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Europaudvalget 2000-01
EUU Alm.del Bilag 243
Offentligt

FROM THE COMMISSION

SLOVENIA’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 Slovenia ................................. 7

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

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

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

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

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

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

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

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

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

1.1. Democracy and the Rule of Law ................................................................. 13

The Parliament .......................................................................................................... 13

The Executive............................................................................................................ 14

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

Anti-corruption measures .......................................................................................... 16

1.2. Human rights and the protection of minorities.......................................... 16

Civil and political rights ............................................................................................ 16

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

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

1.3. General evaluation ........................................................................................ 19

2. Economic criteria................................................................................. 20

2.1. Introduction................................................................................................... 20

2.2. Economic developments ............................................................................... 20

2.3. Assessment in terms of the Copenhagen criteria ....................................... 22

The existence of a functioning market economy....................................................... 22

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

Union ......................................................................................................................... 26

2.4. General evaluation ........................................................................................ 28

3. Ability to assume the obligations of membership............................. 29

Introduction ............................................................................................................... 29

3.1. The chapters of the

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

Chapter 1: Free movement of goods ............................................................. 30

Overall assessment .................................................................................................... 33

Chapter 2: Free movement of persons .......................................................... 35

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

Chapter 3: Freedom to provide services........................................................ 36

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

Chapter 4: Free movement of capital............................................................ 38

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

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

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

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

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

Chapter 7: Agriculture................................................................................... 42

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

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

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

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

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

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

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

Chapter 11: Economic and monetary union................................................. 52

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

Chapter 12: Statistics ..................................................................................... 52

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

Chapter 13: Social policy and employment................................................... 53

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

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 .................................................................................................... 59

Chapter 17: Science and research................................................................. 60

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

Chapter 18: Education and training ............................................................. 60

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

Chapter 19: Telecommunications and information technologies................ 61

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

Chapter 20: Culture and audio-visual policy................................................ 62

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

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

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

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

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

Chapter 23: Consumers and health protection............................................. 67

Overall Assessment ................................................................................................... 68

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

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

Chapter 25: Customs union........................................................................... 72

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

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Chapter 26: External relations ...................................................................... 73

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

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 .........................83

1. Accession Partnership ......................................................................... 83

Short-term priorities .................................................................................................. 83

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

2. National Programme for the Adoption of the

Acquis

...................... 88

Annexes..........................................................................................90

Human Rights Conventions ratified by the Candidate Countries, September

2000 ......................................................................................................... 91

Statistical data ................................................................................................ 93

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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 Slovenia 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 Slovenia’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 Slovenia’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 Slovenia in translating the

acquis

into its official

language.

In line with previous regular reports, the present report:

describes the relations between Slovenia 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 Slovenia’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);

addresses the question of Slovenia’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

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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 Slovenia in preparing for accession.

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

acquis

criteria (including Slovenia’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 Slovenia’s economic

performance.

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

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

For the European Parliament the

rapporteur

is Claudio Martelli.

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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 Slovenia

Recent developments under the Association Agreement (including bilateral

trade)

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

the smooth functioning of the various joint institutions.

The second meeting of the Association Committee took place in Brussels in April 2000

and the second meeting of the Association Council was in Luxembourg in June 2000.

The system of subcommittees continued to function as a forum for technical discussions.

All together, eight subcommittee meetings took place between October 1999 and July

2000.

The fourth session of the Joint Parliamentary Committee between the Slovenian National

Assembly and the European Parliament took place in March 2000 in Brussels. The fifth

session was held in July 2000 in Ljubljana.

In 1999, EC exports to Slovenia amounted to

€

6.7 billion and Slovenian exports to the

EC to

€

5.2 billion. Slovenia thus had a trade deficit of

€

1.5 billion with the EC. This

represents a decrease of 0.6% in both EC imports and exports as compared to 1998. In

1999, the EC accounted for 66 % of total Slovenian exports, and for 69 % of total

Slovenian imports. Slovenia’s exports to the EC consisted mainly of machinery and

electrical equipment (23% of the total), transport equipment (18% of the total) and base

metals (12% of the total). The EC’s exports to Slovenia consisted mainly of machinery

and electrical equipment (26% of the total), transport equipment (16% of the total) and

base metals (11% of total).

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 reaching a fair equilibrium between the

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

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

of the CAP.

The negotiations with Slovenia were concluded between negotiators in May 2000. As a

consequence, approximately 73% of EC imports and 17% of EC exports of agricultural

products will be liberalised. However, no agreement could be reached on reciprocal

concessions under the “double zero” approach (reciprocal elimination of export refunds

as well as elimination of import tariffs within the framework of tariff quotas for certain

sectors). The regime entered into force on 1 July 2000 on an autonomous basis, pending

the conclusion of an Additional Protocol to the Europe Agreement.

Negotiations in the field of processed agricultural products were concluded on a technical

level in October 1999. The provisions will enter into force once the necessary procedures

have been finalised. The negotiations on an agreement on wine and spirits were

concluded in September 2000.

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Slovenia has not yet started negotiations to conclude a PECA (Protocol on European

Conformity Assessment) but is at an advanced stage of preparatory talks.

There are no anti-dumping measures in force against imports from Slovenia.

Accession Partnership / National Programme for the Adoption of the Acquis

The implementation of the revised Accession Partnership adopted in December 1999

continued. Its implementation is reviewed in chapter D of this Report.

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

Acquis

(NPAA), in which it outlines a revised strategy for accession including how to

achieve the priorities contained in the Accession Partnership (see Chapter D).

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;

ISPA,

which finances infrastructure projects in the

fields of environment and transport; and

SAPARD

which provides aid for agriculture and

rural development. 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 the basic total financial assistance to Slovenia will amount

annually to

€

25 million from Phare,

€

6.4 million from SAPARD and

€

10.8-21.7

million from ISPA.

The

Phare

programme has been providing support to the countries of Central Europe

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

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

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

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

building, investment to strengthen the regulatory infrastructure needed to ensure

compliance with the

acquis

and investment in economic and social cohesion. This

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

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

acquis

and

strengthen or create institutions necessary for implementing and enforcing the

acquis.

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

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

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

Around 30% of the Phare allocation is used for “institution building” and the remaining

70% is used for financing investments.

The Phare programme allocated Slovenia with commitments of

€

192 million during the

period 1992-1999 and

€

25 million

in 2000.

The 2000 Phare Programme for Slovenia consists of an allocation of

€19

million

for the

National Programme, concentrated on the following priorities:

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•

strengthening of the administrative and institutional capacity in the field of

liberalisation and regulation of the energy market, including trade in electricity (€ 0.5

million);

preparation of labour market indicators and alignment of statistics in the areas of

regional agriculture and the structure of earnings (€ 1.1 million);

implementation of new laws in the area of freedom of movement of goods (€ 2

million);

support for economic and social cohesion in the areas of SME investments and job

creation in the regions of Pomurje, Savinska and Zasavje (€ 5 million);

improving security on the future external border and drugs (€ 6.1 million, with a

further

€

1 million from a special Drugs Programme), and

participation in various Community Programmes (€ 3.3 million). A further

€

4.4

million is proposed from outside the National Programme.

•

A Supplementary Investment Facility is also being implemented though the National

Programme. The Phare contribution is

€

2.6 million towards a Waste Water Treatment

Plant in Slovenska Bistrica.

An indicative amount of

€

7 million a year for the three years 2000-2002 has been

allocated for cross-border co-operation programmes with neighbouring countries from

within the Phare Programme for Slovenia. There will be a Phare contribution of

€

million to a programme with Austria for the years 2000-2001 which will be decided on in

2000. There will be a similar contribution of

€

5 million to a programme with Italy for

the same period.

€

2 million is the Phare contribution to a programme on the border with

Hungary foreseen in 2000.

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

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

Furthermore, in the year 2000 Slovenia is participating in the following Community

programmes: Socrates, Leonardo da Vinci, Youth for Europe, 5

Framework Programme

for R&D, Third Multi-Annual Programme for SMEs, Health Promotion, Combating

Cancer, Aids Prevention, Drug Dependence, Equal Opportunities and Fiscalis. In

addition, Slovenia has expressed its interest to participate in the Culture 2000

programme.

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

the Agency.

Phare has played a particularly important role in:

•

The energy sector, where Phare co-financed with the Slovenian Government an

Energy Saving Fund Scheme (ESF) which was channelled through a commercial

bank selected by public tender and contributing commercial money to the scheme.

Blending zero interest rate Phare funds with commercial money and subsidising the

interest rate using Slovenian funds, the ESF has been able to offer loans at attractive

rates for investments in energy efficiency measures. To date, the ESF has provided 22

loans to industries and municipalities for a total amount of

€

6 Million. Each loan

consists of 17% Phare funds and the rest is commercial money. The Phare

contribution was

€

2 million.

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•

The trade sector, where Phare assistance contributed to the strengthening of the Trade

and Investment Promotion Office (TIPO) which is supporting Slovenian exporters

and promoting Slovenia with foreign investors. As for Foreign Direct Investment

(FDI), marketing activities have been carried out in four EU countries. The activities

resulted in at least one case of FDI worth

€

50 million that generated 500 new jobs.

Since February 2000 the Government has taken steps to support FDI, including the

introduction of an ‘’Investment Co-sharing Grant Scheme’’, which provides for the

sharing of costs under an eligible investment project. The scheme was effectively

reviewed with the help of the Phare project. There was co-financing of

€

500,000.

The social sector, where Phare assistance of

€

700,000 contributed (among other

things) to preparing the Slovenian partners for future participation in the European

Social Fund and to an active employment policy. Phare provided support for local

employment initiative projects with the establishment of an effective financial

infrastructure and assistance in the elaboration of the national strategy. Five

integrated development plans for 5 regions were created, and a fully equipped

Information Research Resources Centre with fully trained staff was established in

Celje. Seventy different projects had been facilitated in the regions and a total of 6

partnership programmes had been established by the end of the project.

•

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-

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.

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

specialised equipment and financial resources has taken place in a number of important

fields such as industrial restructuring and bank privatisation, SME development, trade

and investment promotion, energy, etc. Phare support for the environment and SME

development has succeeded in developing sector strategies and initiating essential

institutional and financial mechanisms serving enterprises in these sectors.

Nonetheless, the

programming process and individual project development

requires

further work in Slovenia if quality is to reach the level required for effective use of the

Structural Funds after accession. This is particularly the case for projects in the area of

Economic and Social Cohesion and Cross Border Co-operation. Given this weakness, it

is disappointing that

€1.7

million remains to be contracted from the Special Preparatory

Programme for the Structural Funds approved in 1998 and that nothing has been

contracted under the

€2

million Project Preparation Facility approved in 1999. However,

this is the key to future programming.

The Slovenian Rural Development Plan, which provides the basis for the use of

SAPARD

pre-accession aid, got a favourable opinion in the STAR Committee (EC

Management Committee on agricultural structures and rural development) in September

2000. The plan is in the process of being adopted by the Commission.

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The plan is based on two major priorities: improvement of production and marketing

structures in agriculture and food processing (75% of the EC funds) and economic

diversification and improvement of rural infrastructure (24% of EC funds).

The average annual public expenditure will amount to

€

9.9 million during the period

2000-2006, of which

€

6.4 million (at 2000 prices) represents the Community

contribution.

The Agency of the Republic of Slovenia for Agricultural Markets and Rural

Development has been established and has been accredited as the SAPARD Agency by

the relevant national authorities in October 2000. The accreditation will need to be

reviewed and approved by the Commission.

Concerning

ISPA,

in October 1999 Slovenia submitted to the Commission the strategies

for the Environment and Transport for 2000-2006. A revised version of the

Environmental strategy was submitted. Two project proposals for financing in 2000 have

been adopted by the Commission. One project concerns the modernisation of certain

railway sections and the other technical assistance. The annual allocation foreseen lies

between

€10.8

and

€21.7

million.

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

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

of the overall financial management and an implementing agency responsible for the

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

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

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

accredited paying and implementing agency.

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 long-term secondment of civil servants and

accompanying short-term 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.

In the first and second rounds of twinning relating to projects decided on under the

National Programmes for 1997 and 1998 ten twinning projects were adopted. These are

in the areas of agriculture, finance, and justice and home affairs, a wider field including a

project on health and safety at work and equal opportunities and support for

strengthening of labour market organisations. In 1999 a further fourteen projects

approved under the National Programme were proposed for twinning. There are some

new fields of activity in addition to those already mentioned: internal market, financial

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control, external audit and public expenditure management, real estate management,

crime prevention, telecommunications and state aids. In 2000 seven twinning projects

were foreseen for implementation of the Phare National Programme including the areas

of Economic and Social Cohesion, liberalisation and regulation of the Energy Market,

Statistics and Drugs.

Statistics show that a considerable range of Member States are involved. The Member

States' involvement in twinning allows Slovenia to benefit from the variety of

administrative models and cultures in the European Union.

Negotiations / screening

The analytical examination of the

acquis

(screening) for Slovenia started in April 1998

and concluded in Autumn 1999 with the examination of the agricultural chapter. An

updated screening exercise started in February 2000 to cover the new

acquis

up to

January 1 2000.

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

in four rounds of ministerial negotiations. As a result of these negotiations, 12 chapters

have been provisionally closed (company law, fisheries, EMU, statistics, industry policy,

SMEs, science and research, education and training, telecommunications and IT,

consumer and health protection, CFSP, financial control), while negotiations continue for

the remaining chapters.

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B. Criteria for membership

1. Political criteria

Introduction

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

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

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

and respect for and protection of minorities.”

In its 1999 Regular Report on Slovenia, the Commission concluded that:

“ Slovenia fulfils the Copenhagen political criteria. Two areas which still need attention

are the streamlining and speeding up of the judicial and parliamentary processes.”

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

implement the

acquis,

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

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

acquis

in the field

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

24 –

Cooperation in the field of justice and home affairs)

of part

B.3.1.

of this report.

Recent developments

The centrist coalition government, which had been in power since February 1997, lost a

vote of confidence in the Parliament in April 2000. The Coalition fell as one of the three

parties in it left the government in order to merge with another party.

A new coalition government holding 44 of the 90 seats in the parliament was approved

by the Parliament on June 7. European issues and EU membership were identified as one

of the main priorities of the government.

New parliamentary elections took place on October 15. The previous elections were held

in 1996 and according to the Constitution, elections have to be held every four years. The

centre-left Liberal Democratic Party emerged as the largest party in the Parliament,

however, the composition of the new government was not known at the time of issuing of

this report.

1.1.

Democracy and the Rule of Law

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

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

significant developments of the past year.

The Parliament

Although the parliament continued to operate smoothly during the past year, the

legislative process is still slow and no progress has been made in streamlining the

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parliamentary process. Every law still needs three ‘readings’ in the Parliament and draft

legislative proposals are dealt with by the parliament in the order of their arrival. This

ensures that all political forces in the parliament can provide input into the legislative

drafting process, but it can also lead to delays in handling the government’s proposals.

However, EU-related laws continue to be treated with priority in the parliament and

extraordinary sessions have been introduced to speed up their adoption. Most of them

were adopted by accelerated procedure (ie three readings are held within one or a few

days).

Due to difficulties in obtaining a 2/3 majority, no progress was made in the adoption of a

new Parliament Standing Order, which would provide a new parliamentary procedure and

shorten the current three-reading procedure. In addition, an attempt to change the current

standing order by limiting the speaking time of parliamentarians failed to obtain the

required 2/3 majority.

In July the Parliament decided by 2/3 majority to confirm the present proportional

electoral system, to increase the threshold from 3% to 4%, to suspend national election

lists and to include these provisions into the Constitution. The Parliament’s decision to

change the Constitution is intended to conclude a controversial debate on the voting

system dating back to a referendum held on the subject in 1996, the result of which was

disputed.

The process of appointment of the new government in May / June this year revealed that

the rules of the Parliament and the Constitution contained a number of unclear

provisions, allowing different legal interpretations. In May 2000, the Parliament amended

the rules for the appointment of government by changing a secret ballot on the list of

ministerial candidates into an open one. The draft Law on Government, submitted to the

Parliament in August, and related draft amendments to the Constitution, foresee the

simplification of the procedures for appointment of a government.

The Executive

The 1999 Regular Report drew attention to the need for convincing progress on overall

public administration reform. This – including the introduction of a civil service law -has

also been identified as a short-term priority in the Accession Partnership. Only limited

progress has been made in this regard since the last Regular Report.

The draft Law on Public Agencies and the draft Law on Government were submitted to

the parliament in August 2000, but remain to be adopted. The Law on Civil Servants, for

its part, has not yet been submitted to the parliamentary procedure. Serious efforts are

required, as a matter of priority, to ensure that this crucial framework legislation is put in

place, as a prerequisite for a professional, impartial, efficient and effective civil service.

Some progress in public administration reform has been registered, through the adoption

of the Law on General Administrative Procedures in September 1999. It defines

inter alia

the applicable procedures and the competences of the state and local self-governing

organs. However, according to the Slovenian Ombudsman, despite this new law no

progress has so far been made in better defining and protecting the rights, benefits and

obligations of the individual in relation to the public administration. An amendment to

the law aiming at improving the protection of individual and social rights was adopted in

July. Remaining problems include the implementation of administrative supervision and

the long processing times.

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The Directorate for Organisation and Development of the Administration within the

Ministry of the Interior is responsible for public administrative reform in Slovenia. It has

a staff of four people. The Ministry also has an Academy for Administration offering

training to civil servants with a staff of 26 people and over 100 non-resident lecturers. A

government training strategy for public administration was adopted in August 2000. Its

aim is to improve the capacity of the Slovenian administration to implement the

acquis

through training on EU related issues.

The whole public administration comprises approx. 18,000 staff of which 3,200 are in the

decentralised administrative units of the government. The government Employment

Programme and the revised NPAA indicate a need for further recruitment. There is no

regional level of administration in Slovenia, as establishment of regions can, according to

the Constitution, take place only on the basis of voluntary initiative by municipalities.

Municipal elections were held in Koper on 5 December 1999, one year after municipal

elections elsewhere in Slovenia. The delay resulted from a Constitutional Court decision

in 1998 ruling that the Koper municipality had to be divided into two because of its

mixed urban and rural character. The Parliament still needs to pass a law to reshape the

municipality according to the Constitutional Court’s ruling.

The judicial system

The excessive duration of court procedures continues to be a problem in Slovenia.

However, some progress has been made with regard to judicial reform and in reducing

the backlog of pending court cases.

Since the previous Regular Report, the government and the Supreme Court have

introduced a range of measures to reduce the backlog of pending court cases. These

include efficiency-enhancement programmes involving the internal reorganisation of

courts, special solutions for group law suits, longer working hours, and special financial

incentives for increasing productivity of courts. Furthermore, through the Law amending

the Law on Courts – adopted in March 2000 – the possibility has been created to appoint

special "rotating judges" in districts to assist local courts in coping with increased

caseloads. The amended law also gives the presidents of courts greater powers in re-

organising courts and their working procedures, and requires them to produce a

programme for reducing the backlog of cases if this is very high. The Law amending the

General Offences Law – adopted in March 2000 – should equally contribute to

decreasing court delays, by introducing a system of minor offences with monetary

penalties and a system of warnings instead of prosecution.

Also, several government/ministerial decrees concerning the number of personnel in

courts, an increase in the salaries within judicial organs, and the work of independent

judicial officers have been adopted. 50 independent judicial officers (or bailiffs) have

been appointed by the Ministry of Justice and have started their work on implementing

court rulings on civil matters.

While it is still early to fully assess the effectiveness of these measures, the number of

pending court cases has now started to decrease. The 1999 Regular Report noted that

there were 566,000 pending court cases in June 1999. In June 2000, government figures

put the number at 536,477 (158,967 land registry cases, 185,955 cases related to

execution of court verdicts, and 191,555 other cases). According to the Supreme Court,

the real backlog of cases older than one year amounts to 100,410.

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Nonetheless, in a few courts a significant problem of backlogs persisted. Also, the

duration of the judicial procedure in criminal cases did not show significant changes in

1999 as compared with the previous year. 50% of the cases take more than a year. The

judicial procedure for 26% of the civil cases takes more than three years.

The Law on the Enforcement of Penal Sanctions was adopted in February 2000. The law

regulates the principles of enforcing sanctions issued by courts in penal procedures. The

law also guarantees basic rights to convicts.

As regards the training of judges, the Judiciary Training centre, established in 1997,

provides training in European Law.

There were 167,429 pending land register cases in July. The number has increased this

year as a result of legislative changes that have triggered an increase in applications for

land registry entries. A computerised land register was set up in January 2000 and

computerisation should be finished by 2004. As a result, the waiting period for

registrations will be reduced significantly.

Anti-corruption measures

According to the available statistics and reports, problems of corruption are relatively

limited in Slovenia.

In 1999 the government set up a legal framework for anti-corruption measures, although

no specific anti-corruption programme has been adopted. Specific bodies to fight

corruption have been created, including special anti-corruption units in the police, an

Organised Crime Section in the Ministry of the Interior and a group of public prosecutors

for special assignments.

