COMMISSION STAFF WORKING DOCUMENT BOSNIA AND HERZEGOVINA 2015 REPORT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS EU Enlargement Strategy

EN EN
EUROPEAN
COMMISSION
Brussels, 10.11.2015
SWD(2015) 214 final
COMMISSION STAFF WORKING DOCUMENT
BOSNIA AND HERZEGOVINA
2015 REPORT
Accompanying the document
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS
EU Enlargement Strategy
{COM(2015) 611 final}
{SWD(2015) 210 final}
{SWD(2015) 211 final}
{SWD(2015) 212 final}
{SWD(2015) 213 final}
{SWD(2015) 215 final}
{SWD(2015) 216 final}
Offentligt
KOM (2015) 0611 - SWD-dokument
Europaudvalget 2015
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Table of Contents
1. INTRODUCTION....................................................................................................... 4
1.1. Context .............................................................................................................. 4
1.2. Summary of the report....................................................................................... 4
2. POLITICAL CRITERIA............................................................................................. 6
2.1. Democracy ........................................................................................................ 6
2.2. Public administration reform............................................................................. 9
2.3. Rule of law ...................................................................................................... 12
2.4. Human rights and the protection of minorities................................................ 20
2.5. Regional issues and international obligations ................................................. 26
3. ECONOMIC CRITERIA.......................................................................................... 29
3.1. The existence of a functioning market economy............................................. 30
3.2. The capacity to cope with competitive pressure and market forces within
the Union......................................................................................................... 35
4. EUROPEAN STANDARDS..................................................................................... 37
4.1. Internal market ................................................................................................ 37
4.1.1. Free movement of goods................................................................... 37
4.1.2. Movement of persons, services and right of establishment............... 38
4.1.3. Free movement of capital.................................................................. 40
4.1.4. Customs and taxation ........................................................................ 41
4.1.5. Competition....................................................................................... 41
4.1.6. Public procurement............................................................................ 42
4.1.7. Intellectual property law.................................................................... 44
4.1.8. Employment and social policies, public health policy...................... 44
4.1.9. Education and research...................................................................... 46
4.1.10. WTO issues ....................................................................................... 48
4.2. Sectoral policies .............................................................................................. 48
4.2.1. Industry and SMEs............................................................................ 48
4.2.2. Agriculture and fisheries ................................................................... 49
4.2.3. Environment and climate change ...................................................... 50
4.2.4. Transport policy ................................................................................ 52
4.2.5. Energy ............................................................................................... 53
4.2.6. Information society and media.......................................................... 54
4.2.7. Financial control................................................................................ 55
4.2.8. Statistics............................................................................................. 57
4.3. Justice, freedom and security .......................................................................... 58
4.3.1. Visa, border management, asylum and migration............................. 59
4.3.2. Money laundering.............................................................................. 60
4.3.3. Drugs ................................................................................................. 61
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4.3.4. Police................................................................................................. 61
4.3.5. Fighting organised crime and terrorism ............................................ 62
4.3.6. Judicial cooperation in civil and criminal matters............................. 63
Annex I – Relations between the EU and Bosnia and Herzegovina ......................... 64
Annex II – Statistical Annex..................................................................................... 67
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1. INTRODUCTION
1
1.1. Context
The EU initiated in December 2014 a new approach to Bosnia and Herzegovina, which
provides for the re-sequencing of the conditionalities in order for the country to progress
towards the EU and address the outstanding socio-economic challenges it faces. This led to
the entry into force of the Stabilisation and Association Agreement (SAA) between Bosnia
and Herzegovina and the EU on 1 June 2015. It replaced the Interim Agreement (IA) which
had been in force since 2008. In July, the country adopted a Reform Agenda aimed at tackling
the difficult socio-economic situation and advancing the judicial and public administration
reforms. Its implementation has started. Meaningful progress in the implementation of the
Reform Agenda is necessary for the EU to consider an EU membership application from
Bosnia and Herzegovina. Despite these positive developments, the adoption of a decision of
the Republika Srpska National Assembly in July to hold a referendum on the Bosnia and
Herzegovina state-level judiciary runs against the written commitment signed in February
which is the basis for moving ahead on the EU path. Remaining shortcomings in the judiciary
need to be addressed in the Structured Dialogue on Justice.
Regular political and economic dialogue took place between the EU and Bosnia and
Herzegovina in the framework of the SAA/IA structures. However, Bosnia and Herzegovina
has continued to refuse to adapt the trade concessions granted under its SAA/IA to take into
account its bilateral traditional trade with Croatia, following the accession of Croatia to the
EU. Prolongation of the Autonomous Trade Measures beyond 2015 is conditional on Bosnia
and Herzegovina accepting this adaptation of the SAA/IA.
1.2. Summary of the report
As regards to the political criteria, the October 2014 general elections were efficiently
administered and held in an orderly manner and competitive environment. Bosnia and
Herzegovina’s Parliamentary Assembly has started to function and deliver on the legislative
agenda. The adopted Reform Agenda, which set out major socio-economic reforms to be
carried out, was followed by initial progress in its implementation. Cooperation between the
State-level, Entity-level and Brčko District parliaments has yet to be improved. Closer
cooperation and coordination between all levels of government need to be established, not
least to be able to tackle the major socioeconomic challenges.
The country’s Constitution established a complex institutional architecture that remains
inefficient and is subject to different interpretations. The Constitution remains in breach of the
European Convention on Human Rights, as stated in the Sejdić-Finci ruling of the European
Court of Human Rights, and needs to be amended.
The country is at an early stage in public administration reform, with a high level of
politicisation and poor service delivery. Establishing a new strategic framework ensuring
appropriate political guidance to public administration reform in the country is needed.
Bosnia and Herzegovina's judicial system has reached some level of preparation. A Judicial
Reform Sector Strategy was adopted and now needs to be implemented. In September at a
1
This report covers the period from October 2014 to September 2015. It is based on input from a variety of
sources, including contributions from the government of Bosnia and Herzegovina, the EU Member States,
European Parliament reports and information from various international and non-governmental organisations. As
a rule, legislation or measures which are under preparation or awaiting parliamentary approval have not been
taken into account.
5
ministerial meeting in the framework of the Structured Dialogue, the authorities reiterated
their commitment to develop jointly key features of the reform of the judiciary.
Bosnia and Herzegovina has some level of preparation in the fight against corruption. A new
anti-corruption strategy and action plan covering the years the 2015-2019 were adopted.
There was a substantial increase in the confiscation of assets. Corruption continues to be
widespread and the political commitment on this issue has not translated into concrete results.
The legal and institutional framework remains weak and inadequate. The lack of enforcement
of the law negatively affects citizens and institutions. Penalties in force do not constitute a
sufficient deterrent against corruption.
Concerning the fight against organised crime, the country also achieved some level of
preparation. While there have been a number of successful large-scale joint operations in the
past year, some including neighbouring countries, coordination and cooperation between all
institutions throughout the country needs to be significantly improved. The number of final
convictions remains low. Financial investigations remain under used. The lack of strategic
coordination is hampering the effective delivery of police services.
Bosnia and Herzegovina faces many challenges regarding human rights and the protection of
minorities. The legal and institutional framework for the observance of human rights requires
substantial improvements and the adopted legislation needs to be effectively implemented,
notably regarding anti-discrimination aspects. The conditions for the exercise of the freedom
of expression have deteriorated over the reporting period. Although there is some level of
preparation in this are with legal provisions generally in place, the institutional and political
environment is not conducive to creating the conditions for full freedom of expression. The
lesbian, gay, bisexual, transgender and intersex community continued to be subject to threats
and attacks. Some steps were taken on the registration and housing of the Roma minority, but
there was limited action on health, education and employment.
The country continued to participate actively in regional initiatives and has made progress on
good neighbourly relations, including signature of a border agreement with Montenegro in
August. In May, Bosnia and Herzegovina took over the chairmanship of the Council of
Europe's Committee of Ministers.
With regard to the economic criteria, Bosnia and Herzegovina is at an early stage in
developing a functioning market economy. Some progress has been made on improving the
business environment, particularly on easing market entry and the granting of construction
permits. Despite the setback from the 2014 floods, economic growth remained resilient.
However, difficult labour market conditions have remained largely unchanged, with
unemployment at 27.6%, rising to 62.7% among youth. In order to tackle high unemployment
and low participation rates the country should reduce labour market rigidities, including a
reduction of the tax wedge. The quality and sustainability of public finances have
deteriorated. The business environment remained weak, impeding a stronger economic
recovery. The government needs to improve the quality of public sector governance, in
particular by increasing fiscal space for growth enhancing capital investment. Furthermore,
concrete steps are needed to improve its budget management framework, to advance
privatisation and to improve the business environment.
Bosnia and Herzegovina is at an early stage in achieving the capacity to cope with
competitive pressure and market forces within the Union. Some progress has been made on
the liberalisation of energy markets. However, in order to strengthen the country's
competitiveness, the authorities should pay particular attention to developing a more strategic
approach to tackling deficiencies in its training and education system; simplifying its complex
procedure for exports and developing a transport strategy and an energy strategy.
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Bosnia and Herzegovina is at an early stage regarding its approximation with European
standards. There is some level of preparation as regards public procurement and internal
market. The country is at an early stage in the transport area, but the adoption of the Transport
Policy in July is a positive step forward towards the country benefitting from the connectivity
agenda. However, significant efforts are needed in most of the policy areas for the country to
further align with the EU acquis. This includes financial control as well as statistics where the
country is at an early stage and major steps are needed to address outstanding priorities. In
this respect, the processing of the 2013 census data and the publication of the results need to
be completed. Further sustained efforts are also needed in particular as regards justice,
freedom and security matters, the competition area, industry and SMEs, agriculture,
environment and climate change policies, energy, and information society and media.
2. POLITICAL CRITERIA
2.1. Democracy
Elections
The 12 October 2014 general elections were assessed as being efficiently administered and
held in an orderly manner and competitive environment. The OSCE Office for Democratic
Institutions and Human Rights made a number of recommendations to further improve the
electoral framework.
General elections were held in Bosnia and Herzegovina on 12 October 2014. The elections
took place in a difficult political environment and deteriorating socioeconomic conditions, as
witnessed over the last years. The OSCE Office for Democratic Institutions and Human
Rights (ODIHR) assessed the elections as having been efficiently administered and held in an
orderly manner and competitive environment. The candidates were able to campaign freely
and fundamental freedoms of expression, association and assembly were met. The civic
monitoring coalition ‘Pod Lupom’ reached similar overall conclusions. At the same time,
OSCE/ODIHR issued a number of recommendations aimed at improving the holding of
elections. These include reviewing constituency boundaries to uphold the principle of voting
equality, the removal of ethnicity and residency-based limitations on the right to vote and
stand as a candidate and reviewing the regulatory framework for campaign finance.
After five years of deadlock the 2010 Constitutional Court decision on Mostar’s statute needs
to be implemented as a matter of priority to ensure that the citizens of Mostar can exercise
their democratic rights.
Parliament
Bosnia and Herzegovina’s Parliamentary Assembly has started to function and deliver on the
legislative agenda. Cooperation between the State-level, Entity-level and Brčko District
parliaments has yet to be improved.
Following the October elections, the two chambers of Bosnia and Herzegovina’s
Parliamentary Assembly, the House of Representatives and the House of Peoples, were
established in the new compositions in December and February respectively. The formation of
the parliamentary committees was only completed in June. The new Rules of Procedure for
the Parliamentary Assembly entered into force and introduced a fast-track mechanism for EU-
related legislation. Cooperation between the State-level, Entity-level and Brčko District
parliaments has yet to be improved. Joint meetings of the parliaments did not take place.
7
The Federation of Bosnia and Herzegovina’s House of Representatives and House of Peoples
held their constitutive sessions in December and January respectively. The Federation House
of Peoples remained short of three Serb delegates, as no more than 14 Serb delegates could be
appointed from the cantonal assemblies. Legislative changes preventing this issue from
reoccurring are yet to be adopted. The functioning of the Federation Parliament continued to
be hampered by the lack of space in its rented premises and insufficient capacity to deal with
European integration-related issues. Coordination with cantonal assemblies, in particular on
shared powers, remained problematic.
In November, the Republika Srpska National Assembly held its constitutive session. In
February, the Republika Srpska National Assembly unanimously adopted a written
commitment to undertake the necessary reforms for Bosnia and Herzegovina’s European
integration. In March, the Department for European Integration and International Cooperation
was established within the Parliamentary Secretariat. This body will be in charge of providing
support to parliamentarians in Republika Srpska. In July, upon a proposal from the Republika
Srpska president, the assembly adopted a decision to hold a referendum on the Bosnia and
Herzegovina state-level judiciary and its jurisdiction in Republika Srpska. Such a decision
runs against the written commitment signed, in February, by the representatives of all political
parties represented in the country's Parliamentary Assembly. Questioning the existence of the
court and the prosecutor's office of BiH would go against a number of rulings of the
Constitutional Court of Bosnia and Herzegovina, which confirmed that the establishment of
the state level judiciary was in line with the constitution.
The work of the Brčko District Assembly committees, including the Committee for European
Integration, remains problematic due to frequent lack of quorum at their meetings and limited
capacities of the District Assembly’s services.
Governance
Bosnia and Herzegovina's institutions made some progress towards addressing the
outstanding reform priorities notably with the adoption of the Reform Agenda and the start of
its implementation. However, major challenges remain, including the need for closer
cooperation and coordination at all levels of government. The Constitution remains in breach
of the European Convention on Human Rights (the Sejdić-Finci judgment).
The Dayton/Paris Peace Agreement (DPA) put an end to the 1992-1995 war. The country’s
Constitution, which is Annex 4 to the DPA, established a complex institutional architecture
that remains inefficient and which is subject to different interpretations. The Constitution
prevents citizens who do not declare themselves as one of the country’s three constituent
peoples from standing as candidates for the Presidency and the House of Peoples of the
Parliamentary Assembly. This has been declared in breach of the European Convention on
Human Rights in the Sejdić-Finci judgment. Constitutional Court decisions have yet to be
fully enforced throughout the country.
The new tripartite Presidency of Bosnia and Herzegovina initiated a written commitment to
undertake reforms and advance the European integration process. The written commitment,
whose language fully reflected the conclusions of the EU Foreign Affairs Council of
December 2014, was signed by the leaders of all the 14 political parties represented in the
Parliamentary Assembly, and endorsed by Bosnia and Herzegovina’s Parliament in February.
The new Council of Ministers was sworn in at the end of March. In May, the Council of
Ministers adopted its 2015 work plan covering the adoption of some 65 laws related to the EU
integration agenda. The preparations of the Programme of EU Integration started in May. In
July the Council of Ministers adopted the Reform Agenda. The processing of the 2013 census
8
data and the publication of the results need to be completed without further delay in line with
recommendations of the International Monitoring Operation. Country-wide sectoral strategies
necessary to fully benefit from EU pre-accession assistance on transport, energy and the
environment need to be adopted as a matter of urgency. The role and capacities of the Council
of Ministers’ Directorate for European Integration (DEI) will need to be enhanced in order to
cope with the challenges stemming from the entry into force of the Stabilisation and
Association Agreement. The mandate of the DEI Director expired in August 2015 and the
vacancy was published.
An effective coordination mechanism has yet to be put in place between the various levels of
government for the alignment, implementation and enforcement of EU laws. Such a
mechanism is needed to enable the country to interact in an efficient manner with the EU.
In the Federation of Bosnia and Herzegovina, a new government was appointed in March
and the budget for 2015 adopted. The lack of an agreement on appointments to the
supervisory boards of public companies has been detrimental to the work of the Federation
Government and led to the break-up of the ruling coalition and a minority government.
Negotiations on the formation of a new government are pending. A new labour law was
adopted in July, in line with the provisions of the Reform Agenda. The Director of the new
Federation Office for European Integration took office in February. However, the Office does
not have enough administrative capacity to coordinate EU affairs with the rest of the country
and across the different levels of government within the Federation. So far, the Federation
Government and the Cantons are not cooperating successfully on EU integration issues.
In Republika Srpska, a new government was appointed in December. The government has
engaged in economic reforms. In January, it established two working bodies, the board for
economic system reform and the board for public sector reform, which were tasked with
drawing up legislation in their respective areas.
The Brčko District government held several specific sessions on European integration. In
October, five sectoral working groups were set up and communication on EU matters was
made an official part of the working procedures of the relevant institutions and bodies of the
District. In December, a decision was adopted on procedures to harmonise legislation passed
by Brčko District with the EU acquis.
Entity legislation is largely in line with the European Charter of Local Self-Government.
However, a lack of clarity remains in the division of powers between the Entities, Cantons
and municipalities, with a relatively low level of financial autonomy at municipal level.
The Ombudsman’s Office continues to be hampered by financial and human resource
constraints. The law on the reform of the Ombudsman has yet to be adopted. As of December,
the mandate of the three Ombudspersons expired. The joint ad hoc committee of the BiH
Parliamentary Assembly for appointing the new Ombudspersons was established in April and
new rules of procedures regulating the selection process were adopted in July and are in line
with the European standards.
Civil society
No progress was made in improving mechanisms for dialogue and cooperation between
government and civil society organisations. The legal and financial framework needs to be
further improved.
An empowered civil society is a crucial component of any democratic system and should be
recognised and treated as such by the institutions. There have been no developments towards
ensuring formalised policy dialogue between the Council of Ministers and civil society. A
9
national strategy on civil society has yet to be adopted. The State law on the joint registry of
non-governmental organisations which would allow for the establishment of a centralised
database has not yet been adopted.
Political activists that emerged during the February protests 2014 remained active at the local
level and attempted to organise and establish networks across the country to address pressing
socioeconomic issues. Some civil society organisations strived to increase their capacity to
monitor the EU integration process and enter into dialogue on the Reform Agenda with the
EU and the authorities across the country. However, civil society organisations continue to
have limited capacity at grassroots level to participate in policy dialogue.
Public funding for civil society organisations has to be provided in a transparent way
following clearly defined criteria. Substantial funding is mostly given to sporting associations
and war veterans in a non-transparent and unregulated way. Republika Srpska has adopted
initial guidelines on grant management which are obligatory for all ministries. Country wide
legislation, for instance tax rules, is not conducive to stimulating private donations to civil
society organisations.
Civilian oversight of the security forces
The Joint Parliamentary Committee for Security and Defence was set up in April 2015.
Mandated to scrutinise and shape Bosnia and Herzegovina’s security and defence policy, the
Joint Committee should play an important role in steering the defence reform process.
However the Committee held only two sessions and no substantive issues have been discussed
so far. The Parliamentary Military Commissioner continued to oversee the protection of
human rights and freedoms in the armed forces and Bosnia and Herzegovina’s Ministry of
Defence. The armed forces made substantial progress in disposing of the most unstable
ammunition and building sustainable capacity to manage the rest of the stockpiles. At the
same time, the widespread presence of weapons held illegally by the population and the large
stockpiles of ammunition and weapons under the responsibility of the armed forces remain
issues of concern.
2.2. Public administration reform
Bosnia and Herzegovina is at an early stage with the reform of its public administration. No
progress was achieved in the past year. The lack of broad political support for country-wide
reforms and the fragmentation of public service are hampering efforts to carry out institutional
and legislative reforms. A systematic approach to policy development and coordination is still
largely lacking and the politicisation of the civil service continues to be an issue of concern.
In the coming year, Bosnia and Herzegovina should in particular:
→ develop, adopt and start to implement a new country-wide strategic framework for public
administration reform and ensure appropriate political leadership and guidance to public
administration reform in the country;
→ ensure implementation of an effective human resources management system;
→ develop a public financial management reform programme, which is clearly linked to the
new PAR strategic framework.
Public service and human resources management
The public service in Bosnia and Herzegovina is fragmented, which is not conducive to the
emergence of a unified professional civil service. The legal framework is not consistent, with
different laws applying to the civil service at different levels of government. Moreover, the
laws are all amended over time in an uncoordinated fashion.
10
The principle of merit-based recruitment and promotion is enshrined in law. However, in
practice internal competitions and transfers are preferred to external competitions, limiting the
potential for merit-based recruitment. Recruitments to senior management positions continue
to be influenced by political parties and ethnic considerations, and the separation between
politics and public service is not properly reflected in the legislation. The criteria for
dismissals and disciplinary procedures, including possibility to appeal, are also enshrined in
law. In practice the number of dismissals is low. Women are slightly under-represented in
senior management: 30% in the institutions of the State, 40% in the Federation, 43% in
Republika Srpska and 37% in Brčko District in 2014.
Human Resources Management is fragmented and inefficient. There are four main civil
service coordination bodies. The creation of up to 10 new civil service agencies in the
Federation is not in line with efficient resource management and will only further risk
fragmenting the public service. The human resources management information system and the
central civil service registries are in place, but they are not being used to their full potential,
either because of legal obstacles on personal data protection or because they do not contain
complete information. This is a further hindrance to a unified public service.
The remuneration system is based on the job classification of the civil service. The system is
not transparent and does not ensure equal pay for equal work because different salary
regulations are in force. Public sector salaries in Bosnia and Herzegovina, including the civil
service, are almost 40% higher than in the private sector, creating the conditions to attract and
retain qualified and competent civil servants. The right for professional development of
public servants is not fully respected. Funding for training is mainly provided by international
donors. Performance appraisals are regulated by law, but practical application remains weak.
Integrity in public service is relatively well addressed through the adoption of anti-
corruption policies and action plans, codes of conduct for civil servants, rules on
incompatibility of office and the establishment of the anti-corruption agency. There is no legal
requirement for public sector employees to make public information on their personal assets
and income. There is still no whistle-blower protection legislation in the Entities and Brčko
District. Bosnia and Herzegovina’s Criminal Code and the relevant laws in the Federation,
Republika Srpska and Brčko District do not exempt public sector employees from liability in
cases of abuse of authority. However, the number of individuals prosecuted for abuse of
authority has been very low.
Policy development and coordination
The policy-making system in Bosnia and Herzegovina is very fragmented. The basic
institutional structure for a ‘whole-of-government’ approach and policy-making is enshrined
in law but policy coordination is weak as the General Secretariat of the Council of Ministers
focuses mainly on procedural issues. The European integration coordination structure is
partially in place in the country’s institutions, but decision-making and implementation is
scattered. The main weakness is the lack of medium-term harmonised planning at country-
wide level. Overall, no measures are in place to ensure the financial sustainability of sectoral
strategies and programmes. However, a 2014 Decision on Mid-Term planning, monitoring
and reporting procedure at the level of institutions of BiH provides for an attempt to link
policy planning with medium-term fiscal planning.
Only some aspects of inclusive and evidence-based policy and legislative development are
in place. Significant challenges remain with regard to developing high-quality policy and
legislative proposals. Lack of co-ordination between the State level, the Entities and Brčko
District hampers the process of harmonisation with the EU acquis. Both inter-ministerial and
public consultations are regulated by law, but are not systematically implemented. Regulatory
11
impact assessments are enshrined in law but are not carried out systematically. Financial
impact assessments are carried out for draft legislative proposals but not for strategic
documents.
The lack of country-wide medium-term policy planning is a serious obstacle to public
scrutiny of government work. Government reports that are available to the public do not
provide information that would enable them to compare achievements with specific policy
objectives. At the State level more transparency is ensured with publicly available reports,
publication of government agendas and summaries of decisions.
Accountability of the administration
The overall organisation of the public administration in Bosnia and Herzegovina is not
conducive to ensuring clear lines of accountability. The structure and powers of the different
public administration bodies are regulated by overlapping and unclear legislative framework.
This has resulted in blurred accountability and reporting lines, with over 40 institutions
reporting directly to the Council of Ministers. There is a lack of procedures ensuring control
over the creation of new institutions. With regard to lines of accountability within institutions,
managerial accountability is not yet ingrained in the administrative culture. (See also 4.2.7.
