ANTI-CORRUPTION STRATEGY

Croatian Parliament

19th June 2008.

1. INTRODUCTION Corruption is a harmful social phenomenon which undermines the fundamental values of (any) society. It is a historical, psychological, sociological, economic, political and legal phenomenon. In the broadest sense, corruption is any form of abuse of public authority for private gain. More specifically, it can be described as an act of illicit exchange between a public official and another person, committed for the purpose of acquiring an own advantage. It is any act which, contrary to public interest, clearly violates morality and legal norms, and undermines the foundations of the rule of law. One of the major consequences of corruption is a lack of public trust in public administrative bodies, and this in turn stunts economic growth. Thus, not only corruption, but the suspicion of corruption, or the perception of corruption, undermines the credibility of any government. Corruption is difficult to measure. There is an obvious discrepancy between official statistics on the number of corruption cases which reached the courts and public perception of the phenomenon, due to the secretive nature of acts of corruption as well as reluctance of those involved to report such acts to the law enforcement authorities. This makes the detection and prosecution of corruption very difficult. The Republic of Croatia is aware of the seriousness of the problem of corruption and is fully committed to strengthening efforts to combat corruption. Special attention will be given to the legal and institutional framework, prevention, suppression, inter-agency and international co-operation and raising public awareness about the need for the suppression of the corruption. This Strategy is built on experience acquired through the implementation of previous national anti-corruption programmes (2006-2008). The implementation of these programmes has resulted both in an increase in middle and high level corruption cases being prosecuted by law enforcement authorities as well as an increase in public awareness on danger and harmfulness of corruption and on the need for the suppression of the corruption. The 4.1 score on the 2007 Corruption Perceptions Index (CPI) of Transparency International is the best since the assessment of how corruption is perceived has been conducted. This score is especially important because it shows that there has been a great improvement in the fight against corruption. This Strategy is a revision of the National Anti-Corruption Programme 2006-2008. Based on experience acquired through implementing the Programme, the Strategy and Action Plan which, clearly set out measures defined, deadlines, the competent institutions and funds required, are intended to advance all possible means in the fight against corruption. The revision also takes into consideration recommendations in the Screening Report on Chapter 23, “Judiciary and Fundamental Rights”, recommendations in the European Commission’s Croatia 2007 Progress Report, Accession Partnership, and recommendations from the Second Round Evaluation of the Council of Europe GRECO. The Strategy will be implemented through the Anti-Corruption plan which will be reviewed on an annual basis, in order to monitor the implementation of the Strategy. 2. PRINCIPLES AND OBJECTIVES OF THE STRATEGY PRINCIPLES Each activity that the Republic of Croatia will undertake pursuant to this Strategy will follow the principles stated below. Observance of the following principles is essential to the establishment of a modern legal system: – The principle of the rule of law, which obliges all competent authorities of the Republic of Croatia to comply with legal procedures, principles and restrictions and provides legal remedies for citizens whose rights have been violated, regardless of their social position or

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power. It requires the Croatian Constitution and relevant laws and regulations to be implemented and respected, including international treaties to which Croatia is a party. – The principle of good practice, which obliges all competent authorities of the Republic of Croatia to align their policies with best practices required for the efficient suppression of corruption in the Republic of Croatia. – The principle of responsibility, which obliges all competent authorities of the Republic of Croatia to take full responsibility for creating public policy and implementing it efficiently, including the implementation of this Strategy and Action Plan. – The principle of prevention, which obliges all competent authorities of the Republic of Croatia to adopt and implement measures for the systematic suppression of the causes of corruption, including the removal of all shortcomings which facilitate corruption. – The principle of efficiency, which obliges all competent authorities of the Republic of Croatia to make constant progress in proposing and implementing measures for achieving visible results in fighting all forms of corruption. – The principle of co-operation, which obliges all bodies charged with the implementation of this Strategy and Action Plan to co-operate in implementing measures in accordance with positive regulations. In developing co-operation, these bodies are required to set clear objectives, and identify the measures they will take to achieve them. – The principle of transparency, which obliges all competent authorities of the Republic of Croatia to safeguard transparency in decisionmaking processes and to provide citizens with access to information, as required by law. . .– The principle of co-operation with civil society, which obliges all competent authorities of the Republic of Croatia to improve co-operation with civil society. – The principle of self-assessment, which obliges all competent authorities of the Republic of Croatia to consistently and regularly oversee the implementation of the Action Plan, assess the risk of corruption and to take appropriate measures. GENERAL OBJECTIVES In accordance with the public perception of corruption, the following may be defined as priority objectives in implementing the Strategy: – Improving the legal and institutional framework for the efficient and systematic suppression of corruption – Affirming a zero-tolerance approach to corruption – Building integrity, responsibility and transparency in the work of state administration bodies and consequently strengthening citizens’ confidence in state institutions – Creating preconditions for the prevention of corruption at all levels – Enhancing levels of efficiency in detecting and prosecuting criminal acts of corruption – Raising public awareness of the harmfulness of corruption and the need to suppress it – Enhancing international co-operation in combating corruption

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– Enhancing inter-agency co-operation in implementing the Strategy – Enhancing co-operation with civil society organisations. 3. LEGAL FRAMEWORK The Republic of Croatia has a developed legal framework guaranteeing the preconditions for success in the fight against corruption. The following acts are most prominent within the legal framework: 1. The Criminal Code of the Republic of Croatia (OG 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07) 2. The Criminal Procedure Act of the Republic of Croatia (OG 110/97, 27/98, 58/99, 112/99, 58/02, 143/02, 62/03, 115/06) 3. The Act on the Office for the Suppression of Corruption and Organised Crime (OG 88/01, 12/02, 33/05, 48/05, 76/07) 4. The Act on the State Attorney’s Office (OG 55/01, 58/06, 16/07) 5. The Act on the Prevention of Money Laundering (OG 67/97, 106/97, 67/01, 114/01, 117/03, 142/03) 6. The Act on the Prevention of the Conflict of Interests in Performing Public Functions (OG 163/03, 94/04, 48/05, 141/06, 60/08) 7. The Act on Financing Political Parties, Independent Lists and Candidates (OG 1/07) 8. The Act on the Liability of Legal Persons for Criminal Offences (OG 151/03, 110/07) 9. The Witness Protection Act (OG 163/03) 10. The Act on the Right of Access to Information (OG 172/03) 11. The Public Procurement Act (OG 110/07) 12. The Public Internal Financial Control Act (PIFC) (OG 141/06) 13. The Civil Service Act (OG 92/05, 142/06, 77/07, 107/07, 27/08) 14. The Labour Act (OG 137/04) 15. The Budget Act (OG 96/03) 16. The Courts Act 17. Decision on establishing the Co-ordinating Committee for the Implementation of the Strategy (OG 44/2008)

