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GOVERNMENT OF ROMANIA

ADDENDUM

(July ­ August 2003) to the 2003 REPORT on the progress in preparing the accession to the European Union

- September 2003 -

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C O N T E N T S

1. INTRODUCTION..................................................................................................................... 15 1.1. RELATIONS BETWEEN THE EUROPEAN UNION AND ROMANIA ............................. 15 Development of the accession negotiations ....................................................................... 15 The latest developments of the bilateral relations .............................................................. 15

Political dialogue............................................................................................................................ 15 Implementation of the Europe Agreement ..................................................................................... 16 Non-reimbursable Pre-accession Financial Assistance (Phare, twinning, ISPA, SAPARD, participation in Community programmes) ...................................................................................... 17

2. CRITERIA FOR MEMBERSHIP ............................................................................................. 26 2.1. POLITICAL CRITERIA ..................................................................................................... 26 2.1.1. Democracy and the rule of law ................................................................................. 26

The Parliament .............................................................................................................................. 26 The Executive................................................................................................................................ 28 The Judiciary ................................................................................................................................. 32 Anti-Corruption Measures.............................................................................................................. 43

2.1.2. Human Rights and the protection of minorities......................................................... 48

Civil and political rights .................................................................................................................. 48 Child Protection ............................................................................................................................. 51 Economic, social and cultural rights .............................................................................................. 56 Protection of minorities .................................................................................................................. 56

2.2. ECONOMIC CRITERIA.................................................................................................... 60 2.2.1. Macroeconomic developments ................................................................................. 60 2.2.2. Assessment in terms of the Copenhagen criteria ..................................................... 67

The existence of a functioning market economy............................................................................ 67 Capacity to cope with competitive pressure and market forces within the European Union .......... 86

2.3. ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP .................................... 92 2.3.1. FREE MOVEMENT OF GOODS .............................................................................. 92

Horizontal and procedural measures............................................................................................. 92 Standardisation.............................................................................................................................. 92 Accreditation.................................................................................................................................. 92 Metrology....................................................................................................................................... 92 Market surveillance........................................................................................................................ 93 Foodstuffs...................................................................................................................................... 94 Drug precursors............................................................................................................................. 94 Medicinal products of human use .................................................................................................. 94 Fertilisers ....................................................................................................................................... 95 Simple pressure vessels................................................................................................................ 95 Appliances burning gaseous fuels ................................................................................................. 95 Toys............................................................................................................................................... 96 Lifts ................................................................................................................................................ 96 Electrical equipment and electromagnetic compatibility ................................................................ 96 Radio and telecommunication equipment...................................................................................... 96 Medical devices ............................................................................................................................. 97 Public procurement........................................................................................................................ 97

2.3.2. FREE MOVEMENT OF PERSONS .......................................................................... 97

Mutual recognition of professional qualifications in the framework of general system of recognition ...................................................................................................................................................... 97 Mutual recognition of professional qualifications through sectoral directives................................. 98 The right to vote............................................................................................................................. 98 Coordination of social security systems......................................................................................... 99

2.3.3. FREEDOM TO PROVIDE SERVICES.................................................................... 100

Financial services ........................................................................................................................ 100 Non - financial services................................................................................................................ 102

2.3.4. FREE MOVEMENT OF CAPITAL........................................................................... 107

Property right ............................................................................................................................... 107 State nominative control share .................................................................................................... 107 Payment systems ........................................................................................................................ 108 Prevention and control of money laundering ............................................................................... 108

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Removing the restrictions on the free movement of capital regarding the direct investments made by non-residents...........................................................................................................................109

2.3.5. COMPANY LAW......................................................................................................109

Company law ...............................................................................................................................109 Accounting and audit....................................................................................................................110 Intellectual property rights ............................................................................................................111 Industrial property rights...............................................................................................................112 Measures of the Customs authorities relating to intellectual and industrial property ....................112

2.3.6. COMPETITION POLICY .........................................................................................113

Competition ..................................................................................................................................113 State aid.......................................................................................................................................115

2.3.7. AGRICULTURE .......................................................................................................117

General information......................................................................................................................117 Horizontal Issues..........................................................................................................................120 Common Market Organization .....................................................................................................122 The Sanitary Veterinary Sector ....................................................................................................125 Phytosanitary sector.....................................................................................................................128 Seeds and propagating material sector........................................................................................129 SAPARD Programme Implementation .........................................................................................129 Forestry........................................................................................................................................132

2.3.8. FISHERIES..............................................................................................................132

Legislative progresses .................................................................................................................132 Institutional framework .................................................................................................................133 Fishery Inspection ........................................................................................................................133

2.3.9. TRANSPORT POLICY ............................................................................................134

Road transport .............................................................................................................................134 Railway transport .........................................................................................................................134 Maritime transport ........................................................................................................................135 Air transport .................................................................................................................................135

2.3.10. TAXATION.............................................................................................................136

Excise duties ................................................................................................................................136 Improving the Romanian fiscal system.........................................................................................136

2.3.11. ECONOMIC AND MONETARY UNION ................................................................138

Participation in the multilateral surveillance and economic policies coordination procedures ......138 Fiscal policy .................................................................................................................................138 Monetary and exchange rate policy .............................................................................................139

2.3.12. STATISTICS ..........................................................................................................139

Statistical infrastructure................................................................................................................139 Regional statistics ........................................................................................................................139 Macroeconomic statistics .............................................................................................................140 Business statistics........................................................................................................................141 Transport, services, tourism and foreign trade statistics ..............................................................142 Agriculture, forestry and fishery statistics.....................................................................................142 Environment statistics ..................................................................................................................142

2.3.13. SOCIAL POLICY AND EMPLOYMENT ................................................................142

Labour law ...................................................................................................................................142 Equal treatment between men and women..................................................................................143 Health and safety at work.............................................................................................................144 Social dialogue.............................................................................................................................145 Public health ................................................................................................................................148 Employment .................................................................................................................................149 European Social Fund..................................................................................................................150 Social security, elderly and social exclusion ................................................................................151 Persons with handicap .................................................................................................................153 Foundation of Dublin ....................................................................................................................155 Fight against discrimination..........................................................................................................156

2.3.14. ENERGY................................................................................................................157

Natural gas...................................................................................................................................157 Oil sector......................................................................................................................................157 Electricity......................................................................................................................................158 Nuclear field .................................................................................................................................158 Energy efficiency..........................................................................................................................158 Coal industry ................................................................................................................................159

2.3.15. INDUSTRIAL POLICY ...........................................................................................160

Specific sectors ............................................................................................................................165

2.3.16. SMALL AND MEDIUM SIZED ENTERPRISES ....................................................165

Recent developments of the institutional framework and of the policy in the field of SMEs .........165

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Improving the business environment ........................................................................................... 168 Programmes for supporting the SMEs sector .............................................................................. 169 Increasing the SMEs access to information and quality consultancy services............................. 173

2.3.17. SCIENCE AND RESEARCH ................................................................................ 174

Romanian participation at the Research Programmes ................................................................ 174 Legal Framework Development................................................................................................... 176

2.3.18. EDUCATION AND TRAINING .............................................................................. 176

Education..................................................................................................................................... 176 Continuing vocational training...................................................................................................... 179 Youth ........................................................................................................................................... 179

2.3.19. TELECOMMUNICATIONS AND INFORMATION TECHNOLOGIES................... 180

Electronic communications .......................................................................................................... 180 Postal services ............................................................................................................................ 185 Information technology ................................................................................................................ 186

2.3.20. CULTURE AND AUDIOVISUAL POLICY ............................................................. 189

Culture ......................................................................................................................................... 189 Audiovisual policy ........................................................................................................................ 190

2.3.21. REGIONAL POLICY AND CO-ORDINATION OF STRUCTURAL INSTRUMENTS .......................................................................................................................................... 191

The legislative and institutional framework .................................................................................. 191 Programming ............................................................................................................................... 192 Progress registered in the field of public internal audit ................................................................ 193 Recent developments of the preventive financial control system on State budget and Community funds............................................................................................................................................ 193 Regional statistics........................................................................................................................ 194

2.3.22. ENVIRONMENT.................................................................................................... 194

Institutional capacity .................................................................................................................... 194 Legislative harmonisation ............................................................................................................ 197

2.3.23. CONSUMERS AND HEALTH PROTECTION ...................................................... 204

Approximation of legislation......................................................................................................... 204 Enforcement of the consumer protection legislation and existence of the administrative infrastructure................................................................................................................................ 205

2.3.24. CO-OPERATION IN THE FIELDS OF JUSTICE AND HOME AFFAIRS............. 207

Data protection ............................................................................................................................ 208 Visa policy ................................................................................................................................... 208 Border control .............................................................................................................................. 209 Migration...................................................................................................................................... 211 Asylum......................................................................................................................................... 212 Police co-operation and fight against organised crime ................................................................ 213 Fight against fraud and corruption ............................................................................................... 216 Fight against drug........................................................................................................................ 220 Fight against terrorism ................................................................................................................. 222 Fight against money laundering................................................................................................... 222 Customs co-operation ................................................................................................................. 223 Judicial co-operation.................................................................................................................... 223

2.3.25. CUSTOMS UNION................................................................................................ 227 2.3.26. EXTERNAL RELATIONS...................................................................................... 232 2.3.27. COMMON FOREIGN AND SECURITY POLICY.................................................. 233

Participating to the Political Dialogue .......................................................................................... 233 European Security and Defence Policy ....................................................................................... 234 Participating in regional military cooperation initiatives................................................................ 234 Western Balkans ......................................................................................................................... 234 Wider Europe Neighbourhood ..................................................................................................... 234 Relationship with the Russian Federation ................................................................................... 235 Iraq .............................................................................................................................................. 235 Middle East and the Euro-Mediterranean space.......................................................................... 236 EU Code of Conduct on Arms Exports ........................................................................................ 236

2.3.28. FINANCIAL CONTROL......................................................................................... 237

Preventive financial control and internal audit ............................................................................. 237 External financial control.............................................................................................................. 239

2.3.29. FINANCIAL AND BUDGETARY PROVISIONS.................................................... 239

Budgetary system........................................................................................................................ 239 Financial management of the Community funds.......................................................................... 239

2.3.30. TRANSLATION OF THE ACQUIS COMMUNAUTAIRE ...................................... 240 2.4. PUBLIC ADMINISTRATION REFORM.......................................................................... 242

Central public administration ....................................................................................................... 242 Local public administration .......................................................................................................... 246

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2.5. STATISTICAL DATA ......................................................................................................248

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ABBREVIATION LIST

ABREVIATION ADR ADS AE ANAR ANCEX ANDRAD ANEIR ROMANIAN Agentia de Dezvoltare Regionala Agentia Domeniilor Statului Acordul European Administratia Romane" Nationala ENGLISH Regional Development Agency Agency of State Domains Europe Agreement "Apele National Administration "Apele Romane" Agency for Export

Agentia Nationala pentru Controlul National Exporturilor Control

Agentia Nationala pentru Deseuri National Agency for Radioactive Radioactive Waste Asociatia Nationala a National Association of the Importatorilor si Exportatorilor din Romanian Importers and Romania Exporters Agentia Nationala pentru National Agency for Small and Intreprinderile Mici si Mijlocii si Medium Enterprises and CoCooperatie operatives Agentia Nationala Medicamentului a National Drug Agency

ANIMMC

ANM ANOFM ANPM ANPC ANPCA ANPH ANRE

Agentia Nationala pentru National Agency for Employment Ocuparea Fortei de Munca Agentia Nationala pentru Protectia National Environmental Mediului Protection Agency Autoritatea Nationala Protectia Consumatorilor pentru National Authority for Consumer Protection Child

Autoritatea Nationala pentru National Authority for Protectia Copilului si Adoptie Protection and Adoptions Autoritatea Nationala Persoane cu Handicap Autoritatea Reglementare Energiei

pentru National Authority for Persons with Handicap

Nationala de National Authority for Energy in domeniul Regulation

ANRGN

Autoritatea Nationala de National Authority for Natural Reglementare in domeniul Gas Regulation Gazelor Naturale Agentia Nationala pentru Resurse National Agency Minerale Resources Autoritatea Reglementare Comunale for Mineral

ANRM ANRSC

Nationala de National Authority for the a Serviciilor Regulation of the Public Utilities

ANSIT ANFP

Agentia Nationala pentru National Agency for Support Sprijinirea Initiativelor Tinerilor Youth's Initiatives Agentia Nationala a Functionarului 7 Civil Servants National Agency

ABREVIATION Public ANPE ANRC ANSPCP

ROMANIAN

ENGLISH

Autoritatea Nationala a Produselor National Authority for Organic Ecologice Products Autoritatea Nationala Reglementare in Comunicatii de National Regulatory Authority for Communications

Agentia Nationala pentru National Agency for Dangerous Substante si Preparate Chimice Chemical Substances and Periculoase Preparations Agentia Nationala Veterinara Sanitara National Agency Sanitary Veterinary

ANSV APAPS

Autoritatea pentru Privatizare si Authority for Privatisation and Administrarea Participatiilor Management of the State Statului Ownership Agentia pentru Protectia Mediului Agentia Regionala Protectia Mediului Environmental Agency Protection

APM ARPM ARBDD ARCE ARIS ARS ASRO AVAB BCR BEI BERD

pentru Regional Environmental Protection Agency

Administratia Rezervatiei Biosferei Administration of Biosphere " Delta Dunarii" Reserve "Danube Delta" Agentia Romana Conservarea Energiei pentru Romanian Agency for Energy Conservation

Agenia Român pentru Investiii Romanian Agency for Foreign Strine Investments Asociatia Romana de Salubritate Asociatia Standardizare Romana Romanian Association Sanitation Standardisation Assets Resolution

de Romanian Association

Autoritatea pentru Activelor Bancare

Valorificarea Banking Agency

Banca Comercial Român SA Banca Europeana de Investitii

Romania Commercial Bank SA European Investment Bank Bank for and for and

Banca Europeana pentru European Reconstructie si Dezvoltare Reconstruction Development Banca Internationala pentru International Reconstructie si Dezvoltare Reconstruction Development Acordul Bilateral de Investitii Banca Nationala a Romaniei Banca Mondiala Biroul Roman Legala de

BIRD

Bank

BIT BNR BM BRML

Bilateral Investments Treaty National Bank of Romania World Bank Legal Metrology

Metrologie Romanian Bureau 8

ABREVIATION BVB CASPIS CC CCIRB

ROMANIAN Bursa de Valori Bucuresti

ENGLISH Bucharest Stock Exchange

Comisia Anti-Saracie si Anti-Poverty and Promotion of Promovarea Incluziunii Sociale Social Inclusion Commission Consiliul Concurentei Competition Council and and Camera de Comert si Industrie a Chamber of Commerce Romaniei si a Municipiului Industry of Romania Bucuresti Bucharest Municipality Corpul de Control al Guvernului Curtea de Conturi a Romaniei Consiliul de Dezvoltare Regionala Cercetare tehnologica si

CCG CCR CDR CDT CEI CEIP CEN CENELEC

Romanian Government's Control Department Romanian Court of Accounts Regional Development Board technological

dezvoltare Research and development

Comisia Internationala Electrotehnica Centrul European Interprinderilor Publice Comitetul European Standardizare

pentru International Electro Technical Commission al European Centre Enterprise for Public for

de European Committee Standardisation

Comitetul European de European Committee for Electro Standardizare in Domeniul Technical Standardisation Electrotehnic Consiliul Economic si Social Comitetul Interminsterial Integrare Europeana Economic and Social Council pentru Interministerial Committee European Integration for for

CES CIIE CILID CIP CIR CJAS CJASPIS

Comitetul Interministerial de Lupta Interministerial Committee Impotriva Drogurilor Fight against Drugs

Comitetul Interinstitutional pentru Inter-institutional Committee for Elaborarea PND PND Drafting Centrul Informational Roman Romanian Informational Centre for Health Case de Asigurari de Sanatate County House Judetene Insurance

Comisia Judeteana Anti Saracie si Anti-Poverty and Promotion of Promovarea Incluziunii Sociale Social Inclusion County Commission Casa Judeteana de Pensii Consiliul Minoritatilor Nationale Consiliul National Audiovizualului County House of Pensions Council of National Minorities al National Audiovisual Council for Health

CJP CMN CNA CNAS CNCAN

Casa Nationala de Asigurari de National House Sanatate Insurance Comisia Nationala pentru 9

National Commission for

ABREVIATION CNCD CNFPA CNIPMMR

ROMANIAN Controlul Activitatilor Nucleare Consiliul National Combaterea Discriminarii Consiliul National de Profesionala a Adultilor

ENGLISH Nuclear Activity Control pentru National Council for Combating Discrimination Formare National Training Council for Adult

Consiliul National Intreprinderilor Private Mici Mijlocii din Romania Comisia Nationala de Prognoza

al National Council for Private si Small and Medium Sized Enterprises of Romania National Prognosis Commission for

CNP CNPAS CNPS CNRED CNVM CODES

Casa Nationala de Pensii si Alte National House of Pensions and Drepturi de Asigurari Sociale Other Social Insurance Rights Centrului National de Pregatire in National Centre for Training in Statistica Statistics NCTS Centrul national de recunoastere National Center of Equivalence si Echivalare a Diplomelor and recognition of Diplomas Comisia Nationala Mobiliare a Valorilor National Securities Commission for

Comisia Consultativa Interministeriala in Domeniul Egalitatii de Sanse intre femei si Barbati Centrul Exterior Roman de

Consultative Inter-ministerial Commission in the Field of Equal opportunities for men and women

CRCE CSA CSM DECIS DGAIA DGEIP DGP DGV DRI DRVI ERA ETUC

Comert Romanian Center for Foreign Trade a Insurance Commission Supervisory

Comisia de Asigurarilor

Supraveghere

Consiliul Superior al Magistraturii

Magistrature Superior Council

Dezvoltarea Capacitatii de Development of the Capacity for Integrare a Egalitatii de Sanse Integrating equal opportunities Directia Generala pentru General Directorate for Agricultura si Industrie Alimentara Agriculture and Food Industry Directia Generala de Evidenta General Directorate for Personal Informatizata a Persoanei Data Registering Directia Generala Penitenciarelor Directia Generala a Vamilor Departamentul Interetnice pentru a General Department Relatii Inter-ethnic Department Penitentiary

General Directorate of Customs Relations

Directia Regionala Interjudeteana Confederatia Europa

Vamala Regional Customs Directorate European Research Area din European Trade Confederation Union

Zona Europeana de Cercetare Sindicatelor 10

ABREVIATION FASS FGDSB FMI FNAE FNGCIMM FREE FSE GICP IACS ICAS ICIM

ROMANIAN Fondul asigurarilor sanatate sociale

ENGLISH de Health Insurance Fund a Bank Deposits Guarantee Fund International Monetary Found

Fondul de Garantare Depozitelor in Sistemul Bancar Fondul Monetar Internaional Federatia Nationala Agricultura Ecologica

pentru National Federation for Organic Farming

Fondului National de Garantare al National SME Credit Guarantee Creditelor pentru IMM Fund Fondul Roman pentru Eficienta Romanian Energetica Efficiency Fondul Social European Inspectoratul General Protectia Consumatorilor Fund for Energy

European Social Fund pentru General Inspectorate Consumer Protection for and

Sistemul Integrat de Administrare Integrated Administration si Control Control System Institutul de Cercetare Amenajari Silvice

pentru National Institute for Research and Forest Planning

Institutul National de Cercetare- National Research-Development Dezvoltare pentru Protectia Institute for Environmental Mediului Protection Institutul pentru Controlul Institute of the Control of Produselor Biologice si al Biological Products and Medicamentelor Veterinare Veterinary Medicines Institutul de Diagnostic si Sanatate Institute for Animala Animal Health Institutul European din Romania Corporatia Internationala Financiara International Corporation Diagnosis and

ICPBMV

IDSA IER IFC IFOP IGP IGPF IISPV INA INAP INM INMHGA

European Institute of Romania Financial

Instrumentul Financiar Orientarea Pescuitului

pentru Financial Instrument for Fishing Guidance General Inspectorate of Police

Inspectoratul General al Politiei

Inspectoratul General al Politiei de General Inspectorate of Border Frontiera Police Institutul de Igiena si Sanatate Institute of Hygiene Publica Veterinary Public Health Institutul National de Administratie Institutul National Administratia Publica Institutul Meteorologie, National Institute Administration for and of Public

pentru National Institute Administration

Institutul National al Magistraturii National Hidrologie 11

National Institute for Magistrates

de The National Institute of si Meteorology, Hydrology and

ABREVIATION INS IOVR ISAR ISCIR

ROMANIAN Gospodarire a Apelor Institutul National de Statistica Invalizi, Orfani, Vaduve de Razboi Standardele Internationale Contabilitate si Raportari

ENGLISH Water Management National Institute for Statistics Disable, Orphans, War Widows de International Accounting Standards and Reports

Inspectia de Stat pentru Cazane, State Authority for Boilers, Recipiente sub Presiune si Pressure Vessels and Hoisting Instalatii de Ridicat Equipment Organizatia Internationala Standardizare de International Organisation Standards

ISO ISTIS ITC JAP

Institutul de Stat pentru Testarea State Institute for Testing and si Inregistrarea Soiurilor Registration of Varieties Tehnologii informatice Information Technology Documentul comun de evaluare a Joint Assessment Paper politicii de ocupare a fortei de munca Sistemul de Identificare Parcelelor Agricole a Land Parcel System Identification

LPIS MAAP MAE MAI MAPAM MApN MCC MCTI MEC MECT MFP MIE MJ MTCT MMSSF MS NCP

Ministerul Agriculturii, Alimentatiei Ministry of Agriculture, Food and si Padurilor Forestry Ministerul Afacerilor Externe Ministerul Internelor Administratiei Ministry of Foreign Affairs si Ministry of Administration and Interior

Ministerul Agriculturii, Padurilor, Ministry of Agriculture, Forestry, Apelor si Mediului Water and Environment Ministerul Apararii Nationale Ministerul Culturii si Cultelor Ministerul Comunicatiilor Tehnologiei Informatiei Ministry of National Defence Ministry of Culture and Cults si Ministry of Communications and Information Technology Ministry of Economy and Trade

Ministerul Economiei si Comertului

Ministerul Educatiei si Cercetarii si Ministry of Education, Research Tineretului and Youth Ministerul Finantelor Publice Ministerul Integrarii Europene Ministerul Justitiei Ministry of Public Finance Ministry of European Integration Ministry of Justice

Ministerul Transporturilor, Ministry of Transport, Constructiilor si Turismului Construction and Tourism Ministerul Muncii, Sociale si Familiei Ministerul Sanatatii Sistemul Punctelor Nationale de 12 Solidaritatii Ministry of Labour, Solidarity and Family Ministry of Health National Contact Points System Social

ABREVIATION Contact OC OINLR OJPC OMFP OMLPTL OMTCT

ROMANIAN

ENGLISH

Oficiul Concurentei Organizatia Interprofesionala Laptelui din Romania

Competition Office a National Inter-professional Organization "Milk" in Romania

Oficiul Judetean pentru Protectia County Office for Consumers Consumatorilor Protection Ordin al Ministrului MFP Order of the Minister of Public Finance

Ordin al ministrului lucrarilor Order of the Minister of Public publice, transporturilor si locuintei Works, Transport and Housing Ordin ministrului transporturilor, Order of constructiilor si turismului Transport, Tourism the Minister of Construction and Property

OMPI ONCGC ONDOV ONPCSB

Organizatia Mondiala a Proprietatii World Intellectual Intelectuale Organization

Oficiul National de Cadastru, National Office for Cadastre, Geodezie si Cartografie Geodesy and Cartography Oficiul National pentru Denumiri National Office for de Origine al Vinurilor Denominations of Wines Origin

Oficiul National pentru Prevenirea National Office for Prevention si Controlul Spalarii Banilor and Control of Money Laundering Oficiul National pentru Refugiati Oficiul National Comertului al National Refugee Office Registrului National Office of the Trade Registry

ONR ONRC ORDA OSIM PC PEP PNA RENAR RGA RICA RIEEC

Oficiul Roman pentru Drepturile Romanian Copyright Office de Autor Oficiul de Stat pentru Inventii si State Office for Inventions and Marci Trademarks Programe cadru de cercetare Programul Preaderare Economic Framework Research Programmes for

de Pre-Accession Program

Economic

Parchetul National Anticoruptie

National Anti-corruption Prosecutor's Office

Asociatia Retelei Nationale de Romanian National Accreditation Acreditare din Romania Network Recensamantul General Agricol General Agricultural Census Accountancy Data Reteaua de Informare Contabila Farmer Agricola Network Compania Romana pentru 13

Romanian Industrial Energy

ABREVIATION RNP RUCODEM

ROMANIAN Eficienta Energetica in Industrie Regia Nationala a Padurilor

ENGLISH Efficiency Company Forestry National Regie

Asociatia Importatorilor si Association of Importers and Producatorilor de Produse Producers of Cosmetic Products Cosmetice Societatea Romana Asigurarea Calitatii pentru Romanian Society for Quality Assurance

SRAC SSIF SVIAM TAROM

Societi de servicii de investiii Financial Investments Services financiare Companies Statia de Verificare si Intretinere a Verification and Maintenance Aparaturii Medicale Station for Medical Equipment Compania Nationala de Romanian Air Transport National Transporturi Aeriene Romane Company TAROM S.A. "TAROM S.A." Unitatea Centrala de Armonizare Central Harmonising Unit for pentru Auditul Public Intern Public Internal Audit Unitatii Centrale pentru Reforma Central Unit for Administratiei Publice Administration Reform Public

UCAAPI UCRAP UNCTAD UNICE

Conferinta Natiunilor Unite pentru United Nations Conference for Comert si Dezvoltare Trade and Development Uniunea Confederatiilor Industriei Union of Industrial and si Patronatului din Europa Employer's Confederation of Europe Uniunea Nationala Transportatorilor Rutieri Romania a National Union of the Romanian din Road Carriers

UNTRR

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1. INTRODUCTION

1.1. RELATIONS BETWEEN THE EUROPEAN UNION AND ROMANIA

On 27 June 2003, Romania submitted to the European Commission the "Report on the progress in preparing the accession to the European Union", which covers the period September 2002 ­ June 2003. Taking into consideration that between the submission of its own Report by Romania and the issue of the Regular Report of the European Commission there is a delay, the Romanian authorities, under the co-ordination of the Ministry of European Integration, have completed the information contained in the initial Report. The current Addendum reveals the progresses accomplished in the period July ­ August 2003.

Development of the accession negotiations

In the period July-August 2003, the National Delegation for Negotiations has made constant efforts for the fulfilment of the commitments undertaken in the position papers and for the completion of the measures and actions from the "Plan of priority measures for European integration", which would facilitate the negotiation process and the closing of certain negotiation chapters by the end of the Italian Presidency. The following documents have been adopted and submitted to the Romania-EU Accession Conference: the Supplementary Position Paper II for Chap. 7 ­ Agriculture and the Complimentary Position Paper I for Chap. 28 ­ Financial Control. Moreover, the documents for two other chapters have been drafted and submitted to the European Commission for observations, as follows: Chap. 2 ­ Free Movement of Persons (Complimentary Position Paper II) and Chap. 14 ­ Energy (Complimentary Position Paper). Technical consultations with the Commission have taken place as well in the same period, on the following two chapters: 14 ­ Energy and 21 ­ Regional Policy. The permanent dialogue with the Italian Presidency of the EU Council and the services of the European Commission have added a notable contribution to the progress of the negotiation process. The success was also a result of the efforts made in order to submit in time and in good conditions the Complimentary Position Papers. The progress made has been illustrated by the success in the European Council in Thessalonica, where the necessity to close the accession negotiations in 2004 during the current mandate of the European Commission has been confirmed, as well as the necessity to complete the accession process in 2007. The importance of the Thessalonica Council Conclusions also resides in the paramount importance of the decision taken to dissociate the debate regarding the 2007-2013 Financial Framework from the negotiation process with Romania and Bulgaria.

The latest developments of the bilateral relations Political dialogue

Within June-September 2003, Romania - EU political dialogue has maintained its dynamic and substantial character. On June 20th, 2003, the Romanian delegation lead by Romania's President attended the European Council in Thessaloniki, which recognized Romania's progress and reiterated its support for Romania's objective of European integration, of concluding 15

negotiations in 2004 and acceding to the EU in 2007. On June 21st, the delegation lead by Romania's President participated in the EU- Western Balkans Summit and reiterated Romania's support for the EU policy in the region. This period has also registered contacts at minister level with European officials, at the level of the ministers, which have strengthened the dialogue and bilateral cooperation in the accession preparation process. Participation of the minister of transport in the informal ministerial meeting on Transport (Naples, July 4-5th, 2003); Participation of the minister of European integration in the conclusion meeting of the European Convention, final moment of an active involvement in the debates on the future of Europe (Brussels, July 9-10th, 2003); Participation of the minister of labour, social solidarity and family in the informal meeting on employment and social policies (July, 10-12th , 2003); Participation of the minister of education, research and youth and of the minister of economy and commerce in the informal conference of the ministers with responsibilities in the fields of research, industry and the internal market (Rome, July 11-12th, 2003); Meeting of the minister of agriculture, water and environment with the European Commissioner for agriculture, regional development and fisheries (Brussels, July 15th, 2003); Meeting of the minister of justice with the European Commissioner for enlargement (Brussels, July 18th, 2003); Participation of the minister of economy and commerce at the informal meeting on environment and energy (Montecatini, July 18-20th, 2003); Meeting of the minister of administration and interior with the vice-president of the European Commission and with the European Commissioner for Justice and Home Affairs (Brussels, July 22nd, 2003); Participation of the minister of health in the informal meeting of health ministers (Milan, September 5-6th, 2003); Participation of the minister of foreign affairs in the informal Foreign Affairs Council (Riva del Garda, September 6th, 2003); Participation of the minister of administration and interior and of the minister of justice, in the informal Justice and Home Affairs Council (Rome, September 1213th, 2003);

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The visit of Romania's Prime Minister to Brussels on September 16th, 2003 represented an important moment in the evolution of bilateral relations.

Implementation of the Europe Agreement

Romania ­ EU trade relations have maintained their increasing evolution for the first 6 months 2003. Trade between Romanian and EU has increased by 6,81%, with a strong increase in imports (+9,8%) compared with only 7,34% of exports. Statistical data available for the period show an increase of bilateral trade deficit by 18,53% compared with the trade deficit registered for the first semester 2002. As a cause of unfavourable atmospheric conditions, it was neccesary to temporary suspend the export of wheat, in order to cover the internal consumption needs of the good. According to provisions of Art. 34 of Europe Agreement, Romania comunicated to the European Commission the adoption of this measure. 16

In July 2003, the Draft of the Framework Law on the regulated profession recognition was finalized; it transposes the directives of the general system of recognition. When the observations European Commission are received, the draft law will be promoted for the approval of the Government and sent to the Parliament for adoption. A draft normative act for amending Law No 160/1998 on the organization and exercising the profession of veterinarian was prepared. The draft law eliminates all technical barriers for the citizens of the European Union and of the European Economic Area, regarding the exercise of the profession of veterinarian on the territory of Romania. The draft law is now in the final evaluation stage by the Senate, following to be finalized and promulgated this year.

Non-reimbursable Pre-accession Financial Assistance (Phare, twinning, ISPA, SAPARD, participation in Community programmes)

The Progress Report on the implementation of the Strategic Action Plan aiming at improving the administrative and management systems for the operation of the nonreimbursable funds granted to Romania by the European Union, submitted by the Ministry of European Integration to the European Commission in March 2003, included an updated timetable of the measures to be developed in the coming period, aiming at an efficient management of the Phare assistance. MEI is permanently monitoring the fulfilment of the foreseen measures and the respect of the deadlines assumed and intervenes, when necessary, for urging the implementation of the necessary actions. Phare Programmes monitoring and evaluation The reference period registered a sustained activity at the level of the Department for Phare programmes coordination within MEI, taking into consideration that the monitoring and the evaluation developed in the same time with an intense analysis of the contracting stage for the Phare 2001 and 2002 funding and with the finalisation of the Phare 2003 programming exercise. The Sectorial Monitoring Sub-Committees' meetings organised by MEI continued according to the timetable established at the annual meeting of the Joint Monitoring Committee for Phare programmes from 28th of October 2002. In July 2003, the second meeting of the Sectorial Monitoring Sub-Committee no.1Economic and Social Cohesion took place and in August the elaboration of the monitoring reports for the second meeting of the following Sectorial Monitoring SubCommittees' started: no.2 ­ Strengthening the administrative capacity ­ the Public Function and the Public Finance and no.3 ­ Financial Services and Internal Market. The fulfilment of each recommendation regarding the measures for recovering delays or to improve the implementation of the projects, as formulated during the Sectorial Monitoring Sub-Committees is subject to analysis in the following meetings of these sub-committees, as well as, globally, in the annual meetings of the Joint Monitoring Committee. Following the finalisation of the Interim Evaluation Reports by EMS for Financial Services and Public Finance, in July 2003 de-briefing meetings were organised by the European Commission Delegation, all involved institutions being invited. During these meetings, concrete measures and deadlines were established for the fulfilment of the Reports' recommendations. In June 2003 the EMS Headquarters in Brussels submitted to the Ministry of European Integration the first draft of the Country Report regarding the efficiency of the National Aid Coordination structures. The Ministry of European Integration formulated 17

substantial comments to this report and the final version will be debated after it is published. On-going Phare programmes The implementation of the projects financed through the budgetary allocations of the years 1999, 2000, 2001 and 2002 continued. Phare 1999 From the Phare 99 allocation, the implementation of the RICOP Programme is on going, as the deadline for the disbursement period is 31 December 2003. Phare 2000 Due to the complexity of certain projects financed under the Phare 2000 Programme and in order to allow the achievement of the foreseen objectives, the Ministry of European Integration requested to the European Commission in June 2003 the approval for the extension of the disbursement period for six projects from the Financing Memorandum for National Phare and for two projects financed through Phare CBCs. The Ministry of European Integration is weekly monitoring the implementation of these projects so that the contracted funds are fully absorbed. Phare 2001 The contracting deadline for the Phare National Programme is 30 November 2003, and the deadline for disbursement is 30 November 2004, except for the projects "Improvement of maritime and inland waterway safety", "Assistance for the implementation of environmental policies in Romania", "Investments in Economic and Social Cohesion", "Energy efficiency improvement in district heating systems", for which the deadline is 30 November 2005. During July-September 2003, as a result of concentrated efforts of the Implementing Agencies and Authorities and under the strict monitoring of the specialised department within MEI, the elaboration, revision and finalisation of the documents necessary for launching the tenders was urged, in order to avoid contracting the funds allocated through the Phare 2001 National Programme in the last month of the contracting period. Thus, the conditions for ensuring a higher rate of absorbing the allocated funds than the 2000 contracting are created. Taking into consideration the complexity of certain projects, their special impact in the context of the pre-accession process, the Ministry of European Integration, following the requests of the implementing authorities submitted to the European Commission a request for the extension of the disbursement period in connection with 18 projects financed through the Phare National 2001 Financing Memorandum, allowing thus the full achievement of the objectives established in the project fiches. The analysis of the implementation stage for the Phare 2001 projects made by MEI in June 2003 showed the necessity to reallocate funds, so that projects as the one for child protection or for economic and social cohesion can benefit of supplementary funds for grants, in order to achieve their objectives. The Joint Monitoring Committee approved in July 2003 the Minutes for the reallocation of funds within the Financing Memorandum Phare National 2001. The Inter-ministerial Committee from 25 August 2003 discussed inter-alia the contracting stage of the projects from Phare 2001. The analysis showed that the strict monitoring of the implementation done by MEI starting with January this year allowed the identification in due time of the difficulties that intervened in the pre-contracting phases and the intervention for urging the elaboration of the documents by the 18

implementing authorities or their approval by the European Commission Delegation. The conclusion was that currently there is no major risk of non-contracting the funds allocated through Phare 2001. During the same meeting it was strongly recommended that the institutions involved in organising the tenders in the coming period should mobilise themselves so that the tenders are not cancelled and, consequently, the contracting put at risk. The Implementing Agencies, as well as the Implementing Authorities were requested to provide a weekly workload, monitored by MEI. Phare 2002 In July and August 2003 the elaboration of the documents for launching the tenders (Terms of Reference and Technical Specifications) for the projects financed from the National Programme Phare 2002 continued. The deadline for contracting is 30 November 2004, and the deadline for disbursement is 30 November 2005. MEI is monitoring the development of the pre-contracting phases, insisting upon the implementing authorities to urge finalising the documents, so that contracting could be achieved in the first year of the period established by the Financing Memorandum and the implementation of the projects benefits of the whole duration provided by the project fiches. During the meeting of the Inter-ministerial Committee from 25 August 2003 it was established that the implementing agencies, in consultation with the implementing authorities, elaborate a timetable with estimates for the phases to be followed in the coming period, allowing the identification of the delays and the action to avoid reaching at risk. Twinning projects The implementation of the activities in the Twinning projects financed under Phare 2000 and 2001 continued, according to the established timetables. The Ministry of European Integration participated also in July and August 2003 in the Steering Committees meetings within different twinning projects, in order to get a thorough knowledge about the stage of fulfilling the objectives and about the way the twinning partners are working together. In July-August the Twinning Steering Committee of the European Commission approved 12 Twinning Covenants, out of the 30 projects financed within the Phare 2002 Programme. For Phare 2003 the European Commission approved a number of 32 Twinning projects in the following fields: public administration, environment, agriculture, the banking sector, customs, justice and home affairs, social sector, economic and social cohesion. The project fiches were circulated to the Member States in July 2003, in order to get their expression of interest for participating in the Twinning Covenants. The selection of offers will take place in September 2003. Phare 2003 An important step of the Phare 2004 programming exercise was completed with the adoption, on 10 July 2003 by the Phare Management Committee from the European Commission of the Financing Proposal on the basis of which the Financing Memorandum for the Phare National 2003 will be signed. The proposal was approved as agreed by MEI with the representatives of the European Commission and it was unanimously recognised by the Commission that the 19

proposals presented covered the real priorities of the period our country is undergoing in the pre-accession process and also the high quality of the project fiches elaborated. The financial allocation for Romania in 2003 is 278,5 Meuro, out of which 13 Meuro for cross-border cooperation Programmes with Hungary and Bulgaria. Through the Phare national Programme, with a budget of 265,5 Meuro, projects in the following fields will be financed: Child protection; disabled persons; minorities (34,90 Meuro); Economic policies, finances (11,40 Meuro); Preparation for EU accession, public administration (27,39 Meuro); Customs (3 Meuro); Social sector, health (5,80 Meuro); Agriculture (5,50 Meuro); Energy (1,60 Meuro); Transport (7,30 Meuro); Environment (2 Meuro); Justice and home affairs (22 Meuro); Economic and social cohesion ­projects for Institution Building and investments (112 Meuro); Community programmes (23,40 Meuro).

In August 2003 the Ministry of European Integration received for analysis the text of the Phare 2003 Financing Memorandum that will be signed in the coming period. Multi-annual programming 2004 ­2006 The guidelines of the multi-annual programming and the methodology for the elaboration of the sectorial strategies and of the sectorial project fiches were presented by the European Commission during the seminar organised by MEI in June 2003, together with the independent evaluators of EMS. According to the timetable suggested by the European Commission, the Romanian authorities will elaborate the sectorial programmes until October 2003, under the coordination and guidance of MEI. Following an ex-ante evaluation that will be performed by independent consultants in November 2003, the programmes will be sent for approval to the European Commission. After the negotiations between the Commission and the Romanian authorities are finalised, the Financing Proposal will be submitted by the representatives of DG Enlargement in the Commission to the approval of the Phare Management Committee. In the first decade of July 2003 the institutions involved in the multi-annual programming elaborated the first tools for the sectorial programme fiches that were examined by MEI, revised and submitted to EMS for consultations. Based on these tools, MEI organised on 17 July 2003 a new seminar with the EMS experts. The institutions involved had thus the opportunity to clarify the technical and procedural aspects related to the elaboration of the programme fiches. MEI will continue to monitor in the coming period the drafting of the sectorial fiches following the agreed timetable.

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Meanwhile MEI will identify the priorities for projects in connection with acquis issues to be financed from the Supplementary Facility for the acquis and will ask the institutions to draft preliminary project fiches responding to these priorities. Community Programmes and Phare multi-beneficiaries Programmes Funds from the National Phare 2001 and 2002 were allocated to cover parts of the contributions for Romania's participation in Community Programmes in 2002 and 2003. Taking into consideration, on one side, the fact that our country was invited to participate this year in a larger number of Community Programmes than foreseen by the time the Financing Memorandum was approved and on the other side the fact that the amounts representing the contributions for participation differed in certain cases from the ones initially established, MEI requested the modification of the Phare 2001 and 2002 project fiches for Community Programmes, for a better distribution of the funds allocated to this purpose. The European Commission approved these modifications in July 2003, allowing covering from Phare funds part of the contributions for the new Community Programmes to which Romania participates starting with 2003, as those in the field of public health, social or information technology. On 29 July 2003 the European Commission officially launched the evaluation exercise on Candidates Countries' participation in Community Programmes. Five Candidate Countries, Romania among them, were selected. The Community Programmes to be evaluated in our country are: The Framework Programme no.6 in the field of Research; LIFE II; Enterprise and Entrepreneurship; Combating discrimination; Combating social exclusion.

The approach and the evaluation methodology were presented by the EMS Consortium in an Inception Note, which MEI presented to the institutions managing Romania's participation in the Community Programmes to be evaluated. Apart from the participation in Community Programmes, Romania also participates in the activities of the Environment European Agency. In order to extent the participation in the European Agencies, the European Commission allocated Phare funds for a multi-beneficiary programme to be implemented starting with 2003. Romania will benefit, together with the other Candidate Countries, of the Phare support to develop the national structures, the contact points with several Community Agencies whose activities are of special interest for our country, such as: The European Agency for Safety and Health at Work, The European Agency for the Evaluation of Medicinal Products, The European Monitoring Centre for Drugs and Drug Addiction. In 2003 the European Commission allocated Phare funds for other new multibeneficiary Programmes to which Romania was also invited to take part: the Programme "Environment and Enlargement", the "Anti-fraud Programme for the protection of the financial interests of the Communities", the "Networking Programme", the "Phare Programme for Small Projects". Bilateral Assistance In July-August 2003 the programming of the financial assistance offered by Greece and the selection of the offers received in the framework of the bilateral assistance with Italy and the Netherlands continued. 21

Italy The deadline for receiving the projects to be financed by the Italian Government through the Ministry of Productive Activities was extended until 31 July 2003. Under the circumstances, 7 new proposals added in July to those 17 initially submitted. They were analysed by the Ministry of European Integration and, together with the Interest Declaration issued for each project were sent to the Italian Embassy in Bucharest. Greece Following the ratification by Romania, through the Law 163/2003 of the Hellenic Plan for the Reconstruction of Balkans (HiPERB), financed by Greece, the implementation of the foreseen activities started, according to the agreed timetable. Thus, in August 2003 MEI launched to the institutions of central and local public administration the call for projects, the deadline for receiving offers being 26 September 2003. The Netherlands In July 2003 SENTER International presented the result of projects' selection for those that will receive financing from the 2003 funds of the PSO and MATRA Programmes for pre-accession implemented in the framework of the bilateral assistance with Netherlands. Out of the 81 projects received from various ministries, the MEI selected 26 that were forwarded to the Dutch partners for further analysis. MEI continues to monitor strictly the project proposals for financing under the bilateral assistance in order to avoid any overlapping, to make sure they are complementary to the projects financed through the pre-accession instruments PHARE, ISPA and SAPARD. ISPA Programme In order to coordinate the implementing process of ISPA measures, the organizing of monthly monitoring meetings has been continued. Representatives from all responsible institutions, final beneficiaries and EC Delegation in Romania have attended these meetings. During the reference period, several contracts have been signed, as follows: In the environment field, three Technical Assistance contracts for the ISPA measures which are being implemented in Ramnicu Valcea, Timisoara and Brasov, and three works contracts for the ISPA measures form Craiova, Braila and Valea Jiului; In the field of transports, a Technical Assistance contract for ISPA measure for Sbiu by-pass.

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Also, three tenders for works contracts in the environment field (Arad, Cluj and Piatra Neamt measures) and a works contract in the transport field for Sibiu by-pass have been completed. On 12 September 2003, there were signed the works contracts for the ISPA projects from Arad (budget 13.131.857), Cluj (budget 41.085.709 EURO) and Sibiu (budget 52.575.989). The works contract for Piatra Neamt project in the field of waste management will be signed until the end of September. Concerning the programming activity, the two Implementing Authorities, Ministry of Agriculture, Forestry, Waters and Environment ­ for environment field, and Ministry of Transport, Construction and Tourism ­ for transport field, completed the revision of National ISPA Strategies. The National ISPA Strategy for environment sector has 22

already been submitted to European Commission, and at the end of September the Strategy for transport sector will be transmitted, too. Accordingly the objectives and specific priorities assumed in the framework of these strategic documents, new ISPA applications have been promoted to European Commission: Pitesti and Bistrita measures for water sector, and three new applications for Technical Assistance for preparation of new projects in the transport field, Deva ­ Orastie for road sector and Simeria ­ Brasov for railway sector, as well as for environment sector, for the preparation of new ISPA applications and the strengthening of the institutional capacity of the final beneficiaries from 15 towns which are implementing ISPA measures. During the reference period, several reporting documents on the management and control system of ISPA Programme have been transmitted to European Commission, as follows: At the end of June 2003, several document prepared by Romanian authorities, in order to complete the Audit Report following the EC audit mission carried out in January 2003; In July 2003, the 2002 ISPA Annual Report, prepared in accordance with the provisions of the Annex III 4 from Financing Memoranda, which relates to the management and control system of ISPA Programme; In August 2003, the reporting documents prepared by Romanian authorities, concerning the achievement of the recommendations included in the EC Audit Report, drafted following the EC audit mission held during January 2003 in Romania. Also, there were transmitted the Procedures Manual drafted by National Fund, Central Financing and Contracts Unit, National Road Administration and National Company CFR.

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The complexity of ISPA Programme, the great number of projects being implemented, as well as the information and publicity requirements set up in the ISPA Financing Memoranda agreed by European Commission and Romania, suppose a coherent and unitary approach, both at national and local level, of the aspects relating to communication / information / publicity. That's why, the Ministry of European Integration drafted the National Strategy for Communication for ISPA Programme, which has been approved by the Government of Romania on 11 September 2003. SAPARD Programme Until now, under SAPARD Programme, for the measure 1.1 "Processing and marketing for agricultural and fishery products", 75 projects amounting to 77.71 million euro have been selected and contracted and for the measure 2.1 "Development and improvement of rural infrastructure", 438 projects have been selected and contracted, amounting to 350 million euro. In the monthly sessions for submission of projects, for measure 1.1, 120 projects have been submitted, with a total value rounding to 118,36 million euro, from which: 75 projects contracted with a value of 77.71 million euro 7 projects approved, which follows to be contracted in September 19 rejected projects; 19 projects in evaluation process (submitted in the sessions July, August and September)

From the total of contracted value, the European Community contribution is rounding to 39 million euro, representing 40% from the value of the funds allocated by the European Union under this measure for the years 2000, 2001 and 2002 (95 million euro). 23

For the 75 conclude contracts, until now, 27 acquisition dossiers and 9 payment applications have been submitted, amounting to 1,98 million euros, which presently are verified for the reimbursement of expenditure. Basing on the payment forecasts transmitted by the beneficiaries, it is estimated that for the measure 1.1, until the end of this year will be demanded payments amounting to 11,22 million euros. In the monthly sessions for submission of projects, for measure 2.1, 1.354 projects have been submitted, with a total value of round 1.064 million euro, from which: 438 projects contracted with a value of 350 million euro; 818 eligible projects without available funds for the moment, for which financing possibilities are in course of identification; 97 rejected projects; 1 contract ended on the demand of the solicitant.

From the total of contracted value, the European Community contribution is rounding to 260 million euro, representing 100% from the value of the funds allocated by the European Union under this measure for the years 2000, 2001 and 2002 (268 million euro). For the contracted projects, until now, 438 tender dossier have been submitted to the Public Acquisition Service ­ SAPARD Agency, from which: For 293 projects (70% from total contracted) the tender procedure for establishing the constructions firm that will execute the works, it had been or it is in course of developing; For 62 projects(12% from total contracted) amounting to 41 million euro, the execution works started; Castelu Local Council ­ Constanta submitted the first application for payment.

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Basing on the payment forecasts transmitted by the beneficiaries, it is estimated that for the measure 2.1, until the end of this year will be demanded payments amounting to32.25 million euro. In order to coordinate efficiently the actions regarding Programme implementation, in the referred period, took place the forth reunion of the Monitoring Committee for SAPARD Programme to which had attended representatives of all the implicated institutions and of European Commission in observing position, representatives of related non-governmental organizations, being invited also, presidents of the agriculture commissions from the Parliament and the head of European Commission Delegation in Romania. Regarding the Programme implementation process ­ the contracting phase ­ for the accredited measures, in the period July ­ august 2003, contracts have been concluded for projects submitted in October 2002 for the measure 2.1 ­ Development and improvement of rural infrastructure, in the limit imposed by the existent funds allocated under this measures. For accrediting the last measures from the National Programme for Agriculture and Rural Development, in this period took place the following events: Approval of modifications of the technical fiche of the measure 3.4 ­ "Development and diversification of economic activities, multiple activities and alternative incomes" in the last reunion of the Monitoring Committee. The meeting of the STAR Committee, on July 23 2003 where the documents issued by the Romanian part regarding the amendment of the National Programme 24

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for Agriculture and Rural Development (NPARD) had been debated, afterwards being adopted with unanimity of votes. For the measures for which the technical fiches had been approved, the procedures and the structures necessary to the implementation process has been created and the specialized services from the European Commission, basing on the audit mission conclusions from the period July 9-18 2003 will conclude the documents necessary for releasing, by the communitarian part, of the Accreditation Decision regarding the conferral of the technical and financial management for implementing the measures 3.1 ­ " Investments in agricultural holdings", 4.1 ­ "Improvement of the vocational training" and 3.4 ­ "Development and diversification of the economic activities, multiple activities and alternative incomes".

In order to prepare the process of accreditation of the last measures from the National Programme for Agriculture and Rural Development (NPARD), the Romanian authorities implicated in the Programme development, focused on the adjustment of the "Timetable of the preparation process of the technical fiches of the measures 1.2, 2.2, 3.2, and 3.3 and those approval and also the conclusion of the procedures and accreditation" in order to accelerate the preparation and the accreditation of the measures. In order to ensure the funds necessary to conclude new contracts for the projects for which is solicited financing under the Programme, it had been completed the Annual Financing Agreement for 2003, between Romanian Government and European Community Commission. The Annual Financing Agreement brings modifications of the Multiannual Financing Agreement and of the Annual Financing Agreement for 2000, 2001 and 2002, extending the period of the community engagements. For offering a whole picture over the Programme Implementation and in order to contribute to its improvement, in the mid-term evaluation are analysed the first results of the implementation process, in this period being issued the Inception Report.

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2. CRITERIA FOR MEMBERSHIP

2.1. POLITICAL CRITERIA

2.1.1. Democracy and the rule of law The Parliament

During the period 15th May ­ 30 June 2003 the activity of the Parliament focused mainly on finalising an important number of legislative proposals, especially from among those already adopted by the one of the Chambers, or those submitted by the Government for debate and approval through the emergency procedure. During that period, both Chambers of the Parliament met in extraordinary sessions dedicated to debating and final voting of the legislative proposal for revision of the Constitution. The Parliamentary Committee for the preparation of the legislative proposal for the revision of the Constitution, set up by the Parliament Decision no. 23/25 June 2003, submitted to the Permanent Bureaus of the two Chambers of the Parliament the draft proposal for the revision of the Constitution, together with the signatures of 233 deputies and 94 signatures of senators, as well as with the approval of the Legislative Council and the Decision no. 148/16.04.2003 of the Constitutional Court which stated favourably on the constitutionality of the legislative proposal, as compliant with the requirements of Art. 146 paragraph 1 of the Constitution of Romania. The Permanent Bureau of the Chamber of Deputies, approved the Report of the Committee on the amendments (a number of 253 amendments, from which 34 accepted and 209 rejected) during its meeting of 10th of June 2003, and set the date of 16 June 2003 for the beginning of the debates. The debates in the Chamber of Deputies and the final vote resulted in a project whose main provisions concern: The constitutional basis for the achievement of Romania's integration in the European Union and the accession to the North-Atlantic Organization; The improvement of the policy making process, as well as the consolidation of the rule of law through the specialization of the legislative chambers. While maintaining their equality in the exercise of power, the chambers will share their competencies and the order of their fulfilment in such a manner conducive to the elimination of the mediation process through joint commissions or joint session of the Chambers; The principle of the separation and balance of powers, as well as the principle of free initiative were defined in an explicit manner. Private propriety was guaranteed and the role of employers associations in society was expressly recognised. The parliamentary immunity was strictly limited to the exercise of the mandate, as a deputy or senator; The regime of the Emergency Ordinances was strictly limited to extraordinary situations that suffer no delay; The control of the Parliament over the Executive was strengthened, through motions, briefing procedures, interpellations and questions etc. The rights of persons belonging to national minorities were clearly specified. A constitutional framework was set up in order to achieve a correct, efficient, and impartial act of justice, through the setting up of the High Court of Appeal and Justice (Inalta Curte de Casatie si Justitie), the re-organization of the Superior Council of the Magistracy, the modification and completion of some attributions of 26

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the Constitutional Court, the increase of the role of the Ombudsman, of the Court of Accounts, of the Economic and Social Council etc. The improvement of other provisions concerning persons and institutions, on the basis of over 10-year experience in the application of the current Constitution.

The Senate started its debate on the legislative proposal for revision of the Constitution - already approved by the Chamber of Deputies ­ on its extraordinary meeting of 25 August 2003. Although the members of the Senate formulated 234 amendments ­ of which 32 accepted, 191 rejected and 11 retired ­ as compared to the Report of the Committee from the 6th of August 2003 on the draft revision of the Constitution, the provisions relevant for Romania's EU membership did not suffer modification. Most of the amendments submitted by the senators and accepted by the Committee, focused on: The improvement of the solidarity and social protection; The provision according to which detention (including pre-trial detention) can be authorised only by the judge; The free access of the person to economic activity and the free initiative are granted; An improved communication and cooperation between Parliament- President of Romania, Parliament-Government; The specialization of judiciary in courts for labour litigations, minors, commercial issues, administrative contentious, banking - finances etc.

The Senate also adopted the draft text of the revision of the Constitution on the 2nd of September 2003. As a result of the differences between the respective drafts adopted by the Chamber of Deputies and the Senate, the law for the revision of the Constitution will be passed to the Committee for Mediation. Nevertheless, the main objective of the draft proposal on the revision of the Constitution was accomplished, as it exists in the texts adopted by both Chambers. Thus, according to art. 1451 and 1452, Romania's accession to the European Union Constitutional Treaties equates with "transferring several attributions to the European institutions and the exercise, together with the other member states of the competences stipulated by the Treaties". Accession is ratified by law, adopted in a joint session of the Chamber of Deputies and the Senate, with a 2/3 majority of the votes of deputies and senators. As a result of the accession, the provisions of the European Union Constitutional Treaties and of the other European regulations will take precedence, in case of inconsistency between them and the internal law, under conditions stipulated in the accession treaty. This applies also to the situations of revision of the founding Treaties of the European Union. The President of Romania, the Parliament and the Government are responsible for achieving the commitments stemming from the accession treaty. In the light of the above provisions, art. 16 of the Constitution was modified and a new art. 351 was included. According to the provision of article 16, paragraph 4, "In the context of Romania's accession to the EU, European Union's citizens who fulfil the requirements of the organic law have the right to elect and to be elected for the authorities of the local public administration". According to article 351, under the same conditions, "Romanian citizens have the right to elect or to be elected for the European Parliament". According to the constitutional provisions (which specify that revision of the fundamental law is definitive after its approval by referendum, organized in no more than 30 days after the adoption of the draft law) the Constitutional Commission has 27

elaborated and submitted for governmental approval the Draft Law on organising the referendum on the new Constitution. With regard to the electoral system, a joint Special Committee of the Chamber of Deputies and the Senate was created in order to prepare the electoral laws (by the Decision of Parliament no.18/26 June 2003). The creation of this Special Committee is the result of a good and efficient cooperation between all political forces represented in Parliament in the drafting of important legislative proposals. The Committee will translate into this work the experience acquired in the elaboration the draft Law on the political parties, as well as in the debate of the parliamentary initiative for the revision of the Constitution. The debates of the Committee will be open to the participation of experts and representatives of public authorities or of non-governmental organizations. The intention is to apply the new electoral laws in 2004 (when elections will be organized at least for the local authorities and for the President of Romania), which makes necessary to elaborate, debate and adopt them in 2003. During 25-30 August 2003, an extraordinary session of the Parliament took place and more than 10 pieces of legislation with effects on acquis transposition were adopted. The Parliament received from the Government the Priority Legislative Programme, which contains significant projects for the accession to NATO and EU and for speeding up the process of harmonizing the Romanian legislation with the EU acquis, in order to be taken into consideration for the session of September - December 2003. 43 draft laws, which are in parliamentary procedure, either in Senate or in Chamber of Deputies, were nominated as necessary to be adopted with great priority; other 30 pieces of legislation were also specified, as they have implications on the transposition of the acquis. Firm measures were established for finalising as soon as possible another set of 73 draft laws, going to be approved by the Government and submitted to the parliament; more than half of them are transposing the acquis in the Romanian legislation

The Executive

The activity of the Executive during the period of reference intensified in all aspects. In order to support Romania's accession process to the European Union, the weekly meetings of the Government include as a permanent agenda item the "Information concerning the stage of preparations for the integration of Romania into the European Union". Following the debates on documents presented under this item, ministries and other institutions responsible for accession preparation reorient their priorities towards the accomplishment of those measures which are lacking behind the plan. Within the reference period, the Executive Committee for European Integration under the Chairmanship of the Prime Minister of Romania met weekly in order to analyze the progress made in the accession preparation process and to examine the political and diplomatic activities relevant for Romania's European integration. The main topics discussed within the meetings of the Executive Committee, during July ­ August 2003, were focused on: Romania's compliance to the functional market economy criteria: during the analysis, a Priority Action Plan in this area was discussed; its implementation is aimed at substantially influence the progress with the functional market economy, before the elaboration of the Regular Report 2003 of the European Commission; Stage of public administration reform: the minister of former Ministry of Public Administration presented a Strategic Framework necessary for updating the Strategy for Public Administration Reform (foreseen to be complete by the end of 28

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September 2003) and the current priorities of the activities within its ministry, including: Making operational the Corps of high civil servants within the system of public administration; Elaboration and implementation of the new Law on pay system for civil servants; Ensuring the Framework for Decentralisation, aimed to clarifying the functional tasks and the relationships between the central and local administration; Implementing training programs for civil servants.

Stage of the privatisation process in various fields/sectors that the Ministry of Agriculture, Forests, Water and Environment, APAPS and Saving House (CEC) are responsible for; Strategy for judicial reform, and its main objectives: Reorganising the judicial courts; Specialising the Courts in fields such as: minors and family, commercial sector, fiscal ­ administrative sector, labour, intellectual property; Establishing the institution of Court manager (permitting though to take away from the head of the court the administrative tasks). Ensuring (Minister of Public Finance) the budgetary resources necessary for the judicial reform.

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Following the debate within the Executive Committee, the Government approved the Strategy for Judicial Reform by GD No 1052/2003 (OJ No 649/12.09.2003). Food safety: after the analysis of current situation, the Ministry of Agriculture, Forests, Water and Environment was asked to elaborate all the normative acts' drafts necessary for setting up the Food Safety Authority, in order to be approved by the Government and to enter in legislative procedure at the beginning of autumn session of the Parliament. As a result, the GO no. 90/2003 was adopted by the Government (OJ No 624/31.08.2003)

During the joint session of the Chamber of Deputies and the Senate on 19 June 2003, the Prime-Minister of Romania submitted to the approval of the Parliament both the modification of the structure and of the composition of the Executive and the concept which determined the re-organization of the Executive: the growth of the administrative capacity and the efficiency of the act of government in the achievement of the domestic reform, as well as the intensification of the foreign policy activities aimed at achieving the major target represented by Romania's accession to the European Union in 2007. The Decision of the Parliament no. 16/19.06.2003 which approved the Prime-Minister proposal on the structure and composition of the Government brings a reduction in the number of ministries from 24 to 14. By its new structure and number of ministries, the Romanian Executive is comparable with those of the European countries with a modern, medium-sized administration. The priorities of the present Executive remain the same in the field of the foreign policy. The Government action will intensify regarding the implementation of the social programme in order to solve the problems accumulated in the fields of health, labour and social security, education, research and youth etc. At the same time, the content of the social dialogue will be improved through partnership with trade unions and employers' associations. The same objective goes for the control activity (two functions were 29

drawn up: that of ministry-delegate for the relations with the social partners and of ministry-delegate for the coordination of the control authorities). Regarding the central public authorities, the most developed and complex structural reform was accomplished in the field of the public administration, by the creation of the Ministry of Administration and Interior - MAI (from the fusion of the former ministries of public administration and interior). One of its main tasks is the fight against corruption and excessive bureaucracy. The current structure of the MAI assures the necessary conditions for bringing the administration closer to the citizen, for the finalisation of the process of demilitarisation and decentralisation of the public services, for the implementation in the current activity of the principles of impartiality, integrity, transparency of the decision-making process and the supremacy of the public interest, in order to remove the existing discrepancies between the institutional policy and the legal provisions. In order to speed up the reform of public administration and to respond to European Commission observations and recommendations, during the session of 15 July 2003, there was decided to amend the constitution and missions of the Government Council for Monitoring the Public Administration Reform, as well as to re-organise its activity in order to become operational and efficient. The reorganisation was approved by GD No 925/14.08.2003 (OJ No 599/22.08.2003) on the re-organisation of the Government Council for Monitoring the Public Administration Reform. The main decisions on public administration reform, adopted during this meeting were as follows: Forwarding to all ministries and prefectures the Prime Minister' s Circular, asking them to establish their own strategies for accelerating the reforms- according to the methodology for the elaboration of the Multi-annual Programme for Modernisation. These documents, that are going to be analysed during the Council's meeting in September, shall be the basis for the elaboration of the updated Government Strategy on the acceleration of Public Administration Reform; Organizing the National Forum for publicly debating the updated strategy draft, with a large participation of all the actors involved in the reform process; Re-organising the national network for monitoring the reform and strengthening the role and missions of the Central Unit for the Public Administration Reform, organized as a directorate within the Ministry of Administration and Interior.

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The Central Unit for Public Administration Reform, as a specialized directorate within the Ministry of Administration and Interior, as long with the national network for monitoring the public administration reform, carried on the following activities during June - August 2003: Providing technical secretariat and preparing the necessary documents for the meeting of the Government Council for the Public Administration Reform, held on 15 July 2003; Providing documentation and technical support for the ministries and prefectures in elaborating their own strategies for the acceleration of the public administration reform according to the Prime Minister Circular; Launching and promoting at the national level the Phare project "Creating a Corps of Professional Public Managers within the Civil Service"; selection of candidates who will participate in the scheme developed by this project; Organising the National Forum for public debate on the updated Government's Strategy draft, consisting in ten meetings at national and regional level, during September - December 2003; 30

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Finalizing the competition "100 Projects for Romania" entitled "Improving the quality of the public services provided to the citizens by the public administration".

In order to support the reform process, two new structures have been established and placed under the Prime Minister's direct coordination: The Agency for Governmental Strategies, as a specialized body of the central public administration and the Project management unit for the public administration reform, for implementing and monitoring the programme to be agreed with the International Bank for Reconstruction and Development within the Programmatic Adjustment Loan- PAL, established by GD No 856/17.07.2003 (OJ No 531/24.07.2003) on setting up the Project management unit for the public administration reform. An important contribution in achieving the administrative reform is expected also from the newly created National Authority for Control ­ ANC, designed to articulate the activity of all organisms which have to contribute actively and decisively to the fight against corruption, guaranteeing consequently a coherent decision-making policy. The Board of Control of the Prime Minister, the Financial Guard and the General Customs Directorate are to be included in this system. The ANC is not conceived as a ministry of control, but as an authority with the competence of unitary coordination of the structures with attributions in the field of control. It aims at eliminating all parallel structures, inefficiency, "abuse of control" (by succession or overlapping ­ due to the lack of coordination), in favour of an effective action of the specialized authorities, the fight against fiscal fraud and underground economy, regaining the trust of investors and of the honest economic agents, and assuring the needs of the citizens. At the same time it was established a procedure with the regulatory authorities, especially those authorizing the prices. These are no longer subordinated to the ministries but, according to recommendations of the European Commission, they are specialized structures, usually directly subordinated to the Executive or autonomous. In the field of the legislative activity, the Executive ­ following the common practice established at the beginning of governance ­ has already elaborated and approved the "Priority Legislative Programme for the second ordinary session of 2003" (September ­ December). Among the projects which are important for accession preparation, one can mention: Draft law on the statute of magistrates, Draft law on the organization of the judiciary system, draft of the new Criminal Code, Draft law on the status of local elected authorities. Among the projects to be prepared by the Executive and sent for the debate and approval of the Parliament, are to be mentioned the draft Fiscal Code, Code of Fiscal Procedure, the draft on the bankruptcy of the banks, the draft sanitary ­ veterinary law, the draft law on children's rights, the draft law on the legal regime of the adoption, The draft of the Administrative Code and of the Code of Administrative Procedure. The Executive focused thoroughly on the legal process through Emergency Government Ordinances. After the restrictive procedure established in February 2003, their number decreased, significantly (42). All the mentioned EO were carefully analysed and received the "opportunity note", as they were determined by requirements linked to the fulfilment of the commitments in the integration process, the ratification of international acts, payments in due time, the elimination of negative effects determined by the agricultural situation, the fight against serious crimes etc. The Parliamentary Committee for the preparation of the legislative proposals on the revision of the Constitution as well as the Parliament and the Executive have placed a special focus on the problem of legislative delegation of competences. According to the revisions brought to the Constitution of Romania (above-mentioned), revisions 31

which are to be approved by referendum, the Executive can adopt Emergency Ordinances only when three conditions are fulfilled: a. The existence of an extraordinary situation, whose regulation suffers no delay; b. The ordinance must be motivated within the content of the disposed measures; c. The ordinance must be deposed for debate under emergency procedure at the competent Chamber and published in the Official Journal. Emergency Ordinances cannot be adopted in the constitutional law field. They do not affect the regime of the fundamental institutions of the state, the rights, freedoms and duties stipulated in the Constitution, the electoral rights. They do not dispose measures of forced transfer of goods in public property. In addition, the Parliament has the obligation to regulate, through the adoption of a law the necessary measures regarding the legal effects produced during the period of application of the ordinance (a process that must be realized within 45 days from the moment the Ordinance was submitted) In this context, it is important to remind that on 25 June 2003, the Senate approved the EO no. 27/2003 regarding the procedure of tacit approval. By its contents, this legislative act: Removes the administrative barriers in the field of businesses; Forces the public administration authorities to respect the terms established by law for the issuance of the authorisations; Gives an impulse to the economic development, offering several easy conditions to the investors, at the lowest authorisation costs; Fights against corruption, by decreasing the arbitrary factor in the field of administrative decisions; Promotes the quality and promptitude of public services, by the simplification of the administrative procedures.

The Judiciary

During the reference period, Romanian authorities continued to implement measures within the framework of the reform of the judicial system. I. Legislative measures

1. Through the EO No 58/2003 on the amendment and completion of the Civil Procedure Code (OJ No 460/28.06.2003) the legal way for extraordinary appeal in annulment was removed and a new reason for review was inserted in situations where a decision of the European Court of Human Rights found, through its decision, a violation of rights or fundamental freedoms. Also, in order to unify the judicial practice and to ensure the stability of civil judicial relations, the separation of competence for first instance between the courts of 1st instance and the tribunals continues to be based on the criterion of the amount of money involved. New measures were taken for the improvement of the activities of the Supreme Court of Justice (future High Court of Appeal and Justice): Ensuring provisional secondary premises in Bucharest ­ the first such premises were identified and will be transferred into the administration of the SCJ, after the adoption of a normative act in the matter (1st trimester 2004); Reorganizing, within the High Court of Appeal and Justice, the sections, taking into account the perspective of new competences, as well as the creation of 32

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specialised courts, as follows: the Civil and Intellectual Property Section, the Criminal Section, the Commercial Section, the Contentious Administrative and Fiscal Business Section, the Labour and Social Insurance Section and the Section of Admissibility in Principle; Creating several panels of judges for the sections with a heavy workload (the Civil Section and the Commercial Section);

2. Amendments to the procedural criminal legislation a. Law No. 281/2003 for amending the Criminal Procedure Code (OJ no. 468/1.07.2003) increased the criminal procedural guarantees, especially those regarding the measures that deprive of or restrict freedom, or those pertaining to the instatement of the court's control regarding the prosecutor's solutions of non-indictment (not sending to justice). On the other hand, new institutions are being introduced into the Criminal Procedure Code, such as witness protection, or undercover investigators, meant to provide effective and modern instruments for the identification, prosecution and trial of criminals who use organised forms and improved methods of perpetration. The Criminal Procedure Code has been substantially supplemented with respect to the following institutions: Measures depriving of or restricting freedom amended and

The most important amendment in this matter is that the prosecutor will have the competence to authorize the preventive arrest during the criminal prosecution, for a maximum period of three days; after this period, the decision will exclusively fall into the competence of the court, unlike the previous regulation, under which this competence was ascribed only to the prosecutor. Increasing the guarantees granted to accused juveniles or juvenile defendants

The chapter on preventive measures includes a new section containing regulations regarding specific rights and a special preventive detention for juveniles, in accordance with the particularities of their age, special terms for the length of the measure of pre-trial detention or preventive arrest, as well as a maximum term for which juveniles can be kept in preventive arrest. Court control over certain measures or acts decided during the criminal prosecution

Court control has been instated regarding the prosecutor's solutions of "not sending to justice" (non-indictment). Currently, the prosecutor's ordinances in this matter can be disputed only by complaint addressed to the hierarchically superior prosecutor. In the light of the decisions of the Constitutional Court and of the jurisprudence of the European Court of Human Rights it has been stipulated that the affected person or any other person whose legitimate interests have been affected by the prosecutor's decision of removal from criminal prosecution or of ending the criminal prosecution or by his/her resolution not to start criminal prosecution, can address directly to that court which would, according to the law, have the competence to judge the cases in first instance. Witness protection In the new Criminal Procedure Code provisions were included that ensure the protection of witnesses in cases where disclosing their real identity would put into jeopardy their life, corporal integrity or freedom. 33

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Undercover investigators

Their activity is strictly defined by the law, meaning that undercover investigators may be used only in certain causes stipulated by the law, that they act only with the authorization of a prosecutor designated for this purpose by the General Prosecutor from the Prosecutor's Office attached to the Supreme Court of Justice and only for a limited period of time. The data thus obtained can be used only in the criminal case and only in connection with the persons aimed at by the authorization. Extension of the right to reparation of prejudice The extension has been carried out, on one hand, by eliminating the limits stipulated in the texts currently in force, and on the other hand, through reference not only to the persons deprived of freedom, but also to those whose freedom has been restricted. This extension ensures conformity with the decisions of the Constitutional Court in the matter, as well as with the provisions of Art. 5 paragraph 5 of the Convention for the Defence of Human Rights and Fundamental Freedoms and of Art. 3 of the 7th Optional Protocol to the Convention. a. EO No. 66/2003 on modifying certain provisions of the Criminal Procedure Code (OJ No 502/11.07.2003) To avoid any errors and/or confusion in interpreting the text regarding the prolongation of the measure of preventive arrest, the EO No. 66 /2003 has also amended paragraph 1 of Art. 150 and 160c of the Criminal Procedure Code. 3. Proposal for revision of the Constitution Provisions relating to the judiciary are based on the following principles: The principle of separation and balance of powers in the State ­ legislative, executive and judiciary; The constitutional principle of solving causes within a reasonable term, in a fair trial; Extradition of Romanian citizens will be possible based on the international conventions to which Romania is a party, according to the law and based on reciprocity; Judges will be the only authority qualified to issue preventive arrest warrants; During criminal prosecution, it will be possible to authorize the preventive arrest for duration of no more than 30 days, the total duration not exceeding 120 / 180 days (according to the version of the Chamber of Deputies / Senate); During the judgment, the court shall authorize the preventive arrest for no more than 30 days, with the possibility of prolongation (text of the Chamber of Deputies); Only the judges will authorize searches; The prosecutor's offices will oversee and control the work of the judicial police Romanian citizens belonging to national minorities will have the right to express themselves in their mother tongue before the courts, according to the organic law; The patrimonial liability of the State and of the magistrates (for the prejudice caused by acting in ill faith) for prejudice caused by judicial errors; The Superior Council of the Magistracy is to become the guardian of the independence of justice. 34

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5. The Draft Law on judicial organisation The draft Law on the judicial organization was approved by the Government on 29 July 2003 and sent to the Senate on 15 August. The main provisions of the draft law are: Reorganization of the courts and of the prosecutor's offices; Creation of specialised courts and prosecutor's offices; Introducing the principle of collegiality for solving cases in first instance; Creating steering colleges in every court; Involvement of the courts and prosecutor's offices in the elaboration of their own budgets; Random case assignment; Introducing the institution of court manager, under the co-ordination of the court president, to take over the latter's administrative duties; Introducing the principle of collegiality in the establishment of the panels of judges (the sole judge is to be kept only for the trial of minor causes); Creating the legal framework for the establishment of specialised courts (in a first stage, specialised panels and sections will be created; subsequently, based on evaluations, specialised courts will be created); The draft law on the statute of magistrates was approved by the Government on 29 July 2003 and sent to the Senate on 15 August. The law stipulates that: The appointment of probationary magistrates, the proposals for appointment of irremovable magistrates, the promotion of magistrates into executive and leadership position at the level of courts and prosecutor's offices are carried out by the Superior Council of the Magistracy, without any interference from the Minister of Justice); The appointment in leadership posts in the courts and prosecutor's offices shall be the prerogative of the Superior Council of the Magistracy and it will be carried out based on open competition; The suspension from office of magistrates shall be decided by the Superior Council of the Magistracy, and the removal from office shall be decided by decree of the President of Romania, on recommendation from the Superior Council of the Magistracy; The role of the Superior Council of the Magistracy in the recruitment of magistrates has increased. According to the new drafts, the Superior Council of the Magistracy approves the date of the examination for admission into the National Institute for Magistrates; appoints the examination boards, establishes annually, together with the Minister of Justice, the number of students in the NIM; approves the curriculum for the professional training of the auditors of justice etc.); also, the SCM has increased attributions regarding the capacity examination for probationary magistrates. The Superior Council of the Magistracy approves the continuous professional training schedule for the magistrates.

5. The Law on the statute of magistrates

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Other provisions that ensure the independence of justice: 35

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The delegation of judges can be decided by the president of the court of appeal, (unlike the current regulation where it is decided by the Minister of Justice), and can be done only in the jurisdiction of the same court of appeal; The possibility to be nominated into the magistracy without an examination was removed, except for senior university professors.

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6. The draft of the new Civil Code On 29 July 2003 the draft of the new Civil Code has been presented to the Government for the first reading, and then sent to the other institution for As particularly relevant from the perspective of the legislative harmonization with European law are worthwhile to be mentioned: Introduction of a more flexible approach as regards the relation between domicile-residence-dwelling, more appropriate in the economic, social context after 1989, when the right to property has acquired new dimensions and a family can own several estates; New provisions regarding protection of minors through guardianship and the reinsertion of the family council; The new regulations on legal persons, in accordance with Romania's process of preparation for accession to the European Union; The elimination of the discrimination, through recognition of the right of the male minor to conclude marriage at the age of 16, thus responding to the European requirements to remove discriminatory provisions on grounds of sex in this area; Introduction of new grounds and procedures of divorce, which will respond, also, to legal requirements for the respect of family life and personal privacy; New dispositions in the area of the "Cadastre" (land register) which establish the constitutive nature of the registration of the creation or transfer of real rights over estates etc. Organizational measures

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II.

1. Through the GD No. 736/2003 (OJ No. 482/7.08.2003) on the organisation and operation of the Ministry of Justice several organizational measures have been taken in order to increase the effectiveness of its activity. Thus, the Directorate for Relation with the Public Ministry and Crime and Corruption Prevention has been transferred into the direct subordination of the Minister of Justice, and the Unit of World Bank Program Implementation has been transferred into the direct subordination of the Secretary of State for European integration and international relations. New structures were created: the Directorate for Investments and Administration, the Directorate for Medical Assistants and the Service for Public Relations and cooperation with NGO-s. In this organization, the Minister of Justice, who can transfer his/her attributions of coordination to the Secretaries of State or, by the case, to the Secretary General, coordinates: The National Institute for Magistrates; The Training and Specializations centre for Clerks and other Specialised Auxiliary Personnel; The National Institute for Criminological Expertise; The National Criminology Institute; The National Trade Register Office; The General Prisons Department and the units in its subordination; The Independent Protection and Anti-corruption Service; The Training Centre for Magistrates, Clerks and the other personnel in the justice system.

