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Europaudvalget 2000-01
EUU Alm.del Bilag 241
Offentligt

FROM THE COMMISSION

POLAND’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 Poland ................................... 7

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

Accession Partnership / National Programme for the Adoption of the Acquis........... 9

Community aid ............................................................................................................ 9

Twinning ................................................................................................................... 12

Negotiations / screening ............................................................................................ 13

B. Criteria for membership ........................................................14

1. Political criteria.................................................................................... 14

Introduction ............................................................................................................... 14

Recent Developments................................................................................................ 14

1.1. Democracy and the Rule of Law ................................................................. 15

The Parliament .......................................................................................................... 15

The Executive............................................................................................................ 15

The Judiciary ............................................................................................................. 17

Anti-Corruption measures ......................................................................................... 18

1.2. Human Rights and the Protection of Minorities ........................................ 19

Civil and Political Rights .......................................................................................... 19

Economic social and cultural rights .......................................................................... 20

Minority rights and protection of minorities ............................................................. 21

1.3. General evaluation ........................................................................................ 21

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 ....................................................................................... 30

3. Ability to assume the obligations of membership............................. 32

Introduction ............................................................................................................... 32

3.1. The chapters of the

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

Chapter 1: Free movement of goods ............................................................. 33

Overall assessment .................................................................................................... 35

Chapter 2: Free movement of persons .......................................................... 36

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

Chapter 3: Freedom to provide services........................................................ 37

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

Chapter 4: Free movement of capital............................................................ 39

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

Chapter 5: Company law ............................................................................... 40

Overall assessment .................................................................................................... 41

Chapter 6: Competition policy....................................................................... 41

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

Chapter 7: Agriculture................................................................................... 43

Overall assessment .................................................................................................... 46

Chapter 8: Fisheries....................................................................................... 48

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

Chapter 9: Transport policy........................................................................... 49

Overall assessment .................................................................................................... 50

Chapter 10: Taxation ..................................................................................... 51

Overall assessment .................................................................................................... 52

Chapter 11: Economic and monetary union................................................. 53

Overall assessment .................................................................................................... 53

Chapter 12: Statistics ..................................................................................... 54

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

Chapter 13: Social policy and employment................................................... 55

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

Chapter 14: Energy........................................................................................ 57

Overall assessment .................................................................................................... 59

Chapter 15: Industrial policy......................................................................... 60

Overall assessment .................................................................................................... 61

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

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

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

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

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

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

Chapter 19: Telecommunications and information technologies................ 64

Overall assessment .................................................................................................... 65

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

Overall Assessment ................................................................................................... 66

Chapter 21: Regional policy and co-ordination of structural instruments . 66

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

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

Overall assessment .................................................................................................... 70

Chapter 23: Consumers and health protection............................................. 70

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

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Chapter 24: Co-operation in the field of justice and home affairs .............. 72

Overall assessment .................................................................................................... 74

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

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

Chapter 26: External relations ...................................................................... 79

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

Chapter 27: Common foreign and security policy........................................ 81

Overall assessment .................................................................................................... 81

Chapter 28: Financial control....................................................................... 82

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

Chapter 29: Financial and budgetary provisions ......................................... 83

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

3.2. Translation of the

acquis

into the national language................................. 84

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

C. Conclusion ...............................................................................87

D. Accession Partnership and National Programme for the

Adoption of the

Acquis:

Global assessment .........................90

1. Accession Partnership ......................................................................... 90

Short-term priorities .................................................................................................. 90

Medium-term priorities ............................................................................................. 92

2. National Programme for the Adoption of the Acquis ...................... 93

Annexes..........................................................................................95

Human Rights Conventions ratified by the Candidate Countries,

September 2000....................................................................................... 96

Statistical data ................................................................................................ 97

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A. Introduction

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 Poland 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 Poland’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 Poland’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 Poland in translating the

acquis

into its official

language.

In line with previous regular reports, the present report:

describes the relations between Poland 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 Poland’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 Poland’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. This part gives special attention to nuclear safety, as

underlined by the Cologne and Helsinki European Councils. 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 Poland in preparing for accession.

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

acquis

criteria (including Poland’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 Poland’s economic

performance.

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

Recent developments under the Association Agreement (including bilateral

trade)

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

functioning of the various joint institutions.

The Association Council met in December 1999 under Polish presidency and again in

October 2000 in Brussels under EU presidency. An Association Committee meeting was

held in Brussels in June 2000. The system of sub-committees continues to function as a

forum for technical discussions.

The Joint Parliamentary Committee comprising representatives of the Polish and

European Parliament met in November 1999 in Brussels and June 2000 in Warsaw.

Bilateral trade continues to grow. In 1999 EC exports to Poland stood at

€28.9

billion,

with EC imports from Poland amounting to

€17.5

billion. The EC trade surplus of

€11.4

billion shows a small decrease on the 1998 surplus. As has been the trend for the past

decade, bilateral trade with Poland continues to grow faster than the EC’s trade with the

rest of the world. Poland’s share in total EC exports fell slightly to 3.81% while Poland’s

share in total EC imports remained constant at 2.27%. As a result, 1999 EC imports

continued the trend set in 1997 and 1998 and grew faster than EC exports. In

consequence the trade gap when expressed as the ratio of exports to imports further

decreased in 1999. Concerning trade by product, machinery and electrical goods

represent the largest sector for both EC exports to and imports from Poland. On the

import side, machinery and electrical goods (19% growth), transport equipment (29%

growth), and other manufactures (14% growth) all grew strongly. Textile imports fell in

absolute and relative terms.

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

associated countries with a view to new reciprocal concessions in the field of agriculture.

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 Poland. The

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

of the CAP.

The negotiations with Poland were concluded between negotiators in September 2000.

As a consequence of the new agreement approximately three quarters of the bilateral

trade in agricultural products should benefit from preferences. Negotiations concerning

processed agricultural products are ongoing.

For the European Parliament the

rapporteur

is Jas Gawronski.

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

associated countries with a view to new reciprocal concessions in the field of fish and

fisheries products. Technical discussions and the first round of negotiations took place

between the EC and Polish sides in July 2000.

A range of difficulties in the implementation of the Europe Agreement by Poland remain,

from complex long standing issues such as steel restructuring and Special Economic

Zones to product specific trade issues. However, some issues have been resolved through

the functioning of the various joint institutions such as the elimination of export

restrictions on non-ferrous scrap in 2000 and moves towards the full implementation of

the Agreement on the Protocol on European Conformity Assessment (PECAA).

Although the Europe Agreement provides for entry into its second stage since February

1999, a number of legal requirements have yet to be fulfilled to permit this transition.

These were covered in the 1999 regular report. The adoption of the Law on economic

activity has removed some of the obstacles and a new horizontal law

will deal with most,

if not all of the outstanding obligations. Work continues so as to arrive at a speedy

resolution of this issue.

The last regular report noted a tendency towards a reversal of the close co-operation on

trade matters identified in the Opinion. Since then the situation has been rather mixed.

In some areas a close working relationship has led to good results; for example the

replacement of the previous system of licences for the import of cars in knocked down kit

form with a tariff based system, in others, considerable differences remain. One theme

which has reoccurred throughout the year has been the difficulty in ensuring that

solutions to specific or general problems have been fully implemented. At a general level

there have been a number of “teething problems” with the implementation of the new

customs code. More specifically earlier commitments with regards the harmonisation of

VAT levels for fruit and the opening of quotas on yoghurts have not been met.

Since the 1999 report there has been marked progress concerning the certification of

industrial products. Poland has adapted its list of products requiring mandatory

certification in line with its commitments under the PECAA. This should resolve a

number of short term market access issues. In doing so Poland has almost fulfilled its

obligations under the PECAA: the issue of the automatic issuance of certificates for

products subject to producer certification in the EC remains outstanding. The complete

fulfilment of these obligations would do much to demonstrate Poland’s desire to prepare

for the internal market both economically and politically.

Concerns have been expressed that the Polish language act of October 1999 may impede

economic activity because it covers issues such as the language of contracts in a manner

which other language laws, for example in France or Slovakia, do not. In order to avoid

any impediment, which could constitute a potential breach of the Europe Agreement, the

law will need to be implemented in a flexible and sympathetic manner.

The Regulation imposing provisional anti-dumping duties on imports of ammonium

nitrate originating

inter alia

in Poland was published on 26 July 2000. A review of the

measures imposed in December 1994 on imports of urea ammonium nitrate was initiated

See Political criteria section for an explanation of the horizontal laws.

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in December 1999. It comprises an expiry review under Article 11.2 of the Basic

regulation and an interim review under Article 11.3, limited to the form of measures. A

verification visit to Poland took place in July 2000. With regard to wooden pallets, the

regulation imposing definitive anti-dumping duties published in 1997 was amended in

July 2000, following a so-called “newcomer” review of the anti-dumping measures.

Accession Partnership / National Programme for the Adoption of the Acquis

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

reviewed in chapter D of this Report.

In April 2000 Poland submitted a revised National Programme for the Adoption of the

Acquis

(NPAA) to the Commission, in which it outlines its strategy for accession

including how to achieve the priorities contained in the Accession Partnerships (Chapter

D below).

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 Poland will amount annually to

€398

million from Phare,

€168.6

million from SAPARD, and between

€312

and 385 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

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.

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During the period 1990 – 1999, the Phare programme allocated

€2050

million to Poland.

The

2000 Phare Programme

for Poland consists of a national allocation of

€428

million, concentrated on the following priorities:

•

the reinforcement of institutional and administrative capacity in the fields of financial

control, public finance, the central bank, the cadastre, tax administration,

parliamentary procedures, fisheries, transport, social dialogue, vocational training,

SME and export development, regional policy, and statistics (€65 million)

•

internal market (customs, certification and standards, competition and consumer

protection, intellectual and industrial property rights, and telecommunications) (€21

million)

•

the strengthening of co-operation in the field of Justice and Home Affairs (border

management, fight against organised crime, visa and migration policies, fight against

drugs, border infrastructure) (€89 million)

•

institution building in agriculture (for rural development, agri-environment and

afforestation, early retirement, veterinary and phytosanitary administration, food

safety, and preparation for CAP instruments and common market organisations) (€42

million)

•

institution building in environment (for environmental impact assessments and

pollution prevention and control at regional level) and air quality monitoring systems

(€7 million)

•

economic and social cohesion (human resources development, SME development and

business related infrastructure in five target regions of the country)(€130 million)

•

Participation of Poland in Community programmes (€31 million).

•

Participation in ACCESS, a programme to promote NGOs in Poland (€6 million)

An additional

€55

million has been allocated for a cross-border co-operation (CBC)

programme with Germany, the Czech Republic, Slovakia, and for a special action within

the Baltic Sea region.

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

programmes, such as TAIEX and the Small and Medium-sized Enterprises Facility.

Furthermore, Poland participates in the following Community programmes: Fifth

Framework programme on Research and Technological Development, Leonardo,

Socrates, Youth for Europe, SAVE II, and SME. Poland has expressed an interest in

participating in the Community’s CULTURE 2000 programme. Following the opening

of negotiations regarding Poland’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, Poland will become a member of the Agency.

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

equipment and financial resources has taken place in a number of important fields such as

industrial restructuring and privatisation, SME development, trade and investment

promotion, energy, land registration, veterinary and phytosanitary administration,

environmental investments and institution building, etc. Phare support to transport,

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environment, agriculture and SME development has succeeded in developing sector

strategies and initiating essential institutional and financial mechanisms servicing

enterprises in these sectors.

In Poland, Phare has played a particularly important role in areas including:

•

the transport sector, selected sections of construction and renovation of the A4

Motorway project Wroclaw-Katowice-Krakow (126 km) were financed by Phare

(€105 million) together with the EIB (€375 million).

privatisation, where preparatory work, the vouchers for the mass privatisation

programme and bad debt work-outs prior to the privatisation of commercial banks,

were funded by Phare (€20 million) together with the EBRD.

a regional development programme, where SME development was funded by Phare

(€50 million) which co-financed nearly 200 municipal SME infrastructure projects

and co-funded over 1,000 SME investment projects through a grant scheme along

with commercial banks. This created over

€150

million of public and private

investment and generated more than 11,000 jobs in the regions concerned.

a flood damage reconstruction programme funded by Phare (€65 million) in 1997,

which allowed the co-funding of over 500 small infrastructure projects designed to

renovate, reconstruct or improve public infrastructure (schools, medical centres, local

roads, bridges, etc) in the flooded areas.

institution building and twinning in the veterinary administration, regional policy

administration, and the judicial sector were funded by Phare (€10 million) to reform

the sectors concerned and bring these up to the standards in the EU.

•

A reform of the

Phare management system

took place in 1998 and 1999 to improve the

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

Review Communication in 2000 continues to refine these basic management structures

so as to further prepare for 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’s 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’s projects in

institution building, investment in compliance with the

acquis

and economic and social

cohesion.

As regards

SAPARD,

the Polish Rural Development Plan received a favourable opinion

in the STAR Committee (EC Management Committee on agricultural structures and rural

development) in September 2000. The plan was formally approved by the Commission

in October 2000.

The programme is based on two major priorities (improvement of the market efficiency

of the agri-food sector and improvement of conditions for economic activities and job

creation.).

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The average annual outlays would amount to

€431

million during the period 2000-2006,

of which

€168.6

(in 1999 prices) million from the SAPARD programme.

The Agency for Restructuring and Modernisation of Agriculture (ARMA), has been

designated by the Polish Government as the SAPARD Agency and preparations for its

accreditation are underway.

As concerns the

ISPA

programme, the Polish Government has elaborated strategy papers

for transport and environment and the priorities for ISPA support expressed in these

documents have been integrated in the preliminary National Development Plan of the

Polish Government of December 1999. The Commission and the Polish authorities have

together established a shortlist of priority projects for ISPA funding in the transport and

environment sectors over the period 2000-2006. For transport, these concern the

construction and renovation of motorways, national roads and railways on the Trans-

European transport network according to European standards. In the case of the

environment, the main ISPA priorities for Poland are related to drinking water and waste

water, and solid waste treatment for the major cities of Poland. The financial memoranda

for three ISPA projects were signed by the Commission in September 2000 (for an

amount of

€141

million) as part of a programme of transport (€177 million) and

environment (€177 million) projects for the year 2000.

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 overall financial management and a number of Implementing Agencies responsible for

the technical implementation, subject to ex-ante endorsement by the Commission. 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.

In the case of ISPA a first step was taken to strengthen administrative capacity to manage

the funds with the creation, in 1999 in the Ministry of Transport and Maritime Economy,

of a division responsible for the management of ISPA funds. Upon Poland’s accession to

the EU this division will be transformed into a body responsible for monitoring and co-

ordination of implementation of projects in the area of Trans-European Networks.

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 1998 and involving

all candidate countries and almost all Member States are operational. Under Phare 1999 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.

In Poland, twinning under the 1998 National Phare programme came into effect in the

course of 1999 with the first long term Member States’ experts having arrived in Poland

in the middle of 1999. Currently eight different projects are on-going with another 17

twinning projects under Phare 1999 to start in the course of the year 2000. New areas

covered are

inter alia,

financial control and tax customs, civil service development, and

road transport. For Phare 2000, there will be 32 twinning projects with Poland including

twinning between regional administrations in order to prepare Poland for regional policy

and the management of future structural funds. Statistics show that a considerable range

of both Member States involved and policy sectors covered in Poland. Nearly all

Member States are or will be engaged in twinning: allowing Poland to benefit from the

variety of administrative models and cultures in the European Union.

Negotiations / screening

The analytical examination (screening) of the

acquis

started in April 1998 and was

concluded in the autumn of 1999. An update of the screening exercise was commenced

in February 2000 to take into account the new

acquis

which had been adopted since

March 1998.

Of the 29 chapters now opened with Poland during the course of four negotiating rounds

since March 1998, 11 have so far been provisionally put aside, which means that these

chapters do not, at this stage, require further negotiation. These are: Economic and

Monetary Union, Statistics, Industrial policy, Small and Medium-sized Undertakings,

Science and Research, Education, Training and Youth, Telecommunications and

Information Technologies, Consumers and Health Protection, External Relations,

Common Foreign and Security Policy, Financial Control. 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 the 1999 regular report on Poland’s progress towards accession, the Commission

concluded succinctly that:

“Poland fulfils the Copenhagen political criteria. Further efforts are necessary to increase

the efficiency of the judiciary. Attention should be paid to the fight against corruption.”

The section below aims to provide an assessment of developments in Poland 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 Poland’s ability to

implement the

acquis,

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

information on the development of Poland’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

The coalition government elected in September 1997 formally came to an end on 6

June

2000 after having become the longest serving post-communist government. A minority

administration is currently in office.

Presidential elections held on 8

October 2000 saw the re-election of the incumbent

president.

Throughout the changes Poland’s political institutions have continued to function

properly in conditions of institutional stability. The 1997 Constitution has proved to be a

stabilising factor since its introduction.

The government continues to support EU membership as a top political priority and a

broad consensus on this issue exists across the main political parties.

This commitment to EU membership has in recent months manifested itself in a renewed

drive to adopt the necessary legislation to harmonise Polish law with the

acquis.

First

manifestations of this renewed vigour were seen in the Sejm debate on European

integration which took place in February 2000. There has subsequently been an increase

in the amount of draft legislation prepared by the government and submitted to the

Parliament.

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Efforts have also been directed at speeding up the adoption of legislation within the

parliament. Within the parliament new Committees on European Law have been created

on a cross party basis in the Sejm and Senate to oversee the adoption of EU related

legislation and a new approach designed to speed up this process has been adopted. This

approach is based on the concept of horizontal European legislation. The horizontal laws

will consist of bundles of legislation, or amendments to legislation, necessary to achieve

harmonisation with the

acquis.

The legislation grouped together in this way need not

necessarily be related to each other but must be directly necessary for harmonisation with

the

acquis.

This is a new process and it remains to be seen how effective it is in practice, especially

the impact on legal transparency of grouping disparate fragments of legislation together

in a single act. However, it is a clear statement of the desire of Government and

parliament to speed up the process of the adoption of the

acquis.

1.1.

Democracy and the Rule of Law

As mentioned in previous regular reports, Poland has achieved stability of institutions

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

significant developments of the past year.

The Parliament

The Parliamentary process is based on stable institutions and continues to function

satisfactorily. Its powers are respected and the opposition plays a full part in its activities.

The Executive

There have been a number of developments in this sector since the last regular report

with regards amendments to the Presidential elections act and the implementation of the

regional reforms, the civil service act and the Act on Government Departments.

An amendment to the Presidential Elections Act of 27

September 1990 was signed into

law in May 2000. The amendment introduces over 80 changes to the original bill,

aligning its provisions with the Constitution and unifying election rules. The new

provisions also comprise anti-corruption regulations pertaining to the financing of

political campaigns, aimed at aligning Polish election law with European standards. The

new act envisages an extensive system of sanctions for non-compliance with its

provisions. It should be noted that very similar anti-corruption provisions proposed for

the self-government Elections were rejected by the Sejm in 1998.

The last regular report commented upon the introduction of a new regional administrative

structure in Poland. Reform on this scale takes some time to become fully effective.

However, it appears at this early stage that the impact to date has on the whole been

positive. As was noted in the last regular report, the successful implementation of the

new administrative structure will require an adequate allocation of financial revenues and

of revenue raising powers in a stable foreseeable framework. The existing legislation

which set out the system for an initial two year period has been rolled over for another

year with some improvements.

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Under the civil service law (see below) only certain officials working at the regional

(Voivodship) level, will be accorded civil servant status. The legal, financial and

professional provisions for the remainder of the administrative staff responsible for the

management of the Voivodship, and all staff at county (Powiat) and commune (Gmina)

level are set out in the 1990 law on Self-government employees. This provides for

different criteria for staff recruitment and remuneration than the civil service law. Indeed

levels of remuneration are frequently higher in local than national government.

The Act on Governmental Departments which was adopted on 1 April 1999 came into

force on 10

September 1999. This Act regulates the functioning of the Executive,

identifying 32 departments of government and providing the Prime Minister with

chancellery powers to allocate ministerial portfolios and to combine departmental

responsibilities in ministerial portfolios. A first government restructuring under the new

law took place in September 1999 and there was a subsequent change in June 2000 when

the new administration took office. Changes to date have been rather limited in scope and

there has been no wholesale reorganisation of ministries and departments.

The revised law on the Civil Service which came into force on 1

July 1999 continues to

be implemented in a very gradual manner. All persons working within the governmental

administration at the moment of entrance of the law into force became civil service

employees but not civil servants. This distinction is important as one consequence is that

the current civil service corps has not been recruited on an independent basis and its

composition has in part been determined by outside sponsorship. It is envisaged that all

senior level posts will be filled with civil servants. This amounts to 1,630 posts in a civil

service of over 105,000. At the time of writing there were 349 appointed civil servants

The 349 comprises, apart from persons qualified in the last year's competition, graduates

of the National School of Public Administration and persons appointed under the

previous law. It is expected that by publication of this Report there will be an increase of

approximately 150 due to the new intake of graduates of the National School of Public

Administration.

The new selection procedure for posts of civil servants was launched at the time the law

was implemented. As a result of the last year's competition (completed in January this

year) 42 persons were appointed as civil servants (out of 240 persons who applied). This

year's procedure has just started with about 300 applications. Taking into account that -

according to the law - the selection is organised only once a year, reaching the expected

number of independent civil servants in Polish administration could be a very long

process. In the meantime the civil service remains open to outside influence and it

remains doubtful if - even in the medium term - the enforcement of the law will be

efficient enough to guarantee the political independence and stability of nominations and

actions of the civil service. In this context the equal provision of access to the public

service will be an important element in ensuring the continuity of the administration in

the years ahead.

As was also noted in 1999, the issue of remuneration of civil servants is also addressed in

the 1998 Act and will continue to require further attention in the years ahead to ensure the

recruitment and retention of a body of experienced officials.

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The Judiciary

Since the last regular report there have been a number of developments with respect to

the structure, staffing and training of the judiciary.

With regards structural changes, a new layer of jurisdiction has been introduced in

January 2000 to deal with petty cases and a law introducing simplified procedures in civil

matters was adopted in May 2000. The changes are the first of a number of measures

intended to reduce the often chronic delays and the backlog of cases which have dogged

the Polish legal system and which were highlighted in the 1999 regular report.

Under the January 2000 changes up to 200 civil-criminal chambers have been set up,

covering all the national territory, the final target is for 400 such chambers. These new

chambers are competent for petty cases (civil claims below 5000 Zloty), for consumer

rights cases, and for fiscal offences of up to 2 years of imprisonment.

The May legislation includes provision for the establishment of a national Penal Register.

The purpose of this register is to function as a database concerning personal identity,

criminal offences, trials as well as related criminal measures imposed by courts. This

allocation.

