ࡱ> 5@bjbj22 .XXq :::\,4!4!4!8l!4!4, nh!!"""""""`mbmbmbmbmbmbm$qoRqtmJ""JJm""m21Q1Q1QJ""`m1QJ`m1Qz1QQ k8m"!  D4!Mk`mm< nk\7r]P7r08m,,7r8m(" / 1Q9A! """mm,,d Q,,CHALLENGES OF CROATIA AND EU INTEGRATION: is the fast track approach possible? International Issues Journal, Bratislava, March 2005 Visnja Samardzija, Ph.D Institute for International Relations, Zagreb, Croatia Recent steps towards EU membership The starting point of this paper is the fact that launching of negotiations for membership is a cornerstone for the future long-term relationship between Croatia and the European Union and therefore requires deep and organised preparations. Croatia started successfully the preparations for integration and the status of the candidate for the EU membership, achieved in 2004, gave the country the attribute of the forerunner in the integration process among the countries of the Stabilisation and Association Process (SAP). According to the economic development and the overall achieved level of preparations for the EU integration, Croatia is above the average of the SAP countries. However, the EU requirements for the integration are demanding and there are a number of further steps to be undertaken on the path towards an accession to the Union. The aim of this paper is to give a brief overview of the achievements, but also to present the challenges and potential threats in the next stage of the EU accession process. The paper also focuses on Croatias progress in developing institutional and legislative capacity in line with EU requirements in the area of internal market. Integration into the EU is a top priority stated in the Government programme. Croatias internal goal is to achieve internal readiness by the end of 2007 and to catch-up with Bulgaria and Romania on the path towards the EU accession. The start of negotiations together with screening would give additional impetus to internal reforms and Croatian Government estimates that it might need less time for negotiations than the former candidates, having in mind the achieved level of preparations combined with possibility of using the already existing knowledge, experience and the institutional memory of the latest enlargement. Croatias progress towards the European Union is grounded within the Stabilisation and Association Process and the SAP instruments made basis for integration preparation. The Stabilisation and Association Agreement (SAA) between Croatia and EU and its member states was signed in October 2001, while the process of ratification in member states was concluded in September 2004. The SAA entered into force on 1st February 2005, together with the Protocol 7 on enlargement. Before it, trade and transport provisions of the SAA have been applied as of 1st January 2002, through the Interim Agreement on trade and related issues between the European Community on one hand and the Republic of Croatia on the other, and came officially into force on 1st March 2002. After submitting its application for membership in the EU (February 2003) and becoming a candidate, Croatia is facing the challenge of the next phase of relations with the EU. On 14th April 2003, the General Affairs and External Relations Council called upon the European Commission to submit an opinion (avis) on Croatias application. The answers on the questionnaire were submitted to the Commission in October 2003 while the avis was finalised in April 2004. The main findings of the avis are that (i) Croatia is a functioning democracy with stable institutions guaranteeing the rule of law; (ii) could be regarded as a functioning market economy, and should be able to cope with competitive pressure and market forces within the Union in the medium term, provided that continues implementing its reform programme to remove remaining weaknesses; (iii) and should be in the position to take the other obligations of the membership in the medium term, provided that considerable efforts are made to align its legislation with the acquis and ensure the implementation and enforcement. The Commission recommended in the avis that negotiations for accession to the EU should be opened in March 2005, while the screening was expected to start in the same time. The Opinion was accompanied by European Partnership for Croatia which identified the short and medium term priorities during the preparation for accession. In June 2004, the European Council confirmed the status of Croatia as a candidate country for membership and brought a decision on opening negotiations on full membership. The European Commission finalised the Pre-accession strategy for Croatia (October 2004) together with the negotiation framework what opened the door for the access to the pre-accession funds in 2005. The European Council in December 2004 decided to start the accession talks on March 17, 2005, provided the country has demonstrated a full cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY). Thus Croatia became the first SAP country with clearly confirmed European perspective the forerunner of the region in the process of EU integration. The consensus on EU integration has been reached as the priority of the country among political parliamentary parties. The Parliament adopted the Resolution on the Accession to the EU (December, 2002), which confirmed readiness of all Parliamentary political parties to support the EU integration