Europaudvalget 2003-04
EUU Alm.del Bilag 176
Offentligt
Comprehensive monitoring report
on
Hungary’s
preparations for membership
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A.
B.
INTRODUCTION ................................................................................................................................ 3
ECONOMIC ISSUES ........................................................................................................................... 5
1.
Economic developments ........................................................................................................... 5
2.
Implementation of recommendations for improvements........................................................... 7
COMMITMENTS AND REQUIREMENTS ARISING FROM THE ACCESSION
NEGOTIATIONS ............................................................................................................................... 10
1.
Administrative and judicial capacity....................................................................................... 12
Public administration............................................................................................................... 12
Judicial capacity ...................................................................................................................... 13
Anti-corruption measures........................................................................................................ 14
Translation of the acquis into Hungarian ................................................................................ 17
2.
The chapters of the acquis....................................................................................................... 18
Chapter 1: Free movement of goods....................................................................... 18
Chapter 2: Free movement of persons .................................................................... 20
Chapter 3: Freedom to provide services ................................................................. 21
Chapter 4: Free movement of capital...................................................................... 23
Chapter 5: Company law ........................................................................................ 23
Chapter 6: Competition Policy ............................................................................... 25
Chapter 7: Agriculture ............................................................................................ 26
Chapter 8: Fisheries ................................................................................................ 30
Chapter 9: Transport policy.................................................................................... 31
Chapter 10: Taxation .............................................................................................. 32
Chapter 11: Economic and monetary union ........................................................... 33
Chapter 12: Statistics .............................................................................................. 34
Chapter 13: Social policy and employment............................................................ 34
Chapter 14: Energy................................................................................................. 37
Chapter 15: Industrial policy .................................................................................. 38
Chapter 16: Small and medium-sized enterprises................................................... 38
Chapter 17: Science and research ........................................................................... 39
Chapter 18: Education and training ........................................................................ 39
Chapter 19: Telecommunications and information technologies ........................... 39
Chapter 20: Culture and audio-visual policy .......................................................... 40
Chapter 21: Regional policy and co-ordination of structural instruments.............. 41
Chapter 22: Environment........................................................................................ 43
Chapter 23: Consumer and health protection ......................................................... 45
Chapter 24: Justice and home affairs...................................................................... 46
Chapter 25: Customs union .................................................................................... 49
Chapter 26: External relations ................................................................................ 50
Chapter 27 – Common foreign and security policy................................................ 51
Chapter 28: Financial control ................................................................................. 52
Chapter 29: Financial and budgetary provisions .................................................... 53
CONCLUSION................................................................................................................................... 55
C.
D.
STATISTICAL ANNEX.............................................................................................................................. 57
2
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A.
I
NTRODUCTION
The accession negotiations with Hungary were successfully concluded on 13 December
2002 and the Treaty of Accession was signed on 16 April 2003. In a referendum held on
12 April, a majority of Hungarians expressed their support for membership of the
European Union. Following ratification of the Treaty of Accession, Hungary will join the
EU on 1 May 2004.
In its Strategy Paper “Towards the enlarged Union”, which accompanied the 2002
Regular Reports, the Commission stated that:
“Acceding countries need to implement the acquis by the date of accession, except in
cases where transitional arrangements have been agreed. Commitments undertaken
in the negotiations must be fully met before accession. The Regular Reports point to
a number of areas where further improvements need to be made in the context of the
political and economic criteria and in relationship to the adoption, implementation
and enforcement of the acquis. These should be vigorously pursued. In order to
analyse progress and to facilitate successful membership of the European Union, the
Commission will regularly monitor this and report to Council. The Commission will
produce six months before the envisaged date of accession a comprehensive
monitoring report for the Council and the European Parliament.”
The Copenhagen European Council in December 2002 concluded that:
“Monitoring up to accession of the commitments undertaken will give further
guidance to the acceding states in their efforts to assume responsibilities of
membership and will give the necessary assurance to current Member States.”
and the Thessaloniki European Council in June 2003 stated that:
“…the ten acceding States are encouraged to keep up their efforts so that they are
fully prepared to assume the obligations of membership by accession. This also
includes the necessary translation of the Community acquis. With a view to making a
success of enlargement, the monitoring of these preparations has been intensified on
the basis of reports submitted regularly by the Commission.”
As the accession date of 1 May 2004 draws closer, this report presents a comprehensive
state of play of the findings of the regular monitoring carried out by the Commission,
building upon the findings of the 2002 Regular Report for Hungary. The report contains
two main parts.
The first part deals with economic issues. It describes briefly economic developments in
Hungary and then goes on to assess the implementation of the necessary economic
reforms in the areas highlighted in the conclusions of the 2002 Regular Report for
Hungary as being in need of further improvements.
The second part gives an overview of where Hungary stands in implementing all
commitments and requirements arising from the accession negotiations for each
acquis
chapter, both in terms of legislation and from the perspective of implementing structures,
including administrative capacity and enforcement. In view of their importance for the
implementation and enforcement of the
acquis,
the overall state of readiness of the public
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administration and the judicial system and the development of effective anti-corruption
measures are assessed in an introductory section to this part.
This report reflects the situation at the end of September 2003. It records decisions
actually taken, legislation actually adopted, measures actually implemented and
structures actually in place and functioning by that date.
For each chapter of the
acquis,
this report identifies the areas in which Hungary is
expected to be, or is already, in a position to implement the acquis and the areas where
further action is still needed. Where relevant, the report also points out issues where
lagging or deficient preparations are a cause of serious concern. This assessment starts
from the premise that Hungary must be fully prepared for membership from the date of
accession. In cases where transitional arrangements have been agreed in the accession
negotiations, their effect on Hungary’s obligations is duly reflected in the assessment.
Numerous sources of information have been used to compile this report. Hungary was
invited to provide information on its state of preparedness. The Report also draws on
information provided by Hungary within the framework of the Association Agreement
and the accession negotiations, as well as on peer reviews that have taken place to assess
its administrative capacity in specific areas. Council deliberations and European
Parliament reports and resolutions have been taken into account in drafting it.
1
Where
relevant, the Commission has also drawn on assessments made by various international
organisations such as the Council of Europe, the OSCE and the international financial
institutions, and by non-governmental organisations.
1
For the European Parliament the rapporteur is Mr Luis Queiro.
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B.
E
CONOMIC ISSUES
In its 2002 Regular Report, the Commission concluded that
“Hungary is a functioning market economy and that the continuation of its current
reform path should enable Hungary to cope with competitive pressure and market
forces in the Union.
Improvements can be made to macroeconomic management by reducing the general
government deficit, thus preventing fiscal policy to become pro-cyclical and
supporting a further reduction of the inflation rate. A more fundamental reform of
the health care sector now needs to be embarked on. Wage developments will have to
be brought in line again with productivity growth in order not to compromise the
country’s competitiveness.”
The principal purpose of this part of the Comprehensive Monitoring Report is to assess
the implementation of recommendations for improvements in the areas identified in last
year’s Regular Report. The focus is on the change since last year and not on the overall
degree of functioning of the market economy or degree of competitiveness. The
assessment can be found in Section 2. Section 1 briefly describes recent economic
developments in Hungary including the continuation of the reform path since last year’s
Report.
1.
Economic developments
The overall macro-economic equilibrium of the Hungarian economy has deteriorated, in
particular as regards the composition of GDP, external accounts and exchange and
interest rate stability. A significant budget deficit in 2002 has been addressed by a
tighter albeit very ambitious fiscal policy stance in 2003, and a tight 2004 budget, while
inconsistent monetary and exchange rate policies added to the strain in the policy mix.
In
a difficult external environment, but supported by a strong demand-side stimulus, GDP
grew by 3.3% in 2002. During the first half of 2003, the growth rate decreased to 2.6%
year-on-year. Private consumption in 2002 expanded more rapidly than GDP growth, at
9%, while growth in corporate investment declined to just 5.8%. A fiscal deficit of 9.2%
of GDP in 2002 not only reflected the electoral cycle, but also a number of statistical
reclassifications and one-off items. As a consequence of the rising deficit, public debt
rose to 56.3% of GDP in 2002, from 53.4% in 2001. For 2003, the government is aiming
at an ambitious deficit target below 5% of GDP, which looks difficult to achieve. The
exporting industry, including foreign tourism, suffered from declining external demand
which until January 2003 was combined with a strong currency appreciation. As a
consequence, the external balance started to deteriorate in 2002, with a current account
deficit of 4% of GDP. Foreign Direct Investment (FDI) decreased markedly in 2002, to
1.8% of GDP, with a further deterioration of this trend in the first half of 2003. As a
result, there was a net outflow of non-debt-generating capital over the first half of 2003,
and the current account deficit is financed exclusively through the increase in net
external debt. Although the unemployment rate temporarily increased to over 6% in the
first half of 2003, the labour market in the skilled segment and in the industrialised
regions of the country remains tight, while participation ratios continue to be very low.
Inflation, which came down to an annual rate of 5.2% in 2002, reached its lowest level
since transition at a rate of just 3.6% year-on-year in May 2003, before starting to climb
again, to a rate of 4.7% year-on-year in August 2003. Although the National Bank of
Hungary (NBH) reached its second annual inflation target in 2002, primarily through the
nominal exchange rate channel, monetary policy kept a tight stance until late 2002. At
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the beginning of 2003, the combination of a strong currency and high interest spreads in
a low risk environment triggered a speculative attack at the upper end of the forint’s
trading band. The situation was temporarily brought under control through significant
interest rate cuts and administrative measures. In the aftermath of this turbulence, new
inflation targets were agreed between the central bank and the government for 2003 and
2004 (3.5% +/-1% for both years). In June 2003, the forint’s central parity against its
euro peg was devalued by 2.26%. This was a joint decision by the government and the
central bank. The central bank shortly thereafter raised interest rates again by a total of 3
percentage points in an attempt to re-strengthen the currency’s exchange rate which had
started to depreciate sharply as a reaction to a deteriorating overall market sentiment,
reflecting a considerable degree of uncertainty about monetary and exchange rate policy
strategies, as well as the overall economic policy-mix, in Hungary. The effect was that
reference interest rates stood at the same nominal level as before the speculative attack in
early 2003, whereas real interest rates were even higher, given the fall in inflation that
had meanwhile occurred. As a consequence, the forint suffers greater volatility, and risk
premiums have risen sharply in 2003.
Hungary
Real GDP growth rate
Inflation rate
- annual average
- December-on-
December
Unemployment rate
- LFS definition
General government
budget balance
Current account balance
per cent
per cent
per cent
10.1
8.4
per cent
per cent of
GDP
per cent of
GDP
million
ECU/Euro
Per cent
of exports
of goods
and
services
million
ECU/Euro
Per cent
of GDP
1785
2730
1281
b
679 Jan.-
July
b
-8.0
-4.9
-5.6
-4.4
-3.0
-3.2
-4.7
-2.1
-9.2 p
-4.0 p
-2722
Jan.-July
b
11.4
6.9
10.0
6.3
6.8
5.6
4.9
5.6
Main Economic Trends
1998
1999
2000
4.9
14.2
4.2
10.0
5.2
10.0
2001
3.9
9.1
2002
3.3
5.2
2003
latest
2.7 Q1
4.5
August
a
4.7
August
5.8 Q2
Gross foreign debt of the
whole economy
- debt export ratio
-2059
76.0
-1974
76.1
-1627
59.5
-1239
51.5
-2771
:
b
19 943
:
22 360
:
22 564
3.5
22 151
4.7
:
1.8 p
Foreign direct investment
in flow
- balance of payments
data
million
:
:
ECU/Euro
Sources: Eurostat. National sources. OECD external Debt Statistics
a
b
Moving 12 months average rate of change.
Source: Website of the National Bank.
P= provisional figures
The economic reform path is being pursued in a credible manner, through the
privatisation of some remaining state-owned companies, a stepwise liberalisation of
administered prices and the broad completion of the progressive pension reform.
Privatisation, which had been completed at large as early as 1997 in Hungary, received a
new impetus as proceedings for the sale of 19 remaining larger corporations have started
in 2003. In September 2003, the large retail bank Postabank was successfully sold to a
foreign banking group. The telecom market was liberalised in 2002. Gradual
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liberalisation of the electricity market started in 2003, while finally also the legal basis
was set for the liberalisation of the gas market starting in 2004. As of 1 January 2003,
further steps to complete the quite advanced pension reform were taken. New labour
market entrants automatically join the system’s (private) second pillar, and the transfer
rate from the social security budget to the second pillar was increased from 6 to 7% of
the wage bill, improving the system’s long-term sustainability. The administrative fees
retained in the private investment funds of the mandatory second pension pillar remain
high, compared both to the voluntary third pension pillar funds, and similar systems in
other countries. The reason lies primarily with the sales structure through large insurance
groups. However, the Hungarian Financial Supervisory Authority is scrutinising
developments in that sector of the financial market. The capital market is developing
rapidly. Financial intermediation has further deepened over the past year, with credit
volume growing twice as fast as GDP in 2002. Bank profitability remains high, and no
significant deterioration of the overall credit portfolio quality took place. With regard to
foreign holdings in government paper, in the aftermath of the currency turbulence of the
past 10 months, some important investors like large foreign pension funds have started to
leave the market, while short-term speculative capital (‘hot money’) is being attracted by
large spreads as compared to the eurozone’s.
Main Indicators of Economic Structure in 2002
Population (average)
GDP per head
a
Share of agriculture in:
- gross value added
- employment
Gross fixed capital formation/GDP
Gross foreign debt of the whole
economy/GDP
c
Exports of goods & services/GDP
Stock of foreign direct investment
d
b
Thousand
PPS
Per cent of EU average
Per Cent
Per Cent
Per Cent
Per Cent
Per Cent
Million Euro
Euro per head
10,164
57
4.3
c
6.0
22.3
44.6
d
64.5
:
:
2.4
Long term unemployment rate
Source: Eurostat
a
b
c
d
Per Cent of labour force
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 2001.
Data refer to 2000.
2.
Implementation of recommendations for improvements
The
general government deficit
is on a downward trend, following a redirection of fiscal
policy since 2003, but more progress is needed, also as regards the structure of fiscal
reform.
This problem has been addressed in a tight 2004 budget, as adopted in late
September. After a 9.2% of GDP general government deficit in 2002 - this figure,
however, included a considerable amount of statistical reclassifications and one-off items
- a ‘front-loaded’ fiscal turnaround is being implemented in 2003, which is aiming at
bringing the deficit down to below 5% of GDP in 2003, and to 3.8% in 2004. The 2003
budget is marked by limited further wage increases in the public sector, a freeze of
operational spending across-the-board and delays to public investment, in particular with
regard to motorway construction. The composition of adjustment measures in 2003
consisted basically in an increase in revenues combined with across-the-board cuts in
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public spending. Following a slippage of expenditure over the first five months of this
year and increasing tension with the central bank, an additional fiscal correction package
to the tune of 0.5% of GDP was adopted in June 2003. However, the planned savings
were partly consumed by unbudgeted one-off expenditure on farm support following the
2003 summer drought, and by the need to implement a Supreme Court ruling of June
2003 which obliges the government to make considerable retroactive child allowance
payments. The government therefore had to increase its deficit target for 2003 from 4.5%
to around 5% of GDP. This deficit target looks ambitious in the light of budget execution
figures over the first 8 months of 2003. In late September 2003, another tight budget for
2004 which puts more emphasis on improvements to the structure of fiscal reform, was
adopted by the government. The ‘austerity package’ contained in the 2004 budget has
had a positive impact on the government’s credibility with markets on its commitment to
fiscal discipline. The risk of the former demand-side fiscal stimulus turning pro-cyclical
has disappeared, given that fiscal policy in Hungary has actually turned contractionary in
2003. Despite last year’s fiscal expansion, inflation continued to decline after the last
Regular Report, to a CPI rate of just 3.6% year-on-year in May 2003, but started to rise
again to 4.7% in August 2003, following the exchange rate turbulence and the
subsequent currency depreciation in mid 2003.
Health care sector reform
is being addressed in the framework of a ten years’
programme, which received a boost through the admission of private general
practitioners’ practices in 2002, and a new law adopted in 2003 opening the way for
large-scale privatisation of healthcare assets, including hospitals.
Despite considerable
opposition to the new law, the government appears determined to go ahead with health
care reform, given the low average life expectancy in Hungary. Strong emphasis is being
put on the development of home care and outpatient care facilities, along with the
promotion of private health care insurance and nursing schemes, as an alternative to the
present inefficient and over-hospitalised health care system. As a first step towards
implementation of the new law, 30 hospitals have been flagged by the government for
debt relief programmes as a pre-condition for subsequent privatisation. A pilot project
aiming at a step-wise modernisation of services, replacement of outdated technology, and
an improvement of incentives and management systems has been launched. A large
number of health care workers, who had left the underpaid sector over the past few years,
have been re-attracted by above average wage increases. The financial means for these
measures are partly covered in the budget, but the bulk of the financing in the medium to
longer term will have to be provided by an expanding private healthcare sector. To that
end, an investment co-ordination office has been set up to channel private investment in
the form of public-private partnerships into Hungary’s health service. While any health
care sector reform can only be implemented with a view to a long-term perspective, the
steps taken since last year’s Regular Report are encouraging.
Wage developments
in 2003 have started to moderate, coming down from ther high
growth rates of 2001 and 2002, especially in the corporate sector, with the economy
slowly adapting to the new low-inflation environment. Nevertheless, even in 2003 real
wage growth continues to exceed productivity growth by a considerable margin.
Hungary’s wage competitiveness deteriorated considerably in 2001 and 2002. This led to
a number of large lay-offs in low-wage industries that were priced out by the rapid
minimum wage increases that had been implemented over the past two years (see also the
Joint Assessment of Employment Policy Priorities and subsequent progress reports).
