Negotiations
Point a chapter for title display
Click on a chapter to view additional details
 
26/30 Chapters are now closed

CHAPTER 1 FREE MOVEMENT OF GOODS
LEVEL OF NEGOTIATIONS

Negotiations on Chapter Free Movement of Goods were opened in May 2001 and provisionally closed in June 2002.
Commitment has been undertaken to adopt most of the legislation before the date of EU membership and no transition periods or exceptions have been requested. By the date of accession 80% of EC existing standards should be implemented. The most general date for full harmonization stated in the negotiation position is by the end of 2005.


HARMONIZATION PROCESS

The legislation subject to harmonization under Chapter Free Movement of Goods covers huge in volume, mainly technical legislation, covering a number of sectors and risk groups of goods, such as: foodstuffs, pharmaceuticals, cosmetics, chemicals, motor vehicles, construction products, machinery, toys, textile goods, footwear, etc. In non-harmonized sectors the Bulgarian authorities have to guarantee integration on the principle of mutual recognition in each and every statute for the goods.

As of the end of 2002, the process of our legislation harmonization in the field of Free Movement of Goods was almost finished. The basic laws have been adopted, creating conditions for adoption of European requirements towards the goods, tradable on the Common European Market:
- Foodstuffs Act;
- Act on the Technical Requirements to Goods;
- Weights and Measurements Act;
- Act on Humanitarian Medicine Pharmaceuticals and Pharmacies;
- National Standardization Act.

A number of amendments and supplements to the Public Procurement Act have been adopted, which is advancement in respect of acquis communautaire implementation in this area. In 2000 Regulation on the establishment of a Public Procurement Register was adopted. The Register has proven itself as an often-used tool and will contribute to transparency.

The adopted in 1999 Framework Act on the Technical Requirements to Goods introduced the principle of the «new» and «global» approach in legislation and established the legal base for the implementation of the “New Approach” Sector Directives.

The work on the adoption of the specific sectorial legislation is advancing. The basic secondary legislation, introducing the “New Approach” Directives and the “old” Sectorial Approach ones has been adopted. In the areas covered by the “New Approach” 12 Directives have been transposed: for gas appliances, construction products, machinery, recreational craft, toys, lifts, electromagnetic compatibility, simple pressure vessels, explosives for civil use, low-voltage equipment, equipment and protection systems, used in potentially explosive environment, personal protection devices.

As for the areas covered by the "Old Approach Directives", progress has been made in relation to motor vehicles, foodstuffs, chemicals and pharmaceuticals and cosmetics, glass, textile goods and footwear.

In respect of foodstuffs safety ordinances have been adopted pertaining to labeling, additions, packing materials, hygiene, radiation and contamination. Bulgaria has adopted acquis communautaire in respect of hygiene requirements to non-plastic materials to be in contact with foodstuffs. For further harmonization with acquis forthcoming is to eliminate the system of foodstuffs approval before their launching on the market. The administration assigned with the control over foodstuffs safety should be restructured to comply with Community requirements.

Since January 1, 2000 preliminary control on industrial goods has been eliminated, including border control on import, which provides free access and equal treatment on the basis of voluntary standardization regime.

Adoption of European standards is making good progress.


ADMINISTRATIVE INFRASTRUCTURE

The key institutions, taking part in the negotiations and in the transposing of the acquis communautaire are the Ministry of Economy, the Ministry of Agriculture and Forestry, the Ministry of Health (in respect of foodstuffs safety), the Bulgarian Institute for Standardization, the State Agency for Metrology and Technical Surveillance.

The infrastructure of the institutions, responsible for supervising the observance of the requirements or the legislation implementation, is also being developed. The activities on the technical regulation, standardization, accreditation, certification and market surveillance have been separated. The competent institutions in this area are, as follows:
- Bulgarian Institute for Standardization;
- Executive Agency “Certification and Testing” to the Ministry of Economy;
- State Agency for Metrology and Technical Surveillance;
- Executive Agency “Bulgarian Accreditation Service” to the Ministry of Economy;
- National Metrology Institute;
- National Veterinary Service;
- a network of independent laboratories, certification bodies and control services for market surveillance;
- Association Committee, where these reports and information are being discussed;
- and others.

The Bulgarian Institute for Standardization is appointed as National Contact Point, responsible for announcing national technical regulations and standards, as well as for conformity assessment before the European Commission.

The Customs Agency supports and cooperates with market surveillance bodies.

A Public Procurement Directorate has been established at the Council of Ministers, to control legislation in the field of public procurement implementation. Commitment has been undertaken to transform the Directorate into a Public Procurement Agency.

Some of these institutions are comparatively new or recently restructured which asks for their technical strengthening and relevant training of their employees. Coordination too between these institutions should be strengthened in respect of their tasks implementation – full metrological, veterinary, hygienic and epidemiological control of tradable goods produced or imported in the country. Consumer protection organizations and associations also take part in the control.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Efforts and further work need to be done in the following areas:

- strengthening the administrative capacity to ensure efficient market surveillance, modernization of laboratories and training of inspectors; improvement of the coordination between the competent institutions;
- establishment of proper infrastructure for customs control and market surveillance;
- development of a national system of conformity assessment;
- elimination of indirect trade barriers, including introduction of mutual recognition clauses;
- establishment of a Public Procurement Agency.

The big share of exports to EU – 55.6 % in 2002 is indicative of the fact that the production of a considerable part of the Bulgarian enterprises is in conformity with Common European Market requirements. The increased degree of harmonization with the acquis communautaire is an important factor for attraction of investment in Bulgarian enterprises.


CHAPTER 2 FREE MOVEMENT OF PERSONS
LEVEL OF NEGOTIATIONS

Negotiations on Chapter 2 Free Movement of People were provisionally closed in July 2002. The country has made satisfactory progress in respect of bringing its legislation in line with the acquis communautaire in this field. Bulgaria has undertaken commitment as of the date of accession to have fully transposed Community law in the field of free movement of people and to have built the necessary administrative capacity for its efficient implementation. Bulgaria has not requested any transition period in this area.

Bulgaria has accepted the proposed by EU transition period in respect of free movement of workers from Bulgaria to EU: limitations shall be applied in respect of free movement of workers from Bulgaria to EU for a period of minimum two years as from the date of accession, which limitations may remain into force for a maximum of seven years.

As of the moment Bulgaria has partially brought its legislation in line with the acquis communautaire, but further work is required to achieve full consistency and to further build the necessary administrative capacity.

The Chapter covers the following areas:
- mutual recognition of diplomas and professional qualifications;
- free movement of workers;
- coordination of social insurance schemes;
- right of residence;
- civil rights.

In the area of mutual recognition of diplomas and professional qualifications progress has been achieved with the amendments to the Public Education Act, Higher Education Act and the Act on Enhancing Professional Qualification. These laws are focused on promoting freedom to provide services on behalf of the regulated professions. Standards for 18 professions have been developed and a list of professions and subjects for professional education and training has been prepared. A number of bylaws in respect of medical and paramedical activities have been adopted. With the adoption of the Act on the Chambers of Architects and the Chambers of Investment Design Engineers Bulgaria has made progress in harmonization with the provisions for recognition of qualifications and freedom to provide services in this area.

In relation to civil rights progress has been achieved mainly with the amendments to the Civil Rights Act and Foreigners in the Republic of Bulgaria Act. Amendments to the Constitution should be made in order to achieve full consistency with the acquis communautaire in this field. The further harmonization in respect of students’ rights under the Higher Education Act means that now foreigners can apply for higher schools provided they have diplomas allowing them access to higher schools in the country where the relevant diplomas have been issued.

In respect of free movement of workers the new Act on Employment Promotion, January 2002, makes possible the elimination of the work permit regime for EU citizens on accession. By an Ordinance of April 2002 the members of foreign workers families got access to the labor markets, now not being necessary to wait for 24 months. Bulgaria has introduced new residence permit rules for self-employed workers. A bilateral agreement with Spain entered into force, covering health insurance, pensions, unemployment benefits and family allowances. Bulgaria has a bilateral agreement with Germany for workers in hotels and catering since September 1999 and an agreement with the Czech Republic since December 1999.

In the field of coordination of the social insurance schemes Bulgaria has adopted secondary legislation. The efforts for further building and strengthening the necessary administrative structures continue. The preparatory work for facilitating the country’s participation in the European Employment Service continues.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria has partially harmonized its legislation with the Community law, but further efforts are necessary for speeding the process up and strengthening the administrative capacity in all sectors. Further work is required:
- in the area of qualifications recognition: the provisions in respect of lawyers, pharmacists and veterinary doctors should be brought in line with EC legislation;
- in respect of professional qualifications acquired before accession, measures should be introduced to guarantee that all Bulgarian individuals with professional qualification as of the date of accession meet the requirements under the acquis;
- curricula and training should be brought in line with sectorial Directives;
- to guarantee differentiation between academic and professional recognition in mutual recognition legislation and to provide for simplified permission procedures for provision of services;
- on accession the whole Bulgarian legislation should be brought in line with Community rules, with regard to nationality, residence and language requirements in particular;
- as of the moment of accession Bulgaria should guarantee that it is in position to meet the financial and administrative obligations ensuing from the rules for social insurance coordination.


CHAPTER 3 FREEDOM TO PROVIDE SERVICES
LEVEL OF NEGOTIATIONS

Chapter Freedom to Provide Services was opened for negotiations in January 2001 and provisionally closed in November 2001. By its final closing as of the date of accession, 01.01.2007, the following commitments have to be met in compliance with Republic of Bulgaria Negotiation Position:
- to harmonize national legislation with European Community law in the field of freedom to provide services and its efficient implementation;
- to amend the acts regulating the regulated professions (lawyers, physicians, stomatologists, pharmacists, veterinary doctors, architects, etc.), so that individuals who have the right to exercise these professions in EU Member-States to be able to exercise these professions in Bulgaria too;
- to amend the acts regulating financial services (banking, insurance, securities) with the purpose of their harmonization with the acquis communautaire; the changes should provide greater protection of the interests of individuals and legal entities, users of those services;
- to amend the Act on Bank Deposit Guaranty – by 01.01.2007 the minimum level of coverage of individuals’ deposits must reach BGN 39,200. At the moment it is BGN 15,000.

Bulgaria as a whole has made considerable progress in bringing its legislation in line with the acquis communautaire in this area.


HARMONIZATION PROCESS

The liberalization of the services market presumes guaranteeing the right of establishment and freedom to provide services.

The legislation should regulate the implementation of the following fundamental principles, pertaining to the freedom to provide services:
- the principle of non-discrimination and equal treatment of resident and non-resident individuals and legal entities;
- the principle of one license in the sphere of financial services;
- stable prices;

- free competition;
- stable public finances.

The services considered in this Chapter include: financial services (banking, insurance and securities), protection of personal data, self-employed traders regime, information society. These are extremely divers in their nature activities, which fact predetermines the ambiguous evaluation in respect of the extent of harmonization. As of the moment progress has been made in certain areas although part of the existing legislation is subject to up-dating and consequent amendments.

In the area of the right of establishment and freedom to provide services progress has been made in the process of harmonization with the adoption of the Consumer Protection Act and trade rules, in force since 1999. The Act should be up-dated because it presumes establishment of residents in Bulgaria which impedes free trade. Amendments have been made to the Foreigners in the Republic of Bulgaria Act, which eliminate the discrimination permit requirements imposed on self-employed EU citizen, January 2001.

In the area of financial services provision Bulgaria has made good progress in the process of harmonization.

New ordinances have been adopted in respect of banking: the procedures for issuing banking licenses, February 2000; the ordinance on supervision and control of big exposures, November 1999; the consolidated control rules, June 2000; the BNB ordinance on payments, July 2000; the ordinance on capital adequacy of banks; the amendments and supplements to the Act on Bank Deposit Guaranty, December 2001; the Bank Insolvency Act, September 2002.

Legal framework in relation to the annual reports on insurance contracts, insurance agents and brokers has been introduced in the insurance sector. A revision of motor vehicles rules has been made and also amendments and supplements to the ordinance on obligatory insurance. There is certain harmonization of the legislations in respect of third party liability insurance with regard to the use of motor vehicles.

In the area of investment services and securities market the Public Offering of Securities Act was adopted, January 2000, and the secondary legislation in respect of its implementation. The Directive on enterprises for collective investment in transferable securities is only partially transposed.

In the area of personal data protection an Act on Personal Data Protection was adopted, December 2001. Council of Europe Convention 108 on protection of individuals in respect of automatic data processing has been ratified.

As to information society the Council of Ministers adopted in October 1999 a Strategy for Information Society Development. An Act on Electronic Documents and Signature was adopted, April 2001, introducing the EC Directive in respect of Community framework on electronic signature. In January 2002 ordinances were adopted in compliance with the Act on Electronic Documents and Signature requirements.


ADMINISTRATIVE INFRASTRUCTURE

Surveillance institutions are, as follows:
- BNB is exercising bank supervision in an efficient and competent way, but some of its powers should be enlarged;
- Financial sector Supervision Consultative Council;
- Bulgarian National Securities Commission, as capital market regulator;
- National Insurance Council;
- State Insurance Supervision Agency, January 2002, whereby insurance supervision was separated from gambling supervision;
- State Telecommunications Commission;
- Green Cards Motor Insurance Bureau.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION
Further efforts and work are necessary in the following areas:
- in the areas of right to establishment and freedom to provide services, further efforts are necessary to determine measures to ensure full non-discrimination;
- in the area of financial services – despite the progress made, sustainable efforts are required in the course of several years before the Bulgarian financial system would be able to withstand the impact of integration in the internal market;
- in the insurance sector – establishment of a strong regulatory body; adoption of EU Directives on insurance accounts and motor insurance in the period 2003-2005; strengthening the capacity of the State Insurance Supervision Agency;
- in the securities trading sector further harmonization of the legislation is required;
- as to pension funds it is necessary to strengthen the capacity both in respect of the supervisory body, the State Insurance Supervision Agency, and in respect of the pension funds corporate management;
- bringing the Act on Personal Data Protection in line with the acquis communautaire in this field; measures for establishing the administrative capacity for the law implementation and enforcement;



The Commission is of the opinion that Bulgaria is achieving continuous progress in most areas, both in respect of legislation and of the administrative and regulatory infrastructure, necessary for financial services sector supervision. It has achieved acceptable level of harmonization and needs further strengthening of the administrative capacity for implementation and compliance.


CHAPTER 4 FREE MOVEMENT OF CAPITAL
LEVEL OF NEGOTIATIONS

The negotiations on Chapter 4 Free Movement of Capital began in November 2000 and were provisionally closed in July 2001 after reaching all agreements.

Bulgaria has undertaken the commitment by the date of membership to eliminate all restrictions before the free movement of capital with the exception of the agreed transition periods, to bring its legislation in the field of payment systems and money laundering in line with the acquis communautaire and to ensure the necessary administrative capacity for its implementation.

In the course of negotiations two transition periods have been agreed in respect of land acquisition by foreigners:
- seven years as from the date of accession for acquisition of ownership on agricultural land and forests in the country;
- five years as from the date of accession for acquisition of land for second residence.

Self-leased farmers that wish to reside in the country are excluded from the transition period scope.

Bulgaria has undertaken the commitment by the date of accession to change Art. 22 of the Constitution, to eliminate the general prohibition for purchase of land by foreigners and by the date of membership to give the opportunity:
- to EU farmers to buy land in Bulgaria for the purpose of their activities;
- to EU companies and citizens, willing to reside in the country, to buy land in Bulgaria for the purpose of their business activities or their profession’s needs.


HARMONIZATION PROCESS

The Chapter covers three basic areas:
- free movement of capital;
- payment and settlement systems;
- measures against money laundering.

Free movement of capital includes: direct investment, acquisition of ownership over realties, transactions with securities, transactions with current and deposit accounts in financial institutions, physical import and export of financial assets, financial loans and credits, etc.

According to European legislation any restrictions to movement of capital and payments between states are prohibited.

European legislation in the field of payment systems and securities settlement systems aims to unify the technical standards and to establish uniform rules both for internal and for cross-border transfers and payments which will facilitate and encourage free movement of capital.

The movement of capital full liberalization creates conditions for using the financial system for laundering of money, obtained through criminal actions. This requires common coordinated measures and actions to be undertaken to prevent the use of financial systems for money laundering, without in any way affecting free movement of capital or the freedom to provide services, which underlie the internal market liberalization.

Bulgaria has achieved considerable harmonization of its legislation with the acquis communautaire in this field.

In the area of capital flows liberalization two laws were adopted in 2000:
- Foreign Exchange Act;
- Public Offering of Securities Act.

The Foreign Exchange Act adopts the general principle that all transactions between residents and non-residents can be conducted freely, provided not otherwise stipulated in the law. Only a limited number of transactions should be registered with the Bulgarian National Bank before being conducted. The import of national and foreign currency in cash by residents and non-residents is free, while the export of amounts exceeding BGN 20,000 or their equivalent in foreign currency requires authorisation by the Bank.

The Public Offering of Securities Act, which determines all the rules to be followed by the market players, applies equally to residents and non-residents. This Act exclusively allows the offering of foreign securities on the Bulgarian capital market.

Amendments to the BNB ordinance on payments in July 2000 and November 2001 introduced up-to-date payment infrastructure.

In respect of money laundering Bulgaria is party to the Convention of 1990 and adopted Measures against Money Laundering Act in 1996, but considerable amount of work needs yet to be done in order to achieve efficiency of the system in practice.

The amendments and supplements to the Measures against Money Laundering Act, in force from January 2002, reflect the reorganization of the Bureau of Financial Intelligence into an agency.


ADMINISTRATIVE INFRASTRUCTURE

The Bulgarian National Bank and the Ministry of Finance are the bodies responsible for the implementation of the provisions of the Foreign Exchange Act.

The Bureau of Financial Intelligence, which since 1998 has been responsible for the implementation of the money laundering legislation, has been restructured into an agency, an independent administrative structure reporting to the Ministry of Finance.

Procedures are being set for cooperation between the Bureau of Financial Intelligence Agency, the General Tax Directorate, the Insurance Supervision Agency and the Gambling Supervision Agency.

The coordination and cooperation between the specialized institutions, the Bureau of Financial Intelligence Agency and the Police Service responsible for detecting corruption and heavy economic crimes, is improving.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

The following issues require additional attention:
- strengthening and improvement of the already built administrative capacity for implementation of the adopted legislation;
- final elimination of the restrictions in respect of acquisition of realties by foreigners (non-residents);
- completion of the adoption of the legislation pertaining to cross-border credit transfers, settlement and securities settlement transaction systems and the instruments for electronic payment in compliance with EU law;
- adoption of amendments and supplements to the Foreign Exchange Act to replace the verification procedure with a declaration procedure in respect of export of capital;
- establishment of a system for out-of-court redress, which to deal with the settlement of complaints between banks and their clients.


CHAPTER 5 COMPANY LAW
LEVEL OF NEGOTIATIONS

The negotiations on Chapter 5 Company Law began in November 2000 and were provisionally closed in June 2001, after reaching all agreements.

The Chapter covers the following basic areas:
- company law;
- Rome and Brussels Conventions;
- accounting;
- protection of intellectual property;
- protection of industrial property.

Bulgarian legislation in the area of company law, the Rome and Brussels Conventions, accounting law, intellectual and industrial property rights is broadly in compliance with the acquis communautaire.

The existing regulation in the area of Bulgarian company law is contained mainly in the Commercial Code, adopted in 1991. In October 2000 amendments and supplements to the Commercial Code were adopted with the view of it being brought in line with the requirements of part of the key EU Directives: the First Directive on disclosure of information, the Second Directive on capital, the Eleventh Directive on disclosure requirements in respect of branches of foreign companies, and the Twelfth Directive on single-member private limited liability companies. With the purpose of full implementation of aquis communautaire provisions, new amendments to the Commercial Code have been prepared, their adoption by the National Assembly is pending. These amendments implement the legal regulation on company transformations, at the same time improving the existing regulation in respect of corporate management and insolvency procedures.

As from the date of accession of the country to EU, the provisions of two specific Regulations will begin to be implemented – Regulation 2137/85/EEC on the European Economic Interest Grouping and Regulation 2157/2001/EEC on the Statute for a European Company.

The Rome Convention on law applicable to contractual obligations of 1980 covers provisions, aiming to create for the parties to the Convention uniform legal regulation of law applicable to contractual obligations containing international element. As only EU Member-States can be party to it, it was necessary to adopt its principles and provisions in the Bulgarian legislation through its harmonization. That was done with the adopted in February 2003 amendments to the Obligations and Contracts Act, drafting a new part Three – “Law applicable to contracts with international element”. The amendments to the Obligations and Contracts Act grant to contracting parties to contracts with international element equal conditions for contracting and protection of their rights with those in EU Member-States.

The implementation as from the date of accession of the country to EU of Regulation 44/2001 that has replaced the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, will lead to speedy and efficient enforcement of judgments rendered in civil and commercial matters within the Community. For the purpose, however, it is necessary to adopt certain changes in Bulgarian procedure legislation before accession, in order to create conditions for the implementation of the Regulation.

With the adoption of the new Accounting Act, in force since January 2000, the Fourth and Seventh Directives requirements in respect of accounting have been implemented in Bulgarian legislation. The Independent Financial Audit Act, in force since January 2002, implements the Eighth EC Directive requirements. Thus conditions are being created for alignment of the national legislation and practice in the field of accounting and audit with European legislation and international practice. The implementation of the International Accounting Standards and the International Audit Standards is also adopted, whereby Bulgaria is brought in line with the leading world practices.

The legal regulation in the field of intellectual property is basically contained in the Act on Copyright and Related Rights, adopted in 1993. The Act is fully harmonized with the provisions of the existing EU Directives and creates an overall contemporary legal framework that acknowledges, guarantees and protects wide range of rights and objects of copyright protection. The Act on Copyright and Related Rights was amended in December 2000 to protect the rights of films and strengthen border control measures against goods infringing copyright. Our country has become a party to all important international conventions and treaties in the field of intellectual property, whereby the protection of copyright holders’ interests is further guaranteed. The National Assembly ratified the WIPO Copyright Treaty and Performance and Phonograms Treaty in January 2001.

Bulgarian legislation provides three ways of copyright and related rights protection: civil, administrative and penal (regulated in the Penal Code).

Legislation in the field of industrial property (patents, trademarks, geographical indications, industrial design, etc.) is broadly brought in compliance with the existing EU legislation requirements. The level of protection granted and the scope of industrial property owners’ rights, and the procedures on granting and exercising of rights are regulated in compliance with the legislation in EU Member-States. New amendments to the existing Bulgarian legislation are being prepared to ensure the direct implementation of Community Regulations as from the date of accession.

In January /July/ 2002 the National Assembly adopted an Act on the Ratification of the European Patent Convention and the Act, revising the European Patent Convention, whereby Bulgaria’s membership in the European Patent Convention was renewed. Thus Bulgarian and foreign inventors are given the opportunity to acquire protection of their inventions on the territory of one or more of the parties to the Convention through a simplified procedure, guaranteeing high degree of security of the patents issued.

A regulation on border control measures for industrial property rights protection was adopted in November 2000.

Bulgaria has accepted the EC proposal in respect of including in the Accession Agreement a specific mechanism for the introduction of supplementary protection certificates for pharmaceuticals and plant protection products, operating at the moment within the European Union.

Another specific agreement that will find place in the Accession Agreement pertains to Community brands stretching on the territory of our country.



ADMINISTRATIVE INFRASTRUCTURE

Policy responsibility for company law rests with the Ministry of Justice, and the courts are responsible for enforcement. There is an electronic commercial register, which is open to public inspection. The courts have established comparatively uniform practice in this field.

The Ministry of Finance has policy responsibility for accounting law and takes advice from the Institute of Certified Public Accountants, which is responsible for accounting standards. The Institute is competent also for licensing of and quality control over auditors and auditing enterprises.

The Patent Office is the principal authority responsible for protecting industrial property. It processes and registers marks, inventions, utility models and industrial designs applications.

Policy on, coordination and enforcement of intellectual property rights is the responsibility of the Ministry of Culture, which maintains a national copyright database, with support from the Ministry of Interior, the Customs Agency and the courts. The Ministry of Culture issues penal ordinances relating to violations of copyright law, the courts examine intellectual property cases. The Ministry of Interior destroys pirate compact discs and software.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Further efforts and work are necessary in the following areas:
- in respect of company law several of EC Directives in this field are already implemented in Bulgarian legislation; attention should be paid to the need for further alignment with the Third and Sixth Directives on acquisitions, mergers and divisions of companies;
- the capacity of, and co-ordination between, the various bodies responsible for applying the law in the area of intellectual and industrial property rights protection should be strengthened, so that it is enforced in an accurate, timely and transparent way;
- Bulgaria has not introduced sui generis protection of database legislation;
- the action plan, in respect of the implementation of the Regulation, replacing the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, should be carried out;
- the legislative work on the implementation of the Rome Convention on law applicable to contractual obligations should be completed.

As a whole Bulgaria is meeting its commitments, undertaken in the negotiations for accession in this field.



CHAPTER 6 COMPETITION POLICY
LEVEL OF NEGOTIATIONS

Negotiations on Chapter 6 were opened in March 2001 and still continue.
In 2001 and 2002 Bulgaria submitted Additional information to the initial negotiation position, wherein it gave comprehensive reply to the questions of the Member-State. In the field of competition policy Bulgaria has undertaken the following commitments:
- to fully harmonize its legislation in the field of competition;
- to provide the necessary administrative capacity of the bodies in the field of anti-trust and state aid control;
- to implement compliant with the European law-enforcement in the field of anti-trust and state aid control.

