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Europaudvalget 2001-02 (1. samling)
EUU Alm.del Bilag 186
Offentligt

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.11.2001

SEC(2001) 1755

2001

REGULAR REPORT

SLOVENIA’S

PROGRESS TOWARDS ACCESSION

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2001

REGULAR REPORT

SLOVENIA’S

PROGRESS TOWARDS ACCESSION

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

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Table of contents

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

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

Relations between the European Union and Slovenia..................................... 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 ..................................................................................................................... 12

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

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

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

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

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

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

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

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

The judicial system...................................................................................................... 16

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

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

Civil and political rights................................................................................................ 19

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

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

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

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

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

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

2.3. Assessment in terms of the Copenhagen criteria...........................................26

The existence of a functioning market economy ............................................................ 26

The capacity to cope with competitive pressure and market forces within the Union...... 31

2.4. General evaluation ...............................................................................................33

3. Ability to assume the obligations of membership.......................... 34

Introduction................................................................................................................. 34

3.1. The chapters of the

acquis....................................................................................36

Chapter 1: Free movement of goods....................................................................36

Overall assessment ...................................................................................................... 38

Chapter 2: Free movement of persons ................................................................40

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

Chapter 3: Freedom to provide services.............................................................41

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

Chapter 4: Free movement of capital .................................................................43

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

Chapter 5: Company law.......................................................................................44

Overall assessment ...................................................................................................... 45

Chapter 6: Competition policy..............................................................................46

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

Chapter 7: Agriculture..........................................................................................47

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

Chapter 8: Fisheries..............................................................................................54

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

Chapter 9: Transport policy .................................................................................55

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

Chapter 10: Taxation ............................................................................................57

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

Chapter 11: Economic and monetary union.......................................................59

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

Chapter 12: Statistics ............................................................................................59

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

Chapter 13: Social policy and employment ........................................................60

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

Chapter 14: Energy................................................................................................62

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

Chapter 15: Industrial policy...............................................................................65

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

Chapter 16: Small and medium-sized enterprises............................................66

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

Chapter 17: Science and research......................................................................68

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

Chapter 18: Education and training ...................................................................68

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

Chapter 19: Telecommunications and information technologies...................69

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

Chapter 20: Culture and audio-visual policy.....................................................70

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

Chapter 21: Regional policy and co-ordination of structural instruments...71

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

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Chapter 22: Environment......................................................................................73

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

Chapter 23: Consumers and health protection..................................................76

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

Chapter 24: Co-operation in the field of justice and home affairs ................77

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

Chapter 25: Customs union ..................................................................................81

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

Chapter 26: External relations ............................................................................82

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

Chapter 27: Common foreign and security policy.............................................84

Overall assessment ...................................................................................................... 85

Chapter 28: Financial control .............................................................................85

Overall assessment ...................................................................................................... 86

Chapter 29: Financial and budgetary provisions .............................................87

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

3.2. Translation of the acquis into the national languages...................................88

3.3. General evaluation ...............................................................................................89

C. Conclusion....................................................................................91

D. Accession Partnership and National Programmes for the

Adoption of the

Acquis:

Global assessment ............................95

1. Accession Partnership ................................................................... 95

Short-term priorities .................................................................................................... 95

Medium-term priorities................................................................................................ 98

2. National Programme for the Adoption of the

Acquis

................. 100

Annexes.............................................................................................102

Human Rights Conventions ratified by the Candidate Countries, 30

September 2001............................................................................................103

Statistical data......................................................................................................104

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A. Introduction

a) 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 Slovenia and the Union, in particular in the framework of

the Association Agreement;

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

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

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

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

with competitive pressures and market forces within the Union);

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

is, the

acquis

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

Union. This part gives special attention to nuclear safety 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 Slovenia in preparing

for accession.

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

acquis

criteria (including Slovenia’s administrative capacity to implement the

acquis)

focuses on

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

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

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

forward-looking evaluation of Slovenia’s economic performance.

The Report contains a separate section examining the extent to which Slovenia 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 nor requests made in the context of

the accession negotiations.

For the European Parliament the

rapporteur

is Demetrio Volcic.

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b) Relations between the European Union and Slovenia

Recent developments under the Association Agreement (including bilateral

trade)

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

smooth functioning of the various joint institutions.

The third meeting of the Association Committee took place in Ljubljana in April 2001. The

Association Council met in Luxembourg in June 2001. The system of sub-committees continued

to work as a forum for technical discussions. The sixth session of the Joint Parliamentary

Committee between the Slovenian National Assembly and the European Parliament took place

in April 2001 in Brussels.

In 2000, EC exports to Slovenia amounted to €8.1 billion and Slovenian exports to the EC to

€6.3 billion. Slovenia thus had a trade deficit of €1.8 billion with the EC. This represents an

increase of 15% in EC exports and 16% in EC imports as compared to 1999. In 2000 the EC

accounted for 64% of total Slovenian exports, and for 68% of total Slovenian imports.

Slovenia's exports to the EC consisted mainly of machinery and electrical equipment (23% of

the total), transport equipment (18% of the total) and base metals (13% of the total). The EC's

exports to Slovenia consisted mainly of machinery and electrical equipment (25% of the total),

transport equipment (15% of the total) and base metals (11% of the total).

Regarding agricultural products, a new agreement on reciprocal concessions 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 this agreement approximately 76% of EC imports and

56% of EC exports of agricultural products are exempted from duties.

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

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

to a high degree of tariff protection.

The Association Council adopted a decision in September 2001 on further liberalisation of

trade in processed agricultural goods. The decision is implemented as of November 1, 2001.

In March 1996, the Council mandated the Commission to open negotiations with Slovenia for

agreements on the reciprocal recognition, protection and control of wine names and spirits

designations, and a bilateral trade agreement on wine for reciprocal concessions to distribute the

unilateral global quota of 545,000 hl allocated to the States which had previously formed part of

the former Socialist Federal Republic of Yugoslavia. In March 2001 an overall agreement was

reached at technical level and it is foreseen that the agreements should enter into force on 1

January 2002 as an Additional Protocol to the Europe Agreement.

Trade issues with the EC have in the last year primarily centred on veterinary issues (BSE-

related measures, and notably foot and mouth disease measures). Other issues were occasional

problems related to the import of foodstuffs due to incomplete harmonisation of standards

concerning the content of toxic substances in certain foodstuffs. Slovenia is in the process of

adopting relevant legislation that would resolve these issues.

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Slovenia signed the European Agreement on International Occasional international Carriage of

Passengers by Bus (INTERBUS) in December 2000.

The Association Council adopted a decision laying down the Implementing Rules for the anti-

trust provisions of the Europe Agreement in December 2000 and for the state aid provisions in

May 2001. It decided in July 2001 to extend the period for which Slovenia as a whole benefits

from the regional aid status of Article 87(3)(a) of the EC Treaty.

Discussions with Slovenia on the conclusion of a PECA (Protocol on European Conformity

Assessment) are at an advanced stage.

Accession Partnership / National Programme for the Adoption of the Acquis

The implementation of the revised Accession Partnership with Slovenia, adopted in December

1999, continued. Its implementation is reviewed in Part D of this Report. This Regular Report is

accompanied by a proposal from the Commission to update the Accession Partnership.

In May 2001, Slovenia presented a revised National Programme for the Adoption of the

acquis

in which it outlines a revised strategy for accession, including how to achieve the

priorities of the Accession Partnership (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 agriculture and rural development; and

ISPA,

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

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

candidate countries to fulfil the criteria for membership.

In the years 2000-2002 total financial assistance to Slovenia amounts annually to €25 million

from Phare (with €3.3 million added in the course of 2001), €6.5 million from SAPARD and

between €10.8 and 21.7 million from ISPA.

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

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

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

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The Phare programme allocated Slovenia commitments of €192 million during the period 1992-

1999 and €33.4 million in 2000

. The

2001 Phare Programme

for Slovenia consists of an

allocation of €21.3 million for the National Programme, concentrated on the following priorities:

reinforcement of the

acquis

(accounting system of the European Agricultural Guidance and

Guarantee Fund, veterinary and phytosanitary measures, social dialogue), €3.12 million.

internal market (free movement of goods, market surveillance bodies), €2.15 million.

justice and home affairs (police surveillance equipment at frontiers, refugee centre, deportee

centre, border crossing facilities with Croatia, phytosanitary and veterinary controls at the

frontier), €9.30 million.

economic and social cohesion (grant scheme for local infrastructures and social inclusion -

employability-), €3.50 million.

An additional €7 million has been allocated for cross-border co-operation programmes with

neighbouring countries from within the Phare Programme for Slovenia. For the years 2000 to

2001 the Phare contribution amounts to €5 million for Italy and €5 million for Austria; in 2001 a

Phare contribution of € 2 million is foreseen for a programme on the border with Hungary.

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

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

Furthermore, in 2001 Slovenia is participating in the following Community programmes with co-

financing from Phare: Socrates, Leonardo da Vinci, Youth, Life III, and the 5 Framework

Programme for R&D. Following the ratification and entry into force of the agreement, the

formal participation of Slovenia in the European Environment Agency will start in January 2002.

In order to streamline Community legal procedures and therefore facilitate the future

participation of Slovenia in Community programmes, a Decision by the EU-Slovenia

Association Council establishing the general principles for such participation is being prepared.

In Slovenia, Phare has played a particularly important role through the following projects:

Electricity and Gas Sector Regulation:

a technical assistance project under Phare 1999 with

a duration of twelve months and a budget of €200,000 was successfully completed at the end

of March 2001. The overall objective of providing support in the establishment of the Energy

Agency as an independent regulatory authority was reached. The preparation of the institutional

and staffing capacity to regulate gas and electricity markets was achieved

inter alia

through

drafting of licenses/regulations and the development of a price methodology/dispute settlement

procedure.

Business Support Centre, Kranj:

in 2000, two Phare projects supporting the Kranj Business

Support Centre were concluded. The first was financed from the 1996 Phare CBC Slovenia-

Austria programme and its main objective was the construction of a business incubator in the

town of Kranj. The project was later relocated to the city of Jesenice, where the new premises

of the BSC business incubator were opened in October 2000. The project lasted twelve

This includes an allocation of €7 million to Cross-Border Co-operation (CBC) Programmes.

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months and the Phare programme contributed €400,000 with co-financing from both the

Ministry of Small Business and Tourism and the Municipality of Jesenice amounting €482,000.

Existing companies and start-ups located in the region have shown great interest in the project

from the beginning. A second project, BSC phase II, lasted twelve months and was concluded

in October 2000. It was financed from the 1997 Phare CBC Slovenia-Austria programme with

a Phare contribution of €234,000. The two phases of the project focused on the improvement

of co-operation with companies and institutions from the Austrian side of the border.

SAPARD Agency:

following its creation in December 1999, the Agency for Agricultural

Markets and Rural Development (AAMRD) has been working towards certification by DG

AGRI to manage SAPARD funds. The Phare programme has provided €1.2 million for

capacity building in this agency. Support started in January 2000 and continued until June

2001. Germany and France have been the lead Member States for the projects; Austria and

Greece were also involved. The projects have helped in the design of the organisational

structure of the AAMRD, the eligibility and selection criteria, the procedure to handle

applications and payments and the inspection and monitoring functions.

Overall the impact of Phare in Slovenia 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 bank privatisation, SME development, trade and investment

promotion, energy etc. Phare support to agriculture and SME development has succeeded in

developing sector strategies and initiating essential institutional and financial mechanisms serving

enterprises in these sectors.

Whereas the selection and execution of Phare projects linked directly to the adoption of the

acquis

has been generally satisfactory, this is not the case for Economic and Social Cohesion

and Cross Border Co-operation. A large backlog has built up in the implementation of projects.

Only €1 million out of €5 million for the 1999 CBC programme with Italy and none of the €2

million for the 1999 CBC programme with Austria has been contracted. Only 21% of the €2

million Project Preparation Facility agreed in 1999 has been contracted. Similarly, none of the

€12 million set aside in 2000 for Economic and Social Cohesion and CBC has been

contracted. These areas are crucial for practical preparation for the Structural and Cohesion

Funds.

Difficulties in programming can in part be explained by the absence of adequate programming

strategies. This deficit is being progressively removed with the drafting of the National

Development Plan (due for November 2001) and the Joint Programming Documents with

neighbouring countries. However, there is also a fundamental problem of management with

inadequate staffing resources both in quantity and quality, and in the selection of work priorities

inside Slovenia.

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

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

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

acquis

and economic and social cohesion.

The

SAPARD

programme for Slovenia was approved by the Commission in October 2000.

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

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

and improvement of rural infrastructures (24% of EC funds). The annual allocation for

SAPARD in Slovenia for 2000 was €6.4 million at 2000 prices.

The Multi-annual Financing Agreement setting out the rules for implementing SAPARD and the

Annual Financing Agreement setting out the Community financial commitments for the year

2000 to Slovenia were both signed in March 2001 and entered tinto force in August and

October 2001 respectively.

In September 2001 Slovenia submitted the national act of accreditation of the SAPARD

Agency (Agency of the Republic of Slovenia for Agricultural Markets and Rural Development),

which is presently under consideration by the Commission.

Programming for

ISPA

is based on the Strategy Documents for the Environment and Transport

sectors agreed with the Commission in April 2000. An updated version of the Transport

Strategy was presented to the Commission in 2001. An Implementing Agency in the Ministry of

Finance works together with the Ministries for Transport and Environment. Four projects and

two requests for technical assistance were approved by the Commission in 2000 - four of these

in the field of environment (three on waste water treatment and one on cleaning up of the Sava

river) and the remaining two in the field of transport. In the area of transport, given the

availability of funds, the priority has been given to rail projects. However, in reality the priority is

balanced by the emphasis given elsewhere to roads. The Commission has made

recommendations to the Slovenian authorities aimed at improving the quality of the presentation

of projects, particularly concerning the economic and financial analysis. It has encouraged them

to approach international financial institutions such as the EBRD and the EIB in order to have

access to finance for larger and more visible projects. This would be particularly important in

the area of rail transport taking into account strategic position for corridors V and X.

The first Monitoring Committee meeting took place in Ljubljana in May 2001. Preparations for

the introduction of EDIS (extended decentralisation) are ongoing and it is hoped that it could be

introduced at the beginning of 2002.

In 2000, Slovenia received a total of about €19 million of ISPA funding. The Memorandum of

Understanding was signed by the Slovenian Authorities in December 2000.

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.

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To start with, twinning focused primarily on the priority areas 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",

to address issues requiring adaptation which emerge during the negotiation process and have a

limited scope. It is estimated that around 250 twinning projects are operational throughout the

candidate countries at any one time.

In Slovenia there are currently 34 twinning projects, of which nine have been completed,

thirteen are in progress and twelve are under preparation. The sectors covered are agriculture

(nine projects) economic and social cohesion (five projects), internal market (eight projects),

financial sector (four projects), justice and home affairs (seven projects) and environment (one

project)

In January 2001 an assessment was carried out for fourteen twinning projects launched in 1998

and 1999. The result was positive and showed smooth co-operation and good absorption

capacity on the Slovene side.

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 March 1998, Slovenia has participated in

seven rounds of ministerial negotiations. As a result of these negotiations, the following 21

chapters have been provisionally closed (free movement of goods, freedom to provide services,

free movement of capital, company law, fisheries, Economic and Monetary Union, statistics,

social policy and employment, energy, industrial policy, small and medium-sized enterprises,

science and research, education and training, telecommunications and information technologies,

culture and audio-visual policy, environment, consumer and health protection, customs union,

external relations, common foreign and security policy, financial and budgetary provisions),

while negotiations continue for the remaining chapters.

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B. Criteria for membership

1. Political criteria

Introduction

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

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

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

and protection of minorities.”

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

concluded that:

“Slovenia continues to fulfil the Copenhagen political criteria. Progress has been made in judicial

reform, which is a medium-term priority in the Accession Partnership. However, it is still too

early to assess the effectiveness of the new measures aimed at reducing the backlog of pending

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

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

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

priority in the Accession Partnership. The denationalisation process remains slow and further

efforts are needed to speed it up”

The section below aims to provide an assessment of developments in Slovenia 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 as regards the overall functioning of the country’s

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

to developments regarding Slovenia’s ability to implement the

acquis,

in particular in the domain

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

implement the

acquis

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

(Chapter

24 – Cooperation in the field of justice and home affairs)

of part

B.3.1.

of this

report.

Recent developments

The centre-left Liberal Democratic Party emerged as the largest party in the parliament

following the elections of October 15, 2000. It holds 34 of the 90 seats in the parliament. It

formed a coalition government in December 2000 with the leftist United List of Social

Democrats, the centre – right SLS + SKD People’s Party, and the Democratic Party of

Pensioners. The coalition has a large majority with 58 out of 90 seats in the parliament and can

in many issues count on the support of further 10 parliamentarians. The largest opposition

parties are the Social Democratic Party (14 seats) and the New Slovenia Christian People’s

Party (8 seats).

These principles have been emphasized 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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The coalition government is lead by the Liberal Democratic Party, which holds 10 ministerial

posts. The United List of Social Democrats and the People’s Party have each three ministerial

posts.

1.1.

Democracy and Rule of Law

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

guaranteeing democracy and the rule of law. This section focuses on the main new

developments during the past year.

The Parliament

The Parliament has operated smoothly since its appointment in November. The structure of

parliamentary committees and commissions was changed after the elections in order to improve

the efficiency of the Parliament’s work. The bodies responsible for EU affairs remained,

however, unchanged; there is a Commission for EU affairs, a Delegation to the Joint

Parliamentary Committee and a Committee for Foreign Affairs with some accession related

competencies.

The legislative process generally remains slow as every law continues to need three ‘readings’ in

the Parliament and draft legislative proposals are dealt with by the Parliament in the order of

their arrival. While this ensures that all political forces in the Parliament can provide input into

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

EU-related laws are, however, less affected by this situation as they continue to be treated with

priority in the Parliament and many of them have been adopted by accelerated procedure (i.e.

three readings are held within one or a few days).

New Parliament Standing Orders, which had been submitted for adoption already in 1998,

have passed second reading in the Parliament. Once adopted, they will fasten the parliamentary

procedure by limiting the time for discussions and increasing the role of the parliamentary

committees. In the meantime, the handling of the referendum motion concerning the

transformation of duty free shops on land borders to normal retail shops revealed that the

present Parliament Standing Orders are not in line with the Constitution and the Law on

Referenda. The referendum motion was submitted in January and was refused by the Parliament

for failing to fulfil the time limit set in the Parliament Standing Orders for requesting referenda on

adopted laws. However, the constitutional court ruled in May that the provisions in the

Parliament Standing Orders concerning the deadline for submission of such motions do not

comply with the Constitution and the Law on Referenda. The draft new Parliamentary Standing

Orders are intended to remedy this situation.

Amendments to the law on referenda were adopted in July in order to address some of the

shortcomings in the legislation. The number of signatures needed for launching a referendum

request was increased from 200 to 1,000.

The Executive

Over the past year, Slovenia has made some progress with regard to overall public

administration reform through the adoption of the Law on Government and the Code of

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Conduct for Civil Servants. Progress in this area – including the introduction of a civil service

law and legislation on public agencies - was identified as a priority in the Accession

Partnership of 1999. The new Law on Government was adopted in November 2000, and

amendments to the Law on the Organisation and Working Field of Ministries were adopted in

April 2001. The number of ministries was reduced from 16 to 14, the possibility of appointing

two ministers without portfolio was introduced, and a new Ministry for Information Society was

created. The Law on Government also simplified the procedures for appointment of a

government. The related amendments to the Constitution, however, remain to be adopted.

Furthermore, new government standing orders were adopted in May 2001, aiming at

introducing more efficient co-operation including establishing e-communication between

government bodies.

The new Code of Conduct for Civil Servants was adopted by the government in January 2001.

It includes provisions on political neutrality as well as on conflict-of -interest situations. A decree

aiming at improving transparency and the quality of public services was adopted in March

2001.

The Laws on Civil Servants and on Public Agencies have now been submitted to parliamentary

procedure but remain to be adopted.

Slovenia should continue its efforts to ensure that the remaining crucial framework legislation is

put in place, as a prerequisite for a professional, impartial, accountable and effective civil

service.

A new Minister Councillor to the Prime Minister has been appointed to co-ordinate public

administration reform. The Directorate for Organisation and Development of the Administration

within the Ministry of the Interior is responsible for public administration reform. Its staff has

been increased. The Ministry also has an Academy for Administration offering training to civil

servants. The government continues to implement the training strategy for public administration

adopted last year. Its aim is to improve the capacity of the Slovenian administration to

implement the acquis through training on EU related issues. Over 500 civil servants have had

training.

The number of civil servants was increased by about 1,200 last year and amounts to about

30,000.

The Constitutional Court ruled in 1998 that the Koper municipality had to be divided into two

because of its mixed urban and rural character. This issue still remains to be settled.

The judicial system

The judiciary continues to have a high degree of independence in Slovenia. Good progress has

been made since the last Regular Report in reducing the backlog of pending court cases. The

measures introduced by the government in 1999 – 2001 to reduce the backlog of pending court

cases have proven effective. This is, however, not the case with the land register where the

number of pending cases is still increasing. Improving the functioning of the judiciary was

identified as a medium-term priority in the Accession Partnership of 1999.

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The legislative measures to speed up court procedures include amendments to the Act on

judicial service adopted in May 2001 which aim at rationalising and speeding up the work of the

courts. Amendments to the law on offence adopted in March 2001 cancel the necessity for

legal protection in small offences, such as traffic accidents.

The Supreme Court and the Government have set up a programme entitled

Herkules

intended

to cut backlogs in courts. It includes the appointment of rotating judges in districts to assist

overburdened local courts in coping with increased caseloads. The amendments to the Judicial

Service Act adopted in May 2001 created the necessary legal framework for implementation of

the project.

The number of personnel in the judiciary has been increased in 2000. Altogether 41 new

judges, 9 new misdemeanour judges and 14 new state prosecutors have been appointed. There

are over 700 judges in Slovenia. Significant investments have been made in modernising the

technology available in courts and state prosecutors’ offices.

As a result of these measures, the number of pending court cases has continued to decrease for

the second year. The latest figures received from the Slovenian government show a drop of

about 10% from December 1999 to June 2001. Pending cases of major importance have been

reduced by 19%, enforcement-related pending cases by 22%, and other cases by 27% . This

progress is impressive taking into account that these figures include all pending cases, also those

that cannot be defined as backlog cases. However, cases related to land registry increased by

19% .

The Court Rules were amended in October 2000 to define when pending court cases can be

defined as backlogs. According to the Slovenian authorities, the backlog of court cases

calculated on the basis of this new criterion amounted to about 240,000 in December 2000

(including 146,000 land registry cases).

Notwithstanding the progress made, in a few courts a significant problem of backlogs still

persists. Also, the duration of the judicial procedure in criminal cases has not been shortened in

the past few years. About 58% of the criminal cases against adults still took a year or more in

year 2000. The judicial procedure for 25% of the civil cases took three years or more.

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

to provide training in European Law. About 1,400 judges and other judicial professionals took

part in the courses.

In the meantime, the increasing number of pending land register cases gives raise to concern. A

project on computerisation of the land register started last year and should be completed by

2004, as a result of which the waiting period for registrations should be reduced significantly.

Anti-corruption measures

As already mentioned in last year’s report, problems of corruption appear to remain relatively

limited in Slovenia. Progress has been made over the past year in reinforcing the institutional

set-up for the fight against corruption.

A general legal framework for anti-corruption measures is in place. The Criminal Code includes

provisions concerning corruption. The Code of Conduct for Civil Servants adopted by the

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government in January 2001 includes provisions on conflict-of-interest situations. Conflict-of-

interest situations are also included in such legislative instruments as the Act on the

Incompatibility of Holding Public Office with Profitmaking Activities of 1992. However,

preventing conflict-of-interest situations, including in public procurement, should be given more

attention.

Slovenia is a member of the Council of Europe Group of States Against Corruption (GRECO).

The GRECO report on corruption in Slovenia published in December 2000 noted that the rate

of corruption in Slovenia appears low. However, it criticised the lack of coherent government

policies to combat corruption and identified some institutional weaknesses. In response, the

government appointed a specific co-ordination group in charge of combating corruption in

March 2001. The purpose of the group is to strengthen co-operation and information exchange

between the different government departments and to co-ordinate the work of the various

institutions in this area.

Specific bodies to fight corruption exist, including special anti-corruption units in the police, an

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

special assignments. A National Office for the Prevention of Corruption was set up within the

Prime Minister’s Office in July 2001. The Office has the task of drafting a national anti-

corruption strategy, of drafting new legislation and of directing the work of the co-ordination

group for combating corruption.

There have been a few cases of corruption involving senior officials since the last Regular

Report. One concerned a former State Secretary in the Ministry of Economic Affairs who was

given a three year prison sentence.