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2. Decision No. 13 of the Superior Council of the Magistracy of 25 June 2003 on the amendment of the Regulations on the operation of the Superior Council of the Magistracy (OJ No. 491/2003) According to this decision, the Superior Council of the Magistracy is made up of 17 magistrates, elected for 4 years by the Chamber of Deputies and the Senate, in a joint session, and exercises the prerogatives established by the Constitution, by the Law No. 92/1992 and the EO No. 20/2002. The activity of the Superior Council of the Magistracy is performed in annual sessions, in monthly sessions, but there is also the possibility to convene extraordinary sessions. Also, in order to decide on the proposal of revocation from leadership posts, the Superior Council of the Magistracy is notified by the Minister of Justice. The magistrate concerned will be heard, with the possibility provided of making verifications. III. Other measures taken during this period. a. The Order of the Minister of Justice No. 1624/C (OJ No. 529/23.07.2003) approved the maximum fees for the services performed by bailiffs. b. The Government Decision No. 872 of 29 July 2003 (OJ No. 566/6.08.2003) approved, to begin in 2003, the organisation, with the Ministry of Justice, of selffunded competitive examinations for admission into the magistracy or for employment into the units of the judiciary. c. The Order of the Minister of Justice and of the Minister of Health No. 1976/C/909 (OJ No. 522/21.07.2003) on establishing certain measures on the celerity in performing the expertise for establishing the discernment of minors from 14 to 16 years of age who committed acts punishable by the criminal law. The order stipulated that the expertise to determine the discernment of minors who committed acts punishable by the criminal law shall be performed, within 3 hours from the date of registration of the request, by a commission from the Forensic Institute, composed of 2 psychiatrists and one forensic physician. If hospitalisation of the minor is required, the term for performing the expertise shall be of 10 days. IV. Administrative capacity a. During the session May ­ June 2003 the examination took place for the promotion of judges into vacant offices or in the same place or with superior courts, and the results were approved by Decision of the Superior Council of the Magistracy, No. 24, of 2 July 2003. Thus, 77 judges have been promoted in the same place, and 27 judges were promoted with superior courts. b. Status of the posts of judges on 1 August 2003 The total number of posts for judges is 3677. Of these, 3441 posts are occupied. Therefore, a percent of occupation of the posts for judges is of 93,5%. No 1. 2. 3. Court Court of appeal Tribunal 1st instance court Total number of judges 528 1112 1801 Number of probationary udges 82 37 Number of final judges 528 1112 1719 Number of judges by sex F M 346 776 1262 182 336 539 A. General data

c. The number of cases solved and the length of the procedure during 1.01.2003-30.06.2003: Cases solved Civil in 1st instance courts Contestations Commercial in 1st instance courts Civil in 1st instance in tribunals Commercial in 1st instance in tribunals Intellectual property tribunals Law 64/ 1995 Bankruptcy Commercial appeal in points of fact Civil appeal in points of fact Commercial appeal in points of law Civil appeal in points of law Contestations appeal in points of law 1st instance, courts of appeal commercial Contentious Adm. CoA 1st instance Co.A.appeal in points of fact commercial Intellectual property Civil appeal in points of fact Commercial appeal in points of law Administrative Resolution length 0-6 months 231027 6-12 months 17963 1-2 years 8763 2-3 years 1084 Over 3 years 450

259587 78799 14840 38338 72030 46 5036 145 28165 3991 17386 16704

14656 34431 68279 24 2245 118 23516 3891 16212 16082

92 2707 3075 11 1304 12 2953 82 765 395

42 1041 535 7 913 12 1342 16 404 177

44 123 101 2 367

6 36 40 2 207

2 220 2 2 35

1 134 0 3 15

272

247

20

5

0

0

5612 312 40 2254 12337

5460 235 29 2057 12052 38

111 52 5 139 266

31 12 5 55 18

5 8 1 2 1

5 5 0 1 0

contentious appeal in points of law Civil appeal in points of law Criminal 1st instance courts Criminal 1st instance, tribunals Criminal appeal in points of fact tribunal Criminal appeal in points of law tribunal 1st instance criminal Co.A. Appeal in points of fact criminal Co.A. Appeal in points of law criminal Co.A.

3201

3176

8

15

0

2

25299 105980 12472

24755 94644 11367

285 9356 909

228 1791 169

21 164 22

10 25 5

17168

16215

844

95

12

2

14735 336 3898 9587

14264 334 3879 9552

459 2 14 33

12 0 5 2

0 0 0 0

0 0 0 0

*The litigations from Law 64/1995 are not cumulated d. The number of cases assigned per judge in 1st instance courts is 328 and the number of cases solved by a judge is 243. - The number of cases assigned per judge in tribunals is 291and the number of cases solved by a judge is 207. - The number of cases assigned per judge in courts of appeal is 160 and the number of cases solved by a judge is 122. e. Law No. 347, adopted on 10 July 2003, has approved the EGO No. 177 of 2002 on the remuneration of magistrates, published in the OJ No. 525/22.07.2003. B. Investments a. Investments and overhaul with the Ministry of Justice during the period 01.06-01.08.2003 No. Name of the objective Tribunal of Olt Total amount of funds needed for achieving objectives (thousand lei) 116.984.061,0 Type of work Remarks

1 2 3

Investment Overhaul Overhaul

Completed Completed Follows R.T.L Completed Follows R.T.L

1stinstance court 15.445.264,0 Brezoi *1st instance 7.862.551,0 court Novaci 39

4 5

Prof. Constantin 4.000.000,0 Angelescu Hospital Independent 39.000.000,0 equipment total 2003 of which: Law courts 8.485.000,0

Overhaul Independent endowment Independent endowment Independent endowment

Completed Purchases throughout year Purchases throughout year Purchases throughout year

the

the

The Ministry of 30.515.000,0 Justice - of which equipment 10.600.000,0 for the Cadastre office, the WB Programme

the

V.

Development of the national computer system

1) Continuing the Phare 2000 Programme ,,Strengthening the Judicial and Prison System": a) 01.07.2003-31.07.2003 ­ full delivery of the equipment to be purchased within the Programme; the completion of the quantitative receipt. b) 01.07.2003-31.07.2003 ­ achievement of the specialization courses undergone by IT specialists from the MJ and the courts. 2) The organisation and development of the legal procedure concerning public procurement for the equipment of the ONRC units is finalised ral Prisons Department. During the months of June-July 2003, 8 training courses and 8 study visits included in the Strategy for continuous training 2003, took place in the Net VI. The activity of social reinsertion and supervision 1. The social reinsertion and supervision services On 14 July 2003, the Ministry of Justice organized the examination for promotion of the social reinsertion and supervision personnel, which was graduated by 33 beginners. 2. Training of the social reinsertion and supervision personnel: During the months of June-July 2003, 8 training courses and 8 study visits included in the Strategy for continuous training 2003, took place in the Netherlands and Great Britain During the period 7-11 July 2003, a management course according to ,,The European Model of Excellence" was organised in Sinaia, in partnership with the DFID experts. 3. Activities with other institutions/organizations: In June 2003 the Ministry of Justice organised a training course for 34 magistrates on the subject ,,EC measures and sanctions" On 29 July 2003, a centre for the re-socialization of former detainees was opened in Pitesti. The re-socialization centre will be organised and coordinated together with the General Prisons Department. VII. The National Institute for Magistracy (INM) 40

Diversifying curricula for initial and continuous training, by including the new fields recommended by the European Commission (eg. professional deontology, organised crime, competition Law, consumer protection Law etc.) In June/July 2003, 10 seminars for training sitting magistrates have been held, of which 5 for the INM trainers' network. The INM trainers were trained in EC Law, human rights protection and professional ethics and deontology. Moreover, in June, a collection of studies for sitting magistrates was compiled, entitled Studies on the case law of the European Court of Human Rights, and a practical guide for the magistrates who will deal with causes that involve minors, Juvenile justice. VIII. The Cadastre offices and movable goods registration

During the period 1 June 2003 ­ 1 August 2003 numerous activities took place in the field of movable goods registration, in order to increase the effectiveness of the activity in this field and eliminate deficiencies: The offices of certain archive operators and their agents were controlled concerning the activity of registration of the security notes, the check­up the equipment of these offices, the forms for notes of security, the mandates and the payment documents for the registration fees. Notifications have been sent to each authorized operator, requesting the completion of formalities for registration of the territorial offices with the Trade Register and the transmission of documentation regarding the entries made. Upgrading the management system for the database of the Electronic Archive of Movable Corporal Securities, from SQL Server 7.0 to SQL Server 2000, which is necessary for replicating the data between the two centres of the system for administration of the information in the archive (of which one is located at the Ministry of Justice and the other is in the administration of the Body of Operators), thus ensuring the substance and the security of the information. Reviewed of the forms for the for security notes because of the improvement in the software application for the Electronic Archive of Movable Corporal Securities, and they are to be approved by order of the Minister of Justice and published on the web page of the Archive. Following also the measures taken, during the period 1 June 2003 ­ 1 August 2003, 29.366 registrations of security notes have been entered into the Electronic Archive of Movable Corporal Securities, which shows a significant increase by comparison to the same period in the past years (25.848 security notes for the period 1 June ­ 1 August 2002 and 8.959 de security notes for the period 1 June ­ 1 August 2001). IX. The Prisons General Department

a) Following the entry into force of the EO No. 56/2003, at the level of the Prisons General Department, measures were taken regarding the organisation, process and distribution of correspondence for the detainees, the contact with the lawyers and the family, as well as measures to improve the conditions for and the manner of undergoing the penalties. Thus, detainees in preventive arrest have been allowed to wear personal clothing. Those who do not have personal clothing will receive prison equipment, different from the one of persons convicted by final decisions.

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Three new buses have been purchased, and repairs are under way in the Prisons of Arad, Aiud, Gherla, Satu Mare, Poarta Alba. Measures were taken to supply the medication needed by the detainees and a programme was initiated to prevent and combat tuberculosis. Measures have been taken to supply the medication necessary for the detainees. An order of the General Director of the General Prisons Department was issued concerning the supply of medication for the personnel, through the pharmaceutical units in prisons, according to Art.9 (c) of Law 80/1995, and also the standard amount of the supply of free medication or of medication with price compensation, which is delivered to the detainees in emergencies, has been elaborated; The authorities solved the problem of the delivery by the territorial ambulatory pneumophthsiology care units of the anti-tuberculosis medication, for not contagious detainees released from the pneumo-phthisiological sections, who are following a discontinuous treatment in prison. A ,,National Inquiry for Supervision of the Chemo resistance of Tuberculosis" was initiated, aimed at evaluating the epidemiological dimensions of tuberculosis with treatment-resistant germs throughout the country, both for new cases as well as for cases of re-treatment, as well as the measures that are required for applying the provisions of the National Tuberculosis Control Programme in this field. The prison system will participate in the inquiry with all the cases diagnosed during the period of reference for the inquiry; b) Within the PHARE RO 004.01 Programme, the General Prisons Department enjoyed a project with three components: 1. Within the Twinning Programme ,,Reform of the prison system and consolidation of the probation system" the Spanish experts have visited the Prison system and acknowledged the conditions in prisons in order to be able to cooperate with the Romanian authorities on the effort to improving them; the Romanian experts an Prison's personnel attended training seminars for and participated in study visits abroad on areas of interest for the reform of the penitentiary system. Equipping the Training Centre for the Prison Personnel in Arad: Within this programme, furniture was purchased for the classrooms, amphitheatres, medical offices, laboratories, of a total value of 15.461,99 Euro, sporting equipment of 36.141,65 Euro; IT equipment of 96.196,53 Euro; electric appliances, of 66.048,60 Euro; telephonic equipment, of 11.468,20 Euro and a system of simultaneous translation, of 24.683 Euro for the Training Centre in Arad. 3. Computerization of the prison system and the probation system The programme for the computerization of the prison system and the probation system enjoyed a budget of 3.000.000 Euro and was divided as follows: The prisons were equipped with 683 computers, 66 servers, 49 RAK-s, 49 U.P.S.-s, 152 printers, 47 scanners, 113 switches and 45 modems. Developing, with a budget of 400.000 Euro, software for prisons and the probation system, which should achieve the uniform and continuous data transmission among the prosecutor's offices, courts, the prison system, the probation system and the Ministry of Justice. The software has been created, and at present it is being tested in two pilot centres, namely the Prison of Rahova and the General Prisons Department.

2.

42

X.

The Unit for World Bank Project Management

Following the discussions with representatives of the World Bank, beginning with December 2002, on the new structure of the Unit for Project Implementation, the GD No. 316/02.04.2002 has created the Project Management Unit, thus reorganizing the Unit for coordinating the project of cadastre and real property registration. The Project Management Unit operates in direct subordination to the Secretary of State for European and Euro Atlantic integration in the Ministry of Justice. Contracts were concluded for supplying the Project Management Unit with office equipment, hardware, Internet services, as well as for hiring the personnel for the specific activities. Work visits were made in the cadastre offices throughout the country, analyzing and evaluating the existing computer applications for cadastre: the GTZ application in Sighisoara and Odorheiu Secuiesc, the LOTUS NOTES application in Targu Mures, the GEONET application in Targoviste and Bucharest Sector 1. Measures were taken for the organisation of the Donors' Conference in September 2003, and a strategy was prepared to justify the need to provide assistance, which strategy is to be forwarded to the participants.

Anti-Corruption Measures

1. Application of Law No. 161/2003 (OJ No 279/21.04.2003) on certain measures to ensure transparency in the exercise of public dignity, public service and in the business environment, to prevent and sanction corruption a) The public authorities that are obliged to make public the declarations of fortune and of interests have complied with these requirements. At present, 343 declarations of interests, belonging to deputies and 140 belonging to senators have been published on the web page of the Romanian Parliament. The declaration of interests must be made even if the members of Parliament do not hold offices or do not perform activities other than those connected to their term as members of Parliament. Also, 344 declarations of fortune belonging to the deputies and 140 to the senators have been published, as well as to other persons that are required by the law to do so, such as the high ranking personnel in the Senate (32 declarations of fortune and of interests), or the leadership of authorities and institutions that are under parliamentary control: the Court of Accounts, the Legislative Council, the Council of Competition, the National Commission of Movable Values, the National Bank of Romania, the Romanian Intelligence Service, the Foreign Intelligence Service, the Service for Protection and Security, the Special Telecommunications Service, the Council of the Insurance Supervision Commission, the National Council of the Audiovisual, the Romanian Radio Broadcasting Company and the Romanian Television Company, the College of the National Council for the Study of Archives of the Intelligence Service, the National Press Agency (Rompres) ­ 300 declarations of interests. b) A major category covered by the provisions of this normative act is represented by the magistrates - judges, prosecutors, assistant magistrates, the judicially specialised personnel in the Ministry of Justice equated to them, counselling magistrates. Thus, at the level of the Supreme Court of Justice, the declarations of fortune of 89 judges, 53 assistant magistrates and 10 public servants that work in this court have been published. Also, on the web pages of the Ministry of Justice (www.just.ro) and the Prosecutor's Office attached to the Supreme Court of Justice (www.pcsj.ro) the declarations of 43

fortune of the personnel in the justice system that is obliged to do so have been published (approximately 4000 on the site of the Ministry of Justice), so that every person who is interested can have access to the relevant information. Other activities performed by the Ministry of Justice based on Law No 161 of 2003, during the period 1 June -25 August 2003. a) Drawing up the draft orders concerning the structure of the public service posts for the Ministry of Justice, the law courts and the units subordinated to the ministry, based on the endorsement obtained from the National Public Servants' Agency; b) Completing the operations for employment of persons the posts of which have been converted and elaborating the draft order for the re-employment of public servants, based on the Instructions on the re-employment of public servants, approved by Order of the Minister of Public Administration, No.218/2003; c) Centralising the personnel files at the level of law courts and subordinated units; d) Completing the formalities for re-employment public servants in leadership positions both in the Ministry of Justice as well as in law courts, as well as of the formalities for re-employment of the auditors from the courts of appeal; e) Creating the post of director of the Directorate for Investments and Administration and requesting the endorsement of the National Public Servants' Agency, for the temporary promotion of the director of the new structure created at the level of the Ministry of Justice and drawing up the draft order in this respect f) Representatives of the Ministry of Justice and of the Ministry of the Interior have examined the technical possibilities provided by the case management application ECRIS for the identification ­according to a sole number ­ of cases of corruption on their track from the police to the prosecutor's office and to the court. The next step is to identify the concrete means of expanding the module for sole number in the ECRIS application, to the police. g) The operation of the computer application ACOS developed within the PHARE 1999 PreIns Programme, for the creation of a common anti-corruption database between the National Anti-corruption Prosecutor's Office, the Ministry of Justice, the Ministry of Finance, and the Ministry of Justice, was tested at the premises of the National Anti-corruption Prosecutor's Office. h) At the premises of the National Anti-corruption Prosecutor's Office, communication lines were installed with the Ministry of the Interior and with the General Customs Department, as well as access lines to the INTERNET; i) The Ministry of Justice configured and installed the network equipment and it tested the cabling of the current premises of the National Anti-corruption Prosecutor's Office. j) Within the PHARE 2000 Programme, the Ministry of Justice was provided with IT. Thus, the apparatus of the Ministry was equipped with 226 workstations and auxiliary equipment. 2) Measures taken by the National Anti-Corruption Prosecutor's Office in application of Law no. 161/2003

For the application of Law No. 161/2003, the National Anti-corruption Prosecutor's Office has established a new organisation chart that includes the new departments set up by this law (the Criminal Judicial Section, the Judicial Police Brigade, the Specialists' Service), a new personnel establishment, and new Regulations for operation. 44

The new personnel establishment has been endorsed by the Superior Council of the Magistracy, and then approved by Order of the Minister of Justice. The structure of personnel at a central and territorial level has been approved by order of the General Prosecutor of the National Anti-corruption Prosecutor's Office. The structure of personnel was approved by order of the General Prosecutor of the National Anticorruption Prosecutor's Office, both at a central and at a territorial level. During April the 1st ­ July the 31st 2003, 22 prosecutors were delegated at the National Anticorruption Prosecutor's Office, at a national level. Two specialists and 25 judicial police officers were also appointed. During the same period, contests were organized and 46 of the vacant positions were occupied for the auxiliary, specialized personnel and for the economic and administrative personnel. Thus, at the end of July 2003, 58% of the positions of the National Anticorruption Prosecutor's Office structure were occupied: 72 positions of prosecutors (out of 98) 61 positions of judicial police officers (out of 150) 24 positions of specialists (out of 35) 52 positions of auxiliary, specialized personnel (out of 70) 31 positions of economic ­ administrative personnel (out of 63) With regard to professional training of the operative staff, since the beginning of 2003, the professional training programme for prosecutors, police officers and specialists in the National Anti-corruption Prosecutor's Office has included: 27 seminars held by magistrates, police officers and experts from the Special Anticorruption Prosecutor's Office in Spain, within the Phare RO 9910-05 anti-corruption programme, on topics such as: financial and fiscal offences; technological and computer crime; techniques for operative investigation; protecting the financial interests of the European Union; the use of the computer system for investigations; One training seminar on the use of the technical investigation equipment for finding flagrant offences, held by American experts; One seminar with the topic ,,Special Means of Investigation in cases of corruption" held by German experts, with the support of the German Foundation for Judicial Cooperation IRZ; One seminar on the subject ,,Methodology of Investigation in case of flagrant offences" organised with the support of the Hanns Seidel Foundation. One seminar on the topic ,,Amendment of the Criminal Procedure Code through Law No. 281/2003" organised with the support of the Hanns Seidel Foundation. Statistic data regarding the National Anticorruption Prosecutor's Office Activity During September the 1st 2002 and August the 4th 2003, the National Anticorruption Prosecutor's Office registered 2285 cases; 651 of them were solved and for 859 of them the competence was declined. 775 cases are still pending. Out of the 651 solved cases, 119 were solved by sending to trial and 532 of them by ending the criminal pursuit. In the 119 cases, 376 defendants were sent to trial by the public prosecutor's charge, 124 of them under temporary custody for committing 711 crimes of corruption, crimes assimilated or connected to crimes of corruption, as follows: a) Classical crimes of corruption: 45

156 cases of accepting bribe; 91 cases of offering bribe; 83 cases of traffic of influence; 3 cases of accepting undue advantages; b) 201 crimes of corruption assimilated to those of corruption: 5 cases of establishing diminished value for goods 125 cases of crediting by disobeying the law; 55 cases of credit usage for undue purposes; 16 cases of accepting undue advantages by officials with control positions; c) 193 crimes of corruption directly connected to those of corruption: 44 cases of associating with the purpose of committing crimes; 113 cases of forgery and usage of forgery; 26 cases of money laundry; 5 case of abuse of office against the public interests; 4 case of tax evasion; 1 case of fraudulent bankruptcy. 3) Activity of the General Prosecutor's Office attached to the Supreme Court of Justice

The Anti Drug and Combating Organised Crime Section of the General Prosecutor's Office has solved, during the first half of the current year, 1377 criminal cases regarding corruption acts, of which 77 causes were concluded with solutions of indictment. 763 causes are still in criminal prosecution stage, of which 388 are for the offence of bribe-taking, 85 for the offence of bribe giving and 184 for the offence of influence peddling. In these causes, 1584 persons are being investigated. In the cases solved in the first half of the year 2003, 2276 persons were investigated, of which 106 defendants and 399 accused. 4) Activity of the Ministry of Administration and Interior in the field of combating corruption

In terms of the sector strategy for combating internal corruption, the following activities have been conducted: The selection process of the applicants for the Ministry of Administration and Interior education institutions has started; the purpose is to exclude the applicants that are insufficiently motivated to become police officers and those who can not resist to temptations or that pursue only their own interests; The measures for monitoring the discipline of the staff have been intensified; the purpose is to maintain the professional integrity standards required by this profession and to enhance job motivation; The working places with a high risk of corruption have been identified and monitored; the purpose is to ensure their permanent monitoring in order to prevent corruption acts; Procedures for testing the professional integrity and resistance to corruption of police officers have been initiated, especially for those who work in an environment with a 46

high risk of exposure to corruption; this activity is based on a permanent collaboration with structures that have intelligence and internal protection responsibilities; Investigation activities concerning the extra-professional life of the staff and their conduct in family and society are developed on a permanent basis; Transparency has been ensured in relation with media and public, the real image of this institution being presented; on this occasion, measures taken have been presented. Also the results of certain investigations and inquiries conducted in relation with the abuses committed by police officers, such as corruption, breaches of professional deontology etc have been made public, as well as the sanctions adopted. In June and July 2003, two training seminars were organized with Bucharest Postgraduate Studies Centre for 42 officers in order to counter more efficiently the offences related to electronic tender; e-tender represents a new domain of activity subject to corruption acts; many police officers have attended different training courses in Romania and abroad. Statistical data regarding police activity in combating corruption During the period June - July 2003, police detected 1,345 persons reported to have committed 2,118 corruption acts; the cases were referred to the prosecution services since they have competence to conduct and finalise the investigations. As regards the persons involved in corruption acts, 264 persons had management positions, of which 98 persons are public servants, 69 persons are managers of trade companies, regies autonomes and national companies and 91 fall into other social categories. As for internal corruption, the statistics regarding the police officers detected to have committed corruption acts during June - August 2003 are as follows: June - 6 police officers (2 police officers and 4 police agents); July -15 police officers (1 police officer and 14 police agents); August - 0 cases - until 19th August. In this context, mention has to be made that the Draft Code of Ethics for the Police Officer has been submitted to the European Commission for evaluation. 5) Other measures for combating corruption

On September 4th 2003, the Government adopted the EO for the completion of Law no 51/1995 on the organising and exercise of the profession of lawyer, which introduces several restrictions in the exercise of the profession, by lawyers that are also members of the Parliament. Consequently, lawyers that are also exercising their mandate as deputies or senators can not plead in criminal cases before the courts or tribunals, when these cases concern: crimes of corruption; trafficking and illicit consumption of drugs; trafficking in persons; money laundering; state security; crimes that prevent the rendering of justice and crimes against peace and humanity. Also, the lawyer that finds himself/herself in the above situation shall not plead in civil or commercial cases against the state, the authorities or public institutions or the national companies or societies in which the latter are parties, or in trials against the Romanian state before international courts.

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2.1.2. Human Rights and the protection of minorities Civil and political rights

During the reference period, several measures have been taken in order to safeguard and facilitate the exercise of civil and political rights: Legislative progresses 1. As previously mentioned, through EO No. 58 / 2003 on the amendment and completion of the Civil Procedure Code, (OJ No. 460/28.06.2003), the legal way for extraordinary appeal in annulment was removed and a new ground for review was introduced in situations where a decision of the European Court of Human Rights found a violation of human rights or fundamental freedoms. Also, in order to unify the judicial practice and to ensure the stability of civil judicial relations, the separation of competence for first instance between the Courts of 1st instance and the Tribunals continues to be based on the criterion of the amount, which has been reviewed as follows: In civil matters, the court of 1st instance is competent to try lawsuits and requests the object of which has an amount of up to 1 billion lei; beyond this amount the competence belongs to the tribunal. In commercial matters, the court of 1st instance is competent to try lawsuits and requests the object of which has an amount of up to 1 billion lei, beyond this amount the competence belonging to the tribunal.

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Lawsuits and requests in this matter that cannot be assessed in terms of money remain of the competence of the tribunal. The appeal was reintroduced in commercial matters. 2. The EO No. 56/2003 on certain rights of persons that are undergoing penalties with deprivation of freedom (OJ No. 457/27.06.2003) The EO has been adopted in order to safeguard certain rights of persons who are deprived of freedom by penalty, of persons who are in preventive arrest, who are serving a penalty of contravention imprisonment or of persons who are in the reeducation centres. Through this normative act, the court's control was instated over measures that concern the rights of the above-mentioned persons. By adopting the Emergency Ordinance No. 56/2003, the Romania is responding to the general measures decided by the Committee of Ministers of the Council of Europe following the decision of the European Court of Human Rights pronounced in the case Petra vs. Romania. The EO comprises provisions regarding: the right to information, the right to make petitions and the right to correspondence, the right to receive visits, the right to receive goods and the right to medical assistance. This normative act regulates ­ in addition to the express provision prohibiting torture, inhuman or degrading treatments and discrimination ­ the procedure that ensures court control over the measures taken by the prison administration concerning the exercise of the rights of persons deprived of freedom. Against these measures, the persons undergoing penalties with deprivation of freedom can lodge complaints with the court of first instance in the jurisdiction of which the prison is. Complaints shall be judged according to the provisions on the proceedings before the enforcement court provided in the Criminal Procedure Code, the person who is undergoing a penalty with deprivation of freedom shall be brought, as a mandatory rule, before the court when the complaint is considered. The court can admit the 48

complaint, and decide the cancellation, revocation or amendment of the measure taken by the prison administration or can reject the complaint, as unfounded, and the decision of the court can be then subject to appeal. This procedure is designed for application in case of measures regarding all the rights of persons who are undergoing penalties with deprivation of freedom, not only the rights provided in the draft. The access to information of public interest is achieved under the conditions of the Law on free access to information of public interest. The prison administration is obliged to inform the persons who are undergoing penalties with deprivation of freedom about or to make available to them the provisions of the Criminal Code concerning the execution of penalties that involve deprivation of freedom and of the present draft emergency ordinance, the legal provisions on the free access to information of public interest, as well as the provisions of orders issued based on it and of the regulations of inner order of the prison, the fulfilment of the obligation shall be recorded in an official report. This measure is aimed at making the convicted persons aware of the rights and obligations they have during the penalty. Taking into account the case law of the European Court of Human Rights regarding the right to make petitions, this right is safeguarded and cannot be restricted. The petitions, which include any request or notification addressed to the public authorities, public institutions, judicial bodies, courts or international organisations the competence of which is accepted or recognised by Romania, as well as the replies to these complaints shall be confidential and cannot be opened or held back. The right to correspondence for persons who are undergoing penalties with deprivation of freedom is, also, safeguarded, and correspondence is confidential and cannot be opened or held back, except within the limits and conditions provided in the law. Restrictions of the right to correspondence do not apply in the case of correspondence with the defender or with non-governmental organisations working in the field of human rights protection. A series of measures to ensure the exercise of the right to file petitions and the right to correspondence are provided, such as the installation of mailboxes in prisons or the coverage, by the prison administration, of certain expenses involved by the exercise of the right to file petitions and the right to correspondence, if the persons undergoing penalties of imprisonment do not have the necessary financial resources. Provisions similar to those for the right to correspondence for persons undergoing imprisonment are established also for the right to make telephone calls. The right to receive visits can be exercised in spaces designed for this purpose, under visual supervision by the prison administration personnel, the length and the frequency of these visits will be established by order of the Minister of Justice, which shall be published in the Official Gazette of Romania. Persons who are convicted to imprisonment have the right to receive, at any time, in full confidentiality, visits from their defender. The normative act provides the right of persons undergoing imprisonment to receive goods, the number and weight of packages, as well as the goods that can be received, kept and used, by these persons, will be established by order of the Minister of Justice, which shall be published in the Official Journal of Romania. The right to medical assistance is guaranteed. Medical assistance in prisons is provided, any time it is necessary or by request, by specialised personnel, free of charge, according to the law. The periodical medical examination and the one made upon receipt of convicted persons in prisons is done, according to the draft, confidentially. Also, the physician who carries out the medical examination is obliged to notify the prosecutor if he/she finds that the person undergoing a penalty of imprisonment has been subjected to torture, inhuman or degrading treatment or other ill treatment, as well as to mention the 49

findings and the declarations of the convicted person concerning these acts in the medical record. In such cases, the convicted person has the right to request an examination, at the place of detention, by a physician from outside the prison system, designated by him/her or by a forensic physician. The findings of the physician from outside the prison system shall be mentioned in the medical record of the convicted person, and the forensic certificate shall be attached to the medical record. The Emergency Ordinance concerned also provides the proper application of the norms contained in the draft also to other categories of persons who are subject to measures or sanctions depriving of freedom ­ persons undergoing preventive arrest, those undergoing contravention imprisonment and persons in re-education centres. Police activity According to statistics, in 2003 (until 31 July) 14 complaints were submitted to report maltreatments by police officers; criminal procedures have been initiated in all 14 cases. For all 14 cases the concerned police officers have been temporarily suspended; for 3 cases the criminal procedures have been suspended and for 2 cases the charges have been changed; no other disciplinary penalty has been applied. In the field of asylum, based on the provisions contained of art. 23 paragraph 1 of the GD no. 102/2000 on the status and regime of refugees in Romania, approved by Law no. 323/2001, and on the Order of the ministry of education and research no. 3709/2003, measures have been taken so that the children of the persons having been granted statute of refugee in Romania, the unaccompanied minors and the children of the persons having been granted a subsidiary form of protection will be able to attend Romanian language courses within the Romanian education system, in the education year 2003-2004. Anti-discrimination At legislative level, the Government approved at the end of August, an Ordinance for amending the GO no. 137/2000 on preventing and sanctioning all forms of discrimination. Under this new document, the full implementation of the acquis communautaire in the field of anti-discrimination (EU Directives 43/2000/EC and 78/2000/EC) is achieved. The amendments concern: the definition of indirect discrimination; the definition and sanction of the multiple discrimination; the definition and sanction of victimization; introduction of mediation as a way to combat discrimination acts; establishment of minimal standards; establishment by law of the principle of independence regarding the activity of National Council for Combating Discrimination; assistance to victims of discrimination; removal of all provisions contrary to the principle of equal treatment. At institutional level, after the State' Budget rectification, 20 new vacancies have been approved for the Council in order to get the full human resources scheme as it was provided by GD no. 1194/2001 on the Organization and Functioning of the National Council for Combating Discrimination as it was amended. The activity of solving complaints and sanction the discrimination acts has continued. During the period 16 April -29 August the Council has received 113 petitions, 70 of them being already solved. Also, the Steering Board has analised 15 cases ex officio. As a result, there have been 17 sanctions (12 warnings and 5 fines).

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Romanian participation to Community Action Programme for Combating Discrimination (2002-2006) Under GD no. 754/2003 on organisation and functioning of the Agency for Governmental Strategies (ex-Ministry of Public Information), the coordination of this Programme in Romania was transferred to the National Council for Combating Discrimination. Ombudsman The Ombudsman Institution continued the specific activities whose objective was the reinforcement of its role, as promoter and defender of human rights and fundamental freedoms. In order to establish a close relationship between citizens and the Ombudsman institution, three territorial offices were created, in the cities of Alba-Iulia, Bacau and Craiova. The total number of complaints registered with the Ombudsman during the period June 1st - August 31st, 2003 was of 1019. Of the total number of registered complaints, 119 were declared admissible according to the Ombudsman competences and will be examined and solved. For the rest of the registered complaints, citizens were advised to contact the competent authorities. As previously, the complaints addressed to the Ombudsman had as subject: the right to property, the right to a decent living, the right to an equitable/a fair trial and the free access to justice, the right to information, the right to work and to social and labour protection, the right to health. In order to exercise his competences, the Ombudsman pursued 13 investigations, from June 1st to August 31st, 2003. Most of them were done in placement centres for children with neuro-psychiatric diseases. One of the Ombudsman's recommendations made in the "Special Report on the Non-compliance of certain Rights of Disabled Children and Young People", submitted on November 29, 2002, to the two Chambers of the Parliament of Romania and the Prime-Minister of the Government of Romania, was included in Annex 10 to Law 631/2002 regarding the budget for the year 2003, Chapter I ­ Incomes and expenses stipulated in the local county budgets. On June 23rd, 2003, the Ombudsman submitted to the Chairmen of the two Chambers of the Parliament of Romania and the Prime-Minister of the Government of Romania the "Special Report on the Execution of Sentences in Prisons". The report proposed the adoption of a new law on the execution of sentences in prisons, according to the related community, international and constitutional provisions (protection of human dignity, interdiction of torture or other degrading, inhuman or cruel sanctions or treatments, support for building up delinquent's responsibility towards himself and society, the development of the attitudes necessary for the social reintegration). The report is based on complaints received by the Ombudsman from 2002-June 2003, from imprisoned individuals. In order to fulfil its competences stipulated in article 18 paragraph 1 of Law 35/1997 on the organisation and operation of the Ombudsman Institution, as amended and completed by Law 181/2002, the Ombudsman formulated 58 points of view on exceptions of unconstitutionality.

Child Protection

Reform of the legislative framework 51

During June 2003 ­ August 2003, the National Authority for Child Protection and Adoption (ANPCA) initiated the following normative acts: Government Decision no.679/2003 regarding the licensing conditions and procedures and the status of foster parents (OJ no. 443/23.06.2003); Law no. 326/08.07.2003 regarding the rights of children and young people ared for by the specialized public services for child protection, of mothers protected in mother and baby centres, as well as of children entrusted to or placed with foster parents (OJ no. 525/22.07.2003); Common Order no.18/26.02.2003, 3989/19.05.2003, 416/05.06.2003 si 142/2003 of the National Authority for Child Protection and Adoption, of the Ministry of Education and Research, of the Ministry of Health and Family, and of the National Authority for Persons with Handicap, regarding the approval of the Methodological Guidelines for the assessment of the child with disabilities and for determining the handicap degree (OJ no. 538/25.07.2003);

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Other authorities and institutions of the central public administration have also contributed to the reform of the legislative framework in the field by initiating the following normative acts: EO no. 64/28.06.2003 on establishing certain measures regarding the reorganization or the operation of several structures within the work apparatus of the Government, of the Ministries and of other specialized bodies of the central public administration and of several public institutions (OJ no. 464/29.06.2003); GD no. 737/03.07.2003 on the organization and operation of the Ministry of Labour, Social Solidarity and Family (OJ no.483/07.07.2003); GD no. 770/03.07.2003 on the organization and operation of the National Authority for Child Protection and Adoption (OJ no.486/07.07.2003);

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The effective implementation of the above-mentioned normative acts will lead to an increase in the number of professional foster parents, and in the quality of care for children in this form of protection, the promotion of child protection in a family environment, a better approach of children with disabilities, by focusing more clearly on the recuperation, rehabilitation and social insertion process. Programs implementation and organizational development measures Implementation of the National Interest Programs and of the Internationally Funded Programs During this period of time the further implementation of the National Interest Programs co-financed from the state budget and from the local budget, of the internationally funded programs and of the programs of bilateral governmental technical assistance granted to ANPCA continued. National Interest Programs For 2003, the implementation of the following National Interest Programs has been envisaged: "Closing down the old type institutions destined for the child with disabilities/special needs, that can not be restructured/rehabilitated" (94,400,000,000 ROL) ­ continuation of the Program started in 2002; it is expected to close down other 4 hospital homes by the 3rd quarter of this year; these projects are at the building stage (3 projects) or at the stage of purchasing the buildings for developing the necessary services (1 project) 52

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"Social inclusion of the street children" (7,100,000,000 ROL) "Socio-professional integration of the children/young people in the care system who turn 18" (16,000,000,000 ROL)

In this period, the process of assessment of the proposals received for the last two programs is in progress. Internationally Funded Programmes - The Phare Program RO 9905.02 amounting 25 million Euro, with four components: creation and development of community integrated services of child protection (19 million Euros); technical assistance; public awareness campaign for the prevention of abandonment and institutionalisation of children; the twinning component - "the facilitation, as far as the family and child protection policy is concerned, of Romania's accession to the European Union" - signed between the Ministry of Labour, Social Solidarity and Family of Romania and the Ministry of Labour and Social Solidarity of France, having as partners the National Authority for Child Protection and Adoption of Romania and the Association of Local Authorities of Sweden. At the end of August, all the grant contracts will be finalised, and in September the technical assistance contract will also be finalised. At the end of July, the following results were achieved through the grant scheme: 21 institutions closed down, 808 foster parents recruited and trained, 1159 children reintegrated in their natural families, 1009 children protected in substitute families, 81 alternative services, 222 apartments and 28 family type homes. The Phare Program RO 0104.01 amounting 10 million Euros, with three components: creation and development of integrated community services for child protection (7.5 million Euros); technical assistance at central level (1.4 million Euros); public awareness campaign for the prevention of abandonment and institutionalisation of children " Children's Home is not a Home" ("Casa de copii nu e acasa"), amounting to 1.1 million Euros (continuation of the previous campaign run under the Phare Program RO 9905.02). Part of the "Children First II" component, 87 projects have been submitted by 36 counties and 5 sectors of Bucharest, out of which 37 projects have entered the technical and financial assessment stage and 26 projects have been proposed for funding (from 15 counties and 2 sectors of Bucharest). At the end of the implementation period, 27 old type institutions will be closed down and 2,556 children will be protected through services adapted to their individual needs. On the 1st of August 2003, our institution requested the modification of the terms of reference following the decision of the Phare Joint Monitoring Committee regarding the increase of the budget with 3.7 million Euros. Thus, all the 37 projects will be funded, leading to the closure of 38 institutions, 3,740 children benefiting from this program. The central technical assistance component for the implementation and monitoring of the special fund "Children First II" is ensured following a contract concluded with PLS Ramboll Management by direct negotiation. In June 2003, there was a press conference for the launch of the public awareness campaign, and 7 meetings with professionals working in various fields linked to child protection took place. Also, in June 2 new TV spots were produced: one for promoting the foster parent job, the other for the social integration of children with special needs. In July, the "Edelweiss" national contest, 2nd edition, for talented children in placement centres was over. 30 children received awards (27 benefit from scholarships out of Phare funds and 3 received special prizes from the Saatchi & Saatchi company). They are from 16 counties and the 6 sectors of Bucharest. 53

The British Program of Technical Assistance (DFID ­ The United Kingdom Department for International Development), amounting to £3 million, having as major components: improvement of the legislative framework in the field, developing an accreditation system for the NGOs working in the field of child protection, development of the infrastructure of the ANPCA, and training of personnel at central and local level (period of implementation: 2000 ­ 2004) Within this Program, the implementation of the Pilot Project on Performance Management continued. The Pilot Project is to be implemented over a period of six months (April ­ October 2003) in 7 counties (Arad, Bacau, Brasov, Caras-Severin, Galati, Mehedinti, Teleorman) and in sector 4 of Bucharest. So far 16 workshops have been organized (two for each county). The Romanian-American partnership in the field of child protection 2001 ­ 2005. The American Government supports financially this program, through USAID, with an allocated amount of 15 million USD. The American contractor of the ChildNet Program is World Learning. The general objective of the program is to sustain the reform of the child protection system in Romania. The ChildNet program operates, generally, with two components: the program for funding and the program for technical assistance and training. Part of the technical assistance and training component, the minimum standards on adoption, the methodological guidance for the unit in charge with providing adult life skills to young people turning 18 and leaving the placement centres, as well as the minimum standards and methodological guidance in the field of child protection against abuse, neglect and exploitation, as well as the minimum standards on case management are about to be finalized. In this context, 4 workshops have been organized with professionals in the field during this period (June ­ national adoption, June ­ life skills, August ­ abuse and neglect, August ­ case management). Another project in progress funded through this Program and through the Reform Project funded by the World Bank is the creation of a tracking and monitoring system for child protection. During this period, there have been work meetings with representatives of the pilot counties where the project is implemented, as well as the contractor's representatives (the INDACO company). In this period there took place the first meeting of a working group made up of representatives of ANPCA and of the various donors in order to coordinate all the projects regarding the elaboration of minimum standards for child protection services. Also, in June 2003, the Ministry of External Affairs in partnership with ANPCA organized the seminar entitled "Different Causes ­ Common Problems ­ Global Solutions", part of the Central European Initiatives project. The participants were representatives of MEA, ANPCA, the Ministry of Public Information, NGOs and mass media from the countries involved in this project, representatives of international organizations (UNICEF, USAID, The International Labour Office), as well as of the departments for child protection and of Romanian NGOs. During the seminar, the ANPCA representatives presented the progress made by Romania in the field, and two important issues were debated: raising public awareness regarding the phenomenon of child abuse, neglect and exploitation, and the elaboration of normative acts and the specific measures to be taken for combating child abuse, neglect and exploitation. The results achieved after the implementation of programs during June 2002 ­ March 2003 are as follows: The number of institutionalized children decreased from 42,777 to 39,389; 109 small houses and 65 apartments have been opened, where children benefit from a family type form of protection; 54

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The number of alternative services increased from 394 to 506; The number of professional foster parents increased from 9,170 to 9,950; The number of children protected in substitutive families (professional foster parents, relatives up to the 4th degree of kin, entrusted for adoption) increased from 43,783 to 45,152; The professional skills of the human resources involved in the system of child protection were improved.

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Furthermore, as far as the old-type institutions are concerned, by the end of June 2003, 127 institutions were closed down (32 former boarding houses for special schools, 6 former hospital sections, 6 former hospital homes and 83 placement centres taken over during 1997-1998). Other targeted actions Preventing abandonment of children in hospital premises In July 2003 the Common Order by ANPCA and the Ministry of Health was signed regarding the prevention of situation of difficulty or risk for children, and the improvement of the medical condition of children protected in placement centres. This Order specifies the duty that a social worker hired by the specialized public service for child protection should work in every maternity, the duty to register all children with family physicians, as well as the need of a proactive behaviour on the part of the family physician towards the pregnant woman or the mother of a young child. The existing differences among counties in the implementation of the reform The analysis of the reform in the field of child protection in Romania shall represent a distinct project within the Cooperation Program with the UNICEF. The terms of reference have already been approved; at present the tender process for the assigning of the contract is in progress. The Project aims at describing the reform process, the progress made and the difficulties encountered, to determine the roles of the various social stakeholders, as well as the main areas in need of specific intervention. The final report shall include a comprehensive analysis targeted at all these dimensions. The estimated deadline for the final report is the first quarter of 2004. Actions regarding the improvement of the existing legal framework During the reporting period, the process of consultation between the panel of experts of the European Commission and the Romanian party on the legislative package has continued. In July the second round of discussions took place in Brussels. The conclusions of these discussions were submitted for analysis to the group of Romanian experts, so that they could be included in the package. Organizational development measures The strengthening of the institutional capacity at central and local level represents a permanent preoccupation for those managing the child protection system. During June 2003 ­ August 2003 the training projects and programs for the child protection staff have continued, especially with regard to:

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The new attributions of the members of the Child Protection Commission (ChildNet Program, funded by USAID); at the beginning of June there was a training session for trainers in order to extend the pilot project at national level; The child protection system in Romania - project developed within the "Social Management" development program organized by the National Administration Institute in partnership with ANPCA. In August there was a training session for civil servants in management positions in the central and local administration.

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All these themes are also extremely important from the perspective of the implementation of the legislative package following its adoption by the Parliament.

Economic, social and cultural rights

The National Authority for Persons with Handicap (ANPH) has initiated a proposal to improve Art. 46 of the Constitution on the equality of chances and the elimination of all forms of discrimination against people with disabilities. The proposal complies with the provisions of the revised European Social Charter, ratified by Romania through Law 74/1999. In order to increase visibility for the needs of persons with disabilities, ANPH initiated a public campaign, aimed at promoting equal rights for persons with disabilities by ensuring a higher impact on leaders of opinion and the public (15 September-15 November 2003). A higher focus was placed on partnership with NGO's, at the level of the National Authority, as well as on ensuring the participation of a representative of NGO's in each Departmental Commission and in the Superior Commission for Medical Expertise. Events were organized between June ­August 2003, on specific issues, such as: the issue of access for persons with disabilities, protection units, refugees with disabilities etc. In July 2003, ANPH elaborated and sent to the National Council against Discrimination the sector strategy for prevention and combat of discrimination against people with disabilities, which will form a part of the National Plan to Fight against Discrimination, elaborated by the Council.

Protection of minorities

During the period of reference of the addendum, the EO no. 64/2003 (OJ No. 464/26.06.2003) was adopted, regulating the measures to be taken regarding the setting up, restructuring or functioning of certain structures within government, ministries, other specialized bodies of central administration and public institutions. According to provisions in article 2, paragraph 1, letter e) of the above mentioned normative act, the Department for Inter-Ethnic Relations is established as a structure without legal capacity, subordinated to the Prime Minister and coordinated by the General Secretariat of the Government. The Department takes over the activity regarding national minorities from the former Ministry of Public Information. The structure and main responsibilities of the Department for Inter-Ethnic Relations (DRI) are listed in GD no. 749 (OJ No 488/7.07.2003). Two Undersecretaries of State, representing the Hungarian and, respectively, the German minority supervise the activity of the Department. The Department focuses its activity on promoting and developing programmes aiming at guaranteeing, preserving, expressing, promoting and developing ethnic, cultural, linguistic and religious identity of the persons belonging to national minorities. Within the Secretariat General of the Government activates also the National Office for Roma, lead by a secretary of state, representing the Roma minority. 56

Implementation of the Governmental Strategy for Improving the Condition of the Roma Legislation Through GD No. 256/2003 (OJ No 171/18.03.2003) it was approved the legislative Programme aiming at ensuring ownership rights by Roma regarding agricultural land. Commissions were established at the local level, including the Roma experts and members of County Offices for the Roma. The role of these commissions is to identify Roma families in rural areas, who do not own land, to identify agricultural land available in each locality and to establish ways of providing to them arable land, according to the number of Roma families identified in this situation and to the availability of agricultural land. The Order No. 350A/2003 of the Minister of Public Information was adopted in order to approve the Plan of Measures at the level of the Ministry of Public Information, aimed at accelerating the implementation of the Strategy for Improving the Condition of the Roma. In June 2003, through the EU No. 64/2003 (OJ No 464/28.06.2003), the National Office for the Roma was renamed "Office for Roma Issues", and the General Secretariat of the Government took over from the Ministry of Public Information the competences concerning Roma issues and Roma-related activities. To put into practice the Memorandum regarding the "Strategic action plan for improving the administrative and management systems for managing EU funds allocated to Romania", the Office for Roma Issues has drawn up a Memorandum for increasing the staff of Phare PIU, directly coordinated by the General Secretariat of the Government. Institutional framework During the period of reference, the organization of training courses for Roma experts, as members of the County Offices for the Roma, continues to be a priority for the Office for Roma Issues. Training courses in the management of human and financial resources, domestic and international legislation, social policies etc. have been organized by the following partners, including Roma non-governmental organisations: Ministry of Culture and Cults in partnership with Aven Amentza Roma Centre for Public Policies; Office for Roma Issues in partnership with "Împreun" Agency for Community Development; Office for Roma Issues in partnership with Rromani Criss Office for Roma Issues in partnership with the Social-Democrat Roma Party. Other training courses for Roma experts and for the members of the Office for Roma Issues are scheduled for September, and will cover the fields of management, conflict management, legislation, preventing and fighting discrimination etc. At local level, the mayor's offices in areas with a large number of Roma have been encouraged to appoint local experts for Roma. In several localities, the County Offices for the Roma have organized, during the period of reference, training courses in project management with the local experts for Roma activating in the mayor's offices. The foundation in charge with managing external funds for the Roma (CRCR ­ Resource Center for Roma Communities) is monitoring the 37 projects in course of implementation for « Improving the condition of the Roma »,amounting to EUR 900.000, covering the fields: public administration and community development, health, education, social security, communication and civic participation. 57

In order to create and develop a partnership with representatives of the Romanian civil society for the purpose of preventing discrimination, the National Council for Combating Discrimination (CNCD) had, during the period of reference, consultative meetings with non-governmental associations acting in the field of human rights and particularly for the protection of categories included in Law No. 48/2002, which resulted in a Concept paper presented in June within a meeting organized by Open Society Foundation. The members of the Steering Board of the National Council for Combating Discrimination participated in two of the activities on the project « Roma in an extended Europe: "Challenges for the future ", organized by the Ministry of Culture and Denominations in partnership with Aven Amentza Roma Centre for Public Policies. Through the new PHARE 2002 project authorities continued during the period of reference to work towards putting into practice the objectives of the Romanian Government of establishing viable partnerships between public authorities and representatives of local communities, ensuring the professional training and employment of the Roma, solving the issue of housing according to European standards, and facilitating Roma access to infrastructure and healthcare services. In July and August 2003, activities were organized for the evaluation of technical and financial offers of the tenders for the first component of the programme, as well as national training. In order to include in the multi-annual programming practical solutions to the difficulties encountered while putting into practice the Strategy for Improving the Condition of the Roma, the General Secretariat of the Government is preparing a national meeting with Roma NGOs. The purpose of the meeting is to update the Master Plan of Measures of the Strategy for Improving the Condition of the Roma, and to put into practice the objectives of the World Conference "Roma in a Changing Europe: Challenges for the Future", organized by World Bank and the European Union, where the establishment of a fund for the development of Roma communities in Europe was decided on, within the Roma Inclusion Decade 2005-2015. By the end of August 2003, the public authorities have submitted 53 projects, most of which are in the field of house building; their evaluation and funding has started in September 2003, from the fund of ROL 56.651.200.000 earmarked by the Government as financial support for implementing the Strategy in 2003. In June 2003, the National Roma Culture Canter was established by the GD No. 824/2003. The premises (undergoing reconstruction) were allocated, as well as 10 billion ROL, and in September the Ministry of Culture and Denominations started hiring the staff mentioned in GD No. 824/2003 (an approximate number of 87 positions). The Csango community On the background of the Council of Europe interest towards academic and historical research in the matter the Bucharest University (Sociology Department) and the Centre for Urban and Regional Sociology ­ CURS Bucharest elaborated in March and April 2002 a study based on sociological, anthropological, ethno-linguistic and ethnoreligious researches in the areas inhabited by the Csango community. The research included 33 villages in Moldova (in Bacau county, where live 90% of these persons and in the counties of Iasi, Vrancea and Neamt, where live the rest of 10%). The study provides important data on the geographical location of this community, its perception and self-perception from the point of view of the ethnic, linguistic, religious identity, of the language spoken in the family and of the language they want to be taught in and attend the religious service. Essentially, the study reveals that "Csangoism is not ethnically different, Catholicism being the main cohesion element. The Csangos considers themselves to be Romanian, and only a small percentage relate the Csango feature to the ethnic name of Hungarian". 97% of the Csango 58

population want to be educated in the Romanian language, and 96% want to attend the religious service in the Romanian language. The study stresses the importance of the self-identity assumed by the Csangos and of their options regarding the language they want to be taught in and to attend the religious service. In Romania, ensuring the right of all citizens to ethnic, cultural, linguistic and religious identity represents an essential element of the policy in the field of protecting national minorities, according to the assumed international commitments, especially the standards of the Council of Europe and of its instruments, which represent EU fundamental criteria. 1370 persons declared themselves to belong to this group at the latest 2002 census. The Ministry of Education, Research and Youth ensures education in the Hungarian language as a form of facultative study for persons belonging to the respective minority. As an example, in certain villages in Bacau county, with persons declaring to belong to the Hungarian minority, according to the 2002 census, education in Hungarian as mother tongue was organized on request, in a facultative form (3-4 classes / week). Schools having received the Ministry approval to teach Hungarian as mother tongue within 2 study groups for the school-year 2002 ­ 2003 are to be found in Pustiana village, Parjol commune (17 pupils), and in the Somusca village, Cleja commune (14 pupils). These groups will also function in the following years. There were no new requests for education in the mother tongue in Bacau County.

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2.2. ECONOMIC CRITERIA

2.2.1. Macroeconomic developments

The economic reform measures provided by the Governing Programme and the related Action Plan have continued to be firmly pursued. A stimulating general framework was thus ensured, allowing the maintaining of high rates of economic growth, despite the prolonged effects of an unfavourable external environment and the inauspicious internal circumstances. The evolution of the main economic indicators M.U. GDP growth in real terms Industrial production Final consumption Gross fixed capital formation, of which: - Investments Domestic demand Inflation rate - Yearly average - December/December Unemployment rate ­ end of period General consolidated budget balance Export of goods and services Import of goods and services FOB Exports CIF Imports Trade balance (FOBCIF) Current account balance % % % % % % % % % % GDP % % % MEURO % MEURO MEURO % GDP Bill EURO 2001 +5.7 +8.4 +6.0 +9.1 +9.5 +8.2 34.5 30.3 8.8 -3.3 +11.1 +17.2 +12.9 12722.0 +22.1 17383.3 -4661.3 -5.5 -2.5 22.4 2002 +4.9 +6.0 +3.0 +8.3 +7.4 +3.9 22.5 17.8 8.1 -2.5 +16.9 +12.1 +15.4 14674.9 +8.6 18880.8 -4205.9 -3.4 -1.7 21.4 1st Semester 2003 +4.3 +3.3***) +5.0 +7.8 +6.9 +5.5 7.3*) 6.9**) +11.3 +13.1 +8.5***) 8992.7***) +9.9***) 11733.7***) -2741.0***) -1.2 19.1

External debt % - External debt service ratio (external debt service/export of goods and services) Bill EURO - Gross external debt *) August 2003/December 2002 **) End of July ***) Achievements 7 months 2003

13.5

14.6

14.2

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The main feature of this period is the fact that despite the severe drought, which affected Romania as well as the entire European space, the economy managed to counterbalance the losses of the agricultural sector, due to its functional character. It is significant that the overall value added gains has been based mainly on the tertiary sector growth. In the 1st semester 2003, services contributed by 1.9% to the real growth of gross domestic product, while industry by 1.2%. In the mean time, as a result of a higher demand for investments, the industrial activity has been recovered, and constructions became the fastest-growing sector. This is in fact due to a consolidation of the trends manifested in 2002, that became more visible as the vegetal production sector was affected by the severe drought. The increase in domestic saving continued, generating further increase in gross fixed capital formation. Gross fixed capital formation increased ­ in real terms - by 7.8%, while the investment rate (computed as the ratio of gross fixed capital formation to gross domestic product) was of 19.8% as against 18.8% in the 1st semester 2002, and the domestic saving rate was of 13% as against 12.9% in the 1st semester 2002. It is important that the quarterly growing trends are keeping up; gross fixed capital formation, after a 6.8% growth in the 1st quarter 2003, has registered a 7.9% increase in the 2nd quarter. Investment in the national economy over the 1st semester was 6.9% higher, as compared to the same period of the previous year. It is worth mentioning that the dynamic of private investment is constantly superior to that of the state sector. As a result, at the end of the 1st semester 2003, the share of the state sector in investments decreased to 34.9% as against 37.5% registered for the 1st semester of the previous year. The investments of the majority private sector, which have increased by 13.1% as against the 1st semester 2002, were mainly oriented towards the acquisition of equipment and transportation means, which represented 55.7% of the investments achieved. Another fact worthy to be mentioned is the evolution of inventories; their increase by only 1.8% did not, in fact, influence the GDP growth rate. Contributions to the real growth of GDP in the 1st semester 2003 2002 GROSS DOMESTIC PRODUCT Final consumption Households' actual individual consumption Government's actual collective consumption Gross capital formation Gross fixed capital formation Inventory changes Domestic demand Net export Export of goods and services Import of goods and services 4.4 3.0 3.0 0.0 -0.2 1.0 -1.2 2.8 1.6 3.5 1.9 - Percent 2003 4.3 4.4 4.4 0.0 1.5 1.5 0.0 5.9 -1.6 4.5 6.1

Domestic demand increased by 5.5% over the 1st semester 2003, accompanied by an adequate correlation between consumption and investment. Only 93.0 % of this 61

increase was supplied by domestic output (computed in current prices); as a consequence, net export was negative, its contribution to real GDP growth being of ­ 1.6 percentage points as compared to a positive contribution of 1.6 percentage points during the first semester of 2002. One of the main causes of the increase in domestic demand, particularly in the 2nd quarter, is the wage increase in the first part of the year. The wage increase was reflected in an increase in domestic consumption, by 7.4% in the 2nd quarter 2003, as compared to only 3.8% in the 1st quarter 2003. However, the savings propensity of households and companies maintained ­ as an essential feature of a functional market economy and an important prerequisite for sustainable growth ­ if we take into account that the dynamic of final consumption (105.0%) is below that of gross fixed capital formation (107.8%), and the households' final consumption grew by 5.4%, while real wages increased by 8.1% over the 1st semester. In the first 7 months of this year, industrial production increased by 3.3%, as against the same period of 2002. Since February, the rising trend has been evident, as in June and July the highest growth rates, of 6.7% and 6.0% respectively, were attained, as compared to the corresponding months of the previous year. As a consequence, industrial production increased by 12.7%, and manufacturing by 16% in the 2nd quarter, as against the previous quarter. Regarding the three industrial sectors, the situation is as follows: in mining and quarrying the industrial production decreased by 4.2%; in manufacturing and energy sector the growth was of 4.1% and 3.7%, respectively. It is worthy to be mentioned that significant growth has been registered in certain manufacturing, e.g. rubber and plastic products +43.1%; wood processing +19.6%; furniture +15.9%; other transport means +14.4%; electric machinery and apparatus +12.4%; food and beverages +11.7%; equipment, radio, TV sets and communications +9.9%; pulp, paper and cardboard +6.2%; road transport means +5%. These sectors have succeeded to compensate the decrease in certain industries with important weight in the industrial sector, in pârticular: metallurgy -20.6%; machinery and equipment ­7.9%; construction materials ­6.5%; textile products ­3.3%; metallic constructions ­2.3%. A significant improvement was noticed in the degree of industrial production utilization for satisfying the external and domestic demand, with a straight effect in reducing stocks. The weight of industrial products final stock at producers, within month resources, has slightly reduced to 35.5% at the end of July 2003, as against 36% at the end of July 2002. The evolution of the industrial activity between 1 January and 31 July 2003 is characterized by a sharp increase in labor productivity, by 11.7% on the whole industry, and by 12.3% in manufacturing. The manufacturing sectors with the most significant growth rates are, as follows: rubber and plastic products +48.9%; equipment, radio, TV sets and communications +35.7%; wood processing +28.1%; crude oil processing +25.5%; furniture +23.8%; pulp, paper and cardboard +24.1%; road transport means +17.1%. Constructions have increased by 5.5% over the 1st semester 2003, due only to the contribution of the private sector, the construction works carried out by this sector recording a 106.8% dynamic. Gross added value in this sector grew by 6.4% as against the same period of the previous year. Agriculture is still greatly influenced by climacteric factors; the support given to sustaining irrigation did not entirely compensate these influences. The measures undertaken in order to sustain the livestock animal sector led to a revival of this sector; the animal production grew by over 20% over the 1st semester 2003, contributing to the compensation of the drop in vegetal production. As result, agriculture production grew by about 7.5%. Taking into account the special features of this activity, the higher 62

intermediate consumption for the crops to be harvested in the following periods led to a 2.5% decrease in gross added value in this branch, compared to same period of the previous year. Adding to this the increases of gross added value from other activities ­ forestry and fishery ­ it results that the gross added value for the whole branch only registered a 0.6% growth. Over the first 8 months of 2003 the disinflation process continued, so that the recorded inflation rate was 7.3% August 2003/December 2002, as compared to 10.7% August 2002/December 2001. The monthly average inflation rate was of 0.9% during January ­ August 2003, as compared to 1.3% during the same period of the previous year. The growth of consumer prices during the first 8 months of this year was due to the 7.9% increase in food prices, the 7.0% increase in non-food prices and the 6.2% increase in services tariffs. Over the first 7 months of 2003, the degree of employing the labour force continued to rise. Registered unemployment diminished from 761 thousand in December 2002 to 650.4 thousand in July 2003, and the unemployment rate reduced from 8.1% to 6.9%, accordingly. The AMIGO survey shows that the unemployment average rate for the 1st quarter 2003 was 8.1% as compared to 10% in the 1st quarter 2002 and 8% in the 4th quarter 2002. Employment on the whole economy, at the end of July 2003, was of 4412 thousand persons, with 81 thousand persons (+1.9%) higher than in December 2002, and with 7 thousand persons (+0.2%) higher than in July 2002. High employment growth, as compared to July 2002, has been registered in wholesale and retail, repair and maintenance of motor-vehicles and motorcycles and of individual and household appliances (+18.9 thousand), constructions (+14.1 thousand), real estate transactions, renting and service activities rendered mainly to enterprises (+13.5 thousand), textile and textile products industry (+3.6 thousand), wood processing (+2.4 thousand), while significant decrease was registered in machinery and equipment industry (-14.6 thousand), production, transport and distribution of electric and thermal energy, gas and hot water (-11.3 thousand), means of transportation (-10 thousand), education (-9.5 thousand), other non-metallic mineral products (-7.7 thousand), chemical substances and products, synthetically and man made fibres (-4.9 thousand). During the first seven months 2003, FOB exports were of MEURO 8992.7, 8.5% higher than those of the same period of previous year. A monthly average of around EURO 1.3 billion was registered, the peak reached in July (EURO 1.5 billion) representing a top achievement for Romania's external trade. This growth in comparison with the first seven months 2002 is mainly due to the export of machinery building industry's products (+11.5%) as well as the chemical industry' s products (+22.8%). CIF imports in the first seven months 2003 sum up to MEURO 11733.7, representing a 9.9% growth as compared to the corresponding period of 2002, evolution that is due mainly to the increase of import of mineral products with 12.2%, as well as machinery building industry`s products, mainly capital goods imported for sustaining the investment process. Over the first seven months of 2003, imports registered different growth rates. If, over the 1st quarter 2003, the growth rate was moderate (up 9.3% as against the 1st quarter of 2002), over the 2nd quarter 2003, imports increased more than expected (up 11.4% as against the 2nd quarter 2002), which significantly affected their dynamics over the whole period. In July 2003, the imports growth rate slowed down (up 7% as against July 2002), and this trend of moderate import growth it is expected to maintain. 63

Over the first six months of 2003, the current account deficit reached MEURO 1246, increasing with MEURO 267 (+27.3%) as compared to the same period of previous year. The main reason for this is the trade balance' deterioration with MEURO 290, as a result of a higher-than-expected increase in imports, which could not be counter balanced by the amelioration of the services balance with MEURO 25 due to the improvement of the income/payments ratio under "transports" and "tourism ­ travel" and the rise of net current transfers with MEURO 60. The incomes balance also contributed in a negative manner, its deficit increasing with MEURO 62 . Between May and August 2003, the central bank was nevertheless forced to tighten monetary conditions to some extent, primarily in order to prevent a worsening of the external balance of the economy. During the first half of the year, monetary policy has been facing some problems created by a temporary reversal of the capital flows. As a consequence, in May and in June, the central bank's actions were aimed particularly at countering the upward trend of deficits in the inter-bank foreign exchange market and its harmful effects. Subsequently, BNR became more concerned about the potential risk contained by the excessive growth of imports. Whereas the source of the excess demand on the inter-bank forex market was proven to be mainly non-monetary (one-off capital outflows during the second quarter and lower capital inflows), the import growth was bolstered up in the first semester by both strong real wage earnings growth and by credit expansion in the non-governmental sector, particularly with regard to domestic currency denominated credit; by the end of June, the year-on-year increase in these bank assets stood at 38.2% and, respectively, 63.2% (both in real terms). Over the reporting period, BNR restrained from further reductions of the interest rate cap on the central bank's deposit auctions. Moreover, in order to reduce the impact of the forex market deficit on the exchange rate and, ultimately, on inflation, the central bank engaged in interventions in the foreign exchange market by selling a net amount of approximately MEURO 100. Starting with July, as the foreign exchange market has moved towards equilibrium, the monetary authority reverted to a net buyer position, with interventions steered to counter an excessive appreciation trend of the ROL and to rebuild official forex reserves. In the first seven months of the year, the domestic currency has depreciated by 1.4% against the EURO and has appreciated by 10.2% against the USD (both in real terms). BNR's net purchases of foreign currency for the same period amounted to MEURO 193 (compared to MEURO 1181 in the corresponding seven-month interval of 2002). In order to mitigate the growth rate of non-government credit, the central bank has tightened its monetary control, clearly signaling its intention to maintain a prudent stance of monetary policy. To enhance the firmness of this orientation, as well as to boost the domestic currency saving propensity which has been losing ground during the first six months of 2003, BNR decided on 7 August 2003 to increase the interest rate cap on its one-month deposits by one percentage point (up to 19.25%). This policy move was also meant as a preemptive action aimed to address the potential inflationary pressures coming from the administered prices adjustments projected for the latter part of this year. It needs to be emphasized that a large proportion of the recent rapid growth of nongovernment credit is accounted for by the natural tendency of the economy to move towards increased financial intermediation. This process is particularly important for Romania, which is currently recording a low degree of financial intermediation. On the other hand, it is clearly necessary to prevent the proliferation of non-performing loans. To address this problem, BNR will focus on prudential supervision measures, such as: exercising close supervision of the most active lenders, intensifying on-site supervision, improving risk assessment procedures, imposing credit restrictions to regularly 64

imprudent risk-takers. BNR will frequently conduct stress testing on banks' portfolio, employing the methodology elaborated in the context of the Financial Sector Assessment Program (FSAP). As a consequence of the monetary policy stance over the reporting period, the financing conditions obtained by the Treasury from the banking sector have become more restrictive. The average yield of new government securities issues has increased substantially in June, despite falling yields experienced for certain maturities (namely the 3-months and the 2-years). The 2.8 percentage points growth of the average yield for the June issues was largely determined by the massive amount of resources raised for the one-month maturity (ROL 9342 billion), for which the Treasury accepted to offer an average yield of 18.1%. The tightening of monetary conditions was reflected in May by a slight increase of both the average interest rate for medium and long-term loans and the average rate on term deposits; in June, all major commercial bank interest rates showed a downward movement, with the exception of term deposit rates, which remained virtually unchanged. In July, banks' interest rates offered to non-banks customers registered slight increases. For the first two quarters liquidity within the economy has remained within the projected range. The annual growth of M2 was of 12.2% in real terms, while its euro-denominated external counterpart showed a growth of only 4.3%. The latest developments appear to validate the preemptive interest rate increase decided by BNR in August. Reacting favorably to the signal launched by the central bank, the commercial banks have announced moderate increases in deposit interest rates, which are expected to induce favorable effects on savings. At the end of August, net purchases of the central bank on the forex market amounted to MEURO 269. Over the first 7 months of 2003, the budgetary execution was carried out, within the context of the implementation of the Law on Public Finance No. 500/2002, starting with 1 January, and has been characterized by a favourable trend of the main budgetary aggregates compared with the same period of the last year, under the circumstances of a decreasing inflation. The budget deficit decreased with 44% as compared to the same period of the previous year, and did not represent a growth factor for the current account deficit. The general consolidated budgetary revenues achieved during the period January ­ July, amounted to ROL 315,461.8 billion, with a collection rate of 56.1% as compared to the annual programme. While the average inflation rate during the first seven months of the year was of 15.6%, the real increase of the general consolidated budgetary revenues amounts to 10.8%, as compared with the same period of the previous year. Over the reporting period, the fiscal revenues trend, was characterized by: The share of the revenues from direct taxes in the fiscal revenues decreased, with 3.6 percentage points, as compared to the same period of the previous year, mainly as a result of the fiscal policy measures for decreasing the rates of the social security contributions with 5 percentage points, applied starting with 1 January 2003; Indirect taxes increased their contribution to the fiscal revenues' formation, as a result of the growth registered in: VAT collections, which were 35.2% higher as compared to the same period of the previous year. It is expected to exceed the preliminary assessment in the Law on State Budget; Excise duties, whose share in the indirect taxes increased with 1.9 percentage points; 65

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Revenues from customs duties, whose collection rate has reached 84.9% of the updated annual programme. These are 45.3% higher, in nominal value, and 25.6% higher, in real value, as compared to the same period of the previous year. Custom duties are also expected to surpass preliminary assessments.

In the first 7 months of the year, according to the operative execution data, the general consolidated budgetary expenditures summed up to ROL 327,248.5 billion, representing 53.5% of the annual programme. The main characteristics of the budgetary expenditure evolution were: An achieving rate over the average registered for overall expenditure was noted in the case of the national single health securities fund (55.9%) and the local budget (55.2%). From the structural point of view, a more significant growth of primary expenditures, namely 25,1% as compared to the same period of the previous year, is to be noted. This is mainly due to the decreasing of the interest expenditures for the public debt. Within an favourable macroeconomic framework, which triggered a decrease in nominal interests, and thanks to the alternative financing sources for the public debt from privatisation revenues and from the recovery of bank assets, the interest expenditures for the public debt only exceeded those for the same period of the previous year with ROL 60.4 billion. This made it possible to preserve a positive primary balance, 131.6% higher, in nominal value, than that registered in the same period of the previous year.

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For the year 2003, the budgetary policy envisages to maintain the general consolidated budget deficit target within 2.7% of GDP. On 31July 2003, the achieved deficit, in the amount of ROL 11,786.7 billion, representing 0.6% of GDP, kept within the projected targets. As compared to the same period of the previous year, the registered deficit represents 56%, due mainly to the diminution with 1.9 percentage points of expenditures with interests on public debt, but also to the more pronounced ascendant trend for the budgetary revenues, which have increased with 28.1% in nominal terms, for the same period, as compared to the expenditures, which increased with 22.4%. The State budget deficit represents 24.5% of annual estimates, while this reduced level has to compensate the adverse trend registered at the other budgets, especially the budget of social public securities and the budget of the national single health securities fund. As a result of the analysis of income and expenses execution of the consolidated general budget on the first seven months of the year, the budget rectification became a necessity. Therefore, the budget provisions for the year 2003 were modified by GO No. 87/2003 (OJ No. 623/31.08.2003) concerning the modifying of the state budget for 2003. Through this modification, the supplementary sums resulted from the re-evaluation, in the sense of increasing the state budget incomes as compared to the initial provisions, as well as from the savings from projected expenses, due mainly to the diminishing of the interest rate and to the improving of debt management, were primarily directed to the fields of: healthcare, social assistance, agriculture and forestry, pensions, benefits, industry and education. Following the re-dimensioning of the initial budgetary provisions, the weight of the budget deficit in GDP was maintained at the initial level of 2.7%. The budgetary projection for 2004 will be completed and submitted to the Government by the end of September this year. Nevertheless, as a part of the annual budgetary process, a series of proposals concerning the objectives of the fiscal-budgetary policy for the year 2004 have been expressed, among which: 66

Concerning taxation: Diminishing the contribution quota for state social insurance paid by the employer; Reducing VAT for medicines and for accommodation in hotels; Increasing excise duties for certain products, as a result of the process of negotiating EU accession; Applying standard quota for profits corresponding to the export activity; Sustaining the system of social assistance and protection; Supporting the small and medium sized enterprises; Sustaining the policies for stimulating export production and exports; Ensuring with priority the co-financing, non-reimbursable assistance granted by the EU; Orienting the budgetary funds with priority towards the achievement of active measures, especially regarding the employment of young people and unemployed, as well as simplifying the employers' access to funds having such a destination, with the aim of increasing the employment of the active population and implicitly, the corresponding diminishing of the unemployment.

Concerning budgetary expenses, special attention will be paid to:

2.2.2. Assessment in terms of the Copenhagen criteria The existence of a functioning market economy

A. The existence of a broad consensus upon the overall directions of economic policy

Romania elaborated and sent on 15 August 2003 the updated edition of the Preaccession Economic Programme (PEP); this document refers to the measures taken by the Government in view of fulfilling the economic criteria for EU accession, as well as to creating the premises for Romania's participation to Economic and Monetary Union, as a country with derogation from the Euro single currency. The consensus upon the overall directions of economic policy was also shown during the preparation the 2003 edition of the Pre-accession Economic Programme. Taking into account that PEP represents a widespread, extremely important reference document concerning Romania's efforts towards EU accession, involving all segments of the society, during the preparation of the 2003 PEP edition various nongovernmental organisations, trade unions and employers have been consulted. The 2003 PEP edition has been discussed within the framework of the Social and Economic Council, the main trade unions' confederations and employers' associations giving their consent. Encouraging social dialogue and developing social partnership represent constant characteristics of the Government's policy. The sectoral mechanisms for social dialogue have been extended, allowing for all major aspects of economic and social policy to be discussed within the social dialogue commissions existing within the ministries and prefectures, the inter-ministerial committees and commissions, and the working groups established in different fields. Over the reporting period, this approach was applied to elaborating the budgetary rectification, and, at present, contributes to elaborating the budgetary projections for 2004. The Pre-accession Economic Programme, document of reference concerning Romania's medium term economic policy, has been elaborated based on the provisions of the Governing Programme for 2001-2004, the Revised Partnership for 67

Accession, in line with the comments regarding the previous edition and the EU requirements, with the participation of the ministries and institutions responsible for designing and implementing various components of the economic policy, under the coordination of the National Commission for Prognosis (CNP). The medium-term overview has been elaborated based on a macroeconomic prognosis elaborated by the National Commission for Prognosis. Upon the evaluation of the 2002 PEP edition by the European Commission and the EU Member States, several recommendations specific to Romania have been provided, concerning mostly the more detailed presentation of certain issues, such as: business environment issues, the influence of inflation reduction on fiscal revenues, the schedule for enforcing the proposed reform measures, the links between budgetary projections and structural reform implementation, the more detailed description of the measures and achievements regarding the improvement of market enter/exit mechanisms, the development of markets specific to the agricultural sector, issues that have been solved in the 2003 edition of the Pre-accession Economic Programme. The consensus upon the overall directions of economic policy has facilitated the implementation of the convened measures, which led to progress on the way to fulfilling the economic accession criteria. An example for this is the improvement of the relations with the International Monetary Fund and the World Bank. The fourth analysis performed by IMF in July this year comprises elements indicating a consolidation of economic growth; the conclusions of this analysis will be presented to the IMF Board in October 2003. If the Supplementary Memorandum is approved, the last tranche, in value of 110.2 million SDR (153 million USD) will be released. The Supplementary Memorandum agreed with the IMF representatives provides additional measures, necessary for pursuing the Government's efforts for consolidating the fiscal position, improving the social protection system, and stepping up the restructuring and privatisation of state-owned enterprises. Regarding the relations with the World Bank, 3 important loans have been signed since the beginning of 2003: 25 million USD for financing the Romanian Forestry Programme (January 2003), 60 million USD for financing the Rural Education Project (May 2003) and 80 million USD for the Project for updating the irrigations system (August 2003). A 350,000 USD grant is also under negotiation, intended for preparing the project for reducing natural disaster risks, in value of 150 million USD. The preparation of the first Programmatic Adjustment Loan (100 million USD) has also started, as the first in a series of three such loans agreed upon within the Financial Assistance Strategy for Romania. These loans are meant to support the medium term Governing programme regarding the public administration and development policy reforms, and reflect the main fields of interest of the World Bank's Financial Assistance Strategy for Romania, namely: EU accession, economic growth by public sector reforms, private sector development (completing the privatisations initiated in the framework of the PSAL I and PSAL II programmes, improving the business environment) and reducing poverty (improving health and education services, public administration reform). B. Macroeconomic stability attaining, including adequate prices' stability and public finances and current account sustainability

In 2003, macroeconomic stability has considerably improved, with good results mainly in maintaining price stability and public finances' sustainability, characterised by strictly controlled budget deficits and an improvement in the collection rate. The macroeconomic policy mix applied has ensured the disinflation process' continuation, the current level of inflation, even with the increase of certain energy prices in September 2003, making it possible to a achieve a one-digit inflation rate in 2004. 68

In the first 8 months of 2003, consumer prices rose by 7.3% as compared to December 2002, in line with the 14% annual target (December/December). Underlying this outcome were the following: Retrenchment in household demand for non-durables, as a result of the change in the household consumption pattern following the rise in recurrent expenses/disposable income ratio; Lack of major corrections of administered prices, whose change has been considerably below headline inflation (+4.9% during January-August 2003, contributing by 1.1 percentage points to the change in the general level of prices); Stronger ROL against the USD (+0.9% in nominal terms and +8.2% in real terms), which limited the pressure on domestic prices fuelled by steeper oil prices worldwide and mitigated the impact of administered prices geared to the ROL/USD exchange rate on headline inflation; Existing disinflation in Romania's main trading partners, which lowered the inflationary impact of the ROL easing versus the EUR (by 7.9% in nominal terms and 1.2% in real terms).