Protection of market principles and free competition underlie the development of the Common Market and the prosperity of Community Member-States. Competition policy concentrates on four basic areas:
- prohibition of agreements between undertakings, limiting competition and abuses of dominant position on the market;
- control on mergers and consolidation of undertakings with the purpose of establishing dominant position on the market;
- control over granting of state aid;
- liberalization of monopolistic branches of the economy.

The Act on the Protection of Competition, 1998, contains the basic anti-trust rules of EC and establishes extensive legal framework for protection of competition.

In respect to the enforcement legislation Bulgaria introduced in 2001 block exemptions of certain categories of vertical agreements in compliance with the new EC acquis. Further alignment is needed notably in the areas of the new acquis on horizontal co-operation agreements.

In the field of state aid in June 2002 a State Aid Act entered into force, which provides good procedural framework for state aid control. The Council of Ministers adopted rules for the enforcement of the Act, aiming at the implementation of the acquis communautaire.



ADMINISTRATIVE INFRASTRUCTURE
The Commission for Protection of Competition is the body responsible for competition protection policy implementation and control. The Commission is a fully independent institution and has extensive powers for competition rules enforcement. The Commission investigates and considers great number of cases and makes decisions therefor. One of the results of the Commission’s activity is the raised public awareness of competition protection policy.

The Commission reorganized its internal structure in 2000, introducing new Organizational Rules and Procedures and increasing the number of its employees.

Ex-ante state aid control is of the competence of the Commission – permission or ban of projects for aid after mandatory notification. The Commission has to make an assessment of all existing schemes for state aid granting, bringing the inconsistent with EU legislation ones in compliance.

Ex-post monitoring and control on state aid is conducted also by the Ministry of Finance, which maintains a list and presents reports. There is cooperation and interaction between the two organizations.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria should focus its further efforts on the following areas:
- the Commission for Protection of Competition should develop a more deterrent sanctioning policy, and should give priority to cases concerning the most serious distortions of competition;
- to improve the implementation of state aid rules and to create reliable reputation on state aid legislation enforcement;
- to work to make business circles and judiciary representatives aware of the competition protection rules.


CHAPTER 7 AGRICULTURE
LEVEL OF NEGOTIATIONS

Negotiations on Chapter 7 Agriculture were opened in March 2002 and still continue.

Bulgaria has made sustainable progress in terms of approximation of legislation and institutional building in this area. Limited though is the progress in legislation enforcement. The partial accreditation of SAPARD can be considered a major success.

The Program of the Government of 2001 for development of the sector determines the main priorities of agriculture and forestry: efficient land and forest resources management and the further development of market structures; improving the competitiveness of the farming and processing sectors, creating an environment favoring export-oriented agriculture; preparation for implementation of EC internal market requirements and the introduction of the common agricultural policy; sustainable rural development, improvement of the standard of life of those employed in agriculture and forestry and in the rural regions.

In the area of land reform, following the adoption of the Cadastre and Property Register Act of April 2000, the Bulgarian Government adopted a program for the establishment of a cadastre and property register. The agricultural cadastre should be ready by 2004. The program for establishment of a property register covers 2001-2015.

Ownership over arable land has been restored. At the end of 2001 91% of forestland and forests were restituted. Cadastre plans for more than 90% of the territory of the country have been made in relation to the restoration of ownership over land and forests.

In May 2000, the negotiations on further liberalization of trade with EU in the agriculture sector were closed with the signing of “a double zero agreement”, in force from 1 July 2000. As a result of the agreement the trade between Bulgaria and EC increased considerably. The most important product groups in Bulgaria’s exports to EC are wines and spirits, meat and oleaginous crops. Meat, fruit and nuts, cotton and essential oils are amongst the main exports of EC to Bulgaria.

EU legislation in the field of agriculture can be divided provisionally in the following groups of issues:
- horizontal issues, including some general conditions, pertaining to all products;
- the Common Agricultural Policy;
- rural development and forestry;
- internal market legislation - veterinary and phytosanitary issues, including food safety.

Horizontal issues include:
- Funding and support of agricultural producers through the European Agricultural Guidance and Guarantee Fund (EAGGF) – payments on the implementation of the Common Agricultural Policy measures are made through a Paying and Intervention Agency;
- Integrated Administration and Control System (IACS). The System is a requisite condition for the implementation of the Common Agricultural Policy and its objective is efficient monitoring and control over EU direct payments;
- trade mechanisms;
- quality policy;
- organic farming;
- state aid.

Following the approval of the Bulgarian National Agricultural and Rural Development Plan by the Commission in October 2000, and the decision to allocate Bulgaria ? 53 million for the year 2000, the Commission decided on the conferral of management of aid to the Bulgarian authorities for three types of measures:
- investments in agricultural holdings;
- improvement in the processing and marketing of agricultural and fisheries products;
- development and diversification of economic activities and alternative income.

Bulgaria has adopted a resolution to establish a Paying and Intervention Agency to the State Agricultural Fund, which will meet EC requirements by the end of 2005. The Agency will unite and manage EC funds - EAGGF and national funds for support of agricultural producers.

National registers are being created on the basis of which an Integrated Administration and Control System will be developed, animal identification and registration system and agricultural land identification system in particular.

Bulgaria has adopted normative documents on control over ecological production, and also subsequent legislation in respect of ecological products preparation, marketing, labeling, inspection and import. A Commission on Ecoagriculture has been established for control bodies’ approval. Its rules of procedure were adopted in February 2002.

Since April 2002 the work on Bulgaria’s participation in the Farm Accountancy Data Network has started. The typology of the agricultural farms has been developed and operational know-how has been provided.

The Common Agricultural Policy requires the implementation of the Common Market Organizations mechanisms in the different agricultural sectors. Their role is to provide support for the markets through suitable mechanisms in accordance with the specificity of different products. Common Market Organizations are financed from EAGGF. Before accession the measures the country undertakes for implementation of the Common Agricultural Policy mechanisms will be financed by the state budget.

Studies have been completed for the alignment and implementation of Common Market Organizations in respect of sectors: viticulture and wine production, meat and fisheries production. Similar studies have been carried out in the sectors: cereals, fruit and vegetables and milk and diary products. Studies cover legal, institutional and economic aspects and include proposals on how to introduce Common Market Organizations in Bulgaria.

Progress has been made in respect of alignment of agro-statistics and statistical reporting procedures of main yields and land use in compliance with EU requirements.

Rural development and forestry aim at strengthening and reorganization of agricultural and forestry structures, conversion of agricultural production and development of supplementary activities for farmers, support the creation of high standard of life of farmers, environment preservation. This policy includes measures on: investments in agricultural holdings; young farmers promotion; training; early retirement; support of rural regions with ecological problems; agroecology; improvement, processing and marketing of agricultural products; forestry; local development initiatives /LEADER/.

Rural development is among the key priorities of the Government in the area of agriculture. In the process of development is a National Program on Agriculture and Environment, wherein different institutions take part.

The practical experience with the SAPARD Program contributes to the building of administrative capacity and prepares the implementation of the legislation and measures for rural development of the community. A Code of Good Agricultural Practices has been prepared that determines the minimum obligations for farmers to be eligible for SAPARD measures for practices and activities development that preserve environment.

The forestry structural reform is completed. In 2002 the Minister of Agriculture and the Minister of Interior signed a Memorandum, setting the most urgent measures against forest fires.

EU legislation in the field of internal market has the aim to protect the health of people, animals and environment in the production, movement and sale of agricultural products within the EU market. The legislation comprises veterinary and phytosanitary measures. The adoption of these measures is a key priority for Bulgaria because of the geographical location of the country that will be the external veterinary and phytosanitary border of the enlarged EU.

In the veterinary sector the Act on Veterinary Activities, 1999 and the regulations pertaining to the minimum requirements for animal welfare, control on African Swine Fever, veterinary sanitary measures for prevention and veterinary requirements and control on animal and fishery products wholesale market, as well as veterinary sanitary and hygienic requirements towards factory vessels for the processing of fish and fishery products have been adopted.

In September 2000 the Animal-Breeding Act, laying down the basis for continuous development of stock-breeding, efficient animal breeding and preservation and maintenance of the national geno-bank, and serving also as a legal framework for implementation of EU standards regarding acknowledgement of stock-breeding associations, which create or keep stock records of pure-bred breeding animals, was enforced.

Progress has been made in animal identification and registration. Identification of bovine animals has been completed. In April 2002 the work on ear-tagging ovine and caprine animals (goats and sheep) began. A computerised system for animal identification and registration of animal breeding establishments is being developed, as well as a computerised network connecting veterinary bodies/ANIMO/.

The National Veterinary Service (NVS) has developed surveillance and monitoring programs for control of animal diseases. The Animal Disease Notification System (ADNS) is in operation since the end of 2001. Decrees on prevention and control of a number of diseases have been adopted.

Bulgaria has started the implementation of an integrated system for border veterinary control and the construction of a border inspection post at Kapitan Andreevo, on the border with Turkey.

A number of regulations on border inspections, on monitoring and control measures with regard to residual substances in live animals and products of animal origin, and on placing of meat on the market have been adopted.

In 2000 the National Veterinary Service carried out a study on all meat processing enterprises, to determine their consistence with current legislation and to set deadlines for meeting the requirements.

The National Veterinary Service has also undertaken measures for improving epidemiological control of exotic diseases by preparing annual prevention programs that envisage monitoring programs for certain exotic diseases on the border with Turkey, diagnostic tests for certain diseases and mandatory vaccination.

In 2001 Bulgaria began epidemiological monitoring for bovine spongiform encephalopathy. Laboratories for diagnosing and quick tests have been adapted and equipped.

In March 2002, a Regulation on collecting and processing of animal waste and by-products was adopted.

The Nutrition Act, adopted in September 1999, aims at preserving and improving animal productivity, and ensuring the use of quality feedingstuffs and imposing the legal framework for other standards implementation in Bulgarian legislation. This Act sets the conditions for production, circulation, import, export and use of feed materials and control on products intended for animal nutrition.

As regards the phytosanitary sector, a Law on Seeds and Planting Material was adopted in October 2000 aiming to create a legislative framework for the introduction of the seeds and planting material acquis and for the testing and inscription of varieties into the official plant variety list.

With regard to the preservation of plant species diversity, a Decree on the official varieties list was adopted in March 2001. A number of provisions pertaining to the control on plant diseases were also adopted in the field of plant protection. At the end of March 2002 amendments and supplements to the Law on Seeds and Planting Material were adopted with the aim of alignment with EC Directives.

In November 2001 the amendments to the Plant Protection Act introduced the general legal framework for use of plant protection products and established the legal basis for adoption of rules containing detailed provisions. These amendments in particular introduced a licensing regime for testing, import and trade and control system for the use, storage and movement of these products.

Bulgaria has implemented in its legislation the Directives on the control on potato diseases and has made good progress in the adoption of laws and bylaws on phytosanitary control. Schemes guaranteeing the quality of phytosanitary control are being developed and inspectors have been trained for border inspections.

As regards food safety Bulgaria adopted a Food Safety Strategy in June 2001. A number of bylaws were also adopted. The control carried out by the NVS and its regional offices include laboratory analysis of food safety. However, further upgrading of food processing establishments is needed.



ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Agriculture and Forestry develops the government policy in respect of agriculture and forestry. The Ministry is responsible also for the legislation harmonization and implementation process and for the negotiations with the European Community on Chapter 7. A number of services and executive agencies are established at the Ministry, responsible for the control on the legislation implementation. Trade chambers, producers associations and other non-governmental private organizations in the different sectors revive and activate their work.

A National Consultative Service on Agriculture has been established to the Ministry with headquarters in Sofia and 28 regional representative offices. The Service renders support, expertise and consultations to farmers and ensures close connection between research, agricultural policy tasks and agricultural activities.

The National Veterinary Service monitors for the observation of the Veterinary Activities Act and the bylaws requirements and standards adopted. A Department for animal identification and registration has been established at the National Veterinary Service. An Animal Disease Notification System (ADNS) is also in operation.

The NVS adopted its statute in February 2001 which determines its staffing and organization. It has 3,090 personnel, including 1,515 veterinarians. The NVS has a general directorate and subordinate structures for animal health, public health control of animal products, border veterinary control and animal breeding and laboratory control. Its public health control units carry out inspections and control through regional inspectorates, with the support of laboratories within the Regional Veterinary Services. These cover public health controls on raw materials and products of animal origin in production, slaughter and processing establishments, as well as on final products placed on the market.

A common policy for inspections at the border posts and plan for modernization of the border post at Kapitan Andreevo have been approved. There is strict control on illegal import of animal products at the border posts. Detailed surveillance programs on some diseases have been implemented within a 10-kilometer zone on the border with Turkey. Bulgaria has also adopted measures on general requirements for veterinary checks on import and transit of live animals. There are currently 35 functioning veterinary border inspection posts, with 263 employees, including 149 veterinarians. Staff training on registration, control and trade is still required. Bulgaria has indicated that 10 locations will become long-term border inspection posts with third countries.

A General Directorate on Feed Control has been established, which will exercise control over products and substances intended for animal nutrition. A register of producers and traders is maintained. In addition, regulations were adopted on feed additives, circulation of feed materials and control on products intended for animal nutrition.

In the cereal sector the control on the implementation of the legislation is exercised by a National Cereal Service. A Food Control Directorate has been established to the National Cereal Service, which includes seven regional offices and laboratories, three of which have been accredited.

An Executive Vine and Wine Agency and National Vine and Wine Chamber have been established. The role of the Agency is to ensure that laws related to wine production and viticulture are being observed.

Concerning fruit and vegetables, in April 2001 Bulgaria created an administrative structure to carry out conformity checks and quality control of fresh fruit and vegetables and to participate in the process of harmonization with EC legislation. In July 2001, a decree on the conditions and procedures for recognition of producer organizations in fruits and vegetables as well as tobacco was adopted.

The National Service for Plant Protection, Quarantine and Agrochemistry covers administrative needs in line with acquis requirements in the area of plant health.

A Varieties Testing, Seed Inspection and Control Executive Agency has been established. The Agency coordinates a Directorate on Varieties Control (testing of new plant varieties and entering them in the National Varieties List) and Seed on the Field Inspection and Control Directorate (seed certification and trade rules introduction).

The structures responsible for agro-statistics preparation report to the Ministry of Agriculture and Forestry and they should be supported.

The institutions responsible for the Forestry Act implementation are in place: National Forestry Council and Bulgarian Forestry Chamber. The National Forestry Council exercises state forestry management. The Bulgarian Forestry Chamber renders practical assistance and trains owners of forests in forest management.

Training is required for the industry to set up its own control systems and compliance with EC regulations.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Further efforts are required in respect of:

- ensuring the functioning of a transparent land market;
- further adjustment of the agricultural policy to conform to the Common Agricultural Policy requirements;
- development of administrative capacity required for management and implementation of the acquis communautaire;
- enforcement of animal veterinary/hygiene and epidemiological control standards;
- upgrading of food processing establishments.

CHAPTER 8 FISHERIES
LEVEL OF NEGOTIATIONS

Chapter 8 Fisheries was opened for negotiations in March 2001 and provisionally closed in May 2001.

In its position on Chapter 8 Bulgaria has declared that it accepts EU legislation in the field of fisheries and will implement it after accession, while requesting the following:
- to avail of the opportunities and measures of the Financial Instrument for Fisheries Guidance (FIFG) for granting structural aid for renovation of the fishing fleet after accession (without increasing its fishing capacity), for modernization of port facilities, aquaculture development, fish and fish products processing and marketing, socio-economic measures;
- to preserve its right to apply more restrictive fishing technical measures in respect of bottom trawling and dragging within the 12-mile territorial zone in Black Sea;
- measures to be included in EU legislation and to be implemented for preservation of turbot and sturgeon species in the Black Sea and the Danube River.

Bulgaria's task in the pre-accession period is to harmonize the legislation regulating fisheries and to build up administrative capacity and readiness for implementation of the Common Fisheries Policy as from the moment of the country's accession.



HARMONIZATION PROCESS

The European Union Common Fisheries Policy (CFP) is provisionally divided into the following:
- resource management, inspection and control;
- common market policy;
- structural actions;
- international fisheries relations.

Resource management, inspection and control covers the following activities and systems: fixing and management of total allowable catches by types and categories (weight/size) of fish, fishing quotas and effort, licenses, implementation of technical measures; inspections and control of fishing activities in national waters as well as fishing activities exercised by national fishing vessels outside European Community waters; development and maintenance of equipment to ensure control, such as surveillance vessels, aircraft, land vehicles; efficient application of the satellite surveillance system for the fishing vessels concerned; database allowing cross-checking of catch data with other sources and that can connect with that of the European Commission.

Common market policy regulates the control on the implementation by the Member States of common marketing standards for fisheries products and aquacultures, as well as withdrawal of quantities from the market; collection and transmission of market and reference price information; recognition conditions for producers' organizations in fisheries and aquacultures; intervention procedures and mechanisms in the sector.

Structural actions - (including fleet registration): implementation and management of the structural policy for fisheries and aquaculture, in particular structural programs co-financed by the Financial Instrument for Fisheries Guidance (FIFG), and the multi-annual guidance programs (MAGPs); measurement of fishing vessels; establishment of a fishing vessel register from which data are regularly communicated to the Community registers.

International fisheries relations - EU has the exclusive competence to represent Member States under agreements with non-member countries and international conventions in relation to use and enjoyment of fisheries resources and rights. The catch quotas of the Candidate Countries, ensuing from interest in international conventions and organizations in the field of fisheries, after accession will be transferred to the Community, while each Member State shall have such a percentage share of the EU interest on the relevant types outside Community waters, as it has accessed EU with, based on the existing in this sphere principle of relative stability.

The Fisheries and Aquaculture Act (FAA), which replaced the old Fish Husbandry Act, was adopted in April 2001. The Act contains the key principles of EC sectoral legislation and provides the framework for the implementation of all major aspects of the Common Fisheries Policy. Ordinances on logbooks and licensing of fishing activities were adopted in November 2001 and January 2002 respectively. Progress has been achieved in respect of the enforcement of the legislation.

As regards resource management, inspection and control, the Fisheries and Aquaculture Act introduces the requirements of EC acquis on landing declarations and first sale information. The Executive Agency for Maritime Administration (EAMA) and the National Agency for Fisheries and Aquaculture (NAFA) signed a co-operation agreement in order to fulfill the obligations on control of fishing vessels in accordance with the Fisheries and Aquaculture Act and with the Merchant Shipping Code.

An information system has been developed for registration of every fishing and fish breeding activity with the purpose of assessing the fish resources and the biomass. In 2002, 5 100 licenses for commercial fishing were issued and 120 fish breeding sites were registered by the National Agency for Fisheries and Aquaculture. The Agency has also carried out restocking activities, notably at the Danube River, in order to maintain the fish population of endangered species.

In the field of structural actions, significant progress was achieved by the finalization of the creation of the Fishing Vessel Register at the Executive Agency of Maritime Administration (under the Ministry of Transport and Communications) as part of the State Vessel Register. The personnel necessary was recruited and trained to operate it. The Register was also provided with the software and equipment necessary for its functioning.

Amendments to the Merchant Shipping Code were adopted, 2002, aiming at aligning Bulgarian legislation to the acquis on European maritime safety standards and allowing the subsequent adoption of implementing legislation on such matters as procedures for data entry into the Fishing Vessel Register, measurement of seagoing vessels and rules for ship documents.

With regard to the common market policy orders were adopted in April 2000 for veterinary/hygiene requirements to the production and market sale of fish products, and the minimum hygiene standards, applicable to fisheries products that are being processed and stored on board of certain vessels. These orders are in compliance with the acquis.

A feasibility study was prepared, with recommendations on regulating the activities of producers' organizations and the organization of market intervention in the fisheries and aquaculture sector.

In the spring of 2002 after the resolution of the Standing Veterinary Committee Bulgaria was again included in the list of countries allowed to export fisheries products to the European Union.

With regard to international fisheries agreements Bulgaria is a party to a number of conventions and international agreements:
- the North-West Atlantic Fisheries Organization;
- the North-East Atlantic Fisheries Organization;
- the Joint Mediterranean Fisheries Commission.
Different bilateral and multilateral agreements have been signed in respect of fishing in the Black Sea. Negotiations are being carried out on a draft of a Convention on fishing and conservation of living resources in the Black Sea.

A conference of the Black Sea countries on the management of sturgeon populations held under the auspices of the Secretariat of the Convention on International Trade in Endangered Species (CITES) agreed on joint action, including research, for preservation and sustainable use of sturgeons, and set permissible catches and export quotas.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Agriculture and Forestry is responsible for developing the fisheries policy, while the Ministry of Economy - for the processing and canning industry in the same field.

The National Agency for Fisheries and Aquaculture (NAFA) to the Ministry of Agriculture and Forestry is in charge of management of commercial and recreational fisheries in Bulgarian waters. The Agency comprises 27 regional services responsible for on site inspections, control and surveillance.

The National Veterinary Service is responsible for compliance with veterinary/medical requirement in fish processing undertakings.

The State Fund for Agriculture has been nominated as the body to manage financial aid from the European Community. It will also act as the Paying Agency for the fisheries sector.

A Bulgarian Fisheries Association was created to represent marine fishing and processing Companies.

The equipment of the research institutes has been replaced and improved: the Fish Resources Institute in Varna, the Institute on Breeding Freshwater Fish, Plovdiv, the fisheries sections of the National Veterinary Institute, the Fish Breeding and Hydro-Biology Department of the Sofia University.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Further efforts are required for completing the reform in the following areas:
- in the legislation - the adoption of implementing legislation will be needed to ensure full conformity with the acquis;
- further adaptations of implementing legislation are still necessary concerning the vessel monitoring system and the collection and computerized retrieval of catch data;
- development of administrative capacity, technical provision of inspection and control bodies, as well as strengthening the bodies managing the Financial Instrument for Fisheries Guidance;
- further adoption of legislation in line with the acquis is needed in the area of structural actions, notably as regards the rules and procedures enabling the use and implementation of Financial Instrument for Fisheries Guidance measures;
- development of wholesale infrastructure and of the markets themselves; measures ensuring full compliance with EU hygiene and health requirements need to be enhanced;
- development and maintenance of a reliable statistical and market information system.

Bulgaria is generally meeting the commitments it has made in the accession negotiations in this field.


CHAPTER 9 TRANSPORT POLICY
THE CURRENT STATE OF NEGOTIATIONS

Chapter "Transport policy" was opened for negotiations in June 2001, and was temporarily closed in June 2003. EU provided the Bulgarian side with its common position on Chapter 9 in June 2001 and June 2002.

The transitional periods stated by the Bulgarian side are as follows:
- 4-year transitional period (till December 2100) regarding the entering into force of the requirement for financial stability of the road carriers providing domestic road transport services;
- 7-year transitional period (till December 2113) in respect of the requirements for maximum allowable dimensions and mass of road vehicles (Directive 96/53), introduced by means of Regulations N11 concerning the movement of oversized and heavy road vehicles. As stipulated in the Regulations, there should be gradual transition from 10 t/axle to 11,5 t/axle following a schedule complying with the Agreement between Bulgaria and EC for the establishing of certain conditions for the transportation of goods by road, and for the promotion or combined transport;

During the above transitional period, the rehabilitation of the roads related to the international traffic will be given priority - highways and E-roads. The rehabilitation for loads of 11 t/axle of the category 3 road network requires considerable investments, which cannot be provided within a short period of time.

The freight vehicles with air suspension, registered in EU and Bulgaria, complying with the provisions of Directive 96/53, will use the entire national road network without any overweight charges, starting on the date of accession of Bulgaria to the EU.

The development of the basic transport infrastructure, as well as the modernization of the various transport systems, is important for the creation and maintaining of sustained growth of the economy, as it serves as a prerequisite for the attraction of national and foreign investments to the territory. For Bulgaria, the development of the transport infrastructure and the various modes of transport is of great importance, in view of the geographic location of the country, which is the basis for the development of long-lasting comparative advantages in this sector.



HARMONIZATION PROCESS

The main transport policy covers the following areas:
- development of the transport infrastructure;
- road transport;
- rail transport;
- inland water transport;
- air transport;
- sea transport;
- combined transport.

The development of the transport infrastructure is one of the most important prerequisites for the creation of a transport system complying with the European standards, which is one of the EU membership requirements. During the negotiations for accession, Bulgaria undertook to develop its transport infrastructure in accordance with the current legislation of EU, which is primarily related to Decision1692/96/EC for the development of the trans-European transport network. The European Union has been providing considerable non-repayable aid to Bulgaria for the implementation of the most important infrastructure projects in the transport sector.

In October 1999, Bulgaria received the EC report on "The Need for Assessment of the Transport Infrastructure" (TINA), as a basis for the connection of the trans-European networks to Bulgaria. On these grounds, the Bulgarian administration developed a medium-term investment program for the development of the national transport infrastructure, 2001-2005, in accordance with the National strategy for the development of the transport sector. The program was updated in October 2001, with estimated total project costs of ˆ4.9 bln., 31% of which are to be provided by the national budget. Within the framework of the Stability Pact initiative, a final agreement has been concluded with Romania regarding the location of the second bridge over the Danube, Vidin-Kalafat, as well as the financing, organization and design of the project. A number of infrastructure projects have been approved and are currently being implemented: the construction of the roadbeds of all-European corridors IV, VII, and X, the modernization of road E-79, the second bridge over the Danube, the electrification of major railways, and the construction of the second terminal at Sofia Airport. In 2002, the "Roads" executive agency developed a separate program for the completion and development of the National road network.

The legislation in the area of road transport has been updated with the aim of liberalizing the sector and harmonization with the law of the Community. It includes the following:
- the Road Transport Act, September 1999, complemented by the Road Act, regulating the ownership, operation, management, construction and maintenance of the road infrastructure, 2002;
- Rules of the Road, 1999, including a number of bylaws, concerning the traffic safety, the qualification of drivers, the road tests for vehicles, registration, and statistics;
- Automobile Transportation Act.

