Malta

Malta continues to fulfil the Copenhagen political criteria. Further efforts have been made to prepare the administration for operation within the EU, and the authorities' record on democratic and human rights remains generally good. There has been further progress as regards the functioning of the justice system with the reduction of the backlog of judiciary cases and preliminary steps have been taken to implement the Refugees Act.

Malta is a functioning market economy. It should be able to cope with competitive pressure and market forces within the Union.

Macroeconomic developments have been favourable in terms of GDP growth, unemployment, inflation and a significant reduction of the government deficit. The government's medium­term fiscal programme generated a further decrease of the public deficit. Progress has been made in developing restructuring and privatisation programmes and initiatives for entrepreneurship.

However, despite the decreasing trend, the fiscal deficit remains too high, contributing further to a very large current account deficit. Although the current account deficit had a strong one­off component, it will need to be closely monitored. The authorities need to put public finances in a sustainable medium­term path. The reform of the social security system needs to be considered in this perspective. The implementation of the restructuring and privatisation of public utilities and loss­making public enterprises remains slow. Further efforts to limit the influence of the state in the economy are needed. A faster implementation of structural reforms and further liberalisation is crucial to support the sustainability of external balances and external competitiveness in a more open environment.

Since the last Regular Report, Malta has continued to progress well in aligning its legislation with the acquis and strengthening its administrative capacity. However, progress has been uneven across the different fields.

Considerable further progress has been made in aligning with the acquis on Free Movement of Goods, especially as regards the framework for the New and Global Approach. Malta must pursue its efforts in the fields of standardisation, certification and market surveillance and also align its public procurement legislation as regards the remedies system and bodies governed by public law. As regards free movement of persons, efforts should be pursued to further align Maltese legislation. Malta has continued to progress on free movement of services and capital, however further legislative alignment is needed in particular in the fields of banking and investment services, data protection as well as money laundering. In the area of company law Malta is close to full alignment. As regards competition, there has been some progress with the beginning of the enforcement of the State aid rules, but further efforts are needed to strengthen the administrative capacity in this area and to ensure that public undertakings are submitted to competition law in line with the acquis.

Malta has made substantial progress in the area of social policy, mainly as regards labour legislation and occupational health and safety. However efforts are needed in the area of equal opportunities and to further strengthen the implementation capacity on occupational health and safety.

In the field of taxation, considerable progress has been achieved as regards excise tax and some progress with respect to VAT, although progress is needed as concerns the scope of exempt transactions and the code of conduct on direct taxation. Despite some progress in the area of customs, continued efforts are needed to align Maltese customs legislation with the acquis in this domain, and to develop the administrative capacity to implement it.

Progress has continued in the areas of telecommunications and culture and audio­visual policy. Malta has also created a suitable framework for the development of investments and the restructuring of SMEs.

In the statistics area, the Central Office of Statistics of Malta has continued to progress and is pursuing its efforts to fully align its methodologies with EC standards. In the field of financial control, the reengineering of the internal audit system within the Maltese Government has been completed and the National Audit Office has continued to be strengthened, providing Malta with an adequate internal and external audit institutional framework. Malta should further consolidate this progress. Substantial progress has been achieved in the area of regional policy, where the structures needed to implement the structural and cohesion funds have been set up and strengthened.

In the field of justice and home affairs, little further legislative progress has been achieved. Progress has been made in preparing the Maltese administration to the implementation of the Asylum legislation and the control of borders in accordance with the Schengen requirements, in particular with the preparation of a Schengen Action Plan. Efforts are still needed with respect to data protection, immigration, visa policy and judiciary co­operation.

In the area of agriculture, progress has been limited. Malta still has to adopt most of the extensive agriculture acquis and to prepare its agriculture for the Common Agricultural Policy. As regards the environment, the adoption of the Environment Protection Act together with subsidiary legislation represents a significant progress but Malta is still far from full alignment and the capacity to enforce the legislation remains very weak. An overall strategy for the adoption and implementation of the environmental acquis must also be developed.

Over the past year, efforts to strengthen Malta's capacity to implement the acquis have started in the areas of state aids, regional policy and asylum. Capacity building efforts have been pursued in many areas, in particular in the areas of free movement of goods, market surveillance, transport, taxation, social policy, customs, statistics, border control and financial control. Its is important to continue to reinforce the administrative capacity in these areas, in particular as regards the maritime safety acquis. In both customs and taxation, particular attention must be paid to the development of IT systems needed for the exchange of computerised data with the EC. There is a need to further strengthen the administrative capacity in the field of border management Malta should also step up its efforts to enforce the intellectual property rights.

The capacity to enforce the acquis remains a source of particular concern in the area of the environment and it should be strengthened as a matter of priority. Malta should also significantly strengthen its administrative capacity in the agriculture field, in particular it has to upgrade inspection arrangements in the veterinary and phytosanitary fields.

Most of the Accession Partnership short­term and medium­term priorities have been partially fulfilled. Progress has been particularly significant in the areas of free movement of goods and social policy and also in the areas of taxation and telecommunication. Further efforts are required in particular with regard to agriculture and the environment, and in the area of free movement of services.