Slovenia has ratified the Council of Europe Criminal Law Convention on Corruption and the

Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime . The

ratification of these conventions was identified as a short-term priority in the Accession

Partnership of 1999. Slovenia has become a full participant in the OECD Working Group on

combating bribery of foreign public officials in international business transactions and ratified the

OECD Convention on Combating Bribery of Foreign Public Officials in International Business

Transactions in September 2001. The Council of Europe Civil Law Convention on Corruption

is still in the process of ratification. (see also

Chapter 24 – Co-operation in the field of

justice and home affairs)

1.2.

Human rights and the protection of minorities

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

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

Regular Report.

Slovenia has already ratified the major international human rights instruments (see annex). In

March 2001 it signed Additional Protocol 12 to the European Convention on Human Rights

prohibiting discrimination on any grounds. No new developments can, however, be reported

with regard to the transposition of EC anti-discrimination legislation

(see chapter 13 – Social

policy and employment).

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Civil and political rights

Some positive developments can be reported concerning civil and political rights, in particular

concerning provision of free legal aid.

Concerns have been expressed over an increase in

police brutality

in Slovenia. These relate to

cases of excessive use of force against people in

custody.

There have been some cases of

police violence against the Roma. The European Court of Human Rights ruled in November that

Slovenia had breached several provisions of the European Convention of Human Rights in the

case of an EU national ill-treated by the police in 1995. In October 2000, the Ministry of

Interior adopted instructions for dealing with complaints concerning the police.

There are indications that Slovenia has increasingly become a transit country for

trafficking in

human beings.

The Free

Legal Aid

Act adopted in May 2001 introduced free legal aid to socially vulnerable

people.

The legal basis of

asylum

in Slovenia is the Law on Asylum adopted in July 1999. Slovenia

continued to implement the National Action Plan on Asylum adopted last year which identifies

several areas where improvement should be made ( for details see

Chapter 24 – Co-operation

in the field of justice and home affairs).

Slovenia has made progress in this area overall but

should finalise the implementing legislation for the asylum law, create an asylum home separate

from the centre for illegal immigrants, and improve conditions in both.

The United Nations High Commissioner for Refugees and NGOs has expressed continued

concern about the protracted temporary protection status for persons from Bosnia and

Herzegovina, which some have had for a period up to nine years, and the very limited number

of approved asylum applications. The temporary status does not give these people the right to

work or to receive education.

The implementation of the law on regularisation of the

status of citizens of former Yugoslav

republics

has continued, although the processing of the claims was not finalised by the end of

2000 as foreseen by the government. Persons who have lived in Slovenia since 26 June1991

without interruption, and who have not committed serious criminal offences, can obtain

permanent residence. About 13,000 applications have been received and by June this year the

procedure had been completed for about 9,000 of these. About 8,600 of these were positive.

The majority of the remaining applicants had already received Slovenian citizenship in the

meantime.

Freedom of expression

and

freedom of religion

are enshrined in the Slovenian Constitution

and no particular problems have been noted in this regard.

Some progress has been achieved in

denationalisation

(the process of returning property to

persons dispossessed by the Communist regime) over the past year, although the process

remains slow. The process of denationalisation is based on the Denationalisation Act of 1991.

By September 2001 a decision had been made on 61% of restituted property (compared with

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50% in April 2000). This figure refers only to the decisions taken – not decisions implemented

The government decided in February to hire 39 new staff this year to work in this area. The

Working Group on denationalisation, comprising representatives of the relevant ministries and

an organisation representing former owners of expropriated property, continued functioning.

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

right to buy property

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

related provisions in early 1999, 59 applications have been submitted, and on 33 of these a

decision on reciprocity has been made (status June 2001). 26 of the decisions were positive

and the property transaction could thus proceed, and in two cases a property transaction has

been registered.

The Office of the

Ombudsman

continues to function well. A new Ombudsman for Human

Rights was appointed in February 2001 to replace the previous one who stepped down last

year in order to be a candidate in the parliamentary elections. As in previous years, the majority

of cases filed with the Ombudsman concern the length of court and police proceedings (32%)

as well as administrative procedures (18%). The Ombudsman has also drawn attention to the

slow progress in denationalisation.

Economic, social and cultural rights

Overall, some further progress was made with regard to economic, social and cultural rights.

As regards

equal opportunities,

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

and women is guaranteed by the Constitution. The mandate of the Women’s Policy Office has

been widened to cover equal opportunities issues in general and the name has been changed

accordingly to The Office for Equal Opportunities. The representation of women in the most

senior positions in the economy and politics remains modest. There has been a slight increase in

the number of female parliamentarians (from 8% to 13%) – there are three female ministers in

the government. Slovenia has signed the Optional Protocol to the Convention on the Elimination

of All Forms of Discrimination against Women (see

also chapter 13 – Social Policy and

Employment).

The

rights of disabled

people are guaranteed in the Constitution. The Government Office for

the Disabled with nine staff is responsible for monitoring the position of the disabled and for

assisting in drafting legislation. The most protected category of the disabled is the war victims,

notwithstanding the fact that those disabled since birth are most vulnerable. By international

standards protection is average. Challenges include measures to secure employment, and

allocation of resources to the most needy. The government adopted a National Social

Assistance and Services Protection Programme last year addressing some of these concerns.

Trade unions

continue to be active. They participate in the process of adopting relevant

legislation in the parliament and in decision-making on wage, labour and pension policies. The

government has also involved the trade unions in the debate on EU accession. The right to strike

is provided for in the legislation.

The figure is based on the value of property.

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Slovenia ratified

the Revised European Social Charter

in June 2001 undertaking to be bound

by the Additional Protocol providing for a system of collective complaints. The Council of

Europe is assisting Slovenia in the implementation of the Charter and in preparing its first report.

Minority rights and the protection of minorities

The major international instruments in the field of protection of minorities have been ratified.

The minorities recognised in the Constitution (Hungarian, Italian, Roma) are represented on the

Government Commission for National Communities and on the Commission for the Protection

of the Roma. The Government Office for National Minorities monitors the implementation of the

legislation for protection of minorities and provides funding related to minority language media

and culture.

The Slovenian Constitution provides special rights for the Hungarian, Italian and Roma

minorities. The Hungarian and Italian minorities are guaranteed the right to education and

schooling in their own languages and Hungarian and Italian are recognised as official languages

in areas where these communities reside. They also have the right to be directly represented in

the Parliament, where they are allocated a seat each. The situation of the Hungarian and Italian

minorities can be considered as good and the protection of their rights as comprehensive.

The Roma community in Slovenia comprises about 6,500 to 10,000 people. The special status

and rights of the Roma community are guaranteed in the Constitution (Article 65) Rights of the

Roma community are covered in sectoral legislation, for instance the Law on local self-

government, the Law on local elections, and the Law on organisation and financing of

education. In April 2001, the Constitutional Court ruled that some provisions of the Law on

local government were in breach of the Constitution as it did not provide an adequate legal basis

for Roma candidates to run in local elections. The provisions of the legislation have not been

fully translated into action, as many Roma have not officially registered and the total number of

registered Roma therefore stays under the legislative limit. Some of the laws only apply to those

termed ‘autochthonous’ Roma

– excluding the ‘non-autochthonous’ Roma even if they are

citizens.

Many members of the Roma population are among the poorest households in Slovenia, with

74% of the community being recipients of social benefits and 87% not being in regular

employment. The government adopted a Programme on Equal Opportunities of Employment

for the Roma last year to improve employment opportunities. While this is a positive

development, there is still a need for policies promoting Roma socio-economic integration,

especially in the areas of employment and health. Sustained efforts are also required in the area

of education. There have been some cases of discrimination against the Roma.

1.3.

General evaluation

In its 1997 Opinion, the Commission concluded that Slovenia fulfilled the political criteria. Since

that time, the country has made considerable progress in further consolidating and deepening the

The term ‘autochthonous’is not defined in law.

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

and protection of minorities. Over the past year, further efforts have been made in this

direction. Slovenia continues to fulfil the Copenhagen political criteria.

Slovenia has made good progress in judicial reform through adoption of new legislation and

implementation of measures introduced partially already in the previous year aiming at abolishing

the backlog of pending court cases As a result, the number of pending court cases has been

reduced significantly.

Overall public administration reform has progressed over the previous year. However, the Laws

on Civil Servants and Public Agencies still remain to be adopted. They are an important part of

the framework legislation for public administration reform providing for the independence of the

civil service and status of public agencies. The efforts in this area should be continued.

There is a need to address police behaviour notably with regard to certain reported cases of ill-

treatment.

The Accession Partnership of 1999 defines the acceleration of public administration reform as a

short-term priority, which can be considered as having been met. However, adoption of

legislation on public agencies, identified as a medium term priority, remains to be implemented.

Slovenia has progressed well with fulfilling the medium term priority concerning improvement of

the functioning of the judicial system. Continuation of efforts to resolve outstanding border

issues with Croatia is defined as a medium-term priority and has now been fulfilled.

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2. Economic criteria

2.1.

Introduction

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

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

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

rigidities in the economy are reduced”.

This finding was confirmed in the 1998, 1999 and 2000 Regular Reports. In its 2000 Regular

Report, the Commission found that:

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

competitive pressure and market forces within the Union in the near term, provided that it

continues to make further progress on structural reforms"

In examining the economic developments in Slovenia since the Opinion, the Commission’s

approach was guided by the conclusions of the European Council in Copenhagen in June 1993,

which stated that membership of the Union requires:

•

the existence of a functioning market economy;

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

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

well as in the previous regular reports.

2.2.

Economic developments

The macroeconomic situation in Slovenia has remained generally positive in 2000, but

weakened in 2001.

GDP growth, at 4.6%, although somewhat lower than in 1999, remained

robust. With domestic demand subdued, the main growth impetus was provided by rapid

export expansion, while real import growth slowed down. The current account deficit

decreased somewhat, despite the unfavourable development in the terms of trade in 2000. In

the first six months of 2001, GDP growth did slow down while the current account showed only

a small deficit, despite lower growth in the EU. The fiscal deficit, at 1.4% of GDP, or 2.3%

according to harmonised EU standards (ESA95), deteriorated somewhat in 2000, albeit from a

low level. Unemployment dropped slightly, to historically low levels. Inflation, on the other hand,

increased markedly, in first instance pushed by high oil prices and accelerated nominal

depreciation and then further sustained by widespread indexation and a largely accommodating

monetary policy

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Main economic trends

Slovenia

Real GDP growth rate

per cent

1996

3.5

1997

4.6

1998

3.8

1999

5.2

2000

4.6

2001 latest

2.9 Jan-

June

Inflation rate

- annual average

- December-on-December

Unemployment rate, end-

year

- ILO definition

per cent

9.9

9.0

8.3

8.8

7.9

6.4

6.1

8.1

8.9

9.1August

8.8 August

per cent

per cent of

GDP

per cent of

GDP

million

ECU/euro

7.3

7.4

7.9

7.6

7.0

5.9 P Q2

General government budget

balance

Current account balance

0.3

-1.2

-0.8

-1.3

-2.3

0.2

0.1

-0.7

-3.9

-3.3

-131

-735

-645

-55

Jan-

July

Foreign debt

- debt export ratio

- gross foreign debt

per cent

million

ECU/euro

25.2

30.9

37.5

46.1

49.1

2,087

2,854

3,719

4,545

5,668

Foreign direct investment in

flow

- balance of payments data

per cent of

GDP

million

ECU/euro

1.0

2.1

1.3

0.9

1.0

153

331

221

170

196

214

Jan-

July

The pace of the restructuring process remained slow, although some progress has been

made through the preparation of privatisation plans and timetables.

Privatisation by the

PROXY HICP since 1996 (see methodological notes)

Source: National Bank

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Slovene Development Corporation (SDC) moved forward only slowly. In April 2001, the

government decided to liquidate the SDC and privatise the firms under its control by the end of

2001. A proposal to provide a legal framework for the privatisation of insurance companies

was annulled by the Constitutional Court in May 2001. This means that the opening-up of the

still closed insurance sector will be delayed further. The banking sector is still marked by

domination by two state-owned banks and little foreign competition. However, the privatisation

process has now started. In May 2001 the government adopted a programme for partial

privatisation of these two banks, starting in 2001. The absence of significant privatisation

contributed to the marginal foreign direct investment (FDI) inflows in 2000. However, in early

2001 inflows increased, albeit from a low level, as a result of some foreign acquisitions in the

banking and telecommunication sectors. Restructuring and privatisation in the steel sector

continued and a privatisation plan was prepared for the Metal Ravne Plant.

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

1,990

16,100

per cent

million euro

euro per

head

3.2

9.9

26.7

29.0

59.1

2,676

1348

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.

Estimated.

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

demographic statistics.

Data refer to 1999.

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Already starting from relatively high levels, Slovenia has been marking a trend of

relatively rapid and steady catching up with the EU average.

In 2000, GDP per capita in

purchasing power standards stood at 71.6% of the EU average as against 64.3% in 1995. The

economic activity rate, at 57.9%, is somewhat higher than 1996 level, after increasing slightly in

the in the intervening years. The Employment rate, after following a similar movement, was at

62.7% in 2000 while the unemployment rate has decreased slightly and was 7.0%. Long-term

unemployment has increased to 62% from 52% in 1996, principally among older and middle-

aged low-skilled workers. At the same time, the unemployment rate for persons younger than

25 decreased from 18.1% in 1999 to 16.8% in 2000. There is a slight gap between the male

and female unemployment rates with 6.8% for males against 7.3% for females in 2000, but they

have moved in opposite directions – the female rate has been increasing and the male one

decreasing. Slovenia has relatively small but persistent regional disparities, where poorer regions

continue to register declining population and higher unemployment.

2.3.

Assessment in terms of the Copenhagen criteria

The existence of a functioning market economy

The existence of a functioning market economy requires that prices, as well as trade, are

liberalised and that an enforceable legal system, including property rights, is in place.

Macroeconomic stability and consensus about economic policy enhance the performance of a

market economy. A well-developed financial sector and the absence of any significant barriers

to market entry and exit improve the efficiency of the economy.

There is a clear consensus among political parties of the coalition government and the

opposition about current and medium term policy priorities in Slovenia,

although

implementation is often slow. Continuing progress on framework legislation can be noted, while

there has been some slippage concerning the timetable of reforms. There is increasingly good

co-ordination between policy departments. The government economic agency (IMAD)

continues to play a key role in the policy development process. In July 2001 the government

adopted a new medium-term development strategy and policy guidelines up to 2006, based on

improving competitiveness and human capital. This strategy was the basis for the Pre-Accession

Economic Programme, which has also been adopted by the government, and which was

submitted to the Commission on the 1 October 2001.

GDP growth of 4.6% in 2000 was still robust and has continued into 2001.

Growth was

almost exclusively driven by export expansion, while private sector domestic demand

decelerated significantly following the rapid growth in the previous year, linked to the

introduction of VAT. Domestic investment in particular saw a sharp cut back after steep growth

in 1999. In the first six months of 2001 GDP growth slowed down somewhat to 2.9%

compared to the first half year in 2000. This was mainly due to a further cutback in investment

while export growth remained fairly robust so far despite a slowing of growth in the EU,

Slovenia’s major trade partner.

Total employment increased somewhat, while unemployment continued to fall to the

lowest rate recorded so far.

Unemployment (ILO definition) declined from 7.6% in 1999 to

an estimated 5.9% in the 2

quarter of 2001.The participation rate has remained constant at

close to 58% of the labour force.

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Inflation has accelerated in 2000.

Consumer price inflation (CPI) increased from an average

of about 6% in 1999 to 8.9% in 2000 and the harmonised consumer price inflation (HICP)

increased similarly. Higher inflation was initially due to direct and indirect effects of high energy

prices, exacerbated by the dollar appreciation. However, the accommodating monetary policy

stance, the subsequent increases of administered prices and the widespread indexation of wages

and pensions further contributed to inflationary pressures. Inflation has persisted in the first 8

months of 2001, and in August 2001 stood at 9.1% annually.

Rising inflationary pressures did not lead the central bank to conduct a more restrictive

monetary policy because of concern about external competitiveness.

For 2000, expansion

of broad money (M3), at 16.3%, was kept within the broad target rates of 12-18%, thereby in

effect accommodating inflationary pressures from the 1999 VAT increases, the energy price

rises in 2000 and the subsequent pass-through of inflationary pressures via the indexation of

wages and prices. Monetary policy remained relatively loose in early 2001, and M3 growth at

20.3% annually in the 2

quarter overshot the upper target rates by 3.7 percentage points. The

nominal effective exchange rate dropped by 8.7% in 2000. In the first seven months of 2001

the pace of nominal depreciation slowed down to 6.9 %, linked partly to positive current

account developments.

In 2000 the government budget deficit unexpectedly rose to 1.4% of GDP. The

consolidated general government deficit was 2.3%, according to harmonised EU

standards (ESA95).

Although still at a low level, this development raises some concerns. Fiscal

policy has generally been prudent but the budget is still characterised by a high share of fixed

commitments while various expenditure pressures, for example from rising public sector wages,

complicate efforts to keep the budget deficit under control. The deficit mainly resulted from

higher expenditure on debt reimbursement and wages and pensions (linked to the unforeseen

high inflation developments and pre-election spending), as well as lower government revenues

resulting from muted domestic demand. Reform of the public sector wage policy to contain

wage pressures would at least partly contribute to keeping expenditure under control.

According to ESA95 data, the primary surplus (balance excluding interest payments) dropped

in 2000, although it just remained in surplus at 0.1% of GDP. The overall deficit in 2000 is the

sum of a 1.9% of GDP deficit in the central government, a balanced budget for local

government, and a small social security funds deficit of 0.3%. The general government gross

debt ratio in 2000 rose somewhat further to 25.8% of GDP, with the share of foreign debt

overtaking the share of domestic debt for the first time. The relatively moderate indebtedness of

government still generated interest charges of 2.4% of GDP.

The government has started to implement a thorough reform of budgetary procedures

and financial management of government activities.

This includes a move away from annual

budget planning toward a medium–term fiscal framework. This procedure was already partly

used for the 2001 budget and the budget for 2002-2003. Taking into account the relatively

short time since the introduction of the reform, it has already resulted in increased transparency

of government revenues and expenditures. Nevertheless, some delays and difficulties occurred

in the initial phases and the full implementation of new procedures will take some time. The

budget target for 2001 is set at a deficit of 1.1% of GDP, and the budget results achieved so far

this year (first 8 months) indicate that this target is on track. However, in order to realise the

medium term fiscal targets of budget balance, a sustained effort to deal with expenditure

pressures will be required.

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The implementation of pension reform is proceeding, following the entry into force of the

new Law on Pension and Disability Insurance in January 2000.

Although the effects of the

reform were still limited in 2000, it has already had a significant effect on the rights and

obligations of insured persons. Since its implementation, budget expenditure in this area has

been reduced by nearly 0.7% of GDP. Nevertheless, further reform would be needed to

achieve long-term budgetary sustainability. Slovenia also still needs to start implementing the

planned health reforms to alleviate the burdens on the budget and ensure long-term

sustainability.

The current account deficit decreased to 3.3% of GDP in 2000.

Total exports expanded

strongly by 12.7% in real terms, despite a growth slowdown in the EU. Market opening and

expansion in the other successor states of the Socialist Federal Republic of Yugoslavia also

pushed exports. Export growth was supported by a continuing real depreciation of the tolar. As

domestic demand stalled, real import growth slowed down to 6.1%. These positive

developments in volume terms did not lead to a significantly lower current account deficit

because of the unfavourable terms-of-trade development in 2000, a result of the higher energy

prices and dollar exchange rate. The current account deficit was mainly financed through debt-

creating capital inflows, as there were no positive shifts as regards FDI and portfolio equity

investments. FDI inflows remained marginal in 2000, stagnating at the level of 1999 ( 196

€

million, or 1% of GDP), but the first seven months of 2001 saw an increase in FDI. The inflow

of foreign loans prevented total foreign exchange reserves from falling, but led to increased

external indebtedness. By the end of 2000, external debt exceeded € 5.6 billion or 29% of

GDP, putting Slovenia among the medium-level debt countries. While these numbers are not yet

alarming, the direction of the developments is a cause of concern for the medium term.

Fiscal policy in 2000 has been somewhat expansive, while monetary policy did not

forcefully address inflationary pressures.

The relatively high investment and savings rates of

26.7% and 23.5% of GDP, respectively, brought the savings-investment gap, or current

account deficit, to 3.3% of GDP. Fiscal policy contributed to a stable macro-economic

environment although some worrying slippage in budgetary management did occur. Given that a

relatively high share of expenditure is mandatory, there is relatively little leeway for fiscal policy

to deal with external shocks. A more flexible fiscal framework will therefore be needed in the

medium term. The monetary policy stance has remained mostly accommodating to inflationary

pressures. The system of managed floating with continuous nominal devaluation to keep the real

exchange rate constant in an inflationary environment has in turn also contributed to inflation. In

addition, this system will become harder to operate now that Slovenia is progressing with

substantial liberalisation of capital movements.

Price liberalisation is well advanced.

The share of administered prices in CPI stood at

12.7% in 2000. Products and services currently under government price control are mainly in

energy, basic postal and communal services, public transport and basic telecommunication

services. Price liberalisation continued and a number of prices were liberalised for postal

services, milk, and electricity for certain consumers. Although price formation remains under

government control, soft price control mechanisms have been introduced for energy products

by formulating pricing models that establish a more direct link with world market prices. Prices

for telephone services were increased, narrowing the gap with average EU prices.

The state is still prominently present in the economy.

The private sector share in the

economy is now estimated at 64% (1999) of Gross Value Added (against an older estimate of

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57% in 1998). Despite reiterated plans to take concrete measures to reduce the role of the

state in the economy, the presence of the state has so far remained extensive, and by the end of

2000 state institutions still owned numerous companies. The Slovene Development Corporation

(SDC), the Slovene Indemnity Fund and the Capital Fund owned 28.2% of companies.

However, some progress has been made in introducing concrete privatisation plans

Further privatisation is proceeding only slowly, however, privatisation plans were

introduced and preparations intensified.

The Government’s coalition agreement, signed in

December 2000, set a timetable for structural reforms. It scheduled rapid liberalisation and

restructuring measures, particularly in 2001. These included,

inter alia,

a concrete privatisation

plan for banks with clear deadlines to commence in 2001, privatisation of insurance companies,

finalisation of privatisation in the steel sector by end 2001, and the liberalisation of

telecommunications and other state monopolies. In addition, the Ministry of Economy is to draft

a plan for the termination of the SDC by Autumn 2001, with the aim of ceasing operations by

the end of 2001. After closure, some of SDC’s activities, such as the protection of interests of

denationalisation claimants, will be transferred to other state institutions. The proceeds will be

used to cover part of the privatisation gap. The actual implementation of the coalition agreement

would represent a major breakthrough for Slovenia’s economy, after years of delayed reforms.

Although preparations for the reforms are ongoing, there has already been some slippage in the

timetable.

The business climate has improved, but problems remain.

After years of high growth in

enterprise creation, followed by a slowdown in 1999, the number of firms in 2000 increased

marginally by 0.4% to nearly 38 000. Transaction costs of setting up business are high relative

to the small size of the domestic market, while labour markets are rather rigid. The still relatively

underdeveloped capital markets and low level of competition in the banking sector keep costs

high for raising capital locally. Bureaucratic procedures and difficulties in buying land for

construction, obtaining site development approvals and work permits, and hiring and firing

employees also deterred domestic and foreign investors and remain an obstacle to the further

development of the economy. To partly address these problems, in 2000 the government

adopted a programme for promoting foreign investments by simplifying procedures on building

permits, registration of companies and for employment of foreign citizens. The programme was

revised in July 2001. In April 2001, it discussed the “anti-bureaucracy programme” adopted in

1999 (cutting red tape for investments) and set a timetable for implementation of the measures.

Most of the programme’s aims are based on the 1999 FIAS/World Bank findings. However, it

is especially the full and timely implementation of the government programme on privatisation

and liberalisation in sectors in which it is still strongly involved (such as banking, insurance,

utilities) that would improve business conditions and attract more FDI.

There have been some improvements concerning bankruptcy procedures but they remain

slow and relatively limited in number.

Following the implementation of the Financial

Operations of Companies Act (FOCA) in July 1999 improvements were made in the deletion

of legal entities from the court register and through introducing streamlined procedures for

winding up companies no longer actively in business. The application of some of the provisions

of the Act was postponed since there were fears that immediate application might have serious

economic consequences due to widespread insolvency, over-indebtedness and capital

inadequacy.

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The legal system is well developed and firmly in place. Backlogs have diminished.

Laws

and contracts are enforced and the efficiency of courts has been improving.

The financial system is sound but still operating in a relatively sheltered setting.

