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# 52011SC1203

**COMMISSION STAFF WORKING PAPER THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 2011 PROGRESS REPORT /\* SEC/2011/1203 final \*/**

  

TABLE OF CONTENTS

1........... Introduction.................................................................................................................... 3

1.1........ Preface........................................................................................................................... 3

1.2........ Context.......................................................................................................................... 3

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

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

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

2.2........ Human rights and the protection
of minorities................................................................. 15

2.3........ Regional issues and international
obligations................................................................... 22

3........... Economic criteria.......................................................................................................... 23

3.1........ The existence of a functioning
market economy.............................................................. 23

3.2........ The capacity to cope with
competitive pressure and market forces within the Union........ 28

4........... Ability to assume the
obligations of membership............................................................. 30

4.1........ Chapter 1: Free movement of goods............................................................................. 31

4.2........ Chapter 2: Freedom of movement
for workers.............................................................. 32

4.3........ Chapter 3: Right of establishment
and freedom to provide services................................. 33

4.4........ Chapter 4: Free movement of
capital............................................................................. 34

4.5........ Chapter 5: Public procurement...................................................................................... 35

4.6........ Chapter 6: Company law.............................................................................................. 36

4.7........ Chapter 7: Intellectual property
law............................................................................... 37

4.8........ Chapter 8: Competition policy....................................................................................... 38

4.9........ Chapter 9: Financial Services........................................................................................ 39

4.10...... Chapter 10: Information society
and media.................................................................... 41

4.11...... Chapter 11: Agriculture and rural
development.............................................................. 42

4.12...... Chapter 12: Food safety,
veterinary and phytosanitary policy......................................... 44

4.13...... Chapter 13: Fisheries.................................................................................................... 46

4.14...... Chapter 14: Transport policy........................................................................................ 47

4.15...... Chapter 15: Energy....................................................................................................... 48

4.16...... Chapter 16: Taxation.................................................................................................... 50

4.17...... Chapter 17: Economic and Monetary
policy.................................................................. 51

4.18...... Chapter 18: Statistics.................................................................................................... 52

4.19...... Chapter 19: Social policy and
employment.................................................................... 53

4.20...... Chapter 20: Enterprise and
industrial policy................................................................... 55

4.21...... Chapter 21: Trans European
Networks......................................................................... 56

4.22...... Chapter 22: Regional policy and
coordination of structural instruments........................... 56

4.23...... Chapter 23: Judiciary and
fundamental rights................................................................. 58

4.24...... Chapter 24: Justice, freedom and
security...................................................................... 65

4.25...... Chapter 25: Science and research................................................................................. 69

4.26...... Chapter 26: Education and culture................................................................................. 70

4.27...... Chapter 27: Environment.............................................................................................. 71

4.28...... Chapter 28: Consumer and health
protection................................................................. 74

4.29...... Chapter 29: Customs Union.......................................................................................... 75

4.30...... Chapter 30: External relations....................................................................................... 76

4.31...... Chapter 31: Foreign, Security and
Defence Policy......................................................... 77

4.32...... Chapter 32: Financial control........................................................................................ 78

4.33...... Chapter 33: Financial and
budgetary provisions............................................................. 79

Statistical Annex......................................................................................................................... 80

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 assume 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 2010 to September 2011. Progress is measured on
the basis of decisions taken, legislation adopted and measures implemented. As
a rule, legislation or measures which are 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. The Council adopted the
Accession Partnership for the country, including key priorities for reform, in
February 2008. In October 2009, the Commission recommended to the Council to
open negotiations with the country, as well as to move to the second phase of
SAA Implementation. These recommendations were reiterated in 2010. The Council
has not yet concluded its deliberations 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 country has
been implementing the commitments undertaken within the Stabilisation and
Association Agreement (SAA) with the EU, the key priority of the
Accession Partnership, including all the commitments provided for under
the first stage of implementation of Title V (Movement of workers, establishment,
supply of services, capital). The Commission's 2009 proposal on transition to
the second stage of the Association, pursuant to Article 5 of the SAA, has been
under consideration by the Council.

The SAA structures have continued to serve
as the basis for regular political and economic dialogue between the
country and the EU. Since October 2010, experts from both sides have met at
least once a year in seven sub-committees and a special group. Meetings of the
highest joint bodies, namely the Stabilisation and Association Committee and
the Stabilisation and Association Council, have been scheduled for October and
December 2011 respectively. Moreover, the multilateral
economic dialogue between the Commission, EU Member States and Candidate
Countries in the context of the pre-accession fiscal surveillance continued,
including a meeting at Ministerial level in May in Brussels. These meetings focused on the main challenges posed by the
Copenhagen political and economic criteria and reviewed the progress made
towards fulfilling the Accession Partnership priorities.

The EU provided
guidance to the authorities on reform priorities through the Accession
Partnership of February 2008. Progress on these reform priorities is
encouraged and monitored through the bodies set up under the SAA. Based
on the Accession Partnership and the 2010 Progress Report, the
government adopted its annual revision of the national programme for the
adoption of the acquis in December 2010.Visa liberalisation for
citizens travelling to the Schengen area has been in force since 19 December
2009. The rules for visa-free travel have been respected by the vast majority
of travellers. To ensure the continued implementation of the commitments, a
post visa liberalisation monitoring mechanism was established in view of
increased numbers of asylum seekers from the region. The Commission presented
its first monitoring report to the European Parliament and the Council in June
2011. An agreement on readmission with the European Union has been in force
since January 2008.

Financial
assistance is provided through the
Instrument for Pre-Accession Assistance (IPA). In 2011, management of IPA was
decentralised to the country authorities. The Multi-Annual Indicative Planning
Document for 2011-13 provides for a total EU contribution of € 305 million and
adopts a sector-based approach. In addition, the country continues to benefit
from various regional and horizontal programmes. Cross border cooperation is
also used to promote capacity building and dialogue between the local and
regional authorities of neighbouring countries, namely Bulgaria, Greece,
Albania and Kosovo[3].

Since 2007 the
Commission has committed an amount of over €288 million for projects to be
implemented in the country, including 92 million in 2010. The EU financial
assistance portfolio managed by the EU Delegation in Skopje amounts to
€ 115 million. By June 2011, 85% of this total had been contracted and
more than 60% disbursed. This assistance focuses on strengthening
administrative capacities with particular emphasis on the rule of law and
public administration sectors, tax and customs reforms, local infrastructure
improvements for socio-economic economic development, and the ability to assume
the obligations of EU membership. Furthermore, support is given to the
implementation of the National Strategy and an Action Plan of the Decade of
Roma Inclusion and the Ohrid Framework Agreement. In the context of
pre-accession, the EU has already transferred the management of four out of
five components of IPA to the national authorities under the Decentralised
Implementation System (DIS). Further fine tuning of the necessary management
and control systems is still needed in order to ensure higher quality standards
when carrying out this responsibility.

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. Aid
objectives include the wider involvement of civil society in decision making
and an increased capacity of independent civil society organisations. The
national programmes currently being implemented provide significant support to
improve the development and sustainability of civil society organisations and
further capacity building of the government unit for NGO cooperation. Under
DIS, civil society can now start to be involved in the monitoring of the
overall implementation of EU aid.

The former Yugoslav Republic of Macedonia
participates in the following EU Programmes: 'Entrepreneurship and
Innovation programme' (EIP) of the 'Competitiveness and Innovation Framework
Programme', the 'Seventh Research Framework Programme', 'Progress', 'Culture', 'Europe
for Citizens', 'Fiscalis 2013' and 'Customs 2013'.

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

Dialogue between the political forces,
which is a key priority of the accession partnership, was temporarily
interrupted by a parliamentary boycott during the course of the year. This was
brought to an end by early elections leading to a new parliament.

The Parliament worked until January 2011 on
the basis of dialogue between political parties. Several key laws related to
the EU acquis were enacted.

The Committee on EU Affairs and the
National Council for EU Integration, which is chaired by the opposition,
continued to hold regular sessions. They discussed, in particular, the 2010
Progress Report, the related Action Plan and the annual revision of the
National Programme for the adoption of the acquis (NPAA), as well as its
implementation. The Committee examined all draft laws under the National Plan
for the Adoption of the Acquis.

Efforts to strengthen the institutional
capacity of the parliament continued, in line with the 2009 Law on Parliament.
Five further public oversight hearings were successfully held and the
Government implemented their conclusions. The operational budget of the
parliament was increased by 40%. This allowed thirty permanent posts to be
created within the Parliament service, as well as the renovation of the
building.

The amendments to the rules of procedure
adopted in 2010, which aim to strengthen parliamentary cooperation, were
implemented. The right of the opposition to table issues on the Parliament's
agenda was confirmed in practice. All seven agenda items proposed by the
opposition were discussed in plenary.

The implementation of the Law on languages
has moved forward. Draft laws and other motions in the parliament are
translated into Albanian. The use of Albanian in oral procedure continues in
committees and in hearings, including by the chair, as well as in the plenary.
The parliamentary TV channel is also interpreted into Albanian. The amendments
adopted in July provide that all officials elected or appointed by the
Parliament may use Albanian when addressing the parliament and its bodies.

The improved responsiveness of all members of the
parliamentary Committee on inter-ethnic relations enabled three sessions to be
held before the Parliament was dissolved.

However, at the
end of January the main opposition party, the Social Democratic Union of
Macedonia (SDSM), led a boycott of the parliament by a majority of
opposition parties. SDSM stated it was protesting against undemocratic rule.
This included action by the authorities, on charges of tax evasion, against a
television channel known to be critical of the government. The boycott
continued until the early elections in June. Convening several meetings of
political party leaders, the President of the Republic made efforts to mediate
a resolution, but was not successful.

The ruling Internal Macedonian
Revolutionary Organisation (VMRO-DPMNE) and Democratic Union for
Integration (DUI) coalition, which had a two-thirds and a 'Badinter
majority'[4], were able to continue to
enact laws despite the boycott. Amendments to the Constitution, the Electoral
Code and the Law on Lustration were among over 200 acts enacted without the
opposition.

The Parliamentary Institute, whose function
is to enable all parties to have greater access to information and analysis, is
still not operational and its staff have yet to be recruited. This is essential
in order to allow Members of Parliament to properly fulfil their role.

Parliamentary
oversight of intelligence and counter-intelligence services remains weak. In
2010, only one session of the parliamentary Committee was convened. There is
insufficient cooperation between the parliamentary Committee and the Bureau for
Security and Counterintelligence.

Implementation of the Law on Lobbying
continues to create selective access by interest groups to policy making.
Lobbying can only be undertaken at the invitation of the relevant legislative
body, and is permitted for civil associations but not for foundations. So far
no lobbyist has registered.

The committee of inquiry on an incident in
the Parliament in July 2010 did not complete its work before the dissolution of
the parliament, and the responsibilities were not clarified. No practical steps
were undertaken to prevent future similar occurrences. A code of ethics for
Members of Parliament has not been established.

The parliament voted for its dissolution on
14 April, 34 months into its 4-year mandate, and early parliamentary elections
were called for 5 June. A cross party agreement was reached on a code of
conduct for the elections. The parliamentary elections resulted in the third
consecutive victory of the VMRO-DPMNE-led coalition (56 seats), followed by the
SDSM-led coalition (42), DUI (15), DPA (8) and NDP (2).

The finding of the OSCE/ODIHR election
observation mission was that the elections were competitive, transparent, and
well-administered throughout the country. On election day, the voters were able
to freely express their choice in a peaceful atmosphere from a diverse and
pluralistic choice of candidates. Freedom of expression, movement and assembly
was respected. The media provided extensive coverage of the campaign, enabling
voters to make an informed choice. The number of women who were heads of list
increased from six in 2008 to 15 in 2011. Out of 1679 candidates, 34% were
women. There was a high voter turnout of 63%. The political parties largely
endorsed the elections and SDSM was returned to the parliament. Few official
complaints were filed with State Election Commission. The five lawsuits with
the Administrative Court were all rejected.

However, gaps and ambiguities remain,
especially in relation to provisions for complaints, out of country voting and
use of administrative resources. ODIHR reported credible allegations of
insufficient separation between state and political party, and pressure on
civil servants. Political parties campaigned almost exclusively along ethnic
lines, reflecting the ethnic polarisation of society. The public broadcaster,
contrary to legal obligations and its public mandate, favoured the government
and strongly criticised the opposition in its coverage.

Some of the ODIHR recommendations from 2009
were addressed prior to the elections. In particular, the amended Electoral
Code provided that the Broadcasting Council could issue a rulebook on the
conduct of broadcasters; the campaign financing rules were tightened; the
counting process was improved. The Electoral Code was amended by a slim
majority and only two months before the election, which is not consistent with
best practice. Also, the recommendation for a thorough audit of the Voters'
List has not been implemented. This contains over 1.8 million voters for a
population of 2.05 million, and concerns remain that the list is inflated. Questions
remain about the arrangements for out-of-country voting.

The new Parliament, still under the
technical government, enacted in shortened procedure amendments to the Laws on
Use of Flags of Communities, Languages, Broadcasting Council, Judicial Council,
Council of Public Prosecutors and adopted an authentic interpretation of the
Law on Amnesty.

Overall, there has been progress in the conduct of elections. The elections
were competitive and well-administered throughout the
country. The government needs to implement fully the conclusions and
recommendations of the OSCE/ODIHR election observation mission. Some progress
has been made on the reform of the parliament. The implementation of the law on
languages and of the rulebook of procedure has moved forward, and the
operational budget has been increased. However, political dialogue needs to be
further strengthened in order that problems can be resolved through the
institutional framework. The boycott by the opposition hampered the functioning
of the parliament.

Government

The new
government coalition has actively taken forward the EU reform process and given
it new impetus. The early election had delayed the adoption of certain
measures. A revised 2011 National Programme for the Adoption of the Acquis
(NPAA) was adopted in December 2010. Nonetheless, the NPAA does not specify
deadlines, staffing requirements and budgetary implications.

The coalition partners enacted the
sensitive Law on the census in November 2010. Following the decision to hold
early elections, the coalition agreed to postpone the census from April to
October. Reaching agreement between coalition partners on the decision
concerning the ethnic composition of the census enumeration teams was also
postponed.

Coalition relations were challenged in
January by the construction of a church-shaped museum inside the Kale Fortress
in Skopje, in a historic and ethnically mixed area. Protests over the
construction led to an inter-ethnic clash.

The new
governing coalition was formed swiftly after the elections and was sworn in on
28 July. The Government Work programme 2011-15 maintains the same five
priorities as the previous government: increasing economic growth; integration
into the EU and NATO; fighting against corruption and economic crime; maintaining
good interethnic relations on the basis of the Ohrid Framework Agreement;
investment in education, science and a knowledge based society.

Decentralisation
of government - which is a basic principle of the Ohrid Framework Agreement -
continued. The action plans for implementing decentralisation were approved up
to 2013. An additional five municipalities (bringing the total to 79 out of 85)
entered the second and last phase of the fiscal decentralisation process,
enabling a more substantial transfer of competencies 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
3.7% in 2011.

The Law on management of state-owned land
was adopted and entered into force in July 2011. Capacity-building programmes
are being implemented to assist municipalities in the areas of property tax
administration, human resources and financial control. Financial affairs units
were established in three more municipalities; 52 municipalities established
internal audit units and in 46 municipalities an internal auditor is operating.
More than 1000 municipal civil servants have been trained, and progress was
made in implementing annual training programmes.

However, four of
the six municipalities which remain in phase 1 of the decentralisation process
have sizeable debts, and two lack financial management capacity. Additional
efforts are needed in order to prepare them for moving to phase 2. Blocked
accounts remain a problem for municipalities in both phases 1 and 2. Mechanisms
to address the significant disparities in delivery of public services are
limited, and rural and small municipalities are especially disadvantaged. Some
municipalities remain weak in the areas of monitoring or enforcing collection
of the property tax.

Progress in meeting the objectives of
decentralisation needs to be accelerated through the impetus of the Ministry of
Local Self Government (MoLSG). The Ministry of Finance also needs to strengthen
its capacity to develop policy on local government budget issues. The
inter-ministerial committee for monitoring the financing of municipalities
meets infrequently. There is a lack of transparency and coordination of central
funding for municipal projects, particularly for infrastructure projects.

Administrative bottlenecks continue to
impede the opening of new schools. Social care services are still operated
centrally by the Ministry of Labour and Social Policy and they have yet to be
decentralised. Exchange of data between the land registry, the civil registry,
the revenue office and the municipalities has yet to be strengthened within a
unified data-base system.

Significant
additional efforts are needed at central and local levels in order to
strengthen the administrative capacity of certain municipalities, particularly
in the areas of financial control, strategic planning, human resources
management and economic development. The State Audit Office reported numerous
shortcomings by the MoLSG in applying financial control standards and
procurement rules, as well as poor follow-up of previous recommendations.

Overall, the government coalition has overcome
difficulties and strengthened its internal cooperation. The new
government has given fresh impetus to the EU reform process. The
decentralisation process needs a stronger impetus. In particular, the financial
framework for local service delivery needs to be more transparent and
equitable.

Public administration

There was
progress as regards the framework for public administration, which is a key
priority of the Accession Partnership. The political responsibility for public
administration (PA) reforms remained with the High Committee on Public
Administration, led by the Prime Minister. A new recomposed Committee was
appointed in August. The Special Group on Public Administration Reform meets
regularly with the EU. The government adopted a new PA reform strategy for the
period 2010-2015, as well as a financial assessment and an action plan for its
implementation.

The managerial
and operational responsibility for the overall PA was transferred to the
Ministry of Information Society and Administration (MISA). The Civil Servants
Agency was transformed into an Administrative Agency (AA), while maintaining
oversight responsibilities. Overall, the new institutional set-up provides a
good starting point for driving the PA reforms forward. The budgetary, spatial,
and administrative capacity of the MISA is not sufficient, particularly as
regards administrative inspection.

The Law on
public servants entered into force in April 2011, and was further amended and
harmonised with the Law on civil servants. MISA adopted most of the relevant
implementing legislation on both the civil and public service. The Law on civil
servants was amended to introduce new elements in selection and promotion
rules. However, these amendments fall short of providing strategic solutions to
all the existing challenges. The legal framework in the area of civil servants
and public employees remains fragmented, allowing certain institutions to be
regulated differently, including in the area of salary-related provisions. Major
shortcomings remain, in particular regarding the rules on recruitment,
appraisal and promotion; appointment of senior managers; and termination of
employment. Further improvements to the key laws are necessary in order to
ensure that the principles of transparent, apolitical, merit-based recruitments
and promotions are embedded in the legal framework.

The Law on
general administrative procedures was amended to increase accountability by
streamlining administrative and appeal procedures, including the procedures for
the setting-up and functioning of second-instance appeal commissions. A State
second instance Commission for decision-making in administrative procedures and
labour relations procedures was established. In general, however, the amendments
to the Law have not rectified all its shortcomings. The law does not define the
right to an administrative appeal as a principle with clearly defined
exceptions. The principle of 'silence is consent' is subject to a complex
appeal procedure which undermines the application of the principle in practice.
To bring about a systemic change, a new, contemporary and well-structured law
would be necessary.

The registry of public servants foreseen by
the Law on public servants to bring together all data on staff-related needs,
requirements and procedures into one database, is not operational. The AA
started handling complaints by public servants as a second instance body.
While the administrative capacity of the human resources units in some
ministries was increased, a number of these units at local and central level,
on the other hand, remain understaffed. There is still insufficient capacity to
perform proper staff appraisals.

Although the
government took steps to address the excessive use of temporary staff, a number
of questions remain open. A large quantity of temporary positions were
converted into permanent positions in the reporting period, while many posts remain temporary; however despite
requests no official figures on the existing or transferred positions have been
made available by the authorities. A lack of consistency in applying
requirements regarding education or experience was observed in a number of
cases; some requirements appeared to be tailor-made for particular candidates.
Similarly, hiring of new temporary staff in many instances did not comply with
the procedures laid down by law. The accumulation of such examples raises
serious concerns that the principle of merit-based and apolitical recruitment
has not been satisfactorily followed.

The payroll system in the PA remained
fragmented, affecting the unity and mobility of the civil and public service.
The practice of paying ad hoc allowances to public servants for assuming
certain types of tasks pertaining to their job duties continued to lack
transparency and proper justification.

About 1,600
civil servants from the non-majority communities have been assigned to the
civil service since February 2011 to comply with the principle of equitable
representation. However, the trend of recruiting employees from these
communities on a quantitative basis without regard to the real needs of the
institutions continued. The practice shows an insufficient level of
co-ordination on equitable representation between MISA and the Secretariat for
implementation of the Ohrid Framework Agreement. The recruitment procedure
remains vulnerable to undue political influence.

MISA took
practical steps to improve the services offered to citizens. A 'one-stop-shop'
system for electronic exchange of documents among key institutions was
established. A new 'scoreboard' grading system for use by citizens was
introduced in selected institutions. The government adopted the Code of conduct
for cooperation with the civil society organisations. The knowledge and use of
the citizens' charter among the public remains rather tenuous.

Regarding
financial management, managerial accountability has yet to be linked to public
internal financial control. The reports of the State Audit Office continue to
highlight a number of shortcomings with regard to the application of internal
financial control standards, procurement rules and human resources policy. The
quality of strategic planning within central and local institutions is
insufficient, and is still confined to budgetary planning. The General
Secretariat of the government does not perform an effective administrative
governance role. Regulatory impact assessment is not applied systematically.

A High Administrative Court was established
to consider appeals (see also the section on 'judicial system').

The public bodies
carried out the recommendations of the Ombudsman in 80% of cases. The second
instance government commissions and Ministry of Interior remained the least
responsive bodies, followed by the Ministry of Finance and local
self-government units.

The Constitutional Court increased the
number of annulments of new legislation by 5% to nearly 30% of laws. This
raises concerns about the quality of legislative drafting by the central and
local administration.

The number of complaints received by the
National Commission for Protecting Access to Information rose by two thirds in
2010. More than half of the complaints were successful. However, the work of
the Commission was hindered by budget cuts and lack of co-operation by some
state administration bodies. Information related to public expenditure
continued to be only partially available to the public.

There was some progress on police reform with the entry
into force of the Act on Systematisation. It provides the basis for strengthening
the efficiency of police; however additional human resources are needed in
order to implement it. After conducting a performance evaluation process, a
merit-based career and appraisal system was introduced. At the same time, a large number of positions were filled without
publishing vacancies, which raised doubts about a transparent and merit-based
process.

Overall, progress
was made in the area of public administration reform in terms of policy
co-ordination and legislative developments. A Ministry responsible for public
administration reform was created and the Law on General Administrative
Procedure was amended. An e-government interoperability system was launched
among several institutions. Progress in implementing the reforms was limited.
Significant additional efforts are needed in order to guarantee transparency,
professionalism and independence of the public administration in practice.
Further improvements of the current legal framework are necessary, in
particular as regards the Law on general administrative procedures.

Judicial
system (See also chapter 23 - Judiciary and fundamental rights)

Further
amendments were made to the legal framework, which was a key priority of the
accession partnership.

The Minister of Justice's voting rights on
the Judicial Council were removed in line with European Standards and his ex
officio participation on the Council of Public Prosecutors was abolished.

A judicial reform package was enacted consisting of a new Criminal Procedure Code and amendments
to the Law on courts, the Law on the Judicial Council, the Law on
administrative disputes, the Law on the court budget and the Law on the court
service, and amendments to the Law on Litigation entered into force.

The purpose of the new Criminal Procedure
Code is to improve the efficiency of criminal procedures by strengthening the
role of the public prosecutor, establishing a judicial police, streamlining the
investigation phase and introducing new investigative techniques. It aims to
considerably improve the capacity to tackle complex organised crime and
corruption cases. Training of law enforcement agents, prosecutors and judges on
implementing the new provisions has begun, although there are concerns that the
organisational and institutional arrangements for such a major reform as not
sufficiently advanced. The new framework will apply as from November 2012.

Amendments to the Law on Litigation entered
into force in September 2011, introducing electronic service of documents,
audio recordings of hearings, tighter procedural deadlines, the use of a
preparatory hearing and an obligation on courts to inform the parties of the
possibility of mediation. The changes aim at improving the civil procedure in
order to shorten the duration of court proceedings, as well as promoting
alternative dispute resolution.

The Law on Administrative Disputes was
amended in order to establish a High Administrative Court with jurisdiction to
decide on appeals against decisions of the Administrative Court, which itself
hears appeals against decisions of misdemeanour commissions in the
administrative bodies, government second instance commissions and acts of local
self-government bodies. The court became operational in July 2011. 15 judges
have been appointed, the court service staff has been recruited and adequate
premises and equipment were secured.

The amendments to the Law on the court
budget introduced an increase in state budget allocations from 0.4% to 0.8% of
GDP, to be phased in by 2015. There is also a provision protecting the court
budget in the event of a rebalancing of the national budget and a requirement
that at least 2.5% must be spent on vocational training for the judiciary and judicial
staff. However, in practice, inadequate funding of the courts is hampering
further progress.

The amendments
to the Act on Courts and the Act on the Judicial Council refined or introduced
measures to ensure the competence of judges, including minimum educational and
professional requirements, psychological and ethics testing and annual
evaluation criteria. The complaints mechanisms available to parties to court
proceedings, both under the competence of the Supreme Court (in the case of
unreasonable length of proceedings) and the Judicial Council (in the case of
judicial misconduct) were refined. Measures aimed at improving transparency and
public confidence were introduced. However, the entry into effect of new
minimal requirements of judicial experience for Appeal Court and Supreme Court
judges was delayed until mid-2013 and new grounds for dismissal of judges linked
to poor efficiency or performance may have a negative impact on independent
decision-making.

In 2010, the Judicial Council appointed 43
first instance judges and 27 higher instance judges. The principle of equitable
representation was observed, as was gender balance. In the same period, the
Council of Public Prosecutors appointed 23 public prosecutors.

The Parliament dismissed the former
President of the Constitutional Court in April after the Supreme Court, on
appeal, confirmed the finding of the Lustration committee that he had
cooperated with secret services of the former Socialist Federal Republic of
Yugoslavia.

The Academy for
Training of Judges and Prosecutors (ATJP) continued to make a vital
contribution to the professionalism and competence of the judiciary. The third
generation of candidates successfully completed their initial training at the
end of 2010, and the fourth generation began theirs. The ATJP also continued to
provide ongoing in-service training. However, the ATJP's human resources and
premises need to be reinforced in light of the high number of training
activities it carries out each year.

Greater efforts
are needed in order to ensure merit-based recruitment, drawing on qualified
graduates from the ATJP rather than from other sources. 22 of the candidate
judges and prosecutors who graduated in the last 3 years have not yet been
recruited. Moreover, the current threshold for recruitment of non-graduates to
first instance judicial posts (50%) was considerably exceeded and the
transitional period, after which all newly appointed first instance judges must
be ATJP graduates, was extended to January 2013.

Overall, further amendments were made to the legal framework as regards
independence, efficiency and transparency of justice. In November a judicial
reform package was adopted and in July, the Minister of Justice's voting rights
on the Judicial Council were removed. However, considerable efforts are now
needed in order to strengthen the quality of justice, in particular through
continuous training and merit-based recruitment procedures, and to safeguard
the independence of judges in the context of evaluation and dismissal
procedures. Further organisational and institutional coordination is also
needed to ensure the smooth implementation of the new legal framework and
structures introduced by the Criminal Procedure Code.

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

Further
amendments to the legal framework, which are a key priority of the accession
partnership, were made.

Legislative
amendments were adopted with a view to implementing GRECO's third round
recommendations concerning incrimination and transparency of party funding. The
amended Criminal Code refines the scope of incrimination for bribery and
trading in influence and introduces criminal liability for failure to report
funds used to finance electoral campaigns. The amended Electoral Code
introduced a requirement to submit financial reports for all election campaigns
to the relevant authorities. The new Criminal Procedure Code, which becomes
applicable in November 2012, strengthens the role of the public prosecutor in
the pre-trial procedure and introduces a number of special investigative
measures. However, the Law on financing of political parties still remains to
be amended.

