EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 14.10.2009 
SEC(2009) 1338 
COMMISSION STAFF WORKING DOCUMENT 
 
BOSNIA AND HERZEGOVI NA 2009 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2009-2010 
{COM(2009) 533 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 .................................................................................... 7 2.2. Human rights and the protection of minorities .......................................................... 15 2.3. Regional issues and international obligations............................................................ 21 3. Economic criteria ....................................................................................................... 24 3.1. The existence of a functioning market economy ....................................................... 24 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 29 
4. European standards .................................................................................................... 31 4.1. Internal market ........................................................................................................... 31 
4.1.1. Free movement of goods............................................................................................ 31 4.1.2. Movement of persons, services and right of establishment ....................................... 33 
4.1.3. Free movement of capital........................................................................................... 35 4.1.4. Customs and taxation ................................................................................................. 36 4.1.5. Competition............................................................................................................. ... 38 
4.1.6. Public procurement .................................................................................................... 38  
4.1.7. Intellectual property law ............................................................................................ 40 4.1.8. Social policies, employment and 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 ........................................................................................................ . 49 
 
EN 3   EN 4.2.5. Energy .................................................................................................................. ...... 50 
4.2.6. Information society and media................................................................................... 51 4.2.7. Financial control....................................................................................................... .. 53 
4.2.8. Statistics .............................................................................................................. ....... 53 
4.3. Justice, freedom and security ..................................................................................... 55 4.3.1. Visa, border management, asylum and migration...................................................... 55 
4.3.2. Money laundering ...................................................................................................... 58  
4.3.3. Drugs................................................................................................................... ....... 58 
4.3.4. Police.................................................................................................................. ........ 59 
4.3.5. Fighting organised crime and terrorism ..................................................................... 60 4.3.6. Protection of personal data......................................................................................... 62 
 
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
Bosnia and Herzegovina 2009  PROGRESS REPORT  
1. INTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported regularly to the Counc il and Parliament on 
progress made by the countries of the Western Balkans regio n. 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 Herzegovi na 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 period from early Oc tober 2008 to mid- September 2009. Progress is 
measured on the basis of decisions taken, legisl ation adopted and measures implemented. As a 
rule, legislation or measures which are bei ng prepared or awaiting parliamentary approval 
have not been taken into account. This approach  ensures equal treatment across all reports and 
permits an objective assessment.  
The report is based on many sources. As us ual, these include contributions from the 
government of Bosnia and Herzegovina and 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 this report, the Comm ission draws detailed 
conclusions regarding Bosnia and Herzegovina. It is publis hing those conclusions in a 
separate communica tion on enlargement2. 
1.2. Context 
Bosnia and Herzegovina is a potential candidate  for EU membership. The Stabilisation and 
Association Agreement (SAA) between Bosnia and Herzegovina and th e EU was signed in 
June 2008. The Interim Agreement, which focuses on the trade-related areas of the SAA, has 
been in force since July 2008. However, constitutional elements established by the Dayton/Paris peace agreement have continued to  be challenged by key political leaders in 
both Entities, and EU-related reforms have s een limited progress. There has been little 
                                                
 
1 The rapporteur for Bosnia and Herzegovina is Ms. Doris Pack. 
2 Enlargement Strategy and Main Challenges 2009-2010 (COM (2009) 533 of 14.10.2009) 
 