Financial control)
The institutional set-up and resources to protect the citizens' right to good administration
are fragmented. The Ombudsman is relatively active in issuing recommendations, but the rate
at which the public administration implements them is low. (See under Governance) The
right to access public information is regulated at all levels. The laws are mutually consistent
and ensure a wide scope of access, but implementation is not uniform in practice. When
citizens are refused access to public information, there are no efficient means for them to
appeal. There also is no independent supervisory body to review appeals and issue decisions
and guidelines.
On the right to administrative justice, the judicial review of administrative acts is
decentralised and handled by general courts. Public trust in the courts is generally low. There
are a number of laws governing the public’s right to seek compensation in cases of
wrongdoing, but in the absence of a specific law on public liability, practical implementation
is inconsistent.
Public financial management
A budget management information system is in use throughout the different levels of the
public administration. Budget preparation processes improved in 2014 and budgets were
adopted on time. However, this trend did not continue in 2015 due to delays over the
formation of governments following the 2014 elections.
Bosnia and Herzegovina has so far addressed public finances on a sub-system basis, without
explicitly linking different areas and reform measures under a public financial management
reform programme. A public expenditure and financial accountability assessment and other
relevant assessments were carried out in 2014 and 2015, providing a basis for developing the
reform programme. Bosnia and Herzegovina has not yet achieved sufficient budget
transparency. An annual financial report is published by the Ministry of Finance and
Treasury and audited by the Supreme Audit Institution. Similar provisions also apply in the
Entities and in Brčko District. Information on debt and guarantees is also included. In the
Entities and in Brčko District parliamentary approval is not required for spending by the extra
budgetary funds.
Service delivery to citizens and businesses
12
There is no consistent policy on user-oriented administration, as the responsibilities for
service delivery are highly decentralised. Citizen satisfaction with government services is not
generally measured. Equal access to services is not yet ensured. There is potential for e-
services as over two thirds of citizens have internet access. However, further development is
held back by the lack of a country-wide approach and differences in how the State, the
Entities and Brčko District apply the legal framework for e-signatures, develop e-government
portals and implement the interoperability framework.
The current legal framework provides for simplification of administrative procedures at
State level, in the Entities and in Brčko District, but the pieces of legislation regulating the
special administrative procedures would need to be reviewed and revised, as relevant, to
determine the actual level of implementation.
Strategic framework for public administration reform
Bosnia and Herzegovina does not have a comprehensive public administration reform
strategy in place, since the latest strategy expired in 2014. There has been no progress on
preparing a new strategy, mainly due to lack of broad political support and strategic
guidance. Despite the expiry of the strategy and its action plan, its monitoring and reporting
structure continues to operate and some actions are being implemented. No political body
oversees reforms country-wide, but the Public Administration Reform Coordinator’s Office
coordinates the process within its limited functions. The new State-level PAR Co-ordinator
was appointed in August. Coordinators and supervisory teams are also operational at Entity
level. The current monitoring framework has major weaknesses due to the lack of concrete
performance indicators that would allow evaluating whether reform objectives had been
implemented. The previous strategy did not include any costing, and financial sustainability
has not so far been ensured.
2.3. Rule of law
Functioning of the judiciary
Bosnia and Herzegovina's justice system has achieved some level of preparation. Some
progress was achieved in the last year, notably through the adoption of a justice sector reform
strategy. In September at a ministerial meeting in the framework of the Structured Dialogue,
the authorities reiterated their commitment to develop jointly key features of the reform of the
judiciary.
However, politically motivated attacks against the judiciary continued, measures to ensure full
accountability of judges and prosecutors remain to be adopted, there remains a need to
develop specialised training and the efficiency of parts of the system is seriously hampered by
a backlog and excessively lengthy proceedings.
In addressing the shortcomings outlined below, in the coming year Bosnia and Herzegovina
should in particular:
→ adopt an action plan with result indicators and budgeted activities to implement the 2014-
2018 justice sector reform strategy;
→ strengthen accountability and integrity mechanisms, particularly through a more deterrent
disciplinary system and by adopting measures to prevent conflicts of interest;
→ adopt a backlog reduction plan for utility-related cases;
→ modernise the training and provide full access to court decisions.
Strategic documents
13
An updated and country-wide justice sector reform strategy for the 2014-2018 period was
adopted in September 2015. The accompanying action plan that includes a comprehensive set
of concrete actions together with completion indicators and financial resources has still to be
adopted. In order to fill the gaps caused by the delayed adoption of the new strategy, the
institutions responsible for implementing it need to achieve tangible results with consistent
efforts and due pace.
Management bodies
The High Judicial and Prosecutorial Council (HJPC) is the key institution administrating
the judiciary throughout the country. It enjoys institutional independence and of its 15
members, 11 are appointed from among fellow judges and prosecutors. The four remaining
members are appointed by the Council of Ministers, the Parliamentary Assembly and one per
each bar association in the Entities.
The HJPC manages the entry of judges and prosecutors into judicial careers and is also
responsible for overseeing appraisals and career development. While the HJPC is generally
allocated a budget commensurate with its immediate priorities, its secretariat needs to be
given adequate resources.
Judicial scrutiny of most of the HJPC's decisions on appointments or dismissals does not exist
as it is possible only for violation of constitutional and human rights as result of disciplinary
proceedings. The HJPC is only required to produce and publish on its website the annual
activity reports it submits to the executive and legislative branches. In 2015 the HJPC decided
to open its sessions to the public, though there are some restrictions.
There remain shortcomings in the legal framework governing the HJPC. These need to be
addressed based on the opinion of the Venice Commission and relevant recommendations
issued by the European Commission as part of the EU-Bosnia and Herzegovina Structured
Dialogue on Justice.
Independence and impartiality
The principles of judicial independence and prosecutorial autonomy are set out in the
legislation at all levels and enshrined in Entity Constitutions but not in the State Constitution.
While external and internal independence and autonomy have a legal basis, there is no
effective oversight for their implementation. There are no formal procedures carrying
penalties against undue influence or threats to judicial independence. The HJPC can only
issue public statements or provide a non-binding opinion if a judge or prosecutor complains or
if a threat contains elements of a criminal offence. As a result, unlawful and politically
motivated attacks against the judiciary continue without proper legal or constitutional
protection. The new Law on the HJPC should also address these problems, in the absence of
constitutional guarantees for judicial independence at State level.
Legal safeguards exist in case of transfer of judges or prosecutors without their consent. These
are laid down mainly in the rules on disciplinary proceedings. Appeals for a final disciplinary
decision of the HJPC on transfer are possible only where there are violations of human or
constitutional rights. As regards the principle of immovability, over the reporting period, the
HJPC decided in only one case to apply a transfer without consent, as an alternative to the
removal requested by the Office of the Disciplinary Prosecutor. The ‘case management
system’ performs random allocation of incoming cases to judges, while court presidents
decide on parameters for case distribution. Regarding the withdrawal of cases from judges,
despite the existence of an automated case allocation system, court presidents are entitled to
reassign a case in order to guarantee impartiality. In such cases, the HJPC monitors the
rationale behind each reassignment. Impartiality is also protected by exemption and
14
disqualification mechanisms under the procedural laws in force. If judges fail to disqualify
themselves in such situations this constitutes grounds for disciplinary action. Several judges
have been sanctioned on this basis.
Accountability
Although the Office of the Disciplinary Prosecutor is an autonomous body, it is functionally
dependent on the HJPC. The two-instance disciplinary procedure guaranteed by the law is
also subject to final scrutiny by the HJPC, which has the right to revoke the disciplinary
penalty imposed at second instance. However, the number of serious disciplinary penalties
remains low. Codes of ethics for judges and prosecutors exist, but there is no formal
enforcement mechanism. An ethics committee established within the HJPC has the power to
issue consultative opinions and oversee implementation of the codes but has no power to
initiate disciplinary cases. A breach of a code of ethics does not constitute a formal reason to
initiate disciplinary action. Moreover, decisions of the Disciplinary Prosecutor cannot be
appealed against.
Other aspects of accountability are at an early stage or do not exist. The integrity of legal
practitioners is only checked when candidates apply for judicial vacancies. Declarations of
assets are required for all judges and prosecutors, but no institution verifies their accuracy.
The issue of conflicts of interest in the judiciary has raised additional concerns regarding
integrity and accountability. The rulebook on conflicts of interest for the members of HJPC,
which has introduced a clear set of safeguards to prevent situations of conflict of interest,
should be extended to the functioning of the entire judiciary. The new law on HJPC should
work on providing clear rules that can be applied to the functioning of the entire judiciary.
Professionalism and competence
Procedures regulating entry or advancement in judicial careers based on merit and promotion
are in place, with the focus on candidates' professionalism and competencies, which are
assessed against objective indicators. For appointments to any position in the judiciary that
would represent a promotion for a judge or prosecutor, candidates are evaluated in
accordance with the criteria stipulated in the Law on the HJPC i.e. job performance in the
lower-level position or results in the entrance exam and written test (for candidates from
outside the judiciary). However, there is no effective and systematic application of objective
criteria for final appointments to posts of judicial office holders and management-level
positions. Dismissal is also regulated by objective criteria under the Law on the HJPC,
although very few dismissals have actually occurred.
Quality of justice
Training for judges and prosecutors in Bosnia and Herzegovina is provided through the
judicial and prosecutorial training centres in the Entities. These centres also provide induction
training for new members of the judiciary when they are appointed. Training standards,
methodology and delivery need upgrading, particularly on building specific capacities to
handle complex cases, such as in cases of human trafficking, financial and organised crimes.
Management training and training for specialised judicial or prosecutorial functions are not
systematically provided. The country has observer status in the European Judicial Training
Network.
Monitoring of the day-to-day activities of courts and prosecutors’ offices takes place through
the ‘case management system’, which includes an individual and institutional quota system.
In addition to biannual and annual statistical reports submitted to the HJPC, all courts and
prosecutors’ offices produce an annual activity report, which is submitted to their respective
Ministry of Justice and to the HJPC. The budget allocated to courts and prosecutors’
15
offices and the HJPC amounts to 119 million euros, i.e. 0.85% of GDP of Bosnia and
Herzegovina.
Since the introduction in 2010 of the 'Online Access to Court Cases' web service, lawyers and
parties in court proceedings across the country can access relevant information online. The
system recorded more than 100 000 entries over the reporting period. The working of the
courts has become significantly more transparent, though general access to court decisions
remains limited to interested parties and requires payment of a fee. Selected decisions are
available electronically and are easily accessible for judges and prosecutors. More work is
needed to ensure that the working of the courts is fully transparent. This should include
improving the availability of decisions while respecting data protection legislation and
improving conditions for recording court proceedings.
In the absence of a State-level supreme court, consistency of jurisprudence is ensured only
within the Entities and Brčko District, but not across the various levels of authority. Regular
meetings are held of joint panels of the highest-level courts throughout the country. These
have helped to achieve better harmonisation of case law in civil matters but not yet in
administrative or criminal law. Public access to online jurisprudence is limited to the
information published by the courts themselves on their web pages, while judicial
professionals wanting to access full case law have to request a specific access code and pay a
subscription fee.
On availability of alternative dispute resolution methods, commercial arbitration and
judicial conciliation are regularly used, while the use of in-court and out-of-court mediation
needs to be further promoted. Mediation is rarely promoted by judges. Only five cases went to
mediation in the reporting period compared with 5 418 cases adjudicated using judicial
conciliation, thus amounting to barely 1% of cases solved through alternative dispute
resolution methods. Aligning Bosnia and Herzegovina legislative framework with the relevant
EU legislation and achieving a more significant reduction in case backlog through the use of
mediation needs to be further enhanced.
Efficiency
The average length of proceedings in 2014 was just over seven years for all courts across the
country. In 2014, there were 428 701 incoming cases and 472 213 solved cases in all courts
across the country. This gives a clearance rate (i.e. the ratio of solved cases to newly filed
cases) of 110%. With the bulk of the backlog consisting of 1 700 000 unpaid utility bills
cases, the HJPC and legislative bodies in the Entities are aiming to reduce this by providing
support for the introduction of alternative solutions to courts, such as private bailiffs or
enforcement officers on special assignment. However, these have not yet produced significant
results in reducing the backlog.
The package of reforms provided by the HJPC and other relevant stakeholders to improve the
efficiency of justice has helped to bring about a progressive reduction in the backlog of cases.
This included solving the oldest cases through the implementation of ‘plans to resolve old
cases in courts’ and the Rulebook on orientation measurements for the work of judges and
legal assistants of the courts in Bosnia and Herzegovina. The backlog of non-utility-related
cases in the last two years was decreased by more than 40 000 cases out of a total of 406 227
old cases, which is a direct result of actions by the HJPC to improve judicial efficiency.
During 2014, the average duration of unresolved non-utility-related civil cases before courts
of first instance in Bosnia and Herzegovina, measured in days, was also reduced by 27 days
compared with 2012. The courts solved 85 941 old cases in 2014, achieving 80% of their
target, 7% more than in 2013.
16
Fight against corruption
Bosnia and Herzegovina has some level of preparation in the fight against corruption. Some
progress has been achieved in the past year. However, the legal and institutional framework
remains weak and inadequate. The lack of enforcement of the law negatively affects citizens
and institutions. As a general pattern, the penalties in force are not enough of a deterrent
against corruption.
Corruption continues to be widespread and the political commitment on this subject has not
translated into concrete results. In the coming year, Bosnia and Herzegovina should pay
particular attention to:
→ ensuring that sufficient funds from the budget are allocated to the anti-corruption strategy
and implementing its action plan;
→ establishing outstanding prevention and monitoring bodies at the relevant levels of
government and ensuring their functioning, under the coordination of the Agency for the
Coordination of the Fight against Corruption and Prevention of Corruption;
→ improving the legislative framework, particularly for political party financing, asset
declarations and protection of whistle-blowers;
→ bringing in tougher penalties on the prevention and combat of corruption in order to
achieve more of a deterrent effect.
Track record
In 2014, there were a total of 158 investigations at State level into financial crimes and
corruption, out of which 103 (65%) have been closed, and 53 sent to the Prosecutor’s Office
of Bosnia and Herzegovina. There has been no final conviction in high profile cases in the
reporting period. From 1 October 2014 to 31 July 2015 there were a total of 304 confirmed
indictments country-wide, resulting in 209 convictions. Most of the convictions related to
the offence of embezzlement in office.
Audit reports and tax administration reports are not used in a systemic way to fight
corruption. Cases are often leaked to the press, at which point they then tend to become
politicised. The political authorities should ensure that law enforcement bodies are fully
empowered to act effectively and impartially when investigating corruption allegations.
Financial investigations are not yet systematically launched in cases of corruption and
organised crime. Since the creation in 2010 of the only agency dedicated to asset confiscation
in the Republika Srpska, in 16 cases an amount of around 7 775 000 euros was confiscated.
2014 alone saw the confiscation of assets worth around 7 325 000 euros.
There is no track record of effective control of political party and electoral campaign
financing and relevant GRECO (Group of states against corruption) recommendations still
need to be addressed on this point. Asset declarations are governed by separate and
uncoordinated pieces of legislation, making their implementation ineffective, including the
penalties imposed.
Amendments to the State law on conflicts of interest established a new parliamentary
commission to decide on conflict of interest cases. There were no cases at State level or in
Brčko District. In Republika Srpska, 116 cases were processed, and in 10 cases a conflict of
interest was found.
Different laws govern access to information, but common flaws were reported, including the
lack of automated statistical information. 218 access to information complaints were referred
to the Ombudsman in 2014. Following the entry into force of the law on whistle-blowers in
17
2014, two individuals were granted the status of whistle-blowers. However, the law covers
only the State-level public sector.
Institutional framework
Although the anti-corruption agency's mandate is essentially focused on prevention and
coordination, recent amendments entrusted the agency with new powers on whistle-blower
protection and conflicts of interest. Its budget has constantly increased since inception in 2009
and the staffing is at a satisfactory level. At entity level, the Republika Srpska has appointed
in April 2015 a dedicated body. The mandate of the prevention body within the Federation
needs to be reconfirmed. Cantons, where most of the areas at risk are, have limited or no
legislation and no bodies dedicated to preventing corruption. Moreover, there is no policy in
place to prevent corruption in the private sector.
On law enforcement, the capacity to investigate economic, financial and public procurement-
related crimes remains weak. Relations between the police and the prosecution services in
combating corruption still need to be improved. Greater specialisation is needed within the
police and judiciary in order to fight corruption. The law establishing specialised departments
within the Federation's Prosecutor’s Office and the Supreme Court of the Federation to
prosecute corruption and organised crime cases entered into force in February. However,
these bodies are not yet in place while the cantons have ceased to prosecute corruption cases
above a certain threshold, thus creating a legal vacuum. There is still no effective criminal
justice policy, including as regards penalties which are not deterrent.
Rules on personal data protection by the police are not sufficient and generally not
implemented, while penalties for breaches are not dissuasive. Rules on the immunity of
members of parliaments in criminal procedure and procedures governing the lifting of
immunity are in place.
Legal framework
Passive and active corruption are criminalised under the criminal codes at all levels. However,
a number of GRECO recommendations on improving the legal framework have not received
any attention. Bosnia and Herzegovina is party to the UN Convention against corruption,
but has chosen not to criminalise illicit enrichment. The country ratified the Council of
Europe Anti-corruption Conventions but has not ratified the OECD Convention on
Combating Bribery of Foreign Public Officials in International Business Transactions.
Amendments to the State law on conflicts of interest are still not in line with international
standards because there are no independent bodies in charge of processing conflict of interest
cases. In Brčko District, the authorities have entrusted the task of deciding on conflict of
interest cases to the Brčko District Election Commission. The Federation has not yet amended
the law to determine the body that will decide in conflict of interest cases.
The verification of declared assets is not effective and penalties are not serving as a deterrent.
The law on financing of political parties and electoral campaigns has not been adjusted in line
with GRECO recommendations. The country has no legislation governing lobbying and rules
on the protection of whistle-blowers are at a very early stage.
Strategic framework
A new Bosnia and Herzegovina anti-corruption strategy and action plan covering the
2015-2019 period was adopted in April. However, no specific budget has been allocated for
its implementation. Provision has been made for regular revision of the action plan, which
should enable it to undergo adjustments. Similar documents for the 2013-2017 period have
also been adopted in Republika Srpska. To overcome the fragmentation of powers and the
18
various administrative layers, the fight against and the prevention of corruption require the
identification of dedicated and specialised structures at all levels of government with
appropriate coordination channels and a holistic vision. Strategic documents need to be
improved by including notably a solid risk assessment and clear identification of benchmarks.
Monitoring and implementation in most of the cases remain weak.
Fight against organised crime
The fight against organised crime has reached some level of preparation. Some progress has
been made over the past year.
Coordination and cooperation between all institutions throughout the country needs to be
significantly improved. The number of final convictions remains low. Financial investigations
remain under used. The lack of strategic coordination is hampering the effective delivery of
police services. To remedy the systemic shortcomings, Bosnia and Herzegovina should pay
particular attention in the coming year to:
→ strengthening the framework for inter-agency cooperation among law enforcement bodies
to allow for the establishment of specialised multi-agency investigation teams for complex
cases involving organised crime, economic crime and corruption and to make it possible to
dismantle criminal networks;
→ regulating mutual access to databases and the exchange of information between law
enforcement agencies and prosecutors’ offices;
→ developing effective asset confiscation and recovery systems at all levels.
Track record
The number of first instance convictions for organised crime is 22. Even though the number
of cases concerning fighting human trafficking in the reporting period increased, the number
of final convictions for organised crime remains low. The country remains a source, transit
and destination country for trafficking, mostly of women and children, for various types of
exploitation.
The number of convictions for money laundering decreased. Anti-money laundering
legislation still needs to be implemented in an effective way by all relevant institutions,
including financial and non-financial sector and supervisory bodies.
There is no policy for carrying out serious financial investigations on a systematic basis and
the precautionary freezing of assets during the early phase of investigations is not often
applied. There are frequent leaks to the press, violating the confidentiality of investigations.
The joint counter terrorism task force is not functioning properly and its capacity has to be
further strengthened.
Institutional and operational capacity
Bosnia and Herzegovina has 16 531 police officers, or 4.3 per 100 000 inhabitants. A major
reform of the police was carried out in 2008 and new institutions still need further
consolidation. Undue political influence over police top managers and overlapping
competences hamper the proper delivery of police services in some areas. Command
structures remain opaque, with overlapping powers, partly due to the country’s complex
administrative set-up. While clear criteria for the recruitment, evaluation and promotion of
police officers are in place, they are not yet being implemented in a fair and transparent way,
particularly for the appointment of senior police officials. Curricula for initial and in-service
training are being developed by police academies and training institutions. Their capacity to
19
provide specialised training is, however, limited. A working arrangement between Bosnia and
Herzegovina and the European Police College (CEPOL) was signed in November.
Specialised anti-terrorism, human trafficking, drugs, cybercrime and financial
investigations units are broadly in place at State and Entity level, though with limited or
insufficient capacities. A Financial Investigation Unit remains to be set up in the Federation.
The interoperability of the police equipment notably radio communication systems need to be
improved.
Relations between prosecutors’ offices and the police require structural improvements to
guarantee a more effective judicial follow-up. The system for electronic data exchange of
police and prosecution registries is operational, although some technical aspects of the system
are being updated and improved. Better regulation continues to be needed on determining
access rights to data and databases. Provisions governing personal data protection in the
police sector are not sufficient and generally not implemented, while sanctions for breaches
are not deterrent. Operational inter-agency cooperation takes place on a case-by-case basis
and still needs to be improved. Negotiations with Europol on an Operational Agreement were
concluded in December 2014 but the Agreement has not yet been signed.
Statistics on investigations, prosecutions and convictions for criminal offences are collected
from the judiciary throughout the country in an automated fashion and centralised using the
HJPC’s case management system. However, the qualitative analysis of cases has yet to be
introduced. There is no operational country-wide DNA database and the DNA profiling
capacity remains limited, while the swift exchange of forensic data with other countries does
not exist.
Joint minimum standards on civil possession and the carrying of weapons were adopted in
July with a view to harmonise laws within the country and with existing EU and international
standards. Capacity to combat money laundering is weak.
On human trafficking, the country still needs a victim approach and a multidisciplinary and
comprehensive strategy. This would be mainly based on improved police-prosecution
cooperation, data exchange and investigations. There are serious delays in the Federation’s
implementation of its assets seizure legislation because its Agency for Management of Seized
Assets is not operational.
Legal framework
The legal framework is fairly well developed, but legal loopholes and lack of implementation
limit its efficiency. The country's four Criminal Codes are largely in line with the acquis,
although the penalties imposed are not enough of a deterrent. A number of shortcomings in
criminal investigations need to be addressed, including through strategic guidance and
operational priority-setting mechanisms to ensure that special investigative means are used
efficiently and through rules on how to implement them, where these are missing. The
legislation on the confiscation of criminal assets is partially aligned with the acquis. However,
provisions on minimum standards governing asset seizure have yet to be consistently
incorporated into legislation across the country. Recommendations by the Financial Action
Task Force on Money Laundering (FATF) are partially reflected in anti-money laundering
legislation, but the implementation of this legislation remains insufficient. In June an action
plan for addressing deficiencies in the system to combat money laundering and terrorism
financing was adopted.
20
Strategic framework
The 2014-2016 strategy on the combat of organised crime is in place. However, its action
plans have still be adopted and implemented. Inspired by the Europol methodology, a Serious
and Organised Crime threat Assessment is in place, providing a strategic picture of organised
crime in the country. However, its findings have not yet been translated into a coherent
national security policy based on clear priorities.