Restructuring of the banking sector has progressed somewhat, but further work remains. After

consolidation in previous years, the number of banks remained unchanged in 2000. In May

2001, a foreign strategic investor took a majority share in SKB Banka, Slovenia’s 3

largest,

and biggest private, bank. The May 2001 decision of the government to adopt a privatisation

plan, with a timetable for the two state-owned (and largest) banks, NLB and NKBM, was an

important step forward. For NKBM, a majority share will be sold to a strategic investor in

2001. For NLB, the largest bank, with a consolidated market share of 44%, only a minority

share will be sold by March 2002. The state intends to keep a blocking minority share in both

banks, which could diminish the interest of potential key investors. The NLB is still wary of

letting in foreign investors and intends to use the small and relatively underdeveloped local stock

market to raise needed capital. Large international investors have nevertheless shown interest in

both banks so far.

Much remains to be done to stimulate competitive conditions in the banking sector.

Nevertheless, there are some signs of increased domestic competition. NLB withdrew from an

inter-bank agreement that regulates interest rates to set up its own daily interest rates, causing

interest margins to decrease. The number of foreign branches is expected to increase further

after the entry into force of the Banking Act. This should give impetus to consolidation in the

sector. The total assets/GDP rose to 80.5% by the end of 2000, still far below the EU average

but a satisfactory increase considering it stood at 70% in 1997. The level of financial

intermediation stood at 39.4% in 2000. Pre-tax profits increased by 50% in 2000, although this

rise is partly due to the previous losses registered by the SKB bank in 1999. However, a large

part of these positive results is due to indexation clauses (where assets are indexed but deposits

of less than one month are not), which at least partly ensure positive business results regardless

of actual efficiency. De-indexation would represent one important element to help increase

competition in the sector. The framework for prudential supervision of the financial sector has

been reformed to make it more consistent with international best practices and EU acquis;

however, some gaps still remain, partly resulting from the interconnectedness of the financial

system. These shortcomings have been recognised by the government and it has prepared an

Action Plan to address these issues.

The insurance sector remains even more closed and in need of restructuring than the

banking sector.

There has been a lack of progress with privatisation, although some structural

changes are ongoing in the sector. Competition among the thirteen insurance companies and

three reinsurance companies operating in the insurance sector has increased, and the process of

consolidation is starting. Because the market share of the largest insurance company is still 41%,

competition has increased more by the introduction of new insurance products than by

competition among different companies. Privatisation was to take place through the law on

ownership transformation of insurance companies. This law would determine the share of

socially-owned capital in insurance companies to be transformed into State capital and then to

be privatised. However, in May 2001 the Constitutional Court annulled the validity of the law

because it considered the provisions related to the definition of public and private capital to be

in violation of private shareholders’ rights. This in effect means that no progress at all was

achieved in the privatisation of insurance companies in the past year. Privatisation cannot go

ahead until a new law is adopted.

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The stock market in Slovenia is still quite small and underdeveloped.

Despite

modernisation introduced in 2000, turnover at the Lubljana stock exchange (LJSE) increased

only marginally by 1.5% in 2000. However, in the first six months of 2001, the total turnover of

the LJSE showed a 15.6% increase over the same period in 2000, The share of foreigners in

the trade volume on the LJSE was only between 1 and 2%, both in 2000 and in the first half of

2001. Market capitalisation stood at 27% of GDP in 2000, about half of the EU average. The

LSJE has developed regional links and co-operates with stock markets in South Eastern

Europe and, at the end of 2000, it signed a co-operation agreement with the London Stock

Exchange. So far, though, firms do not use the LJSE much to raise capital locally because of

high costs. Structural problems that deterred large investors include tax discrimination against

equities, remaining barriers for foreign (and domestic) investors, and the slow privatisation and

restructuring process. Mandatory custody accounts for non-residents purchasing securities were

abolished as of 1 July 2001. The LJSE expects a boost to its activities from the privatisation of

banks, insurance companies and telecommunications.

The financial sector appears generally robust, but capital liberalisation and increased

domestic and foreign competition are changing the operating environment.

Remaining

capital restrictions on short-term capital flows have been reduced further. In June 2000, the

Bank of Slovenia adopted a schedule for the final liberalisation of capital flows. According to

the schedule, the opening of Slovenia's capital market will be completed by January 2003.

Short-term capital flows have so far not been liberalised out of fear for potential destabilisation

of the financial system from massive capital movements of a speculative nature. Ongoing

restructuring of financial markets and full implementation of the planned restructuring and

privatisation of financial institutions is a necessary precondition to prepare for the forthcoming

full liberalisation of capital flows. In addition, it would provide a better environment for the

conduct of monetary and exchange rate policies.

The capacity to cope with competitive pressure 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.

Slovenia is a functioning market economy.

It has a solid track record of macroeconomic

stability, reasonable fiscal control, a sustainable current account balance, still relatively low

external debts and a high degree of international economic integration. This creates basic

conditions for coping with competitive pressures. The remaining challenges are to develop

requisite instruments to manage macroeconomic policies in a more open environment, bring

down the relatively high inflation rates, and to strengthen and privatise the financial sector.

The labour force is well educated and has relatively high productivity.

Labour productivity

has been catching up with EU levels and in 1998 stood at 71% of the EU average. The

reallocation of labour from low-value added to activities with a higher technological content still

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poses challenges in terms of matching qualifications. The government has introduced

employment action plans, both for the short (2000-2001) and medium term, which follow EU

guidelines. The latter, the ’Strategic Objectives of Labour Market Development up to 2006’

has passed its second reading in Parliament. It sets a number of long-term strategic goals for

higher education levels, active employment programmes for the unemployed, reduction of

regional differences, and aims to reduce the national unemployment rate below 6% within the

period of 2000-2006.

Slovenia has a well-developed infrastructure and high investment rates.

Investment growth

rates on average significantly outpaced GDP growth, leading to steadily increasing investment

shares in the economy. In 2000, the investment/GDP ratio fell somewhat to 26.7%, from

27.4% in the previous year. FDI inflows remained limited in 2000, not surpassing the low 1999

levels. As a percentage of GDP, FDI has contributed only marginally to investment and in 2000

again did not reach higher than 1% of GDP. However, FDI inflows have strongly increased in

the first seven months of 2001 albeit from a low level, with foreign acquisitions in the

telecommunications and banking sector.

Restructuring of the enterprise sector progressed further.

Enterprise restructuring has

continued and companies have on average been improving their performance. The steel

restructuring programme appears to be proceeding well, and restructuring of the textile,

clothing, and leather and footwear industries is also ongoing. For the third consecutive year, the

corporate sector as a whole made a net profit in 2000, although lower than in 1999.

Productivity, capital and value added per employee have all increased strongly in the last four

years. In terms of productivity, the best results were recorded among publicly traded companies

with concentrated (foreign or domestic) ownership, while state-owned companies were the

least profitable. This again confirms the important role FDI can have in restructuring local

enterprises. Traditional industrial activities in low value added rather than in upgraded higher

value added production still dominate the industrial landscape. In July 2001 the government

adopted a new strategy for economic development, emphasising the transition to a knowledge-

based society, increased restructuring and competitiveness of companies, the development of an

efficient financial system and economic infrastructure and reducing regional disparities.

SMEs are becoming increasingly important in the economy.

The role of SMEs has

substantially increased over the last ten years. By 2000, SMEs accounted for 31% of total

production and an employment share of 42%. The situation in the SME sector has consolidated

in recent years and no significant changes in the structure or types of business could be

recorded last year. Although the ratio of over 50 enterprises per 1000 inhabitants is close to the

EU average, Slovenian SMEs have not yet reached the level of competitiveness and efficiency

of EU SMEs due to their unfavourable sector structure and low added value per employee.

Lack of business knowledge and entrepreneurial tradition as well as a negative attitude towards

co-operation are weaknesses for SMEs, while improving access to finance and removing

administrative obstacles would support SME development.

The role of government policy in shaping competitiveness of the economy is still quite

large but slowly changing towards a more market-led approach.

Slovenia has a relatively

liberal trade regime and continues to liberalise its trade policy. In allocating state aids, Slovenia

is now not far from the EU average and there has been progress in improving transparency and

monitoring. However, there should be more information on the activities of the Slovene

Development Corporation. The Competition Protection Office continued to implement anti-trust

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rules but the rulings and fines have not been enforced in courts. The level of fines remains low

and is an insufficient deterrent. Industrial policy has been largely brought in line with EU

industrial policy. In 2001 a Strategy for SME and Entrepreneurship Development in Slovenia

for the period 2001-2005 was drafted, to harmonise Slovene strategic guidelines with EU

Enterprise Policy. Adoption is envisaged in autumn 2001.

Trade integration with the EU remains at a high level.

As a small open economy, the

trade/GDP ratio is high at 105% for 2000. The EU is by far Slovenia’s most important trade

partner. In 2000, the EU represented 64% of Slovenia’s exports and 68% of imports, a slight

drop from the previous year. As the conditions in Slovenia’s traditional regional markets have

stabilised, trade with neighbouring countries – especially Croatia – has been developing rapidly.

The other successor states of former Yugoslavia accounted for 16% of exports and 6% of

imports in 2000. Main export product categories include machinery and transport equipment.

Export growth is mainly pushed from firms with foreign or strategic owners.

External competitiveness has been maintained in an inflationary environment, albeit in

the context of a managed float that allows compensation for, and contributes to, price

increases.

The real effective exchange rate (CPI weighted) depreciated by 2.9% in 2000.

Despite an improvement of both price and cost competitiveness of Slovenian manufacturing, a

result of high labour productivity growth and modest wage rises, Slovenia’s market shares in its

main trade partners continued to decline slightly. This could be an indication of low export

product and market competitiveness related to slow restructuring.

2.4.

General evaluation

Slovenia is a functioning market economy. Provided that it implements the remaining reforms to

increase competition in domestic markets, it should be able to cope with the competitive

pressure and market forces within the Union in the near term.

Macroeconomic developments have continued to be generally favourable, with a steady GDP

growth, low unemployment, and a reduction in the current account deficit. Remaining

restrictions to capital movements are progressively being removed, in the context of a policy of

managed exchange rates.

However, the persistent inflation, linked to widespread indexation in the Slovene economy and

to the monetary and exchange rate policy framework, remains a concern. Labour markets are

not sufficiently flexible. The functioning of markets could be improved by decreasing the state’s

influence in certain areas of the economy. The authorities should now progress with the

implementation of the announced structural reforms and privatisation in a number of essential

sectors such as banking and insurance. This would help to attract more foreign investors and

provide a better microeconomic basis for a sustained growth performance in the medium term.

These structural measures will free up monetary and exchange policy to focus on price stability

instead of maintaining external competitiveness. The ongoing financial sector reform will also

provide a more robust environment for completing the liberalisation of capital movements.

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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 Slovenia’s ability to

assume the obligations of membership - that is, the legal and institutional framework, known as

the

acquis,

by means of which the Union implements its objectives. Alongside an evaluation of

relevant developments since the 2000 Regular Report, this section seeks to provide an overall

assessment of Slovenia’s ability to assume the obligations of membership, and of what remains

to be done. This section is structured to follow the list of twenty-nine negotiating chapters, and

incorporates an assessment of Slovenia’s administrative capacity to implement the

acquis

in its

various aspects. Slovenia’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 Slovenia’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 :

“Since the last Regular Report,

Slovenia has made good overall progress in transposition of

the acquis.

It has made significant progress in some key areas, such as environment,

agriculture, free movement of goods, freedom to provide services, and energy. In these areas

the preparations for membership are already well advanced. However, only limited progress

has been made in other areas, notably on free movement of persons, telecommunications and

the audio-visual acquis. Slovenia’s administrative capacity has been reinforced, however, in

some areas it still needs strengthening.

Slovenia has made good progress since the last Regular Report in adopting legislation in the key

areas of the internal market

acquis.

Substantial progress has been made in establishing the

legislative framework for

free movement of goods,

including in public procurement, and

Slovenia should now concentrate on the timely and complete enacting of the remaining

legislation and the strengthening of the institutional set-up. Significant progress has also been

made in the area of

freedom to provide services.

With the adoption of the insurance

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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legislation, a large part of the legislative work in this area has now been completed. The

legislative framework for

free movement of capital

has now been put in place but Slovenia

should continue eliminating the remaining administrative restrictions to capital movement. Little

progress has been made since the last Regular Report concerning

free movement of persons,

and further legislative efforts are required in this area. The legislative framework is also quite

advanced in the area of

company law,

but some improvements are still needed, for instance

concerning intellectual and industrial property rights.

Slovenia has completed the legislative and institutional framework for

competition policy

with

the adoption of the State Aid Control Act and secondary legislation as well as setting up of the

State Aid Monitoring Commission, and efforts should now be focused on establishing a good

track record of enforcement in this area. Steady progress has been made in the

taxation

area,

except for the failure of Slovenia to fulfil its commitment on closure of the duty free shops.

In the

transport

sector, the progress has been uneven and the overall situation is mixed: while

good progress has been made in the area of land transport, the air and maritime transport areas

are characterised by delays in adoption of key legislation in the Parliament. Slovenia has made

good progress over the past year in the

energy

sector by setting up the Energy Agency and

adopting some key legislation.

Very little progress has been made in the

telecommunications

and

audio-visual

sectors. The

Mass Media Law providing the framework for alignment in the audio visual sector still remains

to be adopted. The Law on Telecommunications has not been adopted yet and the supervisory

authority for the telecommunications sector remains to be set up.

Good progress has been made in

agriculture

sector in particular through the adoption of the

Agriculture Act and the establishment of the Agency for Agricultural Markets and Rural

Development. Legislative alignment in the phyto-sanitary and veterinary sectors should be

continued. Slovenia has advanced well with adoption of legislation in the environment sector,

and focus should now be set on implementation and enforcement.

The good overall progress of the previous year has been continued in

Justice and Home

Affairs,

where the legislative framework has been developed further. However, efforts are still

needed in border control, and this remains a priority to be tackled.

In general, Slovenia’s

administrative capacity

for implementation of the

acquis

has been

enhanced. Since the last Regular Report, significant progress has been made with the

establishment of the supervisory and implementing institutions in the areas of state aids, energy

and agriculture, and separation of the institutions for standardisation, accreditation and

certification. For telecommunications and data protection, independent regulatory agencies still

remain to be established. Attention should now be focussed on strengthening the administrative

capacity in some particular areas such as the local level in the environment sector, border

control, public procurement, insurance supervision.

Slovenia has met a significant number of the short-term Accession Partnership priorities,

especially in the areas of the economic criteria, transport, environment, employment and social

affairs. In other areas the priorities have been met partially. Slovenia has also already started to

implement a number of medium-term priorities.”

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3.1.

The chapters of the

acquis

As indicated, the review of Slovenia’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

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

Progress has continued concerning

horizontal and procedural measures,

notably as regards

the

principles of the New and Global Approach,

on the basis of the legislative framework

adopted last year. The Slovenian Accreditation institute (SA), which was founded in 2000 and

is a full member of European Accreditation, started to operate independently in May 2001.

Until then it had relied on the support of the Standards and Metrology Institute of Slovenia

(SMIS). The Slovenian Institute for Standardisation, founded in 2000, also started to operate

independently in September 2001 with 26 staff. The accreditation, certification and

standardisation functions performed until now by SMIS have now been effectively separated.

At the end of June 2001, 27 bodies had been accredited in accordance with the relevant

standards from the EN 45,000 series, including 11 calibration laboratories, 11 testing

laboratories, three certification bodies and two module-A inspection bodies. As regards

standardisation,

Slovenia has continued making progress. At the end of 2000, it had adopted

75% of all CEN standards, 70% of all CENELEC standards, and 30% of all ETSI standards.

In terms of harmonised standards these rates amount to 95% for both CEN and CENELEC

and 60% for ETSI standards.

Market surveillance

was slightly reinforced, notably the Trade

Inspectorate which received 11 new inspector posts and conducted training with foreign

assistance. In 2000 the Trade Inspectorate conducted 9257 inspections, noted 5408

infringements, which led to judicial proceedings in 93 cases. Of the 6363 inspections conducted

in 2000 by the Labour Inspectorate in the field of safety, 1289 cases involved deficiencies in

periodical examinations and 401 cases technical defaults. In 162 cases the use of equipment

was prohibited until the irregularities were solved. No court penalties have been enforced yet.

No particular developments occurred since the last Regular Report concerning the

notification

procedures

for standards and technical regulations, movement of goods between member

states (“strawberry regulation”),

safety checks at external borders

and the

interchange of

data between administrations.

Substantial progress has been made in

sector specific legislation.

In the areas covered by the

New Approach Directives,

concerning

recreational craft,

a significant step was taken in

March 2001 with the adoption of the Maritime Code, which is supposed to provide the legal

framework for transposition of the directive. Progress continued in the field of

legal metrology.

The directives on measurement units were implemented on the basis of secondary legislation

adopted in March 2001, and the directives on automatic weighing instruments for single

weighing were implemented on the basis of secondary legislation adopted in May 2001.

Secondary legislation was adopted in September in the areas covered by the Old Approach

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sector specific metrology directives. Secondary legislation was published in June 2001 laying

down the conformity assessment procedure to be followed by the Metrology Institute of the

Republic of Slovenia and determining the markings and certificates.

For

electrical equipment,

the directive on equipment used in potentially explosive atmospheres

(ATEX) was partly implemented in October 2000 through secondary legislation. It should come

into force in mid-2003 or at the latest by accession. Concerning

medical devices,

secondary

legislation was adopted in September 2000 on the basis on the Act on Medicinal Products and

Medical Devices. It is meant to implement the directive. In the area of

gas appliances,

secondary legislation was adopted in October 2000, based on the energy act, implementing the

directive on appliances burning gaseous fuels followed in September by a decision on the

recognition of the type examination certificates concerning EC products.

Progress has continued in the area of

construction products

with the adoption in January and

June 2001 of secondary legislation based on the construction products act, providing for partial

implementation of the general provisions of the directive, in areas such as essential requirements,

conformity assessment, and labelling. The adoption of the harmonised European standards and

European technical approvals covering categories of products started in May 2001 with regard

to cement.

In the area of radio and telecommunications terminal equipment (R&TTE), a first step was

taken with the adoption in April 2001 of the Telecommunications Act. However, a number of

improvements as well as comprehensive secondary legislation will need to be introduced in

order to complete the transposition of the directive.

In the areas covered by

old approach directives,

the sector for

motor vehicles

was

transferred in May 2001 from SMIS to the Directorate for Roads of the Ministry of Transport

where it will perform the type-approval of vehicles. Secondary legislation concerning devices

for connecting vehicles was enacted in December 2000.

In the area of

foodstuffs,

Slovenia continued to adopt secondary legislation based on the act

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

with foodstuffs and on the Agriculture Act. This includes rules on labelling official control, on

spreadable fats, on diet food, on extraction solvents, as well as on the quality of sugar, fruit

juice, marmelade and jam, adopted in December 2000. In terms of institutions, a Foodstuffs

and Nutrition Council was established in March 2001 in the Ministry of Health in order to

obtain the advice of experts when implementing the legislation in this area.

(see also chapter 7,

agriculture)

Concerning

chemicals,

some progress took place with the adoption in September 2000 of

secondary legislation which is meant to implement the

acquis

on drug precursors, the adoption

in July and November 2000 of secondary legislation concerning good laboratory practice

(GLP), and the adoption in March 2001 of secondary legislation implementing the

acquis

dangerous substance and preparations. The Rotterdam Convention on Prior Informed Consent

(PIC) procedure for certain dangerous chemicals and pesticides was implemented through

secondary legislation adopted in June 2001. The Government established in January 2001 an

inter-ministerial commission for the safe handling of chemicals in order to programme and co-

ordinate analyses and actions in this sector. The remaining areas to be covered principally

concern explosives, detergents and fertilisers.

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In the area of

pharmaceuticals,

Slovenia has achieved significant progress since the last

Regular Report by adopting a large part of the required secondary legislation based on the Act

on Medicinal Products and Medical Devices of November 1999. However, the regulatory data

exclusivity over clinical trials and test data supporting applications for marketing authorisations,

which was postponed until 31.12.2002 has not yet been reintroduced. As regards medicinal

products for veterinary use, Slovenia has started to issue secondary legislation, regarding the

exceptional use of medicinal products for the treatment of animals, and the classification,

prescription and administering of these products, and on good laboratory practice in the field of

veterinary medicinal products.

Further progress towards alignment with the

acquis

cosmetics

was made with the adoption

in February 2001 of secondary legislation based on the cosmetic products act, which aim at

fully implementing the directives.

No particular new developments occurred since the last Regular Report in the areas of

pre-

packaging, machinery,

personal protective equipment (PPE), and

textiles and footwear.

progress was recorded in the areas of toys, pressure vessels, lifts, glass, and wood.

As concerns other sectoral legislation, some adjustments to the import regime of firearms were

introduced at the end of May 2001. Concerning the restitution of cultural goods, secondary

legislation laying down the definition of national treasure was adopted on the basis of the

Cultural Heritage Protection Act.

No particular developments have taken place since the last Regular Report in the

non-

harmonised areas.

In the area of

public procurement,

an important step was taken with the foundation in

February 2001 of the Public Procurement Office. The office, whose staff is eventually to be

increased to 15 from the present five, will provide advice and training, and will collect and

analyse data on the procurement procedures. As part of the practical measures to implement

the Public Procurement Act of 2000, the Ministry of Finance published in December 2000

instructions on the format of the public procurement notices in the official journal.

In 2000, the National Review Commission (NRC), an autonomous state body in charge of

appeals from bidders, received 242 claims. In around 115 of these cases the decision of the

awarding authority was partially or totally cancelled; 43% of the claims were rejected as

unfounded, and the remaining claims were declared inadmissible.

Overall assessment

On the whole, legislative alignment in this field is very advanced and the reform of the

accreditation, certification and standardisation functions is starting to bear fruit. Attention should

now be focused on the timely and complete enactment of the remaining secondary legislation

and on the strengthening of the institutional set-up, in particular of the conformity assessment

bodies and of market surveillance.

As regards horizontal and procedural measures, Slovenia has horizontal framework legislation in

place since 1999, implementing fully the principles of the New and Global Approach. The

reorganisation of SMIS has been completed. The next step will be the signature by the SA of

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Multilateral Agreements in the field of Accreditation (MLAs). However, the Standardisation

Institute should be given adequate resources and conformity assessment bodies still need to be

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

requires clearer guidance as well as structured co-ordination between the national authorities

responsible. In the area of standardisation, Slovenia is approaching the level of 80% adoption of

European standards required for membership of European standards organisations. The

situation with regard to the notification procedure and to the interchange of data between

administrations is satisfactory. As regards safety checks on products at external borders,

Slovenia still needs to establish appropriate infrastructure as well as effective administrative co-

operation between the customs and other competent authorities.

Progress has been made in strengthening the institutional set-up, but further efforts are needed

as regards both market surveillance and the preparedness of conformity assessment bodies,

including laboratories. The Trade Inspectorate, which performs most market surveillance tasks

together with the Agriculture, Veterinary, Labour, and Health Inspectorates, currently employs

166 persons, including 143 inspectors. While the legal instrument for transferring type-approval

from SMIS to the Ministry of Transport has been issued, a type-approval body for agriculture

and forestry tractors remains to be identified.

Concerning sector specific legislation, the situation appears satisfactory as regards legislation

adopted by the Parliament, since all key framework legislation has been adopted, except for a

new act on mineral fertilisers. Some fine-tuning in specific areas still remains to be done.

Progress in terms of secondary legislation has allowed a good level of transposition in the areas

of legal metrology, pre-packaging, machinery, PPE, electrical equipment - LVD, ATEX, EMC,

cosmetics, textiles and footwear, as well as partial transposition of the

acquis

on medical

devices, construction products, motor vehicles, foodstuffs, chemicals, and pharmaceuticals. The

pace of adoption of the remaining secondary legislation is slower than initially planned in a

limited number of sectors, notably as regards toys, lifts, pressure vessels, R&TTE, agricultural

and forestry tractors and foodstuffs. For foodstuffs it will be important to terminate the present

system, in which both existing and harmonised provisions continue to apply in parallel, well

before accession, as it could deter economic operators in this sector from adapting sufficiently

early to the conditions of the internal market.

The situation in the non-harmonised sector is on the right track but progress is still slow. Putting

into practice Articles 28 to 30 of the Treaty requires continuous efforts, even if it appears that a

first inventory of technical legislation to be amended has been made. The legislation adopted

over the last two years is either too narrow in scope, such as that relating to restitution of

cultural goods, or should be amended, such as the act on firearms which contains excessive

procedural requirements in terms of minimum periods. For the elimination of indirect barriers to

trade, a first inventory of technical legislation to be amended has been made. Articles 28 and 30

of the EC Treaty also require the examining of other provisions potentially restricting trade such

as price regimes, licensing and registration conditions, or commercial communication

requirements.