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The Republic of Croatia is a party to all main international legal instruments for combating corruption: 1. The United Nations Convention against Corruption (OG-IA 2/05) 2. The United Nations Convention against Transnational Organised Crime (OG-IA 14/02) 3. The Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, supplementing the United Nations Convention against Transnational Organised Crime (OG-IA 14/02) 4. The Protocol against the Smuggling of Migrants by Land, Sea and Air, supplementing the United Nations Convention against Transnational Organised Crime (OG-IA 14/02) 5. The Protocol against the Illicit Manufacturing of and Trafficking in Firearms, Their Parts and Components and Ammunition, supplementing the United Nations Convention against Transnational Organised Crime (OG-IA 11/04) 6. The Council of Europe Criminal Law Convention on Corruption (OG-IA 11/00) 7. The Additional Protocol to the Council of Europe Criminal Law Convention on Corruption (OG-IA 3/05) 8. The Council of Europe Civil Law Convention on Corruption (OG-IA 6/03) 9. The European Convention on Mutual Assistance in Criminal Matters (OG-IA 4/99) 10. The Additional Protocol to the European Convention on Mutual Assistance in Criminal Matters (OG-IA 4/99) 11. The Second Additional Protocol to the European Convention on Mutual Assistance in Criminal Matters (OG-IA 1/07) 12. The Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (OG-IA 14/97) 13. The International Convention for the Suppression of the Financing of Terrorism (OGIA 16/03) In implementing this Strategy, the Government of Croatia will pay special attention to the regular assessment and improvement of the legal framework, with a view to enhancing its anticorruption policy.

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4. INSTITUTIONAL FRAMEWORK In order to successfully suppress corruption, it is of paramount importance to have a proper and efficient institutional framework. This requires the relevant institutions to be appropriately co-ordinated and to co-operate when implementing and efficiently monitoring anti-corruption policies. The experience acquired during the implementation of the previous National Programme has indicated there is a need to strengthen the institutional framework in order to implement the Strategy and the Action Plan more efficiently. The National Council for monitoring the implementation of the National programme for the suppression of corruption (hereinafter National Council) has a proactive role in overseeing the implementation of the Strategy. The Council is headed by an opposition Member of Parliament (MP). The experience gained during the implementation of the previous National Programme has shown the need for the role of the National Council to be strengthened. in the coming period the National Council ,by following the decision of the Croatian Parliament and in close co-operation with the National Coordinator will establish more direct communication with institutions immediately responsible for the Strategy tasks. It will also supervise their activities more efficiently, with the aim of implementing the Strategy and accompanying Action Plan. Co-operation between the competent state institutions will be co-ordinated through the activities of the competent ministries and other competent state bodies. For the purpose of enhancing co-ordination and interagency co-operation, a Co-ordinating Committee for the Implementation of the Strategy has been established (hereinafter ‘the Co-ordinating Committee’), involving the authorities in charge of particular measures from the Action Plan. The Co-ordinating Committee is chaired by the Minister of Justice, as the Government National Co-ordinator for the fight against corruption. Each institution participating in the Co-ordinating Committee shall entrust a unit within its own structure to implement the Strategy and the Action Plan. Institutional support for co-ordination is provided by the Anti-Corruption Unit of the Ministry of Justice, which also serves as the secretariat of the Co-ordinating Committee. The Anti-Corruption Unit in the Ministry of Justice needs to be adequately staffed, in order to follow up anti-corruption policies pro-actively and efficiently. The prevention of public officials from having a conflict of interest falls within the competence of the Commission for Conflicts of Interest in the Exercise of Public Office. The Commission is, inter alia, in charge of the assets disclosure of public officials, and their sanction if the conflict of interest rules have been violated. The prosecution of criminal acts of corruption and the application of criminal legal sanctions fall within the competence of the criminal justice system, i.e. specially established departments in the Ministry of the Interior, the State Attorney’s Office, USKOK and the courts. Anti-corruption training for public services is provided by the Government Office for the Public Service, while training for the judiciary is the responsibility of the Judicial Academy. Co-operation with civil society and expert matters within the competence of the Croatian Government have been entrusted to the Government Office for Co-operation with NGOs, whose activities are oriented towards creating the conditions for co-operation and partnership with NGOs. With the aim of achieving a more efficient anti-corruption policy, the Croatian Government will regularly assess and enhance the institu- tional framework in order to ensure the efficient implementation of the Strategy. .

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5. THE PREVENTION OF CORRUPTION Preventing corruption at all levels is the key to a successful anti-corruption policy. It is also the obligation of the Republic of Croatia pursuant to the UN Convention against Corruption, and relevant documents from the Council of Europe and the European Union. Priority areas in the fight against corruption are to prevent a conflict of interests when performing public functions, the implementation of the legislation related to the financing of political parties, the exercise of the right of access to information, strengthen the integrity in the Civil Service, public procurement regulation and the protection of injured parties, as well as persons who, in good faith, report corruption. Public opinion polls have shown that additional efforts need to be invested in the prevention of corruption in the sectors of public administration, health, the judiciary, education and the private sector. 5.1. THE PREVENTION OF A CONFLICT OF INTERESTS IN PERFORMING PUBLIC FUNCTIONS a) Analysis and assessment of the current situation A conflict of interests is a situation when the private interests of a public official are contrary to public interests, or when private interests influence or may influence the impartiality of an official in performing their public function. For the sake of the better prevention of conflicts of interest in performing public functions, the amendments of the Act on the Prevention of the Conflict of Interests in Performing Public Functions were adopted in May 2008. In order to implement this Act, the Commission for Conflict of Interest in the Exercise of Public Office has been established. The Commission consists of eleven members appointed by the Croatian Parliament. Six members of the Commission are Members of the Croatian Parliament, while other members are eminent public figures. The Commission’s main tasks are as follows: keeping a register of officials, giving opinions to officials as to whether a particular form of behaviour is in accordance with the principles of public functions, and making decisions as to whether a particular action or a failure to act constitutes a violation of the conflict of interest provisions. In cases where they are violated, the Commission may impose the following sanctions on a public official: fine, admonition and a public announcement of the decision. The work of the Commission, with the exception of voting, is open to the public. The Commission submits a report on its work to the Croatian Parliament once a year. According to the 2007 annual report, the Commission conducted 16 proceedings of decisionmaking in cases of alleged conflict of interests, and in 12 out of the 16 cases it reached a decision that a conflict of interests did exist. Apart from the aforementioned legislation, conflicts of interest of public servants are managed by their superiors, in line with the provisions of the Public Service Legislation Act and the existing codes of conduct. b) Objectives 1. Strengthen the administrative and professional capacity of the Conflict of Interest Commission to manage the conflicts of interest in performing public functions. 2. Review and strengthen the ethics infrastructure in public service by introducing specialist mandatory training to build up ethics competence;