A number of amendments and supplements to the Rules of the Road and the Automobile Transportation Act have been adopted, with the aim of ensuring the further harmonization with the law of the Community and creating conditions for the development of implementation legislation.

The Act on the Amendment and Supplement to the Rules of the Road, which was adopted in January 2003, provides for the introduction of a new road fee payment system, the so-called vinnet system, starting the beginning of 2004 - the motor vehicles will be charged for using the infrastructure for a certain period of time, for passing through certain national roads, as specified by a resolution of the Council of Ministers. The amount and the manner of collection of the fee will be regulated by a special law. The amount of the fee will be determined on the basis of the duration of use of the respective infrastructure, and corresponds to the costs caused by the different types of motor vehicles; the average amount of the fee will be based on the costs of construction, operation and development of the infrastructure.

In the area of automobile transport, Bulgaria has undertaken to harmonize its legislation in respect of the requirements relating to the qualification of "passenger and freight carrier" (licensing), and the mandatory technical specifications of the vehicles used for the transportation of passengers and goods. The licensing requirements in respect of the carriers have been completely harmonized with those applied in EU, as follows:
- the financial stability requirement;
- professional competence;
- and the mandatory technical specifications of the vehicles used for the transportation of passengers and goods.

Regulations relating to the qualification of a "passenger and freight carrier" have been introduced, as well as the mandatory use of tachographs, and the registration documentation of vehicles.

As regards motor vehicles taxation, the adoption of the Local Taxes and Fees Act in January 2002 initiated the ongoing process of revision of the system of imposing road fees. By the end of 2006, the system will fully comply with the taxation requirements according to the acquis communautaire.

In July 2000, a bilateral agreement was concluded between Bulgaria and EU (effective from May 2001) on the development of combined transport. In December 2000, the European Agreement for International Casual Transportation of Passengers (INTERBUS) was concluded, which will lead to a partial harmonization with acquis in the area of passenger road transport.

The model of restructuring of the Bulgarian railways was chosen following a survey of a number of European directives and regulations. The national legislation has already been adapted to reflect a considerable part of the newly adopted amendments to the EU law in the area of rail transport. The railway Transport Act, which has been in effect since January 2002, abolished the railway transport monopoly of the state. The new legislation regulates the institutional division of the railways and the establishment of a regulatory body - the "Railway Administration" Executive Agency - as a separate budgetary legal entity for the coordination and management of rail transport, and the carrying out of control functions relating to licenses, certificates, and traffic safety. The Agency must ensure fair competition between the rail carriers within the railway sector, as well as between the rail carriers and the automobile carriers.

The adoption of the above act was a significant step in the implementation of the reform in the rail transport sector, by institutionally dividing the services provided by the infrastructure and the carrier, and by ensuring their differentiation.

In accordance with the Rail Transport Act, two independent companies have been established - State Railway Infrastructure Company, and the operator BDZ EAD. The law lays down the rules of access to the railway infrastructure and the rules of identifying the revenue and costs of the railway companies, regulates the introduction of user fees for the railway infrastructure, and a license-based system for the railway operators.

In the area of air transport, the following major commitments for implementation prior to the accession of Bulgaria to EU have been assumed:
- licenses for air transport activity should be issued in accordance with the EU regulations;
- gradual harmonization, in respect of the EU law, of the conditions under which air carriers will have access to the market of air transport services;
- introduction of the same conditions for protection and care of the users (passengers), as those in EU;
- gradual transformation of the technical requirements and administrative procedures in accordance with those of EU;
- establishment of an independent body for the investigation of air accidents and civil aviation incidents.

The Civil Aviation Act of 1999 lays down the regulatory framework for the activities in the area of air transport. Over 30 normative acts have been adopted thereafter, including amendments to the Civil Aviation Act, as well as the Regulations for Airports and Airport-related Procurement. The adoption of regulations for the application of the law and the establishment of competition and gradual market liberalization is currently underway. Bulgaria is making efforts to improve the qualification of the aviation administration, especially in the sector of civil aviation. The national air carrier BCA Balkan went into liquidation. The newly established national air carrier Bulgaria Air restored some of the flights. The company is undergoing a preparation for privatization.

In the area of sea transport, amendments and supplements to the Commercial Sea Transport Code were adopted in December 2002, thus establishing the legal basis for the completion of the harmonization process. The purpose of the above amendments is to establish the principles of navigation safety and environmental protection by means of efficient control of ships, and to ensure the free access to the sea navigation market, and fair competition between the participants therein.

Bulgaria is making every effort to improve the deteriorated safety indicators of the Bulgarian fleet for 2001. The Bulgarian side has developed the "Plan for Harmonization of the Legislation, 2002-2003" for the transposition of the EU law in the area of sea transport, and an Action Plan for improvement of the safety indicators of the Bulgarian fleet.

A policy of complete renewal of the Bulgarian fleet has been adopted. With the aim of decommissioning of the oldest vessels sailing under the Bulgarian flag, seven ships were withdrawn from service and scrapped in 2002, and two ships were sold for scrapping.

Bulgaria has started negotiations with the banks for revocation of the requirement for all newly purchased ships to be registered under a foreign flag.

The specified measures have been efficient - according to the official statistics, the proportion of vessels sailing under the Bulgarian flag which have been detained as a result of port inspection is 9.57%, as compared with 15.7% in 2001.

The Act on Marine Areas, Inland Waterways and Ports was adopted in 2000, providing the framework for further harmonization with aquis, for the inland water transport, especially in respect of safety criteria.

The development of combined transport is an immediate and long-term priority of the transport policy. In terms of technological capabilities, it will be possible to apply (various) standardized transportation and reloading solutions by combining automobile, water and rail transport as a result of the interaction between companies in the organization and operation of the scheme preferred by customers - "timely door-to-door transport, at acceptable price".

The purpose of combined transport is to ensure the most efficient use of the combination of railways, inland waterways and sea transport rather than imposing the use of a certain mode of transport, as each of the above modes of transport alone cannot provide full door-to-door service.

The stimulation of combined transport is one of the transport policies of EU in view of:
- the liberalization of the transport market;
- development of the trans-European networks;
- encouraging fair and efficient pricing;
- introduction of information technologies in the transport sector.

The prerequisites for the development of the combined transport are:
- implementing common European and national transport policy;
- regulation and control of the equal opportunity conditions in the area of competition;
- establishment and implementation of the national transport strategy for the development of combined transportation: separating the infrastructure activity from the transport activity; policy which takes into account the environmental requirements and the "external costs".

(The external costs are those costs which are not paid by the user of transport services. In the transport sector, such costs are: the use of infrastructure, if it is free; the costs relating to the environmental impact of pollution, noise; damages; and the medical services relating to traffic accidents).

An agreement with EC has been concluded for the creation of conditions for road transportation, the transportation of goods, and the development of combined transport, effective since May 2001.



ADMINISTRATIVE INFRASTRUCTURE

The transport policy is developed by the Ministry of Transport and Communications (MTC). The Ministry is entrusted with the task of restructuring the sector in accordance with requirements ensuing from the future accession, proposes amendments to the legislation, and monitors their implementation. The Ministry of Regional Development and Public Works (MRDPW) is responsible for the construction and management of the national road infrastructure. A number of executive agencies to the Ministry of Transport and the Ministry of Regional Development and Public Works have been set up with the aim of implementing the specified policy in the individual sectors:
- the Joint "Committee for Road Traffic Safety" to the MTC, 2000, with general coordination functions;
- the executive agency "Automobile Control" to the MTC, 2002, for the licensing of transport operators, authorization of centers for inspection of the condition of the roads, driving schools, etc.;
- the executive agency "Roads" to the MRDPW, responsible for the development and management of the national road infrastructure, the issuing of permits for transportation of goods, collection of road fees, control of motor vehicles above the allowable limits;
- "Traffic Police" Department to the Ministry of Internal Affairs, responsible for the road traffic control;
- the executive agency "Railway Control" to the MTC, for the issuing of licenses, certificates, proposals for fees for the use of infrastructure, rail traffic safety;
- the executive agency for "Exploration and Maintenance of the Danube" controls the safety of inland waterways;
- the "Civil Aviation" Department to the MTC;
- Air Traffic Control;
- the executive agency "Marine Administration" to the MTC, for governmental control of the ports, flag, and the shoreline;
- the executive agency "Port Administration" to the MTC, for port management, safety and security, registration and collection of statistical data.



RECOMMENDATIONS OF EC

In general, Bulgaria has been meeting the commitments assumed during the process of negotiations for accession. Further efforts should be focused on:

- the provision of considerable investments for modernization of the road infrastructure to ensure the compliance of Bulgarian roads with the EC standards;
- the investments to be made by operators in order to ensure compliance with the European criteria for motor vehicles, domestic traffic, and vessels for inland river transport;
- ensuring the administrative capacity for simultaneous implementation of different infrastructure projects for the development of the road and rail infrastructure - approx. 1200 km of Bulgarian roads should be modernized by 2007, the total cost amounting to around EUR 240 mln., with the aim of meeting the requirement for gradual transition of the road infrastructure load from 10 t/axle to 11,5 t/axle;
- improvement of the operation of the administration which is in charge of sea transport safety: the vessels sailing under the Bulgarian flag, and the seaport infrastructure;
- further harmonization of the legislation in the air transport sector, and gradual introduction of the Common Aviation Requirements.


CHAPTER 10 TAXATION
LEVEL OF NEGOTIATIONS

Chapter Taxation was opened for negotiations in July 2001 and provisionally closed in June 2002.

An agreement has been reached for transition period on the implementation of the minimum excise rates on cigarettes (until 31.12.2009), as well as specific derogations:
- to continue to exempt international transport of passengers from VAT, with the right to refund;
- to apply lower excise duty rates on rakia, produced from fruit and grapes for own consumption (up to 30 l of spirits per year and household);
- to apply registration and exemption threshold to the amount of EUR 25 000 in respect of small and medium enterprises.



HARMONIZATION PROCESS

In relation to the negotiations on Chapter "Taxation" Bulgaria has principally undertaken the following commitments set in the Government program "Tax Policy 2003-2005".

Value Added Tax

The existing at the moment Value Added Tax Act reflects to a great degree the principles and mechanism of VAT taxation in the European Community in accordance with the requirements of the Sixth Directive 77/388/EEC. The inconsistencies existing will be gradually eliminated in compliance with the commitments undertaken in the negotiation position:

Year 2004
- The transfer of enterprise to be taken out of the VAT scope and not to be treated as supply of goods. At present the transfer of enterprise is treated as an exempt supply under the VAT Act;
- Supplies under the Labour Code in Bulgaria are exempt from VAT - these are supplies of goods and services under Chapter XIV of the Labour Code provided by the employer to workers or employees at prices lower or equal to actual costs; European legislation does not provide for such exemptions.

Year 2006
- In compliance with European legislation abrogation of deduction of the transfer-related state and local taxes and fees due for the transfer of ownership of a building or a part thereof from the amount of the VAT charged;
- Transposition in the Bulgarian VAT legislation of the transitional regime of taxation with VAT of the intracommunity trade by 01.01.2006, the provisions shall come into force as from 01.01.2007.

Year 2007
- Tax scope - full harmonization with acquis of the definition of supply of services, which at the moment includes also free supply of services;
- Taking of legal services and agricultural goods and services, prostheses and technical devices for disabled people out of the scope of exempt supplies under the VAT Act in compliance with the requirements of Directive 77/388/EEC;
- The special scheme for supplies of second-hand goods, works of art, collector's items and antiques shall become obligatory for the dealer, while he will be granted the right to opt for the special scheme only in case works of art, collector's items and antiques (excluding second-hand goods) are imported by the dealer or works of art are supplied by their authors or successors;
- Abrogation of the preferential taxation of general tourist service supply by travel agents to non-residents, where the rate at the moment is 7%.


Excise duties

A greater part of the current Bulgarian excise legislation is aligned with the principles of the acquis in respect of the structure of the excise duties. At present the excise rates are lower than the Community minimum excise rates. In the course of the negotiations with EU Bulgaria has undertaken to gradually increase the excise rates with the view upon the date of accession to EU to have reached the minimum rates except for the cases of derogation.

The commitments undertaken for adoption of the acquis principles in the field of excise duties by year are as follows:

Year 2004
- Transition from taxation per ton to taxation per 1000 liters at 15°C for petrol, gas oil and kerosene;
- Transformation of road and echo taxes on fuels into excise duties;
- Unification of tobacco products definitions in Bulgarian legislation with the European legislation ones and raising the excise duty to 48.7% (but not less than BGN 37 per 1000 items) of the retail selling price for the cigarettes of the price category most in demand.

Year 2005
- Excise taxation transition from BGN per alcohol degree to BGN per hectolitre pure alcohol for spirits and increase of excise rates on spirits from BGN 0.05 per alcohol degree to BGN 750 per hectolitre pure alcohol (BGN 0.075 per alcohol degree);
- Increase of excise rates on beer from BGN 1.05 to BGN 1.5 per hectolitre Plato degree and reaching the minimum for the Community rate.


Year 2006
- Increase of excise rates on cigarettes from 48.7% to 52.3% (but not less than BGN 50 per 1000 items) of the retail selling price for the cigarettes of the price category most in demand and introduction of common excise rate on cigarettes, irrespective whether they are filter-tipped or not;
- Introduction of the excise bonded warehouses system for production, storing and movement of excise goods under duty suspension arrangements not later than 01.10.2006;
- Fiscal marking of gas oil and kerosene in order to be taxed with lower excise rate (for industrial purposes and for heating).

Year 2007
- Increase of excise rates on spirits from BGN 750 to BGN 1100 per hectolitre pure alcohol (BGN 0.11 per alcohol degree) in order to reach the EU minimum excise levels;
- Increase of excise rates on unleaded petrol to BGN 570 per 1000 litres in order to reach the EU minimum excise levels;
- Increase of excise rates on diesel to BGN 480 per 1000 litres in order to reach the EU minimum excise levels;
- Increase of excise rates on kerosene to BGN 480 per 1000 litres in order to reach the EU minimum excise levels;
- Full harmonization of Bulgarian legislation with the acquis in the field of excise duties in respect of: exemption; rules for production, storing and movement of excise goods between Member States and control of excise goods under duty suspension arrangements.


Direct taxation

Year 2007
Full implementation by the Bulgarian legislation in the field of direct taxation (corporation taxes) of the principles of Code of Conduct for business taxation not later than 01.01.2007.

Implementation in the relevant tax laws of the principles of Council Directive 90/434/EEC on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States not later than 01.01. 2007.

Transposition in the Bulgarian legislation of the principles of Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States not later than 01.10.2007.

The amendments to the VAT Act of January 2003 reduced the VAT registration and exemption threshold for small and medium sized enterprises to ˆ25 000, and adjusted the scope of VAT exempt financial services The amendments of January 2002 introduced the standard VAT rate on the supply of pharmaceuticals and pharmaceutical products and a special scheme for travel agents. The VAT refund period was shortened from 4 months to 45 days.

The amendments of the Excise Duty Act of December 2001 fully harmonized the scope of excise duty on beer, introduced a uniform rate per hectolitre degree Plato and introduced excise duties per tonne on LPG and methane, heavy fuel oils, and gas oil and kerosene used for industrial purposes or heating; excise duty levels on filter cigarettes were increased. The amendments to the law on Excise Duties of January 2003 introduced the definitions of intermediate products, wine, fermented products other than wine, and beer. The tax base for the excise duty levied on intermediate products was fixed by reference to the number of hectolitres of the finished product and the excise rate on those products was set at ˆ45 per hectolitre in line with the acquis. Excise duty rates on ethyl alcohol, petrol and gas oil are also increased.

In the area of direct taxation, amendments to corporate income tax passed in December 2001 introduced a unified rate of corporate income tax. As from January 2004 the rate is reduced to 19.5 points.



ADMINISTRATIVE INFRASTRUCTURE

There is commitment upon the date of accession all the institutional infrastructures necessary for the implementation of the acquis communautaire in the field of taxation to function in full compliance with the European legislation.

National Revenue Agency was established, November 2002, which combines the functions of the National Social Security Institute (in respect of revenues) and the Tax Administration whereby the collection, accounting and control of revenue from taxes and social security contributions would be unified.

A Central Liaison Office (CLO) was established. It will become responsible for administrative co-operation, mutual assistance and exchange of information with EU Member States and associated countries and action plan.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Significant further efforts are needed:
- to strengthen the tax administration, improving tax collection and VAT refund management;
- development of a fully operational computerized tax information system, including interconnectivity with the customs IT system and EU IT systems.


CHAPTER 11 ECONOMIC AND MONETARY UNION
LEVEL OF NEGOTIATIONS

Chapter “Economic and Monetary Union” was opened for negotiations in March 2002, and was temporarily closed in April 2003. Within the framework of the negotiations for the accession of Bulgaria to the EU, the Bulgarian side has undertaken to transform its national legislation in this area in compliance with the EU law by the time of its accession to the EU.

The European Economic and Monetary Union (EEMU) is a new stage in the further development of the unification process in the European Union, which includes:
- coordination of the economic policies of the member states;
- adoption of a single European currency – euro;
- enforcement of a common monetary policy

The formation of this union continued for almost nine years, including the following stages:

First stage (July 1, 1990 - December 1, 1993)
- achieving completely free movement of capital between the EU member states;
- beginning the coordination at a macroeconomic level – through the development of long-term programs for economic cooperation;

Second stage (January 1994 – December 31, 1998)
- guaranteeing and strengthening the independence of the national central banks as a prerequisite for gradual transition to a common monetary and currency policy;
- establishment of the European Currency Institute (ECI), which was the predecessor of the European Central Bank (ECB) and prepared the establishment of the ECB and the European System of Central Banks (ESCB);
- conclusion of an agreement for the creation of a new mechanism (EBM II), binding the currencies of the member states outside the euro zone with the euro;
- during this stage, the member states preserved their decision-making competence in respect of their currency policies;

Third stage (since January 1999)
- introduction of the euro, starting January 1, 2002, in 12 EU member states (excluding the United Kingdom, Sweden and Denmark); since February 28, 2002, the euro has been the only legal means of payment for over 300 mln. Europeans in the above 12 countries;
- the European System of Central Banks (ESCB) was inaugurated, comprising the European Central Bank and the national central banks of the member states.

The main purpose of the ESCB is to maintain the stability of prices in the EU, carrying out the following major tasks:
- develops and enforces the monetary policy of the Union;
- performs the exchange of foreign currency;
- holds and manages the official foreign currency reserves of the member states;
- supports the proper operation of the payment systems.

The maintenance of low inflation, stable public finances and stable exchange rates is an essential prerequisite for the successful operation of the Monetary Union at the third stage. Each member state which wants to participate in the Monetary Union must be able to meet the following requirements, known as the Maastricht criteria:
- achieving stable prices and average annual rate of inflation of up to 1.5 percentage points above the average annual rate of inflation of the three member states with lowest inflation;
- preventing the occurrence of excessive deficit in its budget policy, or the deficit of the consolidated national budget should not exceed 3% of GDP, and the ratio of the national debt and the gross domestic product should not exceed 60%;
- the average long-term interest rate should not be more than 2 % higher than the average rate for the three countries with the best inflation indicators;
- the currency exchange rate during the last two years before starting the “third stage” must be within the normal fluctuation limits, without excessive stress, as stipulated in the exchange rate mechanism: ±15%.

The Stability and Growth Pact (SGP), effective since 1997, is the other major pillar of the EEMU, ensuring the efficient participation of the countries in the “third stage”. Under the SGP, the member states undertake to maintain stable national financial indicators with the aim of achieving low inflation and stable currency. The states whose national budget exceeds 3% of their GDP, should adjust their budgets within a set period of time. SGP has been implemented by both the member states from the euro zone and the rest of the EU member states, but the latter however cannot be subject to any penalties in case of budget deficit above the recommended level.

The member states from the euro zone submit their annual “Stabilisation programs” to the EC, laying down their national medium-term budgets goals, as well as other macroeconomic information concerning the condition of their economies. The EU states outside the euro zone submit their annual “Convergence programs” to the EC, presenting a wide range of measures for meeting the Maastricht criteria, emphasizing on currency exchange rates and inflation. The above programs, covering 3-year periods, are updated on an annual basis.

The candidate states, including the ten countries from Laacken, develop their Accession Economic Programs (AEP). In May 2001, Bulgaria submitted its first AEP, covering the period until 2004. AEPs are strategic instruments which describe the commitment of the respective government in respect of the goals and tools of the economic policy, as well as the planned structural reforms. They are updated on an annual basis. The Agency for Economic Analyses and Forecasts coordinates the preparation of the annual update of AEP for Bulgaria.

The building of the EEMU does not end with the conclusion of the third stage, because the fiscal and budget policies continue to be relatively autonomous, in accordance with the Stability and Growth Pact. At present, a “Financial Framework of the Union” is being developed and implemented, as a basis for the strengthening of the coordination, preparing the next stages of the EEMU. The Financial Framework covers a 7-year period of time, and is included in Chapter 29 “Budget”. The current financial framework, covering the period 2000-2006, is the third financial framework. In the beginning of 2004, the EC will officially start the preparation process for the next financial framework: 2007-2013. The process will be concluded by the end of 2006, and the development process will include negotiations on the level of unification of the EEMU fiscal and budget policies for the period following 2007. Depending of the results, the fourth stage of the development of EEMU may start after 2007, with the introduction of the “European tax”.


HARMONIZATION PROCESS

This chapter covers certain aspects of EEMU, which are not included in the negotiation chapter discussing the economic criteria, although they have to be adopted by the candidate states by the time of their accession, e.g.:
- prohibition against financing the public sector by the central bank;
- prohibition on granting the public sector a privileged access to the financial institutions;
- the independence of the central bank.

In general, Bulgaria has made progress in the adoption of acquis communautaire in these areas, including the economic policy of coordination, former behaviour in respect of the flexibility of the fiscal policy, the mechanisms of improving the management and control of expenses.

In terms of the independence of the central bank, further harmonization is needed in the area of institutional and personal independence.

In terms of the prohibition on granting the public sector a privileged access to the financial institutions, certain amendment to the Insurance Act were made (October 2002), the lifting of the restriction on insurance companies to invest part of their reserves in government bonds – a provision which was in conflict with acquis. The amendments to the Banks Act (September 2002) and the State Budget Act for 2003 (December 2002) ensures the indemnification of the Ministry of Finance by the Bulgarian National Bank for any contractual budget-related cash transactions.

At the time of accession, Bulgaria will have joined EEMU, although the euro will not be introduced as means of payment by that time. It will take a considerable period of time to carry out all related institutional and legislative changes.

After its accession to the EU, Bulgaria will have an interim status within EEMU, in accordance with Art. 122 of the Treaty establishing the EU, and will have to introduce the required changes in its institutional and legal framework by the date of accession.


ADMINISTRATIVE INFRASTRUCTURE

Many different institutions are related to EEMU, as far as economic stability, which is the main issue in this case, is ensured by a considerable part of the machinery of the government. Therefore, the following list will include only the main competent institutions in the area of the negotiations:

Council of Ministers;
Ministry of Finance;
Ministry of Economy;
Bulgarian National Bank;
The Agency for Economic Analyses and Forecasts, which coordinates the development and update on the pre-accession programs.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

One of the main recommendations of the EC, which should be noted, is the need for further harmonization of the legislation regulating:
- the independency of the central bank;
- alleviation of the remaining restrictions on investments in the pension schemes;
- prohibition against direct financing of the public sector.

CHAPTER 12 STATISTICS
LEVEL OF NEGOTIATIONS

Chapter “Statistics” was opened for negotiations in October 2000, and was temporarily closed in December 2000. Bulgaria will entirely introduce and apply acquis communautaire in the area of statistics, and will not request any transitional periods.

The General Directorate of the European Commission, which collects and publishes statistical data at the European level, is known under the name of Eurostat. It was established in 1953. The evolution of the Community policies has been causing dynamic changes in the functions of Eurostat throughout the years. At present, of special importance are those functions of this directorate, which are related to the collection and processing of information about the Economic and Monetary Union (EEMU), as well as the development of the statistical systems of the candidate states.

Eurostat is part of the European Statistical System, which is comprised of all statistical offices, ministries, agencies and central banks of the member states, which gather official statistical data.

In February 1997, the Council of EU adopted Regulation 322, known as the Statistical Act of the EU. This regulation specifies the responsibilities of the national statistical institutions and the statistical institutions of the Community. It lays down the basic principles for the provision of scientifically independent, reliable, impartial and transparent statistical information.

On May 7, 1993, a joint declaration of cooperation was concluded by Eurostat and the Bulgarian National Statistical Institute.


HARMONIZATION PROCESS

Chapter 12 “Statistics” includes the following sections:
- statistical infrastructure;
- demographic and social statistics;
- economic statistics: macroeconomic statistics, company statistics, monetary, financial and trade statistics, statistics of the balance of payments;
- agriculture, forestry and fisheries;
- multi-branch statistics.

In general, the Bulgarian Statistics Act (June 1999), amended and supplemented in 2001 and 2002, complies with the legislation of the Community in this area – Regulation 322/97. This act lays down the main principles of the contemporary statistical system, including the principle of confidentiality of personal statistical data.

The medium-term strategy for the development of the statistical system for the period 2003-2006 improved the strategic planning in this area. The training of employees is still a priority, in view of the current turnover. NSI was released from the obligation to maintain the anticrime information system, which is usually outside the scope of functions of this type of institutions.

The current national classifiers ensure the direct introduction of the European classifiers and nomenclatures. In 2003, the current versions of NACE (the Statistical classifier of economic activities of the European Union) and CPA (the Classifier of products by activity) were introduced. In the area of classifiers, all classifiers have already been introduced.

