TABLE OF CONTENTS

1........... Introduction. 3

1.1........ Preface. 3

1.1........ Context 3

1.2........ Relations between the EU and Bosnia and Herzegovina. 4

2........... Political criteria. 6

2.1........ Democracy and the rule of law.. 6

2.2........ Human rights and the protection of minorities. 16

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 pressure and market forces within the Union. 29

4........... European standards. 31

4.1........ Internal market 31

4.1.1. Free movement of goods. 31

4.1.2. Movement of persons, services and right of establishment 32

4.1.3. Free movement of capital 34

4.1.4. Customs and taxation. 35

4.1.5. Competition. 35

4.1.6. Public procurement 36

4.1.7. Intellectual property law.. 36

4.1.8. Employment and social policies, public health policy. 37

4.1.9. Education and research. 39

4.1.10. WTO issues. 41

4.2........ Sectoral policies. 41

4.2.1. Industry and SMEs. 41

4.2.2. Agriculture and fisheries. 42

4.2.3. Environment and climate change. 44

4.2.4. Transport policy. 46

4.2.5. Energy. 47

4.2.6. Information society and media. 49

4.2.7. Financial control 50

4.2.8. Statistics. 50

4.3........ Justice, freedom and security. 51

4.3.1. Visa, border management, asylum and migration. 51

4.3.2. Money laundering. 53

4.3.3. Drugs. 54

4.3.4. Police. 55

4.3.5. Fighting organised crime and terrorism.. 55

4.3.6. Protection of personal data. 57

Statistical Annex. 58

1. Introduction 1.1. Preface

The Commission reports regularly to the Council and Parliament on the progress the countries of the Western Balkans region have made towards European integration, assessing their efforts to comply with the Copenhagen criteria and the conditionality of the Stabilisation and Association Process.

This progress report, which largely follows the same structure as in previous years:

– briefly describes relations between Bosnia and Herzegovina and the European Union;

– analyses the situation in Bosnia and Herzegovina in terms of the political criteria for membership;

– analyses the situation in Bosnia and Herzegovina 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 legislation and policies with the acquis, in line with the Interim Agreement/Stabilisation and Association Agreement.

This report covers the period from October 2013 to September 2014. Progress is measured on the basis of decisions taken, legislation adopted and measures implemented. As a rule, legislation or measures that are being prepared or awaiting parliamentary approval have not been taken into account. This approach ensures equal treatment across all reports and enables an objective assessment.

The report is based on information gathered and analysed by the Commission. Many sources have been used, including contributions from the EU Member States, European Parliament reports[1] and information from various international and non-governmental organisations. Due to internal disagreements, Bosnia and Herzegovina’s government failed to provide the official contribution of the country for this year’s report.

The Commission has drawn detailed conclusions regarding Bosnia and Herzegovina in its separate communication on enlargement[2] , based on the technical analysis in this report.

1.1. Context

Bosnia and Herzegovina is a potential candidate for EU membership. The Stabilisation and Association Agreement between Bosnia and Herzegovina and the EU was ratified in 2011, but has not yet entered into force.

The country’s Constitution was drawn up as part of the internationally agreed 1995 Dayton/Paris Peace Agreement (DPA). It establishes a complex political structure that provides for governments at State, Entity and District levels. The State level comprises a tripartite rotating Presidency, a Council of Ministers (executive branch) and a bicameral Parliamentary Assembly consisting of a House of Representatives (lower chamber) and a House of Peoples (upper chamber). The judicial branch established by the DPA consists of a State-level Constitutional Court. The High Judicial and Prosecutorial Council, as well as a State Court and Prosecutor’s Office, were established later.

An international presence under UN auspices— the Office of the High Representative (OHR) — has been in place in Bosnia and Herzegovina since 1995. The Peace Implementation Council Steering Board has set objectives and conditions to be met for the closure of the OHR.[3] In particular, a resolution of the issue of state property and other levels of government and of defence property is still outstanding. This is linked to the implementation of the Constitutional Court’s decision regulating property distribution. In April, the House of Representatives of Bosnia and Herzegovina rejected a proposed law on the disposal of immovable military property, as it did not receive support from Republika Srpska delegates.

1.2. Relations between the EU and Bosnia and Herzegovina

Bosnia and Herzegovina participates in the Stabilisation and Association Process.

All EU Member States have ratified the Stabilisation and Association Agreement (SAA) signed in June 2008, but the Council has refrained from taking a decision on its entering into force, due to the country’s failure to implement the Sejdić-Finci ruling of the European Court of Human Rights.[4] Full implementation of the Sejdić-Finci ruling is a key element for Bosnia and Herzegovina’s membership application to be considered as credible by the EU.[5]

The Interim Agreement (IA) has been in force since July 2008. Regarding obligations on state aid, the State Aid Council has been established, but it is not yet fully functioning. The country is still in breach of the IA due to the non-implementation of the Sejdić-Finci ruling.

Bosnia and Herzegovina has refused to accept the established methodology for the technical adaptation of the IA/SAA and has therefore not yet adapted the trade concessions granted under its IA/SAA with the EU to take into account its bilateral traditional trade with Croatia. After several rounds of negotiations that led to no result, the Commission initiated a dispute settlement against Bosnia and Herzegovina in an extraordinary meeting of the Interim Committee that took place in November 2013. It is crucial that Bosnia and Herzegovina re-engage in constructive discussions with the EU and reaches an agreement on technical adaptation as a matter of urgency. The Commission adopted a proposal to make the prolongation of the Autonomous Trade Measures for the Western-Balkan countries after 2015 conditional for Bosnia and Herzegovina, until it accepts the adaptation of the IA/SAA with the EU to take into account its bilateral traditional trade with Croatia.

The third meeting of the EU-Bosnia and Herzegovina High Level Dialogue on the Accession Process was held in October 2013. Despite some progress, no final agreement on the implementation of the Sejdić-Finci ruling and establishment of an EU coordination mechanism could be reached. The EU continued its intensive facilitation efforts to assist the country’s political representatives to find an agreement on the implementation of the Sejdić-Finci ruling. The Commission held discussions on this matter with the country’s political leaders in October in Budapest, and in December in Prague. Given the lack of agreement among the leaders, Commissioner Füle had to end his facilitation efforts in February. The implementation of the Sejdić-Finci ruling remains crucial in order for Bosnia and Herzegovina to meet its international obligations. As a response to the political situation in Bosnia and Herzegovina and demonstrations calling for improvements in the social and economic situation in the country, in February, the Commission announced three new initiatives: broaden the EU-Bosnia and Herzegovina Structured Dialogue on Justice, accelerate the implementation of projects under the Instrument for Pre-accession Assistance (IPA) and strengthen economic governance. Civil society is closely involved in all three initiatives.

As regards the first initiative, the Structured Dialogue on Justice, which focuses on the reform of the judiciary and issues related to processing war crimes, has been broadened to additional rule of law matters. A new set of agenda items was identified with the domestic authorities and civil society representatives: anti-corruption, anti-discrimination, prevention of conflict of interest, and measures to strengthen the integrity, accountability and efficiency of police forces within the existing legal framework. The first plenary meeting of the broadened dialogue took place in May.

The second initiative, focusing on strengthening economic governance, consists of assistance in preparing a National Economic Reform Programme and a Competitiveness and Growth Programme. As an immediate response to the socio-economic concerns of the citizens of Bosnia and Herzegovina, in May, the EU launched a Compact for Growth initiative through a Forum on Prosperity and Jobs. The conference and subsequent follow-up events in July identified economic policy measures, the so-called Compact for Growth, that targets key economic issues. These commitments are expected to be taken up by political parties in their election platforms and reflected in the National Economic Reform Programme and the Competitiveness and Growth programme. Bosnia and Herzegovina continues to participate in a multilateral economic dialogue with the Commission and EU Member States to prepare the country for participation in multilateral surveillance and economic policy coordination under the EU’s Economic and Monetary Union.

Regarding the third initiative, a Joint EU-Bosnia and Herzegovina Working Group to accelerate the implementation of projects under the IPA was established in March. The group has made only limited progress, despite involvement at Prime Ministers’ level. Following the floods that hit the country at the end of May, after consultation with the country’s authorities, the Commission decided to reallocate € 42 million from projects under previous IPA national programmes that could not be implemented due to blockages on the side of Bosnia and Herzegovina. In July, the Commission hosted a donors’ conference for Bosnia and Herzegovina and Serbia, co-organised with France and Slovenia. Total pledges for Bosnia and Herzegovina amounted to € 810 million of grants and soft loans out of which € 85 million grants from the EU budget.

The EU Delegation to Bosnia and Herzegovina is responsible for implementing financial assistance. The country’s authorities have made no progress towards establishing the structure necessary for indirect management of EU funds. Implementation of the 2008-13 national IPA programmes is ongoing. Due to the country’s lack of progress in the EU integration process and the absence of countrywide strategies in many sectors, the draft IPA II Country Strategy Paper is restricted to the period 2014-17, as compared to the full period for IPA II 2014-20 and the following sectors: democracy and governance; rule of law and fundamental rights; competitiveness and innovation, local development strategies; education, employment and social policies. The establishment of a coordination mechanism on EU matters and countrywide sector strategies remain key requirements for Bosnia and Herzegovina to benefit fully from IPA funding.

