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Europaudvalget 2000-01
EUU Alm.del Bilag 237
Offentligt

FROM THE COMMISSION

ESTONIA’S

PROGRESS TOWARDS

ACCESSION

***********************

8 November 2000

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Table of contents

A. Introduction ..............................................................................5

a) Preface ............................................................................................................ 5

b) Relations between the European Union and Estonia .................................. 7

Recent developments under the Association Agreement (including bilateral trade) .. 7

Accession Partnership / National Programme for the Adoption of the Acquis........... 8

Community aid ............................................................................................................ 8

Twinning ................................................................................................................... 11

Negotiations / screening ............................................................................................ 12

B. Criteria for membership ........................................................13

1. Political criteria.................................................................................... 13

Introduction ............................................................................................................... 13

Recent developments................................................................................................. 13

1.1. Democracy and the rule of law .................................................................... 13

The parliament........................................................................................................... 13

The executive ............................................................................................................ 14

The judicial system.................................................................................................... 15

Anti-corruption measures .......................................................................................... 17

1.2. Human rights and the protection of minorities.......................................... 17

Civil and political rights ............................................................................................ 17

Economic, social and cultural rights ......................................................................... 18

Minority rights and the protection of minorities ....................................................... 18

1.3. General evaluation ........................................................................................ 20

2. Economic criteria................................................................................. 22

2.1. Introduction................................................................................................... 22

2.2. Economic developments ............................................................................... 22

2.3. Assessment in terms of the Copenhagen criteria ....................................... 24

The existence of a functioning market economy....................................................... 24

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

Union ......................................................................................................................... 28

2.4. General Evaluation ....................................................................................... 31

3. Ability to assume the obligations of membership............................. 33

Introduction ............................................................................................................... 33

3.1. The chapters of the

acquis............................................................................

Chapter 1: Free movement of goods ............................................................. 34

Overall assessment .................................................................................................... 36

Chapter 2: Free movement of persons .......................................................... 37

Overall assessment .................................................................................................... 37

Chapter 3: Freedom to provide services........................................................ 38

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Overall assessment .................................................................................................... 39

Chapter 4: Free movement of capital............................................................ 40

Overall assessment .................................................................................................... 40

Chapter 5: Company law ............................................................................... 41

Overall assessment .................................................................................................... 42

Chapter 6: Competition policy....................................................................... 42

Overall assessment .................................................................................................... 43

Chapter 7: Agriculture................................................................................... 44

Overall assessment .................................................................................................... 49

Chapter 8: Fisheries....................................................................................... 50

Overall assessment .................................................................................................... 51

Chapter 9: Transport policy........................................................................... 52

Overall assessment .................................................................................................... 54

Chapter 10: Taxation ..................................................................................... 54

Overall assessment .................................................................................................... 55

Chapter 11: Economic and monetary union................................................. 55

Overall assessment .................................................................................................... 56

Chapter 12: Statistics ..................................................................................... 56

Overall Assessment ................................................................................................... 57

Chapter 13: Social policy and employment................................................... 57

Overall assessment...................................................................................................

Chapter 14: Energy........................................................................................ 60

Overall assessment .................................................................................................... 60

Chapter 15: Industrial policy......................................................................... 61

Overall assessment .................................................................................................... 62

Chapter 16: Small and medium-sized enterprises ........................................ 62

Overall assessment .................................................................................................... 63

Chapter 17: Science and research................................................................. 63

Overall assessment .................................................................................................... 64

Chapter 18: Education and training ............................................................. 64

Overall assessment .................................................................................................... 64

Chapter 19: Telecommunications and information technologies................ 65

Overall assessment .................................................................................................... 66

Chapter 20: Culture and audio-visual policy................................................ 66

Overall assessment .................................................................................................... 66

Chapter 21: Regional policy and co-ordination of structural instruments . 67

Overall assessment .................................................................................................... 68

Chapter 22: Environment .............................................................................. 68

Overall assessment .................................................................................................... 71

Chapter 23: Consumers and health protection............................................. 72

Overall assessment .................................................................................................... 72

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Chapter 24: Co-operation in the field of justice and home affairs .............. 73

Overall assessment .................................................................................................... 75

Chapter 25: Customs union........................................................................... 77

Overall assessment .................................................................................................... 78

Chapter 26: External relations ...................................................................... 78

Overall assessment .................................................................................................... 79

Chapter 27: Common foreign and security policy........................................ 80

Overall assessment .................................................................................................... 80

Chapter 28: Financial control....................................................................... 81

Overall assessment .................................................................................................... 82

Chapter 29: Financial and budgetary provisions ......................................... 82

Overall assessment .................................................................................................... 83

3.2. Translation of the

acquis

into the national language................................. 83

3.3. General evaluation ........................................................................................ 84

C. Conclusion ...............................................................................86

D. Accession Partnership and National Programme for the

Adoption of the

Acquis:

Global assessment .........................89

1. Accession Partnership ......................................................................... 89

Short-term priorities .................................................................................................. 89

Medium-term priorities ............................................................................................. 91

2. National Programme for the Adoption of the

Acquis

...................... 92

Annexes..........................................................................................93

Human Rights Conventions ratified by the Candidate Countries, September

2000 ......................................................................................................... 94

Statistical data ................................................................................................ 95

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A. Introduction

a) Preface

In Agenda 2000, the Commission said it would report regularly to the European Council

on progress made by each of the candidate countries of Central and Eastern Europe in

preparations for membership, and that it would submit its first report at the end of 1998.

The European Council in Luxembourg decided that

“From the end of 1998, the Commission will make regular reports to the Council,

together with any necessary recommendations for opening bilateral intergovernmental

conferences, reviewing the progress of each Central and Eastern European applicant State

towards accession in the light of the Copenhagen criteria, in particular the rate at which it

is adopting the Union

acquis”

… “The Commission’s reports will serve as the basis for

taking, in the Council context, the necessary decisions on the conduct of the accession

negotiations or their extension to other applicants. In that context, the Commission will

continue to follow the method adopted by Agenda 2000 in evaluating applicant States’

ability to meet the economic criteria and fulfil the obligations deriving from accession.”

On this basis, the Commission presented a first series of regular reports in October 1998,

with a view to the Vienna European Council; a second series was adopted in October

1999, with a view to the Helsinki European Council. The Helsinki European Council

noted that the next regular reports would be presented in good time before the European

Council in December 2000.

The structure followed by this regular report on Estonia is largely similar to that of the

Commission’s 1997 Opinion and of the subsequent regular reports; however, it differs

from that used in previous years on three minor points. Firstly, the part of the present

report assessing Estonia’s ability to assume the obligations of membership (Part

B.3.1.)

has been structured to follow the list of twenty-nine negotiating chapters covering the

acquis.

Secondly, this part has been broadened to cover also Estonia’s administrative

capacity to apply the

acquis

under each of the negotiating chapters (previously discussed

in a separate section of the report). Thirdly, the report includes, for the first time, a

section assessing the progress made by Estonia in translating the

acquis

into its official

language.

In line with previous regular reports, the present report:

describes the relations between Estonia and the Union, in particular in the framework

of the Association Agreement;

analyses the situation in respect of the political criteria set by the 1993 Copenhagen

European Council (democracy, rule of law, human rights, protection of minorities);

assesses Estonia’s situation and prospects in respect of the economic criteria defined

by the Copenhagen European Council (a functioning market economy and the

capacity to cope with competitive pressures and market forces within the Union);

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addresses the question of Estonia’s capacity 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 encompasses not only the alignment of legislation,

but also the development of the judicial and administrative capacity necessary to

implement and enforce the

acquis,

as requested by the Madrid and Feira European

Councils in December 1995 and June 2000 respectively. At Madrid, the European

Council underlined the necessity for the candidate countries to adjust their

administrative structures, so as to create the conditions for the harmonious integration

of those States. The Feira European Council in June 2000 emphasised the vital

importance of the candidate countries’ capacity to effectively implement and enforce

the

acquis,

and added that this required important efforts by the candidates in

strengthening their administrative and judicial structures. The Feira European

Council invited the Commission to report to the Council on its findings on the matter.

This report takes into consideration progress since the 1999 regular report. It covers the

period until 30 September 2000. In some particular cases, however, measures taken after

that date are mentioned. It looks at whether intended reforms, referred to in the 1999

regular report, have been carried out, and examines new initiatives. Furthermore,

complementing the assessment of new developments since the last regular report, this

report provides also an overall assessment of the global situation for each of the aspects

under consideration, setting out for each of them the main steps which remain to be taken

by Estonia in preparing for accession.

In accordance with this approach, the assessment of progress in meeting the political and

acquis

criteria (including Estonia’s administrative capacity to implement the

acquis)

focuses on what has been accomplished since the last regular report, complemented with

a view of the global situation for each of the aspects discussed. The economic

assessment, for its part, is based on a forward-looking evaluation of Estonia’s economic

performance.

The report contains also a separate section examining the extent to which Estonia has

addressed the short-term Accession Partnership priorities, and has started to address the

medium-term priorities set out in this framework.

As has been the case in previous reports, “progress” has been measured on the basis of

decisions actually taken, legislation actually adopted, international conventions actually

ratified (with due attention being given to implementation), and measures actually

implemented. As a matter of principle, legislation or measures which are in various

stages of either preparation or parliamentary approval have not been taken into account.

This approach ensures equal treatment for all the candidate countries and permits an

objective assessment and comparison between countries in terms of their concrete

progress in preparing for accession.

The report draws on numerous sources of information. The candidate countries have been

invited to provide information on progress made in preparations for membership since

the publication of the last regular report. The National Programmes for the Adoption of

the

Acquis

of each of the candidate countries, as well as the information they have

provided in the framework of the Association Agreement and in the context of the

analytical examination of the

acquis

(screening) and the negotiations, have served as

additional sources. Council deliberations and European Parliament reports and

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resolutions

have been taken into account in the preparations. The Commission has also

drawn on assessments made by various international organisations, and in particular the

contributions of the Council of Europe, the OSCE and the International Financial

Institutions, as well as that of non-governmental organisations.

b) Relations between the European Union and Estonia

Recent developments under the Association Agreement (including bilateral

trade)

Estonia has continued to implement the Europe Agreement and contributed to the smooth

functioning of the various joint institutions.

The third meetings of the EU-Estonia Association Council and Committee were held in

February and June 2000, respectively. The system of sub-committees continues to

function as an efficient instrument for technical discussions. Current discussions within

the institutional framework of the Europe Agreement focus particularly on the

implementation of the Accession Partnership (see below) and seek to achieve progress in

areas such as the internal market, agriculture and justice and home affairs.

Since the last regular report, the Joint Parliamentary Committee comprising

representatives of the Estonian and European Parliament has met three times, in

November 1999 and in March and October 2000.

Estonia's trade with the EC decreased slightly in 1999, to recover again in the first half of

2000. By June 2000, Estonian exports (except transit exports) to the EC accounted for

73% of total exports. Imports from the EC amounted to 73% of total imports. Estonia’s

main EC trading partners are Finland, Sweden and Germany and the main exports to the

EC are machinery and electrical equipment, wood and mineral products, while the most

important import products are machinery and electrical equipment, agricultural products

including processed foodstuffs and transport equipment.

In March 1999 the Council mandated the Commission to open negotiations with the

associated countries with a view to new reciprocal concessions for agricultural products.

The negotiations, which form a part of the overall accession process, have been carried

out on a reciprocal basis and with the aim of leading to a fair equilibrium between the

interests of the European Community, the EU Member States and those of Estonia. The

negotiations have been based on the principle of neutrality with respect to the functioning

of the CAP.

The negotiations with Estonia for agricultural products were concluded between

negotiators in November 1999. As a consequence more than half of traditional Estonian

exports to the EC will benefit from preferences. EC exports will continue to enjoy full

free access to the Estonian market. The new regime for agricultural products entered into

force on 1 July 2000 on an autonomous basis, pending the conclusion of an Additional

Protocol to the Europe Agreement.

For the European Parliament the

rapporteur

is Ms Gunilla Carlsson.

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In addition, negotiations on further mutual concessions for a number of processed

agricultural products were also concluded between negotiators in May 2000. A Council

Decision to implement the new concessions is under discussion.

In July 2000, the Council mandated the Commission to open negotiations with the

associated countries on new reciprocal concessions in the field of fish and fishery

products.

There is no specific trade problem in the relations between Estonia and the EU. Bilateral

negotiations with Estonia on a Protocol on European Conformity Assessment (PECA)

have continued.

In March 2000, Estonia signed a Joint Assessment on Medium Term Economic policy

priorities with the Commission.

Accession Partnership / National Programme for the Adoption of the Acquis

A revised Accession Partnership was adopted in December 1999. Its implementation is

reviewed in chapter D of this Report.

In May 2000, Estonia presented a revised National Programme for the Adoption of the

Acquis

(NPAA), in which it outlines its strategy for accession including how to achieve

the priorities of the Accession Partnership.

Community aid

Since January 2000, there are three

pre-accession instruments

financed by the European

Community to assist the applicant countries of Central Europe in their pre-accession

preparations: the

Phare

programme;

SAPARD,

which provides aid for agricultural and

rural development; and

ISPA,

which finances infrastructure projects in the fields of

environment and transport. These programmes concentrate their support on the Accession

Partnership priorities that help the candidate countries to fulfil the criteria for

membership.

In the years 2000-2002 total financial assistance to Estonia will amount annually to

€

million from Phare,

€

12 million from SAPARD, and between

€

21 and 37 million from

ISPA.

The

Phare

programme has been providing support to the countries of Central Europe

since 1989, helping them through a period of massive economic restructuring and

political change. Its current “pre-accession” focus was put in place in 1997, in response to

the Luxembourg European Council’s launching of the present enlargement process.

Phare provides the applicant countries of Central Europe with support for institution

building, investment to strengthen the regulatory infrastructure needed to ensure

compliance with the

acquis

and investment in economic and social cohesion. This

support comprises co-financing for technical assistance, "twinning" and accompanying

investment support projects, to help them in their efforts to adopt the

acquis

and

strengthen or create institutions necessary for implementing and enforcing the

acquis.

This also helps the candidate countries develop the mechanisms and institutions that will

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be needed to implement Structural Funds after accession and is supported by a limited

number of measures (investments or grant schemes) with a regional or thematic focus.

Around 30% of the Phare allocation is used for “institution building”, while the

remaining 70% is used for financing investments.

During the period 1990 – 1999, the Phare programme allocated

€

190 million to Estonia.

The

2000 Phare Programme

for Estonia consists of a national allocation of

€

24 million,

concentrated on the following priorities:

−

Political criteria–

social integration and language training for ethnic minorities

(€3.14M)

−

Administrative Capacity

– financial management and financial control (€1 M)

−

Internal Market

– market surveillance and master customs tariff system (€3.8 M)

−

Employment and Social Affairs

– labour market services (€1.8 M)

−

Justice and Home Affairs

– drugs, police training and crime prevention (€1.9 M)

−

Agriculture

- agricultural support systems (€1.98 M)

−

Economic and Social Cohesion

– business development, training and investment.

(€10.1 M)

An additional

€

3 million has been allocated under the Cross Border Cooperation

programme for investment in infrastructure, to improve water quality, and for a small

project facility to support cooperation activities in the Baltic region.

Estonia also participates in and benefits from Phare funded multi-country and horizontal

programmes, such as TAIEX, Justice and Home Affairs and the Small and Medium-sized

Enterprises Facility. Furthermore, Estonia participates in a number of Community

programmes – Small and Medium-sized Enterprises, 5

Framework Programme on

Research and Development, Leonardo da Vinci, Raphael, Socrates, Youth for Europe,

Drug Dependence and Health Promotion. Estonia has expressed its interest in

participating in the Culture 2000 Community programme. Following the opening of

negotiations regarding Estonia’s participation in the European Environment Agency, an

agreement has been reached. Following ratification and entry into force of this agreement,

scheduled for early 2001, Estonia will become a member of the Agency.

Overall, the impact of Phare in Estonia has been positive. Effective transfer of know-

how, equipment and financial resources has taken place in a number of important fields

such as banking, education, the social sector, privatisation, investment and export

promotion, SME development, statistics, agriculture and land reform, environment,

energy, transport, regional development, and justice and home affairs.

For example, Phare played a particularly important role in:

−

Language training for non-Estonians:

In cooperation with the United Nations

Development Programme, Phare support has been used to provide Estonian language

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training in order to improve the social and economic integration of the Russian

speaking population. Phare has provided

€1.4m

out of a total project cost of

€2.2m

−

Strengthening the judicial system:

A twinning project has been helping to train

judges, prosecutors and bailiffs. Information technology equipment has also been

provided for court probation departments and for all judges and court secretaries in

order to improve storage and processing of data. Phare is contributing

€

1.4 million.

−

Improving the effectiveness of border controls

at the future external borders of the

European Union. Phare assistance has been used to supply electro-optical sensors to

the Estonian border guards and to provide training in how to use them. This

equipment should allow for a more efficient border control. Phare has provided

€

million.

−

Improving water quality.

With Phare support, the Island of Vormsi has been able to

address the problem of the lack of sewage treatment systems, which threatened both

the quality of the drinking water and the ecology of the surrounding Baltic Sea. Phare

CBC has contributed

€

0.4 million from a total project cost of

€

0.9 million.

−

Increasing European integration:

This wide-ranging Phare project is supporting the

introduction of EC compatible legislation and the implementation of legislation in a

number of important areas. New legislation has been developed covering the

environment, internal market and agriculture sectors. Phare is contributing

€

million.

Estonia has taken steps in order to improve the programming and management of the pre-

accession instruments. In particular, the government has taken steps to improve

coordination between ministries and to accelerate preparations of the National Phare

Programme. These new procedures have been implemented in respect of the 2001

programme. Still, considerable efforts to reinforce programming capacities need to be

made in order to maximise the efficient use of Phare funds.

A reform of the

Phare management system

took place in 1998 and 1999 to improve the

speed, efficiency, effectiveness and transparency of Phare activities. The recent Phare

Review Communication in 2000 continues to refine these basic management structures

so as to further bridge towards accession and the structural funds. First, management can

be fully decentralised from 2002 if the strict pre-conditions set down in the Co-ordination

Regulation 1266/99 are met. Second, Phare programming can be moved onto a multi-

annual basis if supporting strategies are in place. Third, the trends introduced in 1997 will

continue with an increased role for Delegations, further streamlining of procedures and,

lastly, increasing emphasis of management on raising the impact of Phare projects in

institution building, investment in compliance with the

acquis

and economic and social

cohesion.

The Estonian Rural Development Plan received a favourable opinion by the STAR

Committee (EC Management Committee on agricultural structures and rural

development) in October 2000. The plan is likely to be adopted by the Commission

before the end of the year. The plan is based on three major priorities, namely the

improvement of competitiveness in the agriculture sector and the agri-food industry

(60.1% of EC funds), rural regeneration and rural development (36.5% of EC funds) and

effective programme implementation (3.4% of EC funds). The average annual

expenditure will amount to

€34

million during the period 2000-2006, of which

€12.3

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million (at 2000 prices) will represent the Community contribution. Estonia established

the

SAPARD

agency in March 2000 within the Estonian Agricultural Register and

Information Board (ARIB). This agency will be responsible for all aspects of

implementation of SAPARD including making of payments. The preparation of its

accreditation is currently underway. Unlike Phare, SAPARD will be implemented on a

fully decentralised basis from the start.

As regards the

ISPA

programme, the Estonian government has elaborated two strategy

papers for transport and environment respectively, defining the main funding priorities in

these areas. Priority projects agreed with the Commission for the year 2000 in the field of

transport include a programme for reconstruction of the Via Baltica (Tallinn-Pärnu-Ikla),

the rehabilitation of the Tallinn-Narva road, and the Tapa Railway Yard Reconstruction

Project. In the environmental sector, projects include the construction of a sewage

collector in Tartu, the Narva and Viljandi wastewater treatment plants and the

construction of landfills at Pärnu and Tallinn. ISPA allocation for Estonia amounts to

€14.5

million for 2000 (50% transport and 50% environment).

Implementation of the ISPA projects will follow the same institutional framework as for

the Phare programme, with the National Fund at the Ministry of Finance being in charge

of the overall financial management and a number of Ministries responsible for the

technical implementation. For the programme and financial management of SAPARD, a

different system will apply which reflects the EAGGF (European Agricultural Guidance

and Guarantee Fund) rules and is based on a fully decentralised approach through an

accredited paying and implementing agency.

The National Fund located within the Estonian Ministry of Finance has become the

central entity through which Phare, ISPA and SAPARD funds will be channelled. The

National Fund has overall responsibility for financial management of funds and for

ensuring that procurement rules, reporting and financial management are respected. The

Phare Joint Monitoring Committee is responsible for coordination of monitoring for the 3

instruments. The Joint Monitoring Committee (representatives will include the

Commission and Estonian Ministry of Finance) meets every year to review the

implementation of all assistance to Estonia.

Twinning

One of the main challenges the candidate countries continue to face is the need to

strengthen their administrative capacity to implement and enforce the

acquis.

As of 1998,

the European Commission proposed to mobilise significant human and financial

resources to help them in this respect, through the process of twinning of administrations

and agencies. The vast body of Member States’ expertise is now being made available to

the candidate countries through the long-term secondment of civil servants and

accompanying short-term expert missions. Thanks to the strong support and response

from EU Member States 107 twinning partnerships, funded by Phare 98 and involving all

candidate countries and almost all Member States are operational. Under Phare 99 a

further 107 projects are being implemented and the programming exercise for Phare 2000

includes a further 129 twinning projects. It is estimated that around 250 twinning projects

will be operational throughout the candidate countries at any one time.

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To start with, twinning focused primarily on the priority sectors of agriculture,

environment, public finance, justice and home affairs and preparatory measures for the

Structural Funds. It now covers all sectors pursuant to the

acquis.

For Estonia, 14 twinning projects have been approved since 1998 and are at various

stages of implementation. In addition to the above-mentioned sectors, the twinning

projects in Estonia intend to support the development of the internal market and the

social sector. Eight new twinning projects are foreseen for the year 2000, covering

financial control, market surveillance, computerised tariffs, labour market services, drug

strategies, police training, crime prevention and agricultural administration systems.

The total commitment from the Commission to twinning projects in Estonia amounts to

approximately

€14m,

including the 2000 projects.

Eight Member States (France, Germany, Finland, Sweden, Greece, Italy, Ireland and

Denmark) are currently involved in Twinning with Estonia.

Negotiations / screening

The analytical examination of the

acquis

(screening) for Estonia started in April 1998 and

concluded in autumn 1999 with the examination of the agricultural chapter. An update of

the screening exercise started in February 2000 in order to review the

acquis

entered into

force in 1 January 2000.

Since the opening of accession negotiations in March 1998, Estonia has participated in

four rounds of ministerial negotiations. As a result of these negotiations, thirteen chapters

have been provisionally closed (science and research, education and training, small and

medium-sized enterprises, statistics, industrial policy, telecommunications, health and

consumer protection, CFSP, company law, fisheries, external relations, EMU and free

movement of capital) while negotiations continue for the remaining chapters.

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B. Criteria for membership

1. Political criteria

Introduction

The political criteria for accession to be met by the candidate countries, as laid down by

the Copenhagen European Council in June 1993, stipulate that these countries must have

achieved “stability of institutions guaranteeing democracy, the rule of law, human rights

and respect for and protection of minorities.”

In its 1999 regular report on Estonia’s progress towards accession, the Commission

concluded that:

“Estonia fulfils the Copenhagen political criteria. However, the adoption of the Language

Law, which restricts access of non-Estonian speakers in political and economic life

constitutes a step backwards and should be amended. In the meantime, the Commission

will closely monitor the implementation of the law to see what impact it will have in

practice. Attention needs to be paid to the fight against corruption.”

The section below aims to provide an assessment of developments in Estonia since the

1999 regular report, as well as of the overall situation in the country, seen from the

perspective of the political Copenhagen criteria, including as regards the overall

functioning of the country’s executive and its judicial system. Developments in this

context are in many ways closely linked to developments regarding Estonia’s ability to

implement the

acquis,

in particular in the domain of justice and home affairs. Specific

information on the development of Estonia’s ability to implement the

acquis

in the field

of justice and home affairs can be found in the relevant section (Chapter

24 – Co-

operation in the field of justice and home affairs)

of part

B.3.1

of this report.

Recent developments

There has been no major political change in Estonia since last year’s regular report. A

new Russian political party has been created, aiming at increasing involvement of non-

Estonians in Estonian politics. There has not been any major shift in government policy

and EU membership continues to be a key objective in Estonian foreign policy.

1.1.

Democracy and the rule of law

As mentioned in the previous Regular Reports, Estonia has achieved stability of

institutions guaranteeing democracy and the rule of law. This section therefore focuses on

the most significant developments of the last year.

The parliament

The Estonian Parliament (Riigikogu) continues to operate satisfactorily. Its powers are

respected and the opposition plays a full part in its activities. Efforts made by the current

parliament in the adoption of EU-related legislation should receive special mention. This

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has allowed Estonia to fulfil its legislative timetable and thus contributed to considerable

progress in several areas. Efforts in this direction need to be maintained.

