Europaudvalget 2000
KOM (2000) 0703
8 November 2000
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Table of contents
A. Introduction.............................................................................. 5
a) Preface .............................................................................................................5
b) Relations between the European Union and the Czech Republic ...............7
Recent developments under the Europe Agreement ................................................... 7
Accession Partnership/National Programme for the Adoption of the Acquis ............ 9
Community Aid .......................................................................................................... 9
Twinning ................................................................................................................... 14
Negotiations / screening............................................................................................ 15
B. Criteria for membership ....................................................... 16
1. Political criteria.................................................................................... 16
Introduction............................................................................................................... 16
Recent developments ................................................................................................ 16
1.1. Democracy and the rule of law .....................................................................17
The Parliament .......................................................................................................... 17
The Executive ........................................................................................................... 17
The judicial system ................................................................................................... 19
Anti-corruption measures.......................................................................................... 21
1.2. Human rights and the protection of minorities...........................................22
Civil and political rights............................................................................................ 23
Economic, social and cultural rights ......................................................................... 24
Minority rights and the protection of minorities ....................................................... 25
1.3. General evaluation.........................................................................................27
2. Economic criteria................................................................................. 28
2.1. Introduction....................................................................................................28
2.2. Economic developments ................................................................................28
2.3. Assessment in terms of the Copenhagen criteria ........................................30
The existence of a functioning market economy ...................................................... 30
The capacity to cope with competitive pressure and market forces within the
Union......................................................................................................................... 35
2.4. General Evaluation........................................................................................37
3. Ability to assume the obligations of membership............................. 39
Introduction............................................................................................................... 39
3.1. The chapters of the
Chapter 1: Free movement of goods ..............................................................41
Overall assessment.................................................................................................... 43
Chapter 2: Free movement of persons...........................................................44
Overall assessment.................................................................................................... 45
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Chapter 3: Free movement of services...........................................................45
Overall assessment.................................................................................................... 47
Chapter 4: Free movement of capital ............................................................48
Overall assessment.................................................................................................... 49
Chapter 5 : Company law ...............................................................................49
Overall assessment.................................................................................................... 50
Chapter 6 : Competition policy.......................................................................51
Overall assessment................................................................................................... 52
Chapter 7: Agriculture....................................................................................52
Overall assessment.................................................................................................... 55
Chapter 8 : Fisheries ......................................................................................57
Overall assessment.................................................................................................... 57
Chapter 9: Transport policy ...........................................................................58
Overall assessment.................................................................................................... 60
Chapter 10 : Taxation.....................................................................................60
Overall assessment.................................................................................................... 61
Chapter 11: Economic and monetary union .................................................62
Overall assessment.................................................................................................... 63
Chapter 12: Statistics ......................................................................................63
Overall Assessment................................................................................................... 64
Chapter 13: Social policy and employment ...................................................65
Overall assessment.................................................................................................... 67
Chapter 14: Energy.........................................................................................69
Overall Assessment................................................................................................... 71
Chapter 15 : Industrial policy ........................................................................71
Overall assessment.................................................................................................... 73
Chapter 16 : Small and medium-enterprises .................................................74
Overall assessment................................................................................................... 74
Chapter 17: Science and research..................................................................75
Overall assessment.................................................................................................... 75
Chapter 18: Education and training ..............................................................76
Overall assessment.................................................................................................... 76
Chapter 19 : Telecommunications and information technologies ...............77
Overall assessment.................................................................................................... 78
Chapter 20: Culture and audio-visual policy.................................................79
Overall assessment.................................................................................................... 79
Chapter 21: Regional policy and co-ordination of structural instruments ..80
Overall assessment.................................................................................................... 81
Chapter 22: Environment...............................................................................82
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Overall assessment.................................................................................................... 84
Chapter 23: Consumers and health protection..............................................85
Overall assessment.................................................................................................... 86
Chapter 24 - Co-operation in the field of justice and home affairs..............86
Overall assessment.................................................................................................... 89
Chapter 25 : Customs union...........................................................................92
Overall assessment.................................................................................................... 93
Chapter 26: External relations.......................................................................93
Overall assessment.................................................................................................... 94
Chapter 27: Common foreign and security policy.........................................95
Overall assessment.................................................................................................... 96
Chapter 28: Financial control........................................................................97
Overall assessment.................................................................................................... 98
Chapter 29 : Financial and budgetary provisions.........................................98
Overall assessment.................................................................................................... 99
3.2. Translation of the
into the national language................................100
3.3. General evaluation.......................................................................................100
C. Conclusion ............................................................................ 103
D. Accession Partnership and National Programme for the
Adoption of the
Global assessment....................... 106
1. Accession Partnership ....................................................................... 106
Short-term priorities................................................................................................ 106
Medium term priorities ........................................................................................... 110
2. National Programme for the Adoption of the
assessment........................................................................................... 112
Annexes ....................................................................................... 114
Human Rights Conventions ratified by the Candidate Countries,
September 2000 .....................................................................................115
Statistical data ...............................................................................................116
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A. Introduction
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
… “The Commission’s reports will serve as
the basis for taking, in the Council context, the necessary decisions on the conduct of
the accession negotiations or their extension to other applicants. In that context, the
Commission will continue to follow the method adopted by Agenda 2000 in
evaluating applicant States’ ability to meet the economic criteria and fulfil the
obligations deriving from accession.”
On this basis, the Commission presented a first series of regular reports in October
1998, with a view to the Vienna European Council; a second series was adopted in
October 1999, with a view to the Helsinki European Council. The Helsinki European
Council noted that the next regular reports would be presented in good time before the
European Council in December 2000.
The structure followed by this regular report on the Czech Republic is largely similar
to that of the Commission’s 1997 Opinion and of the subsequent regular reports;
however, it differs from that used in previous years on three minor points. Firstly, the
part of the present report assessing the Czech Republic’s ability to assume the
obligations of membership (Part
has been structured to follow the list of
twenty-nine negotiating chapters covering the
Secondly, this part has been
broadened to cover also the Czech Republic’s administrative capacity to apply the
under each of the negotiating chapters (previously discussed in a separate
section of the report). Thirdly, the report includes, for the first time, a section
assessing the progress made by the Czech Republic in translating the
into its
official language.
In line with previous regular reports, the present report:
describes the relations between the Czech Republic 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);
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assesses the Czech Republic’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 the Czech Republic’s capacity to assume the obligations
of membership, that is, the
as expressed in the Treaties, the secondary
legislation, and the policies of the Union. This part gives special attention to
nuclear safety, as underlined by the Cologne and Helsinki European Councils. It
encompasses not only the alignment of legislation, but also the development of the
judicial and administrative capacity necessary to implement and enforce the
as requested by the Madrid and Feira European Councils in December
1995 and June 2000 respectively. At Madrid, the European Council underlined the
necessity for the candidate countries to adjust their administrative structures, so as
to create the conditions for the harmonious integration of those States. The Feira
European Council in June 2000 emphasised the vital importance of the candidate
countries’ capacity to effectively implement and enforce the
and added
that this required important efforts by the candidates in strengthening their
administrative and judicial structures. The Feira European Council invited the
Commission to report to the Council on its findings on the matter.
This report takes into consideration progress since the 1999 regular report. It covers
the period until 30 September 2000. In some particular cases, however, measures
taken after that date are mentioned. It looks at whether intended reforms referred to in
the 1999 regular report have been carried out, and examines new initiatives.
Furthermore, complementing the assessment of new developments since the last
regular report, this report provides also an overall assessment of the global situation
for each of the aspects under consideration, setting out for each of them the main steps
which remain to be taken by the Czech Republic in preparing for accession.
In accordance with this approach, the assessment of progress in meeting the political
criteria (including the Czech Republic’s administrative capacity to
implement the
focuses on what has been accomplished since the last regular
report, complemented with a view of the global situation for each of the aspects
discussed. The economic assessment, for its part, is based on a forward-looking
evaluation of the Czech Republic’s economic performance.
The report contains also a separate section examining the extent to which the Czech
Republic has addressed the short-term Accession Partnership priorities, and has
started to address the medium-term priorities set out in this framework.
As has been the case in previous reports, “progress” has been measured on the basis of
decisions actually taken, legislation actually adopted, international conventions
actually ratified (with due attention being given to implementation), and measures
actually implemented. As a matter of principle, legislation or measures which are in
various stages of either preparation or Parliamentary approval have not been taken
into account. This approach ensures equal treatment for all the candidate countries
and permits an objective assessment and comparison between countries in terms of
their concrete progress in preparing for accession.
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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
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
(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.
b) Relations between the European Union and the Czech Republic
Recent developments under the Europe Agreement
The Czech Republic has continued to implement the Europe Agreement and
contributed to the smooth functioning of the various joint institutions. The fifth
Association Council meeting was held in December 1999, and the sixth Association
Committee and Association Council meetings were held in June and September 2000
respectively. The Association Committee examined in detail the implementation of
the Accession Partnership priorities. The subcommittees continue to function as a
forum for technical discussions. The Joint Parliamentary Committee comprising
representatives of the Czech and European Parliaments met in November 1999 and in
April 2000.
In September 2000, an agreement of principle was reached on the move to the second
stage of the transitional period of the Europe Agreement, indicating that the Czech
Republic has further aligned its legislation on establishment and movement of capital
with Community rules. Procedures for adoption of the relevant Association Council
decision are under way.
Trade between the EC and the Czech Republic has continued to increase. According
to statistics from the Czech Statistical Office, between 1999 and 1998 EC exports to
the Czech Republic increased from CzK 589.9 billion (€ 16.3 billion) to CzK 638.2
billion (€ 17.3 billion) and EC imports from CzK 545.8 billion (€ 15.1 billion) to CzK
642.8 billion (€ 17.4 billion). Therefore, the Czech Republic recorded a trade surplus
with the EC after many years of deficit. In the year 1999, the EC accounted for 69.2%
of Czech exports, and provided 64.0% of Czech imports. In the first three months of
2000, EC exports increased 29% to reach CzK 184.1 billion (€ 5.17 billion), while EC
imports increased 34% to CzK 195.2 billion (€ 5.48 billion). In the first quarter of
2000, the share of the EC in Czech exports increased again to reach 72.6%, while the
EC continued to provide 64.0% of Czech imports. Major categories of Community
exports in 1999 were machinery and electrical articles, transport equipment, base
For the European Parliament the
is Mr Jürgen Schröder.
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metal and chemical products. Major Czech exports were machinery and electrical
goods, transport equipment, especially vehicles, base metal and textiles.
In March 1999 the Council mandated the Commission to open negotiations with the
associated countries with a view to new reciprocal concessions for agricultural
products. The negotiations, which form a part of the overall accession process, have
been carried out on a reciprocal basis and with the aim of leading to a fair equilibrium
between the interests of the European Community, the EU Member States and those
of the Czech Republic. The negotiations have been based on the principle of neutrality
with respect to the functioning of the CAP.
The negotiations with the Czech Republic were concluded between negotiators in
May 2000. As a consequence of the new agreement, almost half of the bilateral trade
of agricultural products will benefit from preferences. The regime entered into force
on 1 July 2000 on an autonomous basis, pending the conclusion of an additional
protocol to the Europe Agreement.
For processed agricultural goods, negotiations are still ongoing. In July 2000, the
Council mandated the Commission to open negotiations with the associated countries
with a view to reciprocal concessions in the field of fish and fishery products.
During the past year, the Czech Republic acted in a number of cases to correct
decisions which were not in conformity with the Europe Agreement and on which the
Czech authorities had not held the necessary prior consultations with the European
Community. The Government corrected by Decree No. 212/1999 of 15 September
1999 its previous decision of 12 March 1999, which had introduced preliminary
safeguard measures for the import of sugar. Similarly, an amendment to the Labour
Code adopted in May 2000 has eliminated the three-year limit on employment in the
Czech Republic for EU nationals which was in the Employment Act approved by
Parliament in July 1999.
Furthermore, the Government adopted on 29 November 1999 Decree No. 297/1999
Coll. which increased customs duties on imports of road tractors for semi-trailers
originating in the EU countries. The Czech authorities justified the measure under
Article 29 of the Europe Agreement, given the difficult economic situation of both
producers of road tractors for semi-trailers in the Czech Republic . Nevertheless, only
one tractor for semi-trailers was produced in the Czech Republic in the first quarter of
the year 2000 while production in the first quarter of the year 1999 amounted to 14
In July 2000, the Protocol to the Europe Agreement on European Conformity
Assessment (PECA) was initialled. The Protocol will facilitate trade by way of the
"pre-extension" of the internal market prior to accession. The required Association
Council decision is under preparation."
In September 1999 the country initiated for the second time an anti-dumping
investigation against an EC company; this was completed in June 2000. Evidence of
injury was found and the Czech authorities decided to impose anti-dumping duties
ranging from 9.28% to 15.71% on imports of salt from the EC.
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Anti-dumping proceedings have been launched by the EU concerning Czech
companies (amongst others) in the polypropylene, seamless tubes and steel ropes
Accession Partnership/National Programme for the Adoption of the
A revised Accession Partnership was adopted in December 1999. Its implementation
is reviewed in chapter D of this report.
In June 2000, the Czech Republic presented a revised National Programme for the
Adoption of the
(NPAA), in which it outlines its strategy for accession,
including how to achieve the priorities of the Accession partnership
(see chapter D
Community Aid
Since January 2000, there are three
pre-accession instruments
financed by the
European Community to assist the applicant countries in central Europe in their pre-
accession preparations: the
which provides aid for
agricultural and rural development; and
which finances infrastructures projects
in the fields of environment and transport. These programmes concentrate their
support on the Accession Partnership priorities that help the candidate countries to
fulfil the criteria for membership.
In the years 2000-2002 total financial assistance to the Czech Republic will amount
annually to
79 million for Phare,
22.1 million for SAPARD and between
55 and
80 million for ISPA.
The Phare programme has been providing support to the countries of Central Europe
since 1989, helping them through a period of massive economic restructuring and
political change. Its current “pre-accession” focus was put in place in 1997, in
response to the Luxembourg European Council’s launching of the enlargement
Phare provides the applicant countries of Central Europe with support for institution
building, investment to strengthen the regulatory infrastructure needed to ensure
compliance with the
and investment in economic and social cohesion. This
support comprises co-financing for technical assistance, "twinning" and
accompanying investment support projects, to help them in their efforts to adopt the
and strengthen or create institutions necessary for implementing and enforcing
This also helps the candidate countries develop the mechanisms and
institutions that will be needed to implement Structural Funds after accession and is
supported by a limited number of measures (investments or grant schemes) with a
regional or thematic focus.
Around 30% of the Phare allocation is used for “institution building” while the
remaining 70% is used for financing investments.
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During the period 1990-2000 the Phare programme allocated some
722.5 million
the Czech Republic. The 2000 Phare Programme for the Czech Republic consists of a
national allocation of
million, which is concentrated on the following priorities :
strengthening the democratic system, the rule of law, human rights and the
protection of minorities, in particular the Roma (€ 4.50 million)
improving the legal and regulatory environment for business in the Czech
Republic, focused in particular on bankruptcy legislation, credit risk management,
enforcement of court decisions and pension reform (€ 5.50 million)
ensuring the Czech Republic is capable of applying Internal Market rules and
regulations, in particular in areas such as data protection, the finance,
telecommunications, energy and public procurement (€ 5.60 million)
preparing the Czech Republic for the implementation of the Common Agricultural
Policy, notably in areas such agricultural assets registration, veterinary inspection
and the phyto-sanitary sector (€ 6.20 million)
establishing the institutional arrangements required to implement the
in waste management, air quality monitoring and pollution
prevention and control (€ 4.30 million)
addressing important issues in the area of justice and home affairs, including the
fight against organised and economic crime, drug abuse, the Schengen Information
System and border management, and training of the judiciary at all levels (€ 12.60
ensuring full compliance with the
in the area of occupational health and
safety (€ 1.30 million)
strengthening the institutional and administrative capacity to manage the
particular in the area of public administration and statistics (€ 1.5 million)
developing economic and social cohesion, including SME promotion, employment
measures and small-scale infrastructure (€ 17.50 million)
participation in various Community Programmes (Socrates, Leonardo and Youth)
(€ 6.52 million)
An additional
10 million has been allocated for a cross-border co-operation (CBC)
programme with Germany,
5 million for co-operation with Poland, and
4 million
for co-operation with Austria.
