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Europaudvalget 2001-02 (1. samling)
EUU Alm.del Bilag 178
Offentligt

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.11.2001

SEC(2001) 1753

2001

REGULAR REPORT

ROMANIA'S

PROGRESS TOWARDS ACCESSION

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2001

REGULAR REPORT

ROMANIA’S

PROGRESS TOWARDS ACCESSION

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

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Table of contents

A. Introduction.................................................................................... 6

Preface ..................................................................................................................... 6

Relations between the European Union and Romania.................................... 8

Recent developments under the Association Agreement (including bilateral trade)............ 8

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

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

Twinning ..................................................................................................................... 13

Negotiations / screening............................................................................................... 14

B. Criteria for membership.............................................................15

1. Political criteria ............................................................................. 15

Introduction................................................................................................................. 15

Recent developments................................................................................................... 16

1.1. Democracy and the rule of law ...........................................................................16

The parliament............................................................................................................. 16

The executive .............................................................................................................. 17

The judicial system...................................................................................................... 20

Anti-corruption measures............................................................................................. 21

1.2. Human rights and the protection of minorities .............................................22

Civil and political rights................................................................................................ 23

Economic, social and cultural rights.............................................................................. 27

Minority rights and the protection of minorities.............................................................. 29

1.3. General Evaluation...............................................................................................30

2. Economic criteria .......................................................................... 31

2.1. Introduction ...........................................................................................................31

2.2. Economic Developments .....................................................................................31

2.3. Assessment of the Copenhagen Criteria...........................................................34

The existence of a functioning market economy ............................................................ 34

The capacity to cope with competitive pressures and market forces within the union...... 38

2.4. General evaluation ...............................................................................................40

3. Ability to assume the obligations of membership.......................... 41

Introduction................................................................................................................. 41

3.1. The chapters of the

acquis....................................................................................43

Chapter 1: Free movement of goods....................................................................43

Overall assessment ...................................................................................................... 44

Chapter 2: Free movement of persons ................................................................45

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

Chapter 3: Freedom to provide services.............................................................46

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

Chapter 4: Free movement of capital .................................................................48

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

Chapter 5: Company law.......................................................................................49

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

Chapter 6: Competition policy..............................................................................50

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

Chapter 7: Agriculture..........................................................................................51

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

Chapter 8: Fisheries..............................................................................................57

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

Chapter 9: Transport policy .................................................................................58

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

Chapter 10: Taxation ............................................................................................61

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

Chapter 11: Economic and Monetary Union .....................................................62

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

Chapter 12: Statistics ............................................................................................63

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

Chapter 13: Social policy and employment ........................................................64

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

Chapter 14: Energy................................................................................................67

Overall assessment ...................................................................................................... 69

Chapter 15: Industrial policy..............................................................................71

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

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

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

Chapter 17: Science and research......................................................................74

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

Chapter 18: Education and training ..................................................................76

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

Chapter 19: Telecommunications and information technologies...................77

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

Chapter 20: Culture and audio-visual ...............................................................78

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

Chapter 21: Regional policy and co-ordination of structural instruments...79

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

Chapter 22: Environment......................................................................................81

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

Chapter 23: Consumers and health protection..................................................83

Overall assessment ...................................................................................................... 84

Chapter 24 - Co-operation in the field of Justice and home affairs ..............84

Overall assessment ...................................................................................................... 87

Chapter 25: Customs union ..................................................................................89

Overall assessment ...................................................................................................... 90

Chapter 26: External relations ............................................................................91

Overall assessment ...................................................................................................... 92

Chapter 27: Common foreign and security policy.............................................93

Overall assessment ...................................................................................................... 94

Chapter 28: Financial control ............................................................................94

Overall assessment ...................................................................................................... 95

Chapter 29: Financial and budgetary provisions ............................................96

Overall assessment ...................................................................................................... 96

3.2. Translation of the

acquis

into the national languages...................................97

3.3. General evaluation ...............................................................................................98

C. Conclusion..................................................................................101

D. Accession Partnership and National Programmes for the

Adoption of the

Acquis:

Global assessment ..........................105

1. Accession Partnership ................................................................. 105

Short-term priorities .................................................................................................. 105

Medium-term priorities.............................................................................................. 108

2. National Programme for the Adoption of the Acquis ................. 111

Annexes.............................................................................................112

Human Rights Conventions ratified by the Candidate Countries, 30

September 2001............................................................................................113

Statistical data......................................................................................................114

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A. Introduction

Preface

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

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

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

The European Council in Luxembourg decided that:

“From the end of 1998, the Commission will make Regular Reports to the Council, together

with any necessary recommendations for opening bilateral intergovernmental conferences,

reviewing the progress of each Central and Eastern European applicant State towards

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

Union

acquis”

… “The Commission’s reports will serve as the basis for taking, in the Council

context, the necessary decisions on the conduct of the accession negotiations or their extension

to other applicants. In that context, the Commission will continue to follow the method adopted

by Agenda 2000 in evaluating applicant States’ ability to meet the economic criteria and fulfil

the obligations deriving from accession.”

On this basis, the Commission presented a first series of Regular Reports in October 1998, a

second series in October 1999, and a third in November 2000. The Commission has prepared

this fourth series of Regular Reports with a view to the Laeken European Council in December

2001.

The structure followed for this Regular Report is the same as that used for the 2000 Regular

Report. In line with previous Regular Reports, the present Report:

describes the relations between Romania and the Union, in particular in the framework of

the Association Agreement;

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

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

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

the Copenhagen European Council (a functioning market economy and the capacity to cope

with competitive pressures and market forces within the Union);

addresses the question of Romania’s capacity to assume the obligations of membership, that

is, the

acquis

as expressed in the Treaties, the secondary legislation, and the policies of the

Union. This part gives special attention to nuclear safety standards, as underlined by the

Cologne and Helsinki European Councils. It encompasses not only the alignment of

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

implement and enforce the

acquis,

as emphasised by the Madrid European Council in

December 1995, and confirmed by the Gothenburg European Council in June 2001. At

Madrid, the European Council underlined the necessity for the candidate countries to adjust

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

of those States. The Gothenburg European Council emphasised the vital importance of the

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candidate countries’ capacity to effectively implement and enforce the

acquis,

and added

that this required important efforts by the candidates in strengthening and reforming their

administrative and judicial structures.

This Report takes into consideration progress since the 2000 Regular Report. It covers the

period until 30 September 2001. In some particular cases, however, measures taken after that

date are mentioned. It looks at whether intended reforms referred to in the 2000 Regular

Report have been carried out, and examines new initiatives. In addition, this Report provides

also an overall assessment of the global situation for each of the aspects under consideration,

setting out for each of them the main steps which remain to be taken by Romania in preparing

for accession.

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

acquis

criteria (including Romania’s administrative capacity to implement the

acquis)

focuses

on what has been accomplished since the last Regular Report, complemented with a view of the

global situation for each of the aspects discussed. The economic assessment, for its part,

provides, besides an assessment of progress made over the reference period, also a dynamic,

forward-looking evaluation of Romania’s economic performance.

The Report contains a separate section examining the extent to which Romania has addressed

the Accession Partnership priorities.

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

decisions actually taken, legislation actually adopted, international conventions actually ratified

(with due attention being given to implementation), and measures actually implemented. As a

matter of principle, legislation or measures which are in various stages of either preparation or

parliamentary approval have not been taken into account. This approach ensures equal

treatment for all the candidate countries and permits an objective assessment of each country in

terms of its concrete progress in preparing for accession.

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

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

publication of the last Regular Report. The National Programmes for the Adoption of the

Acquis

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

framework of the Association Agreement and in the context of the analytical examination of the

acquis

(screening) and the negotiations

, have served as additional sources. Council

deliberations and European Parliament reports and resolutions

have been taken into account in

the preparations. The Commission has also drawn on assessments made by various

international organisations and in particular the contributions of the Council of Europe, the

OSCE and the International Financial Institutions, as well as that of non-governmental

organisations.

As in previous years, the Report does not mention any commitments undertaken or requests made in the context of the

accession negotiations.

The European Parliament

rapporteur

is Baroness Nicholson of Winterbourne.

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Relations between the European Union and Romania

Recent developments under the Association Agreement (including bilateral

trade)

Romania has contributed to the smooth functioning of the various joint institutions. The

Association Council met in March 2001. The most recent meeting of the Association

Committee was held in October 2001. The Joint Parliamentary Committee, comprising

representatives of the Romanian and European Parliaments, met in Brussels in January 2001

and in Bucharest in September 2001.

Although in most cases Romania continued to implement the Europe Agreement correctly, a

number of specific problems arose during the course of the year. Particular causes for concern

have been obstacles to EU law firms establishing themselves in Romania and the introduction of

export restrictions on sensitive raw materials. Such measures represent a move away from the

both

acquis

and the Europe Agreement.

Recent indicators point to a remarkable improvement in Romania’s trade situation. During the

course of 2000, Romanian exports to the EC were €7.6 billion (a growth of 32% compared to

1999). Over the same period, imports from the EC rose to €8.7 billion (an increase of 38%

over the previous year). This increase in trade both reflected and contributed to the revival of

the Romanian economy that took place in 2000. However, the rapid growth in imports meant

Romania’s trade deficit with the EC increased substantially to €1.1 billion, which remains a

cause for concern.

Over the course of 2000, Romania's main exports to the EC were: textiles and clothing (34%),

machinery and equipment (16%), steel products (12%), footwear (12%), and furniture (7%).

While the structure of exports was broadly similar to previous years, the increased share of

machinery and equipment is a positive development and represents a pick-up in Romania’s

industrial production. The EC's main exports to Romania were machinery and equipment

(28%), textiles and clothing (24%), chemical products (9%) and steel products (6%).

Romania’s main commercial partners amongst the EU Member States were Italy (34%),

followed by Germany (25%), France (10%) and Great Britain (8%).

Regarding agricultural products, a new agreement on reciprocal concessions with Romania

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

Protocol to the Europe Agreement. As a consequence of the new agreement, approximately

85% of EC imports and 17% of EC exports of agricultural products are exempt from duties. A

second round of bilateral negotiations for trade liberalisation in agriculture is presently being

prepared and would cover more sensitive sectors where current trade is low, in particular due

to a high degree of tariff protection. Negotiations with Romania concerning new reciprocal

concessions in the field of fish and fishery products were concluded on a technical level in May

2001. Preparations for a decision of the Association Council are ongoing.

The previous bilateral wine agreement between the Community and Romania expired on 31

December 2000. The parties concluded negotiations relating to new agreements on the

reciprocal recognition, protection and control of wine names and spirits designations, including

trade arrangements, in October/November 2000. The results of the trade agreement were

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applied as from 1 January 2001 as autonomous trade measures pending the adoption of the

new agreements as an Additional Protocol to the Europe Agreement.

Accession Partnership / National Programme for the Adoption of the Acquis

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

reviewed in Part D. This Regular Report is accompanied by a proposal from the Commission to

update the Accession Partnership.

In June 2001 Romania presented a revised National Programme for the Adoption of the

Acquis

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

the Accession Partnerships (see Part D).

Community aid

There are three

pre-accession instruments

financed by the European Community to assist the

applicant countries of Central and Eastern Europe in their pre-accession preparations: the

Phare

programme;

SAPARD,

which provides aid for agricultural and rural development; and

ISPA,

which finances infrastructure projects in the fields of environment and transport. These

programmes concentrate their support on the Accession Partnership priorities that help the

candidate countries to fulfil the criteria for membership.

In the years 2000 – 2002 the total financial assistance available to Romania will, on average,

amount €260 million from Phare, €150 million from SAPARD, and between €208 and €270

million from ISPA.

The level of financial support available under the pre-accession instruments creates an

substantial challenge for the Romanian administration. The capacities of the bodies responsible

for programming, operational management and financial control are limited. For Phare there has

been a relatively low rate of tendering and contracting in 2001 compared with the previous two

years, and consequently the backlog of funds not yet committed has increased. The same limits

of institutional capacity may also affect the implementation of ISPA. Considerable efforts are

therefore needed to strengthen institutional structures and recruit and train staff for all key

functions. In particular, the capacities of the Central Financing and Contracting Unit in the

Ministry of Public Finance and the Financial Unit within the Ministry of Development and

Prognosis need to be reviewed and strengthened. The development of the administrative

capacity needed to manage SAPARD has begun, but substantial further efforts are needed.

The

Phare

programme has been providing support to the countries of Central and Eastern

Europe since 1989, helping them through a period of fundamental economic and social

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

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

Phare provides the applicant countries of Central and Eastern Europe with support for

institution building (around one third of the Phare allocation), investment to strengthen the

regulatory infrastructure needed to ensure compliance with the

acquis

(equally around one third

of the allocation), and investment in economic and social cohesion (the remaining one-third of

the Phare allocation). This support comprises co-financing for technical assistance, “twinning”

and investment-support projects, to help these countries in their efforts to adopt the

acquis

and

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strengthen the institutions necessary for implementing and enforcing the

acquis.

This also helps

the candidate countries develop the mechanisms and institutions that will be needed to

implement Structural Funds after accession and is supported by a limited number of measures

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

During the period 1992 – 1999, the Phare programme allocated commitments of approximately

€1,200 billion to Romania. In 2000 the Phare allocation was €260.3 million

, and in 2001 the

Phare National Programme for Romania allocated a further €273.7 million to the following

priority areas:

1. Strengthening democracy and the rule of law (€ 27 million).

Support is being provided for

further action in the field of child welfare, improving the access of Roma to

education, and development of civil society.

2. Economic criteria (€6 million).

Support for improved management of municipal

services.

3. Strengthening administrative capacity ( million).

Projects promoting the reform of

€18

public administration policies, civil service recruitment and training, and the

programming and management of EC financial instruments are being supported.

4. Meeting the obligations of the

acquis

(€68 million).

Twinning, technical assistance and

investment are being provided in the following areas: internal market, agriculture

and fisheries, energy, transport, health, environment and justice and home affairs.

5. Economic and social cohesion. (€109 million).

Investment support is being provided for

regional development programmes concentrated in areas facing particular problems.

Measures can also support economic restructuring. Associated institution building is

being provided.

6. Participation in Community programmes (€21 million).

An additional €13 million has been allocated for cross border co-operation (CBC) programmes

with Bulgaria (€8 million) and Hungary (€5 million).

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

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

Funding provided under Phare 2001 pre-finances participation in Community programmes for

2002. Romania has continued to participate actively in a number of programmes: Leonardo da

Vinci, Socrates, Youth, Life III and Framework Programme 5 for Research and Technological

Development, and Euratom. Preparations for participation in a number of new programmes

have been initiated: Gender Equality, Enterprise and Entrepreneurship, Altener, ETAP, SURE,

IDA II, DAPHNE, Culture 2000, Fiscalis, European e-content, Customs 2002, and health

programmes covering health monitoring, pollution-related diseases, and injury prevention.

Preparations have also been initiated for Romania’s continued participation in programmes

This includes an allocation of €13 million to Cross-Border Co-operation (CBC) Programmes.

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which have had their period of application extended: SAVE II, as well as public health

programmes dealing with cancer, AIDS, drugs dependence, and health promotion. Following

the ratification and entry into force of the agreement, the formal participation of Romania in the

European Environment Agency will start in January 2002

In order to streamline Community legal procedures and thereby facilitate future participation of

Romania in

Community programmes,

a Decision is in the process of being adopted by the

EU-Romania Association Council establishing the general principles for such participation.

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

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

restructuring and privatisation, institutional structures and planning capacity for regional

development, the phytosanitary and veterinary

acquis,

environment, transport and energy.

Phare support for institution building in a wide range of

acquis-related

areas has succeeded in

developing accession strategies and in focusing efforts on the legislative and institutional

requirements for adoption and implementation of the

acquis.

In Romania, Phare is for example

playing a particularly important role in:

−

Developing the framework for designing and implementing programmes of regional

development. Assistance provided under the 1998 Phare programme (

€33 million) has

developed the arrangements under which substantial pre-accession programmes of

economic and social cohesion are being financed under the Phare 2000 and 2001

programmes.

−

Initiating measures to improve border management in line with Romania’s accession

obligations through institution building and investment. The Phare 1998 and 2000

programmes have supported the Ministry of Interior, providing a total of €20 million.

−

Developing a framework for the implementation by local authorities of projects introducing

modern child welfare services and reducing institutionalisation of children in line with

government policies for the reform of child protection. This is being financed under the

Phare 1999 programme through a €19 million grant scheme known as “Children First”.

Phare is also supporting associated measures that include technical assistance and a public

information campaign.

The Phare Review for 2000 confirmed the accession-driven approach and emphasised the

importance of helping countries to prepare for the Structural Funds. The Review foresees the

possibility that management of the Phare funds can be fully decentralised from 2002 if the strict

pre-conditions set down in the Co-ordination Regulation 1266/99 are met. Second, Phare

programming can be moved onto a multi-annual basis if supporting strategies are in place. Third,

the reforms introduced in 1997 continue with an increased role for Delegations, further

streamlining of procedures and, lastly, increasing emphasis on raising the verifiable and

quantifiable impact of Phare projects in institution building, investment in compliance with the

acquis

and economic and social cohesion.

Romania’s National Plan for Agricultural and Rural Development, which forms the basis for

implementation of the

SAPARD programme

in Romania, was approved in December 2000. It

provides for total public expenditure of around €1,423 million, of which €1,073 million will be

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financed by EC SAPARD funds, over the period 2000 –2006. The annual allocation for

SAPARD in Romania for 2000 was 153.2 million at 2000 prices.

The multi-annual and the annual financing agreements between the Commission and Romania

setting out respectively the rules for implementing SAPARD and the Community financial

commitments for the year 2000 were both signed in February 2001.

In order to accelerate the start of SAPARD implementation the government decided to

concentrate efforts initially on only three of the measures of the programme: rural infrastructure,

processing and marketing of agricultural and fishery products and technical assistance.

Progress has been made in preparing the accreditation of the SAPARD Agency. 150 personnel

have been recruited to work in the central and regional offices of the Agency, and an updated

organisational structure has been approved. New premises have been provided for the Agency

in Bucharest, and eight regional offices have been set up for the territorial management of the

programme.

Financial manuals and procedures are not yet completed, and further efforts are needed to

complete the organisation of the financial department of the Agency. Arrangements must also be

finalised for opening the SAPARD Euro Account. Efforts are continuing on the development of

computerised management and accounting systems tailored to Romania’s specific requirements.

An audit of the system will be required, as well as extensive staff training at central and regional

level.

Further efforts are needed to strengthen the National Fund and the Court of Accounts for their

respective functions in relation to SAPARD. The National Fund has been preparing for the

implementation of a pre-accreditation review of the SAPARD Agency, particularly as regards

its draft procedural manuals. The Court of Accounts requires further strengthening in the area of

clearance-of-accounts procedures for SAPARD.

The internal public expenditure audit function , which has not yet been fully implemented in

Romania, needs to be substantially strengthened within the SAPARD implementation structures.

An internal audit unit in the Ministry of Finance will perform this function for the National Fund,

but the procedures for effectively carrying out this task have not been formalised. The Internal

Audit Unit of the SAPARD Agency requires additional expertise.

The annual allocation to Romania under

ISPA

is between €208-270 million for the period

2000-2006. The sectors benefiting from ISPA are transport and the environment, with both

sectors receiving around half of the annual allocation. The ISPA programme is designed

principally to support municipalities in the field of the environment and the central authorities in

the field of transport (the National Administration of Roads and the CFR railway company).

An overall ISPA strategy in the field of the environment was adopted in 2000 by Romania and

the Commission and is currently being revised. It will concentrate on the 'heavy investment'

directives (mainly drinking water, treatment of wastewater, and solid-waste management) that

are intended to bring Romania up to EC standards. Since the beginning of 2000, eleven

projects have been approved, accounting for a total ISPA allocation of more than €300 million

(multi-annual commitments) in the areas of sewerage networks, drinking water treatment and

waste management.

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In the transport sector ISPA will concentrate on projects located on the Trans-European

Networks (TENs) in the field of railways, roads, ports and airports. An overall ISPA strategy in

the field of transport was adopted by Romania and the Commission in early 2000, focusing on

the upgrading of Corridors IV and IX for both road and rail. Since the beginning of 2000, six

projects have been approved, accounting for a total ISPA allocation of more than €500 million

(multi-annual commitments).

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

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

overall financial management and with a number of Implementing Agencies being responsible for

the technical implementation.

Twinning

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

their administrative capacity to implement and enforce the

acquis.

As of 1998, the European

Commission proposed to mobilise significant human and financial resources to help them in this

respect, through the process of twinning of administrations and agencies. The vast body of

Member States’ expertise is now being made available to the candidate countries through the

long-term secondment of civil servants and accompanying short-term expert missions and

training.

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

public finance, justice and home affairs and preparatory measures for the Structural Funds. It

now covers all sectors pursuant to the

acquis.

A total of 372 twinning projects, primarily in the fields of agriculture, environment, public

finance, justice and home affairs and preparation for the management of Structural Funds, have

been funded by the Community between 1998-2000. These represent the principal priority

sectors that have been identified in the Accession Partnerships. But also other important

sectors of the

acquis

have been addressed through twinning, for example, social policy, fight

against drugs, transport, and telecommunications regulation.

Thanks to the strong support and response from EU Member States 103 twinning partnerships,

funded by Phare 1998 and involving all candidate countries and almost all Member States are

coming to an end or have been concluded. Under Phare 1999 a further 124 projects are being

implemented and the programming exercise for Phare 2000 includes a further 145 twinning

projects. The 2001 programming exercise foresees 131 twinning projects in all Phare

beneficiary countries as well as Cyprus and Malta. Furthermore, the candidate countries are

being offered the possibility of drawing on Member States’ expertise through "Twinning Light"

(twinning projects of less than six months), to address well-defined objectives of limited scope,

which emerge during the negotiation process as requiring adaptation. It is estimated that around

250 twinning projects are operational throughout the candidate countries at any one time.

Under Phare 2000, Romania benefited from 23 twinning projects - nine of which are for

supporting regional development. Considerable twinning support is also being provided for the

agricultural sectorcovering agricultural and rural policy, veterinary standards and the

acquis

wine. The penal system and the Refugee Office each benefit from one twinning project. In the

area of finance, the National Commission of Securities, the Court of Accounts and the Ministry

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of Finance receive twinning assistance. A twinning project on the fight against drugs has been

established with the Ministry of Interior as the main co-ordinator, and the Ministry of Education

is preparing a project dealing with the mutual recognition of qualifications.

Under Phare 2001 twelve twinning projects have been designed in a variety of fields: public

administration reform, phytosanitary matters, fisheries, road safety, waste management, SME

and co-operatives policy, support for the ombudsman’s office, migration and border

management, as well as customs. The National Bank of Romania and the Border Police have

requested support through the new medium-term twinning mechanism.

There have been considerable delays in drafting the 1999 covenants and this has led to less time

being available for the actual implementation of some projects. The preparation for the twinning

projects under Phare 2000 is well on track but the Romanian authorities should make every

effort to ensure that the problems encountered with the 1999 covenants are not repeated.

Negotiations / screening

The analytical examination of the

acquis

(screening) has taken place in the context of meetings

of the Association Committee and the sub-committees.

Since the opening of the accession negotiations in February 2000, substantial discussions on the

individual chapters of the

acquis

started and by September 2001 negotiations on 15 chapters

had been opened.

By the end of September 2001, the following 8 chapters had been provisionally closed:

fisheries, statistics, small and medium-sized enterprises, science and research, education,

external relations, common foreign and security policy and consumers and health protection.

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B. Criteria for membership

1. Political criteria

Introduction

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

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

“stability of institutions guaranteeing democracy, the rule of law, human rights and respect for

and protection of minorities.

”

In its 2000 Regular Report on Romania’s progress towards accession, the Commission

concluded that:

“Romania continues to fulfil the Copenhagen political criteria.

"The government has shown a political commitment to addressing the problems of

institutionalised children and progress has been made. Responsibility for the institutions has been

transferred to local authorities, a national strategy aimed at structural reform has been adopted,

and the necessary budgetary transfers have been made. Romania can therefore be judged as

having met the 1999 Accession Partnership’s short-term priorities. However, the Commission

will continue to monitor the situation closely to ensure that these positive policy developments

result in a comprehensive reform as well as an improvement in the actual living conditions in the

institutions concerned.

"In the case of the treatment of the Roma, the continued high levels of discrimination are a

serious concern. The Accession Partnership’s short-term priorities still need to be met

(elaborating a national Roma strategy and providing adequate financial support to minority

programmes) and progress has been limited to programmes aimed at improving access to

education.

"Continued improvements can be noted with regard to the functioning of the judiciary – although

the reform process needs to be continued and consolidated in line with the short-term priorities

of the Accession Partnership. Further progress still needs to be made with regard to

demilitarisation of the police and other bodies subordinated to the Ministry of Interior (a

medium-term Accession Partnership priority).

"Romania’s democratic institutions are well established, but the process of decision making

remains weak. Despite the initiatives taken over the last year the government has continued to

rely on legislating by ordinances and consultation on draft legislation should be substantially

improved.

"In terms of administrative capacity, Romania has met short-term Accession Partnership

priorities by adopting a law on the civil service and has set up a civil service agency. These

developments should be built upon through the development of a comprehensive, public

These principles have been emphasised in the Charter of Fundamental Rights of the European Union that was

proclaimed at the Nice European Council in December 2000.

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administration reform programme. Particular care needs to be taken to ensure that decentralised

responsibilities are matched by sufficient financial and human resources at the local level. Little

progress has been made in reducing the levels of corruption and improved co-ordination is

needed between the various anti-corruption initiatives that have been launched.”

The section below aims to provide an assessment of developments in Romania since the 2000

Regular Report, as well as of the overall situation in the country, seen from the perspective of

the political Copenhagen criteria, including the overall functioning of the country’s executive and

its judicial system. Developments in this context are in many ways closely linked to

developments regarding Romania’s ability to implement the

acquis,

in particular in the domain

of justice and home affairs. Specific information on the development of Romania’s ability to

implement the

acquis

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

(Chapter

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

of part

B.3.1.

of this

Report.

Recent developments

Parliamentary elections were held in November 2000. The main winner was the Romanian

Party of Social Democracy (PDSR) which won 45% of the seats in the Chamber of Deputies

and 46% of the seats in the Senate. The PDSR was able to govern without forming a coalition

and has secured parliamentary majorities on a case-by-case basis working together with other

parties – in particular the Democratic Union of Hungarians in Romania and representatives from

national minorities. The new government was sworn-in in December 2000. In June 2001, the

PDSR merged with the small Romanian Social-Democratic Party to form a single new party

(the Social Democrat Party).

Presidential elections were also held at the same time and the PDSR candidate, Ion Iliescu, was

elected as President of the Republic. Both parliamentary and presidential elections were free

and fair.

1.1.

Democracy and the rule of law

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

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

developments of the past year.

The parliament

The efficiency of the legislature, which had been recognised as a particular problem in previous

Regular Reports, improved considerably over the reporting period.

Prior to the elections the legislature had been effectively paralysed by the weakness of the ruling

coalition. One of the first acts of the new Parliament was to reform the functioning of both

houses in order to accelerate the legislative process. In the Senate changes included streamlined

procedures for amending legislation, and reducing opportunities for “filibustering.” In the

Chamber of Deputies the changes included an accelerated procedure for the adoption of

priority legal acts – including legislation related to EU accession.

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A series of measures have also been introduced in order to improve the relationship between

the legislature and the executive. Meetings between the President, the Prime Minister and the

speakers of the two chambers take place on a weekly basis. A Minister for Relations with

Parliament has been appointed. State Secretaries responsible for parliamentary relations have

been appointed in all line-ministries. Taken together, these measures illustrate the importance

given by the government to effective co-operation with Parliament.

The combination of a government with a strong position in both houses and reformed

parliamentary procedures has seen the number of laws adopted by Parliament increase

significantly since the beginning of the year. This has allowed the legislature to effectively

process the backlog of some 700 draft legislative acts left over from the previous government.

The improved functioning of Parliament has been matched by the government’s reduced

reliance on ordinances and emergency ordinances as legislative instruments. This said,

legislation by ordinance remains too common and has frequently been used without a clear

justification for bypassing parliamentary procedures. This is a concern because Parliament’s

power to subsequently amend or reject legislation introduced by ordinance can result in

legislative instability. A further concern is that parliament’s ability to carry out the essential

function of scrutinising legislation remains limited.

The executive

Reforms made since the elections have significantly improved the functioning of government.

Inter-ministerial co-operation has increased, as has the policy-making capacity of the

administration. Progress has also been made with the decentralisation of powers to local

government – although certain problems remain related to the implementation of reforms. A

remaining concern is the lack of progress in carrying out a strategic reform of the public

administration.