Slovenia ratified the Council of Europe Criminal Law Convention on Corruption in

February. The Convention on Laundering, Search, Seizure and Confiscation of the

Proceeds from Crime had already been ratified in 1998. The OECD Convention on

Bribery and the Council of Europe Civil Law Convention on Corruption are still in the

ratification process (see also

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

affairs).

1.2.

Human rights and the protection of minorities

As mentioned in the previous Regular Reports, Slovenia continues to respect human

rights and freedoms. The following section concentrates on major developments since the

previous Regular Report.

Slovenia has already ratified the major international human rights instruments (see

annex).

Civil and political rights

The Ombudsman for Human Rights continued to carry out his work effectively and

remains an important institution for safeguarding human rights. The number of

complaints to the Ombudsman remained at the same level as the previous year (about

3,400). As before, the majority of cases concern the length of court and police

proceedings (28%) as well as administrative issues (19%). The Ombudsman identifies the

implementation of the Denationalisation Act as a particular problem.

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As set out in the 1999 Regular Report, the process of

denationalisation

(the process of

returning property to persons dispossessed by the Communist regime) remains very slow

and limited progress has been achieved over the past year. The process of

denationalisation is based on the Denationalisation Act of 1991. The Ministry of Justice

has been requested to establish binding interpretations of the law in order to speed up the

process and to ensure that there are no differences in this respect in the different parts of

the administration. The government also earmarked additional funds for speeding up the

administrative procedures in October 1999. The use of these funds started in June 2000.

By the end of April 2000, a decision had been made on 40% of claims on agricultural

land (the corresponding figure on June 30 1999 was 35%), on 60% of claims on forests

(56%), on 65% of claims on dwelling units (58%), on 69% of business premises (63%),

39% of building plots (36%), 56% of enterprises (51%) and 37% of movable property

(33%). These figures refer to the size of the property (in square metres) and only to the

decisions taken – not decisions implemented. The Slovenian Human Rights Ombudsman

has criticised the inadequate and vague legal provisions for denationalisation, the large

number of amendments to the law, the temporary suspension of the law in the mid 1990’s

(pending a revision ordered by the Constitutional Court), inconsistencies with other

newly adopted legislation, delays in the adoption of implementing legislation, and

insufficient administrative capacity of the relevant bodies. In 1999 a working group on

denationalisation was established, comprising representatives of the relevant ministries

and an organisation representing former owners of expropriated property (SAFOEP).

The law on regularisation of the

status of citizens of former Yugoslav republics

entered

into force in September 1999. Persons who have lived in Slovenia without interruption

and have no criminal record can obtain permanent residence. Over 13,000 applications

have been received and the procedure is foreseen to be finished by the end of 2000. So far

only 0,36% of applications have been rejected. The temporary refugee status of refugees

from Kosovo (totalling about 1,100 persons) expired in May this year and they were

given until the end of June to leave the country voluntarily. The UNHCR and NGOs have

expressed concern about the continued temporary protection status for persons from

Bosnia and Herzegovina, which some have had for a period up to eight years, and the

very limited number of approved asylum applications. The temporary status does not give

these people the right to work or to receive education.

The legal basis of

asylum

in Slovenia is the Law on Asylum adopted in July 1999, which

is considered to be in line with the

acquis.

Slovenia adopted a National Action Plan on

Asylum in April this year identifying several areas in which improvement should be

made ( for details see

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

Slovenia has made good progress in this area but should continue its efforts.

No serious violations of human rights and fundamental freedoms have been reported in

Slovenian

prisons

but they remain overcrowded. This has resulted in lack of privacy, and

degrading health, hygiene and treatment conditions. The law on the implementation of

penal sanctions was adopted in February this year. According to the Criminal Procedure

Act, the Human Rights Ombudsman may visit a detainee and correspond with him/her

without prior notice.

Amnesty International has expressed concern over an increase in

police brutality

in the

first half of this year – it is still investigating the issue. The Law on the Police gives the

police relatively wide powers, which have to be balanced by appropriate supervisory

mechanisms. A complaints procedure concerning individual complaints on possible

police abuses was introduced in April as foreseen in the Law on the Police.

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The societies act provides the legal framework for

NGOs

– however, there are no legal

provisions for their funding, or tax exemptions for charities.

Article 41 of the Constitution guarantees the Freedom of conscience and

rights of

religious communities

continue to be well protected.

There are no restrictions to

freedom of expression

(such as censorship) in Slovenia. The

media is pluralist and represents a variety of political opinions. Amendments to the law

on printed media concerning public financial support to small printed media covering

political issues are in parliamentary procedure. These will serve to support political

pluralism in printed media.

According to Annex XIII of the Europe Agreement, EU citizens have the

right to buy

property

in Slovenia if they have resided in Slovenia for three years. Since the entry into

force of the related provisions in early 1999, 53 applications have been submitted, and on

19 of these a decision has been made. Seven of the decisions were positive.

Economic, social and cultural rights

As regards

equal opportunities,

as indicated in last year’s Regular Report, the equality of

men and women is guaranteed by the Constitution, and a Women’s Policy Office is in

charge of issues related to equal opportunities. The UN has noted that the representation

of women in the most senior positions in the economy and politics remains modest. The

situation concerning the differences in pay is comparable to the rest of the EU. New

legislation has been adopted concerning equal treatment of men and women in

occupational social security schemes. Slovenia has signed the Optional Protocol to the

Convention on the Elimination of All Forms of Discrimination against Women.

The constitution guarantees

children’s rights.

The

rights of disabled

people are guaranteed in the Constitution and a Government

Office for the Disabled has been set up. The most protected category of the disabled is

the war victims, notwithstanding the fact that those disabled since birth are most

vulnerable. By international standards protection is average. Challenges include measures

to secure employment, and allocation of resources to the most needy. In March the

government adopted a National Social Assistance and Services Protection Programme

addressing some of these concerns.

Trade unions

continue to be active. They have been involved in the process of adopting

relevant legislation in the parliament and in decision-making on wage, labour and

pension policies. The government has also involved the trade unions in the debate on EU

accession. The right to strike is provided for in the legislation.

Slovenia ratified

the European Social Charter

in April 1999. The Council of Europe is

assisting Slovenia in starting the implementation of the Charter and in preparing its first

report.

Minority rights and the protection of minorities

Most of the international legislation in this field has been ratified. Minorities are

represented in the Government Commission for Nationalities / the Commission for the

Roma.

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The special status of the Roma community is guaranteed in the Constitution, which

foresees (Article 65) the adoption of a special law for protection of the Roma. Such a law

has not been adopted yet, but the rights of the Roma community are covered in various

sectoral laws, such as the Law on local self-government, the Law on local elections, and

the Law on organisation and financing of education. The government adopted a Special

Programme on Equal Opportunities of Employment for the Roma in May. The situation

of the Roma (6,500-7,000 people) is on the whole satisfactory, but there is a need for

policies promoting Roma socio-economic integration, especially in the areas of

employment and health. Sustained efforts are also required in the area of education. The

provisions in the law on local self-government that enable the political representation of

the Roma have not been realised fully. The main reason is that many Roma have not

registered and the total number of registered Roma therefore stays under the legislative

limit.

1.3.

General evaluation

Slovenia continues to fulfil the Copenhagen political criteria.

Progress has been made in judicial reform, which is a medium term priority in the

Accession Partnership. However, it is still too early to assess the effectiveness of the new

measures aimed at reducing the backlog of pending court cases.

Public administration reform is another area requiring attention. Little progress has been

achieved in this respect since the last Regular Report as important pieces of legislation

which are to provide the basis for reform have not yet been adopted. This area is a short-

term priority in the Accession Partnership.

The denationalisation process remains slow and further efforts are needed to speed it up.

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2. Economic criteria

2.1.

Introduction

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

concluded:

“Slovenia can be regarded as a functioning market economy"; it "should be able to cope

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

provided that rigidities in the economy are reduced”.

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

report, the Commission found that

"Slovenia can be regarded as a functioning market economy. It should be able to cope

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

provided that it continues to make further progress on structural reforms "

In examining the economic developments in Slovenia since the Opinion, the

Commission’s approach was guided by the conclusions of the European Council in

Copenhagen in June 1993, which stated that membership of the Union requires:

•

the existence of a functioning market economy;

•

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

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

Opinion, as well as in the previous regular reports.

2.2.

Economic developments

The macroeconomic situation in Slovenia has remained stable in 1999 and during the

first half of 2000.

GDP growth, fuelled by domestic demand and rapid export growth,

exceeded expectations. The increase in economic activity in the EU has contributed to

this development. Higher domestic demand, due to acceleration of investment and to

consumer spending in anticipation of the introduction of VAT, resulted in a deterioration

of the current account deficit to the highest level in a decade. The deficit is still relatively

modest, although the current low inflows of foreign direct investment raise an issue of its

medium term sustainability. Inflation remained under control in 1999, but high oil prices

and accelerated nominal depreciation, combined with widespread use of indexation, have

pushed up prices in early 2000. Fiscal performance remained sound in 1999 and the

introduction of the VAT reform was a success.

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Slovenia

Real GDP growth rate

Inflation rate

- annual average

- December-on-December

per cent

1996

3.5

1997

4.6

1998

3.8

1999

4.9

2000 latest

4.9 Jan-June

per cent

9.9

9.0

8.3

8.8

7.9

6.4

6.1

8.1

8.9

Sept

9.8 Sept

Unemployment rate, end-year

- ILO definition

General government budget

balance

Current account balance

per cent

7.3

7.4

7.9

7.6

7.2 April-June

per cent of GDP

0.3

-1.2

-0.8

-0.6

per cent of GDP

million

€

0.1

0.2

-0.0

-3

-2.9

-545

Foreign debt

- debt export ratio

- gross foreign debt

Foreign direct investment in flow

- balance of payments data

per cent

million

€

34.3

2,838

33.4

3,061

35.9

3,553

54.0 E

5,324 E

per cent of GDP

million

€

1.4

210

2.6

414

1.0

178

0.4

E = Estimates

Progress on structural reforms has been slow.

Only few of the enterprises transferred to the Slovene

Development Corporation have been divested. Two important laws on the insurance sector were adopted

in January 2000. They pave the way for ownership transformation in the sector and grant the right of

establishment to foreign companies. The privatisation process in the financial sector made only little

progress. Domination by two state-owned banks and little foreign competition continue to characterise

the sector. The lack of major privatisations has kept foreign direct investment inflows low in 1999 and

early 2000.

2 PROXY HICP since 1996 (see methodological notes)

3 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

1,986

14,964

per cent

million

€

per head

3.6

10.2

26.9

28.5

52.7

2,491

1,255

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.

There is a well-established political consensus on the need to pursue the agenda of

structural reforms in preparation for EU membership.

While this has allowed steady

progress on framework legislation, implementation has sometimes fallen behind. Delays

have occurred in such important fields as increasing competition in the banking sector,

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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liberalisation of the telecommunications sector, restructuring of enterprises in

economically depressed areas, and labour market reform. In some cases the reform

content has been watered down and needs further amendments to establish long term

budgetary balance. Pensions reform are one area where a deepening of the reform will

be necessary in due course. There is good co-ordination between policy departments,

and the economic agency plays an important role in the policy development process.

GDP growth of 4.9% in 1999 was higher than expected and has continued into 2000.

Growth was driven by investment, private consumption and - from early 2000 -

increasing exports. Apart from these factors, the strong growth figure may also be partly

linked to the replacement of sales taxes by VAT, which appears to have acted as an

incentive to register previously grey economy activities.

Total employment decreased slightly, while the average unemployment rate (ILO) fell

from 7.9% in 1998 to 7.6% in 1999.

However, its long-term unemployment component

increased to 63%. Persistent long-term unemployment particularly affects mid-aged

workers with few skills. There is at the same time a strong and partly unsatisfied

demand for young and highly educated staff with market-oriented skills. The

Government has formulated its strategic objectives for the labour market in the National

employment action plan for the years 2000 and 2001. The Employment Relationship

Act, submitted in 1997, is still under discussion in Parliament. When approved, it would

constitute a new framework for individual labour relations and remove some rigidities.

However, the problem of the high costs of dismissing workers is likely to remain

Inflation has recently accelerated.

CPI inflation increased from 6.4% at the end of 1998

to 8.1% in December 1999, and is now approaching double digits. Core inflation

remained stable at around 5% in 1999, not least due to an agreement between the social

partners which ensured that the introduction of VAT in 1999 did not immediately fuel

inflation through the indexation mechanism. However, core inflation increased in the

first half of 2000 due to indirect effects of high oil prices and increases of administered

prices working their way through the widespread indexation of wages and pensions.

Increasing inflation and deterioration of the current account led the Bank of Slovenia to

adjust its monetary policy.

While the 1999 monetary policy objective of the Bank of

Slovenia was to keep the expansion of broad money (M3) between 16% and 24%, in

order to accommodate growth without an increase in core inflation, M3 growth will be

restricted to between 12% and 18% in 2000. The real effective exchange rate (CPI

weighted) declined 2.3% in 1999, and an increased pace of nominal depreciation

characterised the first half of 2000. This could be linked to an attempt by the central

bank to reduce the current account deficit. However, the weakening of the currency also

generates additional inflationary pressures.

The lack of competition in financial markets has limited the efficiency of monetary

policy instruments.

It is, as a consequence, difficult for the Bank of Slovenia to

influence economic developments by setting short-term interest rates. In order to deal

with such shortcomings, a new agreement with the ‘Club of Banks’ was made in April

2000, with the aim of improving the efficiency of intervention on the foreign exchange

market. Such an agreement can clearly not be a long-term solution and there remains a

need to improve competition in all parts of the financial markets.

In 1999 the deficit was 0.6 % of GDP, confirming the downward trend from 0.8% in

1998 and 1.2% in 1997.

This result is due to a well-managed and careful fiscal policy

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throughout the transition period. In general, the budget is characterised by a high level

of non-discretionary expenditure. In combination with the high taxation level, this

leaves little flexibility for responding to external shocks. This is a reason for concern in

the light of the additional budgetary needs to prepare for EU accession (administrative

capacity, environment etc). A multi-annual approach to the budgetary framework is

being launched to respond to this concern. Public debt is still low at 24.6% of GDP (end

1999) but increasing. More than half is domestic debt. The low level of public debt has

so far kept debt servicing at a low level of only 1.4% of GDP. As a consequence, the

fiscal risk associated with the present level of public debt is low.

Pension reform has started with a new Law on Pension and Disability Insurance

adopted in December 1999, which came into force on 1 January 2000. The reform

represents a first step towards achieving long-term budgetary sustainability by

modifying the pay-as-you-go system. The compromise solution follows two years of

negotiations within the coalition and with social partners. The implementation will be

gradual and involves an increase in the average retirement age and a new - and less

generous - method for the adjustment of pensions. A supplementary second pillar

pension and disability insurance will also be established. While the aim is to contain

expenditures at the present level, a deepening of the reform will be needed to attain the

objective of long-term financial sustainability of the pension system. In 2000, the

Pension Fund deficit is expected to worsen to 0.9% of GDP.

The current account deficit increased to 2.9% of GDP

(€ 545 million) in 1999. In euro

terms, exports of goods decreased by 0.5% and imports rose by 4.1%. Imports rose as a

result of the strong demand for consumer goods in the first half of 1999 and stronger

demand for intermediate goods in the second half. The current account deficit had to be

almost fully financed by debt creating capital inflows as foreign direct investment

totalled only

€

38 million. If this situation is not improved, the effect on the debt stock

could be problematic in the medium term.

The state still has influence in a considerable number of enterprises.

The private sector

share in the economy is estimated at 57.1% (1998) of Gross Value Added. The Capital,

Health and Compensation Funds have non-controlling shareholdings in large segments

of the economy. A feature of ownership transfer in Slovenia was that a part of the shares

of transferred enterprises (often 10% or more) was given to the social funds to enable

them to meet future commitments. While this does not give the state a controlling stake

in enterprises, there is a risk of it influencing decision-making in private enterprises.

The Slovene Development Corporation has an increasingly unclear role as it maintains a

large number of enterprises in its portfolio with only slow progress in restructuring and

divestment. A new management team was appointed recently and it is planned to speed

up the divestment process in 2000 including offering assets to foreign investors.

The share of administered prices in CPI stabilised around 14% in 1999.

Due to a new

weighting of CPI the share decreased further to 13.7% in early 2000. The price controls

concern mainly energy, community services, public transport and basic communication

services, and some basic food items (milk). In April and September 2000, changes in the

model for setting prices for gasoline products established a more direct link between

changes in world market prices and Slovenian retail prices for petrol products, but price

formation continues to be under Government control. Pricing practices, which take

market developments into account, are being considered for other administered prices.

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The number of bankruptcies has been low.

Besides reluctance to let enterprises go

bankrupt, proceedings are hampered by the lack of administrative capacity in the court

system. Procedures in courts are lengthy with a sizeable backlog, and verdicts are not

always enforced. Some progress has however been achieved in 1999 due to productivity

increases in the courts. In Slovenia, the preferred approach to failing or loss-making

companies has been re-organisation or re-capitalisation. While this allows the

companies to survive in the short-run, it does not necessarily guarantee their long-term

economic viability.

The business climate can be improved.

The decrease of foreign direct investment in

1998 and 1999, which continued into 2000, serves as a clear warning about the need to

improve the general framework for investors and business. Transaction costs of setting

up business are high relative to the small size of the domestic market. Labour markets

are rather inflexible and unit labour costs higher than elsewhere in the region. The costs

of laying-off workers could be dissuasive under present rules and discourage investors

from expanding activities. Bureaucratic procedures for obtaining permits and difficulties

in buying land for construction have also deterred foreign investors. The continued

heavy involvement of the public sector in areas such as banking, insurance, utilities, and

health and the widespread use of management and employee buy-outs in the

privatisation process contribute to the perception of slow economic reforms. As a result,

foreign investors are reported to feel confronted with an ‘insider club', which in practice

creates a non-transparent business environment. A clear signal of the Government’s

commitment to withdrawing from its involvement in the economy and progressively

removing the remaining restrictions on foreign investment and capital flows would be

beneficial.

Restructuring of the banking sector has been slow.

The main development was the

transfer of 10% of the State's share in Nova Ljubljanska Banka and NKBM to the

Capital Fund and the Health Fund. The Government is preparing a strategy for

privatising these banks but is under some political pressure to recuperate the costs of the

rehabilitation, which was needed after the disintegration of the Socialist Federal

Republic of Yugoslavia. In early 2000, more than 40% of banking sector assets were

still directly controlled by the state. The capital adequacy ratio is on average 13.9%, but

lower in the state-owned banks. There has been some progress in implementing banking

supervision and a new law requires supervision of banks on a consolidated basis.

The insurance sector has remained more protected than the banking sector,

but the first

steps towards market liberalisation were made with two framework laws in January

2000. The first law in principle opens the market to foreign competition while the

second determines how to assess the value of the social capital. This is a precondition

for completing ownership transformation. There is still little foreign competition in the

sector and for this reason less pressure to improve efficiency. The implementation of the

law on ownership transformation is currently suspended as the legislation has been

brought before the constitutional court, causing a further delay to the much-needed

restructuring of the insurance sector. The Insurance Supervisory Agency has so far not

been given the budgetary and staffing resources it needs for properly fulfilling its

function, given the size and complexity of the insurance sector

Financial markets remain partially shielded from international competition by de facto

restrictions on certain types of short-term capital movements.

These have been kept out

for fear of the possible destabilisation of the financial system from massive capital

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movements of a speculative nature. In accordance with Slovenia's obligations in the

integration process with the EU, the restrictions have now been reduced. Further

restructuring and deepening of financial markets would be the appropriate and necessary

preparation for further liberalisation of capital movements and would provide a better

environment for the operation of monetary and exchange rate policies.

Slovenia can be regarded as a functioning market economy. Continued macroeconomic

stability, with fiscal and external balances under control, has provided the basis for

steady growth. Economic reform is well underway, but the state still has considerable

influence in certain areas of the economy. Progress in improving the economic climate,

combined with a full and timely completion of structural reforms and market

liberalisation, would help to attract more foreign investors and provide better conditions

for future growth. The relevant legal and institutional framework for a market economy

is largely in place but needs further implementation. Particular attention should now be

paid on reinvigorating the reform of the financial sector where the disengagement of the

state should be accelerated and competition encouraged. This would foster enterprise

development and improve market efficiency.

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

Union

As set out in Agenda 2000, Slovenia'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 EC Member

States provide evidence of this.

Slovenia is a functioning market economy.

Macroeconomic stability is ensured and

confirmed by a solid track record, with good fiscal control, low inflation, a sustainable

current account balance and low external debts. This creates the basic conditions for

coping with competitive pressures. The remaining challenge is to manage

macroeconomic policies in a more open environment.