While the legislative framework on public procurement is to a large extent in place, further

legislative work is still needed. The legislation adopted in 1999 and 2000 generally meets

recognised international benchmarks but contains a number of limited shortcomings, which

should be addressed. These include the priority given to domestic standards in the rules on

technical specifications, the partial or incomplete transposition of certain concepts, and the

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insufficient independence of the review commission and the scope of the review mechanism.

Efforts should also be devoted to making the newly established Public Procurement Office

operational, and to effectively implementing the legislation at all administrative levels. This will

require sustained training efforts for all bodies involved in the public procurement procedures.

Chapter 2: Free movement of persons

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

In the area of

mutual recognition of professional qualifications,

no major developments

have taken place as regards the horizontal framework.

As regards sectoral alignment, a new Veterinary Service Act was adopted in April 2001,

which adapts the role of the implementing institution to

acquis

requirements.

In order to comply with the

acquis

concerning the legal profession, a new Act amending the

Attorneys Act was adopted in March 2001. It contains provisions for the free movement of

lawyers, which will be implemented upon accession.

As regards

citizen’s rights,

no new developments can be reported.

With regard to

free movement of workers,

between December and January the Government

issued some secondary legislation based on the Employment and Work of Aliens Act. This

legislation is intended to facilitate employment procedures for EU nationals before accession

and to eliminate obstacles following accession. The preparations for the Employment Service of

Slovenia to enter the European Employment Services (EURES) network continued in 2000,

mainly through staff training.

On the

co-ordination of the social security systems

, training has been provided for staff as

part of a two-year programme. The Act Amending the Social Security Act adopted in March

2001 introduces amendments relating to social security payments to foreigners. Upon

accession, workers from other Member States will be eligible for social assistance benefits.

Furthermore, proof of compulsory insurance or sufficient own means of subsistence will not be

required from EU workers and members of their families.

Overall assessment

The level of alignment varies widely in different areas and further efforts are required especially

on mutual recognition of professional qualifications and citizen’s rights.

In the area of mutual recognition of professional qualifications, alignment has advanced only in a

few areas. The Act on National Vocational Qualifications adopted in August 2000 defines the

general system of professional qualifications and training. It defines the roles of the various

institutions dealing with professional qualifications. It is important that the amendments to the

act, which are essential for alignment, are adopted within the planned timetable. Individual legal

acts issued by governmental bodies or authorised organisations of the former Yugoslavia remain

in force, provided their validity has not been revoked by individual acts. This applies to all

diplomas and certificates acquired in the territory of the former Yugoslavia prior to June 1991

that are valid and need no recognition in Slovenia.

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With respect to professional qualifications obtained before harmonisation, Slovenia should

introduce measures to ensure that all its professionals can, as of accession, meet the

requirements laid down by the directives. It will need to be ensured that, by accession, there are

no provisions in Slovenia's legislation which contradict Community rules, notably with respect to

nationality, residence or language requirements. In particular provisions relating to knowledge of

the Slovene language should be proportionate.

As regards citizens’ rights, it is important that the legislation to implement the

acquis

residence rights and voting rights is adopted according to the planned schedule.

Legislation on the free movement of workers already incorporates most of the principles and

provisions of the

acquis

even though a number of these will only become effective upon

accession. Before accession, Slovenia will have to adopt new legislation in order to allow EU

citizens access to certain civil service jobs, and will have to amend the provisions relating to

medical certificates by means of the envisaged Employment Relations Act, which is pending in

parliament.

The Ministry of Labour, Family and Social affairs and the Employment Service of Slovenia will

need to employ or train officials to co-ordinate tasks related to job brokering within the EURES

system.

As regards co-ordination of social security systems, further legislative work is required.

Amendments to the Social Assistance Act, to the Act on Employment and Insurance in Case of

Unemployment, and to the Housing Act remain to be adopted.

As far as the administrative structure in this area is concerned, the co-ordinating unit responsible

for implementation has already been established. However, this structure should be reinforced

through continued increase in staff and training activities.

Slovenia continues to implement the bilateral agreements on social security it has signed with all

Member States except France, Sweden, the UK, Luxembourg and Spain.

Chapter 3: Freedom to provide services

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

As regards

freedom of establishment and freedom to provide services

(other than

financial services), new legislation removing obstacles to free movement in specific sectors has

been adopted. Restrictions to the free establishment and provision of services for distributors of

toxic products were brought in line with the

acquis

in January 2001 and May 2001. In the field

of cultural services, amendments to the Act on the Film Fund adopted in July 2001 repeal the

prior authorisation for foreign film producers. However, a foreign producer will be able to shoot

a film in Slovenia only in co-operation with domestic producers. The Obligations Code was also

adopted in October 2001.

In the field of

financial services,

amendments to the 1999 Banking Act were adopted in July

2001. Their purpose is to align the act with the new

acquis

adopted in 2000 and introduce

some fine-tuning of supervisory rules. The Bank of Slovenia continued its efforts towards

alignment in the banking area by issuing an important piece of secondary legislation aimed at

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transposing the capital adequacy and netting directives. In terms of supervision, the banking

supervision department of the Bank of Slovenia had 44 staff at the end of 2000. The

department continued intense on-site inspections of banks in 2000. 29 inspections were

conducted, of which eight were full-scope inspections. Co-operation agreements were signed

with some EU banking supervisory authorities.

The Insurance Supervisory Agency continued steady progress towards alignment with the

acquis

in insurance by issuing a substantial set of secondary legislation on the basis of the

Insurance Act of 2000, including a number of supervision and prudential provisions. The

Agency for Insurance Supervision, a legally independent institution, reached financial

independence in February 2001. It is now fully financed through proportional fees collected

from the insurance sector. Its staff was substantially reinforced in November 2000, bringing it

up to 17 officers, and is currently undergoing training with foreign assistance. The agency signed

a co-operation agreement with the Bank of Slovenia in November 2000 and another with the

Securities Market Agency in February 2001.

In the area of investment services and securities markets, a Decision of the Bank of Slovenia of

June 2001 establishes an investor compensation scheme, which will become operational in

January 2003. The staff of the Securities Market Agency, which has remained at the same level

since the last Regular Report, received further training.

Concerning the

protection of personal data and the free movement of such data,

Amendments to the Act on Personal Data Protection were adopted in June 2001. These

amendments entrust an independent personal data Ombudsman with the responsibility for

supervision in this area, and foresee an inspectorate for personal data. These replace the earlier

authority for data protection, which reported to the Ministry of Justice.

No particular development occurred in the area of

information society regulations

Overall assessment

Alignment in this area is already advanced, although further efforts are still needed to complete

it.

A large part of the legislative work has been completed as regards the freedom to provide

services. In addition to completing the legal framework, Slovenia should now focus on the

practical implementation of the

acquis,

in particular through the strengthening of the supervisory

institutions, and on the structural economic measures necessary to achieve smooth opening of

financial services markets.

Alignment with the

acquis

is well under way as regards direct discrimination against freedom of

establishment and freedom to provide services. The new obligation code is intended to comply

with the

acquis

related to self-employed commercial agents. Further amendments to

Parliamentary legislation are also needed to remove obstacles to free establishment and free

provision of services in a few sectors including agriculture and forestry, cultural activities and

film production, and real estate agents. In addition to the complete removal of direct

discrimination, further attention should now be focused on indirect discrimination.

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As regards banking, Slovenian legislation is already aligned to a high degree, also concerning the

free establishment of foreign banks. The provisions requiring adjustments concern prudential

requirements on capital adequacy, as well as the home country control principle, which there

are plans to incorporate into secondary legislation at accession. The cross-border dimension of

deposit insurance (coverage of branches abroad) should be taken into account in this context.

Slovenia should now enhance its efforts to ensure effective implementation and supervision of

the legislation, as well as to expand co-operation with other European supervisory authorities.

In the area of insurance, Slovenia still needs to pass new legislation in order to align with the

acquis

as regards compulsory insurance for motor vehicles. Otherwise Slovenian legislation is

largely aligned with the

acquis,

even if some provisions will only be applied gradually. Some

further adjustments to secondary legislation will be required on accession in order to implement

the home country control principle. Continued efforts are needed to reinforce the supervisory

body in order to ensure sufficient intensity of controls.

In the area of investment services and securities markets, an important step remains to be taken

through adoption of legislation on investment funds and management companies, following in

particular the UCITS (Undertakings for Collective Investment in Transferable

Securities)Directive. A few parts of secondary legislation remain to be enacted on the basis of

the Securities Markets Act. All in all, however, the level of legislative alignment is quite

advanced. Attention will have to be paid to the effective fulfilment by the securities markets

agency of its new supervisory tasks, and to more systematic co-ordination with the other

supervisory bodies.

In conclusion, a substantial level of approximation with the

acquis

has been achieved in financial

services, and a clear timetable for market opening has been set. However, there are still

concerns as regards the preparedness of the sector for increased competition, since the market

structure is still characterised by a combination of persistent dominant positions and a number of

scattered small undertakings, and the ownership structure has only evolved to a limited extent.

This is especially the case in the insurance sector, where a new act on ownership transformation

of insurance companies should be prepared and adopted following the decision of the

Constitutional Court in May 2001 to annul the Act adopted in January 2000.

The legislative framework for the protection of personal data and the free movement of such

data is almost entirely in line with the directive. However, further fine-tuning is needed, notably

as regards the movement of data.

Slovenian legislation is almost entirely in line with the information society regulations contained in

the

acquis.

Chapter 4: Free movement of capital

Overall, Slovenia has continued to make good progress in this area.

Significant progress has been made during the reporting period in the area of

capital

movements and payments.

The Bank of Slovenia lifted some restrictions in the area of money

transactions pursuant to the Foreign Exchange Act at the end of year 2000. Foreign nationals

are now allowed to withdraw any amount of cash, the premium for the right to buy foreign

exchange from the Bank of Slovenia was lowered from 0.4 to 0.2% and the period, during

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which foreign buyers of securities are not allowed to sell them free of charge was shortened

from one year to six months. In addition, some restrictions concerning securities operations

between residents and non-residents were abolished, inter alia the obligatory custody accounts

for the purchase of securities as portfolio investment by non-residents. New framework

legislation adopted since the last Regular Report lifted the restrictions on foreign direct

investment in the telecommunications, media, auditing and transport sectors. In the latter, the

new aviation act foresees the removal of restrictions by accession. Regarding payments,

Slovenia started in September 2000 the implementation of the programme for reform of

payments by transferring the accounts of legal entities from the central payment agency to

private banks.

No particular developments can be reported in the field of

cross border credit transfers

Overall assessment

On the whole, the preparations in this area are very advanced. The Foreign Exchange Act,

adopted in March 1999, brought the scope and concept of capital movements in line with the

acquis.

Slovenia has continued to abolish the remaining restrictions gradually in accordance with

the liberalisation timetables. It is important that Slovenia maintains the timetables set and

abolishes all the remaining restrictions, in particular concerning short-term transactions, foreign

direct investments in investment funds and management companies.

Slovenia introduced a real time gross settlement (RTGS) system in 1998. A Giro clearing

system for retail payments was introduced in 1999 and a decision was adopted on the

conditions and methods for carrying out international transactions. The legislative developments

and the ongoing reform of the payment system confirm the good overall progress of Slovenia in

this area.

Slovenia has made good progress in the field of cross border credit transfers and it has already

partially transposed the relevant

acquis

by adopting a decision on the conditions and the

methods for carrying out international transactions. However, alignment remains to be

completed and an adequate and effective complaints and redress procedure for settlements in

this area still needs to be implemented.

Slovenia’s legislation concerning

money laundering

is in line with the

acquis.

Compliance with

the recommendations of the Financial Action Task Force should be ensured.

Further liberalisation of capital movements does not require additional administrative capacity,

due to the abolition of control mechanisms. However, well-trained staff and an efficient

reporting system on cross-border transactions within the Bank of Slovenia are necessary to

monitor capital flows effectively.

Chapter 5: Company law

Slovenia has made significant progress in this area since the last Regular Report.

Regarding

company law

as such, the Act amending the Act on Commercial Companies was

adopted in May 2001. Provisions on mergers and capital increases have been incorporated and

provisions for publication of business reports are now provided for. The act also reduced the

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scope of the provisions concerning the compulsory use of the Slovene language inside

companies.

The last implementing regulation to be adopted on the basis of the Accountancy Act, the

Instructions on the method and time periods for adjusting assets and liabilities and on equity

investments, was adopted in January 2001. The Auditing Act was adopted in January 2001.

The law, which aligns with the relevant directive, also abolishes restrictions on the establishment

of foreign audit firms.

As regards the

protection of intellectual and industrial property rights,

the Act Amending

the Copyright and Related Rights Act was adopted in January 2001. This law aligns with the

directives on protection of copyright and related rights, on the legal protection of services based

on conditional access, and on the legal protection of databases. The Act further introduces

more efficient protection of authors’ rights and measures against violations of these rights. The

Amendments to the Industrial Property Act were adopted in May 2001. This act aligns the

legislation with the EU directives relating to trademarks and to the legal protection of designs.

The Act on Customs Measures Relating to Infringement of Intellectual and Industrial Property

Rights was adopted in April 2001. It regulates the measures to be taken when goods that may

infringe intellectual property rights are found during a control operation. It aligns Slovenian

legislation with the border enforcement

acquis

and should facilitate the transition to the direct

application of the EC Regulation upon accession.

Regarding administrative capacity, the Slovenian Intellectual Property Office (SIPO) concluded

a Memorandum of understanding with the Office for Harmonisation in the Internal Market

(OHMI) as regards trademarks and designs. A new Institute of Information Society on

Copyrights and Related Rights was established. Six examiners from the Intellectual Property

Office (SIPO) have undergone a training programme on the CTM registration procedure. Two

training seminars were organised on the extension of European patents to Slovenia and the

SIPO recruited three experts in this field. Customs officers also received training on EC

legislation in 2000.

Regarding the

Regulation replacing the Brussels convention

on jurisdiction and

enforcement of judgements in civil and commercial matters and

the Rome convention

on the

law applicable to contractual obligations, no particular developments occurred.

Overall assessment

The degree of alignment achieved in this sector can be regarded as generally satisfactory.

The Slovenian legislation on company law has been largely aligned with the

acquis

with the

adoption of the Act Amending the Companies Act. However, the practical implementation of

the provisions on the use of language will have to be examined in the light of the principle of

proportionality. No further legislative amendments are required, except for the detailed

accounting standards in the field of auditing and accounting to be laid down by the Slovenia

Auditing Institute after approval of the Ministry of Finance. The administrative structures are in

line with the

acquis.

Since the new companies act will be implemented by business entities, no

strengthening of the administrative system is required.

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Regarding intellectual property, the amendments adopted in January 2001 provide for a

considerable degree of alignment, expect for certain aspects of authors’ rights and their

collective management. The legislation on industrial property is also almost fully in line with the

acquis,

except for the protection of biotechnological inventions on which implementing

regulations will be needed. The legislation concerning border enforcement appears satisfactory.

Slovenia has ratified the two 1996 World Intellectual Property Organisation (WIPO) Treaties.

As far as administrative capacity is concerned, all necessary institutions are now in place. The

Slovenian Intellectual Property Office is qualified to implement the legislation. The Office

currently employs fifty persons. Attention should be paid to ensuring efficient judicial

enforcement in cases of violation of intellectual and industrial property rights. Upon accession to

the EU, the Ljubljana Regional Court will acquire the status of the Community trademark court

of first instance. Judges should be further trained in this field, and customs officers and

policemen should be trained in prevention of trade in counterfeit trademarks and pirated goods.

The improvement of co-operation among the law enforcement bodies should also be

maintained.

Chapter 6: Competition policy

Since last year’s Regular Report, Slovenia has continued to make progress in this area, in

particular in the field of state aid.

In the field of

anti-trust,

the implementation of the Act on Prevention of Restriction of

Competition and related legislation has continued. The Competition Protection Office, which is

the national competition authority in Slovenia, has a staff of 11. In 2000, the Office initiated 43

procedures, of which four concerned restrictive agreements, three were procedures initiated for

abuse of dominant positions, and 36 concerned mergers. The Office adopted 51 final decisions.

Of these, nine concerned restrictive agreements, three abuse of dominant positions and 39

merger cases. However, no fines or court judgements have been issued in 2000.

In the field of

State aid,

Slovenia continued implementing the State aid control act. The new

Government standing orders, adopted early this year, require the opinion of the state aid control

body whenever a measure involving State aid is submitted to the Government. As regards

existing aid schemes, the Government continued implementing a programme on harmonising the

existing state aid with EC standards. With regard to transparency, the quality of the State aid

report and the inventory are good.Full coverage, however, requires the inclusion of all relevant

legislation on taxation, as well as the activities of the state-controlled holdings.

The Government approved a regional aid map, which provides for some differentiation of aid

intensities between Central Slovenia and the other NUTS III regions, in June 2001.

The Government took a decision in April 2001 to modify the composition of the national state

aid monitoring authority, the Commission for the State Aid Control. The Commission relies on

the administrative and technical support of the State Aid Control section, which was transferred

at the end of 2000 from the Ministry of Economic Relations and Development to the Ministry of

Finance. It now employs twelve people who have benefited from training, along with the staff of

other ministries involved in State aid. Programmes of adjustment for the leather, footwear,

textile and apparel industries are being implemented for the period 2000-2003. The

restructuring programme for the steel industry has been approved by the European

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Commission. Overall, from its creation in February 2000 until 30 June 2001, the Commission

received 152 notifications or amendments thereto. The State Aid Control Commission declared

41 of these to be compatible and 51 conditionally compatible. In 39 cases it informed the

notifying body that the measure did not constitute state aid. In one case (the Slovenian regional

aid map), the Commission issued a positive assessment. Four notified cases were pending at the

end of June 2001.

Overall assessment

Preparations in Slovenia are advanced in this area.

As regards anti-trust, Slovenia’s legislation covers most of the

acquis

provisions and the

existing legislation is in line with the EC rules. The Competition Protection Office has broad

powers to enforce competition rules and its staffing is being reinforced. The most important

challenge for the office is now to ensure that the application and enforcement of the anti-trust

rules is effective and that priority is given to cases that concern the most serious distortions of

competition. This implies that attention should now be paid to developing an effective fining

policy as well as to the enforcement of the rules by Courts.

As regards state aid, an important step has been taken with the adoption of the framework

legislation. Following the introduction of secondary legislation, the existing provisions are now

largely in line with the

acquis.

Efforts have also been made in the fields of industry adjustment

and restructuring programmes and schemes. Particular attention should now be paid to the

alignment of existing aid measures and old legislation on the basis of which aid continues to be

granted. This will notably imply repealing the export-based criterion for tax reduction contained

in the Act on Economic Zones, and placing the activities of the Government-owned holding, the

Slovenian Development Corporation (SDC), under the scrutiny of the State aid control

commission. The State aid Commission has already scrutinised a large number of aid proposals

submitted to it by the aid granting bodies. The main priority is now to ensure that the

enforcement of the state aid rules is systematic and that existing aid schemes and legislation

under which authorities at various levels grant aid are aligned swiftly.

In order to ensure a differentiation of maximum aid intensities in assisted areas, Slovenia is in the

process of agreeing a regional aid map with the Commission.

Chapter 7: Agriculture

Agriculture in Slovenia accounted for 3.2% of gross value added (GVA) in 2000, as opposed

to 3.6% in 1999

. Employment in agriculture has decreased and accounts for 9.9% of total

employment (compared to 10.2% in 1999)

Data of the Statistical Office of the Republic of Slovenia on agricultural output in 2000 show

that the production of crops from industrial and fodder plants fell by a quarter compared to the

previous year, as a result of a drought during the growing period and smaller areas planted. The

drought also had a negative effect on the volume of hay gathered on permanent grasslands,

The source for all agricultural statistics is EUROSTAT unless otherwise specified.

Eurostat Labour Force Survey definitions. Agricultural employment is defined in LFS terms as economically active

persons who gain a significant part of their income from agriculture.

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while the production of wheat grew by 6% due to the introduction of direct payments and larger

areas sown. Fruit crops were abundant in both orchard plantations and extensive orchards. The

yield of grapes was also bigger compared to harvests last year. Livestock production, whose

share of total agricultural production is increasing, was characterised by problems in cattle

breeding and lower consumption of beef. Pig breeding has remained profitable this year.

In 2000, EC imports

of agricultural products originating in Slovenia increased by 4% to €93.3

million. EC exports to Slovenia increased by 3% to €431.1 million. The trade balance in favour

of the Community amounted to €337.8 million compared to €325 million in 1999. The most

important product group in terms of EC imports from Slovenia is meat and edible meat offal. As

far as EC exports to Slovenia are concerned, the most important sectors are tobacco, various

food preparations and fruits.

In April 2001 the Commission and the Republic of Slovenia reached an overall agreement on

wine and spirits comprising a new preferential trade regime for wine and the reciprocal

protection and control of wine names and spirit designations. The agreement will take the form

of an additional protocol to the Europe Agreement and is due to enter into force on 1 January

2002

(see section A.b. – Relations between the European Union and Slovenia).

The budget for agriculture was increased by 10% in 2001 to €213 million, following last year’s

increase of 37%. €102 million has been allocated to implement the newly issued market orders

which aim at bringing agricultural markets up to EC standards and stipulate the amount of direct

payments per hectare or animal. €8.8 million out of the total budget for agriculture has been

allocated to the promotion of environmentally friendly production.

According to the Government, a decision on returning property to previous owners has been

made concerning in total approx. 51% of agricultural land and 67% of forests.

Horizontal issues

Good progress has in general been made in this field since last year’s Regular Report.

As regards the implementation of measures related to the

European Agricultural Guidance

and Guarantee Fund (EAGGF),

The capacity of the Agency for Agricultural Markets and

Rural Development (AAMRD) has been strengthened further. The Agency, already established

within the Ministry of Agriculture, Forestry and Food (MAFF) in 1999, is responsible for the

implementation of the SAPARD pre-accession fund

(see section A.b. – Relations between the

European Union and Slovenia),

national support schemes as well as for the tasks related to

the Common Agricultural Policy and the Paying Agency for the management of EAGGF funds

after accession. Recruitment and training of staff is ongoing. 84 of the envisaged total staff of

143 were employed by 15 June 2001.

Concerning the

Integrated Administration and Control System (IACS),

a Decree on the

implementation of agricultural policy measures for 2001 was adopted in April 2001. The decree

establishes the procedures for the introduction of direct payments, administrative and on-the-

Uruguay Round definition of agricultural products, figures taken from EUROSTAT COMEXT (see U.E. 12/15:

Commerce des Produits Agricoles 1988-2000, 1 Partie D.G. AGRI/A.2 Analyses quantitatives, prévisions, statistiques,

études, 2001, p. 10-57 et 86-89)

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spot checks. The AAMRD is the body responsible for the operational implementation and the

setting-up of IACS.

Slovenia has continued to update the databases required for the implementation of IACS, such

as the register of agricultural holdings, the cadastre of actual agricultural land use, the central

animal register and the record of less-favoured areas. On-line links with the register of spatial

units, the central numerical data base of the land cadastre and the business register have been

set up. Digitalisation of the land cadastre is currently under way and is due to be ready by the

end of 2002. The information infrastructure for the establishment of databases referring to

livestock as well as an official eartag system and the unified central register for bovine animals

were established at the end of 2000. Actual land use monitoring data are gathered from digital

orthophoto maps on a scale of 1:5000. In the field of

trade mechanisms,

the competence to

implement the tariff quota system for agricultural and foodstuffs products was attributed to the

AAMRD and the tariff quota system was further aligned with the

acquis

as of 1 January 2001.

The distribution of quotas is now carried out in two ways (“first come – first serve” principle as

well as a licensing system comparable to the EC system). The Customs Administration of the

Republic of Slovenia monitors the carrying-out of imports within tariff quotas and notifies the

AAMRD of the situation daily.

In relation to

quality policy,

a decree laying down the conditions for the use of the designation

of geographical indications as well as several implementing decrees concerning the quality of

agricultural products and foodstuffs have been adopted since the last Regular Report. The

Office of the Republic of Slovenia for the Recognition of Denominations of Agricultural

Products and Foodstuffs was established in December 2000 and its capacity is currently being

upgraded. The Inspectorate for Quality Control of Agricultural Products and Foodstuffs, which

has already been established but is not yet operational, will be authorised to carry out checks on

quality of production, processing and trade in agricultural products and foodstuffs.

In the area of

organic farming,

rules on organic production and processing of agricultural

products and foodstuffs, laying down the production methods and procedures, control,

denomination and conditions for the use of the indication “organic” were adopted in March

2001. Criteria for the designation of “organic product” are defined in the Agriculture Act of

2000. Organic farming aid, provided since 1998, is also continuing in 2001.

Concerning the preparations for Slovenia’s participation in the

Farm Accountancy Data

Network (FADN),

Slovenia plans to collect and analyse FADN data at future NUTS 1

(national) level.

Common Market Organisations

Since last year’s Regular Report, Slovenia has made good progress as regards the introduction

of a legal framework and administrative structures for the establishment of Common Market

Organisations.

