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Europaudvalget 2000-01
EUU Alm.del Bilag 242
Offentligt

FROM THE COMMISSION

SLOVAKIA’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 Slovakia................................. 7

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

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

Community Aid ........................................................................................................... 8

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

Negotiations / Screening............................................................................................ 12

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

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

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

Recent developments................................................................................................. 14

1.1. Democracy and the Rule of Law ................................................................. 14

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

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

The Judicial System................................................................................................... 16

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

1.2. Human rights and the protection of minorities.......................................... 18

Civil and political rights ............................................................................................ 18

Economic, social and cultural rights ......................................................................... 19

Minority rights and the protection of minorities ....................................................... 20

1.3. General evaluation ........................................................................................ 22

2. Economic criteria................................................................................. 23

2.1. Introduction................................................................................................... 23

2.2. Economic developments ............................................................................... 23

2.3. Assessment in terms of the Copenhagen criteria ....................................... 25

The existence of a functioning market economy....................................................... 25

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

Union ......................................................................................................................... 30

2.4. General evaluation ........................................................................................ 32

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

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

3.1. The chapters of the

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

Chapter 1: Free Movement of Goods ........................................................... 35

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

Chapter 2: Free Movement of Persons ......................................................... 37

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

Chapter 3: Free Movement of Services........................................................ 38

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

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

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

Chapter 5: Company Law ............................................................................. 41

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

Chapter 6: Competition Policy ...................................................................... 42

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

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

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

Chapter 8: Fisheries....................................................................................... 46

Overall assessment .................................................................................................... 47

Chapter 9: Transport policy........................................................................... 47

Overall assessment .................................................................................................... 48

Chapter 10: Taxation ..................................................................................... 49

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

Chapter 11: Economic and Monetary Union ............................................... 50

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

Chapter 12: Statistics ..................................................................................... 51

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

Chapter 13: Social policy and employment................................................... 52

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

Chapter 14: Energy....................................................................................... 55

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

Chapter 15: Industrial policy......................................................................... 57

Overall assessment .................................................................................................... 58

Chapter 16: Small and medium-sized enterprises ........................................ 59

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

Chapter 17: Science and Research............................................................... 60

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

Chapter 18: Education and Training........................................................... 61

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

Chapter 19: Telecommunications and information technologies................ 62

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

Chapter 20: Culture and audio-visual policy................................................ 63

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

Chapter 21: Regional policy and co-ordination of structural instruments . 63

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

Chapter 22: Environment .............................................................................. 65

Overall assessment .................................................................................................... 67

Chapter 23: Consumers and Health Protection .......................................... 67

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

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Chapter 24: Co-operation in the field of justice and home affairs .............. 68

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

Chapter 25: Customs Union ......................................................................... 71

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

Chapter 26: External Relations..................................................................... 73

Overall assessment .................................................................................................... 73

Chapter 27: Common foreign and security policy....................................... 74

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

Chapter 28: Financial control...................................................................... 76

Overall assessment .................................................................................................... 76

Chapter 29: Financial and budgetary provisions ........................................ 77

Overall assessment .................................................................................................... 77

3.2. Translation of the

acquis

into the national language................................. 78

3.3. General evaluation ........................................................................................ 78

C. Conclusion ...............................................................................81

D. Accession Partnership and National Programme for the

Adoption of the

Acquis:

Global assessment .........................84

1. Accession Partnership ......................................................................... 84

Short-term priorities .................................................................................................. 84

Medium-term priorities ............................................................................................. 86

2. National Programme for the Adoption of the

Acquis

...................... 86

Annexes..........................................................................................88

Human Rights Conventions ratified by the Candidate Countries, September

2000 ......................................................................................................... 89

Statistical data ................................................................................................ 90

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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 Slovakia 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 Slovakia’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 Slovakia’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 Slovakia in translating the

acquis

into its official

language.

In line with previous regular reports, the present report:

describes the relations between Slovakia 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 Slovakia’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 Slovakia’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 Slovakia in preparing for accession.

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

acquis

criteria (including Slovakia’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 Slovakia’s economic

performance.

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

Recent developments under the Association Agreement (including bilateral

trade)

Slovakia has continued to implement the Europe Agreement correctly and contributed to

the smooth functioning of the various joint institutions. Following a request from the

Slovak authorities for the passage to the second phase of the Europe Agreement, the

Commission requested additional information. A reply was provided in September and

the Commission is currently examining it with a view to forming the basis for a

recommendation to the Council.

The Association Council met in June 2000 following the Association Committee meeting

held in December 1999. These provided the occasion to review progress in preparation

for accession, notably in the light of the Accession Partnership priorities, and in bilateral

relations under the Europe Agreement. The system of sub-committees has operated under

the new format as a forum for technical discussions.

Since publication of the Commission’s last regular report the Joint Parliamentary

Committee, comprising representatives of the Slovak National Council and the European

Parliament, held its 8

th,

and 10

meetings in Brussels in October 1999, in Bratislava

in March 2000 and again in Brussels in October 2000.

Slovakia’s trade with the EC has remained high and continued to grow in 1999, while it

has not shown significant changes in the first six months of 2000. The EC kept its share

of total Slovak trade, reflecting a high level of integration of the Slovak economy with

the EU. During the first six months of 2000 Slovak exports to the EC accounted for 60.1

percent of Slovak’s total exports, while 50 percent of Slovakia’s total imports came from

the EC. For the first time Slovakia’s trade with the EC showed a surplus in 1999,

amounting to

€

500 million. In the first six months of 2000 the surplus amounted to

€0.56

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

the associated countries with a view to new reciprocal concessions for agricultural

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

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

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

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

functioning of the CAP. The negotiations with Slovakia were concluded between

negotiators in May 2000. As a consequence of the new agreement approximately two

thirds of EC imports and 40 % of EC exports will benefit from preferences. The regime

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

Additional Protocol to the Europe Agreement. For processed agricultural products,

negotiations are still ongoing.

For the European Parliament the

rapporteur

is Mr. Marinus Wiersma.

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The Council decided to terminate without the imposition of measures the proceeding

concerning imports of solutions of urea and ammonium nitrate originating in the Slovak

Republic, since it was found that Slovak exports had no material impact on the injury

caused to the Community industry. The safeguard measures on the imports of pigmeat

that had been introduced in April 1999 were discontinued according to schedule. In April

2000 Slovakia introduced quotas on exports of corn (till the end of October) and barley

(till the end of July). In late July it was decided, on the grounds of a severe drought, to

prolong the quotas till the end of 2000, while extending them, for the August-December

period, to other products. Moreover, Slovakia introduced duty free tariff quotas for

certain basic agricultural commodities in order to enhance their import.

The import surcharge which had been reintroduced on June 1

1999 has been phased out

according to schedule and it now stands at 3%. It is due to be completely eliminated by

January 2001 at the latest.

In April 2000 exploratory talks between the Commission and Slovakia took place with a

view to possibly opening negotiations on a Protocol to the Europe Agreement on

Conformity Assessment (PECA) that would effectively provide for pre-extension of the

single market benefits in certain sectors. This was followed up by a fact finding mission

by the Commission in Bratislava in September 2000.

The legislative procedure for the setting-up of an EU-Slovakia Joint Consultative

Committee with the Economic and Social Committee of the European Communities was

completed. Slovakia has appointed its representatives to this body.

Accession Partnership/ National Programme for the Adoption of the Acquis

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

reviewed in section D of this report.

In April 2000 Slovakia presented a revised National Programme for the Adoption of the

Acquis

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

the priorities contained in the Accession Partnership (see

part 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 annual financial assistance to Slovakia will amount to

€

million for Phare,

€

18.3 million for SAPARD and between

€

36.4 million and

€

57.2

million for ISPA, per year.

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

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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.

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 (investment grant schemes) with a regional or thematic focus.

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

remaining 70% is used for financing investments.

During the period 1993 – 1999, the Phare programme allocated over

€

370 million to

Slovakia. The

2000 Phare Programme

for Slovakia consists of a national allocation of

€

28 million, concentrated on the following priorities:

•

Political criteria:

improving the situation of the Roma through a better integration

into society while maintaining their identity.

Economic criteria:

promoting competitiveness through market driven enterprise

restructuring, particularly bad-debt recovery mechanisms; establishing an annual

fiscal surveillance procedure in line with European standards.

Internal market:

implementing the law on technical requirements of product and

conformity assessment.

Agriculture:

upgrading border inspection posts’ arrangements.

Employment and social affairs:

enhanced bipartite social dialogue; establishing an

independent guarantee fund for employees in case of employer’s insolvency.

Environment:

implementation of the environmental impact assessment directive and

reinforcement of the environmental inspectorates.

Justice & Home Affairs:

fight against corruption and drugs.

Economic and social cohesion:

preparation for the implementation of regional

development programmes and Community initiatives.

Reinforcement of administrative capacity:

strengthening statistical capacities.

•

Additional money is committed for cross-border co-operation (CBC) programmes,

notably with Austria (€ 6million), Poland (€ 4million) and Hungary (€ 2million).

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

programmes, such as TAIEX and the Small and Medium-sized Enterprise facility. In 2000

approximately

€

6.5 million has been committed for Slovakia’s participation in

Community programmes, notably the 5

Framework Programme for Science and

Technology, Socrates, Leonardo and Youth, and the Third Multi annual Programme for

SMEs. Slovakia expressed its interest to participate in the Culture 2000 programme.

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Following the opening of negotiations regarding Slovakia’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, Slovakia will become a member of

the Agency.

In connection with the decision of the Slovak Government of September 1999 on the

early closure of the Bohunice V1 reactors, Slovakia received in late 1999 an allocation of

€

10 million for a special programme to support the decommissioning of nuclear power

plants and consequential measures in the energy sector. An additional allocation of

€20

million has been committed.

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 justice and

home affairs, minority issues, agriculture, land registration, customs, etc.. Phare support

has been instrumental in Slovakia’s transformation process of adjusting to the

characteristics of a market economy, a democratic society and the other requirements of

EU membership. In particular,

•

Phare support to SME development has succeeded in developing sector strategies and

initiating essential institutional and financial mechanisms serving enterprises in these

sectors (over

€

40 million).

•

In the field of development of civic society, the Phare funded Civil Society

Development Foundation (CDSF) continues to support NGOs in the fields of

democracy, minorities, human rights, social activities and the environment (€ 5.5

million).

•

Lately, Phare has for example played an important role in the preparation for bank

privatisation through the provision of essential financial and legal advice to implement

key privatisation transactions (approximately

€

2.9 million).

•

In the framework of the export development programme, Phare has supported the

transfer of marketing know-how to Slovak producers, providing inter alia export

market information, support for export development and promotion and an export

development investment scheme (€ 9 million).

•

In the environment field, the Environmental Grant Scheme has provided grant support

to capital investment projects in the private and public sectors which directly facilitate

compliance levels in the key environmental problem areas.

•

In the transport sector, Phare funds were committed to build a 6.5 km section of

motorway D-61 by-passing the city of Bratislava (€15 million). The new link will

divert transit traffic and part of the urban through-traffic away from congested city

centre streets, thus improving traffic conditions, safety and environmental conditions

in the city centre. This project is also co-financed by the European Investment Bank.

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 bridge towards accession and the structural funds. First, management can

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

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

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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.

Concerning the management of the Phare programme in Slovakia, in spite of some

progress achieved over the past few years, further progress is needed in programming,

coordination and management capabilities in order to reap the full benefit of the

programme in the future. This applies both to the Department of Foreign Assistance

within the Office of Government and to individual ministries and beneficiary institutions.

The Slovak

SAPARD

plan received a positive opinion in the STAR Committee (EC

Management Committee on agricultural structures and rural development) in October

2000. The plan is likely to be adopted by the Commission before the end of the year. The

programme is based on three major priorities: improvement of the agricultural production

sector, including the food industry, supporting investments in farm holdings and

investments aimed at contributing to the upgrade of agri-food enterprises to EC

standards, and increasing their competitiveness; support to sustainable rural development

with a view to increase job opportunities and to develop an ecologically sound

management of natural resources; development of human resources. The average annual

public expenditure will amount to

€24.6

million (at 2000 prices) of which the

Community will contribute

€18.6

million (maximum annual amount). Preparations for

accreditation of the Slovak SAPARD agency are currently ongoing. The Agency is also

to carry out in the future issues related to the European Agricultural Guarantee and

Guidance Fund.As concerns the

ISPA

programme, the Commission informed the Slovak

authorities that its indicative allocation would range from 3.5 to 5.5 % of the overall

ISPA budget per year and encouraged Slovakia to propose high quality projects in the

fields covered by the programme, i.e. transport and environment. The Slovak Republic

has already developed strategies for the use of Phare funds in the above-mentioned

sectors that were submitted to the Commission from autumn 1999.

At project level, a transport project has already been selected for ISPA financing, i.e. the

modernisation of the Bratislava - Trnava Rail Track (Bratislava Rača - Šenkvice Section )

with an allocation of approximately

€38.5

million.

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

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

of the overall financial management and a number of Implementing Agencies responsible

for the technical implementation. For the programme and financial management of

SAPARD, a different system will apply which reflects the EAGGF rules and is based on

a fully decentralised approach through an accredited paying and implementing agency.

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

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

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

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

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

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

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

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

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

Structural Funds. It now covers all sectors pursuant to the

acquis.

For the Slovak Republic, following 14 twinning projects under the 1998 programme and

18 under the 1999 programme, twinning is foreseen for 9 projects under the 2000

programme. The new twinning projects will further cover sectors already addressed in the

past (including product standardisation and certification, the establishment of a public

procurement agency, occupational safety and health, the establishment of a national

regulatory authority for telecoms, public administration reform and legal advice on

implementation of energy policy), as well as new sectors (like the Roma minority, the

fight against corruption and drugs, the establishment of a guarantee fund for employees in

case of employers’ insolvency, the development of social dialogue). Member States that

had not participated in the past will be involved, in particular Spain, Italy and Sweden.

Germany is leading two projects in the agricultural area to prepare for the Common

Agricultural Policy and strengthen the relevant institutions. The Netherlands, Germany

and Austria have been selected to lead three environment projects, dealing with

approximation of legislation, the harmonisation of sectorial policy and capacity to

implement measures on air pollution. Two finance projects address the efficiency of

financial control mechanisms and legal advice on banking, insurance, taxation and the

stock exchange. France is leading a group of Member States administrations which will

work with Slovak partners to prepare for the structural funds. Six justice and home affairs

projects have been twinned, under the leadership of Austria, Germany (3), France and the

United Kingdom. Other areas of activity are asylum and immigration, the judiciary,

penal matters, bankruptcy and commercial law.

Negotiations / Screening

The analytical examination of the

acquis (screening)

with Slovakia was completed by the

end of 1999, including agriculture and those parts of justice and home affairs not

previously covered. During the first half of 2000 the screening has been updated on 23

chapters so far, with due account taken of latest developments in the

acquis

and recent

progress.

Negotiations where officially opened at the bilateral intergovernmental conference held

in February 2000. In March 2000 substantive negotiations started on eight chapters of the

acquis:

competition policy, statistics, small and medium-sized undertakings, science and

research, education and training, culture and audiovisual policy, external relations and

common foreign and security policy. The accession conference held in June 2000 decided

to provisionally close all the above chapters, with the exception of competition policy

and culture and audiovisual policy.

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As recommended by the Commission, the Presidency’s proposal is to open negotiations

for eight additional chapters (freedom to provide services, free movement of capital,

fisheries, transport, industrial policy, telecommunications and information technology,

consumers and health protection, and customs union) in the second half of 2000.

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B. Criteria for membership

1. Political criteria

Introduction

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

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

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

and respect for and protection of minorities.”

In its 1999 regular report on Slovakia's progress towards accession, the Commission

concluded that:

“Thanks to the changes introduced since September 1998 Slovakia now fulfils the

Copenhagen political criteria. The independence of the judiciary has improved de facto

but needs to be consolidated de jure, notably through an amendment to the constitution

eliminating the probation period for judges and modifying the nomination and removal

procedures.

Continued efforts are needed to sustain the stable functioning of the democratic

institutions, step up the fight against crime and corruption and to protect the rights of the

minorities. Particular attention should be paid to improving the situation of the Roma and

to fight discriminatory attitudes in society”.

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

implement the

acquis,

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

information on the development of Slovakia’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 process of consolidation of democratic institutions noted in the last report has

continued. In line with the normal political calendar there have been no elections during

the period. Due to the serious illness of the President, his powers were transferred in July,

in accordance with the constitution, i.e. partially to the Prime Minister and partially to the

Chair of Parliament. The President took back his powers upon his recovery four weeks

later. A referendum on early elections has been called at the request of the opposition.

1.1.

Democracy and the Rule of Law

As mentioned in the last Regular Report, Slovakia has achieved stability of institutions

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

developments of the past year.

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The Parliament

The functioning of parliamentary committees and supervisory bodies has been weakened

by the continued refusal of the leading opposition party to take the chair posts it was

offered and by the decision of the second largest opposition party to remove its members

from such positions. Currently chair position are available on the parliamentary

committees for Education, Youth and Sport, Social Affairs and Housing, Culture and

Media and Conflict of Interest and on the special supervisory committees for the Slovak

Intelligence Service and Military Information. The Parliament dismissed the president

and vice-president of the national Property Fund (NPF), on the proposal of the

government, for their mishandling of the gas storage company case.

In February the Parliament unanimously voted in favour of a resolution specifying its

basic tasks in support of Slovakia’s preparation for accession to the EU. All

parliamentary political parties have also participated in the preparation of the reform of

the constitution.

The case of a former member of Parliament who had been unduly deprived of his

mandate has been definitely closed; the Parliament has cancelled its 1996 resolution, and

financial compensation has been provided. The legal case filed by the former MP before

the European Court of Human Rights has been dropped.

In one year the Parliament adopted 71 laws and law amendments. The Parliament has

criticised the excessive recourse to the shortened legislative procedure, which it has

attributed to a lack of adequate preparation of legislation on the part of the Government.

It was estimated that in order to apply the

acquis

the Parliament will have to adopt 231

laws by 2002. The rules of parliamentary procedure have been modified to make them

more efficient.

Following unclear rulings from the Constitutional Court on the possible retroactivity of

presidential amnesties, the Parliament confirmed its previous resolution, already

mentioned in the last report, to strip the parliamentary immunity of two MPs belonging to

the opposition. However, the Parliament did not adopt proposed legislation that would

have cancelled the two relevant but contradictory amnesties, thus facilitating the legal

process. Recently, a district court cancelled the proceedings against one of the MPs, on

the grounds that the original amnesty was still valid. As to the other MP, who is being

prosecuted for eleven criminal offences, a new proposal was approved in Parliament in

August to take him into custody, while he was apparently missing. The legal difficulties

and uncertainties surrounding these important cases highlight a need for improved legal

constitutional clarity in Slovakia.

The two main opposition parties presented a request to the President in August in view of

holding a referendum on early parliamentary elections. The petition has been accepted

and the referendum will take place on 11 November.

The Executive

The internal tensions within the four-party coalition government were exemplified in

April 2000 when some members of Parliament belonging to the coalition, including its

Chairman, voted against the Prime Minister in a no-confidence vote prompted by the

opposition. More recently the chairman of the Hungarian coalition party indicated that

his party could withdraw from the ruling coalition out of disagreement with the

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administrative reform. These tensions have negatively affected the smooth progress of

some politically sensitive elements of the pre-accession legislative agenda, including the

reform of the constitution.

The Minister of Economy was replaced in October 1999, under allegations of

corruption. The Minister of Health resigned and was replaced in July 2000 in connection

with criticism of the functioning of the public health system, prompted by the medical

treatment given to the President during his illness.

The Charter on Local Self-Government has been ratified and entered into force in May.

The adoption of the civil service law and starting the implementation of the public

administration reform strategy

are short-term priorities under the Accession Partnership,

but have both been delayed due to lack of political consensus. Although there has been

progress in the definition of a public administration reform, the Law on Local Authority

Administration has not yet been approved, thus delaying the setting up of the new

territorial structures. Discussions surrounding the draft Civil Service Law have been

particularly difficult and have not yet resulted in a consensus due to diverging views on

key issues (i.e. conditions for tenure, pension rights) within government. The general

weaknesses in individual administrative structures (see

chapter B3 for details),

have

been accentuated by indiscriminate reductions in the number of civil servants and is

compounded by the lack of a satisfactory civil service framework. In August the

Government approved the recommendations of an audit review made on the State

institutions which, when implemented, should lead to staff reductions and staff

allocations in line with priorities. European integration is considered a priority area in

this context.

In spite of some improvement at the diagnostic and conceptual levels, there has been no

tangible progress in the strengthening of the practical functioning of the civil service in

Slovakia since the last report. Therefore, politicisation, patronage and lack of

accountability are still features of a public administration largely unattractive to new,

highly qualified recruits. Delays in the reform of the civil service are already hindering

the key role that the public administration must play in support of the accession process.

Unless a satisfactory solution is found soon (i.e. one that guarantees a professional,

impartial, politically neutral, efficient and flexible civil service) this will constitute a

major obstacle to Slovakia’s ambitions for early accession to the EU.

