The Czech Republic won backing last week to join the European Union as early as 2004 in spite of a 161-page report that steadily leveled criticism at most of the country's regulatory bodies, shortcomings in its administrative capacity and the failure to tackle persistent problems such as corruption, fraud, and an unsatisfactory business environment.

Judging from the European Commission report, which found few instances of progress over the past year, the report might as easily have led it to take a different view than supporting Czech EU membership in the biggest expansion of the EU so far. However, the Commission concluded that "the Czech Republic will be able to assume the obligations of membership." Ten countries, including the Czech Republic, should be invited to join the EU by 2004. Bulgaria and Romania are earmarked for entry in 2007. The Commission recommendation must be approved by the European Parliament and European Council, comprising EU national governments.

Petr Greger, the director of the Euro-Czech Forum, which represents the chambers of industry and commerce of five EU countries in the Czech Republic, said it was pleased the Commission had echoed its criticism of the business environment, in particular the complex and time-consuming procedure for business registration and lack of bankruptcy reform. "Creditor rights have remained weak," the report states.

The more generous overall Commission assessment partly resulted from it taking a broader view of the country's achievements since 1997 rather than a year-on-year progress report, Greger said "Compared to other candidate countries, I think the Czech Republic is prepared for membership, but this does not mean the country can sit down now and do nothing," he added.

Among the Commission's main criticisms is failure to tackle corruption. It cited the government's own report in April, which admitted that the corruption situation is not improving. "[The report] noted that bribery in the public administration and fraud in the private sector continue to be significant problems."

The Commission report on progress towards accession returned to the vexing issue of public procurement and calls for problems to be urgently addressed. In spite of a May amendment to the current rules, which clamps down on the use of emergency procedures to avoid tenders, major gaps in the law remain. The report highlights these as "the scope of the law, time limits, the public remedies system, procurement under thresholds and the non-elimination of a national preference clause."

Commission officials said a new draft law on public procurement had been submitted to Brussels by the Czech government for comment. They could not say whether the new draft would address their criticism.

Telecoms sector regulation was singled out for harsh appraisal. Although the Czech Telecommunications Office (CTU) is charged with regulating the market, considerable powers still remain with the government. "The authorities have not yet responded to the EC's repeatedly expressed view that the presence of ministry appointees in the management structure of the incumbent [fixed line operator Czech Telecom] is incompatible with EU rules."

The CTU lacks the basic ability to enforce its decisions quickly, and local loop unbundling—a precondition for full competition—is still waiting to happen, the report adds.

The EU Commission's head of delegation in Prague, Ramiro Cibrian, said last Wednesday the biggest Czech priority is to complete alignment of its laws and practices with the EU in a few sectors and then complete entry negotiations.

The competition chapter—delayed by the need for EU clearance of Czech plans for steel sector restructuring—should be closed in a few weeks, he said. However, Cibrian said the Commission is looking for the Czech Republic to give a full account of past government aid to the banking sector. "It would not be good if this question was not satisfactorily answered before accession," he added.

Cibrian highlighted better integration of the Roma minority, fiscal reform, the fight against corruption, mutual recognition of professional diplomas, indirect taxation, improved administrative capacity and a better regulatory framework for the audiovisual sector as the main priorities.

(PBJ 14.x.02)