process. Furthermore, the EU integration was confirmed to be a joint task between the Government and the Parliament in the process of the EU accession, and in 2005 the Parliamentary parties adopted joint documents that ensure full cooperation between the two bodies in the Process of the EU accession. During the past years there was a strong public support in Croatia for the integration process: the public opinion surveys carried out since 2000 on a six month basis showed that around 70% of population have positive attitude towards integration. However, recent surveys (2004) indicated significant decrease in public opinion support (around 50% population supporting EU integration), meaning that strengthened communication strategy is needed, encompassing not only urban but also rural population as particularly important target group, information campaigns, strengthened education activities, particularly those focused on media will be needed in Croatia. Key issues of implementation Since its signature, Croatia started the implementation of the obligations undertaken within the SAA. The National Programme for Integration of the Republic of Croatia into the EU (NPPIEU) has been adopted similarly to the experience of the other candidate countries. The Programme is meant to be the main co-ordinating instrument, focusing on all three Copenhagen criteria, with particular emphasis on legal harmonisation. The first Programme started in the year 2003 and was accompanied by similar documents for 2004 and 2005. The Implementation Plan for the SAA (developed earlier) has been merged in 2004 with the National Plan of Integration that made a single implementation and monitoring instrument. Regional co-operation with the SAP countries, as the important component of process of EU integration, has been significantly enhanced. Through different bilateral and multilateral mechanisms, Croatia tries to contribute to the stability and co-operation in South-Eastern Europe by assuming the role of a political and economic model in the region, being aware that the stability of the region is a precondition for its own stability and prosperity. In line with it, Croatia signed in 2002, within the framework of the Stability Pact, the Memorandum for Free Trade Liberalisation and Facilitation with the countries of SEE and wider region, and joined the Memorandum of Understanding on Energy Market and thus contributed to the strengthening of regional energy market (2003). The SAA confirmed the previously existing free trade regime for Croatian goods on the European market and set up a timetable for trade liberalisation of goods and services. Free trade area is being established with the EU for industrial and agricultural products including fisheries, originating from the Community or in Croatia, over a transition period lasting a maximum of six years. Croatia has free trade agreements with more than thirty countries: apart of the SAA now covering 25 countries, Croatia signed the already mentioned bilateral trade agreements with the SEE countries as well as with EFTA countries, and joined CEFTA in March 2003. Efficiency in implementation and continuation of reforms is the key issue relevant for the success of Croatia, having in mind very tight schedule the country has to comply with in order to be able to catch up with Bulgaria and Romania. The speed of integration will depend on how Croatia will prove its efficiency in implementing reforms and accepting the European standards in practice. The stage of achieved implementation of the SAA, progress in adopting the principles of the acquis communautaire, together with the overall macroeconomic picture of the country and the stage of reforms (economic, judicial and administrative one) make a good starting point for fulfilling of the remaining Copenhagen criteria, only in case that the country continues implementing its reform programme at the same speed, in order to remove remaining weaknesses. Croatian economy has achieved a considerable degree of macroeconomic stability with low inflation. Major macroeconomic indicators place Croatia far at the helm of the SAP countries, but also in mid-range of the new member states. Croatia is a small economy with a population of 4.4 million and with the GDP per capita of 6,337 US$ (for 2003), which amounts to around 24% of the EU average. As a comparison, the average level of GDP per capita in the other SAP countries was around 2,000 US$ in the same year. The areas in which Croatia is facing difficulties are high budget deficit and increasing public debt. At the same time, it is extremely important to translate the existing macroeconomic stability into sustainable development of the real economy sector, by accentuating especially faster progress in structural reforms, privatisation and restructuring. The Pre-accession Economic Programme (PEP), that was prepared in October 2004 by Croatian Government, made the ground for economic reforms to be undertaken within the period 2005-2007. It was the answer on the reform agenda developed within the European Partnership, focused on most important economic issues, including macroeconomic development, public finances, structural reforms and other areas. According to it, the expected macroeconomic indicators for the 2007 are the following: the GDP real growth is expected to rise to 4.6% (3.9% in 2004), while inflation should be kept at the same