EN 5   EN consensus on the main reform priorities, and th ere have been attempts to reverse previously 
agreed reforms. A shared vision on the direct ion of the country remains necessary for the 
smooth operation of institutions, for creating more  functional and efficient State structures, 
and for speaking with one voice on EU and internat ional matters. In this regard, the country's 
political leaders have engaged in a joint EU/U S-led initiative, started on 8/9 October 2009 in 
Sarajevo. This now needs to be converted into concrete results that will unblock Bosnia and 
Herzegovina's progress towards the EU th rough constitutional changes and a renewed 
domestic consensus. 
An international presence under UN auspices — the Office of the High Representative, OHR 
— has been in place in Bosnia and Herzegovi na since 1995. Its possi ble closure is being 
considered by the international communit y, but a decision depends on Bosnia and 
Herzegovina’s progress in m eeting specific objectives and conditions, which have been 
determined by the Peace Implementation Council Steering Board3. The EU has started 
preparations to strengthen its engagement in the country upon the closure of the OHR. 
1.3. Relations between the EU and Bosnia and Herzegovina  
Bosnia and Herzegovina is  participating in the Stabilisation and Association Process . The 
Stabilisation and Association Agreement (SAA) has been ratified by fourteen Member States 
so far. The implementation of the Interim Agr eement (IA) has been satisfactory overall in its 
first year, though efforts to prepare for forthc oming obligations under the IA/SAA – which is 
a European Partnership prio rity - need to intensify. 
The EU provides guidance to the authorities of  Bosnia and Herzegovina on reform priorities 
as part of the European Partnership . Progress on these reform priorities is encouraged and 
monitored by Reform Process Monitoring (RPM ) meetings and by the bodies established by 
the Interim Agreement. One Plenary RPM meeti ng, six sectoral RPM meetings, five Interim 
Sub-Committee meetings and one Interim Co mmittee meeting have been held over the 
reporting period. 
The regular meeting between Members of the European Parliament and Members of the 
Bosnia and Herzegovina Parliamentary Asse mbly took place in January 2009. A political 
dialogue meeting at the leve l of foreign ministers was held in September 2009. Three 
coordination meetings on EU-related matters between high-level repr esentatives of the 
government and parliament of Bosnia and Herzegovina and representatives of the 
Commission’s Delegation and the EUSR  took place in the reporting period.  
In addition to Community support, the EU has c ontinued to deploy consid erable resources in 
Bosnia and Herzegovina in the framework of  the Common Foreign and Security Policy and 
the European Security and Defence Polic y. A new High Representative/EU Special 
Representative was appointed in March 2009. The mandate of the EU Special Representative 
is, inter alia,  to promote overall political coordination and offer EU advice and facilitation to 
                                                 
3 These cover five objectives: (1) Acceptable and su stainable resolution of the issue of apportionment of 
property between the State and othe r levels of government; (2) Accepta ble and sustainable resolution of 
defence property; (3) Completion of the Br čko 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.  
 
EN 6   EN Bosnia and Herzegovina to help the coun try meet requirements for European Union 
membership.  
The EU Police Mission (EUPM) has continued to concentrate its efforts on supporting the 
fight against organised crime. EUPM continued to monitor and assess the implementation of 
police reform. Its mandate will expire at  the end of 2009 and discussions about the 
establishment of a follow-on mission  until 2011 are in the final phase.  
The EUFOR/ALTHEA military mission contribu ted to maintaining a safe and secure 
environment in the country. Local law-enforcemen t agencies proved able to deal with public 
unrest issues. In November 2008, the UN Secur ity Council extended EUFOR’s mandate for 
one year. EUFOR forces currently amount to some 2,000 troops in the country, backed up by 
‘Over the Horizon’ reserves — in total four battalions, shared with NATO. Mutual tactical 
reserve arrangements are also in place with  KFOR. Any future reconfiguration of 
EUFOR/ALTHEA will be decided taking into account the overall political situation and 
developments in Bosnia and Herzegovina. 
The visa facilitation and readmission agreemen ts between Bosnia and Herzegovina and the 
European Community continued to be implemented. In the framework of the visa 
liberalisation  dialogue process, Bosnia and Herzegovi na has made good progress in the areas 
of justice, freedom and security, but has not  met all the benchmarks set in the roadmap. 
Bosnia and Herzegovina is encouraged to continue  its efforts, in partic ular in the areas of 
biometric passports, border and migration mana gement and the fight against corruption and 
organised crime.  
As a potential candidate for EU membership, Bo snia and Herzegovina aligned itself with 100 
CFSP declarations from a total of 128 relevant  declarations adopted by the EU during the 
reporting period. 
As regards pre-accession financial assistance , the 2009-2011 Multi-Annual Indicative 
Planning Document (MIPD) for Bosnia and Herzegovina was adopted in July 2009. The 
European Commission (EC) allocated to the country a total of € 89.1 million under the 2009 
Instrument for Pre-accession Assistance (IPA) pr ogramme. The main areas of assistance are: 
public administration, constituti onal reform, rule of law, civil society, culture, SME 
development, labour market and acquis  approximation. The 2009 Programme also aims to 
alleviate the impact of the fi nancial and economic crisis in  Bosnia and Herzegovina.  
IPA — and the remaining CARDS assistance  — is implemented by the Commission’s 
Delegation in Sarajevo. Little progress was made  towards decentralised management of aid 
during the reporting period. The National Fund a nd the Central Financial and Contracting 
Unit (CFCU) in the Ministry of Finance and Treasury (MoFT) are onl y partially staffed. 
Decentralised management remains a medium-t erm objective for Bosnia and Herzegovina. It 
is an indispensable step in order to accede to  all components of the IPA programme and to 
prepare for the future management of structural funds.  
The complex institutional and political environment in the country, significant delays in 
ratifying the 2007 and 2008 IPA Financing Agreemen ts, as well as difficulties in appointing a 
National IPA Coordinator, have seriously dela yed the implementation of IPA programmes.  
 