The Judicial System

The last Regular Report noted progress in the independence of the judiciary, while

indicating that a forthcoming reform of the constitution should pave the way for further

progress. A short-term priority under the 1999 Accession Partnership is:

“strengthen the

independence of the judiciary, in particular amend the constitution with regard to

nomination and probationary system for judges”.

The constitutional reform that should

have,

inter alia,

abolished the probation period for judges and shifted the competence

for proposing their appointment to the Judicial Council, has not been adopted yet.

However, on the basis of the existing constitution, in October 2000 the Parliament

passed a law regulating the status of judges, which will enter into force in January 2001.

This law includes provisions that regulate,

inter alia,

the procedure for selecting,

promoting and disciplining judges. It gives the judiciary more powers. The new law

also increases the remuneration of judges, which was considered to be low in

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comparison with neighbouring countries. The latter provisions will enter into force only

in 2003.

There are 1243 judges in Slovakia. Of these, 1131 correspond to regional and district

courts, a slight decrease compared to the last report.

The number of cases before the courts has tripled since the early 90’s, reaching

approximately 800,000 annually. The length in judicial proceedings, with an average

duration of 12 months in civil cases continues to be an issue of concern and has resulted

in an increasing number of complaints before the European Court of Human Rights.

The independence of the Supreme Court will be strengthened by an already adopted

legislative amendment which foresees its funding outside the budget of the Ministry of

Justice starting with the 2001 budget.

In spite of the work in progress there has been little practical improvement in the

functioning of the judiciary and serious efforts are needed, as a matter of priority, to

guarantee its professional impartiality and political neutrality. There have been reports

of judicial corruption and political pressure on judges as well as physical attacks on a

few of their number. A recent survey, produced at the request of the government,

indicated that about one fifth of the parties involved in court proceedings would have

experienced corrupt behaviour from judges. Bribes were given either to influence the

outcome of the cases or to accelerate their proceedings.

In November last year the President of the Republic appointed several new members of

the Constitutional Court, including a new chairman. In August the government decided

to request a Parliamentary vote on the removal of the President of the Supreme Court,

before the expiry of his five-year term, on the basis of allegations that he has not

fulfilled his professional duties in compliance with ethical principles. It should be noted

that this position had been filled under the previous Government in 1998. In the

meantime, the Association of Judges adopted a Code of conduct for judges, setting

standards of behaviour in professional and private life.

Anti-corruption measures

The European Commission has repeatedly stated that the fight against corruption needed

to be made more effective in Slovakia. In the last Regular Report the Commission

recognised a number of positive measures but indicated that their effects had not yet been

sufficiently demonstrated. Therefore, further sustained efforts were needed to ensure

effectiveness in the fight against corruption both in economic and political life.

In June, the Government adopted a national plan for the fight against corruption. It aims

at tackling corruption by, inter alia, increasing transparency, limiting the scope for abuse

of discretionary powers, addressing market failures related to state-owned enterprises and

privatisation, reinforcing control and audit mechanisms, enhancing the quality and

impartiality of the civil service and strengthening law enforcement, e.g. through the

establishment of a special public prosecutor for anti-corruption. An anti-corruption

steering committee was set up in July at the Office of Government to implement the

programme, including representatives from ministries, other state administration, NGOs

and international donors. The programme constitutes a positive starting point in that it

contains a diagnosis of the situation and a well-balanced combination of prevention and

enforcement proposals. Nevertheless, it remains rather general and lacks operational

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criteria to prioritise measures. It therefore needs to be translated without delay into a

detailed action plan with concrete commitments, responsibilities and resources. The

relevant ministries have already submitted by September their individual proposals ,

which now need to be integrated into the plan.

At the beginning of November 1999, the first trial related to organised crime began

amidst special security and information protection measures. The government has

pursued numerous investigations and launched new ones into alleged cases of fraud,

corruption and abuse of power connected with the previous government. The new law on

public procurement, that entered into force in January has raised transparency by

allowing for the monitoring of tenders by independent third parties at the request of the

contracting authority, a possibility that has already been used in some cases.

During the period Slovakia has ratified the Council of Europe Criminal Law Convention

on Corruption. The OECD Convention on Combating Bribery of Foreign Public Officials

in International Business Transactions has entered into force. Slovakia has signed, but not

yet ratified, the Council of Europe Civil Law Convention on Corruption.

In spite of the above measures, the perception exists, confirmed by various sources, that

corruption is widespread in Slovakia and that it is either rising or at best not decreasing.

The most affected areas appear to be health care, the National Property Fund, customs,

labour offices, tax authorities, the education system, the police, municipal governments,

some ministries and the courts. According to a recent survey amongst entrepreneurs and

civil servants, state subsidies to enterprises are often granted through bribery, political

influence or contacts. The bodies prone to accepting bribes are those involved with

regulating, licensing, certification, inspection, registration, and the issuing of permits.

In the face of this situation the translation of good intentions and well thought-out

concepts into specific actions should not be delayed. The reform of the public

administration and the civil service, including clear internal guidelines, codes of ethics

and disciplinary procedures are also particularly important.

1.2.

Human rights and the protection of minorities

As mentioned in the last Regular Report, Slovakia continues to respect human rights and

freedoms. The following section concentrates on subsequent major developments.

Slovakia has already ratified the major human rights conventions (see annex). In

November 1999 Slovakia signed, but has not yet ratified, the Revised European Social

Charter.

Civil and political rights

Slovakia is further advancing in the active protection and implementation of basic civil

and political rights, which see increased monitoring and protection by the state and

NGOs.

A law on free access to information was enacted in May and comes into effect in

January 2001. Based on the principle that any information that is not classified as

confidential is of public use, this law should contribute to improving transparency in

public life and participation by civil society and to facilitating the fight against

corruption.

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The Government Council for

NGO's,

aimed at coordinating public support for civil

society, has been created and is operating with 37 members, of whom 20 represent

NGO’s. The Government has not yet produced a policy document or adopted changes to

legislation on foundations, non-investment funds and non-profit organisations. However,

the ceiling for tax deductibility of contributions to NGOs has been raised. Moreover, a

provision has been included in the Income Tax Law whereby taxpayers can, as of January

2001, assign up to 1 % of their income tax to NGOs.

The dialogue between Government and NGOs has continued to improve. “Third sector”

representatives have been closely associated with the preparation of various reforms and

their initiatives have increasingly benefited from financial support. In this improved

climate a challenge for the future development of the NGO sector in Slovakia will be to

sustain and improve its constructive cooperation with the political powers, while

preserving the necessary intellectual and political independence so as to contribute to the

furthering of democratic and social progress.

As regards

freedom of expression,

no cases of intimidation of journalists and media have

been reported during the period. The filling by the Parliament of a vacant position on the

Council of Slovak Radio and Television (STV) took seven months, as opposed to the

sixty days contemplated by the law. Monitoring of state-owned TV has indicated that the

opposition is not given sufficient and objective coverage. A recent resolution by STV has

determined that more air-time will be devoted to the opposition. It is important that the

public service nature of state-owned media is ensured and improved.

Slovakia is increasingly being used both as country of origin and transit for

trafficking in

women,

although the number of reported cases is low in absolute terms.

The 24 hour rule applicable to

asylum requests

has been eliminated thus facilitating

access to asylum (see

Chapter 24 – Co-operation in the field of justice and home affairs

in part B.3.1 of this report).

Economic, social and cultural rights

The principle of

equal opportunities

has been reinforced by removing the complete

prohibition on women working at night. Moreover, the rights of pregnant employees

have been strengthened and the implementation of equal pay provisions safeguarded. The

publication of job offers with discriminatory content as to gender has been prohibited

(see

Chapter 13 – Social Policy and Employment – in part B.3.1 of this report).

The

Optional Protocol to the Convention on the Elimination of all Forms of Discrimination

against Women has been signed. However, the rights of women and children remain an

important issue, despite the many international obligations adhered to. In particular,

domestic violence directed at women and children is a serious problem, while appropriate

legislation is lacking.

In the area of

child protection,

Slovakia is not making satisfactory progress and does not

comply with the relevant conventions, including international adoption. There are around

5,800 abandoned children living in homes under the supervision of the Ministry of

Labour, Social Affairs and Family. Their living and educational conditions are considered

inadequate. The Government, however, has approved the establishment of a Committee

for Children's Rights, which monitors the fulfilment of the UN Convention on the Rights

of the Child. It consists of 16 members, representing both ministries and NGO’s.

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Social dialogue

has further improved, despite increasing unemployment. The tripartite

agreement for 2000 was signed in March by Government, Trade Unions and Employers.

The Consultative Committee on European Integration involving the social partners has

met regularly. In November 1999 Slovakia signed the

Revised European Social Charter,

still pending ratification. An amendment to the Penal Code made the late payment of

wages liable to prosecution.

Minority rights and the protection of minorities

In the 1999 Accession Partnership for Slovakia a short-term priority is: “improve the

situation of the Roma through strengthened implementation, including provision for the

necessary financial support at national and local levels, of measures aimed, notably, at

fighting against discrimination, foster employment opportunities and increase access to

education”.

After the considerable progress in setting up the appropriate legislation and supporting

institutions that was reported during the previous period, further progress can be noticed

in developing approaches to tackle the problems of minorities, but only limited progress

can be observed in actual implementation.

The Ministry of the Interior has established the list of 656 municipalities where the Law

on the Use of Minority Languages in Official Communications applies (i.e. where

national minorities - Hungarian, Ruthenian, Roma, Ukrainian and German - represent at

least 20% of the population) and has issued guidelines. Some local authorities have also

developed implementing regulations. However data on actual implementation of the law

is scanty and does not allow for forming a judgement on its effectiveness. It appears that

in many areas national minorities do not make use of the rights granted under the law

due to lack of information. For instance, no Roma village has apparently taken

advantage of the possibilities to use the Romany language.

An expert group at the Office of Government is working on the drafting of further

legislative developments on the use of minority languages, notably in the areas of

education, culture and the media. In May an action plan to prevent all forms of

discrimination, racism, xenophobia, anti-semitism and other forms of intolerance was

adopted, covering the period 2000-2001. The plan aims to raise public awareness

about all forms of intolerance and to promote and co-ordinate education initiatives vis-à-

vis students, targeted professional groups (the police, judges, prosecutors, the army,

health and social workers), as well as the population in general. It appears to be

comprehensive and well conceived, though it does not contain budget allocations.

The Roma minority is very sizeable in Slovakia, although its precise proportions are not

well known. According to the last census it accounts for 1.6% of the population, but

could be as high as nearly 10% -or the largest in Europe in relative terms- according to

estimates. An effort to improve the accuracy of the next census in this respect should be

undertaken. The Roma continued to suffer discrimination, violence at the hands of thugs

(‘skinheads’) and lack of sufficient police protection. In August, a Romani mother of

eight was attacked and killed. The police have launched investigations, confirming racial

motives. The crime has been widely condemned by key political representatives. The

Roma minority has also been the victim of racist language, including from some political

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representatives. It should be positively noticed however that in September a member of

parliament was stripped of his immunity to facilitate legal proceedings in this respect.

The reconstruction of Roma dwellings affected by the July 1998 floods in eastern

Slovakia is not yet complete. There is under-representation of Roma students in the

educational system, most particularly in higher education and university, and over-

representation in schools for retarded children. The efforts to provide teachers with

training about Romani culture and history have nevertheless been strengthened and the

first textbook on Roma history has been made available to schools. De facto segregation

continues to exist in some cities and towns.

The outflow of Slovaks of Roma origin to a number of EU countries has continued and

outflows to the Czech Republic have equally been detected. This has resulted in the

imposition of visa requirements in certain cases. At the time of drafting this report the

following Member States impose visa requirements on Slovak citizens: Belgium,

Denmark, Ireland and the United Kingdom. Some political representatives have blamed

the situation on the Roma themselves or attributed it to organised gangs. The underlying

social and economic roots of the problem can nevertheless not be ignored. The

connection between the Roma outflow and the imposition of visa requirements has

prompted anti-Roma resentment. Recent crop thefts have had a similar effect.

The strategy to tackle the problems of the Roma community which was adopted in

September 1999 (stage I) was further elaborated in March 2000 (Stage II). The new

document constitutes a list of valid intentions and good projects, but lacks in definition of

objectives, assessment of progress to date, clarity in financial allocations and follow-up

mechanisms. Further development and concrete measures would be needed to ensure its

operational value.

The actual budget allocation under the 2000 budget for the Government Commissioner

on Roma Affairs was, in comparison to the previous year, doubled to 0.75 M€. This

allocation seems clearly insufficient. The allocation foreseen under the stage II strategy is

of around 4 M€, but the budgetary sources are not yet clearly identified.

A recent amendment to the Penal Code explicitly recognised racially motivated bodily

crime and raised the penalty for harm in such cases. A number of verdicts have already

been based on this provision. For example, in April a court in Banska Bystrica modified

the legal qualification of a crime, perpetrated four years earlier, deeming it racially

motivated, although the sentence was not changed. In that case and for the first time a

court decision, based on the above provision, was publicised in Slovakia.

Concerning the Hungarian minority, the implementation of the basic treaty with Hungary

has continued through the functioning of various working groups.

The Parliament approved a law designed to compensate people deported to labour camps

in World War II. A total of 4,500 victims will benefit from about 10 M€ in funds.

In spite of some progress recorded there appears to exist, in general, a gap between the

good intentions and their actual implementation. As a result, practical improvement in the

daily life of the minorities is very minor if not unnoticeable. More attention, including

attention at local administration level, needs to be paid to protecting minorities and to

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changing deep-rooted discriminatory attitudes in society and, in particular, to improving

the living and social conditions of the Roma population.

1.3.

General evaluation

Slovakia continues to meet the political criteria for accession which the last report had

recognised, for the first time, as having been fulfilled. Slovakia has further advanced in

the consolidation of its democratic system and in the normal functioning of its

institutions. However the speed of the reform process has lost some momentum due, in

part, to dissension within the ruling coalition.

Certain legal steps were taken to strengthen the independence of the judiciary. However,

key parts of the reform, in particular the constitutional amendment with regard to the

nomination and probationary system, which were set as a short term priority, have not yet

been adopted. Therefore, continued efforts are needed to ensure the independence of the

judiciary.

Progress was also achieved in the fight against crime and corruption, mainly in

formulating a government policy and transposing international obligations. The

translation of good intentions and well thought-out concepts into specific actions should

not be delayed, in order to improve Slovakia’s otherwise insufficient record in this

respect.

Further progress can be noticed in developing approaches to tackle the problems of

minorities, but there remains a gap between policy formulation and implementation on

the ground. Tangible improvement of the situation of the Roma minority in particular by

implementing specific measures, a short term priority of the 1999 Accession Partnership,

has therefore not been achieved to a large extent. Increased efforts in implementing

legislation in various sectors as well as strengthening policies and budgetary means in

line with the medium term priorities of the 1999 Accession Partnership are needed in this

respect.

The adoption of the civil service law and starting implementing the strategy of the public

administration reform, both short term priorities of the 1999 Accession Partnership, have

been delayed. Sustained efforts are required to maintain momentum in these important

areas of the reform process.

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2. Economic criteria

2.1.

Introduction

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

concluded:

“Slovakia has introduced most of the reforms necessary to establish a market economy”;

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

in the medium term, but this would require more transparent and market-based policies”.

This finding was confirmed in the 1998 Regular Report. In its 1999 Regular Report, the

Commission acknowledged that progress had been made and found that:

"Slovakia is close to being a functioning market economy thanks to the courageous

policy decisions and the impressive reform agenda of the new government. The

implementation of these decisions in the coming year will take the process forward and

complete the legal and economic conditions of a functioning market economy. Continued

progress towards sustainable macroeconomic stability and the implementation of the

structural reform programme should enable Slovakia to cope with competitive pressure

and market forces within the Union in the medium term."

In examining the economic developments in Slovakia since the 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 pressure and market forces within the Union.

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

Opinion, as well as in the previous Regular Reports.

2.2.

Economic developments

The macroeconomic stabilisation policies of the government have broadly generated the

desired results. It will be crucial to maintain fiscal discipline in order not to endanger the

still fragile macro-economic stabilisation achievements. In the reporting period, fiscal

tightening and sharp increases in administered prices have curtailed excess domestic

demand. As a result, the trade and current account deficits have been almost halved,

while economic growth slowed down in 1999 to 1.9%, remaining positive thanks to

robust exports. The lower current account deficit and increased net foreign direct

investment have put financing of the balance of payments on a more sustainable path.

Inflation increased in line with expectations as a result of necessary administrative price

adjustments. The exchange rate stabilised, although occasional tensions linked to political

uncertainty still occur. Unemployment increased faster than anticipated, partly due to the

resumption of enterprise restructuring.

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Slovak Republic

Real GDP growth rate

Inflation rate

- annual average

- December-on-December

Unemployment rate, end-year

- ILO definition

General government budget

balance

Current account balance

per cent

1996

6.2

1997

6.2

1998

4.1

1999

1.9

2000 latest

1.7 Jan-June

per cent

5.8

5.4

6.1

6.3

6.7

5.7

10.6

14,1

13.6

Sept

8.7 Sept

per cent

11.3

11.8

12.5

16.2

18.9 April-June

per cent of GDP

-1.7

-3.6

-4.8

-3.4

per cent of GDP

million

€

-10.6

-1,655

-9.6

-1,725

-10.0

1,893

-5.9

-1,088

-1.6 Jan-June

-162 Jan-June

Foreign debt

- debt export ratio

- gross foreign debt

per cent

million

€

38.8

3,338

53.6

5,595

57.4

6,673

60.4 E

6,863 E

Foreign direct investment in flow

- balance of payments data

per cent of GDP

million

€

1.8

279

0.9

154

2.7

504

1.7

310

1.3 Jan-June

136 Jan-June

E = Estimates

The structural reform programme that was announced by the government in early 1999

has been further elaborated and implemented in the past year.

In particular, a new

bankruptcy framework has been approved, state-owned banks have been re-capitalised

and are being privatised, and the privatisation of public utilities has started. This set of

measures is creating an environment where enterprises are put under pressure to

restructure, while the possibilities for attracting the financial means for restructuring are

being improved by enhanced incentives for foreign direct investment and a better

functioning banking sector.

PROXY HICP since 1996 (see methodological notes)

Moving 12 month average rate of change.

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Main Indicators of Economic Structure in 1999

Population (average)

GDP per head

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

End of 1999 data (Eurostat)

5,395

10,279

per cent

million

€

per head

4.5

7.4

30.8

38.9

61.5

2,801

377

2.3.

Assessment in terms of the Copenhagen criteria

The existence of a functioning market economy

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

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

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

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

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

of the economy.

Despite political differences in the governing coalition, the government has managed to

reach a broad consensus on the need for macroeconomic stabilisation and structural

reforms.

Although the execution of the ambitious economic reform programme has

sometimes been slower than initially planned, all implementing measures are in line with,

or in some cases even stronger than, the original agreement. In February 2000, the Slovak

government and the European Commission services signed a Joint Assessment of

Slovakia's medium-term economic priorities. The Joint Assessment is the result of co-

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

from those used in demographic statistics.

Agriculture, hunting, forestry and fishing.

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

The 1999 data for foreign debt are estimates.

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operation among all relevant ministries and thus integrates a number of sectoral strategies

into a consistent framework. The wide support that this economic strategy has received,

both within the government coalition and from the social partners, is essential to

guarantee the full implementation of its sometimes difficult measures.

During 1999, the government started to introduce an austerity package to cut excess

domestic demand in order to restore macroeconomic stability.

By the end of 1998, when

the current government was formed, the internal and external macroeconomic stance had

become unsustainable, leading to periods of exchange rate tensions. The initially positive

results of the austerity package that were observed in the 1999 Regular Report have been

confirmed and strengthened since.

The decline in economic growth from 4.1% in 1998 to 1.9% in 1999 is relatively modest,

given the size of the painful but necessary cuts in domestic demand.

Price and tax

increases, lower public investment and the imposition of a harder budget constraint on

the enterprise sector generated a drop in domestic demand (excluding stocks) by 7.7% in

1999, compared to an increase by 7.2% in 1998. This was mainly the result of a dramatic

contraction of gross fixed capital formation. Private consumption growth also decelerated

sharply from 5.3% to 0.1%, as a result of a decline in real wages by 3.1%.

The negative effects of the weak domestic developments on GDP growth were largely

compensated by the contribution from net exports.

Real exports grew by 3.6%, which is a

good performance given the feeble economic growth during most of the year in Germany,

the Czech Republic and Italy, Slovakia’s main export markets. Exports were supported

by the moderate domestic wage developments and by increased productivity in some

sectors. The sharp contraction of domestic demand resulted in a decline of real imports

by 6.1%, compared to an increase by close to 20% in 1998.

In the first half of 2000, the protracted shrinking of domestic demand has continued to be

compensated by a strong positive contribution from net exports, leading to GDP growth

of 1.7%.

Although the decline of investment has slowed down, private and public

consumption became even weaker than in 1999.

