EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 5.11.2008 
SEC(2008) 2693 
  
COMMISSION STAFF WORKING DOCUMENT 
 
BOSNIA AND HERZEGOVI NA 2008 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2008-2009
 
{COM(2008) 674}
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 4 
1.1. Preface................................................................................................................... ....... 4 
1.2. Context ................................................................................................................... ...... 4 
1.3. Relations between the EU and Bosnia and Herzegovina............................................. 5 2. Political criteria .......................................................................................................... .. 7 
2.1. Democracy and the rule of law .................................................................................... 7 2.2. Human rights and the protection of minorities .......................................................... 15 2.3. Regional issues and international obligations............................................................ 21 3. Economic criteria ....................................................................................................... 24 3.1. The existence of a functioning market economy ....................................................... 24 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 30 
4. European standards .................................................................................................... 32 4.1. Internal market ........................................................................................................... 32 
4.1.1. Free movement of goods............................................................................................ 32 4.1.2. Movement of persons, services and right of establishment ....................................... 34 
4.1.3. Free movement of capital........................................................................................... 35 4.1.4. Customs and taxation ................................................................................................. 36 4.1.5. Competition............................................................................................................. ... 38 
4.1.6. Public procurement .................................................................................................... 38  
4.1.7. Intellectual property law ............................................................................................ 39 4.1.8. Employment and social policies................................................................................. 40 4.1.9. Education and research .............................................................................................. 42 4.1.10. WTO issues ............................................................................................................. ... 43 
4.2. Sectoral policies ......................................................................................................... 43 
4.2.1. Industry and SMEs..................................................................................................... 43  
4.2.2. Agriculture and fisheries............................................................................................ 44 4.2.3. Environment............................................................................................................. .. 45 
4.2.4. Transport policy ........................................................................................................ . 47 
4.2.5. Energy .................................................................................................................. ...... 48 
EN 3   EN 4.2.6. Information society and media................................................................................... 50 
4.2.7. Financial control....................................................................................................... .. 51 
4.2.8. Statistics .............................................................................................................. ....... 51 
4.3. Justice, freedom and security ..................................................................................... 52 4.3.1. Visa, border, control, asylum and migration.............................................................. 52 4.3.2. Money laundering ...................................................................................................... 55  
4.3.3. Drugs................................................................................................................... ....... 56 
4.3.4. Police.................................................................................................................. ........ 56 
4.3.5. Fighting organised crime and terrorism ..................................................................... 57 4.3.6. Protection of personal data......................................................................................... 58 
STATISTICAL ANNEX 
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
BOSNIA AND HERZEGOVINA 2008 Progress Report 
1. I NTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported regularly to th e Council and the Parliament 
on progress made by the countries of the Western Balkan region.  
This progress report broadly follows the same st ructure as in previous years. The report: 
– briefly describes relations between Bo snia and Herzegovina and the Union; 
– analyses the situation in Bosnia and Herze govina in terms of the political criteria for 
membership; 
– analyses the situation in Bosnia and Herze govina on the basis of the economic criteria for 
membership; 
– reviews Bosnia and Herzegovina's capacity to implement European standards, i.e. to 
gradually approximate its legi slation and policies with the acquis , in line with a 
Stabilisation and Association Agreement a nd the European Partnership priorities.  
This report covers the period from 1 Oc tober 2007 to early October 2008. Progress is 
measured on the basis of decisions taken, legisl ation adopted and measures implemented. As a 
rule, legislation or measures which are bei ng prepared or awaiting parliamentary approval 
have not been taken into account. This approach  ensures equal treatmen t across all reports and 
permits an objective assessment.  
The report is based on many sources. As us ual, these include contributions from the 
government of Bosnia and Herzegovina and fro m the Member States, European Parliament 
report1 and information from various interna tional and non-governmen tal organisations.  
The Commission draws detailed co nclusions regarding Bosnia and Herzegovina in its separate 
communication on enlargement2, based on the technical analysis  contained in this report. 
1.2. Context 
Bosnia and Herzegovina is a potential candida te for EU membership. The Stabilisation and 
Association Agreement (SAA) between Bosnia and Herzegovina and the EU was signed in 
June 2008. The Interim Agreement, which focuses on trade-related areas, has been in force 
since July 2008. However, constitutional elem ents established by the Dayton/Paris peace 
agreement have been frequently challenged by ke y political leaders in both Entities, and EU-
                                                 
1 The rapporteur for Bosnia and Herzegovina is Ms Doris Pack. 
2 Enlargement Strategy and Main Challenges 2008-2009. 
EN 5   EN related reforms have stagnated in recent months . There has been little consensus on the main 
reform priorities. A shared vision on the direction of the country remains necessary for a smooth operation of institutions, for creating more  functional and efficient state structures, 
and for speaking with one voice on EU and international matters.  
Bosnia and Herzegovina has con tinued to benefit from autonom ous trade measures granted by 
the EU.  
An international presence under UN auspices has been in place in Bosnia and Herzegovina 
since 1995. It will be terminated once the Office of the High Representative (OHR) is phased 
out. However, the closure of the OHR depends  on Bosnia and Herzegovina's progress in 
addressing specific objectives and conditions, which have been determined by the Peace Implementation Council. In addition to substan tial Community support, the EU has continued 
to deploy considerable resources in Bosnia  and Herzegovina in the framework of the 
Common Foreign and Security Policy (CFSP) and the European Security and Defence Policy 
(ESDP). It has expressed its intention to reinfo rce its engagement in Bosnia and Herzegovina 
upon the closure of the OHR. 
1.3. Relations between the EU and Bosnia and Herzegovina 
Bosnia and Herzegovina is  participating in the Stabilisation and Association Process  (SAP).  
Following progress in four key areas
3 which the Commission and the Council set in 2005 as a 
condition for concluding negotiations  on the Stabilisation and Association Agreement 
(SAA) , the agreement was signed in June 2008, toge ther with an Inte rim Agreement which 
focuses on trade and trade-related areas. The In terim Agreement entered into force on 1 July 
2008. Bosnia and Herzegovina has developed an  Action Plan and established joint bodies 
between the State level and Entity institutions for implementation of the SAA and the Interim Agreement. The implementation of customs-related provisions following the entry into force of the Interim Agreement has generally been satisfactory.  
The EU provides guidance to the authorities of Bosnia and Her zegovina on reform priorities 
as part of the European Partnership . Following a proposal from the Commission, the 
Council adopted an updated European Partnershi p for Bosnia and Herzegovina in February 
2008. Progress on these reform priorities is en couraged and monitored by Reform Process 
Monitoring (RPM) meetings and following the si gning of the SAA, also by the bodies set up 
by the Interim Agreement. Eight RPM meetings ha ve been held since th e last progress report 
was published, including two Economic Dialogue meetings. The first meeting of the Interim 
Committee was held in October 2008.  
The regular meeting between Members of the European Parliament and Members of the 
Bosnia and Herzegovina Parliamentary Assemb ly took place in February 2008. A first EU-
Bosnia and Herzegovina troika at political directors' leve l was held in February 2008. A 
political dialogue meeting at foreign mi nister level followed in September 2008.  
                                                
 
3 1) Implementation of police reform in compliance with the October 2005 agreement on police 
restructuring; 2) full co-operati on with the ICTY; 3) adoption and implementation of all necessary 
public broadcasting legislation; and 4) development of the legislative framework and administrative 
capacity to allow for proper implementation of the SAA 
EN 6   EN In addition to Community support, the EU has c ontinued to deploy consid erable resources in 
Bosnia and Herzegovina in the framework of  the Common Foreign and Security Policy and 
the European Security and Defence Policy. The mandate of the EU Special Representative, 
who promotes overall political coordination an d offers the EU's advi ce and facilitation to 
Bosnia and Herzegovina, has been extended until February 2009. The mandate of the EU 
Police Mission (EUPM) has been extended for a further two years (until the end of 2009). The 
EUPM will continue to mentor, monitor and inspect the police forces in Bosnia and 
Herzegovina. The EUFOR/Althea mission, whic h numbers some 2 500 troops on the ground, 
has continued to maintain a safe and s ecure environment. In June 2008, the Council 
concluded that the EU-led military presence w ould remain in Bosnia and Herzegovina for as 
long as necessary. The EU Monitoring Missi on, with its headquart ers in Bosnia and 
Herzegovina, closed by the end of 2007.  
The visa facilitation and readmission agre ements between the EU and Bosnia and 
Herzegovina entered into force on 1 January 2008. The first Joint Committee meetings on the Visa Facilitation Agreement and the Read mission Agreement between the European 
Commission and Bosnia and Herzegovina we re held in June 2008. In May 2008, the EU 
launched a visa liberalisation di alogue with Bosnia and Her zegovina, which should gradually 
lead to abolition of visas for citizens of Bo snia and Herzegovina travelling to the EU. A 
detailed road map setting clear benchmarks to be met by Bosnia and Herzegovina for lifting 
the visa regime was presented in June 2008. Bo snia and Herzegovina ad opted an Action-Plan 
for implementing the visa road map in August 2008.  
As regards pre-accession financial assistance , the 2008-2010 Multi-A nnual Indicative 
Planning Document (MIPD) for Bosnia and Herzegovina was adopted in September 2008. 
The EC allocated a total of €74.8 million to  Bosnia and Herzegovina under the 2008 
Instrument for pre-accession assistance (IPA) prog ramme. The main areas of intervention are: 
strengthening the rule  of law and public administration structures, economic and social 
development and democratic stab ilisation, including support for civil society. In addition, €5.7 
million has been provided from Community funds to support the budget of the Office of the 
High Representative until June 2009.  
IPA and remaining CARDS assistance is implem ented by the EC Delegation in Sarajevo. 
Decentralised management of aid remains a medium-term objective for Bosnia and Herzegovina. Preparations for decentralised implementation have advanced slightly. The 
National Fund and the Central Financial and C ontracting Unit (CFCU) in the Ministry of 
Finance and Treasury (MoFT) have been partly st affed and further recruitment is in progress. 
The complex institutional and political environmen t, including significant delays in ratifying 
the IPA Framework Agreement and the 2007 IPA Financing Agreement, as well as difficulties in appointing a National IPA Coor dinator, has delayed the start of the 
implementation of IPA. In accordance with the IPA Framework Agreement, Bosnia and 
Herzegovina needs to ensure that Comm unity assistance is exempt from VAT. 
Regarding financial assistance to civil society , the 2008 IPA programme will provide 
€3.5 million to support civil society development.  
The framework agreement for Bosnia and He rzegovina's participation in Community 
Programmes entered into force in January 2007. To date, no memorandum of understanding 
for participation in specific Community  programmes has been concluded. 
EN 7   EN 2. P OLITICAL CRITERIA  
This section examines progr ess made by Bosnia and Her zegovina towards meeting the 
Copenhagen political criteria, which require stab ility of institutions guaranteeing democracy, 
the rule of law, human rights and respect for and protection of minorities. It also monitors 
regional cooperation, good neighbourly relations with enlargement countries and Member 
States, and respect for international obligations, such as cooperation with the UN International 
Criminal Tribunal for the former Yugoslavia (ICTY). 
2.1. Democracy and the rule of law 
Constitution   
Bosnia and Herzegovina's constitution, which is contained in Annex IV to the Dayton/Paris 
Peace Agreement (DPA), establishes a complex institutional architecture. The DPA put an 
end to the war and brought peace and stabilit y to Bosnia and Herzegovina. Although progress 
has been made under the current constitutional  structure, it still prevents swift decision-
making and therefore hinders reform and the cap acity to make rapid progress towards the EU.  
Since the Bosnia and Herzegovina Parliamentar y Assembly rejected a package of proposed 
constitutional amendments in April 2006, no furt her attempts have been made to amend the 
constitution. Consequently, ther e has been little progress in  addressing the key European 
Partnership priority, requesting Bosnia and He rzegovina to establish more functional and 
sustainable institutional structures. There re mains wide disagreement between the political 
parties on the scope of the future constitutional reform.  
Nationalist rhetoric from political leaders fr om all the constituent peoples, challenging the 
Dayton/Paris Peace Agreement and, thus, the constitutional order, remained commonplace. 
The most frequent challenges came from the po litical leadership of Republika Srpska, who 
have continued to claim the right of self-determination fo r the Entity. Following Kosovo's4 
declaration of independence, the Republika Srps ka National Assembly adopted a resolution 
that condemned Kosovo's declaration and stated  that the Republika Srpska authorities may 
seek a referendum of independence if a major ity of EU and UN Member States recognised 
Kosovo's independence. This resolution was wide ly rejected by the inte rnational community.  
As a result of the failure to reform the cons titution, elections continue to be conducted under 
provisions that are in violat ion of the European Conventi on on Human Rights (ECHR). The 
election of Bosnia and Herzegovina 's tripartite Presiden cy continues to be in contravention of 
Protocol 12 of the ECHR, as it  does not allow citizens not bel onging to the three constituent 
peoples to stand as candidates and it determines  the ethnicity of each candidate elected from 
the Entities. 
On the basis of the Dayton/Paris Agreement,  the international community continues to 
maintain a significant presence in Bosnia and Herzegovina. The Office of the High 
Representative (OHR) and the EU Special Repr esentative's office have been working closely 
with the European Commission on issues rela ted to European integration. The High 
Representative has continued to play a key role in facilitating reform and governance issues. The High Representative's use of his executiv e powers has remained low, and he has not 
enacted any new legislation in the reporting period. 
                                                
 
4 Under UN Security Council Resolution 1244 
EN 8   EN In October 2007, the European Court of Human Rights ruled as inadmissible a number of 
applications lodged against the decision of the High Representati ve to remove the applicants 
from public office and to bar them from running for election. The Court considered that the 
High Representative was exercising lawfully de legated powers of the Un ited Nations Security 
Council.  
Due to the concerns over politic al stability in Bosnia and He rzegovina and in the region, the 
closure of the OHR has been further postpone d. In February 2008, the Peace Implementation 
Council decided to make the closure conditiona l on Bosnia and Herzegovina's progress on 
addressing five specific objectives5 and two specific conditions (signing of the SAA and a 
stable political situation). Of the five object ives, there has been little progress on addressing 
the issues related to State property and the Br čko final award.   
The Entities have not yet finish ed bringing their constitutions into line with the March 2006 
ruling by the Constitutional Court of Bosnia and Herzegovina that the Entity coats of arms, 
flags and anthems were not in line with the State-level constitution of Bosnia and Herzegovina. Republika Srpska has adopted a temporary embl em and issued a call for 
proposals for a new coat of arms. The Federati on of Bosnia and Herzegovina is also still 
considering proposals for the Entity symbols.  
Overall, nationalist rhetoric has prevailed and Bosnia and Herzegovina's leaders have made 
no progress towards creating, through the reform of the c onstitutional framework, more 
functional and affordable State structures whic h support the process of European integration.  
Parliament   
Bosnia and Herzegovina has a bi cameral State-level parliament, along with parliaments at the 
level of the Entities (the Federation of Bosn ia and Herzegovina and Republika Srpska), Br čko 
District and Cantons.  
Following the High Representative's recomm endations to Bosnia and Herzegovina's 
Parliamentary Assembly to adopt measures to improve its efficiency, the House of 
Representatives and the House of Peoples eac h adopted amendments to their rulebooks in 
December 2007. These reduced the quorum necessary  for holding a session in the House of 
Representatives and changed the decision-making mechanisms in both Houses. These decisions were designed to make the Bosnia and Herzegovina Parliamentary Assembly more 
functional and will reduce the possibility of boycotts undermining the performance of the Parliamentary Assembly.  
Following the adoption of new rules and proce dures, and reflecting the improved political 
climate which followed the initialling of the St abilisation and Association Agreement, the 
Parliamentary Assembly adopted a number of  important laws based on the European 
Partnership, including legislatio n concerning the police reform. The Joint Colleges of the 
Parliamentary Assembly also adopted a St rategic Plan for 2008-2010, which provides for 
increases in staffing.  
                                                