The EU provides guidance to the country’s authorities on reform priorities. Progress on these priorities is encouraged and monitored by the joint bodies established by the Interim Agreement. The overall pace of reforms has remained weak. Only three out of the six sub-committee meetings and the Interim Committee meeting have been held since October 2013. Three sub-committee meetings had to be cancelled due to internal disagreements on the composition of working groups and the level of consultation on the written documentation to be submitted.

The enhanced presence of the combined Office of the EU Special Representative and the EU Delegation in Bosnia and Herzegovina has continued to be instrumental in communicating EU priorities to citizens and in implementing the objectives of the EU agenda in key areas. An inter-parliamentary meeting between members of the European Parliament and members of the Bosnia and Herzegovina Parliamentary Assembly took place in Sarajevo in March. The EU has continued to deploy considerable resources in Bosnia and Herzegovina under the Common Foreign and Security Policy and the Common Security and Defence Policy.

As regards the Common Foreign and Security Policy (CFSP), Bosnia and Herzegovina aligned itself, when invited, with 23 out of 44 relevant EU declarations and Council decisions (52 % alignment). Bosnia and Herzegovina did not align itself with Council decisions introducing EU restrictive measures in the context of Russia’s illegal annexation of Crimea and events in eastern Ukraine, as there was no consensus within the Presidency of Bosnia and Herzegovina. Bosnia and Herzegovina was absent at the vote on the UN General Assembly Resolution on the territorial integrity of Ukraine.

The EUFOR Althea military operation deployed with over 900 troops in-theatre and additional over-the-horizon reserves. EUFOR troops focused on capacity building and training of the armed forces of Bosnia and Herzegovina, while retaining deterrence capacity to support a safe and secure environment. The UN Security Council has extended EUFOR’s mandate until November 2014.

Visa liberalisation for citizens of Bosnia and Herzegovina travelling to the Schengen area has been in force since December 2010. As part of the monitoring mechanism in place since visa liberalisation, the Commission has been regularly assessing the progress made by the country in implementing reforms introduced under the visa roadmap. The monitoring mechanism also includes an alert mechanism to prevent abuses, coordinated by Frontex. The Commission has regularly submitted its post-visa liberalisation monitoring reports to the European Parliament and the Council. The next report will be presented by the end of 2014. A visa-waiver suspension mechanism entered into force in January 2014. On this basis, EU Member States can request the Commission, in an emergency situation and as a measure of last resort, to examine the possibility of temporarily suspending the visa waiver for third-country nationals. A readmission agreement between the European Union and Bosnia and Herzegovina has been in force since 2008.

Bosnia and Herzegovina participates in the following EU programmes: the Seventh research framework programme, Culture and Europe for Citizens. Bosnia and Herzegovina has also recently concluded or is in the process of concluding new agreements for a number of programmes, including: Horizon 2020, Creative Europe, Customs, Fiscalis and Erasmus+.

2. Political criteria

This section examines the progress Bosnia and Herzegovina has made towards meeting the Copenhagen political criteria, which require stability 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 compliance with international obligations, such as cooperation with the International Criminal Tribunal for the former Yugoslavia.

2.1. Democracy and the rule of law

Constitution

The Dayton/Paris Peace Agreement (DPA) put an end to the 1992-1995 war and brought peace to Bosnia and Herzegovina. The country’s Constitution, which is Annex 4 to the DPA, established a complex institutional architecture that remains inefficient and is subject to different interpretations.

The complicated decision-making process, lack of shared vision and weak cooperation between the various levels of government have delayed structural reforms and hampered the country’s progress towards the EU. In February, the failure of the authorities to address political reforms and citizens’ long-standing social and economic concerns led to large demonstrations.

Despite intensive facilitation efforts by the EU, agreement on a definition of an effective coordination mechanism between various levels of government for alignment with the acquis could not be reached. The continued use of divisive rhetoric by some political representatives and questioning of Bosnia and Herzegovina’s capacity to function as a country had a negative impact on cooperation between the Entities and the functioning of the State.

The Constitution of Bosnia and Herzegovina prevents citizens who do not declare themselves as one of the three constituent peoples from standing as candidates for the Presidency and the House of Peoples of the Parliamentary Assembly. This has been declared in breach of the European Convention on Human Rights in the Sejdić-Finci judgment. The EU has further intensified its facilitation efforts to assist the country’s political representatives in finding an agreement on the amendments of the Constitution and the election law required to ensure the implementation of the ruling.

Facilitation efforts carried out under the auspices of Commissioner Füle and supported by the Council of Europe’s Venice Commission continued at the third meeting of the EU-Bosnia and Herzegovina High Level Dialogue on the Accession Process in October 2013. Despite significant progress in the talks, no agreement could be reached. In February, the Commission had to end its facilitation efforts.

Overall, there has been no tangible progress in establishing functional and sustainable institutions. The efficiency and functioning of the political institutions at all levels of government need to improve. Moreover, the compliance of the country’s Constitution with the European Convention on Human Rights as regards the Sejdić-Finci judgment remains to be ensured.

Elections

General elections will take place on 12 October. The official pre-election campaign period started on 12 September and will end on 11 October, when election silence is to be observed until closing of the polling stations. Election preparations have started without major problems. International observers, notably through the OSCE’s Office for Democratic Institutions and Human Rights (OSCE/ODIHR), and domestic observers, notably through the civic coalition ‘Pod Lupom’, are monitoring the election process and will issue after the 12 October their findings and recommendations.

The 2010 Constitutional Court decision on Mostar’s statute has not been implemented due to lack of agreement between SDA and HDZ BiH[6] parties and municipal elections in Mostar have not yet taken place. This prevents the citizens of Mostar from exercising their democratic rights. Mostar City Council ceased to function in 2012 and since then, the city has been governed by the Mayor, with no City Council in place to exercise its democratic functions and to respect power-sharing arrangements. Following legal challenges to the results of the 2012 municipal elections in Srebrenica,[7] amendments to the State-level law on residence to improve security and certainty remain to be adopted.

Parliament

In June, both Houses of the Parliamentary Assembly adopted new rules of procedure to increase efficiency and improve legislative procedures. The new rules of procedure introduce a fast-track mechanism for EU-related legislation. Legislative activities have been seriously hampered by political disagreements and the uncertainties of coalition building at State and Entity levels. Both Houses of the Parliamentary Assembly failed to convene regularly, mainly due to walkouts of delegates from the Republika Srpska in the House of Representatives and the lack of a quorum in the House of Peoples in the absence of three Bosniak delegates. The work of the House of Representatives was interrupted for about a month. The House of Peoples resumed its work after almost three months, following the socio-economic protests in February.

Due to political turmoil and inter-ethnic divergences, the legislative work of the Parliamentary Assembly and its committees was slow and ineffective. Only four new laws and 21 amendments, including those required for harmonisation with the acquis, have been adopted. Legislation was often introduced in urgent procedure, thereby limiting consultations and amendments from members of parliament. This has led to motions for protection of Vital National Interests and rejections of laws. The lack of consensus and a number of reshuffles of the Council of Ministers have had a negative effect on cooperation between the Council of Ministers and the Parliamentary Assembly.

At Entity level, the absence of a clear parliamentary majority in the Federation has made the decision-making process very difficult. The unsuccessful attempt to reshuffle the Federation Government came to an end in December and resulted in the resignation of the Speaker of the Federation House of Representatives. A new Speaker was appointed at the end of April. These political turbulences further worsened cooperation between the Federation Parliament, Government and Cantonal legislators, which also had a negative impact on the adoption of EU-related legislation. The work of parliamentary committees continued to be affected by a frequent lack of quorum and weak advisory services.

In the Republika Srpska National Assembly, the EU Integration Committee continued to cooperate closely with the government in assessing the level of compliance of proposed legislation with the acquis.

Cooperation between the State and Entity parliaments and Brcko Assembly continued at staff and committees level but lacked support from the parliamentary leadership. The State and Entity-level parliamentary committees for European integration have last met in June 2014 to discuss use of the IPA funds in Bosnia and Herzegovina. The State and Entity-level parliamentary committees for European integration have not met since September 2013.

Overall, the Parliamentary Assembly of Bosnia and Herzegovina has made very limited progress in adopting EU-related legislation. Disagreements along political and ethnic lines have had a major negative effect on the work of the assemblies at State level and in the Federation. Cooperation between the State and Entity parliaments and the Brcko Assembly needs to be better institutionalised to improve countrywide legislative planning.

Government

The tripartite Presidency of Bosnia and Herzegovina has continued to meet regularly. The formulation of foreign policy has remained subject to divergent positions within the Presidency.

In December, the new parliamentary majority at State level endorsed the reshuffling of the State-level Council of Ministers by appointing a new Minister for Foreign Trade and Economic Relations and two deputy ministers. Following street protests, the Minister of Security was dismissed by the Parliamentary Assembly in April. His dismissal was followed by the resignation of the Deputy Minister of Finance in May.

The Council of Ministers continued to convene on a regular basis, except for February, when its work was suspended following street protests. The legislative output of the Council fell short of expectations. The Council held one thematic session on EU integration. It could not reach an agreement on an EU coordination mechanism. Political tensions within the Council of Ministers concerning the division of competencies across different levels of government prevented the provision of material needed to conduct a number of sub-committee meetings under the Interim Agreement.

The Council of Ministers could not reach agreement to prepare countrywide strategies for key sectors of economy. Crucial investment sectors such as agriculture and rural development, energy, environment and transport have therefore not been included in the country strategy paper 2014-20 and in IPA II programming in 2014. Lack of agreement between the State and Entities has led to the cancellation of rural development projects needed for future preparations for IPARD funds and resulted in loss of substantial EU assistance to farmers.

