European Commission: Strategy Paper and Report 2003

Latvia

In its 1997 Opinion, the Commission concluded that Latvia 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. Latvia continues to fulfil the Copenhagen political criteria. Regarding public administration reform, Latvia has continued to address the remaining reform issues and the legislative and administrative framework will be fairly comprehensive once the Civil Service Law and Public Administration Law are fully implemented. It is now important to speed up the introduction of the uniform civil service pay system and to ensure sufficient funding.

Overall, while most of the deficiencies of the judicial system have been identified, only part of them have been addressed. Efforts in this field need to be multiplied in order to ensure a thorough systemic reform, based on political support for modernising the judiciary and sufficient funding. The legislative framework still remains to be completed and the increasing backlog of court cases should be reduced. The issue of pre-trial detention requires continued attention. Further significant efforts to strengthen the de facto independence, efficiency and quality of the judiciary are needed. The upgrading of the infrastructure of courts needs to be completed.

Latvia has made further progress in the fight against corruption, which remains a cause for serious concern. The legislative framework has been improved, the institutional set-up has been strengthened and public awareness as well as the involvement of civil society are rising. However, further efforts are needed in order to complete the institutional set-up and to provide the new Anti-Corruption Bureau with the necessary means in order to achieve concrete results.

Latvia continues to respect human rights and freedoms.

Latvia has encouraged the further integration of non-citizens into Latvian society by removing language requirements in the election law, and increasing support to facilitate the naturalisation process, and through the activities of the Society Integration Foundation. The integration process needs however to be accelerated and sufficient funding made available to encourage naturalisation and language training in particular. Latvia should ensure that at all levels the implementation of the language law respects the principles of justified public interest and proportionality, Latvia's international obligations and the Europe Agreement.

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

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

Improvements can be made to the functioning of the labour markets, in particular by active labour market measures in favour of disadvantaged groups, reinforcing public and private infrastructure necessary for the mobility of the workforce and further reforms to the educational system. Fiscal policy has to maintain a prudent approach, also in view of the high current account deficit. In addition, improving the general business environment and strengthening the administrative and judicial capacity would support a more broad-based private sector development. Since the Opinion, Latvia has made steady progress in aligning its legislation with the acquis, in particular during the last 2 years. As a consequence the majority of the primary legislation has been put in place. At the same time, considerable efforts have been made to strengthen its administrative capacity, albeit not to the same extent as legislative alignment.

Over the past year, Latvia has further advanced in completing alignment and creating or restructuring related specialised bodies in the vast majority of areas. It has as well intensified training in most areas with a view to complying with the requirements of the acquis.

Overall, Latvia 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 in most fields. Further efforts remain to be made, in particular regarding its administrative capacity in most fields, as well as completion of legislation in a number of sectors. Detailed plans have been agreed, in particular in the negotiations and in the Action Plan, to cover the remaining gaps.

The preparation for participation in the internal market is well advanced and Latvia has achieved a good level of alignment in this area. As regards free movement of goods, the legal and institutional framework is generally in place. There has been sustained development of the standardisation system, which needs however to be reinforced. The reform of the market surveillance system and its infrastructure, including on food safety and in the field of public procurement, requires further strengthening. The process of bringing Latvia's legislation and structures in relation to the free movement of persons into line with the acquis has developed satisfactorily, although further efforts are required, especially on mutual recognition of professional qualifications as well as on strengthening institutional capacity. In the area of freedom to provide services, legislative alignment has advanced, notably regarding financial services and banking, but further work remains necessary regarding insurance and securities. In the area of capital movements, legislative alignment is well advanced, but the process needs to be completed as regards capital movements and payments. The administrative capacity has been put in place in this field, though further reinforcement remains necessary. On company law, an important development was the recent entry into force of the Commercial Code, which now needs to be implemented. While Latvia's legislation is well advanced in the field of intellectual and industrial property rights, effective action to fight against piracy and counterfeiting remains a challenge. In the area of competition, Latvia's legislative alignment, administrative capacity and enforcement record is reasonably advanced, but efforts should continue to develop a track record on effective implementation of competition legislation.

As regards customs, legislation is largely aligned, but organisational restructuring and implementation needs to continue, as it does for taxation, where legislation needs to be completed on direct and indirect taxation. Latvia should step up its ongoing legislative work, and urgently speed up its preparations for electronic interconnectivity. For both areas, Latvia has committed itself to introducing adequate information technology systems so as to allow the exchange of electronic data with the Community and its member states. Significant further work is required as a priority for these systems to be operational by the date of accession.

