Commission Staff Working Paper

Transcription

1 EUROPEAN COMMISSION Directorate General IA External relations: Europe and the New Independent States, Common Foreign and Security Policy, External Service Brussels, SEC(99)714 Commission Staff Working Paper on compliance with the conditions set out in the Council Conclusions of 29 April 1997, in the framework of the Regional Approach to the countries of South-Eastern Europe Bosnia and Herzegovina, Croatia, Federal Republic of Yugoslavia, former Yugoslav Republic of Macedonia and Albania

2 TABLE OF CONTENTS Introduction 1 Section 1 1 Bosnia and Herzegovina Democratic principles Human rights and rule of law Respect for and protection of minorities Market Economy Reform Regional Cooperation Compliance with Dayton / Paris and PIC deadlines 8 2. Croatia Democratic principles Human rights and rule of law Respect for and protection of minorities Market Economy Reform Regional Cooperation Compliance with obligations under the Dayton / Paris and Erdut Agreements Federal Republic of Yugoslavia (FRY) 15 Section Democratic principles Human rights and rule of law Respect for and protection of minorities Market Economy Reform Regional Cooperation Compliance with obligations under the Dayton / Paris Agreement Former Yugoslav Republic of Macedonia Democratic principles Human rights and rule of law Respect for and protection of minorities Market Economy Reform Regional Cooperation Albania Democratic principles Human rights and rule of law Respect for and protection of minorities Market Economy Reform Regional Cooperation 28

3 INTRODUCTION On 26 February 1996, the EU Council adopted a Regional Approach to the countries of South-Eastern Europe 1, followed up by a Commission report on common principles for future contractual relations with certain countries in South-Eastern Europe 2. On 29 April , the Council established political and economic conditions to be fulfilled by these countries, as the basis for a coherent and transparent policy towards the development of bilateral relations in the field of trade, financial assistance and economic cooperation, as well as of contractual relations. There are general conditions - applying to all of the countries covered by the Regional Approach (Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia (FRY), the former Yugoslav Republic of Macedonia, and Albania), covering areas such as democratic reforms, respect for human and minority rights, return of refugees and displaced persons to their place of origin, economic reforms and regional cooperation - and specific conditions (e.g. obligations arising under the Dayton/ Paris and Erdut Agreements and PICs, and thus only applying to the signatories of the peace agreements - Bosnia and Herzegovina, Croatia and the FRY). As in the Commission s earlier reports in this series 4, the present factual report is not a general political or economic report but monitors compliance - during the period from mid-october 1998 until mid-april by the countries concerned, with the relevant conditions established by the Council on 29 April Section I deals with Bosnia and Herzegovina, Croatia and the Federal Republic of Yugoslavia (i.e. countries with obligations under the peace agreements) while the former Yugoslav Republic of Macedonia and Albania are treated under section II. The Commission's conclusions in regard to compliance, based on the present factual report, are set out in the annex to the accompanying Commission Communication on the Regional Approach 5, a document which is wider in scope, covering the Regional Approach as a whole as well as suggestions for its future development, in the context of the proposed Stability Pact for SouthEastern Europe, and with a view to the development of an EU Common Strategy towards the region Conclusions of the General Affairs Council of 26 February 1996 Report from the Commission to the Council and the European Parliament, COM(96)476 final of Conclusions of the General Affairs Council of 29 April Commission Services Report ( ): Regional Approach to the countries of South-Eastern Europe: Compliance with the conditions set out in the Council Conclusions of 29 April 1997, which covered the period to October 1997; Commission Staff Working Paper Regional Approach to the countries of South- Eastern Europe: Compliance with the conditions in the Council Conclusions of 29 April 1997 SEC (1998) 586 of and Operational Conclusions COM (98)237 of which covered the period to March 1998; Commission Staff Working Paper SEC (98) 1727 of and Commission Communication COM (98) 618 of which covered the period to October Annex to COM (99) xxx of

