also
needed to complete the human resources capacity of the inland mobile unit set
up at central level. Work continued on extending the TETRA radio communications
system, which currently covers 40% of the country. Progress was achieved in the
technical equipping of the border police, notably with surveillance equipment.
Reconstruction and renovation of 9 out of 20 police stations for border
surveillance were completed. Also, a total of 9 police stations were connected
to the central database of the Ministry of Interior and the connection of
others is underway. Budgetary management of border police resources was partly
decentralised. Overall, preparations in the area of external borders and
Schengen are advanced.

There was some progress on judicial
cooperation in civil and criminal matters. The appointment of two liaison
officers further improved cooperation with Eurojust. In the reporting period
the Ministry of Justice processed 1,017 requests on criminal matters and 3,880
on civil matters. A bilateral extradition agreement with Montenegro entered
into force, and agreements with Serbia and Croatia were ratified. Application
of the 2011 Law on International Cooperation on Criminal Matters was postponed
as a result of the postponed entry into force of the new Law on Criminal
Procedure. In this area the country is moderately advanced.

Some progress can be reported on police
cooperation and the fight against organised crime. The international law
enforcement coordination unit in charge of exchanges of police and intelligence
information (ILECU) within the Ministry of Interior is now in operation and an
agreement was signed on cooperation between the law enforcement agencies
involved. 107 international arrest warrants were issued in the country in 2011.
There was good regional and international cooperation on law enforcement
through Europol and Interpol. The Sector for International Police Cooperation
was designated as the National Central Unit for Cooperation with the
signatories of the Convention on Police Cooperation in South-Eastern Europe. An
agreement on operational and strategic cooperation with Europol entered into
force, but a liaison officer at Europol remains to be assigned.

The Police Training Centre continued to
provide its advanced, continuous and specialised training. Around 300 police
cadet candidates were selected to receive basic training at the Centre. It now
has a separate, but limited, budget line. A training strategy, defining the
objectives and target groups, was adopted. However, human resources are not
efficiently balanced between the different law enforcement agencies. Full
implementation of the new structure for the Bureau of Public Security and the
regional Sectors for Internal Affairs is still hampered by insufficient
financing and staffing. A professional evaluation of Ministry of Interior staff
was carried out. Professionalization of police human resources and a rigorously
merit-based recruitment policy are needed in order to enhance operational
capacity and the efficiency of investigations. Further police training and establishment
of an independent and robust external oversight mechanism for the police
services remain crucial for police reform.

Full implementation of the new Law on
Criminal Procedure (LCP), which was adopted in 2010 with entry into effect
postponed until November 2012, will now be postponed until December 2013 for
lack of budgetary and human resources and equipment. The Investigative Centres
and Judicial Police foreseen by the new LCP have not yet been established.
Further efforts are needed to implement the action plan for enforcement of the
new LCP, in particular in the areas of resources, organisation, equipment and
training of law enforcement agents and prosecutors.

There has still been no progress on
staffing the Centre for Suppression of Organised and Serious Crime, with only
around 62% of the posts filled (a slight decrease from last year). The National
Criminal Intelligence Database is still not operational and the National
Coordination Centre for the fight against organised crime has still not been
established. Efforts by the relevant law enforcement bodies (the Ministry of
Interior, the Public Prosecutor’s Office, the Customs Administration and the
Financial Police) on fighting organised crime need to be stepped up. Structural
problems persist in law enforcement agencies combating organised crime.

The Law on Interception of Communications
was amended, removing the direct involvement of the Minister of Interior in the
authorisation of interceptions and aiming at improved control and supervision
of the process by the public prosecutor and the relevant parliamentary
oversight committee. The use of special investigative techniques still needs to
be increased in practice, as does the systematic use of financial
investigations. The customs administration and financial police still have
limited capacity to apply special investigative measures, significantly
limiting the efficiency of the fight against organised crime.

The witness protection programme was
activated in two cases in 2011. The witness protection unit was granted two
additional premises but still lacks adequate equipment. The implementation of
legislative provisions providing for compensation to be paid to victims of
organised crime needs to be improved in practice.

In 2011, the Financial Intelligence Unit
(FIU) reported 22 cases of suspicious transactions related to money-laundering
and 107 related to other types of economic and financial crime to investigating
authorities and the prosecution service. Most of the cases processed concerned
tax evasion. A total of 43 persons were prosecuted in four cases during 2011.
Six persons were convicted in two cases. The level of reporting and
investigation of money-laundering and financial crime remains weak. A more
pro-active stance is urgently needed.

Moderate progress was achieved in
addressing trafficking in human beings. Eleven victims of human trafficking
were identified in 2011, down from 12 in the previous year. During the year,
the Centre for Victims of Human Trafficking accommodated eight victims. Efforts
are needed to ensure the Centre’s sustained ability to provide comprehensive
care. In 2011, 35 persons were charged on suspicion of trafficking compared
with 25 in 2010 and 7 persons were convicted, down from 11 in 2010. A
comprehensive, multi-disciplinary and victim-oriented approach to trafficking
still needs to be developed, and proactive identification of victims of
trafficking needs to be improved. The country remains a source, destination and
transit country for human sex trafficking and forced labour.

The country is advanced in the fields of
police cooperation and fighting organised crime.

Some progress can be reported in the fight
against terrorism. The country became a member of the counterterrorism
initiative of the Council of Europe. Bilateral and multilateral cooperation
continued. A national strategy for the prevention of money-laundering and
financing of terrorism for 2012-2014 was adopted. The Council for the Fight
against Money-Laundering and Financing of Terrorism was established as an
inter-ministerial body to improve inter-institutional cooperation. A memorandum
of cooperation was signed between the FIU and the Intelligence Agency. In 2011,
the FIU submitted three notifications of suspicious transactions regarding
financing of terrorism to law enforcement agencies and the prosecution service.
Preparations in this area are well advanced.