Since the last report overall efficiency in terms of court delays and effective treatment of

judicial cases has increased although the backlog persists. In this context, there is a

glaring gap between Warsaw, where the situation is still very critical in terms of

overburdening of judges and long delays and the rest of the country: the average duration

of a criminal/correctional procedure is 6 months nation-wide but reaches 40 months in

Warsaw. The situation is similar for commercial cases as well as transactions associated

with the land register. Delays for the latter can reach up to 2 full years in the capital,

compared to an average of 3.7 months nation-wide, although there has been some

improvement with nation-wide delays having fallen from the 1997 figure of 4.8 months.

Given the current concentration of economic activity on Warsaw and the likelihood that

most questions of EC law will be channelled through the capital the existing delays

present a challenge for the effective and timely implementation of EC law in Poland.

The government is aware of the difficulties faced in Warsaw. The Ministry of Justice

unveiled in May its plan to reorganise Warsaw judiciary including the introduction of a

number of new courts. However, it is to date unclear how these planned reforms will

correspond to the new budgetary allocations for the justice system.

Corruption among the judiciary has been mentioned in some reports. The very long wait

for routine court decisions in commercial matters, including in terms of contract

enforcement constitutes an incentive for bribery and corruption.

The backlog and the costs of legal action appear to deter many citizens from using the

justice system at all. Coupled to the existence of cases of corruption, this contributes to

the generally negative perception of justice in Poland by the average citizen who is

complaining increasingly about the low level of efficiency of the judicial system to the

public Ombudsman.

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One measure intended to reduce the delays and the backlog has been the strengthening of

the Public Prosecutors office through both training and an increase in staff numbers.

There has been a slight increase in the number of judges ( up to 8,194) as well as in the

“referendarz” function (a quasi-judicial function which allows for the performance of

certain acts – amendments to the land register- but not adjudication); 295 "referendarz"

have been recruited and are currently employed.

The training system for judges based around 36 centres lasts 2 full years and is generally

considered to be very costly compared to a would-be centralised system of initial and

continued training. Additionally, European Community Law is not compulsory in the

curriculum, and it is rarely offered as a specific area of training.

Anti-Corruption measures

The issue of Corruption was set out in last year’s regular report. In the intervening period

the issue has jumped up the political agenda and in public consciousness following the

publication of a number of critical reports. These reports have been by both external

bodies and the Polish government’s Court of Auditors.

The reports have different methodological approaches and were prepared from different

standpoints, but all point to a similar series of deficiencies which create an environment

in which corruption can flourish: excessive but poorly managed bureaucracy, insufficient

controls, lack of transparency and a general lack of accountability amongst others, are all

elements, which have been mentioned as contributing factors.

To date the response of the government has been piecemeal: there has been a flurry of

activity which has yet to come to fruition. The most significant legislative progress to

date has been the ratification in September 2000 of the OECD Convention on Combating

Bribery of Foreign Officials in International Business Transactions.

On the ground a sustained effort will be required to step up the fight against corruption.

Recent data suggest that in 1999 altogether, up to 664 cases of active and passive

corruption (as defined by Polish law) have been detected, leading to 320 prosecutions.

At the administrative level a working group has been set up within the Team on

“Reducing the burden of bureaucracy” in the Ministry of Economy. The group has

produced a series of measures to tackle corruption in all its aspects including a multi-

disciplinary strategy integrating the preventive as well as repressive aspects.

What is still crucially lacking is a central, integrated strategy at national level, as was

indicated in the 1999 regular report. Any such strategy must be inextricably linked to a

sufficiently resourced administrative reform in the individual law enforcement agencies

(Border Guard, Police, Customs) as well as in the field of Justice. The rapid

implementation of the Civil service law will, increasing an independent open civil

service, also greatly contribute to developing a corruption inhibiting environment.

Legislation necessary to ratify the 1990 Council of Europe Convention on Laundering,

Search, Seizure and Confiscation of Proceeds from Crime has been adopted and a law

allowing the ratification of the Council of Europe Criminal and Civil Law conventions on

Corruption is close to final adoption.

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1.2.

Human Rights and the Protection of Minorities

As reported in the previous regular reports, Poland continues to respect human rights and

freedoms. The following section concentrates on major developments since the last

regular report.

Poland has ratified the major Human Rights conventions with the exception of the

Council of Europe Framework Convention on the protection of National Minorities (see

Annex) and has an established track record of providing appropriate international and

constitutional legal safeguards for human rights and protection of minorities.

Civil and Political Rights

Basic rights continue to be respected and some significant developments have been

registered since the 1999 Report, notably with regard to the death penalty, the aliens act,

and the privacy act. In contrast there are some areas, notably the libel law and prison

conditions, which give cause for concern.

The

death penalty

was formally abolished by the Parliament on 14 April 2000 when it

adopted the legislation approving ratification of Protocol No 6 the European Convention

on Human Rights. The formal act of ratification has not yet taken place.

As concerns

asylum,

the new aliens law has not yet been adopted.

With regards the right to

privacy,

the parliament adopted in January the Classified

Information Law which came into force in March. The act regulates the procedures,

notably the need for security clearance, which citizens must go through in order to have

access to classified information. However, concerns exist about a number of aspects of

the legislation and the Ombudsman has already challenged one provision - denial of

clearance to a specific individual without the right of appeal - before the Constitutional

Court. The issues of privacy raised in the last regular report; surveillance by the state and

functioning of the data protection law, remain valid.

Poland continues with the Vetting or "Lustracja" process which provides for the vetting

of Government members, senior officials, officers of the state and members of the

judicial system regarding the nature of their involvement with the former communist

regime. The concerns about the use and possible abuse of the system and the lack of

transparency of the process have been highlighted by two high profile cases involving

candidates for the recent presidential elections.

Since the last reporting period, concerns have been expressed that the provisions of the

Penal code regarding the liability of journalists to prosecution due to “slander and abuse”

of the public authorities have acted in some instances as an impediment to

free speech.

Slander of politicians and public servants carries a higher penalty than slander of the

public at large. This provision is considered by some observers to contradict the concept

within the jurisprudence of the European Court of Human rights that the broadest

protection against insult is due to the citizen.

Conditions in Polish

prisons

continue to be poor. Overcrowding is a serious problem: in

mid-2000 the prison population of 70,000 was 110% of the notional maximum capacity

of the system. In large urban prisons this figure is often exceeded. Violence and

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mistreatment appear to be a real problem. A report by the European Committee for the

Prevention of Torture has pointed out cases of serious mistreatment in Polish prisons.

External observers are able to point to a number of cases of recent police brutality.

However, while these are both unfortunate and too frequent,

degrading treatment

and

violence from officers are neither systematic nor systemic.

As was reported in the 1999 regular report instances of

trafficking in human beings

and

the number of victims have been on the decline since the mid 1990s. A further decline

will come about as and when the social and economic conditions of those parts of Polish

society most susceptible to such crime improve.

NGOs

continue to play an active role in Polish society with a concentration of

organisations in the large cities, in particular in Warsaw. These cover an extensive range

of interests and issues: the role of NGOs is increasingly important in shaping public

debate and triggers nation-wide discussion around “hot” topics, taboos and other special

issues.

The issue of

property ownership

has been a thorny one during the course of the reporting

period due to the lengthy parliamentary passage of legislation relating to the restitution of

property seized between 1944 and 1962. The law has not been finally adopted and

concerns focus upon who will be eligible for compensation.

The role assigned to the

Ombudsman

is to monitor the protection of civic and political

rights guaranteed by the Constitution. The Ombudsman can sue public authorities, appear

before the courts and tribunals in support of individuals who are victims of violations of

their basic rights. The Ombudsman also has an important political role as he can raise

awareness of public opinion and state authorities on any issue. The Ombudsman has

recently declared his willingness to use any means to enhance the transparency of public

life, to guarantee the right to information in order to contribute to fighting corruption

efficiently.

Economic social and cultural rights

The issue of

equal opportunities

is a complex one. Polish society, as is true for all

societies, reflects a vast array of influences which evolve over time. On the one hand

overt discrimination is common practice (gender-specific job advertisements) and the

UN-backed project on spousal violence remains suspended by the government, on the

other hand other aspects of women’s rights are well protected (new legislation means that

Poland will have the second longest maternity leave in Europe). However, it is clear that

against the objective criterion of adoption of the

acquis,

Poland has made no progress in

this area over the reporting period (Chapter

13 – Social policy and employment).

In respect of

children’s rights

a significant development has been the adoption in January

2000 of a law establishing an independent Ombudsman for the rights of children. The

role of this new office will be to perform a task very similar to the Ombudsman with a

particular emphasis on children’s rights in the field of health protection, the right to be

brought up in a family, social conditions as well as education. The new mediator was

appointed by the Parliament in June 2000. It is expected that this new office will address

the shortcomings regarding child protection which were listed in the Polish

Ombudsman’s 1999 report.

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Minority rights and protection of minorities

In Poland, respect for and protection of

minorities

continues to be assured.

The 1998 Penal code provisions regarding the use of the mass media to “advocate

discord” on national, ethnic, racial or religious grounds also appear to be functioning

well. Polish attitudes to foreigners have been surveyed annually since 1993, there has

over this period been a reduction in negative attitudes towards minorities.

Considerable attention has been focused on the treatment of the Roma population in

Poland over the reporting period. It is true that the economic and social circumstances of

the Roma are poor and worse than those of the population in general. Moreover, some

acts of discrimination by public authorities and violence against Roma do take place.

There is, however, no overt policy of discrimination on the part of the Polish government

towards the Roma. While there is no clear national policy on assisting the integration of

minorities local initiatives do exist. There are plans for nation-wide television broadcasts

with a view to propagating friendly attitudes toward refugees and foreigners.

Legislation regarding the protection of former Nazi concentration camp sites which

forbids public meetings, commercial activities and adjacent construction was adopted in

1999. This is a concrete manifestation of the sensitivity with which mainstream state and

religious representatives have worked to address the concerns of the Jewish community

and others affected by the camps.

1.3.

General evaluation

Poland continues to fulfil the Copenhagen political criteria.

With regard the areas for action identified last year, Poland has undertaken initial steps

in the reform of the judiciary and in preparing the ground to deal with the most pressing

bottlenecks. Such measures are important, as the existence of an effective judiciary is an

essential element in the implementation and enforcement of the

acquis.

Similarly with

regard to the fight against corruption, initial steps have been taken but further efforts are

needed, including the adoption of the necessary legislation. Developments with regard to

equal opportunities have been less marked.

These actions will need to be continued and intensified in order to ensure that the

necessary measures have been taken by the time of accession. This is particularly

important for judicial reform where the priorities set out in the accession partnership are

still to be met in the medium term.

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2. Economic criteria

2.1.

Introduction

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

concluded:

“Poland can be regarded as a functioning market economy; it should be well able to cope

with competitive pressure and market forces within the Union in the medium term.”

This finding was confirmed in both the 1998 and 1999 Regular reports. The General

Evaluation of the Economic Criteria of the 1999 Regular report concluded:

"Poland is a functioning market economy, with an increasingly thriving private sector and

an appropriate legal and institutional environment for economic activity. It should be able

to cope with competitive pressure and market forces within the Union in the medium

term, provided it keeps up the pace of economic restructuring and proceeds with trade

liberalisation."

In its annual assessment of the economic developments in Poland since the 1997

Opinion, the Commission’s approach is 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 pressures 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 1998 and 1999 regular reports.

2.2.

Economic developments

The macroeconomic situation in Poland has improved since the last Regular Report.

The

slowdown in growth, induced primarily by the Russian crisis in 1998, has been reversed

since the middle of last year, and the economy is currently experiencing a strong recovery

in output, linked to a pick-up in external demand and an acceleration of domestic

demand. However, a number of macroeconomic imbalances have developed. The rate of

unemployment is high and rising, and inflation picked up significantly in the second half

of 1999. Higher growth is not offsetting employment losses associated with economic

transformation. Moreover, the current account deficit has widened considerably.

Although exports have picked up and FDI inflows remain high, import growth is even

more robust, reflecting the rapid increase in domestic demand. In 1999, the public sector

deficit was around 3.5% of GDP, with some fiscal loosening during the year, partly due

to the difficult implementation of social sector reforms.

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Poland

Real GDP growth rate

Inflation rate

- annual average

- December-on-December

Unemployment rate, end-year

- ILO definition

General government budget

balance

1996

Per cent

6.0

1997

6.8

1998

4.8

1999

4.2

2000 latest

5.6 Jan-June

Per cent

per cent

19.9

18.6

15.0

13.2

11.6

8.4

7.2

9.8

10.4 Sept

11.3 Sept

Per cent

12.3

11.3

10.6

15.3

16.7 Jan-March

Per cent of GDP

-2.3

-2.4

-3.0

-3.5

Current account balance

Per cent of GDP

million

€

-2.3

-2571

-4.0

-5,065

-4.4

–6,156

-7.5

-10,855

-5.877 Jan-June

Foreign debt

- debt export ratio

- gross foreign debt

Foreign direct investment in flow

- balance of payments data

Per cent

million

€

112.7

31,023

103.4

33,504

103.6

41,220

128.2 E

49,116 E

Per cent of GDP

million

€

3.1

3,542

3.4

4,328

4.0

5,678

4.7

6,821

2.790 Jan-June

E = Estimates

Poland continues to register progress in privatisation and structural reforms.

The pace

of privatisation has been particularly encouraging, with some 150 enterprises sold

through direct privatisation in 1999 and already 50 in the period to the end of April of

this year, across a wide range of sectors. Revenues from privatisation are exceeding the

assumptions of the budget law, and are boosted further by the completion of the sale of a

second tranche of shares in Telekomunikacja Polska. Privatisation revenues are primarily

financing social sector reforms, but uncertainties remain as to the future of the

enfranchisement programme, which foresees the distribution of shares to the population.

There has also been some further restructuring of state-owned enterprises, in particular

the coal mining and defence industries. There are, however, delays in privatisation in the

steel sector and in the restructuring of agriculture. State-owned enterprises continue to be

a burden on overall efficiency and profitability and negatively affect public finances

through tax and social contribution arrears. On the other hand, the implementation of

pension, health care, education and tax reforms, albeit sometimes difficult and costly in

the short-term, are strengthening the basis for future growth.

3 PROXY HICP since 1997 (see methodological notes).

4 Moving 12 month average rate of change.

5 Q4 (permanent survey with quarterly reporting).

6 Data for 1999 are from National Web site source and are on a Cash basis (other years are on a transaction

basis).

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Main indicators of Economic Structure in 1999

Population (average)

GDP per head

thousand

PPS-

€

Per cent of EU

average

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

per cent

million

€

per head

38,654

7,806

3.8

18.1

26.2

33.6

26.2

19,266

498

2.3.

Assessment in terms of the Copenhagen criteria

The existence of a functioning market economy

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.

Poland continues to improve its functioning as an open market economy through prudent

macroeconomic policies and implementation of various types of structural reforms.

Poland concluded a Joint Assessment of Medium Term Economic Policy Priorities with

the European Commission services in February 2000. The Joint Assessment, which

covers the period to 2002, takes into account recently approved sector strategies and the

longer term strategy for public finances that had been adopted by the previous

Government in June 1999. There is broad political consensus on policies geared towards

entrenching the transition process and preparing for EU accession, especially around key

issues such as privatisation, support for the development of the private sector and the

need for foreign direct investment.

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.

Data refer to end of 1998.

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There are, nevertheless, divergences as to the speed at which reforms should be

conducted.

Pressures for trade protection are exerted in various sectors and the

appropriate stance on public finances is heavily debated. The government has delayed

decisions on the final liberalisation of capital inflows under Poland’s OECD

commitments.

In 1999, the Polish economy expanded by 4.1%, somewhat slower than in the previous

year.

However, there was a very significant acceleration of output in the second half of

the year (5.6%), continuing into 2000, with GDP growth estimated at some 6% in the

first quarter. Industrial production is growing at a faster pace, by almost 10% in the

period from January to May 2000, compared with 4.3% in 1999.

The recovery has been primarily fuelled by domestic demand.

Private consumption

expanded by 5% in real terms, while gross fixed capital formation increased by 6.9%.

Since the end of last year, the external sector is also contributing to growth. Trade data

shows that the volume of exports decreased by 5.1% in the first three-quarters of 1999,

but grew by 3.5% in the fourth quarter and 9.2% in the first quarter of 2000.

The very significant widening of the current account deficit constitutes the most pressing

challenge for Poland’s economic policy.

The current account deficit represented 7.5% of

GDP in 1999, compared to over 4 % in the previous year, and is estimated to have

reached some 8% of GDP in the period from January to April 2000. The sharp

improvement in the central bank data recorded in April may suggest that an adjustment is

taking place. The increase in the trade deficit (to 9.5% of GDP) in 1999 took place in the

context of unfavourable external shocks in the past years. In addition to the deterioration

of the trade balance, the widening of the current account deficit is due to a sharp decline

in the surplus on unclassified transactions (unregistered border trade), which was halved

in 1999 compared to the previous year, and a trebling of the deficit in services. The

overall deficit is only partially financed by non-debt creating inflows.

The high level of unemployment represents another significant policy challenge.

Unemployment increased steadily since August 1998 to some 15% in 1999 according to

ILO methodology. Whilst the rise in unemployment reflects restructuring and

demographic pressures, a number of specific features point at the need to improve the

functioning of labour markets: the unemployment rate of persons under the age of 25 is

around 30%, unemployment is high for low skilled workers, there are significant regional

disparities (unemployment rate between 9% and 20%), and nominal wages in some

sectors do not appear very responsive to the recent increases in the level of

unemployment.

Progress in reducing inflation from moderate to lower levels is proving difficult.

In the

second half of last year, prices increased sharply as a result of a combination of factors:

higher food and fuel prices, the impact of a depreciation of the Polish currency, excise

and tariff duty increases and strong growth of household credit linked to the economic

recovery. Year-on-year inflation returned to double digits this year. Average inflation was

7.3% in 1999, and it appears likely that the consumer price index at the end of 2000 will

be higher than the upper band of the Monetary Policy Council target of 6.8%. The

prospect of missing this target for the second year in a row highlights the difficulties of

implementing an inflation-targeting framework for monetary policy in Poland. In April

2000, Poland moved to a free float, an exchange rate strategy consistent with the

implementation of inflation targeting. The float should help the economy to

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accommodate real exchange rate appreciation and capital inflows more easily, and allow

for the abolition of the remaining controls on short-term capital movements.

Since monetary policy is already tight, the combination of a widening current account

deficit and persistent inflation put the onus on fiscal policy as the only robust instrument

for addressing imbalances.

In 1999, the public sector deficit was estimated at some 3.5%

of GDP, with a loosening of the fiscal stance in the course of the year for both cyclical

and structural reasons. In the first half of the year, tax receipts have been lower than

expected. In addition, transfers to social insurance and healthcare have been higher than

expected. The financial situation of the social security office ZUS has been of particular

concern. The deficit of some of the state-owned enterprises, for example PKP (railways)

is worrisome, and there has been a build up of tax and social security arrears. Despite

these difficulties, the target level of 2.8% of GDP for the general government deficit in

2000 appears to be attainable. Pressures on government expenditure will be increasing in

2001 in view of the need to compensate for past inflation and offset higher debt servicing

costs. Beyond windfall revenues (notably from the expected sale of UMTS telecom

licenses) next year, effective fiscal consolidation of current expenditures is the key to

restoring external balance in the medium term.

Regarding public expenditure management, the main structural weaknesses are the

relatively high number of extra-budgetary funds and the need to embed their financial

management within the procedures used for state budget expenditure.

In this respect, it is

worth noticing that the implementation of territorial reform has not been translated into a

greater degree of fiscal federalism. According to the 2000 budget, both revenues (16%)

and spending (17.1%) in the local government sector are due to increase, but tax income

should remain flat. This implies that local budgets will increasingly rely on a subsidy

from the state budget (rising to 21.6% in nominal terms this year).

Significant progress has been made in the area of tax reform.

The government completed

last autumn the parliamentary process for the adoption of a sound and ambitious tax

package, consisting of the broadening of the tax base, the lowering of tax rates, the

simplification of the code and a reduction in tax breaks. This process, however, led to

significant tensions within the previous coalition. Whilst the proposed changes in

Corporate Income Tax and VAT were adopted, the government’s Personal Income Tax

bill was vetoed by the President and will not be re-introduced in the 2001 budget

proposal.

The privatisation programme is being implemented forcefully and successfully.

foresees that 70% of state-owned enterprises will be sold or wound down by the end of

2002. The private sector accounts for at least two thirds of GDP, for about 70% of total

value added and for more than 70% of total employment. There has been acceleration in

the privatisation of large state-owned enterprises in a range of industrial sectors. Apart

from the financial sector, completed large transactions concern the national airline LOT,

the biggest oil company Polski Koncern Naftowy (PKN) S.A., and a first set of power

plants. The major deal to be closed this year is the second tranche (35%) of shares in the

telecom operator TP S.A., and privatisation in the gas, chemicals, distilleries, sugar and

energy distribution sectors are in preparation. Overtime, since 1991, the Agricultural

Property Agency has sold some 846,000 hectares of land, or 27% of the total, while

another 67% is leased.

Prices have been largely liberalised, with the exception of prices of electricity and

central heating, which are still subject to direct regulation.

To some extent, the

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government also continues to influence prices in public transportation, pharmaceuticals

and telecommunication services. According to the Polish authorities, administered and

regulated prices represent about 24% of the consumer price index basket. The remaining

liberalisation of prices is directly linked to progress in the privatisation of the energy

sector, now underway. Trade is also largely liberalised. The major exception to price and

trade liberalisation remains the agricultural sector.

There are no significant legal or institutional barriers to the establishment of new firms

in Poland.

There was a net creation in 1999 of more than 10 000 registered firms, or

some 7% of the total number of such companies. The law on economic activity, signed

last December, provides a comprehensive framework for enterprise creation; it expands

the scope of entrepreneurship by giving a definition of a small and medium size

enterprise, allows equal status to domestic and foreign firms and curbs state intervention

in the economy by bringing down the number of sectors in which a license is required to

conduct economic operations.

Barriers still remain to the exit of firms, especially in the case of bankruptcies.

In this

area, the judicial system is under strain to ensure an adequate processing of bankruptcy

procedures. Amendments to the bankruptcy law are needed to change the balance of

protection in favour of creditors, and to add other features, such as a central register for

bank collateral and a central register of debtors to the State Treasury. Aside from exit

through bankruptcy, a new commercial code is in preparation for possible adoption

around the end of this year. The code should facilitate transactions such as mergers and

their spin-offs.

Property rights are clearly established and transferable.