In terms of demographic and social statistics, surveys relating to the census of population (2001) and houses have been published. Surveys of the development of workforce, the structure of payment, etc., are underway. The preparations for carrying out annual surveys of the price of workforce, income and living conditions are underway.

In terms of statistics at the regional level, a large number of indicators from the Nomenclature of the territorial statistical departments (NUTS 2 and 3) for the period 1995-2002 have been adopted.

In the area of macroeconomic statistics, improvement in the exhaustiveness of time-lines of the national annual accounts has been observed. The statistics of debt and deficit has been improved. The European Accounting System (ESA 95) was introduced for the differentiation of the institutional sectors. The harmonized consumer price index complies with the EC standards.

In the area of company statistics, the data from the census of the population and other surveys were used to gather information concerning the information society. In the area of tourism, a national tourist register was set up, and a new counting of beds is underway. Efforts have been made to improve the company register.

In many subsectors of transport, e.g. road transport of goods, air transport and seaports, the statistical activity meets the requirements of the Community.

In the area of foreign trade, efforts have been made to improve the quality of the primary data being gathered, by strengthening the interaction between the customs administration and NSI. NSI introduced pilot monitoring for Intrastat – a system for gathering statistical data on the trade in goods between the member states of the Community – and is ready to introduce the system upon accession to the EU. The institute also carries out comparative analyses of the data on the trade flows with other countries.

In the area of agricultural statistics, the surveys of livestock, dairy enterprises, vineyards, markets for live animals, etc., have already been completed. Balance reports on the various types of products are currently being prepared. The Agricultural Census Act was adopted in 2003, and the census has been scheduled for the second half of 2003.


ADMINISTRATIVE INFRASTRUCTURE

The institutions which carry on statistical activity in Bulgaria and are responsible for the implementation of the European legislation in the area of statistics, according to the Statistics Act, are:
- the National Statistical Institute;
- specialised structural units in the ministries, departments and other bodies of the central administration.

The main goals of NSI are connected with the full harmonization with the requirements of the European statistical system:
- improvement of the quality of the statistical information;
- increasing the efficiency of the statistical activity;
- increasing the confidence in the statistical information;
- strengthening the cooperation with all participants in the statistical activity – users and respondents;
- enhancing the international cooperation.

The tasks of the National statistical system are based on its functions, and the specific direction, scope and subject orientation of the statistical surveys are determined by the needs, the condition and changes of the events and processes in society.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Some of the major recommendations of the EC, which should be noted, are:
- further strengthening of the informational and technological capacity of the established structures;
- updating the methodology and improving the quality and completeness of data as a whole;
- reorganization of the regional structures of NSI and improving the quality of the regional statistics;
- the company statistics should be expanded to include local and natural persons, and its quality should be improved; and
- a register of farms should be created.

CHAPTER 13 SOCIAL POLICY
LEVEL OF NEGOTIATIONS

Chapter “Social Policy” was opened for negotiations in October 2001, and was temporarily closed in April 2002. Bulgaria has undertaken to implement the entire acquis communautaire in the area of social policy and employment, effective as of 31.03.2001. The negotiations under Chapter 13 have been temporarily closed on the grounds of the current EU legislation.

In the course of the negotiations, Bulgaria achieved a transitional period until 31.12.2010 in respect of the requirement for maximum content of tar in cigarettes.


HARMONIZATION PROCESS

Chapter 13 “Social Policy and Employment” covers the following areas:
- labour law;
- equal opportunities for women and men;
- anti-discrimination;
- safety and health at work;
- social dialogue;
- employment and the European Social Fund;
- social protection and social inclusion;
- public health.

Labour law

The amendments and supplements to the Labour Code, which have been in effect since April 2001, are aimed at complete or partial transposition of acquis communautaire in respect of certain aspects of the organization of working time, young workers protection, the employer’s obligations to inform the employees of the legal terms and conditions of the labor agreements, guaranteeing the rights of employees in case if transfer of ownership of enterprises, and acquis communautaire in respect of mass dismissals.

A draft of the Act on the Amendment and Supplement to the Labour Code has been prepared, which will introduce the requirements of a number of European directives concerning:
- nondiscrimination of full-time and part-time employees by the employer;
- flexible use of opportunities to voluntarily fill vacancies and positions in the enterprise, both full-time and part-time;
- specifying the necessary content of the labour agreements, including information about the parties to the agreement;
- stating that, in case of transformation of an enterprise, consultations between the employers and the representatives of employees should be held in order to reach a possible agreement, and specifying the procedures for holding such consultations;
- regulation of the maximum duration of the working week (48 hours) and the minimum duration of the weekly holidays (24 hours)

A draft of the Act on guaranteeing the receivables due to employees in case of bankruptcy of the employer has been prepared. The purpose of this bill is to introduce the requirements of the European directive for the establishment of a guarantor institution which will guarantee the payment of the amounts due to employees as a result of labor agreements or labor relations in case of bankruptcy of the employer.

The Act on the encouragement of employment (January 2002) is a further step in the process of amending the Bulgarian legislation in order to achieve compliance with the Directive on mass dismissals. The bill also provides for indemnities payable to employers who create jobs for unemployed people.

A National plan against the most unacceptable forms of employment of children (including prostitution, traffic in drugs, panhandling) has been developed. The purpose of the plan is to send abused children back to schools. According to the amendment to the Labour Code (dated 2003), the General Labour Inspectorate is authorized to control the employment of children under the age of 16. The law provides for severe penalties for the employers who employ children illegally.


Equal opportunities for women and men

The above-mentioned Bill for amendment and supplement to the Labour Code also includes provisions connected with the requirements of the European directives concerning: the protection of pregnant employees, introduction of parental leave.

In April 2003, the Council of Ministers adopted the National action plan for employment (2003), which includes the 4th pillar “Strengthening the policy of equal opportunities for men and women”. It includes programs and projects based on the principle of equal opportunities for men and women on the labour market.

The Prevention of Discrimination Act, which was adopted in September 2003, ensures the implementation of some of the European directives in this area, e.g., equal payment, equal treatment during employment, pregnancy.


Anti-discrimination

The Prevention of Discrimination Act, which was adopted in 2003, is aimed at introducing the requirements of the Community law in this area. It provides for the establishment of Commission for Protection against Discrimination as an independent specialized public authority, which will apply the law and will impose sanctions in case of discrimination based on sex, race, nationality, ethnicity, citizenship, origin, religion or belief, education, disability, age, sexual orientation, property status, as well as other characteristics, specified in a law or international agreement to which Bulgaria is a party.


Safety and health at work

A number of ordinances were adopted during the last year, with the aim of introducing the requirements of the European legislation for the protection of employees from certain risks at work, viz.: Ordinance N 4 (dated 14.10. 2002) of MLSP and MH on the protection of employees against risks related to the exposure to biological agents during work; Ordinance N 3 (dated 18.09.2002) of MLSP and MH on the minimum requirements for ensuring healthy and safe working conditions when using video displays; Ordinance N 1 (dated 27.02.2002) of MLSP and MH on the protection of employees against risks related to the exposure to asbestos during work; Ordinance N 2 (dated 27.02.2003) on the protection of employees against risks related to the exposure to noise during work; Ordinance for amendment and supplement to Ordinance N 7 of 1999 of MLSP and MH on the minimum requirements for healthy and safe working conditions at the workplace and in case of use of working equipment; Ordinance N 9 (dated 11.02.2003) of MLSP and MH on the medical services on ships.

Social dialogue

The legislation adopted in December 2001 provides for the establishment of regional councils for tripartite cooperation. The Act on the encouragement of employment (January 2002) is aimed at encouraging the social dialogue, regulating inter alia the establishment of a Tripartite national council for the encouragement of employment. The above law transforms the existing regional councils into standing or interim Employment commissions within the District councils for regional development. According to the law, the regional programs for employment will be developed and implemented by Employment commissions at regional level, and will be monitored by Councils for cooperation. The two bodies include regional authorities, social partners and NGOs.

The amendments to the Labor Code (December 2002) updated some of the provisions concerning the activity of the councils for tripartite cooperation and the representation criteria for employees and employers.

The Act for amendment and supplement to the Economic and Social Council Act (ESC), which was promulgated in March 2003, regulates certain issues related to the operation of ESC. Established as a consultative body dealing with economic and social issues, ESC is the first structure for civil dialogue, which – in addition to the social partners – includes representatives of various nongovernmental organizations in Bulgaria.

The Rules of structure and activity of the National Reconciliation and Arbitration Institute (NRAI) whose major activity includes intermediation and arbitration, were promulgated in April 2003.


Employment and the European Social Fund

Bulgaria and the EC continue to work together on the Review of the employment policy. The purpose of this document is to define the priorities and tasks of the country in respect of the labour market during the pre-accession period. In April 2003, the Council of Ministers approved the National action plan for employment. The plan provides for measures for the creation of lasting employment through training aimed at formal qualification. As compared with 2002, the budget for the implementation of the plan is three times higher.

Measures for the encouragement of employment were taken through the Act for amendment and supplement to the Act on the encouragement of employment, which enhanced the role of the National action plan for employment and created additional opportunities for subsidized employment.

The development and implementation of a National Employment Strategy is currently underway at MLSP. This strategy will comply with the directions of the European Employment Strategy.

Active measures are being taken in respect of the labour market, including under the program “From social aid to the ensuring of employment”. This priority also applies to the “New strategy for social policy”, adopted at the end of 2002. In November 2001, a guaranteeing scheme for microloans was introduced to support entrepreneurship and the creation of jobs.

As a measure to limit the “grey economy”, all labour agreements must be registered at the National Social Insurance Institute.

Directorate “Pre-accession funds and international projects and programs” at the MLSP is currently being prepared to assume the functions of an executive agency under PHARE in the sector of Economic and social approximation.


Social protection and social inclusion

A diversified multi-pillar pension system has been introduced, and it will gradually redirect a larger portion of the contributions to the second pillar and the private pension insurance funds. The amendments and supplements to the Mandatory Social Insurance Code (2001) are aimed at strengthening the connection between contributions and compensations. A financially secured second pillar was introduced in 2002, and voluntary private insurance funds have also been established (the third pillar).

The amendments to the Mandatory Social Insurance Act of January 2002 increased the portion of the contributions payable by employers from 20% to 25%.

The amendments and supplements to the Act on the protection, rehabilitation and social integration of disabled people, which were adopted in December 2001, clarify the structure and criteria for membership in the National council for rehabilitation and social integration and the conditions for granting special-purpose aid.

The Act on amendment and supplement to the Social Assistance Act, which came into force on 01.01.2003, is aimed at improving the identification of recipients of social aid through allocation of financial resources from the state budget to the persons who are not able to cope with difficulties without help; supporting the employment of unemployed persons eligible to receive monthly social aid; encouragement of social entrepreneurship. Individual approach has been introduced in respect of the persons receiving help, through the so-called “individual project” for social integration, which is prepared by the Social Assistance directorates. One of the purposes of the law is to ensure the employment of disabled people in an integrated environment, as well as means for independent and decent life. For the people with permanent disabilities (whose capacity for work is reduced by 70% or more), the social aid has been increased by 42%.

MLSP and EC work together to identify the challenges of social isolation and the appropriate countermeasures, in the context of cooperation for preparing the future participation in the process of social integration in the EU after the accession. NSI cooperates with Eurostat in the gathering of data on poverty and social isolation.

The new Strategy for Social Policy, which was adopted in 2002, specifies the restructuring of the institutions providing social services to MLSP. In the meantime, more efficient alternative structures are being created. A plan for the reduction of the number of children raised in specialized institutions (for the period 2003-2005) was adopted in August 2003. In June 2003, the National strategy for equal opportunities for the disabled was approved, with the aim of improving the living conditions of disabled people.


Public health

The healthcare reform in the country started with the reform in the outpatient medical care (since July 2000) and the inpatient services (since July 2001). Over 16,000 medical specialists from the public sector entered the private sector. The system of emergency medical care was improved in accordance with the Public Health Establishments Act.

The National Healthcare Strategy for the period 2001-2006 was adopted in 2001, and the National program for limiting smoking was adopted in January 2001.

The legislation for the implementation of the reform in the area of pre-hospital care was adopted in March 2002, and the legislation for the structural changes in the public health services was adopted in May 2002. In May 2002, amendments and supplements to the Health Establishments Act were adopted.

In November 2002, the Council of Ministers adopted the Strategy for restructuring hospital inpatient services 2002-2006, aimed at increasing the efficiency and quality of health care.

The following bills have been developed in connection with the requirements of the European legislation:
- draft of the Public Healthcare Act – laying down the main principles of the national healthcare policy and the ensuing public relations, as well as the responsibilities of the state, the municipalities, the health insurance funds, the legal entities and the individuals for the creation of healthy living environment and the establishing of healthy way of life.
- draft of the Blood Act – introduces the requirements specified in the European directive concerning the quality and safety of collecting, testing, processing, storing and distributing human blood and blood components, ensuring high degree of protection of human health;
- draft of the Tobacco and Tobacco Products Act – introduces the European directive concerning the requirements for maximum admissible content of hazardous substances in tobacco products – tar (the Bulgarian government has agreed on a transition period of 4 years till 31.12.2010), nicotine and carbon oxide, the methods of their measurement by authorized laboratories, the requirements relating to labeling, marking and appearance of the tobacco products, as well as the obligations of the competent authorities. These requirements are aimed at ensuring a higher level of protection for the consumers in the production, display and sale of tobacco products.


ADMINISTRATIVE INFRASTRUCTURE

The social policy is developed, planned and implemented by the Ministry of Labour and Social Policy and the Ministry of Public Health, which are also responsible for the process of harmonization of the legislation, as well as the creation of conditions for its implementation. The Ministry of Labour and Social Policy has been assigned to manage the operative program for the development of human resources, and it will participate in the activity of the European social fund after the accession.

A number of executive agencies and regional structures to MLSP have been created with the aim of efficient implementation of the adopted legislation and the completion of the programs and the measures taken in various areas. In the area of social policy there are also many nongovernmental organizations, an active part of the developing civil society in the country.

The Employment Agency is the competent public authority taking active measures aimed at the labour market and sending workers on business trips, as part of the services being provided.

The General Labour Inspectorate ensures the implementation of acquis communautaire in the area health and safety at work.

Tripartite National council for the encouragement of employment – a body for cooperation and consultation in the area of employment policy.

Standing and interim Employment commissions to the District councils develop and implement programs at the regional level, whereas the Councils for Cooperation control them.

The Commission for protection against discrimination was created as an independent specialized public authority which implements the law and imposes sanctions in case of discrimination based on sex, race, nationality, ethnicity, citizenship, origin, religion or belief, education, disability, age, sexual orientation, property status, as well as other characteristics.

The National Reconciliation and Arbitration Institute (NRAI) performs functions related to intermediation and arbitration.

The National council for rehabilitation and social integration to the Council of Ministers plans the measures in this area.

The Agency for Social Assistance, with its 28 regional structures and directorates for social assistance in all municipalities, provides specific services in the area of social security.

The National Revenue Agency (November 2000), which will combine the functions of the National Insurance Institute (in terms of income) and the Tax administration, thus centralizing the process of collection, accounting and control of the revenue from taxes and social insurance contributions.

The National Insurance Institute, which currently manages the pension-insurance contributions and pays the pensions from the first pillar of the pension system.

The National Health Insurance Fund concludes the National Framework Agreement for the pre-hospital and inpatient services and regulates the market of medical services.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Further efforts and work will be needed to achieve the following:
- further development of the reform of the social system and improvement of the social dialogue;
- completing the healthcare reform; creating a national system for the monitoring of diseases, with an emphasis on infectious diseases; creation of epidemiological capacity; overall improvement of public health;
- adoption and implementation of the National Employment Strategy; systematic implementation and improvement of the efficiency of the programs and the active measures aimed at the labour market; continuation of the reform in the area of vocational education;
- creation of an integrated national strategy for the encouragement of social integration, in accordance with the goals of the EU; ensuring the social integration of the ethnic minorities into the Bulgarian society; improvement and development of the sociostatistical systems related to poverty and social isolation, in accordance with the indicators which are generally accepted in the EU;
- overall adoption of acquis communautaire in respect of health and safety at work;
- further preparation for the future management of the European Social Fund after the accession.

CHAPTER 14 ENERGY
LEVEL OF NEGOTIATIONS

Chapter "Energy" was opened for negotiations in November 2001. At the beginning of October 2002 the Bulgarian side delivered answers to the questions raised by EU and clarified the changes and new circumstances set in the sector. On its turn EU did not raise any further questions and Chapter "Energy" was provisionally closed. Bulgaria has undertaken the commitment to adopt and implement from the date of accession EU legislation on Chapter "Energy", undertaking specific commitments in the different areas.



HARMONIZATION PROCESS

The harmonization of Bulgarian legislation in the energy field with the acquis imposed the creation of a new legal framework, which set the beginning of the market reforms in the energy sector. The Energy and Energy Efficiency Act was adopted in 1999. The need for building a common energy market and the further liberalization of the sector necessitated the drafting of a new Energy Act, which develops and supplements the existing legal framework and is to be adopted by the National Assembly.

A new Energy Strategy of Bulgaria was adopted by the Council of Ministers and approved by the National Assembly in 2002. The Strategy outlines the country's energy policy and the reforms pending in the sector. The priorities set forth in this document are in compliance with the EU energy policy and are set in the following order:
- security of supply;
- competitiveness in the energy sector;
- environment protection.

Chapter "Energy" covers the following problem areas:
- security of supply;
- competitiveness and the internal energy market;
- energy efficiency and the use of renewable energy sources;
- nuclear energy.

Concerning security of supply Bulgaria has undertaken to bring its legislation in line with EU requirements in respect of maintaining the mandatory 90 days' reserve of oil and oil products foreseen in the acquis, and to build up these stocks over nine years, starting in December 2004, according to its commitments.

In pursuance of the commitment undertaken Bulgaria adopted the Law on the Mandatory Reserve of Oil and Oil products and the Law on State Reserve and Wartime Supplies in January 2003. After the adoption in April 2002 of the new Act on Classified Information the level of oil stocks in the country is no longer a state secret.

EU and Bulgaria's strong energy dependence on energy resources necessitates the undertaking of measures to guarantee security of supply. The measures in this area create stability of the energy market, including in the event of crisis, stability extending from supplies to relative price control in extraordinary circumstances.

In relation to competitiveness in the energy sector the commitments undertaken are as follows:
- building of a viable energy sector, working under market principles, where state subsidies for producers shall be gradually removed;
- overcoming the electricity and heating prices distortion;
- transparent pricing of electricity for consumers.

The Bulgarian energy market liberalization is ongoing. With the adoption of the new Energy Act the EU Electricity and Gas Directives requirements will be fully complied with, which will create a competitive energy market and will lead to energy services improvement. The compliance with the Electricity and Gas Directive requirements will give consumers the opportunity to choose suppliers that provide the best energy service at an acceptable for them price.

Even if the gradual reduction of subsidies to a level equal to costs to lead to an increase of electricity and heating prices for households, this is socially fairer because instead of subsidizing everybody, the subsidies covering the difference in electricity and heating prices will be reallocated to the socially disadvantaged. Work in a functioning competitive market environment creates incentives for price and costs reduction respectively and for optimum price achievement.

The restructuring of the sector started with the adoption of the Energy and Energy Efficiency Act (EEEA), July 1999. The National Electricity Company (NEK) was reorganized into 15 separate enterprises - 7 generation companies, 7 distribution companies and a transmission system operator. The main existing generation branches of NEK were split off as independent producers, with the exception of the thermal power plant Maritsa East 3, the large hydropower plants and the pumped-storage hydropower plan. The small hydro power plants were separated from the NEK structure and offered for privatization. Coal mines, 20 district heating companies, machine building, repair and engineering companies were also offered for privatization. As of the end of 2003 seven mines, around 30 hydro power plants, repair and engineering companies have been privatized. The privatization of the seven electricity distribution companies and the district heating companies is in progress.

In relation to competitiveness and the internal energy market, amendments to the Energy and Energy Efficiency Act were adopted in November 2001, aiming at further legislative alignment with the aquis. Ordinances on the definition of eligible customers, for both electricity and gas, were adopted in April 2002, as was implementing legislation on network access. Ordinances on the methodology for the formation and application of prices and tariffs for power, natural gas and heating were adopted in December 2001. Thus a regulatory framework has been provided for the transition from administrative pricing of energy to standard price regulation, which is being carried out since 2002. The State Energy Regulatory Commission (SERC) has now formally taken over responsibility for developing and implementing a tariff and price-setting methodology for electricity, gas and heating, and for approval of tariff proposals submitted by companies in the energy sector. New legislation, allowing SERC to fix the capacity and quantities of electricity, which each independent producer can negotiate with eligible customers, was passed in December 2002.

In December 2002, Bulgaria signed a Memorandum of Understanding aiming at the creation of the Regional Electricity Market in South Eastern Europe.

In the district heating sector, a two-component tariff: a fixed price for capacity and a price for energy consumed has been introduced. The policy of phasing out price subsidies for household consumers is continuing, gradually replacing those with social benefits for specific groups of needy consumers. A modernization program - rehabilitation of stations, modernization of the heat exchange system, measurement apparatus etc. is ongoing in this sector.

In the field of energy efficiency and environment protection the commitments undertaken by Bulgaria are as follows:
- regulation of energy efficiency requirements in a law;
- introduction of a requirement for placing labels on household appliances in respect of their power consumption;
- implementation of a government policy for increasing the share of renewable energy sources (RES) in power production in the country.

With the purpose of encouraging generation of power, produced of RES in the internal energy market and promotion of combined generation of electricity and heat, the Energy Bill provides two types of incentives in two consecutive stages - mandatory purchase of electricity at preferential prices and later - issuance of and trade with green certificates.

Pending is the adoption by the National Assembly of an Energy Efficiency Act, which in combination with the rest of the existing normative acts and its implementing legislation under preparation will create conditions for implementation of a strong and active national policy focused on reducing GDP energy intensity, rational use of energy, reduction of the harmful effect on environment and improvement of society energy service.

The Ministry of Energy and Energy Resources adopted a National Energy Savings Program 2004 - 2007.

The amendments to the Energy and Energy Efficiency Act, November 2001, provide for the possibility for local producers of renewable energy to sell power directly to customers.

In the field of nuclear energy, Bulgaria shut down Kozloduy Nuclear Power Plant (NPP) Units 1 and 2 for decommissioning in December 2002.

Bulgaria accepts the EU Common Position (CONF-BG 79/01) in respect of the closing of Kozloduy NPP Units 3 and 4 and commits to close the latter in 2006. A Peer Review under the European Council aegis was carried out in November 2003, which review ascertained the safety of the Units as of the moment of review and the rightful utilization of EU funds for their rehabilitation. These conclusions, however, do not cancel the commitment for closing the Units in 2006.

The European Commission and Bulgaria have set up a working group to evaluate the economic, environmental and social consequences of early closure of the units, whose life expires in 2009. The decommissioning efforts continue to be supported by the Kozloduy International Decommissioning Support Fund, managed by the EBRD. The Fund is the main channel for the "Special PHARE Program to Support the Decommissioning of Nuclear Power Plants and Consequential Measures in the Energy Sector", worth 200 million, agreed in 1999 within the framework of the Understanding on the early closure of units 1 to 4. The program of investments on Units 3 and 4 continues. The modernization programs for Units 5 and 6 are continuing with the support of the European Union. As of the end of 2003 four tranches of the Euratom loan of 215 million have been disbursed.

The Safe Use of Nuclear Energy Act, adopted in July 2002, creates the regulatory framework ensuring safety in the field of nuclear energy activities. The law specifies, inter alia, nuclear and radiation safety principles, the licensing regime and responsibilities of the licensees, the principles of safe management of radioactive waste and spent fuel, and the responsibilities of regulatory authority and regulatory control. The development and adoption of the relevant bylaws will contribute to the enforcement of the Act. The law provides for the establishment of a state enterprise to deal exclusively with radioactive waste management.

Bulgaria will adopt and implement from the date of accession EU requirements on nuclear fuel supply, accountability and control of nuclear material, as well as the international treaties in the field of nuclear energy to which EU is a party.



ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Energy and Energy Resources (MEER) is responsible for the sector development policies and strategies, the harmonization of the legislation, the negotiations with EU on Chapter 14 "Energy". A number of executive agencies, responsible for implementation and control of the legislation enforcement in the different sectors, have been established.

The State Energy Regulatory Commission (SERC) is subordinate to the Council of Ministers and is responsible for the regulation of the energy market, the issuance of licenses and permits to the operating energy companies.

The Energy Efficiency Agency has been established as a MEER executive agency, which is responsible for energy efficiency measures and policies implementation.

A special directorate of the State Agency for State Reserve and Wartime Stocks has been created for mandatory oil stocks management.

The Nuclear Regulatory Agency has an executive regulatory function. It was accepted as a member of the Western European Nuclear Regulator's Association in March 2003.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Further work and continuous efforts are required for strengthening the administrative capacity and ensuring the full and timely enforcement of the legislation adopted, in the first place with regard to the internal energy market. The following issues deserve special attention:
- completion of the energy sector restructuring, with due regard to social consequences;
- transposition of the electricity and gas directive in compliance with the deadlines, provided in the aquis;
- elimination of the remaining price distortions by 2005, including heating prices, etc.;
- implementation of the measures planned for strengthening nuclear safety, including the commitment for closing Kozloduy NPP Units 3 and 4 by the end of 2006;
- increasing energy efficiency and the use of renewable energy;
- progressive building up of the mandatory oil stocks;
- strengthening the control in the field of radioactive waste management.