The labour force is well educated, but there are substantial bottlenecks in the re-

allocation of labour

from traditional industries to activities with a higher technological

content. A well targeted effort in terms of ongoing education and training is necessary to

reduce parts of structural unemployment. The competitiveness of the Slovenian

economy has been sustained by a decreasing real effective exchange rate.

Slovenia has a well-developed infrastructure, which is continuously improved.

Investment rates have been steadily increasing in recent years and this is gradually

putting in place the conditions for greater efficiency. In 1999, the investment to GDP

ratio increased to about 27%, up from 25.5% the year before. However, low FDI inflows

are a source of concern. As FDI is an important vehicle for the transfer of technology

and modern management techniques, this problem should be addressed. A recent

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Government strategy for attracting FDI is a step in the right direction but has not yet

produced results. A sustained level of FDI will require a more transparent economy and

real competition in key sectors.

Restructuring of the enterprise sector is proceeding, but slowly.

The first phase of

ownership transformation is now being followed by a second phase where the privatised

enterprises invest in more rational production techniques and improve the quality of the

management in order to increase productivity. From May 1999 to May 2000 unit labour

costs decreased by 6.4%. In 1999, company profits more than tripled compared to 1998.

The situation is mainly improving for enterprises that are owned by individuals or

foreigners. In this group, investment is strong and there is a return to profitability,

increasing employment, and a rising contribution to exports. Within the larger group of

public enterprises and firms privatised through management-employee buy-outs, the

development is less encouraging. Profitability is low or negative, accompanied by a lack

of investment and a decrease in employment. This shows the limits of privatisation

methods that do not bring in new capital or new management experience.

The State continues to intervene in many sectors of the economy,

either directly as the

facto

owner of enterprises, financial institutions and utilities or indirectly through

special aid schemes. In 1999, the total volume of State subsidies was assessed at 3.5%

of GDP, almost three times higher than the level in the EC-15 with an upward trend

since 1996. While the Slovene Development Co-operation is formally independent, its

behaviour has been described as interventionist with cross- subsidisation taking place

between companies under its authority. Agricultural policy is characterised by subsidy

and price levels well above EC-15 levels in a number of production branches and is the

most protectionist in the region.

Trade integration with the EU remains at a high level.

Slovenia has actively redirected

its exports following the wars in the Balkans. Since the Russian crisis, trade with Russia

has come to an almost complete halt and is now less than 2% of total trade. A certain

return to historical trade patterns would be expected following more positive

developments in the region, especially in neighbouring Croatia. The economy of

Slovenia remains very open with the sum of imports and exports amounting to over

110% of GDP. In 1999, 66.1% of exports were destined for the EC markets, while

68.6% of imports originated in the EC. Export growth is mainly coming from firms with

foreign or individual owners. Cars and car parts are among the important export items.

SMEs are important in the economy

and account for 99.7% of companies (1998), 57.6%

of employment and 57.1% of revenues. They face difficulties accessing banking finance

as well as administrative barriers in obtaining permits and licences. The Government

has prepared a special "anti-bureaucracy programme" to reduce the administrative

obstacles

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

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

Union in the near term provided that it completes the remaining reforms that would

increase competition in the economy. To better prepare itself for this challenge, the role

of the state in the economy should be progressively reduced and more reliance put on

market forces by encouraging competition. In the short term, there is a need to

reinvigorate the reform of the financial sector and to accelerate enterprise restructuring.

Labour market flexibility should also be increased. The ability to attract foreign

investors would be an indication of the real progress in completing the reform agenda

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and of further integration in the EU economy. This would result in increasing

productivity and greater competitiveness.

2.4.

General evaluation

Slovenia 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 near term, provided

that it completes the remaining reforms that would increase competition in the economy.

Continued macroeconomic stability, with fiscal and external balances under control, has

provided the basis for steady growth. Some steps to assure the medium-term

sustainability of pension reform have been taken. The legal and institutional framework

for a market economy is largely in place.

However, implementation of this framework can be improved. Furthermore, the state

still has considerable influence in certain areas of the economy. In particular, the

continued dominance of the financial sector by state-owned banks holds back

development and competition. The slow progress on privatisation and rigid business

conditions are keeping foreign direct investment inflows at a low level.

Progress in improving the economic climate, combined with a full and timely

completion of privatisation, structural reforms and market liberalisation, would attract

more foreign investors and provide better conditions for sustained future growth. In the

short term, there is a need to reinvigorate the reform of the financial sector, where

competition needs to be encouraged, and to accelerate enterprise restructuring. Labour

market flexibility should also be increased. These measures would foster enterprise

development and improve market efficiency

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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 Slovenia’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 Slovenia’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 Slovenia’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 Slovenia 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 Slovenia’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 :

“Slovenia significantly accelerated its overall legislative approximation effort and

demonstrated impressive progress across most sectors of the

acquis.

Key parts of

internal market legislation have been adopted.

In the field of standards and

certification, this includes the adoption of framework legislation, sector specific

legislation and product liability legislation.

Data protection legislation has been

adopted. Important progress was made in capital liberalisation and the banking and

securities sectors which together with changes in the company law have removed many

of the restrictions on foreign companies doing business in Slovenia. The adoption of

laws on anti-trust and on VAT/excise are two further important steps in alignment with

the internal market

acquis.

Progress in alignment is also reflected in justice and home

A description of the

acquis

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

Slovenia’s application for EU membership.

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affairs where laws were passed on foreigners and asylum and measures taken to combat

organised crime and corruption. Efforts have been sustained in the employment and

social affairs area where the level of alignment to the

acquis

is already high. In

environment, laws were adopted in the fields of water, air, waste management and

nature protection and some progress was made in estimating costs and developing

financial plans for alignment. The Customs Law was amended, bringing Slovene

legislation and practice in this area further in line with that of the EC. Progress is being

made in the veterinary and plant health fields but the pace of alignment needs to pick up

as there is still a lot to do in the agricultural sector.

Slovenia still needs to put the legal framework for state aids is place. Attention needs to

be paid to completing alignment in the areas of free movement of persons, capital and

services. With regard to the latter, it is important that legislation on the insurance sector

be adopted. Efforts are still needed as well to align public procurement and intellectual

and industrial property laws. No progress has been made on aligning audio-visual

legislation. The areas of border control and drugs require continued attention.

Slovenia has made little progress in general public administration and judicial reform.

However, the sector legislation (standards and certification, justice and home affairs,

regional policy) which has been adopted recently provides for the establishment of many

of the necessary administrative structures. It is important that Slovenia now sets up these

institutions with adequate resources, including sufficient numbers of trained staff. Steps

have been taken to consolidate institutional capacity in the competition, employment

and social affairs, agriculture and customs areas. Continuing attention needs to be paid

to strengthening of the environment, taxation, state aids and justice and home affairs

administrations. Appropriate supervisory and regulatory authorities need to be

established for public procurement, energy and telecommunications.

Slovenia has met most of its short term Accession Partnership priorities. Internal

market legislation has been adopted, measures have been taken to clarify property

legislation, progress is being made in transposition in the environment field and recently

adopted legislation provides for many of the institutions needed to implement the

acquis.

However, the short term Accession Partnership priorities have only been

partially met in the areas of banking and insurance and concerning administrative and

judicial capacity (adoption of a civil service law, land registration, financial control).”

3.1.

The chapters of the

acquis

As indicated, the review of Slovenia’s ability to assume the obligations of membership

that is provided below has been structured in accordance with the list of twenty-nine

negotiating chapters. Accordingly, this section opens with an assessment of progress

related to the so-called “four freedoms”, the cornerstones of the internal market, and

continues with a systematic review of progress on each of the chapters, to cover the

acquis

in all its various aspects: sectoral policies, economic and fiscal affairs, economic

and social cohesion, innovation, quality of life and environment, justice and home

affairs, external policies, and financial questions.

Chapter 1: Free movement of goods

Slovenia has continued its steady progress in this area since the last Regular Report.

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Progress has continued, on the basis of the legislative framework adopted last year, as

regards the

principles of the New and Global Approach.

A decision was taken in

April to establish the Slovenian Accreditation Body, which is a full member of

European Accreditation. The accreditation functions carried out until now by the

Standards and Metrology Institute of Slovenia (SMIS) have been transferred to it. A

decision to establish the Slovenian Institute for Standardisation was taken in July,

allowing the transfer of the standardisation functions from SMIS. These developments

completed the segregation of the accreditation, certification and standardisation

functions performed until now by SMIS. At the end of 1999, 15 bodies had been

accredited in accordance with the relevant standards from the EN 45000 series,

including 9 calibration laboratories, 5 testing laboratories, and one certification body for

quality systems. As regards

standardisation,

Slovenia has made steady progress since

last year. In June, it had adopted 65% of CEN and CENELEC standards, respectively

3851 and 2168, as well as 43% of ETSI standards, i.e. 624. The minimum required for

allowing membership to these European standardisation organisations is 80%. A decree

was adopted in July introducing the directive on the

notification procedure

for

standards and technical regulations. No particular developments occurred since the last

Regular Report concerning the

interchange of data between administrations.

Substantial progress has been made in sector specific legislation. An order on pre-

packed products was adopted in December 1999 and the metrology act, which

transposes the

acquis

concerning

legal metrology

and

pre-packaging,

was adopted in

February 2000. The act lays down the measurement system, the essential requirements,

as well as the conformity assessment and control conditions. As regards conformity

assessment, the application of proper markings, the mandatory notification of producers’

identifying marks, and the notification of conformity assessment bodies will become

effective after the conclusion of the Protocol to the Europe Agreement on Conformity

Assessment (PECA). The SMIS will remain the authority responsible for

implementation.

The directive on

machinery

was implemented in June 2000 through secondary

legislation. Application of CE marking and notification of conformity assessment bodies

will become effective after the conclusion of the PECA.

Secondary legislation concerning personal protective equipment (PPE) was issued in

September 2000. Surveillance functions have been granted to the Labour Inspectorate.

Implementing secondary legislation on

gas appliances

was adopted in September 2000.

For

electrical equipment,

the directives on

low voltage

and

electromagnetic

compatibility

(EMC) were implemented in June 2000 and December 1999 respectively,

through secondary legislation. Application of CE marking and notification of

conformity assessment bodies will become effective after the conclusion of the PECA.

Concerning

medical devices,

the Act on Medicinal Products and Medical Devices

adopted in November 1999 now provides the framework for alignment in this area and

conceptually separates medical devices from other pharmaceutical products. A

regulation was adopted on that basis in July, concerning retailers of medical devices.

Substantial progress has been made in the area of

construction products

with the

adoption in May 2000 of the construction products act, which incorporates the

requirements of the directive and regulates the marketing of construction products. The

National Construction Inspectorate has been granted the market surveillance functions.

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The remaining steps to be taken are the adoption of harmonised European standards and

of European technical approvals.

In the area of

foodstuffs,

a substantial step towards alignment was taken with an act

regulating the sanitary suitability of foodstuffs and products and materials coming into

contact with foodstuffs, adopted in May. It is a framework law, which provides the basis

for further alignment through subsequent secondary legislation. The agriculture act

adopted in June also provides for further approximation in the sector. Slovenia started to

adopt secondary legislation, by issuing (in early 2000) regulations on the criteria for

authorisation of testing organisations in foodstuffs, on additives, on erucidic acid, and

on mineral and spring water, and on labelling of pre-packed foodstuffs. The health

inspectorate act, adopted in November 1999 provides the legal basis for the enforcement

activities of the Health Inspectorate for this part of the

acquis.

The market surveillance

functions have been granted to the agriculture and veterinary inspectorates. The

administrative capacities and responsibilities for law enforcement and control of

processed food and food of non-animal origin also need to be clarified and strengthened.

Concerning

chemicals,

progress continued. A series of items of secondary legislation

was adopted, covering restrictions on marketing or use of certain dangerous substances

and preparations, classification, packaging and labelling of dangerous preparations,

principles and control of good laboratory practice. The act on transport of dangerous

goods adopted in 1999 contains some of the alignment provisions required concerning

explosives. An act on illicit drugs precursors was adopted in February. The act organises

the monitoring of export, import and domestic trade in drug precursors, defines

conditions for their production and trade, and contains an updated list of drug

precursors, thus transposing the relevant EC regulation. The staff of the national

chemicals office, set up in October 1999 on the basis of the chemicals act, was increased

from 9 to 14 officials in 2000. The health inspectorate act, adopted in November 1999

provides a legal framework for the surveillance and enforcement activities of the Health

Inspectorate for this part of the

acquis.

In the area of

pharmaceuticals,

a major step towards alignment was taken through the

adoption of the Act on Medicinal Products and Medical Devices in November 1999.

The act aligns in particular the conditions and procedures for marketing authorisations

with the

acquis.

On that basis, Slovenia started to enact the relevant secondary

legislation, notably on the determination and method of classification of medicinal

products, on the toxicological and pharmacological testing of medicinal products, on

clinical trials, on colourings, and on authorisations to trade in medicinal products. In

May 2000, a new regulation on wholesale pricing of medicinal products was also

adopted, which is in line with the relevant directive. The act also introduced the

regulatory data protection of clinical trials and test data supporting applications for

marketing authorisations as of 2000, but a subsequent amendment postponed the entry

into effect of that protection until 2002. A law on the supply of blood was also adopted

in May, which aims at alignment with the relevant directive. The health inspectorate act,

adopted in November 1999, provides a legal basis for the enforcement activities of the

Health Inspectorate for this part of the

acquis.

The staff of that body, as well as that of

the office for medicinal products, was reinforced, with additional posts and training is

being provided to inspectors.

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A substantial step towards alignment with the

acquis

cosmetics

was made with the

adoption in July of an act on cosmetic products, which sets safety requirements, and

provides for free circulation and conformity assessment procedures.

Slovenia has aligned with the entire

acquis

textiles and footwear,

through the

adoption of secondary legislation on fibre composition specification and textile names,

on labelling of textiles and footwear, and on the method for quantitative analysis of fibre

mixtures. The discriminatory labelling and certification provisions applying to imported

textile products were repealed.

No substantial progress was recorded since the last Regular Report in the fields of

toys,

recreational craft,

equipment used in potentially explosive atmospheres

(ATEX), lifts,

pressure vessels, motor vehicles, glass,

wood.

Some progress was made in

the non-harmonised

area with the abolition in January of

discriminatory provisions on imported textile products which were contrary to Articles

28-30 of the EC Treaty, with the adoption of an act on firearms which is meant to

transpose the relevant directive, and with the adoption of the Cultural Heritage Act

which aims at transposing the cultural goods directive.

Significant progress in terms of legislative alignment was achieved in the area of

public

procurement

with the adoption in 1999 of a new act on the review of public

procurement procedure, and the adoption in April 2000 of a new act on public

procurement.

The former provides for remedies and protection of bidders throughout the award

procedure, as required by the

acquis.

It also foresees the establishment of an

autonomous state body, the national review commission (NRC). In order to protect their

independence, NRC members are appointed by the National Assembly and cannot be

dismissed except for infringement. During the first months of 1999, the review

commission that preceded the NRC received 250 claims. One third of these were

rejected as unfounded, and for around 160 the decision of the awarding authority was

partially or totally cancelled.

The latter law of April 2000 regulates procurement of supply, works and services,

including for entities operating in the water, energy, transport and telecommunications

sector. It introduces the EC principles of transparency and equality, and defines

procedures and deadlines for procurement. The 10% preference for domestic bidders has

been abolished. The act also foresees the establishment, within one year from its entry

into effect, of a public procurement office whose task is to provide training and advice

to awarding authorities, and to centralise calls for tenders on their behalf. However, this

law must be supplemented with secondary legislation in order to ensure full alignment.

Some improvements will still be needed, for example removing the compulsory use of

Slovenian standards and technical specifications in public procurement.

Overall assessment

On the whole, substantial progress has been achieved on the legislative side, mainly

over the last two years. Attention should now be focused on the timely and complete

enactment of the remaining secondary legislation and on the strengthening of the

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institutional set-up, including of the institutions that replaced the SMIS, and of the

conformity assessment bodies.

As regards

Horizontal and procedural measures,

Slovenia has had in place since 1999

rational horizontal framework legislation implementing fully the

principles of the New

and Global Approach.

This framework consists of the Act on General Safety of

Products, the Standardisation Act, the Act on Technical Requirements for Products and

Conformity Assessment and the Act on Accreditation. The practical establishment of the

related institutional framework is progressing since the SMIS has been fully

reorganised. However, conformity assessment bodies still need to be strengthened,

including in terms of trained staff, or in some cases created. Market surveillance

requires better coordination between the national authorities responsible. In the area of

standardisation,

Slovenia could reach the level of 80% of adoption of European

standards required for membership of European standards organisations, provided the

current pace is sustained. The situation with regard to the

notification procedure

for

standards and technical specification and to the

interchange of data between

administrations

is satisfactory.

Concerning

Sector specific legislation,

the situation appears satisfactory as regards

legislation adopted by the parliament, since all key framework legislation has been

adopted except for fertilisers and recreational craft. Some fine-tuning in specific areas

still remains to be done. There has been progress in terms of secondary legislation,

which has allowed a good level of transposition in the areas of legal metrology, pre-

packaging, machinery, low voltage and EMC, textiles and footwear, as well as partial

transposition of the

acquis

on foodstuffs, chemicals, pharmaceuticals medical devices,

construction products and motor vehicles. However, the Slovenian authorities

themselves admit that the pace of implementation of the remaining secondary legislation

is slower than initially planned. This is notably the case as regards foodstuffs,

pharmaceuticals, ATEX, lifts, pressure vessels, and wood.

Progress has been made in strengthening the institutional set-up, but further efforts are

needed as regards both market surveillance and the preparedness of conformity

assessment bodies. The Trade Inspectorate, which performs most market surveillance

tasks in connection with the construction, Agriculture, Veterinary, Labour, and Health

Inspectorates, currently employs 155 persons, including 131 inspectors, and should be

strengthened both in terms of staff and of expertise. As regards motor vehicles, the

envisaged transfer of type-approval from SMIS to the Ministry of Transport has still not

been implemented, even if the type approval system is mostly based on the EC model. A

type-approval body for agriculture and forestry tractors also remains to be identified.

The situation in the

non-harmonised area

is on the right track, considering the progress

achieved this year and the adoption last year of the Cultural Heritage Act, which aims at

transposing the cultural goods directive. However the elimination of indirect barriers to

trade, including the introduction of mutual recognition clauses in the legislation, will

require continuous efforts. As regards safety checks on products at external borders,

Slovenia still needs to establish appropriate infrastructure as well as effective

administrative cooperation between the customs and other competent authorities.

While the legislative framework on

Public procurement

is largely in place, some

further legislative work is still needed. Most efforts should now be devoted to

effectively establishing the Public Procurement Office, and to fine-tuning and

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effectively implementing the legislation, at all administrative levels. This will require

substantial training efforts for all staff involved in the public procurement procedures.

Most of the Accession Partnership priorities in this area have been met.

Chapter 2: Free movement of persons

Some progress has been made in this area since the last Regular Report.

There have been no particular developments since the last Regular Report in the area of

mutual recognition of professional qualifications and that of Citizens’ Rights.

The

right of residence of EU nationals is regulated by the Foreigners Act.

In the field of

free movements of workers,

the Law on Foreign Worker Employment

and Labour adopted in July 2000 incorporates the

acquis

in the area of prevention of

discrimination against EU nationals in the labour market into Slovenian legislation. This

law is closely linked to the Foreigners Act, which regulates the right of foreign nationals

to reside in Slovenia. It contains provisions treating EU workers like workers from third

countries. However, a provision foresees that upon accession to the EU these provisions

will cease to apply.

With a view to the future

co-ordination of the social security systems,

no new

developments have taken place regarding the administrative strengthening required. A

new bilateral agreement on social security with Germany entered into force in

September 1999, and Slovenia signed such an agreement with the Netherlands in March

2000. These agreements will enhance Slovenia’s experience in this area, including

administrative practice.

Overall assessment

The progress achieved by Slovenia in this area is still limited.

Slovenian legislation in the field of

mutual recognition of professional qualifications

is only partially aligned with the

acquis.

Alignment requires firstly the fulfilment of a

comprehensive legislative programme, which entails both introducing general

legislation on procedures and bodies, and adjusting the legislation governing the various

professions. It will, moreover, require introducing the principle of mutual recognition of

professional qualifications, which should not be confused with academic recognition

and will thus be a new feature in Slovenian legislation. Further efforts are required in

adopting new legislation in the field of

free movement of workers,

notably the

amendment of two acts. The insurance against unemployment act should be amended to

provide for equal treatment of EU and Slovenian workers, as regards rights deriving

from social protection in the case of unemployment. The housing act should be amended

to provide for equal rights of workers regarding access to non-profit and social housing

without any reciprocity condition.

Efforts will have to be continued to strengthen public employment services with a view

to future participation in the EURES network, including language training of staff.

In the field of

citizens’ rights,

as regards the voting rights of EU citizens, Slovenia has

not yet aligned its legislation with the

acquis.