Little progress can be reported as regards cooperation
in the field of drugs. The national focal point cooperated well with the
European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) on common
projects. In 2011, the quantity of drugs seized on the country’s territory
remained low, continuing last year’s downward trend. The country remains on the
main Balkan drug trafficking routes, despite several successful international
police operations to cut international drug trafficking channels. The customs
administration needs to put more effort into detecting and seizing narcotics at
the borders. The human resources capacity of the Illicit Drugs Department in
the Ministry of Interior should be strengthened. The country broadly meets acquis
requirements.

There was good
progress on customs cooperation. The customs administration took
part in eight international operations to detect illicit trade, led by the
regional intelligence liaison offices of the World Customs Organisation (WCO),
the South-east European Law Enforcement Centre (SELEC) and the German
authorities. Cooperation and exchanges of intelligence with the customs
authorities of neighbouring countries also continued and intensified.
Preparations in this area are well on track. (See also Chapter 29 – Customs
union).

For measures
against counterfeiting of the euro, see Chapter 32 – Financial
control.

Conclusion

Progress has
been made in the area of justice, freedom and security, notably on external
borders and customs cooperation, as well as on interception of communications.
Further efforts are needed to improve the efficiency of the asylum procedure,
ensure rigorously merit-based recruitment to the police, step up the fight
against organised crime and improve seizure of drugs. A more pro-active stance
of law enforcement agencies is urgently needed. Overall, preparations in this
area are advanced.

4.25.
Chapter 25: Science and research

Little progress can be reported on research
and innovation policy. The preparations of the national programme
for scientific and research activities for 2012-2016 and the strategy on
innovation have advanced, but remain to be adopted. The 2012 programmes for
scientific research activities, technological development and technical culture
were adopted. The budget for these programmes has, however, continued to
decrease since 2010. Financial resources are still limited and the capacity of
the research facilities remains weak. Greater efforts are needed, in particular
on the level of investment and strengthening the capacity at national level by
increasing the number of scientists and modernising infrastructure.
Preparations in this area are moderately advanced.

Further progress was made on participation
in the Seventh Framework Programme (FP7). The level of participation in
FP7 continued to increase but remains uneven. The administrative capacity to
organise promotion activities, workshops and conferences on cooperation opportunities
under FP7 improved. Particular efforts have been made to involve SMEs and on
Marie Curie actions. Further efforts are necessary, in particular in
preparation for the next framework programme, ‘Horizon 2020’, covering the
period 2014-2020. Collaboration with the Joint Research Centre resulted in the
conclusion of a Memorandum of Understanding (MoU) aiming at increasing the
exchange of scientists and preparing for compliance with EU standards and
technical requirements. Preparations in this area are advanced.

With regard to the European Research
Area (ERA), steps were taken to facilitate integration into the ERA and to
contribute to the Innovation Union. Procurement of equipment for scientific
laboratories for public universities and research institutes allowed upgrading
of several national institutes. On mobility of researchers, preparations for
the national EURAXESS portal and for setting up network infrastructure are well
advanced. However, the level of investment in research decreased in 2012. A lack
of reliable statistics makes it difficult to monitor investments and results.
Preparations on EU research and innovation policy are moderately advanced.

Conclusion

Little progress can be reported in the area
of science and research. Preparations for the national programme for science,
research and development activities for 2012-2016 and for the strategy on
innovation have advanced, but the documents remain to be adopted. Participation
in FP7 continued to be good. The administrative capacity to support participation
in the framework programmes has improved, but remains weak. Little progress can
be reported on future integration into the European Research Area. Overall, in
the area of science and research the country partially meets its targets.

4.26.
Chapter 26: Education and culture

There was some progress in the fields of education,
training and youth. Parliament enacted amendments to the laws on primary and
secondary education. University rankings are published for all 19 universities
covering aspects such as teaching, research and social services. Third-cycle
(doctoral) studies were launched as part of the implementation of the Bologna
process in higher education. Strategies for introducing entrepreneurial and
environmental education and for training gifted pupils in primary education
have been designed. The licensing system for adult education activities was
established. Adult education schemes are in progress providing university
studies and training.

The country improved its performance on
upper-secondary attainment and in areas where EU-level benchmarks were set for
2020, in particular as regards early-school leaving and tertiary attainment.

However, in general, the country remains
below the EU average in education, particularly in early-childhood education.
No national targets were set for educational attainment, aligned with the
education and training 2020 framework to address priority areas in each of the
different levels of education and training. There are limited opportunities for
distance, modular or part-time learning. Austerity measures have affected
overall spending on education. Regional disparities remain. Some children in
rural areas do not receive primary education and the early school-leaving rate
remains high, particularly among Roma. Teacher-training needs to be improved.
Higher education is necessary as it does not reflect the needs of the labour
market. The national qualifications framework is not developed. The overall
capacities of the centre for vocational education and of the centre of adult
education remain insufficient.

There was good progress as regards the
country’s access to the Lifelong Learning and Youth in Action programmes. The
progress made towards meeting the conditions set by the EU led to the lifting
of the suspension of the preparatory measures under these programmes. The
system of secondary controls of the work and day-to-day management of the
national agency for a European educational programme and mobility was enhanced.
The national authorities took measures to remove the irregularities detected
and to make sure that the national agency works properly. The country has also
become part of the centralised action of the Lifelong Learning programme.

Overall, preparations in the areas of
education, training and youth are at an early stage.

Some progress can be reported in the field
of culture. The country has intensified its participation in the Culture
and the Europe for Citizens programmes. New items and institutions were
declared as part of cultural heritage. The government-sponsored cultural
infrastructure programmes have failed to reflect the multi-ethnic composition
of the country and allocations to the cultural activities of the non-majority
communities remain insufficient. Preparations in the area of culture are on track.