We can note that the active measures and policy implemented in the energy sector in 2002 - 2003 have considerably contributed Bulgaria to be recognized as a functioning market economy, which is one of the main economic criteria for EU membership.


CHAPTER 15 INDUSTRIAL POLICY
LEVEL OF NEGOTIATIONS

The Negotiation Position on Chapter 15 "Industrial Policy" was prepared within the national coordination mechanism of the negotiation process and delivered at the Intergovernmental Conference on Bulgaria's accession to EU in June 2000. In November 2001 further information to the negotiation position was prepared and delivered.

Chapter 15 "Industrial Policy" was opened and closed at the Intergovernmental Conference on Bulgaria's accession to EU meeting on December 21, 2001.

The successful completion of the negotiations on Chapter "Industrial Policy" shows that the European Commission is assessing positively Bulgaria's abilities to apply the principles of the European industrial policy, as well as the sustainable existence of a functioning market economy, capable of dealing with European market competitive pressure.



HARMONIZATION PROCESS

The European Community common industrial policy is regulated by the provision of Art. 130 of the Treaty on Establishing the European Community, requiring to ensure conditions necessary for the competitiveness of the Community's industry and Council Decision on "the Implementation of a Community Action Program to Strengthen the Competitiveness of European Industry" (96/413/EC).

The main objective of the European Community industrial policy is to create internationally competitive undertakings through encouraging an environment favorable to initiative and to the development of undertakings throughout the Community, particularly small and medium-sized undertakings, fostering of research, innovations and technological development in accordance with a system of open and competitive markets.

The Industrial policy is implemented through international consultations and national policies coordination.

Chapter "Industrial Policy" covers the following priority areas:
- strategies for industry development;
- restructuring and privatization;
- business environment improvement and encouragement of investments;
- innovations and technological development;
- participation in the pre-accession funds.

In March 2002 the Government strategy "Industry 2002" was adopted for development of a competitive and stable economy. At the end of 2002 the Ministry of Economy presented a package of measures aiming at improving the business climate.

From the beginning of the privatization process till 30.11.2003 the privatized assets are 54.77% of state owned enterprises assets and 82.3% of the state-owned assets earmarked for privatization. Under the adopted Privatization and Post Privatization Control Act the remaining not privatized majority stakes (over 50% state interest), 280 as of 30.11.2003, shall be offered through tenders and competitions at the Privatization Agency or the Bulgarian Stock Exchange. Minority stakes (under 50% state interest), around 1,500 as of 30.11.2003, shall be offered mainly against non-cash payment instruments at remote tenders or centralized public tenders at the Bulgarian Stock Exchange (BSE). As of 30.11.2003 around 557 minority stakes are being prepared for privatization at BSE, including: 432 stakes at centralized tenders, 86 stakes at remote tenders and 48 at the non-cash payment instruments segment of BSE. In progress is the privatization of seven electricity distribution companies. Stepped up is the sale of majority stakes. As of 30.11.2003 buyers for 27 majority stakes have been chosen and around 30 sale procedures have been opened.

Along with the measures for stepping up privatization, amendments have been made to the Commercial Code that improve and speed up liquidation and insolvency procedures, taking into account the creditors, debtor, and employees' interests.

The steel industry restructuring process strictly complies with EU state aid rules. On November 21, 2002 Bulgaria signed an additional Protocol to the Europe Agreement whereby the period in which restructuring aid can be granted to the steel industry under specific conditions had been prolonged by another eight years as from 01.01.1998, or until the date of accession, whichever comes first. The prolongation of this so-called "grace period" is conditional on the adoption of a steel industry restructuring plan and its approval by the European Commission.

The establishment of a favorable business environment and investments encouragement is the main priority of the Government's economic policy. The role of investments, local and foreign, is crucial for enhancing Bulgarian enterprises' competitiveness and their integration in the European economy.

Regulatory regimes optimization is one of the ways to achieve this objective. In 2002 an interinstitutional task force made a full review of 360 existing licensing, permit and registration regimes and analyzed the laws and bylaws introducing the latter, taking into account the existing requirements, criteria and guidelines set by the European Union. Proposals were prepared and adopted for simplification of 119 regimes (through reducing requirements and scope, transition to simpler regimes) and another 73 regimes were eliminated. To fulfill this recommendation a program is under implementation for amendment of the relevant legislation. A public register providing access to information on the licensing, permit and registration regimes has been set up and has been accessible via the Internet site of the Council of Ministers.

Legislative measures have been undertaken to improve business environment, focused on competition protection and ensuring transparency in the acts of the state, as well as for encouraging investments particularly in the regions with high unemployment.

Another important aspect in improving the business climate under macroeconomic stability conditions is the tax policy carried out by the Government. The tendency to reduce the overall tax and insurance burden within low budget deficit, to simplify the tax system and its efficient administration is continuing.

At the end of 2002 the Government approved the establishment of an Investment Fund - a joint stock company with the participation of the Bulgarian state. The Fund will provide funding for small and medium sized joint ventures with foreign partners and will increase investment in Bulgaria.

Increasing Bulgarian industry competitiveness and enhancing the ability to cope with European Union market forces competitive pressure will be possible only through development, introduction and spreading of innovations, ensuring leading competitive positions on international markets and meeting in advance the new demands of national and international consumers. For the purpose an Innovation Strategy of Bulgaria is under preparation, focused on:
- formation of a national science policy;
- encouragement of internal and external scientific institutions integration;
- development of new mechanisms for efficient financing of science and scientific research.

To solve the big tasks that the Bulgarian industrial policy is assigning itself, in order to respond to the challenges on the way of Bulgaria's accession to the European Union, it is relied mostly on the financial instruments offered by the Community. Under implementation are the following projects, financed under the PHARE Program:
- introduction of quality control systems;
- building up of business incubators in regions of industrial collapse;
- consulting and financial assistance for technological renovation of small and medium sized enterprises;
- building up of high-tech business incubators;
- development of cultural tourism sites.



ADMINISTRATIVE INFRASTRUCTURE

The overall development, implementation and supervision of Bulgaria's industrial policy are the responsibility of the Ministry of Economy. A number of government organizations, executive agencies, trade chambers, unions and associations take part in the implementation and monitoring of Bulgaria's industrial policy, in the sector analyses and the formation of sector policies, such as:
- the Small and Medium Sized Enterprises Agency;
- the Privatization Agency;
- the Post Privatization Control Agency;
- the Foreign Investment Agency;
- the Trade Promotion Executive Agency;
- the Bulgarian Export Insurance Agency.



RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Further work and continuous efforts are required for:
- development and implementation of an integrated approach and policies, fostering industrial development; ;
- on-going analysis and continuous improvement of business development conditions;
- attraction of national and foreign investment in Bulgarian industry;
- completion of the privatization process, some major privatization deals in particular - Bulgartabac, BMF and BRP, BTC;
- establishment of a well functioning structure to represent business circles in the process of different policies elaboration and discussion.


CHAPTER 16 SMALL AND MEDIUM-SIZED ENTERPRISES
LEVEL OF NEGOTIATIONS

The analytical review, assessing the degree of implementation and consistency of the national legislation with that of EU, started in 1998. Within the review Bulgaria delivered its position on the development of the small and medium-sized enterprises sector, including information as to what part of the acquis had already been adopted and a time schedule for the adoption of the rest. Chapter 16 "Small and Medium-sized Enterprises" was provisionally closed in April 2000 during the already begun negotiations for Bulgaria's accession to EU. That was one of the first chapters on which the negotiations between Bulgaria and EU had been provisionally closed.


HARMONIZATION PROCESS

The policy in the field of small and medium-sized enterprises (SME) is determined by the Community understanding and valuation of the exceptional importance of the sector for the overall development of economy. One of the key principles of the Community policy is the rule "think about the small first", which reflects the understandings that the requirements which small and medium-sized enterprises should meet, could be met by the big ones too, but vice versa would not always be true. This rule should be a leading one, both in the drafting of laws and other legislation on all levels, (EU level, national legislation level and local regulations) and in their implementation.

The main strategic documents, outlining the Community policy in the sector are, as follows: Council Decision of December 20, 2000 for the adoption and implementation of a Multiannual Program for Enterprise and Entrepreneurship, and in particular for the small and medium-sized enterprises (2001-2005), as well as the European Charter for Small Enterprises endorsed by the European Council of Santa Maria da Feira in June 2000.

In the context of the Bulgarian Government's commitment for implementation of the EU principles in the SME sector, the Small and Medium-sized Enterprises Act was adopted in 1999 and in April 2002 the Government adopted a new National Strategy for Promotion of SMEs, covering the period 2002-2006. The Act regulates community relations pertaining to the implementation of the government policy on promotion, establishment and development of SMEs and introduces SME definition in Bulgarian legislation. The Act also stipulates the statute and functions of the Agency for Small and Medium-sized Enterprises (ASME) as the state body, monitoring the sector and coordinating and implementing the government policy therein. (www.asme.bg)

The Bulgarian SME definition is in compliance with the criteria of the definition used in EU, but is with lower threshold values. Bulgaria should take into account the most recent changes in the European definition of May 2003 and bring the Bulgarian definition in line with the European one. The SME definition creates explicit criteria, both in respect of the subject of policy and in respect of the measures for promotion in the sector.

The establishment of a favorable administrative and regulatory environment for the development of the sector is among the priorities of the Government's economic policy. In 2002 an interinstitutional task force was established by resolution of the Council of Ministers, which made a review of 361 existing licensing, permit and registration regimes and suggested the elimination of 73 of those and simplification of another 119 (through reducing requirements and scope or transition to simpler regimes). The proposal was approved by the Council of Ministers in June 2002. Regarding the number of licensing and registration requirements for SMEs, 58 regimes have been eliminated and 84 simplified.

A public register providing access to information on the licensing, permit and registration regimes has been set up and has been accessible via the Internet since February 2003 to assist newly established and operating SMEs. (www.government.bg/raz)

The tax reliefs introduced in 2003 (lowering corporate income tax rate and VAT accounts introduction) create incentives for entrepreneurship development. The mandatory registration of labor contracts, in force since 2003, has contributed to the legalization of part of the "gray economy" companies.

A law was adopted in June 2003 establishing general principles of administration activities, whereby the administrative structures are subject to strict control and sanctions in the cases where they do not react on questions raised or requests placed within the time limit set.

Within a project supported by the British Government's Department for International Development (DfID) ASME created the information product "information kiosk" for entrepreneurs. The product was introduced in the municipalities of Vidin and Pazardjik. The interest in the product is very high - ASME has concluded agreements with more than 40 municipalities for the development of "information kiosks" for entrepreneurs. At the kiosks the entrepreneurs can get at "one-stop" information in respect of the procedures for company registration, commissioning of commercial or production sites, some licensing or registration regimes, administered by the municipalities.

Access to finance is still an important obstacle to the development of SMEs in Bulgaria. Non-banking financial instruments remain scarce. Several banks started to offer targeted credits to SMEs, which was encouraged by stronger competition in the banking sector, and some public-supported SME loan programs. The Government has set up a guarantee fund for micro-lending and a privately managed equity fund with 49% state participation.

Following the commitments made Republic of Bulgaria joined the European Community Multiannual Program for Enterprise and Entrepreneurship, and in particular for the small and medium-sized enterprises for the period 2001-2005. The main objectives of the Multiannual Program are, as follows:
- to enhance the growth and competitiveness of business in a knowledge-based internationalised economy;
- to promote entrepreneurship;
- to simplify and improve the administrative and regulatory framework for business so that research, innovation and business creation in particular can flourish;
- to improve the financial environment for business, especially SMEs;
- to give business easier access to Community support services, programs and networks and to improve the coordination of these facilities.

Already eight Euro Info Centers (EICs) are operating in Bulgaria, established in compliance with the Third Multi-annual Program of the European Union for SMEs (1997-2000). The task of EICs is to be the "first stop" for access to EU information, providing information, advise and support to SMEs on all issues pertaining to EU enlargement, European legislation and the requirements of the integrated European market. (www.europa.eu.int)

The Multi-annual Program financial instruments are being administered by the European Investment Fund (EIF) and ASME is the National Coordinator for Bulgaria under the Program. The financial instruments are directed to the financial intermediaries and it is expected that they will contribute to the improvement of SMEs crediting conditions.

Important for enhancing Bulgarian entrepreneurs' competitiveness are also the opportunities offered through our country's participation in the Sixth EU Framework Program for Research and Technological Development 2002-2006 (www.cordis.lu) and the Leonardo da Vinci Program (www.Leonardo.hrde.bg). National Coordinator under the Sixth Framework Program is the Ministry of Education and Science and under the Leonardo da Vinci Program - the Human Resources Development Center.

The main objective of the Bulgarian Government's policy in respect of small and medium-sized enterprises is to create fovarable environment and conditions for development of a competitive SME sector that will enhance the country's economic growth, will be a source of innovations and teach society entrepreneurship.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Economy is responsible for the development and implementation of the policy and for harmonization of the legislation in the sector.

The Agency for Small and Medium-sized Enterprises is monitoring the sector, it is responsible for the enforcement of the legislation, it coordinates the implementation of some of the programs, proposes changes of the strategies and amendments to the legislation.

A number of non-governmental organizations and private associations are also operating in the sector on a national and regional level - chambers of commerce, trade chambers and associations and regional development agencies, offering different services to assist small and medium-sized businesses.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria's policy towards small and medium-sized enterprises is broadly in line with the approaches used in EC. Progress is being reported in respect of business environment stabilization. Further continuous efforts are required:
- to further improve the business environment, including the efficiency of the administrative and judicial systems, which have considerable impact on the attraction of investments in the sector;
- for strengthening ASME capacity to perform its main functions on the preparation of SMEs for accession, coordination of large-scale programs in support of the sector and entrepreneurship development, monitoring and coordination of the activities of the other organizations in the sector;
- to improve the dialogue between the administration and the business, including to foster the establishment of organizations, representing the interests of the small business.

CHAPTER 17 SCIENCE AND RESEARCH
LEVEL OF NEGOTIATIONS

Chapter 17 "Science and Research" was opened for negotiations in June 2000 and provisionally closed immediately afterwards. Bulgaria has not asked for any transitional arrangements in this field and broadly meets the commitments made in the negotiations.


HARMONIZATION PROCESS

Bulgaria has a considerable in size and quality scientific and technological sector, examples of innovative companies inclusive. The strengthening, development and efficient use of this potential are key for enhancing the competitiveness of Bulgarian industry, employment and economic growth.

Chapter 17 "Science and Research" covers the following main problematic areas:
- development of a national scientific policy and the relevant legislative and tax environment;
- participation of Bulgaria in the EC framework programs for research and technological development;
- participation of Bulgaria in other European scientific research programs.

The EU policies are binding for Bulgaria. For the creation of a coherent national policy and legal framework strategic documents are being developed and a series of measures implemented, presented briefly hereinafter.

A National Innovation Strategy has been developed and adopted, as well as measures for its implementation and two pilot projects are underway.

The main objectives of the Strategy are as follows:
- enhancement of the Bulgarian industry competitiveness through introduction of scientific achievements, technology and innovations;
- strengthening the scientific and technological sector through concentration and cooperation, and strengthening its links with the production sector;
- creation of favorable conditions for young scientific and technological experts in Bulgaria.

To achieve these objectives the National Innovation Strategy envisages:
- development of a National Innovation System to cover all institutions, companies and organizations working in the field of innovations, exchange and know-how application;
- ensuring cooperation between the scientific and technical sector and the business;
- establishment of a national organization for coordination, adoption and implementation of the strategy in the field of innovations;
- provision of adequate financing for implementation of the measures through two funds: Innovation Fund and Scientific Research Fund.

OECD has made a review of the situation of science in Bulgaria with the purpose to make an analysis and recommendations, as well as to prepare a general report on the development of Bulgarian science.

The Ministry of Education and Science (MES) has announced a competition for the development of a Scientific Activities Strategy. The goal of the Strategy is to set mechanisms and measures for formulating national scientific policy; scientific research funding; scientific potential improvement; creation of new knowledge in traditionally strong areas; strengthening the cooperation between education, science and industry; increasing market demand and supply of scientific research products and innovations; enhancing the competitiveness of Bulgarian economy. The document will contain the following mandatory sections: SWOT - analysis; objectives and views on the scientific activities development; Action Plan.

The Council of Ministers has considered and approved an Act on Scientific Research Promotion, which provides for measures in support of strategic programs and projects, as well as research specific actions.

A new Small and Medium-sized Enterprises Strategy has been developed, which provides for certain incentives for innovation activities and special measures for research activities.

A Macroeconomic Framework for technology development in Bulgaria has been drafted together with the German Agency for Technical Assistance.

Amendments have been adopted to the following laws, providing for tax reliefs for business undertakings and organizations in the case of donations for or investment in research and innovations:
- Taxation of the Income of Natural Persons Act;
- Corporate Income Tax Act;
- Rules on the Implementation of the VAT Act;
- Act on the Ratification of the Memorandum for Bulgaria's participation in the EU Framework Programs for research, technological development, demonstration activities and innovations, guaranteeing tax, custom duties and fees exemption for equipment and services, related to the implementation of projects under international agreements.

New scientific research competitions on a program-project principle have been introduced:
- targeted scientific research programs - the selection of the proposals for projects under the national scientific programs was completed;
- new schemes have been developed for further attraction of young scientists;
- the resources for project funding have been increased;
- an investment fund to support high-tech companies has been established and the first pilot projects are under implementation;
- schemes have been established for joint government financing of scientific research projects on the basis of bilateral cooperation agreements;
- targeted financing is being effected of innovation projects of national significance and projects of young scientists.

Amendments to the Higher Education Act are to be made, aimed at the adoption of measures to promote the integration between universities and companies.

A proposal is under preparation for the establishment of specialized funds for scientific research and innovation promotion working on a revolving principle, as well as pilot schemes in support of risk projects.

In the context of international regional cooperation work is being done on the following issues:
- the signing of new agreements for the implementation of joint projects is under preparation;
- joint scientific research, and information and educational forums are being organized, dedicated on EU programs participation;
- further constructed and updated is the Portal for Regional Scientific and Research Cooperation in South-Eastern Europe.

Bulgaria's participation in the EU Framework Programs for research and technological development is realized through Bulgaria's association with the Fifth Framework Program, as well as with the Fifth Euratom Framework Program. Bulgaria has also been granted observer status to CREST (Comite pour la Recherche Scientifique et Technique).

The analysis of Bulgaria's participation in the Fifth Framework Program showed good level of Bulgarian scientists activity and integration of the national scientific activities with those in the European Research Area. A study was made of scientific research activities to identify areas of competence and corresponding scientific organizations.

Preparation was made for Bulgaria's participation in the EC initiative for expressing areas of interest and their presentation to EC.

Bulgaria has expressed its interest in being associated with the Sixth Framework Program (2002-2006). With a view to this, a government decision approved five national scientific programmes in genomics, the information society, nanotechnologies and new materials, "Bulgarian society - part of Europe" and cosmic research. The programs are coordinated by the National Council on Scientific Research.

With the adoption of the Act on Ratification in February 2003, the procedures for entering into force of the Memorandum for joining the EU Framework Programs was completed. Since February 2003, Bulgaria has been fully associated with the Sixth Framework Program for Research and Technological Development and with the Sixth Euratom Framework Program.

The National Contact Points network is being further developed and extended with sub-networks on a cluster principle as the structure for monitoring, management and coordination of the Sixth Framework Program on different levels.

Bulgaria's participation in other European programs is, as follows:
- COST - beginning and intensification of Bulgarian participation; a regional network to link the partners under the Program is being set;
- membership in the European Scientific Foundation;
- cooperation with the Joint Research Center ECJRC, within which over 11 long-term specializations were carried out and 14 cooperation agreements were signed.


ADMINISTRATIVE INFRASTRUCTURE

The development of the government policy in the science and research sector is within the competences of the Ministry of Education and Science. The Ministry is responsible for the harmonization of the legislation, the development and implementation of strategies, the management of some particularly important programs. A number of structures have been established to support the Ministry, to which functions in different areas have been delegated:
- National Council on Scientific Research within MES - coordinates the implementation of the European Framework Programs for Research and Technological Development;
- expert task forces within MES for scientific research programs management;
- scientific commissions;
- National Contact Points network providing the link between the management and the participants in the European Framework Programs on different levels;
- Committee on Bioethics;
- Committee of Women in Science;
- Consultation offices on EU Framework Programs.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria has made progress in the area of science and research through successful implementation of the acquis and enhancing its participation in the relevant Framework Programs. Bulgaria should focus its efforts in the future on:
- further reinforcement of research-related administrative capacity and infrastructure;
- adoption and implementation of an overall strategy for scientific research and technological development, including the Act on Scientific Research Promotion and its related legislation;
- gradual increase of research and innovations expenditure with a view to meeting the target of 3% of GDP by 2010, set by the Barcelona European Council.

CHAPTER 18 EDUCATION AND TRAINING
LEVEL OF NEGOTIATIONS

Chapter 18 "Education and Training" was opened for negotiations in June 2000 and provisionally closed immediately afterwards. Bulgaria has not asked for any transitional arrangements in this field and broadly meets the commitments made in the negotiations.


HARMONIZATION PROCESS

Community policy in the field of education is based on the sovereignty of Member States to determine the content and scope of educational programs and the organization of the education systems.

The European Union may support and supplement Member States actions in certain areas of education and training, described in Art. 149 and Art. 150 of the Treaty Establishing the European Community, as follows:
- encouraging mobility of students and teachers;
- promoting cooperation between educational establishments;
- developing the European dimension in education, particularly through the teaching and dissemination of the languages of the Member States;
- improvement of the system for academic recognition of diplomas and periods of study for educational and professional purposes;
- encouraging the development of distance education;
- facilitating adaptation to industrial changes, in particular through vocational training and retraining;
- improving initial and continuing vocational training in order to facilitate vocational integration and reintegration into the labor market.

Educational programs and systems reflect the spirit, historical traditions and culture of each nation. That is why there cannot be universally acknowledged "models" or "standards" in the field of education. Several fundamental principles or political parameters of education in the Community are guiding and should be applied by the states:
- quality education;
- equal access to education for all, the groups threatened with social exclusion in particular;
- lifelong learning.

Chapter 18 "Education and Training" covers the following main problematic areas:
- reform of the education and training system with the purpose of introducing European standards;
- improvement of the vocational training system;
- Bulgaria's participation in European Community educational programs.

The main characteristics of the education reform here in Bulgaria are focused on the integration of Bulgarian education into the European education area. The education system should be reformed in such a way so that the knowledge, diplomas and qualifications acquired to be understandable, acceptable and recognized by European Union Member States. Only thus the Bulgarian education system shall be able to integrate into the European education area and access of Bulgarian citizens to European educational establishments and the European labor market shall be provided.

The key elements of the education reform are contained in the following laws and by-laws:
- Act on Education Levels, the Education Minimum and the Curriculum, 1999;
- Vocational Education and Training Act, including the amendments thereto of July 1999, November 2002 and March 2003;
- Public Education Act and the secondary legislation thereto of January 2002;
- Higher Education Act and the relevant amendments thereto.

The listed legislation introduced the following important for the harmonization process changes in the education system:
- 12-class education;
- matriculation as an objective assessment of those finishing secondary education and entry to higher education;
- early learning of foreign languages;
- establishment of a flexible vocational education system, ensuring easy adaptation to the labor market;
- ensuring conditions for equal access to higher education.

The only European legislation having mandatory character at this stage of the accession process is Directive 77/486 on the education of the children of migrant workers. The Act on Education Levels, the Education Minimum and the Curriculum regulates the conditions for studying the mother tongue and culture of the country of origin of migrant workers' children. A Program was adopted in 2003 focused on further implementation of the Directive's requirements. The Program addresses the need for availability of instruction of children of migrant workers in their mother tongue and culture as well as in Bulgarian, relevant teacher qualifications, and school programs and materials, funded by the state budget.

The amendments to the Vocational Education and Training Act of July 1999 set standard conditions for licensing of vocational training providers, as well as for decentralization of the administration on regional, municipal and school levels. A number of criteria and specific procedures for licensing have been worked out for vocational education and training, as well as national educational programs for children (September 2000) and young people (September 2001). A fifth year for all types of professional schools was introduced and programs for the ninth, tenth and eleventh classes were drawn up to ensure compliance with newly-established curricula for vocational education.

The National Development Plan 2000-2006, which was updated in April 2003, emphasizes the need for development of the human resource in the field of education, including quality improvement in vocational education and training as a priority.

The National Action Plan on Employment 2003, also adopted in April 2003, outlines key employment actions, including training for adults leading to acquisition of vocational qualifications.

12 standards were approved by the end of 2002 based on vocational requirements, curricula and programs. The list of professions covered by vocational education and training was amended, thereby assuring education and training in new professional fields relating to the needs of the labor market. The amendments to the Vocational Education and Training Act adopted in November 2002 set forth a more detailed and comprehensive regulation of the acquisition of professional qualification and modify licensing procedures for training institutions to provide training leading to state-recognized vocational qualifications. Further amendments to this law adopted in March 2003 create better coordination between the Ministry of Education and Science and the National Agency for Vocational Education and Training.

The management and coordination structures of Community programs Leonardo da Vinci and Socrates were established in 1999 with the beginning of the preparation for the EC accession negotiations. In August 2000 the Association Council adopted a decision for the country's participation in the second generation (2000 - 2006) of the Community programs Leonardo da Vinci and Socrates. Bulgaria started to participate in the new Youth program, which incorporates European Voluntary Service activities, in October 2001.

The Bulgarian educational establishments joined willingly in the preparation and implementation of projects in the secondary and higher education, the vocational training, and vocational training and qualification for adults. The results achieved from the country's participation in the educational programs, the progress and scope of reforms have led to the successful provisional closing of Chapter 18 "Education and Training".


