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Europaudvalget 2001-02 (1. samling)
EUU Alm.del Bilag 187
Offentligt

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.11.2001

SEC(2001) 1754

2001

REGULAR REPORT

SLOVAKIA'S

PROGRESS TOWARDS ACCESSION

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2001

REGULAR REPORT

SLOVAKIA’S

PROGRESS TOWARDS ACCESSION

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

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Table of contents

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

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

Relations between the European Union and Slovakia..................................... 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................................................................................................... 15

1.1. Democracy and the rule of law ...........................................................................15

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

The Executive.............................................................................................................. 16

The Judicial System..................................................................................................... 17

Anti-corruption measures............................................................................................. 18

1.2. Human rights and the protection of minorities .............................................20

Civil and political rights................................................................................................ 20

Economic, Social and Cultural Rights........................................................................... 21

Minority rights and the protection of minorities.............................................................. 22

1.3. General evaluation ...............................................................................................24

2. Economic criteria .......................................................................... 26

2.1. Introduction ...........................................................................................................26

2.2. Economic developments ......................................................................................26

2.3. Assessment in terms of the Copenhagen criteria...........................................29

The existence of a functioning market economy ............................................................ 29

The capacity to cope with competitive pressure and market forces within the Union...... 34

2.4. General evaluation ...............................................................................................36

3. Ability to assume the obligations of membership.......................... 37

Introduction................................................................................................................. 37

3.1. The chapters of the

acquis....................................................................................39

Chapter 1: Free movement of goods....................................................................39

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

Chapter 2: Free movement of persons ................................................................42

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

Chapter 3: Freedom to provide services.............................................................43

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

Chapter 4: Free movement of capital .................................................................45

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

Chapter 5: Company Law.....................................................................................47

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

Chapter 6: Competition Policy .............................................................................48

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

Chapter 7: Agriculture..........................................................................................50

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

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

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

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

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

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

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

Chapter 11: Economic and monetary union.......................................................58

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

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

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

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

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

Chapter 14: Energy................................................................................................63

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

Chapter 15: Industrial policy...............................................................................66

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

Chapter 16: Small and medium-sized enterprises...........................................67

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

Chapter 17: Science and research......................................................................69

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

Chapter 18: Education and training ...................................................................69

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

Chapter 19: Telecommunications and information technologies...................70

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

Chapter 20: Culture and audio-visual policy.....................................................72

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

Chapter 21: Regional policy and co-ordination of structural instruments...72

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

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Chapter 22: Environment......................................................................................74

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

Chapter 23: Consumers and Health Protection.................................................77

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

Chapter 24: Co-operation in the field of justice and home affairs ................78

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

Chapter 25: Customs union ..................................................................................82

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

Chapter 26: External relations ............................................................................83

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

Chapter 27: Common foreign and security policy.............................................85

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

Chapter 28: Financial control .............................................................................86

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

Chapter 29: Financial and budgetary provisions ............................................88

Overall assessment ...................................................................................................... 88

3.2. Translation of the

acquis

into the national languages...................................89

3.2. General evaluation ...............................................................................................89

C. Conclusion....................................................................................92

D. Accession Partnership and National Programmes for the

Adoption of the

Acquis:

Global assessment ............................96

1. Accession Partnership ................................................................... 96

Short-term priorities .................................................................................................... 96

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

2. National Programme for the Adoption of the

Acquis

................. 101

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

Human Rights Conventions ratified by the Candidate Countries, 30

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

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

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A. Introduction

Preface

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

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

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

The European Council in Luxembourg decided that

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

with any necessary recommendations for opening bilateral intergovernmental conferences,

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

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

Union

acquis”

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

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

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

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

the obligations deriving from accession.”

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

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

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

2001.

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

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

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

the Association Agreement;

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

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

assesses Slovakia's situation and prospects in respect of the economic criteria defined by

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

with competitive pressures and market forces within the Union);

addresses the question of Slovakia's capacity to assume the obligations of membership, that

is, the

acquis

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

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

for accession.

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

acquis

criteria (including Slovakia's administrative capacity to implement the

acquis)

focuses on

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

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

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

forward-looking evaluation of Slovakia's economic performance.

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

the Accession Partnership priorities.

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

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

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

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

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

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

terms of its concrete progress in preparing for accession.

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

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

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

Acquis

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

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

acquis

(screening) and the negotiations

, have served as additional sources. Council

deliberations and European Parliament reports and resolutions

have been taken into account in

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

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

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

organisations.

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

accession negotiations.

For the European Parliament the

rapporteur

is Mr. Marinus Wiersma.

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Relations between the European Union and Slovakia

Recent developments under the Association Agreement (including bilateral

trade)

The implementation of the Europe Agreement has run smoothly, and no significant trade

problems have been noted. Slovakia has continued to contribute to the smooth functioning of

the various joint institutions. The seventh meeting of the Association Council took place in June

2001 following the Association Committee meeting held in December 2000. The system of sub-

committees has also continued to operate well as a forum for technical discussions. Since

publication of the Commission’s last regular report the Joint Parliamentary Committee,

comprising representatives of the Slovak National Council and the European Parliament, met

twice, for its 11

and 12

meetings in Brussels in March 2001 and in Kosice in October 2001.

In general, trade relations between the European Community and Slovakia continue to be

positive. In 2000, EC imports from Slovakia stood at €7 billion, whilst in the same period, EC

exports to Slovakia stood at €6.5 billion. Machinery and electrical and transport equipment

continued to dominate on the export and import side from and into the EC. As in 1999, in 2000

Slovakia had a positive trade balance with the EC, amounting to € 430 million. Exports to the

EC accounted for 59 % of total exports and the share of imports from the EC was 49 % of

total imports. While both these figures decreased slightly compared to 1999, they reflect a high

degree of trade integration with the EU; bilateral trade flows between the EC and Slovakia have

more than quadrupled since 1993.

An import surcharge was phased out by January 2001 in accordance with the envisaged

timetable.

In June 2001 the Commission decided to initiate an anti-dumping investigation concerning

imports of certain tubes and pipe fittings, of iron and steel, originating, in Slovakia, amongst

other countries.. The temporary safeguard measures (in the form of export quotas) on exports

of certain cereals , which were introduced in 2000 were extended and are due to run until

December 2001. Duty-free tariff quotas for certain basic agricultural commodities introduced at

the same time were eliminated at the end of December 2000.

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

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 two

thirds of the traditional EC agricultural imports from Slovakia and 40 % of the EC agricultural

exports to Slovakia benefit from preferences. A second round of bilateral negotiations for trade

liberalisation 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. For processed

agricultural products and fish, negotiations have been concluded at technical level. The relevant

decisions of the Council are under preparation.

Following preparatory work already reported on in last year's Regular Report, Slovakia

accepted the Commission’s invitation to open negotiations on a Protocol to the Europe

Agreement on Conformity Assessment (PECA). A first round of negotiations took place in

Brussels in June 2001. Discussion focused on a framework agreement and a number of sectoral

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annexes. Once agreed, the PECA should play an important role in trade facilitation between the

EC and Slovakia as important benefits of the single market become available to both parties.

An Association Council Decision was adopted in May 2001 concerning a five-year extension of

the treatment of the whole of Slovakia as an Article 87 (3)(a) area for state aid purposes. A

further Association Council Decision concerning implementing rules governing state aid is in the

process of being adopted. As regards the request from the Slovak authorities for the passage to

the second phase of the Europe Agreement, Slovakia has made good progress, particularly

concerning requirements related to capital movements, and technical discussions on the few

remaining issues are on-going. Outstanding issues mainly concern rights of establishment, in

particular, the position of EU lawyers.

Accession Partnership / National Programme for the Adoption of the Acquis

A revised Accession Partnership was adopted in December 1999 - its implementation is

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

update the Accession Partnership.

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

acquis

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

priorities 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 agricultural and rural development; and

ISPA,

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

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

candidate countries to fulfil the criteria for membership.

For the years 2000-2002 total financial assistance to Slovakia amounts annually to around € 78

million from Phare, € 18.6 million from SAPARD, and between 3.5 and 5.5% of the overall

ISPA budget.

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

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

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

The Phare programme allocated to Slovakia commitments of € 356 million during the period

1993-1999 and €78.8 million in 2000

. The

2001 Phare Programme

for Slovakia consists of

an allocation of € 43.5 million for the National Programme, concentrated on the following

priorities:

−

Political criteria: support in the educational field and improving the living conditions of the

Roma while promoting tolerance and integration into society;

−

Internal Market: support of a market surveillance system in consumer and health protection;

customs;

−

Energy;

−

Transport;

−

Economic and social cohesion;

−

Reinforcement of administrative capacity: strengthening the independence of the judiciary;

public internal financial control.

Funds have also been set aside to finance a "Twinning Light" facility.

In addition, Phare committed € 25 million in support of the decommissioning of Bohunice V1

NPP.

A further € 12 million has been allocated for Cross-border Co-operation (CBC) programmes,

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

Slovakia 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, Slovakia participates in several Community programmes, such as the 5

Framework Programme for Science and Technology, Socrates, Leonardo, Youth, the 3

multi-

annual programme for SMEs, Culture 2000, and SAVE. Following the ratification and entry

into force of the agreement, the formal participation of Slovakia in the European Environment

Agency will start in January 2002. In order to streamline Community legal procedures and

thereby facilitate Slovakia's future participation in Community programmes, a Decision is in the

process of being adopted by the EU-Slovakia Association Council establishing the general

principles for such participation.

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

financial resources has taken place in a number of important fields such as banking privatisation,

SME development, trade promotion, environment, justice and home affairs, and agriculture.

Phare support for SME development has succeeded in initiating essential institutional and

This includes an allocation of €12 million to Cross-Border Co-operation (CBC) Programmes, and €20 million for

nuclear decommissioning.

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financial mechanisms serving enterprises in this sector. In agriculture, Phare has been providing

assistance in the veterinary and phyto-sanitary sector.

In Slovakia, Phare for example played a particularly important role in:

−

A well-guided Bank Privatisation and Financial Sector Restructuring Programme: Phare has

been supporting several projects (with an overall allocation of over € 5 million) aiming,

inter

alia,

at strengthening the administrative capacities of the Ministry of Finance, which has

been co-ordinating the privatisation process.

−

Reconstruction of the Sturovo-Esztergom bridge and building of the appropriate customs

facilities on the Slovak - Hungarian border. Phare provided an overall allocation of € 10

million - € 5 million each for Slovakia and Hungary - for the reconstruction of the 328-

metre steel structure bridge destroyed during the Second World War. This project will

contribute to improving the local transport facilities and give new impetus to the local

economy, at the same time enhancing bilateral relations.

−

The Environmental Grant Scheme has provided grant support to capital investment projects

in the private and public sectors which directly facilitate compliance levels in the key

environmental problem areas. A Phare grant ( 15 million) has mobilised local sources

€

amounting to € 25 million, making it possible to build and complete 87 environmental

facilities.

−

In the transport sector, Phare funds were committed to build a 6.5-km section of the D-61

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

traffic and part of the urban through-traffic away from congested city centre streets, thus

improving traffic conditions, safety and environmental conditions in the city centre. This

project is also co-financed by the European Investment Bank.

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

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

acquis

and economic and social cohesion.

The Commission approved the Slovak

SAPARD

programme for Agriculture and Rural

Development in November 2000. The programme is based on three major priorities: (1)

improvement of the agricultural production sector, including the food industry, supporting

investments in farm holdings and investments aimed at contributing to the upgrading of agri-food

enterprises to EC standards and increasing their competitiveness; (2) support to sustainable

rural development with a view to increasing job opportunities and to developing an ecologically

sound management of natural resources; and (3) developing of human resources. Average

annual public expenditure will amount to € 24.6 million (at 2000 prices) of which the

Community will contribute € 18.6 million (maximum annual amount). The Multi-annual Financing

Agreement, which sets out the rules for implementing SAPARD, and the Annual Financing

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Agreement, which sets out the Community financial commitment for the year 2000 to Slovakia,

were signed in March 2001. A monitoring committee for the monitoring of the SAPARD

programme has been established. The Monitoring Committee adopted its rules of procedure

and gave a positive opinion on the proposed monitoring indicators. The Slovak authorities are in

the process of finalising all steps necessary to prepare the national accreditation of the

SAPARD Agency.

Slovakia received € 42.4 million in assistance from the

ISPA

programme in 2000, with € 11.6

million assigned to environmental projects and € 30.8 million assigned to transport projects. The

Financial Agreements were signed in 2001. The Slovak Government has defined the following

three priorities for ISPA financing in the environment sector: wastewater and drinking water; air

quality improvement; waste management. As regards transport, the Slovak Government has

defined its priorities for ISPA financing in the rail, roads and water sector. The implementation

structures are in place. A National Authorising Officer and two Sectoral Authorising Officers

have been appointed. Two implementing agencies were established, one for the area of

transport, the other for the area of railways.

At project level, three environmental projects were adopted in the field of waste water

treatment.

Twinning

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

their administrative capacity to implement and enforce the

acquis.

As of 1998, the European

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

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

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

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

training.

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

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

now covers all sectors pursuant to the

acquis.

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

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

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

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

of the

acquis

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

drugs, transport, and telecommunications regulation.

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

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

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

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

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

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

being offered the possibility of drawing on Member States’ expertise through Twinning light in

order to address well-circumscribed subjects of limited scope, which emerge during the

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negotiations process as requiring adaptation. It is estimated that around 250 twinning projects

are operational throughout the candidate countries at any one time.

For the Slovak Republic, 9 twinning projects have been financed under the 2000 National

Programme. These projects will cover sectors like the Roma minority, the fight against

corruption and drugs, the establishment of a guarantee fund for employees in case of employers’

insolvency, the development of social dialogue, environment (Implementation of the

Environmental Impact Assessment Directive and the strengthening of the Slovak Environment

Inspectorates), business register census and product standardisation and certification.

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, substantial discussions on the individual

chapters of the

acquis

started, and by June 2001, negotiations on all chapters (with the

exception of chapter 30 – Institutions and chapter 31 – Other) have been opened.

By the end of September 2001, the following 19 chapters had been provisionally closed: Free

movements of goods, free movement of persons, freedom to provide services, free movement

of capital, company law, fisheries, economic and monetary union, statistics, social policy and

employment, industrial policy, small and medium-sized undertakings, science and research,

education and training, telecommunications and information technologies, culture and audiovisual

policy, consumers and health protection, customs, external relations and common foreign and

security policy.

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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 Slovakia’s progress towards accession, the Commission

concluded that:

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

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

consolidation of its democratic system and in the normal functioning of its institutions. However

the speed of the reform process has lost some momentum due, in part, to dissension within the

ruling coalition.

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

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

probationary system, which were set as a short term priority, have not yet been adopted.

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

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

government policy and transposing international obligations. The translation of good intentions

and well thought-out concepts into specific actions should not be delayed, in order to improve

Slovakia’s otherwise insufficient record in this respect.

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

but there remains a gap between policy formulation and implementation on the ground. Tangible

improvement of the situation of the Roma minority in particular by implementing specific

measures, a short term priority of the 1999 Accession Partnership, has therefore not been

achieved to a large extent. Increased efforts in implementing legislation in various sectors as well

as strengthening policies and budgetary means in line with the medium term priorities of the

1999 Accession Partnership are needed in this respect.

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

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

delayed. Sustained efforts are required to maintain momentum in these important areas of the

reform process.”

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

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

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

proclaimed at the Nice European Council in December 2000.

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the political Copenhagen criteria, including as regards the overall functioning of the country’s

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

to developments regarding Slovakia’s ability to implement the

acquis,

in particular in the domain

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

implement the

acquis

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

(Chapter

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

of part

B.3.1.

of this

Report.

Recent developments

The process of consolidation of democratic institutions noted in the two previous reports has

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

period. The referendum on early parliamentary elections, initiated by the opposition and carried

out in November 2000, failed because of insufficient voter turnout.

1.1.

Democracy and the rule of law

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

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

developments of the past year.

The Parliament

During the reporting period, the Parliament reached agreements on key reforms which had been

considerably delayed in the past.

In February 2001, the Parliament adopted an amendment to the Constitution, thus taking a

significant step forward in consolidating democratic institutions, strengthening the rule of law and

preparing Slovakia for EU accession. The amendment provides,

inter alia,

the constitutional

basis for transferring the exercise of a part of Slovakia’s sovereign rights to the EU and

provides for the supremacy of EC law over Slovak legislation. The transposition of EC

legislation has been facilitated by introducing the possibility in this regard of issuing Government

decrees in certain circumstances. Moreover, the amendment empowers Slovakia to join

organisations for mutual collective security. It strengthens the judiciary, extends the control

powers of the Supreme Audit Office and lays down the legal basis for the creation of territorial

self-government units. The amendment also provides for the establishment of the office of an

ombudsman for human rights. Other key reforms concerned the decentralisation of the public

administration and the civil service. Furthermore, amendments were also introduced to make

the system of financing political parties more transparent and reinforce the relevant control

mechanisms.

Furthermore, the Parliament approved a Security and a Defence Strategy, setting and

confirming the country's integration into EU and NATO as a priority. It is important to note that

these decisions were widely supported by the opposition.

The proper functioning of Parliamentary Committees and Supervisory Bodies was – as already

reported last year - still hampered due to the continued refusal of the opposition parties to take

the chair posts offered to them. The vacancy of the chair post of the Special Supervisory

Committee for the Slovak Intelligence Service was filled by a Member of Parliament from the

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coalition. The chair positions on the Parliamentary Committees for Social Affairs and Housing,

Culture and Media, Healthcare and Conflict of Interests, Agriculture, as well as on the Special

Supervisory Committee for Military Information remained vacant.

As a reaction to the establishment of a new party by the Prime Minister, the ruling Christian

Democrats left the parliamentary club of the Party of the Democratic Coalition and founded

their own group in Parliament. The number of independent deputies increased to eight, mostly

due to departures from the ruling coalition.

The uncertainties surrounding the validity of two contradictory presidential amnesties, as

reported last year, remained. The criminal proceedings against an opposition Member of

Parliament who had been accused

inter alia,

of the abduction of the son of the Slovak ex-

president, were stopped by a district court on the grounds that the original amnesty was valid.

The Parliament did not succeed in annulling the two relevant amnesties.

The Executive

Significant progress was achieved with regard to the structure and functioning of the

administration, as a legal framework for the public administration reform was established.

Following internal tensions within the ruling coalition on this issue, both the Government and

Parliament reached agreement at the end of the reporting period, thus meeting an important

priority of the 1999 Accession Partnership.

The basic principles of self-administration, which is a key element of public administration

reform in Slovakia, were laid down in the constitutional amendment adopted by the Parliament

in February 2001, referred to above. Self-administration at municipal level will be

complemented at regional level. In July 2001, the Parliament adopted a law, setting the number

of self-administrative regions at 8, and a law on elections for the regional self-administrative

bodies. The first elections are scheduled for December 2001. The remaining package of laws

relating to the decentralisation of public administration reform was passed in September and

October 2001. The law on competencies transfers a considerable number of functions from

state to regional level. Four different acts stipulate the property to be transferred to the

municipalities and self-administrative regions, set the legal conditions for fiscal decentralisation

and determine the salaries of the chairpersons of the self-administrative bodies. It is now

important that this legal framework for public administration reform is implemented without

delay, ensuring the functioning of a democratic, efficient and sustainable self-administration.

With regard to the modernisation of the public administration, an important step forward was

achieved with the adoption of the Civil Service Law in July 2001. It addresses such basic

elements as the scope, recruitment and remuneration of the civil service. The provisions

combine the aims of fostering the creation of a professional, reliable, impartial and politically

neutral civil service on the one hand and ensuring good social and economic conditions for civil

servants on the other. The law grants civil servants life-long tenure. All officials, currently

working in the state administration as well as new candidates, have to pass a qualification exam

to receive such permanent status. Officials have to declare their assets and will have to act in

compliance with code of ethics, though the latter has yet to be adopted. Specific provisions of

the Civil Service Law aim at avoiding a conflict of interest. The performance of civil servants is

evaluated annually.

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The legal framework for state employees other than civil servants was established by the

adoption of the Public Service Law in July 2001.

Due implementation of these two laws is now needed to ensure that the public administration

suitably fulfils the key role it has to play in a functioning democracy based on the rule of law and

in support of the accession process..

The Government has started to implement the results of the state audit approved last year. Its

aim is to enhance the quality, reduce the costs and promote the transparency of the central state

administration. In July 2001, the Government approved a plan to increase the number of staff

dealing with EU integration by approximately 1200 in 2001 and 2002.

The Judicial System

The 1999 Accession Partnership established as a short term priority the strengthening of the

independence of the judiciary, in particular amending the constitution with regard to appointment

of and probationary system for judges.

Over the past year, Slovakia has taken important steps to strengthen the independence of the

judiciary and the prosecutors.

The constitutional amendment adopted by Parliament in February 2001, referred to above,

abolished the four-year probationary period for judges.

Another important element of the amendment is the provision for setting up a Judicial

Council, carrying out crucial administrative functions concerning the judicial system.

According to this amendment, the Council, headed by the President of the Supreme Court,

will consist of nine judges and nine other members. The latter 9 members are appointed by

the Parliament, the President of the Republic and the Government respectively. The Council

has, among other competencies, the sole right to submit proposals for the nomination and

the recall of judges (including the President and Vice-President of the Supreme Court), to

decide on the assignment or transfer of judges to individual courts, and to nominate the

members of disciplinary senates. The important role this Council will play within the

judiciary highlights the vital importance for its chairman, the President of the Supreme Court,

to carry out his functions in an impartial and efficient way.

The amendment to the constitution also deems the exercise of specified other functions,

including membership of a political party and business activities, to be incompatible with the

office of judge.

Furthermore, the amendment of the constitution also provides for the widening of the

competencies of the Constitutional Court. It grants,

inter alia,

wider access for individuals

to this court. The Court will be entitled to award pecuniary satisfaction to individuals whose

fundamental rights have been violated. The number of its judges will be increased from 10

to 13.

The Act on Prosecution and the Act on Prosecutor and Candidate Prosecutors were

amended in March 2001. They reinforce,

inter alia,

the administrative system of the

prosecution system, introduce a new, more transparent promotion procedure and establish

a permanent disciplinary commission.

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Whilst these developments are most welcome, further legislative steps are now needed to

implement the constitutional provisions aiming at strengthening the independence of the judiciary,

including action in budgetary terms. It is important that progress is made notably in adopting the

Act on the Judicial Council.

Significant improvements at practical level are also needed to guarantee the judiciary's

professional impartiality and political neutrality. Reports and surveys continue to show that

corruption remains a serious problem. The judiciary is not united in approaches to combat

corruption. For instance, the attempts of some courts, to monitor corruption have been

criticised by a number of judges, including the President of the Supreme Court. Further

simplification of procedures and changing mechanisms for assigning cases in courts would

constitute an important step towards improving this situation. Increased training of judges, hand

in hand with providing suitable equipment and administrative staff is also a matter of priority.

An EU Expert mission carried out in February pointed out that the prosecution system

constituted one of the main weaknesses of the judicial system in Slovakia. The subsequent

responsibilities of police, investigators and prosecutors appear to make the whole procedure

very long, complex and rather cumbersome. The accountability and transparency of the

investigation procedure should be ensured.

Slovakia currently has 1278 judges 1171 of whom work in regional and district courts. This is a

slight increase as compared to the last report. The number of cases filed continued to increase,

reaching approximately 900,000 annually. The duration of judicial proceedings, with an average

length of almost 13 months in civil cases, remains an issue of concern. The average length in

criminal proceedings amounted to around 4 months. An amendment to the Act on Civil

Procedure, however, adopted in October 2001, aims at shortening the duration of the judicial

proceedings by, inter alia, extending the first instance competencies of the district courts and

limiting the appeal to the regional courts.

Anti-corruption measures

In the last Regular Report the Commission recognised a number of positive measures but

indicated that the translation of good intentions and well-thought-out concepts into specific

actions should not be delayed. In this reporting period, additional legislative steps and individual

measures were taken to tackle this issue.

Following the adoption of the National Programme for the Fight against Corruption last year,

the government approved in November 2000 the individual action plans submitted by the line

ministries, consisting of more than 1,500 concrete tasks. Although constituting a further step

forward, a number of proposed actions were reportedly too vague to make them operational

and verifiable. According to the Government, around half of the tasks have been fulfilled. In

December 2000, the Government established a central co-ordination unit for the fight against

corruption, which is in charge of ensuring the complementarity of measures taken by the

different Government bodies in the fight against corruption and of reporting to the Steering

Committee, set up last year at the Office of Government. The functioning of this steering

committee was weakened after the representative of the Ministry of Justice left the body,

following a disagreement with the other members. This committee consists of officials, NGOs

and international donors and is formally responsible for the implementation of the National

Programme.