Decrees on the organisation of markets in milk and milk products, beef, goatmeat and

sheepmeat, cereals, fresh fruit and vegetables, olive oil, sugar, wine grapes, must and wine,

hops and seeds of agricultural plant species have been adopted since the last Regular Report.

The newly issued market orders stipulate the amount of direct payments per hectare or animal.

In case of beef, sugar and wheat, intervention conditions for intervention buying-in are defined.

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Furthermore, regulations setting-up the market information systems for milk, beef, pig meat,

sheep meat and goat meat as well as several technical regulations concerning the quality of

agricultural products and foodstuffs have been adopted since the last Regular Report. Direct

payments, already introduced in 2000, are being increased in 2001.

The legal basis for setting up producers’ organisations has also been provided for, with the

adoption of the above-mentioned decrees on the different market organisations, as well as with

the adoption of the Agriculture Act.

Rural development and forestry

Some progress has been made as regards

rural development

since the last Regular Report. In

April 2001, Slovenia adopted a Decree on the Slovenian agri-environmental programme and

the introduction of direct payments for 2001 measures as well as the Decree on the introduction

of compensatory payments for less-favoured areas. Further implementing decrees as regards

the type, scope and conditions for carrying out supplementary activities on farms as well as on

the actual programmes to be implemented in 2001 were adopted in June/July of 2001, in order

to identify the eligible measures and projects. No particular developments have taken place in

the field of

forestry

since the last Regular Report.

Veterinary and phytosanitary issues, including food safety

Since last year’s Regular Report Slovenia has made very good progress in the

veterinary

sector.

The new Veterinary Practice Act, adopted in April of 2001, lays down the organisation and

competencies of the veterinary services as well as the basic measures in the veterinary field and

regulates the area of financing of veterinary expenditure. It provides the legal basis for the

adoption of implementing regulations aiming at transposing the veterinary

acquis,

which was not

feasible in some areas under the previous Veterinary Practice Act.

In the field of

veterinary control,

a unified ear tag system for bovine animals and a Central

identification and registration of animals within the Ministry of Agriculture, Forestry and Food is

responsible for the management of the central register. Slovenia has already joined the ANIMO

system on a voluntary basis. The new Veterinary Practice Act and the Order on fees in the

veterinary sector of May 2001 set out the provisions relevant to the financing of veterinary

inspections and fees.

With regard to

control of animal diseases and animal health,

Slovenia discontinued

vaccination against Classical Swine Fever as of 1 November 2000. Furthermore, two

contingency plans in case of an outbreak of compulsorily notifiable diseases, i.e. foot-andmouth

disease and classical swine fever have been adopted since the last Regular Report.

Rules on the conditions and the method of transportation of animals on the basis of the

Protection of Animals Act were adopted in the field of

animal welfare

in September 2000.

Several implementing regulations have been adopted in the field of

common measures

and

public health,

and

animal waste treatment

since the last Regular Report. As regards

animal

nutrition,

the Feedingstuff Act was adopted in March 2001 and amended Rules on suitability

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of animal feed came into force in April 2001 transposing the

acquis

concerning medicated

feedingstuffs. No particular progress can be reported concerning

zootechnics.

The Veterinary Administration of the Republic of Slovenia (VARS) has issued several

regulations relating to alignment with the recently adopted

acquis

on Transmissible Spongiform

Encephalopathies (TSE). Rapid prion tests for all animals over 30 months were introduced in

February 2001. In its assessment of the Geographical BSE risk of May 2001, the EU Scientific

Steering Committee placed Slovenia in group II.

The Veterinary Administration of the Republic of Slovenia (VARS) is undergoing a

reorganisation due to the adoption of the new Veterinary Practice Act. The Animal Health

Centres are due to be abolished by December 2001 and their remaining staff (around 40) will

be reallocated to the National Veterinary Institute or to the VARS. The Veterinary Practice Act

provides for the establishment of the National Veterinary Institute, which will be the national

reference laboratory for veterinary issues and will be located at the premises of the former

Central Veterinary Institute.

In the

phytosanitary sector,

good progress has been made since last year’s Regular Report.

As regards

plant health (harmful organisms and pesticides)

two framework laws, the Plant

Protection Products Act and the Plant Health Act, have been adopted. The Plant Protection

Products Act, adopted in January 2001, regulates all the procedures concerning the registration,

placing on the market and use of plant protection products (pesticides). The Plant Health Act,

which was adopted in May 2001, provides the regulatory framework for plant health (harmful

organisms). It also provides the legal basis for the establishment of the Plant Protection and

Seeds Administration. Furthermore, several implementing regulations concerning control

measures against certain harmful organisms, authorisations granted to public institutes,

conformity certificates for plant protection products as well as a list of plant protection products

registered in the Republic of Slovenia have been adopted since the last Regular Report.

Rules on the certification of the health status and quality of seed potatoes were adopted in the

field of

quality of seeds and plants

in November 2000.

No particular developments have been registered as regards

forest reproductive material,

plant variety rights

and

plant hygiene.

With regard to

border inspection posts (BIPs)

carrying out the veterinary and phytosanitary

checks at Slovenia’s future external borders, progress has been made in the establishment of

one of the three main border crossings at the border with Croatia. The land for the border

crossing at Obrezje has already been located and the plans for the phytosanitary and veterinary

inspection facilities have already been drawn up.

As regards

food safety

(see also chapter 1 - Free movement of goods),

Slovenia submitted

its Food Safety Strategy to the Commission in April 2001. The Strategy outlines the legislation

already in place or still to be adopted which will ensure the transposition of the

acquis

in this

area, the co-ordination of the various official bodies involved, and their competencies,

organisation and staffing.

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Overall assessment

Overall, the preparations for accession are well advanced in this area although further work still

remains to be done.

Slovenia has continued the preparations for the setting-up of the basic mechanisms for the

management, implementation and enforcement of the Common Agricultural Policy (CAP). The

legal basis allowing for the transposition of the

acquis

in this area, the Agriculture Act, was

adopted in 2000. The relevant institutions have already been set up. However, the effective

implementation of all measures related to the CAP in Slovenia will require substantial new staff

at the Ministry of Agriculture, Forestry and Food and at regional level. Slovenia should

therefore further increase its administrative capacity, in particular at the level of the agricultural

inspection services.

Slovenia’s farm structure is dominated by small private farms that cultivate over 90% of

agricultural land and account for about 75% of agricultural output. This unfavourable farm

structure is reflected in the average holding size of 4.8 ha, lower production and a small share of

full-time farmers. Although the apparent economic importance of agriculture is low and declining

in macro-economic terms, it plays an important role in maintaining a social and territorial

equilibrium. Some progress has been made with the denationalisation of agricultural land and

forests. However, this process still needs to be speeded up. Delays in this area constitute a

strain on the development of the agricultural sector in Slovenia as well as on the suitable

identification of land for CAP purposes.

As regards

horizontal issues,

the implementation of the

acquis

concerning the European

Agricultural Guidance and Guarantee Fund (EAGGF) is well under way. The preparation of the

Integrated Administration and Control System (IACS) is also continuing in a satisfactory way.

Slovenia plans to continue investments up to 2003 concerning transition to a GIS (geographical

information system) based IACS. Slovenia should further continue its efforts to establish other

main CAP mechanisms, such as the register for agricultural holdings and the land cadastre of

agricultural land use. Slovenia has already been using the Farm Accountancy Data Network

(FADN) on a voluntary basis since 1994.

Slovenia has introduced a substantial number of decrees for the implementation of the

Common

Market Organisations

. In particular, substantial progress can be noted regarding the

establishment of market information systems for several agricultural sectors. The legal

framework has been created. This is a step in the process of alignment with the agricultural

acquis, which will be directly applicable upon accession.

In the area of

Rural Development and Forestry,

while Slovenia introduced a system of

direct payments for the environment and landscape protection measures and compensatory

payments for less-favoured areas already in 1999, some further work is still required in this

area. According to the Slovenian Agri-Environmental Programme, adopted in April 2001,

support for environmental direct payments is due to increase substantially in the next two years.

As regards forestry, the adoption of legislation amending the Forest Act and the Agricultural

and Forest Funds Act is running behind schedule. Alignment with the

acquis

in this field should

not be further delayed, since Slovenia is highly forested.

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Concerning the

veterinary field,

the adoption of the New Veterinary Practice Act was an

important step forward.

In the area of

veterinary control,

the registration and identification of bovine animals is being

put in place. The systems for porcine and caprine animals still need to be set up. In the field of

control of animal diseases and animal health,

preparations for participation in the animal

disease notification system (ADNS) have been completed.

Regarding

animal welfare,

Slovenia still needs to make some progress to align its legislation

with the

acquis,

in particular as regards the protection of animals kept for farming purposes.

The legal basis, the Law on Animal Protection, was already adopted in 1999.

Good progress has been made in the field of

animal waste treatment

with the adoption of

several decrees, mainly in relation with TSE. There is already one operational animal-waste

processing establishment in Slovenia which meets the technical requirements for high-risk waste

prescribed by the relevant Council Directive on animal waste.

With regard to

common measures,

the legal basis, the law on Medicinal Products and Medical

Devices Act, has already been adopted. The

acquis

public health

has already been

transposed widely.

Further efforts should be made as regards

animal nutrition.

The Medicinal Products and

Medical Devices Act provides the legal basis for a regulation defining the substances the use of

which is prohibited for the purpose of breeding. It also sets out the conditions under which these

substances may be used for therapeutic and certain zootechnical purposes and controls the

trade in and use of these substances. As regards

zootechnics,

Slovenia still needs to regulate

the system of herd books (registering animals, identification of pure bred breeding animals etc.).

The capacity of the VARS is improving steadily. In particular, during the BSE crisis the VARS

proved its ability to react in crisis situations as it was able to implement appropriate measures

rapidly. Nevertheless, its administrative capacity still needs to be strengthened. The VARS is

undergoing a reorganisation following the approval of the new Veterinary Practice Act. The

VARS and the National Veterinary Institute will be reinforced by staff from the Animal Health

Centres due to be abolished by December 2001. The Veterinary Practice Act also provides for

the establishment of the National Veterinary Institute and will serve as the national reference

laboratory independent of the Veterinary Faculty.

Good progress has been achieved in the

phytosanitary sector.

The framework legislation

allowing for further alignment with the

acquis

in the field of

plant health (harmful organisms

and pesticides), plant hygiene

and

plant variety rights

is already in place. The legal basis as

regards

quality of seeds and plants

and

forest reproductive material

still needs to be

harmonised with the

acquis.

The phytosanitary service currently consists of the administration part within the MAFF, the

inspection part within the Inspectorate for Agriculture, Forestry, Hunting and Fisheries (IAFHF)

and the expert part within the authorised institutes and/or public institutions. The legal basis for

the Plant Protection and Seed Administration (PPSA), a body within the MAFF which will be

the central authority responsible for phytosanitary issues and reporting to the European

Commission, was created by adoption of the Plant Health Act. The setting-up of this

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administration will entail a re-organisation of the phytosanitary service. Training of administrative

staff and inspectors is currently ongoing.

However, although major steps have been taken as regards the transposition of the

acquis

its

effective implementation still requires some efforts, in particular as regards administrative

capacity.

Slovenia plans to have three road

border inspection posts (BIPs)

on the border with Croatia

(Obrezje, Jelsane and Gruskovje), one BIP at Ljubjlana Brnik airport and one in the port of

Koper for veterinary and phytosanitary checks at its future external border. Preparations for

alignment with the

acquis

in this area are quite costly and time-consuming and should be given

high priority. Procedures for import control in the veterinary and phytosanitary field are currently

being developed with Community assistance.

As regards

Food safety

Slovenia is progressing satisfactorily in aligning its food safety

standards.

Chapter 8: Fisheries

Since the last Regular Report, some further progress has been made in this domain.

As regards

resource management, inspection and control,

a Department for Freshwater,

Marine Fishery and Fish Farming has been established in the Ministry of Agriculture, Forestry

and Food, and its staff has been slightly reinforced. The fisheries institute was transformed into a

Fisheries Research Institute of Slovenia in April 2001, and will become a focal point for

scientific advice on sea resources. The Maritime Code, which was adopted in March 2001,

establishes the legal basis for the monitoring of fishing vessels by the inter-ministerial CROSS

centre. Monitoring and reporting on fish resources and fishing activities is being improved in the

framework of an international project covering Adriatic fisheries.

In the field of

structural actions,

Slovenia’s Rural Development Plan for 2000-2006 was

approved by the Commission in October 2000. It contains a section on fisheries, which will

serve as a basis for the implementation of the structural policy in the sector. As regards fleet

registration, an important step towards the introduction of the fishing vessel register has been

achieved with the adoption of the Maritime Code.

No particular developments are to be reported in the areas of

market policy, state aid to the

fisheries sector,

and

international fisheries agreements.

Overall assessment

Slovenia's fisheries policy is partly aligned to the

acquis

in this area, but further work is needed

to complete alignment.

Slovenia’s legislation and administrative structure are nearly able to meet the requirements of the

Common Fisheries Policy. However, the framework legislation on sea fisheries and secondary

legislation in the areas of market policy and resources management remain to be adopted.

Further efforts are also needed as regards the administrative capacity, notably the designation of

staff for implementing the market policy and the reinforcement of the sea fisheries control and

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inspection. Inspection is currently carried out by one specialised sea inspector. Efforts should be

continued to turn the Fishing Fleet Register managed by the Ministry of Transport into an

operational tool of the fisheries policy. The inter-ministerial CROSS centre in charge of

monitoring vessels should now be made operational.

It should be noted that Slovenia has a fisheries agreement with Croatia, but that the possibilities

provided by that agreement are not being used, even though it is automatically extended each

year. Slovenia also participates in fisheries co-operation within the UN Food and Agricultural

Organisation, and is a member of the General Fisheries Commission for the Mediterranean.

Chapter 9: Transport policy

Since the last Regular Report, Slovenia has continued to align its legislation with the

acquis

and

achieved significant progress, in particular in the fields of road transport, air transport and

maritime transport with the adoption of new framework legislation.

As regards

Trans-European Transport Networks,

Slovenia has continued the construction

of its motorway network in Trans-European Corridors V and X in accordance with the

National Motorway Construction Programme. The Programme, the estimated investment value

of which totals €280 million for the year 2001, is approximately half-complete. The Government

adopted a highway construction and maintenance programme for this year in June 2001. The

modernisation of the existing railway infrastructure has progressed in accordance with the

National Programme of the Slovenian Railway Infrastructure Development. The rehabilitation of

the existing railway lines is under way, and a new direct railway link with the Republic of

Hungary was opened along Corridor V in May 2001. Slovenia has also agreed with Italy on the

alignment of the future high-speed rail link between the port of Venice and Ljubljana. Slovenia

has also created a programme for port infrastructure development in the Port of Koper which is

linked to the Trans-European Network.

In the

land transport

sector, significant progress was achieved in the field of

road transport

with the adoption of the new Road Transport Act in July 2001. The law aligns different aspects

of road transport with the

acquis,

such as access to national and international passengers and

goods transport market. Two important pieces of legislation were adopted pursuant to the

Transport of Dangerous Goods Act, namely the Rules on safety, in September 2000, and the

Rules on the professional qualifications certificates of safety advisers in February 2001. Slovenia

signed the European Agreement on International Occasional Carriage of Passengers by Bus

(INTERBUS) in December 2000.

A new Road Transport Inspectorate, which will issue EC licences for road transport operators

and enforce legislation, was established in March 2001. It is at present staffed with 30 people,

and the Government has approved the recruitment of 20 new staff in the next two years.

railways,

secondary legislation has been adopted to achieve further alignment with the

acquis,

notably in the fields of public service obligations, the operation and maintenance of

safety systems and infrastructure investment. The Railway Transport Safety Act was adopted in

November 2000 regulating the railway infrastructure, railway rolling stock, rules on the

operation of control and safety systems.

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The Directorate for Rail Transport responsible for licensing railway undertakings, certifying

railway safety, setting infrastructure charges and allocating infrastructure capacity started to

recruit its new staff. It currently has 21 employees and an additional 12 are foreseen to be

recruited.

As concerns

air transport,

Slovenia adopted the Aviation Act in February, and it entered into

force in April 2001. It sets the conditions and requirements concerning, among others, aircraft,

flight personnel and other technical staff, air transport operations and other aviation activities,

airports, infrastructure of air traffic navigation services, air traffic safety, investigation of civil

aviation accidents and incidents, operation of airport services and navigation services in air

transport, public infrastructure and supervision and sanctions in case of aviation offences.

Slovenia became a full member of the Joint Aviation Authority (JAA) in April 2001.

A new investigating body is currently being set up in order to carry out tasks related to the

investigation and prevention of civil aviation accidents and incidents pursuant to the Aviation

Act. In order to implement the harmonised legislation, Slovenia has reinforced staffing at the

Civil Aviation Administration and additional training of staff has been carried out.

As regards

maritime transport,

Slovenia has made substantial progress, notably in terms of

safety, by adopting the Maritime Code in March 2001. Slovenia also adopted the relevant

International Maritime Organisation (IMO) Conventions in the area of “Oil Pollution” in the

reporting period.

Slovenia was admitted to the White list of the STCW Convention (International Convention on

Standards of Training, Certification and Watchkeeping for Seafarers) which regulates

certification of seafarers in June 2001.

The maritime transport administration has been strengthened by the setting-up of the CROSS

Centre, responsible for the management of Vessel Traffic System and navigational safety

control.

Overall assessment

Slovenia's legislation in the transport sector is already to a great extent in line with the EC

acquis.

Three framework laws are now in place: the new Road Transport Act, the Maritime

Code and the Aviation Act, although there are still a number of technical details and secondary

legislation which remain to be implemented.

A transit country, Slovenia continues to participate actively in the development of Pan-European

transport corridors V and X and is engaged in a major investment and upgrading programme of

its road and railway networks. However, there are concerns regarding the timetable for

motorway construction work since progress has been limited in 2001. As regards the recently

adopted highway construction and maintenance programme, contributions from petrol tax,

motorway tolls and loans are now expected to amount to less than half of the forecast. This

could severely limit the planned construction work.

While significant progress has been made on road transport with the adoption of the Road

Transport Act, the Road Transport Safety Act and the Public Roads Act will still have to be

amended. The railways sector is close to alignment with the

acquis

but further efforts will be

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required to align with the new railways

acquis.

This will imply further restructuring of the state-

owned railway company as well as market opening for freight transport.

The field of air transport has been largely aligned with the

acquis

with the adoption of the

Aviation Act, although implementing legislation is still needed. Slovenia has confirmed its

commitment to accelerate harmonisation before accession through the European Common

Aviation Area (ECAA) agreement, and is in the process of introducing the constitutional

reforms that will facilitate ratification.

The field of maritime transport is to a great extent aligned with the

acquis,

now that the

Maritime Code has been adopted. Implementing legislation is still required in the following fields:

port State control, maritime navigation in territorial sea and internal waters, entry of ships and

floating objects in the ship's register, and port concessions. As for maritime safety, Slovenia has

a good track record with its fleet and continues to carry out port State control inspections in

accordance with the Paris Memorandum. Slovenia has also implemented all the relevant EC

legislation concerning navigational safety, ship classification, ship's registers, port State control

as regards the enforcement of the Amendments to the International Convention for the Safety of

Life at Sea, ships' crews and ports. Up until now, Slovenia has ratified 26 IMO Conventions,

protocols, amendments and annexes.

The necessary administrative structures are largely in place in the area of road transport.

Pursuant to the new Road Transport Act, the tasks concerning the management of the regular

passenger transport system will be performed by the Roads Directorate.

All the institutions necessary for implementing the relevant

acquis

are in place in the field of

railways. The Ministry of Transport carries out tasks related to the preparation and

implementation of the harmonised legislation through the public company Slovenian Railways.

The newly set up Directorate for Rail Transport will, as part of the Ministry of Transport,

implement and monitor the regulations related to the implementation of the

acquis.

Subsequently, the Directorate for Rail Transport is to transfer its competencies related to the

implementation of the acquis to the envisaged Rail Agency, that is to be established in early

2002. The Rail Agency will be a public agency independent from the Ministry of Transport.

All the key institutions necessary for implementing the relevant

acquis

in the field of air transport

are in place. However, the independent air accidents investigation body envisaged in the

Aviation Act is still not operational.

Administrative capacity is generally appropriate for implementing the

acquis

in the field of

maritime transport. The recently adopted Maritime Code is the legal basis for the setting-up of

any new institutions in this sector. The body responsible for the management of the Vessel

Traffic System, the CROSS Centre, should be further reinforced through additional staff.

Chapter 10: Taxation

Slovenia has made some progress in this area since the last Regular Report, especially in the

field of excise duties.

In the field of

indirect taxation,

the Act Amending the Excise Duty Act was adopted and

entered into force in May 2001. The amendments fixed a 0-Euro level of excise duty for

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fermented beverages in order to harmonise the rate of fermented beverages with that of wine as

is required in the relevant EC directive. The amendments increased the excise duty level of

methane to the same level as for liquid petroleum gas, which is above the EC minimum rate. In

addition, the amendments abolished the obligation of stocktaking for mineral oils, alcohol and

alcoholic beverages if, at the moment of change of excise duty, the goods are in stock outside

the tax warehouse and the excise duty has already been paid on them. The excise duty on ethyl

alcohol was increased by 25% in February 2001 and it thus reached the EC minimum excise

duty rate. No developments have taken place concerning VAT.

No developments can be reported in the areas of

direct taxation, administrative co-

operation, and mutual assistance.

The law on transformation of duty free shops at road border crossings with Italy and Austria

into normal retail shops was adopted in January 2001 and entered into force in August 2001.

These shops were transformed into normal retail shops in September 2001.

Concerning administrative capacity, fundamental tax functions were transferred from branches

to tax offices. The code of ethics of tax administration including standards of conduct and ethical

values of employees as well as rights and duties of taxpayers, adopted in 1999, was put into

practise during the reporting period.

Overall assessment

Slovenia is already well advanced in its preparations for accession in this field.

The introduction of the key legislation concerning VAT and Excise Duties in July 1999 and the

amendments in the field of excise duties, adopted in May 2001, represented substantial steps

forward in alignment with the

acquis.

For instance, most Slovenian excise duty rates for mineral

oils, alcohol and alcoholic beverages have now reached the EC excise duty minimum rates.

However, some minor adaptations are still necessary in these sectors.

Slovenia in April 2000 declared its readiness to acknowledge the Code of Conduct for

Business Taxation. Slovenia should ensure that its legislation complies with the principles of the

Code upon accession to the same extent as current Member States.

Further efforts have been made to strengthen administrative capacity, the administrative co-

operation and mutual assistance in the tax administration. The implementation of the

modernisation programme began in -1999 is continuing. The Department for the International

Exchange of Data (CLO) was set up in July 1999. An administrative co-operation department

was created in April 2000 for the excise duty system implementation, to carry out tasks such as

the exchange of excise data and co-operation with the EU Member States. The basic

infrastructure for setting up an integrated tax information system was established, followed by

the implementation of systemic solutions and the setting up of a computing centre in July 2000.

However, further strengthening of the administrative capacity and control procedures is

necessary. Slovenia should in particular focus on continuing to develop IT systems allowing for

the exchange of computerised data with the EC.

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Chapter 11: Economic and monetary union

A detailed assessment of Slovenia’s economic policy in its various aspects has been given

above, in the Chapter discussing the economic criteria (b.2). Therefore, the present section is

limited to a discussion of those aspects of the Economic and Monetary Union

acquis

- as

defined by title VII of the EC treaty and the other relevant texts - which candidate countries

should implement 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 last year’s Regular Report, no new legislative developments can be reported.

Overall assessment

Slovenia will participate in EMU upon accession with the status of a country with a derogation

under article 122 of the EC treaty. It will need to implement the necessary changes to its

institutional and legal framework by the date of accession.

Overall, Slovenia has already achieved a substantial degree of compliance with the

acquis.

Regarding the

prohibition of direct public sector financing by the central bank,

however,

Slovenia does not yet comply with the

acquis.

The current Bank Act of Slovenia provides for

the possibility for the Central Bank to grant short-term loans to the Government, even though

this provision has never been used.

Concerning

central bank independence,

the Bank of Slovenia Act should be amended

concerning especially the personal independence of the Governing Board (terms of office,

judicial control, procedures and grounds for dismissal) and on financial and institutional

independence.

An amendment to the Central Bank law addressing these issues was presented to the

Parliament in July 2000 but it still remains to be adopted.

With the adoption of the new Pension and Disability Insurance Act (in December 1999) and an

Insurance Act (in January 2000), Slovenia abolished the possibility of

privileged access of the

public authorities to the financial institutions,

as far as institutional investors are concerned.

However, some provisions in the Law on Banking relating to banking deposit guarantee funds

still need to be amended.