This grand total does not take account of the benefit the Czech Republic has had to date from
particular Phare horizontal programmes such as the Special Assistance Programme, and the STAP
and ATA facilities. Similarly, the figure for participation in EC programmes should be revised
further to a decision on pre-financing participation in 2001. It does take account, however, of the
2000 Supplementary Investment Facility
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The Czech Republic 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, the Czech Republic participates in SMEs, Equal
Opportunities, SAVE II, Fiscalis, Leonardo da Vinci, Socrates II, Youth, Combating
Cancer, Drug Dependence, Health Promotion and Aids Prevention. The Czech
Republic benefits from a Phare contribution towards its participation in these
Community programmes. Furthermore, it has requested to participate in the Culture
2000 programme.
Following the opening of negotiations regarding the Czech Republic’s participation in
the European Environment Agency, an agreement has been reached. Following
ratification and entry into force of this agreement, scheduled for early 2001, the Czech
Republic will become a member of the Agency.
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 SME and regional development, employment, trade and investment
promotion, the environment and infrastructure. Phare support to SMEs and regional
development has succeeded in developing sector strategies and establishing essential
institutional and financial mechanisms.
Examples of Phare support in the Czech Republic include:
With regard to the political criterion, Phare continues to promote the sustainability
of civil society organisations in the Czech Republic. More than 350 new projects
were financed in 2000, ranging from training for treasurers of charities, support to
fundraising activities for handicapped children, finance for Citizen’s Advice
Bureaux and educational support groups to anti-racism events. A particular new
initiative has been to provide more than 60 grants for Roma community projects,
including, for example, the provision of advice on citizens’ rights in the case of
racially motivated attacks, the development of a Roma education programme, and
support for Roma information and community centres.
As to the economic criterion, Phare support in 2000 was given particularly to
human resources development, including training for top managers in corporate
governance; management training for construction companies and hospitals,and
promoting links between cutting edge research in universities and new technology
companies. A new Regional Development Fund was launched which lent money
to develop 7 industrial parks during 2000, in order to provide attractive, well-
serviced sites for new companies to locate. This activity is part of a strategy to
promote foreign direct investment, which has been increasingly successful.
CzechInvest, the national investment promotion agency, received the prestigious
award “European Investment Promotion Agency of the Year” in 2000 at the World
Direct Investment Forum. Over the years, CzechInvest has attracted, with Phare
bn into the Czech Republic and helped to create 33,000 jobs.
In the environment sector, one project focuses on the introduction
Environmental Management and Auditing Systems into Czech companies. If
pilot scheme is successful, it is hoped to persuade more companies to adopt
system, which should ensure that environmental concerns are always at
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forefront in company decision-making. Phare is also helping to improve the
environment in a way that is directly visible in the quality of water in Czech rivers,
for example 13 Waste Water Treatment Plants were completed with Phare co-
financing so far in the year 2000, concentrated particularly in the area of North
West Bohemia where industrial pollution has been particularly bad in the past.
The largest Phare-funded investment project to date in the Czech Republic, and
the second largest ever (€34 m), was completed in May 2000: A section of the
Pan-European rail corridor no.4, which runs from Berlin to Vienna, was
modernised. As a result, track speeds have increased from 120 to 160 km per hour
and, together with other investment financed by the Czech budget and the
European Investment Bank, the result will be a reduction in journey time from
Prague to Vienna of 2 hours.
The Pro-Active Labour Market Intervention Fund is financed by Phare to help
create and protect jobs. One particularly successful PALMIF project has trained
700 unemployed people, of whom 65% set up their own businesses and 30% got
jobs within two months of receiving the training.
A reform of the Phare management system took place in 1998 and 1999 to improve
the speed, efficiency, effectiveness and transparency of Phare’s activities. The recent
Phare Review Communication in 2000 continues to refine these basic management
structures so as to further bridge towards accession and the structural funds. First,
management can be fully decentralised from 2002 if the strict pre-conditions set down
in Co-ordination Regulation 1266/99 are met. Second, Phare’s programming can be
moved onto a multi-annual basis if supporting strategies are in place. Third, the trends
introduced in 1997 will continue with an increased role for Delegations, further
streamlining procedures and lastly, increasing emphasis of management on raising the
impact of Phare’s projects in institution building, investment in compliance with the
and economic and social cohesion.
Implementation of Phare in the Czech Republic continues to be generally satisfactory.
While projects are often subject to substantial delays and there is room for
improvement in preparation and management, 99% of projects have so far been
contracted before the deadlines and implemented to acceptable standards. It should
however be noted that implementation in all sectors suffers from insufficient internal
communication, both within and between ministries and other organisations. Quality
of implementation also tends to depend on particular staff rather than on institutional
strength of the ministries. It is clear that substantial and sustained investment in the
administrative capacity in all Czech ministries and spending centres at all levels is
required, in particular as concerns human resources, if the Czech Republic is to assure
a smooth transition from EC pre-accession support to participation in the EC
Structural Funds.
With regard to the overall financial management of EC funds by the National Fund,
implementation has been poor. The National Fund has been slow in submitting
requests for funds and distributing funds received ; applications submitted have been
subject to shortcomings that have resulted in some cases in loss of funds. The CFCU
should be more active in seeking to improve implementation. Preparation for
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Structural Funds by the Ministry for Regional Development is satisfactory, especially
with regard to investment projects and establishment of the organisations required by
Structural Funds, though with regard to grants and loans improvements are necessary.
Communication between the ministry and the regions also should be improved. The
implementation of Community Programmes by the relevant ministries is satisfactory.
As regards
the Czech Rural Development Plan got a favourable opinion in
the STAR Committee (EC Management Committee on agricultural structures and
rural development) in September 2000 and was approved by the Commission in
October 2000. The plan is based on two major priorities: improvement of production
and marketing structures in agriculture and food processing (75% of the EC funds)
and economic diversification and improvement of rural infrastructure (24% of EC
funds). The average annual public expenditure will amount to
29.8 million during
the period 2000-2006, of which
22.4 million (at 2000 prices) represent the
Community contribution. The Agency of the Czech Republic for Agricultural
Markets and Rural Development has been established and preparations for its
accreditation as the SAPARD Agency are underway. Accreditation has so far not
taken place and there have been substantial delays in making the Paying Agency
As concerns the
programme, the Commission has informed the Czech Republic
that its indicative ISPA allocation would range from 5.5 to 8 % of the ISPA budget
per year, in order to encourage the country to propose high quality projects in the areas
of transport and environment. The Czech authorities have elaborated sectoral strategy
documents for transport and environment. The main priorities included in the Strategy
Paper for Transport are road network development, railway infrastructure
development, waterway transport development and airport projects. The document
was adopted by the ISPA Management Committee (MC) in July 2000. The main
priorities included in the Strategy Paper for the Environment are drinking
water/waste-water, air quality and climate protection and waste management.
Projects submitted by the Czech authorities for ISPA financing in 2000 are presently
under review by the Commission. The Commission has commented on the
environment strategy, indicating in particular the need for links to quality standards set
by environmental legislation in the sectors of water and air.
For ISPA, the relevant structures and committees have been established, but it has yet
to be decided which would be implementing agency for ISPA projects. Overall co-
ordination of ISPA is assured by the Ministry for Regional Development, with line
ministries responsible for sectoral input. Inter-ministerial co-operation has been good.
Implementation of ISPA will follow the same institutional framework as for the Phare
programme, with the National Fund at the Ministry of Finance being in charge of the
overall financial management and a number of Implementing Agencies responsible for
the technical implementation. For the programming and financial management of
SAPARD, a different system will apply which reflects the EAGGF (European
Agricultural Guidance and Guarantee Fund) rules and is based on a fully decentralised
approach through an accredited paying and implementing agency.
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One of the main challenges the candidate countries continue to face is the need to
strengthen their administrative capacity to implement and enforce the
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, in particular through the long-term
secondment of civil servants and accompanying short-term expert missions. Thanks to
the strong support and response from EU Member States 107 twinning partnerships,
funded by Phare 98 and involving all candidate countries and almost all Member
States are operational. Under Phare 99 a further 99 projects are being implemented
and the programming exercise for Phare 2000 includes a further 129 twinning
projects. It is estimated that around 250 twinning projects will be operational
throughout the candidate countries at any one time.
To start with, twinning focused primarily on the priority sectors of agriculture,
environment, public finance, justice and home affairs and preparatory measures for the
Structural Funds. It now covers all sectors pursuant to the
For the Czech Republic, 18 projects have so far been twinned under Phare, of which 8
projects are ongoing and 10 are in preparation. Under the 2000 national programme, a
further 20 twinning projects are envisaged.
Under the 1998 programme, Germany and France are assisting the restructuring of the
Ministry of Agriculture and the Market Intervention Agency, while Germany,
Denmark and Sweden are working together with Czech partners to strengthen
environmental law enforcement bodies. The state aid system will be developed, and
Germany and Greece will strengthen the capacity of the insurance sector and the
banking regulatory authority. Preparation for the Structural Funds is being led by the
UK, Ireland and France, while three justice and home affairs projects will strengthen
border control (Germany, Netherlands), develop law enforcement institutions
(Germany, UK), and promote the independence of the judiciary ( Netherlands).
The 10 twinning projects under the 1999 programme will help the Czech Republic
strengthen its administrative capacity in areas such as participation in the European
Structural Fund, control and management of EC financial flows, the fight against
economic crime, and preparation for Schengen implementation. The Consensus
programme, a horizontal programme to finance twinning projects in the social area in
all the candidate countries is being launched. It will finance four projects in the Czech
Republic, expected to start by the end of 2000.
The 2000 programme foresees both a continuation and an increase of twinning activity
in the Czech Republic. No less than 20 twinning projects are foreseen to help the
Czech public administration prepare for implementation of the
in areas such as
telecommunications and energy, air quality monitoring and pollution prevention and
control. As a priority sector for PHARE twinning assistance, justice and home affairs
will be particularly targeted by the 2000 programme, as will the modernisation of
Czech public administration.
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Although it is as yet too early to assess the overall impact of twinning in the Czech
Republic, the projects currently underway are proceeding satisfactorily after some
initial take-off problems. Pre-Accession Advisers and their host organisations alike
report satisfaction with the mechanism. There is a growing demand for twinning
projects in the Czech Republic and an increasing quality of Member States’ proposals
for the implementation of such projects.
Negotiations / screening
The analytical examination of the
(screening) for the Czech Republic started in
April 1998 and concluded in May 1999 with the examination of the chapter on
financial and budgetary provisions. An update of the screening started at the
beginning of 2000.
Since the opening of accession negotiations in March 1998, the Czech Republic has
participated in four rounds of Ministerial negotiations. As a result of these
negotiations, thirteen chapters of the 29 opened thus far have been provisionally
closed (science and research, education and training, small and medium-sized
enterprises, statistics, industrial policy, telecommunications, fisheries, consumer
protection, free movement of goods, customs union, external relations, common
foreign and security policy and EMU) while negotiations continue for the remaining
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B. Criteria for membership
1. Political criteria
The political criteria for accession to be met by the candidate countries, as laid down
by the Copenhagen European Council in June 1993, stipulate that these countries must
have achieved “stability of institutions guaranteeing democracy, the rule of law,
human rights and respect for and protection of minorities.”
In its 1999 Regular Report on the Czech Republic’s progress towards accession, the
Commission concluded that:
“The Czech Republic fulfils the Copenhagen political criteria. Further efforts should
be made to reform the judiciary and improve the situation of the Roma through the
implementation of an adequately funded policy and efforts to combat discriminatory
attitudes in society. Attention should also be paid to developing an effective policy to
combat economic crime and corruption.”
The section below aims to provide an assessment of developments in the Czech
Republic since the 1999 Regular Report, as well as of the overall situation in the
country, seen from the perspective of the Copenhagen political criteria, including the
overall functioning of the country’s executive and its judicial system. Developments
in this context are in many ways closely linked to developments in the Czech
Republic’s ability to implement the
in particular in the domain of Justice and
Home Affairs. Specific information on the development of the Czech Republic’s
ability to implement the
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
of part
of this report.
Recent developments
The minority government in place since July 1998 has been functioning normally in
both domestic and foreign affairs. Its programme has focused in particular on
management of the economy and economic restructuring as well as accelerating
preparations for EU membership and consolidating and improving good neighbourly
Relations between the CSSD government and the largest opposition party (ODS) are
characterised by the “Agreement on establishing a stable political environment in the
Czech Republic signed between the CSSD and the ODS” which was renewed and
extended in February 2000 on the basis of reciprocal commitments. Four other
opposition parties, which do not participate in this Agreement, have formed a “four
party coalition” and participate actively in the democratic process as a principled
opposition (KDU-CSL, US, ODA and DEU).
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Parliament adopted an amendment to the electoral law in May 2000 which, following
the request of the President, is being examined by the Constitutional Court. Elections
to the Senate and, for the first time, to the recently created 14 regions, are scheduled
for November 2000.
Democracy and the rule of law
As stated in the previous Regular Reports, the Czech Republic has achieved stability
of institutions, guaranteeing democracy and the rule of law. This section focuses on
the most recent developments of the past year.
The Parliament
of the Parliament has been significantly improved through a more
effective dialogue with the government and the streamlining of its legislative scrutiny
procedures. Thus the Chamber of Deputies has amended its rules of procedure to
introduce a fast track possibility for,
inter alia,
EC related draft laws. The Chamber of
Deputies’ Committee for European Integration now holds discussions with Ministers
on legislative drafts prior to submission by the Government to the Parliament.
The Senate, in plenary and in its committees, also plays a role in the legislative
process. It has streamlined its procedures and a greater number of its proposed
amendments are now being adopted by the Chamber.
Since the 1999 Regular Report there has been a significant acceleration in the
legislative process, including for EU related laws. Thus, since 1 July 1999, 132 acts
were promulgated in the Collection of Laws, an almost fivefold increase on the period
covered by the 1999 Regular Report, during which only 27 acts were passed. Out of
192 acts published in the Collection of laws, 79 were identified by the Government
when proposed to the Parliament as EU-related (as of 12 October 2000).
The Executive
of the government is stable but several important
reforms, outlined below, to improve effectiveness have still not been enacted. Within
the Cabinet certain procedural changes have been made in response to the need to
strengthen the preparation of draft laws and to ensure better policy coordination,
including on EU accession preparations.
The 1999 Accession Partnership established as a short term priority the adoption and
implementation of the Act on the Civil Service, as well as training of state officials.
Although the Accession Partnership priorities on the training of state officials are
being partly met through various Government initiatives, the requirement concerning
the adoption of the Act on the Civil Service has not yet been fulfilled.
The Government’s 1998 Manifesto identified the Act on the Civil Service as one of
the most important objectives to be reached by mid-election term (i.e. mid-2000). The
draft Act has recently been approved by the Government. However its original
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commitment that the Act would enter into force by 1 January 2001 has been deferred
to 1 January 2002.
The performance of the state administration remains crucially dependent on the
approval and implementation of the Act on Civil Service. This should foster political
independence and will reduce the scope for political interventions in the appointment
of officials. It should also promote effective management and assist in the creation of
a unified system of human resources development. The terms and conditions of
officials should also be improved, so helping to attract and retain sufficiently qualified
A number of measures have been taken to prepare for the introduction of the Act,
including training for senior officials in EU affairs and languages. Furthermore the
Office of the Government has established a small unit charged with examining ways
in which the central civil service can be reformed within the current legal and
administrative arrangements. This unit will evolve into a central personnel
department for the whole civil service. The Ministry of the Interior has established
“state civil service reform units“ in some Ministries.