 
5 1) Acceptable and sustainable resolution of the is sue of apportionment of property between State and 
other levels of government; 2) Acceptable and sustainable resolution of defence property; 3) 
Completion of the Br čko final award; 4) Fiscal sustainability (promoted by an agreement on a 
permanent coefficient methodology on distribution taxation revenues and establishment of a National 
Fiscal Council); and 5) Entrenchment of the rule of law (demonstrated by adoption of a National War 
Crimes Strategy, of a Law on aliens and asylum a nd of a National Justice Sector Reform Strategy). 
EN 9   EN However, overall the Parliamentary Assembly 's legislative work has continued to be 
adversely affected by the intransigent and et hnically oriented position of the country's 
political leaders. Members of Parliament genera lly continue to vote al ong ethnic lines and the 
Parliamentary Assembly's work is affected by the general political environment. The High 
Representative's recommendations to the Parliamentary Assembly in October 2007 to 
improve efficiency resulted in  threats from Bosnian Serb representatives to boycott the 
legislative work. As a result, the Parliamentar y Assembly met infrequently up to February 
2008.  
The chairmanship of the Parliamentary Assemb ly continues to rotate on an eight-monthly 
basis, which hinders efficiency. It is still  hampered by inadequate  technical and human 
resources. Cooperation with the Council of Mi nisters remains weak, and there is little 
coordination of legislative agendas between th e State and Entity parliaments, even though 
initial discussions have been he ld in the context of European integration. Owing to the still 
complicated decision-making procedures wh ich provide guarantees for the constituent 
peoples, parliamentary activities have continue d to proceed slowly. Committee work has also 
been affected by inter-ethnic divergences and the general lack of resources. The Committee 
for European Integration does not yet deal with specific legislative issues  related to European 
integration.  
Overall, there has been some progress on im proving the efficiency of the Parliamentary 
Assembly of Bosnia and Herzegovina. However, its work is still adversely affected by the unstable political climate, systematic voting alo ng ethnic lines and insufficient administrative 
resources.  
Government 
The Presidency of Bosnia and Herzegovina is  responsible for foreign policy, proposing annual 
budgets and representing Bosnia and Herzegovina in international organi sations. In line with 
the Constitution of Bosnia and Herzegovina, the Presidency members continue to rotate on an 
eight-monthly basis, which hampers efficiency and continuity.  
The Presidency has met regularly. However, so me of the members have continued to show 
first allegiance to their Entity and their cons tituent people. The Presidency members have 
invoked "vital entity interest" on a number of  occasions and have generally shown little 
capacity to find common positions. They have c ontinued to show their differences publicly 
when representing Bosnia and Herzegovina officially in international meetings.  
In October 2007, the High Representative issu ed a decision amending the Law on the Council 
of Ministers in Bosnia and Herzegovina. This  introduced changes to the obligatory quorum 
for holding government sessions and to the de cision-making mechanisms. The decision also 
stipulated that the Council of Ministers needed  to hold sessions on a weekly basis. The aim 
was to make the Council of Mi nisters more efficient and func tional. Following these changes, 
and supported by a more favourable political clim ate in the first half  of 2008, the Council of 
Ministers has met regularly. It has adopted a number of laws based on the European 
Partnership and held specific sessions  on the European integration matters.  
Following the High Representative 's decision to amend the La w on the Council of Ministers, 
the political leadership from Republika Srpska  considered the measures imposed to be 
unconstitutional and threatened to boycott the State-level institutions. As a result, the 
Chairman of the Council of Ministers (Prime Minister) resigned in November 2007. After the 
EN 10   EN Prime Minister's resignation, the Council of Mi nisters met with a technical mandate until 
February 2008, when it was reconstituted wi th the same membership as before.  
Overall, the Council of Ministers has continued to experience internal tensions, even though 
consensus on European integration has helped move the legislative ag enda forward. Capacity 
problems, lack of political will, and diverging national interests in government and parliament 
nevertheless continue to delay a doption of legislation. The work of the Council of Ministers is 
also suffering from the limited powers of the Prime Minister. 
The Directorate for European Integration  (DEI) is directly att ached to the Council of 
Ministers. It has continued to play an important  role as Bosnia and Herzegovina's focal point 
for programming EU assistance. Units for European  integration have been  established in each 
ministry in the Council of Minist ers. However, the DEI has conti nued to be adversely affected 
by limited resources for personnel and the difficu lt political climate. The adoption of the 
action plan for implementation of the European Partnership priorities, which was prepared by 
DEI, was significantly delayed as a result  of Republika Srpska's challenges to the 
competences of the State-leve l in a number of areas.  
The Directorate for Economic Planning (DEP),  which is also linked to the Council of 
Ministers, has been strengthened through the a ppointment of a permanent Director and the 
consolidation of its role of c oordinating the country development strategy process, as assigned 
by the Coordination Board for Economic De velopment and European Integration.  
The staffing of the General Secretariat of the Council of Ministers has been improved, but it 
does not yet have the capacity for planning  and policy coordination. Currently, policy 
coordination, including the process of prepar ing the annual work programme for the Council 
of Ministers, is carried out by the Office of the Chairman of the Council of Ministers. This 
division of tasks between the General Secretar iat and the Office of the Chairman is not 
optimal. The staffing of the Legislative O ffice has improved, but the quality of draft 
legislation still remains unsatisfactory.  
Fragmented policy-making between the State and the Entities remains the main obstacle to 
efficient work by the State G overnment. The Coordination Bo ard for Economic Development 
and European Integration, which is designed to harmonise State and Ent ity agendas, does not 
play an effective role and has met only infrequently. Coordination between the different levels of authority is minimal and de pends largely on personal and part y interests. Due to its limited 
powers the Council of Ministers has occasionally been left out of negotiations on reforms, 
which have been conducted by the political parties. Another serious handicap for policy 
planning in Bosnia and Herzegovi na as a whole is th e lack of proper stat istics, including an 
up-to-date population census. Major reforms ar e still based on the 1991 census, which does 
not reflect the current situation on the ground.  
The Republika Srpska Government  has continued to be efficien t in adopting legislation. 
However, it has maintained its policy of stre ngthening its own legal framework, often without 
coordination with the Council of Ministers or with the government of  the Federation. It 
remains generally opposed to the transfer of powe rs to State level and has often threatened to 
reverse previous transfers. The Federation Govern ment has been less efficient in adopting and 
implementing legislation, mainly owing to the difficult political climat e and diverging party 
and ethnic interests in the governing coalition.  
EN 11   EN Both Entities have local self-government legisla tion largely in line with the European Charter 
for Local Self-Government. However, the impact  on decentralisation of powers to local self-
government units has been limited, and the lack of  resources of the municipalities remains an 
issue both in the Federation and in Republika Srpska. Harmoni sation of Cantonal legislation 
within the Federation has been uneven. The Stat e-level authorities ha ve no powers over local 
self-government, which complicates compliance w ith Bosnia and Herzegovina's international 
obligations in this area.  
Municipal elections took plac e in October 2008. They were  held in ac cordance with 
international standards. Consid ering the sensitivity of the balance of power within the 
Srebrenica local government, the Bosnia and He rzegovina Parliamentary Assembly agreed 
exceptionally to allow all 1991 residents to vote in the municipal elections for Srebrenica and 
not for their current place of re sidence, if they so chose. 
Overall, Bosnia and Herzegovina has made  limited progress on making the State-level 
government structures more functional and effi cient to address their commitments regarding 
European integration. Lack of resources, lack of coordination, ethnic tensions, and internal 
conflicts continue to delay reform. Fragme nted policy-making between the State and the 
Entities remains the main obstacle to efficient work by the State Government. There have been discrepancies between the Entities in the efficiency of the adoption and implementation 
of legislation.  
Public administration 
There has been some progress in the area of public administration reform, which is a key 
European Partnership priority.  
The Public Administration Refo rm (PAR) Coordination Office ha s made signifi cant progress 
in terms of staffing. The number of employees  is 35. Implementation of the PAR Strategy and 
its accompanying Action Plan has been con tinuously monitored: by September 2008 the 
implementation rate had reached 28%. Operat ional cooperation with the coordinators for 
public administration reform appointed for th e Federation Government, the Government of 
Republika Srpska and the Government of the Br čko District has been improved, but further 
efforts are needed. The PAR Coordination Office has strengthened its capacity, primarily for 
managing the Public Administration Reform Fu nd and coordinating various donor initiatives. 
The Public Administration Reform Fund has be come operational and the first proposals for 
projects have been adopted, committing one third of total available funds. Tendering and 
contracting procedures  have started.  
Despite these developments, the administrative structures remain cumbersome, and in some 
cases fragmented, and prone to duplication and unclear division of powers, both between 
institutions at the same level and vertically, between different levels of government. Although 
recruitment by the State Civil Service Agency has improved, further efforts are needed to reinforce its staffing and to make the recruitmen t procedures more efficient. The State Civil 
Service Agency has remained active in organi sing and providing training  on different topics 
for all civil servants. Coordination between the State- and Entity-level Civil Service Agencies 
has improved, with joint involvement in seve ral large-scale training schemes. However, 
harmonisation of the three Civil Service Laws, in pa rticular to allow transfers of civil servants 
between government levels, is still pending.  
EN 12   EN The accommodation of State-level institutions remains a problem. The move to the newly 
reconstructed building of the Council of Minist ers has taken place after considerable delays, 
but this building cannot accommodate all the em ployees of State ministries and standing 
bodies of the Council of Ministers.  
No progress has been made on regulating ownershi p rights to State proper ty. As a result, the 
High Representative has extended the temporary prohibition of disposal of State property 
beyond 30 June 2008.  
The civil service is in need of professiona lisation, transparent and efficient recruitment 
procedures and modern career development. Su stained efforts remain necessary to prevent 
political interference and to limit the role play ed by ethnic identity and party membership in 
public administration. The administration would benefit from modernisation of procedures 
and processes and from closer cooperati on with other parts of the country.  
The implementation of the Ombudsman Law, which was adopted in March 2006 and which 
provides for merging the three Ombudsmen Institu tions, is awaiting the appointment of the 
Ombudspersons. The appointment process was re-launched in 2008 and a parliamentary committee was established for the selection process. However, due to blockages in the appointment process, no agreement has been  reached. Further delays pose a risk of 
undermining the credibility of the State Ombudsman's Office.  
Overall, there has been some progress in the area of public administration. However, Bosnia 
and Herzegovina is still in an early phase of the public administration reform, which needs to 
be accelerated. The country's complex and cumb ersome institutional structure continues to 
undermine efficiency. Significant further efforts towards an efficient, professional, stable, 
accountable and transparent ci vil service are needed at all levels of government.  
Civilian oversight of the security forces   
The Joint Parliamentary Committees for Defence and Security and the Intelligence and 
Security Committee have continued to perfor m their duties efficiently, with the latter 
commencing both announced and unannounced inspections of the Intelligence Security Agency. As regards the defence reform, the issu e of transferring responsibility for military 
weapons, ammunition, explosives and certain other movable defence property from the 
Entities to the State level was resolved in March 2008, when the Council of Ministers and the 
Entity Governments signed an agreement on this subject, which is now being implemented. 
The agreement will also allow the destruction of old and dangerous a mmunition. The issue of 
transferring immovable defen ce property to the State re mains unresolved. EUFOR handed 
over responsibility to Bosnia and Herzegovina for control of military movements of arms and 
ammunition in March 2008.  
Bosnia and Herzegovina's progre ss on addressing the defence re form resulted in an invitation 
from NATO to start the "Intensified Dialogue". This signifies that contacts between Bosnia 
and Herzegovina and NATO will increase in order to prepare the country for an  eventual 
Membership Action Plan, which is the last step before NATO accession.  
Judicial system 
Consolidation of the judicial system con tinued to make progress, but in a difficult 
environment. One ongoing major problem was th e lack of a Supreme Court that could 
harmonise application of legislation across the f our internal jurisdictions: the State level, the 
EN 13   EN Federation of Bosnia and Herze govina, Republika Srpska and the Br čko District. Another 
continuing structural problem was the absence of a single budget for the judiciary. Having 14 
Ministries of Justice each pr eparing judicial budgets has b een detrimental to judicial 
independence and overall implementation of the j udicial reform. Political interference in the 
judicial system remains a cause  for concern. In the parliamentary and executive branches of 
the governments, attempts are being made to re verse reforms already implemented so as to 
allow greater political influence in the work of prosecutors and judge s. The jurisdiction and 
the competences of the State-level judicial ag encies to operate freely in Republika Srpska 
have been challenged by the Republika Srpska  government, which is a serious cause for 
concern.  
At State-level, the system consists of a Minist ry of Justice with limited powers and staff, the 
State Court and the State Prosecutor's Office w ith a common international registry and the 
High Judicial and Prosecutorial Council (HJP C), which substantially  guides the judicial 
reform, but has only limited resources. The HJ PC, as an independent and autonomous body, 
has continued to play an important role in improving the situation of the judiciary. It has 
contributed to increased  professionalism, resources and e fficiency. Cooperation between the 
HJPC and the ministries has been upgraded, in  that it is now more common for budget drafts 
and budget proposals to be submitted to the HJPC for comments. However, these improvements need to be taken further if the HJPC's position is to be made more secure. The presence of international judges and prosecutor s within the State judi cial institutions was 
maintained. Despite some improvements owi ng to international donor funds, material 
conditions remain an obstacle to th e judicial reform, in particular  funding for suitable judicial 
premises and adequate financial means for th e daily operation of courts and prosecutors' 
offices.  
The Judicial and Prosecutoria l Training Centres in the Entities implemented educational 
programmes for judges and prosec utors across the country and were relocated to better 
premises. A training strategy for the two cent res was adopted and the training budgets were 
increased. Two legal documentation centres have been developed. However, there is a need to increase the staffing of the Centres.  
The National Strategy for Development of th e Justice Sector for 2008-2012 was adopted in 
June 2008. The Strategy includes provision s aiming at further strengthening the 
independence, accountability, e fficiency, professionalism and harmonisation of the judicial 
system and at advancing the system of intern ational legal assistance and the processes to 
guarantee equal access to justi ce. Owing to the lack of cons ensus, however, the Strategy 
makes no provision for establishing a Supreme Court of Bosnia and Herzegovina, a single 
judicial budget and a single criminal law.  
Bosnia and Herzegovina has made some effort s to reduce the backlog of court cases. The 
Backlog Reduction Project, formalised by the signing of a memorandum of understanding in 
January 2008, is one positive step. However, the total number of pending court cases 
exceeded 2 million, of which approximately 1.2 m illion were cases of unpaid utility bills.  
There has been progress with restructuring th e minor offence courts. Consolidation of the 
minor offence courts into the regular first instan ce courts has been completed, in line with the 
European Convention on Human Rights. The infl ux of minor offence cases before the courts 
has been reduced; the collection rate for fines imposed has increased a nd resolution of minor 
offence cases has been speeded up.  
EN 14   EN Cooperation between police officers and pros ecutors remains weak. The majority of 
prosecutors and police officers still have difficulties understa nding and applying the different 
substantive criminal codes which are in force. Progress in the area of harmonisation of State 
and Entity criminal legislation has been limited. Problems persist, especially with prosecution of war crimes and organised crime.  
Some progress has been made in the area of j uvenile justice. The Strategy against Juvenile 
Offences, which was adopted in July 2006, did not enter into force until February 2008. In 
May 2008, a coordination body was se t up at State level to mon itor implementation of the 
Strategy and held its first meeting. However, proper implementation of the Strategy and the 
Action Plan has not yet started. Lack of appropr iate and well-regulated juvenile correctional 
facilities and alternative measures for juvenile  offenders continued to  seriously hinder the 
establishment of an effective system  to address juvenile delinquency.  
Local prosecution of war crimes has continued. At State level, trials have generally been held 
within a reasonable time and in compliance with internationally recognised fair trial 
standards. One of the main challenges facing th e State Prosecutor's Office and the State Court 
is the large volume of war crimes cases. A strategy is needed to map and prioritise these cases. Furthermore, the Court needs to make mo re efforts on its outreach activities. Trials 
have also continued to be conducted more effectiv ely before cantonal and district courts in the 
Entities, but there are several remaining major obstacles to be addressed. In particular, effective action needs to be taken to addre ss the lack of witness protection and witness 
support, insufficient staffing and lack of specialisation among cantonal and district 
prosecutors, plus the lack  of harmonisation of the legal codes used in war crimes trials at State 
and Entity levels. A clear and concrete national strategy dealing with war crimes issues has 
still to be adopted.  
Overall, preparations by Bosnia and Herzegovina to develop an effective and efficient judicial 
system have been advancing. The adoption of the Strategy for Development of the Justice 
Sector for 2008-2012 is a positive development.  However, fragmentation and disparities 
across the judicial frameworks continue to impair the efficien cy of the judicial system. 
Sustained efforts are needed in order to improve efficiency and to ensure the independence and the accountability of the judicial system. 
Anti-corruption policy   
Bosnia and Herzegovina is a party to the UN Convention on Fighting Corruption (Mérida 
Convention), but ha s not signed the  Additional Protocol to the C ouncil of Europe Criminal 
Law Convention on Corruption. Bosnia and He rzegovina still needs to harmonise its 
legislation with the Council of Europe Civi l Law Convention on corruption. No progress has 
been made towards ensuring proper implem entation of the 2006 National Anti-Corruption 
Strategy and the associated Action Plan. Ther e has been some progress on addressing the 
recommendations made by the second evaluation report adopted by the Council of Europe Group of States against Corruption (GRECO) in  December 2006, namely to enforce the legal 
framework and to improve coordination and tr aining of the agencies involved in fighting 
corruption and seizure of the instruments and proceeds of crime. The Bosnia and Herzegovina 
Central Election Commission was active in impl ementing the Law on conflicts of interest. 
However, some of its decisions have not been properly implemented.  
As regards anti-corruption legislation, the am endments to the Law on financing of political 
parties are in the parliamentary procedure. Un der the terms of these amendments the amount 
EN 15   EN that political parties ma y receive via grants and donations from legal and physical entities is 
doubled, which is designed to increase transp arency of financing of political parties. 
There are no legal measures in place to ensure confidentiality and protection of civil servants 
reporting corruption. The amendments to the Law on conflicts of interest adopted in July 2008 
reduce the scope of the law in terms of the pers ons to whom it applies and of the situations 
that are regarded as conflicts of interest. No independent anti-corruption agency has been 
established. Convictions for corr uption remain very limited. There is lack of poli tical will to 
implement actions to combat corruption in line  with the 2006 strategy  and action plan. The 
judiciary also faced difficulties in gathering evidence and mastering all aspects of the legal 
framework. The judicial and prosecutorial traini ng centres need to create targeted training 
programmes dedicated to the prosecution of crim inal offences of corruption, economic crime 
and organised crime. Transparency of public activities is hampered by political pressure on public external audit institutions and by limited implementation of the Freedom of Access to 
Information Act.  
Media accusations and pressure from the Repub lika Srpska authorities against a corruption 
watchdog, which led to the temporary suspen sion of the operations of Transparency 
International in Bosnia and Herzegovina, are a serious concern.  
Overall, Bosnia and Herzegovina has made very  little progress on improving its tools to fight 
corruption. Corruption is widespread and rema ins a serious problem, especially within 
government. Bosnia and Herzegovi na needs to improve its anti- corruption legisl ation. Proper 
implementation of the National Anti-Corruption Strategy needs to be ensured. More vigorous 
investigation and prosec ution are necessary.  
2.2. Human rights and the protection of minorities 
Observance of international human rights law   
As regards ratification of human rights instruments , Bosnia and Herzegovina has ratified 
the major UN and international human ri ghts conventions, including the European 
Convention for the Protection of Human Righ ts and Fundamental Freedoms. Bosnia and 
Herzegovina also ratified the revised Europ ean Social Charter in July 2008. Delays in 
fulfilling reporting obligations have continued. The constitution includes most of the principles of the human righ ts conventions and guarantees that they supersede national 
legislation. Although the convent ions are directly applicab le, implementation needs to 
improve. 
In a number of cases, the deci sions of the Human Rights Comm ission of the Constitutional 
Court of Bosnia and Herzegovina were not prope rly implemented. This has led to cases being 
lodged before the European Court of Human Rights  (ECtHR). During the reporting period, 
the Court delivered five judgments finding that  Bosnia and Herzegovina had violated the 
European Convention on Human Rights (ECHR). A total of 1 020 new applications to the 
ECtHR were made during the reporting period.  As of August 2008 the total number of cases 
pending before the Court regarding Bosnia and Herzegovina was about 800, around 500 of 
which concerned the applicants' inability to w ithdraw their old foreign currency savings.  
As regards promotion and enforcement of human rights , the enforcement of the decisions 
of the Human Rights Commissi on remains unsatisfactory. In several cases, criminal 
proceedings have been instituted because of failu re to enforce such decisions. Enforcement of 
decisions relating to amendments to laws and other regulations is pa rticularly slow, as it 
EN 16   EN requires more coordination between various inst itutions. Enforcement of decisions pertaining 
to financial compensation has been comparab ly faster. No progress has been made on 
addressing the question of the ci tizens and residents of Bosn ia and Herzegovina who were 
sent to Guantanamo Bay in a breach of the Human Rights Commission' s decision. This case 
has been referred to the European Court of Hu man Rights. Bosnia and Herzegovina needs to 
take determined action to have its citizens released. 
Overall, Bosnia and Herzegovina has ma de limited additional progress on improving 
observance of international human rights law. Implementation of inte rnational human rights 
conventions needs to improve. Efforts to ensure  proper enforcement of human rights need to 
increase.  
Civil and political rights   
As regards  prevention of torture and ill-trea tment and the figh t against impunity , State 
and Entity constitutions prohibit torture and ill-tr eatment. Bosnia and Herzegovina is party to 
the Council of Europe Convention for the Preven tion of Torture. Howe ver, it has failed to 
appoint a member to the Anti-Torture Committ ee. Recent assessment of the situation in 
prisons and in police detention has revealed a number of allegations of ill treatment of prisoners and detainees by the police or prison guards. In 2008, the European Court of Human 
Rights issued two decisions agains t Bosnia and Herzegovina in th is regard. First, in May, the 
Court decided that the human ri ghts of four applicants had b een violated by not preventing 
violence and intimidation against them by other inmates. Then, in July, the Court issued a 
decision concerning the ill-trea tment of prisoners in the psyc hiatric wing of Zenica prison and 
ordered Bosnia and Herzegovina to pay compensation to the app licants. There remains a need 
to improve the mechanisms for investigation of cases of alleged tortur e and ill-treatment by 
the police. In practice, units responsible for de aling with complaints are often composed of 
the same officers who are alleged to have perpetrated the ill-treatment. Their work is not supervised. 
Bosnia and Herzegovina also needs to ensure ad equate safeguards to en sure that people facing 
deportation following a negative ci tizenship review are protecte d from persecution, including 
torture and ill-treatment, upon retu rn. There are still obstacles to  the transfer of cases and 
extradition of suspects in cases  of war crimes and crimes ag ainst humanity between Bosnia 
and Herzegovina, Croatia, Montenegro and Serbia. This is conducive to impunity.  
The death penalty is prohibited by the consti tution of Bosnia and Herzegovina and by the 
constitution of the Federation. Republika Srpska has taken steps to repeal the death penalty 
provisions from its constitution, but the process has not yet been completed.  
Access to justice  in civil and criminal trials remains a matter of concern, and equality before 
the law is not always guaranteed. Further effo rts are needed to increase the budget of the 
defence counsel and to establish a nationwide le gal aid scheme for criminal and civil trials. 
Legal aid in civil cases is  primarily provided on an ad hoc  basis by privately funded NGOs. 
The right to a fair trial is formally incorporated  in the five criminal procedure codes of Bosnia 
and Herzegovina. However, the time from initiati on of proceedings to a final decision remains 
very long. This is mainly due to a large backlog inherited by the courts and to excessive referral of cases to first instance courts by distri ct and cantonal courts in appellate procedures. 
Furthermore, in lower level courts, judges have tended to neglect the presumption of 
innocence.  
EN 17   EN Responsibility for the  prison system  remains divided between two entities and management 
of penitentiary institutions is split between the State and the Entities.  There is no unified 
practice of criminal sanctions. The lack of co ordination between the 15  different competent 
prison administrations and the absence of a harmonised legislative framework are major 
obstacles to improvement of the country's capacity  to manage its prison ers. Some progress has 
been made with construction of a prison fa cility at State level.  The Law on founding the 
institute for execution of criminal sanctions , detention and other measures, adopted in 
February 2008, provides the legal framework  for construction of the State prison.  The funds 
needed for construction have been secured and the preparatory works fo r the building started.  
No progress has been made on addressing the problems of overcrowding, poor living 
conditions, inadequate medical treatment and p hysical abuse by prison guards. The lack of 
prison inspections, especially in the Federa tion, is a concern. Th e lack of special 
correctional/reform institutions for women, juve niles, persons with mental health problems, 
persons with disabilities and seniors needs to be addressed. The conditions under which 
persons in need of psychiatric treatment serv e their sentences are a cause of particular 
concern. There is still a lack of  acceptance of alternative penalt ies in the form of community 
work.  
All the constitutions provide for freedom of expression. Proper implementation of the 
relevant legislation is required. Following the Federation Constitutional Court's rejection of a complaint that the draft public broadcasting law adversely affected the vital national interest of the Croat people in the Fede ration, the Federation Parliament  adopted the law in July 2008. 
In line with the relevant key European Partnershi p priority, it is now necessary to ensure that 
all State and Entity-level legislation is harm onised, as well as full im plementation, including 
the establishment of the Bosnia and Herzegov ina Corporation of the Public Broadcasting 
Services.  
The cases of physical attacks against journalists  and editors have increased. Cases of physical 
violence against journalists and editors need to be prosecuted vigorously. The withholding of 
financial resources from certain media by the authorities, including the public broadcasting 
system, as a result of political pressure, is a matt er of serious concern. A number of politicians 
have also encouraged the population not to pa y the TV licence fee. The challenges to the 
independence of the Communications Regulatory Au thority have increased, in particular as a 
result of the new Law on wages and allowances  and the unresolved issue of the appointment 
of the authority's Director-General.  
The constitutional framework of Bosnia and Herzegovina includes the right to freedom of 
assembly and association . However, there have been an increasing number of cases of 
intimidation against NGOs and civil society orga nisations. Harassment of  certain collectives 
because of their sexual orientation has also occurred. 
Some progress has been made as regards civil society organisations . A Civil Society Board 
was established in October 2007 in accordance with the Agreement on cooperation between 
the NGO sector and the Council of Ministers of  Bosnia and Herzegovina. Even though the 
Board does not represent the whole of civil so ciety, it has 31 sub- sectors, making it the 
strongest forum for NGOs in the country. However,  more efforts by the authorities are needed 
in order to establish regular and systema tic communication with civil society and to 
encourage its participat ion in policy-making.  
EN 18   EN The constitution of Bosnia and Herzegovina provides for freedom of religion,  and a State 
Law on freedom of confession and the legal status of churches and religi ous communities is in 
place. However, religious intolerance is still pr esent in the country, including physical attacks 
on religious facilities. Cases of physical attacks against pl aces of worship need to be 
prosecuted vigorously. Leaders of the religious communities have  continued to intervene in 
political issues and they often pl ay a divisive role in society.  
Overall, Bosnia and Herzegovina has made limite d progress in the area of civil and political 
rights. Some steps have been taken to suppor t civil society development, but the sector 
remains weak overall. Some progress has been ma de with construction of  a prison facility at 
State level, but the management of penitentiary  institutions continues to be split between the 
State and the Entities. No progress has been made on fostering free dom of expression and 
freedom of assembly.  
Economic and social rights   
Overall the framework for women's rights  is satisfactory, but there has been limited 
additional progress, especially  on effective implementation. One positive development has 
been the revision of the La w on protection from domestic violence in Republika Srpska. 
Under the revised law, the entity and local auth orities are responsible for funding safe houses 
for victims of domestic violence. The Gend er Agency of Bosnia and Herzegovina has 
established a Working Group on work, employ ment and access to all economic resources 
which has made recommendations for implementati on of the Law on gender equality. Overall, 
structures to support gender equality are in pla ce, but there still is a general need to make 
mandates clearer and increase financial and human resources to ensure that these structures 
can function efficiently. Clear pr iorities are also needed for the effective implementation of 
the country's gender Action plan.  
Trafficking in women and domestic violence  remain causes for concern. Bosnia and 
Herzegovina has continued to be a country of origin, transit and destination for trafficking 
women and girls. The incidence of domestic violence has remained high. Criminal acts of 
violence in the family recorded by the authorities rose by more than 50 percent in 2007 compared to 2006. Shelters for victims of dome stic violence lack financial resources and 
sometimes depend on foreign donors. Many wome n are not covered by health insurance. 
Women continue to be under-represented in politics and in the official authorities (see also 
section 4.1.8, Employment and social policies) .  