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The adoption of the Civil Service Law and the Act on Prosecutors referred to above

represented a considerable step forward in combating corruption These items of legislation

have introduced provisions to eliminate possible conflicts of interest including an obligation to

declare assets held. However, proposals to address possible conflicts of interest for Members

of Parliament more effectively failed to gain support in the Parliament.

The Law on Free Access to Information entered into force in January 2001, contributing to the

improvement of transparency in public life. However, it appears that full and effective

implementation is being hampered notably by a non-uniform treatment among administrative

bodies concerning documents considered to be secret and by insufficient awareness among the

population.

Further progress was achieved in the field of party financing. Provisions were approved by the

Parliament in October 2000, obliging political parties to divulge all donations and donors. In

February 2001, the Parliament adopted rules aiming at improving the control over the use of

financial resources for election campaigns. Measures adopted in April 2001 require

independent auditors to check the accounts of political parties.

The commercial register was introduced on the internet on a trial basis as of October 2000 and

extended to all regions from 1 January 2001. The Government has also published a list of basic

principles concerning licences, concessions and permits as a preparatory step to setting up the

necessary registers.

The sentences for bribery and abuse of power were significantly increased by an amendment to

the Criminal Code adopted in June 2001. However, the post of specialised “anti-corruption

prosecutor” has not yet been introduced.

Strict enforcement of the aforementioned rules is now necessary to ensure that the provisions

have a positive impact.

The number of persons convicted of corruption increased from 173 in 1999 to 197 in 2000.

According to the Slovak Statistical Office, the number of people in the public administration

demanding bribes has decreased. The perception, continues, however, that corruption is still

widespread in Slovakia, notably in areas like health care, customs, education, police and in the

courts.

In March 2001, the Head of the Department at the Government Office for European

Integration, responsible for Phare co-ordination and also executive National Aid Co-ordinator,

was dismissed following suspicion that he occupied positions in certain companies which might

have constituted a conflict of interest with his official functions and possible misuse of funds. The

Slovak Police are investigating the case while the Slovak Supreme Audit Office has carried out

an audit of the Office of the Government, the results of which were published at the end of

October 2001. The audit report comes to the conclusion that there is no evidence for fraud or

misuse of funds. It has criticised, however, the existence of institutional weaknesses and

insufficiencies in the management of pre-accession funds. The Slovak authorities are in the

process of analysing the report with the aim of improving substantially the management and

control of these funds as well as of future Structural Funds.

Slovakia successfully participated in the Council of Europe Group of States against corruption

(GRECO). The GRECO evaluation report, issued at the end of last year, acknowledged further

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progress in Slovakia, notably at policy level, but called for the effective implementation of a

number of recommendations. These recommendations cover a broad range of measures,

including in the area of granting licenses, privatisation, police, investigation and the judiciary.

The ratification in May of the 1990 Convention on Laundering, Search, Seizure and

Confiscation of the Proceeds of Crime is a highly welcome, important development. Slovakia

has ratified the Council of Europe Criminal Law Convention, and signed the Council of Europe

Civil Law Convention. Slovakia participates actively in the monitoring of anti-corruption

measures effected by the OECD Working Group on Bribery in international commercial

transactions.

1.2.

Human rights and the protection of minorities

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

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

Report.

Slovakia has already ratified the major human rights conventions (

annex).

The Revised

see

European Social Charter still remains to be ratified. Slovakia has not undertaken to be bound

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

In November 2000, Slovakia signed the Protocol No.12 to the European Convention for the

Protection of Human Rights and Fundamental Freedoms, prohibiting discrimination on any

grounds. Specific anti-discrimination legislation transposing the EC anti-discrimination

acquis

remains to be adopted. The Government, however, is in the process of developing such

legislation, with the aim of providing clear definitions and bans on discrimination as well as

procedures to enforce these rules (see

also chapter 13 – Social policy and employment in

part B.3.1. of this report).

The constitutional amendment of February 2001 has created the legal basis for the office of an

ombudsman for human rights. The ombudsman, elected by the Parliament, will help protect

fundamental rights and freedoms in cases where public administration bodies have violated the

legal system or the rule of law. The relevant primary legislation now needs to be adopted, and

the office of the ombudsman needs to be established and equipped with sufficient human and

financial resources.

Civil and political rights

Over the past year, limited further progress was made in this area, notably by strengthening the

institutional set-up against trafficking of human beings, and in the fight against racism and

xenophobia.

Degrading treatment by the

police,

notably towards some members of minorities, continues to

be reported. The Ministry of Interior recorded around 4000 complaints in 2000 against law

enforcement officials. 552 of these complaints, including cases of physical coercion and

unreasonable use of coercive methods, were found to be justified. In July 2001, a 51-year old

Roma man was beaten to death by police officers while held in detention. This case highlights

the need for urgent action to improve police recruitment and training as well as to establish an

efficient system for examining complaints of police misconduct.

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A special branch within the Office for the fight against organised crime was created in order to

fight

trafficking of persons.

Slovakia has increasingly become a country of origin, transit and

destination for the trafficking of women and children.

With regard to

pre-trial detention,

some evidence has appeared indicating that in certain

individual cases the three-year limitation for proceedings is not being respected. In December

2000, the European Court of Human Rights delivered a judgement concerning the lack of

speedy decision related to the applicant’s detention in a mental hospital, establishing a violation

of the European Human Rights Convention.

In the field of

asylum,

an independent body to act as the second instance in the asylum

procedure still needs to be established.

The Government continued to implement the action plan to prevent all forms of discrimination,

racism, xenophobia, anti-semitism and other forms of intolerance. Amongst other things, public

awareness campaigns and various education initiatives have been carried out. The focus

included training of professional groups like police officers and judges in the area of human

rights. Furthermore, courses on the prevention of intolerance were introduced into the curricula

of primary and secondary schools. An ordinance of March 2001 aims to make the activities of

the police more effective in the fight against racism and xenophobia.

The

freedom of expression

and

freedom of religion

are enshrined in the Constitution of the

Slovak Republic, and no particular problems have been reported in this regard.

Economic, Social and Cultural Rights

A number of positive developments have taken place in this area since the last Regular Report,

notably in the area of equal opportunities.

The Government adopted a Policy paper for

equal opportunities

between women and men in

March 2001. Its aim is to identify concrete steps to enhance equal opportunities both at

legislative and institutional level with a focus on three areas: the labour market; public and

political life; and the family. The adoption of the new Labour Code in June 2001 is a step

forward in ensuring equal opportunities, namely as regards pregnant workers, equal access,

burden of proof and parental leave (see

Chapter 13 - Social Policy and Employment in part

B.3.1. of this report).

Out of 150 Members of Parliament, 19 are women.

Slovakia ratified the Optional protocol to the Convention on the Elimination of All Forms of

Discrimination against Women (CEDAW) in November 2000.

The Committee for

Children’s Rights

established last year was abolished. However, an

advisory body for the promotion and protection of the rights of children, was set up but is not

yet operational. There is no comprehensive legislation on the protection of children.

The integration of

socially vulnerable and disabled persons

remains a matter of concern,

partly due to the absence of appropriate measures taken by the Government and to insufficient

legislation. There is a lack of adequate labour opportunities notably for mentally and physically

handicapped people. However, in June 2001, the Government adopted a National Programme

for the Development of Living Conditions for Citizens with Disability in All Areas of Life in June

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2001, which aims at enhancing equal opportunities and integration of disabled citizens into

society.

The involvement of the

trade unions

in the social dialogue has been satisfactory. The revised

European Social Charter has still not been ratified by the Parliament.

Minority rights and the protection of minorities

With the exception of the Roma minority, the recognised minorities in Slovakia (numbering more

than ten) are comparatively well integrated in Slovak society. This was also acknowledged by

the Advisory Committee on the Council of Europe Framework Convention. The Committee

highlighted, in particular, the achievements made in improving inter-community relations, notably

vis-à-vis the Hungarian minority, representing the largest minority group in Slovakia.

The implementation of the basic treaty with Hungary has continued. The government largely

agreed to the crucial demands of the ruling party SMK, which politically represents the

Hungarian minority in Slovakia. The accord notably concerned the accession to the European

Charter of Regional and Minority Languages and the creation of a faculty for Hungarian

teachers at the university in Nitra. Whereas the Government is willing to provide funds for the

faculty, the autonomous administrative bodies of Nitra university have so far been reluctant to

follow the agreement reached on the political level.

The situation of the Roma minority remained difficult. The Roma minority is sizeable, although its

precise proportions are not well known. According to the last census, conducted in 1991 it

accounted for 1.6 % of the population, but could be as high as nearly 10 % . The census

carried out in the second quarter of 2001, in which for the first time bilingual Slovak-Hungarian,

Slovak-Ruthenian, Slovak-Ukrainian and Slovak-Romany forms were used, is expected to

improve the accuracy of available data on minority communities.

The under-representation of Roma students in the education system, hand in hand with over-

representation in schools for retarded children continued to exist. The practice of separate

classrooms for Roma students was reported in a number of cases. Housing conditions, notably

in the so-called “settlements” mostly in the Eastern part of Slovakia, remain a matter of concern.

There has also reportedly been obstruction of access to public utilities and social services,

including health care. Violence, notably at the hands of “skinheads”, continued to be a serious

threat to this minority. In 2000, the police recorded 35 cases of racially motivated crimes, with

Roma being the biggest group of victims. In some cases, Roma were exposed to serious ill-

treatment by the police.

The 2000 Regular Report noted that considerable progress had been made in introducing the

appropriate legislation and supporting institutions deemed necessary in the field of minority rights

but that only limited progress was observed in actual implementation. Over the reference

period, substantial further efforts have been made by the Slovak Government and some

municipalities as regards national minorities:

In June 2001, Slovakia ratified the European Charter of Regional and Minority Languages.

The Charter will apply to the Bulgarian, Croatian, Czech, German, Polish, Roma, Ruthenian

and Ukrainian languages in all municipalities with over 20 % of any of those minorities. In

line with the flexible instruments provided for by the Charter, the Hungarian minority will

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benefit from the most generous provisions. The Government has entrusted the

Government’s Council on National Minorities and Ethnic Groups with acting as the

advisory body on the implementation of the Charter.

Implementation of the Government Roma strategy, which was adopted last year, started at

both national and local government level. More than 100 projects were carried out in the

areas of housing and infrastructure, education and training, employment, social affairs and

health as well as culture. Around 50 % of the € 4 million budget, allocated for the

implementation of this strategy was spent.

A number of settlements were identified for which urgent action is needed, mostly to

improve the housing situation for Roma. The issue of property ownership, frequently

impeding adequate solutions, is in the process of resolution in some settlements. The

Government has allocated around € 5 million for the implementation of a social housing

programme, from which the Roma population is expected to benefit, too.

In the field of employment, the Government allocated in 2001 approximately € 35 million in

2001 to finance public beneficial works. This programme is being implemented by local

authorities, NGOs and religious organisations. Members of Roma communities are among

its beneficiaries.

In the area of education, the Government continued to establish pre-school preparatory

classes for Roma children and complete construction of a number of schools in

municipalities with a high proportion of Roma.

Notwithstanding the positive steps taken, efforts need to be continued and even reinforced to

remedy the numerous disadvantages the Roma minority is facing. The gap between good policy

formulation and its implementation on the spot, as observed in last year’s report, has remained.

Strengthened implementation of the strategy, including adequate financial support at national and

local level, as well as appropriate training of the people involved, is therefore urgently needed.

Due co-ordination amongst the ministries concerned is required to integrate sound policy

approaches into sectoral strategies and concrete actions. Co-operation between the

Government and the Roma community needs to be improved. An early involvement of the

Roma in project programming and implementation is necessary. The office of the Government

Plenipotentiary (who was replaced by another Roma representative in May 2001) has started

to reinforce its impact. Its managerial capacity and budget should be enhanced. It would appear

that difficult co-operation on the side of the Roma community has contributed to diminishing the

positive outcome of the implementation phase.

The frequent lack of pre-school education, teacher training which does too little to leave people

able to cope with the specific needs of the Roma children, poor housing conditions, and high

unemployment have largely contributed to a situation which deepens further social exclusion.

These issues need to continue to be tackled as a priority. The number of well-trained Roma

advisors to the local authorities and the number of social workers at each level of public

administration should be increased and accompanied by suitable legislative and financial

support.

Concerning the implementation of the Law on the Use of Minority Languages, there continues

to be limited availability of concrete data. The impression noted in last year’s report that in many

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areas national minorities do not make use of the rights granted under the law due to lack of

information remains valid.

1.3.

General evaluation

In its 1999 Regular Report, the Commission concluded that Slovakia fulfilled the political

criteria. Since that time, the country has made considerable progress in further consolidating and

deepening the stability of its institutions guaranteeing democracy, the rule of law, human rights

and respect for and protection of minorities. Over the past year, further efforts have been made

in this direction. Slovakia continues to fulfil the Copenhagen political criteria.

Significant progress was achieved with regard to the structure and functioning of the

administration. The legal framework for the decentralisation of public administration was

adopted, and so was the civil service law. Due implementation of the legislation is now required

to ensure that the public administration adequately fulfils the key role it has to play in a

functioning democracy based on the rule of law and in support of the accession process.

Important steps were taken to strengthen the independence of the judiciary. In particular, the

constitutional amendment abolished the four-year probationary period for judges and provided

for setting up a Judicial Council. This amendment now needs to be implemented by primary

legislation and at a practical level to guarantee the judiciary’s professional impartiality and

political neutrality.

Further progress can be noticed in the fight against corruption, notably in translating and

implementing the government policy into concrete actions and transposing international

obligations. Corruption, however, remains a serious cause for concern. In order to continue

improving the fight against corruption Slovakia should rigorously carry on the implementation of

the action plans, strictly enforce existing legislation and complete planned legislation as well as

strengthen administrative capacities and co-ordination among the bodies involved.

The constitutional reform also created the basis for the strengthening of Slovakia's institutional

structure in the field of human rights. However, there is a need to address police behaviour,

notably with regard to reported cases of ill-treatment

Significant efforts in further developing and putting into practice approaches to protect minority

rights were taken in the reference period, notably in implementing relevant Government

strategies. Positive steps were achieved towards enhancing the use and protection of minority

languages. As regards the Roma minority, the implementation of the Roma strategy, adopted

subsequently in 1999 and 2000, should be further enhanced and the appropriate financial means

at national and local level should be made available. In this context it will be important to

improve efforts to fight against widespread discrimination.

The short term priorities of the 1999 Accession Partnership related to the modernisation and

decentralisation of the public administration were fulfilled. Important steps were taken in

strengthening the independence of the judiciary, which constituted a short term priority, as well.

Despite further positive measures, tangible improvement of the situation of the Roma minority,

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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another short term priority, was achieved only to a limited extent. So were the medium term

priorities for the political criteria of the 1999 Accession Partnership, calling for continued

implementation of minority language legislation and strengthening policies and budgetary means

towards the Roma minority.

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2. Economic criteria

2.1.

Introduction

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

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

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

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

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

Commission acknowledged that progress had been made, and in its 2000 Regular Report, the

Commission concluded that:

“Slovakia can be regarded as a functioning market economy and should be able to cope with

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

structural reform agenda is fully implemented and broadened to include remaining reforms.”

In examining the economic developments in Slovakia 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 1998, 1999 and 2000 Regular Reports.

2.2.

Economic developments

Slovakia has maintained macroeconomic stability originating from the austerity package

of early 1999.

Real GDP growth has been accelerating over the reporting period.

Nevertheless, unemployment remains high. Inflation has been further reduced. Trade and

current account deficits continued to narrow in 2000, but have been widening very substantially

again in 2001. The deficit of all components of general government has also been widening in

comparison to 2000. The government has committed itself to limiting the deficit for 2001 to

3.9% of GDP (excluding bank restructuring cost and called-on guarantees). In a challenging

environment, the National Bank of Slovakia has been able to engineer a relaxation of monetary

policy while comfortably complying with its inflation reduction target band.

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Main economic trends

Slovak Republic

1996

1997

1998

1999

2000

2001

latest

2.9 H1

Real GDP growth rate

Inflation rate

- annual average

- December-on-

December

Unemployment rate, end-

year

- ILO definition

per cent

6.2

4.1

1.9

2.2

per cent

5.8

6.1

6.7

10.6

12.1

7.4

(Sept.)

per cent

5.4

6.3

5.7

14.1

8.4

per cent

per cent of

GDP

per cent of

GDP

million

ECU/Euro

11.3

11.8

12.5

16.2

18.6

19.2 P

General government

budget balance

Current account balance

-2.1

-5.7

-4.9

-5.7

-6.7

-10.0

-9.0

-9.3

-5.0

-3.7

-8.1 H1

-1,564

-1,616

-1,764

-920

-773

-875

Foreign debt

- debt export ratio

- gross foreign debt

per cent

million

ECU/euro

40.4

53.7

59.6

68.3

50.8

3,472

5,603

6,922

7,771

7,796

Foreign direct investment

in flow

- balance of payments

data

per cent of

GDP

million

ECU/euro

1.8

285

1.1

195

3.2

609

2.0

366

10.8

2,258

6.8 H1:

738

PROXY HICP since 1996 (see methodological notes)

Source: Website of National Bank

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Slovakia has made progress with the implementation of further structural reforms.

This is

particularly the case for the restructuring and privatisation of the banking sector. It has also

made progress in the restructuring and privatisation of remaining state-owned enterprises and in

the promotion of private sector development. In addition, reforms have been implemented in the

government sector, notably in public finance management. However, the bulk of medium-term

public expenditure reforms still lies ahead. This holds especially with respect to the health and

pension systems.

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

per cent

million euro

euro per head

5,401 P

10,800

4.5

6.7

30.0

37.3

73.5

5,399

1,000

Slovakia has been catching-up with the EU, but it shows considerable regional and

urban/rural disparities in general living conditions and unemployment.

For the country as

a whole, per capita income in purchasing power standards has reached over 48% of the EU

average in 2000, up from 43% in 1995. Its regional distribution varies from a low 39% in the

East Slovakia region to a very high 99% in the Bratislava region in 1998. The economic activity

rate has remained rather constant at 60% over the period 1995 to 2000, while the employment

rate has been declining to 56.3%. Unemployment has risen to about 18.5% of the labour force

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

demographic statistics.

Agriculture, hunting, forestry and fishing.

Data refer to 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.

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in 2000 from 11.3% in 1996 (labour force survey data), The unemployment rate among

persons younger than 25 was 35.2% and the male and female unemployment rates were 19.5

and 18.6%. Long-term unemployed accounted for 53.9% of all unemployed. Given the strong

correlation between unemployment and social conditions, the latter may have somewhat

deteriorated over recent years, although the social safety net seems to be providing a cushion

against most of the temporary social hardships.

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.

The member parties of the governing coalition, which represent a broad range of the

political spectrum in the country, have maintained sufficient political consensus on the

need for further consolidation of macroeconomic stabilisation and for further structural

reforms.

The government made a broad range of crucial economic policy commitments, in

particular in connection with a Staff Monitored Programme with the International Monetary

Fund and an Enterprise and Financial Sector Adjustment Loan with the World Bank. In

addition, the government approved and submitted a Pre-accession Economic Programme in the

context of the Commission’s pre-accession fiscal surveillance exercise at the beginning of

October. The commitments taken will help to lock in the economic reform momentum as next

year’s parliamentary election approaches.

On the macroeconomic side, real growth has been accelerating again

after a growth

slowdown, which was caused by the implementation of an austerity package in early 1999. It

amounted to 2.2% in 2000 and to 2.9% (year-on-year) in the first half of 2001. In 2000, a

negative growth contribution by domestic demand was more than compensated for by the

positive contribution by net exports. In the meantime, the driving forces behind GDP growth

have been re-balanced. The growth contribution by net exports was negative in the first half of

this year, whereas domestic demand contributed positively. Although exports staged a still

significant increase of 10.0%, imports grew even faster by 15.4%. Mostly private sector and

foreign-direct investment linked gross fixed capital formation has picked up by a sizeable 14.2%

year-on-year. As a consequence of growth in real household income, owing to increases in

employment and real wages and to cuts in taxes, private consumption has been strengthening as

well, and may be encouraged further as the National Property Fund’s privatisation bonds are

being redeemed. It grew year-on-year by 2.9% in the first half of 2001.

Unemployment has continued to increase.

Not the least as a result of accelerated enterprise

restructuring but also due to deficiencies in the labour market, unemployment has risen to 19.2

percent of the labour force in the second quarter of 2001, from 16.2% in 1999 (ILO definition).

Inflation has been further reduced.

As in 2000, increases in administered prices contributed

again to inflation in the first months of this year, but the effect was much smaller. In

consequence, the year-on-year consumer price index (CPI) headline inflation rate has stayed

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consistently below its end-of-2000 level of 8.4%. It amounted to 7.4% in September. The core

inflation measure, which eliminates the effects of changes in administered prices and indirect

taxes, has been much lower and remained in a range between 3.6 and 5.4%. In September, it

was 4.4%.

Trade and current account deficits continued to narrow in 2000, but have been widening

to a very sizeable degree again this year.

In 2000, the trade deficit was reduced to 4.7% of

GDP from 5.5% of GDP in 1999. The current account deficit decreased from 5.0% of GDP in

1999 to 3.7% of GDP in 2000, not the least due to a good development in the transport

services balance resulting from higher oil and gas transit fees. However, during the first half of

this year, the deficits worsened again considerably. As mentioned above, real import growth

outpaced export growth in the first half of this year and the trade deficit rose to 9.0% of GDP.

Whereas this year’s considerable import growth has consisted to a large extent of investment

goods so far, in particular related to foreign direct investment (FDI), consumer goods may

make up a higher share towards year-end. The current account deficit deteriorated in parallel to

the trade balance and amounted to 8.1% of GDP in the first half of this year.

The current account deficit in 2000 has been comfortably financed by foreign direct

investment.

FDI inflows reached a record level in 2000 and amounted to 10.8% of GDP. A

major part of the FDI inflows were privatisation-related. Further considerable privatisation-

related FDI inflows, in particular in connection with the privatisation of the Slovak Gas

Company (SPP), are still outstanding, and FDI inflows are expected to cover the current

account deficits for this year and next year as well.

Strict fiscal discipline remains crucial for the consolidation of the government’s

macroeconomic stabilisation achievements.

After a sizeable fiscal tightening in 1999, the

deficit of all components of general government in 2000 amounted to 3.4% of GDP. For 2001,

the government was authorised in the budget act to run a deficit for all components of general

government of around 4.9% of GDP (excluding bank restructuring costs and called-in

guarantees). However, in the context of the aforementioned Staff Monitored Programme with

the International Monetary Fund, the government has committed itself to limiting this deficit to

3.9% of GDP. So far, budget execution seems to be compatible with this target. Nevertheless,

strict expenditure control is crucial to ensure compliance for the whole of this year. Concerning

2002, the government has committed itself to a further reduction of the general government

deficit to 3.4% of GDP, thus approaching its medium-term deficit target of 2% by 2005. The

general government net borrowing figure according to harmonised EU standards (ESA95) for

2000, which was submitted to the Commission in the first pre-accession fiscal notification in

April, amounts to 6.7% of GDP.

Significant tax reductions have come into force.

In particular, corporate income tax was

reduced from 40 to 29% and the import surcharge, which had been temporarily introduced in

1999, was phased out in 2000. There was no concurrent compensation by a broadening of the

tax base or by corresponding administrative efforts in tax collection. Avoidance of any future tax

cuts without compensatory measures, as well as further advances in the already initiated tax

administration reform and in tax collection, are prime requirements for the envisaged fiscal

consolidation.

In comparison to 2000, the budgeted use of privatisation revenues for financing

expenditure was substantially reduced this year.

It is important that the government

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implements its further commitments in this direction, so that future privatisation revenues are

exclusively used for the retirement of government liabilities and the financing of the transition

cost of the planned pension reform. A reduction of public debt and, consequently, of the public

interest burden will increase budgetary flexibility.

Major expenditure reforms in the human development area, notably in the health and

pension system, still lie ahead.

The Slovak authorities have undertaken a number of first steps

towards medium-term reform. However, the planned fiscal consolidation will hinge on rapid

reform progress. A comprehensive pension reform, which consists of further changes in the

current pay-as-you-go system to reduce the government’s implicit pension debt, the creation of

a new mandatory pre-funded component, and the promotion of voluntary pre-funding, is being

prepared and should be instituted as soon as possible, based on robust calculations of its fiscal

consequences. In the health area, relief of fiscal strains through continued reforms is equally

urgent. Furthermore, the social protection system should be further reviewed for adjustment

needs under efficiency and incentive compatibility aspects. Finally, efforts need to focus on

additional administrative and collection improvements in the social protection system, e.g.

through the introduction of unified collection.