level as in 2004 (2.2%). The unemployment rate should be reduced from 14.9% in 2004 to 12.1 in 2007 according to ILO. The budget deficit is expected to be reduced from the 4.5% of GDP in 2004 to 2.9% while public debt should be 51.0% (52.8% in 2004). Croatias economy is already relatively well (although not enough!) integrated with the EU, but market mechanisms still need significant improvements. Croatia has still low level of exports per capita, amounting approximately 1,400 US$ in 2003 (with the exports to the EU amounting 52.7% in the total exports). For comparison, the export per capita in Slovenia is over US$ 6000, Czech Republic 4000 US$, Hungary 3000 US$. Among others, the reason for this is a low competitiveness of the country. Therefore, it is needed to increase competitiveness of the Croatian industry and trade for the entry into the international market. Trade liberalisation measures need to be accompanied by efficient structural reforms and fiscal policy measures. Furthermore, expected participation in pan-European diagonal cummulation of rules of origin will be extremely important not only for Croatia, but for the SAP region as well. Croatia has undertaken the obligation to start approximation of the existing legislation to that of the Community from the entry into force of the Interim Agreement (January 2002). Approximation is focused on fundamental elements of the internal market acquis as well as on the other trade-related areas what will gradually be extended to the other parts of the acquis, as encompassed by the SAA. After signing the SAA, main instruments for legal harmonisation were adopted and applied from 1st December, 2001. Croatia harmonised 116 legal acts with the acquis in the period 2002-03. In the 2004 the process of legal harmonisation was to a certain extent slowed down, entering into stage of implementation. Around 40 laws were harmonised, together with almost 200 by-laws, while in 2005 the plan for harmonisation encompasses around 30 laws. In short, most of the framework laws regulating internal market were brought and harmonised with the EU in 2003, while in 2004 the implementation started in most of the areas and the work is concentrated on harmonising by-laws with the acquis. However, the screening process that is about to start will show to which extent this initial adjustment was successful and where the remaining potential gaps are. However, the success of the process depends on the quality of legislation, its implementation and enforcement, and therefore the quantity of harmonised acts as such is not the most significant indicator. Namely, that bringing of secondary legislation together with the institutional capacity building and enforcement of institutions is of crucial importance for an efficient preparations for the integration. As already stated above, Croatia made most significant progress in aligning its legislation with the acquis in the area of internal market and trade. However, it is clear that a lot of work still remains to be done on legal harmonization, together with building and strengthening administrative capacities and reforming judicial structures for implementation and enforcement. The SAA, together with the Interim Agreement, made the basis for gradual harmonisation with the EU technical legislation. In the period after signing the SAA Croatia made progress in the development and harmonisation of legislative framework in accordance with the acquis, while the harmonisation of secondary legislation and implementation still remains priority for the coming period. Most institutions regulating free movement of goods have already been established and are in function in Croatia, although in some areas their reorganisations and enforcement is needed. After the framework horizontal laws have been adopted, transposition of the new and old approach directives into Croatian by-laws is needed. Therefore, continuation of the work has to be focused on implementation and enforcement through bringing the secondary legislation, harmonised with the EU directives. Furthermore, sufficient administrative capacity to apply horizontal and procedural measures is essential so Croatia has to continue work on establishment and strengthening its institutional capacities in the area of standardisation and accreditation. Croatia is benefiting from the CARDS programme developed for the SAP countries, while the Pre-accession strategy opened the door for the access to the PHARE, ISPA and SAPARD programme in 2005 which will be available for Croatia until 2007. Namely, the new Financial Perspectives 2007-2013 envisage the new Pre-Accession Instrument (IPA) for the candidates (Turkey, Croatia) and potential candidates (remaining Western Balkans states). The IPA should supersede the existing instruments (PHARE, ISPA, SAPARD), simplifying the management programmes for accession countries. During the past years, mechanisms for co-ordinating, programming and management of CARDS have been established and the implementation of CARDS is under way in Croatia. The annual contribution from the CARDS programme is around 60 million euro, allocated to economic and social development, democratic stabilisation, justice and home affairs and administrative capacity building. Croatia is also beneficiary of the CARDS Regional Programme through which joint projects are implemented together with the other