There has been only very limite d progress in the field of children's rights . An Action Plan 
for children has been adopted, but  problems due to insufficient St ate action in th e fields of 
health, social protection, education and domes tic violence against children remain. Entity 
governments have adopted a policy on children wit hout parental care and families at risk of 
separation. Children's attendance of early ch ildhood education programmes is still low. 
Children with disabilities still lack suffici ent medical care and adequate educational 
opportunities.  
Discrimination against socially vulnerable people and  people with disabilities  is prohibited 
by the legislation of both Ent ities. However, the fragmented legal and financial framework 
does not provide the same social protection fo r all citizens throughout the country. Legislation 
on the professional rehabilitation and employment of persons with  disabilities exists only in 
Republika Srpska. Many groups of the populati on are excluded from social protection and 
assistance benefits. The preferential treatment of  war veterans in terms of social benefits 
EN 19   EN continued to have adverse e ffects on other socially vulnerable persons and persons with 
disabilities, who often lack acc ess to health protection and th e labour market. Accessibility 
legislation is not being implement ed and effective policies need to  be put in place. Bosnia and 
Herzegovina has not signed the UN Convention on the Rights of Persons with Disabilities. 
The inadequacies in the social welfare systems adversely affect the conditions of the persons 
with disabilities, including the me ntally ill. The latter remain pa rticularly vulnerable to social 
exclusion. A study to analyse and evaluate the services for ment al health protection in the 
whole country has been launched, but littl e progress has been made in terms of 
deinstitutionalisation. The Counc il for Disabled Persons has not yet been established.  
Regarding labour rights and trade unions , the ratification of the revised European Social 
Charter is a progress, but th e complex system of government  and the fragmentation of 
legislation continue to hamp er social dialogue across th e country. There has been no 
development in establishing the trade union conf ederation (KSBiH) at State level, and as a 
result the trade unions continue to be ba sed on the Entity structure. No country-wide 
Economic and Social Council has been established, due to opposition from Republika Srpska. The lack of clarity regarding trade union r ecognition has blocked further progress towards 
establishing collective barg aining and moving towards volunt ary collective bargaining. The 
practice of disregarding employees' entitlement to social security, in particular during maternity leave for employed mothers and mate rnity for the unemployed, has been common. 
No steps have been taken to harmonise the le gislative frameworks. Th e lack of a unified 
pension structure is also a problem, which ha s been recognised by the European Court of 
Human Rights in a decision issued in November 2007.  
With regard to anti-discrimination policies , the State and Entity constitutions guarantee 
equal treatment of all people. A comprehensiv e anti-discrimination law has not yet been 
adopted. Anti-discrimination legislation exists in  several areas, but im plementation has been 
deficient. Social discrimination and exclus ion of people belonging to the lesbian, gay, 
bisexual, transgender (LGBT) community is wi despread. Acts of intimidation against these 
groups have occurred. This is exacerbated by the State’s informal and formal support to such 
attitudes and the lack of a proper anti-discri mination legislation and implementing measures 
regarding sexual orientati on and gender identity. 
Progress has continued in the areas of property rights and land administration reform. The 
mandate of the Commission for Property Clai ms of Displaced Persons and Refugees was 
extended until the end of 2008 to address residu al property repossess ion cases. Improvements 
to legal security of transactions were noted after notaries took office in Republika Srpska in 
March 2008 and in the Federation in May 2008 . A new technical regulation on management 
of real estate cadastre information came into force in April 2008 in the Federation. However, 
the law on property rights is not yet in place in Republika Srpska.  
Overall, little progress has been made in the ar ea of economic and soci al rights. Progress on 
property rights has continued. In troduction and implementation of  legal provisions to prevent 
discrimination and to protect the rights of wo men, children, disabled and socially vulnerable 
persons, as well as LGBT people, has been poor  overall. There have been no improvements in 
the area of labour rights  and trade unions.  
EN 20   EN Minority rights, cultural right s and protection of minorities 
As regards minority rights, cultural rights  and the protection of minorities , there are 17 
officially recognised minorities in Bosnia a nd Herzegovina. The three constituent peoples – 
Bosniaks, Croats and Serbs – do not constitute minorities.  
Bosnia and Herzegovina is party to the Council of Europe Framework Convention for 
National Minorities, but ratification of the European Charter for Regional or Minority 
Languages is still pending. The Council of National Minorities at State le vel, which performs 
an advisory function to the Parliamentary Assembly, was established in February 2008. A 
National Minorities Council is functioning in  Republika Srpska, bu t has not yet been 
established in the Federation.  
Bosnia and Herzegovina's legislation provi des free broadcasting time for minorities. 
However, greater emphasis on capac ity-building is necessary in order to allow minorities to 
exercise their rights to media representation. Access to education and employment continues 
to be difficult for disadvantaged and margin alized groups, such as ethnic minorities.  
No progress has been made on reforming th e Bosnia and Herzegovina constitution, and 
minorities therefore continue to be excluded fr om the House of Peoples and the tripartite 
Presidency.  
Despite further improvements in the security situation, further progress on improving the 
socio-economic integration of refugees and internally displaced persons has been slight . 
The revision of the Strategy of Bosnia and He rzegovina for implementation of Annex VII to 
the Dayton Peace Agreement can be considered a si gnificant effort on the part of the State and 
Entities to finalise the process of return. The num ber of returnees has subs tantially declined in 
recent years, but the process has not yet been  completed. There are still some 125 000 persons 
who wish to return to their original place of residence. However, this is not matched by an 
adequate supply of reco nstructed housing. Returnees still fa ce discrimination in employment, 
access to health care, education, pensions and so cial rights - especially when returning to 
areas where they are in a minority position. This remains the biggest obstacle to a sustainable 
return.  
The process of de-mining in Bosnia and He rzegovina is continuing. In April 2008, the 
Council of Ministers adopted a Stra tegy for Anti-mine Action for 2009-2019.  De-mining is 
important to facilitating the return of refugees  and displaced persons and is a precondition for 
development of a number of sectors of the econo my, such as transport, agriculture or water 
management. Insufficient funds remain the main obstacle to faster progress with de-mining. As regards missing persons, the Bosnia and Her zegovina Institute for Missing Persons came 
into operation in December 2007. The main prec ondition before it could begin its work was 
the transfer of authority from the Entity commissions to the State level. Nevertheless, the institute's operations remain affected by the l ack of support from the authorities of Republika 
Srpska.  
A review of citizenship grante d during and after the war was car ried out during the reporting 
period. The State Commission for the Review of Decisions on Naturalisation of Foreign 
Nationals in Bosnia and Herzegovina has propo sed to revoke the citiz enship of over 650 
persons. The State Commission is continuing its work.  
EN 21   EN As regards Roma , Bosnia and Herzegovina joined th e Decade for Roma  inclusion 2005-2015 
in September 2008. At the same time, the Coun cil of Ministers adopt ed an Action Plan on 
Roma housing, health and employment and a D ecision establishing a Coordination Board to 
monitor its implementation. It is important that  sufficient financial re sources are earmarked 
for implementation of this Action Plan. 
However, despite these efforts, Roma continue  to be the most vulnerable minority. Lack of 
civil registration of Roma continues to be problematic: many Roma families have no health insurance and cannot benefit fr om social services. No syst ematic housing assistance is 
provided to Roma. The 2004 Action Plan on the Educational Need s of Roma and Members of 
Other National Minorities is poorly implemented due to lack of financial resources and non-
allocation of specific responsibilities for its implementation. The rates of school attendance 
and Roma refugee return remain much lower th an for other citizens, with extreme poverty as 
one of the main causes of exclusion from e ducation. Despite allocation of funds for the 
purchase and distribution of text books to Roma and other vulnera ble pupils in the school year 
2007/2008, some cantonal and municipal authoritie s reportedly failed to distribute the books.  
Overall, Bosnia and Herzegovina's progress in th e area of minority righ ts, cultural rights and 
protection of minorities has been limited. One positive development has been the 
establishment of the Council of National Minorities at State level. However, enforcement of provisions regarding minorities is weak. Bosnia and Herzegovina needs to take further steps 
and ensure sufficient financial resources to support the Roma population which continues to 
face very difficult living conditions and discri mination. Efforts to address the problems of 
returned refugees and internally displaced pe rsons with access to employment, health care, 
education, pensions and social rights need to be stepped up. 
2.3. Regional issues and international obligations 
Implementation of the Dayton/Paris Peace Agreement has continued, but nationalist 
rhetoric by political leaders from all constitu ent peoples challenging the Agreement and the 
constitutional order has been frequent ( see also section 2.1 Constitution - for further details).   
Bosnia and Herzegovina is still subject to the monitoring procedure of the Parliamentary 
Assembly of the Council of Europe (CoE) on verifying the obligations and commitments 
relating to its membership in the Council of Europe. Th ere has been no significant 
improvement in addressing the outstanding issu es. Bosnia and Herzegovina has failed to 
appoint members or candidates to several Council of Europe  monitoring mechanisms and 
advisory bodies.  
Bosnia and Herzegovina's cooperation with the International Criminal Tribunal for the 
former Yugoslavia (ICTY) , which is a key European Partnership priority,  has continued to 
improve and has reached a generally satisfact ory level. Cooperation between ICTY and the 
State level and Entity authorities is adequate at an operational level, and access to witnesses and archives has been good. In Republika Srps ka, an Action-Plan on cooperation with the 
ICTY was drawn up in March 2008 and a coordi nation team for war crimes investigations 
was established. The arrests of Radovan Karadzic and Stojan Zupljanin in Serbia, indicted for 
war crimes committed in Bosnia and Herzegovina, is also a positive development. In January 2008, the Council of Ministers a dopted a decision on provisiona l measures freezing the funds 
and economic assets of the f ugitive ICTY indictees. In 2008, 38 proceedings against 41 
individuals were initiated. In  March 2008, the Council of Minist ers aligned its elf with the 
EN 22   EN relevant EU Joint Action and issued a decisi on tightening controls on people banned from 
entering or transiting through Bosnia and Herzegovina.  
However, Bosnia and Herzegovina  needs to step up its effo rts to combat the networks 
supporting indicted war criminals. According to the ICTY, Republika Srpska has failed to 
take appropriate action to have  Radovan Stankovic re-arrested after his escape from prison 
there in 2007.  
As regards war crimes , the State Court has continued to perform its duties well. Ten accused 
have been transferred from The Hague to the Special War Crimes Chamber in Bosnia and 
Herzegovina under rule 11 bis, a nd four of these trials have been completed. A significant 
number of other war crimes indictments and trials have been launched by prosecutors in 
Bosnia and Herzegovina. In September 2008, th ere were 61 ongoing war crimes cases, of 
which 23 were at State level, 23 in the Fede ration, 13 in Republika Srpska and two in the 
Brčko District. 
Further funding will be required for the War Crimes Department in the Office of the 
Prosecutor of Bosnia and Her zegovina to secure continuity  in the prosecution of war 
criminals. The number of untried war crimes cases remains high, with estimates varying between 10,000 and 16,000. The different courts in Bosnia and Herzegovina continue to use different criminal codes for trying war crimes . This practice leads to differences in the 
sentences imposed and does not make for a consiste nt system of justice. There is also a lack 
of witness protection and witness support, combined with  insufficient cooperation between 
prosecutors and police.  
In July 2008, Bosnia and Herzegovina ratif ied the European Convention on the Non-
Applicability of Statutory Limitation to Crimes against Humanity and War Crimes.  
As regards the International Criminal Court  (ICC) , Bosnia and Herzegovina still maintains 
the bilateral immunity agreement with the Un ited States of America granting exemptions 
from ICC jurisdiction which does not comply wi th the EU Common Positions on the integrity 
of the Rome Statute, as well as related EU  guiding principles on bilateral immunity 
agreements. It needs to a lign with the EU position.  
No significant progress has been made by the countries of the region on implementing the 
Sarajevo Declaration , the aim of which was to complete the regional refugee return process 
by the end of 2006. A working group meeting, he ld in October 2007, reached agreement on a 
number of issues concerning regional cooperatio n on refugee return. However, there has been 
no progress on resolving the issues related to  compensation claims from those who lost 
occupancy and tenancy rights (OTRs).  
Regional cooperation  and good neighbourly relations  form an essential pa rt of the process of 
Bosnia and Herzegovina moving towards the European Union. 
Bosnia and Herzegovina continues to be an  active participant in  regional cooperation 
initiatives, such as the tran sition from the Stability Pact  to a more regionally-owned 
framework with the South-East European Cooperation Process (SEECP) and the Regional 
Cooperation Council (RCC), the Central European Initiative, the Adriat ic-Ionian Initiative 
and the Danube Cooperation Process. The RCC, with its headquarters in Bosnia and 
Herzegovina, was officially inaugurated in Fe bruary 2008. Bosnia and Herzegovina ratified 
the Host Country Agreement in April 2008.  
EN 23   EN In May 2008, Bosnia and Herzegovina, Croati a and Montenegro signed a Declaration on 
cross-border cooperation in the ev ent of natural and other disasters and in the area of natural 
resources management. Furthermore, the "Neum Initiative" has been established between neighbouring municipalities in Bo snia and Herzegovina, Croatia  and Montenegro. The main 
focus of this initiative is to promote coopera tion between local communities in the areas of 
tourism, environmental protection and de velopment of transport and water supply 
infrastructure.  
Bosnia and Herzegovina has been implementi ng the Central European Free Trade Agreement 
(CEFTA) and the European Common Aviation Area (ECAA) agreement. Bosnia and Herzegovina is party to the Energy Community Treaty but, du e to opposition from Republika 
Srpska, continues to lag behind  in meeting its obligations unde r the Treaty, especially in 
relation to the gas sector.  
Bosnia and Herzegovina acceded to the Union fo r the Mediterranean/the Barcelona Process in 
July 2008.  
As regards peaceful settlement of border disputes , there has been no progress on addressing 
the open border issues with Croatia. The 2005 Agreement between Bosnia and Herzegovina 
and Croatia on demarcation of th e land and river borders has not  yet been ratified. Moreover, 
the dispute over two islands – Veliki Skoj a nd Mali Skoj – remains unresolved, as does the 
issue of the border along the River Una. No border agreement between Bosnia and Herzegovina and Serbia has been signed ye t. There are no open border issues with 
Montenegro.  
On the whole, bilateral relations with ot her enlargement countries  have continued to be 
good. However, there has been very little progre ss in resolving outstanding issues, which is a 
key European Partnership priority.  
Relations with Croatia  have remained stable. An agre ement on police cooperation has been 
concluded. However, there has been no progr ess on addressing other outstanding issues. 
Bosnia and Herzegovina has no t yet ratified the agreement on dual citizenship. There have 
been no developments on the agreement on use of the Port of Plo če. Bosnia and Herzegovina 
objects to Croatia's plans to construct a bridge on the Peljesac peninsula, which it claims could restrict Bosnia and Herzegovina's access to the sea. Other unresolved issues include property and refugees.  
Relations with Serbia  have remained stable. However, no meetings of the Interstate 
Cooperation Council have taken place and there has been no progress on addressing issues 
related to property. The Serbian political leadership assessed the High Representative's decisions concerning the decision-making proce dures in the Bosnia and Herzegovina Council 
of Ministers and in the Parliamentary Assembly as a violation of the Dayton/Paris Agreement. 
This led to exchanges of sharp statements between Bosnia and Herzegovina and Serbia. 
Despite Serbia's progress in co mplying with the International Court of Justice's 2007 ruling on 
the case concerning the a pplication of the Convention on the Prevention and Punishment of 
the Crime of Genocide, opinions about the implem entation of that ruling continue to differ.  
Republika Srpska has continued to cooperate clos ely with Serbia on the basis of the Special 
Parallel Relations Agreement. In January 2008, the Republika Srpska National Assembly and 
the Serbian parliament signe d a Protocol on Cooperation.  
Bosnia and Herzegovina has not recognised Kosovo's declaration of independence. 
EN 24   EN Relations with Montenegro  are good and have further intens ified. Agreements on cooperation 
in the area of defence, police cooperation, civi l protection and cross-bo rder cooperation have 
been signed.  
Relation with the former Yugoslav Republic of Macedonia  are good, both in the bilateral and 
the regional context. Agreements on readmission,  police cooperation and civil protection have 
been concluded. 
Relations with Albania  have intensified, and Bosnia and Herzegovina has decided to open an 
Embassy in Tirana.  
Relations with Turkey  have remained good.  
Bilateral relations with the EU Member States  remain good. The EU is Bosnia and 
Herzegovina's main trading partner, in particular Germany , Italy, Austria  and Slovenia .  
Overall, Bosnia and Herzegovina has con tinued to implement the Dayton/Paris Peace 
Agreement, although political statements chal lenging it have become more frequent. The 
country has made progress on cooperation with the ICTY.  
Bosnia and Herzegovina has continued to part icipate actively in regi onal cooperation. Good 
neighbourly relations have prev ailed, but there has been litt le progress on addressing the 
outstanding issues, notably relating to the settlement of border di sputes, property and 
refugees. 
3. E CONOMIC CRITERIA  
In examining the economic developments in Bosnia and Herzegovina, the Commission’s 
approach was guided by the conclusions of th e European Council in Copenhagen in June 
1993, which stated that membership of the Un ion requires the existence of a functioning 
market economy and the capacity to cope with competitive pressure and market forces within 
the Union. 
3.1. The existence of a functioning market economy 
Economic policy essentials 
In December 2007, the government submitted its second Economic and Fiscal Programme for 
2008-2010, which aims to consolidate the fiscal position and to improve the quality of public 
finances, inter alia by reducing the share of public spending in GDP. To a large extent, 
however, the objectives are not backed by concrete policy meas ures and the budgets adopted 
for 2008 do not fully reflect the scenario de scribed above. Progress was made by reaching 
consensus on the fundamentals of economic polic y and inter-entity cooperation in a number 
of important areas. In particular, a commitme nt was made to improve  fiscal coordination 
through the adoption of the law on the National Fiscal Council and the inauguration of the 
Council in early September. Also, the Governi ng Board of the Indirect Taxation Authority 
agreed on a methodology for the coefficient to determine the allocation of indirect tax 
revenues. Direct taxes were reduced and legi slative measures were taken to avoid double 
taxation in Bosnia and Herzegovina (BiH), albeit the latter remains an issue with regards to 
the Brčko District. On the other hand, in the Fe deration of Bosnia and Herzegovina 
(Federation) the commitment to pursue structural  reforms has remained weak and the quality 
EN 25   EN of public spending has actually deteriorated. Ov erall, political consensus on market-based 
economic policy was maintained. Inter-entity consensus on cooperation in certain economic 
policy areas improved, but the commitment to structural reforms and sound public finances 
remained uneven across the country. 
Macroeconomic stability 
Real GDP growth remained high at 6.8% in  2007, close to the 6.7% recorded in 2006. 
Economic growth in 2007 was driven by a stro ng increase in domestic demand, as evidenced 
inter alia by a widening of the current acco unt deficit and a pick-up in core inflation 
(excluding food and energy prices).  The acceleration of domestic le nding together with fiscal 
relaxation fuelled economic growth by stimul ating both consumption and investment. The 
good economic performance was achieved agai nst a background of unf avourable domestic 
and external conditions, namely: a drought that affected agricultural output and the production 
of electricity from hydro-power plants, the evolvi ng international financial crisis, the increase 
in international energy and food pr ices and volatility of the pri ce of aluminium. As a result, 
gross value added was almost flat in real terms in the agriculture and utilities sectors, detracting from the double-digit growth rate s recorded in financial intermediation, 
construction and manufacturing.  
Growth in industrial output more than halved in 2007 compared to 2006 in the entire country 
and was close to stagnation in the Republika Sr pska (RS). The growth of industrial production 
in the Federation slowed from 10.4% in 2006 to 8.6% and declined significantly to 1.4% in 
the RS following a record level of 19.1% in 2006. The slowdown in the RS was primarily due 
to the overhaul of produ ction capacities in the mining and oi l industry and decl ining output in 
the utilities sector, while th e manufacturing sector moved ahead by 4.1%. Also in the 
Federation, utilities underperformed in 2007, bu t output growth rates in manufacturing and 
mining were strong at 11.7% and 5.6%, respectiv ely. In the first eight months of 2008, the 
year-on-year growth of industrial production st ood at 5.4% in the Federation and 8.4% in the 
RS. In both entities, energy production recovered and even  outstripped the processing 
industry whose output increased by only 5.6% in the Federation and 2.6% in the RS. The shift 
towards higher value-added activ ities remains sluggish in both entities. There has been only a 
modest improvement in the quality of statistica l information. The per cap ita income of Bosnia 
and Herzegovina, measured in purchasing po wer standards (PPS), was 26% of the EU-27 
average in 2006 and increased by around two per centage points in 2007. Overall, economic 
growth in 2007 remained fairly high.  
After narrowing temporarily to 8.4% of GDP in 2006, the current account deficit widened 
again to 12.7% of GDP in 2007. This development reflects the adverse effect of global food 
and energy prices on BiH's im ports and the large swings in import and export patterns 
following the introduction of VAT in January 2006. As a result, the trade deficit widened 
from 35% of GDP in 2006 to around 37% of GDP in 2007, as imports rose by around 19% 
year-on-year, outperforming the 15% growth of exports. The positive balances of services, 
income and current transfers declined as a percentage of  GDP from 2006 to 2007, 
compounding the deterioration of the trade defi cit. During the first ha lf of 2008, the current 
account deficit widened notably by  almost 60% compared to the same period a year earlier. 
This deterioration was due to the expansion in the trade defi cit by 24.1% year-on-year, as the 
value of imported goods rose by 19.6% year-o n-year, exceeding the corresponding increase in 
exports by 5.6pp. A number of branches, such  as mining and manufacturing of wood 
products, base metals and motor vehicles, show ed signs of slowing down. Other components 
of the current account improved in an annual co mparison with the first half of 2007: The 
EN 26   EN services balance rose by 19.9% on the back of well performing t ourism and transport sectors, 
while the income balance increased by 24. 3%. In conclusion, despite a temporary 
improvement in 2006 external imbala nces widened again in 2007 and 2008.  
In 2007, the current account deficit was fully  financed from net FDI, as the major 
privatisations of Telekom Srpska  and the RS refineries contribu ted to a surge in net FDI to 
13.3% of GDP, thus replacing, albe it temporarily, the financial s ector as the traditional main 
destination for FDI. Together with other strong  financial inflows, such as private sector 
remittances that accounted for around 17% of GDP, net FDI led to an annual increase of 
around 23% in official foreign exchange reserves at the end of 2007. In the first six months of 
2008, however, net FDI declined strongly compared to the same period in the previous year 
and covered only 24% of the current account deficit, highlighting its overdependence on 
privatisations and insufficient green-field investment and revealing potential vulnerabilities in the context of global financial turmoil. As a result, it was mainly fi nanced through portfolio 
investments, a drawdown of the commercial banks ' foreign assets, new external trade credits 
and a marginal fall in the central bank's official foreign exchange reserves. Total external debt 
is estimated at around 50% of GDP. So far, the international financial crisis has had only a 
limited direct impact on the ec onomy although it may have c ontributed to declining FDI 
inflows and decreasing external loans. Moreover,  the widening current account deficit creates 
additional external financing needs rendering the economy vulnera ble to possible disruptions 
in capital flows. The risk of a sudden stop or  reversal of capital flows seems limited, but 
higher risk premiums and refina ncing costs could put further pr essure on the external side.  
The results of the Labour Force Survey (ILO standards) of May 2008 show the 
unemployment rate in BiH falling to 23.4% of th e labour force, from 29% a year earlier. 
Labour force participation remains very low, at  about 44% of the total working age population 
and informal employment is still high. Inform al economic activities are fuelled by a poor 
regulatory framework, inappropriate tax and expenditure policies and weaknesses in law 
enforcement. Labour market indicators continue to be somewhat more favourable in the RS, 
where the activity rate remained around 47% against 42.4% in the Federation, while the 
unemployment rate declined to  20.5% and to 25% in the Fede ration. Starting in the second 
half of 2007 and continuing in 2008, registered  labour data show employment growing faster 
in the Federation. However, the increase in registered unemployment in 2007, largely as a 
result of the Law on Demobilised Soldiers and Their Families, prevented the unemployment rate falling even more. Slow expansion of produc tive capacities and structural rigidities - high 
rates of social contributions , distorted wage-setting mechan isms, high and poorly targeted 
social transfers and low labour mobility - hamper job creation and labour market participation. On the other hand, the setup of a pension reserve fund an d the drafting of the 
law on voluntary pension funds sets off the reform of the pension system towards 
individualised savings plans in the RS. Overall, unemployment remains very high, although 
improvements can be noted.  
The monetary policy of the Central Bank of Bo snia and Herzegovina (CBBH) continued to be 
conducted under a currency board arrangement, with  the euro as the anc hor currency. As of 
January 2008, the CBBH increased the reserve requirements rate from 15% to 18%, with a 
view to slowing down credit growth, which ha d accelerated from an annual 23.4% at the end 
of 2006 to 28.5% at the end of 2007. The measure was successful in the sense that the credit 
growth rate did not cont inue this upward tre nd but stabilised at ar ound 29% during the first 
half of 2008, though the trend could also not be reversed. Credit growth was also influenced 
by the relaxation of the banking prudential regula tions on liquidity risk  management, rising 
input prices translating into a higher demand for working capital loans and greater overall 
EN 27   EN credit availability through th e operation of the RS Invest ment-Development Bank. The annual 
growth of broad money slowed from around 25% at the end of 2006 to 14% at the end of June 
2008. Its coverage by foreign exchange reserves declined marginally, but remained sufficient 
at around 84% at the end of June 2008. Inflation started to pick up in the second half of 2007, 
driven by an increase in the pr ices of food, energy and transport and reached an annual rate of 
4.9% in December. It further accelerated to 9.9% in July 2008, before coming down to 9.5% 
in August. The annual average inflation of th e first eight months of 2008 stood at 8.0% in 
BiH, after 1.5% in 2007. In conclusion, the curr ency board arrangement continued to function 
smoothly, despite a relative acceleration in the growth of domestic lending. 
The large increase in  public spending that was initiated in 2006 in the cont ext of the fiscal 
space created by the introduction of VAT con tinued in 2007 and 2008. From 2005 to 2007, 
public spending in BiH increased by 4.5% of GDP from an already high level. In 2007, the 
good performance of budget revenues growing by around 15% from 2006 could not prevent a 
deterioration of the fiscal posit ion. Moreover, collection of indi rect revenues is projected to 
decelerate in 2008, following trade liberalisati on under the Stabilisation and Association 
Agreement (SAA) and increasing VAT refunds,  even though for the first half of 2008 an 
annual increase of 8% can be registered. As a result, the su rplus of close to 3% of GDP 
recorded in 2006 which declined  to 1.3% of GDP in 2007 may tu rn into a deficit in 2008. In 
2007, public spending grew strongly  in both entities and less so at the State level. In the 
Federation, the quality of public spending wors ened, as the increase in expenditures was 
mostly accounted for by higher government consum ption and higher social transfers fuelling 
private spending. Following the adoption of the laws on demobilised soldiers and civilians with disabilities, social tran sfers surged at an annual ra te of close to  30% in 2007. 
Expenditures rose further in 2008 and led to liquidity problems in May. In 2008, total public spending in the Federation is projected to increa se by another 3% of GDP. At the same time, 
there was an acceleration of public investment in both entities, which is necessary in order to 
make up for the declining number of donor-finan ced projects. However, only in the RS did it 
account for a large part of the overall increase in spending, reaching almost 6% of GDP last 
year. The public sector wage bill rose shar ply in 2007, by around 19% in the RS and 15% in 
the Federation. In the RS, there was a further acceleration in the grow th of public sector 
salaries in 2008, as they are gradually catching up  with those at State and Federation levels. In 
general, slippage in public sector wage s and social transfer s is undermining the 
competitiveness of the private sector and fiscal sustainability.  
The reform of direct taxation continued its  progress as the Federation followed up on the 
changes initiated last year by the RS and reduce d the corporate income tax rate from 30% to 
10%, aligning it with the rates in the RS and Br čko District. The law also avoids double 
taxation within BiH. In addition, the Federation simplified the personal income tax system by 
introducing a 10% income tax rate on overall income as of 1 January 2009. The Federation 
enacted changes to the social secu rity legislation, but the reducti on of the overall rate of social 
contributions does not address sufficiently the issue of the high labour tax wedge. The 
adoption of the law on salaries in the BiH institutions and the reform of public wages in the RS simplified the wage structure and consolidated some allowances with wages. At the same time, the reforms are expected to  increase the wage bi lls further in 2008 (thi s is already being 
seen in the RS) and also to establish a wage  indexation mechanism at State level, with 
negative fiscal spill-over effects beyond 2008. The establishment of the National Fiscal 
Council should contribute to better fiscal coordination and disciplin e in the country. In 
conclusion, there has been continued fiscal slippage in 2007 and 2008, accompanied by a deterioration in the quality of public spending in the Federation.   
EN 28   EN The external public debt of Bosnia and Her zegovina continued to decline, from around 21% 
of GDP at the end of 2006 to 18% at the e nd of 2007, and it further decreased by 2.1% during 
the first half of 2008. Domestic public debt, on the other hand, accumula ted further as both 
entities are implementing the legislation on the settlement of liabilities from frozen foreign 
currency deposits and from war damages. It is estimated at around 12% of the entity's 2007 GDP in the Federation and 24% in the RS. Total public debt is estimate d to have increased 
from 22% of GDP in 2006 to 30.5% of GDP in 20 07. In addition, the bill on restitution, which 
has not yet been adopted, may jeopardise fiscal sustainability if it fa ils to align financial 
compensation with the budget’s lo ng-term ability to pay. Finally , the issue of quasi-fiscal 
deficits stemming from the accumulation of budget  arrears and other liab ilities by state-owned 
enterprises (SOEs) in respect of employees and suppliers rema ins largely unaddressed in the 
Federation, which further adds to the fiscal  risks. Debt management improved as the 
Federation adopted a new Debt Law which limits  government borrowing, similar to the laws 
passed in the RS and at State level. In conclusi on, progress has been made in settling domestic 
claims, which will gradually increase the current level of indebtedness. 
The macroeconomic policy mix worsened in 2007 a nd in the first half of 2008. Fiscal risks are 
mounting, in particular in the Federation, where large commitm ents on social spending were 
made in a context of decelerating budget revenues. In addition, the public sector wage policy has been relaxed at all government levels through wage increases and wage indexation 