EN 7   EN In the framework of the Civil Society Facility, the 2009 IPA programme will provide € 3.0 
million to support civil society  development with a focus on strengthening civil society 
networks and enhancing the ro le of civil society in th e fight against corruption.  
In response to the economic crisis, an IPA crisis package  has been created, comprising €200 
million for the Western Balkan region which are e xpected to leverage investments of at least 
€1 billion, co-financed by the partner financial in stitutions. The country will benefit from a 
share of multi-beneficiary f unds for competitiveness, SMEs, energy efficiency and banking 
sector regulation. In addition, national IPA funds  were programmed in response to crisis. 
They will provide financing in amount of €39 m illion, including via the Infrastructure Project 
Facility, to support the development of sma ll and medium sized enterprises and provide 
significant investment in infrastructure in th e transport, environment, and energy sectors. 
Funding will be granted also to the Deposit Insurance Agency to enable it to cope with the negative impact of the financial crisis on the deposit outflows.  
Bosnia and Herzegovina joined its first Community programme - the 7th Framework 
Programme for research, technol ogical development and demons tration activities (FP7). The 
Memorandum of Understanding for its participa tion in the FP7 was signed in November 2008 
and entered into for ce in January 2009.  
Bosnia and Herzegovina became a full member of the Union for the Mediterranean and has 
submitted a number of projects which are undergoing evaluation.  
2. P
OLITICAL CRITERIA  
This section examines progress made by Bo snia and Herzegovina towards meeting the 
Copenhagen political criteria, which require stab ility of institutions guaranteeing democracy, 
the rule of law, human rights and respect for and protection of minorities. It also monitors 
regional cooperation, good neighb ourly relations with enlargement countries and Member 
States, and respect for 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, establishes a complex institutional 
architecture. While progress has been made under the current c onstitutional structure, it still 
offers too many possibilities for political obstr uctionism. The misuse of  provisions such the 
"entity voting"4 and complex rules on quorums prevents swift decision-making and, therefore, 
hinders reform and the country's capacity to make rapid progress towards the EU. Among 
other things, the problem of blockages due to th e entity voting rules needs to be addressed, and 
a stricter definition of the vital national clause in the Constitution is necessary.  
Nationalist rhetoric from all political lead ers challenging the DPA and, by implication, the 
constitutional order remained commonplace. Certain politicians from the Federation 
                                                 