Public sector nominal wages, which had been kept at a very low level during the high-
inflation economic transition period, were increased by an average 50%. This step was
taken also with a view to EU accession, which will put high demands on the Hungarian
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administration, and in particular the medium to high skill segment of the civil service that
has to compete in a tight labour market. In autumn 2002, a tripartite social partnership
framework agreement set a 4.5% real wage growth target for 2003, in order to allow for
more modest gross wage settlements. The rationale behind this exceptional solution is
that reductions to wage taxes and social security contributions would lead to a situation
where real wages in 2003 are growing more strongly than nominal wages, thereby
curbing overall wage dynamics. However, over the first seven months of 2003, the spill-
over effect from the 2002 measures proved stronger than the general growth-slowing
environment, and real wages rose by another 13.1% year-on-year. Thus, although in the
corporate sector gross wage increases have clearly come down to levels around 7-8%,
real wage growth in the economy as a whole continues to exceed productivity growth by
a considerable margin.
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C.
C
OMMITMENTS
NEGOTIATIONS
AND
REQUIREMENTS
ARISING
FROM
THE
ACCESSION
As we approach the actual date of accession and the entry into force of the mutual rights
and obligations enshrined in the Treaty of Accession, it is necessary to focus efforts on
ensuring that Hungary is fully prepared in all areas of the
acquis
from the start of its
membership. In other words, Hungary must meet its commitments and requirements
arising from the accession negotiations.
In the 2002 Regular Report on Hungary the Commission found that:
“Hungary is generally meeting the commitments it has made in the negotiations.
However, delays have occurred with regard to the transposition of parts of the
veterinary acquis, legislation on the size control of imported fish, the adoption of the
gas law and several pieces of environmental legislation (national climate change
strategy, National Waste Management Plan, regional and local waste management
plans, packaging and packaging waste and waste oils). These issues need to be
addressed.
Bearing in mind the progress achieved since the Opinion, the level of alignment and
administrative capacity that Hungary has achieved at this point in time, and its track
record in implementing the commitments it has made in the negotiations, the
Commission considers that Hungary will be able to assume the obligations of
membership in accordance with the envisaged time frame. In the period leading up
to accession, Hungary needs to continue its preparations in line with the
commitments it has made in the accession negotiations.”
As regards the administrative capacity to implement the acquis, the overall findings were
as follows:
“Hungary has continued to make progress in building up its administrative capacity
to apply the acquis in most areas. However, further efforts will have to be made in
particular in areas such as agriculture, transport, regional policy, environment and
financial control. Further action is also still required in establishing the necessary
administrative capacity to ensure the sound, efficient and controllable management
of EC funds.”
As part of its continuous monitoring, the Commission services addressed letters to
Hungary in February and June 2003 expressing concern over its preparedness in the
fields of financial control and agriculture and calling for urgent action to remedy these
shortcomings.
In order to give further guidance to Hungary in its preparation efforts and to give the
necessary assurance to current Member States and other future Member States, this part
of the comprehensive monitoring report, in Section 2, gives an overview of where
Hungary currently stands in implementing all commitments and requirements arising
from the accession negotiations for each of the 29 chapters of the
acquis.
It covers the
whole body of the
acquis,
on a chapter-by-chapter basis, both in terms of legislation and
from the perspective of implementing structures, including administrative capacity and
enforcement.
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The principal commitment undertaken by Hungary in the accession negotiations is to be
fully prepared for membership in all areas by the date of accession. In a number of areas,
however, commitments were made to put in place and implement the acquis according to
specific timetables even before accession. This report examines the extent to which these
commitments have been met, and where delays have occurred, but the principal focus of
the assessment remains the requirement that Hungary must be fully prepared as from
accession. Naturally, in cases where transitional arrangements have been agreed, their
effect on Hungary’s obligations is duly reflected in the assessment. On the other hand, it
should be underlined that, in order for Hungary to make effective use of its eligibility for
Community structural funds from 1 January 2004, the relevant
acquis
in areas such as
public procurement, state aid and environmental protection will need to be fully
respected from 1 January 2004 in relation to the implementation of structural funds
actions
2
.
For each chapter, a conclusion is provided, which is structured in the following way.
Firstly,
it identifies those areas where Hungary is essentially meeting the commitments
and requirements arising from the accession negotiations and is expected to be, or is
already, in a position to implement the
acquis
from accession. This does not exclude the
possibility that certain actions are still to be taken, but these should under foreseeable
circumstances not pose particular difficulties.
In a
second
paragraph, the assessment identifies any areas where important further action
is still needed in order to complete preparations for membership. In some cases these
preparations are ongoing, but enhanced efforts or quicker progress may be called for.
These are issues which can still be remedied taking into account the accession date of 1
May 2004 but which require the special attention of the authorities.
Thirdly,
where relevant, the assessment also identifies issues that are of serious concern.
These are areas where serious shortcomings exist which are likely to persist after
accession unless immediate remedial action is taken. These issues require the urgent
attention of the authorities. In view of their importance for the implementation and
enforcement of the
acquis,
the
overall
state of readiness of the public administration and
the judicial system and the development of effective anti-corruption measures, together
with the question of the translation of the
acquis
into Hungarian, are evaluated in a
separate Section 1.
2
See also the Commission Communication "on the implementation of commitments undertaken by the
acceding countries in the context of accession negotiations on Chapter 21 - Regional policy and
coordination of structural instuments" of 16 July 2003 (COM(2003) 433 final).
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1.
Administrative and judicial capacity
Public administration
The reform of the Hungarian public administration has continued under the new
government, aiming at the functional, organisational and legal modernisation of the
system. The overall responsibility for the reform currently lies with the Prime Minister’s
Office and the Ministry of the Interior.
As regards the functional modernisation of the public administration, recent efforts have
focused on devolving official powers to lower levels of government and to non-
governmental agencies, as well as on deregulation. As to the general organisation, the re-
structuring of the central administration was largely completed in 2000. Following a
government reshuffle in May 2003, two completely new ministerial portfolios were
created at the Prime Minister’s Office: a Minister without portfolio in charge of the co-
ordination of European Integration Affairs and a Minister without portfolio in charge of
Equal Opportunities. The new Minister for EU Affairs has the task of supervising, inter
alia, the National Development Plan and the preparations for Structural and Cohesion
Funds, and the co-ordination of EU affairs across the Hungarian administration.
In September 2002, a Government Commissioner was appointed to design uniform
regulations for the public service, except for judges and prosecutors. The approximately
815 000 people working in the public sector are currently governed by four laws,
multiple wage systems and an even wider variety of benefit packages. The number of
civil servants increased by about 2% in 2002.
A plan on further steps in the public administration reform was submitted to the
government in August 2003. The reform in its current phase focuses on three areas:
regional development, local self-government and state administration. In accordance with
the reform plan, local governments would be reorganised into economic and geographic
regions, and counties would be grouped into larger regions. To that end, elected regional
governments and regional public administration offices are to be set up. The present
statistical-planning regions – set up mainly in view of the EU Structural Funds – would
serve as the basis for regional public administration. The approval of several elements of
the reform would require a two-thirds majority in Parliament, and new regional elections
would have to take place. The reform should be finalised in 2006, in time for the next
elections.
Although the process of aligning local-government legislation with EU requirements has
started, it is still in its initial phase. The Ministry of the Interior has recently opened a
centre with a staff of seven persons to assist local governments in the implementation of
EC legislation.
More than half of all public servants received a 50% gross salary increase as from
September 2002. The main objective of the increase is to reduce the considerable gap
between salaries earned in public service and the private sector and thus to retain staff.
The recruitment and promotion system in the Hungarian civil service is still not fully in
line with essential civil service principles such as equal access and competition based on
merit, given that there is no mandatory recruitment based on open competition. The
current system thus needs to be improved.
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Training for civil servants is based on the medium-term action plan covering the period
2003-2006. Preparation for accession and the operation as a Member State are the main
features of the training programmes. While general EU training for civil servants appears
to be well on track, more sector-specific training is needed. In September 2002, a public
administration database was set up, which contains data on civil servants, such as their
educational level. Such data assist the Government in designing training schemes for
civil servants.
Judicial capacity
Hungary's court system is based on four levels: local courts, county courts, the Supreme
Court and the Constitutional Court. In order to reduce the workload of the Supreme
Court, three regional Courts of Appeal in Budapest, Pécs and Szeged started work in July
2003. Two further regional courts in Debrecen and Györ will start work in January 2005.
The President of the Republic appoints judges, on a proposal by the National Council of
Judiciary, for three years, after which they may be re-appointed for an indefinite period
subject to an evaluation of their performance. Besides being prevented from joining
political parties or engaging in any political activity, judges do not have the right to be
involved in business activities or to be members of an arbitration court. Furthermore,
members of the Constitutional and Supreme Courts are not allowed to be members of
Parliament or to be employed in local government. Since December 2001, judges have
been required to make asset declarations. However, the procedures for selecting and
promoting judges would benefit from clearer and more standardised criteria. The present
lack of transparency and the broad discretion left to officials involved in the process
encourage arbitrariness and even abuse, and may discourage the development of a
professional corps of judges.
The prosecution system takes the form of a centralised body within the judicial system
and is independent from the government. The Prosecutor-General is elected by
Parliament, on a proposal by the President of the Republic, for a six-year term. The
Prosecutor-General is answerable only to Parliament, to which he reports on his
activities. One of his tasks is to appoint prosecutors, who are not allowed to be members
of political parties or to pursue any political activity.
The current Prosecutor-General, who was elected by the previous Parliament for six
years, has had to face in the past months repeated rejections of his answers to
Parliamentary interpellations. Parliamentarians of the governing parties have criticised
his alleged lack of action in investigating potential corruption cases under the previous
government.
Judges currently spend up to 70 % of their time dealing with administrative issues not
directly connected with hearing the case. To remedy this, Hungary adopted an Act on
Legal Assistants in 2001, and the first legal assistants should start working this year. In
order to encourage the use of out-of-court dispute settlement, an Act on Mediation was
adopted in December 2002.
The financial independence of the judiciary was strengthened in October 2002 through
an Act on the Budget of Courts and Judges, according to which the National Council of
Judiciary (OIT) is now entitled to submit its budget proposal directly to the Parliament.
However, the financial situation of the judiciary remains complicated. During 2002, 12
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county courts and the Supreme Court accumulated high deficits, which would have made
them practically insolvent if the OIT had not settled their unpaid invoices.
The Justitia.Net project, aimed at the establishment of a fast and reliable data-flow and
communication between the Supreme Court, country courts, local courts and the Office
of the National Council of Judges, is planned to be operational as from January 2004. For
the offices of the public prosecutors, a similar information system is being established.
The new government increased judges’ salaries by 14% last year, and will increase them
by a further 50% in 2003. Furthermore, the courts will receive extra budgetary support of
HUF 15.2 billion (around € 62.3 million) in 2003, which will be added to this year’s
budget of HUF 37.6 billion (around € 154.1 million). The extra support will facilitate the
continuation of the judiciary reform, including the setting up of three courts of appeal,
information technology development and the judges’ training in EU law. The prosecution
also received additional budget support of HUF 2.3 billion (around € 9.3 million),
increasing the total sum allocated to it in 2003 to HUF 17.6 billion (around € 71.2
million).
The overall situation as regards the length of judicial proceedings has improved, and the
backlog of cases has been reduced. 86 % of all proceedings at first instance are now
terminated in less than one year (1997: 83.7%). The number of cases lasting longer than
a year has been reduced to 36 000. In 2002, a record number of 1 166 000 cases – 6%
more than in 2001 – was terminated. 60% of the 13 500 pending procedures at the
Supreme Court are to be transferred to the new Regional Courts of Appeal. The backlog
of court cases was reduced to 168 309 in 2002 (3.7% less than in 2001).
Although Hungary has a fairly efficient training system, its capacity and level of
financial support are not sufficient to develop necessary training programmes in
management skills. The long-planned setting up of a Training Institute for Judges, which
would improve the situation, has still not taken place, due to lack of financial means. By
the end of January 2003, 2 643 judges had received basic training on EC legislation, and
a further 1 388 judges took part in training in their specialisation in the period up to May
2003.
Legal aid is currently rather restricted. In criminal cases, the state is obliged to provide
defence counsel only in limited cases (e.g. if the offence is punishable with more than 5
years’ imprisonment), and a defence counsel may be provided as a matter of discretion in
other cases. In general, if the defendant is convicted, he must pay all costs. In civil cases,
legal aid tends to be restricted to the very poor and to pensioners. Although there is a
network of offices offering free legal information, these offices do not represent citizens
in trials. The government has undertaken to submit a bill to Parliament to significantly
improve the legal aid system before the end of 2003.
Anti-corruption measures
Although according to independent assessments Hungary ranks among the less corrupt of
the post-communist countries, surveys indicate that corruption continues to represent a
serious problem in this country. Corruption is perceived by the Hungarian population as
a relatively widespread phenomenon, with low-paid government officials, particularly
from among the police, tax and customs authorities, being considered as particularly
vulnerable to bribes. Another main area associated with corruption is the health care
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system, where the practice of “gratuities” is so common that many Hungarian citizens
consider it as a cultural phenomenon rather than hard corruption. Recent surveys on
corruption indicate that suspected cases of extra payments and of requesting gratuities
have actually increased over the last three years in the health care sector, the private
business sector, the customs area and among Members of Parliament and ministry
officials.
The number of persons convicted for corruption charges has been relatively stable during
the last few years. According to data of the Supreme Court, in 2002 some 739 cases of
corruption were revealed, and accusations were brought forward in 415 cases.
According to a study of the Hungarian State Audit Office (ASZ) on the state of
corruption, released in October 2002, the existing anti-corruption programmes have not
achieved their objectives. Although crime statistics may show a declining or stagnating
number of cases, the risk of corruption continues to be high. The ASZ sees a lack of co-
operation among state institutions. According to the study, corruption is strongly present
in public procurement, in party financing and in internal financial control.
In February 2003, the OECD Working Group on Bribery in International Business
Transactions continued its evaluation of Hungary’s implementation of the Convention on
Combating Bribery of Foreign Public Officials. The Group noted that the problems
identified during the evaluation – namely an over-extensive defence, no provision for
liability of legal persons, limitations on confiscation and an unduly short limitation
period – had largely been solved. Despite these improvements, the examiners remained
concerned that the provisions on liability of legal persons and the definition of foreign
public official remained unsatisfactory.
Hungary continues to participate in the Council of Europe Group of States against
Corruption (GRECO). The March 2003 Report on Hungary by GRECO noted, inter alia,
that corruption related to the illegal funding of political parties appeared to be a problem,
and that the Hungarian authorities should consider revising the applicable legal
framework. It also stated that favouritism in the awarding of public procurement
contracts was regularly reported in the media.
The 2001 anti-corruption strategy has led to major improvements in legislation and in the
institutional framework. The new government has introduced a new legal package on the
transparency and control of the spending of public funds and the use of public properties.
An important element of the package is the so-called “glass pocket programme”, which
was unanimously adopted by Parliament in April 2003. The legislative package contains
modifications to 19 legislative acts on public expenditure, the use of public property,
transparency and control. Its main objective is to make the use of public funds more
transparent. The State Audit Office is now authorised to follow the path of public funds,
even in private companies, in cases where they have concluded contracts with state or
local governmental bodies. The law states that all government contracts above HUF 5
million (around € 20 000) must be made public by state and local authorities. The circle
of those obliged to make assets declarations has been further expanded. It is now
important to implement this programme as quickly as possible. Also, the programme
should be made known to the wider public, and the media could play a more useful role
in the fight against corruption by transmitting more detailed information about the
programme.
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As regards the institutional framework, there are no independent bodies whose exclusive
task is to fight corruption. The general investigation authorities are the police and the
Public Prosecution Service, while both the Customs and Finance Guard and the Border
Guard are also empowered to investigate certain criminal offences.
The police are empowered to gather intelligence and investigate both public and private
corruption. However, since June 2001 the “open”, i.e. public, investigation into
corruption has been conducted by the Central Investigation Office of the Public
Prosecution Service whenever high officials of the public administration are involved.
Police investigators are supervised by public prosecutors. Within the Ministry of the
Interior, the prevention and detection of corruption within the law enforcement agencies
fall within the competence of the enforcement service of these agencies. This service is
independent of the police and its staff consists of assigned police officers. The number of
staff has been constantly increasing and is now 285. An anti-corruption unit, staffed by
nine persons, has been established at National Police Headquarters to investigate
allegations of corruption within the police force. Moreover, a special mobile unit, with
twelve staff, has been set up to detect police corruption on the streets. Given the scope of
their responsibilities, the number of staff at the Central Investigation Office of the Public
Prosecution Service and in the police anti-corruption units may need to be increased.
Hungarian law provides for wide immunity from criminal prosecution for political
figures, judges and prosecutors. In several cases of suspected corruption, the lifting of
immunity requested by the Central Investigation Office of the Public Prosecution Service
has been refused. There is a need to establish clear criteria concerning the lifting of
immunity in cases of alleged corruption.
A similarly independent department to investigate corruption cases exists at the National
Customs and Finance Guard’s headquarters. Also, the Central Investigation Office of the
Public Prosecution Service is entrusted with the duty, inter alia, of taking more effective
action against organised crime and corruption. There are 16 prosecutors working for this
Office and a further increase of staff is foreseen. Other state authorities dealing with the
prevention and detection of corruption are the State Audit Office, the Government
Control Office and the recently set-up Co-ordination Centre for Fighting Organised
Crime.
A new State Secretariat for the control of public money was set up within the Prime
Minister’s Office following the change of government in 2002. This body is also
responsible for developing the Government’s anti-corruption plans, such as the above-
mentioned “glass pocket programme”. In November 2002, the Government set up an
anti-corruption advisory body comprising 18 members from professional organisations.
In addition, a new “Ethical Council” of the Republic was created in April 2003 to assist
in drawing up a code of conduct for government politicians and civil servants. The
Council will work independently, its members will not receive any remuneration and its
task will be to make suggestions for fighting corruption, including legislative changes.
Simultaneously to the setting up of the Ethical Council, another anti-corruption body to
deal with the social background of corruption was formed within the Prime Minister’s
Office (PMO), and will be jointly operated with the Ministry of Justice. The tasks of
these three bodies still need to be clearly defined if they are to become efficient tools in
the fight against corruption.
The Hungarian law enforcement system appears to be adequately structured for the fight
against corruption. However, Hungary should further increase its administrative
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capacities, in particular as regards co-operation among all the different governmental
bodies involved in combating corruption and as regards the training of its officials.