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During May-August 2003, the decelerating trend of inflation consolidated; the monthly inflation rate average was of 0.7%, down by 0.4 percentage points from the first four months of 2003. Behind this development stood the low increase in food prices amid larger domestic supply of food industry during summertime. In the first 8 months of 2003, non-food prices went up 7.0%, largely as a result of (i) costlier cigarettes and fuels (also due to the hike in excise duties as of 1 July 2003 pursuant to the calendar of bringing them into line with those in the EU) and (ii) the twostep adjustment in natural gas prices, as agreed with the IMF (by 7.5% in March and 8.7% in July). Therefore, the prices for energy products rose 5.7%, contributing 0.9 percentage points to the change in the general level of prices January through July 2003. As from 1 September 2003, the gas price will be raised by 22.4% for residential consumers and 12% for industrial consumers, whereas the electricity price will go up 17.5%. As for the price of heating, although the production price is to be raised, the national reference price for heating delivered to households will be left unchanged, with the central government and local governments topping up the rest. Behind the latest decision to raise the electricity price stood mainly the difficulties this sector is going through, namely the falling output of hydroelectric power plants because of protracted draught and the ever-lower flow of the Danube, which caused the increase in output of combined heating and power plants, whose costs are almost 8 times as high. Prices for services stepped up 6.2% in August 2003 versus December 2002, on account of the adjustment of certain administered prices (water, sewer, sanitation, city transport and railway intercity transport, basic postal services) and the hike in market prices. The current account deficit in 2003 H1 was of MEURO 1,246, up 27.3% year on year. This development was mainly attributable to the widening of trade deficit, as a result of the sharper rise in imports fuelled by the pressure that higher wages and enhanced availability of credit (for both businesses and individuals) put on domestic demand. It is worth mentioning that this development does not pose financing problems amid (i) direct investment covering 56.5% of the current account deficit, net balance (MEURO 704), 21% above the year-ago level due mainly to capital increases in the non-bank sector (Ispat Sidex Galai, Alro Slatina, Romtelecom, OMV Romania), and (ii) Romania's improved access to international capital markets over the past three years. Moreover, even amid mounting imports, the growth of official foreign exchange reserve 69

to MEURO 6294 at end-July 2003, on account of proceeds from the June Eurobond issue and the central bank's shifting back to the net foreign exchange buyer position, helped maintain the coverage of the official foreign exchange reserve in months of imports of goods and services at 4.1 months, an adequate level by international standards. It is worth mentioning that Romania's international reserve amounted at end July to MEURO 7357, of which MEURO 6294 worth foreign exchange and MEURO 1063 worth gold. After the success recorded last year, when, for financing the budget deficit, the Ministry of Public Finance launched for the first time an Eurobond issue in the amount of MEURO 700, with ten years maturity and a coupon of 8.5 %, significantly lower than previous ones, in July 2003 a new MEURO 700 Eurobond was launched, with a 7-year maturity and a coupon of only 5.75%, thanks to the improvement of the macroeconomic indicators and the structural reforms put into practice by the Government. In order to maintain domestic debt within sustainable limits, efforts have been made concerning the extension of the maturity curve of the financing and refinancing instruments for the domestic public debt. Efforts have also been made to increase the volume of Government securities with 1, 2 and 3 years maturity. Extending the maturity curve for domestic debt instruments has conferred for the following years the advantage of diminishing the monthly volume of Government refinancing securities, and implicitly the declining of the interest rate and the domestic public debt costs pressure on the state budget. By cutting down interest rates for Government securities, the domestic debt service has decreased and the commitment regarding the restructuring of domestic public debt has been achieved. New instruments for shortterm liquidities (T-bills for 1 week and 1 month) were used, thus avoiding gaps from discrepancies between receipts and payments. The collections through tax enforcement represented, in the first semester of 2003, 122.54 % as against the same period of the previous year. The arrears level on 30 June 2003, for the companies monitored, has reached the amount of ROL 154,641.2 billion, respectively 156.3% as compared to the program, exceeding it by the amount of ROL 55,734.8 billion. It must be noted that, starting with April 2003, MFP and MMSSF monitored a number of 74 companies, compared to the 86 presented in the List approved by GO No. 866/2001. In structure, the arrears are as follows: other creditors 47.5%, social security budget 29.5%, state budget 19.8%, special funds budget 2.7%, local budgets 0.5%. As a positive aspect, it must be mentioned that the level of arrears to the state consolidated budget, in comparable prices, has decreased with ROL 3,717.6 billion as compared to 31 July 2001. Out of the total amount of ROL 9,195.7 billion, arrears registered on 31 December 2002 for the sanitary system, those for drugs and sanitary materials amount to ROL 7,718 billion, the difference of ROL 1,477.7 billion representing debts for utilities, food and other expenditures. In these terms, the expenditures of the budget for the Social Health Security National Single Fund on 2003 have been supplemented by ROL 4,000 billion for the extinction of hospitals' debts, registered on 31 December 2002, related to procured goods and services in compliance with legal procedures on public procurement, and which are covered by the indicators achieved in conformity with the Framework Contract regarding the conditions for awarding the hospital medical services, approved by GD No. 1330/2001. 70

GO No. 87/2003 (OJ No. 623/1.08.2003) concerning the rectification of the state budget stipulates that, within the limit of a maximum approved amount, the economic agents under the authority or co-ordinated by the Ministry of Economy and Commerce and the Ministry of Transportation, Construction and Tourism, are exempted from the payment of their obligations towards the state budget, the state social insurance budget, the budget of the National Unique Fund for health social security and unemployment insurance budget, including the accessories related to these, with the exception of the obligations due through collecting at the source. The economic agents benefiting from such stipulations, as well the amounts under which obligations are exempted, will be established by GD after the Competition Council has given its opinion on the state aid scheme. In order to improve the bill collection rate in the energy sector, the electricity and gas distribution companies pursued firm measures for the collection of unpaid bills. Bad payers were disconnected or were only supplied with a limited amount of energy. In this respect, in August 2003, at SC Electrica SA 242 large industrial consumers and at the gas distribution companies ­ SC Distrigaz Sud SA and SC Distrigaz Nord SA ­ 252 large industrial consumers were disconnected or supplied with limited amounts of energy. By constant monitoring of the electricity and gas bill collection process, the bill collection rate for the first half of 2003 was of 95.7% for electricity and 97.5% for gas. Another segment of the economic policy, with implications on the financial stability and the reduction of arrears, is represented by the salary income policy. In the competition sector, in July-August 2003, the measures for monitoring companies with majority state participations were pursued, in view of respecting the programme regarding salaries and the cutting down of staff, agreed with the international financial organisations. In the competition sector, where the state is main shareholder, measures were pursued for correlating salary dynamics with labour productivity, in order to render the activity more efficient by increasing the role of the income/expenses budgets and the programmes for reducing arrears and overdue payments, as established by EO No. 79/2001 on strengthening economic-financial discipline. Following these actions, the real salary income growth settled down, as compared to the beginning of the year; real salary income increased by 8.1% in July 2003 as compared to July 2002, while at the end of the 1st quarter, the growth had reached 9.6% as compared to the same period of the previous year. Another instrument that ensures the necessary conditions for strengthening public finance stability is embodied by the Fiscal Code. The Fiscal Code draft has been completed and published on the Ministry of Public Finance's web page, for proposals and observations. The entering into force of this code is foreseen for 1 January 2004. A fundamental objective in drawing up the Fiscal Code is the harmonization with EU fiscal legislation, as well as ensuring the compliance with international fiscal agreements of which Romania is part (74 countries, among which all EU Member States). Since the adoption of the Fiscal Code, any amendment or completion of the fiscal regulations can only be promoted by measures amending and completing the Law for adopting the Fiscal Code. This principle will ensure the legislative stability necessary for carrying out any business plan on medium and long term. 71

The draft shows a series of legislative framework improvements, in the fields regarding: profit tax, revenue tax, the taxation of micro enterprises' revenues, the taxation of revenues achieved by non-residents in Romania and the tax on foreign companies' representations set up in Romania, value added tax, excise duties, local taxes and fees. The Fiscal Code thus brings improvements in the VAT field, referring to: Introducing a reduced rate of 9%, at the same time with the elimination of VAT exemption with deduction right for: Collection of admission fees to castles, museums, fairs and exhibitions, zoos, botanical gardens, libraries; Delivery of schoolbooks and books, except for the publicity activities performed by them; Prostheses of any type, their accessories, as well as orthopaedic products (except dental prostheses which are and remain VAT exempted). Deliveries of utilities, equipment and supplies of services related to the investment objective "Development and modernization of International Airport Bucharest- Otopeni" Technical documentation and construction materials destined to state and private education, as well as the acquisition of devices, utilities, publications and equipment for the didactic process; Deliveries of utilities, equipment and supplies of services indirectly related to oil operations performed by holders of oil agreements, foreign legal persons, based on the Oil Law No. 134/1995;

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Will be abolished the provisions regarding VAT chargeability postponement for small and medium sized companies, investments in disadvantaged areas and investments with a significant impact on the economy.

Regarding excise duties, the Fiscal Code reunites in the framework all existing provisions which settle the excise duties' regime, the supervision and authorisation system of production, import and circulation of certain products that are subject to excise duties, as well as the cigarette, tobacco product and alcoholic beverages marking system, by stamps and banderols. The Fiscal Code also provides for: Defining and appointing the products submitted to excise duties on positions and tariff code, removing any possibility of interpretation regarding the excise duties' scope; Removing persistent differences regarding the scope of application to alcoholic beverages and mineral oils; Reanalysing the exemptions from the payment of excise duties settling a system similar to that provided by the European directives; Reanalysing the system of the special fiscal papers, in conformity with the European directives in this field.

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At the same time, in accordance with the commitments assumed in the Position Paper on Chapter 10 ­ Taxation, the draft Fiscal Code also contains provisions regulating the regime of the fiscal warehouse, contained in Directive 92/12/EEC. The Fiscal Code also brings improvements in the direct taxation area, referring to: 72

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Exemption from the dividend tax of Romanian or EU Member States legal persons, if, upon the dividends' payment date, they've been holding at least 25% of the share package for at least two full years; Fiscal regulations for the assets transferred in the case of mergers and divisions; Introduction of a more favourable treatment as regards the non-recoverable liabilities of the taxpayers, by accepting the deductibility of the allowances for the depreciation of the debts in the client accounts, set up on the expenditure basis, within the limit of 20% of their value.

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By promoting the draft Fiscal Code, a series of fiscal legislation amendments are envisaged, in line with the principles of the Conduct Code for business taxation, out of which: Stopping the granting of new fiscal facilities which could disturb the business environment; Maintaining the deadlines for current fiscal facilities (free zones, disadvantaged areas, reduced export quota); Introducing, in the transitory provisions chapter, provisions for legal persons that benefit from special fiscal regulations and which, by the accession date, are to be in compliance with the regulation on regional state aid and state aid for small and medium enterprises.

The measures related to the pension system and social insurance also contribute to improving the stability of public finance. The financial difficulties that characterise the last years' evolution of the public pension system and social insurance system have diminished after the entering into force of Law No. 19/2000, a descending trend that is still evident now. Upon the entering into force of Law No.19/2000, the retirement age raised with 2 years both for women and men, with the immediate effect of reducing the number of new persons registered in the system in 2001 and 2002. This trend is maintaining in the 1st semester of 2003, which result in a reduced number of new persons registered in the system for the entire year 2003. As a measure of partial improvement of the public pension system's financial situation, it is worth mentioning the cutting down of the social insurance's budgetary deficit. The budgetary process for 2003 is estimated to close with better results than 2002, as pensions represent the main disbursement of the system. The premises have thus been laid for ensuring financial resources necessary to sustain over the following years, as well, the main political objectives in the pensions field and other social insurance benefits: quarterly indexation and completing the pensions' recorrelation in the 2004, achieving the re-evaluation of pensions for the agriculture sector. The principle underlying the multi-pillar pension system is the diversification of financial sources of pension benefits. A defined benefit regime (PAYG), based on the intergeneration solidarity, is thus combined with capitalized pension funds schemes, privately managed. The main purpose of introducing both the privately managed pension funds and the pension public system reform is to provide new opportunities for increasing pensions for people participating to the system, as well as to promote a strong mechanism, able to face the demographic and macro-economic pressures. C. Structural Reform of the Economy; privatisation and restructuring of the state-owned companies 73

The evolutions in the field of privatisation have been favourable. Thus, analysing the evolution of the privatisation process in the first 8 months of 2003, the positive effect of the legislative measures which have been taken up has been remarkable, consisting in the privatisation by APAPS of a number of large companies remaining in its portfolio, due to their unattractiveness. During the first 8 months of 2003, a number of 177 companies have been privatised (the number of companies privatised by APAPS since December 1992 has reached 7,490). Consequently, the volume of losses corresponding to the APAPS portfolio has diminished with ROL 2,881 billion, and the volume of arrears corresponding to these companies has also diminished with ROL 6,365.4 billion. By privatising these companies, the number of employees transferred to the private sector added up to 33,323 persons. The positive results recorded by APAPS in the privatisation and restructuring process have been confirmed upon the recent IMF mission, which took place between 14 July and 1 August 2003. Following the forth and last evaluation performed within the Stand­ By Agreement with IMF, APAPS' commitments for the first semester 2003 have been considered as fully achieved. Thus: 12 large and very large companies with over 1,000 employees have been privatised. Following the implementation of broad restructuring programs, the volume of lay­ offs exceeded the target of 18,000 employees, numbering 19,698 employees. 5 out of 7 companies with poor financial results have been privatised and the liquidation procedures have been started for the remaining 2 companies.

Upon the same mission, supplementary measures in APAPS' responsibility have been agreed on, with firm deadlines for September 2003. These refer to: The privatisation of another 3 companies with over 1,000 employees; The endorsement of the privatisation contracts for two large loss-makers: ARO and Roman. Otherwise, APAPS will have to take the formal decision to start the liquidation procedure; The endorsement of the privatisation contract of BCR with EBRD and IFC.

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Concerning these new conditions, significant progress has been already registered at the end of August 2003. Thus: 7 companies with over 1,000 employees are currently under negotiations. Out of these, 2 companies are in an advanced negotiation stage. In the case of SC ARO SA Campulung, the last Memorandum negotiated with the IMF outlines that if the sale-purchase contract is not endorsed by 20 September 2003, APAPS' Management Board will decide the liquidation of the company. Nevertheless, on 27 August the company CROSS LANDER submitted its final, improved and irrevocable bid for the purchasing of the majority stake of 68,70%; In the case of SC TRACTORUL SA Brasov, in order to privatise the company with a strategic investor able to provide good management, modern technology, investments, environmental protection measures and social protection, as well as the access on the international product and capital markets, GO No. 53/20.07.2003 (OJ No. 584/15.08.2003) was issued, representing the legal base for carrying out negotiations with the Italian company LANDINI Spa, one of the world leaders in the production of agricultural machines and tractors.

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This progress allows the Romanian authorities to believe that the new set of conditionalities negotiated with the IMF will be achieved in due time. 74

Regarding the results obtained between 15 June and 31 August 2003, a number of 53 companies have been privatised by APAPS (5 large companies, 10 medium sized and 38 small companies) and 8,000 employees have been transferred to the private sector. Consequently, the volume of losses corresponding to the 53 privatised companies in APAPS' portfolio has diminished with around ROL 500 billion, while the volume of arrears corresponding to these companies has diminished with around ROL 2,000 billion. Under these circumstances, on 31 August 2003 a number of 160 state­owned companies in APAPS' portfolio were ready to be privatised, out of which 71 large and 89 small and medium sized. Following the permanent diminishing of its portfolio, APAPS experienced consecutive restructuring in terms of number of employees, in view of proceeding with the dissolution of its regional branches by end-October 2003. The privatisation of the companies included in the PSAL I programme, negotiated with the World Bank, continues at high pace. By the end of August 2003, another 2 large companies have been privatised: FORTUS Iasi and URBIS Bucuresti, amounting to a total number of 7 companies privatised over the first 8 months of 2003. Out of the 61 companies in APAPS' responsibility (all of them belonging to the manufacturing industry sector), as of 31 August 2003: 44 companies have been privatised, as compared to the target of 37 negotiated with the World Bank; 5 companies are under negotiations (Tractorul Brasov, Moldosin Vaslui, Siderurgica Hunedoara, Aro Câmpulung, and Timpuri Noi Bucuresti); In the case of SC Roman Brasov, one offer has been submitted by the deadline (28 August 2003).

Out of a total of ROL 21,897.37 billion, representing the share capital of the 61 companies in APAPS' portfolio, a percentage of 71.61% has been privatised, the share capital of the 17 companies not yet privatised accounting only ROL 6,215 billion. During July and August 2003, significant events have been recorded in relation to the following companies included in PSAL I: In the case of SC Electroputere SA, offered three times for privatisation already, the investors interested in this company, some of them of great financial power, have expressed their interest in purchasing only certain production units of the company. Therefore, it became necessary to change the privatisation strategy, by shaping it to the demands of the investment market, and by splitting up the company into several companies, attractive to the investors. Consequently, in the case of Electroputere Craiova, which is to date under special administration procedure, the privatisation strategy is going to be modified in line with the potential investors' interests; In the case of SC Tractorul UTB Brasov and SC ARO SA Campulung privatisation offers have been submitted, as mentioned above; Concerning SC Roman SA Brasov, the last Memorandum negotiated with the IMF outlines that if the sale-purchase contract is not endorsed by 20 September 2003, APAPS' Management Board will decide the liquidation of this company, as well. On 28 August 2003, one of the company's traditional clients, the Malaysian company Pesaka Astana, has submitted its offer for the purchasing of the majority stake. APAPS' requirements concerning the privatisation of this company foresee the submission of a project for transforming the company into an industrial park, in a determined period of time. It is worth mentioning that, by the sale of the parent 75

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company, the interest owned by Roman in its subsidiaries (around 99% in each of them) will be sold, hence all Roman subsidiaries will be privatised. In the case of SC Siderurgica SA Hunedoara, in order to increase the company's appeal, offering in package both Siderurgica and Petrotub for privatisation has valorised the complementarity and attractiveness of SC Petrotub SA Roman. Under such circumstances, negotiations are currently ongoing with LNM Holdings, who submitted its offer on 4 August 2003.

Within the PSAL II program, 20 new commercial companies have been selected and structured into 7 groups, in order to be privatised with the assistance of the investment banks or sale agents. To date, two international consultancy contracts have been signed and are in progress, for 7 of the 20 companies. The rest of 13 companies are to be privatised by own effort of APAPS, (not with the assistance of the investment banks/consultancy firms), as agreed with the World Bank, in view of fulfilling the Romanian Government's objective to complete, in broad terms, the privatisation of the companies in APAPS' portfolio by end-2003. Out of the 13 companies, two represent specific cases: HELITUBE SA, all of whose assets have been sold by AVAB, and VERACHIM SA, for which the voluntary liquidation procedure has been initiated. The privatisation strategies for the 7 companies which benefit of consultancy services, as well as the 11 companies remaining to be privatised by own effort, have been approved by GD in July 2003. Five companies have been already offered for privatisation during June-August 2003: Tubinox Bucuresti (deadline for submission of offers: 29.08.2003) ­ 1 offer submitted; Hiperion Stei (deadline for submission of offers: 08.09.2003); Premagro Oradea (deadline for submission of offers: 17.09.2003); Hart Miercurea Ciuc (deadline for submission of offers: 17.09.2003); Comefin Costesti (deadline for submission of offers: 17.09.2003).

Excepting the privatisation process, APAPS also has the responsibility to prove that, in the state-owned companies sector, exit mechanisms exist and operate, and the restructuring and liquidation of non-viable companies is possible. That is the reason why, within the efforts undertaken to achieve the Copenhagen economic criteria, measures to reduce losses will be further pursued, including the endorsement of liquidation procedures for new poorly performing companies. In this respect, in accordance with the 2nd Supplementary Memorandum of Economic and Financial Policies negotiated with the IMF, the privatisation of 5 companies has been completed: Corapet SA, Tepro SA, Carom SA, Chimcomplex SA and Oltplast SA. Rulmenti SA Slatina is currently under liquidation procedure, just as Verachim SA, whose liquidation was decided by APAPS as early as 3 July 2003. On 31 August 2003, a number of 27 majority state-owned companies in APAPs' portfolio were under voluntary liquidation procedure, their corresponding volume of arrears amounting to over ROL 300 billion. The judicial liquidation procedure has been opened for a number of 307 companies, out of which 3 companies during 1 June ­ 15 August 2003. The monitoring activity performed by APAPS in the case of the companies under judicial reorganisation or bankruptcy aims mainly at recovering APAPS' receivables at these companies.

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In application of the legal provisions concerning the stimulation of the restructuring, reorganization and privatisation process of the majority state-owned companies, with a view to increasing their attractiveness, restructuring programmes have been drawn up for a number of 53 companies. These programmes include organisational and managerial measures, technical, technological and financial measures, meant to recover the economic and financial situation and to reduce losses and arrears. These measures consisted of: turning into account of assets and stocks; spin-off of auxiliary activities; splitting up into operating modules, adjustable to market demand; optimisation of technological flows; severe measures for recovering receivables; optimisation of the organisational structure and the correlation of the number of employees with the level of production, with lay-offs in case of exceeding personnel. All the ministries and APAPS have taken measures for drawing up programmes for economic and financial restructuring and recovery of the agents co-ordinated by these authorities, in order to reinforce the economic and financial discipline and to implicitly diminish the financial blockage. The effects anticipated by applying these restructuring programs are as follows: Reducing production capacities; Laying off employees, as well as diminishing wage expenses; Performing activities that lead to ensuring own financial resources for the payment of duties to the general consolidated budget.

At present, the analysis of the economic and financial recovery measures is in progress at a number of 152 state-owned companies, according to the foreseen level of the income and expenses, taking into account the specific targets included in each program, so that at the end of 2006 they become viable and capable of performing their activity, in terms of the market economy. By the implementation of the restructuring programmes at the companies in APAPS' portfolio nominated by the new legislative acts, the number of employees laid-off by 30 June 2003 was of 19,698 persons, as compared to the IMF conditionality that only foresaw a number of 18,000 employees to be laid-off. The list of the companies where lay-offs shall apply based on a limited time schedule, that allows for severance payments in order to soften social effects, has been enlarged by another legislative act issued in June 2003. Consequently, a total number of 23,917 employees will be laid-off by end-September 2003. To date, a number of 22,805 employees have been laid-off from the 53 companies mentioned above. According to this, the application of supplementary measures established by Government for this period and agreed with the IMF, will also reduce arrears, especially in the agricultural and railway field. So far, draft GDs have been elaborated to remove holidays grants for five railway companies and two companies subordinated to the Ministry of Agriculture, Forests, Waters and Environment, respectively the Forests National Regie and the Land Improvement National Company. Concerning staff reduction, notifications for 16,000 employees in the railway field have been elaborated so far. In the case of the two agricultural companies, staff will be reduced with 4,000 employers by the decision for rectifying their budget. To decrease the salary fund for state-owned companies, measures have been taken to block 4% of this fund. For this purpose, a part of the stake holding ministries have issued orders to freeze these 4%: Ministry of Agriculture, Forests, Water and Environment (Order 554/26.08.2002), Ministry of Administration and Interior (Order 517/27.08.2003), Ministry of Communications and Information Technology (245/28.08.2003), Ministry of Transport, Constructions and Tourism (Order 111/18.08.2003), Ministry of Economy and Commerce (Order 88/20.08.2003), Ministry of Health (Order 792/21.08.2003); the remaining responsible institutions will apply 77

these measures based on GD 1552/2002 regarding the approval of quarterly wages objectives for 2003. Within the companies for which restructuring programmes have been implemented, a special attention has been given to the restructuring programmes for Siderurgica Hunedoara, Tractorul Brasov and Roman Brasov. These programmes included splitting-up, setting up branches having distinct legal personality, accompanied by massive lay-offs, which led to increasing the company's attractiveness and the progress of the privatisation process in the case of these companies. Despite the trade unions' opposition, massive lay-offs have been applied at these 3 companies by 30 June 2003: TRACTORUL SA Brasov - a number of 3,357 employees have been laid-off; Siderurgica Hunedoara - a number of 3,054 employees have been laid-off; Roman Brasov - a number of 3,403 employees have been laid-off.

All these measures have led to the increase of the attractiveness, also confirmed by the fact that Siderurgica Hunedoara and Tractorul Brasov are, at present, under negotiations with major strategic investors, whilst for Roman Brasov an offer was submitted by one of the company's traditional clients. Concerning the liquidation of ARO and ROMAN, the formal decision for the endorsement of the liquidation procedures has not yet been taken, as there are still perspectives for privatisation. APAPS is negotiating with a potential investor, in view of privatising ARO, and it is estimated that until 25 September 2003, these two companies will be privatised. Out of the 57 companies remaining in APAPS' portfolio, a number of 47 companies have been privatised, (out of which one during July - August), 4 companies are under negotiations, (out of which 2 started negotiations during July ­ August), one company is in the period of submitting offers and the last 5 companies will be offered for sale in the immediate future. At present, within the Ministry of Public Finance, a draft EO for the restructuring and economic and financial recovering of certain national companies, regies autonomies, trading companies is being elaborated. The main objectives of this new regulation will be: Deferring payment for the cancellation of obligations to the State budget, state social security budget, the budget of the health security single fund, unemployment security budget and local budgets, registered on 31 August 2003, including the attached part, in terms of overdue discharge of current budgetary obligations and achievement of restructuring programmes; Ceasing of the applicability covenants for awarding the payment facilities of budgetary obligations concluded with economic agents, for recovering the budgetary arrears, carrying on and respectively, deferring and re-deferring agreements concluded with economic agents; Complying with the legislation related to State aid.

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This draft will be submitted to the stake holding public institutions for approval and to the Competition Council for authorisation of the State aid scheme. The steel industry restructuring and privatisation process has continued during 1 June August 31, 2003, according to the specific strategy approved by the Romanian government. The assessment of the steel industry sector's viability, started in January 2003, has continued, according to the calendar agreed with the European Commission and the Roland Berger Consulting Company, which has submitted 2 reports to date, 78

emphasizing the progress of the restructuring process of the Romanian steel sector in the corresponding period. At present, the consulting experts are going to complete the individual analysis of the 7 integrated steel companies. The restructuring process of the coal industry has continued. Thus, during the first semester of 2003, a number of 6 coalmines have been closed, laying-off 2,525 persons. By GD No. 926/2003 regarding the approval of preservation, definitive closing and post­closing monitoring of environmental factors of certain mines and quarries, the 7th stage, the closing of another 6 mines has been provided for the following period (2 mines within Compania Nationala a Huilei SA Petrosani and 4 within Compania Nationala a Lignitului Oltenia SA Targu Jiu). As part of the restructuring and privatisation process of the energy sector, in July 2003 the Romanian Government approved, by GD No. 890/29.07.2003 (OJ No. 581/14.08.2003), the Road map in Romania's energy sector, which covers the period until 2015, establishing the main action lines in the energy sector. The main provisions of the Road map in Romania's energy sector refer to: Current state of Romania's energy sector; Ensuring energy sources; Structure of the energy market; Guidelines of Romania's energy policy; Guidelines of Romania's policy in the field of energy efficiency; Development programmes for the electricity sector; Romania's participation to the regional electricity market.

The privatisation process in the energy sector has continued; thus, following the restructuring process of SC Termoelectrica SA, the privatisation process has been initiated. In August 2003, SC Termoelectrica SA put up for to sale 5 energy groups ­ 3 from Isalnita Dolj power plant, an energy group from CET Palas Constanta, as well as CET Vulcani. Within the privatisation procedures of Banat and Dobrogea electricity distribution subsidiaries from SC Electrica SA, following the publication of the privatisation announcement in January this year, the Italian company ENEL submitted its purchasing offer in July. In the oil sector, the privatisation procedure of SNP Petrom SA continued by the approval, in July 2003, of the privatisation strategy, by GD No. 924/2003 (OJ No. 606/26.08.2003) regarding the approval of the privatisation strategy and the completion of the consultancy services for the privatisation of National Oil Company Petrom SA Bucharest. The strategy provides for the privatisation of SNP Petrom SA by the acquiring by a strategic investor or a consortium of investors of a 51% stock of the company's share capital. Regarding agriculture, at the end of July 2003 sell-purchase contracts have been concluded for 261 companies and the privatisation procedure is ongoing for 21 companies (announcements, submitted offers, negotiations); 12 companies remain to be privatised. Regarding tourism, of the total 80 companies in MTCT's portfolio, 69 privatisation contracts have been concluded by the end of August 2003, out of which 58 are in force, while 11 have been cancelled due to unfulfilled contractual stipulations. For the remaining 22 companies, (many of which encounter property difficulties due to prolonging the application deadlines for solving assets claims of the former owners) several privatisation solutions are envisaged, such as the sale of assets or the transfer 79

of shares concerning the assets brought into joint ventures, followed by the liquidation of the company where the state still holds shares. In the banking sector, the main actions implemented over the last months referred to pursuing BCR's privatisation process and the restructuring of EximBank and CEC. Concerning the revised privatisation strategy for BCR, agreed on in consultation with the World Bank and the IMF, approved by GD No. 772/2003 (OJ No. 506/14.07.2003), provides for the sale of a minority package of 25% plus 2 shares towards two reputable international financial institutions, EBRD and the International Finance Corporation (IFC). By following this strategy, even if a strategic investor ­ a reputable financial and banking institution ­ does not become majority shareholder at BCR, over 50% of BCR's capital will be owned by the private sector, as over 30% of the banks' shares are currently owned by the 5 Financial Investment Companies. Early in August, the two international financial institutions submitted the general terms of transaction, assimilated with the technical offer, and the financial offer based on their own assessment of BCR. The Romanian side addressed the formal invitation for the starting of negotiations, which are currently ongoing; the foreign partners, together with the Romanian side, intend to agree on the sell-purchasing contract terms by the end of September. The project "Technical assistance for EXIMBANK SA for drafting the bank's restructuring plan and strategy, conditionality of the World Bank's PSAL II program" was completed, by drawing up the Final Report on the implementation of the bank's restructuring plan. In the bank's medium term strategy, formulated in the course of the consultancy program as part of the Final Report, attaining the proposed objectives is conditioned by the increase in the bank's share capital (by ROL 475 billion in 2003, and ROL 570 billion by the end of 2004). The Report also mentions that, in order to support more effectively Romania's foreign trade, EXIMBANK SA should consider opening subsidiaries in target countries for Romanian exporters. According to the strategy for 2002-2005, the Savings Bank (CEC) shall be reorganized into an efficient retail bank for individuals, small and medium sized enterprises, as well as central and local public administrations, offering all the necessary financial and banking services and products, while maintaining profitability. At the end of this period, discussions will be resumed on discontinuing the State's guarantee as well as on the bank's privatisation. On a quarterly basis, CEC notifies the involved institutions, as well as BNR, on the progress made in implementing the restructuring strategy. D. The achievement of the balance between demand and supply, by the free game of market forces; liberalization of prices and trade

In the electricity sector, according to ANRE Order No. 22/20.08.2003 (OJ No. 602/25.08.2003) regarding the approval of the tariffs for the electricity supplied to captive consumers, the electricity price increased by 17.5%, applicable starting with 1 September 2003. In the natural gas sector, in the period July-August 2003, the gas price increased to USD 99/1,000 cm according to the common ANRGN-ANRM Order No. 498/76/16.06.2003 (OJ No. 424/17.06.2003) regarding the approval of the prices and the setting up of regulated tariffs in the natural gas sector, applicable starting with 1 July 2003. Later on, according to the common ANRGN-ANRM Order No. 594/141/7.08.2003 (OJ No. 586/18.08.2003) regarding the approval of prices and the setting up of regulated tariffs in the natural gas sector, the gas price again increased to USD 110/1,000 cm for non-residential consumers and to USD 120/1,000 cm for residential consumers, the provisions of this Order being applicable starting with 1 September 2003. Following the application of the above-mentioned provisions, the gas 80

price was differentiated on categories of consumers according to the relevant European practice. E. The existence of a judiciary system whose decisions to be enforced, including property rights regulations

In order to improve the judiciary system and bring it in line with the EU ones, the Government approved the Strategy for judiciary reform on 4 September 2003. The Strategy provides for the principles underlying the reform of the judiciary, the objectives established and the means to accomplish them. Among the recent progress registered in the field of judiciary reform, the adoption of EO No. 58/2003 (OJ No. 460/28.06.2003) regarding the Civil Procedure Code's modification and supplementation, in force since 26 August 2003, is worthy to be mentioned. By this normative act, the legal way of extraordinary appeal was eliminated and a new reason for review was inserted for situations where a decision of the European Court of Human Rights found a breach of rights or fundamental freedoms. At the same time, in order to unify judicial practice and to ensure the stability of civil judicial relations, the separation of competence for first instance between the courts of 1st instance and the tribunals continues to be based on the criterion of value (which has been reconsidered). The appeal on facts has been reintroduced in commercial matter. A particular attention is granted to introducing alternative methods of solving disputes by the court in the Romanian justice system. At present, pilot programmes are developed in order to introduce the mediation institution in the Romanian judicial system. The law for the introducing mediation in civil cases within the Romanian legal system is to be elaborated. One of the main components of judicial reform in Romania is institutional reorganisation, in view of further integrating Justice as a public service for the society. Therefore, the new draft Law on judicial reorganisation, drawn up in 2003, envisaged mainly the specialisation of instances, the collegiality of completes, the necessity for magistrates to participate in the organisation and functioning of instances and courts. The most important measures concern the setting-up of specialized courts for fields such as: juveniles and family, commercial, administrative-fiscal, labour and intellectual property, starting with 2004. By 31 July 2003, out of the total of 4,787,762 property titles, 4,505,906 titles (of which 4,033,242 for agriculture lands and 472,664 for forest lands) have been issued, representing 94.1% of the total of titles to be issued (95.1% for agriculture lands and 86.7% for forest lands, respectively); property titles have been issued for a total surface of 10,527,761 hectares (of which 9,119,407 hectares agriculture land and 1,408,354 hectares forest land) of the 11,918,443 hectares, representing 88.3% from the total surface (90% agriculture surface and 78.9% forest surface, respectively). Concerning the restitution of buildings to religious cults, in accordance with Law No. 501/2002, by 31 August 2003 the restitution of 118 buildings was approved (Roman-Catholic Church ­ 36 buildings, Orthodox Church ­ 31, Reformed Church ­ 18, Unitarian Church ­ 10, Mosaic Cult ­ 9, Lutheran Evangelic Church ­ 5, Greek-Catholic Church ­ 4, German Evangelic Church ­ 3, Armenian Church ­ 2). F. The absence of significant barriers at market entrance (new firms creation) and market exit (bankruptcy)

Regarding the business environment in Romania, GD No. 586/21.05.2003 (OJ No. 387/5.06.2003) for approving the Action Plan for the development of the business environment in Romania for 2003 was approved, taking into consideration: 81

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Actions not implemented last year, that have been reprogrammed; Actions started in 2002 that continue this year; Recommendations of the Foreign Investment Assistance Service (FIAS) of the World Bank, based on assessments and experience in the field of reforms having an impact on the business environment.

Taking into account the changes that came up in the Ministries' structures, it became necessary to modify the componency of the Working Group for elaborating and monitoring the Action Plan for improving the business environment, set up by GD No. 83/2001, as well as to specify the time stretch of Group's activity. The Ministry of Economy and Commerce subsequently elaborated a draft legal act for amending GD No. 83/2001, that is currently under endorsement procedure. The statistics of monitoring the Action Plan for 2003 show that 64 measures accomplished included in the action plan developed over the period 2002-2003, the most important aiming at: Simplifying the registration and authorisation procedures for new firms; therefore, together with the actions already undertaken, it is expected that these proceedings will be further simplified by the new proceedings of silent approval. The silent approval proceedings are regulated in Romania by GO No. 27/2003 and entered into force mid-May. This applies to the issuing and renewing all the 477 licenses issued by public administration authorities, except for certain specific areas (e.g. ammunition, nuclear activities, national security etc.). According to this ordinance, a license is deemed as issued/renewed if a negative answer is not received from the issuing authority within the legal maximum delay of 30 days from the day when the applicant presents the complete file. In the line of simplifying the administrative proceedings in the employer-central administration relation, the Government decided at its weekly meeting on 21.08.2003 to create a free-of-charge telephone line in order to facilitate the implementation and observance of the provisions of EO No. 27/2003 concerning the silent approval; Improving the proceedings and regulations on bankruptcy; a draft law for amending and modifying Law No. 64/1995 on the procedure of judicial reorganisation and bankruptcy and other legal acts with an impact on judicial reorganisation and bankruptcy and other legal acts with an impact on these proceedings has been drawn up and is under debate in the speciality commissions in the House of Deputies; Simplifying customs proceedings; Adopting and implementing the Law concerning the decision transparency in the public administration (Law No. 52/2003), in order to increase the clarity of regulations, the legislation's stability and transparency; Implementing the electronic purchase system, by Law No. 246/2003 (OJ No. 429/18.06.2003) establishing a clear and safe procedure for participating in the public purchase system. This law implements a series of very severe punishments, as well as strict security measures (for such cases as forgery). The electronic purchase system has been functioning since March 2002 and has successfully contributed to decreasing purchase costs for public institutions and to increasing public spending transparency and efficiency. Since the introduction of the system until September 2003, 166,360 transactions have been concluded, representing savings of around MEURO 65, with a 22% savings rate. It is estimated that over the following 3 years savings will reach approximately MEURO 750.

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The remaining 7 measures, together with the conclusions of a comprehensive analysis among the companies, concerning the obstacles these are facing, were included in the new Action Plan for 2003. 82

Among the objectives proposed for 2003 with the aim of developing an attractive and transparent business environment, the actions initiated in the area of correcting the control procedure regulations, comprised by Law No. 252/2003 (OJ No. 429/18.06.2003), providing for the obligation of an unique Control Register for all taxpayers, legal persons registered at the National Office of the Trade Register, authorized according to the law, are worthy to be mentioned. The proposed measures aim to further improve and make more efficient the companies' registration and authorisation system, to strengthen financial discipline and to implement the legal framework created by the establishment of the fiscal criminal recording system and the completion of the Fiscal Code and the fiscal procedure code, to ensure the transparency in the process of working out and adopting regulations by consulting the civil society, to render permanent the active dialogue between the Government and the business environment, to implement the principles of corporate governance in the administration of commercial companies with a majority of state capital and of regies, to speed up the privatisation and to reduce post-privatisation conflicts. All these measures aim at creating an attractive, efficient, active business environment and a stable and predictable legislative framework, with a view to creating and consolidating a functioning market economy. In order to pursue the process of simplifying the registration and authorizing proceedings for companies, the National Office of the Trade Registry has suggested the separation of the activity of registering the companies in the Trade Registry, from the one of authorising for functioning. Authorisation will follow registration, respectively at the beginning of activity, which simplifies the procedure and cuts down the laps of time needed for the companies' registration. Progress in this area was also reflected in the growth of the number of founded companies, from an average number of 7000-8000 companies founded in the first quarter, to over 10000 (10496) in June and 10633 in July. In the first 7 months of the year, 61756 companies were founded. The improved proceedings and regulations on bankruptcy led to significant progress in solving more rapidly bankruptcy (liquidation) cases. In the first half of 2003, the courts had 12100 cases with such a subject under examination - 8500 from previous years and 3633 new cases ­ out of these 41% were solved, respectively 5036 cases. From the analysis of the files it results that the number of bankruptcies represents an overwhelming majority in comparison with the number of reorganisations (confirmed plans), respectively 43% (2189 cases) as compared to 17% (874 cases). It is also significant that the duration for solving the cases has reduced considerably, so that 45% of cases were solved in less than 6 months and 70% in less than a year. G. Adequate development of the financial sector, aimed at efficiently directing savings towards investment

In May and June 2003, the banking system consolidated its financial intermediation function. The increase in real terms of the net aggregate assets (by 2%) was due mainly to the growth in real terms of the loans to non-banking customers (+2.5%), which benefited from half of the attracted and borrowed sources. The balance of loans granted to non-banking customers increased, in real terms, for 70% of the Romanian banks. The expansion of credit is reflected by the growth of the general risk ratio from 42.9% end-December 2002, to 46.4% end-May 2003, and to 46.8% end-June 2003. The increase of the loan portfolio did not affect its quality or the liquidity of banks, the risk ratios computed on the balance sheet data reverting to the average values recorded last year (0.7% for the past due and doubtful loans to total loan portfolio, at 83

net value). The average aggregate liquidity indicator (1.4) continued to exceed the regulatory limit (1). The steady monthly increase of the aggregate net profit influenced the two profitability ratios, ROA (2.4% end-June) and ROE (17.2% end-June), which maintained their upward trend, after the downward move recorded end-January 2003 (1.2%, respectively 8.4%), as a result of the enforcement of the new loan classification and provisioning regulation. The solvency ratio maintained the decline registered from the beginning of the year (from 25% to 22.8%), but remained well over the regulatory limits (12%) in the context of the slightly larger risk-weighted assets growth than own capital growth. It is important to mention that, at the request of the Romanian authorities, in the context of the World Bank/International Monetary Fund (IMF) Financial Sector Assessment Program (FSAP), a joint World Bank/IMF team performed an assessment of the financial sector of Romania, in two missions: 10­14 March, and 12-23 May 2003. The mission concluded that the Romanian authorities have been remarkably successful in stabilizing the economy and the financial sector over the past years. Based on analysis of corporate finance and leverage, and the potential vulnerabilities of the banking system, it was found that banks are able to deal with considerable stress from the corporate sector. In addition, credit risk, interest rate risk, and exchange rate risk stress testing was applied to the banking system, indicating highly resilience to shocks. The financial soundness indicators show high capital adequacy ratios, strong liquidity, and manageable levels of non-performing loans. Concerning the insurance sector, the legislative framework has been completed and perfected. The draft law for amending and completing Law No. 136/1995 has been elaborated by the Insurance Supervisory Commission and, after consulting the insurance market players, has been submitted for approval to the ministries involved, and until mid-September will be subjected to the approval of the Romanian Government. As regards the control and supervision activity, in the period June-August, the Insurance Supervisory Commission has performed controls to the insurance companies, inflicting sanctions where infringements were found. As regards the authorisation activity, over the reporting period the Insurance Supervisory Commission granted 3 setting-up authorisations and 8 functioning authorisations for insurance brokers. Regarding the insurance companies, in this period was not granted setting-up authorizations or functioning authorizations. In view of strengthening its administrative capacity, the Insurance Supervisory Commission benefits of following external financing sources: Funds allocated by the World Bank within the PSAL II Program, that were used for hiring a consultant in order to strengthen the supervision capacity of the Insurance Supervisory Commission. The tender process for hiring the consultant has been finalised, and is now in the stage of concluding the contract with the winner of the tender; Funds allocated within the Phare 2002 Programme, that are designated to a Twinning project (MEURO 1,2) and to purchasing hardware and software for managing a database for Third Party Liability. In this respect, in June and July 2003, the Insurance Supervisory Commission negotiated with the Greek partner (the Insurance Supervision Authority from Greece) the Twinning Covenant, which is to be subjected for approval to the European Commission at the end of September.

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In the capital market field, the short and medium term priorities envisage the development of the two regulated markets, BVB and RASDAQ. 84

The positive trend registered in 2002, as well as in the first five months of this year by the Bucharest Stock Exchange (BVB) maintained between June and August 2003. The increase registered by the BVB indexes best reflects the ascending trend registered on this capital market sector: BET Index, that reflects the dynamics of the best ten shares with the highest liquidity, registered, on 18 August 2003, +3,45% value in ROL (+5.53% in EURO) as compared to the value registered on 30 May 2003; Of all the three BVB indexes, the BET-C Index, that reflects the prices' evolution for all listed shares, excluding FIC, has registered its biggest increase, of +5,94% in ROL (+8,06 in EURO); BET-FI Index, that reflects the dynamics of the shares' price for the five financial investment companies (FIC), has registered an increase of +5,04% in ROL (+7,18% in EURO).

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These increases of the BVB indexes are due to the intensification of the transaction activity, the monthly average of the total value of securities transactions concluded over the reporting period, as compared to the first 5 months of 2003, increased with +33,62 in ROL (+29,12 in EURO). On 18 August 2003, the historical maximum traded value was reached, as ROL 1,314,783.6 million (EURO 35,321.8 thousand). The positive trend was also noticed in the increase with over +9,96% of the market capitalisation in ROL (+7,13% in EURO) that reached, at the end of the reporting period, EURO 2,86 billion, as compared to EURO 2,62 billion registered at the end of May 2003. The number of traded titles and the number of transactions registered between June and 18 August 2003 has decreased, but this does not represent a diminution of BVB's activity, taking into account the increase of the market capitalisation and traded value. It must be mentioned that the monthly average of the titles traded between June and August 2003 decreased with -2.92%, as compared to the first part of the year; and the monthly average of transactions concluded at BVB decreased with 18,45%, as compared to the above-mentioned period. Another positive element, regarding the period June ­ August 2003, as compared to the first 5 months of 2003, is the increase with +9,18% of the market capitalisation percent in GDP. Thus, this percentage increased from 5.14%, representing the market capitalisation in GDP at the end of May 2003, up to 5.61% at 18 August 2003. It must also be noticed that the percent held by the state in market capitalisation decreased from 53.01% - at the end of May 2003, to 49.64% - on 15 August 2003. This was the result of the decrease of the state holdings in the share capital of the listed companies, from 63,94% to 61,09%, as compared to the same periods mentioned above. For the electronic stock exchange RASDAQ (BER), the dynamics of share prices can be observed by taking into consideration the 3 official indexes of the Rasdaq market: Rasdaq Compozit ­ which includes all traded companies, RAQ-I and RAQ-II, which reflect the dynamics of prices for companies promoted in the superior categories. Between June and August, all Rasdaq official indexes have registered positive evolutions (Rasdaq Compozit index +5,7%; RAQ I +11,9% and RAQ II +5,5 %). Rasdaq Compozit index has registered a historical maximum of 1157 points. Market capitalization on 15 August 2003 was of ROL 69,7 thousand billion (EURO 1.8 billion), as a result of an increase of +2% in ROL and +4% in EURO over the reporting period. The traded value between 1 June and 15 August was of ROL 702 billion (MEURO 18.8) out of which 45% represented ordinary transactions. Over the reporting period, 85

the special operations performed on the Rasdaq market were as follows: Take over bids: 47; Public offers for sale: 3; Electronic auctions­ APAPS: 8. Another important action was de-listing over 95 issuers which did any longer not comply with minimal requirements for trading on a regulated market.

Capacity to cope with competitive pressure and market forces within the European Union

A. The existence of a sufficient volume of human and material capital, at an adequate cost, including infrastructure (education, research and development, energy supply, transportation, telecommunications, etc.)

Taking into account that the performance of Romania's economy and its capacity to face the competition pressures and the EU market forces are directly conditioned by the quality of the human factor and structural adapting of labour force, an important place within the foreseen measures in the governing programme has been taken by the actions targeted on increasing the labour force training level, at the same time with their re-conversion and re-orientation depending on the existing demand and predictions on the labour market. In order to fulfil these objectives, supplementary budgetary funds for education, representing 4.1% of GDP have been allocated for the 1st semester 2003. From this point of view, the Romanian economy has a high capacity to face competition on the external and internal market. The labour force training level is high. In the 1st quarter 2003, as shown by the AMIGO survey, over half of the employed persons (51.3%) were high school and vocational education graduates. At the same time, only 28% of the employed population was represented by secondary school graduates or under this level, as compared to 31% in the 4th quarter 2002 and 29% in the 1st quarter 2002. Efforts regarding retraining and professional perfecting of labour force intensified. The National Agency for Employment (ANOFM) continued to develop training programs, 60,546 persons participating to these courses (by 31 July 2003), out of which 25,363 persons graduated. It must be mentioned that, of the total number of graduates, 12,058 were unemployed, of which 8,402 subsequently found a position and were employed, which reflects the utility of these courses. B. The share of small and medium sized enterprises in the economy At the end of the first quarter 2003 were registered 607,561 small and medium sized enterprises, 2,4% more than in 2002, while natural persons and family associations amounted to 187,089, as compared with 182,415 in 2002. In the first quarter of 2003, 17,804 SMEs have been registered at the National Office of the Trade Registry, representing 35% of all SMEs registered in 2002. Considering that the registering rate in the first quarter of this year, due to the prolongation of the reregistering period stipulated by EO No. 129/2002, will be maintained, it is estimated that at the end of 2003 there will be about 70,000 newly registered SMEs, meaning an increase with 72% as compared to previous year. Natural persons and family associations registered in the same period of 2003 exceeded with 2.6% the number registered in 2002, which explains the effects of enforcing Law No. 507/2002 regarding the organisation and unfolding of economic activities by natural persons.

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Evolution of the number of SMEs, natural persons (NP) and family associations (FA) in the period 1999 - March 2003 2001 669887 36458 20345 5.6 3.1 151635 22760 1253 17.5 1.0 821525 859470 95.58 2002 593425 50547 127009 7.5 19.0 182415 33401 2621 22.0 1.7 775840 814391 95.26 31 March 2003 607561 17804 3668 3.0 0.6 187089 5698 1024 3.1 0.6 794650 833197 95.37

SMEs at the end of the year SMEs registered during the year SMEs erased during the year Registration rate (%)*) Erasing rate (%)*) NP and FA registered at the end of the year NP and FA registered during the year NP and FA erased during the year Registration rate (%) Erasing rate (%) Total natural persons, family associations and registered SMEs The number of the firms that remained registered (effective registration ­ erased firms) The share of natural persons, family associations and SMEs in total registrations (%) C.

The more extended access of enterprises to financing; restructuring, innovation and investments made to increase efficiency

Over the past two years, the advance in macroeconomic stabilisation entailed the resumption of lending, with 2003 witnessing acceleration of this process. Therefore, the rate of increase in non-government credit reached 20.5% in real terms (July 2003/December 2002), pushing financial intermediation1 to 12.6%, from 11.9% end2002. Although this development may be regarded as beneficial from the standpoint of the banking activity gaining in depth and of the support to real sector development, the adverse effects on external equilibrium and the need to avert the risk of decorrelation between the level of this indicator and the real absorption of the economy required measures to contain non-government credit growth. In this context, in early August 2003, the central bank has sent a monetary policy signal, deciding to raise by one percentage point the interest rate ceiling on 1-month deposits taken by BNR. Concerned with the quality of financial intermediation, the central bank introduced, in early 2003, new regulations on loan classification and risk provisioning in line with international practices. Although these regulations enhanced banks' provisioning, they did not yet translate into a slowdown in lending, given that banks' incomes were hurt by the drop in yields on alternative investments in the form of government securities and deposits with the central bank. It is worth noting that the banking system enjoys

It refers to the number of registered SMEs. By convention, the main units of enterprises with private capital have been considered SMEs; Rate of birth represents the percentage ratio between the number of new registered enterprises during the present year and the total number of enterprises that existed at the end of previous year; Rate of death represents the percentage ratio between the number of enterprises erased during the present year and the total number of enterprises that existed at the end of previous year. Percentage ratio between non-government credit at end-June 2003 and GDP projection for the current year

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adequate capitalisation (over 22%2 and liquidity3 (over 1.4%) as well as adequate provisioning (the ratio between net doubtful and past-due claims and own capital remained at moderate levels, i.e. 3.6% in June 2003). The tougher competition between banks in the credit market, particularly in retail banking (whose potential is not yet fully turned to account) led to the steady narrowing of the spread between lending and deposit rates on transactions made by nongovernment, non-bank clients (from 17.6% in December 2002 to 15.1% in July 2003). In the investments area, following the entering into force of Law No.332/2001 regarding the promotion of direct investments with a significant impact on the economy, during October 2001 ­ 28 August 2003, 220 investments were registered that benefit from the provisions stipulated by Law No. 332/2001, with an engaged value of USD 1,898 million, out of which foreign participation of USD 1,018 million; 79 investments were finalised that benefit from the provisions of Law No. 332/2001, with a value of USD 644,997,618. The main areas that have registered investments according to Law No. 332/2000 are: chemical and petrochemical industry; energetic industry; construction and materials for construction; machine building industry; wood, cellulose and paper industry; light industry; electronics and electrotechnics; food industry; telecommunications; metallurgical industry; pharmaceutical industry; agriculture; tourism; commerce. The main investing countries that benefit from the provisions of Law No. 332/2001, during October 2001 ­ 28 August 2003 are: The Netherlands, Austria, Germany, France, Turkey, Great Britain and USA. The foreign direct investments stock grew with MEURO 122 (+21%) in first six months of 2003, as compared to the same period of previous year. EO No. 34/17.05.2003 modifies and completes Law 390/2002 concerning the establishment, organization and functioning of the Romanian Agency for Foreign Investments. In its activity of promoting and attracting foreign capital in the economy, the Agency is supported by a Strategy Council, deliberating institution without legal personality which contains the president of Agency and prestigious representatives of the Romanian and foreign business environment. The Strategy Council co-ordinates the Agency's activity regarding tackling techniques of potential foreign investors interested in the development of investment projects in Romania, information dissemination in foreign business environment, and will direct the Agency's activities so as to obtain results according to the best practices in this field, to ensure a high transparency for the promotion and attraction of foreign investments in the economy, and to identify the best solutions required to achieve the objectives in this field, established by Governing Program. D. Impact of governmental policies and legislation on competitiveness, through commercial, competitive policy, state aid, support for SMEs

As a result of launching and developing programmes supported by the state budget implemented by ANIMMC, MEC, and MIE for the purpose of developing entrepreneurial spirit and increasing SMEs' competitiveness on internal and third party markets, since the beginning of 2003 and until 31 August, a number of 459 SMEs have benefited from the facilities offered from unfolding the respective programs, the not reimbursable budgetary allowances amounting to ROL 396.55 billion. It should be mentioned that, in 2003, by increasing the social capital of FNGCIMM with ROL 100 billion, it has been possible to grant guarantees to 120 SMEs in value of ROL 291.9

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Capital adequacy ratio 1 (>12 percent) Ratio between effective liquidity and required liquidity

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billion. The value of granted guarantees represents 99.3% from the current social capital of the Fund. By the guarantees granted, FNGCIMM mainly supported investment projects on medium and long term, so that from the total of 120 approved guarantees, a number of 70 guarantees correspond to medium and long-term credits, respectively ROL 165.7 billion (56.8%) as compared to ROL 126.1 billion (43,2%) representing guarantees for short term credits. According to commitments assumed by negotiation documents, the project for modifying and completing Law No. 133/1999 regarding the stimulation of private entrepreneurs for the setting up and development of small and medium sized enterprises has been drawn up. Its necessity results from the following considerations: Many of the provisions of Law No. 133/1999 are no longer of actuality, due to legislative modification in what regards: registering and authorising traders' operations, work relations, the privatisation of enterprises at which the state or an authority or local public administration is shareholder, public acquisitions, scientific research, professional training, public finance, etc; The process of harmonising national legislation with community acquis imposes the alignment of the SMEs' definition in Law No. 133/1999 regarding the stimulation of private entrepreneurs for the establishment and development of SMEs, with the definition recommended at EU level; other EU recommendations are also compulsory, regarding the stimulation of the creativity and competitiveness of SMEs and of the craft sector by the creation of new jobs; the promotion of modern techniques and technologies, including electronic commerce and business transfer.

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Adopting and implementing the acquis communautaire in the field of competition and state aid before the date of accession represents an essential condition for provisionally closing the negotiations on Chapter 6 ­ "Competition Policy", and, at the same time, an important component of the wider process of preparation of Romania for facing up the competitive pressure of the EU internal market. Thus, for complete harmonisation with the acquis communautaire, there have been finalized the drafts for the modification and completion of the Competition Law No. 21/1996 and of Law No. 143/1999 on State aid. The modification and completion of the Competition Law has been made in accordance with the recommendations of the European Commission for the improvement of the administrative capacity by establishing a single competition institution for the implementation of the legislation in the field of competition and state aid. The modification drafts have been approved in the Romanian Government in its meeting on 10 July 2003, and are currently under Parliamentary procedure. At the same time, it must be noticed the preoccupation for the application of the provisions of the Law on the competition and state aid, both by further investigating the cases of infringement of the competition law, and by making compatible certain legal acts that contain individual aids and state aids schemes that have produced effects between 1999 and 2001. The "Report on State aids granted in Romania in the period 1999 ­ 2001" has also been approved, in the Romanian Government's meeting on 10 July 2003. E. The degree of trade integration with EU The share of exports and imports of goods and services in GDP has increased, reaching 43% in the 1st semester 2003 and, respectively 51%, which shows the higher degree of opening of the Romanian economy. Export towards EU Member States was in amount of MEURO 6132 in the first seven months of 2003, with MEURO 414.67, respectively 3% higher as compared to the 89

same period in 2002. This trend was also manifested in the case of imports from EU, which were in amount of MEURO 6900.1, and had increased by MEURO 511.4, meaning 8.0% as compared with the same period of previous year. The structural analysis of trade exchanges performed with EU in the first seven months of 2003, as compared to the same period of 2002, reveals more significant growth of exports and imports in certain sectors, such as: The export increase of machinery (+20.9%), transport means (+30.1%), plastics and related products (+36.7%), textile products (+6.4%); The import increase of transport means (+30.2%), plastics and related products (+21.9%), common metals and articles thereof (+15.6%), machinery and equipment (+9.9%).

In the first seven months of 2003, as compared to the same period of the previous year, the share of EU in the total Romanian exports was of 68.2%. The main export partners for 2003 remain Italy with MEURO 2270 (25.2%), Germany with MEURO 1402 (15.6%), France with MEURO 641 (7.1%) and Great Britain with MEURO 568 (6.3%). In the first seven months of 2003, as compared to the same period of the previous year, the share of EU in the total Romanian imports was of 58.8%. The main import partners for 2003 were: Italy with MEURO 2471 (21.1%), Germany with MEURO 1752.5 (14.9%), Russian Federation with MEURO 984.8 (8.4%), France with MEURO 821 (7.0%), and Great Britain with MEURO 387.9 (3.3%). It is worth mentioning that almost half of the imports value from EU represents raw materials, components or spare parts which are manufactured/assembled on Romanian territory under "processing" regime, the resulted products holding around two thirds of our country's exports towards the EU. This proves a high degree, not only of trade integration with EU, but also, from the point of view of manufacturing production structures in some sectors (garment, footwear, electronics, car spare parts and other), the increase of Romanian products competitiveness on the EU internal market. In view of increasing competitiveness, external market access, developing entrepreneurship, special attention is directed at stimulating the growth of the SMEs' sector contribution, for which purpose various national multi annual programmes, financed by the State budget are ongoing. In the framework of the Programme for supporting the investments in priority industrial sectors (launched in 2003, in the co-ordination of ANIMMC) with an allocated budget of ROL 80 billion (under the implementation of BCR, selected according to the programme's rules), ANIMMC concluded with BCR, on 13 August, the contract based upon which the programme started, 20 days after signing. Within the Programme for increasing industrial competitiveness for the period 20032005, implemented by the Ministry of Economy and Commerce, with an allocated budget of 180 billion ROL, 64 SMEs have participated to date, benefiting of an amount of 26.1 billion ROL. On 26 August, the UNIDO Programme (under the implementation of ANIMMC) aiming at the increasing the competitiveness of SMEs in the food and agro-food sectors was approved. The Programme has a life span of 18 months and an allocated budget of EURO 663,000 for 2003. The Sub-programme "Development of towns through stimulation of SMEs' activities" was launched in 2003, based on GD No. 322/2003, having an allocated budget of ROL 408.8 million in the period 2003-2004. The National multi-annual program for the period 2002-2005 for supporting small and medium sized enterprises for developing export has been co-ordinated by ANIMMC 90

since 2002. By the end of 2003, the integral consumption of budget allocations foreseen for this programme this year is estimated. The National multi-annual program for the period 2002-2005 for supporting the access of small and medium sized enterprises to training and consulting services has been implemented by ANIMMC since 2002. The objective of the Programme is to affirm and put to use the production and services potential of SMEs, by reducing the training gap of leading and executing personnel in Romanian SMEs as compared to those in the EU and to facilitate SMEs' access to consulting services. For 2003, as a result of the principle agreement, it has been consumed integrally the amount allocated to the program and, taking into account the SMEs' interest for this program, it is estimated an increasing of the programme ceiling with ROL 4.2 billion through redistribution within the budget allocated to ANIMMC. The programme "Micro-crediting scheme regarding the authorising of credit agencies" was endorsed by the Inter-ministerial Commission for micro lending, by the Ministry of Public Finances and by the Ministry of Justice, and was approved during the Government meeting on 28 August 2003. According to the provisions of Law No. 76/2002 with its subsequent modifications and completions, in the year 2003, from the budget of unemployment insurance the amount of ROL 1,100 billion has been allocated for credits, managed by ANOFM and BCR, according to the contract No. 187/17.04.2002, respectively No. XXI/J264/16.04.2002. For the third quarter of 2003, it was foreseen in the State budget the amount of ROL 529,000 million, out of which ROL 328,594 million were approved for July, leading to the creation of 3,280 new jobs, out of which at least 1,640 for unemployed. It has been continued the capitalisation of the National Credit Guarantee Fund for SMEs (FNGCIMM), the social capital of the fund reaching ROL 294 billion, the instalment allocated through the ANIMMC budget in the second quarter of this year being of ROL 60 billion. It has also continued the increase of the degree of fund representation by setting another 4 branches, another 6 branches going to be set until the end of the year 2003. For the development of the guarantee activity, FNGCIMM has concluded in the reference period a convention with a new financial institution, so until now the fund have concluded 12 conventions with the following banks: Romanian Commercial Bank, Romanian Development Bank ­ GSG, Eximbank, Romanian Bank, Saving House, Raiffeisen Bank Romania, Banc Post, Alpha Bank, Romanian International Bank, Romexterra Bank, Carpatica Commercial Bank, and Eurom Bank. It has also been concluded a convention with SAPARD Agency for the purpose of supporting SMEs participation in SAPARD Program. For increasing the interest of the banks in attracting a number as high as possible of SMEs beneficiary of guarantees granted by the Fund it has been developed a new product ­ "convention and guarantee letter = guarantee convention". The new product stipulates: Guarantee conventions were concluded with Raiffeisen Bank Romania, Romterra Bank, Eurom Bank, Commercial Bank Carpatica, and Romanian Bank. There are under negotiations similar conventions with other 7 banks with which the Fund concluded conventions for risk sharing.

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2.3. ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP

2.3.1. FREE MOVEMENT OF GOODS Horizontal and procedural measures

For signing the European Protocol for the Products Conformity Assessment (PECA), the national harmonised legislation has been adapted to meet the requirements formulated by the Community experts. Thus, the GD No 71/28.08.2003 (OJ No 621/30.08.2003) has been adopted for amending the Law No 608/2001 regarding the conformity assessment products.

Standardisation

During June - August 2003, the evolutions in the national standardisation field consisted of in the increase of the transposed European standards numbers in the Romanian standardisation. In this period, 1097 European standards have been adopted, out of which: CEN-630, CENELEC-440, ETSI-27. Thus, the fund of adopted European standards increased to 11047, out of which: CEN­ 6931 (80.6%), CENELEC­2652 (58.7%), ETSI­931 (58.69%). The percentage of the adopted European standards is of approx. 73%, the standards being transposed both by translation ­ 4484 standards and by endorsement ­ 6563 standards. The financing has been ensured both by the CALIST programme within the National Programme of Research, Development and Innovation being ongoing, as well as by financing contracts signed by ASRO with MEC, MECT and MTCT.

Accreditation

Up to now, RENAR, which operates on the basis of the Law No 245/29.04.2002 for the approval of the GO No 38/1998 regarding the accreditation and infrastructure for the conformity assessment, accredited: 223 test laboratories; 1 calibration laboratory; 12 certification bodies for the quality management systems; 3 certification bodies for the environment management systems; 15 product certification bodies; 2 personnel certification bodies; 6 inspection bodies.

Metrology

For signing PECA, the national harmonised legislation has been adapted to meet the requirements formulated by the Community experts. Thus, the GD No 617/29.05.2003 (OJ No 418/16.06.2003) has been adopted regarding the establishment of the conditions for the placing on the market and putting into service of the non-automatic weighing instruments, which entered into force on 16.07.2003 and by which the GD No 749/26.07.2001 has been repealed. Based on this legislation, for the assurance of the implementation conditions of the harmonised legislation, has been adopted: MIR Order No 365/19.06.2003 (OJ No 456/26.06.2003) for the approval of the Romanian standards List, which adopts the European harmonised standards of the non-automatic weighing instruments; 92

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MEC Order No 34/15.07.2003 (OJ No 549/30.07.2003) for the approval of the List of the recognised bodies, which carries out the conformity assessment of the nonautomatic weighing instruments; MEC Order No 29/14.07.2003 (OJ No 557/04.08.2003) for the approval the measures regarding the recognition and designation of the bodies, which carries out the conformity assessment of the non-automatic weighing instruments.

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On 3 July this year, a seminar has been organized in Bucharest with the representatives of manufactures, importers, BRML-DISP and BRML-CERT, for the implementation of the provisions of GD No 617/2003 according to the European Union's practice in this field.

Market surveillance

During July - August 2003, the National Authority for Consumers Protection (ANPC) made 2 thematic control actions regarding the respect of legal provisions. The thematic control actions were undertaken for: Low voltage equipment: 628 economic operators were controlled, main matters found as: absence of checks reports regarding the conformity with the basic safety requirements, absence of consumers' information, absence of CS/CE marking. For the infringements found were applied fines in value of about 1968 million ROL and, by case, it was disposed the temporary stop marketing (for products in value of 9595 million ROL). Noise level of household appliances: 521 economic operators were controlled, for non-conformity with the legal requirements, it were applied fines in value of about 658 million ROL, and, by case, it was disposed the temporary stop marketing for products in value of 21864 million ROL.

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For CNIEP-LAREX laboratory, which is subordinated to the ANPC, in order to be able to check the conformity of non-food consumer products with the legal requirements, within the grant scheme RO 0006.02.0 developed by the Ministry of Economy and Trade, the following tenders for the projects took place: CFP 14/01 "The development of tests laboratory for determination of the surface agents biodegradability contained in detergents, maintenance products" and CFP 15/01 "The development of tests laboratory of CNIEP LAREX " for toys.

During July - August 2003, 1763 control actions in the Customs administration have been carried out. The value of import goods with non-conformities was of 4995 million ROL. In order to improve the market surveillance activities, ANPC signed in July 2003 the cooperation agreements with: ROMCONTROL S.A. ­ regarding the certification conformity for products; Romanian Agency for Energy Conservation ­ in the field of thematic controls for energy efficiency.

Also, in order to avoid the competence interference with the ANPC, which has responsibilities for market surveillance in the domestic field for low voltage electrical equipments, the Labour Inspection initiated a Protocol Agreement, which was signed in July 2003. Based on this Protocol, if during the controls performed by the labour inspectors at producers, importers and distributors, non-conform low voltage domestic electrical products are identified, the National Authority for Consumers Protection is informed. The market surveillance for low voltage electrical products started systematically since June 2003. Since June 2003, almost 125 producers, importers and distributors have been inspected and about 250 products have been identified as non-conform. The 93

main non-conformities are: the declaration of conformity not according to the legislation, the incorrect conformity marking, technical file missing or incomplete. For the non-conformities, there have been imposed corrective measures and it was disposed the limitation of the marketing until the elimination of non-conformities. Also, the actions for the dissemination of the information regarding the requirements of the national harmonised legislation continued. In this context, in the field of consumer goods (textile, leather, footwear) and simple pressure vessels, in June, July this year seminars were organised with the manufacturers, importers and public administration representatives with responsibilities for the implementation of the legislation concerned.

Foodstuffs

The provisions of Decision 2002/247/EC suspending the placing on the market and import of jelly confectionery containing the food additive E425 Konjac have been transposed by the common Order of MS No 656/07.07.2003 and MAPAM No 463/17.07.2003 (OJ No 549/30.07.2003) regarding the suspending the placing on the market and import of jelly confectionery containing the food additive E425 Konjac, which entered into force on 30.07.2003. For assuring the food safety, starting from the production of raw materials to the distribution to the consumers, by the GO No 90/28.08.2003 (OJ No 624/31.08.2003), the Romanian Agency for Food Safety was set up. In conformity to the provisions of the legislation, the Agency will co-operate with MAPAM, MS and ANPC, as well as the national authorities with executive responsibilities in the food safety domain. Also, the Agency will co-operate with the European Authority for Food Safety, with the similar community institutions and from the Member States. In the period July - August 2003, ANPC developed thematic control actions for different foodstuffs. As a result of the control actions the following measures were undertaken: Regarding the conformity with transport and marketing requirements for milk and dairy product: 623 economic operators were controlled, penalizing infringements by fines in value of about 1161 million ROL and, by case, disposing temporary stop marketing (for 11 tones of products, in value of 233 million ROL) or definitively stop (for 3 tones of products in value of 44 million ROL); Regarding the conformity with safety and quality requirements for pastry and confectionery products, ice-cream: 906 economic operators were controlled, penalizing infringements by fines in value of about 2171 million ROL and, by case, disposing temporary stop marketing (for 41 tones of products, in value of 1641 million ROL) or definitively stop (for 2.8 tones of product in value of 136 million ROL).

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Drug precursors

Based on the provisions of the GD No 1121/10.10.2002 for the approval of the application Regulation of the Law No 300/2002 on the regime of the precursors used for the illegal production of drugs, the drug stores, which on the date of entering into force of the legislation, were not authorized for the activity drugs, have been obliged that starting with 30.06.2003 to be authorized for activities with precursors.

Medicinal products of human use

The provisions of Chapter VI "The classification of the medicinal products" of the Directive 2001/83/EC regarding the Community Code for the medicinal products of human use have been transposed by the MS Order No 679/25.07.2003 (OJ No 556/01.08.2003) for the approval the Regulations on classification of the delivering of the medicinal products of human use. By this Order the regulations approved by the decisions of the Scientific Council of the National Medicines Agency No 9/1999 have been repealed. 94

Also, in the mentioned period, for the adaptation of the national legislation to the Community legislation, the GO No 72/28.08.2003 (OJ No 621/30.08.2003) has been adopted for the amending of the EO No 152/1999 regarding the medicinal products of human use. By this legislation: The definition of the medicinal product has been modified, according to the provisions of the Directive 2001/83/EEC regarding the Community Code for the medicinal products of human use. The validity of the good manufacturing practice certificate issued by the National Medicines Agency will be extended to 3 years. The qualified person responsible with the issue of the manufacturing number for a drug has been authorised, according to the previsions of the Directive 91/356/EEC regarding the good manufacturing practice.

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During 30.07 ­ 01.08.2003 the National Medicines Agency (ANM) has been audited regarding the level of the quality management system implementation by an international auditor team within PERF Programme (PanEuropean Regulatory Forum). The conclusions of the auditor team have been the following: "The National Medicines Agency has a well established quality management system that is based on ISO 17025 in the field of quality control and on ISO 9001 for its regulatory affairs activity. The quality manual as well as other QMS documents was presented and it is clear that the process approach is implemented within the organisation. The top management is deeply involved in QMS related activities and the whole staff is well motivated and clearly understands the mission and objectives of the organisation. The employees are well trained in QMS issues". Also, during July ­ August 2003, the employees of the National Medicines Agency with responsibilities regarding the quality management, took part in international auditor teams for the comparison of the performance levels of the quality management systems of similar institutions from accession candidate countries.

Fertilisers

In the fertilisers area, following the recommendations formulated by the European Union experts, the GD No 651/05.06.2003 (OJ No 431/19.06.2003) has been adopted for the amending of the GD No 716/2001 regarding the establishing of the condition for placing on the market of the fertilisers from domestic production and from import.

Simple pressure vessels

Based on GD No 454/18.04.2003 regarding the establishment of the conditions for the placing on the market of the simple pressure vessels, for the assurance of the implementation conditions of the national legislation, the MIR Order No 378/19.06.2002 (OJ No 561/05.08.2003) has been adopted regarding the recognition and designation of the bodies for conformity assessment of the simple pressure vessels and of the bodies which approved welding procedures and persons for components used on pressure.

Appliances burning gaseous fuels

Based on the GD No 453/18.04.2003 regarding the establishment of the conditions for the placing on the market of the appliances burning gaseous fuels for the assurance of the implementation conditions of the national legislation, the MEC Order No 40/16.07.2003 (OJ No 608/27.08.2003) has been adopted regarding the recognition and designation of the bodies which carry out the conformity assessment of the appliances burning gaseous fuels. The standards related to this Directive were 100% transposed, the conditions for signing PECA being hereby assured. 95

Toys

In the mentioned period, the number of the harmonised European standards adopted as Romanian standards, increased. At present there are 90.5% transposed, the conditions for signing PECA being hereby assured.

Lifts

Based on GD No 439/10.04.2003 regarding the establishment of the conditions for the placing on the market of the lifts, for the assurance of the implementation conditions of the harmonised legislation the following legislation has been adopted: MIR Order No 322/29.05.2003 (OJ No 408/11.06.2003) for the approval of the methodological Norms regarding the recognition and designation of the bodies, which carry out the conformity assessment of the lifts. MEC Order No 44/18.07.2003 (OJ No 549/30.07.2003) for the approval the List of the recognised bodies, which carry out the conformity assessment of the lifts.

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In June this year, a seminar has been organised with the representatives of the manufacturers, ISCIR-SP, ISCIR-CERT, ISCIR-INSPECT, as well as ASRO, RENAR, for the implementation of the provisions of GD No 439/2003 according to the European Union practice in this field.

Electrical equipment and electromagnetic compatibility

Based on the GD No 497/18.04.2003 regarding the establishment of the conditions for the placing on the market and putting into service of the electric and electronic appliances, from the electromagnetic compatibility's point of view, for the assurance of the implementation conditions, the Order of MCTI No 209/30.06.2003 (OJ No 551/31.07.2003) has been adopted for the approval of the methodological Norms regarding the recognition of the bodies for the conformity devices assessment with the basic requirements stipulated by GD No 497/2003 and GD No 88/2003. The number of the harmonised European standards adopted as Romanian standards in the field of low voltage electrical equipment and electromagnetic compatibility, increased. At present there are 97% and respectively 95% transposed, the conditions for signing PECA being hereby assured. In August this year, a seminar has been organised with the representatives of the manufacturers, importers for the implementation of the provisions of GD No 457/2003 regarding the assurance of low voltage electrical equipment users' safety according to the European Union practice in this field.

Radio and telecommunication equipment

Based on GD No 88/23.01.2003 regarding the radio equipment and of the terminal telecommunications equipment and the mutual recognition of the conformity thereof, for the assurance of the implementation conditions the following legislation has been adopted: MCTI Order No 208/30.06.2003 (OJ No 538/25.07.2003) for the approval of the Romanian standards List which adopts the European harmonised standards of the radio equipment and of the terminal telecommunications equipment. MCTI Order No 210/30.06.2003 (OJ No 539/28.07.2003) regarding the notification of the radio equipment in conformity with art. 13 of the GD No 88/2003 regarding the radio equipment and of the terminal telecommunications equipment and the mutual recognition of the conformity thereof. MCTI Order No 209/30.06.2003 (OJ No 551/31.07.2003) for the approval of the methodological Norms regarding the recognition of the bodies that carry out the 96

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conformity assessment of the devices with the main requirements stipulated in the GD No 497/2003 and the GD No 88/2003.

Medical devices

Based on the GD No 190/20.02.2003 regarding the establishment of the conditions for the placing on the market and use of the medical devices, for the assurance of the implementation conditions, the MSF Order No 547/04.06.2003 (OJ No 408/11.06.2003) has been adopted for the approval of the methodological Norms regarding the designation of the bodies which carry out of the conformity assessment of the medical devices. The provisions of the Directive 98/79/EC on in vitro diagnostic medical devices have been transposed by the GD No 798/03.07.2003 (OJ No 555/01.08.2003) regarding the establishing the condition for placing on the market and use of the in vitro diagnostic medical devices, which will enter into force on 1.11.2003. By this legislation the framework for the placing on the market, free movement, registering of the manufacturers, as well as the monitoring measures of health for in vitro diagnostic medical devices have been established.

Public procurement

Within the Complementary Position Paper on Chapter 1 ­ Free movement of Goods, it has been provided the Romania's commitment to reduce the margin quantum of internal preference that the contracting authorities have the obligation to grant currently under the application of the working procedure for awarding public procurement contracts. Thus, the GD No 874/29.07.2003 (OJ No 562/05.08.2003) has been adopted on the amending of the art. 45 (2) by the GD No 461/2001 for the approval the application Norms of the GEO No 60/2001 on public procurement, which stipulated the reduction of the margin quantum of internal preference from 7.5% to 5%. As regards the improvement of the administrative capacity, within Phare Project 2000 `Improving the competitiveness, transparency of the working procedures for awarding public procurement contracts', the National Training Programme was carried on by organizing around 70 workshops for personnel involved in public procurement activities, at the contracting authorities level. More than 1200 practitioners have participated to these workshops. The program is going to be concluded in October, this year.