4 Article IV 4 d) of the Constitu tion of Bosnia and Herzegovina. 
 
EN 8   EN continued to question the existence of Republik a Srpska, claiming that it is the result of 
genocide. Republika Srpska frequently challenged the State institutions, and State competencies and laws. It continued to claim the right of self-determination and remained 
systematically opposed to the transfer of new co mpetencies to the State level, including in the 
context of the SAA. Moreover, it requested un ilaterally – wit hout the consent of the State 
level and the Federation - the return of competenci es transferred to the State in recent years.  
In the framework of the Prud Agreement of N ovember 2008, the leader s of the three main 
political parties committed themselves to initia te the process of constitutional reform and to 
introduce measures to harmonise  the Constitution of Bosnia  and Herzegovina with the 
European Convention on Human Rights (ECHR). Ho wever, the meetings of the Prud leaders 
soon showed diverging views on the future orga nisation of the country. The overall political 
climate has deteriorated in recent mont hs and the process ha s been discontinued. 
The Parliamentary Assembly adopted an ame ndment to the Constitution of Bosnia and 
Herzegovina that establishes the Br čko District as a unit of local self-governance. This has 
been a major development and step forward, which opens the way to the termination of supervision over the District once all conditions  are met. According to the amendment, Br čko 
remains under the sovereignty of Bosnia and Herzegovina in the areas falling within the 
competencies of the institutions of Bosnia a nd Herzegovina, while its territory is a shared 
property of the Entities. The constitutional amendment on Br čko is one of the five objectives 
set by the Peace Implementation Council (PIC) fo r the closure of the Office of the High 
Representative.  
No agreement on a comprehensive reform of the Constitution has been reached. Elections 
therefore would continue to be  conducted under provisions th at are in violation of the 
European Convention on Human Rights (ECHR). The exclusion of citizens not belonging to 
the three constituent peoples from the election to the House of Peoples and the Presidency is incompatible with Protocols 1 and 12 of the ECHR  
On the basis of the Dayton/Paris Agreement,  the international community continues to 
maintain a significant presence in Bosnia  and Herzegovina. The OHR/EUSR’s office has 
worked closely with the European Commission on issues related to Euro pean integration. The 
High Representative (HR) has continued to pl ay a key role in facilitating reform and 
governance issues. The High Representative used  the Bonn Powers on several occasions. 
Amongst other, the HR imposed two decisions related to ICTY coop eration and issued a 
decision to remove two police officers for an ti-Dayton activities. The High Representative 
also used Bonn powers to annul the conclusi ons adopted in May by the Republika Srpska 
National Assembly challenging the competencies of State-level institutions He also used 
Bonn Powers to extend the period of temporary fi nancing of the City of Mostar, to de-block 
developments related to the Brcko District a nd to prevent the collapse of the electricity 
transmission company TRANSCO.  
Some progress has been made towards m eeting the requirements set by the Peace 
Implementation Council Steering Board (PIC) for th e transition from the OHR to a reinforced 
EU presence, notably as regards the objectives of completing the Br čko District final award, 
improving fiscal sustainability a nd entrenching the rule of law. However, the process has been 
hindered by insufficient politic al commitment. The resolution of State and de fence property 
and a positive assessment of the political situ ation in Bosnia and He rzegovina by the PIC 
Steering Board based on full compliance w ith the Dayton Peace Agreement remain 
outstanding requirements for the transition. These issues need to be urgently addressed in 
 