Hungary has signed and ratified the most relevant international conventions against
corruption. It has ratified various international anti-corruption agreements, including the
OECD Convention on combating bribery of foreign public officials in international
business transactions, the Criminal Law Convention on Corruption of the Council of
Europe, the Agreement on joining the Global Programme against Corruption of the
United Nations and the Convention on laundering, search, seizure and confiscation of
proceeds from crime of the Council of Europe. The Civil Law Convention on Corruption
was signed in January 2003, but still needs to be ratified.
Translation of the acquis into Hungarian
In accordance with Articles 2 and 58 of the Act of Accession, all acts adopted by the
Union’s institutions and the European Central Bank prior to accession become applicable
to the new Member States and are to be published in the Official Journal of the European
Union in the new official languages. While the EU institutions take responsibility for the
final revision and publication of the translations, it falls on the acceding states to produce
the translations and to ensure a thorough legal and linguistic revision.
Since the beginning of the year, Hungary has provided a constant and high number of
revised texts. The quality of the Hungarian version of the
acquis
appears to be
satisfactory. In some cases, however, the process has been complicated by late
interventions of certain ministries requiring changes in the terminology at a stage where
the texts are already being sent to the EU Publications Office.
Therefore, if the present flow is maintained, there should be no major problems for the
publication of the Special Edition of the Official Journal in Hungarian.
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2.
The chapters of the acquis
As indicated, the following review of Hungary’s ability to assume the obligations of
membership has been structured in accordance with the list of 29 acquis chapters.
Accordingly, this section opens with an assessment of the acquis relating to the
cornerstones of the internal market which are known as the “four freedoms”, and
continues with a systematic review of each of the chapters, covering all aspects of the
acquis,
including sectoral policies, economic and fiscal affairs, regional policy,
environment, justice and home affairs, external policies, and financial questions.
Chapter 1: Free movement of goods
The principle of the free movement of goods implies that products must be traded freely
from one part of the Union to another. In a number of sectors, this general principle is
supplemented with a harmonised regulatory framework, following the “old approach”
(imposing precise product specifications) or the “new approach” (imposing general
product requirements). The transposition of harmonised European product legislation
represents the vast majority of the content of this chapter. In addition, efficient
administrative capacity to apply horizontal and procedural measures in areas such as
standardisation, certification and market surveillance is essential. This chapter also
covers detailed EC rules on public procurement, requiring specialised implementing
bodies.
As regards
horizontal and procedural measures,
Hungary has honoured the majority of
commitments made in the negotiations. Full membership in CENELEC was achieved in
June 2002, and in CEN as from January 2003. The implementation structures for
standardisation, metrology, accreditation, conformity assessment and certification are in
place, but further strengthening will be required. The infrastructure for market
surveillance requires further development, in particular as concerns the non-consumer
product area. The 2001
acquis
on product safety still needs to be transposed. The General
Inspectorate for Consumer Protection (GICP) has the central role in this field and carries
out the surveillance of consumer products. The Inspectorate created and operates the
Central Market Surveillance Information System (CMSIS), a database that contains the
notifications of all market surveillance authorities. Training programmes being carried
out by the above-mentioned bodies should ensure their operational efficiency by the date
of accession. Also, co-ordination between the different bodies involved needs to be
improved.
Hungary has transposed almost all of the
sectoral legislation
under the
new approach
and in general the legislative transposition has been found to be in line with the
acquis.
Legislation was adopted which aims at transposing the EC legislation on non-automatic
weighing instruments, personal protective equipment, lifts, explosives for civil use, in
vitro diagnostic medical devices, electro-medical equipment used in veterinary medicine,
toys, cableway installations, recreational craft and construction products.
As regards the
old approach
directives, Hungary has transposed the majority of the
acquis
in these product sectors. The transposition of the
acquis
on cosmetics, motor
vehicles, chemicals, pharmaceuticals and aerosol dispensers must be completed. Having
recognised that the identification of "new" chemical substances on its market is a matter
of priority, Hungary should provide for the appropriate notification of such substances in
accordance with the
acquis.
Legislation was adopted which aims at transposing the
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acquis
on legal metrology and pre-packaging, glass, footwear, textiles and wood. As
regards pharmaceuticals, particular attention should now be paid to complete the legal
approximation with the
acquis
with regard to transparency, pricing rules and data
protection. The provisions concerning data exclusivity will only enter into force upon
accession. Hungary has taken the steps necessary to ensure the creation, reinforcement,
and operational capacity of the institutions required to manage the
acquis
in the majority
of the sectors covered by the old approach sector directives.
As to food safety, alignment with the
acquis
has not yet been completed due to the
decision of the Hungarian authorities to draft entirely new framework legislation on food
safety and hygiene issues. Consequently, new implementing legislation can only enter
into force upon accession. Hungary needs to ensure that all food operators and the
administration are fully informed of the new rules and principles as soon as possible,
even if the amended legislation will only enter into force on the date of accession. As to
administrative capacity, there continue to be overlaps in responsibilities and lack of co-
ordination between authorities, which need to be addressed. Also, following the recent
nomination of a contact point for the Rapid Alert System for Food and Feed, further
efforts are now needed in defining the share of responsibilities and the procedures for
handling alerts and responsibilities. Further clarifications are also needed as to the
effective operation of the Food Safety Agency. The compulsory introduction of the
Hazard Analysis Critical Control Points (HACCP) system has started from January 2002
and still needs to be completed for all businesses. Aspects of food safety are also covered
under
Chapter 7 – Agriculture.
In the field of
public procurement,
alignment with the
acquis
is not yet complete due to
the decision of the Hungarian authorities to draft entirely new framework legislation.
Consequently, new implementing legislation still needs to be adopted too. The 2001 Act
on the Amendment to Certain Financial Laws, which entered into force on 1 January
2002, did not address the main shortcomings of the existing legislation such as coverage
(e.g. inclusion of public works concessions and exemptions), the treatment of utilities
and time limits. The new Act on Public Procurement aiming at full transposition of the
acquis
still needs to be adopted. Hungary's implementing structure appears to work
satisfactorily, with the Council for Public Procurement as the national competent
budgetary organisation, subordinated exclusively to the Parliament. The Public
Procurement Arbitration Committee operates alongside the Council. Its task is to provide
legal remedy in cases of violation of the public procurement law, or in disputes arising in
procedures.
In the
non-harmonised area,
Hungary adopted in May 2003 a decision on the screening
of Hungarian legislation on the basis of the four freedoms of Community legislation.
Hungary identified a list of prohibitions and restrictions, which it considers justified
under the acquis and wishes to maintain after accession. As regards mutual recognition,
Hungary has still not taken a decision as to the nature of the mutual recognition clause to
insert into its legislation. Hungary should give urgent attention to solving this issue. The
implementation of the
acquis
as regards arms control needs to be speeded up, too, while
the transposition of the
acquis
on cultural heritage objects has been nearly completed.
Hungary envisages applying the rules on product safety checks at external borders from
accession on the basis of a co-operation agreement between the General Inspectorate for
Consumer Protection (GICP) and the customs authorities.
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Conclusion
Hungary is essentially meeting the requirements for membership as regards
horizontal
and procedural measures
necessary for the management of Community legislation and
the
new approach sectoral legislation.
The country should be in a position to
implement this
acquis
from accession, if efforts are sustained. Hungary needs to ensure
that proper market surveillance takes place in all sectors, in particular in the non-
consumer product area.
Hungary is partially meeting the requirements in respect of the
old approach sectoral
legislation, public procurement
and in the
non-harmonised area.
Hungary should give
priority to completing transposition and implementation of the
acquis
in the old approach
sectors, including in particular the areas of pharmaceuticals and food safety. Additional
efforts should be made to provisionally notify "new" chemical substances prior to
accession so as to ensure the continued marketing of such substances. Also, the new
legislation on public procurement should be adopted without delay. Hungary must also
pay particular attention to completing the screening of its national legislation to ensure
the respect of the principles of free movement of goods. Hungary must decide without
delay on the introduction of the principle of mutual recognition into Hungarian
legislation.
Chapter 2: Free movement of persons
The acquis under this chapter provides for non-discriminatory treatment of workers who
are legally employed in a country other than their country of origin. This includes the
possibility of cumulating or transferring social security rights, which requires
administrative cooperation between Member States. In order to facilitate the practice of
certain professions, the acquis under free movement of persons also includes specific
rules concerning mutual recognition of qualifications and diplomas; for certain
professions a harmonised training curriculum must be followed to be able to use the
professional title. Furthermore, this area also covers the residence and voting rights of
EU citizens in any Member State.
In the field of
mutual recognition of professional qualifications,
Hungary’s legislation
is largely in line with the
acquis.
Transposition of legislation on the general system of
recognition was carried out, but remains to be completed. Hungary has essentially
aligned its legislation concerning the sectoral legislation on the recognition of
qualifications of lawyers, doctors, dentists, general care nurses, midwives, veterinary
surgeons, pharmacists and architects. However, some shortcomings still need to be
addressed. Moreover, the legislation on co-ordination of training for veterinary surgeons
and pharmacists needs to be further aligned with the
acquis.
The necessary implementing
administrative structures are in place, but need to be strengthened.
In the area of
citizens’ rights
legislative alignment has been largely completed, except
on the legislation on the right to participate in the municipal and European Parliament
elections. The main administrative structures for implementation are in place.
As for
free movement of workers,
a transitional arrangement has been agreed. For the
first two years following accession, current Member States will apply national measures,
or bilateral agreements, to regulate the access of workers from Hungary to their labour
markets. These arrangements may continue up to a maximum of seven years. Hungary
has adopted legislation aiming at full transposition of the acquis in this area.
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With regard to
co-ordination of social security systems,
no transposition into national
legislation is needed to achieve alignment with the
acquis,
but appropriate administrative
capacity needs to be ensured. Training and recruitment of staff should be continued. A
number of bilateral agreements with Member States, which rely on the same principles as
the EU rules in this area, reflect that Hungary’s administration is acquainted with the
administrative procedures.
Conclusion
Hungary is essentially meeting the commitments and requirements in the area of
free
movement of persons
and should be in a position to apply the acquis from accession.
Some adjustments need to be made as soon as possible to the legislation on foreigners to
allow EU citizens to participate in the European elections of June 2004. Hungary should
also complete and correct transposition of legislation, in the healthcare and architect
sectors. Hungary also has to reinforce its administrative capacity to implement the
acquis
on mutual recognition of qualifications.
Chapter 3: Freedom to provide services
Under this chapter, Member States must ensure that the right of establishment and the
freedom to provide services anywhere in the EU is not hampered by national legislation.
In some sectors, the
acquis
prescribes harmonised rules which must be respected if the
internal market is to function; this concerns mainly the financial sector (banking,
insurance, investment services and securities markets) but also some specific professions
(craftsmen, traders, farmers, commercial agents). Harmonised rules concerning personal
data protection and certain information-society services must also be respected.
In the field of
the right of establishment and the freedom to provide non-financial
services,
Hungary's legislation is nearly aligned with the
acquis.
However, Hungary still
has to complete the screening in order to identify and eliminate legal provisions and
administrative practices, which are in conflict with the principles of the free provision of
services. In particular, in order to ensure the free provision of cross-border services, a
clear distinction should be made in the Hungarian legislation regulating economic
activities between those economic operators providing services in Hungary on a
temporary basis only and those who are permanently established. Any restrictions need
to be removed before accession.
In the field of financial services, Hungary is completing the legislative alignment with
the
acquis
in the
banking sector.
An amendment to the Banking Act entered into force
on 1 January 2003, raising the minimum capital requirement for co-operative credit
institutions. Furthermore, new rules on consolidated supervision were recently adopted.
Provisions on the publication of annual accounting documents regarding the directive on
the obligations of branches established in a Member State of credit institutions and
financial institutions having their head offices outside that Member State remain to be
transposed. Also, the e-money directive has not yet been transposed. Capital adequacy
rules and the banking act require further modifications. Hungary has committed itself to
ensuring full application of the
acquis
in respect of co-operative credit institutions by 31
December 2007, in accordance with the transitional period it has been granted.
As regards the
insurance sector,
legislative alignment has been largely completed with
the adoption in June 2003 of a new Act on Insurance and Insurers. The new law, which
will come into force from 1 May 2004, incorporates all relevant EC legal provisions,
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including the most recent EC legislation. However, some further fine-tuning is needed
with regard to implementing legislation, which is currently under preparation. Also, the
4
th
motor insurance directive still remains to be fully transposed before accession. In
addition, some further changes are still needed to the legislation on insurance accounting.
In the field of
investment services and securities markets,
the legislation is broadly in
line with the
acquis,
although some further legislative amendments and clarifications are
still needed, in particular regarding the transposition of recent
acquis.
The
acquis
on
financial collateral remains to be transposed.
The Hungarian Financial Supervisory Authority essentially has the required
infrastructure and human resources to deal with the
acquis-related
tasks as a supervisory
authority in the field of financial institutions. It has reinforced its administrative capacity
and appears to be effective. However, it should be given the power to issue its own
regulations. The institutional framework required by the 4
th
motor insurance directive
still needs to be set up.
Concerning the
protection of personal data and the free movement of such data,
in
June 2003 a modification to the Act on Data Protection was adopted, achieving a
considerable degree of alignment with the
acquis.
However, some fine-tuning may still
be necessary to fully align with the
acquis
on personal data protection. The
Parliamentary Commissioner for Data Protection, who appears to be independent as
required by EC legislation and who efficiently performs his tasks, has received enhanced
powers. The office of the Commissioner needs to be strengthened in terms of staffing.
As regards
information-society services,
Hungarian legislation is not yet in line with the
acquis.
Full alignment with the e-commerce directive remains to be achieved, and the
transparency directive still needs to be transposed. The
acquis
on conditional access has
been largely transposed. EC legislation on broadcasting via satellite and retransmission
via cable has been implemented in Hungarian legislation. However, in order to reach full
compliance with the
acquis,
the concept of communication to the public by satellite
should be inserted into the Copyright Act.
Conclusion
Hungary is essentially meeting the requirements for membership and is expected to be in
a position to implement the
acquis
in the areas of
banking
and
insurance services,
investment services and security markets, protection of personal data
as well as
regarding the
right of establishment and the freedom to provide non-financial
services by accession.
It can be expected that the preparations in these sectors will be
completed in time and that the remaining legislative and administrative restrictions will
be lifted before accession. The alignment with the acquis on motor insurance still needs
to be finalised.
Hungary is meeting the majority of the requirements for accession in the area of
information-society services.
In order to complete preparations for membership, a
number of major directives remain to be fully transposed in this area. This work must
now be accelerated.
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Chapter 4: Free movement of capital
Under this chapter, Member States must remove all restrictions in national law on the
movement of capital between themselves, but also with third countries (with some
exceptions) and adopt EU rules to guarantee the proper functioning of cross-border
payments and transfers of all forms of capital. The
acquis
under this chapter also
includes harmonised rules on payments systems and the fight against money laundering,
requiring adequate enforcement capacity.
In the area of
capital movements and payments,
Hungary has nearly completed its
legislative alignment with the
acquis,
but a few further measures remain to be taken.
Hungary still needs to modify its Act on Privatisation and to conduct a case-by-case
examination of existing special rights. This was expected to be done by January 2002,
but has been delayed. Hungary must still remove restrictions on investment in foreign
assets by institutional investors and liberalise all real estate transactions not covered by a
transitional arrangement.
In accordance with the transitional arrangement it has been granted, Hungary will
remove restrictions on the acquisition of secondary residences by EU nationals, non-
resident in Hungary, and by EU companies by May 2009 at the latest. Similarly, in
accordance with another transitional arrangement, Hungary will remove restrictions on
the acquisition of agricultural land and forests by EU nationals and by EU companies by
May 2011 at the latest.
In the field of
payment systems,
Hungary is close to completing its legislative alignment
with the
acquis,
while the implementing structures are in place and function adequately.
In the area of
money laundering,
Hungary has made considerable progress in
strengthening its anti-money-laundering regime and has now completed its legislative
alignment. Moreover, Hungary has ensured compliance with the Financial Action Task
Force (FATF) recommendations. In line with FATF recommendations, Hungary has
established a satisfactory timetable to phase out anonymous savings books. In terms of
implementing structures, the financial intelligence unit’s staff has been increased, but its
equipment needs to be further strengthened (see
also chapter 24 – Justice and home
affairs).
Conclusion
Hungary is essentially meeting the requirements for membership and should be in a
position to implement the
acquis
in the area of
free movement of capital
from
accession. As mentioned above, a limited number of specific issues still need to be
addressed before accession.
Chapter 5: Company law
Under this chapter, Member States must adopt and apply harmonised rules required for
the proper operation of companies in the internal market. They concern five legislative
fields: company law in the strict sense, accounting law, intellectual property rights,
industrial property rights, and the recognition and enforcement of judgements in civil and
commercial matters as well as of contractual obligations.
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In the field of
company law
as such, Hungary has achieved a considerable degree of
alignment with the
acquis.
In June 2003, legislation was adopted amending the
Companies Act, the Act on Firm Registration and the Act on Branches of Foreign
Registered Companies. The new legislation aims at full alignment with the
acquis
by
fine-tuning Hungarian legislation to remove the minor discrepancies between it and EC
company law directives. Furthermore, it introduces implementing provisions to apply the
acquis
on European economic interest groupings. Administrative capacity has been
further improved, but should continue to be strengthened.
With regard to
accounting,
Hungary’s legislation is nearly fully aligned with the
acquis,
except for the 2001
acquis
on valuation rules for the annual and consolidated accounts of
certain types of companies, banks and other financial institutions, which still needs to be
transposed. Also, the introduction of national accounting standards still needs to be
completed. The administrative structures are adequate in this area.
In the field of
protection of intellectual and industrial property rights (IPR),
Hungary
is meeting the majority of the commitments made in the accession negotiations. Its
legislation in this area, such as the Copyright Act, is to a large extent in line with the
acquis.
However, further alignment is needed with regard to the protection of copyright
in the information society and broadcasting via satellite in the field of intellectual
property rights. Hungary joined the European Patent Organisation as of 1 January 2003.
The country also acceded to all relevant international instruments in the field of
copyright and related rights, including the two 1996 WIPO Internet Treaties.