A strategy for the prevention and fight against terrorism for the 2015-2020 period was
adopted in July but an action plan implementing the strategy has yet to be adopted. The
strategy to combat money laundering and drug abuse and its accompanying action plan have
expired, and the new strategic framework has not yet been adopted. Bosnia and Herzegovina
lacks a comprehensive overall strategic approach to address the issue of cybercrime and
cyber security threats. Existing capacities to combat cybercrime and respond to cyber security
threats need to be strengthened.
Fight against terrorism
Bosnia and Herzegovina has been seriously affected by the phenomenon of foreign fighters
and radicalisation. In April, the police station in Zvornik was attacked by a lone gunman,
resulting in one police officer being killed and another two injured. The attacker was killed in
the exchange of fire. The reason for the attack is being investigated by the State Prosecutor’s
Office. In July, Bosnia and Herzegovina’s Council of Ministers adopted its 2015-2020
strategy for the prevention and fight against terrorism for the period. The strategy follows the
model of the EU’s counter terrorism strategy and is structured around four major principles:
prevention, protection, pursuit and response. Action plans remain to be developed. Cases of
hate speech need to be addressed more forcefully. The phenomenon of foreign fighters needs
a dedicated approach by the intelligence and law enforcement community and a coherent
judicial policy towards offenders.
2.4. Human rights and the protection of minorities
The legal and institutional framework for the observance of human rights requires substantial
improvements. No progress was achieved over the past year in addressing country wide
reforms conducive to creating the conditions for the effective exercise of some human rights.
Conditions for the exercise of the freedom of expression have deteriorated.
Shortcomings particularly affect the following areas:
• Effective protection of human rights is undermined by the uneven implementation of the
anti-discrimination legislation and the absence of a country-wide anti-discrimination
strategy.
• The country is still missing an effective free legal aid system to guarantee efficient access
to justice.
• The lesbian, gay, bisexual, transgender and intersex community continued to be subject to
threats and attacks.
• Socio-economic integration of the Roma minority continues to be undermined by limited
action on health, education and employment.
Bosnia and Herzegovina (BiH) has ratified all major European and international human
rights instruments. The UN Human Rights Council Universal Periodic Review took place in
November, with Bosnia and Herzegovina receiving 167 recommendations. However, the
country has not yet implemented recommendations from the previous cycle, including those
21
on anti-discrimination, inclusive education, gender-based violence, harmonisation of law and
policy at all Entity levels and criminal code reform on war crimes.
Since September 2014, the European Court of Human Rights (ECtHR) has found that the
country violated the European Convention on Human Rights (ECHR) in one case relating to
the right to a fair trial and protection of property. A total of 842 new applications have been
allocated to a decision-making body, bringing the number of pending applications to 808. The
remaining outstanding cases relate mainly to re-possession of occupancy rights, missing
persons and discrimination on the ethnic grounds of ethnicity. Some progress has been made
in implementing the Court’s judgments, while action plans foreseeing preparatory steps for
the implementation of the Sejdić-Finci and Zornic cases were adopted by the Council of
Ministers in September.
On the promotion and enforcement of human rights, the Ombudsman continues to be
affected by a lack of adequate human and financial resources to perform its functions as
national human rights institution. In 2015 training related to the ECHR and ECtHR case law
for judges, prosecutors, legal associates and advisers of the Constitutional Court and the Court
of Bosnia and Herzegovina focused in particular on the right to a fair trial.
On the right to life, the provision on death penalty in the Constitution of Republika Srpska
needs to be repealed.
On the prevention of torture and ill treatment, Bosnia and Herzegovina has still not put in
place an independent national preventive mechanism against torture aligned with the
procedures of the Optional Protocol to the Convention against Torture and Other Cruel,
Inhuman or Degrading Treatment or Punishment (OPCAT). There has been no progress on
the adoption of legislation on the rights of civilian victims of torture during the war. There are
reports of ill treatment of suspects in some police stations and of prisoners in some detention
facilities. Such cases need to be properly investigated and preventive measures taken.
Legislation on the prison system is partially harmonised throughout the country. In
November, the psychiatric institution in Sokolac, intended to provide mandatory psychiatric
treatment requested during criminal proceedings was opened. There is no overall strategy for
correctional systems as responsibility for the execution of criminal sentences is a shared
competence between the State and the Entities. The adoption of a new law on execution of
criminal sanctions in the Federation to ensure harmonisation with State-level law and
international standards is still pending. The continuous backlog in the execution of criminal
sanctions in the Federation remains a matter of concern. Existing penitentiary legislation
needs to be aligned with European including Council of Europe standards and effectively
implemented. No official coordination mechanism has been set up between the country's
prison administrations. The quality of healthcare services in prisons remains deficient and
continues to be affected by insufficient resources and medical staff.
Protection of personal data in Bosnia and Herzegovina is partially harmonised with the
European standards. Staffing of the Agency for Personal Data Protection needs to be
strengthened. The number of complaints that were addressed by the agency increased from
107 in 2013 to 140 in 2014. It continued training civil servants at State and Entities level.
However, there were attempts to alter the general personal data protection regime by
introducing contradictory provisions in the special laws. There is no legal obligation to
consult the agency on draft laws that include provisions on personal data.
The constitutional and legal guarantees on the freedom of thought, conscience and religion
are generally fulfilled. However, cases of discrimination on religious grounds continue to be
22
reported. There have been incidents targeting religious symbols, clerics, believers and
religious property.
Freedom of expression
There is some level of preparation on the right to freedom of expression. However, the
country has been backsliding in this area. Although the legal provisions are generally in
place, the institutional and political environment is not conducive to creating the conditions
for full freedom of expression. The financial stability of the system of public service
broadcasting remains to be addressed. Political pressure and intimidation towards journalists
continued during the reporting period. Transparency on media ownership continues to be
lacking. Recent legislative developments in Republika Srpska raise concerns over possible
limitation of online freedom of expression.
In the coming year, Bosnia and Herzegovina should particularly pay attention to:
→ ensuring proper follow-up on cases of threats to journalists;
→ securing depoliticisation, financial and institutional stability and editorial independence for
the Public Service Broadcasters;
→ finalising the reform of the broadcasting system and harmonising relevant entity legislation
with legislation at State level.
Intimidation of journalists
Political and financial pressure on the media continued in the reporting period. Intimidation
and threats against journalists and editors and polarisation of the media along political and
ethnic lines continued during and after the October general elections. Cases were recorded of
political statements putting pressure on journalists and police raids on media outlets. In
December 2014, the police of Republika Srpska and the Sarajevo Canton raided the offices of
a news portal over a criminal investigation involving the Prime Minister of Republika Srpska.
The courts subsequently ruled that the raid was unlawful and in violation of both the
European Convention on Human Rights and national law. The follow-up by the authorities to
threats to media freedom and journalists has been insufficient. Cases were reported of verbal
attacks by politicians towards journalists.
Legislative environment
Legal provisions guaranteeing freedom of expression are in place. However, there are serious
concerns that the implementation of the newly adopted Republika Srpska Law on Public
Peace and Order may limit the freedom of expression online and possibly affect freedom of
assembly and association. The implementation of the Freedom of Access of Information Act
remains uneven and is frequently limited by the right to privacy and the protection of the
commercial interests of companies dealing with governments, without running the test of
public interest.
Implementation of legislation/institutions
The appointment of the new Director General of the Communications regulatory agency is
pending. The political, institutional and financial independence of the agency remains to be
secured.
Bosnia and Herzegovina’s Communications Regulatory Agency adopted in 2012 rules
requiring internet service providers to apply appropriate technical measures to disable access
to internet addresses that were found to be harmful or illegal and would pose threats to safe
23
internet use. Criminal offences listed in the Additional Protocol to the international
Convention on Cybercrime have yet to be incorporated into the criminal codes.
Republika Srpska’s Law on Public Peace and Order, adopted in February, raises concerns
about the potential for arbitrary implementation of certain of its provisions related to online
social networks. The law opens up the possibility for potential abuses through vague
provisions related to minor offences committed on the internet and the setting of a low
standard of proof in proceedings for minor offences.
Public Service Broadcaster
The independence of the three public broadcasters within the country’s public broadcasting
system remains to be ensured. The public broadcasters in the two Entities were exposed to
political influence through political appointments to managerial positions.
The Federation Parliament failed to appoint members to the steering committee of Radio-
Television of the Federation of Bosnia and Herzegovina (RTVFBiH). The Director General of
RTV FBiH remained in a caretaker role, which opened the door to political influence.
The steering committee of Republika Srpska’s public service broadcaster Radio Televizija
Republike Srpske (RTRS) remained politically affiliated, which increased political control
over RTRS and undermined editorial independence. Entity laws on public broadcasting
services are not harmonised with State-level law.
The statute of the State-level public service broadcaster Radio and Television of Bosnia-
Herzegovina (BHRT) has yet to be amended. The adoption of the public broadcasting
corporation’s statute is pending and public broadcasting system reform has yet to be
completed. All types of broadcasting are licensed by the Communications Regulatory Agency
in accordance with the law on communications. The financial sustainability of the public
service broadcasting system remains to be ensured.
Economic factors
The transparency of media ownership remains limited and is partly ensured through the court
registration of businesses that own the media. Full information is not easily accessible due to
problematic legal provisions hampering systematic insight into the ownership structure. This
is especially problematic for online media, which are often not registered as media businesses.
There is a lack of rules governing government financing of the media. Public broadcasters that
are not part of the public broadcasting system are financed from municipal and canton
budgets and remain under strong political influence. At Entity level, the Government of
Republika Srpska funds both public and private media. Lack of transparency and clear criteria
in the distribution of subsidies are a serious concern. In addition, media integrity is also
harmed by the advertising practices of public companies controlled by political parties.
Professional organisations, Professional conditions
The Bosnia and Herzegovina Journalists’ Association has continued to lead civil society
efforts in the country to secure freedom of expression and freedom of the media, the
protection of journalists and media integrity. The complaint commission of the Press Council
of Bosnia and Herzegovina continued to work and mediate between the readers and the
media, securing that readers' complaints are addressed by the editors.
An increased level of unity and solidarity among journalists across the country over the
protection of journalists' rights and privileges was noted after the December police raid on a
news portal.
24
On the freedom of assembly and association, cases of attacks and intimidation against
human rights activists continue to be reported. Such cases are often not adequately
investigated and prosecuted by the authorities.
On property rights, there are 72 ongoing administrative disputes before the Court of Bosnia
and Herzegovina in which the Commission for real property claims of displaced persons and
refugees is a respondent party.
On non-discrimination policies, no steps were taken to develop an anti-discrimination
strategy at State level. The anti-discrimination law has not been amended to include age and
disability as grounds for discrimination, nor have its provisions been adequately reflected or
transposed into labour law or higher education. A working group, co-ordinated by the
Ministry of Human Rights and Refugees and tasked with the revision of the anti-
discrimination law was formed in August. Implementation of the 2009 anti-discrimination law
is hampered by procedural hurdles and low levels of knowledge of the law. A total of 144
judicial cases of discrimination were pending as of August. Hate crime and hate speech are
not covered by the Federation’s criminal law. Most hate incidents targeted returnees, LGBTI
persons or were ethnically motivated. Information about hate crime acts is not systematically
collected or tracked.
The Sejdić-Finci ruling of the European Court of Human Rights has still not been
implemented, meaning that people not belonging to one of the three constituent peoples are
still not allowed to stand for in the House of Peoples and the Presidency of Bosnia and
Herzegovina. The Supreme Court of Federation passed two judgments and the Supreme Court
of the Republika Srpska rendered one judgement in cases of discrimination in 2015. There is
still a lack of consistent and comprehensive collection of data on discrimination.
Legal provisions providing equality between women and men are broadly in place but are
not being implemented in an effective manner. Cooperation between the State Agency and
Entity Centres for Gender Equality remained good. Implementation of gender policies in
Bosnia and Herzegovina is hampered by the fragmentation of powers and the multiple
institutional bodies, as well as by limited budgetary resources. To date, financing is not in
place to continue running the 2009-2014 Financial Mechanism for Implementation of the
Gender action plan of Bosnia and Herzegovina.
A strategy for implementing the Council of Europe Convention on preventing and combating
violence against women and domestic violence for the period 2015-2018 was adopted in July.
Legislation on safe houses is not adequately implemented and lacks sufficient funding,
undermining protection and assistance to women victims of violence. There is no
comprehensive State-level legal framework on sexual assault and rape and no appropriate
compensation mechanism in place for victims. There is no effective data collection
mechanism for monitoring domestic violence and no specialised police units. Women’s
political participation across the country has slightly improved. In the 2014 general elections,
19.03 % of candidates elected at all levels were women.
On the rights of the child, Bosnia and Herzegovina’s Council of Ministers adopted in June
the 2015-2018 action plan for children, which provides a mechanism for the overall protection
of children and complies with the UN Convention on the rights of the child.
Institutionalisation of children with disabilities remains high and only a very low proportion
of them are in pre-school education. Use of foster care and alternative solutions needs to be
further promoted. The exploitation of children and child begging remain issues of concern and
violence against children continues to be widespread. Reporting of violence against children
remains weak, resulting in few cases being brought before the courts and no such specific
25
cases were reported to the Ombudsperson. Data collection on violence against children
remains weak. No awareness-raising activities on rights of the child were organised.
A national strategy against juvenile offending has yet to be adopted. The legal framework on
juvenile justice is in place but has still not been harmonised across the country. The
Federation law on protection and treatment of children and juveniles in criminal proceedings
entered into force in February 2015 but pre-conditions for its full implementation including
relevant by-laws are not in place. Separate units for juveniles exist in prisons and juvenile
educational-correctional facilities, but the absence of separate units during pre-trial detention
and in police stations across the country continues to be a serious concern. The alternatives to
juvenile detention laid down by law contine to be underused and there is insufficient
coordination between the responsible authorities. The Orašje educational-correctional facility,
while ready for immediate use, is not running due to problems with its electricity supply.
Child-friendly proceedings in civil and administrative cases are still not ensured in a
harmonised and non-discriminatory way and measures for child victims and witnesses, while
in place, are not systematically applied.
On the integration of people with disabilities, no steps were taken to change the entitlement
system for rights and benefits to base it on needs instead of status. Inequalities remain in the
level of rights granted by the different Entities and implementation of the legislative
framework for social protection remains limited.
On the rights of lesbian, gay, bisexual, transgender and intersex (LGBTI) persons, the
2015 LGBTI Merlinka festival was held with no incidents and with appropriate police
protection. Bosnia and Herzegovina was one of the signatories of the Joint Statement of
Ministers of the region at the 2015 IDAHO (International Day against Homophobia) forum.
The anti-discrimination law needs to be amended as it does not include a clear definition of
gender identity and sexual orientation and refers to sexual expression and/or orientation as
grounds of discrimination. The Republika Srpska and Brčko District criminal codes need to
be amended to include gender identity and sexual orientation as grounds for hate speech.
Despite an increase in violence, attacks and threats towards LGBTI persons and human rights
defenders, only a limited number of cases are reported to the police. In September, Bosnia and
Herzegovina’s Constitutional Court ruled on a violation of the freedom of assembly in the
case of the October 2008 Queer Sarajevo Festival when a dozen individuals were attacked,
but there has been no criminal prosecution of the attack on the 2014 Merlinka Queer Film
Festival. Transgender persons are a particularly marginalised group and no measures are
planned for legal gender recognition.
On labour and trade union rights, the fragmentation of the legal framework and the absence
of a harmonised approach to social allowances hamper effective exercise of social rights
across the country.
On procedural rights, the legal and institutional framework for free legal aid remains
incomplete, un-harmonised and discriminatory, as basic pre-conditions for free legal aid do
not exist at all levels, including the State level. Minimum common standards for free legal aid
should be harmonised between the various levels of authority and incorporated into the legal
framework, where missing. Non-governmental organisations continued to actively provide
free legal aid without any harmonised country-wide regulation. The Free Legal Aid Network,
a platform for cooperation between civil society and government agencies, helped to provide
specialised training and awareness-raising on free legal aid. Communication between
prosecutors' offices and victims' associations improved. In the absence of a national
transitional justice strategy, compensation for wartime gross human rights violations is
26
achieved through civil actions. As a result, the right to compensation continues to be upheld in
an uneven manner.
The legal framework for the protection of minorities is largely in place and in line with the
Council of Europe Framework Convention for the Protection of National Minorities.
However, the lack of coordination between the State and Entity levels continued to hamper
implementation of the law on national minorities.
The presence and participation of national minorities in public debates and the media remain
low. The effectiveness and impact of national minority councils at State and Entity level is
hindered by insufficient resources and lack of political leverage in decision-making.
Politicised appointment procedures also undermine the legitimacy and ability of the councils
to operate properly. In November, the Federation Supreme Court confirmed the 2012 first
instance verdict that the 'two schools under one roof' in Stolac constitutes ethnic segregation
of pupils. Progress in eliminating the ‘two schools under one roof’ phenomenon continues to
be slow and the number of mono-ethnic schools has not decreased. The common core
curriculum is not yet applied throughout the country.
Bosnia and Herzegovina held the most recent chairmanship of the Decade for Roma
Inclusion, which concluded in September 2015. The third Roma inclusion seminar, held in
Sarajevo in June 2015, adopted specific recommendations in all five key policy priority areas.
Significant progress was achieved towards completing the civil registration process. As of
September, only 77 identified persons at risk of statelessness remained to be registered. On
education, free textbooks for Roma children in primary school continued to be provided to
some Roma pupils. The drop-out rate has slightly decreased, but the number of Roma children
included in the education system needs to be significantly increased. Further housing was
provided to Roma in need in 60 municipalities. The assistance provided included co-financing
by local authorities, including for those affected by the May 2014 floods. However, access to
infrastructure is not provided to all rebuilt housing.
Roma remain the country’s most vulnerable and disadvantaged minority. The lack of reliable
data hampers effective policy-making. A more comprehensive and integrated approach needs
to be adopted for the social inclusion of Roma. The action plans on health and employment
have not yet been fully implemented. Health insurance coverage for Roma needs to improve
significantly. The number of unemployed Roma remained high and their access to the labour
market remains hampered by the lack of suitable qualifications.
According to the Ministry for Human Rights and Refugees, as of September, there are still 84
500 internally displaced persons and 6 795 refugees in Bosnia and Herzegovina. Some
action was taken to tackle the issue of sustainable return, particularly in connection with
employment, education, social protection and healthcare at local level through the initiative of
the ministry. The revised strategy for the implementation of Annex VII to the Dayton/Paris
Peace Agreement still lacks coordinated implementation and appropriate allocation of
resources. The lack of infrastructure, particularly for electricity, needs to be addressed.
Returnees continue to face obstacles in access to healthcare and their sustainable return
continues to be hampered by the lack of employment opportunities. Over 7 500 people are
still accommodated in 45 collective centres across the country.
2.5. Regional issues and international obligations
The implementation of the Dayton/Paris Peace Agreement continued. The government of
the entity Republika Srpska continued to hold joint sessions with the Government of the
Republic of Serbia under the framework of the Special and Parallel Relations agreement. The
27
two governments committed themselves to several joint infrastructural projects and planned to
further strengthen their cooperation across all sectors.
Bosnia and Herzegovina’s cooperation with the International Criminal Tribunal for the
former Yugoslavia (ICTY) continued to be assessed as satisfactory in most areas. However,
the Office of the Chief Prosecutor of the ICTY has expressed concern that the State Prosecutor's
Office did not sufficiently follow up on repeated requests to complete the processing of war
crimes cases partly investigated by the Tribunal and transferred to the jurisdiction of Bosnia and
Herzegovina in 2008 for further investigation and possible prosecution (the ‘Category II’
cases),
Concerning the domestic prosecution of war crimes, further progress was registered in
tackling the large backlog of war crimes cases, in particular following the launch of the
European Union's extraordinary budget support to judiciaries at all levels of the country,
under the guidance of the Supervisory Body for Monitoring the Implementation of the
National War Crimes Strategy. The number of indictments increased, with 98 confirmed
indictments against 177 suspects in 2014. In the first half of 2015, courts in BiH confirmed 44
indictments against 86 suspects. The reduction in the backlog was achieved as planned, but
the State-level authorities failed to allocate regular public funds complementing EU
assistance. The adoption of the country-wide justice sector reform strategy for the 2014-2018
period in September 2015 allows Bosnia and Herzegovina to meet the condition for the
release of the second tranche of the EU direct budget support.
Improvements were noticeable in the prosecution of cases of wartime sexual violence, due to
an increased specialisation by prosecutors, judges, police investigators and witness support
staff. The courts completed 6 war crimes cases involving sexual violence over the reporting
period. However, more efforts are needed to end impunity particularly against the backdrop of
a large number of potential cases. A comprehensive legal and policy framework to improve
the status of victims of rape and sexual violence has still to be achieved. A State-level
programme to improve the status of victims of war crimes involving sexual violence has yet
to be adopted.
Further progress on providing in-court victims and witnesses support remained possible
primarily thanks to international financial support. The long-term sustainability of the system
was called into question by the obvious lack of domestic budget support. Psychological
support to victims and witnesses before, during and after war crimes trials remained
insufficient.
The implementation of the national war crimes strategy objectives continued. This involved in
particular the reallocation of cases by the State judiciary to other judicial levels, and the State
judiciary taking over 40 complex cases from other jurisdictions. However, the initial deadline
to have the most complex cases solved by 2015 has not be met. Additional efforts by
authorities at all levels remain necessary in order for the strategy to be successfully
implemented. Conclusions issued by the strategy’s supervisory body have yet to be
consistently implemented by the authorities.
The 2003 Bosnia and Herzegovina-US bilateral immunity agreement granting exemptions
from the jurisdiction of the International Criminal Court continued to be in force. The
agreement is not compliant with the EU Common Positions on the integrity of the Rome
Statute or the related EU guiding principles on bilateral immunity agreements. Bosnia and
Herzegovina still needs to align with the EU position on this issue.
Bosnia and Herzegovina, Serbia, Croatia and Montenegro have continued to closely cooperate
under the Sarajevo Declaration Process, which aims to find sustainable solutions for 74.000
28
people who became refugees and displaced persons as a result of the armed conflicts in the
former Yugoslavia during the 1990s. All countries need to further step up efforts to deliver on
the implementation of the agreed housing solutions. Bosnia and Herzegovina made some
progress on implementing the regional housing programme with the delivery of 19 housing
solutions out of the 1,868 approved so far. Efforts are needed to further ensure a quality
beneficiary selection process conducive to a speedy implementation of the housing projects.
The unresolved fate of missing persons from the conflicts of the 1990s remains a
humanitarian concern in the Western Balkans. As of February 2015, a total of 10 814 persons
were still missing according to the International Committee of the Red Cross. Of these, 7 019
cases relate to the conflict in Bosnia and Herzegovina. Ascertaining the fate of missing
persons remains vital for reconciliation and stability in the region. Bosnia and Herzegovina’s
Missing Persons Institute continued to lack sufficient support from the authorities and was
subject to further reductions in its budget and political pressures. A reform of the institute is
pending. A support fund for the families of missing persons, which is provided for by the Law
on Missing Persons, has still not been established. The lack of local forensic capacity,
especially in the Federation, continued to hamper the process of identifying missing persons.
Regional cooperation and good neighbourly relations form an essential part of Bosnia and
Herzegovina's process of moving towards the EU. The country continued to participate
actively in regional initiatives, including the South-East European Cooperation Process, the
Regional Cooperation Council, the ‘Western Balkans Six’ initiative and the Energy
Community Agreement. In May 2015, Bosnia and Herzegovina took over the chairmanship of
the Council of Europe Committee of Ministers. It continued to actively support the RECOM
(Coalition for Reconciliation Commission) and Igman initiatives on regional reconciliation.