In September 2000 the “Lustration Law” that excludes from public service posts (but
not from political offices) members of, and persons who cooperated with, the former
State Security Service was amended in order to extend its provisions until the new
Civil Service Act is approved. It is important that this deadline for phasing out the
lustration measures be respected.
In general, the Czech Republic needs to do more to complete the process of
administrative reform. Although there are undoubtedly areas in which incremental
changes are being made and where some improvements have already been achieved,
there is a clear need to improve public administration standards further. The absence
of an Act on Civil Service continues to impact negatively on the overall effectiveness
of the public administration in a number of ways.
Under the present system there is a lack of legal distinction between political
appointees and career officials. There is no legislation to define civil servants in the
Czech Republic, nor any official definition of a civil servant. This has a tendency to
encourage short-term appointments and to discourage professionalism. Low salaries
also make it difficult to attract and retain staff. Establishing a proper legal basis for the
civil service should provide a more attractive career package, including security of
tenure where appropriate as well as recognisable opportunities for career progression
based on merit.
A decision is required on the development of a central system for uniform training of
state officials. Furthermore, the effectiveness of performance targets is undermined by
the lack of measures to hold staff accountable for policy implementation. The Czech
Republic needs to develop clear systematic mechanisms to ensure the implementation
of objectives across government.
The Government cited decentralisation of public administration as one of the key
priorities in its 1998 Manifesto. The Government’s 1998 legislative programme
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included a commitment to prepare the necessary legislation by mid-term in order to
convene regional elections in autumn 2000. At the same time, the Government
committed itself to passing a number of conceptual documents on regional
administration, covering
inter alia
the exercise of powers and regional competencies.
The Czech Republic has taken a number of measures to meet these commitments. In
June 1999 the Parliament approved the concept of the overall reform of public
administration, the main element of which was decentralisation.
Government approval in November 1999, a package of decentralisation measures was
adopted in June 2000. The package entailed a significant shift of powers and
competencies from the centre to the regions, particularly in the areas of education,
health care, culture, transport, regional affairs, and agriculture. Elections to the
regional assemblies will take place on 12 November 2000. This will put in place a
new level of public administration in the Czech Republic.
Despite these steps, important decisions remain to be taken regarding the financing
and staffing of the decentralisation process. Furthermore, a number of conceptual
documents on specific issues related to decentralisation remain to be adopted. A
decision also needs to be taken on the status of public servants working for regional
assemblies and for municipal assemblies. Currently such public servants do not come
under any uniform structure of human resources management. Consequently
conditions of employment and the exercise of duties may differ from region to region.
Homogeneous selection criteria for the recruitment and remuneration of regional
assembly staff also need to be drafted to ensure selection based on professional
The judicial system
The 1999 Accession Partnership established as a short term priority the
implementation of a programme to reform the judiciary by filling vacancies,
simplifying procedures, and stepping up the training of judges in EC law. However,
certain key parts of the reform remain to be adopted.
In February 2000, the Czech Government adopted the ambitious and comprehensive
reform programme ‘Concept of the Reform of the Judiciary’, aiming to deal with the
administration and structure of courts, the independence of the judiciary and training,
as well as complete re-codification of the civil, criminal and commercial codes.
Progress was made in the passing of an amendment to the Civil Procedure Code and
the Commercial Code (both coming into force in January 2001) which are intended to
simplify and accelerate civil and commercial proceedings as regards interim measures,
the taking of evidence, rules governing appeals, enforcement of judgements, and the
Commercial Register. Also, the ineffective Regional Commercial Courts will be
abolished from January 2001.
However, substantial draft amendments to both the Criminal Code and the Criminal
Procedure Code, as well as draft constitutional amendments regarding judicial self-
administration and the functional structure of the courts, have been rejected by the
Parliament as insufficiently prepared. This has led to a revision of the legislative
timetable, thus delaying significantly the date for full completion of the reform. It is
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crucial, for the effective implementation and enforcement of the EC
that the
full momentum of judicial reform be maintained.
As confirmed in last year’s Regular Report, the speeding up of judicial proceedings,
training of judges and prosecutors and adequate administrative support for the courts
are still key areas requiring improvement. The performance of the judiciary in the
fight against organised and economic crime must also be addressed.
length of judicial proceedings
and the backlog of cases remain considerable. The
average length of court cases in the Czech Republic has increased since the last
Regular Report as far as civil cases in the District Courts (563 days) are concerned. It
has decreased slightly for criminal cases in the District Courts (252 days) and civil and
criminal cases in the Regional Courts (311 days and 489 days respectively).
The Ministry of Justice’s figures show that in the first half of 2000 the total number of
court rulings was 33,733 out of which 8,648 were appealed. The corresponding
figures for the year 1999 were 62,594 and 14,988. Also, in the first half of 2000 the
total number of unresolved cases stood at 381,405 for the District Courts (criminal,
civil, family and succession cases and enforcements) and at 175,887 for the Regional
Courts (criminal, commercial, insolvency, pension, and administrative cases). In 1999
the Supreme Court decided on 2,874 cases out of 3,002 cases filed, and at the end of
1999 it had a backlog of 2,048 undecided cases. In 1999, 18 disciplinary proceedings
were initiated against judges in the case of delays, and 7 have been brought since
As regards
status and remuneration,
judges are appointed for life by the President of
the Republic and are independent, although the Minister of Justice can formally recall
them (in practice, this has not happened). Judges’ salaries are set by law and are
relatively high. State prosecutors are subject to a security vetting procedure, their
salaries are on average lower than those of judges and their employment conditions
are inferior. These comparatively inferior conditions of work may have a negative
impact on their motivation and performance and should be redressed.
The Ministry of Justice determines the number of judges. Six vacant posts for judges
were filled in the reference period, bringing the number of
judicial vacancies
to 300
out of a total of 2,801 posts. 370 trainee judges are currently undergoing training, but
will not be fully qualified for a further three years. Out of a total of 990 posts for state
prosecutors, there are currently 88 vacancies. 100 trainees are being trained under a
programme to be completed in three years’ time.
of judges is also the responsibility of the Ministry of Justice and is
mainly provided by the Higher Institute of Training for Judges and State Prosecutors.
This training is still not systematic, and lacks long term concepts and planning. The
courses focus on a key number of areas (human rights, democracy, civil and criminal
judicial co-operation) but there is a lack of specialised knowledge of EC law due
to the absence of foreign language skills.
Thus, judges and state prosecutors remain insufficiently specialised in EC law.
Training in international and EC law is in principle mandatory, and is currently
provided through bilateral or multilateral projects, but it has covered so far only
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around 4% of Czech judges and 10% of state prosecutors. However, the situation
should improve as a result of several Phare initiatives during 1999 and 2000. Besides,
judges and state prosecutors also lack sufficient specialisation in the areas of
economic crime, corruption and money laundering.
Many courts continue to still suffer from a lack of modern
and information
technology. This situation is now being addressed with Phare support. Judges and
prosecutors also continue to lack adequate administrative support staff, which
contributes to the length and inefficiency of court proceedings.
Anti-corruption measures
Corruption continues to be a problem, as does economic crime (fraud, money
laundering, institutional theft, and the phenomenon of ‘tunnelling’ or asset-stripping).
Despite efforts to combat them, implementation in these areas is still far from
(see Part B.3.1., Chapter 24 on Cooperation in the field of Justice and
Home Affairs).
Opinion surveys show that one in five Czechs assume that corruption pervades many
areas of everyday life. According to public opinion, corruption in the Czech Republic
is most widespread in the state administration, followed by the police and intelligence
services, healthcare, banking and the political sphere.
The Government announced in 1998 that it would undertake a campaign against
corruption and economic crime. This was named the “Clean Hands Campaign” and
aimed to “create
an environment acceptable for both foreign and domestic investors
and to recover credibility of the state in the eyes of its own citizens
Responsibility was located within the government itself. The Committee for the
Protection of the Economic Interest (CPEI), chaired by the Prime Minister, was
charged with overall coordination. It included the Deputy Prime Minister for
Legislation, Minister of Justice, Minister of the Interior and Minister without
Portfolio. The latter also chaired a Coordination and Analytical Group (CAG).
The CAG was mandated to analyse the institutional and legal framework with a view
to strengthening the fight against economic crime and corruption but also to present to
the CPEI specific cases of alleged crime.
Over the one and a half years of its duration the campaign was able to identify
shortcomings in the public administration and it pointed to the need for further action.
However, whilst the police registered some progress in some of its anti-corruption
activities, the Clean Hands Campaign itself yielded little in terms of actual
prosecutions and convictions. Thus, of the 209 reports on specific complaints which
Report from the Minister without Portfolio to the Government approved on 15
March 2000 entitled,
“Analysis of Activities Conducted by the Committee for the Protection of Czech Republic’s
Economic Interests and its Co-ordination and Analytical Group”.
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the CPEI submitted to the State Prosecutor, 70 were submitted to the Police for further
investigation. In 18 of these cases criminal proceedings have been launched, while
only 6 have so far lead to a trial. The prosecution of another 10 cases was postponed.
Figures made available by the Ministry of Justice give an overview of the overall
results obtained in this field. As regards corruption (bribery related offences) there
were 203 prosecutions and 110 sentences in 1999 and 84 prosecutions and 50
sentences in the first half of 2000. As regards “abuse of the position of public
official” there were 253 prosecutions and 85 sentences in 1999 and 141 prosecutions
and 47 sentences in the first half of 2000. Concerning money laundering, there were
16 prosecutions and 5 sentences in 1999 and 9 prosecutions and 4 sentences in the
first half of 2000.
In Spring 2000, the Government announced that the CPEI and CAG were to be closed
down. At the same time, the Ministry of Justice allocated additional funds in order to
establish, within the State Prosecutor’s Offices in Prague and Olomouc, specialised
units dealing with corruption and economic crime.
At present, the fight against corruption and economic crime suffers from inadequate
staff, a lack of specialised training and a lack of effective cooperation among the law
enforcement institutions involved. In particular, the duplication of work between the
police and investigators, and the insufficient police powers to investigate offences
continue to seriously hamper the prosecution of corruption and economic crime.
The rejection by Parliament in May 2000 of an amendment to the Criminal Procedure
Code, which intended
inter alia
to modernise the Czech police, as well as the absence
of concrete progress in the reform of the Civil Service statute and the low salaries of
state employees, continue to bear negatively upon the overall effectiveness of the law
enforcement institutions.
The current situation gives cause for concern, not least because of its possible impact
on the investment climate. Efforts need to be stepped up to obtain quick and tangible
results in the fight against economic crime and corruption. The achievement of such
results requires full political commitment and the mobilisation of the necessary
material and human resources.
In January 2000, the Czech Republic ratified the OECD Convention on Combating
Bribery of Foreign Public Officials in International Business Transactions. On 8
September 2000, it ratified the Council of Europe Criminal Law Convention on
Corruption. The Czech Republic has not yet signed the Council of Europe Civil Law
Convention on Corruption.
Human rights and the protection of minorities
As indicated in the previous Regular Reports, the Czech Republic continues to respect
fundamental human rights and freedoms.
The Czech Republic further completed its participation in the main international
human rights conventions by ratifying, in November 1999, the European Social
Charter. However, the revised European Social Charter has not been signed yet.
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The Czech Republic has continued to develop its internal institutional framework in
the field of human rights. Following the establishment of a Human Rights
Commissioner mentioned in the 1998 Regular Report, the Act creating the Public
Protector of Rights (Ombudsman) came into force in February 2000. The
establishment of the Office of the Ombudsman is intended to reinforce the protection
of citizens against unlawful conduct of, and maladministration by public bodies and
institutions. The Ombudsman will be responsible for scrutinising ministries, district
and financial offices and other state administration bodies whilst investigating
whether fundamental rights and freedoms have been violated. He/she will also be
empowered to deal with complaints concerning the police, the army, prison services,
public health insurance offices and medical facilities. However, the Ombudsman has
no power to sanction the authorities, his powers being limited to notifying a superior
organ, or the Government, and to making the case public. Whilst several candidates
for the post have been proposed to the Chamber of Deputies, in line with the
established procedure, agreement has not yet been reached on the appointment.
Civil and political rights
The 1999 Regular Report noted the Parliamentary approval of the Access to
Information Act, with the purpose of ensuring citizens’ access to non classified
information, as well as approval of amendments to the citizenship law which made it
easier for former Czechoslovak citizens to obtain Czech citizenship. These pieces of
legislation have now entered into force. The Report underlined the problems of
prison overcrowding, the conditions of police detention and the persistence of
trafficking in women and children.
Since the last Regular Report, the outstanding issue regarding the
of those
individuals who lost their citizenship in the period between 1948 and 1990, under the
Communist regime, was addressed by an amendment to the Act on Citizenship of
Some Former Citizens. These individuals may now apply for acquisition of Czech
citizenship on the basis of a declaration.
The Minister of Justice has taken steps to improve the
prison system.
The budget for
the prison service was increased in 2000 from CzK 4.6 billion to CzK 5 billion,
equivalent to a 9% rise. The new Prisons Act , which came into force in January, aims
to bring about improvements in the rights and conditions of prisoners and in the
relationship between prisoners and prison services. However, certain aspects were
contested, in particular the introduction of a financial levy on prisoners. The Custody
Law has been amended to improve the conditions of suspects in custody.
Whilst prisons generally meet minimum international standards, the chronic problem
of overcrowding remains, with negative consequences for both prisoners and the
prison administration. Statistics of the Prisons Services indicate that the average
length of pre-trial detention has dropped slightly, from 225 as indicated in the 1999
Report, to between 190-200 days. In May 2000, the number of pre-trial detainees was
down to 6,457 and the total prison population fell to 22,953 whilst the total prison
capacity increased to 19,918. Thus a slight improvement has been registered since the
1999 Regular Report.
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The situation in a considerable number of
police detention
facilities remains
unchanged i.e. persons in detention are frequently unable to notify a third person of
their situation. In April 2000 the Czech Republic signed the Additional Protocol to
the Convention on the Transfer of Sentenced Persons.
Although specific laws prohibit
trafficking in women and children,
and despite the co-
operation between the authorities and third countries to enforce them, there is still
room for improvement in this area.
law, which entered into force in January 2000, aims to increase the
selectivity of criteria for granting asylum, notably by establishing a list of countries
deemed to be a “safe country of origin”. Applicants from these countries will be
unlikely to receive asylum. The new law also allows the state to finance legal advice
for asylum applicants and to support towns with asylum centres. However, the law
does not have an independent second instance for rejected asylum applications.
In 1999, 7,219 people requested asylum in the Czech Republic. In the period 1990-99,
1,898 were granted the status of refugee, of which 80 in 1999. The government funds
an integration program to assist those granted refugee status to locate housing and
receive other social assistance.
In March 2000 the Human Rights Council of the Czech Republic found that the
law, which entered into force in January, contains a number of discriminatory
provisions and, in particular, violates the Convention on Rights of the Child.
Subsequently, the government proposed an amendment in August which
inter alia
addresses this finding. The law on the
restitution of property
confiscated during the
Holocaust was adopted in the Chamber of Deputies. The law will allow the return of
confiscated property to the Federation of Jewish Communities or individual Jewish
communities. The Government has set aside CzK 300 million for a fund to
compensate owners whose property cannot be returned.
As regards
freedom of expression
and the media, in March the Parliamentary Media
Commission dismissed the Television and Radio Council on the legal grounds that
Czech TV had failed to fulfil its public service role. The Council was criticised widely
during the year for its lack of initiative and ineffective action in addressing an
ownership dispute at the country’s largest private television channel.
Economic, social and cultural rights
As regards
equal opportunities,
the Czech Republic signed the optional protocol to the
Convention on the Elimination of All Forms of Discrimination against Women
(CEDAW) in December 1999. Nonetheless, despite the ban on all forms of
discrimination against women, salaries for the same type of work remain
approximately 25% lower than those of men according to the 1999 report on human
rights of the government Council for Human Rights.