Subsidies to and guarantees for state-owned enterprises are another reform area on the

expenditure side which is crucial for medium-term fiscal consolidation.

The government

has limited the issue of new state guarantees in 2001. Its plans to reduce the outstanding stock

in the coming years are commendable. Major necessary reform steps in the subsidy area relate

to the railway system, which the government is dividing into two separate entities for railroads,

on the one hand, and transport and trade activities, on the other hand, in order to start the

liberalisation of rail transport.

Slovakia has been making progress in the conceptualisation and implementation of

public finance management reforms.

Amendments to the Budgetary Rules Act were put into

effect. Important reform steps have been undertaken in the area of budget preparation and

coverage. In connection with the 2001 budget, medium-term fiscal planning in the context of a

medium-term macro-economic framework was initiated. Transparency has been increased,

notably by the on-going inclusion of most extra-budgetary state funds into the state budget and

by continuing improvements in budgetary classification. The focus on the overall situation of

general government has been strengthened. In addition, an advanced budget preparation

schedule has been introduced in connection with the budget for 2002.

However, several important reform steps still need to be implemented in the public

finance management area, too. Careful design and co-ordination of all reforms across

central government institutions, including the National Bank of Slovakia (NBS), and

across all government levels, is vital for success.

The government’s administrative and fiscal

decentralisation project poses particular challenges in this respect, and care needs to be taken

that it does not reverse some of the results already achieved or hamper further progress in fiscal

management and consolidation. A good example for the extensive co-ordination requirements is

the on-going building-up of the treasury system and the planned creation of an autonomous debt

management agency. The introduction of the latter also needs to be connected with the reform

of the legal framework for debt management and of the domestic debt market.

In a challenging environment, the National Bank of Slovakia was able to engineer a

relaxation of monetary policy while comfortably complying with its inflation reduction

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target band.

Interest rates have further moved downwards since the end of last year, while

inflation has been comfortably anchored in the single digit range. Within its inflation

benchmarking framework, the NBS cut its key overnight rates to 6% (sterilisation rate) and 9%

(refinancing rate) in March. Exchange rate interventions have been limited and only used for

exchange rate smoothing. In future, strong FDI and other capital inflows may put continued

appreciation pressure on the Slovak crown. This may challenge monetary policy, especially if

fiscal policy is not adequate.

The current policy mix tends to put too much burden on monetary policy, while fiscal

policy is presently somewhat too expansionary. Fiscal consolidation remains crucial.

This

holds in particular against the backdrop of the recent sharp widening of the trade and current

account deficits and of the prospects for their medium-term development. In the medium term,

the policy mix will become more balanced if fiscal consolidation is implemented as planned, thus

mitigating risks stemming from the trade and current account.

The equilibrium between demand and supply and the free interplay of market forces have

been further strengthened by additional price deregulation.

In February 2001, another

price deregulation package became effective and further enhanced cost recovery and

profitability of the affected sectors, after increases in administered prices had already taken

place in 1999 and 2000. This year’s major areas of price adjustments were housing, energy and

other utilities, public transport, postal services and telephones.

Excellent progress has been made in the privatisation of the banking sector.

After the

successful restructuring of the loan portfolio of the three major state-owned banks in 1999 and

2000, the sale of an 87% stake in the largest one, the Slovak Savings Bank (SLSP), to a

foreign investor was completed at the beginning of this year. In addition, an approximately 95%

stake in the General Credit Bank (VUB), the second-largest state bank, was sold to a foreign

investor in 2001. A strategic investor for the third state bank and sixth largest Slovak bank, the

Investment and Development Bank (IRB), has been identified and the sale is likely to be

completed soon. Further progress has also been made in the privatisation of remaining state-

owned small and medium-sized banks. A majority stake of Polnabanka was sold in November

last year. Slovakia’s smallest bank, Banka Slovakia, is still being tendered. The restructuring

and privatisation of the Slovak insurance company, Slovenska Poistovna, which still had a

market share of almost 50% in 2000, is in progress and is planned to be finalised by year-end.

Its majority stake in a Slovak bank, Istrobanka, has been offered for sale.

The restructuring and privatisation process in the utilities and transport sector advanced

as well.

The privatisation tender for the sale of a 49% stake in the Slovak Gas Company (SPP)

was launched at the end of August. It had been transformed into a joint stock company on July

1. A 49% stake in the oil company, Transpetrol, has also been tendered. The pre-privatisation

restructuring of Slovak Electricity (Slovenske Electrarne) has been started. Privatisation is

planned for next year. Further privatisation plans concern three electricity distributors, bus

transport, water and sewage, and health care facilities. In 2000, the private sector share in the

Slovak economy reached around 83% of GDP.

There is additional scope for dismantling bureaucratic obstacles to market entry and for

facilitating access to financing for newcomers, in particular for small and medium

enterprises (SMEs).

The government has already taken some measures in this direction and

should further review possibilities of streamlining entry regulations and their implementation. In

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addition, the financing opportunities for new enterprises need to be enhanced. The development

of the banking sector will play a decisive role in this respect. Improvements in the legal system,

e.g. with respect to the collateral system, are also crucial.

Last year’s amendments to the bankruptcy framework strengthened creditor rights and

created opportunities to accelerate bankruptcy procedures.

However, it is too early to

assess the overall effect of the new legislation, not least since one important stipulation only went

into force in February this year. An inter-agency commission has been set up to prepare another

round of improvements of bankruptcy rules.

Effective implementation of the legal framework needs to be strengthened, although the

legal rules for a functioning market economy are largely in place and additional

important changes are being prepared.

Legislative proposals on improvements in the

collateral system and in the corporate governance architecture (e.g. Commercial Code,

Securities Law) should be approved and implemented as soon as possible. A particularly

decisive factor for the effective implementation of the legal framework is the strengthening of the

judiciary system.

The situation of the Slovak banking sector has substantially improved as a result of its

restructuring and privatisation.

At the end of June 2001, the reported aggregated capital

adequacy ratio (excluding the workout agency Slovak Consolidation Bank) had risen to 19.7%.

The reported share of non-performing loans in total loans was still 17.6%, and some doubts

about the strictness with which the loan classification rules are applied may be justified.

Nevertheless the share of non-performing loans is significantly lower than before the start of

bank restructuring when it amounted to almost 40% (June 1999). The provisioning ratio for the

non-performing loans was 68% at the end of June 2001. The banking sector ended 2000 with a

reported profit of around SKK 12 billion compared to a loss of almost SKK 17 billion in 1999

(again without the Consolidation Bank). Increased foreign participation in the sector should

foster the transfer of management skills and contribute to better credit decisions.

For the time being, the banking sector does not yet properly fulfil its intermediation role.

As the sector is reconfiguring itself and awaits further improvements in its operating

environment, banks are still very hesitant to expand credit, especially of a longer-term nature

and to new customers. Credit growth to the private sector is currently contracting in real terms

and new credits are predominantly short-term. In particular, access to financing by small and

medium-sized enterprises, which cannot tap foreign sources, is a problem and hampers the

diversification of Slovakia’s growth base.

The non-bank financial sector is embryonic.

Some action has been taken or is being

prepared to strengthen the legislative framework for securities markets and for institutional

investors. Concerning the equity market, a strengthening of transparency and of minority

shareholder rights is necessary to increase the market’s attractiveness to investors. The

government has been lengthening the maturity structure of its debt instruments; this should have

a positive effect on the development of the government bond market. Activity in the municipal

and corporate bond markets is very small. The implementation of a coherent strategy for the

further development of the non-bank financial sector is crucial. The provision of a sufficiently

broad spectrum of diversified investment opportunities for expanding institutional investors

should be ensured, not least with a view to the planned introduction of a mandatory pre-funded

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pension component. This would help to maximise the beneficial effects of pension reform for

financial market development.

Further steps for strengthening the regulatory, prudential, and supervisory framework of

the financial sector, in particular for enhancing its implementation, are necessary.

comprehensive legislative package has been prepared and, to a large extent, adopted.

Amendments to the NBS Law and the Slovak Constitution went into force in May and in July

2001, respectively, and strengthened the power and accountability of the NBS banking

supervision. To a similar effect, a new banking law was approved by parliament at the beginning

of October. A new agency for the supervision of capital markets and insurance companies was

established in November last year. However, its legal and institutional framework needs to be

further reinforced. For the time being, the supervision of banks will stay with the NBS. Efficient

co-operation procedures between the NBS and the new agency should be set up. It is vital that

the mentioned and any further necessary improvements, concerning in particular bank

governance, bank supervision, accounting, disclosure and auditing, are effectively implemented.

In particular, supervisory capacity and resources need to be augmented to ensure effective

implementation.

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

Union

The ability to fulfil this criterion depends on the existence of a market economy and a stable

macroeconomic framework, allowing economic agents to make decisions in a climate of

predictability. It also requires a sufficient amount of human and physical capital, including

infrastructure. State enterprises need to be restructured and all enterprises need to invest to

improve their efficiency. Furthermore, the more access enterprises have to outside finance and

the more successful they are at restructuring and innovating, the greater will be their capacity to

adapt. Overall, an economy will be better able to take on the obligations of membership the

higher the degree of economic integration it achieves with the Union before accession. Both the

volume and the range of products traded with EU Member States provide evidence of this.

Slovakia is a functioning market economy.

In recent years, Slovakia’s commitment to

tackling difficult reforms has been firmly established. The maintenance of macroeconomic

stability and a clear direction in structural reforms enhance the predictability of economic agents’

operating environment, thus contributing to Slovakia’s competitiveness.

A better use and retraining of human capital resources remain urgent priorities for fully

exploiting and for extending Slovakia’s growth potential.

Key reasons for Slovakia’s low

employment and high unemployment rate are the lack of regional mobility, the high tax and

social contribution wedge, labour market segmentation, skill mismatches, and, to some extent,

perverse incentives in the social protection system. In particular, reforms in the health and

pension system are necessary to tackle these problems. A more active approach by the

National Labour Office and a reform of the malfunctioning housing market could contribute to a

reduction of regional disparities in unemployment. In general, labour market flexibility needs to

be a most important consideration in all reform measures.

Slovakia’s gross fixed capital formation has been accelerating again – a process which is

to a large extent FDI-induced.

After a drop to 30% of GDP in 2000, gross fixed capital

formation rose by 14.2% year-on-year in the first half of 2001. The increase is to a large extent

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connected with foreign direct investment. As reported above, foreign direct investment reached

a record level last year and is expected to reach similar proportions this year and next year.

Slovakia has been instituting new incentives for investments. Some of these measures favour

disadvantaged regions. The government has also been working on the improvement of the

business environment. Further progress in the latter is of utmost importance to foster

attractiveness and efficiency of investments. In addition, key infrastructure bottlenecks,

especially in disadvantaged regions, need to be removed.

Increased financial discipline, in particular induced by bank restructuring and an

improved legal framework, should speed up enterprise restructuring.

One policy measure

to increase financial discipline is the on-going market-based workout of the bad loans which

were carved-out from the three major state-owned banks. As of end-September this year, the

Slovak Consolidation Agency (SKA), which had received the bulk of these loans (around 97

billion SKK or almost 11% of the 2000 GDP), had decreased its loan portfolio by around 20

billion SKK, mainly by auctions to the private sector. The workout process is being

streamlined by the take-over of the other workout institution, Konsolidacna Banka (KOB), by

the SKA. Complementarily, the new bankruptcy framework and improvements in the collateral

regime and the corporate governance architecture (see above) are likely to yield beneficial

effects on financial discipline and the overall situation of the enterprise sector.

A major obstacle for small and medium-sized enterprises is their limited access to bank

financing, although Slovakia has been introducing a number of support measures for

SMEs.

Small and medium-sized enterprises accounted for around 58% of employment and

28% of exports in 2000. More information on the progress reached with respect to the creation

of a conducive environment for SMEs can be found in chapter 16.

Government interference in the enterprise sector is being reduced.

Bank restructuring and

privatisation have been a milestone in this direction and the envisaged restructuring and

privatisation in the energy, utility, transport and health sectors will continue along this avenue. In

sharp contrast to past practices, the granting of state aids and guarantees is being restricted

strongly and made more conditional.

Slovakia has already reached a high degree of trade integration with the EU and is a

very open economy.

Exports to the EU as a share of total exports account currently for around

60%, compared with only around 40% in 1996. The share of imports from the EU in total

imports amounts to approximately 50%. These shares reflect a high degree of trade integration

with the EU, given that the overall openness of Slovakia – defined as the sum of imports and

exports in percent of GDP – is very high and amounts to around 150%. Apart from sizeable,

mostly energy-related imports from Russia, most non-EU trade is conducted with the Czech

Republic. Machinery and manufactured products continue to dominate on the import and export

side. The CPI- and unit labour cost-based real effective exchange rates have been following an

upward trend since the beginning of this year, but have so far stayed in last year’s range.

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2.4.

General evaluation

Slovakia is a functioning market economy. Provided that it makes further substantial efforts in

medium term fiscal consolidation and in developing and fully implementing the announced

structural reform programme, it should be able to cope with the competitive pressure and

market forces within the Union in the near term.

Overall, macroeconomic stability has been maintained. There has been further good progress in

bank privatisation, which is nearing completion. Further progress was also made in restructuring

and towards privatisation of the remaining state-owned utilities and transport enterprises.

Further progress was made in setting the framework for private sector development.

However, the substantial widening in the current account deficit will require a more prudent

fiscal policy stance. Unemployment is high and rising. Some parts of the legal and institutional

framework for enterprise development are in need of further improvements and effective

implementation. Financial sector supervision has to be further strengthened. Steps must be taken

to ensure the medium-term sustainability of public finances. The authorities need to comply with

their fiscal targets, by implementing medium-term public expenditure reforms, in particular in the

health, pension, and subsidy areas. Macroeconomic stabilisation will need to be consolidated by

a continued prudent combination of fiscal and monetary policy. Further progress in privatisation,

in the administrative and legal framework and in financial sector reforms will set the stage for

future private sector development. Growth in employment will further require fundamental

reforms of the labour market.

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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3. Ability to assume the obligations of membership

Introduction

This section aims to update the Commission’s 2000 Regular Report on Slovakia’s ability to

assume the obligations of membership - that is, the legal and institutional framework, known as

the

acquis,

by means of which the Union implements its objectives. Alongside an evaluation of

relevant developments since the 2000 Regular Report, this section seeks to provide an overall

assessment of Slovakia’s ability to assume the obligations of membership, and of what remains

to be done. This section is structured to follow the list of twenty-nine negotiating chapters, and

incorporates an assessment of Slovakia’s administrative capacity to implement the

acquis

in its

various aspects. Slovakia’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 Slovakia’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 :

“Slovakia has continued to make significant progress in legislative alignment with the

acquis,

thus furthering its ability to assume the obligations of membership. However, progress has not

been uniform across chapters. As already indicated in last year's Regular Report, a number of

areas continue to lag behind, such as company law, agriculture, transport, regional policy and

co-ordination of structural instruments, the environment and financial control. Also, progress is

generally more noticeable in legislative developments than in the strengthening of the institutions

responsible for implementation and enforcement. These weaknesses need to be remedied.

Appropriate resources should be allocated for this purpose.

Concerning

internal market legislation,

noticeable progress has been achieved in public

procurement, financial services and capital movements and in preparing a basis for full alignment

in the New Approach area, including standardisation. Little progress has been achieved as

regards free movement of persons, as a general framework for the recognition of foreign

professional qualifications has not been established. Apart from continuing alignment, a

particular challenge is now to provide adequate capacity for the implementation and

enforcement of the acquis. In

company law,

there has been no substantial progress in alignment

with the partial exception of accounting law. Further sustained efforts are needed, in particular

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with regard to trademarks and patents as well as the fight against piracy and counterfeiting. In

competition policy legislative progress means anti-trust rules are largely in line and the focus

should now shift to their correct application. Despite some progress in the state aids area further

legislative steps are required and the newly created State Aid Monitoring Authority should be

strengthened.

Tangible progress has also been reached in the area of

statistics

and efforts should be

maintained, especially concerning macro-economic statistics and harmonisation of regional

statistics. Substantial progress has been achieved in the

industrial policy

sector through

continuing privatisation and restructuring. Particular attention needs to be paid to the respect of

EU state-aid rules. Significant progress, notably in terms of legislation, has also been made in

the

telecommunication

and

audiovisual

sector. The emphasis must now turn in particular to

strengthening administrative capacity. Whilst Slovakia has also advanced well in the field of

consumer and health protection,

both as regards safety related measures and non-safety

consumer protection, some further alignment is required and adequate co-ordination and

strengthening of those bodies involved in market surveillance activities needs to be ensured.

In the case of

co-operation in the field of justice and home affairs,

significant progress has

been achieved mainly in aligning visa policy and asylum legislation. However, considerable

progress in all relevant acquis areas is needed, with a particular emphasis on migration, border

control and fight against crime.

Only limited progress has been achieved in the

agricultural sector,

where efforts have focused

on preparations for the SAPARD programme. Despite the progress achieved in the recent

years, there is a need for accelerated alignment and implementation with particular emphasis on

establishing an Integrated Administration and Control System, on adopting specific market

regulations and continuing implementing veterinary and phytosanitary legislation. In the field of

transport,

limited alignment has been achieved in the area of road transport and inland

waterways. However, most of the transport areas, notably rail and road transport, still require

substantial alignment efforts and the strengthening of relevant administrative structures. Some

limited progress has been made in the

energy

sector and in the field of

regional policy and co-

ordination of structural instruments;

Slovakia needs still to enhance its alignment effort and

to reinforce its administrative capacity in these sectors. Very little progress has been made in the

field of

environment,

where substantial efforts remain necessary as regards legislative

alignment, investments and implementation/enforcement capacity. Concerning customs,

Slovakia had already achieved a considerable degree of legislative alignment, but it has not

made significant progress during the period. Further efforts are still necessary to complete the

legislative framework and to ensure proper implementation of the customs-related acquis. Little

progress can be reported in the area of

financial control,

where Slovakia needs to make

substantial progress, notably by developing the necessary public internal financial control

functions.

As regards

administrative capacity

in general, Slovakia has made little progress, with a few

exceptions, in strengthening the relevant institutions. Delays in the adoption of the public

administration reform and in the civil service law further contribute to this general weakness.

The fulfilment of the short term priorities varies in a broad range from sector to sector. As

regards the internal market, Slovakia has met the relevant priorities to a large extent. Whereas in

the area of social policy and employment, energy and co-operation in the field of justice and

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home affairs the short term priorities have been partially met, they have been fulfilled only to a

limited extent in the case of agriculture. Concerning environment and reinforcement of

administrative and judicial capacity, the short term priorities have essentially not been met.

Slovakia has taken some initial steps to start addressing a number of medium-term priorities.”

3.1.

The chapters of the

acquis

As indicated, the review of Slovakia’s ability to assume the obligations of membership that is

below has been structured in accordance with the list of twenty-nine negotiating chapters.

Accordingly, this section opens with an assessment of progress related to the so-called “four

freedoms”, the cornerstones of the internal market, and continues with a systematic review of

progress on each of the chapters, to cover the

acquis

in all its various aspects, including

sectoral policies, economic and fiscal affairs, regional policy, environment, justice and home

affairs, external policies, and financial questions.

Chapter 1: Free movement of goods

Since the last Regular Report, further good progress has been made by Slovakia in the free

movement of goods field.

In the area of

horizontal and procedural measures,

an amendment to the existing Act on

Technical Requirements for Products and Conformity Assessment was adopted by Parliament

in October 2001. In February 2001, the government adopted a resolution on State policy in

standardisation, metrology, testing and conformity assessment, based on the Council

Resolutions of October 1999 on the role of standardisation in Europe and on mutual

recognition. Further progress in the transposition of European harmonised standards has been

made, as of September 2001, almost 70% of CEN European standards and almost two-thirds

of CENELEC standards had been transposed into Slovak standards. In 2001, the Council for

Conformity Assessment (under the auspices of the Slovak Office of Standards, Metrology and

Testing - ÚNMS) became Slovakia’s national member of the European Organisation for

Conformity Assessment.

Following an audit of the market surveillance system in Slovakia by the Ministry of the

Economy, the Government adopted a resolution recommending both the creation of an

integrated market surveillance body in the non-food sector and a foodstuffs surveillance

authority under the competence of the Ministry of Agriculture (see

also Chapter 23 –

Consumer and Health Protection).

Already a full member of the European Co-operation for

Accreditation (EA), the Slovak National Accreditation Service (SNAS) was accepted as a

signatory of the EA multilateral agreement (MLA) for calibration and testing at the 7

meeting

of the EA General Assembly in Stockholm in June 2001.

As far as

sector specific legislation

is concerned, progress has been achieved in the areas

covered by

New Approach Directives,

so that now 16 government ordinances transposing EC

Directives have been adopted in total, including 10 in the reporting period. These covered the

areas of recreational craft, marine equipment, hot-water boilers, fridges and freezers, personal

protective equipment, civil use explosives, equipment and protective systems designed for use in

explosive atmospheres (ATEX) and the three medical devices Directives. An Act amending the

existing Act on construction products entered into force in January 2001. It should be noted

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however that, as regards the government ordinances adopted in the previous reporting period

on electromagnetic compatibility and low voltage, a transitional period until end 2002 still

applies during which the former certification system stays in force.

As regards sectors covered by the

Old Approach Directives,

new chemicals legislation

transposing a considerable amount of the

acquis

in this area entered into force in June 2001,

following some delays already highlighted in last year's Regular Report. In the field of

pharmaceuticals, a decree transposing the EC Directive on the pricing of medicinal products for

human use entered into force in April 2001. Two further Decrees on registration of medicines

and 10-year data exclusivity for high technology medicinal products entered into force in

September 2001. As regards foodstuffs, some much-needed simplification of the certification

and conformity assessment requirements has been introduced, although further steps to abolish

the pre-market system of control are still required. A fairly limited part of the "vertical"

legislation was adopted in 2001. No progress was achieved with regard to foodstuffs labelling.

Cosmetics certification was completely abolished in February 2001. New Decrees transposing

the EC directives on crystal glass and the labelling of footwear entered into force in the course

of 2001. Two Government decrees on the labelling of materials used in crystal glass products

and on the labelling of materials used in footwear entered into force in April 2001. No further

progress can be reported in the field of motor vehicles.

In the

non-harmonised area

no new progress can be reported. No progress can be reported

as regards transposition of both the

cultural goods

and the

arms

Directives.

public procurement,

some progress was made by the adoption of a Government Ordinance

concerning the conditions for publication of notices, methods of public procurement, contents of

tender documentation and the results of public procurement, which entered into force in January

2001. Since January 2001 a separate public procurement bulletin, ‘Vestnik’, has been

published weekly by the Public Procurement Office (PPO) and made available free of charge.

In the period between 1 January and 30 April 2001, the PPO carried out 75 investigations of

complaints, received 259 appeals of which 31 resulted in the suspension or cessation of the

procedure.

Overall assessment

Generally the level of alignment continues to be good, especially regarding legislation.

Nevertheless, administrative procedures still give rise to problems in a number of areas,

especially concerning the steps required to place products on the market. Adequate capacity

for the implementation and enforcement of the

acquis

should be assured. On the whole, in most

areas what remains to be done is clearly established, although some important tasks such as the

need for compliance in the non-harmonised area require much more attention.

Efforts have been made to improve the situation with regard to the continued existence of

certain pre-market certification requirements which are not in line with the

acquis.

However,

entrepreneurs continue to complain of cumbersome, confusing and expensive procedures.

Suspicion of corruption and intransparent behaviour is often cited as a serious obstacle for

entrepreneurs when dealing with the relevant authorities, be they certification bodies, customs or

inspection bodies. Such difficulties should be addressed and attention also paid to ensure that

the planned deadline of 31 December 2002 for the elimination of certain previously mandatory

certification is respected, if not brought forward. The proposed reorganisation of the market

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surveillance system should occur in such a way that the resulting system is able to function at

the same level as those in EU Member States, including as regards safety checks at external

borders and implementation of the EC Regulation on checks for conformity with the rules on

product safety. Independence, probity and efficient co-ordination between the actors involved

are essential, as is adequate funding. Some legislation is in place as regards notification

procedures and interchange of data between administrations, for which the necessary

administrative structures need to be fully established. Arrangements for implementing the

Regulation on the functioning of the internal market in relation to the free movement of goods

should be put in place prior to accession.

