The judicial system remains weak and further efforts are needed for it to become strong, independent, effective and professional and able to guarantee full respect for the rule of law as well as effective participation in the internal market. Corruption has continued to give serious cause for concern. Enforcing the legal framework effectively presents a challenge and greater focus is needed on prevention of corruption. There is a need to address police behavior, notably as regards reported cases of ill treatment, which continues to give cause for serious concern in the field of human rights violations.
A Child Protection Agency and a national advisory council for child protection have been set up, but further steps need to be taken to make the Child Protection Agency operational. On child welfare, poor conditions in some homes for children with mental disabilities are cause for concern. Roma, the main minority group in Bulgaria, continue to suffer from widespread social discrimination. Political commitment from the government to remedy their problems has still not been matched by concrete action. Bulgaria has however made some positive developments on desegregation of Roma schools with the help of various Non-Government Organizations.
Very little progress however, has been made to meet the Accession Partnership priority to start implementation of the Roma Framework Program, and to strengthen the National Council on Ethnic and Demographic Issues. Concerning other related Accession Partnership priorities, Bulgaria has made progress to implement the Civil Service Law. Nevertheless, the priority of strengthening the judiciary has not yet been met.
Economic Criteria
In its 1997 Opinion on Bulgaria's application for EU membership, the commission concluded:
“Bulgaria’s progress in the creation of a market economy has been limited by the absence of a commitment to market-oriented economic policies; it would not be able to cope with competitive pressure and market forces within the Union in the medium term.”
This finding was confirmed in the 1998 and 1999 regular reports. In its 2000 regular report the Commission found that:
“Bulgaria has clearly made further progress towards becoming a functioning market economy. It is not yet able to cope with competitive pressure and market forces within the Union in the medium term.”
Since the 1996-97 crisis, the country has achieved macro-economic stability and has a stable currency board, low basic interest rate, and substantial foreign-exchange reserves. Real economic growth significantly accelerated from 2.4 percent in 1999 to 5.8 percent in 2000, and this trend has been confirmed by the latest 2001 data (4.5 percent in the first quarter). However, inflation rose substantially, mainly due to one off factors, while unemployment slightly moved down from its high level. Private investment has remained low but rising slowly, while foreign direct greenfield investments are high and rising.
Presently Bulgaria is close to being a functioning market economy and should become one within the next few years if it continues to implement market reforms and privatize it's national industries like tobacco and the energy sector. When this happens it should be able to cope with competitive pressure and market forces within the Union in the medium term, provided it intensifies the reform effort to remove persistent difficulties. The Bulgarian macro-economy is going into its fourth year of stable conditions, having established a satisfactory track record of macroeconomic performance. Good progress has been made in privatization for other areas, especially as regards banks, and with structural reform, setting the microeconomic basis for sustained growth.
The share of the private sector in GDP rose further and the remaining assets in the state hands consist largely of utilities. The financial performance of the remaining state owned enterprises is improving and continues to be monitored closely by the Ministry of Finance. The business climate has improved but the licensing, tax and customs regimes still have shortcomings and they needs to improve further.
However, because inflation rose considerably in 2000 and investment remains insufficient especially foreign investment the European Union wants to wait and see if Bulgaria really is serious about truly reforming their markets. Also financial intermediation continues to be low and inefficient and this makes the European Union uneasy too. Specific deficiencies remaining in the land market affect the performance of this market and of other economic sectors. The authorities in these fields should give priority to strengthening the judiciary and the enforcement of the regulatory framework. Administrative obstacles to private sector development, affecting enterprise creation, their development and their closing down, including bankruptcy procedures, must be eliminated. Easy market entry and exit is also a problem that must be tackled to encourage new investment and entrepreneurship. A sustained implementation of these reform measures and higher levels of private and public investment are key requirements for sustainable growth, and building up competitiveness.