2.3.2. FREE MOVEMENT OF PERSONS Mutual recognition of professional qualifications in the framework of general system of recognition

In July 2003, the Draft of the Framework Law on the recognition of regulated profession, which transposes the directives of the general system of recognition, was finalized. The involved institutions (Ministry of Education, Research and Youth, Ministry of Labour, Social Solidarity and Family, Ministry of Administration and Interior and Ministry of Justice) endorsed the draft. Right away, after the reception of European Commission observations, the draft will be promoted for the approval of the Government and adoption by Parliament. In July 2003, it was adopted the Order of minister of labour, social solidarity and family no 237/07.07.2003 for designating the institution which mutually recognizes the documents certifying the specialty vocational training obtained abroad by the Romanian citizens, citizens of EU Member States or of EEA, according the provisions of the Directive 99/42/EC. 97

Through this order, the Office for Labour Migration was designated as the institution that certifies the documents which prove the specialty vocational training obtained abroad by the Romanian citizens, citizens of EU Member States or of EEA applying for the authorization in order to develop economic activities as natural persons. Based on this order, the Office for Labour Migration is entitled to verify the documents obtained abroad which certify the vocational training and to hand out a certificate for its recognition.

Mutual recognition of professional qualifications through sectoral directives

Veterinarians A draft for amending the Law no. 160/1998 on the organization and exercising the profession of veterinarian was elaborated. The draft law grants the same rights to the European Union citizens and the ones of the EEA, regarding the right to establish and exercise the veterinarian profession on the territory of Romania, as those granted to the Romanian veterinarians who graduated a faculty of veterinary medicine in Romania; the only condition is that they posses a diploma, certificate or other document issued by institutions of veterinary higher education in these countries that attest this qualification, that are officially recognized and equated in Romania. The new law eliminates all technical barriers for the citizens of the European Union and of the European Economic Area, regarding the exercise of the profession of veterinarian on the territory of Romania. The draft law is now in the final evaluation stage by the Senate and it will be finalized and promulgated this year. In view of transposing in the national legislation the provisions of the sectoral directives that regulate the profession of veterinarian at Community level, based on art. 13 a) and b) from the Law no 160/1998 for the organization and exercise of the veterinarian profession, on the 26.06.2003 the National Council of the College of the Veterinary Surgeons was gathered and at the proposal of the Legislative Commission of the College of the Veterinary Surgeons discussed and approved the decision of the National Council no. 265/26.06.2003 regarding the completion of the Status of the Veterinarian, as integrant part of the Law no 160/1998, with chapter VI, by which have been transported the provisions of the Directive 78/1026/EEC, chapters V and VI regarding the right to establish and grant services by the veterinarians. The National Council of the College of the Veterinary Surgeons also discussed and approved the draft "Decision of the National Council of the College of the Veterinary Surgeons regarding facilitating the reciprocal recognition of the diplomas, certificates and other evidence that attest the official qualifications in the veterinary medicine, between the Member States and Romania", by which the provisions of the Directive 78/1026/EEC, chapters I ­ IV and of the Directive 78/1027/EEC completely have been transposed.

The right to vote

On 30 June 2003, the Chamber of Deputies adopted the proposal for the revision of the Constitution, and the Senate adopted a similar proposal on 2 September 2003. This proposal was submitted for debate and final vote to the plenary session of the two Chambers, based on the report of the Committee for mediation.

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For the next local elections in 2004, the Law no. 70/1991 will be amended according to the provisions of the new Constitution, and will it include the necessary provisions ensuring the participation and the election of the EU citizens residing in Romania. These provisions will be applied at the moment of Romania's accession to the EU. According to the provisions of article 16, paragraph 4 of the new Constitution, "In the context of Romania's accession to the EU, European Union's citizens who fulfill the requirements of the organic law have the right to elect and to be elected for the authorities of the local public administration". According to article 35, under the same conditions, "Romanian citizens have the right to elect or to be elected for the European Parliament".

Coordination of social security systems

The twinning project RO02/IB/SO-02 Social security for migrants workers, between the Ministry of Labour, Social Solidarity and Family of Romania and the Ministry of Social Affaires, Labour and Solidarity of France was officially launched on 27 June 2003. The project will have that result the improvement of the capacity of the administrative structures involved in the co-ordination of social security systems. In the period July ­ August 2003, in the framework of the twinning project there were developed activities for analysing the Romanian legislation, in order to revise and complete the Romania' proposals on the entries in the annexes of the Regulations 1408/71/EEC and 574/72/EEC, as well as analysing the organization of the activities within institutions involved in the co-ordination of social security systems. The Ministry of Labour, Social Solidarity and Family has continued its activity for redefining the bilateral juridical framework in the field of social security. Thus, in July 2003, it was agreed the Administrative Arrangement for the application of the Agreement between Romania and Czech Republic in the field of social security, ratified by the Law no. 223/2003 regarding the ratification of the Agreement between Romania and Czech Republic in the field of social security, signed in Bucharest, on 24 September 2002. The forms for the agreement' application used by the involved institutions in the implementation of this agreement (National House of Pensions and other Insurance Rights, National House of Health Insurance, National Agency of Employment, Ministry of Labour, Social Solidarity and Family) are those used in the relations between the social security institutions from European Union. It was adopted the GD no. 771/2003 (OJ no. 492/8.07.2003) on approving the Statute of National House of Pensions and other Social Insurance Rights' Statute, according to which the National House applies the provisions of the international conventions on social insurances in which Romania is part, as well as the community regulations, and develops relations with the similar bodies in the field of social insurances from other countries. NHPSI applies the provisions of the bilateral agreements in the field of social security concerning the elderly pensions, invalidity pensions, pensions for successors, cash benefits for labour incapacity and maternity. Developing the administrative structures responsible for social security schemes coordination According to the provisions of programming documents and to the Plan of Priority Measures for European Integration, some permanent activities are carried on: education and training of human resources involved in the area; intensified exchange of information between National House of Pensions and other Insurance Rights and similar institutions in Member and Associate States. Developing an IT system able to process necessary data for implementing the coordinating regulations in the European social security field involves, as well, permanent investments. For instance, according to the plan, during the reference period, in Neamt Territorial House of Pensions (THP), 47 IBM systems, 2 I.B.M. printers and one Kyocera Mita multifunctional device were bought. As an example, the database of the beneficiaries residing in Israel whose 99

pension rights are paid directly on the residing state territory (using banking procedures) is periodically updated (at present there are about 400 beneficiaries registered in our data basis). The Plan for implementing the harmonized legislation with the acquis, at local level, in 2003 provides certain actions at territorial level, which are quarterly supervised by the National House of Pensions and other Insurance Rights. Accordingly, Covasna Territorial House of Pensions registered 72 beneficiaries residing abroad, Galati Territorial House of Pensions updated its database with 27 new persons, and meanwhile Arad Territorial House of Pensions has 15 new beneficiaries residing abroad within its database.

2.3.3. FREEDOM TO PROVIDE SERVICES Financial services

Romania has sent to the European Commission, on the 27th of June 2003, the Action Plan on the implementation of the recommendations stipulated in the final report of the peer review mission in the financial services field, which took place in Bucharest, December 2002. On the 14th of July 2003, Romania has been invited to participate to the Working Group - Effective Financial Services Supervision of Accession Countries ­ EFSSAC that was held in Brussels. During this meeting, the Action Plan of Candidate Countries for implementing the recommendations of the financial services peer review mission has been evaluated. The representatives of the member states appreciated the cooperation with the Romanian authorities during the peer review mission and positively considered the latest evolutions in the financial services sector. During July this year, has been drawn up and sent to the European Commission the "Complementary Position Paper", on chapter no. 3 "Free movement of services", approved by the Government on August 3, 2003. Banking services In the prudential area, the regulation framework related to credit cooperative organizations was supplemented by the BNR Rules no. 6/13.06.2003 (OJ no. 447/24.06.2003) on the merger and splitting-up of credit cooperatives. The BNR's regulatory and supervisory coverage was extended, as well, over the savings houses engaged in collective saving and lending for housing according to the Law no. 541/27.09.2002 (OJ no. 733/08.10.2002) on the collective saving and lending for housing. Up to now, BNR Rules no. 4/13.06.2003 (OJ no. 445/23.06.2003) on licensing saving institutions financing the housing sector and BNR Rules no. 5/13.06.2003 (OJ no. 445/23.06.2003) on specific conditions for the functioning of saving institutions financing the housing sector have already been issued by the National Bank of Romania. Insurance The draft Law regarding the amendments and the supplementing of the Law no.136/1995 regarding the insurances and reinsurances in Romania was elaborated by the Insurance Supervisory Commission and, after consulting the insurance market players, was submitted for approval to the ministries involved. In the same time, there were elaborated and submitted for consultation to the insurance professional associations the following Legal Acts: Norms no. 5 regarding the calculation methodology and the bookkeeping of the minimum technical reserves for the general insurance business; 100

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Norms no. 6 regarding the categories of the assets accepted to represent technical reserves for the insurers involved in the general insurance business, the rules of investments spread, as well as the liquidity ratio; Norms no. 9 regarding the conditions for life business fund management, investments and assets valuation, as well as the mathematical reserves calculation.

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During June-August 2003, the Insurance Supervisory Commission performed controls to the following insurance companies: Anglo- Romana Insurance; Prima SA Insurance and Reinsurance Company; Generali Insurance; Astra; Uniroyal Insurance. As a result of the findings, the following sanctions were decided: penalties for Astra and Generali Insurance; withdrawal of the functioning authorization for Anglo Romana Insurance, Prima SA Insurance and Reinsurance Company and Uniroyal Insurance. At present, controls are performed to the insurance companies Allianz Tiriac, Garanta and AGI. As regards the insurance brokers, in this period there were performed controls to SC Asiana SRL, SC Asibrok Romania and SC Olas Broker, the sanctions decided for them being warning (SC Asiana SRL) and withdrawal of the functioning authorization (SC Olas Broker). In the same time, during this period, the Insurance Supervisory Commission granted 3 setting-up authorizations and 8 functioning authorizations for the insurance brokers. Regarding the insurance companies, in this period there were not granted any settingup authorization or any functioning authorization. As regards the financing that the CSA is beneficiary of: The funds allocated by the World Bank within the PSAL II Program were used for hiring a consultant in order to strengthen the supervision capacity of the Insurance Supervisory Commission. The tender process for hiring the consultant was finalized, now being in the stage of concluding the contract with the Firm winning the tender. The funds allocated within the Phare 2002 Program are designated to a Twinning project (1,2 Meuro) and to purchasing hardware and software for managing a database for Third Party Liability. In this respect, in June and July 2003, the CSA negotiated with the Greek partner (the Insurance Supervision Authority from Greece) the twinning covenant, which is going to be subject for approval to the European Commission at the end of September this year.

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Investments and securities market In June 2003 the National Commission for Securities adopted Regulation no. 3/2003 (OJ no. 437bis/19.06.2003) on the licensing and operation of the asset management companies, open-end investment funds, investment companies and depositories. In August this year, CNVM issued Regulation no. 6/04.08.2003 (OJ no. 577/12.08.2003) for amending the Regulation no. 3/2003. During the reference period CNVM adopted Regulation no. 5/2003 (OJ no. 571/8.08.2003) regarding public offer of securities and other financial instruments. According to the provisions of the Twinning Covenant RO.0005.03 "Securities Market Regulation" with Securities Commission from Italy (CONSOB), between June ­ August, 2003, experts from CONSOB and Bank of Italy presented several seminars on the following subjects: the development of a strategic plan for transaction monitoring, medium term action plan, market abuse, issuers' reports, capital adequacy, licensing and monitoring the investment companies, investors compensation scheme. For the implementation of the recommendations presented in the Peer Review mission Report, CNVM is in the process of hiring new personnel and redistributing the existing one in order to ensure an internal structure that allows a more efficient surveillance and control. In the Office for electronic surveillance of the regulated markets 3 persons 101

have been hired and trained. CNVM is working on the implementation of an own database, as well as on the creation of a historical analysis system for the transactions traded on Bucharest Stock Exchange and Rasdaq, in order to prevent market abuse. The system is still in construction but several applications for monitoring the transactions on BSE and Rasdaq have already been finalized. The entire electronic system for monitoring the transactions in real time will be finalized at the end of 2003. Between June 1 and August 15, 2003, the Intermediaries Directorate suspended the activity of one financial investment services company. On August 15 this year, 73 financial investment services companies were authorized and supervised by CNVM. The number of open-end investment funds was increased up to 25 funds through the authorization of the BCR Dinamic (Commercial Bank from Romania) fund. Between June and August 2003, the Collective Investment Schemes Directorate extended the suspension periods for 3 open-end investment funds in order to finalize their merger and the suspension for the participation titles of one open-end fund has been revoked. During the same period, there have been authorized several amendments to the constitutive acts of the entities supervised by the Collective Investment Schemes Directorate. The Investigation Division of the Capital Market Institutions Directorate has performed 4 inspections at the registrars in order to verify their activity. Due to the merger between S.C. Registrul Mioria S.A. and S.C. Registrul Independent of Buzau Shareholders S.A., the number of the registrars authorized and supervised by the CNVM, decreased to 8. Between June and August 2003, the Control Body of CNVM performed 6 on-site inspections and 8 hearings, at the CNVM premises, by requesting, verifying and analyzing all the relevant documents presented by the market's entities (1 registrar and 7 financial investment services companies). Following the inspections performed by the Control Body, there have been applied the following sanctions: 1 written warning for 1 securities agent, 3 sanctions forbidding the performance of activities on the capital market for 3 years; 2 sanctions blocking the account, from which one for a financial investment services company and one for a natural person, and the authorization of 1 financial investment services company has been withdrawn. The Issuers Directorate have registered 48 public offers for buying shares between June 1 and August 15, 2003, 4 secondary public offers for selling shares, 7 initial public offers for selling municipal bonds and 2 initial public offers for selling corporate bonds. During the analyzed period, 93 publicly held companies have been declared closedend companies.

Non - financial services

Right of establishment (Art. 43 CE) and free movement of services (Art. 49 CE) In conformity with the assumed commitments, in the reference period, there have been recorded the following evolutions: Elimination of the barrier which stipulates the condition that the chief of a pharmacy storehouse to be a specialist, through the initiation by the Ministry of Health of a draft Law which amends the Law no. 336/2002 (OJ no. 418 /17.O6 2002) for approval of GO no. 152/1999 concerning the medical products for human use. The draft law was approved in the government meeting from 28.08.2003. Elaboration, by the Ministry of Administration and Interior, of the draft Law on the regime of the citizens of Member States of the European Union for the complete alignment with the Directive 73/148/EEC stipulation. The present draft represents the frame regulating the entry and stay on Romanian territory of citizens of a Member State of European Union and of the European Union Area and their family 102

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members, who will establish temporary or permanent residence on the Romanian territory. Personal data protection As regards the effect of the enforcement of Law no. 677/2001 (OJ no. 790/12.12.2001) on the protection of individuals with regard to personal data processing and the free movement of such data, during June - August 2003 period, institution of the Ombudsman registered 80 notifications, out of which 9 referred to data transfers abroad. Presently, there are registered 460 personal data operators. Following the analysis of transfer notifications registered by now, the Ombudsman issued 3 authorizations under the conditions of articles 29 and 30 of Law no. 677/2001. As regards the strengthening of the supervisory authority administrative capacity, since June 1st, 2003, according to the new organization structure of the Ombudsman institution, the number of positions from the specialized department increased from 13 to 20. Information Society Services In the reference period, the Ministry of Communications and Information Technology has initiated the participation to the new communitarian programmes and has elaborated governmental projects in order to accelerate the transition to the Information Society. E-Content Programme In the reference period, the participation of Romania in 2003 to the Communitarian Programme "e-Content" has been approved through the GD no. 886/29.07.2003 (OJ no. 574/11.08.2003), on the approval of participation of Romania in 2003 to the Communitarian Programme on stimulating the development and the utilization of the European digital content within the global networks and promotion of linguistics diversities in the Information Society. It was also established through this Legal Act the payment to the European Union's budget of the financial fee within the limits of the equivalent in ROL of an amount of 168.000 euro, for Romania's participation in 2003 in this programme. E-statistics.ro Programme Romania has signed the action plan eEurope+, assuming its transposition and implementation in the framework of the preparation for accession to the European Union. On the 22nd of July 2003 there have been launched, through the electronic system of statistic data collection (SIGMA), made available at www.e-statistica.ro, a number of 4 inquiries: Public Administration 2002, Public Administration 2003, IT Companies, ISP. The electronic collection of the statistical data is a new stage in implementing an electronically government and, also, an information society in Romania. The correct and accurate data obtained on regular time schedules, also helps the public administration in the future directions and strategies and the companies in establishing the commercial policies. Connection to the Internet is another important category in the view of this electronic inquiry and uses indicators as: the number of the PCs connected to the Internet and the number of the users. The institutions will answer whether they own a site or they are making on-line acquisitions, reporting their value, as well. On the other hand, these kinds of statistics are necessary for the fulfilment of the assumed commitments by the adhesion to e-Europe+ plan: information provided half-yearly or annually reports on the European Commission's established indicators. E-statistica.ro has a basic solution that assures secure and confidential transmission of data. 103

For a good functioning of this system, there was approved GD no. 542/17.05.2003 (OJ no. 363/28.5.2003) regarding the norms of using the electronic system of collecting statistic data. The system is in the implementation stage and its usage is mandatory for the institutions of central and local public administration according to Law no. 202/16.05.2003 (OJ no. 351/22.05.2003) for the approval of the GO no. 19/2003 on the obligation of using the electronic system of statistic data. E-Readiness Programme The e-Readiness project refers to the assessment of the state of play on the development of the information and communication technology infrastructure in Romania. In order to make this study, there was obtained a non-reimbursable grant of 35,000 $ from the International Bank for Reconstruction and Development (IBRD), while the entire value of this project is 50,000$. On August 1, 2003, was held a meeting in order to create the Working Group on the evaluation of the present stage of the Romania development, in what regards eReadiness. This Working Group constituted by the representatives of the central and local public administration, of the professionals associations, of the civil society and of the international organisms, established the necessary methodology for making the project and a monthly schedule for meetings. The methodology was adopted taking into account those five aspects of the e-Readiness analysis: the implication of the Government, the access to the infrastructure and interconnecting, human resources, initiatives of the private sector and social development. The Group members will take part to the acquirement process of the information needed for the evaluation and, also, to the analysis of the conclusions and recommendations of the study. This project demands new methodology for the evaluation of the e-Readiness, using inquiries and tests, but also using information from databases of the governmental agencies, private and telecommunications sector. These will be later analysed and processed into a complete report regarding the situation of IT&C in Romania, and, also, into a long term plan of action on opportunities and identification of impediments. E-government projects In the reference period a series of projects has been launched, in order to offer public services by electronic means and to accelerate the Digital Reform of the Government: Extension of the system on eEurope+ indicators. Portal regarding the Intellectual Property: information system, which will make the monitoring activity concerning the law for the right of the author and the additional rights more efficient. By introducing the electronic means, the communication between entities involved will be more efficient. In the reference period there has been concluded a contract of 40 000 euros and it will be operational by the end of 2003. The portal can be accessed from the MCTI's web page. Portal for paying fees and filling declarations to the Police online (in case of theft and documents loss): through this system the payment of the fees will be made by electronic means, without having to go to the police station. The project describes an efficient mechanism through which one can report the loss of documents quicker and more efficiently. At this moment the offers concerning the contract and the portal are analysed. The access to the portal can be made through a link on the MCTI's web page, as well as through a dedicated one. The portal extension for illegal/antifraud information. The project aims to extend the content of the old portal by completing it with facilities. The analysis, which was made at one year from its first day of functioning, showed that the subjects from information society domain have an interest in this service and it has determined its development by adding certain additional facilities, which should make the system more dynamic, should support more efficiently the activity of the institutions with 104

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attributions of monitoring and control, in this sector. The contract regarding the extension, with a value of almost 60 000 euros, has been attributed in July. Extension of the security audit system. By adding certain facilities, the portal will become an efficient instrument, which allows any organization to verify the security of the information system and its conformity with the security standards known in this field. This system is particular because of its ergonomic interface, the users being assisted while exploiting the system. Moreover, certain tests have showed that the system has the capacity to formulate a series of suggestions regarding the improvement of the system's security liable to the analysis.

The project for the informatization of the governmental sessions This project is part of the government's strategy for modernization and increasing of the efficiency of the activity of public institutions. The project wishes to make efficient the mechanism of submission of the normative acts' projects for adoption to the Government, by introducing electronic means of administration and control of documents that are part of the governmental sessions. The implementation of the project started in June-July this year through the enforcement of GD no. 1574/2002 (OJ no. 18/14.01.2003) approving the realization of an information system for the Government's sessions and in present the project is functioning (it has been finalized) and will improve the communications, the information exchange and the documents circulation. The technical solution used for this project of information system for Government's sessions is based on standard products, available to the public. Its purpose is to assure the gradual replacement of paper documents usually used for and during the sessions, as well as the secure circulation of electronic documents between the entities involved in the preparation of the sessions. The Prime Minister and his counsellors, ministers, as well as administrative departments involved in the preparation and administration of the documents to be analysed, discussed, and approved within the Government's sessions are the users of the system. The financing of this project will be assured from the budgetary reserve fund at Government's disposal, fund that is part of the state budget for 2003, by supplementing with 18.0 milliards ROL the budget of the Ministry of Communications and Information Technology. By a common Order of the Minister of the Communications and Information Technology and of the Minister in charge with the coordination of the General Secretariat of the Government, a specialized staff was constituted, formed by the representatives of the SGG, of the MCTI and of the Department of Institutional and Social Analysis, in order to manage and coordinate the necessary measures for this computerized system. The specialized staff is managed by the Minister of Communications and Information Technology, as chief accountant of credits for the usage of the allocated funds. Electronic communications services During the reference period, Law no. 304/4.07.2003 (OJ no. 551/31.07.2003) on the universal service and users' rights relating to electronic communications networks and services, which fully transposes in the Romanian legislation the provisions of Directive 2002/22/EC, has entered into force. Following the adoption of Law no. 304/2003, during the reference period, ANRC launched public consultations on a series of draft Decisions aiming at the implementation of the provisions of this law, as follows: Preliminary public consultation on the identification of retail markets within the electronic communications sector. Public consultation on the objectives of the market studies to be carried out by ANRC for the identification of the specific relevant retail markets within the electronic communications sector. 105

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Draft Decision on the procedure for the resolution of disputes within the competence of the ANRC. Draft Decision on reporting statistical data by electronic communication networks and services suppliers.

At the same time, ANRC continued the regulation of wholesale markets, by issuing draft Decisions concerning the imposition of specific obligations on the operators having significant market power, as follows: Draft Decision for the modification and completion of Decision no.147/2002 on the principles and prerequisites of the reference offer for interconnection with the public fixed telephony network. Draft Decision on the approval of the Regulation for the elaboration of the top-down model for the calculation of the long run incremental cost by Mobifon S.A. Draft Decision on the approval of the Regulation for the elaboration of the top-down model for the calculation of the long run incremental cost by Orange Romania S.A. Draft Decision on the approval of the Regulation for the implementation of accounting separation, within the internal cost accounting system, by Romtelecom S.A. Draft Decision on the approval of the Regulation for the elaboration of the top-down model for the calculation of the long run incremental cost by Romtelecom S.A.

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As concerns the granting of numbering resources, so far, the National Regulatory Authority for Communications has granted numbering licenses for over 30 million numbers to a total of 35 companies. The process for granting numbering licenses will continue as long as there is demand from the companies authorized to provide telephony services. Freedom of services for farmers, craftsmen and small traders In the reference period, the National Agency for Small and Medium-Sized Enterprises and Cooperatives, with the purpose to achieve a methodological guiding and a documentation concerning the way of the enforcement of Law no. 507/2002 (OJ no. 582/6.08.2002) concerning the organization and carrying on economic activities by the individual persons and of the GD no. 58 /2003 (OJ no. 108/20.02. 2003), has assisted a number of seven city halls from Ilfov county (City hall of town Buftea, City hall of town Otopeni, City hall Balotesti, City hall Snagov, City hall Gruiu, City hall Afumati, City hall Voluntari), also to city halls of sectors 1 ­ 6 of Bucharest. The representatives of ANIMMC have observed procedural problems pointed out by the city halls representatives concerning the authorization emissions for carrying on economic activities by the individual persons and by families associations and they assumed the necessary consultation for the interpretation and application of Law no. 507/2002 and GD no. 58/2003. On the 7th of July 2003, it was adopted the Order of the minister of labour, social solidarity and family no 237/2003 (OJ no. 538/25.07.2003) on designation of the institution which automatically recognizes the documents certifying the specialty vocational training obtained abroad by the Romanian citizens or citizens of EU Member States or EEA. Through this order, the Office for Labour Migration was designated as the institution which will recognize the documents certifying the specialty vocational training obtained abroad by the Romanian citizens or citizens of EU Member States or EEA, that apply for the authorization in order to develop economic activities as natural persons. Based on this order, the Office for Labour Migration is qualified to verify the documents obtained abroad which certify the vocational training and hand out a certificate for its recognition. 106

Commercial communications On July 2003 `'The Trade Guide'' was published in 3000 copy, out of which 200 were distributed in the reference period to: commercial agents, professional organization, chambers of commerce and industry, mayors. The Guide will be also distributed through fairs, such as: second edition of TIMM and the 27th edition of TIMIMPEX. The Guide provides the necessary knowledge in order to prepare the future trader and to inform him about commercial rules, commercial practices, techniques and trading typologies. The Guide also provides the necessary information about what the future trader must mainly do and know to start a business in trade field, rules for obtaining the authorization and establishing an activity, legislation in trade field. The Guide is based on the provisions of GD no. 333/2003 (OJ no. 235/7.04.2003) for the approval of the methodological norms for the enforcement of GO no. 99/2000 on trading market products and services. On the 1st of August this year, started the first period of sales below cost, respectively reduced cost ­ regulated through Law no. 650/2002. The reduced sales take place twice a year, with 45 days maximum duration for seasonal goods. The traders must notify the period of reduced sales with at least 15 days before starting the operation, to the mayor nearby his activity. Agency of Small and Medium Enterprises and Cooperatives supervised the way GO no. 99/2000 (OJ no. 424/1.09.2000) has been applied and provided methodological guidance in application of the provisions of the law concerning sales below cost to mayors in Bucharest and mayors from 3 counties: Timis, Dolj, Teleorman. The Agency of Small and Medium Enterprises and Cooperatives offered assistance and consultancy to traders regarding the provisions of the law, solving 5 written interventions and 20 phoned requests on sales below cost, promotional sales, retail and whole sales in the same premises.

2.3.4. FREE MOVEMENT OF CAPITAL Property right

A major objective assumed by Romania, until the accession, envisages the revision of the Constitution, also in the meaning of eliminating the interdiction according to which "the foreign citizens, stateless persons and foreign legal persons may not acquire the right of property on land" from the Art. 41(2). Currently, the draft law for Constitution revision has passed the procedural parliamentary stage. The draft law is amended and completed and thus: "The private property is guaranteed and protected equally, irrespective by titular. The foreign citizens, stateless persons and foreign legal persons may acquire the right of property on land, only under the terms resulted from Romania's accession to the European Union and other international treaties, to which Romania is part, on reciprocity basis, under the terms provided by organic law, as well as legal inheritance".

State nominative control share

By the end of 2002, there have been identified 108 commercial companies and 2 commercial companies of strategic interest where the state held nominative control shares (109 companies in APAPS portfolio and a company ­ ROMTELECOM ­ in the Ministry of Communications and Information Technology portfolio). As a result of the strengthening of the legislative necessary framework - the GO no. 31/31.01.2003 (OJ no.62/1.02.2003), on August, 31st 2003, from the total 110 companies where the state held initially the nominative control shares, only for 62 companies, the significant stock-holders were present to sign the additional acts, by which the nominative control share is transformed into an ordinary share (including the 107

PROSPECTIUNI Bucuresti, declared as strategic interest company by GD no. 362/1998 and ROMTELECOM company). All the other 48 companies, for which the additional acts have not been signed on August 31st, 2003, have been notified by APAPS in order to complete these additional acts, as follows: For 33 companies, the signatories of the privatisation contracts or their legal successors have agreed the concluding of these additional acts, some of these being under completion; For 15 companies, to which the signatories of the privatisation contracts or their legal successors have not yet responded to the APAPS invitation, have been renotified. These additional acts can be concluded only by the agreement of both parties.

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Payment systems

The National Bank of Romania has drawn up the draft Law on final character for settlement in payment systems and settlement systems of the transaction with financial instruments, so as the provisions of the Council Directive 98/26/EC to be fully transposed into national legislation; the draft Law was approved by the Administration Council of the NBR, in June 2003, and currently is under the advising procedure at the involved institutions. The provisions of this Law are applied to the payment and settlement systems of the transaction with financial instruments, to any participant in a such system, as well as to the guarantees supplied related to their participation in system or with the National Bank of Romania's transactions and central banks from the Member States of the European Economic Zone. Thus, the most significant provisions focus on 3 issues: a) transfer and compensation orders; b) insolvency procedures and c) guarantees.

Prevention and control of money laundering

The analyses carried out by the National Office for Prevention and Control of Money Laundering have been finalized in a number of 256 cases sent to the General Prosecutor's Office by the Supreme Court of Justice, for the first part of the year 2003 (including the reference months). After the approval of the Law 656/2002 and the submission to Brussels of the transposition table, the European Commission sent a questionnaire asking for clarifications. The Office answered to these requests offering detailed information on the following aspects: Transposition into the internal legislation of the money laundering definition, in accordance with the second European Directive on money laundering, respectively the incrimination of the money laundering activities when the crime is committed on a member state or third country territory; Reporting obligations of notaries, lawyers and other independent professions acting on behalf of their clients, in accordance with the scope of the second EU Directive; The lack of exemptions in the relevant legislation from the obligation of reporting and from the client identification obligation; Prohibition of anonymous accounts and bearer instruments; Obligation of the reporting bodies to abstain themselves from carrying out an operation, on which are money laundering suspicions, before informing the competent authorities; Suspending banking secrecy and professional secrecy in case of reporting suspicious transactions, investigations made by the Office and starting of penal procedures. 108

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Removing the restrictions on the free movement of capital regarding the direct investments made by non-residents

It is further pursued the process of removing the restrictions identified under the specific sectors legislation, these being eliminated gradually from the special laws that regulate a certain field of activity. In this context, we can present some sectors, whose legislation is under amending process, in order not to contain contrary provisions to the acquis, offering an equal and non-discriminatory treatment for all investors, as follows: In the insurance sector, the restriction existent within the Art. 7 of the Law no.136/1995, which provided "the obligation for the Romanian natural and legal persons to buy insurance only from the insurance companies established in Romania, excepting the cases where the acquired insurances are not performed on the domestic market", was eliminated. The draft Law regarding the amendments and the completion of the Law no.136/1995 was elaborated by the Insurance Supervisory Commission and, after consulting the insurance market players, was submitted for approval to the involved ministries; In the mineral resources exploitation sector, the existent restriction was eliminated from the Art. 28 (f) of the Oil Law no.134/1995, which stipulated that "a titleholder of a petroleum agreement has to use, with priority, in undertaking petroleum activities, competitive local labour of appropriate qualification, and equipment and materials made in Romania in competitiveness conditions". The new draft Law, which abrogates the previous Oil Law, was issued by the Ministry of Economy and Trade, respectively the National Agency for Mineral Resources and was sent for advising to the involved institutions, so that within the fourth trimester 2003 to be submitted to the Government for approval.

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2.3.5. COMPANY LAW Company law

The order of the minister of justice no. 2202/C/29.07.2003 published in the OJ no.589/19.08.2003 approved the Regulation for organisation and functioning of the National Office of the Trade Registry (ONRC) and of the trade registry offices attached to tribunals (regional offices/in each county and Bucharest - 42). The regulation establishes the main tasks of the ONRC and of the regional offices, their organisation, the responsibilities of the ONRC managing board and departments, as well as for the regional offices. The regulation also provides for the personnel responsibilities and the sanctions in case on non-compliance. The regulation is elaborated and approved according to Law no. 26/1990 on the trade registry, consolidated, to EO no. 129/2002 and to EO no. 76/2001 on simplifying certain formalities for the registration and authorisation of the traders, further amended. As regards the activity of the trade registry in the first 7 months of the year, the following statistics are available: Month January February March April Number of registered companies 6706 8659 8168 8667 109

May June July Total at 31 July 2003

8427 10496 10633 61756

The draft Law for amending the Law no. 64/1995 on insolvency procedures and other relevant normative acts is now under parliamentary debate within the special commissions of the Chamber of Deputies.

Accounting and audit

In the accounting field there have been drawn-up several legal acts as follows: The Order of the minister of public finance no. 815/02.07.2003 for the approval of the accounting reporting system at 30th of June 2003 of the company (OJ no.518/17.07.2003); By this order it has been approved the System of accounting reporting for company on 30 June 2003, which is distinguished by the fact that the required information to be submitted to the territorial units of the Ministry of Public Finance are simplified and are the same, no matter the accounting regulations applied by the company. Also, all the company have had the obligation to submit the semester accounting reports on magnetic support, accompanied by their printed form. The legal persons that are regulated and supervised by the National Commission for Securities have completed the semester accounting reports submitted to that institution, accompanied by a limited review report of the financial statements or by a report of the censors commission, if applicable. The publicly hold companies have submitted a limited review report, if they apply the Accounting Regulations Harmonised with the Fourth European Directive and International Accounting Standards, or the report of the censors commission, if the respective accounting regulations are not applicable to them. The common Order of the minister of public finance and of the governor of the Romanian National Bank no. 999/3/05.08.2003 for the approval of the half-yearly accounting reporting system of the credit institutions (OJ no. 578/13.08.2003). By this order it has been approved the System of accounting reporting of the credit institutions, that is mandatory for banks, Romanian legal persons, Romanian branches of the foreign banks and for credit cooperative organizations, named credit institutions. The credit institutions have had the obligation to submit to the territorial units of the Ministry of Public Finance the semester accounting reports both on paper and on magnetic support. Also, the credit institutions have had the obligation to submit the semester accounting reports to the Supervision Directorate within the National Bank of Romania both on paper and on magnetic support or using the interbanking communication Network. Concerning the credit cooperative organizations, they have had the obligation to submit the semester accounting reports to both the Supervision Directorate within the National Bank of Romania and the territorial units of the Ministry of Public Finance, reflecting their operations and their financial situation. Their central house of the credit cooperative organizations should have supervised the semester accounting reports prepared by the credit cooperative organizations. The Order of the minister of public finance no. 1078/06.08.2003 for the approval of the methodological norms concerning the merging, division, dissolution and the liquidation of companies, as well as the backing or exclusion of some shareholders out of the commercial companies (OJ no. 586/18.08.2003). By this order there has 110

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been abrogated the Minister of Public Finance Order no.1223/1998 on the approval of the Specifications regarding the accounting of the main operations on merging, dissolving and liquidation of the commercial companies, as well as on companies shareholders withdrawal and/or exclusion. In the audit field, there has been following legal acts: EO no. 75/1999 on financial audit activity has republished in OJ no. 598/22.08.2003; Order no. 939/25.07.2003 (OJ no. 542/29.07.2003) for approved of the List of members of the Committee for Internal Public Audit.

The legal persons that are regulated and supervised by the National Commission for Securities, other than those that are publicly hold, have completed a review report, in accordance with the International Standards on Auditing.

Intellectual property rights

The progresses made in the intellectual property field in the reporting period follow these main directions: The finalization of the draft of the Government Decision, in July 2003, on the approval of the National Strategy in the Intellectual Property Field (2003-2007), an extremely useful instrument for the long-term evolution of this field that has tried to unite all the institutions which have activities in the copyright and neighbouring rights area. The main objectives of this Strategy are: the harmonization of the national legislation with the acquis communautaire; enhancing the law enforcement; training the specialized human resources; creating efficient administrative structures; setting up a transparent way of cooperation between all the national institutions and organizations involved in the intellectual property rights protection. The adoption of the GD no. 758/03.07.2003 (OJ no. 492/08.07.2003) - the main modification brought to ORDA's Management and Functioning Regulation consists in the reorganization of the organizational chart, the 20 new posts allotted to ORDA being also included. The strengthening of this field was brought by the project that the Romanian Copyright Office together with the State Office for Inventions and Trademarks have within the PHARE 2001 Program, which had the official opening in June 2003. The main components of the project regard: the continuation of the legislation harmonization process, campaigns for raising the public awareness on the importance of respecting the intellectual property rights, training programs for the personnel of all the institutions involved in the process of protection of intellectual property rights, and a technical component. The creation of an inter-institutional network meant to contribute to the coordination of the activity of all the institution involved in the intellectual property rights protection should also be pointed out; the supervision of all the activities taken in order to efficiently finalize the above mentioned PHARE Project is the network's first objective. Regarding the enforcement activity, in the period June-August 2003, ORDA's inspectors concluded 120 official proceedings for control or technical and scientific expertise, and files concluded for the infringements on Law no 8/1996 on copyright and related rights or regarding products seized for expertise following the controls of ORDA's inspectors, of the Police, or of ORDA in cooperation with the Police or regarding the results of these control actions; 4030 products were seized by ORDA or by the Police in order to be examined, under Law no. 8/1996 (products seized by police or other competent authorities subject to technical and scientific expertise effected by ORDA and products seized by ORDA's inspectors). During the reporting period, a number of 55 minor offence proceedings have been concluded, being 111

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imposed fines in amount of 1.517.000.000 ROL under the GO no. 45/2000 and the GO no. 124/2000.

Industrial property rights

A draft Decision on the approval of the Regulation implementing the Industrial Designs Law no. 129/1992 is to be approved by the Government by the end of September, fulfilling therefore a legal obligation ensuing from Law no. 129/1992 as republished with the amendments and completions brought by Law no. 585/2003, regarding the drafting of Regulations implementing the law. The elaboration of the Regulations has been performed in the framework of the process of approximation to the TRIPS provisions, the Community Directive no. 98/71 and for compatibility with the EC Regulation 6/2002. In July 2003, the draft of the Government Decision on the approval of the National Strategy in the Intellectual Property Field (2003-2007) was finalized. The draft was elaborated in cooperation with the Romanian Copyright Office (ORDA) and other national authorities having responsibilities in the enforcement of intellectual property rights. In finalization of the Strategy account has been taken of the remarks and comments of the WIPO experts on the continuation of the transposition of the acquis communautaire; to ensure the adequate legislative framework to continue harmonization with the provisions of the treaties and agreements to which Romania is party; to adjust the research, development and innovation system to the requirements for the integration into the European Union. OSIM continued to develop its bilateral relations with other industrial property offices and signed a cooperation agreement with the Patent Office of the Republic of Bulgaria in June; also, based on the agreements concluded between OSIM and the Offices in the Republic of Moldova and Hungary, there continued the bilateral visits during which great importance was given to the presentation of legislative developments and of the stages of fulfilling the commitments to the acquis communautaire in our countries. As a step in creating an efficient inter-institutional network for the fight against counterfeiting, a Steering Committee of the Phare Ro 0107.06.01 Programme was set up in July, in which, besides OSIM and ORDA, several authorities having responsibilities in the intellectual property rights enforcement in Romania are also represented (e.g.: The General Directorate of Customs, the General Inspectorate of Police, the National Agency for the Consumer's Protection, the Prosecutor's Office by the Supreme Court of Justice, and others).

Measures of the Customs authorities relating to intellectual and industrial property

According to the Law no. 202/2000 and the GD no. 301/2001, 10 applications for intervention of customs authority were filled to General Customs Directorate were filled; 4 of these applications were a result of ex-officio actions of customs authority. Consequently, the goods suspected for infringing an intellectual property right retained by customs authority has been: 7480 pieces clothes (bearing trademarks as: Adidas, Tommy Hilfiger) 504 bottles of perfumes (trademark Boss) 17680 sport shoes (trademarks Puma, Adidas, Reebok) 260 mobile phones accessories (trademarks Nokia, Siemens) 152 pieces sunglasses (trademarks Lacoste, Christian Dior).

All of these goods were originated from China.

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2.3.6. COMPETITION POLICY Competition

Completion of the legislative framework The draft amending the Competition Law no. 21/1996 was presented in the Government Session of 10 July 2003 and is about to be under Parliamentary approval. The application of the competition legislation Within the reporting period, 341 decisions were issued by the Competition Council as follows: Decisions A. Agreements, association decisions, practices (art. 5) of which: - complaints - requests for non-intervention - request for individual exemption - notifications on block exemption B. Abuse of dominant position (art. 6) C. Economic concentrations (art. 11) TOTAL A+B+C E. Other cases TOTAL concerted 20031 June-August 11 2 9 3 66 80 49 129

The decisions issued by the Competition Council in other cases were related to the failure to notify, sanctions for the infringement of articles 5 and 6 of the Competition Law, sanctions imposing comminatory fines, appeals, requests for the recalculation of the authorization fee and other aspects. In the period taken into consideration 36 sanctioning decisions were issued of which 25 decisions for the infringement of art. 16 (1) of the Competition Law related to the failure to notify the economic concentrations within the legal term and 11 decisions for the infringement of art. 5 (1) a) of the Law related to the conclusion and application of an agreement in the insurances' sector. The total amount of the applied fines was of 4 586 000 000 ROL, of which: 681 000 000 ROL for the infringement of art. 16 (1); 3 905 000 000 ROL for the infringement of art. 5 (1).

Out of the 25 sanctioning decisions issued for the failure to notify the economic concentrations, 11 decisions, representing 44% of the total mentioned decisions, were made having in view the retail sale of human pharmaceutical products and cosmetics. The fines' total amount was of 120 000 000 ROL, respectively 17.62% of the total amount of fines applied for the failure to notify the economic concentrations. The 11 decisions issued for the infringement of art. 5 (1) a) of the Competition Law no. 21/1996 sanctioned the infringement of the Competition Law by a number of 11 insurance societies that concluded and put in practice an agreement fixing the minimum levels of the insurance premiums. During June ­ August 2003 Competition Office analysed 69 cases of which 48 were concluded. It is to be mentioned that, from the 69 cases handled by the Competition

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Operative data

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Office, 28 were cases of unfair competition, of which 13 were concluded, the others are on going. Of the total number of cases investigated by the Competition Office during June August 2003, the most cases were on abuse of dominant position and on agreements between undertakings. During June ­ August 2003 at Competition Office level there were formulated points of view and/or advises for a number of 13 promoting normative acts from which 10 were analysed from the Competition Law no. 21/1996 point of view. There are still investigations on going, opened through Order of the Head of the Competition Office, regarding acts forbidden by the provisions of the Competition Law no. 21/1996 on the following markets: market of personal transport services provided by taxi; market of cable network services for TV programs reception by the consumers and/or on other adjacent markets; market of exploitation, delivering and selling of the marble blokes; bread market; drugs market; market of cable network services for the TV programs distribution in Bucharest; market of cable network services for the TV programs distribution in Timisoara; market of service of using the pillars for low voltage energy distribution for telecommunications networks; auction markets; chemical fertilisers market; public urban passenger transport market; market of services provided by bus terminals transport operators in Timisoara; market of services provided by bus terminals transport operators in Salaj county; quartzous sands market; market of edible mushrooms from the spontaneous flora; market of services provided by "CFR MARFA" personnel, others than goods transportation on railway. As regards the implementation of the acquis communautaire at the local level, in the competition field, we point out the actions taken within the "Implementation Plan at local level, in the year 2003, of the legislation harmonised with the acquis communautaire", taken out from the report of 31 August this year: Applying the competition legislation: Actions taken during Action 1st June ­ 31st August 2003 43 Total actions taken during 1st January ­ 31st August 2003 155

1. Carrying out preliminary examinations in order to operatively solve the intimations, complaints and petitions regarding the anticompetitive practices; 2. Carrying out investigations on the anticompetitive practices perpetrated by undertakings, in case that enough reasons for the opening of the investigations procedures had been founded; 3. Providing information and data from different local sources (press, amiable relations with the undertakings etc.) in order to identify the markets in which dysfunction regarding the supply ­ demand ratio are registered. Promoting the provisions of competition legislation:

17

64

168

433

114

Action 1. Organising seminars and meetings, conferences at local level with the local authorities and institutions, as well as with the representatives of the business environment; 2. Distributing synthetic materials presenting the competition legislation, for local authorities and institutions, as well as for the representatives of the business environment.

Actions taken during 1st June ­ 31st August 2003 32

Total actions taken during 1st January ­ 31st August 2003 111

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State aid

Completion of the legislative framework The draft amending the Law no. 143/1999 on State Aid was presented in the Govern Session of 10 August 2003 and is under Parliamentary approval. The Guidelines on the sale of lands and buildings by the public authorities that take over the Commission Communication on state aid related to the sale of lands by the public authority (OJ C 209/3 of 10 July 1997) became applicable through the Order of the Competition Council's President. The Competition Council's Guidelines were published in the Official Journal of Romania no. 541 of 27 July 2002 and they entered into force on the publication date. The application of the state aid legislation In the period June-August 2003, Competition Council issued 18 decisions on state aid of which 16 were authorizing decisions and 2 were decisions on measures that do not constitute state aid. In the period taken into consideration, comparatively with the first 5 months of this year, the number of the notification sent to the Competition Council on state aid cases grew by 40%. The individual state aid and the state aid specific allocations hold the majority weight (about 80%) of the total state aids authorized. The grantors of state aids, object of the above mentioned decisions, are: the Ministry of Public Finance, the Ministry of Administration and Interior, the Ministry of Labour, Social Solidarity and Family, the Ministry of Small and Medium sized Enterprises and Cooperation, the Ministry of Agriculture, Forests, Waters and Environment and the Banking Claims Resolution Agency. The decisions granting state aid may be structured as follows: 12 decisions on state aid for regional development; 3 decisions on restructuring aid; 1 decision for aid in agriculture.

All authorized state aid measures meet the granting and eligibility criteria stipulated in the State Aid Regulations issued by the Competition Council in accordance with the relevant EU acquis. The state aid granted includes subsidies, exemption from the payment of interest due to non-payment and penalties for delay, the reduction of taxable profit by 20% of the value of the investments made, etc.

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The estimated value of the state aid authorized in this period is of 5 535 245 669 344 ROL. According to the negotiating commitments, a list of existing state aids that Romania intends to grant beyond the accession date was completed and transmitted to the Ministry of European Integration on 7th August 2003, list that includes 16 positions, as follows: specific state aid allocations granted within the state aid scheme contained by the EO no. 65/30.08.2001 on setting up and functioning of industrial parks (OJ no. 536/01.09.2001) approved through the Law no. 490/2002 (OJ no. 533/22.07.2002), the individual state aid granted to C.N. "International Airport Bucuresti-Otopeni S.A.". The Report on state aid granted in Romania in the period 1999-2001 worked out in compliance with the provisions of the State Aid Law no. 143/1999 and the GD no. 599/200 related to the approval of the reporting, monitoring and inventorying procedure in the application of the State Aid Law was approved in the Government meeting of 10 July 2003 and was sent to the European Commission on 15 July 2003. At present, the Competition Office analyses the figures received until 31st August 2003, according to the GD no. 599/2000, in order to draw up the Report on State Aids granted in Romania during 2000 ­ 2002 according to the provisions of Law no. 143/1999 on State Aid and to the GD no. 599/2000 for the approval of the procedure of reporting, monitoring and inventorying in the application of the Law no. 143/1999 on State Aid. During July ­ August 2003, at the Competition Office level there were formulated points of view and/or advises for a number of 13 draft normative acts, of which 3 were analysed according to State Aid Law no. 143/1999 point of view. It is still ongoing the monitoring action of: State aids granted according to Government Emergency Ordinance no. 24/1998 on deprived areas; State aids under the value of 50 billion ROL granted according to the Government Emergency Ordinance no. 40/2002 on recovering the budgetary arrears, approved and amended through Law no. 491/2002 and which do not need to be notify to and authorised by the Competition Council; State aid schemes and individual aids authorised by decisions of the Competition Council.

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The EO modifying and completing the Law no. 76/2002 on the unemployment insurance system and the stimulation of employment was amended and completed in order to observe the relevant provisions of the Regulation on state aid for employment worked out by the Competition Council. As regards the implementation of the acquis communautaire at the local level, in the State Aid field, we point out the actions taken within the "Implementation Plan at local level, in the year 2003, of the legislation harmonized with the acquis communautaire", taken out from the report of 31st August this year: Applying legislation in the State Aid field: Total actions Actions taken taken during during 1st January ­ 1st June ­ 31st 31st August August 2003 2003 127 311

Action 1. Identifying the normative acts issued by local councils, susceptible of containing State Aid schemes and individual State Aids which were not notified at the Competition Council; 116

2. Controlling the State Aid reports according to the report procedure stipulated in the Government Decision no. 599/2000; 3. Controlling the monitoring State Aid authorised by the Competition Council and received by the beneficiary undertakings, according to the normative acts in force issued during 2000 ­ 2003. -

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3254

1529

1744

Promoting the provisions of legislation in the State Aid field: Total actions Actions taken taken during during 1st January ­ 1st June ­ 31st 31st August August 2003 2003 20 107

Action 1. Organising seminars and meetings, conferences at local level with the local authorities and institutions, as well as with the representatives of the business environment; 2. Distributing synthetic materials presenting the legislation in the State Aid field, for local authorities and institutions, as well as for the representatives of the business environment. Competition advocacy

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1435

In August 2003, the newsletter "Profil: Concurenta" that promotes competition culture, was published by the Competition Council. In the reporting period, articles and interviews on competition and state aid topics were published and weekly press releases reflecting the Competition Council's activity were issued. The "State Aid Guidebook" was distributed to the main grantors and beneficiaries of state aid, to local authorities, public institutions, and embassies and to the representatives of the business environment. The Guide, elaborated by the Ministry of Public Finances ­ Competition Office within the 1999 Phare Program financed by the European Union, contains the basis concepts and the legislation in the field as well as the methods to assess the state aid elements.

2.3.7. AGRICULTURE General information

Agricultural policy Law of the agricultural credit for production No 150/14.04.2003 (OJ No 276/19.04.2003 has been approved) setting up the agricultural credit as economicalfinancial instrument of the agricultural policy for supporting current activity of agricultural production, and GD No 816/17.07.2003 (OJ No 506/14.07.2003) on approving the methodological norms for the application of the Law No 150/2003 (ROL 1,600 billions) were adopted. The Agricultural Credit is granting to both private persons and legal persons, for supporting the agricultural currently production activities, as follows: 117

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Setting up, maintaining and harvesting the agricultural crops, as well as maintaining and harvesting of plantation; Purchasing and producing chickens for poultry and eggs, little pigs for fattening, as well as youth sheep and bovine for fatting; Purchasing, food processing, medicine supplying and medical treatments for animals, currently expenditures for maintaining and functioning of stables, equipments and relevant installations; Insuring the crops and plantations against harmful effects of natural risk factors, as well as insuring the animals against harmful effects of natural risk factors, of disease and of accidents.

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For the beneficiaries of the agricultural credits that pay back the credits and interests at the terms of payment stipulated in the credit contract, public funds are provided. These public funds are granting in form of budgetary allocation at the rate level for the repayment credit. In basis of the EO No 72/22.08.2003 (OJ No 610/28.08.2003) has been introduced a new direct support measure of state in value of ROL 2 million per ha for agricultural producers, for arable surface up to the 5 ha included. Stage of land retrocession By 31.07.2003, there were issued a number of 4,505,906 property titles out of a total of 4,787,762 (out of which 4,033,242 for agricultural land and 472,664 for forested land) representing 94.1% out of the total number of titles to be issued (out of which: 95.1% of agricultural land titles and 86.7 % of forested land titles), compared to 92.7% recorded on 30.04.2003. The corresponding area of the issued property titles represents 10,527,761 ha (9,119,407 ha agricultural land and 1,408,354 ha forested land) out of the total area 11.918.443 ha of requests validated by the county committees. The percentage of the investiture, according to the area, was of 88.3% (90.0% out of the total agricultural land and 78.9% out of the total forested land) compared to 78.9% recorded on 30.04.2003. Regarding the legal circulation of land, based on the provisions of Law No 54/1998 on legal circulation of land, by 31.07.2003, there were subject to transaction 61,323.93 ha, out of which 3,631.31 ha (surface sold and donated) inside town, and outside cities ­ 61,323.93 ha (surface sold and donated). The average value per ha during 1998 - 2003 reached ROL 112.53 million inside town land and a value of ROL 8.83 million for the outside city land. Privatisation of the commercial companies that undertake in its exploitation the agriculture lands During June 4 - August 31 2003, there have been performed the following actions: The negotiations for 9 commercial companies have been finalized, out of which, the selling-buying contracts have been conclude for 5 commercial companies, and the rest of 4 commercial companies wasn't adjudged, thus entering in restructuring procedures; 5 commercial companies from the chapter "companies remained for privatisation" have the selling notes concluded and published. 261 commercial companies have been privatised (out of which 21 companies in 2003); 21 companies are during the privatisation procedures process (advertisements, submission of the offers and negotiations); 118

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325 commercial companies fall under the provisions of Law 64/1995 ­ reorganization and bankruptcy; by 31.08.2003, the number of these companies reduced to 324; 120 companies twice offered for privatisation and for which no buying offer has been submitted are now being restructured. Feasibility studies are being carried out for these companies in order to assess and sell the assets. The realized proceeds will be used to settle their debts, thus creating the possibility to use the assets that proved to be useful; 12 commercial companies are in litigation. For these companies the privatisation notes are under elaboration and the share-selling announcement will be published, after clarification of patrimony aspects there are in analysing of Court of Justice.

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An important action for clarification of the property titles was representing the inventory of the lands with agricultural destination. As, at date of 4 June 2003 was temporary existing in the portfolio of the State Domains Agency an area of agricultural lands of 760.000 ha, representing 31.7% from the existing surface at the beginning of retrocession process. During June 4 - August 31 2003 period, there have been retrocessed 56,523 ha, 703,477 remaining on a temporary basis in the portfolio of State Domains Agency, representing 29.46% of the existing land at the beginning of retrocession. Institutional capacity - MAPAM reorganization In the framework of Government reorganization, by GD No 739/03.07.2003 (OJ No 495/09.07.2003) on organizing and functioning of the Ministry of Agriculture, Forests, Waters and Environment, the two directorates for European Integration (for environment and agriculture) were subordinated to the same Secretary of State. Also, the same Secretary of State coordinates the directorate for implementing ISPA and Phare programmes (for agriculture and environment) and SAPARD funds. Since 1 January 2004, the same State Secretary will coordinate the Authority for implementing the economical and social cohesion fund for environment and infrastructure projects and also the Management Authority for Sectoral Operational Programme for agriculture, rural development and fishery, responsible for the coordination of the allocated financial aid implementation, accordingly to GD No 1555/18.12.2002 (OJ No 70/03.02.2003). By the new structure, the former county Directorates for Agriculture and Food Industry were organized as Directorates for Agriculture and Rural Development, in the subordination of the Ministry of Agriculture, Forestry, Waters and Environment. Within the Directorates for Agriculture and Rural Development (DADR) there are functioning the structures for genetical improvement and animal reproduction and phytosanitary structures, without juridical personality. DADR coordinates the activity of offices for pedological and agrochemical studies, which are decentralized public institutions, with juridical personality and auto financed. The Directorates for Agriculture and Rural Development have performed the monitoring of the registered progresses during January-August 2003 in the implementation of the acquis at local level, in compliance with the "Action Plan for the Implementation at Local Level the Legislation According to the Acquis Communautaire for the Year 2003". As about the measures and actions applied for restructuring the agri-food sector, these are referring to stimulation of the agricultural exploitation size, to implementation of SAPARD Program, to the enforcement of the program for issuing the propriety titles for agricultural and forestry lands, to General Agricultural Census, and also to the privatisation of the agricultural commercial companies. 119

The measures and actions applied for the implementation of the national legislation harmonized with the EU provisions are referring both to the continuation of the institutional building at territorial level (FADN) and to the implementation of the harmonized national legal framework for various agricultural sectors (seeds and propagating material quality, phytosanitary, sanitary veterinary, forestry, fishery). 172 measures of Chapter "Agriculture" had the deadline during June-August 2003 period, all of them being fulfilled. The most of the due measures have been registered in the following counties: Covasna (42), Cluj (41) and Olt (23). In this period on the whole Plan, have to point out that the due measures for Chapter Agriculture have represented an important weight (8.27%) from the total of due measures.

Horizontal Issues

European Agricultural Guidance and Guarantee Fund (EAGGF) Guarantee Section: Paying Agency In June 2003 there was drafted a legal act that proposes the setting up and the organization, starting with 2004, of the Paying and Intervention Agency. In the first stage, the Paying and Intervention Agency will manage only the financial support granted to the agricultural sector from the state budget, and then it will prepare the institutional structure for the implementation of the direct payments and intervention systems, which will be in place starting with 2007. The financial management of EAGGF ­ Guarantee Section as well as technical management of EAGGF ­ Guidance Section shall be ensured by the Paying and Intervention Agency. At national level, Romania's Court of Accounts shall be the Certifying Body of the Paying and Intervention Agency. Trade mechanisms On the basis of the legislative framework adopted in 2002 on granting of premiums at the export of agro-food products, there was approved the Joint Order of MAPAM/MFP No 388/41874/2003 on granting the premiums at the export of poultry meat (OJ No 540/28.07.2003). This Order sets up the amount premium, the total quantity for which is provided this premium, the beneficiaries, the granting mechanism and the necessary justification documents. This premium is granted for the exports performed to all destinations, except the EU member states. Agricultural Statistics During the 2nd of December 2002 ­ 31st of January 2003, General Agricultural Census took place. The preliminary data obtained through the processing of centralized forms shows that in Romania have been registered 4,759.7 thou agricultural units, out of which 4,736.6 thou (99.5%) individual agricultural exploitations/households without legal personality and 23.1 (0,5 %) thou units with juridical personality using agricultural land and/or having animals. The whole cultivated agricultural area, in the agricultural year 2001-2002, was 13,939.5 ha out of which 7,715.6 ha (55,4%) in the individual agricultural exploitations/households without legal personality and 6,223.8 thou ha (44,6%) in agricultural holdings with legal personality. The average agricultural surface per one agricultural unit, at the national level, represents 2.93 ha. 120

The preliminary data of the General Agricultural Census on the animal livestock in Romania on 1 December 2002 indicate the following situation: Bovines Swine Ovine Goats Poultry 2,865.0 thou heads 8,229.3 thou heads 7,220.8 thou heads 737.1 thou heads 82,086.7 thou heads

On 1 August 2003, the collection of territorial data in the framework of the "Pilot survey of livestock and animal production" (bovines, swine, sheep and goats) started. This action will continue with the introduction, processing, validation and dissemination of the collected data. The results will be published during October 2003. Integrated Administration And Control System (IACS) In order to increase the administrative capacity for the LPIS implementation, in July 2003, there was concluded a collaboration Protocol between the Ministry of Agriculture, Forests, Waters and Environment (MAPAM) and the National Office for Cadastre, Geodesy and Cartography (ONCGC). The protocol has the following specific objectives: Establishing the collaboration framework, rights and responsibilities for both institutions, in order to set up and implement the Agricultural Land Identification Parcel System (LPIS) up to the issuance of the legal acts to specify the rights and obligations of both institutions; Elaboration of the draft legislative acts; Programming of LPIS implementation at the national level.

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The Joint Actions Plan for creating the Agricultural Lands Identification System was agreed by both institutions that are involved. The implementation of this Joint Actions Plan started through the application of a pilot project that covers the area of Ulmi locality, Dambovita County. There was agreed the first draft form of the Agricultural Exploitations Register. Quality Policy In order to harmonize the national legislation with the European requirements, the following legal acts were adopted: The List of geographical indications for food products protected and recognized in Romania, approved by MAPAM Order No 339/2003 (OJ No 351/22.05.2003); The List of geographical indications protected and recognized in Romania for the alcoholic drinks distilled of wine, sub-products resulted from wine processing and from fruits, approved by MAPAM Order No 334/2003 (OJ No 384/04.06.2003);

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These lists have been transmitted to the European Commission, being included in the Complementary Position Document II, on 14 August 2003. For carrying on the conclusion and ratification procedures for the " Agreement on mutual recognition, protection and control of wine denomination" and for the "Agreement on mutual recognition, protection and control of spirit drinks and flavoured drinks", the list containing the geographical indications protected and recognized in Romania for the alcoholic drinks distilled of wine, sub-products resulted from wine 121

processing and from fruits has been transmitted to the European Commission through the Foreign Trade Department and will become Annex to the mentioned Agreements. Organic farming Carrying on the national legislation harmonization in the organic farming sector with the community requirements, there was adopted the Order of MAPAM No 527/13.08.2003 (OJ No 613/19.08.2003) for the approval of the rules on the inspection and certification system and on accreditation conditions for the inspection and certification bodies in organic farming (in compliance with Art 9 ­ Regulation (CEE) No 2092/91), which repeals Order No 186/2002 on approval of the inspection and precaution contained by the Program for inspection and registering of the operators from the organic farming market. The above-mentioned Order stipulates on: registering of operators, accreditation conditions for inspection and certification bodies and also on the inspection and precaution measures contained by the Program for inspection. In conformity with this Order, the national accreditation body ­ RENAR, as provided by standard EN 45011, performs the accreditation of the bodies for inspection and certification. The endorsement of the final accreditation is done by MAPAM, the responsible body for the sector. During 22-25 July, 2003, there was organized the seminar ,,RENAR Training Accreditation Body" by the Research Institute for Organic Farming ,,FIBL", with the following objectives: presentation of the EU standards and rules for organic farming, presentation of standard EN 45011, presentation of the implementation rules for standard EN 45011, and presentation of the inspection and certification procedures. 24 experts from MAPAM, from the Commission for Development of Agriculture, from the future inspection and certification bodies, producers and representatives of RENAR have participated to this seminar. Farm Accountancy Data Network (FADN) There was adopted MAPAM Order No 380/20.06.2003 (for publication at OJ) on the form type used for the farm accountancy study (Regulation EC No 2237/77, 1837/01). On 15 June 2003, the process of data collecting from the agricultural exploitation within FADN network and the transfer of data towards the FADN Office within MAPAM have started. After the collection and processing of data, the FADN Office, in cooperation with the county responsible experts, will verify the accuracy of the data contained by the forms. Up to present time, data from one third of the total number of exploitations have been transmitted.

Common Market Organization

Arable crops In order to support the vegetal production sector, the following normative acts have been adopted: GD No 801/11.07.2003 (OJ No 504/11.07.2003) on approval of the support program for agricultural producers and water users associations for achieving new irrigation equipments, from domestic market, providing state financial support, corresponding to the June-September 2003 period; GD No 817/03.07.2003 (OJ No 506/14.07.2003) on financial support for the domestic seed production, officially certified and intended for planting during the agricultural campaigns from 2003; Order of MAPAM No 432/08.07.2003 (OJ No 517/17.07.2003) on the approval of the categories of integrators which may benefit of the provisions of the Law No 150/2003 on agricultural credit; 122

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EO No 72/22.08.2003 (OJ No 610/28.08.2003) on according direct state support of 2 millions lei per hectare for the agricultural producers with arable land surfaces up to 5 hectares.

The support for the production, based on the in force legislation of 2003, as presented in previous report, continues. There was adopted GD No 864/17.07.2003 (OJ. No 549/30.07.2003) on certain measures regulating the wheat market and temporarily exempt for custom duties for the ray, barley and maize import for the animal feed. These measures were imposed due to the weak production of this year, caused by the unfavourable climate conditions in winter season and by the high temperatures during summer time and the drought, which have negatively affected the wheat and fodder cereal production. In order to meet the internal consumption, there was temporarily suspended until the 1st of July 2004 the wheat export and there was liberalized until the end of this year the import of 1 million tons wheat (out of which 940,000 wheat for bakery and 60 000 tons of seeding wheat) and also the import of fodder cereals: 12 tons of rye, 100,000 tons of barley and 500,000 tons of maize (until 31 October 2003) Sugar During the period June-August 2003, the following legislative acts were adopted: Joint Order MAPAM/MSF/ANPC No 269/453/81/01.04.2003 (OJ No 419/16.07.2003) for the approval of norms on the nature, content, origin, labelling and stamping of certain sugars intended for human consumption, which fully transposes the Council Directive 2001/111, on certain types of sugars intended for human consumption Joint Order MAPAM/MSF/ANPC No 291/386/78/2003 (OJ No 427/17.07.2003) for the approval of norms for analysis methods for sugars testing intended for human consumption, which fully transposed the EC Directive 79/976/1979 on analysis methods for testing certain sugars intended for human consumption

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Fruits and vegetables There was adopted Law on fruit trees growing No 348/2003 (OJ No 541/28.07.2003). The law partially transposes Regulation (EC) No 2200/1996 and Regulation No 2201/1996 and sets-up the legal base for fruits classification according to the quality standards, harmonized with the EU standards. It also establishes rules for fruit trade and for the conformity controls with the standards in the trade chain, and sets-up the rules for organizing and functioning the State Inspection for the Technical Control in the production and capitalization of fruits and vegetables (ISCTPVLF). Law No 312/08.07.2003 (OJ no. 537/25.07.2003) on production and capitalization of field vegetables was adopted. This law is partially harmonized with Regulation (EC) No 2200/96, Regulation (EC) No 2201/96, Regulation (EC) No 1148/2001 and Regulation (CEE) No 466/2001 and defines the legal framework for setting-up and functioning of State Inspection for the Technical Control in the production and capitalization of fruits and vegetables (ISCTPVLF). The law regulates the agricultural policy on vegetables production and trade under the conditions of market organization, adopting the quality standards harmonized with the EU standards, and the conformity checks with the standards. This law also provides penalties regarding the products safety from the point of view of the pesticides residues and contaminants content for field vegetables, melons and cultivated mushrooms. Wine and winery sector Legislative progresses 123

In the reporting period there were adopted the following legal acts: MAPAM Order No 397/2003 (OJ No 513/16.07.2003) on "Designation of the vineyards areas and localities classification in vineyard areas, vineyards and viticulture centres". This legal act allows the Romanian vineyards areas classification into the EU vineyards areas, using simultaneous the ecological, ecoclimatic and cartographic studies of the Romanian vineyards in view to implement Regulation (EC) No 1493/1999, Annex III "Vineyard areas". MAPAM Order No 458/2003 (OJ No 560/05.08.2003) for the approval of the List of designations of origin, geographical indications and traditional mentions allowed to be used in Romania for wines, List of designations of origin for sparkling wines and List of designations of origin for vinars. Accordingly to the provisions of R (EC) No 1493/1999 Ch VI art 54 (4), this order implements the compulsory rule of submitting to the EC the quality wine list produced in delimitated areas; Joint Order MAPAM/MS/ANPC No 498/731/289/2003 (OJ No 581/14.08.2003) for the approval of Norms on the communitarian methods for the neutral alcohol used in wine sector and in spirits drinks, flavoured wines, flavoured drinks from wine and of flavoured cocktails from wine products. The order provides the communitarian methods of analysis for neutral alcohol to the economical operators in the wine sector. This legal act will ensure the quality and the control of the alcohol, in order to allow the free movement of the product on the EU market. MAPAM Order No 537/19.08.2003 (OJ No 604/26.08.2003) for the approval of the documents on the planting and/or grub-up of the vineyard and the vineyard inventory.

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Institutional framework. Implementation of the elaborated legislation By 03.09.2003, follow up to the territorial implementation of the Wine Plantation Register, there were registered 103,832 ha, representing 42% of the total area. In the period 15-24 of July 2003, 66 persons within the county Directions for Agriculture and Rural Development were trained to introduce in the digital database the data from the vineyard Register. Tobacco Legislative progresses In the reporting period there were adopted the following legal acts: Order MAPAM No 502/04.08.2003 (OJ No 568/07.08.2003) approving the contract form for brut tobacco that is closed between the tobacco producers and primary processing operators, for the 2004 crop (EEC Regulation No 2848/1998) Order MAPAM No 503/04.08.2003 (OJ No 568/07.08.2003) on authorising the primary processing units for tobacco. The order stipulates that all processing units should be authorised by MAPAM, in order to be able to close contracts (EEC Regulation No 2848/1998).

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Flowers and ornamental plants In the reporting period there were adopted the following legal acts: Law No 305/08.07.2003 (OJ No 534/24.07.20030) on the ornamental plants and floricultural products market organization in compliance with community market principles (R EC 234/1968);

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MAPAM Order No 520/11.08.2003 (OJ No 613/29.08.2003) on norms for quality standards for live plants and floricultural products (R CEE 315/1968, R EC 316/1968).

Zootechnical sector For the improvement of the livestock quality and for the increase of the animal production, there was adopted the MAPAM Order No 309/23.04.2003 (OJ No 516/17.07.2003) on the approval of the Programs for the improvement of the livestock of bovines, poultry, bees and silkworms in Romania. Beef meat On the carcasses classification system, a first implementation plan has been drawn up. There were analysed the necessary costs and the financing resources for training the classifiers. In June 2003, a meeting with the bovine breeders farmers from the East side of the country, technically supported by a EU expert from Denmark was organised. The European classification beef carcass system was presented theoretically, following that during September ­ November of this year to be organized some similar seminars with the bovine breeders farmers from other regions and with processors Pig meat During April-July 2003, there were performed dissections on a sample of 120 pigs according to representative lot, established in December 2002. The experiments were realised in order to calibrate the equipment to be used for classification. The percentage of the muscle tissue was estimated, by using three Danish equipments and after that, the dissection of the carcasses was performed. Those dissections were realised by technical assistance of an expert from the Danish Meat Institute. The results of the experiments were analysed in August 2003; during September, these results are going to be checked by a specialised Institute. In June 2003 a meeting was organized with the pigs breeders from the East of the country, to whom the European classification system was presented. The organisation of other similar seminars with breeders and processors from other regions are expected in September- November. As regards training for classifiers, two persons were trained so far at Klumbach Institute in Germany; 20 additional persons will be trained starting with September by an expert from the Danish Ministry of Agriculture. Milk and milk products In order to increase the milk production and to improve the parameters of quality, there was adopted GD No 865/17.07.2003 (OJ No 549/30.07.2003) on direct support of the state for the agricultural producers in 2003, for building stables for milk cows, and for buying heifers and zootechnical equipments. By MAPAM Order No 508/05.08.2003 (OJ No 568/07.08.2003) the Control Commission for approving the documents for applying GD No 865/2003 was approved.

The Sanitary Veterinary Sector

Institutional aspects Through the reorganizing of the Ministry of Agriculture, Forests, Waters and Environment (MAPAM), within the Directorate for European Integration, Programs and International Relations, Inspections and Border Veterinary Controls, there was created the Programs and International Relations Office. This office will manage the PHARE Programs and other pre-accession instruments, as well as the inter-governments 125

agreed programs between Romania's Government and governments of some Member States, for assistance in view of Romania's accession to the European Union. At the level of the Counties Sanitary Veterinary Directorates, the European Integration, Animal Identification and Registration Offices were created. These offices represent the departmental structures by through which the National Sanitary Veterinary Agency and the Directorate for European Integration, Programs and International Relations, Inspections and Border Veterinary Controls will manage the transposed communitarian acquis and will monitor its implementation. Public Health In order to respect the requirements of the national legislation harmonized with that of the EU for the production units, the ANSV, by GD No 48/16.01.2003 (OJ No 98/17.02.2003) has established the National Framework Program for Restructuring and Modernizing the Meat and Milk Units, and had forwarded into the territory the criteria that is going to be applied for the programs for each unit. The respect of the stipulated terms is periodically verified by the state sanitary veterinary personnel. Following the evaluation of the units on the basis of the criteria forwarded by the ANSV (the evaluation papers for each profiled unit have been drawn up during July-August), the units have been classified as follows: Units not corresponding to the sanitary veterinary norms and not having drawn up restructuring and modernizing program (will be gradually closed by 2007); Units not corresponding to the sanitary veterinary norms, that have drawn up restructuring and modernizing program (the status of the modernizing activities, on the basis of the approved program, will be periodically verified, and depending on the stipulated terms, there will be decided if the unit will function or will be closed by 2007); Units corresponding to the sanitary veterinary norms in force.

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ANSV monitor the papers that are monthly transmitted by the counties sanitary veterinary directorates and that are synthesizing the controls performed for each profiled unit (meat and milk), containing the disposed measures in order to respect the terms stipulated in their own modernizing and restructuring programs, according to the provisions of the GD No 48/2003. After centralizing the data, the following evaluation resulted: I. Read meat slaughtering units' status (Directive 64/433) Total number of units: 676 out of which: - small capacity - big capacity - respecting the EU norms Total number of units with restructuring program: II. Meat production units' status (Directive 77/99) Total number of units: 692 out of which: - small capacity - big capacity - respecting the EU norms Total number of units with restructuring program: 449 Total number of units without restructuring program: 236 III. Milk and milk products units' status (Directive 92/46) 126 416 276 7 384 Total number of units without restructuring program: 289 433 243 3

Total number of units: 668 out of which:

- small capacity - big capacity

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- respecting the EU norms 14 Total number of units with restructuring program: 298 Total number of units without restructuring program: 356 The sanitary veterinary surveillance of these units is being performed by a number of 151 veterinary doctors from the hygiene and veterinary public health service and by a number of 299 veterinary doctors forms the CSVCA. In each meat or milk unit having a restructuring and modernizing program according to the provision of GD No 48/2003, the sanitary veterinary directorates have employed for a determined/certain period of time sanitary veterinary personnel in order to ensure the sanitary veterinary assistance and control. The general legislative framework for the veterinary activity and the legislative transposition During the report period, there were adopted the following normative acts: Animal health MAPAM Order No 367/30.05.2003 (OJ No 403/10.06.2003) for the approval of the Sanitary veterinary norm on animal and animal origin products certification (Council Dir. 96/93/CEE); MAPAM Order No 369/30.05.2003 (OJ No 402/10.06.2003) on the modification and completion of the MAPAM Order No 643/2002 annex, for the approval of the Sanitary veterinary norm establishing the third countries list which stipulates the live birds and incubation eggs import in Romania (Commission Decision 95/233/EC); MAPAM Order No 428/02.07.2003 (OJ No 517/17.07.2003) for the approval of the Sanitary veterinary norm on the protection measures for the import activities in Romania of some animal species and their products from Albania, Bulgaria, FYROM, The Federal Republic of Yugoslavia, against the blue tongue disease (Commission Decision 2001/706/EC); MAAP Order No 347/20.05.2003 for the approval of the norm on the perishability limit and the maximum waste/loss admitted, on veterinary usage products categories, during transport, storage, selling and usage; MAPAM Order No 497/23.07.2003 (OJ No 31.07.2003) on the replacement of the Annex No 3 of the MAAP Order No 400/2001 on the approval of the instructions for the organization and developing of the sanitary veterinary personnel activity in the units stipulated in the art. 30, align, (3) from the Sanitary veterinary law No 60/1974 republished with modifications and subsequent completions, as well as concerning the approval of the tariffs perceived for the sanitary veterinary state assistance, inspection and control in the slaughtering animal units, including birds, collecting, transformation, processing storage, selling animal origin products, with the modifications and subsequent completions. MAPAM Order No 433/10.07.2003 (OJ No 583/20.06.2003) for the approval of the Sanitary veterinary norm establishing the minimum information necessary for the data base of the animal and animal origin products introduced in Romania (Commission Decision 97/397/EC); MAPAM Order No 456/14.07.2003 (OJ No 561/05.08.2003) for approval of the sanitary veterinary norm on the information to be entered in the computerized file of 127

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consignments of animals or animal products from third countries which are redispatched (Commission Decision 97/152/EC) Animal nutrition MAPAM Order No 412/20.06.2003 (OJ no 583/15.08.2003) for approval of the sanitary veterinary norm concerning the marketing of compound feeding-stuffs (Council Directive No 79/373/EC) MAPAM Order No 365/30.05.2003 for approving the national alert and intervention Program for the control of foot-and-mouth disease (Commission Decision No 93/155/EC); MAPAM Order No 381/09.06.2003 (OJ No 417/13.06.2003) on the modification and completion of MAPAM Order No 640/2002 for approval the sanitary veterinary norm on the Programme for supervision, prophylaxis and fighting against animal disease, for prevention of disease transmission from animal to human and for protection of environment for 2003. MAAP Order No 368/30.05.2003 (OJ No 403/10.06.20003) for approval of sanitary veterinary norm on the official control of products of animal origin (Council Directive No 89/397/EC); MAPAM Order No 455/14.07.2003 (OJ No 561/05.08.2003) for approval of sanitary veterinary norm on laying down interim safeguard measures for imports of products of animal origin for personal consumption (Commission Decision 2002/995/EC). MAPAM Order No 484/24.07.2003 (OJ No 565/06.08.2003) on the modification and completion of MAPAM Order No 344/2002 for approval the sanitary veterinary norm on necessary documents for passing the border for imported live animals in Romania; MAPAM Order No 485/24.07.2003 (OJ No 565/06.08.2003) on the modification and completion of MAAP Order No 343/2002 laying down the procedures for veterinary controls at Community border inspection posts on products from third countries (Commission Decision 93/13/EC). MAAP Order No 370/30.05.2003 (OJ No 426/18.06.2003) for approving the evaluation criteria of some zootechnical units and from the food industry.