In 2010, the
Sector for Internal Control and Professional standards within the Ministry of
Interior brought criminal charges against 29 police officers for criminal
offences, including 16 cases of alleged abuse of an official position. Five
police officers from one border crossing point were charged as part of a single
operation. On the whole the number of instances of
corruption among the border police has been decreasing as a result of
anti-corruption programmes, anticorruption training, CCTV monitoring and salary
increases. The Customs Administration should be prioritized as a high
corruption risk in the development and implementation of future anti-corruption
programmes.

The case of high level corruption
concerning the former Director of the Public Revenue Office was completed when
the conviction was confirmed by the Supreme Court. The four other high-level
corruption cases in which the defendants (including a former prime minister, a
former minister of defence and a former governor of the National Bank) had
previously been sentenced to imprisonment, were quashed on appeal and returned
to the first instance courts for retrial, due to insufficient examination of
the facts. The capacity of the judiciary to deal with sensitive high level
corruption cases remains weak.

The lack of
systematic content checks on asset declarations and conflict of interest
statements hampers the effectiveness of the reporting obligation in deterring
corruptive practices in the public administration. The SCPC, in cooperation
with a number of other institutions, has introduced a methodology for carrying
out verifications of asset declarations; the process needs to be taken forward.
Legislative changes are still necessary before systematic content checks can be
carried out on conflict of interest statements. Conflicts of interest are not
sanctioned in practice.

The legal
framework and the measures taken as regards the financing of political parties
are deficient. The governing coalition parties spent more on election financing
in 2011 than their declared income. Questions have also been raised about the
legality of SDSM's campaign financing. However the institutional structure for
addressing campaign financing and the sanctioning system remain unclear.

Transparency of
public expenditure remains unsatisfactory. The SCPC recommended pressing
criminal charges for the misuse of public funds, but none of the cases
forwarded in 2009 and 2010 to the Public Prosecutor's Office have been
resolved. Existing legislation on public access to information has yet to be
amended in order to ensure full transparency. The internal control mechanisms
in public administration remain critically weak. Legal and institutional
protection of whistle blowers continues to be problematic and insufficient,
discouraging reporting of suspicious cases.

The competent
bodies tasked with combating corruption continue to lack a pro-active approach
and failed to dispel widespread allegations of corruption in key areas of
concern, such as public procurement and financing of political parties. A
convincing track record has yet to be established for prosecutions and
convictions. The new Criminal Code provisions on extended confiscation, illicit
enrichment and criminal liability of legal persons have yet to be implemented.

The State
Commission for the Prevention of Corruption (SCPC), the Anti-corruption Unit
within the Organised Crime Department of the Ministry of Interior and the Basic
Public Prosecutor's Office for the Fight against Organised Crime and Corruption
all remain understaffed and underfinanced. The specialisation of law
enforcement agents and the judiciary at local level, particularly in the area
of petty corruption, remains insufficient.

The Law on
prevention of corruption was amended to confer professional status on the SCPC;
however, public confidence in its
independence remains fragile. Questions have been
raised about the criteria used by parliament in the selection of the seven new
members of the SCPC in April. The SCPC itself concluded in its 2010 annual
report that the significant cut in its budget and mandate called into question
the political will to combat corruption effectively.

Cooperation
between the Ministry of Justice, SCPC and law enforcement agencies needs to be strengthened. Meaningful
analysis of the level and type of corruption in various areas has yet to be
carried out. Collection and processing of relevant data for measuring the
extent and nature of corruption, as well as the effectiveness of
anti-corruption measures, remain deficient. Corruption
remains a serious concern.

Overall, further amendments were made to the legal framework for
anti-corruption policy, which is a key priority of the accession partnership.
GRECO recommendations were addressed and the legal framework is well advanced.
Limited progress was made in implementation. A track record in handling high
level corruption cases has yet to be established. The verification of
declarations of assets and conflicts of interest needs to be systematised and
institutionalised. Transparency of public expenditure and of the funding of
political parties remains insufficient. More pro-active inter-institutional
cooperation is necessary. 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

No progress was
made as regards the ratification of international human rights instruments. The
European Charter for regional or minority languages has still not been
ratified.

During the
reporting period, the European Court of Human Rights (ECtHR) delivered 8
judgements finding that the former Yugoslav Republic of Macedonia had violated
rights guaranteed by the European Convention on Human Rights (ECHR). A total of
374 new applications allocated to a decision body have been made to the ECtHR since
October 2010. In September 2011, 1,111 allocated applications regarding the
former Yugoslav Republic of Macedonia were pending before the ECtHR.

Limited
progress can be reported in the promotion and enforcement of human rights.
The implementation of legal framework was uneven, while the
institutional set up was expanded with the recent establishment of the
Commission for protection against discrimination. The three new units within
the Ombudsman Office remain understaffed, with three employees in each.

In November
2010 the country concluded its chairmanship of the Council of Europe Committee
of Ministers. The country's programme focused on the three priorities of
strengthening human rights protection, fostering integration while respecting
diversity, and promoting youth participation.

Civil and
political rights

As regards the prevention of torture and
ill-treatment and the fight against impunity, legislative provisions in
this area are yet to be translated into a consistent and comprehensive
practice. Systemic deficiencies remain with regard to combating impunity within
the law enforcement agencies. Allegations continued of ill-treatment by the
special 'Alpha' mobile police unit, which now operates only in Skopje. A member
of the unit was charged with the murder of a young man during a post-election
rally in the centre of Skopje on 6 June. This has increased calls for the Alpha
unit to be disbanded.

The effectiveness of prosecutors and judges
in taking appropriate action when there are indications of ill-treatment by the
police remains a concern. The complaints system remains weak and the
data-collection system is poor. The number of allegations regarding
ill-treatment or the use of means of restraint towards persons detained in
police custody remains high. In 2010, 238 complaints were filed with the
Ombudsman with regard to police behaviour, 23% of which related to
ill-treatment. There are still a significant number of police stations with
substandard cells.

Knowledge of international and European
standards among police officers is low and safeguards against ill-treatment in
police stations are not adequately enforced. Decisions by the ECtHR requiring
an independent mechanism for oversight of the police, in the light of ill
treatment of the Roma population, have still not been implemented.
Ill-treatment of the Roma remains a concern.

In the field of prison system reform,
the government adopted an annual programme for the construction, refurbishment
and maintenance of prisons for 2011. Parts of the prisons where degrading and
inhumane conditions had been reported, including the semi-open wing of Idrizovo
prison, were renovated.

The country has yet to develop an effective
national strategy for the prison system. Overcrowding and poor health-care
remain causes for concern. Most of the prisons remain underfunded, understaffed
and unable to cover their basic maintenance expenses. However the conditions of
some prisons, in particular the Idrizovo closed ward, remain below the required
standard. Conditions in the Tetovo Educational-Correctional Institution for
rehabilitating minors continue to raise serious concerns. An effective
independent inspection mechanism is needed in order to safeguard against human
rights violations in prisons.

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

The first year
of implementation of the Law on legal aid has helped to improve access to justice. Two types of legal aid are provided: initial counselling provided by
the local units of the Ministry of Justice and registered civil society
organisations (CSO), and legal aid in judicial and in administrative
procedures. However, only two CSOs were able to register as providers of legal
aid. Also, no legal aid was provided for asylum seekers.

The overall
constitutional and legal framework for the protection of freedom of
expression 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.

As regards the media,
the first independent trade union of journalists and media employees has been
established with the aim of improving working conditions. The collection rate
of the monthly broadcasting fee has been increased to strengthen the financial
viability of the public service broadcaster. Nonetheless, additional efforts
are needed to ensure its sustainable funding as well as that of the
Broadcasting Council. The public service broadcaster is currently failing to
play its statutory role.

Media ownership remains
opaque, highly concentrated and with strong political links. The government is
one of the biggest advertisers in the country and there are concerns that funds
are directed to television channels which are supportive of the government.
Certain television channels are major donors to political parties. The
investigation, on charges of tax evasion, and subsequent closure of a
television channel A1TV and newspapers which are critical of the government has
raised concerns about the proportionality and selectivity of the procedure. The
diversity of the media landscape has been weakened. Printing
of the newspapers Vreme, Shpic and Koha
e Re stopped in early July.
Editors and journalists are faced with increasing undue political pressure and
intimidation.

Defamation has not been
decriminalised and the penalties specified by law
include unlimited fines or imprisonment (although in practice no journalists
were sentenced to imprisonment). Individual
journalists are held personally liable for reporting content and therefore are
exposed to potentially very high fines. In this context, intimidation of
journalists and increasing self-censorship remains a cause for concern.

Amendments to the Law on the Broadcasting
Council have increased the number of appointees from bodies controlled by the
government. The amendments were adopted without consulting the Broadcasting
Council or any public debate. The amendments raise concerns about weakening of
the independence of the body and increasing bureaucratisation. There is
currently no Press Council for the print media.

In September the
government launched a round table process with journalists and the media in
order to establish a dialogue on issues of concern and find solutions.

With regard to freedom
of assembly and association, the overall situation is satisfactory. The
government's strategy and action plan for cooperation with civil society
organisations continues to be implemented. The Code of Good Practices
for Participation of Civil Society Organisations in Policy Making Processes was
adopted in July 2011. Involvement of civil society in the policy development
process and in legislative drafting is making modest progress. A consistent
approach encouraging all-inclusive public participation in decision making,
including appropriate institutional mechanisms, needs to be further developed.

The system for
the allocation of state financing to civil society organisations needs further improvement,
in particular as regards public benefit organisations. Civil society
organisations remain heavily dependent on foreign funding and the lack of
sufficient financial resources remains a serious constraint.

Officials of
political parties and Members of Parliament and some media launched public
attacks on critically oriented CSOs, with allegations
of politicisation of CSOs and money laundering. The
Executive Director of the Open Society Institute was found
guilty by the Lustration Committee of collaboration with the former Yugoslav
State Security Service. Two members of the committee have been boycotting its
work in protest at this decision.

As regards freedom
of thought, conscience and religion, 28 religious entities were registered under
the Law on the legal status of churches, religious communities and
religious groups, while 6 were rejected, including the application from the
Bektashi community from Tetovo on the grounds of using the same name as the
already registered Bektashi community from Kičevo.

Overall, whilst civil and political rights are broadly respected, further
progress was limited. Parts of the prisons were renovated. The financial
viability of the public broadcaster is beginning to be addressed. However,
weaknesses with regard to combating impunity within the law enforcement
agencies remain. The country has yet to develop an effective national strategy
for the prison system. Editors and journalists have faced increasing undue
political pressure and intimidation. In this context, journalists and editorial
policies are easily influenced, resulting in widespread self-censorship.

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

As regards women's
rights and gender equality, implementation of the national strategy against
domestic violence has continued. Awareness of domestic violence among the
population improved and some initiatives have been undertaken to respond better
to the needs of victims. The capacity of the national coordination body for the
national strategy to combat domestic violence was strengthened. Some progress
was made to address women's health needs. The equal opportunity issue is not a
political priority of the government. Discriminatory customs, traditions and
stereotypes are widespread and undermine women's basic rights. Participation of
women in political life at local level remains low. Roma women and girls still
suffer from both racial and gender discrimination. Some very limited actions
targeting Roma women have been implemented and a more pro-active approach is
needed to implement the existing national action plans.

Some progress was made in the area of children's
rights. The National Strategy on Prevention of Juvenile Delinquency was
adopted by the recently established National Council for Prevention of Juvenile
Delinquency. Adequate financial and administrative resources and close
inter-institutional cooperation are needed to properly implement the amended Law on Juvenile Justice. The number of specialized staff to deal
with juvenile victims and children in conflict with the law is insufficient,
and further training is much needed. Police detention and
educational-correctional centers fail to meet standards on administration of
juvenile justice, in particular on the employment of psychologists and social
workers in courts. The Ombudsman reported violations
of basic human rights of juveniles in detention,
including limited or no access to medical service, no access to education and
enforcement of solitary confinement.

The percentage of children living under the
poverty line rose further to nearly 37%. Institutional support for the
prevention of abuse and protection of children's rights is not adequate. Care
and response services for the victims are very limited and suffer from a lack of
sufficient professional skills. The number of reported cases of sexual abuse
and paedophilia remained approximately the same, but reported cases are
considered to be only a small proportion of the total problem. For the first
time, the Ombudsman investigated the trafficking of children inside and outside
the country. Street children, almost exclusively Roma, remain a phenomenon
often linked to begging. Strategies need to be developed and implemented to
further engage them in the educational system. There is a pressing need to
employ specialised staff as psychologists and educational specialists dealing
with children with disabilities.

Concerning socially
vulnerable persons and/or persons with disabilities, efforts have been made
towards deinstitutionalisation, such as including civil society in the
provision of mental health care services and opening further communal housing
units. However, material conditions and inhumane and degrading treatment in
psychiatric institutions, notably Demir Kapija, Demir Hisar and Negorci, remain
a concern. The implementation of the national strategy on equality of rights of
people with disabilities 2010-2018 has not progressed. Overall, social
integration of people with disabilities remains limited.

Some progress can be reported in the area
of anti-discrimination policies. The Commission for protection against
discrimination has become operational and has started to act on the complaints
submitted. The majority of the complaints were on political and ethnic grounds.
However, the law on anti-discrimination remains to be fully aligned with the acquis.
Discrimination on grounds of sexual orientation is still omitted. Also, the
capacities of the Commission need to be strengthened. The Lesbian, Gay,
Bisexual and Transgender (LGBT) community continue to be subjected to
discrimination and stigmatisation. University and high school text books treat
homosexuality as a disease. There is a major need to raise awareness not only
of the new provisions contained in the enacted law, but also with reference to
the principles of respect and tolerance of diversity.

As regards labour
and trade unions rights, there are 39 trade unions listed in the register
of the Ministry of Labour and Social Policy and 7 employers' associations. The
criteria for representative participation of social partners in the bipartite
and tripartite social dialogue provisioned in the labour law were implemented.
The signing of collective agreements in the public sector by the trade unions
was initiated. However, the capacity of social partners has not improved, as
trade unions still do not have stable finances and management capacity.
Participation by social partners in the policy development process continues to
be weak. Bipartite and tripartite social dialogue has not improved.

As regards property
rights, the process of returning property confiscated during the period of
the Socialist Federal Republic of Yugoslavia continues to extend substantially
beyond the legal deadlines. The Constitutional Court annulled the retroactive
effect of the amendments to the Law on denationalisation. Return of property
was substituted by reimbursement in bonds. The Constitutional court also
annulled the provisions of the Law on denationalisation that excluded its
applicability to religious communities. The enforcement of restitution claims
for which a final decision has been taken remains unsatisfactory. The backlog
of property dispute proceedings continued to cause delays.

Overall,
social and economic rights are broadly in place, and some further progress was
made. Awareness of domestic violence among the population improved. New
criteria for representative participation of the social partners were
implemented. The National Council for Prevention of Juvenile Delinquency and the
Commission for protection against discrimination have become operational. The
law on anti-discrimination remains to be fully aligned with the acquis,
notably as regards discrimination on grounds of sexual orientation. The
capacity of the anti-discrimination Commission needs to be strengthened.

Respect for
and protection of minorities, cultural rights

As regards minorities,
the 10th anniversary of the Ohrid Framework Agreement (OFA) provided
an important opportunity for enhanced dialogue between the communities in the
country. The President of the Republic and the Prime Minister both participated
in events marking this milestone. An institutional framework has been developed
to protect the rights of minorities and to support inter-ethnic dialogue.

The current
Secretariat for the Implementation of the Ohrid Framework Agreement (SIOFA)
strategic plan embraces a more comprehensive understanding of different policy
aspects deriving from OFA, such as integrated education, use of languages,
decentralisation and cooperation with civil society. The SIOFA budget for 2011
was significantly increased.

However, SIOFA faced problems in
recruiting sufficiently qualified senior staff. Limited funds were allocated to
increase its capacities and efficiency. SIOFA strategic planning capacities and
internal control standards remained low.

Some progress was made in the implementation of the Law on the use of
Languages spoken by at least 20% of the citizens. In parliament, implementation
of the Law on Languages made headway, with the recruitment of more skilled
translators and interpreters.

However, no clear mechanism for the overall
monitoring and assessment of the implementation of the Law on languages has
been established to date. Some institutions continue to face a shortage of
qualified and experienced interpreters. Optional teaching of the languages of
smaller ethnic communities is not equally available because of the limited
availability of textbooks and the shortage of qualified teachers.

Efforts were
made to promote and implement the Strategy on Integrated Education, in close
cooperation with the OSCE. An inter-ministerial coordination working group was
established. There are close consultations with the international donor
community on the implementation and concrete planned activities of the strategy
in order to guarantee efficiency and avoid duplication. However, the Ministry
of Education and Science lacks the human and financial capacities necessary to
support the implementation of the strategy. Despite government efforts to promote
the principles of integrated education, the practice of separating pupils along
ethnic lines or language shifts continued in a number of schools. Cases of
inter-ethnic violence in secondary schools persisted.

Inter-ethnic
relations were strained by certain incidents. The urban plan 'Skopje 2014'
created inter-ethnic sensitivities. Members of non-majority communities
complained about the neglect of their respective historical and cultural
monuments. In February the construction of a museum in the shape of a church
inside the Kale fortress in Skopje led to a violent confrontation between
members of the two main ethnic communities. The direct involvement of
politicians of one of the parties of the government coalition in the events
caused concern.

Committees for
relations among communities were established in the 20 municipalities where
they are required by law, as well as in 14 other municipalities on a voluntary
basis. A small number of them improved their capacities and visibility among
their community. However, the majority of them continue to face lack of
resources, unclear competencies and insufficient representation of ethnic
communities living in the municipality.

The
administrative capacities and visibility of the agency for protecting the
rights of minorities which represent less than 20% of the population have
increased slightly. However, due to an unclear mandate and significant
reduction of the budget in 2011, the Agency is unable to accomplish most of its
tasks defined by the law.

The overall
number of civil servants from the non-majority ethnic communities reached 30%,
which is broadly in line with the demographic structure. Efforts were made to
increase the representation of the smaller communities in the civil service,
notably the Roma and the Turkish community. In 2010 there was a 46% increase of
members of Roma and a 12% increase in the Turkish community. However, more
efforts are needed in order to improve the quality of the recruitment process.
A large number of newly recruited civil servants received salaries, even though
they were not assigned any tasks or responsibilities. Representation of the
non-majority communities at senior level remains very low.

Some progress
can be reported in the area of Roma inclusion. In July, the country took
over the one-year Presidency of the Decade of Roma Inclusion. It also held a
seminar with the European Commission which adopted new recommendations for
action and agreed to meet regularly to monitor progress. Efforts were made to
implement the action plan for education by carrying out projects in the area of
education and in the social sphere. Enrolment rates of Roma children in
secondary and university education steadily increased. Changes were made in the
law on social protection in order to address the over-representation of Roma in
special schools for children with learning disabilities. The Roma health
mediator programme was initiated in 8 municipalities.

Some active
labour market measures targeting Roma continued to be implemented. Despite
budgetary restrictions the financial support for Roma programmes was maintained
at the 2009 and 2010 levels.

However, no
measures were taken to systematically address the issue of personal documents,
which represents a major obstacle to accessing social, housing and health
benefits. Also, Roma children continue to be over represented in classes for
children with special educational needs. A recent report concluded that about
half the children were Roma whereas they make up only 2.6% of the population.
This is not inline with ECtHR judgements which reaffirm the right of Roma
children to non-discriminatory schooling. The pace of implementation of the
Roma Strategy and the action plans in the framework of the 2005-2015 Decade of
Roma Inclusion, which had reached its halfway point, continued to slow down.
There are no clear evaluation and monitoring mechanisms in place. State funds
allocated to the implementation of the Action Plans remain insufficient to meet
the needs. There was no improvement in the administrative capacities of the
office of the Roma minister without portfolio and of the unit for
implementation of the Roma Strategy. No significant steps were taken to produce
official data on Roma.

High unemployment rates persist, especially among
Roma women and youth, and lead to precarious housing
and living conditions, poor health as well as low school attendance, low income
and high mortality rates among Roma.

Allegations of
police brutality and excessive use of force towards the Roma continued. Many
Roma are reluctant to lodge complaints, especially when ill treatment by police
is involved.

In June 2011,
there were 1,554 refugees and internally displaced persons (IDPs) in
the country, the majority of whom continue to be Roma from Kosovo; of these
only 24 were recognised refugees and a long term solution for the remainder
needs to be found. The government provides some financial assistance to Roma
refugees from Kosovo. Positive decisions have been adopted by the
Administrative Court in judicial review and appeal procedures. These decisions
continued to be handed down on procedural and not on substantive grounds.
However, the mechanism for determining refugee status still faces shortcomings.
Roma refugees from Kosovo continue to encounter particularly difficult conditions.

The number of
registered IDPs decreased from 621 in 2009 to 611 in 2010. The majority of the
complaints lodged by IDPs against the State for damage caused by the 2001
conflict are still pending in court.

Overall,
some progress was achieved as regards the respect for and protection of
minorities and cultural rights. The Ohrid Framework Agreement continues to be
an essential element for democracy and rule of law. In parliament,
implementation of the Law on Languages moved forward. Representation of the
Roma and Turkish community in the civil service increased. The integration of
the Roma in the education system improved, with increased enrolment in
secondary and university education. Continued dialogue amongst all the
communities is necessary in order to foster trust, especially in the areas of
education, culture and language. Roma continue to face very difficult living
conditions and discrimination and additional efforts are necessary.

2.3.
Regional issues and international
obligations

The former
Yugoslav Republic of Macedonia continues to cooperate fully with the International
Criminal Tribunal for the former Yugoslavia (ICTY). There are no remaining
cases or appeals pending in The Hague. The four cases that the ICTY transferred
back to the national authorities in 2008 reached the domestic court system. In
July the Parliament adopted an Authentic Interpretation of the Amnesty Law
which stated that the amnesty should cover the suspects of all cases that will
not be processed by the ICTY. Consequently, in September, one of the cases was
dismissed by the Criminal Court in Skopje at the request of the Public
Prosecution. It was also stated in the hearing that injured persons in the case
could demand compensation through a separate lawsuit. The status of the other
case files remains to be determined. Ethnic Albanian political parties assert
that all the cases are covered by the 2002 Amnesty Law.

The former Yugoslav Republic of Macedonia has aligned with the Council Decision advancing universal support for the International Criminal Court and promoting the
widest possible participation in it[5]. However, it still maintains the 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 process of moving towards the European Union. The country remained
fully engaged 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 signed the additional protocol for further liberalisation of
agriculture under the CEFTA agreement. The country continued to contribute to
the EU ALTHEA mission in Bosnia and Herzegovina. In March, within the framework
of the SEECP, the former Yugoslav Republic of Macedonia endorsed the Regional
Strategic Document and Action Plan on Justice and Home Affairs 2011-2013.
The country supports the RECOM initiative on reconciliation.

The former
Yugoslav Republic of Macedonia continues to play a constructive role as regards
bilateral relations with neighbouring Member States and other enlargement
countries. Relations with Albania remained good and an agreement for
full liberalisation of bilateral and transit transportation between the two
countries was signed. Relations with Bosnia and Herzegovina continued to
be good and negotiations started on agreements on cooperation in the field of
health and medical sciences, mutual enforcement of court decisions in criminal
matters and on legal aid in civil and criminal matters. Relations with Croatia
remained good. As regards Montenegro, agreements were signed for
economic and social cooperation, and for cooperation in the fields of
education, science and technology, and on extradition of citizens involved in
organised crime, corruption and money laundering. Furthermore, a bilateral
investment protection agreement and an agreement for coordination of social
security systems were concluded.

Relations with Serbia remained good.
A bilateral readmission agreement was signed. Furthermore, a protocol for joint
border patrols was signed and a joint contact centre for the police and border
patrol was established. The country provided humanitarian assistance to Serbia
after the Kraljevo earthquake. Serbia continued to maintain its policy of
non-recognition of the border demarcation agreement between the former Yugoslav
Republic of Macedonia and Kosovo. Unresolved issues remain concerning relations
between the Orthodox churches.

Relations with Kosovo intensified
further. An agreement for customs cooperation envisaging the setting-up of a
joint customs checkpoint in line with European standards, an agreement for
avoidance of double taxation, and three agreements on criminal law matters were
signed. Joint monitoring patrols along the border have been launched.

The close
political and economic cooperation with Turkey was maintained.

Relations with Greece remained
close, particularly in the economic sphere, but they continued to be adversely
affected by the unresolved name issue. The country remains engaged in talks,
under the auspices of the UN, as well as through direct meetings of the prime
ministers, in order to resolve it. The government erected a statue in the
centre of Skopje which was seen by Greece as a provocation because of its
resemblance to Alexander the Great. Actions and statements which could
adversely affect good neighbourly relations should be avoided. The hearings
started on the legal proceedings initiated by the country against Greece before
the International Court of Justice in The Hague regarding the bilateral interim
accord of 1995. Maintaining good neighbourly relations, including a negotiated
and mutually acceptable solution to the name issue, under the auspices of the
UN, remains essential.

Relations with Bulgaria have
remained good. The law ratifying the agreement on economic cooperation between
the two countries was enacted. A joint police and customs cooperation centre
was established and a protocol for joint border patrols was signed. In
September the countries also signed a memorandum of cooperation on European and
Euro-Atlantic integration. Ethnicity-based issues continue to be an area of
concern.

Overall, the
former Yugoslav Republic of Macedonia is a constructive partner in the region.
Bilateral relations with neighbouring and other enlargement countries continued
to improve. The name issue continues to affect relations with Greece.

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 regarding the fundamental
features of the country's economic policy setup has been maintained. A number
of programmes describe the medium-term policy framework. In January 2011, the
authorities submitted their fifth Pre-accession Economic Programme, which
presented a feasible, albeit sometimes optimistic macroeconomic and fiscal
framework and displayed improved drafting capacities. The authorities adopted a
public investment programme for 2011-13, a fiscal strategy for 2011-2013 and a
public debt strategy for 2011-13. In late 2010, the government agreed with the
IMF on a pre-cautionary credit line. This was aimed at strengthening
international markets confidence. Communication with the business community has
improved and a number of economic and financial committees have been
established to improve the economic dialogue. Cooperation with the World Bank
and other IFIs continued. Structural reforms were further pursued in a number
of areas. Overall, a broad political consensus on the fundamentals of
economic policy has been maintained.

Macroeconomic
stability

Real GDP rose by 1.8% in 2010, compared to
a decrease of 0.9% the previous year. In 2011, output continued growing by 5.2%
in the first half of the year. The main sources for growth shifted from net
exports in the first half of 2010 and the first quarter of 2011. In the second
quarter of 2011, private consumption was the main driver for growth, increasing
by 8.4% year-on-year, while equipment investment declined by 7.5%. As a result
of the drop in investment, import growth slowed down in the second quarter,
from 36.5% in the first quarter to 4.5% in the second. Export growth also
decelerated, from 34.8% in the first quarter to 8.9% in the second. The strong
growth in the half quarter of 2011 reflects a weak base in the previous year. The
performance of industrial production and retail trade points to a marked
year-on-year acceleration in the first half of 2011. Industrial production
recovered in the first seven months of 2011, rising by 8.6% compared to the
same period the year before. However, the overall level of industrial
production is still lower than before the crisis. Average per capita GDP
remained largely stable in 2010, at 35% of the EU-27. Overall, economic
activity started to regain strength and depth since autumn 2010. However,
government spending for construction played an important part in the strong
rise of gross fixed capital formation.

The current account deficit widened,
reflecting increased domestic economic activity. After a decline from -6.7% of
GDP in 2009 to -2.8% in 2010, the mid-2011 current account deficit rose to some
3.5% of the estimated GDP of 2011. Higher imports were the main reason for the
increase in the trade deficit. However, the rise in the current account deficit
was accompanied by an even bigger increase in capital inflows, accounting in
June 2011 to some 4.5% of the estimated annual GDP. The two main sources were
capital inflows related to the partial use of the IMF pre-cautionary facility,
amounting to some 3% of the estimated GDP and FDI inflows, which in the first
quarter of 2011 were significantly higher than a year before. However, in the
second quarter, FDI inflows were less buoyant, bringing the FDI inflows during
the first half of 2011 to 2% of the estimated GDP for 2011.