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3. In order to strengthen the integrity of state officials and prevent (the prevention of) corruption, the level of information concerning prohibitions for state officials needs to be strengthen, as well as the relationship between prohibitions on the one hand, and criminal acts of corruption on the other hand. 4. Inform about implementing the rules on prevention of conflict of interest in order to strengthen the integrity of state officials and prevent corruption. 5.2. FINANCING OF POLITICAL PARTIES

a) Analysis and assessment of the current situation

The financing of political parties needs to be transparent because unclear and imprecisely defined obligations in the control of the financing of political parties may contribute to the existing of corruption in politics. Subsequently, the Act on Financing Political Parties, Independent Lists and Candidates of 2007 provides transparency in terms of the sources of financing and the expenses of political parties. Political parties are required to manage their finances in accordance with valid regulations on financial transactions of non-profit organisations, and state the source and methods of spending the collected funds. For the first time, this Act limits the amounts of donations and prohibits anonymous donations. Political parties must report any donation exceeding the ceiling to the State Audit Office and the Tax Administration of the Ministry of Finance, as well as any anonymous donation, and pay such donations into the State Budget. Should a political party fail to comply with this regulation, it shall be held responsible for a committed violation for which it may be sanctioned with a pecuniary penalty. In order to properly implement the Act, an Ordinance has been passed on how to manage records and provide receipts when accepting membership fees and voluntary contributions (donations). b) Objectives 1. Increase transparency and accountability in the management of Political Parties Funds, with particular emphasis on the vigorous application of the newly adopted Act on Financing Political Parties, Independent Lists and Candidates. 2. Strengthen the existing mechanisms for internal financial control within political parties. Ensure that the audits of the accounts of political parties are carried out by independent auditors and that the auditing reports are made public. 3. Regularly assess the system of financing political parties and the implementation of the Act on Financing Political Parties.

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5.3. THE RIGHT OF ACCESS TO INFORMATION

a) Analysis and assessment of the current situation

The Access to Information Act of 2003 grants citizens the right to access information about state bodies. These bodies are responsible for setting up catalogues of the information they hold, dispose of, or supervise, as well as securing the right of access to such information. The Central State Office for Administration is in charge of monitoring and implementing the Access to Information Act and it submits regular reports to the Croatian Government. With the aim of making the work of courts public, court practice has been made available on the Internet, which provides public information on court decisions. Process laws and the Court’s Rules of Procedure facilitate the application of the principle of publicity on main hearings in the courts. The media make regular use of this opportunity. The right of access to information is also exercised in other public services. Thus, for instance, all citizens are able to access waiting lists on the internet sites of healthcare institu- tions. The central site of the public administra- tion entitled Mojauprava.hr has been establi- shed. It is a unique place for access to information on how to exercise rights and fulfil obligations of citizens and businessmen, as well as access to public administration e-services. A new Public Procurement bulletin and a new electronic system of announcing public procurements enables the general public to access to comprehensive, organised and structured sour- ces of public procurement information in the Republic of Croatia. b) Objectives 1. Enhancing the implementation of the access to Information legislation 2. Clearly regulate exceptions in general access to the information system, such as the protection of classified information and the personal data protection. 5.4. INTEGRITY IN THE CIVIL SERVICE a) Analysis and assessment of the current situation Codes of conduct are of crucial importance for developing an organisational culture of integrity and intolerance to corruption. They provide guidance to public servants on how to avoid potential conflicts of interest and corruptive behaviour. In 2006, the Government of the Republic of Croatia adopted the Code of Ethics for Civil Servants. It envisages a mechanism for anti-corruption activities in the work of civil servants. Pursuant to the Code, an Ethics Department was set up in the Central State Office for Administration in the same year. The Department deals with the application of ethical principles in public administration concerning eventual conflicts of interests, the acceptance of gifts and eventual corrupt actions. By means of an open telephone line and in other ways, the Department receives reports and complaints from citizens and civil servants, forwards them to the competent bodies and monitors how they are processed. The Code of Ethics for Civil Servants has also been published on the Internet. Candidates admitted to the civil service must be familiar with the provisions of the Code of Ethics. In addition to the Code of Ethics for Civil Servants, the Police Code, with the same principles and relevant contents, has also been adopted. Training after formal education is of particular importance, especially with regard to certain groups who face challenges and the possibility of corruption in their professional work All civil