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Phytosanitary sector

Plant health ­ harmful organisms The "Program for monitoring and control of Erwinia amylovora bacteria" has been elaborated and transmitted at the territorial level in order to be implemented. The "Program for monitoring the main harmful organisms of potato" especially the Clavibacter michiganensis ssp. Sepedonicus and Ralstonia solanacearum bacteria, has been elaborated and will be transmitted at the territorial level in order to be implemented. Plant health ­ plant protection products The Common Order MAPAM/MSF No 474/738/2003 on establishing the maximum levels for pesticide residues in plants and plant products (under the publication at OJ), 128

harmonized with Directives 2000/48, 2000/58, 2000/81, 2001/39, 2001/48, 2001/57, 2002/23, 2002/42, 2000/57, 2001/35, 2002/5, 2000/82, has been elaborated. The activity of training the specialized staff has also continued for the following domains: phytosanitary border inspection, monitoring the harmful organisms, diagnosis of harmful organisms, analysis of the phytosanitary risk, assurance of quality, technical and scientifically communication, homologation of plant protection products, monitoring the pesticide residues in plants and plant products.

Seeds and propagating material sector

Starting with the year 2003, the preparation for accreditation of the 30 laboratories from the territorial level, of the National Inspection for Seeds Quality (INCS) has started. During the period June ­ July 2003, the national authority for seeds certification - INCS, together with the Central Laboratory for Seeds and Propagating Material Quality ­ LCCSMS, accredited two territorial official laboratories for performing analysis in accordance with the provisions of MAAP Order No 506/2002 and with the ISO 9001 and ISO 17025 standards. Two persons within seeds companies have been accredited for sampling, under official supervision, according to the provisions of MAAP Order No 283/2002. 189 official inspectors have been trained and authorized for performing field inspections of sugar beet, cereals, fodder plants, oil and fibre plants, vegetables, potatoes, fruit propagating material, vineyards, and ornamental plants. In order to ensure the necessary conditions for accreditation of the 30 territorial units of INCS, during 01.01.2003 ­ 30.06.2003 has continued the investment for laboratory equipment and their arrangement, in value of 43.100 billion ROL (EURO 1,150,000).

Food safety

It has been approved OUG No 90/28.08.2003 (OJ No 624/31.08.2003) for the set-up and organisation of the National Agency for Food Safety. This legal act provides the set-up of the Romanian Agency for Food Safety (ARSA) and its attributions: it provides scientifically consultancy and technical and scientifically assistance on the national and communitarian legislation for the food safety area (food and feed), risk analysis for food and animal feed, elaborates legal acts for the food safety sector. ARSA is the contact authority for the European Authority for Food Safety.

SAPARD Programme Implementation

I. Accredited measures implementation In the monthly calls for project proposals, between 01.08.2002 and 12.09.2003, the situation is as follows: Measure 1.1. ."The improvement of processing and marketing of agricultural and fisheries products": 120 financing applications have been submitted with a total eligible value of EURO 118.36 mil. (including the private co-financing) 82 projects contracted with a total value of EURO 84.34 mil.; the contracted value represents 70% of the allocated value for 2000 (EURO 119.7 mil.) 19 projects rejected 19 projects under evaluation stage (submitted in July, August and September 2003 sessions)

Within Measure 1.1, for the 82 concluded contracts, there have been submitted to the Regional Offices the following : 27 procurement dossiers 129

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9 payment claims of a value of EURO 1.98 mil. which are in verifying stage in order to be authorized On 10 September 2003, the first fund request of EURO 744,670.66 mil was transmitted to the National Fund and to the Ministry of Agriculture, Forests, Waters and Environment 1,354 financing application have been submitted with a total value of EURO 1,064 mil 438 projects contracted with a value of Euro 350 million, representing 232% of the allocated value for 2000 (EURO 150.7 million) and 100% of the allocated value for 2000, 2001 and 2002 (EURO 350 million) 818 projects eligible for financing 97 projects rejected 1 contract cancelled at the applicant's request

Measure 2.1. "Development and improvement of rural infrastructure": -

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For Measure 2.1, for the projects contracted up to now, 438 procurement dossiers have been submitted to Public Procurement Unit ­ SAPARD Agency, out of which: For 293 contracts, tenders have been organized or are undergoing for establishing the building company that will carry out the works; For 62 projects works are under the execution stage.

A payment claim of EURO 160,000 has been submitted. On the basis of the payment projection submitted by the beneficiary, it is estimated that, by the end of 2003, for Measure 1.1 there will be payment claims of approximately EURO 11.22 million and, for Measure 2.1 payment claims of approximately EURO 32.35 million. Within the Measure 4.2 for Technical Assistance, 5 financing contracts with a total value of 611,500 EURO have been concluded between the SAPARD Agency and the two beneficiaries, namely the Managing Authority within the Ministry of European Integration and the Ministry of Agriculture, Forests Waters and Environment. II. Preparation for new measures accreditation At present, the priority of Romanian authorities is the preparation of other measures from SAPARD in order to be accredited. For the first period the stages of the national and external procedures have been accomplished in view of accrediting Measures 3.1 Investments in agricultural holdings, 3.4 Development and diversification of economical activities providing multiple activities and alternative incomes and 4.1 Improvement of professional training. On 4 July 2003 the package for measures accreditation was sent to the European Commission. Within the period 9 ­18 July 2003, an audit mission of the European Commission representatives was carried out in order to confer the management of SAPARD funds for the above-mentioned measures. The report of the European Commission is being waited for concerning the accreditation of this new package of measures that have a total amount of allocated funds of EURO 457.5 million. III. Other actions implemented for this stage The fourth meeting of the Monitoring Committee for the SAPARD Programme

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On 2 July 2003, the fourth meeting of the Monitoring Committee for the SAPARD Programme was held in Bucharest. The discussed issues were the following: The analysis and the approval of all the points dealing with the accomplishment of the specific objectives of the Programme; The approval of the supplementation of the funds for Measure 2.1 "Improvement of the Rural Infrastructure", by using the 10% flexibility rule; The approval of the Technical Fiche of Measure 3.4 that was approved by the STAR Committee on 23 July 2003.

Commitment of the SAPARD financial contribution In order to commit the Community contribution corresponding to the financial year 2003, on 31 July 2003, the Annual Financing Agreement was signed between the Romanian Government and the European Commission, and this is to be ratified. External controls of the Agency activities The European Court of Accounts made in June 2003 the first specific audit mission at the central level of the SAPARD Agency, the next mission, concerning the regional level and visits to a number of projects, being scheduled within the period 8 ­ 19 September 2003. Administrative actions carried out to increase the efficiency of the SAPARD Agency By the end of 2003, the activity of the SAPARD Agency's headquarter is going to be transferred to a new location, that has all the necessary equipment, ensured by the MAFWE. The number of the Agency staff has been supplemented to 181, positions for which contests have been organized in accordance with the accredited human resources procedures. In order to increase the stability degree within the Agency's staff, by Law No 240/06.06.2003 (OJ No 415/13.06.2003), a salary increase up to 100% has been approved. On the basis of competency, stability, and confidentiality criteria, an increase of 50% has already been applied by Ministry of MAPAM Order No 160/2003, an increase up to 100% is to be applied in the next period. Promotion actions In order to inform the potential beneficiaries on the accessing procedures and on the conditions of allocated funds through the SAPARD Programme for the new measures to be accredited, on 15 August 2003, SAPARD Agency officially launched the Drafts of Applicant's Guide for Measure 3.1 ­ Investments in agricultural holdings and for Measure 3.4 Development and diversification of economic activities providing for multiple activities and alternative incomes. The main purpose of this action is to identify a portfolio of eligible projects and to ensure the absorption of the funds allocated for 2002 and 2003 under SAPARD Programme, till the end of 2006 and 2007, respectively. The promotion activity of the Programme has continued by participations to conferences, seminars, fairs, and exhibitions and by mass media. IV. Actions that are to be carried out in the following stage During the next period, the activity will focus on the following directions:

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Official launching of Measures 3.1, 3.4 and 4.1 after their accreditation and the start of the official process of projects submission and verification; Publishing the Applicant's Guide and other promotional materials with the support of the National Agency for Agricultural Consultancy and their dissemination in the regions; Setting up and carrying out the necessary actions for the accreditation of the other 5 measures from PNADR; Concluding the Mid-term evaluation of the SAPARD Programme by the end of the year 2003; Developing and intensifying the promotion and communication actions using the funds allocated through Measure 4.2 within the project "Publicity Campaign for the SAPARD Programme"; Institutional and legislative adjustments required by the necessity of reaching the specific objectives of the SAPARD Programme, and the efficiency of the activities.

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Forestry

There was approved GD No 1003/28.08.2003 (OJ No 631/03.09.2003) for the approval of the National Programme for monitoring the forests soil and vegetation for forestry. Institutional framework After the Government reorganization approved by the Parliament Decision No 16/19.06.2003 on modification of the structure and composition of the Government (OJ No 436/19.06.2003), the Ministry of Agriculture, Forests, Waters and Environment has become the public authority for forests, which is organized and function according to the GD No 739/2003 (OJ No 495/ 09.07.2003). Within the ministry, the technical activity with forest specific is organized in two directorates: Directorate of Forest Regulation and Directorate of Forest Regime. The territorial inspectorates for forest and wildlife regime, which control the application of forest regime, are subordinated to the National Environmental Guard, starting with the entering into force of EO No 64/28.06.2003 (OJ No 464/29.06.2003). Forest Research and Management Planning Institute is subordinated to the National Agency for Forests as an institution with juridical personality, according to Law No 633/07.12.2002 (OJ No 896/10.12.2002), and from the scientific point of view, the Academy for Agricultural and Forest Sciences coordinates his activity. As a result of retrocession process according to the Law No 18/1991 and Law No 1/2000, in the present there are approximately 1,8 millions ha of forests in the property of local public authorities (communes, towns and municipalities) and in the private property of associations, churches, schools, other juridical persons and individuals. By now, the public authority for forests has authorised 44 forest structures, which manages a total surface of 413,000 ha forestland owned by the categories of owners, mentioned above.

2.3.8. FISHERIES Legislative progresses

In the reporting period there were adopted the following legal acts: Law No 288/27.06.2003 (OJ No 532/24.07.2003) for Romania accepting the amendments of the Agreement for setting up the General Council for Fisheries in Mediterranean. This legal act totally transposes the 2000/487/EC Council Decision 132

of 17 July 2000 on the acceptance, by the European Community, of the amendment to the Agreement establishing the General Fisheries Commission for the Mediterranean with a view to establishing an autonomous budget for that organisation; MAPAM Order No 246/28.03.2003 (OJ No 230/04.04.2003) on fish prohibition was adopted. This order partially transposes the Council Regulation (EC) No 849/1997 concerning some measures for fisheries resources protection; MAPAM Order No 418/24.06.2003 (OJ No 503/11.07.2003) on producer organisations in fishery and aquaculture sector was published. This act partially transposes the Council Regulation (EC) No 104/2000 on the common organisation of the markets in fishery and aquaculture products; MAPAM Order No 553/26.08.2003 (OJ No 617/30.08.2003) on the compulsory sales notes for fish and other aquatic organisms within the sale's units is going to be published into the Official Journal. This legal act partially transposes the Council Regulation (EEC) No 2847/1993 establishing a control system applicable to the common fisheries policy.

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Institutional framework

Following the Government reorganization, the Ministry of Agriculture, Waters, Forests and Environment (MAPAM) was set-up as the result of the unification of the Ministry of Agriculture, Food and Forests and Ministry of Waters and Environmental Protection. This new status creates the premises of a unitary managing and monitoring system concerning the Romanian fisheries resources. In conformity with GD No 739/2003 on the organisation and functioning of MAPAM, the Fishing and Fishery Unit was set up, under Directorate of Animal Production and Food Industry within the structure of General Directorate of Regulating and Implementing. This fisheries office comprises 6 posts. Now, in Romania, the following institutions are in charge with the fisheries resources management, all of them under the MAPAM coordination: The National Company of Fisheries Resources Management for Black Sea, Danube and inland waters, excepting DDBR and mounting waters; The Administration of Danube Delta Biosphere Reservation for DDBR area; The National Agency of Forests, for mountain waters.

All these structures are subordinated to the Ministry of Agriculture, Forests, Waters and Environment and are coordinated through the Office for Fishery and Aquaculture and Fishery Inspection. The National Company of Fisheries Resources Management (CNAFP) is fully operating, even if only half of staff number of total number established in the Romanian legislation (194) is employed. The directors of 6 of 8 CNAFP branches were appointed. As effect of the MAAP Order No 233/26.03.2003 (OJ No 230/04.04.2003) on the approval of the instructions for organising and performing the leasing of fisheries resources under management of CNAFP, the fishery resources leasing activity started, in view of obtaining the commercial fishing right.

Fishery Inspection

During July-August 2003, the fishery inspection developed its territorial structure. In the following months, supplementary staff will be hired (especially in the centre, north and east of the country) In the West and southeast of the country (especially Tulcea and Constanta counties, which have the bigger importance for the sector) there have been performed over 100 checks in all the distribution chain: fish production, transport and trade. 133

The territorial inspectors started the activity with filling up the database on legal persons performing activities of commercial and recreational fishing, aquaculture, fish and other aquatic animals transport and marketing.

2.3.9. TRANSPORT POLICY

The latest measures and developments on the transport acquis transposition and implementation are as follows:

Road transport

Starting with 13.08.2003, it entered into force OMTCT no. 1139/18.07.2003 (OJ no. 543/29.07.2003) modifying Annexes 1 and 2 of OMLPTL 827/03.06.2003 (OJ no. 419/16.06.2003) approving the additional charges to be paid by transport operators for the use of national roads, applicable to transport activities with vehicles registered in Romania and other states, which exceed total maximum weight, axle-weight and/or maximum gauge authorized on Romanian national roads. This Order rectifies, in the re-unification sense, the charge for issuance of prior advice or special authorization for transport with exceeded weights and/or dimensions, including the route and travel requirements. In order to achieve the commitments referring to strengthening the administrative capacity in the field of road transport, carrying on the legal harmonization and implementation of the Action Plan for fitting the vehicles of Romanian transport operators with speed limitation devices and recording equipment, it was approved GD no. 899/29.07.2003 (OJ no. 588/19.08.2003) on setting up the conditions relating to type approval for control device in road transport, type approval of speed limitation devices, as well as the conditions for fitting, repairing, adjustment and check of control and speed limitation devices in road transport. This legal document partially transposes into Romanian legislation the applicable provisions of Council Regulation (EEC) 3821/85 on recording equipment in road transport, as well as of Council Directive 92/24/EEC relating to speed limitation devices or similar speed limitation systems on-board of certain categories of motor vehicles. In order to apply the provisions of Council Directive 76/914/EEC on minimum qualification for road vehicle drivers, it was adopted OMTCT no. 77/13.08.2003 (OJ no. 591/20.08.2003) completing Part 2 - "Norms for the authorisation of centers for training and qualification improvement of road transport personnel" ­ of the Norms for the authorisation of the activity of training centers for road transport personnel", approved by OMLPTL no. 2026/2002. OMTCT no. 84/13.08.2003 (OJ no. 596/21.08.2003), which modifies and completes the Methodological Norms for authorising and carrying out road transport activities and related activities, approved by OMLPTL no. 1842/2001, transposes into Romanian legislation the provisions of Council Directive 2000/85 amending Council Directive 92/6 on the installation and use of speed limitation devices for certain categories of motor vehicles in the Community. OMLPTL no. 891/11.06.2003 (OJ no. 433/19.06.2003) setting up certain rules concerning the transport of dangerous goods by rail transposes the provisions of Directive 2003/29, adapting to technical progress Council Directive 96/49/EC on the approximation of the laws of the Member States with regard to the transport of dangerous goods by rail, as amended. GD no. 850/17.07.2003 (OJ no. 529/23.07.2003) on the interoperability of the Romanian conventional rail system with the trans-European conventional rail 134

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Railway transport

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system transposes into Romanian legislation the provisions of the Directive 2001/16/EC of the European Parliament and of the Council on the interoperability of the trans-European conventional rail system. GO no. 89/28.08.2003 (OJ no. 623/31.08.2003) on the allocation of railway infrastructure capacity and levying of charges for the use of railway infrastructure and safety certification transposes into Romanian legislation the provisions of the Directive 2001/14/EC of the European Parliament and of the Council on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification OMTCT no. 1041/7.07.2003 (OJ no. 605/26.08.2003) for the approval of the Technical Norms regarding Safety of Sea-going Passenger Ships which are not engaged in international voyages transposes into Romanian legislation the provisions of the Council Directive 98/18/EC on safety rules and standards for passenger ships. For the implementation of the applicable provisions of Council Regulation 2027/97/EEC on air carrier liability in the event of accidents, as amended by Regulation of the European Parliament and of the Council no 889/2002, it was adopted Law 355/10.07.2003 (OJ no. 524/21.07.2003) on liability of air carriers and civil aircraft operators which carry out civil air operations in the national air space.

Maritime transport

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Air transport

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As regards the "Plan for the implementation at local level of the harmonized legislation with the acquis communautaire on 2003", in June-August period, the focus was on fulfilling the following tasks: Maintenance, modernization and construction of the roads, bridges and of the whole infrastructure belonging to the local/county communication networks ­ initiation of an inventory programme for bridges and road sections which can be rehabilitated in order to allow the circulation of heavy freight transport vehicles with total maximum authorized axle-weight exceeding 10 tones. Support for achieving the infrastructure objectives, for which MTCT is responsible ­ identification of the landowners in the areas with national roads, highways and railways, that are under rehabilitating/modernization works; declaration of the public utility cause of national interest for works on communication networks; issuance of the agreements for roads and railways construction. Monitoring the use of the financial resources came from the charge on freight transport vehicles with total maximum authorized axle-weight exceeding 12 tones and for mixed freight transport vehicles with total maximum authorized axle-weight exceeding 12 tones (articulated vehicles and road trains), exclusively for maintenance, modernization, rehabilitation and construction works of the local/county roads. Access facilitation to data on local projects financing by the EU funds ­ information and monitoring activities on the funds use.

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In June-August 2003 period, on the local level, on chapter 9 "Transport", from 35 programmed measures, 27 were fulfilled.

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2.3.10. TAXATION Excise duties

Romania has committed to increase the level of the excise duties according to the timetables for gradual increasing the excise duties provided in the position paper for chapter 10 ­ Taxation, in order to reach the minimum level imposed by the European directives. According to this commitment, the excise duties increase will be made on July 1, every year. Thus, on July 1, 2003, by entering into force of the provisions of the EO 57/25.06.2003 (OJ no. 461/28.06.2003) for amending and completing the no.158/2001 regarding the excise duties regime, as well as other normative acts, level of the excise duties was increased, thus being fulfilled the first phase of commitments assumed by Romania. no. EO the the

According to the EO no. 57/2003, starting with July 1, 2003, the level of the excise duties was increased as follows: EO 158/2001 Product M.U. Excise duty (Euro) Alcohol and distillated Hl alcohol alcoholic beverages pure Cigarettes Cigars and cigarillos Smoking tobacco Diesel oil 1000 cigarettes 1000 pieces Kg Tone 108,4 2,42 + 33% 7 15,4 187 150 4,47 + 32% 8 16 221 EO 57/2003 Excise duty (Euro)

Also, by this Legal Act was eliminated the non-concordance which existed within legislation between the excises regime for the beer produced by the independent small producers from Romania and the similar imported beer. Starting with July 1, 2003, the same reduced excise rates are applied both for imported beer and aboriginal beer from the producers that have a production capacity that is not more than 200 thousands hl/year. Another commitment that Romania assumed through the position paper for chapter no. 10 ­ Taxation is to introduce the tax warehouses system for products subject to excise duties, starting with January 1, 2004. The legislation regarding the warehouses system has been drawn-up and will be included in the Fiscal Cod that is going to enter into force on January 1, 2004. In order to prepare the warehouses system implementation, GO no. 86/26.08.2003 (OJ no. 624/31.08.2003) for regulating certain measures in the financial-fiscal field provides that the persons that intend to become authorized warehouse keepers can submit requests for authorization to the Ministry of Public Finance, starting with October 1, 2003. Also, the Ordinance specifies which are the documents needed in order to obtain the authorization, which are the conditions that have to be fulfilled and which are the obligations of an authorized warehouse keeper.

Improving the Romanian fiscal system

The National Agency of Tax Administration The process of improving the tax administration activity continued through the set up of the National Agency of Tax Administration. According to GO no. 86/26.08.2003 (OJ no. 624/31.08.2003) for regulating certain measures in the financial-fiscal field, the Agency 136

is set up starting with October 1, 2003, under the subordination of the Ministry of Public Finance and becomes operational starting with January 1, 2004. Also, according to the same Ordinance, the Ministry of Public Finance takes over the activity of managing the budgetary revenues from social contributions, starting with January 1, 2004, so that the process of budgetary revenues collection can be made under a unitary manner. The Fiscal Code The Fiscal Code draft is finalized and published on Ministry of Public Finance's web site in order to obtain proposals and observations, the next step being its approval by Law until the end of 2003. The main objective of the Fiscal Code is the harmonization with the European Union tax legislation as well as ensuring the compliance with the international fiscal agreements to which Romania is part. This Code will provide several improvements of the legislative framework in the following fields: tax on profit, income tax, the taxation of micro enterprises incomes, the taxation on income achieved by the non-residents in Romania and the tax on the income of foreign companies representations set up in Romania, value added tax, excise duties, local tax and fees. Starting with the adoption of the Fiscal Code, any amendment or completion of the fiscal regulations will be promoted only through the amendment or completion of the Law for adopting the Fiscal Code. This principle will ensure the legislative stability needed for carrying out any business plan on medium and long term. According to the objectives established within the Plan for Local Implementation of the Legislation Approximated with the Acquis Communautaire in 2003, adopted by the Romanian Government on 16.01.2003, the involvement of the disconcerted structures within the activity of state budget revenue collection was improved, the total revenues obtained during July ­ August 2003, being higher by 39.9% than the revenues obtained during July ­ August 2002. The status of collecting the main revenues is the following:

Billion ROL 2002 July August definitive

1 2 3=1+2

2003 Total July definitive

4

August operative

5

Total

Evolution %

6=4+5

TOTAL REVENUES Of which: Profit tax Wages tax- Total Income tax- Total VAT Excise duties Customs duties Remaining revenues

24,181.6 20,386.7 44,568.3 37,302.5

25,033.7

62,336.2

39.9

4,638.5 23.4 3,452.6 9,773.8 2,675.8 741.6 2,875.8

1,649.3 16.3 3,350.8

6,287.9 39.7 6,803.3

8,370.7 18.8 4,278.2 12,666.5 6,674.6 1,160.7 4,132.9

2,074.1 10,444.8 26.4 4,359.2 45.2 8,637.4

66.1 13.9 27.0 21.6 106.4 42.7 14.2

9,085.4 18,859.2 3,270.9 779.0 2,234.9 5,946.7 1,520.7 5,110.7

10,261.8 22,928.3 5,598.9 12,273.5 1,009.9 1,703.4 2,170.6 5,836.3

The amounts cashed from tax enforcement were, during January ­ June 2003, ROL 13,034.09 billions, compared to ROL 10,636.39 billions, the amount cashed in the 137

same period of 2002, which means a 22.54% increase of the cashing to the state budget through tax enforcement. Following the controls performed by the Financial Guard, the differences to be cashed to the state budget have been higher by 21% during the period July ­ August 2003, compared to the same period from 2002. The controls made by the General directorate for tax revision and control methodology and procedures have led to differences of taxes to be cashed of 3,977.5 billions ROL during the period June ­ August 2003 and as regards the illegal VAT refund during the same period, it was found only one case in value of 0.9 billions ROL.

2.3.11. ECONOMIC AND MONETARY UNION Participation in the multilateral surveillance and economic policies coordination procedures

Pre-accession Economic Programme Romania elaborated and submitted, on August 15 2003, the updated version of the Pre-accession Economic Programme (PEP), document that focuses on pursuing the measures for fulfilling the economic criteria for EU accession, as well as on the creation of premises for Romania's participation in the Economic and Monetary Union, as a country with derogation from the Euro single currency. The Pre-accession Economic Programme, a key document for Romania's medium term economic policy, has been drawn up based on the provisions of the Governing Program for 2001 ­ 2004, of the Revised Partnership for Accession and in line with the comments on previous editions and EU requirements, with the participation of ministries and institutions responsible for the designing and implementation of various components of the economic policy, under the co-ordination of the National Commission for Prognosis (CNP). The medium-term overview has been developed based on macroeconomic forecasts elaborated by the National Commission for Prognosis. Upon the evaluation of the 2002 edition of PEP, the European Commission and Member States provided several recommendations specific to Romania, concerning essentially the more detailed presentation of certain issues, such as: business environment issues, the influence of inflation reduction on fiscal revenues, the schedule for enforcing the proposed reform measures, the links between budgetary projections and structural reform implementation, the more detailed description of the measures and achievements regarding the improvement of market enter/exit mechanisms, the development of markets specific to the agricultural sector. All these issues have been addressed in the 2003 edition of the Pre-accession Economic Programme. In order to prepare the 2003 edition of the Pre-accession Economic Programme, Romania has benefited, as in previous editions, of substantial support from European Commission, including a Phare assistance program, located at the National Commission for Prognosis and intended for: improving the monitoring of reform programs implementation, improving analytical capacity, including the reflection in macroeconomic forecasts of the effects of reform measures. At the same time, the excellent collaboration with DG ECFIN specialists in harmonising opinions on the development scenarios must be underlined.

Fiscal policy

In order to line up with the European and international accounting principles, GO No. 81/28.08.2003 (OJ No. 624/31.08.2003) for re-evaluating and depreciation of the fixed assets under the public institutions' patrimony has been adopted. 138

In drawing up this regulation, the principle of accounting on commitments and the implementing of the provisions of EC Regulation 2909/2000/29.12.2000 on the accounting management of the European Communities' non-financial fixed assets related to the registering time on accounting of economic-financial operations, based on accrual, were taken into consideration. In view of fulfilling the commitment assumed by the position paper on Chapter 11 and of fully complying with the acquis concerning the prohibition of direct financing of the public sector, the Ministry of Public Finance is currently working on the draft law for amending the Law on Public Debt No. 81/1999.

Monetary and exchange rate policy

In order to harmonise Romanian legislation with the acquis in this field, by amending Law No. 101/1998 on the Statute of the National Bank of Romania, in July 2003 technical consultations took place between the BNR working group and a team of experts from the Banque de France. In September 2003, in compliance with the timetable for amending Law No. 101/1998, the draft approved by the BNR Board shall be examined and finalized by the joint working group MFP-BNR, and submitted for review to the European Commission and the European Central Bank.

2.3.12. STATISTICS Statistical infrastructure

The GO no 67/2003 (OJ no 618/30.08.2003) was adopted in order to modify and complete the GO no 9/1992 concerning the official statistics. The new elements introduced: Empowering of the National Institute of Statistics - by prior notification of the Ministry of European Integration and Ministry of Public Finance - to directly employ and manage non-repayable external funds, other than those provided by financing memoranda signed at governmental level as well as to carry out the afferent works, in accordance with the donor's requests; The compulsory including in the annual Program of the statistical surveys of all the statistical surveys stipulated in European Union regulations, directives and decisions, in accordance with the programmes assumed by the Romanian part; Providing of depersonalised individual data, for certain works, to be used only in statistical purposes, at the request of international organisations and Romanian researchers in accordance with the provisions of the Title V within the Council Regulation (EC) No. 322/97 concerning the Community statistics.

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By the adoption of GD no 765/03.07.2003 (OJ no 492/08.07.2003) concerning the organizing and functioning of the National Institute of Statistics there were introduced modifications in the structure of INS. According to the new legal act the maximum number of posts is of 488 for the central unit of INS, excluding the dignitaries ­ and the number of posts for the regional and county directorates of INS is of 1339. In the new structure of INS, the president is assisted by only one vice-president who is directly in charge with the activities of EU accession.

Regional statistics

For the survey on Road transport of goods (National Phare Programme 2000, regional statistics component), the collected primary data are under processing.

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For the pilot survey on Living conditions (National Phare Programme 2000, regional statistics component), the data entry activity was finalised, while data logical check and validation were continued. Starting with July 2003, the territorial directorates of statistics are also issuing a monthly statistical bulletin, with a unitary format and content recommended by INS. In order to fulfil the commitments assumed by INS, included in the Local Plan of implementing the legislation harmonised with the acquis communautaire, in the framework of the objective of compliance of the Romanian Statistical System with the European Statistical System, the territorial statistical directorates participated in an active manner in data collecting and the first validation of the electronic data, organised for developing the statistical surveys established through the Strategy of developing the Romanian statistics. The pilot project Local territorial units organised by Eurostat was finalised in August 2003. Its overall objective was to gain the knowledge of the national system used in view to observe the administrative changes, by supplying information (in CONC/MODA format) on the territorial structure of the country and on the changes of administrative breakdown over time, after the 1992 Population and Housing Census till 2002, particularly at municipality and regional level (NUTS 2, NUTS 3 and NUTS 5 level). Among the measures included in the Plan, special attention was given to those related to: the "Achievement of the General Agricultural Census"; the "Harmonization of the social statistics by designing and achieving of the complementary survey on life-long learning"; "Harmonization of price statistics"; "Harmonization of the business statistics"; "Increasing the staff capacity by participating to the training courses organized within the National Centre for Training in Statistics" and "Harmonization of foreign trade statistics". In this way, all the 99 measures - due to be implemented by the end of August - were achieved, other 10 measures being reported as finalized in advance. The National Institute of Statistics participated, by supplying statistical information, to the elaboration of the new version of the National Plan for Development (PND).

Macroeconomic statistics

The pilot project Price statistics ­ Purchasing Power Parity within the European Comparison Programme, organised by Eurostat, was finalised in August 2003. In this context, the 2003 prices related to the modules "Machinery and equipment" and "Construction objectives" were transmitted to Eurostat. Likewise, the survey on Personnel expenditures and average number of employees in certain occupations ­ 2002 was launched in June ­ July 2003, at county level, in the fields of public administration, health and education sectors, in view to obtain the necessary data for the comparison of final government consumption. The data obtained from the survey aiming at price collection for the group "Foodstuff, beverages and tobacco" were supplied to ISTAT (the Statistical Office of Italy), the coordinator of Southern comparison group. Aiming at improving of the Methodology for national accounts compilation and at the compliance with ESA 95 methodology INS experts in the field of national accountancy participated in a series of pilot projects presented below and finalised in August 2003 (with the support of "Phare Multi-country Programme 2000"): Constant prices The project objective was to analyse the current methodology used for the compilation of national accounts at constant prices and to identify the fields needing improvements in view to comply with the draft Commission Decision proposed by Eurostat. The analysis pointed out the need to improve the price indices system used for deflating the various components of Gross Domestic Product. 140

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Gross capital formation The finalisation of this pilot project materialised in the improvement of the gross capital formation estimates at current prices, in the general context of improving the quality of national accounts data. Several issues that should be taken into account for widening the coverage of gross capital formation, by including certain estimates on investments in intangible assets and valuables, were identified.

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Employment data reconciliation This pilot project organised by Eurostat was finalised in August 2003 with the building up of the employment statistical indicators (employed population, hours effectively worked, employees compensation) for national accounts, in accordance with the European System of Accounts (ESA 95) definitions and coverage, using various data sources. According to the works carried out under this pilot project, annual (1995 ­ 2001) and quarterly (1996 ­ 2001) data series related to the three tables of ESA 95 in the field of employment were completed and sent to Eurostat. Financial accounts and governmental statistics The pilot project was finalised in August 2003 and envisaged the compliance of the methodology used for the compilation of financial accounts and governmental statistics indicators with the recommendations of ESA 95, of the Debt and Deficit Handbook and of Eurostat.

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Non-financial national accounts: Dwellings (Real estate services) This pilot project organised by Eurostat, finalised in August 2003, envisaged the obtaining of certain new data on the real estate services in Romania, by setting up a new methodology for computing the imputed rent for the owner occupied dwellings, based on the "cost-beneficiary" method and by applying the stratified method currently used by INS, under the overall objective of compliance with the European System of Accounts (ESA 95) and of improving the national accounts, including the Gross Domestic Product and of the plausibility, comparability and exhaustiveness. Likewise, the evaluation at current prices of the dwellings stock for the 1998 ­ 2002 period, the valuation of building ground based on the dwelling cost price and the gathering of information on dwelling related taxes were envisaged.

Business statistics

In the field of PRODCOM statistics ­ industrial physical production ­ according to the EC Regulation no. 3924/1991, the results of the 2000 and 2001 annual surveys were sent to Eurostat, in GESMES format, in August 2003, as consequence of the pilot project launched by Eurostat. The European rules imposed by PRODCOM were implemented at the level of monthly business surveys beginning with January 1st, 2003. In view to reach the objective of computing and disseminate the short-term indicators for industry and construction, beginning with 2004, the weighting elements needed for the compilation of indices with the new basis (the reference year 2000), according to the recommendations included in Council Regulation no. 1165/98 were established. The computation of indices with the new basis, for the months of 2000 was carried out as well. The pilot project envisaging the transmission to Eurostat of data related to "Shortterm business statistics (GESMES system)" was finalised also in August 2003 by the creation, installation, testing and using of an own software meant to produce GESMES format messages, under the STADIUM system. At the same time, the project also envisaged the collection of metadata and the training of the necessary staff related to GESMES messages production (software implementation). 141

Transport, services, tourism and foreign trade statistics

INS collected on electronic support the data on airports and harbours traffic for the first and second quarters and the necessary software for data processing was built up. As for the INTRASTAT statistical system, the data collected for the Intrastat pilot survey were processed and sent to Eurostat in the required format. Likewise, a report on the results of the Intrastat pilot survey was sent to Eurostat. Beginning with April 2003, the statistical value data on foreign trade are calculated and disseminated in Euro and USD.

Agriculture, forestry and fishery statistics

The preliminary results of General Agricultural Census were officially published and disseminated in June 2003.

Environment statistics

The pilot project on Waste statistics, initiated by Eurostat, was finalised in August 2003, whose results were: the identification of most important problems related to the assessment of data quality, taking into account the application of the two classifications "European Waste Catalogue (EWC)" and "Waste Statistical Nomenclature"; the development and the proposal of strategies and procedures aiming at the quality improvement of data on hazardous and non-hazardous waste; drawing up a pilot study fully compliant with the requirements of the European List of Waste (LoW) and of the European Regulation on Waste Statistics (WSR) on the quality improvement of data supplied by the units owing installations and equipment for hazardous waste treatment and removal, both taking into account specific technical elements and issues related to reported data interpretation, checking and analysis.

2.3.13. SOCIAL POLICY AND EMPLOYMENT Labour law

The GD no 578/2003 (OJ no 385/4.06.2003) for the completion and modification the GD no 247/2003 on the establishment and completing the register for workers situation was adopted. Through this normative act, the diplomatic missions, the foreigner consular offices that have headquarters in Romania and the representations in Romania of foreigner legal persons are not anymore obliged to create a register for workers situation, for the periods in which the individual labour contracts concluded with Romanian citizens are registered in the Labour Office. Starting with July 2003, the Ministry of Labour, Social Solidarity and Family (MMSSF) started a centralization process of all difficulties concerning the implementation of Labour Code, based on memoirs addressed to the public authorities subordinated to the ministry, at central and local level. This material, elaborated in order to identify the main opinions of employers or their representatives concerning the problems in the implementation of Labour Code, allows to the MMSSF to have a general view on the modalities in which the legal provisions can affect the employers activity, depending on nature of capital ­ private, mixed or state, number of employees or branch of activity. For this purpose, there were organized many meetings with representatives of organizations that aren't established as employers organisation according the Employers Law no. 356/2001, but represent a part of employers ­ as, for instance, Foreigner Investors Council and Romanian Club of Press. The Common Order of the minister of transport, constructions and tourism and of minister of labour, social solidarity and family no 43/393/2003 (OJ no 632/3.09.2003) 142

regarding the limitation of work time for the mobile staff civil aviation and establishment of their rights transposing the provisions of Directive 2000/79/EC was approved. The normative act will enter into force in 60 days from its publication. According to GD no 737/2003 (OJ no 483/7.07.2003) on the organization and functioning the Ministry of Labour, Social Solidarity and Family and GD no 745/2003 (OJ no 496/9.07.2003) on the organization and functioning the National Control Authority, the Labour Inspection remained subordinated to the Ministry of Labour, Social Solidarity and Family, but also in the direct coordination of the National Authority for Control. During July 2003, the activity of the Labour Inspection in the field of working relations was materialized in organization of 6812 inspection controls in 6682 enterprises, and 963 penalties applied. In the period 18 - 24 August 2003, the National Campaign for identifying cases of work without a legal contract, as well as on the observance of legal provisions regarding occupational safety and health in the field of constructions has been implemented. During the 7 days of the campaign, 3.333 employers having a number of 186324 employees have been inspected. A number of 586 employers using personnel without legal working contracts were identified, that is 17.6% out of the total number of employers where inspections were conducted. In these enterprises, there were a number of 1947 employees working without legal contracts, that is 1.04% out of the total number of employees working in the enterprises under inspection. 5469 violations of the provisions of labour law, and of the Law no. 53/2003 ­ Labour Code in particular were recorded. For the purpose of remedying the deficiencies identified in the field of working relations, 578 penalties were applied and 5663 compulsory measures, whose implementation in the specified time frame will be monitored by the labour inspectors, were imposed. The effectiveness of the inspections conducted by the labour inspectors for the purpose of identification of the cases of employers using employees without legal working contracts in constructions is reflected in the number of individual working contracts recorded at the level of Local Labour Inspectorates during the time of the campaign, that is: 44263 individual working contracts, out of which 6301 are in the field of constructions; that relieves a substantial increse as compared with last month.

Equal treatment between men and women

According the National Plan for equal opportunities, in the period July ­ August 2003, in the field of equal treatment between women and men another 6 orders of ministers were approved in order to conform the equal treatment principle, which are implemented in the institutions current activity as well as in the institutions being under their sub-ordination, coordination and authority. In the reference period, the text of normative act concerning the maternity protection at the working places was finalized according the provisions of Directive 92/85/EEC on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding. The draft of normative act follows to be referred to the Government for adoption. For the implementation of the Order of the minister of labour, social solidarity and family no 320/2002, the second stage of Training program by organizing two seminars at local level, in Botosani and Gorj was continued. Follow up the Government reorganization, the Ministry of Labour, Social Solidarity and Family will coordinate the National Agency for Family Protection. This agency will 143

implement the new legislation regarding domestic violence combating and preventing, respectively the provisions of the Law no 217/2003 (OJ no 367/29.05.2003) on the combating and preventing the violence within the family. The twinning covenant for the project "Establishment of the National Agency for Equal Opportunities for Women and Men" has been finalised by the project leaders and submitted to European Commission for approval. Within the activities of Programme relating to the Community Framework Strategy on Gender Equality, it was drafted a project having as objectives the promotion and dissemination of the European values and good practices underlying gender equality, to supplement the current Romanian efforts to tackle gender inequalities, the organization of a Conference and Seminar and the edition of the leaflet: Romania and the European Strategy on Gender Equality. The Grant Agreement for the project "Romanian contribution to the implementation of European Union Strategy on Gender Equality" was signed on 7 July 2003 at Bucharest, and it follows to be signed by the representative of the European Commission. In the first semester of 2003, the territorial labour inspectorates received 187 intimations on the equal opportunities conformations, related to: illegal dissolutions of the work contracts, non-payment of the salaries or indemnities to the women during the temporary work incapacity, pregnancy, maternity leave, following that 266 inspections were carried out. For all the illegalities discovered the labour inspectors disposed compulsory measures.

Health and safety at work

For the development of legislative framework on applying Law no. 90/1996 on labour protection, the following acts were elaborated and published: The Specific Norms for Safety at Work on forested exploitation and transportation, approved by the Order of the minister of labour and social solidarity no. 173/2003 (OJ no 387/05.06.2003); The Specific Norms for Safety at Work on ready-mades, fur and leather industry, approved by the Order of the minister of labour and social solidarity no. 174/2003 (OJ no 387/05.06.2003); The Specific Norms for Safety at Work on electric city transport (tramway, trolleybus) and related facilities, operation and maintenance, approved by the Order of the minister of labour and social solidarity no. 182/2003 (OJ no 387/05.06.2003).

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In the field of health and safety at work, it was elaborated for the year 2002, a national Report, on health related to occupational environment, within sub-programme no. 1.4 under the Community public health programme, in accordance with the Order of the Minister of Health, no. 598/2003 (OJ no 557/04.08.2003) regarding the national synthesis in the framework of the 1.4 sub-programme for the evaluation of the health status and the risk factors. During July 2003, the activity of the Labour Inspection in the field of occupational safety and health was materialized in the execution of 4,637 inspection controls on labour protection in 4,591 enterprises and 441 penalties applied. In the period 18 - 24 August 2003, within the National Campaign on the identification of cases of illegal work without a legal working contract as well as on the observance of provisions regarding the occupational safety and health in the field of constructions, 3,333 employers having a number of 186.324 employees have been inspected. Labour inspectors identified a number of 13,032 deficiencies caused by the violations of occupational safety and health provisions. 144

For all these deficiencies identified by labour inspectors, 1,465 penalties were applied and 10,819 compulsory measures were imposed aiming to make employers to observe the legislation in force. In enterprises where an imminent danger to the health or safety of workers has been identified, labour inspectors made orders to stop any activity in the whole enterprise (3 cases), close the construction site (24 cases), stop only certain activities (37 cases) or to stop operation of certain equipments (276 cases). The control of the implementation, at the local level, of the legislation harmonized with the community acquis has been achieved through the development of the following activities, during the reporting period: 10,426 inspections specialized on the awareness and observance of the harmonized legislation; 175 activities (meetings, seminars, conferences, round table discussions etc.) focusing on awareness raising of employers, with the participation of social partners, NGOs and mass-media; 12 training courses in the field of occupational safety and health, where a number of 108 persons responsible for labour protection at employers' level participated.

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Social dialogue

During July - August 2003, new progresses have been achieved in the field of the social dialogue and industrial relations illustrated by the following evolutions: Improvement of the institutional framework in the field of the social dialogue Through GD no 737/2003 (OJ no 483/7.07.2003), the Ministry of Labour, Social Solidarity and Family were received new attributions in the field of the social dialogue and industrial relations. The social partnership has become an important segment in the attributions of the Ministry of Labour, Social Solidarity and Family which is competent in: Coordinating the Government activity in the field of the social partnership both as concerns the relation between the trade union and the employers' organizations and the relations of the above mentioned with the other organizations of the civil society; Working out policies, programs and draft acts in the field of the social partnership and monitoring their implementation; Working out the methodology and providing methodological assistance in the organization and development of the social partnership; Preparing, working out, negotiating and monitoring the conclusion of agreements with the social partners; Issuing opinions and controlling the conformity representative ness with the legislation in force; of the social partners'

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Establishing and administrating the data base and the registration documents of the trade union and employers' organizations and other organizations of the civil society; Elaborating criteria and structures of industrial conflicts mediation and regulating the training of the mediators in this field; Initiating, coordinating and monitoring the achievement of the programs for the development of the social partnership in cooperation with the central and local public administration, employers and trade union organizations and other structures 145

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of the organized civil society as well as with the international bodies and institutions in this field; Providing permanent consultation to the social partners on the legislative initiatives of its field of activity; Coordinating the activity of social dialogue developed at the level of the central and local public administration from the methodological point of view; Analyzing and issuing opinions on legislative acts drafted by ministries or other central bodies in the field of the social partnership; Ensuring the connection with the Parliament, the Economic and Social Council, trade unions, employers' organizations and other partners of the civil society on specific matters.

The new managerial structure of the Ministry of Labour, Social Solidarity and Family includes the new position of Minister Delegate with the Relations with Social Partners who controls the Labour Inspectorate, the Directorate for Social Dialogue and the Directorate for the Relations with the Parliament and Methodology. The Minister Delegate for the Relations Social Partners coordinates the sections for the social dialogue established at the level of the central public administration and at territorial level from the methodological point of view. In this line, the Minister Delegate with the Relations with Social Partners may establish standards with recommendation character. The Minister Delegate with the Relations with the Social Partners is a member of the Government. Recognition of the structures of the employers' s organizations In compliance with the Law no 73/2002 on the organization and functioning of the agricultural and food markets in Romania, the Ministry of Agriculture, Forestry, Waters and Environment recognizes the professional and/or inter-professional organizations representative at the level of products or groups of products. The professional and/or inter-professional organizations structured on products or groups of products conclude agreements with the Ministry of Agriculture, Forestry, Waters and Environment for the proper implementation of the rules regulating the agricultural and food market. In accordance with the Order no 376/2003 (OJ no 402/10.06.2003) the National Interprofessional Organization of Romania - "Laptele" (Milk) - was acknowledged to be the main representative of milk and milk-based products producers, transformers and dealers. Other well-known inter-professional organizations acknowledged by the Ministry of Agriculture, Food and Forestry are: The National Inter-professional Organization of Romania ­ "Zaharul" (Sugar) - as the main representative of sugar producers, transformers and dealers; The Inter-professional Organization ­ "Orz ­ Bere" (Barley - Beer) - as the main representative of barley and beer producers, transformers and dealers; The Inter-professional Organization of Romania ­ "Carne de porc" (Pork) - the main representative of pork meat producers, transformers and dealers; The Inter-professional Organization of Romania ­ Viniviticola"- as the main representative of wine producers, transformers and dealers

Establishment of new social dialogue structures The Order no 132/2003 (OJ no 452/25.06.2003) adopted the Rules of Procedure of the Consultative Committee for the Development of Small and Medium-sized Enterprises.

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The Consultative Committee for the Development of Small and Medium-sized Enterprises is a consultative body, is not a legal entity and represents a forum of debates on the small and medium-sized enterprises sector. As part of this forum, the special bodies of the central public administration, the representatives of chambers of commerce and industry, of employers' organizations and nongovernmental organizations representing the small and medium-sized enterprises as well as the entrepreneurs may express their points of view, make known their suggestions and show their interest, agreement and assistance in the effective accomplishment of the projects, programs and development strategies in the small and medium-sized enterprises sector, at local, regional and national level. The Committee contributes to a greater transparency in the decisions made in the public administration sector, providing information, consultation and active involvement of the representatives of the employers' organizations of the small and medium-sized enterprises, nongovernmental organizations and entrepreneurs in the administrative decision-making process and in the working-out of draft acts concerning to the small and medium-sized enterprises. The committee is composed of representatives of various ministries, trade union and employers' organizations and other institutions. The Committee debates and makes recommendations on: The substantiation of the strategies intended for the development of the small and medium-sized enterprises sector; The definition and implementation of the policies of development and increase of the competitiveness of the small and medium-sized enterprises sector in accordance with the requirements of the single market and the needs of a better quality of the products as requested by the UE standards; The initiation and implementation of programs meant the encourage the setting up and development of small and medium-sized enterprises at local, regional and local level; The improvement of the legal and administrative framework having an impact on the setting up and development of small and medium-sized enterprises.

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With the view to preparing the Committee's debates on specific topics, specialized sections may be created with the purpose to thoroughly examine specific issues identified by the Committee's members. The Committee makes recommendations having a consultative role, which are transmitted to the authorities or competent public institutions in order to be analysed and put into practice. The recommendations are also addressed to the nongovernmental organizations running projects and programs intended for the development of the small and medium-sized enterprises sector. PHARE Projects in the field of the social dialogue On 10 July 2003, the PHARE Administration Committee of the European Commission held a meeting in Brussels. During the reunion there was adopted the Financial Proposal for the National PHARE 2003 Program. As far as the field of the social dialogue is concerned, two projects of twinning were adopted with that occasion whose beneficiaries were the Ministry of Labour, Social Solidarity and Family and the Economic and Social Council, both of this institutions aspiring to contribute to the strengthening of the bipartite social dialogue in Romania. The above projects will be run for a period of three years, until 2006. Social dialogue at territorial level In order to promote the social dialogue at territorial level, the Ministry of Labour, Social Solidarity and Family established specific responsibilities at the level of the territorial structure in 42 counties. In this respect, the representatives of dialogue, family, and 147

social solidarity directorates are compelled to participate in the Commissions for Social Dialogue at prefectures level, to monitor the way the activity is performed and inform about it the executive structures within the Ministry. Moreover, the territorial directorates for dialogue, family and social solidarity are responsible for the following activities: To assess, on monthly basis, the relation between the trade unions / employers' organisations on the one hand and the executives of the local administration on the other as well as to inform the ministry executives about it; To develop the practice of information and consultation of the social partners both through the Commissions for Social Dialogue and directly, through cooperation; To organize, in concert with the local trade unions and employers' organisations, seminars, workshops, round tables meant to promote the legislation in the social field; To promote the social dialogue at territorial level by organizing seminars, publishing information materials in cooperation with the executives of the economic operators as well as with other representatives of the public administration.

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Improvement of the role of the Economic and Social Council in European integration process The involvement of the Economic and Social Council in the European integration process was pointed out by the participation of this institution in the activities of different structures with responsibilities in this area. Thus, The Economic and Social Council have participated in the debates on the Economic Pre-accession Program, in the activities of the National Committee of Coordination of the PHARE Programs ­ the Economic and Social Cohesion Component, in the activities of the Committee for the Monitoring of SAPARD Program and the Interdepartmental Committee for European Integration.

Public health

In the field of tobacco product regulations, the Law no. 275/2003 (OJ no 451/25.06.2003) on approval of GO no 13/2003 amending the Law no 349/2002 for preventing and combating the effects of the tobacco products use was adopted in June 2003. In July 2003, the Government approved the draft Law for manufacturing, storing, transportation and commercialisation of the tobacco products (elaborated by the Ministry of Health and Ministry of Agriculture, Forests, Water and Environment). The draft law has been submitted to the Parliament. It was adopted the Order no 753/699/2003 (OJ no 576/12.08.2003) of the National House for Health Insurance president regarding the modification and completion of the order of minister of health and family and of the National House for Health Insurance president no 22/12/2002 for the approval of the Methodological Norms for the application of the Frame-contract with respect to the granting of hospital health care, home health care, emergency health care services and sanitary transport, as well as health recovery services, within the health insurance system. The Romanian Government approved the Decision no 776/2003 (OJ no 533/24.07.2003 regarding the payment of the amounts afferent to the endowment with apparatus of high performance, bought with extern credits directly contracted or with the state guarantee. For the introduction of a new reimbursement system regarding the medicines granted in compensated regime, the Order of the minister of health no 679/2003 (OJ no 556/01.08.2003) regarding the classification for the release of the medical products for human use was adopted. 148

Employment

Following the demarches initiated by the Ministry of Labour, Social Solidarity and Family, the Law no 308/2003 (OJ no 520/18.07.2003) approved the affiliation of National Agency for Employment (NAE) to WAPES; according this law the membership fee for 2003 was paid. Within the technical assistance project "Implementation and monitoring of National Action Plan for Employment (NAPE)", the Ministry of Labour, Social Solidarity and Family benefits from the support of the Federal Ministry of Economics and Labour of Germany in the implementation and monitoring of NAPE process, a new seminar "Statistical EU indicators used for monitoring the implementation of guidelines; the New European Strategy for Employment 2003 ­2005" was organized. At this seminar, members of the coordination group of NAPE and a German expert in this field from the Labour Federal Office were participated. The necessary data methodology in view to calculate the indicators used by European Union for the monitoring the guidelines was finalized. In order to prepare the elaboration process of new NAPE (2004 ­ 2005), the new European Strategy for Employment was presented to the coordination group. In June and July, a number of 93,381 persons (44,479 persons in June and 48,902 persons in July) were employed by the implementation of this Program: 53,704 persons by the labour exchange program; 2,974 persons by vocational training courses; 25,888 persons by providing allowances for the unemployed who take-up employment before the end of period of entitlement to unemployment benefit; 4,234 persons by hiring over 45 years old unemployed or who are single providers of family income; 1,039 persons by stimulating the labour force mobility, out of which 810 persons by taking up employment in a locality situated at more than 50 km away from their place of residence, and 229 persons by taking-up employment in another locality after changing their place of residence; 2,137 persons by hiring graduates of educational institutions; 100 persons by stimulating the employers to hire disabled persons; 1,106 persons by granting credits to SME's for creating new jobs; 468 persons by providing counselling and assistance services for starting-up an independent activity or a business; 1,329 persons by temporary employment in public works in community services, out of which 1,195 persons in services of repairing and maintaining the infrastructure and 134 persons in local community social services; 271 persons by concluding solidarity contracts, according to the Law no 116/2002; 131 persons by other active measures implemented at county level.

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In 2003, the National Agency for Employment also worked out and implemented two special programs: Program for employment in 200 localities with a high rate of unemployment (150 localities from areas declared disadvantaged according to EO no 24/1998 and 50 localities from industrial and mono-industrial areas), by which 14,784 persons were employed in June and July; Program for Valea Jiului, by which, 271 persons were employed in June and July.

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Up to July 2003, 49,914 persons were employed by implementation of the Program of Social Accompaniment (the Program "SA") designed for the localities affected by layoffs. In July 2003, the unemployment rate at national level was of 6.9%, by 0.2% lower than the one registered in June 2003 that reached 7.1%, both unemployment rates displaying the lowest June and July level within the last years. The women's unemployment rate was of 6.2% in July and the men's unemployment rate was of 7.6%, both rates showing a downward tendency, with 0.1% and 0.2% respectively, in comparison with the rates registered in June, meaning 6.3% and 7.8% respectively. At the end of July 2003, the total number of unemployed registered with Bucharest and county employment agencies was of 650,386 persons, out of which 280,646 women (which stands for 43.1%), figures showing a downward tendency in comparison with figures recorded in June, when total number of unemployed represented 663,606 persons out of which 284,080 were women (which stands for 42.8%). Out of total number of unemployed registered in July, 270,904 unemployed were receiving indemnity and 379,482 unemployed were not receiving indemnity, compared to June when their number represented 280,783 and respectively 382,823 persons. The unemployed not receiving indemnity still have an important weight in total number of unemployed registered with the employment agencies (58.3% in July and 57.7% in June), meaning that the enforcement of Law no 76/2002 still has positive effects, especially through the active measures for supporting the unemployed, either receiving or not receiving indemnity. The execution of the Unemployment Insurance Budget as of 31.07.2003 is as follows: Income: Expenditures: Surplus: 9,874.11 bill. ROL 8,219.33 bill. ROL 1,654.78 bill. ROL

As regards the cashing-in of the current contributions, as compared to the amount provided for the term program, of 8,580.04 billion ROL, 8,159.90 billion ROL were cashed-in (rate of accomplishment 95.1%). Measures of forced execution were taken against 9,892 legal persons with debts and 5,370 natural persons with debts.

European Social Fund

Each institution having responsibilities in structural funs field elaborated a draft action plan and adequate measures needed to implement the provisions of GD No. 1555/2002 as well as for development of administrative capacity. Conform to GD no 737/2003 (OJ no 483/7.07.2003) on organisation and operation of Ministry of Labour, Social Solidarity and Family, has been established the Managing Authority for Sectoral Operational Programme for Social Policy and Employment. Also, within the PHARE Programming 2002 exercise, the twinning project RO02/IB/SPP/02 "To support the Ministry of Labour and Social Solidarity to strengthen the administrative capacity for implementation of European Social Fund" has been approved, which has that community partner the Ministry of Economy and Labour from Federal Republic of Germany. The general objective of the project is to develop institutional capacity of the Ministry of Labour and Social Solidarity and National Agency for Employment in order to participate at the European Union financial assistance projects in social and employment policies field, in particular for projects to be financed through the European Social Fund. Through the implementation of the project, that will be launched starting with October 2003, specialized training will be assured for the staff of the Ministry of Labour, Social 150

Solidarity and Family as well as for the staff of the National Agency for Employment and from its territorial structures.

Social security, elderly and social exclusion

Social security In the period July ­ August 2003 the following normative acts were adopted: GD no 614/2003 (OJ no 392/6.06.2003) on indexation pensions from public system of pensions, state military pensions and indexation some population incomes, starting with June 2003 stipulates that beginning with June 2003 pensioners from public pensions system whom pensions quotes, owned or being in payment, are smaller or equal with 11,725,005 lei, represented equivalent in lei, at the date of 31 March 2003, of the medium 5 points annual, benefited from pension indexation. Pension point value is actualised through indexation pension point with 2,7%, the actualised value is thus of 2,408,317% lei. The monthly financial budgetary effort for afferent indexation to the 2nd quarter of 2003 year is about 265 milliard lei. GD no 1006/2003 (OJ no 618/30.08.2003) on indexation pensions from public system of pensions, state military pensions and indexation some population incomes, starting with September 2003 stipulates that beginning with September 2003 pensioners from public system whom pensions quotes, owned or being in payment, are smaller or equal with 12,041,585 lei, represented equivalent in lei, at the date of 31 August 2003, of the medium 5 points annual, benefited from pension indexation. Pension point value is actualised through indexation pension point with 2,65%, the actualized value is thus of 2,472,138% lei. GD no 731/2003 (OJ no 479/4.07.2003) regarding applying in July 2003 of the fourth public pension system re-correlation stage provides that in July 2003 the fourth public pension system re-correlation stage will take place, stipulated by Government Decision no 1315/2001 regarding supplementary measures for pension re-correlation from the public pension. The total number of persons that benefited from the fourth stage of pension re-correlation was about 2,6 millions, from that about 2,25 millions are pensioners that proceed from state system (from that about 460,275 survivor's pensioners) and about 343.029 farmer's pensioners. The monthly budgetary effort for this fourth stage of re-correlation is about 261 milliard lei. GD no 737/3.07.2003 (OJ no 483/7.07.2003) regarding the organization and functioning the Ministry of Labour, Social Solidarity and Family settles the main prerogatives of the Ministry of Labour, Social Solidarity and Family regards insuring and coordination applying strategies and policies in the following fields: labour, social solidarity, social protection and family. GD no 771/2003 (OJ no 492/8.07.2003) regarding approving the National House of Pensions and other Social Insurance Benefits (CNPAS) settles modifications and completions that were brought to the Statute of the CNPAS for strengthen administrative capacity of this institution that is under the ministry's authority and administrates public pension system and other social insurance benefits. GO no 67/2003 (OJ no 507/15.07.2003) regarding the increasing of pensions from public system of pensions proceeded from insurance system of farmers provides increasing with 100% beginning with 1 January 2004 of the annual medium point of the pensions proceeded from the public system of farmers. GO no 36/2003 (OJ no 376/2.06.2003) on the pensions system for diplomatic staff, approved by Order no 344/4620/18.07.2003 of the minister of labour, social solidarity and family, the minister of foreign affaires and the minister of economy 151

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and commerce and detailed by implementation norms, a distinct procedure of establishing and payment of pension rights for specific categories was elaborated. The Draft-Law on occupational pensions follows to be approved by the Romanian Government by the end of the third quarter 2003 and will be send for parliamentary debate and adoption. This draft-law defines the principles of setting-up, organization and functioning the optional occupational pension schemes, occupational pension funds and pension companies that administrates them. Increasing incomes of pensions public system, important way of granting the first pillar's financial sustainability, was, for the analysed period, in attention of the CNPAS and competent territorial institutions in pensions' fund administration field. Therefore, the collecting rate of current social insurance contribution in Neamt County House of Pensions (CJP) increased by 39,4% (during June 1st, 2003 ­ July 31th, 2003) comparing to last year corresponding period (363 billion ROL, compared to 260 billion ROL). In Ialomita CJP the collecting plan was accomplished (102,93%, 38,6 billion ROL), and in Bihor CJP it increased by 21% (during May 1st, 2003 ­ July 31st, 2003), comparing to the same period of 2002. Ilfov CJP accomplished various forced execution actions (71 forced execution titles, 22 banking garnishment, 21 sequesters). As a result, over 16 billion ROL have been collected. Due to intensified actions of increasing pensions' public system number of beneficiaries, Suceava CJP accomplished a 30% raise for the persons insured on the basis of an insurance statement and a 517% raise for those having an insurance contract (compared to 2002). The same institution also recovered over 26 billion ROL concerning debts relaxations (over 154 billion ROL) and from corresponding easing penalties (over 26 billion ROL), over 3 billion ROL. Expenditure reducing and proper accounting, leading to important savings to the state social insurance budget will, also ensure pensions' public system financial sustainability. For instance, Covasna CJP spent about 10 billion ROL on short-term indemnities (for all the categories). In order to permanently monitories the contribution periods to pensions' public system, Arad CJP receives monthly about 6300 nominal Social Insurance Contribution statements, 2000 of these being registered on paper support and 4300 on magnetically support. Bacau CJP permanently monitories the solving of the pension files (dossiers), registering 5089 claims and issuing 4593 decisions (on categories). At the same time, the managers analysed the causes that led to overworking time. Territorially speaking, the enforcement of the administrative capacity of the pensions' public system bodies involved very important continuous actions in the analysed field. Accordingly, Galati CJP founded Tecuci Local House of Pensions with the specific purpose of increasing efficiency in solving specific items; meanwhile Suceava CJP started the administrative procedures to set up two new local offices in sensitive areas, for the purpose of bringing together the service provider and the service beneficiary. The comprehensive legislative framework on training (Law no 53/2003 ­ Labour Code, GO no 129/2000 on adults' training, Law no 188/1999 ­ Public Servants Statute, Law no. 161/2003 on certain measures aiming to ensure transparency in exercising public dignities, public positions and in the affairs field, to prevent and punish corruption, etc.), as well as the need of training required at CNPASD, CJP's and Bucharest House of Pensions level, made available two training programms during July ­ August 2003 period: 1 July ­ 8 July 2003 ­ Public Relations in State Social Insurance Course ­ developed in Bucharest - 30 employees of CNPAS and CJPs benefited;

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3 August ­ 9 August 2003, Social Protection Management Course ­ held in Costinesti - 50 attendants selected from CNPAS and CJP employees that develop activities in the field of pension rights granting departments.

At the same time, the public campaign for informing and promoting pensions system's reform was going on, according to Consultancy Contract no 33/3 April 2002, by elaborating and transmitting in July 2003 the instructions for territorial distribution (according to a unitary procedure) of the published documents. Social assistance It was adopted the GO no 68/2003 (OJ no 619/30.08.2003) on social services, normative act that establishes the organization, functioning and financing modality of the social services, the type of granted social services and their beneficiaries. According the last statistical data, in the period January ­ July 2003, based on the provisions of the Law no 416/2001 on the minimum income guaranteed, payments of social benefits in amount of 1,808 billion ROL were granted. In the period February ­ July 2003, based on EO no 5/2003 concerning the granting of aid for heating of dwellings as well as some facilities to the people to pay thermal energy, a total amount of 275 billion ROL was paid. EO no 70/2003 (OJ no 600/25.08.2003) amending the EO no 96/2002 on the granting of milked and bread products for the classes I ­ IV pupils from the state education, extends the beneficiaries that will grant the milked and bread products to the preschool children also. In the reference period, the elaboration and finalization procedures of some draft normative acts were continued, concerning: Increasing the limits of incomes and heating quota aid as well as elaboration of new establishment and granting modalities of heating house aid, for the period November 2003 ­ March 2004; Establishment of the annual quota aid for covering a part of rent, electrical and caloric energy for domestic needs, inhered to the wear veterans, wear widows as well as wear casualty out of ordinate service; Establishment of daily allowance alimentation level for the collective consumption in the budgetary units of social assistance; Exemption methodology from the customs taxes payment of protected units.

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Persons with handicap

In the period June 2003 - August 2003, in the field of the protection of the persons with handicap, the following legislative progresses were recorded: GO no. 14/2003 regarding the creation, organization, and functioning of the National Authority for Persons with Handicap (ANPH) was approved by the Law no. 239/2003 (OJ no 394/06.06.2003). It was elaborated the Order of the President of National Authority for Persons with Handicap no 302/2003 (OJ no 571/08.08.2003.) for the approval of the ANPH specific criteria to accord the statute of public utility to the private juridical persons without patrimonial purpose. It was adopted the Order no 18/2003 (OJ no 538/25.08.2003) of the state secretary of the National Authority for Child Protection and Adoption, the minister of research, education and youth, minister of health and the president of ANPH regarding the approval of methodological guide for the evaluation of the child with disability and setting-up the degree of handicap. 153

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The Draft Government Decision regarding the organisation and the functioning of the private centres and services addressed to the persons with handicap, is now under referring procedure. It was adopted the Common Order of the ministry of labour, social solidarity and family and of the National Institute of Statistics' president no 338/334 (OJ no 543/29.07.2003) regarding the completion of the Classification of the Occupations in Romania, the occupations of: personal assistant for the person with severe handicap and sign language interpreter (with high school or university graduation) were introduced in the Classification.

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Also, during June-August 2003, there were elaborated several draft normative acts as follows: Draft Government Decision concerning the methodology used for the exemption of custom taxes for protected units; Draft Government Decision concerning the approval of the amount of the food monthly allowance for the persons infected or with A.I.D.S.; Draft Order of the President of ANPH regarding the approval of the Regulations for the organisation and functioning of the Superior Commission for Medical Expertise for adult persons with Handicap and of the model of the decision of the setting-up the degree of handicap; Draft Order of the President of ANPH for the approval of Regulations for the organisation and functioning of ANPH, of the. Regional Inspections and the Institute for the Prevention and Fighting against Social Exclusion of the Persons with Handicap.

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ANPH made an improvement proposal of 46 Constitution article concerning the persons with handicap, proposal that was agreed by the Chamber of Deputies. The present form is in accordance with the provisions of Revised European Social Chart, document ratified by Romania through the Law no. 74/1999 and provides the equal opportunities of the persons with handicap. In the area of employment, the Monitoring Record M1 was elaborated, regarding the employment of persons with handicap, education level and the reflection way in mass media. During June 2003, the work paper Employment of persons with handicapanalysis situation was accomplished, then, was delivered to MMSSF, Ombudsman, National Council for Fighting against Discrimination, General Secretariat of the Government, non­governmental organisations. Also, the public opinion was informed about this paper by the site http\www: ANPH.RO. In accordance with the Common Order no 748/460/2003 of the minister of health and the minister of labour, social solidarity and family for approval of setting-up criteria and the authorizing procedure of protected units, went on the authorizing procedure of protected units and increased from 13 at the beginning of June 2003 to 23 at the end of august 2003. In the area of monitoring and respect of persons with handicap rights, at the level of ANPH it was elaborated the evaluation document Accessibilities for persons with handicap - achievement stage. As concern the institutional development: In July 2003, the Methodology for restructuring the residential classic institutions, of high capacity and it was elaborated the Methodology for elaboration of Counties Strategy, based on the National Strategy on special protection and social integration of persons with handicap it was finalized. During August 2003, the Modernization Strategy of the administrative system in the field of persons with handicap was finalized. 154

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For quality standards, it was elaborated the Questionnaire concerning the implementation stage of these one, a complex estimate instrument, which contains 320 questions in reference with the provisions of Order ANPH no 22/2003 of the State Secretary of ANPH regarding the quality standards approval for provided services in the special protection institutions of persons with handicap. For every questionnaire one will put a score and thus will obtain at national level the implementation situation of standards. The final situation will be transmitted for analysis and decision to all County Councils. With the view to implementation of National Strategy, in July 2003, it was signed the financial contract with the Nederland partners, for the development of project Training of specialists and staff from central and local public administration level", for implementation of the National Strategy regarding special protection and social integration of persons with handicap. In august 2003, ANPH signed a contract with advertising company Media One to realize a large media campaign out-door, focusing on the equal opportunities for persons with handicap, through Assurance of a great impact on the leaders opinion, as well as on the society in general. This campaign went on during 2 months, between 15 September -15 November 2003. ANPH kept and developed the process of collaboration and advice with nongovernmental organisation (NGO) in the field of persons with handicap protection, concerning elaboration of normative documents, legislation implementation, actions and specific analysis. At the same time, there is a permanent partnership ANPH - NGO for the evaluation of accessibility stage and socio-professional integration. Also, in June 24-th 2003 were analysed in partnership proposals for Fiscal Code regarding fiscal facilities for private persons and employers. For every County Commission and also for Medical Examination Superior Commission, there is a member designated by NGO. In the meaning of permanent dialogue, in June 2003 were organized common sessions having as subjects: protection of persons with handicap concerning the integration in EU, legislative harmonisation at international agreement for refugees' rights with handicap. In June 2003 - August 2003 ANPH went on the events dedicated to European Year of Persons with Handicap -2003. Thus, were organized many socio-cultural and sportive activities and seminars. Seminars had diverse themes as follows: motor cerebral disability (13 June), refugees with disability (20 June), protected units (27 June), accessibilities (11 June). In the period 1-13 June, 173 persons with disability benefited of free holidays on the Romanian seaside as part of Social tourism program. ANPH obtained in June 2003, the agreement of World Health Organisation regarding translator right and publishing right of Disability International Classification, Function and Health state. RENINCO Association being in course of elaboration provides translation and UNICEF provides financing. For equality chances achievement of persons with handicap and fighting against their discrimination in July 2003 ANPH elaborated and transmitted to National Council for Fighting against Discrimination Sectorial Strategy for prevention and fighting against discrimination of persons with handicap, which belong to National Plan of Fighting against discrimination elaborated by the National Council for Combating Discrimination.

Foundation of Dublin

During the month of August it was agreed that the cooperation between Romania and Sweden within the project ,,Social Dialogue to improve the working environment in the wood industry in the county of Sibiu" that will be developed under the programme ,,Work Life and EU Enlargement" is due to start in October 2003 and end one year later, in October 2004. 155

Fight against discrimination

At legislative level, the Government approved, at the end of August, the GO no 77/2003 on amending the GO no. 137/2000 on preventing and sanctioning all forms of discrimination. Under this new document, a full implementation of the acquis communautaire in the field of anti-discrimination (EU Directives 43/2000/EC and 78/2000/EC) is accomplished. The amendments concern: The definition of indirect discrimination; The definition and sanction of the multiple discrimination; The definition and sanction of victimization; Introduction of mediation as a way to combat discrimination deeds; Establishment of minimal standards; Establishment by law of the principle of independence regarding the activity of National Council for Combating Discrimination; Assistance to persons discriminated against; The abolishment of the provisions contrary to the principle of equal treatment.

At institutional level, after the State' Budget rectification, 20 new vacancies have been approved for the Council in order to get the full human resources scheme as it was provided by GD no. 1194/2001 on the Organization and Functioning of the National Council for Combating Discrimination as it was amended. The activity of solving complaints and sanction the discrimination deeds has continued. During the period 16 April ­ 1 September, the Council has received 113 petitions, 70 of them being solved. Also, the Steering Board has analised 15 cases ex officio. As a result, there have been 17 sanctions (12 warnings and 5 fines). Following the monitoring activity a big number of discriminatory job offers has been noticed. Therefore, the Steering Board of the National Council for Combating Discrimination adopted the Guidelines no 1/2003 concerning the obligations of employers and the representatives thereof, as well as of the authors and makers of publicity announcements and their representatives, with respect to conditioning employee positions in announcements and/or competitions and the publication of such announcements. Based on the provisions of the legislation and this document as well, the Council carried out a sanctioning campaign against newspapers, which had published discriminatory job, offers. Seven newspapers were sanctioned with warnings. In order to increase the employers' awareness on the principle of non-discrimination, the National Council for Combating Discrimination has launched, during July, the national campaign ,,Give a chance, give yourself a chance". This campaign consists in distribution of leaflets containing the basic principles on combating discrimination in employment area. As the collaboration with the National Agency for Employment goes well, the next phase of the Campaign will be carried in cooperation with this institution. As regards the cooperation protocols with public institutions, the National Council for Combating Discrimination has agreed such protocols with the National Agency for Employment, Ministry of Culture and Cults and the National Agency for Sport. Romanian participation to Community Action Programme for Combating Discrimination (2002-2006) Under the provisions of GD no 754/2003 (OJ no 488/7.07.2003) on organisation and functioning of the Agency for Governmental Strategies (ex-Ministry of Public Information), the coordination of this programme in Romania was transferred to the National Council for Combating Discrimination. 156

2.3.14. ENERGY

In July 2003, the Romanian Government approved by GD No. 890/29.07.2003 (OJ No. 581/14.08.2003) the Road map in Romania's energy sector, which covers the period until 2015, establishing the main action lines in the energy sector. The Document ensures a coherent approach of the issues regarding the development of the Romanian energy sector, in line with the expected EU developments. All recommendations provided by the European Commission experts upon the technical consultation session on 4 July 2003 have been taken into account in elaborating the Road map. In August, a copy of the completed document was also forwarded to the European Commission, by letter No. 132769/MB/7.08.2003.

Natural gas

According to the common ANRGN-ANRM Order No. 498/76/16.06.2003 (OJ No. 424/17.06.2003) regarding the approval of the prices and the setting up of regulated tariffs in the natural gas sector, the gas price increased to USD 99/1,000 cm, starting with 1 July 2003. Subsequently, according to the common ANRGN-ANRM Order No. 594/141/7.08.2003 (OJ No. 586/18.08.2003) regarding the approval of the prices and the setting up of the regulated tariffs in the natural gas sector, the gas price increased once again to USD 110/1,000 cm for non-residential consumers and USD 120/1,000 cm for residential consumers, starting with 1 September 2003. Thus, compared to the level recorded at the beginning of 2003, the gas price increased by 45.5%. In line with the latest European developments, upon the last increase in gas prices, these were differentiated by consumer categories, so that, at present, prices for residential consumers are higher than prices for non-residential consumers. In order to improve the bill collection rate in the energy sector, the natural gas distribution companies pursued firm measures for the collection of unpaid bills. Bad payers were disconnected or were only supplied with a limited amount of energy. In August 2003, the natural gas distribution companies ­ SC Distrigaz Nord SA and SC Distrigaz Sud SA ­ registered 252 large industrial consumers disconnected or supplied with limited amounts of energy. By constant monitoring of the natural gas bill collection, the bill collection rate for the first half of 2003 was of 97.5%.

Oil sector

According to the commitments in the Position Paper, in July 2003 Romania started sending to the European Commission, on a biannual basis, information regarding the amount of the minimum oil stocks, using the reporting format specified by the acquis. In the future, this information will be sent to the Commission as follows: quarterly in the period January 2004 ­ June 2004 and monthly starting with 1 July 2004. The privatisation strategy for SNP Petrom SA was approved by GD No. 924/14.08.2003 (OJ No. 606/26.08.2003) regarding the approval of the privatisation strategy and the completion of the consultancy services for the privatisation of the National Oil Company Petrom SA Bucharest. According to the strategy, a strategic investor or a consortium of investors should acquire 51% of SNP Petrom's share capital. In the context of Romania's preoccupations regarding the interconnection of the national oil transportation system with the ADRIA system, in view of diversifying the supply sources, in July 2003 was adopted Law No. 345/10.07.2003 (OJ No. 580/14.08.2003) for the ratification of the Protocol setting up an inter-state oil transportation system form Constanta (Romania) to Omisalj (Croatia), among Romania, the Federal Republic of Yugoslavia and the Republic of Croatia. 157

The project provides for the setting up of a pipeline for the transportation of oil from the Romanian port of Constanta, at the Black Sea, crossing the territories of Romania, the Federal Republic of Yugoslavia and the Republic of Croatia, to the Croatian port Omisalj, at the Adriatic Sea.

Electricity

The Electricity Law No. 318/8.07.2003 (OJ No. 511/16.07.2003) was approved, setting up the framework for the regulation of the electricity sector and of the heat produced in co-generation under security conditions and at quality standards, with the observance of environmental protection standards. The National Authority for Regulation in the Energy Field (ANRE) issued the ANRE Order No. 23/25.08.2003 (OJ No. 614/29.08.2003) regarding the approval of average tariffs for the electricity transmission and distribution services and of the tariff for the management of the wholesale market, charged by the economic operators in the energy sector. The privatisation process in the electricity sector continued. Following the restructuring of SC Termoelectrica SA, the privatisation process started. In August 2003, SC Termoelectrica SA put up for sale 5 energy groups ­ 3 from the Isalnita Dolj power plant, an energy group from CET Palas Constanta, as well as CET Vulcani. Concerning the privatisation procedures for the Banat and Dobrogea electricity distribution subsidiaries, following the publication of the privatisation announcement in January this year, the Italian company ENEL submitted an offer. It is intended to complete the privatisation procedure by the end of this year. In the electricity sector, according to the ANRE Order No. 22/20.08.2003 (OJ No. 602/25.08.2003) regarding the approval of tariffs for electricity supplied to captive consumers, the electricity price increased by 17.5%, applicable starting with 1 September 2003. In order to improve the bill collection rate in the energy sector, the 8 electricity distribution companies continued to implement firm measures for the collection of unpaid bills, the bad payers being disconnected or supplied with limited amounts of energy. In this respect, in August 2003, at SC Electrica SA 242 large industrial consumers were disconnected or supplied with limited amounts of energy. By continuously monitoring the electricity bill collection process, the bill collection rate for the first half of 2003 was of 95.7%.