EN 9   EN order for Bosnia and Herzegovina to make furt her progress on its Euro pean Integration path. 
The proper implementation of the other obj ectives needs also to be ensured. 
The Entities have not yet finished making thei r Constitutions compliant with the March 2006 
ruling of the Constitutional Court of Bosnia a nd Herzegovina that the Entity coats of arms, 
flags and anthems are not in line with the State- level Constitution of Bosnia and Herzegovina.  
Overall,  there has been little progre ss in addressing the key European partnership priority of 
more functional and sustainable state structur es and better respect for human rights and 
fundamental freedoms, including by agreei ng and adopting the neces sary constitutional 
changes. Constitutional reform has been limited to the amendment concerning the Br čko 
District.  
Parliament  
The Parliamentary Assembly’s legislative work has continued to be adversely affected by 
intransigent and ethnically orie nted positions taken by the country’s political leaders. 
Obstructions towards State-level laws, includ ing European Partnership requirements, in 
particular by members from the Republika Srpska, remained. 
The Chairmanship of the Parliamentary Assembly  continues, in line wi th the Constitution of 
Bosnia and Herzegovina, to rotate on an ei ght-monthly basis which hinders efficiency. The 
Assembly is still hampered by inadequate technical and human resources. Cooperation 
between the Parliamentary Assembly and the C ouncil of Ministers remained weak. Lack of 
coordination in the legislative process, in particular between the State and the Entity 
parliaments, also continued to be a proble m. The work of the various Parliamentary 
committees has been affected by inter-ethnic divergences. Entity voting has often prevented 
swift adoption of legislation. 
Overall,  the work of the Parliamentary Assembly of  Bosnia and Herzegovina continued to be 
adversely affected by the unstable political clim ate and insufficient administrative resources.  
Government  
The Presidency of Bosnia and Herzegovina is responsible for foreign policy, proposing 
annual budgets and representing Bosnia and Her zegovina in international organisations. In 
line with the Constitution of Bosnia and Herze govina, the Presidency members continue to 
rotate on an eight-monthly basis, whic h hampers efficiency and continuity. 
Members of the Presidency have continued to show their first allegiance to their Entity and 
their constituent people. They have invoked the ‘vital national inte rest’ on a number of 
occasions and have generally shown little cap acity to find common positions. Presidency 
members have continued to represent individual  positions in international fora which often 
did not reflect the policy of Bosnia and Herzeg ovina as a whole. Lack  of political will and 
perceived diverging national interests in the gove rnment and parliament continued to delay the 
adoption of legislation. The State institutions  made limited progress as regards EU-related 
reforms. The work of the Council of Ministers is also hindered by the limited powers of its 
Chairman. There have been delays with appoi ntments to key positions. The post of Minister 
of Security has been vacant for several weeks.  
 
EN 10   EN The Directorate for European Integration (DEI) c ould not fully play its role due to the absence 
of a Director for most of the reporting period. Its work has al so been hampered by the difficult 
political climate.  
The Directorate for Economic Plan ning has continued to play its role as the primary source of 
policy guidelines and in setting the macroeco nomic framework. Nonetheless, the Country 
Development Strategy and Social  Inclusion Strategy have not  been adopted yet. These 
documents are to replace the Medium-Term De velopment Strategy which expired in 2007. 
The staffing of the General Secretariat of the Council of Ministers has improved. However, it 
does not yet have the sufficient capac ity for planning and policy coordination.  
The general secretariats of the governments at the State and Entity level and in the Br čko 
District have signed a memorandum of unders tanding on mutual cooperation which should 
contribute to the European Part nership priority of enhancing coordination at political, legal 
and technical level.  However, fragmented policy-making between the State and the Entities 
remains the main obstacle to efficient work by the State government. The Coordination Board 
for Economic Development and European Integr ation, which is designe d to harmonise State 
and Entity agendas, does not play an effe ctive role and has met only infrequently. 
Coordination between the different levels of authority has been mi nimal. The Council of 
Ministers has held specific sessions on Eur opean integration matters. Due to its limited 
powers the Council of Ministers ha s occasionally been left out of negotiations on reforms, 
which have been conducted by political party leaders.  
A serious handicap for policy planning in Bosnia a nd Herzegovina as a whole is the lack of an 
up-to-date population census. Major reforms ar e still based on the 1991 census, which does 
not reflect the current situation on the ground.  Some progress has been made as regards 
technical preparations for the 2011 popula tion census. However the necessary legal 
framework has not yet been adopted. 
The Republika Srpska government has conti nued to adopt legisl ation often without 
coordination with the Council of Ministers or the Federa tion government. The Republika 
Srpska government remains opposed to the transf er of competencies to  the State level and 
often threatened to reverse previous transf ers. The Federation government has been less 
efficient in adopting and implementing legislatio n, mainly due to the fragmented institutional 
structures. This complex orga nisation encourages diverging ethnic interests and makes it 
particularly difficult to achieve smooth governance.  
Both Entities have local self-gove rnment legislation largely in line with the European Charter 
for Local Self-Government. However, the impact  on decentralisation of powers to local self-
government units has been limited, and the lack of res ources in the municipalities remains an 
issue both in the Federation and in Republika Srpska. Harmonisation of  Cantonal legislation 
within the Federation has been uneven. The Stat e-level authorities have no powers over local 
self-government, which complicates compliance w ith Bosnia and Herzegovina’s international 
obligations in this area. 
The Mostar City Council has failed to elect a new mayor in accordance with the requirement 
of the statute of the City of Mostar, due to  a power struggle between ethnic groups. The 
failure to elect a mayor meant that the city risked serious financial difficulties, since the 
annual budget could not be adopted and the c ity’s temporary financ ing expired in March 
2009. The High Representative issued a decision extending the period of temporary financing 
of the City of Mostar unt il the end of September 2009.  
 