The executive

Progress as regards the modernisation of the public administration and of the civil service

has been limited.

There are 20,505 employees in the Estonian administration

, including ministries

(11.7%), government agencies (83%) and county governments (5.3%). In addition, local

governments employ 4,008 persons. Overall, Estonia’s civil servants continue to perform

their tasks in an impartial and politically neutral way.

The Estonian administration still suffers from a lack of qualified staff at the middle

management and technical levels of the civil service. Some ministries remain weak

because of difficulties in attracting and retaining good staff – due to low salaries and lack

of career schemes- and poor resources management. Turnover of staff remains high

(approx. 15%), which in some sectors results in a loss of expertise within the

administration. Lack of coordination among ministries and between the local and central

levels continues to be a problem. Homogeneous standards applicable to all public

administration settings are unlikely under the present arrangements.

Despite the fact that it has been signalled by the government as a major political priority,

no comprehensive strategy for public administration reform has been developed yet. The

Office of Public Administration Reform (OPAR), within the State Chancellery, became

operational in November 1999. Its role in the definition and implementation of a

comprehensive public administration strategy is much more limited than early

expectations would suggest. Its tasks remain ambiguous. In addition, lack of co-

ordination among the key authorities involved (the Ministry of the Interior, the State

Chancellery and the Ministry of Finance) has also hindered progress in this area. In

December 1999, the OPAR prepared a discussion paper on the “starting points of the

Administrative Reform Programme”. The paper is still under discussion with the

different ministries.

The State Administration department in the Ministry of Finance is also involved in

administrative reform. With a staff of 14 people, it is in charge of proposing salary

structures for civil servants, mapping and analysing the functions of state institutions,

assessing how to change or merge state structures at the central level, and monitoring

administrative expenses from the perspective of cost-effectiveness. Co-operation with the

Office of Public Administration Reform should be improved.

Civil service reform needs to be completed. Efforts are needed as regards recruitment and

promotion criteria and the salary system. The lack of a cross-administration system of

training and human resources management reinforces these problems.

Under the coordination of the European Integration Office, Estonia has continued to

make efforts to train civil servants in EU affairs. The new civil servants performance

appraisal system, adopted in 1999 has been launched. The use of information technology

Data as of 1.9.2000. Includes police, border guard and prisons staff. Does not include education and

healthcare personnel.

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is widespread within the Estonian administration. The adoption of the Law on Digital

Signature has been a new step forward in this area since it establishes the framework in

which electronic, rather than paper, records will be recognised, authenticated and used.

Reform and consolidation of local government is underway. Currently, Estonia is

organised into 15 counties and 247 municipalities, some of them very thinly populated.

The Ministry of the Interior is in charge of the territorial reform of municipalities. The

Ministry of Finance and the Minister without Portfolio responsible for regional

development are in charge of the territorial reform of the counties. The main objective of

the reform is to reduce the number of municipalities from the current number to less than

100.

The judicial system

Estonia has made some progress in addressing the concerns raised in last year’s regular

report in this area, in particular as regards training for judges. However, the workload of

judges and backlog in the system have not registered noticeable improvements.

No concrete developments have taken place as regards the reform of the penal and civil

law systems in order to complete the transition from the former system. Co-operation

between the different authorities (police, prosecutors and judges) still needs to be

reinforced.

A document outlining the strategy for all the institutions under the competence of the

Ministry of Justice- the court system, public prosecution, probation and civil enforcement

–for the years 2000-2003 was adopted in March 2000. The document also redefines the

functions of the Ministry. As regards the administrative capacity of the Ministry of

Justice, an internal audit unit was established in May 2000. In September 2000, the

government adopted the principles of the Court Reform until 2003.

Estonia has a three-instance court system. There are 18 courts (21 in 1999) of first

instance: 3 city courts, 12 county courts and 3 administrative courts. The city and county

courts deal with civil and criminal cases while the administrative courts (located in

Tallinn, Tartu and Pärnu) are the only “specialised” courts. In order to improve the

efficiency of the courts system, three city and county courts have been merged in Tartu,

Pärnu and Sillamae. A new Administrative Court has been established in Pärnu. There

are 3 district courts (second instance), in Tallinn, Tartu and Jöhvi. Finally, the Supreme

Court also serves as Constitutional Court and is therefore fully independent, with its own

budget. The Supreme Court has criminal, civil and administrative chambers; for

constitutional issues, a five-member Constitutional Chamber convenes.

All judges are appointed for life. Although there has been a slight change in the trend, a

career in the judiciary remains unattractive for young qualified lawyers. Of a total of 238

judge posts, 14 remain vacant as compared to 19 in 1999. Since last year's regular report,

nine judges have been appointed in Estonia, five of them to the Tallinn City Court. This

is a first step in order to address the relevant short-term priority of the 1999 Accession

Partnership. Concrete measures to attract highly qualified judges into Northeast Estonia

need to be adopted. As regards the courts administration there are currently 150

prosecutors (out of 172 positions), 80 assistant judges, 37 registrars of the court, 167

court bailiffs and 148 probation officers. There are only 381 barristers (members of the

Bar Association) in Estonia. The reason for this relatively low number is that barristers

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have a monopoly of representation before the Supreme Court. In all other courts, legal

consultants can also provide legal assistance.

In 1999, the number of pending cases in Estonia’s courts, per judge/per month, amounted

to 42.4, 13.6 and 26.9 for the civil, penal and administrative fields respectively as

compared to 38.8, 12.5 and 17.9 in 1998. The backlog in the courts (calculated as the

proportion between pending cases and the number of total cases) has slightly decreased to

62% from 64% since the last regular report. In June 2000, the Ministry of Justice changed

the reporting format according to which courts compile statistical data. “Backlog” is now

defined as the proportion of criminal cases pending for more than one year and civil

cases pending longer than two years. In the past the backlog included all cases pending at

the beginning of the year.

Under the new methodology the estimated backlog decreases

considerably to 21.7% for criminal cases and 5.7% of civil cases. Much of the backlog of

criminal cases is concentrated in north-east Estonia. In 1999, proceedings in criminal

cases lasted 3 months and 20 days on average, while proceedings in civil cases lasted 4

months and 24 days, reflecting no major changes since last year's regular report. In

addition, in July 2000 the government adopted the main goals in the fight against crime,

which include the introduction of measures to accelerate court proceedings.

Uncertainty by judges applying the law, in particular in the administrative and penal law

field, continues to be a problem. The quality of court decisions varies considerably,

although it remains unsatisfactory in the lowest-level courts. In 1999, first instance courts

made 21,432 judgements in civil cases of which around 10% were appealed. In criminal

cases, first instance courts made 6,681 judgements, of which 30.5% were appealed.

Finally, as regards administrative cases, 43.2% of cases (1,316 judgements) were

appealed.

Efforts to improve the training of judges have continued, thus addressing the relevant

short-term priority of the 1999 Accession Partnership. Most of the training has focused

on the recent changes in the legislation, especially in those areas that have changed

dramatically since Soviet times as well as in EC law. Sixty per cent of judges and

prosecutors have undergone an average 112 hours of training each.

The probation system, established in June 1998 is working well. On 1 May 2000, there

were approximately 5,800 probationers in Estonia, of whom 5,400 were conditionally

sentenced and 400 conditionally released. The number of probation supervisors is 200, so

the legal limit of 30 probationers per supervisor is respected. Forty new probation officers

have been appointed since last year’s regular report. A hundred probation supervisors

were trained in 1999. Around 4% of probationers reoffend in the course of their

probation. This is a good result, given the novelty of the institution in Estonia.

Despite the fact that a number of measures in this area are under preparation, no concrete

developments as regards the introduction of information technologies in courts can be

reported.

For the purposes of this report and in order to allow comparability of data last year’s methodology will be

used.

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Anti-corruption measures

Corruption is a relatively limited problem in Estonia. Only isolated cases can be reported,

mainly in the local administrations where business and officials are more closely

interconnected. Overall, Estonia has made considerable progress as regards the fight

against corruption. Estonia has ratified the Convention on Laundering, Search, Seizure

and Confiscation of the Proceeds from Crime. It has also signed, but not ratified, the

Council of Europe Criminal and Civil Law Conventions on Corruption. Estonia has not

yet signed the OECD Convention on Combating Bribery of Foreign Public Officials in

International Business Transactions. These efforts need to be continued and strengthened,

in particular as regards the fight against corruption in the police and customs

administrations. (see

chapter 24 - Co-operation in the field of justice and home affairs).

1.2.

Human rights and the protection of minorities

As mentioned in previous regular reports, Estonia continues to respect human rights and

freedoms. The following section concentrates on subsequent major developments.

Estonia has ratified the major international conventions in the field of human rights (see

annex). Further progress was made with the ratification by the Estonian Parliament, in

May 2000, of the Revised European Social Charter. Estonia has not yet signed the 1991

European Social Charter or the UN Convention relating to the Status of Stateless Persons.

Civil and political rights

As regards the areas which were a matter of concern in the previous regular reports, the

following developments can be reported:

•

Pre-trial conditions:

some isolated cases of ill treatment suffered by prisoners in

custody have been reported, including the use of punishment cells. However, some

progress has been made as regards pre-trial detention periods, which have been

shortened. In addition, in July 2000 the government adopted the main goals in the

fight against crime until 2003, which include to considerably shorten custody periods.

Prison conditions

in Estonia remain poor although considerable progress has been

made in this area. The current prison population rate is 320 prisoners per 100,000

inhabitants. A first step to reform the prisons system in Estonia has been taken by

bringing the administration and control of prisons under the direct responsibility of

the Ministry of Justice. On March 2000, the Ministry of Justice adopted a

development plan, until the year 2003, for the Estonian prison system. In June 2000,

the Imprisonment Act was adopted in order to introduce further Council of Europe

recommendations in this area, such as the abolition of in-prison regimes. In addition,

implementation of the existing multi-year plan to refurbish and restructure the

country’s prisons has started. However, delays have occurred in the construction of a

new prison in Tartu, which together with the introduction of the probation system

should considerably alleviate the current overpopulation. Efforts have been

undertaken to improve training among prison employees, including the teaching of

the Estonian language.

•

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Economic, social and cultural rights

As regards

equal opportunities,

no major changes can be reported. Despite the legislative

framework that guarantees equal rights and opportunities, for women further efforts need

to be made to implement these in practice.

Estonia has not ratified those articles of the Revised European Social Charter related to

the rights to a decent salary, social protection for the elderly, dignified treatment at work,

protection against poverty and social deprivation, and shelter. No concrete date is

envisaged for the ratification of the remaining articles.

Minority rights and the protection of minorities

Ethnic non-Estonians constitute

35% of Estonia’s total population (1,445,580

). Twenty-

eight per cent of the total population (406,000) is of Russian origin.

The naturalisation procedure

112,822 non-Estonians have been granted Estonian citizenship since the Citizenship Law

entered into force in 1992. Since 1 August 1999, 3,637 persons have received citizenship,

as compared to 7,946 between 1 August 1998 and October 1999. In addition, following

the amendments to the Citizenship Law in relation to stateless children, 427 applications

have been introduced for the naturalisation of Estonian-born children of non-citizens

legally resident in Estonia.

The Citizenship Act has been amended in order to lift the language and civic test

requirements for disabled people, thus easing the conditions for receiving citizenship.

Overall, Estonia has fulfilled the recommendations expressed by the OSCE in the area of

citizenship and naturalisation.

Residence permits and special passports for non-citizens

A large-scale process of converting temporary residence permits into permanent ones is

currently underway. Since the beginning of this year, the Citizenship and Migration

Board has faced the difficult task of having to convert 196,913 temporary residence

permits into permanent ones or to renew them. In order to overcome these difficulties,

steps were taken to increase the capacity of the Citizenship and Migration Board, e.g. by

increasing staff in its offices in north-east Estonia.

Currently, 192,072 non-citizens have been granted permanent residence permits and

84,180 hold temporary permits. Around 30,000 residents are estimated to be illegal. By

August 2000, 6,741 illegal residents had filed applications for residence under the

Government’s registration campaign, which started in July 1997. This compared to 4,754

in August 1999.

Since September 1999, the Aliens Act has been amended on six occasions. Most of the

amendments relate to the immigration quota regime (see

chapter 24 - Co-operation in the

field of justice and home affairs).

Following a decision of the Estonian Supreme Court,

In 1999 (OSCE data)

As of 1 January 1999

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spouses and children of Estonian citizens or holders of a valid residence permit are now

excluded from the immigration quota. Although efforts in this area need to be continued,

these amendments constitute a first step in resolving the issue of family reunification in

Estonia. However, minimum income requirements for persons applying for a residence

permit still exist.

Integration of minorities

The rights of the Russian-speaking minority (with or without Estonian nationality)

continue to be largely observed and safeguarded. Russian continues to be widely used in

the courts and in the administration in those areas where Russian-speakers represent a

majority of the local population. Furthermore, non-citizens legally resident in Estonia for

the last five years, were allowed to vote in the local elections that took place on 17

October 1999. Non-citizens are subject to some restrictions affecting the right to sit on

the board of state-owned companies, to belong to a political party or to be employed in

certain areas of the public administration.

In March 2000, the Estonian government adopted the state integration programme,

"Integration in Estonian Society 2000-2007", thus addressing one of the short-term

priorities of the 1999 Accession Partnership. The programme, which covers a wide range

of actions to promote the integration of non-Estonians, will be implemented by the

Estonian Integration Foundation. It focuses on four main areas: integration through the

education system targeting adults and children, language training for adults and socially

disadvantaged groups such as the unemployed, activities intended to protect the cultural

rights of minorities and promoting through a public awareness campaign a positive

attitude towards integration among Estonians and non-Estonians. The programme intends

to spend

€3.68

million in 2000, to be partly financed by foreign assistance. In addition, a

regional office of the Minister without portfolio responsible for Population Issues was

opened this year in Ida-Virumaa.

In the field of education, the

Law on Basic and Upper Secondary Schools

was amended

in April 2000 to guarantee that, after 2007, 60 per cent of teaching in upper secondary

schools will be in Estonian, while the remaining 40 per cent can be in another language.

Initially, the law foresaw that, by that date, all upper secondary instruction would be

provided exclusively in Estonian.

The ombudsman institution in Estonia was established in June 1999 by extending the

powers of the existing Legal Chancellor from ensuring legislative compliance with the

Constitution by the state to dealing with specific complaints by citizens. The Ombudsman

institution is particularly important in Estonia, since it is to play an important role as

regards the protection of minorities, as recommended by the OSCE High Commissioner

on National Minorities.

By June 2000, 688 applications had been lodged with the ombudsman, of which 110

(15.9%) were filed by members of the national minorities. Of these cases, 23 related to

residence issues.

Given the relatively short time since the ombudsman institution was established in

Estonia, it is too early to evaluate its functioning. In addition, the term of the previous

Legal Chancellor finished in June 2000 and the post is currently vacant. Procedures to

nominate a new Legal Chancellor need to be accelerated. Furthermore, the capacity of the

Legal Chancellor to deal with specific complaints by citizens needs to be reinforced. The

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creation of an Ombudsman Office in north-east Estonia so as to ensure that the specific

concerns of non-Estonians in the region are properly addressed needs to be speeded-up.

Finally, public awareness, accessibility and visibility of the institution need to be raised.

Language policy

Estonia has made considerable progress in this area. As recommended in last year’s

regular report, the Estonian Parliament amended the Language Law in April 2000. The

law regulates the use of the Estonian language in the public and private sectors. The

amendments aim at ensuring the compatibility of the law with international standards on

such issues as the freedom of expression as well as with the obligations of Estonia under

the Europe Agreement. They intend to clarify the scope of the law as well as to enhance

the proportionality of the restrictive provisions contained in the text. Under the new law,

the compulsory use of Estonian in the private sphere has to be clearly justified on the

grounds of a specific public interest, such as public security, public order, public health,

health-protection, consumer protection and safety at work. Alignment of language

legislation with international standards and the Europe Agreement constituted a short-

term priority in the 1999 Accession Partnership with Estonia. Efforts in this area need to

be continued in order to ensure that the implementation of the law, including the adoption

of secondary legislation, also complies with those principles.

Under the Parliamentary and Local Elections Law, language requirements for candidates

to parliamentary and local elections still remain. Although enforcement of these

provisions is weak in practice, these restrictions affect the right of non-Estonian speakers

to choose their candidates, in particular at local level.

A new integrated language certification system has also been adopted. The new system

rationalises the previous system, which involved three different tests (for naturalisation,

for education/graduation exams and for professional certification) with different

methodologies and three different bodies responsible. The new system will involve single

comprehensive language testing methodology that will be under the responsibility of the

National Examination and Qualification Centre. These changes should also help to

increase the speed of naturalisation, in particular for graduates of the basic and upper

secondary schools In order to ensure the proper functioning of the Centre and its capacity

to cope with the increasing demand for language certification resulting from the

application of the Language and Citizenship Laws; the necessary budgetary and human

resources need to be allocated.

1.3.

General evaluation

Estonia continues to fulfil the Copenhagen political criteria. It has addressed most of the

short-term priorities of the 1999 Accession Partnership in this area, including the

introduction of amendments to the language law, the adoption of the State Integration

Programme for non-Estonians, the reinforcement in the training of judges and the

reduction in the number of judge vacancies. In addition, steps have been taken to improve

the capacity of the Citizenship and Migration Board to handle residence and citizenship

applications. Progress towards the modernisation of the public administration has been

limited. Efforts should be made to introduce a comprehensive strategy in this area,

aiming at addressing the current deficiencies. Measures which have so far been taken to

improve the functioning of the judiciary need to be continued, in particular to reinforce

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the training of judges. Co-ordination between the different justice bodies needs to be

reinforced and the reform of the penal and civil law systems needs to be accelerated.

As regards the integration of minorities, Estonia needs to ensure that the implementation

of the Language Law takes place in accordance with international standards and the

Europe Agreement. The capacities of the ombudsman, in particular as regards the

protection of minorities need to be reinforced.

Estonia needs to continue efforts as regards the integration of non-citizens, reinforcing

the capacity of the public administration. and improving the judicial system, in order to

meet the medium-term priorities of the 1999 Accession Partnership in these areas.

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2. Economic criteria

2.1.

Introduction

In its 1997 Opinion on Estonia’s application for EU membership, the Commission

concluded:

“Estonia can be regarded as a functioning market economy”; it “should be able to make

the progress necessary to cope with competitive pressures and market forces within the

Union in the medium term”.

This finding was confirmed in the 1998 and 1999 regular reports. In its 1999 regular

report, the Commission found that:

“Estonia is a functioning market economy where market forces play their full role. It

should be able to cope with competitive pressure and market forces within the Union in

the medium term, provided it completes the remaining key structural reforms.”

In examining the economic developments in Estonia since the Opinion, 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;

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

In the analysis below, the Commission has followed the methodology applied in the

Opinion, as well as in the previous regular reports.

2.2.

Economic developments

Economic growth has resumed in Estonia from the second half of 1999.

A stable

economic and legal environment and proper policies have supported the rapid return to

relatively strong growth after the economic recession partly prompted by the Russian

crisis. In particular the Government's stability-oriented macroeconomic policy has led to

restructuring and a rapid adjustment to the new conditions by enterprises and other

economic actors. This has allowed the economy to take full advantage of the more

favourable international economic and financial conditions. As a result, previous

macroeconomic imbalances, in particular large fiscal and current account deficits, have

been reduced, while inflation has been kept under control.

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Estonia

Real GDP growth rate

Inflation rate

- annual average

- December-on-December

Unemployment rate, end-year

- ILO definition

General government budget

balance

per cent

1996

3.9

1997

10.6

1998

4.7

1999

-1.1

2000 latest

6.4 Jan-June

per cent

19.8

13.0

9.5

11.2

9.3

5.7

4.6

5.1

3.7

June

3.2 June

per cent

10.0

9.7

9.9

12.3

13.2 April-June

per cent of

GDP

per cent of

GDP

million

€

-1.6

2.6

-0.2

-4.6

Current account balance

-9.2

-315

-12.1

-497

-9.2

-429

-5.8

–296

-5.4 Jan-June

–135 Jan-June

Foreign debt

- debt export ratio

- gross foreign debt

Foreign direct investment in flow

- balance of payments data

per cent

million

€

15.9

367

32.2

1,031

36.3

1,348

29.9 E

1,109 E

per cent of

GDP

million

€

3.4

119

5.7

235

10.9

513

5.9

284

5.7 Jan-June

149 Jan-June

E = Estimates

The acceleration of the pace of structural reforms has addressed many of the structural

weaknesses of the economy.

The restructuring and consolidation of the financial sector,

further progress in privatisation of state assets, in particular in the oil-shale/energy sector,

and some important decisions in the areas of pension, health-care and fiscal reforms have

strengthened the bases for a sound and sustainable increase in economic activity.

Progress continued to be made in improving external competitiveness. However, the

continuing growth in unemployment suggests that much remains to be done in the fields

of education and skills development and in the reforms of the labour market to avoid

potential bottlenecks to growth.

PROXY HICP since 1996 (see methodological notes).

Moving 12 month average rate of change.

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Main Indicators of Economic Structure in 1999

Population (average)

GDP per head

Share of agriculture

in:

- gross value added

- employment

Investment-to-GDP ratio

Gross foreign debt/GDP

Exports of goods &

services/GDP

Stock of foreign direct

investment

End of 1999 data (Eurostat)

Source Eurostat, National sources, OECD & IMF

Thousand

PPS-

€

Per cent of EU average

per cent

million

€

per head

1,442

7,682

5,7

8,8

25,1

23,0

76,9

2,454

1,703

2.3.

Assessment in terms of the Copenhagen criteria

The existence of a functioning market economy

As set out in Agenda 2000, the existence of a functioning market economy requires that

prices, as well as trade, are liberalised and that an enforceable legal system, including

property rights, is in place. Macroeconomic stability and consensus about economic

policy enhance the performance of a market economy. A well-developed financial sector

and the absence of any significant barriers to market entry and exit improve the efficiency

of the economy.

Estonia has continued to enjoy a broad political consensus on the principles of the

market economy and macroeconomic policies, enabling a climate of economic stability.

The government has abolished one of the four existing tax-free zones and decided to

suspend the creation of new ones. It adopted a medium term economic strategy in

October 1999, concluded a Joint Assessment of medium term economic policy priorities

with the European Commission services in March 2000 and a precautionary stand-by

arrangement with the International Monetary Fund in March 2000. Estonia's medium

term economic strategy remains anchored in the same principles that have been followed

since the onset of transition. These are the Currency Board Arrangement, open external

Figures have been calculated using the population figures from National Accounts, which may differ from

those used in demographic statistics.

Agriculture, hunting, forestry and fishing.

Data refer to Gross fixed capital formation as % of GDP.

The 1999 data for foreign debt are estimates.

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trade, free movements of capital, prudent fiscal policy and continued commitment to

structural reforms.

Macroeconomic stability has improved substantially over the last year.

The acceleration

of a broad-based growth has been combined with a reduction in the fiscal deficit, which

has helped to stabilise the external deficit. This has been accompanied by better monetary

and financial conditions, including moderate inflationary pressures, and further progress

on structural reforms.

After falling in the first half of 1999, real GDP growth has resumed from the second half.

In 1999, the economy contracted by 1.1%, mainly because of a large fall in domestic

demand. Since the last quarter of 1999, real GDP growth has been supported by internal

and external factors. In the first half of 2000, real GDP grew by an estimated 6.4%

compared to the same period of 1999. Most significantly, after falling in 1999, gross

fixed capital formation and exports have increased in 2000.

The deficit of the general government amounted to 4.7% of GDP in 1999 and the target

for 2000 is 1.2% of GDP.

After a deterioration in the second half of 1998 and the first

half of 1999, the government took a number of policy actions, including a negative

supplementary budget in the summer of 1999 and a deferral of expenditures. The 2000

budget has lower total expenditures as a share of GDP and aims to reduce the general

government's deficit by almost two thirds to about 1.2% of GDP. So far, fiscal

performance in 2000 is meeting these targets. Fiscal management and transparency have

been strengthened by the adoption of clear rules on the use of privatisation receipts (60%

of which are to be channelled to the Stabilisation Reserves Fund), the management of the

Stabilisation Reserves Fund and the adoption of a medium term fiscal strategy. This

strategy envisages lowering the tax burden and public expenditures and achieving

balanced budgets while carrying out important fiscal reforms.

Much progress has been made in the fiscal area, but there are still a number of important

fiscal challenges ahead.

In particular the pension and health-care reform needs to be

completed, and the expenditures and debt policy of local governments needs better

control. Under the currency board arrangement, fiscal policy has a crucial role in order to

ensure internal and external balances. Also, further consolidation of public expenditure

management and maintaining prudent fiscal policy will allow the Estonian economy to

cope better with a possible acceleration of capital inflows in the run-up to EU accession.

