EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 9.11.2010 
SEC(2010) 1331 final 
  
COMMISSION STAFF WORKING DOCUMENT 
 
BOSNIA AND HERZEGOVINA  2010 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2010-2011
 
{COM(2010) 660 final} 
 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 4 
1.1. Preface................................................................................................................... ....... 4 
1.2. Context ................................................................................................................... ...... 4 
1.3. Relations between the EU and Bosnia and Herzegovina............................................. 5 2. Political criteria .......................................................................................................... .. 7 
2.1. Democracy and the rule of law .................................................................................... 8 2.2. Human rights and the protection of minorities .......................................................... 15 2.3. Regional issues and international obligations............................................................ 21 3. Economic criteria ....................................................................................................... 25 3.1. The existence of a functioning market economy ....................................................... 25 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 31 
4. European standards .................................................................................................... 33 4.1. Internal market ........................................................................................................... 33 
4.1.1. Free movement of goods............................................................................................ 33 4.1.2. Movement of persons, services and right of establishment ....................................... 35 
4.1.3. Free movement of capital........................................................................................... 37 4.1.4. Customs and taxation ................................................................................................. 37 4.1.5. Competition............................................................................................................. ... 38 
4.1.6. Public procurement .................................................................................................... 39  
4.1.7. Intellectual property law ............................................................................................ 40 4.1.8. Employment and social polic ies, public health policy............................................... 41 
4.1.9. Education and research .............................................................................................. 43 4.1.10. WTO issues ............................................................................................................. ... 44 
4.2. Sectoral Policies......................................................................................................... 44 
4.2.1. Industry and SMEs..................................................................................................... 44  
4.2.2. Agriculture and fisheries............................................................................................ 45 4.2.3. Environment............................................................................................................. .. 47 
4.2.4. Transport policy ........................................................................................................ . 48 
 
EN 3   EN 4.2.5. Energy .................................................................................................................. ...... 50 
4.2.6. Information society and media................................................................................... 51 4.2.7. Financial control....................................................................................................... .. 52 
4.2.8. Statistics .............................................................................................................. ....... 53 
4.3. Justice, freedom and security ..................................................................................... 54 4.3.1. Visa, border management, asylum and migration...................................................... 54 
4.3.2. Money laundering ...................................................................................................... 56  
4.3.3. Drugs................................................................................................................... ....... 57 
4.3.4. Police.................................................................................................................. ........ 58 
4.3.5. Fighting organised crime and terrorism ..................................................................... 59 4.3.6. Protection of personal data......................................................................................... 60 
Statistical Annex .............................................................................................................. ........ 61 
 
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
2010 Progress Report 
1. INTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported re gularly to the Council and Parliament on 
progress made by the countries of the Western Balkans region. This progress report broadly 
follows the same structure as in previous years. The report: 
– briefly describes relations between Bo snia and Herzegovina and the Union; 
– analyses the situation in Bosnia and Herze govina in terms of the political criteria for 
membership; 
– analyses the situation in Bosnia and Herze govina on the basis of the economic criteria for 
membership; 
– reviews Bosnia and Herzegovina’s capacity to implement European standards, i.e. to 
gradually approximate its legi slation and policies with the acquis , in line with the 
Stabilisation and Association Agreement a nd the European Partnership priorities.  
This report covers the peri od from mid-September 2009 to  the end of September 2010. 
Progress is measured on the basis of decisi ons taken, legislation adopted and measures 
implemented. As a rule, legislation or meas ures which are being prepared or awaiting 
parliamentary approval have not been taken into account. This approach ensures equal 
treatment across all reports and pe rmits an objective assessment.  
The report is based on many sources. As us ual, these include contributions from the 
government of Bosnia and Herzegovina and fr om the EU Member States, reports by the 
European Parliament1 and information from various international and non-governmental 
organisations.  
From the technical analysis contained in th is report, the Commi ssion has drawn detailed 
conclusions regarding Bosnia and Herzegovi na, which it is publishing in a separate 
communication on enlargement2.  
1.2. Context 
Bosnia and Herzegovina is a potential candida te for EU membership. The Stabilisation and 
Association Agreement (SAA) between Bosnia and Herzegovina and the EU was signed in 
                                                 
1 The rapporteur for Bosnia and Herzegovina is Ms Doris Pack. 
2 Enlargement Strategy and Main Challenges 2010-2011 (COM (2010) 660 of 09.11.2010)  
 
EN 5   EN June 2008. The Interim Agreement, which focuses on the trade-related areas of the SAA, has 
been in force since July 2008. However, progr ess on EU-related reforms has been limited.  
An international presence under UN auspices — the Office of the High Representative (OHR) 
— has been in place in Bosn ia and Herzegovina since 1995 . Making progress towards 
meeting the conditions which ha ve been set for the closure of the Office of the High 
Representative (OHR)3 by the Peace Implementation Council Steering Board remains 
essential. The country has made very little pr ogress towards meeting the requirements for the 
closure of the OHR.  
There is little domestic consensus on the main EU related reform priorities, such as the 
harmonisation of the Constitution with the Eu ropean Convention on human rights and on 
establishing a single economic space. A shared vision of the directio n to be taken by the 
country remains necessary for smoothly opera ting institutions, for cr eating more functional 
and efficient State structures and for speaking with one voice on EU and international matters. 
The EU has continued preparations to further coordinate and reinforce the EU presence and 
implement the EU agenda.  
The country's Constitution was drawn up as pa rt of the internationally agreed 1995 
Dayton/Paris Peace Agreement and has been a fo cus of reforms. It establishes a complex 
political structure that provides for governments at State, Entit y, District and Cantonal levels. 
The State-level is comprised of a tripartite rotating Presid ency, a Council of Ministers 
(executive branch) and a bicameral Parliame ntary Assembly consisting of a House of 
Representatives (lower chamber) and a House of Peoples (upper chamber). The judicial 
branch established by Dayton consists of a Constitutional Court, with a High Judicial and Prosecutorial Council being established later.  
The process for constitutional reform, which fo llowed two high-level meetings in Butmir in 
October 2009, produced no tangible results. In December 2009, the European Court of 
Human Rights (ECtHR) issued a legally-binding decision (S ejdic-Finci vs. Bosnia and 
Herzegovina case) that found ethnicity-based ineligibili ty to stand for election 
"…incompatible with the general principles of  the European Conventi on for the protection of 
Human Rights and Fundamental Freedoms".
4 Discriminatory provisions  that prevent citizens 
who do not identify themselves as belonging to th e three constituent peoples from standing as 
candidates for the Presidency and the House of Peoples of the Parliamentary Assembly 
remained in the Constitution and the Electoral  Law when the general elections held in 
October 2010 were called. 
1.3. Relations between the EU and Bosnia and Herzegovina  
Bosnia and Herzegovina participates in the Stabilisation and Association Process . The 
Interim Agreement (IA) has been in place sin ce July 2008. The Stabilis ation and Association 
                                                 
3 These cover five objectives: 1) Acceptable and su stainable resolution of the issue of apportionment of 
property between State and other levels of government; 2) Acceptable and sustainable resolution of 
defence property; 3) Completion of the Brcko final awards; 4) Fiscal sustainability (promoted by an 
agreement on a permanent ITA coefficient method ology and establishment of a National Fiscal 
Council); and 5) Entrenchment of the rule of law (demonstrated by adoption of a National War Crimes 
Strategy, of a Law on aliens and asylum and of a Na tional Justice Sector Reform Strategy), as well as 
two specific conditions: 1) signing of the SAA and 2) a stable political situation. 
4 ECtHR decision, application no. 27996/06 and 34836/06, Para 21. 
 
EN 6   EN Agreement (SAA) has been ratified by 25 EU Memb er States thus far. Implementation of the 
Interim Agreement (IA) by Bosnia and Herze govina has been uneven. The country is in 
breach of the IA due to non-compliance with the European Convention on Human Rights and 
due to the absence of a state aid authority. Mo reover, in February, Bosnia and Herzegovina 
unilaterally changed most-favoured nation (MFN ) duties for a number of agricultural and 
industrial products by adopting Amendments on the Law on Customs Tariffs. No prior 
consultation with the European Commission took place, which goes against the provisions of the Interim Agreement. Efforts to address ob ligations under the IA, which is a European 
Partnership priority, need to  be considerably stepped up. 
The EU provides guidance to the authorities of Bosnia and Her zegovina on reform priorities 
as part of the European Partnership .
5 Progress on these reform priorities is encouraged and 
monitored by the bodies established by the In terim Agreement. Six Interim Sub-Committee 
meetings and two Interim Committee meetings  were held during the reporting period. 
Furthermore, the multilateral economic dial ogue between the Commission, EU Member 
States and potential candidate countries in th e context of the pre-acce ssion fiscal surveillance 
took place in an expert meeting in June 2010. 
The regular meeting between Members of the European Parliament and Members of the 
Bosnia and Herzegovina Parliamentary Assembly took place in February 2010 .  
The EU has continued to deploy considerable resources in Bosnia and Herzegovina under the 
Common Foreign and Security Policy and the Co mmon Security and Defence Policy. The EU 
Special Representative (EUSR) continues to promote overall political coordination and to 
offer the EU’s advice and facilitation. The manda te of the EUSR has been extended until 31 
August 2011.  
The mandate of the EU Police Mission (EUPM) focuses on the fight against organised crime 
and corruption. The EUPM has continued to monitor and assess implementation of police 
reform, accountability and provide training. Th e mission currently has 280 officers and its 
mandate has been extended until 31 December 2011. 
The EUFOR/ALTHEA military operation contri buted to maintaining a safe and secure 
environment in the country. EUFOR for ces currently number about 1,900 troops.  In 
November 2009, the UN Security Council exte nded EUFOR’s mandate once again for one 
more year. In January 2010, the Foreign Affa irs Council concluded that the executive 
mandate of Operation Althea will last until at least November 2010 and expressed the 
readiness of the EU, should the situation require, to maintain a military executive beyond 2010, under a UN mandate. Particular emphasi s has been placed on providing capacity-
building and training.  
In the framework of the visa liberalisation  dialogue, Bosnia and Herzegovina has made 
important progress in the different areas of the roadmaps. The Commission therefore 
presented a proposal on lifting the visa obligatio n for citizens of Bosnia and Herzegovina on 
27 May 2010, which was subject to the fulfilment of some outstanding cr iteria. The proposal 
on visa liberalisation was adopt ed by the European Parliame nt on 7 October and the Council 
                                                
 
5 Council Decision of 18 February 2008 on the prin ciples, priorities and conditions contained in the 
European Partnership with Bosnia and Herzegovina (2008/211/EC). 
 
EN 7   EN on 8 November, following the successful co mpletion of outstanding requirements. A 
readmission agreement with Bosnia and Her zegovina has been implemented since 2008.  
As a potential candidate for EU membership, Bo snia and Herzegovina aligned itself with 67 
CFSP declarations out of a total of 74 relevant  declarations adopted by the EU during the 
reporting period (91%). 
Bosnia and Herzegovina receives financial assistance  under the Instrument for Pre-accession 
Assistance (IPA). The EU Delegation to Bosn ia and Herzegovina is responsible for the 
implementation of financial assistance in the country. Little progress has been made by the 
country's authorities towards establishing the necessary structure for decentralised 
management of EU funds. The competent acc rediting officer, the national IPA coordinator 
and the national authorising officer were appoint ed. However, the legal basis for the operating 
structure, appointment of the necessary pr ogramme officers and adoption of the roadmap 
towards a decentralised implementa tion system are still pending.  
Following the delayed signature of the 2007 and 2008 IPA Financing Agreements by the 
authorities of Bosnia and Herzegovina, implem entation is still ongoing. An assessment of the 
Multi-annual Indicative Planning Document (MIP D) for the period 2009-2011 concluded that 
the overall objectives and strategic choices remain  valid, as they are based on the EU strategic 
documents and lessons learned from programmi ng and implementation of EU assistance.  
With a total allocation of €98.3 million, the IPA 2010 programme focuses on political criteria, 
namely social inclusion, cultural heritage, law enforcement, anti-corruption measures, the judiciary and public administration reform. In  addition, it focuses on water infrastructure, 
customs, rural development and eradication of  animal diseases. Bosnia and Herzegovina 
participates in the IPA multi-beneficiary pr ogrammes, including an IPA crisis response 
package developed in 2008 in res ponse to the financial crisis.  
Development of civil society  in Bosnia and Herzegovina con tinues to be supported under the 
Civil Society Facility, with an emphasis on anti-corruption measures, environmental 
protection, local democracy and networks  of civil society organisations.  
The cross-border cooperation programmes be tween Bosnia and Herzegovina and its 
neighbours Croatia, Montenegro an d Serbia were revised to in clude the additional financial 
allocation for the period 2010-2011. Implementation of the 2007-2009 cross-border programmes is continuing.  
Bosnia and Herzegovina is a full member of  the 7th Framework Programme for research, 
technological development and demonstration acti vities (FP7) and participates in COST and 
the EUREKA network. Bosnia and Herzegovina al so participates in the Tempus and Erasmus 
Mundus programmes. Preparations for part icipation in the Culture 2007-2013 programme 
have advanced.  
2. P
OLITICAL CRITERIA  
This section examines the progress made by Bosnia and Herzegovina towards meeting the 
Copenhagen political criteria, which require stab ility of institutions guaranteeing democracy, 
 
EN 8   EN 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 (ICTY). 
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 and stability to Bosnia and Herzegov ina. However, Bosnia and Herzegovina’s 
Constitution, which is contained in Annex IV to  the DPA, established a complex institutional 
architecture, which remains inefficient and is misused. No steps have been taken to address 
the problem of legislation relevant for EU inte gration being blocked. Th e repeated misuse of 
rules on quorums complicate the decision-making process, delay reforms and reduce the country’s capacity to make progress towards the EU.  
There are particular problems in the Federati on, where competences of the Entity, the Cantons 
and the municipalities overlap. Failure to harmonise legislat ion at the different levels, 
particularly in the smaller Cantons, a dds to the arrangement's complexity.  
In autumn 2009, an EU-US initiative to faci litate constitutional ch anges put forward a 
proposal to provide the State gov ernment with the competences and authority needed to meet 
the minimum requirements of the EU accession pr ocess. It also contained proposals to 
improve the functionality of the State and to align the Constitutio n with the European 
Convention on Human Rights (ECHR). No agreement on a way forward emerged.  
The Constitution of Bosnia and Herzegovina prev ents citizens who do not identify themselves 
as belonging to one of the thr ee constituent peoples (Bosniak, Cr oat or Serb) from standing as 
candidates for the Presidency and the House of  Peoples of the Parlia mentary Assembly. In 
December, the European Court of Human Right s (ECtHR) issued a le gally-binding decision 
(Sejdic-Finci vs. Bosnia and Herzegovina case)  that found ethnicity-bas ed ineligibility to 
stand for election "…incompatible with the general principl es..." of the ECHR.
6 Furthermore, 
by ratifying the SAA with th e European Union in 2008, Bosnia and Herzegovina made a 
commitment to ensure full compliance with the ECHR, which is also a European Partnership 
priority.  
In March, the Council of Ministers adopted an action plan for implementation of the ECtHR 
decision and set up an inter-institutional working group. The working group failed to reach an agreement. 
The prospect of elections in October 2010 rein forced the tendency of political parties and 
government officials on all sides to engage in  nationalistic rhetoric. During the pre-election 
period, politicians from Republika Sr pska frequently challenged th e territorial integrity of the 
country. Meanwhile, some political leaders from  the Federation linked the establishment of 
Republika Srpska to war-time massacres. Leaders in Republika Srpska fr equently criticised 
State institutions, competences and laws. They remained opposed to strengthening State-level 
competences, including in the context of the Interim Agreement (IA), in particular by delaying the establishment of a State aid au thority. Politicians from the Cantons in the 
                                                
 
6 ECtHR decision, application no. 27996/06 and 34836/06, Para 21. 
 
EN 9   EN Federation of Bosnia and Herzegovina also con tinued to delay reforms needed to establish 
State-level competences as part of the IA.  
On the basis of the Dayton/Paris Peace Agreement, the international community continued to 
maintain a significant presence in Bosnia and Herzegovina. Ve ry little progress was made 
towards meeting the requirements set by the Peace Implementation Council Steering Board for the closure of the Office of the High Repres entative (OHR). No agreement was reached on 
apportioning State property between the State a nd other levels of government. There is still 
disagreement between political leaders on the method for registration of State and defence 
property. The authorities did not make use of th e inventory of State property compiled by the 
OHR in December.
 The competent authorities, except Br čko District, have not completed 
their assessments of which propert y would be needed for them to  fulfil their constitutional and 
legal responsibilities. In September, the Re publika Srpska National Assembly unilaterally 
adopted its own state property law, which further undermines prospects for a sustainable 
agreement on state property. The issue of i mmovable defence property remains unresolved.  
Due to political difficulties and challenges posed to the DPA, the HR d ecided to use the Bonn 
Powers on several occasions, including in relatio n to the law on the electricity transmission 
company, the fulfillment of the Br čko Final Award and the mayor of Mostar City. He also 
extended the mandates of intern ational judges and prosecutors working on war crimes and 
rehabilitated several di smissed officials.  
The Entities have not made their Constitutions compliant with the 2006 ruling of the 
Constitutional Court of Bosnia and Herzegovina regarding the Entity coats of arms, flags and 
anthems, which are not in line with the State-level Constitution. 
Overall , there has been little progre ss on addressing the European Partnership priority, which 
requires measures to achieve more functional and sustainable institu tional structures and 
better respect for human rights and fundamental freedoms, including by  adopting changes to 
the Constitution. 
Parliament  
On 3 October, general elections were held fo r the Presidency and the lower chamber of the 
Parliamentary Assembly of Bosnia and Herzegov ina (the 'House of Representatives'). Voters 
in the Federation elected 98 deputies in the Entity's House of Representatives, ten cantonal assemblies and two representatives (one Bosniak, one Croat) to the tripartite state Presidency. Voters from Republika Srpska elected 83 deputie s to the Entity's National Assembly and one 
representative to the tripartite state Presiden cy, one Entity President and two vice-presidents.  
The elections were assessed by the OSCE/ODIHR as  being generally in line with international 
standards for democratic elections and as representing further progress for Bosnia and 
Herzegovina. However, they were once again held with ethnicity and residency-based 
limitations to suffrage rights due to provis ions established by the Dayton/Paris Peace 
Agreement.  
Steps were taken to provide the Parliamentar y Assembly of Bosnia and Herzegovina with 
sufficient administrative resources and person nel. Its budget was increased, enabling the 
parliament’s secretariat to r ecruit new staff. Of the 181 posts  in the 2006 staffing plan, 148 
have been filled. Parliament pr epared a new three-year work pl an and adopted an IT strategy 
for 2010-13.  
 
EN 10   EN On occasion, "entity voting"7 prevented the adoption of laws addressing European Partnership 
priorities. These included proposed laws on the promotion of SMEs, contractual obligations, 
witness protection and public procurement.  Regarding the law on the population and 
household census, it was blocked in the House of Representatives by the Federation in 
January 2010 and later boycotted by Republika Srps ka in the House of Peoples in July. The 
legislative work of parliament, including th e various parliamentary committees, proceeded 
slowly and was characterised by inter-ethnic divergences.  
Cooperation between the Council of Ministers and parliament was insufficient. In some cases, 
laws adopted by the Council of Ministers were later blocked in parliament by the same 
political actors from the government coalition. In addition, no proper mechanism exists in the legislative process for coordination between the State parliament and the Entity parliaments.  
Overall , the administrative resources for the Pa rliamentary Assembly of Bosnia and 
Herzegovina have increased. Lack of coordina tion between State and En tity parliaments and 
political discord between the Entities has contin ued to hamper the work of the Parliamentary 
Assembly.  
Government  
The Presidency of Bosnia and Herzegovina co nducts foreign policy and defence policy and 
proposes the State budget. The Presidency held  fourteen regular and fourteen emergency 
sessions in the twelve months up to Sept ember. The Presidency adopted the annual 
programme on intelligence-securi ty policy and on bilateral agr eements. However, individual 
Presidency members often presen ted their own party positions in  international fora. Foreign 
policy coordination remained difficult, partic ularly since January 2010, when Bosnia and 
Herzegovina began a two year term as a non-pe rmanent member of the UN Security Council. 
The Chair of the tripartite Presidency rota tes every eight months and consensus-building 
between the three members is weak, which restricts effective policy formulation and implementation.  
The Council of Ministers adopted the review of  the action plan for meeting the European 
Partnership priorities and the action plan for implementation of the Interim Agreement (IA) 
for 2010-11. The Directorate for European Integr ation (DEI) issues an opinion on all State-
level draft laws related to EU integration befo re they are put on the ag enda of the Council of 
Ministers. However, the capacity of the DEI to  assess compliance with the IA remains weak. 
Furthermore, draft laws of the Entities and Br čko District do not requ ire an opinion from the 
DEI.  
The new Director of the DEI was appointed after a gap of eight months. Staffing levels at the 
DEI reached 82, including 17 new recruits. Howe ver, the DEI has not yet been given the 
authority necessary to drive the EU integrat ion process forward and is not empowered to 
coordinate EU-related legislation. 
The Directorate for Economic Planning comple ted the country deve lopment strategy and 
social inclusion strategy. However, they are ye t to be adopted. Policy planning in Bosnia and 
Herzegovina as a whole is impeded by the l ack of an up-to-date population and household 
                                                
 
7 Article IV 4 d) of the Constitu tion of Bosnia and Herzegovina. 
 
EN 11   EN census. The House of Peoples failed to adopt  the Law on the population and household census 
in September 2010.  
The government of Republika Srpska has establis hed an EU Integration Unit in each ministry, 
except for the Ministry of Ju stice. The government and Na tional Assembly of Republika 
Srpska continued to harmonise legislation with EU standards. However, there was little 
coordination with the Council of Ministers and the Federation government. The Federation 
government has established an EU Integration Unit in some ministries but not all. The 
Federation’s Constitution entails complex a nd expensive governance structures with 
overlapping competences between the Federation, the Cantons and the municipalities. Divergent ethnic interests adversely affected governance within the Federation.  
Both Entities have legislation that  is largely in line with the European Charter for Local Self-
Government. Some Cantons in the Federation ha ve started to adopt local self-government 
legislation. In some cases, the Federation Consti tutional Court had to issue rulings regarding 
breaches of the European Charter by Cantons.  
Overall , only limited progress has been made by Bosnia and Herzegovina on improving the 
functionality and efficiency of the State-le vel government structur es. Tensions between 
Entities, inadequate resources and a lack of political dialogu e delayed reform. The duplication 
of competences added to administrative costs. The efficiency of the State-level government 
was hampered by fragmented policy-making between the State and the Entities.  
Public administration  
Little progress was made in the area of public  administration reform (PAR), a European 
Partnership priority.  
A new PAR coordinator was appoi nted. Resources for monitoring the implementation of the 
PAR strategy, a European Partnership priori ty, have improved. Resources at Entity and 
Cantonal level for PAR implementation are insufficient, except in Br čko District. 
Furthermore, the ability of the State office to  influence the process is constrained. Stronger 
political will and increased resources are crucial for the future success of PAR.  
The administrative capacity of  Bosnia and Herzegovina to implement SAA and IA 
commitments is slowly being st rengthened. However, the country ’s administrative structures 
are still not capable of respondi ng effectively to the requireme nts of EU integration. They 
remain cumbersome, fragmented and with an unclear division of powers across the various 
levels of government. 
Only limited progress can be report ed concerning the civil service.  State-level  institutions 
have adopted a uniform human resources management information system. Several 
appointments that had been dela yed for political reasons were  finally decided. However, 
further key appointments to Stat e-level bodies, such as to the Indirect Taxation Authority, the 
Communications Regulatory Agency, the elect ricity transmission company TRANSCO and 
the State Electricity Regulatory Commission (See Chapter 4.1 – Internal market) , are still 
pending. Overall, the civil servi ce remains highly politicised. It is in need of transparent 
recruitment procedures based on merit, a system of modern career development and 
professionalisation. No progress has been made towards limiting the role played by political 
affiliation in public administration. 
 