The development strategy and the social inclusion strategy at State level and in Republika Srpska have not yet been adopted. The first population and household census since 1991 was successfully conducted in October 2013. Preliminary results were published in November. Statistical data collected through the census aim at contributing to better socio-economic planning.

The role of the Directorate for European Integration to guide the EU integration process and the transposition of the acquis at different levels of government has been further weakened due to disagreements within the Council of Ministers on the EU coordination mechanism. As a number of sub-committee meetings under the Interim Agreement did not take place and preparations of the National Plan for the Adoption of the Acquis were stalled, the Directorate’s coordinating role has further declined. Coordination of activities and the exchange of information between the Directorate and the Entities and the Brcko District need to be strengthened.

The Government of Republika Srpska remains engaged in the approximation of draft legislation with the acquis. Its administrative capacity to monitor EU-related legislation remained good, but there was little coordination and cooperation with the State-level Council of Ministers and the Federation Government.

In the Federation, the reshuffling of the government initiated in June 2012 has not been completed. The activities of the government were hampered by the pending no-confidence vote that was passed by simple majority in both houses of the Federation Parliament and was blocked by the Vital National Interests of the Bosniak Caucus. The case is still pending before the Vital National Interests Panel of the Federation Constitutional Court. The absence of a parliamentary majority hampers the government’s ability to address urgent socio-economic grievances, which were explicitly expressed during the demonstrations in February.

In January, the Federation faced a major political and financial crisis when the Entity’s President dismissed the Minister of Finance. The dismissal took place with immediate effect in the absence of legal provisions providing for a signatory of budget payment transactions, including foreign debt payments. This has also had an impact on Bosnia and Herzegovina’s obligations towards creditors and affected the implementation of the stand-by arrangement with the International Monetary Fund. After the Federation Prime Minister addressed the Entity’s Constitutional Court, the Court adopted a decision on interim measures. In April, the Federation Parliament adopted amendments to the law on execution of the budget of the Federation, according to which a member of the Federation Government or an authorised civil servant of the Ministry of Finance can sign payment orders in the absence of a Federation Finance Minister.

The socio-economic protests in February resulted in the resignation of four Cantonal governments. The Tuzla Canton appointed a new non-partisan expert government in March. In the Zenica-Doboj, Sarajevo and Una Sana Cantons, the governments resigned and are acting in a caretaker capacity.

In October 2013, the Federation Government adopted a decision on the Office for European Integration. The selection process for the director is ongoing. No progress was made in implementing the agreement on cooperation on EU integration issues between the Federation Government and the Cantons. Meetings between EU affairs coordinators in line ministries are held only on an ad hoc basis. Legislative offices of different governments in the Federation do not cooperate systemically to harmonise legislation or to approximate it to the acquis.

In the Brcko District, the Office for European Integration within its government was institutionally reinforced, but remains understaffed. The government and the assembly cooperated closely with the Entities on EU-related legislation. The District Assembly’s Committee for EU integration held two meetings. At the same time, Brcko District Government held a thematic session dedicated to the EU integration process in July.

Entity legislation is largely in line with the European Charter on Local Self-Government. However, there remains a lack of clarity in the apportionment of powers between the Entities, Cantons and municipalities, with a relatively low level of financial autonomy at municipal level. The National Assembly of the Republika Srpska has adopted amendments to the law on local self-government that decreased the power of municipal councils. The Cantons have started harmonising their legislation with Federation law on the principles of local self-government, but progress is slow.

Overall, no progress has been made by Bosnia and Herzegovina in improving the functionality and efficiency of all levels of government. Governments need as a matter of priority to focus on addressing socio-economic grievances and further assisting those in need following the floods. Countrywide strategies for key sectors of economy need to be adopted.

Public administration

The overarching public administration reform strategy of Bosnia and Herzegovina, adopted in 2006, and the revised 2011 action plan provide the strategic framework for public administration reform till the end of 2014. The Public Administration Reform Coordinator’s Office (PARCO) has continued to carry out its coordination tasks effectively at technical level and in close cooperation with its counterparts at the Entities level and in Brcko District. However, the monitoring capacity of PARCO remains weak, due to the lack of adequate performance indicators to measure progress in the implementation of objectives set in the PAR strategy. The reform process lacks the necessary political support. No formal political discussion has as yet taken place on the future of reform beyond 2014, after the expiry of the current strategy and action plan. The pace of public administration reform, in particular at Cantonal level, remains slow and shows weaknesses in various areas, including policy development, budget processes, human resources management, transparency and vertical coordination.

There has been no progress with regard to policy development and coordination. Adequate planning of actual costs and sources of financing for implementation of the current public administration reform strategy is required.

Concerning public service and human resources management, Brcko District has made some progress in improving its civil service legislation. However, at other levels, there has been no improvement in recruitment procedures that would ensure the application of objective and merit-based criteria, transparency and prompt appointments to vacant positions. Fragmentation of the legislation regulating the civil service at Federation and Cantonal level continues to have a negative effect on the functionality of the civil service system. There are still weaknesses in the capacity of the civil service for legal harmonisation and implementation of the acquis or for commitments arising from the Interim Agreement and the Stabilisation and Association Agreement. The country’s administrative structures need to be strengthened substantially to be able to respond effectively to the requirements of the EU accession process.

As regards accountability and service delivery, the lack of a harmonised and modernised legal administrative framework negatively affects the quality of public services delivery at all administrative levels. The development and implementation of coherent standards and common administrative practices across the entire public administration body still need to be addressed.

Bosnia and Herzegovina does not yet have in place a comprehensive public financial management reform programme that would set the basis for prioritising and sequencing reforms necessary in different parts of the public financial management system. However, a public expenditure and financial accountability assessment is underway and could be used as a starting point for preparing a reform programme.

The reform programme could help to address existing weaknesses, such as the lack of a medium-term budgetary framework with medium-term targets, and the lack of long-term planning on capital investment and further development of programme-based budgeting. Also, there is no consolidation of the budgets of State, Entities and other public sector bodies that would provide information as defined by EU requirements. The non-inclusion of extra-budgetary funds in particular prevents a clear view of the entire fiscal position. The budget process also lacks democratic legitimacy, as budgets are usually adopted in urgent procedure. Entity budgets frequently tend to undergo rebalancing over the year, which, given limited human resource capacity, leaves little time to improve the reporting process. This leaves the system vulnerable to abuse for political purposes. On a positive note, debt has been actively managed to avoid defaults on loans and to ensure that principal and interest payments are made on time, but there is no published debt management strategy to guide policy. Financial reporting also needs to be reformed.

Overall, very limited progress has been made in reforming public administration and improving its capacity to fulfil the requirements of EU integration. The dysfunctionalities of public administration at, and between, its different levels remain an issue of serious concern. A new public administration reform strategy after 2014 needs to be developed. The reforms necessary in public financial management need to be addressed in a more comprehensive manner.

Ombudsman

Some progress has been made in increasing public awareness about the role of the Ombudsman Institution of Bosnia and Herzegovina. The Ombudsman Institution continues to face financial and human resource constraints that have a negative impact on its activities, in particular as regards the implementation of anti-discrimination law. Political support for the work of the Ombudsman Institution remains weak and the implementation of its recommendations continues to be low.

Civil society

An empowered civil society is a crucial component of any democratic system and should be recognised and treated as such by state institutions. Civil society has become more active following the widespread socio-economic protests that took place across the country in February, calling on the governments to improve the social and economic situation in the country. Citizens’ assemblies, called plenums, were established in several cities in the Federation. The plenums put forward a number of socio-economic demands and addressed them to the Entity and Cantonal authorities. These demands relate in particular to measures to tackle unemployment, corruption, privileges of elected officials, and improvements in healthcare and social protection. The response from the authorities has been very limited.

Cooperation with civil society at State, Entity and Cantonal levels remains weak. Institutional mechanisms for cooperation with civil society are still not fully operational at Entity level and are lacking at State level. A national strategy for civil society has not yet been adopted. Civil society organisations often face administrative restrictions during the registration process. Transparency in the allocation of funds for civil society organisations needs to improve.

Representatives of civil society in Bosnia and Herzegovina have been closely involved in the preparation of the Progress report, of the draft IPA II Country Strategy Paper as well as in the EU’s three new initiatives (see also 1.3 - Relations between the EU and Bosnia and Herzegovina).

Judicial system

The Structured Dialogue on Justice, broadened to other rule of law matters, remained a sustained confidence-building process, delivering some positive results in the area of regional cooperation, the processing of war crimes, professionalism and the efficiency of the judiciary. The implementation of the Justice Sector Reform Strategy (JSRS) 2009-2013 was completed in part, while the follow-up strategy 2014-2018 and action plan are still in the process of receiving final political endorsement. The State-level Ministry of Justice has finalised a draft law on the High Judicial and Prosecutorial Council (HJPC) that was reviewed by the Council of Europe’s Venice Commission with an opinion adopted in March 2014. The politicisation of the appointment procedures for the Council’s members and that of the Chief Prosecutors at all levels, through involvement of executive and legislative branches, remains problematic. The final adoption of amendments to the law on the Courts of Republika Srpska, which harmonises the law with the HJPC’s existing prerogatives, is still pending. The draft Law on the Courts of Bosnia and Herzegovina, providing for the establishment of a separate State-level Appellate Court, and the draft law on the Prosecutor’s Office of Bosnia and Herzegovina have been finalised by the Ministry of Justice. Following the earlier Venice Commission opinion and relevant Structured Dialogue recommendations, this reform needs to be achieved with the largest possible political consensus as a matter of priority. There was some progress in enhancing the harmonisation and consistency in applying substantive criminal law at the State-level judiciary and other instances throughout the country.