Administrative capacities appear to be sufficient in this area. Further legislation remains
to be adopted before accession, notably in the field of industrial property rights, on the
introduction of supplementary protection certificates for pharmaceuticals and plant
protection products.
As agreed in the accession negotiations, specific transitional rules will apply in relation
to pharmaceutical product patents, involving the non-application of Community
exhaustion to certain exports from Hungary, as regards the granting of supplementary
protection certificates for medicinal and plant protection products, and in relation to the
extension of registered or pending Community trademarks to the territory of Hungary.
As regards enforcement of IPR, administrative structures are in place but need to be
strengthened. In particular, the co-ordination and training of the enforcement bodies
(customs, police and judiciary) remain to be improved. Hungary should also continue its
efforts to further reduce the length of court proceedings. In addition, the fight against
counterfeiting and piracy needs to be continued as a priority. Further efforts are needed
to increase the value of seizures, and to ensure rapid and deterrent legal action against
offences and efficient border control measures.
The
Regulation replacing the Brussels Convention
on mutual recognition and
enforcement of foreign judgements in civil and commercial matters will be directly
applicable upon accession, and accession to the
Rome Convention
will only be possible
upon accession. Hungary should designate the relevant courts or other authorities to
ensure swift implementation of these provisions
(see also Chapter 24 - Justice and Home
Affairs).
Conclusion
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Hungary is essentially meeting the requirements for membership, and is expected to be
by accession in a position to implement the
acquis,
in the areas of
company law
and
accounting,
as well as on the
Regulation replacing the Brussels Convention
and the
Rome Convention.
The transposition of the accounting law
acquis
will need to be
completed.
The majority of commitments and requirements arising from the accession negotiations
in the field of the
protection of intellectual and industrial property rights
have been
met. Further legislative adjustments are required in respect of the protection of copyright
in the information society, and broadcasting via satellite. Although the legislation is
mostly in line, enhanced efforts are in particular needed to strengthen the enforcement of
intellectual and industrial property rights. Better co-ordination and training of
enforcement bodies is required (mainly customs, police and the judiciary), and the
efficient functioning of a well-trained judiciary should be given particular attention.
Efforts must continue to ensure efficient border control measures.
Chapter 6: Competition Policy
The competition
acquis
covers both anti-trust and state aid control policies. It includes
rules and procedures to fight anti-competitive behaviour by companies (restrictive
agreements between undertakings and abuse of dominant position), and to prevent
governments from granting state aid which distorts competition in the Internal Market.
Generally, the competition rules are directly applicable in the whole Union, and Member
States must fully co-operate with the Commission on the enforcement of these rules.
In the
anti-trust
sector, Hungary has adopted legislation containing the main principles
of Community anti-trust rules as regards restrictive agreements, abuse of dominant
position and merger control. However, Hungary still needs to ensure that its legislation is
not in contradiction with the more recent Community block exemptions. Preparations
should continue for the application of the EU's new procedural regulation.
Hungary has the necessary implementing structure in place, and the Office for Economic
Competition is functioning well. Further efforts are needed to raise awareness of anti-
trust rules of all market participants and to build up a credible and transparent
competition culture. Special training for judges should be further developed.
The enforcement record is generally satisfactory. However, in order to ensure further
strengthening, priority needs to be given to cases, which most seriously distort
competition. Furthermore, more deterrent sanctions should be imposed.
In the field of
state aid,
Hungary has adopted state aid rules covering the main principles
of the
acquis.
The necessary implementing structures are in place, and the State Aid Monitoring Office
is functioning well. Further efforts are needed to raise awareness of state aid rules among
all market participants and aid grantors. Hungary must also pay further attention to
training the judiciary.
The enforcement record is generally satisfactory. Hungary should continue to ensure that
all aid measures are monitored and controlled.
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Hungary benefits from a transitional arrangement to phase out certain individual fiscal
aid measures relating to off-shore companies (by 31 December 2005), SME's (by 31
December 2011), and local business tax reductions (by 31 December 2007). The
transitional arrangement also includes the conversion of individual fiscal benefits to large
companies, where Hungary still needs to further amend its fiscal legislation in order to
introduce all the agreed modifications of the fiscal benefits by accession.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the
competition
chapter and is expected to be in a position to
implement this
acquis
from accession. In completing preparations for membership,
Hungary must continue to develop a track record of proper application and enforcement
of both anti-trust and state aid legislation. It should also complete the legislative fine-
tuning that will enable such strengthening of the enforcement record. Particular attention
is needed in respect of amending its fiscal legislation in order to introduce the agreed
modifications of the fiscal benefits by accession.
Chapter 7: Agriculture
The agriculture chapter covers a large number of binding rules, many of which are
directly applicable. The proper application of these rules and their effective enforcement
by an efficient public administration are essential for the functioning of the common
agricultural policy. This includes the setting up of management systems such as a Paying
Agency and the Integrated Administration and Control System, which are covered under
”horizontal issues” below, and also the capacity to implement rural development actions.
The acceding countries must be ready to be integrated into the common market
organisations for a range of agricultural products, including arable crops, fruits and
vegetables, and meat. Finally, this chapter covers detailed rules in the veterinary field,
which are essential for safeguarding animal health and food safety in the internal market,
as well as in the phytosanitary field, including issues such as seed quality, harmful
organisms and plant protection products.
Horizontal issues
The new Agricultural and Rural Development Agency (ARDA) was formally established
on 1 July 2003 through a merger of the existing Agriculture Intervention Centre and the
SAPARD Agency. The preparations for the new
Paying Agency
will need to be urgently
accelerated, in particular as regards the development of the IT system, the establishment
of administrative procedures and the recruitment and training of staff.
The establishment of a fully functional
Integrated Administration and Control System
(IACS) is still seriously delayed from both a technical and an organisational point of
view, even though important progress has been made in the setting-up of the Land Parcel
Identification System (LPIS) in the last six months. Given the work still to be done, and
the time remaining, there must now be serious doubts as to whether Hungary can have a
functioning system in place by the date of accession. The main concern is that the IT
systems still have to be developed.
ARDA and the Licensing and Administrative Office will be responsible for the
administration of
trade mechanisms.
The relevant control tasks will be the
responsibility of the Customs service and the Veterinary service. Accelerated efforts will
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however be needed in setting up the administrative procedures in this area and in
ensuring the co-ordination of the various bodies involved.
Concerning
quality policy
and
organic farming,
Hungary is making good progress.
Hungary has met the commitments and requirements arising from the accession
negotiations in the area of the
Farm Accountancy Data Network
(FADN) and is
expected to have implemented the FADN by accession.
State aid
measures in the field of agriculture remain to be brought in line with the
acquis
at the time of accession.
As concerns direct payments to farmers, the Hungarian government has decided to
implement the single area payment scheme (SAPS) in the first years after accession.
Common market organisations
ARDA will be responsible for intervention as well as inspection and authorisation of
payments for
arable crops.
Following the adoption of the Act on the Regulation of
Agricultural Market, the legislative and administrative requirements to manage this
Common Market Organisation (CMO) are mostly in place, although further work is
required to ensure that intervention centres are fully functioning by accession. Regarding
tobacco and hops, subject to continued good progress Hungary should have adequate
administrative capacity by accession. For dried fodder further progress is needed.
ARDA has been designated as the responsible body for the
sugar
CMO. A transitional
system of sugar quotas has been in place since 2002, including inter-professional
agreements, though full harmonisation with the acquis has yet to be achieved. EU trade
mechanisms are not yet applied. The communication system needs to be fully
harmonised with the EU requirements.
Implementing legislation as regards marketing standards for
fruit and vegetables
and for
the establishment of producers’ organisations has been adopted. Implementing legislation
still remains to be adopted regarding the procedures for operational funds and
programmes. Administrative structures are in place, but price reporting remains to be set
up. Application and controls on marketing standards and controls on producers’
organisations need to be strengthened.
In the area of
wine and alcohol,
the CMO for wine remains to be fully set up. The new
Wine Act and several implementing decrees still have to be adopted. The vineyard
register remains to be completed to cover the whole territory. Administrative structures
for the implementation of the CMO for wine need to be strengthened.
Since 1996 Hungary has applied a
milk
quota system, which remains to be fully aligned
with the EU requirements. The relevant administrative structures need to be finalised and
strengthened in order to ensure milk quota management and the administration of the
CMO on milk and milk products. The other mechanisms in this sector remain to be set up
or to be fully harmonised.
Legislative measures have been adopted regarding carcass classification and labelling for
beefmeat, sheepmeat
and
pigmeat,
but remain to be aligned for price reporting.
Notwithstanding minor shortcomings, in particular on price reporting, administrative
structures are in place.
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For
eggs and poultry,
legislative measures have been adopted but administrative
structures remain to be put in place as regards marketing standards, price reporting and
the reporting of production statistics.
Rural development
The Ministry of Agriculture will be the managing authority for rural development
measures. ARDA will be the paying agency for rural development and will be
responsible for the implementation of the measures. A department of ARDA already has
experience with the implementation of SAPARD, which is however subject to serious
delays in the disbursement of funds to beneficiaries, though the level of commitments is
rapidly accelerating. The draft Rural Development Programme for EAGGF Guarantee
expenditure remains to be formally transmitted. Overall, there are serious concerns about
Hungary’s preparations for implementing rural development programmes, in particular
due to the number of activities that remain to be completed and to the unclear definition
of responsibilities and weak co-ordination.
Veterinary and phytosanitary issues
The transposition of legislation on transmissible spongiform encephalopathies (TSEs)
and
animal by-products
has been completed but needs to be adjusted. Implementation
must be accelerated, in particular as regards official checks on the safe removal and
disposal of specific risk material (SRM) and on the processing of certain animal waste.
TSE surveillance needs to be upgraded, in particular as regards testing of animals at risk,
despite the growth in the number of tests carried out. Rendering plants remain to be
upgraded. A total feed ban has been implemented.
Legislation on the
veterinary control system in the internal market
has to be
significantly adjusted. Hungary has not joined the computerised network linking
veterinary authorities ANIMO, although the decision to join has been formally taken.
The main parts of the
acquis
for identification and registration of animals have been
transposed, but some parts need to be completed, notably in relation to holding
registration and identification of bovines. A central computer database for bovine
animals is operational and well developed but needs some upgrading. Holding
registration and movement control databases need to be fully developed for pigs, sheep
and goats. The law on the financing of veterinary inspections and controls has been
transposed. Transposition regarding veterinary checks of imports from third countries
and rules for imports needs to be completed. Significant work is still needed to bring
border inspection posts into compliance with EU requirements.
Regarding
animal disease control
measures, national contingency plans on foot-and
mouth disease, classical swine fever, Newcastle disease and avian influenza have been
provided. EU requirements in relation to bovine brucellosis have not yet been transposed
into Hungarian legislation. Hungary has joined the Animal Disease Notification System
(ADNS) on a voluntary basis.
Steps have been taken to align the Hungarian legislation on
trade in live animals and
animal products
with the
acquis.
Legislation on
public health
protection is in place but needs to be significantly adjusted.
Administrative capacity in this area must be urgently strengthened. Transitional
arrangements have been granted for certain high capacity red meat establishments until
the end of 2006. Products from these establishments will be restricted to the national
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market. Hungary has given a commitment that all establishments continuing in operation
after accession will be in compliance with the
acquis.
There is a high probability that a
significant number of agri-food establishments will not be in compliance with the
relevant EU requirements at the date of accession.
The
acquis
on
common measures
(including zoonoses) has been transposed, although in
relation to residue controls, transposition is not yet completed. The residue-monitoring
programme is also in place. However, attention needs to be given to bringing
implementation into line with EU requirements.
The
acquis
in the field of
animal welfare
has largely been transposed and remains to be
completed. Hungary has been granted a transitional arrangement until the end of 2009 as
regards the conditions for laying hens in certain farms. Enhanced efforts are needed to
ensure that pig holdings will be in compliance by accession.
In the field of
zootechnics,
steps have been taken to align the Hungarian legislation with
the
acquis.
Legislation for
animal nutrition
is in place. Further efforts will however be needed in
this field to improve effectiveness of controls through the co-ordination of the different
control services.
In the field of
phytosanitary
legislation, the
acquis
concerning harmful organisms and
plant protection products has been largely transposed, although legislation on the
registration of Plant Protection products has yet to be adopted. A new Act on Seeds was
adopted in June 2003 to ensure transposition in the seed quality sector. Some
implementing legislation remains to be adopted, in particular concerning maximum
residue levels for pesticides. The administrative capacity (including laboratories) needs
to be strengthened to ensure proper implementation.
Hungary has to ensure that international veterinary and phytosanitary agreements are
brought into compliance with the
acquis
by accession.
In order to ensure a comprehensive approach to enhance food safety throughout the food
chain, the Food Safety Office was formally established in May 2003 and is now
operational. Aspects of food safety are also covered under
Chapter 1 – Free movement of
goods.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations, in (as far as the horizontal issues are concerned)
quality policy
and
organic farming,
the
Farm Accountancy Data Network
(FADN) and
state aid;
and, as far as the common market organisations (CMOs) are concerned, in
arable crops,
fruit and vegetables, milk, beefmeat, sheepmeat and pigmeat,
and
eggs and poultry.
In the veterinary and phytosanitary field, Hungary is essentially meeting the
requirements in the areas of
animal disease control measures, trade in live in animals
and animal products, animal welfare, zootechnics
and
animal nutrition.
Subject to
good progress being maintained in these areas, Hungary should be in a position to
implement the
acquis
by accession.
Hungary is partially meeting the commitments and requirements for membership in the
area of
trade mechanisms,
CMOs for
wine
and
sugar,
and in the veterinary field as
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regards
TSE and animal by-products
(as regards upgrading of rendering plants),
veterinary control systems in the internal market
(as regards animal identification and
import controls),
common measures
(as regards residue controls), and
phytosanitary
measures
(only as regards pesticide maximum residue levels). Unless efforts are
accelerated in these areas, there is a risk that functioning systems will not be in place on
accession.
There are serious concerns about Hungary’s preparations for setting up its
Paying
Agency,
for implementing the
Integrated Administration and Control System
(IACS),
and in the areas of
rural development
and
public health
(as regards progress in
upgrading agri-food establishments). Unless immediate remedial action is taken,
Hungary will not be in a position to implement the
acquis
in these areas by the date of
accession.
Chapter 8: Fisheries
The
acquis
on fisheries consists of regulations, which do not require transposition into
national legislation. However, it requires the introduction of measures to prepare the
administration and the operators for participation in the Common Fisheries Policy (in the
areas of market policy, resource and fleet management, inspection and control, structural
actions and state aid). In some cases, existing fisheries agreements or conventions with
third countries or international organisations need to be adapted.
In the field of
resource and fleet management, and inspection and control,
Hungary
completed its preparations in March 2003 by adopting rules for the establishment of a
system of size control on fisheries imports through an amendment to the Codex
Alimentarius Hungaricus.
In the area of
structural actions,
a section on fisheries has been included in the draft of
the Hungarian Operational Programme for Agriculture and Rural Development, which
has been submitted to the European Commission. Specific staff should be allocated to the
relevant Service of the Ministry of Agriculture for the administration of the Financial
Instrument for Fisheries Guidance (FIFG).
Regarding
market policy,
Hungary’s legislation is in line with the
acquis,
though
voluntary producers’ organisations have not been established yet.
As regards
state aid
to the fisheries sector, Hungary allocates aid to this sector only for
natural waters, bio-diversity and nature conservation purposes. The aid measures must be
brought into conformity with the
acquis
by accession.
Hungary is not party to any
international fishing agreements.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations and is expected to be in a position from accession to implement
the
acquis
in the area of
fisheries.
However, Hungary needs to finalise a coherent fishery
support policy within the Operational Programme for Agriculture and Rural
Development and raise the number of staff in bodies administering the Financial
Instrument for Fisheries Guidance (FIFG). Furthermore, Hungary is encouraged to set up
producers’ organisations.
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Chapter 9: Transport policy
EC transport legislation aims at improving the functioning of the Internal Market by
promoting efficient and environment- and user-friendly transport services. The transport
acquis
covers the sectors of road transport, railways, aviation, maritime transport and
inland waterways. Member States are required to adopt and implement legislation
concerning technical and safety standards as well as social standards. In order to further
develop the European Single Transport Market, EC legislation also includes rules on
market liberalisation. An important aspect of EC maritime policy is the establishment of
Union-wide maritime safety standards.
The extension of the
trans-European transport networks
has been defined. While the
necessary implementing structures in this area are in place, the administrative capacity of
all institutions involved to prepare, manage and monitor transport projects requires
further strengthening, both in qualitative and quantitative terms, in particular in the road
and rail sectors.
In the land transport sector, Hungary has nearly completed the implementation of its
commitments with regard to legislative alignment with the
road transport
acquis.
Framework legislation is in place and in line with the
acquis.
Alignment with the fiscal
and technical
acquis
has been completed. Hungary has been granted a transitional period
until 31 December 2008 for the full implementation of the
acquis
on maximum
authorised weights and dimensions of vehicles in international traffic. As to the social
acquis,
legal alignment has been completed, except for the legislation on standard
checking procedures and implementing legislation as regards tachographs. Hungary has
been increasing the volume of checks of driving time and rest periods up to the levels
required by the
acquis.
The necessary administrative structures in this area are in place,
with the General Inspectorate of Transport performing key supervisory and control
functions. Some improvement is still required as regards technical roadside inspections
and checks of passenger transport operations. Hungary has been granted a transitional
arrangement concerning gradual reciprocal access to the cabotage market in the road
haulage sector on road freight cabotage (for a maximum of 5 years after accession).
Transposition of the
rail transport
acquis
is taking place according to schedule. The
process remains to be completed with regard to the revised railway
acquis
of February
2001 and the interoperability directives. Furthermore, independence and administrative
capacity for the allocation of capacity and infrastructure charging remains to be ensured.
In the framework of the ongoing reorganisation process, the capacity of the railway
administration needs to be further strengthened. The railways regulatory authority, which
is already in place, must develop competencies for its future role as appeal body for
capacity allocation and charging. The restructuring process of the state railway company
MÁV should continue to be pursued in accordance with the established strategy.