Progress on pension and health-care reform has been steady.

With the entry into force of

the State Pension Insurance Act on 1 April 2000, the long term financial sustainability of

the first pillar (pay-as-you-go element) has been reinforced. Due to difficult discussions

among social partners, the introduction of the second pillar (fully-funded contribution

programme) has been postponed to 2002 and the government decided to make

contributions voluntary rather than mandatory as originally envisaged

The current account deficit has been reduced and the level of external official debt

hasremained low.

In 1999, the current account deficit fell to 5.8% of GDP, a strong

reduction from the very high levels reached in 1997 and 1998. In the first half of 2000,

the current account deficit has continued to decrease, despite the fact that the trade deficit

increased moderately due to higher internal demand. Nevertheless, exports of goods have

grown strongly (+49% in value terms in the first seven months) and at a faster rate than

imports, while the continuing growth of exports of services (up by 31% in the first

quarter) has helped to increase the already sizeable surplus in the services balance.

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Estonia has continued to attract large capital inflows, in particular foreign direct

investment (FDI) and portfolio investment. In 1999 and the first half of 2000, capital

inflows were larger than the current account deficit, allowing for an increase in foreign

exchange reserves.

The consolidation of macroeconomic stability has been reflected in the positive evolution

of monetary indicators.

Nominal interest rates have reached historically low levels at the

end of 1999 and real interest rates have fallen from the high levels reached in the late

summer of 1999. Inflation increased to 4.4% on a yearly basis in August 2000, due to

higher commodity prices, the depreciation of the currency vis-à-vis the US dollar and

higher value added tax rates on heating fuels. Credit growth has stabilised at a level

supporting economic activity. No significant pressures on asset prices or the exchange

rate have emerged and the authorities' strong domestic and international credibility has

been reflected in historically low spreads between Estonian kroon- and deutsche mark-

denominated deposits, which fell from 114 basis points at the end of August 1999 to 6

basis points at the end of July 2000, and the kroon and euro money market rates.

Unemployment measured by the ILO methodology increased to 13.2% of the labour force

in the second quarter of 2000.

The main causes have been the impact of lower growth

and restructuring in many sectors, even though the increase in unit labour costs in 1999

and 2000 may have had also some detrimental effect on job creation. Employment in the

sectors of agriculture, education as well as health and social care declined significantly

compared to the second quarter of 1999, while employment in manufacturing rose.

Estonia continues to have a very liberal external trade and payments regime.

November 1999, it joined the World Trade Organisation (WTO). On 1 January 2000 a

limited number of tariffs on a selected number of agricultural products were introduced

for countries with which Estonia has no free-trade agreement. Tariffs have been set at

rates below the level agreed in the WTO agreement. Some of the few remaining

restrictions on foreign direct investment were removed.

Regulated prices are adjusted regularly to ensure adequate cost coverage.

While the

majority of prices were liberalised quite rapidly following independence, regulated prices

still account for 25.6% of the consumer price index (CPI) basket. They concern

essentially natural monopolies in service sectors, some of them controlled by local

governments. In fact, the goods for which the authorities set the price directly account for

only 0.9% of the CPI basket, while the goods for which the authorities must give their

approval to price changes account for 16.8% of the CPI basket. Finally, the government’s

tax policy has an important influence on the price of some products (notably tobacco,

alcohol and fuels, accounting for 8% of the CPI basket). Decisions by the public

authorities on the timing and size of regulated price changes therefore continue to have an

impact on the rate of inflation.

All small and medium sized enterprises are privately owned, while only a very small

number of large companies have yet to be privatised.

The central bank has completed the

privatisation of the only remaining state-owned bank. Major progress has been made in

the privatisation process of two railway companies and of the company that extracts oil-

shale and generates electricity. This last operation involves a foreign investor buying a

49% stake in the company, with a state-owned company holding the remaining shares. It

has great significance for the long-term future of the indigenous electricity generation

industry and for promoting further restructuring in the north-east region.

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The State has continued to sell its minority stakes in private companies and public assets.

Privatisation of assets controlled by local governments and municipalities, in particular

ports, waste disposal companies, as well as water and heating utilities, has gathered

speed. The private sector generates more than 70% of Estonia’s gross domestic product.

The economic structure is characterised by a predominant services sector and a very

small agricultural sector (excluding forestry and fishing, the share of agriculture shrank

from 3.8% of GDP in 1998 to 3.3% in 1999), making the Estonian economy increasingly

similar to more developed ones.

Except in a declining number of well-defined areas, there are no significant barriers to

market entry.

In fact, the number of new companies being entered in the Commercial

5600 in the same period of 1999-2000. The liberalisation of the telecommunications

sector continues to progress and the fixed-line monopoly of the current operator will

cease at the end of 2000. Also, the liberal trade regime provides for strong competition

from foreign producers. On the exit side, bankruptcy legislation is properly enforced and

bankruptcy proceedings are usually going smoothly. Between 1 October 1998 and 1 June

1999, 115 companies were liquidated from the Commercial Register and 140 companies

went bankrupt. The corresponding figures in the same period of 1999-2000 were 254 and

205 companies.

Property rights are firmly established and around 80% of land restitution has been

completed.

The share of land registered in the cadastre has increased to 57% of the total

land stock, although it is recognised that a large part of Estonia's territory (notably inland

waters and unfit land) will not be registered. Private land accounts for about a third of the

total land stock. Following amendments to existing legislation, privatisation of land has

continued, in particular for forests and agricultural land, albeit at a slow pace. The lack of

enforcement by local authorities and the high financial costs involved for claimants are

delaying the process of restitution and privatisation, in particular in the northern regions

of the country. More determined action by local authorities and the simplification of

procedures to privatise land should improve the functioning of the land market, notably

by allowing more farmers to offer property certificates as collateral for loans.

The banking sector is well developed and strong.

This year, the central bank granted a

licence to a new bank. As a result, there are six banks in Estonia and a branch of a foreign

bank. The three largest domestic banks controlled more than 95% of total assets at the

end of June 2000. The largest banks achieved positive financial results in 1999 and in

2000. They have also reduced the amount and share of short-term external funding from

non-resident credit institutions, reducing their vulnerability to international market

sentiment and improving macro-economic stability. Non-performing loans accounted for

only 2.1% of the total loan portfolio at the end of July 2000, compared to 3% a year

before, while the difference between lending and deposit rates has narrowed considerably

in the same period. Following the sale of the third-largest, public-owned bank to foreign

investors, foreign-owned banks control more than 95% of domestic banks' assets. This

has strengthened the access of local banks to long term, more secure funding and

improved their financial strength and development perspectives. The high degree of

capitalisation (13.5% of total risk-weighted assets at the end of July 2000, compared to

the official requirement of 10%) and the longer-term structure of banks’ liabilities also

points to the increased strength of the banking sector.

Financial intermediation is expanding.

The share of domestic credit increased from

31.9% of GDP at the end of September 1999 to 36.3% at the end of June 2000, while

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there was a similar increase for the share of domestic residents' deposits in relation to

GDP.

The non-bank financial sector is less developed than the banking sector in terms of

economic importance and its regulatory framework is incomplete. Important progress

has been made recently.

Restructuring and consolidation of the insurance sector has been

rapid in 1999-2000, notably through mergers and

acquisitions

by foreign companies.

Activity on the stock market increased and investment funds collected significantly more

resources. The regulatory framework of the non-bank financial sector has also been

strengthened. More significantly, the authorities decided to create a single financial

supervisory authority through the mergers of the existing agencies responsible for

banking, insurance and securities supervision. The agency is scheduled to start operation

in early 2002 and the authorities will need to ensure its operational and budgetary

independence. In addition, the regulatory framework of the financial sector needs to be

strengthened further, in particular by improving supervision of the securities market and

of consolidated financial groups as well as increasing the early information system. In the

run-up to the effective start of operations of the single Financial Supervisory Authority, it

is important to maintain and reinforce the operational capacities of the existing

supervisory agencies.

The capital market remains small, although many steps have been taken to facilitate

access.

A list of the main stocks in the Baltic region was created and links with

Scandinavian stock exchanges enhanced. In addition, there has been an increase in the

share of bonds issued on the domestic market with longer-term maturities.

Estonia is a functioning market economy. The legal, institutional and regulatory

framework is in place and enforcement is largely adequate. Estonia’s open policy towards

trade and capital movements, combined with a large private sector and an attractive

business environment, has provided strong incentives for the development of economic

activity. The Currency Board Arrangement has been supported by flexible labour and

product markets, as well as by the government's commitment to fiscal discipline and

structural reforms. Nevertheless, there is a need to keep the current-account deficit under

control and maintaining prudent fiscal policy is essential. A number of important

challenges remain. The pension and health care reform needs to be completed, further

consolidation of public expenditure management is needed and the expenditure and debt

policy of local governments need to be better controlled. Remaining structural reforms

include the oil-shale and the land reforms. In addition, the regulatory framework of the

financial sector needs reinforcing and the access to market-based credit for agriculture

and small and medium-sized enterprises needs to be improved.

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

Union

As set out in Agenda 2000, Estonia's ability to fulfil this criterion depends on the

existence of a market economy and a stable macroeconomic framework, allowing

economic agents to make decisions in a climate of predictability. It also requires a

sufficient amount of human and physical capital, including infrastructure. State

enterprises need to be restructured and all enterprises need to invest to improve their

efficiency. Furthermore, the more access enterprises have to outside finance and the more

successful they are at restructuring and innovating, the greater will be their capacity to

adapt. Overall, an economy will be better able to take on the obligations of membership

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the higher the degree of economic integration it achieves with the Union prior to

accession. Both the volume and the range of products traded with EU Member States

provide evidence of this.

Estonia’s well-established market economy continues to provide a sound basis for the

modernisation of the supply side.

In the wake of the Russian crisis, the stability-oriented

economic policy and open competitive environment, which have been key elements of

Estonia's economic policy since the onset of transition, have encouraged local businesses

to restructure their operations and improve their competitiveness. The involvement of the

state in the economy remains small and mostly limited to completing transition,

providing public goods and a proper regulatory framework for the economy.

Labour markets have shown the capacity to adjust to changing market conditions.

There

was simultaneous reduction in nominal wages and employment levels in the worst

affected sectors. This has hastened the reallocation of labour to the growing sectors of the

economy, in particular services, where employment grew, albeit modestly, in the second

quarter of 2000 compared to the same period of 1999. At the same time, this adjustment

process has had negative consequences on already fragile sectors and regions of the

country, increasing regional disparities further.

In the first half of 2000, real wages have continued to grow rapidly

(+7.4% compared to

the same period of 1999) and faster than the pace of productivity increase. Because the

increase in real wages in 1998 and 1999 was to a large extent attributable to the strong

growth of public sector wages, the authorities have decided to basically freeze the public

sector wages in 2000. While wage growth has reflected a catch-up phenomenon in some

sectors, where growth had been subdued or negative in 1999, it also points towards to

supply shortages in the expanding sectors of the economy. Part of this structural problem

is a sign of the low mobility of workers in certain regions and of skill mismatch. Tackling

the structural problems of the labour market is one of the most pressing challenges for

sustaining Estonia's growth in the medium term. In the shorter term, there is a danger that

excessive wage growth could increase the current account deficit and negatively affect

cost competitiveness. In order to tackle these problems the National Employment Action

Plan has been adopted. However, there is a need to increase reform efforts in the areas of

technical education and vocational training.

Investment has recovered partially in 2000, after the strong fall in the first half of 1999.

This has been linked primarily to better economic prospects and also to lower nominal

and real interest rates and an increased willingness of financial institutions to extend

credits. The authorities also took important decisions that support the objective of

increasing investment profitability, exports and business creation. Among the most

significant measures were the decisions to reform corporate income tax and launch the

restructuring of a number of public foundations involved in business creation as well as

export and investment promotion. Government needs to make sure that the tax reform

does not have major distortionary effects.

While there are still notable deficiencies in infrastructure, in particular in the area of

transport, there has been considerable progress over recent years.

These efforts should

continue in the coming years in particular because of important projects that have been

launched recently and because of the expected impact of privatisation on the level of

investment in the railways and energy sectors. Already, Estonia has good

telecommunications infrastructures, which has allowed a high use of modern information

technologies among the population. Nevertheless, there is a need for continuing public

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investment in many areas, in particular in education, roads and the environment. This is a

necessary element for successfully achieving some of the authorities' key fiscal reforms,

including the health care reforms and the improvement of the efficiency of public

administration.

Estonia has continued to attract a high level of foreign direct investment inflows.

Gross

foreign direct investment inflows reached 5.96% of GDP in 1999 and 5.7% in the first

half of 2000. EU investors have continued to be the most important foreign investors.

The increase in reinvested earnings in 1999 and in the first half of 2000 indicates the

continuing confidence of existing investors. Partly because EU-controlled companies

make investments in foreign countries through their Estonia-based affiliates, Estonian

companies have increased their investments in foreign markets, primarily in their Baltic

neighbours, an indication of the capacity of some local businesses to adapt to a changing

economic environment and prepare for functioning in the much bigger EU market.

Estonia’s

government policy

continues to promote a stable and predictable economic

environment for enterprises.

Trade integration with the EU has continued to increase.

While total exports declined in

value in 1999, those going to the EC increased in value and in relative terms. In the first

half of 2000, this trend accelerated as exports of goods to the EC increased by more than

59% in local currency terms and by 47% in volume terms. As a result, in the first half of

2000, the share of imports from the EC remained stable at about 73% of all imports, but

the proportion of exports going to the EC increased, also reaching 73%. Although this

performance is partly due to the positive impact of the depreciation of the national

currency against the US dollar, it reinforces the trend of sustained high export growth to

the EC, which has always been higher than the growth of overall trade. The rebound of

economic activity in the EU has been one of the factors explaining this export

performance, notably through the increase of sub-contracting, but there has also been an

improvement in price and non-price competitiveness of local businesses.

The importance of sub-contracting trade in foreign trade has continued to increase, most

notably in the first half of 2000, when it represented 40% of total exports.

The relative

importance of machinery and equipment in imports for processing and re-exporting has

risen significantly in 2000, making sub-contracting trade in textiles a distant second.

While the value added remains small in the process of sub-contracting, the ability of

Estonian sub-contractors to respond to rapidly rising external demand, in particular in

high technology industries, demonstrates their capacity to integrate their production in the

fastest-growing segments of the EU and world economies.

Home-originated exports are dominated by exports of timber, paper products and

furniture.

Encouragingly, the share of processed timber in the total export of timber

increased significantly from 50% in 1998 to 57% a year later. The share of exports of

machinery and equipment also grew in the second half of 1999 and in the first part of

2000. The exports of the food industry, which used to sell a large part of its output on the

Eastern markets, continued to fall despite the recovery in economic activity in Russia and

other regional markets. In 1999 and in the first half of 2000, exports of services grew

faster than imports, a reversal of the trend of the previous two years.

Overall, Estonia's external trade has become more concentrated on a small number of

broad product categories.

The diversification and expansion of the export base in terms

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of geographic coverage, traded commodities and number of exporters remain a key

challenge to reduce the vulnerability of the economy to external shocks.

More than 99% of enterprises in Estonia are small and medium sized.

The share of small

and medium-sized enterprises is largest in wholesale and retail activities and in

construction, while larger enterprises are dominant in industry, energy production and

fishing. At the end of 1998, small and medium-sized enterprises accounted for around

47% of the total workforce, and for more than 74% of enterprise employment. Small and

medium-sized enterprises are the main source of new jobs. However, their development

continues to be hampered by difficulties in raising bank finance and hiring skilled labour.

Farms and small enterprises continue to face difficulties in the access to finance. Two of

the main difficulties encountered are finding collateral acceptable to financial institutions

and uncertainty about property rights for part of the land stock

(see also chapter 16 –

Small and medium-sized enterprises).

Estonia should be able to cope with competitive pressure and market forces within the

Union in the near term, provided that it stays with its present reform path. It has made

considerable progress, restructuring the enterprise and financial sectors, and in

implementing structural reforms in the utilities and energy sectors, in a context of

macroeconomic stability. Exports to the European Community have grown strongly as

enterprises have adapted to changing economic circumstances and maintained their

external competitiveness. Estonia should continue to implement the planned reforms in

full and on time. Measures to improve the response of the labour market to economic

growth, with a focus on improving education and training, need to be developed. This

would allow Estonia to continue to attract large inflows of foreign direct investment and

broaden its export base.

2.4.

General Evaluation

Estonia is a functioning market economy and should be able to cope with competitive

pressure and market forces within the Union in the near term, provided that it stays with

its present reform path.

It has made considerable progress in strengthening macroeconomic stability, restructuring

the enterprise and financial sectors, and in implementing structural reforms in the utilities

and energy sectors. The legal, institutional and regulatory framework is in place and

enforcement is largely adequate. Enterprises have adapted to economic circumstances and

have maintained their external competitiveness.

Nevertheless, the current account deficit remains high, and not enough progress in

containing government expenditures has been made, especially in the pension and health-

care reform area, in the control of local government expenditure and debt policy.

Remaining structural reforms must be completed, particularly the oil-shale and land

reforms.

Estonia must continue with fiscal adjustment, further fiscal consolidation and improved

expenditure management, including the control of local government expenditure and debt

policy. Measures must be taken to reinforce the regulatory framework of the financial

sector, complete land privatisation and improve access to market-based credit for

agriculture and small and medium-sized enterprises. Initiatives to improve the response

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of the labour market to economic growth, with a focus on improving education and

training, need to be developed.

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3. Ability to assume the obligations of membership

Introduction

This section aims to update the Commission’s 1999 regular report on Estonia’s ability to

assume the obligations of membership - that is, the legal and institutional framework,

known as the

acquis

by means of which the Union implements its objectives.

Alongside an evaluation of relevant developments since the 1999 regular report, this

section seeks to provide an overall assessment of Estonia’s ability to assume the

obligations of membership, and of what remains to be done. This section has been

structured to follow the list of twenty-nine negotiating chapters, and incorporates also an

assessment of Estonia’s administrative capacity to implement the

acquis

in its various

aspects (in previous regular reports this had been covered in a separate section).

Furthermore, for the first time, a separate section has been included assessing progress

made by Estonia in translating the

acquis

into its official language.

The European Council in Madrid in December 1995 referred to the need to create the

conditions for the gradual, harmonious integration of the candidates, particularly through

the adjustment of their administrative structures. Taking up this theme, in Agenda 2000

the Commission underlined the importance of incorporating Community legislation into

national legislation effectively, and the even greater importance of implementing it

properly in the field, via the appropriate administrative and judicial structures. This is an

essential pre-condition for creating the mutual trust indispensable for future membership,

which has become a central issue in the negotiation process.

The European Council in Feira in June 2000 recalled the link between progress in the

negotiations and the candidate countries’ capacity to effectively implement and enforce

the

acquis,

and added that this called for important efforts by the candidate countries in

strengthening their administrative and judicial structures. The Feira European Council

invited the Commission to report to the Council on its findings on the matter. Building

on the assessment of Estonia’s administrative capacity provided in the 1999 regular

report, the present report seeks to add further depth and detail, focusing on the main

administrative structures which are required for implementing the

acquis

in its various

aspects.

In the 1999 regular report, the Commission concluded that:

“Estonia has continued its alignment in the single market area, at a steady but slow pace,

in particular as regards intellectual property and data protection, free movement of goods

and state aid monitoring. As regards the New and Global approach for certification and

standardisation the lack of human resources has delayed the reform. Major efforts are

also required in the field of state aids. Good progress has been noted in the fields of

energy and transport, where legislative alignment and liberalisation have been taken

further. However, transparent restructuring of the oil-shale sector should be a priority, as

should fiscal harmonisation in road transport. The capacity to enforce environment

acquis

remains an issue together with a financing plan for investments, which is lacking.

A description of the

acquis

for each chapter can be found in the Commission’s 1997 Opinion on

Estonia’s application for EU membership.

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Although some progress has been made in the agriculture, fisheries and regional

development significant efforts are required to build up the necessary institutional

structures and to develop the capacity to manage funds. Delays in the customs area are a

matter of concern. Considerable efforts are needed on customs code, tariffs and capacity

building. Very limited progress has been noted in financial control and in the social field,

where attention should be paid to implementation capacity. Estonia has followed most of

the 1998 report’s recommendations in justice and home affairs, where efforts need to be

sustained, in particular as regards the police.

Overall, Estonia has continued to make progress in aligning further its legislation to the

acquis.

Progress has been limited in improving administrative and judicial capacity,

where the short-term Accession Partnership priorities have only been partly met. It

remains difficult to recruit and retain qualified staff, a situation which is delaying

capacity building, and priority should be given in both budgetary and staffing terms to

remedying this situation. Considerable efforts should be made in this respect in particular

as regards standards and certification, State aids, agriculture, customs, regional policy and

in the social field.”

3.1.

The chapters of the

acquis

As indicated, the review of Estonia’s ability to assume the obligations of membership

that is provided below has been structured in accordance with the list of twenty-nine

negotiating chapters. Accordingly, this section opens with an assessment of progress

related to the so-called “four freedoms”, the cornerstones of the internal market, and

continues with a systematic review of progress on each of the chapters, to cover the

acquis

in all its various aspects: sectoral policies, economic and fiscal affairs, economic

and social cohesion, innovation, quality of life and environment, justice and home affairs,

external policies, and financial questions.

Chapter 1: Free movement of goods

Since last year's Regular Report, Estonia has made considerable progress in this area, in

particular as regards standardisation and conformity assessment.

As regards

horizontal and procedural measures,

progress has been made in the

implementation of the

principles of the New Approach.

In the field of

conformity

assessment,

a new Product Conformity Assessment Act, which will enter into force in

January 2001, was adopted in November 1999. The law constitutes the legal framework

for the procedures of product conformity assessment and certification, including the

issuing of product conformity certification documents, affixing of the conformity mark,

the basis and rules for the designation of approved bodies (future notified bodies) and the

surveillance of their activities. As regards

metrology,

amendments to the Metrology Act

were adopted in June 2000, in order to align legislation in this area with the

acquis.

The

amendments also establish the legal metrology authority, principles of legal metrology

control and the market surveillance of measuring instruments. Overall, Estonia has met

the 1999 Accession Partnership short-term priority in this area.

Progress has also been made as regards

sector specific legislation.

Estonia has also

addressed the relevant short-term priority of the 1999 Accession Partnership. In the areas

covered by the

New Approach Directives,

implementing regulations have been adopted in

the area of construction products and medical devices. As regards sectors covered by the

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Old Approach Directives,

implementing regulations, aiming at further alignment with the

acquis,

have been adopted as regards textiles and motor vehicles. The new Food Act,

which entered into force in January 2000, provides the framework law in the field of

foodstuffs. Furthermore, procedures for notification, classification, identification,

packaging and labelling of dangerous chemicals as well as the restrictions on their use

have been established. Finally, amendments to the Medicinal Products Act as regards

marketing authorisation and market surveillance for veterinary products have been

introduced. No major progress has been made as regards pressure equipment, lifts and

gas appliances and machinery.

Also in relation to the establishment and strengthening of the administrative structures

necessary for the implementation of the

acquis

in this area, considerable progress has

been made since the last Regular Report.

As regards

standardisation,

the Estonian Centre for Standardisation started operating in

April 2000 as the official standards body, in the legal form of a non-profit organisation. It

has a staff of 14 persons. Its functions include participation in the work of international

and European standards organisations, compiling the Estonian standards programme, the

implementation of

and international standards as well as the adoption, amendment,

and publishing of Estonian standards. The Centre is a member of the ISO and an

affiliated member of CEN. Furthermore; Estonia has made considerable progress in the

adoption of European standards. The total number of European standards (out of 7,000)

adopted and enforced in Estonia by 30 September 2000 was 4,670 as opposed to 78 in

October 1999.

In January 2000, the Estonian Accreditation Centre was established in the form of a

foundation with a staff of four persons. The Centre is the national accreditation body and

it is responsible for the accreditation of testing and calibration laboratories as well as of

the inspection and certification bodies. By June 2000, 30 testing and 2 calibration

laboratories, 3 inspection and 5 certification bodies had been accredited. The Centre has

been a member of the European co-operation for Accreditation since June 2000.

No major progress has been made as regards

market surveillance.

Therefore, Estonia

has not met the relevant 1999 Accession Partnership short-term priority. The Consumer

Protection Board (CPB), the Technical Inspectorate and the Health Protection

Inspectorate are the independent state authorities responsible for market surveillance. The

Consumer Protection Board (retail trade) in co-operation with the Health Protection

Inspectorate (wholesale trade) is responsible for consumer products, including toys,

building materials, cosmetics and chemicals. The Technical Inspectorate is responsible

for market surveillance in the fields of electrical safety, pressure vessels, gas appliances,

lifts, cranes and explosives for civil use. It reports to the Ministry of Economy. It has a

total staff of 35 persons, most of whom (approx. 30) perform inspection activities

according to the yearly inspection plan. In 1999, the Inspectorate made recommendations

in 10 cases, mostly concerning electrical appliances. In most of these cases, the sales of

the product were halted. No fines were imposed, as the situation was always remedied

within the given deadline.