EN 11   EN Overall,  Bosnia and Herzegovina has made very  limited progress on making the State-level 
government structures more functional and effi cient. Lack of coordi nation, ethnic tensions 
and lack of resources continue to delay refo rm. Fragmented policy-making between the State 
and the Entities remains the main obstacle to  efficient work by the State government. The 
frequent duplication of competencies lead s to increased administrative costs. 
Public administration  
There has been some progress in the area of public administration reform, which is a key 
European Partnership priority.  
The Public Administration Reform (PAR) Coor dination Office has maintained its increased 
staffing levels and can be considered to have su fficient human and material resources to carry 
out its task of coordinating and monitoring implementation of the PAR Strategy and the 
accompanying Action Plan. The implementation ra te of the Strategy and the Action Plan 
reached 36% as of July 2009. Operational c ooperation with the coordinators for public 
administration reform appointed for the Fede ration government, the government of Republika 
Srpska and the government of the Br čko District is satisfactory.  Management of the fund 
established to support public administration re form has been good. Almost  two thirds of the 
resources have been committed and several projects deployed. All the implementing 
legislation for the fund is in place. Donor coordination is also fully managed by the PAR 
Coordination Office.  
However, Bosnia and Herzegovina's administra tive structures remain cumbersome, and in 
some cases fragmented, and prone to dupli cation and unclear divi sion of powers, both 
between institutions at the same  level and, vertically, between different levels of government. 
Further efforts are needed to make the recr uitment procedures for civil servants more 
efficient. Civil service laws at all levels have  been amended or replaced by new legislation. 
This should bring some improvements as regard s efficiency of the public administration. 
However, consultation of stakeholders in the process of preparation of the amendments has 
been insufficient. Lack of converg ence of the legislation at the diffe rent levels so as to enable 
better mobility of civil servants from one level of administration to another is of concern.  
The civil service is still highl y politicised and in need of pr ofessionalisation, transparent and 
efficient recruitment procedures and modern career development. Lit tle progress has been 
made in preventing political interference and li miting the role played by ethnic identity and 
party membership in public administration, as  demonstrated during the harsh and lengthy 
processes to appoint new director s in a number of key institu tions (Directorate for European 
Integration, Indirect Taxati on Authority, Communications Regul atory Authority, etc). Little 
progress has also been made in  modernising procedures and in ensuring closer cooperation 
between the various administra tions within the country.  
Action by Bosnia and Herzegovina towards finding an acceptable and sustainable resolution 
of the State property apportionmen t issue has been very limited. In  view of the considerable 
delays incurred in the preparation of a comp rehensive inventory of State property, the High 
Representative decided in August that his office will prepare such inventory. 
The new State Ombudsmen have, after long delays , been appointed. However, the delays in 
phasing out the Entity Ombudsman offices hamper full implementation of the 2006 
Ombudsman Law. These delays have been due, in particular, to the outstanding adoption of 
legislation closing down the Ombudsma n’s office in Republika Srpska  
 
