European Commission: Strategy Paper and Report 2003

The 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. This has been confirmed over the past year. The Czech Republic continues to fulfil the Copenhagen political criteria.

The government has taken further steps to improve the functioning of the central administration. In particular, it has adopted a Civil Service Act which establishes a legal framework for the central public administration and reforms the existing arrangements in a number of key areas. The Act foresees a gradual implementation of its provisions during a transition period which may extend up to the end of 2006, in order to allow sufficient time for their careful preparation and thorough application. Nonetheless, it would be desirable for full implementation to be achieved as soon as possible so that the Czech public administration will be better equipped to deal with the extra demands created by accession to the European Union. The process of decentralization has continued, with the continued transfer of competencies to the regions and municipalities.

The reform of the judiciary has made further progress, in particular with the introduction of a new system of administrative law and the implementation of the streamlined Criminal Proceedings Code. However, further efforts are needed to reduce the length of court proceedings, particularly in civil cases. Overall, the recent reforms need to be underpinned by additional human and material resources as well as increased judicial training.

Some additional legal and organizational measures have been taken to fight against corruption and economic crime, which remain a cause for serious concern. Efforts need to be increased. In particular it is necessary to ensure that the relevant law enforcement institutions receive additional human and technical resources. A recent government report highlights the importance of ensuring full support from political forces in this field.

The Czech Republic continues to respect human rights and freedoms.

An amendment to the Asylum Law, which entered into force in February 2002, tightened the conditions for granting asylum. It also established a second independent appeal instance for rejected asylum applications. The Council for Equal Opportunities started its work in January 2002.

Some additional activities have been undertaken to improve the difficult situation facing the Roma community. However, more structural measures are needed in order to achieve significant results in remedying discrimination in access to education, housing and employment. The adoption of comprehensive anti-discrimination legislation would be an important step forward in this regard.

The 1997 Opinion already acknowledged the substantial reform efforts undertaken by the Czech authorities to transform their economy. Since the Opinion, and against a challenging international economic environment, economic performance has improved. Macroeconomic stability has been achieved, reforms have deepened while the Czech authorities' commitment to the economic requirements of EU accession has been sustained.

Hence, it is concluded that the Czech Republic is a functioning market economy. The continuation of its current reform path should enable the Czech Republic to cope with competitive pressure and market forces within the Union.

Improvements can be made as regards the management of public finance, in particular by addressing the high and rising mandatory and quasi-mandatory government expenditures. Reforms of social expenditure, such as pension and health care schemes, must be pursued. Furthermore, a more decisive approach towards selling off bad assets of the Czech Consolidation Agency to private investors would free the economy of misallocated resources.

Since the Opinion, the Czech Republic has made very good progress. Whilst the pace of legislative alignment was slow in the initial period, subsequently there was a significant acceleration. In recent years there has also been steady progress in building up administrative capacity to implement the acquis, together with the reform of the judicial system.

Over the past year, the Czech Republic has further advanced legislative alignment, in particular as regards financial services, phytosanitary legislation, road transport, social policy, environment and justice and home affairs. However, limited further progress has been made in the field of taxation. Efforts have continued to strengthen administrative capacity, including the adoption of a legal framework for the public administration.

Overall, the Czech Republic has achieved a high degree of alignment with the acquis in many areas and is well advanced towards reaching adequate administrative capacity to implement the acquis, although further efforts remain to be made. Detailed plans have been agreed, in particular in the negotiations and in the Action Plan, to cover the remaining gaps.

In the field of the internal market, transposition of the acquis is well advanced as regards the four freedoms and efforts should focus on filling in the remaining gaps. Administrative capacity is generally good. On the free movement of goods, the Czech Republic now implements almost all harmonised European standards, including those on foodstuffs; however, market surveillance capacity will need to be further increased. Alignment with the public procurement acquis should be completed, building on the welcome progress achieved recently. On the free movement of persons, alignment is high on citizens' rights and free movement of workers, but further work is urgently needed on the mutual recognition of professional qualifications. On the free movement of services, transposition of the banking acquis has advanced well, whilst alignment needs to be completed as regards other financial sectors. Supervision of the financial sector should be further improved. On the free movement of capital, there has been good recent progress on removing restrictions on acquisition of real estate as well as on the regulation of cross-border credit transfers. Administrative capacity to fight money laundering should be further reinforced.