Unemployment increased rapidly and reached 18.9% in the second quarter of 2000

(labour force survey data), an increase of 6.4 percentage points compared to the end of

1998. Unemployment had been high from the start of transition and only declined

marginally when economic growth accelerated from 1994 onwards. It started to increase

again in 1997, even though at that time the economy still grew by 6.5%. This was mainly

the result of increased pressures for enterprise restructuring. Enterprises were forced to

cut costs by eliminating over-employment. The rapid surge in unemployment seems to

have moderated wage developments, leading to a real wage decline by 3.1% in 1999.

In the second half of 1999 and early 2000,changes in the rate of inflation have been

largely determined by government decisions.

Various increases of administered prices

(mainly in the energy sector), higher indirect taxes and the introduction of an import

surcharge have pushed up the inflation rate from 7.1% in June 1999 to 16.6% in March

2000. The average inflation rate in 1999 was 10.6%, compared to 6.7% in 1998.

However, this acceleration of headline inflation has not threatened medium-term price

stability because core inflation, which excludes the effect of government measures, is

kept under control at around 6 to 7%. Due to the profile of administered price increases in

the past, inflation stayed high in the first half of 2000, but eased rapidly from July

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onwards, to reach 8.7% in September. Core inflation also declined to less than 5% in

September.

In 1999, the trade and current account deficits were almost halved.

After three years of

deficits of around 10% of GDP, they declined to below 6% as a result of the strong

export performance and import contraction, and despite the sharp price increase of

imported energy products. The smaller current account deficit was easily financed, partly

by an increase of net foreign direct investment to 3.6% of GDP. The positive external

developments have continued in 2000. The current account deficit has been reduced to

about 1.5% of GDP in the first six months and the trade deficit was only about 2.8% of

GDP in the first eight months of this year. In April 2000, even a surplus on the trade

balance has been recorded for the first time since 1995.

The reduction of the general government deficit will be crucial for the consolidation of

the government’s macroeconomic stabilisation achievements.

Although the 1999 general

government deficit of 3.4% of GDP was higher than the 3% target, the authorities have

been able to reduce the primary deficit (excluding interest payments) by about 2% of

GDP, which represents a significant fiscal tightening. The budget for 2000 again aims at

a general government deficit of 3% of GDP (excluding the cost for bank restructuring).

The state budget developed favourably in the first nine months of 2000: a deficit of

SKK 7.8 billion (€ 184 million) was recorded, compared to a deficit of SKK 12.4 billion

(€ 279 million) in the same period of 1999, mainly as a result of fast revenue growth. In

particular, revenues from corporate income tax and self-employed taxes have been

significantly higher than expected. Past measures seem to have been successful in

improving tax compliance. However, because of a number of risks, mainly on the

expenditure side, it is unlikely that the end-of-year deficit target will be reached.

The current budget proposals for 2001 are not in line with the medium term

consolidation envisaged in the Joint Assessment and give reason for concern.

The current

budget proposals foresee a general government deficit of around 4.9% in 2001 (including

off-budget-items and excluding the costs of bank restructuring). It is essential that the

final budget for 2001 foresee sufficient measures, including in the area of social

expenditures, to keep the general government deficit under control. Otherwise, the

positive but still fragile results of macroeconomic stabilisation would be endangered.

Furthermore, a more medium-term outlook should be introduced in the budget

preparation process,

in order to incorporate better future effects of current measures and

to assure the sustainability of budget consolidation. The structural reforms on the revenue

side should be completed. In this framework, the tax base could be extended and

measures to further improve tax compliance must be introduced. However, because the

tax burden is already relatively high in Slovakia, medium-term measures should

concentrate on containing expenditures. Among other things, this will require a

comprehensive reform of the health, pension and social security system to make it more

self-sustainable. The reform of Slovak Railways, which is under preparation, should cut

losses and thus reduce the need for subsidies from the budget. In addition, other subsidies

to enterprises from the budget should be reduced.

Some relaxation of monetary policy has been made possible by the more restrictive fiscal

policy leading to lower interest rates.

Foreign demand for government securities

increased and has also contributed to lower domestic interest rates. As a result of the

improved current account balance and the increased foreign interest in koruna

denominated securities, the exchange rate started to recover against the euro from the

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middle of 1999. The National Bank of Slovakia has repeatedly intervened to slow down

the appreciation of the koruna. As a result, official international reserves have increased

from a low of

€2.4

billion at the time of the currency crisis in May 1999 to

€4.5

billion in

early May 2000. Later, the currency came under some temporary downward pressure as a

result of Slovak crown sales by foreigners during periods of increased political

uncertainty. On some of these occasions, the central bank intervened to support the

currency. In the near future, significant capital inflows from ongoing privatisations can be

expected. This could lead to upward pressures on the exchange rate and will challenge

monetary policy.

The equilibrium between demand and supply is now largely established by the free

interplay of market forces.

The accelerated increase of administered prices has been

continued. After several hikes in energy and transport prices during 1999, substantial

increases were introduced again in 2000. The rapid price adjustments had become

necessary because the previous government had kept administered prices at an artificially

low level, hampering the profitability of most utilities. As an unavoidable consequence,

the increase of administered prices, which represent 19.3% of the consumer price index,

was one of the main causes of the acceleration of inflation in Slovakia.

The current government has given a new impetus to the privatisation process by opening

up state-owned banks and utilities for full or partial private ownership.

The vast majority

of enterprises in Slovakia are private. The first major sale by the current government, of a

majority stake in Slovak Telecom, has been successfully completed in July 2000. The

ongoing full privatisation of the major state-owned banks is expected to be finalised

between the autumn of 2000 and the first half of 2001, while the sale of minority stakes

in the important energy sector (Slovak Gas, Transpetrol, Slovak Electricity) is under

preparation. In sharp contrast to the past, all these privatisations are conducted through

transparent open tenders, with the full involvement of interested foreign bidders.

In principle, market entry is free in Slovakia, although relatively few new enterprises

have been established.

With some delay compared to the originally announced plans, the

Parliament approved substantial amendments to the bankruptcy framework in June 2000.

The lack of a functioning bankruptcy framework has been one of the main factors behind

slow enterprise restructuring and the build-up of non-performing loans in the banking

system. The amendments to the law should shorten bankruptcy proceedings and improve

the possibilities for financial restructuring of potentially viable enterprises. Conditions to

start bankruptcy procedures have been made more accurate and stringent, and the powers

of creditors in the process have been substantially reinforced. The new legal bankruptcy

framework, if effectively implemented by the responsible courts, should be able to

contribute to faster and less destructive enterprise restructuring.

The legal system for a functioning market economy is largely in place, but

implementation needs considerable strengthening.

The recent amendments to the

bankruptcy framework have solved the biggest remaining problem. Property rights are

guaranteed by the legal and court system. Nevertheless, courts need to be strengthened

further in order to improve commercial law enforcement. As discussed in more detail in

the chapter on the political criteria, corruption is relatively widespread in Slovakia. The

government is currently establishing an action plan for combating corruption.

The role of the financial sector in enterprise restructuring and in supporting economic

development

has been hampered by the conduct of the main state-owned banks. This

conduct has also led to their precarious financial situation. In the second half of 1999, bad

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debts in the banking system had increased to more than 40% of total loans, mainly

concentrated in the state-owned banks, which represent about half of the sector. Despite

the weakness of part of the financial sector, financial intermediation has traditionally

been relatively high, with a domestic credit to GDP ratio of over 60% in 1999, but the

criteria for granting loans have been distorted. This is mainly the result of the heavy

involvement of the state-owned banks in the financing of some of the big Slovak

enterprises which generated the bad debt problem.

During the past year, Slovakia has made great progress in restructuring and re-

capitalising the state-owned banks.

The government increased their capital, and took

SKK 108 billion (about 13% of GDP) of bad assets in two rounds, reducing their share of

non-performing loans to less than 20%. Most of the carved-out assets were put in the

newly established Slovak Consolidation Agency, while the remainder was allocated to

the Slovak Consolidation Bank. The Consolidation Agency will not directly manage the

assets it took over, but will auction them as soon as possible. The capital adequacy ratios

of all state-owned banks are now higher than the required 8%. The steps taken to improve

the financial situation of the state-owned banks should enable their privatisation. The

government has decided to sell all its shares in all banks, including in the Slovak Savings

Bank (SLSP), where it originally intended to sell only a minority stake. Calls for interest

for the Investment and Development Bank, the SLSP and the smaller Banka Slovakia

have already been published. The selection of buyers for these three banks is expected to

be completed before the end of 2000. The sale of the last state-owned bank, the General

Credit Bank, has been postponed somewhat in order not to interfere with the sale of the

other banks and is expected to be finalised in the first half of 2001.

A number of smaller banks, which only represent a small proportion of the Slovak

banking sector, have run into difficulty over the last year.

The supervisory authorities and

the government have taken a differentiated approach. In three cases the license has been

revoked and the bank closed. As a consequence, the deposit insurance fund has paid out

about 1% of GDP in 2000. In other cases the government temporarily stepped in, with the

intention of selling the bank to a strategic investor as soon as possible. Meanwhile, some

of the smaller banks have been taken over by foreign investors, while the sale of others is

pending.

Capital markets remain illiquid and fragmented and progress is still needed in their

regulation.

An integrated supervisory authority is being set up, initially to supervise

capital markets and the insurance sector. In the future, banking supervision, which is

currently done by the National Bank of Slovakia, will be transferred to the integrated

supervision authority. The authorities should ensure the financial and operating

independence of the new authority. Although the banking supervision framework is

largely in place, it needs to be strengthened.

Slovakia can be regarded as a functioning market economy. Macroeconomic stability has

presently been restored through measures to reduce the fiscal and external deficits and

macroeconomic risks have so far been contained. However, the current budget proposals

for 2001 risk to endanger the stabilisation achievements. Continued adoption and

implementation of medium-term fiscal reform will be needed. The legislative framework

for business activity is largely in place, but effective implementation needs to be

strengthened. Price distortions are being eliminated through increases in administered

prices. Privatisation is advanced and it is under preparation in the energy sector. The

authorities are making good progress in the restructuring and privatisation of the state-

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owned banks, but the process needs to be completed and banking supervision has to be

further improved.

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

Union

As set out in Agenda 2000, Slovakia'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 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.

Slovakia can be regarded as a functioning market economy.

The steps taken to

consolidate the functioning of the market economy have improved Slovakia's medium-

term competitiveness. The predictability of the economic environment is also increased

by higher macroeconomic stability, greater transparency, the introduction of a consistent

medium-term macroeconomic framework, and by better policy co-ordination. The

confidence of international financial investors in Slovakia is returning after the first

positive effects of the macroeconomic stabilisation programme appeared and after the

government made credible progress with structural reforms, which facilitated OECD

membership.

In line with the slower growth of domestic demand, growth of investment has fallen.

The

investment ratio receded from an abnormally high level of 38.0% of GDP in 1998 to

30.8% in 1999 and 28.4% in the first half of 2000. Nevertheless, in 1999, the government

accelerated the public investment programme in infrastructure somewhat. Net foreign

direct investment increased to 3.6% of GDP in 1999, the highest level ever. However,

this result was mainly the outcome of a reduction of direct investment by Slovaks abroad,

while foreign direct investment inflows to Slovakia were even lower than in 1998.

Foreign direct investment is expected to be significantly higher in 2000. The privatisation

of Slovak Telecom alone represents close to 5% of GDP. In addition, the sale abroad of

Slovnaft and VSZ, two of Slovakia's private industrial giants, and the pending

privatisation in 2000 of some of the state-owned banks, could further push up foreign

direct investment this year. Moreover, a more favourable fiscal and regulatory

environment should support greater green-field investment projects.

The labour force is in general well qualified and wage costs remain relatively low,

although the lack of regional mobility, partly due to housing problems, is creating labour

scarcity for specific occupations in some regions.

Nevertheless, overall unemployment

has reached very high levels, and regional discrepancies are significant. Indeed, in regions

where the concentration of less favoured population groups is higher, unemployment

affects up to one third of the working population. Some specifically targeted measures,

such as skills up-grading and broader education may be necessary in these cases.. The

structural aspects of unemployment must be dealt with through policies supporting the

competitiveness and flexibility of the economy and the creation of favourable conditions

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for long-term sustainable economic growth. The social security system needs to be

reformed so as to create incentives for employment. An amendment of the Employment

Act, which has entered into force in December 1999, already made the criteria for the

provision of unemployment benefits stricter in order to increase the motivation for the

registered unemployed to look for work. In addition, efforts to improve regional and

occupational labour market flexibility will be of key importance.

Enterprise profitability has picked up significantly in 1999 compared with the low level

of 1998.

In particular, profits have improved in the utilities as a result of the increased

administered prices, in the exporting sector as a consequence of high export growth and

moderate wage developments, and also in the financial sector. However, the improved

overall profitability is the net result of both the increases in profits of profitable

enterprises and losses of loss-makers, resulting in a dichotomous enterprise sector. Inter-

enterprise arrears remain high, which is another indication that there is a large group of

insolvent enterprises that co-exists next to more profitable enterprises. In the past,

pressures for enterprise restructuring in Slovakia were weak. The bankruptcy framework

failed to remove insolvent enterprises, bank credits were easily obtained by the large

enterprises, and tax arrears were significant. The government’s restructuring plans are

tackling these problems. Easy credits have dried up as a result of the restructuring of the

banks, the bankruptcy framework is being strengthened, and the tax administration is

pushing for better tax compliance. Personal and corporate income taxes are being reduced

to promote entrepreneurial activity.

The economic policies of the current Slovak government abstain largely from interfering

with the private sector and its main policies to promote competitiveness are based on

market mechanisms.

Even the collection of the bad debts that were carved out of the

state-owned banks will be left to the private sector, thus minimising government

interference. "Hidden" state aids such as easy loans from state-owned banks or

accumulations of tax arrears are being eliminated and the government has become much

more selective in providing state guarantees to private enterprises. Trade protection is

also low, with the exception of the import surcharge, which should be phased out by 1

January 2001 at the latest.

Slovakia has re-oriented its external trade towards west European markets.

Exports to

the EC represented about 60% of total exports in 1999, compared to only 41% in 1996.

Germany is still the most important trade partner. The proportion of imports from the EC

is still smaller (52%) because Slovakia remains dependent on Russia for most of its

energy imports. The high growth rates of trade with the Community in recent years are an

indication that Slovak enterprises, with the help of foreign partners, are penetrating EC

markets, while ongoing reforms and a decline of real wages are helping to increase their

competitiveness. As a result of negative real wage growth, labour productivity is now

growing significantly faster than real wages.

Production and exports are concentrated in a few big enterprises.

Nevertheless, the SME

sector is also growing and already includes roughly 70% of enterprises. It contributes

50% of GDP and accounts for around 55% of employment and almost one third of all

exports

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

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

Union in the medium term, provided that the structural reform agenda is fully

implemented and broadened to include remaining reforms. Macroeconomic stability has

significantly improved and the implementation of the legal and structural reform

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programme for the financial and enterprise sectors has progressed. The implementation of

these reforms needs to be further strengthened and the privatisation in the financial and

energy sectors needs to be executed according to plan. Public finances need to be

consolidated in a medium term framework, specifically in the area of health, pensions

and social security. This would help to create room for the financing of public investment

and for measures aimed at reducing the disparities in regional labour markets and

enhancing labour mobility.

2.4.

General evaluation

Slovakia can be regarded as a functioning market economy and should be able to cope

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

provided that the structural reform agenda is fully implemented and broadened to include

remaining reforms.

Macroeconomic stability has presently been restored through measures to reduce the

fiscal and external deficits. The legislative framework for business activity is now largely

in place. Price distortions are being eliminated and the privatisation of public utilities has

been started. The authorities are making good progress in the restructuring and

privatisation of the state-owned banks.

However, the progress on macroeconomic stabilisation will need to be consolidated by a

continued prudent policy mix. In particular, the current budget proposals for 2001 risk to

endanger the stabilisation achievements and the medium-term sustainability of public

finances is not yet guaranteed. Ongoing structural reforms still need to be completed and

the new legislation will have to be effectively implemented. Banking supervision needs

to be further strengthened.

The authorities need to implement the remaining reforms and execute the privatisation in

the financial and energy sectors according to plan. Priority should be given to effective

implementation of the legal framework and to administrative capacity. Public finances

need to be kept under control in the short term and to be consolidated in a medium term

framework, specifically in the areas of health, pensions and social security. This would

help to create room for the financing of public investment and for measures aimed at

reducing the disparities in regional labour markets and enhancing labour mobility.

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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 Slovakia’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 Slovakia’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

Slovakia’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 Slovakia 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 Slovakia’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:

“Slovakia has made important progress in legislative alignment in the internal market. A

public procurement law was adopted which is aligned with the

acquis

and foresees the

establishment of an independent procurement authority. Framework legislation was

adopted in the areas of standards and certification which incorporates the principles of the

‘New and Global Approach’ and should pave the way for further alignment in this sector.

Important progress was made in the competition area with the abolition of the

controversial law on enterprise revitalization and the adoption of state aid law. The latter

will facilitate improved monitoring of state aids. Some progress has been made in the

banking and financial services area to improve transparency and protect minority

shareholders. In the social sector, progress has been made in enhancing social dialogue.

A description of the

acquis

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

Slovakia’s

application for EU membership.

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Important progress was made in alignment in the energy sector with the commitment to

closure dates for the Bohunice nuclear reactors.

In other sectors of the

acquis,

although the momentum has picked up and policy

decisions are moving the alignment process in the right direction, there has been little

concrete progress in terms of adopted legislation. For example, while the process of

transposition in the environment field was re-launched with the adoption of some

regulations in the area of air and nature protection, the bulk of transposition of the

environment

acquis

remains to be done. Likewise in justice and home affairs, although

some progress was made by introducing new types of crime into the penal code and

ratifying some important international conventions, much work remains to be done in

making amendments to the aliens and asylum laws and to consolidate efforts in fighting

organised crime and corruption. Alignment in transport legislation is lagging behind.

The Government’s intentions in the regional development field need to be translated into

concrete actions. Little progress has been made in the agriculture, veterinary and plant

health fields. The same applies to health and safety at work. It is important that the

same effort which went into ensuring that key internal market laws were adopted now be

applied to the other areas of the

acquis

to make up for the past couple of years of

legislative inertia.

With regard to administrative capacity, co-ordination of EU policy matters has

improved, first steps have been to separate the legislative, standardisation and

accreditation tasks in the field of standardisation, the laws which have been adopted

recently adopted provide for the establishment of key internal market structures and

increased attention has been paid to improving capacities in the environmental field.

However, the civil service reform law that is needed to lay the foundation for further

improvement of administrative capacities in specific sectors of the

acquis

has not been

adopted. In other key areas such as regional development, financial control and justice

and home affairs, the establishment of relevant institutions has been delayed. There is a

general need to ensure independence of regulatory and supervisory bodies. Given the

delays that Slovakia has experienced in its preparations for membership, it is important

that the preparation of legislation be closely accompanied by planning for the

strengthening of related administrative capacities. Slovakia will need to substantially

step up its efforts in the preparation of laws and implementation and enforcement

capacities .

Slovakia has adequately addressed the political, state aid and internal market short term

Accession Partnership priorities. However the administrative capacity and environment

areas did not receive sufficient attention.”

3.1.

The chapters of the

acquis

As indicated, the review of Slovakia'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.

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Chapter 1: Free Movement of Goods

Since the last regular report, some notable progress has been made by Slovakia in the free

movement of goods field.

In the area of

horizontal and procedural measures

an Act on Technical Requirements

for Products and Conformity Assessment and associated implementing decrees entered

into force in January 2000. This Act introduced many of the key elements of the

New and

Global Approach

and marked a significant step forward for Slovakia. In accordance with

this Act, the national standard setting and accreditation functions of the Office for

Standardisation, Metrology and Testing were transferred in January to the Slovak

Standardisation Office and the Slovak National Accreditation Service respectively. In

July 2000 an agreement on mutual coooperation in the standardisation area was signed

between Slovakia and the Czech Republic which inter alia provides for the adoption in

Slovakia of over four thousand EN standards already transposed and published in the

Czech language.

As far as

sector specific legislation

is concerned, alignment has begun in the specific

new approach sectors, building on the framework established in the Act on Technical

Requirements for Products and Conformity Assessment. Since January, government

ordinances have been adopted in the following areas: electromagnetic compatibility, low

voltage, machinery, gas appliances, toys, and non-automated weighing instruments.

Further delays have prevented the adoption of basic legislation in the chemicals area,

despite this being a short term Accession Partnership priority. An Act on Fertilisers was

adopted in March and is mostly in line with the

acquis.

In June, Parliament approved the

Precursors Act regulating the treatment of narcotic and psychotropic substances. An Act

on Metrology and subsequent implementing regulations entered into force in July 2000,

thereby transposing a significant part of the

acquis

in this area. Some progress was made

in motor vehicles through new legislation partially in line with the

acquis

on agriculture

and forestry tractors. In foodstuffs, some further alignment was achieved through

amendments to the Food Code although the pre-market system of control still exists and

in the area of labelling little progress has been made. The requirement for sensitive or

organolyptic testing is not in line with the

acquis.