Since taking office at the beginning of the year, the new government has conducted an extensive

overhaul of the executive. The number of ministers and ministries has been increased and all

government agencies have been subordinated to ministries – previously many of them were

considered as independent bodies. Bringing the agencies more closely into the structures of

government has improved the cohesion of the administration.

A positive development has been the particular emphasis placed upon re-enforcing the

structures that are responsible for managing the accession process. The new Ministry of

European Integration is responsible for co-ordinating the EU accession effort including

implementation of the pre-accession strategy, management of EC financial assistance and

conducting the accession negotiations. The position of Chief Negotiator has been upgraded to

a ministerial-level post, and a Secretary of State responsible for European Integration has been

appointed in each line-ministry. These Secretaries of State meet regularly in an inter-ministerial

committee. At the civil servant level, inter-ministerial working groups have been established to

deal with the preparation of each negotiating chapter. These measures have significantly

improved the quality of Romanian preparations for accession.

Following the elections, a number of specific initiatives were taken to strengthen

policy

formulation

(identified as a particular problem in last year’s Report). These changes, combined

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with a situation where all ministers now belong to the same political party, have significantly

improved the policy-making capacity of the government.

A Law on the Organisation and Functioning of the Government of Romania was adopted in

February 2001. One of the important elements of the law was the provision of a legal basis for

inter-ministerial bodies “in order to elaborate, integrate, correlate and monitor certain policies”.

The General Secretariat of the Government has been made responsible for co-ordinating the

activities of line ministries and ensuring that the correct legal procedures are observed in the

elaboration and endorsement of draft legislation. In general terms this initiative has improved

policy co-ordination – although there are still cases of government decisions being taken

hurriedly and without key ministries being consulted.

Consultation with stakeholders when drafting legislation –social partners, NGOs, the business

community – has improved over the reporting period but remains limited. The Council for

Economic and Financial Co-ordination, which was created by the previous government and

which proved to be ineffective, has been dissolved.

Last year’s Regular Report welcomed the adoption of a Civil Servants’ Statute and the

establishment of the Civil Servants’ Agency to implement the Statute and to take a leading role

in public administration reform. Unfortunately, little substantial progress on

civil service reform

can be noted since last year.

All ministries have been re-structured - but this has been the result of a change in government

rather than of a programme of strategic reform. Certain positions have disappeared while others

have had their responsibilities changed. This has led to the removal of many civil servants, either

through resignations or through redundancies. This process has seriously undermined the

stability of the civil service at all levels of public administration. The number of secretaries of

state (political appointees) has been significantly increased. Most of them have taken over the

responsibilities that were held by director generals (career civil servants).

The reorganisation of ministries was accompanied by the announcement of a 30% reduction in

the numbers of civil servants (as of September 2001, staff numbers had been reduced by 22%).

This measure has reduced the already low levels of administrative capacity and has left several

important ministries understaffed. There was no evidence of systematic overstaffing in the

central administration and making substantial cuts in each ministry missed the opportunity of

reallocating excess resources to those areas that needed additional staff.

In terms of process, these dismissals were made following written tests and therefore followed

the provisions of the Civil Service Statute. However, the National Agency for Civil Servants

was not involved at any stage. This not only raises concerns as to the standard of these testing

arrangements (which were the responsibility of each ministry) but also indicates that the Agency

is not yet carrying out its role as guardian of the Civil Service Statute.

In spite of this retrenchment a fresh wave of recruitment has also taken place – particularly for

the newly established ministries. Many of the staff hired by the new ministries are officials

previously employed by other ministries which makes it difficult to assess the overall reduction in

numbers of civil servants. Just as with the dismissal of officials, the National Agency of Civil

Servants has not been involved in either supervising or implementing the recruitment process.

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A National Institute of Public Administration has been established with the remit of improving

the training provisions for civil servants. As the Institute will only become fully functional in the

2002-2003 academic year, it is not possible to assess the effectiveness of this institution.

The Commission has made the case that a fundamental structural

reform of the public

administration

should be one of the new government’s most urgent priorities. In order to make

the 1999 Civil Servant’s Statute fully operational, secondary legislation is still needed to cover

recruitment, career structures, and remuneration. In addition, a comprehensive reform strategy

should be developed (this is one of the priorities in the 1999 Accession Partnership that has not

yet been implemented). Such a strategy should cover the development of mechanisms to ensure

the political independence and accountability of civil servants, improved provisions for both

initial and in-service training, and the introduction of a career structure based on transparent

promotion and assessment.

In September 2001, the Romanian Government responded by adopting a “General Strategy

Regarding the Acceleration of Public Administration Reform”, and a strategy on e-government.

An inter-ministerial council, directly subordinated to the Prime Minister, has been established to

monitor the implementation of the reform strategy. Considerable work will be necessary to

further develop the strategy. Nevertheless, these developments are significant steps forward and

should represent the foundations for future progress.

The bodies responsible for administrative reform are the Ministry of Public Administration and

the National Agency of Civil Servants - but their own operational capacity is limited as is their

political influence on other ministries. If a reform programme is to succeed then it is essential

that these institutional arrangements should be considerably reinforced.

The new executive has given considerable attention to issues related to

local administration

and decentralisation.

In March 2001, a new Law on Local Public Administration was

adopted in order to extend and clarify the decentralisation process. This legislation enshrines the

principle of local autonomy, clearly sets out the competencies of local authorities, and defines

the relationship between central and local government. Crucially central government is

prohibited from devolving additional responsibilities to the local level without also providing the

necessary financial means. At the same time a greater fiscal autonomy is envisaged and the law

sets out the right of local authorities to levy local taxes and to elaborate and approve their own

budgets. This is a positive development, although difficulties have continued to arise from the

transfer of new responsibilities to local authorities (e.g. education, health, institutionalised

children) without a corresponding transfer of resources. The capacity of local government to

raise local taxes remains limited and is an issue that should also be addressed.

Significantly, the Law on Local Public Administration also promotes the rights of ethnic

minorities by providing for the use of minorities' languages in the local administration where

more than 20% of the population belongs to a minority.

Local authorities have been increasingly involved in international assistance programmes and

some have started contracting foreign loans to develop local infrastructure without a sovereign

guarantee. These developments are indications of increasing

administrative capacity

although

the performance of the local administrations still varies greatly from one place to another. In

general terms, the local level has not yet developed sufficient financial or administrative capacity

to deal with the decentralisation of competencies. This has contributed, in many local

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communities, to cumbersome administration and, on occasion, a mismanagement of funds – and

these shortcomings will have to be urgently addressed if further decentralisation is to be

successful.

With regard to the

demilitarisation of the police,

no substantial developments can be reported

although the Government did approve draft laws on the statute of policemen and on the

modification of the law on the organisation and functioning of the Romanian police, and has

submitted them to Parliament using urgency procedures. These laws should establish the legal

basis for the demilitarisation of the police and redefine policemen as civil servants albeit with a

special status.

The judicial system

Romania has made considerable advances in reforming its judiciary over recent years. This

process has continued over the reporting period and there has been progress with speeding up

court procedures and the enforcement of judicial decisions. At the same time, additional reforms

are still necessary and should include measures to further guarantee the independence of the

judiciary and to develop a human resource policy for judges and supporting court staff.

A revised version of the Civil Procedure Code entered into force in April 2001. New

procedures were introduced in order to speed up the operation of the courts and improve the

enforcement of judicial decisions. In a separate measure, the government made it necessary for

judges to publish a reasoning for all their decisions (previously this was only necessary in cases

involving appeals to higher courts). Most of the changes to the Civil Procedure Code represent

welcome and much needed efforts to improve the efficiency of the judicial system. However,

some of these changes raise concerns: the Supreme Court, which is already overburdened, has

been given additional tasks (hearing appeals in commercially significant cases), and the process

of simplifying procedures has considerably restricted the right to appeal in certain cases.

A further set of concerns relate to the extension of the General Prosecutor’s right to introduce

extraordinary appeals against judicial decisions. This provision already existed in Romanian law

but an Emergency Ordinance extended the period during which extraordinary appeals could be

brought (from 6 months to 1 year), allowed extraordinary appeals to be made before all other

legal avenues had been exhausted (previously only “final” judgements were covered) and made

the right to introduce such appeals more discretionary (they can now be exercised against

"obviously ungrounded judicial decisions" - an ill-defined criterion). This is a potential worry

since the extension of such extraordinary procedures risks undermining the principle of legal

certainty.

A number of developments have occurred during the reporting period that draw attention to the

independence of the judiciary from the executive. During the first half of 2001, a number of

presidents and vice-presidents of courts have been transferred from their posts (i.e. demoted)

without clear reasons being given. Decisions over transfers and removals of judges are taken by

the Superior Council of the Magistracy, but the Ministry of Justice has a significant influence

over this body (one third of its members are appointed by the Ministry and the Minister chairs

its meetings). In a separate development, the Ministry of Justice issued a circular letter to courts

in March 2001 asking them to pay attention to the social consequences in cases concerning

restitution of nationalised houses. As the Romanian authorities have subsequently recognised,

such recommendations would appear to contradict the principle of an independent judiciary.

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While the involvement of the executive in judicial affairs is not a new phenomenon in Romania,

these incidents indicate that further efforts are needed in order to guarantee the independence of

the Romanian judiciary.

Magistrates continue to rank amongst the best paid public officials, but a change in the wage

policy means that this preference is being eroded - unlike other public employees, magistrates

will not receive a wage adjustment in 2001 to compensate for inflation. Working conditions of

judges need to be improved and existing plans to develop and introduce adequate IT systems to

facilitate case handling and to give access to case law and legislation should be implemented.

Since the last report there have been no major developments with regard to the total number of

judges or the number of judicial vacancies. The average number of cases dealt with by each

judge has decreased slightly from 514 in 1999 to 511 in 2000, but the workload remains heavy,

which limits the ability of judges to carry out their functions effectively. Compared to 1999, the

number of pending cases in Courts of the First Instance and in Courts of Appeal dropped in

2000. However, over the same period, there was a slight increase in pending cases before

Tribunals.

The National Institute of Magistracy is currently the sole entry point for a career as a judge

although it remains unclear if the Institute will keep this position since the law organising the

judicial system provides for other routes into the judiciary. The initial training period has been

extended to two years with effect from the academic year 2001/2002. The training programmes

include Community law, constitutional and human rights subjects, as well as citizens' liability

claims and judicial co-operation in civil and penal matters. Continued support for the National

Institute for the Magistracy, granting it self-governing status and confirming it as the sole entry

point to the judiciary are important elements in developing a professional and independent

judiciary. In a separate development a training centre for legal clerks was opened in December

2000 – although it is not yet operational.

Anti-corruption measures

Last year’s Regular Report noted that corruption was a widespread and systemic problem that

undermined the legal system, the economy and public confidence in government. Despite a

general recognition of the seriousness of this problem by the government there has been no

noticeable reduction in levels of corruption and measures taken to tackle corruption have been

limited.

A section for anti-corruption and related organised crime at the General Prosecutor's Office

was established in October 2000. According to the anti-corruption law passed last year, this

body was to take the lead in combating corruption. However, it has never been functional due

to a lack of staff and equipment. Out of 38 posts for prosecutors only 17 are filled. Secondary

legislation detailing institutional arrangements for the anti-corruption section has not yet been

adopted and as a result there has been no substantial progress in implementing the anti-

corruption law. Co-ordination between the various other bodies charged with tackling

organised crime and corruption remains a problem and recent administrative changes have not

led to any improvements.

Reports on the funding of political parties have indicated that expenditures (and in particular

election expenditures) are considerably higher than declared revenues. This applies to all

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political parties and is a potential source of corruption. In order to address this issue, Romania

should adopt a fully transparent system of party funding.

A positive development regarding the fight against corruption was the adoption, in April 2001,

of an ordinance introducing public procurement procedures and establishing the right to appeal

against the award of public contracts.

Romania has still not ratified the Council of Europe Convention on Laundering, Search, Seizure

and Confiscation of the Proceeds from Crime. It has signed, but has still to ratify, the Council of

Europe’s Criminal and Civil Law Conventions on Corruption. Romania is involved in the

Stability Pact Anti-corruption Initiative supported by the OECD Secretariat. Romania is a party

to the Council of Europe's partial agreement "Group of States against Corruption" (GRECO).

Access to information

is an important issue that is closely related to both the accountability of

government and the fight against corruption. Although the principle of access to information is

enshrined in the 1991 Constitution there is no effective implementing legislation.

In conclusion, and with the important exception of public procurement legislation, there has

been no substantial progress in the fight against corruption since last year's report. In order to

begin making progress, secondary legislation needed for the implementation of the anti-

corruption law should be adopted and the anti-corruption section at the General Prosecutor's

Office given the resources it needs to operate effectively. The National Strategy to Combat

Corruption should be finalised and adopted. The division of tasks among the bodies involved in

the fight against corruption needs to be clarified and overlapping competencies should be

removed. The concept of criminal liability of legal persons should be introduced into Romanian

criminal law and the rules governing the funding of political parties revised.

1.2.

Human rights and the protection of minorities

As mentioned in the previous Regular Reports, Romania continues to respect human rights and

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

Report.

Romania has ratified the major human rights conventions (see annex). In November 2000

Romania signed Protocol no. 12 to the European Convention on Human Rights containing the

general prohibition of discrimination on any grounds such as sex, race, colour, and language.

A major development, and one which was noted in the last Regular Report, was the issuing of

an Emergency Ordinance, in September 2000, on the prevention and

combating of all forms

of discrimination.

The ordinance covers rights defined in relevant international agreements and

is broadly in line with the Council Directive on Implementing the Principle of Equal Treatment

between Persons Irrespective of their Racial and Ethnic Origin (see

chapter 13-Employment

and Social Policy)

as well as recent recommendations of the European Commission against

Racism and Intolerance. However the ordinance is not yet operational since the necessary

secondary legislation has not been adopted and the implementing body, the National Council for

Preventing and Combating Discrimination, has not yet been established. Despite these delays,

this legislation should, when implemented, represent a positive development by providing legal

protection against discrimination on various grounds, including ethnic origin, language, religion

and sexual orientation.

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The Office of the Ombudsman deals with complaints lodged by persons whose civil rights and

freedoms have been infringed by the public administration. In 2000 the institution dealt with

4 556 complaints, a slight increase over the previous year. Almost half of these cases were

declared admissible (compared to 40% in 1999) which demonstrates the growing public

awareness of the role and function of the Ombudsman. Most of the complaints referred to

alleged infringements of individual rights in the process of restitution of land or residential

property. Other frequent cases concern women’s and family rights, and cases related to the

provision of social security.

Over the reporting period, significant developments included the setting up of regional offices,

increased co-operation with NGOs and a large increase in the number of direct audiences held

with complainants. In terms of administrative capacity, the personnel reductions imposed on the

entire central administration at the beginning of 2001 reduced the number of posts at the

Ombudsman’s office from 108 to 80. However, this did not lead to redundancies, as only 77

posts had been filled at the end of 2000.

Despite the fact that the performance of the Ombudsman’s office has improved significantly

over recent years, its co-operation with other state institutions remains problematic. Many

institutions have failed to respond to requests from the Ombudsman within the legally set delay.

The Senate, which is itself responsible for appointment of the Ombudsman, has repeatedly

delayed debating the Ombudsman’s Annual Report. This attitude undermines both the

credibility and the effectiveness of the institution.

Civil and political rights

Romania has made significant progress in improving the civil and political rights of its citizens.

Reform of the childcare system is well under way and the decriminalisation of homosexuality has

brought Romania in line with European standards. Important new legislation has been passed

regarding the restitution of property. New legislation has clarified the rights of asylum seekers

and refugees and the introduction of probation represents an important reform of the penal

system. Positive initiatives have been taken to address trafficking of human beings – although

this remains a serious problem. Despite this progress, implementation of reforms has been

disappointing in several of these areas. This is a challenge that the government will have to

address. Other areas where further reform is needed include modernising the Penal Code (in

particular the articles relating to freedom of expression) and increasing the public accountability

of police officers.

In last year’s Strategy Paper, the Commission noted that Romania had adopted legislative,

administrative and financial measures to address the problems in

child-care

institutions.

However, it stressed that further sustained efforts were needed to improve living conditions,

implement structural reforms and address the problem of street children in full respect of human

rights.

There has been further progress made over the reporting period. The budget allocated to child-

care has been substantially increased (€79 million in 2001 compared to €42 million in 2000).

The number of child-care services offered as alternatives to institutions has been increased.

Presidents of county councils have direct responsibility for all institutions related to child

protection - a measure intended to ensure that local administrations give sufficient political

priority to child-care issues. Important translation errors in the United Nations Convention on

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the Rights of the Child were corrected. The process of moving children out of special schools

and into mainstream education has been initiated.

The reforms made mean that Romania has met the 1999 Accession Partnership priority related

to child protection. However, and despite these developments, the demand for state-supported

care remained constant in 2001 with poverty being the main reason. A better-targeted social

allowance scheme for families with children is therefore necessary in order to prevent child

abandonment and institutionalisation.

According to official figures, at the end of 2000 there were 129 296 children in need of special

protection out of which 77 844 were children in residential care and 51 452 were children

supported in natural or substitute families.

In May 2001 the Government adopted a revised Strategy on the Protection of Children in

Need (2001-2004). The revision was made following consultation with NGOs and international

organisations and is a broadly positive development – although the emphasis is placed on

rehabilitating institutions rather than closing them. There are also important areas that are not

fully addressed by the strategy: the provision of support to families and mothers, the care of

young adults leaving the residential care system, and policies to prevent abandonment.

In terms of institutional structures, the National Authority for Child Protection and Adoption

was placed under the Secretary General of the Government. This was an important

development that provided the Authority with representation at ministerial level. At the same

time, insufficient budgetary resources and training reduce the Authority’s ability to effectively

carry out its regulatory and monitoring functions. The role of the National Authority in co-

ordinating government policies related to children’s rights is still not fully established. This is a

matter of some urgency since the integration of childcare policy with other sectoral policies,

such as social and family policies, health and education, has not been adequately addressed.

A High Level Group to support and monitor the reform efforts was set up during the reporting

period. This body is made up of the European Parliament’s rapporteur on Romania

(who took

the initiative to establish it) and representatives of the Romanian Government, the European

Commission, the World Bank, UNICEF and the WHO.

In the 2000 Regular Report, the Commission expressed concern with regard to legislation and

practices on inter-country adoption that allowed considerations other than the best interest of

the child to influence adoption decisions. This risked having a negative effect on efforts to

reform the child protection system in Romania. Following this and similar expressions of

concern, the Romanian government decided to suspend international adoptions. In December

2000 the Romanian Adoption Committee stopped referring children to international adoption

foundations. As of June 2001, the Committee suspended the registration of new foreign families

requesting international adoption for at least one year.

The Commission welcomes this moratorium as a mechanism to end practices that were

incompatible with Romania’s international obligations under the United Nations Convention on

the Rights of the Child and which risked opening opportunities for trafficking in children and

other forms of abuse. The Romanian authorities need to reform legislation on international

The European Parliament

rapporteur

is Baroness Nicholson of Winterbourne.

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adoptions and to develop the appropriate administrative structures and capacity in order to

ensure that adoption decisions are made exclusively in the best interest of the child. This should

be done prior to international adoptions being resumed.

Cases of inhuman and

degrading treatment by the police

continue to be reported by human

rights organisations. There is no evidence to suggest that these cases are the result of a

systematic disregard of human rights by the police. At the same time, it is clear that the use of

physical violence to extract confessions is not exceptional and that the safeguards in place to

prevent such incidents are inadequate. Allegations of police abuse are investigated through the

system of military courts, and investigations are typically lengthy and often inconclusive.

Increasing the public accountability of police officers should reduce instances of degrading

treatment. It is therefore important that progress is made with the demilitarisation of the police

force.

Romania is both an origin and a transit country for the

trafficking of human beings.

Economic

and social uncertainty, widespread poverty and domestic prostitution rings are the main reasons

for this problem. Recent research has revealed a very low level of public awareness on this

issue and, alarmingly, a continuing decrease in the age of the victims. In the first eight months of

the year the police dealt with 435 trafficking cases.

Against this background, the Romanian government has made considerable efforts to detect and

fight trafficking in persons. Within the framework of the Regional Centre for Combating

Organised Cross-border Crime, a task force for combating trafficking in human beings was set

up. In October 2000, the Ministry of the Interior launched a programme for the protection of

women and children against trafficking and, in April 2001, the Government appointed a national

co-ordinator to combat trafficking. In May 2001 the Government established an inter-ministerial

commission to draft an anti-trafficking law. Despite these actions, there are still insufficient

legislative tools for prosecuting and punishing traffickers and for protecting victims.

Overall

prison conditions

are often extremely poor and prisons remain severely overcrowded.

A particular problem with pre-trial detention is that the periods of detention can be excessive –

up to half of the possible sentence. In order to address these issues, important reforms of the

Romanian penal system have been initiated. An ordinance establishing a probation system

entered into force in October 2000 and 11 experimental probation centres have been set up in

seven counties. The Penal Code was amended through an Emergency Ordinance in November

2000 to further improve the provisions on conditional release from prison. These are positive

developments. However, a major constraint on the effective implementation of these laws is the

severe shortage of probation officers.

Other initiatives have been taken in order to improve prison conditions, such as finding jobs for

inmates and limited improvement to educational and recreational facilities. A further positive

development has been the granting to prisoners of the right to appeal against disciplinary

measures.

The Civil Procedure Code contains provisions for granting

legal aid

to persons who cannot

afford the legal costs of a case. The Penal Procedure Code guarantees the right to defence

throughout criminal proceedings. The legal aid provisions are applied in Romania - although the

relatively low levels of payment and the delays in processing payment claims limit the

attractiveness of these cases for the legal profession. In criminal cases, both the Romanian

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Constitution and the Penal Procedure Code provide for free access to an interpreter for citizens

belonging to a national minority, as well as persons who cannot understand Romanian.

Concerning

asylum-seekers and refugees,

a new Law on Aliens was adopted in April 2001.

This legislation represents a much needed improvement upon the previous legislation (which

dated from 1968) although certain problems remain – notably concerning the possibility of

expelling foreigners without their having the right to challenge this decision in the courts.

Amendments to the Refugee Law, in line with the

acquis,

were approved by Parliament in June

2001. The principle of ‘non-refoulement’ is guaranteed and the amended legislation represents

considerable progress. This said, there are still shortcomings in the legislation and the provisions

on detention of asylum seekers should be based on stronger legal guarantees. In parallel with

revised legislation, the assistance provided to refugees and asylum seekers has been improved.

Measures have been developed to ensure minimum standards of reception for all asylum

seekers throughout the whole asylum procedure and refugees enjoy the same basic rights as

Romanian citizens, including the right to work.

The Romanian constitution provides for

freedom of expression

and prohibits censorship.

There is a great diversity of media in Romania with 15 national daily papers, many more local

daily papers, over 70 private television channels and over 150 private radio stations. Most of

the print media is privately owned and both the written press and electronic media are able to

report freely. At the same time there are limitations on the free operation of the media.

Of particular concern are provisions in the Penal Code that restrict the activities of journalists.

The articles dealing with slander and libel are restrictive and the extensive use of legal proceedings

against journalists, in particular where they have made allegations of corruption, undermines the

freedom of the press. A related concern is that the burden of proof in such cases is weighted

against journalists since the accused is obliged to prove the absolute truth of public statements –

as opposed to the responsibility lying with the plaintiff to demonstrate that a mis-representation of

the truth had taken place. An amendment to the Penal Code, that would have reversed this

situation and brought Romania in line with the case law of the European Court of Human Rights,

was drafted by the previous government but has not been taken forward.

Other articles in the Penal Code dealing with “offences against authorities” and “verbal outrage”

provide for specific punishments, including prison, for insulting or defaming elected officials or civil

servants. As a general principle, supported by the case law of the European Court of Human

Rights, politicians and civil servants should expect closer public scrutiny of their actions than

private individuals. There is also a risk that these provisions could be used to stifle public criticism

of the authorities. Although these concerns about the Penal Code have been raised by

international observers, no progress can be reported since the last Regular Report.

Freedom of religion

is guaranteed by the Constitution and the government does not restrict the

observance of religious belief. However, as last year’s Regular Report noted, the 1948 decree on

religious denominations, which is still in force, is outdated and in need of reform. There are 15

recognised religions in Romania and other congregations are obliged to register as either religious

foundations or as cultural associations and are not permitted to build churches or houses of

worship. A further issue is that legislation on conscientious objection to military service

differentiates between members of “recognised religions” and other religious groupings.

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In June 2000, the government adopted an emergency ordinance that amended the Penal Code

in order to

decriminalise homosexuality.

Homosexual relations are no longer a criminal

offence, and sexual offences are now governed by the same legislation irrespective of sex. This

represents a major and positive development in human rights legislation that brings Romania into

line with European standards.

The Romanian Constitution provides for the

freedom of association

and the

freedom of

assembly.

Both of these rights are respected in practice.

The Real Estate Restitution Law entered into force in February 2001, setting out the basic

principles and procedures that are to be applied for the

restitution of property

– as well as

establishing a mechanism for providing compensation in cases where restitution is not possible.

The law applies to all real estate “abusively taken” by the former Communist regime between

1945 and 1989. The law also covers the 1940-45 period, thus satisfying many of the restitution

demands of Jews who suffered from anti-Semitic laws adopted during the war.

The law has several positive aspects. Most importantly it provides a legislative framework for

addressing an issue that has remained unresolved since 1989. It goes considerably further than

the requirements of the European Convention on Human Rights by covering almost all

confiscations made under the Communist regime. It also extends the right for restitution to all

persons who have been dispossessed (earlier restitution legislation only covered Romanian

citizens).

Despite these developments, implementation of the new legislation has proved to be

disappointing and crucially, the administrative procedures for calculating and awarding

compensation have not yet been adequately defined. A further issue arises because the

restitution law does not cover property confiscated from churches. Although the law indicates

that this issue will be covered by future legislation there has been no progress in preparing such

legislation.

The law on the restitution of land and forests has also been amended in order to address some

of the shortcomings of the initial version of the law that had proved to be inoperable.

Economic, social and cultural rights

The government’s agenda has prioritised social issues such as the fight against social exclusion

and promoting equal opportunities between men and women. Various initiatives have been

launched - but a lack of resources and limited administrative capacity has slowed down

implementation. More substantial progress has been made with the conclusion of a Social Pact

with the social partners – although the position of trade unions in private enterprises remains

weak.

In December 2000 the government approved the National Action Plan Regarding

Equal

Opportunities

for Men and Women. The plan identifies a number of areas of intervention and a

number of operational objectives in the fields of legislation, social rights, economy, participation

in decision-making, and public awareness. While the action plan is a welcome development,

there have been no concrete actions taken in order to implement it and the resources allocated

for implementation are insufficient.

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The government has identified equal opportunities between men and women as one of its main

objectives and has made important changes to administrative structures in order to address this

issue. A new structure for liaison with NGOs and trade unions has been set up in the Ministry of

Labour and Social Solidarity. Specific departments have also been set up within both

governmental and non-governmental bodies (the Equal Opportunities Commission within the

Economic and Social Council, the Department for Family, Children and Women within the

Ombudsman’s office, and departments for equal opportunities within the trade union

confederations).

Following last year’s election, 10% of deputies in the Chamber of Deputies are female (33

women out of a total of 345 deputies) as are 9% of senators (12 women out of a total of 140).

In the government, four out of 28 cabinet ministers are female (European Integration, Justice,

Education and Research, and Health and Family).

Disabled persons,

the elderly and isolated women are particularly at risk of both poverty and

social marginalisation.

The government’s programme has prioritised the fight against social

exclusion as a political priority and has adopted legislation establishing a Minimum Guaranteed

Income, under which the state will cover the basic living expenses of the unemployed as well as

persons earning less than the legal minimum income. In April 2001, the Law on the Public

Pension entered into force. During the reporting period, the government also took a number of

decisions concerning evaluation of needs of the elderly, criteria for identifying dependency

degrees, and definition of the type of services to be supplied to dependant persons.

Despite these developments, the fragmentation of the administrative structures dealing with

socially vulnerable sections of society is a considerable obstacle to making decisive reforms.

No less than five government bodies are involved in the provision of social assistance and the

fight against exclusion. The decentralisation of social services and social assistance has also led

to difficulties related to finding the appropriate level of decentralisation (municipalities or

counties), low levels of administrative capacity at the local level, and problems related to

financial decentralisation.

The new government has demonstrated a firm commitment to strengthen the

role of trade

unions

in social and political life. Recognising that social peace and partnership are

indispensable for implementing economic and social reforms, the government signed a Social

Pact with the social partners shortly after taking office. The main objective of this initiative was

to establish an agreed economic and social agenda (macro-economic stability, social policy,

employment, social protection and fiscal measures). The Social Pact also provides a

framework for negotiations – although important disagreements still arise and there have been

serious labour conflicts during the reporting period.