An amendment of the Employment Act which entered into force in October 2000 bans
all forms of discrimination and gives the district labour offices the power of sanction
(for details see Chapter 13 – Social Policy and Employment in part B.3.1. of this
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In April 2000, the law on the social and legal
protection of children
entered into force.
In 2000 there have been demonstrations prompted by the non-payment of wages by
some large firms. This is reported by the government to be affecting 53,000 workers.
The Act on the Protection of Employees in case of insolvency, which came into force
in May 2000, addresses this issue by making district labour offices responsible for the
payment of wages in case of insolvency. In addition, the government launched a loan
scheme, which enables district offices to grant loans to people who are not being paid.
Membership in
trade unions
has been steadily declining since 1989 and continued to
do so in 1999. While in 1998 26% of the labour force was unionised, by 1999 this
had fallen to 23%. The spokesman of the Czech-Moravian Confederation of Trade
Unions said that the decrease in membership is mainly due to the industrial
Minority rights and the protection of minorities
The 1999 Regular Report concluded that the greater attention paid by the government
to the improvement of the condition of the
needed to be translated into a
comprehensive long-term policy to fight discrimination and social exclusion. The
1999 Accession Partnership established as a short term priority the implementation of
the Government Resolution of 7 October on Roma including provision for the
necessary financial support, measures aimed at fighting discrimination, fostering
employment opportunities and increasing access to education.
In June 2000 the Czech government adopted a draft outline for a long-term policy
called, “Concept of the Government Policy towards Members of the Roma
Community”. It envisages a strategic action programme for the period 2001-2020,
focusing on the key areas of education, employment, housing and the fight against
discrimination. The Inter-Ministerial Roma Commission also submitted a progress
report in June 2000 on the fulfilment of the measures of the government’s 1997 action
plan to improve the situation of the Roma. The report indicates that the vast majority
of the measures have been fulfilled.
The action plan has had the most tangible results in the field of education. The 1999
state budget set aside CzK 12.3 million to pay for assistants for Roma children in
kindergartens, primary schools and special schools. There are currently 180 assistant
teachers in schools helping Roma children.
The Ministry of Education, Youth and Sports has recommended that schools include
in their syllabus multicultural education programmes and schools have acted to make
information concerning Romany culture more widely available. An amendment to the
School Act entered into force in February 2000 which significantly improves access to
higher education for the Roma community.
Nonetheless, education levels for Roma children remain low and these still make up
some 70 % of children sent to special schools ie schools for children with educational
difficulties. Out of the extended network of 114 preparatory schools set up in 1999 to
prepare Roma children for mainstream primary schools, 41 have actually been set up
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in the special schools. The European Roma Rights Centre (ERRC), an independent
body based in Budapest which monitors Roma human rights issues and provides legal
defence, has filed a suit against the Ministry of Education and the principals of the
special schools, alleging that the high proportion of Roma children in special schools
has meant
de facto
segregation. The action was first brought before the Czech
Supreme Court but was dismissed in October 1999. The ERRC then took the case to
the European Court of Human Rights in April, where the case is still pending.
There have been some positive steps in the field of housing. In particular, in April
2000 the government earmarked CzK 32.5 million for the reconstruction of two
buildings, mainly occupied by Roma, in Brno (Moravia). The government will also act
as guarantor for a CzK 32.5 million soft loan from the Council of Europe
Development Bank to the city of Brno.
In October 1999 the city of Usti nad Labem constructed a wall between a building
occupied mostly by Roma citizens and its neighbours across the street. The Chamber
of Deputies reacted by condemning the construction of the wall. The government also
expressed its opposition, and appointed a deputy Minister for the Interior as its special
mediator in discussions between the district authority and the local council.
Subsequently, in November the city dismantled the wall. In return it received a state
subsidy worth CzK 10 million, of which CzK 3.6 million was used to buy the houses
of the citizens who had required the Council to build the wall. In April the
Constitutional Court upheld a subsequent complaint by the City Council that the
Chamber of Deputies’ vote to abrogate the City Council’s decision to construct the
wall was not in line with the division of competence between Parliament and local
As regards the overall situation of the Roma in the Czech Republic, further efforts are
needed, in particular to combat anti-Roma prejudice and to strengthen the protection
provided by the police and the courts. Estimated Roma unemployment remains very
high at 70-90 %. Health and housing conditions are still much worse in the Roma
communities than amongst the general population. Attitudes at local level are largely
unaltered, as illustrated by some recent district court judgements. The inter-
Ministerial Roma Commission still has no budget to implement policies, no executive
power and few permanent staff. The long-term strategic action programme essentially
comprises a list of tasks for individual ministries, but contains no overall budgetary
In June the government approved the draft principle of a law on the rights of national
On the whole the situation as regards
other minorities
in the Czech Republic
(comprising particularly Slovaks, Poles, Germans, Hungarians and Ukrainians)
remains satisfactory. In March 2000 the Ministry of the Interior banned the National
Alliance, an extremist group. Nonetheless, the Ministry of the Interior’s 2000 Report
on Extremism noted a slight increase in the number of followers of
over the period 1998-1999 (following a doubling of membership over the
period 1997-1998).
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In 1999 the number of racially motivated or extremist crimes rose to 316 (from 133 in
1998) of which 273 were solved (compared to 100 in 1998). The 2000 Report on
Extremism stressed the improved effectiveness of the police and the increase in the
number of crimes reported, especially by the Roma. In 1999, there were no fatalities
caused by extremist movements although a number of assaults took place.
A number of positive steps have been taken to fight discriminatory attitudes and the
spread of racism. In particular, in December the government launched an anti-racism
campaign for the first time, allocating CzK 10 million from the state budget.
General evaluation
The Czech Republic continues to fulfil the Copenhagen political criteria. Recent
significant developments include, in particular, a more effective collaboration between
the government and Parliament.
There has been progress in setting the legal framework for regional government.
However, the reform of the public administration has not advanced significantly and
therefore the short term priority of the Accession Partnership in this field has not been
met. The reform of the judiciary is equally a short term priority of the Accession
Partnership. Whilst progress has been made, it is regrettable that certain key parts of
the reform have not yet been adopted. Administrative and judicial reform are both
essential for effective enforcement of the
and improved good governance.
Thus efforts must be pursued in these fields, in line with the medium term priorities of
the Accession Partnership.
Furthermore, the fight against corruption and economic crime has so far been
insufficient. Tangible results in this field will respond to public concern and help
ensure a transparent business environment.
The Czech Republic continues to respect human rights and freedoms and has
developed its internal institutional framework in this field. Nevertheless, areas of
concern remain, in particular overcrowding of the prison system and persistence of
trafficking in women and children.
Increased and, in some areas, significant efforts have been made since last year
regarding the situation of the Roma community, notably with regard to the education
system. However, a lasting improvement in the situation of the Roma requires
sustained effort over time. Further progress is needed, as indicated in the medium
term priorities of the Accession Partnership.
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2. Economic criteria
In its 1997 Opinion on the Czech Republic´s application for EU membership, the
Commission concluded:
"The Czech Republic can be regarded as a functioning market economy; it should be
able to cope with competitive pressure and market forces in the Union in the medium
term provided that change at the enterprise level is accelerated."
This finding was confirmed in the 1998 and 1999 regular reports. In its 1999 regular
report the Commission found that
"The Czech Republic should be able to cope with competitive pressure and market
forces within the Union in the medium term, provided that the government accelerates
implementation of legal and structural reforms."
In examining the economic developments in the Czech Republic since the 1997
Opinion, the Commission’s approach is guided by the conclusions of the European
Council in Copenhagen in June 1993 which stated that membership of the Union
the existence of a functioning market economy;
the capacity to cope with competitive pressure and market forces within the
In the analysis below, the Commission has followed the methodology applied in the
Opinion, as well as in the previous regular reports.
Economic developments
The macroeconomic situation in the Czech Republic has improved since the last
regular report.
Three years of recession came to an end in the second quarter of 1999,
when GDP growth resumed. In the first half of 2000, real GDP growth rose by 3.1%.
This recovery was driven by external demand, reflecting the revival of economic
activity in the EU, and by private consumption. The unemployment rate, which
increased during the period of recession and reached 9.4% by the end of 1999, edged
down to 9% in August 2000. Foreign direct investments have supported job creation
and have helped to offset part of the job losses due to restructuring. The current
account deficit narrowed from 2.4% of GDP in 1998 to 2% in 1999. As a result of
prudent monetary policy, inflation fell to an average rate of only 2.1% in 1999, but,
mainly due to the rise in international commodity prices, the inflation rate has recently
been increasing. The general government budget deficit in 2000 will be considerably
higher than the 0.6% of GDP recorded in 1999. The monetary and fiscal policy mix
has been appropriate.
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Czech Republic
Real GDP growth rate
Inflation rate
- annual average
- December-on-December
Unemployment rate, end-year
- ILO definition
General government budget
Current account balance
per cent
2000 latest
3.1 Jan-June
per cent
per cent
4.1 Sept
per cent
8.7 April-June
per cent of GDP
per cent of GDP
–754 E Jan-June
Foreign debt
- debt export ratio
- gross foreign debt
Foreign direct investment in flow
- balance of payments data
per cent
37.7 E
11,932 E
per cent of GDP
2,135 E Jan-June
E = Estimates
The Czech Republic has accelerated structural reforms.
Privatisation activities, which
were under review in 1999, were re-launched at the beginning of 2000, when the
minority government and the largest opposition party agreed to complete the
remaining privatisation of large enterprises within the next two years. The
Revitalisation Agency has selected nine large companies to be restructured. With a
view to the improvement of business practices, the privatisation of banks has been
progressing with the sale of
Spořitelna (the Czech savings bank) to a foreign
bank; Komerční Banka, the largest commercial bank in the Czech Republic and the
only one left with a majority state participation is envisaged to be privatised in 2001.
The agreement between government and opposition also contains commitments on
income tax and pension reform.
PROXY HICP since 1996 (see methodological notes).
Moving 12 month average rate of change.
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Main indicators of Economic Structure in 1999
Population (average)
GDP per head
Per cent of
EU average
Share of agriculture
- gross value added
- employment
Investment-to-GDP ratio
Gross foreign debt/GDP
Exports of goods &
Stock of foreign direct
End of 1999 data (Eurostat)
per cent
per cent
per cent
per cent
per cent
per head
Assessment in terms of the Copenhagen criteria
The existence of a functioning market economy
As set out in Agenda 2000, the existence of a functioning market economy requires
that prices, as well as trade, are liberalised and that an enforceable legal system,
including property rights, is in place. Macroeconomic stability and consensus about
economic policy enhance the performance of a market economy. A well-developed
financial sector and the absence of any significant barriers to market entry and exit
improve the efficiency of the economy.
The agreement between the minority government and the largest opposition party has
resolved the differences on the implementation of economic policy, and thus reflects
greater consensus.
Only after reaching this agreement, could the state budget for 2000
be approved by Parliament in March 2000. The Government has committed itself to a
Figures have been calculated using the population figures from National Accounts, which may differ
from those used in demographic statistics.
Agriculture, hunting, forestry and fishing.
Data refer to Gross fixed capital formation as % of GDP.
The 1999 data for foreign debt are estimates.
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gradual reduction of budget deficits. However, the agreement also allows the
government to create new extra-budgetary funds for housing and transportation. The
Government has further agreed not to raise income tax, to submit a proposal for
pension reform and to speed up privatisation.
The medium-term framework for macroeconomic policy in the Czech Republic is
provided by the Government’s "Economic Strategy of the Accession to the European
Union", which was adopted in May 1999.
In November 1999 the Czech government
and the European Commission services signed a "Joint Assessment of Economic
Policy Priorities", which reviews the economic policy options for the medium term.
Considering the current favourable macroeconomic developments in the Czech
Republic, the government is planning to move medium term economic priorities into
the centre of attention, especially in the area of fiscal policy. Policy co-ordination
between the Government and the Czech National Bank has improved substantially.
The Government has endorsed the CNB’s medium-term monetary strategy and the
inflation target for 2001. A joint policy has been formulated in order to contain
upward pressure on the currency. Special attention needs to be paid to the preservation
of the central bank’s independence, as required by the EC
In 1999 real GDP contracted by 0.2%, compared with a negative growth rate of 2.3%
in 1998.
The recession of the Czech economy bottomed out in the first quarter of
1999, when real GDP was 3.3% lower than in the same period of the previous year.
Growth picked up subsequently, although only moderately at first. The recovery was
led by external demand and private consumption. Fixed capital formation, which
shrank by 5.5% year-on-year, contributed more negatively to economic growth than
the year before. In the first half of 2000, however, fixed capital formation increased by
3.8% and overall economic growth was 3.1% compared with the same period of 1999.
Strong demand in the EU continued to push up exports, which rose by 22.5% in value
year-on-year, whilst imports increased by 19.4%.
Unemployment in the Czech Republic has remained at a rather high level.
This goes
hand in hand with wide regional disparities. At the end of January 2000, the
unemployment rate peaked at 9.8%, after which it came down to 9.0% at the end of
August 2000. This decline reflected the economic recovery, the job creation due to
foreign investments, helped by active labour market policy. However, as an
acceleration of large-scale enterprise restructuring is likely to increase lay-offs, the
challenges of reducing structural unemployment and improving the flexibility of the
labour market remain.
Inflation came down sharply from an average rate of 10.7% in 1998 to 2.1% in 1999.
The inflation target of the Czech National Bank, which had been set at 4.5±0.5%, was
undershot considerably, as was the case in 1998. The sharp reduction of inflation was
the result of prudent monetary policy and low economic activity in the first three
quarters of 1999. Since the end of the year, the resumption of price deregulation, the
rise in world energy prices and the recovery of economic activity have induced an
acceleration of inflation to 4.1%, at the end of September 2000 year-on-year. Net
inflation, excluding administrative price changes, amounted to 3.2% .
Monetary policy has been eased over the last year in an attempt to support the growth
prospects of the economy.
In the autumn of 1999 the Czech National Bank cut the key
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interest rates, but it took some time for these measures to have effect in terms of
market rates offered to the public. Commercial banks have remained cautious in the
extension of credit to enterprises as they still suffer from weak balance sheets and
insufficient management capacity.
Strong foreign capital inflows have continued to put the Czech crown under upward
Though an explicit exchange rate target does not exist for the Czech
currency, the central bank has been intervening selectively in the foreign exchange
market in order to prevent the Czech crown from undesirable appreciation. Renewed
foreign capital inflows are expected for this year. As one element of the "Strategy of
Economic Policies in a Period of Higher Capital Inflows", the Government has
established a special account to collect privatisation revenues from foreign investors
by the Czech National Bank.
The current account deficit has narrowed significantly.
In 1999 it fell to 2% of GDP
from 2.4% in 1998. The improvement was caused mostly by a decrease in the trade
deficit. In 1999 exports grew significantly slower than in 1998, but export growth still
outpaced import growth. The deficit was more than fully covered by financial flows,
which added to the reserves. This situation continued in the first half of 2000.
In 1999, the general government posted a deficit of 0.6% of GDP, benefiting from a
surplus on the budget of local authorities.
This result was far better than the expected
deficit up to 3.5% of GDP and could only be achieved by deferring the 1998 losses of
state-owned Konsolidacni Banka to the 2000 budget. At the beginning of this year, the
deficit of the general government budget for 2000 was projected to be about 3.5% of
GDP, but the government has recently revised its projection to 5.2% of GDP. It has
explained the higher deficit with the need to cover Konsolidacni Banka´s losses of
1998 and 1999, which amount to
billion. However, if privatisation receipts
were not counted as revenue, the general government deficit would reach some 7.7%
of GDP. Official public debt rose by
billion in 1999, leading to a total debt
stock of
billion (or 16% of GDP).
Fiscal reform is a political priority.
The government has taken steps to enhance fiscal
transparency in line with the IMF Code of Good Practices on Fiscal Transparency. A
new Law on Budgetary Rules for the State Budget was approved, which requires the
government to present an indicative three-year rolling budget simultaneously with the
annual draft of the state budget. The law will enter into force on 1 January 2001 but it
has already been applied to the draft state budget for 2001. Furthermore, a complete
list of outstanding state guarantees will be worked out, including the medium-term
projection of the losses of the off-budget institutions.