mechanisms that weaken fiscal sustainability  and external competitiveness. The monetary 
policy was aimed at tightening cr edit conditions, but was not fully  coordinated with decisions 
in the area of banking prudential regulation s. Overall, the macroeconomic policy mix 
worsened as the fiscal policy became strongly expansionary, fuelling in flationary pressures 
and the widening of the current account deficit.  
Interplay of market forces 
After the large privatisations in  2007, RS continued to make progr ess in privatisation, and so 
far around 68% of the initial stock of state-owned capital slated fo r privatisation has been sold 
and about 15% of the same stock was transferre d into public funds for pension insurance and 
restitution. Apart from the succe ssful sale of strategic enterp rises, the process was slowed 
somewhat by changes in the legal framework,  which transferred privatisation sales and 
management competences to the RS Inve stment-Development Bank. In 2007, around 18 
companies were privatised, while in the period from January to September 2008, 13 additional companies were sold. In July, the new Law on Takeover of Shareholding Companies in the 
RS entered into force. The privatisation proces s almost came to a halt in the Federation in 
2007 and the first half of  2008, mainly due to the conflicti ng interests involved, a complex 
decision-making structure and sizable social an d financial obligations accrued by the SOEs. 
Between October 2007 and June 2008, the Federation sold stakes in only five companies and 
the privatised capital remained at around 41% of the initial stoc k slated for privatisation. The 
cancelled tenders for some strategic companies (e.g. Energoinvest and Hi drogradnja) were not 
reissued and the sale of Aluminij d.d. Mostar remains in limbo due to  negotiations over the 
subsidised power price. The Federation governme nt submitted a new privatisation strategy to 
the Parliament, which – if approved – should unblock the privatisati on process, also by 
defining options for the sale of the telecom op erators. Neither entity yet has any concrete 
plans regarding the privatisation of the utilitie s sector. The share of the private sector as a 
percentage of GDP rose to approximately  60% in 2007. In conclusion, progress in 
privatisation continued to be uneven across the country.  
EN 29   EN Market entry and exit 
The implementation of a single business registra tion system has largely been completed and 
the number of days and the procedural requirement s to register a busine ss have been reduced. 
Courts in the BiH, the fiscal administration o ffices and the statistics agencies have been 
networked. The regulatory impact analysis aimed at reducing red tape, known as the 
"guillotine process", was completed in the RS , while the Federation started it. Bankruptcy 
procedures have improved and the number of cases initiated and closed by the courts has 
gradually increased. The RS has amended the Law on Bankruptcy Procedure, which includes 
limiting the bankruptcy procedure to a maximum of one year. Over one hundred  non-viable 
SOEs are in bankruptcy procedures in the RS. It is also now quicker and easier to obtain 
construction permits and to register propert y. At the same time, only limited progress was 
made in improving the procedures for obtai ning licences, enforcing contracts, employing 
workers or paying taxes – all of which make doi ng business rather difficult. Overall, company 
and property registration, and d ealing with construction licen ces and bankruptcy procedures 
have improved, but market exit remains ineffect ive, in particular for insolvent SOEs. Further 
efforts are needed to improve the business environment. 
The legal system 
The functioning of the judicial  system improved slowly and the courts processed a higher 
number of cases than those submitted in 2007. Ev en so, a total backlog of about 1.9 million 
cases was recorded at the end of 2007 (inc luding approximately 1.2 million cases of unpaid 
utility bills). A Backlog Reduction Project has been launched and concrete results are expected in particular with regard to ut ility bills and minor offence cases. A Case 
Management System has been gradually introduced  into courts, leading to an improvement in 
the management of cases. The authorities have not yet established commercial courts. Closing 
a business and enforcing contracts has become somewhat easier as a result of improvements 
in bankruptcy legislation. Wide spread corruption, and also crim inal activities, affect the 
business climate and have a negative impact on the quality of public services. Overall, the 
judicial system has slowly improved; however, the existing backlog of unsolved cases and the 
slow processing times are hampering the enfo rcement of creditor and property rights.  
Development of the financial sector 
Banks continue to dominate the financial sector  and their assets surg ed to around 93% of GDP 
in 2007, up from around 77% in 2006, triggered by th e acceleration in the growth of domestic 
credit and a significant increase in  short-term foreign assets on th e basis of the funds received 
from the privatisation of RS Telecom. Ther e were 31 banks operating at the end of 2007 
(compared to 55 in 2000), with foreign capital c ontrolling about 83% of the total bank capital. 
Only three banks remain in public hands, a nd all three are under provisional administration. 
The five largest banks held around 57% of the total asse ts of the banking sy stem at the end of 
2007, slightly less than in 2006. Together with the narrowing of interest spreads, this shows 
that bank consolidation is not obstr ucting competition in the market.  
The non-bank financial sector is expanding ra pidly. Four new leasing companies began 
operating last year, bringing the total number of  companies to ten. Leasing contracts worth 
approximately € 380 million (3.6% of GDP) were  concluded in 2007; this figure was 62% 
higher than in 2006. At the end of 2007, there were  12 microcredit organisations active in the 
Federation and six in the RS. The sector origin ated some € 500 million in new loans (4.6% of 
GDP) - a 61% increase over 2006. In the insura nce sector, 25 active companies collected 
EN 30   EN around € 200 million in insurance premiums (1.9% of GDP) in 2007, which was 12% more 
than in 2006. The adoption of new bylaws on financial reporting and solvency margins in 
2007 is expected to enable the uniform functioni ng of the insurance sector in the country. The 
stock markets have undergone a major correctio n since the second half of 2007 and the main 
indices have lost around 60% of their value sin ce October 2007. Nonethele ss, total turnover at 
both the Sarajevo and Banja Luka Stock Excha nges in 2007 increased by more than 90% over 
2006. Their combined market capitalisation incr eased to 111% of GDP in 2007 from 99% of 
GDP in 2006, but declined in 2008. The bond mark et started to develop through the issuance 
of government securities, municipal and corpor ate bonds. In conclusion, the financial sector 
develops rapidly.  
Financial stability indicators continued to strengthen in 2007, as they too were influenced 
favourably in the short-term by the high rate of  credit expansion. Non-performing loans as a 
percentage of total loans fe ll to 1.8% in 2007 from 2.5% in 2006. The capital adequacy ratio 
was 17.1% at the end of 2007, i.e. marginally hi gher than the previous year and well above 
the legal minimum of 12%. At the end of 2007, th e average return on equ ity increased further 
to 8.9%, indicating an improvement in profitabi lity. However, profitabi lity indicators strongly 
deteriorated in the first quarter of 2008 comp ared to the first qua rter 2007. The liquidity 
situation of banks also tightened, even though it  could still be considered as good with the 
financial sector being able to meet its obligations. The authorities strengthened certain areas of financial supervision with a vi ew to increasing the stability of  the financial system. Overall, 
despite the volatility in intern ational financial markets and the rapid expansion of the financial 
sector, financial stability has largely been mainta ined and the financial sector so far remained 
relatively immune from first-wave e ffects of the global financial crisis.  
3.2. The capacity to cope wi th competitive pressure and market forces within the 
Union 
Existence of a functioning market economy 
Macroeconomic stability has weakened and economic  operators need to be able to deal with 
increased risks stemming from expansionary fiscal policies,  higher inflation and widening 
external imbalances. Structural reforms advanced in some areas and the consensus on economic reforms and coordination of policie s strengthened. However, the continuing 
excessive influence of the public  sector in the economy, in part icular slow privatisation and 
restructuring or liquidation of insolvent SOEs in the Federation, is hampering the efficient 
allocation of resources by market mechanisms.  
Human and physical capital  
Enrolment rates for secondary and higher education, including graduation rates, remain fairly 
low. The Law on Vocational Education Training has been adopted, but implementation of the 
Higher Education Law has been slow. Coordina tion between the 14 ministries of education 
has improved somewhat. In general, the education reform has been lagging behind. 
Participation in the labour market remains very poor. Active labour market programmes are 
being implemented, some of which focus on tr aining and improving the skills of job-seekers. 
However, only limited progress has been made in  removing structural ri gidities and building 
up the productive capacity. Overall, the weak  performance of the education system 
contributes to the skills mismatch that hamp ers the proper functioning of the labour market.  
EN 31   EN Investment increased to around 26% of GDP in  2007, of which about ha lf was allocated to 
machinery and equipment and some 45% to construction works in the Federation. The 
increase of FDI inflows into Bosnia and He rzegovina in 2007 brought the total stock of FDI 
per capita to around € 1,150. Upgrading of the telecommunications and transport 
infrastructure, and particularly of local road s, has continued. The penetration of landline 
telephones, mobile connections a nd internet usage has increased further. However, the growth 
of the local IT market of 13.4% in 2007 was moderate considering the very low base. Contracts have been signed for several large investments in energy a nd infrastructure. In 
2007, there was a strong acceleration in public inve stments, primarily in the RS, where they 
more than doubled in nominal terms compared to the previ ous year. In conclusion, the 
upgrading of physical capital continued at a faster pace, based on FDI inflows and higher 
public spending.  
Sectoral and enterprise structure 
The restructuring and liquidation of SOEs has made very slow progress. This process has 
been hampered by the SOE's accumulated unset tled arrears against the budget, employees, 
utilities and suppliers and by the vested intere sts of enterprise managers, trade unions and 
decision-makers. In the RS, more than a hundred SOEs are in liquidation, and the RS 
Investment-Development Bank has been carrying out financial restruct uring programmes for 
those enterprises being privatis ed. The Federation has similar en abling legislation in place, 
but instead has come forward with plans to fi nancially consolidate the loss-making mines and 
provide them with debt relief from the budget a nd from the electricity companies with whom 
they are subsequently to be merged. This has significant fiscal implications and may actually 
hold back the process of enterprise restruct uring. Liberalisation of network industries has 
continued at a slow pace. As of  1 January 2008, the electricity market was liberalised for all 
buyers, except for households. Furthermore, the unbundling in the energy sector has been further complicated by the Federation's plan  to merge the mines with the electricity 
companies. Little progress has b een made as regards the gas sect or. Current plans to privatise 
the two telecom companies in the Federation ma y facilitate the further liberalisation of the 
telecommunications sector. To conclude, progress in the restructuring an d liquidation of SOEs 
has been slow and uneven across the country. Li beralisation of networ k industries continued 
at a slow pace.  
There was a further shift in the sectoral structur e of the economy towards services, i.e. retail 
and wholesale trade, financial intermediatio n and real estate. At the same time, the 
contribution of public administration, educati on and health to gross value added in the 
economy remains fairly large, given that they have not displayed enough of an improvement. 
Exports and industrial production reveal a gradual but slow sh ift towards higher value-added 
goods. The small and medium-sized enterprise s (SME) sector is growing, and enjoys 
increased access to financing from private, public or EU funds. Lendi ng by microcredit and 
leasing companies grew by around 60% in 2007. In addition, in the RS some of the proceeds 
of privatisation are being ch annelled to SMEs through the RS  Investment-Development Bank, 
with the Federation following suit by establishing its own development bank through the transformation of the previous Investment Bank. Improvements in the business environment 
are primarily benefitting the SME sector, mainly in the shape of improved access to finance. The informal sector remains large. Overall, st ructural shifts in the economy are slow and 
SMEs continue to operate in a complex business environment.  
EN 32   EN State influence on competitiveness 
After an initial State aid i nventory for 2004-2006 was carried out in 2007, no further progress 
on improving the transparency of state-aid was made. The inventory showed that State aid 
was increasing. In 2007, budget subsid ies increased slightly as a share of GDP and are largely 
allocated to loss-making SOEs in an ad-hoc  and non-transparent manner. In addition, quasi-
fiscal deficits continue to accumulate thr ough the build-up of arrears to the budget, state-
owned utilities or employees. Overall, State intervention in the econom y is still too high.  
Economic integration with the EU 
Bosnia and Herzegovina is an open economy wi th total trade equiva lent to around 95% of 
GDP in 2007, up from about 87% of GDP in 2006. Th e real effective exch ange rate declined 
by 1.7pp from June 2007 to June 2008. The EU c ontinues to be the mo st important trading 
partner with shares of  around 57% of Bosnia and Herzegovina 's total exports and of 48% of 
its total imports in 2007, although its weight is sl ightly declining. This de cline should be seen 
in the context of the price increases for en ergy, commodities and food a nd of deeper regional 
trade integration through CEFTA. At the same time, the signing of the SAA and the entry into 
force of the Interim Agreement are likely to  deepen this relationship and expand trade 
integration with the EU. The sh are of FDI inflows from the EU  declined temporarily in 2007, 
after the major privatisations in the RS with non-EU buyers . Overall, the level of integration 
of trade and investment with the EU remained fairly high. 
4. E UROPEAN STANDARDS  
This section examines Bosnia and Herzegovina’s capacity gradually to approximate its 
legislation and policies to the acquis  related to the internal market, sectoral policies and 
justice, freedom and security, in line with the Stabilisatio n and Association Agreement and 
the European Partnership priorities. It also an alyses Bosnia and Herzegovina’s administrative 
capacity. In each sector, the Commission's asse ssment covers progress achieved during the 
reporting period, and summarises the country 's overall level of preparations.  
4.1. Internal market 
4.1.1. Free movement of goods Limited progress has been made in the area of free movement of goods.  
There have been some developments in the area of standardisation . The Institute for 
Standardisation (BAS) has increased its human resources and currently has a staff of 27. 
Progress in adopting European standards (ENs ) has continued; the Institute has adopted 
approximately 13,000 national standards, out of  which around 8,000 are European standards. 
BAS has become an affiliate member of the European Committee for Standardisation (CEN). 
As part of regional coope ration, in November 2007 BAS signed the Agreement on 
Professional and Technical Cooperation with th e Standardisation Inst itute of Montenegro. 
No progress has been made on conformity assessment . With a few exceptions, conformity 
assessment procedures are not performed on locally manufactured and imported products 
before they are released onto the market. There is no clear and coherent system for verifying 
the conformity of products. Enforcement of existing regulations is  weak. No technical 
regulations based on the product-specific acquis , including relevant conformity assessment 
EN 33   EN procedures, have been adopted. Th ere is a lack of proper confor mity assessment infrastructure 
(testing and calibration laboratories, certification and inspection bodies).  
Some progress has been made as regards accreditation . The Institute for Accreditation 
(BATA) has so far granted 32 accreditations. Four teen testing laboratories, five calibration 
laboratories, two certification bodies and eleven inspection bodies have been accredited. 
Currently, there are a total of 40 assessors and technical experts in ad dition to the permanent 
staff of 11. Further human resources are nece ssary to enable BATA to respond to future 
needs, e.g. to establish technical committees, to update the quality system documentation and 
policies and to develop accreditation schemes in  the areas where BATA is not yet active. 
Action is also necessary to prep are the Institute for future inte rnational recognition of Bosnia 
and Herzegovina's conformity assessment resu lts and for the signature of multilateral 
agreements with European co- operation for Accreditation (EA).  
Limited progress has been made in the area of metrology . Three additional ci vil servants have 
joined the Institute for Metrology (IMBiH), br inging the number of staff to 38 out of a 
planned total of 72. The Counc il of Ministers appointed 15 members to the Bosnia and 
Herzegovina Metrology Council in July 2008. A memorandum of understanding fostering 
scientific and technical coope ration was signed in May 2008 be tween IMBiH and the Office 
of Metrology of the Republic of Slovenia. E fforts to establish the necessary metrology 
infrastructure, including laboratories, have c ontinued. However, the le gislation on metrology 
is not harmonised with the EU requirements:  separation between legal, scientific and 
industrial metrology is lacking, and the legal fr amework is not harmonised within the country. 
Cooperation and coordination is needed betwee n the IMBiH and the Metrology Institutes of 
the Entities in order to avoid dupl ication of efforts and to create  a harmonised approach to the 
competence criteria for laborator ies dealing with verifications. 
There has been some progress in the area of market surveillance . The market surveillance 
system comprises the State-level Market Surv eillance Agency as an umbrella/coordination 
body and the market surveillance au thorities of the Entities and Br čko District, which carry 
out the actual surveillance activities. The Ag ency's administrative capacity has been 
strengthened with 8 addi tional staff, bringing it up to a total of 11 employees. The European 
Commission Decision laying dow n guidelines for the notifica tion of dangerous consumer 
products by producers and distributors has been tr ansposed, but has yet to be implemented. In 
March 2008, the Agency signed a memorandum of  understanding with the Indirect Taxation 
Authority, laying down cooperati on methods for exchanges of  data on dangerous products. 
Nonetheless, Bosnia and Herzegovina's market  surveillance system remains largely based on 
mandatory standards and pre-market control. Further development of the system based on 
adequate horizontal legislation and appropriate product-specific le gislation is needed in order 
to enforce the legislation on free movement of goods efficiently. 
Limited progress has been made on technica l regulations transpos ing the new and old 
approach directives into na tional legislation. The Council of  Ministers adopted a decision 
establishing coordination at decision-making level in the fiel d of quality infrastructure. 
However, no technical regulations transposing the acquis have been adopted yet and no 
internal consultation and notification mechanis ms have been established. No progress has 
been achieved as regards the old approach directives. Administrative capacity requires 
strengthening. 
The Law on pharmaceuticals and medical device s was adopted in June 2008. This law will 
contribute towards achieving a single internal ma rket within Bosnia and Herzegovina in this 
EN 34   EN sector. A set of by-laws for the proper implementation of this La w is still needed. In line with 
the Law, the Council of Ministers adopted a D ecision on the beginning of the work of the 
Agency for Pharmaceuticals and Medical Devices, which has an official seat in Banja Luka.  
As regards consumer protection , some progress has been ma de. The Council for Consumer 
Protection convened its first c onstitutional session in Februa ry 2008. For the first time, the 
country's consumer protection associations have  been granted the possibility to apply for 
funds from the State Budget. However, the St ate Annual Programme for Consumer Protection 
in Bosnia and Herzegovina for the pe riod 2008 to 2011 has not yet been adopted. 
Overall, Bosnia and Herzegovina's preparations in the fields of sta ndardisation, accreditation, 
conformity assessment, metrology, market surveillance and consumer protection remain at an early stage. Continued efforts are necessary in order to further approximate the legal 
framework to the Community legislation on free movement of goods and to efficiently 
implement and enforce it. Progressiv e transposition of product-specific acquis  needs to be 
ensured. Further strengthening of institutiona l and administrative capacity and increasing 
cooperation between the relevant  institutions is ne cessary in order to create conditions 
favourable to the internal market and trade.  
4.1.2. Movement of persons, services  and right of establishment 
Little progress has been made regarding movement of persons . Bilateral agreements on 
social insurance and social security have been  signed with Hungary and Montenegro. Bosnia 
and Herzegovina has also concl uded agreements with the empl oyment agencies of Croatia 
and Slovenia. However, movement of persons  within the country remains constrained by 
fragmented internal labour legi slation and social security syst ems. There is no portability of 
pensions within the country. In November 2007, the European Court for Human Rights issued 
a decision on this subject against Bosnia and Herzegovina. No steps have been taken towards 
granting social security benefits  for resident family members of  foreign nationals working in 
Bosnia and Herzegovina.  
Bosnia and Herzegovina is laggi ng behind with preparations in  the field of movement of 
persons. 
Concerning freedom to provide services , limited progress has b een made. The rules on 
operators from EU-Member States  who provide cross-border services and those who are 
permanently established in the country are not transparent. The banking sector has continued 
to develop and to contribute to economic growt h. Some progress can be reported with regard 
to information sharing between the Central Ba nk and the banking supervision agencies, as a 
memorandum of understanding was signed in June 2008. However, no progress has been 
made towards approximation with the EU banking acquis  nor towards the establishment of a 
single State-level supervisory ag ency for banking. Separate banki ng legislation at Entity level 
still prevails, and banks continue to be li censed and supervised by two separate Entity 
agencies. The capacity of banking regulators and supervisors needs to be reinforced. 
Immunity from legal prosecution, in line with th e "Basel principles", has not been introduced 
for the staff of the Republika Srpska Banki ng Agency. The cooperation with home banking 
sector supervisors of foreign banks operati ng in the country is still not satisfactory.  
Some progress has been made as regards insura nce. All the requisite implementing legislation 
affecting market access, including that on so lvency margins, has been adopted in both 
Entities. This has opened the way for companies fr om one Entity to operate in the other, even 
EN 35   EN though administrative procedures remain cumb ersome. The State Insurance Agency became 
observer in the International A ssociation of Insurance Supervisors (IASA) and member of the 
International Insurance Foundation (IIF): However,  the role of the agency remains limited, 
with licensing and supervision remaining the re sponsibility of the En tity agencies. Little 
action has been taken to upgrade the supervis ory enforcement capacity in this sector. A 
working group for the harmonisation of the Entities and Br čko District insurance laws has 
been established. Sectoral statistics have b een prepared. The Insurance Ombudsman has been 
appointed, but the legal framework for hi s activities has not yet been finalised. 
No progress has been made with  regard to the adopt ion of the State-le vel legislation on 
leasing and obligations, in particular due to  the opposition of Republika Srpska. Instead, the 
Entities have moved unilaterally  to develop their regulatory frameworks on leasing, with 
Republika Srpska adopting the legislation an d establishing leasing supervision under the 
auspices of its Banking Supervision Agency. Ther e has been progress in the supervision of the 
micro-credit sector, with all operators integrat ed under the supervision of the existing banking 
supervision agencies. 
The Entity securities markets st ill lack a coherent legislative and regulatory framework. 
Oversight remains fragmented between the two Entity-level securities commissions. The institutional arrangements for coordination of  capital markets policies and regulation between 
the two Entities are not in place. 
There has been limited progress with respect to postal services. A Bosnia and Herzegovina 
postal agency was established in 2006 and is now operational. Nonetheless, there are 
impediments to the proper functioning of this  sector. Legislation gove rning these services 
remains inconsistent between the State and the Entities.  
As regards the right of establishment for companies, there has been progress towards 
establishment of a simplified and more efficient business registration system. Court registration time has been shortened. However, th e overall time needed to register a business 
is still above the average. Bosnia and Her zegovina remains one of the most difficult and 
costly places in the region for setting up busine sses. Continued action is necessary to further 
facilitate business registration and to simplif y administrative procedures for companies and 
the self-employed. No progress can be report ed in the area of mutual recognition of 
professional qualifications. 
No progress has been made on developing State-level company law.  
Bosnia and Herzegovina's prepar ations in the area of services, establ ishment and company 
law remain at an early stage. 
4.1.3. Free movement of capital 
There have been no significant developments in the area of movement of capital . 
Bosnia and Herzegovina has continued to ap ply relatively liberal rules on inward capital 
flows. However, no further steps have been taken to remove the ex isting restrictions on 
outward transfers by individual re sidents and non-residents. Rest rictions also remain with 
regard to holding of foreign accounts by reside nt entities. There is a need to ensure that 
legislation concerning foreign currency operati ons is harmonised across the country in line 
with EU legislation. 
EN 36   EN Restrictions on foreign direct investment apply only to the armament and media sectors, 
where the foreign capital stake is limited to 49%. Transfers and repa triation of profits and 
remittances along with foreign currency transf ers by domestic and foreign companies have 
been liberalised. The Law on the Central Bank of Bosnia and Herzegovina stipulates that the 
authorities must not set any restrictions on paym ents and international transactions unless this 
is necessary in the light of po ssible international obligations.  
Bosnia and Herzegovina has a modern payment system  for giro clearing and real-time gross 
settlement operations. The clearing platform fo r international payments between Bosnia and 
Herzegovina and Serbia came into operation in  February 2008, making transactions through 
the payment system between the two countries cheaper and faster. Commercial banks will use 
this platform to execute payment orders for their clients.  
Overall, Bosnia and Herzegovina's preparatio ns are on track. However,  further legislative 
initiatives are needed with regard to movement  of capital, in order to approximate the legal 
framework to the acquis , to ensure countrywide harmoni sation and to achieve further 
liberalisation. 
4.1.4. Customs and taxation 
Bosnia and Herzegovina has made  good progress in the field of customs  and has been 
addressing its priorities. The implementation of customs-related provisions following the 
entry into force of the SAA Interim Agreement on 1 July 2008 has been adequate. As regards 
verification of the origin of goods, the Indirect Taxation Aut hority (ITA) became the single 
authority in Bosnia and Herzegovina authoris ed to request and verify EUR 1 movement 
certificates for trade with the EU and CE FTA. A number of training sessions on 
implementation of rules of origin have been organised for ITA staff, the business community 
and the Chambers of Commerce. Nevertheless, ther e is a need for specialised training on rules 
of origin (diagonal cumulation). Bosnia and Her zegovina's nomenclature for the classification 
of goods has been aligned with the EU Comb ined Nomenclature. Regular updates are now 
necessary. 
The instructions regarding the minimum valuation price list for imports of certain goods have 
been abolished, and GATT-compliant instructions  on valuation have been issued. However, 
additional efforts, including cl earer instructions and training of customs officers, remain 
necessary to ensure harmonise d implementation of the valua tion rules across the country. 
Five free-trade zones exist in Bosnia and He rzegovina and operational surveillance of these 
zones comes under the authority of the ITA Cu stoms Department. It is important that 
legislation applicable in free zones is compatible with the acquis  and that adequate 
supervision is performed in these areas. 
The compliance with the Interim Agreement of  Bosnia and Herzegovina's regime for the 
import of used cars needs to be determined.  
In accordance with the SAA, since 1 July 2008 Bosnia and Herzegovina has not been 
applying any charges having an equivalent effect  to customs duties on products originating in 
the EU. 
ITA's Law Enforcement Unit has achieved signifi cant results. Compared with 2006, the value 
of temporarily seized goods increased by 14 6% in 2007 and totalled approximately 
€7.0 million. The number of reports submitted to  the Prosecutor's offices increased by 17%. 
EN 37   EN The memorandum of understanding on coopera tion between ITA and the border police is 
operational. ITA has been involved in joint opera tions against organised crime, resulting, for 
instance, in the discovery of an illegal cigarette  factory and confiscation of cigarette-making 
machinery, including several tonnes of tobacco and of counterfeit excise banderols.  
ITA is carrying out a gap needs assessment and formulating a long-term strategy paper on the 
basis of the EU customs blueprints. In 2008, ITA became member of the World Customs 
Organisation (WCO).  
Overall, preparations in the area of custom s, both as regards legislative alignment and 
administrative capacity, are advancing. However, Bosnia and Herzegovin a needs to continue 
its efforts to align its customs legislation with the acquis . Problems of enforcing the 
legislation properly remain; operational instructi ons are to be drafted and agreed. Particular 
efforts are necessary to enforce intellectual,  industrial and commer cial property rights. 
Furthermore, a customs strategy on business, human resources management, information technology and training ha s to be developed. 
Some progress can be reported as regards taxation.  In January 2008, ITA established the 
Single Indirect Taxpayers Register. This covers  value-added tax (VAT) taxpayers, excise duty 
products, registration for forei gn trade exchange and internat ional forwarding registration.  
VAT collection improved in 2008 as a result of increasing economic activity and the growing 
number of registered VAT taxpayers. The VAT  legislation is largely in line with the acquis.  
Attempts to introduce a 0% or reduced VAT rate on certain goods have been unsuccessful. Bosnia and Herzegovina needs to ensure that  any amendments made in this area do not 
undermine the achievements so far in terms of a pproximation to EU legislation. It also needs 
to develop computerised management and analys is tools, together with a risk management 
system, so as to ensure proper VAT enforcement. 
The Law on excises has been implemented, but is not yet fully in line with the acquis . Any 
new legislation on excises must refrain from introducing discriminatory elements against 
imports, as this would be contrary to WTO rules and the SAA. 
In July 2008, the Law on the National Fiscal Council was adopted. The Council, a permanent 
body in charge of overall fiscal policy coordina tion in the country, was inaugurated in early 
September. In June 2008, the methodology for alloca tion of indirect tax revenues to the State, 
Entities and Br čko District was agreed. Smooth implem entation of this methodology is now 
essential. The State-level Minist er of Finance and treasury has also taken over the function as 
the Chairman of the ITA Governing Board.  
In relation to direct taxation, in December  2007 the Federation adopted a new Corporate 
Income Tax Law, which came into force in Ja nuary 2008. This law harmonised the applicable 
tax rate of 10% with those in the Republika Srpska and Br čko District. It adopted the Personal 
Income Tax Law, which significantly simplified personal income taxation. The law will enter into force on 1 January 2009.  
A gap analysis on business taxation has been ca rried out to identify existing measures that 
might be contrary to the Code of Conduct fo r Business Taxation. However, no follow-up to 
the report and the proposed measures has been  carried out by the authorities. Companies in 
the Federation that earn in revenue more than  30% from exports remain exempted from 
corporate income tax, which is not in compliance w ith the Code of Conduct. Discrepancies 
EN 38   EN with regard to double taxatio n persist between the tax laws  of Republika Srpska and the 
Federation on the one hand, and Br čko District on the other. 
As regards administrative and operational capacity , the staffing of ITA has not been 
reinforced, but its overall perf ormance has been good. In 2007, it collected about €2.7 billion, 
comprising VAT, customs duties and excise taxe s, which is an increase of 18% over 2006. 
Efforts need to continue to improve ITA's administrative capacity to implement customs and tax legislation and, together with other law en forcement bodies, to make it more effective in 
fighting corruption, cross-border crime and fiscal  evasion. There is a need for additional 
advanced training with regard to complicated  VAT areas and risk analyses. An overall 
training strategy is to be presented an d an IT strategy is to be defined. 
ITA became a member of the Intra Europ ean Organisation of Tax Administration. 
Overall, Bosnia's preparations in the area of  taxation are progressing. Its tax legislation is 