Bulgaria's 2000 average per capita income in purchasing power standards was low at only 24% of the European Union average. This meant a slight increase over 1999, but the relative income level was still below the pre-crisis level of 1996. Regional income differences are small in Bulgaria, ranging from 22% to 24% of the European Union average (data for 1998). Employment rates for both genders are relatively low. In 2000 the overall employment rate was 51.5%. The economic activity rate has been on a declining trend over the past years, reaching a low 47.5% in 2000. Unemployment showed a small decrease to 16.4% of the labor force in the year 2000, but increased to 19.4% (2001Q2). More than half of the unemployed (58.6%) are long-term unemployed. Unemployment rates are slightly higher for men than women, but for young people (<25 years) at 34.2% much higher than for older people, which is contributing to Bulgaria's brain drain.
Ability to assume the Obligations of Membership/Chapters of the Acquis
Bulgaria has continued a good pace of alignment of legislation with the acquis but still needs to pay more attention to how this will be implemented and enforced. Progress on public administration reform has continued and is a positive sign. This needs to be sustained to ensure public administration is prepared for its role at EU accession. However, little has been done to prepare the judicial system, which needs to be modernized and strengthened, in particular to ensure effective enforcement of the acquis. Regarding the internal market, Bulgaria has made further progress in most areas.
In free movement of goods progress continued with membership of European Accreditation as a major achievement. Reinforcement of administrative infrastructure for standardization and certification, and of market surveillance systems, is still necessary. On financial services, Bulgaria has developed sound banking supervision practices. Company law has been further aligned and the legal framework for protecting intellectual and industrial property rights improved, but further steps are needed to ensure this is enforced. Becoming a member of the Treaty of Rome would help foreign investors feel more comfortable in developing software industries in Sofia, the capital of Bulgaria and the center of learning in the country. On state aids, Bulgaria is at last starting to develop and implement a framework for state aids but this is not yet compatible with the acquis. Although it looks as though Bulgaria is on the right track.
Bulgaria still lacks a legal framework on data protection compatible with the acquis. Which has scared off most European technology investment and has thus created a brain drain in Bulgaria, as it's young people leave to take high-tech jobs in other countries. In agriculture, Bulgaria has continued generally good progress on approximation of legislation but implementing the acquis poses a significant challenge. Veterinary and phytosanitary inspection arrangements need further upgrading. The partial accreditation of SAPARD is a noteworthy success. Progress on fisheries has accelerated compared to previous years. While progress has been made to amend labor law towards alignment with the acquis, progress on equal treatment legislation remains slow. Even though administrative capacity of the general labor inspectorate has been reinforced, the capacity to implement the acquis on occupational health and safety will need to be increased to meet European Union demands.
Concerning regional policy, Bulgaria has made little further progress and much more attention needs to be paid to preparation for implementing structural policies. Bulgaria has continued its positive efforts on transposition of the EC environmental acquis but implementation and the cost of alignment remain a challenge. The pace of progress on transport has been pursued both on adoption and creation of implementing structures. There has also been an increase in investments. The restructuring of the energy sector has progressed at a very slow pace throughout 2001 following delays in the planned revision of the legislative framework. These delays have hindered efficiency improvement and preparation for privatization. As regards nuclear energy, Bulgaria must respect the de-commissioning commitments of the Memorandum of Understanding and ensure a high level of nuclear safety.
The National Energy Strategy is to be updated next year, taking into consideration in particular the early closure commitments for Units 1-4 of the Kozloduy Nuclear Power Plant. Forecasts for energy demand confirm that this is not growing at the rate foreseen in the previous strategy (1998). This will be taken into account in the new strategy. It must be pointed out that Bulgaria still has an energy consumption per capita three to four times the European Union average. Despite plans to activate an energy efficiency fund, it is of concern that Bulgaria has not been able to put into practice an active policy on energy efficiency during the period under consideration. The lack of such an active policy, both on the production and end-user side, should be underlined. Substantial efforts must be made rapidly in this area, a first step would be substantially improved co-ordination between the State Agency for Energy Resources (SAER) and the State Energy Efficiency Agency (SEEA). Concrete steps to enhance support for energy efficiency, energy saving and the use of renewable energy sources should be taken rapidly.