A strong commitment to fiscal transparency is needed to stop the proliferation of off-
budget deficits and contingent liabilities, which could endanger macroeconomic
sustainability in the medium term.
If the official fiscal deficit of the general
government were to be adjusted for the deficits of all off-budgets entities, the fiscal
deficit would be considerably higher. Moreover, significant contingent liabilities have
been accumulated through off-budget funds and the extensive use of state guarantees.
These liabilities, if properly accounted, could double the amount of public debt. Most
worryingly, this situation continues to deteriorate. New off-budget entities are being
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created - the Transportation Fund and the Housing Fund - and the amount of state
guarantees is rapidly increasing in connection with bank and enterprise restructuring.
Privatisation of strategic enterprises has been revived.
The proportion of private
ownership has remained more or less constant since 1996. Three quarters of GDP is
produced in the private sector. The state, through the National Property Fund, still
retains significant stakes in more than some 350 companies. Apart from the successful
sale of the Ceska Sporitelna bank, the state sold its 30% share in Skoda Auto to
Volkswagen AG in June 2000. The approval of the new Telecommunications Act in
early 2000 has paved the way for privatisation in the telecommunications sector. The
sale of the oil refinery Paramo is also expected to take place in 2000. In addition, the
large-scale enterprises in the portfolio of the Revitalisation Agency are being prepared
for sale. Finally, it is worth noting that the state is actively involved in the
restructuring of already privatised enterprises.
Market forces determine the prices of a vast majority of goods.
Trade and foreign
exchange regimes have been liberalised. Administered prices form 18% of the
consumer basket. Price deregulation, which slowed down in 1999, has gained
momentum this year. The government has committed itself to pursuing further price
alignments aiming to eliminate market distortions. In 2000, prices for public transport,
postal services, housing, gas and electricity will be increased. The deregulation of
administered prices is foreseen to be completed by the end of this parliamentary term.
Market entry and exit mechanisms have not been functioning sufficiently well.
registration of business activities continues to be a lengthy and uncertain process in
the Czech Republic, marred by inequality of treatment. Similarly, the lack of efficient
bankruptcy procedures has been a serious drag on economic adjustment in the
enterprise sector. In 1999, the number of bankruptcy proposals submitted to courts
amounted to about four thousand, but only two thousand bankruptcy judgements were
delivered. Obsolete bankruptcy legislation and capacity and qualification problems
within the courts have been the main reasons. An amendment to the Bankruptcy Law
and a new Law on Public Auctions entered into force in May 2000. The new
legislation aims to accelerate bankruptcy proceedings and to balance creditor’s and
debtor’s rights by allowing specialised firms or legal persons to act as trustees in
bankruptcy. The Law on Public Auctions further simplifies the procedure of recovery
of claims in favour of the creditor through seizure and sale of collateral. As the role of
courts remains dominant, the effective implementation of the amended Bankruptcy
Law depends very much on improvement of the court system. That the amended
Bankruptcy Law is still not satisfactory is illustrated by a new amendment that has
recently been submitted to Parliament.
Although private ownership is dominant in the economy as a whole and the land
market has been liberalised, a large share of agricultural land is still in state hands.
Currently, the State Land Fund is supervising about 900,000 hectares of agricultural
land; plans of selling off some 500,000 hectares have been discussed for a long time.
An amendment to the law on the sale of state land, which entered into force in June
1999, has created the legal basis for privatising state property in the coming years.
However, the amendment to the Transformation Law of 1992, settling ownership
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relations in agricultural co-operatives, was abrogated by the Constitutional Court at
the end of last year.
Banking privatisation has speeded up during the last two years, leaving only
Komercni Banka majority state-owned.
The banking sector currently comprises 42
commercial banks, with about two thirds of the assets representing foreign capital.
The sale in March 2000 of Ceska Sporitelna to a foreign bank for
515 million was
conducted in a transparent manner. Privatisation of the largest commercial bank,
Komercni Banka, was hampered by the discovery of irregularities and fraud. In
February 2000, the government agreed to a massive bailout of Komercni Banka, and
transferred bad assets worth
billion to a new subsidiary that was sold to
Konsolidacni Banka. Despite these delays the privatisation of Komercni Banka is
expected to be completed at the beginning of 2001.
Investicni a postovni banka (IPB) – the third largest bank in the Czech Republic and
privatised in 1998 – experienced severe problems in maintaining the legal capital
adequacy ratio due to the high level of classified loans in its portfolio.
This led in turn
to growing concern on the part of depositors, who withdrew considerable amounts of
money from the bank, provoking a liquidity crisis. The Czech National Bank and the
Government acted in concert to calm the fears of depositors and find an adequate
solution to the problems of IPB. Forced administration was imposed on 16 June 2000,
and on 19 June, the bank was sold to Ceskoslovenska Obchodni Banka (CSOB),
which had itself been successfully privatised in 1999. Although intervention by the
authorities might have been the only available option under the circumstances, it
should have been possible to avoid such actions by strong, independent, supervision
of the banking sector.
Despite sharp falls in nominal interest rates, the supply of bank credit to the private
sector has in fact declined, as banks have become more cautious in extending new
The domestic credit to GDP ratio was 65% in 1999. The large amount of bad
loans represents a serious burden for the Czech banking sector. In 1999, bad loans,
excluding Konsolidacni Banka, amounted to
billion, or 32% of all loans; around
40% of the bad loans were labelled as losses. Konsolidacni banka’s total assets, which
consist of the bad loans of the rest of the banking sector, increased by almost 39% in
1999 to
billion. Thus, overall, bad loans in the Czech financial system have
billion, or 26.5% of GDP, which is a serious matter of concern.
Since its establishment, the work of the Securities Commission has met with only
partial success.
The situation on the Czech capital markets is still characterised by
significant lack of transparency and by price manipulation. Although the regulatory
framework has been strengthened and the Securities Commission has enforced it with
determination, the capitals market remains largely illiquid and a negligible source of
finance for commercial and industrial enterprises. This does not encourage strong
corporate governance. The continued presence of divergent prices for the same stock
due to the fragmented organisation of the securities market remains an important
problem. The new law on securities, now under discussion, should be an opportunity
for increasing the regulatory and enforcement powers of the Securities Commission.
The failures of the financial sector, combined with deficiencies in the enterprise sector
and weaknesses of the legal system, have allowed the development of some
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inappropriate business practices.
This has manifested itself in the stripping of assets
from enterprises by managers, known in the Czech Republic as “tunnelling”, which
has affected many of the industrial companies privatised through the coupon
privatisation scheme of the mid-1990s, in addition to investment funds, and
agricultural co-operatives. The recent collapse of most credit unions, in which 70% of
the deposits are unaccounted for, and the irregularities and fraud uncovered in several
banks, are the results of those business practices. Better co-operation between the
police, the courts, the Securities Commission and other supervisory institutions is
needed to fight these irregularities effectively.
The Czech Republic can be regarded as a functioning market economy. In the past
year, macroeconomic stability has increased. Growth has resumed, while the
favourable performance on inflation and the external balance has been maintained.
Efforts are being made to increase the transparency of the public accounts. However,
measures need to be taken in order to ensure fiscal sustainability in the medium term.
Progress has been made on further restructuring and privatisation of banks. The
strengthening of proper supervision in the financial sector is crucial in order to
reinforce macro-economic policies and to foster economic activity. The prudential
regulations should be implemented without further delay. Moreover, every effort
should be made to maintain the momentum in the process of restructuring and
privatisation of state-owned enterprises and to effectively implement the recent
amendment to the bankruptcy laws. Effective action must be taken to strengthen
corporate governance and the enforcement of laws.
The capacity to cope with competitive pressure and market forces within
the Union
As set out in Agenda 2000, the Czech Republic's ability to fulfil this criterion depends
on the existence of a market economy and a stable macroeconomic framework,
allowing economic agents to make decisions in a climate of predictability. It also
requires a sufficient amount of human and physical capital, including infrastructure.
State enterprises need to be restructured and all enterprises need to invest to improve
their efficiency. Furthermore, the more access enterprises have to outside finance and
the more successful they are at restructuring and innovating, the greater will be their
capacity to adapt. Overall, an economy will be better able to take on the obligations of
membership the higher the degree of economic integration it achieves with the Union
prior to accession. Both the volume and the range of products traded with EU Member
States provide evidence of this.
Macroeconomic policy has been conducted with a sufficient degree of predictability to
allow proper decision making by economic agents.
Co-ordination of economic
policies and regained macroeconomic stability have improved the general
environment for economic activity.
The Czech Republic has enjoyed high overall levels of investment over the years.
Fixed investment, as a share of GDP, has been around 30%. Infrastructure is
comparatively well-developed. However, the additions to the capital stock have not
led to rapid and sustained output growth, mainly due to former inconsistencies in
economic policies. Past investment in both the private and public sector are starting to
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bear fruit in a more appropriate economic environment. In this respect, it is worth
noting that productivity growth has recently outstripped the growth in real wages.
The country has a skilled and educated workforce, as illustrated by the short
qualification periods reported by foreign investors.
Considering ongoing industry
restructuring and adjustments in the agricultural sector, adequate qualification and
training measures are gaining importance in order to develop new or extend existing
skills. The government is aware of this challenge and has adopted a "National
Employment Plan" in May 1999, and has signed a "Joint Assessment of Employment
Priorities" with the European Commission services in May 2000. Both strategies aim
to increase the flexibility of the labour markets and to improve the skills of the
unemployed to better respond to growth opportunities.
Foreign direct investment has been very strong in 1999, reaching an inflow of
billion (more than double the level of 1998) or about 9.2% of GDP.
This result was
strongly affected by the sale of CSOB to a foreign bank. Strong foreign direct
investment should continue in 2000, as the first quarter already showed inflows close
billion and significant privatisation projects are scheduled for the remainder of
the year. Greenfield investments are becoming more important. Attractive investment
packages have supported this development up to now. However, beyond the beneficial
impact on employment, productivity, exports, and growth, the extent of these
incentives should be considered carefully in terms of their fiscal cost and the impact
on distorting initial investment incentives.
Overall, enterprise restructuring has gained momentum, but continued political
support is needed as the process involves sizeable lay-offs.
The programme for the
revitalisation of industry approved by the Government in April 1999 is on track. The
Revitalisation Agency, a 100% subsidiary of Konsolidacni Banka, started to operate in
November 1999. Its portfolio includes nine major industrial companies, and it
provides financing for companies with realistic medium-term perspectives. However,
it is not clear how these companies have been selected (see also Chapter 15 –
Industrial policy). The Agency follows a tailored approach for each firm and, in spite
of the high social cost of restructuring in some cases, the Government has so far
refrained from interfering in the operations.
The overall business climate in the Czech Republic has improved in the past year.
new Act on Investment Incentives entered into force in May 2000. The new Act
maintains the minimum level of investment of $10 million as a general threshold, but
this can be reduced to $5 million in areas with high unemployment. Another change
with respect to the previous arrangements is that the new Act has introduced tax
incentives to already existing companies which plan expansion. The package of
investment incentives contains the possibility of direct tax holidays of up to 10 years,
duty free technology imports, job creation and training grants, and subsidies for
building up infrastructure.
The Czech Republic has already achieved a high degree of trade integration with the
It continues to increase, with the EC accounting for 69% of total Czech exports
and 64% of imports in 1999. The main traded goods, both on the export and the
import side, are manufactured products and machinery and transport equipment. These
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higher value-added categories have also continuously increased in importance as a
share of total exports to the EC.
Small and medium-sized enterprises (SMEs) comprise 56% of the labour force and
produce 53% of GDP.
SMEs in the Czech Republic still have limited access to
outside finance and to business advisory services. The SME development strategy
adopted by the government in June 1999 is aimed at tackling these problems whilst
improving the business environment, enhancing access to training and encouraging
the internationalisation of SME business activities. In addition, the SME fund has
been doubled. The Government should now ensure the full and transparent
implementation of this strategy, including a better co-ordination between the many
agencies that are active in this field
(see also Chapter 16 – Small and medium-sized
The Czech Republic should be able to cope with competitive pressure and market
forces within the Union in the near term, provided that it keeps up and completes the
implemention of structural reforms. The authorities need to concentrate on developing
a transparent and predictable environment supportive of business activity - especially
in the area of small and medium-sized enterprises - and on other measures conducive
to sustaining economic growth. In this respect, the further improvement of the legal
framework, the strengthening of corporate governance, the acceleration of enterprise
restructuring, and the continued development of the financial sector are essential.
These measures would result in more efficient enterprise and banking sectors, and
help to sustain increases in productivity and competitiveness.
General Evaluation
The Czech Republic can be regarded as a functioning market economy and should be
able to cope with competitive pressure and market forces within the Union in the near
term, provided that it keeps up and completes the implementation of structural
Macroeconomic stability has increased. Growth has resumed, while the favourable
performance on inflation and the external balance has been maintained. Efforts are
being made to increase the transparency of the public accounts. Progress has been
made on further restructuring and privatisation of banks.
However, the strengthening of competition and of supervision in the financial sector is
crucial in order to reinforce macro-economic policies and to foster economic activity.
The sustainability of public finances in the medium-term is not yet assured. The
efforts to privatise and restructure the state owned enterprises must continue and
corporate governance must improve.
The authorities need to concentrate on developing an environment supportive of
business activity – especially in the area of small and medium-sized enterprises.
Further improvement of the legal framework, the implementation of the prudential
regulations for the financial sector and the continued development of this sector are
essential. The restructuring and privatisation of state-owned enterprises and the
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restructuring of other enterprises must go hand in hand with the strengthening of
corporate governance.
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3. Ability to assume the obligations of membership
This section aims to update the Commission’s 1999 regular report on Czech
Republic’s ability to assume the obligations of membership - that is, the legal and
institutional framework, known as the
by means of which the Union
implements its objectives. Alongside an evaluation of relevant developments since the
1999 regular report, this section seeks to provide an overall assessment of Czech
Republic’s ability to assume the obligations of membership, and of what remains to be
done. This section has been structured to follow the list of twenty-nine negotiating
chapters, and incorporates also an assessment of Czech Republic’s administrative
capacity to implement the
in its various aspects (in previous regular reports this
had been covered in a separate section). Furthermore, for the first time, a separate
section has been included assessing progress made by Czech Republic in translating
into its official language.
The European Council in Madrid in December 1995 referred to the need to create the
conditions for the gradual, harmonious integration of the candidates, particularly
through the adjustment of their administrative structures. Taking up this theme, in
Agenda 2000 the Commission underlined the importance of incorporating Community
legislation into national legislation effectively, and the even greater importance of
implementing it properly in the field, via the appropriate administrative and judicial
structures. This is an essential pre-condition for creating the mutual trust
indispensable for future membership, which has become a central issue in the
negotiation process.
The European Council in Feira in June 2000 recalled the link between progress in the
negotiations and the candidate countries’ capacity to effectively implement and
enforce the
and added that this called for important efforts by the candidate
countries in strengthening their administrative and judicial structures. The Feira
European Council invited the Commission to report to the Council on its findings on
the matter. Building on the assessment of Czech Republic’s administrative capacity
provided in the 1999 regular report, the present report seeks to add further depth and
detail, focusing on the main administrative structures which are required for
implementing the
in its various aspects.
In the 1999 regular report, the Commission concluded that :
“The pace of legislative alignment in the Czech Republic has not picked up
significantly and progress is uneven across sectors. Alignment and effective
application of the laws are well advanced in the area of standards and certification
although there is a need to complete the legislative framework through adoption of
amendments to the existing framework legislation, sector legislation and product
liability legislation. Further progress has been made in liberalisation of capital
A description of the
for each chapter can be found in the Commission’s 1997 Opinion on
Czech Republic’s application for EU membership.