Hungary received a transitional period until 31 December 2006 as regards the full
implementation of the Trans-European Rail Freight Network access.
In the area of
air transport,
framework legislation is in place and essentially in line with
the
acquis.
Implementing legislation still needs to be adopted with regard to the complete
and official publication of Joint Aviation Requirements (JARs). Administrative capacity
has been strengthened and is sufficient. However, specialised training of staff should
continue, and additional staff should be recruited for the Civil Aviation Authority in view
of that body's increasing tasks. As regards noisy aircraft, Hungary received a transitional
period until 31 December 2004 for the full implementation of the relevant
acquis.
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On
inland waterways
transport, legislative alignment has been completed; the Inland
Waterway Fund has been set up. Administrative structures in this area are in place and
are being strengthened, in particular through specialised training of staff.
In the field of
maritime transport,
framework legislation is in place and in line with the
acquis.
However, the adoption of implementing legislation remains to be completed, in
particular in relation to the
acquis
adopted under the “Erika” packages relevant to
Hungary. The relevant administrative structures in this area are in place and are being
strengthened, in particular through specialised training of staff.
Conclusion
Hungary is essentially meeting the requirements for membership in the areas of
trans-
European transport networks, road transport, air transport, inland waterways and
maritime transport
and is expected to be in a position to implement the
acquis
in these
areas by the time of accession. Hungary needs to reinforce administrative capacities for
project management regarding trans-European transport networks and to complete
alignment in the other above-mentioned areas.
Hungary is meeting the majority of the requirements for membership as regards
rail
transport.
In order to complete preparations for membership, Hungary needs to
complete the legislative alignment and adopt the missing implementing legislation.
Hungary also needs to reinforce its administrative capacity - in particular as regards
capacity allocation and charging - in this sector.
Chapter 10: Taxation
The acquis on taxation largely covers the area of indirect taxation, as concerns VAT
(value-added tax) and excise duties. It lays down definitions and principles of VAT.
Excise duties on mineral oils, tobacco products and alcoholic beverages are regulated at
EU level as concerns the structure of the duty, the level of minimum rates and the
holding and movement of excisable goods. As concerns direct taxation, the acquis covers
some aspects of corporate taxes and aims mainly at removing obstacles to cross-border
activities between enterprises. Finally, the Community legislation in the area of
administrative co-operation and mutual assistance provides tools to prevent intra-
Community tax evasion and tax avoidance on both direct and indirect taxation.
In the area of indirect taxation, transposition of the
acquis
on
VAT
is taking place
according to schedule. Alignment needs to be completed in particular as concerns the
scope of reduced VAT rates and exemptions, except in the areas where it has obtained
transitional periods (see below), and taxable persons (public authorities). Hungary also
needs to introduce the intra-Community regime and the special schemes for investment
gold and to adjust its special scheme for second-hand goods. Furthermore, the special
schemes for hotels and the flat-rate scheme for small and medium sized enterprises,
which are both not in conformity with the
acquis,
need to be addressed. Hungary should
also eliminate some remaining discrepancies with the
acquis
concerning the place of
taxation in respect of certain supplies, the VAT refunds and the right of credit for goods
used for both taxable and non-taxable purposes.
Hungary has obtained transitional periods to continue the application of the reduced
VAT rate on coal, coal-brick and coke, firewood and charcoal, and on district heating
services (until 31 December 2007), on restaurant services and foodstuffs sold in similar
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premises (until 31 December 2007) and on natural gas and electricity (until one year after
accession). Derogations were also granted as concerns the application of a VAT
exemption on international passenger transport, and the application of a VAT exemption
and registration threshold of € 35.000 for small and medium sized enterprises. The
necessary administrative structures are in place.
As concerns
excise duties,
in order to complete alignment with the
acquis,
Hungary
needs to further align its legislation as concerns the level of duty on some categories of
products, and some exemptions. Hungary also needs to extend the domestic suspension
scheme to intra-community movements and to eliminate some remaining discrepancies
with the
acquis
concerning the definition of beer, the exemption for wine produced by
tax warehouses for own consumption and the exemption for alcohol used in the
preparation of foodstuff. The gradual increase of excise duties on cigarettes is proceeding
according to schedule to reach the minimum rate level on 31 December 2008, in
conformity with the transitional period agreed in the accession negotiations. Hungary
was also granted a derogation to continue applying its excise duty scheme for small fruit
grower's distillation, provided that the quantity does not exceed 50 litres of fruit spirit per
year per household and provided that the reduced excise rate is not less than 50% of the
standard national duty rate for alcohol. Hungary still needs to fully adjust its legislation
to the terms of this transitional period. The necessary administrative structures in this
area are in place.
In the area of
direct taxation,
Hungary needs to complete transposition as concerns the
taxation of the raising of capital. It should also transpose the EC legislation on interests
and royalties and on the taxation of savings income. The necessary administrative
structures in this area are in place.
On
administrative co-operation and mutual assistance,
Hungary is taking the
necessary steps to transpose the
acquis
and to implement it by accession, both from the
legislative point of view and as concerns organisational structures including information
technology systems. The central liaison office (CLO) is operational, while the excise
liaison office (ELO) remains to be established. Preparations for the VAT Information
Exchange System (VIES) and for the System for Exchange of Excise Data (SEED)
databases are ongoing and proceeding according to plans.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations on this chapter and is expected to be by accession in a position to
implement the
acquis
in the area of
taxation.
Hungary still needs to adopt some
legislation to complete the alignment process in all areas. The level of administrative
capacity is adequate. Hungary should continue at the current pace its ongoing efforts to
set up the IT systems allowing for the exchange of computerised data with the
Community and its Member States.
Chapter 11: Economic and monetary union
EC legislation on Economic and Monetary Union (EMU) contains specific rules ensuring
the independence of central banks in Member States, prohibiting indirect financing of the
state by the central bank, and disallowing privileged access of the public sector to
financial institutions. These rules must be transposed into the national legislation, despite
the fact that Hungary will not yet adopt the euro as a currency from accession. EMU
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policy also includes the co-ordination of exchange rate and economic policies, adherence
to the stability and growth pact and the statutes of the European System of Central
Banks.
Hungary has met the commitments and requirements arising from the accession
negotiations in the area of
economic and monetary union
and is in a position to
implement the
acquis
as from accession.
Chapter 12: Statistics
The
acquis
in the field of statistics requires adoption of basic principles such as
impartiality, reliability, transparency, confidentiality of individual data and dissemination
of official statistics. It also covers methodology, classifications and procedures for data
collection in various areas such as statistical infrastructure, macro-economic and price
statistics, business statistics, transport statistics, external trade statistics, demographic
and social statistics, agricultural statistics and regional statistics. The focal point of the
statistical system of a country is the National Statistical Institute, which acts as the
reference point for the methodology, production and dissemination of statistical
information.
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the area of
statistics
and is expected to be in a position to
implement the
acquis
as from accession. Hungary needs to improve the exhaustiveness
and the timeliness of data in certain domains such as national accounts, government
finance statistics and business statistics.
Chapter 13: Social policy and employment
The
acquis
in the social field includes minimum standards in fields such as labour law,
equal treatment of women and men in employment and social security, and health and
safety at work. Specific binding rules have also been developed in public health (on
tobacco control and surveillance and control of communicable diseases) and recently also
with respect to non-discrimination on grounds of racial or ethnic origin, religion or
belief, disability, age or sexual orientation. The European Social Fund (ESF) is the main
financial tool through which the EU supports the implementation of its Employment
Strategy and contributes to social inclusion efforts (implementation rules are covered
under Chapter 21, which deals with all structural instruments). The acceding countries
are expected to be able to participate in social dialogue at European level, and in the EU
policy processes in the areas of employment policy, social inclusion and social
protection.
As regards
labour law,
most of the EC legislation has been transposed into Hungarian
law, especially after the adoption, in March 2003, of new amendments to the Labour
Code. Some outstanding elements remain to be adjusted in order to achieve full
alignment in the areas of transfer of undertakings and working time. Transposition of
legislation of the new
acquis
related to information and consultation of workers and
involvement of workers in the European Company is foreseen after accession. The
independent guarantee fund for employees is in place and functioning well.
Hungary has adopted all the necessary legislation in the field of
equal treatment of
women and men,
and, in general, the legislative transposition is in line with the
acquis.
However, the pensionable age for male and female civil servants will have to be
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equalised upon accession, when the pension scheme constitutes pay within the meaning
of the Treaty and EC case law. Moreover, legislation concerning the protection of
women in employment, yet leading to their discrimination, should be removed.
Implementing structures need to be further strengthened. In this respect, the creation, in
May 2003, of a new government position of a Minister without portfolio in charge of
equal opportunities is a welcome development.
In the area of
health and safety at work,
most of the legislation has been adopted and
will be in force as from accession. However, several issues need to be adjusted by
amendments of national legislation in order to achieve full compliance with the
acquis.
This concerns,
inter alia,
the duty of the employer to actively consult, inform and ensure
participation of workers and/or their representatives, as well as the need to stress the
preventive character of health surveillance provisions. The authorities responsible for the
enforcement of health and safety legislation are in place, but further strengthening, in
terms of both staffing and technical facilities, is needed. There is also a need to improve
the co-ordination of health and safety issues through close co-operation between these
authorities, to establish a better reporting system for workplace accidents and to put in
place an efficient public information system.
As regards
social dialogue,
the tripartite national bodies are in place, and tripartite social
dialogue has substantially improved in Hungary. However, autonomous bipartite social
dialogue needs to be improved at all levels and the number of collective agreements
signed at sectoral and enterprise level increased. The social partners’ administrative
capacity, primarily for entering into social dialogue at European level, is to be reinforced,
too.
In the field of
public health,
Hungary has recently adopted legislation aiming at
transposing the tobacco
acquis.
As regards surveillance and control of communicable
diseases, the Hungarian legislation is in line with the
acquis.
However, current efforts to
upgrade the surveillance and control structures should be continued, in particular with
regard to education and training and reinforcement of county public health institutes.
Efforts should continue in order to develop a health monitoring system with a view to
obtaining health data and indicators comparable with the Community health monitoring
system. Attention should be paid to the improvement of the health status of the
population and to health expenditure. In this respect, the “Decade of Health” programme
launched by the Government is a welcome development.
Concerning
employment policy,
efforts are still needed to effectively implement the
priorities identified in the Joint Assessment of the Employment Priorities (JAP). In
particular, it is important to increase the employment rate, especially amongst older
workers and women, the unskilled and the disadvantaged, and to reduce regional
imbalances. Also, incentives for people to work and on mobility should be improved.
Further efforts are needed to reduce the level of undeclared and informal work. Efforts
are needed to establish appropriate administrative capacity for policy planning and
delivery, in particular in the public employment services.
As regards the
European Social Fund (ESF),
the main elements of the administrative
structures are in place. However, there is a need for a stronger decision-making capacity
as well as greater inter-ministerial co-ordination. A more strategic approach should be
ensured with respect to all measures proposed for ESF assistance. The management,
administrative, monitoring and control capacities of the relevant Ministries, intermediate
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bodies and financial beneficiaries should be further reinforced. Although Hungary has a
first experience of participation in EQUAL, preparations need to be intensified.
The Commission and Hungary are finalising the Joint Memorandum on Social Inclusion
(JIM), which identifies key challenges and possible policy orientations for promoting
social inclusion.
On this basis, a national integrated strategy and a National Action Plan
on social inclusion will have to be developed. Analytical work and social statistics
systems on poverty and social exclusion should continue to be developed in line with the
EU commonly agreed indicators on social inclusion.
In the field of
social protection,
sustained efforts are required to implement the reforms
that have been introduced, including the health care reform and the pension reform,
which will help to further improve the level and efficiency of social protection.
Concerning
anti-discrimination,
draft legislation intended to transpose the
acquis
is
before Parliament. The Equality Body required by the
acquis
needs to be established. As
regards the Roma minority, the Government introduced a number of structural changes in
2003. The overall responsibility for Roma affairs was transferred to the Prime Minister’s
Office. However, despite these developments, the situation of the Roma remains very
difficult. The majority of persons belonging to the Roma community are still exposed to
social inequalities, social exclusion and widespread discrimination in education,
employment and access to public services. Segregation in schools has remained a serious
problem. The long-term Roma strategy announced under the previous Government has
still not been adopted either. Social exclusion of the Roma community should be better
analysed and monitored, and ESF assistance could be a useful tool to help Hungary to
better address the situation of its Roma population.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the areas of
labour law, equal treatment of women and men,
health and safety at work, social dialogue, public health, employment policy, social
inclusion
and
social protection
and is expected to be in a position to implement this
acquis
as from accession. Some legal adjustments are needed in the fields of labour law,
equal treatment of women and men and health and safety at work. Implementing
structures need to be further strengthened in the areas of equal treatment of women and
men, health and safety at work and public health. Autonomous bipartite social dialogue
should be improved. As regards employment policy, the effective implementation of the
priorities identified in the Joint Assessment Paper is necessary to prepare for full
participation in the European Employment Strategy.
Hungary is meeting the majority of the requirements for membership in the areas of
European Social Fund
and
anti-discrimination.
With regard to European Social Fund,
including EQUAL, while considerable progress has been achieved during the last few
months, further efforts are urgently needed in order to strengthen the administrative
capacity for management, implementation, monitoring, audit and control at national and
regional level. Attention is to be given to alignment with the anti-discrimination
acquis,
and considerable efforts should aim at improving the situation of the Roma minority.
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Chapter 14: Energy
EU energy policy objectives include the improvement of competitiveness, security of
energy supplies and the protection of the environment. The energy
acquis
consists of
rules and policies, notably regarding competition and state aids (including in the coal
sector), the internal energy market (for example, opening up of the electricity and gas
markets, promotion of renewable energy sources, crisis management and oil stock
security obligations), nuclear energy and energy efficiency. This chapter also covers
important aspects of the safety of nuclear installations.
With respect to
security of supply,
and in particular oil stocks, both framework and
implementing legislation in Hungary are in place and in line with the
acquis.
The
administrative capacity required - the Association of crude oil and oil products
stockpiling and a division in the Ministry of Economic Affairs and Transport - is
functioning well. Hungary already complies with the
acquis
requirement to hold 90 days
of oil stocks, except for oil products of category III.
In the field of
competitiveness and the internal energy market
(electricity and gas
sectors), the transposition of the
acquis
is now taking place according to schedule.
Framework legislation, i.e. the Acts on Electricity and on Gas, is in place and in line with
the
acquis.
Implementing legislation is also largely in place and in line with the
acquis,
but remains to be completed in particular with regard to gas with a view to the price
setting mechanism. Market opening in the gas and electricity sectors takes place in line
with the commitments made in the negotiations. Presently 33 to 35% of the electricity
market are open for competition. Following the adoption of the Gas Act in June 2003, it
is envisaged that 44% of the gas market will be opened for competition as from January
2004. While electricity price distortions have been removed since February 2003 in line
with the commitments made, the removal of the price distortions in the gas sector still
needs to continue. Through the Gas Act, the status of the head of the regulatory body, the
Hungarian Energy Office (HEO), has been changed. The required independence of the
HEO must not be endangered by the legislative amendments to the status of the President
of the Office. Both the Ministry and the regulator need to be further strengthened in
terms of staffing. Hungary should transpose the recently adopted electricity and gas
directives in line with the timetable laid down by the
acquis.
In the area of
energy efficiency and renewable energy,
legislative alignment has been
largely completed, except for implementing legislation as regards the new
acquis
adopted as from 2000. The latest legislation should be transposed according to the
timetables laid down in the directives. Administrative structures in this area, with the
Energy Centre as the main institution, are in place and function adequately, but need to
be strengthened. An Energy Efficiency Programme launched in 1999 is being
implemented and is partially also addressing renewable energy issues.
In the field of
nuclear energy and nuclear safety,
Hungary meets the commitments and
requirements arising from the accession negotiations and will be in a position to
implement the Euratom
acquis
as from the date of accession. Based on the results of the
accession negotiations, Hungary is expected to provide additional information on
measures taken to implement the recommendations of the June 2001 Council Report on
Nuclear Safety in the Context of Enlargement. Hungary provided such information in
January and March 2002. In July 2003, Hungary submitted additional information
covering recent progress made in various fields of nuclear safety, including
inter alia
legislative aspects, the independence of the regulatory authorities, the bubbler condenser
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system, and the INES 3 incident at the Paks nuclear power plant in April 2003.
Regarding the latter, Hungary also gave a detailed presentation to the Council in
September 2003.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the
energy
chapter and is expected to be in a position to
implement the
acquis
from accession. Hungary needs to continue the opening up of the
electricity and gas markets as planned and to fully complete legal alignment in these
areas. In addition, Hungary must complete alignment by adopting implementing
legislation as regards the latest
acquis
on energy efficiency and renewable energy.
Hungary should continue to further strengthen its administrative capacity in the sector,
including the Ministry of Economic Affairs and Transport. With a view to the recent
changes in the Gas Act as to the status of the Head of the Hungarian Energy Office, the
regulator’s independence must be fully ensured.
Chapter 15: Industrial policy
EC industrial policy seeks to enhance industrial competitiveness and rates of
employment, whilst operating in markets open to international competition. Its aim is to
speed up adjustment to structural change, encouraging an environment favourable to
initiative and to the development of undertakings throughout the Community. EC
industrial policy mainly consists of policy principles and horizontal and sectoral
industrial policy communications.
Hungary’s
industrial strategy
essentially complies with the concepts and principles of
EC industrial policy, i.e., it is market-based, stable and predictable. The Government
should continue elaborating the new, broader industrial policy strategy. A strategy for
Innovation and Technology Development has been finalised, but was incorporated into a
wider scope Government proposal on competitiveness, which remains to be approved
this autumn.
As concerns
privatisation and restructuring,
the privatisation process has not yet been
fully completed, in particular in the steel sector. There are altogether 19 state-owned
companies on the list for privatisation in 2003. Hungary should ensure that the
restructuring policy is implemented in conformity with the EC state aid and competition
rules in order to create efficient and competitive companies. The main administrative
structures for implementation in this sector are in place.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the
industrial policy
chapter and is expected to be able to
implement the
acquis
as of accession. Hungary should continue the privatisation and
restructuring process.