EN 12   EN Overall,  there has been some progress in the ar ea of public administration in terms of 
coordination and capacity. However, the reform e fforts need to be inte nsified. The country’s 
complex and cumbersome institutional stru cture continues to undermine efficiency. 
Significant further efforts towards an effici ent, professional, st able, accountable and 
transparent civil service are needed  at all levels of government.  
Civilian oversight of the security forces 
The committee of the Parliamentary Assembly of Bosnia and Herzeg ovina in charge of 
overseeing the Intelligence-Security Agency (O SA) continued its practice of inspecting the 
OSA’s regional centres, which is a positive el ement. The amendments to the Law on the OSA 
and the amendments to the Law on Protection of  Secret Data came into force in February 
2009. The former contributed to enhancing the planning and reporting ob ligations between the 
OSA and the State’s executive and parliament ary bodies. The amendments to the Law on 
Protection of Secret Data broa dened the scope of data protec tion in Bosnia and Herzegovina 
with regulations on industrial security that were also in line with NATO standards. The process of Bosnia and Herzegovina's accessi on to NATO will further reinforce civilian 
oversight of the country's security forces. 
Judicial system 
Progress in the area of judicial refo rm has been limited on the whole.  
Positive developments have taken place as regards development of Information and 
Communication Technology in courts and prosecut or’s offices. Almost all courts and a few 
prosecutors' offices in Bosnia and Herzegovina  are connected to a nationwide area network. 
Training courses have been pr ovided to facilitate the usag e of the new Case Management 
System supported by this network.  Local area networks have been installed in all courts and 
prosecutor’s offices. This should contribute  to further improving the efficiency and 
transparency of the work of the courts and prosecutor’s offices in Bosnia and Herzegovina. 
The Judicial and Prosecutoria l Training Centres in the Entit ies continued their training 
activities in line with the traini ng strategy. Nonetheless, the staffing of the Centres needs to be 
reinforced in order to ensure sust ained and adequate implementation.  
Regarding the backlog of court cases, vari ous projects are underway  with the aim of 
introducing systemic solutions. There has been so me improvement in this regard, even though 
a high number of cases are still to be reso lved and further efforts are necessary.  
However, the complex structure of the judici ary and the absence of a single budget continue 
to be a major obstacle to reform. No progress has been made towards establishing a Supreme 
Court that could harmonise applic ation of legislation across the f our internal jurisdictions: the 
State level, the Fede ration of Bosnia and Herzegovi na, Republika Srpska and the Br čko 
District. Bosnia and Herzegovina has been unable  to agree on the prol ongation of the mandate 
of international judges a nd prosecutors. Political interference in the judicial system continues 
to be a cause for concern. The challenges to th e jurisdiction and the competences of the State-
level judicial agencies by the Republika Sr pska government are unacceptable and deeply 
worrying. Political interference du ring the process of appointing ne w judges at the Federation 
Constitutional Court has also been of concern. 
 