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markets with an amendment to the Foreign Exchange Act and in the banking and
insurance sectors. A high level of alignment has been reached in the customs area and
legislation adopted on border enforcement (counterfeit and pirated goods) combined
with a continuing focus on modernisation of information systems indicated that
necessary attention is being paid to the effective enforcement of the laws. Continued
efforts are being made to put the necessary structures into place for regional and
structural policy. It is important that the legal framework be completed and
administrative capacities reinforced so as to sustain momentum in this field.
In other key internal market areas such as intellectual property, public procurement,
data protection, insurance, anti-trust, state aids and VAT/excise, legislation is already
partially aligned, but there has been little or no movement towards completing
alignment. Although preparatory work has been done, the legal framework for state
aids is incomplete and the resources committed to the area are insufficient to ensure
an effective system of state aid monitoring. No effort has been made to align audio-
visual legislation. In environment, a general policy was adopted, some conventions
ratified and a limited number of laws passed. However important framework
legislation has not been adopted and an implementation plan with investment
planning has not been worked out. Until a more coherent approach is adopted, there is
a risk of a piecemeal approach to the alignment process . Other than air transport,
alignment in the transport sector has not moved ahead. The pace of alignment in
agriculture, veterinary and plant health is slow. No progress was made in the areas of
labour legislation and health and safety at work. Apart from adopting laws on drugs,
efforts in the area of justice and home affairs have stalled. The pace of alignment
needs to pick up substantially across the board.
The Czech Republic has taken limited steps toward general public administration
reform. The Government has recently approved a programme for overall reform of the
judiciary which addresses current problems such as vacancies, a lack of specialisation
of the judges, lack of equipment and inadequate training. Capacities in certain areas of
the internal market
are well developed and progress has been made in
strengthening banking and financial services supervision capacities. State aid
monitoring capacities need to be strengthened and independent authorities for data
protection and telecommunications still need to be set up. While the veterinary and
phytosanitary administrations are being reinforced to meet EC requirements, little
progress has been made in setting up the structures necessary for the implementation
of the Common Agricultural Policy. Efforts need to be stepped up in general public
administration reform and continued attention needs to be paid to border management,
enforcement of environment legislation and improving internal financial control
capabilities. Initiatives in the fight against organised crime and corruption should
also be reinforced.
The Czech Republic’s record in terms of meeting the short term Accession
Partnership priorities is not satisfactory, despite efforts by the government to prepare
and put forward legislation. The difference between the government’s policy
intentions and implementation can be explained by the length of parliamentary
procedures, the minority status of the government and the fact that certain priority
policy areas did not receive sufficient attention from previous government. While the
Czech Republic met short term Accession Partnership priorities in areas such as
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economic reform, standards and certification, regional development and veterinary,
priorities in the areas of industrial restructuring, administrative capacity (strengthening
environment and agricultural institutions), the internal market (alignment of
intellectual property and state aid legislation), justice and home affairs (border
enforcement) and environment have not been adequately dealt with.”
The chapters of the
As indicated, the review of the Czech Republic’s ability to assume the obligations of
membership that is provided below has been structured in accordance with the list of
twenty-nine negotiating chapters. Accordingly, this section opens with an assessment
of progress related to the so-called “four freedoms”, the cornerstones of the internal
market, and continues with a systematic review of progress on each of the chapters, to
cover the
in all its various aspects: sectoral policies, economic and fiscal
affairs, economic and social cohesion, innovation, quality of life and environment,
justice and home affairs, external policies, and financial questions.
Chapter 1: Free movement of goods
The 1999 Regular Report stated that continued progress could be noted in this area.
This positive assessment can be repeated this year.
In the area of
horizontal and procedural measures,
one of the short-term priorities
of the 1999 Accession Partnership was to modify horizontal legislation on technical
requirements for products, conformity assessment and public health protection. The
process of alignment has been progressing well and is generally well advanced. In
April 2000 an Amendment to the Act on Technical requirements for products of 1997
came into force, concerning essential requirements and conformity assessment
procedures. This will permit the full implementation of the principles of the New
Approach through a number of new Government Orders adopted in July. It will also
facilitate implementation of the Protocol to the Europe Agreement on conformity
assessment and acceptance of products (PECA) initialled in July 2000. The areas
covered by the annexes to the PECA are machinery, lifts, personal protective
equipment, electrical safety, electromagnetic compatibility, equipment and protective
systems intended for use in potentially explosive atmospheres, hot water boilers, gas
appliances, pressure equipment and good manufacturing practice for medicinal
products: inspection and batch certification. The level of the transposition of technical
standards amounts to around 90 % of the total of European technical standards,
demonstrating good progress.
Concerning administrative capacity, progress has been made in meeting the Accession
Partnership short-term priority to improve market surveillance and conformity
assessment structures as regards equipment and training of staff. A network of
conformity assessment bodies has been enlarged. The authorised bodies are expected
to act as notified bodies in the sectors covered by the PECA with mandates lasting
only two more years, while new unlimited authorisations were granted to bodies
operating in the areas of lifts, medical devices and pressure equipment. Further
improvement in technical equipment for authorised bodies and metrological
laboratories has been supported.
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In the fields of
sector specific legislation,
further progress has been achieved in
overall alignment of legislation, in line with the short-term priorities of the Accession
Partnership. The EC Directive on Safety of Toys is now transposed since July 2000
but technical standards must be further aligned. In the area of legal metrology and pre-
packaging the amendment to the Act on Metrology came into force in July 2000
followed by three implementing Decrees in August 2000. The institutional
responsibility lies with the Czech Metrological Institute. The personnel are constantly
trained and the effectiveness of the institution is at a very good level.
With regard to medical devices, further progress was made following the adoption of
both the Act on Medical Devices, which came into force in July 2000, and the
Government order laying down technical requirements for active implantable medical
devices which came into force six months earlier. The veterinary medical legislation is
in line with the
following the approval of the Act on Veterinary Care and of the
subsequent secondary legislation in 1999. The legislation in the area of simple
pressure vessels and pressure vessels is in line with the
following the entry into
force of the Government regulation in January 2000. In the area of construction
products a Government Order on technical requirements came into force in October
The area of chemicals is in line with the
following the entry into force of the
Act on Chemical Substances and Preparations in January 2000. The registration
authority for chemical substances placed on the Czech market works well. The
Designated National Authority managing the import and export of selected dangerous
substances works satisfactorily. An amendment to the Act on Dependency Producing
Substances entered into force in July 2000, accompanied by specific secondary
legislation on export authorisations, record-keeping and documentation.
The amendment to the Act on Fertilisers was also adopted and will enter into force in
January 2001. The area of pharmaceuticals is in line following the entry into force in
August 2000 of the Act on Pharmaceuticals. In the areas of crystal glass and footwear,
the entry into force in June 2000 of the Amendment to the Act on Consumer
Protection provides for the transposition of the
by decrees.
Progress has been achieved in the area of food legislation. The Act on Foodstuff and
Tobacco was adopted and will enter into force in January 2001. Developments also
took place as regards maximum levels for pesticide residues in foodstuffs. As regards
consumer protection, the State Veterinary Administration is the main supervising
body for foodstuffs of animal origin. Its structures for control and inspection are well
established and generally function well, both in the country and at the border. The
Czech Agricultural and Food Inspection supervises the safety and quality of food. It
has seven regional offices. The testing laboratories of regional offices are accredited
in accordance with European Standards. All local branches are connected through a
common network. In order to enforce all the food legislation, the appropriate
administrative structures need to be strengthened.
In the area of cosmetics, the adoption of the Act on Public Health Protection in July
2000 will allow alignment with the
The institutional responsibility was shifted
in July 2000 from the Czech Trade Inspectorate to the Hygiene Service.
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In the fields of
non-harmonised areas,
initial progress has been made in the area of
the application of Articles 28 - 30 of the EC Treaty. The Czech Republic has screened
the necessary legislation and analysed the discrepancies. The rules concerning control
of products from third countries are being implemented. With regard to cultural
goods, alignment with the
has progressed but implementing legislation has yet
to be examined for its substance. As regards cultural goods unlawfully removed from
the territory of a Member State, the General Directorate of Customs and the Police are
responsible bodies. Although the institutions claim their close contacts, there is no
evidence that a network system among the customs, police, Ministry of Culture, and
courts operates.
As regards safety checks on products at external borders, the Czech Republic still
needs to establish appropriate customs and market surveillance infrastructures as well
as effective administrative co-operation between competent authorities.
Finally, as regards
public procurement,
the new law amending the Act of 1994 by
introducing the utilities sector (water, energy, transport and telecom) came into force
on 1 June 2000.
Overall assessment
The Czech Republic has made significant progress, building on a solid basis that was
already acknowledged in last year’s report and which permitted further harmonisation
in the field of the New and Global Approach. The adoption of the amendment to the
Act on Technical Requirements for Products has created the conditions for further
alignment of Czech legislation in this field. The finalisation of the talks on the PECA
agreement represents a recognition of the progress made by the Czech Republic.
However, further progress is still needed, particularly in the areas of medical devices,
motor vehicles and cosmetics.
The administrative bodies need to be strengthened in the areas of cosmetics and
pharmaceuticals. Otherwise, the level of administrative capacity is good. The
necessary separation between legislative regulatory, conformity assessment,
standardisation and market surveillance functions has been achieved. Standardisation
and certification bodies are generally functioning well, both in terms of personnel and
technical equipment.
The Czech Standards Institute, is a member of CEN, Cenelec and the European
Telecommunications Standards Institute (ETSI). The Institute, which is independent,
prepares, adopts and issues standards, and co-operates with international non-
governmental organisations and agencies for technical standardisation. The institute
works on the basis of the principles of transparency and independence.
The Czech Accreditation Institute (ČIA) is a full member of the European
Cooperation for Accreditation (EA) and the international accreditation organisations
ILAC and IAF. The
became a signatory to MLA IAF (for the accreditation of
certification bodies certifying Quality Systems) in September 1999. The Institute has
the status of an independent company, although the Ministry of Industry and Trade
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(MIT) appoints the chairman. Its main tasks are to ensure the accreditation of testing
laboratories, calibration laboratories and certification bodies.
Market surveillance of industrial products, with the exception of some specific sectors
(foodstuffs, medicinal products, cosmetics), is performed by the Czech Trade
Inspectorate (CTI) which is also the main supervising body for the protection of
consumer economic interests. Its performance should be strengthened in terms of the
control of the market and with the respect of combating dual pricing where the CTI´s
activity has not been fully satisfactory.
The Czech Office for Standards, Metrology and Testing, which is the central state
administration responsible for legislation in the field of industrial goods, performs its
duties independently of the MIT, to which it is formally subordinated. The
competence of the staff and the level of equipment is generally good. It has
established the Centre for Translation of EC Technical Regulations with the task of
inter-ministerial co-ordination and control of the elaboration of official translations.
In the area of metrology, the Czech Republic has signed the Agreement on Mutual
Recognition of National Measurement Standards and the Czech Metrology Institute
continues to increase its equipment and improve its personnel.
Further efforts are still necessary in the area of public procurement.
Chapter 2: Free movement of persons
In the area of
mutual recognition of professional qualifications,
the legal
framework of mutual recognition of both diplomas and professional qualifications still
does not match with EC requirements, as stated already in the previous Regular
Report. However, the establishment of an inter-Ministerial working group for mutual
recognition at the Ministry of Education should facilitate the alignment of the Czech
system with the
Some progress has also been made through the entry into
force of the Act on Veterinary Care in September 1999.
As regards the regulation of sectoral professions, and despite several draft laws
adopted recently by the Government in March 2000, the legislation still needs to be
adopted for medical professions.
As regards
citizens’ rights
an amendment was adopted to the Act on the Elections
into Municipality Representative Bodies which includes the right of EU citizens to
take part in the elections after the Czech Republic enters the European Union.
In the field of
free movement of workers,
since the previous Regular Report, some
progress in alignment with the
has been achieved. The Act on Employment
has been amended abolishing the rule that foreigners can only work in the Czech
Republic for three years, at which point they had to stop working for 12 months.
With a view to the future
co-ordination of social security systems,
in May 2000 the
Government decided to work on institutional, technical, and personnel preparation for
the co-ordination of social security systems.
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Overall assessment
Some limited preparatory work has been undertaken in this area and further serious
efforts are required to ensure that there are no provisions in Czech legislation which
contradict Community rules. Overall, the preparation for the application of the
must be accelerated especially in the area of mutual recognition of professional
qualification and of the free movement of workers, in the areas of public health
insurance and social security of migrant workers.
In the area of mutual recognition, the main concern is the introduction of language
requirements as a condition for professional recognition in recent legislation, without
respect for the principles of non-discrimination and proportionality. The tendency to
apply academic recognition procedures to the case of professional recognition is still a
concern, in particular in the case of the sectoral Directives that foresee automatic
recognition. As regards the regulation of sectoral professions, while some draft
legislation has been prepared, legislation remains to be adopted on medical
The necessary structures for mutual recognition are generally in place. The Ministry of
Education, Youth and Sport co-ordinates the process of alignment of the Czech
legislation. However, a general system of mutual recognition of qualifications has not
yet been set up and the appointment of a national co-ordinator (through the creation of
a Centre for recognition of professional qualifications) is not due to be set up before
June 2001. The Ministry of Labour and Social Welfare is responsible for the free
movement of persons.
In the field of the free movement of workers, progress has been made in transposing
but it is necessary to ensure that all the necessary legislation and structures
are put into place. An inter-connected system including the Ministry of Labour and
Social Affairs, the Labour Offices and the EURES system is not yet established,
although the current system is compatible with EURES. With regard to future
participation in EURES, training efforts should be continued, especially with regard to
language training.
With a view to the future co-ordination of social security systems, further work to
develop the necessary administrative structures, including training of staff, is needed.
Chapter 3: Free movement of services
Further progress has been achieved in the alignment of the areas identified in the
previous Regular Report as requiring further efforts.
In the area of
freedom of establishment and freedom to provide services,
progress was achieved principally in the area of business undertakings, self-
employment and provision of services with the approval of an amendment to the Act
on Trade Licensing (in March 2000).
Further liberalisation in the tourist sphere has been achieved through the Act on
Conditions of Enterprising in the Tourist Industry which entered into force in March
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In the field of
financial services,
and as regards the
sector, the transposition
process continues to be satisfactory, even though this process is not yet completed.
A new amendment to the Bankruptcy Act has been introduced (in May 2000), but its
positive effect on the credit business remains questionable, because the procedures to
seize collateral still remain very complex. The amendment makes only existing loans
subject to foreclosure and is not retroactive, thus leaving a heavy burden from the past
An amendment was adopted in October to strengthen the position of Czech Credit
Unions which provide final services only on a self-help basis. Under the Act on
Credit Unions, the Office of Supervision of Credit Unions can impose remedial
measures or apply restrictions.
The Banking Supervision Department of the Czech National Bank has presently 89
staff. Each of the five supervision divisions has an inspection team. The CNB’s staff
has continued to be very stable with a low turnover and thus has preserved its
institutional knowledge. However, given the ongoing difficulties of the banking
sector, the CNB faces a great challenge in its supervisory role.
In the
insurance sector,
Czech legislation has progressed further towards EC
requirements, mainly as regards the status of the former State monopoly and as
regards motor insurance. A new Insurance Act in line with the
entered into
force in April 2000, setting the framework for an overall restructuring of the sector
and improvement of supervision. The question of distortion of competition because of
the conditions for the licensing of new companies has been a subject of concern. The
level of coverage has increased since the adoption of the new Motor Third-Party
Liability Insurance Act and is considered to be in line with the
The new Insurance Act strengthens the Insurance Supervision Department at the
Ministry of Finance and gives it considerable powers and new resources, including a
significant increase in staff. In 1999 only 3 inspections were carried out (and only
when there was reason to suspect something). On the other hand, insurance companies
submitted regular reports. As regards motor vehicle insurance, an insurance bureau has
been set up with a guarantee fund to cover non-insured vehicles and non-identified
In the area of
investment services and securities’ markets,
the 1999 Accession
Partnership also considered as a short-term priority the reinforcement of the Securities
Commission (SC) and of its field of operation. As regards the legal framework, the
Act on the Stock Exchange was adopted recently. The Ministry of Finance is
responsible for drafting legislation and the SC for the correct functioning of the
market. Co-operation between the Ministry and the SC should be effectively
Furthermore, in September 2000 the amendment to the Commercial codes, the
Securities Act and Bonds Act were adopted.