aligned with the EU acquis to a large extent, especially in the field of VAT. It is necessary to ensure that amendments to th e existing legislation remain in  line with EU provisions. 
Significant efforts are also needed to reinforce the administrative capacity and to fight against 
corruption, in order to improve tax collection and reduce the size of the informal economy. 
4.1.5. Competition 
Progress in the field of anti-trust  control has continued, even though no action has been taken 
to bring the Competition Law closer to the acquis . The Competition Council has increased its 
staff to 26. Its activities have focused mostly  on mergers and abuses of dominant position. 
During the reporting period, the Competition Council  started 42 procedures and concluded 28. 
Nine opinions were issued. It collected around €350,000 of penalties from economic entities 
which were not acting in accordance with the Competition Law. It signed a memorandum of 
understanding on competition policy and relevant market legislation with its counterparts in 
the former Yugoslav Republic of Macedonia and Bulgaria. 
Overall, Bosnia and Herzegovina's preparations in the area of anti-trust are moderately 
advanced. No progress has been made as regards State aid. Preparations in this area remain at 
an early stage.  
4.1.6. Public procurement 
Limited progress has been made in the area of public procurement.  
The Public Procurement Agency employs 15  people. A new rulebook on the internal 
organisation of the Agency was adopted in Apr il 2008. It provides for 31 posts to be filled in 
the next four years. A number of training ac tivities have taken place. A new website of the 
Agency and the Procurement Review Body has been set up.  
There has been no major progress in terms of legislative alignment. In early 2008 the 
Parliamentary Assembly of Bosnia and Herzeg ovina overruled an attempt to modernise the 
current primary law and the Public Procurement Agency was tasked to draft a new law by the 
summer 2008. This has not been done. Domestic preferential treatment remains in force, 
except for the electricity sector. The current legi slation provides for th e phasing out of such 
preferential treatment by 2011.  
EN 39   EN Efforts necessary to enhance the administrative capacity of the Public Procurement Agency 
and the Procurement Review Body have been  limited. Insufficient staffing continues to 
hamper the performance of the Procurement Review Body (PRB). Nevertheless, the PRB was 
able to address all complaints received in 2007, as well as some of the backlog of cases which 
had built up in 2006 as a result of the l ack of a quorum to take decisions.  
Proper implementation of public procurement procedures across the country is not yet 
ensured. Although some training was provided, the overall administrative capacity of 
contracting authorities and their level of knowledge of public pr ocurement legislation is low, 
which has negative effects in terms of law implementation and enforcement.  
Overall, Bosnia and Herzegovina's preparatio ns in the field of public procurement have 
started, but further efforts remain necessary. Public awareness and accountability in public 
expenditure needs to be further consolidated.  
4.1.7. Intellectual property law 
Little progress has been made with regard to intellectual, industr ial and commercial 
property rights (IPR) . No steps were taken to draft a co mprehensive strategy to enhance the 
legislative framework, administrative capacity and enforcement of IPR. 
Bosnia and Herzegovina has ratified the Wash ington Agreement on Intellectual Property and 
Integrated Circuits, the Hague Agreement con cerning the Internationa l Deposit of Industrial 
Designs, the Strasbourg Agreement concerning the International Pate nt Classification, the 
Convention for the Protection of Producers of  Phonograms against Unau thorized Duplication 
of their Phonograms, the Protocol to the Ma drid Agreement concerning the International 
Registration of Marks and the International Convention for the Protection of Performers, 
Producers of Phonograms and Broadcasting Orga nizations. The implem entation of these 
Conventions and Agreements should now proceed.  
The Institute for Intellectual Property has 32 employees, with staff working in the Mostar 
headquarters and in the Sarajevo branch office.  Office space for the Banja Luka branch has 
been provided, but staff still ha ve to be recruited. A number of measures have been taken to 
improve the Institute's operation, including enhancing existing databases (on patents, 
trademarks and industrial designs). New data bases on geographical indications have been 
established. The Complaints Commission has be en set up. The new Law on wine, spirits, and 
other grape and wine products aims at responding to the ob ligations imposed  by the TRIPS 
Agreement and the acquis . However, overall alignment with the TRIPS Agreement and with 
the acquis  is still at an early stage. 
No progress has been made in relation to admi nistrative procedures on copyrights and related 
rights. The regulatory framework for the colle ctive management organisations operating in 
the country is inadequate and needs to be impr oved in line with experience and best practice 
in the region and in the EU. Awareness-raising among right-holders and us ers of the protected 
subject-matter is also necessary. 
No significant development has taken place concerning industrial property rights . Under 
the current legislation, the Institute grants pa tents without prior subs tantive examination of 
applications, shifting the burden of proof of the validity of su ch patents on to the patent-
holder. Application of this model for granting patents is hampered by deficiencies in the 
legislation and the lack of capacity in the In stitute. As a result, a total of 1 660 patent 
applications have still to be processed. The waiting time for applications is almost five years.  
EN 40   EN Trademarks and designs are granted on the ba sis of prior substantive examination of 
applications. The constant increase in trademar k applications and the limited capacity of the 
Institute have resulted in an extremely long wa iting time - four years on average. The waiting 
time for design applications averages one year, but this is due to the relatively small number of design applications and the limited document base to be examined (only prior domestic 
applications and granted rights). No applicatio ns for protection of geographical indications 
and topographies of integrated circuits ha ve yet been filed with the Institute. 
Administrative enforcement of IPR by various inspectorates is the responsibility of the 
Entities, Cantons and Br čko District, while the State level is  responsible for enforcement of 
criminal law. IPR enforcement remains weak. Bosnia and Herzegovina is not yet able to 
implement and enforce its legislation and its international obligations in this field. The 
performance of the Indirect Taxation Author ity, responsible for implementation of border 
measures for IPR protection, is hampered by the lack of expertise and deficiencies in the 
legislation on this subject. Awareness among right s-holders and users is very low. No unified 
track record of enforcem ent measures is being kept. High le vels of counterfeiting and piracy 
persist and the country remains a point of  distribution to the rest of Europe. 
Bosnia and Herzegovina's preparations in the fi eld of intellectual property law remain at an 
early stage. In order to accelerate preparatio ns, rapid action is necessary to develop a 
comprehensive IPR strategy, to strengthen the ca pacity of the Institute and law enforcement 
agencies, to provide additional training to the various stakeholders and to implement broad 
awareness-raising campaigns. 
4.1.8. Employment and social policies 
Limited progress has been made in this area. 
The fact that there are no powers at State level in the field of employment  and social policies 
remains an obstacle to the development of a countrywide strategy fo r employment. Based on 
constitutional arguments, Republika Srpska systema tically objects to giving a role to the State 
level in internal labour market issues. Empl oyment strategies and projects for active 
employment measures have been developed by the two Entities and Br čko District. However, 
there is little coor dination between them. 
There has been some progress as regards the labour market. According to the Labour Force 
Survey (LFS), the employment rate increase d by 1.7% (from 35% in 2006 to 36.7% in 2007). 
However, job creation cannot absorb the grow ing labour force and informal employment 
remains high.  
The causes behind persisting high unemployment in Bosnia and Herzegovina, estimated at 
around 30%, have not changed. The labour market still suffers from significant structural 
rigidities in the form of wage-setting mechan isms and high taxation of labour. The complex 
institutional and administrative structure and extreme fragmentat ion of the market are major 
obstacles to improving its functioni ng. Substantial, persistent de ficiencies in the employment 
administration, regulatory framework and labour market institutions do not allow effective development of employment policies.  
Active labour market programmes are still be ing implemented, some of which focus on 
training and improving the skills of  job-seekers, but resources are lacking to develop the latter 
on a wide scale. Development and implementa tion of these programmes remain fragmented. 
In the Federation, unemployment cash benefits paid  to demobilised soldiers are stretching the 
EN 41   EN budgets of employment services and making further financing of active labour market 
programmes difficult.  
As regards social policies , no progress has been made on either policy development or 
implementation. Labour legislation has not yet been harmonised across the country. Little 
action has been taken to co mply with EU provisions on health and safety at work . The revised 
European Social Charter has been ratified but, apart from this, little has been achieved in 
terms of social dialogue . The Trade Union Confederation (KSBiH) has not been able to 
register at State level and no specific measur es have been taken to clarify the rules on 
recognition of trade unions. The complex social or ganisation in the country continues to affect 
dialogue between social partners and solutio ns do not seem immediate. No countrywide 
Economic and Social Council has been established. 
Limited progress has been made on social inclusion and anti-discrimination . Social inclusion 
of vulnerable categories, includi ng returnees, remains a challenge. Monitoring, in particular of 
severe poverty, needs to be given priority w ith a view to promoti ng social cohesion and 
reconciliation within  the country. Poverty and social excl usion indicators and analyses in line 
with EU standards are necessa ry. Discrimination against th e Roma population remains an 
issue, as well as discrimination in employ ment on the basis of ethnicity and sexual 
orientation.  
There has been no significant progress as regards social protection . The existing system does 
not provide equal access to social protection serv ices. Key shortages in the reform of social 
protection are related to the lack  of a clear vision of the scop e and content of the reform and 
the non-existence of a policy at St ate level. The diversity of soci al security systems acts as an 
obstacle to workers' mobili ty within the country.  
As regards equal opportunities , no serious measures have been undertaken to address the 
problems related to women's access to labour ma rket. As a consequence, discrimination of 
workers on the basis of gender remains widespread, women con tinue to be under-represented 
in business and politics, and their salaries are generally lower than those of men.  
The diverse social security  systems in Bosnia and Herzegovina continue to have an adverse 
effect on workers and citizens in general. Ri ghts to health insurance and other social 
protection, including unemployme nt benefits, continue to depend on which Entity and, to 
some extent, which Canton the claimants liv e in. There is no political consensus on 
establishing a harmonised social security system , with Entities and Cantons maintaining their 
constitutional rights to set policy and deliver services. 
Decision-making and coordination in the public health  sector have improved. A "Conference 
of Health Ministers of Bosnia and Herzegovina" has been esta blished and meets regularly. A 
Strategic Plan for development of the hea lth sector for 2008-2013 was adopted by the Council 
of Ministers. 
There has been some progress on statistical reporting. Relevant stakeholders have been 
trained and reports on the national health accounts were produced for 2005, 2006 and 2007. 
Republika Srpska has adopted a health informati on system strategy, but no such document has 
been developed in the Federation. A Supplem ental Immunisation Activities (SIA) Expert 
Committee has been established an d handed the task of prepari ng a situation an alysis, a SIA 
strategy (including social mobilisation plan),  a detailed operational plan and a training 
programme. Bosnia and Herzegovina's annual polio information update for the European 
EN 42   EN Regional Certification Commi ssion (ERCC) for 2007 is not yet finalised, but activities to 
maintain polio-free status are being implem ented. Some steps have been taken towards 
implementing the WHO Framework Convention on Tobacco Control (FCTC) and the International Health Regulations (IHR). However,  further efforts are necessary in order to 
achieve implementation. Mental health policies have been adopted at Entity level, based on 
the principle of protection in communities of  those who depend on assistance, and on the 
principle of non-discrimination. Action Plans, wh ich follow these principles, are carried out. 
Deinstitutionalisation at State level has made almost no progress; only an analysis of the 
situation and evaluation of  services for mental health protect ion in Bosnia and Herzegovina as 
a whole has been launched as preliminary phase for the establishment of a coherent Action Plan for the whole country. 
Bosnia and Herzegovina's overall preparations regarding employment a nd social policies are 
at a very early stage and ar e undermined by the extreme frag mentation of the relevant 
institutional and legislative frameworks. 
4.1.9. Education and research 
Some progress has been made in the area of education .  
Coordination between the fourt een Ministries of Education ha s improved as a result of the 
establishment of the Conference of Ministers ch aired by the Minister of Civil Affairs. The 
Law on vocational education and training has been adopted. A st rategy paper on the reform of 
the education sector, entitled "Directions for Education Development in Bosnia and 
Herzegovina 2008-2015", has been adopted. As rega rds higher education, a set of documents 
relevant for the implementation of the Bologna  process have been adopted. The Council of 
Ministers has taken a decision to join the European Quality Assurance Register for Higher 
Education. An acting Director for the Agency  for development of higher education and 
quality control was appointed in June 2008. Some additional progress has been made in eliminating divisive and discrimi natory symbolism from schools. 
Nonetheless, a number of shortcomings remai n. Harmonisation of legislation at Entity and 
Canton level was not completed by the end of April 2008, as provided for by the Higher 
Education Law, and equal implementation thro ughout the country is not being ensured. The 
planned integration of unive rsities is making slow progr ess. The 2003 Framework Law on 
primary and secondary education, which gave a mandate for the introduction of nine-year 
primary education in schools, is not yet fully implemented in certain Cantons. Establishment 
of State-level agencies responsible for st andards and assessment,  quality assurance, 
curriculum development and accreditation in edu cation needs to be completed. Separation of 
pupils in schools ("two schools un der one roof") remains a serious issue in the Federation, 
despite reported improvements  in the Zenica-Doboj Canton.  
No measures have been taken to improve the efficiency of public spending in education. 
There is no systematic approach to improving education outcomes.  
Concerning culture, Bosnia and Herzegovina has ratified the UNESCO Convention for the 
safeguarding of the intangible cultural heritage, as well as the UNESCO Convention on the 
Protection and Promotion of the Diversity of Cultural Expressions. The Council of Ministers 
has taken a decision to establish a State- level Agency for anti-doping in sports.  
As regards research , Bosnia and Herzegovina has request ed to become associated to the 
Seventh Research Framework Programme (FP7) and expects full participation as from 2009. 
EN 43   EN Until then, Bosnia and Herzegovina is particip ating under FP7 as a th ird country partner. 
Compared to the previous year there is a slight improvement in the success of cooperation 
with EU partners under FP7. 
There has been some progress in the work, or ganisation and output of the National Contact 
Points. However, there is no integrated res earch policy and budgetary allocations to support 
research are very limited. Research policy is st ill designed and implemen ted at Entity level, 
with no real coordination. No progress has b een made on preparing a country-wide policy. 
The research infrastructure remains poor. 
Preparations have started in the area of education and rese arch. Sustained efforts remain 
necessary. 
4.1.10. WTO issues 
Some progress has been made recently in the ne gotiations for the WTO accession. To meet its 
accession target, Bosnia and Herzegovina w ill have to intensify its market access 
negotiations, while continuing to bring its legislation into conformity with WTO 
requirements. 
4.2. Sectoral Policies 
4.2.1. Industry and SMEs Limited progress has been made in the area of industry and SMEs. 
As regards industry , no countrywide industrial policy strate gy has been established. At local 
level, a large number of municipalities ha ve adopted their own economic development 
strategies. Little has been done as regards the harmonisation of Entity regulations, and the 
corporate governance environment remains incoherent. No corporate governance code 
applicable across the whole country has been developed. 
The institutional framework fo r export promotion has been strengthened and the Export 
Promotion Council has continued to be active.  The Council of Ministers has adopted the 
Council's recommendations, inter alia  on incentives for exporte rs and on the process for 
preparing an export promotion strategy. The Export Promotion Agency has improved its 
corporate image and has organi sed a number of promotional events. However, no country-
wide export promotion strategy has been deve loped. Exporters would benefit from improved 
information channels. The institutional framew ork for export development and promotion is 
relatively young and both human resources and qua lity infrastructure need to be further 
developed. 
Limited progress has been made in the area of SMEs . The sector has enjoyed increased access 
to financing. 
Bosnia and Herzegovina has continued to implement the European Charter for Small 
Enterprises, even though the non-harmonised legal and institutional framework for SMEs, combined with the persisting lack  of capacity at Stat e level, are still hampering the country's 
capacity to meet the requirements of the Charte r and to better support the development of the 
sector. A State-level strategy for SM Es development remains necessary. 
EN 44   EN Overall, preparations in the ar ea of industry and SMEs are at an early stage. The adoption of 
country-wide strategies for indus try and SMEs, together with th e creation of robust capacity 
at State level to conduct and coordinate pol icies on SMEs, industry, competitiveness and 
innovation would be significan t steps forward. Further improvements in the business 
environment remain crucial for facilitating busin ess and trade. 
4.2.2. Agriculture and fisheries 
Some progress has been made in the field of agriculture and rural development policy . The 
State-level Law on wine was a dopted in February 2008 and the important Framework Law on 
agriculture, food and rural deve lopment, defining the competencies and responsibilities 
among institutions of the sector,  was adopted in May 2008. Despite the adoption of this Law, 
no progress has been made in establishing th e Ministry of Agriculture, Food and Rural 
Development at the State level. There has b een no progress on adopti on of the State-level 
agriculture strategy. The Strategic Plan for Harmonisation of Agriculture, Food and Rural 
Development for 2008-2010 and its operating progr amme have not yet been adopted by the 
Council of Ministers. 
The staffing of the Agriculture, Food, Forestry a nd Rural Development Sector in the Ministry 
of Foreign Trade and Economic Relations has been increased. Following the recommendations made in the functional review of  the agriculture sector, there has also been 
a notable increase in staffing in the Entity-level ministries with the aim of improving policy formulation and implementation capacities. In li ne with the State-level decision on farm and 
client registers, Entity-level regulations on farm  registers were harmonised in order to ensure 
application of unified farm registration procedures in Bosnia and Herzegovina. 
In order to improve coordination of all aspects of  agriculture, a ministerial-level task force for 
agriculture was set up  in March 2008 within the overal l coordination body for quality 
infrastructure. 
The support earmarked for agriculture an d rural development in 2008 totalled €73
 million, an 
increase of 35%  as compared to 2007 ." While the structure of the support is gradually shifting 
from production-linked support to ca pital investment and rural de velopment, the capacity for 
monitoring and evaluating the impact of support is still limited. Weaknesses persist in the 
areas of land ownership, land use, market acce ss and market restructuring, hampering the 
productivity and economic potential of the sector. 
Collection and processing of agricultural data still rema in weak. Although the first 
Agriculture Report (for 2007) was adopted, in the absence of accurate and standardised data 
collection, it gives no more th an an indication of the main  trends and opportunities for 
development of the agri-food sector  in Bosnia and Herzegovina. Overall, the lack of reliable 
and comprehensive statistics is hampering the development of agricultural policy.  
Some progress has been made on food safety . The Food Safety Agency has further increased 
its staff. 
To enhance implementation of the 2004 Food Safety Law, implementing legislation has been 
adopted in nine areas (alcoholic drinks, label ling of packaged foods, labelling of nutritional 
values, use of food additives, use of colours in food, use of sweeteners, use of other food 
additives, fruit juices and non- alcoholic drinks). However, the comprehensive Action Plan 
required for implementing the Food Safety Law has still not been adopted. The enforcement capacity remains weak in th e absence of implementing le gislation on food hygiene and 
EN 45   EN official control. Overall responsibilities along the food safety control chain remain to be 
clarified, in particular those of  the inspection services and au thorised testing and reference 
laboratories. Upgrading of agri-food estab lishments has not advanced. Bosnia and 
Herzegovina is on the list of third countries for the export of fishery  products to the EU, but 
no establishment intending to export fishery produc ts to the EU has so far obtained approval. 
Progress has been made on international coope ration, as Bosnia and Herzegovina is now a 
member of the Codex Alimentarius Commission. 
There has been limited pr ogress in the field of veterinary and phytosanitary policies . The 
staffing of the State Veterinary Office has in creased significantly under the new management . 
No progress has been made with revision of State-level legislation. The Entity legislation has been revised, but further legal harmonisation, in the form of a new State Veterinary Law, is 
necessary. The quality of enforcement of legislation has improved and two veterinary diagnostic laboratories have been accredited by the State-level accreditation body (BATA) in 
accordance with the ISO 17025 standard.  
There has been no progress in the field of animal health. There is  no strategy for the control of 
animal diseases. This prevents efficient im plementation of the existing animal disease 
programmes. Some efforts have been made, but the animal identification and movement 
control scheme is not yet operational. Some pr ogress has been achieved regarding the control 
of residues, as the residue monitoring plan fo r fishery products has been approved by the EU. 
Overall, inspection capacity remains weak. 
There has been no progress in the phytosanitary se ctor. The State Plant Health Agency has not 
been fully operational, even though it was established in 2006. Only temporary employment contracts were concluded and the process of se lecting and employing civil servants is in its 
initial phase. No implementing legislation has been adopted. Due to weak veterinary and 
phytosanitary standards, Bosnia and Herzegovin a is not able to use the export potential 
offered to them by the EU, including  through the SAA Interim Agreement. 
Overall, Bosnia and Herzegovina's preparatio ns in the area of agriculture are advancing 
slowly, although the adoption of a State-leve l legal framework will facilitate gradual 
approximation to the acquis . The adoption of a countrywi de strategic plan for the 
development of the agricultural and rural development remains urgent. Progress in the field of veterinary and phytosanita ry policies has been slow, and over all preparations remain at an 
early stage. 
4.2.3. Environment 
There has been limited progress in the field of the environment. 
Limited progress has been made as regards horizontal legislation . Transposition and 
implementation of the  acquis  in this field requires furthe r improvement, and shortcomings 
need to be dealt with. Environmental impact assessment needs particular attention including 
for projects with possible trans- boundary effects. Bosnia and He rzegovina ratified the Aarhus 
Convention in July 2008. However, further effo rts are needed to ratif y and implement other 
relevant international conventi ons, notably the Espoo Convention.  
No developments can be reported with regard to air quality .  
Regarding waste management , there has been little progre ss on construction of regional 
sanitary landfills and on rehabilitation and cl osure of unregulated landfills. Some progress has 
EN 46   EN been made on adoption of impl ementing regulations on waste products that can no longer be 
disposed of in landfills if untreated, such as  medical waste. Further efforts are required to 
initiate management of waste streams of an imal origin. No progress has been made on 
legislative support for recycling and recovery of prio rity waste streams, such as packaging, 
motor oil and tyres. 
Some progress can be reported on water quality . Bosnia and Herzegovina has started to 
implement the requirements of the Water Fram ework Directive by means of the Entity Water 
Laws. Water agencies have been in operation in the Federation since January 2008. 
Establishment of water agencies in Republika Srpska is in progress. Further efforts are 
required to ensure uniform ri ver basin planning, public cons ultation and monitoring between 
the Entities. Implementing legislation for wate r laws, water fees and harmful and dangerous 
substances and their maximum levels in surface water have been adopted. However, much of 
the implementing legislation still needs to be put in place in order to ensure further alignment 
with the acquis . Untreated discharges of waste water remain a key environmental challenge.  
There has been limited progress in the field of nature protection . Bosnia and Herzegovina 
has drafted a biodiversity strategy and Ac tion Plan, as required by the Convention on 
Biological Diversity. The Convention on the Cons ervation of European Wildlife and Natural 
Habitats was ratified in August 2008.  As regards declaration of pr otected areas, the Federation 
has adopted the Law on the Una national park, making this the first national park in the 
Federation. Transposition of th e Habitats and Wild Birds Di rectives, including aspects 
required under the Energy Community  Treaty, is at an early stage. 
In the field of industrial pollution control and risk management , some progress can be 
reported. Transposition of the Integrated Po llution Prevention and Control Directive is 
relatively advanced. The implementing legislatio n on establishment of polluter and pollutant 
registries, adoption of best avai lable techniques and eco-labels is  in place. The Federation has 
initiated a public campaign on the issuing of e nvironmental permits to raise the awareness of 
relevant operators.  
No progress can be reported in terms of approximation to the acquis  as regards chemicals, 
genetically modified organ isms (GMOs) and noise.   
Bosnia and Herzegovina suffers from weak administrative capacity in the environment 
sector. A State-level Environmental Law en suring harmonised nationwide environmental 
protection has not been adopte d, and no State Environment Agen cy has been established. 
Comprehensive monitoring is difficult in the absence of this State-level agency. The administrative capacity of the Ministry of Foreig n Trade and Economic Relations to act, in the 
meantime, as the national authority in this field is also undermined by the lack of an adequate 
legal or institutional framework. Implementation of the environmental legislation remains a 
concern. The human and technical capacity of th e inspectorates to ensure compliance with 
environmental legislation at En tity, Canton and local levels is insufficient. Integration of 
environmental concerns in other sectors remains weak. 
Bosnia and Herzegovina is at an early stag e of investment in solid waste management, 
drinking water and wastewater in frastructure. Further efforts are required to prioritise and 
coordinate investment programmes, as financia l resources are scarce. Some progress has been 
made with the Entity-level Environment F unds. The Republika Srpska Environment Fund is 
operational, but there have been delays  in establishing the Federation Fund. 
EN 47   EN Overall, Bosnia and Herzegovina's preparations in the field of the environment remain at an 
early stage. Bosnia and Herzegovina needs to strengthen its environmental protection 
institutions, in particular at St ate level. It also needs to main stream environmental concerns in 
other sectors. Establishment of a harmonised legal framework for environmental protection, 
of the State Environmental Agency and of a functioning environmental monitoring system would be significant steps forwar d. Bosnia and Herzegovina needs to step up its efforts with 
regard to its obligations unde r internationa l conventions. 
4.2.4. Transport policy 
There has been good progress on development of the trans-European transport networks . 
Bosnia and Herzegovina has continued to activ ely participate in the implementation of the 
2004 Memorandum of Understanding for the deve lopment of the core regional transport 
network. It has also been activ e as regards the South-East Europe Transport Observatory 
(SEETO), in particular through the updating a nd implementation of the multi-annual plan 
2008-2012. 
The upgrading of Pan-European Corridor V-c is continuing. In 2008, a new 10 km section of 
the motorway from Sarajevo to the north ha s been opened. Work ha s also started on the 
bypass road of Sarajevo and funding has been s ecured for another 30 km motorway section. 
Tenders have been launched for reconstruction of  an additional 170 km of priority railway in 
the SEETO core network. Bosnia and Herz egovina and Montenegro have signed a 
memorandum of understanding on preparatory action for construction of the railway link 
between the two countries. Financing has been ensured for electrification of the Doboj-Tuzla 
Zvornik and Br čko-Banovici sections, contributing to be tter efficiency and environmental 
protection. The total volu me of freight transport has been substantially increased (2 billion 
℮tkm in 2007, 1.2 billion ℮tkm in first half of 2008). 
Some progress can be reported in the area of road transport.  Since the entry into force of the 
SAA Interim Agreement, on 1 July 2008, Bosnia  and Herzegovina is granting unrestricted 
access through its territory to Community transi t traffic. The State Law on public roads and 
the legislation on digital tachographs have been  adopted. However, the impact of the Law on 
road safety is limited by the poor road infrastr ucture. Significant invest ments are required in 
order to achieve sufficient levels  of safety and efficiency.  
There has been limited progress in the area of rail transport . Network statements, providing 
train operators with a single information sour ce on rail infrastructure, have been prepared. 
Some legislative steps have been carried  out by Republika Srpska. However, railway 
companies do not yet meet the preconditions for functioning as vertically integrated - in 
accordance with the acquis -  since independent audits fo r effective separation between 
infrastructure managers and railway undertak ings have not been performed. The Railway 
Regulatory Board (RBB) has yet to complete its  recruitment and training. In order for the 
RBB to function toits full capacity, the railway t echnical and safety regul ations need to be 
aligned with the acquis , and the Railway Package II Directives remains to be implemented. 
Furthermore, there is a need to accelerate co ordinated harmonisation of  legislation at State 
level in order to achieve full interoperabil ity, in accordance with the "Addendum to the 
Memorandum of Understanding on the Development of the South East Europe Core Regional 
Transport Network for a South East Eu ropean Railway Transport Area".  
Some progress has been made in the area of inland waterways . A feasibility study for 
rehabilitation and re-establishm ent of navigability on the Rive r Sava has been presented by 
EN 48   EN the Sava River Commission. In addition, under the same Commission, a number of acquis -
compliant rules for water transport, including on navigation and transport/traffic safety, and on the marking of the navigation rout e on the Sava, have been adopted.  Application of these 
rules is mandatory for all the countries along the Sava. A study was produced on the market and demand for inland waterway transport, paying  particular attention to the Sava route.  
As regards maritime transport , Bosnia and Herzegovina is not  a yet party either to the 
SOLAS Convention (International C onvention for the Safety of Life  at Sea) or to the ISPS 
Code (International Ship and Po rt Facility Security Code). 
Some progress has been made in the area of combined transport . Bosnia and Herzegovina 
finalised a study on inter-modal transport, which confirmed the potential of this transport 
mode and identified ways to meet possible de mand for capacity and quality of services.  
Good progress can be reported in the area of air transport . The market for commercial air 
carriers has been opened following ratifica tion of the European Common Aviation Area 
(ECAA) Agreement, even though administrative burdens and unnecessary delays still limit 
the efficiency and effectiveness of its applica tion. The final organisation al set-up of the air 
navigation provider and civil avia tion authority has been adopted  and their seats established. 
An action plan was drawn up for the tran sposition and implementation of the ECAA 
Agreement. Implementation of the air traffic management strategy has started and contracts 
have been concluded with the supplier of the equipment. Pr ivatisation of B&H Airlines, 
owned by the Federation, is ongoing. In the meantime, Republika Srpska established 
"SkySrpska". Alignment to aviation acquis  under ECAA is still needed in the areas of 
aviation safety, security and air traffic manageme nt, and further efforts are necessary in terms 
of staff training.  