The entrepreneurial and

investment climate is good, even though a certain degree of bureaucracy and difficulties

with the enforcement of court decisions constitute obstacles to business activity. Serious

efforts, supported across the political spectrum, are starting to be made to deal with the

problem of corruption.

The financial sector is developing, albeit from a low base.

Indicators of financial

deepening are steadily increasing. Financial intermediation is rising and domestic credit

amounted to 28.8% of GDP, from around 20% in the middle of the decade. Commercial

bank assets represented some 62.3% of GDP in 1999.

The banking sector has remained fundamentally sound since the middle of the 1990s.

The

“bad loans” problem of the early 1990s was largely overcome through the establishment

of efficient regulatory and supervisory frameworks and institutions, some re-

capitalisation of banks, and a decentralised approach putting the burden of work-outs

onto banks themselves, helped by new procedures such as bank-led conciliation and debt-

to-equity swaps. These gave banks power over corporate clients and incentives to avoid

the emergence of new non-performing assets. Bad loans, however, have grown again

recently in the portfolio of banks since the Russian crisis as a result of corporate failures.

By the end of last year, 13.4% of commercial banks’ outstanding claims on the non-

financial sector were reported as irregular. This reflects poor assessments of corporate

credit risk in the past, as well as methodological changes to the reporting of problem

loans.

The advanced stage of privatisation in the banking sector is one of the key features of the

Polish economy, and one of its major strengths.

In 1999, private owners controlled 70 out

of 77 commercial banks and 39 are in the hands of foreign investors. Foreign ownership

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now accounts for 56% of the total capital of Polish banks, and when all types of property

links are considered, it is estimated that foreign investors control over 70% of

commercial banks’ total assets. In 1999 two banks were privatised (Bank Pekao S.A. and

Bank Zachodni S.A.) and in April 2000 the first step for the privatisation of the former

state savings bank PKO BP was completed with its transformation into a Treasury

corporation.

The present state of the financial sector provides a good basis for future developments.

Real interest rates are high, but the debt-servicing capacity of domestic borrowers should

be sustained through high growth. The corporate sector has borrowed extensively,

including in foreign currency, and there is no evidence that this financing is hedged. It

remains to be seen whether the move to a fully floating currency will influence the

behaviour of operators in this respect. Corporate indebtedness, however, is mostly

medium and long term and an estimated 32% of liabilities at the end of last year was

inter-company loans. Reserve indicators also remain comfortable, with gross official

reserves representing more than 7 months of imports of goods and services at the end of

June 2000.

Important market-oriented changes have taken place in the non-bank financial sector.

Privatisation in the insurance sector moved forward last year with the sale of a 30% stake

in PZU S.A in November. The sector has been boosted by the reform of the pension

system, even though the issue of transferring from the first to the second pillar is

unresolved. The insurance market nevertheless experienced two bankruptcies in 1999.

Pension reform led to a 71% increase in the market capitalisation of the Warsaw Stock

Exchange last year; it now represents around 20% of GDP (13.3% in 1998). Some

regulatory changes in the non-bank sector are still needed, and some legal obstacles to

effective supervision remain, notably in regard to consolidated supervision.

Poland is a functioning market economy. It has maintained an adequate degree of

domestic and external macroeconomic stability, and its growth performance has again

been impressive. However, a number of economic imbalances have emerged, and require

adequate monitoring and policy measures. Inflation will be above the upper band of the

Monetary Policy Council’s target for the second year in a row. The current-account

deficit has widened to a level that raises issues of sustainability. Ensuring medium term

fiscal sustainability also remains a challenge. Both macroeconomic (in particular fiscal

measures) and structural policy responses are needed. Among the remaining structural

reforms to improve the functioning of markets, the implementation of bankruptcy

procedures should be improved, the regulatory and supervisory framework for non-

banking financial institutions must be completed and implemented.

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

Union

Poland'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 the higher the degree of economic

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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.

Poland’s now well-entrenched market economy continues to allow agents to make

decisions in a climate of stability and predictability.

The supply side is increasingly

modernised as a result of market allocation mechanisms and competitive pressures.

Poland needs to continue building high quality infrastructure to enhance its

competitiveness and to avoid bottlenecks (notably in transport infrastructure) to

sustained growth in the medium term.

At 25% of GDP, the investment ratio is high.

However, a closer examination of the determinants on the supply side, in particular

investment and productivity, suggests that there are still challenges for ensuring the

sustainability of current levels of growth. To date, the investment boom that has

contributed to rebuilding quantitatively and qualitatively the capital stock has been

financed mainly through retained earnings and foreign direct investment. Over the last

two years, however, corporate profitability has been deteriorating. Gross profits in the

enterprise sector decreased by some 24% in 1999, while there are a number of sectors

that are still loss making. In addition, a large share of FDI inflows so far has been related

to privatisation. The completion of the current privatisation programme in the next few

years will necessitate new strategies to attract more green-field investment.

Foreign direct investment inflows are significant and play a major role in the

progressive upgrading of Poland’s exports and overall competitiveness.

Polish sources

estimate that inflows could have amounted to

€8

billion in 1999. Poland, however, did

not attract large inflows until 1995, following the agreement on debt restructuring. More

than half of cumulative FDI over the last decade occurred after 1997. In view of the lags

in the impact of FDI on restructuring and improvements in corporate governance, the

current scale of inflows is conducive to increased competitiveness in the medium term.

The share of foreign firms in total investment outlays in the manufacturing sector had

increased to 56% in 1997. These firms accounted for some 50% of total Polish exports

last year. A large share of FDI has been oriented towards non-exporting sectors such as

banking, retail trade or construction, partly reflecting the size of the Polish market. In

addition, FDI in the services sector can have an indirect beneficial effect on trade by

lowering transaction costs and attracting foreign investors in manufacturing.

In general, Poland’s markets have become highly contested and open to competition,

reflecting trade liberalisation and growing market access by its preferential trade

partners.

However, a number of government policies create market distortions. The

presence of state aids is pervasive in both private and state-owned firms and some of the

latter do not fully operate under hard budget constraints, including from the point of view

of wage setting. Subsidies and accumulations of tax and social security arrears are still

present. The presence of non-tariff barriers is also extensive. Poland should resist

resorting to instruments of foreign trade policy to address current external imbalances.

The Polish economy needs to further develop its ability to absorb the shocks of industrial

restructuring, building upon its level of infrastructure and human capital.

In this light,

investments will continue to be needed in infrastructure. The system of education and

vocational training system should be geared towards responding to the needs of the

growing enterprise sector. The implementation of structural reforms in agriculture as well

as coal and steel will lead to a shake out of labour that needs to be absorbed in other

sectors of the economy.

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Active labour market policies appear to have a mixed record on the creation of new

employment opportunities, with training being clearly more effective than various forms

of subsidised jobs.

Training, education and the creation of non-farm jobs in rural areas

are key to absorb the excess labour that will be shed from the steel and agricultural

sectors where restructuring has so far been insufficient. However, what matters is to

improve the response of the labour market to the job opportunities created by economic

growth.

Trade integration with the EU is extensive and advancing.

The EC accounted for 70.5%

of Polish exports last year, compared to 68.3% in 1998. However, the value of Polish

exports to the EC, as reported in central bank statistics, increased only marginally last

year. Moreover, the increase in the imports of capital equipment, if it is linked to a pick-

up in investment and to industrial restructuring, can be expected to lead to a greater

capacity to export in the medium term. Wage increases have so far lagged behind

productivity increases helping a favourable development in unit labour cost.

Products with higher value added (machine and electrical engineering goods) represent

less than one third of the exports of goods in Poland’s trade with the EC.

There are signs,

however, of shifts towards more processed goods. The share of manufactured products in

total exports to the EC reached close to 80% in 1998. Moreover, changes in the

composition of Polish exports to the EC in terms of factor content suggest a shift towards

products requiring skilled labour.

The SME sector is thriving, even though small and medium-sized enterprises still

continue to face difficulties in accessing finance.

One of the reasons for this is the lack of

availability of collateral acceptable to lending institutions. In this area, guarantee schemes

are still underdeveloped. The SME sector represents 99% of the total number of firms. It

accounts for half of GDP and value- added in the economy, as well as almost two thirds

of total employment

(see also chapter 16 – Small and medium-sized enterprises).

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

Union in the near term, provided it continues and completes its present reform efforts.

Progress in structural reforms should help to ease fiscal constraints and allow for high

and sustainable growth through increased productivity in the medium term. The pace of

privatisation has been particularly encouraging in the last year. There has also been

progress in restructuring in sensitive sectors such as the coal and defence industries, but

large parts of the state-owned enterprise sector still need to be restructured to increase the

efficiency and profitability of the overall economy. There are also delays in privatisation

in the steel sector and the restructuring of agriculture. Urgent measures still need to be

taken to improve Poland’s infrastructure and to improve the response of the labour

markets to changing economic conditions.

2.4.

General Evaluation

Poland 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 it continues and

completes its present reform efforts.

It has maintained adequate macroeconomic stability, and its growth performance has

again been impressive. The pace of privatisation has been encouraging and there has also

been further restructuring in sensitive sectors such as the coal and defence industries.

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However, a number of economic imbalances have emerged: inflation is high and the

current account deficit has widened to a level that raises the issue of sustainability.

Ensuring medium term fiscal sustainability remains a challenge. There are delays in

privatisation in the steel sector and the restructuring of agriculture. Large parts of the

state-owned enterprise sector still need to be restructured.

Both macroeconomic and structural policy responses are needed. Fiscal adjustment must

take place and efforts towards the sustainability of public finances must continue. Among

the remaining reforms to enhance the functioning of markets are improvements to

bankruptcy procedures and the completion of the regulatory and supervisory framework

for non-banking financial institutions. Measures still need to be taken to improve

Poland’s infrastructure and to improve the response of the labour markets to changing

economic conditions.

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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 Poland’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 Poland’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 Poland’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 Poland 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 Poland’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 :

“Poland’s track record in the free movement of services and capital is good. As regards

public procurement and competition (anti-trust and mergers), although alignment needs

to be pursued, the decisions taken by the institutions in charge indicate that their

effectiveness has increased. Overall, however, there has been little progress in fields

which are fundamental for the operation of the internal market, such as industrial and

intellectual property, data protection, conformity assessment and certification and state

aids. Progress in these areas is urgently required if Poland is to be smoothly integrated

into the internal market.

A description of the

acquis

for each chapter can be found in the Commission’s 1997 Opinion on

Poland’s

application for EU membership.

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Industrial policy gives raise to serious concern, in particular in the absence of a clear

strategy for steel restructuring and in the automobile sector. As regards taxation, the well-

structured strategy which has been adopted needs to be implemented effectively.

In the agriculture sector, although progress has been made in the veterinary and

phytosanitary

acquis,

the cost of implementation has not been adequately budgeted.

Overall, Poland has not yet launched the substantial transformation which is needed, in

terms of policy,

acquis

and structures, in the agriculture and fisheries sectors. Given the

importance of these sectors to the domestic economy and within the EU, it is essential

that a strategy be developed which will facilitate necessary adjustments prior to

accession, including a rural and social development plan.

Some progress has been made in the energy sector. In the environment; framework

legislation has not been transposed. This combined with a lack of an implementation

programme and financial strategy and weaknesses in monitoring point to the need for

very substantial efforts in this sector. Good progress has been achieved in road transport

alignment. Although the reform of territorial State administration provides a good basis

for regional policy, the legal framework and related structures still need to be established.

In the social field, efforts have been limited and legislative enforcement is a matter of

concern, in particular the capacity of labour institutions.

Progress has been made in the customs area but continued efforts are required in

alignment and implementation capacity. Major efforts are necessary also as regards

financial control. Some progress has been achieved in justice and home affairs, notably as

to the border guards. However, alignment remains limited and considerable improvement

is required in law enforcement bodies and judiciary capacity, in particular at the eastern

border.

Poland has not progressed significantly in aligning further its legislation and in adapting

and strengthening the structures required in a large-sized country in view of accession. In

the same manner, Poland has addressed only to a limited extent the Accession

Partnership short-term priorities, with a notable lack of progress on certification, State

aids and steel restructuring. Continued efforts are needed to set up or strengthen

capacities in intellectual property protection, certification, state aids, agriculture and

regional policy, social field, customs and justice and home affairs.”

3.1.

The chapters of the

acquis

As indicated, the review of Poland’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

The last reporting period has seen significant progress in the adoption of the

acquis.

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Considerable progress has been made as regards

horizontal and procedural measures;

with the adoption of the necessary framework legislation for the New Approach, and

amendments to the existing law on testing and certification to further fulfil Poland’s

obligations under the Agreement on the Protocol on Conformity Assessment (PECAA) in

the context of the Europe Agreement.

The adoption of the Law on Conformity Assessment in April 2000 is a crucial step

forward toward the implementation of the industrial products

acquis.

This Law

establishes the legal framework for the further adoption and implementation of New and

Old approach directives. One of the key elements is the separation of accreditation

functions from certification activities within the Polish system and the unification of

accreditation activities in an independent "Polish Accreditation Centre" (PAC). This

separation of accreditation, certification and standardisation functions is an essential step

in the creation of the quality infrastructure necessary to apply New Approach directives.

Some new PAC accreditation activities will start in January, 2001. PAC is not yet a

member of the EA (European Accreditation).

The other elements of the Law are mostly in line with the

acquis.

The core part of the

Law will enter into force in January 2001. This legislation will speed up the adoption and

implementation of vertical industrial product legislation (both old and new approach),

thus facilitating the preparations for the adoption of the new approach and removing in

the medium term existing technical obstacles to trade whose origin can be found in the

discrepancy between the EC and the Polish legal order. Rapid implementation of new

approach directives will also extend the adjustment period available to Polish firms as

they prepare to face the competitive pressures of the internal market.

The other pieces of framework legislation, the law on general product safety and the Law

on producer liability, were also adopted during the reporting period (see

Chapter 23 –

Consumers and health protection).

The adoption in 1999 of the amendment of the Law on Testing and Certification has been

another important step in the right direction as it facilitated the amendment during the

reporting period of the list of products requiring mandatory certification in Poland (B

Mark) so as to conform with the obligations undertaken under the PECAA. Further

secondary legislation has been adopted as regards the issuing of certificates for products

subject to mandatory certification and products for which producer certification is

acceptable. While for mandatory certification the procedures adopted by the Polish

authorities meet the requirement of the PECAA, this is not yet the case for products for

which producer declaration of conformity is acceptable.

With regard to standards, the Polish authorities as of March 2000 had adopted 30 % of

the total amount of European Standards - still a long way short of the 80% level needed

to be member of CEN/CENELEC and ETSI.

As regards the adoption of legislation in

specific sectors

there has been some progress

since the last regular report.

In the field of

motor vehicles

the Regulation on type approval of vehicles implementing

several EC directives was adopted in November 1999. In October 1999 the Polish

authorities also implemented the Directives on the interior fittings of motor vehicles, the

behaviour of the steering wheel and column in an impact, on the installation of lighting

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and light-signalling devices on wheeled agricultural and forestry tractors and on the

lateral protection of certain motor vehicles and their trailers.

No particular development can be reported concerning

non-harmonised areas

and

public procurement.

Overall assessment

Overall, Poland has achieved a moderate level of alignment with the

acquis,

with most

progress having been made over the past year.

Poland has now adopted the necessary framework legislation to be able to implement the

new approach on standards and technical regulation with the sole relevant exception of

the new Law on Standardisation. The next step must be a concentrated effort to rapidly

adopt the legislation implementing EC vertical directives (both new and old approach)

and relevant European Standards. Following the adoption of the Law on Conformity

Assessment, further implementation is needed. The Polish authorities should also

strengthen the infrastructure needed to apply this legislation. Some relevant progress can

be recorded in the sector of motor vehicles. Progress can also be registered in the

chemical, pharmaceutical and in all the other traditional approach sectors.

Certification and accreditation activities have been functionally separated by the Law on

Conformity Assessment although it now needs to be implemented in practice.

Accreditation functions will now be transferred from the Polish Institute For Testing and

Certification to the Polish Accreditation Centre. Officials of the Conformity Assessment

unit of the Ministry of Economy will also participate in the works of the Polish

Standardisation Committee.

The progressive implementation of the vertical directives following the adoption of the

Law on Conformity Assessment should ensure the creation of a network of specific and

independent conformity assessment bodies. Existing conformity assessment capacity

should progressively be reinforced. The Polish Committee for Standardisation (PKN) is

still a government-controlled public institution (members are appointed and recalled by

the Prime Minister) and will therefore have to be seen to operate as an independently

functioning body. Market surveillance should been reinforced following the introduction

of the notion of producer self-declaration and the foreseen adoption of new approach

directives.

Further effort is required in disseminating information on the new legal regulations

among the staff of the institutions involved in the conformity assessment system and

entrepreneurs.

In the area of standards one means of improving the rate of adoption would be through

the so-called “cover method”, a one page explanation of the standard in Polish with the

technical text in a Community language. This is one of the objectives of the law

modifying the Act on Standardisation which is currently before parliament.

To date there has been no alignment in the area of food safety. Pending legislation may

soon provide the framework for this important area of the

acquis.

As for certification,

further efforts will need to be devoted to the adoption of the necessary secondary

legislation and to the setting up of administrative structures.

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In the non-harmonised area, the internal screening of the Polish legislation should lead to

the elimination of provisions that may constitute unjustified barriers to trade. Further

efforts are required to ensure alignment with the

acquis

on cultural goods.

Regarding public procurement, Poland’s legislative situation is to some extent in line

with the Community

acquis.

Further alignment will be needed in particular, in terms of

specifying the entities covered by the legislation, elimination of the national preference

clause and the use of Polish standards. The proposed new legislation should go some way

to meeting these concerns. Further efforts will be required to ensure that they are fully

addressed. With a view to the new law and the recent administrative and territorial

reform in Poland, there is a pressing need for training of staff in public contracting

authorities at all administrative levels.

Chapter 2: Free movement of persons

There has been no progress in the adoption of the

acquis

since the last regular report.

There has been some limited progress in reinforcing administrative capacity.

In the area of

mutual recognition of professional qualifications,

no progress has been

registered during the last year in terms of adopted legislation. However, the internal

distribution of overall responsibilities between different Government bodies has been

more precisely defined. The concept of “professional recognition” still does not exist in

Polish legislation, which only makes provision for “academic recognition/nostrification”.

No concrete progress can be reported on

Citizen’s rights.

In the field of

free movement of workers,

steps have been taken to strengthen the

employment offices with a view to full participation in EURES (European Employment

Services).

Poland’s efforts to prepare its administration for future participation in the system for

co-

ordination of social security systems

are continuing. Poland has signed bilateral

agreements in this field with the United Kingdom, Sweden and Luxembourg, and there

are ongoing talks with some other Member States.

Overall assessment

The overall level of alignment with the

acquis

is very limited. However, in contrast to

the situation reported in the 1999 regular report, some preparatory work has been

undertaken and some draft legislation is under preparation. These efforts will need to be

continued to ensure that there are no provisions in Polish legislation which contradict

Community rules, in particular with respect to nationality, residence or language

requirements. This is the case in the field of free movement of workers, where legislation

is not yet aligned and efforts are required to ensure that all such provisions are removed

and that Poland is able to apply effectively EC legislation.

As concerns preparations to participate in the EURES network, continued efforts are

required to strengthen public employment services, notably as regards the linguistic

training of staff.

The assessment in last year’s report that Poland has achieved a limited level of alignment

in the field of mutual recognition of diplomas and qualifications remains unchanged.

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Legislative proposals regarding some professional qualifications have now been tabled,

but relevant draft acts are currently under inter-governmental consultations or at an early

stage of Parliamentary proceedings. Serious efforts are required in strengthening the

necessary administrative structures in this area in particular concerning the coordination

of social security systems and the mutual recognition of professional qualifications.

Chapter 3: Freedom to provide services

As stated in the 1999 regular report, Poland has already achieved a relatively high level

of alignment in the field of freedom to provide services. This trend has been consolidated

during the last year by an acceleration of the ongoing bank privatisation and further

progress in terms of supervision of financial markets, while legislative work is

continuing. Legislative progress has been limited during the reporting period.

In the area of

freedom of establishment and freedom to provide services,

legislative

progress has been limited: certain restrictions on foreign entrepreneurs in the film sector

have been removed, and discriminatory requirements related to sport joint-stock

companies have been revoked. Nationality and residence requirements still remain for

small craft industry and craftsman activity, as well as in respect of services provided by

bodyguards, sworn translators, tourism services and gambling and mutual bets.

In the field of

financial services,

there have not been any important changes in

banking

and

insurance legislation.

The amendment to the law on insurance activity adopted in

August brings the legislation in line with developments in other laws.

In the area of investment services and securities

markets,

several amendments to the Act

on Public Trading of Securities and Act on Investment Funds were adopted in form of

Governments’ decrees, which further Poland’s alignment in this area.

Since the last progress report, further acceleration of privatisation in the

banking sector

has taken place (see

economic criteria).

As in the banking sector, the presence of foreign capital in the

insurance sector

is on the

rise with the partial privatisation of the state owned insurance company PZU during the

reporting period

(see economic criteria for further details).

Overall assessment

In the last regular report, the level of alignment in the area of freedom to provide services

was assessed as relatively high. In general terms, this assessment is maintained. There has

been little development as regards freedom of establishment, but progress on the ground

relating to financial services has continued.

Supervision institutions (General Inspectorate of Banking Supervision, State Office for

Insurance Supervision, Securities and Exchanges Commission) have made further

progress in assuring stability in their respective areas. Thanks to their efforts, companies

have upgraded the quality of their services, by raising levels of capital, consolidation and

an increase in technical reserves (in the case of insurers).

The Securities and Exchanges Commission is generally perceived as a very professional

and efficient body. The Securities and Exchange Commission is a governmental agency

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in charge of supervision of public trading of securities. Since 1998, its responsibilities

were broadened and cover also commodity exchanges. The Commission is composed of

its chairman (nominated by the Prime Minister), 2 deputies and 6 representatives of

ministries. On top of this, the office of the Securities Commission employs 130 persons

in 8 departments. In 1999, the Commission met 21 times and made 869 decisions.

According to the law on the National Bank of Poland, the Committee of Banking

Supervision is entrusted with responsibility for supervision over the banking institutions.

The General Inspectorate of Banking Supervision (GINB) is an executive body of the

Committee of Banking Supervision. GINB is an autonomous unit of the National Bank of

Poland. The GINB has continued to be perceived as efficient and well-organised

institution, in spite of criticism over the recent bankruptcy of Bank Staropolski, which led

to the resignation of the General Inspector of Banking Supervision.

Priority has been given to the implementation of existing rules instead of further legal

transpositions. The State Office for Insurance Supervision (PUNU) has been reinforced.