Chapter 12: Statistics

Slovenia has achieved quite a good level of alignment and progress can be recorded in a

number of areas since the last Regular Report.

Progress has been made in the area of

statistical infrastructure

by the adoption of the Law

on National Statistics in January 2001. The law provides for the independence of the Statistical

Office, the protection of confidentiality of statistical data and improved monitoring of statistics

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research programmes. The administrative capacity of the Statistical Office (SORS), which is the

central statistics producer within the country and co-ordinates the work of other bodies active in

the area of statistics production, has been strengthened by the recruitment of 13 new staff.

Progress has also been made concerning sectoral statistics. In the field of

demographic and

social statistics,

including labour force surveys, business registers and other register-based

statistics, methodological preparations have been completed and the time-use survey was

continued. An ad hoc model for working time and labour costs monitoring has been introduced

in labour force statistics. Amendments to the Law on Census, Population, Households and

Housing were adopted in March 2001, and the Census was postponed until 2002.

As for

business statistics,

structural business statistics (SBS) have been developed further

and a new database was designed in March 2001. Comparative statistics for the period starting

in 1995 were completed in February 2001. A new system of data collection was prepared at

the beginning of 2001 in the field of energy statistics. Several statistics were published in 2001 in

the tourism area, mainly focussed on accommodation statistics.

As regards availability of statistics at the

regional

level, the Slovene proposal concerning level 3

was incorporated in the NUTS classification system of Eurostat. Efforts are ongoing to compile

data at regional level and store them in a single framework.

Concerning

macro-economic statistics,

and especially the European System of Accounts

(ESA-95), the quality of annual economic accounts in current prices has been improved and

institutional sectorisation of business register units has been completed since the last Regular

Report. However, quality improvements and some aspects of methodology using ESA-95 are

still to be implemented.

As regards

agricultural statistics,

the agricultural census was successfully completed in 2000,

and the results provide a basis for and strengthen the whole agricultural statistical system.

Overall assessment

Slovenia is very well advanced in the field of statistics. The Statistical Office has appropriate

personnel, information technology and, to a certain extent, finances. However, disseminating

methodological know-how should be given further attention, especially in the area of macro-

economic statistics.

Chapter 13: Social policy and employment

Some progress has been made in terms of transposition of the

acquis

since the last Regular

Report.

No new developments have taken place in the field of

Labour Law.

As regards

equal treatment for women and men,

the Office for Women's Policy was

renamed the Equal Opportunities Office by a Government decision in February 2001. It is

directly under the responsibility of the Government and has six employees. A founding charter

for the coalition for equal representation of both sexes in public life was adopted by the Equal

Opportunities Office and the Information Centre of the Council of Europe in February 2001.

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Four regulations in the field of

health and safety

at work were adopted in the period January

to May 2001 in order to transpose the acquis concerning work on board fishing vessels, risks

related to exposure to noise at work, medical treatment of crew on board vessels and asbestos

risks.

As regards

public health,

budgetary funds were earmarked in 2001 to provide expert support

and training to the Institute of Public Health to carry out measurements of harmful substances in

tobacco, taking into account the requirements of the new EC acquis. Since 2000, Slovenia has

taken part in the European network for influenza surveillance and the European sero-

epidemiological network ESEN II.

No specific new developments can be reported with regards to

social dialogue,

which

continues to contribute to the legislative process and collective bargaining.

The unemployment in year 2000 dropped to the historically low level of 7.0 %.In the area of

employment policy,

the Ministry of Labour, Family and Social Affairs, working in co-

operation with the Commission initiated the follow-up process of the priorities and commitments

in the Joint Assessment of Employment Priorities agreed in 2000.

European Social Fund (ESF)

Department was formed in April 2001 within the Ministry of

Labour, Family and Social Affairs. It will have six staff when fully established. It will provide

legal expertise and the infrastructure required to programme, implement, manage, monitor,

evaluate, control and co-ordinate the ESF interventions in Slovenia. It will also provide the

information system for monitoring the implementation of ESF interventions and, supported by

EU experts, train staff who will carry out tasks relating to the ESF in Slovenia.

In the field of

social protection,

the Act Amending the Social Security Act was adopted in

March 2001. The aim of the amendments is to increase social security in an attempt to fight

poverty. The Child Benefit Act was adopted in March 2001. The aim of this law is to preserve

the current selective system of children's allowances until the adoption of the new parental

Protection and Family Benefit Act. The selective approach to allowances envisages higher levels

of benefit for socially endangered families. Within the framework of the pension system reform,

the Pension and Invalidity Act was amended in December 2000 with a change in the method of

pension adjustments so that they follow the trend in wages.

No particular developments occurred concerning

anti-discrimination.

Overall assessment

The overall situation concerning social policy and employment is good, but legislative alignment

is still slow.

The Employment Relations Act and the Parental Protection and Family Benefit Act still remain

to be adopted. The Act Amending the Social Security Act introduced some innovations relating

to social security payments to beneficiaries, the amount thereof, the amount of the minimum

income per family member and acquisition of necessary data. A Guarantee Fund for the

protection of employees has been in place since 1997.

The social dialogue is very well developed in Slovenia. Social partners are involved in the

adoption of new legislation and tripartite dialogue between the social partners and the

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Government is regularly conducted notably in the fields of wage policy and with social

agreements. Thorough discussions were held between the Government, employers'

organisations and the trades unions regarding the Employment Relations Act, Collective

Agreements Act and the Civil Servants Act, as well as executive regulations for the

implementation of the Safety and Health at Work Act. This has often led to a lengthy legislative

process in the Parliament. This has been the reason for the delays in the adoption of the

Employment Relations Act. There is a need for a better understanding of the contribution that

social dialogue can make to the legislative process and also of the limits of such contributions.

Also, the development of autonomous bipartite social dialogue should be encouraged further.

The programme of the current Government has two main goals for the social sector: an efficient

wage policy based on social partnership and a social security policy which includes an active

employment policy. This would include the signing of a social agreement for the period 2001-

2004 with a package of laws on wages, employees' rights, social security and an active

employment policy. Concerning pension and invalidity insurance, harmonisation will take place

once a year based on the principle of linking increases between pensions and wages.

Regarding employment, the Joint Assessment of the Employment Policy Priorities (JAP)

represents an important step in the preparation for accession. Slovenia should now ensure

effective monitoring of the implementation of the priorities and commitments contained in the

JAP.

Preparation for the work of the European Social Fund has been slow, notably because of the

lack of decisions on the overall structures for the management of the Structural and Cohesion

Funds after accession. The administrative capacity of the Ministry of Labour and Social Affairs,

which is foreseen to have the leading role in ESF interventions, should be reinforced notably in

the areas of monitoring and evaluation as well as financial control. It will also need to ensure

proper co-ordination.

As noted last year, there continues to be a need to strengthen the public employment service, as

well as the public administration and enforcement structures in most areas of social policy, and

in particular in the areas of health and safety at work, labour market and social policies. The ban

on discrimination is provided for in the Constitution and the Penal Code, and special rights are

granted to the Italian and Hungarian national communities, as well as to the Roma Community.

Further efforts are needed to ensure alignment with the

acquis

on anti-discrimination based on

art. 13 of the Treaty. (See

also section B.1.2 - Human rights and the protection of

minorities)

The fight against exclusion, as laid down in art.136 of the Treaty establishing the European

Community, is part of the objectives of the 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 Gothenburg European Council in June 2001 invited

candidate countries to translate the Union's objectives of promoting social inclusion into their

national policies.

Chapter 14: Energy

Slovenia has made significant progress in this area during the period covered by this Regular

Report.

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Concerning

security of supply,

the constitution of 90 days’ oil stocks has been continued in

accordance with the government plan which aims to reach the level of 47 days by the end of

2001. Current emergency oil stocks stand at somewhat less than one third of the eventually

required level. An agreement with Germany concerning storage of part of Slovenia’s oil

reserves in Germany was ratified by the Parliament in May 2001. Slovenia will temporarily keep

part of its mandatory oil reserves in EU Member States due to the lack of storage facilities.

Slovenia has made continuous progress on

competitiveness and the internal energy

market.

A number of decrees were adopted in April 2001 in preparation for the opening of the

energy markets. These concern the independent regulatory authority (the Energy Agency),

abolition of the monopoly in electricity supply and distribution, regulations on market share, and

operation of electric power systems and trade. As of April 2001, Slovenia’s domestic

electricity market

has been opened in line with the Energy Act, allowing the largest electricity

users to choose their electricity provider. As regards the natural gas market, a degree regulating

the transport and distribution of natural gas in Slovenia was adopted in January 2001.

In the field of

solid fuels,

the Law on State Guarantees for Financing the Gradual Closure of the

Coalmine Trbovlje Hrastnik in 2001 was adopted in April 2001. This law foresees a SIT 2.229

billion (€10.36 million) allocation from the budget and in the form of loans guaranteed by the

state for the closure of the Trbovlje Hrastnik coalmine.

As regards

energy efficiency

and the use of renewable energy sources, Slovenia has

continued to promote various initiatives favouring efficiency. These include awareness raising,

financial incentives and tax incentives for certain household appliances.

In the field of

nuclear energy,

the Slovenian and Croatian governments have finally signed an

agreement concerning the dual ownership by Slovenia and Croatia of the Krško nuclear power

plant (NEK). According to the agreement, both countries will be joint owners and have joint

responsibility for waste and past liabilities. The agreement still remains to be ratified by both

Parliaments. Also, the Paris Convention on Third Party Liability in the field of nuclear energy

and the Brussels supplementary convention were ratified in April 2001.

As regards nuclear safety, Slovenia has continued to make progress on safety improvement by

completing the 1998-2000 modernisation programme at NEK. A continuous backfitting and

upgrading programme and a large modernisation programme, including the replacement of

steam generators and a full-scope simulator, have been carried out. The Slovenian Nuclear

Safety Administration made serious efforts to re-evaluate the seismic hazard of NEK by

commissioning further investigations which concluded that the seismic risk of the site is within the

limits of the seismic design parameters applied for the construction and operation of NEK. The

experts recommended improving the seismological network and including a high-quality station

in the area for detection of small tremors and local earthquakes and determination of their

hypocentres. The Maritime Code adopted in March 2001 forbids sailing of nuclear fuel-driven

ships into Slovene waters and their registration in Slovenia.

Concerning administrative capacity, the energy sector of the Ministry of the Economy was

transferred to the Ministry of Environment and Spatial Planning in 2001. A new independent

body, the Energy Agency, became operational in January 2001 as required by the Energy Act.

It will oversee both the electricity and gas markets and its competencies include pricing, dispute

settlement and licensing.

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Overall assessment

With the adoption of the Energy Act, the Mining Act, the Amended Commodities Reserves Act

and the subsequent pieces of secondary legislation, alignment with the

acquisin

the energy

sector in Slovenia is well advanced. The framework regulations are in place.

In the field of security of supply, Slovenia has achieved satisfactory progress in the constitution

of oil stocks, having gradually increased its stocks to the current level. Efforts have been made

in order to overcome the lack of storage capacity for oil stocks by concluding an agreement

with Germany. Efforts to build the oil stocks up towards the level of 90 days should continue.

On competitiveness and the internal energy market, the opening of the domestic electricity

market and the setting-up of its regulator, the Energy Agency, constituted a positive

development. However, the ongoing liberalisation of the internal energy market needs continued

attention: in particular, remaining price distortions, notably in the electricity sector, should be

eliminated. Slovenia should continue its efforts to improve energy efficiency and the use of

renewable energy. On solid fuels, Slovenia should complete the restructuring process.

As regards administrative capacity, Slovenia has set up the necessary institutions: the Energy

Agency, the Agency for the Efficient Use of Energy, the Agency for Oil Stocks and, in the

nuclear field, the Slovene Nuclear Safety Administration. These bodies need to be further

reinforced.

As regards the issue of 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 practice within the European Union,

particularly regarding various 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 should continue their national programmes

regarding the safe management of spent fuel and radioactive waste, and regarding the safety of

their research reactors.

With regard to Slovenia, the Council Report recommends five specific measures to ensure the

safe operation of the Krško NPP and other nuclear installations. The recommendations include

completion of the revision of the 1984 Act on radiation protection and the safe use of nuclear

energy, an action plan to ensure adequate resources for the regulatory authority, the seismic

qualification of the Krško NPP, and a national emergency response plan.

The safety of the NEK - which has a PWR reactor of Western design - is comparable to that

of Western European nuclear power plants. A modernisation programme was successfully

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implemented in the period 1998-2000. A project for increasing the existing capacity of the

spent fuel storage pool at NEK is being implemented and will be concluded in 2003.

Slovenia will need to ensure compliance with Euratom requirements and procedures. In this

respect continued attention should be given to preparing the implementation of the 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 Slovenia has concluded a Full Scope Safeguards Agreement with the

International Atomic Energy Agency (IAEA). An additional protocol to this agreement is in

force since August 2000.

Chapter 15: Industrial policy

Slovenia has made some progress in this area since the last Regular Report.

In the field of

industrial policy,

Slovenia has continued to implement the "Strategy for

Increasing Competitiveness of Slovenian Industry", adopted in 1996 and last updated in 2000.

The measures aim at increasing productivity, encouraging the linking of companies and

development of ‘clusters’, and promoting the internationalisation of Slovenian companies and

new investments, as well as encouraging technological development and innovations. A revised

version of the programme that aims to attract more foreign direct

investment

was adopted in

July 2001. Special emphasis is put on removal of administrative barriers.

Regarding

restructuring

of Slovenian industry, two programmes were adopted in June 2001

for the adaptation of Slovenia's textile, leather and shoe industries to the EU internal market

between 2001 and 2003. Both programmes are intended to support marketing and

modernisation projects in these three sectors.

In the area of

privatisation,

the Government made a decision in April 2001 on restructuring of

the Slovenian Development Corporation (SDC), a body that owns state companies. Its

liquidation is foreseen by the end of 2001.

Since the beginning of 2001, the Government has been actively supporting the development of

industrial clusters. Three clusters were identified for support in the transport and tool-making

sectors, and one in the Port of Koper. They are due to become self-sustaining in 2003.

Overall assessment

Overall, Slovenia’s policy towards industry is by and large in conformity with the principles of

EC industrial policy, i.e. market-based, stable and predictable. Slovenia has made good

progress in this area over the past few years and figures for industrial production have been very

positive. Slovenia has used innovative methods, in particular in the benchmarking of different

industrial sectors. The Government is envisaging a new strategy for economic development

which has among its priorities the transition to a know-how society, increasing competitiveness

and restructuring of companies.

Developments concerning Industrial policy should be seen in relation to the overall enterprise policy, including the SME

policy (see

chapter 16 - Small and medium-sized enterprises).

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In addition, Slovenia has begun to shift from direct intervention in companies to horizontal

measures for the promotion of competitiveness. Although direct assistance to companies in the

form of subsidies is still present, efforts have been made to increase the transparency of the

measures and to limit their duration.

There has been progress in the restructuring and privatisation of two key sectors: the

textile/footwear and steel sectors. The textile and footwear sector plans foresee no capacity

increases and contain welcome measures. The steel restructuring programme, adopted in

September 2000 and submitted to the Commission in October 2000, is considered to be in line

with Protocol 2 of the Europe Agreement. However, it is important that it is implemented as

planned.

In the field of investment promotion, the strategy adopted in 2000 and upgraded in July 2001 to

attract FDI has not been very effective so far. While administrative barriers pose difficulties to

both Slovene and foreign businesses alike, the effects are most visible as concerns foreign

companies. Together with the elimination of cumbersome procedures, a key way of increasing

investment would be the implementation of an active policy to increase availability of industrial

land.

The Ministry of Economy is the central body responsible for the formulation and co-ordination

of industrial policy. The Trade and Investment Promotion Office (TIPO) is responsible for

promotion of enterpreneurship and investment in Slovenia. The administrative capacity in this

field appears to be satisfactory.

In order to complete the restructuring and privatisation process successfully and to increase the

competitive potential of its industry, Slovenia should create better conditions for foreign direct

investments, support the internalisation of Slovenian enterprises, support technological

development and define effective policies for regional development and economic and social

cohesion.

The role of the public sector in industry is still too important and further privatisation is

necessary. The planned liquidation of the SDC is a vital step forward in the finalisation of the

restructuring/privatisation process and it is important that the adopted timetable should be

maintained.

The work of business associations and their dialogue with the Government continues.

It should 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. (See

also Chapter 6 – Competition).

Chapter 16: Small and medium-sized enterprises

Slovenia has made some progress since the last Regular Report as regards SME policy.

Developments concerning SME policy should be seen in relation to the overall enterprise policy, including Industrial

policy. (see

Chapter 15 – Industrial policy)

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Slovenia’s

SME policy

is based on creating a favourable business environment, developing

employment opportunities, internationalisation and the new economy. New instruments under

the SME strategy that have been introduced include interest-free loans, guarantees and

interest-rate subsidies. In addition, Slovenia continues to implement measures for development

of entrepreneurship, including financial support for women's entrepreneurship and for work at

home and at a distance.

As regards the

business environment,

the Company Act was amended in May 2001 to

simplify the start-up of companies by removing administrative barriers. In April 2001, the

Government set up an inter-ministerial Commission and adopted a time schedule for

implementing measures belonging to the "Anti-Bureaucracy Programme" adopted in 1999.

The Government adopted in spring 2001 a comprehensive programme for years 2001-2002 to

promote entrepreneurship, internationalisation of companies, company networking, cluster

development, increasing productivity and technological development and innovations.

At the end of year 2000 the Ministry of Small Business and Tourism merged with two other

Ministries into a single Ministry of the Economy with a State Secretary responsible for

entrepreneurship and competitiveness. Following this re-organisation, the Small Business

Development Centre is now being developed as a central co-ordination point for all activities

related to SME development, including co-ordination of the anti-bureaucracy programme. The

two new Euro Info Centres in Koper and Maribor have been operational since early 2001 and

have already promoted a number of initiatives.

Overall assessment

Slovenia’s SME policy is generally in line with the principles of EU enterprise policy.

Access to finance is the main obstacle to the development of SMEs in Slovenia. Some

innovative financial instruments are being introduced (such as the first business angels network).

Venture capital should be developed and access to foreign capital should be made easier for

SMEs, mainly through an effective reform of the financial system. A key element to improve the

business environment for SMEs in Slovenia is the implementation of the "Anti-Bureaucracy

Programme" adopted in 1999. It contains a list of measures to develop entrepreneurial culture,

to simplify administrative procedures and boost self-employment. However, its implementation

needs to be improved urgently. The adoption of a schedule for implementing the planned

measures is a positive step.

The

definition of SMEs

is not yet fully aligned with the recommendations of the European

Commission.

Administrative capacity in the field of SMEs appears satisfactory. Co-operation between the

different Ministries and other public bodies (Small Business Development Centre and Small

Business Development Fund, regional and local agencies) has improved since the creation of the

Ministry of Economy. However, co-operation between the authorities on one hand, and the

organisations representing the business community and the SMEs on the other, should be

strengthened.

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Chapter 17: Science and research

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

The Rules on Infrastructure Development Centres adopted in June 2001 lay down the

procedures and criteria for the classification of infrastructure development centres and define

infrastructure development centres as technological parks. The Rules on the Promotion of

Technological Development adopted in June 2001 determine the criteria for obtaining funds for

research related to the development of the economy and public infrastructure.

Slovenia continued to be fully associated with the Fifth Framework Programme, as well as with

the Euratom Framework Programme. As other countries associated with the Fifth Framework

Programme, Slovenia has been granted observer status in CREST (Comité

pour la Reserche

Scientifique et Technique).

Overall assessment

Slovenia is well advanced in this area, and policy and legislation in this field are in line with EU-

guidelines. The Act on Support of Companies Developing New Technologies and Setting up

and Managing their Development Units in the Period from the Year 2000 – 2003 is a valuable

effort to stimulate the business expenditure on research. The inter-ministerial working group set

up in January 2000 to enable close co-operation in the implementation of the Fifth Framework

Programme continues its operation. The National Contact Point (NCP) system continues to

function.

The level of the existing gross domestic expenditure on research and development approaches

the EU average.

The success rate of Slovenia's tendering for projects in the Fifth Framework Programme is

good and comparable to the success rate achieved by EU Member States. Though the

association with the Fifth Framework Programme continues to function well, further

reinforcement of the research-related administrative capacity and strengthening of research-

related infrastructure would be beneficial.

The strengthening of the link between the private sector and science and research in particular

through transfer of know-how would be welcome.

Chapter 18: Education and training

Slovenia has made progress in this area since the last Regular Report. In the reference period,

Slovenia started to participate in the second generation of

Community programmes

Socrates

and Leonardo as well as in the new Youth Programme (see

section A.b - Relations between

the European Union and Slovenia).

As regards

reforming its education and training system,

a law on special rights of the Italian

and Hungarian Minorities in the education system was adopted in April 2001. It brings the rights

of the Italian and Hungarian minorities into line with the new Slovenian education legislation. The

amendments to the law on Elementary Schools adopted in July 2001 delayed the introduction of

nine-year elementary education by one year. The amendments to the law on Gymnasiums

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adopted in July 2001 established the same conditions for enrolling all pupils who finished the 8-

year elementary school as well as those who completed the 9-year elementary school.

The Ministry of Education and Sport was merged with the Ministry for Science and

Technology. The unit for European Affairs in the new Ministry of Education, Science and Sport

has four employees.

Overall assessment

Slovenia is fully aligned with the acquis in the field of education, training and youth, including the

Directive concerning the education of children of migrant workers.

Participation in the relevant Community programmes is satisfactory and the number of

applications is constantly increasing. The agencies established are functioning well, however,

sufficient staff has to be ensured, taking into account the increasing number of applications. The

Unit for European Affairs in the Ministry of Education, Science and Sport should be

strengthened as well. The Law on National Occupational Qualifications, which was adopted in

August 2000 and regulates the procedures, bodies and organisations for obtaining national

vocational education, represented an important step for the development of the education and

training system. On the whole Slovenia has made significant progress in re-orienting it system to

make it suitable for a small open-market economy aiming at international competitiveness.

Chapter 19: Telecommunications and information technologies

Substantial progress has been achieved in the telecommunications sector since the 2000 Regular

Report but there was little progress in the postal sector in this period.

Regarding the

liberalisation of the telecommunications markets,

all special and exclusive

rights have been removed as from 1 January 2001 including those of the fixed line incumbent

Telekom Slovenije. However, the new Telecommunication Act of 2001 foresees some

transitional measures, namely for cost-oriented leased lines, cost accounting of operators with

significant market power, number portability for non-geographical numbers and unbundling of

the local loop. These measures will expire in July 2002. Following a public tender in January

2001, three licences were granted for the provision of mobile services at 1800 MHz radio

frequencies for mobile telephony services. The same three operators are now licensed to

operate at 900 MHz and 1800 MHZ. A new numbering system was introduced in November

2000. Progress towards the rebalancing of tariffs was made through two Government decrees

in March 2001. Tariff reductions for Internet access were introduced in March 2001 as a

means of promoting Internet access. A tender for UMTS licences was launched in September

2001.

As regards the

regulatory framework,

the new Telecommunication Act entered into force in

May 2001. This Law transposes a substantial part of the

acquis,

including the Directive

concerning the processing of personal data and the protection of privacy in the

telecommunications sector. However, additional secondary legislative measures are still

required. The Agency for Telecommunications and Broadcasting was established in July 2001.

Concerning the e-Europe + Action Plan, a strategy for electronic operation of public

administration was adopted in February 2001.

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No developments have taken place since the last Regular Report in

postal services.

Overall assessment

Legislative alignment in the telecommunications sector is well advanced and enforcement has

started. Important practical measures have been adopted to build on the initial commitment

made in the Telecommunications Act of 1997 to remove all special and exclusive rights in the

telecommunications sector on 1 January 2001. Licences have been awarded in the mobile

GSM market, and these should lead to effective competition once networks have been rolled

out in 2002. Measures have been introduced to regulate the dominance of the incumbent in both

the fixed line and Internet markets. Effective competition can be anticipated in all parts of the

market as soon as the transition periods have expired except for the UMTS services where it

appears that as a result of the modalities of the recent tender, only one company has submitted

a bid. This would effectively create a UMTS monopoly and the result would be inconsistent

with Community policy in this sector.

Slovenia should now continue with the preparation of secondary legislation in order to complete

it by the end of 2002, in accordance with the timetable set. Further progress is needed in

establishing cost models for significant market-power operators, as these would enhance

moving towards cost orientation of prices as soon as possible. The speeding up of the schedule

for unbundling of the local loop and for providing full number portability for non-geographical

numbers in 2002 is a welcome development.

In view of the substantial liberalisation of the markets in January 2001 and the many measures

which need to be taken, especially the application of asymmetric regulation as foreseen in the

acquis,

the Agency for Telecommunications and Broadcasting should as a priority be provided

with adequate financial and human resources, including training of its staff.