Gross external debt was about 60% of GDP in
the first quarter of 2011, compared to 56% of GDP a year before. The main
source for the increase was public debt, which contributed 2.6 percentage
points of GDP to the increase. Private bank lending pushed up the external debt
ratio by 1.4 percent points. Foreign reserves rose to €2.0 billion
(29% of GDP) in August, reflecting a marked increase in FDI inflows, but also
the partial drawing of the country's pre-cautionary credit line with the IMF.
As a result, the reserve coverage of prospective imports recovered to close to three
and a half months, although the strong increase in imports limited the
improvement. Overall, external accounts registered a marked
increase in the current account deficit, although this was more than offset by
higher capital inflows, in particular FDI, but also by loans from the IMF and
other international financial institutions.

Unemployment was very high during 2010, at
32% on average. In 2011, the labour market situation improved slightly, as
unemployment fell to 31.4% in the first quarter of 2011. Employment increased
by 5.5% year-on-year in the first quarter of 2011, (i.e. by 34,000 persons),
compared to a decline of 0.4% in the previous year. The main sectors where
there were employment gains were agriculture, but also manufacturing. However,
new employment in agriculture is largely due to new registrations of
subsistence farmers. The number of unemployed persons fell by 4.8% in the first
quarter of 2011, i.e. a drop of 15,000. There is a positive trend in youth
unemployment (age bracket 15-24 years), falling from 57.1% in the first quarter
of 2010 to 52.5% in the first quarter of 2011. Youth unemployment as a share in
total unemployment dropped from 20.1% in 2010Q1 to 17.7% in 2011Q1. A key
factor for this decline was a big reduction in youth unemployment among women.
Furthermore, easier access to higher education courses helped reduce
unemployment rates. Even though the existence of a substantial informal sector
means that actual unemployment may be overstated, the very high unemployment
remains an important issue, in particular among young people and the less
educated. Overall, the situation in the labour market has improved
slightly, but unemployment continues to be very high, particularly among the
young and less well educated.

Monetary policy cautiously supported the
gradual recovery, while the exchange rate policy remained oriented towards maintaining
price stability and the de facto peg to the euro. The Central Bank has
continued to lower its key policy rates, such as the rate on 28-day Central
Bank bills from 4.5% to 4.0%. Overall, the exchange rate policy and
monetary policy have remained sound.

Inflation accelerated in the last quarter
of 2010, reaching 3.0% at the end of the year, while the annual average in 2010
was 1.6%, as compared to -0.8 % in 2009. The main factors driving the strong
increase towards end-2010 were higher prices for energy, base metals and food. During
the first three months of 2011, consumer price inflation continued to
accelerate, driven by prices for food and transport services. However since
then, inflation has been slowing down, declining to 3.6% in August. This
brought average inflation to 4.2 for the first eight months of the year. Core
inflation, which excludes the impact of energy and food prices on the overall
price level, was close to zero in 2010, but increased to around 1.3% in the
first five months of 2011.

The overall
fiscal policy stance has been oriented towards achieving the deficit targets. In
order to reach the 2.5% deficit target for 2010, the authorities responded to lower
than anticipated revenues by reducing spending on goods and services and strongly
limiting the planned increase in capital spending. Consequently, the 2010 deficit
target of 2.5% of GDP was reached, although revenues were 7.8% lower than
envisaged. The deficit target for 2011 is 2.5%. In the first seven months of
2011, revenues as a share in GDP were on a similar level as a year before,
while spending was slightly higher. This brought the accumulated central
government deficit in July to about 2% of the year's estimated GDP, compared to
a deficit of 1¼% of GDP the year before. However, a part of this increase
reflects front-loaded spending, mainly in construction, related to early
elections in June. The authorities have a solid track record of meeting prudent
fiscal target. However, the quality of public spending suffers from still weak
planning capacities and short-term oriented spending decisions, which delay the
accumulation of productive investment. Higher deficits, but also increased public
spending financed by debt, contributed to an increase in the public debt ratio,
from 31.9% in December 2009 to 35.7% in December 2010.

Fiscal decentralisation has continued. By mid-2011, 79 out of 85
municipalities have advanced to the second stage of decentralisation.
Furthermore, additional measures have been taken to strengthen the fiscal
viability of indebted municipalities. The efficiency of the public
administration still suffers from insufficient staffing, lengthy procedures, a
high degree of political interference leading to high turnover of qualified
staff. Overall, fiscal policy was oriented towards achieving its fiscal
target, despite lower than expected revenue performance. The spending profile
maintained its focus on transfers, although lowering its current spending for
goods and transfers. Capital spending was raised slightly, however the growth
and employment stimulating effect of this investment was reduced by the high
import content of the spending.

As in the past, the overall macroeconomic policy mix was largely
sound, Monetary conditions were still relatively favourable to growth, while
taking into account the country's policy of a de facto peg to the euro. Public
spending was largely kept in line with revenues. The structure of spending was
broadly maintained, focussing on transfers, with a small increase in capital
investment and a further reduction in current spending for goods and services. However,
some of the capital investment could have been spent in a more growth
supportive manner. Overall, the general policy mix continued to be
sound, remaining stability oriented while trying to support the recovery.
However, the quality of public finances has not improved significantly and the
issue of high unemployment, in particular among the young, remains a major
policy challenge.

Interplay of
market forces

Privatisation is largely completed and the
economy is mainly driven by market forces. The share of state activities has
remained largely unchanged, however, largely as a result of a fall in private
activities, the share of the private sector declined, from 87% of total value
added in 2008 to 86% in 2009. In terms of employment, the share of private
sector employment dropped from 77.8% in 2009 to 77.2% in 2010. The share of
administered and regulated prices in the CPI basket was down from 14.4% in 2009
to 13.1% in 2010, partly due to changes in the CPI basket. Most of those
administered and regulated prices are cost recovering. The asset value of fully
or partly state-controlled companies has remained at around 13.5% of GDP. The
majority of this capital - nearly 80% - is concentrated in five companies,
mainly public utilities such as the production and transmission of electricity,
where the state is majority owner and telecommunication, where the state is a
minority owner in the highly profitable incumbent telecom company. Overall,
as a result of the crisis, the role of the state has increased, while state
ownership has remained concentrated mainly on telecommunication, energy and
public utilities.

Market entry and exit

The government has continued taking steps
to facilitate market entry and exit. The second phase of the 'one-stop-shop'
has been completed, improving in particular the possibilities for the
electronic registration of mortgages, bankruptcy proceedings, documentation
delivery etc. The costs of registration have been reduced further. The
implementation of the third phase of the so-called 'business guillotine' aimed
at simplifying regulation has continued. Contact with the business community
was strengthened. The process of closing down unviable companies has continued.
In the second half of 2010, the number of bankruptcy procedures was about one
quarter higher than a year before. However, during 2011, the number of new
bankruptcies has declined again towards pre-crisis levels. As a result of the
rapid increase in the number of bankruptcy procedures, the backlog of pending
bankruptcy procedures has increased in the second half of 2010, from 338 cases
at the end of 2009 to 358 cases at the end of 2010. There is still room for a
further shortening of bankruptcy procedures. Overall, some further
progress has been achieved in reducing barriers to market entry and exit.

Legal system

The legal
system for a functioning market economy is largely in place. Steps have been
taken to increase the efficiency of courts, to improve the transparency of
court decisions, to accelerate legal procedures and to improve enforcement of
contracts, for example by transferring jurisdiction on payment orders to
notaries. The registration of real estate ownership rights is practically
completed. The number of pending court cases has been reduced from 6014 cases
end-2009 to 5492 cases end-2010. Furthermore, the duration of court procedures
has been reduced, with the percentage of cases solved within three months
rising from 25% in 2009 to 36% in 2010, while the percentage of cases lasting
more than one year has declined, from 17% in 2009 to 13% in 2010. Contract
enforcement is still difficult, hampering the business environment, in
particular for small-and-medium-sized enterprises. The introduction of
electronic procurement has increased the transparency of public spending.
However, despite strengthened legal and financial independence of regulatory
and supervisory bodies, the administrative capacities and the enforcement
record of some of those institutions, such as the railway regulatory agency,
the energy and the telecom regulators, the agencies regulating and supervising
the fully funded pension funds and the securities and exchange commission still
need to be strengthened. Overall, the functioning of the legal system
has improved, which should have a positive impact on the business and
investment climate. However, weaknesses in the rule of law, particularly in the
judiciary, which is characterised by slow procedures, insufficient resources
and unreliable enforcement of contracts, and the prevalence of corruption,
continue to adversely affect the business environment.

Financial
sector development

The financial sector's significance and its
intermediation function has increased, reflecting additional capital from
foreign investors but also increased deposits and lending. In the banking
sector, total assets as a share of GDP were up from 67% mid of 2010 to 69% of
the estimated GDP by mid 2011. Credits as a share of GDP increased from to
43.5% in October 2010 to some 45% of the estimated GDP end of August 2011,
while the level of deposits rose from 48% end of October 2010 to around 50% of
the projected GDP in August 2011. Deposits continue to be the sector's main
source of liquidity. The coverage of loans by deposits is still above 100%. The
sector continues to be predominantly owned by foreign companies with 14 out of
17 banks dominated by foreign owners. The share of foreign ownership has
increased from 68.6% end of 2009 to 78% mid of 2011. The share of state
ownership in the sector remains low, at 7% of the sector's assets. The main
state asset is the majority share in the country's only development bank and a
limited number of remaining minority shares. Market concentration remains high,
but has decreased slightly during the past year. The assets of the five biggest
banks as a share of total assets declined only marginally, from 77.4% end of
2009 to 77.2% end of 2010. However, the three biggest banks lost some market
shares to medium-sized banks. The efficiency of the banking sector has remained
largely unchanged. Profitability of the sector as a whole remains low, with
slightly negative returns-on-assets and equity in the first quarter, and slight
profits in the second quarter (0.2% return-on-assets, and 2.1%
return-on-equity). However, larger banks performed better than smaller ones. Credit
growth accelerated since autumn last year, reaching some 8% in August. Private-sector
weighted interest rates declined following their peak in the last quarter of
2009. Rates for denar loans declined from 9.2% in September 2010 to 8.9% in July
2011, while the rates for denar deposits declined from 6.8% to 5.8%. As a
result of the faster decline of deposit rates, spreads widened from 2.4
percentage points in September 2010 to 3.1 percentage points in July 2011. Financial
stability has been maintained, with sound liquidity, solvency and capital
adequacy ratios. The share of non-performing-loans has started to decline
again, from a peak of 10.6% in September 2010 to 9.3% by end-June 2011

Banking regulation and supervision is
largely in line with international standards. However, the proper functioning
of regulatory and supervisory agencies, such as the Agency for the supervision
of fully funded pension insurance (MAPAS) or the security exchange commission
(SEC), is still hampered either by still insufficient financial independence
and/or by insufficient human and IT resources. Furthermore, sometimes
institutional competences are not sufficiently defined. As a result, the
leverage of those institutions has not yet reached an adequate level. Transparency
of the credit market has improved through the establishment of a private credit
bureau, providing credit history reports.

The relevance of other financial market
intermediaries is limited, with assets accounting for some 10% of the financial
sector's assets or some 8% of GDP. Insurance institutions account for some 4%
of the sector's assets, while leasing companies and pension funds account for
about 3% each. The value of the capital market accounts for some 30% of GDP

Overall, the financial sector continued
its gradual process of deepening and widening. However, the level of financial
intermediation and competition in the market are still low, impeding more
dynamic growth in the private sector, particularly for SMEs. Furthermore, some
regulatory and supervisory agencies have not yet reached a sufficient level of
independence, 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 despite the continued global economic turbulence. Market entry and
exit procedures have been improved and the rule of law has been strengthened.
However, structural imbalances on the labour market are still very pronounced
and the business environment is still suffering from slow judiciary, and a
number of weak and not fully independent regulatory and supervisory
institutions.

Human and
physical capital endowment

The level of human capital endowment is
still low. The authorities continued to improve both the physical
infrastructure for education and the regulatory framework in order to improve
the performance of the educational system. The number of teachers was increased
by 4.4% in 2010, in particular in primary and lower-secondary schools.
Enrolment rates have been improved. Budgetary allocations for education were
marginally increased, from 3.7% of GDP in the 2010 budget to 3.8% in the budget
for 2011. As in the past, spending has been focused on renovation and
construction of school buildings and the purchase of IT equipment. Despite
continued efforts, the overall level of education and training of the labour
force is still relatively low and the mismatch of skills is still substantial.
There remains significant room for improving the efficiency of public spending
on education and for raising the quality of education. Overall, measures
to improve the level of qualification 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 continues to be relatively low and its quality is hampered by
previous decades of underinvestment. The low level of education and the weak
capital endowment contribute to a low general level of productivity. Some
further progress has been made on improving transport infrastructure. Gross
fixed capital formation showed a marked acceleration in the second half of 2010
and in particular in the first quarter of 2011. However, overall investment
levels in 2010 and early 2011 were still lower than a year before. The stock of
foreign investment stands at 51% of GDP. Foreign direct investment inflows increased
markedly in the fourth quarter of 2010 and the first quarter of 2011, but were
less buoyant in the second quarter. Overall, the interest of foreign investors
in the country has improved. In some cases, persistently slow legal procedures,
such as those involving work permits for foreign employees, or fragmentation of
responsibilities between central and local governments continue to be an
impediment to FDI. Spending on strengthening
the knowledge-based economy has remained low. The accumulation of the public
capital stock is impeded by weak implementation capacities, but also the use of
funds for less productive purposes, such as the beautification of the capital. Overall,
the country's capital stock continued to be low. Infrastructure improved, but
it continues to require repair and modernisation.

Sectoral and
enterprise structure

There were no major changes in the area of
enterprise restructuring. Network industries, such as railways, energy
production and transmission, are still state owned to a considerable degree.
Recent amendments to the energy law adopted in spring 2011 should increase
competition and transparency in the electricity sector. Gas and electricity
markets are dominated by a very small number of suppliers, which undermines
effective competition. In the telecommunication sector, the number of service
providers has increased, leading to a lower market share of the incumbent
operator for fixed-line and mobile telephony. There was no significant
structural change in the transport sector.

The focus of economic activity has
continued to move away from manufacturing towards services, in particular
retail trade, and – recently - also towards construction. Manufacturing
increased its share from 12.4% of GDP in the fourth quarter of 2009 to 14.4% in
the fourth quarter of 2010, and construction rising from 5.6% to 7.8% of GDP.
At the same time, the share of value added in agriculture declined, from 12.8%
to 10.9% of GDP. In terms of employment, agriculture registered the highest
employment gains in the fourth quarter, increasing its share from 16.7% of
total employment to 19.2% while the share of manufacturing in total employment
dropped from 23.9% to 22.5% in the fourth quarter of 2009. The increase in
agriculture employment and the simultaneous reduction of the sector's
productivity suggests an important share of 'administrative' job creation and
not new capacities.

Small and medium-sized companies (SMEs) are
by far the most important group of companies, providing employment for some 82%
of private sector employees or 56% of total employment. In 2010, in line with
the general decline in economic activity, the number of SMEs fell by 8.3%. This
mainly reflected a sharp drop in the number of micro-enterprises, while the
number of larger SMEs increased. In terms of employment, the number of
employees increased by 1.5% in 2010, while among large companies employment
declined by 14%. The availability of an EIB financed SME facility worth €100
million improved access to financing. Furthermore, the government is
subsidizing interest costs for export oriented SMEs and has increased budgetary
allocations for SME support schemes.

The informal sector, fuelled by weaknesses
in tax and expenditure policies as well as in law enforcement, and the fight
against corruption, 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. Official data point
to 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 institutional setup for monitoring State aid and competition
issues, the Competition Commission, is in place. However, the current resource
endowment is still insufficient to cover the agency's full range of
responsibilities. Overall, state influence on competitiveness remained
limited.

Economic integration with the EU

The country has a small, open economy, with
total trade in goods and services recovering to a level of 114% of GDP in 2010,
following the 2009 recession. Trade integration with the EU is advanced, with
about 63% of all exports currently going to and about 53% of imports
originating from the EU. The CEFTA region is the country's second most
important trading region, accounting for around 24% of exports and around 10%
of imports. The export structure continues to be highly concentrated on a
limited range of products, with textiles and clothing accounting for about 17%
of total exports and manufactured iron products for 26% in 2010. The stock of
FDI increased to about 51% of GDP, with the Netherlands, Slovenia and Austria
being the biggest investors. In total, EU countries accounted for about 60% of
total FDI inflows. Switzerland, Turkey and Serbia are the most important non-EU
investors. The exchange rate against the euro has remained stable in nominal
terms. Price competitiveness has remained largely unchanged. Overall,
trade integration with the EU is well advanced, but exports remain concentrated
on a few price-sensitive products. International price competitiveness remained
largely unchanged.

4.
Ability to assume the obligations of membership

This section
examines the former Yugoslav Republic of Macedonia's ability to assume the
obligations of membership – that is, the acquis as expressed in the
Treaties, the secondary legislation and the policies of the Union. It also
analyses 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

There was some progress in the area of general
principles. Out of the 42 identified measures within the action plan for
achieving compliance with Articles 34 to 36 of the TFEU, 14 measures having an
equivalent effect to quantitative restrictions on imports and exports have
already been amended or repealed. There is a clear delay in the implementation
of the action plan.

Progress can be
reported in the field of horizontal measures. The Strategy with
milestones for implementation of the acquis for the relevant horizontal
institutions is closely followed and implemented via annual plans of operation
of the quality infrastructure institutions.

In the area of standardisation,
good progress was achieved. European and international standards were adopted
in the fields of machinery, construction products and processes, chemicals,
food and electro-technical devices. 21,131 European standards (ENs) have been
adopted as national standards, mostly by endorsement. A total of 2,998 national
standards give a presumption of conformity to New Approach directives. The
notification of EU standards and standardisation related documents to the European
Committee for Standardisation (CEN) and the European Committee for
Electrotechnical Standardisation (CENELEC) continued, as did the withdrawal of
conflicting standards.

The number of
the assembly members of the Institute of Standardisation (ISRM) increased to 90
stakeholders. The administrative capacity remains insufficient, especially with
regard to the commitment of the ISRM to become a full member of the CEN/CENELEC.
The ISRM has signed cooperation agreements with the standardisation institutes
of France, Azerbaijan, and Ukraine. The government does not allocate sufficient
funds for membership fees in the European standardisation organisations,
contrary to the Law on Standardisation. The shortfall is covered by the modest
revenues of the ISRM.

Following the new Law on accreditation and
the recommendations of the European co-operation for Accreditation (EA), the
Institute of Accreditation (IARM) amended its Charter and a number of rulebooks
and documents on procedures. The IARM currently employs 16 full time
employees, 16 lead assessors, 49 assessors, 57 experts, and 44 candidate
assessors. By 1 September 2011, the IARM has accredited a total of 76
conformity assessment bodies and withdrawn 11 accreditations. Most of the
accreditations granted in 2010 refer to testing and calibration laboratories
and inspection bodies. The 2011 operational budget of the IARM has increased by
77% compared to 2010. Significant resources are allocated for the procurement
of equipment. The multilateral agreements for testing laboratories, calibration
laboratories, inspection bodies and product certification bodies with the EA
have not been signed yet.

As regards conformity assessment,
the number of conformity assessment bodies has further increased to a total of
eight. The Law on Product Safety has been revised in 2011, but it is still not
in conformity with the horizontal framework acquis of 2008 (i.e. the New
Legislative Framework).

In the area of metrology, the
Ministry of Economy set eighteen new standards for measuring instruments and
adopted regulations on alcohol meters and alcohol hydrometers, as well as on
essential requirements for bottles used as measuring containers, with the aim
of transposing the relevant EU acquis. In 2010 the number of calibration
certificates issued by the Bureau of Metrology (BoM) increased by 35% compared
to 2009. The 2011 operational budget of the BoM was increased by about 59% to
nearly €1.6 million. Most of the budget is allocated to the procurement of
equipment for the BoM laboratories. However, the equipment in the laboratories
is not regularly calibrated and none of them have been accredited. The planned
increase of staff did not take place and administrative capacity remains
insufficient.

In 2010, the State Market Inspectorate
(SMI) conducted a total of 331 surveillance actions. Subsequently, it
imposed a total of 75 corrective measures and initiated 10 misdemeanour
procedures. The SMI enhanced the efficiency of its market surveillance
activities by modifying its internal operational practices. Furthermore it
improved its visibility by launching a website and enabling electronic
submission of complaints by citizens. It also issued brochures for consumers
and businesses and a 'Guide through SMI'. The National Programme for
coordination and taking effective measures for market surveillance for
2011-2012 was adopted in November 2010 and the Memorandum of Understanding and
Cooperation between the customs authorities and the market surveillance
authorities was signed in February 2011. The members of the coordinative body
for market surveillance were appointed and, as from January 2011, joint actions
were undertaken by market surveillance authorities for the surveillance of some
products (e.g. toys, medicinal devices and telecommunications equipment).
However, the market surveillance authorities still have limited human
and financial capacities to conduct comprehensive checks on technical
compliance of products. Preparations in the area of horizontal measures are
advanced.

Little progress can be reported in the area
of the 'Old Approach' product legislation. A new Law on chemicals was
enacted, but full transposition of the EU acquis in this area has yet to
be ensured through implementing legislation. Preparations in the area of old
approach product legislation are advancing.

There was some progress in the area of product
legislation under the 'New and Global Approach'. The rulebooks on toy
safety and recreational craft, as well as radio equipment and
telecommunications terminal equipment and by-laws on medical devices came into
force. Their alignment with the acquis remains to be confirmed. In the
area of New and Global Approach product legislation, the country is advanced.

No progress can be reported in the area of procedural
measures. In this area, the country is advanced.

Conclusion

There has been
some progress in the area of free movement of goods, especially in the area of
adoption of EN standards and operational activities of the SMI. The budget for
the implementation of the comprehensive strategy on the horizontal institutions
has increased. However, the framework legislation is still not fully aligned
with the horizontal acquis in the area of free movement of goods. The
quality infrastructure institutions still have insufficient funds for development
and financing the cooperation with their relevant EU counterparts. Full
membership and efficient exchange of information with the relevant EU bodies
are yet to be ensured. Overall, preparations in the area of free movement of
goods are moderately advanced

4.2.
Chapter 2: Freedom of movement for
workers

No progress can be reported in the field of
access to the labour market. The government adopted a decision
determining the number of work permits to be issued to foreigners in 2011 at
3000, and 1146 work permits were issued to foreign citizens in the first half
of the year. The Law on public servants remains to be modified in order to give
EU citizens access to posts in the public service. Preparations in this area
are starting.

Some progress
was made towards preparing for the country's participation in the EURES
(European Employment Services) network. The action plan outlining the measures
and activities for participation in EURES is being implemented. The
administrative capacity of the Employment Service Agency was strengthened by
the employment of two more staff members. Preparations in this area remain on
track.

Little progress can be reported in the area
of coordination of social security systems. Training has been carried
out to strengthen the capacity of the public authorities. An agreement with
Montenegro for coordination of social security systems came into force.
Preparations in this area are moderately advanced.

There was little progress in the area of
the European health insurance card (EHIC). An agreement on the use of
the EHIC entered into force with Belgium in July 2011. Preparations in this
area are at an early stage.

Conclusion

There was
little progress 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

Progress can be reported in the area of the
right of establishment. Implementing legislation was adopted aimed at
simplifying the procedures for granting authorisations. Efforts were made to
eliminate unnecessary formalities and administrative barriers. Electronic
submission of application for establishment was enabled. The licensing regime
under the amended Law on Construction is not yet harmonised with the acquis.

Regarding the services directives, which
have effects on both establishment and cross-border services, the Law on
tourism was amended as to provide for automatic licensing; however, licensing
requirements for tourist guides remain. The action plan for harmonisation with
the Services Directive was updated and its implementation is on track. The
horizontal law transposing the Services Directive has not yet been adopted and
the 'Point of single contact' has still to be designated. Coordination among
the authorising bodies under the leadership of the Ministry of Economy has
improved. Local authorities and also judicial authorities are not yet part of
the coordination process which is aimed at increasing knowledge of European
case law among the relevant services.

There was some progress in the area of the freedom
to provide cross-border services. The Law on trade was amended in order to
align with the Services Directive. The Law on the real estate cadastre was
amended, removing the reciprocity and nationality requirements and providing
for cross-border services. Foreign operators need to establish either a
subsidiary or a branch in order to provide services in the country, which is
incompatible with the acquis. There is no general legal provision in
place allowing the cross border provision of services. Although reciprocity
requirements for legal persons from the EU were removed, the nationality
requirement is still present in several service sectors, including in the
veterinary, private education, tourism and regulated professions. There is an
increased awareness of the obligations arising from the acquis. However,
the administrative capacities of the various authorising bodies remain weak.
Preparations are starting in the area of cross-border services.

Significant progress can be reported in the
area of postal services. A new law on postal services was enacted on 6
December 2010 and the level of alignment with the postal acquis is well
advanced. Further work is required, in particular on further market opening;
period of designation; financing of net costs of universal service obligation.
Besides the adopted primary legislation, the Postal Agency continued with the
adoption of the relevant implementing legislation. The postal market is growing
and there are many operators now active in the market. However, it is also
important to strengthen supervision of the market with a view to preventing the
circumvention of existing legal requirements. Full liberalisation of the postal
services is expected by 2015. The designated universal postal service provider
that holds a monopoly for services weighing below 50 grams has enhanced its
performance, but further improvement of its services is necessary. Preparations
started for privatisation of the part of the designated universal postal service
provider, which is currently fully owned by the state. The Postal Agency as a
national regulatory authority is sufficiently staffed and self-financed. The
regulator has improved capacities to supervise the provision of the universal
postal service and has also imposed regulatory remedies in that regard. It set
up dispute settlement procedures and increased its capacities to enforce its
decisions. Cooperation with the competition authority is at a satisfactory
level. The policy-making capacity of the Ministry of Transport and
Communications in the field of postal services remains weak. In the area of
postal services the country is well on track.

There was progress in the area of mutual
recognition of professional qualifications. The Law on recognition of professional
qualifications was enacted, distinguishing between professional and academic
qualifications. However, the law is not fully in line with the Directive on
Recognition of Professional Qualifications, in particular with regard to
temporary mobility. In addition, requirements concerning nationality, language
and reciprocity remain in the legislation regulating various professions. The
action plan for upgrading the system for mutual recognition was implemented. A
coordination group among the authorising bodies has not been formed yet. A
National Coordinator of the bodies and institutions responsible for recognition
of professional qualifications has not been nominated yet as required by the
Professional Qualifications Directive. Alignment with the Lawyers' Directives
and the acquis on commercial agents and toxic products has yet to be
achieved

Conclusion

In the area of the right of establishment
and freedom to provide services, the country is on track, particularly in the
area of postal services. The level of coordination among the various bodies
responsible for authorising cross-border services has improved. In the area of
mutual recognition of professional qualifications the country is at an early
stage. Overall, preparations in the area of the right of establishment and
freedom to provide services are at an early stage.

4.4.
Chapter 4: Free movement of capital

The country already met the requirements of the first stage of the
Stabilisation and Association Agreement (SAA) in the field of capital
movements and payments in 2008. Further liberalisation is conditional on
the transition to the second stage of the SAA, pending a decision by the
Council. Progress was limited to relaxing some of the restrictions on residents
regarding portfolio investments in foreign markets; however, all restrictions
remained. The restrictions for the amounts of cash that may be carried across
borders and on the amounts of transfers that non-residents can perform through
their local and foreign currency accounts are not aligned with the acquis.
EU citizens are not allowed to purchase agricultural land. This constitutes an
effective barrier to the free movement of capital. Foreign investment has not
kept pace with neighbouring economies. Modernisation of infrastructure has to
be reinforced. The legal provisions preventing nationals from buying foreign
securities, opening accounts in foreign banks, or purchasing real estate abroad
remain. Preparations in the area of capital movements and payments are
moderately advanced.