EN 12   EN Some limited progress on civil service manage ment can be reported especially in Republika 
Srpska, where performance management has starte d. However, there have been no attempts to 
harmonise the divergent civil service legisl ation across the country . In the Federation, 
attempts were made to politicise the civil service. A ruling by the Federation's Constitutional Court opened the door for the establishment of separate, Cantonal civil services. This would draw further on the Federation's budget and de lay the implementation of the PAR strategy.  
During the reporting period, the En tities’ Ombudsman’s Offices were merged into a State-
level Ombudsman, which is functioning. The Ombudsman issued several recommendations 
on public administration appointments, tenders and anti-discrimination to institutions 
operating at each of the four administrative leve ls (State, Entity, Cantonal and municipal), but 
they were not implemented. The functioning of the Ombudsman’s Office was hampered by 
budgetary constraints and requi res further financial support. Enforcement capacity and 
political will to implement the Ombuds man's recommendations remain weak. 
Overall , little progress was achieved in the area of public administration reform. A State-level 
Ombudsman is now operational. Significant furt her efforts are needed towards developing a 
professional, accountable, transparent and e fficient civil service based on merit and 
competence at all levels of government. The c ountry’s complex and cumbersome institutional 
structure continues to undermine efficiency.  
Civilian oversight of the security forces 
Civilian oversight of  the security forces is larg ely ensured. The committee of the 
Parliamentary Assembly of Bosnia and Herze govina in charge of overseeing the Intelligence-
Security Agency (OSA) conti nued its practice of inspecting the OSA’s regional centres. The 
OSA carries out its task s professionally without political pr essure. However, an amendment to 
the Law on protection of secret da ta, which ensures that the law is in line with the relevant EU 
standards and provides for implementation of the bilateral security agreement, remains to be 
adopted.  
Judicial system 
Limited progress has been made in the area of judicial reform.  
The State-level High Judicial and Prosecutorial Council (HJPC) supervised the establishment 
of a country-wide court inform ation technology (CIT) system. A time management system for 
prosecutors and a case management system now exist in all courts and all Prosecutor’s 
Offices. This facilitates distri bution, management and monitori ng of cases. The HJPC also 
supervised additional development of the judi cial documentation centre. Users now have on-
line access to over 3,600 court decisi ons and many legal opinions.  
The reconstruction of the Saraje vo municipal court, th e largest in the c ountry, was completed 
in December 2009, thus increasing its efficiency and effectiveness. Republika Srpska also 
renovated several courts. In the Fe deration, a review of the court system and of the number of 
court branches is ongoing.  
The parliament of Bosnia and Herzegovina a dopted amendments to the Criminal Procedure 
Code, which is expected to facilitate the tran sfer of war crime proceedings from State to 
Entity-level. The board overseeing implementation of the national war crimes strategy proved an effective monitoring system.  
 
EN 13   EN However, the complexities arising from the four separate judicial systems (State-level, 
Republika Srpska, Federation and Br čko District) pose serious chal lenges to the functioning 
of the judicial system. There is no single body comparable to a supreme court that can guarantee uniform application of the law. The presence of 14 budgetary authorities affects the 
independence of the judiciary. In  addition, budgetary measures have  led to posts in State-level 
judicial institutions bein g frozen for two years. 
Political pressure on the judiciary continued. Th e authority of the HJPC, the State Court and 
the Prosecutor's Office have often been questioned by political leaders. The role of the HJPC in appointing new judges was also challenged when the President of the Federation delayed 
three appointments to the Entity Constitutional Court, thus undermining the proper functioning of the court. The State-level prosecut or's office faced cases of internal corruption 
and frequent leaks of information. The impar tiality of courts is not always guaranteed. 
The backlog of cases remained one of the most  acute problems facing the judiciary and court 
proceedings are generally lengthy. The HJPC took several measures to reduce the backlog, 
including quarterly reporting by all courts, a new quota system for judges, more judges in 
critical courts, new specialised software and tr aining for bailiffs. Despite these reforms, the 
backlog still stands at over 2.1 million cases country-wide. Many of these are claims for 
unpaid utility bills.  
A general lack of political will meant that few steps were taken to implement the Justice 
Sector Reform Strategy for 2009-13. In particular , authorities at Entity  and Cantonal levels 
failed to integrate the strategy into their wo rk plans. Limited human resources and poor 
coordination hampered implementation. The work of the five working groups for 
implementation of the strategy has been undermined by the lack of a quorum.  
Specialisation within courts and prosecution services has started on administrative and 
commercial cases, but wit hout strategic planning or harmonised measures.
 To speed up case 
adjudication in commercial disputes and to fa cilitate business regist ration, Republika Srpska 
established six new commercial co urts, including a sec ond instance commercial court. In the 
Federation, a system of commercial c ourts has not yet been established. 
The physical condition of a number of courts and Prosecutor’s Offices throughout the country 
remains inadequate. A comprehensive country-wide approach to improving courts and Prosecutor’s Offices is lacking. The two Entity-l evel judicial and prosecutorial training 
centres continue to face staffing problems. Furt her specialised staff are needed. International 
cooperation needs to be improved. The State-le vel Law on internationa l legal assistance in 
criminal matters is implemented unevenly.  
Little progress was made in the area of juven ile justice. The State-level juvenile offence 
strategy is under review. Implementation of th e strategy remained uneven due to a lack of 
resources. Republika Srpska adopted a new law which includes alternative sanctions. A new 
Department for Juveniles was opened in th e Federation’s Ministry of Justice.  
Implementation of the national war crimes strategy was seve rely delayed and remained 
minimal. A caseload database outlining the type s, numbers and perpetrators of cases was 
compiled after a delay of 18 months. A compre hensive approach to implementation of the 
strategy is needed. Prosecution of war crimes  by the State Court ha s continued to be 
satisfactory. In December 2009, the High Representative decide d to extend the mandate of 
international judges and prosecutors dealing with  war crimes at the State-level court and in 
 
EN 14   EN the Prosecutor’s Office, after parliament failed to  adopt the related legislation. Delays to those 
appointments had repercussions for the planning of operations in both the court and the 
Prosecutor’s Office and for the processing of cases.  
War crimes trials at Cantonal and District cour ts advanced slowly. Pr ogress was hindered by a 
lack of capacity in the Prosecutor's Offices, inad equate facilities and a lack of appropriate 
witness protection and support services. Bosnia and Herze govina has signed bilateral 
agreements with Croatia, Serbia and Monten egro on mutual recognition and enforcement of 
court rulings in criminal matters  to prevent people with dual ci tizenship convicted of a crime 
in one country avoiding prison by fleeing to the other. (See Chapter 2.3 – Regional issues and 
international obligations) . 
The number of prosecuted war crimes involvi ng cases of sexual violence remained low. 
Sustained efforts are needed to guarantee succes sful investigations and prosecution, as well as 
adequate witness protection and psychological support for victims. 
Overall , development of an independent and eff ective judiciary in line with European 
standards remains at an early stage. Significant efforts are needed to ensure implementation of 
the justice sector reform strategy and of th e national war crimes strategy, including by 
securing adequate financial resources. The fragmented legal framew ork across the country 
and the absence of a single budget restrict effec tiveness. The backlog of cases and political 
pressure on the judicial system c ontinue to be causes for concern. 
Anti-corruption policy 
Bosnia and Herzegovina has made limited progress in tackling corruption, which is 
widespread throughout the public and private sect ors, affecting the judiciary, tax and customs 
administrations, public procurement, and priv atisation. Implementation of the 2009-2014 anti-
corruption strategy has started and the Law esta blishing the Anti-Corruption Agency has been 
adopted.  
Bosnia and Herzegovina ratified the additional protocol to the Council of Europe Criminal 
Law Convention on Corruption. The country does not yet fulfil th e requirements for 
participation in the working group on bribery in international business transactions, which is a 
precondition for accession to the OECD Convention on combating bribery. Regarding the report of the Group of States against Corruption (GRECO), 4 out of 16 recommendations 
have been addressed. Bosnia and Herzegovina has amended provisions of the Criminal Code 
relating to the management  of confiscated assets (See Chapter 4.3.2 – Money laundering) .  
Parliament adopted a Law establishing the Ag ency for Prevention and Coordination of the 
Fight against Corruption. The law has entered in to force and provides for the establishment of 
an independent agency, thus meeting one of the GRECO recommendations. An acting 
director was appointed, pending selection of a permanent director. A first draft of the 
agency’s rulebook has been produced. Premises for the agency were identified, but staffing 
levels have not been finalised.  
A State-level code of conduct fo r civil servants, regulating bot h prevention and detection of 
corruption, has not been adopted. Amendments to  the code of conduct for civil servants in 
Republika Srpska were adopted to regulate the movement of public officials to the private sector and to prevent conflict of interest. In  the Federation, the code of conduct for civil 
 
EN 15   EN servants was amended to introduc e priorities regarding the risk  of corruption and the concept 
of ethics. 
Bosnia and Herzegovina has a Law on conflicts of interest in place. However, country-wide 
implementation of the law is uneven. In the twelve months to September 2010, the CEC found 2 violations of the State law on conflict of inte rest and 15 violations of the Federation law. 
Republika Srpska has its own commission for de termining conflict of interest, which found 1 
violation.  
The House of Peoples adopted amendments to the Law on financing of political parties to 
raise the threshold for individual donations. The Central Electoral Commission (CEC) has 
started to monitor asset declarations, conflicts of  interest and reports on financing of political 
parties. It has imposed financial and admini strative sanctions in 18 cases. However, asset 
declarations by political partie s remain voluntary. Th e Public Procurement Law largely meets 
basic standards regarding transparency, but its provisions for preventing or detecting 
irregularities are not applied consistently.  
There is no effective investigation, prosecu tion and conviction of high-level corruption. 
Corruption is mainly prosecuted under the rules on abuse of office and at Entity-level. A number of high-level cases involving senior politicians and civil servants are at the 
prosecution stage. One high-level ca se of abuse of office resulted in an acquittal. The judicial 
follow-up of cases of corruption remains slow and although special investigative measures are 
available to police and prosecutors, they are rare ly used in corruption cases. Staff working on 
corruption are insufficiently trained to conduct financial investigations. Cooperation between 
police and prosecutors needs to be improved in order to make the inve stigation of corruption 
cases more effective.  
Overall , Bosnia and Herzegovina has started to t ackle corruption by adopting an updated anti-
corruption strategy and action pl an and by appointing an acting director who is overseeing 
their implementation and the establishment of the anti-corruption agency. Some measures 
have been taken to prevent corruption (e.g. on  awareness-raising, ed ucation and training). 
However, corruption is prevalent in many areas  and remains a serious problem throughout the 
public and private sectors. An ti-corruption policies and m easures are not adequately 
implemented. Investigation and pros ecution of corruption remain weak. 
2.2. Human rights and the protection of minorities 
Observance of international human rights law As regards ratification of human rights instruments , Bosnia and Herzegovi na has ratified the 
major UN and international hum an rights conventions. During th e reporting period it ratified 
the UN Convention on the Rights of Persons with  Disabilities. However, implementation of 
the human rights conventions remained uneven and delays in meeting reporting obligations 
continued.  
There were several cases of non-enforcement of decisions of the Constitutional Court of 
Bosnia and Herzegovina, which led to  cases being lodged before the European Court of 
Human Rights  (ECtHR). Between September 2009 and September 2010 the ECtHR issued 20 
judgements finding that Bosnia and Herzegovina  had violated the European Convention on 
Human Rights (ECHR). A total of 673 new app lications were made to the ECtHR since 
October 2009. As of September 2010, some 1,216 cases were pending before the Court, 
 
EN 16   EN approximately 300 of which related to ‘old’ fo reign-currency savings in banks based in 
Bosnia and Herzegovina.  
Little progress was made on the promotion and enforcement of human rights . Effective 
monitoring has  not been ensured in every area related to human rights.  Bosnia and 
Herzegovina’s Constitution has not been amende d to remove incompatibilities with the 
ECHR, despite a legally-bi nding decision by the ECtHR (See Chapter 2.1 – Constitution) .  
Following the demise of the Human Right s Chamber (HRCh) and the Human Rights 
Commission (HRCom),8 the State-level Constitutional Cour t was confirmed as the competent 
body to review the proper implementation of their outstanding decisions. Th is is the first step 
towards ensuring that there is  an independent body in charge  of monitoring and assessing 
implementation of HRCh and HRCom decisions by the Entities.  
Overall , the main elements of international human rights law have been incorporated into 
Bosnia and Herzegovina’s legal system. Howe ver, little progress took place on enforcement 
of human rights legislation and on enforcing these instruments and complying with the 
ECtHR rulings. Full compliance with the ECHR remains essential.  
Civil and political rights 
With regard to  torture and ill-treatment , the Council of Europe Committee on the Prevention 
of Torture (CPT) found several deficiencies in the treatmen t of detainees and convicted 
criminals. Areas of concern in cluded ill-treatment, intimida tion and poor health services, 
particularly for vulnerable prisoners. Bosnia  and Herzegovina has still not appointed a 
representative to the CPT. Very little was don e to improve the procedures for investigating 
cases of alleged tortur e and ill-treatment.  
Adequate safeguards are lacking for people facing  deportation after being refused citizenship 
and who are at serious risk of persecution, including torture and ill -treatment, upon return. 
The death penalty is prohibited by the Const itution of Bosnia and Herzegovina and by the 
Constitution of the Federation. However, the deat h penalty provision in the Constitution of 
Republika Srpska has not been repealed. 
Some progress was made on  access to justice  in civil and criminal trials. However, the 
adoption of the framework Law on free legal aid needed to comply with the ECHR is still 
pending. Equality before the law is formally guaranteed. In practice the presumption of 
innocence and equal treatment are not always  ensured during legal proceedings. Republika 
Srpska has legal aid centres in five locations . The Federation has no comprehensive system of 
legal aid, but three of the ten Cant ons have established offices. The Br čko District Judicial 
Commission also operates a legal aid office. Legal aid in civil cases continues to be provided 
on a mainly ad hoc  basis by privately funded NGOs.  
                                                 
8 The Human Rights Chamber (HRCh) was established by Annex 6 to the Dayton/Paris Peace 
Agreement, as a judicial body dealing with complaints concerning violation of basic human rights and 
freedoms envisaged under the European Convention on Human Rights. The mandate of the HRCh expired on 31.12.2003, without having  resolved all the cases it received (15,191). In order to resolve all 
the cases, the State and Entities agreed to create the Human Rights Commission within the 
Constitutional Court of BiH (HRCom). 
 
EN 17   EN Some progress was made regarding the  prison system . A new section for juveniles was 
opened in Tuzla prison, but lacks rehabilitatio n services. Republika Srpska adopted several 
laws, including the amended Law on the execution of criminal sanctions, the Law on a special 
regime for enforcement of imprisonment and th e Law on protection and treatment of juveniles 
in criminal proceedings. The Fede ration lacks some of this legi slation. As a result, the legal 
framework is not harmonised and criminal sa nctions are not uniform across the country.  
Prison conditions improved somewhat. In both Entities prison accommodation was expanded 
with new or upgraded buildings. A pool of so cial workers specialising in human rights, 
including in the treatment of  vulnerable groups, was estab lished. Construction of a new 
psychiatric unit in Sokolac has begun. However, construction of a high-s ecurity State prison 
has incurred serious delays and has not started yet affecting the country's capacity to deal with 
high-security prisoners.  
Overcrowding remains of concern and is part icularly acute in the Federation, where over 
1,000 convicted criminals have not started to se rve their prison sentences. Estimates suggest 
that an average of five years pass between  a final conviction and actual imprisonment, 
particularly in the Federation. Efforts are underway to increase prison capacity and to 
introduce a system of electronic bracelets for hous e arrests. Both Entities amended their laws 
on execution of criminal sanctions in an e ffort to reduce overcrowding. The scope for 
applying alternative sanctions has been broadened, in particular in Republika Srpska, but they 
are still not widely applied.  
Proper medical facilities, segr egation of vulnerabl e groups and prison inspections remained 
insufficient. Coordination between the 15 prison  administrations in the country remained a 
serious concern.  
Bosnia and Herzegovina's Constitution provides for the freedom of expression , but a growing 
number of journalists and editors are subject to physical violence and intimidation, including 
death threats. Political pressure on the me dia increased and the independence of the 
Communications Regulatory Agency  continued to be undermined. In certain cases, public 
bodies continued to deny access to information, even after the Ombudsman issued a recommendation to provide access.  An increasing number of co mplaints about news reporting 
and Press Code violations have been filed with the Press Council. However, the self-
regulating Press Council has not been sufficientl y active in enforcing professional standards.  
Implementation of the Freedom of Access to Info rmation Act remains insufficient. Journalists 
investigating corruption have faced intimidation. (See Chapter 4.2.6 – Information society 
and media) .  
Freedom of assembly and association  are enshrined in the country's Constitution. However, 
further cases of violence and threats against huma n rights advocates and civil society 
organisations have been reported, mostly involving activists inve stigating suspected 
corruption.  
The governments of both Entities and of Br čko District as well as many municipalities 
adopted cooperation agreements with civil society organisations . At State-level, the office for 
NGO Cooperation within th e Council of Ministers has not b een established as envisaged in 
the cooperation agreement between civil so ciety and the Council of Ministers. The 
administrative capacity of the department for coope ration with civil society at the Ministry of 
Justice is weak. Resources for the Civil Societ y Board remain inadequate and funds allocated 
 
EN 18   EN to human rights and environmental organisations  are insufficient. The development of civil 
society in Bosnia and Herze govina requires further support a nd more transparency in the 
allocation of funding. 
The constitutional and legal guarantees of freedom of religion  are somewhat compromised. 
Discrimination on religious grounds is often intertwined with discrimination on ethnic 
grounds. Consequently, inter-ethnic tensions tend to perpetuate religious intolerance. There 
were a number of cases of relig ious buildings being vandalised and of religious officials or 
believers being subjected to violence, particularly in the case of those who constitute a 
religious minority in certain communities. 
Overall , Bosnia and Herzegovina has made no furt her progress in the area of civil and 
political rights. Efforts to address torture and ill-treatment  failed to meet European standards. 
Access to justice  and equality before the law are not guaranteed. Prison conditions have 
improved somewhat, but a comprehensive reform of the prison system has not started. In the areas of freedom of expression, freedom of asse mbly and freedom of religion, there was little 
progress. Political pressure on the media has increased. The continuing challenges to the 
independence of the Communications Regulatory Authority are a serious cause for concern. 
Further efforts are needed to support the develo pment and funding of the civil society sector.  
Economic and social rights 
Little progress has been made in the field of women’s rights . The 2009-11 State-level strategy 
for preventing and combating domestic violen ce was adopted. The Law on gender equality 
was amended in line with the recommendati ons of the Council of Europe and the UN 
Committee for the Convention on elimination of discrimination against women (CEDAW). 
The amendments set a quota of 40% for women w ithin the public admini stration, but this is 
not implemented in practice. The State report on elimination of discrimination against women 
was presented after consultations with NGOs. At Entity-level, collection of gender-disaggregated data was improved with the coopera tion of the statistical institutes. However, 
harmonisation of the Entity and Cantonal laws with the gender equality law proceeded very slowly.  
War crimes involving sexual violence have not yet been recognised in the Criminal Code in 
accordance with international standards. Domestic violence against women remains 
widespread and under-reported. Bo snia and Herzegovina continue s to be primar ily a country 
of origin but also a transit and destination country for trafficki ng in women and girls. Political 
representation of women at all levels has increased somewhat, but remain low. There are few 
women in senior decision-making positions and they are under represented in economic life.  
The main mechanisms for ensuring gender equa lity are adequately f unded but still do not 
monitor sufficiently implementation of the ge nder law and gender action plans. Cooperation 
between ministries and agencies, including th e Ombudsman’s Office, remains weak. Victim 
support mechanisms for women are insufficient.  
Little progress was made in the area of children’s rights.  Protection of children was improved 
by an amendment to the State-level Criminal Code, which introduced penal sanctions for trafficking and prostitution of children. A comm on, nine year core curriculum was introduced 
in most schools throughout th e country and the number of ‘d ivided schools’ (two schools 
under one roof) was reduced from 83 to 19. Howe ver, at the same time, the number of mono-
ethnic schools has grown, making longer term inte gration more difficult.  Children who form 
 
EN 19   EN part of an ethnic minority in school sometimes  suffer discrimination. At Entity and Canton 
levels the costs of introduci ng universal pre-school education were analysed, but insufficient 
resources were made available for implementation. Children continued to suffer from domestic violence and trafficking. 
Very little progress was made  in improving conditions for socially vulnerable people and 
people with disabilities . The UN Convention on the Rights of  Persons with Disabilities was 
ratified, but implementation has not started.  The Federation adopted  a Law on professional 
rehabilitation, training and empl oyment of disabled people. Ho wever, the social inclusion 
strategy was not adopted. The Entities adopted fr amework legislation to reform their social 
protection systems towards a needs-based appro ach for social benefits, including veterans’ 
benefits. Disparities between the social protec tion systems of the Entities and Cantons remain. 
The Council for Disabled Persons has still not be en established.  
As regards labour rights and trade unions , legislation is not harmonised between the two 
Entities, nor between the Cant ons. A State-level Economic and Social Council has still not 
been established. Individual trade unions belo nging to the Confederation of Trade Unions 
(KSBiH) are able to function satisfactorily. Ho wever, the KSBiH itself has still not been 
registered at State-level, becau se of divergences between the State-level Ministry of Justice 
and a trade union from the Federation. Employees  continued to have difficulty obtaining 
social benefits, particularly during maternity leave. The le gislative framework for social 
benefits and pensions remained fragmented (See Chapter 4.1.8 – Socia l policies, employment 
and public health) . 
With regard to anti-discrimination policies , no steps were taken to remedy the shortcomings 
of the Anti-Discrimination Law, notably the failur e to include age and disability and the broad 
scope of the exceptions. Social discrimination ag ainst lesbian, gay, bise xual and transgender 
(LGBT) people remained common. Physical attacks and harassmen t against these groups have 
continued. There has been no official condemna tion of such acts by government authorities. 
Implementation of anti-discrimination remains weak. 
In the field of property rights , the vast majority of cases of property repossession requests 
have been resolved. However, the work of th e Commission for Property Claims of Displaced 
Persons and Refugees on the re maining requests was interrupted  after the mandate of its seven 
members expired in December 2009. A new thr ee-member commission was appointed in June 
2010. The database regarding outstanding claims is  not available and funding is insufficient. 
Property registers are largely unr eliable. The Ministry for Huma n Rights and Refugees has no 
power to enforce the commission’s decisions. 
Overall , little progress was made in the area of  economic and social rights. The Law on 
gender equality was adopted and a common nine year core curriculum was established in 
most schools throughout the country. However, do mestic violence remains a serious problem. 
Protection of women against all forms of violen ce needs to be strengthened. No steps were 
taken to remedy the shortcomings of the Anti- Discrimination Law. More efforts are required 
on discrimination against vulnerabl e people and to safeguard the rights of children. Social 
inclusion policies that effectively promote so cial cohesion and natio nal reconciliation are 
needed. Labour rights, th e role of trade unions a nd the mechanisms for social dialogue need to 
be strengthened. 
 