countries of the region. It goes without saying that, similar to the experiences of other candidates, Croatia needs to additionally develop its institutions and strengthen its capacities to absorb the expected additional support from the EU funds. The Government is therefore making preparations for the effective use of EU technical assistance as well as for the effective implementation of projects, particularly within the Phare, ISPA and SAPARD programmes. Towards negotiations In the meantime, Croatia continued with preparations for the start of negotiations. However, there are still some remaining political conditions, particularly the one relating the full cooperation with the ICTY, fulfilment of which is still a high priority. It is the explicit last precondition for the start of negotiations. Thus, the opening of negotiations, although primarily envisaged for 17th March, is highly conditioned, not only with the need of providing clear results of full cooperation with the ICTY, thus confirming respect of legal obligations, but also with the need to demonstrate a full respect of international agreements. However, the fulfilment of the political criteria is a clear precondition not only for the start of the accession negotiations. As announced in the Pre-Accession Strategy, the accession negotiations may be suspended in the case of serious and persistent breach of the principles of liberty, democracy, respect of human rights and freedoms, and the rule of law. Although the mentioned suspension clause was not explicitly underlined in pre/accession documents of the former candidates, it could be understood as the outcome of the experiences of the previous enlargement. It applies nowadays on Bulgaria and Romania, as well. Similar to other countries, the important principle, stated in the negotiating framework, is that negotiations will be based on Croatias own merits, meaning that their pace will depend on Croatias progress in meeting the requirements for the membership. The progress will be measured by compliance with the Copenhagen criteria. Rights and obligations of the European Union are not negotiable, meaning that they should be applied by the time of accession. Negotiations will start with the screening. It is the formal process of examination of the EU legislation and their explanation to Croatian authorities and assessment of Croatias level of preparation for the opening of the negotiations in each particular chapter. Differently from the previous negotiations, EU legislation and standards are divided into 35 chapters. The novelty is also the introduction of benchmarks for the provisional closure of chapters (and, if necessary, for the opening of the chapters). In the avis, the Commission gave the initial estimations which might be most difficult chapters for Croatia in negotiations. According to the avis, Croatia should not have major difficulties in applying the acquis in the medium term in the following fields: Economic and Monetary Union, Statistics, Industrial policy, Small and medium sized enterprises, Science and research, Education and training, Culture and Audio-visual policy, External relations, CFSP, Finance and budgetary provisions. However, some of the mentioned chapters are the areas where Croatia has to define its strategic priorities (such as for the industry, where a coherent industrial strategy needs to be developed), meaning that some of these chapters might require a more substantive efforts. On the other hand, according to the Commission, stronger efforts will be needed in the medium term in aligning legislation and its enforcement in the areas such as Free movement of capital, Company law, Fisheries, Transport, Energy, Consumer and health protection, Customs union and financial control. However, the most difficult areas are foreseen in the following areas: Free movement of goods, Free movement of persons, Freedom to provide services, Competition, Agriculture, Taxation, Social policy and employment, Telecommunications and information technologies, Regional policy and JHA. Apart from this, the area dealing with environment will be particularly difficult, having in mind that substantial investment will be needed and the administrative capacity strengthened. The negotiation process requires good and coordinated preparations. The main coordinating body for the process of the EU integration was until recently the Ministry for European Integration. The Ministry has been merged with the Ministry of Foreign Affairs in early 2005, meaning that the external and internal coordination will be provided at the same place. Having in mind the expected proximate start of negotiations, it is extremely important that the new institution shows the ability to provide a good coordination and continue the activities of the former Ministry for European Integration, which was considered to be among best performing ones within the Government. On the other hand, Croatia has to speed up the overall organisational efforts, regarding its preparations for negotiations. Although the indicative date for the start of the negotiations (March, 2005) has to be confirmed by the Council, depending on the possibility to solve the last of the open questions regarding the cooperation with the ICTY, Croatia has up to now only defined its negotiating structures, but has not yet appointed the negotiating team. The Chief Negotiator