There are persistent flaws in the independence and impartiality of the judiciary. Political interference has continued. In particular, the political establishment has applied pressure on issues related to processing war crimes, including the enforcement of the European Court for Human Rights judgment in the case of Maktouf and Damjanović vs Bosnia and Herzegovina.

Sources of budgeting for judiciary and prosecution services in Bosnia and Herzegovina continue to be highly fragmented, particularly in the Federation, and capacities for planning within the 14 budgetary institutions remain weak. Streamlining budgetary responsibilities, necessary to increase efficiency in resource allocation and the overall independence of the sector, remains a key structural objective. The total adopted budget for 2013 was € 110 million, representing 0.82 % of the country’s GDP.

Due to budgetary restrictions, 13 % of positions for regular and reserve judges, as well as prosecutors, cannot be filled across the country. In an effort to examine the current situation, the HJPC is undertaking a comprehensive analysis to facilitate reaching optimal numbers.

On accountability, the number of complaints submitted regarding judicial office holders, particularly prosecutors, has increased at the Office of the Disciplinary Council. The overall trend has been to reduce the number of pending cases, as well as to shorten processing time. The number of disciplinary cases opened ex officio due to the elapse of the statute of limitation has increased, totalling 50 % of all disciplinary proceedings. Out of 18 disciplinary proceedings, 17 were completed and sanctions disposed. Due to the current legal framework, there is a lack of adequate disciplinary sanctions against wrongdoing judicial office holders. A rulebook on conflict of interest for members of the HJPC has been adopted.

As regards efficiency, there has been progress on the package of measures and technical reforms provided by the HJPC as well as other relevant stakeholders, reducing the backlog of cases. Each court has developed a backlog reduction plan complying with the judicial quotas adopted. In 2013, seven courts reached the target of bringing their caseload up to date. The rise in of unpaid utility bills cases continues to be a significant burden on the judiciary and represents 79 % of unresolved cases (total: 1.709 million). Productivity in courts rose by 9 % in 2013 compared to 2012, partly thanks to the implementation of a rulebook with suggested quotas for the work of judges and judicial associates in courts. As recommended by the Structured Dialogue on Justice, cooperation with Entity notary chambers was established to relieve the pressure on first-instance courts by transferring certain court competencies to public notaries.

The judicial information and communication system is fully functional throughout the country. The case management system in courts and prosecutors’ offices covers over 3.9 million cases and now produces automated reports on judicial performances that contribute to policy and strategic planning decisions. In January 2014, a tool was introduced to enable all parties in proceedings to receive information on the predicted duration of their cases in court.

Access to the judicial web portal has improved substantially. The Judicial Documentation Centre has also registered a significant rise in online visits. The number of visits to this site has increased by 35 %. New electronic services such as a web calculator for court fees and a web address book listing lawyers are available on this portal.

A uniform human resources management information system for courts and prosecutors’ offices has been established, improving efficiency in the appointment, management and planning of such resources.

The physical conditions in several courts in the Entities have improved, particularly regarding witness protection measures. Several Entity prosecutors’ offices have benefited from renovations to improve their working conditions. Technical preconditions for more efficient processing of war and organised crime cases, as well as application of witness protection measures, have been met in a number of courts and prosecutor’s offices by introducing digital audio and video. Use of these systems will have a positive impact on reducing the costs/duration of proceedings and the quality of witness protection measures. Further improvements to the judicial and prosecutorial infrastructure are still required.

As regards professionalism, training for the judiciary is provided by the Judicial and Prosecutorial Training Centres of the two Entities. It is based on the three-year mid-term strategy for induction and continuous training adopted by the HJPC. Each training centre prepares an annual curriculum, which includes distance learning modules comprising 30 % of the training modules available. Although most judicial staff holders comply with the compulsory minimum days of training per year, institutional reforms of the training centres are necessary to improve both the delivery and substance of training. The HJPC successfully completed the test phase for new procedures regulating access to judicial careers. A new system of competitive written examinations for all candidates entering judicial careers and the systematisation of structured interviews for all applicants, including internal promotions, is expected to increase the objectivity and transparency of recruitment, based on merit and qualifications.

Progress has continued on tackling the large backlog of domestic war crimes cases. The implementation of the national war crimes strategy continues, although at an unsatisfactory pace, and the body in charge of its supervision requires additional support from all authorities. The State-level judiciary continues the referral of war crimes cases. The capacities of prosecutors’ offices throughout the country were improved through recruiting more staff, and material conditions were significantly improved through international assistance. Appropriate financing of adequate staffing levels in prosecutors’ offices and courts remains an issue to be addressed urgently to ensure timely and effective processing of the backlog. The competent authorities failed to allocate the funds needed to complete the support infrastructure.

Discussion on the lack of harmonisation of case-law through application of different criminal codes was re-launched following the European Court of Human Rights judgment in the case Maktouf and Damjanović vs Bosnia and Herzegovina. New jurisprudence in cases of war crimes against civilians and genocide was enforced. The court’s earlier jurisprudence on crimes against humanity was confirmed. The institutionalisation of regular consultations among the highest judicial institutions led to the establishment of three fully functioning panels of the highest judicial instances in charge of ensuring harmonisation in criminal, civil and administration-related matters. The Criminal Codes Implementation and Assessment Team that had provided a forum for expert discussion was dissolved.

The prosecution of war crimes cases involving sexual violence further improved, and there is genuine commitment on the part of the authorities to delivering justice to survivors of sexual violence. However, efforts to investigate and prosecute these crimes need to be stepped up further, as the overall number of indictments for sexual violence is low in comparison to the prevalence of such crimes during the conflict. The low number of suspects and lack of evidence hampers the progress of investigation. A comprehensive approach to improving the status of victims of rape and sexual violence has still to be achieved. The adoption of a State-level programme to improve the status of victims of war crimes involving sexual violence is pending.

Steady progress on witness protection measures is primarily due to international financial support, particularly regarding psychosocial witness support in the Entities. Refurbishing of some court rooms for protected witness testimony and provision of adequate equipment has been completed in the majority of Cantonal/district courts. Recruitment of non-judicial witness support staff in courts and prosecutors’ offices is ongoing, but a comprehensive witness protection system before and after proceedings is still not in place. The draft law on witness protection programme was adopted.

Access to justice has moderately improved, but equality in relation to rights, criteria and procedures is not uniformly guaranteed. Concerning free legal aid, the risk of discrimination continues to be of serious concern as a consequence of a fragmented and non-harmonised system. A free legal aid agency has been established in one more Canton of the Federation, bringing the total to eight. However, the free legal aid system is still unregulated in two Cantons and in the Federation. The adoption of a State-level law on free legal aid is still pending. Civil society organisations actively continue to provide free legal aid, particularly in civil cases, but their role is not consistently recognised or even regulated in the country. The Free Legal Aid Network has made steady progress, with additional training, strengthened cooperation between these organisations and governmental agencies, increased awareness and reinforced monitoring.

Overall, there was little progress in the area of judicial system reform. The Structured Dialogue on Justice remains an important platform to consolidate consensus on judicial reforms and has been further broadened to other rule of law-related matters. The reform of the State-level judiciary remains a priority. A new Justice Sector Reform Strategy has been prepared, but final political endorsement is still pending. Measures to reduce the backlog of cases have successfully started, but the backlog remains high, with a large number of unpaid utility bills cases that need to be addressed with structural solutions as a matter of urgency. The lack of human resources at all levels to tackle the backlog of war crime cases has been partly addressed, but sustainability still needs to be ensured with proper planning and relevant funding from competent domestic authorities. There was no progress on reducing the budgetary fragmentation of the judiciary, which also undermines independence. The judiciary requires further reinforcement of disciplinary tools and adequate regulations of conflict of interest. The law on the courts of Republika Srpska requires amendments in line with the recommendations of the Structured Dialogue on Justice.

Fight against corruption

Political patronage networks are widespread and influence all levels of government. The Agency for Prevention of Corruption and Coordination of the Fight against Corruption is operational, with adequate premises and an initial level of staffing. Five additional advisors were recruited and started working. The Agency received opinions of all relevant bodies to amend its rulebook on internal organisation, to create 20 new positions, which would bring the total number of staff to 49. The revised rulebook remains to be adopted. Activities to draft a new anti-corruption strategy for 2015-2020 were initiated with the establishment of a working group including representative of all relevant institutions.

At Entity level, Republika Srpska adopted a new strategy for the fight against corruption and an action plan for the period 2013-17. The monitoring commission and operational team remain to be appointed. The Team for Monitoring in the Federation developed action plans for institutions. The Brcko District and Cantons have not yet designated their monitoring bodies, despite their legal obligation to do so.