EN 20   EN Respect for and protection of minorities and cultural rights9 
As regards respect for and protec tion of minorities and cultural rights, the legal framework is 
largely in place, but little progress was made towards implementation. In terms of inter-ethnic 
relations, the National Minority C ouncils at State and Entity leve ls are operational. However, 
they only have an advisory role in parliament  and a limited influence over policy formulation.  
The European Charter for Regional or Minor ity Languages was ratified in September. 
Representation of minorities in the media is limited, despite provisions in the Law on 
protection of national minorities.  
As the Constitution has not been amended to  comply with the EC tHR ruling, minorities 
continue to be excluded from representation in the House of Representati ves and the tripartite 
Presidency (See Chapter 2.1 – Constitution) . The lack of relevant, up-to-date information on 
minorities precludes revision of the statutes of the municipalities in accordance with the Electoral Law.  
No progress has been made towards nominatin g the members from Bosnia and Herzegovina 
on the Council of Europe Advisory Committee for the Framework Convention for Protection 
of National Minorities. Communi cation and cooperation between the different levels of 
authority are inadequate and the political will to implement the Law on national minorities is 
lacking.  
Some progress was achieved with regard to refugees and internally displaced persons . In 
2009 there were 117,000 internally displaced pe rsons, including 7,500 liv ing in collective 
centres. The revised strategy for implementati on of Annex VII to th e Dayton/Paris Peace 
Agreement was adopted in June. It includes pl ans for material assistance and reforms to 
improve access to rights. State-level funding wa s allocated for the return fund. However, 
appropriate procedures for allocating assistance are lacking and the transparency of the return 
fund remains poor. Problems with economic reinte gration and access to health care, social 
protection and pensions remained the main obstacles to sustainable return and local 
integration. One particularly sensitive issue is the employment of returnees who are members 
of a minority. Such returnees continued to face discrimination in access to employment.  
Regarding landmines from the war, some areas have still not been cl eared. In the twelve 
months to September 2010, 9 people were killed and 17 injured in 16 landmine accidents and 
others injured. There has been some progres s with implementing the mine action strategy. 
However, the Law on anti-mine actions remain s to be adopted. Shortage of financing has 
slowed down the implementation of the strate gy and cast doubt on th e goal of clearing the 
entire country of mines by 2019.  
Some progress can be reported concerning protection of the Roma minority . Implementation 
of the Roma action plans on health, employ ment and housing has improved. The State 
earmarked a further €1.5 million for reconstructi on of houses, for small projects to generate 
income and employment and for immunisati on of Roma children. Th e Roma population is 
                                                
 
9 According to the Law on the protection of rights of persons belonging to national minorities, there are 
17 national minorities in Bosnia and Herzegovina (Albanians, Montenegrin, Czechs, Italians, Jews, 
Hungarian, Macedonians , Germans, Poles, Romas, Romanians, Russians, Rusins, Slovaks, Slovenians, 
Turks and Ukrainians). The three constituent peoples – Bosniaks, Croats and Serbs – do not constitute 
national minorities. 
 
EN 21   EN identified as a priority group to be targeted in the Bosnia and Herzegovina social inclusion 
strategy for 2008-13, which remains to be adopted. The revised 2004 action plan on 
educational needs of Roma and other minorities  was adopted by the Counc il of Ministers, but 
financial resources for implementation are st ill pending. More efforts are needed on birth 
registration and on the provision of free legal aid for civil registration. The proportion of 
Roma children enrolled in primary schools vari es between municipalities. The effectiveness 
and efficiency of measures addressing the Roma  have not improved. The Roma continue to be 
the most vulnerable minority.  
The administrative capacity of the Ministry for Human Rights and Re fugees to steer the 
implementation of the Roma strategy remains weak. The coordination board for monitoring implementation of the Roma action plans at St ate-level has no link to the bodies at lower 
levels (Entities, Cantons and municipalities). Inter-agency coordination remains insufficient.  
Overall , some progress was achieved in the areas  of minority rights, cultural rights and 
protection of minorities. The re vised strategy for implementati on of Annex VII was adopted 
and includes plans for material assistance for refugees and internal ly displaced persons. 
However, the difficulties facing returnees, particularly in finding employment and securing access to health care, social protection an d pensions, remain issues of concern. 
Implementation of the legislation guaranteei ng protection of minority rights remains weak. 
Progress was made towards implementing the Roma  action plans, but insufficient priority was 
given to improving coordination and to esta blishing monitoring mechanisms. The Roma 
continue to face very difficult living conditions and discrimination. 
2.3. Regional issues and international obligations 
Implementation of the Dayton/Paris Peace Agreement  has continued, but narrow nationalistic 
rhetoric by political leaders challenging the Ag reement and the constitutional order remained 
frequent (See Chapter 2.1 – Constitution) . During the pre-election period, politicians in 
Republika Srpska frequently challenged the terr itorial integrity of th e country. Furthermore, 
statements by Republika Srpska's political leadership denying the gravity of war-time 
massacres involving the civilian population have continued.  
Cooperation with the International Criminal Tribunal fo r the former Yugoslavia (ICTY),  a 
European Partnership priority, continued to be satisfactory. Cooperation between the ICTY 
and the State-level and Entity authorities was adequate at operational level and access to 
witnesses and archives rema ined good. The Bosnia and Herzegovina Council of Ministers 
extended the interim measures for freezing funds and economic means of people indicted by 
the ICTY until October 2011. However, continued efforts are needed to find the remaining fugitives. Ratko Mladi ć and Goran Hadži ć remain at large. Radovan Stankovi ć escaped from 
prison in 2007 and remains at large. In Ma rch 2010 the State Court sentenced, in a first-
instance judgement, his brother to two y ears in prison for assisting his escape.  
Local prosecution of war crime cases  continued. All but one case transferred from the ICTY 
to the special war crimes chamber of the State Court
10 have been completed. A significant 
number of other war crimes indictments and tria ls have also been la unched by prosecutors in 
Bosnia and Herzegovina. In September 2010, 87 war crimes cases were under way, of which 
50 were at State-level, 20 in the Fede ration, 13 in Republika Srpska and 4 in Br čko District. 
                                                 
10 Cases transferred by the ICTY for local prosecution. 
 
EN 22   EN Nevertheless, the estimated to tal number of untried cases remains high (over 10,000). Little 
has been done to implement th e 2008 National War Crimes Stra tegy to reduce the backlog of 
cases and witness protection mechanisms are insufficient. Further steps are needed to 
strengthen the capacity to deal with war crimes cases, in particular by improving the functioning of cantonal and district courts a nd to ensure adequate financial resources. 
Regional cooperation and the provision of adequate  victim and witness protection will be key 
in this regard.  
Cooperation between the courts and prosecutors  from Bosnia and Herzegovina, Croatia and 
Serbia improved. Bilateral agreements were signed on mutual execution of sentences in 
criminal matters and enforcement of court rulings. This is a positive development. However, considerable legal obstacles to extradition contin ue to exist in the criminal procedure code.  
Bosnia and Herzegovina still maintains the 2003 bilateral immunity  agreement with the 
United States granting exemptions from the jurisdiction of the International Criminal Court.  
This does not comply with the EU common positions on the integrity of the Rome Statute or the related EU guiding principles  on bilateral immunity agreements. Bosnia and Herzegovina 
needs to align with the EU position.  
The Parliamentary Assembly of the Council of Europe  (CoE) frequently monitors the 
progress made by Bosnia and Herzegovina towards fulfilling the obligations and 
commitments relating to its membership of th e CoE. Bosnia and Her zegovina has made no 
progress in appointing members to several CoE monitoring mechanisms and advisory bodies. 
Implementation of requirements stemming from the CoE Conventions remains inadequate.  
Bosnia and Herzegovina became a non-permanent member of the UN Security Council in 
January 2010 for a two-year term. 
Fresh impetus was given to the Sarajevo  declaration process  following the Ministerial 
meeting held in Belgrade in March 2010. The Sarajevo Process was initially launched through the Sarajevo Declaration of 31 January 2005. Bo snia and Herzegovina, Croatia, Montenegro 
and Serbia cooperate within this process to fi nd solutions for refugees and other people who 
were displaced as a result of  the 1991-1995 armed conflicts in ex-Yugoslavia. The ministerial 
meeting in March 2010 brought togeth er the countries, all of which agreed to work together in 
order to clarify refugee statistics. They also committed themselves to work towards solutions to a number of outstanding issues by the en d of 2010. However, there are a number of 
difficult issues, in particular that of occupanc y and tenancy rights, which still need a mutually 
acceptable solution. In June 2010, there were 6,941 registered refugees from Croatia in 
Bosnia and Herzegovina, the vast majority  in Republika Srpska, and approximately 1,300 
refugees from Kosovo.
11  
As regards missing persons, in August 2010 ther e were still 14,631 pers ons missing from the 
conflicts in the region. Of these, 10,402 cases we re related to the co nflict in Bosnia and 
Herzegovina, 2,392 to the conflict in Croatia a nd 1,837 to the conflict in Kosovo according to 
figures provided by the International Co mmittee of the Red Cross (ICRC). During the 
reporting period, almost 900 ca ses of missing persons were solved in Bosnia and 
Herzegovina, mostly related to Srebrenica. Th e process for solving these cases has been 
obstructed by the lack of coope ration between the au thorities of the Federation and of 
Republika Srpska. Approximately 3,000 human rema ins are still unidentified and the modest 
                                                 
11 Under UNSCR 1244/1999. 
 
EN 23   EN number of exhumed and identified Serb victim s is a concern. Working towards the resolution 
of the remaining cases within a reasonable time  frame is essential for the reconciliation 
process.  
The implementation of the Law on missing pers ons advanced but the database of missing 
persons and the Fund to support families remain to be established. The State-level Missing 
Persons Institute (MPI) conti nued to account for persons mi ssing from the 1992-95 conflict. 
As MPI's co-founder, the Council of Ministers a llocated sufficient funds for the work of the 
MPI. However, the authorities of Republika Srpska support an entity-level body with similar 
responsibilities to MPI and have  remained critical of the MPI' s operations. Politicisation of 
this issue has impeded the work of the MPI.  
Regional cooperation and good neighbourly relations  form an essential part of Bosnia and 
Herzegovina’s process of m oving towards the European Un ion. Bosnia and Herzegovina 
continued to be an active partic ipant in regional initiatives, in cluding the South East European 
Cooperation Process (SEECP), the Regiona l Cooperation Council (RCC), the Central 
European Free Trade Agreement (CEFTA), the Energy Community Treaty and the European Common Aviation Area Agreement. The country hosts the RCC Secretariat, which organised 
many regional activities. However, difficulties for holders of Kosovo passports in obtaining 
visas to attend regional meetings in Bosnia a nd Herzegovina persist. The Council of Ministers 
issued a decision that facilita ted participation in RCC events for holders of Kosovo passports. 
For participants in other regional cooperation ev ents, the visa procedure remains cumbersome.  
Bosnia and Herzegovina has been implementi ng the CEFTA. A law that protected domestic 
agricultural and related products  by reintroducing customs duties,  contrary to the CEFTA and 
to the Interim Agreement, was abolished, fo llowing a ruling by the Constitutional Court. 
Bosnia and Herzegovina is still behind in meeting its obligations under the Energy 
Community Treaty. Bosnia and Herzegovina part icipated in the EU-Western Balkans High-
Level Meeting, held in Sarajevo on 2 June 2010. 
In May 2010, Bosnia and Herzegovina hosted a su mmit of the Igman initiative on regional 
reconciliation, with the participation of th e Chair of the Presidency of Bosnia and 
Herzegovina and the Presidents of Croatia, Se rbia and Montenegro. This year marked the 10
th 
anniversary of the initiative,  involving more than 140 NGOs from the region and aimed at 
promoting and facilitating lo cal and regional cooperation.  
Bilateral relations with other enlargement countries  developed further. Judicial cooperation 
in penal matters has improved between Bosnia and Herzegovina, Croatia and Serbia. Bosnia 
and Herzegovina signed an agreement with Cr oatia and Serbia in February and with 
Montenegro in July on mutual recognition and enforcement of court rulings in criminal matters. Under the new agreements , a person convicted of a crim e in one country who flees to 
a neighbouring country can be requi red to serve their sentence in  the country to which they 
fled. Good progress was made in  cross-border cooperation to fight organised crime, 
trafficking and smuggling, but little progress was made towards resolving outstanding issues, 
including border issues, and contributing to re conciliation, which is a European Partnership 
priority. All heads of state from neighbouring countries attended the 15
th anniversary of the 
Srebrenica commemoration.  
Relations with Albania  have expanded. Several bilateral agreements on the fight against 
crime, in particular regarding terrorism, illegal drug trafficking and organized crime, entered into force. A number of agreements were ra tified in areas such as  readmission, investment, 
 
EN 24   EN international passenger and freight transport and visa facilitation. Albania has opened an 
embassy in Sarajevo. 
Relations with Croatia  intensified. The Croatian Presiden t visited Bosnia and Herzegovina 
three times between February and June. He visited war crime sites commemorating victims from all three ethnic groups. A joint session of the Bosnia and Herzegovina Council of 
Ministers and the government of  Croatia was held in June. A bilateral agreement on police 
cooperation was signed in September. Some pr ogress was made on border issues with the 
Inter-state Commission for Border s meeting in July for the first time in several years. No 
progress took place on border demarcation and ag reement on some parts of the land and river 
borders remains outstanding. Use of the Port of Plo če and Croatia’s plans to construct a 
bridge connecting the Pelješac peninsula with the Croatian mainland have been put on hold. 
Other unresolved issues include property and refugee return, and the lack  of ratification by 
Bosnia and Herzegovina of the agreement on dual citizenship.  
Relations with the former Yugoslav Republic of Macedonia  continued to be good. A new 
readmission agreement and an  agreement on cooperation in fighting organised crime and 
terrorism were ratified. An agreement on cooper ation on health matters has been signed, but 
not yet ratified. A declarati on on the Srebrenica genocide wa s adopted by the Parliament. 
Relations with Montenegro  further intensified. Agreemen ts on education, culture and 
readmission were ratified. Several other agreemen ts have been signed, bu t not yet ratified, in 
areas such as science and tec hnology, joint border patrols, cro ss-border traffic and crossing 
points, international passenger and freight road transport and on legal aid in civil and criminal 
matters. Inter-parliamentary cooperation wa s stepped up, with a specific focus on EU 
integration. The Inter-State Border Coope ration Commission met on several occasions 
regarding the delimitation of the border with  Montenegro. However, a full agreement on 
border delimitation is not yet in place.  
Relations with Serbia  improved overall. Serb ia’s parliament adopt ed a declaration on 
Srebrenica, which was welcomed as a significant  step towards reconcil iation. The President of 
Serbia attended the 15th commemoration of th e genocide in Srebrenica. The Speaker of the 
Bosnia and Herzegovina House of Peoples met th e President of Serbia in Belgrade in June. 
An ambassador from Bosnia and Herzegovina to  Serbia was accredited by Serbia in March, 
after a three-year delay. A b ilateral agreement on police c ooperation in areas such as 
organised crime and terrorism was signed in Se ptember. Two protocols intended to strengthen 
cooperation on integrated border management we re ratified. An agreement on culture and 
sport was signed. After an interruption of four years, the Inter-State Cooperation Council for 
the border between the two countries met. The Economic Cooperation Agreement between 
Bosnia and Herzegovina and Serbia entered into  force in April. Republika Srpska continued 
to cooperate closely with Serbia on the basis of  the Special Parallel Relations Agreement and 
the related Protocol on Cooperation.  
There are no official relations with Kosovo ,
12 as Bosnia and Herzegovina has not recognised 
Kosovo as an independent state. The country has not recognised Kosovo passports and little 
progress has been made to set up procedur es for citizens of Kosovo to obtain visas 
comparable to those issued by EU Member Stat es that have not recognised Kosovo. Bosnia 
and Herzegovina does not recognise the Kosovo customs stamps.  
                                                 
12 Under UNSCR 1244/1999. 
 
EN 25   EN Relations intensified with  Turkey , through trilateral meetings, which took place in 2009 and 
2010 between Turkey, Serbia and Bosnia and He rzegovina, as well as Turkey, Croatia and 
Bosnia and Herzegovina. In April 2010, the heads of state of Serbia and Turkey, and the Chair 
of the Presidency of Bosnia and Herzegovina signed a Declaration in Istanbul re-confirming 
the territorial integrity, sovereignty and lega l personality of Bosnia  and Herzegovina. In 
September, the President of Turkey paid a State visit to Bosnia and Herzegovina. An agreement on cooperation in science and technology between Turkey and Bosnia and Herzegovina was signed. 
 
Overall , Bosnia and Herzegovina’s cooperation w ith the ICTY has remained good but its 
capacity to deal with war crim e cases needs to be strengthene d. The country has continued to 
participate actively in regional cooperation. Good neighbourly relations have prevailed, but 
there has been limited progress in addressing  outstanding issues, notably settling border 
disputes, property issues and removing legal obstacles to extradition with neighbouring 
countries. 
3. ECONOMIC CRITERIA  
In examining the economic developments in Bosnia and Herzegovina, the Commission’s 
approach was guided by the conclusions of th e European Council in Copenhagen in June 
1993, which stated that membership of the Un ion requires the existence of a functioning 
market economy and the capacity to cope with competitive pressure and market forces within 
the Union. 
3.1. The existence of a functioning market economy 
Economic policy essentials In January 2010 the authorities submitted their fourth Economic and Fiscal Programme for 
2010-12. The macroeconomic framework presented is more realistic than in  the previous year, 
but still on the optimistic side. The programme  remains fragmented and does not reveal a 
coherent formulation of economic and fiscal policies. It is not fully integrated into budgetary 
procedures and its objectives are not adequately quantified or backed by concrete policy measures. The implementation of fiscal adjustme nt and structural reform measures agreed 
with the International Monetary Fund in the 2009-12 Stand-By Arrangement has been broadly 
satisfactory. The conclusions of both the first and the second programme review were delayed 
due to the slow implementation of  structural benchmarks, in pa rticular in the Federation of 
Bosnia and Herzegovina. In April 2010 th e World Bank approved a Development Policy 
Loan to the country that is linked inter alia  to transformation of the predominantly rights-
based system of social benefits into an incr easingly needs-based system. The Fiscal Council 
failed to adopt the global fiscal framework 20 11-13 within the deadlines prescribed by law, 
reflecting the lack of consensus between the entities and the state on economic and fiscal 
policy. Fiscal surveillance mechanisms based on fi scal rules, a European Partnership priority, 
are not well implemented. The Fiscal Council ha s not met for several months. No progress has 
been made in the development of fiscal surv eillance mechanisms based on fiscal rules, a 
European Partnership priority. The quality  of public spending has remained low. Overall , the 
commitment to structural reforms and sound public finances remained uneven across the 
country. Some fiscal and struct ural reform measures have b een enacted recently under the 
pressure of budgetary imbalances and th e international supp ort programmes.  
 