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Education and Science (MES) develops and implements the policy in the field of education. The Ministry is responsible for the harmonization process and the consistency of the ongoing reforms with Community standards in the education area. MES also participates in the consultations on the Commission's Memorandum on Life Long Learning.

The National Agency for Vocational Education and Training is responsible for the monitoring and control of vocational education and training standards, and the licensing of vocational education and training providers.

The Ministry for Youth and Sport is competent on the issues of sport and the student and youth sport education and training programs.

The National Agency for Leonardo da Vinci and Socrates programs is responsible for the organization of the Bulgarian participation in these programs.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

The process of harmonization of Bulgarian legislation with the aquis requirements is developing successfully.

Further continuous efforts are required for:
- increasing investment in education - a sector of key importance for the overall prosperity of the economy and development of the country;
- increasing and adapting of education levels to ensure flexible adaptation to the changing requirements of the labor market;
- enhancement of the cooperation between universities, enterprises, the Ministry of Education and Science and social partners to achieve consistency between the skills in the area of higher education and the requirements of the labor market;
- development of the vocational education and training system on regional level to stimulate and strengthen the cooperation between enterprises and schools, investment in active measures on the labor market respectively;
- development and implementation of a strategy on continuous vocational training, as well as training of the employed, in close cooperation with the social partners;
- continuous effort to ensure equal access and access of minority groups to education.

Education should be continuously reformed in the contemporary dynamic world. The education reform is a process ongoing in all countries. That means that Bulgarian education and vocational training should be always in line with the changing characteristics of the European educational area, so that from the moment of accession to be part of that area, as well as part of the movement in the generally accepted direction.

CHAPTER 19 TELECOMMUNICATIONS AND INFORMATION TECHNOLOGIES
LEVEL OF NEGOTIATIONS

The negotiations on Chapter "Telecommunications and Information Technologies" were opened on 24 October 2000 and provisionally closed on 26 October 2001. A transitional period until 31.12.2008 was negotiated in respect of number portability, and a number of commitments were made related to the harmonization of the legislation and meeting certain requirements.
Bulgaria's main commitments in the field of telecommunications, postal services and information technologies under Chapter 19 are, as follows:
- Full liberalization of the telecommunications market from 01.01.2003 and of the postal services market from 01.01.2006 and creation of the necessary prerequisites for fair and efficient competition development. The realization of this goal requires regularization of the relations between the telecommunications market players and the postal services market players: networks and services operators, and users; the executive bodies, developing the policy in the given area and the regulatory authorities, exercising regulation and control functions. Guiding principles in the introduction of liberalization are: equality of operators, transparency, publicity, validity, proportionality, predictability and consultativeness of the authorities' actions.
- A Communications Regulation Commission (CRC) has been established as an independent state specialized body to regulate the telecommunications and postal services markets. CRC has powers to regulate the telecommunications and postal services markets consistent with the powers of EU Member States regulatory bodies. Forthcoming is the solving of the issue regarding the commitment made to give CRC powers for dispute resolution in accordance with European legislation requirements. The aim is the regulator, having high competence in its field, to be able to solve disputes between users, users and operators or between the operators themselves, within time limits much shorter than the court ones, without revoking the possibility to refer to the court. The deadline for meeting this commitment is 2005, as it is connected with amendments to the Constitution.


HARMONIZATION PROCESS

The main aspects of legal and regulatory framework development that will ensure competition development with all its advantages for the people and the business are, as follows:
- Simplification of the licensing regimes. A progressive transition from the prevailing individual licensing regimes to registration under general license regimes is underway. The principle is introduced to issue individual licenses for activities that require use of scare resources, such as the radio frequency spectrum for individual use. Individual licenses are issued also where the activities are of particular importance for society and specific requirements are set before the operators to satisfy public needs, such as the provision of voice telephone services (including where necessary the obligation to provide universal telecommunication service). Establishment of clear and publicly familiar conditions of licensing procedures, the grounds of refusal to issue a license inclusive, is the main requirement in order licensing not become an obstacle to market penetration. - Ensuring the provision of the universal telecommunication service. The definition of universal telecommunication service under Bulgarian legislation is in line with the one used in the Community. A universal telecommunications service shall be a service of definite quality, provided to every end user regardless of his geographic location, at an affordable price. The universal telecommunications service shall include: initial connection to a public fixed telephone network at a terminal point of it and an access to fixed voice telephone services (subscription), providing a possibility of making local, long distance and international calls; access to a fixed voice telephone service through public payphones; a telephone directory of the numbers of the subscribers of the fixed networks and providing telephone inquiry services for the numbers of the subscribers of the fixed and mobile networks; free-of-charge access to emergency calls; providing access to fixed voice telephone services under special conditions and/or providing terminal equipment, where appropriate, for the disabled or the persons with special social needs. Commitments have been made for setting and ensuring an affordable price of the universal telecommunications service, whose provision in our conditions is not an attractive business, people with low income being under special protection. They are offered the choice between price packages, independent control on expenditure, limitations, at their request, in respect of certain calls.
- Establishment of conditions for fair competition. Despite the general principle for equal treatment of operators, the legal and regulatory framework provides for the possibility of specific regulation of certain telecommunications operators with significant market power that could hinder competition development. This ex-ante regulation, (imposing of obligations in advance), is fully directed towards the establishment of upright relations between operators and provision of conditions for new or existing small operators development. Particularly important in this aspect are the obligations imposed on operators with significant market power in respect of interconnection, and limitation of the possibilities for refusal to provide interconnection, the provision of the service "leased lines", the allowance of competition in the subscribers network, the gradual introduction of cost oriented prices. It is the obligation of such operators to publish reference proposals for the services listed above, which meets the requirement for non-discrimination and transparency of their actions.
- The requirement to provide an opportunity to choose an operator for long distance and international calls is fully in the context of consumer interests protection to choose the best offer for the provision of a given service. In this aspect is also the commitment to provide number portability, which gives subscribers of a given telecommunication network the opportunity to change networks without changing their number.
- Personal data protection. Irrespective of the existence of a general law on personal data protection, the specificity of telecommunications requires comprehensive protection of the rights of users in respect of guaranteeing the confidentiality of communications and personal data protection. The issues pertaining to the issuance and use of telephone directories and telephone inquiry services, of protection against wanton calls, against disturbing calls, will be regulated in the telecommunications legislation in compliance with European standards and the best European practices.

The amendments to the Telecommunications Act of 1991 aimed at enhancing the regulatory framework. Ownership functions were separated from regulatory functions, the Directive on licensing was to a large extent transposed, and the definition of "universal telecommunications service" was updated.

The new Telecommunications Act was adopted in September 2003 and aims at further aligning with the acquis and fulfillment of the listed principles and commitments. Three mobile phone operators are currently operating on the Bulgarian market for mobile telephone services: one analogue and two GSM operators.

The National (Radio) Frequency Plan was approved by the Government in May 2002. This provides for the comprehensive release of frequency bands for GSM, DECT and S-PCS.

In the area of information society, a Strategy on e-Government was adopted by the Council of Ministers in December 2002. Bulgaria is actively participating in aAurope+ and shows commitment to develop these services.

In the area of postal services, the gradual narrowing of the reserved sector aims at introducing competition on that market. In view of the social aspect of part of the postal services and the impossibility to apply cost oriented prices to the universal services, postal services operators that perform such obligations at economically unprofitable conditions, could be compensated in order a balance between satisfying the needs of people for universal postal services and operators' financial stability be achieved.

Amendments to the Postal Services Act, which entered into force in January 2003, aim at strengthening the Communications Regulation Commission, which is also responsible for the regulation of the postal services sector. The duration of the monopoly over the reserved sector was extended until December 2005. The scope of the reserved area remained unchanged. Competition is open for all postal services outside the reserved area.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Transport and Communications is responsible for the development of the policy in the field of telecommunications and postal services, the harmonization of the legislation and the negotiations with EC on Chapter 19. A number of structures, monitoring the enforcement of the legislation and performing specific regulatory functions, are functioning in support of the Ministry, such as:

Communications Regulation Commission (CRC) established as an independent specialized state regulatory body, whose members are elected or appointed on quota principle by the National Assembly, the Council of Ministers and the President.

Information and Communications Technology Development Agency, established in 2002.

National Council on Radio Frequency Spectrum and others.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

The processes of market liberalization and of harmonization of Bulgarian legislation are developing successfully. By the date of accession Bulgaria has to transpose in Bulgarian legislation the existing as of 2002 European sector legislation. The following issues require special attention:
- strengthening the administrative capacity of the regulator CRC to implement the legislation effectively;
- completion of BTC privatization with the purpose of attracting investment for modernization of the company and development of the fixed voice telephone services;
- further work to achieve full transposition of aquis in the postal services sector.

The ongoing reforms aim at developing the telecommunications and postal services sector to the level of EU Member States by the date of accession so that the integration of the Bulgarian market in the Common European Market to be natural and effortless.

CHAPTER 20 CULTURE AND AUDIO-VISUAL POLICY
LEVEL OF NEGOTIATIONS

Chapter 20 "Culture and Audio-visual Policy" was opened in the process of accession negotiations in May 2000 and provisionally closed at the time of the Intergovernmental Conference on Bulgaria's accession to EU in November 2000. Bulgaria is broadly meeting the commitments made in the accession negotiations.


HARMONIZATION PROCESS

Chapter 20 "Culture and Audio-visual Policy" covers two main areas:
- culture
- audio-vision.

The policy in the culture area is not subject to mandatory alignment. The Europe Agreement provides for the following forms of cultural cooperation: exchange of non-commercial works of art and artists; translation of literary works; conservation and restoration of monuments and sites (architectural and cultural heritage); organization of European-oriented cultural events. The key instrument for implementation of these provisions is the participation of Bulgaria in the Community cultural programs, as the contents of the acquis in the area of culture pertains only to Decisions of the European Parliament and the Council regarding the launching of cultural programs.

In 2001 Bulgaria joined Culture 2000 Framework Community program, for the period 2001 - 2004, which is the only EU cultural program at this stage.

Culture 2000 is the first framework program of the European Union in support of arts and culture and uniting three aspects: the arts, cultural heritage, and literature and translation. The idea is to support the common European cultural area development, which is characterized with cultural values diversity. Creativity, the transnational dissemination of culture, the movement of creators, other cultural operators and professionals and their works, cultural dialogue and mutual knowledge of the history of the European peoples are promoted. The Program was approved by Decision of the European Parliament and of the Council of 14 February 2000 for a period of five years, considered from 1 January 2000.

Every year the European Commission publishes a Call for Proposals, which summarizes the criteria and priorities for project submission for the relevant year. Each applicant must comply with the Call for Proposals, which is available in all EU official languages on the Internet address of the European Commission:

http: //europa.eu.int/comm/culture/index_en.html

An application form is attached to the Call for Proposals, which is to be sent by the applicant country by mail directly to the address of the European Commission in Brussels given in the application form.

Leading countries and/or co-organizers under projects within the 2004 Call for Proposals besides the 15 Member States of the European Union can also be the ten Central and Eastern European countries (Bulgaria, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Hungary and the Czech Republic).

In 2004 the separation into annual projects (specific innovative and/or experimental) and multiannual (two- or three-year ones) in the form of cooperation agreements will continue. Annual partnership projects must involve operators from at least three States participating in the Culture 2000 program (for example an organizer and two co-organizers), while the multiannual ones - operators from at least five States participating in the Culture 2000 program. Projects submitted by Central and Eastern European countries, including Bulgaria, must have as co-organizer at least one operator from a European Union Member State.

Each year the invitation for participation is focused on particular cultural sector. In 2003 the focus was on all types of performing arts: theater, dance, music, opera, the lyric arts, street theater and circus.

The European Commission determined as priority sector for 2004 Cultural Heritage: movable heritage, built heritage, immaterial heritage, historical archives and libraries, archeological heritage, underwater heritage, cultural sites and cultural landscapes (with the exception of modern period cultural heritage).

At the end of June 2003 the publication of the new Call for Proposals under Culture 2000 program for 2004 is expected to be published. According to preliminary information the deadlines for submission of the proposals in Brussels will be October 15 for annual projects and October 31 for multiannual projects.

In the audio-visual area the efforts are focused on harmonization of the national media legislation with the EU "Television Without Frontiers" Directive and the efficient implementation of the audio-visual acquis. The objective is one - deregulation of the media environment and market liberalization - creation of conditions for equality of private and public radio- and television operators.

With the amendments to the Radio and Television Act of 1998 in September 2000 and November 2001 substantial alignment with the amendments of the "Television Without Frontiers" Directive was achieved.

The amendments were intended to strengthen the regulatory body in this sector and to streamline licensing procedures. As a result, a Council for Electronic Media has been established to replace the National Council on Radio and Television as the Bulgarian national regulatory body. The amendments to the Radio and Television Act led to liberalization and deregulation of the media sector.

On the initiative of the Media Committee of the National Assembly of Republic of Bulgaria a draft of a new Radio and Television Act has been prepared based on broad public discussion among stakeholders.

The Protocol Amending and Supplementing the European Convention on Transfrontier Television was promulgated in October 2003.

Another aspect of the audio-visual section activities is Bulgaria's participation in the Media Plus and Media Training Community programs for the period 2001-2005, which Bulgaria joined in 2002. These are programs promoting European audio-visual works development, dissemination and support.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Culture is responsible for the development of the policy and the harmonization of the legislation in the culture and audio-visual policy area. A number of structures, monitoring the enforcement of the legislation and performing regulatory functions in respect of the market, are functioning in support of the Ministry.

Council for Electronic Media (SEM) - an independent specialized body, regulating radio and television activity through the registration and issuing of licenses and exercising supervision over radio and television operators.

National Council on Radio Frequency Spectrum and others.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Legislation in the audio-visual sector is broadly aligned. Further efforts are required:
- to ensure predictable, transparent and effective implementation of the regulatory framework;
- to enhance the administrative capacity of the regulator in respect of the control over (monitoring of) regional and local broadcasters.

The provisions of Chapter 20 establish conditions for further integration of the country in the European cultural area, further building up and enhancement of the vision for Bulgaria abroad, better opportunities for Bulgarian artists contribution, improvement of the quality of the cultural product and attraction of investment in culture and audio-vision.

CHAPTER 21 REGIONAL POLICY AND CO-ORDINATION OF STRUCTURAL INSTRUMENTS
LEVEL OF NEGOTIATIONS

The negotiation process under Chapter 21 "Regional Policy and Co-Ordination of Structural Instruments" began in November 2001 and was developing based on the commitments made by the Bulgarian side in the Negotiation Position. According to this Position from the date of accession Bulgaria is to implement directly, without any arrangements or transitional periods, the acquis in the area of regional policy.


HARMONIZATION PROCESS

In 2001 in pursuance of the commitments made the Bulgarian Government adopted a Strategy for the participation of Bulgaria in the structural Funds and the EU Cohesion Fund. On 27 May 2003 the Council of Ministers adopted a Plan for coordination, control and implementation of the Strategy for the participation of Bulgaria in the structural Funds and the EU Cohesion Fund.

The Negotiation Position is regularly updated in accordance with the progress made with regard to the implementation of the accession commitments. It registers the implementation of the measures in the priority areas: territorial organization, legislative framework, institutional framework, administrative capacity, programming capacity, financial and budgetary management, training of the administration staff to manage pre-accession funds instruments, and consequently the aid under structural Funds and the EU Cohesion Fund.

With the view of closing the negotiations on Chapter 21 the main requirements, stated in the Negotiation Position and the Supplementary Information thereto, have already been met.
- Territorial organization has been adopted consistent with Eurostat NUTS classification criteria. The territory of the country is divided into six regions for regional development planning, which are not administrative-territorial units. The planning regions are set forth in the Regional Development Bill introduced by the Council of Ministers on 28 February 2003 and passed on first reading by the National Assembly on 15 May 2003.

- The legal framework, providing consistency with the Europe Agreement texts, with the instruments provided therein and with Community policies and actions, including the rules on fair competition, public procurement, environmental protection, elimination of inequality and promotion of gender equality, has been fully or partially aligned. The legislative framework, required for multi-annual budget programming to provide national co-financing to EU assistance, is also in place.

- The agencies and authorities, responsible for the preparation and implementation of the measures to be co-financed by the structural Funds and the EU Cohesion Fund, have been set up, as well as the mechanisms to guarantee efficient inter-ministerial coordination. The Minister of Finance has been appointed as the National Aid Coordinator.

- The basis for efficient multi-annual programming was established. Coordination Council for the National Economic Development Plan, for the period 2000-2006, was established by a Council of Ministers Decree of 02.08.2002. The Agency for Economic Analysis and Forecasting to the Minister of Finance is to coordinate the elaboration of Development Plan 2007-2013, reflecting Bulgaria's priorities and strategic objectives for the period in accordance with EU existing legislation and in close cooperation with all partners.

- Four Operational Programs (OP) and the ministries responsible for their development and implementation have been set:
    - National Regional Development Operational Program - managed by Ministry of Regional Development and Public Works;
    - Development of Human Resources OP - managed by Ministry of Labor and Social Policy;
    - Rural Development OP - managed by the Ministry of Agriculture and Forestry;
    - Development of Bulgarian Industry Competitiveness OP - managed by Ministry of Economy.

Consultations and cooperation between the government institutions, the local government authorities, business and social partners will be maintained at all stages of programming, financing, monitoring and evaluation of Structural Funds aid.

After accession Bulgaria will use financial aid from the Structural Funds and the EU Cohesion Fund. The whole territory of the country will be eligible for funding under the so-called Structural Funds Objective 1: "Supporting development in the less prosperous regions", where the gross domestic product (GDP) is below 75% of the Community average. All newly acceded Central and Eastern European countries will receive assistance under this objective.

Currently and in the future practical achievements will be aimed at economic and social cohesion of the planning regions, through promotion of equal opportunities, elimination of discrimination, ensuring gender equality, employment promotion, vocational training; strengthening and enhancing the administrative capacity, support of local democracy, strengthening local and regional government. The harmonization of the legislation at this stage is also the way to future participation in the drafting of Community legislation.

Through their participation in the existing programs PHARE - Cross border cooperation, PHARE - Economic and social cohesion and ISPA, the administration at national, regional and local levels, non-governmental organizations and the business sector are gaining experience for the future management of the Structural Funds and the EU Cohesion Fund. These programs help for the training of human resources, who after accession will be able to successfully cope with European standards requirements.

EU funds will co-finance national operational programs and measures in the six planning regions, aimed at:
- infrastructure investment to strengthen the economic potential, to restructure the economy and to ensure sustainable and balanced regional development;
- provision of sustainable employment, equality of men and women on the labor market, fight against discrimination and inequality on the labor market (AQUAL);
- small and medium-sized enterprises development;
- environment preservation and improvement;
- development of information society;
- cross border, transnational and international cooperation (INTERREG);
- sustainable urban development (URBAN).



ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Culture is responsible for the development of the policy and the harmonization of the legislation in the culture and audio-visual policy area. A number of structures, monitoring the enforcement of the legislation and performing regulatory functions in respect of the market, are functioning in support of the Ministry.

Council for Electronic Media (SEM) - an independent specialized body, regulating radio and television activity through the registration and issuing of licenses and exercising supervision over radio and television operators.

National Council on Radio Frequency Spectrum and others.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Legislation in the audio-visual sector is broadly aligned. Further efforts are required:
- to ensure predictable, transparent and effective implementation of the regulatory framework;
- to enhance the administrative capacity of the regulator in respect of the control over (monitoring of) regional and local broadcasters.

The provisions of Chapter 20 establish conditions for further integration of the country in the European cultural area, further building up and enhancement of the vision for Bulgaria abroad, better opportunities for Bulgarian artists contribution, improvement of the quality of the cultural product and attraction of investment in culture and audio-vision.

CHAPTER 22 ENVIRONMENT
LEVEL OF NEGOTIATIONS

Chapter 22 "Environment" was opened for negotiations in July 2001. Bulgaria is basically meeting the commitments assumed in the negotiations. The following transition periods have been negotiated:
- until 2011- concerning the sulfur content in liquid fuels;
- until 2009 - concerning the emission of hazardous organic components during storage and distribution of oil;
- until 2011 - concerning the processing and recycling of packing waste;
- until 2014 - concerning the disposal certain kinds of liquid waste;
- until 2009 - concerning the disposal certain kinds of waste;
- until 2011 - concerning the environmental impact assessment, the access to information, industrial pollution prevention and control (IPPC), in view of the existing equipment;
- until 2014 - concerning city sewage;
- until 2014 - concerning large waste incinerators.
The negotiations on this Chapter have been temporarily closed.


HARMONIZATION PROCESS

This Chapter covers the issues of assessment and meeting the standards in the protection of all components of the environment: the quality of air and water, management of waste storage and recycling, environmental protection, industrial pollution control and risk management, genetic modification of organisms, chemicals, noise generated by vehicles and machines, nuclear safety, and radiation protection.

The Environmental Protection Act, which was adopted in 2002, lays down the legal framework for a comprehensive approach to the environmental issues, and regulates the procedures of environmental impact assessment, the access to information, the control of industrial pollution and the risk management (IPPC).

The procedures of environmental impact assessment (EIA) constitute one of the major administrative and regulative instruments specified in the Act. Any project or activity, as specified in the appendix to the Environmental Protection Act, which could impact one or several components of the environment, is subject to obligatory EIA procedure. The procedure includes research, preparation of reports, and broad public discussions prior to approval by the competent environmental authorities. According to the above act, EIA must also be carried out in respect of any project which is expected to have a considerable transborder impact. The Bulgarian society will thus participate in public discussions on those projects in neighbouring countries, which are expected to have a considerable environmental impact in Bulgaria.

The access to environmental information and the right of the public to participate in the decision-making process occupy a major place in the legislative framework. This element is present in all environmental legislative procedures, in accordance with the political commitment assumed by the government through signing the Convention on Public Access to Information, also known as the Orhus Convention.

The Environmental Protection Act is complemented by the implementation legislation on EIA procedures in relation to investment projects, for the creation of a public register of experts, and for integrating the EIA assessments into the development plans and programs at national, regional, municipal, and urban levels.

Through environmental assessment of the national and regional plans and programs laid down in the legislation, environmental protection considerations will be introduced in all sectoral strategies and development programs in the area of transport, tourism, agriculture, and industry, which will ensure sustained development of the national economy.

In terms of air quality, in November 2001, a second amendment to the Purity of Atmosphere Act was adopted, introducing a national system of fuel quality control. Legislation on the sulphur content in liquid fuels has also been adopted, and plans on its implementation have been developed. Plans for implementation of the regulations on the emission of hazardous organic components during storage and distribution of oil have also been developed. The Protocol on Persistent Organic Pollutants to the Long-Range Transborder Air Pollution Convention has been ratified.

Legislation allowing partial introduction of the EC framework directive on waters, as well as on city sewage, drinking water, bathing water, and the quality of surface waters for drinking water supply and household water supply has been adopted. Directorates for management of the four river catchment areas have been established. A plan for the implementation of the provisions concerning the treatment of city sewage and for partial analysis of the content of hazardous substances has been developed.

In the area of waste management, the Waste Management Act was adopted in September 2003. The National Waste Management Program should be updated for the period 2003-2007. Implementation plans concerning packing and packing materials, waste disposal sites, and decommissioned vehicles have been drawn up. Ordinances on electric batteries and rechargeable batteries, used oil, and sewer deposits have been adopted. The Ordinance on the Issuing of Permits for Waste Import, Export and Transit has been amended.

In regard to environmental protection, with the aim of introducing the EC law (acquis communautaire) on birds and habitats, the Biological Diversity Act was adopted in August 2002. Legislative amendments on the permits for introduction of non-indigenous species have been made, and action plans for endangered plant and animal species have been drawn up. In April 2000, the Protected Areas Act was amended. 140 specially protected areas were identified, covering 12% of the territory of the country. The Act on Plants of Medical Importance and the Act on Hunting and Game Protection were adopted.

In the area of control of industrial pollution and risk management (IPPC), the legislative framework has been laid down in the Environmental Protection Act. The competent bodies have been appointed, and a survey of the necessary control systems has been made. Implementation legislation on permits for eco-labeling and eco-management has been adopted. Plans for implementation of measures for control of the industrial pollution and risk management (IPPC) and large waste incinerators have been drawn up.

In the area of chemicals, progress has been achieved by introducing the law-enforcement legislation concerning the import and export of certain hazardous substances, and the assessment of the human health risk and the environmental risk arising from new chemical substances. Legislation transposing the aquis in respect of the protection and reduction of asbestos contamination of the environment, protection of test animals, and ozone-depleting substances has been adopted. Database describing the hazardous substances has been set up, and procedures for risk assessment and introduction of temporary prohibitions have been established. Bulgaria ratified the Rotterdam Convention on international trade in certain hazardous substances and pesticides, and the Cartagena Convention on bio-safety.

In the area of nuclear safety and radiation protection, progress was made with the adoption of the Act on the Safe Use of Nuclear Energy (June 2002). In 2002, the following two ordinances were also adopted: Ordinance on the maximum admissible radioactive contamination of agricultural products, and the Ordinance on the requirements for limiting the radioactive contamination of food products.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Environment and Waters (MEW) is the competent body which develops and implements the environmental policy, harmonizes the legislation, and the planning and management of the environmental protection measures and programs. The MEW also carries out the negotiations under Chapter 22. A number of specialized structures, which are responsible for the implementation of the legislation at national, regional and municipal level, have been established to provide assistance to the Ministry. The social importance of these issues is the reason for the great interest, in terms of participation of civil and nongovernmental organizations, including at regional and local level.

The Executive Environmental Agency is responsible for the implementation of the public environmental policy, the issuing of licenses and permits in this area.

The 15 Regional Inspectorates to the MEW control the industrial pollution and the risk at regional level.