No major developments have taken place in the

non-harmonised areas

since last year’s

Regular Report.

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In the area of

public procurement,

progress has been limited. In March 2000, a strategy

towards setting up a Public Procurement Information System was adopted. Estonia has

not met the short-term priority of the 1999 Accession Partnership in this area.

The Public Procurement Office is the body responsible for enforcing the public

procurement policy. Currently it has a staff of 22 persons. Its main tasks include drafting

guidelines for central and local authorities, implementing legislation, publication and

review of tenders. In 1999, 1,852 public tenders were launched in Estonia. 316 (23.5%)

of these tenders corresponded to single source procurement, needing the explicit

permission of the Office. 112 of these applications were refused. Overall, the Public

Procurement Office received a total of 113 complaints, of which 54 were considered

ineligible. The Office cancelled 38 tendering procedures and 107 appeals were reviewed

by the arbitration body.

Overall assessment

Overall, Estonia has made considerable progress in the area of free movement of goods.

Efforts need to be pursued as regards market surveillance and further strengthening and

developing of the administrative capacity.

As regards

horizontal and procedural measures,

considerable efforts have been made

to introduce the necessary framework legislation, in particular as regards the

implementation of the basic principles of the New Approach on standardisation,

conformity assessment, metrology and accreditation. Estonia has also established an

important part of the necessary administrative structures. However, implementing

regulations on conformity market assessment, designation of pre-notified bodies and the

establishment of a register of pre-notified bodies still need to be adopted.

Although, overall, progress has been made in aligning

sector specific legislation,

both

under the Old and New Approach Directives, further efforts need to be made in order to

complete alignment with the

acquis.

In particular, administrative structures and the

strengthening of its capacity to implement and enforce the foodstuffs legislation need to

be strengthened.

As regards

market surveillance and product safety

although

ad-hoc

steps have been

taken towards setting-up the administrative framework, overall progress has been limited.

A market surveillance strategy including implementation and financial plans needs to be

adopted. Also, the definition of responsibilities among the different authorities involved

in market surveillance needs to be clarified and co-operation among them reinforced. As

regards safety checks on products at external borders, Estonia still needs to establish

appropriate customs and market surveillance infrastructure as well as effective

administration cooperation between competent authorities.

As regards

public procurement,

Estonian legislation is not fully in compliance with the

acquis.

Alignment with the

acquis

needs to be completed as regards scope, procurement

procedures, qualification of tenders and the definition of contracting authorities, technical

specifications and remedies. The current law does also not cover utilities and work

concessions as required by the

acquis.

Unfortunately, the adoption of a new Public

Procurement Act has been delayed. As regards enforcement capacity, although the flow

of information from procuring agencies to the Public Procurement Office needs to be

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improved, no major problems can be singled out in the implementation of the legislation

in this area.

Chapter 2: Free movement of persons

Since the last Regular Report, Estonia has made considerable progress in this area.

In the area of

mutual recognition of professional qualifications,

some progress has

been made with the adoption of the Recognition of Foreign Professional Qualification

Act. The Law intends to align Estonian legislation with the 1

and 2

General System

Directives on mutual recognition of professional qualifications. It covers the recognition

of foreign professional qualifications in regulated professions requiring and not requiring

higher education. However, professions such as medical doctors, pharmacists, general

care nurses , midwives and lawyers are excluded from its field of application. On the

basis of this law, a regulation was adopted in September 2000 establishing the

requirements and procedures for the recognition of foreign vocational qualifications.

In the fields of

citizens’ rights

and

free movement of workers,

no new developments

can be reported.

With a view to the future

co-ordination of social security matters,

progress has been

made by establishing, at the beginning of 2000, a Social Security Department in the

Ministry of Social Affairs which will be the body responsible for implementing social

security co-ordination with EU Member States. Staff numbers and training need to be

reinforced. In addition, Estonia has signed the European Interim Agreements on Social

Security Schemes relating to Old Age, Invalidity and Survivors, on Social Security other

than Schemes for Old Age, Invalidity and Survivors and the European Convention on

Social and Medical Assistance. These conventions provide for equal treatment of

nationals of the Contracting Parties in respect of social security benefits, and social and

medical assistance. In addition, Estonia has signed the European Code for Social Security

establishing European minimum standards on social security systems.

Overall assessment

Overall, Estonia has progress in this area. Efforts to tackle the remaining issues need to

be continued.

First steps have been taken as regards the implementation in Estonia of the

acquis

recognition of diplomas and professional qualifications.

However, substantial work

remains to be done on both the legislative framework and the implementing structures. In

this context, attention should be paid to seeing that those procedures regulating the

recognition of academic qualifications and professional qualifications are clearly distinct.

Legislation on the professions regulated by EC Sectoral Directives and implementing

decrees to the current framework legislation need to be adopted. Competent authorities

have to be designated.

No major problems can be reported in the fields of

citizen’s rights

and

free movement

of workers,

provided that the implementation of language legislation avoids unnecessary

restrictions in this area. Furthermore, efforts to allow Estonia’s participation in the

European Employment Service (EURES) need to be continued.

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With a view to the future

coordination of social security

schemes with other member

states, Estonia has already introduced the necessary administrative structures. Training of

staff needs to be continued. Estonia has concluded bilateral social security agreements

with Finland, Sweden, Latvia, Lithuania, and Ukraine. In the framework of these

agreements Estonia has granted 1,800 pensions, of which 800 involved export of

benefits. This practice has allowed Estonia to familiarise itself with the administrative

procedures involved in this area.

Chapter 3: Freedom to provide services

Since last year's Regular Report, Estonia has made significant progress in completing

legal approximation in this area and has taken additional steps towards strengthening

administrative capacity, in particular in the area of financial services.

In the field of

freedom of establishment and freedom to provide non-financial

services

no major progress can be reported.

As regards

financial services,

and notably in the

banking

field, implementing regulations

on the statute of the Banking Supervision Department within the Bank of Estonia, credit

institution reporting, and the rules for the acquisition of the qualifying holding in a bank,

have been adopted. Furthermore, a new regulation on disclosure of financial statements

of credit institutions on sole and consolidated basis was adopted. In the

insurance

field, a

new Insurance Business Act, further harmonising Estonian legislation with the

acquis,

has entered into force. However, provisions on insurance intermediation will only come

into force in August 2001. Furthermore, secondary legislation establishing subclasses of

life and non-life insurance as well as insurance intermediation, the rules for calculating

the solvency margin of insurance companies and rules as regards reporting of insurance

companies has been adopted. As far as

securities

are concerned, amendments to the

Securities Market and Investment Funds Acts have been adopted, covering take-overs of

public companies, simplifying licensing procedures for EC securities intermediaries and

clarifying certain definitions such as public issuing and offering of securities.

Furthermore, the Act on the Estonian Central Register of Securities has also been

adopted.

The Banking Supervision Department of the Bank of Estonia is the authority responsible

for supervision of banks and credit institutions. Its current staff is 23. The Department

carries out the on-site inspections of credit institutions. The overall assessment of

efficiency in banking supervision is largely positive and has continuously improved since

last year. In order to reinforce consolidated supervision, the Banking Supervision

Department has further developed inspection manuals and other in-house instructions.

The Insurance Supervisory Authority is the supervisory body for the insurance market. It

is responsible for the authorisation of insurers, approval of business plans, revoking

licenses and monitoring prudential requirements. The Authority has three departments

responsible for financial supervision and reporting, supervision of Life insurance and

supervision of Non-Life Insurance. The new Insurance Business Act has increased the

powers of the agency, including the capacity to supervise brokers and agents. The current

number of staff is 17, which seems insufficient to undertake its new tasks. In 1999, the

Authority reviewed 232 complaints.

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The Securities Inspectorate is the securities market regulatory and supervisory body. The

Inspectorate has the power to carry out inspections of firms, institutions and organisations

operating in Estonia, including the Stock Exchange. Since last year’s Regular Report its

powers to deal with insider dealing cases have been reinforced. In 1999, the Inspectorate

carried out a total of 57 inspections.

In May 2000, the government adopted the main principles as regards the creation of a

unified financial supervisory agency, which should be completed by 2002. A commission

responsible for preparing the relevant legislation as well as co-ordinating the

establishment of the supervisory agency was created in July 2000. Therefore, Estonia has

partially addressed the relevant 1999 Accession Partnership short-term priority.

With regard the

protection of personal data and the free movement of such data

the

European Convention on Data Protection was signed in January 2000. The Data

Protection Inspectorate is responsible for the implementation and enforcement of

legislation in the area of data protection Although it is an independent body in practice,

legally and from a budget point of view is still dependent on the Ministry of Interior.

Currently, staff is insufficient to carry out its tasks.

In the field of

information society services,

the Digital Signature Act has been adopted

in order to align with the

acquis

in this area. It foresees the use of a digital signature for

transactions under public law. For private law transactions the use of a digital signature

has to be agreed by the parties. The National Communication Board bears the

responsibility for its implementation. The competencies related to the co-ordination of

the information technology policy have been transferred from the State Chancellery to the

Ministry of Transport and Communications.

Overall assessment

Estonia has made considerable progress in this area and legislation is largely in

compliance with the

acquis.

As regards

freedom of establishment and provision of non-financial services

attention

should be paid that the procedures regulating establishment and provision of services are

clearly distinct.

In the field of

financial services,

Estonian legislation is largely in compliance with the

acquis.

However, certain provisions of the

acquis

still need to be implemented. In the

banking

sector, provisions related to the recognition of contractual netting by the

authorities, home and host country supervision and commodities and commodity

derivatives risks are not covered by the current legislation. In the

insurance

sector,

despite the progress made, full compliance will only be achieved with the adoption of the

Law of Obligations, which is suffering considerable delays. As regards

securities,

compliance with the

acquis

in relation to investment services, insider dealing, pension

funds and investor compensation schemes needs to be ensured. Although efficiency in

banking supervision is largely positive, efforts to strengthen insurance and securities

supervision need to be continued.

As regards

data protection,

current legislation is not yet fully in compliance with the

acquis.

The European Convention on Data Protection has to be ratified.

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In the field of Information Society services, Estonia has taken a first step towards

aligning the

acquis

in this area. Efforts have to be made in order to complete alignment as

regards the Transparency, Conditional Access and Electronic Commerce Directives.

Chapter 4: Free movement of capital

Since last year’s Regular Report, Estonia has continued to make progress in this area.

As regards

capital movements and payments,

Estonia has made further progress in

abolishing remaining restrictions on capital movements. In particular, prudential

restrictions vis-à-vis EEA member states and restrictions on foreign capital participation

in the ownership of broadcasting companies have been removed. This constitutes a first

step in addressing the relevant short-term priority of the 1999 Accession Partnership with

Estonia. Furthermore, the Foreign Investment Act has been amended in order to revoke

the provision allowing the government to specify areas of activity where the

establishment of enterprises with foreign capital or participation of foreign investors is

prohibited or can only take place under special permits.

As regards

cross border credit transfers,

no major developments can be been reported.

Work to introduce a new interbank payment system based on a real time gross settlement

(RTGS) system for large value payments and a Designated-time Net Settlement (DNS)

system for retail payments has continued.

In the field of

money laundering,

Estonia has ratified the Council of Europe Convention

on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. The

necessary amendments to the Criminal Code and related legislation have also been

adopted. This is an important step that will,

inter alia,

allow Estonia to increase its

capacity to confiscate proceedings of crime.

The Financial and Intelligence Unit, created in June 1999, is the body responsible for

implementing legislation in this area and for investigating reports on suspicious

transactions as established by the money laundering legislation. The Unit is under the

responsibility of the Police Board and it currently has a staff of four persons. By May

2000, 134 cases had been reported to the Unit since its creation in June 1999, of which 91

were reports of suspicious or unusual transactions. 29 cases out of the 91 were closed.

Overall assessment

Estonia has made considerable progress in transposing the

acquis

in this area. Efforts to

reinforce administrative capacity in the money laundering area need to be continued.

As regards alignment in the field of

free movement of capital

considerable progress has

been made. However, some restrictions still remain, in particular those related to the

acquisition of real estate by foreigners Alignment also needs to be completed as regards

foreign investments in a limited number of strategic sectors.

Concerning

cross-border credit transfers,

Estonia has introduced a legal framework for

the harmonisation of the legislation and achieved some progress in the implementation of

a modern payment infrastructure.

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As regards

money laundering,

Estonia has made important progress with the adoption of

new legislation to combat money laundering. Efforts should now concentrate on ensuring

adequate enforcement. The Financial Intelligence Unit is currently understaffed if it is to

carry out its tasks in an efficient manner. In addition, training of judges and court staff

dealing with financial crime should be reinforced.

Chapter 5: Company law

Since the last Regular Report, Estonia has made considerable progress in further aligning

legislation in this area.

With regard to

company law,

amendments to the Commercial Code were adopted in

March 2000 in order to achieve further alignment with the Twelfth Company Law

Directive on single-member private limited liability companies. Legislation

implementing the European Economic Interest Grouping has been adopted. In November

1999 Estonia joined the European Business Register which will allow the cross-usage of

registered data via the internet. In February 2000, Estonia was invited to accede to the

Lugano Convention.

No major legislative developments have taken place in the

accounting

and

auditing

fields. As regards administrative capacity, the Institute of Authorised Auditors has been

established. The Minister of Finance is responsible for the supervision of the activities of

the Institute. The Authorisation Committee for Auditors was established in November

1999 with representatives of the Institute of Authorised Auditors, the Ministry of

Finance, the Bank of Estonia, State Audit Office and Tax Board. Training and

qualification of auditors need to be reinforced. In relation to

industrial property rights,

the Patent Act was amended in October 1999, introducing

inter alia

supplementary

protection (SPC) of medicinal and plants protection products. The new SPC legislation

includes a transitional arrangement for products with old market authorisations. The

Utility Model Act was amended in February 2000, in order to broaden the protection by

Utility Models to substances and processes. Furthermore, several regulations

implementing the law have been adopted, establishing,

inter alia,

the requirements and

procedures for the certification of utility models

The Geographical Indications Protection Act was adopted in December 1999 and several

implementing regulations have been issued. This law also amends the Trademark Act by

specifying the administrative liability of legal persons and enabling the protection of

geographical indications against an identical or confusingly similar trademark.

The national authority responsible for industrial property protection is the Estonian Patent

Office. Since last year’s Regular Report four new work places have been created. In

addition, a new section for the international registration of trademarks under the Madrid

Agreement Protocol has been established. The Estonian Patent Office (EPO) and the

Office for Harmonisation in the Internal Market (OHIM) signed, in December 1999, a

Memorandum of Understanding in order to make preparations for the integration of

Estonia in the implementation of the Community trademark system. Since March 2000 a

free electronic search system for trademark applications and registered trademarks has

been available.

As regards

intellectual property rights,

the Copyright Act was amended in December

1999 and in September 2000 in order to align Estonian legislation further with the

acquis

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and the other relevant international agreements. The latest amendments make the storage

and carriage of pirate copies into an administrative offence. Estonia joined the Rome and

Geneva Conventions in April and May 2000 respectively although it has made a

reservation to article 12 of the Rome Convention. This reservation means that non-

Estonian producers and performers have no broadcasting rights in Estonia

The Copyright Committee, established in June 1999, has started its activities. It is

responsible for co-ordinating all intellectual property issues in Estonia. The main task of

the Committee is to provide an overview on compliance of Estonian legislation with

international copyright norms and to monitor the quality of enforcement in this area. The

Media and Copyright Department within the Ministry of Culture is responsible for

copyrights protection in Estonia. Copyright protection in Estonia is still weak and trade in

pirated goods is a continuing problem. Some efforts to reinforce the fight against pirated

and counterfeited goods have been undertaken since last year’s Regular Report. In May

2000, a special task force was created within the Tallinn Police Department to deal with

piracy issues although it is still too early to assess its efficiency. In 1999, the police

seized 53,052 pirated goods, mostly CDs and videotapes. 73 administrative and 42

criminal procedures were initiated. From January to May 2000, 34,273 seizures took

place and 40 administrative and 37 criminal procedures were launched.

Overall assessment

Overall, as far as

company law

is concerned, Estonia has made considerable progress in

aligning its legislation. However, full alignment with the 1st Council Directive is not

completed yet. Estonia’s accounting and audit legislation is largely in compliance with

the

acquis

although measures related to consolidated accounts are still to be adopted.

As regards

intellectual and industrial property rights,

Estonia’s legislative alignment

is considerably advanced. However, Estonia is encouraged to withdraw its reservation

regarding Article 12 of the International Convention for the Protection of Performers,

Producers of Phonograms and Broadcasting Organizations of 1961, and thus to fully

implement Article 8 of the EC Rental and Lending Right Directive. In addition, doubts

exist regarding Estonia’s administrative capacity to address current piracy issues.

Currently piracy and counterfeiting of goods on the Estonian market affects all industries.

Both civil and criminal enforcement of intellectual property rights should be improved,

by strengthening the existing legal tools for the fight against piracy. Human and financial

resources allocated to this purpose need also to be considerably reinforced. The efficiency

of the judiciary, police and customs authorities should also be further enhanced in order

to improve judicial enforcement and reduce the length of prosecution delays in this area.

Chapter 6: Competition policy

Since last year’s Regular Report, Estonia has made some progress in this area, in

particular in the field of state aids.

In the field of

anti-trust,

over the past year Estonia has adopted additional implementing

regulations introducing block exemptions on restrictive agreements, hence bringing

legislation on block exemptions closer to the

acquis.

The new regulations affect

technology transfer, specialisation and research and development agreements, as well as

agreements in the insurance sector. No progress has been made as regards the

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introduction of full merger control, which was indicated as a short-term priority in the

1999 Accession Partnership.

The

Competition Board

is the national competition authority in Estonia. It is a fully

independent authority and has sufficient resources and expertise in place. In 1999, the

Board handled 53 cases related to the telecommunications and postal services sectors, the

establishment of control and abuse of dominant position in the milk and meat markets,

competition in the oil market, prices of professional associations (unions), surveillance of

undertakings having exclusive or special rights and concerted practices in the taxi

services market. Nine of these cases were considered to be in breach of the competition

legislation. The Board participated in seven court cases. In addition, the Board analysed

39 merger notices and dealt with two applications for exemptions. Currently, the Board

employs 47 civil servants, including 13 lawyers. In March 2000, the Board was

restructured in order to improve its monitoring capacity. Restructuring includes the

creation of three separate departments, specialising in different economic sectors. In

addition a merger department and legal department have been established. Reinforcement

of the Competition Board was identified as a short-term priority in the 1999 Accession

Partnership.

In the field of

state aid,

amendments to the state aid provisions of the

Competition Act,

specifying conditions for the grant of state aid, entered into force in January 2000. In

particular, the amendments lay down the procedural rules for ex-ante state aid control and

strengthen the role of the national state aid monitoring authority whose clearance is now

required for all new aid projects. In addition, implementing regulations on

de minimis

aid

and on aid for SMEs, training and employment have been adopted. The state aid

notification form for local authorities has also been introduced. The state aid survey for

1997 and 1998 was completed in January 2000 and largely follows the methodology and

the presentation of the European Commission's survey on state aid in the EC. Plans to

complete the state aid map have been delayed. The relevant 1999 Accession Partnership

priority has been only partially met.

The national state aid monitoring authority is the

Division of Competition and State aid

within the Financial Services Department of the Ministry of Finance. Currently, four

people work in this division. Several training activities on the EC state aid

acquis

have

been undertaken. In 1999, the Ministry of Finance received notifications for and

approved ten state aid programmes.

Overall assessment

In the field of competition, Estonia has made good progress in the area of anti-trust.

Progress has been less satisfactory in the area of state aids.

As regards

anti-trust,

Estonia’s legislation is largely in line and covers most of the

acquis

provisions, with the exception of full merger control. Further alignment is still

necessary, especially in view of the new

acquis

on vertical restraints. The Competition

Board has broad powers to enforce competition rules and sufficient staff in place. The

most important challenge is now for the Competition Board to ensure the effective

application and enforcement of the anti-trust rules, where priority should be given to

cases that concern the most serious distortions of competition.

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As regards

state aids,

and although additional legislation needs to be introduced to

complete alignment, the existing provisions are largely in line with the

acquis.

In order to

make the control framework fully operational, regulations covering EC secondary

legislation and other relevant instruments need to be adopted. In addition, Estonia still

needs to ensure that old aid, which entered into force before the amendment of the

Competition Act,

is systematically scrutinised by the state aid monitoring authority and

brought into line with the EC

acquis.

In this context, a review of acts potentially

containing aid award provisions, such as the acts on taxation, principles of local

government, customs, budget and privatisation, is of particular importance. Furthermore,

the regional aid map and the state aid inventory, covering all existing aid measures, need

to be completed. Enforcement capacity in this area needs to be further strengthened in

order to ensure the effective application and enforcement of the state aid rules, including

the alignment of existing aid schemes and legislation under which authorities at various

levels grant aid. Evidence of such enforcement practice is still scant.

Chapter 7: Agriculture

Agriculture in Estonia accounted for 5.7% of GDP in 1999, as opposed to 6.3% in 1998

Employment in agriculture has declined strongly over the past years, accounting for 8.8%

of total employment

The situation in 1999 was particularly difficult for the agricultural sector, whose total

output decreased by 4.3% compared to 1998

Particularly important was the decrease in

production in the livestock sector, where a decline both in production and in prices was

observed. In particular, total production of milk decreased. This was the result of low

productivity and a decline in the number of cows following a steep decrease in milk

prices, which on average were 20% lower than in 1998. The recovery of milk prices

started in the last quarter and continued this year. In meat production, pigmeat is by far

the most important product. Prices of pigmeat were, on average, 30% lower than in 1998.

The unfavourable international market conditions and increased exposure to international

competition explain the big decrease in prices.

In 1999, EC imports

of agricultural products originating in Estonia decreased by 17% to

€34.2

million. EC exports to Estonia dropped by 25% (€231 million), although exports of

meat and meat products increased by 6.8% . The trade balance was favourable to the EC

and amounted to

€197

million in 1999, compared to

€238

million in 1998. The main EC

imports from Estonia are dairy products. The main EC exports to Estonia are alcoholic

beverages; coffee, tea and spices; edible fruits and nuts and meat and edible meat offal. In

The source for all agricultural statistics is EUROSTAT unless otherwise specified.

In order to improve consistency and comparability, the employment figures presented are now defined

according to Labour Force Survey definitions (LFS). Agricultural employment is defined in LFS terms as

economically active persons who gain a significant part of their income from agriculture. The agricultural

census, which was previously a source of employment data in many countries, takes into account all

persons nominally active on a farm. There are therefore some significant differences between previous

and new figures. Further information can be found in the Eurostat publication “Central European

Countries’ Employment and Labour Market Review” available free of charge through the Eurostat Data

Shops.

Source: FAO.

Source: Uruguay Round Agreement definition of agricultural products, figures taken from EUROSTAT

COMEXT (see Agriculture in the EU-statistical and economic information 1999, p.36 for definition of

the products).

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this context, and following the new reciprocal concessions on agricultural products

negotiated under the Europe Agreement, Estonia’s agricultural exports to the EC will be

considerably liberalised (see

section A.b. – Relations between the European Union and

Estonia).

Since last year’s Regular Report, Estonia has taken further steps as regards its agricultural

policy. The Strategy document on agriculture, adopted by Parliament in June 2000,

establishes the main goals and measures of the Estonian agricultural and rural

development policy for the period 2000-2003. The strategy for the period aims at

increasing the efficiency of agricultural production; guaranteeing stable domestic prices

as well as a stable supply of main domestic foodstuffs and contributing to the

development of the rural economy. In order to achieve these goals, the strategy covers a

set of concrete actions, including the introduction of market regulation measures,

subsidies from the state budget and rural development measures. In addition, in March

2000 the Ministry of Agriculture went through an important restructuring, which should

improve the Ministry’s capacity to cope with the tasks related to preparation for

membership. Elements of this reorganisation include the creation of four new

departments responsible for Agriculture, Rural development, Veterinary and Food and

agri-food matters and trade.

In 2000, the state agricultural budget will amount to approx.

€45.4

million. Out of the

total agriculture budget,

€14.8

million will finance direct support schemes to farmers,

€8

million input support and

€10.8

million general and other support measures. State

support to agriculture, including rural development, represents 2.4% of the 2000 state

budget. As compared to previous years, this year’s budget did not include compensation

granted due to bad weather. In 2000, five types of direct support will be granted: sheep

breeders, goat breeders, ecological farmers (the only new type of support introduced this

year), dairy farmers with Estonian breed cattle, and growers of oil plants, flax, grain and

grass seed.

As regards land reform, progress has been slow since the last Regular Report. Although

the legal basis to speed up the reform already exists, the lack of enforcement by local

authorities, the high financial costs involved in the process for claimants and

discrepancies between the authorities responsible as to the amount of land to be

privatised are considerably delaying the process.