Nuclear field

The Law No. 321/8.07.2003 (OJ No. 509/15.07.2003) for the approval of GO No. 7/2003 regarding the use of nuclear energy for exclusively peaceful purposes was approved. On the basis of this piece of legislation, the Nuclear Agency (AN) was set up as a specialised body in the nuclear field, with legal personality, under the subordination of the Prime minister. The main objective of the AN is to provide specialised technical assistance to the Government, in the process of elaboration of the nuclear policy and the promotion and monitoring of the nuclear activities in Romania. GO No. 11/30.01.2003 (OJ No. 61/1.02.2003) regarding the management of the spent fuel and radioactive waste, including the final disposal, was approved by Law No. 320/8.07.2003 (OJ No. 527/22.07.2003).

Energy efficiency

The acquis communautaire in the energy efficiency field has been fully transposed into national legislation, with the exception of Directive 2002/91/EC regarding the energy efficiency in buildings, which will be transposed in 2005. 158

In view of ensuring the implementation of harmonised legislation in force, the Romanian Agency for Energy Conservation (ARCE) continued to perform concrete control actions. Thus, on the basis of GD No. 1056/18.10.2001 (OJ No. 727/15.11.2001) setting up the requirements for placing household lamps on the market, in the period July-August 2003, controls were performed on 619 economic operators, sanctions in total amount of ROL 835 million were inflicted and products in amount of ROL 7,303 million were temporarily withdrawn from the market. The Decision of the ARCE President No. 53/16.05.2003 (OJ No. 413/12.06.2003) was adopted, regarding the approval of the Regulation for finding, notifying and sanctioning infringements of Law No. 199/2000 regarding the efficient use of energy, republished, as well as infringements of the technical regulations for labelling household electrical appliances regarding the energy efficiency. As part of the measures for improving the energy consumption of industrial companies, the following documents have been elaborated and approved: The Guide for the elaboration and analysis of energy balance sheets ­ approved by Decision of the ARCE President No. 56/28.05.2003; The Guide for the training and examination of the trainees in the field of energy sheets elaboration for the application of the Regulation regarding the authorisation of the natural and legal persons that have the right to elaborate energy balance sheets ­ approved by Decision of the ARCE President No. 57/28.05.2003 (OJ No. 425/17.06.2003); The Guide for the training and examination of the trainees in the field of energy management for the application of the Regulation regarding the certification of those responsible in the field of energy management ­ approved by Decision of the ARCE President No. 59/28.05.2003 (OJ No. 426/18.06.2003); The Procedure for monitoring the energy balance sheets elaboration activities ­ approved by Decision of the ARCE President No. 59/28.05.2003 (OJ No. 426/18.06.2003).

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Staring with June 2003, the Romanian Fund for Energy Efficiency (FREE), an independent, self-financing institution, has become operational by launching the procedures for the selection of energy efficiency projects. In 2003, the European Bank for Reconstruction and Development (BERD) and the American Fund for Investments (RAEF) have launched the programme named Romanian Industrial Energy Efficiency Company (RIEEC) aimed to the development and financing of energy efficiency projects in Romania. RIEEC disposes of an initial financing of USD 14 million, funds which will be allocated, on commercial principles, for the development of energy efficiency projects in the Romanian industrial plants. In this operation stage, RIEEC aims at the identification of opportunities for the achieving of low power co-generation projects in the facility of some industrial manufacturers, using a BOOT type (Build ­ Own ­ Operate ­ Transfer) financing scheme.

Coal industry

The restructuring process in the coal industry has continued. Thus, in 2003, 6 mines were closed, the personnel laid off as a result of this process adding up to 2,525 persons. GD No. 926/14.08.2003 (OJ No. 602/25.08.2003) regarding the approval of the conservation, final closing and monitoring of the environment post-closing factors of a number of mines and quarries, the 7th stage, was adopted, providing for the closure of another 6 mines ­ 2 from SA Petrosani Hard Coal National Company and 4 from Oltenia SA Targu Jiu Lignite National Company - over the following period. 159

2.3.15. INDUSTRIAL POLICY

Based on the EO no 64/2003 provisions, concerning the set up, reorganisation or functioning of the Government institutions (OJ no 464/29.06.2003), the Ministry of Economy and Trade was set up, through the reorganization of the Ministry of Industry and Resources, that has taken over the activity of the Economic Policies Department, of the Department of Foreign Trade and the activity concerning the business environment as well, previously in the responsibility of the former Ministry of Development and Prognosis. In this context, through the adoption of the GD no 738/2003 (OJ no 485/2003) concerning the organization of Ministry of Economy and Trade, it was set up the Division for the Improvement and Monitoring of Business Environment, which coordinates the Action Plan for the development of the Romanian business environment, in 2003. This Action Plan was approved through the GD no 586/2003 (OJ no 387/5.06.2003). Thus, by the correlation of the activity of the General Directorate for Industrial Policy set up according to the European concept - with the activity of the Division for the Improvement and Monitoring of Business Environment there will be achieved a more efficient co-ordination of the implementation of Romania's Industrial Policy, respectively the monitoring of the related Action Plan measures. During July-August 2003 the twinning project no RO2000/IB/OT/03 aiming at the strengthening of the administrative capacity of Ministry of Economy and Trade was continued. The following main actions were achieved: Professional training actions in the field of industrial policy In order to develop the knowledge in the field of industrial policy, to train the future trainers and to ensure the information dissemination, during this period of time, there were organised 10 seminars and workshops with the participation of the DTI/UK experts and of those of the Ministry of Economy and Trade. Out of these 10 seminars, 2 were organised in regions. Elaboration of 26 specific programmes by the General Directorate for Industrial Policy In order to strengthen the co-ordination and administration capacity to implement the measures included in the concerned Action Plan. These programmes have as main goal the implementation of strategy of the Ministry of Economy and Trade, in order to re-vitalise the Romanian industry, through the follow main actions: - Extending of the dialogue with the companies from the Romanian counties, in order to identify the problems that they met in their activity; in this context, there were organized meetings with the participation of the local business community from 7 counties, in order to identify the economic and legal problems that are encountered by the companies. These problems have already been sent to the Inter-ministerial Committee for the Implementation of Industrial Policy of Romania in order to be for their analysed and solved; Harmonising of the sectorial development programmes and promoting of the research ­ development projects; Increasing of Romanian industry contribution to the national programmes concerning the modernisation of agriculture and energy sector; Promoting of the systems and equipment for renewable energy production; Promoting of foreign investments in the industry field.

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In the process of the implementation of the Romania's Industrial Policy of and of the related Action Plan, the main actions achieved during July - August 2003, in the 160

priority fields established through the above mentioned documents, aiming at the increasing of industrial competitiveness, are the following: Consolidation of a viable and open business environment - elimination of the administrative and bureaucratic barriers through: - The adoption of the Law no 252/10.06.2003 (OJ no 429/18.06.2003) concerning the single control register. According to this law, the single control register is compulsory for all the taxpayers, legal bodies that are registered to the National Office of Commerce Register and are authorised according to law. Attracting the direct foreign investments Till the end of August 2003, as a result of the implementation of the Law no 332/2001 regarding the promotion of the direct investments with a high impact on the economy, there were registered 220, with a total value of 1,898.483 mil USD, out of which the foreign participation was of 1,017.934 million USD. During the same period of time there were finalized 79 investments, under the provisions of the Law 332/2001, with a value of 644,997 million USD. The main sources of the foreign capital are the countries: Netherlands, Austria, Germany, France, Turkey, followed by Cyprus, Virgin British Islands, USA and Italy. Accelerating the structural adjustment (restructuring and privatisation) Privatisation During the first 8 months of 2003, a number of 177 companies have been privatised. Thus, the total number of the companies sold by APAPS between December 1992 and the end of August 2003 is of 7,490 (346 large companies, 1,646 medium sized companies and 5,498 small companies). 53 companies (5 large companies, 10 medium sized and 38 small companies) were privatised between June 15th ­ August 31st2003. Correspondingly, the number of employees transferred into the private sector was of approx. 8,000 persons. Out of the 53 privatised companies, 18 (4 large, 3 medium and 11 small) are belonging to the manufacturing industry. Under these circumstances, at August 31st 2003, in APAPS portfolio there were 160 companies with majority state-owned capital share able to be privatised, out of which 71 large companies and 89 medium and small sized companies. In accordance with the permanent reducing of APAPS portfolio, the institution experienced consecutive restructuring in terms of number of employees, the target being the dissolution of its regional branches by end October 2003. The Stand-By Agreement with the International Monetary Fund The positive results recorded by APAPS in the privatisation process have been confirmed during the recent IMF mission between July 14th and August 1st 2003. According to the evaluation of IMF Stand-By Agreement, APAPS commitments semester have been considered fully achieved. Thus: and restructuring which took place fourth (and last) for the first 2003

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12 large and very large companies, with more than 1,000 employees each, have been privatised; Following the implementation of heavy restructuring programmes, the volume of 19,698 the lay-offs exceeded the target of 18,000 employees; Five companies out of the seven with bad financial results have been privatised, and the liquidation procedures have been started for the remaining two; 161

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The privatisation process of BCR is running in a good direction with the EBRD and IFC.

During the same mission, supplementary measures in APAPS responsibility have been agreed on, with firm deadlines for September 2003. These refer to: The privatisation of another 3 companies with more than 1,000 employees each; The endorsement of the privatisation contracts in case of two large loss-makers: ARO and Roman. In a contrary case, APAPS will have to take the formal decision to start the liquidation procedure; The endorsement of the privatisation contract of BCR with EBRD and IFC.

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Taking into account that new conditionality, significant progress has been already registered at the end of August 2003. Thus: At present, a number of 7 companies with more than 1,000 employees each, are under negotiations. Out of these, 2 companies are in an advanced stage of negotiations; In case of ARO, one offer has been submitted by the North American company CROSS LANDER, whilst for Roman Brasov, one of the company's traditional clients has submitted its offer for the purchasing of the majority share package. For both companies, the Romanian side intends to complete the endorsement of the sale-purchase contracts no later than September 20, 2003; Concerning the sale of the BCR package (25% plus 2 shares) to EBRD and IFC, by August 15th 2003 there have been received the revised terms of the transaction, which can be assimilated with a technical offer and also the financial offer formulated following EBRD and IFC own assessment over BCR. The formal invitation for negotiations has been launched by the Romanian side.

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Privatisation of the companies included in the PSAL I and PSAL II negotiated with the World Bank PSAL I The privatisation process of the companies included in the PSAL I continued in an accelerated pace. Since the last report, other 2 large companies have been privatised: Fortus Iasi and Urbis Bucuresti, the total number of companies privatised during the first 8 months of 2003 being of 7. Out of the 61 companies in APAPS responsibility (all of them belonging to the manufacturing industry sector), as of 31 August 2003: 44 companies have been privatised, given the target of 37 negotiated with the World Bank; 6 companies are under negotiations (Tractorul Brasov, Moldosin Vaslui, ARO Campulung, Siderurgica Hunedoara, Timpuri Noi Bucuresti and Roman Brasov).

Out of a total of 21,897.37 billion ROL, representing the capital share of the 61 companies from APAPS portfolio, a percentage of 71.61% has been privatised, the capital share of the 17 companies not yet privatised accounting only 6,215 billion ROL. During July and August 2003, significant events have been recorded in relation to the following companies included in PSAL I: In the case of SC Tractorul SA, in order to privatise the company with a strategic investor capable to provide a good management, modern technology, investments, environmental protection measures and social protection, as well as the access on the international product and capital markets, it was approved 162

the GO nr. 53/29.07.2003 (OJ no 584/15.08.2003) based on which negotiations are carried on with the Italian company LANDINI Spa, one of the world leaders in the production of agricultural machines and tractors. In the case of SC Aro SA Campulung, the last Memorandum negotiated with the IMF outlines that if the sale-purchase contract is not endorsed by September 20th 2003, the APAPS Management Board will decide the liquidation of the company. To date, ARO Campulung is under negotiations: the North American company CROSS LANDER has submitted on August 27th 2003 its final, improved and irrevocable offer for the purchasing of the majority stake of 68.70%. Similarly, in the case of SC Roman SA Brasov, the last Memorandum negotiated with the IMF outlines that if the sale-purchase contract is not endorsed by September 20, 2003, the APAPS's Management Board will decide the liquidation of this company too. On August 28, 2003, one of the company's traditional clients, the Malaysian company Pesaka Astana, has submitted its offer for the purchasing of the majority stake and negotiations have started. The APAPS requirements concerning the privatisation of this company foresee the submission of a project for transforming the company into an industrial park, in a determined period of time. It is worth mentioning that, by the sale of the parent company, the shares owned by Roman in its subsidiaries (approx. 99% in each of them) will be sold, hence implicitly all Roman subsidiaries will be privatised. In the case of SC Siderurgica SA Hunedoara, in order to increase the company's attractiveness, the complementarities and the attractiveness of SC Petrotub SA Roman have been valorised by the offering for privatisation the package of both Siderurgica and Petrotub, in. Under these circumstances, to date are carried on negotiations with LNM Holdings who submitted its offer on August 4, 2003.

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By the privatisation of the companies Tractorul, Roman, ARO, Siderurgica and Petrotub, the volume of arrears to the state budget will be diminished with 13,800 billion ROL, meaning a reduction with approx. 41% of the total arrears to the state budget corresponding to the total number of companies with majority state-owned capital in APAPS portfolio. PSAL II Within PSAL II program negotiated with the World Bank, 20 new commercial companies have been selected and structured into 7 groups to be privatised with the assistance of the investment banks or sale agents. To date, out of the 20 commercial companies 7 have signed contracts and are under implementation two consultancy contracts. The rest of 13 companies are to be privatised by the own effort of APAPS (without the assistance of the investment banks/consultancy firms, as agreed with the World Bank in view of fulfilling the objective of the Romanian Government to finalize, in broad terms, the privatisation process of the companies from APAPS portfolio by end 2003. Out of the 13 companies, two represent a specific case: HELITUBE SA for which the Asset Resolution Agency sold all the assets, and VERACHIM SA for which the voluntary liquidation procedure has been initiated. The privatisation strategies for the 7 companies which benefit of consultancy services and also for the 11 companies remaining to be privatised by own effort have been approved by the GD no 773/2003 (OJ no 506/14.07.2003). Eight companies have been already offered for privatisation: - Tubinox Bucuresti (deadline for submission of offers: 29.08.2003) ­ one offer submitted and negotiations have started; - Hiperion Stei (deadline for submission of offers: 08.09.2003); 163

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Premagro Oradea (deadline for submission of offers: 17.09.2003); Hart Miercurea Ciuc (deadline for submission of offers: 17.09.2003); Comefin Costesti (deadline for submission of offers: 17.09.2003); Energoreparatii Bucuresti (deadline for submission of offers: 24.09.2003); Energoutilaj Bucuresti (deadline for submission of offers: 26.09.2003); UMUC Bucuresti (deadline for submission of offers: 22.09.2003).

The restructuring process Having in view the legal provisions concerning the stimulation of the restructuring process, the reorganization and privatisation of the companies with majority stateowned capital in order to increase their attractiveness, there have drawn up restructuring programmes for a number of 53 companies. These restructuring programmes have included organizational and managerial measures, technical-technological and financial measures, in order to recover the economic and financial situation and to reduce losses and arrears. These measures had in view: Turning into account of assets and stocks; Spin-off of auxiliary activities; Splitting up operating modules, flexible to the market demand; Optimisation of technological flux; Severe measures for the recovering of receivables; Optimisation of the organizational structure and the correlation of the number of employees with the level of production, lay-offs in case of exceeding personnel.

By the implementation of the restructuring programmes at the companies in APAPSs portfolio nominated by the new legislative acts, the number of employees laid-off till 30 June 2003 was of 19,698 persons, whilst the conditionality negotiated with the IMF foresaw a number of 18,000 employees to be laid-off. The list of the companies where lay-offs shall apply based on a limited in time programme which allows for severance payments in order to soften the social effects, has been enlarged by the GD no 663/2003 (OJ no 421/16.06.2003). Consequently, in total, 23,917 employees will be laid-off by end September 2003. To date, a number of 22,805 employees have been laid-off from the 53 companies mentioned above. In the case of the companies for which restructuring programmes have been implemented, a special attention has been given to the restructuring programmes of Siderurgica, Tractorul and Roman. These programmes included splitting-up, spinningoff in branches having distinct legal personality accompanied by massive lay-offs, which led to the increase of company attractiveness and the progress of the privatisation process in case of these three companies. The restructuring process was accompanied by massive lay-offs, as follows: - At Tractorul SA Brasov a number of 3,357 employees have been laid-off; - At Siderurgica Hunedoara a number of 3,054 employees have been laid-off; - At Roman Brasov a number of 3,403 employees have been laid-off. All these measures have led to the increase of the attractiveness, confirmed also by the fact that Siderurgica Hunedoara and Tractorul Brasov are, at present, under negotiations with major strategic investors, whilst for Roman Brasov an offer was submitted by one of the company's traditional clients. Regarding the status of the companies which were included in the RICOP program, out of the 57 companies remaining in APAPS portfolio, a number of 47 companies have been privatised, 5 companies are under negotiations and the last 5 companies will be put for sale in the very next period. 164

Specific sectors

Steel industry The process of restructuring and privatisation of the Romanian steel industry was continued during July ­ August 2003 according to the strategy approved by the Romanian Government. The privatisation process of SC Siderurgica SA Hunedoara started by searching for solutions, in order to increase the company's attractiveness. Thus, the complementarities and the attractiveness of SC Petrotub SA Roman have been valorised by the offering for privatisation of the package of both Siderurgica and Petrotub. Under such circumstances, to date are carried on negotiations with LNM Holdings who submitted its offer on August 4th 2003. The assessment of the Romanian steel industry viability made by the European experts in collaboration with the Romanian ones, was continued, according to the schedule agreed with the European Commission and the consultancy company- Roland Berger. Up to now, there have been presented two reports by the consultancy company, which highlight the fact that the restructuring process of the Romanian steel industry has registered progress during this period of time. At the present, the experts of the consultancy company are analysing all 7 steel integrated works companies, action to be soon finalised. Defence industry In order to implement the provisions of the Strategy of privatisation in 2003 of companies belonging to the Ministry of Industry and Resources portfolio, approved by the GD no 653/2003 (OJ no 431/19.06.2003), the efforts of the Office of State Ownership and Privatisation in Industry were focused on the following actions: Modernisation and endowment of some production capacities (SC IAR SA Brasov, SC ROMAERO SA, SC UM Dragasani SA); Externalisation of some activities at SC METROM SA, SC Carfil SA, SC UM Cugir SA, SC UM Mija SA, SC UM Sadu SA, SC TOHAN SA, SC AVIOANE Craiova SA, SC IAR SA Brasov, SC UM Orastie SA, SC IOR SA Bucuresti; Privatisation of one company from the Ministry of Economy and Trade portfolio. During this period it was signed the privatisation contract for SC ELPROF SA Bucuresti and there were published the privatisation adverts for SC ROMPIRO SA Orastie and SC UZINA MECANICA Rm. Valcea SA).

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2.3.16. SMALL AND MEDIUM SIZED ENTERPRISES Recent developments of the institutional framework and of the policy in the field of SMEs

Within the process of Government reorganization and reducing the number of ministries, the Ministry for Small and Medium-Sized Enterprises and Co-operatives has been transformed, into the National Agency for Small and Medium-Sized Enterprises and Co-operatives, subordinated to the Government and under the direct co-ordination of the Prime Minister, according to EO no 64/2003 (OJ no 464/29.06. 2003) for establishing of measures regarding the setting up, organizing, reorganizing or functioning of structures of the Government working instrument, of ministries, of other specialized bodies of central administration and of other public institutions and according to GD no 753/2003 (OJ no. 494/9.07.2003) regarding the organizing and functioning of the National Agency for Small and Medium-Sized Enterprises and Cooperatives (ANIMMC). 165

ANIMMC took over the activity of MIMMC, keeping the same activities and responsibilities as the former ministry respectively: the elaboration of strategy and policies for stimulation the SMEs development; elaboration, implementation and monitoring the programmes for SMEs sector; the elaboration of the specific legislation, the representing the state in this domain, based on the mandates given by the Government. The directorates that operate in ANIMMC with specific tasks in developing the enumerated activities and responsibilities are the Directorate for the SMEs Strategy and Policy and for European Integration and the Directorate for the Elaboration, Implementation and Monitoring of Programmes for SMEs International Cooperation. The maximum number of 99 positions of the Agency was supplemented with 10 new positions of counsellors on the European integration issues. The SMEs sector stimulation continues to be a priority for the Government in accordance with the Programme of Governance in 2001-2004 that makes clear the objectives regarding SMEs sector development, namely increasing the sector contribution to the creation of GDP, creation of new jobs, increasing the exports achieved by this sector. The policies and programmes addressing SMEs sector are divided into two main categories: The first category represents the policies addressed to SMEs sector itself, with the view to contribute to the creation of the necessary conditions for functioning and development of the small and medium-sized enterprises and realising the abovementioned objectives of Program of Governance. The second category refers to other policies that address some social and economic priority objectives of the Government, in the framework of which the small and medium-sized enterprises are implementation tools (e.g. industrial policy, regional policy, policy for development of the labour market, policy of rural development, policies addressed to the young people).

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For the first category, ANIMMC is the co-ordinator and the responsible for the realisation of the strategy and policies. For the second category, ANIMMC is member in the set-up task forces, contributes to the policies elaboration and assumes the obligations of implementing the actions in its activity area. The Agency activities are addressing to the both objectives: creation of the general conditions for the development of SMEs sector and intervention in the areas that demand special treatment. The Agency will give a special consistency to actions started in the period September 2002 ­ June 2003 through the Consultative Committee for Developing SMEs sector, approved through the Order of the Ministry for small and medium-sized enterprises and co-operatives no 132/2003 (OJ no 452/29.06.2003) regarding the approval of the Regulation on the organisation, functioning and composition of the Consultative Committee for developing SMEs sector. The first meeting of its members (over 40 members representing governmental and non-governmental bodies) will take place on 24 of September, in order to discuss the strategy for the SMEs development in 2004-2008, the financial multi-annual programmes 2004-2006 and the annual report regarding the development of SMEs sector (2001-2002). This committee is an extension of the Social Dialogue Commission that functioned within the ministry/agency from 2001 and it was established for improving the dialogue and efforts co-ordination of all the institutions and organisations involved in supporting the SMEs sector. 166

ANIMMC continued the activities initiated for the SMEs development trough different instruments of specific policies implementation in its capacity of: Member of the Task Force for Elaborating and Implementing the Action Plan for Improving the Business Environment (co-ordinated by the MEC); Co-ordinator of the Action Plan for the Removal the Barriers that SMEs sector is confronted with; the Plan contains actions that address the specific issues of SMEs (caused by their small size and limited resources), such as access to finance and training. This practical plan will also include the action plan for implementing the European Charter for Small Enterprises; Member of the Working Group for the implementation of the understanding memoranda concluded with Ministry of Education, Research and Youth in order for support; Member of the Working Group for the implementation of specific measures and actions included in the National Strategy of the Intellectual Property.

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It was continued the implementation of the European Charter for Small Enterprises (ECSE) through the organising in Bucharest on July 8th 2003 of the bilateral meeting Romania ­ European Commission. In this context, there were approached the evolutions registered in ECSE implementation since the last report, in the areas of: the new institutional framework of implementing the SMEs policies in the context of government reorganisation; the system of relations with the dialogue partners in implementing the policies, strategies and programmes for SMEs; access to finance, in particular risk capital and micro-credits; developments in implementing the SMEs programmes financed from the state budget; development of a stronger and more efficient representation of SMEs at national and EU level. During the meeting, the following initiatives were underlined as major developments in July 2002 ­ July 2003 period: The "Arts School" Programme implemented Junior Achievement (JA) for developing the entrepreneurial spirit; up to present, over 250.000 Romanian pupils and students benefited of this programme; The Program Business women and electronic trade through the international network WINNER (sponsored by the Italian Government is hosted by the Chamber of Commerce and Industry of Romania and Bucharest); the programme included 650 beneficiaries and 17 success cases; Launching the e-taxes, e-auction, e-forms, againstfraud.ro, abuses.ro projects by the MCTI. The main benefits of the e-auction system were: 927 contracting authorities, 40,000 unique visitors monthly, saving percentage 23%, 130,000 closed transactions. The main benefits of the e-taxes system were: reducing the bureaucracy, efficiency, reducing the costs, increasing the transparency, reducing the time and a non-stop functioning.

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These evolutions of ECSE implementation will be detailed in the Report for ECSE implementation ­ Romanian contribution on 2003 year, which will be finalised in September this year. In the process of elaborating of the Strategy for developing the SMEs sector in compliance with NDP (2004-2006), there were established the budgetary grounds for the strategically priorities, measures and actions included in the Strategy and it was promoted their inclusion in the draft budget of 2004-2006. In order to hold the first meeting of the Consultative Committee for the Development of the SMEs sector, scheduled for the 24th of September 2003, there were organized the necessary preparations. In the framework of the mentioned meeting, there will be debated the Strategy for developing the SMEs sector in 2004-2006, the Annual report 167

regarding the development of SMEs sector in 2001-2002 period and the financing programmes of the SMEs sector. On August 29th 2003, it was finalised the elaboration of the draft Annual report for developing SMEs sector in 2001-2002 period, based on the 2002 balance sheet. On 26th August 2003, during the meeting of the Social Dialogue Commission, it was analysed the project of modifying and completing of the Law no. 133/1999 regarding the stimulation of the private entrepreneurs for setting up and developing the small and medium-sized enterprises. Modifying and completing the provisions of the Law no 133/1999 is imposed by the need of: A legal framework well outlined, strengthened and applicable in the area of stimulating the establishment and development of small and medium-sized enterprises in order to ensure a sustainable SMEs development, correlated with the newest legal developments regarding the registration and authorising of traders, the work relations, the public procurement, scientific research, the vocational training, the privatisation of the companies were the state or an authority of local public administration is shareholder; Fulfilment of the commitments made during accession negotiations regarding the adoption of the acquis comunautaire in the SMEs field, with special reference to the harmonisation of the definition recommended at the level of European Union for the small and medium-sized enterprises; Introducing provisions regarding the stimulation of creativity and competitiveness in the SME's and craft sector through the creating of new jobs, promotion of the techniques and modern technologies, including of the electronic trade and business transfer.

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In the context of actions focused on the strengthening of the administrative capacity, through the activities implemented within the twinning project no RO/2001/IB-SPP01 ­ ,,Improving the institutional work framework and organising the SMEs and co-operatives policies", in July-August, there were trained 11 civil servants from ANIMMC (through study visits and internships). Within the same project, by implementing the fourth component "Support in the area of export promotion", there was elaborated the draft Strategy for export promotion.

Improving the business environment

The Romanian Parliament adopted the Law no. 252/2003.06.10 (OJ no. 429/2003.06.18) regarding the single control register. According to this legal, the Single Control Register has a compulsory character for all the taxpayers, legal bodies registered at the National Office of the Commerce Register, authorised according to law. In the view of simplifying the administrative procedures within the relationship entrepreneurs ­ central administration, the Government of Romania, during its weekly meeting of August 21st 2003 decided the creation of a free telephonic line for facilitating the implementation and respecting the provisions of EO no.27/2003 regarding the tacit approval procedure. There was revised the inventory of authorizations, notifications and agreements elaborated by the ANIMMC according to the legislative developments between October 2002 and August 2003. ANIMMC continued to grant consultancy to the town halls of Bucharest and of Ilfov county in view to the correct implementing of procedures for registration and authorization foreseen by the Law no. 507/2002 and its methodological norms.

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Programmes for supporting the SMEs sector

As result of the launching and implementing of the programmes financed from the state budget implemented by ANIMMC, MEC and MIE, in the aim of developing the entrepreneurial spirit and increasing SME's competitiveness on internal market and tertiary markets, from the beginning of the 2003 until August 31st, 459 SMEs benefited have been beneficiated of the facilities offered by the respective programmes, the total budget granted being of 396.55 billion ROL. In 2003, through the rising of social capital of NFGCSME with 100 billion ROL it was possible to grant guarantees to 120 SMEs, the total budget allocated being of 291.9 billion ROL. This value represented 99,3% form the actual social capital of the fund. In the framework of the Programme for supporting the investments in priority industrial sectors (launched in 2003, in the co-ordination of ANIMMC) with an allocated budget of 80 billion ROL (under the implementation of the Commercial Bank of Romania selected according to the programme rules), ANIMMC concluded with BCR on August 13th, the contract based upon, in 20 days after signing, the programme started. Within the Programme for increasing the industrial competitiveness for the period 2003-2005, implemented by the Ministry of Economy and Trade, with an allocated budget of 180 billion ROL, 64 SMEs participated up to now, benefiting of an amount of 26.1 billion ROL. On August 26th, the UNIDO Programme was approved (under the implementation of ANIMMC) aiming at the increasing of the competitiveness of the SMEs in the food and agro-food sectors. The goals pf the program are: Setting up milk collection centres at European standards and introducing the system of quality assurance in the circuit farmer ­ milk-processing enterprise; Setting up training centres, able to act as technological information and consulting centres for farmers and SMEs with activity in the area of milk and milk product processing; Increasing competitiveness of preserved vegetable and fruit products on the internal and international market through implementing of the consumer protection and quality assurance systems, diversification of production and introduction of cheap and modern production technologies in SMEs; Increasing the competitiveness of institutions from this area and increasing SMEs qualification from food industry through education and technical support for introducing and dissemination of modern techniques and technologies for processing in food area in order to increase the profit made by companies and to implement the principles of environmental technologies and the marketing techniques;

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For the of the Sub-programme "Development of towns through stimulation of SMEs activities" launched in 2003 based on GD no 322/2003, having an allocated budget of 408.8 billion ROL in the period 2003-2004, the regional analysis pointed out the results presented in the following table: Requested Number of financing The Number projects (through the developof appli- proposed projects that will ment cations for be contracted) region contracting - ROLNorthEast

Total investment value - ROL-

Contribution of beneficiaries (through project) - ROL-

5

4

13,680,000,000 169

32,058,800,000 18,378,800,000

Requested Number of financing The Number projects (through the developof appli- proposed projects that will ment for cations be contracted) region contracting - ROLSouthEast South Muntenia South West West NorthWest Center Bucharest TOTAL

Total investment value - ROL-

Contribution of beneficiaries (through project) - ROL-

15 36 20 20 17 30 20 163

6 19 18 14 11 21 11 104

15,094,715,374

45,078,713,332 29,983,997,958

47,872,805,874 115,895,227,043 68,022,421,169 44,887,265,500 31,314,043,818 18,743,788,750 99,614,315,700 54,727,050,200 72,952,382,901 41,638,339,083 47,530,260,500 28,786,471,750

43,018,740,102 196,018,740,102 153,000,000,000 33,540,400,000 87,837,376,730 54,296,976,730 248,151,759,418 696,985,816,308 448,834,056,890

The outcomes of the implementation up to now of the National multi-annual program for the period 2002-2005 for supporting small and medium sized enterprises for developing export, co-ordinated by ANIMMC are presented in the following table: 2003 (till the end of August) Number of financing applications registered Number of approved applications 381 216 14.5 35 Comparison 2003/2002 % 133.7 94.7 100.4 22.3

Total value of amounts approved, billion ROL Number of applications registered and approved for releasing allocation

% 2003/2002 The value of allocation released at the end of the program, billion ROL 32.95 Number of allocations % 2002/2003 Value of released allocations % 2002/2003

2003 2.9

Components of the program

Number of allocations

Value of released allocation billion ROL

170

Participation to international fairs and exhibitions, organized abroad, with own stand or in association with other enterprises Participation to international fairs and exhibitions, organized across the country, with own stand or in association with other enterprises Drawing up and production of printed materials for promotion of enterprises Designing an Internet site, for presenting the activity of applicant and of promoted products Participation to training courses, inside the country and/or abroad, in the area of export promotion techniques Contracting consulting services for drawing up export strategies and/or market studies Procurement of information regarding foreign markets provided by specialized firms

145.5

190.6

16

1.06

260.0

538.0

39

1.62

134.7

148.15

159

8.03

143.5

153.7

89

824.33

600.0

1057.4

24

1.29

117.4

118.0

54

1.77

22.7

30.13

5

99.54

Until the end of the year 2003, it is estimated the integral consumption of budget allocations foreseen for this programme, in this year. The results registered in 2003, till the end of August, for the National multi-annual program for the period 2002-2005 for supporting the access of small and medium sized enterprises to training and consulting services, implemented by ANIMMC are presented below, in comparison with those of 2002.

% 2002/2003 Number of financing applications requested Number of applications approved 245.7 266.67 171

2003 (till August 31st) 231 136

The value of allowances released at the end of the program, billion ROL

261.74

7.8

Value of Value of Components of the No. of the released program, billion ROL allowances allowances Number of % % allowances allowances 2002/2003 2002/2003 Training activity 208.82 173.13 71 2.32 Consulting activity 307.32 153.05 126 2.51

For the year 2003 as a result of the principle agreement it has been consumed integrally the amount allocated to the program and, taking into account the SMEs interest for this program, it is estimated an increasing of the programme ceiling with 4.2 billion ROL through redistribution within budget allocated to ANIMMC. The programme "Micro-crediting scheme regarding authorizing of credit agencies" was endorsed by the Inter-ministerial Commission for micro lending, by the Ministry of Public Finances and by the Ministry of Justice and was approved during the Government meeting of August 28th, 2003. According the provisions of the Law no 76/2002 with its subsequent modification and completion, in the year 2003, from the budget of unemployment insurance has been allocated for credits the amount of 1,100 billion ROL. The amount is managed by ANOFM and Romanian Commercial Bank, according to the contract no. 187/17.04.2002, respectively no. XXI/J264/16.04.2002. For the third quarter of the year 2003, it was foreseen in the State budget the amount of 529,000 million ROL, out of which 328,594 million ROL were approved for July, leading to the creation of 3,280 jobs, out of which at least 1,640 for unemployed. It has been continued the capitalization of the National Credit Guarantee Fund for SMEs (FNGCIMM), the social capital of the fund reaching 294 billion ROL, the instalment allocated through the ANIMMC budget in the second quarter of this year being of 60 billion ROL. It has also continued the increase of the degree of fund representation by setting another 4 branches, another 6 branches going to be set until the end of the year 2003. For the development of the guarantee activity, FNGCIMM has concluded in the reference period a convention with a new financial institution, so until now the fund have concluded 12 conventions with the following banks: Romanian Commercial Bank, Romanian Development Bank ­ GSG, Eximbank, Romanian Bank, Saving House, Raiffeisen Bank Romania, Banc Post, Alpha Bank, Romanian International Bank, Romexterra Bank, Carpatica Commercial Bank, and Eurom Bank. It has also been concluded a convention with SAPARD Agency for the purpose of supporting SMEs participation in SAPARD Program. For increasing the interest of the banks in attracting a number as high as possible of SMEs beneficiary of guarantees granted by the Fund it has been developed a new product ­ "convention and guarantee letter = guarantee convention". The new product stipulates: The integral payment of guarantee at the first request of the bank, unlike the previous model (convention for sharing risks ­ payment being made in two stages at the beginning of constrained execution/bankruptcy procedure, respectively after ending it); The payment of guarantee for foreign currency credits based on BNR's foreign exchange rate of the date of registering the bank's payment request at Fund, unlike 172

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the use of foreign exchange rate at the date of bank's request for guarantee, as stipulated in convention for sharing risk. There were concluded guarantee conventions with Raiffeisen Bank Romania, Romterra Bank, Eurom Bank, Commercial Bank Carpatica, and Romanian Bank. There are under negotiations similar conventions with other 7 banks with which Fund concluded conventions for risk sharing.

The situation of guarantees granted to SMEs and natural persons on August 31, this year:

Requested guarantees / Approved guarantees %

By number

Areas of activity

Guarantees, million ROL Code

Requested Approved

Number of Guarantees

Requested

Approved By value

Textile industry Trade Communications Food industry Services Non-metal industry Transport Constructions Wood processing Chemical and metallurgy industry Computer production Agriculture silviculture and product

1 2 3 4 5 6 7 8 9 10 11 12 13

15,015 10,295 3,049 81,090 78,304 12,798 18,768 94,017 44,400 44,905 1,883 49,509 2,021 456,054

9,127 0 1,964 49,518 47,537 12,794 16,176 86,945 11,494 21,160 816 34,371 0 291,902

14 4 3 23 26 8 13 25 18 11 2 15 1 163

7 0 2 19 20 8 12 23 10 7 1 11 0 120

60,8 0,0 64,4 61,1 60,7 100,0 86,2 92,5 25,9 47,1 43,3 69,4 0,0 64,0

50,0 0,0 66,7 82,6 76,9 100,0 92,3 92,0 55,6 63,6 50,0 73,3 0,0 73,6

Natural persons and family associations Total

Through granted guarantees, FNGCIMM supported, mainly, investment projects on medium and long term, thus from the total of 120 approved guarantees, a number of 70 guarantees correspond to medium and long term credits, respectively 165.7 billion ROL (56.8%) in comparison with 126.1 billion lei (43.2%) representing guarantees for short term credits. And this, in the conditions in which, at the level of the banks crediting activity has been focused to granting credits on short term. Thus, according to Monthly Bulletin of BNR no 6/2003 credits on medium and long term had a share of 49.5% from the total of credits granted by banks.

Increasing the SMEs access to information and quality consultancy services

173

In the aim of supporting the small and medium-sized enterprises, ANIMMC offers consultancy to the entrepreneurs in the fields of the constitution, registration and function of commercial companies. In this respect, offers to the entrepreneurs models of constitutive acts for setting up, respectively for joint-stock companies, limited liability companies with unique stockholder and with more stockholders. The interested users can consult on ANIMMC site the necessary information for initiating the constitution procedure and registered company. On August 1-3, this year, took place in Piatra-Neamt, the SMEs Fair ­ TIMM 2003 ­ in the first regional approach. With this occasion, 1500 SMEs participated over, seminaries round tables and workshops with the entrepreneurs were organised, on the following themes: - Guaranteed methods for attracting business partners form Germany; - European strategy for employment; - Communication and its role in the organisation management; - Business plan; - Regulations on work relations according to the Law no 53/2003 ­ the Labour Code; the small entrepreneur obligations from the point of view of labour protection at the setting up and developing of a business; - Interactive presentation of service package offered by AJOFM; - Programme for supporting the business in the North-West Region; - Obligations of the employees and employers; global income; declarative part of employees; - Active instrument of governmental policy in supporting the access to credits and developing the Romanian SMEs sector; - Managers with experience versus young managers; - Management, quality, training; - Labour psychology ­ stress at work; - Local communities sustainable development. On August 31st, in Alexandria, on the occasion of the 13th edition of the National Fair for Agriculture and Food Industry ­ AGRALIMEX ­ it was presented the ONUDI project for supporting the SMEs development project in the food industry. It was continued the editing and publishing of the following guides and information leaflets for the entrepreneurs: - "The guide of the young entrepreneur or how to establish your own business" ­ republished paper; - "Business plan - instrument of your own business" ­ republished paper; - " Financing programmes 2003-2004" - updated and republished paper.

2.3.17. SCIENCE AND RESEARCH Romanian participation at the Research Programmes

The National Plan for R&D and innovation The 2003 competition at the programmes in the National Plan for R&D and innovation was launched in March and was ended in early July, after the evaluation of projects proposals was finished. The calls for projects proposals were opened for all the programmes in the Plan: Agriculture and food (AGRAL) Life and health (VIASAN) Environment, energy, resources (MENER) Territorial planning and transportation (AMTRANS) 174

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Information society (INFOSOC) Biotechnologies (BIOTECH) New materials, micro and nano-technologies (MATNANTECH) Technologies for the space and aeronautics field (AEROSPATIAL) Basic and socio-economic research (CERES) Promotion of Romanian inventions (INVENT) Quality and standards (CALIST) Quality and standardisation infrastructures (INFRAS) Economic re-launch by research and innovation (RELANSIN), which mostly promotes RTD projects dedicated to SMEs and to technological development at regional level

The budget allocated for the multi-annual financing of winning projects, till 2005, is of about 1970 billon ROL (approx. 60 mil EUR). The number of new projects expected to be financed following the 2003 competition is in the range of 1200-1500. The competition also included tenders in a top/down regime for 103 priority R&D projects, promoted by various ministries, for supporting the achievement of development strategies in the respective sectors. At nine programmes of the Plan - AGRAL, VIASAN, AMTRANS, MENER, INFOSOC, BIOTECH, MATNANTECH, AEROSPATIAL and CERES ­ the priority projects launched in competition included also the projects promoted by the Ministry of Education and Research for elaborating R&D strategies in the S&T fields specific to the respective programmes. The strategies are aimed for medium term, taking into account the process of integration in the European Research Area. According to the terms of reference, the structure of these projects on R&D strategies includes a major component dedicated to foresight activities in the envisaged S&T fields and related economic sectors, with the participation of all major stakeholders, from both the scientific and the economic environment. International S&T cooperation The calls are permanently opened at the CORINT programme for international S&T cooperation, in order to match the various schedules of international R&D programmes. Participation at the EU RTD Framework Programmes and ERA Several Romanian project proposals for developing NCP network activities were submitted under the FP6-2003-ACC-SSA-General call (published in OJ C79 of 2.04.2003), with deadline in 26 June 2003. The launch of this call can also be seen as an implementation measure for the joint action plan established with EC/ DG Research for improving participation in EU RTD FPs. Bilateral S&T co-operation In order to create a climate of mutual trust for promoting EU RTD FPs partnerships, and according to the recommendations of ministerial meetings at European and regional level, the Ministry of Education, Research and Youth has initiated, during September 2002 / June 2003, new bilateral S&T programmes with France, Slovenjia and Poland. Also, the ministry renewed the existing bilateral S&T programmes with Hungary, Belgium-Flanders, Belgium-Wallonie, Swiss and Greece. The bilateral programmes give a particular support for the development of scientific partnerships on FPs priority themes and also encourage the participation of young researchers and of economic partners. 175

Mobility expenditures for the bilateral S&T programmes are financed from a special chapter in the budget of the ministry. Expenditures for research activities within bilateral S&T programmes are covered by those projects in the national R&D programmes, the achievement of which is directly supported by the respective bilateral S&T collaboration (projects financed in the programmes of the National Plan, including CORINT, or in other national research programmes).

Legal Framework Development

Two major legal acts referring to the R&D system and activities were recently passed: Law 324/8.07.2003 (OJ nr. 514/16.07.2003), for the approval of GO nr. 57/2002, concerning scientific research and technological development, which represents the overall regulatory framework for R&D institutions and activities, including coordination and planning components, and also financing mechanisms, procedures and instruments. Law 319/8.07.2003 (OJ nr. 530/23.07.2003) for the approval of GO nr. 65/ 2002, concerning the Statute of the researcher, which specifies the responsible bodies, as well as the conditions and procedures, for professional development and promotion in the scientific and technical career.

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2.3.18. EDUCATION AND TRAINING Education

Formal education Legislative framework The Law no. 268/2003 (OJ no. 430/19.06.2003) brings some important changes to Education Law no. 84/1995, as follows: It ensures the legal framework for the generalization of the last division of kindergarten, preparatory group for school, and sets the obligation for school inspectorates and local authorities to provide material, human and financial resources for including all children 5-6/7 years old in the preparatory group for school It sets the beginning of compulsory education at the age of 6; It sets the legal framework for a 10 year compulsory education; It ensures the legal framework for the Ministry of Education to provide efficient second chance programmes for persons that did not finalize primary education; It defines a new framework for vocational education and training through Art and trades schools.

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GO no. 68/14.08.2003 (OJ 590/19.08.2003) for the modification of Law 84/1995, establishes: The right for secondary education graduates who wins in the last four years 1st prize or gold medal at school Olympiads or World Olympic level to enrol in higher education institution without exams; The possibility to establish classes with students above the maximum approved by the law with the approval of the Ministry of Education, Research and Youth, Assurance of free school textbooks for students in compulsory education as well as for the students in upper secondary education with social problems. 176

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Continuing the ICT process in Education During the mentioned period continued the national programme ICT Aided Educational System. Hardware implementation: 1220 schools have already been provided with high-tech equipment (server, 25 workstations, switch, router, modem, printer- all connected in a LAN); AEL LCMS implementation As of June 2003, 850 schools have been implemented with LCMS software, which included teachers' training, technical support and delivery of electronic educational content; Training of final users ­ teachers, administrative personnel: 8328 persons in 850 schools have been directly trained by AEL experts as of June 2003 for integrating LCMS software within education, of which: 6774 teachers of various subjects such as physics, mathematics, biology or geography, 1554 auxiliary personnel such as system administrators, librarians, school secretaries. The training scheme provides for these first-level trainees to further disseminate the information and knowledge to their colleagues. For each of the 1220 schools provided with hardware equipment, a supplementary number of 2 to 4 persons were already trained as hardware system administrators. Integration: The SEI educational portal http://portal.edu.ro, created early 2002 as a pilot project, currently reaches 2 million pages visited monthly. A number of 24,267 user accounts are managed by the SEI portal, whose functions include: Administrative communication (intra-ministerial, county administration, local schools), including mail, newsgroups, document management, press reviews etc; Public forums, public surveys; Dissemination of SEI activity such as progress reports, public and private educational system information; Integration of all IT projects developed within SEI in a common framework; Support for automated distribution of educational content or software patches and updates for all schools in Romania.

Ensuring access to education for all The School Rehabilitation Programme. Romanian Government approved the draft law ratifying the Financing Memorandum between Romania and European Bank for Investment for financing the programme for the rehabilitation of school infrastructure in Romania signed at Bucharest in 11 June 2003. The loan amounting 131 millions EUR is granted for 25 years. The project on the school infrastructure rehabilitation has duration of 6 years and has as objectives rehabilitation, reconstruction, modernization and the endowment of 1400 schools as well as other buildings from educational sector from rural and urban area. The main objectives financed are: Rehabilitation, modernization and endowment with furniture of 700 schools from rural area and approximately 300 schools from urban area; Reconstruction and endowment with furniture of 370 adobe schools; Finalization and rehabilitation of 10 students hostels from 9 counties; Rehabilitation, modernization and endowment of 44 camps in 10 counties.

Providing free of charge school supplies for students who come from families with low incomes. During the mentioned period was singed the contract for acquisition the school supplies for 2003/2004 for more than 980 000 pupils.

177

Number of beneficiaries Alba - 14357, Arges - 21621, Arad - 15087, Bacau - 45840, Bihor - 22213, Bistrita - 22168, Botosani - 34571, Braila - 17850, Brasov - 18282, Bucuresti - 7459, Buzau - 27400, Calarasi - 23690, Caras ­ Severin - 17150, Cluj 18635, Constanta - 22000, Covasna - 11100, Dambovita - 20500, Dolj - 36160, Galati 29040, Giurgiu - 12000, Gorj - 15300, Harghita - 13200, Hunedoara - 14085, Ialomita 18527, Iasi - 56511, Ilfov - 6304, Maramures - 30626, Mehedinti - 16245, Mures 24700, Neamt - 33500, Olt - 32000, Prahova - 30089, Salaj - 12942, Satu Mare 21687, Sibiu - 17600, Suceava - 60574, Teleorman - 25494, Timis - 20735, Tulcea 14980, Valcea - 19300, Vaslui - 36176, Vrancea - 22400, Total - 980101 Continuing the of vocational education reform The recent modification of the Education Law, as well as the activities realized up to the present within the technical and vocational education and training (TVET) modernization project, supported by the Program Phare TVET, have led to achievement of the following premises and results: Assurance of equal access to education and vocational training, as well as consolidation of the basic competencies for everyone (Memorandum LLL) through extension of the compulsory education to 10 grades, including TVET (The Arts and Trades School ­ hereinafter named SAM). Assurance of qualifications' transparency in order to obtain mobility on the Romanian and the European labour market. The proposed Romanian TVET system redefines the qualifications in accordance with the defining systems of qualifications in different member states, using ISCED classifications, Decision of the European Council 85/368/EEC regarding the comparability of professional qualifications between member states of the European Community. Assurance of vocational training flexibility through the delay of narrow qualifications (e.g. level I of qualification certified by SAM, after grade X does not correspond to the old school of apprentices, it represents a kind of "general training" qualification and assurance of the social competence for the vocational fields in which qualification of level II is going to be achieved). Assurance of chances of the compulsory education graduates to continue learning at the level of upper secondary education, through routes of professionalization for which there is a free access, without any conditionality, offers opportunities that will contribute to increase the school population participation to the upper secondary education. Assurance of occupational mobility, through the development of a national system of qualifications, common for both initial and continuous training, as well as consolidation of training through modularised curriculum (training modules) to which transferable credits are associated. In case of the Arts and Trades School there were developed new syllabi (OMEC 4664/31.07.2003), for the education year 20032004, in accordance with the Reviewed Training Standards. The syllabi have a modularised curriculum. In view of implementing the new syllabi, trainers from the resource centres in the Phare TVET project have been trained, whom on their turn will train teachers from technical and vocational education through the common financial effort of the European Union (Phare TVET ­ 122 schools) and the Romanian Government (the other schools). The institutional structures which are proposed for the present reform consolidate the regional dimension in the vocational training. Regional Consortia were created having as members representatives of the social partners, County School Inspectorates, Universities and local public authorities. These new structures are complementary to the structures of social partnership for education and vocational training existing at the local / county level, namely the Local Development 178

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Committees of Social Partnership in VET, which are consultative bodies of County School Inspectorates. Higher education There was approved GD no. 693/2003 (OJ no. 466/30.06.2003) for modifying and completing the GD no. 410/2002 regarding the structures and the approved specializations from higher education institutions. Through this legislative act are settled the credits granted to the graduates coming from short time or long time studies, day or evening classes, open distance learning.

Continuing vocational training

It was approved Law no. 253/2003 (OJ no. 429/18.06.2003) for modification and completing the Law no. 132/1999 on the establishment, organization and functioning of the National Adults Training Board (NATB) that stipulates: Coordination at national level of the activity to authorize the providers of adult's vocational training. Elaboration of the occupational standards. Evaluation and certification of the professional competencies received by adults trough the continuous vocational training system (in the context of formal, informal and non-formal training).

According to the extent of the National Adults Training Board attributions, a new organizing and functioning Regulation was elaborated. This one will be approved by common order of the minister of labour, social solidarity and family and the minister of education, research and youth. In this moment, the Regulation is analysed for observations and recommendations to the Ministry of Education, Research and Youth. In view to transpose in practice the provisions of the GO no. 129/2000 regarding the adult's vocational training, a lot of reference paper was elaborate (methodologies), which will be approved by common order of the minister of labour, social solidarity and family and the minister of education, research and youth: The Methodology of authorization of the adult's vocational training providers, The Methodology of certification of the adult's vocational training providers, The Catalogue of qualifications able to be organized trough programs finalized with qualification certificate.

The NATB, according standard procedures, will approve the framework of vocational training programs. These procedures provide evaluation of the programs by the training specialists in this field, who have the capacity to compare the content of the training program framework with the economic agent's needs. It was elaborated training papers for different categories of actors implicated in authorization process: the members of authorization commission and local technical secretary, the specialists competent for evaluation, examination, monitoring, social partners and training providers. It was set-up a working group formed by representatives of Ministry of Labour, Social Solidarity and Family and National Adults Training Board for elaboration of the implementation strategy (Training Plan) of GO no 129/2000. A first meeting with the directors of dialog, social solidarity and family directorates of all the country, taking into consideration they position of presidents of authorization commission, was organized.

Youth

179

In accordance with Action plan for European integration in august 2003 took place at Capidava ­ Cernavoda in partnership with Complex Studies Centre, World Genesis Foundation, Scientific Association for Youth CYGNUS and under the patronage of UNESCO, The Summer Academy for prospective sciences and futurology Atlantykron. The reunion get together 200 youngsters in different conferences and workshops in the field of prospective sciences and futurology, development of creativity etc.

2.3.19. TELECOMMUNICATIONS AND INFORMATION TECHNOLOGIES Electronic communications

Finalising the transposition of the acquis During June-August 2003, the most important legislative event was the entry into force of Law no.304/2003 (OJ no. 551/31.07.2003) on the universal service and users' rights relating to electronic communications networks and services, which fully transposed in the Romanian legislation the provisions of Directive 2002/22/EC. The law establishes the regulatory framework governing the relations between the electronic communications services and networks providers, on the one side, and the end-users, on the other side, establishing rules for the provision of the services within the scope of universal service, the obligations of the electronic communications networks and services providers with significant market power, the rights of the endusers, as well as the obligations of the providers of public electronic communications networks and publicly available electronic communications services towards the endusers. The Law grants to the Ministry of Communications and Information Technology (MCTI) the attribution to establish the policy and strategy concerning the implementation of the universal service. In exercising this attribution, MCTI shall observe the principles of transparency, objectivity and non-discrimination and shall act with a view to ensure the protection of public interest and to limit negative effects on competition. Based on the policy and strategy thus established, the National Regulatory Authority for Communications (ANRC) has the obligation to ensure the right of access to the universal service on the entire Romanian territory. For this purpose, ANRC shall designate one or more universal service providers to ensure the provision of one or more services within the scope of the universal service, in certain areas or in the entire Romanian territory. Implementation of the acquis communautaire An integrated informatics' system (management of documents type) has been initiated in order to create more efficient and modern licenses and authorizations administrative procedures by creating a portal for authorization in the telecommunications field. ANRC activity during this period resulted in elaborating and submitting to public consultation a series of draft decisions. The public consultation procedure, through which the legal provisions concerning the transparency of ANRC activity are implemented, is a very important step in the regulation process, allowing the adjustment of the measures announced by the regulatory body to the market needs and the concrete conditions, as well as contributing to the strengthening of the public trust in the public administration action in this strategic field of the Romanian economy. a. Authorisation of the electronic communications networks and services provision Following the publication of Law no.304/2003, ANRC initiated the internal working procedures with a view to modify and complete the Decision no.131/2002 (OJ no.907/13.12.2002) on the general authorization regime for the provision of electronic 180

communications networks and services, in order to include providers` obligations related to the universal service and users' rights in the general authorization regime, in accordance with the provisions of this Law which has recently entered into force. Until September 1st, a number of 1397 companies have been authorised to provide electronic communications networks and services based on the general autorisation regime, out of which 805 for public networks, 514 for private networks and 168 for telephony services (out of which 130 for local calls, 139 for long-distance calls, and 154 for international calls). b. Licensing of the use of numbering resources Based on Decisions no 140/2002 (OJ no.20/15.01.2003) on the approval of the National Numbering Plan and 141/2002 (OJ no.25/17.01.2003) on the application and granting procedure regarding the licenses for the use of the numbering resources, issued by ANRC, a number of 35 companies have been granted so far numbering licenses (for over 30 million numbers), out of which 29 companies have also received carrier codes. c. License for utilizing radio electric frequencies After completing the evaluation process of the offers that have been handed in during the auction organized at the end of June for tuning of the usage of the radio electric frequencies licenses to provide national networks - point-multipoint electronically communications in 3.5 GH band ­ 6 of these licenses have been granted. Out of the 5 companies that have won, 3 were already in possession of a point-multipoint national license. So far there are 11 companies that are in possession of licenses for pint-multipoint networks: 3 of them already holding national licenses for 82 cities, and one having 14 licenses for 14 cities. In 2003, 3 of the companies that hold licenses in the 3400-3600 MHz band have notified 55 stations. The number of released authorizations for those 11 companies is 287. d. Identification of relevant markets, market analyses and designation of undertakings with significant market power During the reference period, following the entry into force of Law no.304/2003, ANRC launched public consultations on a series of draft decisions whereby the implementation of the provisions of this Law has been launched, by initiating the relevant retail markets identification process, as follows: Preliminary public consultation on the identification of retail markets within the electronic communications sector

This document is a first step towards fulfilling the legal attributions assigned to ANRC under Law no.304/2003, namely: the identification of the relevant retail markets, the analysis thereof and the designation, if such is the case, of the providers with significant market power, as well as the imposition of certain obligations on those providers, for the purpose of promoting competition and protecting users' rights and interests. For the identification of the retail markets, ANRC suggests the following market segmentation: access to public fixed telephone network, local calls provided at fixed locations, national calls provided at fixed locations, international calls at fixed locations, fixed-to-mobile calls, Internet dial-up and ISDN access, broadband Internet access, and the provision of leased lines services. For each of these segments, an analysis of the need to make a separation according to the type of users ­ natural or legal persons ­ will be carried out. Also, for the identification of the relevant specific retail markets, ANRC will take into account the concrete conditions in the market, as well as the global estimation of the future evolutions of its structure and operation, 181

based on the features and evolutions of the markets in the European countries with a similar regulatory framework. Public consultation on the objectives of the market studies to be carried out by ANRC for the identification of the specific relevant retail markets within the electronic communications sector

By carrying out these market studies, ANRC intends to obtain information that will serve the purpose of setting out of the geographic and substitutability limits of the relevant retail markets, to evaluate the capacity of the markets to function on the basis of competitive mechanisms, as well as to identify the possible factors that would hinder the development of a competitive environment in the retail markets. The market studies proposed by ANRC will measure parameters such as: the impact of the mobile telephony on the usage of fixed telephony, monthly average expenditure with the different types of electronic communication services, users' behaviour in case of the emergence of fixed telephony alternative providers, the number of prepaid cards and their satisfaction degree, users' satisfaction degree as regards the fixed telephony services and the dial-up and ISDN Internet access services, as well as the extent to which they are willing to buy services based on new technologies. In order to obtain complete and accurate information mirroring the real situation on the Romanian electronic communications market, the market studies will target the end-users, both natural and legal persons, and the providers of electronic communications networks and services. At the same time, during the reference period, ANRC continued to carry out market analyses and identify the operators with significant power in the markets subject to analysis. In this respect, during 17.06-7.07.2003 two new draft decisions were submitted to public consultation: Draft Decision on the designation of S.C. "Romtelecom" ­ S.A. as having significant power in the market for full or shared unbundled access to the twisted metallic pair local loop, for the purpose of providing broadband electronic communications services and publicly available telephony services at fixed locations; and Draft Decision on the designation of S.C. ,,Romtelecom" ­ S.A. as having significant power on the market for leased lines­terminal segments.

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e. Imposition of specific obligations on the undertakings with significant market power During the reference period, ANRC continued to elaborate and submit to public consultation a number of draft decisions for the imposition of certain ex ante obligations, aiming to contribute to the establishment of an effective competition, on the operators with significant power in the relevant wholesale markets, as follows: Regulation of the market for access to the fixed public telephone networks for the purpose of call origination, termination and transit During 14.08­12.09.2003, ANRC conducted a public consultation on the second draft version of the Decision on the Regulation for the implementation of accounting separation by S.C. "Romtelecom" ­ S.A. This document will regulate the keeping of separate accounting by S.C. "Romtelecom" ­ S.A. for the activities relating to interconnection and access to its network or to the associated facilities. The transport network, the access network, and the retail sales are the most important business units for which the company will have to prepare separate financial statements. The imposition of accounting separation will ensure compliance by S.C. "Romtelecom" ­ S.A. with the obligations of transparency, non-discrimination, and cost orientation. These separate accounting statements will offer a clear and transparent image of the wholesale prices and of the internal transfer prices between S.C. "Romtelecom" ­ 182

S.A.'s business units, as if these were developed by distinct entities. This will also help to prevent cross-subsidies. ANRC also published the Draft Decision on the approval of the Regulation for the elaboration of the top-down model for the calculation of the long run incremental cost by S.C. ,,Romtelecom" ­ S.A., which is submitted to public consultation during 14.0812.09.2003. As concerns the progress made in implementing the interconnection regime, during the reference period 7 alternative fixed telephony operators and one mobile operator have already concluded interconnection agreements based on the Reference Interconnection Offer published S.C. "Romtelecom" ­ S.A. in February 2003 based on Decision no.147/2002 on the principles and prerequisites of the reference offer for interconnection with the public fixed telephone network issued by ANRC in December 2002, and 28 other companies are currently negotiating interconnection agreements on the same basis. On 27.08.2003, ANRC launched the public consultation on the Draft Decision on the modification and completion of the ANRC President's Decision no.147/2002 on the principles and prerequisites of the reference offer for interconnection with the public fixed telephone network. The purpose of this new Decision is to facilitate the provision of telephony services by means of prepaid cards, access to free number services and premium rate services, as well as to insure the interconnection for the provision of dialup Internet access service. S.C. "Romtelecom" ­ S.A. will thus have the obligation to offer access to intelligent network services to its users, and, at the same time, to grant access to its intelligent network services for the users of other operators, under regulated conditions. The consultation procedure on this draft decision shall end on 1.10.2003. Regulation of the markets for access to each public mobile telephone network During 21.08.2003-20.09.2003, ANRC submitted to public consultation two draft decisions: Draft Decision on the approval of the Regulation for the elaboration of the top-down model for the calculation of the long run incremental cost by S.C. "Mobifon" S.A. Draft Decision on the approval of the Regulation for the elaboration of the top-down model for the calculation of the long run incremental cost by S.C. "Orange Romania" S.A.

Based upon the provisions under these decisions, S.C. "Mobifon" S.A. and S.C. "Orange Romania" S.A. shall elaborate LRIC (Long Run Incremental Cost) calculation models, which should allow the cost orientation of the tariffs charged by the two companies for the interconnection services for call termination at mobile locations, these companies being already designated by ANRC as having significant power on the respective relevant markets. For the calculation of the tariffs charged for these services, the calculation models shall use data from the accounting records of the two operators. The cost calculation models shall be based on information on the recent performances of the operators, making possible to eliminate all the costs related to structural and operational inefficiencies as well as to estimate the long-term evolution of these costs. The Decisions comprise, among others, the description and the level of detail of the calculation model imposed on the operators, the definition of the services analysed within the model, and the principles for determining the current costs corresponding to the fixed assets. At its turn, in order to determine the tariffs for which the two operators have cost orientation obligations, ANRC will elaborate a second LRIC cost calculation model, where the information introduced will take into account the practices and the performances of the efficient operators in the international markets. The calculation 183

models elaborated by the operators must be flexible enough to allow the comparison of the data resulted from the application of the two models. The models will be submitted to a reconciliation process meant to ensure the correctness of the determination of all the costs of the company, as well as the transparency of the tariff calculation by the two mobile operators. Regulation of the market for leased lines­terminal segments During 17.06-16.07, ANRC submitted to public consultation a draft Decision on the interconnection of leased lines­terminal segments with the public fixed telephone network. This project aimed to impose on S.C. "Romtelecom" ­ S.A. (after the release of the final version of the Decision whereby this operator will be designated as having significant power in the market for leased lines­terminal segments) transparency and non-discrimination obligations when concluding interconnection agreements with other operators with a view to provide leased lines­terminal segments. This company will also have the obligation to provide certain services and grant to its partners access to certain facilities, as well to charge cost oriented tariffs and keep separate accounting. The draft Decision on the interconnection of leased lines­terminal segments with the public fixed telephone network also includes the maximum time for negotiation of interconnection agreements, as well as delivery and repair times that S.C. "Romtelecom" ­ S.A. must observe when signing the contracts. The maximum negotiation time with a view to conclude a framework interconnection agreement for leased lines­terminal segments is of 2 months from the receipt of a request, and the agreements shall be concluded for the time interval requested by the beneficiaries. The interconnection services for leased lines­terminal segments made available for the other operators, the conditions under which they will be offered, and the tariffs charged will be object of certain completions to the Reference Interconnection Offer published by S.C. "Romtelecom" ­ S.A. in February 2003. f. Dispute resolution between providers

Following the entry into force of Law no.304/2003 on universal service and users' rights relating to electronic communications networks and services, ANRC elaborated and launched for public consultation a draft Decision aiming to complete the Decision no.139/2002 (OJ no.20/15.01.2003) on the establishment of the procedure for the resolution of disputes within the competence of ANRC (the consultation period is 1.0930.09.2003). Decision no.139/2002 exclusively regulated the procedure for the resolution of disputes between providers, as until the entry into force of Law no. 304/2003 ANRC had dispute resolution attributions in this field only. This draft Decision brings as a new element the mediation procedure for the settlement of disputes between providers and end-users, considering the additional attributions acquired by ANRC in this field once this new Law entered into force. g. Collecting statistic data On 27.08.2003, the Draft Decision on the communication of certain data by the electronic communications networks and services providers for statistical purposes was submitted to public consultation, being addressed to the electronic communications market as a whole and having a paramount importance in the context of the need for ANRC to have detailed knowledge on the market. According to this Draft Decision, the providers of electronic communications networks or services will have the obligation to periodically communicate to ANRC certain data for statistic purposes ­ financial data or data referring to the networks and services they make available to consumers. These data will offer ANRC the possibility to supervise and control the compliance with the provisions of the normative acts in force, but will also constitute the basis for the reports, studies or analyses in the electronic communications field this authority will elaborate. 184

h. Radio equipments and terminal telecommunication equipments During the reference period, a secondary legislation that completes the implementation process of the Directive 1999/5/EC has been adopted. This process was started by adopting the Government Decision no. 88/2003. Based on the dispositions of the article 13 of the G.D. no. 88/2003 on the radio equipments and telecommunication terminal equipments and the mutual recognition of their conformity, the Order no. 210/30.06.2003 of the Minister of Communications and Information Technology concerning the notification on radio equipments was promoted. (OJ no. 539/20.07.2003) The order stipulates that the producer, importer or the distributor must notify in writing the General Inspectorate for Communications and Information Technology the intention to introduce on the Romanian market radio equipments that function within frequency bands that do not comply with the regulations in the European Union and Romania. The notification must be handed in at least four weeks before the date at which the introduction on the market of these equipments is intentioned to be made and also must contain information on the radio characteristics of the equipment, especially about the frequency bands, the distance between the channels, the type of modulation and the radio frequency power. The Order also provides a category of equipments that may be introduced on the Romanian market without notification and may be put in service without restrictions. It is prohibited the introduction on the market, the possession and the functioning of jamming and interruption of radio communication equipments. The efficient supervision of the market necessary for the assurance of introduction on the market only of those equipments conform with the applicable and essential requirements, was assured by the adoption of the Order no. 209/30.06.2003 for the approval of methodological norms on the recognition of the authorities in charge with the evaluation of conformity of the equipments to the essential requests stipulated by the Government Decision no. 497/2003 and by Government Decision no. 88/2003 (Official Journal no. 551/31.07.2003) by the Minister of Communications and Information Technology. The Methodological norms, with de legal fundament on the article 34 of GD no.88/2003, establish the evaluation and recognition procedures of the authorities that accomplish the conformity evaluation in the field of radio equipments and of telecommunication terminal equipments, and respectively in the field of electromagnetic compatibility, with the essential requests stipulated by the Government Decision no. 88/2003 on radio equipments and telecommunication terminal equipments and the mutual recognition of their conformity, respectively the Government Decision no.497/2003 on establishing the stipulations of introduction on the market and functioning of electric and electronic equipments from the point of view of electromagnetic compatibility. The evaluation and recognition procedure establishes the criteria for the evaluation of the authorities with the purpose of recognition, the steps that the solicited authority must follow for the recognition, the documents that must be presented by the solicited authority for its competence evaluation, the obligations of the authorities recognized by the Ministry of Communications and Information Technology, as well as the organization and functioning regulations of the Evaluation Committee. Within the program of adopting the harmonized standards under the Directive 1999/5/EC as Romanian standards, the Order of the Minister of Communications and Information Technology no. 208/30.06.2003 on adoption of European harmonized standards as Romanian standards was adopted and published (Official Journal no. 538/25.07.2003).

Postal services

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Until the end of August a number of 99 companies have been authorized to provide postal services based on the provisions of the Decision no.118/2003 (OJ no.212/1.04.2003) on the procedure for the authorisation of the postal services providers. ANRC published on its website (www.anrc.ro) the Official Record of the providers of postal services, which contains all identification data of the providers authorised on this market, as well as information concerning the services they offer. At the same time, the draft Decision launched for public consultation by ANRC during 1.09-30.09.2003, which proposes the completion of the Decision no.139/2002 (OJ no.20/15.01.2003) on the establishment of the procedure for the resolution of disputes within the competence of ANRC, also brings as a new element the mediation procedure for the settlement of disputes between the consumers and the providers of postal services.

Information technology

Communitarian and governmental projects for the acceleration of the transition to the Information Society The project for the informatization of the governmental sessions is part of the government's strategy for modernization and efficiency of the activity of public institutions. The project wishes to make the mechanism of submission of the normative acts' projects for adoption to the Government efficient, by introducing electronic means of administration and control of documents that are part of the governmental sessions. This project will make the Romanian administration have those attributes that the optimal decisional process and the integration process require: transparency, responsibility and adaptability through efficiency. The project was implemented in June this year through the Government Decision no. 1574/2002 on the approval to create an informatization system for the Government's sessions (Official Journal of Romania, Part I no. 18/14.01.2003).This project is functioning (it has been finalized) and will improve the communications, the information exchange and the documents circulation. The technical solution used for this project of informatization system for Government's sessions is based on standard products, available to the public. Its purpose is to assure the gradual replacement of paper documents usually used for and during the sessions, as well as the secure usage of electronic documents between the entities involved in the preparation of the sessions. The Prime Minister and his counsellors, ministers, as well as administrative departments involved in the preparation and administration of the documents to be analysed, discussed, and approved within the Government's sessions are the users of the system. The finances for this project will be assured by the budgetary reserve fund at Government's provision, fund that is part of the state budget for 2003, by supplementing with 18.0 milliards ROL the budget of the Ministry of Communications and Information Technology. By a common Order of the Minister of the Communications and Information Technology and of the Minister in charge with the coordination of the General Secretariat of the Government, a specialized staff was constituted in order to manage and coordinate the necessary measures for this computerized system. This group is formed by the representatives of the General Secretariat of the Government, of the Ministry of Communications and Information Technology and of the Department of Institutional and Social Analysis. The specialized staff is managed by the Minister of Communications and Information Technology, as chief accountant of credits for the usage of the allocated funds. 186

Launching the electronic collection of statistic data through e-statistics.ro Romania has signed the action plan eEurope+ assuming its transposition for the adhesion to the European Union. This plan implies actions to be coordinated by the Ministry of Communications and Information Technology, and the National Statistics Institute will supervise the fulfilment of these actions through specific statistics indicators. This project has as purpose a good internal or external communication, a real information exchange in order to obtain some accurate analysis on the Romanian economy. On the 22nd of July 2003 have been launched, through the electronic system of statistic data collection (SIGMA), made available at www.e-statistica.ro, a number of 4 inquiries: Public Administration 2002, Public Administration 2003, IT Companies, ISP. These inquiries will provide relevant information for the information society services market, as well as for the public administrative services. The electronic collection of the statistic data is a new stage in implementing an electronically government, and, also, an informational society in Romania. The correct and accurate data obtained on regular time schedules, also helps the public administration in the future directions and strategies and the companies in establishing the commercial policies. Connection to the Internet is another important category in the view of this electronic inquiry and uses indicators as: the number of the PCs connected to the Internet and the number of the users. The institutions will answer whether they own a site or they are making on-line acquisitions, reporting their value, as well. On the other hand, these kind of statistics are necessary for the fulfilment of the assumed commitments by the adhesion to e-Europe+ plan, information provided half-yearly or annually reports on regards to the European Commission's established indicators. www.e-statistica.ro has a basic solution that assures secure and confidential transmission of data. For a good functional of this system, the GD no. 542 regarding the norms of using the electronic system of collecting statistic data was approved on May 17 2003 (Official Journal of Romania, Part I no.363/28.V.2003). The system is in the implementation stage and its usage is mandatory for the institutions of central and local public administration according to Law no.202 from May 16, 2003 for the approval of the Government Ordinance 19/2003 on the obligation of using the electronic system of statistic data collection (Official Journal of Romania, Part I no.351/22.V.2003). E-Content In the reference period the participation of Romania in 2003 to the Communitaire Programme on stimulating the development and the utilization of the European digital content within the global networks and promotion of linguistics diversities in the Information Society (e-Content) has been aproved. Government Decision no. 886 from July 29, 2003 on the approval of participation of Romania in 2003 to the Communitaire Programme on stimulating the development and the utilization of the European digital content within the global networks and promotion of linguistics diversities in the Information Society (e-Content), as well as the payment of the fee of the participation in 2003 at this programme (Official Journal no. 574 from August 11 2003) has established the financial fee for Romania in 2003 to the European Union's budget within the limits of the equivalent in ROL worth 168.000 euro. In a period in which the globalisation quickly extends, the digital content market is fragmented to European level, having few participants on the international level and poorly connections between the complementary fields. 187

Initiated by the European Commission, E-Content Programme is very important for the future development of the European market on the products and on-line services, facilitating the spread of the European digital content in other regions of the world. This project has the purpose of new partnerships, strategies and solutions for making some services of digital content easily adapted to the European and global requirements. This program has the following directions: Facility of the access and the extend usage of information on the public sector; Increase the production of digital content in a multilinguistic and multicultural environment; Growth of the digital content market dynamics.

The E-Content project supports the adoption of some innovating and real projects that implies multinational and multisectorial partnerships, as well as their abutting measures, and, also, the initiative of market studies for the identification of the challenges and conveniences in this field. e-Readiness The e-Readiness projects referrs to a country's capacity of application in the process of economic and social development . using the Internet

The Ministry of Communications and Information Technology has initiated an estimating project of the present stage of the information technology and communications infrastructure development in Romania (e-Readiness). For making this study, it was obtained a non repayment grant, to the sum of 35,000 $ for the International Bank for Reconstruction and Development (IBRD), the entire value of this project has increased to 50,000$, On August 1, 2003, at the Ministry of Commnunications and Informations Technolgies center took place a meeting in order to create the Work Group on the evaluation of the present stage of the Romania development, e-Readiness' point of view . This Work Group, constituted by the representatives of the central and local public administration, of the professionals associations, of the civil society and international organisms, established the necessary methodology for making the project and a month schedule for meeting. The methodology was adopted taking into account those five aspects of the e-Readiness analysis: the implication of the Government, the access to the infrastructure and interconnecting, human resources, initiatives of the private sector and social development. The Group members will take part to the acquirement process of the information needed for the evaluation and, also, to the conclusions and recommendations of the study analysis. This project demands new methodology for the evaluation of the e-Readiness, using inquiries and tests, but also using information from data bases of the governmental agencies, private and telecommunications sector. These will be later analyzed and processed into a complete report regarding the situation of IT&C in Romania, and, also, into a long term plan of action on opportunities and identify impediments. E-government projects A series of projects has been launched, in order to offer public services by electronic means, as well as the acceleration of Digital Reform of the Government. These are part of the main public services proposed by the European Community and they are considered fundamental for the implementation of the ,,e-government" projects: Portal regarding the Intelectual Property: information system which will make the monitoring activity concerning the law of the right of the author and the additional rights more efficient. By introducing the electronic means, the communication 188

between entities involved will be more efficient. This period, a contract of 40 000 euros has been signed, and it will be functioning by the end of 2003. The portal can also be accessed by the MCIT's web page. Portal for paying fees and declarations to the Police online (in case of theft and documents loss): through this system the payment of the fees will be made by electronic means, without having to go to the police station. The project describes an efficient mechanism through which one can report the loss of documents quicker and more efficiently. At this moment the offerts concerning the conctract and the portal are analyzed. The access to the portal can be made through a link on the MCIT's web page, as well as through a dedicated one. The portal extension for illegal/antifraud information: the project aims to extend the content of the old portal by completing it with facilities. Within the analysis, one year from its first day of functioning, the subjects from information society domain showed an interest in this service and it has determined its development by adding certain additional facilities which should make the system more dynamic, should support more efficiently the activity of the institutions with attributions of monitoring and control, in this domain. The contract regarging the extension, worth almost 60 000 euros, has been attributed in July. Extension of the security audit system: by adding certain facilities, the portal will become an efficient instrument which allows any organization to verify the security of the information system and its conformity with the security standards known in this field. This system dinstinguishes itself by an ergonomic interface, the users being assisted while exploiting the system. Moreover, certain tests have been covered, the system has the capacity to formulate a series of suggestions regarding the improvement of the system's security liable to the analysis.

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All the projects are presented on the official site of MCIT (www.mcti.ro) which will be extended and updated once new systems appear, thus assuring the transparency and continuous informatization on the achivements in the information society services.

2.3.20. CULTURE AND AUDIOVISUAL POLICY Culture

For the preservation, the rehabilitation and the promotion of the national cultural heritage, there have been developed the following activities: Correlation of the initiatives included in the Memorandum concluded with Austrian partners in order to participate to the second auction for the "Network of Danubian Cities for Economic Co-operation" project; Romania was accepted as part of the Regional Programme for Culture and Natural Heritage in South East Europe (2003-2005), a joint project of the Council of Europe and the European Commission (within the framework of the Culture 2000 Programme). An Integrated Rehabilitation Project Plan/Survey of the architectural and archaeological heritage (IRPP/SAAH) will be completed and implemented; Sulina project was presented at Salonic, 28-30 August 2003 within the framework of the Integrated Rehabilitation Project Plan/Survey of the architectural and archaeological heritage (IRPP/SAAH) ­ of the Regional Programme for Culture and Natural Heritage in South East Europe. The Romanian Cultural Contact Point for Culture 2000 signed the Agreement for 2003 with European Commission (July); 189

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The official launch of the auction for 2004 and preparation of the awareness campaign in Romania: press releases, newsletter, Internet, e-group for 437 cultural operators, distribution by mail to 1000 cultural institutions and non-governmental organizations; The database of the Romanian cultural operators was up-dated and there were published the following Culture 2000 information materials: financing guide for the annual and multiannual cooperation projects; financing guide for books translation projects; Culture 2000 questionnaire; information paper ­ "Euroculture", No 3; Ministry of Culture and Religion was represented to the Culture 2000 Management Committee, to the Culture 2000 workshop (Atena) of the Cultural Contact Points and to training sessions initiated by UNESCO; Co-organizing the ECA conference "Artists Sharing without Frontiers. Networking in the Enlargement Process", Bucharest, 6-7 September; Romania's Cultural Contact Point organized the seminar "National and TransNational Partnerships in the framework of Culture 2000 programme", Bucharest, 13 September; Romania's Cultural Contact Point was invited to participate to the seminar "Cultural Heritage", organized by Cultural Contact Point of Ireland, financed through Culture 2000 programme and held in Dublin on 8 September.