Progress in the

New Approach

area has been particularly good, as is reflected in the number of

ordinances adopted. Slovakia should now pursue the completion of alignment with the

remaining New Approach Directives such as lifts and cable way installations, and in the Old

Approach fields of motor vehicles, agricultural and forestry tractors, chemicals and

pharmaceuticals. In the pharmaceutical area, for example, essential procedural rules for licensing

are partly missing in the laws and the existing procedures often lack transparency and are

inconsistently enforced. Although a decree transposing the EC Directive on the pricing of

medicinal products entered into force in April 2001, provisions relating to deadlines and

transparent procedures have yet to be implemented. As regards foodstuffs, adopted horizontal

legislation needs to be reviewed, as it is not in all cases in conformity with the

acquis.

Although

no major legislation was adopted in 2001, the Slovak Republic is making efforts to reorganise

the administration so as to streamline the control authorities and cover efficiently the whole food

chain (see

also chapter 7 - Agriculture).

Major effort will be required to strengthen the

administration, clarify the numerous food acts and carry on the legislative transposition work

It is important that, in all sectors, the relevant administrative infrastructure for application of the

acquis

be in place and function effectively by the date of accession, if not before. Overall there

is still a mixed picture, but improvements are evident. The Slovak Office of Standards,

Metrology and Testing as the central body responsible for standardisation and conformity

assessment is operating effectively, though it will require strengthening in relation to its role for

the free movement of goods in the non-harmonised sectors. The Slovak Standardisation Office

and the Slovak National Accreditation Service also appear to be functioning well. The former is

preparing its application for full membership of CEN/CENELEC and the latter is preparing

further applications under the MLA within European Accreditation in the areas of certification

and inspection bodies. In other areas, the proposed Centre for Chemical Substances and

Preparations, a central procedure for authorisations for the placing of medicines on the market

and the procedure for mutual recognition of registrations all still need to be instituted, however.

There appears also to be a need for greater transparency in application of the rules at already

existing authorities such as the State Institute for Drug Control (SUKL) and the Ministry of

Health.

In the non-harmonised areas, Slovakia still operates a system of import licences, which is not in

line with the

acquis.

The Slovak authorities should ensure all legislation in conflict with Articles

28-30 of the EC Treaty is amended by the date of accession. The practical implementation of

the principle of mutual recognition is a question which must be urgently addressed by the Slovak

authorities as the principle of mutual recognition has to be integrated into every piece of relevant

Slovak legislation on goods.

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The Public Procurement Office seems to be functioning well, although a number of important

legislative gaps need to be filled concerning,

inter alia,

discriminatory provisions for the support

of underdeveloped regions and the lack of coverage of privately owned utilities. Improvements

to the current complaints/review system are still outstanding. The importance of transparency in

public procurement cannot be overemphasised, especially with regard to negotiated procedures

without prior notification and the need to address the issue of corruption and fraud in the

awarding of public contracts.

Chapter 2: Free movement of persons

Further progress has been achieved since last year in this area.

In the field of

mutual recognition of professional qualifications ,

no new developments can

be reported.

As regards

citizens’ rights,

the Act on elections for the regional self-administrative bodies

adopted by the Parliament in June 2001 has included the right for foreign permanent residents to

take part in the regional elections.

Some progress was made in the area of

free movement of workers.

The Civil Service Law

adopted in July 2001 defines the nationality requirement in the light of the

acquis.

Efforts have

continued to prepare Slovakia’s participation in the European Employment Services (EURES)

network, in particular concerning training of staff in languages and safeguarding the

supplementary pension rights of employed and self-employed persons moving within the

Community which are regulated by the amendment to the Act on Supplementary Pension

Insurance, effective from January 2001.

Slovakia has taken some steps to strengthen institutional capacity and bilateral relations with a

view to the future

co-ordination of social security systems

. In November 2000 the Ministry

of Labour, Social Affairs and Family set up an inter-ministerial Commission on social security

systems. A bilateral agreement with the Netherlands covering health insurance and pension

benefits was signed in May 2001.

Overall assessment

Overall, despite the considerable alignment with the

acquis

already achieved, preparation for

the application of the

acquis

must be accelerated. This is especially true in the area of mutual

recognition of professional qualifications for which Slovakia has to further develop the required

administrative structures, education and training programs. With respect to professional

qualifications obtained before harmonisation, Slovakia should introduce measures to ensure that

all its professionals can, as of accession, meet the requirements laid down by the directives.

In particular, a general framework for the recognition of foreign professional qualifications has to

be established. To achieve alignment with the general systems directives, and certain sectoral

directives, much work remains to be done. An inventory of bodies authorised to take decisions

under the general systems directives still needs to be completed. Legislative alignment on health

care workers is lagging. It is important that the proposed amendment to the Act on Advocacy

removes current restrictions on the right to practice for EU lawyers and does not create new

ones. The Centre for Equivalence of Diplomas has to be designated as the contact point and

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national co-ordinator for the general system directives. A clear distinction between academic

and professional recognition is needed.

Measures must be adopted to ensure that there are no provisions in Slovak rules that contradict

Community rules, in particular with respect to nationality, residence or language requirements.

Further work is needed to ensure that Slovak legislation is aligned with the

acquis

on the free

movement of workers. Concerning future participation in EURES, training efforts should also be

continued, especially with regard to language training.

As for the future co-ordination of social security systems, further work to develop the necessary

administrative infrastructures is needed. Institutional capacity needs to continue being

strengthened so as to enable Slovakia to apply the

acquis

on co-ordination of social security.

The entry into force of an agreement signed with the Netherlands on social security should

facilitate Slovakia’s compliance with the regulations from accession, as they normally rely on the

same principles as the social security co-ordination regulations and this familiarises the

administration with these procedures.

Chapter 3: Freedom to provide services

Since last year’s report further progress has been achieved, mainly as regards improving the

performance of financial services.

In the field of the

rights of establishment and the freedom to provide services,

further

progress can be recorded. The amendment to the Small Traders Act entered into force in

September 2001 stipulating that EU economic operators will neither have to be registered nor

have to possess a residence permit and will thus benefit from national treatment. The

amendment to the Commercial Code adopted by the Parliament in October 2001 and coming

into force on January 2002 will ensure that residence is no longer required for EU nationals

prior to as well as after registration in the commercial register. The same amendment will

remove the requirement for an EU company to have an “organisational unit” (branch or agency)

in Slovakia from the day of the entry into force of the Treaty on Accession.

Further progress was achieved in the field of

financial services,

and in particular in financial

supervision legislation. An amendment to the Act on the National Bank of Slovakia (NBS),

which entered into force in May 2001, established the independence of the Central Bank and

reinforced its supervisory power over the banking sector. Banking supervision is thus no longer

under the control of both the NBS and the Ministry of Finance. The new Act on Banks adopted

by the Parliament in October 2001 contained further steps towards alignment of banking

legislation and organised banking supervision on an individual as well as on a consolidated basis.

In the

investment services and securities

area, a new Stock Exchange Act which came into

force in November 2000, included a tightening up of listing requirements.

The Act on obligatory contractual

insurance

against civil liability in respect of the use of motor

vehicles was approved by the Parliament in September 2001. As from January 2002, this Act

abolishes the monopoly of the Slovak Insurance Company. Indeed, it defines general listing

requirements so that henceforth other insurance companies may be licensed to offer insurance

protection for civil liability in cases of motor vehicle damages. In the meantime, the Slovak

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Government started the privatisation of the Slovak Insurance Company by launching an ad hoc

invitation for international tender bids in June 2001.

In November 2000, the Financial Market Authority responsible for the supervision of the

insurance and capital markets

commenced operations.

Concerning the

protection of personal data and the free movement of such data,

Slovakia

has advanced in implementing the Act on the protection of personal data in information systems.

The Government and the Parliament approved the annual report from the State Supervisory

Office for Personal Data Protection in December 2000.

Implementation of the directives on

information society regulations

has progressed with the

entry into force of the Governmental Ordinance on the procedures for exchange of information

on technical regulations and standards in July 2001.

Overall assessment

Overall, despite the considerable alignment with the

acquis

achieved, there is still important

legislative work to be completed, and administrative capacity, particularly as regards financial

services supervision, needs to be reinforced.

In the field of rights of establishment and freedom to provide services, there are still provisions

in Slovak law with discriminatory effects against all non-Slovak nationals. Although the

requirement of Slovak nationality for authorised architects and engineers was eliminated in

August 2000, there still exists requirement for other professions and positions in the field of

gambling. On the other hand, Slovakia has brought its banking legislation closer to alignment

with many of the requirements enshrined in EC banking directives governing the areas of

minimum capital, licensing requirements, supervision on an individual and consolidated basis,

internal control requirements, exchange of information between financial supervisory bodies and

capital adequacy rules. Particular attention should now be given to legislative provisions for

transposing the

acquis

relating to the deposit guarantee scheme and the schedule for meeting

the EC minimum level of guarantee; the deposit guarantee scheme should be structured in such a

way that it will, after accession, be able to cover foreign branches of Slovak banks.

Concerning the insurance sector, the approval of the Act on the contractual insurance of motor

vehicle third-party liability brings the operation of the insurance market in Slovakia closer to

community standards.

Little progress has been achieved in the investment services and securities field. The investment

services, capital adequacy and collective investment directives have not been transposed yet. In

the same vein, the legislative transposition for the securities market sector has to be completed

before the accession.

As regards specifically the investor compensation scheme, the compatible legislative framework

and the alignment of the levels of compensation with the EC requirements need to be

completed.

Further strengthening and co-ordination of financial supervision needs to be achieved. The

creation of the Financial Market Authority constituted the first step towards ensuring an efficient

and well-supervised financial sector. Adequate staffing should be ensured and attention should

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be paid to the need for effective supervision of financial institutions, both off-sight and on-sight.

Further legislative and administrative measures will be required, particularly considering that the

Resolution on the institutional organisation of banking supervision signed between the Minister

of Finance and the Governor of the NBS in May 2001 did not decide whether the integrated

supervision of capital markets, insurance companies and credit institutions would be performed

by the NBS or by some other institution.

Concerning the State Supervisory Body for Personal Data Protection, the degree of

independence of the Commissioner for the protection of personal data, who is currently

appointed and removed by the Government, should be strengthened. This body has started to

play a more active role, carrying out not only registrations, but also announced and

unannounced inspection visits. However, to further implement the

acquis

in this area, will

require the recruitment of new staff members, and the acquisition of additional premises and

technical equipment. Furthermore, legislation in this field needs to be brought fully in line with the

directive on the protection of personal data and the free movement of such data has not yet

been transposed and a significant number of operators are not registered.

Concerning the implementation of information society regulations, the directive on the

community framework for electronic signatures needs to be transposed.

Chapter 4: Free movement of capital

Since last year’s report, steady progress has been achieved in this area, especially concerning

capital movements and the fight against money laundering. On payment systems, progress was

limited.

In the field of

capital movements and payments,

most long-term capital inflows were

liberalised. Effective from January 2001, both an amendment to the Slovak Foreign Exchange

Act and a Finance Ministry Decree implementing certain provision of the Foreign Exchange Act

have implemented further liberalisation measures.

From January 2001, non-residents having their seat of business in the European Union or in the

OECD countries and having established an organisational unit in Slovakia can acquire real

estate needed for carrying out their business. The new Stock Exchange Act, effective from

November 2000, removed the limitation for non-resident participation in the equity capital of

the Stock Exchange. In addition, from January 2001, the State’s compulsory participation in

companies operating betting games in casinos was abolished and the restriction on participation

of foreigners in companies operating consumer lotteries was removed. The new Act on Banks,

adopted by Parliament in October 2001, sets out transparent criteria for the acquisition of

holdings in banks. As regards transactions in securities and access to financial loans, as of

January 2001, granting and accepting short-term financial credits and the provision of

guarantees with a maturity under one year does not require Foreign Exchange approval. The

authorisation requirement was also dropped for residents issuing Slovak bonds abroad with

maturities shorter than one year. A new supervisory authority, the Financial Market Authority,

covering the insurance sector and capital market, has been in place since November 2000 (see

also Chapter 3 - free movement of services).

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Concerning the

acquis

payment systems

, in February 2001, the National Bank of

Slovakia approved the strategy for the introduction of the Real Time Gross Settlement System

in the Slovak payment system infrastructure.

money laundering,

Slovakia has made some progress by implementing the new law

adopted last year. The Financial Analytical Unit, established within the Financial Police Office of

the Police Corps, is now involved each time a financial institution identifies an unusual

operation/transaction on an anonymous account. Enforcement records, available for 1999 and

2000, show that the number of investigations of illegal financial transactions doubled from 1999

to 2000, leading to an increasing number of prosecutions.

Furthermore, the aforementioned new Act on Banks imposes the obligation on banks of

examining the ownership of funds used by clients for every transaction exceeding € 2 100. In

addition to the abolition of the anonymity of banking and other financial products and following

amendments to the Civil Code and Securities Act effective from July 2001, it is no longer

possible to open saving books or issue other deposit instruments in bearer form in Slovakia.

Overall assessment

Although Slovakia has considerably advanced in general, further efforts are still required to

achieve full compliance with the

acquis,

notably on short-term capital movements, functioning of

payment systems and in relation to the fight against money laundering.

As for short-term capital movements, Slovakia has confirmed its timetable for the elimination of

remaining restrictions.

Attention should be paid to the abolition of remaining restrictions on investment by insurance

companies in foreign securities as well as the progressive removal of restrictions on other

institutional investors. On inward direct investment, the specific issues of the elimination of

certain restrictions on licensing in the energy sectors and residual issues on foreign participation

in companies operating lotteries and other similar, games will need to be addressed in the period

ahead. Liberalisation of investment in air carriers is conditioned by the application of the EC

regime in this area, i.e. on accession or in conjunction with any prior air transport agreement. As

far as natural persons are concerned, present legislation restricts the acquisition of real estate by

non-residents. Certain restrictions remain concerning the acquisition of non-agricultural or

forestry land.

As part of the privatisation process, the government has to continue to take significant steps

forward on the path to opening up State-owned companies and financial institutions to foreign

participation with transparent procedures.

In the field of payment systems, Slovakia has not yet transposed the directives on cross-border

credit transfers and on settlement finality, making substantial efforts necessary to fully implement

the

acquis

in this field. Administrative capacities should be reinforced in that area by introducing

effective procedures for handling customers’ complaints and for the settlement of disputes

between banks and customers on cross-border credit transfers.

On money laundering, it is of paramount importance for Slovakia to effectively abolish all

existing anonymous accounts and to take all measures necessary to comply with the Financial

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Action Task Force recommendations. Furthermore, criminal responsibility for legal entities has

still to be introduced.

The newly established Financial Market Authority supervises the insurance and capital markets.

The National Bank of Slovakia exercises prudential supervision of credit institutions. Some

residual powers remain with the Ministry of Finance in relation to specialised financial

institutions. These financial supervisory authorities should strengthen their mutual co-ordination

in the application and enforcement of legislation in the capital markets, banking and insurance

sectors.

Chapter 5: Company Law

Since last year’s report, Slovakia has made significant progress under this chapter, mainly as

regards the company law directives, and industrial property legislation.

In terms of alignment in the area of

company law,

a number of amendments to the Commercial

Code aimed at implementing the 1

, 2

, 3

, 6

, 11

and 12

company law directives were

adopted by Parliament in October 2001, most of which will enter into force in January 2002.

The Slovak commercial register has been accessible on-line since the beginning of the year and

this represents an important step forward for Slovakia, although further steps are required in

terms of accessibility and disclosure of data on companies listed in the commercial registers. In

accounting law,

no particular developments can be reported.

In the field of

industrial and intellectual property rights,

a new

patent law

was adopted in

October 2001 which is aimed at alignment with the

acquis.

This law includes provisions on the

European patent, biotechnological inventions and supplementary protection certificates for

medicines and plant protection products, although these will only enter into effect in July 2002,

when Slovakia accedes to the European Patent Convention. No progress was made as regards

adoption of amendments to the

trademark law.

As regards the

fight against piracy and counterfeiting,

a law on measures relating to the

import, export and re-export of goods that violate certain intellectual and industrial property

rights entered into force in July 2001. Statistics show that in 2000 9 persons were investigated

for trademark violations, of whom 1 was sentenced. In relation to copyright violations, 39

persons were investigated, of whom 22 were sentenced.

The amendment to the Slovak Constitution, adopted in February 2001 (see

section B.1.)

should facilitate the application of the Brussels and Rome Conventions as of accession without

the need for modifications to national legislation.

Overall assessment

The legislation adopted by the Slovak Parliament in October 2001 significantly improves the

overall situation under this chapter. The comprehensive amendments to the Commercial Code

adopted in October 2001 should provide for the gradual alignment in the period up to January

2003 with all Company law directives. Although the on-line availability of aspects of the

Commercial Register is welcome, further steps are required to increase efficiency, transparency

and allow fuller public access. Improvements could also be made in relation to company

registration, which is reported by entrepreneurs to be a lengthy and cumbersome process.

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Accounting law is largely in line, although further amendments to the 4 and 7

accounting

directives are required. Slovakia has established a number of working groups under a National

Steering Commission responsible for the alignment process in the accounting area.

Slovakia will be in a position to incorporate the Rome and Brussels conventions on accession.

Slovakia has ratified the two 1996 WIPO Treaties.

In the field of intellectual and industrial property rights (IPR), patent legislation adopted in

October is aimed at fully aligning with the

acquis.

acquis,

but delays have been occurring in the preparation of the envisaged Act on Trademarks.

Slovakia will have to fully implement the EC Directive on the legal protection of designs, the EC

Directive on copyright in the information society and the resale right Directive.

As for administrative capacity, efforts to improve the institutional framework have been

vindicated by Slovakia’s invitation to accede to the European Patent Convention. Further

improvements could be made, however, such as reducing registration times for trademarks. As

regards IPR infringements, some difficulties with enforcement persist, with lengthy court

proceedings being a particular problem. Specialised training in IPR issues for judges will need to

be continued. Awareness of the enforcement situation at the ministry in charge of copyright

issues appears to be poor.

Although an Act on measures related to the import, export and re-import of goods violating

certain intellectual and industrial property rights has entered into force, training of enforcement

authorities (customs officers, police and judiciary) and effective border control require particular

attention in order to create a coherent enforcement system in Slovakia. Statistics show that in

the first quarter of 2001, only one seizure was made by customs involving 2026 counterfeit

CDs. This is unlikely to represent the true extent of the problem. Appropriate strengthening of

administrative and judicial bodies involved in all areas of IPR should continue to be pursued

across the board, so as to ensure implementation of the relevant laws in all fields of industrial

and intellectual property protection and adequate co-ordination between the authorities

involved.

Chapter 6: Competition Policy

Legislative progress has been made in both areas of competition policy over the reporting

period, though this has not been matched by any significant progress in enforcement practice in

the State aid field.

In the

anti-trust

area, Slovakia has continued to make good progress. In May 2001 an

amendment to the Protection of Competition Act entered into force which takes account of

recent Community developments in the anti-trust field and further strengthens the independence

of the Anti-Monopoly Office. Also in May 2001, the Anti-Monopoly Office issued two decrees

covering merger notifications, and the calculation of turnover.

In terms of enforcement, the Anti-Monopoly Office in 2000 adopted 201 decisions, of which

29 concerned agreements restricting competition, 33 abuse of dominant positions, and 139

mergers. Of these, 10 decisions (including 5 attracting fines) prohibited vertical or horizontal

restrictive agreements. Additionally, in 3 cases abuse of dominant position was proved and

sanctioned. As for merger decisions, there were 4 conditional approvals and 1 prohibition.

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In the

State aid

field some progress has been achieved. In October 2001 the Slovak

Parliament adopted amendments to the Act on State Aid. These amendments are aimed at

further alignment with the

acquis,

and include new rules for aid for employment and training,

regional development and SMEs, as well as the sensitive sectors. Slovakia also submitted its

proposal for a regional aid map. A State aid report for the year 1999 was published early in

2001.

The State Aid Office is beginning to develop an enforcement record, with 53 decisions adopted

in the course of 2000, all of which were approvals of individual aid. No aid schemes have been

approved at all, as there is a tendency to consider all forms of aid on a case-by-case basis,

rather than to assess the framework schemes. Following audits by the Government Office and

Ministry of Finance, the Slovak Cabinet proposed to Parliament in August the recall of the

Director of the State Aid Office. The future of the State Aid Office as a whole also looks

uncertain at the moment, as the possibility of its incorporation or merger with the Anti-

Monopoly Office is being considered.

Overall assessment

The legislative framework for competition policy in Slovakia is largely in line with the

acquis.

However a competition discipline akin to that of the EU still needs to be further developed,

especially as regards State aid, where administrative capacity needs strengthening and

enforcement remains sketchy and less than transparent.

The Slovak Act on the Protection of Competition of 1994, as amended in 2001, is largely

compatible with the

acquis,

covering the main principles of Community anti-trust rules on

restrictive agreements, abuse of dominant position and merger control. Secondary legislation on

block exemptions is still outstanding, although preparatory work on this has started. In terms of

administrative capacity, the Anti-Monopoly Office is already well established. In 2000 the

Office had some 68 staff, of which two-thirds were engaged in enforcement activities and

management. The enforcement record of the Office appears satisfactory, although a more

deterrent sanctioning policy is required. Priority should be given to those cases which concern

the most serious distortions of competition. As a result of its increasing workload the Office

itself sees the need for an increase in overall staff numbers.

As regards State aid, the recent amendments to the Slovak State Aid Act, yet to enter into

force, are understood to incorporate substantive rules on most areas for which there are specific

secondary Community regimes, including the sensitive sectors. These amendments aim to bring

state aid rules largely in line with the

acquis.

Some discrepancies remain, however, as the

provisions of the Act provide only for a summary of the corresponding EC State aid

acquis.

The role of the State Aid Office vis-à-vis aid awarded under other laws (e.g. the Law on

Industrial Parks -

see also Chapter 15, Industrial Policy),

or by regional and local authorities,

should be strengthened.

In terms of administrative capacity, the State Aid Office has been operational since May 2000,

with a total staff of 28, 17 of whom are involved in enforcement activities and management.

While the Government has approved an increase in staff numbers up to 45 for 2001, it must be

stressed that overall numbers are less important than the recruitment, retention and on-going

training of competent and fully operational members of staff.

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As regards the fledgling enforcement record, it does not appear that the State Aid Office has

been routinely consulted on all relevant State aid matters. Co-operation between the aid

providers including the Ministry of Finance - to which the State Aid office is currently

subordinate - and the State Aid Office itself must be strengthened to enable the State Aid Office

to fulfil its role satisfactorily. Therefore the Slovak authorities will have to ensure that all aid

grantors consult the State Aid Office systematically, and well in advance. An adequate

notification system still needs to be fully established. As to the State Aid Office itself, it

sometimes appears as if a more in-depth analysis of aid cases could have been carried out. The

State Aid office should devote more attention in the future to the scrutiny of aid schemes and the

privatisation process, and to the alignment of existing aid schemes.

It is particularly important that all currently available measures to encourage inward investment,

including the recently adopted investment incentives law (

see also Chapter 15, Industrial

Policy),

are implemented fully in line with EC State aid principles. Although the investment

incentives law was recently amended to ensure its compatibility with the

acquis,

similar

incentives (such as in particular under Article 35(a) of the Income Tax Law) are neither in line,

nor monitored by the State Aid Office.

The quality of the recent State aid reports has been satisfactory.

Chapter 7: Agriculture

Since last year’s Regular Report, except in the veterinary sector, Slovakia has made,

progress in terms of transposition and implementation of the relevant

acquis.

little

While the share of agriculture in gross value added stayed at the same level as in 1999,

accounting for 4.5 % , employment in agriculture continued its downward trend (6.7 % in

2000, 7.4 % in 1999)

The temporary safeguard measures on exports of certain cereals, in the form of export quotas,

which were introduced last year, were extended and are due to run until 31 December 2001.

Furthermore, a WTO safeguard measure for imports of sugar, in the form of a tariff quota, was

introduced as from May 2001 (see

section A.b - Relations between the European Union

and the Slovak Republic).

In 2000, EC imports of agricultural products originating in Slovakia decreased by 1 % to €

92.3 million.

EC exports to Slovakia increased by 21 % to € 312 million. The trade balance in

favour of the Community amounted to € 219.7 million compared to € 164.3 million in 1999.