Chapter 16: Small and medium-sized enterprises
SME policy aims to improve the formulation and co-ordination of enterprise policy
across the internal market with a view to supporting the development of SMEs. In doing
so, it seeks to improve the overall business environment in which SMEs operate. SME
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policy consists largely of consultation fora and Community programmes, as well as of
communications, recommendations and exchanges of best practices.
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations relating to
small and medium-sized enterprises.
Alignment with
the new Commission recommendation on the SME definition should be carried out.
Further attention is needed in order to ensure the effective implementation of the new
Széchenyi Enterprise Development Programme. The implementation of the European
Charter for Small Enterprises should be maintained.
Chapter 17: Science and research
Due to its specificity, the
acquis
in the field of science and research does not require any
transposition in the national legal order. However, the necessary implementing capacity
needs to be created to allow for effective participation in activities under the Framework
Programmes in the field of research.
Hungary has met the commitments and requirements arising from the accession
negotiations in the area of
science and research
and will be in a position to implement
the
acquis
as from accession.
Chapter 18: Education and training
Education, training and youth is primarily the competence of the Member States. The
Community's acquis consists of a directive on education of the children of migrant
workers, and of action programmes and recommendations. The necessary implementing
capacity needs to be in place to allow for effective participation in the Community
programmes related to this chapter (Leonardo da Vinci, Socrates and Youth).
Hungary has met the commitments and requirements for membership in the area of
Community programmes,
and will be in a position to implement this
acquis
from
accession. The implementing capacity for Community programmes will need to be
enhanced in order to be able to benefit from additional allocations for decentralised
actions following accession.
In the area of
education of children of migrant workers,
an action plan has been set up.
Also, the Public Education Act has recently been amended. However, due
implementation of this
acquis
still needs to be ensured.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the area of
education and training
and is expected to be in a
position to implement this
acquis
from accession. Efforts to implement the
acquis
on
education of children of migrant workers should continue.
Chapter 19: Telecommunications and information technologies
The acquis in the field of telecommunications consists mainly of the 1998 regulatory
framework and a 2000 regulation, and is aimed at the elimination of obstacles to the
effective operation of the single market in telecommunications services and networks,
and the achievement of universally available modern services. A new regulatory
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framework on electronic communications was adopted in 2002 and must be
implemented. As regards postal services, the objective is to implement the single market
by opening up the sector to competition in a gradual and controlled way, within a
regulatory framework which assures a universal service (1997 and 2002 acquis).
In the field of
telecommunications,
Hungary’s primary legislation is in line with the
1998–2000
acquis,
except for the area of carrier selection for local calls. Implementing
legislation should be improved in order to provide a firm legal basis for universal service
and for the cost orientation of interconnection prices. In order to develop further
competition in the market, measures to reduce both interconnection and wholesale
Internet access prices need to be taken. A new Act on Telecommunication aiming at full
transposition of the 2002
acquis
was adopted by the Government in September 2003.
While the necessary administrative structures in this area are in place, the role and the
regulatory capacity of the Communications Authority need to be strengthened, as does its
capacity for economic analysis.
In the area of
postal services,
Hungary’s legislative alignment remains to be completed.
As to the first postal directive, the Hungarian legislation needs to be further aligned as
regards the authorisation and licensing regime, the compensation fund mechanism, the
universal services' obligation, where some exemptions granted to the incumbent are still
in place, and the quality of service provision. Furthermore, as regards accounting, the
costs and the separation by services have not yet been ensured by the framework
legislation. Also, the transposition and implementation of the second postal directive is
still missing. The administrative capacity in this sector needs to be further strengthened,
including through further staffing and training.
Conclusion
Hungary is meeting the majority of the commitments and requirements in the
telecommunications
area and is partially meeting the commitments and requirements
arising from the accession negotiations in the
postal services
sector. Implementation of
the telecommunications
acquis
must be speeded up,
inter alia
by setting reasonable terms
for interconnection. The effectiveness and independence of the regulator in the
telecommunications sector needs to be ensured. Complete legislative alignment with the
acquis
must be ensured. Enhanced efforts must be made with regard to the transposition
of the
acquis
in the postal sector. Hungary must ensure the correct application of the
universal service
acquis.
Chapter 20: Culture and audio-visual policy
The culture and audio-visual policy chapter requires legislative alignment with the
Television without Frontiers directive and contains the community programmes Culture
2000, Media Plus and Media Training. Alignment with the Television without Frontiers
directive creates the conditions for the free movement of television broadcasts within the
Community. It implies basic common requirements concerning advertising; the
protection of minors and public order; and the promotion of European works.
In order to complete transposition of the
audio-visual policy
acquis,
Hungary needs to
align its legislation concerning the question of linguistic policy measures. Administrative
capacity for implementation of the audio-visual
acquis
is satisfactory.
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Hungary meets the requirements for participation in Community activities in the field of
culture.
Conclusion
Hungary has met the commitments and requirements arising from accession negotiations
in the field of
culture.
Hungary is partially meeting the requirements for membership in the area of
audio-
visual policy.
In order to complete preparations for membership, the remaining
legislative amendment must be completed.
Chapter 21: Regional policy and co-ordination of structural
instruments
The
acquis
under this chapter consists mostly of regulations, which do not require
transposition into national legislation. They define the rules for drawing up, approving
and implementing Structural Funds programmes and Cohesion Fund actions. These
programmes are negotiated and agreed with the Commission, but implementation is the
responsibility of the Member States. It is essential that Member States respect
Community legislation in general, for example in the areas of public procurement,
competition and environment, when selecting and implementing projects, and have the
necessary institutional structures in place to ensure implementation in a sound and cost-
effective manner from the point of view of both management and financial control.
Hungary has agreed with the Commission on a NUTS classification of its
territorial
organisation.
The essential feature of the
legislative framework,
i.e. the ability to ensure multi-annual
budget programming, is in place, and it is expected that the 2004 budget law will include
a specific appendix covering multi-annual budgeting for development programmes. As
regards budgetary flexibility, the Public Finance Act needs to be amended and the
relevant secondary legislation introduced. Hungary is committed to making the necessary
legislative changes by the end of 2003.
The legislative framework for financial control and compliance with other Community
policies is monitored in other chapters. However, in order for Hungary to make effective
use of its eligibility for structural funds from 1 January 2004, the relevant
acquis
in areas
such as public procurement, state aid and environmental protection will need to be fully
respected from that date. Urgent efforts are needed in particular in the area of public
procurement.
The main
institutional structures
for the preparation and implementation of the
Structural and Cohesion Funds have been put in place. Staffing levels in the Managing
Authorities have been increased. However, the design of the implementation structure,
including the final designation of the intermediate bodies, needs to be completed, in
particular as regards the system for verifying, authorising and effecting payments to final
beneficiaries. Specific administrative arrangements for inter-ministerial co-ordination
have been made, covering both the ongoing programming exercise and future
implementation. Hungary needs to ensure that these arrangements are effectively
implemented.
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Internal audit units have been established in the managing and paying authorities.
However, the administrative framework for internal audits in general, and in the
ministries hosting the managing authority in particular, needs to be further strengthened.
The functional independence of the internal audit units in those ministries, which,
together with the Government Control Office, are in charge of the 5% and 15% on-the-
spot checks, needs to be ensured.
The
programming
documents — specifically the Development Plan (DP) and the
Operational Programmes — have been submitted, although the
ex-ante
evaluation has
not yet been completed. It is expected that Hungary will submit the programme
complements by October 2003.
An extensive process of consultation of a wide range of partner organisations on the DP
and the draft operational programmes has taken place at national and regional level.
The setting up of a functioning monitoring system has been delayed. A contract for the
development of an on-line information technology system aiming at covering the
monitoring needs of the Structural and Cohesion Funds was concluded in July 2003. A
central evaluation unit has been established in the National Development Office.
Considerable and sustained efforts are needed to establish a pipeline of projects that are
ready to be implemented in technical and financial terms so as to enable Hungary to
benefit fully from Community funds as soon as the programme starts.
The
financial management and control
system has still to be reviewed following the
finalisation of the implementation structure. Adequate operating procedures still need to
be developed and the procedures for co-ordination amongst the bodies involved in
financial control defined. Hungary is in the process of developing procedure manuals in
relation to financial control, auditing, the certification of expenditure, and the correction
of irregularities of future Structural and Cohesion Funds expenditure, including the
detailed responsibilities of the Paying Authority, the Managing Authorities and the
Intermediate Bodies in the field of financial management and control. Adequate levels of
trained staff need to be made available to the internal audit and control units in all
Ministries and bodies concerned.
The complex budgetary structure and the centralised system of payments through the
Treasury need to be considerably streamlined with a view to the practical requirements of
the financial management of the assistance and to ensuring full and timely payments to a
large number of final beneficiaries.
Additionality will be verified before approval of the Community Support Framework.
Conclusion
Hungary is essentially meeting the requirements for membership in relation to
territorial
organisation
and
programming.
Provided the further work programme is carried out as
envisaged, Hungary should be in a position to meet all requirements in these areas by the
start of the programme. As regards programming, Hungary needs to focus on establishing
an adequate pipeline of well-prepared projects and on setting up a functioning
computerised monitoring system.
Hungary is partially meeting its commitments and the requirements arising from the
accession negotiations in the areas of
legislative framework, institutional structures
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and
financial management and control.
Concerning the legislative framework Hungary
must urgently adopt new legislation on public procurement in line with the acquis and to
make sure that final beneficiaries will be in a position to effectively apply the rules and
procedures resulting from the new law in order to benefit from Community funding from
1 January 2004. As regards institutional structures, Hungary needs to strengthen
interministerial co-ordination and finalise the design of the implementation structure,
including in the area of financial control, providing for a clear definition, a clear
allocation of tasks and an adequate separation of functions. In the area of financial
management and control, Hungary needs to complete the development of procedures, to
reorganise its budgetary structure and to streamline the very centralised system of
payments.
Chapter 22: Environment
Community environment policy aims to promote sustainable development and protect the
environment for present and future generations, and is based on the integration of
environmental protection into other Community policies, preventive action, the polluter
pays principle, fighting environmental damage at source, and shared responsibility. The
acquis
comprises over 200 legal acts covering horizontal legislation, water and air
pollution, management of waste and chemicals, biotechnology, nature protection,
industrial pollution and risk management, noise, and radiation protection. Ensuring
compliance with the
acquis
requires significant investments, but also brings significant
benefits for public health and reduces costly damage to forests, buildings, landscapes and
fisheries. A strong and well-equipped administration at national, regional and local level
is imperative for the application and enforcement of the environment
acquis.
Horizontal legislation
is in place and is in line with the
acquis,
except for the recent
acquis
on strategic environmental impact assessment, which needs to be transposed and
implemented by July 2004 in line with the Directive. The existing National Climate
Change Strategy is currently being reviewed. While the relevant administrative capacities
are in place and function adequately, the competent authority for strategic environmental
impact assessment still needs to be designated.
In the
air quality
sector, legislation is in place and is in line with the
acquis.
Administrative capacities are in place and function. Air quality plans and programmes
need to be completed and monitoring enhanced by accession.
In the field of
waste management,
legislation is in place and is in line with the
acquis,
except for the recent
acquis
on end-of-life vehicles, which needs to be completed by
accession. Administrative capacities are in place and function. More staff are needed to
deal with waste management within the Regional Environmental Inspectorates and in the
municipalities. The setting up of local waste management plans needs to be completed.
The setting-up of a supervision system for waste shipments and the establishment of a
permit and deregistration system for end-of-life vehicles need to be completed by
accession. The establishment of collection systems and recovery and disposal facilities
needs to continue. As regards packaging waste, a transitional arrangement until 31
December 2005, with intermediate targets, has been agreed.
In the area of
water quality,
legislation is in place and is in line with the
acquis,
except
for the recent framework
acquis
on water, which needs to be completed by accession.
Programmes for discharges of dangerous substances and action plans with regard to
surface water need to be finalised by accession. Further institutional arrangements need
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to be developed for the monitoring of drinking water. Administrative capacities are in
place and function adequately. However, co-ordination between the ministries and the
regional authorities should be maintained. As regards urban wastewater, a transitional
arrangement until 31 December 2015, with intermediate targets, has been agreed.
In the field of
nature protection,
legislation is in place and is in line with the
acquis,
except for implementing legislation on habitats and birds, including the authorisation for
site designation. Efforts have to be stepped up in this respect. In this context, particular
attention needs to be paid to clarify the issue of consultation of stakeholders. Enhanced
efforts are required to prepare a list of proposed sites of Community interest and to
designate special protection areas by accession, and to ensure that relevant protection
measures are applied. Administrative capacities have to be strengthened, in particular
with regard to the consultation process.
The legislation on
industrial pollution
is in place and is in line with the
acquis,
except
for the recent
acquis
on national emission ceilings, which needs to be transposed by
accession. While administrative capacities are essentially in place and function, greater
efforts (both in terms of staffing and training) are required to ensure that permits are
issued and complied with as regards all new installations subject to the rules on
integrated pollution prevention and control (IPPC) by accession, and that permits for
existing installations continue to be issued and complied with until October 2007. As
regards
industrial risk management,
legislation is in place and in line with the
acquis.
Although progress has been made with regard to major accident hazards, the setting up of
a notification system, the establishment of a system for identifying establishments, which
pose a risk, and the assessment of safety reports have to be completed. Also, external
emergency plans need to be drawn up. As regards waste incineration, transitional
arrangements until 30 June 2005 for certain installations and until 31 December 2004 for
certain large combustion plants have been agreed.
The legislation concerning
chemicals and genetically modified organisms
(GMOs) has
been transposed and is in line with the
acquis,
except for asbestos and the recent
acquis
on the deliberate release into the environment of GMOs. With regard to GMOs, the
institutional and procedural framework has still to be finalised. Administrative capacities
are in place and function, but more staff is needed. Co-ordination between the
organisations involved needs to be further enhanced.
Transposition of the
acquis
on
noise
is proceeding according to schedule. Legislation is
in line with the
acquis,
except for the recent
acquis
on ambient noise, which needs to be
transposed by July 2004 in line with the Directive. Administrative capacities are in place
and function adequately.
On
nuclear safety and radiation protection,
legislative alignment has largely been
completed and the legislation is in line with the
acquis,
except for information on
emergencies, which needs to be transposed by accession. Administrative capacities in
this area are in place and function adequately.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations and is expected to be in a position to implement the
acquis
in the
areas of
horizontal legislation, air quality, waste management, water quality,
industrial risk management, chemicals and genetically modified organisms, noise
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and
nuclear safety and radiation protection
by accession. Hungary needs to finalise
the legal alignment as regards the following areas: horizontal legislation, waste
management, water quality, industrial pollution, genetically modified organisms, noise,
and nuclear safety and radiation protection. It needs to complete air quality plans and
programmes and continue to enhance air quality and water quality monitoring. Moreover,
Hungary must pay close attention to implementation in the water sector, especially as
regards drinking water quality, and to complete programmes for discharges of dangerous
substances to water by accession. Also, local waste management plans need to be
completed. The establishment of waste collection systems and recovery and disposal
facilities needs to continue, and a supervision system for waste shipments should be set
up. With regard to industrial risk management and major accident hazards, the setting up
of a notification system, the establishment of a system for identifying establishments,
which pose a risk, the assessment of safety reports have to be completed and external
emergency plans drawn up. Furthermore, the institutional and procedural framework for
GMOs still needs to be established.
Hungary is partially meeting the commitments and requirements in the areas of
nature
protection and industrial pollution.
In order to complete preparations for membership,
enhanced efforts are required to align with the
acquis
in the area of nature protection, to
prepare the lists of proposed nature protection sites and special bird protection areas, to
complete consultations and to strengthen the administrative capacity. As regards
industrial pollution, enhanced efforts are required to ensure that permits are issued and
complied with as regards all new IPPC installations by accession and that permits for
existing installations continue to be issued and complied with until October 2007.
Chapter 23: Consumer and health protection
The
acquis
covers protection of the economic interests of consumers (concerning
misleading and comparative advertisements, price indication, consumer credit, unfair
contract terms, distance and doorstep selling, package travel, timeshare, injunctions for
the protection of consumers’ interests, and certain aspects of the sale of consumer goods
and associated guarantees) as well as the general safety of goods (liability for defective
products, dangerous imitations and general product safety). Recently adopted legislation
includes rules on general product safety and distance marketing of consumer financial
services. The acceding countries need to effectively enforce the
acquis
through
appropriate judicial and administrative systems, including market surveillance and a role
for consumer organisations.
With regard to
safety-related measures
Hungary has completed alignment in the area of
liability for defective products. However, in the area of general product safety, legislation
still needs to be adopted to transpose the revised directive. The administrative structures
are in place, but need to be strengthened in terms of both financial and human resources.
Market surveillance
relating to general product safety is partly developed. Hungary has
created the relevant policy, management structures and information system. However,
the capacity of the main bodies in charge of market surveillance activities needs to be
further developed. These structures need also to be strengthened in terms of both
financial and human resources.
As regards
non-safety related measures,
EU legislation on injunctions for the
protection of consumer interests, on distance contracts and on certain aspects of sale of
consumer goods and associated guarantees remain to be fully transposed. Enforcement
activities relating to the protection of the economic interests of consumers are partly
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developed. More efforts are needed in effectively implementing the
acquis,
in particular
as regards indication of prices and package tours. The administrative structures in terms
of both financial and human resources need to be further developed and strengthened,
also with regard to arbitration bodies, which play an important role in solving consumer
cases.
With regard to
consumer organisations,
the role of non-governmental organisations
needs to be further promoted in order to develop and implement consumer policy and
encourage more active involvement in developing consumer product safety standards.
Consumer information and education need to be further promoted. It is necessary for
Hungary to improve and increase the level of awareness of the rights and responsibilities
of consumers and businesses.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the areas of
safety-related measures
and
consumer
organisations
and is expected to be in a position to implement this
acquis
from
accession.
Hungary is meeting the majority of the requirements for membership in the area of
market surveillance
and
non-safety related measures.
Hungary needs to complete
alignment in the non-safety related area and implement the necessary legislation.
Hungary also needs to improve market surveillance to ensure the proper enforcement of
legislation on safety and non-safety related measures including by strengthening its
administrative capacity and structures.