It now has a staff of 100 persons, all working in the Warsaw headquarters. The main task

of the supervision is to protect interests of insured persons. A recent Supreme Chamber

of Control report accused PUNU of not reacting early enough to prevent abuses taking

place in insurance companies and blamed the insurance watchdog for too few and

unnecessary prolonged audits and general low efficiency of PUNU’s work. In the period

since the last regular report, two insurers lost licences and subsequently went bankrupt:

Polisa SA (which in 1998 was 3

largest insurer in the non-life sub-sector, with 7%

market share) and Gwarant SA.

The situation has improved also in the most difficult sectors: co-operative banks and

insurance. The challenge which the supervision institutions face is the increasing role of

multi-sectoral products (e.g. bank-assurance, life insurance with investment fund) and

competition from non-regulated markets (pseudo-banking institutions, like co-operative

savings-and-loan associations). To this end, supervision institutions should improve co-

ordination between themselves.

Although some additional legislative progress has been achieved in the last year, further

efforts are required, also in view of passage to the second stage of the transition period

foreseen in respect of Art. 44 of the Europe Agreement, involving the abolition of most

restrictions listed by Poland in respect of establishment and freedom to provide services.

As far as financial services are concerned, the most urgent areas in which legislation

should be brought in line with the

acquis

are the capital adequacy of credit institutions,

consolidated prudential supervision, and new insurance laws, covering

inter alia

the area

of insurance supervision.

In the field of

protection of personal data and the free movement of such data,

Poland has signed the European Council Convention N° 108 of 28 January 1981 on the

protection of persons in connection with the automatic processing of personal data.

However, further alignment with the

acquis

is still required, notably as concerns personal

data protection.

Concerning the

information society directives,

efforts should be stepped up with the

aim of achieving full implementation.

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Chapter 4: Free movement of capital

The legal framework for the liberalisation of

capital movements and payments

had, as

reported last year, been mainly established by the adoption of the new foreign exchange

law. There have been no significant advances as regards the adoption of the

acquis

during

the reporting period.

As regards the free movement of short-term capital limitations in the form of

authorisation procedures which apply to money market securities transactions and short-

term financial loans and credits, it was expected that the remaining short term restrictions

would be removed at the start of 2000 as the Government has stated in the context of its

commitments vis-à-vis OECD. However, the decision to liberalise was postponed.

As was recorded in the 1999 regular report, other restrictions on capital movements

concern foreign investment in such sectors as gambling and mutual bets, insurance,

broadcasting, telecommunications, legal services, continue to exist and there has been

little positive progress in these areas. Indeed new laws have placed additional restrictions

on foreign investors in some sectors. However, further legislation is currently before

parliament with the intention to amend those elements which are not compatible with

Poland’s obligations under the Europe Agreement.

payments systems

no progress can be reported in relation to the transposition of the

acquis.

Overall assessment

The 1999 regular report noted that in the area of capital movements and payments the

majority of capital flows between Poland and abroad have been liberalised. This having

been said, it further noted that substantial restrictions remain in place, in particular on

direct investments from foreign entities in specific economic sectors, real estate

acquisitions and short-term transactions.

As far as liberalisation of short-term capital movement is concerned, the postponing of its

introduction by the government occurred in a context of current account deficit that was

considered inappropriate by the Polish authorities. An improvement in the current

account situation should lead to a reappraisal of the timetable for liberalisation.

Open issues also remain with regard to the special rights of the State in privatised

companies, restrictions on investment abroad carried out by institutional investors. As

reported in earlier years the acquisition of real estate by foreign legal or natural persons

requires a permit of the Minister of Internal affairs and Administration. No legal or

institutional changes took place in this area.

The most important gap is the absence of legislation in the area of money laundering - a

point borne out by the recent report of the Council of Europe on money laundering which

gave a negative assessment of the situation in Poland in this respect. The report stressed

that in the last five years there were no cases of money laundering in the Polish courts.

The rapid adoption of legislation which has passed through the lower chamber of

parliament would do much to remove a major obstacle to the adoption of the

acquis.

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With regard to cross border credit transfers, these still face restrictions, which will require

specific legislation as well as a change in the existing banking law in order to align with

the

acquis.

Progress in the payment systems' infrastructure was achieved in 1998 with the

introduction of a real time gross settlement (RTGS) system. However, further efforts are

needed to align Polish legislation to the

acquis

in this area.

Chapter 5: Company law

During the period covered by this report, Poland has made further progress in this area, in

particular as regards the protection of intellectual and industrial property rights which is a

short-term priority under the 1999 Accession Partnership. The adoption of a new

market legislation.. Less progress has been achieved in the area of company law in the

strict sense.

Regarding

company law,

the new Act on the Commercial Company Code which is to

replace the Commercial Code of 1934 awaits the signature of the president after having

been adopted by the parliament in September. It is planned to enter into force in 2001

together with the Act on the National Court Register which was adopted in 1997.

In the field of

accounting law

which is already largely in line with the

acquis,

no new

legislation has been adopted over the last year.

Poland has ratified the Lugano Convention on jurisdiction and enforcement of

judgements in civil and commercial matters which entered into force in February 2000.

Training courses on the Lugano Convention for judges have been started and will be

continued.

Concerning

intellectual property rights,

an amendment law to the 1994 Act on

acquis

alignment. The new law significantly improves

the scope and periods of protection and retro-protection, which renders the Polish

legislation to a large extent compliant to the relevant EC Directives in this field. In terms

of legal protection of databases, however, no progress has been achieved. This issue

requires further amendments of the intellectual property legislation. The new law is

introducing stricter penal provisions and allows for prosecution ex officio. The efficient

functioning of collective management is an important condition for an adequate exercise

and enforcement of the property rights.

In the field of

industrial property rights

a new Act on Industrial Property Rights was

adopted in June 2000 which the President refused to sign and, instead, referred to the

Polish Constitutional Tribunal for an examination of its constitutionality. This reference

relates to one specific article concerning the reallocation of trademarks to domestic

producers. The ruling of the constitutional court will therefore apply only to this article

and not the legislation as a whole. The new law will bring Polish legislation further into

line with the requirements of the Community

acquis.

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Overall assessment

On the whole, Poland’s progress so far regarding company law is substantial.

Existing Polish company law has been modelled largely on German company law, and

already incorporates most legal forms of companies. Current differences between the

Polish legislation and the Company law Directives are few. The Polish legislation

nevertheless requires some further amendments with regard to the 1

and 2

Company

Law Directives, the 11

Directive regarding registration requirements for branches of

companies, the 3

and 6

Directives on mergers and divisions of public limited liability

companies respectively and the 12

Directive on the single member limited liability

company.

New intellectual and industrial property laws implied further adjustments to Community

standards in a key sector of the internal market. There is a particular need to ensure an

adequate and efficient implementation of both new laws both at administrative and

judiciary level, notably with a view to appropriate measures against piracy and

counterfeiting. In addition to strengthening the judiciary, improved co-operation between

enforcement bodies including border, customs and police services as well as enhanced

staff training, will all require further particular attention in the immediate future.

In the field of intellectual property rights further legislative alignment is required as

regards the protection of databases. Legislation on the rationalisation of the collective

management societies is also required.

In the area of industrial property law further important legislative measures are necessary.

The legislation on designs has to be developed and in the field of patents new legislation

has to be introduced in order to provide protection for biotechnological inventions and to

introduced for “Supplementary Protection Certificates.

Administrative preparations for the entry into force of the new Court Register law, which

will provide for a central, universally accessible register of entrepreneurs, companies and

insolvent debtors, are underway. Information Technology systems have been developed

and tested in five pilot courts in Poland.

Chapter 6: Competition policy

Since last year’s regular report, significant progress has been made in the area of

competition in particular with the adoption of the framework state aid Law.

In the field of

anti-trust

acquis

the Polish Government has adopted two executive

regulations which have simplified and clarified anti-trust proceedings: firstly in

December, 1999 the regulation concerning the detailed requirements for notifications of

intended mergers, and secondly in February 2000 the regulation on detailed terms and

procedures of conducting controls of entrepreneurs’ compliance with the provisions on

counteracting monopolistic practices.

In the field of

state aid,

in June 2000 the Parliament adopted the Law on the conditions

of admissibility and monitoring of state aid to entrepreneurs that will enter into force in

January 2001. The law would contain the basic principles of EC State aid

acquis

providing for a basis for the systematic ex-ante control of aid projects. Following the

adoption of the Law, Poland therefore has achieved a relatively high level of legislative

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approximation in the field of State aid control. Some disparities still remain. For instance,

restructuring aid projects involving large companies would, under the Law, not always

have to be scrutinised on a case-by-case basis by the OCCP. This shortcoming needs to

be addressed, possibly in connection with the adoption of the relevant secondary

legislation.

The Polish legislation in force on the Special Economic Zones (SEZ) includes elements

contrary to the

acquis

and Poland’s immediate obligations under the Europe agreement.

Pending legislation is intended to do away with the elements of operating aid and ensure

that aids in the sensitive sector respect the special rules under the

acquis.

However the

so-called “acquired rights” of investors, (c.f. tax holidays until 2017) are to be upheld.

These rights, which are in apparent contradiction to Poland’s earlier obligations under the

Europe Agreement are very problematic. The situation is aggravated by the fact that

Polish authorities continue to deliver permits under the old legal basis until the entry into

force of the amended Law.

As regards transparency of aid, Poland has submitted, in autumn 1999, the Report on

state aid granted in the year 1998. This report largely follows the methodology and the

presentation of the Community’s Survey on State aid and provides for a relatively good

level of comparability. The OCCP has also, in April 2000, submitted to the Commission

the State aid inventory. Its classification of aid broadly follows the EC practice, thereby

enabling the OCCP to keep track on State aid granted. The inventory should however

also include information on any individual aid awards granted outside the State aid

schemes.

Overall assessment

As regards anti-trust, Polish legislation is to a great extent compliant with EC law.

Regarding implementation the main challenge is now to ensure that the Office for

competition and consumer policy gives priority to cases that concern the most serious

distortions of competition (e.g. cartels). Further alignment is still necessary, especially in

view of developments in the

acquis

on vertical restraints.

As regards state aid, Poland has made progress in the field by way of adopting the State

Aid Law. The main priority now is to ensure the enforcement of the State aid rules is

systematic and includes a swift alignment of existing aid schemes and legislation under

which authorities at various levels grant aid. Granting of State aid in Poland has so far

not been systematically controlled and the State aid award provisions have only been

partially aligned with the Community legislation. The future enforcement practice of the

OCCP and progress regarding the aligning of existing aid arrangements with the

acquis,

will be a serious test to the administrative capacity in the State aid field. This can only be

expected when the implementation of the Law on state aid is appropriately commenced.

In this context it should be ensured that the State aid Department of the OCCP receives

adequate overall resources.

In terms of administrative capacity, the OCCP is the national competition authority in

Poland. It has faced an expanding role over the last few years as its key activities have

been enlarged to cover merger control, counteracting monopolistic practices and

consumer protection.

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The OCCP will be entrusted with full powers as monitoring authority for supervising

state aid pursuant to the entry into force of the new state aid Law in 2001. Furthermore,

the OCCP is in charge of the legislative work that contributed to harmonisation of the

Polish antimonopoly and consumer protection laws with the European Community

legislation.

Given the existing and new responsibilities of the OCCP, it is of crucial importance that

the overall resources of the Office are sufficient. The fact that the Office is not classified

as a Ministry results in lower levels of remuneration which in turn make it more difficult

to retain staff. At the end of 1999, the Office employed 190 persons, of whom 145 hold a

university degree. Of these the State Aid Team created in June 1999 is intended to have a

staff of 20 by the end of the year

In order to ensure a differentiation of maximum aid intensities in assisted areas, Poland

should commence, as a matter of priority, the preparation of a regional aid map in

consultation with the Commission.

Chapter 7: Agriculture

Poland has made limited progress in adopting the

acquis

since the last regular report.

Agriculture (including hunting, forestry and fishing) in Poland accounted for 3.8% of

GDP in 1999, as opposed to 4.8% in 1998.

Employment in agriculture according to

Eurostat figures has declined over the past years accounting for 18 % of total

employment in 1999.

In 1999, a significant drop in agricultural production (-3.7%)

occurred, particularly in plant production (- 11.5 %) due primarily to unfavourable

meteorological conditions and to a lesser extent to reduced crop areas. Reduced animal

production (- 1.6%)

resulted primarily from a decrease in animal stock.

In 1999, EC imports of agricultural products originating in Poland increased by 1 percent

€1080

million. EC exports to Poland decreased by around 10 percent to

€1616

million.

The trade balance in favour of the Community amounted to

€536

million compared to

€723

million in 1998, a decline of over a third.

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. Fuller 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.

According to Polish data, 4.3 million people are employed in agriculture, which accounts for about 27% of

the total employment in 1998. These data are based on a different definition to EU data and include the

high share (around 44%) of people declared as farmers but not deriving income from their holding.

Source: FAO

Source: Uruguay Round Agreement definition of agricultural products, figures taken from EUROSTAT

COMEXT (see Agriculture in the European Union - statistical and economic information 1999 p. 36 for

definition of the products).

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Bilateral negotiations between the EC and Poland opened in 1999 with a view to new

reciprocal concessions for agricultural products and were concluded between negotiators

in September 2000 (see

section A.b. – Relations between the European Union and

Poland).

There have been no major changes in Polish agricultural policy since the last Regular

Report. Some strategic documents were adopted of which the Pact for Agriculture is the

most important one. Endorsed by the Polish government in early September, it is

designed to improve competitiveness and working conditions in agriculture, prepare

Poland’s integration into the European Union and improve the viability of the socio-

economic fabric of rural areas. Support is structured around four pillars: agriculture and

its environment, development of entrepreneurship and creating off-farm employment,

integrated social policy for rural areas and development of rural environment, partnership

and social dialogue. In addition, in early 2000, the Polish Fine Food Programme was

adopted aiming at promoting the quality of food originating in Poland. In the context of

continuous decline in farm incomes, the Polish government has chosen to continue with

intervention in the agricultural markets.

In 2000, the agricultural budget amounts to

€1158

million including the loan from the

World Bank and appropriations for co-financing of Phare and Sapard programmes. In

comparison to 1998, allocations for agriculture, rural development and agricultural

markets increased by 20%, and represent 3 % of the State budget.

Legislation in the form of four Regulations of the Minister of State Treasury have been

adopted so as to facilitate the sale, lease and exchange of property and the control of the

land market. However, restrictions on foreigners purchasing land remain. Privatisation

and restructuring of land and state agricultural property has advanced considerably under

the lead of the Agricultural Property Agency.

Horizontal issues

In the last year, the main structure of the institutional framework for the management of

measures related to the

European Agricultural Guidance and Guarantee Fund (EAGGF)

was decided. The "concept of the operation of paying agencies", adopted in February

2000 divides the main tasks arising from the Common Agricultural Policy (CAP)

between two agencies. Thus, Poland has opted for two paying agencies: ARMA (Agency

for restructuring and modernisation of agriculture) and AMA (Agricultural Market

Agency). ARMA will manage rural development measures under Guarantee and

Guidance as well as direct payments. AMA (Agricultural Market Agency) on the other

hand, will be responsible for market mechanisms: intervention, market information,

supply management instruments. For some market sectors (hops, fruit and vegetables,

tobacco, dried fodder), the Inspection for Agricultural Products Purchase and Processing

(ISiPAR) is designated as the relevant management body (distribution of production

quota, disbursement of payments, monitoring, etc). ISiPAR is also the main body for

quality control assessment of agri-food products besides the Central Standardisation

Inspectorate (CIS).

As regards preparations to establish the

Integrated Administration and Control System

(IACS) in Poland, a working group has been appointed for its introduction. The

institutional structures for the implementation of the system have been defined and a

legal basis has partly been provided. Existing tools which may be used for the purpose of

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IACS have been identified as well as further needs for the full implementation of the

system. The budget for the development of IACS was adopted in July 2000

Concerning

Farm Accountancy Data Network,

a clear institutional framework has been

established although the respective legal basis still needs approval. The Institute of

Agricultural Economics will be responsible for defining principles for the selection of

farmers, for data collection, for verification and submission to the Commission. The

selection plan of farms will be approved by the National Committee set up for Farm

Accountancy Data Network.

Some progress can be stated for organic farming for the period assessed. An aid scheme

has been launched for certified organic producers (€ 126 per ha).

Common Market Organisations

Since last year’s regular report, no legislation has been adopted in this area, with the

exception of the law on establishment of producer groups and associations thereof,

adopted in September 2000 and covering producer groups for fruit and vegetables, hops

and tobacco.

However, for the Polish milk sector a development strategy was adopted in early 2000 to

improve its competitiveness and capability to adapt the organisation and regime to the

Community requirements. It will combine actions for producers and processors of milk

and for the organisation of the milk market. Financial support for the milk sector is

provided by different sources, EBRD, PHARE, private contributions and SAPARD. As

for the key issue of milk quality, at present about 40% of the milk produced is of "extra"

quality, thus meeting EC requirements. A new Polish standard "raw milk purchase" came

into force in January 2000.

Rural Development and Forestry

No major developments have occurred in the field of rural development and forestry

besides the development and submission of the SAPARD programme. The general

outline of agri-environment measures and of afforestation was introduced in the

SAPARD programme at a pilot project level. Currently support for restructuring and

modernisation of agriculture and food processing as well as of services for agriculture is

provided by means of subsidies to interest rates on credits granted by banks co-operating

with the Agency for the Reconstruction and Modernisation of Agriculture (ARMA).

Veterinary and phyto-sanitary

The legislative process has seen little progress in the

veterinary field

since the last

Regular Report. The Regulation of the Minister of Agriculture and Food Economy of

October 1999, on the scope of control tests as to infection of animals and the residue of

banned chemical and biological substances as well as radioactive contamination in the

tissue of slaughter animals, meat, animal-products, inedible raw materials of animal

origin, specifying sampling methods and the documentation of the tests, entered into

force in December 1999.

With regard to the Organisation of the Polish Veterinary System, the legislative power for

veterinary laws lies within the competence of the Ministry of Agriculture. On the other

hand, the “Veterinary Inspection” has been established pursuant to the Veterinary

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Framework Act and started its activity in January 1999. It is a unit of the state

administration managed by the Chief Veterinary Officer (CVO). The CVO is appointed

by the Prime Minister at the request of the Minister of Agriculture. The CVO heads the

General Veterinary Inspectorate that is the Central Competent Authority for veterinary

matters in Poland. There are 35 staff working at the central organ and the rest of the staff

work in regional offices in a structure modified to reflect the new administrative division

of the country (16 Voivodships, 292 counties, including 27 border veterinary

inspectorates).

Pursuant to the Regulation of the Minister of Agriculture and Food Economy of May

1999, the number of border crossings on which border veterinary control was

accomplished decreased from 39 to 32 in the reporting period. Upgrading of the

inspection arrangements at the future external borders has started but they are not in full

compliance with the

acquis.

The adjustment of border control outlets, imports and transit

procedures to the veterinary requirements of the European Community will begin only

after adopting the new framework act.

In the

phytosanitary sector,

some progress could be reported in adopting legislation: the

law on seeds was adopted in September 2000 and the law on fertilisers and fertilisation

was signed by the President in August 2000. Their compliance with the

acquis

can be

assessed only after the official publication.

Overall assessment

The preparations for the integration of Poland's agricultural sector into the European

Union still need considerable efforts at both the legal and institutional levels. The pace of

adoption of agriculture-related laws was very slow over the past year though the

legislative procedural process accelerated towards the last few months. For the

management of Community instruments, basic decisions on the institutional framework

have been taken but in many cases still require a legal foundation and further refinement.

Adjustment of procedures in the designated institutions for final enforcement of

instruments according to Community rules is in its infancy and should be reinforced.

As regards

horizontal issues,

while the basic decisions on the division of tasks between

institutions related to the management of

EAGGF

have been taken, further steps have to

follow. The adoption of legal grounds for the enlarged or new scope of the two paying

agencies, ARMA and AMA, and the other relevant bodies has to be finalised. This will

empower these institutions to put into place the necessary structures and to start work on

the elaboration of rules and procedures for the enforcement of the

acquis.

For all

administrative bodies, including the Ministry of Agriculture and Rural Development,

employment of new staff, training, and the purchase of equipment will require further

considerable efforts in terms of financial and human resources.

Many preparatory steps have been taken for the implementation of the

integrated

administration and control system.

However, its implementation in full compliance with

EC requirements needs further considerable efforts. A legal basis has to be laid down.

Though the system will partly be based on existing elements, essential parts such as the

computerised data base, the farm registration, the plot and animal identification system

have still to be developed. Institutional decisions for the management of IACS need to

be taken.

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Poland is not ready to apply Community

quality policy

to promote products of a specific

origin and geographical indication. In addition to the legal basis, the implementation of

such a policy would require the setting up of the necessary registration and control

bodies. The Polish Fine Food policy does not include such definitions and rules.

For the participation in the

Farm accountancy data network,

a clear institutional

framework has been established by charging the Institute of Agricultural Economics with

this task. However, the necessary structures, rules and procedures can only be put into

place after the pending approval of the respective legal basis.

As regards the implementation of

Common Market Organisations,

the legal

implementation has not advanced greatly. AMA has been designated as the intervention

body and has started to gradually harmonise intervention mechanisms with EC

mechanisms. However, for all sectors, further adjustment of rules and procedures for

intervention and foreign trade are necessary. Systems for private storage, for the

management of temporary surplus have to be introduced. Methods and quality standards

need elaboration, laboratories have to be designated. For all the tasks resulting from the

implementation of CMOs, the adaptation of AMA through the adoption of the Law on

the establishment of an Intervention Agency is still necessary.

In the area of rural

development and forestry,

efforts were concentrated in the last year

on the preparation of the SAPARD programme. It has been decided that ARMA will

become the SAPARD Agency and upon accession the body responsible for rural

development measures. To this end, ARMA will have to run two different management

systems as most probably rural development measures will be implemented under

Guidance and Guarantee rules. As for the preparation of the implementation of the

different rural development measures, the agri-environmental measures, which will

become mandatory upon accession, are in the pilot project stage. The same is the case for

afforestation. No progress could be identified for the classification of less-favoured areas

A successful implementation of the rural development strategy needs to be broader than

just agricultural restructuring and should be based on the increase of the level of

education of rural population. The Rural Education programme, which is essential to

accompany rural development policy, is still in the planning stage.

Concerning the

veterinary field

no legislative progress could be assessed even if work

on the draft of the new “General Veterinary Act” has been increased during last months.

This draft lies in the centre of the Polish activities aiming at the full transposition and

implementation of EC veterinary law. The Council of Ministers adopted the final draft on

12 September 2000 but it still has to go through Parliament. Only the adoption on the

current time scale of the amended “Veterinary Framework Act” could authorise a real

strengthening of the legislative process. Moreover, in view of assuring the full

transposition of certain directives the framework law must be accompanied by a series of

around 106 technical application provisions, which will be issued as Ministerial decrees.