4 1.1 Democratic Principles SECTION 1 CHAPTER 1: BOSNIA AND HERZEGOVINA 6 As far as representative government and accountable executive is concerned, the BiH Council of Ministers, formed following the September 1998 general elections, was approved only at the beginning of February. Cooperation within the Council of Ministers started well until the recent political events in the Republika Srpska and in Kosovo. However, the development of a multiethnic civil service and the strengthening of the Common Institutions has been hampered by the persistence of nationalist ideologies at the entity level, the lack of premises and human resources and the lack of public information and trust. No appropriate mechanism for a proper financing of State institutions has been put in place. The 1999 budget provides a mere 61 million KM (ca 30.5 m ) for the financing of the common institutions The improvement of the efficiency of the State Ministries, in particular the restructuring of the oversized Ministry of Civil Affairs and Communications, is still too slow. Concerning the legislative authorities, few plenary sessions have taken place during the present legislature, for political reasons but also as a consequence of the absence of or the poor regulation of parliamentary procedures. For the first time since Dayton, all Committees of the BiH House of Peoples have been established. However, the regulation of the committees is insufficient and the size of the secretariat is too limited to ensure a proper functioning of the Parliamentary Assembly. In contrast with the CoM, some members of the Parliamentary Assembly still seem to rely more on the cohesion of the ethnic groups than on democratic principles and on the rule of law. Certain members of the House of Representatives who continue to question the statehood of Bosnia and Herzegovina make this situation more difficult. The Collective Presidency has not contributed enough to the creation of a more favorable climate for mutual co-operation across the country and the real power remains more within the political parties than within the state institutions. The permanent state and entity election laws are currently being drafted, although those laws may come too late to be applied for the municipal elections on November a) The political situation is particularly uncertain in the Republika Srpska (RS). The Presidential crisis created by Poplasen himself has led to the current unstable and unpredictable situation. His attempted dismissal of the incumbent PM Dodik constituted a clear violation of Dayton / Paris obligations and brought the High Representative to decide on his removal. Despite the obstruction by the President, the current caretaker government led by PM Dodik has continued, until recent events, to act in a cooperative and positive manner. At the moment, four main problems can be identified: the new President of the RS; the formation of a new government; the Serb reaction to the decision on Brcko; the Serb refusal to participate in the work of the common institutions. The radicalisation of the political situation following the NATO operations against FRY has further widened the gap between moderates and nationalists. Tension and uncertainty likely to remain as long as air strikes against FRY continue. Concerning Brcko, the international arbitrator Owen decided in March 1999 to create a special district in Brcko, under the condominium of the two entities. This decision is binding and final and it must be accepted and implemented by all BiH authorities. In the wake of the 6 Throughout this report, BiH refers to Bosnia and Herzegovina; FBiH to the Federation; and RS to Republika Srpska. 2

5 Arbitration Decision on Brcko and the High Representative's decision to dismiss RS President Nikola Poplasen, the National Assembly of the RS adopted a resolution on 7 March rejecting both decisions. The resolution also confirmed the moratorium declared by RS representatives on their activities in offices held in joint BiH bodies. The Serb member of the BiH collective Presidency and Chairman in office of the Presidency, Mr. Zivko Radisic, has also declared a moratorium on his post in the Presidency until instructed to do otherwise by the RS Assembly. Dodik and the RS Caretaker Government tendered their collective resignation after the announcement of the Arbitrator's decision on the status of Brcko (withdrawn in the meantime). These events have practically brought to a standstill the work of the joint bodies of BiH and risk jeopardising all the progress that had been achieved up to now. The authority of the moderates has been challenged by these events and it is still very uncertain as to how will the situation unfold. b) In BiH Federation (FbiH), coinciding with the events in the RS, Bosnian Croats have focused their action more on the protection and promotion of their group than on the cooperation within a unified State, although some moderate leaders are committed to the integration of the country and to its movement towards European structures. The withdrawal of Croat representatives from joint bodies at State and entity level, as a reaction to the terrorist act against Deputy Interior Minister Leutar, who was killed in a bomb attack, has further weakened the institutions created by the Peace Agreements. Bosnian Croats decided to end the 7-day boycott of common institutions on 28 March). More commitment to a truly multiethnic state is also expected from the SDA that seems to be incapable of promoting stronger common institutions because of serious internal conflicts between territorial fractions and moderate and nationalists components. The merger of Social-Democrat parties (SDP and SDBiH) was implemented in February. The new party is the strongest multiethnic political organization in the country and seeks to develop ties with constituents throughout the country. Other initiatives to create new coalitions have been taken by the Liberal Bosniak Party, which aims to create a moderate Center Coalition. The New Croatian Initiative (NHI) has tried to unite all moderate Croat parties but it is difficult at the moment to assess the real chances of this project. 1.2 Human Rights and the Rule of Law The Madrid PIC Declaration outlined priorities within the field of human rights and the rule of law for The concerted effort of the International Community in 1998 to streamline and focus its policies as well as strengthen its capacity to monitor and respond effectively to human rights abuses have not brought a qualitative improvement in the level of protection. Increased efficiency in the work of the Human Rights Institutions has not been matched by reciprocal good will in compliance by the BiH authorities. December 1998 finally saw the creation of liaison offices to the Human Rights Commission of both FbiH and RS. It is hoped that the establishment of these permanent offices will be a positive step in increasing compliance. The judicial system, since the last report, has been incapable of approaching the standards of the European Convention on Human Rights. At the State level, the Constitutional Court needs further strengthening, particularly in light of its forthcoming judgement on the constitutionality of the Entity Constitutions. As stressed in the recommendations of the EU/BiH Consultative Task Force, State and Entities have not fully ensured the independence and budgetary autonomy of the Constitutional Court and the uniform status of the judges of the Court is still not guaranteed. 3