The amendments to the Food Code

brought legislation on cosmetics closely in line with the Community system, although

pre-market control still exists here also. In the field of pharmaceuticals some legislative

progress was achieved in the area of classification of medicines and the registration of

generic medicines. Although some first steps were taken with regard to industrial

property rights in the field of medicines, full alignment in this area is not expected until

adoption of the new Patent Act. There have been no new developments in the

non-

harmonised areas.

A new Public Procurement Act entered into force in January which, although largely in

line with the

acquis,

will require some fine-tuning. In accordance with this Act, a Public

Procurement Office was established in January 2000, thereby fulfilling a short-term

Accession Partnership priority. Since its inauguration, this office has made good progress

in key areas.

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Overall assessment

Generally progress has been good, although a number of problems remain. Although the

intention of the Act on Technical Requirements for Products and Conformity Assessment

is to simplify the procedure of introducing goods into the market, the Act does contain a

transitional period for some products until the end of 2002, during which the former

certification system, which is not in line with EC rules, stays in force. There have been

calls from business to amend the act and connected interim regulations as in some cases

it would appear that the number of steps necessary for the release of goods into

circulation has been increased and complicated. These issues must be rectified in the

relevant sectors before any successful negotiation of a Protocol to the Europe Agreement

on Conformity Assessment (PECA), for which the relevant Slovak authorities has carried

out good preparatory work.

As mentioned above, alignment in the chemicals area should be accelerated. As regards

food legislation, although the Slovak Food Code provides a global framework for the

transposition of the

acquis,

it seems that in many cases veterinary legislation is

combined with legislation regulating processed food. It is vital that no important piece of

legislation is overlooked when combining legislation of the two sectors. In the

non-

harmonised areas,

Slovakia currently operates a system of import licences, which is not

in line with the

acquis.

There is currently no Slovak legislation in force corresponding to

the

acquis

in the field of notification and co-operation mechanisms, for which the

necessary administrative structures should be set up. Slovakia continues to apply price

controls to some sensitive areas. In the area of cultural objects Slovak legislation is

largely in line with the

acquis.

In terms of administrative capacity to implement the

acquis

under this chapter, there is a

mixed picture. Progress in the adoption of EC standards being made by the Slovak

Standardisation Office was given a boost by the agreement with the Czech Republic in

July thereby marking an important step towards eventual membership of CEN and

CENELEC. The Slovak National Accreditation Service has been a member of European

Accreditation since 1998 and its evaluation for membership of the multilateral agreement

for mutual recognition of certificates and reports issued by accredited bodies (MLA) is

on-going. The independence and capacity of this body will need to be assured, as will that

of the State Institute for the Control of Medicines, where improvements are required.

Further efforts will be necessary to establish the capacity of the conformity assessment

bodies to fulfil their tasks. The Public Procurement Office appears to be sufficiently

staffed and functioning well, with a strong increasing tendency in the number of notices

published. The current complaints/review system should be improved, however, possibly

through the creation of a judicial or quasi-judicial means of arbitration.

In the area of market surveillance, there is a need for improved co-ordination between,

and strengthening of, the bodies active in this field. In particular, the independence and

the capacity of the enforcement authorities in this area to cope with the major shift from

what is essentially pre-market to post-market product control

should be assured.

Attention will have to be paid to the effectiveness of these bodies, to the upgrading of the

technical equipment and further training of staff. It is notable that at a time when the

strengthening of the Slovak Trade Inspectorate, the main enforcement body in this area,

would be expected, its staff has been reduced by 10%, due to financial reasons. It is also

noteworthy that in the first half of 2000 almost 80% of the controls carried out by the

Trade Inspectorate led to some form of sanction.

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Overall, much legislative work has been undertaken by Slovakia. The challenge now is

to provide adequate capacity for the implementation and enforcement of the

acquis

in this

area and to accelerate work where legislative gaps remain.

Chapter 2: Free Movement of Persons

Little progress has been achieved in this area over the past year.

As regards

mutual recognition of professional qualifications

small steps were taken

but much remains to be done. The Act on chartered architects and chartered civil

engineers was amended with the abolition of the requirement of Slovak citizenship for

the take-up of professional activity in these fields, and an amendment to the Act on

Health Care was passed which lays down the categories of health care workers in line

with EC rules. Particular problems were reported in relation to practice rights of EU

lawyers in Slovakia in the past year.

No progress can be reported on

citizens rights

and only little progress was made in the

area of

free movement of workers

with minor amendments to the Act regulating the

Stay of Aliens in the Slovak Republic in April and some preparatory steps taken to enable

participation in the EURES (European Employment Services) network.

With a view to the future application of the

acquis

in the area of

co-ordination of social

security systems

Slovakia is setting up within the Ministry of Labour, Social Affairs and

Family, an inter-ministerial co-ordination working group consisting of all organisations

administering social security.

Overall assessment

There has been little progress generally under this chapter.

In particular, a general framework for the recognition of foreign professional

qualifications has not been established. Much work remains to be done to reach

alignment with the General Systems Directives, and certain sectoral directives. An

inventory of bodies authorised to take decisions under the general systems directives still

needs to be completed. Some delays have been occurring in legislative alignment with

implementing decrees on health care workers. It is important that the proposed Act on

Advocates and that on Commercial Lawyers bring the rules in this area closer to the

acquis,

especially given the problems referred to above. The Centre for Equivalency of

Education Documents which has been set up will require strengthening as progress is

achieved in the various sectors Slovakia should ensure that a clear distinction is made

between academic and professional recognition.

Efforts will be required to ensure that there are no provisions in Slovak rules 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

efforts are required to ensure that all such provisions are removed. With regard to future

participation in EURES, efforts should also be continued, with a special emphasis on

language training. With a view to the future co-ordination of social security systems,

further work to develop the necessary administrative infrastructures is necessary.

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Chapter 3: Free Movement of Services

Since last year’s report some progress has been achieved in this area, mainly in financial

services.

In the field of

freedom of establishment and freedom to provide services,

the Foreign

Exchange Act has been amended for financial services companies, thus allowing

companies active in this sector to open branches in Slovakia without the need to set up

subsidiaries.

In the area of

financial services,

a number of legislative measures have been taken which

move Slovakia in the direction of the medium term accession partnership priority of

completing alignment and implementation of directives on banking, insurance,

investment services and securities markets. In addition to providing for further

consolidation of bank restructuring, the new

Banking

Act, which entered into force in

October 1999, strengthens the supervisory role of the Slovak National Bank and

improves access to information for potential investors.

A new

Insurance

Act entered into force in April which provides Slovak entities with the

option of insuring themselves abroad and also outlines that newly established insurance

companies will be licensed only for either life or non-life insurance. The present

universal insurance companies will be able to retain both activities, but to be in

compliance with EC rules, will need to introduce separate bookkeeping for both

activities. The revision also strengthens the role of the supervisory authority, and

introduces a new registration obligation for insurance brokers.

In the

investment services and securities

domain, a new Act on Stock Exchanges was

adopted in September which foresees a number of improvements, including tightening up

listing requirements, and introduces stricter requirements on the provision of information.

Improvements were made to the process of bond issuance with an amendment to the Act

on Bonds in January. Also, an Act on Collective Investments entered into force in

January, which transposed certain provisions of the Directive on collective investment.

Progress has been made towards achieving the short term Accession Partnership priority

in the area of supervision, an important objective given the historically insufficient

standards of financial services supervision. An Act on the Financial Market Authority

providing for the establishment of a Joint Supervisory Authority (JSA) was adopted and,

from November 2000, the JSA is responsible for the supervision of the insurance and

capital markets.

The Council of Europe Convention ETS 108 was ratified by Slovakia in September 2000.

A Supervisory Office for Personal

data protection

was established in accordance with

the new Act in this area last year, its main task being the supervision of personal data

processing, registration of information systems containing such data and the lodging and

settlement of complaints in cases of violation of the law. No new developments can be

reported with regard to

information society regulations.

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Overall assessment

Overall, despite some progress, there is still important legislative work to be completed

and institutional capacity, particularly as regards financial services supervision needs to

be reinforced.

Although financial services companies can now set up branches, these rights of

establishment and the related rights to acquire, use, rent or sell immovable property, are

not yet granted also to other economic operators. There are still a number of restrictions

which are not yet in line with the

acquis,

such as the requirement that the

directors/managers of branches of Community firms be in possession of long-term

residence permits and that rental contracts be approved by the authorities. Furthermore,

according to EC rules no seat of a company in any form can be required in order to

facilitate the free provision of services.

In banking despite some progress, further efforts are needed to bring the legislative

framework more fully in line with the

acquis.

Slovak banking rules on capital adequacy

and consolidated supervision and accounting are not in line with EC requirements. While

the strengthening of the National Bank of Slovakia’s supervisory role should lead to

improvements in bank supervision, the capacity to fulfil the allocated tasks should be

assured with adequate numbers of well trained staff.

The cornerstone of Slovakia’s commercial insurance legislation consists of the Insurance

Act and other generally binding laws. The changes introduced in April by the amendment

to the Insurance Act bring the operation of the insurance market in Slovakia closer to

community standards. The creation of the Joint Supervisory Authority should lead to

improvements in supervision of the insurance market, which is currently less than

satisfactory. The Government is yet to elaborate a concept paper for the restructuring and

privatisation of the Slovak Insurance Company, Slovenska poistovna. The monopolies

held by this company in motor vehicle third party liability insurance and employer’s

liability insurance have not yet been dismantled.

Despite some progress, more remains to be done in the investment services and securities

field. The Directive on Insider Trading is only partially transposed and in addition to

completing transposition, enforcement needs to be improved. The Directives on

Investment Services and Investor Protection Schemes have not yet been transposed.

The plans for the JSA aim to lay the basis for important improvements in area of

supervision. Adequate staffing should be assured and attention paid to the need for

effective, impartial, regular control of financial institutions. Further legislative and

administrative measures will be required, should the JSA’s competence be extended

beyond the capital and insurance markets to the banking sector and pension funds.

The Supervisory Office for Data Protection seems to be sufficiently equipped on the

technical level and its independence has been assured to some extent. However, the

Directive on the protection of personal data and the free movement of such data has not

yet been transposed and public awareness about data protection is still very low.

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Chapter 4: Free movement of capital

Since the last regular report Slovakia has made reasonable progress in this chapter,

especially on capital movements and payments. On payment systems, progress was

limited.

In the area of

capital movements and payments,

Slovakia has been applying a gradual

approach to liberalisation, focusing first on long-term capital inflows. Since the last

regular report the Slovak Foreign Exchange Act, which regulates this domain, was

liberalised in several respects.

Acquisition of real estate was liberalised as from January 2000 for foreign financial

institutions including banks, insurance companies, collective investment companies and

securities dealers, provided that the real estate is needed for the performance of their

business activity.

As regards trade in securities, as of January 2000 residents are no longer required to

obtain a Foreign Exchange permission to acquire foreign securities traded in the main

market of foreign stock exchanges. The permission requirement was also dropped for

residents issuing Slovak securities abroad, provided that the securities have a maturity

period of at least one year. Other such securities still require approval. As for capital

outflows, direct investments for Slovak companies in OECD countries were liberalised.

As reported under Chapter 3, a new supervisory authority covering the insurance sector

and capital market is in place from 1 November 2000 following adoption of a new Act in

September.

As regards the

acquis

in payment systems, Slovakia has not taken any steps to implement

the directives on

cross-border credit transfers

and on settlement finality.

Only some provisions of the directive on

Money laundering

have been incorporated into

national legislation. A new law, passed by Parliament in October 2000, requires banks

and a broad range of other financial entities to identify the authors of transactions

exceeding the equivalent of

€

2.500. The new law also requires reporting to the police in

case such transactions appear suspicious.

Overall assessment

Although progress has been achieved recently, an effort is still needed to achieve full

compliance with the

acquis,

notably on capital movements with maturity shorter than one

year, on trade in financial derivatives, and on the acquisition of real estate. As for short-

term capital movements, the improved external balance situation should permit further

liberalisation. In addition, during negotiations for accession to the OECD, Slovakia has

taken wide-ranging commitments for further liberalisation.

As for direct investments of foreign companies, foreign branches belonging to the non-

financial sector cannot yet acquire land in Slovakia. As far as natural persons are

concerned, the present legislation does not permit non-residents to acquire real estate.

Slovakia’s Commercial Code stipulates that non-residents may run a business in the

country under the same conditions as Slovak persons. However, in some sectors, primary

legislation provides otherwise, and restrictions remain. The sectors concerned include

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lotteries, the Stock Exchange and the Securities Centre, the non-bank financial sector

(investments can only be made through an enterprise incorporated in Slovakia), and the

air transport sector. .

As part of the privatisation process, the government is taking significant steps forward on

the way to opening up state-owned companies and financial institutions to foreign

participation with transparent procedures.

In the field of payment systems, the National Bank of Slovakia has started preliminary

activities to improve the payment infrastructure. However, substantial efforts are needed

to fully implement the

acquis

in this field.

Progress is still to be made at legislative level on money laundering. In particular,

anonymous accounts are still to be abolished, and the criminal responsibility of legal

entities to be introduced.

The National Bank of Slovakia regulates and supervises credit in accordance with the

Ministry of Finance, and oversees the payment system. The Ministry of Finance operates

capital market and insurance authorisation. Both the National Bank of Slovakia and the

Ministry of Finance are deemed to have appropriate competence and capacity to

implement a regime of free movements of capital.

However, administrative capacity should be reinforced by setting up a body for handling

customers’ complaints, as required by the directive on cross-border credit transfers.

Chapter 5: Company Law

Only little progress can be reported under this chapter over the past year.

In terms of alignment with the

company law

directives, no legislative progress has been

made since the last regular report. In

accounting law,

some progress was achieved with

the partial alignment with the 4

and 7

Accounting Directives and the adoption of an

amendment to the Act on Auditors and Slovak Chamber of Auditors which partially

implements the 8

Accounting Directive.

Only minor progress was achieved in the field of

industrial and intellectual property

rights

with the adoption of an Act on the Protection of Topographies of Semi-Conductor

Products which aims to bring protection in this specific area in line with the

acquis.

progress was made as regards adoption of amendments to the

trademark law

and

adoption of a new

patent law

has been delayed, though this is partly due to the need to

take on board imminent revisions to the European Patent Convention. Progress has been

achieved in reducing registration times for trademarks, though further advances will be

needed to meet EC norms. An amendment to the

entering into force in

August extends the protection provided by the existing legislation in connection with the

development of digital information technologies and databases, and aligns Slovak law

with recent changes to the WIPO Copyright Treaty and the WIPO Performances and

Phonograms Treaty, both of which were ratified by Slovakia in January.

The mechanism for the

fight against piracy and counterfeiting,

a short-term Accession

Partnership priority, is also not yet in line with the relevant EC Regulations on counterfeit

and pirated goods.

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Overall assessment

There is still a certain amount of outstanding work in the field of company law where

amendments to the Commercial Code necessary to achieve full alignment with the

various company law Directives have been put back. Improvements are also called for in

relation to the

Company Register

to increase efficiency, transparency and allow public

access. In this regard the on-line trial operation of the Commercial Register is to be

welcomed. Slovakia is seeking adherence to the Lugano Convention on jurisdiction and

enforcement of judgements in civil and commercial matters.

The legislative environment for

trademarks and patents

in particular needs more progress

and appropriate institutional strengthening should be pursued to ensure implementation

of the relevant laws in all fields of industrial and intellectual property protection. Positive

steps to reinforce the Industrial Property Office have resulted in reductions in the time

taken for trademark registration. Although copyright rules are largely in line with the

acquis,

there appears to be a need to strengthen the Ministry of Culture’s capacity in this

field. The Ministry of Culture has authorised four bodies for the collective administration

of rights covering between them musical authors and publishers, literary authors,

performers and producers of phonograms.

As regards the fight against piracy and counterfeiting, work on the preparation of an act

on measures related the import, export and re-import of goods violating certain

intellectual and industrial property rights and an amendment to certain laws should be

continued. Trademark infringement appears to be a problem mainly in the areas of

textiles, shoes and electronics and the level of copyright infringement seems to be

decreasing. Nevertheless, Slovakia should ensure adequate administrative capacity to

deal with this, in particular through training of customs officers and effective border

control, where particular attention is required in order to create a coherent enforement

system in Slovakia. Judicial bodies involved in all areas of industrial and intellectual

property should be sufficiently strengthened to ensure their effectiveness and the

currently insufficient level of co-ordination between the actors involved addressed. In

addition to judges and prosecutors, relevant police officials still lack knowledge and

experience in respect of both legal aspects in the field of copyright and neighbouring

rights infringements and in practical issues.

Chapter 6: Competition Policy

Important new legislation in the competition area, the enactment of which was reported

on in last year's Regular Report, entered into force in January. In particular, the new

State Aid Act setting up the State Aid Monitoring Authority marks an important step

forward.

In the

anti-trust

area the Competition Act is largely in line with EC rules. Through

amendments to this Act, progress has been made in areas identified last year such as the

exemption of the agricultural sector, the de minimis rule and negative clearance. In 1999,

280 cases were handled by the Antimonopoly Office of which 123 concerned agreements

restricting competition, 36 abuses of dominant position and 121 concentrations. Of these,

27 decisions prohibited particular parts of restrictive agreements and 12 decisions on

cartels led to financial penalties of roughly SKK 7.5 million (€170 000), the main areas

concerned being the agriculture, food and rubber tyre industries. In 5 cases abuse of

dominant position was proved and prohibited, with a total penalty of about SKK 3.7

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million (€84 000), with abuse mainly in the area of natural monopolies. One

concentration was prevented. In the first half of 2000 there were 136 Decisions, 14

concerning restrictive agreements, 21 on abuse of dominant position, 55 concerning

concentrations and 46 miscellaneous.

Despite recent progress, the Slovak Republic’s achievements in the

state aid

field have

been lagging behind those in the anti-trust area. The Slovak Act on State Aid which

entered into force on 1 January 2000 represents a positive step but has not yet achieved

full alignment with the Community

acquis.

As regards administrative capacity, the State

Aid Monitoring Authority has only been operational since May. This followed the

resignation of the first Director of the Authority shortly after taking up duties and the

appointment of a new Director in February. At present, there are 30 staff members (12

operational experts) working for the Office with further staff reinforcements envisaged.

Overall assessment

The Slovak Competition Act of 1994, as amended, is largely compatible with the anti-

trust

acquis.

Full alignment has not yet been achieved, but the Slovak Republic is already

quite advanced in fine-tuning its legislation. State-controlled undertakings are covered by

the current Act. Secondary merger legislation covering turnover and the notification

questionnaire and further alignment especially in view of developments in the

acquis

vertical restraints and as regards EC policy on block exemptions is still necessary.

The Antimonopoly Office has examined a large number of cases. The main challenge

now is to ensure that the application and enforcement of anti-trust rules is effective and

that priority is given to cases that concern the most serious distortions of competition.

In the state aid field, the State Aid Act is not fully in line with the

acquis,

The work of

further amending this Act, notably regarding provisions regulating State aid for

employment; and aid to the sensitive sectors, should be accelerated.

As far as administrative capacity is concerned, further resources will be required in view

of the need to accelerate work in the State aid field. There appears to be a need to

upgrade the status of the State Aid Monitoring Authority to enable it to require the

necessary information from all aid providers at all levels of government. In practice, no

comprehensive state aid notification system is in place. It is therefore doubtful whether

the Slovak State Aid Monitoring Authority is currently able to actually assess all aid

projects at all levels of government whether local, district, regional, or national, including

all Ministries.

An adequate notification system should in turn allow for a comprehensive State aid

inventory, currently not complete, despite the importance attached to this in the short

term Accession Partnership priorities. Such an inventory should also cover all old aid

measures under which aid continues to be granted and which must be brought into line in

line with the

acquis.

Work on the State aid reports should continue.

In order to ensure a differentiation of maximum aid intensities in assisted areas, the

Slovak Republic should prepare a regional aid map in consultation with the Commission.

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Incompatible aid measures in the sensitive sectors (in particular car manufacturing and

steel) and with regard to investment incentives should be addressed as a matter of

urgency.

Chapter 7: Agriculture

Limited progress can be reported in the agricultural sector.

The share of agriculture in GDP (4.5 % in 1999, 4.6 % in 1998

) continued its downward

trend. So did employment in agriculture, accounting now for 7.4 % of total employment,

as opposed to 8.2 % in 1998.

The overall agricultural production in 1999 was 22 % lower in comparison to 1998 (of it

– 6 % for crop and – 30,1 % for livestock production).

The difficult economic situation

of the agricultural enterprises continued, with losses in 1999 about twice as high as in

1998. This was due to increased input costs, lower yields and unfavourable climatic

conditions. Agricultural prices decreased by 2.1 % on a year–by-year basis. The bank

sector considerably reduced its financial engagement in this sector. Drought throughout

the spring has negatively influenced this year’s harvest, leading to a shortage in the

production of certain agricultural products. The Government has introduced temporary

safeguard measures for barley, maize, seed rape, bran, sharps and other residues, residues

of starch, oil-cake and other solid residues (see

section A.b - Relations between the

European Union and the Slovak Republic).