Privatization of commercial state-owned banks and enterprises is now nearing completion, though the sales of the telecoms and tobacco companies have not yet taken place. There continue to be complaints about a lack of transparency in some privatization procedures. Less progress has been made in placing the public utilities, notably in the energy and transport sectors, on a financially sound and competitive basis. It is uncertain whether the steps so far taken to restructure the steel industry are sufficient to assure its medium-term viability. There remain concerns about the viability of some privatized enterprises, particularly those sold by management or employee buy-out, where the new owners may lack the financial resources and management skills to run the enterprises successfully.
In justice and home affairs, further progress has been made in most areas in terms of legislation but progress on strengthening administrative capacity is still not as strong as required. Some progress has been made on control of external borders; however, there is scope for further improvement here as well, in particular in inter-agency co-operation. In external policies, Bulgaria’s performance remains strong, continuing to make a substantial contribution to regional stability and following the path of trade liberalization with the European Community and its preferential partners.
The environmental situation has generally improved in Bulgaria, also as an effect of the economic restructuring and the closure or modernization of polluting enterprises. There are still environmental hot spots which should be treated, for example the air quality in big cities such as Sofia and Plovdiv. Major efforts are still needed, as was pointed out last year, in terms of consultation with, and information for, industry on its responsibilities and obligations, notably as regards the preparation of necessary investments. The national programs for investments that have been finalized to date must be followed by concrete results on the ground.
Further progress is needed, however, regarding transposition and implementation, in particular as regards landfill and incineration of waste. Bulgaria benefits from a well-preserved nature and wild life that is attracting more and more visitors in many areas of the country. Further transposition is still needed on the habitats directive and certain aspects of the birds’ directive, and concrete implementation measures are still needed. The attention that has been paid to nature protection should be maintained and enhanced.
For customs and taxation, Bulgaria will need to develop Information Technology systems that allow for exchange of data with the European Community in regards to infrastructure for high-speed, reliable data transfer.
Bulgaria is party to the major international agreements in the area of customs co-operation and is preparing for accession to the EC conventions in this area upon accession. It has concluded bilateral agreements with Armenia, Austria, Azerbaijan, Greece, Mongolia, Romania, Russia, Turkey, the United Kingdom, Ukraine, the USA and Yugoslavia. Intelligence and investigation services within the Bulgarian customs are being established but do not yet meet European Union standards. They are in need of both administrative strengthening and specialized training, including in covert surveillance techniques. The effectiveness of their work will depend on the further development of risk analysis and modern methods to fight fraud and corruption. As regards the fight against fraud and corruption, significant further efforts need to be undertaken.
Further progress has also been made to strengthen financial control and on improving public expenditure management and control. However, greater efforts should be pursued in regards to corporate corruption at all levels in particular. While some progress can be noted on establishment of the institutions necessary to implement the acquis and on public administration reform, the capacity of the Bulgarian administration remains limited. Further sustained progress and allocation of the necessary resources will be necessary to meet the challenges ahead. Further efforts are also required in establishing the necessary administrative capacity to ensure the sound, efficient and controllable management of EC funds. While work on public administration is progressing, the slow pace of preparation of the judicial system to enforce the acquis is worrying to the European Union. Progress on judicial reform needs to be substantially accelerated. Bulgaria has fulfilled partially and made progress since last year on all of the short-term Accession Partnership priorities relating to the acquis, but it still has to implement these changes for any real progress to be credited to them.
Concerning administrative capacity, Bulgaria has moved forward on priorities, with the exception of that of strengthening the judiciary, where little progress has been made. The implementation of the recently adopted strategy for judicial reform should make a difference. Bulgaria has started to address the majority of medium-term Accession Partnership priorities.
Works Cited
EU Website on Bulgaria
The Commissions Regular Report on Bulgaria November 13, 2001
The Commissions Regular Report on Bulgaria November 8, 2000
The Commissions Progress Report on Bulgaria October 13, 1999
The Commissions Progress Report on Bulgaria November, 1998