An Act governing the voting rights of

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Slovenian nationals in elections to the European Parliament will have to be adopted by

accession.

With a view to the future

co-ordination of the social security systems,

Slovenia

already fulfils certain bilateral obligations, including bilateral obligations with the

majority of the EU Member States, that are to a certain extent similar to the principles of

co-ordination of the social security systems. Implementation of the relevant EC

regulations after accession requires not only that Slovenia effectively introduce the

planned administrative structure, but also that Slovenia foresee the appropriate financial

means to this end.

Overall, it is important that there are no provisions in Slovenia’s legislation which

contradict Community rules, in particular with respect to nationality, residence or

language requirements.

Chapter 3: Freedom to provide services

Substantial progress has been made since the last Regular Report in this area.

Some progress has been made as regards

freedom of establishment and freedom to

provide services

in non-financial services, with the adoption in June of an act amending

the small business act. It repeals restrictions to freedom to provide services based on

citizenship or residence permit requirements. Certain restrictions on the freedom to

provide agricultural and forestry services were also lifted in the new agriculture act

adopted in June. The Act on Foreign Workers’ Employment and Labour, adopted in

July, provides general provisions on the establishment and activities of foreign self-

employed individuals. Slovenia also adopted an act on administrative fees, which aligns

the procedures and levels for determining such fees with the relevant directive.

In the field of

financial services,

the Bank of Slovenia continued the progress towards

alignment in banking by issuing secondary legislation on the basis of the Banking Act of

1999, including a number of supervision and prudential provisions and the creation of a

new deposit guarantee system. In terms of supervision, the Bank of Slovenia has

decided to increase the staffing of its banking supervision department to 45 officials in

2000. It also intensified the frequency of on-site inspections of banks in 1999. 39

inspections were conducted, of which 9 were full-scope inspections. Slovenia has also

brought the savings and loans undertakings under full baking supervision.

Substantial progress towards alignment with the

acquis

in insurance has been made. An

act on insurance and an act on ownership transformation of insurance companies were

adopted in January 2000. However, the implementation of the latter is suspended as it

has been brought to the Constitutional Court. The insurance act establishes a framework

for safe and prudent provision of insurance services. It also foresees the lifting of

restrictions upon the establishment of subsidiaries and branches of EU companies, with

transitional periods for life and property insurance. Furthermore, it includes provisions

for supervision according to EC principles, and transforms the relevant office of the

Ministry of Finance into an Agency for Insurance Supervision. The agency is a legally

independent and autonomous entity. Its director has been nominated by the government

and is directly accountable to Parliament. The staff, which was slightly increased in

2000, is undergoing training.

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In the area of investment services and securities markets, the Securities Market Agency

continued to make progress towards alignment, initiated by the securities market act of

1999, by issuing a substantial set of secondary legislation based on that act. It also

received ten more posts in order to meet the new supervision tasks foreseen by the

securities markets act and by the act on pension funds.

Concerning the

protection of personal data and the free movement of such data,

Act on Data Records in the Field of Health was adopted in July. It regulates the

collection and processing of data in the health sector, and protects personal data in that

respect.

As regards

Information society regulations,

Slovenia adopted an act on electronic

commerce and electronic signature in June 2000 which provides a legal framework for

electronic signatures and organises the activities of digital signature verifiers, thus

ensuring alignment with the relevant directive of December 1999. An implementing

decree on conditions for electronic commerce and electronic signature was adopted in

August. A decree introducing the notification procedure foreseen by the directive on

transparency in the information society was adopted in July 2000.

Overall assessment

Slovenia has reached a substantial level of progress in this area.

A large part of the legislative work has been completed as regards freedom to provide

services. In addition to completing the legal framework, Slovenia should now focus on

the practical conditions for full implementation of the

acquis,

in particular the

establishment or strengthening of the appropriate institutions, and on the structural

economic measures necessary to facilitate the opening of financial services markets.

Acquis

alignment is well under way as regards direct discrimination against

freedom of

establishment and freedom to provide services,

although the new obligation code is

still awaited in order to comply with the

acquis

related to self-employed commercial

agents. Further amendments to parliament legislation are also needed to remove

obstacles to free establishment and free provision of services in a series of sectors

including agriculture and forestry, cultural activities and film production, transport

agents, and real estate agents. In addition to the complete removal of direct

discrimination, attention will now have to be focused on indirect discrimination,

including procedures that service providers have to follow in order to have access to

property.

As regards

banking,

Slovenia is coming closer to full alignment since most of the

banking legislation is in place, including the free establishment of foreign banks. The

parliament still needs to adopt an act on payment transactions so as to introduce the

competition-based system of inter-bank payment transactions. Further secondary

legislation as regards prudential requirements related to capital adequacy and netting

remains to be adopted, and provisions regarding the home country control principle will

require adjustments to secondary legislation. Slovenia now needs to focus on the

effective implementation and supervision of the new legislation, as well as on increased

cooperation with other European supervisory authorities.

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insurance,

a parliament act is still needed in order to align with the

acquis

compulsory insurance for motor vehicles. Slovenia should proceed with the adoption of

the secondary legislation needed to implement the framework insurance act. Continued

efforts are also needed to further reinforce the supervision body, both in terms of staff

level and training, and in terms of intensity of controls.

In the area of

investment services and securities markets,

a parliament act on

investment funds and management companies remains to be adopted, in order to clarify

the future role of investment funds which, following the UCITS Directive, should be

able to manage portfolios of shares of companies. The further use of vouchers acquired

through mass privatisation will have to be reviewed in this context, given, for instance,

the holding limits of shares in one and the same company flowing from the UCITS

Directive. Four items of secondary legislation remain to be enacted on the basis of the

securities markets act and an investor compensation scheme needs to be introduced. All

in all, the legislation has come closer to the

acquis,

even if effective integration into the

single market rules in this sector is closely linked to the timetable for liberalising capital

movements. Attention will also have to be paid to the effective fulfilment by the

securities markets agency of its new supervision tasks, and to more systematic

coordination with the other supervision bodies.

In conclusion, a substantial level of

acquis

approximation has been achieved in

financial services,

and a clear timetable for market opening has been set. However,

there are still concerns as regards the preparedness of the sector for increased

competition, since the market structure is still characterised by a combination of

persistent dominant positions and a number of scattered small undertakings, and since

the ownership structure has only evolved to a limited extent.

The 1999 legislative framework for the

protection of personal data and the free

movement of such data

is largely in line with the directive. However further fine-

tuning is needed, notably as regards the movement of data, and an independent

supervision institution in line with the requirements of the directive needs to replace the

present authority for data protection that reports to the Ministry of Justice.

Slovenian legislation is in line with most of the

information society regulations

contained in the

acquis.

Chapter 4: Free movement of capital

Some progress has been made during the reporting period in the area of

capital

movements and payments.

Several decisions of the Bank of Slovenia have been

enacted to implement the Foreign Exchange Act, which was adopted in March 1999. In

addition, in June 2000 the Governing Board of the Bank of Slovenia defined a

timetable for the liberalisation of capital flows. The secondary legislation adopted since

last year’s Report provided mainly for a further easing of existing restrictions in the field

of portfolio investments by non-residents, operations on current and deposit accounts

with domestic financial institutions by residents as well as with financial institutions

abroad by residents, and import or export of financial assets. The Law on Recording

Property, State Border and Premises, adopted in May 2000, aims to unify the real estate

Undertakings for Collective Investment in Transferable Securities

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registration system to obtain more reliable data. The act provides the legal basis for the

project of modernising property registering supported by international funds. The

government adopted in December 1999 a programme for the reform of payments, in

order to replace the earlier system based on a central payment agency with a

competition-based system of inter-bank payment transactions. The Ministry of Finance

and the Central Bank also issued criteria for performing payments to be fulfilled by

banks when they take over the payment function.

In the field of

cross border credit transfers,

Slovenia partially transposed the Directive

on customer information and on execution times for cross-border transfers by adopting a

decision on the conditions and methods of carrying out international transactions.

Regarding

money laundering,

no particular developments can be reported.

Overall assessment

While the entry into force of the new Foreign Exchange Act presented a substantial step

forward in the process of capital movements liberalisation, further alignment has to be

ensured.

Restrictions remain mostly on short-term transactions (money market securities

transactions, operations on current and deposit accounts with financial institutions,

physical import or export of cash), but also on portfolio investments and acquisition of

real estate by non-residents. Further progress should take place in accordance with the

‘liberalisation timetable’ that was adopted in June 2000 by the Bank of Slovenia. It

provides for the abolition of existing restrictions on some capital movements between

the end of 2000 and the end of 2002. However, open issues remain with regard to the

existence of ‘special control rights’ of the state in privatised companies and the rules

applying to investment activities abroad of institutional investors.

Given the low level of foreign direct investment, the government has implemented a

strategy to stimulate it, which aims at, among other things, the elimination of

administrative barriers.

Slovenia is still lagging behind as regards capital movements linked to the right of

establishment in the field of transport, telecommunications and media, where

participation of foreign investors is still severely restricted. Further progress in this field

should be an urgent priority.

Slovenia introduced a real time gross settlement (RTGS) system in 1998 and a Giro

clearing system for retail payments in 1999. The recent legislative development and the

ongoing reform of the payment system confirm the good overall progress of Slovenia in

this area.

Slovenia’s legislation concerning money laundering is in line with the

acquis.

Due to the remaining restrictions on capital movements, the priority identified in the

Accession Partnership to speed up alignment of the legislation on foreign direct

investments in sectors still restricted (in particular the financial sector, transport,

telecommunications and media) has been met only partially.

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Further liberalisation of capital flows does not require additional administrative capacity

due to the abolition of control mechanisms. However, further liberalisation has to be

accomplished by an efficient system of monitoring of capital flows. Therefore, the Bank

of Slovenia should ensure that both well-trained staff and a reliable data base system are

available.

Chapter 5: Company law

Since the last Regular Report, Slovenia has made limited progress in this area.

In the field of

company law,

no particular developments have taken place since the last

Regular Report, except in the field of accountancy. With the adoption of the

Accountancy Act, Slovenia has implemented the legislation concerning accounting for

non-profit organisations. The act has been in force since January 2000. Slovenia has

applied to the Lugano Convention.

In the field of

intellectual and industrial property rights,

Slovenia has ratified the

World Intellectual Property Organisation (WIPO) Copyright Treaty and the Act

Ratifying the WIPO Performances and Phonograms Treaty.

No significant developments have occurred since the last Regular Report regarding the

administrative capacity.

Overall assessment

Slovenia has reached a rather good level of preparation in this chapter.

The legislative framework concerning

company

law, including accountancy, is to a

large extent in line with the

acquis.

However, amendments to the recent Law on Commercial Companies still have not been

adopted by the National Assembly, notably as regards the protection of creditors, the

classification of companies, certain publicity rules, the definition of certain capital

categories, the alignment with the principle of uniform merger, and the abolition of the

existing obligation to use the Slovene language in companies. The Auditing Act, which

is intended to bring Slovenian legislation on auditing in line with the Eighth Council

Directive, is still in parliamentary procedure.

Significant legislative progress has already been made in the area of

intellectual and

industrial property rights.

In certain areas, only slight technical and terminological

improvements are necessary. These include amending the Copyright and Related Rights

Act. The major remaining legislative step is the adoption of an act on border

enforcement, which should cover both fight against piracy and against counterfeiting, as

well as a new act on industrial property.

The administrative capacity is partially in place to implement the

acquis

and all the

relevant institutions have already been identified. Concerning intellectual and industrial

property rights, particular attention should be paid in the forthcoming years to more

effective implementation of the new legislation through training and other activities for

the enforcement officers and magistrates.

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Chapter 6: Competition policy

Since last year’s Regular Report, Slovenia has made substantial progress in this area, in

particular in the field of State Aid.

In the 1999 Accession Partnership for Slovenia, alignment of merger control and state-

aid legislation, as well as full enforcement of competition legislation, were identified as

short -term priorities.

In the field of

anti-trust,

the implementation of the new Act on Prevention of

Restriction of Competition has begun. Ministerial instructions on procedures and

conditions for determining the relevant market were issued. The Government also

adopted a decree on block exemptions, as well as a decree about the form of notification

of concentration of undertakings. These represent major steps in the process of bringing

Slovenian legislation in line with the

acquis.

The Competition Protection Office is the national competition authority in Slovenia. Its

functional independence and powers are laid down in the Act on Prevention of

Restriction of Competition. The Office, which comprises nine officials, recruited two

more professionals in 2000. In 1999, the Office handled 31 antitrust cases. Of these 7

concerned restrictive agreements, 16 were procedures initiated for abuse of dominant

positions, 6 were applications for individual exemptions, and 2 were applications for

negative clearance. In addition, the Office analysed 23 merger notifications and issued

15 decisions. Overall the Office issued 20 final decisions, in none of which

infringements were found, sometimes due to additional commitments subscribed to by

the parties. There were no court cases in 1999.

In the field of

state aid,

Slovenia adopted in December 1999 a framework Act on State

Aid Control, which entered into force in January 2000. This act contains the basic

principles of EC State Aid control, as well as procedural provisions, thus providing a

basis for the control of aid proposals in Slovenia. The Government started implementing

the Act, notably through the adoption of a government decree on the Purposes and

Conditions for the Granting of State Aid, and of rules on the preparation of the annual

state aid survey. However, the new act does not apply to existing aid schemes. For such

aid, the Government approved in May 2000 a programme on harmonising the existing

state aid with EC standards.

Slovenia has prepared a state aid report for the years 1998 and 1999. It largely follows

the methodology and the presentation of the Community’s Survey on State Aid and

provides for a very good level of comparability. A state aid inventory has also been

prepared which should help in ensuring that the adjustment programme for the existing

aid measures covers all relevant legislation. Attention must now be paid to the full

coverage of the inventory, including all relevant legislation on taxation.

The national state aid monitoring authority is the Commission for State Aid Control

established by the new act. The Government appointed the members and approved the

rules of procedure of that commission in February 2000. The Commission for State Aid

Control relies on the administrative and technical support of the State Aid Control

section, which was set up in the Ministry of Economic Relations and Development, and

employs eleven people. Programmes of adjustment for the leather, footwear, textile and

apparel industries have been approved for the period 2000-2003. A restructuring

programme for the steel industry has been presented to the European Commission.

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Overall, up to September 2000, the Commission dealt with 44 notifications. It approved

20 of these, 11 of them conditionally. In 6 cases it found that the measure notified did

not constitute state aid. 7 notifications were rejected. 11 were pending.

Overall assessment

Slovenia has reached a substantial level of progress in this area.

As regards

anti-trust,

Slovenia’s legislation covers most of the

acquis

provisions and

the existing legislation is fully in line with the EC rules. The Competition Protection

Office has broad powers to enforce competition rules and its staffing is being reinforced.

The most important challenge for the office is now to ensure that the application and

enforcement of the anti-trust rules is effective and that priority is given to cases that

concern the most serious distortions of competition.

As regards

state aid,

an important step has been taken with the adoption of the

framework legislation. Following the introduction of secondary legislation, the existing

provisions are now largely in line with the

acquis.

Efforts have also been undertaken in

the fields of industry adjustment and restructuring programmes and schemes. Particular

attention should now be paid to the alignment of existing aid measures and old

legislation on the basis of which aid continues to be granted. Effectiveness of the

enforcement and monitoring capacity in this area cannot yet be fully ascertained since

the Commission for State Aid Control was established only recently. The State aid

Commission has already scrutinised a number of aid proposals submitted to it by the aid

granting bodies. The main priority now is to ensure that the enforcement of the state aid

rules is systematic and includes a swift alignment of existing aid schemes and

legislation under which authorities at various levels grant aid. For this purpose, the

adjustment programme mentioned above should now be swiftly put into effect.

In order to ensure a differentiation of maximum aid intensities in assisted areas,

Slovenia should now complete the establishment of a regional aid map in consultation

with the Commission.

Chapter 7: Agriculture

Good progress has been made in this area since the last Regular Report.

Agriculture in Slovenia accounted for 3.6% of GDP in 1999

. Employment in

agriculture accounted for 10.2% of total employment

The source for all agricultural statistics is EUROSTAT unless otherwise specified.

In order to improve consistency and comparability, the employment figures presented are now defined

according to Labour Force Survey definitions (LFS). Agricultural employment is defined in LFS

terms as economically active persons who gain a significant part of their income from agriculture.

The agricultural census, which was previously a source of employment data in many countries, takes

into account all persons nominally active on a farm. There are therefore some significant differences

between previous and new figures. Fuller information can be found in the Eurostat publication

“Central European Countries’ Employment and Labour Market Review” available free of charge

through the Eurostat Data Shops.

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Data of the Statistical Office of the Republic of Slovenia on

agricultural output

1999 show that the early harvest of cereals was poor. 31% less wheat was produced

compared to the abundant crop of the previous year and the harvest of late crops was

equally poor. The production of grain maize and silage maize was 8% and 9% lower

compared to 1998. The yield of early fruit was high (any comparison with 1998 is not

relevant due to the severe frost in that year) while the yield of late fruit and grapes was

low: production of apples in plantation orchards fell by 14% and grapes by 20%

compared to 1998. As in previous years, the production of sugar beet increased in 1999,

up by 23%, as a larger area was again sown last year. As regards animal husbandry, the

total number of cattle increased by 4% at the end of 1999 compared to the year before,

the number of sheep remained the same as in 1998, while the number of pigs fell by

5.7%. Slaughterhouses reported a 23%-rise in slaughtered pigs, and a 2%-rise in

slaughtered cattle. The total purchase of agricultural produce did not increase to last

year's levels despite the higher agricultural production.

In 1999, EC imports of agricultural products originating in Slovenia decreased by 1% to

€

89.5 million. EC exports to Slovenia decreased by 1% to

€

415 million. The trade

balance in favour of the Community amounted to

€

325 Million compared to

€

329

million in 1998

. The most important product group in terms of EC imports from

Slovenia is meat and edible meat offal. As far as EC exports to Slovenia are concerned,

the most important sectors are tobacco, various food preparations as well as fruit and

cacao.

With the entry into force of CEFTA Protocol No. 6 in January, Slovenia liberalised

trade in agriculture with all the other six members of the Central European Free Trade

Agreement (CEFTA). In May Slovenia and the EC concluded negotiations on the

liberalisation of trade in agricultural products as regards list 1 (non-sensitive products)

and list 3 (specific requests). (For

details see part Ab on Relations between the EU and

Slovenia)

The

budget

for agriculture has been increased by 37% for the 2000 budget. This

increase facilitated the expansion of direct area payments for all arable crops, the

introduction of area payments for less favoured areas, the introduction of environmental

measures as well as the setting up of the appropriate institutions and services.

source: Uruguay Round Agreement definition of agricultural products, figures taken from EUROSTAT

COMEXT (see Agriculture in the European Union – statistical and economic information 1999 p. 36

for definition of the products).

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Horizontal issues

The adoption of the Agriculture Act in June presents a major step towards the alignment

to the Common Agricultural Policy. The Act provides the legal basis for issuing the

relevant secondary legislation, in particular regarding alignment to the EC’s common

market organisations and for a rural development policy in line with the

acquis.

As regards the implementation of measures related to the

European Agricultural

Guidance and Guarantee Fund (EAGGF),

Slovenia has made significant progress

since last year’s Regular Report, notably through the establishment of the Agency for

Agricultural Markets and Rural Development. In December 1999 the Government

adopted the Rural Development Plan 2000 – 2006, which is in the process of being

adopted by the Commission. The Plan provides the basis for the use of SAPARD pre-

accession aid in the field of agriculture and rural development and focuses on farm

investments, investments in processing and marketing of agricultural and fishery

products as well as on economic diversification and improvement of rural infrastructure.

The Agency for Agricultural Markets and Rural Development (AAMRD) was

established within the Ministry of Agriculture, Forestry and Food (MAFF) already in

1999. The Agency is responsible for implementing the SAPARD pre-accession fund

(see also section on Community aid) as well as national support schemes. After

accession, the AAMRD will carry out the tasks related to the Common Agricultural

Policy. The Director of the Agency, section heads and heads of services have already

been appointed and staff is being recruited. Currently 67 persons are employed by the

Agency. Training of staff is currently ongoing.

Concerning the

Integrated Administration and Control System (IACS),

the current

central database on agricultural holdings is being upgraded with the data on the actual

land use per land cadastral parcel in order to control area payments. A link with the

existing databases on animal identification, one for veterinary purposes and the other for

breeding purposes, are still not merged. Land use monitoring from digital ortophoto

maps is in progress. By the end of April, land use data had been acquired for 1,168 maps

out of a total of 3,250.

In the field of

trade mechanisms, quality policy

and

state aid

in agriculture no

particular developments can be noted regarding alignment to the

acquis.

A direct support scheme for

organic farming

was already introduced in 1999.

Furthermore, new ecological measures, such as support for the production of seeds and

plant propagating materials for organic farming as well as support for reduction of

vineyard erosion were introduced in 2000.