The most important product groups in terms of EC imports from Slovakia are prepared feed

(17 %) with an increase of 14 %, dairy products (15 %) with an increase of 16 % and oilseeds

(14 %) with a decrease of 54 %. As far as EC exports to Slovakia are concerned, the most

important sectors are prepared feed (14 %) with an increase of 15 %, fruit (12 %) with an

increase of 1 %, cereals (8 %) with an increase of 348 %, as a consequence of shortages due

The source for agricultural statistics is EUROSTAT unless otherwise specified.

Eurostat Labour Force Survey definitions (LFS). Agricultural employment is defined in LFS terms as economically active

persons who gain a significant part of their income from agriculture.

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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to drought, raw hides and skins (7%) with an increase of 49% and miscellaneous preparations

(6 %) with an increase of 11 %.

Horizontal issues

Since last year’s Regular Report little progress can be reported with regard to the

implementation of measures related to

the European Agricultural Guidance and –Guarantee

Fund

(EAGGF).

The Slovak Paying Agency, which was established as a budgetary organisation reporting

directly to the Minister of Agriculture, enlarged its activities and changed its name to the

SAPARD Agency. The SAPARD Agency currently employs 66 people, including the

employees at the eight regional units. The Commission approved the Slovak SAPARD

Programme for Agriculture and Rural Development in November 2000. The Multi-annual

Financing Agreement, which sets out the rules for implementing SAPARD, and the Annual

Financing Agreement, which sets out the Community financial commitment for Slovakia for

2000 , were signed in March 2001. A monitoring Committee has been established under the

Managing Authority for the monitoring of the SAPARD programme. The Monitoring

Committee adopted its rules of procedures and gave a positive opinion on the proposed

monitoring indicators

(see section A.b – relations between the European Union and

Slovakia).

No significant progress has been achieved as regards the

Integrated Administration and

Control System (IACS).

Slovakia has just drawn up a strategy for the implementation of this

system. For the moment, there is no system for the administration and control of payments

similar to IACS in Slovakia. Only records of privately owned plots and a digital system

containing information on qualitative soil parameters for use in land valuation are available in the

Slovak database. First steps towards setting up the geographical information system, involving

the preparation and processing of orthophoto maps, are underway.

As regards

trade mechanisms

and

quality policy,

no significant progress can be reported.

With regard to the implementation of the

farm accountancy data network system (FADN)

Slovakia has established a National Commission for the FADN in line with the relevant

acquis.

Common Market Organisations

Progress can be reported on Slovakia's preparation for the establishment of a proper market

information system. A new bulletin monitors the price developments for the most important

commodities on foreign markets and it is planned to extend its coverage also to the Slovak

market.

Slovakia has adopted the Act on Common Market Organisations for certain agricultural

products. However, little progress can be reported in adopting of specific regulations organising

the various markets covered by the

acquis.

Slovakia has adopted a Government Order

concerning labelling and quality requirements for alcohol and spirit drinks. Vineyard registration

has started in a sample wine-growing area. Slovakia has harmonised its legislation on quality

requirements for the quality of fruit and vegetables with the relevant EC and UN/ECE

standards. These requirements have been transposed in the Food Code, which entered into

effect in October 2000.

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Rural development and forestry

Limited progress can be reported in this field. However, it should be highlighted that only agri-

environmental measures are compulsory from the

acquis

point of view. Slovakia has adopted

an Act amending the Agriculture Act of 1998 which lays down agriculture and rural

development programmes prepared in co-operation with the EC and specifies beneficiaries for

the provision of assistance. Secondary legislation on agriculture and rural development

programmes, implementing this Act, has been put in place.

Veterinary and phytosanitary issues, including food safety

Since last year’s Regular Report considerable progress can be identified with regard to the

legislative alignment in the

veterinary sector.

A series of Regulations implementing the Act on Veterinary Care have been adopted and

entered into force; they deal with matters including Food Hygiene, Border Inspection Posts,

Drugs and Sanitary Aids, the Conditions for the Preparation, Placing on the Market and the

use of Medicated Feeding stuffs and Animal Health. However, these Regulations are not fully

harmonised with EC legislation.

With regard to

animal welfare,

legislation setting rules on animal welfare during transport has

been put in place.

Slovakia has aligned itself with the

acquis

in the area of

identification and registration of

animals

for cattle. Legislation on the Breeding of Farm animals relating to labelling,

identification and maintenance of the central register for cattle as well as to checks on livestock

has been put in place.

In the area of

animal waste treatment

Slovakia has substantially aligned itself with the

acquis

on the performance of veterinary rendering activities. In the area of

animal disease control

Slovakia has put its system of reporting infections largely in compliance with EC requirements.

Slovakia is prepared to deal with all infectious diseases on the World Organisation for Animal

Health list A in line with EC criteria. Routine vaccination against classical swine fever has been

prohibited since 1 January 2001. The rules on the protection against zoonoses have been

harmonised. The plan for residue control based on the principles of EC legislation has been put

in place.

Regarding

imports of live animals and animal products from third countries,

Slovakia has

adopted a Decree on veterinary protection of the State territory which, together with the Act on

Veterinary Care creates the legislative framework enabling the transposition of EC veterinary

legislation for imports from third countries. However, proper implementation of this legislation

needs to be ensured.

Slovakia has made further steps with regard to strengthening the administrative capacity in the

veterinary field. Two State Veterinary Administration branches have been established in

Bratislava and Zvolen and equipped with the technology for BSE diagnosis. These branches are

already operational. Slovakia has signed an agreement on implementation of the ANIMO

system which establishes an information network concerning trade in animal products and live

animals, at four ANIMO units, namely the State veterinary Administration, Vysné Nemecké,

Bratislava – airport and port as well as Cierna nad Tisou border inspection posts.

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No progress can be reported with regard to completing the establishment of the Border

Inspection Posts at the future EU external borders.

In the

phytosanitary sector,

some progress has been made since last year’s Regular Report.

An amendment of the Phytosanitary Care Act relating to harmful organisms and to plant

protection products has been adopted. With regard to the administrative capacity in the

phytosanitary sector, the staff of the Central Control and Testing Institute has been strengthened

by 10 additional employees.

Slovakia produced a Food Safety Strategy, which contains a clear state of play of the present

administrative capacity and of new regulations recently adopted. However, it provides only

limited information on detailed timetables for the alignment with the

acquis.

The paper states

that EC measures in the area of Public Health are mostly aligned via two implementing

regulations, one on requirements for ensuring food safety and wholesomeness of animal

products, and one on general and special hygienic conditions for establishments (see

also

Chapter 1 - Free movement of goods).

Slovakia has achieved good progress towards the compliance of its legislation on Transmissible

Spongiform Encephalopathy (BSE) with the

acquis.

In the context of the Geographical BSE

Risk Assessment, Slovakia has been classified in group III. Slovakia has started an extensive

programme of testing cattle for BSE. The State Veterinary Office has issued an Order

concerning the definition of Special Risk Materials. In the meantime, a first BSE case was

officially confirmed by the Slovak authorities in October 2001.

Overall assessment

Slovakia is still lagging behind in aligning with the agricultural

acquis,

with the exception of the

veterinary sector. The weaknesses pointed out in the 2000 Regular Report can be confirmed.

Slovakia has, so far, only prepared strategy documents with regards to the structure of its

agricultural policy over the coming years, namely the "Agrarian and Food Policy Concept", the

"Forestry and Water Management Concept" and the “Agricultural Sector Information Strategy”.

There is a need for Slovakia to take urgent action to speed up its preparation for the

implementation of the acquis upon accession. Administrative capacities, chiefly of the Ministry

of Agriculture need to be strengthened.

As regards

horizontal issues,

progress needs to be made with regard to the implementation of

measures relating to the

European Agricultural Guidance and –Guarantee Fund

(EAGGF).

Slovakia needs to complete all steps necessary to prepare national accreditation of the

SAPARD Agency, before any Community funds can be released to its SAPARD programme.

Slovakia needs to accelerate its efforts with regard to preparation for the establishment of the

Integrated Administration and Control System

(IACS) by the date of accession. Slovakia

has only initiated the preparatory work on the compilation of special registers (vineyards, hop

gardens, intensive orchards). A detailed strategy including a precise timetable for establishing

the necessary elements of a functioning IACS needs to be drawn up.

As regards the implementation of

Common Market Organisations

, Slovakia needs to

complete its legislation organising the various markets covered by the

acquis.

It also needs to

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make operational the Slovak Agrarian Marketing Organisation, which should be focused on

support for the sale and marketing of agricultural commodities. Slovakia needs to complete the

registration and inspections of wine growing model areas in line with the EC requirements and to

start the registration of vineyards across the whole territory. A central laboratory for the

inspection of milk and dairy products needs to be set up. Market Intervention systems in line

with the

acquis

are not yet established.

In the area of

Rural Development and Forestry,

Slovakia needs to carry out delimitation of

Less Favoured Agricultural Areas (LFAs), in line with EC criteria. Progress needs to be made

as regards the introduction of agro-environmental schemes.

In the

veterinary

field, Slovakia has undertaken important steps with the view to the alignment

with, and implementation of, EC legislation. It needs, however, to make further progress in

adopting and implementing legislation in order to achieve full alignment. In particular, the

amendment to the Act on Veterinary Care, which will constitute a legal basis to pursue

transposition of the

acquis,

needs to be adopted.

With regard to veterinary control in the internal market, the introduction of the movement

control system needs to be completed and the Central Register for Cattle needs to be enforced.

Furthermore, the register of breeding data needs to be put in place. No progress has been

made with regard to the establishment of the veterinary and phytosanitary controls at the future

external borders of the EU. Slovakia needs to make substantial efforts to complete construction

of the Border Inspection Post (BIP) in Vysné Nemecké and to start the construction of the

remaining BIPs.

In the

phytosanitary

field t ere is a clear and urgent need for Slovakia to speed up the

alignment process and to strengthen administrative capacity in order to be able to guarantee a

full and correct implementation of the

acquis

by the time of accession. Cornerstones of the

Community plant health (harmful organisms) system, such as the registration of producers and

the use of plant passports, need a considerable preparatory period prior to accession. It is

particularly important that both the inspectors and the producers/traders concerned get

acquainted with the system in order to guarantee effective implementation of the

acquis

in this

field. It is equally important for Slovakia to ensure that all inspection bodies concerned,

including Border Inspection Posts, have been established and have the necessary legal basis to

correctly implement the acquis.

The food -processing establishments need to be upgraded so as to ensure that they respect EC

food safety

standards.

Chapter 8: Fisheries

Some progress in legislative terms can be reported in this sector.

With regard to

resource management, inspection and control,

Slovakia has adopted

secondary legislation through which Chapter III of the Food Code concerning fish and fish

products has been put into effect. This chapter encompasses provisions concerning sizes as well

as export and release into circulation of fish products. It also contains provisions concerning the

market policy, such as classification and technical specifications in the area of quality control.

The Order of the Ministry of Agriculture on the Veterinary Protection of State Territory, has

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been adopted, covering among other topics the administrative and control requirements in the

area of import and transit of products. Slovakia has made progress in the area of structural

policy by adopting the amendment to the Act on Agriculture, which covers

structural actions

in fisheries.

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

Slovakia's fisheries policy is partly aligned to the

acquis

in this area. Further progress is needed

both as regards the legislative transposition and as concerns administrative capacity necessary

to implement the Common Fisheries Policy.

Further alignment should take place by amending and implementing the Fisheries Act and the

Veterinary Care Act. Following the introduction of legislation for controlling imports of fish and

fish products, special attention needs to be attached to training of the officials in charge of these

controls and to their practical implementation. The legal basis for setting up an Agricultural

Agency is still to be established. This Agency is necessary with a view to implementing the

market policy and structural actions.

With regard to the administrative capacity, the Fisheries Department is under the responsibility

of the Ministry of Agriculture and currently employs two persons.

Slovakia needs to strengthen the administrative capacity of the institutions involved in this sector,

especially as regards control of Common Fisheries Policy requirements upon import and transit.

In particular, enforcement of new legislation will require the recruitment of qualified staff.

Since Slovakia is a landlocked country, parts of the

acquis

on fisheries are of lesser importance

for this country.

Chapter 9: Transport policy

Further progress has been made by Slovakia in aligning with the acquis in this area.

Regarding

Trans-European Transport Networks,

the Slovak Government approved in

March 2001 the "National Regional Development Plan for the 2001-2006 Period", concerning

the plans in the field of transport infrastructure development of individual regions of Slovakia

including financing. The Slovak Government approved in February 2001 a Resolution on the

"New Project for the Construction of Motorways and High Speed Roads”. At the beginning of

2001, approximately 45% of the total planned motorway and high-speed road network was in

operation and 8% was under construction. In May 2001 Slovakia signed an agreement with

European Investment Bank, which granted a loan of €34 million EUR for the construction of an

8 km length motorway section between Bratislava and Banska Bystrica.

In relation to

land transport,

some limited progress has been made. As regards

road

transport,

in December 2000, the Slovak Republic signed the INTERBUS agreement. New

legislation on vehicle registration and corresponding certificates entered into force in January

2001. Concerning road user charges, 15-day vignettes have also been available since January

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2001 for vehicles with a total weight more than 3.5 tonnes. The privatisation process of 17

regional bus companies belonging to Slovak Bus transportation has started. As concerns

rail

transport,

the Slovak Government approved by Government Resolution in October 2000 the

Project for the transformation and restructuring of Slovak Railways (ZRS), setting the

conditions for the liberalisation of the railways transport sector. New legislation, aimed at

aligning with the

acquis,

separating the railroad (infrastructure, operation of the railroad) from

the provision of rail operator services (operation of transport by rail) entered into force in July

2001. ZSR will for the time being remain the main operator of cargo and passengers transport.

It will consist of the top control body, the General Directorate, and four divisions. There is no

further progress with the establishment of the Railway Regulatory Body to be reported.

Nevertheless two bodies have been created: the Slovak Railways Body and the Slovak Road

Administration Body.

In January 2001, the Slovak Government approved the "Concept for the development of

Combined Transport with an outlook to 2010". New legislation on

combined transport

entered into force in November 2000. Concerning

inland waterways,

the Act on Inland

Navigation transposing the provisions on access to the occupation and mutual recognition of

diplomas entered into force in January 2001. Several binding implementing regulations for the

Act on Inland Navigation entered into force during the reference period.

Only limited progress has been achieved in the field of

air transport,

as far as the

implementation of the Joint Aviation Requirements (JAR) is concerned, with the transposition at

national level of a certain number of requirements. Regarding

maritime transport,

in January

2001, the Act on Maritime Navigation entered into force, covering in particular safety-related

“acquis” such as common rules and standards for ship inspection and survey organisations,

minimum level of training for seafarers (STCW Convention) and rules on pilotage of vessels in

the North Sea. An ordinance on vessel equipment entered into force in July 2001 implementing

Community

acquis

on marine equipment.

Overall assessment

While the overall level of alignment with the

acquis

has improved, substantial alignment is still

necessary.

Efforts to complete legal alignment and strengthen administrative and enforcement capacity in

road transport are needed, in particular on social legislation, including financial standing

requirements for access to the profession, fiscal harmonisation and technical and safety

standards, among others, with regard to weights and dimensions and tachographs. As concerns

railway transport further efforts are necessary in order to allow for the implementation of the

revised railway

acquis.

The Rail Regulatory Authority must be established. Although no high-

speed rail system is planned in Slovakia, interoperability requirements will have to be

implemented. In addition, the directive on interoperability for conventional rail should be

implemented.

Concerning air transport, further efforts are needed, in particularly on air safety (implementation

of all Joint Aviation Requirements), and on the establishment of an independent aviation

accident investigation authority.

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As regards inland waterways, Slovakia should establish an Inland Waterway Fund. Further

alignment is needed in fields such as navigability licences, technical requirements, and the

harmonisation of conditions for obtaining national boatmasters’ certificates. Additional

requirements identified within the acquis, such as the liberalisation of the market still need to be

met.

Concerning maritime transport, although Slovakia is a landlocked country, it should complete

alignment and set up the necessary administrative structures.

The administrative capacity has to be strengthened: co-operation and co-ordination between the

ministries concerned should be improved, and human resources should be enhanced. Some

progress has been achieved in increasing the efficiency of relevant structures, in particular by

delegating particular tasks from the Ministry to institutions under its authority.

Chapter 10: Taxation

Since the last regular report Slovakia has made limited progress with aligning its tax legislation

with the

acquis.

The reform of the Slovak tax administration has moved some further steps

forward.

In the area of

indirect taxation,

amendments to the excise legislation were adopted in May

2001, entering into force in July 2001 and January 2002 respectively. The amendments

introduce tax warehouses, the arrangements for suspending tax with financial guarantee,

registered traders and authorised users of goods subject to excises, specification of the structure

of the taxable transaction and tax rates. In October 2001 the Excise Duty Act was amended,

entering into force in November 2001, introducing further alignment in this area. No progress

was made in the field of VAT.

No progress was made in the area of

direct taxation.

As regards

administrative co-operation and mutual assistance,

there has been some

progress but much remains to be done. The Act on Tax Authorities entered into force in May

2001 and is aimed at aligning partly the Slovak legislation with the

acquis

in a number of fields.

These include mutual assistance in the field of direct taxation, administrative co-operation on

VAT, and mutual assistance for the recovery of claims.

Since last year’s Regular Report, some further steps have been taken to reform and strengthen

Slovakia’s tax administration.In January 2001, the Tax Administration headquarters office was

separated from the regional office in Banska Bystrica, thereby improving its capacity to plan and

manage national operations. The new structure increases managerial functions at headquarters,

while granting executive functions to the local offices. As of March 2001, the Tax

Administration has been organised along functional lines, with separate departments specialising

in the main tax administration functions at all three levels. In May 2001, the central tax

directorate was granted partial autonomy.

Little progress has been made in improving taxpayer compliance. Apart from some

improvement in the productivity of VAT audits, there has been little progress as regards

improvement of the quality of audits and audit coverage, reduction of the high level of VAT

refunds, and strengthening of collection enforcement procedures in order to stem the growth of

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tax arrears. VAT refund claims increased again in 2000, while the stock of tax arrears rose to

36 per cent of total tax collection.

Overall assessment

While some achievements have been made on legislative alignment in the field of excises, this is

less the case with VAT and direct taxation. Additional efforts are required, in particular as

regards adjustments of VAT and excise duty rate levels. The measures taken to modernise the

tax administration should be further pursued.

As regards direct taxation, action should be taken to ensure that direct tax legislation is

amended to eliminate potentially harmful tax measures, and in particular preferential tax

schemes, so as to comply with the Code of Conduct for Business Taxation upon accession to

the same extent as current Member States. Further alignment should be pursued in the area of

administrative co-operation and mutual assistance.

There is still a need to strengthen headquarters, where the lack of skilled management is a major

shortcoming and an impediment to the successful implementation of reforms at the regional level.

It will be important to ensure that staff are able to carry out the decision-making, monitoring and

supervision of local offices which are required under the new functional organisation.

Little progress has been made with addressing some of the most critical weaknesses identified in

last year’s Regular Report. These include improving audit coverage and audit yields for the

major taxes, VAT refund management, taxpayer compliance for large taxpayers, and tax

collection enforcement. Training and human resource development should continue to be seen

as a priority task, particularly in the areas of audit and tax collection enforcement.

Ensuring full operational status of the IT tax information system, its link with the customs

information system and its interconnectivity with the EC systems ahead of accession should also

be given priority, as little has been done in this field. Legislative amendments will be required to

allow the exchange of information relating to indirect taxes.

Slovakia’s tax administration is run by the Ministry of Finance, the central tax directorate with

its 8 regional and 101 operational district offices (as compared to 108 last year), the customs

directorate and customs offices. There are 5500 employees within the tax administration, of

whom 600 work at headquarters and in the regional tax offices. The Act on Tax Authorities

grants partial autonomy to the central tax directorate. However, it still lacks the competence to

make strategic decisions, for example, to determine the number and location of local tax offices,

to modify procedures, interpret tax laws, or redesign certain aspects of its organisational

structure.

Slovakia should continue to give high priority to improving administrative capacity. The

organisational reshuffling implemented in the last two years is a step in the right direction and

should be further pursued.

Chapter 11: Economic and monetary union

A detailed assessment of Slovakia’s economic policy in its various aspects has been given

above, in the Chapter discussing the economic criteria (B-2). Therefore, the present section is

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limited to a discussion of those aspects of the Economic and Monetary Union

acquis

-as

defined by title VII of the EC treaty and the other relevant texts- which candidate countries

should implement by accession, 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.

Significant progress has been achieved in this area since the last Regular Report. An amendment

to the Act on the National Bank of Slovakia was adopted and came into effect in May 2001.

The amended act establishes the

independence of the central bank,

thus bringing Slovak

legislation in line with the requirements of the

acquis

in this area. The amendment also ensures

the prohibition of

direct public sector financing by the central bank.

Overall assessment

Slovakia will participate in EMU upon accession with the status of a country with a derogation

under article 122 of the EC treaty. It will need to implement the necessary changes to its

institutional and legal framework by the date of accession.

Overall, Slovakia’s legislation is now in line with the

acquis

in this area, notably as regards

aligning the National Bank's statutes and the prohibition of direct public sector financing by the

central bank.

Slovakia has largely aligned with the

acquis

prohibiting privileged access by public authorities to

financial institutions.

As regards administrative capacity, carrying out medium-term fiscal planning and fiscal reporting

constitutes a matter of priority. Further strengthening of the appropriate expert departments at

the Ministry of Finance will be required to ensure that there is sufficient capacity to cover issues

of domestic economic policy in the EU environment.

Chapter 12: Statistics

Slovakia continued to make progress over the last year towards achieving compliance with the

acquis

in this area.

Several projects were launched such as the Farm Structure Census. They will help Slovakia to

bring statistics more in line with the EC methodology. However, most of these projects need

substantial financial support. As regards

statistical infrastructure

, the Statistical Office of the

Slovak Republic (SOSR) is composed of a Head Office and 8 Regional Offices. Its staffing has

been reinforced. The SOSR now employs around 1140 staff, of which 340 work at central

level and 800 at regional level.

Concerning

classifications

, most statistics are now in line with the NACE classification.

As regards

demographic and social statistics,

the Population Census was carried out in the

first semester of 2001. Data are being processed and the first results are expected in the

autumn.

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In the field of

regional statistics,

at the territorial unit (NUTS) II and III digit levels, data for

the years 1997 to 1999 have been updated and data for 2000 became available. So far,

macroeconomic data are not covered at the level of villages and municipalities.

Concerning macro-economic statistics,

for national accounts, progress has been seen in the

implementation of ESA 95 methodology.

Concerning

price statistics,

including production prices and agricultural prices, comprehensive

revision of price index schemes was completed.

In the field of

business statistics,

further progress was made with setting up registers of

statistical units and in harmonising them with other registers, in particular the tax register.

For

transport statistics,

the Slovak legislation is now compliant with EC rules on transport

infrastructure, transport policy and the statistical survey on behaviour of transport operators in

the transport market, with the exception of the statistical survey on transport of goods by road

transport. As regards

agricultural statistics,

work has begun on carrying out a structural

census of farms.

Overall assessment

Overall, Slovakia is well advanced in the field of statistics. Slovakia still needs to finalise

legislation to comply with the principles of Community statistics. The quality and coverage of the

statistics, in general, needs to be improved.

Progress is still required in some specific areas, including national accounts and external trade

statistics. For national accounts, improvement is still needed in regional accounts, annual national

accounts and quarterly national accounts.

Concerning external trade statistics, the INTRASTAT system, which gathers statistical data on

the internal trade of all commodities among Member States, has to be implemented by the date

of Slovakia's accession to the EU.

The SOSR seems adequately staffed and has appropriate competence in the implementation of

the

acquis.

However, due to low wages in comparison with the private sector, the SOSR

suffers from high turnover of staff. Therefore, policies aimed at improving recruitment and

retention of skilled staff should be applied. Co-operation runs smoothly between ministries and

local governments involved in the production and use of statistics. Data of the SOSR are

available on its Internet page and are frequently updated. Adequate resources need to be

ensured to further strengthen statistical capacities, including at regional level.

Chapter 13: Social policy and employment

Considerable progress was achieved in terms of transposing the

acquis

in this area, notably in

the field of labour law and health and safety at work.

Substantial progress was achieved with the adoption of the new

Labour Code

in July 2001.

This act aims to finalise the transposition of the Directives on collective redundancies, transfers

of undertakings, written statement, European works councils, working time and protection of

young people at work. According to the Labour Inspection Act, the National Labour

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Inspectorate and regional labour inspectorates shall, from July 2001, discharge duties in the field

of enforcement of labour law and wage regulations, as well as concerning obligations resulting

from collective agreements.