Chapter 24: Justice and home affairs
The most developed part of this chapter is the Schengen
acquis,
which entails the lifting
of internal border controls. However, much of this
acquis
will not apply to the acceding
countries upon accession, but only after a later separate Council Decision. The Schengen
Implementation Action Plan aims at preparing this on the basis of a credible schedule for
the introduction of the Schengen provisionsBinding rules which must be put in place as
from accession include part of the rules on visas, rules on external borders and the acquis
on migration, asylum, police co-operation, combating organised crime, fight against
terrorism, fraud and corruption and drugs, customs co-operation as well as human rights
legal instruments. On issues such as border control, illegal migration, drugs trafficking
and money laundering, organised crime, police and judicial co-operation, data protection
and the mutual recognition of court judgements, acceding countries need to be equipped
to meet adequate standards of administrative capacity. The establishment of an
independent, reliable and efficient judiciary and police organisation are also of
paramount importance.
So far, Hungary’s preparations with regard to the Schengen provisions (Schengen
Action Plan)
relevant for accession are satisfactory, but further efforts will be needed
after accession to prepare for the lifting of internal borders and the full implementation of
the Schengen
acquis
on the basis of a further decision to be taken by the Council. The
preparation for integration into the Schengen Information System (SIS) II is progressing
well, in terms of the development of national applications. However, Hungary needs to
monitor the situation closely.
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In the field of
data protection,
Hungary has completed its legislative alignment, with the
adoption in June 2003 of a new Act including provisions on the protection of personal
data and disclosure of data of public interest. The Data Protection Supervisory Body of
the International Law Enforcement Co-operation Centre (NEBEK) started operations in
November 2001 with five staff. The last Parliamentary Commissioner for Data Protection
was appointed in December 2001, for a six-year mandate.
Hungary has made progress in the area of
visa policy
but has not yet achieved full
alignment with the
acquis,
in particular as concerns the “positive” visa list. As regards
implementation and administrative capacity, considerable progress has been made in
relation to infrastructure, recruitment of staff, training and installation of information
technology for the development of the consular network. All consular missions are
connected to the Consular Information System. The centralised visa register has been
established. Hungary is in the process of providing all diplomatic and consular missions
with equipment to detect forged and falsified documents.
As regards the management of the future
external borders,
Hungary has in general
aligned its legislation on border control and border surveillance. Negotiations on co-
operation agreements on border control and crime prevention with neighbouring
countries are under way. Implementation of its Schengen Action Plan is ongoing.
However, particular attention is needed concerning the recruitment of staff, the allocation
of sufficient financial resources to fully implement the Schengen Action Plan, and inter-
agency co-operation. Hungary is in the process of upgrading its equipment for border
surveillance, including the construction and renovation of border posts at Hungary’s
eastern border. The most important border crossing points are now equipped with the
necessary materials according to Schengen standards. In addition, simplified border
crossing agreements were concluded with Slovakia in 2002, and with Slovenia, Croatia,
Serbia and Montenegro, Romania and Ukraine in 2003.
In the area of
migration,
legislative alignment has been essentially completed. Hungary
is taking impressive action to conclude readmission agreements. Administrative
structures are in place. The staff of the department responsible for expulsion within the
Office of Immigration and Naturalisation (OIN), the body responsible for migration
matters, has been increased to fifteen.
In the field of
asylum,
Hungary is continuing to align its legislation with the
acquis.
As
regards implementation capacity, the capacity of the OIN has been substantially
strengthened, and substantial progress has been made in renovating OIN reception
centres for asylum applicants. Despite these improvements, some asylum applicants
continue to be detained for up to one year in border guard detention centres. Measures
for the integration of refugees require substantial improvement. Although “persons
authorised to stay” can now obtain work permits, such persons should also have access to
more extensive social integration measures. Moreover, Hungary should continue its
analytical and organisational measures for active participation in EURODAC and
Dublinet.
In the area of
police co-operation and combating organised crime,
efforts are still
required to ensure that Hungary has an accountable, reliable and fully co-ordinated
police organisation by accession. Continuous attention is needed concerning co-operation
and co-ordination between the police and the prosecuting and judicial bodies.
Information-sharing in the field of combating economic and organised crime needs to be
considerably improved and sufficient financial means allocated to implement all the
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envisaged measures. In particular, specialised prosecutors should be assigned to NEBEK
and to the Police Operational Support Directorate, and new methods of technical crime
investigation should be developed. International co-operation is well established and is
supported by sufficient co-operation agreements, in particular by the conclusion of an
agreement with Europol. Attention should be paid to the timely preparation of national
procedures in order to ensure the swift ratification of the Europol Convention upon
accession to the EU. Furthermore, administrative structures have been set up but need to
be further strengthened. In particular, the capacity of the Police Operational Support
Directorate in international co-operation should be further developed. Hungary has
signed but not yet ratified the UN Convention against Transnational Organised Crime
and the first two Protocols. The Protocol against illicit manufacturing of and trafficking
in firearms, their parts, components and ammunition has not yet been signed.
In the
fight against terrorism,
Hungary has ratified the most important Conventions in
this area, in particular the 1999 UN Convention for the Suppression of the Financing of
Terrorism. Preparatory measures have been taken in order to accede to the Convention
on Mutual Assistance in Criminal Matters between the EU Member States upon
accession.
As regards the
fight against fraud and corruption,
Hungary’s legislation is essentially
aligned with the
acquis.
The 1999 Council of Europe Civil Law Convention on
Corruption was signed in January 2003, but has not yet been ratified. Negotiations to
conclude bilateral agreements on terrorism, organised crime and corruption with
seventeen countries are ongoing. Amendments to the Penal Code and to the Criminal
Proceedings Code largely aligned Hungary’s legislation with the
acquis,
including with
EU legislation on the protection of the euro against counterfeiting and on combating
fraud and counterfeiting of non-cash means of payment. Hungary has yet to designate a
National Central Office dealing with banknote and coin analysis. Overall, co-operation
and co-ordination between law enforcement agencies need to be strengthened. As regards
corruption, see also
the Section C.1. – Administrative and judicial capacity.
On the
fight against drugs,
Hungary has largely completed its legislative measures. The
national strategy to combat drugs problems was adopted by the Parliament in 2000, and
an action plan to implement the strategy was adopted by the Government in November
2002. Implementation, however, needs further improvement, including the necessary
administrative capacity. In particular, the establishment of the National Focal Point for
co-operation with the European Monitoring Centre for Drugs and Drugs Addiction has
proceeded extremely slowly. However, the necessary legislation was adopted in
September 2003.
Hungary has completed its legislative alignment with the
acquis
on
money laundering,
which entered into force in 2003. A Financial Intelligence Unit is in place, but its
information technology system needs to be strengthened (see
also Chapter 4 – Free
movement of capital).
In the area of
customs co-operation,
Hungary is in the process of aligning its legislation.
Inter-agency co-operation is provided for as well as co-operation with business
organisations on the basis of memoranda of understanding.
In the area of
judicial co-operation in civil and criminal matters,
legislative
alignment, where still necessary, is ongoing. Hungary should be ready upon accession to
apply the relevant conventions. Particular attention is needed for alignment with the 2002
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EU legislation on the European arrest warrant and the surrender procedure between
Member States. Administrative structures for direct contacts between competent judicial
authorities are in place, but need to be further strengthened.
As regards the
reform of the judiciary
in general, a detailed analysis is provided in
Section
C.1. – Administrative and judicial capacity.
All the
human rights legal instruments
under the justice and home affairs
acquis
have
been ratified by Hungary, except for Protocol No 12 on human rights.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations and is expected to be able to implement by accession the
acquis
in
the areas of the
Schengen Action Plan, data protection, visa policy, migration, police
co-operation and combating organised crime,
the
fight against terrorism,
the
fight
against fraud and corruption, the fight against drugs, money laundering, customs co-
operation
and
judicial co-operation in civil and criminal matters
and
human rights
legal instruments.
Hungary is partially meeting the commitments and requirements for membership in
relation to
external borders
and
asylum
where implementation needs to be further
strengthened. Overall, inter-agency co-operation needs to be improved and co-ordination
structures strengthened.
Chapter 25: Customs union
The Customs Union
acquis
consists almost exclusively of legislation which is directly
binding on the Member States and does not require transposition into national law. It
includes the Community’s Customs Code and its implementing provisions; the
Combined Nomenclature, Common Customs Tariff and provisions on tariff
classification, customs duty reliefs, duty suspensions and certain tariff quotas; and other
provisions such as those on customs control of counterfeit and pirated goods, drugs
precursors and cultural goods and on mutual administrative assistance in customs matters
as well as Community agreements in the areas concerned, including transit. Member
States must ensure that the necessary enforcement capacities, including links to the
relevant EC computerised customs systems, are in place.
Hungary’s
customs legislation
is in line with the
acquis
as it stood in 2002, except for
some provisions, including those on free zones and duty reliefs. Hungary is committed to
ensuring compliance with EC provisions in this respect (as well as for all other non-
aligned provision, e.g. on the use of Binding Origin Information) upon accession, which
will also involve the reduction in the number of locations designated as “free zones".
National provisions superseded by the
acquis
are to be repealed at the time of accession,
and agreements on mutual administrative assistance in customs matters are to be
amended as necessary.
Hungary has been granted a transitional period until 30 April 2006 for compliance with
the Common External Tariff as regards the opening of a yearly tariff quota for
aluminium, not alloyed.
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A customs administration with an adequate level of
administrative and operational
capacity
is in place. Hungary should continue to implement its plans for reorganisation
in terms of reduction of customs clearance locations and redeployment of staff as a result
of accession, when the volume of customs work decreases owing to the conversion of
external to internal trade. Preparation for the application of measures and provisions that
will be introduced only at the time of accession, including for complying with the
acquis
on free zones and duty reliefs, should also be continued. Strengthening inter-agency co-
operation on combating customs fraud and irregularities, in particular with regard to
counterfeit and pirated goods, must also remain a priority.
Despite some delays, e.g. in transit, Hungary is progressing reasonably well with the
interconnectivity projects and operational capacity plans, and is on course to complete
customs computerisation projects by the date of accession. A significant amount of work
is still outstanding, however, and attention must be paid to maintaining the schedule for
finalising development work, testing and operational release.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations and is expected to be in a position to implement the
customs
union
acquis
with the necessary administrative and operational capacity by accession.
Some adjustments are needed to ensure compliance with EC provisions on customs duty
reliefs and free zones. Hungary also needs to ensure that the work on computerised
systems and interoperability is completed according to schedule.
Chapter 26: External relations
The main element in this chapter, the common commercial policy, is made up of directly
binding EU legislation, which does not require transposition into national law. The
acceding countries were requested to align before accession with the
acquis
on dual-use
goods and, where applicable, export credits. Acceding countries committed themselves to
ensure compatibility with the
acquis
of their bilateral agreements with third countries. In
the area of humanitarian aid and development policy, countries need to ensure the
capacity to participate in the EC’s development and humanitarian policies.
The administrative structures for dealing with the issues related to the
common
commercial policy
are in place and sufficient.
Hungary has co-ordinated its positions and policies with the Commission with regard to
the Doha Development Agenda. It should continue close co-ordination and co-operation
with the Commission, mainly in order to carry on preparing the convergence of its GATS
commitments and most-favoured nation exemptions into the EU ones, which need to be
finalised upon accession. Exchanges of information have taken place with Hungary on
the use of its third stage of integration to align its list of integrated products under the
Agreement on Textiles and Clothing (ATC) with the Community.
On trade in dual-use goods, Hungary has reached a high degree of alignment with the
acquis.
However, further alignment, in particular regarding the list of dual-use items,
needs to be achieved, as export control regimes continue to adopt decisions, which the
EU integrates into its legislation. Full alignment as regards the Community general
export authorisation can only take place upon accession.
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Legislative alignment in the area of export credits has been completed. Administrative
structures are in place and satisfactory.
With regard to its
bilateral agreements with third countries,
Hungary needs to take
further steps to terminate or renegotiate those international agreements that it has
requested to maintain and that have been found to be incompatible with the
acquis
in
their current form. Besides other agreements that need to be terminated or adjusted, the
Foreign Investment Protection Agreement with Canada, as well as the Friendship,
Commerce and Navigation Treaty with Japan have to be brought into conformity with
the
acquis.
The Authorised Destination Status agreement in the tourism sector between
Hungary and China will be superseded by the EU Authorised Destination Status
agreement with China when the latter one enters into force.
In the area of
humanitarian aid and development policy,
Hungary still needs to shape
a development policy that is fully in line with EC principles, in particular with the
guidelines laid down by the OECD Development Assistance Committee as well as the
commitments and objectives that Hungary has approved in the context of the UN and
other international organisations. An organisational unit in the Ministry of Foreign
Affairs was set up in January 2003. However, further efforts are needed to ensure that the
administrative capacity needed for Hungary’s participation in EU decision-making for
development co-operation are in place upon accession.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations and is expected to be able to implement the
acquis
on the
common commercial policy
and
humanitarian aid and development policy
from
accession.
Hungary is meeting the majority of the commitments and requirements for membership
in relation to
bilateral agreements with third countries.
In order to complete
preparations in this area, Hungary must take decisive steps towards renegotiating or
terminating its bilateral agreements to make sure that they are compatible with the
acquis
upon accession.
Chapter 27 – Common foreign and security policy
The
acquis
related to common foreign and security policy (CFSP) is essentially based
either on legally binding international agreements or on political agreements to conduct
political dialogue in the framework of CFSP, to align with EU statements, and to apply
sanctions and restrictive measures where required.
The administrative structures in this area in Hungary are in place and satisfactory. With
regard to participation in
political dialogue,
Hungary has continued its successful co-
operation. Concerning the Law on Hungarians living in Neighbouring Countries, the
modifications to the law adopted by Parliament in June 2003 appear to have brought the
framework legislation in line with the
acquis.
However, given that the law still contains
extraterritorial elements, prior agreement has to be sought with the neighbouring
countries concerned on the application of these elements in these countries. Also,
attention must be paid to ensuring that the implementing legislation will be in full
conformity with the
acquis.
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With regard to alignment with
EU sanctions and restrictive measures, statements,
declarations and démarches,
Hungary still needs to adjust its legislation in relation to
the introduction and withdrawal of economic sanctions.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the chapter on the
common foreign and security policy
and is
expected to be able to participate in the political dialogue and to align with EU
statements, sanctions and restrictive measures by accession. Hungary has to adopt
legislation on economic sanctions. Furthermore, attention must be paid to ensuring that
the implementing legislation of the Law on Hungarians living in Neighbouring Countries
will be fully in line with the
acquis.
Also, any extraterritorial benefits provided for by the
law have to be agreed in advance with the neighbouring countries concerned.
Chapter 28: Financial control
The acquis under this chapter consists mostly of general, internationally agreed and EU-
compliant principles of public internal financial control that need to be transposed into
the control and audit systems of the entire public sector. In particular, the acquis requires
the existence of adequate ex ante financial control and functionally independent internal
audit systems; an independent external audit of the public internal financial control
systems in the public sector; an appropriate financial control mechanism for EU pre-
accession funding and future structural action expenditure; and arrangements on the
protection of EC financial interests. In addition, an anti-fraud co-ordination service,
capable of co-operating with the Commission’s Anti-fraud Office OLAF at an
operational level, is to be designated.
In the area of
public internal financial control,
framework legislation has been partially
aligned with the
acquis
(including the basic principle of functional independence of
internal auditors), while implementing legislation still needs to be revised. In July 2003
Hungary adopted a policy paper setting out a strategy on the development of the public
internal financial control system. Legislative alignment (in particular the amended Public
Finance Act and the Internal Audit Decree) and implementing procedures need to be
completed in line with the schedule foreseen in the policy paper. The administrative
framework for internal audits at the level of internal audit services in budget spending
centres has to be further strengthened, and their functional independence still needs to be
ensured. Additional human resources have been allocated to the department for the
development of public internal financial control within the Ministry of Finance (Central
Harmonisation Unit). Training activities for financial control and audit have started.
In the field of
external audit,
legislative alignment has been completed. The State Audit
Office is functionally and operationally independent, its staff is adequate and well trained
and its audit services satisfactorily cover all public and EU funds.
As regards
control over structural action expenditure,
framework legislation in
Hungary is in place and in line with the
acquis.
Implementing legislation has only been
partially adopted, and clear internal financial control procedures are still to be
established. Appropriate administrative structures are being set up. Hungary should
continue to enhance its administrative capacity to manage future structural funds in order
to meet fully the requirements for financial control and internal audit. In relation to EU
pre-accession assistance, the necessary legislation is in place. Hungary has made good
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progress in preparing for the extended decentralised implementation system (EDIS). This
needs to be sustained in order to implement the EDIS system for Ispa and Phare.
In the area of the
protection of EC financial interests,
Hungary needs to refine the
framework legislation to allow competent authorities to effectively exchange information
regarding irregularities and investigations among themselves and with OLAF. An anti-
fraud co-ordinating service (AFCOS) in the Ministry of Finance has been designated and
a standing inter-ministerial committee established. Operational co-operation with OLAF
has started. The administrative capacity of the AFCOS to co-operate with other relevant
institutions and bodies, including OLAF, at an operational level must be considerably
reinforced.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the areas of
external audit
and is expected to be in a position
to implement the
acquis
from accession.
Hungary is meeting the majority of the commitments and requirements arising from
accession negotiations in the areas of
public internal financial control, control over
structural action expenditure
and the
protection of EC financial interests.
In order to
complete preparations for membership, particular efforts must be made to complete
legislative alignment and to further strengthen administrative capacity in public internal
financial control. Particular attention should be paid to implementing the necessary
structural changes and to providing adequate training to the internal auditors. Good
progress towards the extended decentralised implementation system needs to be
sustained. In the area of the protection of EC financial interests, operational capacities
need to be considerably reinforced.
Chapter 29: Financial and budgetary provisions
Chapter 29 covers the rules concerning the financial resources necessary for the funding
of the EC budget (‘own resources’). These own resources are made up mainly from
contributions from Member States based on 1) traditional own resources from customs
and agricultural duties and sugar levies, 2) a resource based on VAT and 3) a resource
based on the level of gross national income (GNI). Member States must ensure the
creation of appropriate administrative capacity to adequately co-ordinate and ensure the
correct calculation, collection, payment and control of own resources and reporting to the
EU for implementation of the own resources rules.