Horizontal issues

As regards the implementation of measures related to the

European Agricultural

Guidance and Guarantee Fund (EAGGF),

Estonia has made considerable progress since

last year’s Regular Report.

In March 2000, a SAPARD Agency was established within the Agricultural Register and

Information Centre. The agency consists of two separate structures responsible,

respectively, for the implementation of the SAPARD pre-accession fund (see

section A.b.

– Relations between the European Union and Estonia)

and the administration of the

existing national support schemes. Each structure has three departments responsible for

support, control, and finance. Although several training programmes have been carried

out during 2000, training of staff is far from completed.

In June 2000, amendments to the Government of the Republic Act provided the legal

basis to restructure the current Agricultural Register and Information Centre into the

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Agricultural Register and Information Board, which became operational in July 2000.

This change will allow the SAPARD Agency to fulfil the functions of a state authority. In

addition, the Rural Development and Agricultural Markets Regulation Act, adopted in

October 2000 empowers the Agricultural Register and Information Board to implement

the EC rural development and other market support schemes and mechanisms upon

accession.

As regards preparations to establish the Integrated Administration and Control System

(IACS) in Estonia, progress has taken place mainly in the registration of animals.

Identification and registration of animals is compulsory since the entry into force of the

Animal Disease Prevention Act in January 2000. On the basis of this law, the regulation

allowing for the establishment of the animal register entered into force in October 2000.

On the other hand, progress in the identification of land use and the establishment of the

land register has been much more limited.

As regards the implementation of

trade mechanisms,

Estonia has taken the first step, by

introducing customs duties on agricultural and processed agricultural products from third

countries not having concluded a free trade agreement with Estonia. These tariffs entered

into force in January 2000.

In relation to

quality policy,

the Act on Protection of Geographical Indications, which

entered into force in January 2000, constitutes a first step to implement EC legislation as

regards designations of origin and protection of geographical indications. However, the

law is not fully in line with the

acquis.

The new Bureau of Environment which was

established within the Ministry of Agriculture in April (see below) is responsible

inter

alia

for the promotion of organic farming.

Concerning preparations for Estonia’s participation in the

Farm Accountancy Data

Network,

considerable progress has been made in the field of data collection and data

processing. The Agricultural Census Act entered into force in May 2000. Preparations

have started to carry out the first agricultural census for 2001.

Common Market Organisations

Since last year’s Regular Report, Estonia has made some progress as regards the

introduction of a legal framework and administrative structures for the establishment of

Common Market Organisations.

The above-mentioned Rural Development and Agricultural Markets Regulation Law also

provides the legal framework to regulate and manage agricultural markets (state support

and other support measures) for several sectors (grain, milk and meat). It also establishes

the requirements as regards statistics and reporting, and establishes the framework for

intervention and private storage.

Regulations introducing quality requirements, as provided for in the

acquis,

have only

been introduced for a limited number of products. Concerning

arable crops,

a regulation

on the certification and quality requirements for cereals has been adopted. In the field of

specialised crops,

requirements as regards the identification, description and presentation

for sale of alcohol and alcoholic beverages have been adopted. Finally, in relation to

animal products,

the list of animals subject to marking and the methods and procedures

for their marking and registration have been introduced. The newly created Agriculture

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administration of common market organisations for all field crops and animal species,

including the management of export/import regimes.

Rural development and forestry

Little progress has been made in this field. However, it should be highlighted that,

according to the

acquis,

only

agro-environmental measures

are compulsory. In April

2000, a new Bureau of Environment within the Ministry of Agriculture was established.

The bureau is responsible for the co-ordination of the development of agro-environmental

programmes, the promotion of organic farming, and for general environmental issues

related to agriculture.

Veterinary and phytosanitary issues

Since last year’s Regular Report some progress has been made in the

veterinary

sector,

in particular as regards measures related to the internal market, notably veterinary control.

However, no progress has been made as regards

common measures

including animal

waste treatment, and

animal welfare.

In this area, continuing alignment and upgrading of inspection arrangements, in particular

at the future external border, as well as continuing upgrading of the food processing

industry, were identified as short-term priorities in Estonia’s 1999 Accession Partnership.

In the fields of

veterinary control

– including animal registration and identification and

external border control–,

control of animal diseases and animal health

and

public health

protection,

regulations on border control for animals and products of animal origin, on

veterinary requirements for import and export of animals, and on the remuneration of

veterinarians have been adopted. The Infectious Animal Disease Control Act entered into

force in January 2000. It provides for financing from the state budget for the control of

A-list diseases and for the system of notification in the case of outbreaks of an infectious

disease. Furthermore, the lists of most hazardous and infectious animal diseases, which

are subject to notification or registration, provisions on quarantine control, and

regulations on the eradication of certain animal diseases have been adopted. Finally,

hygiene requirements have been adopted for several products and establishments,

including fresh meat and meat preparations, fishery products, milk and milk products,

and egg and egg products.

As regards administrative capacity in this field, some steps forward have been made to

strengthen the veterinary and food control system, by reorganising the food and

veterinary inspectorate into the Veterinary and Food Board. The Board is the authority

responsible for enforcing legislation as regards animal health, animal welfare and public

health. However, so far its powers only cover veterinary control, given that the

competencies as regards food control (both animal and non-animal origin) are currently

under the Health Inspectorate. The restructuring of the system has made it possible to

increase the efficiency of official meat hygiene control in slaughterhouses and meat

processing establishments. Since January 2000 all the activities performed by

veterinarians are financed from state budget. The number of authorised veterinarians in

Estonia is 206.

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There are 5 veterinary and food laboratories in Estonia. All laboratories have been

accredited by the Estonian Standards Board. Authorisation of laboratories for official

veterinary and food control started in the first half of 2000.

Currently, veterinary and food control is carried out at 14 border inspection posts. Since

the beginning of 2000, border posts with third countries have been in the process of being

upgraded for veterinary and food control. So far, only the upgrading of the Luhamaa

border post has been completed. None of the border inspection posts has so far been

recognised as meeting EC requirements in this field..

In the

phytosanitary sector,

some progress has been made since last year’s Regular

Report. As regards

plant health (harmful organisms and pesticides),

the Plant Protection

Act was adopted in March 2000. In addition, the import-export regulation and the

nomenclature of goods and pesticides requiring a special import and export licence and

subject to plant health control have been adopted. Furthermore, implementing regulations

establishing the list of harmful organisms that are banned from import, the statutes of the

plant health register, the list of plants subject to phytosanitary control at the border

inspection posts, the list of border posts authorised for the import of plants as well as the

measures for the control of plant pests have also been adopted. As regards

plant variety

protection,

amendments to the Plant Variety Protection Act entered into force in March

2000

with a view to adapting Estonia’s legislation to join the Convention of the

International Union for the Protection of New Varieties of Plants (UPOV).

As regards

pesticides,

several regulations have been adopted establishing the rules for the

sale of pesticides on the grounds of the Plant Protection Certificate, the requirements to

obtain the Plant Protection Certificate, the safety requirements for the use of plant

protection equipment, the list of agents forbidden in plant pesticides, and the regulation

and methods for classification of plant pesticides.

No progress has been registered as regards

plant hygiene

and

animal nutrition.

The national competent authority for the phytosanitary sector is the Estonian Plant

Production Inspectorate. The Inspectorate is responsible for keeping the official registers,

co-ordinating the work of inspectors at regional level, and checking the market. The

inspectorate was reorganised at the beginning of the year. Following this reorganisation,

the inspectorate currently has seven technical departments responsible for seed

certification, variety control, plant protection products, plant health (including Border

Inspection Service), feedingstuffs, fertilisers and organic agriculture. 15 regional bureaux

in districts carry out the practical inspection work. Currently, the Inspectorate employs

181 persons, including 42 inspectors. The total staff at border controls is 61. In 1999

2,265 inspections were carried out and 3,554 samples were taken. Inspectors have the

capacity to impose administrative sanctions up to

€625.

Fines over that amount can only

be imposed by the administrative courts. Last year, 3 fines were imposed.

Laboratory controls and management are the responsibility of the Control Centre of Plant

Production. This is a semi-state institution with around 100 employees under contract to

the Ministry of Agriculture. Laboratory capacity for analyses and training of specialists

need to be increased. So far, only two laboratories (seed testing and agro-chemistry) have

been accredited according to EC standards. The plant health laboratory is not yet

operational. In 1999, about 10,000 analyses were carried out in the laboratories of

Control Centre of Plant Production, both for the public and the private sector.

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The number of border inspection posts has been reduced from 11 to 9. Only the border

posts at Luhamaa and Narva are largely in compliance with EC requirements.

Overall assessment

Overall, the most important steps taken by Estonia in the agricultural field so far have

been made during this last year. However, considerable efforts still need to be made.

Regrettably, progress in land reform has continued to be slow. By September 2000, only

57% of Estonian land (2.5 million ha out of 4.3 million) had been registered in the

cadastre (since 1992). Of the total land, about 3.8 million ha are subject to restitution and

privatisation. Of the land still to be registered, 0.6 million ha correspond to pending

claims, half of which have been pending since 1992. Delays in this area constitute a strain

on the development of the agricultural sector in Estonia as well as on the adequate

identification of land for CAP purposes.

As far as the restructuring of the

agri-food industry

is concerned, the sector still suffers

from a 50% over-capacity. Overcoming technical barriers to trade, sanitary and

phytosanitary measures as well as raising quality standards to internationally accepted

levels are still big challenges for Estonia.

As regards

horizontal issues,

and in order to properly implement

trade mechanisms

upon

accession, an intervention unit responsible for the administration of import and export

licences, advanced fixed certificates and export subsidies still needs to be established

within the structure of the Agriculture Register and Information Board. Furthermore, in

the framework of preparations to establish the Integrated Administration and Control

System (IACS), existing databases and data networks should be improved in order to

allow a better integration of data with cross-checking purposes. In particular,

considerable progress needs to be made to complete the land parcel identification system,

especially as regards digitalisation of land parcels according to EC requirements. Further

investments in training should be made.

As regards the implementation of

Common Market Organisations,

considerable

progress still needs to be made in order to implement the Rural Development and

Agricultural Market Regulation Law by adopting secondary legislation, including the

establishment of quality and marketing standards for

arable crops

and

animal products

(cereals, milk and meat products). In addition, Estonia still needs to adopt the

Horticultural Products Act in order to establish the framework legislation for regulating

the markets for

specialised crops

(fruit and vegetables, plants and flowers and bananas).

Market Intervention systems in line with the

acquis

are not yet established.

In the area of

Rural Development and Forestry,

Estonia needs to make further progress

as regards the introduction of agro-environmental schemes.

Concerning the

veterinary field,

while legislation adopted so far represents an important

step, Estonia needs to make further progress in adopting and implementing legislation if

it wants to achieve full alignment with the

acquis.

In the area of

veterinary control in the internal market,

the process of introducing both

the internal computerised system linking veterinary authorities inside the country and an

external movement control system (ANIMO) needs to be completed. Although the

system for identification of bovine animals is close to full alignment and covers more

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than 90% of the animals, more progress is needed as regards the identification and

registration of pigs, sheep and goats. Controls at the future external border of the EU are

not yet in full compliance with the

acquis.

In the field of

control of animal diseases and animal health,

Estonia still needs to

establish contingency plans and to create a reserve fund covering expenses for

compensation in the case of an outbreak of an infectious disease. Preparations to

participate in the animal disease notification system (ADNS) need to be completed.

The process of bringing food processing establishments into line with EC requirements is

far from being completed. Of the 130 fish processing and 32 dairy plants currently

existing in Estonia, only 19 and 5, respectively, have been approved by the EC. None of

the egg farms (37), packaging centres (2) or meat plants (281) have been approved by the

EC.

Progress in the fields of

animal waste treatment

has been very limited and the situation in

this field is far from meeting EC requirements, both for low-risk and high-risk materials.

Currently, only 30% of animal waste is processed. Progress towards setting up a

rendering plant covering the whole of the country needs to be accelerated.

In the area of

animal welfare

progress has equally been limited. The situation in this field

is far from compliant with EC requirements, both in terms of legislation and

implementation.

In the

phytosanitary sector,

despite the adoption of a number of legislative measures

transposing the

acquis

into Estonian legislation, much still remains to be done. The

adoption of the remaining legislative and implementing measures in this field needs to be

speeded up.

While the Plant Protection Inspectorate seems to have adequate human resources to carry

out its tasks, training of staff needs to be considerably reinforced. The feedingstuffs

legislation cannot yet be considered as EC compatible, the plant health and the plant

producers’ register have to be completed, and the ISTA seed control laboratory of the

Control Centre of Plant Production has to be accredited. Furthermore, a phytosanitary

emergency fund and specific budgetary allocations have to be established. In addition,

registration of data on animal feedingstuffs and fertilisers in an official register and

practical official control and sampling need to be completed.

Chapter 8: Fisheries

Since last year’s Regular Report, Estonia has made progress in aligning its legislation on

fisheries with the

acquis

with the adoption of new amendments to the Fisheries Act in

January and October 2000 respectively. However, the reorganisation undertaken within

the Fisheries Department puts into question progress made so far in building the

administrative capacity needed in this area.

The new Fisheries Act, as amended in October 2000, establishes the first elements to

develop a

market policy

in the sector by providing the legal basis to introduce the

common marketing standards.

As regards

resources management,

a first set of amendments to the Fisheries Act

entered into force in March 2000, in order to establish conservation measures and

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improve the legal basis for controls and penalties. On this basis, the government has

adopted a number of fisheries rules, regulations on issuing of fishing licences and

submission of fisheries data. In addition, the latest amendments to the Fishery Act

provide for the legal basis to regulate distant fishing. The Fisheries Department is under

the responsibility of the Deputy Secretary-General of the Ministry of Environment. Its

tasks include drafting and implementing the fisheries policy, resources management –

including issuing licences, managing quotas, collecting data on fisheries activities–,

market policy and the implementation and monitoring of structural actions. The

department was reorganised earlier this year, and as a consequence, the competencies

related to fish processing and marketing have been transferred to the Ministry of

Agriculture. Following this reorganisation, the total number of posts in the department

has been reduced from 24 to 12.

In the area of

inspection and control,

some progress has also been made in the

legislative field, since the latest amendments to the Fisheries Act constitute the legal

basis to implement the satellite-based Vessels Monitoring system. The tasks of inspection

and control–including supervision of ports, vessels and other equipment–are under the

remit of the Nature Protection Department in the Environmental Inspectorate. This

Inspectorate was merged in January 2000 with the Sea Inspectorate. Furthermore, the

Inspectorate is responsible for maintaining the fishing vessel register and the fisheries

information system. Overall, there are currently around 50 inspectors working on fishery

control. Since the Environmental Inspectorate reports directly to the Minister of

Environment, it is unclear how an efficient co-ordination with the Fisheries department is

attained. At local level, there is one person responsible for fisheries in each of the 15

Regional Environmental Departments. Their main tasks are collecting data, and drawing

up plans on restocking and conservation.

As regards

structural actions

the above-mentioned Fisheries Act also provides the legal

basis for introducing regulations in this field, in particular to establish the Fishing Vessels

Overall assessment

Although the adoption of the new Fisheries Act constitutes a very important step in this

direction, Estonia’s legislation and administrative capacity are far from meeting the

requirements of the Common Fisheries Policy. Considerable efforts still need to be made

in this area, in particular to strengthen administrative structures and to adopt and

implement secondary legislation in order to develop the Fisheries Act.

As regards the general

fisheries policy,

a fisheries strategic plan needs to be adopted.

This plan should establish the main lines guiding the work of the fisheries administration

in planning and managing the activities concerning fish resources, the fishing fleet,

fishery ports, fish processing, marketing and trade, the relevant control and enforcement,

human resources, scientific research, legislation and international co-operation.

As far as legislative alignment is concerned, considerable progress needs to be achieved

in the adoption of secondary legislation to cover the

acquis

in the

resources

management

and

structural policy

areas. In relation to administrative capacity, the

Fisheries Department is considerably understaffed. Responsibilities related to the

fisheries policy are scattered among different departments and ministries. Co-ordination

and definition of tasks between them is unclear. Inspectors of the environmental

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inspectorate also carry out a number of additional tasks related to environmental control.

A refocusing of their activities in favour of fisheries activities would be desirable.

As regards

market policy,

producers’ organisations need to be created in order to control

the implementation of the common market standards in Estonian ports. So far, no

common marketing standards exist in Estonia.

In the field of

inspection and control,

the setting-up of a fisheries information system

has to be completed. The satellite surveillance system for fishing vessels needs to be

established and the inspection activities intensified and refocused.

As regards

structural policy,

Estonia still needs to launch the re-measurement of fishing

vessels and subsequently establish the fishing vessel register. These actions are a pre-

condition for the future management of the fleet capacity and connected EC structural

aid.

Chapter 9: Transport policy

Since last year’s Regular Report, Estonia has made considerable progress in completing

the legislative framework in the transport sector. In relation to

horizontal issues,

Estonia

has approved the final report on Transport Infrastructure Needs Assessment (TINA) of

October 1999 that should form the basis for extending the trans-European networks to

Estonia.

As regards

land transport,

provisions regarding public service obligations to be met by

public transport, state aids to public transport and the conditions of access to the transport

services market for enterprises have been adopted. In addition, rules on state aids as well as

an accounting system for infrastructure for railway, road and inland waterway transport

have been issued.

In the area of

road transport,

the new Road Transport Act, adopted in June 2000, regulates

national and international transport of goods and non-professional passenger transport. It

also provides the basis for a number of items of secondary legislation including fiscal

issues and the international transport licences system. In addition, it introduces for the first

time in Estonia the concept of

combined transport.

Furthermore, comprehensive rules and

implementing acts on market access for road haulage and passenger transport operators as

well as technical supervision of motor vehicles have been adopted. At the beginning of this

year, the requirement to use tachographs for registering the working and resting times of

drivers operating in national transport entered into force. Rules for admission to the

occupation have also been introduced although full harmonisation has not yet been

achieved.

In the area of

railway transport,

the elaboration of secondary legislation has continued in

order to guarantee safe traffic

(

inter alia

several regulations have been adopted regarding the

engine driver's licence system)

and equal conditions for railway entrepreneurs in order to

have access to the railways' infrastructure. The national railway register has been

established. The first stage in the process of privatisation of 66% of the shares of

Estonian Railways has been completed. Privatisation concerns both infrastructure and

operations.

The National Railway Administration is the national regulatory authority in charge of

carrying out state surveillance, applying coercive measures, regulating competition,

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drawing up conditions and principles of capacity distribution and charges and laying

down safety regulations. Since last year’s Regular Report the staff of the administration

has increased to 23 employees from 15. Since its creation in June 1999, 26 operating

licences and about 110 engine driver licences have been issued.

As regards

inland waterways,

qualification requirements for the crew of inland waterway

ships and rules for traffic on navigable inland waterways have been adopted.

In the

air transport sector,

the Estonian National Development Plan of Aviation for the

Years 2000-2006, including a Development Plan for Regional Airports, has been

adopted. It outlines the main strategy for the sector development until 2006, including the

alignment with the

acquis,

and the impact for the sector of EU accession. On the basis of

the Aviation Act, regulations establishing the rules for issuing and cancelling licences

and certification of air carriers and air navigation services, the conditions of issuing

certificates for building, manufacturing and service of an aircraft, the requirements of

airworthiness for aircraft, the environmental requirements for powered aircraft and the

rules for using Estonian air space as well as for ensuring air traffic management, have

also been issued. Negotiations between the EC and Estonia on the multilateral Agreement

to establish a European Common Aviation Area were concluded at the end of 1999 and a

bilateral country protocol has been signed. As regards administrative capacity, the new

structure and statutes of the Estonian National Civil Aviation Administration have been

adopted.

In the

maritime transport sector,

the Maritime Safety Act has been amended. The new

law constitutes the framework for establishing the rules and conditions for issuing,

terminating or cancelling operating licences for entrepreneurs providing services

connected with construction, manufacturing, repairing, testing and inspection of ships.

Furthermore, amendments to the Merchant Shipping Code Act adopted in April 2000

allow ships under the flag of an EU Member State to carry out shipping services between

Estonian ports on a reciprocal basis. Furthermore, on the basis of the Ports Act, a

regulation regarding ship's waste has been adopted, further aligning legislation with the

acquis

in this area.

The Estonian National Maritime Board operates under the responsibility of the Ministry

of Transport. Its main function is to deal with maritime safety, including technical

supervision over small craft, ship supervision, maintenance of navigation marks and

hydrography. The Maritime Safety Department employs 70 persons, including 15

inspectors. Furthermore, two new departments have been created within the Maritime

Board, the International Safety Management and the Vessel Traffic Management and

Information Departments.

The Board has the capacity to impose administrative penalties and has already done so. In

1999, the National Maritime Board inspectors inspected a total of 1,035 vessels,

including 789 under Estonian flag of which 12% were detained. In addition, 3.6%

Estonian vessels were detained at ports of countries which are members of the Paris

Memorandum of Understanding for Port State Control. This number, compared to 8.67%

in 1998, indicates that considerable efforts have been made in this area Strengthening the

implementation of maritime safety standards was indicated as a short-term priority in the

1999 Accession Partnership.

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Overall assessment

Overall, Estonia has made good progress in adopting legislation transposing the transport

acquis.

Efforts in order to strengthen administrative capacity need to be continued.

As for strategic documents and legislation, the Transport Development Plan for the Years

1999-2006, approved in March 1999, continues to be implemented following the

envisaged timetable.

Estonia has made considerable progress in aligning its

road transport

legislation .in

various fields such as market access, pricing, technology or some social rules. Further

harmonisation is still needed as regards legislation on minimum vehicle taxes and social

legislation. Estonia has not yet initialled the multilateral INTERBUS agreement on

occasional bus services. Overall, administrative structures to bolster the enforcement

capabilities in road transport are still to be established.

As regards

railways,

efforts to complete alignment with the railway

acquis

need to be

continued.

In the

aviation sector,

on the other hand, Estonia has made considerable progress to align

towards full membership of the Joint Aviation Agreement (JAA). Negotiations to join

EUROCONTROL are ongoing. Although the working guidelines of a permanent

investigating body for accidents and incidents have been adopted, the actual body has not

been established yet.

In the area of

maritime transport,

Estonia needs to continue the reinforcement of its

administration and the implementation of the relevant safety requirements in order to

bring its fleet up to the EC's standards. Care should be taken that there is a sufficient

number of trained inspectors to apply the

acquis.

Chapter 10: Taxation

Estonia has continued to align its legislation in this area.

Since last year’s Regular Report, some progress has been made in the field of

indirect

taxation.

Therefore, Estonia has partially met the relevant 1999 Accession Partnership

short-term priority. As regards

VAT,

the Value Added Tax Act has been amended in order

to abolish most VAT exemptions and lower rates existing in Estonian legislation. The

amendments also align VAT refunds to non-residents with the

acquis

rules.

With regard to

excise duties,

the Alcohol Excise Duty Act, introducing the system of tax

warehouses for alcohol and restructuring of the rates of alcohol excise, was adopted in

June 2000. Furthermore, new tobacco excise rates have been introduced and amendments

to the Mineral Oils Excise Duty Act regarding the range of taxable mineral oil products

and aiming at reducing evasion of fuel excise duties entered into force in September

2000. Unfortunately, the new amendments also invalidate the existing timetable for the

gradual increase in petrol excise. In addition, in September 2000 a regulation exempting

fuel, motor oil and heating oil-like products and components in the chemical industry

from the excise tax entered into force.

With the adoption of amendments to the Taxation Act, initial steps have been taken in

order to provide the tax authorities with the necessary powers to effectively undertake the

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acquis

obligations related to

administrative co-operation and mutual-assistance

with

other Member States.

direct taxation,

the new Income Tax Act entered into force in January 2000. The law

exempts legal persons registered in Estonia and non-residents that have registered a

branch or other permanent establishment in Estonia from paying income tax on re-

invested profit.

The core administrative structure in the field of taxation consists of the Customs Board

and the National Tax Board, both of which report to the Ministry of Finance. In 1999,

5,738 tax audits were carried out (2,106 in the first five months of 2000). In order to

improve the efficiency of the tax administration, new procedures have been implemented

as regards the control of VAT, income tax declarations, the supervision of tax payments

and enforcement of arrears. Initiatives aiming at extending the use of information

technologies within the tax administration such as pilot projects to file income tax returns

electronically and to monitor individuals’ social insurance tax payments via the Internet,

have also been adopted.

Overall assessment

Estonia has made some progress in aligning its tax legislation with the

acquis.

However,

considerable efforts need still to be made in order to complete alignment, in particular as

regards excise duties. In this context, the withdrawal of the foreseen timetable for the

gradual alignment of excise duties on fuel is a step backward in achieving this goal.

As regards

indirect taxation,

Estonia’s legislation is not yet in full compliance with the

acquis.

Although Estonia’s

VAT

system is based on the 6

Directive, the current

application of the reduced and zero rates as well as of exempt transactions are not in

compliance with the

acquis.