The Economic and Social Council has been created as an institution to allow social partners to

comment on legislation with a significant economic and social impact. However, to date, the

Council has not been systematically consulted. At the working level, commissions for social

dialogue have been created within all ministries and prefectures. The commissions are consulted

on draft sectoral legislation, as well as economic restructuring and privatisation issues.

Despite these initiatives, the role and the recognition of trade union activities in private

enterprises remains weak. Bipartite social dialogue at enterprise level is not sufficiently

developed – a problem that is magnified because the employers' movement remains divided.

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Minority rights and the protection of minorities

During the reporting period, a number of positive developments took place in this area. New

legislation extended the use of minority languages, and a National Strategy for Improving the

Condition of Roma was adopted.

There are over 1.6 million ethnic Hungarians in Romania and they represent the most politically

active minority group. Romanian provisions for respecting the rights of minorities are well

developed and existing policies provide extensive rights for education in minority languages.

Further developments were made during the reporting period with the Law on Local Public

Administration giving linguistic minorities, in localities where they represent more that 20% of the

population, the right to receive services from local authorities in their mother tongue. In these

localities, the law also stipulates that the agenda and decisions of the local council will be made

public in the relevant minority languages.

During the school year 2000-2001, the number of educational units providing teaching in

minority languages remained constant. A slight increase was noted in the number of students

from linguistic minorities studying their mother tongue in schools teaching in Romanian. There

were no developments with establishing a public university teaching in Hungarian, German and

Romanian (the proposed Petöfi-Schiller University) despite the fact that legal obstacles had

already been removed in 2000. However, a decision was taken to establish a private Hungarian

university, financed with the support of the Hungarian State. Courses started in October 2001

for 450 students.

Since the last Regular Report, the government has taken several major initiatives to address the

problems faced by the

Roma minority.

The most important of these was the adoption, in April

2001, of a National Strategy for Improving the Condition of Roma – which means that Romania

has met one of the key political priorities contained in the 1999 Accession Partnership. The

strategy is a comprehensive and high quality document that was elaborated together with Roma

organisations and has been welcomed by them. The strategy covers a 10-year period and sets

out a plan of measures to be taken for the first four years. The starting point of the document is

a clear admission that discrimination against Roma is a serious problem in Romania. It goes on

to set objectives that include changing negative public perceptions, improving living conditions

for the Roma, and encouraging Roma participation in all aspects of civil society. It is anticipated

that Roma NGOs will play an active role in the implementation of the strategy. At the same

time, the lack of unity between Roma organisations could pose an obstacle to the

implementation of the strategy. Important next steps will be drafting an operational plan, and

securing the necessary budget allocations.

One of the key features of the strategy is its decentralised nature. This is an important

consideration since most of the public institutions covered by the strategy (e.g. education,

police, hospitals) are managed at the local level. In order to implement the strategy local Roma

offices are being set up in each county. Staff, who are themselves Roma, have been hired for

these offices. This represents a positive development, although there are concerns that their

actual responsibilities remain unclear and that recruitment has been based on reasons other than

technical merits.

Despite these positive developments, discrimination against the Roma minority remains

widespread – although it occurs as individual incidents and is not institutionalised. Human rights

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organisations have documented instances of police harassment of individual Roma as well as of

whole Roma communities. Roma face difficulties in gaining access to schools, medical care and

social assistance. Social discrimination is often manifested in Roma being banned from public

places and, despite the fact that it is illegal, a number of job advertisements explicitly exclude

Roma applicants.

1.3.

General Evaluation

In its 1997 Opinion, the Commission concluded that Romania fulfilled the political criteria. Since

then, the country has made considerable progress in further consolidating and deepening the

stability of its institutions guaranteeing democracy, the rule of law, human rights and respect for

and protection of minorities. Over the past year, further positive developments have been

noted. Romania continues to fulfil the Copenhagen political criteria.

The efficiency of the legislature has improved considerably as has the overall functioning of

government. The reform of judicial procedures has continued and effective implementation of

new legislation on public procurement should play an important role in the fight against

corruption – although corruption remains a serious problem that is largely unresolved. Other

particular concerns are the lack of progress in carrying out a strategic reform of the public

administration and the need to further guarantee the independence of the judiciary.

Significant progress has been made in the field of human rights. Reform of the childcare system

is well under way; homosexuality has been decriminalised; and important new legislation has

been passed regarding the restitution of property and the treatment of asylum seekers and

refugees. The introduction of probation represents an important reform of the penal system and

several initiatives have been taken to address trafficking of human beings. Future reforms

should seek to modernise the Penal Code and increase the public accountability of police

officers as well as ensure the proportionality of their actions. Efforts to improve the actual living

conditions in childcare institutions should continue.

New legislation extending the use of minority languages was approved, and a National Strategy

for Improving the Condition of Roma adopted. Efforts now need to focus on the

implementation of the strategy, with the aim of effectively combating widespread discrimination,

and improving living conditions.

Romania has addressed the short-term Accession Partnership priorities related to the political

criteria by improving the conditions of institutionalised children, making progress with the reform

of childcare policy, developing a national strategy for Roma, and taking measures to provide

support to minority programmes. As regards medium-term priorities, progress has been made

towards meeting the medium-term priority related to childcare, and initiatives have been taken

to increase the Roma’s access to education. However, important actions are still needed in

other areas: the Roma strategy has not yet been implemented; anti-discrimination legislation has

been adopted but it is not yet operational; and the demilitarisation of the police has not yet

started.

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2. Economic criteria

2.1.

Introduction

In its 1997 Opinion on Romania’s application for EU membership, the Commission concluded:

“Romania

has made considerable progress in the creation of a market economy”; it

would face serious difficulties coping with the competitive pressure and market forces

within the Union in the medium term”.

This finding was confirmed in the 1998 and 1999 Regular Reports. In its 2000 Regular Report

the Commission found that:

“Romania cannot be considered as a functioning market economy and it is not able to

cope with the competitive pressures and market forces within the Union in the medium

term.”

In examining the economic developments in Romania since the Opinion, the Commission’s

approach was guided by the conclusions of the European Council in Copenhagen in June 1993,

which stated that membership of the Union requires:

the existence of a functioning market economy; and

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

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

the previous annual Regular Reports.

2.2.

Economic Developments

The macroeconomic environment has improved.

After three years of declining economic

activity, GDP growth was positive in 2000, and accelerated in the first half of 2001. Export

performance has been remarkable, but the current account deficit has been widening in 2001 on

the back of surging imports. Other indicators of external vulnerability, however, have improved

as gross international reserves increased, and Romania regained access to international capital

markets. After several years of fiscal consolidation, the deficit is targeted to decrease slightly to

3.5% of GDP. Though declining, inflation remained high throughout 2000 and the first half of

2001.

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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Main economic trends

Romania

Real GDP growth rate

Inflation rate

- annual average

- December-on-

December

Unemployment rate,

end-year

- ILO definition

General government

budget balance

Current account

balance

per cent

1996

3.9

1997

-6.1

1998

-4.8

1999

-2.3

2000

1.6

2001 latest

4.9 H1

per cent

38.8

154.8

59.1

45.8

45.7

37.2

Sep

per cent

56.9

151.5

40.6

54.8

40.7

31.2 Sep

per cent

per cent of

GDP

per cent of

GDP

million

ECU/euro

6.7

-3.5

-8.8

6.0

-4.5

-6.1

6.3

-4.4

-7.1

6.8

-2.1

-4.2

7.1 P

-3.8

-3.7

7.7 P Q1

-2,446

-1,895

-2,637

-1,382

-1,477

-1549

Jan-

July

Foreign debt

- debt export ratio

- gross foreign debt

per cent

million

ECU/euro

76.4

82.6

84.2

86.8

65.8

5,974

7,513

7,346

8,315

8,960

Foreign direct

investment in flow

- balance of payments per cent of

data

GDP

million

ECU/euro

0.9

250

3.5

1,077

4.9

1,804

3.0

980

2.8

1,114

391

Jan-

July

The political uncertainty in the months prior to the end-of-2000 elections delayed

progress on Romania’s key reform priorities.

In the closing months of 2000, privatisation

PROXY HICP since 1996 (see methodological notes)

Moving 12 month average rate of change

Source: Website of National Bank

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sales ground to a halt and the decision to cap energy prices at their August 2000 level

undermined previous efforts to strengthen enterprise sector financial discipline. As a

consequence, enterprise arrears increased dramatically during the first half of 2001. After the

election, there were increasing signs of a renewed commitment to privatisation, and two

important sales – Banca Agricola, and SIDEX – were finalised. In the summer months of 2001,

energy prices were raised, to more closely reflect production costs, and tied to the exchange

rate, to protect their real value.

Main Indicators of Economic Structure in 2000

Population (average)

GDP per head

thousand

PPS

per cent of EU

average

Share of agriculture

in:

- gross value added

- employment

Investment-to-GDP ratio

Gross foreign debt/GDP

Exports of goods & services/GDP

Stock of foreign direct investment

22,435

6,000

per cent

million euro

euro per head

12.6

42.8 P

18.5

22.4

34.1

7,121

317

P: provisional data

Romania has been losing ground in the catching- up process with the EU. GDP per

capita in Purchasing Parity Standards (PPS) as a percentage of the EU average has

fallen over the last five years,

from 32% in 1995, to just under 27% in 2000. Regional

disparities are moderate: per capita income is some 40% above the national average in the

capital region, some 20% below in the poorest region. Pension levels are very low. In June

At 1

of July

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

demographic statistics.

Agriculture, hunting, forestry and fishing.

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

At 1

of July

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

demographic statistics.

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2001, the social insurance pension was approximately € 40 a month, and represented 30% of

the net average wage. The economic activity rate and employment rate have declined somewhat

to 63.2% and 64.2% in 2000, while the unemployment rate increased slightly to 7.1% from

6.8%. Unemployment is higher in urban areas and higher for men than for women, at

respectively 7.7% and 6.4%. Long-term unemployed workers account for nearly half of all

unemployed. The declining level of income has imposed serious hardship in the population, and

the social, education and healthcare infrastructures have deteriorated, creating serious obstacles

for human capital development.

2.3.

Assessment of the Copenhagen Criteria

The existence of a functioning market economy

The existence of a functioning market economy requires that prices, as well as trade, are

liberalised and that an enforceable legal system, including property rights, is in place.

Macroeconomic stability and consensus about economic policy enhance the performance of a

market economy. A well-developed financial sector and the absence of any significant barriers

to market entry and exit improve the efficiency of the economy.

There is a growing consensus about the ultimate objectives of economic policy.

The

commitment to structural reform and macroeconomic stabilisation was reaffirmed by concluding

a new IMF programme at the end of October 2001. In September 2001, the government

approved Romania’s first Pre-Accession Economic Programme and submitted it to the

Commission in early October.

In 2000, Romania experienced a 1.6% increase in economic activity.

This ended the

recession which had caused a 13% cumulative decline in GDP since 1997. The primary source

of growth in 2000 was investment, which grew by 5.5%, along with inventory accumulation and

exports, which expanded by nearly 24% in real terms. In contrast, household consumption

expenditure fell by 1.2%.

Driven by rising domestic demand, growth accelerated during the first half of 2001.

Gross domestic product grew by 4.9% in the six months to June. Higher social transfers and

real wages led to a recovery in household consumption, which rose by 7.6%. Investment

growth accelerated to 6.7 %. However, stocks also continued to accumulate. The strong pick-

up in activity was also reflected in industrial production, which rose 10.8% year-on-year in the

seven months to July.

In recent months, labour market conditions have improved.

Over the last five years, labour

force participation has fallen from around 65% to 63%. In 2000, unemployment was 7.1%,

compared to 6.8% in the previous year. In the first quarter of 2001, it increased further to 7.7%

(ILO definition). However, as economic activity picked up in 2001, the registered

unemployment rate has fallen and private sector employment started to increase.

Monetary policy has focused on objectives other than price stability.

In order to honour its

external obligations and maintain external competitiveness, the central bank has pursued the twin

objectives of building up foreign exchange reserves and keeping the real exchange rate

competitive. However, this came at the expense of price stability, which was already hard to

achieve given the difficulty to control costs, and most notably public enterprises wages, in the

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absence of hard budget constraints. As a consequence, inflation has remained very high,

although declining. The December 2000 end of period inflation rate was 40.7%, compared to

54.8% the previous year. The twelve-month average inflation rate had fallen to 37.2% in

September 2001 from 45.7% in 2000.

After several years of significant fiscal consolidation, the deficit has stabilised.

In 2000,

the GFS-based general government consolidated deficit was 4.0.% of GDP, compared to

3.8% in 1999. The previous government successfully resisted expenditure pressures in the run-

up to the elections. The budget was also helped by a lower foreign debt-servicing requirement.

Government expenditure accounted for 35.6% of GDP, while total revenues accounted for

31.6% of GDP. For 2000, the authorities’ estimate for the ESA 95-based general government

deficit was also 3.8% of GDP

The underlying fiscal dynamics have improved in recent months.

The 2001 budget,

adopted in April, prioritised social expenditure, particularly in the areas of child allowances and

pensions, and targeted a general government deficit of 3.7% of GDP. Due to the upturn in

economic activity during 2001, tax revenues have performed well. Interest expenditure, as a

percentage of total expenditure, has fallen giving the authorities some room to increase social

outlays. In line with the improved budgetary performance, the deficit target was revised

downwards to 3.5% of projected GDP last June. Since the budget outturn for the first half of

the year was a deficit of 2% of projected GDP, the revised target implies a welcomed tightening

of fiscal policy. In line with this new stance, the deficit target for 2002 was set at 3% of GDP.

Much remains to be done to improve the transparency of fiscal policy, increase the

quality of public expenditure management, and enhance medium term fiscal

sustainability.

These problems are particularly severe at the local government level. These

issues need to be addressed to allow Romania to increase EU accession-related expenditures.

Furthermore, the government has not yet addressed the medium term fiscal challenges,

especially pensions and healthcare reform. So far government policies have been directed at

attaining short-term stability.

After improving to 3.7% of GDP in 2000, the current account deficit widened sharply

over the first seven months of 2001, when it totalled 3.6% of projected GDP.

Over the

last 18 months, export performance has been impressive. In 2000, exports increased by 22% in

(dollar) value terms. Growth remained buoyant but slowed down to 14.6% in the eight months

to August. The foundation for this strong export performance was laid in 1999 when the real

exchange rate depreciation restored external competitiveness. Export demand was also strongly

affected by developments within the EU economy. The value of imports increased by around

25% in 2000 and grew at roughly the same pace year-on-year over the first eight months of

2001. The import surge is partly the result of temporary factors in 2000, such as higher world

oil prices and a drought, which depressed agricultural production and increased food import

needs. Lately, however, import growth has been supported by rising capital expenditure and by

the looser policy mix leading to stronger household consumption.

Two figures are given for the government balance. One is based on the most commonly used national concept, and the

other is calculated according to the European System of Accounts (ESA 95), which was reported by the candidate

countries for the first time this year.

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In general, indicators of external vulnerability have improved recently.

Romania’s liquidity

position has improved considerably in recent months. In September 2001, gross reserves held

by the central bank were €4.1 billion, compared to €2.4 billion a year earlier. Romania will

easily meet this year’s external debt servicing obligations. The liquidity position has also been

helped by a more benign debt servicing profile, especially compared to the difficult year of

1999. However, in the early months of 2001 a significant proportion of the current account

deficit was financed by debt-creating inflows to the public sector, which regained access to the

international capital markets in late-2000. While external indebtedness is still low by

international standards, it has increased rapidly in recent months. In December 2000, medium

and long-term external debt was €10.8 billion, but by June 2001 the stock had risen to €12.7

billion with short term external debt slightly increasing to €454 million. This growth of external

borrowing will have to be curtailed if current account sustainability is to be maintained.

In general, the policy mix has not paid sufficient regard to reducing inflation and

maintaining the external balance.

As evidenced by the rise in non-interest expenditures, fiscal

policy has become more expansionary in 2001 against the background of a largely

accommodating monetary policy. From this point of view, the plan to tighten the fiscal stance in

the second half of 2001 and the new IMF programme are welcome developments. An

improved co-ordination of macro-economic policies, based on an effective public sector

income policy and on a tighter enterprise financial discipline, is urgently needed in Romania.

Only under this new policy framework can the central bank develop a more aggressive anti-

inflationary strategy.

Most prices in Romania are liberalised, but sporadic price controls tend to create large

distortions, which can be very costly to the economy.

The share of regulated prices in the

consumer price index is 18%, of which 9% are energy prices. However, as already mentioned,

the decision to cap energy prices at their August 2000 levels had a severe impact on enterprise

sector financial discipline. Lower domestic energy prices relative to international prices did

nothing to reduce domestic consumption, while the utilities had to pay for energy imports by

borrowing abroad with the support of state guarantees. Enterprise arrears, primarily within the

utilities sector, increased by nearly 50% during the first three months of 2001. At the end of

March, total arrears within the largest state-owned enterprises were € 3.2 billion, or 7% of

GDP. A further deterioration took place in the second quarter. The government has recently

introduced an emergency ordinance, which links management salaries to the financial

performance of the public utilities. Following a small rise in end-users electricity prices in April,

electricity, heating and gas prices were increased more substantially and linked to the exchange

rate in the summer. Nonetheless, any progress on enterprise sector financial discipline will

require that the authorities continue to increase prices further as envisaged under the new IMF

arrangement.

The private sector is still quite under-developed, with the state owned enterprises

accounting for a significant share of economic activity.

In 2000, the private sector

produced 65% of GDP. The state owned enterprises still play a major role in many sectors of

the economy, including the utilities sector, finance, and manufacturing.

The authorities have renewed their commitment to privatisation.

In the closing months of

2000, the privatisation process effectively ground to a halt. However, during the first six months

of 2001, privatisation activity started again. The government reaffirmed its commitment to sell

64 of the largest state-owned enterprises, and it has developed a broad timetable to fulfil it. The

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sale of Banca Agricola and the large loss-making steel producer SIDEX were two important

successes with a high symbolic value. In recent months, the authorities have also sold about 40

medium sized companies and more than 180 small enterprises.

The authorities have modified the administration of the privatisation process.

The new

government abolished the State Ownership Fund, the institution that had previously been

responsible for managing and privatising state-owned enterprises. It was replaced by the

Authority for Privatisation and Management of State Assets (APAPS). This new institution was

given additional legal authority to accelerate the privatisation process. The authorities decided

against modifying the existing privatisation law but are prepared to adopt a more flexible case-

by-case approach with those enterprises where there is strong investor interest. However, the

flexibility of a case-by-case approach will have to be coupled with greater transparency to

avoid opportunities for corruption.

Most of the legal framework of a market economy is already in place; however, the

institutions to implement and enforce it are either weak or have not yet established.

Regulations are frequently changed, and public officials often interpret them in a discretionary

manner. Corruption is a serious problem which has hampered the development of the private

sector. Bankruptcy legislation has only limited effectiveness, as procedures are often long and

difficult. The number of liquidation procedures during 2001 is unchanged relative to 2000.

While some progress has been made towards clarifying property rights for land, much

still needs to be done.

Many large state farms have not yet been privatised. It is still difficult to

use land as collateral, and this has limited the development of modern market-orientated

financial structures for the rural economy.

The financial system is very underdeveloped, and it cannot yet provide effective

intermediation between savers and investors.

In June 2001, total banking sector assets

amounted to only 24.7% of projected GDP, while total lending activity was only 10.4% of

GDP. The majority of commercial loans have very short maturities. Over half of all loans have a

maturity of less than one year, while only 13% have a maturity greater than five years. Mortgage

lending accounts for just over 1% of all lending activity. Around 69% of all loans are

denominated in foreign currency. In June 2001, the commercial bank interest rate spread for

non-bank clients was a massive 19%.

Although the dominance of the state-owned sector has fallen in recent years, the state

still plays a major role within the banking system.

The three remaining state-owned banks

account for 46% of total assets, while in 1998 the state-owned sector accounted for three-

quarters of total assets. By June 2001, foreign banks accounted just over 50% of total assets.

The financial sector is turning away from the damaging practices of the past.

The state-

owned banks have now been cleaned up by removing bad and dubious loans. Large directed

credits are no longer channelled through the banking system. Commercial bank loans to state-

owned enterprises account for just 10% of all lending activity. Based upon the available

information, the largest state-owned bank – BCR – seems to be profitable. The Savings Bank

(CEC) is now the most problematic state-owned bank. Its cost structure is extremely heavy.

Due to the highly inflationary environment and the considerable macroeconomic uncertainty, the

Savings Bank enjoys a high spread between government bonds (its primary investment vehicle)

and its deposits. The bank could quickly run into difficulties if interest rate spreads narrowed.

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The central bank has stopped issuing liquidity support to the banking sector.

Between

September and December 2000, the central bank extended significant credit lines to Banca

Agricola. However, these were withdrawn after the privatisation of the bank. To set a sound

basis for the future development of the banking sector, the recent government restraint from

interfering in banks’ credit decisions, the limitation of new state guarantees, and the elimination

of liquidity support by the central bank for those banks which do not pose a systemic risk need

to become permanent features of Romanian economic policy. In addition, the mandate of the

debt recovery agency should be kept limited to minimise the costs of the banking sector clean

up and reduce moral hazard problems.

The equity markets are at a rudimentary stage of development.

Romania has two main

stock exchanges - the Bucharest Stock Market and the over-the-counter RASDAQ. Their

capitalisation is very small. In August 2001, the capitalisation in the Bucharest market was €0.7

billion or just 1.7% of GDP, while RASDAQ was €1.2 billion, representing 2.7% of GDP.

Trading is generally very light, and in recent months trading volumes have declined compared to

2000. Since 1997, foreign participation in both markets has fallen.

In the area of financial-sector supervision, the picture is mixed.

Supervision within the

commercial bank sector has improved. An early warning system is now in place, and banks are

inspected more frequently. The central bank has taken a more proactive role with those banks

that break prudential regulations, issuing warning letters and sanctioning offenders. The central

bank has also recently assumed responsibility for supervising the potentially problematic co-

operative institutions and what are known as the “popular banks”. In contrast, capital market

regulation is extremely weak. The Romanian National Securities Commission is only starting to

effectively carry out all its legal responsibilities, because it is still building up its capacity.

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

union

The ability to fulfil this criterion depends on the existence of market economy and a stable

macroeconomic framework, allowing economic agents to make decisions in a climate of

predictability. It also requires a sufficient amount of human and physical capital, including

infrastructure. State enterprises need to be restructured and all enterprises need to invest to

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

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

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

higher the degree of economic integration it achieves with the Union before accession. Both the

volume and the range of products traded with EU Member States provide evidence of this.

The absence of a functioning market economy has hampered the development of

economic activity – particularly the growth of the private sector.

This often led to

economic disequilibria with high social costs. Misplaced attempts to solve the problems through

further direct government intervention eventually failed, producing cycles of stop and go

policies. The high inflationary environment has been especially damaging to private sector

confidence.

Romania’s education system suffers from a lack of resources.

In 2000, government

expenditure on education was just 3.6% of GDP. Romania has a low participation rate of

students in higher education and only 11% of the workforce has received tertiary level

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education. The amount spent on research and development has fallen from 0.8% of GDP in

1994 to 0.5% of GDP in 1998. Skill levels in the rural areas are low.

Romania does not have sufficient physical capital.

The transport infrastructure is weak and

suffers from a lack of investment. The motorway network has not increased in nine years. A

long-term programme for the rehabilitation of the main road and railways networks has now

been established, but it will have to be financed by international donors. In 2000, gross fixed

capital formation amounted to 18.5% of GDP, although this ratio was inflated by often wasteful

investments made by the state-owned enterprises. The large agricultural sector suffers from

particularly difficult problems, including an obsolete capital stock, low productivity and feeble

market institutions. Energy sector infrastructure is also in a poor state as artificially low prices

have starved firms of the funds needed to maintain and upgrade their capital.

Cumulative foreign direct investment (FDI) remains low on a per capita basis.

Nonetheless, FDI has provided a fairly constant inflow of funds, averaging 3.5% of GDP over

the last four years. In 2000, net foreign direct investment amounted to € 1.1 billion, which

represents 2.8% of GDP. In the first half of 2001, FDI flows remained constant in nominal

terms relative to the same period in 2000. The authorities have tried to improve the

administrative procedures for foreign investors. They have created a new government

department for relations with foreign investors, which will act as a “one-stop shop” for

investments above $10 million. Although the government has adopted a new investment law

which offers tax incentives to investors, the stability of the tax codes, rather than the continuous

fine-tuning of targeted incentives, holds the key to increase investors’ interest.

The new government has emphasised the importance of developing small and medium-

sized enterprises.

SMEs represent the vast majority of firms and employ around 50% of the

labour force. Most are very small and operate in trade and services. An unstable legal

environment has hindered their development. SMEs have also found it difficult to gain access to

the financial system, forcing them to rely largely on retained profits to finance their growth.

Government policy towards the enterprise sector has often directed scarce resources to

the support of the state owned sector at the expense of developing a strong private

sector.

Several large and inefficient firms have been allowed to survive with state support.

Despite poor corporate governance, unviable state-owned enterprises have been allowed to

continue their operations because of the absence of hard budget constraints, and, in many

cases, large implicit state aid, typically granted by forgiving tax arrears and other debts to the

state. Moreover, the state has not been able to stop these companies from building up very

considerable arrears to creditors, including workers, utilities and the budget. By allowing these

enterprises to continue their operations, successive governments have failed to create an

appropriate structure of incentives for a thorough restructuring of the supply side of the

economy.

However, the authorities have set up the institutional framework for monitoring and

approving state aids.

The Competition Council, which was created in 1999, now considers

each case of state aid, and assesses its impact upon the competitive environment.

As a result of strong recent export performance, the Romanian economy has become

much more open.

In 2000, exports and imports accounted for 74% of GDP, compared to

62.4% in 1999. The European Union is Romania’s largest trading partner. In 2000, the EU

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accounted for around 64% of exports and 57% of imports. Reflecting Romania’s comparative

advantage and increased wage competitiveness, the product composition of exports is changing.

Textiles now account for about a third of exports, while metallurgical products account for

about 15%. Over the last two years, the real exchange rate has remained broadly constant.

2.4.

General evaluation

Romania has made progress towards establishing a functioning market economy and although it

would not, in the medium term, be able to cope with competitive pressure and market forces

within the Union, it has taken measures that would allow to develop its future capacity, provided

that it keeps to the engaged economic reform path.

Romania has made progress towards macroeconomic stabilisation: growth has resumed and

exports have increased. The government is acutely aware of the need to implement the

programme agreed with the IMF and the Pre-accession Economic Programme. Structural

reforms have been re-launched, most notably in the area of privatisation and energy price

adjustments. The recent privatisations demonstrate a new commitment towards the

establishment of a functioning market economy.

However, there are still serious economic imbalances with high inflation and a widening current

account deficit, in a difficult social environment. The still fragile macroeconomic environment, the

uncertain legal framework and the poor administrative capacity hinder the development of the

private sector. Large parts of the enterprise sector have yet to start restructuring or are still in

the early stages of the process. Romania’s reform agenda remains considerable. The authorities

should give priority to securing macroeconomic stability by fighting inflation and halting the

deterioration of the external account. The full implementation of the programme agreed with the

IMF, focusing on reversing the causes of inflation, would permit a gradual shifting of monetary

and exchange rate policy towards inflation reduction. Enterprises’ financial discipline should be

established by halting the accumulation of inter-enterprise arrears and the provision of state

support to inefficient ventures. The removal of the burden that these practices put on fiscal

policy would allow for a better co-ordination between fiscal and monetary policy. A further

priority is to accompany enterprise restructuring and privatisation with the establishment of

sound legal and institutional foundations of the functioning market economy.

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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3. Ability to assume the obligations of membership

Introduction

This section aims to update the Commission’s 2000 Regular Report on Romania’s ability to

assume the obligations of membership - that is, the legal and institutional framework, known as

the

acquis,

by means of which the Union implements its objectives. Alongside an evaluation of

relevant developments since the 2000 Regular Report, this section seeks to provide an overall

assessment of Romania’s ability to assume the obligations of membership, and of what remains

to be done. This section is structured to follow the list of twenty-nine negotiating chapters, and

incorporates an assessment of Romania’s administrative capacity to implement the

acquis

in its

various aspects. Romania’s progress in translating the

acquis

into its official language is

assessed in a separate section.

The European Council in Madrid in December 1995 referred to the need to create the

conditions for the gradual, harmonious integration of the candidates, particularly through the

adjustment of their administrative structures. Taking up this theme, in Agenda 2000 the

Commission underlined the importance of effectively incorporating Community legislation into

national legislation, and the even greater importance of implementing it properly in the field, via

the appropriate administrative and judicial structures. This is an essential pre-condition for

creating the mutual trust indispensable for future membership.