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Audiovisual policy

In the first trimester of 2003 the Chamber of Deputies considered a set of amendments to Law 504/2002 mainly aiming to transpose the comments made by the European Commission in the sense of an increase in the degree of harmonization of the law with the community acquis and also of the improvement of the sanctioning system. The amendments were already debated by the specialized commissions of the Chamber of Deputies and of the Senate and will be debated in the plenary sessions in September 2003. Closely following the community acquis' standards, The National Audiovisual Council continued drafting secondary legislation in application of Law No 504/2002 by adopting the following decisions: Decision no. 122/30.06.2003 2003 (OJ no. 480/4.07.2003) concerning the broadcast of local programs repealing Decision no. 87/2003; Decision no. 123/30.06.2003 (OJ no. 479/4.07.2003) concerning advertising and teleshopping repealing Decisions no. 21, 22, 36, 38/2003; Decision no. 234/4.07.2003 (OJ no. 517/17.07.2003) concerning the obligations of broadcasters upon recording radio and TV programs; Decision no. 245/5.08.2003 (OJ no. 580/14.08.2003) concerning the organization of contests for frequencies for local radio and television stations.

In order to create a coherent framework for the activity of the NAC, there were created Department for Licensing and Control and Department for Legal Affairs and European Integration and additional personnel were employed for the Monitoring Department and the Complaints and Synthesis Office. The strengthening of NAC capacity to monitor and control also continued by the implementation of the Phare Project "Audiovisual Acquis Adoption and Implementation in Romania ­ Improvement of Policy-making and Development of Administrative Capacity". In July, took place the auction and have been evaluated the offers for the Technical Assistance Component of the project. Also, the Procurement Notice for the Investment Component was published in July on the Europeaid web page. This component, that aims to create an IT system for the monitoring of the activity of 190

broadcasters, is present in the stage of the launch of the auction; the offers will be opened in September. Civil servants from the Departments of Communication, Finance, Legal and European Affairs attended specialized training sessions. In 2003 NAC adopted measures aiming to increase the quality of programs in general, assuring the minors' protection and reducing violence in the audiovisual programs; in order to do this, license holders were requested to comply with the regulations in force. NAC sanctioned the infringement of legal provisions on the protection of minors and of human dignity, advertising and the right to reply by issuing 70 summonses, public warnings and fines to the broadcasters.

2.3.21. REGIONAL POLICY AND CO-ORDINATION OF STRUCTURAL INSTRUMENTS The legislative and institutional framework

Following the institutional reorganisation of the central administration structures, the process of developing the legislative framework required by the efficient and effective co-ordination of the structural instruments after the accession date was continued; in this respect, the most important regulations adopted in the field were the following: GD no 734/3.07.2003 (OJ no 479/4.07.2003) regarding the organisation and functioning of the Ministry of European Integration According to the provisions of the above GD, the Ministry of European Integration took over from the former Ministry of Development and Prognosis the tasks related to the co-ordination and monitoring of the regional development activities and, to this end: Prepares the National Development Plan according to the regional development plans and strategies and sectorial programmes of the central administration authorities, based on which it substantiates structural-type funds allocated in the pre-accession period and Structural and Cohesion Funds after the accession; Monitors the achievement of economic and social cohesion objectives in order to reduce the differences in regions development and to consolidate the competitiveness of each region; Ensures the co-ordination of the implementation of the national development policy across the entire country, by regions and zones; Analyses and makes proposals to the National Board for Regional Development with regard to the financing of regional development programmes and projects, elaborates projects to support the regions in order to obtain the necessary means for their restructuring, modernisation and development; Ensures the financial and technical management of the National Fund for Regional Development and of the structural-type funds, in order to achieve the social and economic cohesion, in compliance with the National Development Plan; Ensures the chairmanship and secretariat of the National Board for Regional Development.

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According to the provisions of the same legal act, within the Ministry of European Integration the following structures are established: Managing Authority for Community Support Framework

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that will become operational ­ at general directorate level ­ in 2004. The total number of positions foreseen for the Management Authority for Community Support Framework in 2005 is 70, out of which 20 jobs in 2004; Management Authority for the Regional Operational Programme that will become operational ­ at general directorate level ­ in 2004. The total number of jobs envisaged for the Management Authority for the Regional Operational Programme in 2005 is 204, out of which 142 in 2004; Co-ordination Unit for the Cohesion Fund to become operational as of 2005 with a total number of 8 jobs ensured by supplementing up to the total number of jobs approved by budgetary laws.

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GD no. 737/3.07.2003 (OJ no. 483/7.07.2003) on the organisation and functioning of the Ministry of Labour, Social Solidarity and Family According to the provisions of the above decision, a structure is to be organised within the Ministry ­ at general directorate level ­ the Managing Authority for the Sectorial Operational Programme for Employment and Social Policy. It will become operational starting with 2004, with a total number of 75 jobs in 2005, out of which 25 jobs in 2004. The number of jobs will be ensured by staff redistribution, within the total number of jobs approved for the Ministry and for the institutions subordinated or under the authority thereof. GD no. 768/3.07.2003 (OJ no 487/7.07.2003) regarding the approval of the Statute of the National Employment Agency According to the provisions of the above decision within the National Employment Agency will be set-up - at general directorate level - the Implementing Authority for the Sectorial Operational Programme for Employment and Social Policy planned to become operational as of 2004, with a starting number of 16 jobs to a total number of 34 jobs in 2005. The staff will be provided by redistribution from the units subordinated to the Agency. GD no. 739/3.07.2003 (OJ no. 495/9.07.2003) regarding the organisation and operation of the Ministry of Agriculture, Forests, Waters and Environment For the co-ordination of the structural instruments, two structures were established­ at directorate level ­ that will be operational as of January 1st 2003: the Implementing Authority for the Cohesion Fund for environment infrastructure projects and the Managing Authority for the Sectorial Operational Programme for Agriculture, Rural Development and Fishery. GD no. 740/3.07.2003 (OJ no. 496/9.07.2003) regarding the organisation and operation of the Ministry of Transport, Construction and Tourism According to the provisions of the above decision, in the Ministry's structures will be organized - at general directorate level - the Implementing Authority for Transport Projects financed through the Cohesion Fund ­. The Implementing Authority will become operational in 2004 with a total number of 53 jobs out of which 40 in 2004.

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Continuous professional training will be provided to the employed staff and as well as to the staff to be subsequently employed, a process supported through programmes financed by the European Union and/or Member States.

Programming

Following the recommendations received from the European Commission during the meetings held in Bucharest on June 12th (during the on 2004-2006 programming) as well as on 18 July (the peer-review regarding Romania's progress in preparing for the management of the future Structural Funds), the priorities originally proposed by the Romania for the National Development Plan 2004-2006 were cut down to five (the 192

fifth refers to "Improvement and development of transport, environment and energetic infrastructure"). According to the mentioned recommendations the priorities of the National Development Plan 2004-2006 will be found (as Operational Programmes) in the National Development Plan 2007-2013, based on which Romania will negotiate the Community Support Framework.

Progress registered in the field of public internal audit

It was continued the specific training of the public internal auditors, aimed at consolidating the public internal audit position and increasing the efficiency of the public internal audit, within: the technical assistance project RO 0006.06.01 - "Training of the Public Internal Auditors in Romania"; the twinning project PHARE 2000 "Institutional Capacity Building regarding the Public Internal Audit and Financial Control" (RO 0006.06.03); and the technical assistance project for Directorate of Public Internal Audit and for the General Directorate of the National pre-accession Fund regarding SAPARD Programme (RO 0106.07.01). There were elaborated the "Procedures Guide regarding the audit of wages payment within public institutions" and the "Procedures Guide regarding the audit of materials and services public purchases". There were also improved the existing audit manuals (eg. the Audit Manual regarding SAPARD Programme). Within the 2000 PHARE project "Institutional Capacity Building regarding Public Internal Audit and Financial Control" (RO 0006.06.02) a software application for assisting and monitoring of the public internal audit activity was implemented. Within the Ministry of Public Finance it was established and became operational the Committee for Public Internal Audit by the adoption of GD no. 235/2003 (OJ no. 162/10.03.2003) for approval of the Norms regarding the appointment of the members of the Public Internal Audit Committee (CAPI). Likewise, by the Order of the Minister of Public Finances no. 939/25.07.2003 it was approved the list of the members of the Public Internal Audit Committee who had their first meeting on the 27.08.2003.

Recent developments of the preventive financial control system on State budget and Community funds

In order to implement the provisions of the Strategy on the development of Public Internal Financial Control in Romania (Policy Paper), of the commitments assumed within the complementary position paper for chapter 28 "Financial control", as well as of the primary legislation in the field of the preventive financial control (Law No. 84/2003 amending and supplementing GO no 119/1999 on internal control and preventive financial control ­ OJ no 195/26.03.2003), the following orders were adopted: Order of the Minister of Public Finance No. 752/11.06.2003 for approving the general framework and specific framework of operations subject to delegate preventive financial control; Order of the Minister of Public Finance No. 940/25.07.2003 for approving the methodological norms on organizing and carrying on of the delegate preventive financial control to the National Fund of Pre-accession and to the SAPARD Agency, within the SAPARD program; Order of the Minister of Public Finance No. 941/25.07.2003 for approving the methodological norms on organizing and carrying on of the delegate preventive financial control within the projects financed by ISPA and PHARE funds; Order of the Minister of Public Finance No. 1030/5.08.2003 for delegating to the management of the General Directorate for preventive financial control the competence of endorsing and submitting to the main spending agencies of the 193

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proposals of specific methodological norms on organizing and carrying on of the own preventive financial control submitted by the public entities concerned; Order of the Minister of Public Finance No. 1031/5.08.2003 for approving the methodological norms establishing evaluation criteria for the preventive financial control at the level of public institutions and the integration procedures of this one into the scope of the managerial responsibility, as well as the role of the Ministry of Public Finance in this process.

At the same time, there was revised the manual of preventive financial control.

Regional statistics

In the field of regional statistics, according to the GD no 765/03.07.2003 (OJ no 492/08.07.2003) regarding the organisation and functioning of the National Institute of Statistics, under INS sub-ordination eight regional statistics directorate are functioning, organised at county level ­ centres of development regions established according to the provisions of Law no. 151/1998 regarding the regional development in Romania, with its subsequent modifications - and 34 county statistics directorates at the other counties ­ as decentralised public services, without legal personality. Starting with July 2003, the territorial statistics directorates prepare a monthly "Statistical Bulletin", with a unitary form and contents recommended by the National Institute for Statistics. The pilot project Local territorial units organised by Eurostat was finalised in August 2003. Its overall objective was to gain the knowledge of the national system used in view to observe the administrative changes, by supplying information (in CONC/MODA format) on the territorial structure of the country and on the changes of administrative breakdown over time, after the 1992 Population and Housing Census till 2002, particularly at municipality and regional level (NUTS 2 and NUTS 3 level). For the survey on Road transport of goods (National Phare Programme 2000, regional statistics component), the collected primary data are under processing. For the pilot survey on Living conditions (National Phare Programme 2000, regional statistics component), the data entry activity was finalised, while data logical check and validation were continued.

2.3.22. ENVIRONMENT Institutional capacity

The Ministry of Agriculture, Forests, Water and Environment (MAPAM) was set up, according to the provisions of Art. 9 of EO No. 64/28.06.2003 (OJ No. 464/29.06.2003) establishing certain measures for setting up, organising, reorganising or functioning of certain structures within the framework of the working body of the Government, ministries, other specific bodies of the central public administration and certain public institutions. In accordance with the provisions of GD No. 739/3.07.2003 (OJ No. 495/09.07.2003) on the organising and functioning of MAPAM, this ministry is a public central authority with legal personality, subordinated to the Romanian Government, which takes over the activity of the Ministry of Water and Environmental Protection (MAPM). MAPAM implements the strategy and the Governing Programme in order to promote the policies in the following domains: agriculture, pisciculture, food industry, rural development, sanitary-veterinary, water and environmental protection. In the water and environmental protection fields, MAPAM has the following responsibilities: policy making at national level, drawing up the strategy and the specific regulations for developing and harmonising these activities into the general framework of the 194

Government policy and co-ordinating the implementation of the Government strategy in the concerned areas, accomplishing its role as a state authority for synthesis, coordination and control in these fields. The total number of personnel in the field of environmental protection, water management, European integration on environment, including the related economic, management, human resources activities is of 220 persons (excluding the dignitaries). No personnel fluctuation was registered, the experts of the former MAPM carrying on with their activity in the new ministry. On the basis of art. 8 of GD No. 739/2003, the Authority for the Implementation of the economic and social cohesion funds for environmental infrastructure projects was organised within the structure of MAPAM, as general directorate, subordinated to the Secretary of State who co-ordinates the European integration activity. In accordance with art. 8 par. 3 of GD No. 739/2003, the Authority for the Implementation of the economic and social cohesion funds for environmental infrastructure projects will become operational starting with 2004, when it will function with a staff of 50, to be extended to a total of 100 employees in 2005. The National Administration « Apele Romane », which implements the policy and strategy in the water management field, under the authority of MAPAM, has maintained the same territorial structure (organised by hydrographical basins) and staff (9461 employees in July 2003) as before the publishing of EO No. 64/2003 and GD No. 739/2003. The National Company « The National Institute of Meteorology, Hydrology and Water Management » (INMHGA), also under the authority of MAPAM, currently has 1369 employees. On the basis of Art. 7 of Law No. 294/27.06.2003 (OJ No. 505/14.07.2003) for the approval of EO No. 91/2002 modifying and completing the Environmental Protection Law No. 137/1995, republished, the legal basis was established for setting up the National Environmental Protection Agency (ANPM) and the Regional Environmental Protection Agencies (ARPM). According to Art. 7, "the co-ordination and control of the activity on environmental protection are realized by the central public authority on environmental protection, by the territorial public authorities on environmental protection, by the National Environmental Protection Agency, as well as by other institutions authorized by this law for their fields of responsibility." The entering into force of GD No. 739/2003 brought no modifications to the structure and responsibilities of the APMs (ex-IPMs), the total number of staff amounting to 1486, out of which 1179 civil servants. According to the provisions of GD No. 739/2003, the existing APMs, organized at the level of each county and Bucharest, are public institutions fully financed by the state budget, under the subordination of MAPAM. As a result of the Romanian Government's restructuring, based on the provisions of art. 16 par. 5 letter a) of EO No. 64/28.06.2003 (OJ No. 464/29.06.2003), the National Environmental Guard has been reorganized as specialized body of the central public administration with legal personality, by taking over the Forestry and Cynegetic Territorial Inspectorates, legal institutions in the subordination of the former Ministry of Agriculture, Food and Forestry. Based on the provisions of art. 1 par. 2 of GD No. 761/2003 (OJ No. 499/10.07.2003) for the reorganization and functioning of the National Environmental Guard, this structure is subordinated to the National Authority of Control, financed by the state budget through the Authority's budget, with a maximum approved number of 903 job positions allocated as follows: 644 job positions for its own structure; 259 job positions for the Forestry and Cynegetic Territorial Inspectorates in its subordination. 195

The National Environmental Guard has attributions in preventing, assessing and sanctioning the infringements of the legal provisions in the field of environmental protection, forestry, pisciculture, hunting, waters, soil, air, bio-diversity, as well of the specific attributions in the field of industrial pollution control and risk management, environmental fund, etc. In accordance with art.1 paragraph 1 letter n) of EO No. 64/2003, the National Commission for Nuclear Activity Control (CNCAN) is functioning under the direct coordination of the Prime-Minister, as a public institution of national interest, with legal personality, fully financed from its own revenues. The total number of the staff is 80 persons (without the dignitary positions). In accordance with the provisions of art. 5 paragraph IV, letter t) of EO No. 64/2003, MAPAM ensures the co-ordination for the activity of the Environmental Fund Administration, subordinated institution, financed from its own revenues, having a number of 14 employees. In order to elaborate the research-development studies and to substantiate the strategy and policy in the environmental protection and water management field, under the coordination of MAPAM are the following institutes: No. Institute The National Institute for Research & Development for Environmental Protection ­ ICIM ­ Bucharest The National Institute for Marine Research & Development "Grigore Antipa" ­ INCDM ­ Constanta The National Institute for Research & Development "Delta Dunarii" ­ INCDDD Tulcea TOTAL Number of employees - July 2003 352

1

2

114

3

103 569

Since January 2003, MAPAM, by its territorial structures in the field of environmental protection and water management (APMs and Basin Water Directorates) has participated in monitoring the state-of-play of the measures included in Chapter 22 "Environmental Protection" within the "Action Plan for the Implementation at Local Level of the Legislation Harmonised with the Community Acquis, for the year 2003", adopted by the Romanian Government on 16 January 2003. The actions provided under Chapter 22 mainly refer to the sectors of horizontal legislation, air quality, waste management, water quality and industrial pollution control and risk management. Between June-August 2003, out of the 789 measures with deadlines in this period under Chapter 22 "Environmental Protection", 781 have been achieved, the highest number of measures coming to term in June-August 2003 being registered in the counties of Cluj (39), Arges (38), Constanta (38), Satu Mare (34), Buzau (31), Botosani (29), Suceava (29), Timis (29). It must be underlined that the measures coming to term in this period under Chapter 22 represented the most important percentage (32.1%) of the total measures provided by the Plan. An additional number of 73 measures were fulfilled in advance as compared to their normal deadlines. Monitoring the Action Plan has contributed, over this year, to significantly improving information flows between central and territorial structures having attributions in environmental protection, to acquiring a more comprehensive and accurate image of 196

the current situation, as well as to detecting existing difficulties earlier on. This allowed for establishing adequate measures and for solving problems before any delay occurred in fulfilling the commitments assumed in negotiations. A higher degree of involvement and motivation of the territorial structures in following the implementation of the environment acquis is also worthy of mentioning. By the end of 2003, the number of personnel involved in the environmental field will increase, both at central and local level, by redistribution of the personnel within the Ministry of Agriculture, Forests, Waters and Environment, with 777 job positions, allocated as follows: MAPAM ­38 job positions; Local APMs ­ 498 job positions; Regional Environmental Protection Agencies (ARPM) ­ 88 job positions; National Environmental Protection Agency (ARPM) -100 job positions and National Administration « Apele Romane » (ANAR) ­53 job positions.

At the same time, for the period 2003 ­ 2006, a Strategy has been established for increasing the personnel number in the environmental field, which foresees a total increase of personnel involved in the environmental field (both at central and regional and local level) of 1478 job positions by the end of 2006.

Legislative harmonisation

Over the reporting period, the implementation plans for all environmental sectors have been finalized, including the Directives for which a transition period was requested in the Position Paper for Chapter 22 ­ Environmental Protection CONF ­ RO 37/01. These plans have been submitted for comments and observations to the experts of the European Commission ­ DG Environment, while the Complementary Position Paper will be finalized accordingly. Thus, for the full compliance with the environmental acquis communautaire, a necessary cost of approximately EURO 32.8 billion was estimated until 2022. The financial sources identified are: EURO 5.3 billion from the state budget (16%); EURO 17.9 billion from the economic operators (54.6%); EURO 8.1 billion­ Community funds (24.7%); EURO 1.5 billion­ other sources (4.7%).

Upon the 2003 budget rectification, the MAPAM budget was allocated, for the compliance with specific requirements of the environmental acquis communautaire, EURO 4,502,600 (approximately ROL 167.5 billion) (including the modernisation of the ARPM headquarters). Between 1 June - 26 August 2003, the Environmental Fund collected approximately ROL 248 billion, so that on 26 August 2003, the total collected amount was of ROL 613.4 billion. In order to carry out the priority actions in the Waste Management National Plan (the stage plan), in accordance with the European Strategy on Waste Management, the financing of the projects on the selective collection, the recycling and the treatment of the waste is a priority. For stepping up the establishment of decision structures with attributions in the selection of the priority projects to be financed from the Environmental Fund, the draft EO on the modification and completion of Law No. 73/2000 on the Environmental Fund, republished, has been elaborated and is in the process of endorsement. 197

The National Environmental Action Plan (PNAPM), that includes 177 priority projects for environmental protection, has been completed. This will be officially approved in September 2003 by the Inter-ministerial Committee for the co-ordination of the integration of the environmental protection field into the sectoral policies and strategies at national level. The National Environmental Guard's representatives further pursued inspection and control activities, developed in accordance with the provisions of Recommendation 2001/331/EC on the minimum inspection criteria in the EU Member States. Between 1 January ­ 31 July 2003, 23,572 controls were performed at economic operators, out of which 16,740 at units with a significant impact on the environment. As a result, a number of 2528 contravention fines were inflicted (1705 fines for natural persons and 823 for legal persons), in total amount of ROL 32.57 billion. At the same time, 925 warnings and 326 summonses for ceasing of activity were issued. The activity of 42 economic operators was suspended, 31 environmental permits/agreements were suspended and in 12 cases, criminal files were drawn up. Horizontal legislation Law No. 294/27.06.2003 (OJ No. 505/14.07.2003) for the approval of EO No. 91/2002, amending and completing the Environmental Protection Law No. 137/1995, republished, was adopted. It ensures the general organization and functioning framework for the system established for the pollution prevention, environment protection, monitoring of activities with environmental impact, entry into force and monitoring of measures adopted. EO No. 91/2002, approved by Law No. 294/2003, stipulates the development of authorisation procedures and public participation in decision-making in the environmental field and establishes the competent authorities for environmental protection. The Order of the Minister of Waters and Environmental Protection No. 864/26.09.2002 (OJ No. 397/93.06.2003) approving the procedures for environmental impact assessment and public participation in decision-making concerning projects with trans boundary impact was published. Under the PHARE 2000 RO 0006.14.02 "Technical assistance to ensure compliance with the EIA Directives" project, during June - July this year, training sessions aiming at explaining the correct application of harmonized legislation have been organized for the representatives of the 42 APMs and regional and local officials that work in the field of investments and international agreements in connection to the implementation of Directive 85/337/EEC amended by Directive 97/11/EC on the assessment of the effects of certain public and private projects on the environment. In their turn, during 2004-2007, the participants will have to train the personnel at central and local level. To this end, a manual regarding the EIA procedure has been elaborated and is going to be published in September this year. MAPAM and 15 APMs have benefited from the purchase and installation of hardware and software equipment that will ensure data transmission among central, regional and local environmental authorities regarding the EIA procedure, and will allow the public's access to information. Within PHARE 2000 project "Technical assistance to ensure compliance with the requirements of EIA Directives", in June 2003 a workshop was organized for training the representatives of central and local environmental authorities on the setting up and updating of environmental information data base. In the field of climate change, Romania's third National Communication is under elaboration and will be finalized by the end of September 2003, in order to be transmitted to the Secretariat of the UN Framework Convention on Climate Change. 198

The project « The National Action Plan on Climate Change (PNASC) » - stage 1 « Elaboration of Methodology and Strucure of PNASC », financed by the Japan Special Fund and developed by the Regional Environmental Center for Central and Eastern Europe ­ REC Romania, aimed at improving the cooperation between civil society and governmental institutions, as well as at identifying and attracting specific investments for the reduction of greenhouse gas emissions and adapting to the forecast climate change. The Methodology and the structure of the National Action Plan on Climate Change have been elaborated with the support of representatives of the ministries, research institutes and professional associations. As regards the LIFE program, GD No. 650/5.06.2003 (OJ No. 420/16.06.2003) on the payment of Romania's contribution for 2003 for the participation in LIFE Program was approved. Air quality According to the provisions of the Order of the Minister of Waters and Environmental protection No. 592/2002 on the approval of the Norm regarding the establishing of limit values, of threshold values and of criteria and methods of assessment of sulphur dioxide, nitrogen dioxide and nitrogen oxides, particulate matter (PM10 and PM2,5), lead, benzene, carbon monoxide and ozone in ambient air, as well as on the basis of the results obtained following the preliminary assessment, the air quality assessment procedure according to the provisions of the relevant Directives has continued. The preliminary assessment and the design of the air quality monitoring network in all 11 agglomerations has been achieved; to date, the Agencies for Environmental Protection from 21 counties have submitted data on pollution sources to the National Institute of Research and Development for Environmental Protection ­ ICIM Bucharest in order to be verified, processed and validated. Within the PHARE 2000 Project ­ the investment component ­ "Monitoring System of the Air Quality for Bucharest Municipality", building authorizations have been obtained for the locations of the monitoring stations, and the locations for the displays for the air quality parameters and the information points for the population have been established. At the same time, the specification book for the PHARE 2000 project ­ "The monitoring system of the air quality in Craiova, Cluj and Iasi agglomerations" was finalized. In view of elaborating the Strategy and National Plan on the atmosphere protection, technical assistance was requested from the European Union, through a PPF. On the basis of selection, the winner company was established and will begin its activity in September 2003. As regards the Directive 98/70/EC relating to the quality of petrol and diesel fuels, over the reporting period, GD No. 897/29.07.2003 (OJ No. 588/19.08.2003) on the modification and completion of GD No. 732/2001 establishing the requirements for placing on the market petrol and diesel fuel was adopted. The adoption of this legal act will compel Romanian refineries to produce only diesel fuel complying with the technical specifications stipulated in Annex II of the Directive, transposed into national legislation by Annex No. 3 of GD No. 732/2001. By the new legal act, the deadline of introduction on Romanian market of the above-mentioned type of diesel fuel was advanced from 1 September 2005 to 1 September 2003. Waste management Within the working group for the implementation of the Framework Directive 75/442/EEC on waste, comprising representatives of all interested institutions, local authorities, civil society and academic field, a first draft of the National Strategy and National Waste Management Plan has been finalized. The first drafts of the Guide for the elaboration of county waste management plans, respectively of regional waste management plans, have been elaborated. At the same 199

time, the elaboration of the Regional Waste Management Plan for the Development Region-Centre has started. The identification and classification of landfills falling under Directive 1999/31/EC on landfill of waste have been finalized and the landfills to be exempted from certain provisions of the Directive are to be identified (isolated settlements). Thus, at national level, out of the 249 municipal landfills identified: 11 landfills with free landfilling capacity comply, on the whole, with the Directive's provisions; 235 landfills with variable free capacities do not comply with the Directive's requirements; 3 landfills are currently under construction.

Except for the landfills identified at municipal level, in rural areas have been inventoried 3453 dumping sites, not equipped for the landfill of household waste, the surfaces of 95% of these sites being smaller than 2 ha. These areas are going to be mapped and included in the county waste management plans. The assessment of costs for the Directive's implementation has been made on the basis of a calculation scenario within the Twinning with France, PHARE 2000 "Development of the environmental approximation strategy with particular reference to financial mechanism". The total investment, operational, rehabilitation costs amount to MEURO 6,307 till 2020. If to this figure are added the investment and operational costs for the collection of biodegradable waste fraction, the costs of transfer stations in the proximity of the landfills and of composting platforms required for the full implementation of the Directive, it results a necessary amount of MEURO 8,916. On the basis of the inventory of the incineration and co-incineration installations, the costs necessary for the implementation of Directive 2000/76/EC on the incineration of waste have been assessed at approx. MEURO 220. For centralizing data reported by the economic operators that place on the market packaging and packed products, a database has been established at the APMs and MAPAM. For the implementation of Directive 94/62/EC on packaging and packaging waste, the necessary costs have been estimated at MEURO 242.9. The cost assessment has been made within the Twinning with France (PHARE 2000). A commercial company (GreenTech SRL Buzau) whose activity consists in packaging waste recovery (PET), with a capacity of 1300 to/month, started to operate in June 2003. In the implementation process of Directive 75/439/EEC on waste oils, through LIFE ­ Environment project, in Caras Severin county a pilot project aiming at establishing a selective collection system of waste oils in the Western side of Romania is currently implemented (LIFE00ENV/RO/000989). Within this project, three intermediate collection centers of waste oils in Resita, Caransebes and Oravita have already begun to operate, while the collection stations from the 10 PETROM gas stations (PETROM being a partner in the project) are under completion. Water quality A number of 79 sensitive areas have been identified on the basis of the Methodology for the identification of sensitive areas, elaborated by ANAR, in compliance with the requirements of Directive 91/271/EEC on urban wastewater treatment. Accordingly, 48 urban agglomerations, of over 10,000 p.e. (with a total population of 5,566,918 inhabitants), are situated within the sensitive areas. On the basis of data provided by county councils, local councils and communal regies, the agglomerations of over 2,000 p.e. have been identified for all the 11 Water 200

Directorates; for these agglomerations, the sewage network and waste water treatment plants will be constructed. Thus, there are 2609 human agglomerations of over 2,000 p.e., divided as follows: 2346 agglomerations of 2,000 ­ 10,000 p.e.; 111 agglomerations of 10,000 ­ 15,000 p.e.; 131 agglomerations of 15,000 ­ 150,000 p.e.; 21 agglomerations of more than 150,000 p.e.

Out of the total of 2609 agglomerations, 453 agglomerations have sewage systems and 340 agglomerations have wastewater treatment plants. Of these, only 11 wastewater treatment plants and 2 sewage systems comply with the Directive's requirements. There have been identified 31 industrial units, according to the Art 13 of Directive 91/271/EEC, only 3 of which comply with the Directive's provisions. The quantity of sludge from urban wastewater treatment plants has been estimated at 171,086 to/year. The estimated costs for the implementation of the Directive are EURO 8 billion for investments (EURO 2.8 billion for wastewater treatment plants and EURO 5.2 billion for sewage collection systems), to which are added the exploitation costs of about EURO 3 billion. Together with the county councils, an Action Programme for the construction of sewage systems and wastewater treatment plants has been drawn up, on the basis of an investment plan until 2022. On the basis of GD No. 118/2002 approving the Action Plan for reducing pollution of the aquatic environment and groundwater caused by discharge of certain dangerous substances, which transposes Directive 76/464/EEC on pollution caused by certain dangerous substances discharged into the aquatic environment of the Community (and the 7 "Daughter" Directives), the Order of the Minister of Agriculture, Forests, Waters and Environment No. 501/4.08.2003 (OJ No. 591/20.08.2003) on the approval of the Rules for drawing up the initial inventory of pollution sources of the aquatic environment and groundwater. In accordance with the monitoring methodology elaborated by ANAR, the endowment program of the Water Directorates' Laboratories for the monitoring of dangerous substances has been established. For drawing up the pollution sources' inventory, an analysis of the water samples has been performed in the accredited laboratories, and the values obtained were centralised by categories of dangerous substances. Thus, on the basis of the pilot monitoring (on hydrographical basins) at 70 industrial units which use, produce, discharge or deposit dangerous substances, performed in 2002, the quantitative monitoring of dangerous substances specific to certain types of activities has been developed for 582 industrial economic operators. As regards the quality of water intended for human consumption, the following actions have been undertaken: The assessment of the water supply situation at local level. After centralising the data, the human agglomerations where measures for fulfilling the requirements of the Directive 98/83/EC (new works, extensions, rehabilitations) are necessary have been identified; The County Public Health Directorates have established a program of measures and works for the compliance of the water producers and users from the food 201

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industry with the provisions of Law No. 458/2002 on the quality of water intended for human consumption; A preliminary cost assessment for the implementation of the Directive. The costs related to investments for the wastewater treatment plants and the achievement of the control monitoring, assessed by the representatives of MAI, MS and MAPAM, according to the Law No. 458/2002, are of approximately MEURO 4,381.

In the field of water protection against pollution caused by nitrates from agricultural sources, the identification of the vulnerable areas in compliance with the requirements of the Directive 91/676/EEC has been completed. The Code of Best Agricultural Practice for the Farmers' Use, approved by Order of the Minister of Waters and Environmental Protection No. 918/2002 has been printed in 7000 copies and distributed to the local authorities involved in the implementation of the Directive. The County Directorates for Agriculture have drawn up their own training programs for farmers, in order to implement the Code, which also comprise the system of fertilisers and pesticides use. In accordance with the studies carried out within the project "Pollution control from agriculture" financed by the World Bank ­ GEF, the total implementation costs of the Directive 91/676/EEC are of MEURO 1962. In order to ensure the transposition of the Water Framework Directive 2000/60/EC into national legislation, a draft Law on the modification of the Water Law 107/1996 has been elaborated and is now under endorsement by the interested ministries. In the process of the directive's implementation, the delimitation on abiotic criteria of surface waters has been carried out. For each abiotic type identified, representative reference sections have been selected in order to determine the multi annual average values for the biological elements. The preliminary delimitation of the water bodies at the level of all hydrographical basins has been carried out and the results have been mapped in GIS format and submitted to ANAR for validation. In the process of implementation of Directive 75/440/EEC concerning the quality required of surface water intended for the abstraction of drinking water in the Member States, the Basin Water Directorates have established the monitoring network of the quality of surface water intended for human consumption. Based on the results of the campaigns developed by their laboratories, the surface waters were classified by the quality categories A1, A2, and A3. At the level of each Water Directorate, analyses on water quality at the source were performed, in accordance with the provisions of GD No. 100/2002. Following these analyses it was established that there is correspondence between water quality at the source and the technology used in the water treatment plants. At the same time, training programmes for staff in the laboratories of the Water Directorates have been drawn up. Nature Protection GD No. 582/21.05.2003 (OJ No. 386/4.06.2000) on the payment of Romania's contribution to LIFE ­ Nature Program of the European Community for 2003 and 2004 was adopted. The Order of the Minister of Agriculture, Forests, Waters and Environment No. 552/26.08.2003 (OJ No. 648/11.09.2003) on the approval of the interior zoning of the national parks and of the natural parks from the point of view of the conservation necessity of the biological diversity was issued. At the same time, the natural habitats from the European biographic Panonic Region have been delimitated and GIS maps at the 1:50000 scale have been drawn up. In accordance with the measures provided in the Implementation Plan of Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora (article 202

22), MAPAM, together with the subordinated institutes, must establish the mechanism of promoting training and the information of the public. Within the project "Management of Conservation of Biodiversity", developed with GEF support, the National Strategy on public awareness in the field of Biodiversity Conservation was elaborated and is currently under approval. The elaboration of information and publicity materials concerning Natura 2000 is made within a study contracted by MAPAM. Industrial pollution control and risk management For the full transposition of Directive 96/61/EC on integrated pollution prevention and control, a MAPAM Order for approving the procedure for issuing the integrated permit is under completion. The inventory of installations falling under IPPC Directive 96/61/EC has been finalized. The 2640 installations preliminarily inventoried in 2002 belong to a number of 876 economic units. The process of re-assessment of costs for implementing the IPPC Directive that took place until 15 July 2003 have determined a need of approx. EURO 3.9 billion, which corresponds to the 201 economic units that have requested a transitional period. This action is going to be finalized by the end of September 2003. The economic operators that did not submit substantiated requests for transition periods by 31 august 2003 will have to comply with the provisions of Law 645/2002 for the approval of EO No. 34/2002. In elaborating these new evaluations, the specific requirements in the BAT reference documents (BREF), approved by the European Commission, as well as the provisions in the draft guide (BREF) "Economics and cross media effects" have been taken into consideration. According to the provisions of GD No. 541/2003 establishing measures for the limitation of certain pollutant emissions from large combustion plants (LCP) which transposes Directive 2001/80/EC, the drawing up of the "Guide for the elaboration of proposals for progressive emissions reduction programs for SO2, NOx and dust from LCP" is under completion and will be approved in September 2003 by joint Order of MAPAM, MEC, MAI. The inventory of LCPs at national level has been finalized. SCTERMOELECTRICA SA is the main holder of LCPs in Romania, with 122 such plants. In addition, the local public administration subordinated to the Ministry of Administration and Interior own 25 LCPs. For the 122 LCPs belonging to tSC TERMOELECTRICA SA, the emissions' inventory has been finalized for SO2, Nox and dust. On the basis of data obtained, the results are the following: Do not meet the ELV* for one or more pollutants (SO2, NOx, dust) Total existing LCP ­type I (before 1 July 1987) -109 Total new LCP ­ type II (after 1 July 1987) -13 *emissions limit value Taking into account the total number of LCPs, as well as their structure, the compliance costs for Directive 2001/80/EC on the limitation of emissions of certain pollutants into the air from large combustion plants can be estimated at approx. EURO 2.6 billion. The inventory of economic operators falling under Directive 96/82/EC on major accidents hazards involving dangerous substances (SEVESO) has been finalized. The number of such economic agents, at national level, is 623. Out of this number, there have been identified: 203 97 10

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245 economic units with major accident hazards (39.3%); 88 economic units with minor accident hazards (14.1%); 290 economic units not presenting accident hazards (46.6%).

Directive 1999/13/EC on the limitation of VOC emissions from the use of organic solvents in certain activities and installations has been transposed by GD No. 699/12.06.2003 (OJ No. 489/8.07.2003) establishing certain measures to reduce VOC emissions resulted from the use of organic solvents in certain activities and installations. The legal act provides requirements of ELV for VOCs in residual gas, fugitive emissions values of VOCs and limit values for the total emission of VOCs (depending on activity/installation and threshold values for the use of organic solvents with VOCs content), monitoring procedures for verifying the compliance, appropriate sanctions for non compliance cases. The preliminary inventory of installations falling under Directive 1999/13/EC was finalized on 31 August 2003, and the assessment of costs necessary for the implementation of the Directive will be realized by the end of September 2003.

2.3.23. CONSUMERS AND HEALTH PROTECTION Approximation of legislation

In the reported period, as a result of the reorganization of the Government, has repealed the GD no. 166/2001 regarding the organization and functioning of the National Authority for Consumers Protection. Thus, ANPC continues its competencies and tasks in the consumer protection field through adoption the GD no. 755/03.07.2003 (OJ no. 490/08.07.2003) regarding the organization and functioning of the National Authority for Consumers Protection, establishing: ANPC as specialized body of central public administration, subordinated to the Government and co-ordinated by the Prime-Minister; Department for precious metals and stones, functioning under the ANPC and assuming an activity supported from own incomes.

ANPC has collaborated together with the Ministry of Agriculture, Forests, Waters and Environment, the Ministry of Health, the Ministry of Public Finance, the Ministry of Administration and Home Affairs and the Ministry of Labour, Social Solidarity and Family to elaborate of the following legal acts: Order no. 130/11.07.2003 (OJ no. 573/11.08.2003) to approve the norms regarding the definition, the description and the presentation of vinegar and acid acetic for alimentary use; Order no. 289/01.08.2003 (OJ no. 581/14.08.2003) to approve the norms regarding the Community methods for analysing neutral alcohol for obtaining wine and spirits, flavoured wines, flavoured drinks based on wine and flavoured cocktails obtained from wine; GO no. 90/28.08.2003 (OJ no. 624/31.08.2003) establishing the Romanian Agency for Food Safety. In the period 21-23 July 2003, representatives of the European Commission made a peer review mission regarding market surveillance and metrology for the institutions with attributions on the chapter 1 ­ Free movement of goods. With this occasion, ANPC informed about different aspects of the infrastructure, including the administrative surveillance structures for consumer products and resources available, number of controls carried out, the results and the geographical coverage of the controls, the 204

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complaints received from consumers and the actions undertaken, number and types of measures taken by market surveillance authorities and by custom authorities. At the same time, ANPC informed about its activity as National Contact Point for TRAPEX System, and about the activity undertaken (meetings, information documents etc.) in order to assure the co-ordination of the authorities having market surveillance responsibilities and especially the co-operation with the custom authorities, the relationship with the economic operators and the consumer associations, the information activities, the programmes of surveillance, the participation of consumers in relevant standardization work.

Enforcement of the consumer protection legislation and existence of the administrative infrastructure

ANPC is responsible for the surveillance activities regarding the observance of the legal consumer protection requirements on the safety of products and services offered to the population. Within PHARE 2000 Programme ­ RO 0006.02.06 "Technical Assistance for ANPC" continued the seminars for ANPC inspectors training in matter of: "Safety of toys", Bucharest, 16 - 17 June 2003 (with the participation of 25 specialists, from ANPC and its territorial offices), "Law voltage", Bucharest, 30 June - 1 July 2003 (with the participation of 25 specialists, from ANPC and its territorial offices), "ANPC Information Strategy - Communication plan and improvement of communication skills", Sinaia, 28-29 August 2003 (with the participation of the representatives of ANPC and of the 42 territorial offices for consumer protection).

Following its regular activity, ANPC and its 42 territorial offices for consumers protection made in the period July-August 2003 a number of approximate 17000 control actions, 15,8% of actions being made in co-operation with other specialized bodies of the Central Public Administration. In order to improve the market surveillance activities, ANPC signed in July 2003 the cooperation agreements with: ROMCONTROL S.A. ­ regarding the certification conformity for products; Ministry of Labour, Social Solidarity and Family ­ in the field of market surveillance for low voltage equipments; Romanian Agency for Energy Conservation ­ in the field of thematic controls for energy efficiency.

In the period July-August 2003, within the co-operation actions with the Custom Administration, the ANPC specialists made 1763 custom controls, drawing up 1037 fact-finding statements, the value of import goods with non-conformities in custom being of 4995 million ROL. In the same period, as a result of periodical and on the spot inspections, the ANPC specialists from the 42 territorial offices disposed measures to reduce the consequences of violation of legal acts concerning the protection of consumers' life, health and safety, drawing up 10280 fact-finding statements (4307 for foodstuffs and 3279 for non-food), including 5979 fact-finding statements outside the territorial municipalities (56,5% in the rural area), penalizing infringements by fines in value of 29247 million ROL and, by case, based on the checks and risk declaration, prohibiting the marketing or imposing the withdrawal of products from the market (goods in value of approximate 8288 million ROL, including import products in value of approx. 2742 million ROL) or disposing temporary stop marketing for 1204 economic operators; a number of 1522 economic operator were imposed the definitively stop production or marketing. ANPC commissioned to the laboratories a number of 1089 samples of food and non-food. 205

We mention the action made by the inspectors of the Office for Consumers Protection Bistrita, who sanctioned the organizer of the event ,,Bistrita Municipality's Days". Without a prior control of their legal functioning and of the hygienic and sanitary legal requirements, the organizer authorized the placement on the public domain of some economic operators providing services destined to citizens. For these reasons and for approving the placement of a playground installation non-certified by ISCIR, the inspectors of the Office for Consumers Protection Bistrita disposed a fine of 130 million ROL. Regarding the rapid exchange of information for dangerous products, ANPC being national contact point, we mention that the TRAPEX System is in reorganization. A decision will be taken within the Conference of the national contact points from Central and East European countries, organized in Prague, on 24 -25 September 2003. In its activity of market surveillance, ANPC received from the consumers, in the period July-August 2003, a number of approximate 5000 complaints (from which a number of 47 were sent by the consumer associations) and approximate 2390 were solved being considered well grounded. On the same occasion was offered legal advice to the damaged consumers by the ANPC specialists. We can also mention the actions for ensuring the observance of the rights of consumers and for obtaining redress in case of bad quality products and services. For the period July - August 2003, the value of the products that have been replaced or the value of the redress offered to consumers for non conform products was 2382 million ROL, following the complaints of damaged consumers. In the period June ­ August 2003, the Territorial Office for Consumer Protection Constanta has coordinated the Mini-headquarter "Seashore 2003" in order to develop control and survey actions concerning the quality of products and services offered in this tourist area in the summer period and in order to solve as quick as possible the consumer's complaints. Within this Mini-headquarter were registered over 1000 complaints from consumers and the ANPC inspectors made 933 control actions (cafeterias, accommodation, food and non-food products, exchange and other services), penalizing infringements by fines in value of 2521.5 million ROL and, by case, disposing temporary stop for services for 33 economic operators; a number of 13 units were temporarily closed and products in value of 39.5 million ROL were definitively stop marketing. Within consumers' information and education actions, brochures "Info Tourist" and "Safety of foodstuffs", as well as the weekly publication "Consumer Protection" were delivered free of charge. Consumers' information was also made through the news at local and national radio ­ TV, on this occasion being promoted the free phone line for tourists (966). In the reported period were made actions of information, including 1898 articles in newspapers and over 3400 radio-interviews. The national education and information campaign of consumer's rights and means for defending them continued in 2003 the Programme "Safety of foodstuffs" realized in cooperation with the Ministry of Health. The first event took place in Bucharest on 13 May 2003, being followed up by itinerant seminars organized in two important towns - ClujNapoca (on 17 June 2003) and Constanta (on 27 June 2003). All over the country, in the main shopping centres, the representatives of the ANPC and its regional offices offered the leaflet "ABC of Safety of Foodstuffs", containing basic information on food additives accepted in the national law, labelling of foodstuffs, consumers rights and practical advice. Based on the partnership with Ministry of Education, Research and Youth, started with 15 September 2003, were distributed educational posters in all schools of Romania.

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In the reported period, ANPC issued the draft legal act in order to offer a financial support in value of 500 million ROL, from its budget, destined to the Advisory and Information Pilot-Centre for consumers in Bucharest and its branch in Eforie Sud.

2.3.24. CO-OPERATION IN THE FIELDS OF JUSTICE AND HOME AFFAIRS

On the basis of the Parliament Decision no. 16/2003 on the amendment of the Government organisation framework (OJ no. 436/19.6.2003), the Government of Romania adopted the Emergency Ordinance (EO) no. 64/28.6.2003 (OJ no. 462/28.6.2003) for establishing some measures on the setting-up, organisation, reorganisation or functioning of some structures within the Governmental body, ministries, other specialised central public administration bodies and public institutions. Thus, according to art.5 of the above-mentioned EO, the Ministry of Administration and Interior (MoAI) was set up by merging the Ministry of Interior and the Ministry of Public Administration. According to the provisions of the EO no. 63/28.6.2003 on the organisation and functioning of the MoAI, the new responsibilities of this institution envisage mainly the fields of public administration, order and public safety. Therefore, the MoAI is the specialised body of the central public administration that has as main responsibilities: a. In the field of public administration: To carry out and monitor the implementation of the provisions included in the reform and re-structuring strategies and programmes of the central and local public administration, drawn up in compliance with the Government Programme, the European Union standards and the national legislation. To lead and support the local public authorities and their own body with a view to correctly and unitary apply the legal provisions. To give notice to drafts of legal acts elaborated by ministries and other specialised bodies of the local public administration that include provisions regarding the local public administration; to monitor the co-operation agreements and conventions that the authorities of the local public administration conclude with the authorities of other countries local public administration. To ensure the setting-up and functioning of the refundable and non-refundable external programmes management units, granted financing by external financial institutions; to draw up and to submit for approval the strategy of industrial parks. Its specialised structures to ensure the strategy and Government Programme implementation in the field of civil servants and public service management; to monitor the unitary implementation of the provisions of Law no. 10/2001 on the legal regime of some buildings abusively undertaken during 6.3.1945 ­ 22.12.1989. To manage the civil emergency situations regarding the defence against fires, civil protection and environment protection. To set up and use the National Personal Data Records and to co-ordinate the issuing of identity cards, travelling documents, driving licenses and road vehicles register certificates and their general book keeping activities.

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b. In the field of public order and safety: 207

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To set out according to the law the measures for defending the fundamental freedoms and human rights, the public and private property. Its specialised structures to organise and carry out the activities for preventing and countering terrorism, the various forms of organised crime, as well as other criminal phenomena and anti-social deeds and to carry on the investigations in such cases, as stipulated by the criminal law. To ensure the observance of the Romanian national border regime, as well as the aliens legal regime on the Romanian territory. To ensure the setting-up and the management of the National Weapons Register, Crimes Records Register and National Archive Found.

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Also, MoAI centralizes the data transmitted by the prefectures and monitor, in collaboration with the Ministry of European Integration, the "Plan for the implementation at local level of the legislation harmonised with the acquis communautaire, in 2003" and present periodically to the Government information on the stage of implementation of this plan. The Romanian authorities have taken into consideration the necessity to fully and effective apply the legislation aligned to the European norms on the Romanian territory. Thus, this plan represent a territorial detail of the objective and measures from the "Priority Action Plan for the EU Accession for 2003" the fulfilment of which suppose actions initiated at the county and regional level by the decentralized services of the public central authorities.

Data protection

In this sector, the Ombudsman acted as supervisory authority, registering 80 notes, out of which 9 referring to data transfers abroad. At present, 460 personal data operators are registered. After having analysed the transfer notes registered up to now, Ombudsman issued 3 authorisations under the conditions stipulated by articles 29 and 30 of Law 677/2001. As regards the strengthening of the administrative capacity, according to Ombudsman's new organisation framework, the number of posts in the Directorate for Personal Data Protection has increased from 13 to 20 since 1.6.2003.

Visa policy

Romania has initiated the procedures for amending the agreements on lifting the visa regime, by verbally notifying Bulgaria, the Czech Republic, Croatia, Poland, Singapore and Slovakia. The agreements in force grant the right of residence, no visa required, for a period of 30 days and this period is intended to be extended up to 90 days within 6 months. Regarding the mutual lifting of the visa regime, Romania has verbally notified the following states: Andorra, Argentina, Australia, Bolivia, Brazil, Brunei, Chile, El Salvador, Estonia, Guatemala, Honduras, Israel, Lithuania, Mexico, Monaco, Nicaragua, New Zealand, Panama, Paraguay, Uruguay. The tender procedure for making the new visa stickers has been initiated. The first series of stickers will be delivered before 31.12.2003. At the legislative level, the EO no. 194/2002 on the aliens' regime in Romania, approved with amendments by Law no. 357/2003 (OJ no. 537/25.7.2003), is the most important legal act in this field, which especially stipulates the possibility of granting the short-term and transit visa, only as an exception, at the border crossing points. At present, Romania has a visa regime for all the countries on the EU negative list, except for the Russian Federation, Ukraine, Turkey, Serbia and Montenegro and the Republic of Moldova. 208

The deadline for the entering into force of the visa regime for the nationals of the Russian Federation is 31.12.2003. The Agreement between the Government of Romania and the Government of the Russian Federation on their nationals' mutual travels was signed on 26.8.2002. The internal procedures for approving this Agreement are underway. The deadline for the entering into force of the visa regime for the nationals of the Republic of Ukraine is 31.12.2003. The Agreement between the Government of Romania and the Government of Ukraine on their nationals' mutual travels was negotiated and sealed. Only one article was sealed ad referendum by the Ukrainian party, and the Romanian party's efforts to reformulate its text had remained unanswered. In the case of the Ukrainian party's further delaying the completion of the visa agreement, the denunciation of the "Convention with the Government of the Union of the Soviet Socialist Republics on the visa regime lifting" from 11.3.1991 (fully in force with Ukraine) shall be taken into account. Romania began the negotiations for introducing the visa regime for the Turkish nationals. The second series of negotiations with Turkey is scheduled for the second half of September, 2003. The deadline for the entering into force of the visa regime is 31.12.2003. The deadline for entering into force of the visa regime for the Serbia and Montenegro nationals is 31.12.2003. Romania has made the necessary arrangements in order to start the negotiations for setting the visa regime. As for the Republic of Moldova, the deadline for introducing the visa regime is the accession date, according to the commitments under negotiations. For the proper development of the new regime on the movement of persons with the above-mentioned states, in June 2003, the General Consulate of Romania to Sankt Petersburg has been formally opened and General Consulates to Izmir (Turkey) and Podgoritza (Serbia and Montenegro) are to be opened, as well. Furthermore, the number of the positions corresponding to the consular services or offices from the respective states is to be increased, as needed. As regards the extension at national level of MoAI's integrated voice-data communication system, deadline 31.12.2005, the GoR granted an external credit to purchase communication and IT equipment for the second phase of MoAI's integrated voice-data communication network system (the implementation of the networks in 16 county residences). Also, the tender dossier was draw up and approved by the leadership of MoAI.

Border control

On 1.8.2003, the Border Policeman Manual was concluded and approved by the Minister of Administration and Interior Order. It includes external border control procedures with effects upon the road, railway, international civil airway, sea traffic control, in compliance with the Common Schengen Manual. This manual was elaborated under the twinning light project RO/01/IB/JH-03-TL RO 0107.16.01, "Further legislative harmonisation in the field of border management and control", with Germany as partner. In co-operation with the Ministry of Transport, Constructions and Tourism, the MoAI drafted the Common Order for introducing the internal border regime on the airports of Romania, which completely harmonises the Executive Committee's Decision SCH/Com-ex (19)17 rev.4. On 5.9.2003, taskforces have been made up in order to establish the specific implementation measures of the order above mentioned, individualised according to each airport characteristics. Since 2.6.2003, the Contact Centre in Galai has opened in internal regime, the border police, the police and the customs personnel working together. For the centre to 209

function internationally, the necessary steps for negotiating and signing the agreements with Ukraine and Republic of Moldavia have been taken. Under the 2001 PHARE programme, the tender procedures for the pilot stage of the Integrated Voice-Data Communication System for the Romanian Border Police (Galai, Vaslui and Iai counties) have been initiated. In June 2003, the Treaty between Romania and Ukraine on the state border regime, the co-operation and the mutual assistance in border issues was signed. During June and July, the Agreement on the state border regime and the Convention on traffic control at border crossing points were negotiated with the Republic of Hungary. The Treaty on marking the common state border, the protection, maintenance, reconstruction and verification of the border signs was also negotiated. In July, the preparatory meeting of the 4th annual meeting of the Border Police Commanders/Coast Guard Chiefs from the Black Sea region took place in Bucharest, at expert level. On 27.8.2003, the heads of border authorities from Romania and Bulgaria met and discussed a series of issues, such as: the possibility for the Romanian/Bulgarian policemen teams to carry out joint activities; the setting up of an alternative surveillance system; the Contact Office from Giurgiu to start working permanently; to initiate the negotiations on the border co-operation agreements. During the referred period, steps have been taken to initiate the cooperation at the Romanian border with the Spanish and Italian authorities, on the model of the cooperation with the French authorities at the Oradea Contact Point. By G.D. no. 826/10.7.2003 (OJ no. 522/21.7.2003), the agreement between the General Inspectorate of the Border Police (GIBP) within the MoAI and Border Federal Service of the Russian Federation concerning the co-operation on border issues, signed on 27.3.2003, was approved. On the basis of this Agreement, at present, the "Measures Plan for developing the co-operation between the General Inspectorate of Border Police and the Border Federal Service of the Russian Federation for 20032004" is being elaborated. Within the GIBP, the Legal and European Integration Directorate was set up, with 3 subordinate services: the Legal Service, the Service for European Integration, Programmes and International Co-operation and the Service for the Management of the Border Security Integrated System, which monitors the implementation of the Integrated Border Management Strategy and the Romanian Border Security Strategy. Regarding the professional training of the GIBP personnel, during June-August 12 training programmes took place, as follows: 7 courses for professional border guards - 75 border policemen trained in the following domains: IT Management Maritime service and combating illegal migration Railway border crossing points Training conductors, drugs detecting entering Training conductors, tracks detecting entering Training for commanders of the operational fluvial boats Training for deputy-commanders of the operational fluvial boats

5 courses for combating trans-border crime - 86 border policemen trained in the following domains: 210

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Criminal procedure Control offices Public order, preventing and combating terrorism Combating smuggling Criminal investigations

Under the Twinning Covenant with Germany as partner, 2 workshops took place, with the attendance of customs, border police and justice personnel. 23 border policemen were trained.

During the referred period, 82 police officers and 65 police agents, who graduated in 2003, were employed in the operative structures.

Migration

MoAI took the following additional legislative measures on combating illegal migration to the EU member states: Drafting an amendment of art. 14 align. 1 letter e) of the EO no. 65/1997 on the passports regime in Romania, approved by the Law no. 216/1998, with amendments, consisting of the restriction measure of the right of free movement and against the Romanian citizens returned from the countries Romania has signed readmission agreements with; Signing a Cooperation Protocol on the repatriation of the Romanian minors, victims of abuses committed in Italy, between the GoR and the City Council of District no. 3 ­ Bucharest, on one hand, and the Prefecture and the City Hall of Torino, on the other hand.

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The EO no. 194 on the aliens' regime in Romania, in force since 26.1.2003, was approved with amendments by Law no. 357/11.7.2003 (OJ no. 537/25.7.2003). Also, the GD no. 585/21.5.2003 (MO nr. 391/06.06.2003) on excepting certain countries nationals from the obligation of obtaining long-term-visa for economic and commercial activities, as well as from meeting certain conditions concerning the extension of right of residence, stipulated in the EO no. 194/2002 on the aliens regime in Romania, stipulates that the nationals of Estonia, Latvia, Lithuania, Malta, Hungary, Slovakia, Cyprus, the Czech Republic and Poland are excepted from the long-termvisa for economic and commercial activities. Also, these countries nationals can have their temporary right of residence in Romania extended, as stipulated by law, with no need to prove their subsistence means or to meet the special provisions of articles 53 and 55 of the EO no. 194/2002. At the same time, the spouse, the underage children and the relatives in the custody of the persons mentioned above can have their right of residence extended for the same period. At institutional level, according to the provisions of art 131, para.3 of the EO no. 194/2002 on aliens regime in Romania, the organization of the Aliens Authority was approved by the GD no. 577/21.5.2003 (OJ no. 391/6.6.2003). The Aliens Authority is a structure specialised in the aliens regime in Romania, in combating illegal staying and in managing the data records of the aliens legally residing in Romania. The Aliens Authority constitutes a public service and acts in the benefit of the people, of the community, to support the state institutions, exclusively under the conditions legally stipulated. The main responsibilities of the Aliens Authority are: To endorse entry visas for aliens coming to Romania; To approve the invitations stipulated in art. 37 of the EO no. 194/2002; 211

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To examine if the aliens meet the necessary conditions for being granted or having extended their right of residence in Romania; To grant the permanent right of residence, by approving their residence in Romania; To cancel or revoke, as the case may be, the aliens right of residence in Romania; To undertake the legal measures to clarify the legal statute of unaccompanied minor aliens; To manage the National System for Aliens Data Record; To exercise the legal accountability regarding the extradition regime of aliens from Romania.

The Aliens Authority cooperates with the authorities from Sweden (namely the Swedish Migration Board) and from Denmark (namely the Danish Immigration Service) under the Twinning Covenant RO 2001/IB/JH/01. An officer from the Aliens Authority was appointed to take part in the Working Group on migration, within the Trilateral Romania-Hungary-Austria. This group's activity consists of statistic data exchange in the field of illegal migration, as well as of operational data exchange in the field of illegal trafficking in human beings. Readmission During 2003, 9.773 Romanians were returned from the Schengen Area, as compared to 11.368 persons returned in the same period of 2002. By the GD no. 591/21.5.2003 (OJ no. 386/4.6.2003), the Protocol for the entering into force of the Agreement between the Government of Romania and the Government of the United Kingdom of Great Britain and Northern Ireland on person readmission, signed in Bucharest on 20.2.2003, was approved.

Asylum

In the referred period, the rehabilitation and repairing works have been resumed for the centres of Timisoara and Galati. At present, 96 persons work in the NRO, out of which 42 police officers, 39 police agents and 20 civil servants. The NRO has a total number of 163 allocated posts; the rest of 67 posts will be filled by the opening date of the Accommodation and Procedure Centres from Timisoara and Galati. Efforts for implementing a unique action plan in the field of asylum and for the aliens' police, border police and Romanian police personnel to improve their knowledge of the relevant legislation and practices were resumed. In this respect, by the Minister of Administration and Interior Order no. 491/14.07.2003, The Best Practice Manual in the Field of Asylum for the personnel of the Aliens Authority, Border Police and Romanian Police was approved and it will come to support other institutions with responsibilities in the field, to raise and improve the training level of the staff that gets in touch with asylum seekers and persons who receive a form of protection in Romania. In august 2003, the database on the country of origin information was concluded. It is functional, permanently updated and used within the refugee status determination procedure. On 1.9.2003, the Twinning Covenant RO/02/IB/JH/02 - "Further Development of the Legislative, Practice and Institutional Framework in the Field of Asylum and Refugees", with Germany and Greece as partners, has begun. Its guaranteed results aim at further developing the institutional framework, legislative harmonisation and training of the personnel of the NRO, with a view to totally and unconditionally implement, after the accession date, the Council Regulation no. 343/2003 establishing the criteria and 212

mechanisms for determining the Member State responsible for examining an asylum application lodged in one of the Member States by a third-country national and the Council Regulation no. 2725/2000 concerning the establishment of 'Eurodac' for the comparison of fingerprints for the effective application of the Dublin Convention. Regarding the integration of aliens who were granted a protection form in Romania, during the referred period, the Minister of Education, Research and Youth Order no. 3709 / 2.4.2003 for approving the Methodological norms on the education of the alien children who were granted the refugee status in Romania and of unaccompanied minors started to be implemented. Thus, starting with September, the Ministry of Education, Research and Youth organizes Romanian language classes ­ preparatory year, for the children of asylum seekers, refugees and for unaccompanied minors The draft Law on the integration of persons who were granted a protection form in Romania, currently almost finalised, aims at eliminating any difference of treatment among those who were granted the refugee status and those who were granted conditioned humanitarian protection.

Police co-operation and fight against organised crime

Police co-operation The Twinning Covenant ­ "The further development of the demilitarisation and decentralization process of the police functions", under Phare 2002, is carried on with the assistance of the police institutions from Great Britain and Spain. The acceleration of the structural and organisational re-construction process is fully illustrated by extensive organisational measures and the setting up of some new structures in order to strengthen the institutional building, as follows: The setting up of the National Office for Witness Protection The recruitment of the police officers that are going to work within the National Office for Witness Protection is still on going, as well as the analysis of the operational level of the Office, that has two protected witness in the programme. The re-organisation of the Transport Police (Minister of Administration and Interior Order no. I/0543/1.7.2003), by setting up transport police services and offices at county level and transport police stations within the General Directorate of Police ­ Bucharest and the Police Inspectorate of Constanta County. The setting up of the Service for Countering IT Crimes within the General Directorate for Countering Organized Crime and Anti-drug, on 1.6.2003. The setting up of some police compartments for national and European roads, as well as the creation, by re-distribution, of some data operator positions that implement and manage the traffic offences, according to the new Traffic Code, within the Traffic Police Directorate and all the county traffic police services. Thus, by the Minister of Administration and Interior Order no. I/0544/15.6.2003, a traffic police compartment for European and national roads was set up within each county police inspectorate. As a consequence of the re-organization of the Transport Police, every inspectorate took over such a structure.

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The setting up of police stations in the newly created villages. The re-organization of the General Directorate of Police ­ Bucharest, according to the Minister of Administration and Interior Order no. I/0549/1.7.2003, by taking the following measures:

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The dissolving of the Police Stations no. 26 and 27, of the Mounted Police Department and the strengthening of the operational capacities of the police sectors and stations with available police officers; The decrease in number of the central services positions and their redistribution to the operational capacities of the police stations; The command re-structuring of the police directorates and stations by eliminating the chief position of the Logistical Directorate, the deputy chief positions of the Judicial and Public Safety Directorates and the deputy chief position of police station; The dissolving of the Custody Service and its transformation into an office within the Criminal Investigation Service, as well as the setting up of Custody - Transfer Compartments in all the police stations; The setting up of an operational office, at sectoral level, specialized in flagrant, wanted persons and suspicious deaths; The setting up of the Procedure Compartment within the Criminal Investigation Offices of the police stations, relieving the operational staff activity from collateral actions; The setting up of the criminal investigation nucleus, at each sector's level, in order to operationally solve the cases of the economic and operative offices; The balancing of the number of the positions in the Economic ­ Financial Services from the police sectors and in stations; The setting up of the Transport Police Station in Bucharest.

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The setting up of 11 operative surveillance and investigation services within the Police Inspectorates from Alba, Arges, Bacau, Bihor, Cluj, Dolj, Galati, Iasi, Mures, Timis and Suceava Counties, according to the Minister of Administration and Interior Order no. I/0558/1.7.2003. The increase in number of the Public Order Police staff by 60 officer positions at county level, according to the Minister of Administration and Interior Order no. I/0558/1.7.2003. The re-organization of the General Directorate for Countering Organized Crime and Anti-drug and of the regional centres, according to the Minister of Administration and Interior Order no. I/0561/1.8.2003. Thus, within the General Directorate the following structures have been set up: Undercover Investigators Service Information Investigations Service Money Laundering Service in the organized crime area Communication and IT Office

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Within the Romanian Police, the public servant functions turned into contractual staff functions, according to the Minister of Administration and Interior Order no. I/0551/1.7.2003. The Romanian Police initiated criminal phenomenon prevention programmes in the countryside and towns: "Quiet Streets ­ A Safe Town", "Safe Schools and Parks", "For the quietness of countryside community", "A Safer Road Traffic", "Against White Death", "Against Fraud and Corruption", "For the Community ­ together with the citizens", "Images through Actions". Also, "police service points" have been set up in all the territorial units, with a view to operationally solve the citizens' petitions and intimations. 214

In order to render more effective the prevention actions, to combat anti-social deeds and to consolidate the police-community partnership, the Action Programme in the field of Community Police has been carried out and managed in cooperation with the Dutch experts, within the Police Stations of District no. 3 ­ Bucharest. At the same time, the Programme named the "Proximity Police" was concluded at the level of the Police Stations of District no. 5 in cooperation with the Swiss experts. The record data base of persons known to have committed hooligan acts during sports competitions and of persons known as members of biker gangs predisposed to commit illegal activities is in compliance with the Council Recommendation of 22.4.1996 and there is the possibility to connect it to the integrated data transmission system. As regards the amendment of article 3 of Law no. 60/1961, as to priory declare the international sports meetings, at the present moment the draft legal act is under parliamentary procedure in the Mediation Commission of the Romanian Parliament. Once the Covenant is endorsed, the Romanian Gendarmerie will proceed to the implementation of the twinning RO-02/IB/IH-06 ­"Modernization of the Romanian Gendarmerie structures and practices", in partnership with a French-Spanish consortium (the National Gendarmerie of France and the Civil Guard of Spain). The launching seminar and the official opening are going to take place during the period 812.9.2003. On the basis of "The action plan for ensuring public order and strengthening the citizens security" no. S/7062/28.2.2003, approved by the minister of administration and interior, 43 public order detachments, 229 stations and 216 gendarme posts were created, out of which 39 detachments, 155 stations and 86 gendarme posts already function. During 1.7­2.8.2003, the General Directorate for Countering Organized Crime and Anti-drug held 27 meetings with the liaison officers accredited to Bucharest and received 5 foreign delegations. This year the General Directorate held 72 meetings and received 19 foreign delegations, on the whole. As regards the institutional building, we can also mention the bilateral programmes in partnership with London Metropolitan Police, Italy and BKA, as well as the Romanian police officers' attending the courses organized by the FBI National Academy and ILEA, in the field of information analysis, undercover officers and countering economic crimes. During the referred period, the MoAI organized courses in the field of policing, including courses related to countering organized crime. The Centre for Post-academic Studies from Bucharest organised the following courses: Countering organized crime ­ 25 police officers attended the course between 1418.7.2003. Countering economic-financial crime ­ the offences related to the privatisation process ­ 42 police officers attended the course between 2-4.6.2003 Countering economic-financial crime ­ the capital market ­ 42 police officers attended the course between 7-9.7.2003. Countering economic-financial criminality ­ offences related to intellectual property and gambling ­ 42 police officers attended the course between 14-16.6.2003.

Between 9-20.6.2003, the Training Centre for Police Agents ,, Nicolae Golescu" from Slatina organised the 4th series of training courses on drug prevention and detection, precursors and illegal laboratories, attended by 16 police officers. A special attention was paid to the recruitment process for the police education institutions and for direct hiring, so that all the candidates met the universal criteria. All 215

Romanian citizens, disregarding their ethnic group, had access to the recruitment process and could take the entrance examination. Fight against organised crime The National Office for Witness Protection, set up by the Law no. 682/2002 on the witness protection, keeps on recruiting police officers and analysing the Office's operational level. At present, there are two protected witnesses in the programme. In the referred period, the investigations focused on trans-border organised crime, operational information being used and sent by the means of the National Focal Point and the Romanian liaison and home affairs officers to the similar authorities from France, Germany, Spain, Austria and others European countries. In the referred period, the engineering works at the National Focal Point H.Q. were concluded and the technical conditions for getting connected to the data communication Metropolitan network of the MoAI were met. As a consequence, the INTERPOL National Office can change premises to the new location, so that until December 2003 the MoAI integrated structure, specialised in data exchange on combating trans-border crime, were set up. During June-August 2003, the National Focal Point received 357 assistance applications from the national authorities, the SECI Regional Centre, the Romanian home affairs attaches accredited abroad and the foreign liaison officers accredited in Romania. During the same period, as part of their specialised activity of operational information checking and exchange, the National Focal Point personnel exchanged 414 messages with the above-mentioned institutions. Together with the police structures and the Italian anti-Mafia authorities, the National Focal Point investigated crimes whose authors belonged to criminal organisations. More than 20 pieces of information have been exchanged. During the referred period, the National Focal Point located and ensured the information control on the movement of a criminal group, providing the necessary conditions for its detaining. The group was made up of several Ukrainians, staying on the Romanian territory for a long time, but internationally followed. On 30.6.2003, the MoAI's data and voice Metropolitan Network was concluded. Channels of communication with all county police inspectorates were developed in cooperation with Special Tele-communications Service. The Manual on countering organised crime has been drawn up by MoAI's staff, together with UNDCP Romania, USAID, in co-operation with SECI Centre. The manual has been adopted by the regional countries and its implementation has begun. During 7-11.7.2003, the first course on this issue took place in Bucharest, 25 police officers within the General Directorate for Countering Organised Crime and Anti-drug attending it. The objective under Phare RO 9910.05 - ,,Strengthening the State Capacity in Fight against Corruption and Organised Crime", to create an inter-institutional computerised information exchange network, necessary for solving corruption cases, was met. The connection with the National Anticorruption Prosecutor's Office was established through MoAI's metropolitan network; security measures and necessary speed requests have been also tested. As regards the co-financing of the project no. RO 9910.05, the public invitation to tender was launched, by advertising it in the Official Journal, and the tender dossier has started being drafted.

Fight against fraud and corruption

During the referred period, the implementation of the Programme against Fraud and Corruption consisted of training and organisational activities. Thus, responsibilities for 216

the officers working in this field, including for those working at local level, have been set in order to achieve the objectives of the Programme. Currently, police officers are being trained in order to counter more efficiently the offences related to electronic tenders; e-tenders represent a new domain of activity in which corruption acts occur quite often; many police officers have attended different training courses in Romania and abroad. During June - July 2003, police detected 1 345 persons reported to have committed 2 118 corruption offences; the cases were referred to the prosecution services, since they have competence to conduct and conclude the investigations. In the first seven months of 2003, statistics show that 4 977 persons have been reported for having committed 7 036 corruption offences. As regards the persons involved in corruption offences, 264 persons hold management positions, 98 persons are public servants, 69 persons are running trade companies, regies autonomes and national companies and 91 fall into other social categories. In order to consolidate the institutional framework of the fight against corruption and to ensure an efficient operation of the National Anti-corruption Prosecutor Office (NAPO), on the basis of the Minister of Administration and Interior Order S/II/2932/17.06.2003, 50 police officers were seconded for a six years period to NAPO. Recruitment activities are still on going for 10 police officers. At the level of the Financial Police Directorate within the General Inspectorate of Romanian Police, activities for supporting NAPO in identifying and investigating corruption acts are constantly carried on. A specialised body was created within the General Directorate of Intelligence and Internal Protection ­ the Anti-corruption Sector - in the field of preventing and gathering evidences on corruption deeds, which manifest themselves as phenomena and may deeply affect the operation of the financial system and of the institutional authority and produce serious damages to the private and public property. In terms of the strategy for countering internal corruption, the following activities have been conducted: The selection process of the applicants to MoAI's education institutions has started; the purpose is to identify the applicants that are insufficiently motivated to become police officers and those who can not resist to temptations or that aim at following their own interest; The measures for monitoring the discipline of the staff have been intensified; the purpose is to maintain the professional integrity standards required by this profession and to enhance job motivation; The working places with a high risk of corruption have been identified and monitored; the purpose is to ensure a permanent monitoring of those positions, in order to prevent negative events, which may damage the image of the institution. Procedures for testing police officers' professional integrity and resistance to corruption have been initiated, especially for those who work in an environment with a high risk of exposure to corruption; this activity is based on a permanent cooperation with the structures that have intelligence and internal protection responsibilities;

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The statistics regarding the police officers detected to have committed corruption deeds during June - August 2003 are as follows: June - 6 police officers (2 police officers and 4 police agents); July -15 police officers (1 police officer and 14 police agents); August - 0 cases - until 19 August. 217

In 2003 (until 31 July), 14 complaints have been lodged for reporting ill treatments used by police officers; criminal procedures have been initiated for all 14 cases. For all the 14 cases the police officers have been temporarily suspended; for 3 cases the criminal procedures have been suspended and for 2 cases the charges have been changed; no disciplinary penalty has been inflicted. In order to implement Law no. 161/19.4.2003 on some measures for ensuring the transparency in exercising public authorities, public functions and within the business field, in preventing and sanctioning the corruption, MoAI's specialised structures developed joint activities and delivered to NAPO information, documentary materials and data of interest in 14 cases. At the beginning of 2003, a new action plan to counter corruption of the customs staff was drawn up. This way, the new working methodology on carrying out controls has been elaborated and topics on preventing and countering corruption deeds among customs staff have been included in the control plans. On the spot checks were conducted on the observance of the financial, foreign currency and managerial discipline, with a view to eliminate the illegal acts that may generate corruption among customs officers. As a consequence of the registered public complaints, in all cases in which the provisions of the "Conduct and Discipline Code of the Customs Staff" were not observed, the deeds committed by the customs personnel were investigated from the administrative point of view; the persons involved were heard and the ones found guilty were sanctioned. During the first term of 2003, 62 disciplinary penalties were inflicted for corruption cases. Thus, during June-August 2003, the Inspection and Control Division for Customs Activity conducted 11 thematic and 7 on the spot checks and measures for remedying the existing deficiencies were disposed. 48 administrative investigations on the deeds reported from inside or outside the institution were concluded. 18 checks and training activities on ethics were carried out countrywide, at the level of the regional customs directorates. The arguments for NAPO's autonomy within the Public Ministry, as well as in relation with the Minister of Justice are the following: NAPO is but co-ordinated by the General Prosecutor of the Prosecutor's Office with the Supreme Court of Justice; it is not subordinated, as the other Prosecutor's Offices are. The General Prosecutor of NAPO is appointed by the President of Romania at the proposal of the Superior Council of Magistrates and the Minister of Justice only makes one or more recommendations to the Council, right provided by law. NAPO is the only Prosecutor's Office within the Public Ministry that submits an annual report of activity to the Parliament. NAPO has its own Regulation. The budget of NAPO is separately approved by the Parliament as an annex of the Public Ministry's budget. NAPO has the competence to carry out investigations in the corruption cases stipulated by Law no. 78/2000, within the limits of EO no. 43/2002, amended by Law no. 161/2003. The corruption cases which, according to the legal amendments above mentioned, are not in NAPO's competence are to be solved by the Prosecutor's Offices with the courts. 218

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Thus, it is obvious that NAPO's competencies do not overlap with those of the other structures of the Public Ministry (prosecutor's offices). At same time, there is no overlapping between NAPO and other bodies specialised in checking law observance in different fields of activity (the Control Body of the Government, the Financial Guard, etc.). According to article 14 of EO no. 43/4.4.2002, these bodies are compelled to notify NAPO whenever a crime under its competence is committed. NAPO signed co-operation protocols with several Intelligence Services, with the Romanian Banks Association (on May 2003), with the National Bank of Romania and with the Commercial Bank of Romania, with the purpose of being provided with information on corruption crimes, according to the provisions of article 14 of the EO no. 43. NAPO co-operates with the other control bodies (the Control Body of the Government, the Financial Guard), as already mentioned, according to the procedure established by article 14 (para. 1 and 2) of the EO no. 43. The Superior Council of Magistrates endorsed the new organisation framework of NAPO, which was subsequently approved by the Minister of Justice Order along with the personnel record, according to the provisions of Law no. 161/2003. The personnel organisation framework was approved by the Order of the General Prosecutor of NAPO, both at the central and local level. At the same time, 46 vacant positions of specialised auxiliary personnel and economic and administrative personnel were filled in by competitive examination. Thus, at the end of July 2003, 58% of NAPO's positions were filled in: 72 positions of prosecutors (out of 98) 61 positions of judicial police officers (out of 150) 24 positions of specialists (out of 35) 52 positions of specialised auxiliary personnel (out of 70) 31 positions of economic ­ administrative personnel (out of 63)

In July (22-23.7.2003), as a consequence of the legal changes in the field of criminal procedure, "The Amending of the Criminal Procedure Code by Law no. 281/2003" seminar was organised with the support of the Hanns Seidel Foundation. Preliminary activities were carried out, in order to get the necessary budgetary funds (by budgetary adjustment) and start the repairing works of the NAPO H.Q. and its arrest place, expertly assessed at 1 MEURO. During 1.9.2002­4.8.2003, NAPO registered 2285 cases, out of which 651 were solved; for 859 cases the competence was declined. 775 cases are still pending. Out of the 651 solved cases, 119 were sent to trial and for 532 the investigations were abandoned. As regards the 119 cases followed by the public prosecutor's charge, 376 defendants were sent to trial, out of which 124 under temporary custody for having committed 711 assimilated or connected corruption crimes, as follows: a. classic corruption crimes: b. 156 cases of being bribed; 91 cases of bribing; 3 cases of accepting undue advantages 83 cases of traffic of influence; 201 assimilated corruption crimes, out of which: 5 cases of establishing diminished value for goods 219

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125 cases of unlawful crediting; 55 cases of credit usage for other purposes; 16 cases of accepting undue advantages by officials in control positions;

c. 193 directly connected corruption crimes, out of which: 44 cases of crime association; 113 cases of forgery and usage of forgery; 26 cases of money laundering; 5 cases of abuse in office against the public interests; 4 cases of tax evasion; 1 case of bankruptcy.