Latvia has made further progress in the field of agriculture as well as more recently through upgrading of administrative structures with a view to the implementation of the Common Agricultural Policy. The establishment of the Food and Veterinary Service as the joint body responsible for controls of the entire food chain and the accreditation of the SAPARD agency constitute a significant achievement. However, important challenges lie ahead to complete alignment, and to reinforce the institutional capacity to implement the Common Agricultural Policy and its implementing measures, including the paying agency, the Integrated Administration and Control System (IACS) and the Common Market Organisations (CMO). Particular efforts remain necessary in the field of veterinary and food safety controls as well as on upgrading of food establishments to Community Standards. As regards fisheries, Latvia's legislation has been aligned to a reasonable extent, although there are gaps, notably as regards structural actions and market policy. The administrative structures have been partially established. Latvia's efforts now need to focus on further reinforcing administrative capacity and ensuring sufficient funding.

While Latvia's legislation is to a great extent in line with the acquis in the field of transport, the relevant framework laws (with the exception of maritime transport) are in place and the administrative capacity is being strengthened. Further efforts are necessary to complete the alignment process notably in the rail and maritime sectors as well as regarding administrative capacity in road, rail and air transport. The recent increase in capacity regarding maritime safety and Flag State performance needs to be further enhanced.

A significant step forward was the adoption of the new Labour Code in the field of social policy and employment. Legislative alignment in this field is well advanced, but needs to be completed. Effective implementation and enforcement regarding labour law, health and safety and public health remains important. In the field of energy, a reasonable level of alignment of legislative and institutional capacity has been achieved, but this process needs to be completed, in particular regarding the internal energy market (electricity and gas), oil stocks, increased energy efficiency and reinforcement of the administrative capacity of the various bodies. Latvia has achieved considerable progress in aligning with the environmental acquis. This process needs to be completed and the administrative capacity needs further strengthening, especially regarding inspections, co-operation and coordination at all levels. Investments should be enhanced.

With the adoption of the Law on Telecommunication and the establishment of the Public Utility Commission as regulator, the legislation is largely aligned and the institutions are in place. However, particular efforts are necessary with a view to a further liberalisation of the telecommunications market, the strengthening of the independence and effectiveness of the regulator and legislative alignment in the field of postal services. Particular progress was made recently in terms of institutional strengthening in the field of culture and audio-visual policy, where Latvia's legislation is largely in line with the acquis.

In the field of justice and home affairs, significant progress has been made in terms of legal alignment as well as continued strengthening its institutional capacity. Latvia's efforts need now to focus on completion of legislative alignment, especially on migration, money laundering, and protection of the financial interests of the European Communities and judicial co-operation and implementation of the high quality Schengen Action Plan. Further reinforcing of the law enforcement bodies is needed, with particular attention to be paid to the fight against drugs and trafficking in general, smuggling, fraud, corruption and organised crime, including through improved cooperation between the various bodies involved. Strengthening of integrated border controls and completion or upgrading of structures also remains an important priority.

As for regional policy and the co-ordination of structural instruments, progress was made recently in preparing for the implementation of structural policies and designation of the main institutions involved. However, efforts will need to focus on building up adequate and efficient administrative capacity for the management of the Structural Funds and Cohesion Fund at all levels. Moreover, preparation of an up-to-standard draft Single Programming Document should be speeded up and inter-ministerial co-ordination and partnership needs to be ensured. Generally, all systems and procedures for effective monitoring, financial management and control should be reinforced and the legal framework has to be completed. There is a particular need for progress as regards the technical preparation of projects eligible for Community funding. Latvia has started to take measures to address the weaknesses identified, including through the allocation of human resources. Ongoing efforts need to be continued and substantially stepped up. The establishment of the Public Internal Financial Control system is relatively advanced, but needs to be completed, including legislative alignment.

Preparing its administrative capacity for membership remains one of the greatest challenges Latvia faces. With a view to the responsibilities Latvia will have to assume in managing and enforcing the acquis upon accession, a substantial portion of the necessary institutions have been restructured or created. While this process is well advanced, further substantial efforts are required to ensure that these institutions become fully operational. This is particularly important in areas such as internal market, agriculture, fisheries, transport, regional policy, environment, justice and home affairs and with regard to the implementation of information technology systems for taxation and customs. Finally, continued efforts are necessary to enhance Latvia's capacity to ensure sound, efficient and controllable management of EC funds.

In the accession negotiations, 27 chapters have been provisionally closed. Latvia is generally meeting the commitments it has made in the negotiations.

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

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