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servants must undergo professional training in the activities they perform in their job and in the relevant skills and knowledge through organised training programmes. Seminars entitled “Anti-corruption Policies and Preventive Measures”, which were held as part of the implementation of the National Anti-Corruption Programme 2006-–2008, were attended by all representatives of the competent state bodies responsible for the implementation of the measures, representatives of the criminal police and from other state bodies, and the bodies of local and regional self-government. The Act on the State Attorney’s Office and the Courts Act stipulate the requirement for state attorneys and judges to undergo continuous professional training. The Judicial Academy of the Ministry of Justice organised training in the code of ethics for judges and on the deontology of the state attorney profession, the rule of law, professional ethics and corruption. The lifelong learning of judicial officials also takes the form of regular annual meetings of the Croatian Association for Criminal Sciences and Practice. As part of the project entitled “USKOK Capacity Building”, training was held for USKOK employees who work on cases involving criminal offences of corruption and related criminal offences. Professional development is a continuing activity, which is also systematically implemented by the Ministry of the Interior. As a part of its activities as foreseen in the annual plan, along with its regular tasks, the Department for Economic Crime and Corruption also trains police officers who work in police administrations. Training also takes place within the Police Academy. Tax inspectors, state auditors, internal auditors and employees of the Public Procurement Directorate within the Ministry of the Economy, Labour and Entrepreneurship are also involved in professional development programmes. b) Objectives 1. Strengthen the ethics competence of public servants in Croatia by further developing anti- corruption training courses for public service. 2. Strengthen the ethics framework through a review of the application of the codes of conduct and propose improvements in key risk areas. 3. Design and implement a permanent system for integrity auditing and implement risk management approaches at both individual and organisational levels. 5.5. THE ECONOMY a) Analysis and assessment of the current situation Managing the corruption risk in the economy of the country is an important element of the anti-corruption strategy. Often corruption is caused by the overregulation of certain economic activities, where economists consider corruption to be a rational choice that is made to reduce the cost of doing business in a heavily regulated environment. Accepting and implementing the recommendations of HITROREZ (Special Project Implementation Unit of the Croatian Government) is the key to success in eliminating the opportunities for corruption in the economy, as well as creating an environment that encourages the faster development of Croatian entrepreneurship. The privatisation of 100 companies in which the State is the majority owner will be privatised mainly through the sale of ownership shares in a public collection of bids, and only exceptionally will several companies that have a low value of stock capital be privatised through their sale on the stock market. Due to observed

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shortcomings in the privatisation process, it is important that special attention is paid to improving existing legal mechanisms. With the aim of ensuring the consistent implementation of European standards in the field of free market competition and to stop the abuse of monopolistic positions, regulatory bodies have been set up. Their purpose is to establish an efficient market and create entrepreneurship in individual areas of economic activity of general interest in an objective and transparent manner. The Act on the Regulation of Energy Activities has established the Croatian Energy Regulatory Agency (HERA), the Act on the Croatian Financial Services Supervisory Agency has instituted an agency of the same name, while amendments to the Telecommunications Act have defined the authorities of the Croatian Telecommunications Agency in clearer terms. The Croatian Chamber of Economy (CCE) has signed an Agreement with a non-profit institution of the private sector (Croatian Business Council for Sustainable Development). Based on relevant global experience, the project’s intention is to define a transparent benchmarking method for socially responsible practices of members with the final aim of introducing an award for socially responsible business operations. For the purpose of a comprehensive regulation of business conduct rules within individual segments of economic activity and the ethics of business communication, the CCE has confirmed numerous codes governing relations in this respect. b) Objectives 1. Reduce the corruption risk by simplifying business regulations that may stimulate corruption. 2. Involve business associations in creating new legislation solutions in order to strengthen business ethics and the way business is done in Croatia. 3. Reduce the corruption risks in the process of privatization by ensuring the transparency of the privatization process and by strengthening controls over the privatising entities. 4. Strengthen free market competition and accept standards that prevent market monopolies. 5. Strengthen the capacity of the regulatory bodies to act in an objective, transparent and non-biased manner. 6. Ensure the integrity of the auditing process, where private auditors and accountants ought to be required to act consistently and in accordance with the guidelines for auditors’ actions in cases of suspected fraud and corruption. 7. Ensure the continuous implementation of all envisaged control mechanisms, ensure control and supervision over business operations and business conduct with the aim of preventing corruption. 8. Continuous implementation of all the envisaged control mechanisms for curbing the phenomena of the non-registered economy (i.e. grey economy).

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5.6. PUBLIC FINANCES 1. Internal financial control system a) Analysis and assessment of the current situation An internal financial control system (financial management and control, as well as internal audit) has been developing in the Republic of Croatia since 2005 in line with the requirements of the European Union and the needs of the Republic of Croatia. The implementation of this system is defined by the Public Internal Financial Control Act (OG 141/06) and the Development Strategy of Public Internal Financial Control (PIFC) in the Republic of Croatia, which was adopted separately for central government and separately for units of local and regional self-government. In addition, a series of implementing regulations and legal acts has been passed in the last two years, which has resulted in this system being in line with international standards and directives, as well as with European Union good practice. Internal financial controls in the public sector represent a comprehensive system of financial and other controls that are established by the heads of budget users with the aim of successfully managing and optimally realising the tasks of budget users. Apart from a normative framework existing in the Republic of Croatia, there is also an institutional framework in place, in other words services that establish and develop this system. Thus, at the state level, as well as in larger local units, organisational structures have been established for the implementation of financial management and control, just as independent units have been set up for internal audit. The advice and recommendations of internal auditors will help improve the operations of budget users, and their contributions will bring benefits to the operations of each institution. In order for the above-mentioned operations to be carried out expertly and to a high quality, continuous training is being organised and implemented for those involved in financial management and control. Internal audits are also conducted in a way that is in line with the adopted training plans and programmes. The Tax Administration contributes to the realisation of the State Budget revenue, but also, through its transparent activities, to preventive action and reduction of the risk of corruption. The introduction of Personal Tax Identification Numbers aims to link all official records on persons and assets that are managed in the Republic of Croatia. This is as much for the purposes of tax policy as for the effectiveness of all state and other institutions. By linking data on people and assets from official records through a personal identification number, the Tax Administration will be able to more easily and efficiently follow changes in the status of assets of citizens and legal persons. It will also be able to compare these changes with reported revenues and receipts. As a result it will be able to have a significantly better view of the assets of citizens and legal persons, as well as an insight into the tracking of cash flows. In the Customs sector adoption of the Anti-Corruption Programme will provide concrete guidelines for key services which contribute to the reduction of risk of corruption throughout their scope of work. With a view to suppressing corruption, the Customs Directorate should continue with systematically organises rotations of customs officers in local customs offices. b) Objectives 1. Strengthen the existing internal and external (both ex-ante and ex-post) financial control structures in order to improve and advance the operations of all budget spenders. 2. Improve financial management and decision making.