This means that the Polish authorities are only at the first step of the process and have to

accelerate the legislative work in the veterinary field.

In the

phytosanitary sector,

no progress could be reported in legislative approximation.

As regard the transposition work on the 6 phytosanitary subsectors, the schedule of

changes needs acceleration and the adequacy of any new draft legislation aiming at

transposing Community directives will be apparent in the table of correspondence

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between the national legislation and the relevant phytosanitary

acquis

which the Polish

authorities are preparing.

Referring to plant health specifically, Poland places a lot of emphasis on the

strengthening of border inspection posts, which seems to go beyond current Community

minimum requirements in that respect. On the other hand, Poland seems to underestimate

the importance of the preparatory work which is needed to establish an appropriate

control system of the domestic production in order to phase out the internal border

control at the time of accession.

There are two competent authorities for the phytosanitary sector in Poland: the Plant

Protection Inspection Service and the Seed Inspection. Since 1 January 1999, in

accordance with the EC requirements, the latter became an independent organ, the

Central Inspectorate of Seed Inspection (CISI). CISI is responsible for qualifying seed

material and controlling trading in this material in Poland. The Plant Protection

Inspection Service is acting on the basis of the Law of 12 July 1995 on crop protection.

Its responsibilities comprise crop supervision, preventing harmful organisms crossing

state borders, prevention of threats to human and animal health and environmental

pollution which might occur as result of marketing and application of pesticides. Work is

continuing to improve phytosanitary border controls.

Chapter 8: Fisheries

Since the last regular report, no major legislative developments have taken place in this

field.

In November 1999, the Fisheries Department, which currently has a staff of 18 people,

was created in the Ministry of Agriculture and Rural Development.

market policy

no progress has been achieved since the last Regular report.

As regards

resource management, inspection and control,

a regulation on the

management and protection of sea life, which establishes an upper limit for the number of

Polish fishing vessels in the Baltic Sea, has been adopted. Under the Ministry of

Agriculture and Rural Development, three Regional Maritime Fisheries Inspectorates

have been created in Gdynia, Slupsk and Szczecin which replace the General Inspectorate

for Maritime Fisheries. The three inspectorates employ 72 persons, but these appear to

have been mainly relocated from the previous administration and the tasks of the

inspectorates seem to correspond to previous duties of that administration. Therefore, the

administrative development cannot as such be considered as a measure of improved

efficiency as regards practical fisheries control activities.

€8

million have been allocated

to these inspectorates between 2000 and 2002 to increase the number of staff and to

improve the availability of technical resources. As regards control, no progress has been

achieved in setting up a full scale Vessel Monitoring System in line with the

requirements of the

acquis.

In the field of

structural actions

(including fleet registration) Poland has adopted a

structural policy plan for the fishery sector for the years 2000-2006 which could

constitute the initial basis for developing programmes for restructuring and

modernisation of Polish fishing fleet and fish processing infrastructure. In the reporting

year, Poland also adopted a series of secondary legislation to prepare the way for the

control of fisheries and the use of fishing quotas. Primary among these is the Ordinance

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on “determination of keeping the record and on the rules of marking of fishing vessels,

on standard certificates of listing into the register and on issuing fishing signs as well as

on the level of fees charged for the entry into the registration”. This regulation lays down

the scope of information about fishing vessels entered in the register. It does not,

however, foresee the introduction of the Fishing Vessels Register required by the

acquis,

which is scheduled for end 2000.

Poland provides

state aid to the fisheries sector

in the form of Value Added Tax

exemption and excise tax on fuels for fishing vessels, and of subsidisation of loans

granted for the purchase and storage of sea fish. In July of this year the Parliament

adopted an Act, pursuant to which VAT amounting to 3% will be apply to fisheries in

2001.

Overall assessment

In view of the very limited uptake of the

acquis

in this field much remains to be done in

all key areas of the Common Fisheries Policy (resource management, control, structures,

market). The adoption of the new Fisheries Act planned for end of 2000 is a first, but

only a first, step in this direction.

Poland’s implementation capacity is very weak and needs to be strengthened, in

particular qualified staff should be recruited and the necessary budget earmarked so as to

ensure the implementation of the Common Fisheries Policy upon accession. As regards

market policy, this requires

inter alia

controlling the implementation of common

marketing standards in ports and on wholesale markets, collecting and transmitting data

concerning the price reference regime and data on markets in the representative ports, and

applying the recognition conditions for producer organisations.

As concerns resource management, the reorganisation of the three Regional Maritime

Fisheries Inspectorates could be an important step forward with regard to the

administration of resource management. Because Polish legislation does not yet

comprise landing declarations and first sales notes and Poland has not introduced the

computerised retrieval of data, there is no possibility of performing crosschecks on the

information received from logbooks. Priority should therefore be given to an EC-

compliant inspection and control policy, including the setting up of a Vessel Monitoring

System. With regard to structural actions, the administrative capacity to implement the

management of Community structural actions in fisheries needs to be developed and the

setting up of an operational fishing fleet register, in conformity with EC requirements,

dealt with as a priority.

With regard to international

fisheries agreements,

Poland has bilateral fisheries

agreement with 8 countries and is part of numerous multilateral

agreements/organisations.

Chapter 9: Transport policy

Since last year’s regular report, there has been some progress in the area of transport,

especially as regards the adoption of new legislation.

Regarding

horizontal issues,

one positive element has been the adoption of the Law on

Economic Activity. This repeals current provisions pertaining to licences for entities

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operating transport services and introduces equal operating conditions for domestic and

foreign entities, with the exclusion of economic activity in the area of air transport and

railways.

In the field of

transport infrastructure,

the main investment efforts have, as in previous

years, been concentrated in the development of the four transport corridors on Polish

territory. Poland has approved the final report on Transport Infrastructure Needs

Assessment (TINA) of October 1999. This should form the basis for extending the

Trans-European Networks to Poland.

In the field of

road transport

some progress has been made in adopting secondary

legislation: several technical regulations were passed since the 1999 report (three

regulations on roadworthiness tests, two regulations on documents certifying the right to

drive and the registration and marking of vehicles, and finally a regulation on the

procedure of drawing up and making accessible data on the public roads network).. In

April 2000, the multilateral INTERBUS programme was initialled by Poland. Its

implementation will result in partial alignment with the road passenger transport

acquis.

With regard to

railway transport,

the institutional changes in the Polish States Railways

(PKP) have led to the establishment of independent entities: the Directorate of Railway

Infrastructure, the Directorate of Passenger Operations and the Directorate of Railway

Freight Operations CARGO.

The law on commercialisation, restructuring and privatisation of PKP (the Polish State

Railways) was adopted in September 2000. The law includes provisions on infrastructure,

competition and licensing in railway transport, and is aimed at carrying out reforms

adjusting PKP to market conditions and the

acquis

requirements and at speeding up

privatisation. PKP’s debts are a cause for concern: in a number of instances power

supplies have been cut due to unpaid bills resulting in the temporary shutdown of

services in some areas.

As regards

air transport,

there has been no progress in adopting legislation The

privatisation of the Polish flag carrier, LOT Polish Airlines, started successfully.

maritime transport,

there have been both positive and negative developments. The

encouraging decrease in detention rates for inspected ships from 6.92% to 5.08% brings

Poland closer to the EU average of 3.6%. The gloss has to some extent be taken of this

achievement by the (unrelated) decision of the International Association of Classification

Societies (ICAS) to terminate the Polish Register of Ships associate status in ICAS due to

serious contravention of the ICAS quality system certificate scheme. Regarding

administrative structures, the Department of the Maritime Administration in the Ministry

of Transport and Maritime Economy is responsible for the preparation and coordination

of maritime policy. The three maritime offices located in Gdynia, Slupsk and Szczecin

deal with issues of environmental protection and pollution, maritime safety and marine

traffic, each office having a division of European integration.

Overall assessment

The overall level of alignment with the

acquis

in the transport sector is limited.

Notwithstanding the preparatory work which has been undertaken, much remains to be

done in order to adopt and implement the necessary legislation and develop the

appropriate administrative structures. The process of transposition of the

acquis

should

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be intensified, as in many cases it constitutes the necessary legal basis for introducing the

institutional changes.

The administrative capacity in most areas remains weak and will need considerable

reinforcement if the

acquis

is to be implemented effectively. This is particularly the case

for maritime transport.

In land transport, substantial progress remains to be done. Social legislation in road

transport has only been partly introduced; qualitative criteria for admission to the

occupation for road transport operators is still pending, which will have a knock-on effect

on vocational competence and the establishment of vocational training centres. On road

taxes and charges, no progress has been reported regarding the problematic Polish

‘vignette’ system. Efforts are required towards compliance with the

acquis

on weight

limits of trucks. One of the most important shortcomings of the Polish roads is that only

0.5% of the national network fulfil the condition to support 11.5 tonnes–axle-load lorries.

The adjustment of roads will require substantial capital investments.

In railway transport, with the adoption of the law on restructuring of PKP, an important

step in the transposition of the

acquis

has been taken which paves the way to

improvements in the Polish railway sector. It is recommended that Poland intensify its

efforts to achieve compliance with the railway

acquis

ahead of accession.

With regard to inland waterway transport, the establishment by the Government of an

inland waterway scrapping fund would constitute a step forward. Considerable progress

is still required both in respect of legislative alignment and of the reinforcement of the

administrative capacity.

In the air transport sector, an early finalisation of negotiations between the EC and

Poland should make further efforts to ensure the progressive incorporation of the

acquis

by joining the European Common Aviation Area. Budgetary and structural adaptations

appear necessary in the field of air safety. Substantial efforts will be required to complete

the restructuring of LOT.

As regards maritime transport, there is a need to improve maritime safety and to reinforce

the present administrative capacity. Despite recent improvements in the safety

performance of the Polish fleet, the safety record of Polish flagged vessels still does not

meet the average record of the EU fleets.

Chapter 10: Taxation

Since the 1999 Regular report, Poland has achieved further progress in legislative

alignment with the

acquis.

Improvements in the tax administration have been much more

limited in scope.

In the area of

VAT

the reduced rate of 4% was increased to 7% for the supply of

pharmaceutical products and medical equipment. Furthermore, certain supplies,

previously exempt from taxation, including municipal transport, sewage disposal, water

supplies, street cleaning, refuse collection, chimney sweeping and washing and dry

cleaning services have become taxable at the reduced VAT rate of 7%. In addition,

exemptions for protected labour establishments, prison-employing establishments and

school workshops have been abolished, and thus become taxable.

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A VAT refund scheme for foreign tourists and the right of deduction of input VAT for

international services have been introduced and the definition of the taxable amount has

been amended in order to include transport and insurance costs where this was not

already the case.

Finally, the July amendment to the law on tax on goods and services and excise duty has

extended the VAT system with regard to agricultural products. The first phase entered

into force as in September 2000, whereby a rate of 3% has been introduced on items

previously exempt or zero-rated.

Concerning

excise duties,

the most significant progress relates to the introduction of a

single combined (specific/ad valorem) duty on cigarettes together with an increase in the

duty rate on cigarettes. The duty rates on fuel have also been increased and resulted in

unleaded petrol having reached the minimum duty level of the

acquis.

In the field of alcoholic beverages the taxable scope has been broadened, whereby alcohol

with an alcoholic content of 1.2% and beer mixed with non-alcoholic beverages, in which

the alcoholic content exceeds 0.5%, have become taxable. The previous special scheme

for small breweries, which was discriminating against certain imports, has been

abolished. Moreover, the excise duties on both domestically produced and imported

chewing gum have been abolished.

As regards the performance of the

tax administration, its co-operation and mutual

assistance,

Poland continued its efforts to strengthen the administration, the co-operation

with other tax administrations and international bodies.

Some progress has been achieved in rendering the tax administration more taxpayer-

friendly. Tax return forms, user instructions and other useful information are now

available via internet. Tax declarations and procedures still require significant

simplification. Compliance with the tax administration’s requirements continues to be a

heavy burden for corporate and individual taxpayers. Steps have been taken to establish

the Central Office for VAT Information Exchange, which is part of the modernisation

process of the Polish tax administration. Furthermore, two persons have been recruited in

order to commence the setting up of fiscal warehouses.

In the field of

direct taxation,

changes in corporate taxation have been introduced

allowing for a better efficiency of the tax services and reduction of the taxation burden on

business. The new rate of corporate income tax is 30 per cent (instead of 34 per cent

previously). In the coming years, tax rates will be gradually reduced (from 28% in 2001

to 22% in 2004). Tax deductions for companies with high investment rate have been

abolished. The tax rates in 2000 are 19, 30 and 40 per cent. All existing tax deductions,

including those for housing construction of individuals, have been maintained.

Overall assessment

Overall, there has been some progress in fulfilling the legislative requirements necessary

for accession. However, this progress has not been mirrored in developments as regards

the administrative capacity necessary to run the system: considerable further effort will be

required in this respect.

Poland has continued to gradually align its VAT legislation to that of the

acquis,

although

efforts are still required. The main problems relate to tax-exempt transactions and the

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taxation of the property market. Furthermore, a range of products is taxed differently

depending on origin, which results in discrimination against imports. It is important that

Poland establishes a well-structured pre-accession strategy, so as to attenuate any

negative impact on consumer prices arising out of alignment with the

acquis.

The efforts made in the field of excise duties further Poland's alignment with the excise

duty

acquis.

Additional efforts should, however, be addressed towards meeting the

Community’s minimum duty levels, in particular in respect of the taxation of cigarettes

and mineral oils.

Some efforts have been made to initiate the process of modernising the Polish tax

administration. The implementation of the needs identified in this area will be an

essential task in Poland’s pre-accession strategy. The computerisation of the tax

administration should also be addressed more rigorously.

The full computerisation of tax services has not yet been achieved as the POLTAX

system is not yet working. In addition, the lack of a wide area network means that tax

offices and chambers are not interconnected.

Chapter 11: Economic and monetary union

A detailed assessment of Poland’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

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.

No legislative developments have taken place in this field during the reporting period.

Overall assessment

Poland will participate in EMU upon accession with the status of a country with a

derogation as per 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.

Overall, Poland has adopted substantial parts of the EMU-related

acquis.

Necessary

legislative adjustments are well identified and being prepared.

Remaining legal provisions to be harmonised relate to the independence of the central

bank. The National Bank of Poland (NPB) already enjoys a high level of independence.

However, the law on the National Bank for Poland needs to be amended with regard to

the participation of a government representative in the sessions of the Monetary Policy

Council, the financial management of the NBP and the independent audit of the central

bank.

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Chapter 12: Statistics

During the reporting period Poland has made further progress in this area.

Concerning

statistical infrastructure,

the Polish statistical authorities have continued to

align their working methods to EC practices. The necessary resources are available such

that the foreseen statistical programme can be implemented. The overall staff supply in

terms of quantity is sufficient but not always in terms of qualifications. Some sensitive

areas like National Accounts and Information Technology are still understaffed and in

addition their turnover remains too high. Following the territorial and administrative

reform, the 16 regional statistical offices received new tasks including regional statistics.

The co-operation of the Polish statistics sector with Eurostat and the statistics authorities

of the Member States has been intensified.

As regards

demographic and social statistics,

preparations for the population census

including the underlying law are underway. It is to take place in 2002 (in parallel with the

agricultural census) both of which are foreseen in a 4-year budget programme of PLN

600 million (€147 million) covering the budget years 2000-03. Test surveys which met

the EC requirements have taken place in several pilot municipalities during May/June

2000.

In the field of

regional statistics,

some progress has been made. The Regulation on

NUTS classification was adopted in July 2000, this foresees 2489 municipalities

(gminas), 373 powiats, 44 groups of powiats (corresponding to NUTS III), 16

voivodships ( corresponding to NUTS II) and the country as a whole.

Concerning

business statistics,

the scope of statistic surveys has been expanded to

tourism statistics and prices and products statistics. Estimates have been conducted for

the hidden economy. However, products statistics remain an area of concern where

further efforts have to be made to adjust the methodology of surveying production

(PRODCOM).

Transport statistics

require further work especially in the field of road transport and

vehicle register which is now envisaged only for the year 2005.

As regards

agriculture statistics,

preparations for an agricultural census in 2002 are

underway. Full adjustment of surveys with Community standards can be expected after

the census. A new structure has been established in the Ministry of Agriculture which is

responsible for the co-ordination of surveys with the GUS.

Overall assessment

Poland’s legislative framework is, as noted in the 1999 Regular report, largely in

compliance with the Community statistical

acquis.

The foreseen censuses and surveys will contribute to render the sector in line with the

acquis.

Areas where further efforts are needed are business statistics (implementation of

PRODCOM) and

trade statistics

where preparations for the introduction of the

Community-wide Intrastat system on accession are underway. The co-operation between

the statistics sector and other relevant administrations (i.e. customs services) should

remain the focus and needs further strengthening.

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For external trade further improvements in the customs services are needed in order to

relieve the statistical services of data collection and verification.

On administrative capacity the Polish Central Statistical Office could be considered as a

professional institution with a clear structure, experienced staff and an informatics system

which has been substantially upgraded in recent years. This remains the case, although to

ensure that this situation continues into the long term may require further attention to the

staffing issues mentioned above.

With regard to resources, it should be ensured that the annual budgets of the forthcoming

years actually reflect the planning of the future censuses so that the resources can be

made available in time.

Chapter 13: Social policy and employment

Little progress has been made during the reporting period as regards the adoption of

legislation. Only two pieces of legislation, in the field of labour law and occupational

health and safety, intended to align Polish legislation with the

acquis

were adopted.

There have also been some developments in administrative capacity.

As regards

Labour Law

limited progress has been made during the reporting period

through an amendment to the 1994 Act on employment and combating unemployment,

adopted in January 2000. This amendment introduces into Polish legislation some of the

EC provisions on collective redundancies.

The amended law on pension schemes came into force in April. The amendments should

ensure consistency with the provisions on

equal treatment for women and men

occupational social insurance systems in existing EC legislation (see

also Political

Criteria, Economic, social and cultural rights).

In the field of

health and safety,

a Regulation of the Minister of labour and social policy

on the manual handling of loads was adopted in March. This will enter into force within

six months except in seaports where it will enter into force after 12 months.

The current number of Inspectors have been slightly increased and is now 1369. Further

efforts are required in alignment and administrative capacity.

As was noted in the 1999 regular report,

Social Dialogue

in Poland is dominated by

tripartite dialogue. This dialogue, which takes place within the tripartite Commission for

social and economic affairs, continues to be hampered by the withdrawal in April 1999 of

the OPZZ Union, whose absence means that the Commission’s decisions are no longer

binding on the government. There has been considerable reflection on how the bipartite

dialogue could be developed but with few tangible results during the reporting period.

Autonomous social dialogue at sectoral level is still missing while no progress seems to

have been registered at enterprise level, with social dialogue not taking place in most new

enterprises.

The employment situation deteriorated through 1999. The labour force survey shows that

employment fell by more than 4% between February 1999 and February 2000, by which

time the employment rate had fallen to 56% - well below the EU 1999 average of over

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62%. Over the same period, the unemployment rate rose from 12.5% to 16.7%, despite a

further fall in labour force participation.

More recent indicators on employment and unemployment from registration sources

suggest that the economic recovery during 2000 has not yet (as of mid-year) translated

into an improvement in the labour-market situation.

Although much of the recent increase in unemployment has been cyclical in nature,

Poland also continues to face serious structural problems in the labour market (see

economic criteria).

In response to this challenge, a national strategy for employment and

human resources development has been adopted by government for the period 2000-

2006.

Following the adoption of the “Strategy”, the government has been working on a detailed

programme for its implementation. It has been decided that the goals outlined in the

document will be realised on the basis of “National Action Plans for Employment

Development”(NAP). This document was adopted in June by the Council of Ministers.

The Action Plan is geared to the four pillars of the European Employment Strategy (EES)

– employability, adaptability, entrepreneurship and equal opportunities - and structured in

line with the 22 “Guidelines for Member States’ Employment policies for the year 2000”.

The regional labour offices subordinated to the National Labour Office were dissolved

and their functions were taken over by self-government units and local public

administration bodies. The Labour Fund resources, aimed at financing active labour

market policy, are divided in half between the National Labour Office (NLO) and the

self-government units.

Poland has started to implement the

social security

reform, which began in January

2000. The most serious problem encountered by the reform is the unsuccessful

computerisation of the national social insurance fund (ZUS). In the past few months ZUS

has significantly improved its administration and transfer of the premiums, thus at least in

part overcoming problems in this respect encountered in the first half of 1999.

Outstanding debts to ZUS are still an issue which requires further attention as the arrears

to the organisation stood at 9.6 billion Zloty (approximately

€2.5

billion) at the end of

1999.

In the area of

Public Health

the first of 3 parts of the Amendment to the Regulation on

tobacco products was adopted. It concerns the content, patterns and manner of placing

warnings, information on the content, the issue of acceptable content, ways of finding the

content, and anticipates the introduction of the norm of 12 mg of tar per cigarette.

Poland is continuing the work on its reform of its health system, including the health

monitoring system.

Overall assessment

There has been little in the way of alignment with the

acquis

or in developing the

necessary administrative capacity to implement it once adopted.

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Serious efforts are needed in most areas covered by this chapter, particularly health and

safety at work. The issue of equal treatment for women and men was highlighted in the

1998 and 1999 reports as requiring urgent attention.

Much work is still needed on the administrative capacity of the National Labour Office

and to labour inspection. The situation as regards ZUS has improved but is still a matter

for concern.

Social dialogue requires considerable further effort if it is to be developed so that it

facilitates the implementation of the

acquis

at local level. This will also entail the

reinforcement of the Government’s administrative capacity so as to better follow and

motivate autonomous social dialogue.

As concerns

employment,

Poland has made progress in transforming its labour market

and adapting its employment system so as to be able to implement the European

Employment Strategy. Consistent efforts will be required, however, to ensure full

implementation of the measures outlined in its recently adopted strategy (see above). In

particular, there should be close monitoring of the capacity of the public employment

service, in its newly decentralised form, to contribute to the delivery of a coherent

employment strategy at the national level.

Current efforts to prepare for participation in the

European Social Fund

need to be

pursued further.

It is too early to judge the impact of the reforms and restructuring which took place at the

start of the year, but this task will not be facilitated by the lack of data relating to the

functioning of the decentralised bodies.

Legislation transposing the EC directive based on Article 13 of the Treaty relative to

discrimination

on the grounds of race or ethnic origin will have to be introduced and

implemented.

Chapter 14: Energy

Progress in this field since the 1999 regular report has been limited in terms of legislation

adopted with no new legislation adopted for most of the sub-sectors. There has been

some progress as regards the restructuring and privatisation of some sub-sectors and in

the general formulation of policy for the sector.