Overall, Bosnia and Herzegovina's preparations  in the transport sector are advancing. The 
country has made steady progress both on stre ngthening its institu tional set-up and on 
adjusting the regulatory framew ork. However, further efforts are needed to complete the 
transformation of the country's  institutional set-up and to m eet the conditions for opening 
every sector of the transport market.  
4.2.5. Energy 
Overall, progress in reforming the energy sector has stalled. 
There have been no new developments as regards oil stocks and security of supply . Bosnia 
and Herzegovina still does not provide fo r the 90 days rese rve of oil stocks. 
Bosnia and Herzegovina is a Party to the Treaty Establishing the Energy Community in 
Southeast Europe. As such, it was bound to apply the releva nt energy-related acquis  as from 1 
July 2007, with the exception of the provision s on market opening to which a specific 
timetable applies. This deadlin e was extended to July 2008, but has not been met. As a result, 
Bosnia and Herzegovina is sign ificantly lagging behind in a numb er of energy-related areas. 
Over the years, there has been  good progress on the roadmap fo r electricity, but still none on 
the roadmap for the gas sector. Since a country -wide legal framework for gas has yet to be 
developed (the State-level law does not yet exist), no national re gulator has been established. 
Instead, separate Entity legislation has been put  in place to establish operators and regulatory 
functions in the Entities. In Republika Srpska, the re gulatory power s over the gas sector have 
EN 49   EN been given to the electricity regulator, whereas  in the Federation these powers lie with the 
Ministry. Preparations in th is area are lagging behind.  
Regarding the internal energy market , the independent system operator (ISO) and the 
transmission company (Transco) for the electric ity sector have been operating in compliance 
with the legal framework. Coope ration between Transco and the ISO remains to be improved. 
A proposal by Republika Srpska to split the company along Entity lines could have jeopardized the progress achieved in the electric ity sector. Instead, efforts need to focus on 
identifying and addressing the co mpany's possible shortcomings.  
There has been no progress as regards the gene ration plan. Coordination between the Entities 
on investment planning has not improved and there is still a lack of data for finalising the 
plan. The procedure for providing the ISO with the data needed remains unresolved, as does 
the procedure for ranking proposed investment projects. Transco's investment planning for 
development of the transmission network depends on this definitive generation plan.  
As regards the opening of the electricity ma rket, from January 2008 all consumers (except 
households) can become eligible consumers. However, the benefits of a more open market 
continued to be watered down by system, tec hnology or metering barriers. Consumers have 
little incentive to change suppliers due to pers isting differences between  regulated and market 
prices (regulated tariffs remain below the costs of generation). Full opening for major 
industrial customers has been delayed until 2009. 
Regarding regulation of the electricity market , the State Electricit y Regulatory Commission 
(SERC) and the two Entity regulators have adopted new tariffs for the current year, as well as key rulebooks on market opening. Regarding connection to the grid, only the Republika 
Srpska regulator has announced the general c onditions for electricity supply (regulating 
connection to the distribution grid), while the Federation regulator is still finalising such 
implementing legislation. New draft legislation is putting regulatory inde pendence at risk in 
the Federation. There have been  continued attempts by the au thorities to influence the 
regulators, notably in relati on to tariff setting. Furtherm ore, the new Law on Wages and 
Allowances poses an additional potential thr eat to the independence of regulators.  
Bosnia and Herzegovina has not developed any comprehens ive energy strategy. A study on 
the energy sector in Bosnia and Herzegovina, which should provide a basis for the strategy, 
was finalised in May 2008. Little progress has b een made as regards the diversification of 
energy sources. No progress has been made on energy efficiency and renewable energy. 
On nuclear safety and radiation protection , a new Law on radiation was adopted in 
November 2007. Rapid establishment of an effi cient national regulato ry agency (NRA) is 
required. The NRA's seat will be  in Sarajevo. The act ing director of th e NRA was appointed 
by the Council of Ministers in June 2008 an d deputy directors are planned for the NRA 
regional offices in Banja Luka and Mostar. 
Radiological issues in Bosnia  and Herzegovina are dominated  by management of sealed 
radioactive sources. In th e absence of specific legislation, partic ular efforts need to be made to 
ensure that these sources are under proper regul atory control. Preventi on of illicit trafficking 
of nuclear and other radioactive materials is an important issue. In this respect, portal 
monitors have been installed at some of the main border crossing points of the country. 
Overall, Bosnia and Herzegovina's preparations to meet EU standards in the field of energy 
have started, but remain at an early stage.  
EN 50   EN 4.2.6. Information society and media 
Overall, Bosnia and Herzegovina has made some progress in this area. 
Progress as regards electronic communications a nd information technologies , however, 
has been limited.  Few new entrants have become operationa l since liberalisation of the sector 
and no new licences for fixed tele phony services have b een granted in the reporting period. So 
far, 13 interconnection agreements have been concluded between new and incumbent operators. Four operators offer carrier selecti on services. The rules on number portability and 
local loop unbundling were adopted in 2008 by  the Communications Regulatory Authority 
(CRA), but the timeframe for implementatio n has not been decided by the Council of 
Ministers, pending the adoption of the new sect or policy. Tariff rebalancing - a key element 
for creating a competitive market - is ongoing, but still at an early stage. 
The CRA has improved its administrative cap acity by acquiring new spectrum monitoring 
equipment. However, further human, financial a nd technical resources are needed to enable 
the CRA to support the development of the sector, including on market regulation and 
creating a competitive market.  
The challenges to the CRA's independence have increased over the repo rting period, due to 
the adoption of a new Law on wages and allo wances and the unresolved issue of the 
nomination of the CRA's Director -General. All stakeholders in Bosnia and Herzegovina need 
to work constructively to solve the outstanding issues and to guarantee the CRA's independence. In the meantime, CRA decisions s ubmitted to the Council of Ministers need to 
be properly dealt with. 
Little progress has been  made in the area of information society services . Bosnia and 
Herzegovina has ratified the e-SEE Agenda Plus  for the development of information society 
in South-East Europe 2007-2012, which is impl emented under the umbrella of the regional 
cooperation council (RCC). With regard to the st atus of the citizen id entification protection 
system (CIPS), the Law on the Agency for Id entification Documents,  Record-keeping and 
Exchange of Bosnia and Herzegovina came into  force in July 2008. This Law provides for the 
establishment of an agency which will take over the tasks of the CIPS Directorate. Rules implementing the e-signature law of Nove mber 2006 are still pending. Legislation on 
conditional access services has not yet been adopted. The legislatio n to establish a State-level 
Information Agency in charge of implementing the information society strategy throughout the country has not yet been adopted. 
Progress has been made on audiovisual policy and media. The CRA adopted several codes 
and decisions: the Broadcasting Code of Practic e, the rules on licences for audiovisual media 
services providers and the establishment of the Digital Terrestrial Television (DTT) forum. In 
particular, the Broadcasting Code  of Practice is an important step towards harmonisation of 
the legislation with the European Convention on  Transfrontier Television and the Audiovisual 
Media Services Directive. The Code was adopt ed after wide public consultation and includes 
provisions on promotion of European works, pr otection of minors, pr otection of privacy, 
reporting on criminal trials, trials involvi ng minors, dangerous behaviour, erotic and 
pornographic programmes, the obligation to in form viewers about programme content and 
stricter rules on the watershe d (restricting programmes unsu itable for minors to the night-
time). 
EN 51   EN The Constitutional Court of the Federation rule d against the claims th at the proposed public 
broadcasting law was contrary to the national interest of one of the country's constituent 
peoples. As a result, the Federation Parlia mentary Assembly adopted the Law on Public 
Broadcasting Service, which formally comple ted the legal framework for public broadcasting 
in Bosnia and Herzegovina. The Federation's La w on Public Broadcasting Service still needs 
to be fully aligned with the Public Broad casting System Law of Bo snia and Herzegovina. 
Proper implementation of the whole legal framework for public broadcasting will be necessary to meet the relevant key pr iority of the European Partnership. 
Bosnia and Herzegovina's preparations in the field of the information society and media are 
advancing. Particular efforts ar e necessary to implement the le gal framework in the area of 
public broadcasting, to carry out the reform of  this sector and to ensure the functional 
independence of the Communica tions Regulatory Authority. 
4.2.7. Financial control 
Bosnia and Herzegovina has made limited pr ogress in the area of financial control. 
Some developments have been reported in the area of Public Internal Financial Control 
(PIFC) . Internal audit laws have been adopted by  the State and the Entities. A working group 
has been established to draft comprehensive PIFC policy papers to guarantee balanced 
development of control and audit systems. Howe ver, no tangible results have been produced 
so far. No Central Harmonisation Unit for PIFC has been established.  
As regards external audits , the three supreme audit instituti ons (SAIs) in the country are 
continuing to implement their common strate gic development plan for 2007-2012 on the basis 
of the three External Audit La ws. The three SAIs cooperate vi a a Coordination Board. After a 
two-year delay, the State level Auditor-Ge neral was appointed in June 2008. The State 
Auditor has 34 staff. The follow-up to the SAIs' reports and recommendations remains 
insufficient. The existence and independence of the SAIs have not yet been anchored in the 
constitutions of Bosnia and Herzegovina. 
Overall, Bosnia and Herzegovina's preparations in the area of financial control remain at an 
early stage. The introduction of comprehensive PIFC policies is still awaiting the outcome of 
the PIFC Policy Working Group. Further work rela ting to the status of the SAIs and of the 
quality of external audit is needed. 
4.2.8. Statistics 
Some progress has been made in the area of statistics. 
As regards statistical infrastructure , cooperation between the State Agency for Statistics 
(BHAS) and the Institute for Statistics in the Federation has improved considerably. However, further efforts are necessary to improve coor dination with the Republika Srpska statistical 
office. BHAS has developed a new organisa tion chart which provides for a significant 
increase in staff and coverage of more sect ors. Similar organisation charts are being 
developed for the Entity statis tical institutes.  Capacity-building thro ughout the statistical 
sector in Bosnia and Her zegovina is paramount and should remain a priority. 
The Law on statistics and the 2005 Agreement to strengthen the coordinatin g role of BHAS in 
harmonising methodologies and disseminating St ate level data have not been properly 
EN 52   EN implemented. A protocol between BHAS and the Indirect Taxation Authority (ITA) regarding 
exchange of external trade da ta has been signed; however, im plementation is still pending. 
Some progress has been made on classifications and registers. The clas sification of products 
by activity (CPA) has been ha rmonised with the European CPA 2002 classification. The 
classification of individual c onsumption by purpose (COICOP) ha s been finalised and a high 
degree of harmonisation w ith international standards has be en achieved. The development of 
a statistical business re gister is advancing. 
Some progress has been made on sectoral statistics,  including statistical research In the area 
of demographic and social statistics, initial st eps have been taken to prepare a population and 
housing census. However, the political decision  confirming that the ce nsus will be conducted 
in 2011 is still pending. BHAS produced a countrywide publication on gender issues. 
Regarding labour statistics, the 2007 Labour For ce Survey (LFS) was the first conducted by 
BHAS in cooperation with the two Entity statistical instit utes. Preparations for the 2008 
Labour Force Survey are under way. A Househol d Budget Survey (HBS) was also conducted 
in 2007 on a sample of 7 600 households. The pub lication of quarterly and semi-annual data 
on salaries, employment and unemployment began in August 2008. 
BHAS has initiated regular m onthly publication of tourism st atistics. The methodology still 
needs to be brought fully into line with EU recommendations.  
Some progress has been made in the area of m acro-economic statistics. A draft master plan 
for development of national accounts has b een prepared, although not yet approved by the 
Statistical Office of Republika Srpska. For the first time, GDP figures from the expenditure 
side in current and constant prices fo r 2006 were published. Quar terly national accounts 
statistics do not yet exist.  
Some action has been taken to improve the qual ity of business statistics, primarily concerning 
industrial statistics, statistics on the constructi on industry and structur al business statistics. 
BHAS has started to publish monthly data on ex ternal trade, based on  data provided by the 
Indirect Taxation Authority. As regards agricu ltural statistics, several pilot surveys on 
agricultural prices have been conducted. However,  continued efforts are necessary: structural 
business statistics are still not based on business registers, and almost no transport and energy 
statistics are availabl e at State level.  
Bosnia and Herzegovina's preparatio ns in the field of statistics are advancing, but remain at an 
initial stage. Therefore, it is essential to strengthen the administrative capacity of the BHAS and the cooperation with the institutes in the Entities.  
4.3. Justice, freedom and security 
4.3.1. Visa, border, control, asylum and migration Progress in the field of visa management has continued. The Visa Facilitation Agreement 
between the EC and Bosnia and Herzegovina entered into force in January 2008. The first 
meeting of the Joint Committee on implementation of the agreem ent took place in June 2008. 
In July 2008, bilateral agreements on visa faci litation were signed with Denmark and Norway. 
The visa liberalisation  dialogue was launched in May 2008 and a roadmap towards visa 
liberalisation for Bosnia and Herzegovina was presented to the author ities in June 2008. In 
EN 53   EN May 2008, the Council of Minist ers appointed an Inter-Agency working group for the 
dialogue on visa liberalisation.  
Further steps have been taken towards intr oduction of biometric passports. Following 
adoption of the amendments to the Law on travel documents, in May 2007 the Council of 
Ministers adopted a decision to introduce biometric passports during 2009. Secure and 
effective management of the CIPS would benefit from the establishment of an improved legal framework placed under State-level authority.  
The number of visas issued at the border has been further reduced fr om 927 in 2006 to 735 in 
2007. The new Law on movement and stay of aliens and asylum, adopted in April 2008, 
includes transition to and introduction of the f our categories of visas provided for in the 
Schengen acquis . Bosnia and Herzegovina's visa lists ha ve not yet been al igned with the EU 
visa lists.  
The migration information system, including the visa module for electronic data storage and 
transfer between consular offices and the centr al administration in Bo snia and Herzegovina, 
came into operation in September 2007. Howeve r, the authorities are not adequately 
supporting the wide use of this new system. Full and proper use of the system by all the 
institutions concerned is needed so that th e system can be used to its full capacity.  
Overall, progress in the field of visa management has contin ued, but Bosnia and Herzegovina 
needs to make further efforts to align with EU  standards and to use the migration information 
system to its full capacity. 
Bosnia and Herzegovina has continued to make progress in the area of border control . 
Cooperation and information-sharing between th e border police and the ITA have improved. 
The number of joint training activities and join t operations at the border has increased. The 
border police and the ITA have taken steps towa rds harmonising collection and registration of 
data at border crossing points in  order to avoid duplication. C ontacts have been established 
with Frontex with a view to c oncluding a working arrangement. 
Further action needs to be taken to improve c ooperation with the State Veterinary Office and 
the State Plant Health Agency. The agencies invo lved in border management have agreed on 
common risk analysis documents and a borde r control model. The border police needs 
effectively to address the high number of vacancies. 
A revised integrated border management (IB M) strategy was adopted in July 2008. The 
strategy and the Action Plan that forms an integr al part of the strategy define the central 
coordinating roles in relati on to border management issues and include a financial 
implementation framework. The Decision establ ishing a Commission for Integrated Border 
Management, in charge of IBM coordination and implementation of the strategy, the action 
plan and the implementation of border crossing agreements, was adopted in July 2008. A draft 
Law on border control clarifying, inter alia , responsibility for management of border posts 
has not yet been adopted..  
Bosnia and Herzegovina still has a number of unr esolved border demarc ation issues which 
continue adversely to affect control of the green border. A decision establishing the State 
Border Commission, responsible for identificat ion and demarcation of the border line, was 
adopted in June 2008, filling the vacuum left afte r the mandate of the previous State Border 
Commission expired in July 2007. Four pr otocols implementing the 2007 Agreement on 
border control between Bosnia and Herzegovi na and Croatia were signed in June 2008, 
EN 54   EN covering the following fields: cooperation and official transit over State territory; 
establishment of joint task forces for crime prevention; mixed patrols; and liaison officers. 
Delays in adopting the IBM stra tegy, lack of definition of ta sks and responsibilities between 
the main stakeholders for border management, incomplete land expropriation, reclassification 
of border crossing points (BCPs) and insufficient political attention have been obstacles to 
sustained improvement of the country's BCPs. These factors reduced the efficiency of EU 
financial assistance and led to the can cellation of a number of projects.  
Overall, Bosnia and Herzegovina has made progress in the area of border management. 
Further efforts are needed, in particular to address the unres olved border demarcation issues 
and the improvement of border crossing points.  
Asylum  procedures in Bosnia an d Herzegovina are largely in line with international 
standards. The number of asylum applications  has increased substantially compared with 
2006, mainly as a consequence of refugees fr om Kosovo losing their temporary admission 
status in September 2007.  
A new Law on movement and stay  of aliens and asylum ente red into force in May 2008. The 
necessary implementing legislation remains to be  adopted. The roles and tasks of the Ministry 
of Security and the Ministry for Human Right s and Refugees, both of which are responsible 
for dealing with asylum-seekers and refugees, have been clar ified. As regard s improving the 
capacity to manage evidence of persons with recognised refug ee status or other forms of 
international protection, greater efforts ar e needed to develop software requirement 
specifications for a database which will be part of the migration management project. The Ministry for Human Rights and Refugees is to  be connected to the migration information 
system. The use of the asylum module of the migration information system needs to be 
enhanced. The capacity of the Ministry will need  to be upgraded in order to implement the 
new legal framework adequately.  
Bosnia and Herzegovina still lacks an appr opriate permanent asylum reception centre. 
However, a temporary centre was opened in  May 2008. The design for a new permanent 
centre has been completed and the construction pr oject is in its final stage. The centre is 
expected to become fully ope rational in 2011. However, Bosnia  and Herzegovina has not yet 
assumed full responsibility for managing and financing the existing asylum centres.  
Overall, some progress has been made in the field of asylum. Some progress has been made on migration . Construction and equipment of the temporary 
reception centre for irregular migrants has been completed and the centre was opened in May 2008. All staff members recruited for the tem porary reception centre have received the 
required training. 
The Readmission Agreement between the EC and Bosnia and Herzegovina entered into force 
in January 2008. The first meeting of the Joint Committee on implementation of the 
Agreement took place in June 2008. Bosnia and Herzegovina has continued its efforts to 
establish readmission agreements with non-EU countries. No difficulties have been observed 
in handling cases concerning read mission of third-country nationa ls, mainly from Croatia and 
Albania. Bosnia and Herzegovina has continued to readmit its own nationals even when no 
readmission agreement is in place. The number of readmitted persons increased (240 in 2007 compared with 174 in 2006). 
EN 55   EN There has been a significant decrease in inte rceptions during attempts to cross the border 
unlawfully. In 2007, 851 persons were intercepted wh en trying to enter or  leave the territory 
of Bosnia and Herzegovina (1 289 in 2006) an d, in the first half of 2008, 231 persons were 
intercepted at the borders. The number of nationa ls deported back to Bosnia and Herzegovina 
decreased (to 1 117 in 2007, from 1 350 in 2006). Border control activities in combating 
illegal migration need to be stepped up. 
Out of the approximately 3 000 refugees originating from Kosovo whose temporary 
admission status was withdrawn in September 2007, 870 persons submitted an asylum request. The Foreigners Affairs Service of Bosnia and Herze govina has taken measures to 
finalise the status of those still residing on the territory of Bosnia and Herzegovina. 
There has been good progress on the Service fo r Foreigners' Affairs under the State-level 
Ministry of Security. The legal basis for opera tion of the Service has been adopted and the 
transfer of staff from the previous Department s for Aliens completed. Nevertheless, the staff 
levels need to be further rein forced and more training courses need to be conducted. The legal 
basis requires some clarification. 
The National Migration Strategy ha s not been adopted. The staffing of the Migration Sector at 
the Ministry of Security has improved, but fu rther efforts in this regard are needed. The 
legislation in the area of migration to implemen t the new Law on movement and stay of aliens 
and asylum has still to be adopted. Use of th e migration module of the migration information 
system needs to be enhanced. 
Overall, some progress has been made in the area of migration. 
4.3.2. Money laundering 
Limited additional progress can be reported on implementation of anti-money laundering 
measures. The Financial Intelligence Unit (FIU) in the State Investigation and Protection Agency has not been significantly reinforced in terms of staff. There have been limited improvements in cooperation between the FIU and other law enforcement agencies and 
prosecutors' offices by means of joint traini ng and joint investigations. A multi-agency 
Working Group for Prevention of Money Launderi ng and Funding of Terrorist Activities has 
recently been set up, in order to better coordi nate the investigative and regulatory bodies 
dealing with money laundering and terrorism. Ho wever, Strategy and Action Plan for this 
Working Group have not yet been adopted. Coope ration at international level has improved, 
with the aid of EGMONT but also of the rele vant provisions in bilateral conventions with 
Member States. The Council of Europe C onvention on laundering, search, seizure and 
confiscation of proceeds of crime and financing of terrorism entered in to force in May 2008. 
Bosnia and Herzegovina needs to harmonise  its legislation with this Convention. 
Political disagreements between the State level and the Entities persist with regard to legal 
solutions in respect of confiscation of illegally acquired property. The Law on confiscation of illegally acquired property has not yet been adopt ed. As a result, confiscation continues to be 
regulated in a non-harmonised ma nner by the State and Entities' criminal procedure codes. 
Money laundering and tax evasion remain amon g the most common criminal cases handled 
by the State Court. Weak preventive measur es for supervision of non-banking financial 
institutions and intermediaries make it easier for such offences to be committed.  
Further efforts are needed in order to reinfo rce the administrative capacity to fight money 
laundering Bosnia and Herzegovina needs to  improve its legislation against money 
EN 56   EN laundering, including in relation to implementation and enforcement. Following analysis of 
the existing framework, this should be carried out as part of a State-level strategy for 
preventing and fighting money launde ring and financing of terrorism. 
Overall, Bosnia and Herzegovina has taken a number of steps in this area, but efforts need to 
be increased. Money laundering cont inues to be a serious problem. 
4.3.3. Drugs 
Bosnia and Herzegovina remains primarily a tran sit country for drug tra fficking, with rising 
local consumption. This trend has led to an incr ease in violent drug-rela ted crime, mainly in 
urban centres even though such in cidents remain relatively rare.  
There has been some progress in the fight ag ainst drugs. The Commission on Narcotic Drugs 
was established in October 2007. The Ministry of  Civil Affairs has been designated national 
contact point for the European information network on drugs and drug addiction. A joint 
campaign by the Ministry of Security and th e EU police mission is aiming to raise public 
awareness of the dangers of drugs. Moreover,  telephone hotlines and local press coverage 
have focused public attention on issu es related to smuggling of drugs. 
However, no State-level strategy on illicit dr ugs and Action Plan has been adopted. Bosnia 
and Herzegovina needs to implement standards for information collection set by the European Monitoring Centre for Drugs and Drug Addicti on. The State-level coordination on the fight 
against drugs remains understaffed and weak. 
As regards enforcement, Bosnia and Herzegovina's law enforcement bodies are not 
adequately equipped to fight trafficking. Inte r-agency and international cooperation needs to 
be enhanced. Border controls have improved, but  the overall measures against narcotics trade 
are often below EU standards. 
Overall, Bosnia and Herzegovina has made some  progress in the field of drugs, mainly as 
regards awareness-raising, but drug trafficking remains a serious concern. Sustained efforts 
are required. 
4.3.4. Police 
There has been some progress in reforming th e police forces in Bo snia and Herzegovina, 
although the fragmentation of the police has not  been addressed. Cooperation and information 
exchange between law enforcement agencies remain weak. Following a political agreement 
between the political leaders in November 2007 (Mostar agreem ent), and in line with the 
relevant key European Partnership priority, th e Law on independent and supervisory bodies of 
the police structure of Bosnia and Herze govina and the Law on the Directorate for 
Coordination of Police Bodies and Agencies in Bosnia and Herzegovina were adopted in 
April 2008.  
These laws provide for establishment of seven new agencies at State level. Given that no 
agreement was reached on a transfer of policing powers, the new bodies have no coordination role vis-à-vis the Entities', cantonal and Br čko District police forces. However, the new 
institutions have generated forward momentum  for closer cooperation on police matters and 
may become a platform for streamlining the overa ll police structure in the years ahead. In this 
context, transitional provisions in the laws stipul ate that future steps will be considered after 
the constitutional reform. This approach is essential to ensuring full compliance with the three 
EN 57   EN European Union principles on policing. These laws now need to be  implemented and the 
directors of the new agencies  need to be appointed.  
In terms of operational policing, so me steps have been taken to facilitate the work of the State 
Investigation and Protection Agen cy. Its director has been a ppointed, and new and adequate 
premises are under construction. However, there have been some attempts by the authorities of Republika Srpska to undermine the proper f unctioning of the State Investigation and 
Protection Agency. The issues relating to the fragmentation of teleco mmunications systems, 
databases, computer-based investigation, crim inal analysis systems and forensics are not 
addressed by the police reform laws.  
Police cooperation agreements with Bulgaria , Montenegro and Roma nia were ratified in 
February 2008. Some reinforcement of the sta ff of the State Investigation and Protection 
Agency took place. Bosnia and Herzegovina ha s started implementing the strategic agreement 
with Europol and took steps towards c onclusion of an operational agreement. 
Despite some progress having been made, sm all arms and light weapons, as well as 
explosives and remnants of war, remain a se rious problem in Bosnia and Herzegovina. In 
particular, illicit arms possession is widespread, leading to rising levels  of crime and private 
violence; legislation in this regard is still not sufficiently developed. 
Contrary to the op inion of the United Nations Security  Council and the Council of Europe, 
decertified police officers are still prevented fr om applying for vacant jobs in the Bosnia and 
Herzegovina police forces.  
Overall, Bosnia and Herzegovina's preparations  in the police field are advancing. Particular 
efforts are now necessary to implement the new po licing legislation fully and to continue with 
the police reform. 
4.3.5. Fighting organised crime and terrorism 
There has been limited progress on fighting organised crime . In April 2008, Bosnia and 
Herzegovina acceded to the UN Protocol agains t illicit manufacturing and trafficking of 
firearms. The Ministry of Security has started to prepare its contributio n to the common threat 
assessment for the South-East Europe region. 
No additional Action Plans, except the one on the fight against vehicle-related crimes, have 
been developed to implement th e national strategy to combat organised crime and corruption. 
The responsible sector within th e Ministry of Security is a ssessing and revising the strategy. 
Some cases of corruption in the field of economic crime and of tax evasion and other 
obligations were discovered a nd processed in Republika Srpska, but few of them have been 
completed. 
No amendments to the Criminal Code have been adopted. Difficu lties in applying the criminal 
procedure based on the accusatorial system persist, resulting in inadequacies in the 
cooperation between police and pr osecutors and inconsistencies in the implementation of the 
codes. 
Bosnia and Herzegovina has not yet signed the additiona l protocol to the Council of Europe 
Convention on mutual legal assistance in crimin al matters. Bosnia and Herzegovina is also 
not yet party to the Council of Europe Conven tion on the international validity of criminal 
EN 58   EN judgements and the additional prot ocol to the Council of Europe Convention on the transfer of 
sentenced persons. 
The State Investigation and Protection Agency  has successfully conducted investigations, 
which have ended the activities  of several organised crime groups operating in the country. 
The most common examples of organised crime were underrated taxation, smuggling of 
persons and money laundering. However, the na tional statistical inst ruments for measuring 
crime rates need to be improved. 
Some progress has been made in the area of trafficking in human beings.  The Council of 
Europe Convention against Trafficking in Hu man Beings entered in to force in May 2008. 
Bosnia and Herzegovina has undertaken further efforts to implement the national action plan 
for combating trafficking in human bei ngs for 2005-2007. The Action Plan for 2008-2012 
was adopted by the Council of Ministers in Ma y 2008. The number of re lated investigations, 
indictments and convictions ha s decreased. One major case of prostitution and pandering of 
minors was solved. Sufficient financial resource s need to be secured for the office of the 
national coordinator for the fight ag ainst trafficking in human beings. 
With regard to protection of witnesses and vi ctims of trafficking, the necessary amendments 
to the Law on the witness protection programme  have not yet been adopted. A handbook on 
universal procedures for differe nt professions in the protecti on and treatment of victims of 
trafficking was issued. The Ministry of Secu rity has concluded protocols on cooperation on 
provision of assistance for victims of traffick ing with several non-governmental organisations 
which run safe houses. The Ministry of Security  finances these safe houses from its budget. 
The cooperation is based on referral mechanis ms, which stipulate that law enforcement 
agencies accommodate victims in safe houses.  
There has been some progress in the fight against  terrorism . Bosnia and Herzegovina has 
ratified the Council of Europe Convention on the Prevention of Terrorism, and it entered into 
force in May 2008. The capacity of the State Inve stigation and Protecti on Agency to collect 
and analyse information, to conduct investigati ons and to assess possible targets has been 
enhanced. There have also been some improvements in information sharing with the police bodies of the Entities. Nevertheless, the staffi ng of the SIPA Criminal Investigation Unit 
needs to be further reinforced. 
Little follow-up has been given to the 2006 anti -terrorism strategy. A number of Action Plans 
remain to be adopted, including on protecti on of civil aviation and on civil-military 
cooperation in the event of  a terrorist attack.  
Overall, some progress has been made in the fight against organised crime, trafficking in 
human beings and terrorism. 
4.3.6. Protection of personal data 
Limited progress has been made in this area. The Director of the future Data Protection 
Agency of Bosnia and Herzegovina was appoint ed in June 2008. Despite some progress, the 
administrative framework for establishing the agency needs to be completed, including 
adequate staffing. The agency needs to become  operational, and proper implementation of the 
rules for protection of persona l data needs to be ensured. 
 