Amendments to the law on conflicts of interest at State level have been adopted. The implementation of the law is entrusted to a commission composed mainly of parliamentarians, while expert tasks will be performed by the office of the anti-corruption agency. The amendments do not guarantee impartiality and effective prevention of conflict of interest. As a result of the amendments, the Central Election Commission is no longer competent to implement the law and to monitor its application in the Federation and Brcko District. The legislation on declaration of assets is fragmented. There are four laws concerning different forms of declaration, overlapping in terms of relevant officials and data to declare. The existing framework does not provide efficient review mechanisms that would enable proper verification of assets. The law on political party financing does not comply with the recommendations issued by the Council of Europe’s Group of States against corruption (GRECO). In line with art 20 of the United Nations’ Convention Against Corruption, country Bosnia and Herzegovina should consider criminalising inexplicable wealth.

Changes to the law on access to information are pending the appointment of a new Working Group by the Council of Ministers. Amendments to the Criminal Procedure Code to improve the legal framework for the use of special investigative measures were withdrawn from parliamentary procedure.

As regards protection of whistle-blowers, a State-level law was adopted, entrusting the anti-corruption agency with the protection of persons who report on corruption. A draft law on protection of whistle-blowers passed the public debate phase in the Federation.

The track record of investigation and prosecution in high profile cases remains unsatisfactory and the overall level of effective investigations, prosecution and convictions is low. The capacity to investigate economic, financial and public procurement-related crimes is weak. There is a strong case for introducing specialisation within the police and judiciary to fight corruption. The proposed law to establish specialised departments within the Prosecutor’s Office and Supreme Court of Federation to prosecute corruption and organised crime cases was adopted by the Federation’s parliament. There is still no effective criminal justice policy, and sanctions for corruption are no deterrent.

Overall, Bosnia and Herzegovina has made little progress in advancing reforms to reduce corruption, which continues to affect the entire public sector and remains most acute in the areas of service delivery and access to employment. There is little political will to move beyond rhetoric and to tackle corruption, including effective investigations and convictions in high profile cases. While the legal framework is largely in place, the implementation of laws is weak and inconsistent. Some key pieces of legislation fail to comply with international standards.

Fight against organised crime

Efforts by law enforcement agencies have led to a number of successful large-scale joint operations, some also through close coordination with neighbouring countries. Strategic coordination among police forces throughout Bosnia and Herzegovina remains to be further developed. Effective judicial follow-up remains an issue, and cooperation between police and prosecutors’ offices needs to be further strengthened.

Domestic and transnational criminal networks have continued to operate throughout the territory of Bosnia and Herzegovina. The fight against arms trafficking requires additional targeted efforts. Bosnia and Herzegovina also remains a country of origin, transit and destination for the trafficking of human beings for the purpose of labour exploitation, sexual exploitation, begging and forced marriages. Although production of drugs remains limited, and is mostly limited to marijuana cultivation, the territory of Bosnia and Herzegovina continues to be used for transit and storage purposes. Organised crime remains an issue of serious concern.

For a detailed analysis of developments in the fight against organised crime, see 4.3 — Justice, Freedom and Security.

2.2. Human rights and the protection of minorities

As regards international human rights instruments, Bosnia and Herzegovina has ratified all major UN and international human rights conventions. The principles of the European Convention on Human Rights are entrenched in the Constitution, which also guarantees the supremacy of this Convention over national legislation.

During the reporting period, the European Court of Human Rights delivered 12 judgments finding that Bosnia and Herzegovina had violated the European Convention on Human Rights. The total number of pending applications decreased from 1662 in October 2013 to 1228 as of September 2014. The remaining cases relate mainly to the impossibility to withdraw foreign currency savings deposited before the dissolution of former Yugoslavia, the non-possibility of resolving cases related to re-possession of occupancy rights, missing persons and discrimination on the grounds of ethnicity. While some further progress in implementing the Court’s judgments has been made, the judgment in the Sejdić-Finci case has yet to be implemented.

As regards the promotion and enforcement of human rights, since October some 393 judges, prosecutors and legal associates throughout the country have taken part in training on anti-discrimination, gender equality, domestic violence, anti-defamation and freedom of expression.

The death penalty is prohibited by the Constitution of Bosnia and Herzegovina and by the Constitution of the Federation. Although there is a moratorium, the death penalty provision in the Constitution of Republika Srpska remains in place. The relevant Article 11(2) of the Constitution of Republika Srpska has to be repealed in line with the acquis.

The legal framework on the prevention of torture and ill-treatment and the fight against impunity is in place and is generally respected. Bosnia and Herzegovina has appointed its representative to the Council of Europe’s Committee on the Prevention of Torture. Effective investigation needs to be ensured and preventive measures taken as regards ill-treatment of suspects by police officers in some police stations and of prisoners by prison staff in some detention facilities. Legislation on the rights of victims of torture remains to be adopted.

Regarding the prison system, there was some improvement in conditions for vulnerable prisoners. After long delays, the construction of a high-security State prison started in August. There remains a large backlog in the execution of criminal sanctions, particularly in the Federation. A new law on the execution of criminal sanctions needs to be adopted in the Federation to ensure harmonisation with State-level law and with international standards. Prison inspections need to be improved, particularly through the delivery of a harmonised training curriculum and programmes for inspectors. An effective coordination mechanism among the country’s 15 prison administrations is lacking.

Legal provisions guaranteeing freedom of expression are in place. However, political and financial pressure on the media has increased. Intimidation and threats against journalists and editors and polarisation of the media along political and ethnic lines intensified prior to the October general elections. There were a number of attacks on the media by politicians, mostly from the Republika Srpska, as well as alleged wiretapping of journalists. Cases of intimidation of journalists by law enforcement officers were recorded during the socio-economic protests in February. The follow-up by the authorities to such threats has been insufficient. The violent attack on a university professor in Mostar that occurred in June was swiftly investigated and the perpetrators brought to justice. There were only few judicial cases regarding defamation.

The new Council of the Communication Regulatory Agency was elected. It completed a procedure for overturning the decision of the previous Council to reduce advertising time during public service broadcasters’ programmes. The new Council finalised in March a procedure for the selection of the agency’s Director General whose appointment is still pending. The political, institutional and financial independence of the agency remains to be secured.

The independence of the three public broadcasters within the country’s public broadcasting system remains to be ensured. The two Entity broadcasters were exposed to further political influence. The Federation Parliament failed to appoint members to the Steering Board of the Federation of BiH Radio and Television. At the same time, the Director General of the RTV FBiH remained in a technical mandate.

The Steering Board of the Republika Srpska public service broadcasters (the RTRS) was elected in accordance with legislative amendments adopted in October 2013. These amendments introduced a selection and appointment procedure for the steering board without any involvement of the Communication Regulatory Agency. This increased political control over RTRS and thus undermines editorial independence. The amendments also opened a possibility for RTRS to be co-financed from the Republika Srpska government budget, opening the door to further political influence. The newly elected steering board appointed the new acting Director General of RTRS, who previously worked at the Office of Republika Srpska’s Prime Minister.

Entity laws on public broadcasting services remain to be harmonised with State-level law. The procedure for amending the statute of the public service broadcaster BHRT failed. The adoption of the Public Broadcasting Corporation’s statute is pending and Public Broadcasting System reform has not been completed.

All types of broadcasting are licensed by the Communications Regulatory Agency, under the provisions of the Communications Law of BiH.

The transparency of media ownership is limited. It is partly assured through the process of court registration of business entities, but the full information is not easily accessible due to problematic legal provisions hampering a systematic insight into the ownership structure. This is especially problematic regarding online media, which are often not registered as media businesses. There have been no major initiatives to regulate ownership, privatisation and public funding, or to create a supportive economic environment for the work of independent and financially viable media.

Government financing of media raises concerns. Public broadcasters that are not part of the public broadcasting system are financed from municipal and Cantonal budgets and remain under strong political influence. At Entity level the Government of the Republika Srpska is funding both public and private media. Lack of transparency and clear criteria in the distribution of subsidies are a serious concern. In addition, the advertising practices of public companies controlled by political parties also affect media integrity. The advertising money in some cases follows political party affiliations and influence editorial policies.

The BiH Journalists’ Association has been leading civil society efforts in the country aiming at securing freedom of expression and freedom of media, protection of journalists and media integrity. The Press Council of Bosnia and Herzegovina continued to intervene with print and online media outlets on behalf of readers, with the aim of strengthening professional reporting. The implementation of the Freedom of Access of Information Act remains uneven among public institutions.

With regard to freedom of assembly and association, there have been some cases of intimidation and violence against human rights defenders. Effective investigation and prosecution of all cases needs to be ensured.

The constitutional and legal guarantees of freedom of thought, conscience and religion are generally respected. Cases of discrimination on religious grounds continue to be reported. Incidents targeting religious symbols, clerics, believers and property have been reported and particularly affect religious minorities in certain communities.

Legal provisions guaranteeing women’s rights and gender equality are in place. A new Action Plan for the Implementation of the UN Security Council Resolution 1325 for the period 2014-2016 was adopted in July. Cooperation between the State Agency and Entity Centres for Gender Equality has been good. Gender focal points were appointed in the State-level ministries of defence and security. A Gender Equality Committee was established in the Brcko District Assembly. Women’s political participation across the country remains low. Participation of women in the workforce is low and there is still maternity-related discrimination in employment.

Concerning domestic violence, coordination between the State and Entity levels has been improved. There is still discord in legislative and policy frameworks between various levels of governance, particularly in the Federation. A study on the prevalence of violence against women in Bosnia and Herzegovina carried out by the Gender Equality Agency, the Entity Gender Centres and the Institutes for Statistics, concludes that almost half of the women surveyed have experienced at least one form of violence from the age of 15. There is no data collection mechanism for monitoring domestic violence. A strategy for the implementation of the Council of Europe’s Convention on preventing and combating violence against women and domestic violence has still to be adopted.