The Directorates for Management of National Parks are responsible for the protection and development of the national parks.

The Directorates for Management of the four river catchment areas are charged with the task of solving the environmental problems of the river catchment areas.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

For a very short period of time, Bulgaria managed to establish the rules of modern environmental management. The current challenges are connected with their efficient implementation, the change in the way of thinking and the attitude at all levels. Further efforts are needed with the aim of:
- planning measures and providing the necessary financial resources for the implementation of the environmental acquis communautaire in the medium term, including improvement of the management of resources from the existing funds and ISPA;
- further integration of the environmental protection requirements into the sectoral policies, including the energy sector;
- extending and enhancing the training and qualification of the experts working in the area of environmental protection, primarily at regional and local level.


EFFECT AND EXPECTED BENEFITS

During the negotiations for accession, Bulgaria assumed a commitment for gradual construction of water treatment plants for the settlements, as well as regional deposit sites for household waste, in accordance with the European standards. A system of selective waste collection and priority waste safety treatment through recycling, incineration or other types of treatment - other than disposal - will be introduced. This is a significant commitment towards reduction of the harmful impact on environment and health, taking into account the fact that currently over 95% of the non-hazardous waste is disposed of at waste disposal sites which do not comply with the European standards. These improvements imply considerable public investments, which will be partially provided by the EU pre-accession funds. After the accession, it will be possible to partly finance the environmental protection measures from the Community Structural Funds. In this regard, for the period until 2006, the grants are expected to amount to BGN 100 mln. per year, while, after the accession, the amount will be five or more times higher.

The environmental protection measures directly impact the quality of life, the way of life, and the comforts of people, and indirectly impact the development of the strategic sectors of the country, e.g., tourism and agriculture.

Private companies are given the opportunity of participating in activities related to water and waste management - a new unoccupied area of services, which used to be an exclusive obligation of the state, until recently. Other areas involving private capital are the services relating to water supply and sewerage, the production and trade in mineral water, the construction and use of alternative power sources.

The ISO 14 000 series standards and the European schemes of eco-marking, eco-management and auditing, which are being introduced into the Bulgarian production practice, create an opportunity to inform the public of the real results of certain producers in terms of environmental protection.

As result of the efforts and investments made, the environmental situation in the country has been improving noticeably. The investments in this area have also increased, including those from private donors at regional and local level. The desired economic growth inevitably leads to intensive use of natural resources and pollution of the environment. The sustained economic development and the future of our country and its nature depend on the balance between this priority with the environmental protection priority.

CHAPTER 23 CONSUMERS AND HEALTH PROTECTION
LEVEL OF NEGOTIATIONS

Chapter 23 "Consumers and Health Protection" was opened for negotiations in October 2000, and was temporarily closed in November 2000. Bulgaria is basically meeting the commitments assumed in the negotiations, and has not requested any transitional periods in this area.

The consumer protection policy in Bulgaria is aimed at protecting the consumer health, ensuring the safety of the consumers, and protecting their economic interests. The products and services available on the market must be safe, and consumers must be given the necessary information, in order to be able to make the right choice. Consumers should be protected from misuse. Most activities in this area include legislative and other norms, which have immediate impact on the behaviour of the market, e.g. standardization and good practice codes.


HARMONIZATION PROCESS

Chapter 23 "Consumers and Health Protection" covers the following major groups of issues:
- measures connected with the safety of products on the market;
- measures, which are not related to safety, e.g. labeling, indication of the price, misleading advertising, unfair terms in contracts, distance contracts;
- market surveillance mechanisms;
- consumer organisations.

The adopted framework Act on Consumer Protection and Trade Rules (ACPTR) (April 1999) has fully incorporated the following European directives into the Bulgarian legislation:
- Directive 98/6 on the indication of prices;
- Directive 84/450 on misleading advertising;
- Directive 98/13 on unfair terms in consumer contracts;
- Directive 92/59 on general product safety;
- Directive 85/347 on liability for defective products;
- Directive 85/577 on the contracts negotiated away from the main business premises.

ACPTR has partially incorporated certain significant provisions of Directive 97/7 on distance contracts into the Bulgarian legislation.

On the grounds of ACPTR, the following bylaws have been adopted:
- Ordinance on Consumer Protection in the Indication of Prices;
- Rules of Operation of the Conciliation Committees;
- Ordinance on Non-food Product Labeling;
- Rules of Operation of the National Consumer Protection Council.

In May 2001, bylaws transposing the acquis communautaire in respect of dangerous imitations were adopted.

The listed bylaws have introduced the following principles of consumer protection policy into the Bulgarian legislation:
- providing consumers with information;
- out-of-court procedures for the settlement of disputes between consumers and sellers;
- participation of consumers in advisory bodies.

A plan for the adoption of the EU directives on consumer protection, which are not included in the Consumer Protection Act, has also been drawn up.

The updated National Program for Adoption of the EU acquis communautaire contains a detailed plan for complete introduction of the European directives in the area of consumer protection. According to the National Program, Bulgaria will adopt the following directives in the area of consumer protection, as follows:
- Directive 97/55/CEE, concerning the comparative advertising - by means of amendments and supplements to the ACPTR;
- Directive 90/314/CEE, concerning group travels - by means of the Tourism Act (adopted in June 2002), including the enforcement-related legislation, with effect from January 2003;
- Directive 94/47, concerning the purchase of the right to use a real estate for a certain period of time - by the end of 2003;
- Directive 87/102, concerning consumer credits - by adopting a special Consumer Credit Act;
- Directive 87/357, concerning goods with misleading external appearance, which might endanger the health or safety of consumers - by means of an ordinance on the grounds of the Foods Act;
- Directive 97/7/CEE, concerning distance selling - by means of amendments and supplements to the ACPTR;
- Directive 1999/44/EC, concerning the guarantees for the goods and services being sold, by means of amendments and supplements to the ACPTR, in 2004;
- Directive 98/27 - by amending the current legislation with the aim of incorporating Art. 2 of the Directive, in 2004.

The Republic of Bulgaria joined the system of exchange of information on the presence of hazardous products on the market - TRAPEX, operating in the CEE countries. Bulgaria's participation in TRAPEX is a prerequisite for the establishing of a national system for exchange of information between the market surveillance bodies.

National Consumer Protection Council to the Minister of Economy was established, comprising representatives of nongovernmental consumer protection organisations. The National Consumer Protection Council provides opportunities for the consumers to participate in the decision-making process.

ACPTR provides for the establishment of Conciliation Committees, which will assist with the out-of-court settlement of disputes between consumers and sellers, and shall be deemed out-of-court bodies for the protection of consumer rights and interests. The conciliation committees are tripartite committees, comprising representatives of the Trade and Consumer Protection Commission, branch organisations, and consumer protection organisations. Conciliation committees have been established and are currently operating in nine regional centers in the country. By legislative amendments, effective from February 2003, the number of conciliation committees was increased from 9 to 24, with the aim of improving the consumers' access to the committees.

The Trade and Consumer Protection Commission to the Ministry of Economy monitors the market in all areas, which are not regulated by specific sectoral legislation. The Commission concludes agreements for joint actions in the monitoring of the market with other public organisations performing market surveillance functions, e.g. the State Agency for Standartisation and Metrology (March 2003), and the Customs Agency - in respect of the import of goods from third countries (July 2003). The Commission has been gaining experience and improving its efficiency - in the period from September 2002 to April 2003, a total of 20 894 inspections were carried out, and 95 orders of prohibition were issued for dangerous goods, which were removed from the market.

ACPTR encourages the establishing of consumer associations, whose number is currently very large. In 2003, there were 11 the consumer associations with membership of more than 300, 7 of the above associations being united in the National Union of Consumer Organisations, with the aim of consolidating and strengthening their influence. The grant provided to the consumer organisations by the state in 2003 was increased up to EUR 51 000. The consumer protection associations have established Advisory Bureaus for citizens and Consumer Information Centers.

Workshops on the enforcement of the legislation were conducted with the aim of training the staff performing control functions in the area of consumer protection.

Since the entry into force of the ACPTR, information campaigns have been conducted with the aim of familiarizing the consumers with the new legislation in the area of consumer protection, as well as with their rights and economic interests.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Economy (ME) prepares the consumer protection legislation, and develops and implements the public policy in this area. In accordance with ACPTR, the other administrative bodies authorized to enforce the legislation are:
- The Trade and Consumer Protection Commission to the ME - responsible for the enforcement of ACPTR, carrying out inspections of the safety of goods, as well as measures which are not related to safety. The Commission comprises nine regional offices and 28 district offices;
- National Consumer Protection Council - an advisory body assisting the Minister of Economy with the implementation of efficient consumer policy; the Council is comprised of representatives of nongovernmental consumer-protection organisations;
- Conciliation Committees to the regional units of the Trade and Consumer Protection Commission - an independent out-of-court body for the settlement of disputes between consumers and sellers;
- Consumer Protection Units to the municipal authorities - ACPTR provides for the establishing of such units; - Consumer associations.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria has already transposed a considerable part of the Community legislation, and has built, to a great degree, the administrative structures for its implementation. Permanent attention and purposeful efforts are needed for the completion of the legislative framework and for solving certain implementation-related issues:
- further transposition of acquis communautaire in respect of the measures, which are not related to safety;
- improving the efficiency of the market surveillance mechanisms, broadening the scope and improving the quality of the inspections being performed, improving the technical qualification of the inspectors, strengthening the coordination between all participating market surveillance institutions and structures;
- further stimulation of the activity and influence of the consumer organisations;
- integrating the consumer protection policy into other policies.

CHAPTER 24 COOPERATION IN THE FIELD OF JUSTICE AND HOME AFFAIRS
LEVEL OF NEGOTIATIONS

Chapter "Cooperation in the Field of Justice and Home Affairs" was opened for negotiations in June 2001 and provisionally closed in November 2003.

Our accession to the EU is connected, above all, with the participation of the country in the area of freedom, security and justice, a concept enshrined by the Treaty of Amsterdam, according to which the citizens of the Union are entitled to the following rights:
- to live in an environment based on respect for the rule of law, working public authorities, protection of the fundamental human rights and freedoms, and protection against all forms of discrimination;
- free movement within the EU;
- access to justice;

The creation of the necessary conditions for unfettered exercise of these rights, and their protection in certain "third pillar" areas will be achieved through:
- Bulgaria's accession to the Convention implementing the Schengen Agreement, which will lead to the abolition of checks when crossing the internal borders and freedom of movement for Bulgarian nationals within the Schengen states.
- Incorporation of the European standards for personal data protection, which will ensure respect of the rights of Bulgarian nationals and protection against any abuse when collecting and processing of personal data relating to them.
- Harmonizing the visa policies and introducing the EU standards for border control, thus abolishing the visa requirements for nationals of states included in the EU "positive visa list" and improving the service of citizens at border crossings. Enhancing security at the external borders will improve the personal security of the citizens.
- Transposing and implementing European best practices and standards for conducting migration control, which will also enhance the security of citizens and the protection against crimes related to trafficking in human beings, in particular women and children.
- Achieving the preventive effect of the fight against corruption, by acceding to the international instruments in this field, criminalising different corruptive activities, such as offering of non-material advantage, trading in influence, corruption in the private sector, introduction of heavier penalties for bribing magistrates and other legislative measures, as well as creation of conditions for broader awareness of the civil society of corruptive behavior.
- Reducing the number of criminal offences, relating to narcotic drugs and increasing the role of prevention and rehabilitation within the framework of the joint efforts of law enforcement, health and educational institutions, as well as non-governmental organizations and the society as a whole in the fight against drug addictions.

The responsibilities following for our country from its joining the European Union cover a number of specific legislative, practical and constitutional measures, such as:
- Implementation of firm and consistent external border control policy;
- Adoption of rules and working practices with a view to the effective application of the Schengen standards;
- Harmonisation of the visa regime of Bulgaria with the current EU visa regime;
- Ensuring the availability of up-to-date modern equipment for external border control at border crossing points;
- Improvement of the interaction between the authorities conducting mandatory checks at the external borders;
- Ensuring further harmonisation with EU practices in the application of data protection legislation;
- Establishment of a Migration Service for control over foreigners resident in the country;
- Opening of centers for temporary accommodation of foreigners illegally present in the country, who are subject to coercive taking to the border or expulsion;
- Sustained efforts for prevention and coordination between public authorities and NGOs in counteracting all forms of criminal activity;
- Optimizing the capabilities of the State to suppress the general and specific crime factors, including those of social and economic nature;
- Establishment of a national mechanism for coordination and effective counteraction to offences against the financial interests of the European Community;
- Taking the necessary legislative and practical measures for protection of the single European currency against forgery;
- Accession to the international instruments for fighting corruption and transposition of their standards into the national legislation;
- Development of cooperation and exchange of information between the law enforcement authorities on national, regional and international level;



HARMONIZATION PROCESS

By the end of 2003 progress and a good level of transposition of acquis has been recorded in most of the areas covered by Justice and Home Affairs acquis. Numerous legislative and implementing measures have been adopted and we shall therefore limit this overview to some of the recent and most important achievements and policies. In the field of data protection, in January 2002 the new Law on Personal Data Protection entered into force. In June 2002 the Bulgarian National Assembly adopted a law ratifying the Council of Europe Convention No 108 for the Protection of Individuals with regard to Automatic Processing of Personal Data. In April 2002 a Law on protection of Classified Information was adopted, and in December 2002 its implementing regulations entered into force. In February 2002 the Rules for searching and keeping of information for the purposes of law enforcement were adapted in compliance with the main Recommendations of the Council of Europe on the use of police information and the 1981 Convention on data protection. Visa policies have been largely aligned with EU policies. Since 10 April 2001, Bulgaria has free visa regime with all Member States signatories to the Schengen Agreement. Since October 2001 Bulgaria introduced mandatory visas for the nationals of Russia, Ukraine and Georgia. The Amendments to the Law on Foreigners of April 2002, and the new Rules on the conditions and procedure for issuing of visas, constitute a step in reaching further alignment with EU policies. The technical equipment for issuing of visa stickers is being installed in all diplomatic and consular offices, the missions in Europe and high migration risk countries being a priority. A new version of the computer visa control system has been installed in 66 diplomatic and consular offices, and the remaining 27 missions are in the process of being connected. The capacity of the Visa Centre at the Ministry of Foreign Affairs has been strengthened and it was connected with the computer network of the Bulgarian border check points, as well as with the office of the foreigners' control authorities. In November 2001 was adopted an Action Plan for adoption of the Schengen requirements, which identifies the measures and deadlines for achieving compliance with the Schengen acquis. In May 2002 the Government adopted Rules for border crossing checkpoints, as part of the future strategy for integrated border management. The Action Plan is being updated and its implementation is on track, helping to achieve high level control at the external borders. By the end of 2002 the phasing out of all conscripts in the border police has been completed. Border police is restructured and modernized The upgrading of its infrastructure and high-tech equipment for border control has continued. Priority in the order of installation of the equipment is being given to the external borders with Turkey and the Black Sea Coast. A new Automated Information System on 'wanted vehicles" is now operational. In April 2003 the Council of Ministers approved new Agreements for cooperation of the border police with Romania and Greece, based on Article 7 of the Convention implementing the Schengen Agreement. As regards the migration acquis, in June 2002, new Rules on the conditions and procedure for issue, refusal and withdrawal of work permits for foreigners entered into force. The amendments to the Law on Foreigners adopted in April 2003, bring further alignment with the acquis on carrier liability, the establishment at the National Police of special facilities for temporary accommodation of foreign nationals awaiting expulsion and the creation of a National Register of foreign nationals staying in the territory of Bulgaria. Amendments to the Law on the Ministry of the Interior have been prepared, providing the legal framework for the setting up and functioning of a Migration Directorate in the Ministry of the Interior - a specialised unit responsible for administrative control over the stay of foreign nationals in the country. Bulgaria continued its efforts to combat illegal employment. Bulgaria has concluded readmission agreements with all EU Member States, including the United Kingdom and Estonia. Similar agreements have been concluded also with Ireland, Albania and Ukraine. Negotiations are ongoing with Turkey, Russia,Tunisia and Cyprus. Bulgaria adopted a new Law on Asylum and Refugees in May 2002. It defines the role of the Agency for Refugees, regulates the procedure for seeking asylum, the procedures for taking a decision, and the accelerated procedure. The new legislation provides for the application of the criteria and mechanisms for determining the responsible Member State (Dublin Convention), authorising the Agency for Refugees, in cooperation with the relevant bodies of the Ministry of the Interior, to take fingerprints and other identification characteristics of foreign nationals seeking asylum. For achieving full alignment with Community rules and practices (the EURODAC Regulation), in 2003 the Law on the Ministry of the Interior has been amended. The Agency for Refugees maintains its own database, containing all documents and data related to the identity of refugees, as well as data that have become known during the procedure. The number of asylum seekers in Bulgaria remains limited - 1631 for the period between June 2002 - June 2003. In the area of police cooperation and fight against organised crime, a cooperation agreement with EUROPOL was signed in June 2003. The amendments to the law on the Ministry of Interior of February 2003 and the implementing rules thereof provide the legal framework for setting up an international operational police cooperation unit - the National Contact Point. In the future the National Contact Point will also incorporate the national SIRENE and EUROPOL desks. In September 2002 were adopted amendments to the Penal Code relating to terrorism, corruption, organised crime, trafficking in human beings, computer crimes, as well as the development, storage and use of chemical and biological weapons. The amendments provide for a legal definition of 'organised criminal group' and introduce new penalties for the formation, operation and participation in organised criminal groups. As regards trafficking in human beings, in a separate part of the Penal Code were included measures against trafficking for the purposes of prostitution, coercive labour, transplantation of human organs or forceful detention in subordination. The amendments take into account Joint action of 21 December 1998 criminalising the participation in a criminal organisation, and the UN Convention on transborder organised crime. They align the Bulgarian legislation with Joint Action of 24 February 1997 concerning action to combat trafficking in human beings and sexual exploitation of children, and criminalise the possession of child pornography. A new chapter on Cyber Crime was incorporated in the Penal Code, aligning it with the provisions of the European Convention on Cyber Crime, signed in 2001. In May 2003 amendments to the Penal Procedure Code were adopted, some of which are aimed at simplifying certain procedures, and others relate to international legal assistance in criminal matters. In November 2002 the National Strategy for Counteracting Crime 2002-2005 was adopted, followed by the adoption of an Action Plan for its implementation in February 2003. In December 2002 Bulgaria started to prepare for the establishment of the Unified Information System for Combating Crime. In December 2001 Bulgaria ratified the 2000 UN Convention against transnational organised crime (The Palermo Convention) and the Protocols thereto on trafficking in human beings and trafficking in immigrants. In August 2002 Bulgaria ratified the Additional protocol on firearms. As regards the fight against terrorism, Bulgaria adopted a Law on measures against the financing of terrorism in February 2003. The Law seeks to prevent and detect any possibility for financing of terrorism by instituting measures such as freezing of financial assets. Amendments, aimed at improving the exchange of information between the Financial Intelligence Agency and the Ministry of the Interior, were adopted in April 2003. In November 2001 Bulgaria ratified the International Convention on Combating Bomb Terrorism. In January 2002 the 1999 United Nations Convention for the Suppression of the Financing of Terrorism was ratified. The amendments to the Penal Code of September 2002 introduce specific provisions on terrorism and financing of terrorist activities. The establishment and participation in a terrorist group has been criminalised, as well as the preparation for a terrorist act. Provisions governing confiscation of assets have been established. As regards the fight against fraud and corruption, Bulgaria is a party to the Council of Europe Convention on money laundering, search, seizure and confiscation of the proceeds from crime, and to the Council of Europe Criminal Law Convention on Corruption, as well as the OECD Convention for Combating Bribery of Foreign Public Officials in International Business Transactions. The amendments to the Penal Code from September 2002 introduce more precise provisions and form the basis for alignment with the Convention on the Protection of the European Communities' Financial Interests (1995). In May 2003, Bulgaria signed the Additional Protocol to the Council of Europe Criminal Law Convention on Corruption. A number of new laws and amendments having an impact on the fight against corruption have been adopted: the Public Procurement Law (amended in April 2002), the Law on Privatisation and Post-privatisation Control (March 2002), The Civil Servant Law and the Law on Public Administration, the Law on Publicity of the Assets of Persons in Public Office (May 2000). After thorough screening a number of licensing and authorisation regimes were simplified or abolished. In October 2001 was adopted the National Anti-corruption strategy, followed by an Action Plan in February 2002. The general strategy is aimed at creating the institutional and legal environment for addressing and preventing corruption through improving the financial and taxation control, reforming the customs agency, adopting measures by the Ministry of Interior, improving the performance of local authorities, promoting transparency in the financing of political parties and enhancing the role of the National Assembly in the fight against corruption. Anti-corruption measures concerning the judicial system and the economic sector have also been included. The overall tendency is to simplify procedures and promote transparency. Bulgaria applies the measures, provided by the Strategy and the Action Plan. The Ministry of the Interior has developed an inter-sectoral programme for fighting corruption and a code of ethics for policemen. Most recently codes of ethics have been elaborated for judges and prosecutors. The Internal Anti-Corruption Directorate in the Ministry of the Interior is actively carrying out investigations in corruption-related complaints and imposing the appropriate sanctions and punishments. A Coordination Council in the area of combating offences against the financial interests of the European Communities was established in February 2003, chaired by the Minister of the Interior. In compliance with Council Framework Decisions on the protection of the euro against counterfeiting. In the area of fight against drugs in February 2003 was adopted the National Drugs Strategy, covering the period 2003 - 2008. The Strategy is in line with the EU Drug Strategy 2000-2004. Furthermore, in April 2003 an Action Plan containing detailed measures and tasks for implementation of the strategic objectives and tasks defined in the Strategy as well as the responsible agencies. The Action Plan will be updated annually and its implementation will be coordinated by the National Drugs Council. At the National Drug Addictions Centre within the Ministry of Health will be established a National Focal Point for participation in the European Information Network on Drugs and Drug Addiction (Reitox) in compliance with the requirements of the European Monitoring Centre for Drugs and Drug Addiction. In February 2003 an amendment to the Law on the Ministry of Interior was adopted, providing for extension of the powers of the National Service to Combat Organised Crime, with respect to undercover operations and controlled deliveries. Furthermore, in May 2003 Bulgaria signed the Council of Europe Agreement on Illicit Traffic by Sea, implementing Article 17 of the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. With the amendments to the Law on Control of Narcotic Substances and Precursors adopted in May 2003, Bulgaria introduced stricter rules on business licenses for legal entities engaging in retail or wholesale trade in narcotic substances and precursors. In March 2002 Bulgaria concluded agreements for exchange of information and prevention of drug trafficking with Austria, FYROM and Iran. In February 2002 Bulgaria acceded to the Joint declaration of the EU Member States and Candidate Countries on drugs. The Law on Narcotic Substances and Precursors was adopted in 1999. As regards money laundering in January 2002, the amended Law on Measures against Money-laundering entered into force, providing inter alia for the transformation of the Bureau of Financial Intelligence into a Financial Intelligence Agency (FIA). The amendments adopted in April 2003 enlarge the operational independence of the FIA, and extend the circle of entities and persons obliged to identify their clients and report suspicious operations, and also provide for a more precise regulation of the relations between the FIA and the law enforcement authorities. In August 2003, the rules for implementation of the Law on Measures against Money Laundering entered into force. They enlarge the circle of obliged institutions including legal professions and real estate agents. In the field of customs cooperation Bulgaria is further preparing for the implementation upon accession of the Convention on Mutual Assistance and Cooperation between Customs Administrations of 18 December 1997 and to the Convention on the Use of Information Technology for Customs Purposes of 26 July 1995. Bulgaria will make reservations to certain forms of cooperation provided for in Articles 20 (8), 21 and 23 (5). The administrative capacity of the Customs Administration to deter and detect customs offences is being reinforced as provided for in the Customs Law and the Road Traffic Law. In July 2002 amendments to the Road Traffic Law were adopted, authorising mobile customs teams to stop vehicles traveling within the country for the purposes of customs inspections and checks.In 2003 the number of these specialised teams reached 10. They are being trained to effectively perform the tasks entrusted to them by the law. The above-mentioned amendments to the Law on the Ministry of Interior of February 2003 introduced the legal framework for undercover operations. Furthermore, an amendment to the Penal Procedure Code in order to provide custom officials with powers to carry out criminal investigations for custom offences entered into force in June 2003. As regards Bulgaria's preparation for implementing the 1995 Convention on the Use of Information Technology for Customs Purposes, in December 2002 the Rules for implementation of the Law on Protection of Classified Information were adopted. Measures were taken for improving internal control with respect to corruption and "inordinate operations" through on-the-spot checks and enhanced control on the financial status of Customs Administration officials at all levels.