EN 59   EN STATISTICAL ANNEX  
STATISTICAL DATA (as of 29 September 2008)            
Bosnia and Herzegovina            
            
Basic data Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Population (thousand) 1) 3 550 3 689 3 753 3 790 3 813 3 830 3 837 3 843 3 843 3 844 
Total area of the country (km²)  51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209 
            
National accounts Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Gross domestic product (GDP) (million national currency) 2) : : 10 713 11 599 12 829 14505b 15 786 16 927 19 121 21 641p 
GDP (million euro) 2) : : 5 477 5 930 6 559 7416b 8 071 8 655 9 777 11 065p 
GDP (euro per capita) 2) : : 1 449 1 561 1 714 1935b 2 103 2 252 2 544 2 880p 
GDP (in Purchasing Power Standards (PPS)  per capita)  : : : : : : : : : : 
SI: GDP (in PPS per capita, EU-25=100)  : : : : : : : : : : 
SI: Growth rate of GDP (national currency, at constant pr ices, % change on previous year)  : : : : : : 6.3 3.9 6.7 6.8p 
SI: Employment growth (national accounts, % change on previous year)  : : : : : : : : : : 
Labour productivity growth: GDP growth per person employ ed (% change on previous year)  : : : : : : : : : : 
SI: Unit labour cost growth (national accounts, % change on previous year)  : : : : : : : : : : 
SI: Labour productivity (GDP in PPS per person employed, EU-25=100)  : : : : : : : : : : 
Gross value added by main sectors (%)                      
Agriculture  : : 11.8 11.5 10.8 9.7 10.5 10.3 10.2 9.5p 
Industry  : : 20.3 20.0 18.7 19.2 19.4 19.3 19.2 19.6p 
Construction  : : 5.2 4.7 4.6 5.2 4.9 5.0 5.0 5.8p 
Services  : : 62.8 63.8 65.9 65.9 65.2 65.4 65.6 65.2p 
Final consumption expenditure , as a share of GDP (%)  : : : : : : 113.7 113.4 107.8 : 
Households and NPISH, as a share of GDP (%)  : : : : : : 92.2 93.0 88.2 : 
General government, as a share of GDP (%)  : : : : : : 21.5 20.4 19.6 : 
Gross fixed capital formation, as a share of GDP (%)  : : : : : : 24.6 25.4 23.0 : 
Changes in inventories, as a share of GDP (%)  : : : : : : 2.9 0.1 -0.9 : 
Exports of goods and services, relative to GDP (%)  : : : : : : 29.4 30.7 36.6 : 
Imports of goods and services, relative to GDP (%)  : : : : : : 70.7 69.6 66.4 : 
            
