Czech Republic

In its 1997 Opinion, the Commission concluded that the Czech Republic fulfilled the political criteria. Since that time, the country has made considerable progress in further consolidating and deepening the stability of its institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities. Over the past year, further efforts have been made in this direction. The Czech Republic continues to fulfil the Copenhagen political criteria.

The government has also taken steps to improve the functioning of the central and regional administration. However, it is regrettable that the Czech Republic continues to lack a Civil Service Act for its public administration; this is essential for establishing independence, professionalism and stability.

The reform of the judiciary has gained significant momentum. Work in the area of civil law has made good progress whilst efforts continue on criminal law as well as the organisation of the courts and self­government of the judiciary. In particular, a radical reform of the Criminal Proceedings Code has been adopted which aims to increase the capacity to investigate effectively and bring cases efficiently to trial.

Some additional measures to fight against corruption and economic crime have been taken. Nonetheless, corruption and economic crime remain a serious cause for concern, as evidenced by a governmental report which calls on support from the political forces to address the issue.

The Czech Republic has consolidated its internal institutional framework in the field of human rights. However, increased efforts are necessary to better fight the persistent trafficking of women and children.

Considerable efforts have been made by the Czech government as regards Roma and other minorities. However, further measures to combat widespread discrimination are needed, in line with the government policy for the Roma of June 2000. The central government should ensure that all levels of administration, including regional and local, fully abide by and implement the legislation in place as regards minority rights and that the financial resources necessary to do so are available.

Some progress has been made in addressing the Accession partnership priorities although continued efforts are necessary. The government has proposed a Civil Service Law to the Parliament but this has not been adopted and implementation of a comprehensive reform has thus not started. Continued and encouraging progress has been made on the reform of the judiciary. The majority of the tasks contained in the government's resolution of 1997 concerning the Roma have been fulfilled and the government has adopted a long­term policy towards the Roma. However, further efforts are needed to implement measures to fight discrimination.

The Czech Republic is a functioning market economy. Provided that it makes further progress towards medium­term fiscal consolidation and completes the implementation of structural reforms, it should be able to cope with the competitive pressure and market forces within the Union in the near term.

The macroeconomic performance has improved overall. Growth has resumed and broadened, while the favourable performance on inflation has been maintained. Efforts are being made to increase the transparency of the public accounts. Sustained high domestic and, in particular, foreign, investment has engendered substantial restructuring and high productivity growth in the corporate sector. Further progress has been made on the restructuring of banks and privatisation of this sector is complete.

However, the current account deficit has widened and the budget deficit has considerably risen, driven by transformation related one­off costs and an accommodating cyclical stance. In addition, the medium­term sustainability of public finances is not yet assured. Further improvements of the legal framework for market entry and exit, as well as a forceful implementation of the prudential regulations for the financial sector are essential. The authorities should resume the process of disposing of bad loans after the restructuring of banks. Their efforts to privatise or restructure the remaining large state­owned enterprises should be pursued actively so as to strengthen corporate governance and efficiency.

The Czech Republic has made further significant progress in a wide variety of chapters of the acquis. Nevertheless, further efforts remain necessary in a number of areas. There has also been progress in strengthening administrative capacity, although this remains hampered by the absence of a legal framework for public administration.

Alignment on the single market is overall well advanced, although the remaining gaps need to be filled. On free movement of goods, there has been progress, except for public procurement, and the bodies responsible for standards and certification continue to function well. As regards free movement of persons, transposition needs to be accelerated, in particular as regards mutual recognition of professional qualifications. In the area of free movement of services, alignment with the financial services acquis should be pursued. The capacity of the Securities Commission has been reinforced although stronger regulatory powers would be welcome to improve supervision of financial services. As regards free movement of capital, existing anonymous accounts remain to be abolished.

