Commission Report 2002 (Hungary)

C. Conclusion

In its 1997 Opinion, the Commission concluded that Hungary 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 the protection of minorities. This has been confirmed over the past year. Hungary continues to fulfil the Copenhagen political criteria.

Public administration reform at central level has been completed to a large extent. In this respect, the 2001 Law on Civil Servants, partly enforced in 2002, was an important step forward in the consolidation of the legal framework for civil servants. Following a complex review of the salary structure, the gap between earnings in the public and private sector was further reduced. A financial reform of the local self-governments is still outstanding.

Within the judiciary, the constitutional and legislative guarantees of judicial independence are well-established in Hungary and the system of judicial self-administration functions efficiently. The decisions to introduce the Regional Courts of Appeal and to strengthen the judiciary`s financial independence are important steps as regards the improvement of the judicial capacity.

In line with its anti-corruption strategy, the Hungarian Government has continued to adopt a series of legal and practical measures to fight corruption, which remains a cause for concern. It is important that the new decisions be implemented quickly to better address the situation.

Hungary continues to respect human rights and freedoms. In the area of public service media, political parties are again fully represented in the Supervisory Boards of Trustees. New steps were taken to improve social dialogue.

With a view to addressing the difficult situation of the Roma, the implementation of the 1997 medium-term programme continued. The institutional framework has been further strengthened and a new monitoring system introduced. Still, Roma policy is not well integrated into general social development strategies and exists as a separate and parallel project. Roma continue to suffer discrimination. The Government is currently revising its Roma policy. The envisaged adoption of a comprehensive long-term strategy and comprehensive anti-discrimination legislation would be major steps forward in this regard.

The 1997 Opinion already acknowledged the comprehensive reform efforts undertaken by the Hungarian 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 continued while the Hungarian authorities` commitment to the economic requirements of EU accession has been sustained.

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

Improvements can be made to macroeconomic management by reducing the general government deficit, thus preventing fiscal policy to become pro-cyclical and supporting a further reduction of the inflation rate. A more fundamental reform of the health care sector now needs to be embarked on. Wage developments will have to be brought in line again with productivity growth in order not to compromise the country`s competitiveness.

Since the Opinion, Hungary has made continuous progress in aligning with the acquis in all areas. Implementation of the new legislation has been proceeding well in most sectors. Considerable efforts have been made by the country since 1997 to improve its administrative capacity needed for a satisfactory implementation of the acquis.

Over the past year, Hungary has further advanced in a number of areas, such as social policy, justice and home affairs, telecommunications, culture and audio-visual and energy with regard to the adoption and the enforcement of the acquis. Among the sectors in which only limited progress was made in the reporting year as regards administrative capacity figure agriculture and regional policy. However, administrative capacity was further improved in many other sectors, thereby increasing the level of preparations to effectively implement and enforce Community legislation.

Overall, Hungary has achieved a high degree of alignment with the acquis and is also well advanced with regard to achieving adequate administrative capacity to implement the acquis. However, further efforts remain to be made for Hungary to be fully capable of enforcing it by accession. Detailed plans have been agreed, in particular in the negotiations and in the Action Plan, to cover the remaining gaps.

Continued good progress could be noted in the internal market sector. As described in last year`s report, the major part of the acquis has been adopted, and administrative structures are in place. Since transposition of the acquis is very advanced as regards the free movement of goods, attention is now focusing on enforcement, for example on the effective establishment of the Food Safety Agency as well as on market surveillance. The necessary infrastructure for standardisation and certification is in place. Progress could be noted with the adoption of legislation on procurement in the motorway construction sector. However, further efforts are needed to align with the acquis on public procurement in particular as far as its correct application is concerned. In the field of services, Hungary`s legislation is largely aligned. On data protection, however, legal alignment has to be completed and the appropriate administrative structures strengthened. Following the adoption of legislation on the fight against money laundering, Hungary was removed from the OECD Financial Action Task Force list of non-co-operative countries in June 2002. Also in the sector of free movement of capital, new legislation on land was adopted. However, further adaptations are still required. Administrative capacity to ensure the due supervision of financial services is adequate. In the field of company law, Hungarian legislation is largely in line with the acquis. While Hungary has a relatively good enforcement record, border control measures need to be strengthened with respect to intellectual property rights and the fight against piracy and counterfeiting further intensified. In competition policy, further efforts are still necessary to align State aid schemes, in particular the fiscal aid schemes. Both anti-trust and State aid enforcement bodies continued to work satisfactorily.