The European Council in Santa Maria da Feira and in Gothenburg in June 2000 and June 2001

respectively recalled the vital importance of the applicant countries’ capacity to implement and

enforce the

acquis,

and added that this required important efforts by the applicants in

strengthening and reforming their administrative and judicial structures.

Building on the

assessment of Romania’s administrative capacity provided in the 2000 Regular Report, the

present Report seeks to add further depth and detail, focusing on the main administrative

structures which are required for implementing the

acquis

in its various aspects.

In the 2000 Regular Report, the Commission concluded that :

“Romania has continued to advance with the adoption of the

acquis

– although the

achievements over the last year have been mixed. In certain sectors both legal transposition and

the setting up of the necessary administrative structures are advanced. At the same time there is

a worrying lack of progress in certain key areas.

Those areas where positive developments can be noted include

company law

and

competition

where Romania has achieved a high degree of compatibility with the

acquis.

Romania has also

made significant progress with the transposition and implementation of

transport acquis

during

the last year (although the questions of fiscal harmonisation in road transport and maritime safety

still need to be addressed). Advances have been made with the transposition of the

statistics

acquis although statistical coverage for a number of areas still needs substantial improvement.

Concerning

internal market legislation,

progress has been made in the field of public

procurement and positive developments have also taken place with regard to the simplification

of the issuance of work permits for EU citizens and the adoption of a new law on social

security. Romania has also eased authorisation requirements on capital imports and has made

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progress in combating the problem of money laundering. Romanian

VAT and excise duties

are

broadly in line with the EU principles.

Despite the positive achievements noted above, there are many areas where further progress is

needed. For the

internal market,

Romania still needs to develop framework legislation on the

principles of the New and Global Approach. A number of crises in the banking industry

demonstrate that the effective supervision of financial services still has to be considerably

strengthened. Further work is required to ease the authorisations for capital exports and to

transpose the acquis on cross border credit transfers. Romanian legislation on the protection of

personal data remains inadequate and substantial harmonisation is still required in the area of

direct taxation.

In the case of

agriculture,

a major structural reform of the sector is needed. The conditions

that would allow the implementation of much of the EU agricultural acquis do not yet exist. The

lack of administrative capacity is acute and the Ministry of Agriculture is not able to either

develop the necessary reforms, or to effectively implement those items of legislation that have

been adopted. In the case of

social policy,

little legislative progress was made over the period

and further measures are needed with regard to the adoption of a new Labour Code, improving

the protection of employee rights, and extending legislation on health and safety at work. The

structures for social dialogue do exist but need to be accorded greater importance. In the

environmental sector,

in contrast to previous years, Romania has made progress with

preparing strategies for transposing the acquis but the status of approximation is still very low.

Specific cost assessments and the corresponding financial plans for implementing the

environmental acquis need to be developed. Romania’s approach to

industry policy

is not yet

either market-based or predictable and Romania still has to develop an official industrial policy

at both national and sectoral level. With

telecommunications,

there has been no substantial

progress with the transposition of the acquis and further efforts are required to develop the

regulatory framework. In the field of

justice and home affairs

positive measures have been

taken on visa policy, border management and asylum. This said, Romania still needs to adopt or

amend legislation in several important areas (the status of foreigners, the state frontiers, the

organisation of the police and the statute of police officers).

The Romanian authorities have not yet elaborated a comprehensive policy framework for

internal

financial control.

Policy guidelines still need to be developed for preventive financial

control and internal audit functions (this is particularly important at the local level where the

capacity to manage and control public funds remains weak). Substantial efforts are still required

to develop control mechanisms for pre-accession funds. National

budgetary procedures

are

weak and the medium-term programming of expenditure needs to be substantially improved.

A related concern is the ability of Romanian institutions to effectively manage the increased

levels of EU funding. A programme-oriented budgeting system needs to be developed and the

overall budget execution process strengthened. Romania should also take measures to

strengthen public financial control functions through the provision of adequate staff, training and

equipment.

The quality of the Romanian administration is very diverse. A number of ministries are well

managed and are staffed by qualified professionals. However, in general terms, the

capacity of

the public administration

to implement and manage the acquis is very limited and represents a

major constraint in the accession preparations. Despite the widespread recognition in Romania

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that this is a fundamental problem there has been little progress in developing administrative

capacity since the last regular report. The main conclusions of the 1999 report - that certain

key institutions still need to be set up, that in many key sectors (particularly agriculture and

environment) the administration lacks the required level of competence, and that there is a need

to ensure independence of regulatory and supervisory bodies - remain valid.

With regard to meeting short-term Accession Partnership priorities, Romania has made some

progress in the areas of

taxation, customs, transport

and

justice and home affairs

although

none of the priorities identified for these sectors have yet been fully met. Some, limited

progress has been made in addressing the priorities related to the

internal market,

and the

reinforcement of administrative and judicial capacity.

In the case of

agriculture,

employment and social affairs

and

environment

no substantial progress has been made.

Romania has already started to address some of the medium-term Accession Partnership

priorities.”

3.1.

The chapters of the

acquis

As indicated, the review of Romania’s ability to assume the obligations of membership that is

below has been structured in accordance with the list of twenty-nine negotiating chapters.

Accordingly, this section opens with an assessment of progress related to the so-called “four

freedoms”, the cornerstones of the internal market, and continues with a systematic review of

progress on each of the chapters, to cover the

acquis

in all its various aspects, 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

Since the last Regular Report, Romania has made only limited progress in this domain, except

for new legislation on the New and Global Approach and public procurement.

In the area of

horizontal and procedural measures,

Romania has only recently adopted

framework legislation introducing

New and Global Approach principles

into domestic

legislation but no further progress has been made over the last year in the implementation of

these principles. Nor can any significant progress be reported on the transposition of the

acquis

related to the notification procedure, interchange of data between administrations, market

surveillance, product safety and safety checks at external borders.

Very little progress can be reported on the adoption of

sector specific legislation.

In the

areas covered by

New Approach Directives,

this lack of progress is linked to the lack of

framework legislation. This has delayed the implementation of the

acquis

concerning lifts, gas

appliances, electromagnetic compatibility, medical devices, recreational crafts, legal metrology

(non-automatic weighing equipment) and, pressure equipment, as well as radio- and

telecommunications terminal equipment. New legislation on low voltage equipment and simple

pressure vessels has been adopted, which will be difficult to fully implement in the absence of

framework legislation.

As regards sectors covered by

Old Approach Directives,

the directive on wood has been fully

implemented. Some limited progress has been made in the implementation of the

acquis

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chemicals and pre-packaging. No further progress can be reported on motor vehicles,

pharmaceuticals and the Old Approach Directive on legal metrology. Romania has transposed

only part of the textiles, motor vehicles and cosmetics

acquis.

No progress can be reported on

the

acquis

on glass. As regards the issue of food safety - foodstuffs legislation (see

also

chapter 7 - Agriculture)

no new developments took place in the period under consideration.

There have been no developments on the transposition of the

acquis

on firearms and cultural

goods.

As concerns the development of Romania’s administrative capacity for the implementation of

horizontal and procedural measures and sector specific legislation the gradual improvement has

continued during the period under consideration. The Romanian Accreditation Body has signed

some multilateral recognition agreements and the Romanian standardisation institution has

continued its programme of transposing European standards, having so far transposed about

15% of European harmonised standards. However, there are still institutional weaknesses

concerning conformity assessment bodies and laboratories, which

also affect the

implementation of the

acquis

on food safety. The overall administrative capacity to implement

the

acquis

on industrial products has improved only gradually over the course of the last year.

Since the last Regular Report, no progress has been made as regards

non-harmonised area.

New

public procurement

legislation eventually entered into force on 1 April 2001 after an Act

of Parliament on the subject, adopted in 2000, had seen its entry into force postponed

repeatedly and, once entered into force, had been suspended. While this legislation still leaves

room for improvement and its protracted postponement is regrettable, it nonetheless brings

Romanian legislation much closer to the acquis in this area.

Overall assessment

On the whole, the alignment with the

acquis

on free movement of goods has been considerably

limited throughout the reporting period by the persistent lack of framework legislation on the

principles of the New and Global Approach, which has also prevented further progress on

sector specific legislation in areas covered by the New Approach Directives.

In the non-harmonised area, Romanian authorities should ensure that all legislation in conflict

with articles 28-30 of the EC Treaty is amended by the date of accession. To ensure the

principle of mutual recognition, a clause of mutual recognition should be integrated into each

piece of relevant Romanian legislation on goods by the date of accession.

As regards sector specific legislation for areas covered by Old Approach Directives, apart the

implementation of the wood directive, some limited progress can be noted in the transposition of

the

acquis

on textiles, chemicals, motor vehicles, cosmetics and pre-packaging. However,

further substantial steps are required in all these sectors, particularly in transposing the

acquis

on pharmaceuticals, foodstuffs, legal metrology and glass.

As for administrative capacity in this domain, the Romanian standardisation and accreditation

bodies) have been in place for some years and continue to function appropriately. Efforts need

to be strengthened to adopt European standards to meet the requirements for membership of

CEN, CENELEC and the European Telecommunications Standards Institute. Major efforts are

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required to improve the overall administrative capacity to implement the

acquis

on industrial

products, which remains very weak. Particular efforts will need to be devoted to re-structuring

the food control system, while abolishing the pre-market approval system for foodstuffs and

preparing both the administration and the food operators to the principles underlying the EC

food safety system. Urgent progress is required to establish conformity assessment bodies and

laboratories, and improve the capacity of those which already exist to cope with their tasks.

Furthermore, the capacity of the administration to design legislation on free movement of goods

is still limited and should be reinforced.

As regards safety checks on products at external borders, Romania still needs to establish

appropriate customs and market surveillance infrastructure as well as effective administrative

cooperation between competent authorities.

After numerous delays in the entry into force of the legislation on public procurement adopted in

August 1999, it eventually entered into force during the reporting period, but was suspended

shortly after. Meanwhile, the Romanian authorities have in May 2001 published a new

Emergency Ordinance. Although the protracted postponement of the legislation in public

procurement is regrettable and despite the fact that the legislation still requires work on

substantive issues, it will constitute a significant progress in the alignment to the acquis on public

procurement. However, the new public procurement procedures need to be implemented by

over 10000 contracting public authorities in all areas of public activity throughout the country,

such as ministries, regional governments, public utilities and schools. It is a significant challenge

to make the staff of all these institutions familiar with the new system and to ensure that the

legislation is properly and competently applied throughout the country.

Chapter 2: Free movement of persons

In the area of free movement of persons no significant developments can be recorded during the

reference period.

No progress was made on

mutual recognition of professional qualifications

or on

citizens’

rights.

As regards non-discrimination towards EU citizens in the field of education, tuition fees

for foreigners in higher education are set by a Government Ordinance at a fixed level. Fees for

Romanian students are set by the University Senates on the basis of cost calculations provided

by the National Council for the Funding of Higher Education. As a result, the fees for foreign

students are considerably higher.

In December 2000, the Romanian Parliament amended the law on the legal profession, which

increased existing discrimination against EC legal firms. This represents a move away from the

acquis

and the provisions of the Europe Agreement.

As regards free

movement of workers

no significant developments took place. While the

1999 law on work permits was amended in October 2000, the changes have little consequence

for the free movement of workers and concern the preliminary visa requirements for work

permits, and the taxes and fees applied. A bilateral agreement on free movement of workers

was concluded with Portugal in July 2001. Romania also signed a bilateral agreement on the

exchange of trainees with Luxembourg in July 2001.

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No significant developments related to the

co-ordination of social security systems

occurred

during the period.

Overall assessment

Alignment with the

acquis

has been limited in Romania. Steps have been taken to establish the

required administrative structures and these efforts will need to be maintained and institutional

capacity strengthened in all areas.

Measures to ensure mutual recognition of professional qualifications and diplomas should be

intensified, and the necessary administrative structures and education and training programmes

introduced.

It should be ensured that by accession there are no provisions in Romanian legislation which

contradict Community rules, in particular with respect to nationality, residence or language

requirements. Legislation on mutual recognition will need to include simpler procedures to allow

the provision of services.

With respect to professional qualifications obtained before harmonisation, Romania should

introduce measures to ensure that all its professionals can, as from accession, meet the

requirements laid down by the directives.

Although some progress has been made in the area of free movement of persons, in particular

with respect to equal treatment and work permits, further alignment with the

acquis

is needed.

This is particularly important with regard to the employment and residence of migrant workers

and their families.

As regards future co-ordination of social security systems, Romania needs to develop the

required administrative structures and to train the necessary staff. Romania is encouraged to

conclude further bilateral social security agreements, in particular with Member States, as these

normally rely on the same principles as the Community rules in this field.

Steps will have to be taken to strengthen public employment services with view to future

participation in the European Employment Services (EURES) network. A particular emphasis

should be placed on language training for staff.

Chapter 3: Freedom to provide services

Since last year’s Regular Report, Romania has made no substantial progress in this area - with

the exception of the field of financial services.

In the area of

the right of establishment and the freedom to provide services

(other than

financial services), legislative developments over the last year have further entrenched previously

existing discriminatory provisions concerning legal practice by EU law firms. Legislative

developments concerning other liberal professions have also introduced rules incompatible with

the Europe Agreement and the

acquis.

Romanian law continues to contain provisions

concerning residence requirements and, in the case of lawyers, prescribes particular legal forms

of incorporation and requirements to associate Romanian lawyers in registered law firms. In

addition, EU legal firms can no longer use their habitual name for practice in Romania, but must

conform to the form prescribed by Romanian law.

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No progress concerning alignment with the

acquis

self-employed commercial agents

can

be reported, since the law in force still requires residence in Romania.

In the field of

financial services,

with regard to the

banking sector,

the National Bank of

Romania has issued a number of rules bringing banking regulation more closely into line with the

acquis.

These rules concern notably accounting norms, minimum required share capital, own

funds, and liquidity levels. Progress has also been made in the implementation of legislation

approved in 2000 to extend normal prudential surveillance requirements to credit co-operatives.

In the

insurance sector

the appointment of members to the Insurance Supervision Commission

Council, even if it occurred much later than had been provided for in the relevant legislation, has

allowed initial steps to be taken to allow the independent regulator to start operations.

With regard to

investment services and securities markets,

no major legislative developments

have occurred.

Concerning the

protection of personal data and the free movement of such data

and

information society directives

no progress can be reported. In July 2001 the Government

published a law on electronic signature.

Overall assessment

Recent developments have reinforced Romanian laws that discriminate against EU citizens with

regard to the right of establishment and freedom to provide services. This represents a move

away from the

acquis

since the last Regular Report.

Concerning financial services as a whole, Romania will still have to make substantial efforts to

bring its legal framework in line with the

acquis.

However, in the

banking sector

Romanian legislation has made some progress towards

compatibility with the

acquis

and further steps forward continue to be made. Its rules, policies,

and practices follow broadly the Recommendations of the Basle Committee on Banking

Supervision and to the relevant EC directives. Despite progress in this area, the sector is still

fragile and only the consistent application of the regulatory and supervisory framework over a

period of time will re-establish confidence.

As regards the

insurance sector,

the late establishment of the Insurance Supervision

Commission (ISC), which is in charge of drafting relevant secondary legislation, has delayed the

implementation of the

acquis.

Furthermore, the situation concerning administrative capacity of

the new Insurance Supervisory Commission is unclear, and indications are that the ISC will

require considerable strengthening in terms of staff, training, and equipment. At present, a large

number of currently registered insurance companies are not expected to meet the requirements

of the legislation. While waiting for the new law to come into force, some of these companies

have continued to operate, while others do not report any activity at all. In the meantime, no

new companies have been able to commence operations in the sector. The ISC will have to

meet a considerable challenge during its start-up period to oversee all operators in the sector,

while laying the groundwork for its own operations.

In the field of

investment services and securities markets,

current legislation remains

incompatible with the

acquis.

The new law on securities supervision is still before Parliament. In

the absence of a suitable legal framework, the National Securities Commission can only make

marginal improvements in the situation, which has given rise to major crises in recent years.

Moreover, the administrative capacity of the National Securities Commission continues to be a

cause for concern. As noted in previous years, the National Securities Commission’s

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effectiveness is restricted by the limited number and experience of its staff. This reduces its

capacity to gather and process information about operators in its sector. Considerable progress

is necessary in this area - starting with the creation of an adequate legal framework.

In the field of the protection of personal data and the free movement of such data, the current

legislation remains inadequate.

Chapter 4: Free movement of capital

Progress on liberalisation measures has been limited since the last report.

As regards

capital movement and payments,

the Government approved, at the start of

2001, a three-stage approach to abolish all existing restrictions by 2004. Some initial measures

have been taken in the course of 2001 to implement this plan. Nevertheless, tight capital

controls, requiring prior authorisation for capital account transfers, remain in force. Over the

course of the year the only change introduced to the foreign exchange regime was allowing

residents to acquire foreign exchange, for the purposes of payments to other residents, and only

in the case of transactions carried out within free zones.

In the reporting period the Government adopted a law on the promotion of foreign direct

investments with significant impact on the economy. This law aims to guarantee the stability and

coherence of the legal framework for foreign direct investment and the application of

international conventions in this area.

No significant progress can be reported on the implementation of the

acquis

payment

systems.

Nevertheless, the establishment in May 2001 of the National Society for Settlement

by Transfer (TransFonD S.A.) creates the framework for the externalisation, by the National

Bank of Romania, of the inter-bank transfer of funds.

As for the related

acquis

money laundering,

although no major legislative developments

can be reported over the last year, the National Office for the Prevention and Control of Money

Laundering is operational. The Office has recruited staff and investigation and enforcement

operations have commenced.

Overall assessment

While Romania has aligned with some of the

acquis,

a comprehensive system of exchange

controls and other restrictions on capital movements still exists.

While there are no specific restrictions on inward direct investment, current laws are ambiguous

and open-ended as concerns undefined “sensitive” sectors where prior authorisation can be

imposed through “special laws.”

The Romanian Constitution forbids the purchase of real estate by non-nationals. Nevertheless,

for companies established in the country, even if wholly foreign-owned, land purchases for the

conduct of business are allowed.

Preparations for the creation of a new inter-bank payment and settlement system are, as yet, at

an early stage. Considerable work remains to be done in order to transpose the

acquis

payment systems (including the introduction of adequate and effective redress procedures for

settlement of disputes between bank and customers) and to improve the payment infrastructure.

The National Bank of Romania regulates and supervises banking and credit institutions,

operates exchange control and oversees the payment system. The National Bank has sufficient

staff and administrative capacity to ensure the effective application of legislation in these areas.

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In the area of money laundering the National Office for the Prevention and Control of Money

Laundering needs to complete the recruitment process and the acquisition of certain specialised

equipment related to enforcement. The National Office for the Prevention and Control of

Money Laundering has introduced important measures concerning the reporting obligations of

financial institutions, but revision to the current legal framework is required concerning the civil

liability of the Office in the course of investigations.

The Office is a member of the Egmont Group and connected to the Egmont Secure Web

permitting the secure exchange of information on financial transactions. The Office has signed

Memoranda of Understanding with Slovenia and Belgium on the exchange of financial

information.

Compliance with the Recommendations of the Financial Action Task Force should be ensured.

Chapter 5: Company law

In the year under review further progress was made as regards company law, accounting

regulation, and the protection of intellectual and industrial property rights.

Regarding

company law

as such, legislative developments included the introduction in May

2001 of a simplified, single procedure for the registration and authorisation of traders. In June

2001, a law providing for accelerated winding-up procedures for companies failing to meet

minimum levels of social capital was adopted.

Romania has transposed much of the content of the 4

, 7

and 8

Accounting Directives. This

process has continued throughout the year with further transposition of the 4

Accounting

Directive. Romanian legislation now provides the framework for consistent application of the

Harmonised Accounting Regulations in relation to Romanian Accounting Standards.

In the field of

industrial and intellectual property rights,

Romania ratified the Geneva Treaty

on Copyright and the Geneva Treaty on Performances and Phonograms. The ratification

instruments were deposited with the World Intellectual Property Organisation in February

2001.

Romania has also adopted legislation to ensure the protection of intellectual property rights

during customs clearing operations. Secondary legislation on the law’s application was also

adopted. As regards enforcement, staffing at the Romanian Copyright Office was recently

reduced, although this reduction was limited to posts then unfilled. Romania has a long tradition

of legislation on industrial property rights and has become a member of the International

Convention for New Variety of Plants Protection. Since the last Regular Report, Romania also

ratified the Geneva Act in the Hague Agreement on International Patenting of Industrial Designs.

In June 2001 the Romanian Parliament approved a law transposing provisions regarding the

protection of undisclosed data.

Overall assessment

As mentioned in previous years’ Regular Reports, Romania has already aligned with most of the

acquis

company law.

Further transposition is, however, necessary as concerns company

registration, Economic Interest Groupings, and provisions on the jurisdiction and enforcement of

foreign judgements in civil and commercial matters.

In the area of

accounting law,

Romanian legislation is largely in line with the

acquis.

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The body responsible for Accounting Standards is the Ministry of Finance through the

Department of Accounting Regulations. Romania does not plan to create an independent

accounting standards body before 2005, by which time it expects to have completed the

implementation of the International Accounting Standards.

In the field of

industrial and intellectual property rights,

Romanian legislation is generally

consistent with the

acquis.

The process of further alignment and transposition of the

acquis

has

continued during the reporting period and it should be pursued in order to align with the

directive on copyright in the information society and the directive on the resale right.

As regards

administrative capacity

in the field of intellectual and industrial property rights, the

Romanian Copyright Office and the Office for Inventions and Trademarks are the competent

authorities to which right-holders can present applications for intellectual and industrial property

protection. Despite considerable efforts in this area, further improvements in staffing and

budgets should be made. Financial allocations were increased recently, but taking into account

inflation, further financial allocations are deemed necessary to secure the Office a sufficient level

of resources. Overall, administrative capacity in this area is considered adequate, although

statistical reporting could be improved. Nevertheless, the Commission has repeatedly expressed

concern about weaknesses in the enforcement of legislation on intellectual and industrial

property rights.

Of particular concern is the import into Romania of pirated and counterfeit goods. Controls at

Romania’s borders continue to give rise to concerns, as demonstrated by the high percentage of

counterfeit goods in circulation. However, the statistics currently produced are insufficient to

allow a detailed assessment of trends in copyright piracy. Further progress is necessary with

implementing border controls and enhancing co-operation between organisations involved with

industrial and intellectual property rights, (the border police, the judiciary and customs

authorities). Additional training is also required for the judiciary on intellectual property rights

issues. Further efforts are needed to avoid overlapping between the institutions involved in

industrial and intellectual property rights, particularly as regards to “name” rights, where cross

checking to avoid granting overlapping registrations is necessary. The creation of an efficient

inter-institutional network is vital in making progress in the fight against piracy. Communication

and co-operation between customs, police, border police, the Ministry of Justice, and the

judiciary need to be improved and joint training programmes established.

Chapter 6: Competition policy

Romania has made some progress in this area since last year’s Regular Report.

In the field of

anti-trust

legislation, the turnover thresholds for merger notifications were

updated in February 2001. The enforcement record of the

Competition Council,

as the

national competition authority in Romania, has further developed in the past year. In 2000, the

Council Board handled 437 cases, including 2 prohibition decisions concerning vertical

restraints and horizontal co-operation. Of these decisions 18 were challenged in court.

In the field of

state aid,

the law of 1999 became operational, but no new legislative measures

were taken. The national state aid monitoring authority is the

Competition Office,

which

operates under the authority of the Ministry of Public Finance. The investigative and decision-

making body is the

Competition Council.

The

Competition Council

dealt with 72 state aid

cases in 2000. However, the state aid authorities were not consulted systematically on all state

aid measures and in some cases their opinion was not observed by the Government.

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Following concerns expressed in last year’s Regular Report concerning the law on “industrial

parks”, measures have been taken to replace the law governing the creation of these industrial

parks with legislation more compatible with existing state aid legislation and the

acquis.

September 2001, a Government Order regarding the constitution and functioning of industrial

parks repealed the previous law of 2000.

The Competition Office finalised its work on state aid reports for the years up until 1999.

Romania also presented a proposal for a regional aid map.

Overall assessment

Romania has made considerable progress in creating a legal framework in this area that is

broadly aligned with the Community acquis. However, additional efforts are necessary to

complete the legal framework and ensure its adequate enforcement.

As regards

anti-trust,

Romania’s legislation is largely in line with, and covers most of, the

acquis

provisions. However, further secondary legislation still needs to be adopted, to take

account of the Commission's new vertical restraints policy and its policy on horizontal co-

operation agreements. The Competition Council has broad powers to enforce competition rules

but will need further reinforcements- especially in the form of training and IT equipment, in order

to fulfil the tasks assigned to it. It is essential that the Competition Council could focus its

resources more effectively on cases with most serious distortions to competition. A more

deterrent sanctioning policy will also be required. Finally, general transparency, including an

improved access of the public to relevant documents should be increased.

As regards

state aids

, the existing legislation covers the basic principles of state aid control.

However, the field of application of this law is not comprehensive and numerous state aid

measures are not notified to the competition authorities. Romania should rapidly adopt the

required secondary legislation on state aids, which is currently being prepared. This is a pre-

condition to any effective enforcement activities. A significant number of unaligned aid schemes

remains such as the profit tax rate 5% on export earnings and the law on direct investment

promotion. Moreover, implementation of state aid policy in sensitive sectors is still at an early

stage. There are continuous problems with the monitoring of frequent waivers by public bodies

of the accumulated debt.

Romania has now formally adopted state aid reports for the period 1996 – 1999 but has yet to

finalise the state aid inventory. In addition, Romania’s recent proposal for the regional aid map

would allow aid intensities for regional investment aid of up to 50% net grant equivalent. In the

area of state aids, both the Competition Office and the Competition Council require further

strengthening in terms of human resources and training.

In addition to strengthening administrative capacity within the competition authorities, particular

attention should also be given to intensifying the training of the judiciary in the specific fields of

anti-trust and state aid. There is also a need to raise awareness amongst all market participants,

and especially amongst administrations granting state aids, of the policy and legislative

provisions in this area.

Chapter 7: Agriculture

While Romania has made progress in alignment with several aspects of the agricultural acquis,

restructuring of the agricultural sector has barely begun.

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In 2000, agriculture accounted for 12.6% of Romania gross value added as opposed to 14.8%

in 1999

. Agricultural employment represents 42.8% of the national labour force and around

70% of the rural labour force

The situation in 2000 and at the start of 2001 was particularly difficult for the agricultural sector

due to the severe drought, which affected the entire country. The decline in vegetable

production was particularly serious and of the order of 20%, despite an increase in cultivated

area. The fall in grain production negatively affected livestock. Numbers of cattle, sheep and

goats fell by 6% while pig numbers declined by 18%. Agri-food exports dropped by 30% in

2000 as against 1999. Exports were €337 million and imports were €1010 million. The trade

deficit in agricultural food products represented 22% of Romania’s total trade deficit.

In 2000, EC imports

of agricultural products originating in Romania decreased by 2% to €224

million. EC exports to Romania increased by 24% to €332 million. The trade balance in favour

of the Community amounted to €107 million compared to €39 million in 1999. The most

important product groups in terms of EC imports from Romania are live animals (27%) with an

increase of 40%, oilseeds (15%) with a decrease of 56% and vegetables (7%) with a decrease

of 18%. As far as EC exports to Romania are concerned, the most important sectors are meat

(12 %) with an increase of 265%, due to a strong progression of exports of pig meat and

poultry meat, miscellaneous preparations (10%) with an increase of 40%, tobacco (9%) with a

decrease of 17% and fruit (8%) with an increase of 72%.

A first round of trade negotiations with Romania was concluded in May 2000 and the results

were applied as from 1 July 2000 as autonomous trade measures pending their adoption as an

additional Protocol to the Europe Agreement (Council Regulation (EC) N°2435/2000). As a

consequence of the new agreement approximately 85% of the EC imports and 17% of EC

exports of agricultural products are exempted from duties (see

section A.b. - Relations

between the European Union and Romania).

In 2001, the allocation from the state budget for agriculture and forestry was €403 million. In

real terms, the level of domestic budget support for agriculture remained steady (about €332

million in 2001 as compared with €330 million in 2000). Some changes in the type of measures

for domestic support were decided on, and the voucher-for-inputs scheme was replaced with a

fixed cash payment of about €41 per hectare. This new scheme accounts for 61% of total

assistance but does not radically change the philosophy of last year’s voucher-for-input scheme.

It continues to subsidise the purchase of farm inputs but it targets bigger individual farms and

associations rather than small subsistence households. The severe drought that affected

Romania last year led the Government to make a large budgetary contribution for irrigation

(14% of the total budgetary support to agriculture in 2001).