As regards the
traditional own resources (TOR),
a national reporting system on cases
of fraud and irregularity exists in Hungary but the procedures for reporting to the
Commission in line with the OWNRES system still need to be introduced. Procedural
and administrative preparations for the collecting and accounting of sugar levies are
largely complete. Reporting and accounting requirements as regards the A and B
accounts should be developed further, with particular attention paid to the IT module for
B accounts and accounting for provisional anti-dumping duties.
Hungary is largely in a position to correctly calculate the
VAT-based resource.
However, further efforts are required in particular for the correct calculation of the
weighted average rate in accordance with ESA95.
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For calculation of the
GNI-based resource,
although conceptual and practical
compliance is being continuously improved, further efforts are needed to fully implement
ESA95 and improve the quality and reliability of the national accounts and GNI
calculations, including their exhaustiveness.
All institutions necessary for application of the own resources system in Hungary exist.
An EU Affairs Unit within the Fiscal and Financial Policy Division of the Ministry of
Finance is responsible for own resources co-ordination and is operating effectively.
Conclusion
Hungary is essentially meeting the commitments and requirements arising from the
accession negotiations in the area of
financial and budgetary provisions
and is
expected to be in a position to implement the relevant acquis by accession. Hungary
should now focus attention on completing preparations under this chapter by fine-tuning
the calculation of the VAT-based resource, further developing and implementing the IT
module for B accounts and accounting for provisional anti-dumping duties, and finalising
procedures for forwarding sugar levies to the Commission’s account and for sending
reports on cases of fraud and irregularity to the Commission (OWNRES).
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D.
C
ONCLUSION
The overall macro-economic equilibrium of the Hungarian economy has deteriorated, in
particular as regards the composition of GDP, external accounts and exchange and
interest rate stability. A significant budget deficit in 2002 has been addressed by a tighter
albeit very ambitious fiscal policy stance in 2003, while inconsistent monetary and
exchange rate policies added to the strain in the policy mix. The economic reform path is
being pursued in a credible manner, through the privatisation of some remaining state-
owned companies, a stepwise liberalisation of administered prices and the broad
completion of the progressive pension reform.
As regards the areas, where last year’s report suggested improvements, some progress
has been made, but challenges remain. The general government deficit is on a downward
trend, following a redirection of fiscal policy since 2003, but more progress is needed,
also as regards the structure of fiscal reform. Health care sector reform is being addressed
in the framework of a ten years’ programme, which received a boost through the
admission of private general practitioners’ practices in 2002, and a new law adopted in
2003 opening the way for large-scale privatisation of healthcare assets, including
hospitals. Wage developments in 2003 have started to moderate, coming down from the
high growth rates of 2001 and 2002, especially in the corporate sector, with the economy
slowly adapting to the new low-inflation environment. Nevertheless, even in 2003 real
wage growth continues to exceed productivity growth by a considerable margin.
As regards overall administrative and judicial capacity, sufficient conditions are in place
for the implementation of the
acquis
by the Hungarian public administration and
judiciary, but there is room for further improvements. In the field of public
administration, the general reform should be continued in the fields of regional
development, local self-government and state administration, and transparency in
personnel matters should be improved. A number of further steps remain to be taken as
regards the judicial system, such as to ensure an adequate financing of the judiciary to
establish further regional courts and to improve the legal aid system. The fight against
corruption should continue to receive high priority, in particular through the rapid
implementation of the “glass-pocket” programme that was adopted in April 2003.
As regards the implementation of the
acquis
in specific policy areas, the findings of this
report are set out below.
Firstly, it should be noted that Hungary has reached a
high level of alignment with the
acquis
in most policy areas.
It is expected to be in a position to implement the
acquis
as required in the following
areas by accession: horizontal and procedural measures and new approach legislation in
the
free movement of goods
chapter; the
free movement of persons
chapter; the banking
and insurance services sectors, investment services and securities markets, the protection
of personal data, the right of establishment and the freedom to provide non-financial
services in the area of
freedom to provide services;
the
free movement of capital
chapter,
including money laundering;
company law
and accounting; and
competition policy.
In
the area of
agriculture,
Hungary is expected to be in a position by accession to
implement the
acquis
in a number of horizontal areas, in most common market
organisations and, in the veterinary field, as regards the requirements in the areas of
animal disease control, trade in live animals and animal products, animal welfare,
zootechnics and animal nutrition; and in
fisheries
in general.
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Hungary is also expected to be in a position to implement the
acquis
by accession in: the
transport
sector except for rail transport; all areas in the field of
taxation; economic and
monetary union
and
statistics;
most areas of
social policy and employment;
the
energy
sector;
industrial policy; small and medium-sized enterprises; science and research;
education and training;
culture in the
culture and audio-visual policy
chapter; in relation
to programming within the
regional policy and co-ordination of structural instruments
chapter; horizontal legislation, air and water quality, waste management, industrial risk
management, chemicals and genetically modified organisms, noise, and nuclear safety
and radiation protection in the
environment
chapter; safety-related measures and
consumer organisations in terms of
consumer and health protection;
most aspects of
justice and home affairs; customs union;
the common commercial policy, humanitarian
aid and development policy in the
external relations acquis; common foreign and
security policy; financial and budgetary provisions;
and external audit in the area of
financial control.
Secondly, in certain areas Hungary partially meets the commitments and requirements
and needs to make
enhanced efforts
in order to complete its preparations for accession.
This includes the old approach sectoral legislation on the
free movement of goods,
as
well as public procurement and the non-harmonised area; in the area of
free movement of
services,
the field of information society services; and, within the area of
company law,
the protection of intellectual and industrial property rights. In the
agriculture
area it
concerns trade mechanisms, the common market organisations for sugar and wine and, in
the veterinary field, transmissible spongiform encephalopathies (TSEs) and animal by-
products, the veterinary control system, common measures, and certain phytosanitary
issues.
This also includes the fields of: rail
transport;
the European Social Fund and anti-
discrimination in the area of
social policy and employment; telecommunications and
information technologies,
including postal services; the audio-visual area in the chapter
on
culture and audio-visual policy;
the legislative framework, institutional structures and
financial management and control in the chapter on
regional policy and co-ordination of
structural instruments;
legislative alignment and implementation in the nature protection
and industrial pollution areas of
environment
policy; market surveillance and non-safety
related measures in the area of
consumer and health protection;
external borders and
asylum in the area of
justice and home affairs; external relations,
as regards bilateral
agreements with third countries; and public internal financial control, control over
structural action expenditure and the protection of EC financial interests in the area of
financial control.
Thirdly, Hungary must take immediate and decisive action to address four issues of
serious concern
in one chapter of the
acquis
if it is to be ready by the date of accession.
This concerns the
agriculture
chapter, relating to Hungary’s preparations to set up its
Paying Agency, to implement the Integrated Administration and Control System, to
prepare for the implementation of rural development measures and to ensure public
health standards in agri-food establishments.
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1465024_0057.png
S
TATISTICAL
A
NNEX
1998
Basic data
Population (average)
Total area
National accounts
Gross domestic product at current prices
Gross domestic product at current prices
Gross domestic product per capita a) at current
prices
Gross domestic product at constant prices (nat.
currency)
Employment growth
Labour productivity growth
Unit labour cost growth
Gross domestic product per capita a) at current
prices
GDP per capita a) at current prices in PPS
Labour productivity (GDP per person employed in
PPS)
Structure of production
- Agriculture
- Industry (excluding construction)
- Construction
- Services
Structure of expenditure
- Final consumption expenditure
- household and NPISH
- general government
- Gross fixed capital formation
- Stock variation c)
- Exports of goods and services
- Imports of goods and services
Inflation rate
Consumer price index
10,087
41.9
4,100
10,267
93,030
1999
10,238
93,030
2000
in 1000
10,211
in km²
93,030
2001
10,188
93,030
2002
10,159
93,030
1000 Mio Forint
11,393
45.1
4,400
13,172
50.7
5,000
14,850
57.9
5,700
16,980
69.9
6,900
1000 Mio ECU/euro
in ECU/Euro
% change over the previous year
4.9
1.8
3.0
-1.8
9,800
4.2
3.2
1.0
-4.1
10,400
5.2
1.0
4.2
1.2
11,200
3.1
12,300
3.9
0.4
3.4
:
13,600
3.3
0.7
2.6
in Purchasing Power Standards
in % of EU-15 average
48
58
49
57
50
59
53
62
57
66
% of Gross Value Added b)
5.5
28.2
4.6
61.7
72.6
50.8
21.7
23.6
5.3
62.6
64.1
4.9
27.7
4.7
62.9
74.0
52.5
21.6
23.9
4.8
65.2
67.8
4.3
27.8
5.2
62.7
73.0
52.2
20.8
24.1
6.7
74.9
78.7
4.3
26.2
5.1
64.4
74.4
53.0
21.4
23.6
3.5
74.4
75.9
:
:
:
:
78.2
53.5
24.7
22.3
1.7
64.5
66.7
as % of Gross Domestic Product
% change over the previous year
14.2
10.0
10.0
9.1
5.2
57
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1465024_0058.png
1998
Balance of payments
-Current account
-Trade balance
Exports of goods
Imports of goods
-Net services
-Net income
-Net current transfers
-
of which: government transfers
- FDI (net) inflows
Public finance
General government deficit/surplus
General government debt
Financial indicators
Gross foreign debt of the whole economy
Gross foreign debt of the whole economy
Monetary aggregates
- M1
- M2
- M3
Total credit
Average short-term interest rates
- Day-to-day money rate
- Lending rate
- Deposit rate
ECU/EUR exchange rates
- Average of period
- End of period
- Effective exchange rate index
Reserve assets
-Reserve assets (including gold)
-Reserve assets (excluding gold)
External trade
Trade balance
Exports
Imports
Terms of trade
Exports with EU-15
Imports with EU-15
-2,407
20,505
22,912
101.3
72.9
64.1
8,107
8,081
240.57
252.39
71.0
18.0
20.1
15.1
7.9
17.3
18.2
20.1
:
-2,059
-2,110
18,505
20,615
1,592
-1,675
133
-41
1999
-1,974
-2,057
20,535
22,592
1,318
-1,556
321
-8
:
2000
-1,627
-2,303
27,590
29,892
1,942
-1,708
441
-14
1,785
2001
2002
in Mio ECU/euro
-1,239 -2,771 e)
-2,250
31,331
33,581
2,413
-1,675
273
-16
:
:
:
:
:
:
:
2,730 1.281 e)
in % of Gross Domestic Product
-8.0
61.9
-5.6
61.2
-3.0
55.5
-4.7
53.4
-9.2p
56.3p
:
:
15.4
31.9
33.2
30.6
8.9
10.5
7.1
242.96
236.29
69.2
:
:
in % of Gross Domestic Product
47.6
49.6
44.5
38.3
as % of exports
76.0
76.1
9.3
19.9
20.4
20.3
14.8
17.1
12.2
252.77
254.70
59.5
10.0
21.4
23.1
22.5
11.1
13.1
8.8
260.04
265.00
51.5
12.7
27.0
29.3
25.5
10.9
12.5
8.4
256.59
245.18
64.4
12,252
12,221
1000 Mio ECU/euro
% per annum
(1ECU/euro=..Forint)
1995=100
66.9
63.3
Mio ECU/euro
10,883
10,855
12,065
12,036
Mio ECU/euro
-2,799
23,487
26,286
98.4
76.2
64.4
-4,308
30,525
34,833
97.3
75.1
58.4
-3,552
33,983
37,535
99.7
74.3
57.8
-3,424
36,503
39,927
100.4
75.1
56.3
previous year=100
as % of total
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1998
Demography
Natural growth rate
Net migration rate (including corrections) d)
Infant mortality rate
Life expectancy :
Males:
Females:
Labour market (Labour Force Survey)
Economic activity rate (15-64)
Employment rate (15-64), total
Employment rate (15-64), males
Employment rate (15-64), females
58.4
53.7
60.5
47.2
66.1
75.2
-4,2
1,7
9.7
1999
-4,7
1,6
8.4
66.3
75.1
2000
-3,7
1,6
9.2
at birth
67.1
75.6
2001
-3,4
1,0
8.1
68.15
76.46
2002
-3.5p
0.3
7.2p
68.26
76.56
per 1000 of population
per 1000 live-births
% of population
59.6
55.5
62.4
49.0
59.9
56.3
63.1
49.7
59.7
56.5
63.4
49.8
59.9
56.6
63.5
50.0
as % of the total population of the same age group
Employment rate of older workers (55-64)
Average employment by NACE branches
- Agriculture and forestry
- Industry (excluding construction)
- Construction
- Services
Unemployment rate, total
Unemployment rate, males
Unemployment rate, females
Unemployment rate of persons < 25 years
Long-term unemployment rate
Social cohesion
Inequality of income distribution
Early school-leavers
Population in jobless households (persons aged
0-65)
Standard of living
Number of cars
Main telephone lines
Number of subscriptions to cellular mobile
services
Infrastructure
Railway network
Length of motorways
85
448
220
334.7
102.2
:
15.9
18.0
7.3
28.6
6.2
57.9
8.4
9.0
7.8
15.2
4.3
17.3
19.5
7.0
27.6
6.7
58.7
6.9
7.4
6.3
12.3
3.4
22.2
6.5
26.8
7.0
59.8
6.3
6.8
5.6
12.3
3.1
24.1
6.1
27.3
7.2
59.4
5.6
6.1
4.9
10.5
2.6
26.6
6.0
27.2
7.0
59.8
5.6
6.0
5.1
11.2
2.4
in % of total
% of labour force
ratio of top quintile to lowest quintile
:
13.0
16.8
:
13.8
15.8
:
13.2
15.6
:
12.3
15.6
% of population aged 18-24
% of population aged 0-65
per 1000 inhabitants
225
359.3
161.3
235
378.0
306.9
244
368.0
488.0
258
362.0
678.0
in km per 1000 km²
85
Km
448
448
448
533
85
85
:
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1998
Industry and agriculture
Industrial production volume indices
Gross agricultural production volume indices
Innovation and research
Spending on Human
expenditure on education)
Resources
(public
4.56
112.5
100.9
1999
110.4
99.5
2000
118.1
94.3
2001
103.6
110.8
2002
102.6
95.6
previous year=100
as % of GDP
4.66
4.54
4.52E
:
as % of GDP
Gross domestic expenditure on Research &
Development
Level of Internet access - households
Environment
Total greenhouse gases emissions
Energy intensity of the economy
Share of renewable energy
Modal split of freight transport
p=provisional figures
E=estimated data
0.68
0.69
0.80
:
:
per 1000 inhabitants
:
:
2.6
:
:
tonnes CO2 equivalent per capita
81.4
661.6
0.4
65.8
84.4
647.0
0.5
68.2
82.4
598.9
0.5
68.0
:
:
:
67.8
:
:
:
:
kg of oil equivalent per 1000 euro of GDP
as % of total electricity consumption
as % of total freight transport
a) Figures have been calculated using the population figures from National Accounts, which may differ from those used
in demographic statistics.
b) Including FISIM.
c) These figures include changes in inventories, acquisitions less disposals of valuables and the statistical discrepancy
between the GDP and its expenditure components.
d) The population data have changed, because on the basis of the 2001 Population Census Hungary has subsequently
and with a retroactive effect amended the data of the previous years, as a result of which the rates of the natural
increase and the balance of migration have also changed.
e) Source: Website of the National Bank
Methodological notes
Inflation rate
For
details
please
refer
to
the
following
link
to
the
Eurostat
website:
http://europa.eu.int/newcronos/suite/info/notmeth/en/theme1/strind/ecobac_ir.htm
Finance
Public finance:
The general government deficit / surplus refers to the national accounts concept of
consolidated general government net borrowing / net lending (EDP B.9) of ESA95. General government
debt is defined as consolidated gross debt at end-year nominal value.
External trade
Imports and exports (current prices).
The data is based upon the special trade system. Trade Classification:
Trade in goods are recorded using the commodity classification according to the Combined Nomenclature.
Imports are recorded on CIF basis, exports on FOB basis.
Imports and exports with EU-15.
Data declared by Hungary.
Labour market
Indicators are harmonised annual figures with the exception of average employment by NACE branches
and unemployment rate of persons < 25 years, which are for the 2
nd
quarter of the respective year. The
60
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1465024_0061.png
results are based on the European Union Labour Force Survey (LFS). The EU LFS is conducted on a
quarterly basis in accordance with Council Regulation (EEC) No. 577/98 of 9 March 1998.
For
details
please
refer
to
the
following
link
on
the
Eurostat
website:
http://europa.eu.int/newcronos/suite/info/notmeth/en/theme1/strind/emploi.htm
Social cohesion
For
details
please
refer
to
the
following
link
on
the
Eurostat
website:
http://europa.eu.int/newcronos/suite/info/notmeth/en/theme1/strind/socohe.htm
Industry and agriculture
Industrial production volume indices.
Industrial production covers mining and quarrying, manufacturing
and electricity, gas, steam and water supply (according to the NACE Rev.1 Classification Sections C, D,
E).
Index of total industrial production includes the data of all industrial enterprises. The indices by branches
refer to enterprises with more than 10 employees.
Gross agricultural production volume indices.
Gross agricultural output volume indices. Intra – unit
consuption (excluding own-produced products used for the same activity), processing by producers, own
final consumption, sales, own – account produced fixed capital goods, change in stocks. The data of
Production Account of Economic Accounts of Agriculture, calculated on producer prices, by the
methodology of Eurostat.
Innovation and research
For
details
please
refer
to
the
following
link
to
the
Eurostat
website:
http://europa.eu.int/newcronos/suite/info/notmeth/en/theme1/strind/innore.htm
Environment
For
details
please
refer
to
the
following
link
to
the
Eurostat
website:
http://europa.eu.int/newcronos/suite/info/notmeth/en/theme1/strind/enviro.htm
Sources:
Total area, External trade, Demography, Standard of living, Infrastructure, Industry and agriculture:
National sources. Other indicators: Eurostat.
61