6 A comprehensive judicial reform through a strategic plan will inter alia address the crucial issue of the establishment of an independent judiciary. The current system does not ensure independence or impartiality of the judiciary. The independence of the judges of the two entities is still undermined by a system of appointment in which nominations by the Minister of Justice are approved by elected assemblies. The legal system of the two Entities is too complex, especially in the Federation, where some judicial powers are devolved to the cantons. The cooperation between the judiciary in the two entities and between Croat and Bosniak judges in the ethnically mixed cantons of the Federation has still not improved. However, the reform of the judiciary has begun and should be completed in the first semester of 1999, aiming at guaranteeing de jure and de facto a strong judiciary. Recent events raised serious concerns concerning the separation of powers, confirming the strong influence exerted on the judges by political powers, and the politicisation of the judiciary in both entities. The most notable example is the verdict of the Zvornik Seven case in December 1998 which was condemned based on strong indications of political influence over the Court in Bijeljina. Strong condemnation has been voiced against government authorities who have failed to execute arrest warrants issued by the ICTY. In this regard the arrest by SFOR of the Serb General Krstic in December, although followed by violence, represents a step forward. The progress achieved in media reform constitutes one of the most encouraging developments of The consolidation of this success, matched with the establishment of the necessary media regulations and complaints procedures through the Independent Media Commission (IMC), will be crucial for the peace implementation process in a) The RS National Assembly has amended the 1996 Law on Amnesty, to bring the law in compliance with annex 7 of the GFAP. The law now guarantees the inclusion of draft dodging and desertion in the list of crimes subject to the amnesty and extends the amnesty period to the official date of cessation of hostilities. RS has almost completed the first phase of the reform of the criminal and criminal procedure codes whereas the draft law on judicial selection and dismissal is still at an early stage. Following the beginning of the operation in Kosovo, SRT (RS TV) has suddenly precipitated in quality. It is directly re-broadcasting programs from Belgrade and is spreading out the Milosevic propaganda. b) FBiH has already passed the first phase of the reform of the criminal and criminal procedure Codes. An FBiH draft law on judicial selection and dismissal has been prepared. Some progress (with the assistance of the OHR, OSCE and the EU) has been achieved in restructuring the FBiH prosecution authority. Currently, the pivotal element of the overall reform of the media sector in BiH, namely the reform of Bosnia and Herzegovina TV into a proper public Federation broadcasting service, is still delayed because of the need to find programming solutions which will elicit the support of the Bosnian Croats. The problem of Croatian Television (HRT) broadcasting illegally into BiH was addressed by the Independent Media Commission on 16 December and is linked to the organisation of a Federation television system. Illegal transmission of programming from Croatia by terrestrial means on the territory of BiH obstructs the development of a normal media market in BiH and blocks frequencies requested by RTV BiH. No progress has been achieved yet to establish a public broadcasting corporation for BiH based on a reformed SRT and a Federal TV. 1.3 Respect for and protection of minorities With regard to the return of refugees and displaced persons to areas in which they would constitute an ethnic minority, no unified picture can be drawn. The number of returns in 1998 is estimated to have reached 120,000, a figure considerably lower than the planned 200,000. Of greater concern is the continuing low level of so-called minority returns that took place (an estimated 35,000). Whereas Sarajevo should become, as capital of the State, the model 4

7 for a unified and multiethnic country, the implementation of the "Sarajevo Declaration" has been much below the expectations. The definitive reallocation of apartments and of socially owned land prevents refugee return. For this reason, the deadline for aprtment claims has been, by a decision of the High Representative? Extended by three months. The main hurdle for the success of minority returns remains the issue of housing and the implementation of the property legislation. Some breakthroughs have been achieved, with much political brokering and financial assistance. Although considerable efforts are being deployed to foster the security environment for minority returns, it is estimated that 90% of repatriates choose to relocate thus contributing to an increase in the displacement within BiH. What is also needed is a commitment in action and not just in words by the national and local authorities to uphold of individual human rights and to promote economic revitalisation and job creation, especially at the local level. Persistent resistance against minority returns exists in many localities. However, minority return related incidents have declined in numbers during the reporting period. The Kosovo spill-over has affected BiH too. According to the OHR, the number of refugees is around ( from Kosovo and from Sandjak). The presence of refugees in the Federation risk to further slow down the returns foreseen in a) RS continues to have the worst record in terms of minority returns. The suspension of evictions decreed by the RS Ministry of Justice is one of the main pressing problems. These suspensions are designed to prevent minority returns. They undermine the rule of law and violate the commitments undertaken by the RS at the Return Conference in Banja Luka in April The recently adopted RS Law on Cessation of Application of the Law on Abandoned Property contains a number of flaws that are being addressed. b) The BiH Federation is currently undertaking a review of the criteria for reallocation of apartments in cases of permanent occupancy right holders and considers amendments to the Law on Cessation, the Law on abandoned Apartments, the Law on Abandoned Property and the Law on Housing Relations in view to removing outstanding inequities and procedural obstacles to the return process. On the other hand, the southern region has been marred by continuous serious incidents linked to minority return (Stolac and Caplijna). 1.4 Market Economy Reform Economic growth, driven by donors funds, has remained strong (40%). In early 1999 there were promising signs of change for the better, but the events in the RS in March and in the Federal Republic of Yugoslavia have led to the delay of important economic policy decisions. Gross Domestic Product (GDP) at State level as a whole was DM 6.9 bilion in GDP per head was DM The income gap between the two entities in considerable. In 1998, GDP per head was DM 2100 in the Federation and DM 1500 in the RS.Prospects for private investment and self-sustained growth have therefore worsened. Concerning the CTF, the participation of BiH State and Entity level representatives to its activities has improved but a more substantial input is still expected. The BiH authorities are expected to fully implement CTF joint recommendations. As regards the legal and institutional framework, progress has been made in terms of improved inter- Entity co-operation in order to ensure the proper functioning of common institutions at the State level. The groundwork has been laid for development of a Treasury system at the State level and the creation of Supreme Audit institutions at the State and Entity levels in The state has begun to regularise its external debt service payments and units to manage the monitoring of external borrowing and debt-service obligations have been established at the State and Entity levels. BiH also reached an agreement in October 1998 with its bilateral creditors in the framework of the Paris Club on debt reduction. A key outstanding issue is the reform of the payment system. The Prime Ministers 5