As regards company law, there is a high degree of alignment with the acquis although as regards enforcement of intellectual property rights, further improvement is required, including tackling pirated and counterfeited goods. Concerning competition, legislation is largely in line with the acquis and the Office for the Protection of Competition has developed a satisfactory track record of enforcement on anti-trust as well as state aids. The state aid enforcement and restructuring of the steel sector will need to be closely monitored. In the area of banking, increased transparency is needed.

As regards economic and fiscal matters, a high level of alignment has been achieved with the acquis on economic and monetary union, with significant recent progress as regards the independence of the central bank. A good level of alignment has been reached on taxation, but this needs to be completed in important areas of VAT and excise. Continued progress is necessary to develop information technology systems for the exchange of electronic data with the Community and its Member States. Ongoing efforts to strengthen administrative capacity in this area should be vigorously pursued. A high level of compatibility has been achieved with the customs acquis. It is necessary to finalise the work on computerisation and full interconnection of national systems with EC customs information technology systems.

Sectoral policies have reached an overall good level of alignment with the acquis and administrative capacity is generally satisfactory. As regards transport, road and air legislation is largely in line with the acquis but further efforts are needed as regards the railways. Sufficient administrative capacity to enforce the acquis remains to be ensured. In the energy sector, there is a good level of alignment, in particular on establishing a competitive electricity market. Full and timely implementation of legislation now needs to be ensured. The Czech Republic has accepted and is addressing all recommendations of the Council report on Nuclear Safety in the Context of Enlargement.

In the field of agriculture, the overall level of preparation is good, in particular as regards the implementing structures for the Common Agricultural Policy and alignment with phytosanitary legislation. Continued efforts are needed to complete alignment and strengthen inspection arrangements in the veterinary field.

In the area of economic and social cohesion, as regards social policy and employment, alignment is well advanced, in particular on labour law and health and safety at work. Administrative capacity with regard to occupational health and safety, in particular the labour inspectorates, needs further reinforcement. In regional policy, over the last year important progress has been made so that the legal framework is largely in place. Efforts need to continue to render the implementing and control structures fully operational and as regards the technical preparation of projects eligible for Community funding.

Concerning the environment, the Czech Republic has achieved a high level of legislative alignment and significant investments have produced notable results, particularly as regards air and water quality. Continued efforts are needed to finalise transposition and implementation in the areas of water quality, waste, nature protection and industrial pollution prevention. Also, administrative capacity at local and regional levels needs to be ensured and long term financial investments need to be planned.

On telecommunications, the Czech Republic has made further recent progress and has achieved a good level of alignment concerning the development of the telecommunications infrastructure and diversification of the market. However, full market liberalisation remains to be achieved and the independence of the regulatory authority needs to be ensured.

As regards the audio-visual sector, the Czech Republic is well advanced in terms of legislative alignment. However, effective implementation will require strengthening of administrative capacity. It remains particularly important to establish and supervise effectively a transparent and predictable regulatory framework in the audio-visual sector.

Concerning justice and home affairs, notable progress has been made in almost all areas and legislative alignment is almost complete. Continued efforts should be made to ensure further upgrading of border management and the implementation of the Schengen Action Plan as well as strengthening the fight against fraud, corruption and organised crime.

Regarding financial questions, in the field of financial control legislative alignment is completed but further substantial efforts are required to ensure full implementation of public internal financial control. Overall, the administrative capacity of the Czech Republic has been strengthened considerably. Efforts need to be pursued in particular as regards agriculture, the environment, regional policy, justice and home affairs as well as financial control. Special attention should be given to the structures necessary to ensure sound and efficient management of EC funds. Currently ongoing activities, notably the strengthening of the internal audit units through increasing human resources and training, need to be vigorously pursued in order to attain full operational capacity by accession.

In the accession negotiations, 25 chapters have been provisionally closed. The Czech Republic is generally meeting the commitments it has made in the negotiations. However, delays have occurred with regard to the full alignment of public procurement legislation, completion of alignment regarding mutual recognition of professional qualifications, adoption of parts of veterinary legislation, and the completion of alignment of certain VAT and excise duties. These issues need to be addressed.

Bearing in mind the progress achieved since the Opinion, the level of alignment and administrative capacity that the Czech Republic has achieved at this point in time, and its track record in implementing the commitments it has made in the negotiations, the Commission considers that the Czech Republic will be able to assume the obligations of membership in accordance with the envisaged timeframe. In the period leading up to accession, the Czech Republic needs to continue its preparations, in line with the commitments it has made in the accession negotiations.

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