Concerning preparations for Slovenia’s participation in the

Farm Accountancy Data

Network (FADN),

some substantial developments have occurred, such as the

agricultural census organised in June 2000 in compliance with international standards

(FAO and Eurostat) and the registration of Slovenian farms, which facilitates the

creation of FADN.

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Common Market Organisations

By implementing the Decree on the organisation of the market in cereals for the 2000

harvest, which entered into force on 1 July, the State monopoly in the wheat and rye

market was abolished. In the field of

arable crops,

area payments per hectare for

growers of wheat and rye were introduced already for the 1999 harvest. For the 2000

harvest, area payments per hectare have been introduced for all other crops. Area

payments have been set at the level of SIT 54,000/ha (246.75 euros/ha.) for bread

cereals and SIT 27,000/ha (132.37 euros/ha.) for other cereals, oilseeds and vegetables.

The Decree on the organisation of the market in cereals for the 2000 harvest fixes the

intervention price for wheat and rye. The intervention price has been set at the level of

SIT 22/kg (0.11 euros/kg), which is 4.5 % lower compared to 1999 and 26.2% lower

compared to 1998.

Furthermore, the criteria for establishing the premiums for suckler cows in the

beef and

veal market

as well as for sheep and goats in the

sheep meat and goat meat market

have been aligned with the

acquis.

In the second half of 1999 the administrative control on prices in the

sugar market

was

abolished and sugar and sugar beet prices were therefore liberalised. In 2000, the sugar

beet area payment per hectare has remained at the level of SIT 42,000/ha. (205.92

euros/ha.).

In the

fruit and vegetable market,

an area payment per hectare fixed at the level of SIT

60,000/ha. (294.17 euros/ha.) has been introduced this year, in order to support

integrated production of vegetables. No specific developments concerning marketing

standards or on the recognition of producer groups can be reported.

In the field of

wine,

the list of geographical designations of wine and other grape and

wine products was issued in February. Furthermore, rules on the methodology of

evaluation of must, wine and other grape products as well as a regulation on Cvicek

wine, a traditional recognised denomination, were adopted at the beginning of this year.

Rural development and forestry

In July Slovenia adopted a decree on

less favoured areas,

which specifies the criteria

for classifying agricultural land according to the following three categories: mountain

areas, areas with other limitations (infertile land that can be rendered fertile only at high

cost, demographically weak areas) and areas with specific natural limitations (areas in

which floods are frequent, marshland, windy areas, etc). Furthermore, Slovenia has

introduced direct area payments for agricultural land in less favoured areas as of the

year 2000.

With regard to

agri-environmental measures,

the instruction on good agricultural

practice in manuring, based on the Code of Good Agricultural Practice, was adopted in

April 2000. In addition, direct support measures for integrated fruit growing and

mountain grazing were introduced in 1999.

In the field of

forestry,

rules on the protection of forests were adopted in September

2000.

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Veterinary and phytosanitary issues

Continuing alignment of veterinary and phytosanitary legislation and the establishment

and equipping of border inspection posts, in particular at the land border with Croatia,

the port of Koper and the airport in Ljubljana, were identified as short-term priorities in

Slovenia’s 1999 Accession Partnership.

The

veterinary

service in Slovenia has been reorganised on the basis of the Act

amending the Veterinary Practice Act, which entered into force in January 2000. The

Veterinary Administration of the Republic of Slovenia (VARS) became the only

authority responsible for administration and inspection activities as well as for

authorising laboratories performing tasks of the veterinary institute. The Chief

Veterinary Officer of the VARS has been authorised to implement all measures for the

prevention of the spread of contagious animal diseases or substances endangering public

health. These include the carrying out of safeguard measures and disbursement of

compensation for slaughtered animals. Furthermore, the Chief Veterinary Officer

became responsible for granting authorisations to official veterinarians. 185 employees

of the Animal Health Centres performing veterinary inspections have been re-deployed

by the VARS as of January 2000.

At the end of last year, several rules on veterinary-sanitary conditions for the production

of foodstuffs of animal origin, veterinary-sanitary inspection and control of food

production establishments, veterinary-sanitary checks, the conditions for fitness of

human consumption of foodstuffs and raw materials of animal origin were adopted.

With these rules Slovenia has partly transposed into its legal order EC requirements on

classification of establishments, internal control required within the establishments,

establishment authorisation and registration procedures, training of staff, hygienic and

technical requirements as well as provisions relating to residues. The VARS re-

inspected establishments for the production of foodstuffs of animal origin, classifying

them on the basis of the above legislation from late 1999 until May 2000.

Several instructions on the detection and eradication of different animal diseases were

issued in October last year. Vaccination against Classical Swine Fever is planned to be

discontinued as of November 2000.

Furthermore, Slovenia adopted the Protection of Animals Act in November 1999. The

law defines conditions for animal protection in the case of breeding and transport and

provides a definition of illegal treatment of animals. Furthermore, a legal basis with

regard to veterinary medicinal products was provided with the adoption of the Medicinal

Products and Medicinal Devices Act adopted in November 1999.

Two regulations laying down provisions regarding the identification and registration of

bovine animals as well as sheep and goats have been issued. An Animal Identification

and Registration Service as well as an Autochthonous Breeds Protection Section have

been established within the MAFF.

In the

phytosanitary

sector, Slovenia adopted several regulations on quarantine of

harmful organisms as regards plant health (harmful organisms). In the field of plant

health (pesticides), the competencies of the MAFF and the Ministry of Health have been

delimited.

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Overall assessment

Slovenia has made considerable progress towards the full implementation of the

agricultural

acquis.

The institutional and legislative alignment goes in the right

direction. However, further efforts still need to be made, notably as regards the

establishment and upgrading of the border inspection posts at the border with Croatia.

The Slovenian

farm structure

is still unfavourable since it is dominated by small

private farms cultivating over 90% of agricultural land. This unfavourable farm

structure is reflected in the average holding size of 4.8 ha. per holding, lower production

and a small share of full-time farms. In this context, denationalisation of

agricultural

land

and restructuring is of importance to achieve sustainable development in the

agricultural sector and to enable in particular the management of the quota system for

milk and of premiums in the animal production sector. By the end of April 2000 only

40% of agricultural property had been returned. Denationalisation of agricultural land

thus continues slowly and, at present, there is no timetable for the conclusion of the

process.

As regards

horizontal issues,

the implementation of the

acquis

concerning the

European Agricultural Guidance and Guarantee Fund is well under way. Some progress

has been made in terms of setting up a comparable Integrated Administration and

Control System (IACS), but substantial efforts are still required to achieve full

compliance with EC requirements in this field. A register of grape and winegrowers has

been set up and is regularly updated. It includes data on grape and winegrowers, area

under vines, grape and wine crop. Register data is used for administrative checks of the

application for subsidies. The setting up of registers and cadastre registers for other

permanent crops (orchards, olives and hops) is at an initial stage. The two systems of

animal identification and registration still need to be merged.

With regard to the implementation of

Common Markets Organisations,

significant

progress has been made. However, further efforts are required to adopt and implement

the relevant secondary legislation and to set up the Market Information Systems. Also

efforts should be made to align marketing standards for animal products, fruit and

vegetables and other specialised crops. Minimum quality requirements for the

intervention buying-in of wheat and rye are already set out.

In the field of

rural development and forestry,

Slovenia classified and introduced

direct area payments in less favoured areas. The concrete criteria for the classification of

less favoured areas will have to be submitted upon accession in the framework of the

rural development plans, in order to assess compliance with Community rules. Slovenia

also made progress with the introduction of new environmental measures to be included

in the agri-environmental programme upon accession. As regards forestry, the adoption

of legislation amending the Forest Act and the Agricultural and Forest Funds Act are

running behind schedule. Alignment with the

acquis

in this field should not be delayed,

since Slovenia is highly forested.

In the

veterinary and phytosanitary sector,

no progress has been made on the

establishment and upgrading of border inspection posts with Croatia (Obrezje, Jelsane

and Gruskovje) for both veterinary and phytosanitary control. The controls at the EU’s

external borders constitute a very important aspect of the internal market control system.

Preparations for alignment with the

acquis

in this area are time-consuming and should

be undertaken well before accession.

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Substantial progress has been made in the

veterinary

field with the re-organisation of

the veterinary service and the cancellation of the preventive vaccination against classical

swine fever which will take effect in November 2000, as well as as regards alignment

with EC provisions on establishments for the production of foodstuffs of animal origin,

veterinary medicinal products and the identification of animals. The timely adoption of

the implementing legislation will now require some attention. Progress has also been

made in the area of animal welfare with the adoption of the Animal Protection Act. A

study with regard to the protection of animals kept for farming purposes is under way.

Furthermore, a legal basis for livestock-breeding will need to be put in place.

Further progress should be made in the

phytosanitary

field as regards legislative

alignment. Although several implementing regulations were adopted in the field of

harmful organisms, a new legal framework needs to be adopted in line with EC

requirements on plant health, plant production products, seeds and propagating

materials, forest reproductive material and feeding stuffs. Further efforts have to be

made as regards permanent and special health protection and control of harmful

organisms as well as harmonised monitoring of pesticide residues in foodstuffs of plant

origin and in agricultural products.

With regard to

administrative capacity,

significant progress has been made with the

establishment of the Agency for Agricultural Markets and Rural Development. It will

carry out tasks for the implementation of the SAPARD pre-accession assistance in the

short term and for the Common Agricultural Policy in the medium term. The setting up

of new sections within the Ministry of Agriculture, Forestry and Food and the re-

organisation of the veterinary service have also improved the administrative capacity in

this sector. Further strengthening of the administrative capacity is still necessary,

especially in the phytosanitary field.

Chapter 8: Fisheries

Since the last Regular Report, no major legislative developments have taken place in

this domain.

The agency for agricultural markets and rural development, that will be responsible for

applying the

market policy,

has started to function. Staff appropriations have been

approved in the Government Employment Programme, and the 2000 state budget

includes the necessary funds for the operation of the agency.

As regards

resources management, inspection and control,

the staff dealing with

fisheries in the Ministry of Agriculture, Forestry and Food has been reinforced.

Preparatory steps have been taken for the establishment of an inter-ministerial centre, in

particular decisions have been taken on the location of the centre’s various facilities.

In the field of

structural actions

(including fleet registration), some progress has been

made in preparing the fishing vessels register especially the registration of the largest

vessels and installation of software.

Slovenia provides

state aid to the fisheries sector

in the form of a pension and

invalidity insurance scheme for fishermen. In March, a decree was adopted on financial

interventions for the conservation and development of agriculture and food production

for the year 2000. It replaced previous forms of price subsidies with structural measures.

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Overall assessment

Slovenia has achieved a significant level of progress in this area.

Slovenia’s legislation and administrative structure are nearly able to meet the

requirements of the Common Fisheries Policy. However, the Fisheries and Aquaculture

Development Strategy, which will provide the basis for implementing the structural

actions of the Common Fisheries Policy, notably the management of the fleet capacity,

still needs to be finalised. The Maritime Code, which will form the legal basis for

aligning the register of fishing vessels with the

acquis,

has not yet been adopted by the

Parliament.

Further efforts are expected, notably the adoption of amendments to the law on sea

fisheries and to secondary legislation, the rationalisation of monitoring and control

through the legal establishment and resources endowment of the inter-ministerial centre,

and the completion of a fishing vessels register in line with the Common Fisheries

Policy.

It should be noted that Slovenia has a fisheries agreement with Croatia, but that the

possibilities provided by that agreement are not being used, even though it is

automatically extended each year.

Chapter 9: Transport policy

Progress in this chapter has been uneven since the last Regular Report.

As regards

horizontal issues,

Slovenia has approved the final TINA report that should

form the basis for extending the trans-European networks to Slovenia.

Progress has been made at a steady pace in

land transport.

As regards safety, full

alignment was achieved with the issuing of new legislation. This includes secondary

legislation implementing the law on transport of dangerous substances adopted in

January, amendments to the rules on weights and dimensions, as well as amendments to

the road transport safety act adopted in June. The latter amendments also provide for an

appropriate payment system relating to annual road usage refund fees, adjust the training

programme for driving examiners, envisage improvement of traffic flows and road

transport safety and align the performance of roadworthiness tests for specific vehicles.

In road transport, adjustments were introduced in secondary legislation as regards the

granting of permits for international freight, and as regards tolls. The Ministry’s staffing

was reinforced in that area. Slovenia initialled in April the Multilateral Interbus

Agreement on occasional Passenger Transport by Bus, but signature is still pending. In

the railway sector a significant legislative step has been taken with the adoption of the

law on railways in November 1999. This law defines the public service obligations,

determines infrastructure access conditions and foresees the restructuring and

privatisation of Slovenian Railways. The law also establishes a Railway Traffic

Directorate, for which internal and budget appropriations for the recruitment of 27 staff

in 2000 have been approved. An act on contracts in railway transport was also adopted.

No major development was recorded as regards inland waterways and public services

obligations. However the overall level of state aid to the transport sector continues to

decrease noticeably.

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Further alignment was achieved in

air transport

with the adoption in February of the

Act on Obligatory and Other Legal Relations in Aviation. It regulates liabilities and

contractual relations in the sector. Secondary legislation was also passed in the areas of

technical harmonisation, as regards specifications of navigation equipment and systems

and crew licensing, as well as on noise reduction. Negotiations between the EC and

Slovenia on the multilateral agreement establishing a European Common Aviation Area

(ECAA), which will result in a significant alignment with the

acquis

prior to accession,

were concluded at the end of 1999 with the signing of the bilateral country protocol.

Budget appropriations for the recruitment of 39 staff by the civil aviation authority

during 2000 were also adopted.

maritime transport

the alignment of legislation on maritime safety is a short-term

priority under the 1999 accession partnership. Secondary legislation in that area was

passed notably as regards the institutions entitled to perform safety checking of ships, in

view of Slovenia’s ratification of the Paris Memorandum of Understanding (MoU) on

Port State Control in March 2000. The MoU’s Advisory Board granted to Slovenia the

status of cooperating member of the Paris MoU.The Government adopted a decree on

the reduction of port fees for segregated ballast tankers, as well as rules on the

examination of pilots. The maritime transport administration is being reinforced with

budget appropriations to recruit seven more staff in 2000. No particular developments

were recorded as regards non-safety aspects.

Overall assessment

Slovenia is to a large extent able to meet the requirements of the EC transport

acquis.

large part of the legislative framework is in place, however, the framework legislation in

the aviation and maritime sectors is still in the parliamentary process. Some efforts are

also needed on road transport. Slovenia’s administrative capacity has already reached a

good level even if reinforcements are needed in specific areas. As a transit country,

Slovenia participates actively in the development of Pan-European transport corridors V

and X. It is engaged in a major investment and upgrading programme of its road and

railway networks, notably on the basis of the annual financing plan for the national plan

for highway construction.

The

horizontal issues

of transport raise no particular concern in the case of Slovenia. It

is in full compliance with summertime arrangements, and alignment with EC provisions

regarding the trans-European networks requires only specific efforts concerning the

framework for financing and the high-speed train interoperability.

land transport,

progress towards alignment is already well under way. However full

alignment requires the adoption of a new act on road transport, of amendments to the

road transport safety act, and of a new road transport contract act. The effective

implementation of the present

acquis

providing for liberalisation in the railways sector

requires special efforts, including the supervision and the accounting separation of

infrastructure and operations activities, even though a general legislative framework is

now in place.

Full alignment of the legislative framework for

air transport

requires the adoption of a

new act on air transport, which is still in parliamentary procedure, and the issuing of the

secondary legislation needed for implementation. No major practical difficulties are

foreseen provided the reinforcement of the civil aviation authorities is completed.

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Slovenia displays a good record in the field of safety of

Maritime transport.

However,

the adoption of a comprehensive maritime code has been delayed further in the

parliament and some related secondary legislation is still missing. Port State control and

flag safety records continued to meet the EU best practice levels in 1999.

Chapter 10: Taxation

Since the last Regular Report there has been some progress in this field.

In the field of

indirect taxation,

implementing regulations concerning the Value Added

Tax Act and the Excise Duty Act, which were both enacted in July 1999, have been

adopted since the last Regular Report. These serve to clarify the implementation of these

acts in the tax system. Furthermore, a Decree on Determining the Excise Duties for

Spirits Produced by Small Distilleries and for Cigarettes has been adopted.

Slovenia has reinforced its administrative capacities to ensure the efficient

implementation of the Value Added Tax Act and the Excise Duty Act as well as

administrative co-operation and mutual assistance.

The Tax Administration Office has been reorganised in order to be able to implement

the Value Added Tax Act effectively. A Central Liaison Office for international

exchange of information and new departments for tax accountancy and for enforcement

have been established. The number of employees was increased from 2,376 to 2,505 in

1999. Furthermore, a certification exam for tax collectors was introduced in 1999.

The Customs Administration has set up an Excise Duty Department with a division for

administrative co-operation and introduced a new method for recording data on

registered taxpayers through tax numbers in January 2000. In 1999, the Customs

Administration also introduced software support for uniform implementation of customs

procedures at the borders.

In the sector of

direct taxation,

no developments have taken place.

Overall assessment

Slovenia is already very advanced in this area. It took a substantial step forward towards

alignment with the introduction of the key legislation concerning VAT and Excise

Duties in July 1999. However, some minor adaptations are still necessary.

Substantial efforts have been made to strengthen the administrative capacity in the tax

and customs administrations.

Despite Slovenia’s commitment under the Europe Agreement to end the duty-free status

of the shops on its land borders by July 1998, this still remains to be implemented. This

has also been identified as a priority in the Accession Partnership. The Government has

submitted to the parliamentary procedure amendments to the Law on special measures

of duty free shops’ operation monitoring and amendments to the customs law, which

would enable it to end the duty-free status of these shops. However, these amendments

have not been adopted so far.

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Chapter 11: Economic and monetary union

A detailed assessment of Slovenia’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. These concern

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. Liberalisation of capital movements, upon the completion of

which compliance with the EMU

acquis

is conditional, has been covered in the section

Chapter 4 – Free movement of capital.

Since last year’s Regular Report, Slovenia has made some progress towards the

adoption of the

acquis.

With the adoption of the new Pension and Disability Insurance Act and an Insurance

Act, in December 1999 and January 2000 respectively, Slovenia has taken steps towards

prohibition of

privileged access of the public authorities to the financial sector.

Actual compliance in this area needs to be checked further.

Regarding

independence of the Central Bank

and

prohibition of direct financing of

the public sector,

no new legislation has been adopted since the last Regular Report.

Overall assessment

Slovenia 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.

Overall, Slovenia has already achieved a reasonable degree of compliance with the

acquis.

However, in some areas Slovenia does not yet comply with the

acquis.

For instance, the

current Bank Act of Slovenia provides for the possibility for the Central Bank to grant

short-term loans to the government, even though this provision has never been used.

The Bank of Slovenia is not yet fully financially independent, as it has an obligation to

consult the parliament on its financial plan and on its annual statement of accounts. An

amendment to the Central Bank law addressing these issues was presented to the

Parliament in July 2000.

The privileged access of the public authorities to financial institutions has been partly

abolished. However, it still remains in the area of investment funds. However, further

legislative changes regarding the investment rules of investment funds and management

companies are required to ensure compliance in this area.

Therefore further progress is required in these fields.

Chapter 12: Statistics

Slovenia has already achieved a relatively good level of compliance and in the last year

progress could be recorded in a number of areas.

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The Statistical Office of the Republic of Slovenia (SORS), which is the basis of the

statistical infrastructure,

continues to be the central statistics producer within the

country, co-ordinating other bodies active in the area of statistics production. The

administrative structure was reinforced during 1999 with 26 new employees and during

2000 with 15 new employees. In total the SORS now has 300 employees.

Progress has been made in a number of domains. These include the adoption of several

EC classifications in national versions and their mandatory implementation in surveys,

including use in other administrations. Co-operation with other administrations in

several statistical domains is fruitful and contributes to reducing the cost and to

increasing the quality and timeliness of statistics production.

The situation concerning production of

demographic and social statistics

including

labour force surveys, business registers and other register-based statistics is basically

good and further progress has been made since the last Regular Report. In February

2000, a Law on a Census of Population, Housing Fund and Agricultural Farms was

adopted.

As regards availability of statistics at

regional

level, the results of the agricultural

census of 2000 will serve to introduce these improvements. The regional breakdown of

the country and regional statistics linked to it need further clarification.

Concerning

macro-economic statistics,

nearly complete national accounts are produced

including quarterly and financial accounts. However, quality improvements and some

methodology using the European System of Accounts of 1995 (ESA-95) are still to be

implemented. Developments are expected in fixed capital statistics and quarterly

accounts. Gross Domestic Product coverage (hidden economy) and other quality

improvements in national accounts are a constant challenge. Transparency in the field of

macro-economic statistics still increases trust in them.