As regards children’s rights, the first session of the Council for Children was held in December and since then the Council has been meeting regularly. The law on a single reference number, important to ensure access to health and social benefits and travel documents for newborn children, was adopted in November. The adoption of the first report on the guidelines for the identification of socially excluded children has brought some improvements in data collection. The Parliament of the Federation adopted a strategy for 2013-17 to improve early childhood development. Services for young children, including home visits to reach marginalised families, started to expand through health centres, reaching 10 % of municipalities across the country. Some progress was made in reducing the number of children in institutions, mainly in Tuzla Canton. The number of children with disabilities in institutions remains high. Use of foster care needs to be further promoted. Domestic violence against children continues to be widespread. The percentage of children immunised against preventable diseases has increased slightly, but is still low.

The continued existence of divided schools (‘two schools under one roof’) in some Cantons of the Federation and mono-ethnic schools across the country do not foster the development of an inclusive multi-cultural society. In October 2013, the Travnik Municipal Court rejected on procedural grounds a lawsuit filed by a non-governmental organisation that claimed that the existence of ‘two schools under one roof’ was discriminatory. De facto ethnic-based separation and discrimination in some public schools in the Federation remain of concern.

The start of the 2013-14 school year was marked by school boycotts in several locations in the Republika Srpska. In two schools, Bosniak parents boycotted education over the failure of the authorities to meet their demands regarding inter alia the introduction of the Bosniak national curriculum, and the lack of Bosniak teachers and school support staff. Some parents and their children publicly protested in Sarajevo. The situation is not legally resolved and some pupils missed the first semester of the official school year. Some parents have filed lawsuits against the school authorities and the Republika Srpska Ministry of Education referring to the anti-discrimination law and unequal treatment when exercising the right to education. The ministry submitted requests to initiate minor offence proceedings against parents whose children did not attend school during the year 2013-14.

A law on juvenile justice was adopted in the Federation. Orasje juvenile institution became operational. The lack of separate units for juveniles in prisons and police stations across the country still raises concerns. There has been steady progress on enforcement of the Brcko District and Republika Srpska’s juvenile justice laws’ requirements, with adequate training for judicial and non-judicial actors and designations of suitably qualified prosecutors. Several technical obligations remain insufficiently implemented, with almost no establishment of specialised departments for juveniles in prosecutors’ offices and courts, and no recruitment of expert advisers such as psychologists. The lack of capacity to implement alternative measures for juveniles has not been addressed. The pace of legal proceedings involving juvenile suspects remains insufficient throughout the country, while such proceedings have decreased in number. The legal framework in place is still not harmonised. A national strategy on youth in conflict with the law needs to be adopted.

As regards the socially vulnerable and/or persons with disabilities, entitlement to rights and benefits for the disabled is based on status and not on needs. As a result, some categories of persons with disabilities do not receive adequate benefits. Implementation of the social protection legislative framework needs to be stepped up.

An anti-discrimination law is in place, but the exclusion of age and disability as categories on the grounds of which there should not be discrimination has not been addressed. Other legislation, such as labour law and laws on higher education, need to be harmonised with the anti-discrimination law. The application of the law by judges remains very limited and its interpretation is uneven across the country. Awareness about the anti-discrimination law remains low among the general public but also by law enforcement agencies and legal professionals. The technical capacity of the Ombudsman to contribute to effective implementation of the anti-discrimination law needs to be strengthened (see also 2.1. Democracy and the rule of law — Ombudsman). An anti-discrimination strategy at State level has yet to be adopted. There is no comprehensive collection of data on discrimination.

Concerning rights of lesbian, gay, bisexual, transgender and intersex (LGBTI) persons, the anti-discrimination law does not include a clear definition of gender identity and sexual orientation and refers to sexual expression and/or orientation as grounds of discrimination. Sexual orientation and gender identity are not included as grounds for hate crime in the criminal law of the Federation. In the Sarajevo Canton, 19 police officers have been trained on LGBTI rights.

Discrimination against LGBTI people remains widespread. Hate speech, hate crimes and violent attacks against LGBTI people and human rights defenders have increased along with the higher visibility of the LGBTI community. The number of complaints on discrimination and violence officially registered with the police and the Ombudsman remains low. Awareness on LGBTI rights remains very low among the judiciary, law enforcement agencies and the general public. Participants in the LGBTI film festival Merlinka in Sarajevo in February were attacked and two were injured. Police did not intervene promptly to ensure protection. Hate speech and hate crime remain an issue of concern.

With regard to labour and trade union rights, the legal framework for social benefits and pension rights remains fragmented. The labour laws are still not harmonised between the Entities and within the Federation. A State-level Economic and Social Council has yet to be established. Provisions for the recognition of social partners at State level have not yet been established (see also 4.1.8 Employment and social policies, public health policy).

As regards property rights, little additional progress has been made to resolve outstanding cases. There are a total of 183 cases before the State Court in which the Commission for Real Property Claims of Displaced Persons and Refugees is the respondent party in administrative dispute procedures. From thi number 129 cases have been archived, 19 cases are pending to be resolved by a judge and 35 which are still in the preparatory phase. Although the new members of the Commission were appointed, the Commission has not yet started to function. A database on outstanding claims and property registers has not been established.

Overall, the legal and institutional framework for the observance of human rights is in place and the main elements of international human rights laws have been incorporated into the legal system. The implementation of the judgment in the Sejdić-Finci case remains essential (See 2.1 — Constitution). The death penalty provision in the Constitution of Republika Srpska needs to be deleted. Rising political and financial pressure on the media and intimidation and threats against journalists and editors are of serious concern. Media ownership issues need to be addressed. There needs to be more effort to make schools more inclusive and to address the continuing existence of ‘two schools under one roof’ in the Federation and to ensure children’s right to education throughout the country. The anti-discrimination law needs to be amended to include additional categories on the grounds of which there should not be discrimination. Effective prevention and investigation of cases of hate speech, violence and discrimination against in particular LGBTI persons need to be ensured.

Respect for and protection of minorities, cultural rights

The legal framework for the protection of minorities is largely in place, but implementation needs to improve. The National Minorities’ Councils are operational, but their advisory role remains weak. Implementation of the European Charter for Regional and Minority Languages remains weak. As the Sejdić-Finci ruling has not yet been implemented, minorities continue to be excluded from representation in the House of Peoples and the Presidency of Bosnia and Herzegovina (see 2.1 — Constitution). Cultural rights need to be strengthened, including those affecting the participation of national minorities in public life.

Bosnia and Herzegovina holds the chairmanship of the Roma Decade in the second semester of 2014. There are two action plans under the Roma strategy — an action plan on educational needs of Roma and an action plan on employment, housing and healthcare 2013-16. The latter has been revised to reflect recommendations from the Roma Inclusion Seminar held in July 2011. The defined objectives are now more realistic, with deadlines and clearer division of responsibility among stakeholders.

Very good progress was made in addressing the housing needs of Roma through building new housing units and upgrading existing Roma settlements. The percentage of Roma children vaccinated against preventable diseases remains very low. The mortality rate under one year of age is three times higher for Roma children than for the overall population.

There has been a rise in the enrolment of Roma children in pre-school education in the Sarajevo and Zenica-Doboj Cantons. Countrywide, the enrolment rate of Roma children in pre-school education is only 1.5 %, compared to 13 % for the overall population. Only two out of three Roma children attend primary school and only about 23 % attend secondary school. In 2012-13, no funding was allocated at State level to support the implementation of the action plan on educational needs. Budgets allocated at Entity level are not sufficient. State-level guidelines on improving the situation of Roma children and social inclusion were adopted in October 2013. Poverty, change of residence and lack of support from families continue to be barriers to access to education for Roma children.

As regards access to civil registration, the overall number of persons at risk of statelessness, the vast majority of whom are Roma, decreased from an estimated 4 500 in January 2012 to an estimated 792 in April 2014. There have been some improvements with regard to discrimination against Roma. Over 50 primary schools in the Federation in the Tuzla Canton and in Republika Srpska integrated an inclusive approach through school development plans based on an index for inclusiveness methodology to promote respect for diversity and tolerance. However, discrimination against the Roma minority remains widespread. Discrimination cases against the Roma population have been reported in the context of the heavy floods in May.

With regard to refugees and internally displaced persons (IDPs), there are still 84 500 IDPs and 6 853 refugees in Bosnia and Herzegovina. In March, the Parliament of the Federation adopted a law allowing returnees from the Republika Srpska to access pension benefits and healthcare in the Federation. Access to social rights for returnees remains an issue of concern. Transparent and non-discriminatory criteria for allocating return assistance have yet to be established, despite the fact that the State Commission for Refugees and Displaced Persons became operational in 2012 and has met regularly. The Revised Strategy for the Implementation of Annex VII of the Dayton/Paris Peace Agreement still lacks coordinated implementation and appropriate allocation of resources. There are problems related to the lack of infrastructure. In particular, electricity and comprehensive de-mining activities continue to limit access to basic services for returnees, displaced persons and refugees. Over 8 600 persons are still living in difficult conditions in collective centres. As regards landmines from the 1992-95 conflict, implementation of the mine action strategy has been slow. Potentially mined areas currently cover 2.4 % of the country’s surface. Since September 2013, six people have been killed and nine injured in landmine accidents. The adoption of the law on anti-mines actions still needs to be adopted. There is still no comprehensive approach to address the remaining challenges of clearing the country of mines by 2019.