A fresh impetus has been given to regional cooperation through the 'Berlin process' and the
Western Balkan Six initiative notably regarding the EU’s connectivity agenda. In April, the
Western Balkan Six countries reached an agreement on the core transport network and in June
2015 on extending three Trans-European Transport Networks core corridors to the Western
Balkans. They also identified the priority projects to be implemented by 2020. The countries
agreed to implement before the next summit in Paris a number of 'soft' measures such as
aligning and simplifying border crossing procedures, road safety and maintenance schemes.
On regional judicial cooperation, the fight against impunity in the area of war crimes
resulted in its first arrests and issuing of indictments in line with the Protocol of the
Prosecutor's Office of Bosnia and Herzegovina and the Office of the War Crimes Prosecutor
of the Republic of Serbia on Cooperation in Prosecution of Perpetrators of War Crimes,
Crimes against Humanity and Genocide. Similar Protocols signed with the Croatian and
Montenegrin Prosecutor’s Offices are yet to produce concrete results.
In March 2015, Bosnia and Herzegovina ratified an agreement on the exchange and mutual
protection of classified information with Albania In July an agreement allowing their citizens
to travel between the two countries with ID cards only was signed.
An agreement on the exchange and mutual protection of classified information was ratified
with the former Yugoslav Republic of Macedonia in March. Overall relations continue to
develop.
An Agreement on cooperation in consular protection and visa issues with Montenegro was
ratified in March 2015. A bilateral border agreement with Montenegro was signed in August
which largely improved bilateral relations.
Relations with Serbia remained good. The chair of Bosnia and Herzegovina’s Presidency
visited Belgrade and the Serbian Prime Minister visited Sarajevo in May. Serbian Prime
29
Minister was attacked during the Srebrenica genocide commemoration in July by some
participants and investigations are ongoing to find the perpetrators. A few days later, the three
members of the Presidency travelled to Belgrade upon the invitation of the Serbian Prime
Minister.
There are no official relations with Kosovo, as Bosnia and Herzegovina does not recognise
Kosovo as an independent state. The Ministry of Foreign Affairs maintained its practice of
issuing individual short-term visas to citizens of Kosovo only if they have an invitation from a
foreign diplomatic mission or international organisation accredited in Bosnia and
Herzegovina, or for humanitarian reasons. An amendment to normalise the visa procedure for
all citizens of Kosovo remained pending.
Bilateral relations with Turkey are good. An agreement on military financial cooperation and
its implementing protocol were ratified in June 2015. Member of the Presidency Bakir
Izetbegovic paid an official visit to Turkey in March 2015. A visit to Bosnia and Herzegovina
by the Turkish President took place in May 2015.
Relations with Croatia remained good. Members of the Presidency of Bosnia and
Herzegovina took part in the inauguration of the Croatian President, who subsequently paid
her first visit abroad to Bosnia and Herzegovina. The Croatian Prime Minister visited Bosnia
and Herzegovina in December 2014. The agreement signed by Bosnia and Herzegovina with
Croatia in June 2015 in Brussels on border crossings, border traffic and free transit together
with the joint statement should enable the smooth transport of goods form Croatia in transit
through the Neum corridor in accordance with the applicable acquis. No progress was made
towards resolving further outstanding bilateral issues, including property issues and border
demarcation.
3. ECONOMIC CRITERIA
Key economic figures 2013 2014
Gross domestic product per capita (% of EU28 in PPS) 29 28
GDP growth (%) 2.5 1.1
Unemployment rate (female; male) (%) 27.6 (29.1; 26.7) 27.6 (31.2; 25.3)
Economic activity rate for persons aged 20–64: proportion
of the population aged 20–64 that is economically active
(female; male) (%)
58.7 (45.1; 72.1) 59.2 (46.0; 72.4)
Current account balance (% of GDP) -5.7 -7.6
Foreign direct investment (FDI) (% of GDP) 1.6 3
Source: Eurostat
In line with the conclusions of the European Council in Copenhagen in June 1993, EU
accession requires the existence of a functioning market economy and the capacity to cope
with competitive pressure and market forces within the Union.
The monitoring of these economic criteria should now be seen in the context of the increased
importance of economic governance in the enlargement process. In order to improve their
economic governance, in 2015 the enlargement countries were asked to prepare Economic
30
Reform Programmes (ERPs), which set out a medium-term macro-fiscal policy framework
together with key structural reforms aimed at supporting the framework and boosting
competitiveness. The ERPs were the basis for country-specific recommendations jointly
adopted by the EU and the Western Balkans and Turkey in the Economic and Financial
Dialogue meeting on 12 May 2015.
3.1. The existence of a functioning market economy
Bosnia and Herzegovina is at an early stage in developing a functioning market economy,
although some progress has been made. In particular, steps have been taken to strengthen
policy coordination and to improve the business environment, particularly on the ease of
market entry and the granting of construction permits. Despite the setback from the spring
floods, economic growth remained positive.
However, stronger and sustainable economic growth will require the development of a more
dynamic private sector. This requires strong political support and the timely implementation
of much-needed structural reforms.
In line with the ERP recommendations and the Reform Agenda and in order to support long-
term growth, in the coming year Bosnia and Herzegovina should pay particular attention to:
→ increasing the quality of public finance, for example by providing for more fiscal space, in
particular for capital investment;
→ improving its budget management framework;
→ taking steps to advance restructuring and privatisation and to improve the business
environment.
Economic policy essentials
The consensus on economic policy essentials has increased. A broad agreement has been
reached on economic reforms, but the government now needs to show strong reform
commitment by starting to implement the planned reforms. The consensus between the
authorities at different levels of government on the economic policy essentials has broadly
gained momentum with the adoption of the global framework for fiscal policies and balances
2016-2018 by the Fiscal Council.
In February 2015, Bosnia and Herzegovina submitted its Economic Reform Programme
covering the 2015-2017 period. The programme sets out an overly ambitious fiscal strategy
based on reductions in expenditure but lacks initiatives that would stimulate growth. In
addition, although some major obstacles for growth were identified, the structural reform
strategy is vague on medium-term measures beyond 2015. There is ample room for
improvement in terms of policy coordination. Following the adoption of the Reform Agenda
in July, Bosnia and Herzegovina is encouraged to take further steps towards its
implementation, including with the help of the ERP recommendations set out below, which
reflect Reform Agenda priorities
The IMF Stand-By Arrangement (SBA), agreed in 2012, expired on 30 June 2015 but the last
loan tranche disbursement was made in July 2014. The programme went off-track due to
delays in implementation of previously agreed structural reforms. Negotiations for a new IMF
programme have been ongoing.
31
Macroeconomic stability
Economic growth remained resilient in spite of
external shocks. However, the short-term outlook
will heavily depend on the implementation of
structural reforms. After GDP growth of 2.4 % in
2013, substantial flood damages in mid-2014
reduced output growth to around 1 % in 2014. In
contrast to 2013, it was domestic demand rather than
net exports that drove GDP growth in 2014.
Investment was stimulated by disbursements under
the flood recovery programme (2.2 % of GDP by the
end of 2014) and could remain important for
economic growth in 2015. Investment in the private
sector, however, continued to be stagnant. Private consumption growth remained subdued in
2014, reflecting persistently high unemployment and declining wages. Industrial production
remained largely unchanged in 2014 but showed signs of increased activity from the second
quarter 2015 onwards. However, a drought hit agricultural production in mid-2015 and could
negatively impact on growth in 2015. Overall, data since early this year point to strengthening
economic dynamics. Per capita GDP2
reached only 28 % of the EU average in 2014, largely
unchanged since 2011.
External imbalances have declined recently. In
2014, strong import growth, partly resulting from
reconstruction following the spring floods, pushed
the current account deficit up from 5.7 % of GDP in
2013 to 7.6 % in 2014. However, strengthening
exports since autumn 2014 and the fading out of
reconstruction-related imports helped to bring the
current account deficit back to 6.2 % of GDP in the
first quarter of 2015. The substantial trade deficits of
around 25 % of GDP are primarily financed by
inflows of transfers, such as remittances, which increased to slightly above 11 % of GDP, and
by service exports. Net foreign direct investments (FDI) rose from 1.7 % of GDP in 2013 to
around 3 % of GDP in 2014. Partly boosted by IMF financial assistance, net foreign exchange
reserves reached a level of some 30 % of GDP in mid-2015, covering more than six months’
worth of imports.
Improvements in the labour market remained subdued so far. The difficult labour market
conditions remained broadly unchanged. Employment in the public sector continued to
account for the largest proportion of
employment (32 %). At the same time,
employment and activity rates remained at
low levels of 43 % and 59 % respectively.
The average rate of registered
unemployment slightly decreased from
44.5 % in 2013 to 43 % in mid-2015, while results from the annual labour force survey (using
ILO methodology) indicate that unemployment stood at 27.6 % in 2014 for a second
consecutive year. The significant difference between the registered and survey-based labour
figures points to a fairly large informal labour market. The structural nature of unemployment
2
Expressed in purchasing power standards.
ERP recommendation 5: ‘Reduce labour market
rigidities by addressing disincentives to hiring,
including taking further steps towards a reduction
of the tax wedge while ensuring budget
neutrality.’
32
is reflected by the high proportion of long-term unemployment, accounting for around four-
fifths of jobseekers. In addition, the already high youth unemployment figure increased to
63 % in 2014, as compared with 59 % in 2013. Furthermore, the enduring large differences
between female and male participation rates (46 % and 72 % in 2014) suggest that labour
market conditions remain especially adverse for women.
Monetary policy remained in line with the overall economic development. Monetary
policy continued to be conducted under a currency board arrangement with the euro as anchor
currency and enjoys a high level of confidence and credibility. This approach has served the
economy well so far. However, it also implies that the burden of adjustment to external
shocks has to be accommodated by other policy areas, including fiscal policy. This requires a
more responsible fiscal policy, necessitating the building-up of sufficient fiscal buffers and a
stronger emphasis on medium-term stability. The overall price level continued to decline,
although at a slower pace. In the first eight months of 2015, the overall index of consumer
prices was 0.6 % lower than a year before. In July 2014, the decline had been -1.3 %.
However, the main reason for the drop in the overall index was a marked decline in a limited
number of commodities while prices for housing, health and education rose by some 1-2 %.
Planned increases of energy prices in Republika Srpska in the second half of 2015 and
stronger domestic demand are expected to lead to a higher overall price level.
The budget deficit increased in 2014 amid the
persistently low quality of public finances. The
suspension of disbursements of the last tranches under
the IMF SBA and the emergency financing for the areas
hit by flooding put heavy pressure on public finances in
2014, resulting in short-term financing solutions. The
fiscal deficit in 2014 is estimated to have surged to close
to 3 % of GDP, nearly tripling the target of 1.1 % of
GDP set in the 2015-2017 framework for fiscal balance
and policies. Public expenditure remained broadly flat at
46 % of GDP in 2014 and consisted mostly of current
expenditure. Capital expenditure reached
only around 4 % of GDP and is projected
to decline to below 3 % in the coming
years, contrary to ERP recommendation 2.
Despite the adverse economic effects of the
spring floods, revenues from indirect taxes
showed positive growth in 2014. Measures
to improve tax compliance, coupled with
increases in excise duties on beer and
tobacco contributed to stronger revenues.
As a result, consolidated revenues are
estimated to have remained broadly
unchanged at 43 % of GDP in 2014.
ERP recommendation 2: ‘Improve the
composition of public spending to increase the
fiscal space for capital investments by containing
current expenditures through curbing the public
sector wage bill and more efficiently allocating
staff in the civil service at all levels of government.
Take steps to better target social expenditures
through extensive audits and finalisation of the
establishment of the Single Registry of
Beneficiaries of Cash Payments without
Contribution in the Federation’.
33
Although important legal steps have been taken to improve the sustainability of fiscal
policy, Bosnia and Herzegovina needs to do more to put these into practice, in line with
ERP recommendation 1. The 2015 budgets of the Federation and the State government were
adopted with considerable delay. Fiscal
discipline in the Federation and its lower
levels of government improved following
the entry into force of the Law on Budgets
in January 2014. However, so far the law is
not implemented efficiently. In mid-
September, the Republika Srpska adopted a
law on fiscal responsibility, including
establishment of an independent Fiscal
Council and a fiscal rule limiting
government expenditures and deficits.
The rapidly increasing public debt and
related refinancing risks are sources of
macroeconomic vulnerability. General government debt has steadily increased in recent
years, reaching 45.1 % of GDP by the end of 2014. The repayment schedule for public debt is
concentrated in the next few years, posing additional risk to fiscal sustainability given the
tight fiscal space and lack of access to international capital markets. Debt service payments in
2014 soared to 5 % of GDP on the back of intensified issuing of short-term government
securities to make up for the non-disbursement of tranches under the IMF SBA.
Interplay of market forces
Privatisation remained largely an unfinished task. The direct state influence on the
economy has remained significant, with a total spending-to-GDP ratio of close to 45 % of
GDP. The problem is less severe in
Republika Srpska, where only a few large
publicly owned companies remain. The
privatisation process in the Federation,
started in 1999, continued to suffer
setbacks despite the adoption of
privatisation strategies in 2014 and 2015. Attempts to sell 14 companies in 2014 were largely
unsuccessful. This left the assets still to be privatised at two-thirds of the initial stock of state-
owned capital for privatisation, underscoring the pressing need for an initial restructuring to
kick-start the privatisation process, as underlined in ERP recommendation 3.
Market entry and exit
Some progress was made to ease market
entry and to facilitate the issuing of
construction permits. However, progress
has been uneven and uncoordinated across
the entities. In 2013 and 2014, Republika
Srpska carried out an ambitious set of
reforms to reduce business registration time
and costs. The Republika Srpska
authorities also started a single registry for
companies.
ERP recommendation 1: ‘Improve the budget
management framework by adopting and
implementing the Law on Fiscal Responsibility in
Republika Srpska, especially including the
establishment of a Fiscal Council and the adoption
of a fiscal rule. Take steps to address obstacles to
an efficient implementation of the Law on Budgets
in the Federation, in particular the functioning of
the Fiscal Coordination body. Continue with the
improvement of expenditure controls, fiscal
discipline, budget reporting methods and the
efficiency of tax authorities of lower levels of
government.’
ERP recommendation 3: ‘Take steps to advance
restructuring and privatisation and improve the
efficiency and corporate governance of companies
with state ownership, notably in the Federation, to
relieve the substantial burden on public finances.’
ERP recommendation 4: ‘Take steps to continue
with the set-up of registry of para-fiscal fees to
relieve burden on businesses without endangering
the sustainability of public finances. Continue to
reduce costs of business entry and exit and simplify
the regulatory framework for the issuance of
construction permits, especially in the Federation.’
34
In the Federation, the adoption of
amendments to the law on the default
interest rate created conditions for
companies to address arrears more
effectively. In addition, both Entities
announced the set-up of a registry of non-
tax charges for end-2015, in accordance
with ERP recommendation 4. Limited
access to financing, slow contract
enforcement and the high tax burden on
labour have been identified as major
disruptive factors for doing business in
Bosnia and Herzegovina. No progress was
made on the creation of a single economic space (ERP recommendation 7), nor on mutual
recognition of business registration by the Entities (ERP recommendation 8).
The legal system
Strengthening the rule of law, simplifying contract enforcement procedures and fighting
corruption remain essential if Bosnia and Herzegovina’s business environment is to
improve. Although a few steps have been taken to improve the legal rules governing
business, the situation remains complex and problematic. The country has a lack of
institutional capacity and a poor track record, especially on settling commercial disputes. The
enforcement of commercial contracts still takes a long time, involving 37 procedures, taking
on average 595 days and costing 34 % of the claim value.
Financial sector development
The banking system is liquid and well-capitalised but burdened with a high level of non-
performing loans (NPLs). The financial system continues to be dominated by the banking
sector, which accounted for 87 % of total financial assets.
The number of banks declined to 26 after one bank filed bankruptcy proceedings in 2014; this
increased the proportion of foreign-owned assets in the banking sector to over 90 %. There
were only two majority state-owned banks, accounting for less than 3 % of the sector's assets.
The rest is privately owned.
The capital adequacy ratio declined slightly to 16.3 %, remaining well above the regulatory
minimum of 12 % at the end of 2014. Banking sector profitability recovered in 2014 after
recording losses in 2013. Nevertheless, the
credit risk indicators for the banking
system raise concerns as the proportion of
NPLs in total loans remained slightly
above 14 % in the second quarter of 2015.
Despite some recent progress, legislative
changes to facilitate loan restructuring and
NPL resolutions are still not in place. In
order to strengthen the sector's resilience,
Bosnia and Herzegovina needs to markedly
step-up its efforts to encourage the clean-up of banks’ balance sheets, as requested in ERP
recommendation 6. Furthermore, the Central Bank's analytical capacities need to be
strengthened. Credit growth remained feeble despite greater liquidity in the banking sector.
The size of the non-banking sector, chiefly investment funds and insurance companies,
ERP recommendation 7: ‘Take steps toward the
establishment of a single economic space by
addressing the lack of internal coordination across
all government levels.’
ERP recommendation 8: ‘Improve the business
environment and support private sector
development, including through the mutual
recognition of business registration. Develop
measures to provide targeted support for SMEs and
to widen their access to finance. Tackle all forms of
corruption, fraud and money laundering and
informalities in the economy.’
ERP recommendation 6: ‘Finalise the
development of a financial restructuring framework
including to address the high burden of non-
performing loans on bank balance sheets from both
a stock and a flow perspective and thus help
remove potential supply- and demand-side
obstacles to credit extension. In this context, a
strengthening of the crisis resolution framework
would also appear warranted.’
35
increased somewhat: its assets increased slightly to 13 % of GDP in 2014, still below half of
the pre-crisis period.
3.2. The capacity to cope with competitive pressure and market forces within the
Union
Bosnia and Herzegovina is at an early stage in achieving the capacity to cope with
competitive pressure and market forces within the Union, although some progress has
been made, in particular on the liberalisation of energy markets. There were however no
positive developments in the quality of education (a key driver of competitiveness). State
influence on the economy remains significant and puts a persistent burden on public finances.
In line with the ERP recommendations and in order to support long-term growth, in the
coming year Bosnia and Herzegovina should pay particular attention to:
→ developing a more strategic approach to tackling deficiencies in its training and education
system; improving teacher training and, in turn, the basic and transversal skills of students.
→ simplifying its complex procedure for exports;
→ developing a transport strategy and an energy strategy.
Human and physical capital
Significant efforts are needed to improve the efficiency of the education system, in line
with ERP recommendation 9. Education policy is not decided on at national level but at
Entity level in the Republika Srpska and at cantonal level in the Federation. Despite recent
efforts to increase coordination, the system
remains very fragmented. Public
expenditure for education is nearly 3.5 %
of GDP, slightly below the regional
average. The inefficient use of education
spending leaves ample room for
improvement. The low enrolment rates for
tertiary education, despite an upward trend,
are far below the regional average. The
country should use its upcoming
membership in the Advisory Group on
European Qualifications Framework to develop and finalise its National Qualification
Framework.
There is a pressing need to attract private investment, in particular FDI, and to increase
public spending on investments that stimulate growth. The spring floods in May 2014
affected large parts of the country, causing losses and damage of up to 15 % of GDP.
Reconstruction advanced at a slow pace and only 20 % of the reconstruction funds pledged
for the Floods Recovery Programme had been disbursed by March 2015. The investment-to-
GDP ratio in 2014 remained relatively modest at 18 % of GDP. In addition, low public capital
expenditure (below 4 % of GDP) is holding back improvements to physical infrastructure. On
a positive note, net FDI inflows reversed their downward trend and increased to 3 % of GDP
in 2014. The development of public-private partnerships and lending schemes to SMEs could
further boost private investments.
ERP recommendation 9: ‘Develop a more
strategic approach to tackle the deficiencies in the
training and education system by effectively
prioritising measures based on a mapping of the
skills gap taking into account the needs of industry,
especially SMEs. Harmonise legislation and
standards related to education and training at state
and entity level, as well as at cantonal level, since
the competence on education in the Federation is at
cantonal level.’
36
Some progress has been achieved on unbundling electricity networks. Starting from 2015,
Bosnia and Herzegovina formally liberalised its electricity market. However, legislative
changes to the regulatory framework are
still to be passed. On the other hand, hardly
any progress has been achieved towards a
more competitive telecommunications
market. The three incumbent operators
continue to act as de facto monopolies over
fixed voice telephony in their geographical
areas. The number of new registrations in
the internet services and network operators
market continued its upward trend in 2014.
The energy and transport sectors need
country-wide energy and transport
strategies to help unlock their large potential in line with ERP recommendation 10.
Sectoral and enterprise structure
The structure of the economy is dominated by services, while agriculture's share in the
economy is the lowest in the region. The economy continued to be dominated by the
services sector, which accounted for 67 % of gross value added in 2014. Industry accounted
for the second largest share at 21 %, broadly unchanged over the last four years. Agriculture
occupies the lowest share in value added by regional comparison (7.1 %), while the
contribution of the construction sector remained around 4.5 %.
Micro-enterprises play a significant role in the economy. According to end of September
2014 figures from the Statistical Business Register, only 56.7 % of enterprises in Bosnia and
Herzegovina were active. The majority (75.1 %) were micro-enterprises with less than 10
employees, operating mainly in wholesale and retail sales. The informal sector, which
flourishes in the context of poor law enforcement and insufficient anti-corruption measures, is
a major obstacle for industrial development and continues to impose significant costs on the
overall economy.
State influence on competitiveness
State subsidies and guarantees remain significant and put a heavy burden on public
finances. Limited progress has been achieved on reducing the state’s influence on the
economy. A large proportion of subsidies were granted to agriculture, while state guarantees
were granted primarily to public enterprises in the infrastructure sector to keep them afloat.
Budget subsidies to industry and agriculture decreased somewhat in 2014 to slightly below
1 % of GDP. Loan guarantees and transfers provided by the Entities to bankrupt public
enterprises reached 7 % of GDP.
Economic integration with the EU
Trade integration with the EU fell slightly as a result of declining exports. Trade
openness increased somewhat in 2014 to 91 % of GDP but still remains relatively low. The
EU is by far Bosnia and Herzegovina’s largest trading partner, accounting for 72.1 % of
goods exports and 58.9 % of goods imports. The main export categories include low- to
medium-tech manufactured goods, such as textiles and raw materials. The share of the EU-28
in total exports fell in 2014 due to a 20 % slump in exports to Croatia and a stagnation of
exports to Germany, Bosnia and Herzegovina’s main EU trade partner accounting for one-
quarter of its total goods exports. Over the same period, imports from the EU increased by
4.8 %, mainly from Italy (+20 %) and Austria (+10 %).
ERP recommendation 10: ‘Develop a transport
policy and strategy and an energy strategy at each
level of government according to competencies,
and embed them with the regional agenda on
connectivity, including through the establishment
of a credible planning of prioritised reforms with a
timeline and funding mechanism (single project
pipeline). The energy strategy should also consider
substantial investments in a diversified power
generation and on an effective distribution
network.’
37
The EU is also the major investor in Bosnia
and Herzegovina, accounting for nearly
63 % of total FDI, with Austria and
Slovenia accounting for the largest FDI
stocks in 2013. Non-tariff barriers to trade
with the EU remain a significant problem
and require structural and regulatory
reforms. Some positive regulatory steps
were taken toward stimulating exports to
the EU, in line with ERP recommendation 11. In June 2015, the EU Food and Veterinary
Office approved all actions proposed by Bosnia and Herzegovina to meet standards for the
production and processing of dairy products intended for export to the EU.