To exemplify, as far as the defendants' positions/jobs, we mention: 1 Government expert; 1 ministerial director general; 1 director of a county health insurance company; 5 customs officers; 6 public officials within the General Directorate of Public Finances; 4 managers of bank branches; 15 bank officials; 25 policemen; 2 syndic judges; 1 judicial executor; 59 trading companies' managers.

Fight against drug

On 1st of August 2003, it was putting in practice the new organizing diagram of structures with attribution in the field of combating the organized crime and illegal drugs trafficking. Due to the necessities to have local strong structures there were created organized crime and anti-drug units, at the level of 41 counties in Romania, with new 474 positions in this structures and with policemen working in the narcotic drugs field. In the General Directorate for the Countering the Organized crime and anti-drug was founded a new specialized service for investigation of money laundering obtained from organized crime and drugs trafficking activities. The service for Analyse of information in the drugs field, initially created in the UNDCP Phare Program was extended later in the second phase under the coordination of UNDOC and there were founded new territorial units of analyse of information for problems regarding organized crime. States form European Union financed this project. The stored information was and is turning to account through strategically and operational analyses, which establish criminal connections at national and international level. The international exchange of information and data is achieved with similar agencies and through the net of the new Romanian Police liaison officers appointed in Italy, France, Greece, Germany, Spain, Austria, Turkey and the Czech Republic. During 1.1-25.7.2003, the General Directorate for Countering Organised Crime and Anti-drug (GDCOCA) seized 277,09 kg heroine and 5,37 kg cocaine. Under the programme Against white death, MoAI approved the amount of 5750 MROL for fitting up 4 drug analysis laboratories, within the Timis, Cluj, Constanta and Iasi county police inspectorates. This is one of the measures, together with the modernisation of the drug analysis laboratory within the GDCOCA, taken for countering drug traffic and illegal consumption, by the Supreme Council for National Defence in the session on 14.5.2003. The above-mentioned programme allocates 1400 MROL to 220

purchase a liquid chromatograph connected with a mass spectrometer designed to detect synthetic narcotics. Depending on the amount allocated in the amended budget, the procedures for purchasing this equipment will begin. Under the Endowment Programme for 2003 ­ the co-financing for Phare Programme RO.0006.17, GDCOCA was allocated 80535 EURO, out of which 29196 EURO was already spent, in order to purchase specialised technique in preventing and countering drug traffic and illegal consumption. Thus, based on the supply contracts, by the end of the third trimester of 2003, the specialised units in countering organised crime and antidrug will have been endowed with 25 tape recorders, 4 video cameras, 10 photo cameras and 5 videos, the digital technique resembling that of the EU institutions. During the referred period, the National Anti-drug Agency (NAA) set up the primary database on countering drug production, traffic and illegal consumption, with the expertise of the representatives of all MoAI's institutions and units. Also, NAA required the competent institutions in the field to update the existing data and they established together the guidelines of their cooperation in the field of combating drug production, traffic and illegal consumption and money laundering; all these objectives will turn into co-operation protocols. In this context, NAA issued the implementation plan of the epidemiological indicators and drew up the documents necessary for the signing of the Protocol of cooperation for data collection in the field of drug supply and demand reduction, as well as the monitoring indicators for each ministry and Drug Prevention and Counselling Centres. NAA revised chapters I, III and IV of the EMCDDA Annual Rapport, issued by the European Centre on the basis of the candidate countries regular reports on 2002 drug statistics, and sent proposals and remarks to Lisbon. NAA met the Resident Representative of UNO in Bucharest, Her Excellency Ambassador Soknan Han Jung, evaluating the first results of the cooperation between the two institutions and establishing the common activities for the next years, such as a three year (2005-2008) draft programme submitted for financing to the European Commission. According to the National Anti-drug Strategy for 2003-2004, endorsed by GD no. 154/2003 (OJ no. 111/21.02.2003), the General Customs Directorate (GCD) took a series of measures to enhance the efficiency of the bodies with responsibilities in countering drug trafficking, both at central and local level. The measures aimed at reanalysing the anti-drug control teams depending on the available human resources and their knowledge, improving the co-operation with other involved agencies in the fight against drug, according to the existent protocols. At the same time, the representatives of GCD attended, together with specialists from other institutions (Ministry of Administration and Interior, Ministry of Justice, Ministry of Foreign Affairs, Regional Centre SECI etc), work meetings, seminars and actions on countering narcotics illegal traffic. The anti-drug laboratory within the GCD was re-authorised in July 2003. Thus, the sanitary authorisation for the lab's functioning as a "Laboratory for analysing chemical substances with a view to detect drugs" was received; this laboratory is authorised to carry out the quantitative and qualitative analysis of drugs. As far as the professional training in the field of countering drug traffic is concerned, during June 2003, the following actions were carried out: A regional workshop on the units of risk analysis and assessment (the action SWS 601 within the Regional Phare Programme); Two courses on setting-up the intelligence unit in the field of drugs (the actions ROM 311 and ROM 312 within the Regional Phare Programme); 221

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A seminar on "Countering the Illicit Traffic of the Essential Chemical Substances and Precursors at the Border", organised under the Phare Project on Synthetic Drugs and Precursors; A seminar on "The analysis of narcotics in the laboratory", approaching the aspects concerning the harmonisation of the laboratory analysis methods of the synthetic drugs. A train the trainers course concerning the improvement, development of control techniques and methods in the field of combating drugs trafficking, organised under the Regional Phare Programme (action ROM 121), having Eurocustoms experts as trainers; A seminar on precursors and essential chemical substances, organised by the NAA for the pharmaceutical companies and the users of chemical products.

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In July 2003, the representatives of GCD attended the following activities: -

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Fight against terrorism

The characteristics of the present domestic situation in the field of countering terrorism emphasise that Romania does not face, directly, explicit terrorist manifestations. With regard to the latest developments in the external security context, maintaining Romania outside the field of direct confrontation with terrorism of local motivation and origin imposes, with priority, the prevention of the manifestation of risks and terrorist threats on the national territory, endangering both internal and external security. In compliance with the General Protocol for the organisation and functioning of the National System on Preventing and Fighting Terrorism, the Romanian Intelligence Service draw up co-operation protocols with MoAI, the Foreign Intelligence Service, the Guard and Protection Service and the Ministry of National Defence. The co-operation protocol with MoAI was signed by the heads of the two institutions and currently the drafting procedure of the additional protocols on the co-operation between the subordinate structures is being initiated. The Romanian Intelligence Service leadership signed the protocols with the Foreign Intelligence Service, the Guard and Protection Service and the Ministry of National Defence; in the next period these protocols shall be signed by the leadership of the other parties. Mention should be made of the fact that the co-operation protocol in the field of preventing and countering terrorism between the Romanian Intelligence Service and the Ministry of Economy and Commerce is being drafted. Also, during the referred period, in according with the Decision no. 0084/14.05.2003 of the Supreme Council of National Defence, the Romanian Intelligence Service concluded the draft Law on preventing and countering terrorism. The draft law is intended to provide a legal framework for unitary preventing and combating terrorism, in accordance with the European and Euro-Atlantic requirements in the field.

Fight against money laundering

Law no. 656/2002 makes no difference between the laundering of illicit funds belonging to the person who committed the predicate offence or the funds belonging to a third party, which committed the predicate offence. This law also creates broader possibilities for confiscation of goods, the confiscation of equivalent or substitute goods instead of the goods that are not found being added to the existing regulations. This law includes some procedural provisions in order to facilitate the prosecution and judgement of money laundering offences. Thus, some special investigation methods, 222

such as the surveillance by telecommunication or IT systems or of the bank accounts and assimilated accounts were established. NOPCML's personnel include financial analysts with university degrees in legal and economic sciences, assistant analysts with medium education, as well as auxiliary and economic personnel. The total number of personnel employed is 72 (out of a maximum total number of 75), out of which 44 are financial analysts. In 2003, 414 reports on suspicious transfers have been analysed, out of which: 176 received from reporting entities; 139 received from regulating and financial control institutions; 99 draw up by NOPCML's analysts. Reports concerning the suspect transactions: July (96); August (42); Reports concerning the cash transactions: July (875); August (820); Reports concerning foreign transactions: July (329); August (318).

The structure of the reports concerning the money laundering actions is as following:

During the first part of 2003 (including July and August) 256 cases/information were transmitted to the Prosecutor's Office with the Supreme Court of Justice.

Customs co-operation

The co-operation at the borders is carried out in accordance with the measures proposed by the Integrated Border Management Strategy for 2003-2006, approved by the Government Decision no. 482/2003 (OJ no. 309/8.5.2003). In August 2003 a new co-operation Protocol between GCD and GDCOCA was signed. The new Protocol focused on improving the provisions of the former Protocol by adding necessary stipulations, due to the new trends in the field of combating drug traffic. At the same time, on 4.8.2003, the GCD and GIBP Joint Order on the mass-media coverage of the cases detected during joint checks entered into force; this order aims at correctly and quickly informing the public opinion and at strengthening the cooperation between the two institutions. In June 2003, in the field of inter-institutional co-operation, a training course was carried out in the field of special investigation techniques (ROM 412), attended by the representatives of GCD, GIBP, GDCOCA and General Prosecutor's Office.

Judicial co-operation

Judicial co-operation in civil and commercial matters In the referred period, the Ministry of Justice (MJ) focussed on three basic legal instruments, all of them likely to contribute to the strengthening of the international judicial co-operation in civil and commercial matters, of the business environment and to the stability of court decisions. The EO no. 58/25.6.2003 (OJ no. 460/28.6.2003) on amending and supplementing the Civil Procedure Code entered into force on 26.8.2003.

This normative act excludes the legal way to appeal the action in cancellation and introduces a new reason for review when a decision of the European Court of Human Rights establishes a breach of rights or fundamental freedoms. Also, in order to unify the judicial practice and to ensure the stability of civil judicial relations, the separation of first instance competence between courts and tribunals continues to be based on the updated value criteria; the court is competent to trial lawsuits and petitions of up to 1 billion ROL; beyond this value the competence belongs to the tribunal. 223

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Draft Law on amending and supplementing Law no. 64/1995 on insolvency proceedings and other laws ruling upon these proceedings, was approved by GoR and submitted to Parliament for debate and adoption. The amendment of this law aims at accelerating and simplifying the insolvency proceedings; The new draft Civil Code was submitted to GoR for a first reading on 29 July 2003.

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Judicial co-operation in criminal matters Substantial amendments were made to the criminal legislation as well, in order to facilitate the judicial co-operation with the EU Member States, and for the Romanian legislation to be in compliance with both the community and international legislation. Thus, by Law no. 281 on amending the Criminal Procedure Code, adopted on 24.6.2003 (OJ no. 468/1.7.2003), the Romanian procedural criminal system was substantially amended, as regards the development of the criminal lawsuit. On one hand, the amendments enhance the criminal procedural guarantees, especially those regarding the measures that deprive of or restrict freedom, or those pertaining to the instatement of the court's control regarding the prosecutor's solutions of not sending to trial. On the other hand, new institutions are being introduced into the Criminal Procedure Code, such as witness protection or undercover investigators, meant to provide effective and modern instruments for the detection, prosecution and trial of offenders who use organised forms and improved methods for committing crimes. Thus, the Criminal Procedure Code was substantially amended and supplemented with respect to the following institutions: Measures depriving of and restricting freedom The most important amendment in this matter is ascribing the decision of preventive arrest during the investigation to the prosecutor's competence, for a period of maximum three days, and, after this term, exclusively to the competence of the law court; the former regulation stipulated that the competence belonged only to the prosecutor. This legal solution is in accordance with the jurisprudence of the European Court for Human Rights which has established that the body that orders or maintains the measure of preventive arrest must show certain guarantees among which independence and impartiality both in relation with the executive power and with the involved parties. The European countries legislation, such as France, Italy, Germany and Poland, agree on this matter, stipulating that the measure of preventive arrest is ordered by a judge or a law court, and not by the prosecutor. This regulation has also taken into account the fact that on the role of the European Court of Human Rights there are several such Romanian cases, the sentences against the Romanian State being unavoidable. Mention should be made of the fact that by EO no. 66/11.7.2003 (OJ no. 502/11.7.2003), the provisions of art 155 para 1 and of art 160c para 1 were amended and they eliminate any doubt with regard to the prolongation of the arrest. In order to ensure the development of the investigation in the case of offenders that might leave the country, a new preventive measure depriving of freedom was provided for, namely the "obligation not to leave the country", which can be ordered by the prosecutor during investigation or by the law court during the trial, for a period not exceeding 30 days with the possibility of being extended, according to the law. Increasing the guarantees granted to juvenile accused or defendant A new section was included in the chapter on preventive measures, stipulating regulations regarding: specific rights and a special preventive detention in relation with the particularities of their age, special terms for the length of the retention or preventive arrest measure, as well as a maximum period in which juveniles can be kept in preventive arrest. 224

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Court control over certain measures or acts ordered during the investigation

Court control was established over the prosecutor's solutions of not sending to trial, at present the prosecutor's ordinances in this matter being attacked with appeal only at the hierarchically superior prosecutor. Thus, in compliance with the decisions of the Constitutional Court and the jurisprudence of the European Court of Human Rights, the Criminal Procedure Code stipulates the conditions under which an injured person can address the court of first instance. Thus, the conditions refer to the situations when the legitimate interests of a person have been injured by the prosecutor's ordinance of action dismissal, charges lifting or investigation ceasing or by his/her resolution of not starting the investigation. The law also stipulates that the court and the prosecutor can order domicile searches, detainment and handing over the correspondence and objects, as well as audio or video interceptions and recording, for the urgent and well-justified cases. Only the court can order the safety measures of medical treatment obligation and hospitalisation. Witness protection The law includes new provisions that ensure witness protection when declaring the real identity could jeopardise their life, corporal integrity or freedom. In these cases, the prosecutor, during the investigations, or the court, during the trial, grant the witnesses another identity, under which they show before the judicial body; also, the hearing of witnesses can be accomplished by modern technical means, such as TV networks with image or voice distortion. The protection measures for these witnesses shall be maintained as long as they are threatened. The amendments and additions of the Criminal Procedure Code that refer to witness protection are stipulated by Law no. 682/2002 on witness protection, meant to provide the necessary legislative framework for granting more efficient assistance and protection to citizens who accomplish their civil obligation to co-operate with the judicial bodies. Undercover investigators Bearing in mind that it is difficult to obtain the evidences by classical means in certain cases, the institution of undercover investigators was introduced by law. These persons' activity is strictly delimited by law, meaning that undercover investigators can be used only in certain cases; they act only with the authorisation of a prosecutor appointed by the General Prosecutor from the Prosecutor's Office with the Supreme Court of Justice and only in a limited period of time. The data they acquire can be used only in the criminal case and in connection with the persons the authorisation refers to. The extension of the right to legal redress was achieved, on one hand, by excluding the legal limits, and, on the other hand, by referring not only to the persons deprived of freedom, but to the persons whose freedom was restricted as well. This extension complies with the decisions of the Constitutional Court on this issue, as well as with the provisions of art 5 para 5 of the Convention for the protection of human rights and fundamental freedoms and of art 3 of the 7th Protocol of the Convention.

Besides the amendments and additions of the Criminal Procedure Code, the law also stipulates the functional subordination of police investigation bodies. For a greater effectiveness of the investigations, the law stipulates that the judicial police carry out its activities under the authority of the General Prosecutor of the Prosecutor's Office with the Supreme Court of Justice. The judicial police is made of the police investigation bodies and the police officers specialised in carrying out, discovering offences and data collection, with a view to start the investigation. The new draft Criminal Code 225

The new draft Criminal Code fully reshapes the system of offences and penalties in Romania, aligning it to the EC system. The new draft Criminal Code was approved by GoR on 29.7.2003 and submitted to the Parliament. The Draft Code stipulates: A new definition of the offence: an offence is a deed stipulated by the criminal law, committed on purpose; it was excluded the requirement for the deed to have a social danger degree. This solution emphasises the idea that the lawmaker incriminates only those deeds that reach a social danger degree that justifies the criminal law appliance. The new approach of the title dedicated to the penalty and to its individualisation: It introduces a new main penalty for petty offences ­ the community service; It establishes the system of fines by days; It reflects the division of offences into petty offences and crimes and it regulates the penalties; It provides the penalty execution in a progressive system; It provides new means for penalty individualisation: renunciation of the penalty and postponing the execution of the penalty. The legal entity, except for the State, the public authorities and public institutions, is criminally liable in the cases provided by law, for offences committed on behalf of or in the interest of the legal entity, by its bodies or representatives; The system of penalties applicable to legal entities includes, in addition to the main penalty of fine, several complementary penalties, regulated in detail by the draft law: dissolving the legal entity; suspending the activity or one of the activities of the legal entity for a period of 1 to 3 years; prohibiting its partaking in proceedings for public acquisitions, for a period of 1 to 5 years; prohibiting its access to certain financial resources, for a period of 1 to 5 years; displaying the conviction decision or broadcasting it in the media; Dissolution and suspension cannot be applied to political parties, unions, religious cults or citizens' organisations belonging to national minorities, constituted according to the law; Dissolution cannot be applied to legal entities exercising their activity in the media field; Media activity cannot be suspended.

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Regulating criminal liability for legal entities: -

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Unification of the incrimination norms provided for in special laws and the organisation of the special part into titles: Innovating is the stipulation into separate titles or chapters of the following crimes and petty offences:

Crimes and petty offences of genetic manipulation Petty offences against family Petty offences against labour protection Crimes and petty offences of terrorism Petty offences against the exercise of political and citizens' rights 226

Crimes and petty offences of corruption Crimes and petty offences concerning organised crime Crimes and petty offences against the environment Petty offences against the national cultural heritage and against the national state property archives Petty offences against intellectual property Petty offences against computer data and systems Crimes and petty offences against the economy, industry and trade Crimes and petty offences against the financial interests of European Communities LEGAL ACTS ADOPTED IN THE REFERENCE PERIOD Laws: 1. 2. 3. 4. Law no. 281/24.6.2003 on amending and supplementing the Criminal Procedure Code and other special laws (OJ no. 468/1.7.2003); Law no. 285/26.6.2003 on approving EO no. 69/2002 on the legal regime of electronic ID card (OJ no. 473/2.7.2003); Law no. 357/11.7.2003 for approving EO no. 194/2002 on aliens regime in Romania (OJ no. 537/25.7.2003); Law no. Law 329/8.7.2003 on exercising the profession of private investigator (OJ no.530/23.7.2003); EO no. 66/10.7.2003 on amending some provisions of the Criminal Procedure Code (OJ no. 502/11.7.2003). GD no. 725/28.6.2003 on the organisation framework and the staff of MoAI (OJ no. 478/4.7.2003); GD no. 804/3.7.2003 on endorsing the Agreement between the GoR, represented by the MoAI and the Public Ministry, and the Government of Switzerland, represented by Swiss Agency for Development and Co-operation, on the implementation of the programmes "Introducing the concept of <<Proximity police>> in Romania, 2003-2004", "Improving the co-operation between the Romanian Police and the Prosecutor's Office", signed at Bern on 26. 3.2003 (OJ no. 557/4.8.2003); GD no. 826/10.7.2003 on endorsing the Agreement between GIBP within the MoAI of Romania and the Federal Border Service of Russian Federation on co-operating in border issues, signed at Bucharest on 27.3.2003 (OJ no. 522/21.7.2003); GD no. 869/17.7.2003 on endorsing the Memorandum of understanding between the GoR and the European Institute for Co-operation in Law Enforcement, concerning the co-operation in the field of justice and home affairs, signed at Bucharest, on 19.3.2003 (OJ no.565/6.8.2003).

Emergency Ordinances: 1.

Government Decisions 1. 2.

3.

4.

2.3.25. CUSTOMS UNION

For the purpose of strengthening the administrative-operational capacity for implementing the Community acquis, in January 2003 there was adopted the Plan for local implementation of the legislation harmonized with the Community acquis in 2003, 227

which is a detailed plan for each district, describing the way of implementation of the objectives and measures included in the Plan of priority measures for European integration. Thus, a system was set up for monitoring the way the commitments assumed in preparing accession of Romania to the European Union are met out by the local responsible authorities. As to the customs, the procedure is for the regional customs directorates to report periodically to the local prefect's office the stage of fulfilment of the measures due included in the Plan, subsequent to getting the endorsement of the General Customs Directorate. This monitoring system streamlines communication between central and local structures and gives a concrete image of the way of implementing the Community acquis in customs matters. The European Integration Unit in the prefect's office transmits the situation to the Ministry of Public Administration, that together with Ministry of European Integration, issue notes concerning the stage of fulfilment of the measures and commitments in the Plan, which are presented in the Government meetings. All the measures and objectives proposed by the regional customs directorates and subordinated customs offices and included in this Plan were carried out in due time. In order to simplify the customs formalities, Decision No 1257/7.08.2003 (OJ No 1901/15.08.2003) of the director general of the General Customs Directorate was issued for finding the fulfilment of the conditions laid down in art.13 of the GO No 131/2000 concerning measures for facilitation of port exploitation approved by Law No 99/5.03.2002 with amendments for the port of Constanta. Thus, previously, for foreign goods introduced in Constanta port, with the purpose of temporary storage or transshipment, a summary declaration was required, while they had to be taken over by an operator and the customs duties had to be guaranteed. Starting with 25 August 2003, such formalities are no longer necessary. Actually, these measures will determine both the simplification of the customs formalities and diminishing bureaucracy. The Romanian authorities consider that their application will trigger increase of the goods traffic on the Danube and the Danube ­ Black Sea Channel. At the same time, during June-August 2003, written norms were issued for the uniform application of the provisions referring to the customs transit in all the customs offices. Authorisation of the principals, forwarders and consignees involved in the application of the principles of the common transit system in the territory of Romania continued, at present, 465 principals and 65 forwarders and consignees being authorised to use the common transit system. Also, the authorization process continued of the access of the carriers to the TIR regime, 100 companies were authorized in this respect. The legislation on the observance of the industrial property rights was completed by adoption of the Government Ordinance No 59/2002 (OJ No 643/30.08.2002) amending the Law No 202/2000 concerning certain measures for ensuring the observation of the intellectual property rights within the customs clearance operations. In July 2003, GD No 764 (OJ No 429/18.06.2003) concerning the organization and functioning of the General Customs Directorate was adopted. This legal act provides that, for the purpose of improving coordination of control activity in all domains at national level, as well as removing tax evasion, the minister delegated for coordination of control authorities coordinates the customs inspection and post clearance control activities in the General Customs Directorate. Practically, the organizational structure and prerogatives of the General Customs Directorate are the same. Also, a draft was issued for the harmonization of the Statute of the Customs Staff with the Statute of the Public Servant, with a view to observing the provisions of Law No 161/2003 concerning measures to ensure transparency in practicing public office, public positions and in the business media, prevention and sanctioning of corruption. At present, it is under preliminary approval procedure. At the same time, the public servants were assigned new job appointments in the customs authority, according to Law No 161/2003.

228

In the field of combating corruption in all cases when failure to observe the provisions of the Code of Conduct and Discipline of the Customs Staff was found, or as a consequence of the intimations of the public, administrative investigations were carried out concerning the deeds of the customs officers, the persons involved were heard and the guilty parties sanctioned, if the case might be. During June - August 2003 the Division of Inspection and Control for Customs Activity conducted 11 thematic controls and 7 unannounced controls. Measures were decided for remedying the deficiencies found. The controls led to 48 administrative investigations concerning the facts notified from within or without the institution, and to 23 disciplinary sanctions during June August 2003, ranging from written notice and decrease of the basic salary by 5-15% for a period of 3-6 months, to disciplinary cancellation of the work contract. The detailed situation of the sanctions applied to the staff in the General Customs Directorate and subordinated units during June - August 2003 is the following: Number of sanctions 10

No. 1.

Sanction Warning according to Art.99 letter "b " of the G.O. 16/1998 concerning the Statute of the Customs Staff Decrease the basic salary by 5 ­ 15% for 3-6 months according to Art.99 letter "d" of the G.O. 16/1998 concerning the Statute of the Customs Staff Disciplinary cancellation of the individual contract of work according to Art.99 letter "h" of the G.O. 16/1998 concerning the Statute of the Customs Staff Suspension according to Art.109 of the G.O. 16/1998 concerning the Statute of the Customs Staff

The deed committed Superficiality in conducting official duties Lack of firmness in coordinating the subordinated customs officers Conducting superficial customs control

2.

8

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3.

1

Failure to apply the customs seal to a truck after conducting the customs clearance

4.

4

The customs officers were trailed for the offences of accepting bribe, abuse in conducting official duties, accessory to forgery

In the country, at the level of the regional customs directorates, over 18 control actions and training actions on ethics were performed. As far as the cooperation at the frontiers between the customs services and other enforcement bodies is concerned, this is carried out in accordance with the measures proposed in the Strategy of the Integrated Management of the State Border during period 2003-2006, approved by the GD No 482/2003 (OJ No 309/8.05.2003). Also, on 4.08.2003 the Joint Order of the General Customs Directorate and the General Inspectorate of Border Police concerning the mass media cover of the cases on the infringement of the law discovered within the control common actions entered into force. It has as objective the correct and rapid information of the public opinion and the increasing the co-operation relations between these two institutions. In June 2003, in the field of inter-institutional co-operation, a training course was held in special investigation techniques (ROM 412), attended by the representatives of the General Customs Directorate and the General Inspectorate of the Border Police, the 229

General Directorate for Combating the Organised Crime and Anti-drug, the General Prosecutor Office. In the field of the fight against illicit traffic of drugs, the anti-drug laboratory within the General Directorate of Customs was re-authorised in July 2003. Thus, the sanitary authorisation for the operation of the laboratory as "Laboratory for analysing the chemical substances in view of drugs findings" was obtained. This laboratory is authorised to carry out the quantitative and qualitative analysis of drugs. At the same time, in August 2003 a new co-operation Protocol was signed between the General Customs Directorate and the General Directorate for Combating the Organized Crime and Antidrug. The new Protocol contains certain changes of the provisions of the former Protocol due to the new trends occurred in combating the drugs trafficking. For the purpose of combating customs fraud, during the months of June and July 2003, 1658 control actions were conducted at the premises of public institutions, economic operators and private persons. During the same period, the General Police Inspectorate was notified to begin criminal investigation in 46 cases concerning economic operators and other persons. The amounts found to be due to the state budget (representing due customs duties, confiscations and fines) were over 146.860 millions ROL (out of which: customs duties: 136,547 millions ROL; confiscations: 7,423 millions ROL; fines: 2,890 millions ROL). The value of payments to the state budget: over 21,543 millions ROL (out of which: customs duties: 19,448 millions ROL; confiscations: 729 millions Lei ROL; fines: 1,366 millions Lei ROL). The activity of the mobile units of customs surveillance and control during June August is summarized as follows: 3015 surveillance and control actions were conducted, 84 contravention reports were concluded, 187 receipts for detaining goods; contravention sanctions were applied, amounting to 1,884 billions ROL; the actions of the mobile units of customs surveillance and control resulted in assessing an amount of 7,209.8 billions ROL customs duties; various goods with a value amounting to 10,783 billions ROL, 8 cars; 1957 grams of gold and 3019 grams of silver were detected.

At present, the General Customs Directorate, through the Directorate of Customs Surveillance and Fight against Customs Fraud, run specific actions with a view to reorganize the mobile units of customs surveillance and control at national level, aiming to increase the efficiency of their controls. Based on Law No 202/2000 concerning measures to ensure observance of the intellectual property rights in customs clearance operations, and on GD No 301/2001 concerning its Application Norms, during July ­ August 2003, 10 intervention requests were submitted to the General Customs Directorate, out of which 4 were the result of ex-officio actions of the customs authority. During the reference period, the General Customs Directorate made seizures of goods suspect of infringing an industrial property right, as follows: clothing ­ 7480 pieces (trademarks Adidas, Tommy Hilfiger), perfumes - 504 pieces (trademark Boss), sport footwear ­ 17680 pairs (trademarks Puma, Adidas, Reebok), mobile telephone accessories ­ 260 pieces (trademarks Nokia, Siemens), sunglasses ­ 152 pieces (trademarks Lacoste, Christian Dior) all with the country of origin China. For the purpose of securing the borders, on 30 June 2003, the border crossing point Urziceni (Satu Mare district) was finished and commissioned. At the same time, in August, the modernization works were finished at the border crossing point Sculeni (Iasi district) and it will soon be commissioned. 230

At the same time, within the Trade and Transport Facilitation in the South Eastern Europe Project, co-financed by BIRD and the Government of Romania, on 5 August 2003 the contract for the sub-component of acquiring the civil works for the extension/modernization of the Siret customs office (the biggest customs office located at the border with the Republic of Ukraine, situated on the corridor Turkey-Kiev) was signed. As concerns trade facilitation, within Phare project EUROPEAID/1133883/D/SV/RO "Danube border crossing facilitation" Romania ­ Bulgaria (Lot 2 ­ exchange of information and technical facilitation, in August were finalized the information categories and the working methods for the information exchanges between the enforcement authorities at the Romanian border and the corresponding ones in Bulgaria. As concerns customs cooperation based on Protocol no. 6 on mutual assistance in customs matters, during June - August 2003, the Romanian Customs Administration received 13 assistance requests from Member States (Greece, Italy, Germany, Austria, the United Kingdom, Spain). The customs assistance requests had as object verification of the correct manner in which companies in Romania and their counterparts in the respective countries ran their transactions. The Romanian Customs Administration started 15 assistance requests in customs matters directed to the EU countries or through the means of OLAF, their main object being verification by the requested customs administrations of the authenticity of the customs valuation declared on import in Romania, as well as the quantity, kind and origin of such goods. In the field of professional training of the customs officers, the following activities were carried out: The continuous professional training for the school year 2002-2003 was finalized, the final results centralized for the purpose of assessing the efficiency of this type of training and identifying the necessary changes and the real needs of the customs administration training wise; As a result of the findings, the training needs and priorities were analysed and a training plan for the next school year was drawn up; The centralized documentary stock of the customs authority was increased, while the documents sent from the local units were sorted according to the specific themes of professional training, on closing the current school year; The existing course modules were updated; The problems arising out of lack of a proper professional training were identified and suggestions were made to find solutions to improve activity and to implement such solutions; Training also intensified through seminars with external assistance granted by the TAIEX Office, with subjects of wide significance for the customs officers (Binding Tariff Information, tariff preferences, suspensive customs procedures, simplified procedures for the customs evaluation of goods, customs laboratories, international cooperation, etc.).

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In July 2003 the Memorandum of Understanding between the European Community and Romania concerning participation to Customs 2007 Community Program was concluded, thus the attendance conditions are met for an important number of customs offices to take part to the future actions in the Actions Plan of this program. The main achievements in the field of Information technology refer to: Launching of the computerized module for suspensive procedures to operate at Arad customs office and Arad Regional Customs Directorate; 231

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Launching of the computerized module for bookkeeping and accountancy to operate at Fairs and Exhibitions and Oradea customs offices; Implementation, within the transit monitoring module, of the single codes, assigned by the guaranteeing associations A.R.T.RI. And U.N.T.R.R. to the Romanian carriers involved in carrying goods in the international traffic; Within the program "Trade and Transport Facilitation in South East Europe", financed by BIRD, the Government of Romania and the Government of the United States of America: Testing on the test platform of the General Customs Directorate of the functionalities of the component "Bar Code Equipment and development of software interface with ASYCUDA++; "E-learning" component ­ Finalization of installation of the platform related to the "e-learning" system, testing of the functionalities of the network set up in the training room in the General Customs Directorate, training in the Regional Customs Directorates; The component "Documents administration system" ­ installation and configuration of the system at the level of the Regional Customs Directorates, testing of the system functionalities; The component "Legislative portal" ­ testing of the system functionalities at central level, training of the administrators and users;

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Extension of the locations number by three units in which the electronic payment of the customs debt application is installed; Improvement of the selectivity mechanism implemented in Constanta Port customs office for the container goods; Adjustment of the application concerning management of human resources to the legislative changes on public servants appointment to the post; Updating of the Internet page of the General Customs Directorate with the "Statement of the assets" of the customs staff (according to Law No 161/2003).

2.3.26. EXTERNAL RELATIONS

The increasing evolution of bilateral trade has been maintained for the first 6 months 2003. Trade between Romanian and EU has increased by 6,81%, with a strong increase in imports (+9,8%) compared with only 7,34% of exports. Statistical data available for the period show an increase of bilateral trade deficit by 18,53% compared with the trade deficit registered for the first semester 2002. European Commission has launched a new exercise of negotiations with the candidate countries for further liberalization of trade in processed agricultural products. The first round of negotiations was held in Bucharest on 10 June 2003. At the present, the Free Trade Agreements (FTA) concluded by Romania with Republic of Macedonia, Republic of Albania and Bosnia and Herzegovina are in the process of ratification in Romanian Parliament. Romania expects that these FTA will enter into force till the end of 2003. In the framework of the negotiations for accession on the chapter 26 - External relations, Romania assumed to harmonise its commercial policy with the EU legislation, in order to ensure the compatibility with Community acquis. In this context, the Romanian authorities have launched a complex process for the assessment of the provisions of the trade and/or economic co-operation with 232

Community acquis. Up to present, a list of these kinds of agreements and a preliminary analysis concerning the conformity with Community law has been done. The description of the approach and the results of this exercise will be communicated to the European Commission in order to obtain its approval regarding the measures proposed for the alignment to the Community requests. During the works of the WTO Ministerial Conference - Cancun, Romania's position reflect the need for an adequate protection both of the country's economic development interests and of the national producers of goods and services. Last, but not least, the Romanian delegation will support the opening of new markets for our exports and the implementation of rules and terms of trade designed to ensure a fair competition. At the same time, the Romanian delegation will hold permanent consultations with the EU representatives with a view of avoiding any negative effects of the negotiations on our country's accession process to the European economic system. GD No 733/3.07.2003 (OJ No 479/4.07.2003) on organising and functioning of the Ministry of Foreign Affairs establishes an Office for Development, within the framework of the Directorate for Relations with International Economic Organisations. Within the UN framework or bilaterally, Romania continued to provide humanitarian aid for several states affected by war or other calamities. Accordingly, as set out in GD No 11/ 9.01.2003, the Government of Romania approved the supply of humanitarian aid to the Republic of Angola, consisting of pharmaceutical products and medicines, food supplies and bed linen and lingerie. The humanitarian aid has reached the Republic of Angola by the end of August this year. It amounts at about US dollars 50,000. Additionally, for 2002-2003 academic year, ten scholarships for complete university studies have been granted for Angolan students, mainly in the fields of medical and pharmaceutical studies, economics and civil engineering. The draft law on the control regime for the export of dual-use goods and technologies, which is the primary legislation in the field of dual-use goods and technologies control, is in the adoption process, in Parliament.

2.3.27. COMMON FOREIGN AND SECURITY POLICY Participating to the Political Dialogue

The political dialogue took place in such formats to prevent the risk of diluting the substance of consultations on topics of mutual interest. Thus, the meetings at the level of General Directors for European Affairs (July 11th and August 26th, 2003) and European Correspondent (August 26th, 2003), with the Italian Presidency of the EU Council, have contributed to the enhancement of the political dialogue. Between July 6th-8th, 2003, a series of consultations took place, at directors level, with the representatives of the European Commission, respectively the EU Council, on the following issues: EU Security Strategy, developments in the Middle East and fighting terrorism. Romania continued to align itself to the EU Positions and Declarations and, when invited, associated itself to the EU's Common Positions and Actions. Romania continued to observe the international sanctions and restrictive measures imposed by the EU and the UN. The list containing the main normative acts adopted with a view towards the implementation of the acquis communautaire is to be found at the end of this chapter.

233

European Security and Defence Policy

During the above-mentioned timeframe, Romania continued to fulfil its commitments in implementing the ESDP provisions. Following the Decision adopted by the EU Council on July 21st, 2003, concerning the extension of the EU military operation in the Former Yugoslav Republic of Macedonia (CONCORDIA) until December 15th, 2003, a process of analysis was initiated regarding the further participation of the 3 Romanian staff officers until the end of the operation. The package of forces committed by Romania for this operation (3 staff officers, deployed in the theatre, and a National Information Cell consisting of 6 military personnel) has not been changed. On June 25th, 2003, in Brussels, Romania participated in "The trilateral meeting (EU Presidency - EUMS - Romania) on the national contribution to Helsinki Force Catalogue Supplement", dedicated to the debate on some technical aspects related to the package of forces made available for the EU by Romania.

Participating in regional military cooperation initiatives

Romania continued to be actively involved in various regional military cooperation initiatives, such as: The Process of South-Eastern Europe Defence Ministerial - SEDM; the Multinational Peace Force in South-Eastern Europe - MPFSEE; the Naval Cooperation Group in the Black Sea - BLACKSEAFOR; The Joint RomanianHungarian Battalion. On July 25th, 2003, Romania handed over the Presidency of the SEDM Coordination Committee (SEDM-CC) and of the Political-Military Committee of the MPFSEE (PMSC/MPFSEE), a responsibility that had been assumed on September 1st, 2001, for a two-year period. On June 30, 2003, Romania assumed the responsibilities stemming from the status of host nation for the SEEBRIG Headquarters - SEEBRIG representing the operational side of MPFSEE. This multinational structure will activate in Romania for a four-year period. As far as BLACKSEAFOR and the Joint Romanian-Hungarian Battalion are concerned, they continued the joint training of the forces made available, including through participating in joint exercises (the third activation of BLACKSEAFOR took place in August 2003). There are serious premises for Romania to remain further involved in the EU-led operations in the Balkans (civil police mission in Bosnia and Herzegovina - EUPM and CONCORDIA in FYROM), as well as in other missions such as KFOR, SFOR, in Afghanistan and Iraq.

Western Balkans

Romania maintained its policy towards the Western Balkans countries, by supporting the importance of maintaining the EU openness towards these states bearing in mind their potential to become EU members after 2007 and, generally, the EU policy in the region. During the EU-Western Balkans Summit (Thessaloniki, June 21, 2003) Romania reiterated the relevance of the Western Balkans for the regional stability and welcomed the political message addressed by the EU to the states in the region, including the clarification of the steps needed to be taken in bringing them closer to the Union.

Wider Europe Neighbourhood

Romania continued to pursue a policy of consolidating its good relations with the neighbours. Thus, a meeting between the Romanian President and his Moldavian counterpart was held at Stanca-Costesti, on August 1st, 2003. On this occasion, the Romanian part proposed a European Partnership between Romania and the Republic 234

of Moldova. This partnership should establish the basis for a pragmatic and efficient cooperation between the two countries, aiming at consolidating their special relation. The future of bilateral and regional cooperation, aiming to strengthen the European perspective for the Republic of Moldova, has also been tackled. At the same time, the Romanian part reiterated the proposal for cooperation in the field of joint border control, including through organizing consultations with a view to conclude the necessary agreements concerning the legal status of the common border and the cooperation between the border authorities. The Treaty on the Regime of the State Border between Romania and Ukraine, Cooperation and Mutual Assistance in Trans-Border Matters was signed during the visit of the Romanian President to Cernauti (June 17th, 2003). The Treaty represents a step forward in consolidating the bilateral relations. The document establishes the foundation of a modern cooperative system at the Romanian-Ukrainian border, fulfilling the requirements of the acquis. The agreement is extremely important, bearing in mind that this frontier will become the external border of both an enlarged European Union and NATO. While signing the document, the two parties agreed to continue their negotiations in order to reach a favourable solution with a view to closing negotiations on the Agreement on the delimitation of the continental shelf and the exclusive economic zones of Romania and Ukraine in the Black Sea.

Relationship with the Russian Federation

On July 4th, 2003 the Presidents of Romania and the Russian Federation signed in Moscow The Treaty on friendly relations and cooperation between Romania and the Russian Federation. At the same time, the Ministers for Foreign Affairs of the two countries signed The Joint Declaration of the Ministers for Foreign Affairs. The Treaty is a modern document, in line with the European and international standards, setting up the framework for an enhanced cooperation in various fields (economic, legal, disarmament, security, culture) and at various levels (parliamentary, governmental, local administration, civil society, NGOs). The Joint Declaration of the Ministers of Foreign Affairs is a political document, which pertains to relevant historical moments of the bilateral relations. Its provisions include the moral condemnation of the Ribbentrop-Molotov Pact and establish a Joint Commission to deal with the problem of the Romanian Treasure, deposited in Russia during the World War I. Romania and the Russian Federation agreed to intensify the dialogue at foreign minister level, on issues pertaining to European Integration, including the evaluation of the effects of Romania's future EU accession on the bilateral relations, on joint projects in the JHA area and strengthening of cooperation in the energy sector and in the field of Trans-European networks. A new dimension of the bilateral relations consists in expanding and deepening of the economic cooperation, particularly in order to diminish the trade deficit of Romania and to promote mutual investments, taking into account the future participation of Romania to the Internal Market and the perspectives of Russia's integration into a Common European Economic Space. The year 2003 marks a cornerstone in the political dialogue with the Russian Federation, paving the way for a partnership based on mutual trust as well as a European vision.

Iraq

Romania supported actively the efforts aiming at the democratisation of the Iraqi political life, being ready to support, in a direct manner, the achievement of this task, including the creation of viable, democratic institutional structures. To this extent, 235

Romania expressed, on several occasions, the availability to provide its entire experience in the field. Romania welcomed the adoption of Resolutions 1483 and 1500 and highlighted that these documents represent a solid base for the international community to concentrate its efforts towards concrete measures, contributing to the democratic stabilization of the Iraq, the improvement of the population well-being, and the reconstruction of the Iraqi economy and society.

Middle East and the Euro-Mediterranean space

The Sharm-El-Sheik and Aqaba meetings offered the opportunity for entering in a new stage with regard to the efforts aiming to solve the complex problems in the Middle East. Romania continued to support the implementation of the measures set up in the Quartet's "Road Map", seen as a viable mechanism for stabilizing and modernizing the Israeli Palestinian relations. Romanian authorities' visits to Lebanon and Kuwait, at Prime Minister level (June 22nd ­23rd, 2003), as well as the visit to Romania of the Moroccan foreign minister (July 2nd ­ 3rd, 2003), aimed at stimulating and consolidating the traditional relations with these friendly states, as of now from a new perspective, provided by the Euro Atlantic and European status of Romania. During the Moroccan foreign minister's visit, a series of documents were signed: the Protocol for Cooperation between the Ministry of Foreign Affairs of Romania and the Ministry of Foreign Affairs and Cooperation of the Kingdom of Morocco, the Convention for Avoiding the Double Taxation, the Protocol for Cooperation in the field of Health and Medical Sciences, the Protocol of the 9th Session of the Economic and Technical Cooperation Mixed Commission, as well as the Protocol for Cooperation between the Romanian Foreign Trade Centre and its Morocco counterpart.

EU Code of Conduct on Arms Exports

Romania has made constant efforts in promoting a responsible policy in the field of conventional arms exports and has always acted according to the provisions and guidelines of the EU Code of Conduct on Arms Export. Conventional arms transfer operations have been carried on with the strict observance of the embargoes and restrictive measures imposed by the UN, the EU and the OSCE, as well as the guidelines adopted by the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. The English version of the first Report on conventional arms export (2000-2001), elaborated and edited by the National Agency for Export Control (ANCEX) in September 2002, was presented and distributed in June 2003 to the participants at the biannual evaluation meeting of the Action Program on Prevention and Elimination of Illicit Trade of SALW in All its Aspects and Fight against it. In the field of conventional arms, Romania continued to conduct a policy of enhancing transparency and promoting the Government-Industry relations in the field of export control of strategic goods, through organizing conferences, seminars and round tables for Romanian companies dealing with conventional arms foreign trade activities. The national export control regime of strategic goods was enhanced, through the implementation, within the companies that carry out important trade activities with conventional weapons, of the" The Internal Control Programme" software. The results of implementing this program were distributed to all the companies, during a seminar organized by the National Agency for Export Control (ANCEX), in the second trimester of 2003. Romania improved and developed the operational mechanisms for inter-institutional co-operation. It aimed at the enhancement of the control over transfers of conventional weapons activities. Moreover, Romania continued to co-ordinate its positions with 236

those of the EU Member States in the framework of international non-proliferation and exports control regimes. During the reference period were adopted in order to align to the acquis communautaire in the CFSP field the following normative acts: The Parliamentary Decision no. 15 of June 19th, 2003 (OJ no. 441/ June 23rd, 2003), on Romania's participation with MoD units and subunits in the 4th stage of Iraqi stabilization and reconstruction. In accordance with the Common Position of the EU Council no. 2001/931/CFSP/L 344 (December 28th, 2001), Specific measures concerning fighting against terrorism 2001/930/CFSP/L 344 (December 28th, 2001), Specific measures concerning fighting against terrorism. The Parliamentary Decision no. 17 of June 26th, 2003, (OJ no. 465/June 30th, 2003), on supplementing Romania's participation with MoD special units to the Iraqi stabilization and reconstruction. In accordance with the Common Position of EU Council no. 2001/931/CFSP/L 344 (December 28th, 2001), Specific measures concerning fighting against terrorism, and 2001/930/CFSP/L 344 (December 28th, 2001), Specific measures concerning fighting against terrorism. The Law no. 301 of July 4th, 2003, on the approval of the Governmental Ordinance no. 33/2003, (OJ no. 508/July 15th, 2003), on the ratification of the Agreement between the Government of Romania and the Government of the State of Kuwait regarding the status of Romanian Armed Forces in Kuwait, signed in Kuwait on March 10th and 11th, 2003. The Government Decision no. 837 of July 10th, 2003, (OJ no. 526/July 22nd 2003), on organizing in Romania, in July 2003, of the handing-receiving ceremonial of the chairmanship of the South-Eastern Defence Ministers Coordination Committee (SEDM-CC) and of the Political-Military Steering Committee (PMSC) of the Multinational Peace Force of South-Eastern Europe (MPFSEE), of the replacement ceremonial for the SEEBRIG commander and opening of the Commandment of the South-Eastern Brigade in Constanta. In accordance with the Common Position of the EU Council no. 1999/361/CFSP/L 141 (July 4th, 1999), Processes of Stability and Good Neighbourhood. The Government Decision no. 881 of July 29th, 2003, (unpublished), on the financing of Romania's participation with MoD units and subunits in the 4th stage of Iraqi stabilization and reconstruction. In accordance with the Common Position of the EU Council no. 2001/931/CFSP/L 344 (December 28th, 2001) and 2001/930/CFSP/L 344 (December 28th, 2001), Specific measures concerning fighting against terrorism.

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2.3.28. FINANCIAL CONTROL

In reply to the EU Common Position (CONF-RO 39/02), the Romanian Government officially submitted to the European Commission the complementary Position paper on chapter 28 "Financial control", after its approval in the Government meeting on 25 June 2003. A SIGMA Peer-Review mission is on going, in order to assess the administrative capacity of the Public Internal Financial Control in Romania.

Preventive financial control and internal audit

In order to implement the provisions of the Strategy on the development of Public Internal Financial Control in Romania (Policy Paper), of the commitments assumed within the complementary position paper for chapter 28 "Financial control", as well as of the primary legislation in the field of the preventive financial control (Law No. 237

84/2003 amending and supplementing GO No. 119/1999 on internal control and preventive financial control ­ OJ No. 195/26.03.2003), during June ­ August 2003 the following orders were adopted: Order of the Minister of Public Finance No. 752/11.06.2003 for approving the general framework and specific framework of operations subject to delegate preventive financial control; Order of the Minister of Public Finance No. 940/25.07.2003 for approving the methodological norms on organizing and carrying on of the delegate preventive financial control to the National Fund of Pre-accession and to the SAPARD Agency, within the SAPARD program; Order of the Minister of Public Finance No. 941/25.07.2003 for approving the methodological norms on organizing and carrying on of the delegate preventive financial control within the projects financed by ISPA and PHARE funds; Order of the Minister of Public Finance No. 1030/5.08.2003 for delegating to management of the General Directorate for preventive financial control competence of endorsing and submitting to the main spending agencies of proposals of specific methodological norms on organizing and carrying on of own preventive financial control submitted by the public entities concerned; the the the the

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Order of the Minister of Public Finance No. 1031/5.08.2003 for approving the methodological norms establishing evaluation criteria for the preventive financial control at the level of public institutions and the integration procedures of this one into the scope of the managerial responsibility, as well as the role of the Ministry of Public Finance in this process.

At the same time, the secondary legal framework has been completed by revising the manual of preventive financial control, completed at the end of June 2003. In the field of Public Internal Audit, the procedural measures carried on in order to implement the primary legislation in this field (Law No. 672/19.12.2002 on public internal audit ­ OJ No. 953/24.12.2002) were the following: The improvement of the existing audit manuals, in particular the Manual on audit for the SAPARD program; The drawing up of several procedural guides for audit, respectively the Procedural Guide on wages audit at public institutions and the Procedural Guide on public procurement audit for materials and services.

From the institutional point of view, by Order of the Minister of Public Finance No. 939/25.07.2003 (OJ No. 542/29.07.2003) the Committee for Public Internal Audit has been established, which functions within the Ministry of Public Finance, having an advisory role for the Central Unit for Harmonizing the Public Internal Audit. On 27 August 2003 the Committee held its first meeting, upon which the Regulation of organizing and functioning was approved and the president of this Committee was appointed, thus rendering the Committee functional. At the level of public entities, a broad process of administrative reorganizing was initiated, by establishing audit compartments in compliance with the new legal framework. The activity of internal audit was thereby completely separated from the control activity, the compartments being directly subordinated to the highest management level. Through the investments component of the PHARE project 2000 ,,The strengthening of the institutional capacity on public internal audit and financial control" (RO 0006.06.03), an IT pilot application for assisting and monitoring the activity of public internal audit was implemented. 238

The training activities for the 200 internal auditors and 200 financial controllers continued through the twinning project PHARE 2000 ,,Strengthening of the institutional capacity regarding the public internal audit and financial control" (RO 0006.06.01) and through the technical assistance project "Training of the public internal auditors" (RO 0006.06.02). In the field of the European Communities' financial interests protection, the legal framework was completed by GD No. 79/28.08.2003 (OJ No. 622/30.08.2003) regarding the control and recovery of the community funds, as well as of the cofinancing funds related to these, improperly used.

External financial control

During July - August 2003, with the assistance of experts from the National Audit Office of Great Britain and from the Greece Court of Audit, the activities provided under the Twinning Covenant PHARE 2000 have been completed. The main results obtained over this period were: The development of the human resources of the Romanian Court of Accounts, from the training point of view (approximately 125 trained staff), by organizing courses and seminars, as well as by carrying on the 5 pilot financial audits on central and local level and by initiating the 18 financial performance audits; The development of the external financial control and audit performed by the Court of Accounts over the programs and projects financed by the European Union, through the elaboration of the Guide on financial audit of PHARE and ISPA funds.

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2.3.29. FINANCIAL AND BUDGETARY PROVISIONS Budgetary system

The budgetary provisions approved for the year 2003 have been amended by the GO No. 87/28.08.2003 (OJ No. 623/31.08.2003) concerning the rectified State budget, whose necessity appeared as a consequence of changes in the evolution of the macroeconomic indicators, of the elaboration of certain legal acts with influences over the budgetary revenues, and of the budgetary execution for the first seven months of the year. Following the budgetary readjustment, the weight of the budgetary deficit in the gross domestic product has been maintained at the level approved by the initial budgetary law, respectively 2,7%. In June this year, EO No. 45/5.06.2003 (OJ No. 431/19.06.2003) on the local public finances was approved, and will enter into force starting with 1 January 2004. The EO brings more legislative rigor in the complex field of local public finances, by focusing the activity on results, performance and budgetary discipline, principles that will be taken into account in running the budgetary process. In order to line up with the European and international accounting principles, GO No. 81/28.08.2003 (OJ No. 624/31.08.2003) for re-evaluating and depreciation of the fixed assets under the public institutions' patrimony has been adopted. In drawing up this regulation, the principle of accounting on commitments and the implementing of the provisions of EC Regulation 2909/2000/29.12.2000 on the accounting management of the European Communities' non-financial fixed assets related to the registering time on accounting of economic-financial operations, based on accrual, were taken into consideration.

Financial management of the Community funds

During the period July ­ August 2003 the following developments have been recorded: 239

-

The Instructions establishing the procedure on the necessary operations for financing measures for which the National Fund is Implementing Agency within the Instrumental Program for Structural Policies of Pre-accession were approved by Order of the Minister of Public Finance No. 839/11.07.2003; The draft GO ratifying the 2003 Annual Financing Agreement between the Romanian Government and the European Commission, related to the Special Programme of Pre-accession for Agriculture and Rural Development signed in Brussels on 31.07.2003, was endorsed; On 01.07.2003, the National Accreditation Act was signed by the National Office for Authorization, for the following SAPARD measures: 3.1 Investments in agricultural operation; 3.4 Development and diversification of the economic activities for generating of the multiple activities and alternative revenues; Improvement of the professional training;

-

-

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The preliminary version of the ISPA Procedure Manual of the National Fund was completed and submitted to the European Commission on 30.07.2003; The Explanatory Notes and the draft GO ratifying the Financing Memorandum between the Romanian Government and the European Commission were endorsed, for the following programs: National PHARE 2002; PHARE 2002 ­ Cross border cooperation between Romania and Hungary; PHARE 2002 ­ Cross border cooperation between Romania and Bulgaria;

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GO No. 79/28.08.2003 (OJ No. 622/30.08.2003) concerning the control and the recovery of EU funds and the related co-financing funds inadequately used was adopted.

Contribution to the European Union Budget

The 2001 PHARE twinning light project with Greece, "Initiation of the process for the creation of a simulation model for the Romanian contribution to the EU budget" ended in July 2003 (15 working meetings have been held) and had as main results the creation of a theoretical simulation model (synthesis of the models on components) of the Romanian contribution to the European Union budget, and the training of 35 experts in the Ministry of Public Finance and other institutions involved, regarding the implementation of the computing methodologies of the Romanian contribution. Progress has been registered lately, both in improving the methodology for Gross National Product (gross national revenue) calculation, and in assessing the Euro value of these indicators, value that is used for determining Romania's contribution to the EC budget. At the level of the Romanian Customs Administration audit nucleus have been established that perform audit missions within the customs system.

2.3.30. TRANSLATION OF THE ACQUIS COMMUNAUTAIRE

Translating the acquis communautaire into the national language by the time of accession is one of the responsibilities taken over by all the candidate countries. In Romania the Translation Coordination Unit is set up within the European Institute of Romania (EIR). 240

Between 1 June and 1 September 2003 the Translation Coordination Unit within the European Institute of Romania (EIR) has carried on the translation and revision project which has as objective the translation of 10 000 OJ pages and the revision of another 11 000 OJ pages. The project started in April and will be finalised in December 2003. In parallel with the translation work, EIR has continued to upload translations into the CC Vista database of the TAIEX Office, DG Enlargement, European Commission. Thus, on 1 September 2003, 8 464 acts translated into Romanian had been uploaded into CC Vista. They represent 61 987 OJ pages, of which 13 942 fully revised. In December 2003, when this project is finalised, we can forecast that approximately 79 000 OJ pages will have been translated, of which approximately 16 000 fully revised.

241

2.4. PUBLIC ADMINISTRATION REFORM

Following the Government reorganization, the Ministry of Administration and Interior was created, by the unification of the former Ministry of Public Administration and the Ministry of Interior. During June - August 2003, as a result of the Romanian Government ample process of restructuring, a series of regulations have been elaborated and adopted with the view to establishing the legal framework for the organization and functioning of the ministries and other central public institutions. The Government Council for Monitoring the Public Administration Reform was reorganized, in order to accelerate the reform process and to answer to the remarks and recommendations formulated by the European Commission. The Phare Twinning Light Programme was launched, providing technical assistance from the European Union for the elaboration of the updated version of the Romanian Government Strategy on the acceleration of the public administration reform. The updated Strategy will focus on civil service reform, local public administration reform - especially on continuing the de-concentration and de-centralisation process, and on improving the decision making process. The activities provided by the Programmatic Adjustment Loan ­ PAL to be agreed with the World Bank, are focused on the same components of the reform. This programme is aimed to ensure a unitary coordination of the policies and actions carried on by the central and local authorities to achieve the public administration reform in Romania, according to the Government Programme and the requirements of the integration process.

Central public administration

Legal framework During June ­ August 2003, a series of regulations have been adopted in the field of public administration reform, out of which the most relevant are: EO No 64/28.06.2003 (OJ No 464/29.06.2003) on measures for establishing, organizing, re-organising or functioning of certain structures within the Government working apparatus, ministries, other specialized bodies of the central public administration and public institutions; EO No 63/28.06.2003 (OJ No 462/28.06.2003) on the organization and functioning of the Ministry of Administration and Interior; GD No 725/28.06.2003 (OJ No 478/04.07.2003) on the organizational structure and staff of the Ministry of Administration and Interior; GD No 733/03.07.2003 (OJ No 479/04.07.2003) on the organisation and functioning of the Ministry of Foreign Affairs; GD No 734/ 03.07.2003 (OJ No 479/04.07.2003) on the organisation and functioning of the Ministry of European Integration; GD No 735/03.07.2003 (OJ No 481/04.07.2003) on the organisation and functioning of the Ministry of Public Finance; GD No 741/03.07.2003 (OJ No 481/04.07.2003) on the organisation and functioning of the Ministry of Education, Research and Youth; GD No 767/03.07.2003 (OJ No 481/04.07.2003) on the organisation and functioning of the Competition Office subordinated to the Ministry of Public Finance; GD No 736/03.07.2003 (OJ No 482/07.07.2003) on the organisation and functioning of the Ministry of Justice; 242

-

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GD No 736/03.07.2003 (OJ No 483/07.07.2003) on the organisation and functioning of the Ministry of Labour, Social Solidarity and Family; GD No 738/03.07.2003 (OJ No 485/07.07.2003) on the organisation and functioning of the Ministry of Economy and Commerce; GD No 764/03.07.2003 (OJ No 486/07.07.2003) on the organisation and functioning of the Customs General Directorate; GD No 769/03.07.2003 (OJ No 486/07.07.2003) on the approval of organizational structure of the National Agency for Children Protection and Adoption; GD No 748/03.07.2003 (OJ No 487/07.07.2003) on the organisation and functioning of the Department for Liaison with the Parliament; GD No 768/03.07.2003 (OJ No 487/07.07.2003) the approval of statute of the National Agency for Occupying Labour Force; GD No 743/03.07.2003 (OJ No 490/08.07.2003) on the organisation and functioning of the Ministry of Health; GD No 750/03.07.2003 (OJ No 490/08.07.2003) on the missions, organisation and functioning of the Department for Institutional and Social Analysis; GD No 755/03.07.2003 (OJ No 490/08.07.2003) on the on the organisation and functioning of the National Authority for Consumers Protection; GD No 757/03.07.2003 (OJ No 490/08.07.2003) on the organisation and functioning of the National Commission for Prognosis; GD No 744/03.07.2003 (OJ No 494/09.07.2003) on the organisation and functioning of the Ministry of Communications and Information Technology; GD No 752/03.07.2003 (OJ No 494/09.07.2003) on the approval of the number of positions and organizational structure of the Romanian Agency for Foreign Investments; GD No 753/03.07.2003 (OJ No 494/09.07.2003) on the organisation and functioning of the National Agency for Small and Medium- sized Enterprises; GD No 756/03.07.2003 (OJ No 494/09.07.2003) on the organisation and functioning of the National Agency for Mineral Resources; GD No 762/03.07.2003 (OJ No 494/09.07.2003) for amending the Regulation for the organisation and functioning of the National Office for the Prevention and Fighting against Money Laundering, approved by GD 479/2002;

-

The important reorganization of the Government was aimed to substantially reduce the number of ministries (from 24 to 14) providing flexibility and efficiency for the Government decisional act, eliminating the duplication of work and overlaps in ministries' activities, clearly defining the missions and strictly delimitating their field of action. The regulatory bodies were taken away from the subordination or coordination of the ministries of resort, being now coordinated by the Prime Minister. Institutional level A. The Government Council for Monitoring the Public Administration Reform. By GD No 925/14.08.2003 (OJ No 599/22.08.2003) on the re-organisation of the Government Council for Monitoring the Public Administration Reform, there was decided to amend its constitution and missions, as well as to re-organise its activity in order to become operational and efficient. The main decisions on public administration, adopted during the meeting of the Government Council for Monitoring the Public Administration Reform held on 15 July were as follows: 243

-

Sending to all ministries and prefectures the Prime Minister' s Circular, asking them to establish their own strategies for accelerating the reforms- according to the methodology for the elaboration of the Multi-annual Programme for Modernisation. These documents, that are going to be analysed during the Council's meeting in September, shall be the basis for the elaboration of the updated Government Strategy on the acceleration of Public Administration Reform; Organizing the National Forum for publicly debating the updated strategy draft, with a large participation of all the actors involved in the reform process; Re-organising the national network for monitoring the reform and strengthening the role and missions of the Central Unit for the Public Administration Reform, organized as a directorate within the Ministry of Administration and Interior.

-

B. In order to strengthen the institutional capacity of the new established Ministry of Administration and Interior, following to the merging of the former ministries of the public administration and of the interior, its missions concerning the public administration, public order and security were clearly stated: In the field of public administration reform, the ministry's missions refer to monitoring, on Government behalf, the elaboration and implementation of the institutional reform programmes of the ministries and other central public administration authorities. In this respect, the minister of administration and interior is the chairman executive of the Government Council for Monitoring the Public Administration Reform, the Central Unit for the Public Administration Reform ensures the technical secretariat of this body and the position of secretary of state responsible for the public administration reform was newly created within the ministry; Providing the institutional framework necessary to allow the acceleration of demilitarisation process of community services, an important commitment comprised in the Romania's National Programme to the Accession to the European Union.

-

C. The Central Unit for Public Administration Reform, as a specialized directorate within the Ministry of Administration and Interior, together with the national network for monitoring the public administration reform carried on the following activities during June - August 2003: Providing technical secretariat and preparing the necessary documents for the meeting of the Government Council for the Public Administration Reform, held on July 15th, 2003; Providing documentation and technical support for the ministries and prefectures in elaborating their own strategies for the acceleration of the public administration reform according to the Prime Minister Circular. Launching and promoting at the national level the Phare project "Creating a Corps of Professional Public Managers within the Civil Service"; selection of candidates who will participate in the scheme developed by this project; Organising the National Forum for public debate on the updated Government's Strategy draft, consisting in ten meetings at national and regional level, during September - December 2003; Finalizing the competition "100 Projects for Romania" entitled "Improving the quality of the public services provided to the citizens by the public administration".

-

-

-

-

Two new structures have been established and placed under the Prime Minister's direct coordination to support the reform process: The Agency for Governmental Strategies, as a specialized body of the central public administration and the Project management unit for the public administration reform, for implementing and 244

monitoring the programme to be agreed with the International Bank for Reconstruction and Development within the Programmatic Adjustment Loan- PAL, created by GD No 856/17.07.2003 (OJ No 531/24.07.2003) on setting up the Project management unit for the public administration reform. D. Civil Servants National Agency In the legislative field, GD No 730/03.07.2003 (OJ No 478/07.07.2003) on the reassignment of the civil servants in a position according to the category of senior civil servants was adopted. During June - August 2003, the carried on the following activities: Continuation of the activity of centralising data on civil servants becomes incompatible according to Law No 161/2003. From a total of 1,205 civil servants found incompatible on 10 June 2003, their number decreased to 455 on 9 July 2003, by giving up the activities that caused this situation; Concluding the process of approving the new civil service positions according to the documentation sent by the authorities and public institutions; Setting up a mechanism for planning the human resources within the civil service through starting up the elaboration of the project for the employment plan for the civil service positions. To elaborate this plan, an interdepartmental working group within NACS has been established, under advice provided by DFID; Continuing the process of elaborating the draft law on the setting up of a unitary payment system for civil servants; Updating the database containing information on civil servants and civil service. This became operational on May, but has to be updated in accordance with the amendments to the civil servants statute; Elaboration of the draft law for the approval of Code of conduct for the Romanian civil servants.

-

-

-

E. National Institute of Administration. During June - August 2003, the National Institute of Administration carried on the following activities: Issuing and approving the methodological norms on the organisation of a ECDL (European Computer Driving License) certifying programme for the civil servants working within central and local public administration, approved by MAP Order No 252/02.06.2003 (OJ No 432/19.06.2003); Elaboration of the GD No 615/2003 (OJ 415/13.06.2003) on the approval of the Regulations for organising the national contest for the admittance to the specialized training programs in public administration, amended by GD No 932/14.08.2003 (OJ No 605/26.08.2003) which specifies that the selection of candidates participating in the Phare project "Creating a Corps of Professional Managers within the Civil Service" will be performed by a special commission consisting of the representatives of the winning consortium for Phare 2001 Program RO-0106.03; Organizing a one year specialized training programme in public administration, for 2003-2004, on the following fields: modern governance and local development, management of the European public affairs and eadministration; Organising, starting from October this year, a two years specialized training programme in public administration; Launching the Phare RO 0106.02 project "Development of an operational National Institute of Administration, capable of training competent civil servants" on 23 June 2003. 245

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F. National Authority for Regulating the Community Public Services. Following to the process of restructuring the central public authorities, the National Authority for Regulating the Community Public Services was placed under the Prime Minister's direct co-ordination. By GD 828/10.07.2003 (OJ No 569/07.08.2003) for the approval of the GD 86/2001 on regular public transportation services was established the framework for the organisation, regulating, control, monitoring and administration of the afferent public assets and of the regular local public persons transportation service, with road common transportation means. G. National Office for Cadastre, Geodesy and Cartography. During June August 2003, the National Office for Cadastre, Geodesy and Cartography paid a special attention to the acceleration of the process of implementing the Law 18/1991 and Law 1/2000 related to the reconstitution of the property right. By the end of July, 2003 4,505,906 property titles have been issued for a total area of 10,527,761 ha (out of which 4,033,242 for agricultural land of an area of 9,119,407 ha and 472,664 for forestry land of an area of 1,048,354 ha), representing 94.1% of all the certificates issued. The percentage of entering into possession according to the area was 88.3% out of total area of 11,918,443 ha, related to the applications validated by the county commissions (out of which 90% for agricultural land and 78.9% for forestry land). The areas to be covered in ongoing works (to be completed by the end of 2003) for cadastral index plans are: Based on Orthophoto maps: 4 lots covering a total of 438,212 hectares in 99 administrative territories. Production of cadastral index plans based on existing maps and plans: 5 lots.

A total of 794,112 hectares will be covered with cadastral index plans within the ongoing activities in the pipeline, which amounts about 3.5% of the total area of the country and about 5% of the agricultural area. The activities of the project started in May 2003, for the setting up of the National Centre for Photogrammetry and Remote Sensing continued. The centre was established as a general department within the Institute of Cadastre, Geodesy, Photogrammetry and Cartography (ICGFC). H. The Authority for monitoring the unitary implementation of Law 10/2001 on the legal status of real estate unlawfully seized in between 6 March 1945 and 22 December 1989. By 1 July 2003, based on the checking the notifications submitted according to Law 10/2001, 9,200 properties have been retrocessed, representing about 18.4 % of the estimated total number of properties that can be returned without financial compensation (50,000). As for the properties returned to the religious denominations, according to the Law 501/2002 provisions, the restitution of 118 properties has been approved by July 2003. In order to calculate the approximate value of the buildings and lands abusively overtaken, during the period stipulated in the Law 10/2001, the Common Order No 4/24555/2003 of the Governor of the National Bank of Romania and of the President of the National Institute for Statistics (OJ No 576/12.08.2003) on the official rate ROL/USD during 1945-1989 was issued.

Local public administration

Legal framework 246

The Government of Romania adopted the GD on the organisation and functioning of the prefectures, during its meeting of 22 August 2003, to be published in the Official Journal. This decision strengthens the importance granted to the field of European integration as a national priority objective, alongside with the main responsibility of the prefect as a warrant of legal observance within the county. The regulation provides that the community public service for passports' issuance and registration shall be organised within the prefect's specialised body. The general secretary of the prefecture is responsible for efficiently running the prefect's specialised body, having clearly stated tasks, with the view to ensuring the continuity and coherence of the measures aimed at fulfilling the responsibilities granted to the prefect by the Constitution, Law on local public administration and other legal provisions. The EO No 45/05.07.2003 (OJ No 431/19.07.2003) on the local public finance establishes the general framework, principles and procedures related to the constitution, management and use of local public funds, as well as the responsibilities of the local authorities and other public institutions concerned. According to the provisions of this regulation, no expenditure can be provided, engaged or effected in the budgets without a legal basis. No expenditure can be engaged, ordered and paid without being approved under legal conditions, provided in the budget and with financing sources clearly stated. Institutional level A series of re-organisations have been done within local public administrations authorities, following to the entering into force of the Law 161/2003 on certain measures for ensuring transparency in exerting public dignities, civil service and business environment, preventing and sanctioning corruption, which provides requirements related to the organisational structure and maximum number of managing civil service positions. The European integration structures within all the 42 prefectures carried on the monitoring of the progress achieved in implementing the acquis at local level during June - August 2003, as established in "The Action Plan for the Implementation at Local Level the Legislation According to the Acquis Communautaire for the Year 2003". Basis on the data collected, the Ministry of Administration and Interior transmitted a report to the Ministry of European Integration, analysed and approved during the Government' s meeting on 4 September. The ministries' de-centralised services and other institutions having responsibilities in implementing the acquis at local level reported 2311 measures achieved, representing 97,67 % of a total of 2366 measures with term on 31 August. The measures with permanent deadline were achieved in a proportion of 89%. By the order of the minister of administration and interior, two more positions were allotted to each prefecture with the view to strengthening the European integration structures.

247

2.5. STATISTICAL DATA

1997 Basic data Population (first July) Total area National accounts (*) Gross Domestic current prices Gross Domestic current prices Gross Domestic current prices Product at 252925.7 373798.2 22546 23839 22503 23839 1998 1999 22458 23839 2000 22435 23839 2001 22408 23839 2002 21795 23839

in thousands in thousand hectares

in Bn ROL 545730.2 800308.1 1154126.4 P 44.8 P 1154126.4 P

in Bn ECU/EUR Product at 31.3 37.4 33.5 40.3 48.4 P

in ECU/EUR per capita Product at 1387 1663 1491 1795 2001 2216 P

Structure of Gross Added Value - Agriculture - Industry - Construction 19.6 33.5 5.7

in % of Total Gross Value Added 16.2 29.6 5.8 15.2 28.2 5.7 12.5 30.9 5.5 14.8 31.5 P 5.5 13.1 32.5 P 5.6 P

- Services ­ IOBS included (**) Structure of expenditure - Final consumption expenditure - household and NPISH - general government - Gross fixed capital formation - Exports of goods and services - Imports of goods and services Gross Domestic Product Gross Domestic Product per capita Consumer price index Inflation rate Balance of payments - Exports of goods - Imports of goods

41.2

48.4

50.9

51.1

48.2

48.8 P

in % of GDP 86.4 74.1 12.3 21.2 29.2 36.2 -6.1 6422 90.3 75.8 14.5 18.2 22.6 30.6 -4.8 6153 88.7 74.3 14.4 17.7 28.0 32.8 -1.2 5441 86.1 70.0 16.1 18.9 32.9 38.5 2.1 5764 85.2 69.5 15.7 20.5 33.3 41.1 5.7 6244 82.7 P 67.1 P 15.6 P 21.1 P 35.4 P 41.2 P 4.9 P 6872 P

% change over the previous year in Purchasing Power Parity

% change over the previous year 254.8 154.8 159.1 59.1 145.8 45.8 145.7 45.7 134.5 34.5 122.5 22.5

in millions USD 8431 10411 8302 10927 8487 9744 249 10366 12050 11385 14354 13876 16487

- Trade balance - Services, net - Income, net - Net current transfers - of transfers which government

-1980 -381 -322 579 64 -2104

-2625 -603 -442 753 52 -2917

-1257 -395 -411 626 57 -1437

-1684 -246 -285 860 122 -1355

-2969 -115 -282 1143 221 -2223

-2611 9 -459 1536 281 -1525

- Current account balance Public Finance General Government Surplus1 Gross foreign debt Financial indicators Monetary Aggregates - M1 - M2 - Total credit Average interest rate - Lending rate Deficit/

in % of GDP -3.3 26.9 -3.0 23.5 -1.8 25.7 in Bn USD 2.3 7.7 5.9 63.7 2.0 8.4 7.3 56.9 1.6 7.3 5.6 % per year 65.9 53.5 45.1 35.2 1.8 7.1 4.4 2.0 8.6 4.5 2.6 10.6 5.4 -4.0 28.7 -3.2 30.7 -2.5 P 34.1 P

1

The data are calculated according to the Government Financial Statistics 1986 methodology

250

- Deposit rate ECU/EUR exchange rate - Average of period - End of period - Effective exchange rate Foreign Trade Imports CIF Exports FOB Balance FOB/CIF Terms of trade Imports with EU-15 Exports with EU-15 Demography Natural growth rate Net migration rate Infant mortality rate

51.6 8090.9 8867.0 /

38.3 9989.3 12788.0 /

45.4 16295.6 18331.0 /

32.7 19955.8 24118.0 /

26.4 26026.9 27881.0 /

18.7 31255.2 34919.0 /

(1 ECU/EUR = National currency)

in millions of ECU/EUR 10077 7481 -2596 101.3 52.5 56.6 10583 7381 -3202 105.1 57.7 64.5 10034 8055 -1979 103.8 60.7 65.5 14420 11365 -3055 103.5 56.6 63.8 17373 12685 -4688 102.0 57.3 67.8 18905 14680 -4225 103.9 58.4 67.1

previous year = 100 ***) as % of total

per 1000 of population -1.9 -0.6 22.0 -1.5 -0.3 20.5 -1.4 -0.1 18.6 251 -0.9 -0.2 18.6 -1.8 0.02 18.4 -2.7 -0.07 17.3

per 1000 live-births

at birth Life expectancy: Males Females Labour market2 Economic Activity Methodology) Unemployment methodology) rate (ILO (ILO 64.8 6.0 18.0 3.8 63.6 6.3 18.3 4.2 65.2 73.0 65.2 73.3 65.2 73.7 66.1 74.2 67.0 74.8 67.2 P 74.3 P

in % of labour force 63.4 6.8 18.8 4.9 in % of total 39.0 26.3 4.2 30.5 40.0 25.4 4.0 30.6 41.7 23.9 3.7 30.7 42.8 22.4 3.8 31.0 42.3 22.2 4.0 31.5 36.4 P 25.0 P 4.5 P 34.1 P 63.2 7.1 18.6 5.3 62.2 6.6 17.5 4.9 56.0 P 8.4 P 21.7P 6.4 P

rate

< 25 years >= 25 years Employment by branches (LFS)2 - Agriculture. Forestry and Fishery - Industry - Construction - Services

2

NACE

The data for 2002 onwards are not comparable with the data series of previous years because of estimation based on the results of the Population and Housing Census of March 2002, as well as because of revising the definitions and coverage, according to the last regulations of the European Commission

252

Infrastructure Railway network Length of motorways Industry and Agriculture Industrial index production volume 92.8

3

in Km per 1000 Km2 47.7 113 46.2 113 46.1 in Km 113 113 113 113 46.2 46.2 46.2

previous year = 100 86.2

3

97.83 105.2 104.0

107.63 85.8 85.2

108.44 / 122.7

106.0 P4

Gross agricultural production volume index

5

103.4

92.5

Agricultural production volume indices of goods and services P = provisional data

3

96.5 S

Indices are calculated according to the structure of the year 1995

4

Indices are calculated according to the structure of the year 1998

The indicator ,,Gross agricultural production volume indices" is no longer calculated starting with 2001 and it was replaced with ,,Agricultural production volume indices of goods and services", according to the Eurostat methodology

5

253

S = semifinal data E = estimated data (*) - for the indicator ,,GDP in current prices" it has been applied the ESA 79 methodology for 1997 and for the period 1998 -2002 it has been applied the ESA 95 methodology. - for the indcator ,,Percentage change of GDP over the previous year" it has been applied the ESA 79 methodology for the period 1997-1998 and for the period 1999-2002 it has been applied the ESA 95 methodology. - The data for the year 2001 are semidefinitive. (**) IOBS = Imputed output of banking services. (***) Terms of trade are obtained on the basis of the Unit Value Indices calculated from values expressed in US dollars.

254

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