In 1999, EC imports of agricultural products originating in the Slovak Republic increased

€

91.1 million.

EC exports to the Slovak Republic decreased to

€

254 million. The

trade balance in favour of the Community amounted to

€

163 million compared to

€

172.2 million in 1998. In the first six months of 2000, the negative agricultural trade

balance with the EC slightly grew, whilst the total trade agricultural deficit dropped by

more than 4 %, compared to last year. The most important product groups in terms of EC

imports from the Slovak Republic in 1999 were oil seeds (+82 percent), animal fodder (-

36 percent) and dairy products (+18 percent). As far as EC exports to the Slovak

Republic are concerned, the most important sectors were animal fodder (-26 percent) and

edible fruits and nuts (- 5 percent).

The source for all agricultural statistics is EUROSTAT unless otherwise specified.

In order to improve consistency and compatibility, 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.”

Source: FAO.

Source: Uruguay Round Agreement definition of agricultural products, figures taken from

EUROSTAT COMTEXT (see Agriculture in the European Union – statistical and economic

information 1999 p. 36 for definition of the products).

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Negotiations on bilateral trade concessions were concluded in May 2000. As a

consequence of the new agreement approximately two thirds of the EC imports and 40

percent of EC exports of agricultural products will be exempted from duties (see

section

A.b - Relations between the European Union and the Slovak Republic).

As regards Slovakia’s agricultural policy and its preparation for the Common

Agricultural Policy, the Government has approved long-term programmes for the

development of agriculture, the food industry as well as for forest and water management.

These long-term strategic documents aim at anticipating the basic sectoral developments

in the next decade on the basis of an analysis of the current situation. The Government

has also elaborated a Concept for Agrarian and Foodstuff Policy, addressing, inter alia,

areas like price policy and financial instruments.

The number of staff in the Ministry of Agriculture was reduced from 414 in 1999 to 373.

Further progress in the land reform has been hampered by the unresolved issue of

unidentified land.

Horizontal issues

The

SAPARD

rural development plan received a favourable opinion by the STAR

Committee (EC Management Committee on agricultural structures and rural

development) in October 2000. Preparations for accreditation of the SAPARD agency are

currently ongoing

(see section A.b – relations between the EU and Slovakia).

No significant progress can be reported concerning trade mechanisms and quality policy.

As regards Slovakia’s preparations to establish the Integrated Administration and Control

System (IACS) and to participate in the Farm Accountancy Data Network, no significant

progress was achieved either. However, preparations have started to carry out an

agricultural census for 2001.

Common Market Organisations

Little progress can be reported in view to the adoption of specific regulations organising

the different markets covered by the EC

acquis.

Slovakia passed several commodity

regulations for, inter alia, sugar, cereal and milk which are, however, not yet in line with

EC legislation. A school milk programme was introduced in the last quarter of 1999.

The completion of the vineyard register, a short-term priority of the 1999 Accession

Partnership, has not been achieved, mainly due to a lack of clarity about the ownership of

land and its fragmentation.

Rural development and forestry

No significant progress can be reported in this area. However, it is to be noted that only

agri-environmental measures are compulsory from the

acquis

point of view.

Veterinary and phytosanitary issues

Continuing alignment and upgrading of inspection arrangements, in particular at the

future external border, were identified as short-term priorities in Slovakia’s 1999

Accession Partnership. This priority has been met to a limited extent. Installations for the

inspection of live animals were built at the border station Vysné Nemecké. The State

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Veterinary Administration elaborated annual programmes for residue and zoonosis

control. Further elements of the control Directives have been incorporated in the

quarantine measures by the Slovak authorities. Regulations concerning, inter alia, control

of potato ring rot and brown rot of potato were transposed. Provisions of the Food Code

obliging producers to introduce and apply the Hazard analysis critical centre point system

(HACCP) entered into force in the beginning of the year. The Act on Veterinary Care was

amended, determining the headquarters of regional veterinary administrations. Efforts to

establish an uniform approach to veterinary supervision at central, regional and district

level were continued. A central laboratory for TSE diagnostics was completed.

Overall assessment

Overall, despite some progress achieved in recent years, there is a need for accelerated

alignment and implementation as well as strengthening of administrative capacities in all

areas.

As regards

horizontal issues,

preparations to establish the IACS have to be accelerated

and work in preparing the envisaged agricultural census needs to be continued.

Implementation of EC legislation concerning designations of origin and protection of

geographical indications has to be continued.

As regards

Common Market Organisations

the adoption and implementation of market

regulation tools needs to be continued; these need to be fully brought in line with EC

legislation. The market information system needs to be completed. Considerable progress

still has to be achieved in, inter alia, adopting secondary legislation establishing quality

and marketing standards. Further efforts are needed as regards the introduction of the

legal framework and administrative structures.

In the area of

Rural Development and Forestry,

Slovakia needs to make further

progress as regards the introduction of agro-environmental schemes.

The transposition of EC legislation in the

veterinary and phytosanitary

field is

advanced, although implementation remains rather weak. Further efforts are required,

notably in upgrading border inspection posts, laboratories, training of inspectors,

completion of the establishment of the veterinary and phytosanitary informatic systems

and in the field of animal welfare. The creation of the central animal register needs to be

accomplished, and the procedures for herd registration and animal identification should

be brought fully in line with EC requirements. The strengthening of administrative

capacities of veterinary and phytosanitary institutions in general remains an important

objective.

Chapter 8: Fisheries

As in the last reporting period, no legislative and no substantial administrative changes

can be reported. An authorisation committee for the breeding of fish was set up in

October 1999.

In pond farming, salmon and lowland fish are the main species involved. In 1999, the

total production accounted for around 3000 tonnes, imports of freshwater fish for around

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1700 tonnes and imports of sea fish for approximately 80 tonnes. The exports amounted

to around 360 tonnes.

Overall assessment

Since Slovakia is a landlocked country, parts of the

acquis

on fisheries are of minor

importance for the country. Slovakia has only partly transposed and implemented the

acquis.

Further alignment should take place by amending and implementing the Fisheries

Act and the Veterinary Care Act. The legal basis for setting up an Agricultural Agency is

awaited to channel EC funds for Market policy and structural actions. Strengthening of

administrative structures is needed, namely in the inspection and control sector but also

in the Ministry of Agriculture in order to implement effectively the Common Fisheries

Policy.

Slovakia provides no price subsidies for fish products. State aid is given to the Slovak

fishing union for the improvement of fishing resources, breed stock in acquaculture and

to protect fishing areas in larger water reservoirs and to fish farmers for the support of

genetic pools of fish.

Chapter 9: Transport policy

Some limited progress has been made by Slovakia in the approximation to the transport

acquis

during the period covered by this Regular Report.

Regarding

horizontal issues,

the Slovak Government approved in January 2000 the

“Updated Principles of the State Transport Policy”, which take account of EC principles

on the development of Trans European Transport Networks (TEN), the interoperability of

the trans-European high-speed rail system and the financing of TEN. The Slovak

Republic has approved the final report on Transport Infrastructure Needs Assessment

(TINA) of October 1999, which should form the basis for extending the trans-European

networks to the Slovak Republic. At present 40% of the planned corridor motorways are

completed and around 10% under construction. Slovakia and Hungary continued

preparations on the reconstruction of a bridge over the Danube at Sturovo.

As regards

land transport,

some limited progress has been made regarding road

transport. New legislation to align with the

acquis

was adopted concerning

roadworthiness tests of vehicles. Partial alignment was achieved in respect of driving

licences (training of drivers and instructors) and dimensions and weights of vehicles.

However, Slovakia does not fully comply yet with the EC weight limits for trucks, as it

provides both for lower axle weight limits and for lower total weight limits. As regards

fiscal issues, partial alignment has been achieved through amendments to the Road Tax

Act, which entered into force in January 2000. Concerning road user charges, Slovakia

has changed its system, which is now based on the weight of vehicles. However, whilst it

now provides for 15-day vignettes in addition to yearly ones, compliance with the

acquis

has not been achieved yet since heavy goods vehicles with a total weight more than 3.5

tonnes can only use the yearly vignettes. In July 2000, the Slovak Government approved

a concept for transformation and privatisation of state owned bus transport companies.

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In relation to rail transport and combined transport, no particular progress can be

reported. The current critical situation of Slovak Railways (ZSR) continues to have a

negative impact on alignment in this area.

As regards inland waterways, further alignment has been carried out through the adoption

in September 2000 of a new Inland Waterways Act. This act is due to enter into force on

1 January 2001.

In the field of

air transport,

negotiations between the EC and the Slovak Republic on

the multilateral Agreement to establish a European Common Aviation Area (ECAA)

have been concluded at the end of 1999 and a bilateral protocol has been signed.

As a landlocked country,

maritime transport

is of less importance for Slovakia.

However, work on introducing the maritime

acquis

-including maritime safety- has

continued through the preparation of a new Maritime Navigation Act.

Overall assessment

Despite limited progress, much remains to be done in most of the transport areas, notably

as regards rail and road transport. A considerable adaptation and strengthening of the

administrative structures is also necessary.

On horizontal issues, harmonisation with the

acquis

on TEN and interoperability will

require further regulatory measures beyond the level of Government resolutions.

The limited progress in the area of road transport in the last year cannot hide the fact that

the Slovak Republic is still at a rather early stage of alignment concerning land transport.

Substantial efforts to accelerate transposition and implementation are needed on many

parts of the road transport

acquis,

for example in the field of fiscal harmonisation, social

rules as well as technology, safety and environment (including weights and dimensions).

The multilateral INTERBUS agreement on occasional bus services has not yet been

initialled by Slovakia.

As regards rail transport, Slovakia needs to accelerate its restructuring efforts in this

sector, in accordance with the 1999 Restructuring Plan, and to adopt and implement new

legislation in order to achieve further alignment to the

acquis,

notably as regards

management independence for railways undertakings, access to the rail infrastructure and

transit rights, sound financial basis for undertakings, separation of accounts for

infrastructure and operation services, as well as licensing and allocation of infrastructure.

A great deal of resistance remains to be overcome, due to the foreseen reduction of staff

within this sector.

As regards combined transport, inland waterways and maritime transport, Slovakia needs

to continue its efforts to progressively align with the

acquis.

As regards air transport, Slovakia should accelerate the establishment of an independent

body in charge of the investigation of air traffic accidents and should reinforce the system

for the approval of compatible technical specifications in the procurement of air traffic

management equipment and systems. In this respect, reinforcement of the Civil Aviation

Authority, which will be responsible for implementing JAR (Joint Aviation

Requirements), is necessary.

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Overall administrative capacity regarding the transport sector should be enhanced

through an adequate clarification of tasks and proper co-ordination between the various

Ministries involved in the legislative process. Provision should be made for the

establishment of the necessary independent bodies in accordance with the best practices

in the EC, an adequate law enforcement by the competent bodies and the provision of

sufficient qualified human resources and information technology to properly implement

the tasks deriving from the

acquis.

Chapter 10: Taxation

Since the last regular report Slovakia has made some progress, especially in the area of

excise duties.

In the area of

indirect taxation,

progress was made in particular in the field of excise

duties, whereas on VAT, progress was limited to an amendment to the VAT Act defining

the taxable amount for transactions related to bankruptcy and other forced sales, which

entered into force in January 2000. No progress was done on the alignment of the scope

of the reduced rate, an Accession Partnership short-term priority.

In the field of excise duties, the government applies a policy of gradual but steady rate

increases, with a view to preventing economic disruption. In 1999 and 2000 the

adjustment towards the minimum rates required by the

acquis,

and -in the case of mineral

oils- by an Accession Partnership short-term priority, has continued. As of January 2000

rates on spirits and beer were increased. In January an adjustment of the excise duty on

domestically produced ecological fuel entered into force and the duty rates on petrol and

diesel for specific purposes were brought closer to the required EC minima (in the case of

gas oil, the rate is now higher than the minimum). Finally, the duty rates on cigarettes

were increased, however much remains to be done in this area.

As for duty-free shops at land-borders, the only previously in operation was closed at the

end of 1999.

direct taxation,

capital gains -including mergers-, the withholding tax for parent

companies and their subsidiaries and the prevention of double taxation were partly

aligned to the Community

acquis

by 1 January 2000. A “flat tax” income scheme for

small enterprises was introduced in January 2000 (see chapter 16 – Small and Medium-

Sized enterprises).

As regards the area of

administrative co-operation and mutual assistance,

Slovakia’s

legislation is only partially harmonised with the

acquis.

In September 1999 the term “tax

secrecy” was defined and measures were introduced for the exchange of information with

other countries based upon reciprocity. Measures to grant, under certain conditions, relief

from imposed penalties, sanctions and interest on tax arrears were introduced in January

2000.

Slovakia’s tax administration is operated by the Ministry of Finance and by the Central

Tax Administration –based in Banska Bystrica- and its 108 local tax offices.

Some measures have been taken in order to modernise the tax administration and

improve its effectiveness. As a first step, the reform has implied a reorganisation of

offices at both central and local level, by introducing a structure based on activities,

rather than on types of taxes. In addition, the powers of the tax administration in

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enforcing tax collection have been strengthened and taxpayer services were introduced.

Finally, the transfer of the administration of Excise Duties on mineral oils from the Tax

to the Customs authorities has taken place.

Overall assessment

VAT was introduced in Slovakia in 1993 and the relevant legislation has been amended

several times to bring it closer to the

acquis.

As a result, the system currently in place is

on the whole close to the general principles of the Community VAT system, although it

still requires being further amended in some substantive areas. No progress was made last

year on issues requiring harmonisation. These include in particular the scope of

application of the reduced VAT rate, which is currently applied to a range of goods and

services going beyond what is provided for by the

acquis,

exempt transactions and the

provisions for the right of deduction of input VAT.

In the field of excise duties, legislation also requires extensive adjustments. As concerns

excise rate levels, Slovakia has recently made progress. However, the duty rates for most

product categories remain lower than what is provided for under the

acquis,

and

alignment should be further pursued and intensified. Slovakia should also address the

taxation structure for cigarettes and certain protective measures in the field of mineral

oils and alcoholic beverages.

As regards direct taxation and the directives on administrative co-operation and mutual

assistance, full transposition is still required.

Despite some steps taken last year, Slovakia should give higher priority to the upgrading

of administrative capacity. Prompt action is required in particular to address the most

critical weaknesses, including tax collection and high accumulation of tax arrears, VAT

refunds management and internal and external audit functions.

Action should focus particularly on strengthening headquarters. Of the 5,700 total

employees, only about 3.5% work at headquarters level, a ratio much below the average

of other modern tax administrations. In addition, tasks at central level are currently not

clearly defined and dispersed. The organisation of the headquarters along functional lines

should be completed, and functional units should be given responsibility for strategy

planning and overall policy co-ordination across the country. Particular efforts should be

devoted to training and human resource development.

Chapter 11: Economic and Monetary Union

A detailed assessment of Slovakia’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.

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Since the 1999 regular report no particular progress could be reported on the legislative

adjustments required to comply with the

acquis.

Overall assessment

Slovakia will participate in EMU upon accession with the status of a country with a

derogation under article 122 of the EC treaty. It will need to implement the necessary

changes to its institutional and legal framework by the date of accession.

A substantial effort is still needed in order to bring legislation fully in line with the

acquis

in this chapter, on both the

independence of the Central Bank

and the

prohibition of

direct public sector financing.

The Central Bank Act allows in particular limited short-term direct financing of the

government by the Central Bank. The relevant article should be repealed. In addition, the

Act is only partially compliant with the

acquis

requirements on Central Bank

independence, and should be extensively amended to introduce full functional,

institutional, personal, and financial independence.

As for the issue of privileged access by public authorities to financial institutions,

pinpointed in the 1999 regular report, there are no explicit provisions in Slovakia’s

legislation allowing it, nor is there empirical evidence of such activities at this stage.

Potential risks of privileged access will be considerably reduced once the privatisation of

financial institutions is completed.

Slovakia has been steadily upgrading its administrative structures to design and

implement its economic policies and to implement the EMU

acquis.

In addition, over the

last year Slovakia has improved its internal policy co-ordination and macroeconomic

planning.

Chapter 12: Statistics

Slovakia has made progress over the past year in order to achieve compliance with the

acquis

in this area.

As regards

statistical infrastructure,

the Statistical Office of the Slovak Republic

(SOSR) is composed of a Head Office and 8 Regional Offices, set to be increased to 11

in the frame of the Administrative Reform. The SOSR employs around 1100 staff, of

which 300 at central level and 800 at regional level.

Most classifications are harmonised with EC standards.

demographic and social statistics,

methodological and technical preparation was

carried out for the Population Census, scheduled for May 2001 A sample surveys on

earnings was conducted during the second half of 1999 Labour statistics largely comply

with EC standards.

Concerning

macroeconomics statistics,

progress on the adoption of the European system

of integrated economic accounts ESA 95 was made. As for the Quarterly economic

accounts, the compilation of figures on Import and Export of goods and services was

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improved. More data sources are available for the establishment and improvement of

financial accounts and government finance statistics.

In the field of

business statistics,

further progress was also made with respect to the

Structural Business Statistics. Short-term statistics were extended to the construction

sector and now monthly data is available.

As regards

agriculture Statistics,

the Slovak Republic has started the implementation of

the Farm Structure Census. The SOSR has elaborated for the first time Regional

Agricultural Economic Accounts concerning 1998.

regional Statistics,

at the NUTS 2 and 3 digit levels, data for 1997 and 1998 have

been updated, and data for 1999 have become available.

Overall assessment

Overall, the Slovak statistical system has shown significant improvements in the last

year. Several projects started recently, such as Farm Structure Census, or under

preparation (Population Census, New Statistical Law, Improvement and harmonisation of

Business Registers), will help Slovakia to bring statistics more into line with the EC

methodology. However, most of these projects require substantial financial support.

Slovakia still needs to finalise legislation to comply with the principles of Community

statistics.

In some areas efforts are still required. These include macro-economic statistics, where

some inconsistencies on the structure of GDP remain. Slovakia should also address the

harmonisation of its Regional statistics.

The Statistical Office of the Slovak Republic is deemed to be adequately staffed and to

have appropriate competence to implement the

acquis.

However, the level of salaries is

still low in comparison with the private sector and turnover relatively high. Policies

aimed at improving recruitment and retention of skilled staff should be applied.

Chapter 13: Social policy and employment

Since the last Regular Report, Slovakia has made further progress in aligning with the

acquis

in the field of social policy and employment.

In the area of

Labour Law,

progress has been achieved over the last year. The

Amendment to the Labour Code and to the Employment Act addressed several

acquis

requirements, in particular those on insolvency, part-time work and health and safety for

workers with fixed-term contracts. The Guarantee Fund required under the Insolvency

Directive was established as of 1 May 2000. The Labour Inspection Act, which entered

into force in July 2000, aims at, inter alia, ensuring the practical implementation of labour

law provisions.

The amendment to the Act on Employment also has implications for the further

alignment of the

acquis

in the field of

equal treatment for men and women.

The

amendment has removed the complete prohibition on women working at night.

Moreover, it reinforced the principle of equal opportunities by inserting an explicit ban

on publishing job offers containing any restrictions or discrimination with regard to

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gender. The rights of pregnant employees have been strengthened through the amendment

to the Labour Code. The implementation of equal pay provisions is intended to be

safeguarded,

inter alia,

by the new Labour Inspection Act.

Little progress can be reported in the field of occupational

health and safety,

apart from

that achieved through the above-mentioned amendment to the Labour Code and the

amendment to the Act on Safety and Protection of Health at Work. The Labour

Inspection Act entered into force in July 2000 and aims at creating an effective tool to

systematically protect the health and safety of workers. It also intends to streamline the

relevant competencies in the National Labour Inspectorate and to co-ordinate the

activities of the administrative bodies involved in supervision. The amendment aims to

establish the legal preconditions for strengthening the integrated supervision on the spot

and thus the practical application of provisions relating to health and safety at work. The

provisions on supervision will enter into force in July 2001.

In the area of

public health,

the Government has approved a National programme of

health promotion in November 1999, aiming at, inter alia, the fight against drugs and

cancer.

As regards

Social Dialogue,

a tripartite General Agreement was signed for the year 2000

for the first time after 1997. Efforts have been made by the Slovak authorities to promote

social dialogue at all levels. However, bipartite Social Dialogue at sectoral and enterprise

level still needs further strengthening.

Decline in

employment

accelerated in 1999. The labour force survey shows that average

employment fell by 3 % between 1998 and 1999, with the employment rate falling to less

than 58 % - significantly below the EU 1999 average of over 62 %. The average

unemployment rate rose from 12.5 % to 16.2 %. The deterioration in the labour market

continued in 2000. In the second quarter, employment was 2 % down on the same period

in 1999, and unemployment had reached 18.9 %. Serious structural problems persist in

the labour market. The Government is now in the process of elaborating a National

Employment Plan, a short-term priority under the 1999 Accession Partnership. A joint

assessment of employment policy priorities, together with the Commission, is also being

prepared. A training unit for the

European Social Fund (ESF)

was established at the

National Labour Office. Its objective is to elaborate concepts and to provide training for

the state and public administration in view of Slovakia’s preparations for administering

support by the ESF.