Conclusion

There was some progress in the areas of
education, training, youth and culture. The country improved its performance in
relation to the Education and Training 2020 common benchmarks. The suspension
of preparatory measures for the Lifelong Learning and Youth in Action
programmes was lifted. Investment continued, although it has yet to be
equitably applied to reflect the multi-cultural society better. In the areas of
education and culture the country is moderately advanced.

4.27.
Chapter 27: Environment and climate change

In the field of
environment, further progress was made on the horizontal legislation.
Legislation was adopted on strategic environmental assessment (SEA) and
environmental impact assessment (EIA). The administrative capacity for implementing
the EIA and SEA Directives was improved, but shortcomings remain, in particular
at local level. The requirements for access to information and public
consultations related to EIA and SEA are still not adequately applied.
Implementation of environmental liability legislation has not yet begun.
Preparations for alignment with the INSPIRE and the Environmental Crime
Directives need to be speeded up. Preparations in this area are advanced.

Some progress
was made in the area of air quality. Alignment with the acquis continued,
with the adoption of implementing legislation. Good progress was made on
developing an air quality monitoring system, but it was uneven, due to
insufficient financial resources for operating the system. This hampers proper
implementation of the legislation in this field. Preparations in this field are
well underway.

Some progress
was made in the area of waste management. The Law on Electrical and
Electronic Equipment waste management was adopted. Implementing legislation was
adopted and further progress was made on setting up the integrated waste
management system. The administrative capacity was improved. Investments in
this area are far from sufficient and need to be increased. A system to deal
with data collection, registration and reporting was launched on a pilot basis.
Preparations in this area are progressing.

Very little progress can be reported in the
area of water quality. Alignment with the acquis is still lagging
behind. The national strategy for water has not been adopted yet. River basin
management structures were established, but are not yet fully operational. The
administrative capacity remains insufficient at central and local levels. The
insufficient coordination between the competent authorities in the water sector
continues to hamper implementation of the legislation. No progress was made on
addressing the gaps in the water monitoring system. Planning and preparation of
infrastructure investment are lagging behind and funding is low compared with
the needs in the sector. No progress was made to apply the polluter-pays
principle and establish an appropriate water pricing system. This continued to
hamper operation of water treatment facilities. Preparations in this area are
lagging behind.

Little progress
was made in the area of nature protection. Alignment with the acquis
continued with the adoption of legislation implementing the Law on Nature
Protection. Some progress can be reported on the development of management
plans for protected areas, but requirements for public consultation with
stakeholders are still not always properly applied. Implementation of these
plans is still inadequate due to the lack of sustainable financing and
insufficient monitoring. Work on the new national strategy and action plan for
nature protection has not yet started. Preparations in this area are moderately
advanced.

Little progress was made on industrial
pollution control and risk management. Work on transposition and
implementation of the Seveso II Directive is
progressing. The integrated pollution prevention and
control (IPPC) permit process is behind schedule. Administrative capacity needs
to be significantly strengthened, in particular for permit, control and
inspection activities. Preparations in this area require substantial additional
efforts.

Good progress
was made in the area of chemicals. The report on the status of chemicals
and the national plan for the strategic approach to chemical management were
adopted. Progress can be reported on implementation of REACH (registration, evaluation,
authorisation and restriction of chemicals). The administrative capacity was
improved. Preparations in this area are moderately advanced.

Very little
progress was made in the area of noise. Administrative capacity is
insufficient in terms of both staff and equipment. In this area, preparations
are at an early stage.

Good progress
was made on civil protection in the form of accession to the EU
civil protection mechanism and participation in the IPA cooperation project on
civil protection.

Little progress
was made in the area of climate change. A comprehensive climate strategy
is still to be developed. Climate considerations are being increasingly
integrated in energy policy, but substantial efforts are required in order to
fully integrate climate change into other sectoral policies and strategies. The
country regularly associated itself with EU positions in the international
context. While having previously associated itself also with the Copenhagen
Accord, the country did not yet put forward a mitigation commitment by 2020.
The country should consider taking mitigation commitments consistent with those
of the EU and its Member States for the purpose of the post-2020 climate
agreement to be reached by 2015.

The country
took initial steps to identify stationary installations for the purpose of
future implementation of an emissions trading system. The national management
plan for the phase-out of hydrochlorofluorocarbons (HCFCs) was adopted in
November 2011. Significant efforts are required to strengthen the country’s
monitoring, reporting, and verification capacities.

The country
participated regularly in the climate work under the Regional Environmental
Network for Accession (RENA) and a high-level event on climate cooperation was
organised under the Regional Environmental network for Accession (RENA).
Initiatives to raise awareness and promote cooperation between stakeholders
were launched, but efforts should be intensified. In this area, preparations
are at an early stage.

The administrative
capacity for implementing and enforcing environmental and climate change
legislation remains largely insufficient at both national and local levels.
Coordination between administrative bodies responsible for environment-related
issues is not yet effective. Environmental protection and climate change
requirements are still not integrated well into policy-making and policy
implementation. Involvement of stakeholders in decision-making has improved,
but is still not sufficient. The environmental monitoring and information
system needs further development. Investments in the sector continue to be very
low.

Conclusion

Overall,
limited progress was made in the environment and climate change chapter.
Further progress was made on transposing the acquis into national
legislation, in particular on waste management, air quality and chemicals.
Little progress was made towards alignment with the climate change acquis.
Significant efforts are needed in order to implement the national legislation,
especially on water management, industrial pollution control, nature protection
and climate change. Considerable efforts are required on awareness-raising,
setting a more strategic approach for the country, aligning with and implanting
EU climate acquis, as well as strengthening administrative capacity.
Administrative capacity at both central and local levels needs to be
strengthened. Investments need to be increased, especially in the waste and
water sectors. Overall, preparations in the field of the environment are
moderately advanced while in the field of climate change remain at an early
stage.