8 of the two Entities have confirmed their political agreement to its dismantling, as foreseen in the Madrid PIC Declaration Fiscal discipline is maintained by balancing budgets on a cash basis with expenditures limited to domestic revenues and foreign financing, and both Entities allocate available funds every ten-days. Revenue collection has improved in both Entities over the last six months, mainly thanks to interentity harmonisation of taxes. Budget execution information is now provided on a monthly basis by both Entities. Under the present IMF stand-by arrangement, macroeconomic stability has been maintained. The operations of the Currency Board and the peg of the Konvertible Marka, KM, to the DM has contributed to monetary stability. There is evidence of increasing acceptance of the KM as a means of payment. The RS government took important decisions to require, as of 6 February 1999, all taxes and customs (with some exceptions) to be paid in KM. In the Croat parts of the Federation, however, the wide-spread use of the Croatian Kuna for transactions and the insistence by some local authorities on paying fees and duties in Kuna has hampered the use of the KM.. Banking sector rehabilitation remains a priority in BiH has still too many banks with little capital. In autumn, new laws were passed to prohibit insider lending. In addition, the BiH Banking Agency of the Federation took a decision to regulate the supervision of banks and agency acts (December 1998). In the RS, the discriminatory treatment of Federation banks, which are classified as foreign, needs to be addressed and banking laws be harmonised. The State Framework Law on Privatisation is now in force as well as separate privatisation legislation for both Entities. Privatisation remains subject to delays, in particular with regard to the demanding requirements for issuing privatisation vouchers in four categories of citizen claims. The recently established Privatisation Monitoring Commission has become operational. It is tasked to review the ownership transformation of mixed-ownership companies and companies of dubious status. As far as the restitution of nationalised property is concerned, the law on denationalisation is still at the drafting stage and needs to be promulgated quickly. The Ministry of Finance and Trade of the two entities have formally acknowledged the need to remove the legal and administrative obstacles that prevent free trade of goods and services between the two entities. In early 1999, the inter Entity cooperation slightly improved when both Entities reached broad agreement on a list of import surcharges as well as unified excise rates for domestic and imported goods. Non-tariff barrier obstacles remain non-transparent and need to be addressed soon. Even though there are stated intentions by the entities to harmonise the respective legislation with EU and WTO rules, there have been no further safeguards taken by the entities to ensure the non-discriminatory inter Entity circulation of goods, capital and services. This issue, including technical standardisation, quality norms and certification, as well as others such as accounting, auditing, company law are, however, being addressed at the EU BiH Consultative Task Force meetings. In the RS, three commissions, for the coordination and monitoring of the realisation of the EU benefits, for the harmonisation of the Serb entity legal system with the EU and for the coordination and implementation of the PHARE programme have been created under the auspices of the RS Ministry of Foreign Economic Affairs. Customs duties are paid in KM. The Customs Tariff Law and Schedule of Bosnia and Herzegovina, (developed with the guidance of the CAFAO programme) came into effect on 13 March Despite these clear regulations, Croatian imports do not pay full customs and excise duties when crossing the border into Herzegovina, whereas the full rates of customs duties are being applied to goods cleared at customs centres staffed by Bosniacs. The illegal trade agreement between the FbiH and Croatia has up to date not been abolished but a trade agreement between Croatia and BiH is being negotiated and will replace that agreement. The RS has recently revoked unlawful agreement with the Federal Republic of Yugoslavia. 6