Industry Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Industrial production volume index (2000=100)  : : 100.0 105.3e 112.4e 118.0e 132.8e 144.7e 159.3e 170.4e 
            
Inflation rate Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Consumer price index (CPI), (total, % change on pr evious year) 3) : : 4.8 3.1 0.4 0.6 0.4 3.8 6.1b 1.5 
            
Balance of payments Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Balance of payments: current account total (million euro)  -311 -471 -429 -834 -1 253 -1 439 -1 319 -1 555 -817 -1 401 
Balance of payments current account: trade balance (million euro)  -2 803 -3 095 -3 000 -3 308 -3 524 -3 671 -3 678 -3 962 -3 4 06 -4 142 
 
EN 60   EN Balance of payments current account: exports of goods (million euro)  597 781 1 226 1 268 1 169 1 303 1 677 2 060 2 687 3 092 
Balance of payments current account: imports of goods (million euro)  3 400 3 875 4 227 4 577 4 692 4 974 5 355 6 022 6 093 7 2 34 
Balance of payments current account: net services (million euro)  171 168 203 254 232 297 347 402 501 548 
Balance of payments current account: net income (million euro)  728 683 641 595 539 473 408 378 326 340 
Balance of payments current account: net current transfers  (million euro)  1 594 1 773 1 727 1 626 1 499 1 462 1 604 1 628 1 76 2 1 853 
of which government transfers (million euro)  393 458 339 450 347 298 261 251 237 186 
Foreign Direct Investment (FDI) in the reporting economy (million euro)  60 166 159 133 282 338 567 478 564 1 478 
            
Public finance Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
General government deficit/surplus, relative to GDP (%)  : : : : : 0.7 1.6 2.4 2.9 1.3 
SI: General government debt, relative to GDP (%)  : : 37.9 38.1 33.4 27.7 25.5 25.6 21.3 18.3 
            
Financial indicators Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
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)  159 562 717 1377b 1 538 1 592 1 808 2 098 2 593 3 149 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro)  791 1 107 1 262 2387b 2 593 2 810 3 493 4 129 5 150 6 263 
Money supply: M3 (M2 plus marketable instruments, million euro)  : : : : : : : : : : 
Total credit by monetary financial institutions to resident s (consolidated) (million euro)  1 496 1 422 1 543 1 707 2 189 2 619  3 031 3 857 4 759 6 117 
Interest rates: day-to-day money rate, per annum (%)  : : : : : : : : : : 
Lending interest rate (one year), per annum (%) 4) : : : : 12.6 10.9 10.3 9.6 8.0 7.2 
Deposit interest rate (one year), per annum (%) 5) : : : : 1.4 1.1 0.9 0.7 0.5 0.4 
euro exchange rates: average of period - 1 euro = … national  currency  1.969 1.956 1.956 1.956 1.956 1.956 1.956 1.956 1.956 1. 956 
Effective exchange rate index (2000=100)  : : : : : : : : : : 
Value of reserve assets (includi ng gold) (million euro) 6) 145 443 525 1 385 1 270 1 428 1 779 2 160 2 787 3 393 
            
External trade Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Trade balance: all goods, all partners (million euro)  : : : : : -2 019 -2 667 -3 750 : : 
Value of exports: all goods, all partners (million euro)  : : : : : 908 1 299 1 920 : : 
Value of imports: all goods, all partners (million euro)  : : : : : 2 928 3 966 5 670 : : 
Terms of trade (export price index / impor t price index)  : : : : : : : : : : 
Share of exports to EU-27 countries in value of total exports (%)  : : : : : 53.4 54.2 53.8 : : 
Share of imports from EU-27 countries in value of total imports (%)  : : : : : 58.5 53.0 51.9 : : 
            
Demography Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Natural growth rate: natural change (births minus deaths) (per  1000 inhabitants) 1) 4.4 3.7 2.4 1.9 1.5 0.9 0.6 0.1 0.2 -0.2 
Net migration rate: immigrants minus emigrant s (per 1000 inhabitants)  : : : : : : : : : : 
Infant mortality rate: deaths of children under one year of age per 1000 live births  11.0 10.1 9.7 7.6 9.2 7.6 7.4 6.7 7.5 : 
Life expectancy at birth: male (years)  70.5 70.5 71.3 71.3 71.3 71.3 71.3 72.1 72.1 72.1 
Life expectancy at birth: female (years)  75.9 75.9 76.7 76.7 76.7 76.7 76.7 77.5 77.5 77.5 
 
EN 61   EN             
Labour market Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Economic activity rate (15-64): share of  population aged 15-64 that is economically active (%)  : : : : : : : : 51.3 52.2 
SI: Employment rate (15-64): share of population aged 15-64 that is in employment (%)  : : : : : : : : 35.0 36.8 
Share of male population aged 15-64 that is in employment (%)  : : : : : : : : 46.1 48.7 
Share of female population aged 15-64 that is in employment (%)  : : : : : : : : 24.0 25.0 
SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in 
employment (%) 7) : : : : : : : : 30.6 31.9 
Employment by main sectors (%)                      
Agriculture  : : : : : : : 19.6 20.6b 19.9 
Industry  : : : : : : : 21.4 30.7b 32.6 
Construction  : : : : : : : 4.9 : : 
Services  : : : : : : : 54.1 48.7b 47.5 
SI: Unemployment rate: share of labour force that is unem ployed (%) 8) : 39.4 39.7 40.0 41.1 41.6 41.8 43.9 31.1b 29.0 
Share of male labour force that is unemployed (%)  : : : : : : : : 28.9 26.7 
Share of female labour force that is unemployed (%)  : : : : : : : : 34.9 32.9 
Unemployment rate of persons < 25 years: shar e of labour force aged <25 that is unemployed 
(%)  : : : : : : : : : : 
SI: Long-term unemployment rate: share of labour force that  is long-term unemployed (%) 9) : : : : : : : : 28.4 26.4 
            
Social cohesion Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Average nominal monthly wages and salari es (national currency) 10) 296.0 343.0 372.0 408.0 446.0 484.0 505.0 538.0b : : 
Index of real wages and salaries (index of nom inal wages and salaries divided by the CPI) 
(2000=100)  : : : : : : : : : : 
SI: Early school-leavers: share of popul ation aged 18-24 having not completed upper 
secondary education and not currently in education or training (%)  : : : : : : : : : : 
            
Standard of living Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Number of passenger cars per 1000 population 11) : : : : 116.4 112.1 116.3 117.2 : 114.5b 
Number of subscriptions to cellular mobile telephone se rvices per 1000 population  7.1 : : 117.3 196.4 274.1 : : : : 
            
Infrastructure Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Density of railway network (lines in operation, per 1000 km²)  : : : : : : 20.1 20.1 20.1 20.1 
Length of motorways (thousand km)  : : : : : : : : : : 
            
Innovation and research Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Spending on human resources (public expenditure on education) relative to GDP (%)  : : : : : : : : : : 
SI: Gross domestic expenditure on research & development, relative to GDP (%)  : : : : : : : : : : 
SI: Percentage of households who have Internet access at home (%)  : : : : : : 6.6 : : : 
            
Environment Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
SI: Total greenhouse gases emissions, CO2 equi valent (tons, 1990=100)  : : : : : : : : : : 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP)  : : : : : : : : : : 
SI: Share of renewable energy in electric ity consumption (%)  : : : : : : : : : : 
SI: Road freight transport as a share of total in land freight transport (modal split of freight 
transport) (%)  : : : : : : : : : : 
 
EN 62   EN SI: Structural Indicator  
e : estimate  
f : forecast  
p : provisional  b : break in series  Source: Eurostat. 
1. For 2000-2002, the value of non-observe d economic activities is not included, thus values are estimated.  
2. Until 2006, the growth rate of retail prices is presented, from 2006 onwards  growth rate if the consumer price index (CPI) is u sed. 
3. Short-term lending rates in national currency to priv ate enterprises and cooperatives (weighted average). 
4. Demand deposit rates in national currency to households (weighted average). 
5. Data as of 31 December; reserv e assets do not include gold. 
6. Population aged between 50 and 64. 
7. Before 2006 data based on administrative sources, from  2006 onwards data based on the labour force survey. 
8. Unemployed for 24-59 months. 
9. For 1998 to 2004 net salaries; 2005 incl uding data from Brcko District. 
10. 2002 to 2005 data refer to the Federation of  Bosnia and Herzegovina only and considers the total vehicle fleet (official data f or the state level are not available). 2007 data  contain only passenger cars and are official 
data delivered by Ministry of  Civil Affairs Excluding goats.             
Energy Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Primary production of all energy products (thousand TOE)  : : : : : : : : : : 
Primary production of crude oil (thousand TOE)  : : : : : : : : : : 
Primary production of hard coal and lignite (thousand TOE)  : : : : : : : : : : 
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)  : : : : : : : : : : 
            
Agriculture Note 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 
Agricultural production volume index of goods  and services (produc er prices, previous 
year=100)  : : : : : : : : : : 
Total utilised agricultural area (thousand hectare)  : : : 2 126 2 122 2 192 2 196 2 187 2 194 2 139 
Livestock: cattle (thousand heads, end of period)  : : : : : : 453 460 515 468 
Livestock: pigs (thousand heads, end of period)  : : : : : : 596 654 712 535 
Livestock: sheep and goats (thousand heads, end of period) 12) : : : : : : 893 903 1 005 1 103 
Production and utilisation of milk on the farm (total  whole milk, thousand tonnes)  : : : : : : 580 629 662 724 
Crop production: cereals (including ri ce) (thousand tonnes, harvested production)  1 184 1 369 930 1 139 1 309 793 1 439 1 350 1 341 1 000 
Crop production: sugar beet (thousand tonnes, har vested production)  : : : : : : : : : : 
Crop production: vegetables (thou sand tonnes, harvested production)  274 279 176 190 247 204 276 257 297 254