4.28.
Chapter 28: Consumer and health protection

Some progress can be reported in consumer
protection. As regards horizontal aspects, the regulatory framework
and the enforcement records have improved. The Organisation of Consumers has
continued organising awareness raising events, education campaigns and
providing advice to consumers, including in rural areas. Capacity-building
events have been organised for professionals from market inspectorates, consumer
organisations and relevant ministries. However, the financial support granted
to the consumers’ association remains insufficient. The administrative capacity
of the consumer protection department within the Ministry of Economic Affairs
needs to be increased.

Some progress has been noted on product
safety-related issues. Amendments to the rulebook on the safety of
childrens’ toys have been adopted. The enforcement record of the consumer
protection legislation has further improved. Market inspectorates have been
increasingly dealing with consumer complaints, decreasing the workload of
consumer organisations. Despite some improvement, market surveillance does not
yet provide for fully effective and transparent protection for consumers. The
administrative capacity of the coordinating body needs to be substantially
augmented.

Some progress can be reported with regard
to non-safety-related issues. The new law on consumer protection for
agreements for consumer credits entered into force and implementing regulation
were adopted with a view to alignment with the acquis. The law provides
for more information and efficient legal protection for consumers when
concluding credit agreements. Preparations in the area of consumer protection
are advanced.

Some progress has
been achieved in the area of public health. Regarding horizontal
aspects, a new law on healthcare was adopted regulating health professions
and the system of accreditation of health care institutions. It also
re-organises network of health facilities on geographical basis. An integrated
IT system for health is being implemented including delivery of equipment. The
preparations for introducing an e-health card system continued. The overall
budget allocated to the health programme has doubled compared to 2011.
Cooperation with the European Centre for Disease Prevention and Control (ECDC),
the World Health Organisation (WHO) and the Global Fund (GF) remains very good.
Preparations in this area are on track.

In the area of tobacco control, some
progress can be reported. Enforcement of the law on protection against smoking
remains at a satisfactory level and has been further reinforced with the
introduction of heavier sanctions in case of repeated violations of the law.
The labour and market inspectorate and the state sanitary and health
inspectorate have performed joint controls in the field. Counselling services
to help people quit smoking have been provided.

Limited progress has been made in the fight
against communicable diseases. Training has been provided to health
professionals and inspectors on implementation and control of immunisation as
well as other issues related to control of communicable diseases. The national
strategy for containment of antimicrobial resistance 2012-2016 was adopted and
activities promoting awareness raisings on the responsible use of antibiotics
were carried out. The strategy for fighting HIV/AIDS 2012-2016 and the national
strategy on immunisation 2011-2020 have not been adopted. Preparations in this
area are on-going.

There has been little progress in the area
of blood. The institutional capacity of the national integrated blood
transfusion system needs further strengthening. IPA 2009 assistance has been
earmarked for this purpose. In the area of tissues, cells and organs, an
integrated transplantation system is being developed. Training for health
professionals working in this field has been provided through TAIEX.
Implementing regulations need to be adopted to complete the regulatory
framework in the area. Preparations in this area are on-going.

Limited progress can be reported in the
field of mental health. The annual programme on healthcare for people
with mental disabilities was adopted. Some of the mental health institutions
underwent refurbishment. The facilities remain however understaffed and without
adequate financial resources. The budget of the annual programme is
insufficient. No progress can be reported on implementation of the action plan
on mental health that aims at creating community-based mental healthcare as an
alternative to institutions. Sustainability of the existing community mental
health centres is a serious concern. Preparations in this area are at an early
stage.

There was some
progress in the field of drug abuse prevention. An evaluation of the
national strategy regarding illicit drugs until 2012 has commenced. Some
progress has been made in capacity-building to address dependence on alcohol
and illicit drugs, to provide rehabilitation and family support, and to develop
substitution treatment.

There has been
little progress on addressing health inequalities. Within the Decade of
Roma Inclusion 2005-2015, sixteen Roma health mediators started providing
health counselling to Roma people.

Some progress
has been made in the area of reducing alcohol-related harm, where the
introduction of a minimum age of 18 years for purchasing alcohol, and a ban on
alcohol sale in night hours contributed to reduced occurrence of alcohol
poisoning in all age groups.

There has been
little progress in addressing health inequalities. Within the Decade of
Roma Inclusion 2005-2015, sixteen Roma health mediators started providing
health counselling to Roma people.

Some progress
has been made in cancer screening. The government launched a yearly
programme for early detection of malignant diseases; including regular cancer
screenings. The cancer registry remains however only partly operational.
Awareness raising activities on cancer do not receive sufficient funding.

The yearly
national programme for treatment of rare diseases has been adopted and
its budget increased. However, the budget is still insufficient to ensure full
implementation. Preparations in these areas are ongoing.

Conclusion

There has been
some progress in the area of consumer and health protection. Further progress
in this area is undermined by the limited financial resources and weak
operational structures, particularly in the field of consumer protection.
Overall, preparations in this area are moderately advanced.

4.29.
Chapter 29: Customs union

Some progress was made on customs
legislation. The 2012 customs tariff was adopted in line with the latest
changes in the EU Combined Nomenclature. New implementing provisions were
introduced on risk management, including electronic risk management and
exchange of information, use of summary customs declarations, risk analysis,
the procedure for issuing and revoking authorisations for the simplified
customs procedure, and exchange of information between customs authorities
using IT and computer networks. Preparations in this area are advanced.

Good progress
was made on administrative and operational capacity. Cooperation with
the business community intensified and exchange of information with the customs
administrations of neighbouring countries continued. Professional standards and
internal control measures were implemented systematically with the aim of
preventing and fighting corruption among customs officers. Operational capacity
for customs controls was further enhanced. Further progress was made with
developing the risk management system at border crossings, in the form of more
comprehensive application of risk analysis. However, sustainable financial
resources for operation and maintenance of customs control equipment need to be
secured. An Information and Communication Technology (ICT) development strategy
and a public relations strategy were adopted for 2012-2014. The national plan
for implementing the New Computerised Transit System (NCTS) was regularly
updated. A new transit application, fully compatible with the NCTS, was
developed and the necessary implementing capacity was put in place. The single
window system for issuing authorisations was further upgraded. The customs
administration started developing a new Customs Declaration Processing System.
Further development of staff’s project management and quality assurance
capacity is necessary in order to minimise the risks associated with parallel
implementation of a number of IT development projects and to improve project
performance in general. Preparations in this area are on track.