The Government has launched

social protection

reforms, including the reform of social

insurance, particularly pensions, and of health service financing. Slovakia signed the

reviewed European Social Charter. The amendment to the Act on Employment has

introduced the obligation for companies employing over 20 persons to reserve 3% of

their posts for disabled people.

Overall assessment

While some progress was made in terms of transposition and implementation of the

acquis

in some areas, continuing efforts need to be made to ensure that both further

transposition and implementation occurs as planned.

Slovakia has partly transposed the EC

acquis

in the field of labour law. Further alignment

will be necessary to secure adoption of measures transposing the remaining

acquis

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requirements, notably as regards collective redundancies, working time, the written

statement Directive, posting of workers, employee participation and European Works

Councils. Particular attention should be paid to the reinforcement of implementation and

enforcement structures. Major progress is dependent on the adoption of the new Labour

Code, scheduled to enter into force next year. Proper functioning of the guarantee fund

has to be ensured.

Transposition of the equal treatment for men and women

acquis

is, despite continued

alignment, only partially achieved. Further alignment is needed, in particular, as regards

parental leave, burden of proof and equal treatment in social security and equal treatment

in occupational social security. Implementation and enforcement of equal treatment rules

needs to be strengthened.

In the field of health and safety at work, Slovakia has to speed up its efforts to progress in

transposition and implementation. Considerable work remains to be done to secure the

adoption of measures transposing the

acquis

and to avoid slippage in the timetable.

Particular attention has to be paid to the financial impact of the implementation of health

and safety legislation on businesses, in order to ensure a realistic assessment of when

each element can be realistically brought into force. As concerns the administrative

capacity to implement the

acquis,

continued efforts are needed to strengthen enforcement

bodies, notably the national labour inspectorate .

The autonomous social dialogue and social partners’ structures at sectorial level need to

be further strengthened, also in the regions. The Council of Economic and Social

Partnership has to be strengthened. Collective bargaining, particularly at sectoral and

regional level, needs to be reinforced. Forms of dialogue and workers’ participation

should also be promoted at enterprise level. The social partners have to be, in general,

more widely involved in the social and employment policy, in order to play a role in the

adoption and implementation of the

acquis.

Slovakia is making progress in transforming its labour market and adapting its

employment system so as to be able to implement the European Employment Strategy.

Finalisation of the employment plan and moving onto implementation is an urgent

priority. Policy needs to concentrate on a number of structural problems. The extent of

the occupational and sectoral mobility that will be required as re-structuring proceeds

means that particular attention will need to be paid to reform of vocational education and

training, and to potential barriers to mobility in the tax and benefit systems.

The social protection reforms announced are much needed to meet macroeconomic and

demographic pressures. Achieving the immediate priority of restoring balance to the

social insurance fund, and the success with the longer-terms aims of overhauling this

system and health insurance by 2002, with a subsequent broadening of pension provision

foreseen, will be crucial to develop an effective and sustainable social protection. It will

be important to track the development of these reforms.

As regards future participation in the European Social Fund, appropriate administrative

structures still yet need to be established within the relevant ministry. Training of staff

and development of management systems will be of particular importance in order to

meet EC requirements.

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Legislation transposing the EC Directive based on Art. 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

Some progress has been made by Slovakia during the period covered by this Regular

Report. An important development in the field of energy has been the approval by the

Slovak Government, in January 2000, of a new Energy Policy which sets up a basis for

alignment with the

acquis.

Concerning

security of supply,

little progress has been made by Slovakia. Current

emergency oil stocks stand at 26 days, calculated according to the

acquis.

Slovakia will

need to enact the relevant legislation and enhance its efforts to build up the

infrastructures necessary to ensure oil stocks for 90 days’ consumption, as required by EC

legislation. The Slovak Administration of State Material Reserves is in charge of the

administration of oil stocks. This body would require further strengthening, notably

through adequate training.

In relation to

competitiveness and the internal energy market,

initial steps have been

undertaken by Slovakia in order to progressively align with the

acquis.

In February 2000 the Slovak Government approved an increase of electricity prices

(average of 40% for households and 5% for businesses), of natural gas prices and of the

ceiling price for heating. These measures were taken in the context of the overall policy

of gradual energy prices increase to ensure cost recovery by energy producers. For the

first time, household prices are higher than those for industry.

The Slovak electricity and gas sectors still need to be restructured in order to prepare for

the implementation of the EC gas and electricity directives, although preparatory steps

are being undertaken. In the framework of the Slovak Energy Policy, Slovakia has

decided that certain end-users would be given the opportunity to choose their electricity

supplier from amongst the electricity generation licence holders in Slovakia. This process

will start on 1 January 2001 for the major energy users (approximately 20% of the

market). The domestic market will be progressively further opened. Access by foreign

suppliers to the Slovak market is, however, not foreseen in the medium term. For the gas

sector, no decisions have yet been taken on the rhythm for market opening.

The privatisation plan (49% of shares) for the state owned Slovak Gas Company (SPP)

has been adopted, while plans are being elaborated for the national electricity company

(SE), for the national oil company (Transpetrol) and for the distribution sector. Steps are

also being undertaken for the establishment of an independent regulatory authority, which

will be responsible for all regulatory activities such as granting of licenses, inspection,

price regulation.

As regards

energy efficiency,

no particular progress can be reported. Energy efficiency

remains low and needs to be improved. Concrete steps to enhance support for energy

efficiency, energy saving and the use of renewable energy sources should be rapidly

undertaken.

In the

nuclear energy

field, Slovakia operates two nuclear power plants (NPPs), located

at Bohunice and Mochovce. At Bohunice there are four units in operation: two VVER

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440/230 reactors (units 1 and 2 at Bohunice V1) which have been classified as non-

upgradable, and two VVER 440/213 reactors (units 3 and 4 at Bohunice V2) classified

as upgradable. At Mochovce, two upgradable VVER 440/213 reactors (units 1 and 2) are

in operation.

Following the conclusions of a Joint European Commission-Slovakia Working Group on

Nuclear Energy, which was created in June 1999 to analyse the consequences of the

closing down of Bohunice V1, the Slovak Government decided in September 1999 that

the two Bohunice V1 reactors will be shut down in 2006 and 2008 respectively. The

Commission considered these dates in line with Agenda 2000 and with the 1998

Accession Partnership, and welcomed this decision.

The 1999 Accession partnership for Slovakia considered the preparation of a

decommissioning plan to implement the Government decision to close the Bohunice V1

nuclear reactors and the continuation of efforts aiming to ensure high levels of nuclear

safety at Bohunice V2 and Mochovce nuclear power plants as short term priorities.

In 2000, the Slovak authorities have prepared a Report on the Economic and Social

Consequences of the Early Closure of the Bohunice V1 NPP. This report includes an

“Early Decommissioning Preparation Plan”, which indicates tasks, timing, sequencing,

and costs estimates for the decommissioning of the plant. Once approved by the

Government, Slovakia will need to rapidly develop a detailed decommissioning plan and

to implement it vigorously .

As regards units 3 and 4 at Mochovce NPP, the Slovak Government made clear in April

2000 that no State guarantees or any form of state aid will be provided for the completion

and operation of these units.

Extensive upgrading programmes are being implemented at both Bohunice and

Mochovce. Unit 2 at Mochovce NPP was put into commercial operation at the beginning

of 2000.

Concerning radioactive waste management, a new radiocative waste treatment centre has

been in operation in Bohunice since March 2000. Mochovce low and intermediate-level

operational waste disposal facility was licensed at the end of 1999 for one year period of

test operation.

The Slovak Nuclear safety Authority has continued to improve its mode of operation.

Overall assessment

Slovakia needs to enhance its efforts to be in the position to comply with the energy

acquis

in the medium term. Particular attention should be given to the completion of a

compatible legislative framework as regards emergency oil stocks and to develop a

credible plan for the required investments in this area. Also the preparation for the

internal energy market (electricity and gas directives) needs particular attention. In this

respect, Slovakia should establish an appropriate and efficient regulatory mechanism able

to carry out the functions as defined in the internal energy market directives. Removal of

price distortions should continue while "stranded costs" also need attention. Energy

efficiency should continue to be improved

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As regards the issue of nuclear energy, the EU has repeatedly emphasised, most lately at

the European Council in Helsinki, the importance of a high level of nuclear safety in the

candidate countries in the context of the Union’s enlargement. The Union has also asked

for the earliest practicable closure of the candidate countries’ nuclear power plants which

are deemed non-upgradeable to international safety standards at a reasonable cost. In this

context, Slovakia should continue and, as far as possible accelerate, the preparations for

the shutting down and decommissioning of reactors 1 and 2 at Bohunice V1. Moreover,

the planning and duration of the upgrading plan for Bohunice V2 needs also to be

actively pursued. It should be fully implemented on a time-scale consistent with Agenda

2000 requirements (by 2004-2007). The remaining upgrading safety measures scheduled

for Mochovce units 1 and 2 should be implemented promptly.

The Slovak Nuclear regulatory Authority, although credible and technically competent,

needs more resources in order to be able to better fulfil its tasks, notably in the field of

technical assessment. Slovakia should ensure that all regulations required by the Atomic

Act of July 1998 are issued.

Slovakia should also ensure full compliance with Euratom requirements and procedures.

In this respect, due attention should be given to preparing the implementation of Euratom

Safeguards.

Longer term solutions for spent fuel and nuclear waste will continue to need attention.

Chapter 15: Industrial policy

Since the last regular report, the government has begun to make substantial progress on

this chapter and prepared the conditions for meeting the Accession Partnership priorities,

in particular those relating to investment promotion and enterprise restructuring.

The Slovak

industrial strategy

is based on a document adopted by the government in

1999, “Elaboration of the European Union’s Industrial Policy in the conditions of the

Slovak Republic”. The document puts emphasis on the need to implement a market-

friendly industrial policy aimed at increasing the competitiveness of the Slovak industry

through the creation of a good business environment and a stable institutional and legal

framework. The paper recognises the need for Slovakia to shift resources from traditional

sectors and rules out direct State intervention to maintain non-viable industries. However,

it considers the possibility of applying specific schemes to sustain sectors undergoing

restructuring, although in compliance with EC state aid rules.

The paper also reflects the increased government awareness that priority is to be given to

policies aimed at attracting foreign direct investments (FDI). A set of financial measures

in this respect entered into force in January 2000, including the reduction of corporate tax

from 40% to 29%, and the introduction of five-year tax holidays for legal entities with

foreign capital participation. However, the unrestricted nature of the tax holidays does not

allow the calculation of a state aid equivalent and thus appears not to conform to state aid

rules

(see also Chapter 6 – Competition).

Developments concerning 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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As regards

privatisation and restructuring,

the new Bankruptcy Law, passed by the

Parliament in June 2000, improves the legal framework for industry development and

should create the conditions for more effective enterprise restructuring. The law

strengthens the position of creditors in bankruptcy cases and allows them to participate in

the restructuring of the bankrupt company.

The privatisation of the national Telecom Company was finalised in July 2000, and 51%

of the company’s capital sold to a foreign investor. The sale of VSZ Kosice steel plant to

a US strategic investor was negotiated by the government and approved in May 2000 by

the company’s shareholders meeting. A foreign partner also entered into a business

agreement with Slovnaft, the Refinery Company. The deal is now before the Anti-Trust

authority for clearance.

Legislation that entered into force in October 1999 allows for privatisation of up to 49%

of most public utilities in the energy and transport sectors. The government is committed

to going ahead in this direction, and has taken preliminary steps in this respect as

concerns the energy company Transpetrol and the Slovak gas industry.

The most significant progress in the field of restructuring and privatisation came about in

the financial sector, and more particularly in the banking sector, where full privatisation

of the three major state-owned banks (IRB, VUB and SLSP) is firmly on track. Two debt

carve-out operations,, the latest of which was completed in June, allowed the government

to transfer the bad-debts to a newly created consolidation company, and to clear the

financial situation of the banks. During summer the government invited offers for IRB,

SLSP (the savings bank) and the smaller Bank of Slovakia. It has been decided that VUB

will be put on the market at a later stage.

The Ministry of Economy formulates and co-ordinates industrial policy. Since January

2000, the Ministry has created a Benchmarking Information Centre, focusing on

incorporating modern benchmarking methods into policy-making, and a Council for

Competitiveness in Industry, made up of representatives from industry, Trade Unions,

Chambers of Commerce and relevant government departments. Other implementing

agencies, such as the National Agency for Development of SMEs, the Industrial

Development and Revitalisation Agency and the Slovak Post-Privatisation Fund,

complete the range of public institutions involved in industrial policy implementation.

Overall assessment

Slovakia’s approach to industrial policy has evolved towards the EC principles of a

market-oriented, stable and predictable policy. The recent steps in transparent and

market-friendly restructuring and privatisation in the industrial and financial sectors,

together with the first measures to increase FDI, all go in this direction.

However, more attention should be devoted to the respect of EC state-aid rules, for some

of the measures taken do not always appear to be entirely in line with what is provided

for by EC legislation. The recently created State Aid authority needs to be strengthened

as previously mentioned.

Steps forward were also taken as regards the adoption of a long-term industrial strategy.

However, the document “Elaboration of the European Union’s Industrial Policy in the

conditions of the Slovak Republic”, although innovative in the context of Slovakia’s

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approach to industrial policy, needs to be further developed, especially in terms of

defininig specific priorities and policy implementation.

The administrative capacity is adequate, and the two above mentioned recently created

agencies within the Ministry of Economy should provide additional expertise. The extent

to which their contribution to the policy-making process will be taken into account,

remains however to be assessed.

Chapter 16: Small and medium-sized enterprises

Since the last regular report, Slovakia has been focusing increased attention on the SME

sector. Progress was made in decreasing and simplifying taxation of small businesses and

streamlining SME support schemes.

As regards

SME policy,

the main document underpinning Slovak industrial strategy

mentioned in the previous chapter, considers support to SMEs as instrumental to

achieving the policy objective of shifting redundant industrial capacity from traditional

sectors.

The Council for small and medium-sized enterprises formulates recommendations to the

government to simplify the

business environment

for SMEs. In July 2000 the Council

submitted to the government two extensive SME policy documents, “Improvement of the

Legal and Regulatory Framework for Support of Businesses and Investments” and

“Improvement of the tax and customs framework to support enterprises and

investments”. The documents focus on simplification of new business registration, of real

estate registry, of court proceedings and collateral rights, and suggest that the protection

of the minority shareholders rights be improved.

Against this background, efforts to improve the business environment were stepped up

over the last year.

The State Aid Act, entered into force in January 2000, fully aligned the Slovak

SME

definition

with the recommendation of the European Commission. The Act also includes

SMEs among the possible targets for state aid and defines the circumstances under which

state aid can be provided to them.

A new taxation scheme for small businesses has entered into force in January, allowing

SMEs having annual income under 1.5 million SKK to pre-pay a lump tax at rates of 2 to

2.5% of annual turnover at the beginning of every year, with no need for book keeping.

This measure however proved to be only partially successful, for between January and

April 2000 a lower than expected number of businesses applied. An amendment

extending the categories of eligible entrepreneurs was therefore passed by Parliament in

September, and will enter into force in January 2001.

In March the government support programmes for SMEs were streamlined and merged

into a single scheme renamed Start 2000. The equivalent of

€24

million was allocated to

the scheme, which concentrates on providing start-ups with interest subsidy for

Developments concerning SME policy should be seen in relation to developments in the context of

industrial policy

(see chapter 15 – Industrial Policy)

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commercial loans. As of January 2000, the export-import Bank introduced a new

financial scheme aimed at SMEs.

Two Euro Info Centres were opened, and an Interprise event took place in April 2000.

Overall assessment

Slovakia’s SME policy is increasingly aligned with the principles and objectives of EC

enterprise policy. SMEs account for a 58% share of GDP and for 60% of total

employment. As for financial support to SMEs, Slovak programmes are overall in line

with the approach used in the EC, as they concentrate on support for intangibles.

However, SME development continues to be hampered by difficulties to access to

finance.

The Ministry of Economy is responsible for the formulation and overall co-ordination of

SME policy, and relies on the advice of the Council for Small and Medium-Sized

Enterprises, created in August 1999. Representatives from the economic ministries, the

parliament, and the business sector are represented in the Council, which is chaired by the

Ministry of Economy. Policy implementation is mostly carried out by the National

Agency for the Development of Small and Medium-Sized Enterprises, which co-

ordinates a network of local Regional Advisory and Information Centres (RPICs) and

Business Innovation Centres (BICs).

The necessary administrative structure in the field of SMEs has been established, and

appears to be relatively effective. The government envisages completing the range of

institutions active in this field by the creation of a Research Centre on the SME

Environment.

Chapter 17: Science and Research

The Slovak Republic has made further progress in this area since the last regular report.

Since September 1999 the Slovak Republic is fully associated to the

Fifth Framework

Programme,

as well as the Euratom Framework Programme. It has established the

National Contact Point (NCP) system and appointed experts to the Programme

Committees. Results for the first year of participation in these programmes correspond to

average expectation.

Overall assessment

On the whole, Slovakia should have little difficulty in taking on the

acquis

in this area,

but efforts on its part will be needed, including a substantial increase of financial support,

if it wishes to take full advantage of the opportunities offered by Community

programmes.

After its successful launch, participation in the Community programmes could be further

enhanced through strengthening of administrative capacity and encouraging greater

participation of the enterprise sector, including SMEs.

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

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relatively low (0.86% of GDP in 1998). Priorities urgently require definition, particularly

regarding the relationship between research and higher education. Funding mechanisms

should be aligned with the redefined priorities. Measures to promote and enhance the rate

of research and development as well as to increase the European co-operation in this field

are needed.

Chapter 18: Education and Training

Since the last Regular Report, progress can also be reported in the area of Education and

Training.

In the past year, Slovakia continued to take part in the

Community programmes

(see

bilateral part A).

In addition, the Association Council adopted in July 2000 a decision

allowing participation in the second phase of the Socrates and Leonardo da Vinci

programmes (2000-2006) and in September 2000 allowing participation, also from 2000,

in the new Youth Programme which incorporates European Voluntary Service activities.

The Government has approved two strategic documents in the field of

vocational

education and training

in December 1999 and January 2000. They propose, inter alia,

the introduction of a diversified system of tertiary education, the extension of compulsory

and average length of education and to increase the share of education expenditure in the

GDP.

Overall assessment

On the whole, Slovakia is on a good track, but efforts to further reform the sector and to

increase financial support need to be undertaken.

Participation in the relevant Community programmes is satisfactory and the established

national agencies are functioning.

The

Directive concerning the education of children of migrant workers

still has to be

fully transposed and implementation to be ensured. As regards the free movement of

students, Slovakia is also not yet fully in line with the

acquis.

The pace of reform of the vocational education and training system (VET) continues to

be slow and a legal framework is still missing and, in particular, legislation on education

and higher education is pending. A comprehensive approach for the introduction of a new

system of VET financing, including financial management, to increase accountability and

cost-effectiveness is pending. The spread of competencies between different ministries

remains unclear. Training is often offered in obsolete professions, not sufficiently

meeting labour market needs. Promotion of co-ordinated inter-ministerial policy is also

necessary to increase access to vocational training, in particular for disadvantaged groups

in the labour market.

There is a need to further strengthening the administrative capacity of the Ministry of

Education and to promote the dialogue with social partners.

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Chapter 19: Telecommunications and information technologies

Since the last regular report, Slovakia has achieved further significant progress in the

telecommunication

sector.

As regards the

telecom market,

the privatization of Slovak Telekom has advanced well

through the sale of a 51 per cent stake in July to a major international firm. Slovak

Telecom has acquired a license to provide public services via the fixed public

telecommunication network. For public telephone services the licence will be exclusive

until the end of 2002.

The mobile sector has maintained its quick growth to reach a market share of 20 % of

inhabitants (as compared to 9 % in the last reporting period). The licensing of a third

mobile operating company has not still been achieved. The process of price re-balancing

has continued.

The Act on Telecommunication entered into force in July. It addresses, inter alia, the

open access to network, the provision and financing of universal telecommunication

service, price regulation and creates a standard licensing system.

The Government has approved its paper on the

Telecommunication Policy

for the years

2000 – 2002 in June 2000, preparing further necessary steps for harmonization in this

sector. The strategy focuses on licensing, price policy, interconnection, mobile

communication, open network provision and development of digital broadcasting.

The new Act on Telecommunication creates a new

regulatory

framework. It abolishes,

as from January 2003, the exclusive rights presently assigned to Slovak Telecom. The

new Act re-establishes the Telecommunications Office as a separate legal body with

wider powers and greater independence to regulate the sector and to administer the radio

spectrum, thus bringing Slovakia closer in line with the

acquis

in this area. Further

clarifications however are needed in particular whether regulatory and operational

functions are properly separated.