Progress in transposition of the

acquis

in the field of

equal treatment for women and men

was also achieved with the adoption of the new Labour Code, which aims,

inter alia,

to finalise

transposition of the Directives on pregnant workers, equal access, burden of proof and parental

leave. In March 2001, the Government adopted the Concept of Equal Opportunities between

Women and Men focusing on the labour market, and, public and political life as well as on

family. Its implementation needs to be ensured by,

inter alia,

the provision of sufficient financial

means. In February 2001, the amendment to the Slovak constitution established conditions for

introducing the institution of the ombudsman, which should contribute to reducing discrimination

by extra-judicial means.

Further progress can be reported in the field of

health and safety

at work. The amendment to

the Act on Health and Safety at Work adopted in March 2001 aims at fully transposing the

Framework Directive on occupational health and safety. It provides, among other things, the

basis for issuing a number of pieces of secondary legislation. In this context the Slovak

government has adopted ordinances intended to transpose the

acquis

on the minimum health

and safety requirements for the use of work equipment by workers at work, for the workplace

and for the manual handling of loads. Slovakia has also adopted legislation aiming at

transposition of the Directives on display screen equipment and signs.

No particular developments can be reported with regard to

public health.

Efforts continued by Slovak authorities to promote

social dialogue

at all levels. A tripartite

General Agreement was not signed this year. Concerning bipartite social dialogue, the

aforementioned new Labour Code provides for the establishment of works councils in

undertakings where no trade unions are present. Social dialogue and number and contents of

collective agreements at sectoral level continue to be limited.

After several years of decline,

employment

showed a small year-on-year increase in the first

half of 2001. Despite this, unemployment showed a further small increase, as Slovakia’s labour

force continues to grow relatively rapidly. Slovakia had an unemployment rate of 19.2 % in the

second quarter of 2001, which is very high relative to the EU average. Employment rate was

56.3 %, much lower than the EU average of 63.3 %.

Structural problems continue to persist in the labour market. Regional segmentation is very high,

due to low labour force mobility and rigidities in the labour and housing markets. A National

Plan of Employment for the period 2001–2002 was adopted by the Government in

November 2000. Together with the Commission, a Joint Assessment of Employment Priorities

in the Slovak Republic has been drawn up. The document presents an agreed set of

employment and labour market objectives that should enable Slovakia to adapt employment

policy in line with the requirements set out in the framework of the European Employment

Strategy. The document is to be jointly signed by the Commission and Slovakia later this year.

Apart from the establishment, in September 2001, of a Management Unit of the European

Social Fund in the Ministry of Labour, Social Affairs and Family, there has been little progress

concerning the preparation for the

European Social Fund (ESF).

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As regards

social protection,

the Government has taken further steps towards reforms,

including the reform of social insurance, particularly pensions, and of health service financing. In

December 2000 an organisational timetable for the implementation of the social insurance

reform was adopted, according to which reforms will be launched between mid-2002 and mid-

2003. The National Programme for the Development of Living Conditions for Citizens with

Disability in All Areas of Life was approved in June 2001. Its objective is to create equal

opportunities and integration of disabled citizens into the life of society.

The fight against exclusion, as laid down in art. 136 of the Treaty establishing the European

Community, is part of the objectives of EU social policy. As decided at the Lisbon and Nice

European Councils, policies to combat social exclusion combine commonly agreed objectives at

the EU level, and national action plans. The Gothenburg European Council in June 2001 invited

candidate countries to translate the Union’s objectives of promoting social inclusion into their

national policies.

As regards

discrimination,

no particular developments can be reported

(see also

section B.1.2. – Human rights and the protection of minorities.)

Overall assessment

Slovakia has adopted legislation aiming at transposition of a considerable part of the

acquis

the field of social policy and employment. Further transposition and effective implementation

needs to be ensured.

In the field of labour law, Slovakia has substantially advanced in the transposition of the relevant

acquis.

Transposition of the posting of workers Directive needs to be ensured. Emphasis has

now to be put on strengthening implementation as well as the enforcement structures, and

notably the labour inspectorates’ capacity to discharge their duties. A liaison office or

competent national body as required under the Posting of Workers Directive, needs to be set

up. The Guarantee Fund set up last year is functioning properly.

As a result of the new Labour Code, progress has also been achieved in the field of equal

treatment for women and men. The

acquis

on equal treatment in matters of social security

remains to be transposed. Effective implementation and enforcement is crucial and attention

now needs to be turned to developing appropriate and adequately financed information, training

and institutions.

Although progress has been made in the field of health and safety, Slovakia still needs to

transpose and implement important parts of the relevant

acquis.

Further efforts are needed in

this respect. Particular attention must be paid to the financial impact of the implementation of

health and safety legislation on undertakings. Timely and complete transposition and

implementation of the relevant

acquis

must be accompanied by the effective operation of labour

inspection institutions. There is a particular need to co-ordinate the supervision and enforcement

of the relevant provisions on occupational health and safety. Labour inspection under the

competence of the Ministry of Labour, Social Affairs and Family is carried out by the National

Labour Inspectorate and 8 regional labour inspectorates, comprising 175 inspectors in total.

State health supervision is carried out by the 36 State health institutes, with a staff of 50 medical

doctors and 400 other employees. Training, financial resources and equipment need to be

reinforced for these institutions, and an efficient public information system put in place.

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In the field of public health, efforts should be continued for the development of a health

monitoring system in order to obtain health data and indicators comparable with the Community

health monitoring system. With regard to the surveillance and control of communicable diseases

further measures should be undertaken on the background of the principles and methodology of

the Community Network for the epidemiological surveillance and control of communicable

diseases. In the area of tobacco Slovakia should also continue efforts in developing

infrastructure for the implementation of community tobacco legislation.

As regards social dialogue, further support should be given to social partners’ capacity- building

efforts, in particular with a view of their future role in the elaboration and implementation of EU

employment and social policy, including the ESF. Tripartite social dialogue should be further

widened to economic and financial issues such as budgetary, employment and macroeconomic

policies in line with developments of social dialogue at EU level. Social dialogue in the public

sector also needs to be improved. Bipartite social dialogue and the introduction and

development of workers’ participation, information and consultation, in particular in the SMEs,

needs to be strengthened. Autonomous social dialogue must be considered as a priority to

ensure implementation of the Community

acquis

at local level.

Reform of the employment system and transformation of the labour market will need to be

pursued with vigour. The structural problems inherent in the labour market should be addressed,

and particular attention should be paid to promoting active labour market policies over passive

measures in order to counteract the rise in unemployment. More extensive co-ordination should

be pursued between the Ministry of Labour, Social Affairs and Family, the National Labour

Office and the line ministries responsible for regional policy and preparation for the structural

funds. Slovakia should further develop and implement a national employment strategy in line

with the principles of the European Employment Strategy and the priorities identified in the Joint

Assessment of Employment Priorities. Although a Management Unit of the European Social

Fund has been established in the Ministry of Labour, Social Affairs and Family, concrete efforts

are required to avoid the risk that the delays occurred endanger a proper, well co-ordinated

preparation for the ESF. The relationship between the ESF unit and the implementation units

within the National Labour Office and the Slovak Education Ministry should be clarified as soon

as possible. Further development of training systems in this area also remains of utmost

importance. It is also important that the contents of future ESF interventions is embedded in the

European Employment Strategy and the fight against social exclusion.

Further efforts are needed to ensure alignment with the

acquis

on the anti-discrimination based

on Art. 13 of the Treaty.

Regarding overall administrative capacity, efforts should be made to ensure that the Ministry of

Labour, Social Affairs and Family, which takes the lead in many areas of social policy, has an

efficient organisational structure, and adequate levels of trained staff. A strategic approach to

the division of competencies with the other ministries, in particular the Ministry of Health, should

be taken. Co-ordination between ministries, and with the relevant monitoring and enforcement

institutions, should be improved.

Chapter 14: Energy

Further progress has been made in the field of energy during the period covered by this Regular

Report.

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In the field of

security of supply,

the Act on Emergency Reserves of Crude Oil and Petroleum

Products, effective from June 2001, has provided the basis for increasing oil stocks towards

levels sufficient for 90 days’ consumption as required by the

acquis.

Currently emergency oil

stocks stand at somewhat less than one third of the eventually required level.

As for

competitiveness and the internal energy market,

further steps have been taken by

Slovakia in order to progressively align with the acquis. All future increases of energy prices will

take place within the framework of the Energy Policy of the Slovak Republic, which aims

gradually to increase prices to ensure that producers fully cover their costs.

Concerning the electricity sector, following the adoption of the Act on Network Sectoral

Regulation in June 2001, Slovakia has decided to open up 33% of the domestic market as from

2002.

The privatisation plans (49% of shares) for the State-owned Slovak Gas Company (SPP), for

the national oil company (Transpetrol), for the national electricity company (Slovenske

Elektrarne) and for the distribution sector have been adopted. Privatisation of these main energy

sector companies should be carried out by the end of 2001, except for that of Slovenske

Elektrarne and of the distribution sector, both of which are scheduled for no sooner than mid-

2002.

The Network Industry Regulatory Office has been operational since August 2001. However,

at present, there is no independent transmission system operator to safeguard the functioning of

the internal electricity market.

No significant progress can be reported in the field of

energy efficiency.

In the

nuclear energy field,

Slovakia operates two nuclear power plants (NPPs), located at

Bohunice and Mochovce. At Bohunice there are four units in operation: two VVER 440/230

reactors (units 1 and 2 at Bohunice V1), which have been classified as non-upgradable, and

two VVER 440/213 reactors (units 3 and 4 at Bohunice V2) classified as upgradable. At

Mochovce, two upgradable VVER 440/213 reactors (units 1 and 2) are in operation.

The Slovak Government decided in September 1999 that the two Bohunice V1 reactors will be

closed down in 2006 and 2008 respectively. In November 2000 the Slovak Government

agreed by decree the framework procedure and timetable for the decommissioning of Bohunice

V1, including provisions for the socio-economic impact of the closure. In October 2001, the

Grant Framework Agreement was signed at the technical level between the Slovak Government

and the EBRD who acts as manager of the Bohunice International Decommissioning Support

Fund.

As regards Bohunice V2 reactors, in 2001, the Slovak Nuclear Regulatory Authority

requested the operator to implement specific safety improvements in various steps by the end of

2004, 2006 and 2008.

Further measures have been taken to upgrade units 1 and 2 at Mochovce NPP. The safety

improvement programme, with the exception of the Post Accident Monitoring System, has been

completed. As regards the unfinished units 3 and 4 at Mochovce NPP, the Slovak Government

has continued to stress that neither State guarantees, nor any form of State aid, will be provided

for their completion or operation.

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Concerning radioactive waste management, the radioactive waste treatment centre at Bohunice

has been operational for a year. The low and intermediate-level operational waste disposal

facility at Mochovce has been operational for a one-year test period, and permission for full

operation has been issued by the Nuclear Regulatory Authority.

Overall assessment

Overall, Slovakia has fairly well advanced in this area, in particular concerning the

establishment of the legislative framework for emergency oil stocks, the preparation of the

internal energy market (electricity and gas directives) and the strengthening of the level in nuclear

safety. However, continuing efforts are necessary to ensure that Slovakia is in a position to

comply with the energy

acquis

in the medium-term. In particular, Slovakia should continue to

build up emergency oil stocks, to ensure that the necessary infrastructure is in place and to

strengthen the institutional capacity of the State Material Reserves Administration.

Preparation for the internal energy market will require further concrete measures including

legislation and restructuring. The independent regulatory authority established in August 2001

needs to create efficient mechanisms enabling it to carry out the functions defined in the internal

energy market directives. An independent transmission system operator has to be established.

Remaining price distortions should continue to be eliminated.

Concrete steps to enhance support for energy efficiency and the use of renewable energy

sources should be taken as a matter of priority.

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, including the need to respect

closure commitments and dates for certain nuclear installations. 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 2001, this

report was conveyed 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 to 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 Slovakia, the Council Report recommends seven specific measures to ensure the

safe operation of the Bohunice V-1 NPP until final closure, and of Bohunice V-2 and

Mochovce NPP, as well as other nuclear installations. The recommendations include an action

plan for the remaining operation time for Bohunice V-1, the resources of the regulatory

authority, a national emergency response plan, and other specified technical aspects such as the

bubbler condenser systems and seismic qualification of the Bohunice NPP units 3 and 4 and of

Mochovce NPP. In September 2001, Slovakia accepted the recommendations of the Council

Report.

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The Slovak Nuclear Regulatory Authority has the responsibility for fully independent supervision

of nuclear safety. Its competence, including that of its staff, has been positively assessed by

outside bodies. However, its financial and human resources are limited.

Slovakia will need to ensure compliance with Euratom requirements and procedures. In this

respect, continued attention should be given to preparing the implementation of Euratom

safeguards, in particular regarding the reporting of nuclear material flows and inventories directly

by the persons or structures operating nuclear installations or storing nuclear material. It is to be

noted that Slovakia has concluded a Full Scope Safeguards Agreement with the IAEA. An

Additional Protocol to this Agreement was signed in 1999.

Chapter 15: Industrial policy

Since the last Regular Report, Slovakia has concentrated its action on bank and enterprise

privatisation, and to some extent on investment promotion. Only limited progress has been

made in the promotion of competitiveness and in improving policy-making and policy co-

ordination.

No specific further developments can be noted regarding Slovakia’s

industrial policy,

which is

based on the document adopted by the government in 1999, "Elaboration of the European

Union’s industrial policy in the conditions of the Slovak Republic". The main objective of the

policy is the promotion of industrial restructuring and competitiveness.

As concerns

investment promotion,

after extensive internal discussions and consultation with

the Commission, the Government approved a Law on Investment Incentives intended to be

fully in line with the

acquis.

The law, which was passed by the Parliament in October 2001,

allows foreign and domestic investors investing in regions with GDP lower than 75% of the EU

average to qualify for 10-year tax holidays. The initial investment required is € 9.4 million (SKK

400 million), or € 4.7 million (SKK 200 million) for regions having an unemployment rate above

10% (see

also Chapter 6 - Competition policy).

In May 2001 the Parliament passed a bill on industrial parks applicable as from June 2001.

Under the law, the government may cover up to 70% of the setting up costs of industrial parks,

the rest being financed by local municipalities. The government has identified seven priority

geographical areas.

As concerns

privatisation and restructuring

in the banking sector, after the sale of Slovenska

Sporitelna (SLSP), the largest nation’s bank, and of VUB, the second largest, to major

European strategic investors, the banking sector is now almost completely in private hands (see

Section B.1.2. - Economic criteria).

As concerns enterprise restructuring, the government has

set a tight schedule aimed at accelerating the privatisation of thirty-eight State-owned

companies, for a total accounting value of approximately € 5.8 billion (SKK 248 billion). In the

energy sector, at the end of August 2001 the government launched the partial privatisation of

SPP, the main player in the gas industry. The process of partial privatisation of Transpetrol, the

crude oil pipeline operator, and of the national electricity company (Slovenske Elektrarne) also

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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made progress (see

also Chapter 14 – Energy).

In June 2001, the government invited bids for

the privatisation of Slovenska Poistovna, the main national insurance company.

Overall assessment

Overall, Slovakia’s policy towards industry is by and large in conformity with the principles of

EC industrial policy, i.e. market-based, stable and predictable.

While foreign direct investments dramatically increased last year and reached an unprecedented

level, this appears to be mostly due to revenues from large enterprise and bank privatisation

(revenue from the sale of the national Telecom operator accounts for nearly half of the total

inflow). The government needs to continue developing a pro-active and demand-driven policy

to attract new green-field investors, both domestic and foreign. The recently created Investment

and Trade Development Agency, SARIO, has shown administrative weaknesses, preventing it

from performing its tasks effectively.

Privatisation, especially in the banking sector, and enterprise restructuring have made

remarkable progress during the last year.

The central body responsible for the formulation and co-ordination of industrial policy is the

Ministry of Economy. The line ministries that are responsible for managing specific industrial

branches take part in the policy-making process. Specialised implementing bodies include the

Benchmarking Information Centre, the Council for Competitiveness in Industry and the

National Agency for Development of SMEs (NADSME), as well as its latest report on the

"State of SMEs in the Slovak Republic". While the necessary administrative bodies have been

established, the administrative structure in this area still remains highly fragmented. The Ministry

of Economy would need to strengthen its role as co-ordinator. Some specialised bodies, such

as the Benchmarking Information Centre, lack funding and have trouble in defining and asserting

their role.

The bankruptcy law is not implemented properly, due to weaknesses in the administrative

capacity of bankruptcy courts. Staffing in courts should be strengthened and training of judges

intensified to make the new bankruptcy provisions fully applicable and effective.

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 restructuring

provisions of the ECSC Treaty, will have to be examined (

see Chapter 6 - Competition

policy).

Chapter 16: Small and medium-sized enterprises

Since the last Regular Report, Slovakia has made some progress in revising its SME policy and

improving the business environment.

As concerns the

SME strategy and implementing policies,

the document on the

"Elaboration of the EU’s Industrial policy in the Conditions of the Slovak Republic" referred to

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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in the previous chapter, the latest Annual Report of the National Agency for the Development of

SMEs (NADSME), and its latest report on the “State of SMEs in the Slovak Republic” all

identify improvements in the business environment as being the crucial issue for SME

development in Slovakia.

Following up the recommendations to simplify the

business environment

made by the Council

for SMEs referred to in the last year’s report, in autumn 2000 the Slovak government adopted

a decree on “improving the legal and regulatory framework in support of business and

investments”. The decree covers a variety of areas including the establishment of a central

commercial register accessible via the Internet, the simplification of the company registration

process, the introduction of a register of collateral rights for movable property, and a reduction

in the formalities applying to foreigners residing in Slovakia. Most of the above measures are

already in force.

Furthermore there have been changes in the organisational structure of the Ministry of Economy

which now has a business environment department.

Overall assessment

Slovakia’s policy towards SMEs follows the approach promoted at EU level. The Slovak

definition of SMEs is in accordance with the EC recommendation.

Slovakia recognises the need to improve its business environment and has begun to do so. The

most important issues affecting the Slovak business environment have been identified and

addressed by the government. The government has followed an integrated approach to

implementation, the above mentioned decree being addressed to a number of different

Ministries. A dialogue between the policy-making institutions and the business community has

also been established.

A start has thus been made in implementing improvements, but much remains to be done. Most

of the enterprise support schemes funded by the government lack critical mass. In addition,

further efforts are needed to improve information to enterprises, especially in relation to the

changes undertaken by the Government in business legislation.

Access to finance remains the main obstacle to the development of Slovak SMEs. The National

Agency for the Development of Small and Medium-Sized Enterprises (NADSME) manages a

number of financial support schemes for SMEs including micro-loans and the seed capital fund.

More in general, the privatisation of State-owned banks should improve risk management and

may lead to credit being more easily available to SMEs.

The central body responsible for the formulation and co-ordination of SME policy is the

Ministry of Economy. The line ministries that are responsible for managing specific industrial

branches take part in the policy-making process. NADSME manages most SME support

projects under the supervision of the Ministry of Economy and co-ordinates a network of local

Regional Advisory and Information Centres (RPICs) and Business Innovation Centres (BICs).

While the basic implementation bodies both at national and regional level have been established,

the administrative structure for this sector is not yet adequately co-ordinated. The co-ordinating

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role of the Ministry of Economy would need to be further strengthened. Several business

organisations represent the interests of smaller business.

Chapter 17: Science and research

Further progress can be reported in the area of science and research.

The Act on the Agency for the Promotion of Science and Technology entered into force in July

2001. The Agency is financed from the State budget and will be responsible for the support of

research and development tasks and the promotion of international co-operation in science and

technology.

The Slovak Republic continued to be fully associated with the Fifth Framework Programme, as

well as the Euratom Framework Programme.

As for other candidate countries associated with the Fifth Framework Programme, Slovakia has

been granted observer status in CREST (Comité

pour la Recherche Scientifique et

Technique).

Overall assessment

The framework for Slovakia's participation in Community activities in this area is well

established, but further efforts on its part will be needed, including an increase of financial

support and administrative capacity if it wishes to take full advantage of the opportunities

offered by Community programmes.

The results of Slovakia’s participation in the 5 Framework Programme correspond to the

average expectation. The National Contact Point System is working properly. Though the

financial and institutional framework for its participation is well established, the reinforcement of

research-related administration capabilities as well as the strengthening of research-related

infrastructure is necessary to ensure successful participation of Slovakia in the Framework

Programme. Greater participation of the enterprise sector, including SMEs, should be

encouraged.

For the further development of the sector and for an effective integration of Slovakia into the

European Research Area, it is important to increase the gross domestic expenditure on research

and technological development.

The strategy of State scientific and technological policy until 2005 defines main RTD priorities

and measures to identify co-operation between science and research, universities and private

sector. As regards State support to science and research, the legal and institutional framework

is basically in place. However, in order to complete the legal and institutional framework,

required for the implementation of the strategy, the Act on Science and Technology and the Act

on Slovak Academy of Sciences need to be adopted and implemented.

Chapter 18: Education and training

Progress can be reported in the area of education and training. In the reference period, Slovakia

started to participate in the second generation of the

Community programmes

Socrates and

Leonardo, as well as in the new Youth programme (which incorporates European Voluntary

Service activities) (see

section A.b – Relations between the European Union and Slovakia).

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No further progress can be reported as regards the transposition of the

Directive concerning

education of children of migrant workers.

Slovakia has made progress with

reforming its education and training system.

In May

2001, the Government approved a strategic document entitled “Millennium – National

Programme for Education and Training” which defines the primary, secondary and tertiary

education systems’ objectives for the next 15 years. A gradual increase of funding for education

aims at reaching 5 % of GDP in 2006.

A positive development has been the shift of the management responsibility for all schools

(including vocational education and training) to the Regional offices (which are part of the State

administration and operate under the responsibility of the Ministry of Interior). This is to replace

the rather cumbersome system where management competencies were spread across different

authorities. The Ministry of Education remains responsible for content and pedagogical matters.

In the National Plan of Employment for the period 2001–2002 which was approved in

November 2000 special attention is paid to the issues of transition from school to work and the

interaction of the education system with the labour market's requirements, as well as to the

development of a system of schools offering a second chance at education for such groups as

young people without qualifications, the long-term unemployed, older employees and women

returning to the labour market after maternity leave.

Overall assessment

Participation in the relevant Community programmes is satisfactory and the established national

agencies are functioning. The Directive concerning education of children of migrant workers still

has to be fully transposed and its implementation has to be ensured.

Moreover, further progress is needed in the reform of the vocational education and training

system. The quality of vocational schools should be improved, in particular as regards the need

to adapt the scope of vocational education to the changing needs of the labour market. A

stronger collaboration between the vocational education sector (including schools and State

administration), the employment services and private enterprises is required. Given the high

unemployment figures in Slovakia, particularly in the mono-industrial areas, vocational training

actions should be part of future integrated regional economic development programmes, where

training supports related actions in fields such as productive investment, business infrastructure

and other labour market reforms. Instead of creating temporary jobs for the unemployed, the

system of further (continuing) education and retraining should be reinforced, and a strategy for

lifelong learning needs to be developed. Access to vocational training and second-chance

education opportunities should also be increased substantially for disadvantaged groups in the

labour market, such as the unemployed, youth, the disabled and the Roma minority.

Chapter 19: Telecommunications and information technologies

Since the last regular report, some progress can be reported in the

telecommunication sector.

As regards the

liberalisation of the telecommunications market,

Slovakia has advanced in

implementing the relevant

acquis.

The Ministry of Transport, Telecommunications and Postal

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Services issued a number of pieces of secondary legislation, based on the Act on

Telecommunication, which entered into force last year.

Fixed network penetration now appears to have stabilised at around 32 per 100 inhabitants

which may partly explain the relatively low penetration of Internet access. The mobile sector has

maintained its quick growth to reach a market penetration of 29% of inhabitants (as compared

to 20% in the last reporting period). The government's plan for the release of the GSM and

UMTS spectrum has been published. The process of price re-balancing has continued, with the

incumbent becoming more commercial in its approach.

In June 2001, the Government approved the Country Informational Policy and decided to join

the e-Europe + initiative.

As regards the

regulatory framework,

the Telecommunications Office, established last year, is

now functioning as a separate legal body with wide regulatory powers. A large number of

existing telecommunications licences have been reissued under the new Act on

Telecommunication. Three licences for the provision of wireless local loops (26 GHz) have

recently been issued. The Office has also moved quickly to establish its new authority in relation

to the pricing of telecommunications services.

As in the last year, no progress can be reported with respect to the liberalisation of

postal

services.

Overall assessment

In the telecommunications sector Slovakia is considerably advanced in transposing and

implementing the relevant

acquis.