The Securities Commission has a staff of 60 persons, which will be increased to 95 in
the course of 2000. The SC makes active use of all the powers invested in it by the act,
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which has substantially improved the standard of supervision of entities on the capital
market. The SC has launched the daily monitoring of non-standard securities
transactions, assesses cases of trades and transactions made on the public markets,
where prices deviate from the defined price band, uncovers violations of due expert
care by securities traders, price manipulation, misuse of information (insider trading)
and other areas.
In the fields of
protection of personal data and free movement of such data,
a new
Act on Personal Data Protection entered into force in June 2000 and is intended to be
well in line with the
The Act covers the protection of personal data processed
by public and regional authorities as well as individuals and businesses. It foresees the
independence of the Office for Personal Data Protection.
In the field of the
information society,
an amendment to the Act on Technical
Requirements for Products has entered into force. It harmonises definitions related to
technical standards and technical regulations of the Information Society Directives.
Overall assessment
The overall situation is satisfactory as the Czech Republic has adopted a large part of
in most of the sub-sectors, or has set a clear harmonisation timetable. In
spite of the progress achieved, a lot remains to be done in the capital markets and in
the insurance sectors, but the recognition of these weaknesses has been a positive step
forward. No particular problems can be foreseen in the field of information society.
In the field of freedom of establishment and freedom to provide services (craftsmen,
traders, and farmers), a second amendment to the Act on Trade Licensing must be
prepared to complete the current legislative framework. There is still however a
concern as regards the lack of a clear distinction between establishment and provision
of services, the latter requiring a more flexible and quick procedure, whereas the
tendency is to apply establishment procedures.
As regards the banking sector, the Czech Republic needs to adopt the new Act on
Banks, the amendment to the Act on the CNB, both of which are currently before
Parliament, and the Payments System Act for both banks and non-banking
institutions. The level of non-performing loans remains very high and strengthened
monitoring by the regulatory authorities should be ensured.
In the insurance sector, significant progress has been achieved with the adoption of
new Acts, and the strengthening of Insurance Supervision. However, these efforts must
be pursued to create a fully functioning, open and effective insurance sector that gives
equal opportunities to all the market participants. The new Insurance Act strengthens
the Insurance Supervision Department at the Ministry of Finance and gives
considerable powers and new resources to it (staff is expected to rise from 17 last year
to 40 by the end of 2000).
The overall restructuring of the insurance industry will have to be achieved through
another amendment to the new Insurance Act, which will cover all three generations
of non-life insurance and life assurance directives. A new Act on Insurance Contracts,
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on Insurance Intermediaries, Insurance Advisers and Independent Loss-Adjusters has
to be prepared.
In the area of investment Services and securities’ markets, market surveillance must
be further strengthened with a stronger Securities Commission remaining fully
independent from the Ministry of Finance. New Acts on the Stock Exchange and on
the Securities Commission have to be prepared, as well as a new Act on Collective
Investment. As regards the Czech market, the structural problem of the two prices
system for the same security is however still not sufficiently well addressed.
As regards protection of personal data, the timing in the establishment of this new
Authority, its degree of independence, its real means (financial and human resources)
and the transmission of tasks from the OSIS to the ISA will need to be closely
Finally, as concerns information society the transposition has been achieved with the
approval of the Act on Technical Requirements for Products. Progress has not yet
been made on alignment with the
in the fields of electronic signatures,
conditional access and electronic commerce.
Chapter 4: Free movement of capital
Significant progress has been achieved in this field.
In the area of
capital movements,
the liberalisation process continued with the
adoption of two new acts: the Act on Insurance, effective since April 2000, which
liberalises the conclusion of insurance contracts with foreign insurance companies and
the Act on Telecommunications which abolishes restrictions on direct investments
into local telephone networks as from the end of 2000. Additionally, the Act on
Bonds was adopted in September 2000 and removes the need for a prior authorisation
for issuing debt securities to the foreign capital market.
In the field of
payment systems
the Act on securities’ settlement transactions has
been amended and the real time gross settlement (RTGS) system has been modernised
by the Czech National Bank (CNB).
As regards the prevention of the use of the financial system for the purpose of
the amendment to the Money Laundering Act of 1996 entered into force
on 1 August 2000, widening the duties of financial institutions (see also chapter on
justice and home affairs). The amendment foresees the cancelling of new anonymous
accounts (bearers passbooks) and the suppression of anonymous treatment before their
cancellation, the identification of third persons acting on behalf of a client, the
identification of unusual transactions, the record keeping of transfers for 10 years and
the creation of a new control system.
The Financial Analytical Unit (FAU), created in January 1997 within the Ministry of
Finance (28 staff), has the responsibility to monitor and identify money laundering
activities, but has no power to indict or to impose sanctions. Its role is to analyse and
present strong cases to other bodies having the capacity to penalise illegal
transactions. The FAU plays therefore a key role but must permanently liaise with the
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CNB, the Ministry of the Interior, the Ministry of Justice and the Securities
Commission among others. Its performance and know-how has improved significantly
in the last three years. However, in three years of existence, there has not been any
Overall assessment
In the field of capital movements liberalisation is almost completed.
remaining restriction concerns acquisition of real estate by non-residents.
The main
As regards administrative capacity, the Ministry of Finance and the CNB ensure
supervision of foreign exchange and are also responsible for collecting statistical data.
The inter-bank payment system and Cross-border payments are managed by the CNB
in its clearing centre, in line with the current Act on Banks.
In the field of payments the further improvement to the RTGS system already in
operation and the preparatory activities to implement the EC
confirm the good
overall progress of the Czech Republic in this area.
Significant progress has been achieved with the passage of money laundering
legislation but questions and concerns remain as regards the effective closing of
existing anonymous accounts. This requires an amendment to the Accounting Act,
regulating reporting for derivatives, including all monetary and financial institutions
in the monetary statistics and an increase in foreign reporting.
The prevention of the use of the financial system for the purpose of money laundering
requires effective and well functioning co-operation between the different institutions
involved. On the other hand, it is necessary and urgent to reinforce their legal powers
in order to obtain more concrete results (indictments). The lack of an appropriate legal
basis for empowering enforcement bodies, together with the unclear time table for the
cancelling of existing anonymous bank accounts, do not facilitate either the prevention
nor the sanction of this kind of criminal activities. These two aspects must be tackled
urgently by the Government in the context of the reform of the judiciary and the
announced revision of the code on criminal proceedings.
Chapter 5 : Company law
Since the 1999 Regular Report a wide range of measures has been taken.
As regards
company law,
amendments to the Acts on Bankruptcy and Settlement
have been adopted to shorten the legal procedures and to the Bankruptcy Law to give
creditors more guarantees. Also, in September 2000 a major revision of the
Commercial Code was adopted which brings legislation more fully in line with the
in such areas as minority shareholders’ rights, publicity of the Commercial
Register requirements, mergers and buybacks.
Implementation has been partially enhanced by various measures, e.g. the Commercial
Register being accessible on the Internet. Further effort, however, will be needed to
improve the efficiency of court proceedings and enforcement.
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In the area of
the Act on Auditors was adopted in July 2000 and will enter into
force from 1 January 2001.
Progress has been made in the field of
protection of intellectual property rights.
The new Copyright Act has been adopted in line with the
Also the protection
of the rights of performing artists, producers of phonograms and broadcasters have
been strengthened. The rights of the audio-visual producers will be newly protected.
A further step towards alignment with the
in the field of
industrial property
was taken with the adoption of the new Act on industrial property in December
1999. The Patent Law and several other laws on Trademarks, Utility Models and
Topographies of Semiconductor Products were amended, taking over provisions of the
European Patent Convention and the TRIPS provisions concerning compulsory
licenses, enforcement of rights and enhanced protection of wines and spirits. The
Czech Republic also introduced legislation on Supplementary Protection Certificates.
The new provisions dealing with relations between the EC and national patent systems
will enter into force on 1 July 2002 and enable a smooth accession to the European
Patent Convention. Finally, the Czech Republic has aligned its legislation in the areas
of the protection of both Designs and Biotechnological Inventions with the adoption
of two Acts which will enter into force on 1 October 2000.
A special Inter-ministerial Commission was set up in February 2000 at the Ministry of
Industry and Trade to co-ordinate the fight against copyright violation. This follows a
co-operation agreement among the Czech Trade Inspection, Police, Ministry of
Finance (Customs and Industrial Property Office) and Ministry of Culture in the
activities against the infringement of regulations on unfair competition, trademarks,
appellation of origin of goods, utility models, industrial designs, inventions and
copyrights. According to this agreement the Industrial Property Office (IPO) provides
information on the legal status of the products of industrial property, which are within
its competence, to the partners. The IPO also provides information from the Madrid
Express database, which also includes the trademark applications according to the
agreement concerning the International Registration of Marks. The staff of the IPO
amounts to 266. The capacity of the Office seems adequate and it works satisfactorily.
As regards bad faith trademark registrations, the Patent Office confirmed that about
half of the applications were rejected or proceedings stopped. The Office reported that
it processes nearly 10 000 trademark applications per year, which is about 10 times
more than before 1990. As the new Act will increase the responsibilities of the
Ministry of Culture, an extension of the Copyright Section of the Ministry is vital.
Currently, all its tasks are managed by only 3 expert staff members, which is
completely inadequate, and was already noted in the last Regular Report.
Overall assessment
The legislation in the area is largely in line with the
Legislation in the field of accountancy is already largely in line with the
although new legislation (expected for the end of 2000) is still necessary to fill in the
remaining gaps.
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In 1999 the Czech Republic was invited to join the European Patent Organisation as
of 1 July 2002. There should be more emphasis put on the enforcement process, where
long delays still persist at all stages. The implementation and monitoring capacity of
the relevant authorities in the fields of intellectual and industrial rights should be
increased and their mutual co-operation should be improved.
Chapter 6 : Competition policy
The 1999 Regular Report noted that alignment of Czech legislation in general was
well advanced and since then some further progress has been made.
In the field of
one of the short-term priorities of the Accession Partnership
was further alignment of anti-trust legislation but only limited progress has been
An amendment to the Act on Economic Competition, which entered into force in
September 2000, introduced more precise terms and conditions and performance
requirements for the Chairman of the Office for the Protection of Economic
The Act on the Protection of Competition contains the main principles of Community
anti-trust rules as regards restrictive agreements, abuse of dominant position and
merger control. A block exemption on franchise agreements entered into force in
March 2000.
state aids,
significant progress has been made in aligning state aids legislation and
completing the state aid inventory, a short-term priority of the Accession Partnership.
The Czech Republic made significant progress in this area through the adoption of the
Act on State (Public) Aid. This Act entered into force on 1 May 2000. The Act
provides for the transfer of the state aid monitoring role from the Ministry of Finance
to the Office for the Protection of Economic Competition. The Office will have the
powers to assess all state aid and to recover all illegal state aid. The Office has
published guidance notes, setting out the criteria applicable for state aid notifications
in certain areas.
As far as the regional aid map is concerned, the Czech Republic has created an inter-
ministerial commission to consider this issue.
Preparations for a State aid inventory have been carried out.
inventory should be tackled as a priority.
Completing the
One of the short-term priorities of the 1999 Accession Partnership was to reinforce the
state aid monitoring authority with sufficient qualified staff. The Office recruited 13
new employees in January 2000 to deal with its new tasks as the state aid monitoring
authority. The Office has also co-operated closely with the Ministry of Finance to
share expertise in advance of the transfer of responsibilities. A State aid manual and
other guidance material has been prepared and circulated to key officials.
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Overall assessment
The Czech Republic’s achievements in the area of anti-trust are generally satisfactory,
and legislation is largely in line with the
However the failure of the
amendment to the Act on the Protection of Economic Competition represents a delay
in the overall process of alignment. Gaps remain in a number of areas relating to
restrictive agreements, market dominance and the definition and notification of
mergers. Further alignment will still be necessary, especially in view of developments
in the
on vertical restraints.
As regards administrative capacity, the Office for the Protection of Economic
Competition has around 120 employees and has examined a large number of cases on
anti-trust matters. The staff’s knowledge of the
in this field is also good. The
main challenge now is to ensure that there is effective application and enforcement of
anti-trust rules. Priority should be given to cases which raise the most serious
concerns in terms of distorting competition. Staff should also receive adequate
training on developments in EC competition law and practice.
In general, alignment of Czech legislation on state aid is now well advanced. Good
progress has been made in meeting the short-term priorities of the Accession
Partnership. The establishment of an independent system for monitoring state aid
issues is to be welcomed. One major shortcoming of the current state aid regime is
that there is currently no comprehensive notification system in operation. A system
whereby all public aid providers inform the Office of aid projects in advance is
necessary to ensure effective control and monitoring of state aid. Furthermore the
Office should complete the State aid inventory and also ensure that it is kept up to
date. Annual reports on state aid should follow the methodology and presentation of
the EC’s survey.
On state aid, the main challenge is again to ensure the effective application and
enforcement of state aid rules. In view of the greater efforts required, further
resources may be needed. State aid expertise should be strengthened further, not least
in view of the transfer of responsibilities from the Ministry of Finance to the Office.
Chapter 7: Agriculture
Agriculture in the Czech Republic accounted for 3.7% of gross value added in 1999,
as compared to 4.6% in 1998
. Employment in agriculture has declined over the past
years, accounting for 5.3% of total employment
. During the same period, the gross
The source for all agricultural statistics is EUROSTAT unless otherwise specified.
In order to improve consistency and comparability, the employment figures presented are now
defined according to Labour Force Survey definitions (LFS). Agricultural employment is defined in
LFS terms as economically active persons who gain a significant part of their income from
agriculture. The agricultural census, which was previously a source of employment data in many
countries, takes into account all persons nominally active on a farm. There are therefore some
significant differences between previous and new figures. Fuller information can be found in the
Eurostat publication “Central European Countries’ Employment and Labour Market Review”
available free of charge through the Eurostat Data Shops.
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agricultural output increased by 9.1%, with a 10.6% increase in crop production and a
5.6% increase in livestock production
In 1999, EC imports of agricultural products originating in the Czech Republic
increased to
379 million, compared with
299 million in 1998. In the same period,
EC exports to the Czech Republic were stable at
954 million. The trade balance in
favour of the EC amounted to
575 million in 1999, compared to
655 million in
. As a consequence of the new reciprocal concessions on agricultural products
negotiated under the Europe Agreement, approximately half of EC imports and one
third of EC exports of agricultural products will be exempted from duties
(see section
A.b – Relations between the European Union and the Czech Republic).
In January 2000, the government approved an Implementation Strategy for the Area of
Agriculture, laying down a schedule of pre-accession activities.
Legislation adopted in January 2000 modifies the law on restitution of agricultural
property, to allow for restitution of agricultural land confiscated during World War II.
Originally, restitution legislation only provided for the return of agricultural property
confiscated after 1948.
Horizontal Issues
Some limited progress has been made in these areas over the past year. The short-term
priorities of the 1999 Accession Partnership include the preparation of measures
required to implement the Common Agricultural Policy. The Czech Republic has
made some progress over the past year as regards measures related to the
Agricultural Guidance and Guarantee Fund (EAGGF).
The Act on the State
Agriculture Intervention Fund, establishing the basis for a new system of market
regulation for agricultural and food products originating in the Czech Republic,
entered into force in August 2000. The new Act is partly in line with current
Community regulations. It contains basic provisions of the EC common market
organisations, the Integrated Administrative and Control System (IACS) and other
functions of the intervention agencies.