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3. Strengthen the responsibility and transparency in the operations of state and local level budget users. 4. Continue training of those in charge with financial management and control. 5. Implement the Act on the Personal Identification Number. 6. Adopt an Anti-Corruption Programme for Customs sector. 7. Continue strengthening administrative capacity of the Service for Internal Inspection and Control of the Customs Directorate. 2. The legality of using budget funds and the protection of the financial interests of the EU a) Analysis and assessment of the current situation Given the importance of the proper management of the use of budget funds, and also the protection of the financial interests of the EU, the Republic of Croatia established a system for both the prevention and suppression of fraud and other irregularities committed against EU funds and the state budget. Therefore the Ministry of Finance, in line with its scope of activity, carries out the supervision of the legality, regularity, and timeliness of the use of budgetary funds in central state administration bodies, extra budgetary users, local and regional units of self-government, legal persons whose working expenses and/or material expenses are ensured from the budget, as well as natural and legal persons who receive funds from the State Budget on a variety of different grounds. The supervisions that have been carried out have had a significant effect on the suppression of illegal behaviour, which is directly or indirectly related to the suppression of corruption. Good quality and clearly defined ex-post control is important for the legal and proper functioning of a system that fights irregularities and fraud, both in the use of national budgetary funds and in the use of EU funds. Insistence on the legal and intended use of financial means, irrespective of the source, results in the preventing of illegal behaviour. Within the Division for Budget Supervision in the Ministry of Finance in December 2006 the Department for Anti-Fraud Co-ordinating Service (AFCOS) was established, which is responsible for the co-ordination of legal, managerial and operational activities that set out to protect the financial interests of the EU. This Department became a Division within the Sector for Budget Supervision at the beginning of 2008., in charge of making reports to OLAF (the European Anti-Fraud Office) on irregularities and fraud in the use of EU funds. AFCOS, alongside the other competent inspection services, also participates in direct inspections and surveys of OLAF experts. b) Objectives 1. Further strengthening regulatory framework on budgetary supervision. 2. Strengthen the capacity of AFCOS to work to ensure the integrity of the process of disbursing EU funds. 3. Suppress misuse, irregularity and fraud in the use of budgetary funds and EU funds. 4. Improve the surveillance of business subjects.

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5. Create an effective system for making reports on irregularities in the management of the budgetary and EU funds 6. Establish a transparent and easily accessible system to a broad circle of potential reporters of irregularities. 5.7. PUBLIC PROCUREMENT a) Analysis and assessment of the current situation Public procurement is one of the most critical economic activities with regard to corruption-related risks. The high level of risk is corroborated by the fact of the total value of recorded public procurements in 2007. The total value of public procurements recorded in 2007 was HRK 44,427,016,678.33 which was around 16.15% of the GDP, excluding VAT. Compared with 2006, when the proportion of public procurements in the GDP was 11.77%, the value of public procurements increased by 5.38%. This increase indicates economic growth and investment growth together with competition growth. Relations arranged between the public and private sector are the signal to economists to strengthen their competitive abilities towards achieving more success in competition. On the other hand the public sector in the entrepreneur role, applying the principle of good management and giving everyone equal opportunities, has the chance to choose the optimal market offer. An attempt is made to ensure procurement on the principle of the best value for money by promoting the values of the public procurement system as a public and private point of synergy. By assuming liability for spending tax payers’ money, this Strategy also aims to improve public finance management and to provide legal security for all participants in the public procurement system. The objectives of the public procurement system are coordinated implementation of procedures, transparent award of public procurement contracts and concessions, equal treatment for all participants in the public procurement system, encouraging competition and sustainable economic growth , promotion of the application of the public-private partnership model and simultaneously providing legal protection The weaknesses observed and the opinions voiced by the public served as the starting point for the new Public Procurement Act, which was passed by the Croatian Parliament at its session of 3 October 2007, and which entered into force on 1 January 2008. Furthermore, by the provisions of the Act on the Structure and Scope of Central State Administrative Organisations and its amendments, aadministrative and other activities related to the improvement and coordination of the comprehensive public procurement system are within the competence of the Ministry of the Economy, Labour and Entrepreneurship. Subsequently, a Public Procurement Directorate has been established within the Ministry of the Economy, Labour and Entrepreneurship with four Divisions. Finally, in the Draft of the Strategy of the development of the public procurement system a special chapter was included dedicated to suppression of corruption in the public procurement system. This chapter deals with all the observed weaknesses as well as ways to resolve them., The objectives for suppressing corruption in the public procurement system are established on the basis of this defined framework

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b) Objectives 1. Strengthen the legal framework (public procurement, concessions, public private partnership) 2. Strengthen control mechanisms (evaluation, recognition and reduction of risk) 3. Cooperation with other control authorities (mutual activities of external and internal control and audit institutions) 4. Anti-corruption and ethical education (specialised programmes for all participants of the public procurement procedures) 5. Strengthen the awareness of the importance of suppression of corruption in the public procurement system (independently and in cooperation with civil society organisations) 6. Stimulate and encourage the use of the e-procurement (by reference and promotion) 7. Establish central public procurement bodies (providing consultative services, pilot-projects) 8. Establish a fast, simple and readily available system of legal protection, in all phases of the procurement procedure, by the Act on amendments to the Public Procurement Act, and legal protection adjustment procedures included in Directive 2007/66/EZ. In the new Concessions Act, procedures to award concessions will be included in legal protection before the State Commission for Supervision of Public Procurement Procedure in order to achieve comprehensive adjustment of the legal protection system in public procurement and Directives concerning this field. Legal protection before the SCSPPP includes the field of public-private partnership. It is necessary to develop a training system for those members of staff dealing with public procurement procedures as part of their job. The training should serve to transform the staff into public procurement professionals – specialists with ethical principles, strong professional integrity and an awareness of the harmfulness of corruption in the system of public procurement. 5.8. PROTECTING INJURED PARTIES AND PERSONS WHO IN GOOD FAITH REPORT CORRUPTION a) Analysis and assessment of the current situation Republic of Croatia, as a party to the Civil Law Convention on Corruption, is obliged to provide effective remedies for persons who have suffered damage as a result of acts of corruption. These remedies are ensured through the general provisions of the Civil Obligation Act on the compensation of damages as well as through provisions from other relevant legislation (The Civil Service Act, The Courts Act, The Act on the State Attorney’s Office, The Police Act and The Labour Act). The Civil Obligations Act provides that a legal person is to be held liable for damages caused to a third party by one of its bodies in the performance or in connection with the performance of its functions. The Civil Obligations Act and the above acts also provide that the employer is to be held liable for any damages incurred by a third party as the result of actions by one of its employees during work or in connection with work, unless it is demonstrated that there are reasons for releasing the employee from responsibility.