Overall assessment

The Statistical Office in general has appropriate infrastructure, in terms of personnel,

information technology and, to a certain extent, finances. This fact, together with the

generally positive situation, will outweigh the proportionally large burden of

implementing the full

acquis

in statistics, as it appears for a small country.

Chapter 13: Social policy and employment

Some progress has been made in terms of transposition of the

acquis,

in spite of the

lengthy legislative process.

No significant progress has been achieved in the area of

labour law,

which is of

fundamental importance for the alignment with the

acquis.

Equality of treatment

is a horizontal theme for Slovenia, which is dealt with in all

changes to legislative measures in the social area. In addition to this, the Government

pursues active policies for women through the Women’s Policy Office. In 1999 this

Office carried out an important campaign in the field of prevention of violence against

women.

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Following the adoption in June 1999 of the

Health and Safety

at Work framework law,

eight executive acts transposing EC provisions on health and safety at work have been

adopted since the last Regular Report.

In compliance with the resolution of the Association Council on

public health,

Slovenia is taking part in several Community programmes

(see part A. on bilateral

relations).

In line with the provisions on the

Social dialogue

in the Amsterdam Treaty, Slovenia

has increased the involvement of the social partners in the preparation of legislation in

the field of employment and social affairs through the Economic and Social Council,

which provides a framework for tripartite dialogue. The social partners are encouraged

to be active in the areas of professional training and in the preparation and

implementation of regulations translating EC requirements into Slovenian legislation.

The Government has involved the social partners in the discussions and the drafting of

national programmes as in the case of the National Employment Action Plan for 2000

and 2001 and the Strategic Development Aims for the Labour Market until 2006.

However, no specific progress has been observed with regard to bipartite social

dialogue, especially at sectoral level, but also within enterprises.

In the area of

Employment Policy,

the Government adopted a document “Strategic

development goals for the labour market up to 2006, employment policy and its

programme of fulfilment”. A National employment action plan for 2000 and 2001 was

adopted at the end of 1999. It is based on four pillars: increasing the employability of

the population, stimulating private business initiative, enhancing companies and worker

flexibility and creating equal employment conditions for men, women and various

groups of disabled people. Slovenia carried out a Joint Employment Policy Review with

the Commission, leading to a document entitled the ‘Joint Assessment of the

Employment Policy Priorities’ which was signed by the Commission and Slovenia in

July 2000.

Preparation for the

European Social Fund

to date has taken the form of seminars and

training courses and the start in February 2000 of a twinning project.

The Law on pension and disability insurance entered into force in January 2000. It is

based on three pillars and will be implemented gradually. A law on calculating financial

obligations of the state towards the Pension and Invalidity Insurance Fund was adopted

in August 2000.

As regards

social protection,

the Programme to Combat Poverty and Social Exclusion

was adopted in February 2000 followed in March 2000 by the adoption of the National

Social Protection Programme, which will run until 2005.

Overall assessment

A large part of the

acquis

in the field of labour law will only be transposed into

Slovenian legislation with the adoption of the Employment Relationships Act, which is

still in Parliament (already submitted in October 1997). The parliamentary procedure is

also very slow in adopting for instance the Parenthood Care and Family Benefits Act

(submitted in July 1998), also in its second reading.

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Since 1994, employment is slowly increasing. Employment rates have been rising to

around 65% in 1998. Slovenia has made substantial progress in transforming its labour

market towards a market-oriented economy. The Joint Assessment paper has identified

key challenges for employment policy, such as an active and preventive approach,

improvements in the educational system and a review of the tax and benefit systems

with a view to increasing incentives to work and create jobs.

There also continues to be a need to strengthen the public employment service, as well

as the public administration and enforcement structures in most areas of social policy

and in particular in the areas of health and safety at work, and labour market and

employment policies. The institutional, judicial and administrative capacity to

implement co-ordination rules in the field of social security of migrant workers needs to

be improved further through strengthening of the social security administration and the

further training of officials.

The Ministry of Labour, Family and Social Affairs will need to set up an organisational

structure necessary for the management requirements of the future European Social

Fund type programmes. This will require additional staff.

As reported last year, although a number of transposing regulations have been adopted

in the meantime, substantial work remains to be done in the area of Health and Safety at

work with respect to important parts of the

acquis.

Activities would be needed at intermediary levels to structure social dialogue and

prepare social partners better, especially at the sectoral level. This development should

be supported through strengthening of the government’s administrative capacity on

social dialogue.

Legislative transposing of the EC Directive based on Article 13 of the Treaty relative to

discrimination on the grounds of race or ethnic origin will have to be introduced and

implemented. The current fight against discrimination falls under the competence of

several institutions, and Slovenia will in the future appoint a co-ordinating body to

combine the activities of state institutions and non-governmental organisations in the

field concerned.

Chapter 14: Energy

Slovenia has made significant progress in this area since the last Regular Report.

Progress was made in the area of

security of supply

with the adoption of secondary

legislation implementing the Amendments to the Act on Commodity Reserves in

December 1999 and March 2000. These decrees define a public policy for obligatory oil

stocks, establish a specific public institution in this field, and foresee the collection of a

special fee on petroleum products aimed at financing the creation of the stocks. While

the government confirmed its programme to reach 60 days of stocks by 2003 and 90

days by 2005, calculations using the EC method indicate that the current level of oil

stocks was only at 18 days. In order to fulfil the programme, the Government was

authorised by the relevant parliamentary body to negotiate with foreign countries the use

of their oil stocks facilities, and decided to initiate a tender in order to rent stocking

facilities from private operators.

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Slovenia has maintained its steady progress as regards energy

competitiveness and the

internal energy market.

The main secondary legislation needed for the implementation

of the energy act in this respect was passed in May. It includes decisions to establish the

Energy Agency as of October 2000, the appointment of its director and the decision to

recruit its employees by the end of 2000. This independent agency will be competent for

both electricity and gas, and will have powers notably on prices, dispute settlement, and

licenses. The domestic market will be opened for electricity produced in Slovenia in

April 2001, and for electricity generated abroad by January 2003 at the latest. Eligible

consumers will be those consuming more than 41kWh per year (60% of the market).

Opening up of the gas market starts in 2003 for all consumers with an annual

consumption of 25 million m

or more, and for all electricity producers using natural gas

for the production of electricity (45% of the market). Changes in the model for setting

gasoline prices were introduced in April and in September, these establish a closer link

with world prices. However, all price distortions have not yet been eliminated.

In the field of solid fuels, Slovenia adopted an act foreseeing the gradual closure of the

Trbolvje-Hrastnik mine. This adds to the decision to close down the others mines, three

of them by July 2002. State aid to the sector has grown over the recent years, although in

1999 such aid was solely devoted to the closing down of mines and entailed no

operating aid.

Slovenia enacted a decree based on the mining act of June 1999 which aimed at fully

transposing the directive on hydrocarbon licensing. It also reinforced the staffing of the

relevant Directorate of its administration.

Limited progress was achieved since the last Regular Report in the area of

energy

efficiency,

although Slovenia conducted information actions and provided a number of

financial incentives to that end.

As regards

nuclear energy,

Slovenia’s nuclear reactor is a PWR unit of Western design

located at Krško (unit 1).

Slovenia has committed itself to reporting twice a year to the EU on its safety

programme. Slovenia continued the safety upgrading programmes for the Krško nuclear

power plant. It installed new steam generators in the plant in June. A new full-scope

simulator was installed in April and is operating with the licenses needed, allowing

training to proceed. The first phase of extensive geological research to re-evaluate the

seismicity of the ground at the Krško nuclear power plant has been completed and the

next phase is on-going.

No major developments occurred in the area of spent fuel storage. Slovenia had returned

all spent fuel from its research reactor to the United States by July 1999. Slovenia

should rapidly settle with Croatia the consequences of the dual ownership of the Krško

plant, particularly on matters such as nuclear waste storage.

Overall assessment

The overall situation in the energy sector in Slovenia is good.

With the energy act, the mining act, the amended commodity reserves act and the

subsequent pieces of secondary legislation Slovenia has laid down most of the

legislative framework for implementing the EU's energy policy and for creating the

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necessary institutions. However, some further legislative work is still needed, notably in

the areas of energy efficiency and nuclear energy.

The proper functioning of the newly created institutions, the Energy Agency and the

public institution for oil stocks will be critical for the fulfilment of the approximation

programme that Slovenia has set itself. This concerns in particular the achievement of

the minimum level of compulsory oil stocks, and the gradual liberalisation of the energy

market in 2001 and 2003. The restructuring and privatisation plans in the sector should

be steadily brought forward, including decisions concerning the Nafta Lendava refinery.

Remaining price distortions, particularly in the electricity sector, should be eliminated.

No major problems are foreseen for Slovenia to comply with the Euratom provisions,

provided the legislative programme is fulfilled and provided that due attention is given

to preparing the implementation of Euratom safeguards.

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 continuation of the

upgrading programme at Krško is therefore essential. Better employment conditions for

the staff of the safety authority would help it to retain its skilled personnel. Longer term

solutions for spent fuel and nuclear waste will have to be found.

Chapter 15: Industrial policy

Since the last Regular Report, Slovenia has made some progress in the field of industrial

policy.

Slovenia's

industrial policy,

based on the "Strategy for Increasing Competitiveness of

Slovenian Industry" adopted in 1996 and updated in 1998 and 2000, is in line with the

principles of EC industrial policy. The emphasis is on promoting competitiveness in an

open market, on increasing the value added per employee, on promoting business

infrastructure and enterpreneurship, on developing industrial clusters, on

internationalising companies and their strategies and on focusing on the new

technologies. The

restructuring

of Slovenian industry, in particular the textile and

footwear industry and steel industry, has been a core element in this strategy. The

Accession Partnership identifies promotion of competitiveness through market based

enterprise restructuring as a short-term priority, and Slovenia has made some progress in

this respect. An important dimension of the industrial policy is the control of state aid

(see

also Chapter 6 – Competition).

In the beginning of 2000, Slovenia performed a benchmarking exercise on the

competitiveness of its industries compared with that of the EU and other OECD

Member States. This action made it possible to identify strengths in promising sectors,

such as biotechnology.

"Developments in Industrial policy should be seen in relation to developments in the context of SME

policy (see

chapter 16 - Small and medium-sized enterprises)."

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After consultations with the Commission, the Slovenian Government approved an

amended steel restructuring programme in September 2000 in order to comply with

Protocol 2 of the Europe Agreement and submitted it to the Commission in October

2000. This programme includes business, financial and personnel restructuring of the

core companies, a liquidation plan for non core business companies, definition of the

privatisation process, an approach for resolving the issue of financial liabilities, the

envisaged scope and scheme of state aids and tackling the social and ecological

consequences in the regions in which the steel industry is predominant.

Two programmes have been adopted to ensure sustainable development and enhanced

competitiveness in the textile and footwear sectors. The total funding for 2000 amounts

€

5.6 million for the textile industry and

€

4.3 million for the footwear industry. A

Programme Council comprising ministries, experts and social partners has been

established to ensure co-ordination and monitoring of the programmes.

Overall assessment

Slovenia has made substantial progress in this area over the past few years and has used

innovative methods, especially in the benchmarking of different industrial sectors. This

exercise is in line with recent initiatives taken at the EC level in the field of enterprise

policy and has demonstrated the degree of progress Slovenia has made in this area.

The ‘Strategy for Increasing the Competitiveness of Slovenian Industry’ updated in

2000 aims to improve the general business environment and the competitive position of

Slovenian industry by focusing on Research and Development, export development, and

the promotion of Foreign Direct Investment. Its principles are in line with the

acquis.

The policy of supporting industrial clusters (industries concentrated in a given region)

has been successful.

In addition, Slovenia has begun to shift from direct intervention in companies, by means

of vertical measures, to horizontal measures for the promotion of competitiveness.

Although direct assistance to companies in the form of subsidies is still present, efforts

have been made to increase the transparency of the measures and to limit their duration.

Furthermore, there has been some progress in the

restructuring and privatisation

the industry. The Commission is currently examining the compliance of the steel

restructuring programme with Protocol 2 of the Europe Agreement. The textile and

footwear sector plans foresee no capacity increases and contain welcome measures.

Nevertheless, the role of the public sector in industry is still too important and therefore

further privatisation is necessary.

The administrative capacity in the field of industrial policy seems to be satisfactory.

However, after the formal ending of the privatisation process in 1998, the role of the

Slovenian Development Corporation (SRD), which manages a number of companies

due to be restructured, privatised or liquidated, is becoming increasingly unclear.

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Chapter 16: Small and medium-sized enterprises

Slovenia has made some progress since the last Regular Report as regards SME policy,

in particular on the development of support schemes and on the improvement of the

business environment.

Slovenia’s

SME strategy

is based on four pillars: small businesses and accession to the

EU, support infrastructure for small businesses, a microcredit scheme and an

information system. This strategy addresses important issues such as the development of

the enterprise sector, regional economic and social stability, job creation and

competitiveness of SMEs. It puts together all the existing means of support for SMEs.

Promotion of development of SMEs has been identified as a priority in the Accession

Partnership.

The Small Business Development Act was modified at the beginning of 2000. The

Small Business Development Fund is now managed within the Ministry of Small

Business and Tourism.

Slovenia has attached priority to the development of an efficient administrative

environment for enterprises.

In November 1999, the Ministry of Small Business and

the Ministry of Labour developed an anti-bureaucracy programme in the framework of

the National Action Plan for Employment (2000-2001). This is based on four pillars:

legislation, local administration, information and entrepreneurial environment. It

addresses issues such as the costs and the time required for setting up a new business,

the flexibility in the labour legislation, the regulation and information, and the access to

technology for SMEs.

Three Euro Info Centres have been opened in Koper, Ljubljana and Maribor. They

operate under the co-ordination of the Small Business Promotion Centre.

Overall assessment

Slovenia’s SME policy is overall aligned with the principles of the EC enterprise policy.

SMEs account for 58% of employment in Slovenia. However, their competitiveness

should be improved. Support mechanisms should be oriented towards innovative,

development-oriented and exporting SMEs. Actions to improve the financial

environment for SMEs have not been very successful in the recent past. The emphasis

put on access to finance needs to be strengthened further in the strategy to support

SMEs. Slovenia has been developing an efficient network of business incubators.

The

definition of SMEs

should be aligned with the EC definition with regard to the

maximum number of employees by type of company.

The administrative capacity in the field of SMEs appears satisfactory. In 2000, the

Ministry of Small Business and Tourism has increased its staff. Nevertheless, Slovenia

has to ensure proper co-ordination between all the related bodies in order to be able to

implement the SME policy effectively. This concerns especially the Ministry of Small

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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Business and Tourism, which is responsible for small companies and the Ministry of

Economic Affairs, dealing with medium sized enterprises.

Chapter 17: Science and research

Further progress has been made in this area since the last Regular Report.

In November 1999 the Act on Support of Companies Developing New Technologies

and Setting up and Managing their Development Units in the Period from the Year 2000

– 2003 was adopted. This act regulates the provision of financial support to companies,

sole proprietorships and individuals in developing new technologies and establishing

and operating their development units in the time period 2000 – 2003.

Since its association with

the Fifth Framework Programme,

as well as the Euratom

Framework Programme, in August 1999, Slovenia has established the National Contact

Point (NCP) system and appointed experts to the Programme Committees. Initial results

for the first year of participation in these programmes have been good.

Overall assessment

On the whole, Slovenia should have little difficulty in taking on the

acquis

in the area of

science and research. Nevertheless, further institution building in this field is to be

welcomed, particularly in the areas of innovation and transfer of results, and in plans to

strengthen scientific autonomy and to encourage equipment renewal.

The level of the existing gross domestic expenditure on research and development

(1.4% of GDP in 1998) approaches the EU-15 average of 1.9%. The new Act is a

valuable effort to stimulate the business expenditure on research.

After its successful launch, participation in the Community programmes could be

further enhanced through continuing promotion of participation of private companies,

including SMEs.

Chapter 18: Education and training

Since the last Regular Report, Slovenia has made progress in this area.

The Agencies for

Community programmes

Leonardo da Vinci, Socrates and Youth for

Europe programmes have been established with appropriate staff. 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 a

decision allowing participation, also from 2000, in the new Youth Programme which

incorporates European Voluntary Service activities.

Regarding

non-discrimination toward EU citizens,

Slovenia adopted the Higher

Education Amendments Act in December 1999. These amendments aim at granting EU

citizens equal treatment in Slovenia as Slovenian nationals upon accession.

Regarding the reforms in the field of training and youth, amendments to the law on

vocational and professional education were enacted in May 2000. Furthermore, the law

on the education and treatment of children with special needs was enacted in June 2000.

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This law regulates education, counselling, guidance and treatment measures for

children, minors and younger people (university programmes) with special needs.

A new Unit for European Affairs has been established within the Ministry of Education

and Sport to enhance co-operation with EU institutions.

Overall assessment

On the whole, Slovenia has achieved substantial progress so far. Participation in the

relevant Community programmes is satisfactory and the National Agencies are

functioning well. However, additional staff will be needed in the National Agencies for

progressive participation in the Community programmes.

The field of education, training and youth is fully in line with the

acquis,

including with

the

directive on the Education of Children of Migrant Workers.

In the past few

years Slovenia has made significant progress in re-orienting the education and training

system to make it suitable for a small open market economy aiming at international

competitiveness.

Chapter 19: Telecommunications and information technologies

Slovenia has made some progress in this area since the last Regular Report.

Slovenia has made some progress since the last Regular Report towards alignment of

the

acquis

regarding

liberalisation of the telecommunications markets.

Decrees have

been adopted on granting concessions for the use of radio-frequencies for mobile

telephony services and for paging services as well as on technical requirements for

cellular mobile radio systems. Four licences have been issued for the provision of

Internet services.

A tender for a third mobile telephony network has been published with the objective to

issue a licence and start operations early next year.

Furthermore, the government has introduced a decree modifying the tariff system for

fixed voice telephony by rebalancing certain prices and by introducing only one tariff

zone for the whole country. The rates of calls to neighbouring countries and the

installation charges are substantially above the EU average, whereas the rates for calls

within Slovenia and the monthly rental charges are well below EU average.

In the field of

regulatory framework

the Telecommunication Act is still not in force.

No developments have taken place since the last Regular Report in

postal

liberalisation.

Overall assessment

Slovenia has a relatively well developed telecommunications sector and there have been

progressive steps towards implementation of the

acquis.

However, the legal framework,

which should be in place by the time of full liberalisation of the telecommunication

markets in January 2001, is still incomplete. Therefore, it is essential that Slovenia

accelerate the pace of legislative alignment, especially by speeding up the adoption of

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the Telecommunication Act, which is still in parliamentary procedure. The adoption of

the law and the establishment of an independent regulatory authority have been

identified as priorities in the Accession Partnership. Alternative infrastructures such as

Cable TV networks can be used for the provision of Internet services only on the basis

of temporary licences.

The preparation for the establishment of an independent National Regulatory Authority

(NRA), foreseen in the draft telecommunications law, needs to start as soon as possible.

It should be operational before the full liberalisation of the sector foreseen for the

beginning of next year in order to ensure the timely implementation of the

acquis.

The National Programme on Telecommunication has been adopted by the Government,

marking further progress in the application of a market-oriented policy. An increase in

the staff of the Ministry of Transport and Telecommunication is foreseen in accordance

with this programme. Nevertheless, the strengthening of resources in the relevant

Ministry should remain an urgent priority.

The field of postal services is regulated by the Postal Service Act of 1997, which has

brought Slovenia's legislation partly into line with the

acquis.

However, further steps are

required to enable full liberalisation in providing postal services. In addition, an

independent regulatory authority has to be established before liberalisation to ensure

smooth implementation and effective enforcement of the

acquis.

Chapter 20: Culture and audio-visual policy

Limited progress in alignment with the

audio-visual

acquis

has been made in Slovenia

since the 1999 Regular Report.

A Media and Audio-visual Culture Department has been set up within the Ministry of

Culture. It will have an overall coordinating role between the different administrative

bodies. In co-operation with the Broadcasting Council, the Department conducts

administrative supervision and inspection and drafts and implements legislation in the

media and audio-visual field.

Overall assessment

On the whole, Slovenia has made limited progress in alignment with the Community

acquis

and further efforts are required in this area. The Mass Media Act, which is to

provide alignment with the Television without Frontiers Directive and to set the legal

framework for Slovenian media in general, was due to be adopted by the end of 1999,

however, it is still in parliamentary procedure. Hence, Slovenia has not met the short-

term priority of the 1999 Accession Partnership for completion of alignment with the

audio-visual

acquis.

The draft mass media law is to provide alignment with the

Television without Frontiers Directive and to set the legal framework for Slovenian

media in general.

Slovenia has been a party to the Council of Europe Convention on Transfrontier

Television since November 1999 and has also ratified the Protocol amending the above

Convention.

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The Broadcasting Council has limited powers for effective monitoring: this weakness is

due to be addressed in the amendment to the Mass Media Act.