The number of staff in the Ministry of Transport, Post and Telecommunication remains

relatively low. The division of Posts and Telecommunication employed 23 persons,

amongts them 10 working for the two telecommunication departments. The

Telecommunication Office is currently employing 220 people.

No significant progress can be reported as regards the liberalisation of

postal markets.

Overall assessment

In the telecommunication sector, Slovakia has significantly advanced in terms of

harmonisation and liberalisation, although it is not yet fully in line with the

acquis.

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

facilities. Rapid progress is needed with respect to the remaining pieces of secondary

legislation that are necessary for the market to be fully opened and regulated properly in

the meantime. Fair competition and proper functioning of the market have to be ensured.

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Administrative structures need to be strengthened, the independency of the regulatory

body needs to be safeguarded.

The number of lines is still low (nearly 31 of 100 inhabitants at the end of 1999), the

average waiting time of more than 5 months still quite long. The successful privatisation

of Slovak Telecom is expected to accomplish, inter alia, full digitalisation of the fixed

telephone network by the end of 2004.

The current legislation on Posts is not yet in line with the

acquis.

A new law on postal

services and the establishment of an independent Postal Regulatory Authority are needed

to comply with EC legislation.

Chapter 20: Culture and audio-visual policy

During the period since the last Regular Report, Slovakia made substantial progress in

aligning to the Community

audio-visual

acquis.

The Parliament adopted the Act on

Broadcasting and Retransmission in September. This Act brings Slovak legislation very

closely in line with the Television without frontier directive.

In October Slovakia ratified the Protocol to the Council of Europe Convention on

Transfrontier Television, to which Slovakia is already a party.

Slovakia’s successful process of accession to the OECD has been consistent with its

process of alignment with the audio-visual

acquis.

Overall assessment

With the approval of the new Broadcasting Act, Slovakia has achieved a substantial

degree of alignment with the audio-visual

acquis

thus meeting the relevant short-term

priority in the 1999 Accession Partnership.

However, the administrative capacity of the the Council for Radio and Television

Broadcasting has to be noticeably strengthened, both in terms of staff and equipment to

cope with the new competences and powers conferred on it by the new legislation.

Particular attention has to be paid to the monitoring and sanctioning powers.

As regards future participation in the

Culture

2000 programme, administrative capacities

for the management of the programme have to be reinforced also.

On the whole, Slovakia has made substantial progress and has reached a high degree of

alignment with the Community

acquis.

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

Slovakia has achieved limited progress in this area since the 1999 Regular Report.

In June 2000 the Slovak Government adopted a new

territorial and administrative

organisation

(corresponding to NUTS 3). The new classification, which has not been

agreed as yet with the European Commission (Eurostat), divides the Slovak territory into

twelve units. The latter present important differences as regards unemployment rate,

varying from 8 % in the Bratislava region to nearly 28 % in the Kosice region as already

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mentioned. The Government has not indicated when the new territorial organisation will

enter into force.

As concerns the

legislative framework,

through a Parliamentary Resolution of

November 1999, the Ministry of Construction and Regional Development was

established on 1

December 1999 as the central state administration body for regional

development.

The Act on Regional Development, currently under preparation, should define the

competences of individual entities and strategic objectives. The Slovak authorities must

pay particular attention to define a strategy on how to shape and prepare the

administration to implement structural funds, the present role of various state institutions

in the preparatory process, the legal framework, coordination amongst ministries and the

role of the lead ministry in the decision making process.

As regards the

preparation for programming,

the preliminary Integrated Plan for

Regional and Social Development of the Slovak Republic (National Development Plan),

was approved in October 1999. The plan has identified Eastern Slovakia (corresponding

to NUTS II level) -Kosice, Banska Bystrica and Presov-) as the target region where joint

financing should be provided by Phare, the Slovak Government and local authorities for

integrated regional development projects. A revised version of the National Development

Plan (NDP) should be adopted by the Government in November 2000.

The Slovak Republic has also elaborated programming documents for ISPA and

SAPARD. Details are included in the section on Community aid (A.b).

The

co-ordination and monitoring

of pre-accession funds is the responsibility of the

Preparatory Committee for Structural Funds chaired by the State Secretary of the

Ministry of Construction and Regional Development. This Committee, set up in

February 2000, is an inter-ministerial body, with representation of several ministries.

A Department of Regional Development has been operational since January 2000 at the

Office of the Government. Its main task is to support the Ministerial Council on Regional

Policy, which is responsible for the overall coordination of regional development and is

chaired by the relevant Deputy Prime Minister.

The Ministry of Construction and Regional Development has set-up in March 2000 a

“Department of Regional Development Management” as the operational “arm” of the

Ministry until the National Agency for Regional Development is established.

As regards the

financial and budgetary management,

the Slovak Government has

adopted in June, 2000 a “Strategy for the establishment of the Treasury System” which

aims, inter alia, at ensuring a comprehensive management of public finances, including

funds provided through the pre-accession financial instruments (see also chapters 28 and

29).

Overall assessment

Substantial problems remain in this area and efforts need to be intensified, both with

regard to the legislative framework and as concerns administrative capacity.

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In its preparation for structural funds Slovakia must pay particular attention to the legal

framework, co-ordination amongst ministries and decision making in the lead-ministry,

to a clear separation of administrative and political functions, to the management capacity

and partnership with regional and local partners, social partners, SMEs and the business

community. Special attention should be devoted to reinforcing the administrative

capacity necessary to carry out the programming and policy tasks in a satisfactory

manner.

The competence on regional policy is scattered among different institutions/bodies. The

current situation in terms of responsibilities for the implementation of future Structural

Funds and the Cohesion Fund needs to be clarified.

Developments in this area are linked with the new territorial and administrative

organisation, not yet adopted by the Parliament and also with the public administration

reform, the adoption of which has also been further delayed.

The lack of qualified staff at the Ministry of Construction and Regional Development is

also a matter of concern and should be addressed by the Government without delay.

Programming and monitoring working committees responsible for sectoral operational

programmes are being set-up. The Ministry of Construction and Regional Development

and the Preparatory Committee for Structural Funds are organising the coordination of

this work in co-operation with representatives of the academic community, non-profit

governmental organisations and regional partners. The Slovak Government will have to

ensure an effective coherence between the various sectoral strategies and the activities

covered by the Rural Development Plan and those envisaged by the National

Development Plan.

As to regional statistics, data for the determination of eligibility are available for

Objective 1 and INTERREG criteria. The availability of data allowing for the

determination of Objective 2 and the URBAN initiative has yet to be confirmed. 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, no data exists concerning social

indicators and structural business statistics. Data is available for employment statistics

and infrastructure. Investments statistics should be improved.

Chapter 22: Environment

Limited progress has been achieved by Slovakia in the field of environment since the last

Regular Report.

Slovakia has undertaken a number of actions of a general nature in this area, in particular,

the adoption by the Slovak Government of an Updated National Environmental Action

Program and the establishment of a ”free phone line” for citizens on environmental

issues. Moreover, in May 2000, Slovakia set up a new department for the implementation

of EC-financed Projects and Programmes in order to ensure better co-ordination and

management. This department, which currently comprises 7 persons, is still in its start-up

phase and results cannot be assessed yet. With regard to the integration of environment

into other policies, this is now addressed in more detail in the Updated National

Environmental Programme referred to above.

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As regards

EC horizontal legislation,

an important step forward has been the adoption

by the Slovak Parliament of new legislation to align with the Environmental Impact

Assessment directive. This addresses an Accession Partnership short term priority. It can

also be noted that the UN ECE (United Nations Economic Commission for Europe)

Convention on Environmental Impact Assessment in a Trans-boundary Context was

ratified by Slovakia in November 1999 and that the Directive on Access to Information

has been fully transposed.

Little progress can be reported in the field of

nature protection.

Preparatory steps have

been undertaken in view of the transposition of the Habitats and the Birds Directive. The

actions carried out to date by the Slovak authorities aiming to increase administrative

capacity in this area are insufficient in view of the considerable tasks ahead.

In relation to

water quality,

no concrete progress can be reported as all Directives

concerning water protection will be transposed through the new Water Act and its

implementing regulations, expected to be finalised in 2001. In the field of

industrial

pollution and risk management,

progress with respect to the transposition and

implementation of the relevant EC Directive is lacking. Only some indirect progress can

be reported as regards the Directive on the Control of Major-Accident Hazards involving

dangerous substances (Seveso II) through the entry into force in July 2000 of an act on

Labour Inspection which takes into account the requirements of the Directive.

As far as

air quality

is concerned, some limited progress has been made, in particular by

transposing certain emission quotas provided for in the EC Directives relating to

combating air pollution and by partially aligning the quality requirements for fuels. Some

progress has also been achieved through further alignment of the Directive on ambient air

quality assessment and management. A Government decree on the requirements for

keeping operational evidence of pollution sources and on provisions of data to the air

protection authorities by operators of pollution sources has also been adopted.

Further alignment in the field of

noise from vehicles and machinery

has been achieved

through new legislation on "Technical Product Requirements and Assessment of

Consistency", which came into force in January 2000, as well as through an amendment

of the Slovak act on Consumer protection. In addition, a number of European standards

relating to noise measuring have been adopted. The Slovak testing bodies for

measurements of noise of household appliances and construction machinery according to

the above mentioned European standards are in the last phase of accreditation process in

compliance with the European Norm 45001. The market supervision in this area is to be

ensured by the Slovak Commerce Inspection.

In the fields of

chemicals

and

Genetically Modified Organisms (GMOs)

no particular

progress can be noted.

No particular progress can be reported in the area of

waste.

The adoption of a new law on

waste, which will constitute a major step forward, will only be carried out in 2001. It is to

be noted that the Slovak administration in charge of waste management needs to be

substantially reinforced at all levels.

In relation to

nuclear safety and radiation protection,

legislation on accidental

planning for case of breakdown or accident in nuclear installations has been issued by the

Slovak Nuclear Regulatory authority. This legislation fully complies with Directive

89/618/Euratom on Information of the Public. A regulation of the Slovak Nuclear

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Regulatory Authority on nuclear material handling and radioactive waste shipment

entered into force in November 1999. This regulation complies with the requirements of

Commission Decision 93/552/Euratom on Shipments of Radioactive Waste. (Other

aspects related to nuclear safety are dealt with under Chapter 14 - Energy).

Overall assessment

Slovakia needs to accelerate the legislative alignment process and to adopt a

comprehensive strategic approach including implementation plans and financial

strategies necessary to ensure implementation, particularly for those Directives having

important financial implications. It should also progressively implement the principle of

integration of environmental aspects in all policy areas.

The need for the adoption of Slovak legislation transposing the major EC Directives in

the fields on Water, Waste, Nature Protection and Industrial Pollution and Risk

Management becomes pressing. Slovakia needs to ensure the urgent adoption of major

pieces of legislation in these sectors, as planned. Moreover, investment efforts in

compliance with the

acquis

will need to be progressively increased. To this end further

efforts in project preparation and implementation are needed.

Overall institutional strengthening remains necessary. Additional duly trained personnel

should be allocated to the Slovak bodies competent for the alignment, implementation

and enforcement of the

acquis,

in particular in the fields of water, waste, nature and

control of industrial pollution and risk management. Slovak Environmental Inspectorates

should also be provided with a higher number of inspectors in order to be able to properly

fulfil their tasks.

Chapter 23: Consumers and Health Protection

Overall progress under this chapter since the last Regular Report has been encouraging.

Slovakia has made significant advances in terms of its alignment with the

safety related

measures

of the consumer protection

acquis,

with amendments to the Act on consumer

protection integrating most provisions of EC Directives on General Product Safety,

Dangerous Imitations and Product Liability into Slovak law, although the damages

threshold under product liability should be raised to

€500

from the current level of

approximately

€113.

Also in the

non-safety consumer protection

area Slovakia has made notable progress.

Further amendments to the Consumer Protection Act have partially aligned rules on

doorstep and distance selling, and unfair contract terms. A new Act on Advertising

should enter into force in January 2001 with the aim of incorporating EC rules on

misleading and also comparative advertising.

The important progress Slovakia has made legislatively highlights the need to ensure

effective

market surveillance

and also the indispensability of proper

enforcement

of the

rules. The Slovak Trade Inspectorate, subordinate to the Ministry of Economy, is the

general body in charge of consumer affairs, although specific inspectorates deal for

example with food complaints.

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Overall assessment

Although progress under this chapter has been good, further work is required to align in

the areas of consumer credit, indication of prices on foodstuffs, package travel, time-

share, and injunctions and guarantees.

Furthermore, it will be particularly important to ensure adequate co-ordination between

and strengthening of those bodies involved in market surveillance activities including the

consumer organisations so that the consumer can rely with greater confidence on the

safety of the products available on the Slovak market. Recent figures on the activities of

the Slovak Trade Inspectorate show a high level of infringements discovered as a

percentage of total inspections, highlighting the need for more effective enforcement.

Adequate funding of the relevant bodies should be assured (see

also Chapter 1 - Free

movement of goods).

In the field of consumer protection, two associations already exist

that are raising public awareness, providing information to individual citizens and

helping out with specific complaints.

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

Since the 1999 regular report, significant progress has been registered in the Slovak

Republic in the fields of visa and asylum. Some progress has also been registered in the

area of migration, police co-operation, fight against money laundering and organised

crime, fight against fraud and corruption, drugs, customs co-operation and judicial co-

operation. However little progress is to be reported on border control.

The Supervisory Office for Personal

Data Protection

was established in accordance with

the Law on Personal Data Protection at the end of last year (see

section B.3.1. chapter 3).

Slovakia has ratified the Council of Europe Convention for the Protection of Individuals

with regard to Automatic Processing of Personal Data in September.

As far as

visa policy

is concerned, the amendment to the Law on the residence of

foreigners entered into force in April. It includes provisions on the issuing of visas. Visas

are no longer granted at borders, except for humanitarian reasons. Visa stickers were

introduced as of 1 January 2000 replacing the old visa stamps. Harmonisation of

Slovakia’s visa policy continued. The Government introduced a visa requirement for

Ukraine with effect from end of June 2000 and decided to abolish the current non-visa

regime with Russia and Belarus as of the beginning of next year and with Cuba not later

than six months prior to the entry of Slovakia to the EU.

With regard to

border control,

the Slovak Government adopted in November 1999 a

concept for the protection of the future EU external borders, aiming at restructuring the

border guards and improving the infrastructure of the border crossing points.

Regarding

migration,

some progress was achieved by the above-mentioned amendment

to the Law on the residence of foreigners, which entered into force in April. The

amendment regulates the control of movements at the border. In May 2000, the Border

and Foreigners Office was established. It is responsible for granting various forms of stay

to foreign nationals who come to Slovakia to work, to study or who have received

refugee status. It is, at the same time, the appeal body for decisions made by first instance

bodies of the police force concerning visas, stays and expulsion. The office employs 54

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police officers and 12 civil servants. Moreover, a refugee camp in the Eastern part of

Slovakia has been built and is already open.

Significant progress can be reported in the alignment of

asylum

legislation. The

Parliament approved an amendment to the Law on Refugees in September. It includes the

abolition of the “24 hour rule” for lodging an asylum claim, one of the 1999 Accession

Partnership short-term priorities. Furthermore it amends the definition of manifestly

unfounded cases, establishes the right to recognition as a refugee for purposes of family

reunification and lengthens the accelerated procedure at first instance from 7 days to 30

days and of the appeal procedure to 7 days. The list of safe third countries and safe

countries of origin has been amended. The independent body as the second instance in

the asylum procedure has not yet been established.

In the field of

police co-operation and fight against organised crime,

an amendment to

the Act on weapons and ammunition entered into force in April, redefining weapons and

ammunition and tightening up conditions to grant licenses. The Criminal Procedure Code

was amended, including provisions on recognition and implementation of third country’s

decisions concerning asset forfeiture. The alignment of the Penal Code in the area of the

fight against organised crime and fraud – a short-term priority of the 1999 Accession

Partnership – has not yet been achieved. The Act on the Police Corps was also amended,

regulating, inter alia, international police co-operation. The legal basis for seconding

liaison officers abroad was hereby established. The management structure of the Slovak

police was partly changed, shifting responsibilities from the Ministry of Interior to the

head of police corps. This change aims at enabling a close co-operation between the

future Europol Office and the Interpol Office under the umbrella of one department.

As regards

Money laundering,

the Parliament passed the Law on the Protection against

the Legalisation of Revenues from Criminal Activities in October 2000. It requires banks

and a broad range of other financial entities to identify the individuals or corporate

entities undertaking transactions exceeding the equivalent of

€

2,500 over one year. The

new law also requires reporting to the police in case such transactions appear suspicious.

As far as the

fight against fraud and corruption

is concerned, the Government adopted

in June a National Plan for the Fight against corruption (see

section B.1.).

In order to

better detect corruption and other types of serious crimes, the possibility to use

undercover agents was established. Slovakia ratified the Council of Europe Criminal Law

Convention on Corruption, thus fulfilling a short-term priority of the 1999 Accession

Partnership, and signed the Council of Europe Civil Law Convention on Corruption in

June. The ratification procedure for the OECD Convention on combating bribery of

Foreign Public Officials in international business transactions was, as a short-term

priority of the 1999 Accession Partnership, completed and the Convention entered into

force for Slovakia in November 1999.

In the field of

drugs,

the Government approved the National Programme for the Fight

against Drugs in January 2000. The Programme focuses on three elements: prevention,

treatment and re-socialisation of addicted people. It constitutes a valuable and

comprehensive analytical document which now needs to be implemented into concrete

measures. The Act on narcotic, psychotropic substances and preparations was amended,

aiming at improving efficient drug control. This Act covers also new synthetic drugs but

there is no exact definition of this type of drug. A joint police/customs team has been set

up in October 1999 to improve the control of import and export of precursors.

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In the area of

customs co-operation,

work has continued to further develop customs IT

systems, notably concerning the establishment of a Slovak integrated tariff and on the

computerisation of customs procedures. Actions are also being undertaken in Slovakia to

strengthen the co-operation between customs and police at the borders, as for example

through the establishment of joint police-customs points for precursor control.

As regards

judicial-co-operation,

the Slovak Parliament approved the Convention on

Civil Aspects of Kidnapping in June, which now needs to be ratified. The amendment of

the Criminal Code Procedure has partly transposed the Conventions on extradition into

Slovak legislation.

Overall assessment

Overall, Slovakia has kept its momentum in transposing and implementing the

acquis.

However, additional work needs to be done, in particular as regards further alignment in

the field of asylum and migration, improving border facilities and management at the

future external border. The fight against organised crime needs further to be sustained.

As regards

data protection,

Slovakia needs to ratify the Council of Europe Convention

for the Protection of Individuals with regard to Automatic Processing of Personal Data.

By introducing

visa

stickers, Slovakia has met one important short-term priority of the

1999 Accession Partnership. Yet, efforts to upgrade and complete the visa system have to

be maintained. In particular, an on-line system for issuing visa and a central registration

system need to be established.

As regards

border control,

currently 1686 police officers work at the border crossing

points. At the green border, 1100 police officers and 763 soldiers are installed. The

detection rate for illegal border crossing remained at a similar level (1999: 7888, 1998:

8320), whilst the number of undetected illegal immigrants is still estimated to be very

high. Particular effort has to be focused on strengthening the administrative capacities.

The current reorganisation of the border security system, notably the replacement of

soldiers by professional border guards as well as their training need to be continued.

Sufficient and qualitative equipment remains a prerequisite for efficient border control.

Slovakia is still very susceptible to illegal immigration and needs to make serious efforts

to strengthen the border management.

The number of

asylum

seekers in 1999 amounted to 1320 (as compared to only 506 in

1998). In the first nine months of 2000, 1101 people sought asylum. Almost half of the

applicants came from Afghanistan, followed by India and Pakistan. Despite the progress

reported, Slovakia is not yet fully in line with the

acquis

in the field of asylum. In

particular, an independent body as the second instance in the asylum procedure still needs

to be established, as was also set out as a 1999 Accession Partnership short-term priority.

The exclusion clause of the Law on Refugees is too broad, its

non-refoulement

provisions

are not in line with international requirements, the provisions for recognition for purposes

of family unity are too narrow. Continued attention needs to be paid to the practical

application of provisions relating to the concept of “safe third countries”. The different

responsibilities of the Migration Office and the Aliens and Border Police for determining

the need for international protection are a constant cause for concern, since they do not

guarantee a consistent, competent assessment of refugee cases. Also, administrative

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capacities need to be strengthened, mainly the staff and equipment of the Migration office

need to be increased and training continued.

In the area of

migration,

Slovakia has partially transposed and implemented the

acquis.

It needs to continue efforts to conclude a number of readmission agreements with third

countries and strengthen its administrative capacity to implement the readmission

acquis.

The amendment of the Law on the residence of foreigners does not properly meet all

acquis

requirements. In particular, the

non-refoulement

provisions should be harmonised

with international rules, the status of tolerated stay and associated rights introduced for

persons who are not eligible under the law but nevertheless un-deportable as well as the

right for family reunification stipulated. Further alignment is necessary, notably in view

to the admission of third country nationals. The granting and extension of work permits is

still not in line with the

acquis.