9 Corruption and diversion of public funds are of concern. A huge burden for Bosnia and Herzegovina is also the organised commercial sales tax fraud. The governments on State and Entity level have not yet invested enough efforts to resolve these problems. The CAFAO programme includes the creation and equipping of anti-smuggling, investigation and intelligence teams and specific projects which will improve the ability of the customs and taxation services to both prevent and detect corrupt practices. 1.5 Regional Cooperation The attitudes towards the country of the Federal Republic of Yugoslavia and of Croatia tend more towards regional obstruction than co-operation. Belgrade and Zagreb constantly interfere in BiH internal affairs. Despite its obligations under the Dayton Agreements, the Federal Republic of Yugoslavia has still not established full diplomatic relations with Bosnia and Herzegovina. The negotiations concerning important questions such as the repartition of the assets of former Yugoslavia are still blocked by Belgrade, as are the payments operation system between that country and Bosnia and Herzegovina. The 'Agreement on the Free Transit Through the Territory of Croatia to and from the Port of Ploce and through the Territory of Bosnia and Herzegovina at Neum", between Bosnia and Herzegovina and the Republic of Croatia has not been ratified yet. However, the "Special Relations Agreement", between Croatia and the Federation of Bosnia and Herzegovina, finally ratified by the Federation parliament, marks an improvement in the relations between the Federation and Croatia. 1.6 Compliance with obligations under the Dayton-Paris agreement BiH authorities have been closely involved in the preparation of the Madrid Declaration (December 1998) and have supported it, although the Bosnian Serbs and the Bosnian Croats have been more reserved. The implementation of the Declaration is progressing slowly. The Bosnian State authorities are now all in place. Annex 9 of the Dayton Agreement provides for the establishment of the Public Corporations. Again, progress if any, is slow. The PIC deadline for the adoption of the Civil Aviation Act of has not been respected. The railways, and in particular the vital Ploce Sarajevo - Budapest link, are not yet fully operative; the negotiations relating to the Zagreb Bihac Split link are hampered by the uncooperative behaviour of the Croatian authorities, while the postal services are still far from functioning reliably. The PIC deadline of for the implementation of the Srebrenica municipal elections has also been missed, mainly because of the obstruction of SDS and SRS. A framework Agreement on Local Government in Srebrenica was finally signed on 4 March. The co-operation with the International Criminal Tribunal for the former Yugoslavia (ICTY) is progressing satisfactorily in FBiH. The RS however still refuses to co-operate with the ICTY and to apprehend war criminals. Half of the indicted war criminals are still at large, by far most of them in the RS. Both the Federal Republic of Yugoslavia and Croatia continue to violate Annex 4 Article I.7 d) of the Dayton Peace Agreement, concerning dual citizenship. Dual Citizenship, as practised by the Croat and Yugoslav authorities with regard to citizens of Bosnia and Herzegovina, can be lawful only after the adoption of bilateral agreements approved by parliamentary assemblies. In the absence of such bilateral agreements, the continued recognition of dual citizenship by the Croat and Yugoslav authorities clearly infringes the Peace Agreements. 7

10 CHAPTER 2: CROATIA 2.1 Democratic principles Over the reporting period, the political dialogue has become more focussed. The ruling Party, HDZ, and the alliance of six main opposition parties, which following refusal from HDZ to appropriately inquire into alleged abuses by security and intelligence services have resigned all parliamentary committee positions, started discussions on issues of crucial importance for the improvement of democratic standards in Croatia. However, satisfactory progress in key areas has not yet been achieved. Despite strong international and internal insistence, there has until recently been no substantial progress regarding the revision of the electoral law. This question is crucially urgent since parliamentary elections will take place before January 2000 and the present system would not permit fair elections to be held. A detailed analysis of the disputable provisions was contained in the nonpaper delivered by the International Community to the Government of Croatia on 19 October The formal reaction to this demarche, received on 29 January, has not shown a clear intention to undertake serious and substantial modification of the relevant legislation. Nor have discussions between the HDZ and the Opposition made progress with regard to the main bone of contention, the abolition of the so-called Diaspora List, which reserves 12 out of 127 parliamentary seats for representatives elected by Croatian citizens living abroad and goes against the basic principle of representative democracy. The draft new electoral law, prepared by an expert group directly appointed by HDZ although including some independent personalities, does not seem so far to provide satisfactory solutions to all contested issues. Parliamentary discussion, which has started in April, will be followed with strong interest. Discrimination in the recognition of the citizenship, and the consequent voting rights, on ethnic basis, also remains a main point of concern, in particular with reference to recognition of citizenship and voting rights to Bosnian Croats which is not in full compliance with the letter and the spirit of the Dayton Agreement. Finally, a general need for more transparency and democratic participation in the electoral process remain crucial. Dominance by HDZ of Croatian society has been even exacerbated by the departure, voluntarily or involuntarily, of a number of leading HDZ moderates from influential posts or from the party itself. The extensive powers of the President and the dominance of the ruling party continue to have a negative effect on representative government and accountable executive, with a lack of clear distinction between party and government. There has been no significant progress regarding full respect for separation of powers. In particular, the independence of the judiciary remains a serious concern since, through parliamentary approval, the HDZ wields influence over the selection of judges and uses them as a political tool of the executive branch. A specific point of criticism concerning the relations between the judiciary and the executive concerns the lack of full judicial review of the decisions taken by the administrative authorities, since courts can only review the procedural aspects of such decisions, and not their substance. As a matter of fact, it can be questioned whether the nomination of the loyal former Supreme Court President to the Constitutional Court is not the most recent example of "sanctioning" a "too independent" behavior of the Constitutional Court, which has overturned many government as well as parliament decisions. 2.2 Human Rights and Rule of Law Croatia has formally undertaken important international commitments in the field of the protection of human rights, and is a signatory or party to the main European and international instruments of protection of human rights. While taking note of the more cooperative approach which Croatia demonstrating, notably in discussion with the Council of Europe, it must be underlined that the legal framework is still applied in a selective manner and substantial implementation of the international and constitutional legislation in this field is lacking with the result of need for significant improvements in some crucial areas. Important provisions of the 1991 Constitutional Law on Human 8