There was no progress
in the area of payment systems. Preparations for transposition of the
Payment Services Directive were launched. Most of the charges for cross-border
electronic payment transactions remain disproportionate to those for domestic
electronic payment transactions. In the area of payment systems, the country
partially meets its targets.

Some progress
can be reported in the area of the fight against money laundering. The
Office for Prevention of Money Laundering and Financing of Terrorism (OPMLTF)
and the central bank have issued additional implementing legislation on the
prevention of money laundering and financing of terrorism. Reporting from the
financial institutions on all transactions above € 15,000 and from the customs
administration for cash transfers over € 10,000 is now automatic, via a secured
channel. The OPMLFT started to perform inspections in the reporting
institutions (over 54 legal entities in 2010), issued misdemeanour fines, and
carried out temporary seizures of assets. Cooperation with the investigative
and prosecuting bodies and with the foreign financial intelligence units, which
are members of the Egmont group, has improved. (However, in 2010 the number of
reports on suspicious transactions fell by a further 15%; half of them being
sent by banks. The OPMLFT sent 28 reports and 140 notifications to the
investigating and prosecuting institutions. Statistical data-base on the number
of court cases and sentences on money laundering has been established (see
chapter 24 – Justice, freedom and security). Overall, preparations in the
area of combating money laundering are moderately advanced.

Conclusion

Progress in the
area of free movement of capital was uneven and focused on enforcement in the
area of combating money laundering and financing of terrorism. There are still
restrictions on short-term portfolio investments and on cross-border payment
transfers. There are plans for the further liberalisation of the capital
movements and payments 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

Progress was
made as regards general principles. The unit responsible for concessions
in the Ministry of Economy improved its cooperation with other institutions
involved in the public procurement system. The Public Procurement Bureau (PPB)
established a separate IT and accounting unit. The PPB coordinates and monitors
the implementation of the strategy for the development of the public
procurement system for 2010-2012. In 2010, 354 representatives from both
contracting authorities and economic operators were trained in the training
centre of the PPB. Conflict of interest, ethics and anti-corruption in
procurement procedures became a separate training module of the annual training
programme. The PPB continued to cooperate with the State Audit Office, the
State Commission for Prevention of Corruption (SCPC) and the Commission for
Protection of Competition (CPC). However, court statistics on public
procurement related court cases need to be strengthened. The trend of tender
cancellations and failures continued. The capacity of the unit responsible for
concessions in the Ministry of Economy remains insufficient to deal with
large-scale projects. Coordination with other state bodies should be
strengthened in the field of Public Private Partnerships. As regards general
principles, the country is well on track.

Some progress
was made regarding transparency in the award of public contracts. The
ceiling for mandatory e-procurement was raised from 30% of the total estimated
value of all public contracts to 70%. In 2010, 693 contracting authorities and
economic operators received specialised training on the use of the integrated
electronic system for public procurement. The rulebook on the use of this
system was amended to define the criterion of economically most advantageous
tender. A customer support centre became operational. The public prosecutor's
office pressed criminal charges against mayors and directors of medical institutions
for violating the law on public procurement. However, some of the works
contracts under "Skopje 2014" were amended as regards the criteria
prevailing at the time of their award by multiplying the amounts contracted and
increasing the scope of works. The SCPC confirmed that state funds were often
misused for public awareness campaigns, and supplies were delivered while the
respective tender was still ongoing. With regard to the award of public
contracts, the country is moderately advanced.

Progress can be
reported as regards the remedies system. About 12% of all the tenders
launched in 2010 were the subject of appeals. The State Appeals Commission
(SAC) maintained the level of case resolution of around 95% in 2010. The
website of the SAC is regularly updated with both the cases received and the
respective decisions taken. The Law on public procurement was amended to ensure
timely enforcement in case of appeal of decisions of the SAC. The number of
staff increased to 12, but the SAC remains seriously under-budgeted and
understaffed. Full alignment with the amended EU Directive on remedies has yet
to be achieved. As regards the remedies system, the country is moderately
advanced.

Conclusion

Progress was
made in the area of public procurement. The legislation on concessions and
public-private partnerships still remains to be aligned with the acquis.
Procurement procedures have been made more transparent and enforcement was
stepped up, but the administrative capacity of the contracting authorities is
still weak. The legal environment for the enforcement of remedies was improved.
The administrative capacity in the field of remedies and concessions remains
weak. Overall, preparations in the area of public procurement are well
advanced.

4.6.
Chapter 6: Company law

Good progress can be reported in the area
of company law. The Company Law was amended with the aim of aligning it
with the company law directives on disclosure requirements in respect of
certain types of companies; on the exercise of certain rights of shareholders
in listed companies; on cross-border mergers of limited liability companies and
on consolidated accounts of companies with limited liability. The Law on the
one-stop shop was amended to introduce electronic company registry; alignment
with the acquis remains to be confirmed. Alignment with the Tenth
Company Law Directive on cross-border mergers is significant, but the
transposition of Article 16 on employee participation has yet to be achieved.
In the area of company law the country remains well on track.

Little progress
was made on corporate accounting. The rulebook on the form and content
of the annual accounts has been adopted. Full alignment with the Seventh
Company Law Directive, including the conditions for preparation of consolidated
accounts, has still to be achieved. A Law on public oversight in the area of
accounting has still not been adopted.

Good progress
can be reported as regards auditing. A new Audit Law was enacted with
the aim of partially aligning with the Directive on statutory audits of annual
accounts and consolidated accounts. The law provides for the establishment of a
public oversight body to supervise and promote the audit profession. The
Council for audit promotion and supervision is in the process of being
established as an independent regulatory body. The Institute for Chartered
Auditors (ICA) undertakes quality control reviews and has become an affiliated
member of the International Federation of Accountants (IFAC). The ICA now has
the status of a legal entity; however, it remains understaffed. Chartered
auditors' qualifications obtained abroad have yet to be recognised. Overall, in
the area of corporate accounting and auditing the country is moderately
advanced.

Conclusion

Good progress
was made in the area of company law. The Company Law was amended to further
align it with the acquis. A quality control system and a public
oversight body are being established; however, the legal framework in the area
of auditing remains only partially aligned with the acquis. The Institute
for Chartered Auditors is now an affiliated member of the International
Federation of Accountants, but its administrative capacity remains weak.
Qualifications obtained abroad have yet to be recognised. Overall, preparations
in the area of company law partially meet their targets.

4.7.
Chapter 7: Intellectual property
law

There was some
development in the area of copyright and neighbouring rights. The Law on
copyright and neighbouring rights improved the framework for the licensing of
collective rights management (CRM) societies and set a deadline of September
2011 for renewal of the old licences. Alignment of the law with EU acquis
remains to be confirmed. However, the CRM societies remain inactive and/or
are still to obtain their licences under the new Law on copyright. The
administrative capacity of the unit responsible for copyright in the Ministry
of Culture remains weak. In the area of copyright and neighbouring rights, the
country is moderately advanced.

Good progress
was made in the area of industrial property rights. The Law on
industrial property was amended to better protect the geographical names of
agricultural products and to increase the competences of the State Market
Inspectorate (SMI) when seizing counterfeit items. Furthermore, the Law on
ratification of the Lisbon Agreement for the Protection of Appellations of
Origin and their International Registration was adopted. The State Office for
Industrial Property (SOIP) signed a 2010-2012 action plan for cooperation with
the European Patent Organization. Some management staff of the SOIP resigned;
however, a total of 33 staff is sufficient. Activities to raise awareness of
intellectual property rights (IPR) continued. Under the TEMPUS programme, the
Centre for Intellectual Property Education launched the first specialised
master studies on IPR starting with the 2010-2011 academic year. As part of the
curriculum for continuous training of the Academy for Judges and Prosecutors,
405 members of the judiciary were trained on IPR in 2010. In the area of industrial
property rights, the country remains well advanced.

Progress can be reported as regards enforcement.
The Coordination Body for Intellectual Property (CBIP) in 2010 undertook 23
coordinated actions throughout the country to combat piracy and counterfeiting.
The CBIP continued to seize counterfeit goods, mainly audio/video CDs,
clothing, cigarettes and alcohol, but also toys, software and broadcasting
equipment. Cooperation with the Agency for Managing Confiscated Property
continued and about 180,000 goods that were the subject of a court decision
were publicly destroyed in 2010. The distribution of competences between the
law enforcement institutions (SMI, the Customs administration and the Ministry
of Interior) remains unclear. Seizure of counterfeit pharmaceutical products
started in cooperation with the Bureau on pharmaceuticals, but consumers'
awareness of their health risks and threats to their safety remains limited.
The number of misdemeanour, civil and criminal proceedings increased; 91 out of
152 cases dealt with by the specialised IPR departments of the 13 basic courts
were completed in 2010. 34 fines of between €200 and €1,600 were imposed on
legal entities, and 10 individuals were sentenced to 6 months' imprisonment.
However, counterfeit products continued to be sold on temporary stalls in the
streets, markets and outlets. The trade in counterfeit medicines and fake
products via the internet is not subject to criminal prosecution. There is
still no reliable enforcement record. A methodology for collecting statistical
data has yet to be developed. A system for exchanging data between the law
enforcement institutions has yet to be established. Counterfeit channels remain
untraced and little was done to tackle the 'counterfeit pyramid'. A central
body is needed in order to bring together the various institutions and
authorities involved in enforcement related activities and to fully assess the
current situation and develop a national strategy and action plan.

Conclusion

Some progress
was made in terms of the IPR legal framework. The framework for the licensing
of collective rights management societies was improved. The powers of the State
Market Inspectorate when seizing counterfeit items were increased. Law
enforcement institutions continue to cooperate, but their respective
responsibilities with regard to enforcement of intellectual property rights
remain unclear. Although the actions of the CBIP continued on a regular basis,
counterfeiting and piracy remains widespread. The track record on investigation,
prosecution and judicial handling of piracy and counterfeit is not
satisfactory. Counterfeit and piracy are not addressed as an aspect of
organised crime. The level of awareness of intellectual property rights among
the public remains low. Overall, preparations in the area of Intellectual
property law are advancing.

4.8.
Chapter 8: Competition policy

Good progress
can be reported in the area of anti-trust, including mergers. The new
law on protection of competition entered into force in November 2010. It
strengthens the enforcement powers of the Commission for Protection of
Competition (CPC) in the anti-trust area by introducing leniency measures, and
removes the suspension clause for sanctions under administrative decisions.
However, in the case of misdemeanour procedures the suspension clause can still
delay the enforcement of the decisions of the CPC.

The number of
staff in the CPC dealing with anti-trust and mergers increased by one, but is
still insufficient. The enforcement record remains low in the area of cartels.
The general budget of the CPC for 2011 has decreased slightly compared to last
year and remains inadequate. Judges in the Administrative Court working on
competition cases received some training on anti-trust and mergers. Overall, preparations
in the area of anti-trust, including mergers, are at an advanced stage.

The percentage
of CPC decisions confirmed by the Administrative Court has increased. Compared
to 2010, the enforcement record has increased in the field of mergers but
remains low in the area of cartels. Since October 2010, the CPC has adopted one
decision on a prohibited agreement, four decisions in cases involving abuse of
dominant position and fourteen decisions on mergers.

There was some
progress in the field of State aid. The new law on State aid was
enacted. It allows for simpler administrative procedures before the CPC. The
number of staff dealing with State aid is sufficient. The number of decisions
taken by the CPC in the field of State aid has increased - since October 2010,
it has adopted six decisions. However the quality of the decisions, in
particular with regard to the question of the qualification of the aid, needs
to be improved. Awareness activities were organized for State aid providers,
particularly on the provisions of new law. The number of reporting institutions
increased, in particular among large providers of aid. However, some are still
reluctant to notify aid to the CPC.

There was little progress in the field of
market liberalisation. Recent amendments to the energy law, adopted in spring
2011, have led to an increase in competition and transparency in the
electricity sector. In the energy sector, most of the (lignite) coal reserves
are still being managed by the electricity generation company and there is
still no clear legal and financial separation between the lignite excavation
activities and operation of the thermal power plants. Gas and electricity
markets are dominated by single suppliers who undermine effective competition.

Conclusion

Some progress
was made in the area of competition. In the field of mergers and State aid the
enforcement record has improved in quantitative terms, but it remains low in
the field of cartels. The quality of the decisions in the area of State aid
needs to be further improved. The CPC does not have adequate budgetary
resources. The number of staff is adequate to cover State aid matters, but
insufficient in the area of anti-trust and mergers. Overall, preparations in
the area of Competition Policy are moderately advanced.

4.9.
Chapter 9: Financial Services

There was good
progress in the area banks and financial conglomerates. The law on the
deposit guarantee fund, increasing the amount of guaranteed deposits, was
adopted. It will be fully applied by the time of accession. The law on
financial companies which regulates the non-bank credit institutions was also
adopted.

Preparation of
legislation in the area of banks and financial conglomerates is well advanced.
However, further efforts are needed in order to keep track of the latest
regulatory developments at international level. Moreover, financial intermediation is hampered by weak
competition in the sector and a high risk-aversion of the banking sector.

New legislation
has been introduced requiring the banks and the financial institutions to
provide consumers with full information on their products and services.
However, the implementation of this legislation remains a challenge and the
protection of consumers is not properly addressed.

The central
bank, the National Bank of the Republic of Macedonia (NBRM), issued
several pieces of implementing legislation relating to credit and operational
risk management and management of banks under administration. Cooperation
continued with the supervisory authorities of those countries whose banks own
some of the largest banks in the country. The capacity of the NBRM for proper
implementation and enforcement of regulations is satisfactory. The Basel II
Accord for risk-based supervision is being applied gradually: pillars 2 and 3
are fully applied. However pillar 1, crucial for Basel II, will only be applied
from January 2012 onwards. The transposition of the Capital Adequacy Directive
for investment funds and credit institutions has not been completed.

Good, but
uneven, progress can be reported in the area of insurance and occupational
pensions. The law on insurance supervision was amended in order to bring it
into line with the law on prevention of money laundering and the Criminal Code.
Some of the acquis under the Solvency I directive, including the acquis
on risk-based supervision and off-site reporting requirements, was transposed;
alignment remains to be confirmed. The enforcement record of the Insurance
Supervisory Agency (ISA) improved; it now performs both on-site and off-site
supervision. The capacity of the ISA and its cooperation with the supervisory
authorities of the insurance companies that have local subsidiaries are
adequate. Foreign-owned insurance companies reinsure most of the risk
undertaken by the local subsidiaries, in particular that related to larger
clients. The guarantee fund for insolvency of insurers is now sufficient; the
required capital and solvency margin are above the required levels. However,
there is no enforcement record in combating offences committed by uninsured
drivers. The legislation implementing the Law on vehicles, which regulates
vehicle registration and insurance, will be applied from the 1 January 2012.
The provisions in the Law on compulsory insurance of road vehicles authorising
the Ministry of Finance to set the premiums for motor vehicle insurance, which
constitute an effective barrier to competition among the insurance companies,
have not been removed.

The law on
fully-funded pension insurance was amended in order to lower the sanctions.
Further legislation implementing the Law on fully funded pension insurance was
issued by the Agency for the supervision of fully funded pension insurance
(MAPAS). The MAPAS launched the preparations for the introduction of risk-based
supervision. The new regulations will be modelled on International Organisation
of Pension Supervisors best practices; however, they are not linked to the
Basel principles. The country's pension scheme, which is based on defined
contributions, differs from the model applied in most of the EU countries;
hence the respective EU acquis for supervision of the institutions for
occupational retirement provisions cannot be applied. Pension funds can now
invest a small part of their portfolio in equity capital and in municipal
bonds, in order to stimulate SMEs and local development. The limitation on
investing in non-domestic securities continues, which is contrary to the
principles of EU law. However, the limit was relaxed to 50% (30% in 2010). The
financial independence of MAPAS was not fully ensured, despite the separation
of the MAPAS budget from the Ministry of Finance, which still gives prior
approval regarding the management of MAPAS assets. No previous experience
related to financial supervision or capital markets is required for appointment
to the MAPAS management. Its overall administrative capacity is weak, and
exposed to turnover of experienced staff. MAPAS has limited leverage over the
institutions it supervises. In the area of insurance and occupational pensions
the country partially meets its objectives.

Progress was
made in the area of financial market infrastructure. The financial
stability committee and the financial services supervisory committee meet
regularly. A new law on leasing, introducing soft supervisory standards was adopted.
In the area of financial market infrastructure the country is moderately
advanced.

Progress can be
reported in the area of securities markets and investment services. Most
of the present directives on market abuse, markets in financial
instruments, investors' compensations schemes, transparency and prospectuses,
are already transposed; alignment remains to be confirmed. Further steps need
to be taken to achieve alignment with Directive 2007/16 and other developments
in the EU acquis relating to undertakings for collective investment in
tradable securities (UCTIS IV package). Furthermore, the frequency with which
the supervisory regulations of are amended makes implementation by the capital
market undertakings cumbersome. As regards administrative developments, the
Parliament has elected four new members and re-elected the President of the
regulator, the Securities and Exchange Commission (SEC); all of them will be
full-time employees of the SEC. Moreover, steps were taken to distinguish the
competences of the Central Bank and the SEC in the area of licensing and
supervision of trading in securities, while the SEC's cooperation with other
domestic authorities was strengthened. The IT system of the SEC was upgraded
and is now adequate. However, the number of SEC staff is still not sufficient.
On an international level, the SEC has signed the International
Organization of Securities Commissions Multilateral
Memorandum of Understanding.

Conclusion

There was
overall good progress in the areas of banking, insurance and securities markets
and investment services. The laws on the deposit guarantee fund and on distance
marketing of financial services were adopted, the Basel II accord for
risk-based supervision is being gradually applied and the preparation of remaining
legislation in the area of banks and financial conglomerates is advancing. The
Insurance Supervisory Agency has started with enforcement through on-site and
off-site supervisions. New legislation regulating other financial services has
been introduced, such as leasing and non-banking financial companies and steps
were taken to distinguish the competences of the Central Bank and the SEC in
the area of licensing and supervision of trading in securities. However,
alignment remains to be confirmed for some newly transposed legislation. The
independence and the enforcement capacity of the MAPAS remain to be addressed.
Recent developments in the EU law will need to be taken into account. Overall,
in the area of financial services, alignment with the acquis is on
track.

4.10.
Chapter 10: Information society and
media

There was good progress in the area of electronic
communications and information technologies. The regulator adopted
implementing legislation aimed at improving competitive conditions and
introduced most of the key competitive safeguards. The implementation of cost
accounting obligations would ensure that operators follow fair, objective, and
transparent criteria when allocating costs to services. The regulator has
obliged operators to make provision for greater protection of consumer rights
by adopting consumer rights regulation by obliging service providers to publish
all conditions for access, pricing and tariffs. The MVNO regulation (mobile
virtual network operator) was introduced and procedures were launched for the
regulation of next generation access networks. The regulator analysed all
relevant markets for electronic communications and made headway in imposing
regulatory remedies. Relevant markets that are sufficiently competitive are no
longer subject to ex-ante regulation. High fees charged by the regulator to the
operators exceeding the level necessary to cover the administrative costs
called into question the non-profit nature of the regulator and may constitute
a barrier to market entry, in contradiction to the acquis. The regulator
appointed a new Director; however, the appointment process raised concerns
about possible politicisation. The level of cooperation with the competition
authority has improved as a start was made on coordination of ex-ante measures
imposed by the regulator with ex-post measures by the competition authority. A
universal service provider was designated. Preparations for the introduction of
the emergency number 112 have advanced. The administrative capacity within the
competent ministry has yet to be strengthened. In the area of electronic
communications and information technologies, the country is advanced.

There was progress in the area of information
society services under the responsibility of Ministry of Information
Society and Administration, notably in the area of online public services.
Amendments to the Electronic Commerce Act were adopted which were aimed at
completing alignment in this field, in particular by establishing a national
contact point, which has yet to be put into operation. An e-inclusion strategy
was adopted. Internet shopping in the country remains at a low level. A new 'threshold'
on internet trading with a high customs tariff is not in line with the current
strategy to promote the digital economy. A national internet exchange point is
yet to be established. In the area of information society services, the country
is advanced.

There was some progress in the area of audiovisual
policy. The Broadcasting Law was amended, putting the Public Revenue Office
in charge of collecting the broadcasting fee on behalf of the Public Service
Broadcaster. The number of members of the Broadcasting Council increased from
the current 9 to 15. The Broadcasting Council's market monitoring activities
increased, but remain insufficient. Cooperation with the competition authority
intensified, but legislation on copyrights and on media ownership and
concentration is still not fully enforced. Piracy is widespread, notably in the
cable TV networks. Sustainable funding of the public service broadcaster and
the Broadcasting Council is yet to be secured. The public service broadcaster
does not currently fulfil its statutory role to provide informative,
educational and entertaining programmes. The process was launched for the adoption
of a new Law on electronic media aimed at aligning with the Audiovisual Media
Services Directive. Preparations have started for the introduction of mobile TV
services and second generation digital television. The government adopted an
Action Plan for digital switch-over and use of the digital dividend; however,
the switch-over was postponed to 2013, thereby hindering investments in the
market. Use of the operators' money for the digitalisation of the public
broadcaster is not in line with best European practices. Intrusions into media
freedom hindered the uninterrupted functioning of the media without political
interference. Large fines are imposed for defamation of public figures, which
is contrary to European case law. In the area of audiovisual policy the country
needs to step up its efforts to align with the acquis.

Conclusion

Progress was made in the field of
electronic communications and information society services. Alignment with the
EU acquis is advancing and most of the key competitive safeguards were
introduced. The country's approximation with Digital Agenda Europe actions is
progressing. Some progress can be reported in the area of audiovisual policy,
including an Action Plan for full digital switch-over and use of the digital
dividend. However, the country only partially meets the EU requirements in this
area. Further efforts are necessary with regard to the capacity of the
Broadcasting Council whose ability to monitor the market effectively remains
inadequate. The public broadcaster is failing to fulfil its statutory role.

4.11.
Chapter 11: Agriculture and rural
development

Horizontal
progress was made. Implementing legislation was enacted in the fields of
agricultural and rural development support policy, including direct payments,
and market support measures. For 2011, a total of € 101 million is allocated
for direct support schemes; this includes area and headage payments, premium
payments for strategically important products, and non-commodity based
payments. Institutional capacity remains a concern, with restrictions in
budgetary allocations in 2011 for salaries of public servants in the sector
compounded by uneven progress in filling vacant posts.

Good progress can be reported towards
setting up an Integrated Administration and Control System (IACS). The Land
Parcel Identification System (LPIS) is in an advanced stage of development; and
farmer registration is on-going. The real estate register currently covers 99%
of the country. The farm register, with a supporting automated IT system, is fully
functional and is being used in the supervision of national support schemes in
2011. However, internet and server capacity is a constraint, particularly at
times of peak activities. Compatibility of data registers is progressing,
although it has not yet been fully achieved. Institutional capacity to manage
and maintain a functioning IACS is insufficient.

There was some progress in improving the
capacity of the paying agency (the Agency for Financial Support for
Agriculture and Rural Development — AFSARD). Staff employed in AFSARD has a
wide range of responsibilities, covering both national support schemes and
existing and planned additional Instrument for Pre-Accession Assistance for
Rural Development (IPARD) measures under Component V. However, despite high
levels of motivation and training, their number is insufficient. Preparations
for implementation of the European Agricultural Guarantee Fund (EAGF) (direct
payments) are being initiated through the introduction of relevant implementing
legislation. Limited progress is evident in the development of a sustainable
and efficient agricultural information system. The activities of the Pilot Farm
Accountancy Data Network (FADN) continue. Provision of support in agriculture
was strengthened. Preparations in the area of horizontal issues are moderately
advanced.

Regarding animal products, implementing
legislation for poultry and eggs and honey has been adopted. Harmonisation of
legislation with the acquis has continued for specialised crops,
principally through the adoption of implementing legislation on wine.
Institutional capacity to implement and enforce the legislation in force has
been strengthened. The legal basis is in place for implementation of market
support measures such as intervention for a restricted number of commodities,
consumption promotion, and producers' organisations. Alignment with the EU
common market organisation is limited. Preparations in this area are being
initiated.

Alignment with the acquis in the
area of specialised crops is on track, particularly for wine.
Implementing legislation on wine was introduced, relatingd principally
to the registration of producers and control of processing facilities. However,
the implementing law concerning geographical indications remains to be fully aligned
with the acquis.
Implementing rules for fruits and vegetables have been enacted and an ambitious
timetable has been set for other products.

Further progress can be reported in the
field of rural development. Implementation of the IPARD programme under
component V continues for three measures 'Investments in agriculture holdings',
'Processing and marketing' and 'Diversification in rural economy'. To date,
three calls for proposals have been completed and fourth launched. The
associated commitment for the four proposals under IPA Component V totals €M
4.67. Nevertheless, the absorption of allocations for 2007 and 2008 under IPA
Component V, totalling €M 8.8, remains a concern. The institutional capacity of
the Ministry of Agriculture, Forestry and Water Economy
(MAFWE) Managing Authority was strengthened.
Preparations for accreditation of the Technical Assistance measure were renewed
with a view to finalisation by the end of 2011.

Continuing progress can be reported in the
field of quality policy. Implementing legislation for the legal
framework covering regulation of marketing standards, requirements on
presentation and consumer labelling, and the establishment of quality schemes
were introduced. This was supported by institutional restructuring and
strengthening.

There was further progress with organic
farming. The law on organic production was strengthened, principally in the
fields of registration of producers, and control of permitted and non-permitted
inputs. Alignment with the acquis remains to be confirmed. Numbers of
registered organic producers, as well as total organic production, continue to
increase. A budget of € 1.79 million was allocated in 2011 to support organic
production. Administrative capacity is insufficient to meet acquis
obligations. Preparations in this area are back on track.

Conclusion

Further progress was achieved in the field
of agriculture and rural development. Key support policies for agriculture and
rural development are gradually being aligned with EU requirements. Alignment
with the acquis requires continuing sustained efforts. Administrative
capacity remains a concern throughout the sector. Overall, preparations in the
area of agriculture and rural development are moderately advanced.

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

Good progress was made as regards the general
principles. A new food safety law was enacted. The Law lays down the
general principles and requirements of an integrated system for safety of food
and animal feed, general and specific hygienic requirements for food safety,
and organisation of the food safety system, including official controls.
Starting from 1 January 2011, an independent Food and Veterinary Agency (FVA)
was established by a merger of the Food Directorate of the Ministry of Health
and the Veterinary Directorate of the Ministry of Agriculture, Forestry and
Water economy, to provide more coherent approach in the sector. Staffing of the
FVA still needs some strengthening.

Progress was made in the area of veterinary policy. Additional implementing legislation on control
systems was adopted. A system for the collection, processing and disposal of
animal by-products remains to be put in place. The capacity of systems for the
control of imports was improved by opening two new border inspection posts at
the border crossing point of Tabanovce and Skopje Airport. Since January 2011
all formalities for import of animals and animal by-products are the
responsibility of the veterinary inspection at the border.

The part of the
system for identification and registration of bovines, sheep and goats
which deals with movement control has been improved, but it does not cover all
the movements. Corrective measures have been adopted to address shortcomings in
identification and registration of animals, but the FVA administrative capacity
remains weak. Good progress was made in the area of control measures for
animal diseases. The FVA is implementing the programme for oral
vaccination of foxes, based on a developed action plan and corresponding
implementing legislation. Surveillance programmes for rabies and classical
swine fever are in an initial phase of implementation. A programme for the
control and eradication of transmissible spongiform encephalopathies was
adopted. Measures for control and eradication of Newcastle disease and African
horse sickness have been adopted, alignment remains to be confirmed. The FVA is
implementing a programme for eradication of brucellosis. Although clear
progress has been made in the areas where small ruminants are mass vaccinated
against brucellosis, the prevalence of disease is maintained or increased in
other regions. The national control plan on salmonella in hens is not
implemented due to lack of funds. The capacities of the FVA, although
strengthened, remain insufficient to perform systematic controls in relation to
transmissible animal diseases. The 2011 budget for veterinary expenditure on
measures for animal health was reduced by 18% as compared to 2010; the total
budget is required for payment of arrears carried over from 2010. The costs of
implementation of the 2011 programme are foreseen to be paid from the 2012
national budget.