Concerning competition, legislation is now largely in line with the acquis, and the enforcement record in the anti­trust and state aid fields is reasonably good. In the latter, rigorous and transparent enforcement needs to be demonstrated as regards the steel and financial sectors. The Office for the Protection of Economic Competition is overall well staffed and trained. As regards company law, there is a high degree of compatibility with the acquis; however, the enforcement and monitoring capacity of the relevant authorities in the field of IPR, such as customs authorities, police, judiciary and trade inspection should be further strengthened.

On Economic and Monetary Union, overall a significant part of the acquis has been adopted but further efforts are needed to complete alignment as regards central bank independence. Only limited progress has been made on taxation, and a number of important issues remain to be tackled on the approximation of VAT and excise duty rates. Also, more concrete progress is needed to ensure the proper and efficient functioning of the tax administration upon accession.

There has been little recent progress on telecommunications although overall alignment is satisfactory. The technical conditions need to be put into place to permit the foreseen liberalisation to take place. There has been a significant improvement in legislative alignment on audiovisual policy.

Further progress has been made on sectoral policies. As regards transport, road transport legislation has been aligned further, and the Czech Republic has become a member of the Joint Aviation Authority. However, there has been no significant progress in the railways sector. In the energy sector, considerable progress has been made in preparing for entry into the internal energy market for electricity and gas. On industrial policy, a fresh impetus is needed to take forward the restructuring of enterprises.

In the area of economic and social cohesion, progress on legal transposition has continued. As regards social policy and employment, alignment has progressed on equal treatment, labour law and health and safety at work. On regional policy, the legal framework for the future implementation of the structural funds has been further completed. However, additional efforts are needed to ensure that the administrative bodies responsible are fully functional, trained and well co­ordinated in order to be ready for implementation of the structural funds upon accession.

In the field of agriculture, there has been good legislative progress in the phytosanitary field. However, further work on alignment, for example in the veterinary area, will need to continue across the range of issues of this extensive Community policy. Good progress has been made in setting up the State Agricultural Intervention Fund but further efforts are needed, particularly in the reorganisation of the Ministry of Agriculture.

Good progress has been achieved in transposition of the environmental acquis. In particular, the adoption of the Act on Environmental Impact Assessment was a major development. Co­ordination amongst the relevant government bodies needs to be improved, with particular attention to the implications of the ongoing process of decentralisation.

In the field of Justice and Home Affairs, progress has been made in particular aligning visa policy, migration policy and on strengthening the legal framework for police and judicial co­operation. The adoption of a high­quality Schengen Action Plan is a positive development. However, significant further efforts are needed to implement government policies for combating organised crime and `white collar' crime via effective policing strategies and organisational measures. As regards border control, whilst checks have improved at official crossings, there are still significant difficulties in intercepting illegal immigrants at the green borders with Slovakia in particular.

A high level of compatibility has been achieved with the customs acquis, although the amendment to the Customs Act remains to be adopted, and operational capacity has been improved. Nonetheless, further efforts are needed to ensure that EC­compatible IT systems are fully functional before accession.

Concerning financial control, progress has been made in legislative alignment as regards public internal financial control and external audit, although further efforts are needed to develop a comprehensive system of control.

Overall, the administrative capacity of the Czech Republic is being strengthened and efforts in this direction need to be pursued, in particular as regards agriculture, the environment, regional policy and border controls. Further efforts are also required to establish the necessary administrative capacity for sound, efficient and controllable management of EC funds.

The large majority of Accession Partnership priorities have been addressed and overall satisfactory progress has been achieved in meeting them. The short term priorities relating to the single market have generally been met although further efforts are needed in some areas. Limited progress has been made on taxation. The priorities relating to agriculture, the environment and Justice and Home Affairs have been partially met.

As regards the medium term priorities, those relating to the single market have been met to a large extent, except as regards public procurement. The priorities on economic and monetary union and on taxation have not been met. Some progress has been achieved in meeting the medium term priorities in the remaining fields, which have generally been partially met.

---

Next: Estonia
Up: Annex 1: Conclusions of the Regular Reports
Previous: Cyprus