Despite the fact that so far a gradual increase in

excise duties

has taken place, alcohol,

tobacco and fuel excise duties are still currently lower than what is required by the

acquis.

The tax warehouse system for mineral oils and tobacco still needs to be

introduced.

As regards

direct taxation,

Estonia needs to ensure that the new Income Tax Act has no

discriminatory effects on non-residents.

Estonia needs to continue substantial efforts to reinforce its tax administration. Tax

enforcement capacity remains low, in particular as regards the collection of fuel and

alcohol excise duties. Estonia needs to strengthen cooperation between the different

authorities currently involved in these areas (the Customs and Tax Board, the Energy

Inspectorate and the Economic Police) in order to solve this problem.

Chapter 11: Economic and monetary union

A detailed assessment of Estonia’s economic policy in its various aspects has been given

above, in the chapter discussing the economic criteria (B-2). Therefore, the present

section is limited to a discussion of those aspects of the Economic and Monetary Union

acquis--as

defined by title VII of the EC treaty and the other relevant texts--which

candidate countries should implement by accession at the latest, i.e. the prohibition of

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direct public sector financing by the central bank, the prohibition of privileged access of

the public sector to financial institutions, and independence of the national central bank.

As to the process of liberalisation of capital movements, upon the completion of which

compliance with the EMU

acquis

is conditional, this aspect has been covered above, in

the section on

Chapter 4 – Free movement of capital.

Since last year’s Regular Report, no major developments can be reported. However, it

has to be noted that the Bank of Estonia has launched a reform of the operational

framework of monetary policy, which will bring it in line with that of the European

System of Central Banks.

Overall assessment

Estonia will participate in EMU upon accession with the status of a country with a

derogation under article 122 of the EC treaty. It will need to implement the necessary

changes to its institutional and legal framework by the date of accession.

Alignment with the

acquis

in this chapter is almost complete. The Bank of Estonia

already enjoys a high degree of

independence

and

direct financing of the public sector

by the central bank

is prohibited by law. Estonian law does not explicitly prohibit

privileged access of the public sector to financial institutions,

but this has never

happened in practice. Yet, Estonia still needs to introduce some changes to the Bank of

Estonia Act for full alignment with the

acquis,

notably as regards the composition of the

Supervisory Board.

Chapter 12: Statistics

Since last year’s Regular Report, Estonia has made some progress in the field of

statistics.

As regards

statistical infrastructure,

amendments to the

Official Statistics Act

were

adopted in June 2000 in order to further align the statistical legislation with the

acquis.

These amendments allow the Statistical Office to communicate directly with ministries

and other governmental agencies for the preparation of statistical surveys, and enable the

government to establish statistical classifications and rules to restrict the use of collected

data for purposes other than the production of statistics.

The Statistical Office and the Bank of Estonia are the only statistics producers in Estonia.

The Statistical Office co-ordinates the production of statistics, it is responsible for the

quality and respect of fundamental principles in the production of most statistics and for

their dissemination. The Office has the status of a government agency dependent on the

Ministry of Finance. Following the reorganisation of the statistical services, 18 staff

members have been transferred from the regional statistical bureaux to the central office.

Additional increases in staff have also taken place. Statistics related to the balance of

payments and banking institutions are collected by the Statistics Department and Banking

Statistics and Analysis Department of the Bank of Estonia. 21 persons work in these

departments.

Concerning

demographic and social statistics,

the first Population and Housing Census

was carried out in April this year. The Household Income and Expenditure Survey has

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been revised and improved and the quarterly Labour Force Survey (LFS) has been

implemented.

As regards statistics at

regional level

and

macro-economic

statistics, no changes have

been registered.

For

business statistics,

a new questionnaire has been established in order to fulfil the

requirements of the structural business surveys.

As regards

external trade

statistics, the special trade system has been introduced.

For

agricultural statistics,

considerable progress has been achieved with the adoption of

the Agricultural Census Act in April 2000. This law constitutes the legal basis to

establish the agricultural census.

Overall Assessment

Overall, Estonia has made considerable progress so far in this area. Statistics produced by

the Bank of Estonia are largely in line with the

acquis.

Still, additional efforts need to be

made, in particular as regards classification, registers, infrastructure and dissemination.

Priority areas for further improvement are regional, business, labour, transport and trade

statistics.

Although the Estonian Statistical Office largely functions following the criteria

established in the

acquis,

Estonia needs to increase efforts as regards the allocation of

budgetary and human resources to the Statistical Office.

Chapter 13: Social policy and employment

Since last year's Regular Report, Estonia has taken steps in all areas covered by this

chapter. Main progress has taken place in the implementation of the occupational and

health protection legislation and social protection.

As regards

labour law,

no major developments have taken place since the last Regular

Report. Adoption of a new labour code was identified as a short-term priority in the 1999

Accession Partnership.

In relation to

equality of treatment for women and men,

a concept paper on gender

equality was adopted by the government in April 2000. This paper should be the basis of

the legislation transposing the

acquis

in this field. Since June 2000, the competencies of

the Ministry of Social Affairs have been extended to gender equality issues. In order to

fulfil this new task, two additional posts have been created within the Equality Bureau of

the Ministry. Training of civil servants in this field has also been strengthened.

Several regulations implementing the

Occupational Health and Safety Act

have been

adopted. They include,

inter alia,

provisions on safety requirements at construction sites

as well as for working with asbestos, for the use of work equipment, for metallic lead and

its ionic compounds at work and for work in environments with biological risk factors.

Furthermore, implementing legislation on personal protective equipment, protection of

workers from the risks related to exposure to carcinogens and mutagens, requirements for

health exams for workers and procedures for the examination and registration of

occupational accidents and diseases have also been approved. Finally, a list of

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occupational diseases and the procedures for the examination and registration of

occupational accidents and diseases have been issued. The Occupational Health Centre

started its activities in August 2000 with a staff of 11 persons. The Centre is responsible,

inter alia,

for organising and co-ordinating occupational and health activities in Estonia,

developing and implementing occupational health programmes and organising training

for occupational health specialists. In 1999, the total public and private expenditure on

working environment and occupational health and safety was between

€160

and

€300

million. Estonia has met the relevant 1999 Accession Partnership priority to a large

extent.

As regards

public health,

in May 2000, the government adopted a strategy with a view

to restructuring the Estonian health care system. It covers the reform of the primary

health sector, the restructuring of the hospital network, the development of human

resources and the effective use of financial resources. With the adoption of the Tobacco

Act, progress has been made in implementing the

acquis

concerning the labelling of

tobacco products and maximum tar yield of cigarettes.

In order to enhance the legal environment of

social dialogue,

the Trade Unions Act has

been adopted. It lays down basic rights and legal status of trade unions, their relations

with central and local government bodies and employers as well as the provisions

concerning their creation and functioning. Furthermore, Estonia has continued to promote

and support social dialogue both on a tripartite and bipartite level, thus partially

addressing the relevant short-term 1999 Accession Partnership. First steps to establish

tripartite regional employment councils at county level have been taken, in order to find

solutions to regional socio-economic problems. These councils will define labour market

measures including re-training and vocational training. At bipartite level, collective

agreements have been concluded at branch level in the agri-food and road transport

sectors. No new developments have taken place as regards collective bargaining and

collective agreements at sectoral level.

The unemployment rate (ILO methodology) of 11.7% in 1999, increased to 14.8% in the

second quarter of 2000. Officially registered unemployment was 6.8%. In the field of

employment, Estonia has made considerable progress and has addressed the relevant

short-term priority of the 1999 Accession Partnership. In October 2000, the government

adopted the National Employment Action Plan (NEAP) following the European

Employment Guidelines. The priorities of the plan include the development of active

labour market policies, support to microenterprises, reducing administrative burdens for

business, development of vocational education more suited to business needs, integrating

disadvantaged groups into the labour market and improving the administrative capacity

of the public employment services. In addition, the Labour Market Services Act was

adopted in June 2000 to provide the legal framework for the functioning of employment

services, including the licensing of private providers of employment services and

vocational counselling. Since the beginning of the year, six vocational counsellors have

started providing their services within local state employment offices. In order to monitor

the functioning of these services, a Labour Market Department with a staff of four has

been established within the Ministry of Social Affairs. No progress can be reported as

regards the preparations towards the implementation of the rules and procedures of the

European Social Fund.

Since the last Regular Report, some progress has also been made in the implementation

social protection

reform. Legislation on social protection for the unemployed,

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measures to strengthen protection of families with children and the State Pension

Insurance Act, introducing the mandatory pillar of the pension system, have been

adopted. Furthermore, the Disability Benefits Act partly entered into force in January

2000. In addition, several implementing regulations as regards procedures for the

granting of social benefits have been issued. A committee in charge of resolving disputes

on social benefits for disabled persons has been established within the National Social

Insurance Board. Furthermore, the National Pension Insurance Register became

operational in January 2000.

As regards administrative capacity, the Labour Inspectorate is the authority responsible

for the implementation of legislation in the field of labour relations and occupational

health and safety. The 15 county centres employ 84 labour inspectors The Board has an

estimated capacity to annually inspect approximately 15% of all Estonian firms.

Inspections are carried out on the basis of the inspectorate work plan and complaints. In

1999, it received 398 written complaints as opposed to 503 in 1998. A total of 4,994

inspections took place during 1999 (in 1998 the number of inspections was 4,775). The

inspectorate can impose administrative sanctions up to

€17,000.

In 1999, administrative

penalties were imposed in 282 cases (in 1998 this was 353). Alternatively, the

inspectorate can also suspend the activities of the infringing company, a measure taken

on 80 occasions during 1999. Preliminary steps have been taken to reinforce training on

occupational health and safety requirements among the Labour Inspectorate staff . In this

context, a number of guidance materials for labour inspectors have been developed.

Overall assessment

Although Estonia has taken steps to implement the

acquis

in all areas of this chapter,

progress has been uneven and a number of problems still remain. Efforts should continue

focusing on the implementation and enforcement of the current framework legislation. In

this context, efforts to strengthen enforcement bodies, in particular the National Labour

Inspectorate, should be pursued. In addition, the capacities of the Ministry of Social

Affairs need to be reinforced in order to ensure,

inter alia,

coherence between the

different policies under its responsibility.

Estonia’s

labour law

is still not in full compliance with the

acquis.

Furthermore, due to a

change in the legislative strategy, delays have occurred in the adoption of remaining

legislation in this area. Legislation implementing the

acquis

as regards collective

redundancies, establishment of the European work councils and posting of workers still

needs to be introduced.

As regards

equality of treatment,

considerable efforts need to be made to complete

alignment with the

acquis.

As regards

public health,

Estonia continues promoting different public health

programmes related to the prevention of alcohol and drug abuse, tuberculosis, HIV/AIDS

and other sexually transmitted diseases. The setting up of a network for the

epidemiological surveillance and control of communicable diseases, as required by the

acquis,

needs to be completed. Furthermore, procedures for measuring the tar and

nicotine content of cigarettes and rates of excise duties still need to be adopted.

As far as

social dialogue

is concerned, further efforts need to be made to extend

achievements made to improve the number and also the contents of collective agreements

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at sectoral level. In this regard, administrative capacity should be reinforced to further

promote autonomous social dialogue.

Estonia has made some progress in transforming its labour market and adapting its

employment system in order to be able to implement the European Employment Strategy.

However, structural problems persist. Efforts should now be focused on the full

implementation of the measures included in the new National Employment Plan.

Furthermore, efforts in the preparations for the implementation and management of the

European Social Fund

need to be strengthened.

Legislation transposing the EC Directive based on Art. 13 of the Treaty relating to

discrimination

on the grounds of race or ethnic origin will have to be introduced and

implemented.

Chapter 14: Energy

Since the last Regular Report, progress in this area has been limited, the most noticeable

step being the completion of the first step of the sale of the 49% of the oil-shale power

stations to a private strategic investor.

Concerning

security of supply,

a limited stock for diesel fuel and petrol was established

by November 1999, falling considerably short of the

acquis

requirements of 90 days’

consumption.

As regards

competitiveness and the internal energy market,

Estonia, Latvia and

Lithuania decided in February 2000 to create a Common Baltic Electricity Market

(CBEM) as well as to establish power transmission links between the three countries.

This constitutes an important step as a preparation for the internal energy market, also in

view of the current absence of interconnections with the EU. The Estonian and Latvian

governments signed a co-operation agreement between Eesti Energia and Latvenergo in

May 2000. The content of possible cooperation is under negotiation.

In the area of

energy efficiency,

the Estonian government adopted the National Energy

Conservation Programme in January 2000.

As regards

nuclear energy,

Estonia signed an Additional Protocol to its IAEA

Safeguards Agreement in April 2000 .

The Energy Market Inspectorate is the regulatory body in the energy sector. It is in charge

of supervising the sector, ensuring correct implementation of the legislation and

monitoring energy prices. Since the last Regular Report three new departments have been

created and staff has increased by 30%.

Overall assessment

Estonia needs to make considerable progress to complete the implementation of the

acquis

in this area. In addition, the Energy Market Inspectorate needs to be reinforced in

order increase its capacity to cope with its increasing functions in the internal energy

market. In particular, its supervision and licence withdrawal powers need to be increased.

Furthermore, Estonia needs to complete the restructuring plan for the oil-shale sector and

ensure that the privatisation agreement in the electricity sector that has been signed is

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implemented in compliance with the

acquis

rules, in particular as regards the internal

energy market and state aids rules.

As regards

security of supply,

emergency preparedness in the energy sector, including

the obligation to hold ninety days of oil stocks, is far from complying with the

acquis.

Framework legislation as well as a sound programme for building up the required stocks

need to be adopted. Estonia is encouraged to calculate oil stocks according to EC

methodology.

As regards

competitiveness and the internal energy market,

Estonia still needs to

amend its legislation and enact the necessary secondary legislation in order to complete

alignment with the Electricity and Gas Directives. In particular, further efforts need to be

focus on third party access to networks, procedures for building new capacity or gas

facilities, the establishment of an independent transmission system operator in the

electricity sector and the definition and the role of the regulator in the future internal

energy market. Furthermore, price distortions need to be gradually removed.

Currently, Estonia does not have legislation regarding

energy efficiency

(e.g. labelling

requirements, minimum efficiency standards). An action plan to implement the National

Energy Conservation Programme needs also to be adopted. Estonia does not participate

in the relevant EC energy programmes, which could play a role in improving energy

efficiency and promoting renewable energy.

Although Estonia does not operate

nuclear

power plants, due attention should be given

to preparing the implementation of Euratom safeguards.

Chapter 15: Industrial policy

Since last year’s regular report, Estonia has continued to develop industrial policy

measures. Privatisation and restructuring of the industrial sector has progressed further.

As regards the preparation of an

industrial strategy,

several initiatives have been

launched although concrete progress has been limited. Since last year’s Regular Report,

Estonia has taken some steps to adopt a genuine and comprehensive industrial policy,

independent from its general economic policy, by integrating its principles into the

preliminary National Development Plan under preparation. In addition, it has

concentrated on the promotion of technological development and innovation activities

such as the reform of the Innovation Fund. Also, national quality policy and quality

programs have been launched.

Estonia has continued to promote foreign direct investment. As far as specific sectors are

concerned, an information memorandum has been adopted in order to attract potential

investors to wood processing activities.

Since last year’s Report, Estonia has continued the process of

privatisation and

restructuring

of its industrial sector. In January, the privatisation programme for the

year 2000 was adopted. Ten additional companies have been privatised in the

manufacturing sector. As regards industrial restructuring, a comprehensive restructuring

Developments in Industrial policy should be seen in relation to developments in the context of SME

policy (see

chapter 16 – Small and medium-sized enterprises).

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plan for the Ida-Virumaa region has been adopted, focusing mainly on the social and

regional impact of restructuring.

The Ministry of Economic Affairs is the administration responsible for developing and

implementing Estonian industrial policy. In 1999, it carried out different activities in this

area, including the development of an information network in order to increase awareness

of industrial policy measures among enterprises.

Overall assessment

Estonia’s policy measures in industry are by and large in line with the concepts and

principles of EC industrial policy, i.e. market-based, stable and predictable. Estonia’s

industrial policy principles are based on minimal state intervention and intend to create a

favourable economic environment for entrepreneurship. However, Estonia needs to

develop an industrial policy which is distinct from its general economic policy. Although

some progress has been made in this direction, achievements as regards the design and

implementation of specific measures have been limited. In this context, it has to be

pointed out that the control of state aids is an important dimension of industrial policy

(see chapter 6-Competition).

As regards specific industrial policy measures, so far Estonia has mainly focused on the

promotion of technological development and innovation activities. However, these

measures have had a limited impact due to a minimal allocation of resources.

Furthermore, the co-operation network among enterprises, research institutions and

government agencies should be further developed.

As regards privatisation, of industry, the bulk of manufacturing industry has been

privatised. The restructuring process for Ida-Virumaa is intimately linked to the prospects

and restructuring of the oil-shale sector (see

Chapter 14-Energy),

which is directly and

indirectly the main employer in the area. The oil-shale restructuring plan still needs to be

adopted. This issue was identified as a short-term priority in the 1999 Accession

Partnership.The basic administrative capacity for implementing an industrial policy is in

place in Estonia.

Chapter 16: Small and medium-sized enterprises

Since the last Regular Report, Estonia has continued developing its SME policy by

paying special attention to business development in the less developed and single-

industry regions.

As regards

SMEs policy and its implementation,

Estonia adopted, in April 2000, the

SMEs Development Plan, which states the main lines of SME policy in accordance with

the draft Preliminary National Development Plan. The plan establishes the objectives,

target groups and key sectors for SME support. In addition, in June 2000, the government

took the decision to reform the Estonian business support system in order to consolidate

the current business support foundations in a more efficient organisation. In the process

of the transformation of the foundations, a decision to establish the Business and Housing

Loans Guarantee Foundation, which merges three former foundations, was taken in July

Developments concerning SME policy should be seen in relation to developments in the context of

industrial policy (see

Chapter 15 - Industrial policy).

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2000. This institution should be in charge of promoting the development of

entrepreneurship through guaranteeing loans and export transactions.

Estonia’s

business environment

continues to be stable and relatively predictable. The

statistical database of small business, which was created in February 2000, will make it

possible to improve the analysis of small business’ development. In addition, the

National Employment Action Plan adopted in October 2000 foresees specific measures to

promote microenterprises and simplify the business environment.

Two Euro Info Centres have been opened in Estonia and are functioning.

Since last year’s Regular Report, no new developments can be reported as regards the

SME definition

applied in Estonia.

Overall assessment

Estonia has made progress in developing a policy towards SMEs that is in line with the

principles and objectives of EC enterprise policy. The main lines of Estonia’s policy

towards SMEs revolve around internationalisation, creation of a system of regional

business support and the development of innovation and technological development.

However, the current SME strategy is still not clear as regards its integration with other

policies. The current number of support schemes and bodies should be streamlined.

SMEs represent 99% of Estonian enterprises and by the end of 1998 accounted for

around 47% of the workforce. However, their development continues to be hampered by

the difficulties of access to finance and employing skilled labour. Efforts in this direction

need to be continued.

Although the definition of SMEs recommended by the European Commission is not

officially recognised in Estonia, it is applied in practice.

Chapter 17: Science and research

Since the last Regular Report Estonia’s progress in this area has mainly focused on the

implementation of the Fifth Framework Programme.

Some steps have also been taken in order to build up appropriate capacities in this field,

including the reorganisation of the Estonian Innovation Fund into a Technology Agency

in order to increase the effectiveness and quality of the Estonian innovation system. The

main fields of activity will be co-financing of innovative projects, preparation of national

technology programmes and creation of an innovative environment.

Estonia has been fully associated with the

Fifth Framework Programme

since June

1999. The relevant infrastructure for assisting the research community at national and

local level has been introduced under the supervision of the Ministry of Education. A

system of National Contact Points to disseminate information and to assist researchers in

the preparation of proposals has been established. The necessary staff and financial

resources have been allocated, so that the system is working efficiently.Representatives to

all programme committees have been nominated.

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Overall assessment

So far Estonia’s association with the Framework Programmes has been relatively

successful and the management capacity of the existing structures for association with

these programmes is adequate. During the past year there has been a high level of

participation.

The level of the existing gross domestic expenditure on research and development as a

share of GDP is relatively low in Estonia (0.51% of GDP in 1998). Further concrete

measures are required in order to increase gradually the financial support for the sector

and in particular to stimulate private sector research activity.

Efforts need to be continued to increase the participation of small and medium sized

enterprises, and industry in general, in research and technological development

programmes. Links between research institutes and industry and SMEs need to be further

promoted.

Chapter 18: Education and training

Since the last Regular Report, Estonia has taken further steps to reform

its education

and training system

and to introduce European standards.

In the past year, Estonia has continued to participate in the

Community programmes

(see

bilateral part A).

In addition, the Association Council adopted a decision in July

2000 to allow participation in the second phase (2000-2006) of the Socrates and

Leonardo da Vinci programmes. The decision to allow participation in the new Youth

programme, which incorporates European Voluntary Service activities, was adopted in

September 2000.

As regards

vocational training,

some progress has been made. A number of vocational

standards have been adopted. In order to improve the vocational school network, the

management of a number of schools has been merged. Some schools are currently being

reorganised so as to also carry out adult retraining, training for people with special needs,

and specific vocational instruction for upper-secondary students. This should also allow

filling of the current gap between vocational secondary education and professional

education at the university level.

In relation to

higher education,

the Universities Act and implementing legislation have

been amended to clarify the procedures on the state-commissioning of student places, the

initial training of medical doctors and the transition from professional higher education to

academic education. Work has continued towards the consolidation of public higher

education institutions aiming at increasing the quality of higher education. In addition,

with a view to enhancing the mobility of students and lecturers between the Baltic States,

an agreement on recognition within the Baltic Higher Education area between Lithuania,

Latvia and Estonia was signed in February 2000

Overall assessment

Participation in the relevant Community programmes is satisfactory and the established

national agencies are functioning. Estonia’s legislation as regards the education of

children of migrant workers

is largely in line with the

acquis.

Still, steps need to be

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taken to ensure its effective implementation. Estonia has made considerable progress in

reducing existing discrimination against EU citizens in the field of education (see

Chapter 2-Free movement of persons).

However, discrimination against foreign students

as regards vocational training still remains.

Estonia has introduced the legal framework in order to diversify and reorganise the

vocational education and training

system. However, efforts to implement these

reforms, in particular the qualification systems, vocational standards and curricula need

to be continued. The supply of vocational training is still insufficient. In addition, the

involvement of social partners, in particular enterprises, needs to be strengthened. Inter-

ministerial coordination in this field also needs to be reinforced.

Chapter 19: Telecommunications and information technologies

Since the last Regular Report, Estonia has made considerable progress in this area.

Particular progress has been made as regards

liberalisation

and alignment of the

regulatory framework.

The new Telecommunications Act was adopted in February

2000. The law introduces the regulatory framework to implement the

acquis

in this area.

It regulates the competencies of the independent regulator, as well as a new regime for

authorisation and licensing and for interconnection as required by the

acquis.

constitutes the legal basis for the provision of national universal services and establishes

that tariffs have to be cost-oriented. In addition, the law foresees the expiry on 31

December 2000 of the exclusive rights of the Estonia Telephone Company. Estonia has

therefore addressed the relevant short-term priority identified in the 1999 Accession

partnership.

Several regulations implementing the Telecommunications Act have also been adopted.

These include the National Radio Frequency Plan, the rules for conformity assessment as

well as the procedures for marking of terminal equipment, the rules for verifying radio

frequencies, the establishment of the National Numbering Plan as well as rules and

procedures for using and reserving blocks of numbers and the identification code and

short –code for carrier selection.

The Telecommunications Act regulates the activities of the National Communications

Board, as a full independent regulatory authority. The Board operates under the

responsibility of the Ministry of Transport and Telecommunications, which retains some

auditing functions, and has a staff of 98 employees. In addition, since August 2000 it has

been responsible for the numbering of telecommunication networks, the registration of

telecommunications service providers and the issuing of permits to use blocks of

numbers.

Currently, the state participation in Estonia Telephone Company is 27.3%. In order to

enhance further the independence of the National Communications Board, the ownership

rights have been transferred from the Ministry of Transport and Communications to the

Ministry of Finance.

In April 2000, Estonia ratified the Conventions of the International Telecommunications

Union and Convention of the formation on the European Telecommunications Office. It

has also acceded to the Convention on the formation of the European Radio

Communication Office.

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As regards

postal services,

no progress has been registered in this area. The national

Communications Board is also the regulatory authority in this area.

Overall assessment

Overall Estonia has made considerable progress in this area.

Although the Telecommunication Act introduces a regulatory framework largely in line

with the

acquis

in the

telecommunications

sector, some problems still remain. In

particular, the law does not require the universal service to be affordable nor it is clear

from the law whether an affected party has a right of appeal against decisions of the

national regulatory authority. Therefore, a credible policy to secure the availability of an

affordable universal service needs to be devised. In addition, further implementing

regulations need to be adopted. Although, important formal steps have been taken in

order to ensure the independence of the National Communication Board, this

independence needs to be monitored in practice. Furthermore, its availability of staff

needs to be reinforced, in particular as regards licensing and interconnection. Prices have

been rebalanced to a considerable extent and it is expected that the imminent arrival of

competition will lead to a rapid completion of the process.