EN 26   EN Macroeconomic stability 
In 2009, the country endured recession with re al GDP dropping by 2.9% after a 5.7% increase 
in 2008. The economic downturn was mainly caused by a drop in private domestic consumption, falling investments and a contr action of external demand. Trade slowed 
drastically, construction activity and indu strial production d ecreased in 2009 and 
unemployment picked up. Per cap ita income, measured in purc hasing power standards (PPS), 
was 30% of the EU-27 average in 2009, unchanged fr om a year earlier. As  sufficient fiscal 
space had not been created in the years prior to the crisis and high spending commitments 
prevailed, public finances came under severe stress when revenues declined in 2009 as a 
result of the economic contraction, so that the Bosnian authorities had to resort to the 
international community for extern al support. The fiscal adjustme nt measures agreed with the 
IMF and the World Bank for the 2009 and 2010 budgets contributed to a consolidation of 
public finances, while some impor tant structural reforms have been advanced. In 2010 some 
signs of economic recovery can be noted as th e volume of industrial production grew by 1.1% 
year-on-year in the first eight m onths and that of exports by 28.8%. Overall , available 
indicators suggest a mild recovery of the economy in 2010 after the recession of 2009. 
The current account deficit fell from 14.4% of  GDP in 2008 to 6.8% in 2009, driven mainly 
by a significant improvement of the trade balan ce due to a contraction of domestic demand 
which outpaced the contraction of external demand. Hence, the trade deficit fell by 29%, 
shrinking from 38.2% of GDP in 2008 to 27.8% in 2009 (goods only). While exports fell 
annually by 17.6%, the drop in imports was even st eeper at 24.2%. The su rpluses in the other 
components of the current account all dec lined. Remittances dropped by around 20% but, 
nevertheless, transfers still represent the major o ffset to trade within th e current account. The 
current account deficit was mainly financed by ne w loans from abroad and, to a lesser extent, 
by foreign direct investment. 
The trade balance continued its improvement in 2010 and the deficit fell by 10% year-on-year 
(January-August). Unlike in 2009, this developmen t was driven by exports, which soared by 
28.8% y/y, while imports increased moderately  by 7.7%. However, the trend of an improving 
trade balance was reversed in recent months when the trade gap widened again for the first 
time in 20 months. Agriculture and manufacturing were the ma in sectors recording export 
growth. As a result, the current account deficit fell by 37.3% year-on-year in the first half of 
2010. Bosnia and Herzegovina’s external public  debt increased by 22.6% in 2009, mainly due 
to the disbursements made in the context of  the IMF programme and the activation of an 
optional debt to the London Club in Decembe r 2009. In terms of GDP it increased from 
17.2% to 21.8%. In the first ha lf of 2010, public foreign debt rose by another 13%. Public 
international creditors account for 88% of the country’s foreign debt. The largest creditor 
remains the World Bank group. Official foreign ex change reserves have remained relatively 
stable since the last quarter 2009, co vering around six months of imports. Overall , external 
imbalances have continued to adjust, characterised by a significant narrowing of the current 
account deficit towards a more sustainable level. 
The average unemployment rate in 2009 was ve ry high at 24.1%. According to the Labour 
Force Survey conducted annually in May, unemp loyment significantly increased to 27.2% in 
2010 from 24.1% in 2009. Measured according to the national registry, the rate was 43.2% in July 2010. It was particularly high among the young population (48.7% for people between 15 and 24). The sector most affected by risi ng unemployment in 2010 was the processing 
industry. On the other hand, the highest growth of employment was registered in financial 
intermediation and transport. Workers were laid  off mainly in the private sector while the 
 
EN 27   EN number of employees in the public administration increased by 1.6% year-on-year in 2010 
(January-July). After th e very high wage increases of pr evious years, no minal gross wages 
still rose by 3.4% in 2009, but then decrease d by 0.5% in 2010 (until July). Structural 
rigidities such as the high rates of social c ontributions and low labour mobility continue to 
hamper job creation and labour market participa tion. High and poorly targeted social transfers 
reduce the propensity to work, furt her highlighting the need for re form of the social benefits 
system. Overall , labour market conditions remained fragmented and rigid. 
Annual inflation was negative in 2009, reach ing -0.4%, down from 7.4% in 2008. The 
disinflationary trend was mainly driven by falls  in transport, energy and food prices. This 
downward pressure was, however, reversed in  early 2010. Annual inflation rose to 1.7% in 
August, bringing the 12-month moving average infl ation rate up to a moderate 1%. Inflation 
in 2010 is driven by a hike in excise duties on tobacco and alcohol, as well as transport and 
communication costs following international pric e developments. The monetary policy of the 
Central Bank continued to be conducted under a cu rrency board arrangement , with the euro as 
the anchor currency. Monetary policy settings have remained unchanged since May 2009 after 
minimum reserve requirements had been lowered in several steps from October 2008 in order 
to boost the liquidity of  the banking sector during the fi nancial turmoil. The monetary 
aggregate M2 increased by 9.5% y/y in August. Overall , the currency board has continued to 
function well and monetary and financial stability  have been preserved while inflation slowly 
picks up. 
The fiscal situation of Bosnia and Herzegov ina worsened significantly in 2009. The share of 
general government in GDP remains high, with 2009 revenues at 43.1% of GDP and 
expenditures (including net lendi ng) at 47.6%, thus creating a budget deficit of 4.4% of GDP 
in 2009 (2.2% in 2008). Following the agreement on a Stand-by Arrangement with the IMF earlier in the year, the Federation revised its  budget three times in 2009 and Republika Srpska 
twice. The 2010 budgets were dominated by a furthe r need for fiscal consolidation, mainly 
through a reduction of current expenditures. Substantial savings were envisaged in the public sector wage bill and in transfers due to the elimination of special unemployment benefits for demobilised soldiers, the implementation of e ligibility audits for civil and war benefit 
recipients and strict control over pensions pr ovided on favourable terms. The state level froze 
wages in 2010. After initial de lays, the Federation advanced the reform agenda over the 
summer: The parliament adopted a new civil serv ice wage law at the end of July rationalising 
the wage bill by inter alia  consolidating a large number of al lowances into the base wage. The 
government approved a pension reform strategy  which however was later withdrawn from 
parliamentary procedure. Eligibility audits of privileged pension and war disability benefit 
recipients started in July, al beit slowly. The Federation al so rebalanced its budget in 
September 2010 in order to apply with IMF requirements and to account for increased revenues. In Republika Srpska wages in public administration were cut by 10% (and 15% for 
the highest paid employees). An eligibility audit for social transfers was conducted in 
Republika Srpska, reducing the number of beneficiaries.  
In the first half of 2010, deficits remained below those targeted in  the IMF programme, 
mainly due to improved revenue collection (i ncreasing by 2.9% year-o n-year). As regards 
indirect taxes, this increase resulted mainly from the growth of revenues from excise duties 
and road tolls, which had both been increas ed in the context of the IMF programme. 
Collection was nevertheless still lower than in  the pre-crisis period (first half of 2008), 
especially VAT, where there has been no change of taxation policy. As regards direct taxes, the highest increase was registered in corporat e profits tax. Expenses increased by 3.1% year-
on-year in the first half of 2010. Current  spending dominates the budgets with wages 
 
EN 28   EN accounting for 29% of overall expenditure and so cial benefits for 38%, both marginally lower 
in relative terms than in 2009. While the wage cuts  resulted in a decrease of the nominal wage 
bill by 2.2%, social benefits were still rising by 2%. An agreement on a permanent formula for the allocation of indir ect tax revenues to the stat e, the entities and the Br čko District is still 
pending. The Fiscal Council failed to adopt th e global fiscal framework for 2011-13 within 
the deadlines prescribed by law. Overall , budgets are still not self -sustaining and depend on 
international support, especially in the Federati on, even though the state of public finances is 
improving. The pace of implementation of fiscal adjustment and structural reform measures 
agreed in the context of the interventi on by the international community is uneven. 
General government debt, both domestic and fore ign, stood at approximately 35% of GDP in 
2009, up from 28% in 2008. The total amount of do mestic public debt is  still subject to 
verifications related to old foreign currency sa vings and wartime claims. Nevertheless, it was 
estimated at around 13% of GDP in 2009 (up fr om 11% in 2008). Domestic public debt is 
managed and served by the entities (50.7% Federation, 47.1% Republika Srpska, 2.2% Br čko 
District). Both Republika Srpska and the Federation continued issuing bonds in 2009 and 
2010 to service the debt. The government of th e Federation amended the debt law allowing 
local authorities to issue municipal bonds as already practised in Republika Srpksa. Overall , 
even though the debt-to-GDP ratio  is still relatively moderate, its recent growing trend needs 
to be monitored carefully. 
The sharp economic downturn of 2009 revealed th e vulnerabilities of the country’s growth 
model relying on externally financed consump tion, thus creating large external imbalances. 
The productive capacity and the competitiveness of the economy remain weak as domestic sources of growth are not adequately exploite d and national saving is too low. The currency 
board arrangement enjoys a high level of confidence and credibility, while fiscal policy decisions remain erratic, in pa rticular in the Federation, which undermines their reliability and 
predictability, despite adjust ments and reforms pursued under the international support 
programmes. Overall , the viability of macroeconomic pol icies suffered from the structural 
weaknesses of public finances, even though extern al imbalances have improved and financial 
and monetary stability has been preserved. 
Interplay of market forces 
The private sector’s share in GDP  is estimated to have remain ed stable at around 60% of GDP 
in 2009. In Republika Srpska around 69% of the in itial stock of state-owned capital intended 
for privatisation had been sold by May 2010, prac tically unchanged from a year earlier. After 
a series of failed privatisation deals the priv atisation agency of the Federation developed a 
revised action plan for 2009-10, including the priva tisation of the entire public share in eight 
companies. However, the main public enterprise s in the Federation, including the two telecom 
operators, are not covered. Progre ss on the plan is very slow a nd several auctions have failed 
as they did not attract interested parties. The privatisation of an 88% share in the aluminium 
company Aluminij d.d. Mostar, one of the largest enterprises in the country and a key source 
of export revenue, which had been pending for more  than three years, was declared to have 
failed. The value of the state’s capital in public  enterprises in the Federation has fallen in 
recent years, as many were inefficiently managed, recorded losses and are indebted towards the entity’s budget, which also limits the scope fo r successfully privatis ing them. Most prices 
are liberalised even though a number of administered prices remains. Overall , the 
privatisation process did not advan ce for a second consecutive year. 
Market entry and exit 
 
EN 29   EN During 2009 the court registration process for co mpanies registering for the first time was 
shortened from 5-45 days to 5-20 days; an electronic a pplication form for company 
registration was made available on the web page s of some courts. However, companies must 
still register in both entities if they want to  do business in the whole country, and procedures 
remain different. The law on foreign investment  policy was amended in order to shorten the 
lengthy procedure for starting a foreign-owned business (on average 83 days in 2009). The 
requirement to register foreign direct investment with the Stat e Ministry of Foreign Trade and 
Economic Relations has been removed; only regi stration with local courts is now required. 
Republika Srpska established five specialised commercial courts responsible for resolving 
commercial lawsuits, bankruptcy and insolvency procedures, and registration of companies. 
The transfer of numerous cases from the m unicipal courts to these newly established 
commercial courts is expected to speed up a nd harmonise business-related legal proceedings. 
Republika Srpska reduced the time for the completion of bankruptcy proceedings to one year for companies with assets of less than €2.5 m illion, and to two years for larger companies. 
The respective legislative amendments also incr eased the threshold for the appointment of a 
bankruptcy administrator to €2.5 million, compar ed to €0.5 million before. The ‘legislative 
guillotine’ project to reduce administrative burdens has been completed in Republika Srpska. 
In the Federation, the parliament amended 34 laws  in July 2010 initiatin g the second stage of 
this regulatory reform, simplifying and streamlin ing 35 priority administrative procedures. 
Businesses nevertheless continue to suffer from  political instability, the high tax burden, and 
slow contract enforcement and business registration procedures. Overall , some improvements 
in the business environment can be recorded, particularly in Republika Srpska, but reforms 
are not sufficient to substantially fo ster private sector developments. 
The legal system 
No material improvements can be recorded as regards the comple x and challenging legal 
environment in Bosnia and Herzegovina. While in  some areas the standard of legislation is 
relatively high, the practical implementation and a pplication of laws is often poor due to the 
weak enforcement capacity of key instituti ons. A law on commercial arbitration does not 
exist. The rule of law is weak, notably the ju dicial system often does not function efficiently, 
is subject to obstruction by th e parties and does not cover commercial activities adequately. 
Property registers are largely unreliable. Overall , weak rule of law, prevalent corruption and 
unreliable contract enforcement continue  to hamper the business environment. 
Financial sector development  
The financial sector in Bosnia and Herzegovina is dominated by banks that mainly engage in 
traditional credit and savings activities. The share of claims to the private sector in relation to 
GDP stood at around 58% in mid-2010, up from 54% a year earlier. 30 banks operate in the 
country, of which 21 are in foreign ownership, seven in domestic private ownership and two 
majority state-owned, unchanged from a year ear lier. The concentration of the banking sector 
remained at nearly the same level as in 2008; th e five largest banks controlled almost 60% of 
total assets of the ba nking sector. Banks with foreign owne rship accounted for more than 90% 
of the total banking system a ssets in 2009, even t hough they reduced thei r exposure towards 
Bosnia and Herzegovina by 9%, experienci ng some difficulties in maintaining their 
commitments under the European Banking Coordination Initiative
13 due to the lack of credit 
                                                 
13 Bosnia and Herzegovina was included in the European Banking Coordination Initiative, coordinated by 
the EBRD, the IMF and the European Commission, in mid-2009. Foreign banks active in the country 
 
EN 30   EN demand and of available instruments to inve st excess liquidity (e .g. lack of government 
treasury bills and bonds). Banki ng sector assets increased  somewhat in 2010, by 2.6% 
(August compared to December 2009). The capital adequacy ratio fell from 16.1% at the end 
of 2009 to 15.1% in the second quarter 2010, still comfortably above the legal minimum of 
12%, which itself is significantly higher than  the 8% required in the Basel II accord.  
The aggregated net profit of  the banking sector declined by 70% in 2009. Nine banks 
recorded losses. Following the economic downturn w ith a lag, the quality of the loan portfolio 
is deteriorating: The share of  non-performing loans to total loans more than doubled from 4% 
in mid-2009 to 8.7% in the second quarter 2010, th e highest level since 2004. However, this is 
not only due to an increasing volume of non-performing loans,  but also to the decreasing 
volume of total loans. Banking profitability indicators have also worsened: The return on 
average equity turned negative in the second quarter 2010, decreasing from 1.3% in mid-2009 
to -2.9%, its lowest level since 2002. The return  on average assets fell from 0.1% to -0.3%. 
Liquidity indicators remained relatively stable with  the rate of liquid to total assets rising from 
28.5% at mid-2009 to 29.5% in th e second quarter 2010, and li quid assets to short-term 
financial liabilities marginally  falling from 49.5% to 49.3%. The situation was worse in the 
micro-finance sector, where the proportion of poor  quality loans had risen to 20% as it was – 
contrary to its tradi tional role – heavily engaged in consumer lending. To improve the 
oversight of this sector, it has been brought under the supervision of  the Banking Agencies 
and the credit register. A Sta nding Committee for Financial Stab ility, comprising the Central 
Bank, the Banking Agencies and the Ministries of Finan ce, was established in the context of 
the IMF programme and had its first meeti ng in May 2010. The limit on guaranteed bank 
deposits was further increased to ar ound €18,000 (from around €10,000) as of April 2010. 
Overall , despite an interruption of banking sector growth, lower profitability and a 
deterioration in asset quality, financial stability was safeguarded. 
Annual credit growth turned slightly positive ag ain reaching 0.6% in August after it had been 
negative since September 2009, confirming the upw ard trend of recent months. Loans to 
households continued to drop (by 3%), though at a decreasing pace, but those to private 
enterprises were growing by 2.2%. Deposits rec overed in an annual comparison, growing by 
6.5% in August, a clear sign of  the return of c onfidence in the banking sector. This 
development is mainly due to private house holds, which increased their savings by 14.1%, 
while the corporate sector increased its de posits by 8.6%. As a consequence of these 
developments, the loans-to-deposit ratio d eclined from 118.7% in September 2009 to 111.4% 
in August 2010. The spread betw een average loan and deposit interest rates of commercial 
banks increased by 26 basis points in the firs t quarter 2010 to a level of 7.96 percentage 
points, due to lower deposit rates. This leve l points to still high intermediation costs. Overall , 
the difficult economic environment has caused mark et agents to become more risk-averse.  
Local stock markets continued to decline. Th e main index of the Sa rajevo Stock Exchange 
lost 15% in the first three qua rters of 2010; that of the Banj a Luka Stock Exchange fell by 
13.5%. The cumulated turnover at Sarajevo fell by 47% in the first three quarters of 2010 
compared to the same period in 2009; at Ba nja Luka the drop was far less pronounced at 
1.3%, but this figure is blurred by one majo r emission in July. The combined market 
capitalisation declined to ar ound 44% of GDP from rates at around 50% in 2009 and 100% in 
2008. The insurance sector remained small and re latively weak. Its growth lost pace in 2009 
                                                                                                                                                         
committed — on a voluntary and non-legally binding basis — to maintain their exposure at the level of 
December 2008 throughout the dura tion of the IMF programme.  
 
EN 31   EN when it decelerated to 1.35% (a nnual growth of premiums). The market was dominated by the 
non-life insurance segment, which accounted for 85% of the total. 26 companies were active 
on the market in 2009, two more than in the previous year. Overall , financial intermediation 
by the non-banking sector remained shallow. 
3.2. The capacity to cope with competitiv e pressure and market forces within the 
Union 
Existence of a functioning market economy While external imbalances have been decreasing, fiscal imbalances are still high despite short-
term adjustment measures undert aken in the context of the international support programmes. 
The reform of the system of social benefits contributes to fiscal consolidation and better 
targeting of benefits to those really in need. However, its sluggish implementation, the still 
slow pace of economic restruct uring, especially in the Fede ration, prevailing obstacles to 
private sector development and the excessive influence of th e public sector in the economy 
continue to undermine a more gr owth-oriented alloca tion of resources and a strengthening of 
domestic sources of growth. Progress towards creating one single economic space within the 
country, a key European Partnership priority, has been limited. Coordination on economic and 
fiscal policies has been insufficient. Overall , the functioning of market  mechanisms remained 
hampered by distortions, an excessive role  of the state and lack of competition.  
Human and physical capital  
Information on the endowment of human capital remains scarce. The law on vocational 
education has been adopted, but  not yet implemented. So far,  cooperation between vocational 
education schools and employers is only pro form a and the profile and number of graduates 
coming out of the vocational and educational tr aining system often does not correspond to the 
employers’ needs. A curriculum for a nine-year  education in all primary and secondary 
schools country-wide was implemente d as of the school year 2009/10. Overall , structural 
rigidities and the weak performance of the educa tion system, in particular delays in reforms of 
vocational education, co ntinue to contribute to the skills mismatch, hampering the proper 
functioning of the labour market. 
The ratio of investment to GDP dropped signi ficantly from 24.4% in 2008 to 19.1% in 2009. 
Investment in road and rail infrastructure continued, in pa rticular on corridor Vc. The 
‘Railway Package II’ di rectives on rail safety have been partly implemented through the 
issuance of safety instructi ons by the Bosnia and Herzegovi na Railways Regulatory Board. 
The railway companies of the Federation and Republika Srpska joined those of Slovenia, 
Croatia and Serbia establishing a regional railway  alliance. The reform in accordance with the 
Addendum to the Memorandum of Understandi ng on the development of the South-East 
Europe Core Regional Transport network for a South-East European railway transport area 
has not been completed. Net foreign direct i nvestment (FDI) flows dropped by more than 70% 
in 2009, falling to 1.4% of GDP. There were cons iderable outflows of FDI in the financial 
sector. Manufacturing and trade acc ounted for more than 80% of FDI inflows. In the first half 
2010 net FDI actually turned negative. Overall , the upgrading of physical infrastructure 
continued, though at a slow pace. 
Sector and enterprise structure 
 
EN 32   EN The planned restructuring and liquidation of soci ally-owned enterprises has made only slow 
progress. The entry of foreign investors has completed the priv atisation and liberalisation of 
the oil derivatives market.  
Electricity and gas utilities continue to be public stock companies. Their unbundling and 
restructuring has not been completed yet. In  the Federation, the country’s biggest power 
utility company merged with seven coal mines in  2009. It now needs to inject capital into the 
mines for their modernisation a nd restructuring. Market liberalis ation remains insufficient as 
most utility providers still do not apply mark et prices. Although the market was opened for 
non-household consumers, they have  little incentive to  change suppliers as regulated tariffs 
remain below market prices.  
As for unbundling of the electrici ty networks, progress has been  uneven across entities. 
Republika Srpska completed unbundling of genera tion from distributi on and supply in 2008, 
but has not yet unbundled the latter two activities. In the Federation no unbundling has 
occurred so far.  
Progress towards a competitive telecommunications market has been limited. The incumbent 
operators continue to act as de facto monop olies in their respective fixed-line market 
segments and as oligopolists in the mobile segment. As a result,  new entrants have not gained 
traction. Overall , little progress was achieved in the lib eralisation of network industries. 
As a consequence of the economic crisis a small shift in the sectoral structure of the economy 
towards services could be discerned in 2009, in particular at the expense of industrial 
production. Services accounted for 65% of gross value added (up from 63.7% in 2008), industry and construction fo r 26.2% (27.5%) and agricu lture for 8.9% (8.8%). The 
contribution of public administration, education and health, already at a high level, further 
increased to 22%. The informal sector, fuelled by weaknesses in tax a nd expenditure policies, 
as well as in law enforcement, including the fight against corruption and organised crime, 
remains large. It reduces the tax base and the effici ency of economic policies. Overall , there 
have been no major changes in the structure of the economy. The informal sector is an 
important challenge. 
State influence on competitiveness 
The large public sector absorbs significant parts of the labour force and continues to act as a 
wage setter. However, while in previous years high wage increases hampered the 
competitiveness of the Bosnian economy, the r ecent reductions in public sector wages can 
have a reverse effect. In 2009, direct budget subsid ies to industry and agriculture increased to 
a consolidated 1.7% of GDP from  1.5% in 2008. In the first ha lf of 2010, they increased by 
16.8% annually. Indirect subsidie s continue to be sizeable. Bo snia and Herzegovina has still 
not established a state aid au thority as required by Article 36 of the Interim Agreement. 
Overall , state influence on competitiveness remains high.  
Economic integration with the EU 
Bosnia and Herzegovina remains an open economy  even though total trade (added volume of 
exports and imports) declined significantly in 2009, falling from around 94% of GDP in 2008 
to approximately 76%, mainly due to the steep  drop in imports. In 2009, the real effective 
exchange rate based on the country’s 20 largest trading partners depreciated marginally. The 
EU continues to be the larges t trading partner, with shares  of 54.5% of total exports and 
 
EN 33   EN 45.9% of total imports in the first eight m onths of 2010 (goods only). While the share of 
exports to the EU has increased slightly, the share of imports ha s decreased slightly. The other 
main trading partners remain the countries  of the CEFTA region, accounting for 33.9% of 
exports and 26.9% of imports. The share of net FDI inflows from the EU to total net FDI 
inflows decreased to 24% in 2009 from 55% in  2008, mainly due to net FDI outflows in the 
financial sector caused by constraints in  the home markets of some parent banks. Overall , the 
level of integration of trade with  the EU remained fairly high. 
4. EUROPEAN STANDARDS  
This section examines Bosnia and Herzegovina’s capacity to gradually approximate its 
legislation and policies with the acquis in the areas of the internal market, sectoral policies 
and justice, freedom and security, in line with  the Stabilisation and Association Agreement 
(SAA) and the European Partnership priorities. It also analyses Bosnia and Herzegovina’s 
administrative capacity. In each sector, the Commission’s assessment covers progress 
achieved during the reporting period, and summ arises the country’s overall level of 
preparations. 
4.1. Internal market 
4.1.1.  Free movement of goods 
There has been some progress in the area of free movement of goods. 
Some progress can be reported in the field of standardisation . The Institute for 
Standardisation of Bosnia and Herzegovina (BAS) adopted 2.053 European standards (ENs) 
as national standards, bringi ng the total to 11.279 ENs. Altogether there are 50 technical 
committees. The BAS increased its human resources.  It was certified in accordance with the 
EN ISO 9001:2009 standard. The BAS signed agreements on professional and technical 
cooperation with the Turkish Standardisation In stitute and the Croatian Standards Institute.  
There has been little progress in the area of conformity assessment . Five New Approach 
Directives, including the releva nt conformity assessment proce dures, have been transposed. 
However, conformity assessment is not being performed on all locally manufactured or imported products before they are released onto the market. There is no coherent system for 
verifying product conformity. Appropriate desi gnation procedures for conformity assessment 
bodies remain to be established. Preparations to set up a homologation system for vehicles 
have been launched; nevertheless, the continuou s ban on the import of used motor vehicles is 
contrary to the Interim Agreement and needs to be removed. 
Some progress can be reported  in the field of accreditation . The Institute fo r Accreditation of 
Bosnia and Herzegovina (BATA) granted four further accreditati ons for testing laboratories, 
resulting in a total number of 39 accredited bod ies. The BATA's application to sign bilateral 
agreements with the European co-operation for Accreditation (EA) for testing and calibration 
laboratories and inspection bodies was accepte d. In addition, the BATA signed bilateral 
cooperation agreements with th e accreditation bodies of Hungary and the former Yugoslav 
Republic of Macedonia. However, the BATA does not have sufficient staff to develop 
accreditation schemes in areas where it is not active. The further conditions for future international recognition of testing and calibra tion results and certification remain to be 
fulfilled.  
 