Some progress
was made in the area of animal welfare. Implementing legislation
transposing the acquis was adopted; alignment remains to be confirmed.

Some
implementing legislation on intra-Community trade in live animals, semen,
ova and embryos, remains to be adopted. The aim of the existing legislation
on non-commercial movement of pet animals and on import requirements
for live animals and animal products aims is to transpose the acquis;
alignment has yet to be confirmed. No new international veterinary agreements
were signed during the reporting period. The capacity to transpose
and implement the acquis on zootechnical issues was strengthened.
A programme for livestock breeding was adopted.

The
laboratories of the veterinary faculty were nationally accredited to ISO 17025
standard for an additional 89 laboratory methods. A system for the supervision
of veterinary inspectors and veterinary stations was established. The
administrative capacity of the veterinary inspection remains insufficient, at
both central and local level, to implement an EU-compatible control system. In
the area of veterinary policy, the country is advanced.

Some progress
was made in the placing on the market of food and feed. The aid schemes
for HACCP were prolonged to 2011 and training events provided for food business
operators (FBO). The FBOs do not always apply the HACCP based procedures
correctly and official controls are not always conducted in accordance with the
legal requirements. The new food safety law provides a comprehensive legal
basis for the formal categorisation and upgrading of the food business
operators. Evaluation of food processing establishments for compliance with EU
standards is not always performed correctly. The existing legislation
transposes the acquis on hygiene rules, specific rules for animal
products, control rules and specific control rules for
animal products still remains to be adopted. Planned activities for
improving the quality of the raw milk are not implemented.

Implementing rules,
covering the control and
management of animal by-products, were adopted. The necessary collection and treatment systems have
not yet been set up. Development of a strategy for
management of animal by-products is in progress. Preparations
in this area are being initiated.

Some progress
can be reported in the area of food safety rules. Implementing
legislation was adopted on the safety of food for particular nutritional uses
and food supplements. The legislation aims at transposing the acquis on food
contact material, labelling, food additives, flavourings, quick-frozen
foodstuffs, contaminants, novel food, ionising radiation and mineral waters.
Implementing legislation on extraction solvents and fortified food
has yet to be adopted. The capacity of the laboratory in the Institute for
Health Protection is still insufficient to provide reliable results with
respect to both human resources and procedures. The capacity of the food
inspectorate was strengthened, but the number, training and competence of staff
remain insufficient. The annual monitoring programme for food safety was
adopted and is in the implementation phase. Preparations in this area
are being initiated.

Progress was
made on specific rules for feed. A law on animal feeding was enacted.
The implementing legislation remains to be adopted.

Progress can be
reported in the area of phytosanitary policy. Implementing legislation
was adopted in all areas, including on plant health, plant protection
products, quality of seeds and propagation materials and plant
variety rights. A new list of authorised active substances intended for plant
protection products was adopted. No action was taken to implement the
international standards for phytosanitary measures, in particular for
surveillance, export certification and determining pest status in an area.
Despite some recruitment, the administrative capacity of the phytosanitary
directorate needs further strengthening.

Coordination among the various
competent authorities in the area of phytosanitary policy has not improved. Two
new phytosanitary border inspection posts were opened at the border crossing
point of Tabanovce and Skopje Airport. Preparations for accreditation of the
state phytosanitary laboratory are ongoing. Its capacity has improved, but
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 the area have been initiated.

No progress has been observed in alignment
with the acquis as regards the release into the environment of genetically
modified organisms (GMOs) and genetically modified food and feed.

Conclusion

There was good progress in the area of food
safety, veterinary and phytosanitary policy, in particular with respect to the
adoption of the new food safety framework law, establishment of the new Food
and Veterinary Agency and implementation of various animal disease eradication
programmes. The administrative capacity of the Food and Veterinary Agency, in
terms of both the number and the competence of its staff, is still insufficient
to ensure proper implementation of the acquis. Preparations in the area
of food safety, veterinary and phytosanitary policy are well on track.

4.13.
Chapter 13: Fisheries

There was
limited progress in the field of resource and fleet management. Preparations
in this area are on track. The acquis requirement on fleet registration
is not applicable.

Limited
progress was made in the area of inspection and control. Implementing
legislation was enacted that reinforces the Law on Fisheries and Aquaculture.
However, 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, is insufficient.
Preparations in this area are being initiated.

Some progress
was made in the field of structural actions. Implementing legislation
was enacted to cover the control of, and procedures related to, recreational
fishing. For 2011, €1 million is allocated for support schemes.

Progress was
achieved in the field of market policy. MAFWE has established a register
of all State aid approved in the fisheries sector. National schemes
remain to be aligned with the EU's structural and State aid policies, in
particular regarding support for the stocking of fish waters.

There are no
formal international agreements. Informal working arrangements continue
with Albania and with Greece, covering the management of resources in Lakes
Ohrid, Prespa and Dojran, whose waters are shared.

Conclusion

There was some
progress in the area of fisheries. Administrative capacity is still insufficient.
Since the country is landlocked, a large proportion of the fisheries acquis is
not relevant. Preparations for implementation of the common fisheries policy
are being initiated. Preparations in the area of fisheries are moderately
advanced.

4.14.
Chapter 14: Transport policy

Good progress
can be reported in road transport. The work of the Road Safety Council
was improved; safety campaigns were implemented according to their annual plan.
Implementation of the legislation on digital tachographs has started and all
the necessary structures were put in place. The Law on road transport was
amended with a view to aligning it with the acquis on market access. The State
transport inspection capacity was strengthened, and specialised equipment and
further training events were provided. However, the number of inspections is
still insufficient. The administrative capacity for implementing the road
safety policy, and the social acquis, needs further improvement.
Preparations in the area of road transport are well advanced.

There was considerable progress in the rail
transport. A new law on interoperability was enacted by the Parliament. The
Safety Authority was established as entity within the transport ministry, but
its administrative capacity needs to be strengthened. Legislation on the
licensing of train drivers was adopted to transpose EU rules, but it will only
be applicable after accession of the country to the EU. The safety authority
issued a series of vehicle authorisations, some of them according to EU Technical
Specifications of Interoperability. The accident investigating body,
established in early 2010, was not effective. Preparations for a new, full-time
body within the government Secretariat General are ongoing. Additional efforts
are still needed in order to implement and enforce the acquis. The level of track-access charges still adversely affects the
competition of rail with road transport. The Railway Regulatory Agency is a
regular participant in the EU working group of rail regulators. Burdensome, non-transparent
and costly licensing and safety certification procedures and ensuing court
proceedings have had a discouraging effect on companies from entering this
monopolistic market. As a result, there is still only one operator. The Joint
Border Crossing Agreement with Kosovo has been signed.

Little progress
was made in the area of inland waterways transport. Implementing
legislation on the requirements of ships' crew members was adopted. A safety
inspection and licensing function was established and started to operate.
Preparations in this area are advanced.

No progress can
be reported in the area of combined transport. Preparations are on
track.

Limited
progress can be reported in the area of air transport. The Civil
Aviation Agency, which is the independent regulatory body, has become
operational. However, the human resources have not yet been strengthened. The
reduction of the financial resources of the Civil Aviation Authority in the
amendment to the Aviation Law has not been resolved. For some of the
requirements under the first phase of the European Common Aviation Area
agreement as regards air traffic management, aviation safety and security,
national implementation measures have been put into place. Several important
pieces of the Single European Sky legislation have been correctly transposed,
but significant efforts are needed in order to complete regulatory alignment.
In order to meet the obligations of the first transitional period in accordance
with Protocol V of Annex V to the ECAA Agreement, the transposition of the
interoperability regulation and the airspace and the flexible use of airspace
regulations need to be finalised, and the airspace needs to be reconfigured
into a functional airspace block. Although the associated National Supervisory
Authority has been established, efforts are still needed to ensure its proper
functioning and sustainable structure. The Air Accident Investigation Committee still
needs to be established. The air-navigation services
company staff still lacks relevant expertise. The administrative capacity of
the air traffic department of the Ministry of Transport and Communications was
strengthened. Overall, there is still a lack of adequate administrative
capacity in the air transport sector. In the area of air transport,
preparations are moderately advanced.

No development
can be reported in the area of satellite navigation. Preparations for
establishing technical assistance for the implementation of the satellite
navigation programme, once it is operational, are ongoing.

Conclusion

Progress can be
reported in the area of transport policy, particularly in the area of road and
rail transport. The implementation of digital tachographs has started. A new
law on railways interoperability was adopted and a Safety Authority was
established. The Safety Authority needs to introduce safety certification
procedures. The administrative capacity in each regulatory transport authority
needs further strengthening. The Accident Investigation Committees, in both
rail and air transport, need to be strengthened in order to act as an
independent body for investigating accidents and serious incidents. Overall,
preparations in the area of Transport policy are advanced.

4.15.
Chapter 15: Energy

Progress can be
reported in the area of security of supply. Legislation was aligned with
the directives on security of electricity and natural gas supply. The
Directorate of Compulsory Reserves of Oil and Oil Derivatives proceeded to
implement the medium-term programme 2010-2015 for the establishment of mandatory
reserves. At the beginning of September 2011, oil stocks were equivalent to
only 33 days' average consumption. Alignment with the new oil stocks directive
remains to be achieved. In the area of security of supply the country partially
meets its objectives.

There was good
progress in the area of the internal energy market. A new comprehensive
energy law, aligned with the obligations deriving from the Energy Community
Treaty, was enacted. The new energy law envisages the full opening of the
electricity market to all non-household customers by mid-2012, and it
strengthens the competences and independence of the Energy Regulatory
Commission (ERC). The ERC adopted rulebooks on licences and on awarding
cross-border transmission capacities. The ERC amended the rulebook on the
method and conditions for regulating electricity prices, and started
preparations on a new tariff system for electricity transmission and
distribution for the 2012 regulatory period. The subsidy scheme for vulnerable
customers was extended to 2011. The dispute with the distribution system
operator, a major EU investor, was resolved. The dispute settlement procedure
opened by the Energy Community Secretariat on this case has been closed.
Electricity prices for households increased in 2011 by more than 5%, but still
do not reflect costs. Market rules are still under preparation. Collection
rates for power bills remain insufficient to ensure the viability of the
system.

The new energy
law stipulates the unbundling of natural gas supply from transmission. The
ownership of the gas transmission pipeline system remains unresolved between
the government and the distribution company.

The
administrative capacity of the ERC was further strengthened: two new staff
members were employed, and the ERC continued to benefit from extensive
training activities of two IPA 2007 projects. The staff numbers of the energy
department of the Ministry of Economy stayed unchanged at 14. The
administrative capacity remained insufficient to address all energy policy challenges.
In the area of the internal energy market the country is moderately advanced.

Progress was
made in the area of energy efficiency. The national energy efficiency
action plan, in line with the commitments of the Energy Efficiency Task Force
of the Energy Community, was adopted in April. An energy saving campaign was
carried out. The Ministry of Economy adopted rulebooks on labelling and high
–efficiency co-generation plants, and a decree on eco-design. The Energy Agency
still lacks the necessary resources and administrative capacity to effectively
promote energy efficiency and renewable energy sources. In the area of energy
efficiency, the country has started to address its objectives.

In the field of
renewable energy, a new rulebook on renewables and the decree for
feed-in tariffs were adopted. The government took a decision confirming the
renewable energy target for 2020 of 21%, and submitted a simplified renewable
energy action plan for implementation of the strategy to develop renewable
energy sources to the Energy Community Secretariat. The country was for the
first time eligible for participation in the 2011 call for proposals for the
Intelligent Energy program. However,
the memorandum for participation in the program is not yet signed.
The first 8 small hydropower plants are currently under construction. The
government issued an authorisation for the construction of the pilot wind farm
Bogdanci with an installed capacity of around 50MW. Preparations in the area of
renewable energy are ongoing, but the country is not making full use of its
renewable energy potential. Further efforts are needed to improve the share of renewable
energy in final energy consumption.

The country has
no nuclear energy. A study was commissioned for assessing the
feasibility of constructing a nuclear power plant as an option to meet energy
demand from 2020.

Some regulatory
progress was made regarding nuclear safety and radiation protection. The
national emergency plan was adopted in June. The compliance with the acquis
of existing regulations in force remains to be verified. Memorandum of
understanding for cooperation between the Radiation Safety Directorate (RSD)
and its counterpart in Montenegro was signed. The administrative capacity of
the RSD remains satisfactory; however, implementation of the law cannot be
effectively monitored as the RSD has only two inspectors. The 2011 budget for
the RSD was substantially reduced, and the RSD is still not financially
independent from the Ministry of Health, although it is still in charge of
licensing medical practices. The envisaged storage facility for radioactive
waste has not yet been licensed: the current design does not meet international
standards and the necessary environmental impact assessment has not been
carried out.

Conclusion

Good progress was made in the energy
sector, in particular in enacting the new comprehensive energy law and
resolving the long-standing dispute with the distribution system operator.
However, an effectively functioning electricity market has yet to be established,
and conditions for competition ensured. The country's energy efficiency and
renewable energy potential has not yet been adequately exploited, and the
financial independence of the radiation protection regulator is still not
secured. Preparations in the area of Energy are moderately advanced.

4.16.
Chapter 16: Taxation

There was limited progress on harmonisation
of legislation in the area of indirect taxation. The rate of value
added tax (VAT) for medical equipment and other devices for personal use to
alleviate or treat disability was reduced from 18% to 5%, which is compatible
with the acquis. The VAT registration threshold was increased from 2011
to approximately € 32,000 which is generally in line with the thresholds
applied by some EU Member States. The Law on excise duties was amended
with a view to discouraging the misuse of marked mineral
oils as fuel for vehicles instead of for heating and to increase the amounts of
fines for certain types of offences. Legislation on VAT and excise is
only partially aligned with the acquis, some rates for excise remain
lower than the minimum required. Preparations in this field remain on track.

No progress was
achieved in the area of direct taxation. The Law on profit tax was amended, however issues such
as potential discrimination against non-resident legal persons
for payment of tax on dividends and the future application of the
Parent-Subsidiary Directive have yet to be addressed. Relief
from personal income tax for employees in the technological industrial development
zones was increased from 5 to 10 years. The introduction of taxation of
interest on deposits was postponed until 2013. Preparations in this
field remain moderately advanced.

There was
limited progress in the field of administrative cooperation and mutual
assistance. A double taxation agreement with Belgium was ratified. The
number of agreements concluded with EU Member States remains at 23. Double
taxation agreements were concluded with Kosovo and Norway. However the
agreements do not cover debt recovery and automatic exchange of information.

Progress was
made in the area of operational capacity and
computerisation. The amended Law on registration of cash payments
reinforced the penalty policy. The twice-amended Law on
tax procedure introduced policies for taxpayers
to correct irregularities, clarified the penalty policy and improved the tax
appeal procedure by involving the State Administrative Inspectorate in cases
where appeals are not dealt with within the legal time limits. An
amendment to the Law on the Public Revenue Office (PRO) created new competences
for the office, including the collection of administrative and misdemeanour
fines, as well as television and radio licence fees. The PRO updated its
strategic plan for 2011-2013 and prepared action plans for 2011. Taxpayers'
services were further decentralised and new Service Points offering taxpayer
services were opened. The PRO office for large taxpayers increased the number
of companies it covers from 235 to 255. Enhanced audit activities were combined
with new risk assessment tools, arrears collection was stepped up, e-filing of
tax returns was extended and internal audit capacity was somewhat strengthened.
Horizontal monitoring agreements with taxpayers were introduced in order to
improve compliance with limited inspection and desk audit was launched.
Intensive communication strategies through the web, telecommunication tools and
new publications led to increased voluntary compliance. Training on
professional standards and management took place and a staff appraisal system
was implemented. A Centre for debt collection, a Centre for seized goods, a Tax
Academy for training and a special audit unit to collect information on
high-risk fraud and tax evasion were established within the PRO. The new Rulebook for
implementation of the Law on excise duties became effective and guidelines for control procedures for excise levied on liquid
petroleum gas were adopted. However, staff shortages persist, especially in the
area of auditing. The IT capacity of the tax administration remains weak.
Internal audit, enforced collection, tax investigation, tax audit, as well as
efforts to reduce the informal economy, need to be further improved. The PRO
lacks tax investigation and intelligence capacity, and co-ordination with the
financial police remains to be substantially strengthened. A code of conduct
for business taxation is not yet in place. Preparations in this area remain
advanced.

Conclusion

Limited
progress can be reported in the field of harmonisation of taxation legislation
with the acquis. Operational capacity for the administration of taxes
continued to improve, however enforced collection, investigation, audit
performance, IT and staffing capacity remain to be addressed. Effective means
of combating tax fraud and reducing the informal economy have yet to be
introduced. Preparations in the area of taxation are on track.

4.17.
Chapter 17: Economic and Monetary
policy

Significant progress can be reported in the
field of monetary policy. A new Law on central bank was enacted,
outlining the organisation and the operations of the central bank, its legal
status, independence and its relations with the parliament and the government,
as well as its tasks and responsibilities after accession to the EU and after
accession to the eurozone. The law addresses the prohibition of monetary
financing of the public sector and the prohibition of preferential access for
the public sector to financial markets. The central bank is responsible for the
monetary and other operations, such as last instance creditor and other
monetary policy instruments; foreign exchange rate and foreign currency
reserves policy; issuance of banknotes and coins; organisation of the payment
system; supervision of the financial institutions; financial stability;
statistical analysis; and keeping of credit register. The institutional and
administrative capacity of the central bank is adequate. The quality of
monetary statistics and their compliance with international standards has
improved. In the area of monetary policy the country is in compliance with the
requirements.

There was some progress in the area of economic
policy. The fifth pre-accession economic programme (PEP), covering the
period 2011-2013, was submitted on time. The presentation of information in the
PEP, especially the fiscal and macroeconomic framework, has improved. There is
still room for improvement of the calculation of outputs and quality of data
for the capital stock and the labour market. The structural part lacks a more
comprehensive description of the reform strategies. The PEP is still not used
as a core document for economic policy-making. The administrative capacity of
several central state institutions for the formulation and implementation of
economic policy has increased. However, the administrative capacities of some
municipalities, in particular the smaller ones, remained weak. Preparations in
the area of economic policy are moderately advanced.

Conclusion

There was significant progress in the area
of economic and monetary policy. A new law defining the operations,
organisation and independence of the Central Bank was enacted. The quality of
the pre-accession economic programme improved. Administrative capacity for
policy implementation varies widely between the central and local level.
Overall, preparations in the area of economic and monetary policy are advanced.

4.18.
Chapter 18: Statistics

Progress was
made in the area of statistical infrastructure. The amended Law on State
Statistics was adopted by Parliament and has strengthened the State Statistical
Office's (SSO) role as coordinator of the national statistical system, and
advanced the introduction of the principles of the European Statistical Code of
Practice. The new strategy on data dissemination for 2010-2012 and the action plan
for its realisation were adopted. About 40 new employees from the non-majority
communities were recruited, improving the equitable representation and staff
situation. The resource situation in SSO needs to be further improved, but
overall preparations in this area are advanced.

Some progress
was made in the field of classifications and registers. The national
classification of occupations was prepared in line with the International
Standard Classification of Occupation ISCO-08. The database for the statistical
farm register was completed and the procedures for updating it were improved.
Preparations in this area are moderately advanced.

Good progress
was made in the area of sector statistics. Following intensive
preparations for the census of population and housing, originally scheduled for
April 2011, the census was postponed to October 2011. However, the State Census Commission only reached an agreement on the
composition of the enumerator teams in mid-September, which caused delays in the recruitment and training of
enumerators.

Improvements
were made in agricultural statistics, and the results of the first farm
structure survey were published in 2011. Overall, progress was made on national
accounts, including methodological improvements to supply and use tables and
quarterly accounts; and on further development of sector accounts. Cooperation
between the SSO and the Ministry of Finance was reinforced. It has not been
decided which institution is to be responsible for the financial accounts
statistics. Progress was made in business statistics. The development of
structural business statistics continued and preliminary data were submitted to
Eurostat. SSO introduced methodological improvements in the area of short-term
statistics and released the first data under the new classification for
economic activity, NACE Rev. 2. The number of data transmitted to the European
Commission increased, and SSO and the other producers of official statistics
are encouraged to continue this trend. However, substantial effort and
financial resources will be needed in order to achieve full alignment with ESA
95, including improved exhaustiveness of data. Preparations in the area of
sector statistics are advanced.

Conclusion

There was good progress in several areas,
but full alignment with the acquis on statistics has yet to be achieved.
Substantial effort is needed to improve sector statistics, in particular in
economic statistics. The scope of data transmission has increased, but efforts
need to be stepped up. Preparations in the area of statistics are advanced.

4.19.
Chapter 19: Social policy and
employment

There was little progress in the area of labour
law. Several amendments were made to Law on Labour Relations and Law on
Temporary Employment Agencies. Implementation of the applicable laws is
slow. The administrative capacities of the
institutions responsible for implementation and enforcement of the labour law
have not been further strengthened. Cooperation between the relevant
institutions has not improved. Preparations in this area have slowed down.

There is some
progress to report in the area of health and safety at work. The
National Council for Occupational Safety and Health is functioning. The number
of inspectors increased slightly and training was provided. Nevertheless, the
inspection capacity remains insufficient. The number of workplace inspections
of the State Labour Inspectorate continues to be high. In the legislative area,
a Rulebook concerning risks related to exposure to biological agents at work
was adopted. Amendments were prepared to the Law on Health and Safety at Work
to bring it further into line with the Framework Directive 89/391/EEC. The lack
of coordination between relevant authorities is still hindering the
finalisation of the strategy for the further development of health and safety
at work. There is still no consolidated recording of data on accidents at work.
Overall, the administrative capacity needs to be strengthened to ensure proper
implementation and enforcement of the legal provisions.

There was some
progress in the field of social dialogue. The Economic and Social
Council has met regularly. The three largest trade unions signed a memorandum
for co-operation, providing for their coordinated participation in the social
dialogue. Bipartite and tripartite social dialogue needs to be further
improved, and participation by the social partners in the policy development
process further developed. Preparations in this area continue to make slow
progress.

Limited
progress was made in the area of employment policy. Employment in the
grey economy has not diminished. The State Labour Inspectorate continued to
implement some initiatives at central level in order to raise awareness of the
need to combat undeclared work. However, the impact has been rather limited.
Efficient cooperation and coordination between enforcement bodies is still
lacking. The unemployment rate remains high and labour market participation is
still very low. The budget allocated to the active labour market programme
decreased for the second year and is still inadequate. The Employment Service
Agency has undertaken to analyse the existing active labour market measures,
but is still without a comprehensive approach to monitoring and evaluation.
Preparations in this area are not very advanced.

There was some
progress in the preparation for participation in the European Social Fund.
The procurement of projects co-financed under the Human Resources Development
Operational Programme (IPA component IV) has started, but encountered
significant delays, which put at risk part of the funds. Administrative
capacity within the line ministries involved in the implementation of this
component is still insufficient, in terms of both numbers of staff and
expertise. Preparations in this area are advancing.

Some progress
was made on social inclusion. The national strategy for alleviation of
poverty and social exclusion was adopted, and the related action plans was
prepared. The corresponding budget for implementation of the operational
programmes has not been ensured. Implementation of the national programme for
development of social protection 2010-2021 started with the analysis of
decentralised social inclusion services. Local action plans for social
inclusion were prepared in eight municipalities. The transition from
institutional to community-based care has continued, particularly for people
with mental disabilities. Progress in the field of administrative and fiscal
decentralisation of social services remains limited. The full impact of the
economic situation on poverty remains to be assessed; the poverty rate is still
high. The high drop-out rate in the early years of education improved slightly,
but still remained significant, in particular for Roma children. Implementation
of the national strategy on equality of rights of people with disabilities
2010-2018 has not progressed. Overall, the potential of social policies still
needs to be fostered. The progress in implementing the measures set by the
adopted strategic plans concerning poverty reduction, Roma, people with
disabilities and other socially excluded people, lacks the adequate human and
financial resources. Preparations in this area are at an early stage.

Little progress
can be reported in the field of social protection. The Law on social
protection was amended and new provisions for totally visually impaired
and physically disabled people were introduced. Implementation of the Law on
social protection continued to be slow. Administrative capacity is still
insufficient to develop a sustainable and equitable social protection system.
Preparations in this area are moderately advanced.

Some progress can be reported in the area of anti-discrimination. The
framework law on anti-discrimination has begun to be implemented. However, it
is not fully in line with the acquis, particularly because it does not
explicitly prohibit discrimination on grounds of sexual orientation in
employment and occupation. The restrictive three-month time limit for
complaints and the wide scope of exceptions were maintained in the law. The
Commission for Protection against discrimination was established and started
work, but there are concerns about the functionality and independence of that
body. The financial and administrative capacity and expertise of the Commission
still need to be strengthened and a significant track record established. The administrative capacity of the secretariat of the Commission is
particularly critical. The Secretariat lacks sufficient resources and equipment
to support the work of the Commission. Civil society
organisations are monitoring the implementation of the law and the activities
of the Commission. The majority of the complaints
submitted were based on ethnic grounds. The Roma are the community who suffer
most from discrimination. The collection, elaboration and analysis of data are
still very limited. Preparations in this area are moderately advanced.

Little progress
can be reported on equal opportunities. The mechanisms are in place to
allow the Ministry of Labour and Social Policy to deal with complaints of
unequal treatment. However, the section for equal opportunities within the
Ministry of Labour and Social Policy still lacks the appropriate human and
financial resources. Also the capacities of the equal opportunity commissions
at local level remain inadequate. Support for activities and initiatives aiming
at combating discriminatory customs, traditions and stereotypes remains
limited. The female employment rate has increased at 36%, but remains
very low compared to the EU average. Little was done to improve women's rights
in rural areas.

Conclusion

Limited
progress was made in aligning with the acquis in the area of social
policy and employment. The unemployment and poverty rates remain high.
Effective employment and social inclusion policies should be further
implemented. Inclusion of Roma, people with disabilities and other socially
excluded people is slow. The framework law on anti-discrimination has started
to be implemented; however, its full alignment with the acquis is yet to
be achieved. Tripartite and bipartite social dialogue should be further
strengthened. The overall administrative capacity is still insufficient.
Preparations in the area of social policy and employment are not very advanced.

4.20.
Chapter 20: Enterprise and
industrial policy

Progress can be reported in the area of enterprise
and industrial policy principles. Business regulatory reform continued. So
far 48 measures have been implemented under the regulatory guillotine project,
as well as 19 measures under the fourth anti-crisis reform package. These
measures aim at lessening the penalties for misdemeanour violations, auctioning
of construction land in state ownership to businesses on favourable terms,
simplifying and reducing the costs of construction permits, creating legal
conditions for the regularisation of businesses operating in the grey area and
abolition of the profit tax for re-investment in the country. The one–stop shop
for company registration was upgraded. The central register was further
expanded with the addition of a register of bankruptcy proceedings and a
register of persons disqualified to act as company managers. However, the data
entry, functionality and interoperability of the new registers have yet to be
ensured. A survey of 150 companies was conducted with a view to identifying
obstacles faced by businesses. The government continued its regular dialogue
with the business community representatives and companies, including
consultation on business related legal acts and strategic objectives. The 'think
small first' principle has been taken into consideration by the authorities,
but further work is still needed. The central database of all legal acts is not
being regularly updated and is not yet fully functional. The Strategy for
craftsmanship development was adopted, but no budget was allocated for its
implementation. The human resources of the SME Department and the SME Agency
continue to be insufficient. In the area of enterprise and industrial policy
principles, the country is moderately advanced; however, the business
environment remains weak, with low investment rates.