Over the reporting period there has been some progress in the privatisation of agri-food

companies. By the end of May 2001, out of 637 former state-owned farms, 113 had been

privatised and 210 were in the process of being liquidated. The privatisation of the food

The source for all agricultural statistics is EUROSTAT unless otherwise specified.

Eurostat Labour Force Survey (LFS). Agricultural employment is defined in LFS terms as economically active persons

who gain a significant part of their income from agriculture.

Source: Uruguay Round Agreement definition of agricultural products, figures taken from EUROSTAT COMEXT (see

U.E 12/15: Commerce des produits agricoles 1988-2000, 1 Partie DG AGRI/ A.2 Analyses quantitatives, previsions,

statistiques, études, 2001, p. 10-57 et 86-89)

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processing industry is more advanced, and out of a total of 440 commercial companies 345 had

been privatised by the same date. Despite the adoption of a legal framework for restitution of

agricultural and forested land the actual pace of restitution was very slow. By May 2001, only

6% of claims for restitution of agricultural land and 0.03% of claims for forested land had been

processed. At the same time, the land market has started to grow and is likely to be larger than

reflected by central statistics, but Romania still has to establish an agricultural cadastre register

and ensure a fully operational land market.

Horizontal issues

Following the change of government in January 2001 there has been an increased political

commitment to the SAPARD programme and considerable efforts have been made to make up

the delay in setting up and accrediting the SAPARD Agency

(see also Section A.b. - Relations

between the European Union and Romania).

The main priorities for Romania’s rural

development policy were set in the Rural Development Plan approved by the Commission in

November 2000. The Multi-annual Financing Agreement signed in February 2001 and the

2000 Annual Financing Agreement signed in March 2001 were ratified by the Parliament. The

legal basis for the implementation of SAPARD and rural development support schemes was

approved and the SAPARD Agency was set up under the responsibility of Ministry of

Agriculture, Food and Forestry.

A decision was taken as regards the central and regional structure of the Agency including the

number and positions of staff. The Managing Authority, Competent Authority, and Certifying

Bodies were officially designated.

By May 2001 the recruitment of the SAPARD Agency staff was well under way – and the

senior positions had been filled. Training courses are being organised, the staff are competent

and motivated, and the administrative capacity of the SAPARD Agency is developing.

Nevertheless, continued efforts are needed in order to consolidate the newly created structures

and to fulfil criteria for accreditation.

In contrast to the positive developments on SAPARD, there has been very little progress with

preparations to establish the Integrated Administration and Control System (IACS). No

progress has been registered in developing the animal identification and farm registration system.

The Ministerial Order adopted last year was never published and consequently could not be

enforced.

No major progress has been made as regards the development of a land registration system,

which is a vital pre-condition for the identification of agricultural parcels.

As regards the implementation of

trade mechanisms

only limited progress has been made with

setting up the administrative structures required by the Common Market Organisations for each

specific sector. New legislation introduced a grain grading system and warehouse receipts.

However, there has been no improvement as regards regular market and price monitoring.

Progress has been made as regards protection of denomination of origin for wines, wine by-

products and alcoholic beverages obtained through natural fermentation. Secondary legislation

was approved by ordinance in February 2001 allowing full enforcement of the framework law

on wine and new administrative structures responsible for the enforcement of the law have been

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established. A list of laboratories for wine quality control has been authorised and inspectors

have been appointed in all regional inspection offices.

The basic elements of the

Farm Accountancy Data Network

(National Committee, Liaison

Agency) have not been set up.

Common Market Organisations

Since last year’s Regular Report there has been no progress in Romania as regards the

development of the horizontal structures necessary to operate the Common Market

Organisations for arable crops, sugar, specialised crops (including fruit and vegetables, plants

and flowers) or animal products. There has been little progress (with the exception of the wine

sector) as regards the introduction of a legal framework and overall administrative structures for

the establishment of the Common Market Organisations.

Rural development and forestry

Concerning

agri-environmental measures,

some progress has been made. A Government

Decision of October 2000 approved the Action Plan for Protection of Waters Against Pollution

with Nitrates from Agricultural Sources, and set up a Commission for the enforcement of the

Action Plan. The Plan proposes the identification of vulnerable zones and establishes a

framework for introducing the Code of Good Agriculture Practices.

Progress was made with the legal designation of the competent authority for monitoring and

classifying forest resources (the National Regie of Forests).

Veterinary and phytosanitary issues, including food safety

Since last year’s Regular Report some progress has been made in the

veterinary

sector.

The lack of a coherent overall strategy for adoption and enforcement of the veterinary

acquis

remains a major problem. The absence of agreement amongst different ministries is an obstacle

to reaching the necessary consent on new draft legislation.

Substantial efforts have been made to improve laboratory infrastructure for animal health and

diseases control. New laboratories have been set up and scientists have been trained in new

laboratory techniques. Preparation has started for the accreditation of laboratories for quality

control of foodstuff of animal origin. Insufficient resources have been allocated to allow

implementation of EC directives on veterinary controls for animal health and meat products at

the place of origin. In the context of the Geographical BSE Risk Assessment, Romania has been

classified in group III.

No significant progress can be reported in the field of animal nutrition.

Although the National Sanitary Veterinary Agency was restructured during the reporting period

there is no evidence of any real improvement in its functioning. Administrative capacity is low.

In the

phytosanitary sector,

considerable progress has been achieved with the adoption of

legislation in the area of

plant health, pesticide residue control, and harmful organisms.

Legislation approved in 2001 sets up measures for protection against the introduction and

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spread on Romanian territory of organisms injurious to plant and plant products. A framework

law for determining maximum pesticide residue levels of was approved in December 2000. This

was followed by the adoption of secondary legislation that is aimed at completing the

harmonisation with the

acquis.

Progress has also been made in developing the infrastructure

necessary to enforce the newly adopted laws on pesticide residues and a new Central

Analytical Laboratory for the control of pesticide residues in plants and plant products has been

established in Bucharest. Plant protection and phytosanitary quarantine activities were re-

organised in 2001 and the competent authority is now the Directorate for Plant Protection and

Phytosanitary Quarantine inside the Ministry of Agriculture. Training programmes have been

carried out for central and local staff and internships for border inspectors have been organised.

Recent investments have been made to set up a nation-wide computerised system linking the

counties’ phytosanitary inspectorates with the central administration.

As regards

food safety

(see

also chapter 1 - Free movement of goods),

Romania produced

a Food Safety Strategy in early 2001. The document outlines the systems for co-ordination

between the various official bodies involved, their roles, organisation, and staffing. Little

progress has been made with regard to upgrading food-processing establishments and

considerable efforts are still necessary.

Overall assessment

The pace of agricultural reform and alignment with the CAP

acquis

has been disappointing.

Despite some progress in

privatisation of state-owned farms,

the majority of these continue

to be state-owned and to accumulate losses. Little attention is paid to economic efficiency and

new investments in the privatisation process have not improved the economic situation of the

sector.

As far as the restructuring of the

agri-food industry

is concerned, some progress has been

made in privatisation of the food processing industry and agricultural services companies.

Regrettably, progress in

land reform

has continued to be slow and there has been no significant

restitution of agricultural and forested lands. The overall economic environment continues to be

unfavourable to the development of Romanian agriculture and the diversification of the rural

economy. Fragmentation of land remains a major problem and the lack of a land consolidation

policy perpetuates inefficient farm structures. However, a more positive development is that

markets for both sale and leasing of agricultural land are now emerging in many areas of

Romania. Legislative reforms over the past two years have stimulated the agricultural land

market, and it is significant that sale transactions, and not just lease transactions, are now taking

place in Romania.

The lack of reliable

statistics

and

regular market and price monitoring instruments

combined with the lack of competitive marketing channels weaken the government decision-

making process. It often merely reacts to interest groups’ pressures for measures that will

create a window of opportunity for increased profit margins. As a matter of priority, Romania

should carry out an agricultural census.

Progress has been made in several sectors with the

adoption of EC-compliant legislation.

However, the enforcement of legislation has proved to be difficult due to delays in adopting

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secondary legislation and a lack of financial and human resources. While some investments have

been made in the control infrastructure for animal heath and phytosanitary control, further

developments are still required to ensure appropriate enforcement of the

acquis.

Romania still

needs to establish a vineyard register and control systems in the wine sector.

As regards

horizontal issues,

The SAPARD Agency accreditation process is now at an

advanced stage. However, progress in areas such as land registration, trade mechanisms, inter-

professional organisations, quality policies and the Farm Accountancy Data Network is limited.

Romania still needs to carry out conceptual work to prepare the administrative structures and

systems required for handling the Common Agricultural Policy expenditure under the Guarantee

and Guidance section of the EAGGF.

Preparation of the administrative and horizontal structures necessary for the operation of

Common Market Organisations

is at a very early stage. The internal support policies are still

based on measures that are not compatible with the CAP and a change in agriculture policy to

achieve sustainable agriculture needs to be undertaken.

Although some legislative progress has been made, overall progress in the area of

rural

development and forestry

remains limited.

As concerns

veterinary and phytosanitary issues, including food safety,

the lack of a

coherent overall strategy for the adoption and enforcement of the veterinary

acquis

remains a

major problem. The shortage of resources allocated to the Sanitary Veterinary Agency

continues to be a major obstacle to strengthening its administrative capacity. Although an

assessment has been carried out as regards the real capacity and possibilities for implementation

of EC Directives on veterinary controls for animal health and meat products at the place of

origin, no decision on the allocation of the necessary resources has been taken.

In the phytosanitary field there has been some progress towards the approximation of Romanian

legislation with the

acquis.

However, greater efforts as regards both transposition and

implementation are still needed. Administrative capacity has been improved but remains weak.

The overall

administrative capacity

of the Ministry of Agriculture is weak. Although the

technical staff of the ministry are well qualified, the current situation is typified by an

inappropriate allocation of human resources between central and local services, understaffing, a

high turn-over of personnel, job insecurity, and limited career prospects. Further support is

required to strengthen the overall capacity of the agricultural administration to elaborate and

enforce agricultural policies compatible with the

acquis.

Particular priority should be given to

the ability to conduct economic assessments of various policy options and to prepare

administrative structures for the management of EC-funded rural development programmes. The

capacity of middle and senior management also needs to be improved and would greatly benefit

from increased job stability. Staff cuts made at the beginning of the year have weakened the

capacity of some services and agencies to carry out their mandate (e.g. the veterinary agency,

and the phytosanitary directorate). A clear policy decision needs to be taken on the outsourcing

of agricultural services whose functioning has been impaired by a lack of certainty about their

future.

The Ministry of Agriculture and its subordinate institutions need to take urgent measures to

develop administrative capacity in order to be able to implement and enforce the management

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mechanisms of the Common Agricultural Policy - in particular the Integrated Administration and

Control System, including an animal identification and registration system.

Chapter 8: Fisheries

Since the last Regular Report, significant progress in the fisheries sector has been recorded.

Concerning

resource management, inspection and control

a new law on fisheries resources,

fishery and aquaculture was adopted in April 2001 and represents a significant step forward.

The law establishes the legal framework regulating resource conservation, resource control and

management, fisheries inspection, aquaculture and state intervention for the management and

development of the fisheries sector.

The law initially provided for the setting up of the National Company for the Management of

the Fisheries Fund and the creation of a Fisheries Inspection. The main tasks of the National

Company would be to implement the national strategy for protection of fish stocks and total

annual catches Romania finally decided not to proceed with the establishment of the said

company and to establish instead 8 regional offices. Therefore the enforcement of the newly

adopted law risks being delayed. The Fisheries Inspection is in charge of monitoring the

enforcement of the law. Inspectors have been given considerable additional powers, although

pending the full enforcement of the new law, all inspections and controls continue to be carried

out according to the procedures set out in the Ministerial Order on the matter issued last year.

As regards inspection operations, good progress has been made: in 2000, 102 infringements

were detected, and the Coast Guard and the Fishery Inspection opened 57 criminal

investigations.

The newly-adopted law also introduces measures for conservation of fish stocks. These include

the introduction of total allowable catches, limits on the capture of small fish, forbidding certain

devices and practices, and setting up minimum fish landing sizes.

As for

structural actions,

the new fisheries law introduces a Fishing Vessel Register that is

separate from the General Fishing Register. Pending the approval of the necessary secondary

legislation, previous provisions establishing a register office remain valid although no new

records have been entered into the database. Progress has been made over the reporting period

with providing the register office with basic IT equipment and with training staff. All vessels will

have to be measured in accordance with the 1969 London Convention by the end of 2001.

There were no specific structural actions in the fishing industry. Significant progress has been

made in the privatisation of fishing farms.Concerning

market policy,

no significant development

can be recorded. The supply of fish in Romania is channelled through several distribution

channels. Some of the companies are vertically integrated, covering all stages from fishing to

retailing. There was a slight increase in 2001 in the number of fish and fish products' storage

facilities (121) as compared with 1999 (103). Three professional associations have been set up

representing respectively the interests of caviar producers, the Danube Delta fishermen and the

Black Sea fishermen.

As concerns

State aid to the fisheries sector,

support has been given to preserve animal

genetic heritage and covering,

inter alia,

freshwater fish. In total, the new measure concerns

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ten farms and research institutes. No other State aids for the fisheries sector exists. In July

2001, legislation was adopted to support Romanian Black Sea fisheries via VAT exemptions

for diesel oil. As regards

international fisheries agreements,

Romania is party to several

international fisheries conventions and is a member of the General Fisheries Commission for the

Mediterranean. Over the reporting period, Romania withdrew from the North-western Atlantic

Fishing Convention (NAFO). Negotiations have continued on a new convention for fishing in

the Black Sea.

Overall assessment

Despite good progress achieved with regard to legislation, considerable further work and

investment is still needed, especially in terms of administrative structures, for Romania to achieve

compliance with the

acquis.

Considerable efforts are needed to strengthen administrative structures that, at present, are only

partially able to implement the common fisheries policy. The institutional set-up needs to be

streamlined and some administrative responsibilities still need to be clarified between the

Ministry of Agriculture and the Ministry of Waters and Environmental Protection. The Fisheries

Department within the Ministry of Agriculture, although recently reinforced, remains

understaffed.

In the field of resource management, inspection, and controls, Romania already has a licensing

scheme for marine fishing vessels. Licences specify the type of fishing, allowed gears and area

of operation. The newly adopted fisheries law brings the Romanian legislative framework largely

in line with the

acquis.

However, the enforcement of the law and the effective creation of the

Fisheries Inspection, and the National Company will depend upon the adoption of secondary

legislation. This should therefore be treated as a priority.

Control actions have intensified but fisheries control in Romania is still weak. No full-time

enforcement service exists and the inspectors carry out many other tasks. More emphasis

should be put on training fisheries inspectors and providing appropriate equipment, as well as on

increasing the number of inspectors for controlling sea fisheries.

Development of a research strategy remains among Romania's short-term priorities in fisheries.

As for structural actions, primary legislation regarding the Fishing Vessels Register is now in line

conformity with EC requirements, although secondary legislation is still needed and sufficient

resources should be allocated for implementation of this legislation. The process of reforming

the fisheries administration should be accelerated.

As regards market policy, no market intervention mechanism for fish products has been

established so far. While there has been some progress as regards the establishment of

producer organisations (there are now five), there is no indication as to their compliance with

the EC conditions for recognising such organisations. Romania still needs to set up a market

monitoring instrument and improve the collection of statistics.

Chapter 9: Transport policy

Romania has continued to make good progress in harmonising its legislation.

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As regards

Trans-European Transport Networks,

Romania has continued to develop and

rehabilitate its infrastructure. However, considering the costs involved, the full rehabilitation of

the road network to make it suitable for lorries with 11.5 tonnes axle-weight will be a long-term

objective. Romanian plans are restricted to the rehabilitation of part of its national road

network.

As regards

land transport,

in the area of

road transport,

progress has been achieved in the

field of technology and safety, with a Government Decision approving the gradual application of

the provisions of the European Agreement for the road transport of dangerous goods and in the

field of weights and dimensions, including a Government Ordinance on the legal arrangements

relating to roads. No progress has been made with transposition of the

acquis

on recording

equipment and speed-limiting devices.

Only limited progress can be reported in the field of fiscal harmonisation: Romania has

submitted a plan to gradually phase out the existing discriminatory practices and has adjusted

tariffs at Giurgiu-Ruse bridge to make them less discriminatory. That being said, the new user

charge system announced by Romania for 1 January 2002 will continue to discriminate in

favour of Romanian national operators performing domestic transport operations.

The road transit agreement for the carriage of goods was signed with Romania in June 2001,

and should enter into force by the beginning of 2002. Its implementation will result in an

increased number of transit authorisations for both Romania and the EU. In October 2000

Romania signed the European Agreement on International Occasional Carriage of Passengers

by Bus (INTERBUS). Its implementation will result in partial harmonisation with the road

passenger transport

acquis.

As far as the

railways

sector is concerned, several activities such as maintenance and ticket

selling have recently been contracted out from the former freight and passenger transport

companies. The freight transport sector is fully liberalised, five different operators have been

licensed, and subsidies are no longer provided. With regard to passenger traffic, the 8 (newly

created) regional companies were re-merged with the national passenger company. The main

reasons for this decision were that the public service obligation compensations from local

budgets and the division of costs and revenues between various operators were not functioning

properly.

In the

inland waterways

sector, no progress has been registered as regards alignment of

Romanian vessels with EC technical requirements. Since this sector suffers severely from the

present blockage of the Danube, the Romanian authorities have decided to wait until the

economic situation improves before taking any decision.

No major developments have been registered in the field of

combined transport,

mainly due to

the financial implications of promoting this mode of transport .

As concerns

air transport,

Romania has adopted legislation which partly transposes the Joint

Aviation Requirements and covers certification procedures for aircraft, additional navigability

requirements, noise produced by aircraft, minimum equipment of civil aircraft and rules for

international air transport. Romania also became a full member of the Joint Aviation Authority in

December 2000. The Civil Aviation Inspectorate, which carries out technical investigation of

civil aviation accidents and incidents, has been separated from the Directorate for Air Transport

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within the Ministry of Public Works, Transport and Housing. It is now directly subordinated to

the Minister.

The privatisation of TAROM, the national air carrier, was launched at the end of 2000 but

failed: no offers were received. Romania has therefore given up the idea of privatisation in the

short-term and decided to restructure the company. The success of this operation will ultimately

depend on the willingness of the Romanian authorities to implement drastic measures. Romania

has recently demonstrated a reticence to adopt the

acquis

on the licensing of air carriers, fearing

that this would result in non-Romanian control of TAROM.

As regards

maritime transport,

Romania has made considerable progress on the legislative

aspects, and has adopted Governmental ordinances on: safety of life at sea, the tonnage

measurement of ballast spaces in segregated ballast oil tankers, standards of training,

certification and watch-keeping for seafarers, methodological norms for international maritime

traffic, oil pollution preparedness, response and co-operation in case of hydrocarbon pollution,

civil liability for oil pollution damage, the international convention on rescue, and minimum

standards for merchant shipping.

The main problem in this sector concerns safety issues due to sub-standard vessels operating

under the Romanian flag. The authorities have therefore undertaken a policy of “cleaning” their

national shipping registry and the total number of vessels flying the Romanian flag has decreased

to 48, out of which only 14 belong to state-owned companies. The institutions involved in the

implementation of the port and flag State controls are currently being reorganised in order to

ensure improved co-ordination. Unfortunately, these positive developments have not yet

resulted in acceptable detention rates: according to 2000 statistics under the Paris

Memorandum of Understanding, the percentage of Romanian flag vessels detained following

port State control was still very high: 19.1%, even though a significant decrease compared to

1999 (29.6%) and 1998 (20.9%). This compares to an average for EU-flagged vessels of

3.9% in 2000.

Overall assessment

Considering the overall level of transposition, the main issue over the coming years will be the

strict implementation of the recently adopted legislation, particularly considering the financial

resources that will be necessary for the heavy investment needed to meet the standards required

by the

acquis.

In the short-term, Romania should concentrate on three key issues where

concrete results have not yet materialised: fiscal harmonisation in road transport, maritime safety

and restructuring of TAROM.

As regards Trans-European Transport Networks, Romania is implementing its long-term

rehabilitation plan and will only be able to speed up this process when the global economic

situation improves, allowing the country to invest additional financial resources in infrastructure.

On road transport, the operators have made considerable efforts to adapt their fleet to EC

norms. The main difficulty in Romania is the intentional maintaining of certain discriminatory

tariffs and charges in favour of Romanian hauliers. Although plans to gradually phase out these

practices are becoming clearer, no concrete improvement has been registered on the ground

with the exception of tariff adjustments at the Giurgiu-Ruse bridge. In addition, Romania needs

to develop the administrative capacity for enforcing the road transport

acquis.

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As regards railways, Romania is in line with most of the EC requirements.

Concerning inland waterways, Romania has decided to postpone all reforms until navigation

along the Danube restarts. This is particularly worrying as Romanian vessels are already far

from complying with EC technical requirements and this policy will result in additional delays in

adapting the Romanian fleet.

Concerning air transport, Romania has made significant efforts to transpose the

acquis.

The

main remaining problem is the restructuring of TAROM. According to a recently carried-out

assessment, TAROM could become profitable by 2005 if properly restructured. A restructuring

plan has been drawn up and a set of measures intended to cut losses have been identified.

However, stronger political commitment to implement the recommended restructuring measures

is still required.

As regards maritime safety, Romania is currently taking measures to solve the outstanding

problems. However detention rates remain very high and Romania should intensify its efforts.

Priority should be given to the reorganisation of the institutions involved in port and flag State

controls in order to clearly define their responsibilities and avoid the present lack of co-

ordination.

Chapter 10: Taxation

Since the last Regular Report Romania has made some progress, particularly with regard to

excise duties.

In the area of

indirect taxation,

Romania has continued to align its legislation on excise duties

with the

acquis.

The specific duty on cigarettes was increased in March 2001, bringing the total

duty on the most popular price category to 45% (although this is still below the present EC

minimum of 57%). The Emergency Ordinance from 2000, providing a 50% reduction on

excises on alcoholic products for producers without outstanding liabilities, was abolished. This

removed an important area of conflict with the

acquis.

An Emergency Ordinance from

September 2001 established a single excise duty rate for all kinds of alcohol and alcoholic

beverages. No progress was made on the alignment of VAT legislation.

No progress was reported as regards

direct taxation.

The reduced tax rate of 5% on profits

made from exports (instead of the normal profit tax of 25%) remains in force, even though this

measure appears to contravene Romania’s WTO and Europe Agreement obligations.

As regards

administrative co-operation and mutual assistance,

Romania has continued to

modernise its tax administration. The National School of Public Finance has developed training

programmes covering most aspects of tax administration. IT-systems have been introduced to

improve revenue collection and to support control and audit activities.

Overall assessment

Romania has continued, albeit at a slow pace, to align its legislation with the

acquis.

Limited

results have been achieved in modernising the tax administration.

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Significant alignments are still needed in the area of VAT as regards the taxable scope, VAT

refunds, exempt transactions and zero rates.

While some progress has been made concerning excise duty levels, Romanian legislation on

excise duties still requires extensive adjustment with regard to the structure of the duties,

exemptions, and the applied rates (which remain much lower than EC minimum levels). The

taxable scope of mineral oils should also be aligned with the

acquis.

As regards direct taxation and the directives on administrative co-operation and mutual

assistance, full transposition is still required. The setting up of national IT systems compatible

with EC systems should be given priority.

It will be important to ensure that existing and future legislation complies with the principles of

the Code of Conduct for Business Taxation.

Despite the efforts made during the reporting period the administrative capacity of Romania’s

tax authorities remains weak.

The Romanian administration has given a commitment to develop a Code of Ethics by mid-

2003. In order to address issues related to corruption, and to improve administrative practices,

the application of this code should be brought forward.

Chapter 11: Economic and Monetary Union

A detailed assessment of Romania’s economic policy in its various aspects has been given

above, in the Chapter discussing the economic criteria (B-2). Therefore, the present section is

limited to a discussion of those aspects of the Economic and Monetary Union

Acquis

- as

defined by title VII of the EC treaty and the other relevant texts - which candidate countries

should implement before accession, i.e. the prohibition of direct public sector financing by the

central bank, the prohibition of privileged access of the public sector to financial institutions, and

independence of the national central bank. As to the process of liberalisation of capital

movements, upon the completion of which compliance with the EMU

Acquis

is conditional, this

aspect has been covered above, in the section on

Chapter 4 – Free movement of capital.

Since the last Regular Report, there have been no significant developments with regard to

alignment with the EMU

acquis

in Romania.

Romanian legislation still allows for the possibility of

direct public sector financing by the

Central Bank

though an overdraft facility. Public authorities made only very limited use of

financing by the National Bank of Romania during the course of 2000 and no such cases have

been reported during 2001.

No specific developments can be reported regarding

privileged access of the public sector

to financial institutions.

Romania’s legislation already guarantees a very high degree of

independence for the Central

Bank.

This legislation has remained unchanged over the last year.

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Overall assessment

Romania will participate in EMU upon accession with the status of a country with a derogation

under article 122 of the EC treaty. It will need to implement the necessary changes to its

institutional and legal framework by the date of accession.

Romania has transposed a significant part the

acquis

on Economic and Monetary Union, but

has not yet fully aligned its legislation with the

acquis.

Further changes to Romanian legislation,

concerning for example the elimination of direct public sector financing and the full

independence of the National Bank, will be necessary in order to achieve this goal.

Chapter 12: Statistics

Romania has continued over the past year with the gradual implementation of the statistics

acquis.

The new statistical law has helped strengthen the mission and organisation of the statistical

system in Romania. Meanwhile, Romania’s

statistical infrastructure

has also undergone

significant changes during the reporting period. In the context of a general restructuring of the

public administration, decision-making processes in the National Institute for Statistics were

simplified and the number of staff was cut by 20%. The National Institute for Statistics now has

436 posts at headquarters and 1381 posts in its territorial units. There are now 34 directorate

generals at country level and 8 regional statistical directorates, one for each of Romania’s main

regions. It is too early to assess the full impact of this reorganisation, although it appears not to

have had a negative impact on the National Institute for Statistics’ ability to carry out its core

tasks.

The Ministry of Development and Prognosis is in charge of the National Institute for Statistics.

The National Institute for Statistics co-operates closely with line ministries, the National Bank of

Romania and other administrative bodies, which supply the National Institute for Statistics with

data on a regular basis. A Co-ordination Council for Statistics Activities, chaired by the

National Institute for Statistics' president, advises on the development of the Romanian

statistical system. The National Institute for Statistics is financed on the state budget.

Demographic and social statistics

have been brought further in line with EU practice

regarding the quarterly labour survey and the multi-functional sample of territorial units.

However, Romania has postponed to 2002 the population census, which was originally

scheduled for March 2001.

Romania has continued to align

regional

statistics with the

acquis.

The creation of 8 regional

statistical offices should facilitate the collection of data at NUTS II level. Some regional data,

for example business statistics, have been made available starting in 1998. Regional data in a

number of other areas, such as population, GDP and social conditions are being collected and

fed into the system on a regular basis. More efforts are required to create a coherent regional

collection and storage system for statistical data.

Romania has also made progress over the last year in the field of

macro-economic statistics.

ESA 95 methodology was used for the first time for the 1998 National Accounts. The

Consumer Price Index has been brought closer to EU practice by the introduction of annual

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updating of expenditure weightings. Last year Romania completed its first fiscal notification and

submitted it to the Commission, although the notification is not yet in line with EC requirements.

The National Institute for Statistics should try to maintain an adequate number of staff with the

specific skills required for the elaboration of macro-economic statistics.

Concerning

business statistics

Romania has set up a sampling base of industrial companies in

line with the

acquis.

A pilot survey on PODROM 2000 was carried out during the first half of

2001. Sectoral statistics for industry, construction, trade and services have also been brought

closer in line with the

acquis

during the past year. A structural business survey is being carried

out at regional level. There are no new developments to report concerning tourism statistics.

In the area of

transport statistics

Romania started to collect data on railways and inland

waterway traffic in 2001. However, there is still a need to improve the statistical coverage of

motor vehicle use and maritime transport.

As concerns statistics on

external trade

Romania was connected to the foreign trade database

of EUROSTAT (COMEXT) at the beginning of 2001.

In the area of

agricultural statistics

a micro-census on agricultural holdings was carried out in

October 2000 with the goal of establishing a sampling frame for the first structural survey in

agriculture (planned for December 2002). However, significant efforts are still necessary to

bring agricultural statistics in line with the

acquis.

No significant progress can be reported on

forestry and fishery statistics.