4. EUROPEAN STANDARDS
4.1. Internal market
4.1.1. Free movement of goods
The country is at an early stage of preparation in the area of free movement of goods. There
has been some progress, notably in the areas of standardisation, accreditation, metrology and
consumer protection. In the coming year, Bosnia and Herzegovina should in particular:
→ improve coordination between the relevant institutions;
→ repeal conflicting legislation within the country;
→ adopt a country-wide strategy for quality infrastructure.
A country-wide strategy for quality infrastructure is still not in place, and cross-cutting
coordination in this field between the relevant institutions at different levels of government
remains insufficient.
On horizontal measures, in the area of standardisation the Institute for Standardisation of
Bosnia and Herzegovina (BAS) adopted 85 % of the European standards required for
membership of the European Committee for Standardisation (CEN) and the European
Committee for Electrotechnical Standardisation (CENELEC). The institute adopted 1 500
European standards as national standards, bringing the total to 17 341 European standards. A
new technical committee, BAS/TC 59 (Social Security and Protection), was established,
bringing the total to 52. No conflicting ex-Yugoslav mandatory standards have been
withdrawn yet.
On conformity assessment, Republika Srpska continued to develop and implement its own
legislation. The Federation and the Brčko District continued to implement the Law on
Technical Requirements for Products and Conformity Assessment of Bosnia and
Herzegovina. The country needs to provide for even application of conformity assessment
procedures throughout the whole territory.
The Institute for Accreditation of Bosnia and Herzegovina has accredited 77 conformity
assessment bodies, comprising 54 testing laboratories, 1 medical laboratory, 9 calibration
laboratories, 1 product certification body and 12 inspection bodies. The law on accreditation
is not yet fully in line with the acquis and should be amended. There is a need for a clear
policy on the role of accreditation in authorising conformity assessment bodies at both State
and Entities levels.
ERP recommendation 11: ‘Simplify the complex
procedures for exports, ensure coordinated border
controls and improve the border infrastructure
system. Develop a comprehensive and strategic
approach in the field of EU food safety and sanitary
and phytosanitary standards to receive accreditation
for exporting agricultural and food products to the
EU.’
38
In September 2014, the Institute for Metrology of Bosnia and Herzegovina (IMBiH) adopted
14 regulations, including eight rulebooks related to instruments used in medicine, and the
Federation of Bosnia and Herzegovina adopted, in September 2014 and January 2015, ten
regulations in the area of precious metals. The secondary standard dosimetry laboratory was
opened in Banja Luka in September 2014. Representatives from the IMBiH regularly
participated in the work of technical committees on metrology. The institute also participated
in two inter-comparisons. A decision on the appointment of the Metrology Council’s
members by the Council of Ministers is still pending. The country’s strategy for developing
the metrology system has yet to be adopted, as has the new law on metrology which would
merge the existing legislative framework and lay the foundation for implementing the acquis.
Cooperation and coordination between the institute and the metrology institutes of the Entities
requires strengthening.
The Market Surveillance Agency and the inspection bodies of the Entities and of the Brčko
District have initiated, implemented and coordinated proactive and reactive market
surveillance activities. During the reporting period sixteen activities were implemented as part
of the proactive surveillance and 14 cases were initiated on reactive surveillance. As a result
of 370 inspection controls 18066 unsafe products were withdrawn from the market and 11475
unsafe products were destroyed. The agency published 70 notifications with descriptions of
risk and instructions for consumers and followed-up in the Bosnia and Herzegovina market 47
alerts on dangerous products published on the public website of the EU Rapid Alert System
on dangerous non-food products (RAPEX) detected in the EU market. The Council of
Ministers of Bosnia and Herzegovina adopted the Strategic Development Plan on the Market
Surveillance Agency for the period 2014 – 2016 in July.
The market surveillance system is still largely based on mandatory standards and pre-market
checks. Cooperation between the agency and inspections carried out by the Entities and the
Brčko District needs further improvement.
Although the ‘New and Global Approach’ product legislation is regulated at State level,
Republika Srpska is adopting its own legislation (separately from the State, Federation and
the Brčko District). The division of responsibilities for aligning with the ‘Old Approach’
acquis has yet to be clarified. Republika Srpska should re-engage in the work of technical
committees.
The report on the execution of the 2014 State-level annual consumer protection programme
and the 2015 State-level annual consumer protection programme were adopted in May and
July 2015 respectively.
The Ombudsman’s Office for Consumer Protection is fully staffed. The Ombudsman resolved
all 295 cases received and delivered 20 expert opinions. Furthermore, the Ombudsman issued
recommendations in the telecommunications sector and continued to raise awareness and
further educate consumers, including through publication and distribution of two brochures.
4.1.2. Movement of persons, services and right of establishment
The country is at an early stage of preparations in the area of movement of persons, services
and right of establishment. Some progress was made in this field. A legal framework for
providing universal postal services across the country has yet to be established.
In the coming year, Bosnia and Herzegovina should in particular:
→ strengthen the Insurance Agency of Bosnia and Herzegovina, whose role in the legislative
process needs to be respected by the Entities as set out in the law.
39
→ prepare updated transposition tables to map the level of harmonisation of national
legislation with the European banking legislation.
→ make further efforts to align with the latest accounting and auditing acquis.
The movement of persons and the mobility of the labour force within the country remain a
concern: the absence of harmonisation in employment and labour legislation, of rights based
on employment (i.e. health, pension, social and unemployment insurance) and other related
taxation issues effectively prevent mobility inside the country. An Agreement on the
Employment of Citizens between Bosnia and Herzegovina and the Republic of Slovenia has
entered into force. (see also 4.1.8 — Employment and social policies, public health policy).
There were no developments on the right of establishment and freedom to provide
services. Preparations for aligning with the Services Directive have not yet started.
A total of 13 postal service providers have been licensed by the Bosnia and Herzegovina
Agency for Postal Traffic. Three of these are public and 11 private. There is still no State-
level strategy for postal services. The State-level law on postal services, which aims to
achieve further harmonisation with the acquis and to ensure the regulatory framework is
consistent between the Entities, has yet to be adopted. The lack of harmonisation between the
Entities and the State level on the scope of universal and reserved services continues to
undermine legal certainty. Administrative capacity at State level remains weak.
Implementing the decision on the costs of issuing licences and the fees for providing postal
services removed discriminatory treatment of postal service operators as it sets the costs of
licences for both public and private operators as a fixed percentage of their respective
revenues. The Agency for Postal Traffic also began implementing the amended rulebook on
licensing postal services.
The country has yet to align its national legislation on the mutual recognition of
professional qualifications with the acquis. The Brčko District adopted the law governing
recognition of professional qualifications in January but this is not fully aligned with the
acquis. Implementation of the acquis on the recognition of professional qualifications is
undermined by the lack of harmonisation between the Entities and the State level.
On financial services, both Entities are in the process of finalising the draft law on banks.
Banking agencies carry out stress tests on a regular basis, as a result of which in the baseline
scenario 5 out of 26 banks were identified as potentially being undercapitalised by end-2015.
The Standing Financial Stability Committee adopted a ‘comprehensive plan for reaction to
crisis situations’. The strategy for implementing Basel II was revised into a strategy for
introducing Basel III, and all activities envisaged in 2014 were successfully implemented.
Updated transposition tables to map the level of harmonisation of national legislation with the
EU banking acquis are still lacking.
The Ombudsman for financial services became operational in the Federation, and the
implementing legislation governing its work was adopted.
Some progress was made towards creating a single economic area for insurance services. The
Administrative Board of the Insurance Agency of Bosnia and Herzegovina is operational but
the Entities still need to allow it to work properly.
Legislation on third party motor vehicle insurance has yet to be harmonised at State level and
between the Entities. The State level guidelines on prevention of money laundering and
financing of terrorism were adopted at the State level in January, based on which the
Federation adopted harmonised implementing guidelines in March.
40
The three insurance supervision agencies signed a cooperation agreement with Croatia in
March to ensure that insurance institutions and other relevant stakeholders receive regular
education.
The Federation adopted an amendment to the rulebook on handling claims for non-life
insurance which strengthens the authorities’ supervisory role. An integrated information
system for supervising compulsory insurance policies and claims was adopted. To improve
the way the Ombudsman functions and promote implementation of the law on insurance
companies, Republika Srpska adopted the rulebook on handling customers’ complaints and
guidelines on improved reporting and collection of statistics by insurance companies.
The mechanism for harmonising laws between the Entities and with the acquis in the
insurance sector is operational under the Insurance Agency of Bosnia and Herzegovina. The
latter´s role needs to be strengthened to ensure that this process is permanent.
On capital markets, the Entities’ legislative frameworks are neither fully aligned with the
acquis nor fully harmonised with each other. The Federation and the Brčko District have
adopted a new law on takeovers of joint stock companies. Participants in the securities market
with their head office in one Entity still need to obtain a licence to operate in the other.
The Federation of Bosnia and Herzegovina adopted its new company law, further aligning it
with the acquis but has not yet published it in the Official Gazette.
Legislation on corporate accounting and auditing is almost fully harmonised between the
Entities. Further efforts should be made to align it with the latest accounting and auditing
acquis. Progress was achieved regarding the quality assurance system. In December, the
Federation Chamber of Auditors adopted a rulebook to strengthen internal organisation. The
Committee for Public (audit) Control should have adequate resources to carry out its work as
the competent authority for public audit oversight.
4.1.3. Free movement of capital
Bosnia and Herzegovina remains moderately prepared in the area of free movement of
capital, but there was no progress in this area. Further alignment with the acquis is needed to
provide for country-wide harmonisation and to create a single economic area,
As regards movement of capital, Bosnia and Herzegovina continues to apply relatively
liberal rules on inward capital flows. The legal framework is not harmonised with the acquis.
In both Entities, the legislation limits the amount that non-residents may transfer without
bureaucratic burdens.
On foreign investment, there is a persistent lack of coordination across the country in
designing and implementing legal reforms. Restrictions on foreign direct investment continue
to apply in the media sector, where a 49 % limit on foreign-owned capital remains in place.
Capital markets continue to suffer from challenging economic conditions and operate at
relatively low levels. The securities market remains dominant in terms of capital market
growth since both Entities continue to secure both short-term and long-term financing through
local capital markets.
Bosnia and Herzegovina has a payment system for giro clearing and real-time gross
settlement operations within the Central Bank. In 2014, the value of transactions in these two
categories increased by 8.7 % compared with 2013.
41
4.1.4. Customs and taxation
Bosnia and Herzegovina is moderately prepared in the areas of customs and taxation. Some
progress was made in these fields, particularly on adopting the new customs policy law,
improving protection of intellectual property rights and the overall operational capacity of the
Indirect Tax Administration (ITA). In the coming year, Bosnia and Herzegovina should in
particular:
→ adopt implementing rules to enable the implementation of the new customs policy law;
→ improve cooperation between ITA and the tax administrations of the Entities, including
through joint audits;
→ modify the Law on Excise Duties to align its definition of small breweries with that of the
acquis.
The new customs policy law was adopted in July. The new law provides for additional
simplified customs procedures such as the Authorised Economic Operator status, and for
introducing a new computerised transit system and will require the adoption of implementing
rules. In December the customs tariff was updated in line with the 2015 version of the EU
Combined Nomenclature. The regional Convention on Pan-Euro-Med Preferential Rules of
Origin entered into force in November.
There was progress in terms of registration and follow-up procedures for customs cases
against violations of intellectual property rights which increased from 73 in 2013 to over 200
in 2014.
Implementation of Asycuda World, the new customs declaration processing system that will
support implementation of the new customs policy law, is continuing.
Bosnia and Herzegovina has yet to finalise procedures to ratify its participation in the EU’s
Customs 2020 and Fiscalis programmes.
In the area of taxation, legislation has to be adopted further aligning value added tax (VAT)
with the acquis. IT applications for electronic submission of VAT returns and for VAT
refunds to non-established taxable persons are not yet operational. The Law on the
Amendments to the Law on Excise Duties in Bosnia and Herzegovina which introduces
differentiated excise duties for beer became applicable in September. It is not in line with the
acquis and discriminates against imported beer.
ITA is conducting a pilot E-audit project with a small number of big taxpayers with a view to
improving tax compliance. In exchange for real time access to tax relevant information it
provides them with specific contact points and increased taxpayer assistance.
The Entities need to continue aligning legislation with the acquis and step up their efforts to
improve mutual cooperation and to strengthen their administrative capacity on direct taxation.
4.1.5. Competition
The country has some level of preparation on competition. No progress was made in this
area. In the coming year, Bosnia and Herzegovina should in particular:
→ fully implement the State aid legislation and set up the institutional framework needed to
control all State aid effectively, in order to comply with the SAA;
→ further align with the EU acquis on competition and ensure the Competition Council
functions efficiently.
42
On antitrust and mergers policy, the Competition Council issued 14 opinions. It is fully
staffed under the existing rulebook and personnel received training to strengthen its capacity
to conduct investigations. However, short procedural deadlines often lead to automatic
adoption of decisions. This raises concerns, particularly when combined with ethnicity-based
veto rights of Competition Council members. Complex procedures for the formal appointment
of the chairperson have prevented the Competition Council from functioning properly.
The State Aid Council, has issued 21 decisions so far. The regulation on the criteria for
verifying the compatibility of State aid has yet to be adopted by the Brčko District and at State
level. The regulations on this issue and on procedures, State aid applications and the
notification form will need to be aligned with EU acquis. The alignment of existing State aid
schemes in accordance with obligations arising from the SAA and EU State aid rules has not
yet started. Bosnia and Herzegovina still needs to improve the consolidated State aid
inventory reporting and address the issue of transparency.
The technical competence of all stakeholders in the State aid system has been improved by
specialised training. Financing the operations of the State Aid Council and its secretariat
remains an issue as Republika Srpska again did not contribute its full share. The secretariat is
not yet fully operational. Further efforts are needed to ensure that all State aid measures are
notified to and approved by the Council before being granted. The transparency of all State
aid granted in Bosnia and Herzegovina has yet to be assured.
4.1.6. Public procurement
Bosnia and Herzegovina has some level of preparation in this area. Procurement is an area
particularly vulnerable to corruption and more efforts are needed to prevent corruption during
the procurement cycle. Good progress was achieved in the past year, especially through the
entry into force of the new law on public procurement. However, the country is still at an
early stage of harmonising with the acquis on public-private partnerships and concessions. In
the coming year, Bosnia and Herzegovina should in particular:
→ adopt remaining secondary legislation;
→ strengthen the monitoring role of the Public Procurement Agency and make the
procurement process more transparent;
→ establish a specialised procurement function within contracting authorities.
Institutional set-up and legal alignment
In terms of the institutional set up and legal framework, the new public procurement law
came into force in December. It is broadly in line with the EU legislation from 2004. The law
ensures respect for the principles of the Treaty on the Functioning of the EU, such as value for
money, free competition, transparency and equal treatment, but Bosnia and Herzegovina
maintains a system of domestic preferences which will be gradually phased out. Most of the
implementing legislation was adopted on time, except for some secondary legislation and
decisions. The country will need to align with EU legislation from 2014 in this area.
Bosnia and Herzegovina did not take measures to provide for competitive and transparent
procedures or the independent reviews required by the acquis in the area of public-private
partnerships and works concessions. The regulation of the concessions system is still
fragmented and its administrative set-up has no formal channels for cooperation. This creates
legal uncertainty and high administrative costs, and fragments the envisaged single economic
area.
43
The Public Procurement Agency of Bosnia and Herzegovina (PPA), the body mandated by
law to initiate, implement and monitor public procurement reform in all sectors, has sufficient
administrative capacity to fulfil its core tasks. The PPA implements the public procurement
systems reform strategy. The strategy is outdated, however, and should be renewed in line
with the provisions of the new public procurement law.
Implementation and enforcement capacity
The public procurement market was worth 8.14% of GDP in 2014. The average number of
bidders per tender ranged from one to four, depending on the type of procurement (goods,
works or services) and the procurement procedure. Only 50 % of tenders had a prior notice
published and 44% of the total procurement value was attributed through the use of less
transparent award procedures, albeit under the previous procurement rules.
The administration needs to be strengthened including through trainings, in order to provide
for the monitoring of procurement procedures.
Regarding implementation and enforcement capacities to manage public procurement
processes, the new public procurement law calls for more detailed planning, preparation and
publication of public procurement activities. Specialised procurement functions still need to
be established in each contracting authority and staffed with officials who have relevant skills
and capabilities.
The PPA also maintains the central procurement portal where tender and contract notices and
other important information and guidance are published. The e-procurement information
system was developed and brought into use at the end of 2014 but e-procurement is still at a
very early stage.
The statistics collected from contracting authorities and published by the PPA provide a solid
tool for monitoring the use of procurement procedures, including the less competitive ones.
However, the PPA’s monitoring role is limited and should be strengthened to enable it to
identify potential weaknesses and irregularities.
Improvements were made to the regulation of integrity and conflict of interest in public
procurement procedures.
Efficient remedies system
The right to legal remedy is stipulated in the Constitution and in the Law on Public
Procurement. The legislation on review procedures is broadly in line with the relevant EU
Directive and general EU Treaty principles. The decisions of the Procurement Review Body
(PRB) can be challenged in the Court of Bosnia and Herzegovina. The submission of an
objection suspends the procurement procedure.
In 2014, the PRB upheld complaints in half of the cases it reviewed (i.e. 355 of the 696 cases
resolved in 2014. A further 436 cases were rejected, dismissed or suspended). Over the same
period, the Court of Bosnia and Herzegovina delivered eight judgments in cases brought
against PRB decisions, ruling against it in six cases.
The procurement legislation does not lay down the institutional arrangements for handling
complaints about concessions award procedures. While the composition of the PRB's board
was renewed in March, its implementation capacity, especially to deal with the complexity
and high number of procurement-related appeals, needs to be strengthened. Publication of
decisions by the PRB and by the Court of Bosnia and Herzegovina has resumed, which should
allow for better transparency, but it does not cover decisions taken before 2015.
44
Bosnia and Herzegovina should strengthen the review and remedies system, including at
branch offices, to provide for speedy, effective and competent handling and resolution of
complaints and penalties. This would give businesses easier access to the system at lower
cost, and would help regain public trust.
4.1.7. Intellectual property law
Bosnia and Herzegovina is moderately prepared in the area of intellectual property law.
Some progress was made in this area. Further efforts are required, in particular to improve
enforcement and coordination.
In the coming year, Bosnia and Herzegovina should in particular:
→ adopt a strategy of intellectual property rights (IPR) enforcement;
→ set-up an inter-ministerial body for the coordination of enforcement of intellectual property
rights.
The Institute for Intellectual Property continues to function well but needs to further increase
its staff to fulfil the tasks related to granting of intellectual property rights set out in its
development strategy for 2008-2015. The Memorandum of Understanding between the Office
for Harmonization in the Internal Market of the EU (OHIM) and the Institute for Intellectual
Property of Bosnia and Herzegovina was signed in December 2014.
On copyright and neighbouring rights, 25 copyright works and related rights entered the
institute’s records and certificates of deposit and registration were issued accordingly.
Regarding industrial property rights, the International Convention for the Protection of
New Varieties of Plants and the European Patent Convention have yet to be ratified.
On enforcement, the Indirect Taxation Authority issued 257 decisions, of which 170 are in
the procedure of temporary retention and seizure of goods. The State Investigation and
Protection Agency seized counterfeit goods valued at about EUR 470 000. The enforcement
of IPR remains to be improved. An inter-ministerial body for the coordination of enforcement
of IPR is still to be set-up. The monitoring system should be improved so that information and
statistics on civil proceedings before the Court on enforcement of IPR are accessible.
Knowledge of IPR significantly increased among Bosnia and Herzegovina’s enforcement
institutions. However, the institutions’ capacities need to be strengthened and their
cooperation needs to improve. The country has yet to adopt the intellectual property
enforcement strategy for 2015-2020. A reliable system for collecting, analysing and
exchanging data among the various institutions has yet to be set up.
4.1.8. Employment and social policies, public health policy
Preparations remain at an early stage. There has been no progress in the area of employment
and social policies. Unemployment is still largely structural and remained high overall, while
unemployment among women and young people rose. There has been some progress on
public health. In the coming year, Bosnia and Herzegovina should in particular:
→ develop autonomous social dialogue, modernise labour and health and safety laws and
harmonise them between the Entities;
→ urgently address high unemployment, notably youth unemployment, and provide effective
support to job seekers;
→ implement public health reforms and provide for cooperation between the Entities.
45
On employment policy, labour laws throughout the country need to be modernised and
harmonised with each other. Challenges in relation to the labour market remain considerable.
Some programmes exist to support the employment of Roma and other target groups, notably
in Republika Srpska. There is an urgent need to strengthen the financial and administrative
capacity to implement active labour market measures both at the level of Entity governments
and public employment services.
Labour market participation marginally increased in 2014 to 59.2 %, with both male and
female participation rates growing slightly. The employment rate also rose somewhat to
43.2 % in 2014, but female employment dropped marginally from 32.2 % to 31.9 %. Job
creation remained modest and the overall unemployment rate remained unchanged at 27.5 %
in 2014. However, the male unemployment rate fell to 25.2 % and the slight increase in the
female participation rate was hence entirely reflected in a somewhat higher unemployment
rate for women, which increased to 31.2 %. Unemployment among young people (15-24 years
old) further increased to 63 % in 2014. Overall, more than 80 % of unemployment remains
long-term (i.e. unemployed for one year or more).
With regard to social policies, the outdated labour law remains in place in the Entities, and
hiring and dismissal procedures are extremely complex and burdensome for employers. Social
contributions differ between cantons, the Entities and the Brčko District. In July the
Federation adopted a revised labour law which was met with protests by trade unions. Health
and safety at work legislation at the level of Entities, cantons and the Brčko District is not
harmonised with the acquis nor across Entities. Labour inspectorates remain understaffed and
are unable to perform their tasks properly.
On social dialogue, no steps have been taken to establish the State Economic and Social
Council due to the continued lack of State-level legal provisions for recognising social
partners. However, such councils exist at Entities level, as well as in some cantons in the
Federation. Following the adoption of the Federation's new Labour Code, social partners
should renegotiate collective agreements. Social dialogue remains weak at all levels.
Implementation of the legislative framework on social protection remains low. Due to the
financial constraints at all levels of government, the social protection benefits prescribed by
social protection laws are not implemented in practice, with some benefits not being paid or
amounts reduced according to available funding.
Participation of women in the workforce is low and there is still maternity-related
discrimination in employment. Employed mothers or fathers enjoy full salary compensation
for 12 months for parental leave in Republika Srpska. In the Federation, the situation is
fragmented and can vary among cantons. The same goes for child allowances for low-income
families.
Social inclusion policies are still not harmonised across the Entities and neither are provisions
for individuals. In June a State-level Action Plan for Children 2015–2018 was adopted
focusing on social protection and healthcare for children, pregnant women and childbearing
women. In general, vulnerable groups including children, Roma, returnees, internally
displaced persons and disabled people are not adequately protected by the State, the Entities,
the Brčko District or the cantons.
In the field of public health policy, in May Bosnia and Herzegovina ratified the Additional
Protocol to the Convention for the Protection of Human Rights and Dignity of the Human
Being with regard to the Application of Biology and Medicine, on the Prohibition of Cloning
Human Beings. Republika Srpska made some progress in implementing the e-health strategy.
A web application was developed for family medicine teams and installed in 48 health
46
centres. Overall cooperation between the Entities’ ministries in implementing health sector
reforms needs to be strengthened.
Projects to limit tobacco and alcohol consumption, improve diet and increase physical activity
are being implemented with World Bank support, but efforts in the area of tobacco control
overall need to be reinforced
In the field of communicable diseases, the multi-drug resistance and infection control plan
and the framework plan for tuberculosis prevention and control in healthcare facilities —
which form part of the national tuberculosis programme — were updated. State-level
coordination of the harmonisation of legislation in the Entities and the Brčko District and of
the international reporting of epidemic data should be strengthened.