Overall, some progress has been achieved in improving housing conditions for Roma and as regards civil registration. Roma remain the most vulnerable minority in Bosnia and Herzegovina. The implementation of Roma action plans needs to be stepped up and allocation of sufficient budgets ensured. As regards refugees and internally displaced persons, effective implementation of the revised strategy needs to be ensured, in particular its socio-economic aspects.

2.3. Regional issues and international obligations

Bosnia and Herzegovina has appointed representatives to a number of Council of Europe advisory bodies where it was not represented. The country has yet to select and appoint the chairperson of its delegation to the Council of Europe’s Parliamentary Assembly. Implementation of requirements stemming from the Council of Europe Conventions remains uneven.

Implementation of the Dayton/Paris Peace Agreement continued. In May, Serbian Prime Minister Vucic reiterated his support for the Agreement and for the sovereignty and territorial integrity of Bosnia and Herzegovina during his visit to Sarajevo. Under the Agreement on Special Parallel Relations between Serbia and Republika Srpska, joint sessions of the governments were held in October and December, with emphasis on joint efforts to fight organised crime and corruption and on economic cooperation.

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) continues to be satisfactory in most areas. Serious, consistent efforts are, however, still required to complete the handling of all category II war crimes cases,[8] which were transferred from the Tribunal to Bosnia and Herzegovina. For developments related to the processing of domestic war crimes cases, see above — Judicial system.

There have been significant steps to improve regional cooperation and the fight against impunity. Regional cooperation between courts and prosecutors’ offices in Bosnia and Herzegovina, Serbia and Croatia continued within the existing legal framework. Bilateral extradition agreements (excluding war crimes) with Serbia and the former Yugoslav Republic of Macedonia have entered into force. Further agreements with the former Yugoslav Republic of Macedonia on legal assistance in civil and criminal matters and on mutual execution of court decisions in criminal matters have been ratified in March. The Bosnia and Herzegovina Prosecutor’s Office and Montenegro Supreme State Prosecutor’s Office have signed a protocol on cooperation in prosecution of perpetrators of war crimes, crimes against humanity and genocide.

Bosnia and Herzegovina still maintains a 2003 bilateral immunity agreement with the United States, granting exemptions for US citizens from the jurisdiction of the International Criminal Court. In doing so, it is not complying with the EU Common Positions on the integrity of the Rome Statute or with the related EU guiding principles on bilateral immunity agreements. Bosnia and Herzegovina needs to align with the EU position.

Bosnia and Herzegovina, along with Croatia, Montenegro and Serbia, have continued to cooperate closely in the framework of the Sarajevo Declaration Process, which aims to find sustainable solutions for people who became refugees and displaced persons as a result of the armed conflicts in ex-Yugoslavia during the 1990s. In March, the UN High Commissioner for Refugees (UNHCR) recommended that UN member states terminate refugee status for refugees originating from Croatia, at the latest by the end of 2017.

Implementation of the regional housing programme, expected to provide sustainable housing solutions for some 14 000 people in Bosnia and Herzegovina, has started. Two housing projects, targeting about 900 beneficiaries, have been approved. Two Entity and one second-instance commissions for the selection of beneficiaries have been appointed and started working in October 2013. However, lengthy, complex procedures to select beneficiaries and lack of capacity within the lead institution continue to cause delays in the implementation of the programme in Bosnia and Herzegovina. The selection of returnees, in particular, is advancing at a very show pace due to the high number of applications and their so far inefficient processing. Good overall cooperation between the partner countries on the process and its housing programme needs to continue.

The unresolved fate of missing persons from the conflicts in the 1990s remains a humanitarian concern in the Western Balkans. As of August, a total of 11 155 persons were still missing according to the International Committee of the Red Cross (ICRC). Of these, 7 282 cases relate to the conflict in Bosnia and Herzegovina, 2 163 to the conflict in Croatia and 1 710 to the conflict in Kosovo*. Ascertaining the fate of missing persons remains vital for reconciliation and stability in the region. Greater political commitment and renewed efforts are needed.

Serbia, Bosnia and Herzegovina, Croatia and Montenegro signed in August a Declaration on the role of the state in addressing the issue of persons missing as a consequence of armed conflict and human rights. A review of non-identified bodies stored in 11 mortuaries has started. Over 260 cases from the Mostar and Nevesinje morgues have been re-examined, resulting in 30 new identifications. In all, 684 remains were exhumed over the reporting period, resulting in 576 new identifications.

The Missing Persons Institute continues to be subject to political pressure. No progress was made on implementing the provisions of the law on missing persons regarding the establishment of a fund to provide financial support to families of missing persons. Lack of local forensic capacity is hampering the process of identifying missing persons, especially in the Federation.

Regional cooperation and good neighbourly relations form an essential part of Bosnia and Herzegovina’s process of moving towards the EU. The country has continued to actively participate in regional initiatives, including the South-East European Cooperation Process, the Regional Cooperation Council and the Energy Community Treaty. Bosnia and Herzegovina successfully concluded its one-year term as Chair of the Central European Free Trade Agreement at the end of 2013. Bosnia and Herzegovina continues to actively support the Coalition for Reconciliation Commission (RECOM) and Igman initiatives on regional reconciliation.

In December, Bosnia and Herzegovina, Montenegro and Serbia signed a protocol to establish a joint centre for police cooperation in Trebinje (Bosnia and Herzegovina), which opened officially in March. On 29 September 2014, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Montenegro and Serbia signed an agreement on reducing the prices of roaming services on public mobile communications networks.

Bosnia and Herzegovina has further developed its bilateral relations with other enlargement countries and neighbouring EU Member States.

A treaty on cooperation with Albania in the veterinary field was ratified in March. A bilateral agreement on mutual protection of classified information was signed in May.

An Agreement on double taxation with the former Yugoslav Republic of Macedonia was ratified in March, and amendments to a number of other agreements were ratified.

A protocol on cooperation in the area of forensic examinations and expertise with Montenegro was signed in December. The protocol on cooperation in the prosecution of perpetrators of war crimes, mentioned above, was signed in April. A bilateral border agreement was initialled in May.

Relations with Serbia remained good. The new Serbian Prime Minister Vučić made his first official foreign visit to Sarajevo and focused on improving economic and trade cooperation and resolving remaining bilateral issues. There were several other high-level reciprocal visits. The Serbian leadership took a constructive approach during the socio-economic protests in Bosnia and Herzegovina, calling for restraint and moderation by the political representatives of the Republika Srpska. An agreement on readmission of persons whose entry or stay is illegal and its implementing protocol were ratified in December. Border demarcation remains to be addressed.

There are no official relations with Kosovo, as Bosnia and Herzegovina has not recognised Kosovo as an independent state. The Ministry of Foreign Affairs of Bosnia and Herzegovina is issuing individual short-term visas to citizens of Kosovo only by invitation from foreign diplomatic missions and international organisations accredited in Bosnia and Herzegovina, or for humanitarian reasons. An amendment to normalise visa procedure for all citizens of Kosovo is pending. In January, Kosovo introduced visas for citizens of Bosnia and Herzegovina.

An agreement on cooperation in the defence industry and on military training was ratified with Turkey in December. The Turkish Foreign Minister visited Bosnia and Herzegovina in February and the Chairman of the Presidency of Bosnia and Herzegovina Izetbegovic paid an official visit to Turkey in May.

Relations with Croatia remained good. A number of Croatian officials, including the President, government members and parliament representatives visited Bosnia and Herzegovina. Regarding the transit of goods through the Neum corridor, in October 2013 the Indirect Taxation Authority of Bosnia and Herzegovina introduced systematic customs controls of shipments of goods by way of tracking shipments and copying transport documents, on top of controls carried out by Croatia, on behalf of the EU, at the EU’s external border. These controls are an impediment to the smooth flow of mainly domestic Croatian goods. Both parties are working towards a practical solution on a bilateral basis. No additional progress has been made in resolving outstanding bilateral issues, including property issues and border demarcation.

Overall, Bosnia and Herzegovina has continued to participate actively in regional cooperation and to maintain good neighbourly relations. Remaining border and property issues with neighbouring countries need to be addressed.

3. Economic criteria

In examining economic developments in Bosnia and Herzegovina, the Commission’s approach was guided by the conclusions of the European Council in Copenhagen in June 1993, which stated that membership of the European Union requires the existence of a functioning market economy and the capacity to cope with competitive pressures and market forces within the Union.

Monitoring of the economic criteria needs to be seen in the context of the increased role of economic governance in the enlargement process, as welcomed by the General Affairs Council of 17 December 2013. To this end, Bosnia and Herzegovina engaged in high-level policy dialogue with the Commission, the Member States and the European Central Bank, based on its Economic and Fiscal Programme.

Economic structural reforms were put at the centre of the Compact for Growth initiative launched by the EU in May 2014, which identified key economic policy issues.

3.1. The existence of a functioning market economy

Macroeconomic stability was broadly maintained but the export-led recovery remains fragile. Despite a shrinking current account deficit, external imbalances remain large, reflecting limited output- and export diversification and a generally low degree of competitiveness. A significant state presence in the economy as well as considerable weaknesses in the business environment continue to negatively affect private sector development. No progress has been made towards creating a single economic space within the country. Some measures to improve public finances sustainability have been adopted in both Entities but the quality of public finances remains low and fiscal discipline and expenditure control have to be strengthened. The stalled privatisation process and the unfavourable composition of public expenditures continue to significantly undermine the growth potential of the economy. Unemployment remains persistently high.