Conclusion

There was
progress in the area of customs union, in particular on administrative and
operational capacity. Inter-agency cooperation, the fight against corruption in
the customs administration and the capacity to tackle cross-border crime
continued to improve. Preparations in the area of customs union are well on
track.

4.30.
Chapter 30: External relations

Progress was
made in the area of the common commercial policy. The former Yugoslav
Republic of Macedonia continued gradually to reduce customs duties in 2012, in
line with its WTO obligations. The country
also ratified the regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin, which will enable it to participate in the system of diagonal cumulation of origin. The country participates in the work of the
Central European Free Trade Agreement (CEFTA) bodies and continued to
coordinate closely with the European Commission and to align with the policies
and positions of the EU in international trade negotiations. A new list of dual-use goods and technologies was adopted and is
being implemented, thus replacing the previous one from 2008. It transposes the
list of dual-use goods and technologies contained in the relevant Council
Regulation. Preparations in the area of the common commercial policy are
moderately advanced.

As regards bilateral
agreements with third countries, the country ratified investment protection
agreements with Lithuania and Qatar. The number of ratified bilateral
investment protection agreements rose to 37, of which 32 are in force and 17
are with EU Member States.

Some progress
can be reported in the areas of development policy and humanitarian
aid. The Ministry of Foreign Affairs coordinated the country’s humanitarian
aid to Turkey in the wake of the Van earthquake in 2011. The country became a
member of the European Union’s civil protection mechanism, which enables it to
participate in the European disaster response system. Preparations in both
areas are at an early stage.

Conclusion

Some progress
was made in the area of external relations, notably as regards the common
commercial policy. However, the country’s institutional capacity is still not
sufficient for it to participate fully in EU commercial, development and
humanitarian policies. Preparations in the area of external relations are
moderately advanced.

4.31.
Chapter 31: Foreign, security and defence policy

The regular political
dialogue between the EU and the former Yugoslav Republic of Macedonia
covers foreign policy issues on an ongoing basis. (Concerning relations with
other enlargement countries and Member States, see Political criteria,
section 2.3 – Regional issues and international obligations.)

As regards the common
foreign and security policy (CFSP), during the reporting period the country aligned itself, when invited, with all EU declarations and Council decisions. (As
regards the International Criminal Court, see Political criteria, section 2.3 — Regional issues and international
obligations.)

With regard to
sanctions and restrictive measures, the country aligned itself with the
restrictive measures introduced
by Council decisions. Implementation of restrictive measures continued during
the reporting period. The
coordination body for monitoring implementation of international restrictive
measures, which was recently established under the relevant law, met regularly. The register of international restrictive
measures was established and is kept within the Ministry of Foreign Affairs,
with sub-registers at the competent institutions.

No particular
developments can be reported concerning conflict prevention.

With regard to non-proliferation, the country has begun to participate
in the Wassenaar Arrangement on non-Member States’
outreach activities. The Ministry of Interior
eradicated its stockpile of weapons and confiscated weapons were destroyed.

The country
continued to engage actively in cooperation with international organisations
(UN, OSCE, Council of Europe, etc.).

With regard to security measures (classified
information), draft texts of bilateral
agreements with Italy and Serbia on exchanges and
protection of security-classified information were agreed. The agreement with Germany was signed.

As regards the common
security and defence policy (CSDP), the country maintained its
ongoing commitment to participate in civil and military crisis management
operations. Currently, the country has a total of 171
personnel deployed in the ISAF mission in Afghanistan,
including eight officers at the Afghan national army
school for military police training in Kabul. The country continued to take part in the EUFOR Althea mission in
Bosnia and Herzegovina, with an 11-member medical team at Camp Butmir and an assistant legal adviser for
gender issues. It also continued
to participate in the UN-led peacekeeping/UNIFIL mission in Lebanon by
providing a staff officer in
the joint operation centre in Nagura. As part of its
contribution to the EU battlegroup for the second half of 2012, the army’s general staff is participating in related
training, including preparations for the European Endeavour 2012 exercise.

Conclusion

The country has maintained its high level
of alignment with EU declarations and Council decisions and has continued to
participate in civil and military crisis management operations. Overall, the
preparations in the area of foreign, security and defence policy are well
advanced.

4.32.
Chapter 32: Financial control

There was little progress in the area of public
internal financial control (PIFC). Committees for financial management and
control (FMC) and for internal audit were established. However, the medium term
fiscal strategy for 2013-2015 which set out the basic parameters of the budget
was not adopted, as required by the Organic Budget Law. An updated PIFC policy
paper for 2012-2014 and its action plan and Law on Financial Inspection are
lacking. The PIFC Law and its implementing legislation are being implemented
with delays. The heads of institutions have yet to adopt managerial
accountability and to authorise the delegation of responsibilities accordingly.
Managerial accountability is an essential prerequisite for development of FMC
and internal audit as tools for improving public management. Preparations in
this field are at an early stage.

Some progress can be reported on
external audit. The State Audit Office (SAO) is implementing a strategic
development plan for 2010-2014, which was updated in 2012. In 2011, the SAO
fully implemented its annual work programme with all types of audits. Since the
amendment of the Law on Financing of Political Parties in October 2011, the SAO
has been carrying out audits on all finances of all political parties,
regardless of the source. The IPA audit authority has been formally separated
from the SAO with the creation of an independent budget line in June 2012. The
SAO’s functional independence still needs to be safeguarded constitutionally.
Formal mechanisms for cooperation between the SAO and parliament remain to be
established, especially in relation to the follow-up of audit reports.
Preparations are progressing.