Overall assessment

Romania is quite advanced in the field of statistics. However, there are still shortcomings, in

particular concerning agricultural statistics (a general agricultural census is not planned until end

2002) and tourism statistics. These are the same areas which the 2000 Regular Report

identified as weaknesses. The one-year delay in carrying out the population census is also

disappointing.

There is room to improve the administrative capacity of Romania’s statistical system, in

particular as concerns the relatively low qualifications and relatively high turnover of staff.

Adequate resources need to be made available to further strengthen statistical capacities,

including at regional level.

Chapter 13: Social policy and employment

Mixed progress was made in this area since the last Regular Report.

Pending the adoption of a new Labour Code no major legislative development can be reported

in the field of

Labour Law,

although Romania did ratify the ILO Convention on Child Labour.

In the field of

equal treatment for men and women,

slow progress in transposition and

enforcement of the

acquis

is a cause for concern.

A National Action Plan on equal opportunities was adopted in December 2000. It identifies

priority areas of intervention according to the European strategy model: legislative framework,

social rights, economy, decision-making, and civic awareness. While the National Action Plan is

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a welcome development it does not appear to have been followed by any implementing action

and it is essential that the Plan is adequately financed if it is to have any impact. Other than the

National Plan, there has been little progress in improving the position of women on the labour

market.

In the field of

health and safety at work

initiatives include a clearer definition of different

categories of employers and the requirement for specific health and safety norms for certain

economic sectors. The Government has also established the methodology and the criteria for

defining “special conditions” in work places.

The administrative capacity of the Labour Inspectorate remains weak. There is a scarcity of

funds, and a serious shortage of qualified staff. The Labour Inspectorate has been allocated

239 staff at the central level and 2,570 regional staff, but 40% of the central posts and 20% of

the regional posts remain vacant. The creation of a centre for training and re-training labour

inspectors is a welcome development.

public health,

legislation on the labelling of tobacco products has been adopted which

partly transposes the

acquis.

No measures have been taken on the maximum tar yield of

cigarettes. No new measures have been taken related to epidemiological surveillance although

the establishment of a functioning surveillance system has been initiated.

With a view to stabilising the

social dialogue,

the Government signed a social pact with trade

unions and employers' confederations, which sets common social, economic, and legislative

priorities. Secretaries of State responsible for, amongst other things, the relationship with the

social partners have been appointed in all ministries. In a separate initiative, tripartite social

dialogue commissions, with consultative power, were established at the sectoral and territorial

levels. Despite these developments, no progress can be reported concerning bipartite social

dialogue and workers' participation at enterprise level.

The level of unemployment increased to 7.0% in 2000. Employment in agriculture is particularly

high in Romania (45% in 2000) and is increasing. At the same time, illegal working is

widespread.

Romania and the Commission have launched the Employment Policy Review in order to

examine progress in adapting the Romanian employment system so as to be able to implement

the European Employment Strategy in line with the Employment Title. Work on a Joint

Assessment Paper started in May 2001. The preparation of a National Plan for Employment is

also under way.

The National Agency for Employment has been designated as the body responsible for the

implementation of

European Social Fund (ESF)-type

projects. However, since the Ministry of

Development and Prognosis is formally responsible for the programming and implementation of

ESF-type programmes, in the framework of pre-accession support, the overall coherence of

the system remains unclear. Other than this, no progress can be reported concerning

preparations for administering the ESF.

Social protection

and social assistance were presented as major political priorities in the new

government’s programme and some progress has since been madein addressing them. A

Commission for the Fight against Poverty and Social Inclusion has been set up. This

Commission will report directly to the Prime Minister. In July 2001, the law creating a minimum

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guaranteed income was adopted. The law includes provisions covering additional allowances

such as heating allowances, and allowances for childbirth. In a separate development, the

National Solidarity Fund was consolidated into the national budget.

Following an agreement with the major trade union confederations, the Government amended

the law on public pensions. The main changes include lower retirement ages and revaluation of

pension points. The government has also defined priorities for provision for the elderly as well

as norms for home-care services. Local authorities are responsible for the provision of these

services but ensuring adequate budgetary transfers to the local level remains a problem.

The issue of the financial sustainability of the pension system has begun to be addressed through

better collection measures and the overall situation has improved slightly, mainly due to transfers

from the unemployment budget to the social insurance budget. However, the question of social

contributions remains unresolved and undeclared working combined with the non-payment of

social insurance contributions by many employers has led to a serious deficit in the social and

unemployment budgets.

As regards

anti-discrimination,

no further progress can be reported.

Overall assessment

While Romania has advanced in some areas, considerable efforts are still needed to align with

the social policy

acquis.

The approval of a new Labour Code is a particular priority. Further work is also required to

align Romania's legislation with the

acquis

on health and safety at work and improving the

capacity of the Labour Inspectorate should be dealt with as a matter of urgency.

On equal treatment for women and men, substantial work is required to align and enforce the

acquis.

On public health, some progress can be recorded as regards tobacco directives but further

steps need to be taken to comply with the new

acquis

on tobacco. Efforts to establish the

national surveillance system for communicable diseases in line with the Community Network

should be stepped up.

Basic indicators, such as high infant mortality and low life expectancy, demonstrate the low level

of public health in Romania. While reform of the health care system is one of the Government’s

priorities, the budget allocation to the health sector, measured as a share of GDP, is far lower

than EU levels. This lack of resources limits the delivery and quality of health services. Romania

should therefore continue with its health sector reforms and a greater emphasis should be placed

on strategic planning of human and financial resources in order to make efficient use of scarce

public funds. Ensuring equal access to basic health care should be one of the Government’s

objectives.

Despite some recent progress, social dialogue is still not given sufficient importance and the

Economic and Social Council is repeatedly by-passed in the decision making process. Efforts

are required to promote and strengthen bipartite social dialogue structures especially at sectoral

level. Social dialogue in the public sector remains inadequate. At enterprise level, social dialogue

mechanisms and worker participation in works councils should be improved. The Government

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will need to help the social partners to develop their capacity before they can play an active role

in the EU context.

As regards employment, necessary re-structuring of the economy will pose further challenges on

the labour market. Therefore, finalising a Joint Assessment Paper and approving a national

employment strategy should be considered as priorities. Romania should further develop an

active labour market policy, develop the capacity of the National Agency for Employment, and

strengthen the administrative capacity of the local employment offices in order to improve their

provision of services.

As regards preparation for participation in the European Social Fund, Romania should use the

expertise gained with ESF-type projects in order to fully benefit from the European Social Fund

after accession and to establish links with the European Employment Strategy and the Social

Inclusion Process.

Increasing poverty and the risk of social exclusion of different categories of the population

(including abandoned children, young unemployed, families of unemployed, single parent

families, homeless families, and the Roma population) is a major challenge facing Romania.

Sustained efforts are required to reform social assistance which is currently hampered by

fragmented administrative structures and the confused decentralisation of resources and

responsibilities to the local level.

The fight against exclusion, as laid down in Article 136 of the Treaty establishing the European

Community, is part of the objectives of EU social policy. As decided at the Lisbon and Nice

European Councils, policies to combat social exclusion combine commonly agreed objectives at

the EU level and national action plans. The Göteborg European Council in June 2001 invited

candidate countries to translate the Union's objectives of promoting social inclusion into their

national policies.

Legislation on preventing and sanctioning all forms of discrimination does exist and contains the

basic principles of the

acquis

- equal pay, equal access to employment, training, promotion and

working conditions. However, this law is not yet applied due to the lack of implementing

legislation. Efforts should continue to ensure alignment with the acquis on anti-discrimination

based on Article 13 of the EC Treaty.

Chapter 14: Energy

During the reporting period the energy sector has been subject to contradictory decisions which

led to an inconsistent evolution. The first half of 2001 was typified by the blockage of reforms

and even steps backward. This contrasts with positive developments, in particular as regards

pricing, that occured during the second part of 2001. Overall progress has therefore been

limited.

Concerning

security of supply,

no progress has been registered. The

acquis

has still not been

transposed and there is no reliable oil stock monitoring system. On this point, following

clarification with the competent Romanian authorities, it appears that the present level of stocks

of oil and oil products corresponds to over a third of the required level of consumption, while

the storage capacity already meets the requirements of the

acquis.

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competitiveness and the internal energy market,

there have been major developments

over the reporting period - not all of them positive. A long-awaited “National Strategy for

Energy Development” was adopted in June 2001. This document mainly focuses on energy

production (especially electricity and heat), and proposes an extensive rehabilitation and

investment programme, with little mention of how to secure the necessary funds. It does not

address core issues such as demand-side management, improvement of the financial health of

energy utilities, sectoral restructuring and regulation, and energy pricing. In its present form the

strategy is not an adequate basis on which a competitive and market-oriented energy sector can

be developed.

In the

electricity

sector, the market openness has reached15%, with licensed suppliers and

eligible customers. In practice, the contracts signed between licensed suppliers and eligible

customers amount to 8%. For the first months of 2001, electricity prices were frozen and were

only increased in the early summer by 20% compared with last year. However, the present

prices cover only around 85% of production costs. ANRE, the national regulatory authority,

has performed a reasonable amount of work despite the fact that it is understaffed with only 65

employees.. In particular it has elaborated secondary legislation to strengthen the electricity

market. Since December 2000, ANRE has been brought under the control of the Ministry of

Industry and Resources, which now plays an active role in the setting of electricity prices.

A more positive development is the restructuring of the distribution and transport utilities.

Electrica, the distribution company, was reorganised into 8 regional branches and one service

subsidiary in June 2001 (reversing a reorganisation in 2000 that had set up 19 branches of

limited size, which made individual branches less attractive to private investors). The

maintenance activity of the electricity transport company Transelectrica has been contracted out

As regards energy production, despite its worrying financial situation, Termoelectrica has only

been subject to limited reorganisation: 8 plants have been closed down for lack of efficiency and

there are plans to transfer several heating power plants to local municipalities.

Concerning the interconnection to the Western European UCTE (Union Co-ordinating the

Transport of Electricity) electricity networks, two 400 kV connections with Hungary and

Ukraine have become operational. Tests have started with a view to a future interconnection

with UCTE.

The

gas sector

has also been subject to considerable shifts in policy during the past year.

Whereas the market used to be open at a rate of 15% with licensed suppliers and eligible

customers, the Government suspended all bilateral contracts in October 2000. In July 2001, it

re-opened the sector at a rate of 10% and the regulatory authority selected 18 new eligible

customers.

The gas utility ROMGAZ was re-established in 2001 by merging the gas production and

underground storage companies (in 2000 it had been unbundled into five companies responsible

for transport, production, underground storage and distribution in the south and in the north of

Romania). The Government initially kept the price of indigenous gas production artificially low

with most of it directed to household customers. This had an effect similar to cross-

subsidisation: household customers paid nearly half the price that industrial customers paid. In

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mid-August 2001, a single regulated price for all gas consumers was established, reducing

greatly this price distortion and ensuring cost recovery.

As for legislative harmonisation, ANRGN, the regulatory authority for the gas sector, has

elaborated secondary legislation in order to facilitate the establishment of the gas market in

Romania. With 51 employees, ANRGN is understaffed.

Although it is difficult to obtain precise figures on energy bill collection rates the situation seems

to have improved slightly with a collection rate around 85%. However, this still significant level

of non-payment, combined with an electricity price that does not cover production costs

worsens the financial situation of the utilities and continues to endanger the whole sector.

Because of cash flow shortages, the utilities have to borrow at high costs on the international

market to pay their suppliers. These loans worsen their financial situation, and ultimately the

Government has to intervene to take over these debts. As an illustration, the Government had to

write off the penalties (about €450 million) and to reschedule the debt (also about €430 million)

of 13 energy companies or utilities in April. Payment rates for the electricity produced by

Romania’s nuclear power plant have, however, improved to a level whereby Nuclearelectrica

no longer needs to resort to budgetary help.

In the sectors of

oil

and

solid fuels,

no major developments have been recorded.

As far as

energy efficiency

is concerned, the efficiency of the existing network, and in

particular the heating systems, is very poor. The energy intensity of the economy is very high

and has been estimated at between two and four times that of EU member states. Legislation

has been adopted on energy efficiency requirements for washing machines, washing-drying

machines and refrigerators. More importantly, a law for “the efficient use of energy” providing

for the establishment of the National Energy Efficiency Fund has been adopted. However,

detailed rules for the implementation of the law have not yet been elaborated, and the budget

devoted by the Government to the fund is very limited (€2.5 million for 2001). Moreover, the

enforcement of the law is the responsibility of the Romanian Agency for Energy Conservation,

which suffered a severe reduction in staff numbers over the reporting period and therefore has

limited administrative capacity.

In the field of

nuclear energy,

Cernavoda unit 1 (a CANDU unit of Canadian design) provides

9-10% of the country’s electricity. The government has declared the completion of the second

unit (CANDU type 700 MW) a national priority. This second unit is expected to be operational

by 2005 – 2006.

The Nuclear Safety Authority (CNCAN) has been returned to the control of the Ministry of

Water and Environmental Protection. CNCAN can now concentrate on regulatory issues since

the Environmental Radioactivity Surveillance Networks have been transferred to the local

Environmental Protection Agencies. CNCAN has 80 employees, but salaries remain very low

when compared with employees in the nuclear industry.

Overall assessment

The Romanian energy sector has been characterised by a succession of reorganisations and

contradictory decisions, which have finally resulted in an overall limited level of alignment with

the energy

acquis.

This was the consequence of the lack of a clear medium-term vision for the

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energy sector - as illustrated by the limited scope of the energy strategy that was produced. This

instability and lack of direction has slowed down the reform of the Romanian energy sector. In

order to stabilise the sector and to restore the confidence of foreign investors, Romania should

elaborate a clear medium-term policy for restructuring the energy sector, establish annual action

plans, and strictly implement these programmes.

In the electricity sector, price setting is not subject to market rules. Prices still do not reflect the

production costs and therefore the financial situation of the utilities has become very serious.

This is all the more worrying as no clear programme yet exists to restructure the energy

production companies in order to reduce production costs (beyond the intention to transfer

non-viable plants to local municipalities). Transferring ownership without addressing core issues

is unlikely to solve structural problems.

The gas market has been subject to an even more erratic evolution, with the re-merger of the

production and underground storage gas companies after only one year of independence, the

suspension of internal market and the return of distorted prices. However, the situation has

improved and Romania has recently re-opened its gas market and adjusted gas prices (which

resulted in a doubling of the gas price for household customers).

Although improvement can be registered, the problem of non-payment of energy bills continues

to weaken not only the energy sector but also the economy as a whole. The debts and the

arrears of the energy utilities continue to grow at a preoccupying level.

Progress has been achieved with legislation to promote energy efficiency. However, Romania

still does not devote the necessary resources to effectively address the very serious issue of

energy efficiency, which would offer large potential for savings and rationalisation. In order to

do so, the administrative capacity of the Romanian Agency for Energy Conservationneeds to be

reinforced.

There is a continued lack of progress in the transposition of the oil stock

acquis

and related

necessary investment.

As regards nuclear energy, the European Union has repeatedly emphasised the importance of a

high level of nuclear safety in candidate countries. In June 2001, the Council of the European

Union took note of a Report on Nuclear Safety in the Context of Enlargement. This report

contains findings on the situation and perspective regarding nuclear safety in each candidate

country, as well as recommendations for specific improvements. In July, the Commission

conveyed this report to the candidate countries.

General recommendations of the Council Report call for all candidate countries with nuclear

power plants to complete their plant-specific safety improvement programmes, and to ensure

that their programmes include measures considered good practices within the European Union.

This concerns particularly specified safety measures such as assessment practices, emergency

procedures, feedback of experience, resources of the regulatory authority and other aspects.

The report recommends all candidate countries to continue their national programmes regarding

the safe management of spent fuel and radioactive waste, and regarding the safety of their

research reactors.

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For Romania, the Council Report recommends seven specific measures to ensure the safe

operation of the Cernavoda nuclear power plant and other nuclear installations. The measures

concern the capability and resources of the regulatory authority, the financial situation and

competence of the operator, the establishment of an on-site emergency centre, fire and seismic

hazard analyses and due consideration and, if applicable, implementation of safety

improvements implemented in Canada for the CANDU type reactor used in Cernavoda.

The resources of CNCAN, the nuclear safety regulatory authority, should be further

strengthened and salary levels should be brought in line with those in the nuclear sector. No

progress has been achieved regarding spent fuel and nuclear waste, which are two issues that

need to be addressed in the very short term.

Romania will also need to ensure compliance with Euratom requirements and procedures. In

this respect, due attention should be given to preparing the implementation of Euratom

Safeguards, in particular regarding the reporting of nuclear material flows and inventories

directly by the persons or structures operating nuclear installations or storing nuclear material. It

should be noted that Romania has concluded a Full Scope Safeguards Agreement with the

IAEA. An Additional Protocol to this Agreement has been in force since July 2000.

Chapter 15: Industrial policy

Since the 2000 Regular Report, the government has made some further progress in developing

a national industrial policy. Despite some progress, efforts still need to be made with the

privatisation and restructuring process.

In July 2001 the Government approved the

industrial strategy

document “Industrial Policy of

Romania”, together with an Action Plan covering the measures needed to implement this policy.

The document was drawn up after consultation with relevant stakeholders (professional

associations, trade unions, employers, ministries, private sector, academics, and other public

institutions).

The stated objective of the strategy is to increase Romania’s industrial competitiveness through

the development of a business-friendly environment, speeding up structural adjustment

measures, more effective investment promotion, respecting European environment standards,

supporting the SME sector, and developing industrial and business services.

Over the last year the Romanian authorities have prioritised

investment promotion,

particular through the simplification of legal and administrative procedures and by improving the

stability and transparency of the legislative system. Several tax initiatives aiming at the promotion

of investment were introduced and in July 2001 a law on the promotion of investments was

adopted. The law covers large-scale investments (worth over US $1 million) and provides a

combination of special fiscal incentives and measures to improve the business environment. In

contrast to previous efforts to attract investment, the fiscal incentives offered would appear to

be compatible with Romania’s international obligations. In September 2001 legislation on the

establishment of industrial parks was adopted. Significantly, this law repealed the legislation of

June 2000 and introduced measures that are compatible with the Europe Agreement and the

“Developments in industrial policy should be seen in relation to developments in the context of SME policy (see

chapter 16 – Small and medium-sized enterprises).

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relevant

acquis.

(See

also chapter 16 – Small and medium-sized enterprises for progress in

implementing the business environment).

The

privatisation and restructuring

process came to a virtual standstill in the period before

the November 2000 elections. This was followed by a period of institutional re-organisation

which saw the abolition of the State Ownership Fund, (responsible for managing and privatising

state-owned enterprises), and its replacement by the Authority for Privatisation and

Management of State Assets (APAPS). This new institution was given additional legal authority

to accelerate the privatisation process.

The pre-election stagnation of privatisation and subsequent institutional changes meant that the

number of privatisations recorded during the first half of the reporting period was very low. The

high profile privatisation of Banca Agricola and the progress made with the privatisation of the

steel company SIDEX (where a pre-privatisation agreement has been concluded) have

demonstrated the government’s commitment to the privatisation process. In September 2001

the Government approved a “Steel

Industry Restructuring Programme

”.

Overall assessment

Romania’s policy towards industry is moving towards the principles of EC industrial policy, i.e.

market-based, stable and predictable. However, considerable additional efforts will be needed

before policy objectives are reflected in practice.

In 2000, industrial output increased by 6.1% over the previous year. This trend has continued

and over the first six months of 2001 the growth of industrial value-added was 11.2%. An

increase in domestic investments has also taken place since the last Regular Report although, by

regional standards, the level of Foreign Direct Investment remained low (see

Section B.1.2. -

Economic criteria).

Privatisation and restructuring remain an area where major additional efforts are needed. There

is still a considerable backlog with privatisation and this should be addressed as a matter of

urgency.Romania’s progress, to date, has been limited (the private sector only accounted for

65% of GDP in 2000).

While the development of a Steel Industry Restructuring Programme is a welcome (and long

overdue) development, the plan remains incomplete, and improved transparency in the field of

State aids as well as better coordination between ministries involved in implementing the

restructuring strategy are urgently needed. There has only been limited progress in the actual

restructuring of the sector and individual viability plans for Romania’s steel enterprises have still

to be submitted to the Commission.

Romania continues to grant both direct and indirect State aids to its steel industry and, with the

notable exception of SIDEX, the privatisation process has been slowed down by restructuring

delays and the high level of indebtedness of the main steel enterprises.

It should also be noted that an important element of any industrial policy is the control of state

aid and that the compatibility of support schemes with EC rules, including the current rules on

state aid of the ECSC Treaty, will have to be examined under the Europe Agreement

(see

Chapter 6 - Competition policy).

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The government has made notable efforts to collaborate with bodies representing industrial

interests as well as with foreign investors. This is a welcome development. At the same time,

there is still scope for the administration to further improve its dialogue with the business

community so that their concerns can be taken into account when policy is being drafted.

The Ministry of Industry and Resources is responsible for the design and implementation of

industrial policy – although a particular concern is that the department responsible for these

tasks has limited administrative capacity.

Chapter 16: Small and medium-sized enterprises

The Romanian authorities have made considerable progress in developing policy and measures

for SME development.

Over the reporting period, the government has developed a comprehensive

SME strategy

and implementing policies.

An “Action Plan for the Abolition of Certain Barrier to SMEs”

was adopted in May 2001 and responds, to a large extent, to problems identified by

international studies of the SME sector. The Action Plan specifically aims at the simplification of

registration and licensing procedures for new SMEs, streamlining the legal framework, reducing

and simplifying the tax system, promoting access to finance and access to public contracts, and

providing an information system for SMEs.

The measures identified in the Action Plan for the first semester of 2001 have already been

implemented – essentially through reactivating a 1999 law that had subsequently been

suspended. These include the establishment of a programme for stimulating R&D in the SME

sector, training programmes for entrepreneurs, and the establishment of a national consultancy

network for SMEs. In order to improve SMEs' access to finance, the government has

established a National Credit Guarantee Fund, which can grant low-interest loans to SMEs. A

simplified taxation system has been introduced for micro-enterprises. Important tax exemptions

are given to SMEs on selected imports, as well as for the re-investment of profits. Reductions

on profit tax are given for job creation and for profits generated by exports, although there are

concerns that these incentives are incompatible with Romania’s WTO and Europe Agreement

obligations

(see also chapter 10 – taxation and chapter 26 – external relations).

A further set of measures aim at improving the

business environment

through the

simplification of registration and licensing procedures.

An Emergency Ordinance issued

in May 2001 established a “one-stop-shop”, situated in local Chambers of Commerce, where

new companies can be registered and get all necessary operating permits within 20 days (an

earlier initiative had only dealt with registration procedures). Progress has also been made by

the unification of the two identification codes (the fiscal code and the trade code) into a single

code.

The new Government’s commitment to promoting the sector was demonstrated by the creation

of a new ministry - the Ministry for SMEs and Co-operatives. The Ministry is responsible for

elaborating policies to support SME development and for ensuring that SME interests are

Developments concerning SME policy should be seen in relation to the overall enterprise policy, including the industrial

policy (see

Chapter 15 - Industrial policy).

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integrated into other policy areas. The Ministry shares responsibility for the implementation of

SME support measures with other ministries, public institutions and accredited NGOs.

Overall assessment

The Government has recognised the importance of the sector and, through its Action Plan, has

started to address some of the most serious problems facing SMEs. This is a positive

development, although the Action Plan should only be considered a first step - it is far from

complete, and lacks sufficient detail in several key areas.

While recent initiatives may result in some improvements, the Romanian business environment

remains hostile and considerable further efforts are needed. A comprehensive simplification of

enterprise licensing remains overdue, as does a clear and binding calendar for streamlining the

existing legal framework. There is also considerable scope for reducing the cost and

bureaucracy involved in gaining access to the services provided by public utilities (e.g.

electricity, water, telephones).

Heavy state controls also place an excessive burden on SME operators. A large number of

bodies are authorised to conduct inspections and audits of businesses. Businesses can expect

to be investigated several times each year and the wide degree of discretion left to inspectors

creates opportunities for corruption. This issue was not raised in the recent SME Action Plan.

The preferential tax treatment of SMEs is a potential concern and the fiscal incentives contained

in the SME law will prove difficult to apply – a situation which creates the risk of increased

bureaucracy, as well as arbitrary treatment of enterprises. These measures also appear to

contravene normal market rules and are potentially incompatible with Romania’s international

obligations, including the Europe Agreement. Finally, giving such preferential status to SMEs

could encourage the fragmentation of larger enterprises.

Since the banking system is typified by high interest rates and heavy collateral procedures,

access to investment funds remains a serious constraint on the development of SMEs.

Concessional finance schemes for SMEs have been launched, but the funds allocated by

government are insufficient to meet financing needs.

The Romanian SME definition is broadly in line with the EC definition.

Setting up a ministry to deal exclusively with SME policy underlines the political importance

attached to the sector. However, this initiative will only prove effective if the new Ministry of

SMEs and Co-operatives is given sufficient influence over other ministries that also deal with

issues related to the SME sector. There is a considerable risk of overlapping responsibilities.

A further concern is that funding allocated to the ministry will prove insufficient given the

ambitious scope of its mandate. The new ministry may well emerge as a dynamic and effective

institution. However, what is most urgently required is a period of institutional stability. There

have been three different administrative structures responsible for SME policy in the last 18

months. These constant changes have undermined the possibility of making genuine progress.

Chapter 17: Science and research

In the area of science and research some progress has been made since the last Regular Report.

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In January 2001, the Ministry of National Education was reorganised as the Ministry of

Education and Research. It took over the responsibilities of the former National Agency for

Science, Technology and Innovation, with a view to establishing closer links between higher

education and research. So far the reorganisation has taken place at government level but

organisation at lower levels (e.g. universities) has not seen any change.

The National Plan for Research, Technological Development and Innovation, which was

launched in 1999, has been only partly implemented due to lack of funding. The plan was

further updated in June 2001 to cover the period until 2005. The updated plan shifts the focus

of Research and Technological Development activities away from supply-oriented and towards

demand-oriented actions with the aim of better responding to the needs of economy and

society. Co-operation with the enterprise sector has been reinforced.

The state budget expenditure in research and development as percentage of GDP continued to

decrease in 2000 and was approximately 0.22%. The state budget for 2001 foresees an

increase to 0.25% of GDP.

Romania continued to be fully associated with the Fifth Framework Programme, as well as with

the Euratom Framework Programme. As for other candidate countries associated with the

Fifth Framework programme, Romania has been granted observer status in CREST (Comité

pour la Recherche Scientifique et Technique).

Overall assessment

Though the financial and institutional framework for participation in the Fifth Framework

Programme is well established, the reinforcement of research-related administration capabilities,

as well as the strengthening of research-related infrastructure is necessary to ensure Romania’s

successful participation.

Romania’s contribution to the EC budget for participation in the Fifth Framework Programme

is financially significant for a country with limited resources. The results Romania achieved in the

participation have improved over the reporting period but they remain less than satisfactory. As

a consequence, Romania is currently unable to reap the full benefits from its contribution to the

Fifth Framework Programme. Although active information dissemination and assistance

activities for the project promoters through the National Contact Point network and regional

and institutional networks continued, they need to be further intensified if this situation is to be

remedied.

Funding for RTD activities is low compared to many European countries and remains far below

the EU average. This lack of funding has prevented the full implementation of the National Plan

for Research, Technological Development and Innovation. Efforts are needed to ensure

adequate levels of funding for this sector.

The recent reorganisation of research activities at the government level is a welcome

development. However, the reinforced co-operation between research centres, universities and

enterprises is necessary to ensure successful participation in the framework programme.

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Chapter 18: Education and training

Some progress has been made since the last Regular Report.

As regards participation in

Community programmes

in the fields of education, training and

youth, the new Association Council decision establishing the financial contribution of Romania to

Socrates and Youth for the years 2001 to 2006 was adopted in May 2001, and information

activities through the agencies and the network of county school inspectorates were intensified

and improved results can be noted (see

section A.b Relations between the European Union

and Romania).

A legal framework for voluntary activities was created in April 2001.

The Government decision adopted in June 2001 represents a significant step towards the

transposition of the

Directive concerning education of children of migrant workers

However, some details still require further clarification.

As regards the reform of the education system, support measures for poor families and for

children from rural areas were introduced in order to facilitate school attendance. These include

providing free notebooks and schoolbooks in primary and secondary education for children

from families with limited income and organising school transport in rural areas. Scholarships for

higher education students from rural areas will also be provided. One negative development is

that some legislative measures that were noted in the last Regular Report have not been

implemented: the overall legislative framework for vocational training of adults has not come into

effect and is being modified; legislation on social partnership in vocational education and training

was rejected by the Parliament; and legislation on quality management in higher education has

been suspended.

Following the governmental reorganisation, education and research activities were merged into a

single ministry, the Ministry of Education and Research

(see chapter 17 – Science and

Research).