The

postal services

in Estonia are

de facto

deregulated. However, legislation to bring the

sector into full compliance with the

acquis

still needs to be adopted, in particular as

regards the establishment of the mechanism for guaranteeing universal postal services in

a competitive environment and the strengthening of the independent regulator.

Chapter 20: Culture and audio-visual policy

Since last year’s Regular Report, Estonia has made considerable progress in further

aligning legislation in the audio-visual area. In May 2000, amendments to the

Broadcasting Act of 1999 were adopted largely in line with the Television without

Frontiers Directive. The law provides for Estonian broadcasters to comply with the

requirements of the directive by 2003. In addition, the new amendments introduce

provisions as regards jurisdiction, the definitions of European works and independent

producers, the principle of freedom of reception and retransmission, and the rules

concerning exclusive rights and regulates access to major events. The act also contains

provisions as regards the right of reply, protection of minors, requirements for advertising

and teleshopping and the definition of sponsorship. Therefore, Estonia has addressed the

relevant short-term priority identified in the 1999 Accession Partnership.

In January 2000 Estonia ratified the European Convention on Transfrontier Television

and the protocol amending it.

A Media and Copyright Department has been created within the Ministry of Culture to

carry out the tasks of application and enforcement of the audio-visual legislation; it is

under the responsibility of the Ministry of Culture.

Overall assessment

Estonia has made considerable progress in the audio-visual field and its legislation is

largely in line with the

acquis.

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However, Estonia needs strengthen the necessary administrative capacity and improve

co-ordination of the different authorities in charge of the implementation of the

legislation, in order to cope with the new competencies and powers conferred on them by

the new legislation. Particular attention needs to be paid to monitoring and sanctioning

powers.

Chapter 21: Regional policy and co-ordination of structural instruments

Since last year's Regular Report, progress has been limited in the field of regional policy.

As regards the general regional policy framework, the government adopted in November

1999 the Regional Development Strategy establishing the main priorities in this area.

As far as

territorial organisation

is concerned, the State Statistic Act, amended in June

2000, constitutes the legal basis for the adoption of the NUTS classification.

With regard to the

legislative framework,

the new State Budget Act, which entered into

force in January 2000, allows for co-financing and three-year programming of budgetary

expenditure., Furthermore, amendments to the Local Government Organisation Act

entered into force in October 1999 establishing that local budgets must be based on a

multi-annual plan of at least three years..

Concerning the

preparation for programming,

Estonia prepared a first version of the

preliminary National development Plan (PNDP) in autumn 1999, which constitutes a first

step towards developing a comprehensive and detailed programming document in line

with Structural Funds requirements. The Ministry of Finance is in charge of co-ordinating

the preparation of the NDP. Furthermore, a Regional Development Committee of

Ministers has been created in order to discuss and pre-select regional development

projects before they are submitted to the government. The Committee of Ministers will

allocate resources between different sectors on the basis of priorities of the National

Development Plan. The current draft of the Preliminary National development Plan

identifies three target regions: Northeast Estonia, East Estonia and the western islands

Estonia has also elaborated programming documents for ISPA and SAPARD (see

section

A.b. – Relations between the European Union and Estonia).

As regards the

evaluation and monitoring system,

no particular progress can be

reported.

In order to enhance

administrative co-ordination,

the division of responsibilities

between the Ministry of Internal Affairs and the Minister without portfolio responsible

for regional affairs have been specified within the Preliminary National Development

Plan. The Ministry of Internal Affairs and the Estonian Regional Development Agency

(ERDA), under its responsibility, are the authorities responsible for designing and

implementing regional policy in Estonia. The National Regional Policy Council is the

body in charge of co-ordinating the different activities undertaken in the area of regional

policy, although so far it has not been very active. The Council comprises representatives

from all ministries and a few county governors. As regards the administration of regional

development programmes, the government has launched the reform of state agencies

supporting business development. Two subsidiaries of the ERDA have been established

in North-eastern and Southern Estonia.

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As regards

financial and budgetary management,

the procedures for the use of the

funds allocated in the state budget, in particular regarding the assessment and selection of

projects, have been improved. In addition, the amended Government of the Republic Act

gives the Ministry of Finance the powers to co-ordinate the internal control and audit

activities in the public sector (see

chapter 28 on Financial Control).

Overall assessment

Although Estonia has made some progress in this area, a number of difficulties remain,

and efforts to complete the legal and administrative framework to apply the EC regional

and cohesion policy need to be continued. Estonia has only limited experience in

appraisal and evaluation procedures. Management of pre-structural funds should increase

Estonia’s capacity in this area.

As regards

territorial organisation,

the adoption of the regulation establishing a

provisional NUTS classification is still pending. A definition of the statistical regions

corresponding to NUTS 3 level has not been agreed upon so far.

As regards the

preparation for programming and managing Structural Funds

support,

considerable efforts still need to be made. The Preliminary National

Development Plan 2000-2002 has to be further developed and adopted. Furthermore,

Estonia needs to clarify the division of responsibilities between different administration

departments and institutions for implementing structural funds support. Special emphasis

should be put on strengthening administrative capacity necessary to carry out

programming and managing tasks.

Further progress as regards the preparation of an

evaluation and monitoring

system

corresponding to structural funds requirements is necessary.

As for

administrative coordination,

a clear division of competencies between

institutions responsible for regional development is needed. The current structures do not

yet seem to provide an appropriate framework for efficient decision making. The role of

the inter-ministerial Regional Policy Council has to be reviewed. The structures need to

be rationalised and strengthened in order to upgrade the level of programming and project

approval, monitoring and evaluation of pre-accession instruments and activities preparing

for future Structural Funds assistance. As far as

regional statistics

are concerned most of

the key indicators are available at national level, with some shortcomings in the fields of

social indicators, employment statistics and structural business statistics. No regional data

are available yet for GDP data, social indicators and structural business statistics.

Chapter 22: Environment

Since the last Regular Report Estonia has made considerable progress in this area, by

speeding up the implementation of the existing framework legislation in most sectors.

With regard to the

integration of environment into other policies,

Estonia has started,

over the past year, to implement the action programme for sustainable development

adopted by all Baltic Sea countries in the framework of 'Agenda 21 for the Baltic Sea

region'.

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As regards

horizontal legislation,

Estonia has adopted the Environmental Impact

Assessment and Auditing Act in order to align its legislation with the

acquis.

Transposition and implementation of the impact assessment directive is a short-term

priority in the 1999 Accession Partnership. Furthermore, secondary legislation has been

introduced in the area of

environmental information

regarding the national monitoring

stations and national sub-programmes. Environmental impact assessments are the

responsibility of the Ministry of the Environment. At local and regional level, they are the

responsibility of the County Environmental Departments of the Ministry of the

Environment. They are carried out by licensed independent experts. There are about 195

licensed experts. In the area of

civil protection,

an emergency call number for the whole

territory of Estonia has been introduced.

In the field of

nature protection,

in July 2000, the government adopted the National

programme for the Implementation of Natura 2000. Furthermore, procedures for the

export and import of different products and goods specified in the CITES Convention

have been adopted. In addition, implementing regulations to the Protection and Use of

Wild Fauna Act as well as regulations on protected animals and the assessment of

damage caused to protected animals and birds on spring migration have been adopted.

Accelerating the transposition and enforcement of nature protection directives was also

identified as a short-term priority in the 1999 Accession partnership.

Concerning

water quality,

progress as regards the transposition of water quality

requirements has been limited. Amendments to the Public Health and Radiation

Protection Acts have been adopted in order to add quality control requirements for

drinking and bathing water. The Public Water Supply and Sewerage Act has been

amended to enforce the responsibility of the client in using the public water supply and

sewerage system. Requirements on discharges of wastewater are largely in line with the

directive. In addition, implementing legislation has been adopted regarding the statute of

the water cadastre, the list of water bodies or parts to be used as wastewater recipients

and the health protection requirements for bathing water and beaches. Therefore, Estonia

has partly met the relevant short-term priority of the 1999 Accession Partnership.

Industrial Pollution Prevention Control (IPPC) and Risk Management,

Programme on Reducing Pollutant Emissions from Large Combustion Plants has been

launched. In addition, the Conventions on the Transboundary Effects of Industrial

Accidents and the Prevention of Major Industrial Accidents have been ratified.

Furthermore, Estonia has identified the installations covered by the IPPC directive. In

relation to control of industrial accidents all enterprises concerned have provided

information sheets on dangerous substances. Estonia has met the relevant short-term

priority of the 1999 Accession Partnership to a limited extent.

As regards

noise emission,

a government regulation establishing environmental

requirements was adopted in July 2000.

Concerning

air quality,

progress in introducing the necessary legislation has continued

with Estonia’s accession to the Geneva Convention on Long Range Transboundary Air

Pollution and three of its protocols (SO2, NOx, VOCs). In addition, regulations regarding

such issues as VOC control, pollutant emissions, target levels, quality requirements for

liquid fuels, and ambient air pollution permits have been adopted. Furthermore, earlier

concessions on lower fuel quality have been abolished and the capacity to enforce fuel

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quality standards has been strengthened due to improved laboratory capacity. Therefore,

Estonia has met the relevant short-term priority of the 1999 Accession Partnership.

In the field of

chemicals,

Estonia has continued implementing the existing framework

legislation by adopting additional regulations on the management of dangerous

chemicals. The Chemicals Notification Centre became operational in autumn 1999 with

two employees. Implementing regulations in the field of

GMOs

have been adopted as

regards the placing on the market of products containing GMOs and the release of GMOs

into the environment. The Committee of Gene Technology has been established. It is

responsible for issuing permits for intentional release of GMOs into the environment and

the marketing of GMOs.

waste management,

the Packaging Excise Duty Act has been amended in order to

expand packaging excise duties to reimported packages and to strengthen administrative

capacity in this area. Furthermore, implementing regulations on requirements and

conditions for issuing, amending and invalidating hazardous waste licences, the list of

waste for the recovery and disposal operations, procedures for issuing waste permits as

well as the implementation of the Basel Convention have been adopted. In addition, a

regulation was adopted in November 1999, bringing legislation largely into line with the

acquis

as regards the use of sludge on agriculture. Estonia has also continued progress

towards the establishment of a network of waste disposal installations. As regards the

management of hazardous waste, two regional transfer stations have been completed and

more than 50 collection points have been established. A new hazardous waste landfill

meeting the requirements of the landfill directive became operational in April 2000. As

for municipal solid waste one landfill was closed, one reconstructed and five new sites

constructed. Therefore, Estonia has met the relevant short-term priority of the 1999

Accession Partnership.

radiation protection

a regulation has been adopted regarding the list of radiation

sources, radiation generators, radiation protection devices and materials and consumer

goods containing the radiation sources. In addition, a remedial plan has been approved

for the tailing pond in Sillimäe and financial resources have been allocated for its

implementation (see

also Chapter 14-Energy)

The Environmental Inspectorate is the co-ordinating, organising and supervising body as

regards the use and protection of natural resources. Currently, it shares enforcement and

supervisory powers over the environmental legislation (water, waste, air, protection of

forests, games, inland waters, radiation safety) with the County Environmental

Departments (see below). It has the power to impose administrative sanctions. 260 people

are currently working in the Environmental Inspectorate.

Since the beginning of 2000, the Environmental Departments of the County Governments

have been converted into Regional Departments of the Ministry of the Environment. This

step should improve the environmental administrative capacity at regional and local

levels. The Regional departments play a key role in implementing environmental

legislation, mainly through issuing permits (air, water and waste permits) and supervision

of pollution emissions in their territories. They are also responsible for imposing and

collecting pollution charges and environmental impact assessment in their territories. The

fifteen regional departments employ around 275 persons. In 1999, they issued 1,419

water permits, 717 air permits and 868 waste permits.

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Municipalities are responsible for the provision of public water supply, sewerage and

treatment of waste water. Furthermore, they are also responsible for collection, treatment

and final disposal of municipal solid waste.

Overall assessment

Overall, Estonia has made progress in transposing and implementing the framework

environmental legislation. Progress needs to be continued in building the necessary

capacity to implement and enforce this legislation, it particular at the local level. In

addition, Estonia needs to further develop the plans for financing environmental

investments (directive specific), which are based on the estimates of alignment costs and

on realistic sources of public and private finance. It has to continue to fund the

implementation of the heavy investment directives in air, water and waste as indicated by

the relevant short-term priority of the 1999 Accession Partnership.

As regards

horizontal legislation,

Estonia needs to complete the necessary secondary

legislation to finalise transposition of the Environmental Impact Assessment provisions

and complete full implementation. Additional legislation needs to be adopted regarding

environmental information. The implementation of these requirements is at an early stage

and measures need to be introduced for its implementation. In relation to the monitoring

mechanism of greenhouse gases, a monitoring and reporting system covering all gases

needs to be established.

Recently substantial measures to accelerate efforts in the area of

nature protection

have

been taken, but progress so far has been limited. Work to transpose and implement the

Wild Birds and Habitat Directives need to be accelerated. Sanctions in the case of illegal

trade in endangered species need to be introduced in the legislation. A system needs to be

established to control the import and export of live specimens.

water quality,

Estonia has continued the implementation of the 1999 ‘National

Programme of Water Protection’. Considerable progress has been made in the alignment

of legislation as regards bathing water. Progress has also been made as regards public

water supply and wastewater treatment, where approximately 50% of built-up areas are

largely in compliance with the

acquis

on the discharge of wastewater. Nevertheless,

Estonia still needs to provide the scientific documentation justifying the exclusion of

some parts of its territory from requirements on discharges to sensitive areas. The

vulnerable zones and criteria for identifying nitrate-affected waters need to be

established. Further work is needed on establishing a monitoring system in the water

sector and clarifying the responsibilities between different authorities.

In relation to

industrial pollution and risk management,

despite significant progress in

the implementation of requirements on large combustion plants, the transposition of

legislation on large combustion plants has been delayed.

Overall, progress as regards

noise emission

has been limited.

As regards

air quality,

Estonia’s legislation is largely in compliance with the

acquis

regards the framework directive and fuel quality directives. Furthermore, progress has

been made as regards ambient air monitoring and reporting. Still, the ambient air quality-

monitoring programme needs to be extended and the measurement of lead and particulate

matter needs to be introduced.

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As far as

waste management

is concerned, legislation transposing the framework

directive is largely in place. Legal work should focus on completing transposition of

specific directives in this sector, e.g. landfill sites, packaging waste and batteries. High

priority needs to be given to the finalisation of the national waste management plan in

order to progress further in the implementation of waste management structures, e.g. the

closing of existing landfills and construction of new ones.

radiation protection,

further efforts are needed for the transposition of requirements

on medical exposure, information to the public and protection of outside workers.

Estonia continues the process for the management of radioactive waste, decommissioning

and remedial work on Paldiski is in progress. The solid waste storage and liquid waste

treatment plant are decontaminated and to be demolished. Furthermore, Estonia needs to

start the implementation of the remedial programme for the tailing pond in Sillimäe.

Chapter 23: Consumers and health protection

Since last year’s Regular Report, Estonia has made some progress in this area.

As regards

safety related measures,

amendments to the Product Safety Act have been

adopted in order to further align legislation as regards dangerous imitations.

No major progress can be reported as regards

non-safety related measures.

In the field of

market surveillance,

the conditions and procedures for notifying other

countries of dangerous products detected in the course of market surveillance, as required

by the

acquis,

have been adopted. The Consumer Protection Board and Health Protection

Inspectorate are responsible for implementation and supervision of legislation related to

consumer protection. The Consumer Protection Board has been designated as the national

contact point with the transitional rapid exchange information system (TRAPEX) on

dangerous goods. The Consumer Protection Council is the main body through which the

local governments and voluntary organisations can participate in the decision making

process in the area of consumer protection policy. It also advises the Consumer

Protection Board on consumer policy. In 1999, the Consumer Protection Board inspected

3,058 enterprises. 2,481 consumer complaints related to goods and services were

received. The most frequent related to household appliances (such as the absence of

instructions). The Board forwarded 24 cases to the administrative courts, 20 of which

related to infringements of the sales procedures for alcohol and tobacco products.

The Health Protection Inspectorate is responsible for general health matters although its

functions overlap with those of several other institutions (e.g. Consumer Protection

Board, Veterinary and Food Board, Environmental Inspectorate, Medicine Board, etc.).

The division of responsibilities within the different departments of the inspectorate is

ambiguous.

Overall assessment

Overall, Estonia has made some progress in aligning its legislation with the

acquis.

Efforts to adopt the remaining legislation, in particular the Law of Obligations, and to

ensure correct implementation and enforcement of the existing legislation need to be

continued.

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Existing legislation on

product safety

is largely in line with the

acquis.

As regards

non-safety related

legislation, progress in this area continues to be hindered

by the delay in the adoption of the Law of Obligations. This provision should cover

distance selling, unfair contractual terms, consumer credit, doorstep selling and

timeshares and package travel. Legislation on comparative advertising still needs to be

adopted. Legislation on misleading advertisements is still not fully in line with the

acquis.

Chapter 24: Co-operation in the field of justice and home affairs

Since last year’s Regular Report, Estonia has made further progress in the field of justice

and home affairs.

In the area of

data protection,

Estonia signed the 1981 Council of Europe Convention on

the Protection of Individuals with regard to the Automatic Processing of Personal Data in

January 2000.

As far as

visa policy

is concerned, progress has been made in order to align it further.

Since September 2000, Estonia has abolished visa-free border crossing for Russian

nationals living in border areas. In addition, amendments to the Aliens Act were adopted

in December 2000, regulating the issuing of visas at border checkpoints. Visas are no

longer granted at borders except in extraordinary circumstances specified in the law. In

August 2000, a regulation providing the legal basis for the establishment of the National

Visa Register was adopted. Furthermore, requirements for airport transit as well as the

list of data to be kept in the National Visa Register have been established.

In the field of

border control,

actual progress has been limited as regards the

transposition and the implementation of the

acquis.

However, Estonia has continued

reinforcing the management of its eastern border by upgrading, with Phare assistance, its

surveillance and infrastructure equipment. As regards preparations for Estonia’s

participation in the Schengen Information System, national databases and information

systems are being rearranged with a view to their integration. Furthermore, and following

a cooperation agreement on cross-border crime with Finland, Lithuania and Latvia, joint

border control procedures have been introduced at all border control points on the border

with Latvia. Since December 1999, there is an electronic data exchange on the common

border control points of Estonia and Latvia.

Regarding

migration,

progress has been made in adopting legislation, in particular as

regards family reunification. The Aliens Act has been amended in order to incorporate

the requirements of international agreements as the basis for granting residence permits.

These amendments also provide for accompanying measures, in accordance with Chapter

6 of Title II of the Convention implementing the Schengen Agreement. The rules

regulating the immigration quota (see

also chapter on Political criteria)

have also been

amended. As a result, the immigration quota does not apply, under certain conditions, to

spouses or under-age children of Estonian citizens or to under-age children whose parents

apply for a residence permit. Furthermore, the amended aliens law harmonises the

definition of an under-age child with that of the

acquis.

The new Aliens Act also allows

applicants for an extension of their residence permits or for a permanent residence permit

to stay legally in Estonia until a decision is made concerning their application.

Readmission agreements have been signed with Spain and Croatia .

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As regards administrative capacity, the powers of the Ministry of Internal Affairs to

distribute the immigration quota have been reinforced. The Citizenship and Migration

Board and the Board of the Border Guard have unified and rearranged data collection

concerning illegal immigration and further harmonised it with the

acquis.

From October

1999 to May 2000, Estonian courts decided on 12 expulsions of illegal residents at the

request of the Police Board, the Board of the Border Guard or the Citizenship and

Migration Board. During the same period 1,309 invitations to leave Estonia voluntarily

were issued.

In the field of

asylum,

progress has been limited. In October 1999, the National Register

of Refugees was established. Procedures for the replacement and revocation of refugees’

travel documents and the list of documents and data to be submitted upon application

have been adopted. Up to 5 June 2000, 47 asylum applications had been made in Estonia

and so far only 3 applicants have been granted the status of refugee. As regards the

remaining ones, 8 applications have been refused and 20 cases are still ongoing. 16 cases

ended without a decision, either because of the death of the applicant or withdrawal of

the application. . In April 2000, the new Illuka Reception Centre for Asylum Seekers was

opened.

In the field of

police co-operation and the fight against organized crime,

several

initiatives have been taken. An amendment to the Code of Criminal Procedure entered

into force, easing the requirements for launching criminal cases. In addition, a

Governmental Agreement between the Baltic States on the Protection of Victims and

Witnesses has been adopted, aiming at reinforcing co-operation in the fight against

organised crime and ensuring the application of measures to protect witnesses on the

territory of all three countries. Furthermore, in March 2000, the Council of Criminal

Prevention was created in order to develop a national criminal prevention strategy and

ensure its implementation. In July 2000, the government adopted the national strategy for

the prevention of crime (to run until 2005) and the main objectives for the fight against

crime.

The reform of the

police

forces has continued. At the end of 1999, police structures were

reorganised and the number of policemen was reduced from 4,255 in November 1999 to

3,738. The restructuring intends to reinforce the operational capacity of the police by

reducing the size and increasing the efficiency of the current administrative departments.

These measures have been accompanied by a plan to substantially increase police

salaries, in particular at the lowest level of the chain of command. Steps have also been

taken to reinforce training of the police in different areas. Whether the reform will attain

its objectives without jeopardising police efficiency as a whole needs to be monitored.

Although crime clear-up rate has improved in 2000 as compared to 1999, increasing to

31.7% from 27.3%

, efforts in this area need to be continued. The police information

system POLIS, introduced by November 1999, registers all police alerts and decisions on

criminal cases.

As far as the

fight against fraud and corruption

is concerned, progress has been made

(see

also Political Criteria Chapter)

with the signature of the Council of Europe Civil

and Criminal Law Conventions on Corruption. Signature and ratification of these

Conventions was regarded as a short-term priority in the 1999 Accession Partnership. In

addition, the Economic Crime Department in the Central Criminal Police has been

Data of clear-up rate refers to the period between January and June

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designated as the contact body required by Article 7 of the Second Protocol of 19 June

1997 to the Convention of the European Communities Financial interests.

Regarding fight against

drugs

an important step has been taken with the ratification in

May 2000 of the 1988 UN Convention against Illicit Traffic in Narcotic Drugs and

Psychotropic Substances. In the field of administrative capacity, a special advisory

committee- with representatives from the Internal Affairs, Social Affairs and Justice

Ministries, the Security Police and Customs Boards, the Border Guard as well as the

State Prosecutor’s Office and the Central Criminal Police- has been established in order

to reinforce inter-ministerial coordination in the fight against drugs. In addition, a drugs

prevention unit has been created within the Customs Board.

As regards the fight against

money laundering,

Estonia has ratified the Council of

Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds

from Crime. Subsequently, the Criminal Code and the Code of Criminal Procedure have

been amended. Therefore, Estonia has met the relevant short-term priority of the 1999

Accession partnership.

As regards

judicial co-operation in civil and criminal matters,

progress has continued.

Estonia has signed the Luxembourg Convention on Custody of Children (1980), The

Hague Convention on the civil aspects of child abduction (1980), The Hague Convention

abolishing the requirement of legalisation for foreign public documents (1961) and the

European Convention on the international validity of criminal judgements (1970).

Overall assessment

Overall, Estonia has made progress in aligning its legislation in this area. Efforts made so

far need to be continued, in particular as regards asylum, the fight against organised

crime, including drug trafficking, the fight against corruption in the police and customs

administration, modernisation of the police and up-grading surveillance equipment and

infrastructures at the borders.

As regards

data protection,

current legislation is not yet fully in line with the

acquis.

The 1981 European Convention on Data Protection still has to be ratified.

With the abolition of the special visa regime for Russian nationals living in border areas,

progress has been made in further aligning Estonia’s

visa policy.

Estonia should continue

alignment of its visa practice, such as developing the Schengen-type visa sticker and

generalising the electronically supported system for issuing visas to all diplomatic

missions.

In the field of

border control,

as already highlighted in last year’s Report, border

management in Estonia is relatively efficient. Modernisation of equipment and

infrastructure and reinforcement of human resources and training of the border guard

need to be continued. Although a border agreement with Russia has been initialled, its

signature and ratification are still dependent upon Russia. As regards preparations for

Estonia’s participation in the Schengen Information System, the common border control

information system needs to be introduced.

In the area of

migration,

Estonia has made some progress by taking steps to address the

issue of family reunification. Although Estonia lies off international migration routes and

is not for the time being a major country of destination or transit, the capacity of the

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Migration Board to implement the

acquis

in this area should still be considerably

reinforced.

In relation to

asylum

policy, Estonia’s legal framework is not yet fully in compliance

with the

acquis.