11 Rights and Freedoms and on Rights of Ethnic and National Communities or Minorities are still suspended and no timetable for further action has been scheduled. Moreover, the situation remains critical in the area of freedom of expression, more specifically, freedom of the press. Amendments to the Law on Croatian Radio and Television, HRT, adopted by Parliament in October 1998, have not addressed the key issues and Croatian state television, which is the main if not the only source of information for the majority of people, continues to be controlled by the ruling party. Once more, the international community expressed its clear position through a nonpaper delivered to the Government in October The formal answer was rather disappointing since the Government of Croatia claims that HRT legislation, as recently modified, is comparable to international standards. In fact the law as amended only incorporates one of the points put forward with the recommendations made in March 1998 by the Council of Europe experts, namely the reduction of the number of MPs who can be members of the HRT Council to 10 out of a total of 23. The 13 non-parliamentary members, however, must be approved by Parliament. The remaining substantial recommendations by the CoE were not followed. Under these conditions, serious concern has also been expressed regarding the unacceptable bias of the HRT in favor of the ruling party with worrying consequences especially during the electoral campaigns. Confirming the political meddling in the state-owned media are two noticeable resignations, namely that of the deputy director of the HRT, and that of the director of the News Agency HINA, who openly said they had left because of the interference in their work. Substantial changes are also required to the Law on telecommunication, notably in order to ensure independence of the Telecommunication Council and a transparent and open process of granting and revoking concessions and licenses. Against the request of the International Community to privatize the third channel, taking into account the limited size of the Croatian market, the Telecommunications Council has approved a call for tender for a fourth nationwide private TV channel. As it is unlikely that anyone will find such a concession profitable, the practical results would not entail any change in the current HRT monopoly. Ongoing contacts between the Croatian Government and the international community, which lately included the practical proposal of at the least establishing a code of conduct to ensure equitable coverage of all political parties in HRT-information programs in the run-up to the elections, to date have not produced any concrete result. The printed media continues to suffer serious difficulties in collecting distribution revenues from the monopolistic distributor Tisak, whose huge debts to Croatian publishers jeopardises the regular publication of independent dailies and weeklies. Whether the proposed economic restructuring of Tisak will eliminate the use of distribution to exert political pressure remains to be seen but the financial restructuring is not taking place in a transparent manner either. More important still, intimidation and harassment of independent journalists, notably through numerous lawsuits, continues. As a matter of fact, despite continued international and internal insistence, the government has not taken any steps to revise an article of the Penal Code which authorizes the criminal prosecution of journalists who publish state secrets or insult the honor or dignity of the top officials of the government. The new law on public assembly has not yet been adopted by Parliament. As far as the right to property is concerned, the important issue of tenancy rights has not yet been solved. Government recently gave indications to address this issue but no concrete proposal has been made yet.. The importance of this question in the process of refugee return is evident. There has been no progress either as regards access to courts and the right to fair trial, and some discriminatory legislation is still in force violating the principle of equality before the law and equal protection by the law. 2.3 Respect for and protection of minorities 9