EN 34   EN Some progress has been made in the area of metrology . The State-level Institute of Metrology 
was granted full membership of the European  Association of National Metrology Institutes 
(EURAMET). The Institute signed a memorandu m of understanding with  the International 
Association of Assay Offices and bilateral ag reements with the national metrology institutes 
of Germany and Austria. Despite a staff increase the Institute needs further human resources to fulfil its tasks.  It was certified in accordance w ith the EN ISO 9001:2008 standard.  
However, legislation needs to be harmonised with the acquis . The procurement of new 
equipment to upgrade the metrology infrastructu re remains to be finalised. The strategy for 
the development of the metrology system remains to be adopted. There is still no cooperation and coordination between the State-level Inst itute of Metrology and metrology institutes of 
the Entities which would help create harmonise d competence criteria for laboratories dealing 
with verifications.  
Little progress ha s been made on market surveillance . A law on general product safety and a 
law amending the law on market surveillance as well as implementing decisions restricting 
the placing on the market of produ cts containing the biocide di methylfumarate were adopted. 
The structure of the market surveillance syst em of the State-level Market Surveillance 
Agency remained unchanged; the number of staff increased but remained well below the 
required level. The Market Surveillance Agency became an authorised publisher of RAPEX 
notifications in the official languages of Bosnia and Herze govina. However, the framework 
legislation is not yet based on the horizontal acquis  for harmonised products. Despite the 
progress made, the market surveillance system remains largely based on mandatory standards 
and pre-market control. Coordination among the re levant bodies is inadequate. Further efforts 
need to be made regarding institutional and administrative capacities to ensure efficient 
market surveillance. Additional measures ar e needed for further alignment with the acquis .  
Little progress has been made rega rding the New and the Old Approach  acquis . New 
Approach Directives on low voltage equipmen t, electromagnetic compatibility, machinery, 
lifts and personal protective equipment have been transposed. However, the division of 
responsibilities for trans posing the Old Approach acquis  remains to be further clarified to start 
approximation of legislation. Line ministries and institutions involved in transposing and 
implementing directives do not have sufficient capacity to perform these tasks. A suitable 
mechanism is needed for internal consulta tion before the adoption of new technical 
regulations that have  an impact on trade. 
There has been some progress in the area of consumer protection . The Ombudsman’s office 
was sufficiently strengthened to fulfil the dut ies laid down by the consumer protection law. 
The efficiency and the output of the office increased. In 2009 the Ombudsman handled 241 cases, of which 229 were resolved, compared  with 147 and 138 respectively in 2008. In 2009, 
the Ombudsman delivered 34 expert opinions , provided 620 items of legal advice and 
answered 1,764 requests for information. The Consumer Protection Council adopted the 2010 
State-level annual consumer pr otection programme. However, the ministry allocated no 
budget for the implementation of the programme.  
Overall , preparations in the fields of standard isation, accreditation, co nformity assessment, 
metrology, market surveillance and consumer protection are moderately advanced. The 
creation of favourable conditions for the inte rnal market and foreign trade, further 
strengthening of institutional and administrative capacity as well as closer cooperation and 
coordination among the relevant ministries and institutions are essential. Further efforts 
remain to be undertaken to achieve a fully functional, single economic space, which is a European Partnership priority. 
 
EN 35   EN 4.1.2.  Movement of persons, services  and right of establishment 
No progress has been made in the area of movement of persons . The fragmented nature of 
internal labour legislation and social security systems, which differ between the Entities as 
well as among cantons, continues to hamper th e movement of workers within the country. 
Alignment with European standards remains at an early stage.  
No progress has been made in reforming the coordination of social security  systems between 
the Entities and among cantons.  
Little progress was achieved in the provision of services . Preparations have not yet started for 
transposing the Services Directive. In terms of  cross-border services, there is no distinction 
between the treatment of EU operators providi ng cross-border servi ces and those providing 
services through a permanent es tablishment in the country.  
Little progress can be reported in the area of financial services . The State-level Law on 
deposit insurance was amended to increase furt her the amount of guaranteed deposits. This 
law remains to be transposed at Entity-level. The Entities proceeded separately and at a different pace with the adoption of the Base l II capital measurement rules and capital 
standards. The Federation of Bosnia and He rzegovina Banking Agency adopted implementing 
legislation on market risk. Republika Srpska adopted decisi ons on operational and market 
risk. Temporary measures on loan repayments were adopted by the Entities’ banking 
supervisory agencies to address the increase in non-performing loans resulting from the economic crisis. To improve coordination of  banking supervision, the Central Bank and 
Entity supervisors established a standing committee for financial stability. However, no further steps were taken to transpose the acquis or to establish a single State-level agency for 
banking supervision. Memorandums of understand ing with supervisors of foreign banks 
present in the country were not signed.  
There has been little pr ogress towards creating a single economic space for insurance 
services . An insurance company registered in one En tity can operate in the other only if it 
establishes a branch there. There are currently 26 insurance companies operating in Bosnia and Herzegovina. Of the 15 insurance companies registered in the Federation, 9 have branch 
offices in Republika Srpska and 5 of the 11 insurance companies registered in Republika Srpska have branches in the Federation.  
The Federation amended the law on intermediati on in private insuranc e and the transitional 
provisions of the law on insurance companies in private insurance. The Republika Srpska 
amended the legislation on intermediation in insurance and on insurance companies. The legislation is partially harmonised with the acqui s and between the entities. Various pieces of 
implementing legislation in the field of insu rance have been adopte d. The Republika Srpska 
Insurance Ombudsman’s office is functional. In th e Federation, the insurance agency is acting 
as Insurance Ombudsman as s tipulated by the consumer protection law. However, no 
insurance ombudsman’s office is en visaged at the State-level.  
In coordination with Entity insurance agencies  and with international support, the State 
Insurance Agency completed an insurance s upervision self-assessment for the sector. The 
management board of the Agency adopted a d ecision regulating the subm ission of statistical 
data by the Entity insurance supervision agencies. Implementation of the decision will facilitate compilation of insurance statistics at the State-level. Nonetheless, the Agency’s role remains limited as the responsibility for licen sing and supervision li es with the Entity 
 
EN 36   EN agencies. Supervisory enforcement improved mo derately, resulting in one insurance company 
in the Federation being placed under temporary ad ministration. The agenci es in the Entities 
increased their on-site inspections and recomm endations, and pressed a number of charges 
against insurance operators. In  Republika Srpska the licence of one company was revoked.  
Little progress can be re ported in the field of leasing services , which are regulated at Entity-
level. The two Entity laws have been harmonised. However, divergences remain in the implementing legislations. A leasing operator regi stered in one Entity is required to establish 
a branch in the other to provide services. Diffe rences in regulations impose additional costs on 
operators.  
There has been little progress in the area of capital markets . Republika Srpska amended its 
legislation on acquisition of shareholding comp anies, and both entities have adopted some 
implementing legislation. Regulatory authority and oversight remain fragmented between the 
Entity-level securities commissions. A harmoni sed approach throughout the country towards 
developing the sector is needed. Institutional arrangements for coordination of policies and regulations between the Entities remain to be established.  
Little progress can be re ported in the field of postal services . Current provisions provide for 
an unclear definition of the de jure  monopoly and, among others, include express services 
within the scope of the statutory monopoly. In Republika Srpska a new law on postal services 
was adopted. It reserves a si gnificant share of postal services for the universal service 
provider, whilst otherwise following the main principles of the postal acquis. Several licences 
for courier services were issued in both Entities. However, Entity-level licensing remains an additional and unnecessary administrative burd en for postal service providers and runs 
counter to the goal of a single economic space. Effective monitoring mechanisms need to be 
put in place. The issue of the scope of the rese rved areas remains to be solved, as under the 
current legislation it is not al ways clear what services may be reserved under the statutory 
monopoly. 
No progress has been made in the area of the right of establishment . Administrative 
procedures for licensing and ob taining permits for both foreign and domestic companies, as 
well as the self-employed, need to be st reamlined. The absence of a single company 
registration system for the entire country cont inues to hamper business activity. Bosnia and 
Herzegovina made no progress towards recogni tion of EU professiona l qualifications.  
Little progress has been made in the area of company law . Amendments to Entity company 
laws were adopted to improve inspection and permit processes. However, coordination is 
lacking. Bosnia and Herzegovina needs to implement systematic company registration 
procedures. Some procedures have  been harmonised, but there is  no system of data sharing 
among different company regi sters. The legislation on accounting and auditing  remains to be 
further harmonised with the acquis .  
Overall , preparations in the area of movement of persons, services and ri ght of establishment 
are at an early stage. Little progress was ma de in simplifying the business environment and 
ensuring a harmonised framework across the count ry in the area of company law, accounting 
and auditing. More efforts remain to be unde rtaken to establish the legal framework for 
providing universal postal se rvices across the whole countr y. Further simplification of 
company registration and court procedures woul d attract new investments. Few efforts have 
been made towards ensuring a single economic space, a European Partnership priority. 
 
EN 37   EN 4.1.3.  Free movement of capital 
There has been some progress in the area of free movement of capital .  
Bosnia and Herzegovina continues to apply rela tively liberal rules on inward capital flows. 
Restrictions remain on outward transfers by re sidents. Residents may hold accounts abroad, 
but the amounts that may be transferred ar e limited. The Federation adopted a new law on 
foreign currency operations. The Republika Srpska  amended its existing law. However, in 
both Entities the new legislation limits th e amount that non-residents may transfer. 
Throughout the country, coordinatio n in designing and implementi ng legal reform in this area 
is lacking and the legal framework is not harmonised. Capital markets in Bosnia and Herzegovina are not fully functional.  
The State-level Law on foreign investment  policy was amended. The procedures for 
registration of foreign direct investment were streamlined; companies are now required to 
register only with district cour ts. However, restrictions on fore ign direct investment continue 
to apply in the media sector, where a 49% limita tion on foreign capital exists. Privatisation of 
state enterprises continues to be slow. Overall levels of foreign invest ment have decreased.  
Within the Central Bank, Bosnia and Herzegovina has a modern payment system  for giro 
clearing and real-time gross settlement operation s. In 2009 giro clearing and real-time gross 
settlement operations represented 31% of the number of transact ions and 42% of the value of 
internal traffic in the country. Within the co mmercial bank system they represented 69% of 
the number of transactions and 58% of the value of transactio ns between clients with accounts 
in the same bank.  
Overall,  preparations in the area of free move ment of capital are m oderately advanced. 
Further legislative initiatives are required in order to align the legal framework with the 
acquis and to ensure country-wide harmonisa tion and the creation of single economic space. 
4.1.4.  Customs and taxation 
Progress has been limited in the field of customs . The customs tariff was fully harmonised 
with the EU Combined Nomenclature 2010, whic h Bosnia and Herzegovina applies. Rules on 
origin are used in accordance with the Interim Agreement, a nd operational instructions have 
been prepared. However, the customs law has ye t to be revised regarding issues such as 
paperless environment, securi ty and trade facilitation.  
The regime on free zones remains to be aligned with the acquis , since it provides for an 
exemption from duties on equipment intended fo r production activities in the free zones.  
The TIR procedure is fully operational, and Bosnia and Herzegovina has acceded to the 
Istanbul Convention on temporary admission of goods . However, the use of the ATA carnet is 
not yet implemented. Laws on intellectual prope rty rights (IPR) have been adopted and the 
first results are visible. A law to clarify the ro le of the customs services in implementing and 
enforcing IPR remains to be agreed.  
The capacity of the customs authority to appl y simplified procedures for export and import 
has improved. However, the number of traders appl ying for authorisation is  relatively small. 
Customs controls remain too frequent and not well targeted owing to  the lack of a risk 
analysis system. Enforcement of inte llectual property rights remains weak. 
 
EN 38   EN Some progress can be re ported in the area of taxation . Double taxation agreements were 
signed with Ireland, Spain and the Czech Republic . Direct taxation remains in the exclusive 
jurisdiction of the Entities and Br čko District. The direct taxation systems of the Entities were 
partly harmonised. The  Federation's law on income tax a nd implementing legislation were 
amended. However, discrepancies with regard to double taxation persist between tax laws of 
the Entities on the one hand and the Br čko District on the other. A permanent formula for 
allocation of indirect tax revenue among the State, Entities and the Br čko District remains to 
be agreed. Further alignment with EU VAT rule s needs to be ensured. In the area of business 
taxation, some measures do not comp ly with the Code of Conduct.  
As regards administrative and operational capacity , the ITA’s organi sational structure 
needs strengthening to address present and fu ture challenges. Some progress was made on 
enforcing legislation, but furt her steps are essential. A s ubstantial number of junior 
professionals have been recrui ted. However, the appointment of  a director-general remains 
pending and a formal staffing plan is not in place. 
The 2010 investment plan provides for improvement  of office premises and investment in the 
maintenance of technical equipment. The ITA a dopted business and IT st rategies in the past 
but these are outdated and do not reflect EU standards. Furthermore, implementation of 
strategies continues to be delayed owing to a lack of resources. A training unit was 
established, but the trai ning facility needs to be set up, and a training strategy to be developed. 
Advanced training on risk analys is and IPR enforcement as well as training for the customs 
laboratory remains to be delivered. 
Cooperation and coordination within the ITA a nd with other authorities remain weak. The 
ITA is not sharing data with the Agency for Statistics of Bosnia and Herzegovina. The effectiveness of border crossing checks needs to  be improved. The functionalities of customs 
laboratories remain limited. The IT system ca nnot cope with the necessary changes in 
customs and tax administration, such as simplific ation, risk analysis, integrated enforcement, 
local clearance, the guarantee procedure and e-government.  
Overall, preparations in the areas of customs and taxation are not very advanced. Substantial 
efforts are required to further al ign customs legisl ation with the acquis  and to ensure effective 
implementation of legislation and the Interim Agreement. Positive developments are the improved knowledge and use of the use of rule s of origin, the implementation of the TIR 
Convention and the accession to  the ATA Convention. However, the regime on free zones 
needs to be aligned with the acquis . The effectiveness of customs controls has to be improved. 
Further efforts will be needed to enforce the recently enacted IPR legislation. Further 
harmonisation regarding the VAT le gislation is essential. The ITA’s administrative capacity 
needs to be reinforced. Improved communication and cooperation is esse ntial, particularly 
between the ITA and the Agency for Sta tistics of Bosnia and Herzegovina.  
4.1.5.  Competition 
Some progress can be re ported in the field of anti-trust . The six-year mandate of the 
Competition Council members expired on 1 Ju ly 2010. The Council of Ministers has 
appointed three new members, the Federati on two and the Republika Srpska one. The new 
Council is operational. 
There has been some progress regarding th e enforcement of competition rules. The 
Competition Council’s activities continued to focus on mergers and abuse of dominant 
 
EN 39   EN positions. The Competition Council initiated 12 procedures and issued 20 decisions. It 
collected approximately €100,000 in fines from economic operators that breached the 
competition law. However, the administrative capacity of the Competition Council remains 
insufficient. 
No progress can be reported on state aid . The state aid legal framework needs to be put in 
place. Legislative alignment remains to be st arted. A State-level, operationally independent 
authority for the control of state aid in line wi th the Interim Agreement was not established by 
1 July 2010. Transparency of a ll aid granted in Bosnia and Herzegovina is not ensured.  
Overall,  preparations in the areas of anti-trus t and mergers are moderately advanced. 
Substantial further efforts are needed to remedy the absence of state aid control.  
4.1.6.  Public procurement 
Limited progress has been made in the area of public procurement . The legal framework for 
fighting corruption in public procurement has improved with the enactm ent of anti-corruption 
legislation. However, its implementation awaits  the establishment of the anti-corruption 
agency. The Public Procurement Agency prepar ed a Strategy for deve lopment of the public 
procurement system in Bosnia and Herze govina, covering the period 2010-2015. The overall 
legislative alignment needs to advance. Many pr ovisions of the new EU Directives remain to 
be transposed; simplified procedures for low-value procurement have not been introduced . 
Contract notices are not systematically publishe d in electronic form on the website of the 
Public Procurement Agency (PPA).  
The system for awarding concessions is fragment ed because of the different legislation at 
State, Entity, cantonal and Br čko District levels. Most concessions and public-private 
partnership contracts continue  to be awarded through the ‘ unsolicited proposals’ procedure 
without a transparent and competitive process. An independent review of the concessions 
award procedure does not exist. The Br čko District enacted a law on public-private 
partnerships without coordinating with other levels, which resulte d in further fragmentation of 
the procurement framework. Overlapping competen ces, high administrativ e costs and the lack 
of formal cooperation between commissions needs to be tackled.  
Domestic preferential treatment remains in fo rce until 2015, except for the electricity sector.  
The PPA now employs 21 people, 10 short of th e 31 posts to be filled by 2012. Its move to 
larger premises allows for further staff increases.  
The Public Procurement Review Body (PRB) adopted a rulebook on internal organisation 
which provides for a staff increase. The PRB ope rates efficiently and was able to address 
most of the complaints it received. No specific measures have been undertaken to enhance the 
transparency of remedial decisions. The PRB’ s decisions are not published, despite a legal 
requirement to do so. This makes it impossible to asse ss their quality. 
Monitoring of public procurement procedures  across the country improved. However, the 
capacity of the contracting authorities to apply the law is not sufficie nt. The weak support of 
the central public procurement institutions for contracting authorities and economic operators 
hampers the effective implementation of legisl ation. The provisions c oncerning public-private 
partnerships, as well as  services and works concessions at all levels, do  not guarantee 
competitive and transparent procedures in line with the acquis . 
 
EN 40   EN There has been no progress regarding the buildi ng of a single economic space in the field of 
public procurement. As regards concessions and public-private partnershi p contracts, different 
provisions apply to companies based in the Entity other than that of th e contracting authority. 
This does not make for equal treatment in tender procedures. 
Overall , preparations in the field of public procurement remain at an early stage. The new 
public procurement law taking into account the new acquis  remains to be adopted. The 
coordination mechanisms and administrative capacities of the main stakeholders need 
strengthening to improve the coherence of  public procurement policy and to reduce 
corruption.  
4.1.7.  Intellectual property law 
Some progress has been made in the area of intellectual, industrial and commercial property 
rights (IPR).  
Bosnia and Herzegovina ratified the Agreem ent concerning the International Patent 
Classification, the World Intellectual Property Organisation  (WIPO) Copyright Treaty and 
the WIPO Performances and Phonograms Treaty.  
State-level laws were adopted on patents, trad emarks, topographies of integrated circuits, 
geographical indications, industrial design, c opyright and related rights, and collective 
management of copyright. The legislation has been further approximated with the Agreement 
on Trade Related Aspects of Inte llectual Property Rights and the acquis . However, Bosnia 
and Herzegovina needs to align its IPR-relate d policies and laws in the audiovisual field. 
The level of staffing of the Institute for Intell ectual Property increased. Further measures were 
taken to improve the institute’s functioning and to disseminate information about intellectual property. However, another 20 posts remain to be filled, and the administrative and operational capacity of the institute is not sufficient to perform its tasks. 
As regards industrial property rights , the number of patent a pplications increased. The 
Institute for Intellectual Property received 654 pa tent applications and 186 applications for 
extending a European patent to Bosnia a nd Herzegovina; it proces sed 280 applications, 
including some from previous years. The averag e time taken to process a patent application 
was reduced from five to two years, and tradem ark applications from four to two and a half 
years. However, no applications for protection of geographical indicatio ns and topographies 
of integrated circuits  have been filed. 
The regulatory framework for the collective management organisations is inadequate. 
Awareness-raising is lacking am ong rights holders and users of protected subject matter.  
Enforcement remains to be improved. The Indirect Taxation Authority referred files to the 
Prosecutor’s Office and seized counterfeit goods valued at approximately €622,500. However, 
high levels of counterfeiting and piracy persist. The country remains a point of distribution to 
the rest of Europe. No significant awareness-ra ising activities took place. The action plan for 
capacity building remains to be prepared. C oordination among enforcement bodies at various 
levels remains inadequate.  
Overall, preparations in the area of intellectual, industrial and commercial property rights are 
advanced. Progress was made in adopting IPR-re lated laws. Further efforts are required to 
strengthen the administrative and enforcemen t capacity of the Institute for Intellectual 
 