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The laws do not expressly stipulate the obligation to compensate damage to persons who have incurred losses as the result of corruption, but this obligation arises from the abovementioned acts. As a party to the Criminal Law Convention on Corruption, the Republic of Croatia has the duty to provide protection to those persons who report corruption in good faith. These persons are usually employed in state bodies, companies or are other legal persons who first find out about corruption, and in particular about the abuse of an official position or an abuse of power by official or responsible persons. Despite their knowledge about corruption, such persons are on the main reluctant to report such illegal acts because they fear they will lose their job or face other sanctions, although the legislation does lay down mechanisms of protection. The Civil Service Act stipulates that any civil servant who addresses or files a report for justified suspicion of corruption with the responsible persons or competent state bodies may not be released from civil service. At the same time, the Act also provides that such civil servants must be guaranteed anonymity and protection against any form of abuse, and that the person in the state body restricting or denying the rights of these civil servants is making a serious violation of his or her official duty. The Labour Act provides that when an employee addresses or submits a report in good faith to the responsible persons or the competent bodies of state authority with justified suspicions of corruption, this does not represent a justified reason for dismissal. Regardless of the existing practice according to which the state attorney’s office does not open criminal procedures by reason of disclosure of confidential data against persons who report corruption in good faith (whistle-blowers), the matter is still not regulated in the Criminal Code in a way that would be completely clear. b) Objectives 1. Strengthen the legislative framework on whistleblower protection. 2. Raise public awareness on state and the state bodies’ responsibility regarding compensation for damage caused by illegal activities, including persons who have suffered damage as a result of acts of corruption and protection of whistleblowers. 3. Grant of immunity or the adequate reduction of penalties with regard to those persons charged with corruption offences who contribute to its investigation, disclosure or prevention. 4. Develop relevant administrative and other practices in order to avoid the secondary victimisation of those who have reported corruption and providing security to those who have still not reported corruption.

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5.9. THE JUDICIARY a) Analysis and assessment of the current situation In the period of transition of the political system, the Croatian judiciary faced serious difficulties which had an impact on its efficiency, and indirectly on its independence, impartiality and professionalism. It became evident that weaknesses in the judiciary gave rise to suspicions and distrust in the functioning of this part of the state authority. The Republic of Croatia is aware of the problem. Through the adoption of the Judicial Reform Strategy in 2006, it proceeded with the process of resolving problems in the judiciary in a more systematic and comprehensive fashion. In the implementation of the said Strategy, the Croatian Government has made significant progress, but the Croatian judiciary is still burdened with the problem of a large number of unresolved cases, lengthy procedures, and a lack of equipment and infrastructure. With a view to accelerating reforms in the judiciary, in early 2008 the Government began to revise the Action Plan of the Judicial Reform Strategy. In the implementation of the judicial reform, significant progress was made in terms of strengthening independence, impartiality, professionalism and training in the judiciary. Concerning the impartiality of the judiciary, measures have been taken to adopt and apply codes of ethics. In October 2006, the Code of Ethics for Judges was adopted, while the new Code of Ethics of State Attorneys and Deputy State Attorneys was adopted on 5 February 2008. Along with the existing Code of Ethics of Attorneys and the Code of Ethics of Civil Servants, a code of ethics system in the judiciary is now in place. With a view to reducing the possibility of corruption in the judiciary, the amendments to the Courts Act of February 2007 lay down an obligation for all judges to submit declarations of their assets, so that in the event of alleged corruption in the judiciary, relevant data is readily available. In addition, amendments to the Act on the State Attorney’s Office introduce the obligation of submitting declarations of assets and to perform security risk appraisals at the time of employment for all officials who are to work in state attorney’s offices. Considering that the efficiency of the judiciary has a direct impact on diminishing corruption in the judiciary, great efforts have been made with a view to reducing the backlog of unresolved cases. Capital investments in infrastructure and information technology were increased with the aim of better efficiency. The measures of introducing modern information technologies that aim to increase the efficiency of the judiciary and to prevent corruption through the system of random case allocation are being continually implemented. The new statistical tool (e-statistics) will enable the work of judges to be monitored, improve court management in terms of court cases, human resources, equipment and funds in general, and contribute to making the work of the courts more transparent (for example, making data on the work of courts and court cases more available so as to inform the public through the official web-site of the Ministry of Justice). Mediation as an alternative way of dispute resolution is also encouraged. Legislative and other measures were taken to reduce the duration of court proceedings. Judicial inspections aimed at supervising court administration and improving its efficiency continue, and the rationalisation of the courts network was also launched. The computerisation and the modernisation of public judicial registers – the commercial court register and the land register – also continue. It is now possible to use the Internet to obtain data from the land register for almost all plots. These and other measures serve to successfully continue the implementation of the land register and cadastre reforms, thus enabling the fast entry of ownership rights and public access to the books. Reasons for potential corruption of civil servants and judicial officials are thus greatly reduced.

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b) Objectives 1. Intensify activities with a view to fully implementing the Judicial Reform, and especially measures aimed at improving the efficiency, impartiality and professionalism in the judiciary. 2. Complete the verification process of the land register data on the Internet for the entire country. 3. Consistent and intensive activities on eliminating those conditions which give rise to suspicions of corruption and on strengthening public trust in the judiciary and its credibility. 4. In terms of the declarations of assets of judicial officials, it is necessary to amend the Ordinance in a way to make the obligations clear, complete and subject to specific time limits. 5.10. HEALTH CARE a) Analysis and assessment of the current situation By monitoring activities in the health care system during the implementation of corruptionsuppressing activities, it became evident that it was necessary to change certain goals in the suppression of corruption in the health care system based on already performed activities and based on the activities yet to be adopted. The possibility of corruption in the health care system is based on the organisation of health care, but also on general health care activity. The use of a system of objectivity is not applicable in most cases, because there is no protocol in the processes of providing health care. This is a global problem. To a certain extent, basic protocols (Evidence-Based Medicine) can lead to objectivity in the evaluation of work, but treatment can take countless directions and be creative, which is a part of the basic responsibility of health professionals. In other parts of the health care system, the possibility of corruption is based on subjective decisions in procuring expendable materials, medicinal products and medical equipment, and in employment. b) Objectives 1. Basic tenets in suppressing corruption must target two principle directions: – In a system in which it is possible to set objective criteria, it is necessary to adopt regulations which would impose an obligation on the system to respect the criteria of objectivity and transparency, – In a system where subjectivity is part of the basic responsibility and the responsibility of one’s position, it is necessary to introduce strong control mechanisms which would reduce the possibility of corruption to the greatest possible extent. 2. Further strengthen the capacity of the health care system, which includes the procurement of new equipment to replace old equipment, the repair of premises and the organisation of lifelong learning and the professional development of doctors. 3 Review the procurement system for hospitals in order to identify potential corruption risks.