On blood, tissues, cells and organs, Republika Srpska adopted the Law on Transfusion
Activities, regulating transfusion activities, the quality system for such activities and the
supply of blood and blood components to residents in June. The Federation adopted a
rulebook on the specific technical requirements for blood and blood components.
The Federation also established the Centre for Transplantation and adopted by-laws on
transplantation. Further efforts are needed to avoid duplication, establish a more efficient and
less fragmented technical and administrative system for substances of human origin and bring
it into line with the quality and safety requirements of the acquis.
In Republika Srpska, early childhood development activities have continued. They are based
on the adopted policy for improving early childhood development, the policy for improving
the nutrition of children under five and the guidelines on nutrition for infants and pre-school
and school children.
Republika Srpska adopted the rare diseases strategy for 2014-2020 in December.
A country overview of the situation on drugs and drug addiction was submitted to
the European Monitoring Centre for Drugs and Drug Addiction and published in November.
On pharmaceuticals, the Agency for Medicinal Products and Medical Devices published
rulebooks on the manner of and procedure for classifying medicinal products and on
conditions for manufacturing a medicinal product.
4.1.9. Education and research
Preparations on education and research and innovation policy are at an early stage. There was
no progress in these sectors but Bosnia and Herzegovina actively participated in different
cultural programmes as well as research networks and activities.
In the coming year, the country should in particular:
→ step up coordination and harmonisation of the legal framework on education;
→ strengthen the capacity of State-level education agencies to develop EU standards,
including for quality assurance in education;
→ step up efforts to strengthen the research and innovation capacity.
On education, the action plan for implementing the ‘baseline qualifications framework’ was
adopted in October. Some elements of the qualification framework for higher education were
developed (qualification and occupational standards for study programmes dealing with
agriculture, food processing and ICT, as well as teacher education, mechanical engineering
and management). There are 46 higher education institutions registered in Bosnia and
Herzegovina, of which 16 are accredited and 16 are in the process of being accredited.
Bosnia and Herzegovina’s strategic development platform for adult education in the context
47
of lifelong learning for 2014-2020 was adopted in October 2014. Four cantons (Zenica-Doboj,
Una-Sana, Podrinje and Tuzla) adopted laws on adult education. Further efforts should be
deployed to establish national educational statistics. The education sector remains a high-risk
area for corruption.
Coordination between bodies responsible for quality assurance is weak at the level of pre-
school, primary and secondary education due to the relevant agency's lack of capacity. Bosnia
and Herzegovina still does not participate in the Programme for International Student
Assessment (PISA). BiH participation is important as PISA results are an EU benchmark and
an internationally accepted assessment of the basic skills of 15 year old children. The national
pre-school enrolment rate for children aged 3-6 is still very low at 14% and far from the EU
target of 95% by 2020. Increasing this rate requires both infrastructure and teacher training.
Some cantons have yet to adopt legislation on pre-school education and vocational education
which would further develop legal frameworks across the country as well as fully harmonise
them, including with the State-level framework law. An effective coordination mechanism has
not been established in the Federation of Bosnia and Herzegovina and the two existing
coordination bodies are still acting in parallel.
Bosnia and Herzegovina participates actively in the Western Balkans Platform on Education
and Training. Bosnia and Herzegovina continues to participate in Erasmus+ and the Western
Balkans Youth Window. In view of the very high youth unemployment rate in Bosnia and
Herzegovina it is all the more important that the country uses Erasmus+ Youth in Action to
foster young people's non-formal learning at international level so as to enhance their
competences, skills and employability.
As regards culture and media, in May a Creative Europe Desk was established, and Bosnia
and Herzegovina participates actively in both sub-programmes (Culture and MEDIA).
Ratification of the UNESCO Convention for the Protection and Promotion of the Diversity of
Cultural Expressions was followed by the adoption and implementation of the Culture for
Development Indicator Suite in May 2015.
On research and innovation policy, following Bosnia and Herzegovina's association to the
EU's 'Horizon 2020' programme, a Network of National Contact Points (NCPs) was
established and representatives in the Horizon 2020 Programme Committees were nominated.
Bosnia and Herzegovina also organised several workshops and information days on Horizon
2020 but based on initial statistics, successful participation is limited. Further efforts are
needed to increase the country's participation in particular on research and innovation actions
on societal challenges and on participation of SMEs as well as on scientific excellence in
general.
Bosnia and Herzegovina continues to show good participation in COST, the framework
supporting trans-national cooperation among researchers, engineers and scholars across
Europe, but the country's participation in Eureka is less successful. Bosnia and Herzegovina
cooperates at regional level as co-signatory of the Regional Strategy on Research for
Innovation, with the Central European Initiative (CEI) and with UNESCO.
At policy level, some progress was made on human capital building as more universities and
institutes signed the European Charter for Researchers and a Code of Conduct for the
Recruitment of Researchers. Bosnia and Herzegovina participates regularly in the European
Research Area Committee (ERAC) and related advisory bodies and in regional networks and
initiatives. According to statistical data from Bosnia and Herzegovina, the total expenditure
on research (both public and private investment) amounted to less than 69.6 EUR million or
0.27% of its GDP in 2012.
48
4.1.10. WTO issues
The country’s preparations are at an early stage. No progress was made in the negotiations
for accession to the World Trade Organisation.
Concerning bilateral market access for goods and services, Bosnia and Herzegovina still
needs to conclude longstanding negotiations with Brazil and Ukraine and recently received
requests to also enter into negotiations with the Russian Federation and the Republic of
Indonesia. Furthermore, Bosnia and Herzegovina has been asked by WTO members to enact
and deposit three pieces of legislation on trading rights, anti-dumping/countervailing duties
and sanitary and phytosanitary measures (a by-law on genetically modified organisms), as
well as to finalise two commitment paragraphs on trading rights and agricultural policies in
the draft Working Party Report.
4.2. Sectoral policies
4.2.1. Industry and SMEs
Bosnia and Herzegovina is at an early stage in the area of industry and SMEs. No progress
was made in this field. In the coming year, Bosnia and Herzegovina should in particular:
→ address the lack of a single economic area by harmonising or coordinating industrial and
SME policies;
→ address outstanding issues harming the business environment. These include weak
competitiveness, high barriers to business entry and exit, and an opaque and complex legal
and regulatory framework.
On industrial policy in May the Federation, adopted a report on implementation of the
industrial policy action plan for 2014 and tasked the line ministry to prepare a new action plan
for 2016-2019.
Regarding SME policy, a national coordinator for the Small Business Act Assessment was
appointed in January. This should now bring a more active coordination role that is required
at State level. A single Entity registry of business operators in Republika Srpska became
operational in February. Republika Srpska also adopted an amendment to the rulebook on
craft entrepreneurs in November to finalise the establishment of a crafts business registry.
However, the lack of a State-level SME strategy and SME definition hampers policy
harmonisation and assessment of how the Small Business Act is being implemented country-
wide. The double registration requirement in both Entities for business registration has yet to
be resolved, possibly through mutual recognition. The lack of a unified, country-wide
economic area and shortcomings in the regulatory environment continue to hurt the business
environment. Barriers include high costs of compliance with regulatory burdens; gaps in
implementing laws and regulations at Entities and sub-Entities level, with sometimes
contradictory regulations; lack of targeted support for SMEs; and lack of coherent and high-
quality infrastructure covering the whole country.
Bosnia and Herzegovina’s participation in the EU’s COSME programme for the
competitiveness of enterprises and small and medium-sized enterprises is still under
negotiation. Participation in COSME is necessary for the two Entities’ consortia to become
part of the Enterprise Europe Network (EEN) for 2015-2020.
49
4.2.2. Agriculture and fisheries
Preparations in these areas are at an early stage. Some progress was made in the field of
food safety and veterinary policy. In the coming year, Bosnia and Herzegovina should in
particular:
→ align the official veterinary and phytosanitary control system with European standards;
→ strengthen its administrative capacity, in particular in inspection services and laboratories;
→ draw up a State-level strategic plan for rural development and establish the national
structures for pre-accession assistance to the agricultural sector through the Instrument for
Pre-accession Assistance for Rural Development.
In the area of agriculture and rural development policy, sectoral analyses on the forestry
and aquaculture sectors were completed in January. The Entities’ policy framework was
improved by adoption of the Federation's Medium-term Development Strategy of the
Agricultural Sector for 2015–2019 in June and of the Strategic plan for development of
agricultural and rural areas of Republika Srpska for 2016-2020 in May.. Progress is needed in
establishing the necessary institutional structures that would allow the use of the Instrument
for Pre-accession Assistance for Rural Development (IPARD. Bosnia and Herzegovina has
not yet drawn up a State-level strategic plan for rural development. A revised harmonisation
programme for agriculture, food and rural development has yet to be adopted, as has State-
level legislation on wine and organic production. The administrative capacities and
coordination structures within the agriculture and rural development sector including support
measures, still need to be strengthened.
Improvements in productivity and competitiveness remain hampered by the lack of an
efficient administration and effective rural credit schemes. Adoption of a national agricultural
information strategy is still pending. The agricultural census has not taken place yet as the
legal framework has not been agreed. Agricultural statistics and the agricultural information
system still need to be improved. The land registration systems need to be harmonised
country-wide, and land management needs to be strengthened.
On food safety, following recommendations from the EU Food and Veterinary Office the
Bosnia and Herzegovina authorities drew up an action plan for controls on the production and
processing of dairy products for export to the EU. This was accepted in June 2015. In July
2015 the country proposed to the European Commission a list of establishments that could be
allowed to export to the EU, and four dairy establishments were authorised to export heat
treated products to the EU in September 2015.
However, the chain of command and the official food and feed control system can be further
improved in order to become more efficient and the country is still not allowed to export most
goods of animal origin to the EU market. It has yet to amend veterinary, food safety,
agriculture and rural development legislation to create an EU-compliant official food and feed
control system. Institutional and administrative capacity — including inspections, particularly
at designated border inspection posts — need to be further strengthened so that the relevant
bodies can perform the tasks such a system demands. These include carrying out controls on
genetically modified food and feed, in particular implementing the import control system and
internal market controls in accordance with EU legislation. The Hygiene Package has yet to
be fully implemented in a harmonised manner country-wide.
Administrative capacities in the food safety sector were improved through additional training.
Bosnia and Herzegovina continued to play its full part in the European Commission’s rapid
alert system for food and feed. In total, 8 notifications were received through the system.
50
These were appropriately followed up with inspections and the results reported back to the
Commission. None of the cases posed a risk to consumer health and safety. Nonetheless,
further training is needed, in particular for inspection services and food businesses. A central
database for the official control system is not yet fully operational. A State-level strategy for
laboratory testing of samples as required by the official controls on the food and feed chains
has yet to be drawn up.
In July the authorities of Bosnia and Herzegovina introduced a practice of stopping trucks
transporting bottled drinks from an EU Member State at the border in order to gather samples
for laboratory testing. This caused unjustified delays and damage to EU exporters. After
complaints from the EU, the practice ended in mid-August
On veterinary issues, Bosnia and Herzegovina adopted further implementing legislation on
controlling, preventing and eradicating communicable animal diseases. It continued
implementing animal control measures, among other things for brucellosis and tuberculosis in
cattle. Vaccination against brucellosis and rabies continues, as do related monitoring and
coordination activities. The new animal disease notification and outbreak information
management system which became operational in 2014 needs to be further strengthened in
order to become fully functional. The strengthening of laboratories’ capacities continues. The
country is also continuing to implement a residue monitoring plan. The legal framework on
animal health still needs to be strengthened further. A country-wide strategic framework for
managing animal by-products needs to be established in line with the acquis. The animal
identification and movement control systems have yet to be upgraded.
Further implementing legislation was also adopted in the phytosanitary sector. In July,
Bosnia and Herzegovina was recognised to be free from potato ring rot and allowed to start
exporting potatoes to the EU. Institutional capacities need to be further strengthened and the
network of Plant Health Protection Administration regional offices has yet to become fully
operational. The work of official diagnostic laboratories and controls at border inspection
points are generally harmonised with the acquis. Surveillance and quarantine of harmful
organisms continues to be undertaken country-wide. Registration of relevant producers,
importers, exporters and distributors in a single phyto registry is carried out on an ongoing
basis.
Implementing legislation on genetically modified organisms needs to be further harmonised
to provide for uniform operating procedures across the country.
On fisheries, the sectoral analysis on aquaculture in Bosnia and Herzegovina contributed to
improving the country’s policies. Legislation in this sector needs to be harmonised across the
country, and greater efforts are needed to facilitate exports of fish and fishery products to the
EU.
4.2.3. Environment and climate change
Preparations in these areas are at an early stage but there was some progress. In the coming
year, Bosnia and Herzegovina should in particular:
→ put forward and start implementing the country's contribution to the expected 2015 UN
Climate Agreement;
→ establish a harmonised legal framework for environmental protection and climate action,
strengthen strategic planning and implementation of the acquis in these fields;
→ strengthen administrative capacity and monitoring systems and improve inter-institutional
coordination among all authorities.
51
Concerning horizontal legislation, several strategic documents fostering approximation with
the EU environmental acquis have yet to be adopted. They include the environmental
approximation strategy and its implementing documents, specific implementation plans for
selected environmental directives, and environment policy documents. Implementation plans
on environmental impact assessment, the protocol on strategic environmental assessment and
the Basel Convention on hazardous waste have yet to be adopted, as does an environmental
monitoring data management and reporting strategy. Public participation has yet to be
improved in both Entities. New Federation of Bosnia and Herzegovina legislation on
environmental protection has yet to be adopted. The same goes for the Brčko District’s
strategy in this area.
Implementation of the acquis on air quality is at an early stage. Air quality planning and
monitoring systems need upgrading. A country-wide air monitoring network has not yet been
established. Bosnia and Herzegovina missed the Energy Community deadline for
implementing the 1999 Directive on sulphur content in fuels. The State and Entities’
legislation is not in line with relevant acquis.
A country-wide waste management strategy and strategic planning of related investments
have yet to be prepared. The municipal waste management plans have been drawn up but
have yet to be implemented. The Federation of Bosnia and Herzegovina is implementing the
waste management strategy and waste management plan. An implementing legislation for
waste from electrical and electronic equipment has been adopted. In Republika Srpska a new
waste management strategy is in preparation and implementing legislation on waste storage,
treatment and disposal has been adopted. Economic instruments to promote recycling and
prevention of waste generation remain limited. The capacity to manage industrial and
hazardous waste needs to be strengthened.
Regarding water quality, the country still lacks a consistent and harmonised State-level policy
on water management that would include implementing legislation, monitoring and river-
basin management plans. In Republika Srpska the strategy for integrated water management
for 2015-2024 is awaiting adoption. The water management strategy in the Federation of
Bosnia and Herzegovina for 2010-2022 is in the process of being implemented. In the Brčko
District the water law transposing the Water Framework Directive is awaiting adoption. Acts
are being drafted to enact the EU water directives but the country’s capacities to implement
the water acquis remain insufficient. The drafting of the river-basin management plan for the
Neretva-Trebisnjica rivers has been completed but has yet to be adopted. Preparation of a plan
for the River Sava is under way. Investment in infrastructure has brought some improvements
in access to drinking water and also in wastewater discharges. An action plan for flood
protection and river management in Bosnia and Herzegovina for 2014-2017 has been adopted.
A project to draw up flood risk and hazard maps is in preparation.
On nature protection, initial steps have been taken to develop the Natura 2000 network in
Bosnia and Herzegovina. A list of potential Natura 2000 sites has yet to be adopted, as has
legislation to align with the acquis on protection of wild birds and habitats. Investments in
hydropower projects need to ensure that EIA, water legislation and nature protection
obligations are respected, especially in national protected areas and areas of high natural value
that could potentially become Natura 2000 sites.
The law on chemicals in the Federation has yet to be adopted. A national plan for
implementing the Stockholm Convention on Persistent Organic Pollutants has been drafted
but has yet to be adopted.
Regarding industrial pollution control and risk management, Bosnia and Herzegovina is
working on developing a national emissions reduction plan.
52
Significant further efforts are needed on noise.
On civil protection, disaster risk reduction and management need to be addressed as a matter
of priority, particularly in the light of the severe 2014 floods. Bosnia and Herzegovina
expressed its interest in becoming a member of the EU Civil Protection Mechanism in 2014
and concluded a protocol on cooperation and establishment of a point of contact with the
mechanism. The point of contact, a prerequisite for joining the mechanism, should ensure
country-wide outreach and coordination. Further coordination and cooperation efforts and
further preparations for joining the mechanism are needed.
The country is at a very early stage in aligning with the EU acquis on climate change. Some
limited measures and activities were taken on adaptation to climate change. Implementation
of the strategy for adapting to climate change and low emissions development needs to be
ensured. Further development of the country's climate policy and strategy is required and
needs to be consistent with the EU 2030 framework. Significant efforts are also needed to
integrate climate action into relevant sectoral policies and strategies. Bosnia and Herzegovina
submitted in March the First Biennial Update Report on greenhouse gases to the United
Nations Framework Convention on Climate Change (UNFCCC). Three Nationally
Appropriate Mitigation Actions projects were finalised. Bosnia and Herzegovina’s capacities
for monitoring, reporting and verification in this area remain weak and should be considerably
strengthened. As a priority, significant efforts are needed to align with the EU Monitoring
Mechanism Regulation and ensure that the country's capacity to implement the expected 2015
Paris Climate Agreement is enhanced. The administrative capacity in the environment and
climate sectors remains weak. No progress has been made on country-wide strategic planning
or on a mechanism for comprehensively aligning with EU legislation. Capacity building is
required to address the significant needs for greater capacity, cooperation and coordination.
Further efforts are needed to raise awareness on environmental protection and need for
climate action at all levels of the country.
4.2.4. Transport policy
Preparations in the transport area are at an early stage. Some progress was made in the past
year. In the coming year, Bosnia and Herzegovina should in particular:
→ adopt country-wide transport strategies for all sub-sectors;
→ strengthen the regulatory framework, coordination and administrative capacities, to help
ensure that the country will be able to benefit fully from the connectivity agenda.
The State-level framework transport policy for 2015-2030 was adopted in July. The key
strategic documents for the transport sector and its sub-sectors, at all administrative levels in
Bosnia and Herzegovina, remain to be drafted and adopted. Legislation on rail, road,
maritime, inland waterway transport and intermodal transport has not yet been fully aligned
with the acquis. The general transport infrastructure in Bosnia and Herzegovina requires
significant upgrades.
On trans-European transport networks, Bosnia and Herzegovina continued to participate in
the South-East Europe Transport Observatory (SEETO) and to implement the memorandum
of understanding on developing the South-East Europe Core Regional Transport Network.
The country played an active role in the Western Balkans 6 connectivity agenda by endorsing
the agreement on the regional core transport network in Brussels in April, and the agreement,
in Riga in June on the core network corridors and on the list of projects to be implemented by
2020. There has been progress in both the road and rail networks, however, at the same time,
financing of remaining activities remains a challenge.
53
Road transport safety is a major concern. A road safety strategy and related action plan have
yet to be adopted.
Regarding rail transport operations, renovation of railway tracks continued. The two
Entities’ vertically integrated railway companies are both in critical financial situations. Both
have yet to fully separate operational functions from infrastructure management as the acquis
requires.
Concerning inland waterways, no activities are currently under way to restore the River Sava
in Bosnia and Herzegovina, Croatia or Serbia. This is due to the cancellation of the loan
agreement with the World Bank and the subsequent cancellation of EU assistance.
On intermodal transport, the railway bottleneck at the Ivan Tunnel and Bradina ramp is
preventing the transit of Ro-La trains (trucks on train) and 40 feet containers from the port of
Ploče. Together with a dysfunctional navigation route on the River Sava, it is also preventing
an increase in combined transport volumes.
Regarding air transport, the Bosnia and Herzegovina Air Navigation Services Agency has
— in full coordination with EUROCONTROL — taken over control of the lower level of the
country’s airspace from Serbian and Croatian air traffic control service providers. Bosnia and
Herzegovina participates as an observer in the Joint Service Provision Area Initiative.
On maritime transport, Bosnia and Herzegovina is not a party to the main International
Maritime Organisation conventions.
4.2.5. Energy
Bosnia and Herzegovina is at an early stage of preparations in the area of energy. Some
progress was made in the past year. The country continues to fall behind in fulfilling its
international commitments stemming from the Energy Community. In the coming year,
Bosnia and Herzegovina should in particular:
→ adopt a country-wide energy strategy;
→ strengthen coordination and cooperation at all relevant levels of governance to improve
strategic planning, facilitate a comprehensive investment policy and allow for efficient
implementation;
→ urgently adopt the law on gas in order to comply with Energy Community Treaty
obligations.
Bosnia and Herzegovina continues to operate without a single country-wide energy strategy.
The lack of country-wide strategic planning prevents it from adequately addressing issues of
security of supply in particular of oil and gas. The two Entities, through their respective
legislative frameworks, introduced measures to establish oil stocks. However, a
comprehensive and coordinated system at State level is not in place. There is no information
on the level of the country’s oil stocks..
On the internal energy market, Bosnia and Herzegovina formally liberalised its electricity
market. In May, the State Electricity Regulatory Commission adopted new rules to improve
the market principles in this area. The legislative and regulatory framework needs to comply
fully with the acquis at all levels as it does not allow country-wide wholesale and retail
markets to develop. The independence of the regulatory commissions, particularly in the
Republika Srpska, needs to be strengthened and fully provided for. Bosnia and Herzegovina,
did not meet its obligation under the Energy Community (EnC) to align its legislative
framework on electricity with the acquis, and specifically with the Third EU Energy package.
54
The country remains in serious and persistent breach of its commitments under the EnC
Treaty in the gas sector. The law on gas must be adopted as a matter of urgency in this area.
Changes to Republika Srpska’s gas law are needed to bring it into line with the acquis,
whereas the gas law of the Federation of Bosnia and Herzegovina has yet to be adopted.
The legislative framework on renewable energy still does not comply with the EnC
requirements. In May, the EnC submitted a reasoned request over the country’s failure to
submit the national renewable energy action plan. Submitting the plan must be treated as a
priority, together with ensuring that Bosnia and Herzegovina’s renewable energy targets are
met by developing a State-level framework to supplement the framework at Entities level. On
biofuels, the Entities’ respective authorities took no action to address sustainability criteria or
set up appropriate certification. Any further development of hydropower should take place in
conformity with EU environmental legislation
Secondary legislation on energy efficiency was adopted at various governance levels,
particularly in Republika Srpska. However, there was no progress in developing the
legislative and institutional frameworks required at the State level. Bosnia and Herzegovina
missed its EnC deadline to align with the 2006 Directive on Energy End-Use Efficiency and
Energy Services. Due to limited coordination between authorities at State and Entities levels,
the country did not develop and adopt a national energy efficiency plan or a consistent
roadmap for enacting the acquis under the EnC Treaty.
On nuclear safety and radiation protection, the State Regulatory Agency for Radiation and
Nuclear Safety Law adopted a number of regulations to strengthen and improve its regulatory
function, including a rule book on monitoring radiation in the environment. The agency
continues to receive bilateral and international assistance to strengthen its technical capacities.
In May, the BiH Parliament adopted an Action Plan on emergency cases aimed to protect the
population from ionizing radiation in case nuclear accidents or incidents.
4.2.6. Information society and media
Preparations in the field of information society and media are at an early stage. There has
been backsliding over the last year. In the coming year, Bosnia and Herzegovina should in
particular:
→ adopt a plan to ensure the financial stability and political independence of public service
broadcasting;
→ implement, as a matter of urgency, the digital switchover.