The Polish Government adopted in February 2000 the document “Assumptions of the

State Energy Policy for the period until 2020”. The priority targets in preparation for the

adoption of the

acquis

are the following: security of supplies, improvement of

competitiveness for energy products on domestic and international markets and

protection of the environment.

In the reporting year no progress has been made as regards alignment with the

acquis

the field of

security of supply.

A timetable for full alignment with the

oil stocks

has yet

to be developed. Present stocks correspond to approximately 17 days of national

consumption and fall considerably short of the

acquis

requirement of 90 days. A schedule

of increasing oil security stocks that meet EC requirements has been developed.

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As regards

energy competitiveness and the internal energy market,

the Government

has approved in May 2000 the “Timetable of Privatisation of the Electricity Sector”.

Four energy enterprises have already been privatised, while according to the privatisation

timetable all power plants and distribution companies will be privatised by the end of

year 2002, the last enterprise to be privatised being the transmission system operator

Polish Power Grid Company. In order to allow a smooth privatisation process and avoid

“stranded costs”, the Ministry of Economy has elaborated a programme to address long-

term contracts between energy producers and the national power grid. This compensation

system, which is expected to be implemented by the end of the year 2000 will allow the

granting of compensatory payments to energy producers bound by such contracts. The

system will also help to develop the Energy Exchange, which started at the beginning of

the year 2000 its commercial activity with spot transaction.

In the gas sector, a restructuring programme adopted by the Government opens the first

phase of transformation. Four new distribution companies and one exploration and

production company will be established with Polish oil and gas company (PGNiG), the

current monopoly, as owner. PGNiG will deal with transmission, imports and storage.

The state remains owner of PGNiG. By the end of 2000 the Ministry of Treasury will

perform an economic and financial analysis of these companies and prepare privatisation

strategies.

In the field of solid fuels, in the first four months of the year 2000 Poland produced 9.5%

less coal than in the same period in 1999 and the output costs fell by 10% in comparison

with last year. In February 2000, the average price of one tonne of coal was for the first

time above production costs. However, the debt of the coal sector continues to grow at an

alarming rate. The total liabilities have already exceeded PLN 20.6 billion (over

€5

billion). In order to respond to this situation the Government agreed in the reporting year

corrections to the programme of “Reform of Hard Coal Mining Industry in Poland in the

Years 1998-2002”. The amendments have been submitted to the Parliament in February

and are now discussed in the committees. The main changes concern provisions for

achieving the profitability of coal sales (postponed from 2000 to 2001) and for the entire

mining industry (from 2001 to 2002). The privatisation of hard coal mines continued.

In the oil sector, November 1999 saw the privatisation process enter its crucial phase with

the introduction of the shares on the Warsaw Stock Exchange and the London Stock

Exchange of the new Polish Oil Concern (Polski Koncern Naftowy- PKN, created from

the merger of two companies, the Plock refinery representing two third of capacity and

the operator of service stations). In June this year further PKN shares were offered for

trading on the Warsaw Stock Exchange. The privatisation of the second Polish oil

company, Rafineria Gdanska SA (RG SA) is being prepared.

Poland created, through a recent amendment of the Energy Act, a legal basis for adoption

energy efficiency

acquis.

Secondary legislation should subsequently be enacted. The

Sejm and the Senate adopted the ratification instruments related to the

Energy Charter

Treaty,

while the President has to sign it. The ratification procedure is therefore near to

completion.

Poland has no nuclear energy generation plants. The national atomic energy agency is

responsible for other nuclear installations (research, medical) in Poland.

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Overall assessment

The level of alignment with the energy

acquis

and the preparation for EU membership

varies greatly from sub-sector to sub-sector. The internal energy market, oil stocks and

the coal restructuring programme need further attention. Two essential documents

adopted by the Government during the reporting period - “Assumptions of the State

Energy Policy for the period until 2020” and the programme for the restructuring of the

Polish oil and gas companies - represent an important move forward in preparation of the

energy sector for EU membership

As regards oil, current stocks are far from complying with EC requirements and remain a

fundamental problem. The developed schedule of increasing oil security stocks needs to

be thoroughly assessed. Furthermore, the creation of an independent agency for the

management of the stocks should be considered.

The electricity sub-sector is the most advanced in relation to EC requirements with an

already well established Energy Regulatory Authority as well as an on-going privatisation

process, which despite initial delays has recently speeded up and the governmental

schedule foresees its accomplishment by the end of 2002. The start up of the Energy

Exchange is an important achievement on the way to creating a free electricity market.

The compensation system recently proposed should bring to an end in the near future the

constraints in electricity trade imposed by long-term agreements. However, in this

respect, a clear timetable to remove price distortions for electricity and also for gas

should be developed. In addition, for both the electricity and the gas sub-sectors, the

Energy Regulatory Authority should be reinforced and its independence improved. The

largest delay in restructuring remains in the gas sector. The appropriate implementation

of the adopted restructuring programme will be crucial for a true restructuring of the

sector, particularly as regards the adjustment of the present monopoly, the regime for the

network access, the building of new gas interconnections, the modernisation of

measurement systems and the improvement of storage capacity.

More complex is the situation in the coal and oil sectors. Both are in the middle of the

restructuring process. The latest amendment to the coal sector restructuring programme,

deferring its completion by one year, proves that there is still considerable risk of serious

delaying of true restructuring. In the oil sector substantive progress was achieved in

privatisation. However the privatisation of Rafineria Gdanska will be crucial for the

restructuring of the whole sub-sector.

The implementation of such issues as energy efficiency and promotion of renewable

energy sources remain neglected. Admittedly, governmental programmes and legal

solutions prove that the importance of these issues for the sector as well as for the overall

economic development is fully recognised, but any real progress requires financial

involvement, which should be foreseen in the national budget.

In terms of administrative structures the energy sector falls under the supervision of the

Ministry of Economy. The Department of Energetics is responsible for overall policy

formulation and monitoring, security of supplies, as well as for specific aspects of power,

gas, oil and renewable energy sub-sectors. The Department of Industry Restructuring is

responsible for preparation and implementation of the restructuring programme in -

among others- the coal sector. The task of creation and monitoring of rules governing the

energy sector, such as licensing, schedules of prices, tariff control, and the development

programmes is turned over to the Energy Regulatory Authority. It covers the electricity,

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the gas and the heat sub-sectors. The nuclear energy sub-sector is supervised by the

National Atomic Energy Agency. Preparations to Euratom safeguards should continue.

The specific duties of implementation of restructuring programmes are fulfilled for the

coal sector by the State Agency of Coal Restructuring and for the oil sector by Nafta

Polska. The obligation of collecting and analysing the statistical data belongs to the

Central Statistical Office and the Ministry of Economy (in practice the Agency of Energy

Market).

Now that the administrative structure in the sector seems to be established, more attention

should be placed on policy formulation and monitoring, in particular in such areas as

energy security, strategic stocks, and transformation of oil and gas sub-sectors. In this

context, considering the complexity of tasks for which the Ministry of Economy is

responsible, the total of 32 persons responsible for all substantial issues in the sector

seems not to be sufficient. Improvements are also required in such areas as collection and

processing of statistical data.

Chapter 15: Industrial policy

Poland continued to make progress in this area over the reporting period. Improvement

of competitiveness of the Polish economy through modernisation and structural

adjustment of industry and services is one of the key areas of the National Development

Plan for the years 2000-2002.

Within Poland’s overall

industrial policy,

priorities, as set out in the National

Development Plan, include: increase of competitiveness of the restructuring sectors of

industry and increase in innovation. In the case of innovation, the Polish government

adopted

inter alia

a document: “Assumptions of innovation policy until the year 2002”.

The government is in the process of implementing its pro-export policy based on the

document: “Assessment of the current situation and proposed activities for improvement

of Poland’s foreign trade”.

Poland has continued with the process of

restructuring and privatisation,

which has

been a major feature of Polish economic development over the last few years. The

government’s intention has been to privatise in areas of strategic importance to the

economy so as to generate dynamic effects for the economy as a whole. This has been

most apparent in the banking sector and financial services but the part privatisation in

July of the telecommunications company TPSA is another example of this approach as is

the growing focus on the energy sector.

The latest update to “Restructuring programme of the Polish

steel

industry” was

completed in September 2000, in particular the investment plans and production

capacities, foreseen for the sector, were revised. Progress has been made in altering the

employment structure of the sector, the European Community has played an active role in

support of alleviating any negative social impact of the restructuring process (see

section

A.b. Relations between the European Union and Poland).

The problem of indebtedness

of the sector has not yet been resolved and the issue of state aid to the sector remains

outstanding. In addition individual viability plans remain unrealistic.

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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The restructuring of the

coal

sector is progressing, in particular in the field of social

restructuring. This is a very difficult, important and costly reform for both the state and

local communities. There are the first signs of improving performance from some mines.

Modifications were made to the commercial regime for

automobiles

in order to no

longer give preference to simple assembly operations over complete production lines.

Thus, the licensing system for imports of car bodies and chassis used for industrial

assembly was replaced at the start of the year by a tariff-based system. Imports from the

EC and other preferential sources benefit from a zero tariff.

Progress in the area of adjustment to the

regulatory environment

of the EC has only

recently been made, notably with the entry into force of the new law on conformity

assessment and other horizontal legislation. The considerable delay deprived Polish

producers of gaining experience with regard to EC rules, notably in the field of

certification, technical standards, product safety requirements and rules of competition,

including state aid and competition (see

Chapter 1 – Free movement of goods and

Chapter 6 – Competition policy).

It forced them to continue producing according to

different rules for the national and EC market.

Overall assessment

The principles of Poland’s industrial policy are overall in line with the concepts and

principles of EC industrial policy.

The underlying situation noted in the 1999 Regular Report remains unchanged in Poland.

Poland’s industrial policy as set out in the Industrial policy guidelines (1999-2002) is

based upon the same broad principles which guide the EC’s own policy. The policy

endorses market-based rules of competition and free enterprise. The central objective of

Polish Industrial Policy is to create a proper environment for industrial operators, to

improve the international competitiveness of industry, and to facilitate and encourage its

adaptation to the business environment and industrial structures in the EU.

Poland has achieved much in the way of creating an appropriate legal environment in

which businesses can operate. This has been reflected by the rapid development of the

private sector and in the flow of foreign direct investment to Poland. However, in some

areas, there is, as was noted in the 1999 regular report, a clear discrepancy between the

stated policies and practice. Policies are usually well defined but their implementation

has been limited or often postponed. Innovation needs to be further promoted. Polish

industry is still characterised by a rather low level of competitiveness.

This is especially true of the restructuring of the steel sector, which has been underway

since the beginning of the last decade. These efforts have to date had little impact upon

the structure of the sector. In the coal sector more attention should be paid to active social

measures such as training, creation of new jobs outside the sector, preferably in small and

medium-sized enterprises.

Privatisation of state-owned enterprises has played a very important role in industrial

policy. Not only has it brought about ownership changes but also it has speeded up the

restructuring processes in enterprises, bringing in strategic foreign investors with know-

how, new technologies and new management techniques. Continuing and completing the

privatisation process is important from the view of competitiveness of Polish industry.

The clear dominance of sectoral policies to accompany restructuring measures in

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different sectors should not lead to neglect of the importance of a horizontal industrial

policy approach.

Further progress in the adjustment of the regulatory environment to that of the EC is

needed.

Chapter 16: Small and medium-sized enterprises

Poland has made further progress in aligning with the

acquis

during the reporting period.

It is undertaking a wide range of measures to assist SMEs. The government continues to

implement the “Government Policy Guidelines for SMEs until 2002” with a budget of

over

€80

million. About a third of this amount is to come from foreign assistance funds.

The National Development Plan for the years 2000-2002 includes the development of

SMEs as a specific priority. Apart from the Ministry of Economy, the Polish Foundation

for Promotion and Development of SMEs is a decisive actor in implementing SME

policy. It is foreseen that the foundation will be superseded by a new Polish Agency for

Entrepreneurship Development.

The

definition

of SMEs was introduced into the Law on Economic Activity, which came

into force on 1

January 2000. This definition is in line with the recommendation of the

European Commission. The Polish government also adopted the regulation concerning

collecting the statistical data in the field of the SME sector and tourism, which came into

force in October 1999 (see

Chapter 12-Statistics).

Overall assessment

Poland’s active policy towards SMEs conforms overall with the principles and objectives

of EC enterprise policy.

The adoption of the law on economic activity will reinforce the progress which Poland

has achieved in creating a legal environment in which businesses can operate. At the

beginning of the transformation process, the Polish economy was dominated by large

enterprises. Now, SMEs prevail and constitute the core of the economy employing over

7 million people, i.e. almost two thirds of the total employment in the economy. They

account for half of Polish GDP. They also account for 50% of Polish exports and for

over 60% of imports. These figures illustrate how important SMEs are for further

development and competitiveness of the Polish economy.

The current attention paid by legislators to the SME sector does not always fully reflect

this importance. Despite a wide range of efforts undertaken to implement the

“Government policy guidelines until 2002”, the main focus of attention often remains

large-scale enterprises usually in traditional heavy industries.

SMEs still suffer from problems with bureaucracy, red tape and - as was noted in the

1999 report - access to finance. It is difficult for them to meet the bank requirements in

Developments in policy towards small and medium sized enterprises should be seen in relation to

developments in the context of industrial policy (see

Chapter 15 – Industrial policy),

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order to obtain access to credit and the cost of credit, when available, is much higher than

for large enterprises. The National Credit Guarantee Fund and other small local

guarantee funds do not meet expectations of the sector. The representation of the business

community in Poland is very dispersed with a large number of organisations representing

different interest groups and operating on different levels and speaking with different

voices. In particular, the interests of SMEs are poorly represented.

The creation of the SME agency will be an important step in enhancing the profile of

SMEs and ensuring that the issues which are of particular importance to them are placed

on the political agenda notably further improving the business environment. To meet

expectations it will, when created, have to be endowed with sufficient resources.

Chapter 17: Science and research

Poland has made further progress in this area since the last regular report.

Since it joined the 5

Framework programme (FP 5) in September 1999, the focus of

Polish policy has been to increase Polish participation in the programme. To support this

objective, the Polish administration has undertaken two main actions. First, the creation

of a network of “Contact Points”. The Contact Points are supervised and financed by the

State Committee for Scientific Research (KBN). Second, financial assistance from the

State Committee for Scientific Research for each project accepted within the 5

framework programme. This assistance may be up to 60-90% of the value of the EC

grant received.

Within the KBN’s Department of International Co-operation and European Integration, a

Unit for European Integration has been created with the intention of facilitating the

efforts described above. There are currently 9 staff engaged in EU-related work. At the

moment there is no direct involvement of KBN (apart from financial support for the

successful applications) in attracting Polish entities to apply for EC grants.

Overall assessment

Important changes and improvements have already taken place. The links of the research

sector with the industry and small and medium enterprises need to be strengthened. As

Poland is stronger in basic rather than in applied research, the improvement of co-

operation between “academic” and “applied” science should take place in order to take

full advantage of the possibilities offered by FP 5. Further reform of the administrative

system will be needed, notably through reinforcement of the staff responsible for

international co-operation within the Ministry dealing with research, and their operational

resources.

For the further development of the sector it is essential to have an increase in the gross

domestic expenditure in research and development as percentage of GDP which is

relatively low (0.74% in 1999). Consequently, further efforts will be needed, including a

substantial increase of the business activity in research (which amounted to 0.3% of GDP

in 1999), if Poland wishes to take full advantage of the opportunities offered by the

Community Programmes.

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Chapter 18: Education and training

Since the last regular report Poland has made no progress in adopting the directive on the

education of children of migrant workers.

Poland has continued to participate in a number of

Community programmes

(see

bilateral part A).

In addition, the Association Council adopted a decision in July 2000

allowing for participation in the second phase of the Socrates and Leonardo da Vici

programmes (2000-2006). In September 2000, a decision to allow participation in the

new Youth programme, which includes European Voluntary Service activities, was

adopted.

The education reforms of 1999 continue to be implemented although not without

occasional difficulty. In January an amendment was passed to the Teacher’s Charter. The

bill introduces a new motivational career system, comprised of four grades: junior

teacher, contract teacher, appointed teacher and certified teacher. Advancement in this

hierarchy requires the attainment of higher qualifications, confirmed by passing an exam,

and is linked to higher wages. The bill also provides for changes in regard to working

hours.

The reform is linked to the process of implementing the National Strategy for

Employment and Human Resources Development. It is important in this context that an

integrated approach is followed concerning human resources development, which is well

connected between national and regional level, and which takes into account skills

development in rural areas with high unemployment and industrial restructuring.

Overall assessment

The limited

acquis

in this field remains to be adopted.

Poland is making good progress as regards its participation in Community programmes.

All programmes have seen a considerable increase in their take up since the last regular

report and are proving to be a useful tool for integrating Poland into EC networks and

preparing for accession.

The real challenge is to fully implement the reforms of 1999 and ensure that the teaching

profession retains a cadre of dedicated capable pedagogues. Average monthly salaries in

the education sector as a whole in the second quarter of 2000 were PLN 1577.95 (approx.

€400)

and for the country as a whole PLN 1869.78 (approx.

€465).

Within the education

sector teachers’ salaries have historically been 10-15% above the average for the sector.

The Teachers charter is intended to address this issue. This has been made more difficult

following the budgeting error in the Ministry of Education, which resulted in the

necessary funds to honour pay increases not being available.

Chapter 19: Telecommunications and information technologies

Since the last regular report, very substantial progress in the adoption of the

acquis

has

been made.

With regard to the

liberalisation

of the sector, the government has continued the process

of privatising the incumbent operator, TPSA, with the selection earlier this year of France

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Telecom as a strategic partner. Also, it was decided to license competitors in the

domestic long distance part of the sector and this was achieved in July this year.

In the field of

telecommunications regulation,

a great deal of progress in transposing

the

acquis

has been made since the last report and the new act on telecommunications

was enacted in July 2000. This law is intended to transpose, or to be the basis for

transposition, of the current package of EC telecommunications directives. It establishes

the Office of Telecommunications Regulation (URT) as a separate independent legal

body with wide powers to regulate the sector and subsuming those of the former State

Radiocommunications Agency. It also abolishes the exclusive rights presently enjoyed

by TPSA and requires the company to operate under licence. It sets up a new regime for

authorisation/licensing pursuant to the Licensing Directive and for interconnection

pursuant to the Interconnection directive. Limitations are set on the pricing practices

permissible for operators having significant market power and there are new provisions

that support a policy to secure the availability of universal service in a competitive

environment.

The extent to which the law aligns Polish legislation with the

acquis

remains to be

determined. For example, it is not clear that the new law compels the provision of carrier

selection facilities as soon as new entrants will be allowed to enter the market. These

facilities, which are required by the

acquis,

are indispensable to achieving effective

competition and any delay in providing them would be damaging to the market.

In order, in part, to address the Universal Service

Acquis,

in May 2000 the Ministry of

Posts and Telecommunications elaborated the “Strategy for Development of Rural

Telephony for years 2000-2004”. Studies and experiments in different ways of addressing

the lack of telecommunications infrastructure in the rural areas have been carried out over

the past ten years. The strategy document will now need to be updated to take account of

the new telecommunications law.

In respect of the

postal markets

there has been no progress in terms of legislation

adopted.

Overall assessment

It is only since 1998 that Polish telecommunications policy has developed strongly along

the lines of EC practice and the fixed communications sector still shows a legacy of

relative under achievement, particularly in rural areas.

The foundations laid by the new telecommunications Act now need to be built on to

secure complete compliance with the

acquis

particularly regarding cost-orientation,

interconnection, affordability, universal service and the availability of carrier selection

and number portability facilities. In the case of interconnection, the existing regime

should, in the meantime, be implemented without further delay. Wherever possible, call-

by-call carrier selection needs to be made available by the time long distance competitors

are ready to begin operations.

Rapid progress is now needed with the remaining pieces of secondary legislation that are

necessary for the market to be regulated properly and fully opened. In particular, the

issuance of a TPSA licence will be a vital step towards equal treatment in the market.

Moreover, much of the success of the reform of the telecommunications sector will

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depend upon the capacity of the URT to oversee and regulate the sector in an efficient

and independent manner.

Similar developments might have been expected to occur in the postal sector, but

progress has been much slower and there is no regulatory agency for the postal sector.

Chapter 20: Culture and audio-visual policy

During the period covered by this report, Poland has made significant progress in

aligning with the Community audio-visual

acquis.

However some further progress will

be needed and Poland has only partially met the 1999 Association partnership priority of

completing legislative alignment of the audio-visual

acquis.

In March 2000 the Sejm adopted the amendment Act on Radio and Television

Broadcasting which constitutes a step towards alignment with the

acquis.

However, no

progress has been made in eliminating the restrictions for foreign capital. The law came

into force in May 2000 and it will be some time before the full impact can be assessed.

In October, Poland ratified the Protocol to the Council of Europe Convention on

Transfrontier Television, to which it is already a party.

Overall Assessment

On the whole, Poland has made significant progress but has still to launch new legislative

initiatives to achieve alignment with the Community

acquis.

Issues that are not tackled in the new law may suggest that Poland could face some

difficulties in fully taking on and implementing the

acquis

in the area of culture and

audio-visual policy. Further progress and clarifications will be needed, in particular, with

respect to jurisdiction, promotion of European and independent works, right of reply and

some advertising provisions. Moreover the issue of foreign investment remains an area

of concern. In spite of the new law, the legal situation remained unchanged in this

respect; the new law continues in its Art. 35, to set a limit for the share of foreign capital

in TV broadcasting stations at 33%. This lack of compatibility of the Polish system with

important principles of the EC regime continues to constitute a major obstacle to foreign

investment in this sector and to full EC harmonisation in this sector, in general.

Poland is a party to the Council of Europe Convention on transfrontier Television but has

not yet ratified the protocol amending the above convention.

Poland’s administrative capacity seems adequate with regard to the implementation of the

acquis

in this field. However, Poland has to improve its administrative capacity for

implementing the cultural Community Programmes. A more active role of Poland

remains hampered by organisational and staff constraints in the Ministry of Culture. The

dissemination of information about the programmes to potential cultural circles has to be

improved.

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

Significant progress has been achieved since the last Regular Report.

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Poland has made further progress regarding its

territorial organisation.

Following the

State Administration Reform of 1999, the newly created self-government provincial

(voivodship) and county (powiat) authorities became fully operational and started to carry

out important regional policy functions in Poland in the course of the year. In addition, in

June 2000, a provisional NUTS classification was adopted by a Council of Ministers

Ordinance and this introduced a five level hierarchical structure consisting of 2489

municipalities

(gminas)

(similar to NUTS 5), 373 powiats (similar to NUTS 4), 44

groups of powiats (corresponding to NUTS 3), 16 voivodships (corresponding to NUTS

2).