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4. Further improve the transparency of the waiting lists for specialist examinations and operations. 5, Further work on better and more precise legislative conditions under which those doctors who work in state medical institutions may provide medical services as part of their private practice. 5.11. SCIENCE, EDUCATION AND SPORTS a) Analysis and assessment of the current situation The required level of transparency and control has been ensured and a higher level of quality of application procedures, assessment and the funding of scientific projects and programmes has been achieved. As of 2006, the application and assessment procedure is conducted exclusively through an electronic system, subject to the application of the measures required to prevent conflicts of interest of all those who take part in the procedure and with the final public presentation of the results. It is evident that it is necessary to improve the criteria for performing the scientific activity which must be met by scientific organisations during the process of establishment. It is necessary to draw up an analysis of the success with which scientific organisations organise education for young scientists, to determine the criteria for the procedure of approving work posts for their employment, and to develop clear criteria for approving scientific equipment. Education programmes on the harmfulness of corruption exist all the way from pre-school education to higher education. The organisation and implementation of national examinations and the preparation and implementation of state matriculation exams introduce objective criteria for evaluating, assessing and grading students’ achievements during their education at all state levels. The proper formation and holding of state matriculation exams and the right attitude towards the examination results of all those participating in the education system will significantly decrease the possibility for various forms of corrupt behaviour. The acceptance of the results of state matriculation exams will enable simpler enrolment procedures for universities and polytechnics. The implementation of those measures does not impinge on the constitutionally safeguarded autonomy of universities. The Act on Text Books for Primary and Secondary Schools regulates the problem of preventing conflicts of interest in the procedure of approving and selecting approved text books. The Sports Act stipulates several measures, the purpose and goal of which is to suppress abuse and corruption in sports. It regulates the transformation of sports clubs set up for participation at sporting events into sports joint-stock companies. The transparency of funding sports and timely provision of information, whenever requested, is important for the prevention and suppression of corruption.

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6. CRIMINAL PROSECUTION AND APPLICATION OF CRIMINAL LAW a) Analysis and assessment of the current situation Although the number of criminal charges for corruption, and in particular the number of criminal proceedings instigated over the past three years, has not significantly risen, there have been significant changes in the prosecution of corruption. As opposed to the previous years, when most procedures involved less significant criminal offences of so-called “street corruption”, the structure of criminal proceedings shows that in 2007 most proceedings involved medium-to high-level criminal offences of corruption. The mentioned criminal proceedings, some of them known to the public under code names (Maestro, Five Stars, diagnosis, etc.), without a doubt build up public trust in the bodies responsible for detecting and prosecuting corruption and have a positive impact on the way in which corruption is viewed in Croatia. The positive impact will be even greater if the proceedings are concluded within a reasonable period of time. The structure and operation of USKOK, as a special state attorney’s office for the suppression of corruption, shows how important it is to have specialised bodies for detecting and prosecuting criminal offences of corruption. In particular, positive developments were achieved through joint work with the police, through the evaluation of those areas in which corruption is especially widespread and through the use of special investigative techniques to identify and prove corruption. Work on complex cases shows that there are certain difficulties, because the territorial structure of the Office, which is competent for the entire area of Croatia, and of the police is different, has no specialist organisational units for detecting corruption at the level of police administrations. The prosecution of corruption, especially at medium and high levels, is not and cannot be entirely successful if it only involves the punishment of the perpetrators. It is essential to use a criminal procedure to determine and to seize any property gained through such criminal offences. It is of vital importance to work with other state bodies, especially those in charge of financial and tax control, but it is also necessary to have adequate legislation to enable the seizure of all proprietary gains generated through the criminal offence of corruption from the person involved. There is no such legislation, and in most cases it is only possible to seize those gains generated through the criminal offence of which the person was found guilty, although there may be knowledge about the possession of considerably more property of questionable origin. b) Objectives 1. It is necessary to pay even greater attention to the detection and prosecution of corruption at high levels. 2. Initial positive results in detecting and suppressing corruption at medium and high levels show that a commitment to investigate the existence of corruption in specific fields yields good results. To make further progress, it is essential to strengthen the capacity of USKOK, but also to strengthen the capacity of the police in all segments within the existing organisational units or through the formation of new ones in the General Police Directorate, Criminal Police Directorate and in individual county police administrations. 3. Regardless of the complexity of a particular case and the related difficulties, criminal procedures for corruption should be concluded as soon as possible, since this is the only way in which criminal prosecution can yield positive effects, both in terms of punishment and building trust in the bodies involved in the investigation, prosecution and adjudication. This

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will subsequently have a positive impact on the way in which corruption is perceived. In order to achieve the above goal, it is imperative, inter alia, to pass a new Criminal Procedure Act, which should substantially reduce the duration of the investigative phase and make the criminal procedure more effective. 4, Along with punishing the perpetrator, it is also essential to seize all proprietary gains that he or she generated through corruption. Therefore, not only those gains that have been established to have been gained through a criminal offence, but all property reasonably believed to originate from such criminal offences since its legal origin cannot be determined. Therefore, it is necessary to incorporate a new provision in the Criminal Code concerning the expanded seizure of proprietary gains generated through corruption. 5. In identifying committed criminal offences, and in particular in identifying corruption at the medium and high levels, and in identifying proprietary gains generated through corruption, the police and state attorney’s offices cannot be successful without the support and co-operation of other state bodies. Co-operation with the Tax Administration and the Customs Directorate, Foreign Exchange Inspectorate, Office for the Prevention of Money Laundering, State Commission for the Supervision of Public Procurement Procedures, State Audit Office, and the like, is particularly important. 6. It is also necessary to ensure that the competent state bodies have access to data on security measures that have been issued (especially those involving prohibitions on performing an occupation, activity or duty). 7. INTERNATIONAL CO-OPERATION a) Analysis and assessment of the current situation Corruption is not exclusively a Croatian problem; it has both a global and cross-border character. This is the reason why the strengthening of international co-operation is important for the suppression of corruption. The Republic of Croatia takes an active part in international co-operation in the field of suppressing corruption, both at the bilateral and multilateral levels. On the bilateral level, the Republic of Croatia concluded 26 agreements on police cooperation related, amongst other issues, to the fight against terrorism, organised crime and corruption. In connection with multilateral international co-operation, Croatia’s participation in various activities of the UN, EU, Council of Europe, Interpol and the Regional Co-operation Council (formerly Stability Pact) must be singled out. In terms of police and judicial co-operation with the EU, it is necessary to mention an agreement which was concluded with Europol and Eurojust. On 13 January 2006, Croatia signed the Agreement on Operational and Strategic Co-operation with Europol, which entered into force on 16 August 2006 (OG-IA 7/06). To ensure the further strengthening of international cooperation, in 2008 the Republic of Croatia sent a liaison officer to Europol’s headquarters. Furthermore, in late 2004, Croatia appointed three contact-persons for co-operation with Eurojust. On 9 November 2007, Croatia signed the Agreement on Co-operation between the Republic of Croatia and Eurojust, and in 2008 it plans to send a liaison officer to Eurojust’s headquarters. In addition, Croatia takes an active part in the meetings of the European Judicial Network in criminal matters. Concerning the Council of Europe, the Republic of Croatia is particularly active in GRECO, while in terms of regional co-operation, the Republic of Croatia is engaged in the Regional Anti-Corruption Initiative (RAI – formerly SPAI), PACO – Programme against Corruption and Organised