Slovenia has partly aligned with the

acquis

in the field of postal services through the adoption of

the Postal Service Act in 1997. However, since then alignment has been slow and further steps

are required to enable full liberalisation in providing postal services. In addition, an independent

regulatory authority has to be established before liberalisation to ensure smooth implementation

and effective enforcement of the

acquis.

Chapter 20: Culture and audio-visual policy

Substantial progress has been made on alignment with the

audio-visual

acquis

since the last

Regular Report.

The Mass Media Act was adopted in April 2001. The act brings Slovenia’s legislation largely

into line with the Television without Frontiers Directive, and also incorporates regulations for

advertising, safety measures for the protection of youth, and a legal framework for technologies

in a joint EC audio-visual market. The current competencies and powers of the Broadcasting

Council have been extended by the new Act. In addition, amendments to the Law on

Radiotelevizija Slovenija were adopted in September 2001 to ensure compliance with the Mass

Media Act and to bring it in line with the Directive.

The Agency for Telecommunications and Broadcasting was established in July 2001.

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No new developments can be reported concerning Community actions in the field of

culture.

Overall assessment

On the whole, Slovenia is well advanced in aligning with the Community

acquis

in this area.

The Mass Media Act, which sets the legal framework for Slovenian media in general, is to a

large extent in line with the relevant provisions of the Television Without Frontiers Directive. The

necessary secondary legislation should be adopted within the given time-frame.

Slovenia has signed and ratified the Council of Europe Convention on Transfrontier Television

and its Protocol.

The number of staff in the Media Department, which was established in the Ministry of Culture

in 1999, is adequate. The Department is responsible for implementation of the framework

requirements and for administrative supervision, as stipulated in the Mass Media Act. The

Broadcasting Council, as the competent regulatory body, is responsible in particular for

awarding and withdrawing radio and television licences and prevention of law infringements. It is

now integrated in the recently established Agency for Telecommunications and Broadcasting.

The Agency for Telecommunications and Broadcasting will monitor the stipulated programme

requirements and the restrictions concerning television and radio programmes set by the

Broadcasting Council. The Council has the authority to decide on the distribution of frequencies.

It is important that sufficient co-ordination between all the relevant bodies is ensured in

implementing the law. The Agency should also have sufficient equipment. The Council should be

given the necessary human and technical resources to cope effectively with the powers provided

by the new Mass Media Act.

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

Since the last Regular Report, limited progress has been achieved in preparing for the

implementation of structural policies.

No progress has been made with regard to the establishment of a

territorial organisation

allowing for effective implementation of the Structural Funds Regulations.

No particular developments have taken place since the latest Regular Report as regards the

legislative framework.

Concerning Slovenia’s

institutional structures,

no particular progress has been made since

the last Regular Report. In May 2001, the Government decided to employ ten new staff in the

National Agency for Regional Development, which will be the central institution for the

implementation of Structural and Cohesion Funds after accession. In April 2001, a unit to

handle future European Social Fund (ESF) interventions was set up in the Ministry of Labour

and Social Affairs.

With regard to

programming,

sectoral working groups were set up in November/December

2000 led by the relevant line ministry for each of the envisaged priority tasks of the National

Development Plan. These groups are responsible for evaluating the effects of the plan on the

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environment, for ensuring gender equality and for evaluating the effects on employment and

social inclusion in society.

In order to ensure the application of the

partnership principle,

a supervisory board for the

preparation of the National Development Plan has been set up by the Structural Policy Council

in February 2001.

A group for

monitoring and evaluation,

consisting of representatives of ministries responsible,

the Statistical Office and the Institute for Macro-economic Analysis and Development, was set

up in March 2001 with the task of determining the common quantified aims for the development

plan. It held its first meeting in the same month.

Concerning

financial management and control,

Slovenia adopted budget outlines for the

years 2002-2005 in July 2001.

As regards

statistics,

no particular developments for the management of Structural Funds are

to be reported since the latest Regular Report.

Overall assessment

Slovenia needs to substantially speed up its efforts in order to be able successfully manage the

Structural Funds upon accession. Above all, the administrative capacity of the units within the

Ministries to be designated as future Managing and Paying Authorities will need to be

considerably strengthened in order that they will effectively be able to take the responsibility for

efficient and correct management and implementation of Structural Funds. Slovenia should also

continue its efforts to develop the necessary structures and co-ordination mechanisms for the

European Social Fund interventions in the context of the European Employment Strategy and

the Inclusion Process.

Slovenia’s territorial organisation is based on 12 units corresponding to NUTS III level. In

September 2000, Slovenia proposed to the Commission a new territorial organisation

corresponding to the Member States’ NUTS classification. This new classification divides

Slovenia into two regions corresponding to NUTS II, namely the “Ljubljana Urban Region”

comprising the capital Ljubljana as its centre and the “Rest of Slovenia Region”. The proposed

territorial breakdown for the two areas corresponding to NUTS II level was not accepted by

the Commission in October 2000 as it would have created an unbalanced breakdown of

Slovenia in terms of population figures, while treating Slovenia as a whole as one NUTS level II

region would be quite close to the EU 15 average. This issue is still under discussion. Slovenia

urgently needs to agree with the Commission on a provisional NUTS classification which would

allow for the effective implementation of the structural funds upon accession.

Slovenia has adopted the framework legislation needed to implement the acquis in this Chapter.

Some progress has also been made as regards the setting up of the institutional structures. The

National Agency for Regional Development, the central institution for implementation of the

funds upon accession, has already been established. The Slovene authorities should urgently

take a number of fundamental decisions on the implementation of the Structural Funds

Programming, most notably concerning the nomination of the managing and paying authorities.

Furthermore, the role of the line ministries and other bodies acting under the responsibility of the

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future managing and paying authorities needs to be clarified. Efficient inter-ministerial co-

ordination will need to be ensured. The Commission should have a single counterpart who has

the authority and competence to steer the programming and implementation process based on a

political consensus.

With regard to programming, the adoption of the National Development Plan for 2002-2006,

which will serve as the basis for the establishment of the development plan required by the

Structural Funds Regulations, is delayed. No decision has yet been taken regarding the form of

assistance to be provided under the Structural Funds to Slovenia (Single Programming

Document or Community Support Framework). It is of great importance that Slovenia quickly

decides on the organisation and nature of the programmes as well as the implementation

structures of the final plan. Multi-annual programming has already been introduced with the

adoption of the Public Finance Act in 1999. Slovenia will have to ensure that the partnership

principle is respected with regard to programming, implementation, monitoring and evaluation of

assistance. Substantial progress is needed at the level of the technical preparation of projects

eligible for Structural and Cohesion Fund assistance (project pipeline).

The capacity of the National Agency for Regional Development to the co-ordinate all activities

related to monitoring and evaluation needs to be further developed. An appropriate system and

capacity for monitoring and evaluation needs to be built up in due time, both centrally and within

the emerging implementation structure, in order to ensure effective and efficient implementation

of the Structural Funds.

Slovenia has generally made good progress in the field of financial management and control. The

procedures for financial control, auditing, certification of expenses and correction of

irregularities are being put in place. Internal audit units have been established in eleven out of

fourteen ministries on the basis of the decision taken in 1999 introducing a decentralised system

of internal audit services. The central audit service within the Budgetary Supervisory Service

ensures the co-ordination of these services. However, these departments still need to be

strengthened. The training of internal auditors should be a priority in this respect. Common

guidelines for the internal audit services still need to be drawn up. Slovenia has aligned itself with

the indicative planning of public finance expenditure in use in the EU Member States, with the

introduction of multi-annual planning. Appropriate systems and procedures for financial

management and control need to 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.

As to statistics, the key indicators necessary for the management of the Structural Funds are

available for the national level. A separate division for regional statistics was set up within the

Statistical Office of the Republic of Slovenia at the end of 1998. However, its working capacity

is still limited. The compilation of data needs to continue, and the quality and coverage should

be further refined.

Chapter 22: Environment

Since the last Regular Report, Slovenia has continued to make progress in terms of

transposition of the EU environmental

acquis

and with the preparations for the implementation

of EC directives.

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With regard to the

integration of the environment into other policies,

recommendations for

the integration of sustainable development principles into the planning process by performing

early environmental impact assessments were issued in the reporting period.

In the field of

horizontal legislation,

the Strategy and action programme for the reduction of

greenhouse gas emissions was adopted in November 2000. Concerning civil protection, the

Law on Ratification of the International Convention on readiness, response and co-operation in

case of oil spills was adopted in April 2001.

As regards

air quality,

amendments to the decrees on air emissions from heating boilers and on

the CO

emission tax were adopted in November 2000 and December 2000 respectively. A

decree concerning vehicle exhaust emissions vehicles and the type of fuel used was adopted in

December 2000. Two regulations on liquid fuels quality were also adopted in 2001.

In the

waste management

sector, a decree on Packaging and Packaging Waste Treatment

came into force in November 2000. The purpose of the decree is to reduce the quantity of

packaging waste and to reduce harmful environmental impacts caused by the materials and

substances contained in packaging and packaging waste. In addition, a decree on Treatment of

Batteries and Accumulators Containing Dangerous Materials came into force in November.

Amendments to the decree on export, import and transit of waste, and to the price list of public

services for handling nuclear waste were adopted in October 2000 and in November 2000

respectively. Books of rules for packaging and packaging waste and for handling batteries and

accumulators containing dangerous substances were also adopted in November 2000.

Slovenia passed several decrees on

water quality

in October 2001, in particular concerning

wastewater from the production of non-ferrous metals, from casting of iron and from production

of iron and steel. A decree on quality of surface waters used for water supply was adopted in

December 2000. As regards the waste water treatment plants directive, vulnerable areas were

identified by the amendments to the decree on the emission of substances in the discharge of

waste water from urban waste water treatment plants adopted in April 2001. In relation to the

nitrates directive, the whole territory of Slovenia has been defined as a sensitive area by a

decree on the input of hazardous substances and plant nutrients into the soil adopted in May

2001. A decree on the quality of surface waters extracted for drinking water supply was

adopted in December 2000, and rules on the monitoring of the quality of surface waters

extracted for drinking water supply in May 2001.

In the field of

nature protection,

progress has been made on the drawing-up of the relevant

executive acts and expert bases for designating Special Protection Areas (SPA) and potential

Sites of Community Importance (pSCI) and on the administrative organisation for

implementation of the Convention on international trade in endangered species of wild fauna and

flora (CITES). The law on the national park of Triglav was amended in May 2001.

Amendments to the law on physical planning were adopted in September 2000, with the aim of

sustaining environmental protection and preventing investment blockades. The Nature

Protection Authority completed the first phase of the Slovenian Wetlands Inventory and a

strategy on the Management of the bear population was adopted in February 2001.

As regards

industrial pollution control and risk management,

the decree on the emission of

substances into the atmosphere from combustion plants was amended in October 2000. A

regulation on the management of waste containing asbestos was also adopted in October 2000.

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With regard to the Industrial Pollution Prevention and Control (IPPC) Directive, amendments to

the Environmental Protection Act were adopted in March 2001 and to the Protection against

natural disasters Act in June 2001. Several decrees on emissions were adopted in September

2000.

In the field of

chemicals,

a law on the implementation of the prior informed consent procedure

was adopted in June 2001 regulating import and export of certain hazardous chemicals. A book

of rules on conditions to be fulfilled by laboratories for testing samples of chemicals and

chemicals’ packaging was approved in November 2000. A book of rules for the work of the

ethical committee on animal testing was also approved in September 2000. The National

Chemicals Bureau was established as the competent authority to manage the harmonisation of

legislation and to guide implementation of the new provisions in line with the Chemicals Act of

1999.

As regards

genetically modified organisms

(GMOs), a three-year project "Setting-up of the

Bio-safety System in Slovenia" is being carried out. It covers not only the procedures for

granting consents and permits for the use and placing on the market of GMOs, and for

assessing risks to human health and the environment, but also public awareness and

participation, and information systems.

As regards

noise,

rules on noise emission from household appliances were adopted in January

2001.

In the field of

radiation protection

(see

also chapter 14 - Energy),

no particular

developments can be reported during the period covered by this Regular Report.

The administrative capacity in this area has been improved. The Environmental Agency of the

Republic of Slovenia was established in April 2001. It has overall responsibility at the national

level for the implementation of the

acquis

in the field of environment. Some existing institutions,

namely the Nature Protection Authority, the Hydro-meteorological Institute, and the

Administration for Geophysics have been absorbed into the Agency. It functions as the

competent authority and has licensing and enforcement powers under environmental directives.

Special training has been provided to adequately implement the legislative requirements of the

environmental impact assessment legislation. The number of staff dealing with EU issues, in

particular in the field of waste management, water quality and inspection, increased by nearly

50% in the last year.

Overall assessment

Alignment with the EC environmental

acquis

is well advanced in Slovenia. Slovenia’s legislation

is almost entirely aligned with the

acquis

in the fields of horizontal legislation, waste

management, chemicals and noise, and good progress has been made in the fields of air quality

and climate change, nature protection, water quality, and genetically modified organisms.

The main task concerning legislation for the period 2001-2002 is the adoption of four key acts

(governing waters, the application of gene technology, nuclear safety and radiation protection,

and the amendments to the Environmental Protection Act) as well as their implementing

legislation. Adoption of the Water Act and related ministerial regulations to ensure the

transposition of EC water directives is a priority. The level of implementation in the water quality

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area is good, but further progress is still necessary. Only slight delays have occurred in the

ambitious transposition schedule, save in the case of the Water Act.

With regard to the integration of the environment into other policies, under the National

Environmental Action Programme the industry, transport, energy, agriculture and tourism

sectors are obliged to integrate environmental considerations into the sectoral policies.

Slovenian legislation on environmental impact assessment is now almost in line with the

acquis.

Several regulations for the implementation of the

acquis

on industrial pollution control and risk

management have been adopted since the last Regular Report, but only limited progress has

been made in the transposition of the requirements of the Large Combustion Plants’ Directive.

Only limited progress has also been made with regard to the Industrial Pollution Prevention and

Control (IPPC) Directive. Completing transposition of both directives has been delayed until

2002. The transposition and implementation of the Seveso II Directive has begun and is

foreseen to be completed in 2002.

Further progress on transposition in the air quality sector is needed. Limited progress has been

achieved since the last Regular Report on implementation.

In the waste sector, nearly complete transposition of the

acquis

has been achieved with the

exception of the packaging and packaging waste directive. Slovenia also has a well-developed

waste management system in place. Although implementation of the waste framework

requirements is well advanced, this is a sector in which particular efforts are needed.

The level of implementation of the

acquis

is rather high in the field of chemicals, however, the

status of transposition remains at a relatively low level.

As for the radiation protection field, limited progress has been made to date on harmonisation

with the

acquis.

Slovenia should continue to integrate environmental protection requirements into the definition

and implementation of all other sectoral policies with a view to promoting sustainable

development.

As regards administrative capacity, most of the necessary institutions in the area of environment

are in place, but the competent authorities for various directives remain to be identified. The

overall administrative capacity has been steadily improved and the establishment of the

Environmental Agency represents a breakthrough. However, the local capacity to implement

EC environmental directives needs to be strengthened.

Chapter 23: Consumers and health protection

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

No major developments have taken place since the last Regular Report as far as

safety

related measures

are concerned.

Regarding

non-safety related measures,

implementing legislation for the Consumer Credit

Act was adopted in July 2001, setting the criteria to be met by a grantor of credit for obtaining

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the authorisation for the supply of consumer credit service, conditions to be met by a credit

intermediary, and the content of the label showing the fulfilment of conditions for supplying the

consumer credit service.

As regards the

functioning of the market surveillance mechanism,

in 2000 Slovenia

became a full member of the TRAPEX (Transitional Rapid Exchange of Information) System.

The Office for Consumer Protection was slightly reinforced in terms of budget, and in terms of

staffing through the recruitment of two new experts.

The activities of non-governmental consumer organisations were promoted in 2001 by calls for

tenders relating to consumer advice, the publishing of a consumer magazine and support for the

operations of consumer organisations.

Overall assessment

In the field of safety, legislative alignment is already rather advanced, although fine-tuning is still

needed to ensure complete alignment. However, non-safety related measures have only been

partially implemented in Slovenia and substantial efforts will be required in this area.

The Act on Consumer Protection still has to be thoroughly amended in order to implement the

directives on misleading advertising, comparative advertising, liability for defective products,

contracts negotiated away from business premises, unfair terms in consumer contracts,

timeshare, distance contracts, injunctions and guarantees. The recent Consumer Credit Act

requires fine-tuning. The directive on price indications has been largely implemented.

Concerning administrative capacity, further strengthening of the Office for Consumer Protection

is needed, notably with respect to training, and the co-ordination and training of other

administrative and judicial bodies involved in enforcement and market surveillance should be

improved.

Slovenia has a strong consumer movement and the government is carrying out measures to

foster the development of non-governmental consumer organisations. The register of consumer

organisations currently includes 12 non-governmental consumer organisations which work to

advise, inform and educate consumers. The Office for Consumer Protection operates a Council

of experts as a consultative structure, which represents consumer interests and ensures the

participation of consumers in the decision-making process. The government provides funding to

consumer organisations, although its tendering procedure for support to consumer organisations,

has contributed to the proliferation of several small consumer associations, which often lack a

real programme and the sufficient back-up training.

In accordance with the National Consumer Protection Programme for the period from 2001 to

2005, legislation related to the granting of concessions to non-governmental consumer

organisations will have to be adopted. Preparations also need to be completed for the

establishment of an out-of-court consumer dispute settlement system for financial services.

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

Slovenia has made some progress since the last Regular Report on Justice and Home Affairs,

both in terms of the harmonisation of legislation and strengthening of the administration.

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Amendments to the Act on Personal

Data Protection

setting out the responsibilities of different

institutions were adopted in June 2001. An Inspectorate for Personal Data Protection will be

set up to supervise personal data protection while the independent supervision of

implementation of the act will be exercised by a Personal Data Ombudsman.

Concerning

visa policy,

instructions on issuing of visas at border crossings, (including refusal of

entry for foreign nationals), on issuing of visas on humanitarian grounds and on revoking a visas

were introduced in January 2001. A list of countries whose citizens need airport transit visas

when transiting through Slovenian airports was adopted in July 2001. New Slovenian passports

were issued in March 2001 on the basis of the Law on passports for Slovenian citizens adopted

last year. The introduction of the electronic information system (Vision) continued.

Since the last Regular Report, Slovenia has made some progress concerning control of

external borders,,

but this area still remains a priority to be tackled. The Slovenian and

Croatian Governments agreed in July 2001 on the demarcation of the outstanding parts of the

sea and land border. Once the agreement is ratified by both Parliaments, Slovenia’s last

remaining border issue with its neighbours will have been settled. The border co-operation

agreement with Croatia, which had been awaiting ratification since 1997, was ratified by

Slovenia in July 2001.

In May 2001, the Government adopted a

Schengen

Action Plan identifying the needs for the

period 2000 – 2005 for further recruitment of staff to ensure adequate control of the future EU

external border, and for training and purchase of equipment.

Concerning

migration,

the Act on Employment of Third Country nationals entered into force in

January 2001. Slovenia ratified the agreement with Romania on re-admission in March 2001.

Amendments to the

Asylum

Act concerning detention of asylum seekers suspected of

deception and abusing procedures and facilitating the return of illegal immigrants to Hungary

and Croatia were adopted in December 2000. Amendments to the act adopted in July 2001

aim at improving the efficiency of procedures for granting refugee status. They also regulate the

distribution of asylum homes in various parts of the country, the granting of asylum for

humanitarian reasons, as well as special protection. They also include a provision on the right of

every asylum seeker to consult a refugee councellor. Rules concerning conditions and the

procedure for the reception and accommodation of aliens in the Centre for Foreigners were

adopted in October 2000.A new departmentwas created in the Ministry of the Interior in

September 2000 to deal with asylum applications. It has 13 staff.

The implementation of the reorganisation of the Ministry of Interior and the Police has continued

on the basis of the legislation adopted last year. 363 new police officer candidates have been

recruited in 2000. A Criminal Investigation Police Directorate (with a section for organised

crime) and units for computer crime, criminal analysis and investigation support have been set

up. Concerning

police co-operation,

the Co-operation agreement between Slovenia and

Europol was signed on October 1, 2001. The Slovenian police have enhanced co-operation

with police in the Member States, especially with Italy, in the areas of training, equipment and

co-operation in state border control. Joint police patrols have been established to patrol the

most vulnerable part of the Slovenian – Italian border since January 2001 in order to prevent

illegal border crossings. Slovenia ratified an agreement with Romania in March 2001 concerning

– among other things – co-operation in

fight against organised crime

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Concerning the

fight against fraud and corruption,

Slovenia became a full member of the

OECD Working Group on Combating Bribery of Public Officials in International Business

Transactions in January 2001 and ratified the OECD Convention on Combating Bribery of

Foreign Public Officials in International Business Transactions in September 2001 (see

also

Section B.1.1. - Democracy and the rule of law).

A decision on the organisation of a Prohibited

Drugs

Information Unit in the Ministry of Health

was issued in March 2001. The unit will be responsible for the co-ordinated collection of data

and exchange of information nationally and internationally. It will also become the Reitox

(European information network on drugs and drugs addiction) focal point.

A new law on

money laundering

has been adopted in September 2001. It extends the liability

to legal persons and aims at improving the co-ordination of the relevant authorities in this area.

Regarding

customs co-operation,

Slovenia has ratified agreements with FYROM and Norway

on mutual assistance in customs demands.

Concerning

judicial co-operation in criminal and civil matters,

Slovenia has ratified the

European Convention on Mutual Legal Assistance in Criminal Matters and the additional

protocol to the same convention in May 2001. A law allowing Slovenia to improve its co-

operation with the UN International Criminal Tribunal for the former Yugoslavia was adopted in

December 2000.

Overall assessment

The overall situation and level of alignment in the Justice and Home Affairs area is good

although establishing adequate border controls especially at the future EU external border as

well as implementation of the Asylum Act will require a further sustained effort.

The legislative framework for

data protection

is largely in place, however, the Classified Data

Act still remains to be adopted. The main task remains the establishment of the new institutions

foreseen for supervision in this area. Slovenia ratified the Council of Europe Convention on the

protection of Individuals with regard to Automatic Processing of Personal Data in 1994.

Slovenian

visa policy

is close to alignment. The only outstanding question is the visa policy on

Romania. However, the Government decided last year that Slovenia will follow the visa policy

of the EU on Romania.

The Government continues to implement measures to improve

border control,

especially at the

green border with Croatia. The activities are co-ordinated by a group set up by the Government

last year. The Schengen Action Plan adopted by the Government in May provides the

framework for measures in this area. Enhanced border control is especially important, as

Slovenia has increasingly become a transit country for illegal immigrants, mainly over the

borders with Croatia and Hungary. About 36,000 illegal border crossings were reported in

2000 – this represents a 91% increase from year 2000. Substantial Community assistance is

being provided for border control. Slovenia has a simplified border crossing regime with

Austria and Italy and agreements with all neighbouring countries (Austria, Croatia, Italy,

Hungary) concerning the right to enter the territory of Slovenia with identity cards. An

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agreement with Austria on border control co-operation remains to be ratified by both parties

and similar agreements with Hungary and Italy are being prepared.

As far as

migration

is concerned, the Law on Foreigners covers the entry and residence of

foreign nationals in Slovenia. Part of the implementing legislation has been adopted – but some

legislation concerning issuing of visas and residence permits still remains to be adopted. As

Slovenia is increasingly becoming a transit country for illegal immigrants, including trafficking of

human beings, it should increase its capacity to tackle trafficking and provide suitable training for

the relevant authorities. Slovenia has readmission agreements with 23 countries including

Austria, Belgium, Bulgaria, Canada, Croatia, Denmark, Estonia, France, Greece, Hungary,

Italy, Latvia, Lithuania, Luxembourg, Macedonia, the Netherlands, Poland, Romania, Slovakia

and Switzerland.

The basic legislation on immigration and

asylum

is in place since 1999. Implementing legislation

for the Asylum Act still remains to be adopted from the point of view of the rights of asylum

seekers and the procedure for handling asylum applications. The creation of an asylum home

separate from the deportation centre for illegal immigrants is an urgent priority. Both are

currently located in the same building, the general conditions in which are a source of concern

due to over-crowding. The centre houses up to 600 persons although its capacity is only 150-

300. Community assistance will be provided to set up the home and to upgrade the centres for

illegal immigrants in different parts of the country. The number of asylum seekers is increasing

rapidly (800 in 1999 and 13,000 in 2000). Partly as a result of this, there is a large backlog of

pending asylum applications. At the end of 2000, there were over 8,000 pending applications

and only 57 decisions were taken. ByApril 2001, only 14 applicants had been granted asylum.

Many of the asylum seekers leave the country after they have filed an application. Amendments

to the asylum law submitted to the Parliament aim at improving the efficiency of the procedure.