In the field of electronic communications and information and communications
technologies, the electronic communications law is still largely based on the 1998 EU
regulatory framework. A general authorisation system, replacing individual licences for the
provision of electronic communications has yet to be introduced. The institutional framework
does not ensure political independence or adequate financial and operational independence of
the regulator which undermines certainty for the sector and raises concerns over its efficiency.
No further steps have been taken to introduce the European emergency number 112.
The Communication and Regulatory Agency (CRA) continued to further implement
competitive safeguards as well as to implement the last phase of rebalancing of the fixed
telephony retail tariffs. However, effective implementation of the market regulation - and
thereby new entrants' access to the market - remains a concern. While the three incumbent
operators are subject to regulatory obligations, they continue to operate as de facto
monopolies in fixed voice telephony in their geographical areas, whereas competition is
55
emerging in the fixed broadband market. The overall fixed broadband penetration rate
increased modestly to 11.9 %.
The agreement of September 2014 signed by the former Yugoslav Republic of Macedonia,
Bosnia and Herzegovina, Montenegro and Serbia on reducing the prices of mobile roaming
services came into force in July.
On information society services, the e-commerce and e-signature laws at State level remain
unimplemented due to the absence of a supervisory body for accreditation. Administrative
capacity in the Ministry of Transport and Communications remains insufficient.
On audiovisual policy, the country missed the 17 June 2015 international deadline for the
digital switchover. Only the first phase of the digitalisation process has been completed, and
only in the territory of the Federation of Bosnia and Herzegovina as Republika Srpska did not
allow the equipment to be installed.
The process is jeopardised by the non-existence of the corporation which was supposed to
coordinate technical aspects of digitalisation under the relevant law. The financial stability
and sustainability of the entire public broadcasting system is still seriously affected, as the
collection rate of the RTV tax (license fee) is continuously dropping. The current model for
tax collection expired on 26 April and the authorities have not agreed yet on a new model.
4.2.7. Financial control
Bosnia and Herzegovina is at an early stage of its preparations in the area of financial control.
Some progress was recorded with the establishment of internal audit units and the adoption
of the public internal financial control (PIFC) strategy by the Federation and by Brčko
District. However, the absence of a coordinated approach hampers introduction of credible
reforms. Further efforts should be especially devoted to completing the strategy and legal
framework at Entities level. In the coming year Bosnia and Herzegovina should in particular:
→ complete the legal framework on financial management and control at Entities level;
→ update, adopt and start implementation of PIFC strategies at State level and in the
Republika Srpska;
→ reconvene the regular meetings of the Central Harmonisation Unit Coordination Board and
ensure systematic co-ordination among the SAIs.
Public internal financial control
The individual PIFC strategies and action plans of the institutions of Bosnia and
Herzegovina and Republika Srpska need to be renewed. The Federation and Brčko District
adopted strategy papers on PIFC respectively in September and in December. A formal
mechanism to monitor and report on implementation of action plans is still lacking.
The central harmonisation units (CHU) have been established at State and Entities levels
but not yet in the Brčko District. CHU staffing is well below the authorised staffing levels, in
particular at the Entities level where there are six staff altogether. The CHUs act
independently of each other and have not convened the CHU Coordination Board since 2011
even though it is a legal requirement. They prepare and submit annual consolidated reports to
their respective governments. The annual report of the Republika Srpska CHU makes
reference to developments in the financial management and control framework but the
equivalent documents for the State level and the Federation deal only with internal audit. The
CHUs are active in organising training. They are mainly subsidised by external assistance.
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The concept of financial management and control is still at a very early stage of
development. Legislation on this needs to be adopted at the Entities level. Delegation and
accountability arrangements, the distribution of management information, and the risk
management and financial management of public enterprises are insufficiently regulated. A
centralised budget inspection function has not yet been established at any governance level.
The legal framework for internal audit is in place at all levels except in the Brčko District
and is largely consistent with international standards. The criteria for establishing internal
audit units have been fixed at all levels, but they are not consistent with each other. Internal
audit capacity remains low. An internal audit charter is in place or being prepared by an
increasing number of institutions.
External audit
Regarding the constitutional and legal framework, the functional, operational and financial
independence of each of the four supreme audit institutions (SAIs) — for Bosnia and
Herzegovina institutions, the Federation, Republika Srpska and the Brčko District — is
provided for by respective laws on external audit at the State and Entities level and in the
Brčko District. These are in line with the standards of the International Organisation of
Supreme Audit Institutions (INTOSAI). However, none of the SAIs are anchored in the
Constitutions or in the Brčko District’s Statute. The State-level SAI is a full member of
INTOSAI and EUROSAI. The independence of the heads of the SAIs and the deputies is
sufficiently legally protected and their mandates provide for a full range of financial,
regularity and performance audits of all public financial operations.
Concerning institutional capacity, the SAIs of the Bosnia and Herzegovina institutions and
Republika Srpska have sufficient staff while the SAIs of the Brčko District and especially of
the Federation lack capacity to cover the wide scope of external audit. The SAIs of the State
and the Entities have adopted strategic development plans for 2014-2020.
To improve the quality of audit work, the Coordination Board of Supreme Audit Institutions
in Bosnia and Herzegovina published amendments to the decision on transposition and
application of the framework of International Standards of Supreme Audit Institutions in the
country. However, cooperation among the SAIs in the Coordination Board is not systematic
and needs to be improved. The four SAIs have adopted procedures that cover financial audit,
performance audit and quality control, and they ensure that audit work undertaken conforms
to these standards and procedures. The head of each SAI monitors the execution of the annual
audit plan and submits annual activity reports to the respective parliament. Increased use of
information technology and sampling methodologies has improved the efficiency of audit
processes.
In Republika Srpska a department for quality control and compliance with international audit
standards is operational. At the end of 2014 the Audit Office of the Institutions of Bosnia and
Herzegovina established a new sector for development, methodology and quality
management.
Concerning the impact of audit work, the annual reports are submitted to the legislatures
regularly, are published online and receive wide media and public attention. The time allowed
for the parliamentary committees to assess and discuss the reports is shorter than optimal but
they are usually discussed in the presence of the SAIs. The implementation of audit
recommendations is formally monitored by the SAIs at the time of the next audit. The SAI of
Republika Srpska has set up an online database of recommendations available to the general
public. The SAIs and CHUs should strengthen their cooperation to improve the internal
control environment.
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Protection of the EU’s financial interests
Legislation is not aligned with the acquis, and no national anti-fraud coordination service
(AFCOS) has been set up. Fraud prevention and repression are addressed under the national
anti-corruption strategy. Initial steps have been taken to ensure cooperation with the
European Commission investigators during their on-the-spot missions.
Protection of euro against counterfeiting
The country is addressing counterfeiting-related issues under its strategy for fighting
organised crime. Legislation is not aligned with the acquis as it does not define counterfeiting
or identify the competent authorities and procedures to deal with counterfeit money. Medals
and tokens similar to euro coins are not yet regulated. The country is a party to the 1929
International Convention for the Suppression of Counterfeiting Currency since 2009.
Technical analysis of counterfeit money, including euro banknotes and coins, is performed
by the Central Bank of Bosnia and Herzegovina, which has a dedicated department with three
staff. Some of the cantonal ministries of interior also have experts and equipment for
undertaking technical analysis of counterfeit banknotes only. No cooperation agreements
have been concluded yet with the Commission and the European Central Bank.
4.2.8. Statistics
Preparations in the area of statistics are at an early stage for many sectors, whereas for a
limited number of sectors some level of preparation is visible. Some progress was achieved
in the past year, notably in harmonising the statistical methodology with EU standards.
Significant efforts are needed across the board, especially to provide for the alignment of
statistics with the EU acquis. In addressing the shortcomings outlined below, in the coming
year Bosnia and Herzegovina should in particular:
→ further align statistics with the European System of Accounts (ESA) 2010, in particular
regarding national accounts;
→ further improve cooperation, coordination and decision-making processes to develop the
national statistical system in key statistical areas;
→ urgently complete the processing of the census data and publish its results, in line with the
International Monitoring Operation recommendations.
As regards statistical infrastructure, the law on Statistics of Bosnia and Herzegovina
remains to be fully aligned with the principles of the European statistics Code of Practice. The
position as Director of the Agency for Statistics of Bosnia and Herzegovina (BHAS) is still
vacant. However, a recruitment procedure has been initiated. Cooperation in the national
statistical system between BHAS and other producers and providers of statistics needs to be
enhanced as well as cooperation between BHAS and the entity offices, particularly in view of
applying European methodology in a harmonized way. Exchange of data between the Indirect
Taxation Authority and the Agency for Statistics of Bosnia and Herzegovina (BHAS) requires
further improvement BHAS is partially using Eurostat’s electronic Dataflow Administration
and Management Information System to send data to Eurostat.
Significant efforts are necessary to align macro-economic statistics with the European
System of Accounts (ESA) 2010. The same goes for annual and quarterly National Accounts.
Preparation of sector accounts has still not been completed, so annual and quarterly sector
accounts are not available. Supply and use tables are not compiled regularly, nor are input-
output tables produced. Fiscal notifications in line with ESA 2010 and financial accounts are
not produced. Government finance statistics (GFS) are mainly produced in line with the
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relevant IMF manual from 2001; introduction of the 2014 manual is under way. Government
finance statistics are also not produced in accordance with ESA methodology and the Central
Bank has introduced bridge tables to convert them to ESA. Accrual accounting is applied for
expenditures only. Bosnia and Herzegovina needs to compile a harmonised index of consumer
prices (HICP).
Structural business statistics and short-term statistics are produced but with limited scope.
Four annexes of the Regulation on structural business statistics are being implemented and
data for several of the remaining annexes is under development. Some short-term business
statistics was produced but further improvement remains necessary for industry, construction
and services statistics. On tourism statistics, Bosnia and Herzegovina produces
accommodation statistics but this statistical area needs to be improved further. Production of
transport statistics is at an early stage. R&D statistics, innovation statistics and statistics on
information and communication technology (ICT) should be produced on a regular basis.
As regards social statistics, a severe limitation is the lack of up to date population figures.
Publication of the census results are delayed as the statistical offices did not fully agree on the
methodology. The State level Minister of Civil Affairs was appointed by the Council of
Minister as the Census co-ordinator in August.The provision of data under the European
system of integrated social protection statistics is in the development phase. The labour force
survey (LFS) is conducted annually. The Structure of Earnings survey and statistics on job
vacancies are not implemented. Labour cost statistics are being compiled and provided to
Eurostat. Bosnia and Herzegovina started producing National Health Accounts and submitted
data to Eurostat in May 2015. Production of statistics on external migration and asylum is in
development and a memorandum of understanding (MoU) needs to be signed between BHAS
and the Ministry of Security of Bosnia and Herzegovina. Basic statistics on education are
produced on a regular basis. However, significant efforts are needed to develop education
statistics further, especially for financial indicators. For crime statistics, BHAS submits data
to Eurostat but further improvements are required.
In the area of agricultural statistics, relevant legislation on an agricultural census has yet to
be adopted. The data from the census is the basic precondition for developing the country’s
agricultural statistics. Since no agricultural census has been undertaken for more than 50
years, Bosnia and Herzegovina produces only a very limited number of statistical indicators
on agriculture and provides some experimental estimates.
As regards energy statistics, structural statistics are available for all energy sources produced
except renewable energy. Some short-term statistics are available, including for electricity,
gas and coal. Energy balances are produced for all energy sources except renewable energy.
In the area of environment statistics, waste and water statistics are compiled on an annual
basis. Air emission accounts and statistics on environmental taxes by economic activity are
not produced, and neither are statistics on environmental protection expenditures. Material
flow balances are not produced.
4.3. Justice, freedom and security
Bosnia and Herzegovina has some level of preparation for implementing the acquis in this
area. Some progress was made. The migration and asylum systems are being strengthened
and are adequate for current inflows. Infrastructure, surveillance and equipment at border
crossing points have improved. Implementation of the Law on Prevention of Money
Laundering and Terrorism Financing started and amendments to the criminal code regulating
money laundering were adopted, even though some further legislative changes are still
necessary to meet international standards. The capabilities of individual law enforcement
59
agencies to identify and disrupt drug trafficking operations have improved. In the coming
year, Bosnia and Herzegovina should in particular:
→ step up efforts to prevent radicalisation and to address the phenomenon of foreign terrorist
fighters;
→ address remaining deficiencies in the legal framework concerning anti-money laundering,
as well as adopt and implement a new strategy and action plan to combat money laundering;
→ ensure policies to reduce drug demand are implemented effectively and drugs seized are
destroyed. Strengthen institutions’ capacity to coordinate and implement the policies.
4.3.1. Visa, border management, asylum and migration
Regarding visa policy, in 2014, 58 visas were issued at the border, a reduction of 37.6 % (93
issued in 2013). In the first half of 2015, 32 visas were issued at the border, an increase of
33% compared to the same period of 2014. Implementation of the visa-free regime with the
EU continued smoothly overall. Although most travellers to the Schengen area are bona fide,
a number of Bosnia and Herzegovina nationals have persistently abused the visa-free regime
by lodging manifestly unfounded asylum applications. As in previous reporting periods,
seasonal peaks of asylum-seekers were registered by some EU Member States and Schengen
associated countries. The number of asylum applicants from Bosnia and Herzegovina grew by
54 % between 2013 and 2014. The extremely low recognition rate confirms the unfounded
nature of these claims. Short and long-term measures to counter this phenomenon are needed:
authorities in Bosnia and Herzegovina must take immediate action under the post-visa
liberalisation monitoring mechanism to address asylum abuses. They should do so by
continuing public information campaigns, intensifying investigations into facilitators and
implementing policies to improve the social and economic inclusion of the most vulnerable
population groups that are most likely to migrate, including Roma. Efforts in these areas need
to continue systematically and be properly resourced. In September 2014, Germany included
Bosnia and Herzegovina in its list of safe countries of origin.
Legislation related to integrated border management, including the law on border control, is
aligned with the relevant EU acquis. A new strategy and action plan on integrated border
management has not yet been adopted. The upgraded integrated system for controlling State
border crossings should be more effective in detecting invalid documents. A mechanism for
issuing local border traffic permits is in place and operational. The Joint Centre for Police
Cooperation between Bosnia and Herzegovina, Montenegro and Serbia, located in Trebinje,
continued to function with liaison officers from Bosnia and Herzegovina and Montenegro. It
aims to strengthen regional capacities to counter cross-border crimes and illegal migration.
Following the signing of a memorandum of understanding with Serbia in March, action has
started to close the unauthorised border crossing points on the border with Serbia. The higher
number of joint border patrols with neighbouring countries led to more people being charged
with smuggling. Joint risk analysis is undertaken with Frontex, mainly in the Western Balkans
Risk Analysis Network. Bosnia and Herzegovina authorities regularly provide agreed
statistical and qualitative information.
The migration and asylum strategy and action plan for 2012-2015 are being implemented. A
coordination body for monitoring implementation of the strategy is functioning well. The
asylum sector in the Ministry of Security is almost fully staffed. The permanent asylum centre
in Trnovo functions adequately. Detention procedures have to be brought into line with the
acquis. A new asylum law that aims to align more closely with the acquis has yet to be
adopted. The number of asylum applications fell in 2014: 45 applications involving 45 people
were submitted, compared with 73 involving 100 people in 2013. Afghans comprised the
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biggest group of asylum-seekers in 2014. In 2014, the Ministry of Security rejected 7 asylum
applications. In the first half of 2015, 19 new asylum applications involving 20 people were
submitted.
Regarding migration, a centre for temporary detention of irregular immigrants is in
operation, employing 53 staff and with capacity for 120 immigrants. In 2014, 218 foreign
nationals were accommodated in the centre, down from 236 in 2013. In the first half of 2015,
a total of 93 people were accommodated in the centre, a decrease in comparison to the same
period of 2014 when there were 121 people. A total of 238 foreign nationals were returned to
their country of origin in 2014. For the same purpose, in the first half of 2015 a total of 101
foreign citizens were returned to their countries of origin, a decrease of 27% compared with
the same period of 2014. In 2014, 169 irregular migrants were registered for the assisted
voluntary return programme for special purposes, compared to 83 in the first half of 2015.
The number of irregular migrants intercepted at the border fell to 189 in 2014 from 228 in
2013. In the first half of 2015, 75 people were intercepted, a reduction of around 13 from the
same period in 2014.
The seventh country migration profile was adopted in May. A new law on migration, which
would further align with the EU acquis, among other things on the maximum period of
detention at the immigration centre, has yet to be adopted. In September 2014 Bosnia and
Herzegovina extended a decision granting Syrian nationals one year of temporary residence
on humanitarian grounds.
Readmission agreements between Bosnia and Herzegovina, the EU and other countries
continued to be implemented satisfactorily. Most of the 140 readmission cases in 2014 were
carried out under the agreement with Croatia (194 in 2013). Bosnia and Herzegovina accepted
readmission of 573 of its citizens in 2014 (against 397 in 2013). In the first half of 2015, 498
citizens were readmitted, an increase of 90% compared to the same period of 2014 when there
were 262 citizens readmitted. Implementing the strategy for reintegrating returnees remains a
challenge. Obstacles to lasting return and local integration include difficulties with economic
reintegration, access to healthcare, social protection, pensions and the employment of
minority returnees (see 2.2 — Human rights and the protection of minorities).
4.3.2. Money laundering
Moneyval issued a revised Public Statement in April stressing outstanding deficiencies in the
legal framework and calling for action. Implementing legislation for the Law on Prevention of
Money Laundering and Terrorism Financing was adopted in May. Amendments to the
Criminal Code of Bosnia and Herzegovina changing the definition of the crime of money
laundering and financing of terrorism activities were adopted in March and May, respectively.
The supervisory bodies established by the law have yet to fully exercise their functions. In
June 2015, Bosnia and Herzegovina made a high-level political commitment to work with the
FATF and MONEYVAL to address remaining strategic deficiencies in the area of
criminalisation of money laundering and terrorist financing, freezing terrorist assets under
UNSCR 1373, effective supervision, non-profit sector, cross-border currency controls and
confiscation of assets.
The Council of Ministers adopted the Action Plan for removal of deficiencies in the anti-
money laundering system, as required by FATF. The number of confirmed indictments and
verdicts remains low.
The memoranda of understanding with 12 foreign financial intelligence units allowed for
continued electronic exchanges of information with all other members of the Egmont Group.
Training sessions were organised for people subject to reporting obligations under the new
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law. The Financial Intelligence Directorate is adequately staffed but its technical capabilities
to conduct complex analyses are limited. There was a reduction in the number of reports of
money laundering filed at prosecutors’ offices across Bosnia and Herzegovina. One report of
financing of terrorism activities was filed. In total, 78 people were reported in 2014, compared
with 108 in 2013.
4.3.3. Drugs
Bosnia and Herzegovina continues to be used for transit and storage of drugs. Production of
drugs remains small and mostly limited to marijuana cultivation. Domestic demand for drugs
increased slightly, especially for synthetic drugs.
There is currently no national strategy and action plan for the suppression of drugs. The
Republika Srpska Government adopted its Strategy for Supervision and Suppression of
Narcotic Drugs. The BiH Commission for Suppression of Abuse of Narcotic Drugs is not
functioning due to a lack of political will. Legislation to prevent and suppress the abuse of
narcotic drugs, which would establish a focal point for drug issues at national level, is
awaiting adoption.
The number of reported crimes related to drug abuse decreased. Criminal reports on
trafficking and possession of drugs in 2014 fell to 1344 from 1480 in 2013. The number of
confirmed indictments declined to 985 in 2014 from 1039 in 2013 and convictions fell to 968
from 1050. In May, the Commission for Drugs Destruction destroyed 550 kg of various
drugs. However, a large quantity of drugs seized by order of various courts across the country
is still awaiting destruction. Operational activities continue to be coordinated case-by-case.
Cooperation with the European Monitoring Centre for Drugs and Drugs Addiction continued.
BiH became a member of the Co-operation Group to Combat Drug Abuse and Illicit
Trafficking in Drugs - Pompidou Group of the Council of Europe as of January 2015. In
November 2014 Bosnia and Herzegovina produced a national report on the national drug
situation which describes drugs policy, prevention, drug related treatment, social correlates
and social integration as well as data on drug related crimes and drug market.
4.3.4. Police
Police agencies across the country continued to build up their capacities. The system for
electronic data exchange of police and prosecution registries is operational and some technical
aspects of the system are being updated and improved. However, some legislative provisions
prevent the development of an effective institutional framework at State level. The general
lack of coordination and cooperation between law enforcement agencies hampers the ability
of the police to deliver a full range of services. Legislation which would improve the legal
framework on policing has yet to be adopted. While the legislation provides for independent
and transparent oversight of the police, including public complaints mechanisms, its
implementation in practice is often flawed. More efforts are therefore needed to limit undue
influence, particularly in the appointment of senior police officials, ambiguous rules and a
general lack of cooperation and coordination between police agencies and bodies. A
regulation setting out access rights to data and databases needs to be adopted. Staffing in
various law enforcement bodies and agencies needs to be strengthened.
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4.3.5. Fighting organised crime and terrorism
Track record
There have been 22 first instance convictions for organised crime. Some large scale
operations took place, including in cooperation with EU Member States. In 2015 criminal
assets worth 550 000 euros were subject to confiscation orders in a total of 36 cases.
In 2014, the number of victims of trafficking of human beings identified increased, with 49
victims acknowledged, up from an average of 30 in previous years. In the first six months of
2015, ten victims of trafficking were identified. The trafficking detected was for the purpose
of labour exploitation, sexual exploitation, begging and forced marriages.
In the fight against terrorism Bosnia and Herzegovina has been seriously affected by the
phenomenon of foreign terrorist fighters and radicalisation. Pockets of radicalisation have
been identified across the country, in particular in the Wahhabi community. In April, the
police station in Zvornik was attacked by a lone gunman who killed one police officer killed
and wounded two others. The attacker was killed in the exchange of fire. Two suspects
allegedly linked to the attack were apprehended and subsequently released from custody, with
restrictive measures. The reason for the attack is being investigated by the Bosnia and
Herzegovina State Prosecutor’s Office. Provisions in the State criminal code on sanctions
against ‘foreign fighters’ have started to be used in criminal proceedings. Cases of hate speech
need to be addressed more forcefully.
Institutional and operational capacity
In the area of fight against organised crime, the Federation faces serious delays in applying
the legislation on seizures since the agency responsible for managing seized assets is not yet
operational.
Concerning trafficking in human beings, regional monitoring teams continue to meet
regularly and improve their capacity through training. International cooperation by law
enforcement agencies in Bosnia and Herzegovina, primarily State Investigation and Protection
Agency, through joint investigation teams, joint activities and use of the international legal
assistance mechanism is satisfactory but requires further improvement. Training of law
enforcement agencies, especially border police, on human trafficking issues has continued.
Police academies’ official 2014 curricula now include subjects related to human trafficking
based on the EU acquis and best EU practices. The prosecution of perpetrators and the
identification and proactive protection of victims need to be further improved. Cooperation
between the four regional monitoring teams and the Task Force for combating human
trafficking needs to be strengthened further to ensure investigations are properly coordinated
and assistance provided to victims. Neither the Department for Combating Trafficking in
Human Beings within the national coordinator’s office nor the database on victims are fully
operational.
The capacities of the Counter Terrorism Task Force have yet to be significantly
strengthened. The Task Force’s operational component is still awaiting regulation of its
financing and confirmation of the formal status of its members. The counter-terrorism
capacity of the Bosnia and Herzegovina’s Prosecutor’s Office remains insufficient. The
phenomenon of foreign terrorist fighters needs a dedicated approach by the intelligence and
law enforcement community and a consistent judicial policy towards offenders. Efforts need
to be enhanced to identify, prevent and disrupt the flow of foreign terrorist fighters traveling
to conflict areas such as Iraq and Syria.