Economic policy

Consensus between the authorities at different government levels led to an agreement on a medium-term countrywide fiscal strategy -the Global Frameworks on Fiscal Balance and Policies for 2014-2016 and 2015-2017- were adopted, albeit with some delay. Consensus was also reached regarding some adjustments in excises along with several reform steps aimed to improve fiscal sustainability. However, significant efforts are still needed to develop further the medium-term fiscal strategy in order to strengthen its role as a fiscal coordination tool. In January 2014, the authorities submitted their Economic and Fiscal Programme (EFP) for 2014-2016. It foresees a gradual economic recovery based on strengthening of domestic demand, but at the same time remains silent on pressing structural reforms, in particular beyond 2014, and faces non-negligible implementation risks. A nine-month extension of the Stand-By Arrangement (SBA) with the IMF, totalling € 153.6 million was granted in January 2014. Following a temporary stalemate in early 2014, the combined sixth and seventh review of the SBA was completed in June 2014. To meet the country’s urgent balance of payments needs caused by the severe flooding in May 2014, the programme was at the same time augmented by about € 95.7 million. Budgetary support from the World Bank, which had already been delayed and temporarily suspended, is expected to be disbursed by the end of 2014. The country needs to step up its efforts on fiscal consolidation and improving public spending composition and targeting, address the high burden of non-performing loans in the banking sector, improve the business environment, and reduce labour market rigidities, in line with targeted policy guidance as outlined by the European Commission in the framework of the EFP dialogue in June 2014. Overall, despite some slight improvement, the consensus on economic and fiscal policy essentials remained weak and significant efforts are needed to pursue reforms already envisaged.

Macroeconomic stability

The economy recovered somewhat in 2013 but this recovery is fragile. Output growth reached 2.5 % in 2013 and accelerated to 2.7 % in the first quarter of 2014, compared to a drop by 1.2 % in 2012. Per capita GDP in purchasing power standards remained at 29 % of the EU-28 average in 2013. Net exports were the main drivers of economic growth, a result of declining imports coupled with buoyant export activity. Despite a modest growth of real wages and broadly unchanged remittances, domestic demand in 2013 was held back by a stagnating private consumption on the back of a slowing credit growth and persistently high unemployment. At the same time, investment activity posted a meagre growth thanks to foreign-financed public investments, while private investments were stagnant. Signs of fragility are becoming evident in 2014. Partly due to base effects export growth came to a halt in the first five months in 2014 but showed signs of modest recovery afterwards, while imports reversed their negative trend. Heavy floods in the spring severely damaged transport- and energy infrastructure as well as production and are expected to result in a drag on short-term GDP growth. Overall, the economy is slowly emerging from recession but economic growth remains fragile and the short-term outlook has deteriorated due to the spring floods.

External imbalances narrowed substantially in 2013 on the back of stagnating private consumption and imports coupled with a solid export performance, but started to widen again in the first half of 2014. The current account deficit nearly halved to 5.5 % of GDP in 2013 from well above 9 % of GDP in the previous two years, mainly linked to a strong improvement of the trade deficit to 30.5 % of GDP from 33.6 % of GDP in 2012. At the same time, the contribution of current transfers, although slightly declining from last year, amounted to some 10 % of GDP. The trend for a narrowing trade deficit reversed in the first seven months of 2014 when merchandise exports expanded at a slower pace (1 % in annual terms), while imports of goods picked up by some 6 %. The current account deficit increased to 6.1 % of GDP in the four quarters to March 2014. Net foreign direct investment (FDI) inflows, which accounted for only one-third of the current account deficit financing, continued their declining trend and amounted to a meagre 1.9 % of GDP in 2013 even narrowing further in the first quarter of 2014. Net foreign exchange reserves steadily increased in the course of 2013 and the first half of 2014 and covered more than five months’ worth of imports, boosted partly by financial assistance under the IMF Stand-By Arrangement. Overall, the external imbalances have narrowed but remain a source of vulnerability, especially in view of the potential adverse impact of the volatile environment on FDI inflows.

Labour market conditions improved somewhat during 2013 despite continuous adverse developments in some sectors (e.g. construction). Notwithstanding a slight rise of employment in the manufacturing sector, the public sector still accounts for the largest share in the workforce (27 %) in 2013. The unemployment rate (ILO methodology) dropped by half a percentage point to 27.5 % of the workforce in 2013 and remained unchanged in 2014. At the same time, the already low employment and activity rates of the population aged 15 years and older also slightly declined further to 31.6 % and 43.6 %, respectively. The structural nature of unemployment is reflected by the high share of long-term unemployment accounting for around four fifths of total job-seekers, while youth unemployment remains close to 60 %. A significant difference between the registered and survey-based labour figures points towards the existence of a fairly large informal labour market. Overall, labour market conditions have remained difficult and structural rigidities continued to hamper job creation, including for youth, calling for urgent measures to reduce disincentives to hiring, enhance flexibility of the labour market, and increase participation rates.

Inflationary pressures abated in the course of 2013 bringing consumer price inflation from 2 % in 2012 down to -0.2 % in 2013. The deflationary trend started in August 2013 and continued in the first half of 2014. Consumer prices declined by 1.4 % in the period January-July 2014. Monetary policy of the central bank continued to be conducted under a currency board arrangement—with the euro as anchor currency—enjoying a high level of confidence and credibility. Overall, the currency board has continued to function well, but feeble domestic demand and persistent deflation are growing causes for concern.

Despite some fiscal consolidation measures in 2013 such as the freeze of public sector wages and restrictive employment policy in both Entities and the central government, as well as additional measures including the one-off cut of salaries in Republika Srpska, the general government deficit remained broadly unchanged at 2.2 % of GDP. In particular, public expenditures in 2013 declined by 1 percentage point to 45.6 % of GDP and are heavily biased towards current expenditures. The public wage bill still accounts for a large share of expenditures although marginally decreasing to 12.5 % of GDP, while expenditures on social benefits remained unchanged at some 17 % of GDP. At the same time, capital expenditures increased slightly to 6.8 % of GDP. Expenditure consolidation was coupled with some underperformance of revenues dropping to 43.4 % of GDP in 2013 partly due to the decline of net indirect taxes, in particular because of high VAT refunds. In the first half of 2014, the fiscal situation deteriorated again as a result of the spring floods and the temporary stalemate of the Stand-By Arrangement with the IMF against the backdrop of elevated debt servicing needs in 2014, thus prompting a rebalancing of the Entities’ budgets. In particular, the emergency financing needs to tackle the consequences of the spring floods are likely to double the target of the consolidated fiscal deficit for 2014 to close to 3 % of GDP. Overall, the fiscal situation improved slightly in 2013 but worsened again in early 2014 amid a persistently low quality of public finances. Further efforts are needed to address the composition of public spending.

The management of public finances appears to have strengthened in 2013-2014 with the adoption in due time of the State and Entity budgets, although the Global Frameworks for Fiscal Policies 2014-2016 and 2015-2017 were adopted with some delay. To improve the long-term sustainability of the Entity’s public finances, in September 2013 the Federation government endorsed a strategy for a contributory pension system reform. A new Law on Budgets in the Federation entered in force in January 2014 aiming to enhance the coordination with lower levels of government i.e. Cantons and municipalities. However, the quality of fiscal reporting remains low, undermining public scrutiny, proper analysis and policy design. Overall, important steps towards improving the sustainability of fiscal policy have been taken, but significant further efforts are required, notably with a view to strengthening expenditure controls and fiscal discipline.

General government debt (domestic and external), although still below the statutory ceilings of the Entities, has been steadily increasing in recent years to reach 46.2 % of GDP in 2013 according to national data. This was mainly due to an increase of external borrowing reaching 28.2 % of GDP at end-2013, however, with an average favourable interest rate of 1.44 %. At the same time, both Entities issued short-term treasury bills and long-term government bonds in 2013 securing relatively favourable conditions due to high demand. The issuance of government securities intensified in the first half of 2014 linked to the temporary stalemate of the programme with the IMF and elevated refinancing needs estimated to increase to 4.5 % of GDP in 2014. In addition, the spring flooding is putting further pressure on public finances. Overall, despite a still moderate level, the upward trend of public debt and the elevated servicing needs are a source of macro-financial vulnerability.

Interplay of market forces

The share of the private sector continues to account for about 60 % of GDP while the government’s influence over economic activity has remained significant as reflected in the share of GDP of public expenditures and the off-budget expenditures for state-owned firms. Despite the adoption of privatisation strategies in 2013 and 2014, the privatisation process in the Federation continued to suffer setbacks. The unsuccessful attempts to sell 11 companies in 2013, mostly with minority stakes of the state, left the initial stock of state-owned capital for privatisation unchanged at some two-thirds. In Republika Srpska, about 2/3 of the enterprises intended for privatisation had been sold prior to the crisis, while other companies previously offered for sale were forced to declare bankruptcy. Most prices are liberalised and a number of regulated prices remain (e.g. utilities). Overall, the long-stalled privatisation process needs to be re-started again.

Market entry and exit

In spite of some recent improvement, the business registration and start-up process remains cumbersome and costly. The lack of harmonisation of registration procedures across Entities still requires entrepreneurs to register in both Entities before they can do business in the whole country.