These efforts should begin to show results well before the expiry of the Slovak Telecom

monopoly at the end of 2002. The new Telecommunications Act needs to be built on to secure

complete compliance with the

acquis,

particularly regarding cost-orientation, interconnection,

affordability, universal service and the availability of carrier selection facilities. The Ministry for

Transport, Post and Telecommunication is in the process of preparing the necessary amendment

to bring the law fully into line with the

acquis.

Action to secure compliant procedures for regulating interconnection between public networks

should now be a priority so that the market can be regulated properly. Fair competition and

proper functioning of the market have to be ensured. The independence of the regulatory body

needs to be safeguarded and close co-operation established with the competition authority,

which has also been working in the field of telecommunications. In order to achieve a proper

separation of regulatory from operational functions, the Ministry of Transport, Post and

Telecommunication should no longer exercise the state’s property rights in the incumbent sector.

The number of staff in the Ministry of Transport, Post and Telecommunication working on

telecommunications (11) remains relatively low. The Telecommunication Office currently

employs 180 people and needs to ensure that it can attract and retain the services of suitable

staff.

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The current legislation on postal services is still not in line with the

acquis.

A new law (one is

currently under preparation), and the establishment of an independent Postal Regulatory

Authority, are needed to comply with EC legislation.

Chapter 20: Culture and audio-visual policy

Slovakia has made significant further progress since the last Regular Report in the field of culture

and audio-visual policy.

With regard to

audio-visual

policy, the new Act on Broadcasting and Retransmission, which

entered into force in October 2000 and was slightly amended in April 2001, has brought

Slovakia’s legislation largely into line with the Television Without Frontiers Directive.

Slovakia ratified the Amending Protocol to the Council of Europe Convention on Transfrontier

Television in October 2000.

In the area of

culture,

the Slovak Republic established a Culture Contact Point in April 2001,

which will facilitate future participation in Community activities in this area.

Overall assessment

On the whole, Slovakia is well advanced in this area and its legislation is largely in line with the

audio-visual acquis. Slovakia has ratified the Council of Europe Convention on Transfrontier

Television and will be bound by its amending Protocol upon the date of entry into force.

The Council of the Slovak Republic for Radio and Television Broadcasting is an independent

body responsible for supervision of compliance with radio and television broadcasting

legislation. The Council currently has 25 staff members (an increase of 2 persons compared to

last year). Further strengthening is required, both in terms of staff and equipment, to enable the

Council effectively to fulfil its duties under the new Broadcasting and Retransmission legislation.

Further strengthening of administrative capacity will also be necessary in the field of culture.

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

Since the last Regular Report, little progress has been achieved in preparing for the

implementation of structural policies.

As regards

territorial organisation,

the Slovak Parliament adopted in the context of a Public

Administration Reform in July 2001 a changed territorial organisation similar to NUTS III with 8

regions. This reform may have direct implications for the existing provisional classification

corresponding to NUTS II and III.

With regard to the

legislative framework,

the Acton on regional development support,

specifying the eligibility conditions and the competence of the relevant state administrative

bodies, has been adopted in October 2001.

With regard to

programming,

Slovakia has made progress in drafting a National Development

Plan (NDP) for 2002-2006, which will serve as the basis for the establishment of the

development plan required by the Structural Funds Regulations. The plan, adopted in March

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2001 by the Slovak Government, sets out six priorities: development of human resources,

support for competitive production activities, infrastructure, development of production and

services, protection and improvement of the environment, rural development and agriculture.

No decision has yet been taken as regards the structure of the final plan. In order to ensure the

application of the

partnership principle,

some steps have been undertaken for example in the

consultation of NGOs, notably during the whole process of preparation of the NDP.

Concerning Slovakia’s

institutional structures,

the Slovak Government established in June

2001 the Implementing Agency for Regional Development which is planned to develop into a

Paying Authority.

The Ministry of Construction and Regional Development is foreseen as the Community Support

Framework Managing Authority and as the Managing Authority for a regional programme or

regional programmes. Respective line ministries are foreseen as Managing Authorities in charge

of the individual Sectoral Operational Programmes. A Management Unit of the European Social

Fund has been established in the Ministry of Labour, Social Affairs and the Family.

No concrete progress has been made as regards

monitoring and evaluation

to allow

Slovakia to effectively manage the funds and provide the required information for evaluation

purposes. No actual action has been taken to prepare a full ex-ante evaluation, nor have

structures been designated to implement other evaluation tasks.

Concerning

financial management and control,

procedures for financial control, auditing,

certification of expenses and correction of irregularities are being put in place.

As regards

regional statistics,

data for 2000 have become available at NUTS II and III level.

Overall assessment

Up to date, Slovakia has little advanced in developing the necessary structures for the

implementation of the Structural Funds after accession.

Slovakia’s territorial organisation is based on four statistical units (similar to NUTS II) and eight

regions (similar to NUTS III). Changes in the territorial organisation are still to be officially

submitted to, and agreed with, the European Commission in order to become a new provisional

NUTS.

With regard to programming, first steps have been taken with the approval by the Slovak

Government of the National Development Plan. However, the document needs further

refinement in order to meet the requirements, such as a full ex-ante evaluation, of the framework

regulation on the Structural Funds. In order to match sectorial and regional approaches, inter-

ministerial co-ordination and partnership need to be made much more effective and

comprehensive.

Substantial progress is also needed at the level of the technical preparation of projects (project

pipeline) to be co-financed by the Structural Funds.

For Structural Funds implementation at the central level proposals concerning the distribution of

responsibilities have been made but these remain to be discussed in detail with the Commission.

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A clear and reasonable division of responsibilities on the central level and between central and

regional level must still be established.

Administrative capacity remains a matter of major concern that should be addressed without

delay. Staff levels and training are key elements. Above all, the administrative capacity of the

units within the ministries which will hold key responsibilities need to be significantly and urgently

strengthened in order that they will effectively be able to take on the responsibility for the

efficiency and correctness of the management and implementation of the Structural Funds. On

regional level no structures exist which could assume in a credible manner significant

management tasks in the near future.

Actual inter-ministerial co-ordination is very weak and needs to be significantly improved.

Concerning the European Social Fund Slovakia has only partially developed the necessary

structures and operational arrangements. Concrete efforts are required to improve both

administrative capacity and the mechanism for co-ordinating ESF interventions in the context of

the European Employment Strategy and the Inclusion Process. The timely availability and

functioning of an effective monitoring and evaluation system will be of crucial importance.

In the field of financial management and control, Slovakia has made some progress.

Appropriate systems and procedures for financial management and conrol need to be

established, in particular in relation to the structure of the managing and paying authorities, in

order to fulfil the specific requirements of the Structural Funds regulations. The procedures for

financial control, auditing, certification of expenses and correction of irregularities are being put

in place. However, the internal audit departments in the ministries involved in the management of

the funds have not been established as yet. The training of internal auditors should be a priority

in this respect.

As to regional statistics, further efforts are necessary to bring them up to the level required for

regional policy planning and programming, in particular ex-ante evaluation. Slovakia still needs

to improve the system for the collection and processing of relevant statistical information for the

purposes of ex-ante evaluation.

Chapter 22: Environment

Since the last Regular Report, Slovakia has made further progress in the field of environment.

Schedules for transposition have been clarified and comprehensive implementation plans have

been prepared. Little progress can however be noted regarding the alignment of Slovak

legislation with the major EC Directives on genetically modified organisms, water, water

protection and industrial pollution and risk management.

In the field of

horizontal legislation,

the Act on environmental impact assessment, which is in

line with the

acquis,

entered into force in December 2000. The requirements on access to

environmental information have been enacted with the entry into force of the new Law on

Access to Information in January 2001.

As regards

air quality,

some progress has been achieved with the adoption in December 2000

of new legislation partially in line with the EC requirements on petrol and diesel fuels and on the

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reduction in the sulphur content of certain liquid fuels. An amendment to the Law on fines for air

pollution entered into force in May 2001.

Good progress has been made in the area of

waste,

with the entry into force in July 2001 of the

new waste Act. The waste Act is partially in line with the

acquis

on the supervision and control

of shipments of waste within, into and out of the European Community, on the disposal of waste

oils, on batteries and accumulators containing certain dangerous substances, and on old

vehicles.

In relation to

water quality,

there is no progress to report. In the field of

nature protection,

no progress can be reported.

As regards

industrial pollution and risk management,

transposition of the Directive on

integrated pollution prevention and control has not been achieved, but its schedule has been

clarified.

In the field of

genetically modified organisms and chemicals,

in June 2001 an Act on

chemical substances and chemical preparations entered into force. The Act transposes the

acquis

in the fields of the classification, packaging and labelling of dangerous chemical

substances, dangerous chemical preparations, restrictions on the marketing and use of certain

dangerous chemicals and preparations, detergents (washing and cleaning products), evaluation

and control of the risks to man and the environment of existing substances, the assessment of

the risks of new chemical substances and exports and imports of certain dangerous chemical

substances.

As regards

noise,

no progress can be reported.

In the field of

radiation protection

(see

also chapter 14 - Energy),

a December 2000

amendment to the Act on the protection of people’s health brought Slovak legislation into

alignment with EC regulations on the protection of health from ionising radiation. The Ministry of

Health ensures protection from radiation at locations which are home to sources of ionising

radiation through its State Health Institutes.

As regards administrative capacity, the Ministry of Environment adopted a new organisation

structure, which came into force in January 2001. An Implementation Agency for environmental

investment projects was established as a separate department reporting directly to the Minister,

and a Division of European Integration and International Relations was also established. A

limited number of extra staff was appointed to units responsible for investment projects, waste

management, and nature protection.

Overall assessment

While Slovakia still needs to take substantial action to ensure full transposition and

implementation of the

acquis,

it has now prepared clearly-defined schedules for transposition

and comprehensive plans for implementation. Considerable investments need to be secured,

also in the medium term, to ensure implementation of the environmental acquis.

A National strategy for Sustainable Development, available in draft, still has to be adopted. The

Community requirements for monitoring and reporting of CO

and other greenhouse gas

emissions are to a large extent in place, but further work is needed to ensure projections and

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annual updating on the effects of policies and measures implemented or committed to at national

level.

Slovakia should complete transposition of the

acquis,

in particular as regards genetically

modified organisms, air quality, water quality, packaging and packaging waste, waste

management, nature protection and industrial pollution control. Moreover, it should continue its

implementation efforts in all sectors. For drinking water attention should be paid to problematic

parameters like iron, manganese and nitrates, and necessary attention should be paid to removal

facilities. In relation to dangerous substances, the establishment of inventories with regards to

List II substances and pollution reduction programmes, as well as the building up of the

necessary monitoring capacity, will be of paramount importance. For air quality, the

development of an action plan and the local structures required deserve particular attention.

Further legal provisions for radiation protection and their implementation need continued

attention. Implementation of legislation in the waste sector, in particular the recovery and

recycling rates to be attained for packaging and packaging waste need attention as well as the

disposal of waste oils and the collection, sorting and recycling of batteries and accumulators.

Slovakia still lacks the infrastructure necessary to deal with the recovery and recycling of waste.

The Ministry of Environment is the competent authority for the majority of environmental

protection measures; it shares some responsibilities in the water sector with the Ministries of

Health and Agriculture, in the area of fuel quality with the Ministries of Environment and

Transport, and in the area of noise with the Ministry of Economy. Radiation protection falls

under the competence of the Ministry of Health. The responsibility for nuclear safety lies within

the Ministry of Economy. The legislation on chemicals is developed in co-operation with the

Ministry of Economy.

Monitoring activities are to a large extent concentrated in the Hydrometeological Institute. The

Slovak Environmental Inspectorate is responsible for the enforcement of environmental

legislation. The Ministry of Environment controls the State Environmental Fund, which imposes

levies and supports financing primarily for public programmes, including construction of

wastewater treatment plants, drinking water supply facilities and fuel-switch projects.

As regards implementation capacity, overall strengthening continues to be necessary, in

particular in the fields of water, waste, and control of industrial pollution and risk management

as well as within the environment inspectorates. The Ministry of Environment needs to be

strengthened, in order,

inter alia,

to be able to develop the necessary implementation plans and

financing strategies. Moreover, it will be necessary to ensure that the Slovak Environmental

Agency, the Ministry of Economy and the Ministry of Environment have sufficient financial and

human resources to implement the requirements of the

acquis.

Strengthening of the

administration is also needed to develop and implement the necessary environmental projects

for adoption of the

acquis

and to absorb the funds made available to Slovakia for this purpose

by the EU and others.

Slovakia’s environmental investments have remained stable, corresponding to just over 1.5% of

national GDP in the late 1990s and are budgeted to be in the range 1.5-1.7 up to 2002. Private

funding accounts for close to 80% of the total volume of investment in the environment area.

Considerable investments need to be secured, also in the medium-term, to ensure

implementation of the environmental

acquis.

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Chapter 23: Consumers and Health Protection

There has been some progress since the last Regular Report under this chapter, mainly in the

non-safety consumer protection area.

No new developments can be reported on the

safety-related measures

covered by the

consumer protection

acquis.

In the

non-safety consumer protection

area, a new act on

advertising entered into force in May 2001 aimed at aligning Slovak legislation with the EC

acquis

on comparative and misleading advertising. This act introduces a new definition of

advertisements, and more transparent regulation by the State authorities that supervise

advertising. An act on consumer credit entered into force in October 2001. It sets out the

conditions for providing consumer loans, stipulations regarding the loan contract, and measures

to protect the consumer against unfair business practices in the area of consumer credit. An act

on package travel aimed at aligning with the EC Directive in this area also entered into force in

October 2001.

As regards administrative capacity, following an audit of bodies dealing with market supervision,

the Ministry of Economy as the body responsible for co-ordination of consumer protection

policy and the enforcement of the relevant legislation submitted proposals to the Government in

June 2001 with the aim of improving the current system. It recommended the creation of two

new institutions: an integrated

market surveillance

authority for consumer protection, under

the Ministry of Economy, with controls to be carried out by the current surveillance authority,

the Slovak Commercial Inspection, including regional bodies of the State administration; and a

food surveillance authority, under the Ministry of Agriculture. A legislative basis will be

necessary to implement these recommendations.

Overall assessment

A general consumer protection system exists in Slovakia, which includes important elements of

the

acquis

such as those concerning product safety, product liability and most recently,

consumer credit. However, further progress is required to achieve alignment in the area of

product liability, concerning unfair terms in consumer contracts, indication of prices, time-share,

and injunctions and guarantees.

Initial steps aimed at building up improved institutional conditions for market surveillance are to

be welcomed. This process should be continued, so as to ensure adequate co-ordination and

strengthening of the bodies involved in market surveillance activities, including consumer

organisations (see

also Chapter 1 - Free movement of goods).

There are two main umbrella non-governmental consumer organisations in the Slovak Republic:

the Association of Slovak Consumers, and the Association of Consumer Entities of Slovakia.

The former has been operating for ten years and provides information and consulting services

through 14 Regional Consumers' Centres. The Association of Consumer Entities of Slovakia

began operating at the beginning of 2000.

Consumers' awareness of their rights is developing progressively, but information is often

insufficient and imprecise. A sensitive issue is how to bring claims to a successful conclusion.

Currently, the relevant institutions are hampered in this regard due to a lack of funds, and the

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legal impossibility of representing citizens in court. The important role played by the consumer

organisations should be further promoted by the Government.

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

Since the 2000 Regular Report, some progress has been made in Slovakia in the field of justice

and home affairs. Particular progress can be reported in the fields of border control, visa policy

and police co-operation. Further progress has been registered in the area of asylum policy, the

fight against money laundering and against drugs, customs co-operation and judicial co-

operation. Little progress is to be reported on data protection and on migration.

As regards

data protection,

no particular progress can be reported in the reference period.

As far as

visa policy

is concerned, in June 2001 the Slovak Government approved a new

Visa Policy Concept, aiming at further harmonising its policy with the

acquis.

The Slovak

Republic has terminated the Agreement on a visa-free regime with Ukraine and the Agreement

between the Slovak Republic and Ukraine on simplified border-crossing procedures for

nationals with permanent residence in municipalities in the border areas. The Government

adopted a Resolution in January 2001 according to which specific categories of persons may

receive their visa free of charge or at a reduced charge, implying a partial softening of the

regime. A visa requirement was introduced for nationals of Belarus and the Russian Federation

with effect from January 2001.

The system of external

border control

has been undergoing substantial changes, but has still not

reached EU standards. The new organisational structure of the Border and Aliens Police came

into force in April 2001. This constitutes an important step towards a more coherent and

Schengen-compatible border security with the creation of a more unified, specially trained and

nation-wide border police organisation. In February 2001, within the bureau for the fight against

organised crime, a special branch was created to combat trafficking in human beings. This unit

provides sensitive information to the border police. Recent trends show that Slovakia is very

susceptible to illegal immigration, but that it is still mainly a transit country towards Austria and

via the Czech Republic towards Germany. The Border and Aliens Police Office of the Police

Presidium is now responsible for the management of all borders in Slovakia. The Regional

Border and Police Departments are directly under the command of the chief of the Border and

Aliens Police. With effect from April 2001 the National

Schengen

Information System was

created within the International Police Co-operation Office at the Police Force Headquarters.

Slovakia adopted its Schengen Action Plan in September 2001.

No significant progress can be reported in the area of

migration.

A readmission agreement

with the Former Republic of Yugoslavia, was, however, signed in August 2001.

As regards

asylum

a specialised documentation centre for the collection and analysis of

information on countries of origin was set up in July 2001 as part of the National Action Plan for

Asylum.

As regards

police co-operation and the fight against organised crime,

the Slovak Republic

signed the UN Convention against Transnational Organised Crime in December 2000. In the

field of the fight against terrorism, the sectoral crisis management concept was approved by the

management of the Police Force Presidium in March 2001 and is currently being implemented

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by the Ministry of the Interior. The Slovak Republic signed the Convention on the Suppression

of the Financing of Terrorism in January 2001. The Office for International Police Co-

operation was established in January 2001 and acts for both the police force and the

investigators. The Office for International Police Co-operation co-operates with the National

Bureau of Interpol, the Unit of international bilateral co-operation and the National Bureau of

Schengen and comprises a National Europol Centre. The conditions for the secondment of

liaison officers have been established through an alteration covering the Police Force. From July

2001, two liaison officers with the status of police attaché have been based in diplomatic

missions in Kiev (Ukraine) and The Hague (The Netherlands). As of April 2001, the Police

Force Presidium set up a separate unit “National Schengen Information System organisation

unit”. One of the primary tasks of the unit is to draw up the timetable for the implementation of

the Schengen

acquis

and the development of the necessary infrastructure.

As far as the

fight against fraud and corruption

is concerned, the Government approved

individual plans in November 2000 comprising more than 1500 concrete tasks following the

adoption of the National Programme to Combat Corruption last year

(see also Section B.1.1. -

Democracy and the rule of law).

In December 2000 the Government established a central

co-ordination unit for the fight again corruption. In January 2001, the Government approved a

concept aimed at ensuring the transparency of the process of granting licences and permits and

at identifying problem areas.

In February 2001, the Parliament ratified the 1990 Convention on

Laundering,

Search,

Seizure and Confiscation of the Proceeds of Crime. An amendment to the Act on budgetary

rules was adopted in January 2001, introducing new elements into the management and control

of funds in the State budget of the Slovak Republic, including funds from the European

Communities and other funds to finance international-agreement-based projects, and financial

resources from State funds given to municipalities, legal entities and natural persons. An

independent financial police unit has been set up within the Police Force, co-operating with

police authorities in the member states and with OLAF.

The government has continued to implement the National Programme for the Fight against

Drugs

approved last year. In June 2001, the Slovak Republic formally applied for membership

of the European Monitoring Centre for Drugs and Drug Addiction.

As far as

customs co-operation

is concerned, the Act on State Administration Bodies in the

field of customs, together with the new Customs Act and its implementing provisions entered

into force in July 2001. These acts are considered to serve the purpose of creating the

appropriate legislative framework for the implementation of individual articles of the Convention

on Mutual Assistance and Co-operation between Customs Administrations. From January

2001, the Customs Administration acceded to the information system of the World Customs

Administration with full rights of access.

Concerning

judicial co-operation

in criminal and civil matters, the Law on Extradition of

Slovak citizens was amended in June 2001. Slovakia will, according to the amendment, allow

the extradition of citizens under binding international treaties and rules of international

organisations. In February 2001 the Parliament approved the ratification of the 1980 European

Convention on the Recognition and Enforcement of Decisions concerning Custody of Children

and on Restoration of Custody of Children. The 1980 Convention on Civil Aspects of

International Child Abduction entered into force for Slovakia in February 2001. Furthermore, in

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March 2001 the Convention abolishing the requirement of legalisation of foreign public

documents and the Convention on protection of children and co-operation in respect of inter-

country adoption were ratified.

Overall assessment

Overall, Slovakia should make sure it maintains the appropriate momentum in the transposition

and the implementation of the

acquis.

Sustained efforts are needed across all sectors, notably in

the area of border control. Particular attention should be paid to the improvement of

administrative capacity in the areas discussed.

The Slovak personal

data protection

regime is currently not fully in line with the

acquis

as the

police data, the Slovak Intelligence Services’ and army information systems are not yet covered

by Slovak legislation. Slovakia needs to accelerate the adoption and subsequent implementation

of the envisaged legislation on personal data protection and the strengthening of the independent

supervisory authority, inter alia by increasing the level of staffing. The proper implementation of

the Data Protection Act has to be ensured and the Commissioner’s Office should be

encouraged to develop a long-term and nation-wide approach.

The existing legislation for visa issuing procedures is partly in line with the

acquis.

The Slovak

Republic has legislation that regulates the format of visas comparable with the legislation and

practice of the EU member states. Partial alignment has so far been achieved with the relevant

acquis.

Visa policy

needs to be updated to prepare for full alignment with the relevant EC

Regulation and the setting-up of an on-line system for the issuing of visas and a central register

has yet to be achieved. The Slovak Republic has yet to publish the list of countries whose

nationals will be required to be in possession of airport transit visas. The Agreement on a visa-

free regime concluded with Cuba is to be terminated. As regards administrative capacity,

Slovakia has not yet completed the on-line system for the issuing of visas, nor a central visa

The recent reorganisation of the Border and Aliens Police, giving it the nation-wide

responsibility for border management, should allow for the development of a comprehensive

border management strategy. However, there remain a number of serious outstanding issues

and problems relating to the proper functioning of the border police (i.e. equipment for

border

controls,

surveillance and detecting of forged documents, level of staffing, co-operation

between the different bodies involved). The number of staff at border posts remains too low,

despite the strengthening at the border with Ukraine. The Slovak-Ukrainian border continues

to be very permeable. In 2000, over €1.72 million were invested in technical equipment for the

Border and Aliens Police on the Ukrainian and Hungarian border. Nevertheless, further efforts

will have to be made to invest in modern techniques and basic equipment at border crossing

points and at the green border. Careful attention should be paid to ensuring that there is

sufficient co-operation between the different services involved. Slovakia still has to phase out

the practice of employing conscripts as border guards and replace them with professional

officers.

Regarding

migration,

the Act on the Stay of Aliens in the Territory of the Slovak Republic is,

for the time being, only partly compatible with the

acquis

as regards the granting of long-term

residence permits for employment purposes.

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Slovakia is not yet fully in line with the

acquis

in the field of

asylum.

In particular, an

independent body as the second instance in the asylum procedure still needs to be established.

Furthermore, the exclusion clauses of the Law on Refugees are too broad, and its non-

refoulement provisions remain to be brought into line with international agreements. Special

attention needs to be paid to the practical application of provisions relating to the concept of

"safe third country". The different responsibilities of the Migration Office and the Aliens and

Border Police in determining the need for international protection remain a cause for concern, as

they still do not guarantee a consistent and competent assessment of refugee cases. Moreover,

the competence of the border police in the area of asylum policy should be further clarified.

The section of immigration officers at the Migration Office needs additional reinforcement and

professional training. Extra attention is to be devoted to the accommodation of asylum seekers

and to eliminating the backlog of pending asylum cases and to implementing the Dublin

Convention. In the first 7 months of 2001, a total of around 3,000 asylum applications were

lodged in the Slovak Republic; only one applicant was recognised as a refugee. In 2000, there

were 1,556 applications (1,320 in 1999). In 2000, the largest groups of asylum seekers were

from Afghanistan, India, Pakistan, Iraq, Sri Lanka, Bangladesh and Kosovo. The fact that the

number of asylum seekers is increasing, while the number of persons recognised as refugees is

actually decreasing, must be considered as disturbing.