The SAPARD Rural Development Plan, which describes the main lines of the Czech
Republic’s rural development policy and the main objectives to be attained by
SAPARD assistance, was approved by the Commission inOctober 2000. The
accreditation of the SAPARD Agency is currently ongoing. (See
Section A.b –
Relations between the European Union and the Czech Republic).
As to preparations to establish the
Integrated Administration and control System
in the Czech Republic, progress has been made as regards the registration of
animals. A system for cattle identification and registration was introduced in July
1999. Based on the new Veterinary Act and the new Act on Livestock Improvement,
Source: FAO
Source: Uruguay Round Agreement definition of agricultural products, figures taken from
EUROSTAT COMEXT (see Agriculture in the European Union – statistical and economic
information 1999 p. 36 for definition of the products).
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Breeding and Registration, the system will be obligatory for cattle by January 2001
and will be extended to cover sheep, goats and pigs by April 2002. The new Act
establishing the State Intervention Fund contains basic provisions on the IACS. The
harmonisation of animal identification systems is a short-term priority in the 1999
Accession Partnership.
An Act on Ecological Agriculture was adopted in 2000, setting rules for ecological
agriculture and labelling of bio-foodstuffs, import requirements on bio-foodstuffs and
bio-products from other countries. It will enable access to ecologically oriented EC
structural programmes and is in line with Community rules concerning organic
An amendment to the Act on Foodstuffs and Tobacco was adopted in August 2000. It
aligns legislation with Community requirements as regards foodstuff labelling, the
regime for manufacture, import and marketing of novel foodstuffs, in particular
foodstuffs produced from genetically modified organisms. A number of Decrees have
also been approved in this field
(see Chapter 1 - Free movement of goods).
The Czech
legislation is partly in line with the Community
but the control system needs
to be established.
Common Market Organisations
In this field, the Czech Republic has made some important progress over the past year
as regards the introduction of an administrative structure, notably with the adoption of
the Act on the State Agricultural Intervention Fund, which contains basic provisions
on the establishment of Common Market Organisations. This can be the basis for a
number of agricultural regulations, such as the introduction of quota policies in the
milk, sugar and potato starch markets.
As regards the adoption of specific regulations organising the different markets
covered by the
some progress has been made. Concerning
arable crops,
Decree was adopted in February 2000 laying down the measures and state intervention
in creating the conditions to secure and maintain sugar beet and sugar production, and
to stabilise the market in sugar. The decree lays down temporary measures for one
year and is a step towards alignment with the
A new department for the sugar
sector was established in the Ministry of Agriculture in April 2000.
In the field of
specialised crops,
an amendment of the Act on Viticulture entered into
force in August 2000, partly aligning legislation with Community requirements
and acting as a precursor to a new viticulture law. This concerns
oenological practices, requirements on imported wine, vineyard register, the
conditions for the production of quality wines and the labelling of individual types of
wine. An Amendment to the Act on Protection of Hops entered into force in May
2000. The amendment aims to ensure the same standard of qualitative control of hops
and hop products for domestic producers and importers, and is partly in line with the
In March 2000, a new department for permanent plantations was established at
the Central Institute for Supervision and Testing in Agriculture. Its task will be to
prepare the introduction of the system of contract registration in the hops sector in
accordance with Community regulations.
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In relation to
animal products,
the government has decided to introduce milk quotas
as of April 2001, based on the new Act on the State Agriculture Intervention Fund. A
department for the classification of slaughter animals was established at the Research
Institute for Livestock Productions to carry out the activities of the future
Classification Agency. The introduction of the common classification of carcasses
(SEUROP) is foreseen by the amendments to the Act on Foodstuffs adopted in August
Veterinary and Phytosanitary Legislation
The short-term priorities of the 1999 Accession Partnership include legislative
alignment and upgrading of inspection arrangements in the veterinary and
phytosanitary sector and the elaboration of a plan to modernise meat and dairy plants
to meet EC hygiene and public health standards.
In the
field, the new Veterinary Act entered into force in 1999. It covers
conditions for veterinary care, identification and registration of animals, animal
welfare and conditions for animal trade. Several implementing Decrees have been
issued. The new Veterinary Act does not ensure full transposition of all Community
Directives in this field. An Act on Livestock Improvement, Breeding and Registration
(Breeding Act) was adopted in May 2000. It changes the structure and organisation of
the livestock improvement and breeding process and is a step towards alignment with
EC legislation.
The HACCP (Hazard Analysis at Critical Control Points) system, which involves
measures to identify and control hazards related to food processing and the monitoring
of safety requirements became obligatory for all food producers in January 2000.
As regards administrative capacity, an
animal welfare
department was established
within the State Veterinary Administration in January 2000.
In the
field, an amendment to the Act on fodder was adopted in 2000,
bringing legislation on animal nutrition further in line with the
although some
gaps still remain in the area of inspection. The new amendment stipulates rules for
the production, use and circulation of fodder and additives, including supervision and
Overall assessment
Overall, progress has been made with regard to legislative alignment and the setting
up of implementing structures for the CAP. However, efforts need to be stepped up,
particularly in terms of introducing market organisation regulations in specific sectors
and the strengthening of administrative structures to effectively implement the
veterinary and phytosanitary
In order to prepare for the future management of the Common Agricultural Policy, the
Ministry of Agriculture still needs to carry out the restructuring of its organisation and
to accelerate its decision-making procedures.
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In the field of
horizontal issues,
further progress in the alignment of legislation as
trade mechanisms
is needed. In the field of
quality policy,
mechanisms in line with Community requirements need to be put in place.
Further measures should be taken to ensure a fully functioning and accredited
SAPARD Agency. Efforts are needed with regard to payment procedures, accounting
procedures as well as a fully functioning internal audit, which is a key requirement for
the accreditation of the SAPARD Agency. The organisational restructuring of the
Ministry of Agriculture, in view of the future management of the CAP, needs to be
In the preparations for implementation of the IACS (Community Integrated
Administration and Control System), good progress has been made with the system of
animal identification and registration. In order to provide an efficient animal disease
prevention system, it needs to be centralised and connected to the Czech
epidemiological surveillance network. Preparations for the establishment of the land
parcel identification system have begun, but the system is not yet completed.
As regards the Farm Accountancy Data Network (FADN) the existing surveys are
only partly in line with the
The collection of data and administrative capacity
still needs to be fully established in conformity with Community requirements and co-
operation on the exchange of data must be ensured.
As regards the implementation of
Common Market Organisations,
an effective
network with a reliable market monitoring system, capable of collecting price data in
real time at all points in the chain is missing. Legislation establishing quality and
marketing standards for
arable crops
animal products
needs to be completed. The
Czech Republic also needs to complete market regulation for
specialised crops.
marketing standards for fruit and vegetables are currently aligned to Community
requirements. However, the quality control system in the area of fruit and vegetables
needs reorganisation. The existing legal framework for producer organisations is not
in line with Community requirements. However, the government has been supporting
the establishment of producer marketing organisations since January 1999.
In the area of
rural development and forestry,
the horizontal legislation is largely in
place, but the administrative structures for implementation need to be completed.
Concerning the
field, progress has been made in the alignment of
legislation, and the horizontal legislation is largely in place. However, further progress
is needed in the transposition of veterinary legislation, e.g. in the fields of
welfare, food safety control
rules concerning imports from third countries.
Veterinary Administration as well as the Food Inspection generally function well, but
need to be strengthened in terms of adequately trained staff and equipment.
In the field of
veterinary control in the internal market,
the process of introducing
both the internal computerised system linking veterinary authorities inside the country
and an external movement control system (ANIMO) needs to be completed. Progress
has been made as regards the system of identification and registration of cattle, but
should also be extended to other species according to decisions taken. Border
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inspection posts and import checks need to be reinforced and aligned with Community
Little progress has been made over the past year in upgrading the two
border posts
Ruzyne airport and Decin airport. The infrastructure needs to be completed and
adequately equipped, and the staff should be trained with regard to border inspection
In the field of
control of animal diseases and animal health,
preparations to
participate in the animal notification system (ADNS) need to be completed. The Chief
Veterinary Officer needs to be empowered to take the necessary safeguard measures in
case of an emergency.
A substantial part of the plants processing products of animal origin do not yet meet
Community hygiene and public health requirements. They need to be modernised and
up-graded in terms of construction, equipment, water quality, cleaning systems and
training of staff. As regards
animal waste treatment,
most of the rendering plants for
high-risk waste are operating according to Community requirements.
The Agriculture and Food Inspection authority is working relatively well, but needs
further strengthening in terms of specialised equipment and expert staff.
In the
field, most legislation is in line with the
but efforts are
needed to complete legislative alignment. On the enforcement side, the phytosanitary
control must be upgraded to be in full compliance with Community requirements,
including border control procedures, sampling methods for plants and plant products,
surveys, monitoring and registrations systems. The State Phytosanitary Administration
is preparing its linkage to the EUROPHYT information system in the field of plant
health and harmful organisms. The State Phytosanitary Administration generally
functions well, but needs to be strengthened in terms of sufficient number of
adequately trained staff and equipment. The situation with regard to specialised
equipment has improved but will require further investment.
Chapter 8 : Fisheries
Fisheries activities in the Czech Republic are limited to acquaculture, mainly carp.
Since the last regular report, little progress has taken place as regards the management
of resources and control, international fisheries agreements, common market
organisations or state aids and structural actions.
Overall assessment
Further progress is needed as regards the legislative transposition and administrative
capacity necessary to implement the Common Fisheries Policy. Legislative
transposition is needed in the fields of public and animal health. Legislation regarding
the control on imported fish needs to be adopted. In the field of fishery products and
live fish for direct consumption, conditions of production and export to the EC are
adequate. Export health certification and public health aspects are being observed.
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However, a public health certificate should also be issued for live fish to be exported
to the EC. Monitoring plans should be drawn for e.g. environmental contaminants. A
system of control of sources and species of fish needs to be set up.
A specialised unit was established in the Ministry of Agriculture in 1999 to improve
administration of the tasks associated with the accession to the EU in the area of fish
and fisheries. The unit operates satisfactorily, but needs further strengthening in terms
of expertise and technical equipment in view of the expected increase in workload.
To improve the processing and marketing of fishery products in line with EC
practices, the establishment of producer organisations should be encouraged.
Institutions also need to be set up in order to implement the
as regards
controlling the implementation of common market standards, collecting and
transmitting data concerning the price reference regime, and applying the recognition
conditions for producer organisations. They should also implement the
concerning the management of Community structural actions in fisheries. In order to
establish a well-functioning monitoring system regarding the control of fish resources
and imports, co-operation between relevant authorities should be improved.
Chapter 9: Transport policy
Since the previous regular report, the Czech Republic has made progress in several
areas of the transport
The Medium Term Strategy for the Transport,
Telecommunications and Postal Sector was approved by the Government in February
2000. This strategy reflects the medium and short term Accession Partnership
As regards
horizontal issues,
the government approved by a resolution the “Proposal
for the Development of Transport Networks in the Czech Republic until 2010”.
In July 2000 the State Transport Infrastructure Fund was established on the basis of an
Act approved by Parliament. The Fund forms the basis for participation in EC
structural aid and will improve transport infrastructure financing through limiting the
previous fluctuations due to the annual changes in the relevant State budget lines.
As regards transport infrastructure, the state budget for 2000 set aside the same
percentage of GDP, 1.36%, as in 1999 for the modernisation of the stretches of the
Pan-European Transport Network in Czech territory, but at the cost of higher credit
and delays in the timing of construction. In road transport infrastructure, some
progress has been made in linking the Czech Republic to the trans-European Network
by speeding up construction of the D5 motorway (from Prague to Nuremberg), around
Plzen and by building the D8 motorway (connecting Prague to Dresden and Berlin),
both part of Pan-European Transport Corridor IV. The upgrading of national road
Corridors Iand II is ongoing, as is the case with the railway Corridors. The Czech
Republic has approved the final report on Transport Infrastructure Needs Assessment
(TINA) of October 1999 that should form the basis for extending the trans-European
networks to the Czech Republic.
As regards the interoperability of high speed trains, the relevant EC Directive will be
complied with through the amendment to the Act on Tracks, which entered into force
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in April 2000, as well as a forthcoming implementing decree. However, whilst the
Government does not intend to implement the
in this area pending decisions to
construct high-speed railway infrastructure, there is a legal obligation to do so, in
particular since the
also provides for an internal market for the construction of
high speed train equipment.
In so far as
road transport
is concerned, further amendments to the Act on Road
Transport entered into force in January and in July 2000, with the aim of adapting the
Czech provisions on access to the profession to those of the
namely with
regard to the financial standing criterion. Furthermore, the Act on the Professional
Competence for Driving Motor Vehicles, which approximates to the
on driving
licenses, was adopted in June 2000. As regards road fiscality, a new system of road
user charges, providing for annual, monthly and 10-day vignettes, entered into force in
January 2000.
In April 2000, the multilateral INTERBUS agreement on occasional bus services was
initialled by the Czech Republic. Its implementation will result in partial alignment
with road passenger transport
railway transport
the amendment to the Act on Tracks sets out the legal
framework for a new system for the financing of railway infrastructure and public
passenger railway, as well as conditions for market access. However, these provisions
can only be implemented once the forthcoming Act on the Transformation of Czech
Railways has entered into force. As in previous years, there has been no progress in
the legislative procedures due to a lack of political consensus.
Concerning inland waterways an amendment to the Act on Inland Waterways was
adopted in January 2000 which aims at transposing the EC
on access to the
occupation of carrier of goods by inland waterways.
In April 2000, the government approved a Programme of support to combined
transport, which aims at fostering this type of services, based upon railway transport
and at approximating the relevant
air transport,
an amendment to the Civil Aviation Act entered into force in June
2000 which is expected to implement both the Joint Aviation Requirements (JARs)
and the Eurocontrol standards.
Following the approval of an analysis on
administrative resources by the government in April 2000, restructuring of the Civil
Aviation Authority and Air Traffic Control was started. This is aimed at a progressive
increase of civil aviation personnel and at the establishment of independent bodies for
the investigation of air accidents and the allocation of slots. Negotiations between the
EC and the Czech Republic on the multilateral Agreement to establish a European
Common Aviation Area (ECAA), which will result in significant progressive
alignment with the
prior to accession, were concluded at the end of 1999 and a
bilateral protocol has been signed.
As regards
maritime transport,
a new Act on Maritime Navigation entered into force
this year in July 2000. The Act provides for further harmonisation with the
areas such as cabotage, the investigation of maritime accidents and the professional
competence of the crews of sea-going ships.
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Overall assessment
Further progress has been made in several areas of transport, although certain key
steps regarding legislation and administrative structures remain to be taken. On
horizontal issues, although investments into the modernisation of transport
infrastructure do show positive results, they could be further strengthened, particularly
as regards the framework partnerships between the public and private sector.
Regarding land transport, the harmonisation of road transport has advanced
considerably but has not yet been concluded on a number of issues. Thus the Act on
Road Transport should be adapted in particular concerning fiscal and social rules and
safety requirements. Administrative structures to bolster the enforcement capabilities
in land transport are still to be implemented.
The significant lack of progress, in both legal and institutional terms, regarding the
restructuring of the Czech railways remains a major obstacle. As a consequence,
harmonisation with the developing railway
will continued to be hampered as
will the strengthening of administrative structures and improvements in
competitiveness. It is recommended that the Czech Republic intensify its efforts to
achieve compliance with the railway
ahead of accession.
In the field of air transport, independent bodies for the investigation of air accidents
and for slot allocation remain to be established. The Czech Republic expects to
become a full member of the Joint Aviation Authority (JAA) by the end of 2000. As
regards maritime transport, whilst the Czech Republic is a landlocked country, the
adoption of the Maritime Act constituted an important step in the approximation to the
which needs to be followed by the issuing of secondary legislation.
Chapter 10 : Taxation
The 1999 Regular Report found that the Czech Republic had established solid VAT
legislation compared to the
This was also the case generally for excise duty,
although to a lesser extent. Since then certain additional measures have been taken.
As regards
indirect taxation,
an amendment to the Act on VAT entered into force on