In taxation, Hungary`s legislation is to a large extent aligned with the acquis. However, transposition of the acquis, notably as regards VAT and excise duty, has to be completed. Efforts should be continued to ensure that the computerised tax information system is fully operational ahead of accession. In customs, legislation is largely aligned with the acquis. Further efforts were made as regards customs warehousing, temporary importation, valuation and non-commercial consignments. Hungary continued to strengthen the administrative and operational capacity of the Hungarian Customs and Finance Guard and undertook significant steps to revitalise the development of interconnectivity enabling systems. Efforts should be continued to ensure interconnectivity with EC computerised systems in the customs area.

With regard to industrial policy and small and medium-sized enterprises, the Széchenyi Plan will now concentrate on SME development and EC pre-accession projects and be integrated into the National Development Programme.

Good progress was again made in the area of environment, notably through the adoption of legislation in the air, water, industrial pollution control and genetically modified organisms sectors. However, the National Waste Management Plan still needs to be adopted. Administrative capacity in this sector was improved, inter alia, by changes in ministerial responsibilities, but due attention should be given to this issue in the future. In addition, environmental investments need to be further increased.

As to agriculture, Hungary has a steady basis upon which to implement the acquis. However, the preparation of key management instruments such as the paying agency and the Integrated Administration and Control System (IACS) has been delayed, and a number of decisions on the distribution of responsibilities are awaited. As regards IACS, serious efforts are needed to ensure that a fully functioning system will be soon in place. Delays have also occurred in making the SAPARD Agency operational. Steady progress could be noted in the veterinary and phytosanitary fields, but the upgrading of Border Inspection Posts and of establishments needs appropriate attention. Ongoing efforts need to be substantially stepped up. Legal alignment proceeded in the area of transport, in particular in the road and rail sectors. Although some additional steps have been taken, the restructuring of the rail sector should be completed to fully implement the market access acquis. In addition, institution-building efforts have to be further enhanced in this sector.

Considerable progress was made in the energy sector with the adoption of the electricity law, which paved the way for the liberalisation of the Hungarian market. However, no similar progress was made in the gas sector. Administrative capacity is at an advanced level. Good progress could be noted in the audio-visual sector through the adoption of the media law, but further efforts are needed to achieve full alignment.

Considerable progress was made in the area of social policy and employment, notably with the adoption of further implementing legislation to the Labour Law. As to social dialogue, the new Government introduced confidence-building measures and decided to set up a National Interest-Reconciliation Council to enhance real dialogue. The capacity to implement the acquis on occupational safety and health, including the strengthening of labour inspectorates, has been increased, but needs further attention.

In relation to regional policy, it was decided in June 2002 to establish a more efficient institutional framework for programming and implementation of structural and cohesion funds. However, the capacity of the managing and paying authorities has to be strengthened. Further progress is also needed as regards the technical preparation of projects eligible for Community funding. While progress was made in establishing financial management and control systems, the programming process suffered from delays in the reporting period. Hungary`s preparations for the structural instruments have to be substantially stepped up.

Considerable progress was made in the telecommunications sector, where the Hungarian market was opened for competition with the adoption of the communications law. Efforts need to focus on ensuring affordable universal service.

In the area of Justice and Home Affairs, significant progress was achieved through further alignment with the acquis in the fields of visa policy, migration and asylum. The fight against fraud, corruption, money laundering and organised crime was made more efficient through the adoption of additional legislation and reinforced institutional structures. A revised Schengen Action Plan addresses the main issues of the acquis.

In the area of common foreign and security policy, Hungary still needs to find an agreement with Slovakia and Romania on the implementation of the Law on Hungarian minorities living in neighbouring countries. Also, the law needs to be aligned with the acquis upon accession.

As to financial control, enhanced efforts are needed in the sector Public Internal Financial Control, both in terms of legal alignment and administrative capacity. In order to tackle the weaknesses identified, Hungary is in the process of redefining its internal audit functions and structures according to international practice and to redraft the respective legislation. Efforts need, however, to be considerably stepped up.

Hungary has continued to make progress in building up its administrative capacity to apply the acquis in most areas. However, further efforts will have to be made in particular in areas such as agriculture, transport, regional policy, environment and financial control. Further action is also still required in establishing the necessary administrative capacity to ensure the sound, efficient and controllable management of EC funds.

In the accession negotiations, 26 chapters have been provisionally closed. Hungary is generally meeting the commitments it has made in the negotiations. However, delays have occurred with regard to the transposition of parts of the veterinary acquis, legislation on the size control of imported fish, the adoption of the gas law and several pieces of environmental legislation (national climate change strategy, National Waste Management Plan, regional and local waste management plans, packaging and packaging waste and waste oils). These issues need to be addressed.

Bearing in mind the progress achieved since the Opinion, the level of alignment and administrative capacity that Hungary 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 Hungary will be able to assume the obligations of membership in accordance with the envisaged time frame. In the period leading up to accession, Hungary needs to continue its preparations in line with the commitments it has made in the accession negotiations.

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