and the Head of Negotiating Team have been nominated, together with a special monitoring body, composed of representatives of political parties, trade unions, employers union and academic community. The absence of the core team and supporting structures at operational level might affect timely preparations for negotiations and creating background for drafting of the negotiation positions. Therefore, more concrete and swift preparations are necessary for the start of negotiations. It will be extremely important to keep the process transparent during negotiations, without raising expectations too high, and to introduce experts to take part in it. Implementation and enforcement should be strengthened in particular, further education and development of human capacities will be necessary in order to introduce it as a regular obligation. Continuation of reform in judiciary and public administration are crucial for the success of integration into the EU. Although the main strategic documents for the reforms have been adopted, and continuous training of public officials has stated, it will probably take time and only as such could give adequate response to the existing needs. Special attention needs to be given to a human resources management and the well-trained staff should be kept in the process of negotiations from the beginning until its end. This is necessary since institutional capacity building is one of crucial issues for the overall success of the accession process. Concluding remarks The start of negotiations is important not only for Croatia, but also for the other countries of the region for at least two reasons. Firstly, the start of negotiations, together with the candidate status, should confirm the progress achieved in meeting the goals set by the SAA and defined in the Copenhagen criteria. It should enable the country to continue more effectively in pursuing the internal reforms, particularly through the EU pre-accession support. Secondly, since the EU integration is convincing motive for changes and the strongest cohesion factor in the SEE countries, Croatias negotiations have enormous importance for the region - it could motivate the other countries to follow the example and build stable democratic structures, capable for meeting the European Union membership criteria. On the other hand, a freeze on Croatias membership talks might send a negative message to the entire region. Credibility in answering to the political criteria and efficiency in their implementation are the key issue for Croatia at the moment. The speed of integration will depend on how Croatia will prove its efficiency in implementing reforms and accepting the European standards in practice. The stage of implementation of the SAA, progress with adopting the principles of all Chapters of the acquis, together with the overall macroeconomic picture of the country and the stage of reforms might give an answer to how soon could Croatia fulfil the remaining Copenhagen criteria, which are common preconditions for each candidate becoming EU member. The assessment of Croatias readiness to integrate into the EU will depend to greatest extent on success of internal reforms, ability and quality of implementation, but the external framework might significantly help the country to pass this exam more easily, and more successfully. Finally, the factor of political willingness of the EU to integrate additional new members should not be neglected. In the period after signing the SAA Croatia made significant progress in the development and harmonisation of legislative framework in accordance with the acquis, while harmonisation of secondary legislation and implementation remains priority for the coming period. Most institutions regulating free movement of goods have already been established, although in most areas their strengthening, enforcement and even reorganisation is needed. Furthermore, coordinated work on continuation of accelerated implementing the SAA obligations and structural reforms leading to functioning market economy is needed. Speeding up internal reforms (particularly in judiciary, privatisation, public administration, fiscal consolidation, and in some other areas), continuing SAA implementation and law enforcement are the key preconditions for the success of joining Bulgaria and Romania in the next wave of enlargement. Bibliography Answers of Croatian Government to the European Union Questionnaire. October, 2003. www.mei.hr CARDS programme - preliminary assessment and perspectives of introducing elements of pre-accession strategy for Croatia. Institute for International Relations. Zagreb, May 2003. Communication from the Commission. Opinion on Croatias application for membership of the European Union. COM (2004) 257 final. Brussels, 20 April 2004. Communication from the Commission to the Council. Financial Perspectives 2007 2013. COM(2004) 487 final. Council Decision on the principles and conditions in the European Partnership with Croatia. COM(2004) 275 final. Croatian Competitiveness Challenge. Annual Report on Croatian Competitiveness 2002. National Competitiveness Council, June 2003. EBRD. Spotlight on South-eastern Europe. An overview on private sector activity and investment. London, 2004. European Commission. DG ECFIN, (2003). Western Balkans in Transition. European Economy. Occasional Papers. No. 1. Bruxelles. European Strategic