Romania has a low GDP per capita expenditure on education and there are insufficient

resources available to make necessary investments. In 2001 funding of pre-university education

was decentralised to local authorities. The transfer of responsibility will be accompanied by

budgetary transfers from the state to the county councils. However, it is important that

appropriate measures are taken to ensure that the new system does not increase regional

disparities in educational standards.

Overall assessment

Participation in relevant Community programmes is satisfactory and national structures are

functioning. A regulatory framework for voluntary activities has been established and Romania

has advanced towards the full transposition of the Directive concerning education of children of

migrant workers. However, some details remain to be clarified.

Absence of a structured vocational training system for adults is a problem in the context of large

scale economic restructuring. A coherent system should urgently be established and this will

require intensified co-operation between all concerned authorities: education, labour and the

social partners.

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Adequate level of funding for the education system as a whole should be ensured.

Chapter 19: Telecommunications and information technologies

Progress since the last Regular Report has been limited. The main development in this sector

was the abolition in January 2001 of the National Agency for Communications and Informatics

and its replacement by the Ministry of Information Technology and Communications. The

Ministry of Information Technology and Communications has taken over all the responsibilities

of the former Agency, including policy and strategy formulation and regulatory functions.

Concerning the

liberalisation of the telecommunications market,

steps announced last year

to introduce competition in the 1800Mhz band for mobile telephony became the subject of a

court dispute between two private operators and the incumbent, Romtelecom, which currently

has the monopoly on fixed line telephony. In the end, the parties reached an agreement

stipulating that the private mobile telephony companies would not use frequencies allocated in

the 1800Mhz band before the end of 2002. The date foreseen for the liberalisation of the fixed

line telephony market remains the end of 2002. Until that date, the incumbent maintains a

monopoly on these services. However, liberalisation has already taken place in other markets,

such as cellular mobile telephony, data transmission, and the provision of Internet services,

cable television, and satellite networks.

As regards the

regulatory framework,

a law on the processing of personal data and the

protection of privacy in the telecommunications sector, transposing the Directive concerning the

processing of personal data and the protection of privacy in the telecommunications sector, has

been passed. As stated above, the new ministry has taken over the regulatory functions of the

former National Agency for Communications and Informatics. It will continue to exercise these

functions until the creation of the independent national regulatory authority in the course of

2002.

As regards the

postal services,

no major developments can be reported in the period under

review. There is, however, a considerable degree of liberalisation already in the sector, with the

following services being open to competition: express mail, insured mail, parcel services and

advertising and marketing mail services. Restrictions remain for the moment on regular mail,

parcels below 2kg and money order and wire transfers.

Overall assessment

While the overall development in the telecommunications sector has been limited, there has been

extensive preparatory work through the identification of key personnel and arranging assistance

with the transposition of the

acquis.

In terms of administrative capacity, only a short time after its creation the Ministry of

Information Technology and Communications has given considerable indications of a new

impetus in preparing for the liberalisation of the communications and postal markets. In order to

achieve the objectives of liberalisation of fixed line telephony by the start of 2003 and postal

services by the same date, considerable legislative work remains to be done. Furthermore,

administrative weaknesses in the exercise of regulatory functions as regards telecommunications

remain. Although these functions are scheduled to be transferred in 2002 to the new National

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Regulatory Authority, considerable training will be necessary to ensure adequate administrative

capacity in this area for the new body.

As for postal services, a political decision was taken regarding the establishment and type of

regulatory authority in the sector, contrasting with the lack of any such decision by former

governments. On the other hand, some key departments of the Ministry of Information

Technology and Communications still require further strengthening.

Chapter 20: Culture and audio-visual

Romania has made limited progress since the last Regular Report.

In January 2001 the Ministry of Culture and Religious Affairs was given new responsibilities in

the field of

audio-visual

policy, including the right of legislative initiative, and the mandate to

negotiate international agreements in the film and audio-visual field. This is a positive

development. A Directorate for Harmonisation, Media, Audio-visual and Evaluation was set up

to assume these responsibilities but its staff remains limited.

No progress can be recorded as regards the audio-visual framework law, which means that no

progress in aligning with the Television Without Frontiers directive has been achieved.

Although staffing at the National Audiovisual Council remains the same as last year (138 posts

out of an allocation of 144 are occupied), the monitoring and control activities of the Council

have increased over the reporting period. However, the capacity of the National Audiovisual

Council still needs strengthening in terms of equipment and training. In order to encourage self-

regulation in the audio-visual field, the NAC also issued recommendations relating to the respect

of human dignity, protection of minors and restricting excessive violence in broadcasts. A

decision concerning the right to reply was adopted in April 2001.

A strategy for culture was established in 2000, but results have been limited despite the fact that

a number of cultural managers were trained to implement the strategy.

Overall assessment

Adoption of the main legislation related to the audio-visual sector remains pending.

The debate on the new audio-visual framework law, which has been on-going since 1998,

proved inconclusive. Following the breakdown in discussions, the Ministry of Culture and

Religious Affairs, the Ministry of Communications and Information Technology, and the

National Audiovisual Council have been charged with elaborating a completely new law that

fully covers all aspects of the

acquis.

The deadline for the adoption of this law has been set for

March 2002. In order for this deadline to be respected, it will be important to ensure due co-

operation between the various bodies involved in the sector.

Romania has signed but not yet ratified the Council of Europe Convention on Transfrontier

Television. Upon ratification Romania will be bound, as well, by the Protocol amending the

Convention.

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Romania’s obligations under the GATS agreement – which are not in line with the obligations

that Romania will have to take on under the

acquis

and the obligations that it already has

through the implementation of the Europe Agreement - still need to be clarified.

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

Some progress has been achieved in preparing for the implementation of structural policies since

the last Regular Report.

No further developments can be reported as regards the

territorial organisation.

Concerning Romania’s

institutional structures,

the National Agency for Regional

Development was disbanded following the change of government, and the main responsibilities

for regional development were moved to the newly created Ministry of Development and

Prognosis. Two of the Ministry’s five state secretaries are in charge of regional policy: the State

Secretary for Investment and Regional Development (responsible for programming and

management), and the General Secretary (responsible for payments).

In the field of

financial management and control,

Romania has made some progress. The

Ministry of Development and Prognosis has developed its own payment and accounting

procedures for financial management and a Payment Directorate Office has been established as

a separate function from the General Directorate for Regional development. No developments

can be reported concerning preparation for a multi-annual budgeting system.

The

legislative framework

has been amended to reflect these changes. Government decisions

of January and April 2001 have defined the Ministry of Development and Prognosis’s role as

the central body responsible for co-ordinating the national development policy, drawing-up the

National Development Plan, managing the National Fund for Regional Development, and

managing EC pre-accession funds for social and economic cohesion. The Minister of

Development and Prognosis chairs the National Board for Regional Development.

Two Government decisions have been taken concerning the definition of territories with special

development problems: one modifies and adapts the criteria for "less favoured areas", and the

other establishes eleven industrial restructuring zones as priority areas for EC economic and

social cohesion assistance. Three related laws were passed in April and July 2001. The law on

local public administration defines new responsibilities for local authorities and gives a co-

ordination power to the local representative of the central government (the prefect). The law on

the State Budget provides for state co-financing of pre-accession funds.

The National Agency for Employment was designated as the body responsible for the

implementation of the European Social Fund. In order to ensure the smooth implementation of

future ESF-type programmes, the administrative capacity of this agency needs to be

strengthened and co-ordination with the Ministry of Development and Prognosis improved.

Regarding

programming,

the National Development Plan is in the process of being revised.

Administrative capacity improved over the reporting period, mainly through improved training,

although significant weaknesses remain. As a new institution, the Ministry of Development and

Prognosis experienced delays in filling several key positions, defining responsibilities and

organising internal work. Substantial efforts have been made to strengthen the Regional

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Development Agencies’ administrative capacity - both in terms of staff training and office

facilities. This said, insufficient financial resources and inadequate premises remain a problem.

No major developments can be reported with regard to the application of the

partnership

principle, monitoring

and

evaluation

and

regional statistics.

Overall assessment

While Romania has developed some structures for the implementation of the Structural Funds

many issues still need to be tackled.

Romania has already agreed with EUROSTAT on a national territorial organisation for

statistical purposes. The territorial classification consists of 42

judets

(similar to NUTS 3) and

of 8 groupings of

judets,

termed “development regions” (similar to NUTS 2).

There is still a need to clearly define the responsibilities of ministries and all other bodies

involved in the preparation of future Structural Funds assistance - both at national level and

regional level. Romania needs to ensure that the structures for inter-ministerial co-ordination are

efficient and based on a political consensus. In this context, the newly created Ministry of

Development and Prognosis needs to be given greater authority.

While new legislation foresees that administrative structures will be put in place at the regional

level, these structures’ role in programme development and implementation needs to be further

clarified. Regional development institutions also need to be strengthened in terms of the

recruitment of sufficient numbers of qualified staff and the allocation of sufficient financial

resources by local authorities. At the central level, the Payment Directorate is currently

understaffed, and better-qualified and better-trained staff are needed in the bodies involved in

the programming, management and implementation of Structural and Cohesion Fund assistance.

Concerning the European Social Fund, Romania is slowly developing the necessary structures

and operational arrangements to implement the European Social Fund. Substantial efforts are

still required to improve both administrative capacity and the mechanism for co-ordinating

European Social Fund interventions in the context of the European Employment Strategy and

the Social Inclusion Process.

As regards programming, in order to match sectoral and regional approaches inter-ministerial

co-ordination needs to be made more effective and comprehensive. Genuine partnership

structures at the regional level, including regional/local authorities, the economic and social

partners and other relevant organisations need to be established.

With a view to preparing for Structural and Cohesion Funds, substantial progress is needed

with the technical preparation of projects (project pipeline).

In the field of financial management and control the newly established internal audit departments

need to be strengthened. The training of internal auditors should be a priority. Appropriate

systems and procedures for financial management and control should be established in relation

to the structure of the managing and paying authorities, in order to fulfil the specific requirements

of the Structural Funds regulations.

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Significant work is still necessary to ensure compliance with the

acquis

requirements for

monitoring and evaluation. Particular priorities are ex-ante evaluation of the National

Development Plan and the collection of the relevant statistical information and indicators. The

timely availability and effective functioning of a monitoring and evaluation system will be of

central importance for the efficient implementation of the Structural Funds.

As regards regional statistics, further efforts are necessary to bring them up to the level required

for regional policy planing and programming.

Chapter 22: Environment

Since the last Regular Report, Romania has made progress with ratification of international

conventions, elaboration of action plans for alignment, and adoption of some elements of the

acquis.

With regard to the

integration of the environment with other policies,

no significant

progress has been achieved. The Ministry of Water and Environment Protection has

experienced difficulties assuming its co-ordination role and the inter-ministerial committee,

established two years ago, has not met since the end of 1999.

In the field of

horizontal legislation,

Romania ratified the Convention on environmental impact

assessment in trans-boundary contexts (the Espoo Convention). Ratification of the Agreement

on the participation in the European Network for Information and Observation is in the final

stage. Romania has also ratified the Kyoto Protocol on climate change. While these are positive

developments, Romania is still some way from complying with EC requirements in other key

areas - in particular with the legislation on environmental impact assessments.

Substantial legislation aiming at transposing the acquis on

air quality

has been adopted: an

emergency ordinance on air protection was promulgated, guidelines for air polluting emissions

inventories were established and a governmental decision on the reduction of the sulphur

content of diesel fuel was taken.

waste management,

limited progress has been achieved in the legislative field, with three

emergency ordinances adopted on waste arrangements, on the management of recycled

industrial waste, and on the procurement of metal and non-ferrous waste.

In the field of

water quality,

a National Plan for the prevention of water pollution by nitrates

from agriculture has been drawn up and adopted. Romania is also in the process of identifying

and selecting areas to be classified as sensitive areas as regards urban wastewater. This process

is of great importance given the costs that will be involved in proper implementation. Romania

has also adopted a regulation for the organisation and functioning of water basin committees in

line with the requirements of the recent water framework directive.

nature protection,

in order to transpose the directives on the conservation of natural

habitats, of wild fauna and flora, and on the conservation of wild birds, an emergency ordinance

has been adopted and published. In addition, an Order of the Ministry now establishes the

permitting procedures for the harvest, capture, purchase and commercialisation of wild flora and

fauna. Efforts are needed to prepare for the NATURA 2000 network.

As regards

industrial pollution control and risk management,

no progress has been made,

only an inventory of the enterprises that will be concerned by this legislation is under

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preparation. The importance of legislation in this area is demonstrated by the numerous

industrial pollution accidents that occurred during the reference period.

With regard to

chemicals and genetically modified organisms

, an emergency ordinance on

classification, labelling, packing, and packaging of hazardous chemical substances has been

adopted. Romania also adopted the provisions of several Amendments to the Montreal

Protocol on substances that deplete the ozone layer.

As far as

noise

is concerned, only a Government Decision intended to transpose the Directive

on airborne noise emitted by households appliances has been adopted.

No progress has been recorded in the field of

radiation protection,

(see also chapter 14 –

Energy),

where the level of alignment is quite limited.

As regards

administrative capacity,

the Ministry of Water and Environmental Protection is

responsible for drawing up of environmental policy. The Ministry has been reorganised once

again but there has been no improvement at the level of staffing, who still number 170.

Implementation of environmental policy lies with the 42 local authorities (counties). Since the

last report, the Environmental Protection Inspectorates in the counties have had their staff cut by

over 20% (there are now 1680 employees working for the Environmental Protection

Inspectorates plus around 200 additional staff in the environmental radioactivity surveillance

network).

The budget allocated for environment has been slightly increased, but remains extremely low: it

reached around €73 million in 2001, which represents less than 0.4% of GDP (the average

figure for EU Member States is approximately 1.5%).

Overall assessment

Romania still has a long way to go before being in line with the acquis in the field of environment

policy: the overall level of transposition and implementation of the environmental

acquis

still

remains low. Whereas transposition has advanced, the development of the administrative

capacity in 2001 has led to increased uncertainty about Romania’s enforcement capacities in

this sector.

On the one hand, the determination exists in the Ministry of Water and Environment to

harmonise Romanian practices with the environmental

acquis.

In this respect, progress has been

achieved and several pieces of legislation transposing the

acquis

were adopted in 2001, or are

now before Parliament for final approval. The top priorities for the next year should be the

transposition of legislation on environmental impact assessment and industrial pollution control

and risk management. Particular emphasis needs to be put on the development of

implementation plans, including financing strategies and institutional strengthening.

On the other hand, there have been no improvements in creating the administrative capacity to

enforce the newly adopted legislation. Furthermore, the resources allocated to environment in

Romania are insufficient to address the environmental problems the country faces. The situation

is made worse by the fact that domestic institutions have a relatively short experience in the field

of environmental protection, especially as regards transposition of legislation and application of

economic instruments.

At the local level, the staff allocations for policy implementation have been reduced and the self-

financing mechanism set up last year has only generated one quarter of the expected revenues.

Co-ordination at regional level is non-existent. At the national level, the budget devoted to

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environmental protection is insufficient, and the Environmental Fund is unlikely to be operational

in the short term.

Romania should make the environment one of its priorities for accession and considerable

investments need to be secured, also in the medium-term, to ensure implementation of the

environmental

acquis.

Chapter 23: Consumers and health protection

In the field of consumer protection, the intensive legislative work noted in the last Regular

Report has continued.

safety related measures,

no new measures can be recorded. As regards

non-safety

related measures,

modalities regarding price indication were established and a law on unfair

contract terms was adopted. In terms of

administrative structures,

the National Authority for

Consumer Protection (NACP) replaced the Office for Consumer Protection. This

reorganisation has resulted in the number of posts being cut from 770 (of which 668 were filled

at that time) to 600. Currently still 612 posts are filled. A five-year strategy for the NACP

was adopted in June 2001.

The National Authority for Consumer Protection has the right of initiative in consumer

protection and co-ordinates Government policy in the field. As regards

market surveillance

has the right to impose sanctions, which can take the form of fines, definite or temporary

prohibition of marketing of the product or service or imposing withdrawal from the market and

it actively exercises this right. However, the authority cannot order refunds or compensation,

since it only acts as an administrative body.

The National Authority for Consumer Protection functions as the contact point for TRAPEX

(Transitional Rapid Exchange of Information System). Under TRAPEX, 22 notifications of

dangerous products on the Romanian market were received between January and August

2001.

During the period between September 2000 and August 2001, 9 371 out of the 17 205

consumer complaints received by the authority were judged admissible. Consumer associations

submitted 398 complaints.

The National Authority for Consumer Protection actively provides consumer and legal advice.

A web-site has been established and complaints can now be submitted online.

Consultative Councils of consumers at county and local level are functioning, but the Inter-

Ministerial Committee for Markets, Products and Services Surveillance, which was established

in 2000, has only met once and its functioning has recently been reviewed. As a result of the

review, the consumer organisations are no longer represented as formal members of the

Committee. This can be considered a negative development, especially as one of main

objectives of the Committee is co-operation with the civil society. Co-operation with other

bodies involved in consumer protection issues could be further strengthened, as well.

There are 127 consumer associations in Romania, organised into 16 federations and one

confederation. These have the right to be consulted on legal acts and receive some funding from

the state budget. However, the extent to which active consultations are carried out remains

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unclear. The degree to which some of these organisations are genuinely representatives of

consumer interests should also be examined.

Overall assessment

Romania has successfully managed an ambitious legislative agenda in the field of consumer

protection over a relatively short time period. However, adjustments are still necessary in order

to align fully with the

acquis

and in some areas the

acquis

have not yet been transposed

(consumer credits, time-share, injunctions, sales of consumer goods and associated guarantees)

or is only partly transposed (product liability). As regards legislation that was recorded in last

year’s Regular Report, the law on advertising is partially in line with the

acquis.

While

addressing these gaps, Romania should also place particular emphasis on the implementation of

existing legislation.

The adoption of the five-year strategy for the National Authority for Consumer Protection

represents progress, although concrete measures to implement it have still to be established.

Recent staff cuts may have an impact on the well-established control and monitoring activities,

which are crucial for the implementation of activities in the field of consumer protection.

Romania should pay further attention to clarifying the roles of different bodies involved in

consumer protection and enhancing co-operation between them. This will be necessary in

order to establish a clear market surveillance mechanism and to avoid overlapping activities.

The support for and concrete involvement of consumer organisations in decision-making, as

well as full enforcement of consumers’ rights, should be ensured.

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

Since the 2000 Regular Report, significant progress has been made in Romania in the fields of

visa policy, border control and migration. However only limited progress can be reported on

police co-operation and the fight against fraud and corruption.

Romania has not yet adopted legislation on

Data Protection.

As far as

visa policy

is concerned, the conditions and criteria for obtaining visas have been

specified in methodological norms implementing the new Law on Aliens and in common

instructions agreed by the Ministry of Foreign Affairs, the Ministry of Interior and the Ministry

of Labour. The new Law on Aliens and the provisions on visas were adopted in April 2001.

Particularly strict conditions are applied to citizens of 86 countries with high migratory

tendencies. Since 1 January 2001, visas can, as a rule, only be obtained from Romanian

diplomatic missions and consular offices. They are only issued at border posts in exceptional

cases. Since 1 July 2001, Moldovan citizens have needed to have a passport to enter Romania.

All visa applications are sent from the diplomatic or consular missions to the National Visa

Centre, which takes the final decision on the issuing of a visa. The applications from nationals of

countries with high migration tendencies are also sent, for a further check, to the Directorate for

Aliens and Migration Issues of the Ministry of Interior. A new Schengen-compatible type of

visa application form has been introduced.

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Significant progress has been made in alignment with, and implementation of, the

acquis

in the

field of control of

external borders

. Two emergency ordinances were adopted in June 2001,

one on the Romanian State Border and another on the organisation and functioning of the

Border Police. The former contains general provisions on the border regime and aligns

Romanian legislation in the field of border control with similar legislation in EU Member States.

The ordinance on the Border Police establishes a new organisational structure and sets up the

framework for co-operation between the Border Police and other agencies. It also contains

provisions on the competences of the individual border policemen.

A Government Decision was adopted in April 2001 on the exchange of existing passports for a

new type of passport with additional security features.

As regards administrative capacity, a new organisational structure was introduced in June 2001.

The hierarchical structure has been simplified and one regional level of command has been

abolished. The number of Regional Directorates has been decreased to one for each land

border and one for the Black Sea. Significant numbers of personnel have been reassigned from

administrative to operational tasks. The professionalisation of the border police, i.e. the

progressive replacement of conscripts with professional staff, has continued. The newly

recruited sergeants get initial training for a period of three months at regional Border Police

training centres.

Several measures have been taken to fight corruption amongst the Border Police. Following the

entry into force of the new law on fighting corruption (May 2000), a specialised service, the

General Internal Protection Directorate, was set up within the Ministry of Interior. This new

structure, which became operational in January 2001, is one of the results of a recently

developed anti-corruption strategy for the Ministry of Interior and its subordinate bodies. One

of the tasks of this new structure is to carry out preventive and

ad hoc

inspections of Border

Police structures.

In February 2001 a co-operation protocol was signed between the Border Police and the

National Office for Refugees with the purpose of carrying out joint controls at airports. The

controls focus on transit travellers coming from high-risk migration destinations.

To make controls of travel documents and visas more effective, a co-operation protocol was

signed in May 2001 between the General Inspectorate of Border Police and the national airline

(TAROM). The protocol provides for special training programmes on the detection of false or

forged documents for airline staff.

Training activities have been carried out as regards preparations for the

Schengen

Agreement.

Otherwise there have been no significant developments in this area.

As regards

migration,

a new Aliens Law entered into force in May 2001, establishing the

conditions for entry and stay in Romania as well as the regime for expulsions. As indicated, the

Government also adopted the ‘methodological norms’ to implement the above-mentioned law.

These norms contain detailed provisions specifying the procedures for applying the law as

regards checking of documents, issuing visas, granting residence rights and expelling aliens.

Recently adopted legislation has also tightened the conditions for obtaining work permits in

Romania. A necessary pre-condition is the possession of a work visa (i.e. persons having a

student visa are therefore no longer allowed to obtain a work permit).

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The Government has signed an agreement with the International Organisation for Migration, to

establish a centre offering temporary protection for women victims of trafficking as well as

managing programmes supporting their reintegration into society.

In 1998, 2,830 foreigners were expelled for not complying with the conditions of entry and stay

in Romania. This number increased in 1999 to 3,431 aliens, but then decreased to 2,498 in

2000.

As regards

asylum,

the Refugee law of 1996 was amended through a government ordinance in

August 2000. In June 2001, Parliament definitively approved this ordinance after certain

changes had been made. The amended law introduces new concepts in Romanian legislation on

asylum in order to align it with the

acquis,

such as ‘manifestly unfounded applications’, ‘safe

third country’, ‘country of origin’, and ‘accelerated procedures’. ‘Non-refoulement’ is, in

principle, guaranteed. The body responsible for dealing with asylum applications is the National

Office for Refugees, whose decisions can be appealed against before a court of law. However,

when Parliament adopted the government ordinance it eliminated the right to a second appeal in

cases of accelerated procedures.

Following the new legislation, measures have been developed to ensure minimum standards of

reception for all asylum seekers during the whole procedure. As far as recognised refugees are

concerned, they have a right to nine months of public financial support. Additional support is

provided for particular categories of refugees, such as unaccompanied minors, elderly people,

and single women with children. Refugees basically enjoy the same rights as Romanian citizens,

including the right to work. The National Office for Refugees has a modern accommodation

centre for asylum seekers located in Bucharest with a capacity of 250 places. However, due to

lack of resources, accommodation centres for asylum-seekers are not fully equipped and have a

shortage of staff.

According to the Romanian authorities, the number of people applying for asylum in Romania

decreased from 1,667 in 1999 to 1,366 in 2000. Asylum seekers in Romania come mainly from

Afghanistan, Bangladesh, India, Iran, Iraq and Pakistan. Most of the applicants (95%) apply for

asylum as soon as they enter the country.

In the field of

police co-operation and the fight against organised crime,

the structures

dealing with organised crime within the General Inspectorate of the Police have been

reorganised and the Directorate for Combating Organised Crime has become a General

Directorate for Combating Organised Crime and for Anti-drugs. The process of bringing the

police under civilian control has continued and the police have received training courses on the

respect of human rights. Police numbers at central level have been reduced and these posts

have been transferred to operational levels (see

Section B. 1.1, Democracy and the rule of

law).

As far as the

fight against fraud and corruption

is concerned, a section for anti-corruption

and related organised crime at the General Prosecutor's Office was established in October

2000 (see

section B.1.1. - Democracy and the rule of law).

In the field of

drugs,

after the adoption of the law on the fight against trafficking and illicit

consumption of drugs, no further important legislation has been adopted. However, in

December 2000 secondary legislation for enforcement of the aforementioned law was adopted.

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An Anti-drug Squad was established in March 2001 within the General Inspectorate of the

Police. After a peak in 1998, drugs seizures decreased significantly during 1999 and 2000.

The current legislation on

money laundering,

has been supplemented with new legal acts (see

also Chapter 4 - Free movement of capital).

The Penal Code and Penal Procedure Code

have been amended and the responsibility for judging crimes relating to money laundering has

been passed to the tribunals (the second level of jurisdiction in the Romanian court system). The

National Office for Preventing and Fighting Money Laundering Operations has carried out

training sessions for its own staff and the personnel of the reporting entities.

In 2000, the National Office for Preventing and Fighting Money Laundering Operations sent

130 reports to the General Prosecutor's Office. Investigations have been started in 87 cases

and 3 cases have been sent to court for trial. Eight seizure orders have been issued in money

laundering investigations on related properties to a value of €2.5 million. Although the National

Office for Preventing and Fighting Money Laundering Operations is functioning well, the

criminal investigations and court proceedings in money laundering cases have not yet led to any

convictions.

As regards

customs co-operation,

no mutual assistance agreements have been signed since

the last report. An Anti-fraud Service was established in January 2001 in the Directorate for

Customs Surveillance and Fighting Customs fraud within the General Customs Directorate.

judicial co-operation,

no major conventions have been ratified since the last Regular

Report. A Ministerial Order of November 2000 established the legal framework for a network

of judges to function as local correspondents in the field of international judicial assistance.

Overall assessment

While important legislation has been adopted recently, in particular on border control and on the

aliens regime, much remains to be done on legal approximation and strengthening administrative

capacity. Particular attention should be paid to speeding up the reform of the national police and

the recent anti-corruption law should be followed up by measures to strengthen the capacity to

enforce the legislation.

Legislation on personal

data protection,

data protection and privacy in the telecommunications

sector, and on the ratification of the European convention on Data Protection, is pending in

Parliament. It is envisaged that the Romanian Ombudsman will be the implementing and

supervisory body, although it is questionable whether the modest budget allocations will allow

the ombudsman to successfully carry out this additional responsibility.

Romania has also made significant progress in aligning its

visa policy

with that of the European

Union. There are 156 countries whose citizens need a visa to enter Romania, while nationals of

35 countries, including the EU Member States, are exempted from the visa requirement. Further

alignment with the EU visa policy should continue, in particular with regard to the introduction of

visa obligations for countries with high migration potential.

In order to improve identity checks and detect attempts to misuse visas, a Schengen-type visa

sticker will need to be developed and Romania should also rapidly implement the upgrading of

existing passports. As regards

external borders,

the reorganisation and modernisation of the

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Romanian Border Police is ongoing and is yielding its first results in terms of improved efficiency

and practices. However, inter-agency co-operation between border management agencies

should be further improved and efforts to combat corruption increased.

The Border Police currently has 23,000 staff made up of both professionals and conscripts. The

ongoing replacement of conscripts with contract staff is to be completed by the end of 2002.

Plans to reform the training programmes for different categories of border police staff still need

to be implemented.

Considerable investments have been made in surveillance equipment and further investments are

foreseen. Border posts still need to develop an on-line connection to the central database on

immigration.

Romania should start the preparations for participation in the

Schengen

area and develop a

Schengen Action Plan.

Romania has concluded readmission agreements with all Member States except the United

Kingdom and Portugal. These agreements are all in force, except the agreements with Finland

and Ireland, which have been signed but not yet ratified. In addition, 6 readmission agreements

with candidate countries (Poland, Slovakia, the Czech Republic, Slovenia, Hungary and

Bulgaria) are in force. There are also agreements with Switzerland, India, Croatia and Moldova.

The Romanian Government has re-negotiated the readmission agreements with Sweden,

Slovenia and Hungary in order to update and align them with the relevant EU recommendations

and standards. For the same purpose the agreement with Austria is in the process of

negotiation.

The amended Refugee Law has considerably improved the alignment of the

asylum

legislation.

However the provisions on detention of rejected asylum seekers need to be further clarified.