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Legal framework
As regards the fight against organised crime, minimum standards for asset seizures have yet
to be consistently incorporated into legislation across the country. The legislation on the
confiscation of criminal assets is partially aligned with the acquis. Alignment is still required
at the State level, in Republika Srpska and the Brčko District.
As regards trafficking in human beings, there is still no legislation in this area at Federation
level. At the same time, national legislation, especially on penalties, has yet to be aligned with
the acquis.
Strategic framework
A strategy on combating organised crime for 2014-2016 is in place. However, its
implementation is fragmented due to the high number of action plans by the various law
enforcement agencies across the country. Activities to implement the country’s 2013-2016
strategy for controlling small arms and light weapons continued. Joint minimum standards on
the possession and carrying of weapons by civilians were adopted in June and acknowledged
by the Council of Ministers in July, to harmonise laws within the country and with EU and
international standards. Fighting organised crime and corruption remains fundamental to
countering criminal infiltration of the political, legal and economic systems.
An agreement on operational and strategic co-operation with Europol is pending.
Bosnia and Herzegovina continues to be a country of origin, transit and destination for
trafficking in human beings. Implementation of the strategy and action plan for 2013-2015
is continuing. A comprehensive, multidisciplinary and victim-oriented approach to trafficking
still needs to be developed and identification of victims needs to be improved. The country
lacks a comprehensive system to identify the overall trends and challenges in addressing
human trafficking.
Bosnia and Herzegovina still lacks a comprehensive overall strategic approach to address
cybercrime and cybersecurity.
In July the Bosnia and Herzegovina Council of Ministers adopted a 2015-2020 strategy to
prevent and combat terrorism. It follows the model of the EU counter-terrorism strategy and
is structured around four major principles: prevention, protection, pursuit and protect.
However, an action plan based on the strategy has yet to be adopted at State level or at other
levels of governance in the country.
(See also under 2.3: ‘fight against organised crime’.)
4.3.6. Judicial cooperation in civil and criminal matters
There was no further development regarding the conclusion of a cooperation agreement with
Eurojust. Relevant jurisdictions need to agree on who should be the partner of Eurojust for the
negotiation and execution of the future cooperation agreement.
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Annex I – Relations between the EU and Bosnia and Herzegovina
Stabilisation and Association Process
Bosnia and Herzegovina participates to the Stabilisation and Association Process and is a
potential candidate for EU membership. Meaningful progress in the implementation of the
Reform Agenda adopted in July 2015 by the country authorities is necessary for the EU to
consider an EU membership application from Bosnia and Herzegovina.
The country’s Constitution was drawn up as part of the internationally agreed 1995
Dayton/Paris Peace Agreement (DPA). It established a complex political structure that
provides for governments at State, Entity and District levels. The State level comprises a
tripartite rotating Presidency, a Council of Ministers (executive branch) and a bicameral
Parliamentary Assembly consisting of a House of Representatives (lower chamber) and a
House of Peoples (upper chamber). The judicial branch established by the DPA consists of a
State-level Constitutional Court. The High Judicial and Prosecutorial Council, as well as a
State Court and Prosecutor’s Office, were established later.
An international presence under UN auspices— the Office of the High Representative (OHR)
— has been in place in Bosnia and Herzegovina since 1995. The Peace Implementation
Council Steering Board has set objectives and conditions to be met for the closure of the
OHR. In particular, a resolution of the issue of state property and other levels of government
and of defence property is still outstanding. This is linked to the implementation of the
Constitutional Court’s decision regulating property distribution.
Stabilisation and Association Agreement
The Stabilisation and Association Agreement between Bosnia and Herzegovina and the EU
entered into force on 1 June 2015, thus replacing the Interim Agreement (IA) which had been
in force since July 2008. Some progress was recorded regarding the level of approximation of
the EU acquis, mainly in the areas of public procurement, intellectual, industrial and
commercial property rights (IPR), internal market, customs and taxation as well as Roma
inclusion. Bosnia and Herzegovina has continued refused to accept the established
methodology for the technical adaptation of the SAA/IA and has therefore not yet adapted the
trade concessions granted under its SAA/IA with the EU to take into account its bilateral
traditional trade with Croatia. Bosnia and Herzegovina needs to reach an agreement on
technical adaptation as a matter of urgency. Prolongation of the Autonomous Trade Measures
beyond 2015 is conditional for Bosnia and Herzegovina accepting the adaptation of the
IA/SAA with the EU to take into account its bilateral traditional trade with Croatia.
The EU provides guidance to the country’s authorities on reform priorities on the country's
EU membership path. Regular political and economic dialogue took place between the EU
and Bosnia and Herzegovina in the framework of the SAA/IA structures. Under the 7th cycle
of sub-committee meetings, with the exception of one sub-committee which had to be
postponed, all the other five meetings as well as the Structural Dialogue on Justice took place
as planned.
The EU-BiH Inter Parliamentary Meeting took place in May in Strasbourg. The European
Parliament adopted a Resolution on the Commission Progress report on Bosnia and
Herzegovina in April.
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A Reform Agenda was adopted by the country authorities in July aimed at tackling the
difficult socio-economic situation, advancing the judicial and public administration reforms,
as well as further advancing the country on its EU membership path. Its implementation has
started. Meaningful progress in the implementation of the Reform Agenda is necessary for the
EU to consider an EU membership application from Bosnia and Herzegovina.
The Structured Dialogue on Justice has been refocused in July following an agreement
reached with state and entities' authorities in order to specifically address the outstanding
institutional issues related to the functioning the judiciary. In September at a ministerial
meeting in the framework of the Structured Dialogue relevant representatives of executive
authorities reiterated their commitment to develop jointly key features of the reform of the
judiciary,
As regards the Common Foreign and Security Policy (CFSP), Bosnia and Herzegovina
aligned itself, when invited, with 18 out of 29 relevant EU declarations and Council decisions
(62% alignment). Bosnia and Herzegovina did not align itself with Council decisions
introducing EU restrictive measures in the context of Russia’s illegal annexation of Crimea
and events in eastern Ukraine. A Framework Agreement on the participation of Bosnia and
Herzegovina in EU crisis management operations was signed in September.
EU has continued to deploy considerable resources in Bosnia and Herzegovina under the
Common Foreign and Security Policy and the Common Security and Defence Policy. The
enhanced presence of the combined Office of the EU Special Representative and the EU
Delegation in Bosnia and Herzegovina has continued to be instrumental in communicating
EU priorities to citizens and in implementing the objectives of the EU agenda in key areas.
The EUFOR Althea military operation deployed with over 600 troops in-theatre and
additional over-the-horizon reserves. EUFOR troops focused on capacity building and
training of the armed forces of Bosnia and Herzegovina in line with the strategic intent
expressed by the BiH defence leadership to develop operational capabilities of dual use in
support of civil authorities for removing physical remnants of war or disaster relief and
deployment in peace support operations overseas. At the same time, EUFOR retained
deterrence capacity to support a safe and secure environment. The UN Security Council has
extended EUFOR’s mandate until November 2015.
Visa liberalisation for citizens of Bosnia and Herzegovina travelling to the Schengen area
has been in force since December 2010. As part of the monitoring mechanism in place since
visa liberalisation, the Commission has been regularly assessing the progress made by the
country in implementing reforms introduced under the visa roadmap, including with regard to
corruption. A Senior Official meeting in the framework of the Post-Visa Liberalisation
Monitoring Mechanism was held in Sarajevo in November 2014. The monitoring activities
also include an alert mechanism to prevent abuses, coordinated by Frontex. The Commission
has regularly submitted its post-visa liberalisation monitoring reports to the European
Parliament and Council. The latest report was issued in April 2015. A readmission
agreement between the European Union and Bosnia and Herzegovina has been in force since
2008.
The EU Delegation to Bosnia and Herzegovina is responsible for implementing financial
assistance as well as ensuring coordination of assistance with the Member States. The
country’s authorities have yet to establish the structure necessary for indirect management of
EU funds. Implementation of the 2008-13 national IPA programmes continued. A new
framework programme under IPA II, covering for 2014-2017 period and providing for some
€160 million as well as over €40 million for further flood recovery measures was adopted in
December 2014 and ratified by Bosnia and Herzegovina in August. In the absence of
66
countrywide strategies in many sectors, the IPA II Country Strategy Paper is restricted to the
period 2014-17, as compared to the full period for IPA II 2014-20 and the following sectors:
democracy and governance; rule of law and fundamental rights; competitiveness and
innovation, local development strategies; education, employment and social policies. The
establishment of a coordination mechanism on EU matters and countrywide sector strategies
remain key requirements for Bosnia and Herzegovina to benefit fully from IPA funding.
Bosnia and Herzegovina participates in the following EU programmes: Horizon 2020,
Creative Europe (which brings together the former Culture and MEDIA programmes),
Fiscalis 2020 and Customs 2020. The country is in the last phase of joining the Europe for
Citizens programme. Bosnia and Herzegovina also expressed interest in becoming a member
of COSME programme and activities are ongoing regarding the conclusion of the
international agreement with the view of joining the programme as of 2015.
67
Annex II – Statistical Annex
STATISTICAL DATA (as of 7.09.2015)
Bosnia and Herzegovina
Basic data Note 2002 2010 2011 2012 2013 2014
Population (thousand) 1) 3 828e 3 843e 3 840e 3 836e 3 832e 3 827e
Total area of the country (km²) 51 209 51 209 51 209 51 209 51 209 51 209
National accounts Note 2002 2010 2011 2012 2013 2014
Gross domestic product (GDP) (million national
currency)
13 982 24 879 25 772 25 734 26 743 27 259
Gross domestic product (GDP) (million euro) 7 149 12 720 13 177 13 158 13 674 13 937
GDP (euro per capita) 1 868 3 310 3 432 3 430 3 569 3 641
GDP (in Purchasing Power Standards (PPS) per
capita)
: 7 000e 7 300e 7 500 7 700 7 800
GDP (in Purchasing Power Standards (PPS) per
capita), relative to the EU average (EU-28 =
100)
2) : 27 28 28 29 28
Real GDP growth rate: change on previous year
of GDP volume (%)
5.0 0.8 1.0 -1.2 2.5 1.1
Gross value added by main sectors
Agriculture, forestry and fisheries (%) : 8.2 8.1 7.7 8.0 7.1
Industry (%) : 21.5 21.5 21.1 21.6 21.3
Construction (%) : 5.2 4.9 4.9 4.5 4.7
Services (%) : 65.1 65.6 66.8 65.9 66.9
Final consumption expenditure, as a share of
GDP (%)
3) : 105.6 105.1 104.9 102.8 :
Gross fixed capital formation, as a share of GDP
(%)
3) : 16.6 17.9 17.5 16.8 :
Changes in inventories, as a share of GDP (%) 3) : -1.0 0.2 0.5 0.2 :
Exports of goods and services, relative to GDP
(%)
3) : 28.0 29.9 29.1 30.0 :
Imports of goods and services, relative to GDP
(%)
3) : 49.1 53.2 52.0 49.8 :
Business Note 2002 2010 2011 2012 2013 2014
Industrial production volume index (2010 = 100) 4) : 100.0 102.4 98.4 103.4 103.6
Number of active enterprises (number) : : : : : :
Birth rate: number of enterprise births in the
reference period (t) divided by the number of
enterprises active in t (%)
: : : : : :
Death rate: number of enterprise deaths in the
reference period (t) divided by the number of
enterprises active in t (%)
: : : : : :
People employed in SMEs as a share of all
persons employed (within the non-financial
business economy) (%)
5) : : : 66.4 66.0 :
Value added by SMEs (in the non-financial
business economy) (EUR million)
5) : : : 3 715 3 513 :
Total value added (in the non-financial business
economy) (EUR million)
5) : : : 6 023 5 847 :
Inflation rate Note 2002 2010 2011 2012 2013 2014
Consumer price index (CPI), change relative to
the previous year (%)
6) 0.4 2.1b 3.7 2.0 -0.2s :
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Balance of payments Note 2002 2010 2011 2012 2013 2014
Balance of payments: current account total
(million euro)
7) -1 253 -783 -1 270 -1 168 -773 -1 057
Balance of payments current account: trade
balance (million euro)
7) -3 524 -3 797 -4 131 -4 091 -3 741 -4 142
Balance of payments current account: net
services (million euro)
7) 232 998 944 921 923 932
Balance of payments current account: net
income (million euro)
7) 540 211 108 122 169 160
Balance of payments current account: net
current transfers (million euro)
7) 1 500 1 805 1 810 1 881 1 876 1 993
of which government transfers (million euro) 7) 347 76 45 55 62 81
**3 year backward moving average of the current
account balance relative to GDP (%)
7) -12.5 -8.9 -7.4 -8.2 -8.1 -7.4
Net inward foreign direct investment (FDI)
(million euro)
7) 282.0 272.2 344.6 260.3 224.7 422.4
Foreign direct investment (FDI) abroad (million
euro)
7) 0.0 58.8 -4.1 1.1 16.3 -3.4
of which FDI of the reporting economy in the EU-
28 countries (million euro)
: : : : : :
Foreign direct investment (FDI) in the reporting
economy (million euro)
7) 282.0 331.0 340.4 261.4 241.0 418.9
of which FDI of the EU-28 countries in the
reporting economy (million euro)
: 147.7 196.5 157.3 146.7 :
**Net international investment position, relative
to GDP (%)
7) : -57.7 -59.5 -61.6 -56.9 :
Year on year rate of change in gross inflow of
remittances (in national currency) from migrant
workers (%)
: : : : : :
Public finance Note 2002 2010 2011 2012 2013 2014
***General government deficit / surplus, relative
to GDP (%)
: -2.5 -1.3 -2.0 -2.2 :
***General government gross debt relative to
GDP (%)
: : : : : :
Total government revenues, as a percentage of
GDP (%)
: 43.7 44.1 44.5 43.4 :
Total government expenditure, as a percentage
of GDP (%)
: 46.1 45.3 46.6 45.6 :
Financial indicators Note 2002 2010 2011 2012 2013 2014
Gross foreign debt of the whole economy,
relative to GDP (%)
: : : : : :
Gross foreign debt of the whole economy,
relative to total exports (%)
: : : : : :
Money supply: M1 (banknotes, coins, overnight
deposits, million euro)
8) 1 538 3 017b 3 163 3 141 3 423 3 738
Money supply: M2 (M1 plus deposits with
maturity up to two years, million euro)
8) 2 593 6 968 7 372 7 624 8 229 8 830
Money supply: M3 (M2 plus marketable
instruments, million euro)
: : : : : :
Total credit by monetary financial institutions to
residents (consolidated) (million euro)
8) 2 189 7 436 7 828 8 151 8 388 8 635
Interest rates: day-to-day money rate, per
annum (%)
: : : : : :
Lending interest rate (one year), per annum (%) 10) 12.64 7.89 7.43 6.87 6.99 6.64
Deposit interest rate (one year), per annum (%) 11) 1.45 0.19 0.12 0.08 0.13 0.10
Euro exchange rates: average of period (1 euro
= … national currency)
1.956 1.956 1.956 1.956 1.956 1.956
Trade-weighted effective exchange rate index
(2005 = 100)
12) : 100.0 100.4 99.6 97.8 98.1
Value of reserve assets (including gold) (million
euro)
13) 1 270 3 302b 3 284 3 328 3 614 4 001
69
External trade in goods Note 2002 2010 2011 2012 2013 2014
Value of imports: all goods, all partners (million
euro)
: 6 962 7 938 7 799 7 756 8 283
Value of exports: all goods, all partners (million
euro)
: 3 628 4 204 4 018 4 285 4 440
Trade balance: all goods, all partners (million
euro)
: -3 334 -3 734 -3 781 -3 472 -3 843
Terms of trade (export price index / import price
index * 100) (number)
14) : 100 99p 97p 98p 100p
Share of exports to EU-28 countries in value of
total exports (%)
: 69.5 70.3 72.7 73.5 72.1
Share of imports from EU-28 countries in value
of total imports (%)
: 61.0 59.7 61.4 60.0 58.9
Demography Note 2002 2010 2011 2012 2013 2014
Crude rate of natural change of population
(natural growth rate): number of births minus
deaths (per thousand inhabitants)
1.4 -0.4 -0.8 -0.9 -1.3 -1.5p
Infant mortality rate deaths of children under one
year of age (per thousand live births)
9.4 6.4 5.8 5.4 5.9 4.8p
Life expectancy at birth: male (years) 71.3e 72.4e 73.7e 73.7e 73.7e 73.7e
Life expectancy at birth: female (years) 76.7e 77.7e 78.8e 78.8e 78.8e 78.8e
Labour market Note 2002 2010 2011 2012 2013 2014
Economic activity rate for persons aged 20–64:
proportion of the population aged 20–64 that is
economically active (%)
: 58.4 58.3 58.7 58.7 59.2
*Employment rate for persons aged 20–64:
proportion of the population aged 20–64 that are
in employment (%)
: 42.8 42.5 42.5 42.8 43.2
Male employment rate for persons aged 20–64
(%)
: 54.6 53.7 54.2 53.3 54.6
Female employment rate for persons aged 20–
64 (%)
: 31.2 31.4 31.1 32.2 31.9
Employment rate for persons aged 55–64:
proportion of the population aged 55–64 that are
in employment (%)
: 26.8 27.0 27.2 27.7 28.5
Employment by main sectors
Agriculture, forestry and fisheries (%) 15) : : : 20.6 18.9 17.1
Industry (%) 15) : : : 21.5 22.2 22.1
Construction (%) 15) : : : 8.9 7.7 7.9
Services (%) 15) : : : 48.9 51.0 52.7
People employed in the public sector as a share
of total employment, persons aged 20–64 (%)
16) : 31.3 32.5 30.0 32.7 31.9
People employed in the private sector as a
share of total employment, persons aged 20–64
(%)
16) : 63.5 62.1 65.3 62.5 63.1
Unemployment rate: proportion of the labour
force that is unemployed (%)
17) 41.1 27.3b 27.6 28.2 27.6 27.6
Male unemployment rate (%) : 25.6 26.1 26.5 26.7 25.3
Female unemployment rate (%) : 29.9 30.0 30.8 29.1 31.2
Youth unemployment rate: proportion of the
labour force aged 15–24 that is unemployed (%)
: 57.5 57.9 63.1 59.1 62.7
Long-term unemployment rate: proportion of the
labour force that has been unemployed for 12
months or more (%)
: 22.3 22.3 23.1 22.9 23.4
Unemployment rate for persons (aged 25–64)
having completed at most lower secondary
education (ISCED 0–2) (%)
: 28.2 29.1 26.8 28.0 31.6
Unemployment rate for persons (aged 25–64)
having completed tertiary education (ISCED 5 &
6) (%)
: 13.2 13.5 15.5 15.7 17.2
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Social cohesion Note 2002 2010 2011 2012 2013 2014
Average nominal monthly wages and salaries
(national currency)
18) 446 798 816 826 827 830
Index of real wages and salaries (index of
nominal wages and salaries divided by the
inflation index) (2000 = 100)
: : : : : :
GINI coefficient — see definitions : : : : : :
Poverty gap : : : : : :
*Early leavers from education and training:
proportion of the population aged 18–24 with at
most lower secondary education who are not in
further education or training (%)
: 31.8 29.9 30.3 25.9 25.2
Standard of living Note 2002 2010 2011 2012 2013 2014
Number of passenger cars relative to population
size (number per thousand population)
: 188.6e 191.4e 195.9e 202.6e 211.3e
Number of mobile phone subscriptions relative
to population size (number per thousand
population)
175.5e 784.3e 825.8e 873.2e 910.4e 920.7
Infrastructure Note 2002 2010 2011 2012 2013 2014
Density of railway network (lines in operation per
thousand km²)
19.7 20.1 20.0 20.1 20.0 :
Length of motorways (kilometres) : 35 35 48 50 :
Innovation and research Note 2002 2010 2011 2012 2013 2014
Public expenditure on education relative to GDP
(%)
: : : : : :
*Gross domestic expenditure on R&D relative to
GDP (%)
: : : 0.27 0.33 :
Percentage of households who have internet
access at home (%)
: : 29.8 : : :
Environment Note 2002 2010 2011 2012 2013 2014
Energy intensity of the economy (kg of oil
equivalent per 1 000 euro GDP at 2005 constant
prices)
: : : : : :
Electricity generated from renewable sources
relative to gross electricity consumption (%)
: : : : : :
Road share of inland freight transport (based on
tonne-km) (%)
: 62.0 64.0 65.9 68.1 70.3
Energy Note 2002 2010 2011 2012 2013 2014
Primary production of all energy products
(thousand TOE)
: : : : : :
Primary production of crude oil (thousand TOE) : : : : : :
Primary production of hard coal and lignite
(thousand TOE)
: 3 476 4 086 3 933b 3 515 :
Primary production of natural gas (thousand
TOE)
: : : : : :
Net imports of all energy products (thousand
TOE)
: : : : : :
Gross inland energy consumption (thousand
TOE)
: : : : : :
Electricity generation (thousand GWh) : 17.1 15.3 14.1 17.5 :
71
Agriculture Note 2002 2010 2011 2012 2013 2014
Agricultural production volume index of goods
and services (at producer prices) (previous year
= 100)
: : : : : :
Utilised agricultural area (thousand hectares) 19) 1 697 1 649 1 675 1 680 1 670 1 652
Livestock numbers: live bovine animals
(thousand heads, end of period)
: 462 455 446 447 444
Livestock numbers: live swine (thousand heads,
end of period)
20) : 581 577 539 530 533
Livestock numbers: live sheep and live goats
(thousand heads, end of period)
: 1 110 1 086 1 070 1 089 1 099
Production and utilisation of milk on the farm
(total whole milk) (thousand tonnes)
: 693 688 674 688 686
Harvested crop production: cereals (including
rice) (thousand tonnes)
1 309 1 104 1 119 906 1 224 1 081
Harvested crop production: sugar beet
(thousand tonnes)
0 0 0 0 0 0
Harvested crop production: vegetables
(thousand tonnes)
21) 247 286 287 265 319 238
: = not available
b = break in series
e = estimated value
p = provisional
s = Eurostat estimate
* = Europe 2020 indicator
** = Macroeconomic Imbalance Procedure (MIP) indicator
*** = The government deficit and debt data of enlargement countries are published on an "as is" basis and without any
assurance as regards their quality and adherence to ESA rules.
Footnotes:
1) Mid-year population.
2) Source: Eurostat.
3) GDP calculated by the expenditure approach is higher than GDP calculated by the production approach.
4) Gross index.
5) Excluding natural persons (entrepreneurs).
6) 2002: retail price index.
7) 2010–14: based on IMF balance of payments manual, sixth edition.
8) 2010–14: based on IMF monetary and financial statistics manual, 2000.
9)
Data for MFIs. 2013: based on the Central Bank of Bosnia and Herzegovina's estimates for GDP (production approach) for
2013.
10) Short-term lending rates in national currency to non-financial corporations (weighted average).
11) Demand deposit rates in national currency of households (weighted average).
12) Real effective exchange rate.
13) 2002: excluding gold.
14) Based on Paasche export and import unit value indices in BAM (2010 = 100).
15) The analysis of employment by sector does not sum to 100% because Section U is not included.
16)
The analysis of employment between public and private sector does not sum to 100% as some types of ownership are
excluded.
17)
2002: not calculated using the ILO methodology; taken from the Bureau for Employment; excluding data from Brčko District.
18) Net salary. 2002: excluding data from Brčko District.
19)
The utilised agricultural area consists of arable land, kitchen garden, permanent crops and permanent grassland as cadastral
data (not as UAA).
20)
2010–11: related to the Government Decision (all levels in Bosnia and Herzegovina) about repurchase of all quantities of pig
meat on the market by large industrial processors.
21) 2002: including dried pulses.