There was progress in the field of enterprise
and industrial policy instruments. The country continue to participate in
the EU Entrepreneurship and Innovation Programme. An innovation scoreboard
report was prepared and the country was included for the first time in the EU
Innovation Scoreboard 2010. The FDI Agency was allocated a sum of €4.9 million
and a department for legal matters and investor after-care was established. The
2011 budget for the annual programmes to support competitiveness,
entrepreneurship and clusters networking is slightly higher than in 2010. The
Ministry of Economy allocated about €173,000 for the Programme for the
implementation of industrial policy in 2011. Despite the new measures taken to
enhance the business environment, the service provided by some central and
local administrative offices still impedes the smooth operation of business.
The attraction of foreign direct investments (FDI) and export promotion remain
the prime focus of the economic policy, however, the instruments have yet to
deliver the desired results. Preparations in the area of policy instruments are
moderately advanced, but remain ineffective.

There was some progress in the area of sector
policies. Amendments were made to the Law on tourism and related
implementing acts in order to simplify the enforcement of the law and to make
the subsidy scheme more attractive for foreigners. The 2011 Programme for
tourism development was set at €932,000, an increase of 72% over 2010.

Conclusion

Progress was good but uneven in the field
of enterprise and industrial policy and principles, but yielded little
practical benefit in terms of boosting the economy. Legislation was simplified
and administrative procedures for business operation were streamlined. However,
enterprise support measures remain dispersed across several programmes run by
different authorities with insufficient public funding.

4.21.
Chapter 21: Trans European Networks

Some progress
was made in the area of transport networks. The country has maintained
active cooperation under the Memorandum of Understanding on development of the
South East Europe Core Regional Transport Network and has continued
implementing the South East Europe Transport Observatory multi-annual plan for
2011-2015. The motorway section along corridor X near the border with Serbia
(Tabanovce-Kumanovo) was completed. The procurement process of the motorway
section Demir Kapija – Smokvica, co-financed by IPA funds, is not yet finished.
Strengthening of the administrative capacity with adequate technical expertise
still remains to be done. Preparations in the area of transport networks are
moderately advanced.

There was
progress in the area of energy networks. The transmission system operator
signed the declaration for establishment of the Coordinated Auction Office in
South Eastern Europe. The preparations for the construction of a new 400 kV
electricity interconnection line with Serbia made further progress. A
memorandum of understanding was signed between the two transmission system
operators for the construction of a new 400kV interconnection with Albania
(Bitola – Elbasan). The country is moderately advanced in the area of
electricity networks.

Progress was
made in the area of telecommunications networks. The country took steps to
benefit from the Information and Communication Technologies Policy Support
Programme of the Competitiveness and Innovation Framework Programme.

Conclusion

Further
progress was made in the area of Trans-European networks. Overall, the
country is continuing to develop its transport and energy networks and to
participate actively in the South East Europe Transport Observatory and the
Energy Community. The implementation of corridor X is still delayed, as additional
time was needed in order to establish the financial framework. Preparations in
the area of Trans-European networks are moderately advanced.

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

Regarding the legislative
framework, no progress has been noted in this area. Additional efforts are
needed in order to ensure implementation of the Cohesion Policy in line with
the EU rules and policies, in particular in the environment sector.
Multi-annual programming and budget flexibility remains insufficient.
Preparations in this area are moderately advanced.

Limited
progress was noted in relation to the institutional framework. In line
with audit recommendations, some changes were made to the management and
control system within the Operational Structures for IPA Components III and IV,
including self-assessment and risk management as well as procedures for
reporting irregularities. Roadmaps for the establishment of a decentralised
implementation system without 'ex-ante' controls were prepared and submitted to
the Commission. Further significant improvements are needed in order to enhance
the efficiency of the operating structures of the IPA regional development and
the human resources development programmes. This includes overcoming the lack of
inter-ministerial coordination within these programmes. Preparations in this
area are moderately advanced.

Some limited
progress was made in the area of administrative capacity. Workload
Analyses and recruitment plans for 2011 were prepared by the relevant IPA
institutions, such as the National Fund, the CFCD, and all line
ministries/beneficiary institutions that are part of the operating structures.
Training was conducted on the basis of the Training Plan for 2010 and 2011.
Limited availability of appropriate experts hampered procurement process in
several programmes; the relevant ministries still need to demonstrate that they
have the full ownership of the implementation of the programmes. Further
substantial strengthening of administrative capacity in all institutions is
needed by deriving full benefit from the training events and experience
learning by doing experience under the relevant IPA Components. The country's
administrative capacity in the area remains insufficient.

Limited
progress was made as regards programming. Partial changes were made to
operational programmes and the preparations for identifying operations and
major projects continued, in part with IPA assistance. Nevertheless, the
development of a project pipeline remains a major issue, in particular in the
education and environment sectors. Significant strengthening of administrative
capacity is needed in the area of programming and project preparation.
Preparations in this area are advancing.

In the area of monitoring
and evaluation, limited progress can be reported. The Management
Information System (MIS) and the evaluation steering committee under IPA
Component IV were established. Interim evaluation of the IPA Component III has
not taken place yet. The interim evaluation on the IPA Component IV has been
finalised. Preparations in this area are advancing.

Some progress
was noted in the area of financial management and control. The National
Authorising Officer submitted the first interim payment applications for
Component III and Component IV, as well as the first advance
payment for Component I. The Audit Authority was established in June 2011,
however, with a significant delay after the entry into force of the national
Law on Audit on the Instrument for Pre-Accession Assistance. The nomination of
the Audit Authority's head raised questions about the selection criteria. The administrative capacity under Decentralised
Implementation System (DIS) has improved in terms of the necessary staff and
training, but remains insufficient. Preparations in this area are in progress.

Conclusion

Some progress was noted in the area of
regional development and coordination of structural funds. The implementation
of the IPA operational programmes for regional development and human resources
development has progressed, but at a slower pace than necessary in order to
benefit fully from available resources and avoid the de-commitment of funds.
The lack of adequate expertise and sufficient institutional coordination has
hampered the preparation of operations/projects and the procurement process.
The relevant ministries still need to demonstrate full ownership of programme
implementation. Overall, moderate advancement can be reported in the area of
regional policy and coordination of structural instruments.

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

There has been some progress in the area of
the judiciary. A number of legislative amendments were adopted, covering
a range of issues; however, core problems relating to independence, competence
and efficiency still remain to be tackled in practice.

As regards the independence of the
judiciary, the ex officio membership of the Minister of Justice in the
Judicial Council was amended. The Minister of Justice now
participates in the work of the Judicial Council without voting rights, in line
with the recommendations of the Venice Commission. The Minister's ex officio
membership of the Council of Public Prosecutors was removed.

Dismissal proceedings were initiated
against 13 judges in 2010, resulting in 7 dismissal decisions (compared with 10
in 2009). 5 judges resigned, including one in the course of dismissal
proceedings. No disciplinary proceedings were initiated against any judges
(compared with 2 in 2009). Further efforts are necessary in order to safeguard
the security of tenure of judges, including the need for clearly defined and
predictable legislation outlining less extensive and more precise grounds for
dismissal and a better balance between disciplinary and dismissal proceedings.
Recent amendments to the Law on courts failed to address the shortcomings,
instead adding further grounds for dismissal which may encroach on independent
decision-making.

As regards impartiality of the
judiciary, the random allocation of cases has been operational in all courts
since 2010 as part of the Automated Court Case Management Information System
(ACCMIS). No judges were subject to dismissal proceedings on the grounds of
bias or failure to treat the parties equally during 2010 (compared with 3 in
2009). A total of 11 training sessions on topics relating to judicial ethics,
corruption and conflicts of interest were carried out during the reporting
period.

As regards professionalism and
competence of the judiciary, the Law on courts was amended to set out in
detail the educational requirements for judges, including mandatory knowledge of
English, as well as introducing psychological and integrity testing. New
minimum requirements of 4 and 6 years' continuous judicial experience were
introduced for Appeal Court and Supreme Court judges respectively. However, the
entry into effect of these provisions was postponed until mid-2013, thus
considerably delaying the positive impact on the profession.

The third generation of candidates of the
Academy for Training of Judges and Prosecutors (ATJP), comprising 10 judges and
7 prosecutors, successfully completed their initial training at the end of
2010. The ATJP also continued to provide ongoing in-service training for
judges, prosecutors and other target groups in the justice field with a total
of 240 seminars, conferences and workshops carried out in the reporting period,
benefiting a total of 7156 participants. Training of trainers has begun in
preparation for the implementation of the new Law on Criminal Procedure, which
will enter into force in November 2012. Of the 71 graduates of the ATJP from
the last three years, only 49 have so far been recruited as judges and
prosecutors. By contrast, judicial recruitments from outside the ATJP continued
this year, under transitional provisions which have been extended to 2013. In
the reporting period, out of a total of 26 available posts for first instance
judges, only 6 were filled by graduates of the ATJP, despite a healthy rate of
applications by its candidates. The remainder of judges (considerably more than
the 50% set out in the transitional provisions) were appointed by the Judicial
Council from the ranks of other legal professions.

New provisions on the monitoring and
evaluation of judges' work were introduced by amendments to the Law on the
Judicial Council. They seek to improve the functioning of the court system by
instilling procedural discipline at the level of individual judges; however,
they do not address the quality of judgments and there is no link to training
needs. On the contrary, the emphasis on targets and deadlines, as well as the
link to dismissal proceedings, may have an adverse effect on independence. The
Judicial Council carried out its annual evaluation of the work of 605 judges
and presidents of court in 2010. Only one judge was rated as 'unsatisfactory'.

As regards the efficiency of the
judiciary, the Judicial Council adopted a decision on
the number of cases which should be processed per month by judges at different
court instances, as well as a methodology for ranking the complexity of cases
by subject matter. While the overall aim of these measures is to enhance
efficiency, care should be taken to avoid an over-formalistic application of
targets at the expense of high-quality, independent decision-making.

The overall duration of court proceedings
is still a challenge and the country's ability to address it is hampered by the
inadequacy of statistical data. A methodology was
adopted in July 2011 for the gathering, analysis and processing of court data on
the basis of the European Commission for the Efficiency of Justice (CEPEJ)
guidelines. However, this will only be implemented through the ACCMIS from the
end of 2012, following the development and testing of the necessary software. Complete
and comparable information needs to be developed on the average duration of different
types of proceedings, taking all instances as well as enforcement into account.
It is important to identify and address unreasonably lengthy proceedings and
court backlogs, which have a negative impact on citizens' fundamental right of
access to justice as well as the country's attractiveness to foreign direct
investment. In 2010 the Supreme Court received 398 complaints concerning
unreasonably lengthy proceedings. In the same period it upheld 137 complaints
and awarded compensation in 124 cases. The total amount paid out was around
€160,000.

Following legislative changes in 2010
around 400,000 enforcement cases will be transferred from the court system to
professional bailiffs or closed in the second half of 2011 and around 37,000
payment orders will be transferred to public notaries. Around 90,000 criminal
and misdemeanour fines have already been transferred to the Public Revenue
Office for enforcement and a further 43,000 remain to be transferred. There are
still insufficient numbers of bailiffs (90 out of a target 132), especially in
the north-west part of the country. There are currently over 111,000 active
enforcement cases being handled by the bailiffs. The jurisdiction for hearing
appeals against decisions of the Administrative Court was transferred from the
Supreme Court to the newly established High Administrative Court, which became
operational in July 2011. This will ease the future workload of the former. It remains to be seen what the impact of these changes will
be on the overall average length of proceedings at all levels.
Reorganisation of jurisdiction alone can not ensure
efficiency and quality of justice, unless it is accompanied by adequate
resources, training and improved procedural rules to support the smooth
functioning of the court system.

As regards alternative dispute resolution, several laws were amended to promote mediation in civil,
criminal, misdemeanour, juvenile and consumer protection cases and a handbook
for the training of mediators was prepared. The number of certified
mediators is currently 177. Between April and June
2011 an initiative for free mediation in commercial disputes was carried
out in the Basic Court Skopje 2 and 22 cases were directed towards free
mediation. However, in general the level of uptake of mediation is still low.

The latest amendments to the Law on court
budget introduced an increase of state budget allocations from 0.4% to 0.8% of
GDP, to be achieved gradually by 2015. In practice further progress is being
hampered by inadequate funding. New buildings for Basic Court Skopje 1 and the
Public Prosecutors' Office (PPO) are under construction, but the strategy for improving the working conditions and IT
infrastructure of the PPO has not been implemented due to budgetary constraints
and the ATJP is both understaffed and lacks adequate premises in view of the
high number of training activities it organises.

As regards access to justice, there
were 174 applications for legal aid, of which 141 were considered by the
Ministry of Justice and 58 granted. There are 211 lawyers and 2 citizens'
associations registered as providers of legal aid. The annual budget for legal
aid is currently €100,000. The system of legal aid is still at an early stage
of development.

As regards transparency and public
relations, the Judicial Council considered 1 581
citizens' complaints regarding the work of judges and courts in 2010 and 808 in
the first half of 2011. These mainly concerned the length of proceedings,
failure to schedule trial or hearing dates, non-enforcement of judgments and
failure to comply with procedural deadlines. Amendments were made to the Law on
the Judicial Council, obliging it to hold public sessions at least once a month
to discuss such complaints. Amendments to the Law on courts introduced public
relations offices in all courts and also require courts to publish their
judgments on their websites within two days of adoption, in order to increase
the transparency of their work. So far around 72,000 judgments have been
published.

Some progress
was made in the area of anti-corruption policy. The Criminal Code was
amended to refine the scope of incrimination for bribery and trading in
influence and to introduce criminal liability for failure to report donations
and other funds used to finance electoral campaigns. The amended Electoral Code
introduced a requirement to submit financial reports for all election campaigns
to the State Electoral Commission, State Audit Office and State Commission for
Prevention of Corruption (SCPC) within 15 days of the end of the campaign, to
be published immediately on the respective websites of these bodies. The
amendments were adopted with a view to implementing GRECO's third round
recommendations concerning incrimination and transparency of party funding. The
new Criminal Procedure Code, which was adopted in November 2010 and enters into
force in November 2012, aims to enhance the role of the public prosecutor in
the pre-trial procedure and introduces a number of special investigative
measures. The 2011-2015 State programme for the prevention and repression of
corruption and the State programme for reduction of conflict of interest, as
well as their corresponding action plans, remain to be adopted. The Law on
Financing of Political Parties still remains to be amended to take account of
GRECO recommendations. The OECD Convention on Combating Bribery of Foreign
Public Officials in international business transactions has yet to be ratified.

There are
several bodies tasked with combating corruption. The SCPC, the Anti-corruption
Unit within the Organised Crime Department of the Ministry of Interior and the
Basic Public Prosecutor's Office for the Fight against Organised Crime and
Corruption all remain understaffed and underfinanced. The establishment of
investigation centres under the new Criminal Procedure Code will require a 30%
increase in the numbers of both prosecutors and support staff. The
specialisation of law enforcement agents and judiciary at local level, in
particular on petty corruption, remains insufficient. Although the Law on
prevention of corruption was amended to professionalise the SCPC, public trust in its independence and impartiality
nevertheless remains fragile. Its approach is still
reactive rather than proactive, and its impact on the promotion of
anti-corruption policies is weak. The SCPC received 457 new complaints or
reports of corruption in 2010 and filed 14 requests with the Public prosecutor's
Office (PRO) to initiate criminal prosecutions.

The majority of
corruption cases prosecuted and brought before courts continue to be for abuse
of an official position and fraud. There were 83 convictions for
corruption-related offences in 2010 and 58 convictions so far in 2011. The
capacity of the judiciary to deal with sensitive high-level corruption cases
remains weak. The courts continue to apply lenient penalties. The number of
cases in which seizure or confiscation of assets were ordered remains low. Decisions
by public prosecutors not to indict are still not being reviewed by the courts.
The absence of consolidated statistics which clearly track the investigation,
prosecution, conviction and sentencing of corruption-related offences is a weakness
which needs to be addressed both in order to facilitate the preparation of
strategies for combating the phenomenon and to better inform the public of
progress made in suppressing it.

In 2010, the
Sector for Internal Control and Professional standards within the Ministry of
Interior brought criminal charges against 29 police officers for criminal
offences, including 16 cases of alleged abuse of an official position. Five
police officers from one border crossing point were charged as part of a large-scale
police operation. The Customs Administration should be prioritised as a high
corruption risk in the development and implementation of future anti-corruption
programmes.

During the
reporting period, 496 asset declarations were submitted by public officials
upon election, appointment or expiry of office. The SCPC established, for the
first time, a procedure for systematic verification of asset declarations, in
cooperation with the Ministry of Interior, the Cadastral Agency, the Central
Register, the Central Securities Depository and the PRO. Between April and June
2011, 9 out of the 122 asset declarations made by officials from the
legislative branch, 28 out of the 124 declarations from the executive branch
and 89 out of the 913 declarations from the judicial branch were verified. The
SCPC referred 30 cases in which discrepancies had been found to the PRO for
further action.

The SCPC
received 620 declarations of conflict of interest and submitted 202 requests to
initiate criminal proceedings for failure to submit such declarations,
including against one MP, 4 mayors and 8 judges. It also received 95 complaints
requesting a determination of a conflict of interest. Amendments to the Law on
conflict of interest and secondary legislation setting out a procedure for
checking the content of such declarations still remain to be adopted.

As regards
enforcement of the Law on financing of political parties, 16 political parties
submitted annual accounts of financial operation to the State Audit Office
(SAO), 8 parties submitted annual financial reports, 6 parties submitted
quarterly reports on donations for the second half of 2010 and 7 parties
submitted quarterly reports on donations for the first half of this year. All
political parties which took part in the parliamentary elections of June 2011 submitted
financial reports on the election campaign, including donations, in terms of
the Electoral Code. The SAO began auditing these reports in September.

The number of
complaints to the National Commission for Protection of the Right to Public
Interest Information rose from 340 in 2009 to 540 in 2010. The majority were
submitted by civil society organisations and the most common ground was the
inactivity of information-holders. Information related to public expenditure continued
to be subject to a number of exceptions set out in the law.

The Academy for
Training of Judges and Prosecutors (ATJP) carried out 13 training events for 373
participants on the new provisions of the Criminal Code related to extended
confiscation and illicit enrichment and 6 training events on bribery were
attended by 162 participants including judges, prosecutors and legal clerks.

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

The Office of the Ombudsman received
4043 complaints in 2010 (an increase of 11% from 2009). Violations were found
in 20% of the cases dealt with (987 out of 4 828) and the Ombudsman's
recommendations were accepted in 791 cases, representing an increase of 71% over
2009. The largest number of violations was found in the area of property rights
(19%), consumers' rights (12.4%) and the judiciary (10%). The second instance
Government commissions continued to be the least responsive to the Ombudsman's
instructions, followed by the local self-government units. Three persons were
recruited to each of the three new units of the Ombudsman's Office which deal
with anti-discrimination, combating torture and ill-treatment and children's
rights respectively.

There was some limited progress as regards
the prohibition of torture and ill-treatment. The Ombudsman's
specialised unit on combating ill-treatment, which is designated as a national
prevention mechanism for implementing the Optional Protocol to the Convention
against Torture, became operational in April. However, it lacks the authority
and resources to fulfil its mission effectively. The unit of the Ministry of
Interior for internal control and professional standards intensified its
monitoring of police work. It increased its coordination with the Ombudsman and
the Prosecutor's Office in exercising oversight over police behaviour. However,
it is yet to be transformed into an authority that is fully independent from
the police with the ability to implement effective investigations. The numbers
of cases of ill treatment which were prosecuted was down to 27 criminal charges
against 29 police officers in 2010, as compared to 36 criminal charges against
50 police officers in 2009. No cases of illegal arrest were reported.

Some limited progress was made as regards
the prison system. A manual for the supervision of penitentiary
institutions was adopted. A programme of compulsory training of prison staff,
including on international human rights standards, was adopted in December 2010
and several trainings have been conducted. Construction and rehabilitation of
detention facilities and prisons continued. The semi-open wing of Idrizovo
prison was renovated; however, parts of the prison remain below the required
standards. The country has yet to develop a strategic plan to comprehensively tackle
the challenge of managing a prison system in accordance with international and
European standards. The capacity of the Directorate for Execution of Sanctions
to pursue prison reform needs to be strengthened.

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. Some training targeted at journalists and judges has taken place, but
more systematic training and awareness-raising is necessary in this field. The
Association of Journalists held a number of consultations in 2011 on the
development of self-regulation for both print and broadcasting media. In 2010,
the first ever independent trade union of journalists and media employees was
established. However, defamation has not been decriminalised. In 2010
there were 587 defamation cases brought before the courts, of which 139 were
against journalists. The level of fines imposed is often high in
relation to the average monthly wage and this can lead to self-censorship. The
media continue to be subject to interference from political and business
interests. Intimidation of journalists and selective enforcement of legislation
against media companies are increasing causes for concern. The enforcement
track-record against illegal media concentrations is poor, hampered in part by
the lack of transparency of ownership.

There was no progress on freedom of
assembly and association. The Government Commission
for Public Benefit Status has yet to be established. Tax legislation has not
been harmonized with the Law on associations and foundations, thereby
preventing access to tax benefits and the exercise of certain types of economic
activities.

Freedom of thought,
conscience and religion is generally ensured.

Little progress
was made on women's rights and gender equality. The sector for equal
opportunities policy in the Ministry of Labour and Social Affairs still lacks
adequate expertise and human resources. Its financial capacities are
negligible. Despite efforts to strengthen the capacities of the local
commissions on equal opportunities, they are still faced with a lack of
expertise and of political will. Only very limited actions targeting Roma women
have been implemented. The participation of women in political life remains low
at local level. The work in this field is still at an early stage.

Some progress has been made on children's
rights. The National Strategy on Prevention of
Juvenile Delinquency was adopted and the Law on
Juvenile Justice was amended, introducing improvements regarding free legal
aid, mediation and procedural rights of juveniles. Proper
implementation of both the Law
and the 2010-2012 Action Plan requires additional financial and administrative
resources, closer coordination between the relevant institutions, the adoption
of standards and protocols for implementation and the development of a
comprehensive monitoring system. Further efforts are also needed in order to
enhance the capacity of specialised staff to deal with juveniles, improve
detention conditions and ensure provision of education and medical services for
juveniles in custody. Children
with psychological and intellectual disabilities continue to be a highly
vulnerable group with no specialised medical institutions devoted to them. The
lack of resources and capacity of the Centre for Social Work is critical.
Preparations in this area are at an early stage.

Limited progress
can be reported in the treatment of socially vulnerable persons
and/or persons with disabilities. The law on social protection was amended
to introduce new provisions for people with disabilities. Additional
small communal housing units for people with disabilities were opened as part
of the social care services, bringing the total number to 14. However, the
administrative capacity of municipalities remains insufficient to assume the
necessary social policy responsibilities. Social integration of people with
disabilities remains limited. The UN Convention on the rights of persons
with disabilities is yet to be ratified.

Some progress can be reported in the area
of anti-discrimination policy. The Commission for protection against
discrimination has become operational and has started to act on complaints submitted.
The majority of the complaints were made on political and ethnic grounds.
However, the law on anti-discrimination has yet to be fully aligned with the
acquis. Discrimination on grounds of sexual orientation has been omitted. Also,
the financial, administrative and technical capacity of the Commission needs to
be strengthened.

As regards property rights, the land
register covers 99,5% of the country's territory, leaving minor areas of
Skopje, Gostivar and Kriva Palanka uncovered. The land registry office
organised some public awareness campaigns and continued with the regular
organisation of open days for the public. E-cadastre was piloted in Skopje,
Negotino and Kavadarci. The country joined the European
Position Determination System (EUPOS). However, the
process of returning property confiscated during the period of the Socialist
Federal Republic of Yugoslavia continues to extend substantially beyond the
legal deadlines. Breaches of property rights linked to the process of
denationalisation alone accounted for 32% of petitions lodged with the
Ombudsman. The enforcement of restitution claims for which a final decision has
been taken remains unsatisfactory. The backlog of property dispute proceedings continued
to create delays. There has again been no progress on returning the property of
religious communities.

Little progress was made as regards respect
for and protection of minorities and cultural rights. The Ohrid Framework
Agreement (OFA) remains crucial for ensuring continued inter-ethnic dialogue
and cooperation. Steps have been taken to promote
inter-ethnic integration in education. The implementing structure of the Decade
of Roma Inclusion has improved. Progress was made to
ensure equitable representation, in particular with regard to the Roma and
Turkish communities. However, the public administration
needs to recruit more qualified and experienced civil servants from
non-majority communities across all sectors and positions. The implementation of
the Roma Strategy and its action plans needs to be strengthened and adequately
funded.

Progress was
made on data protection. Amendments to the law on personal data
protection were adopted in order to strengthen the position of the Directorate
for personal data protection (DPDP) and to improve implementation. The DPDP's
performance continued to be satisfactory and its capacity was enhanced by a
small increase in staff. It continued to provide frequent training sessions and
interaction with other institutions was on a satisfactory level. However, there
is no reference in the law to any form of judicial intervention. The Council of
Europe Convention for the protection of Individuals with regard to Automatic
Processing of Data had not yet been signed. The DPDP's budgetary allocation has
been reduced.

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

Conclusion

Some limited progress can be reported on
independence and efficiency of the judiciary, in particular the amendment of
the Minister of Justice's role on the Judicial Council and the establishment of
the High Administrative Court. Weaknesses remain in the evaluation and security
of tenure of judges. Increased efforts are needed to ensure competence within
the profession, in particular through the work of the ATJP and the application
of more stringent minimum requirements for recruitment. The inadequacy of
statistical court data and analysis needs to be addressed as a priority. Some limited
progress was made on anti-corruption policy. Legislative alignment has
continued and systematic verification of asset declarations by the SCPC has
begun. However, implementation of the recently amended legal framework has not fully
taken place, consolidated statistical collection and analysis is missing, a track
record of high-level corruption cases has yet to be established, a system of
verification of conflict of interest statements still remains to be
established. The SCPC needs to be more pro-active in both referring and monitoring
the progress of corruption cases. The country is moderately advanced in the
area of fundamental rights. Much needs to be done in order to further promote
and safeguard fundamental rights. In the field of freedom of expression,
intimidation of journalists, self-censorship and the frequency of defamation
actions remain a concern. Some progress was made as regards cultural rights and
minorities. The Ohrid Framework Agreement remains an essential element for
democracy and rule of law in the country.

4.24.
Chapter 24: Justice, freedom and
security

Some progress
has been made on migration. The implementation of the 2009-2014 action
plan on migration policy has continued, although with several notable delays.
The Law on foreigners was amended to provide a legal framework for the
establishment of a national database for foreigners, covering data on asylum,
migration and visas. The database is operable and connected to all concerned
institutions and training of users and administrators of the database has been
completed; however the secondary legislation necessary for its use and
maintenance has yet to be adopted. Exchange of information and coordination on
irregular migration with countries from the region was enhanced. In 2010, over
1100 irregular migrants were detected. The readmission agreement with the EU
continues to be implemented well. A readmission agreement was also signed with
Serbia. In 2010, 839 persons were received under the EU readmission agreement
and bilateral agreements. The budget and human resources of the Ministry of
Labour and Social Affairs have increased slightly. The national migration
profile for 2010 has been adopted. In this area, the country is well advanced.

There has been
limited progress on asylum. Rules were adopted establishing the role of
each institution in the integration of refugees and foreigners and providing
for the appointment of legal guardians for unaccompanied minors and mentally
disabled persons. The centre for integration, which prepares family integration
plans for recognized refugees and persons under subsidiary protection, became
partially government-funded from the beginning of 2011. The government adopted
a program for integration of persons granted asylum including assistance for
housing. However, a number of concerned families were in practice left without
housing support for several months due to delays in implementation. In the
first half of 2011 there were 349 requests for asylum (compared with 147 for
the whole of 2010). During the same period, 418 asylum seekers were
accommodated in the reception centre Vizbegovo. Asylum-seekers still face
difficulties accessing information about procedures and social rights. There
has been no progress in speeding up the process for providing asylum seekers
with ID documents. Free legal aid provided by the state is still not available
to asylum-seekers. The legal framework for ensuring access to public health
insurance for persons granted asylum is missing. Although the administrative
capacity of the section for asylum in the Ministry of the Interior increased slightly,
its efficiency in issuing first instance asylum decisions cannot be considered
as satisfactory and needs to be improved. Efforts should be made to consider
how to prevent potential abuses of the asylum system. Problems providing
interpretation persist. Appeal decisions by the Administrative Court continue
to be issued largely on procedural rather than substantive grounds. A further
appeal instance was introduced with the establishment of the High
Administrative Court. The institutional and legal framework is largely in
place, but implementation of the existing legislation and strategies remains
insufficient and further efforts are needed. In this area, the country is
advanced.