In addition, the division of responsibilities between the Broadcasting Council and the

Telecommunication Agency (to be established with the adoption of telecommunication

law) will need to be clearly defined in the area of supervision of audio-visual content

and the attribution of radio frequencies.

It is too soon to assess the effectiveness of the new Media department within the

Ministry of Culture at this point.

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

Since the last Regular Report, significant progress has been achieved in preparing for

the implementation of structural policies.

The

territorial organisation

in Slovenia is based on 12 units similar to NUTS III

statistical units. There is no intermediate authority between the state and the municipal

levels. However, Slovenia proposed a new NUTS classification in March 2000 with the

adoption of the Decree on the Standard Classification of Territorial Units. The new

classification divides Slovenia into two regions, similar to NUTS II, namely an urban

region comprising the capital Ljubljana as its centre and the rest of Slovenia. According

to the Slovenian authorities, the two areas are characterised by different types of

development problems: the metropolitan area is densely populated and has a GDP per

capita of around 87% of the EU average. The peripheral area has a GDP per capita of

approximately 59% of the EU average and faces increasing unemployment and

depopulation problems. This classification was officially presented to the Commission

in May, but remains to be agreed.

With regard to the

legislative framework,

Slovenia adopted six regulations in

May/June this year implementing the Act on the Promotion of Balanced Regional

Development of 1999. These concern the organisation and tasks of the National Agency

for Regional Development and the Regional Development Agencies, the minimum

obligatory structure of regional development plans, the establishment of the Structural

Policy Council, the criteria for defining territories with special development problems as

well as criteria for granting development incentives.

In June 2000, the Government adopted a Decision on the establishment, composition,

organisation and tasks of the Structural Policy Council. The Structural Policy Council is

an inter-ministerial co-ordination body responsible for programme co-ordination at

national level.

Concerning the

preparation for programming,

the Preliminary National Development

Plan (PNDP) 2000 – 2002 was approved by the Government in November 1999. This is

an intermediate step towards the development of a comprehensive and detailed National

Development Plan 2000 – 2006 (NDP). The preparation of the NDP is progressing well.

The National Agency for Regional Development (NARD) was officially established in

September 1999 by the Act Amending the Organisation and Competence of Ministries

for

co-ordinating

the government’s policy for regional development. In May 2000,

Slovenia adopted the Rules on the composition, organisation and tasks of the Regional

Development Agency. The NARD is part of the Ministry for Economic Relations and

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Development and currently employs 20 people. The NARD is responsible for the actual

implementation,

monitoring and evaluation

of programmes. At regional level, so far

only two Regional Development Agencies, which will function under the guidance of

the NARD, have been established. A total of 12 agencies, one per future NUTS III

region, is envisaged.

Concerning the development of the

financial and budgetary management,

Slovenia

adopted two decrees on the basis of the Law on Public Finance of 1999: a decree on the

basis and procedures for the preparation of the State Budget proposal and the Rules on

common criteria for establishing and implementing financial control with direct

budgetary recipients.

Furthermore, the Accountancy Act, which contains special provisions regarding

accounting control and internal audit of legal persons, entered into force in January 2000

and a Decree on general accreditation conditions for payment agencies in Slovenia using

EC funds was adopted in December 1999.

Overall assessment

In the last few years, Slovenia has developed the necessary structures for the

implementation of the Structural Funds after accession. However, some issues still

remain to be tackled.

The new territorial division is a source of concern, since it is not clear on which

analytical requirements and administrative structures the division into these two

statistical units is based. This division is being discussed with the Commission. Also,

Slovenia should avoid establishing an overly complex administrative framework.

The legal basis for regional and structural policy, the Act on the Promotion of Balanced

Regional Development and the Law on Public Finance, is in place. The Law on Public

Finance introduced the four-yearly budgetary programming principle, which will already

be applied to the State budget. The secondary legislation implementing the Regional

Development Act was adopted in May/June this year.

Three key institutions are implementing structural policy at the national level: the

National Agency for Regional Development, the Structural Policy Council and the Fund

for Regional Development and Preservation of Rural Settlement.

Now that these institutions have been established, further efforts are required in setting

up the appropriate structures necessary to improve the co-ordination among national

ministries and with regional and local partners.

With the establishment of the NARD Slovenia has entered a new phase of preparation

for Structural Funds, in which Slovenia will have to develop structures for monitoring,

evaluation and financial control. In this context Slovenia will have to put emphasis on

the strengthening of human resources.

As to statistics, most of the key indicators are available at national level, with some

shortcomings in the fields of employment statistics and structural business statistics. No

regional data are available yet for GDP data, social indicators and structural business

statistics.

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Chapter 22: Environment

Since last year’s Regular Report, substantial progress has been made in Slovenia

concerning the formal alignment of national legislation with the environmental

acquis

especially in the areas of horizontal legislation, waste and chemicals. Progress has also

been made in the drawing up of implementation programmes for various directives.

In the field of

horizontal legislation,

Slovenia adopted a Decree in January on

categories of activities for which environmental impact assessments are mandatory.

This Decree is enforced through the Ministry of Environment and Spatial Planning as

well as municipalities. Slovenian legislation on environmental impact assessment is

now, except for one minor requirement, in line with the

acquis.

Slovenia has therefore

fulfilled this short-term priority of the Accession Partnership 1999 for the most part.

With regard to the protection of

air

against pollution caused by volatile organic

compound emissions in storage and distribution of liquid fuels, alignment has been

achieved with the entry into force of the Transport of Dangerous Goods Act in January.

The Act includes provisions for ensuring that road tankers transporting petrol are tested

for vapour tightness.

Several rules on

waste

and hazardous waste management have been adopted in order to

complete transposition of the relevant Community framework directives. In addition,

rules on the disposal of PCBs and PCTs, the labelling of batteries and transboundary

movements of waste have been adopted since the last Regular Report. Furthermore, the

Government approved legislation concerning waste from the titanium dioxide industry,

which bring the legislation into line with the EC directive. Significant progress has also

been made with transposition of the landfill directive for which certain rules were

adopted early in 2000 aiming at full transposition.

In the field of

water,

several regulations were adopted at the beginning of this year, in

order to limit values of emissions in the discharge of waste water from the food

processing industry to urban waste water treatment plants. The Operational Programme

for the Collection and Treatment of Urban Waste Water with the Water Supply Projects

Programme, which determines the timetable for implementation of measures included in

the National Environment Action Programme, was adopted in November 1999. The

activities are sufficiently concentrated for urban waste water to be collected and

conducted to an urban waste water treatment plant – has been drawn up. Also, the

collection of data on industrial waste water as defined in the directive on urban waste

water has been concluded. Several regulations were also adopted to limit discharge of

dangerous substances into surface waters. Rulings concerning good agricultural practice

and manuring were adopted in April in the field of nitrate pollution. In the field of

drinking water the amendments to the Rules on the sanitary suitability of drinking water

as well as rules on monitoring of pesticides and were adopted.

In the field of

nature protection,

the Act Ratifying the Convention on International

Trade in Endangered Species of Wild Fauna and Flora was adopted in December 1999.

Furthermore, the Law on the Ratification of the Convention on Plant Protection was

adopted in August.

With regard to

industrial pollution and risk management,

several regulations

supplementing the Decree on the emission of substances into the atmosphere from waste

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incineration plants were adopted in March. No progress has been made on laws required

for compliance with the IPPC and Control of Major Accident Hazards directives.

Several regulations necessary for the implementation of the

acquis

relating to

chemicals

have been adopted since the last Regular Report. The new legislation concerns rules on

trade in dangerous chemicals, examinations of health inspectors, data on poisonings,

monitoring of pesticides in drinking water and a decision on granting authorisation to

the Institute of Public Health. The Institute also has nine regional branches and covers,

among other activities, issues related to hygiene and environmental health.

The National Chemical Bureau was established pursuant to the Chemicals Act of 1999.

Furthermore, a team for assessing chemical risks, which consists of experts of the

Chemical Bureau and other institutions, was set up.

The Animal Protection Act, which also covers

genetically modified organisms

and

transposes a large part of the EC directive on the protection of animals for experimental

purposes, was adopted in November 1999.

In the field of

nuclear safety,

Slovenia adopted a law in November 1999 which

permanently forbids the construction of new nuclear power plants and depositing

nuclear waste imported from abroad on the territory of Slovenia. The law provides for

health protection and the preservation of a friendly environment and tackles the problem

of nuclear waste deposits in the framework of land planning. The third station for

continuous sampling and measuring of radioactivity of aerosols in the air was integrated

into the radiation monitoring network in December of last year. Furthermore, the

national database for the monitoring of radiation doses received by radiation workers

was set up and is now in operation at the Nuclear Safety Administration.

(for further

details see Chapter 14 - energy).

Slovenia increased environmental expenditure from 1.5 to 2-2.5% of GDP. Several

investment programmes linked to the enforcement of the

acquis,

a short-term priority of

the 1999 Accession Partnership , were prepared or are under preparation. As foreseen in

the National Environment Action Programme, this share is to increase to more than 3%

of GDP in the coming years.

Overall assessment

Slovenia has made significant progress with the adoption of legislation in the

environmental

acquis.

However, more work remains to be done as regards

implementation and enforcement of the

acquis.

Further efforts for the strengthening of

administrative capacity are still needed. Also the overall responsibilities for

implementation and enforcement are very complex and split between different

ministries and agencies and between different groups within these organisations.

Alignment with the

acquis

is envisaged to be achieved through eleven framework laws.

Six of them - on chemicals, nature preservation, transport of dangerous goods, animal

protection, ratification of the Rotterdam Convention and ratification of the Convention

on international trade in endangered species – are already in place. Some minor

amendments are needed to the existing Environmental Protection Act and to the

Protection Against Natural and Other Disasters Act. The remaining acts are being drawn

up in accordance with the National Environment Action Programme. The Law on

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Water, a short-term priority of the Accession Partnership 1999, has not been adopted

yet, in order to take into account the new EC framework directive.

The key institutions for implementing the environment

acquis

are already in place. The

Ministry of Environment and Spatial Planning, the Administration for the Protection of

Nature, the Hydrometeorological Institute, the Nuclear Safety Administrations, the

Inspectorate for the Environment and Spatial Planning and the Health Inspectorate

already implement and monitor the implementation of most of the national

environmental legislation. As regards the Nature Protection Institute, the regional

institutes for the protection of natural and cultural heritage will have to be reorganised

before the Institute is fully functional. The newly established Chemical Institute has

already started to operate. The preparations to merge the Administration for the

Protection of Nature and the Hydrometeorological Institute into a new Environmental

Protection Agency have already started.

The administrative capacity requires reinforcement, which has already started. Further

strengthening is particularly needed in the areas of waste, water and radiation protection

as well as at local level where many of the responsibilities for implementation lie. Most

of the new posts (in particular environment inspectors) which the Government approved

last year, have already been filled.

Chapter 23: Consumers and health protection

Since last year’s Regular Report, Slovenia has made some progress in this area, in

particular in safety and non-safety related measures.

In the field of

safety related measures,

Slovenia adopted the

Rules on products with

misleading appearance

in January 2000 transposing the relevant directive. The

healthcare databases act was adopted in June. It provides the legal basis for Slovenia’s

future participation in the EHLASS

programme or its successor.

In the field of

non-safety related measures,

some discrepancies between the law on

consumer protection and the law on promoting tourism were solved by amendments to

the law on consumer protection. An Act on Consumer Loan was adopted in July aiming

at transposing the

acquis

on consumers’ credit. In August 1999, the Government

adopted Rules on Price Indications for Goods and Services, thus transposing the

relevant directive.

No major developments have occurred since the last Regular Report as regards the

market surveillance mechanism.

The Parliament approved a

National programme on consumer protection

in July 2000.

This programme represents the basis for the implementation of the Government policy

on consumer protection and provides for a balanced relationship between the interests of

companies and consumers.

European Home and Leisure Accidents Surveillance System

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Overall Assessment

Slovenia has made significant progress in this area.

Substantial progress has been achieved to date in the field of

safety,

considering notably

the transposition of most of the relevant

acquis

on the basis of the framework provided

by the 1999 act on general product safety.

Progress in the field of

non-safety

measures appears generally satisfactory to date in the

areas of pricing, travel and consumer credit. However, several amendments to the

Consumers Protection Act are still needed before full alignment can be reached.

Continued improvements are needed with respect to the

administrative and judicial

framework

for

acquis

enforcement and market surveillance. The institutions for

implementation and enforcement are the Trade Inspectorate, the Health Inspectorate,

and the Office for Consumer Protection, as well as the competent courts. These should

be reinforced by 2002, as foreseen in the government programme of November 1998,

notably in terms of staffing and training.

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

Significant progress has been made since the last Regular Report in the Justice and

Home Affairs sector on policy development, harmonisation of legislation and

strengthening of the administration. Progress has been made especially in the adoption

of legislation for control of illicit drugs. However, full implementation of the

acquis

will

require a further sustained effort.

No particular developments have taken place in the area of

data protection

since the

last Regular Report.

As concerns

visa policy,

the harmonisation of the Slovenian visa list was completed in

1999. The introduction of visa requirements for Bulgaria and Romania in line with the

present

acquis

led to political problems. Therefore, arrangements were made for visa-

free travel for certain categories of people pending the adoption of a new EC Regulation

on visa lists presently under discussion. A regulation concerning issuing of visas for

foreign nationals intending to work in Slovenia was adopted in February but repealed in

March 2000 following criticism about over-restrictive provisions. The electronic system

for issuing visas is being installed and is working in eight diplomatic and consular

representative offices. Instructions on issuing visas by diplomatic missions and consular

posts have been prepared and are being applied, with the exception of those provisions

which will be applicable only after accession. New stickers for visas and residence

permits harmonised with the

acquis

and international standards came into use in June

2000. A Law on passports for Slovenian citizens was adopted in July. It regulates the

passport issuing procedures, monitoring and sanctions against violations. New passports

are due to be issued at the beginning of 2001; they will contain more elements for

protection against fraud.

No major developments have taken place since the last Regular Report concerning

border control

and this area remains a priority to be tackled. There has been no

progress in resolving the question of the sea and land border with Croatia in Piran Bay

and in South Eastern Slovenia.

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As far as

migration

is concerned, the Law on Foreigners covers the entry and residence

of foreign nationals in Slovenia. Implementation of the law was identified as a short-

term priority in the Accession Partnership, and it has been partly fulfilled. Part of the

implementing legislation has been adopted – for instance concerning issuing of visas

and residence permits. A Law on Prevention of Illegal Employment was adopted in

April 2000. A new Law on Foreign Worker Employment and Labour was adopted in

July setting out the criteria to be met by foreign nationals to obtain employment or to

work in Slovenia. The aim of the law is to align the Slovenian legislation with

employment policy principles in the EU member states.

The basic legislation on immigration and

asylum

was adopted in 1999. Implementation

of the asylum legislation was identified as a short-term priority in the Accession

Partnership, and it has been partly fulfilled. A decree on refugee counsellors was

adopted in November 1999. A National Action Plan on Asylum was adopted in April

this year. It identifies several areas in which improvements should be made including

the separation of Asylum Homes from the deportation centre for illegal immigrants and

the adoption of further implementation regulations for the Asylum law. These concern

the process for applying for asylum, and the rights of asylum seekers and refugees.

Some of these concerns have been addressed in a decree adopted in July concerning

treatment of asylum seekers and the documentation needed for an application for

asylum. Following a recommendation of the Plan, an Operative Unit has been

established at the Ministry of the Interior for processing asylum applications.

Overcrowding of the centres is a further problem that should be resolved. This has

become more acute as the number of illegal immigrants increased dramatically during

the summer of 2000. The Plan also suggests the establishment of a centre that would

assist in asylum proceedings and train personnel in implementation of the legislation.

The Ministry of Interior and the Police have been reorganised according to Rules which

entered into force in April. This reorganisation has enhanced the administrative capacity

of these institutions. Recruitment of 91 new staff into the Police, the establishment of a

Criminal Investigation Police Directorate (with a section for organised crime) and of

units for computer crime, criminal analysis and investigation support are foreseen. The

Slovenian

police

have enhanced

cooperation

with police in the Member States in the

areas of training, equipment and cooperation in state border control. A police

cooperation agreement with Italy was ratified in November last year.

In order to improve the monitoring of

fraud and corruption,

the police has been

reorganised, and specialised units to fight fraud and corruption at national and regional

level have been established together with a unit for crime in the public and business

sector and financial crime in the General Police Directorate. Slovenia ratified the

Council of Europe Criminal Law Convention on Corruption in February. (see

also part

B.1.1. on Political criteria)

Significant progress has been made in adoption of legislation related to illegal

drugs.

The Law on the Prevention of the Use of Illegal Drugs and the Treatment of Drug

Addicts was adopted in November 1999. The law establishes measures for prevention,

treatment, rehabilitation and social programmes in this field. Prevention and monitoring

activities are delegated to the Office for Drugs. The Law on the Production and Traffic

of Illegal Drugs adopted in December 1999 sets the framework for preventing

cultivation of illicit drugs or plants, for their manufacture and for preventing trafficking

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and possession of illegal drugs. The Law on Precursors of Illegal Drugs was adopted in

February 2000 taking into account the UN convention and the relevant

acquis.

Concerning

judicial cooperation,

in September 1999 Slovenia ratified the European

Convention on Mutual Assistance in Criminal Matters and the Additional Protocol to it.

Slovenia ratified the European Convention on International Validity of Penal

Judgements in July 2000 as well as the Convention on the Service Abroad of Judicial

and Extrajudicial Documents in Civil or Commercial Matters and the Convention on

Taking of Evidence Abroad in Civil or Commercial Matters. The European Convention

on the Suppression of Terrorism was ratified in September 2000.

Overall assessment

The overall situation and level of alignment in the Justice and Home Affairs area is in

general good, with the exception of border control, on which further efforts are still

needed.

The legislative framework for data protection is largely in place. A Classified

Information Act has been submitted to the parliamentary procedure. Slovenia ratified

the Council of Europe Convention on the protection of Individuals with regard to

Automatic Processing of Personal Data in 1994. An independent body for data

protection is still missing but its establishment is foreseen in amendments to the Law on

Personal Data Protection submitted to the parliamentary procedure in August.

Slovenian

visa policy

is close to alignment – however, Slovenia still has to align its

legislation as far as airport transit visas are concerned.

The government has recognised the need for improving

border control,

especially at

the green border with Croatia, and is implementing measures to this end. The

government set up a coordinating group in July to lead the preparations for the

establishment of customs, phytosanitary and veterinary inspections and security at the

future EU border between Slovenia and Croatia. The legislative framework in the area

of border control is still incomplete as the law on border control is still outstanding. The

government plans to adopt the law by 2002. Enhanced border control is especially

important, as Slovenia has become a transit country for illegal immigrants, mainly over

the borders with Croatia and Hungary. Substantial assistance is being provided from

Phare in this area and a Phare Twinning project has been ongoing on state border control

since the end of last year. Slovenia has a simplified border crossing regime with Austria

and Italy and agreements with all neighbouring countries (Austria, Croatia, Italy,

Hungary) concerning the right to enter the territory of Slovenia with identity cards. An

agreement on border control assistance with Germany was signed in 1999. An

agreement with Croatia on border control is in the process of ratification .An agreement

with Austria on border control cooperation is in ratification procedure and a similar

agreement with Hungary is still lacking. While international assistance and cooperation

will contribute to responding to the training needs in the sector, particular attention

should be paid to adequate staffing and equipment. Also, adequate funding needs to be

provided for redeployment of staff from borders that will become EU – internal borders

to the EU- external borders.

The legislative framework concerning

migration

remains to be completed. Rules for

issuing visas for foreign nationals intending to work in Slovenia also still need to be

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adopted. According to police data, illegal immigration into Slovenia increased by 3% in

1999 compared with 1998. About 40,000 people – mainly from Romania, FYROM,

Yugoslavia, Ukraine, Turkey and Russia were refused entry. The number of illegal

immigrants increased during the summer of 2000. From January – August 2000, over

18,000 illegal immigrants were caught – the same number as during the whole of 1999.

Slovenia has readmission agreements with Belgium, Bulgaria, Canada, Croatia, Czech

Republic, Denmark, Estonia, France, Greece, Hungary, Italy, Latvia, Lithuania,

Macedonia, Poland, Romania, the Slovak Republic and Switzerland.

The necessary institutions in the area of

asylum

have been created and administrative

capacity in the sector has been strengthened through appointment of new staff, including

28 refugee counsellors. However, some implementing legislation for the Asylum Act is

still missing and there is still a need for further training of staff. The National Action

Plan on Asylum has identified the remaining issues to be tackled in the area – including

the creation of asylum homes separate from the deportation centre for illegal

immigrants. Slovenian asylum policy is rather restrictive and only five persons have so

far obtained refugee status in Slovenia. The number of asylum seekers is increasing (800

in 1999 and 1300 in the first six months of year 2000).