Romania also needs to develop country-of-origin information and there is still scope for

improving accommodation conditions for asylum-seekers.

In the field of

police co-operation and the fight against organised crime

new legislation on

Police Organisation and Operation and on the Statute of Policemen were approved by the

Government and are pending in Parliament. This legislation will form the legal basis for the

demilitarisation of the police, which will be essential in order to increase the democratic control

and the accountability of the police forces. Discussions with EUROPOL for concluding a co-

operation agreement have not yet started. A prerequisite for the negotiations is the adoption of a

data protection law.

Very limited progress has been made with the

fight against fraud and corruption.

Far greater

efforts are needed to create an efficient implementing capacity and to improve inter-institutional

co-operation in this area.

In order to ensure the protection of the financial interests of the European Communities

Romanian should, as a matter of priority, align its legislation with the 1995 Convention on the

Protection of the Financial Interests of the European Communities and its protocols.

The Romanian authorities have applied for full membership of the OECD Working Group for

Combating Corruption in International Commercial Transactions. The council of Europe Civil

and Criminal Law Conventions on Corruption remain to be ratified.

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Romania is a party to all international conventions listed under the

acquis

in the field of

drugs,

with the exception of the 1995 Agreement on Illicit Traffic by Sea. The national drug strategy

should be further developed to cover both drug demand and drug supply reduction. The Inter-

ministerial Committee for Fighting Drugs should be made fully operational. The capacity of the

law-enforcement agencies, especially the police and customs, should be increased. Further

efforts are required to improve the collection and availability of information on drug-related

issues. The creation of the National Drug Information Focal Point, in accordance with

EMCDDA (European Monitoring Centre for Drugs and Drug Addiction) requirements, should

be completed.

As regards

money laundering,

Romanian legislation is, to a great extent, already aligned with

the

acquis,

although the Council of Europe Convention on Laundering, Search, Seizure and

Confiscation of Proceeds of Crime still has to be ratified. Sufficient financial means and training

should be given to the National Office for Preventing and Fighting Money Laundering

Operations. The capacity of the Office to co-operate with other law-enforcement agencies

should be strengthened, in particular with the police and prosecutors. Specialised training should

be organised for police officers and prosecutors dealing with money laundering issues.

Romania has made progress on

customs co-operation

by setting up the Anti-Fraud Service

within the General Customs Directorate. Inter-agency co-operation needs to be improved and

mutual assistance agreements signed. Areas where good progress has been made are the

development of risk analysis and the development of a national computerised database in line

with CIS standards. However, other methods for fighting fraud and corruption should still be

developed, including the introduction of mobile surveillance units, the development of customs

laboratories and the attribution of powers to customs personnel to carry out controls and

enforce compliance.

As far as

judicial co-operation

is concerned, Romania has ratified most of the international

conventions included in the

acquis.

The following conventions need still to be ratified: the Hague

Convention of 1965 on Service of Documents; the Hague Convention of 1970 on the taking of

Evidence Abroad; the Hague Convention of 1980 on International Access to Justice; the

European Convention on Recognition and Enforcement of Decisions Concerning Custody of

Children.. Further efforts will be required in order to ensure the appropriate level of co-

operation in civil matters, notably as regards mutual recognition and enforcement of judicial

decisions, and direct court-to-court dealings in cross-border situations.

All the

human rights

legal instruments covered by the Justice and Home Affairs

acquis

have

been ratified by Romania, with the exception of the 1981 Council of Europe Convention on the

protection of individuals with regard to automatic processing of personal data.Legislation for its

ratification is pending in Parliament.

Chapter 25: Customs union

Good progress has been made by Romania in the field of customs since the last Regular report.

As regards alignment between the Romanian legislation and the

EC Customs Code and its

implementing provisions,

further progress has been achieved in areas including simplified

procedures, inward processing, duty relief, customs value, counterfeit and pirated goods, and

transit.

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Regarding the

customs

acquis

outside the Customs Code,

legislation was passed in October

2000 harmonising Romanian laws on the protection of cultural goods with those of the EC. In

November 2000, legislation on protection of intellectual property rights was also harmonised. In

December 2000, the printed form of the Romanian Customs Integrated Tariff (TARIR) was

finalised. This document uses the same principles of codification and integration as the EC

Integrated Tariff (TARIC).

Progress has also been made in improving the

administrative and operational capacity

implement the

acquis.

The ASYCUDA system (a computerised customs system) is operational

and currently processes 98% of all customs declarations. The Integrated Customs Information

System (ICIS) has been designed, developed and implemented taking into account

interconnectivity with EC IT systems. The opening of the National School of Public Finance in

October 2000 represented an important step towards upgrading the training of customs

officials.

At the beginning of 2001, the Romanian customs administration was reformed. The new

structure includes an Internal Control and Audit Division in charge of ensuring the regularity of

customs operations and detecting fraud. Considerable efforts have been made to introduce IT-

based systems for risk analysis. A Risk Analysis Office has been set up and specialist staff have

been appointed to carry out risk analysis both at central and regional levels. Co-operation

protocols have been concluded with other agencies with border-related competencies such as

the border police, the national police and the financial guard. The reform also introduced a new

system for appeals against administrative decisions in customs matters.

Considerable efforts have been made in order to secure the Northern and Eastern borders.

Substantial investments have been made in upgrading border infrastructure and in purchasing

equipment for customs enforcement and control. A drug-testing laboratory has been set up

within the General Customs Directorate. For the control of other kind of goods, the customs

administration has concluded agreements with external laboratories.

Overall assessment

Although Romania has adapted large parts of its legislation to the customs

acquis,

efforts are

still needed, in particular with regard to rules of origin and the status of free zones. Further

harmonisation is also needed in the cases of simplified procedures, end use provisions, and

precursors.

Romania should continue its efforts to tackle the problem of waiting times at borders, step up

the fight against customs fraud, and further improve co-operation with other enforcement

bodies.

Romania is a signatory to the major international customs agreements and is an observer in

working groups of the Common Transit System. Free Trade Agreements with Latvia and

Estonia still need to be finalised; this is important in order to allow the full integration of Romania

into the pan-European system of origin cumulation.

As regards administrative and operational capacity to implement the

acquis,

Romania should

increase its efforts to combat corruption within the customs administration. Border management

should be improved and customs laboratories established. With regard to IT development, it

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must be emphasised that flawlessly functioning EC-compatible IT systems should be in place at

least one year before EU accession in order to allow a sufficient period of time for the test

requirements and to guarantee interconnectivity with the EC customs computerised systems.

Chapter 26: External relations

Romania has continued to align itself with the

acquis,

in most cases, and to co-ordinate

positions and policies within the World Trade Organisation with those of the EU, in particular

with regard to the preparation of the New Round. However, several new trade measures have

represented a move away from EC practices.

As regards the

common commercial policy,

Romania will be required to align its tariffs with

those of the EC upon accession. Romania’s applied tariffs currently average 19.4% on all

products, 33.2% on agricultural products, 21.4% on fishery products and 15.6% on industrial

products. By comparison the EC tariffs

currently stand at 6.3% on all products, 16.2% on

agricultural products, 12.4% on fishery products and 3.6% on industrial products.

Over the reporting period, Romania has increasingly resorted to trade policies that are

incompatible with its international obligations. In response to pressure from domestic

producers, Romania introduced export restrictions on strategic raw materials (logs, sunflower

seeds and scrap metal – although in the case of sunflower seeds the restrictions have not been

implemented). This is not only a move away from the

acquis

in the field of commercial policy

but potentially violates Romania’s obligations under both the Europe Agreement and the WTO.

Romania should also honour its commitments under the WTO Agreement on Subsidies and

Countervailing Measures and abolish the export subsidies it currently maintains in the form of

reduced taxation on profits from exports (see

chapter 10 - Taxation).

As regards

bilateral agreements with third countries,

Romania has finalised negotiations for

a FTA with Lithuania and has started negotiations with Croatia. Romania’s FTA with Israel

entered into force in July 2001. Within CEFTA, the member countries, including Romania,

signed Additional Protocol No. 8 on the updated version of the Pan-European cumulation of

origin of goods

(see chapter 25 – Customs Union).

In January 2001 the responsibility for commercial policy was transferred from the Ministry of

Industry to the Ministry of Foreign Affairs (the Department for Foreign Trade and Economic

Promotion). This reorganisation resulted in a reduction of staff dealing with trade policy as well

as a reduction in the number of commercial counsellors in Romania's diplomatic missions. The

Department for Foreign Trade has exclusive powers in certain policy areas (e.g., trade defence

instruments), a co-ordination role in other areas (e.g. international trade negotiations), and an

overall responsibility for ensuring that legislation drawn up by other government departments

compatible with Romania’s overall trade policy.

As regards

development policy

and

humanitarian aid,

Romania has neither institutions nor a

policy framework for managing external assistance. Romania has, however, consistently

provided emergency assistance following natural disasters in other countries.

WTO bound tariffs after full implementation of all concessions including - where possible - estimated

ad valorem

equivalents of specific and compound tariffs.

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Overall assessment

Where alignment with the Community

acquis

on commercial policy is necessary - for example

concerning rules of origin and dual-use goods – Romania is advanced.

However, breaches of

the Europe Agreement and WTO commitments are a serious cause of concern.

The EC and Romania have established a framework for co-operation regarding WTO issues

both at ministerial and at departmental level. Romania has been supportive of EC policies and

positions within the WTO framework. As regards the New Round, Romania concurs with the

EC on the need to launch a comprehensive trade round as soon as possible and shares the view

that the results of work under the built-in-agenda would be less substantial in its absence.

Romania is a signatory to the WTO plurilateral agreements on Civil Aircraft and Information

Technology. By the time of accession Romania will need to have joined the WTO plurilateral

agreements on Government Procurement. Further co-operation is also needed to ensure

alignment of Romania’s GATS commitments with EC commitments and MFN exemptions.

As regards the WTO Agreement on Trade in Textiles and Clothing (ATC), Romania needs to

use the third stage of integration under the ATC to align its integration programmes with those of

the EC, while avoiding the integration of products not yet integrated by the EC.

Romania lacks enforceable legislation on trade defence instruments (anti-dumping, anti-subsidy,

and safeguards) and has no provisions relating to the application of an “injury test” as part of

anti-dumping and countervailing investigations. The result of this legal vacuum is that Romania

has not made use of trade defence instruments as a part of its commercial policy. While not a

problem in itself, there is a risk that, in the absence of conventional control mechanisms,

otherwise legitimate requests for protection by Romanian producers will be met through other

instruments - such as non-tariff barriers.

Romania is a member of CEFTA and has concluded FTAs with the Republic of Moldova,

Israel, Turkey and EFTA. Any international agreement which is incompatible with the

obligations of membership will have to be re-negotiated or renounced prior to accession.

Romania should continue to keep the Union fully informed about existing trade agreements or

negotiations aimed at the conclusion of any new trade agreements with a third country. This also

applies to Bilateral Investment Treaties concluded with third countries.

With regard to medium and long-term export credits, further alignment with the

acquis

necessary.

Despite significant staff cuts the Ministry of Foreign Affairs has sufficient personnel to manage

Romania’s commercial policy.

In principle, the transfer of responsibility for commercial policy to the Ministry of Foreign Affairs

should have had the benefit of distancing trade policy from vested domestic interests. However,

this has not happened and there have been several instances of trade measures that are

incompatible with Romania’s international commitments being adopted without properly

consulting the responsible ministry. In order to prevent a repeat of these problems, the trade

department of the Ministry of Foreign Affairs urgently needs to improve its control over the

formulation of its trade policy. Development and humanitarian aid are also administered by the

Ministry of Foreign Affairs. Romania’s future contribution to the European Development Fund

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will rely upon effective management of the national budget organisation and management of the

flow of funds to the EC budget. These issues are addressed under

Chapter 29 – Financial

and budgetary provisions.

The administrative infrastructure concerning customs services is addressed under

Chapter 25 -

Customs union.

Chapter 27: Common foreign and security policy

Over the reporting period Romania has continued to align its foreign policy with that of the

European Union and has participated constructively in the framework of the Common Foreign

and Security Policy (CFSP).

The regular

political dialogue

established by the Association Agreement with Romania is

proceeding smoothly and Romanian participation in the CFSP has included meetings at the level

of Political Directors, European Correspondents and Working Groups.

Romania has shown a keen interest in continuing the political dialogue with the EU including

European Security and Defence Policy (ESDP) developments. It has actively participated in the

exchanges in this context with the EU and, for ESDP, in the EU+15 format meetings (i.e. with

non-EU European NATO members and candidates for accession to the EU). Romania played

an active role in the first Capabilities Commitment Conference in November 2000 and, in

March 2001, held bilateral consultations with the EU on its participation in ESDP missions. It

has pledged forces to EU Rapid Intervention Force missions from 2003 (including two

battalions of ground troops, three specialised companies, and four ships).

Since the last Regular Report, Romania has responded positively to all invitations of association

with EU

joint declarations and demarches.

Since October 2000, Romania has associated

itself with 8 EU common positions, including 3 on the Federal Republic of Yugoslavia.

Romania has also implemented those joint actions which it was invited to join and has aligned

itself with the Union’s decisions on

international sanctions and restrictive measures

and

has implemented negative measures in accordance with those adopted by the EU.

Romania has been Chair-in-Office of the OSCE in 2001. This important responsibility was

successfully carried out by the Ministry of Foreign Affairs and during its chairmanship Romania

co-operated effectively with the EU institutions.

Romania’s relations with neighbouring countries have been mixed. High level visits confirmed a

spirit of co-operation between Romania and the new Bulgarian government and Romania

participated in the trilateral summit with Bulgaria and Turkey in February 2001. Diplomatic

relations were resumed with Yugoslavia following an official visit from the Yugoslav President.

Romania established the Euro-Regio “Upper Prut” together with Ukraine and the Republic of

Moldova. However, border demarcation negotiations with Ukraine have proved controversial

due to the Ukrainian decision to authorise oil and gas exploration in one of the areas covered by

the negotiations. Relations with Hungary have encountered difficulties concerning Hungarian

legislation granting preferential status to ethnic Hungarians living in selected third counties

(including Romania).

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The Ministry of Foreign Affairs was restructured after the new Government took office and

alignment with the CFSP is managed within its Department for Multilateral Affairs.

In the field of arms exports control, the National Agency for the Control of Strategic Exports

and the Prohibition of Chemical Weapons (ANCESIAC) was established as a body within the

Ministry of Foreign Affairs. This measure is aimed at improving the implementation of existing

export controls. In a separate development, the Ottawa Convention on landmines was ratified in

November 2000 and entered into force in May 2001.

Overall assessment

Romania has demonstrated a good track record in the Common Foreign and Security Policy

and there have been no problems regarding Romania’s alignment with the CFSP

acquis.

Romania has subscribed to the EU Code of Conduct on Arms Exports and continues to respect

and implement those aspects of the Code that are applicable to candidate countries.

On the regional level Romania has maintained an active role in the Stability Pact. Romania has

also made considerable efforts to support international peacekeeping missions and has

participated in KFOR and a series of UN, OSCE and WEU (MAPE) peacekeeping and

observer operations. The Romanian contribution includes 6 military personnel in KFOR, 62

military and 49 support staff in the Dutch Unit in SFOR, and 70 police officers in UNMIK

(Kosovo).

The successful management of the OSCE Presidency provides a clear demonstration of

Romania’s capacity to assume an international leadership role in the field of foreign affairs.

Romania has a well-staffed and functioning Ministry of Foreign Affairs that has sufficient

administrative capacity to implement the provisions relating to CFSP. The effectiveness of the

ministry was demonstrated by its efficient chairmanship of the OSCE. The Ministry is

connected to the Associated Correspondents’ Network information system through which the

EU communicates within the CFSP with the associated partners.

Chapter 28: Financial control

Romania has made some progress in this area during the period covered by the Regular Report.

As regards

Public Internal Financial Control,

the Ministry of Public Finance further

developed the ex-ante financial control function during the reporting period, through legislative

acts defining the methodology for both own and delegated ex-ante control. No particular

development can be reported in the area of internal audit.

The Romanian Court of Accounts is the institution responsible for

external audit,

reporting to

Parliament on the financial management and control of public funds exercised by government.

The Court has begun to prioritise the development of systems-based and performance-audit

methodologies. The staffing levels of the Court have been considerably reduced.

With regard to preparation for

control of structural action expenditure

, some progress has

been made in the creation of structures for the control and audit of SAPARD funds but

substantial efforts are needed in order to meet the requirements for the accreditation of the

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SAPARD Paying Agency and the National Fund. An Order of the Minister of Finance has

been issued concerning the organisation of delegated preventive financial control for ISPA

funds. No specific progress can be reported concerning audit of ISPA and Phare funds and

preparations for extended decentralisation in the management of these programmes.

No progress can be reported either in the field of the protection of

EC financial interests.

Overall assessment

Further substantial efforts are required in order to complete the policy framework for public

internal financial control and to adopt new legislation in line with EC requirements, focusing in

particular on internal audit. Romania needs to establish functionally independent internal audit

units in the budget spending centres, with a focus on systems-based and performance audit

methodology.

The Policy Paper on Public Internal Financial Control (PIFC) has not yet been finalised,

whereas the administrative capacity for Public Internal Financial Control remains insufficient,

both in terms of numbers of staff and level of training. Difficulties have been experienced in

attracting competent new personnel.

The co-ordinating functions of the Ministry of Public Finance as regards harmonisation of the

methodology for financial management and control, as well as for internal audit, should be

defined. A coherent programme of recruitment and staff development for financial control and

internal audit functions in all spending centres should be developed. Romania should make

further efforts as regards the implementation of legislation on public procurement, including ex-

ante control of commitments, tender and contracting procedures, as well as disbursements and

recovery of unduly paid sums.

The availability of the staff necessary for the Romanian Court of Accounts to fulfil its mandate,

and to develop its capacity to implement modern audit methods, should be ensured . The Court

of Accounts should continue its efforts to prioritise the development of modern audit

methodologies. Parliament should put in place follow-up procedures relating to the audit findings

and recommendations of the Romanian Court of Accounts.

With regard to the control of structural action expenditure, efforts need to be made in order to

enhance Romania’s capacity for the management of pre-accession funding and future structural

funds. Clear rules and procedures for public internal financial control should be established and

administrative capacity should be substantially reinforced. The development of mechanisms for

the recovery of lost funds is equally important.

With a view to ensuring suitable protection of EC financial interests, Romania needs to adopt

legislation allowing the competent EC bodies to carry out on-the-spot checks. It should also

develop the adequate administrative capacity to implement the acquis, including the ability of the

Romanian law enforcement bodies and judiciary to address cases where EC financial interests

are at stake. Romania should designate, in consultation with OLAF,an institution or

administrative structure capable of co-ordinating investigations into cases of fraud and

irregularities affecting the Communities’ financial interests and of acting as a single contact point

in relations with OLAF.

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Chapter 29: Financial and budgetary provisions

Romania has made some progress over the reporting period, in particular as regards

strengthening

national budget

procedures and ensuring

co-financing of EC financial

instruments.

Efforts were made in the context of the preparation of the State Budget Law for 2001 to move

towards a programme-based approach to budgeting based on national and sectoral priorities in

a multi-annual macroeconomic framework. The number of ministries and government agencies

using a programme-based budget approach has been increased. The State Budget Law for

2001 ensures the co-financing of projects and programmes supported by EC pre-accession

financial instruments.

The national budget for 2002 was submitted to Parliament by early October 2001.

There has been some progress during the past year in the development of the capacities for

medium-term economic forecasting and the preparation of a medium-term budget strategy.

There has also been considerable progress in absorbing special funds into the state budget.

As regards

Own Resources and administrative infrastructure

, and more specifically

control measures relating to own resources, Romania’s customs and tax administrations are in

the process of carrying out reforms in order to enhance their operational and administrative

capacity. These reforms involve the completion of the computerisation process, the

strengthening of human resources, and the improvement of internal organisation. This is also

important in the context of control relating to own resources with a view to ensuring the

protection of EC financial interests.

Overall assessment

Continued efforts are needed to ensure that budgetary principles and rules are brought into line

with the standards generally applicable in the Community. Preparation of a new Law on Public

Finance should contribute to this process.

Submission of the national budget for 2002 to Parliament by early October 2001 represented

an improvement in performance in comparison with previous years.

Legislation to strengthen the role of the Ministry of Finance’s co-ordination of line ministries

when preparing budget proposals should be adopted. Procedures for multi-annual budgeting

should be put in place, and the inclusion of multi-annual co-financing in the national or local

budgets should be ensured.

Links between the National Plan for Adoption of the Acquis and the budgetary process should

be developed. Capacity should be developed to assess the cost-effectiveness of proposed

budgetary expenditure in fulfilling national and sectoral policy objectives. In parallel, on-going

work on improving macro-economic forecasting and drawing up a medium-term budget

strategy should be continued. The work in progress for defining and implementing the operating

procedures for the management of EC pre-accession funds, through the National Fund, should

be continued and improved.

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In the interest of transparency and efficiency the number of extra-budgetary funds should be

further reduced.

The procedures for selecting, monitoring and evaluating public investments and expenditure

programmes need to be strengthened in order to improve the process of allocation of resources.

Inter-ministerial co-ordination for Community Own Resources under the Ministry of Public

Finance should be developed to prepare for the tasks required after accession. The Ministry of

Public Finance is the central body of state administration responsible for taxation, and for the

performance of customs functions. These functions are performed through the Romanian

Customs Administration and the Central Tax Directorate respectively. The calculation of own

resources based on gross national product (GNP) is the responsibility of the National Institute

for Statistics. Further efforts are needed to bring practice in Romania closer to the European

System of Accounts (ESA 95) standards. There is currently no provision in Romanian law with

regard to the levies on trading in and warehousing of sugar, which forms part of the Traditional

Own Resources.

Romania still needs to improve its capacity to calculate GNP as well as VAT and customs

receipts in a reliable, harmonised, controllable and transparent way. The administrative capacity

to duly collect and transfer in a timely manner all Own Resources to the Community budget will

need to be established prior to accession, as will the ability to provide the Commission with

accurate reports on the situation with regard to each type of own resources. With regard to

the control of future EC Own Resources, Romania should continue its efforts to set up effective

instruments to combat fraud relating to VAT and customs duties.

In addition to the need for central co-ordination for the proper collection, monitoring and

payment and control of funds to and from the EC budget, administrative capacity should be

strengthened in the context of the relevant policy areas described elsewhere in this report, such

as financial control, taxation, agriculture, customs, and regional policy.

3.2.

Translation of the

acquis

into the national languages

Applicant countries are to translate the various legal texts constituting the

acquis

into their

national languages by the time of their accession. The

acquis,

consists of primary and secondary

binding legislation, and represents a considerable volume of acts, roughly estimated at 60,000-

70,000 pages of the Official Journal. To help the candidate countries in this process, assistance

is being provided under the Phare programme. With the help of TAIEX, a centralised

Translation Co-ordination Unit has been created in each of the ten candidate countries of

central Europe.

In the case of Romania, this unit has been established within the European Institute of Romania

and became operational in December 2000. The unit is responsible for translation, linguistic

revision, and technical revision of texts. It functions effectively, but is understaffed in relation to

the volume of translation work required. As of September 2001, approximately 14 300 Official

Journal pages of

acquis

had been translated by the Translation Co-ordination Unit - of which

some 5 000 had also been revised. This represents a considerable improvement since the last

Regular Report.

The Romanian government has also allocated substantial resources from the state budget in

order to speed up translation of the

acquis.

This is a separate initiative managed by the

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National Institute of Information and Documentation, under which, as of September 2001,

approximately 11 600 Official Journal pages of

acquis

had been translated.

Without prejudice to the outcome of the accession negotiations, while the progress made in

translation is welcomed, further efforts will be needed, in particular to ensure quality control and

the technical uniformity of texts.

Due attention should also be given to the training of conference interpreters.

3.3.

General evaluation

Romania has continued to make progress with the adoption of the

acquis.

However, advances

in legal transposition have not always been matched by improvements in administrative capacity.

Romania’s progress with

internal market legislation

has been mixed. Other than the adoption

of new legislation on public procurement, little progress has been made with the

free movement

of goods

and the framework legislation for the New and Global Approach has still not been

adopted. The administrative infrastructure for standardisation, certification and market

surveillance should be reinforced. Only limited progress has been made in aligning with the

acquis on free movement of persons,

and while progress has been made with insurance and

banking supervision there has been no progress with transposing the

acquis

on financial

securities markets. Legislation on the protection of personal data remains inadequate. New

Romanian legislation on money laundering is a welcome development but a comprehensive

system of exchange controls and other restrictions on capital movements still exists. The

supervision of financial services should also be improved. Further progress was made in

aligning with the

company law

and

competition policy acquis

– sectors where Romania has

already achieved a high degree of transposition. This said, the supervision of intellectual

property rights should be further developed as should the capacity to enforce state aid and anti-

trust rules.

In the field of

taxation,

Romania has made some progress particularly with regard to excise

duties. However, further alignment is still needed in the area of VAT and much remains to be

done to modernise the tax administration – including the development of electronic data

exchanges with the Community and Member States. Romania’s adoption of an

industrial

strategy

document is a welcome development and while some important progress has been

made in privatisation considerable further efforts are still needed. Good progress has been made

in promoting the

SME sector

and a series of measures have been taken to improve the business

environment.

While Romania has made progress in aligning with several aspects of the

agricultural acquis,

restructuring of the sector has barely begun. The overall administrative capacity of the Ministry

of Agriculture remains weak and Romania still needs to develop the ability to implement the

management mechanisms of the Common Agricultural Policy. Inspection arrangements in the

veterinary and phytosanitary fields also need to be upgraded. The newly adopted fisheries law

brings the Romanian legislative framework largely in line with the

acquis.

However, efforts are

still needed to strengthen administrative structures.

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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Romania has continued to make good progress in harmonising its

transport

legislation. Policy

related to the

energy sector

has been inconsistent and therefore only limited progress can be

noted. While there has been limited progress in the

telecommunications sector

in terms of

transposition, extensive preparatory work has been carried out that should enable future

reforms. Romania has made advances in aligning itself with the

environmental acquis

but does

not have the administrative capacity to effectively enforce the newly adopted legislation and

insufficient financial resources are allocated to the sector. Romania has made progress in

aligning with several aspects of the

consumer protection acquis

but attention will be required

to ensure effective enforcement. Romania has only made limited progress in the

audio-visual

sector.

Social policy

is a priority for the government, and while progress has been made further

alignment with the

acquis

is necessary, as are improvements in administrative capacity (in

particular in the area of occupational health and safety and in strengthening labour

inspectorates). Some progress was made in the area of

regional policy

during the reporting

period - mainly in terms of improving institutional arrangements. However, the new structures

remain fragile and considerable work is still necessary as regards programming, monitoring and

evaluation and developing the capacity to manage and control public funds.

In the field of

justice and home affairs,

significant progress has been made in the fields of visa

policy, border control and migration. However, there is still a need to adopt legislation in some

important areas such as data protection and to further upgrade the capacity and infrastructure

for border management.

Romania has increasingly resorted to

trade policies

that are incompatible with its international

obligations and which represent a move away from the

acquis.

At the same time, the

management of the OSCE Presidency demonstrated Romania’s capacity to assume its

responsibilities international leadership role in the field of foreign affairs. Romania has continued

to make progress on harmonisation with the

customs acquis

although the operational capacity

of the customs service should be improved and efforts should be intensified to develop systems

that will allow the exchange of computerised data between the EC and Romania.

Despite some positive developments, the Romanian authorities have not yet succeeded in

elaborating a comprehensive policy framework for internal

financial control

over public funds,

and further efforts are needed to strengthen administrative capacity in this area. Romania has

made some progress in reforming national budgetary procedures but further efforts are required

both in relation to the national budget and own resources.

The overall

capacity of the public administration

to implement the

acquis

remains limited and

represents a major constraint on Romania’s accession preparations. While certain parts of the

administration are able to function effectively there are many important sectors where the

weakness of the administration is a serious cause for concern. These concerns extend beyond

adoption of the

acquis

and also apply to the management of EC funds. There has been no

significant progress in developing administrative capacity although this issue is beginning to be

addressed by the government.

With regard to meeting short-term Accession Partnership priorities, Romania has met the

priorities related to

transport.

While progress has been made in the areas of

taxation,

customs,

and

justice and home affairs

none of the priorities identified for these sectors have

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yet been fully met. Some, limited progress has been made in addressing the priorities related to

the

internal market, agriculture, environment, employment and social affairs

and the

reinforcement of administrative and judicial capacity.

Romania has started to address

some medium-term Accession Partnership priorities. In

transport

and

fisheries

Romania is

close to meeting the medium-term priorities. However, no substantial progress has been made

in the cases of

agriculture, environment, and employment.

100

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C. Conclusion