EN 41   EN Property. Cooperation among law enforcement bodi es and among relevant stakeholders needs 
further strengthening.  
4.1.8.  Employment and social polic ies, public health policy 
Some progress has been made in alignment with European standards in the area of 
employment policy . The adoption of the State-level employment strategy 2010-2014 is a 
significant step. However, at Entity-level , major policy documents are awaiting final 
adoption. In Republika Srpska and the Br čko District employment stra tegies are not in place. 
In the Federation, the action plan for the impl ementation of the employment strategy remains 
to be finalised.  
Unemployment remains very hi gh; nearly half of the younger age group is unemployed. The 
labour market participation of women is low. Moreover, the lack of reliable labour market 
data remains a serious obstacle to  developing labour market policy. (See Chapter 3.1 — 
Macroeconomic stability).  
Republika Srpska adopted a law on mediati on in employment and entitlements during 
unemployment. In the Federati on, a similar law aimed at str eamlining cantonal and Entity-
level employment services is not in place. 
Most resources allocated to assisting the unemployed are spent on passive labour market 
measures. However, effective active labour market  programmes are needed to help the long-
term unemployed and curb long-term unemployment.  
The large number of labour and employment institutions at State, Entity and canton levels and 
the lack of coordination among them remain a matter of concern. Unified standards and 
methodologies for data collection are lacking. Inst itutions at different levels are unequally 
equipped to offer effective services. The capacity  of employment services across the country 
is a matter of particular concer n. The registration system for the public employment services 
remains to be reviewed to ach ieve a greater focus on providi ng support and services to job-
seekers. 
Links between employment and education polic y are weak. The State-level Law on vocational 
education and training is not  being fully implemented. Neither the Entities nor the Br čko 
District have a life-long learning concept. Measures to develop sk ills, in particular for women, 
remain to be developed.  
No progress can be reported in the area of social policies . Republika Srpska adopted a law on 
peaceful resolution of labour disputes. The Re publika Srpska Agency for Mediation became 
operational. However, no steps were taken to harmonise the labour laws  of the Entities and 
Brčko District with the acquis. A labour law  at the State-level remains to be adopted. 
Provisions regulating labour matters at ca ntonal-level are not aligned with the acquis  and 
make for further fragmentation in the Federation.  
There was little progress in the area of health and safety at work . The cantons agreed to 
transfer responsibility for this area to the En tity-level. Republika Srpska adopted amendments 
to the Law on Safety at Work and implementi ng legislation to reinforce the capacity for 
monitoring health and safety at work. The Br čko District adopted similar legislation. 
However, the Federation needs to adopt a law on safety at work. The State-level Ministry for 
Civil Affairs needs to complete  the analysis of compliance w ith the ILO Conventions and the 
 
EN 42   EN acquis . Labour inspectorates are un derstaffed and unable to monitor fully the implementation 
of health and safety at work standards. Reliabl e data on accidents at work are not available. 
There is a particular problem in the Federati on, where records are held at cantonal level. 
There has been no progress in the area of social dialogue . Republika Srpska adopted a new 
general collective agreement. Basic steps were  taken to establish a country-wide Economic 
and Social Council. However, no agreement has been reached on the membership criteria for 
the social partners. The non-recognition of trad e unions at State-level remains an outstanding  
issue. The legal framework is not  in place and the rules for the recognition and registration of 
social partners need to be cl arified. The Law on social partners ’ representativeness remains to 
be adopted. (See Chapter 2.2 – Human rights an d the protection of minorities)  In general, the 
complex system of government and the fragmentati on of legislation continue to hamper social 
dialogue across the country. 
Little progress can be reported in the area of social inclusion and anti-discrimination . The UN 
Convention on the Rights of Disabled Persons wa s ratified. The Federa tion adopted a law on 
the professional rehabilitation, training and em ployment of disabled people. However, no 
steps were taken to remedy the shortcomings of the anti-discrimination law, not least the absence of age and disability and the broad scope of exceptions. The State-level social 
inclusion strategy remains to be adopted.  
There has been some progress in the area of social protection . The economic crisis increased 
the risks faced by vulnerable gr oups and public expend iture levels on soci al protection were 
kept high. Both Entities adopted framework legi slation to reform their social protection 
systems by moving towards a needs-based appr oach. Means-testing for social benefits, 
including veterans’ benefits, was introduced. However, Republika Srpska needs to put in 
place implementing legislation on means-testing as of 2011, and in the Federation, objections 
from veterans prompted the government to d ilute the corres ponding implementing legislation. 
Social assistance and entitlement still vari es considerably across the country. Some 
groups continue to have privileged access to se veral social protection and assistance schemes 
based on their status, thus going against the needs based approach. The pension systems 
remain fragmented  (See Chapter 2.2 – Human rights and the protection of minorities) .  
Little progress can be re ported in the field of public health . The Entities finalised their 
strategies for healthcare reform. They served  as a basis for the State-level strategy for 
healthcare reform, which was rejected by the Repub lika Srpska Ministry fo r Health and Social 
Welfare, on the ground that heal th care is an Entity responsi bility.. The Federation adopted 
laws on blood and blood components, organ tr ansplantation and tissu es for the purpose of 
medical treatment. The Federation adopted the Law on health protection, the Law on the 
rights, duties and responsibilities of pa tients and the Law on pharmaceutical activities. 
Republika Srpska enacted laws on transplantatio n of human organs, tran splantation of human 
tissues and cells, protection against contagious diseases and health care as well as implementing legislation on transfusion me dicine. Republika Srpska also adopted 
amendments to laws on the use and advertising of  tobacco products. However, there is no plan 
to align laws with the acquis  at the State-level.  
The conference of health ministers meets re gularly. The health ministers adopted the 2008 
roadmap for EU integration of the sector. Harm onisation of reform activities between Entities 
needs to be improved and the coordinating role of  the Ministry for Civil Affairs remains to be 
strengthened. The institutional and legislative framework remains fragmented. No steps were 
 
EN 43   EN taken to address problems of inadequate covera ge of health insuran ce and non-transferability 
of health funds. Little was done to impr ove the quality of healthcare services.  
The Agency for Medicines and Medical Devices is only partly functional. The institutional 
capacity to produce reliable statistical data on health is insufficient. Data need to be harmonised with European standards.  
Implementation of International Health Regulat ions (IHR) is slow. Country mechanisms for 
reporting and exchanging information on communi cable diseases remain to be developed. An 
action plan for meeting core capacity requirem ents in the event of outbreaks of diseases 
remains to be adopted. 
There has been some progress in the area of mental health . The South-Eastern Europe Health 
Network accepted the application of the Ministry  for Civil Affairs to establish the regional 
centre for cooperation and develo pment in the area of mental health for South-Eastern 
Europe. The regional centre is operational. Both Entities adopted mental health strategies and 
new mental health centres were opened. However, estab lishment of community-based 
services, provision of aid to dependent persons and mental h ealth care for children and young 
people need further attention.  
Overall , the country's preparations regarding social  policies and employment policy remain at 
an early stage.  Sustained efforts are essential to es tablish a country-wide social dialogue, 
which is a European Partnership priority. The fragmentation of legisl ative and institutional 
frameworks hampers progress in developing public health policy.  
4.1.9.  Education and research 
Some progress has been made in the field of education . The number of divided schools was 
reduced, but the separation of children within schools along ethnic lines and the existence of 
mono-ethnic schools remain issues of concern. (See Chapter 2.2 — Ec onomic and social 
rights). Coordination mechanisms at the State-leve l became more effective. A nine-year 
curriculum is being implemented in most school s country-wide. The Agency for Development 
of Higher Education and Quality Assurance is an associate member of the European Association for Quality Assurance in Higher Education. Some provisions of the higher 
education qualifications framew ork are being implemented. An initial national qualifications 
framework for life-long learning was completed. A department of statistics and informatics 
was established within the Ministry for Civil Affairs, with the task of contributing to 
statistical reporting on e ducation in line with Eurostat standards.  
In the Federation, harmonisation of cantonal la ws with the framework laws has advanced. 
Some cantons adopted laws on pre-school educ ation and vocational education. Eight out of 
ten cantons adopted a higher education law. The Republika Srpska adopted a law on adult 
education and a law on higher education institutions, which is not fully in line with the 
framework law and provides for Entity agencies to be set up in parallel with State institutions.  
However, pre-school attendance is very low. St ate-level agencies (Centre for Information and 
Recognition of Documents in the Field of Hi gher Education, Agency for Development of 
Higher Education and Quality Assurance and Ag ency for Pre-school, Primary and Secondary 
Education) are not entirely functional. The State-level strategies and framework laws are not fully implemented. In the Federation, harmonis ing laws with the State-level framework 
legislation is advancing slowl y. There are no State-level laws on recognition of qualifications 
 
EN 44   EN and adult education. Almost all cantons insist on  the exact equivalence of diplomas which has 
led to the non-recognition of many qualifications obtained abroad. The issue of education 
meeting the needs of the labour market remains to be addressed.  
There has been some progress towards alignment with European standards in the area of 
culture . The establishment of a cultural contact point promoting the Culture programme 
throughout the country was a significant step towards participation in the programme. 
Negotiations on the Memorandum of  Understanding regarding the country's participation in 
the programme as of 2011 were completed. Republika Srpska adopt ed its cultural 
development strategy which was based on th e State-level strategy on cultural policy. 
However, there is no law on cultural herita ge. The Federation reduced its allocation. 
Further progress has been made in the area of research . The number of successful projects 
under the 7th Research Framework programme  (FP7) has increased and the administrative 
capacity was strengthened. A c ountry-wide network of nationa l contact points to provide 
information on research cooperation in FP7 a nd other research programmes (Cost, Eureka) 
has been established and nominations in th e FP7 Committees made. Further actions are 
essential, particularly regard ing the involvement of the priv ate sector and SMEs and the 
mobility of scientists. The Framework Law on sc ientific and research activities was adopted, 
improving coordination of Entity-lev el research actions with the State-level research strategy. 
A science and development strategy for 2010-2015 and an action plan were adopted. The Science Council was appointed to  assist the Ministry for Ci vil Affairs in the strategic 
development of science, re search and innovation policy. 
However, investment in research is very limited. Statistics on research and development 
activities are lacking. No data  exist on business, foreign an d private non-profit funding. The 
Entities and cantons fund their specific polic ies through their own bud gets. This makes it 
difficult to streamline research policies and av oid fragmentation, one of the key European 
Research Area (ERA) objectives.  
Overall, alignment with European standards in the ar eas of education and culture is advanced. 
The main challenges are divided schools, the full implementation of strategies and framework 
laws, and the adoption of the in itial national qua lifications framework. In addition, State-level 
agencies for education and quality assurance stru ctures need further st rengthening. In the area 
of research and development, preparations for future integration into the ERA are on track but 
closely monitoring and follo w-up is very important.  
4.1.10.  WTO issues 
Some progress has been made in the acc ession negotiations with the World Trade 
Organisation (WTO). The WTO working pa rty met for a seventh time. Bosnia and 
Herzegovina has brought more legislation into  line with WTO requirements. The country 
proceeded in its bilateral negot iations, in particular on mark et access for goods and services, 
and in multilateral negotiations on domestic support to agriculture and export subsidies.  
4.2. Sectoral Policies 
4.2.1.  Industry and SMEs 
Some progress has been made in the area of industry and SMEs. 
 
EN 45   EN There has been some progress in the area of industrial policy . The strategies for development 
and for social inclusion include industrial policy elements. However, a country-wide 
industrial strategy remains to be developed. The Entities prepared industrial policies and 
action plans. The industrial policy fram ework remains inconsistent. Cooperation and 
harmonisation of measures to boost competitiveness and restructuring of the major industrial sectors remain insufficient. Harmonised statis tics are needed for effective industrial policy 
planning.  
Little progress has been made in the area of SMEs . Bosnia and Herzegovina is participating 
in the European Enterprise Network. The European Charter for Small Enterprises is being implemented slowly and unevenly and preparat ions for implementing the Small Business Act 
are at an early stage. The State-level SME development strategy needs to be implemented. 
The law on promotion of SMEs and entreprene urship, which was needed to implement the 
SME development strategy, remains to be adopted.   
The Entities took some initiatives to support SM Es. However, SMEs continue to operate 
under different conditions across the country.  
A single registration system for the whole c ountry which would simplify conducting business 
in both Entities remains to be established. Inter-Entity investment flows are small. The e-
government strategy to provide on-line public servic es to businesses remains to be fully 
implemented and a systematic approach to business education is lacking.  
An export promotion strategy does not exist an d the institutional framework remains weak. 
The Export Promotion Agency is operational but the related department in the Ministry of 
Foreign Trade and Economic Relations and the Export Council are not. 
Overall , preparations in the area of industry and SMEs remain at an early stage. Bosnia and 
Herzegovina has to develop a comprehensive in dustrial strategy and to implement the State-
level strategy for SMEs. Further improvements in the business environment are essential for 
the expansion of bus iness and trade.  
4.2.2.  Agriculture and fisheries 
There has been little progress in alignment with European standards in the field of 
agriculture and rural development .  
A State-level strategic plan and operational pr ogramme for harmonisation of agriculture, food 
and rural development are in place. However,  implementation has not started. The Republika 
Srpska rural development strategy and action pl an and the Federation operational programme 
for harmonisation of agriculture, food and rura l development need to be harmonised with the 
State-level framework.  
Some legislation implementing the Fram ework Law on agriculture, food and rural 
development and the law on tobacco were adopte d. However, the law on wine remains to be 
adopted. An overall lack of implementing legi slation impedes coordination of harmonised 
strategies and legislation in th is area throughout the country.  
There has been no progress toward s establishing a State-level Ministry of Agriculture, Food 
and Rural Development. The Ministry of Fo reign Trade and Economic Relations appointed 
working groups on the payment agency and ma naging authority for IPA rural development 
structures. The Entities increased their staffi ng and continued to build up paying agencies, 
 
EN 46   EN particularly Republika Srpska. The Council of Mi nisters adopted a decision on the location of 
the Office for Payment Harmonisation and alloca ted budget for additional staff. However, the 
office is not operational. Coordination of rural development policy is weak. At the State-level 
the sector for agriculture, food, forestry and rural development did not  increase staffing.  
The Advisory Council for agriculture, food and rural development is operational. However, 
inter-sectoral coordination and participation by  the non-governmental sector remain weak. 
The Entities did not increase their overall support for agriculture and rural development, but a 
larger proportion of this support was allocated to  rural development measures. The lack of an 
efficient administration and effective rural credit schemes impede the competitiveness of farmers and the agri-p rocessing industry.  
Limited progress was made towards improving agricultural statistics. An action plan for 
developing a Farm Accountancy Data Networ k in selected municipalities was agreed. 
Preparations have started for the agricultural census, which will be carried out after the population and household census. The populati on and household census will only provide 
data on agricultural holdings  (See Chapter 4.2.8 – Statistics) . However, the 2009 report on 
agricultural statistics remains to be published. The lack of reliable statistics hampers the 
development of agricultural policy. 
A decision on establishing a State-level monito ring and evaluation system for agriculture, 
food and rural development was adopted. The info rmation system for the integrated register 
of agricultural holdings is being tested. Ho wever, land registration systems have not been 
harmonised and land management needs to be improved. 
Overall, preparations in agriculture and rural development are at an early stage and stronger 
coordination between the State and the Entities in aligning with the acquis in the field of 
agriculture and rural development is required. 
There has been little pr ogress in the field of food safety . Implementing legislation has been 
adopted. The assessment of food laboratories was completed and training of inspectors 
intensified. However, a nationa l food laboratory plan remains to be drawn up. Reference 
laboratories have yet to be de signated and testing cap acity to be upgraded. Implementation of 
existing legislation remains weak. An overlap in competences between the veterinary and 
food safety sectors persists. No steps were  taken to upgrade ag ri-food establishments. 
Enforcement capacity of inspection serv ices and laboratories remains weak. 
Overall, closer coordination betw een the State and the Entities is essential for an effective 
administrative system and for food control legisl ation. The lack of progress in the food safety 
sector has a negative impact on trade in agricultural products. 
Some progress can be re ported in the field of veterinary and phytosanitary  policies . In the 
veterinary sector, implementing legislation on animal health and welfare was adopted. 
Conditions were established for placing certain imported products on the market. 
Amendments to the rules governing the examina tion of animals for slaughter were adopted. 
However, the State veterinary law remains to be amended to allow for alignment with the 
acquis  and harmonisation of legisla tion at Entity-level. Because  of budgetary restrictions 
there were no further staff increases within th e State-level administra tion for food safety, 
veterinary and plant health . The division of competences  within the administration 
responsible for food safety, veterinary and phytosanitar y policies remains unclear.
 There has 
been no progress towards accreditation of  veterinary diagnostic laboratories. 
 
EN 47   EN An amended decision on animal identification an d movement control provided the legal basis 
for identification of small ruminants and pigs . An IT system for comprehensive national 
animal identification is being prepared. A vaccination campaign against brucellosis has 
produced the first positive results, and a control strategy is  being drafted.  
Veterinary health control at borders has improved.  
In the phytosanitary sector, implementing legi slation was published which paved the way for 
the potato monitoring programme and enhanced  Bosnia and Herzegovina’s export capacity. 
Amendments to the legislation on plant protection products were adopted. The national list of 
varieties was adopted. Bosnia and Herzeg ovina began to implement the Rotterdam 
Convention by nominating the Plan t Health Agency to be the designated national authority. 
State-level legislation that transposes the fisheries acquis  remains to be drafted. In terms of 
quantity and value, imports of fish and fi shery products from the EU to Bosnia and 
Herzegovina decreased. There was an increase in exports of these products to the EU.  
Overall , preparations in the fields of agricultu re and rural development, food safety, 
veterinary and phytosanitary policy and fisherie s remain at an early stage. Bosnia and 
Herzegovina lacks a comprehensive strategy for aligning with the acquis  on agriculture and 
rural development. State-level capacity fo r policy formulation is weak. There is no 
coordination between State and Entity levels, which hampers the harmonised implementation 
of legislation. No structures have been se t up to implement the IPA rural development 
component.  Limited implementation of the State- level veterinary, food safety and 
phytosanitary legislation is prev enting agri-food estab lishments from making more substantial 
progress towards meeting EU standards. Official  control capacities, the laboratory system for 
food safety as well as the veterinary and phytosanitary fields need strengthening. 
4.2.3.  Environment 
Progress in the field of environment remained limited.  
There has been some progress in horizontal legislation . Bosnia and Herzegovina ratified the 
Espoo Convention on Environmental Impact Assessment in a Transboundary Context. 
Implementation of Bosnia and He rzegovina’s internati onal obligations, in particular of the 
Aarhus and Espoo Conventions, remains at an early stage. The directive on Strategic 
Environmental Assessment has been transpos ed by the Federation. However, it was not 
transposed by the State, Republika Srpska and Br čko District. Transposition and 
implementation of the acquis in the area of horizontal legisl ation requires further efforts. 
Little progress can be reported on air quality . The Stockholm Convention on Persistent 
Organic Pollutants was ratified. The Federation adopted legislation tran sposing the directives 
on air quality, and legislation on ambient air quality.  
There has been little progress in the area of waste management . Bosnia and Herzegovina has 
started to address infrastructure needs by cons tructing sanitary landfil ls. Use of resources 
available for waste management measures ha s improved. However, no concrete steps were 
taken to establish systems for recycling and recovering priority waste streams, such as 
packaging, electrical and electronic equipment,  hazardous substances, motor oil and tyres. 
Management of waste streams of an imal origin requires improvement.  
 
EN 48   EN There has been little progress in the area of water quality . The Federation established water 
councils to oversee public consultation procedur es for river basin management planning. It 
also adopted implementing legislation on identifying and monitoring areas sensitive to eutrophication and nitrates. Re publika Srpska established water agencies. However, a large 
amount of legislation transposing the acquis  is not in place. There is a lack of  harmonised 
implementation of water laws, monitoring and river basin planning between the Entities. 
Untreated discharges of wast ewater, access to drinking water and flood management remain 
key challenges. 
No progress has been made on nature protection . The percentage of designated protected 
areas remains at 2.2%. Alignment with the Habitats  and Birds Directives is at an early stage. 
No developments have taken place in the fields of industrial pollution control and risk 
management, chemicals and noise . 
There has been some progress in the area of genetically modified organisms (GMO) . The 
GMO Council was appointed and nationa l GMO laboratories were designated. 
In the field of climate change , the plan to phase out ozone- depleting substances (ODS) is 
being implemented. Licences, annual quotas and permits for importing and exporting ODS 
are being issued in accordance with the existing Entity and State-level legislation 
implementing the Montreal Protocol. Conseque ntly, Bosnia and Herzegovina phased out the 
use of ODS and banned imports, except hydroch lorofluorocarbons. The country associated 
itself with the Copenhagen Accord. Bosnia and Herzegovina submitted its first national communication under the United Nations Fram ework Convention on Climate Change, 
covering only the greenhouse ga s inventory. However, despite  progress made towards the 
establishment of a designated na tional authority (DNA), a final de cision to set it  up is still 
outstanding. Participation in the international climate negotiations was limited.  
Bosnia and Herzegovina’s administrative capacity  in the environment sector remains overall 
weak. The Federation’s environm ent fund was established, and its  director and management 
board were nominated. Republika Srpska’s envir onment fund is fully operational. However, 
sources for the Entity funds are limited to ve hicle registration and wa ter fees. A State-level 
environmental law providing for harmonised envi ronmental protection and an adequate legal 
and institutional framework were not adopt ed. A State-level Environmental Protection 
Agency, which is a European Partnership prio rity, needs to be esta blished. Environmental 
institutions do not have the capacity to impl ement and enforce legislation at Entity, Canton 
and local levels. Integration of  environmental concerns in other sectors remains weak.  
Overall , preparations in the field of environment re main at an early stag e. Establishment of a 
harmonised legal framework for environmenta l protection, of the State Environmental 
Protection Agency and of a functioning environm ental monitoring system remain priorities.  
4.2.4.  Transport policy 
Some progress can be re ported in the field of trans-European transport networks . Bosnia 
and Herzegovina is actively pa rticipating in implementing th e memorandum of understanding 
on the development of the South-East Europe Co re Regional Transport Network. It is also 
taking part in the South-East Europe Transport Observator y (SEETO) by updating and 
implementing the multi-annual plan for 2010-2014.  
 
EN 49   EN In the Pan-European Corridor Vc upgrading of the road continued, with the building of 
additional stretches of motorway. Repair an d overhaul of the rail track and signalling 
continued. However, the bottleneck at Ivan tunnel and Bradin a ramp has yet to be tackled, and 
overhaul and repair designs for the remaining railway sections have not been drawn up. Nor has a comprehensive study on safety and capacity requirements been prepared.  
Uneven progress can be reported in the field of road transport . Bosnia and Herzegovina 
introduced unrestricted transit traffic in land transport, one of its commitments under the 
Interim Agreement.  It also started to implement the TIR carnet system (S ee Chapter  4.1.4 – 
Customs and taxation) . Maintenance and upgrading of roads continued. The Law on digital 
tachographs was adopted. Howeve r, delays in implementation of the digital tachograph to 
meet international obligations remain an i ssue. The Law on transport of dangerous goods 
remains to be adopted.  
Uneven progress can be reported in the area of rail transport . Steps were taken to create the 
conditions for competition on the rail network, including regulatory and safety institutions. However, no implementation has taken place so far. The separation of operational functions 
from infrastructure management in the two vert ically integrated comp anies, the Railways of 
the Federation and the Railways of Republika Srpska, still needs to be implemented. The opening of the rail market is at an early stage. 
The Bosnia and Herzegovina Railways Regulatory Body issued a set of safety instructions 
which partly implemented the ‘Railway Pa ckage II’ Directives. The railways of the 
Federation published their network statement and the template contracts for access by railway 
undertakings. The condition of the rolling stock has improved. However, many aspects of railway safety remain to be addressed. The reform envisaged in the addendum to the 
memorandum of understanding on development of  the South-East Europe Core Regional 
Transport network for a South-East European ra ilway transport area remains to be completed.  
No progress has been made on maritime transport . Bosnia and Herzegovina is not a party to 
the International Convention for the Safety of Li fe at Sea nor to the International Ship and 
Port Facility Security Code. Some pr ogress has been made in the area of inland waterways . 
Demining and rehabilitating the River Sava waterw ay remain a priority. No progress has been 
made in the area of combined transport .  
Progress has been made in air transport . The laws on the civil aviation authority and the air 
navigation services-provider we re adopted, and the sector was restructured. The Civil 
Aviation Directorate remains responsible for re gulatory issues. The air navigation services 
provider was established. Bosnia and Herzegovina completed the first transitional phase of the European Common Aviation Area Agreement. However, further efforts are needed to 
transpose and implement the single European sky regulations, in particular with regard to a 
national supervisory authority.  
Bosnia and Herzegovina needs to adopt the tr ansport policy document; th e transport strategy 
and an action plan remain to be approved by the Government. 
Overall , preparations in the area of  transport are at an early st age. Transport infrastructure 
strategies remain to be prepar ed and the legal framework to be completed. Upgrading of the 
transport infrastructure has barely started.  
 