According to available information, fraud, corruption and organised crime are not major

problems in Slovenia. The reorganisation of the Slovenian

Police

will enable it to fight

fraud, corruption and organised crime

more effectively. The administrative structures

for tackling these problems have been strengthened through the creation of specialised

units in the police. The legislative framework has been created. Legal provisions needed

for Slovenia’s eventual accession to the Convention on protection of the EC’s financial

interests are included in the Penal Code. Slovenia had ratified the Convention on

Laundering, Search, Seizure and Confiscation of the Proceeds from Crime already in

1998 and has initiated proceedings to sign the Council of Europe Civil Law Convention

on Corruption and the OECD Convention on Combating Bribery of Foreign Public

Officials in International Business Transactions. The adoption of these conventions was

also identified as a priority in the Accession Partnership. Strengthening of capacities to

deal with money laundering was identified as a further priority in the Accession

Partnership. The legislative basis for prevention of

money laundering

is in place and

the National Office for Money Laundering Prevention continues to act as the Slovenian

Financial Intelligence Unit.

Substantial progress has been made in the past year in creating the legal framework in

the area of illicit

drugs.

Amendments to the law strengthening the police mandate and

enabling faster trials are in parliamentary procedure. Further strengthening of the

institutions in this area would enable the authorities to tackle the drug problems more

effectively. The Ministry of Health is planning to set up by the end of this year an

independent information unit for illicit drugs. This unit will become the focal point for

cooperation within the Reitox network. Efficient control of drug transit presupposes

strengthened border control especially at the borders with Croatia and Hungary.

Government statistics on drug related crime indicate a considerable increase in the

1990’s. Slovenia is also increasingly becoming a drug consumption country in addition

to being a transit country on the Balkan route.

Concerning

customs cooperation,

Slovenia’s cooperation with OLAF has been

effective.

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Concerning international

judicial cooperation,

Slovenia has requested to sign the

Lugano Convention on the Jurisdiction and Enforcement of Judgements Abroad in Civil

and Commercial Matters. A law allowing Slovenia to improve its cooperation with the

UN International Criminal Tribunal for the former Yugoslavia has been submitted to

parliamentary procedure. Slovenia has extradition agreements with Austria, Croatia,

France, FYROM, Germany, Italy and Turkey.

Chapter 25: Customs union

Some progress has been made in this area since the last Regular Report.

No developments have taken place since the last Regular Report in the field of the EC

Customs Code and its implementation provisions.

Regarding the customs

acquis

outside the Code,

the Law on Customs Tariffs was

adopted in July 2000. It will enter into force in January 2001. It aims to enable greater

flexibility in the alignment of Slovenia’s tariffs with those of the EC. Furthermore, the

regulation on the method of implementation of duties of authorised persons of the

Customs Service was adopted in July 2000.

The administrative and operative capacity to implement the

acquis

has been

strengthened through the appointment of new staff and reorganisation of the relevant

institutions. In the second half of 1999 new departments were set up within the Customs

Office: The Department for administrative co-operation within the Excise Duty Section,

the Transit Unit in the Customs System and Customs Procedure Sector and the TARIC

Department in the sector for tariff value and origin. At the end of 1999 and in the first

half of 2000, the Customs Administration increased the number of its employees by 30.

The intelligence service within the Customs Administration has obtained additional

human resources and special equipment to fight smuggling and illicit trafficking as well

as new computer equipment.

The Custom Administration’s IT Support Service followed the legislative and

organisational changes. Unified software support for the application of border customs

procedures was introduced and the Customs Service achieved an increase of computer

control over the major part of significant transit routes crossing the territory of Slovenia.

Overall assessment

Slovenia has already reached a good level of harmonisation with the EC

acquis.

However, refinement is still necessary in a number of areas such as customs

warehousing, cultural goods, free zones, duty reliefs and the system of tariff quotas,

ceilings and suspensions.

The amendments of the Customs Service Act and the relevant implementation rules

adopted in the first half of 1999 represented substantial progress in Slovenia's alignment

with the customs

acquis.

The Law on Customs Tariffs provides for further methodological alignment with EC

standards, however the law is not fully harmonised from the point of view of the

combined nomenclature system.

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Slovenia participates in the Pan-European System of Origin, and has agreed to the

amendments to the System which will come into force in January 2001.

The administrative and operational capacity to implement the

acquis

has reached a

partially satisfactory standard, as concerns training of staff and material equipment. The

adoption of the regulation concerning duties of customs service personnel is an

important step towards regularisation and strengthening of the administration. However,

efforts must still be made to fully arrive at an integrated computerised system

comparable to the EC administration.

Chapter 26: External relations

Slovenia has made considerable progress in this area since the last Regular Report.

As regards the

Common Commercial Policy,

since 1999 there has been some progress

in alignment of Slovenia's agriculture and fisheries tariffs with those of the EC.

Slovenia's average applied tariffs are 10.6%. (EC: 5.3 %) on all products, 13.6%. (EC:

9.4 %) on agricultural products, 7.4%. (EC: 12.4%) on fishery products and 10.0% (EC:

4.2 %) on industrial products.

Slovenia adopted the Act Regulating the Exports of Dual-Use Goods, the Decree on the

List of Dual-Use Goods and the Order on the Format and Content of Request Forms for

the issuing of authorisations for the export of dual-use goods in Spring 2000. These

measures aim to establish a unified monitoring system over the export of dual-use

goods.

In June 2000 Slovenia became a participant in the WTO Agreement on Trade in

Information Technology Products.

Between September 1999 and May 2000 Slovenia ratified

bilateral agreements

on the

protection of investments with Albania, the Belgo-Luxembourg Economic Union,

Bulgaria, Greece, Kuwait, Poland, Portugal, the Russian Federation, Spain, Thailand

and Ukraine, signed similar agreements with Italy, Sweden and initialled an agreement

with Austria. In addition Slovenia ratified bilateral agreements on economic co-

operation with Bosnia and Herzegovina, Brazil, Egypt, Indonesia, Korea, the Philippines

and Thailand.

In December 1999 the Free Trade Agreement with FYROM came into force and in

August 2000 the Free Trade Agreement with Israel came into force.

Regarding

humanitarian aid,

Slovenia is involved in projects under the Stability Pact

for Southeast Europe, for instance by providing health care in the context of SFOR and

through the International Trust Fund of Demining and Mine Victims Assistance in

Bosnia Herzegovina.

As a member of the WTO Slovenia has established an interministerial working group

for the efficient co-ordination of WTO matters and for dealing with the preparations for

further negotiations on liberalisation within the WTO.

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Overall assessment

Slovenia has made good overall progress and has continued to liberalise its trade policy.

Its trade trends and policy are increasingly integrated with those of the EU.

The EU and Slovenia have established a framework for co-operation regarding WTO

issues both at ministerial and at departmental level. Slovenia has been supportive of EU

policies and positions within the WTO framework. As regards the new round, Slovenia

concurs with the EU on the need to launch a comprehensive trade round as soon as

possible and shares the view that the results of work under the built-in-agenda would be

less substantial in its absence.

Slovenia has progressed in aligning the legislation related to the Government

Procurement Agreement (GPA) with the

acquis

and is an observer of the WTO

Government Procurement Committee. It will need to accede to the GPA before its

accession to the EU. Slovenia will also need to sign the WTO Agreement on Civil

Aircraft before accession.

Slovenia agreed in 1999 to phase in tariff reductions to reach the level of Common

External Tariff (CET) by 2003. However, it is important that the preferential regime

provided in the Europe Agreement is maintained.

Slovenia is a member of CEFTA. It has concluded free trade agreements, for instance

with the Baltic States, Turkey, Croatia, FYROM and Israel, and an agreement on

Economic Cooperation with Bosnia-Herzegovina. In this respect Slovenia should

continue to keep the Union fully informed about negotiations aimed at the conclusion of

any new trade agreements with a third country.

As regards the WTO Agreement on Trade in Textiles and Clothing (ATC), Slovenia

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.

Further co-ordination is necessary in order to consolidate the adjustment of the

Slovenian list of commitments in the General Agreement on Trade in Services (GATS)

with the EC commitments and to align it with the EC exemptions.

Regarding development policy and humanitarian aid, Slovenia should closely co-operate

with the EU.

Chapter 27: Common foreign and security policy

Slovenia has made good progress in this area since the last Regular Report.

The regular

political dialogue

established by the Europe Agreement is proceeding

smoothly and Slovenia continues to orient its foreign and security policy towards the

EU. It participates actively in the framework of the Common Foreign and Security

Policy (CFSP), including meetings at the level of Political Directors, European

Correspondents and Working Groups.

Slovenia 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

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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,

Slovenia has regularly

aligned its positions with those of the Union and, when invited to do so, has associated

itself with the Union’s

joint actions and common positions.

It has refused to do so

only once: In September 2000 concerning the EU declaration on the elections in the

FRY. Slovenia did not agree with the wording of the EU Declaration supporting

‘reintegration of the FRY into the International Community’ as it thought that this

wording implied recognition of FRY’s claim to be the sole successor state of SFRY.

A Declaration of Foreign Policy of the Republic of Slovenia was adopted in December

1999. It defines full membership in EU, NATO and the WEU, membership in the

OECD and an active role in the UN, OSCE and CEFTA as Slovenia’s foreign policy

priorities in addition to stable and good neighbourly relations with countries in its

vicinity. Participation of Slovenia in the stabilisation of the South-Eastern Europe is

defined as a further priority. Slovenia was a non-permanent member of the UN Security

Council in 1998 and 1999.

Slovenia’s relations with its neighbours remain good. It engages actively in trilateral

cooperation with Italy and Hungary, which in September 2000 became quadrilateral

with the inclusion of Croatia, and participates in the Central European Initiative.

Slovenia’s relations with Croatia have become more constructive after the political

changes in Croatia. Slovenia ratified the bilateral property agreement in December,

which creates a basis for resolving outstanding property rights cases. The two countries

have also concluded an agreement on border transport and cooperation – however, it

remains to be ratified by Slovenia. However, there are still some outstanding issues to

be settled between the two countries including the demarcation of the land and sea

border at Piran bay and in South Eastern Slovenia. The settlement of ownership of the

Krsko nuclear power plant (situated in Slovenia but jointly owned by the two countries)

and the debt of the Slovenian Ljubljanska Banka to its former Croatian account holders

at the bank’s former branch in Zagreb also need to be tackled.

Slovenia continues to participate actively in the Stability Pact for South Eastern Europe

by contributing to the three Working Tables. It also offers assistance to the countries of

South Eastern Europe – over 30 projects have been approved and Slovenia has allocated

about

€

4 Million for this purpose. 40 per cent of this assistance is earmarked for

Bosnia-Herzegovina. Slovenia also initiated the setting up of the International Trust

Fund for Demining and Mine Victims Assistance for Bosnia-Herzegovina. The Fund

has expanded its activities to Croatia and Kosovo.

Since the last Regular Report, Slovenia has adopted defence and military cooperation

agreements with Israel, Portugal, Poland, Hungary and Estonia and agreements on

cooperation between Defence Ministries with Greece and Bulgaria.

Overall assessment

The overall progress achieved in alignment with the

acquis

in the CFSP area is

satisfactory. Slovenia should maintain its foreign policy orientation in line with that of

the Union as the

acquis

in the field of foreign policy and security develops further.

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Slovenia’s relations with its neighbours remain good. It still has a number of remaining

issues to be settled with Croatia but the overall relations between the two countries can

be considered good. Slovenia’s role and the special contribution it can make in South

Eastern Europe have been reconfirmed in the course of the last year.

Slovenia has a well staffed (a total of 436) and functioning Ministry of Foreign Affairs

and the administrative capacity to implement the provisions relating to CFSP.

Chapter 28: Financial control

During the period covered by this Regular Report, good progress has been made in the

field of financial control.

In the area of

internal financial control system,

the Law on Public Finances was

adopted in September 1999. It regulates the structure, preparation and implementation

of the national budget and budgets of municipalities and contains provisions regarding

accounting and budget control. A special unit in charge of internal financial control has

been created in the Ministry of Finance. The Rulebook on Joint Criteria for the

Organisation and Procedures of Financial Control was enacted in February 2000 on the

basis of the Public Finance Act adopted in September 1999. These provisions provide

the foundation for the establishment of an internal audit function in line ministries and

other government spending centres, and of a centralised organisation for harmonising

control and audit methodology.

No particular developments have taken place concerning

external financial control.

According to a plan to strengthen the Government Office for Budgetary Control within

the Ministry of Finance, 4 new staff was recruited. The Court of Auditors increased its

staff from 88 to 91 employees.

Slovenia has strengthened administrative capacities regarding

control of structural

action expenditure

and

protection of financial interests

following the adoption of the

Law on public finances in 1999. The Government Office for Budgetary Control has

been reorganised and the staff increased. According to the new organisational structure,

this office now oversees the legality and effectiveness of integral budget expenditures

and EC-funds.

Overall assessment

Substantial progress has been made in the field of financial control in the past few years.

Completion of the legislative framework for internal and external financial control and

the setting up of internal audit/control units in spending centres has been identified as a

priority in the Accession Partnership. The Public Finance Act and the Rulebook in

particular are adequate starting points for further implementation of internal financial

control. The appointment of internal auditors is an important step towards effective

internal control. However, a properly defined functional independence of the internal

audit function and a precise mechanism for the follow –up of internal audit reports still

need to be set up. In addition, an adequate description of the relationships between the

different control bodies is necessary for efficient implementation. In the framework of

an adequate public internal financial control system, it is now important to focus on the

development of financial management and control manuals in line ministries and other

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government spending centres. Audit manuals should be set up in the internal audit

services, based on the methodological guidelines of the Ministry of Finance.

External financial control can be considered adequate in Slovenia. The Court of Audit

operates functionally and financially independently of the government. Its activities

cover the full range of regulatory and performance audits set out in international

standards. However, further improvements remain to be made, especially in the field of

systems and performance audit. There is scope to improve on the follow-up procedures

of both the Parliament and the Government relating to the Court's findings and

recommendations. These do not seem to be satisfactory at present. Furthermore, the

Court’s status needs to be formally changed to that of a National Audit Office so that it

no longer issues decrees.

The administrative capacity of the Court and the Budgetary Inspectorate need to be

strengthened.

The institutional framework concerning structural action expenditure and protection of

EC financial interests is in place. However, to ensure effective implementation of the

legislation harmonised with the

acquis,

the strengthening of the Government Office for

Budgetary Control should continue.

Chapter 29: Financial and budgetary provisions

Slovenia has made some progress in this area since the last Regular Report.

Slovenia has made some progress in the reporting period as regards the

national budget

and EC co-financed measures.

A new legal basis for the management of budgetary

funds in Slovenia, the Law on Public Finance and the Accountancy Act, entered into

force in January 2000. The principles and rules contained in these laws generally meet

current

standards and their application will contribute to ensuring sound

management of Community assistance in overall budgetary terms. The Law on Public

Finance introduced multi-annual programming of public expenditure, which has been

put into practice as of this year for the preparation and monitoring of budgets for the

next four-year period.

In the field of

own resources

the Parliament adopted in July the Law on Customs

Tariffs, which aims to facilitate the alignment of Slovenian tariffs with those of the EC.

No particular developments have taken place as regards the

administrative

infrastructure.

Overall assessment

Slovenia has made some progress as regards the

acquis

on financial and budgetary

provisions.

The legal framework for the management of budgetary funds, comparable to that found

in EU member States, is already in place. In parallel, the analytic capacity for the

appraisal, follow-up and evaluation of projects and programmes should be developed in

the Ministry of Finance and spending departments. With regard to the Community’s

own resources, further efforts to align with the

acquis

still need to be made. Calculation

of GNP still needs to be fully harmonised with the ESA 95 statistical norms. VAT was

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only introduced on 1 July 1999. The main features are in line with the

acquis,

but no

experience or data for the control, assessment or inspection of VAT collection is

available at this early stage. Nevertheless, the introduction of VAT was smooth and

properly managed, with no major price increases or liquidity problems and, according to

the Ministry of Finance’s receipts, in line with expectations. Concerning the traditional

own resources, there are currently no special provisions for agricultural levies in

Slovenia. Further amendments to the sugar regime are necessary for full alignment with

the

acquis.

The legal basis for the collection of customs duties is in place, but still needs

to be further harmonised with the

acquis.

As regards administrative capacity, the necessary institutions for implementing the

acquis

in this field are already in place. However, central co-ordination for the proper

collection, monitoring and payment of funds to and from the EC budget still need to be

strengthened. Furthermore, administrative strengthening will also be necessary 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.

Slovenia has made further progress in translating the

acquis

into Slovene. Concerning

the primary legislation, the Single European Act, the Maastricht Treaty and the Euratom

Treaty have been translated. According to the government, almost one quarter of the EC

secondary legislation – i.e. 23.600 pages of the Official Journal have been translated.

However, only 26 pages have been legally revised.

The Translation Unit of the Government Office for European Affairs with 38 staff is

responsible for this task. The government is also providing funding for translations

commissioned from freelance translators. Slovenia aims at completing the translation of

the

acquis

by the end of 2002.

Urgent additional efforts are required in this area.

3.3.

General evaluation

Since the last Regular Report,

Slovenia has made good overall progress in transposition

of the acquis.

It has made significant progress in some key areas, such as environment,

agriculture, free movement of goods, freedom to provide services, and energy. In these

areas the preparations for membership are already well advanced. However, only limited

progress has been made in other areas, notably on free movement of persons,

telecommunications and the audio-visual

acquis.

Slovenia’s administrative capacity has

been reinforced, however, in some areas it still needs strengthening.

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Slovenia has made good progress since the last Regular Report in adopting legislation in

the key areas of the internal market

acquis.

Substantial progress has been made in

establishing the legislative framework for

free movement of goods,

including in public

procurement, and Slovenia should now concentrate on the timely and complete enacting

of the remaining legislation and the strengthening of the institutional set-up. Significant

progress has also been made in the area of

freedom to provide services.

With the

adoption of the insurance legislation, a large part of the legislative work in this area has

now been completed. The legislative framework for

free movement of capital

has now

been put in place but Slovenia should continue eliminating the remaining administrative

restrictions to capital movement. Little progress has been made since the last Regular

Report in the field of

free movement of persons,

and further legislative efforts are

required in this area. The legislative framework is also quite advanced in the area of

company law,

but some improvements are still needed, for instance concerning

intellectual and industrial property rights.

Slovenia has completed the legislative and institutional framework for

competition

policy

with the adoption of the State Aid Control Act and secondary legislation as well

as setting up of the State Aid Monitoring Commission, and efforts should now be

focused on establishing a good track record of enforcement in this area. Steady progress

has been made in the

taxation

area, except for the failure of Slovenia to fulfil its

commitment on closure of the duty free shops.

In the

transport

sector, the progress has been uneven and the overall situation is mixed:

while good progress has been made in the area of land transport, the air and maritime

transport areas are characterised by delays in adoption of key legislation in the

Parliament. Slovenia has made good progress over the past year in the

energy

sector by

setting up the Energy Agency and adopting some key legislation.

Very little progress has been made in the

telecommunications

and

audio-visual

sectors.

The Mass Media Law providing the framework for alignment in the audio visual sector

still remains to be adopted. The Law on Telecommunications has not been adopted yet

and the supervisory authority for the telecommunications sector remains to be set up.

Good progress has been made in

agriculture

sector in particular through the adoption of

the Agriculture Act and the establishment of the Agency for Agricultural Markets and

Rural Development. Legislative alignment in the phyto-sanitary and veterinary sectors

should be continued. Slovenia has advanced well with adoption of legislation in the

environment sector, and focus should now be set on implementation and enforcement.

The good overall progress of the previous year has been continued in

Justice and Home

Affairs,

where the legislative framework has been developed further. However, efforts

are still needed in border control, and this remains a priority to be tackled.

In general, Slovenia’s

administrative capacity

for implementation of the

acquis

has been

enhanced. Since the last Regular Report, significant progress has been made with the

establishment of the supervisory and implementing institutions in the areas of state aids,

energy and agriculture, and separation of the institutions for standardisation,

accreditation and certification. For telecommunications and data protection, independent

regulatory agencies still remain to be established. Attention should now be focussed on

strengthening the administrative capacity in some particular areas such as the local level

in the environment sector, border control, public procurement, insurance supervision.

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Slovenia has met a significant number of the short-term Accession Partnership

priorities,

especially in the areas of the economic criteria, transport, environment,

employment and social affairs. In other areas the priorities have been met partially.

Slovenia has also already started to implement a number of medium-term priorities.

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C. Conclusion

Slovenia continues to fulfil the Copenhagen political criteria.

Progress has been made in judicial reform, which is a medium term priority in the

Accession Partnership. However, it is still too early to assess the effectiveness of the

new measures aimed at reducing the backlog of pending court cases.

Public administration reform is another area requiring attention. Little progress has been

achieved in this respect since the last Regular Report as important pieces of legislation

which are to provide the basis for reform have not yet been adopted. This area is a

short-term priority in the Accession Partnership.