Some progress
has been achieved on visa policy. All diplomatic and consular missions
in the country are connected to the national visa system N-VIS. The system is
interconnected with the national database for foreigners. The government
adopted a decision allowing third-country nationals with a valid Schengen
C-type visa to enter the country without a visa. Alignment with the EU negative
and positive lists is not yet fully completed. In this area, the country is
well advanced.

Visa
liberalisation for citizens travelling to the Schengen
area was granted with effect from 19 December 2009. The rules for visa-free
travel have been respected by the vast majority of travellers. However, under
the visa-free regime, increases in the number of unfounded asylum applications
in several EU Member States occurred. To counteract this phenomenon the
national authorities introduced a set of measures, including public information
campaigns, focusing in particular on the vulnerable groups most likely to be
involved, as well as preventive measures like enhanced border checks and
profiling. Efforts to address this issue are ongoing. In order to ensure
ongoing implementation of the commitments taken, a post visa liberalisation
monitoring mechanism has been established. The Commission presented its first
monitoring report to the European Parliament and the Council in June 2011.

There has been
good progress in the area of external borders and Schengen. A new Law on
border control was adopted with a view to aligning with the EU acquis,
in particular the Schengen Border Code. A Joint Contact Centre for Police and
Customs Cooperation was opened with Bulgaria and protocols for joint border
patrols were signed with Bulgaria, Serbia and Kosovo. Good cooperation
continued with Frontex. A Rulebook on developing risk analysis in the area of
organised cross-border crime and illegal migration was adopted and several
training events were carried out in the area of risk analysis. Two mobile units
were created at central level to enhance efficiency in the fight against
irregular migration and trans-border crime and operational use of risk
analysis. Training of field officers has developed
noticeably and a specific training programme for senior
and mid-level police officers has been adopted and is starting to be
implemented. The central database for false and genuine documents
and specimen travel documents has been established and is regularly updated.
The second phase of implementation of the TETRA radio communication system is
ongoing and it covers 40% of the country's territory. The border police still
do not have adequate technical equipment and budgetary resources. Police
stations responsible for border surveillance still have no access to the
central database of the Ministry of Interior. Overall, preparations in the area
of external borders and Schengen are advanced.

Good progress can be reported on judicial
cooperation in civil and criminal matters. The agreement on judicial
cooperation with Eurojust entered into force. Three
bilateral agreements were signed with Kosovo on mutual legal assistance in
criminal matters, on extradition and on transfer of sentenced persons. A new
law on international cooperation in criminal matters was enacted, providing a
comprehensive legal framework, but its application will only begin with the
application of the new Criminal Procedure Code in November 2012. Training was
carried out for 54 judges and 14 prosecutors on the implementation of the new
law. The Constitution was amended in order to enable extradition agreements to
be concluded in further alignment with international agreements. The Ministry of Justice processed 752
requests in criminal matters and 2 316 requests in civil matters. Cooperation with Eurojust was good. Posting of a liaison officer to
Eurojust would further enhance the cooperation. In this
area the country is moderately advanced.

Some progress can be reported on police
cooperation and the fight against organised crime. An international law
enforcement coordination unit in charge of the exchange of police and
intelligence information (ILECU) was established within the Ministry of
Interior. 103 international arrest warrants were issued in the country in 2010.
There has been active regional and international law enforcement cooperation,
including through Interpol channels. Cooperation with Europol, via a contact
point, was also good. The conclusion of an operational agreement with Europol
will significantly facilitate exchange of analytical data in order to improve
the fight against organised crime and terrorism.

The Act of Systematisation of the Bureau
for Public Security introduced job descriptions and a new organisational
structure. The newly established strategic level of the Bureau for Public
Security aims to improve efficiency and provide an integrated approach for
police operations. The Ministry of Interior completed an annual performance
evaluation process for the first time, as a first step in implementing a
merit-based career and appraisal system. The sector for Internal Control and
Professional Standards of the Ministry of Interior carried out 33 checks under
legal provisions restricting the political activity of Ministry officials. A
working group was established to develop a training strategy; however this has
not yet been done. The Police Training Centre conducted advanced, continuous
and specialised training.

Full implementation of the new
organisational charts of the regional Sectors for Internal Affairs (SVRs) is
however hampered by insufficient staffing. There are also concerns about
politicisation of the police and its work, including investigations it carries
out. Around 160 cases of non-transparent recruitments for posts of authorised
officials within the Sectors for Internal Affairs, without prior advertising of
vacancies, were reported. An amendment to the Law on Internal Affairs created
the possibility of salary reductions where Ministry employees are deployed to a
lower position as a result of organisational changes, which may weaken the
stability of employment within the police organisation. The fact that the
Training Centre does not have a separate budget line within the Ministry of
Interior limits its training outreach and strategic planning capacity.

The Act of Systematisation also introduced
changes to the Organised Crime Department of the Ministry of Interior,
improving its functionality and integration into the national and international
criminal investigation intelligence system. All services dealing with organised
crime are now within the Centre for Suppression of Organised and Serious Crime,
which will comprise the National Intelligence Database and National
Coordination Centre in charge of strategic planning and intelligence gathering.
However, there was limited progress as regards the staffing of the Centre for
Suppression of Organised and Serious Crime; only around 64% of the total number
of posts in the organisational chart has been filled, thereby hampering its
effectiveness. The National Intelligence Database will not become operational
before the end of 2012 and is currently in the tendering phase. The National
Coordination Centre, which could enhance exchange of information between the
law enforcement agencies, has not been established so far. The government has
adopted a Strategy and accompanying Action Plan for its establishment, however,
the relevant budgetary allocations to accompany these instruments is missing.

The new Criminal Procedure Code was enacted
and will enter into force from November 2012. Its aim is to improve the
efficiency of criminal procedures by strengthening the role of the public
prosecutor, establishing the judicial police and improving investigative
procedures for complex organised crime and corruption cases.

The direct involvement of the Minister of
Interior in authorising the use of interceptions remains in place and the Law
on interception of communications has yet to be amended. Moreover the existing
parliamentary oversight over the use of interception orders needs to be
strengthened. The overly restrictive and centralised application of the
interceptions inadequately addresses the increasing threat of organised crime.
The customs administration and the financial police have no technical capacity
to apply special investigative measures. The number of interceptions used in
organised crime cases is relatively low. Generally, the use of special
investigative techniques is still rare and needs to be increased, as does the
systematic use of financial investigations.

The witness protection programme was
activated in seven cases in 2010. The witness protection unit still lacks
adequate equipment. The measures taken to ensure compensation for victims of
organised crime were not sufficient.

Structural problems
are still evident in law enforcement agencies combating organised crime. Human
resources are not efficiently balanced between the different law enforcement
agencies. There is a surplus of police and customs officers as a percentage of
the population, while the number of investigative judges and trial judges is
not sufficient.

The analytical and administrative
capacities of the Office for the Prevention of Money Laundering and Financing
of Terrorism (OPMLFT) were increased as regards investigation of financial
crime. The majority of cases analysed in the reporting period concerned tax
evasion. In the reporting period, the OPMLFT submitted 23 reports of suspicious
transactions related to money laundering to the investigating authorities and
prosecution service and 95 reports relating to other types of economic and
financial crime. International cooperation with FIUs in other countries
continued, with the OPMLFT receiving 33 requests and submitting 79 requests in
2010. So far, 39 persons have been prosecuted for money laundering in 2011, as
compared with 10 persons in 2010. The quality of investigations into money
laundering and financial crime still needs to be enhanced.

Some progress
has been achieved in the fight against, and prevention of, trafficking in human
beings. A national shelter for victims of trafficking
was opened, with a capacity for 12 persons. The number of identified victims of
human trafficking was 12 in 2010, an increase from 8 in the previous year. In
2010, 25 persons were arrested on suspicion of trafficking, compared with 17 in
2009 and 11 persons were convicted, an increase from zero in 2009. Sentences
ranged from four to 8.5 years' imprisonment. A comprehensive,
multi-disciplinary and victim-centered approach to trafficking needs to be
further ensured. In addition, proactive identification of victims of
trafficking both from abroad and from within the country needs to be improved.

The country is advanced in the field of
police cooperation and fighting organised crime. However, efforts of relevant
law enforcement bodies (the Ministry of Interior, the Public Prosecutor's
Office, the Customs Administration and the Financial Police) in fighting
organised crime should be strengthened. At the same time, substantial efforts
are needed to ensure the full implementation of the police reform in practice,
as well as to ensure the establishment of the National Intelligence Database.
Concerns remain in connection with the politicisation of the police.

Some progress can be reported in the fight
against terrorism. The police are adopting an adequate approach to the
issue of counter-terrorism. Bilateral and multilateral cooperation has
continued. Cooperation with the investigative and prosecuting bodies and
foreign financial intelligence units has improved. The strategy on the fight
against terrorism (2012-2014), in line with the EU Strategy on
counter-terrorism and the Council of Europe Convention on the Prevention of
Terrorism, together with the corresponding Action Plan, have yet to be adopted.
In the reporting period, five suspicious transactions related to financing of
terrorism were reported by the Office for prevention of money laundering and
financing of terrorism. Overall, preparations in this area are advanced.

Little progress can be reported as regards cooperation
in the field of drugs. Implementation of the new action plan of the
National Drug Strategy covering the period 2009-2012 is ongoing, in line with
the EU strategy on drugs (2005-2012). In 2010, the amount of drugs
seized remained relatively low considering the country's location on the main
Balkan drug trafficking routes. The customs administration does not
significantly detect and seize narcotics at the borders. The human resources
capacity of the Illicit Drugs Department of the Ministry of Interior remains
insufficient. The country largely meets acquis requirements.

Good progress can be reported in the area
of customs cooperation. The Customs Administration took part in a number
of international operations for the detection of illicit trade. Cooperation and
exchange of intelligence with the customs administration of neighbouring
countries and the wider region was intensified with a view to preventing and
detecting illicit trafficking, and combating cross-border crime. Intelligence
information was exchanged on a regular basis with the South-East European
Cooperative Initiative and the Regional Intelligence Liaison Offices. A customs
cooperation agreement was signed with Kosovo, a memorandum of co-operation was
signed with Polish customs and a joint contact centre for police and customs
cooperation was established with Bulgaria. Preparations in this area are on
track.

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

Conclusion

Good progress can be reported on external
borders and Schengen and customs cooperation. The border police still lack
adequate technical equipment and budgetary resources. Some progress has been
achieved on migration, visa policy, police cooperation and the fight against
organised crime. The implementation of the police reform has continued. At the
same time, structural problems, understaffing and lack of budgetary provision
still persist. The national intelligence database has not yet been set up.
Implementation in the field of asylum needs to be considerably enhanced,
including on the provision of legal aid, interpretation and access to social
rights. Preparations in the area of justice, freedom and security are on track.

4.25.
Chapter 25: Science and research

Little progress
can be reported in the area of research and innovation policy. The 2011
programme for scientific research activities,
technological development and technical culture was adopted. The national strategy for science - research and development activity
2011 – 2020 is not yet in place. The 2011 budget for
the programme for research and technological development decreased compared to
the 2010 level. Financial resources are limited and the capacities of the
research facilities remain weak. Preparations in this area are moderately
advanced.

Good progress
is being made as regards the country's participation in the framework
programmes. There was an increase both in the number of applications submitted
and selected, and in the amount of funds received, under the Seventh EU
Framework Programme for Research and Development (FP7). Participation is
good in the energy, ICT and environment themes; however, partaking in Marie
Curie actions and involvement of SMEs remains very low. The Joint Research
Committee was established. The Committee monitored progress under FP7 since the
association and established at its February meeting that additional efforts are
required to increase participation in FP7.

Little progress
can be reported in the area of integration into the European Research Area.
Following the adoption of amendments to the Law on higher education, 40% of the
tuition fees are invested in fundamental and applied research and in
modernisation of infrastructures. Some equipment was procured for universities
and laboratories. However, the investment in research, from both the public and
the private sector, remains very low (estimated at around 0.2% of GDP in 2010).
In addition, the lack of reliable statistics makes implementation and
monitoring difficult. Preparations in this area are moderately advanced.
Nominations have been made in most governance bodies, including in the European
Research Area Committee (ERAC) and the Strategy Forum for International
Cooperation (SFIC). However, attendance at their meetings is irregular, due to
the lack of administrative capacity.

Conclusion

Concerning European standards on research
and innovation, progress can be reported. There was increased participation in
the EU framework programmes. National strategies for science - research and
development activity and for innovation policy are not yet in place. Private
and public investment in the field of research is low. The administrative
capacity to support participation in FP7 and ERAC governance bodies needs to be
strengthened. Preparations in the area of science and research are
insufficient.

4.26.
Chapter 26: Education and culture

Some progress can be reported in the field
of education, training and youth. Amendments were enacted to the laws on
higher education, primary and secondary education. The system of ranking of
universities has been established. The implementation of the Bologna process in
higher education is progressing. A system of counselling of pupils' parents was
established. The possibility was introduced for international public schools to
be established with curricula in foreign languages. The government adopted the
Integrated Education Strategy that envisages introducing the ethnic communities'
languages as the teaching language. The second donor-funded integrated
bilingual primary school started classes in Strumica. The council for adult
education developed the operational plan for implementation of the adult
education strategy. Efforts have continued with a view to developing the
national qualifications framework. The centre for vocational education became
operational. The country improved its performance in early school leaving and
higher education attainment, areas where EU-level benchmarks were set for 2020.

However, additional efforts are needed in
relation to all the Education and Training 2020 EU benchmarks, including for
early childhood education and participation of adults in lifelong learning.
Resources allocated to education remain low. There are still large regional
disparities in accessing education, particularly at the pre-school education
level.

Increasing interaction between members of
ethnic communities at school remains a challenge, as does decreasing of the
early school leaving rate among Roma students. The need to provide structured
training for teachers is yet to be tackled.

Efforts were made to reinstate the
preparatory measures for the Lifelong Learning and Youth in Action programmes.
Parliament enacted amendments to the Law on establishing the National Agency
for European educational programmes and mobility, thus increasing the
accountability of the National Agency. However, the progress made did not reach
the level required by EU rules and remained inadequate. The preparatory
measures therefore continued to be suspended. In the area of education,
training and youth, the country is partially meeting its priorities.

There was some progress in the field of culture.
The country has become further involved in both the Culture programme and the Europe
for Citizens programme. Amendments to the law on protection of cultural
heritage were enacted. The Council of Europe Framework Convention on the Value
of Cultural Heritage for Society was ratified. In the area of culture the
country is well advanced.

Conclusion

Concerning European standards in the areas
of education, training, youth and culture, there was some progress. Reform
efforts were made at all levels of education. The country improved its
performance in relation to the Education and Training 2020 common benchmarks,
notably in areas such as early school leaving and higher education attainment.
However, the National Agency for the Lifelong Learning and the Youth in Action
programmes did not reach the level required by the EU and the preparatory
measures remain, therefore, suspended. Increasing interaction between the
ethnic communities in education remains a challenge. Substantial funds were
invested in cultural projects and in the renovation and construction of school
buildings; however, the investments have not been equitably applied to all
municipalities in the country and do not reflect the multi-ethnic composition
of the country. Preparations in the area of education, training, youth and
culture are moderately advanced.

4.27.
Chapter 27: Environment

In the field of
environment, some progress was made in the area of horizontal
legislation. A multilateral Agreement among the countries of the
South-Eastern Europe for implementation of the Convention on Environmental
Impact Assessment in a Transboundary Context and the Protocol on Pollutant
Releases and the Transfer Register were ratified. Transposition of the acquis
continued with adoption of some implementing legislation. The administrative
capacity for implementing the requirements for Environmental Impact Assessment
(EIA) and Strategic Environmental Assessment (SEA) has improved, but the
provisions for public consultation are still not adequately applied.
Preparations in this area are advancing.

Some progress
can be reported in the area of air quality. Transposition of the acquis
continued with adoption of some implementing legislation. Three more Protocols
to the CLRTAP were ratified. Some progress was made in developing the system of
air quality monitoring. The administrative capacity remains insufficient at
central and local levels. Preparations in this field are moderately advanced.

Some progress
was made in the area of waste management. The Law on Management of
Batteries and Accumulators and Waste Batteries and Accumulators was adopted,
following a comprehensive consultation. Some implementing legislation was
adopted in the area of waste management planning and packaging waste management.
The process for issuing concessions for regional landfills to store
municipal solid waste in four regions continued. Administrative capacity
is still insufficient at both central and local level. Investment in this area
is far from sufficient and needs to be increased. A system of data collection,
registration and reporting is still not operational. Preparations in this area
are making slow progress.

Little progress can be reported in the area
of water quality. Administrative reorganization of this sector is
underway. The process of transposition of the acquis in this field is
not very advanced. Some implementing legislation was adopted to further align
with the Urban Waste Water directive and the Water Framework Directive.
Administrative capacity is still insufficient at all levels. The lack of
sufficient coordination between the competent authorities in the water sector
is hampering the implementation of the legislation. There is very little
progress in addressing the gaps in the water monitoring system. Planning and
preparation of infrastructure investments are lagging behind and the funding is
far too low in relation to the needs. No progress was made in applying the
polluter-pays principle. This creates problems for the sustainability of
investments in this sector. Preparations are lagging behind in this area.

Some progress was made on nature
protection. The process of transposition of the acquis related to
natural habitats and of wild fauna and flora continued with the adoption of an
amendment to the law on nature protection. Implementing legislation was adopted
in this area. Good progress was achieved with the introduction of the national
information system on biodiversity. Some progress can be reported on the
development and implementation of management plans for protected areas, but
sustainable financing still needs to be secured. A national strategy and action
plan for nature protection has still not been completed. The administrative
capacity is still insufficient, at both central and local levels. The
stakeholders are not yet sufficiently involved. Preparations in this area are
moderately advanced. In the field of forestry, the programme for expanded
reproduction of forests 2011 was approved and implementation of the programme
commenced.

Little progress
was made in the area of industrial pollution control and risk management.
The process of transposition of the acquis continued with adoption of
some implementing legislation. However, full alignment remains a considerable
challenge for the country. The permissions process is well behind schedule. The
requirements for public consultation in relation to the IPPC permitting system
are not always properly applied. Administrative capacity needs to be
significantly strengthened, in particular for inspection activities.
Preparations in this area are slow.

Some progress
was made in the area of chemicals. The Convention on the import-export
of dangerous chemicals (Rotterdam Convention) was ratified. A new Law on
chemicals was adopted, aimed at transposing the Regulation on the registration, evaluation, authorisation and restriction of chemicals (REACH). The Bureau for
medicines and chemicals published the list of restrictions and prohibitions for
the use of chemicals. Administrative capacity is still insufficient.
Preparations in this area are at an early stage.

Some progress
was made in the area of noise. Transposition of the noise directive was
completed. Administrative capacity is insufficient in terms of staff and
equipment. The preparations in this area are still at an early stage.

As regards civil
protection, progress has been achieved with the signing of the memorandum
of understanding on the country's accession to the EU Civil
Protection Financial Instrument and the EU Civil Protection Mechanism. The ratification by the government still needs to take place for the
document to enter into force.

Regarding climate
change, some progress was made on general policy developments. The revision
of the national climate action plan was initiated. The country has also
initiated a five year program for greening the economy, but the measures,
responsibilities, timeframe and the other details to be covered are still not
defined. Significant awareness-raising at all levels is still needed.

At the
international level, the country supported the EU's position at the UN Climate
Change Conference COP16 in Cancun and has associated with the Copenhagen
Accord, but did not formulate pledges for greenhouse gas (GHG) emissions
reductions. The country is preparing its Third National Communication to
UNFCCC. The country participated actively in the climate work under the
Regional Environmental Network for Accession (RENA).

The process of
introducing mitigation measures into some national strategies started.
Programming of pilot projects to implement the clean development mechanism
under the Kyoto Protocol continued. Preparations for the introduction of the
emissions trading scheme were initiated, but this remains a considerable
challenge. Concrete steps are needed in
order to move gradually towards adopting a GHG reduction/limitation target in
order to be able to implement EU climate acquis, especially the EU
Emissions Trading Scheme, and to join the EU Effort-Sharing.

Some progress was made in the area of
ozone-depleting substances and fluorinated gases. The process of transposition
of the acquis continues with adoption of implementing legislation. A
national plan for eliminating HCFCs was developed and consulted with various
administrative bodies, but further substantial efforts are necessary to align
with the EU legislation. The country associated itself with the Declaration
adopted at the 22nd Meeting of the Parties to the Montreal Protocol
on the global transition away from HCFCs and CFCs.

Very little
effort was made to strengthen the administrative capacity for
implementing and enforcing environmental legislation, which remains largely
insufficient, both at national and at local level. The coordination between the
administrative bodies responsible for environment-related issues is still not
effective. The stakeholders are not sufficiently involved in the
decision-making process. Enforcement of legislation has improved, but the
system is not yet efficient and a credible record has not been established. The
environmental monitoring and information system is still not adequate. The
investment in the sector is still extremely low in relation to the needs.
Environmental protection requirements are still not well integrated into policy
making and policy implementation in other areas. The precautionary principle,
the principle of preventive action and the polluter-pays principle are only
partially applied. Administrative capacity
as well as technical and financial resources need to be considerably
strengthened in order for the country to be able to align with, and implement,
all the requirements of the EU climate change policy and legislation.

Conclusion

Some progress can be reported in
transposing the EU acquis into national legislation and in ratifying
multilateral environmental agreements. Limited progress was achieved in
alignment with climate change acquis. However, significant efforts are
needed in order to implement the national legislation, especially in the areas
of water management, industrial pollution control and climate change.
Administrative capacity is still weak at both central and local level across
all sectors. Investments need to be significantly increased, especially in the
waste and water sectors. Overall, preparations in the field of environment and
climate change are moderately advanced.

4.28.
Chapter 28: Consumer and health
protection

There has been
some progress in the area of consumer protection. As regards horizontal
aspects, the regulatory and administrative frameworks have improved. The
consumer protection programme for 2011-2012 was adopted. The Organisation of
Consumers continues its work on organising awareness raising events, mounting
education campaigns and advising consumers, thanks to an increased financial
allocation which is, however, still insufficient. Also the activities are
concentrated mostly in urban rather than rural areas. The administrative
capacity of the consumer protection department within the Ministry of Economy
remains low. Preparations in this area are on track.

There has been
some progress as regards product-safety related issues. An amendment to
the Law on product safety was enacted and a rulebook on the safety of children's
toys was adopted, with the aim of aligning with the acquis. The
enforcement of consumer protection legislation improved slightly as a result of
increased market surveillance activity, although not all of this activity
related to consumer products. The collaboration between the customs
administration and the market inspectorates was strengthened by the signature
of a Memorandum of understanding between competent authorities. Market
surveillance does not yet provide for effective and transparent protection of
consumers. The administrative capacity of the coordinating body remains poor.

There has been
good progress with regard to non-safety related issues. A law on the
sale of distance financial services has been adopted. Furthermore, the law on consumer
protection has been amended with a view to alignment with the acquis on
unfair commercial practices and injunctions. Preparations in the area of
consumer protection are advanced.

There has been
some progress in the area of public health. Regarding horizontal
aspects, the government adopted various health programmes. The overall
funding has increased considerably compared to previous years. Preparations in
this area are on track.

There has been
some progress in the area of tobacco. The law on protection against
smoking is generally in line with the acquis. The enforcement of the law
remains at a satisfactory level. The labour and market inspectorate and the
state sanitary and health inspectorate intensified joint controls in the field.
Public acceptance is good and there are relatively few violations of the law.
Preparations in this area are well advanced.

Some progress was made in the area of communicable
diseases. The rulebook on case definitions was introduced and aligned with
the EU criteria on case definitions. However, full alignment with the acquis
on communicable diseases remains to be confirmed. Specific health
programmes for prevention and control of some communicable diseases, such as
the programme on obligatory vaccination of the population, were launched.
Several training events were organised for health professionals dealing with
communicable diseases. Efforts are being made to ensure functionality of the
healthcare database, including the national early warning system; further
improvement is however needed. The national programme on antimicrobial
resistance 2012 – 2016 was adopted. Although the
prevalence of HIV/AIDS is currently low, the financing of future activities on
prevention, testing, treatment and care of the disease needs to be ensured. Preparations in this area are on track.

There has been
good progress in the area of blood. A national integrated blood
transfusion system was developed and it now comprises an institute for
transfusion medicine, three regional centres and 19 units. The national
programme for organisation and improvement of blood donation was adopted. A new
law on organ, tissue and cell transplantation was adopted aimed at
aligning with the acquis. Preparations in this area are on track.

There is little
progress to report in the field of mental health. The programme on
healthcare for people with mental disabilities was adopted and its budget was
nearly doubled compared to 2010. However, there was no progress in the
implementation of the Action Plan on mental health which is supposed to provide
community based mental health care as an alternative to institutions. Adequate
staff and financial resources are needed in order to provide good quality
health care. Preparations in this area are at an early stage.

Progress in addressing the socio-economic
determinants of health and health inequalities is slow. National
strategy for sexual and reproductive health is now in place. Some progress was
made in the field of cancer. The budget of the programme for the
early detection of malignant diseases was more than tripled. Funds were
allocated to organise three types of cancer screening for breast, colorectal
and cervical cancer screening as recommended by the Council Recommendation. The
cancer registry is in place, but not yet fully operational. Preparations in
this area are ongoing.

Conclusion

There has been
some progress in the area of consumer and health protection. In the field of
consumer protection, good progress was made as regards legal alignment with the
acquis. There was some progress in the field of public health,
particularly with regard to the completion of the integrated blood safety
system and the enactment of the Law on organ, tissue and cell transplantation.
Progress in the area of consumer and health protection is still hampered by the
limited financial resources and weak operational structures. Overall,
preparations in the area of consumer and health protection are moderately
advanced.

4.29.
Chapter 29: Customs Union

Good progress
was made on customs legislation. The 2011 customs tariff was adopted
taking into account the obligations arising from the Stabilisation and
Association Agreement (SAA) and the changes in the EU Combined Nomenclature.
Customs duties for imports from EU countries for all industrial products were
completely abolished, in accordance with the SAA provisions. The Customs Code
was amended to introduce provisions for the use of customs representation in
customs clearance, including licensing for customs representation. Furthermore,
amendments to the Customs Code were enacted in order to further align it with
the customs acquis in the areas of electronic customs declarations,
transit procedure, and customs debt and guarantees. Further customs-related
fees were abolished in line with the acquis, namely fees relating to
entrance and stay at customs terminals, processing fees for IPR protection
requests and fees relating to printing and distribution of EUR1 forms.
Preparations in this area are advanced.

Good progress was made on administrative
and operational capacity. Several strategies were adopted for the period
2011-2014, including on training and professional development of customs
officers, integrity and anti-corruption, risk management, prevention of
smuggling of tobacco and tobacco products and protection of intellectual
property rights. A new customs clearance guide was published, outlining
applicable customs duties and the procedures for customs clearance.

The Customs Administration introduced new
IT modules, including an electronic document management system, a human
resource management system and an electronic resource planning system. The
single-window system for issuing authorisations was further upgraded and a new
functionality for transport authorisations was introduced. The strategy for joining
the Common Transit Convention and the national plan for implementing a new
computerised transit system were adopted and are being implemented. However,
the new customs declaration processing system which was installed has not
become operational, thus undermining the overall operational capacity of the
Customs Administration. A pilot system for exchanging
electronic pre-arrival information with several other neighbouring customs
administrations started to function.