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Crime in South-eastern Europe, and PACO IMPACT – Implementation of Anti-corruption Plans in South-eastern Europe. Croatia has been a member of Interpol since 1992. So far, for Croatia operational co-operation through Interpol has been the most important multilateral means of fighting crime. In addition, Croatia also achieves police co-operation through the Regional Co-operation Council (formerly Stability Pact), the SECI Centre, Adriatic-Ionian Initiative (AII), Southeast Europe Police Chiefs Association (SEPCA), Central European Initiative (CEI), DCAF. b) Objectives 1. To take an active part in the work of international organisations and initiatives aimed at suppressing corruption. 2. Encourage the implementation of the Council of Europe Civil Law Convention on Corruption and the United Nations Convention against Corruption. 3. Actively participate in the work of the Council of Europe (GRECO) and in other regional initiatives – Regional Co-operation Council, RAI, SPOC, PACO. 4. Strengthening of operational co-operation on the suppression of corruption with other states through Interpol, Europol and Eurojust. 5. With the aim of strengthening bilateral co-operation in suppressing corruption, the Republic of Croatia will continue to improve co-operation through the implementation of agreements that have been already concluded and through the conclusion of new agreements. 8. RAISING PUBLIC AWARENESS OF THE HARMFULNESS OF CORRUPTION a) Analysis and assessment of the current situation In the process of educating citizens about corruption, raising public awareness of the harmfulness and danger of corruption is of special importance. The Ministry of Justice organised a national campaign aimed at pointing out the harmfulness of corruption through the media, round tables and seminars, posters and in a large number of other ways. In raising public awareness of the harmfulness of corruption, all state bodies entrusted with the implementation of this Strategy co-operate with civil society organisations. The co-ordination of the said co-operation is achieved through the Office for Co-operation with NGOs of the Government of the Republic of Croatia. The Office co-ordinates the work of state administration bodies that provide support to the projects and programmes of NGOs from the State Budget and, in that sense, monitors and encourages the award of grants to NGO projects that work on the suppression of corruption. In the period of the implementation of the National Anti-corruption Programme 2006-2008, the Office organised a number of conferences, professional gatherings and meetings for civil society representatives, thus encouraging better quality co-operation between NGO representatives and state bodies active in the suppression of corruption. The Office also co-ordinates the activities of the providers of financial grants for civil society organisation projects and programmes from the State Budget and from part of the lottery revenue, involving line ministries, government offices, the Council for National Minorities and the National Foundation for the Development of Civil Society. The purpose of the co-ordination is to emphasise the obligation to comply with the

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provisions of the Code of Good Practice, Standards and Benchmarks for the Allocation of Funding for NGO Projects and Programmes. This is with a view to prevent abuse in the award of financial grants for projects and programmes of civil society organisations and potential conflicts of interest. In order to improve the transparency of the information about the award of financial grants to such projects and programmes from the State Budget, the Office for Co-operation with NGOs used its website to publish a database on financial aid awarded to NGOs in 2004, 2005 and 2006. b) Objectives 1. Systematically organise and hold training sessions for pupils and students on the harmfulness of corruption, and to set up databases with articles and audio and video recordings that deal with the problem of corruption and to make them available to the public. It is also necessary to organise campaigns aimed at informing the public of the content of this Strategy and its Action Plan. 2. Stimulate activation of postgraduate specialist and doctoral studies dealing with various aspects of its suppression. In this way, the state will provide funds for this form of specialised training of employees in state bodies who deal with the suppression of corruption in their everyday work. 3. Stimulate active co-operation and partnership by and between all competent authorities and civil society organisations will be achieved through round tables, publications and promotional materials concerning the dangers and harmfulness of corruption and measures aimed at suppressing it. 4. Additional training of journalists and their sensitisation concerning the problem of corruption in order to avoid journalistic sensationalism and to further raise public awareness about the dangers and harmfulness of corruption and the need to suppress it. 5. Draw up a manual for the application of the Code of Good Practice, Standards and Benchmarks for the Allocation of Funding for NGO Projects and Programmes, which will involve the providers of financial aid with their examples of best practice.

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9. FINAL PROVISIONS The suppression of corruption is not, and should not be, the sole obligation of those state bodies entrusted with such activities in their scope of work or based on this Strategy. The suppression of all forms of corruption should really be an activity for society to the greatest possible extent, involving all state bodies and interested organisations, business subjects, non-governmental organisations, citizens, and others. The model for suppressing corruption defined in this document is a long-term solution. Concepts defined in this document are subject to continuous evaluation and re-evaluation and will change in the event of any major changes in the area of internal development and available resources. Based on the standpoints and solutions defined in this document, concepts in specific special functional areas of suppressing corruption will continue to be developed, elaborated and evaluated. An efficient fight against corruption is an obligation and a priority of the Government of the Republic of Croatia. Therefore, the Government of the Republic of Croatia, in co-operation with local and regional self-government, civil society and the private sector is doing everything it can to transform the political will to suppress corruption into reforming Croatian society as a whole and into making the Republic of Croatia based on the rule of law, democracy and a free entrepreneurial economy.