12 A step forward in this field has been taken by establishing a consultative body of representatives of minorities, the Council of National Minorities, a forum for discussion with the Government of all issues related to minority policy, as well as for proposing relevant laws or amendments to laws. By the way, Croatia has undertaken formal commitments by signing the relevant European and International Conventions on the protection of minorities. However, concrete implementation of these international instruments is often lacking. The suspension of some provisions of the Constitutional Law on Human Rights and the Rights of Minorities hampers full protection of minority rights, in particular as far as the Serb minority is concerned. An example is the suspension of the granting of special status to districts with a Serb majority. The reason given by the Government for this suspension is that in the event of population movements, there would be no more units where Croatian Serb population would constitute a majority and that consequently, the conditions for implementation of these provisions are not met. For these reasons, the Venice Commission recommended that it would not be appropriate to re-introduce suspended provisions of the Croatian Constitutional Law on HR and Rights of Minorities from 1991, in their original version but recommended instead, that this law should be revised, with a view to ensuring participation of minorities in public life. This has not yet been done. There have been no significant changes with regard to the right of minorities to establish and maintain their own educational, cultural and religious institutions. The Minority Language Act, although proposed by the Government in September 1997, has still not been passed by the parliament. As for the implementation of the Reconciliation Programme, further efforts must be made to realize the goals set out in the Programme. Committees at local and county level, responsible to the National Committee, have either not been established or tend to be passive, waiting for instructions from the latter. 2.4 Market economy reform Progress in stabilisation of the Croatian economy were mitigated in GDP growth did not exceed 3.5% (to be compared to official forecasts of 7%). Annual inflation reached 5.4% in 1998, a slightly higher figure than in 1997, mainly due however to the introduction of the VAT in early Unemployment remains at worrying levels (17.8%). The serious difficulties of the banking system contributed to the depreciation of the kuna (HRK),-which has lost about 7% against the Deutsche mark since September 1998, and led to acute insolvency problems. Non-payment threatens the overall Croatian economy. The Croatian Institute for Payments has registered a total of 14 billion HRK (about US$ 2.2 bn) of unpaid debts and therefore claims that some companies are insolvent. Combined with a strong reduction in imports, caused by a decreasing domestic demand, the stagnation in exports could not prevent the - structural - foreign trade deficit to reach almost US$ 2 billion for the first ten months of The current account deficit decreased sharply and is expected to have reached some 7.5% of GDP, compared to 12.5% in The trade regime remained unchanged since the last report. Croatia maintains tariffs ranging from 0 to 25%, with a weighted average of some 9%. Payments and transfers for current international transactions are free of restrictions. Progress in the area of enterprise privatisation has been slow and disappointing. The prospect for the privatisation process, however, has improved with the recent announcement by the government of its plan to sell shares in the major public utilities, as well as in three of the largest commercial banks. However, as the privatisation of big state-owned companies requires a special law to pass through the parliament, preparations have so far only been made for the privatisation of the Croatian Post and Telecommunications (HPT), which has been split into separate post and telecom companies from January The government is also nearing completion of another part of its sell-off programme through a voucher privatisation scheme. As far as the legal and regulatory framework is concerned, the main achievement of the government was the adoption, in December 1998, of the new Banking Law, aiming at increasing the National 10

13 Bank s authority on the numerous small banks (60 banks and 33 saving associations) composing Croatia s banking sector. However, the banking sector is experiencing serious difficulties. The new law includes general provisions on the legal status of commercial banks and defines and lists banking operations. The law also contains provisions governing the establishment of a bank or a bank branch, the conduct of business by a bank, the bank management, bank accounting and auditing, and the supervision of banks by the National Bank. In line with this new law, the National Bank has recently appointed trustees for five banks facing major difficulties. The expected sell-off of the 3 commercial banks should further contribute to the reorganisation of the sector. 2.5 Regional Cooperation Normalization of political relations with neighboring countries is being actively pursued. Major steps forward have been achieved in particular with reference to relations with Bosnia and Herzegovina (BiH) although Croatia s interference in BiH internal affairs remains strong. In November 1998 Croatia signed the Ploce/Neum Agreement, giving BiH the use of a key Adriatic port and Croatia free transit across a strip of coast, and the Agreement on special relations with the Federation of Bosnia and Herzegovina (FBiH), a framework agreement enabling and inciting transparent relations between the two countries. The Agreement on Special Relations was ratified in April. Concrete aspects of cooperation shall be implemented through annexes which are to be agreed and signed by July The Croatian Government has recently submitted draft annexes to the FBiH for consideration. Outstanding controversial border issues between Croatia and RS are being dealt with by an ad hoc commission. Croatia continued efforts to normalize its relations with the FRY with which it has signed several bilateral agreements. Furthermore, on , the FRY opened a consulate general in Vukovar. The FRY has also given its consent for the opening of the Croatian consulate general in Kotor, in the Montenegrin coast. As far as the Prevlaka Peninsula is concerned, Croatia has improved its cooperation with the UNMOP, mandate of which has been extended until July 1999, and it has accepted to continue discussion with the FRY seeing this issue as an exclusively security and not territorial issue. Croatia has proposed demilitarization of the region on both sides of the frontier, a solution which the FRY authorities have so far rejected. Meanwhile, border crossings between Croatia and Montenegro have been opened. Overall good relations between Croatia and Slovenia are somewhat soured by the stalemate on outstanding issues. Up to now, Croatia and Slovenia, although certain rapprochement has been achieved, failed to reach full agreement on land borders (99.1% of the land borders are agreed upon) and sea borders. Nevertheless, the two countries have agreed to seek international arbitration should they fail to find lasting solutions for the northern Adriatic Bay of Piran. Efforts to reach an agreement on management of the Krsko nuclear plant and the treatment of nuclear waste as well as on property relations and to sign an arbitration on the Ljubljanska bank continue. Economic relations with neighbouring countries continue to develop. Slovenia and BiH remain Croatia s main trading partners. On Kosovo Croatia has supported NATO operations against the FRY, deciding i.a. to permit the use of Croatian air space. As regards the crucial issue of Kosovar Albanian refugees, Croatia officially announced that it would accept refugees, although some incidents have been reported at the borders with Kosovar refugees seeking asylum in Croatia being denied entry and forced back into FRY. 2.6 Compliance with obligations under the Dayton / Paris and Erdut Agreements Croatia continues to be fully committed to Dayton and Erdut implementation. However, compliance by Croatia with the obligations of Peace Agreements is not fully satisfactory since strong Croatian interference in BiH continues as evidenced i.a. by illegal broadcasting of Croatian Television in FbiH, 11