There was little progress in protection
of the EU’s financial interests. The Anti-fraud Coordination
Service (AFCOS) prepared a national strategy for fraud prevention to protect
the financial interests of the European Union covering the period 2012-2014.
However, the administrative capacity of the AFCOS needs to be further enhanced,
along with operational cooperation between the AFCOS and its partners,
including OLAF. Preparations are at an early stage. (See Chapter 22 –
Regional policy and coordination of structural instruments – for progress on
audit of EU funds.)

Good progress can be reported on protection
of the euro against counterfeiting. The Memorandum for Cooperation between
the Ministry of the Interior, the Financial Police, the Central Bank and the
Customs Administration, which regulates their coordination and their joint
efforts to protect money against counterfeiting, was adopted and is being
implemented. The central office for preventing money counterfeiting cooperates
and participates in joint activities with international counterparts. An
electronic database on counterfeit money is in place and the rulebook on use of
the database is prepared. Preparations are on track.

Conclusion

Some progress was made in this chapter,
notably in the areas of external audit and protection of the euro against
counterfeiting. Substantial efforts are still required, especially on
implementation of PIFC law, on constitutional anchorage of the state audit
institution and on increasing administrative capacity for effective protection
of the EU’s financial interests. Overall, preparations in this chapter are at
an early stage.

4.33.
Chapter 33: Financial and budgetary provisions

There have been
no major developments as regards traditional own resources, VAT
resource and GNI resource. For progress on the underlying policy
areas, see Chapters 16 – Taxation, 18 – Statistics, 29 – Customs union and
32 – Financial control.

As regards administrative
infrastructure, institutions are in place in the underlying policy areas
that directly affect the own resources system. These will need to be further
strengthened for future correct calculation, collection, accounting, payment
and monitoring of own resources and for reporting to the EU on implementation
of the EU’s own resources rules. Appropriate coordination structures to steer
and streamline own resources pre-accession preparations and to establish
working procedures are to be set-up. Effective tools to fight against tax
evasion and fraud and to decrease the informal economy are to be further
developed.

Conclusion

There has been
little progress under this chapter. The institutions and administrative
capacity for correct calculation, forecasting, collection, accounting, payment,
monitoring and reporting of own resources will need to be developed in due
course. Overall, preparations are at an early stage.

Statistical Annex

STATISTICAL DATA The former Yugoslav Republic of Macedonia || || || || || || || ||

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

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

Population (thousand) || || 2 031 || 2 042 || 2 045 || 2 049 || 2 053 || 2 057

Total area of the country (km²) || || 25 713 || 25 713 || 25 713 || 25 713 || 25 713 || 25 713

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

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

Gross domestic product (GDP) (million national currency) || || 233 840 || 364 989 || 411 728 || 410 734 || 434 112 || 463 393f

GDP (million euro) || || 3 839 || 5 965 || 6 720 || 6 703 || 7 057 || 7 531f

GDP (euro per capita) || 1) || 1 890 || 2 921 || 3 286 || 3 272 || 3 438 || 3 661fe

GDP (in Purchasing Power Standards (PPS) per capita) || || 4 972 || 7 723 || 8 414 || 8 500 || 8 873 || 9 248fe

GDP per capita in PPS (EU-27 = 100) || || 25 || 31 || 34 || 36 || 36 || :

Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) || || -4.5 || 6.1 || 5.0 || -0.9 || 2.9 || 3.1f

Employment growth (national accounts, % change on previous year) || || -1.7 || 4.4 || 6.2 || 2.5 || 1.5 || :

Labour productivity growth: GDP growth per person employed (% change on previous year) || 2) || -2.9 || 1.7 || -1.1 || -3.4 || 1.4 || :

Real unit labour cost growth (national accounts, % change on previous year) || || -0.8 || -8.8 || -2.0 || 9.9 || 1.8 || :

Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100) || || 46.5 || 56.7 || 58.5 || 60.2 || 58.3 || :

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

Agriculture and fisheries || 3) || 11.8 || 10.6 || 11.6 || 11.1 || 11.5 || :

Industry || 3) || 26.1 || 24.3 || 24.1 || 21.8 || 21.5 || :

Construction || 3) || 6.0 || 6.6 || 5.7 || 6.0 || 6.3 || :

Services || 3) || 56.1 || 58.5 || 58.7 || 61.1 || 60.8 || :

Final consumption expenditure, as a share of GDP (%) || || 94.8 || 93.8 || 98.5 || 95.7 || 93.2 || 92.4f

Gross fixed capital formation, as a share of GDP (%) || || 14.8 || 19.6 || 21.0 || 19.9 || 19.1 || :

Changes in inventories, as a share of GDP (%) || || 4.2 || 5.0 || 5.8 || 6.3 || 6.4 || :

Exports of goods and services, relative to GDP (%) || || 42.7 || 52.4 || 50.9 || 39.2 || 46.6 || 54.4f

Imports of goods and services, relative to GDP (%) || || 56.6 || 70.8 || 76.2 || 61.0 || 65.3 || 73.8f

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

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

Industrial production volume index (2005=100) || 4) || 96.4 || 110.0 || 115.6 || 105.6 || 100.5 || 103.8

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

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

Annual average inflation rate (CPI, % change on previous year) || || 5.5 || 2.3 || 8.3 || -0.8 || 1.6 || 3.9

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

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

Balance of payments: current account total (million euro) || 5) || -263 || -421 || -862 || -457 || -150 || -201

Balance of payments current account: trade balance (million euro) || 5) || -588 || -1 181 || -1 763 || -1 560 || -1 468 || -1 682

Balance of payments current account: net services (million euro) || 5) || -21 || 28 || 9 || 16 || 49 || 97