Initiative, (2002). Promoting Economic Development and Institution Building in Western Balkans. www.esiweb.org European Strategic Initiative. (2002). Western Balkans 2004. Assistance, cohesion and new boundaries of Europe. A call for policy reform. Berlin - Brussels - Sarajevo. Government of the Republic of Croatia, (2004). Working Programme of the Government of Republic of Croatia for the period 2004-2007. Zagreb. Government of the Republic of Croatia, (2004). National Programme for the Integration of the Republic of Croatia into the European Union - 2004 (NPPEU). Zagreb, January 2004. Government of the Republic of Croatia, (2004). Pre-accession Economic Programme 2005-2007. October 2004. Government of the Republic of Croatia, (2002). The Plan for Implementation of the Stabilisation and Association Agreement with the European Union. Zagreb. Government of the Republic of Croatia. Regular monthly reports on the execution of the Implementation Plan for the Stabilisation and Association Agreement between the Republic of Croatia and the European Communities and their Member States, for the year 2004. Zagreb. Proposal for a Council Decision Concerning the Signature of the Stabilisation and Association Agreement between the European Communities and its Member States and Republic of Croatia on behalf of the European Community. COM(2001) 371 final. Brussels, 09.07. 2001. Report from the Commission. The Stabilisation and Association process for South Eastern Europe. Third Annual Report. COM(2004) 202/2 final. Samardzija, Visnja and Zivkovic, Zrinka: Internal Market, National Report for Croatia. Prepared within the project Support to promotion of reciprocal understanding of relations and dialogue between the European Union and the Western Balkans, Specific Grant Agreement RELEX I-2 190202 REG 4-14. Zagreb, 2005 (in publishing). World Bank. Croatia: Country Economic Memorandum. A Strategy for Growth through European Integration. July 2003. "The Thessaloniki agenda for the Western Balkans: Moving Towards European Integration.  Visnja Samardzija is the head of the European Integration Department in the Institute for International Relation in Zagreb and former Assistant Minister in the Ministry for European Integration of Republic of Croatia.  Working Programme of the Government of Republic of Croatia 2004-2007, December 23, 2003.  The Protocol 7 extended the concessions that were given to the new candidates bilaterally on the EU 25 and thus the SAA became applicable to the enlarged EU.  Communication from the Commission. Opinion on Croatias application for membership of the European Union. COM (2004) 257 final. Brussels, 20 April 2004.  Council Decision on the principles and conditions in the European Partnership with Croatia. COM(2004) 275 final.  The Croatian Parliament adopted in January 2005 three important documents: Declaration on joint activities of Croatian Government and Parliament in the EU accession process; Declaration on basic principles of negotiations for the full EU membership; Declaration on establishing National Committee for monitoring the negotiations.  Since 2000, the Ministry for European Integration carries out regular public opinion surveys to examine the level of support, expectations and knowledge on EU integration issues. Until now, ten public opinion surveys have been carried out. The last one was at the end of 2004.  National Programme of Integration into the EU for 2003 was adopted by the Government on December 12 and by the Croatian Parliament on December 18, 2002. For 2003, 50 legal acts and 33 by-laws were envisaged to be harmonised with the acquis. The plan for 2004 has been prepared and was adopted at the beginning of 2004.  Memorandum was signed with all the SAP countries, Bulgaria, Romania and Moldova.  Copenhagen criteria, adopted at the Summit in Copenhagen 1993 set up the political, economic and legal preconditions for membership which are valid for the SAP contries, as well.  The European Commission Opinion on Croatia.  Spotlight on South-eastern Europe. An overview on private sector activity and investment. EBRD, 2004.  Government of RC. Pre-accession Programme 2005-2007. pp 10.  Croatian National Bank, September 2004.  The Decision has been adopted at the Government session of July 19, 2001.  In accordance with it, and under the Article 69 of the Stabilisation and Association Agreement, state administration bodies are obliged to submit a Statement of Compatibility and Table of Concordance of Legislative Provisions of the RC together with the relevant EU Provisions, attached to the draft of legal act that has to be harmonised with the acquis.  These statements are based on the study: Internal Market, National Report for Croatia, prepared by Visnja Samardzija and Zrinka Zivkovic within the project Support to promotion of reciprocal understanding of relations and dialogue between the European Union and the Western Balkans, Specific Grant Agreement RELEX I-2 190202 REG 4-14. Zagreb, 2005 (in publishing).  ISPA - Instrument for Structural Policies for Pre-Accession  SAPARD - Special Accession Programme for Agriculture and Rural Development  Since its introduction in 2000, within the national component of the CARDS programme in Croatia 113 project have been identified with total budget of 155 mil euro (29 of them being in preparation).  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