Further progress was also made regarding the

legislative framework

with the adoption

in May 2000 of a Law on Regional Development. This new law has laid down a number

of principles for support towards regional development in Poland, notably regarding

programming, management, and institutional structures and, in particular, introduces the

concept of the regional contract (voivodship contract) as the fundamental basis for

funding of regional development programmes throughout the country. The new law

therefore constitutes an important step forward for regional policy development in

Poland. Further clarification will however be needed on the implementation of the

regional contract and its capacity to participate in Structural Funds operations in Poland.

Regarding

programming,

the Preliminary National Development Plan (PNDP) 2000 –

2002 was approved by the Government in December 1999. This is an intermediate step

towards the development of a comprehensive and detailed National Development Plan

2000 – 2006 (NDP). A rural development plan is in the process of being approved by the

Commission in view of funding from SAPARD. Poland and Germany have made

progress with a joint programming document for Interreg and Cross border co-operation.

While good progress has been made over the last year regarding programming, further

intensive work in this respect will however be required in the near future as Poland has

set itself the ambitious target of finalising its National Development Plan by the end of

2001.

In June 2000, a Council of Ministers Ordinance created a Ministry of Regional

Development in Poland, but cross-border co-operation remains within Ministry of

Interior’s responsibilities. This new ministry should play a leading role in regional

development programming. The Law on Regional Development has laid down the rules

administrative coordination

between central and regional government regarding the

government’s policy for regional development, inter-ministerial coordination, distribution

of competencies and application of the partnership principle, including the advisory role

to be played by a Council of state regional policy. All this organisation is subject to

practical administrative arrangements to be implemented.

The newly created ministry will also be in charge of

monitoring and evaluation

programmes, but the latter remains largely at the planning stage for the moment and

considerable efforts will be required to establish and develop an adequate monitoring and

evaluation system in Poland. The national ISPA co-ordinator has been placed in the

Office of the Committee for European Integration.

financial and budgetary management,

preparatory work is being undertaken by the

Ministry of Finance in the form of a regulation which will create the framework for

expenditure within the principles set out in the Law on Regional development and the

Law on Public Finance. The Law on Public Finance regulates the principles of budgetary

commitment and expenditure control allowing for multi-annual programming. However,

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budgetary provisions for regional interventions have yet to be identified both at national

and regional levels. Financial participation of sub-regional levels, which has been

envisaged, should be carefully examined.

Overall assessment

In the last few years, Poland has made significant progress in developing the necessary

structures for the implementation of the Structural Funds after accession. However, some

issues remain to be tackled. The Ministry of regional Policy, as well as the newly

established inter-ministerial co-ordination structures need to prove their effectiveness in

practice. Also, the division of responsibilities between the marshals and the Voivods

needs further clarification.

Poland is gradually establishing the required instruments for the implementation of

economic and social cohesion. Multi-annual programming still needs to be introduced

and further intensive efforts will be needed in programming, notably as regards the

National Development Plan. Further secondary legislation will be needed regarding

budgetary and financial management. The administrative management and co-ordination

structures are in place but need to become operational and considerable training will be

required to ensure that these can function effectively.

As to regional

statistics,

data for the determination of eligibility are available for

Objective 1 and INTERREG criteria. More importantly, the provision of data necessary

to meet the ex-ante evaluation requirements has yet to be assured. For instance, at NUTS

2 level, very limited data exists concerning social indicators and structural business

statistics. Data seems to be only available for employment statistics.

Chapter 22: Environment

There has been little legislative progress in this area over the last year.

With regard to the integration of the environment into other policies, over the last year

Poland has started 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”

In the field of

horizontal legislation,

the Act on Environmental Impact Assessment and

on Access to Information has been adopted by both chambers and should shortly be

signed by the president. The draft Act transposes the corresponding EC Directives.

Transposition of the environmental impact assessment directive is a short-term priority in

the 1999 Accession Partnership.

In the area of

waste,

a Regulation listing types of waste which producers can deliver to

physical persons for use entered into force in July 2000.

In the field of

water quality

an Act on Fertilisers has been adopted, which partially

transposes the Directive on water pollution caused by nitrates from agricultural sources.

In the field of

nature protection,

preparations to establish the NATURA 2000 network

have started with some delay while on the other hand some of the protected areas have

been extended.

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As regards

industrial pollution control and risk management,

the Ministry of

Environment has established a working group on Best Available Techniques (BAT). This

will constitute the basis for a future BAT unit.

A ministerial Regulation has been adopted in November 1999, partially transposing the

directives on the contained use and the deliberate release of

genetically modified

organisms.

In the field of

radiation protection

(see

also Chapter 14- Energy),the

National Atomic

Energy Agency has recently completed a two-year Strategic Governmental Programme

on radioactive waste and spent fuel management in the country. This has been conducted

in the light of the present situation in Poland and also a possible adoption of a nuclear

power programme in the future.

As regards administrative capacity at central level, most EC issues are centralised in the

European Integration Unit in the Environment Ministry. The Ministry of Environment

employs some 300 persons. The Ministry is composed of fourteen departments, two of

which answer directly to the Minister (political office and secretariat). The Ministry of

Environment has displayed some shortcomings as regards the administrative capacity to

initiate and co-ordinate all EC-related issues in the field of the environment. This also

applies to the Unit for European Integration, which centralises most EC issues, but it is

now fully staffed. A special unit for financial assistance has been set up within the

Department for European Integration but this is not yet official. This unit will primarily

deal with Phare and ISPA. Its staff amounts to eight officials.

Implementation of environmental policy is entrusted to the regions (voivodships),

counties (powiats) and municipalities (gminas). The division of competence between the

voivodships and the powiats depends on the nature of the activity concerned.

Voivodships have responsibility for all activities which are particularly harmful to the

environment. The powiats and, in certain circumstances the voivodship, are responsible

for issuing environmental permits. The municipalities (gminas) bear the main

responsibility for carrying out decisions and have direct responsibility for waste

management, in particular for municipal waste.

Enforcement of environmental rules is entrusted to the Inspectorate for Environmental

Protection which comprises the Chief Inspectorate and 16 Voivodship inspectorates, re-

organised from the 49 former voivodships. The Voivodship Inspectorates employ some

600 environmental inspectors. Training is needed as to the requirements of EC

environmental directives. During 1999, Voivodship inspectorates conducted 16.000

control among 13.450 permit users. They imposed 6800 fines for non-compliance with

environmental protection regulations.

Poland has not improved its environmental monitoring infrastructure. Voivodships are

responsible for monitoring but the voivodship funds have not granted priority to

monitoring infrastructure although this was identified as a shortcoming in the 1999

Regular report.

Poland’s environmental investments have remained stable at some

€2

billion,

corresponding to 1.7% of national GDP. The National Fund for Environmental Protection

has continued to promote investments primarily in air protection and water, but without a

comprehensive strategy for implementing EC directives. The main financial instrument

for environmental investments are now the voivodships funds. These primarily operate

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through soft loans. With ISPA, foreign assistance will amount to some 10% of total

environmental investment.

Overall assessment

Poland has achieved very limited progress in aligning with the EC environmental

acquis.

However, a wide range of environmental laws has been prepared and many of these are

now in Parliament. Their adoption will significantly improve Poland’s compliance with

EC environmental directives – which to date remains at a low level. However, given the

sheer quantity as well as the economic implications of these laws, further delays seem

likely. It is also important to carry out detailed compliance checks of these laws in order

to ensure full transposition of EC environmental directives.

Poland has not yet adopted implementation programmes in the field of air, waste, water

and industrial pollution. The drafting of such programmes is a short-term priority in the

1999 Accession Partnership with Poland. Current preparation of these programmes

proves to be difficult, largely due to the lack of information and data. Also, Polish

authorities consider that a legal basis (through the adoption of the various Acts) is

necessary before implementation programmes can be prepared. Further delays in

implementation are therefore to be expected.

Poland’s - considerable - environmental investments should to a larger extent focus on

the concrete implementation of EC environmental directives, based on a comprehensive

investment strategy.

In general, the administrative capacity at national and regional level remains a matter of

concern. The Ministry of Environment needs to be strengthened, as does the capacity of

voivodships and powiats to implement EC environmental directives. At the central level,

co-ordination between ministries needs to be improved. Whilst the effects of Poland’s

new territorial organisation are still to be assessed, the administrative capacity of

voivodships and powiats to efficiently implement EC directives raises some question

marks: They are financially weak and lack knowledge about EC requirements. The

municipalities (gminas), with independent financial means collected largely through local

taxes, also need to speed up their preparations for EC environmental policy, in particular

as regards training.

Poland should also further develop its monitoring capacity.

Chapter 23: Consumers and health protection

Since the 1999 regular report considerable progress has been made in the area of

consumer protection.

The Act on General Product

Safety

was adopted in January 2000 and came into force in

September 2000. The Act transposes into Polish law the EC Directive on general product

safety and contains legal delegation for the Council of Ministers to issue implementing

regulations transposing further Community legal acts (toy safety, dangerous imitations,

safety and names of textiles, checks on conformity of products imported from third

countries, establishing systems of rapid exchange of information on dangerous products

and monitoring consumer accidents).

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Furthermore, in March the Parliament also passed the bill on the protection of consumer

rights and on the liability for damage caused by a dangerous product. The new law

transposes the following EC regulations into Polish law: Directive on liability for

defective products, Directive concerning contracts negotiated away from business

premises, Directive concerning unfair terms in consumer contracts and Directive on

distance selling. The Act came into force in July 2000.

The Act amending the Act on combating unfair competition was adopted in March 2000

and came into force in July 2000. The Act is aimed at transposition of the EC Directives

on misleading and comparative advertising and contains extension of measures protecting

consumers from acts of unfair competition, in particular misleading advertising.

Special civil-legal departments were established in order to settle small claim civil cases,

including claims resulting from warranties or quality guarantees

There has also been progress as regards the development of an effective system of

market surveillance.

At the legislative level, secondary legislation has been adopted

which will enable the act on Trade Inspection to be implemented. Practical efforts are

also being put in place to aid and inform the consumer. These range from the publication

of independent test results, through dissemination of leaflets to the creation of consumer

advocates at the regional and sub regional level. There are currently 180 such advocates.

Their primary function will be to act as an initial contact point for consumers and as a

conduit to pass information to the Office for Competition and Consumer Protection

(OCCP) about infringements of consumer interests, which may lead to investigation by

the Trade Inspection. As to the market surveillance system, the OCCP became an

observer in the Transitional Rapid Exchange of information (TRAPEX) system.

In 1999 the Consumer Policy Department (9 employees) and regional offices of the

OCCP received 1467 complaints, requests for advice etc. The OCCP have sent 132

summons for abandoning acts of unfair competition, 86 entities complied with the

summon, in 46 cases investigations continue, in 5 cases the OCCP addressed the courts.

Acts of unfair competition consisted in most cases of inadequate marking of products,

misleading or prohibited advertising, imitation of another product and others.

In April 2000 the Council of Ministers approved the Governmental Programme on

Consumer Policy for the years 2000-2001 and Report on the implementation of the

Programme for the years 1998-1999. The main objectives of the new Programme are;

enhancement of the consumers’ health and safety, enhancement of economic safety,

further adjustment of the Polish consumer protection law to EC standards, improvement

of the market surveillance system, provision of legal and financial conditions for

development of consumers’ movement and ensuring universal access to consumer

information and education. These objectives are an accurate summary of the main

challenges which Poland faces in the effective adoption and implementation of the

acquis

in this field.

Overall assessment

Poland has achieved a high level of alignment with the

acquis

in the area of consumer

protection.

In order to fulfil tasks connected with creation of legal and institutional bases for a

market surveillance system, as well as proper functioning of the consumer protection

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system in general, it is still necessary to strengthen the competence and potential of the

OCCP by legislative changes and by increasing resources both human and budgetary.

Further effort is still required in dissemination of information of new legal regulations

among the staff of the OCCP, ministries and other governmental institutions, courts,

entrepreneurs and consumers.

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

Since the 1999 regular report, progress has been noted in general in Poland in all the

areas covered by co-operation in the field of justice and home affairs”. Nevertheless the

requirements of the sector are very large and it is only more recently that the size of the

task which has to be accomplished has been recognised. The budgetary implications are

being calculated more precisely within the emerging "strategic approach" which covers

particularly the border guard and the police.

In the area of

data protection,

Polish efforts have been noted during the reporting period

to improve the independence of a personal data supervising authority, called the general

inspection for personal data protections.

As far as development of the

visa policy

is concerned, the Polish government has now

authorised the Minister of Foreign Affairs to start bilateral discussions on the cancelling

of visa free travel from Russia, Belarus and the Ukraine. This is an important policy

signal, particularly in respect of the Ukraine where currently neither visa nor "voucher"

system is required. In line with this, progress has been made over the past twelve months

in the further strengthening of administrative capacity so as to be able to align the Polish

visa regime. New consular offices have been opened in Russia, Armenia, and Mongolia,

and three have been opened in the Ukraine. Upgrading of offices has also taken place in

Kaliningrad, Minsk and Brest on the Belarus border. Computerisation of the visa issuing

process has begun and is being extended to all consular offices, which will allow for

positive vetting controls at the border posts which are already equipped with

computerised passport reading technology.

Strengthening

border control

remains a key task to be accomplished in the Justice and

Home affairs area in the context of accession. The external pressure on Poland's borders

continues to increase. Recent data confirm the steady increase overall of border traffic in

Poland in 1999 and early 2000 particularly from the east.

A great stride has been taken this year, in the development of an overall strategy for

border management which covers all the agencies active at the border. The Ministry of

the Interior as chair of the inter-ministerial group responsible for guiding Border

management policy, drafted a comprehensive goal orientated strategy including

contributions from all the agencies and indicated the matching budgetary requirements.

The strategy, decided by the government in June, also provides for crisis management.

In parallel, border control has been marked in the last 12 months by sustained efforts with

a view to making the border guard more efficient, mainly by means of reforming its

internal structures, improving its operational efficiency, moving ahead with the building

programme and providing additional equipment to the eastern Polish border. Ongoing

annual "institution building" support from EU Member States has also been recognised as

crucial and the first programme for the strengthening of the eastern border started in

October 1999 with a comprehensive situation analysis.

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Key indicators seem to suggest that the efforts being made are proving effective since the

level of illegal migration continues to fall, down by 17% compared to 1998 on the

Eastern border. A similar trend can be observed as to the number of illegal aliens

admitted in Poland from Germany under the readmission agreement, down by 27%

compared to 1998. These indicators are also confirmed by the decreasing size of the

individual groups being apprehended.

Regarding

migration,

during the reporting period staff and financial resources have been

allocated to strengthen the administrative capacity.

The

asylum

arrangements over the period were enhanced by the establishment of the

second instance board.

In the field of

police co-operation and fight against organised crime,

over the period

the need to combat organised crime and economic crime has been widely recognised as a

priority in Poland. Whilst the overall average annual rate of increase in crime continues

to rise the number of criminal acts of severe physical injury against individual persons

actually appeared to decrease, judging from 1999 figures. However, the use of automatic

weapons seems to be increasing, as is juvenile crime.

Both economic crime and organised crime are on the increase. Recent developments

suggest that new criminal mechanisms are being used in the field of defrauding public

funds on large scale (VAT, evasion of fiscal levies on sales of sensitive products as fuel,

electronics, cigarettes, alcohol, vehicles). The loss to the state as a result of organised

crime was estimated at some

€160

million in 1999.

Following severe criticism from the parliament of the lack of strategy in fighting

organised crime, a comprehensive analysis was produced in May 2000 on the Security

Situation with recommendations as to where improvements needed to be made. The

report is quite openly critical in a number of areas, citing for example the lack of co-

ordination between law enforcement services, lack of follow through on plans and the

problems of corruption. The key recommendation is the setting up of a national criminal

intelligence service which would serve the dual purpose of co-ordaining services and

sharing information – whilst incidentally forcing the pace of upgrades in the technology

of all the services concerned. In parallel the report recommends improving police salaries

in particular by rewarding the acquisition of skills. The government accepted these

recommendations and took action in July to increase police salaries by an average of

20%.

The police services continued to upgrade their technology and in each of the

Voivodships, the main high-speed telecommunications nodes are coming on stream. In

the Central Criminal Laboratory, the Fingerprinting System finally became fully

computerised in 2000. Budgets, including assistance from the EC, have been allocated to

link on the regional Voivodship offices. This has important implications both for

international police co-operation and for significantly improving “scene of crime”

forensic output.

In parallel the police have now merged the organised crime and narcotics departments so

as to provide for a strong single centralised structure to fight against organised crime with

1 600 staff from the outset.

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As far as the

fight against fraud and corruption

is concerned, recent reports suggest

that corruption across Poland’s public administration as well as across Polish society at

large has reached a high level. The government is developing a range of measures to deal

with the issue. One of the first steps has been the adoption of anti-corruption legislation

which allows for the ratification of the 1990 Council of Europe Convention on

Laundering, Search, Seizure and Confiscation of proceeds from crime. The 1997 OECD

Convention on Combating Bribery and Corruption in international business transactions

has been ratified The Council of Europe Criminal Law Convention on Corruption has

been signed but not ratified while the Council of Europe Civil Law Convention on

Corruption has not yet been signed. (see

also Political criteria)

In the field of

drugs,

limited progress has been made.

In spite of the higher degree of detection, as indicated by the liquidation early 2000 of 7

clandestine labs producing amphetamines, it is estimated that there are currently between

10 and 20 clandestine amphetamines labs operating in Poland. Similarly, the amount of

drugs seized in 1999 from illegal sales has increased to reach a total value of some

€4

million.

In terms of demand reduction, the government adopted in September 1999 a “National

programme for counteracting drug addiction” in Poland for the period 1999-2001. This

programme outlines a number of priorities in the field of prevention as well as on

community programmes and co-operation between local authorities and NGOs. This

strategy gives a detailed outline of the tasks and responsibilities of the various players at

the level of demand reduction (prevention), supply reduction (repression and prosecution)

and policy development.

In the field of prosecution and supply reduction, a significant change took place at the

level of Headquarters of the police with the merger between the Central Narcotics Bureau

and the Organised Crime Bureau on April 2000. This move was motivated by the need to

make the structure more efficient and to enhance co-operation between the national HQ

level and the regional levels of the 16 Voivodship and 400 field officers.

In respect of

money laundering,

despite much preparatory activity and the adoption of

the law allowing for the ratification of the 1990 Council of Europe Convention, the

administrative capacity is still not in place to deal with this key element.

As regards customs co-operation there has been no progress in aligning with the

acquis

during the reporting period.

In respect of

judicial co-operation,

the ratification procedure of Protocol no. 7 of the

European Convention on Human rights began last March and the Polish Parliament

adopted in April the Act on ratification of Protocol no. 6 of the European Convention on

Human Rights.

Overall assessment

Some progress has been made in alignment with the

acquis.

Considerable further efforts

are required as regards the reinforcement of the necessary infrastructures in order to

implement this legislation. This is of vital importance as Poland’s geographic position

and long borders make it particularly vulnerable to penetration by criminal organisations.

Also the rapid growth in the criminal use of sophisticated technology continues to raise

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the standard which the Polish law enforcement agencies have to attain. Bearing in mind

the high investments required, the organisational implications and the fact that the rate of

progress needs to be speeded up significantly, both sustained funding and political

commitment will need to be guaranteed.

A serious effort must now be undertaken to deal with corruption comprehensively, since

it is recognised as a major problem and barrier to improving administrative efficiency and

is hampering the institution building.

In respect of

data protection,

the legislative framework and administrative capacity

exist, including a well staffed Supervisory Authority, but they are limited in their

application in so far as law enforcement, particularly against organised and international

crime, is carried out also by the State Security Office. Ratification is required of the 1981

Council of Europe Convention on the Protection of Individuals with regard to the

Automatic Processing of Personal Data, which was signed in April 1999.

Visa policy

is moving towards alignment though a process of gradual adoption in parallel

with the establishment of the necessary administrative capacity aimed at sustaining co-

operation at the future external border.

Border control

is gradually improving, and a major step forward was made with the

adoption of the Border Management Strategy. However a number of challenges remain.

Border management is still strongest and most efficient at the Polish-German frontier

both at official crossing points and along the green border where joint Polish-German

patrols are active. On the future external border, at those locations where border

inspection posts have been completely refurbished with modern buildings and equipment,

checking seems to be carried out adequately. However, this improvement has yet to be

made at all crossing points and railway crossings deserve particular attention. The Border

Management Strategy now needs to be implemented with sufficient resources and taking

into account the advice and recommendations which are emerging though close co-

operation with the EU Member State services through bilateral contacts and “twinning”

arrangements. Control of the future green and blue external borders still needs to be

greatly improved. Further improvements will also be needed with regard to the data

processing needs for accession to Schengen. The development of a National Schengen

Information System, when compared to the current state of play, will require considerably

greater resources if it is to be completed by the dates of accession being suggested by the

Polish government.

In respect of human resources, more officers have to be transferred to the future external

borders, there needs to be a review of salary levels and organisational structures revised

so as to achieve the necessary high level of professionalism throughout and sustain

specialist management resources. Amendments to the law on the border guard support the

developments but will, as they come into force, place additional burdens as the

geographical area of competence of the border guard is extended, and the use of

conscripts phased out.

In respect of

migration,

Poland continues to work with the EU Member State services

and has established the basic legislation and institutional capacity.

With regard to

asylum

also, the basic legislative and administrative structures in place

are gradually being adapted to take account of the growing numbers of claimants and

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future permanent residents. Poland should continue to be encouraged to ratify the Dublin

Convention. For the future, in view of the increasing numbers involved, some emphasis

will need to be given firstly to the integration into society of the asylum seekers

positively assessed and secondly to those claimants who are rejected.

In the field of

police co-operation and fight against organised crime,

the challenges

are even greater and although some progress is being made, the scale needs to be stepped

up considerably. The Security Report is a good starting point and shows the direction but

it needs to be taken further towards a wide and comprehensive strategy for improvement

including the upgrading and the bringing of the various databases together for the

purpose of criminal intelligence gathering and processing. Funding has been erratic in the

past and needs to be increased and sustained with justification based on the considerable

revenue which is currently lost owing to inadequately resourced law enforcement.

Currently recruitment to the Police Force is still hampered by inadequate pay and

conditions. Despite this, good candidates can still be found although largely outside

Warsaw so that the Police Force is relatively young and potentially open to new ideas and

approaches.

Of particular concern currently is the dramatic rise in economic crime which is becoming

increasingly sophisticated but for which the police capacity is still quite inadequate.

Considerable progress in this field in particular will be needed so as to properly support

the needs of the future internal market.