Balance of payments current account: net income (million euro) || 5) || -30 || -281 || -94 || -47 || -99 || -109

Balance of payments current account: net current transfers (million euro) || 5) || 377 || 1 012 || 985 || 1 133 || 1 367 || 1 493

     of which government transfers (million euro) || 5) || 55 || 24 || 49 || 35 || 32 || 76

Net foreign direct investment (FDI) (million euro) || || 498 || 507 || 409 || 137 || 158 || 302

Foreign direct investment (FDI) abroad (million euro) || 5) || 1 || -1 || -9 || 8 || 1 || 2

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

Foreign direct investment (FDI) in the reporting economy (million euro) || 5) || 499 || 506 || 400 || 145 || 159 || 304

      of which FDI of EU-27 countries in the reporting economy (million euro) || 6) || : || 355 || 264 || 131 || 114 || 168

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

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

General government deficit/surplus, relative to GDP (%) || || : || 0.6 || -0.9 || -2.6 || -2.4 || -2.6

General government debt relative to GDP (%) || || 48.8 || 24.0 || 20.6 || 23.8 || 24.2 || 28.6

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

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

Gross foreign debt of the whole economy, relative to GDP (%) || 7) || 44.2 || 47.6 || 49.2 || 56.4 || 58.6 || 64.7f

Gross foreign debt of the whole economy, relative to total exports (%) || 7) || 108.4 || 92.6 || 97.6 || 148.2 || 129.7 || 122.5

Money supply: M1 (banknotes, coins, overnight deposits, million euro) || 8) || 415 || 772 || 881 || 854 || 933 || 997

Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || 8) || 1 145 || 2 728 || 2 913 || 3 040 || 3 277 || 3 523

Money supply: M3 (M2 plus marketable instruments, million euro) || 8) || 1 267 || 2 872 || 3 184 || 3 388 || 3 781 || 4 147

Total credit by monetary financial institutions to residents (consolidated) (million euro) || 9) || 620 || 2 093 || 2 803 || 2 913 || 3 102 || 3 367

Interest rates: day-to-day money rate, per annum (%) || 10) || 11.7 || 3.6 || 4.1 || 6.0 || 3.8 || 2.2

Lending interest rate (one year), per annum (%) || 11) || 23.0 || 7.5 || 8.5 || 10.0 || 5.5 || 5.5

Deposit interest rate (one year), per annum (%) || || : || : || : || : || : || :

euro exchange rates: average of period - 1 euro = … national currency || || 60.913 || 61.184 || 61.265 || 61.273 || 61.515 || 61.529

Effective exchange rate index (2005=100) || 12) || 88.6 || 99.8 || 100.8 || 106.8 || 106.3 || 107.2

Value of reserve assets (including gold) (million euro) || 11) || 844 || 1 524 || 1 495 || 1 598 || 1 715 || 2 069

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

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

Value of imports: all goods, all partners (million euro) || || 1 893 || 3 834 || 4 664 || 3 637 || 4 137 || 5 038

Value of exports: all goods, all partners (million euro) || || 1 293 || 2 477 || 2 698 || 1 937 || 2 535 || 3 198

Trade balance: all goods, all partners (million euro) || || -600 || -1 356 || -1 967 || -1 700 || -1 602 || -1 841

Terms of trade (export price index / import price index) || || 97.1 || 109.3 || 93.1 || 98.3 || 101.5 || 92.7

Share of exports to EU-27 countries in value of total exports (%) || || 53.5 || 65.3 || 59.5 || 56.4 || 61.8 || 60.6

Share of imports from EU-27 countries in value of total imports (%) || || 59.5 || 49.8 || 48.2 || 52.2 || 53.2 || 54.4

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

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

Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) || || 5.0 || 1.5 || 1.9 || 2.3 || 2.5 || 1.6

Infant mortality rate: deaths of children under one year of age per 1000 live births || || 11.9 || 10.3 || 9.7 || 11.7 || 7.6 || 7.6

Life expectancy at birth: male (years) || || 70.8 || 71.9 || 72.1 || 72.5 || 72.7 || :

Life expectancy at birth: female (years) || || 75.6 || 76.1 || 76.3 || 76.7 || 77.0 || :

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

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

Economic activity rate (20-64): share of population aged 20-64 that is economically active (%) || || : || 68.5 || 69.4 || 70.1 || 70.4 || 70.1

\* Employment rate (20-64): share of population aged 20-64 in employment (%) || || : || 45.0 || 46.3 || 47.9 || 48.1 || 48.4

Employment rate male (20-64) (%) || || : || 54.0 || 56.2 || 58.4 || 58.4 || 57.8

Employment rate female (20-64) (%) || || : || 35.8 || 36.2 || 37.1 || 37.5 || 38.8

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) || || 27.7 || 28.8 || 31.7 || 34.6 || 34.2 || 35.4

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

Agriculture || 13) || 25.0e || 17.4u || 18.9u || 18.5be || 19.1e || 18.1u

Industry || 13) || 29.3e || 25.2u || 25.2u || 23.3be || 22.6e || 24.1u

Construction || 13) || 6.0e || 6.5u || 6.5u || 6.5be || 6.4e || 6.2u

Services || 13) || 39.8e || 50.8u || 49.5u || 51.7be || 51.9e || 51.6u

Unemployment rate: share of labour force that is unemployed (%) || || 30.5 || 34.9 || 33.8 || 32.2 || 32.0 || 31.4

Share of male labour force that is unemployed (%) || || 29.5 || 34.5 || 33.5 || 31.8 || 31.9 || 31.8

Share of female labour force that is unemployed (%) || || 32.0 || 35.5 || 34.2 || 32.8 || 32.2 || 30.8

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) || || 56.1 || 57.7 || 56.4 || 55.1 || 53.7 || 55.3

Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) || || 26.5 || 29.7 || 28.7 || 26.3 || 26.7 || 25.9