In the field of

police co-operation

and the

fight against organised crime

, the Slovak

Republic has not yet reached full alignment with the

acquis.

The Penal Code is not yet in line

with the

acquis,

notably as regards the notion of “organised crime”. The re-codification of the

Penal Code and the Code of Criminal Procedure, however, is to bring Slovakia in line with the

acquis

in this respect. Supervision over the municipal police needs to be strengthened, the role

of the prosecution authorities during the pre-trial phase should be modernised and functional

overlaps between police bodies and police investigators should be reduced. Slovakia should

also ensure that the pre-requisites for the conclusion of a co-operation agreement with Europol

are met.

With regard to the

fight against fraud and corruption,

there has been some progress but

there remains a considerable gap between well-formulated policies and the implementation.

Slovakia should step up its operational activities in this field. The Council of Europe Civil Law

Convention on Corruption remains to be ratified.

In order to ensure the protection of the financial interests of the European Communities,

Slovakia should continue to align its legislation fully with the Convention on the Protection of the

Financial Interests of the European Communities and its Protocols. Moreover, efforts should be

strengthened to ensure adequate implementation capacity and to ensure good co-operation

between all of the law-enforcement bodies involved.

Alignment in

drugs legislation

needs to continue. As regards administrative capacity, Slovakia

should take operational measures to reinforce the staffing and equipment of the national focal

point for participation in the European information network on drugs and drug addiction

(REITOX) of the European monitoring centre for drugs and drug addiction (EMCDDA).

Slovakia should also improve inter-institutional co-operation among law-enforcement bodies in

the fight against drugs supply.

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As regards

money laundering,

Slovakia should undertake further action to ensure full

alignment with the

acquis

and strengthen the administrative capacity of the Financial Intelligence

Unit.

As regards

customs co-operation,

Slovakia should continue its efforts for the implementation

of customs-related IT systems, the establishment of customs laboratories, the improvement of

border management, staff training, staff ethics, and the fight against internal irregularities and

corruption. Furthermore, Slovakia should improve the development of risk analysis and the co-

ordination among its departments and with the other enforcement bodies, including the police

and judicial authorities.

As far as

judicial co-operation

in civil and criminal matters is concerned, Slovakia has not yet

acceded to the 1980 Convention on international access to Justice.

All the human rights legal instrument which are parts of the Justice and Home Affairs

acquis

have been ratified by Slovakia.

Chapter 25: Customs union

Slovakia has achieved considerable progress in the field of customs since the last Regular

Report.

As regards alignment between Slovak legislation and the

EC Customs Code and its

implementing provisions,

the new Customs Act and its implementing provisions, which

removes the existing differences between Slovak legislation and the

acquis,

entered into force in

July 2001. The Act covers the placing of goods under customs procedures, customs value, free

zones and free warehouses and relief from customs duties. It also contains provisions on the

powers of the customs authorities in the field of customs offences, recovery of customs debt,

seizure of goods, sale of goods, administration of State property and organisation of the

customs administration.

Regarding the

customs

acquis

outside the Customs Code

, it can be noted that compatible

legislation on precursors entered into force in 2000. The Act on counterfeit and pirated goods,

compatible with the EC legislation, entered into force in July 2001.

As far as the

administrative and operational capacity

to implement the

acquis

is concerned,

significant progress can be noted. The Act on State administration bodies in the field of customs

entered into force in July 2001. This Act is designed to regulate the status, organisation, powers

and jurisdiction of State administration bodies in the field of customs (the Ministry of Finance in

charge of legislation and legislative process and the Customs Directorate and the Customs

Offices is in charge of the actual implementation of the customs legislation) and obligations,

rights and means available to customs officers.

Regarding computerisation, a Customs Information System (CIS) composed of several

subsystems is currently in place and is being developed. A new computerised system for the

administration of indirect taxation, compatible with the future legislation on excise duty on

mineral oils, has been developed. Work has also continued to further develop EC compatible

customs IT systems. Only limited progress has been achieved in ensuring the full interconnection

of the national systems with the EC customs IT systems.

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The Customs Directorate has set up a department of indirect taxes to cope with the gradual

transfer of competence for excise duty on mineral oils to the customs authorities (see

Chapter

10, Taxation).

Slovak Customs is enhancing the capacities of the Customs Laboratory in

terms of facilities, equipment and personnel.

In relation to border management, action has been taken to tackle the problem of waiting times

at the border, including an increased use of simplified procedures and of risk analysis methods.

Work is being carried out both at the borders with Ukraine and the border with Poland to

improve facilities and to speed up the trade flow.

The Customs Administration participates in the National anti-corruption programme. A code of

Ethics has been implemented.

Overall assessment

Slovakia has almost completed the alignment of its customs legislation with the

acquis.

Legislation on cultural goods should enter into force as scheduled.

As regards administrative and operational capacity to implement the

acquis,

Slovakia should

pay particular attention to the development of IT systems allowing computerised data exchange

between the EU and Slovakia. In this respect, it must be emphasised that flawlessly, functioning

EC-compatible IT systems should be put in place at least one year before accession to the EU

in order to guarantee interconnectivity with the EC customs computerised systems.

Slovakia should continue its efforts to tackle the problem of waiting times at the borders, to act

in the field of the fight against customs fraud and economic crime, and to improve co-operation

with other enforcement bodies.

Chapter 26: External relations

Since the previous Regular Report Slovakia has continued to align its legislation with the

acquis

regarding the common commercial policy and to co-ordinate positions and policies within the

World Trade Organisation with those of the EU, in particular with regard to the preparation of

the New Round.

As regards the

common commercial policy,

upon accession Slovakia will be required to align

its tariffs with those of the EC. Slovakia’s applied tariffscurrently 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.

With regards to the WTO Agreement for Textiles and Clothing (ATC), the Slovak Republic has

co-operated with the Community in the process of third - stage notification to align its list of

products integrated under the ATC with the EU’s, thus avoiding integrating products that have

not yet been integrated by the EC.

WTO bound tariffs after full implementation of all concessions including - where possible - estimated ad valorem

equivalents of specific and compound tariffs.

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Slovakia abolished as of January 2001 the 3% surcharge that it had imposed on imports. The

Slovak Republic has unilaterally applied a suspension of MFN tariffs levied on imports of

twelve civil aircraft products. This temporary measure is due to come to an end on 31

December 2001.

Concerning

bilateral agreements with third countries,

a Free Trade Agreement was

initialled with the Republic of Croatia in June 2001. Within CEFTA, the member countries,

including Slovakia, signed Additional Protocol No. 8 on the updated version of the Pan-

European cumulation of origin of goods.. Slovakia joined the OECD in December 2000.

As regards the fields of

development policy

and

humanitarian aid,

co-operation and

assistance, Slovakia is adapting its development practices to the principles laid down by the

Development Assistance Committee.

Further to the new Customs Act, which took effect in July 2001,Slovakia has further

harmonised its Generalised System of Preferences with the EU system.

Overall assessment

Slovakia is rather advanced in this area. Where alignment with the Community

acquis

commercial policy is necessary, some further effort before accession is still required.

Harmonisation of legislation in the area of export credits and compliance with the OECD

arrangement are advanced, although further efforts are necessary in order to achieve alignment

with the

acquis.

The EU and Slovakia have established a framework for co-operation regarding WTO issues

both at ministerial and at departmental level. Slovakia has been supportive of EU policies and

positions within the WTO framework. As regards the new round, Slovakia concurs with the EU

on the need to launch a comprehensive trade round as soon as possible and shares the view that

the results of work under the built-in-agenda would be less substantial in its absence.

Further co-ordination is needed to ensure the alignment of Slovakia’s GATS commitments with

the EC’s commitments and MFN exceptions.

Slovakia is a member of the Information Technology Agreement (ITA). By the time of

accession the Slovak Republic will need to have joined the WTO plurilateral agreements on

Government Procurement, to which it has observer status, and on Civil Aircraft (ATCA).

Regarding dual use goods Slovakia still has to align its legislation to the

acquis.

Slovakia is a member of CEFTA (Central European Free Trade Agreement) and holds free

trade agreements with Estonia, Latvia, Lithuania, Turkey and Israel. In this area further progress

is necessary in aligning with EC international trade obligations. Any international agreement that

is incompatible with the obligations of membership will have to be re-negotiated or renounced

prior to accession. Slovakia should continue to keep the Union fully informed about existing

trade agreements or negotiations aimed at the conclusion of any new trade agreements with a

third country. This applies also to Bilateral Investment Treaties concluded with third countries.

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The administrative capacity relevant to external relations is split among several Ministries,

including the Ministries of Economy, Agriculture, Foreign Affairs and Finance. The

administrative infrastructure which needs to be in place as regards customs services is

addressed under

chapter 25 - Customs union.

For the purpose of Slovakia’s future financial

contribution to the European Development Fund, Slovakia’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.

Chapter 27: Common foreign and security policy

Since the last Regular Report Slovakia has continued to align its foreign policy with that of the

European Union and has participated constructively in the framework of the Common Foreign

and Security Policy.

The regular

political dialogue

established by the Association Agreement with Slovakia is

proceeding smoothly and Slovakia continues to orient its foreign and security policy towards the

Union. It continues to participate actively in the framework of the Common Foreign and

Security Policy (CFSP), including the meetings at the level of Political Directors, European

Correspondents and Working Groups.

Slovakia has shown a keen interest in the development of the European Security and Defence

Policy (ESDP) as part of the CFSP and has actively participated in the exchanges in this

context with the EU and in EU + 15 format (i.e. non-EU European NATO members and

candidates for accession to the EU).

The Parliament has adopted a Security and a Defence Strategy, setting out the country’s main

foreign policy objectives in line with those of the EU and aiming at creating a framework for

reacting to security challenges.

As regards alignment with

EU statements and declarations

, Slovakia has regularly aligned its

positions with those of the Union and when invited to do so has associated itself with the

Union’s

joint actions and common positions.

Since October 2000, it has associated itself

with 8 EU common positions, including 3 on the Federal Republic of Yugoslavia. In February,

the first informal meeting of the Political Committee of the EU to be held in a candidate country,

took place in Bratislava. Slovakia has kept a good track record as regards implementing

international sanctions and restrictive measures.

Over the last year, Slovakia has continued to take an active role in supporting international

peacekeeping missions, notably in SFOR, KFOR and a series of UN, OSCE and EUMM

peacekeeping and observer missions. In the reporting period, it joined the UN missions in

Cyprus, East Timor, Eritrea, Ethiopia, the Golan Heights, Iraq and Syria. In February, the

Parliament approved an amendment to the constitution, enabling Slovakia inter alia to join

organisations for mutual collective security.

Slovakia played an active role in the first Capabilities Commitment Conference. The

government approved the allocation of funds under the ESDP and is ready to provide special

units forming part of the EU Rapid Intervention Force missions.

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Slovakia further improved its relations with neighbouring central European partners both at

multilateral and bilateral level. In November 2000, the Slovak and Czech governments signed

an agreement on cross-border co-operation, notably to facilitate the flow of passenger traffic

across the common border. In April, the Slovak and Hungarian government signed an

agreement on cross-border co-operation, enabling local self-governments on either side to

conclude joint Slovak-Hungarian projects. The implementation of the basic treaty with Hungary

has continued through the functioning of several working groups. Discussions with Hungary on

the Gabcikovo-Nagymaros dam continued and were kept on a technical level.

The Visegrad Group continued to function properly. The Visegrad Fund, established last year,

operated smoothly.

Overall assessment

Slovakia's alignment with the

acquis

in the CFSP is well advanced. As the

acquis

in the field of

foreign policy and security develops further, Slovakia should maintain the orientation of its

foreign policy in line with that of the Union.

Since the beginning of the political dialogue with the EU, Slovakia has reached significant

alignment with the EU statements and other CFSP instruments.

Slovakia’s relations with its neighbours have in general improved and Slovakia has taken a

proactive role in promoting enhanced bilateral cooperation and regional integration, especially

in the frame of the Visegrad group.

Slovakia has aligned itself to the content and principles contained in the EU Code of Conduct

on Arms Exports, but there is concern that more efforts are necessary to ensure implementation

of its criteria.

Concerning the administrative capacity to implement the provisions relating to the CFSP,

Slovakia has a well-staffed and functioning Ministry of Foreign Affairs. The Slovak Ministry of

Foreign Affairs is connected to the Associated Correspondents’ Network information system

through which the EU communicates within the CSFP with the associated partners.

Chapter 28: Financial control

Since last year’s Regular Report Slovakia has made significant progress in this area.

Slovakia has moved forward in the legislative alignment of its

Public Internal Financial

Control

systems. It has adopted the Act on Financial Control and Internal Audit, which

provides the basis for the establishment of both financial management and control as well as of

internal audit systems. The Act describes managerial accountability relating to financial

management and control systems, establishes functionally independent internal audit services in

the budget spending centres and gives the Ministry of Finance responsibility for developing and

co-ordinating methodology for the Public Internal Financial Control systems including

compliance assurance. As of October 2001, the Ministry of Finance has created a new

Department for Financial Control and Internal audit methodology, directly reporting to the State

Secretary in the Ministry of Finance and an Internal Audit Department directly reporting to the

Minister.

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Slovakia has made good progress in the area of

external audit.

An amendment to the

Supreme Audit Office Act, aimed at the extension of the Supreme Audit Office (SAO) mandate

to cover EC funds, entered into force in January 2001. The amendment of the Slovak

constitution, which took place in February 2001, has strengthened the status and the role of the

Supreme Audit Office has been strengthened. These constitutional changes were reflected in

another amendment to the Supreme Audit Office Act, adopted in October 2001, which

broadens the SAO mandate to audit all public finds, including the National Property Fund and

EC funds. During the reporting period the SAO has undertaken several training activities and

has increased its staff by five employees.

Slovakia has made limited progress in the area of

control over structural action

expenditure.

In December 2001, Slovakia adopted the Act on Financial Control Authorities,

which extended the scope of powers of the financial control authorities with regard to EC funds

as well as other funds stemming from international agreements. The Audit Manual and the Audit

Trail including the description of all the Pre-accession funds procedures have been prepared.

No further steps can be reported with regard to the accreditation of the SAPARD Agency.

No further developments can be reported in the field of the

protection of EC financial

interests.

Overall assessment

Overall, Slovakia has advanced with regard to the legislative alignment, notably in the areas of

Public Internal Financial Control. However, further substantial efforts are still required in order

to implement sound financial control systems and strengthen, or build up, the necessary

institutional structure.

With regard to Public Internal Financial Control, Slovakia needs to establish functionally

independent internal audit units in line ministries with internal audit focussing on systems-based

and performance-audit functions. Furthermore, Slovakia needs to define appropriate working

methods for the Central Harmonising Unit at the Ministry of Finance. Both the internal audit

units and the Central Harmonising Unit need to be adequately staffed with well-trained and

experienced personnel.

In the area of external audit, Slovakia needs to reinforce the independent status of the Supreme

Audit Office, especially with regard to its financial independence, and to enhance its overall

operational capacity. The conformity of the external audit procedures with the internationally

accepted and EU-compliant external audit standards needs to be ensured. Slovakia also needs

to enhance the formal procedures to follow up the audit findings of the State Audit Office as

well as to improve the transparency and publicising of the State Audit Office Reports.

With regard to the control of structural action expenditure, substantial efforts need to be made

in order to enhance Slovakia’s capacity to manage of pre-accession funding and future

structural funds, in particular through the establishment of clear public internal financial control

rules and procedures, and a substantial reinforcement of Slovakia's administrative capacity in

this regard. The development of mechanisms for the rapid recovery of lost EC funds is equally

important.

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With a view to ensuring suitable protection of EC financial interests, Slovakia needs to put in

place the legislation necessary to allow the competent authorities to carry out on-the-spot

checks, if necessary jointly with the Commission, and to develop adequate administrative

capacity to implement the

acquis.

Contacts should be pursued to agree on the most suitable

institution with the appropriate competencies to co-ordinate investigations into cases of fraud

and irregularitie saffecting the EC financial interests, and to act as a single contact point in

relation with OLAF.

Chapter 29: Financial and budgetary provisions

Some limited progress has been made over the reporting period, mainly as regards the

national

budget and EC co-financed measures.

The Slovak Budgetary Rules Act was amended with

effect from January 2001 to allow for the management of EC pre-accession funds as State

budget funds and introduce concomitant financial control mechanisms, including sanctions.

Other amendments were introduced concerning common budgetary classifications for the

compilation of aggregate public budget deficit, albeit not effective until 2003. As part of the

overall public finance reform, a medium-term financial outlook was enclosed as an appendix to

the 2001 State budget for the first time, although this outlook will only become an integral part

of the budget from 2002.

As regards

own resources and administrative structures,

a new customs law entered into

force in July 2001 (for

further details please refer to chapter 25, Customs Union).

Otherwise no particular developments can be reported.

Overall assessment

While at this stage the level of preparation achieved by Slovakia under this chapter is

acceptable, further efforts will be required prior to accession.

Although basic budgetary rules in Slovakia are broadly satisfactory, further amendments will be

necessary to ensure budgetary principles and practice are brought into line with standards

generally applied in the Community. Plans to introduce procedures for multi-annual budgeting

are welcome. In this regard, the approval of co-financing appropriations for inclusion in the

State or municipal budgets to be available on a multi-annual basis should be assured. First steps

in drawing up a medium-term budget outlook and improving macro-economic forecasting

should be built on. The work in progress for defining and implementing the operating

procedures for the management of EC pre-accession funds, through the National Fund, should

be continued and improved.

In order to improve and promote the efficient allocation of resources, the procedures for

selecting, monitoring and evaluating public investments and expenditure programmes need to be

strengthened. At the same time, the corresponding analytical capacity should also be increased

in the Ministry of Finance and the spending Departments.

As regards the Community’s Own Resources, the Ministry of Finance is the central body of

State administration responsible in the area of taxation, and for the performance of all customs

functions. These functions are performed through the Customs Directorate and the Central Tax

Directorate respectively. The calculation of own resources based on gross national product

(GNP) is the responsibility of the Slovak Statistical Office. There is not yet any provision in

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Slovak law with regard to the levies on trading in and warehousing of sugar. A draft Act on the

Markets in Selected Agricultural Products is currently under discussion and, once adopted,

should provide the basis for the relevant secondary legislation.

Appropriate administrative steps should be taken prior to accession to ensure the efficient

central co-ordination of the proper collection, monitoring, payment and control of funds to and

from the EC budget. The capacity to calculate in a reliable, accurate and transparent way the

level of customs duties and VAT collected by Slovakia, and to calculate Slovakia’s GNP,

needs to be improved to allow calculations to be harmonised and verifiable. The ability to

report accurately and regularly to the Commission on the situation with regard to each of the

types of Own Resources needs to be assured. With regard to the control of future EC Own

Resources, Slovakia 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.

Administrative capacity should also be strengthened in the context of the relevant policy areas

described elsewhere in this report, such as Financial Control, Agriculture, Taxation, Customs,

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.

So far, approximately 52 000 pages of the Official Journal have been translated into Slovak, of

which more than 17 000 have been revised. The Central Translation Unit within the Slovak

Institute for Approximation of Law is responsible for the translation of the

acquis

into the

Slovak language. It currently employs 10 persons. Without prejudice to the outcome of the

accession negotiations, further efforts are required in this area.

Due attention must also be given to the training of conference interpreters.

3.2.

General evaluation

Slovakia has continued to make good progress in legislative alignment with the

acquis.

As last

year, progress has not been uniform across chapters. Significant progress has been achieved in

areas such as free movement of goods, company law, social policy and employment as well as

customs union. Structural weaknesses have persisted in a number of sectors, namely in

agriculture as well as regional policy and co-ordination of structural instruments. While further

progress in strengthening administrative capacities was made, reinforced and sustained efforts

are needed across all sectors.

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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Concerning

internal market legislation,

further progress has been achieved, notably in

free

movement of goods

and

free movement of services.

In the area of

free movement of

persons,

progress continues to be limited. In

company law,

with the exception of trademarks,

significant legislative progress has been made, especially through further alignment with the

company law directives and adoption of a new patent law. Appropriate strengthening of

administrative and judicial bodies involved in all areas of intellectual and industrial property

rights should be continued. In

competition policy

the amendment to the Act on State Aid has

brought the legislative framework largely in line with the

acquis.

In contrast to the anti-trust

area, however, the enforcement record in the field of state aid remains rather sketchy and non-

transparent. Administrative capacities in the internal market domain need reinforcing, in

particular as regards the supervision of financial services.

As regards

agriculture,

overall steps both in aligning and implementing the acquis have been

limited with the exception of veterinary issues, where significant progress was made. Efforts

should be reinforced to establish an Integrated Administration and Control System, the adoption

of specific market regulations should be accelerated, alignment in the phytosanitary sector

speeded up and administrative capacities, including border inspection posts, strengthened.

Further legislative alignment was achieved in the field of

transport,

notably in relation to land

transport. Substantial alignment across all sectors and reinforcement of the administrative

capacities, including completing the setting-up of the necessary structures is, however, needed.

Limited legislative alignment of indirect and direct

taxation

has been accomplished and

additional efforts are required for adjusting VAT and excise duty rate levels. The reform of the

Slovak tax administration has moved forwards, the measures for its modernisation should be

vigorously pursued. The IT tax information systems allowing for the exchange of electronic data

with the EC and its Member States should be developed.

Further positive steps have been taken in the

energy

sector with the decision to substantially

open the domestic electricity market and the launching of the privatisation of major energy

companies. As regards nuclear energy, Slovakia should implement its decommissioning

commitments, and continue to ensure a high level of nuclear safety. In

industrial policy,

Slovakia kept its reform momentum by continuing privatisation, particularly in banking

privatisation, and enterprise restructuring. With the exception of postal services, Slovakia has

reached an overall high degree of alignment in the area of

telecommunications and

information technologies.

Emphasis should now be put on the effective implementation and

strengthening of administrative capacities. Legislative alignment in the field of

consumers

protection,

notably on non-safety related issues, has continued. Efforts to ensure adequate co-

ordination and strengthening of those bodies involved in market surveillance need to be

continued.

In the field of

social policy and employment,

considerable progress has been achieved notably

in further aligning with the

acquis

in the area of labour law and equal treatment for men and

women. The focus needs to move now to the implementation, with a particular emphasis on the

enforcement of health and safety at work.

Progress in the field of

regional policy and co-ordination of structural instruments

has

continued to be limited. The lack of sufficient and qualified staff in the relevant ministries and

bodies involved remains a matter of concern.

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Concerning

environment,

legislative alignment – with the exception of water quality, nature

protection and industrial pollution and risk management, has well advanced although substantial

alignment is still lying ahead. The measures to strengthen the administrative capacities should be

rigorously pursued.

In the area of

co-operation in the field of justice and home affairs,

further progress in terms

of alignment and administrative capacities has been achieved notably with regard to external

border control by, inter alia, adopting a Schengen Action Plan, as well as in the fields of visa

policy and police co-operation. Considerable progress in all relevant areas is needed, including

reinforced efforts for strengthening administrative capacities.

Considerable steps were taken in the area of

customs union

with the entering into force of the

new Customs Act and the Act on State administration bodies in the field of customs. IT systems

allowing for the exchange of computerised data between the EC and Slovakia should be

developed. Significant progress can be reported in the area of

financial control,

where the

basic legislative framework for public internal financial control and external audit is now in place.

Particular emphasis should be put on the area of control over structural action expenditure and

protection of EC financial interests.

As regards

administrative capacities,

while good progress was made in a limited number of

domains in strengthening the relevant institutions, overall progress in this regard has been limited.

Whereas considerable progress has been achieved in the areas of free movement of capital and

customs union, little progress can be reported notably in agriculture, transport policy, regional

policy and co-ordination of structural instruments as well as co-operation in the fields of justice

and home affairs. As regards enforcement, more efforts should be invested particularly in the

areas of company law, competition policy, as well as social policy and employment. The

positive momentum reached in strengthening administrative capacities in the areas of taxation,

energy and environment should be maintained. The institutions and mechanisms related to the

efficient and controllable management of EC funds needs to be considerably strengthened.

The decision of the Government to increase the number of staff dealing with EU integration by

approximately 1 200 persons by 2002 is a welcome step necessary to strengthen the overall still

weak administrative capacities.

The short term priorities of the

1999 Accession Partnership

have been met to a large extent in

the field of internal market and social policy and employment; they have been partially met in the

area of energy as well as co-operation in the fields of justice and home affairs and only to a

limited extent in agriculture and environment. All medium term priorities have been partially met,

with the exception of transport policy, regional policy and co-ordination of structural instruments

as well as environment, where priorities were fulfilled only to a limited extent.

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C. Conclusion