EN 50   EN 4.2.5.  Energy 
There has been uneven progress with oil stocks and security of supply . Republika Srpska 
passed a law to transpose the directives on m itigation measures and 90- day stocks. However, 
no official figures are available on the country 's level of oil stocks. The Energy Community 
acquis on security of gas and electri city supply remains to be implemented. There is no State-
level energy strategy.  
Little progress has been made regarding the internal energy market . There has been no 
progress in transpos ing the electricity acquis  as applicable under the Energy Community 
Treaty. Issues such as tendering procedures for new generation capacity have not been 
addressed. The lack of implementation of legisl ation remains a problem. The situation of the 
State-level transmission company (TRANSCO/E lektroprijenos) has not improved. A working 
group set up by the Entities’ Prime Ministers has been unable to resolve the continuing 
stalemate. No business or investment plans have been approved by TRANSCO. The 
company's management operates in an acting capacity only. Only technical operations and 
minor maintenance tasks are be ing carried out. There has been  no improvement in 
communication with the independent system operator (ISO/NOS). Cross-border capacity is 
allocated on an ad hoc  basis rather than ac cording to open compe tition. The viability of 
TRANSCO as a country-wide enterp rise and the fragmentation of  the electricity market are 
issues of concern and would represent an obstacle the full implementation of the Energy 
Community Treaty. Moreover, the 2009 amendments  to the electricity legislative framework 
need to be reviewed in order to comply with the objective of  a competitive and transparent 
electricity market as required  by the Energy Community Treaty. 
The independence of the regulatory commissi ons is not ensured. The Republika Srpska 
regulator revised tariffs. The State Electricity Regulatory Co mmission (SERC) issued new 
tariffs for transmission services, for the inde pendent system operator, and for ancillary 
services. Since the market was opened up for non-household customers, two industrial 
companies have purchased part of their electric ity on the market. Consumers have little reason 
to change suppliers, as regulated ta riffs remain below market prices. 
No progress can be reported in the gas se ctor. There is no State-level gas law and 
transposition of the gas acquis is missing, including a number  of basic network access 
elements. 
There has been little progress on energy efficiency and renewable energy . Regulators 
provide for some feed-in tariffs and lower netw ork connection fees. Entities plan to develop 
hydropower plants and wind parks over the next 10 years. However, there is no comprehensive strategy, and the Entities have  not coordinated their plans. Commitments 
made under the Energy Community Treaty regard ing the promotion of renewable energy and 
biofuels have not been fulfilled. The development of an energy efficiency action plan to meet obligations under the Energy Commun ity Treaty is behind schedule. 
Some progress can be reported in the area of nuclear safety and radiation protection . Three 
international conventions on nuclear safety (C onvention on Nuclear Safety, Convention on 
Early Notification of a Nuclear Accident a nd Convention on Assistan ce in the Case of a 
Nuclear Accident or Radiological Emergenc y) have been ratified. A new director was 
appointed for the State Regulatory Agency for Radiation and Nuclear Safety. However, the 
law on radiation and nuclear safety remains to  be implemented. The existing regulations are 
not in line with the acquis . In addition, the structure, manda te and operation of the Regulatory 
 
EN 51   EN Agency have not been specified. A national em ergency plan and a strategy for radioactive 
waste management need to be developed. 
Administrative capacity within the Ministry  of Foreign Trade and Economic Relations on 
energy issues remains low. 
Overall , preparations in the field of energy are no t very advanced. Further efforts are needed 
for the country to meet requ irements under the Energy Comm unity Treaty. The lack of 
cooperation and coordination between the Entiti es hampers development of a functioning 
energy market and compromises improvements in the security of supply. Bosnia and 
Herzegovina lacks a fully functioning transmi ssion company and remains at the early stages 
in implementing the acquis on the internal gas and electricity market. The development of a 
comprehensive energy strategy, including promo tion of energy effici ency and renewable 
energy sources, remains essential. Further effort s are needed on oil stoc ks. The transposition 
of the nuclear safety and radiation protection acquis  has not started.  
4.2.6.  Information society and media 
Little progress can be reported in the area of electronic communications and information 
technologies . The three incumbent operators kept a market share of 99% in the fixed-line 
segment. They operate as de facto  monopolies in their geographi cal areas. Other operators 
have a larger share of the international calls market. Operators with significant market power 
published their reference unbundling offers. Th ree contracts were signed between an 
incumbent and an alternative operator. Implementation of competitive safeguards is proceeding slowly which means that even though there is liberalisation, there is no healthy 
competitive market. Six operators offer carrier selection services and only one carrier pre-
select services. New licences were granted for internet service providers and network 
operators.  
The Communications Regulatory Agency (CRA) has developed guidelines for mobile virtual 
network operators, which provided for competiti on in the mobile telephony sector. The CRA 
took a decision on fixed-to-mobile termination tari ffs, halving the wholesale tariff. This is a 
positive development. However, price squeezes stil l exist. Steps to rebalance tariffs, a key 
element for creating a competitive market, are at an early stage. 
The level of broadband internet access is fairly  low, with the incumbent operators dominating 
xDSL provision (more than 90%), although ca ble broadband offers a strong competitive 
alternative. 
The challenges to the CRA’s independence have intensified (See Chapter 2.2 – Human rights 
and the protection of minorities) . The law on ministries and administrative bodies was 
amended to include the CRA. This is not in lin e with the relevant EU provisions and specific 
national legislation, since the independence of the CRA is enshrined in the law on 
communications. The CRA has been without a di rector-general since 2007. No decision was 
taken on the nomination of the CRA Council members whose mandate ended in April 2009. 
Payment of compensation to the CRA Council,  suspended in 2009, was resumed but cut by 
half. The overall situation in the CRA hampers its administrative capacity. The administrative 
capacity of the Ministry of Transpor t and Communications remains weak.  
Little progress has been made in the area of information society services . The pace of 
developments regarding information society va ries across the countr y. However, the State-
 
EN 52   EN level law on development of the information society was not adopte d, and the State-level 
agency not established. The E-commerce Directive needs to be transposed in national legislation. Implementation of the 2006 e-signatu re law is slow. Implementing legislation on 
conditional access services remains to be adopted.  
There has been some progress as regards audiovisual policy and media . Bosnia and 
Herzegovina has ratified the European Convention on Legal Protection of Conditional Access Services. Implementing legislation and the stra tegy for transfer from analogue to digital 
terrestrial broadcasting were a dopted. All existing radi o and television stat ions were granted 
new licences.  
However, the Public Broadcasting System (P BS) Board of Governors failed to adopt the 
statutes of the PBS corporation due to di sagreements over ownership of equipment and 
revenue-sharing. Since its statutes  have not been adopted, the PBS corporation could not be 
registered, which delayed the reform of the public broadcasting sector. The Entities’ laws on public broadcasting services are not a ligned with the State-level law.  
Overall , Bosnia and Herzegovina’s preparations in the field of information society and media 
are advancing slowly. Implementation of th e public broadcasting legal framework is 
necessary for reforms in this sector, a Europ ean Partnership priority . Ensuring the functional 
independence of the CRA remains a top prio rity. Continued challenges to the CRA’s 
independence are having a negative imp act on the development of competition. 
4.2.7.  Financial control 
Bosnia and Herzegovina has made some progr ess in the area of fi nancial control.  
Further steps have b een taken to introduce Public Internal Financial Control (PIFC) . Laws 
on internal audit continued to be implemented at State and Entity level and the administrative 
capacity is slowly being strengthened to ensu re sound management of public funds. However, 
the number of skilled internal auditors remains very low.  
The State-level Council of Ministers and th e governments of Republika Srpska and the 
Federation adopted their PIFC po licy papers. In the Federation a nd Republika Srpska internal 
audit units are being established. Central Harmon isation Units (CHUs) exist in the Ministries 
of Finance of the State and Republika Srpska. Ho wever, the Federation has not yet recruited 
managers for its CHU. Lack of staff is an  impediment to further development of PIFC. 
Adequate financial management and c ontrol systems need to be developed.  A coordination 
board to ensure a harmonised approach to PIFC across all three CHUs remains to be 
established. 
As regards external audits , the four supreme audit instituti ons (SAIs) (State, Entities and 
Brčko District) are performing well,  but have no impact on public  financial management. In 
the Entities SAIs are not subjec t to administrative and civil service laws. The State-level SAI 
is not entirely independent from  the Council of Ministers. The audit offices at State and Entity 
level are building capacity for performan ce audits. Cooperation among SAIs through the 
Coordination Board continued. The Coordinati on Board issued guidelines for performance 
audits and a human resource development strate gy. The establishment of parliamentary audit 
committees increased the capacity of all three pa rliaments to deal with  audit reports. As a 
result, based on audit reports, the audit committee of the Bosnia and Herzegovina 
Parliamentary Assembly recommended budget changes.  
 
EN 53   EN Overall , in the area of financial control Bosnia and Herzegovina has partly met its objectives 
regarding PIFC legislation, regulations and re-organisation. Internal auditing is being 
introduced. Financial management and control systems need to be further developed. The 
issue of the independence of external auditors remains to be addressed.  
4.2.8.  Statistics 
Limited progress has been made  in the area of statistics. 
Very little progress has been made on statistical infrastructure . The staff number of the 
Agency for Statistics of Bosnia and Herze govina (BHAS) increased. However, cooperation 
between the BHAS and the Entities institutes for statistics needs to be considerably improved. 
Different interpretations of the existing legislat ion persist. Neither the State-level statistics 
law nor the Agreement on cooperation and coordi nation in the area of statistics are being 
correctly implemented.  
Cooperation between the BHAS and the Indirect  Taxation Authority (ITA) is poor. The ITA 
does not provide administrative data to the BHAS in a sufficient way. The results are low-
quality business, macro-economic and external trade statistics (See Chapter 4.1.4 – Customs 
and taxation) .  
Some progress has been made regarding classifications and registers . The statistical business 
register is operational,  but the lack of data from certain administrative sources negatively 
affects its quality. Approximation to the NACE Rev. 2 statistical classification of economic 
activities is moderately advanced.  
Some progress has been made on sector statistics . Technical preparations for the population 
and household census are advanced. Entities are at different stages  of preparation of maps for 
census enumeration areas. However, the Stat e-level law on the popu lation and household 
census was not adopted. Political agreement could not be reached on the use of the census results for the composition of public bodies. In the absence of a census law, no pilot census has taken place.  
In the area of social statistics, the 2010 extended Labour Force Survey (LFS) has been carried 
out and first results were published.  
Limited progress has been made on macro-econo mic statistics. The annual GDP estimate for 
2009 was published. However, the Republika Sr pska Statistical Of fice does not fully 
implement the multi-annual master plan for developing national accounts. Therefore, 
quarterly national accounts  cannot be developed.  
The quality of short-term sta tistics, construction industry stat istics and structural business 
statistics improved. Quarterly surveys are being conducted on i nput prices in  agriculture. 
Preparations for an agriculture census started (See Chapter 4.2.2 – Agri culture and fisheries) . 
A pilot farm structure survey was carried out.  Progress has been made on energy statistics.  
Overall , preparations in the field of statistics  are moderately advanced. National accounts, 
business and agricultural statistics remain to  be improved. The BHAS development plan has 
to be implemented to ensure necessary capacity. Technical preparations for the population and household census are advanced. The Law on th e population and household census remains to 
be adopted. Closer cooperation between the B HAS and Entity statistical offices as well as 
between the BHAS and State ag encies remains essential.  
 
EN 54   EN 4.3. Justice, freedom and security 
4.3.1.  Visa, border management, asylum and migration 
Progress has been made in the field of visa policy  and in the framework of the visa 
liberalisation dialogue. The visa  facilitation agreement betw een the EU and Bosnia and 
Herzegovina is being implemented. The number of visas issued at the border was further 
reduced from 684 in 2008 to 345 in 2009. However in the first half of 2010, 145 visas were 
issued which is an increase of 20% compared  to the same period of 2009. At the moment, 
positive and negative lists are not fully harmonised with the EU visa list.  
Biometric passports started to be issued. The Agency for identification documents, registers 
and data exchange (IDDEEA) finished verifying a ll registers and entering data into the central 
database. As of end September 2010, a total of 329,400 biometric passports had been issued. 
Overall , Bosnia and Herzegovina continues to address its priorities in the field of visa policy.  
Good progress has been made in the area of border management . Legislation implementing 
the Law on border control has been adopted, wi th the exception of the by-law on demarcation 
of the borderline. An agreement on mutual coop eration between the institutions involved in 
integrated border management (IBM) was si gned, providing a general framework for inter-
agency cooperation. The IBM joint risk analysis  centre has become opera tional. However, the 
connection between the centre and the databases of the agencies involved remains to be 
established. Revision of th e IBM strategy and action plan is pending. The Council of 
Ministers appointed a new director and deputy direct or of the border police. 
Infrastructure at existing border crossing point s has been further improved, in particular 
surveillance and equipment. All border crossi ng points are connected to the I-24/7 Interpol 
system. Two new, fully equipped border crossi ng points have been cons tructed on the border 
with Montenegro in Klobuk and Zupci. The majority of border crossing points for 
international traffic are equipped with biomet ric passport readers and are connected to the 
integrated system of control of State border  crossings (CSBC). CSBC  is one of the four 
modules of the migration information system, which allows automatic registration of border 
crossings, entry refusals and access to releva nt databases. Installation of IT access and 
equipment at border crossing points needs to continue.  
Responsibility for management and maintenance of  border crossings has been assigned to the 
indirect taxation authority (ITA). ITA prep ared an amendment to its internal rulebook 
foreseeing an increase in the number of posts  for management and maintenance of border 
crossings. However, the adoption of this  amendment by the ITA governing board is 
outstanding. The border police ha s adopted development, human resources and information 
management strategies for 2010-14.  
Border demarcation has advanced. Along the green  border with Croatia,  the remaining illegal 
crossings for vehicles have been physically bl ocked with the necessary infrastructure and are 
monitored by the border police. On the border w ith Montenegro, illegal crossings have also 
been identified and blocked. More efforts are needed to close unauthorised border crossing 
points with Serbia. Bosnia and Herzegovina an d Croatia are reviewing the relevant border 
agreements, including the number of crossing po ints. Agreements with Montenegro on border 
crossing points and local cross border tr affic have been signed in October 2010. 
 
EN 55   EN Implementation of the working arrangement w ith Frontex is well on track and Bosnia and 
Herzegovina participates in the West ern Balkans risk analysis network. 
Overall , Bosnia and Herzegovina’s preparations in the area of border management have 
advanced but need to be intens ified. Efforts need to focus on strengthening the infrastructure 
at border crossing points, settling unresolved border demarcation is sues and reinforcing staff.  
There has been some progress in the area of asylum . Bosnia and Herzegovina has adopted all 
the legislation necessary for implementing th e 2008 Law on aliens and asylum. The asylum 
and migration action plan is being fully impl emented. Training has been provided for staff 
employed in the asylum sector. The number of asylum applications in 2009 decreased to 32 
(71 people) in comparison with 49 applications  (95 people) in 2008. In 2009 the Ministry of 
Security (MoS) granted asylum status to one person and denied it for twenty nine. 
All asylum-seekers from Kosovo, whose tem porary protection status expired in 2007, 
received first instance decisions from the Sector for Asylum. The sector issued 279 negative decisions. Of this number, 205 people have appeals pending. A further 163 former asylum-seekers from Kosovo have received final bind ing negative decisions on their asylum claims. 
Others are being resettled or voluntarily repatriated. 
The Sector for Asylum in the MoS has 16 of the 17 employees provided for by the ministry’s 
rulebook. The asylum module of the migration information system (MIS) is being fully 
utilised. The Ministry for Human Rights and Re fugees has been connected to the MIS. The 
temporary asylum centre in Rakovica has 12 em ployees and 86 occupants. Work has begun 
on a permanent asylum centre in Trnovo with 150 beds.  
Overall , the asylum and internationa l protection system in Bosnia  and Herzegovina has come 
into operation and has been further enhanced. 
Good progress has been achieved on migration.  The permanent reception centre for irregular 
migrants has been upgraded and meets EU standard s. Its total capacity has been increased to 
120 beds and it employs 53 professional staff. The State has assumed full responsibility for 
the centre's financing and management. In 2009, 191 irregular migrants passed through the 
centre. In 2010, 116 foreign nationals were accommodated, 93 of whom  were returned.  
In 2009, the number of readmitted persons has decreased to 311 (from 459 in 2008), of whom 
122 were foreign nationals a nd 189 citizens of Bosnia a nd Herzegovina. Bosnia and 
Herzegovina continues to readmit the larges t number of individuals under the readmission 
agreement with Croatia. In accordance with the EU readmission agreement, Bosnia and 
Herzegovina accepted 173 of its citizens in 2009 (20 in 2008). A strategy for the reintegration 
of returnees is being implemented. Bosnia a nd Herzegovina has continued its efforts to 
conclude readmission agreements with non-EU countries, but no new readmission agreements 
were signed. 
There has been a significant decrease in the num ber of people intercepted whilst attempting to 
cross the border unlawfully. In 2009, 381 people we re intercepted when trying to enter or 
leave the country.  
The Service for Foreigners Affairs (SFA) in th e MoS continued to improve its administrative 
capacity. Despite budgetary constrai nts, the SFA hired new professi onal staff. It increased the 
level of cooperation with other law enfor cement agencies. The SFA regularly accessed the 
 
EN 56   EN MIS. Access has been granted to the relevant agencies at both central and local levels. In 
2009, the SFA issued 7,512 permits for temporary stays, an increase of 29% in comparison with 2008. In 2009, 359 permits for permanent stays were issued, an increase of 67% compared with 2008. The SFA issued 474 expulsi on decisions in 2009, a decrease of 40% on 
2008. 
All legislation implementing the Law on moveme nts and stays of aliens and asylum-seekers 
entered into force. The migration action pl an is being implemented. The coordination body 
established to implement the asylum and migr ation strategy and action plan has improved 
inter-agency cooperation. An administrative stru cture for monitoring migration flows, with 
regular updates, has been established. The first migration profile of Bosnia and Herzegovina 
was adopted by the Council of Ministers. The MIS now provides statistical reports for the 
migration profile.  
Overall , the country’s preparations in the area of migration are advanced. Monitoring of 
migration flows and inter-agency cooperation have improved.  
4.3.2.  Money laundering 
Limited progress has been made in the fi ght against money laundering. The rulebook for 
implementation of the Law on prevention of money laundering and financing of terrorist 
activities was adopted, as well as a by-law impl ementing this law for insurance supervisory 
agencies in the country. 
The third round Moneyval Mutual Evaluation Repor t concluded that Bosnia and Herzegovina 
achieved minimum level of compliance with international and European standards on combating money laundering and financing of terrorism. However, the evaluation report 
identified shortcomings in the legislation and in the functioning of the Financial Intelligence 
Department (FID). At present the FID is within  the State Investigation and Protection Agency. 
The FID is understaffed, in particular the inves tigation section, and does not have sufficiently 
trained staff to fully perform its functions.  
The FID tends to operate in isolation from ot her law enforcement agencies as inter-agency 
cooperation regarding the FID’s activities remain s weak. Financial inte lligence gathered by 
the FID is not requested by or disseminated to other law enforcement agencies for investigations into predicate offences or money laundering at the Entity-level and in the Br čko 
District.  
The Ministry of Security esta blished a multi-agency working gr oup to prepare amendments to 
the Law on prevention of mone y laundering and financing of te rrorist activitie s, including 
measures to ensure the institutional independe nce of the FID. Draft amendments to the law 
were submitted to the Council of Ministers. 
Reports of suspicious transactions increased, wi th most originating from the banking sector 
and a few from the insurance and securities sect ors. However, the qual ity of reporting requires 
improvement. The electronic reporting system doe s not include the non-banking sector and its 
operational scope and capacity do not support the FID.  
There have been convictions for money launderi ng and two cases on financing of terrorism 
were filed. However, the overall statistics on money laundering, the financing of terrorist 
activities and on predicate offences are still  incomplete and do not provide sufficient 
 
EN 57   EN information for preventive measures. Furthermor e, there is a lack of information exchange 
between the authorities responsible for combating money laundering.  
The provisions on confiscation in the Criminal Code have been amended to harmonise them 
with the Council of Europe Convention on La undering, Search, Seizure and Confiscation of 
the Proceeds from Crime and on the Financing of Terrorism. However, the legal framework 
for confiscation of proceeds from crime is not  applied adequately. Pr ocedures for managing 
seized and confiscated asse ts have not been set up. 
Overall , in the fight against money laundering, Bosnia and Herzegovi na has started to address 
its objectives. Further efforts are needed regard ing administrative structures, enforcement of 
legal provisions and awarenes s-raising on money laundering. 
4.3.3.  Drugs 
There has been some progress in the fight ag ainst drugs. Bosnia and Herzegovina remains a 
transit country for heroin and synthetic drugs al ong one of the main Balk an routes to Western 
Europe. Drug-related illegal activities remain on e of the most widespre ad forms of organised 
crime. 
Amendments to the Law on prevention and suppr ession of abuse of narcotic drugs were 
adopted. They establish the State-level office for drugs envisaged in the strategy and action 
plan and improve control over precursors. A ru lebook for destruction of confiscated drugs has 
been adopted. Bosnia and Herzegovina has im proved its cooperation with the International 
Narcotics Control Board. Implementation of  the action plan for the prevention and 
suppression of drug abuse is not very advan ced. The overall institutional situation of the 
country does not facilitate the establishment of the co ordination mechanism and the 
implementation of the measures announced in the national action plan on drugs. Specific 
budgetary allocation for data co llection would facil itate the implementation of the strategy. 
Some progress was achieved on in ter-agency exchanges of information. The Ministry of 
Security established a database on perpetrators of drug-related offences which is accessible at 
most  border crossing points. The State Investigati on and Protection Agency, the border police, 
Brčko police and the Federation polic e regularly submit data to this database. Nonetheless, 
Inter- and intra-agency cooperati on in this area is insufficient. 
Narcotics control capabilities have improved. Ac tion by the police and pr osecutors leading to 
seizures and arrests has incr eased considerably as a resu lt of improved cooperation with 
neighbouring countries and EU Member States . There has been some improvement in 
international cooperation as the country be gan implementation of the Police Cooperation 
Convention for South-East Europe. However, effective judicial follow-up is lacking.  
Some progress has been made on collection of information in line with the European 
Monitoring Centre for Drugs and Drug A ddiction (EMCDDA) st andards. Notably, a 
European School Survey Project on Alcohol and Other Drugs (ESPAD) was implemented in 
the two entities, and a first country overvie w and an information map were produced. A 
situation analysis has been c onducted and a standardised regist ration form for drug users at 
rehabilitations centres was introduced. Howe ver, the institutional cooperation with the 
EMCDDA is still at a preliminary stage, and its further progress is likely to depend on the 
consolidation of the cooperation mechanis ms between the State and the entities. 
 