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

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

Average nominal monthly wages and salaries (national currency) || || 10 552.0 || 14 584.0 || 16 096.0 || 19 957.0 || 20 553.0 || 20 847.0

Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) (2000=100) || 14) || 98.1 || 124.5 || 126.9 || 158.7 || 160.8 || 157.0

\* Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in further education or training (%) || || : || 19.9 || 19.6 || 16.2 || 15.5 || 13.5

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

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

Number of passenger cars per 1000 population || || 152.1 || 121.9 || 128.6 || 137.7 || 151.0 || 152.1

Number of subscriptions to cellular mobile telephone services per 1000 population || || 109.0 || 884.2 || 1 223.4 || 948.4 || 1 098.2 || 1 104.9e

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

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

Density of railway network (lines in operation, per 1000 km²) || || 36.0 || 36.0 || 36.0 || 36.0 || 36.0 || 36.0

Length of motorways (km) || || 145 || 221 || 237 || 251 || 251 || 259

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

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

Spending on human resources (public expenditure on education in % of GDP) || || 3.6 || 3.1 || 3.3 || 3.6 || 3.7 || :

\* Gross domestic expenditure on R&D in % of GDP || || 0.30 || 0.17 || 0.23 || 0.20 || 0.19 || :

Percentage of households who have Internet access at home (%) || || : || 16.5e || 29.0e || 42.0e || 46.0 || 55.0

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

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

\* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) || || 92.0 || : || : || : || : || :

Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) || || 720.4 || 646.5 || 613.9 || 575.7 || 580.4p || :

Electricity generated from renewable sources in % of gross electricity consumption || || 9.2 || 11.2 || 9.3 || 15.4 || 28.0p || :

Road share of inland freight transport (% of tonne-km) || 15) || 87.0b || 88.4 || 84.3 || 89.0 || 89.0 || :

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

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

Primary production of all energy products (thousand TOE) || || 1 642 || 1 504 || 1 624 || 1 607 || 1 616p || :

Primary production of crude oil (thousand TOE) || || 0 || 0 || 0 || 0 || 0 || :

Primary production of hard coal and lignite (thousand TOE) || || 1 419 || 1 254 || 1 378 || 1 293 || 1 194p || :

Primary production of natural gas (thousand TOE) || || 0 || 0 || 0 || 0 || 0 || :

Net imports of all energy products (thousand TOE) || || 1 011 || 1 461 || 1 404 || 1 273 || 1 274p || :

Gross inland energy consumption (thousand TOE) || 16) || 2 677 || 3 033 || 3 023 || 2 810 || 2 882p || :

Electricity generation (thousand GWh) || || 6.4 || 6.5 || 6.3 || 6.8 || 7.3p || :

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

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

Agricultural production volume index of goods and services (producer prices, previous year=100) || || 90.2 || 98.1 || 104.5 || 102.9 || 107.7 || 96.8

Total utilised agricultural area (thousand hectare) || || 1 244 || 1 077 || 1 064 || 1 014 || 1 121 || 1 120

Livestock: cattle (thousand heads, end of period) || || 265 || 254 || 254 || 253 || 260 || 265

Livestock: pigs (thousand heads, end of period) || || 189 || 255 || 247 || 194 || 191 || 197

Livestock: sheep and goats (thousand heads, end of period) || || 1 286 || 944 || 950 || 849 || 854 || 839

Production and utilisation of milk on the farm (total whole milk, thousand tonnes) || || 201 || 374 || 368 || 343 || 347 || 376

Crop production: cereals (including rice) (thousand tonnes, harvested production) || || 474 || 469 || 613 || 606 || 539 || 552

Crop production: sugar beet (thousand tonnes, harvested production) || || 38 || 8 || 0 || 0 || 0 || 0

Crop production: vegetables (thousand tonnes, harvested production) || || 667 || 698 || 728 || 804 || 887 || 845

: =
not available

- =
not applicable

p =
provisional

e =
estimated value

b =
break in series

u =
unreliable or uncertain data

f = forecast

\* =
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)            Estimated
using the GDP in euro and population as of 1st January.

2)            GDP
in constant prices of the previous year.

3)            2003
- 2008, data according to Nace Rev. 1.1.

4)            Data
are recalculated according to NACE Rev.2 for the period from 2005 to 2010.

5)            2001
- 2002 - Values in Euro are calculated using the annual average exchange rate.
From 2003 onwards, the values in Euro are calculated on the basis of the
current exchange rate.

6)            Data
on FDI flows by countries for 2011 are produced only for the categories Equity
capital and the Loans component of Other capital. Data for reinvested earnings
and the remaining components of FDI flows, based upon the Annual FDI Survey,
are available within t+270 days.

7)            2001
- 2003, external debt data are calculated on the old methodology, with partial
data coverage. Since 2004, Gross Foreign Debt Data are prepared according to
the External Debt Statistics Guide, with full data coverage.

8)            From
2003, data series for money supply are revised to include data for saving
houses

9)            From
2006, data cover bilateral transactions over night [2003] - Starting from 2003,
the category Total credits by MFIs is expanded with loans granted by saving
houses.

10)          2001
- 2006, end of year; until 2005 data cover transactions with all maturities
concluded on the Institutionalized Money Market; from 2006, data cover
bilateral transactions over night.

11)          End
of year.

12)          NEER
(nominal effective exchange rate).

13)          Data
are provided according to NACE Rev 1.1

14)          A
new concept of the gross income was implemented in 2009.

15)          Break
in series: 2004-2008 revised data (included transport for own account); 2005 -
2010 - Break in series: 2005-2010 revised data (included pipeline transport)

16)          2001
- 2009, to compute gross inland energy consumption the primary production, net
imports and stock change data were used.

[1]               The rapporteur for the former Yugoslav Republic of
Macedonia is Mr Richard Howitt.

[2]               Enlargement Strategy and Main Challenges 2012-2013,
COM(2012) 600.

\*               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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