Operational capacities for customs controls
were further enhanced, and co-operation with other government bodies, including
the Ministry of Interior and the Public Revenue Office, was strengthened. This
led to the seizure of significant quantities of counterfeit and illicit goods.
Good progress was made in developing the risk management system at border
crossings, with more systematic application of risk analysis and risk-based
control measures.

Co-operation with the business community
has intensified. The business advisory body meets monthly as a forum for
consultation on, and discussion of, initiatives and legislative proposals that
might affect businesses. Cooperation with other customs administrations
continued to be strengthened, in particular with those of the neighbouring
countries. An agreement on customs cooperation was signed with Kosovo and a
joint police and customs cooperation centre was established with Bulgaria.
Preparations in this area are well on track.

Conclusion

Good progress
was made in the area of customs union, both on customs legislation and on
administrative and operational capacity. The customs legislation is well
aligned with the acquis. There was continued improvement in the
administrative capacity of the customs administration to implement legislation
and to tackle cross-border crime. Preparations in the area of customs union are
well on track.

4.30.
Chapter 30: External relations

There has been
good progress in the area of the common commercial policy. The country
continued gradually to reduce customs duties, in line with its WTO obligations.
The average customs duty on industrial products was reduced to 6.20% (compared
to 6.31% in 2010) and the duty on agricultural and fisheries products was
16.61% (compared to 15.98% in 2010). The country continued to coordinate
closely with the Commission and to align with the policies and positions of the
EU in international trade negotiations.

The Law on
control of exports of dual-use goods and technologies was amended and
several Rulebooks were adopted, with a view to further alignment with the acquis
on the control of export, transfer, brokering and transit of dual use
goods. The responsibilities of state institutions and legal and natural persons
engaged in these activities were defined, including the procedure for issuing
transit and brokering licences.

In the area of bilateral
agreements with third countries, the country ratified investment protection
agreements with Morocco and Montenegro. The number of bilateral investment
protection agreements that were ratified rose to 35, of which 28 are in force
and 16 are agreements with EU Member States. An agreement with Lithuania was
signed, but is yet to be ratified.

There is little
progress to report in the areas of development policy and humanitarian
aid. Preparations in both areas are at an early stage. Co-ordination
between institutions with responsibilities for humanitarian aid was streamlined
and they began to meet on a more regular basis. The Ministry of Foreign Affairs
co-ordinated the country's humanitarian aid to Serbia (after the earthquake in
Kraljevo) and Japan.

Conclusion

Alignment with
the common commercial policy has continued in the WTO forum. The country's
institutional capacity is not yet developed enough to enable it to participate
fully in EU policies in the fields of development and humanitarian aid.

4.31.
Chapter 31: Foreign, Security and
Defence Policy

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

As regards the common foreign and
security policy (CFSP), during the reporting period, the former Yugoslav
Republic of Macedonia has aligned itself, when invited, with 66 out of the 67
relevant EU declarations and Council decisions during the reporting period (99%
alignment). As regards the International Criminal
Court, see Political criteria 2.3 — Regional issues and international
obligations.

With regard to sanctions and restrictive
measures the country aligned itself with the restrictive measures
introduced by the Council's Decisions. Implementation of restrictive measures
is ongoing. The Law on international restrictive measures was enacted. It includes
more detailed provisions on financial measures and introduces a system for
monitoring of the implementation of restrictive measures by a national
coordination body, operational from September 2011.

No particular developments can be reported
concerning conflict prevention.

With regard to non-proliferation, the country submitted a letter of intent to
become a participating state of the Wassenaar Agreement on export controls for
conventional arms and dual-use goods and technologies. It also asked, as a pre-accession
measure, to be included in the Wassenaar Arrangement Outreach programme.

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

With regard to security measures
(classified information), the Directorate for Security
of Classified Information of the Ministry of Foreign Affairs completed the
selection of members of the Misdemeanour Commission
pursuant to the Law on Classified Information

As regards the common security and defence
policy (CSDP), the country continued to demonstrate a sustained commitment
to participate in civil and military crisis management operations.
Currently, the country has a total of 166 soldiers deployed in the ISAF mission
in Afghanistan. The country continued to take part in the EUFOR Althea mission,
with a medical team at Camp Butmir and an assistant legal advisor for gender
issues. It also participates in the UN-led peacekeeping/UNIFIL mission in
Lebanon by providing a staff officer in the Joint Operation Centre in Nagura.
The country signed the MoU on the principles of establishment and operation of
the EU Battlegroup available for the second half of 2012.

The government approved the initiative for
the conclusion of an Agreement with the European Union to establish a framework
for participation in crisis management operations.

Conclusion

The country made
efforts to ensure better coordination between the competent authorities in the
implementation of international restrictive measures. It demonstrated a high
level of alignment with EU declarations and Council decisions and a continued
commitment to participate in civil and military and crisis management
operations. Overall, preparations in the area of foreign, security and defence
policy are well advanced.

4.32.
Chapter 32: Financial control

Some progress
can be reported in the area of public internal financial control (PIFC).
Secondary legislation on financial management and control and on Internal
Audit has been adopted, although implementation of the legislation remains
slow. The strategy for the development PIFC still needs to be updated to
include a medium to long-term plan for development of PIFC an action plan to
insure its full implementation The government is facing delays in establishing
units for financial control and internal audit. Some units which have already
been established remain understaffed. The Committees for financial control and
internal audit were established by Government decisions, but are not
operational yet. A PIFC policy paper remains to be developed, including the
legislative separation of internal audit from financial inspection.

As regards external
audit, the State Audit Office (SAO) continued with the implementation of
its development strategy 2010-2014 and has improved the
quality of its audits. The annual SAO programme for
year 2011 envisages intensive cooperation with the Parliament and creation of
conditions for timely discussions of the SAO reports in the Parliament.
However, as yet, no formal mechanism for parliamentary follow-up of SAO reports
has been established. A procedure for the amendment of the Constitution has
been launched which will ensure the functional and financial independence of
the SAO.

Some progress was made towards aligning
legislation in the area of protection of the EU's financial interests.
The Decree for procedure for preventing irregularities, mutual cooperation and
reporting was adopted. In accordance with the Decree the Ministry of Finance's
financial police department serves as the central contact point for cooperation
with OLAF, and is responsible for coordinating the system for the prevention of
irregularities and fraud, as well as for the admission, control, assessment and
reporting of irregularities in the management and use of EU funds.

Progress was
made in the fight against counterfeiting of the Euro. A Central office
for preventing the counterfeiting of money was established, which will
coordinate cooperation on the investigation of counterfeiting among the
Ministry of Interior, the financial police, the central bank and the customs
administration. Preparations for setting up an electronic data base on
counterfeited money are underway. The new Central Bank law transferred
responsibility for detection and seizure of forged banknotes from the Ministry
of Interior to the Central Bank. The Central Bank set up a national analytical
centre and issued a manual on procedures for detection and withdrawal of
counterfeited banknotes. About 70% of all investigative procedures initiated on
counterfeited bank notes resulted in criminal charges. In 2010 the police
hosted a training session under the EU Pericles Programme on recognition of
counterfeit euro banknotes and coins. The authorities regularly participate in
Pericles events. In the fight against counterfeiting of the Euro, the country
is advanced.

Conclusion

There has been little progress in the area
of financial control. Developments in the area of PIFC were related mainly to
legislative alignment. Efforts are needed in order to ensure its implementation,
especially in relation to the establishment of Financial Management and Control
systems. The State Audit Office (SAO) administrative capacity has been further
strengthened; however, the independence of the SAO has yet to be anchored in
the Constitution. Cooperation with the Parliament remains a concern.

4.33.
Chapter 33: Financial and budgetary
provisions

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

A regards administrative
infrastructure, institutions are in place in the underlying policy areas
that indirectly affect the own resources system. However, in addition to
further strengthening these institutions, a fully operational coordination
structure will be required in order to ensure the correct calculation,
forecasting, collection, payment and monitoring of own resources and reporting
to the EU for implementation of the own resources rules.

Conclusion

There is no particular progress to report
under this chapter. Overall there are no significant divergences between the
systems in the country and the EU in terms of basic principles and institutions
for the underlying policy areas that might affect the correct application of
the rules on own resources. The administrative framework for the application of
the own resources framework is still not in place.

Statistical Annex

STATISTICAL DATA (as of 30.09.2011) || || || || || || || || || || || ||

The former Yugoslav Republic of Macedonia || || || || || || || || || || ||

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

Basic data || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Population (thousand) || || 2 022 || 2 031 || 2 039 || 2 024 || 2 030 || 2 035 || 2 039 || 2 042 || 2 045 || 2 049 || 2 053

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

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

National accounts || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Gross domestic product (GDP) (million national currency) || || 236 389 || 233 841 || 243 970 || 258 369 || 272 462 || 295 052 || 320 059 || 364 989 || 411 728 || 410 734 || 427 172

GDP (million euro) || || 3 893 || 3 839 || 4 001 || 4 217 || 4 442 || 4 814 || 5 231 || 5 965 || 6 720 || 6 677 || :

GDP (euro per capita) || || 1 921 || 1 887 || 1 981 || 2 081 || 2 185 || 2 363 || 2 564 || 2 919 || 3 283 || 3 253 || :

GDP (in Purchasing Power Standards (PPS) per capita) || || 5 100 || 5 000 || 5 200 || 5 400 || 5 900 || 6 600 || 7 200b || 7 700 || 8 500 || 8 400 || :

GDP per capita in PPS (EU-27 = 100) || || 27 || 25 || 25 || 26 || 27 || 29 || 30b || 31 || 34 || 35 || 35

Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) || || 4.5 || -4.5 || 0.9 || 2.8 || 4.6 || 4.4 || 5.0 || 6.1 || 5.0 || -0.9 || 1.8e

Employment growth (national accounts, % change on previous year) || || 0.3 || -1.7 || -0.6 || -1.9 || -2.2 || 2.1 || 3.2 || 4.4 || 6.1 || 2.5 || :

Labour productivity growth: GDP growth per person employed (% change on previous year) || 1) || 4.2 || -2.9 || 1.4 || 4.8 || 6.4 || 3.0 || 5.6 || 5.0 || 6.2 || 3.9 || :

Real unit labour cost growth (national accounts, % change on previous year) || || -7.0 || -0.8 || -0.4 || 2.7 || -9.9 || -8.6 || 3.2 || -8.8 || -2.0 || 9.9 || :

Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100) || || : || : || : || : || : || : || : || : || : || : || :

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

Agriculture and fisheries || 2) || 12.0 || 11.8 || 12.4 || 12.9 || 12.8 || 12.3 || 12.1 || 10.6 || 11.6 || 11.2 || :

Industry || 2) || 26.9 || 26.1 || 24.2 || 23.2 || 21.6 || 21.9 || 22.2 || 24.3 || 24.1 || 21.5 || :

Construction || 2) || 6.8 || 6.0 || 6.0 || 6.0 || 6.2 || 6.3 || 6.4 || 6.6 || 5.7 || 5.9 || :

Services || 2) || 54.2 || 56.1 || 57.5 || 57.8 || 59.4 || 59.5 || 59.3 || 58.5 || 58.7 || 61.4 || :

Final consumption expenditure, as a share of GDP (%) || || 92.6 || 94.8 || 99.5 || 97.3 || 98.1 || 95.7 || 96.3 || 93.8 || 98.5 || 95.7 || 93.2e

Gross fixed capital formation, as a share of GDP (%) || || 16.2 || 14.8 || 16.6 || 16.3 || 17.4 || 16.6 || 17.6 || 19.6 || 21.0 || 19.9 || :

Changes in inventories, as a share of GDP (%) || || 6.0 || 4.2 || 4.0 || 2.8 || 4.6 || 4.8 || 3.9 || 5.0 || 5.8 || 6.0 || :

Exports of goods and services, relative to GDP (%) || || 48.6 || 42.7 || 38.0 || 38.1 || 39.9 || 44.1 || 46.6 || 52.4 || 50.9 || 39.0 || 47.3e

Imports of goods and services, relative to GDP (%) || || 63.5 || 56.6 || 58.2 || 54.5 || 60.1 || 61.1 || 64.5 || 70.8 || 76.2 || 60.6 || 66.0e

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

Industry || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Industrial production volume index (2000=100) || 3) || 99.4 || 96.3 || 91.3 || 95.5 || 93.4 || 100.0 || 105.9 || 110.0 || 115.6 || 105.6 || 100.5

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

Inflation rate || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Annual average inflation rate (CPI, % change on previous year) || || 5.8 || 5.5 || 1.8 || 1.2 || -0.4 || 0.5 || 3.2 || 2.3 || 8.3 || -0.8 || 1.6

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

Balance of payments || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Balance of payments: current account total (million euro) || 4) || -112 || -263 || -402 || -170b || -362 || -122 || -23 || -421 || -862 || -449 || -191

Balance of payments current account: trade balance (million euro) || 4) || -750 || -589 || -856 || -753b || -914 || -858 || -1 001 || -1 181 || -1 763 || -1 551 || -1 468

Balance of payments current account: net services (million euro) || 4) || 53 || -21 || -24 || -6b || -43 || -25 || 22 || 25 || 6 || 28 || 60

Balance of payments current account: net income (million euro) || 4) || -76 || -30 || -48 || -57b || -32 || -93 || -26 || -278 || -91 || -58 || -149

Balance of payments current account: net current transfers (million euro) || 4) || 661 || 377 || 525 || 646b || 628 || 853 || 982 || 1 012 || 985 || 1 132 || 1 366

of which government transfers (million euro) || 4) || 144 || 55 || 103 || 89b || 55 || 53 || 59 || 24 || 49 || 36 || 32

Net foreign direct investment (FDI) (million euro) || || 234 || 499 || 112 || 100b || 260 || 75 || 345 || 507 || 409 || 137 || 220

Foreign direct investment (FDI) abroad (million euro) || 4) || 1 || -1 || 0 || 0b || -1 || -2 || 0 || 1 || 9 || -8 || -1

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

Foreign direct investment (FDI) in the reporting economy (million euro) || 4) || 233 || 500 || 112 || 100b || 261 || 77 || 345 || 506 || 400 || 145 || 221

of which FDI of EU-27 countries in the reporting economy (million euro) || 5) || : || : || : || 43 || 125 || 41 || 255 || 355 || 264 || 131 || 144

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

Public finance || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

General government deficit/surplus, relative to GDP (%) || || 2.3 || -2.5 || -0.5 || 0.1 || 0.4 || 0.2 || -0.6 || 0.6 || -1.0 || -2.7 || -2.5

General government debt relative to GDP (%) || || 47.9 || 48.8 || 42.9 || 37.9 || 35.6 || 38.4 || 32.0 || 24.0 || 20.6 || 23.9 || 24.8

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

Financial indicators || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Gross foreign debt of the whole economy, relative to GDP (%) || 6) || 42.7 || 44.2 || 39.3 || 35.9 || 46.8b || 52.5 || 47.9 || 47.6 || 49.2 || 56.6 || 62.4

Gross foreign debt of the whole economy, relative to total exports (%) || 6) || 93.6 || 108.4 || 108.5 || 95.7 || 121.7b || 122.8 || 104.7 || 92.6 || 97.7 || 148.9 || 135.0

Money supply: M1 (banknotes, coins, overnight deposits, million euro) || 7) || 368 || 415 || 432 || 461b || 470 || 501 || 591 || 772 || 881 || 854 || 933

Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || 7) || 690 || 1 145 || 1 052 || 1 260b || 1 475 || 1 708 || 2 130 || 2 728 || 2 913 || 3 040 || 3 277

Money supply: M3 (M2 plus marketable instruments, million euro) || 7) || 786 || 1 267 || 1 141 || 1 324b || 1 542 || 1 777 || 2 221 || 2 872 || 3 184 || 3 388 || 3 781

Total credit by monetary financial institutions to residents (consolidated) (million euro) || 8) || 624 || 620 || 657 || 761b || 951 || 1 153 || 1 504 || 2 093 || 2 803 || 2 913 || 3 102

Interest rates: day-to-day money rate, per annum (%) || 9) || 7.2 || 11.9 || 14.4 || 5.8 || 8.0 || 9.2 || 5.6b || 3.5 || 4.8 || 6.0 || 3.7

Lending interest rate (one year), per annum (%) || 10) || 17.5 || 23.0 || 23.0 || 14.0 || 13.0 || 13.0 || 9.5 || 7.5 || 8.5 || 10.0 || 5.5

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

euro exchange rates: average of period - 1 euro = … national currency || || 60.720 || 60.910 || 60.970 || 61.260 || 61.330 || 61.290 || 61.180 || 61.180 || 61.260 || : || :

Effective exchange rate index (2005=100) || 11) || 83.6 || 88.6 || 91.9 || 95.5 || 98.1 || 100.0 || 100.2 || 99.8 || 100.8 || 106.8 || 106.3

Value of reserve assets (including gold) (million euro) || 10) || 759 || 844 || 771 || 715 || 717 || 1 123 || 1 417 || 1 524 || 1 495 || 1 598 || 1 715

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

External trade || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Value of imports: all goods, all partners (million euro) || || : || : || 2 105.3 || 2 031.3 || 2 354.0 || 2 601.0 || 2 979.7 || 3 795.0 || 4 587.3 || 3 615.8 || 4 119.1

Value of exports: all goods, all partners (million euro) || || : || : || 1 177.9 || 1 203.0 || 1 345.9 || 1 643.5 || 1 917.5 || 2 446.4 || 2 697.6 || 1 925.2 || 2 497.5

Trade balance: all goods, all partners (million euro) || || : || : || -927.4 || -828.2 || -1 008.1 || -957.5 || -1 062.2 || -1 348.6 || -1 889.7 || -1 690.6 || -1 621.6

Terms of trade (export price index / import price index) || || 95.4 || 97.1 || 106.4 || 94.5 || 82.9 || 95.6 || 100.4 || 109.3 || 93.1 || 98.3 || 101.5

Share of exports to EU-27 countries in value of total exports (%) || || : || : || 55.9 || 58.9 || 60.3 || 56.9 || 61.3 || 65.2 || 59.5 || 56.2 || 63.0

Share of imports from EU-27 countries in value of total imports (%) || || : || : || 61.7 || 60.3 || 60.8 || 54.7 || 52.9 || 49.6 || 49.0 || 52.2 || 53.1

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

Demography || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) || || 5.9 || 5.0 || 4.8 || 4.4 || 2.7 || 2.0 || 1.9 || 1.5 || 1.9 || 2.3 || 2.5p

Infant mortality rate: deaths of children under one year of age per 1000 live births || || 11.8 || 11.9 || 10.2 || 11.3 || 13.2 || 12.8 || 11.5 || 10.3 || 9.7 || 11.7 || 7.7p

Life expectancy at birth: male (years) || || 70.8 || 70.9 || 70.6 || 70.9 || 71.5 || 71.6 || 71.7 || 71.8 || 72.4 || 72.3 || :

Life expectancy at birth: female (years) || || 75.2 || 76.1 || 75.6 || 75.7 || 75.8 || 75.9 || 76.2 || 75.9 || 76.5 || 76.7 || :

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

Labour market || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) || || 59.7 || 61.8 || 59.8 || 61.3 || 58.8 || 60.7 || 62.2 || 62.8 || 63.5 || 64.0 || 64.2

\* Employment rate (15-64): share of population aged 15-64 in employment (%) || || 40.3 || 42.6 || 40.4 || 38.5 || 36.8 || 37.9 || 39.6 || 40.7 || 41.9 || 43.3 || 43.5

Employment rate male (15-64) (%) || || 49.7 || 50.6 || 48.6 || 45.6 || 44.4 || 45.4 || 48.3 || 48.8 || 50.7 || 52.8 || 52.8

Employment rate female (15-64) (%) || || 30.9 || 34.5 || 32.0 || 31.3 || 28.9 || 30.1 || 30.7 || 32.3 || 32.9 || 33.5 || 34.0

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) || || 26.2 || 27.7 || 25.8 || 28.5 || 24.5 || 26.2 || 27.9 || 28.8 || 31.7 || 34.6 || 34.2

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

Agriculture || 12) || : || 24.9 || 23.9 || 22.0 || 16.8 || 19.5 || 20.1 || 18.2 || 19.7 || 18.5 || 19.1

Industry || 12) || : || 29.2 || 27.5 || 27.3 || 25.8 || 25.8 || 25.0 || 24.9 || 24.8 || 23.2 || 22.6

Construction || 12) || : || 5.9 || 5.8 || 6.6 || 7.0 || 6.5 || 7.6 || 6.4 || 6.5 || 6.5 || 6.4

Services || 12) || : || 39.7 || 42.6 || 43.8 || 50.1 || 48.0 || 47.1 || 50.1 || 48.9 || 51.7 || 51.9

Unemployment rate: share of labour force that is unemployed (%) || || 32.2 || 30.5 || 31.9 || 36.7 || 37.2 || 37.3 || 36.0 || 35.0 || 33.8 || 32.2 || 32.0

Share of male labour force that is unemployed (%) || || 30.5 || 29.5 || 31.7 || 37.0 || 36.7 || 36.5 || 35.3 || 34.6 || 33.5 || 31.8 || 31.9

Share of female labour force that is unemployed (%) || || 34.9 || 32.0 || 32.3 || 36.3 || 37.8 || 38.4 || 37.2 || 35.6 || 34.2 || 32.8 || 32.2

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%) || || 59.9 || 56.1 || 58.4 || 65.7 || 64.8 || 62.6 || 59.8 || 57.7 || 56.4 || 55.1 || 53.7

Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) || || 26.9 || 26.5 || 27.0 || 31.2 || 31.7 || 32.3 || 31.1 || 30.1 || 28.7 || 26.3 || 26.7

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

Social cohesion || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Average nominal monthly wages and salaries (national currency) || || 10 193.0 || 10 552.0 || 11 279.0 || 11 824.3 || 12 293.3 || 12 597.0 || 13 517.0 || 14 584.0 || 16 096.0 || 19 957.0 || 20 553.0

Index of real wages and salaries (index of nominal wages and salaries divided by the CPI/HICP) (2000=100) || || 100.0 || 98.1 || 103.0 || 106.7 || 111.4 || 113.6 || 118.1 || 124.5 || 126.9 || 158.7b || 160.8

\* Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in further education or training (%) || || : || : || 32.2 || : || : || : || : || : || : || : || :

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

Standard of living || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Number of passenger cars per 1000 population || || 147.9 || 152.1 || 151.1 || 148.2 || 122.7b || 124.3 || 118.7 || 121.9 || 128.6 || 137.7 || 151.0

Number of subscriptions to cellular mobile telephone services per 1000 population || || 49.4 || 109.0 || 179.7 || 300.4 || 491.6 || 597.6 || 695.1 || 884.2 || 1 157.9 || 1 036.8 || 1 098.2

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

Infrastructure || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

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

Length of motorways (thousand km) || || : || : || : || : || : || : || : || : || : || : || :

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

Innovation and research || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Spending on human resources (public expenditure on education in % of GDP) || || : || : || 3.4 || 3.4 || : || : || : || : || : || : || :

\* Gross domestic expenditure on R&D in % of GDP || || 0.4 || 0.3 || 0.3 || 0.2 || 0.3 || 0.3 || 0.2 || 0.2 || : || : || :

Percentage of households who have Internet access at home (%) || 13) || : || : || : || : || 11.2e || 11.2e || 14.0e || 16.5e || 29.0e || 42.0e || 46.1e

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

Environment || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

\* Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) || || 104.0 || 92.0 || 90.0 || : || : || : || : || : || : || : || :

Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) || || 710.2 || 720.4 || 771.4 || 710.9 || 681.6 || 680.3 || 661.9 || 646.5 || 613.9 || 576.0 || :

Electricity generated from renewable sources in % of gross electricity consumption || || 16.9 || 9.2 || 11.0 || 17.9 || 18.9 || 17.5 || 18.7 || 11.2 || 9.3p || 15.4 || :

Road share of inland freight transport (% of tonne-km) || 14) || 60.0 || 87.0 || 92.0 || 94.0 || 91.0 || 93.0 || 92.0 || 88.0 || 84.0 || 89.0 || 89.0

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

Energy || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Primary production of all energy products (thousand TOE) || || 1 595 || 1 642 || 1 577 || 1 666 || 1 598 || 1 578 || 1 617 || 1 504 || 1 624 || 1 607p || :

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

Primary production of hard coal and lignite (thousand TOE) || || 1 273 || 1 419 || 1 356 || 1 353 || 1 293 || 1 288 || 1 296 || 1 254 || 1 378 || 1 293p || :

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

Net imports of all energy products (thousand TOE) || || 1 104 || 1 011 || 1 486 || 1 029 || 1 152 || 1 248 || 1 323 || 1 469 || 1 403 || 1 274p || :

Gross inland energy consumption (thousand TOE) || || 2 765 || 2 677 || 2 892 || 2 740 || 2 749 || 2 863 || 2 925 || 3 039 || 3 022 || 2 811p || :

Electricity generation (thousand GWh) || || 6.8 || 6.4 || 6.1 || 6.7 || 6.7 || 6.9 || 7.0 || 6.5 || 6.3 || 6.8 || :

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

Agriculture || Note || 2000 || 2001 || 2002 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010

Agricultural production volume index of goods and services (producer prices, previous year=100) || || 101.0 || 90.2 || 97.5 || 104.5 || 107.0 || 100.3 || 105.0 || 98.0 || 104.5 || 102.9 || 107.7

Total utilised agricultural area (thousand hectare) || || 1 236 || 1 244 || 1 316 || 1 303 || 1 265 || 1 229 || 1 225 || 1 077 || 1 064 || 1 014 || 1 120

Livestock: cattle (thousand heads, end of period) || || 265 || 265 || 259 || 260 || 255 || 248 || 255 || 254 || 254 || 253 || 260

Livestock: pigs (thousand heads, end of period) || || 204 || 189 || 196 || 179 || 158 || 158 || 167 || 255 || 247 || 194 || 191

Livestock: sheep and goats (thousand heads, end of period) || || 1 251 || 1 286 || 1 234 || 1 239 || 1 432 || 1 244 || 1 249 || 944 || 950 || 849 || 854

Production and utilisation of milk on the farm (total whole milk, thousand tonnes) || || 220 || 201 || 198 || 192 || 213 || 197 || 235 || 374 || 368 || 343 || 347

Crop production: cereals (including rice) (thousand tonnes, harvested production) || || 565 || 476 || 556 || 466 || 677 || 645 || 595 || 469 || 615 || 609 || 541

Crop production: sugar beet (thousand tonnes, harvested production) || || 56 || 38 || 44 || 40 || 47 || 58 || : || : || : || : || :

Crop production: vegetables (thousand tonnes, harvested production) || || 680 || 696 || : || : || : || : || 588 || 565 || 590 || 650 || 743

: =
not available

p =
provisional

e =
estimated value

b =
break in series

\* =
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)             GDP in constant prices
of the previous year.

2)             2003–2009, data are
provided according to NACE Rev 1.1.

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

4)             2000-2002, 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.

5)             Data on FDI flows by countries
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, will be available within t+270 days.

6)             2000-2003, 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.

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

8)             From 2006, data cover
bilateral transactions over night; 2003, end of year; from 2003, the category
Total credits by MFIs (Microfinance Institutions) is expanded with loans
granted by saving houses.

9)             2000-2006, 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

10)           End of year.

11)           NEER (nominal effective
exchange rate).

12)           Data provided according
to NACE Rev 1.1.

13)           Data for 2004 and 2005
are the same figure, obtained from the same ICT survey, conducted in February
2005, as a pilot survey, which covered the end of 2004 and beginning of the
2005.

14)           Break in series:
2004-2008, revised data (including transport for own account).

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

[2]               Enlargement Strategy and Main Challenges 2011-2012 -
COM(2011) 666.

[3]               under UNSCR 1244/99

[4]               majority among both the
majority and non-majority communities

[5]               Council Decision 2011/168/CFSP of 29 March 2011.

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