The proper co-ordination of the various law enforcement services is still of some concern

and the continuing involvement of the State Security Office hampers progress in

international police co-operation.

Also crucial to the above developments in the uniformed services has been the gradual

strengthening of the policy development and guidance capacity of the Ministry of the

Interior where specific offices are now established with responsibility for law and order

and border management.

A very positive sign is that more emphasis is being placed on contacts with the general

public and making police stations buildings less sinister so as to emphasise the “service”

aspects. In a public opinion survey of September 1999 (CBOS), about half of those

persons asked considered that the police worked well.

In respect of combating

drugs,

although significant progress has been achieved in

preparing and presenting the relevant legislation on the prevention and prosecution of

money laundering, legislation has not yet been adopted by the parliament. Secondary

legislation is also still under discussion concerning the establishment of the Council for

Counteracting Drug Addiction foreseen under the law of 1997. Also a preventative

approach has yet to emerge since the issue is seen rather more from its purely criminal

aspects.

Poland continues to be an important drug producing country, mainly of synthetic drugs

and amphetamines, as well as a consumer country. The general situation in terms of drug-

related organised crime is marked by a steady increase of its share within organised crime

activities and criminal offences. Organised crime groupings dominate narcotics activity

by means of producing high-quality amphetamines for both export and domestic

consumption.

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While the new arrangement of combining Drug Combating with combating Organised

crime may improve law enforcement efficiency, some have expressed concern that the

resources currently dedicated to fight drug-related organised crime may be diverted to

address other organised criminal activities. The most important problem is associated

with the lack of internal and inter-ministerial co-ordination between the different actors

dealing with drugs at the level of demand reduction, supply reduction and policy

development; among the different actors are the Police, the Public Prosecutor’s office and

the Customs Inspectorate for the repression, the Ministry of Health, the Ministry of

Finance for prevention and the PM’s office for policy development.

As far as the

fight against fraud and corruption

is concerned, a serious effort must now

be undertaken to deal with corruption comprehensively, since it is recognised as a major

problem and barrier to improving administrative efficiency and is hampering institution

building. Concrete steps must be taken to adopt the necessary legislative framework

(see

also Section B.1.1. – Democracy and the rule of law).

In respect of

money laundering,

progress here is urgently needed since a number of

issues need to be resolved during implementation such as the independence of the

Financial Control unit, its relationships with other law enforcement bodies and training,

especially since there are too few specialists familiar with complex financial transactions

within existing JHA agencies.

Current draft legislation should provide for: the setting up of a Financial Information

unit; a system of prevention of money laundering; the duty to notify any transaction

exceeding 10,000 Euros; fines and sanctions in the case of failure to notify such

transactions.

The purpose of this legislative package is to bring the Polish system in line with the

acquis

in particular in terms of the confiscation of assets indirectly connected to criminal

offences (art 45), international co-operation and mutual assistance in exchanging

information, recognition of foreign judgements concerning seizure, forfeiture and

confiscation of assets and punishment of corruption of public officials.

Once adopted, the law on money laundering will locate the financial information unit

within the Ministry of Finance. The unit will be headed by a General Inspector to be

nominated at political level with the ranking as a under-secretary of state.

judicial co-operation,

Poland needs to take further steps in order to adopt all the

international conventions which constitute the

acquis

in this field, notably the Joint

action of December 1998 making it a criminal offence to participate in a criminal

organisation and on Joint Action of February 1997 concerning action to combat

trafficking in human beings and sexual exploitation of children, the 1970 European

convention on the international validity of criminal judgements and the 1972 European

convention on the transfer of proceedings in criminal matters.

Chapter 25: Customs union

Since the last regular report Poland has, to a large extent, adapted its legislation to the

acquis.

A significant step forward has been the government’s adoption of a customs

business strategy in October 1999. This sets a framework for preparatory work still to be

undertaken to render the customs services fully EC compatible. To date much remains to

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be done as regards both the implementation of legislation and the reinforcement of the

administrative capacity.

Regarding further adoption of the

EC Customs Code and its implementing provisions,

Poland made some progress. Poland has introduced a regulation in order to abolish all

customs fees with effect from end of 2001. In the interim, some fees have been

eliminated, whereas others are still being applied in contradiction to Poland’s obligations

under the Europe Agreement. The lack of transparency which on occasion surrounds the

application of the customs code in specific cases is also the source of some concern; this

is particularly the case as regards the reclassification of products.

Regarding the pan-European system of origin, Poland has agreed to the amendments to

the system which will come into force in January 2001.

Some steps have been undertaken to increase the use of simplified customs procedures.

Although an increase of authorisations for simplified procedures has recently been

achieved, the total number of companies which enjoy this privilege, around 700, remains

small. No legislative progress has been achieved in areas identified in the 1999 regular

report as having seen little progress notably: duty relief, procedures with economic

impact, free zones and dual use of goods. Some progress has been made in Poland’s

accession to international conventions.

As far as the

administrative and operational capacity to implement the

acquis

concerned, some progress can be noted. With the start of the implementation of the

business strategy, important efforts have been undertaken in various fields to upgrade the

customs services. A wide range of problems remain to be resolved. The most visible

among those is probably the continuous problem of long waiting times at borders, which

Poland, being a transit country of considerable importance on the West-East-axes of

Europe, has to tackle.

Regarding human resources, implementing provisions to the new Law on Customs

Service which establishes a particular status for customs officials, are being applied. Staff

training schemes have been developed. Corruption continues to be a serious problem.

Positive steps in this regard have been the June agreement between the central board of

customs and the office of State protection on co-operation in fighting customs fraud, and

in September the entry into force of the Code of conduct for customs officials.

Efforts have been undertaken to improve the administrative co-operation with other

services. The customs strategy for border management has been included into the overall

integrated border management strategy and agreements between customs services and the

border guard and police have been renewed during the last year.

Actions are also being undertaken to improve the performance of the customs services in

tasks relating to the Common Agricultural Policy. Regarding computerisation, the

integrated customs tariff system, compatible with the TARIC system, is in the final stage

of implementation. Polish customs have undertaken considerable efforts to co-operate

with the public, especially by institutionalised contacts with hauliers and others in the

private sector. The implementation of the IT strategy for customs which was adopted in

April 2000 has commenced but has not yet borne fruit.

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Overall assessment

With the entry-into-force of the Polish Customs Code in January 1998 and additional

alignment measures since then, Poland has achieved a relatively high level of legislative

alignment, whereas its administrative capacity is lagging behind.

Alignment with the

acquis

still has to be completed, in particular as regards duty relief,

customs procedures with economic impact, free zones, dual use of goods and clearance

fees. These shortcomings, already identified in previous regular reports, should be

addressed as soon as possible.

The administrative and operational capacity of the customs services remains an area of

concern. Poland should continue and possibly increase its efforts to implement the

business strategy, in a timely and efficient manner. In this context, it is of utmost

importance that Poland in the forthcoming years provides sufficient budgetary own

resources to facilitate this implementation. As regards shortcomings such as corruption

and on-going frequent staff changes, particular attention should be paid to guarantee

permanent employment which is independent from political interference, and a stable

staff structure in the Polish customs services.

Chapter 26: External relations

As regards the

Common commercial policy,

since 1999 there has been some progress in

alignment of Poland’s Commercial policy with that of the EC, for example the

replacement of the licensing regime in the automotive sector with a tariff based system.

Poland’s applied tariffs currently average 16.4% (MFN) on all products, 36.1% on

agricultural products, 18.3% on fishery products and 10.9% on industrial products. By

comparison, the EC tariffs currently stand at 5.3% on all products, 9.4% on agricultural

products, 12.4% on fishery products and 4.2% on industrial products.

Poland is a full and active member of the WTO, a point amply demonstrated by the Trade

Policy review of Poland which took place in July 2000 and where the chairman

commented “members (also) appreciated Poland’s overall commitment to liberal trade

and investment policies.” Poland needs to align itself with the EC plurilateral and sectoral

obligations upon accession. As regards these obligations, Poland is an observer to the

plurilateral WTO Government procurement agreement.

With regard to export credits, an amendment to the Act on export contract insurance

guaranteed by the State and a draft law on officially supported export and medium term

and long term credits have been adopted and are expected to enter into force within 2000.

As regards

bilateral agreements with third countries,

Poland and Turkey concluded a

Free trade agreement on 4 October 1999 which entered into force in May 2000. There

has been no progress in discussion towards an FTA with Morocco. Otherwise, Poland

held neither consultations nor negotiations on new trade agreements in 1999.

Within CEFTA, the member countries, including Poland, signed the Additional Protocol

No. 8 on the updated version of the Pan-European cumulation of origin of goods.

Poland has not yet adopted legislation on the control of dual-use goods and technologies.

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In 1999 Poland has started collecting tariff and trade data flows in line with the

obligations of WTO agreement article 24.

In the field of

development policy and humanitarian aid,

Poland is an active member

of the OECD and it is adapting its development practices to the principles laid down by

the Development Assistance Committee.

Overall assessment

Where alignment with the Community

acquis

on commercial policy is necessary some

progress has been made in the field of export credits.

The EU and Poland have established a framework for co-operation regarding WTO issues

both at ministerial and at departmental level. Poland has been supportive of EU policies

and positions within the WTO framework, most recently through its Chairmanship of the

last Ministerial meeting between the EU and the Candidates countries which took place

in July 2000. As regards the new round, Poland 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.”

Poland is a member of the plurilateral Agreement on Trade in Civil Aircraft and is a

signatory to the Information Technology Agreement. However, Poland has not yet

acceded to the WTO Government Procurement agreement.

As regards the Agreement for Textiles and Clothing, Poland needs to use the third stage

of integration under the ATC to align its integration programmes with those of the EC,

while notably avoiding integrating products not yet integrated by the EC. Also, further

co-ordination is necessary in order to consolidate the adjustment of the Polish list of

commitments in GATS in line with the EC commitments.

In addition to the FTA concluded recently with Turkey, Poland is a member of CEFTA

and holds Free Trade Agreements with Estonia, Latvia and Lithuania, the EFTA

countries, and Israel. Progress has been made in aligning with the EC’s international

trade obligations. Poland should continue to keep the Union fully informed about existing

trade agreements or negotiations aimed at the conclusion of any new trade agreements

with a third country.

Poland will need to bring in conformity with the

acquis

the Bilateral Investment Treaty

concluded with the US. While Poland has committed itself to meeting this obligation, it

has not taken specific steps to this end.

Some progress has taken place in the field of export credits. Poland follows the OECD

consensus; where medium and long term credits are granted, further alignment with the

acquis

is necessary.

Poland’s alignment with and future participation in the common commercial policy is

administered by the Ministry of Economy. The administrative infrastructure which needs

to be in place as regards customs services is addressed under the chapter relating to the

Customs Union (Chapter

25 – Customs union).

Development and humanitarian aid are

administered by the Ministry of Foreign Affairs. At this stage no specific issues are to be

highlighted in terms of administrative capacity in addition to the analysis presented above

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in this report (B.

Criteria for membership - 1.1. Democracy and the rule of law – The

executive).

Chapter 27: Common foreign and security policy

The regular

political dialogue

established by the Europe Agreement is proceeding

smoothly and Poland continues to orient its foreign and security policy towards the

Union. It 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.

Poland has shown a keen interest in the development of

European Security and

Defence Policy

as part of CFSP and has actively participated in the exchanges in this

context with the EU, in EU + 15 format (i.e. non-EU European NATO members and

candidates for accession to the EU) and in EU + 6 format (i.e. non EU European

Members of NATO).

As regards

alignment with EU statements and declarations,

Poland 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. During the course of 1999

Poland associated itself, together with the other CEECs, with a common action of the EU

concerning the contribution of the EU to the fight against accumulation and the

destabilising proliferation of lightweight and small calibre firearms. This was made

possible by the implementation in September 1999 of the September 1999 ordinance of

the Council of Ministers on prohibition and limitations on foreign arms trade. It also

associated itself with 11 EU common positions, including 3 on the Federal Republic of

Yugoslavia. In the year 2000, as of 30 June, Poland has associated itself with 3 EU

common positions.

In terms of political dialogue, Poland participates actively in regional co-operation

forums as the Council of Baltic Sea States, the Visegrad group and the Central European

Initiative. Of particular importance is the Polish-Ukrainian Standing Conference on

European Integration. To date 4 meetings have taken place alternatively in Kiev and

Warsaw. Another important area of dialogue is with the Russian enclave of Kaliningrad

especially as regards cross border co-operation. A particular effort is made to ensure

contact with the regional authorities.

Poland introduced a secure communications system in November 1999. The introduction

of this system facilitates the effective exchange of information between Poland and EU

member States and candidate countries on CFSP related matters, as well as speedy

alignment with EU declarations, démarches and common positions.

Overall assessment

The overall progress achieved since 1997 in alignment with the

acquis

in the CFSP is

satisfactory. As the

acquis

in the field of foreign policy and security develops further so

Poland should maintain the orientation of its foreign policy in line with that of the Union.

Poland adhered to the EU Code of Conduct on Arms Exports, but there is concern that it

needs to make more effort to ensure implementation of its criteria.

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Following the Kosovo crisis, Poland showed active support for and interest in the

Stability Pact. It continues to participate in the SFOR peacekeeping operations in Bosnia-

Herzegovina and in KFOR in Kosovo with over 1600 personnel involved in these two

operations. Furthermore the UN appointed ombudsman for Kosovo is a Polish national.

Poland works hard to maintain and foster good relations with its neighbours, especially

along its eastern border.

The administrative capacity to implement the provisions relating to CFSP is the

responsibility of the Ministry of Foreign Affairs. The current structure does not contain a

position equivalent to that of the political director. The role of political correspondent

also differs from that of EU counterparts being a horizontal function ensuring

coordination between the 6 political directors each of whom have sector specific

responsibilities. It is foreseen that this structure will change, budget resources permitting.

Chapter 28: Financial control

During the period covered by this regular report, some progress has been made in this

area.

In relation to the

control measures relating to Own Resources,

Poland has put in place

this year a business strategy for the further development of the customs authorities and an

integrated border management strategy and is currently working on a blueprint for the tax

administration, which, when implemented, should enhance the operational and

administrative capacity of these units. Poland also established a customs inspectorate in

1999 which has already been able to make important recoveries but which demonstrates

at the same time that the customs control procedures will need further strengthening both

in terms of computerisation and accounting systems and the further development of its

human resources base.

Regarding structural action expenditure,

Poland adopted a Law on Regional

Development in May 2000 and, together with the Public Finance Law, referred to above,

this has laid down the principles of the reception and administration of support funds

provided by the European Community. But further implementing regulations are required

laying down further detailed rules and procedures for state budget funds and funds from

foreign sources. Poland has also designated this year, through Council of Ministers

ordinances, the units, departments or agencies that will be in charge of ISPA and

SAPARD and the National Fund at the Ministry of Finance became fully operational this

year. Considerable further efforts are required regarding the accreditation of the

SAPARD paying agency.

In the field of

protection of EC financial interests,

Poland has nominated the customs

inspectorate as the single contact point for OLAF and a high level anti-corruption

advisory group has been established which is preparing an anti-corruption strategy

Overall assessment

Poland’s overall level of alignment with the

acquis

is good. There are clear differences

between sectors.

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Progress regarding external financial control is substantial. Poland’s Supreme Chamber

of Control enjoys full independence and has a very high media profile. It already fulfils

all major requirements for supreme audit institutions, although further training of staff

and the introduction of more detailed audit manuals could be useful in the future.

Further considerable efforts are however required regarding internal financial control.

The broad framework for internal financial control was included in the Public Finance

Law of last year but executive implementing regulations and an act for public

administration audit are not yet adopted. Poland’s public

internal financial control

system

continues, therefore, to be based on internal financial control units in each

ministry, whose functional independence is not assured at the moment in the absence of a

unified basis for such a structure. The Polish control authorities will need to establish

adequate internal audit legislation and procedures. The responsibilities between budget

spending centres/agencies and the Ministry of Finance in relation to ex-ante financial

control and internal audit will have to be clearly defined, with special attention to the

principle of functional independence of the internal audit function. Relevant staff have to

be adequately trained.

The administrative structure for effective internal financial control must be improved and

a better audit trail relating to the pre-accession funds has to be developed urgently.

Systems for fighting irregularities, fraud, corruption and for recovering lost amounts

should be further developed. There is a particular need to further develop the customs

inspectorate into a real horizontal anti-fraud structure and the management and control

systems of pre-accession funds and future structural funds will require further particular

attention in the immediate future.

Chapter 29: Financial and budgetary provisions

There has been no progress in the adoption of legislation over the past year but other

measures have been taken.

With regard to the national budget and EC co-financing measures

some progress

has been made through the inclusion in the 2000 budget of “non-reimbursable foreign

funds and expenditure financed from them”. This is the first time that such a category

has been included. As for

own resources and administrative infrastructure,

some

progress has been made in the organisational framework of the Ministry of Finance.

Overall assessment

There has been a moderate level of alignment with the

acquis

to date. The current

budgetary legislation, passed in late 1998, needs still to be further amended and

supplemented by stronger regulations and administrative procedures to meet the norms of

the EC. The process of consolidating the budget should be continued, with a reduction of

the extra-budgetary funds and the standardisation of the rules of financial management.

The procedures for multi-annual budgeting, within a medium-term expenditure

framework, should be developed. Capital and operational budgeting, for the preparation

and the implementation of expenditure programmes need to be more completely

integrated. In parallel, the capacity for the appraisal, monitoring and evaluation of

programmes and projects should be increased. As noted elsewhere, the central/local

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financial relationship needs to be clarified, and probably modifications to the current

regulations need to be put in place.

The National Fund is administered by a special Department at the Ministry of Finance,

with the responsibility for managing EC pre-accession funds. The operating procedures

should be completed.

A very slow pace of progress has been noted in the area of Own Resources where Poland

still needs to develop appropriate systems for sugar levies and custom duties.

Furthermore, Poland still needs to complete full application of ESA 95 for the proper

calculation of the statistical aggregates.

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 work to translate all the

acquis communautaire

into Polish was launched in 1996, but

only in February 2000 were the basic responsibilities of different ministries and central

offices defined in a document adopted by the Committee for European Integration. The

overall responsibility for the translation and revision process is entrusted to the

Translation Co-ordination Unit of the Office of the Committee for European Integration.

According to Polish reports, some 26 000 pages had been translated by the end of April

2000, whereas only 4 200 of translated secondary legislation had been revised by the

central administration.

According to the NPPM, the main part of translation work is foreseen for the year 2001

with necessary revision taking place in 2002. Urgent additional efforts are required in this

area.

3.3.

General evaluation

The fresh impetus which can be noted since the Sejm debate on European integration in

February and the creation of the Parliamentary Committee on European Law is already

beginning to bear fruit with a marked acceleration in the adoption of the

acquis

comparison to the last reporting period. While much has been done towards regaining

momentum these efforts will have to be further intensified and the flow of legislation

likewise increased. The need for further effort applies even more to the strengthening of

the administrative capacity to adopt the

acquis.

There have been developments in this

regard, in particular in the implementation of civil service legislation, but not

commensurate with the progress in adopting legislation.

In contrast to the 1999 regular report, there has been progress in adopting legislation in

key areas of the internal market

acquis,

standards and certification and state aid. In both

cases the necessary framework legislation has been adopted. The emphasis must now

turn to the secondary legislation necessary to implement the

acquis

in these areas and the

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accompanying administrative capacity. The adoption of new intellectual property

legislation is a welcome step although difficulties with the industrial property law remain

to be resolved. Legislative progress has also been made in the area of consumer

protection. It is still necessary to strengthen the capacity and competence of the relevant

structures for enforcement as well as the dissemination of information on the new

regulations.

Poland’s track record in the free movement of services and capital has been good but

there has been little progress over the reporting period. Public procurement and the

movement of persons are other areas where progress is urgently required if Poland is to

be smoothly integrated into the internal market.

There has been some progress in industrial policy, notably in the automotive sector

although the lack of concrete progress in steel restructuring remains a cause for concern.

In the agriculture sector, progress has been made in the elaboration of the rural

development plan, however a clear coherent and fully budgetised strategy for the sector

remains to be developed. Overall, Poland has not yet launched the substantial

transformation which is needed, in terms of policy,

acquis

and structures, in the

agriculture and fisheries sectors and in both sectors the necessary legislative work is

lagging behind.

In the environment sector despite considerable work on the development of drafts little

has been achieved in the way of adopting legislation, similarly for the energy and

transport sectors where legislative developments have been limited. Framework

legislation has not been transposed. In all three sectors considerable further work is also

required to strengthen the administrative capacity.

There have been notable developments with regard to regional policy, again the

appropriate structures will need to be developed to implement the national development

plan and the application of the NUTS-comparable legislation. In the social field, efforts

have been limited and legislative enforcement remains a matter of concern, in particular

the capacity of labour institutions.

Some progress has been achieved in justice and home affairs, most notably with regard to

the border guards and border management, for which an overall strategy has been

developed. Its implementation will require considerable effort and a high degree of co-

ordination between the agencies concerned. Efforts are being undertaken to improve the

efficiency of the judiciary, these will likewise need to be pursued with vigour. Alignment

in some areas remains limited and considerable improvement is required in law

enforcement bodies dealing with the fight against organised crime, in particular the police

services. In the customs area alignment with the

acquis

and the establishment of an

effective implementation capacity both require significant additional efforts as is the case

for financial control.

Poland has made notable progress in aligning further its legislation but needs to do more

in order to be able to match this effort when adapting and strengthening the structures

required with a view to accession. This relates not just to the administrative capacity at

the level of central and regional government, although this is clearly primary, but also to

the other actors; business operators, NGOs and indeed the public at large, who are all

involved in the implementation of the

acquis

in the broadest sense. At the level of the

civil service and public administration, it will specifically entail a determined effort to

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increase the stability, independence, and efficiency of Poland's administrative capacity as

a whole.

This is reflected in the extent to which the short-term priorities of the accession

partnership have been addressed. There has been progress in meeting the

acquis

based

elements, notably certification and state aids but continued efforts are needed to set up or

strengthen capacities in intellectual property protection, certification, state aids,

agriculture and regional policy, the social field, customs and justice and home affairs.

Poland has already started to address some of the medium-term Accession Partnership

priorities.

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C. Conclusion

Poland continues to fulfil the Copenhagen political criteria.

With regard the areas for action identified last year, Poland has undertaken initial steps

in the reform of the judiciary and in preparing the ground to deal with the most pressing

bottlenecks. Such measures are important, as the existence of an effective judiciary is an

essential element in the implementation and enforcement of the

acquis.

Similarly with

regard to the fight against corruption, initial steps have been taken but further efforts are

needed, including the adoption of the necessary legislation. Developments with regard