Further legislative amendments and administrative adjustments need to

be adopted in order to accede to the Dublin Convention. Remaining issues include

exclusion clauses or the lack of safeguards in the accelerated procedure applied at the

border. Furthermore, provisions of state financed legal aid to asylum seekers have to be

adopted. In addition, asylum procedures need to be speeded up, training of border guards

to correctly distinguish between illegal immigrants and asylum seekers has to be

reinforced and the administrative and judicial capacity to deal with asylum cases has to

be enhanced.

In the field of

police co-operation and the co-operation in the fight against organised

crime,

efficiency of the police forces remain weak, in particular as regards the fight

against drugs and economic crime. Efforts to increase forensic capacity, in particular as

regards new technologies and investigation techniques, need to be continued. Estonia has

concluded bilateral agreements on legal assistance with Latvia, Lithuania, Russia,

Ukraine, Poland, and, on criminal matters, with the USA. Within the first four months of

2000, 102 legal aid requests were satisfied; including drug related proceedings. Estonia

has also started contacts to join Europol, but still does not have a liaison officer in this

organisation or in any other country.

As regards the fight against

fraud and corruption,

the importance of this problem is

relatively limited in Estonia. Estonia has signed the two conventions of the Council of

Europe in this area, and now efforts should be made to accelerate the process of their

ratification. Estonia has not yet signed the OECD Convention on Combating Bribery of

Foreign Public Officials in International Business Transactions. In addition, changes in

the legislation need to be made in order to introduce the criminal liability of legal persons

and officials of foreign countries and international organisations, including passive

corruption; corruption crimes in the private sector, the criminalisation of the obtaining of

non-material benefits as well as promises accepted by public officials in favour of a third

party, e.g. a political party. Estonian legislation does not yet cover the Second Protocol to

the Convention on the Protection of the European Communities’ Financial interests.

Some preliminary steps have been taken in order to prepare cooperation with OLAF.

In the area of

drugs

Estonia continues to implement the national drug strategy it adopted

in 1997. The Ministry of Social Affairs is the national drug information focal point. Co-

ordination between the bodies involved and strengthening of human resources, including

training, needs to be reinforced. In addition, a comprehensive national drug supply

reduction strategy needs to be adopted.

As far as

money laundering

is concerned, Estonia has made important progress in

implementing the

acquis.

Efforts should now concentrate on ensuring adequate

enforcement. The Financial Intelligence Unit within the Crime Department of the Police

Board is responsible for the prevention of money laundering. It is currently understaffed

if it is to carry out its tasks in an efficient manner. In addition, training of judges and

court staff dealing with financial crime should be reinforced.

As regards

customs cooperation,

Estonia has made some progress in its alignment with

the

acquis.

However, efforts in order to improve Estonia’s implementing capacity,

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particularly on the development of risk analyses and on the efficiency of the investigation

teams are still needed.

In the area of

judicial co-operation,

Estonia has signed nearly all the international

conventions concluded in other fora and included in the

acquis.

Procedures for their

ratification need to be accelerated. Furthermore, Estonia still needs to amend its Penal

Code to complete alignment with the 1997 Joint Action concerning action to combat

trafficking in human beings and sexual exploitation of children and the 1998 Joint Action

on making it a criminal offence to participate in a criminal organisation.

Chapter 25: Customs union

Since last year’s Regular Report Estonia has made some progress in the customs area, the

most important development being the introduction of customs duties for certain products.

Regarding the

EC customs code and its implementing provisions,

progress has been

limited. Amendments to the Customs Valuation Act entered into force in November

1999, in order to align the determination of customs value with GATT and Community

rules.

As regards

free zones

some progress has been made. In January 2000, the government

adopted the rules for customs procedures on free zones. Early this year, the government

decided to close the Võru free zone, although it was not operational yet, and to freeze the

establishment of new free zones. There are currently three free zones in Estonia, Muuga,

Sillamäe and Valga.

Regarding the

customs

acquis

outside the Customs Code,

an important step has been

taken with the entry into force on 1 January 2000 of the Customs Duties of Preferential

Regime Act, which introduces customs duties for a limited number of agricultural

products imported from third countries. In addition, implementing regulations to the

Customs Act on binding tariff information have been adopted.

As far as the administrative and operational capacity to implement the

acquis

concerned, some progress has been made with the introduction, in October 1999, of the

new electronic customs declaration system, ASYCUDA. The system will enable Estonia

to harmonise its customs’ data processing system with that of the EC. The Customs

Board is the national customs authority, under the responsibility of the Ministry of

Finance, in charge of ensuring the effective application of customs rules. Since last year's

Regular Report, the division of responsibilities between the central office of the Customs

Board and its regional units (Customs Houses) has been redefined, an internal audit unit

has been established and a code of ethics and conduct for customs officials has been

adopted. Training of customs officials has continued, and in 1999, around 70% of

customs officials received some kind of training. In 1999, the number of detected

customs offences was 4,261, around 43% more than in 1998. In 1999, smuggling

represented 37% of all customs offences as opposed to 21% in 1998. The total amount of

fines imposed has doubled since 1997 and 1998.

Joint customs control has been introduced at all the Estonian-Latvian international road

border-crossings.

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Overall assessment

Overall, Estonia has made limited progress in the customs area.

As regards the

EC Customs Code and its implementing provisions,

Estonia’s customs

legislation is still not in compliance with the Community Customs Code requirements.

Unfortunately, the adoption of the Customs Code is considerably delayed. Speeding-up

the adoption of the Customs Code was a short-term priority in the 1999 Accession

Partnership.

As regards the

customs

acquis

outside the Customs Code,

progress has also been

limited. A timetable for the progressive and effective implementation of tariffs and tariff-

related measures needs to be adopted as soon as possible. This issue was also indicated as

a short-term priority in the 1999 Accession Partnership. Introduction of customs duties

needs to be completed since the effective application of customs duties is a precondition

of effective adoption of the

acquis

in this area. Particular efforts should be made in

aligning customs procedures with economic impact as well as in adopting and

implementing legislation on free zones that is compatible with the

acquis.

Regarding the

pan-European system of origin, Estonia has agreed to the amendments to the system,

which will enter into force in January 2001. For the system to be complete, it remains for

Estonia to sign and enforce the necessary free trade agreements with Romania and

Bulgaria.

As regards the administrative and operational capacity to implement the

acquis,

substantial efforts still need to be made. So far, and despite the limited number of tariffs,

the tariff revenue for the first four months since the introduction of tariffs has been 12.9%

of the total estimate for the year . These results raise doubts as regards the capacity of the

customs administration to collect and estimate revenue related to tariffs and to manage

these tariffs. In addition, Estonia needs to strengthen the enforcement capacity of the

Customs Board as regards the fight against pirated and counterfeited goods and post-

clearance controls. The fight against fraud and corruption must remain a priority and

customs laboratories have to be strengthened. Furthermore, Estonia should improve co-

ordination between the customs administration and the other Estonian administrations

active in the area of enforcement and revenue collection.

In the field of IT, Estonia needs to continue efforts to install and make operational as soon

as possible all of the relevant customs-related IT systems and the applications necessary for

smooth implementation of the

acquis.

It should also develop a comprehensive Customs

Computer Information Strategy.

Chapter 26: External relations

Since the last Regular Report, Estonia has made progress in continuing to align its trade

policy with that of the EU.

As regards the

Common Commercial Policy,

Estonia has made some progress in

aligning its tariffs with those of the EC by introducing tariffs, as of 1 January 2000, on

imports from third countries for several agricultural products. These tariffs currently

average 3.2 % (EC 5.3 %) on all products, 14.9 % (EC 9.4 %) on agricultural products,

3.1 % (EC 12.4 %) on fishery products and 0 % (EC 4.2 %) on industrial products.

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As regards export control of strategic goods, implementing regulations concerning the

statutes of the Export Control Commission, the establishment of exceptions to import

requirements, the issuing of export or transit licenses and the procedures for export,

import and transit of strategic goods have been adopted. The Estonian List of Strategic

Goods is based on that of the EC.

Estonia became member of the World Trade Organisation (WTO) in November 1999. In

order to bring Estonia's legislation into conformity with the WTO rules, several related

pieces of legislation have been adopted in different fields ranging from

telecommunications to protection of intellectual property rights. Estonia started

negotiations to join the Government Procurement Agreement in July 2000.

As regards

bilateral agreements with third countries,

since last year’s Regular Report,

two MFN agreements with Kazakhstan and Vietnam entered into force, in September

1999 and May 2000 respectively. Furthermore, the Free Trade Agreement with Poland

was ratified in March 2000. Economic co-operation agreements with Azerbaijan and

Georgia have been signed and are under ratification. In addition, a double taxation

Avoidance Agreement with the US entered into force in December 2000.

In the field of

development policy and humanitarian aid,

Estonia has continued

progress in the establishment of a development policy. In 2000, the Estonian

humanitarian and development budget amounted to about

€0.47

million. Humanitarian

projects carried out in 1999 were particularly targeted at the Balkan region.

The Ministry of Foreign Affairs is responsible for the administration of external

economic relations and development and humanitarian aid in Estonia.

Overall assessment

With the exception of alignment with the EC external tariff, good overall progress has

been made in alignment with the Community

acquis.

Estonia continues to have a very

liberal trade regime, with very few duties or quantitative restrictions being applied.

The EU and Estonia have established a framework for co-operation regarding WTO

issues both at ministerial and at departmental level. Estonia has been supportive of EU

policies and positions within the WTO framework. As regards the new round, Estonia

concurs with the EU on the need to launch a comprehensive trade round as soon as

possible and shares the view that the results of work under the built-in-agenda would be

less substantial in its absence.

Estonia has committed itself to join, prior to accession, the two WTO plurilateral

agreements on Government Procurement and Civil Aircraft. Estonia currently holds

observer status in the Government Procurement WTO Committee and it is a signatory to

the WTO Agreement on Trade in Information technology Products (ITA). As regards the

WTO Agreement on Trade in Textiles and Clothing (ATC), Estonia needs to align its

integration programmes for stages 1, 2 and 3 on those of the EC.

Further co-ordination is necessary in order to consolidate the adjustment of the Estonian

list of commitments in GATS with the EC commitments and EC MFN exemptions.

As regards

bilateral trade agreements,

Estonia has so far, in addition to those

mentioned above, concluded free trade agreements with the Czech Republic, the Slovak

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Republic, Hungary, Slovenia, Latvia and Lithuania, the EFTA countries, Ukraine and

Turkey. It is currently negotiating similar agreements with Bulgaria and Romania. In this

area, further progress is still necessary in aligning with the EC’s international trade

obligations. Estonia should continue to keep the EU fully informed about existing trade

agreements or negotiations aimed at the conclusion of any new trade agreements with a

third country.

Estonia has very recently started to implement a genuine development policy. Up to now,

progress has been made as regards the establishment of a development aid strategy, an

administrative structure responsible and a budget allocation.

Chapter 27: Common foreign and security policy

Since the last Regular Report, Estonia has continued to orient its foreign and security

policy towards that of the Union.

The regular

political dialogue

established by the Europe Agreement is proceeding

smoothly. Estonia continues to participate actively in the framework of the Common

Foreign and Security Policy (CFSP), including the meetings at the level of Political

Directors, European Correspondents and Working Groups.

Estonia has shown a keen interest in the development of the European Security and

Defence Policy as part of the CFSP and has actively participated in the exchanges in this

context with the EU, in EU + 15 format (ie non-EU European NATO members and

candidates for accession to the EU).

As regards

alignment with EU statements and declarations,

Estonia has regularly

aligned its positions with those of the Union and, when requested to do so, has associated

itself with the Union’s joint actions and common positions. Since last year’s Regular

Report, as of 30 June, Estonia has associated itself with all EU common positions.

Estonia signed and ratified in March 2000 the second amended Protocol to the Geneva

Convention on Certain Conventional Weapons. In addition, Estonia has contributed to

peace support operations in Bosnia-Herzegovina (SFOR) and Kosovo (KFOR). Since last

year’s Regular Report, new Estonian contingents have been deployed in the KFOR (10

troops) and SFOR (73 troops) missions. The Parliament decided to prolong this mission

for another year and to increase the personnel up to a maximum of 30 persons.

Estonia has a separate CFSP unit in the Political Department of the Ministry of Foreign

Affairs and a full-time post of European correspondent. Since December 1999 Estonia

has participated in the Associated Correspondents’ Network system.

Overall assessment

Overall, Estonia has achieved a good level of alignment with the

acquis

in the CFSP. As

the

acquis

in the field of foreign policy and security develops further so Estonia should

maintain the orientation of its foreign policy in line with that of the Union.

Estonia’s relations with its neighbours remain good. Estonia strives to contribute to

regional stability through a policy of good-neighbourly relations and regional cooperation

in the Baltic Sea Region,

inter alia

as an active member of the Council of the Baltic Sea

States (CBSS). Further development of good relations with Russia remains a key element

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of Estonia’s foreign policy. The border agreement with Russia has been initialled, but

signature and ratification is awaiting Russia’s decision.

Concerning the administrative capacity to implement the provisions relating to the CFSP,

Estonia has a well-staffed and functioning Ministry of Foreign Affairs. It has the capacity

to effectively participate in the Associated Correspondent’s Network both in terms of

staffing allocations and in terms of the appropriate information systems.

Chapter 28: Financial control

Since last year's Regular Report, Estonia has made considerable progress in introducing

legislation and setting up the administrative structures needed in the field of financial

control. As far as

internal financial control

is concerned, amendments to the

Government of the Republic Act were adopted in June 2000. They define the internal

control and internal audit in the government sector, and give the Ministry of Finance the

formal authority to co-ordinate the internal control and audit activities in the public

sector. The Ministry of Finance has the overall responsibility for the establishment of an

internal audit system encompassing the whole government hierarchy and the creation of

the legal environment necessary for the operation of such a system, for co-ordination of

the system's activities and its proper functioning. In addition, a regulation was adopted in

October 2000 establishing the general rules of internal audit for government and state

agencies as well as the requirements set to internal auditors. Completing the legislative

framework for internal control and setting up a central organisation within the

government to harmonise internal audit and control functions were short term priorities

identified in the 1999 Accession Partnership.

A new statute for the Ministry, adopted in December, provides for these responsibilities

to be exercised by the Financial Control Department, which currently employs 15

officials. Following this decision, a reorganisation of the department has been

undertaken, including the appointment of a Deputy Secretary-General of Government

Control with overall responsibility for the area. A Best Practice Manual for the internal

auditors of the public sector as well as amendments to the State Public Servants

Officials’ Titles and Salary Scale Act defining the status of internal auditors have been

adopted.

As regards

external financial control,

a Strategic Development Plan for 2000-2003

aiming at further developing the capacity and effectiveness of the State Audit Office has

been adopted. In accordance with the objectives set out in this plan, the reorganisation of

the State Audit Office has been launched.

The State Audit Office reports directly to the Parliament. The Auditor General of Estonia

is appointed by Parliament for a period of 5 years. The Office currently employs 60

auditors. A positive development that needs to be reported is an improvement in the co-

operation between the Internal Audit Unit at the Ministry of Finance and the State Audit

Office.

No major developments have taken place as regards control measures related to own

resources and structural action expenditure.

In relation to the

protection of the EC financial interests,

progress has been limited.

The Economic Crime Department in the Central Criminal Police has been designated as

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the contact body required by Article 7 of the Second Protocol of 19 June 1997 to the

Convention of the European Communities’ Financial interests.

Overall assessment

Overall, Estonia has made progress in aligning its legislation and establishing the

necessary administrative structures in the field of financial control.

Although progress has been made in introducing the necessary legislation to meet

internationally accepted standards in the field of public

internal financial control,

the

latter remains weak and efforts need to be continued. Responsibilities, roles and functions

on internal financial control are not always explicitly set out in the existing legislation.

Ex-ante control functions need to be developed methodologically. Secondary legislation

introducing the functional independence of the internal auditors needs to be adopted.

However, not all ministries and key governmental agencies have internal audit units.

Furthermore, there is still scope to improve financial management as well as control

mechanisms and related manuals. Finally, audit trails for pre-accession funds need to be

developed. These issues are identified as short term priorities in the 1999 Accession

Partnership.

As regards

external financial control,

currently the Parliament has no formal

mechanisms for reacting to the State Audit Office reports. Therefore, the practical impact

of these reports is considerably diminished. Steps need to be taken to reinforce

parliamentary control in this area. Furthermore, co-operation between the State Audit

Office, local government internal audit units and other audit bodies needs to be

formalised. Moreover, progress is needed to increase the power of the State Audit Office

to audit the use of public funds, assets and resources directly with all end users.

As far as

control measures related to own resources

are concerned, the capacity of the

customs administration to collect and enforce customs duties is low, given the limited

experience of Estonia in this area (see

chapter 25 - Customs Union).

Efforts in this area

need to be particularly increased. As regards

structural action expenditure

Estonia needs

to complete the legal framework to receive and manage EC funds upon accession.

As regards the

protection of the EC financial interests,

currently there are no common

procedures for the detection of irregularities and the recovery of assistance. Estonian

legislation does not yet cover the Second Protocol of the Convention on the Protection of

the European Communities’ Financial interests. In order to comply with this convention,

fraud against the Community budget should be specifically criminalised. Currently

protection of financial interests of the EC is arranged via bilateral agreements regulating

the EC pre-accession funds (such as PHARE, ISPA and SAPARD) in Estonia.

Chapter 29: Financial and budgetary provisions

Estonia has made some progress in order to align its financial and budgetary provisions

with EC standards.

As regards

the national budget and EC co-financed measures,

the new State Budget

Act that entered into force in January 2000 intends to apply the main

budgetary

requirements. The new law also covers the rules and procedures regulating the transfer of

budget revenues to the economic stabilisation reserve. In May 2000, the Government

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approved a long-term budgetary strategy, which will constitute the basis for the

preparation of the state budget until 2004. It includes economic forecasts for the period

covered , the budgetary targets and loan burden, expenditure and investments.

As regards

own resources and administrative infrastructure,

progress since last year's

Regular Report has been limited. The State Budget Department within the Ministry of

Finance has been restructured in order to reinforce the state budget, tax policy and

economic analysis department.

Overall assessment

Overall, Estonia has made some progress in this area, although further efforts are

required as regards the national budget and management of own resources.

As regards the

national budget,

the implementation of the new budget legislation should

allow Estonia to meet the main EC standards in this field. Nevertheless, improvements

need to be made in accounting and reporting. While the expenditure management system

is being developed, the expertise for the appraisal, the monitoring and the evaluation of

the expenditure programmes should be increased in the Ministry of Finance as well as in

the spending departments. Progress is being made in setting up procedures for managing

and controlling the use of EC pre-accession funds and establishing the National Fund.

As regards

own resources,

Estonia needs to develop a timetable for the introduction of

customs tariffs and for strengthening the customs administration in order to ensure the

necessary administrative capacity from the day of accession. In addition, legal provisions

with regard to the levying and collection of sugar levies need to be adopted. Estonia’s

budgetary statistics are already compiled in accordance with ESA 95 norms

3.2.

Translation of the

acquis

into the national language

Applicant countries are to translate the various legal texts constituting the

acquis

into

their national languages by the time of their accession. The

acquis,

consisting of primary

and secondary binding legislation, represents at present a considerable volume of acts,

roughly estimated at 60,000-70,000 pages of the Official Journal. To help the candidate

countries in this process, assistance is being provided under the Phare programme. With

the help of TAIEX, a centralised Translation Co-ordination Unit has been created in each

of the ten candidate countries of Central Europe.

The translation of the

acquis communautaire

is managed and co-ordinated by the

Estonian Legal Translation Centre (ELTC), a state agency administered by the State

Chancellery. The ELTC is responsible,

inter alia,

for the translation of the EC

acquis

into

Estonian and the Estonian legislation into English, and for the creation and management

of the full-text database of legal translations. These are made available to the public

through the Internet. The ELTC has two departments, the Estonian and English

Translation Units. Translation priorities are established in co-operation with the line

ministries and approved by the Council of the Senior Civil Servants. The ELTC has 86

employees, 72 of whom are translators, terminologists and linguistic and legal revisers.

The Centre’s terminologists work in close co-operation with subject field specialists in

the line ministries and other institutions. All translations produced by the Centre pass

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through in-house linguistic and legal revision and, where possible, receive a content edit

by a subject area specialist in the ministry concerned.

So far, the ELTC has translated and revised all primary legislation of the

acquis

communautaire.

As of 31 May 2000, the ELTC and ministries had translated 18530 OJ

pages of secondary legislation, of which 11385 OJ pages had been revised. Considerable

further efforts are required in this area.

3.3.

General evaluation

Overall, Estonia has continued alignment of legislation at a good pace in most areas of

the

acquis.

Although some steps have been taken in order to set up administrative

structures for most chapters, Estonia still needs to make considerable efforts in this area.

Concerning the

internal market,

considerable progress has been made as regards the

adoption of framework legislation and the setting up of administrative structures related

to standardisation and conformity assessment. Efforts need to be pursued to introduce a

market surveillance system. Considerable progress has also been made in legislative

alignment in

telecommunications

and the

audiovisual

sector. Overall, Estonia’s

legislation is already broadly in line with the

acquis

in the fields of

free movement of

capital, free provision of financial services

and

company law.

However, efforts to

strengthen the administrative capacity in these areas need to be pursued. Special attention

should be paid to adequate enforcement of industrial and intellectual property rights,

especially the fight against pirated and counterfeited goods. Although alignment of

legislation has continued, further efforts need to be made as regards state aid control and

mutual recognition of professional qualifications.

As far as

taxation

is concerned, some progress has been made in aligning VAT and excise

duty legislation. Considerable efforts still need to be made in order to reinforce the tax

administration. In this context, the withdrawal of the envisaged timetable for the gradual

alignment of excise duties on fuel constitutes a step backwards in working towards this

goal. In the area of

customs,

progress to complete the legal and administrative framework

has been limited. Estonia urgently needs to adopt a timetable for the progressive and

effective implementation of tariffs and tariff related measures. Substantial efforts still

need to be made to enhance the administrative and operational capacity to implement the

acquis.

In the area of

transport

Estonia has continued progress in completing the legislative

framework. Progress made this year in strengthening the implementation of maritime

safety standards needs to be continued. In the field of

energy,

progress in alignment of the

legislation has been limited.

Concerning

agriculture,

substantial progress has been made as regards the introduction of

a legal framework and in setting up administrative structures for the future

implementation of the Common Agricultural Policy. However, efforts need to be

continued to introduce quality and marketing standards for the different products and

market intervention systems in line with the

acquis.

Alignment in the

veterinary and

phytosanitary

sectors has continued. Efforts in these fields need to be speeded up. In the

fisheries

sector, Estonia has made some progress in aligning its legislation on fisheries by

introducing the legal framework to develop a market policy, implement measures related

to resources management, inspection and control and structural aid. Considerable efforts

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still need to be made, in particular to strengthen administrative structures and to adopt

and implement the existing legislation.

Although progress has been uneven, Estonia has taken steps in most

social policy

areas.

Efforts should continue, focusing on the implementation and enforcement of the current

framework legislation as well as on strengthening enforcement bodies.

In the area of

regional policy,

progress has been limited. Although steps have been taken

to set up the necessary instruments in this area, a number of difficulties still remain, and

efforts to complete the legal and administrative framework to apply the EC regional and

cohesion policy need to be continued. Furthermore, Estonia has made considerable

progress in introducing legislation and setting up the necessary administrative structures

in the field of

financial control.

Still, internal financial control remains weak and these

efforts need to be continue.

Estonia has speeded up the implementation of the existing framework legislation in most

environment

areas. Furthermore, progress needs to be continued in building the necessary

capacity to implement and enforce this legislation, it particular at the local level. Estonia

still needs to further develop the plans for financing environmental investments.

Since last year’s regular report, Estonia has made further progress in the alignment of

legislation in the field of

justice and home affairs.

Efforts need to be continued, in

particular as regards asylum, the fight against organised crime, including drug trafficking,

the fight against corruption in the police and customs administration, modernisation of

the police and upgrading surveillance equipment and infrastructures at the borders.

As regards

administrative capacity,

Estonia has taken steps to set up the necessary

structures in most areas of the

acquis.

However, substantial efforts in this area are still

needed to ensure that the existing structures are fully capable of enforcing and

implementing the

acquis

correctly. In this context, ensuring that the relevant institutions

have sufficient powers to undertake their tasks, that coordination between competent

bodies is efficient and strengthening the training of staff should be the highest priorities.

Estonia has continued to address, although with some differences, aspects of all sectors

indicated as short term priorities of the 1999 Accession Partnership. In particular, Estonia

has met the priorities related to telecommunications, audiovisual, standardisation and

conformity assessment, veterinary and phytosanitary sectors, transport, occupational

health and safety, employment and employment services. Priorities related to public

procurement, labour law, penal law, customs and market surveillance have not been met.

Estonia has already started to address some of the medium-term Accession Partnership

priorities.

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C. Conclusion