In the field of

police co-operation,

the Europol office has to be established and the fight

against

organised crime

intensified, as organised crimes continues to be a major

problem. The Penal Code is not yet in line with the

acquis,

notably as regards the notion

of “organised crime”. The re-codification of the Penal Code and the Code of Criminal

Procedure is expected to bring Slovakia in line with the

acquis

in this respect. Internal

co-operation within the police as well as with other law enforcement agencies need to be

improved.

The Council of Europe Convention on

Laundering, Search, Seizure and Confiscation

of the Proceeds from Crime

remains to be ratified. Further efforts are needed to

strengthen the administrative capacity to fight money laundering.

Alignment in

drugs

legislation needs to continue, comprising the control of precursors.

There is a need both to widen the competence of the customs authorities to carry out

investigations into drug related crimes and to improve co-operation between the various

bodies involved. Further efforts to enhance administrative capacities, mainly as regards

equipment, are necessary.

As regards

customs-co-operation,

Slovakia should continue its efforts, namely in

implementing customs-related IT systems compatible with those used in the EC.

In the field of

judicial co-operation,

the Conventions on Extradition need to be fully

implemented.

Chapter 25: Customs Union

Limited progress has been achieved by Slovakia in the field of customs since the last

Regular Report.

As regards alignment between the Slovak legislation and the

EC Customs Code and its

implementing provisions,

only minor steps concerning inward processing,

supplementary declaration for customs warehouses as well as the diversion of narcotic

and psychotropic substances have been undertaken. A new Customs Act which should

achieve full alignment in this area is still pending.

Regarding the

customs

acquis

outside the Customs Code,

it can be noted that, since

January 2000, Slovakia applies a quota management system based on actual imports, on

the “first-come, first-served” principle applied in the Community. Moreover, Slovakia

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has issued for the first time an Integrated Customs Tariff consistent with the EC

Integrated Tariff (TARIC). Regarding the pan-European system of origin, Slovakia has

agreed to the amendments to the system which will come into force in January 2001.

In relation to international Agreements and Conventions, Slovakia acceded to the

Convention on Customs Treatment of Pool Containers used in International Transport in

November 1999. In March 2000, the Slovak Government approved the International

Agreement on the temporary importation, free of duty, of medical, surgical, and

laboratory equipment to be used in hospitals and other medical institutions for purposes

of diagnosis or treatment. In May 2000, the Slovak Government approved the Proposal of

Slovakia’s Accession to the 1990 Convention relating to temporary admission. In June

2000, the Protocol on amending the International Convention on the simplification and

harmonisation of customs procedures (the Kyoto Convention) was signed by the Slovak

Government. Moreover, Slovakia is part of the Nairobi Convention on mutual

administrative assistance for the prevention, investigation and repression of customs

offences since May 2000.

As far as the

administrative and operational capacity

to implement the

acquis

concerned, some progress can be noted. Regarding computerisation, the ASYCUDA

system (a computerised customs information system) is in the process of being

generalised. By the end of 2000, 75 % of all customs declarations are expected to be

processed through this system. Work has also continued to further develop customs IT

systems, notably concerning the establishment of a Slovak integrated tariff and on the

computerisation of customs procedures. Some progress has also been made as regards the

provision of information to the economic operators via internet in view of trade

facilitation.

Steps have been undertaken to prepare the transfer of the administration of excise duties

on mineral oils from the tax authorities to the customs authorities.

In relation to border management, Slovakia has concentrated its efforts on the Ukrainian

border, as the future EU external border. The main works regarding the construction of a

border control facility at the Vyšné Nemecké border crossing have been completed.

However, this facility needs to be now properly equipped, and appropriate veterinary

facilities need still to be set up.

Actions are also being undertaken in Slovakia to strengthen the co-operation between

customs and police at the borders, as for example through the establishment of joint

police-customs points for precursor control.

Overall assessment

Although Slovakia has already achieved a considerable degree of legislative alignment in

the field of customs, this process needs now to be completed. In particular, Slovakia

should adopt, as soon as possible, new legislation ensuring full compliance with the EC

Customs Code and its implementing provisions. Slovakia should also aim to achieve

further alignment in the fields of simplified procedures, re-exportation, customs

warehouses, end-use, duty relief, and customs debt repayment and remission of duties.

As regards administrative and operational capacity to implement the

acquis,

Slovakia

should continue its efforts, notably as regards the implementation of customs-related IT

systems compatible with those used in the EC, the establishment of customs laboratories,

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the improvement of border management and the fight against irregularities and corruption

within the customs administration. There is also room for improvement in relation to the

internal organisation of the customs administration, in particular regarding the co-

ordination between the Ministry of Finance, in charge of the legislative process, and the

Customs Directorate, in charge of the effective implementation of the Customs

legislation.

Chapter 26: External Relations

Since the last Regular Report, Slovakia has made progress in continuing to align its trade

policy with that of the EC.

As regards the

common commercial policy,

upon accession Slovakia will need to fully

align with the Common External Tariff (CET). Slovakia’s applied tariffs currently

average 6.4% on all products, 14% on agricultural products, 0.1% on fishery products

and 4.6% 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.

Slovakia is a member of the WTO, and joined the PHARMA initiative for the

liberalisation of trade in pharmaceutical products in January 2000. Slovakia is not yet a

member of the plurilateral Agreements on Government Procurement (GPA) and on Trade

in Civil Aircraft. However, some progress was done in this respect, as the Act on Public

Procurement entered into force in January 2000 set the prerequisites for opening

negotiations for accession to the GPA.

In July 2000, the OECD invited Slovakia to become member of the organisation.

As of July 2000 Slovakia has started harmonisation of legislation in the area of export

credits. Amendments to the Act on the Export Import Bank were introduced, aimed at

extending the possibilities of medium-term import and export credit financing, and

abolishing fees due from exporters and importers to the Bank. The decision-making

process at the Bank was also streamlined, and some competencies transferred from the

government to the Bank.

As regards the conclusion of new free trade agreements, none has been concluded in the

period since the last Regular Report. The possibility of starting negotiations with Croatia

is being considered, and consultations are being held with Morocco.

In the field of

development policy and humanitarian aid,

Slovakia does not have a

comprehensive policy addressing developing countries.

The administrative capacity relevant to external relations is split among several

Ministries, including the Ministries of Economy, Agriculture, Foreign Affairs and

Finance. These institutions are considered to be able to cope effectively with commercial

policy and their upgrading in this respect is not foreseen at this stage.

Overall assessment

Slovakia is prepared to take over the

acquis

upon accession, and is not expected to

experience particular problems in its full implementation.

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However, in some areas alignment with the

acquis

is required, and although Slovakia has

made progress, legislative action is still required in particular as regards accession to the

WTO agreements on Government procurement and Civil Aircraft. The national

legislation on export credits still requires further harmonisation to the

acquis.

The EU and Slovakia have established a framework for co-operation regarding WTO

issues both at ministerial and at services level. Slovakia has been supportive of EU

policies and positions within the WTO framework. As regards the new round, Slovakia

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 build-in-agenda would be

less substantial in its absence.

As regards the WTO Agreement on Trade in Textiles and Clothing (ATC), Slovakia

needs to use the third stage of integration under the ATC to align its integration

programmes on those of the EC, while notably avoiding integrating products not yet

integrated by the EC.

As regards free trade agreements, Slovakia and the Czech Republic are part of a Customs

Union and pursue a common trade policy. As regards

bilateral agreements with third

countries,

the two countries only aim at signing free trade agreements with countries

having association agreements with the EU. Slovakia is a member of CEFTA (Central

European Free Trade Agreement) and holds free trade agreements with Estonia, Latvia,

Lithuania, Turkey and Israel. In this area, further progress is necessary in aligning with

the EC's international trade obligations; Slovakia should continue to keep the Union fully

informed about negotiations aimed at the conclusion of any new trade agreements with a

third country.

The administrative structures currently in place are adequate. The administrative

infrastructure for customs services is addressed under the chapter covering Customs

Union (Chapter

25).

Chapter 27: Common foreign and security policy

The regular

political dialogue

established by the Europe Agreement is proceeding

smoothly, and Slovakia 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.

Slovakia has shown a keen interest in the development of the 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 (ie non-EU European NATO members and

candidates for accession to the EU).

As regards

alignment with EU statements and declarations,

Slovakia has regularly

aligned its positions with those of the Union and, when requested to do so, has associated

itself with all Union’s joint actions and common positions.

Over the last year, Slovakia has taken an active role in the Balkan region, while fully co-

ordinating its policy in this area with the EU. Slovakia has continued its participation in

the European Community Monitoring Mission (ECMM) under EU mandate in the

Western Balkans. Eight Slovak officers participate in the SFOR operation in Bosnia

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Herzegovina and an engineering unit of forty soldiers takes part in the KFOR operation in

Kosovo. The Slovak Foreign Minister has been confirmed as special UN envoy to the

Balkans. The “Bratislava Process”, an initiative aimed at strengthening relations between

the international Community and the pro-democratic forces in the Former Republic of

Yugoslavia (FRY) held its fifth meeting in Bratislava in July.

Slovakia improved further its relations with neighbouring central European partners both

at multilateral and bilateral level. In May 2000 the Slovak and the Czech governments

settled the issue of division of former Czechoslovak Federation property. The agreement

provided for the Czech Republic to return 4.5 metric tons of gold that it kept as lien for a

25.8 billion crown debt that Slovakia did not acknowledge. The Czech Republic was

compensated by the exchange of shares of the Slovak Bank VÚB and the Czech

Komerční Banka (KB). The implementation of the basic treaty with Hungary has

continued through the functioning of several working groups. Discussions with Hungary

on the Gabcikovo-Nagymaros dam are underway, and kept at a technical level.

After contributing to the revival of the Visegrad group in 1998 and 1999, Slovakia has

continued to participate actively in this framework. In 2000, more than fourteen high-

level meetings took place to discuss common issues ranging from defence to transport,

justice and home affairs, environment and culture. In June 2000 the four governments

agreed to set up a Visegrad Fund aimed at promoting co-operation in the fields of culture,

education and youth, sports and cross-border co-operation. The Secretariat of the Fund is

based in Bratislava.

CFSP issues are handled by the Division of European Integration within the Ministry of

Foreign Affairs. A European Correspondent co-ordinates CSFP issues within the

Department of Political Relations with the EU. In 1999 a new coded communication

system was implemented at the Ministry and at the Mission of the Slovak Republic to the

EC, allowing easier access to communication, démarches and other CFSP instruments,

and facilitating contacts with the Council Secretariat and associated countries.

Overall assessment

Since the beginning of the political dialogue with the EU, Slovakia has reached

significant alignment with the EU statements and other CFSP instruments.

Slovakia has also shown active support for and co-operation goodwill with the EU in the

Balkan region.

The Slovak republic’s relations with its neighbours have shown a further improvement

since last year, especially in the frame of the Visegrad group. For Slovakia, co-operation

with its Visegrad partners represents an increasingly valuable source of political support

and technical know-how on its way to accession to the EU.

Regarding arms exports, Slovakia has adhered to the EU Code of Conduct on Arms

Exports, but there is concern that Slovakia needs to make more effort to ensure respect

for sanctions and weapons exports to conflict zones.

Slovakia has in place all the necessary administrative capacity to handle CFSP, and

participation in the Associated Correspondents’ Network has so far operated smoothly.

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Chapter 28: Financial control

During the period covered by this regular report, only limited progress has been made in

this area.

The 1999 Accession Partnership includes the completion of the legislative framework for

internal and external financial control as a short-term priority.

Little progress has been made by Slovakia regarding its

Public Internal Financial

Control system (PIFC),

which continues to need substantial improvement. A Concept

Paper on further developments and strengthening of PIFC has been prepared. This Paper

will be the basis for the development of primary and secondary legislation on the issue of

PIFC. Slovakia has also approved a strategy for the setting up of a State Treasury system

in view of providing for an efficient management of public finance and has adopted new

legislation in areas closely related to public financial control, such as public procurement

and accounting. However, these measures do not sufficiently address the key pending

issues.

As regards

external financial control

(external audit), some limited alignment has been

achieved through the adoption by the Slovak Parliament of an amendment to the Act on

Auditors and the Slovak Chamber of Auditors. In January 2000 the Supreme Audit

Office prepared and issued a Code of Ethics for its auditors based on the Code adopted by

INTOSAI at the 1998 World Congress in Uruguay.

In relation to the

control measures relating to Own Resources,

the Slovak customs and

tax administrations are in the process of reform in order to enhance their operational and

administrative capacity. This involves in particular the completion of the computerisation

process, the strengthening of human resources, and the improvement of internal

organisation.

Regarding

control of structural action expenditure,

the Slovak Parliament has adopted

new legislation which creates the legislative framework for the reception and

administration of support funds provided by the European Community. This legislation

(amendment to an existing law) stipulates precedence of international agreements over

Slovak legislation, and sets forth the rules for the accounting of funds received from the

EC, as well as the purpose for which such funds can be used and the manner in which

they can be disbursed.

In the field of

protection of EC financial interests,

the Slovak Criminal Law has been

amended in order to define the concept of indirect corruption, to specify penal sanctions

for bribery and to determine the conduct of special agents in charge to fight corruption.

Overall assessment

Little progress has been achieved by Slovakia in this area to date. Slovak efforts need

therefore to be substantially enhanced, in particular, through the development of the

necessary public internal financial control functions.

Slovakia needs to urgently establish the basis on which a sound financial control system

could be built up, and start its implementation. It also needs to strengthen the functional

independence of internal auditors and controllers. The administrative structures for

effective internal financial control must be improved and an audit trail relating to the pre-

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accession funds has to be developed. Efficient systems for fighting irregularities, fraud

and corruption, and for recovering those public funds not used in conformity with the

rules governing their use, should also be developed. The independence of the Supreme

Audit Office needs to be reinforced and its overall operational capacity enhanced.

In relation to the control of future EC Own Resources, Slovakia should continue its

efforts to set up effective instruments to combat fraud relating to VAT and customs

duties.

In the field on structural actions expenditure, efforts need to be made in order to enhance

Slovakia’s capacity for the management of pre-accession funding and future structural

funds, in particular through the establishment of clear public internal financial control

rules and procedures, and a substantial reinforcement of the Slovak administrative

capacity. The development of mechanisms for the expedient recovery of lost EC funds is

equally important.

With a view to ensuring adequate protection of EC financial interests, Slovakia needs to

put in place the necessary legislation to allow the competent EC bodies to carry out on-

the-spot checks and to develop adequate administrative capacity to implement the

acquis,

including the ability of the Slovak law enforcement bodies and judiciary to address cases

where EC financial interests are at stake. Slovakia should nominate as soon as possible a

single contact point for the relations and co-operation with the bodies competent for the

protection of the EC financial interests, in particular with OLAF.

Chapter 29: Financial and budgetary provisions

Slovakia has made some progress over the reporting period, in particular as regards

the

national budget and EC co-financed measures.

In December 1999 amendments to the

Act on Budgetary Rules clarified some of the provisions of this Act and introduced some

of the basic functions of a State Treasury. In June 2000, the Government adopted a

‘Strategy for the establishment of a State Treasury System’ which aims, inter alia, at

ensuring a comprehensive management of public finances, including funds provided by

the EC.

An amendment to the Act on State Statistics in late 1999 brought Slovak practice closer

to the European System of Accounts (ESA 95) norms, although for the statistical

calculations of the GNP resource some inconsistencies remain. Otherwise little progress

can be reported as

regards own resources and administrative infrastructure.

Overall assessment

Whilst Slovakia has made some progress in this area, further efforts will be required.

Although basic budgetary rules are broadly satisfactory, further amendments will be

necessary to ensure budgetary principles and rules are brought into line with those

standards generally applicable in the Community. In the interest of transparency the

number of extra-budgetary funds should be further reduced. Procedures for multi-year

budgeting should be put in place, in parallel with the development of macro-economic

forecasting and a medium-term budget strategy. The procedures for selecting, monitoring

and evaluating public investments and expenditure programmes need to be strengthened

in order to improve the process of allocation of resources. To this end, the corresponding

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analytical capacity should also be increased in the Ministry of Finance and the spending

Departments.

The work in progress for defining and implementing the operating procedures for the

management of EC pre-accession funds, through the National Fund, should be continued.

As regards the Community’s Own Resources, there is currently no provision in Slovak

law with regard to the levies on trading in and warehousing of sugar. Further alignment

for the calculation of the VAT and GNP resources is also necessary. In addition to the

need for central coordination for the proper collection, monitoring and payment of funds

to and from the EC budget, administrative capacity should be strengthened in the context

of the relevant policy areas described elsewhere in this report such as Agriculture,

Customs, and Regional Policy.

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.

So far, in Slovakia approximately 35,000 pages of the Official Journal have been

translated, of which more than 5,000 have been revised. To ease some of the remaining

workload of translation, Slovakia has decided to give legal validity to texts translated into

Czech in the field of standardisation.

Further efforts are required in this area.

3.3.

General evaluation

Slovakia has continued to make significant progress in legislative alignment with the

acquis,

thus furthering its ability to assume the obligations of membership. However,

progress has not been uniform across chapters. As already indicated in last year's Regular

Report, a number of areas continue to lag behind, such as company law, agriculture,

transport, regional policy and co-ordination of structural instruments, the environment

and financial control. Also, progress is generally more noticeable in legislative

developments than in the strengthening of the institutions responsible for implementation

and enforcement. These weaknesses need to be remedied. Appropriate resources should

be allocated for this purpose.

Concerning

internal market legislation,

noticeable progress has been achieved in public

procurement, financial services and capital movements and in preparing a basis for full

alignment in the New Approach area, including standardisation. Little progress has been

achieved as regards free movement of persons, as a general framework for the

recognition of foreign professional qualifications has not been established. Apart from

continuing alignment, a particular challenge is now to provide adequate capacity for the

implementation and enforcement of the

acquis.

company law,

there has been no

substantial progress in alignment with the partial exception of accounting law. Further

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sustained efforts are needed, in particular with regard to trademarks and patents as well as

the fight against piracy and counterfeiting. In competition policy legislative progress

means anti-trust rules are largely in line and the focus should now shift to their correct

application. Despite some progress in the state aids area further legislative steps are

required and the newly created State Aid Monitoring Authority should be strengthened.

Tangible progress has also been reached in the area of

statistics

and efforts should be

maintained, especially concerning macro-economic statistics and harmonisation of

regional statistics. Substantial progress has been achieved in the

industrial policy

sector

through continuing privatisation and restructuring. Particular attention needs to be paid to

the respect of EC state-aid rules. Significant progress, notably in terms of legislation, has

also been made in the

telecommunication

and

audiovisual

sector. The emphasis must

now turn in particular to strengthening administrative capacity. Whilst Slovakia has also

advanced well in the field of

consumer and health protection,

both as regards safety

related measures and non-safety consumer protection, some further alignment is required

and adequate co-ordination and strengthening of those bodies involved in market

surveillance activities needs to be ensured.

In the case of

co-operation in the field of justice and home affairs,

significant progress

has been achieved mainly in aligning visa policy and asylum legislation. However,

considerable progress in all relevant

acquis

areas is needed, with a particular emphasis on

migration, border control and fight against crime.

Only limited progress has been achieved in the

agricultural sector,

where efforts have

focused on preparations for the SAPARD programme. Despite the progress achieved in

the recent years, there is a need for accelerated alignment and implementation with

particular emphasis on establishing an Integrated Administration and Control System, on

adopting specific market regulations and continuing implementing veterinary and

phytosanitary legislation. In the field of

transport,

limited alignment has been achieved in

the area of road transport and inland waterways. However, most of the transport areas,

notably rail and road transport, still require substantial alignment efforts and the

strengthening of relevant administrative structures. Some limited progress has been made

in the

energy

sector and in the field of

regional policy and co-ordination of structural

instruments;

Slovakia needs still to enhance its alignment effort and to reinforce its

administrative capacity in these sectors. Limited progress has been made in the field of

environment,

where substantial efforts remain necessary as regards legislative alignment,

investments and implementation/enforcement capacity. Concerning customs, Slovakia

had already achieved a considerable degree of legislative alignment, but it has not made

significant progress during the period. Further efforts are still necessary to complete the

legislative framework and to ensure proper implementation of the customs-related

acquis.

Little progress can be reported in the area of

financial control,

where Slovakia needs to

make substantial progress, notably by developing the necessary public internal financial

control functions.

As regards

administrative capacity

in general, Slovakia has made little progress, with a

few exceptions, in strengthening the relevant institutions. Delays in the adoption of the

public administration reform and in the civil service law further contribute to this general

weakness.

The fulfilment of the short term priorities varies in a broad range from sector to sector.

As regards the internal market, Slovakia has met the relevant priorities to a large extent.

Whereas in the area of social policy and employment, energy and co-operation in the

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field of justice and home affairs the short term priorities have been partially met, they

have been fulfilled only to a limited extent in the case of agriculture. Concerning

environment and reinforcement of administrative and judicial capacity, the short term

priorities have essentially not been met.

Slovakia has taken some initial steps to start addressing a number of medium-term

priorities.

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C. Conclusion