EN 58   EN Overall , preparations in the area of fight agains t drug trafficking are at an early stage. 
Information collection and exchange, narcotics control capabilities and international cooperation have improved. Furthe r efforts are needed regarding the lack of inter- and intra-
agency cooperation within law enforcem ent and effective judicial follow-up.  
4.3.4.  Police 
Uneven progress has been made on police matt ers. Implementation of legislation on police 
reform, which is a European Partnership prior ity, continued. All instit utions established under 
the police reform laws have had directors and deputies a ppointed. Rulebooks have been 
adopted for the agencies of forensic examinat ions, of education and training and of police 
support. 
The 2010 budget allocations for the State-level Mi nistry of Security and a number of law 
enforcement agencies increased. The budget of the Directorate for coordination of police 
bodies  was approved and its rulebook adopted. The independent  board that s upervises the 
police has been established and is  operational. The Directorate received the responsibility and 
staff for international police cooperation (inc luding Europol and Inter pol) and VIP protection. 
Initial preparations for the electronic data exchange system between police and prosecution 
services advanced. Within the law enforcement sector, the police have the necessary resources 
to develop its capacity and joint capability. Ho wever, the Directorate for coordination of 
police bodies is not staffed with police officers.  
The State Investigation and Protection Agency (SIPA) has reached a staffing level of 70%. 
Not enough qualified candidates could be found to fill all the vacancies. The laws on the SIPA 
and border police were brought into line  with the new police reform laws.  
Laws on police officials have been harmoni sed and further improved across Cantons, the 
Entities and the State. Some pr ogress has been made on exchange  of information between the 
police and prosecution bodies. Regulations regarding record -keeping were harmonised. 
Records will be exchanged through an electro nic data exchange system. No progress was 
made on harmonising Entity-level regulations on arms. 
The strategic agreement with Europol is bei ng implemented, including a gap analysis with a 
view to preparing the operational agreement.  Bosnia and Herzegovina regularly submitted 
strategic information. The office for cooperation with  Interpol has a secure data link to all law 
enforcement agencies. However, the level of s ecurity in the Interpol office needs to be 
improved and the communication link with Europol is still not operational. Both the Interpol 
and Europol offices are staffed with civilians , not police officers, making effective police 
work difficult.  
Some progress has been made on operational cooperation between law enforcement agencies 
in the fight against organised crime, includi ng sharing of intelligen ce and joint action. 
However, formal coordination and exchange of  information, particularly of intelligence, 
remains weak. SIPA's cooperation with othe r police bodies was poor. A coordination 
mechanism has been set up between police director s, the chief prosecutor and the Ministry of 
Security. Results of police operations have no t been adequately converted into successful 
prosecutions and convictions.  
Overall , Bosnia and Herzegovina’s preparations in the police field remain at an early stage. 
As part of the police reform, particular effo rts are necessary to strengthen cooperation and 
 
EN 59   EN exchange of information between police agencies . The successful completion of police reform 
requires the constructive involveme nt of all levels of government in Bosnia and Herzegovina. 
4.3.5.  Fighting organised crime and terrorism 
There has been some progress in fighting organised crime . However, the presence of 
organised criminal networks and their attempts to infiltrate the legal economy remain a major 
cause for concern. The structure and high number  of different law enforcement bodies within 
the country is problematic and reduces effectiveness.  
The Criminal Code of Bosnia and Herze govina was further harmonised with the UN 
Convention against transnational organised crime.  It was also harmonised with the Council of 
Europe Conventions on combating organised cr ime, on the prevention of terrorism and on 
action against trafficking in human beings. The Entities and Br čko District have harmonised 
their criminal codes accordingly. An updated acti on plan for the fight against organised crime 
was adopted in February 2010. 
Republika Srpska adopted a new Law on confisca tion, which provides for the establishment 
of a specialised agency for asset recovery. However, a comprehensive legal framework and 
structures for managing confiscat ed assets have not been es tablished throughout the country. 
Bosnia and Herzegovina is not a party to  the Council of Europe Convention on the 
International Validity of Criminal Judgments nor  to the additional protocol to the Council of 
Europe Convention on the Transf er of Sentenced Persons. Mutual  legal assistance agreements 
have been concluded with Croatia and Serbia. They enable fugitives to serve sentences passed in Bosnia and Herzegovina in  those countries and vice versa. In October 2010, an 
agreement establishing a regional office in Be lgrade for improving cooperation in the fight 
against organised crime was signed with Alba nia, Croatia, Montenegro, former Yugoslav 
Republic of Macedonia and Serbia. New action pl ans for the fight against organised crime 
have been adopted. However, Bosnia and Herz egovina has not negotiated an agreement with 
Eurojust. The country has not harmonised its  legislation with th e Council of Europe 
Convention on cybercrime. 
The State Investigation and Protection Agency (SIPA) has been involved in investigations 
into prominent organised crime groups. In majo rity of cases, the investigations have not 
resulted in convictions. Inter-agency joint inve stigation teams, acting on the instructions of 
prosecutors, became more frequent. Special investigative measures increased. Cooperation with neighbouring and EU countries improved. 
The lack of transparent and reliable crime sta tistics remains a cause for concern and impacts 
upon joint strategic operational plan ning and threat assessments.  
Overall , Bosnia and Herzegovina has started to a ddress its priorities related to organised 
crime. The issue remains a serious concern an d affects the rule of  law and the business 
environment. Recurring challenges such as the la ck of intra- and inter-agency cooperation, of 
an adequate legal framework and of m odern investigative practices persist. 
Some progress has been made on combating the trafficking of human beings . Bosnia and 
Herzegovina continued to impl ement the national action plan for combating trafficking of 
human beings. Offences related to trafficking of human beings  are regulated by the Criminal 
 
EN 60   EN Code of Bosnia and Herzegovina. The Entity and Br čko District criminal codes have been 
harmonised with the latest amendmen ts to the State criminal code.  
The number of identified victims and investiga tions related to human trafficking increased, 
against the decreasing regional tr end. Bosnia and Herzegovina c ontinues to be a country of 
origin, of transit and a destina tion for trafficking in women and girls. Most of the victims 
were women from Bosnia and Herzegovina.  
The national coordinator’s office continued to  coordinate a campaign targeting young people 
seeking employment abroad. It was renamed th e Department for Combating Trafficking in 
Human Beings and given addi tional funding for planning a nd monitoring. However, the 
department remains understaffed and not fully operational.  
The State-level government secure d funds for victim ‘safe houses’.  A database of traffickers 
has been established within SIPA. The n ecessary amendments to the Law on witness 
protection have not been adopted. Witn ess protection remains insufficient.  
Overall , Bosnia and Herzegovina continues to be at an early stage in the fight against 
trafficking of human beings. Some progress was made regarding the identification of victims. 
The provision of victim support and w itness protection requires improvement.  
There has been some progress in the fight against terrorism . Operational capacities of the 
Entity-level police forces and cooperation with SIPA on terrorism issues improved. 
International cooperation on te rrorism was good. A strategy fo r preventing and combating 
terrorism for 2010-13 was adopted. An action plan for civil-military cooperation in the event 
of a terrorist attack was adopted but its implementation needs to st art. However, the lack of an 
effective system for freezing funds used for fina ncing terrorism is an issue of concern. The 
existing legislation is overlapp ing and incomplete. The Counter-T errorism Unit in the SIPA is 
sufficiently staffed, but its capacity remains limited.  
Overall , Bosnia and Herzegovina remains at an early  stage in the fight against terrorism. The 
strategy for 2010-2013 was adopted. Effective implementation needs to be ensured.  
4.3.6.  Protection of personal data 
Progress can be reported on personal data protec tion. Regulations and instructions on record-
keeping in the law enforcement sector have b een harmonised with the Law on personal data 
protection. The Agency for Personal Data Protec tion is operational. Its Inspection Department 
has carried out inspections and issued recommen dations. As the national supervisory authority 
for hardware and software, the agency has set up a central register for all data protection 
systems. The director of the agency acts indepe ndently of other state authorities. However, 
complete independence remains to be achieved.  Its independence is cr ucial for cooperation 
with Europol and Eurojust. Most public institu tions have neither adopted regulations to 
enforce the Law on personal data protection nor es tablished a plan for pe rsonal data security.  
Overall , preparations for protection of personal data re main at an early stag e. In particular, the 
independence of the Agency for Persona l Data Protection is not ensured.  
 
EN 61   EN Statistical Annex  
STATISTICAL DATA (as of 14 October 2010)            
Bosnia and Herzegovina  
            
Basic data Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Population (thousand)  3 753e 3 790e 3 813e 3 830e 3 837e 3 843e 3 843 3 844 3 844 3 844p 
Total area of the country (km²)  51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209 
            
National accounts Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Gross domestic product (GDP) (million national currency)  11 689 12 565 13 821 14 505 15 786 17 127 19 252 21 760 24 702 23 994 
GDP (million euro)  5 977 6 424 7 067 7 416 8 071 8 757 9 844 11 126 12 630 12 268 
GDP (euro per capita)  1 581 1 691 1 846 1 935 2 103 2 279 2 561 2 896 3 287 3 192 
GDP (in Purchasing Power Standards (PPS) per capi ta)  : : : : : 5 500.0 6 400.0 7 200.0 7 900.0 7 200.0 
GDP per capita in PPS (EU-27 = 100)  : : : : : 24.4 27.0 28.9 31.5 30.5 
Real GDP growth rate (growth rate of GDP volume, national curr ency, % change on previous year)  : 2.0 4.9 3.8 6.3 3.9 6.1 6.2 5 .7 -2.9 
Employment growth (national accounts, % c hange on previous year)  : : : : : : : : : : 
Labour productivity growth: GDP growth per person employed (%  change on previous year)  : : : : : : -1.4 7.9 7.5 8.0 
Real unit labour cost growth (national accounts,  % change on previous year)  : : : : : : : : : : 
Labour productivity per person employed (GDP in PPS per per son employed, EU-27 = 100)   : : : : : : : : : : 
Gross value added by main sectors (%)                      
Agriculture and fisheries  11.6 11.4 10.9 9.7 10.5 10.2 10.3 9.8 8.9 8.8 
Industry  19.2 19.0 18.0 19.2 19.4 20.5 20.2 20.4 21.0 20.0 
Construction  6.9 6.2 5.6 5.2 4.9 5.2 5.3 5.9 6.5 6.2 
Services  62.3 63.4 65.6 65.9 65.2 64.2 64.3 63.9 63.7 65.0 
Final consumption expenditure, as a share of GDP (%)  : : : : 112.0 111.8 105.0 100.5 100.6 : 
Gross fixed capital formation, as a share of GDP (%)  : : : : 24.2 26.7 22.3 26.1 26.8 : 
Changes in inventories, as a share of GDP (%)  : : : : 2.9 0.1 -0.9 1.3 1.4 : 
Exports of goods and services, relative to GDP (%)  : : : : 27.8 30.4 32.9 32.9 32.4 : 
Imports of goods and services, relative to GDP (%)  : : : : 66.9 68.9 59.2 60.8 61.1 : 
            
Industry Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Industrial production volume index (2000=100)  100.0 105.3e 112.4e 118.0e 132.8e 144.7e 162.7e 173.4e 186.2e 188.9e 
            
Inflation rate Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Annual average inflation rate (CPI, % change on previous year) 1) 4.8 3.1 0.4 0.6 0.4 3.8 6.1b 1.5 7.4 -0.4 
 
EN 62   EN             
Balance of payments Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Balance of payments: current account total (million euro)  -429 -833 -1 253 -1 439 -1 319 -1 500 -783 -1 191 -1 819 -840 
Balance of payments current account: trade balance (million euro)  -3 000 -3 308 -3 524 -3 671 -3 678 -3 962 -3 406 -4 142 -4 823  -3 406 
Balance of payments current account: net services (million euro)  203 255 232 297 347 446 534 639 643 549 
Balance of payments current account: net income (million euro)  641 595 540 473 408 377 312 336 431 385 
Balance of payments current account: net current transfers  (million euro)  1 727 1 626 1 500 1 462 1 604 1 639 1 775 1 976 1 93 0 1 633 
of which government transfers (million euro)  338 450 347 298 261 251 237 193 186 147 
Net foreign direct investment (FDI) (million euro)  159 133 282 338 566 493 608 1 499 627 184 
Foreign direct investment (FDI) abroad (million euro) 2) 0 0 0 0 -1 0 -3 -20 -9 7 
of which FDI of the reporting economy in EU- 27 countries (million euro)  : : : : : : : : : : 
Foreign direct investment (FDI) in the reporting economy (million euro) 2) 159 133 282 338 567 493 611 1 520 636 177 
of which FDI of EU-27 countries in the repo rting economy (million euro)  : : : : 340 410 448 531 348 43 
            
Public finance Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
General government deficit/surplus, relative to GDP (%)  : : : 0.7 1.6 2.4 2.9 1.2 -2.2 -4.4 
General government debt relative to GDP (%)  37.9 35.2 31.3 27.7 25.5 25.3 21.1 18.2 17.2 21.8 
            
Financial indicators Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Gross foreign debt of the whole economy, relative to GDP (%)  : : : : : : : : : : 
Gross foreign debt of the whole economy, relative to total exports (%)  : : : : : : : : : : 
Money supply: M1 (banknotes, coins, overnight deposits, million euro)  717 1 377 1 538 1 592 1 808 2 098 2 593 3 149 3 063 3 01 1 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro)  1 262 2 387 2 593 2 810 3 493 4 129 5 129 6 24 4 6 493 6 648 
Money supply: M3 (M2 plus marketable instruments, million euro)  : : : : : : : : : : 
Total credit by monetary financial institutions to resident s (consolidated) (million euro)  1 543 1 707 2 189 2 619 3 031 3 858  4 759 6 110 7 442 7 209 
Interest rates: day-to-day money rate, per annum (%)  : : : : : : : : : : 
Lending interest rate (one year), per annum (%) 3) : : 12.6 10.9 10.3 9.6 8.0 7.2 7.0 7.9 
Deposit interest rate (one year), per annum (%) 4) : : 1.4 1.1 0.9 0.7 0.5 0.4 0.4 0.3 
euro exchange rates: average of period - 1 euro = … national  currency  1.956 1.956 1.956 1.956 1.956 1.956 1.956 1.956 1.956 1. 956 
Effective exchange rate index (2000=100)  : : : : : : : : : : 
Value of reserve assets (includi ng gold) (million euro) 5) 525 1 385 1 270 1 428 1 779 2 160 2 787 3 425 3 219 3 176 
            
External trade Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Value of imports: all goods, all partners (million euro)  : : : 2 927.8 3 965.8 5 669.8 : : : : 
Value of exports: all goods, all partners (million euro)  : : : 908.3 1 298.6 1 919.8 : : : : 
Trade balance: all goods, all partners (million euro)  : : : -2 019.5 -2 667.2 -3 749.9 : : : : 
Terms of trade (export price index / impor t price index)  : : : : : : : : : : 
Share of exports to EU-27 countries in value of total exports (%)  : : : 53.4 54.2 53.8 : : : : 
Share of imports from EU-27 countries in value of total imports (%)  : : : 58.5 53.0 51.9 : : : : 
 
EN 63   EN             
Demography Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Natural growth rate: natural change (births minus deaths) (per  1000 inhabitants)  2.4 1.9 1.5 0.9 0.6 0.1 0.2 -0.3 0.0 0.0p 
Infant mortality rate: deaths of children under one year of age per 1000 live births  9.7 7.6 9.4 7.6 7.2 6.7 7.5 6.8 6.9 6.5 
Life expectancy at birth: male (years)  71.3 71.3 71.3 71.3 71.3 72.1 72.1 72.1 72.4 72.4e 
Life expectancy at birth: female (years)  76.7 76.7 76.7 76.7 76.7 77.5 77.5 77.5 77.7 77.7e 
            
Labour market Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%)  : : : : : : 51.3 52.2 53.5 53.2  
Employment rate (15-64): share of population aged 15-64 that is in employment (%)  : : : : : : 35.0 36.8 40.7 40.1 
Employment rate male (15-64) (%)  : : : : : : 46.1 48.7 52.9 51.2 
Employment rate female (15-64) (%)  : : : : : : 24.0 25.0 28.7 29.3 
Employment rate of older workers (55-64 ): share of population aged 55-64 that is in employment (%)  : : : : : : 30.6 31.9 34.4 34.0 
Employment by main sectors (%)                      
Agriculture  : : : 18.1 19.4 19.6 20.6 19.8 20.6 21.2 
Industry  : : : 24.8 24.2 21.4 30.7 32.6 32.5 31.4 
Construction  : : : 10.6 10.5 4.9 : : : : 
Services  : : : 46.5 45.9 54.1 48.7 47.5 47.0 47.3 
Unemployment rate: share of labour force that is unemployed (%)  39.7 40.0 41.1 41.6 41.8 43.9 31.1 29.0 23.4 24.1 
Share of male labour force that is unemployed (%)  : : : : : : 28.9 26.7 21.4 23.1 
Share of female labour force that is unemployed (%)  : : : : : : 34.9 32.9 26.8 25.6 
Unemployment rate of persons < 25 years: share of labour forc e aged <25 that is unemployed (%)  : : : : : : 62.3 58.4 47.5 48.7  
Long-term unemployment rate: share of labour force that is unem ployed for 12 months and more (%)  : : : : : : 26.7 25.0 20.2 20 .0 
            
Social cohesion Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Average nominal monthly wages and sala ries (national currency) 6) 372.0 408.0 446.0 484.0 505.0 538.0 : : : : 
Index of real wages and salaries (index of nominal wages and sa laries divided by the CPI) (2000=100)  : : : : : : : : : : 
Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in 
further education or training (%)  : : : : : : : : : : 
            
Standard of living Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Number of passenger cars per 1000 population  : : : : : : 162.6 171.7 178.7 180.5 
Number of subscriptions to cellular mobile telephone serv ices per 1000 population  49.6 92.6 176.2 271.8 344.2 412.5 489.0 637. 4 770.8 831.8 
            
Infrastructure Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Density of railway network (lines in operation, per 1000 km²)  : : 19.7 18.2 20.3 20.1 20.1 19.9 19.9 19.9 
Length of motorways (thousand km)  : : : : : 0.0 0.0 0.0 0.0 0.0 
            
Innovation and research Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Spending on human resources (public expenditure on educ ation in % of GDP)  : : : : : : : : : : 
Gross domestic expenditure on R&D in % of GDP  : : : : : : : : : : 
Percentage of households who have Internet access at home (%)  : : : : 6.6 : : : : : 
 
EN 64   EN             
Environment Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100)  : : : : : : : : : : 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP)  : : : : : : : : : : 
Electricity generated from renewable sources in % of gross electricity consumption  : : : : : : : : : : 
Road share of inland freight transport (% of tonne-km)   : 51.0 52.0 53.0 53.0 43.0 54.0 62.0 60.0 63.0 
            
Energy Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Primary production of all energy products (thousand TOE)  : : : : : : : : : : 
Primary production of crude oil (thousand TOE)  : : : : : : : : : : 
Primary production of hard coal and lignite (thousand TOE)  : : : 214 211 230 : : : : 
Primary production of natural gas (thousand TOE)  : : : : : : : : : : 
Net imports of all energy products (thousand TOE)  : : : 369 478 627 681 : : : 
Gross inland energy consumption (thousand TOE)  : : : : : : : : : : 
Electricity generation (thousand GWh)  : : : : : : : 13.0 14.8 : 
            
Agriculture Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Agricultural production volume index of goods and services (producer  prices, previous year=100)  : : : : : : : : : : 
Total utilised agricultural area (thousand hectare)  : : 1 697 1 722 1 722 1 712 1 722 1 670 1 679 1 656 
Livestock: cattle (thousand heads, end of period)  : : : : 453 460 515 468 459 458 
Livestock: pigs (thousand heads, end of period)  : : : : 596 654 712 535 502 529 
Livestock: sheep and goats (thousand heads, end of period)  : : : : 965 976 1 081 1 104 1 101 1 125 
Production and utilisation of milk on the farm (total  whole milk, thousand tonnes)  : : : : 583 629 662 724 737 734 
Crop production: cereals (including ri ce) (thousand tonnes, harvested production)  930 1 139 1 309 793 1 439 1 350 1 341 1 001 1 375 1 343 
Crop production: sugar beet (thousand tonnes, har vested production)  : : : : : : : : : : 
Crop production: vegetables (t housand tonnes, harvested production)  176 190 247 204 276 257 297 254 282 280 
 
: = not available p = provisional value 
e = estimated value 
1) Until 2005, the growth rate of retail prices is presented; from  2006 onwards growth rate of the consumer price index (CPI) i s used. 
2) The balance of payments sign conventions are used. For FDI abroad a minus sign means  investment abroad by the reporting econ omy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the repo rting economy an entry without sign means that investment into  the reporting economy exceeded disi nvestment, while a minus sign 
indicates that disinvestment exceeded investment. 3) Short-term lending rates in national currency to private enterprises and cooper atives (weighted average). 
4) Demand deposit rates in national cu rrency to households (weighted average). 
5) As of 31 December; since 2009 gol d has been included in reserve assets. 
6) For 1998-2004, net salary; for 2005, including data from Brcko District.