In the field of judicial cooperation in criminal and civil matters Bulgaria continues to ratify the international conventions constituting part of the acquis. In May 2003 were adopted amendments the Penal Code creating the conditions for Bulgaria to accede to the Convention on Simplified Extradition Procedures between the Member States of the EU. In October 2003 Bulgaria ratified the European Convention on Recognition and Enforcement of Decisions concerning Custody of Children and the Convention on Restoration of Custody of Children entered into force for Bulgaria. The ratified Hague Convention on the Civil Aspects of International Child Abduction entered into force in August 2003. The National Assembly adopted amendments to the Family Code related to the ratification of the two Conventions in July 2003. Amendments to the Civil Procedure Code were adopted in September 2003. The amended Penal Code of October 2002 contains provisions aligning it further with the Convention on the Protection of the European Communities' Financial Interests. In January 2002 were amended the Laws Ratifying the European Convention on Mutual assistance in Criminal Matters and the Additional protocol thereto, the Convention on Transfer of sentenced persons and the European Convention on Extradition and the two Additional Protocols. Bulgaria is party to all human rights legal instruments that are part of the justice and home affairs acquis.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Justice and the Ministry of the interior are authorities competent for policy making, harmonisation of legislation, planning and implementation of strategies and measures in the field of justice and home affairs cooperation. Matters concerning the fight against narcotic drugs also involve the Ministry of Health. In certain problematic areas specialised units and structures for application of legislation and implementation of strategies have been established.
- Data protection Commission, a specialised body, competent in data protection issues, consisting of 10 experts;
- National Border Police Service;
- Agency for Refugees - state agency, competent to grant refugee status, to maintain a database with documents and data, capable of identifying refugees;
- National Contact Point at the Ministry of Interior, a specialised structure for international joint police operations, which in the future will incorporate the national EIUROPOL and SIRENE bureaus (under construction);
- Directorate for fight against corruption in the Ministry of the Interior;
- Coordination Council for combating offences against the financial interests of the European Communities, chaired by the Minister of the Interior;
- National Council on narcotic substances - coordinates the implementation of the National strategy for fight against narcotic drugs;
- Financial Investigation Agency - collects, examines, analyses and detects information relating to money laundering;
- National Focal Point for participation in the European Information Network on Drugs and Drug Addiction (Reitox), established at the National Drug Addictions Centre within the Ministry of Health (under construction);
- Migration Directorate within the Ministry of the Interior, a specialised body for administrative control over foreigners staying in the country (to be established).


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

A satisfactory level of approximation of legislation has been achieved and the reform of administrative structures is on track. The sectoral strategies and action plans in the different areas are an instrument for the implementation of a well focused, consistent and durable policy. Further constant work and concentrated measures are needed for:
- completing the process of harmonisation of legislation;
- completing the reforms, restructuring and building of administrative structures and improving their efficiency;
- fighting corruption, especially in law enforcement bodies;
- fighting various types of organised crime, and especially, drugs trafficking and illegal migration.

CHAPTER 25 CUSTOMS UNION
LEVEL OF NEGOTIATIONS

Chapter 25 "Customs Union" was opened for negotiations in June 2000, and was temporarily closed in November 2000. Bulgaria is basically meeting the commitments assumed in the pre-accession negotiations in this area.

The Customs Union is the foundation for the operation of the Single Market of the European Community and for the implementation of the four major freedoms: free movement of goods, persons, services, and capital. With a total of 370 million consumers, the Single Market is the largest one in the industrial world, and its operation is only possible if common rules are applied in respect of the entire trade in goods. The aggregate of the above rules constitutes the customs policy of the Community, as a prerequisite for the identical operation of the customs administrations of all member states. The customs union is based on the elimination of customs duties in mutual trade, and the implementation of common customs tariff in the trade with non-member countries. The uniform treatment of goods and persons crossing any border of the Community is ensured by means of a single customs legislation, single veterinary and phyto-sanitary legislation, as well as the legislation adopted within the framework of the single trade policy.

The Customs Union has been in effect since 01.01.1993, when the Community formed a single territory, without internal borders, ensuring the free movement of goods therein. Upon crossing the borders between the member states, the customs documentation and formalities have been replaced with fiscal, statistical and other control systems, which do not impose or require any new documents or control procedures. Gradually, the entire customs legislation of the European Union will be harmonized in the Customs Code of the Community, thus eliminating any possibility of different interpretation of the customs regulations in the different member states. The Code is amended on a regular basis, in order to reflect the development in the business area, and to simplify the customs procedures. Upon its accession, Bulgaria will join the above single territory and will have to apply the same Customs Code, in order to participate in the free movement of goods, without any customs formalities in the trade with the other member states.

While the principle of free movement of goods is the internal aspect of the customs union, the Common Customs Tariff (CCT) forms its external visage, enabling the application of unified (identical) customs duties on the products imported from states outside the Union, irrespective of the state of destination of the imported goods. In the beginning, the Common Customs Tariff used to be an arithmetic tool for the applied customs tariffs. Subsequently, on the grounds of Art. 28 of the EU Treaty, by a qualified majority in respect of the motions put forward by the Commission, a number of amendment to the CCT were made, both on autonomous grounds and within the tariff negotiations - multilateral, between the member states of the World Trade Organisation, and bilateral, between the Community and other states or groups of states.

The Community has been adjusting the Common Customs Tariff all the time, with the aim of using it as a world trade management tool. It participates in eight rounds of tariff negotiations, reducing the customs duties considerably, in accordance with the Common Agreement on Customs Duties and Trade, which is currently governed by the World Trade Organisation (WTO). Formulating the Common Customs Tariff in accordance with the WTO rules, the European Union has demonstrated that it has really assumed its responsibilities in the free-world trade system. The adoption of the Common Customs Tariff upon the accession of our country will lead to a considerable reduction in the customs duties on industrial goods imported from states outside the European Union (from the average customs duty of 8.62 % for Bulgaria in 2003 to 4.1 % for the EU), and protection systems will be introduced in respect of the import of agricultural goods (e.g. the system of entry prices, and the regimes stipulated in the Common Agricultural Policy); the customs duties, however, both for the latter and for the processed agricultural goods, will decrease (from 21.97 % in Bulgaria to 16.1 % for the EU).

The nomenclature of the common customs tariff is a very important instrument for both the collection of customs duties and the creation of statistical information about the foreign trade, as well as the implementation of the measures of the trade-related, agricultural, fiscal and monetary policies. It is known as the Combined Nomenclature and is used for tariff purposes and for statistical purposes. It is based on the international classification instrument "Harmonised System for Description and Coding of Goods", administered by the World Customs Organisation. In parallel with the introduction of the Combined Nomenclature, the Integrated Customs Tariff of the European Communities was created, with the aim of identifying the provisions to be applied by the Community in respect of the individual goods. The general rules of origin, storage procedures, and all other instruments have also been created. The adoption of the Single Administrative Document (SAD) in 1988 as a single customs declaration form - replacing the 150 different documents previously used by the customs administrations of the member-states - is a significant achievement. No changes are expected in this area, as Bulgaria has already introduced the above elements - under the Europe Agreement on Bulgaria's Association - and has been implementing them for several years.

The implementation of automated computer systems, e.g. the Customs Information System, facilitates the cooperation between the administrative bodies of the different member states, as well as between the above bodies and the European Commission, contributing to the efficient prevention of fraud and the correct application of the customs regulations. The Naples Convention, which is aimed against infringements of the customs legislation of the Community, is another instrument of cooperation and mutual assistance. The Customs 2007 Program was created and financially secured by the member states, with the aim of ensuring uniform application of the customs legislation throughout the Community, preventing fraud, and encouraging the cooperation between the customs administrations. In order to meet these requirements, the Bulgarian customs administration will need quality equipment for inspection, radio and telecommunication equipment, as well as other facilities and equipment, which would allow them to perform high-quality inspection of the vehicles and cargos, and would facilitate the finding of hidden and undeclared goods and drugs. The selection and the specialized training of customs officers is also an important factor in the enhancement of the efficiency of the staff.

The customs policy is a responsibility of the Community, which is however implemented by the member states. The European Commission is responsible for the initiatives aimed at developing the customs policy, as well as the proposals for customs legislation. The EC carries out the coordination between the administrations of the member states and gathers opinions and information from the businesses and industries at the level of the Union. The tariff concessions and the reductions of the customs duties at the international level are also negotiated by the Community. The customs duties specified in the Common Customs Tariff are determined by the Council by qualified majority, on the basis of a motion put forward by the Commission. The Council is the only body entitled to make decisions for revocation of the standard application of the Common Customs Tariff by implementing certain tariff measures, e.g. tariff quotas, tariff ceilings, or full or partial suspension of the collection of customs duties. The member states are responsible for preventing any infringement of the customs legislation. The national customs administrations are obliged to implement the common European legislation on a daily basis - by collecting customs duties, excise duties, and value-added tax for the goods being imported.

This is the system which Bulgaria will join by assuming all obligations required to meet the above terms and conditions. From the very first day after the accession, the customs administration will have to manage and control our borders, which will be external borders of the Community, complying with the interests of the EU citizens and the economic operators. The entire customs legislation of the Community will become obligatory, in terms of enforcement as national legislation, in a unified and harmonized manner, like the other member states. The most important instruments of the above legislation are: the EC Customs Code and the Rules of its application, the Combined Nomenclature, the Common Customs Tariff, including all EC trade customs preferences, as well as other legislation, e.g. the legislation concerning the falsified pirated goods, the precursors and drugs, the export of goods of cultural nature, the import of goods with customs exemptions, etc. All relevant instruments ensuring the operation of the Customs Union and the efficient protection and control of the external borders of the Community (the external borders of Bulgaria) will have to be developed and used. The fulfillment of the commitments assumed by Bulgaria upon closing the "Customs Union" Chapter will ensure the country's capability of becoming a part of the single customs territory of the EC.

The commitments assumed by the country are mainly related to the creation of conditions for building and strengthening the necessary administrative capacity for implementation of the legislation. In order to increase the operating capacity of the Bulgarian customs administration, it is necessary:
- to delegate, on legal grounds, all the powers given to the customs administrations in the other member states, in order to be able to manage the existing customs information systems which are currently being administered by the European Commission or by the member states;
- to install the necessary information equipment and develop operating information systems which will enable the communication with the systems managed by the European Commission;
- to complete the process of reform in the customs administration, aimed at improving the quality of the customs services being provided, including the reduction of the period of stay while crossing the border, to guarantee the protection of the intellectual and industrial property rights, to ensure the implementation of the border-related measures of the Common Agricultural Policy of the Community;
- to strengthen the administrative structures for fighting fraud and corruption, customs and currency violations, economic and organized crime;
- to improve the cooperation with the other bodies enforcing the law in the country, as well as with the customs administrations in the other member states;
- to develop the system ensuring the collection and management of the revenues for the national budget and the revenues to be allocated as own resources of the EC, in order to secure their accounting and auditing, including the accounting and auditing by the competent EU bodies.


HARMONIZATION PROCESS

Chapter "Customs Union" covers the following groups of issues:
- Customs Code of the EC;
- customs acquis communautaire, other than the Customs Code;
- administrative capacity.

The Bulgarian customs legislation is basically identical with the Customs Code of the EC and the provisions on its application. In most areas of the customs acquis, Bulgaria has achieved a considerable degree of legislative conformity.

The amendments to the Customs Act, effective from April 2003, are aimed at further harmonization of the Bulgarian customs legislation with the acquis communautaire. The above amendments concern the transit crossing of borders, the customs regimes with economic impact, the free trade zones, the duty-free shops, the imposing of customs regimes, and the customs obligations. These amendments reflect the amendments to the Customs Code of the EC, effective from 1999 and 2000.

The above act contains provisions which are similar to the legislation of the Community concerning the Combined Nomenclature. The customs tariff adopted by Bulgaria, which has been in force since January 2003, is based on the Combined Nomenclature. It also includes the changes in the lists of countries, in respect of which preferential rates and terms of most-favoured nation have to be applied (according to the EU resolutions), as well as the changes in the tariffs for the most-favoured nations, in accordance with the obligations of Bulgaria arising from its membership of the WTO.

The Convention on Temporary Admittance (the Istanbul Convention) was ratified in December 2002.

Bulgaria has concluded customs cooperation agreements with a number of states, and is a member of the World Customs Organisation. Bulgaria is a party to the TIR Convention (since 1978), and to eight annexes to the Kyoto Convention. Bulgaria is a member (since 1990) of the Convention on the Harmonised System. Since 1996, the country has been applying the Combined Nomenclature, as provided for under the Europe Agreement on Bulgaria's Association. Bulgaria also applies the Single Administrative Document.

With regard to the administrative and operating capacity, the updated Business Strategy for the period until 2006 lays down the four major goals of the reform in the customs administration: - adapting the customs administration to the EC standards; - strengthening the cooperation between the customs administration, the economic operators, the trade sector, and the public; - improving the effective collection of customs levies and other public revenues within the competence of the National Customs Agency; - implementing the customs policy of the state aimed at fighting the customs violations, and the currency violations and crimes.

In May 2002, the Customs Agency adopted the Strategy for Rationalisation of the Border Activities, followed by a detailed plan on the activities for the implementation of the strategy. The implementation of the plan is currently underway. The equipment and infrastructure of the Central Customs Administration was improved. The electronic seals for high-risk goods were introduced in December 2002.

The amendments to the Penal Code, effective from May 2003, enable the customs officers to carry out investigations of customs violations. A new administrative penal procedure was introduced in July 2003 with the aim of accelerating the above investigations.

The amendments to the Customs Act include provisions concerning the obligation of customs officers to provide information about their income and property. An updated Ethical Code of Conduct of customs officers was adopted in May 2003. The employees are being trained for the purpose of complying with the above code.

The cooperation with the customs authorities in neighbouring countries has been increasing -customs information in the form of lists of high-risk goods is being exchanged at the border inspection posts at Kalotina / Gradina (the Serbian border) and Kulata / Promachanos (the Greek border).

Amendments to the Customs Code, effective from April 2003, lay down the obligations of the Customs Agency in respect of the implementation of the measures against pirated and false goods. An agreement with the Bulgarian Association of Music Producers was concluded in July 2003.

The integrated computerized information system has been operating in all customs offices since June 2003. The work on the Bulgarian System for Transit Goods Control and for ensuring the compatibility with the Community systems is currently underway.

In April 2003, Bulgaria concluded a Memorandum of Understanding with the Community in respect of its participation in the Customs 2007 Program.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Finance is responsible for the development and implementation of the public policy on the issues related to the Customs Union, as well as for the harmonization of the legislation.

The National Customs Agency is responsible for the enforcement of the customs legislation and the implementation of all strategies and measures aimed at achieving the EC standards in this area.

The Advisory Customs Council is a forum for exchange of information and ideas, assisting the Minister of Finance and the executive director of the Customs Agency.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria has achieved a high degree of compliance of its the customs legislation with the Customs Code of the EC and the customs acquis communautaire.

The Customs Agency has been making great efforts to implement the National Strategy for Fighting Corruption, in respect of customs administration, and considerable results have been achieved in this area in the past two years. Progress is being made in the implementation of the Bulgarian Integrated Information System. Further purposeful efforts should be made in order to:
- strengthen the administrative and operating capacity of the Customs Agency;
- strengthen the coordination and cooperation with the other bodies enforcing the law in this area - border police, economic police, tax administration;
- complete the full implementation of the Bulgarian Integrated Information System and ensure the complete compatibility and communicability with the respective Community systems.

CHAPTER 26 EXTERNAL RELATIONS
LEVEL OF NEGOTIATIONS

Chapter 26 "External Relations" was opened for negotiations in March 2000, and was temporarily closed in November 2000.

The legislation in the area of external relations covers mainly the international agreements and treaties, as part of the EU law, as well as the legislation related to the trade protection instruments, the measures in respect of third countries, undertaken under this legislation, the quantitative restrictions and trade prohibitions dictated by the EU foreign policy (embargoes and sanctions) in pursuance of resolutions of the United Nations Security Council and the common positions of the EU, the control of the export of dual-use goods and technologies, the export crediting, and the investments. The main instruments for the enforcement of the above legislation include the principles of the Common Trade Policy, applied within the World Trade Organisation (WTO), and the rules and the chapters of the agreement for the establishment of the WTO, the bilateral agreements between the Community and third countries, the EU policy in the area of development and provision of humanitarian aid.

The Bulgarian side has assumed the following responsibilities under Chapter "External Relations":
- In the area of external relations, in a number of aspects Bulgaria has already achieved equalization of its national trade policy with the EU trade policy, taking into account the commitments assumed by the EU within the WTO and the relations with third countries.
- With regard to the preferential agreements and the autonomous trade regimes, the EU commitments will be assumed by Bulgaria as from the date of its accession.
- Bulgaria should denounce its agreements with third countries and join the agreements concluded by the EU, as well as apply the EU Generalised Scheme of Preferences.
- With regard to the trade protection instruments, as from the date of its accession, Bulgaria should rescind its legislation and the trade protection measures applied in respect of third countries, as well as enforce the EU legislation and the measures introduced by the EU in respect of third countries.


HARMONIZATION PROCESS

In accordance with the commitments assumed under the Europe Agreement on the Association (EAA), the Republic of Bulgaria gradually decreased the customs duties on certain industrial goods. In pursuance of the EAA, the trade in industrial goods was fully liberalized, effective from 01.01.2002.

With regard to the trade in agricultural goods, the EU and Bulgaria have granted each other with mutual concessions, within the tariff quotas or without limitation, at reduced or null customs duties. So far, a considerable degree of liberalization of the mutual trade in goods of agricultural origin has been achieved.

The new trade arrangements regulating the mutual trade in processed agricultural goods have been in effect since 01.09. 2002, in accordance with Protocol No. 3 of the EAA. The additional protocol to the EAA concerning the agreements on the trade in fish and fish products, signed in November 2002, came into force on 01.03.2003.

The last round of negotiations between Bulgaria and the EU on the additional liberalization of the trade in agricultural goods ended in 2002. A protocol on the adjustment of the trade aspects of the EAA, taking into account the results of the negotiations for mutual granting of new agricultural concessions, was signed in April 2003. The above protocol covers all concessions agreed to date in the area of trade in agricultural products, and will enter into force as from June 1 this year.

In accordance with the agreement between Bulgaria and the EU on the granting of mutual concessions for certain wines and alcoholic drinks, the parties provided each other with considerable quotas at null customs duties. The signing of a long-term Agreement on the Trade in Wine and Alcoholic Drinks, an Agreement on the Mutual Recognition, Protection and Control of the Names of Wine, and an Agreement on the Mutual Recognition, Protection and Control of the Names of Alcoholic and Flavoured Drinks is impending. The above agreements are of great importance to the Bulgarian producers and exporters.

In the process of its preparation for EU membership, BULGARIA pursues a policy of establishing free trade zones with the EU associated states and the EU candidate states.

Bulgaria is currently carrying out bilateral Free Trade Agreements (FTA) with Turkey, the Republic of Macedonia, Israel, Lithuania, Estonia (effective from 01.04.2003), and the Agreement on the Accession of Croatia to CEFTA, replacing the bilateral FTA concluded with this country (effective from 01.01.2002), has been in force since 01.03.2003.

Bulgaria has negotiated FTAs with Southeastern European states. A FTA with Albania was concluded in March 2003. FTA with Serbia and Montenegro was endorsed in 2003, and the negotiations for FTA with Bosnia-Herzegovina were completed in February. The negotiations with the Republic of Moldova for the establishment of a free trade zone are currently underway.

Bulgaria continues to harmonize its legislation in the area of export insurance and crediting. The Act on the Amendment and Supplement to the Export Insurance Act has been in effect since the beginning of 2000. The amendments contribute to the approximation of the Bulgarian legislation to the European legislation in this area, and - in addition to the insurance and reinsurance of goods and services - provide for the insurance and reinsurance of the Bulgarian investments abroad.

Bulgaria continues to approximate its legislation with the EU legislation in the area of control of the foreign trade activity related to dual-use goods and technologies. The list of dual-use goods and technologies applied in Bulgaria is identical to the one used in the EU.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Economy administers the processes of bringing into compliance and the future participation in the Common Trade Policy.

Bulgarian Agency for Export Insurance was established and is currently operating, assisting the export-oriented producers.


RECOMMENDATIONS OF THE EUROPEAN COMMISSION

Bulgaria has reached a good level of legislative compliance with acquis communautaire. Further efforts are needed in order to:
- take steps to denounce or re-negotiate the previously concluded bilateral agreements with the aim of amending them in compliance with the obligations arising from the EU membership, by the date of accession;
- adjust our policy of development in compliance with the EU standards.


POTENTIAL BENEFITS FOR THE BULGARIAN PRODUCERS AND TRADERS

- Market access - in the process of trade negotiations with the EC (while negotiating the agricultural concessions), the Bulgarian side always takes into account the position of the agricultural producers and traders. This practice will continue in the future, with the aim of ensuring maximum protection of their interests. The trade negotiations constitute a stage in the preparation of the Bulgarian entrepreneurs, producers and traders for meeting the requirements of the EU market, thus allowing a gradual adaptation to the criteria of the European market and to the competitive pressure on this market. Such an approach will contribute to the faster adaptation from the time of accession of the Republic of Bulgaria to the common European market.
- From the date of accession, Bulgaria will become a party to all bilateral and multilateral trade agreements concluded by the EU. This will enable the Bulgarian producers and traders to use the preferential conditions and the opportunities for access to the markets of the countries which have concluded free trade agreements or customs union agreements with the EU. In addition to the countries which have already concluded FTAs with Bulgaria - EACT, Turkey, Romania, the Republic of Macedonia, and Croatia - the Bulgarian companies will benefit from the preferential agreements which the EU has concluded with countries in the Southern Mediterranean region and the Middle East, Latin America (Mexico, Chile, the countries from the Andean group, MERKOSUR), and the countries in the Far East (South Korea).
- Bulgaria has fully adopted the Combined Nomenclature of the EU as a nomenclature of its own Customs Tariff. From the date of accession, Bulgaria will apply the Common Customs Tariff of the EU and the Common System of Preferences in respect of the imports from the least developed countries.
- Within the WTO - achieving maximum effect and utilizing the emerging opportunities resulting from the participation in the new round of multilateral trade negotiations within the WTO, with immediate coordination with the EU in respect of the positions during the above negotiations, with the aim of further liberalization within the WTO.
- Creating more favourable conditions for the Bulgarian exporters through more efficient utilization of the opportunities for export insurance and export credits, under the conditions of full compliance of the Bulgarian legislation with the European legislation.

COMMON FOREIGN AND SECURITY POLICY
LEVEL OF NEGOTIATIONS

Chapter 27 "Common Foreign and Security Policy" (CFSP) was opened for negotiations in March 2000, and was temporarily closed in June 2000. Bulgaria declares that it fully assumes the acquis communautaire in this area - legislation, joint actions, common positions, statements - and it will implement them in their form as of the date of accession. Bulgaria also undertakes to abide by the commitments arising from the above.

The Common Foreign and Security Policy of the European Union is a system of cooperation between the member states on matters relating to the international policy. It is assumed by the participating countries as a main instrument for protecting the national interests in the period of increasing global interdependence. The goal of the CFSP is to preserve the identity of the EU at the international level. Unlike the implementation of the other kinds of policies of the Community, no legal instruments (directives and regulations) have been provided in respect of the common foreign and security policy of the EU. The provided mechanism for action in this area includes political cooperation between the member states, built up in a gradual and pragmatic manner on the basis of political consensus.

The European political cooperation (EPC), renamed as Common Foreign and Security Policy in the Maastricht Treaty (1992), denotes a system of cooperation between the EU member states on international policy matters, which is unique for the whole world. The CFSP, along with the European Community (EC), represents the second pillar of the European Union. The participants in the structuring and operation of the CFSP are: the European Council, the Council of the EU (general matters), the European Commission, the member states, and the Special Envoys.


HARMONIZATION PROCESS

Bulgaria continues to adjust its foreign and security and defence policy in accordance with the respective policy of the European Union, viz:
- Bulgaria ratified the Rome Statute establishing the International Criminal Court.
- Bulgaria joined the action plan, dated September 21, 2001, and the four common positions of the fight against terrorism;
- Bulgaria continues to abide by the international sanctions and restrictive measures imposed by the United Nations and the EU.
- In July 2002, Bulgaria adopted the Act on Foreign Trade in Weapons and Dual-use Goods and Technologies, identical with the EU list adopted in 2001.
- Bulgaria confirms its willingness to contribute to both the EU emergency missions and the civil instruments for crisis management. It declared its national contribution to the formation of the European Rapid Reaction Forces, in accordance with its national resources and the respective needs, as identified by the EU. The country participates with its own contingent in the first EU police mission in Bosnia-Herzegovina (European Union Police Mission), which started on 01.01.2003. Bulgaria also declared that it would participate in the first military operation of the EU in Macedonia, which started on 31.03.2003, in accordance with the Common European Security and Defence Policy.
- Bulgaria continues to participate actively in the development of the Common European Security and Defence Policy (CESDP). The country participates in exchange activities in this area in the EU+15 format (European NATO members, which are not members of the EU, and the EU candidate states)
- Bulgaria has been making considerable efforts in support of the international peace-keeping missions, and participates in peace-keeping operations under UN supervision, KFOR, SFOR, ISAF, OSCE.
- Bulgaria became a non-permanent member of the United Nations Security Council for the period 2002-2003, and was its chairman in September 2002.
- Bulgaria has been active in the development of regional cooperation: tripartite cooperation with Greece and Romania, with Romania and Turkey, the Republic of Macedonia and Albania. It participates in the Stability Pact, playing active role in the regional forums: the Process of the Southeastern European Ministers of Defence, The SEE Cooperation Process, and the Coordinating Group for Cooperation in the Area of Security in Southeastern Europe (SEEGROUP)
- Bulgaria signed the text and the principles contained in the EU Code of Conduct in the area of export of weapons.
- Bulgaria is an active participant in the dialogue with the EU, as an area of most intensive interaction between the EU and the candidate states, participating in joint actions and joining common positions and declarations. It carries out cooperation within international organizations and forums, as well as cooperation with third countries. The country participates in the meetings of the workgroups of the EU Three with the acceding states and the candidate states.


ADMINISTRATIVE INFRASTRUCTURE

The Ministry of Foreign Affairs carries out and coordinates the activity related to Chapter 27 "Common Foreign and Security Policy". The established system of relations within the CFSP demonstrates how the EU member states, the acceding states, and the candidate states may work together for the implementation of common objectives and aspirations. This fact inevitably has a positive impact on the life of ordinary citizens, establishing the European values and strengthening their sense of security and affiliation to the large European family.




©SG 2003