The National Action Plan on Asylum provides the framework for further measures in this area.

The legislative framework in the area of

fraud and corruption

is in place. The reorganisation of

the Slovenian Police, which started last year, is intended among other things to improve the

capacity of the police in this area. The police has specialised units for fraud and corruption.

Adequate training on financial and economic crime should be provided to ensure sufficient

investigation capacities. Slovenia should continue to improve co-ordination between the

different law enforcement bodies to fight organised crime. Slovenia's Penal Code contains legal

provisions which, to a great extent, adapt it for Slovenia’s eventual accession to the Convention

on the protection of the EC’s financial interests. The Council of Europe Civil Law Convention

on Corruption remains to be ratified.

The legislative basis for prevention of

money laundering

is in place. The National Office for

Money Laundering Prevention continues to act as the Slovenian Financial Intelligence Unit.

The legal framework in the area of illicit

drugs

has largely been put in place. Further

strengthening of the institutions in this area would enable the authorities to tackle drug problems

more effectively. Efficient control of drug transit presupposes strengthened border control

especially at the borders with Croatia and Hungary. Government statistics on drug-related crime

indicate a considerable increase in the 1990’s. Slovenia is also increasingly becoming a drug

consumer in addition to being a transit country on the Balkan route and it is important that the

authorities tackle also domestic drug consumption adequately.

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Concerning

customs co-operation,

Slovenia’s co-operation with OLAF has been effective.

Regarding

international judicial co-operation,

Slovenia has extradition agreements with

Austria, Croatia, France, FYROM, Germany, Italy, Romania and Turkey.

All the

human rights

legal instruments, which are part of the Justice and Home Affairs

acquis,

have been ratified by Slovenia.

Chapter 25: Customs union

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

In the field of the

EC Customs Code and its implementing provisions

, in December 2000

and April 2001 Slovenia adopted three decrees based on the Law on Customs Tariffs,

concerning tariff quotas and suspension of autonomous duties. Regarding tariff quotas, the "first-

come, first served" system has been introduced. The suspension of autonomous duties is in line

with the

acquis.

Regarding the

customs

acquis

outside the Customs Code

, Slovenia adopted the law on

Customs Measures Relating to Infringement of Intellectual Property Rights in April 2001. The

Act stipulates new tasks for the Customs Service in preventing counterfeit and pirated goods as

well as goods bearing counterfeit trademarks or geographical indications from entering or

leaving the customs territory of Slovenia. The application of the act is planned for November

2001.

Regarding international Agreements and Conventions, Slovenia acceded to the Convention on

Temporary Admission (Istanbul Convention) in November 2000.

Some progress can be noted in connection with the

administrative and operative capacity

to implement the

acquis.

The administration has begun to introduce risk analysis methods and to

provide IT support for processing of customs declarations. A free telephone hotline was set up

for confidential information on smuggling and customs fraud. To simplify customs procedures,

some activities were undertaken in the areas of warehouse-logistics centres, paperless

procedures and declaration procedures. As a result, 94% of all customs declarations will be

lodged in electronic form by the end of 2001. Language and computer training, as well as

training on the application of the new rules on the origin of goods and on the pan-European

cumulation system, has been provided.

Overall assessment

Slovenia has reached a good level of alignment in the customs area. However, further work is

still necessary in a number of areas such as free zones, customs warehousing, duty relief, inward

processing, Binding Tariff Information and cultural goods.

The adoption of the Law on Customs Tariffs in July 2000, and the amendments to the Customs

Service Act, adopted 1999, represented substantial progress in Slovenia's alignment with the

acquis.

Further alignment was achieved by the implementation of a system of tariff quotas

and suspensions, which will enable Slovenia to be integrated with the relevant EC customs

procedures by accession.

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The administrative and operational capacity to implement the

acquis

has reached a partially

satisfactory standard as concerns training of staff and material equipment. A Code of Ethics is in

place. However, Slovenia should continue with the training activities and the restructuring of its

administration in order to be able to cope with the new tasks following accession. Infrastructure

at the border with Croatia should be developed further. Particular attention should be paid to

the development of IT systems, especially to further development of risk-analysis, taking into

account the fact that flawlessly functioning EC-compatible IT systems should be in place at least

one year before accession to the EU in order to guarantee interconnectivity with the EC

customs computerized systems.

Chapter 26: External relations

Slovenia has made substantial progress in this area since the previous Regular Report.

As regards the

common commercial policy,

upon accession Slovenia will be required to align

its tariffs with those of the EC. Slovenia’s applied tariffs currently average 9% on all products,

13.7% on agricultural products, 5.9% on fishery products and 8.1% 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.

Slovenia has prepared - in consultation with the Commission - a Programme for the third phase

of integration in the Agreement on Textile and Clothing (ATC) and notified it to the World

Trade Organisation (WTO). Several regular and periodic notifications, which were reviewed by

various WTO committees, were prepared in 2000 aiming at an effective implementation of

WTO agreements. Slovenia has applied the Information Technology Agreement (ITA) on a

provisional basis since 1 January 2001 although it still remains to be ratified and is an observer

to the WTO plurilateral agreement on Government Procurement.

Slovenia is actively participating in negotiations on further liberalisation of trade in services and

agricultural products under the WTO. In September 2000 Slovenia adopted a Decree on

Safeguard Measures based on the WTO Agreement on Safeguards provisions.

Concerning

bilateral agreements with third countries,

in the same period, an agreement on

co-operation in trade and economy was signed with the Federal Republic of Yugoslavia (FRY)

in March 2001, while agreements with Brazil, Egypt, Indonesia, Korea and Thailand came into

force.

Slovenia has contributed significantly to the development of trade relations among the former

FRY republics with a view to enhancing stability in the region. Slovenia signed a memorandum

with Montenegro in March 2001 aiming at strengthening economic co-operation.

Slovenia and Bosnia-Herzegovina signed a free trade agreement in September 2001. Slovenia

and the Federal Republic of Yugoslavia announced in March 2001 that they plan to negotiate a

free trade agreement.

WTO bound tariffs after full implementation of all concessions including – where possible – estimated add valorem

equivalents of specific and compound tariffs.

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Slovenia’s

development policy

and

humanitarian aid

are mainly focussed on South Eastern

Europe. The assistance funds made available by Slovenia in 2000 and 2001 were distributed

as follows: Bosnia and Herzegovina 40%, Montenegro 25%, Macedonia 20%, Kosovo 10%

and Albania 5%.

Overall assessment

Slovenia’s trade trends and policy are increasingly integrated with those of the EU. Slovenia

continues to liberalise its trade policy by implementing the Europe Agreement, CEFTA and

bilateral agreements.

Slovenia has signed free trade agreements with EFTA, CEFTA, Croatia, Estonia, Latvia,

Lithuania, FYROM, Israel, Turkey and Bosnia-Herzegovina. It is also a member of CEFTA.

Any international agreement which is incompatible with the obligations of membership will have

to be re-negotiated or renounced prior to accession. Slovenia should continue to keep the EU

fully informed about negotiations aimed at the conclusion of any new free trade agreements with

a third country.

Slovenia has signed bilateral agreements on the protection and promotion of foreign investment

with all EU Member States with the exception of Ireland.

Slovenia is actively involved in the preparations for the launching of a new Round of Multilateral

Trade Negotiations within the WTO and has been steadily supportive of EU policies and

positions in this framework. However, b the time of accession Slovenia will need to have

joined the WTO plurilateral agreements on Government Procurement and Civil Aircraft. Further

co-ordination is needed to ensure the alignment of Slovenia’s GATS commitments with the

EC’s commitments and most favoured nation exemptions.

Further harmonisation in the field of alignment to the EC Dual Use goods legislation is needed.

As far as export credits are concerned, Slovenia has made progress in its alignment to the

OECD Arrangement. With regards to medium and long term export credits, some further

efforts are necessary.

Approximation and harmonisation with the

acquis

is the responsibility of the Department for

International Economic Relations, based within the Ministry of Economy, which co-ordinates

activities among ministries and relations with international organisations and associations. An

interministerial working group for co-ordination in WTO matters, headed by the Ministry of

Economy, acts as a co-ordinator between the ministries with regard to WTO matters. The

administrative infrastructure which needs to be in place as regards customs services is

addressed under

chapter 25 – Customs union.

The Ministry of Economy is currently in charge

of assistance matters but a central authority responsible for development policy remains to be

appointed. For the purpose of Slovenia’s future financial contribution to the European

Development Fund, Slovenia’s management of its national budget organisation and management

of flow of funds to the EC budget is addressed under

chapter 29 – Financial and budgetary

provisions.

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Chapter 27: Common foreign and security policy

Since the previous Regular Report, Slovenia has continued to align its foreign policy with that of

the European Union.

The regular

political dialogue

established by the Europe Agreement is proceeding smoothly.

Slovenia continues to participate actively in the framework of the Common Foreign and

Security Policy (CFSP), including meetings at the level of Political Directors, European

Correspondents and Working Groups.

Slovenia has shown a keen interest in the development of the European Security and Defence

Policy (ESDP) as part of the CFSP and has actively participated in the exchanges in this

context with the EU, in EU + 15 format (i.e. non-EU European NATO members and

candidates for accession to the EU).

As regards

alignment with EU statements and declarations,

Slovenia has regularly aligned

its positions with those of the Union and, when invited to do so, has associated itself with the

Union’s

statements, joint actions and common positions.

Since October 2000, it has

associated itself with eight EU Common Positions, including three on the Federal Republic of

Yugoslavia

Slovenia played an active role in the first capabilities Commitment Conference in November

2000 and had consultations in March 2001 with the EU on its participation in European

Security and Defence Policy missions. It has pledged forces to participate in EU Rapid

Intervention Force missions.

A Law on Sanctions was adopted in April 2001 establishing the basis for Slovenia’s

participation, as a member of international organisations, in

international sanctions and

restrictive measures.

The new Foreign Affairs Act adopted in May 2001 sets out a clearer division of powers

between the executive and the legislature. The Government is authorised to ratify certain

international agreements, which concern matters under its competence. However, internal

instructions to the departments concerned as regards these provisions of the law have not yet

been issued.

Slovenia’s relations with its neighbours remain good and several positive developments can be

reported. The Slovenian and Croatian governments reached agreement on the demarcation of

the remaining parts of the land and sea border in July 2001 as well as on ownership of the

Krško nuclear power plant (situated in Slovenia but jointly owned by the two countries). The

agreement still remains to be ratified by both Parliaments. The debt of the Slovenian Ljubljanska

Banka to its former account holders at the bank’s former branches in the other successor states

of the former Socialist Federal Republic of Yugoslavia (SFRY) remains to be settled. The

Slovenian Parliament ratified the agreement on border transport and co-operation with Croatia

in July 2001. Slovenia and the Federal Republic of Yugoslavia established diplomatic relations

in December 2000. Slovenia engages actively in quadrilateral co-operation with Italy, Hungary

and Croatia, and participates in the Central European Initiative.

An umbrella agreement on the succession of the former Socialist Federal Republic of

Yugoslavia was signed by the successor states in May 2001. The agreement divides up state

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property including diplomatic and consular properties, foreign reserves, and financial assets and

liabilities. An agreement on archives was also reached, although some issues need to be clarified

further.

In accordance with its Strategy of the Engagement in the Economic Reconstruction of South

Eastern Europe, Slovenia has participated in the Stability Pact for South Eastern Europe as an

active provider of humanitarian aid, technical assistance and co-financing of bilateral projects. It

participated in the regional working table and in three other working tables. Slovenia and

FYROM signed a memorandum on non-refundable investment aid in February 2001 as part of

the co-operation under the Stability Pact. Slovenia and Bosnia-Herzegovina signed an

agreement on technical assistance in February 2001.

Overall assessment

Slovenia's alignment with the

acquis

in the CFSP area is overall satisfactory. Slovenia should

maintain its foreign policy orientation in line with that of the Union as the

acquis

in the field of

foreign policy and security develops further.

Slovenia’s relations with its neighbours remain good. The agreements reached between the

Croatian and Slovenian Governments on the Krško nuclear power plant as well as on the

demarcation of the remaining parts of the land and sea border have been a positive

development. However, they remain to be ratified by both parliaments. The signature of the

agreement with Austria on co-operation in culture, education and science is a further welcome

development. Slovenia’s role and the special contribution it can make in South Eastern Europe

have been reconfirmed in the course of the last year.

Slovenia has aligned itself to the content and the principles of the EU Code of Conduct on Arms

Exports; these are reflected in the Act on the Export of Dual Use Goods.

Slovenia has a well staffed and functioning Ministry of Foreign Affairs. A special unit for CFSP

and ESDP headed by a political director for EU affairs is in place in the Ministry. The Ministry

is connected to the Associated Correspondents' Network information system through which the

EU communicates within the CFSP with the associate partners. Slovenia is committed to

building up adequate IT and secure communications channels needed for participation in the EU

exchange system for classified CFSP information.

Chapter 28: Financial control

Some progress has been made in the field of financial control during the period covered by this

Regular Report.

In the area of

public internal financial control,

at the beginning of 2001 Slovenia started to

establish internal audit units in the line ministries and to produce the appropriate internal audit

manuals. 11 audit units had been established by July 2001. Furthermore, the Budget

Supervisory Service (BSS) was reorganised into the following departments: Audit and

Certification Department, Inspection and Supervision Department and Department for Internal

Audit, Quality Control and Training. Five new employees were recruited, four of them in the

Audit and Certification Department and one in the Inspection Department.

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Regarding

external audit,

the Act on Court of Audit (COA) was adopted in January 2001.

The number of the Members of the Court of Audit has been reduced from nine to three, the

authority of the President has been increased and detail auditing procedures, responsibilities and

conditions have been stipulated in greater detail. The parliamentary procedures for follow up of

the COA audit reports have been strengthened by giving more attention to the conclusions of

the audits.

No particular developments are to be reported concerning

control of structural action

expenditure

and

protection of financial interests of the European Communities.

Overall assessment

Overall, the situation concerning external financial control is good in Slovenia while Public

Internal Financial Control should be improved.

The Public Finance Act adopted in September 1999, and the enacting of the Rulebook on Joint

Criteria for the Organisation and Procedures of Financial Control in February 2000, provide a

basis for further implementation of the new internal financial control systems. However, this

legislation needs to be amended and brought into line with internationally accepted standards

and terminology. An analysis of the present status of control and audit systems in the public

sector, preferably through a Public Internal Financial Control Policy Paper, should be carried

out. The appointment of internal auditors in some line ministries is an important step towards

sound financial management, but more efforts are needed to harmonise the functions and

positions of internal auditors. Furthermore, not all budgetary chapters are presently covered by

internal audit. The functional independence of the internal auditors also needs to be strengthened

in a harmonised way.

The right of Budget Supervisory Service financial inspectors to stop financial transactions ex

ante in line ministries is not in step with the principle of managerial accountability. Moreover, this

function of ex ante control, as exercised by the BSS inspectors, violates the principle of

separation between managerial responsibilities and the central function of the BSS, which is to

harmonise the methodology of financial management and control systems as well as of internal

audit systems.

Finally, the administrative capacity of the Department for Internal Audit, Quality Control and

Training within the Budget Supervisory Service should be strengthened by recruitment of new

staff. This would improve the centralised harmonisation of financial management and control and

internal audit methodologies, including the development of manuals and audit trails.

External audit is largely satisfactory in Slovenia. The new Act has further strengthened the

financial independence of the Court of Audit, stipulating that its budget is to be approved by the

Parliament. The Court now fully covers the use of EC- funds, up to the final beneficiaries, and

the judicial powers of the Court have been abolished. Finally, stipulations have been introduced

for suitable parliamentary discussions of the findings and recommendations of the Court’s

reports as well as of the follow-up procedures.

In the area of structural action expenditure, preparation for the Extended Decentralised

Implementation System (EDIS) is a priority. A comprehensive description of the systems

applied for procurement, contracting and payments (audit trail) is required. With regard to

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control and audit of EC pre-accession funding, the national accreditation of the SAPARD

Agency needs to be approved by the Commission.

The unit for the fight against crime and corruption established at the Ministry of Interior in April

2000 has overall responsibility for co-ordination concerning protection of EC financial interests.

Slovenia should officially nominate, as soon as possible, in consultation with OLAF, an

institution or administrative structure with the appropriate competencies to co-ordinate

investigations into cases of fraud and irregularities affecting the EC’s financial interests and to act

as a single contact point for OLAF.

Chapter 29: Financial and budgetary provisions

Slovenia has made some progress in this area since the last Regular Report.

Concerning the

national budget and EC co-financed measures,

the framework budgetary

legislation has been improved so as to guarantee the transparency and efficiency of financial

flows to and from the EC budget. The Act on implementing the 2001 budget was adopted in

April 2001 and includes a number of general budget implementation provisions. A legal

framework for budgetary management comparable to that in the EU member States has also

been set up.

Regarding the medium term budget expenditure, the budget documents for 2001 (budgetary

memorandum and national budget) have been prepared in accordance with the new framework

legislation. In July 2001 the Government adopted the budget memorandum, macro-fiscal

scenario and budgetary outlines for the period 2002-2005, which aim to introduce multi-annual

budgeting for the years 2002-2003.

Regarding the

own resources system,

efforts for estimating GNP in accordance with

European System of Accounts (ESA-95) standards are ongoing. The ESA-95 standards have

been translated into Slovene, the quality of annual economic accounts in current prices has

improved and institutional sectorisation of business register units in compliance with ESA-95 has

been completed.

Administrative capacity has been improved, notably by training personnel involved in EU-

related fiscal and customs administration. Furthermore, Slovenia has established a co-ordination

group for monitoring pre-accession assistance programmes and jointly financed programmes

within the structural and cohesion funds. In order to improve co-ordination of financial relations

with the EC, a special department was created within the Budget Preparation and Management

Division of the Ministry of Finance in June 2001.

Overall assessment

While Slovenia's budgetary rules are broadly satisfactory, further efforts are still required to

bring them into line with those standards generally applicable in the Community.

The legal framework for budgetary management as well as for the transparency and efficiency

of financial flows to and from the EC budget is in place. Regarding the medium term budget

expenditure, all programming and monitoring mechanisms, including co-financing, have been put

in place. The programme-oriented structure of the 2001 budget is a positive step. The Ministry

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of Finance has started a reform of budgetary procedures and public expenditure management in

order to make further improvements. The reform is concentrated on central financial control and

management of state budgetary expenditures as well as familiarisation with budgetary

requirements related to Slovenia’s accession to the EU.

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.

Overall preparations for application of the

acquis

on own resources are progressing well. The

co-ordinating role of the Ministry of Finance in connection with the provision of data on the

criteria for determining the level of Slovenia’s contribution to the EC budget should also be

strengthened. Special provisions for agricultural duties still need to be completed, and quality

and methodology improvements related to the ESA-95 standards are still to be implemented.

With regard to the control of future EC Own Resources, Slovenia should continue its efforts to

set up effective instruments to combat VAT and customs duty fraud so that the financial

interests of the EC can be protected.

In addition to the need for central co-ordination for the proper collection, monitoring and

payment of funds to and from the EC budget, administrative capacity should be strengthened in

the context of the relevant policy areas described elsewhere in this report, such as Financial

Control, Agriculture, Customs, Taxation and Regional Policy.

3.2.

Translation of the acquis into the national languages

Applicant countries are required to translate the various legal texts constituting the

acquis

into

their national languages by the time of their accession. Primary and secondary legislation alone

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 and Eastern Europe.

The Translation Unit of the Government Office for European Affairs is responsible for this task

and currently has 38 staff, while the judicial revision is carried out by the Legal Office. The

government is also providing funding for translations commissioned from freelance translators.

Slovenia has continued to make progress on translation of the

acquis

into Slovene. All primary

legislation has been translated. According to the government, about 29 000 pages of the Official

Journal have been translated. However, only about 1 800 pages of translated texts have

undergone legal revision. Without prejudice to the outcome of the accession negotiations, urgent

additional efforts are required in this area.

Due attention must also be given to the training of conference interpreters.

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3.3.

General evaluation

Since the last Regular Report, Slovenia has made good overall progress in transposition and

implementation of the

acquis.

It has made significant progress in the areas of company law,

agriculture, transport, energy, culture and audio visual and telecommunications However, only

limited progress has been made in other areas, notably on regional policy, free movement of

persons, social policy and employment, and consumer and health protection. It has continued to

strengthen the administrative capacity, especially in the areas of free movement of goods,

telecommunications, culture and audio-visual, and internal financial control.

Slovenia has made good progress since the last Regular Report in adopting and implementing

legislation in key areas of the internal market

acquis.

Substantial legislative progress has been

made in

company law

and the legislative framework is now nearly complete. Slovenia should

now focus on implementing the new provisions on intellectual and industrial property rights

adequately. Good progress has also been made in completing the legislative framework for

free

movement of goods,

and attention should now be given to strengthening the institutional set-up,

including the newly created Standardisation Institute and the market surveillance systems. In the

reporting period, Slovenia made substantial progress in removing restrictions to

free movement

of capital,

but this process remains to be completed according to the timetable set by the

government. Progress has also been achieved in

freedom to provide services

and alignment is

advanced. The supervisory institutions in this area should be further strengthened. Although few

new developments occurred in the area of

competition

policy, Slovenia’s preparations in this

area are already advanced and it should continue to focus on establishing a good track record

of enforcement. Little progress has been made in the reporting period in the area of

free

movement of persons

and Slovenia should speed up alignment especially on mutual recognition

of professional qualifications and on citizen’s rights.

Concerning

taxation,

Slovenia has continued to made steady progress and has now met its

commitment on transformation of the duty free shops. It is important that Slovenia develops its

IT systems to allow for the exchange of electronic data with the Community and its Member

States.

Very good progress has been made in the

agriculture

area, notably by adoption of the new

veterinary, plant health and plant protection acts. Priorities should now include strengthening of

the administrative capacity, completion of CAP management mechanisms, and setting up of

adequate phyto-sanitary and veterinary inspections .

Slovenia has made significant progress in legislative alignment in

transport

though adoption of

the key aviation, maritime and road transport laws. It has continued to make progress in

preparing for accession in the

energy

sector, especially by opening up the domestic electricity

market.

Slovenia has made very little progress since the last Regular Report in preparing for accession in

the area of

regional policy.

The preparations for implementation of the structural funds should

be speeded up as a priority. Progress has also been limited in the reporting period in the area of

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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employment and social affairs

where adoption of the Employment Relations act has been

delayed further.

The level of alignment in the

environment

sector is already high and efforts should now be

focussed on adoption of the remaining key legislation in the areas of water quality, Genetically

Modified Organisms (GMOs), and radiation protection. Little progress has been made in the

reporting period in the area of

consumer protection

and substantial efforts are required

especially in the area of non-safety related measures.

Slovenia has taken a substantial step forward towards completing legislative alignment and

ensuring the implementation of the

acquis

in the

telecommunications, culture and audio

visual

sectors by adopting key legislation and setting up the Agency for Telecommunications

and Broadcasting.

Some progress has been made in the field of

justice and home affairs,

notably though the

adoption of the Schengen Action Plan and reinforcement of staff for processing asylum

applications. Slovenia should continue its efforts to improve its capacity and infrastructure for

border control, create adequate facilities for asylum seekers separate from the centre for illegal

immigrants and adopt the remaining secondary legislation.

Slovenia has already reached a good level of alignment in the

customs

area and should now

focus on completing legislative approximation and strengthening of its administration through the

on-going reform, including development of IT systems so as to allow for the exchange of

computerised data between the EC and Slovenia.

Good progress has been made in the area of external

financial control

through adoption of the

new law on the Court of Audit and preparations are already advanced in this area. Attention

should now be given to strengthening public internal financial control.

Slovenia’s administrative capacity for the implementation of the

acquis

has been enhanced.

Since the last Regular Report, significant progress has been made with the establishment of the

implementing, supervisory, regulatory institutions in the areas of free movement of goods,

telecommunications, culture and audio-visual. Most of the institutions necessary for the

implementation of the

acquis

are now in place and attention should now be focussed on

providing them sufficient resources to carry out their work. Administrative capacity needs to be

developed in the area of management of the structural funds. An independent supervisory

agency still remains to be effectively established for data protection. Further efforts are also

required in establishing the necessary administrative capacity to ensure sound, efficient and

controllable management of EC funds.

Slovenia has met a large part of the short-term Accession Partnership priorities in the areas of

economic criteria, internal market, agriculture, transport, environment, employment and social

affairs, and justice and home affairs. In the area of reinforcement of the administrative and

judicial capacity (including the management and control of EC funds) the priorities have been

met partially. It should now focus especially on the remaining short term priorities, especially

related to control of EC funds. Slovenia has also made good progress in implementing a number

of the medium term priorities. It should speed up its preparations in the area of economic and

social cohesion and ensure fulfilment of priorities especially in the areas of the economic criteria,

internal market, agriculture, and employment and social affairs.

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C. Conclusion