14 violations by Law enforcement officials of the integrity of Bosnian territory and electoral legislation with reference to Diaspora slate (see above 2.1). In this regard, the EU Troika made a demarche on 2 March reiterating its request to halt illegal business practice by HRT in BiH, to abide by a fair and equitable use of the frequencies and to comply with the standards of a public broadcasting by allowing a balanced coverage of all political parties. No further progress has been done in order to fully dismantle the former Croat Republic of Herceg Bosna, whose remaining structures continue to be partially supported by the Government of Croatia. As far as the customs border and agreements with the RS are concerned, progress is continuing and the situation is improving. The Commission Customs Assistance Mission to the OSCE in Croatia (Eastern Slavonia, Baranja and Western Sirmium), which constitute an important confidence building measure, has been prolonged in Croatia's cooperation with ICTY has remained rather uneven, due to disagreement on whether the Court has jurisdiction over the events that occurred during the 1995 military operations in Croatia. Strong criticism against ICTY has increased by some high level politicians, stating correctly that Croatia has been the only country to cooperate so far. Return of displaced persons and refugees to places of origin are a basic priority under Dayton and Erdut Agreements. 7 The necessary legal and administrative frameworks to facilitate return have been put in place although full implementation of the different commitments undertaken in this field is still lacking. Procedures for Croatian Serbs refugees to obtain Croatian documents have been simplified, and the number of Croatian Serbs returning is increasing although the whole process is still slow. As a matter of fact, difficult economic conditions, as well as only partial reconstruction in most of the concerned and heavely destroyed areas are hampering the process. Following the adoption of a comprehensive and non-discriminatory Plan for Reconstruction and Development, a Conference on Reconstruction and Development was held in December. Nevertheless, the Government, despite international insistence, has failed to launch the promised massive information campaign on the rights of persons wishing to apply for reconstruction assistance, both currently resident in Croatia as well as still resident outside the country, and further extension of the deadline for applications has been decided. Practical application of the Plan will need to be closely monitored to avoid discrimination. The Government has presented first drafts of some discriminatory legislation still in force in this field 8 modification of which is crucial to encourage return. In mid- February, following considerable insistence but with worrying delays, the Government Commission for Return issued its instructions for the Housing Commissions whose crucial task is to deal with property-related questions (including the important problem of applications for repossession of property by former holders of tenancy rights and the provision of alternative accommodation). The activity of the Housing Commissions, unsatisfactory to date due to late issuing of instructions and ethnic bias, as well as lack of resources, shortage of inhabitable housing and alternative accommodation, should continue to be monitored. Lack of progress in the implementation of the Amnesty and Convalidation Laws also hampers return. To this regard, the provision of information to ICTY on the case of 23 individuals recently indicted in Dalj has not taken place yet. 7 According to the OSCE progress Report of 26 January 1999 and the CoE Committee on Migration, Refugees and Demography report of 22 February 1999 referring to official figures, of the persons of Croat nationality displaced from Eastern Slavonia to other parts of Croatia, have returned (although the actual number of permanent returnees seems to be much lower). Of the Croats refugees from BiH and FRY received the Croatian citizenship, are still registered as refugees and the rest returned to BiH or FRY or left to other countries. Of the Croatian Serbs internally displaced or refugees in BiH and FRY, some returned ( returned from FRY and BiH and returned from the Danube Region to other parts of Croatia). 8 Notably the Law on the Status of Displaced Persons and Refugees. Draft amendments of the Law on Areas of Special State Concern have also been announced. Amendments of the Law on Reconstruction need to be tackled as well. 12