EN 13   EN Implementation of the Justice Sector Reform Strategy has not progressed in accordance with 
the agreed timelines. This was due mainly to th e complicated structure of the judicial system 
and the limited contribution by the Entity Ministries of Justice to the work of the implementation working groups. Material cond itions for the improvement of judicial 
capacities remained very limited. 
Limited progress has been made in the area of juve nile justice. One of the main priority areas 
for the implementation of the Juvenile Justice Strategy is the adoption of a Juvenile Justice 
Law in line with international standards. However, a State-level Juvenile Justice Law has not been adopted. Republika Srpska has prepared a Juvenile Code. However, there is no such 
initiative in the Federation and the Br čko District. As regards support for legal provisions on 
the application of alternative measures, which is another priority area for the implementation of the Juvenile Justice Strategy, a by-law on such measures has been adopted by the 
Federation. However, only limited steps have been taken for its implementation. Despite 
some improvements, there continues to be a l ack of appropriate and well-regulated juvenile 
correctional facilities.  
Protection of child witnesses in legal proceedings and child victims is insufficient. The 
awareness of judges and prosecut ors about children’s rights remains lacking, and priority to 
hearing juvenile cases in order to reduce the detenti on periods is not ensured.  
As regards local prosecution of war crimes, both the War Crimes Chamber of the Court of 
Bosnia and Herzegovina and the Special Depart ment for War Crimes of the Prosecutor’s 
Office of Bosnia and Herzegovina continued to  operate with efficiency and in compliance 
with internationally re cognised fair trial standards. St rategies on public information and 
outreach of the Court of Bosnia  and Herzegovina have been a dopted. However, despite some 
improvements, the outreach of the Court continue s to be insufficient. Raising the currently 
low level of public awareness is important al so because lack of knowledge about the War 
Crimes chamber has undermined public confidence in its work.  
Some limited progress has been registered as re gards prosecution of cases before cantonal and 
district courts, especially in the Federati on. However, the lack of witness protection 
capabilities and witness support,  insufficient staffing and l ack of specialisation among 
cantonal and district prosecutors continue to be  major obstacles to effective prosecution of 
war crimes. The lack of harmonisation of the lega l codes used in war crime trials at State and 
Entity level, and in particular th e fact that the Criminal Code of  former Yugoslavia can still be 
applied at the Entity level, is of concern. The cooperation between prosecutors and police and between police across Entity lines needs to be stepped up.  
The number of prosecuted war crime cases invol ving sexual violence remains low. More 
efforts are needed to investigate and prosecute  such cases and to provide witnesses with 
sufficient protection and psychological support.  
A National War Crimes Strategy, providing for a systematic appr oach for dealing with the 
large volume of war crimes cases, was adopted in December 2008. However, only limited progress has been made in its implementati on, mainly due to insufficient coordination 
between the various justice sector institutions at the State level, in  the Entities and the Br čko 
District. Sufficient funds need also to be made available for the implementation of the 
strategy. The substantial reduction of the budget of  the State Court for 2009 is of concern, as 
it may put its functioning under c onsiderable strain. The work flow on the processing of 
serious war crime and organised crime cases  as undertaken by the office of the Chief 
 
EN 14   EN Prosecutor and the Court President has been nega tively affected by the delays in clarifying the 
position for an extension of the international pr esence in State judicial  institutions after 2009.  
Overall,  preparations by Bosnia and Herzegovina to develop an effective and efficient 
judiciary remain at an early stage. Significant efforts are needed to ensure implementation of 
the Justice Sector Reform Strategy and th e National War Crimes Strategy, including by 
ensuring adequate financial resources. The frag mented legal and structural framework across 
the country and the absence of a single budget imp ede efficiency. Political  interference in the 
judicial system continues to be a cause for concern. 
Anti-corruption policy  
Bosnia and Herzegovina has made little progress in fighting corruption. A positive 
development has been the adoption of a new Strategy for fight against corruption 2009-2014 
and the related Action Plan. Furthermore, a dr aft Law on Agency for prevention of corruption 
and on cooperation in fight against corruption has been prepared a nd is under adoption. 
However, considerable further efforts remain necessary in this area. The implementation of 
the corruption-related aspects of the 2006-2009 St rategy for the fight ag ainst organised crime 
and corruption has shown very limited result s. Insufficient implementation of the legal 
framework and problems in coordi nation between the Entities consti tute an issue of concern.  
Bosnia and Herzegovina has not yet signed the Additional Protocol  to the Council of Europe 
Criminal Law Convention on Corruption and th e OECD Convention on Combating Bribery of 
Foreign Public Officials in International Business  Transactions. It still needs to harmonise its 
legislation with the Council of Europe Civil Law Conve ntion on Corruption. Implementation 
of the Group of States against Corruption (GRECO) recommendations, among others as 
regards the management of confis cated assets, remains incomplete. 
Following the rejection of the amendments to the State-level Law on Financing of Political 
Parties aimed at increasing transparency, no ne w proposal has been presented. Elected public 
officials at State and Entity level and their re latives are required to submit information on 
their involvement in other institutions. Howe ver, there is no effective monitoring of 
declarations of assets and no eff ective sanctions are provided for.  
Implementation of the Freedom of Access to Info rmation Act is insuffic ient with respect to 
anti-corruption. Threats to non-governmental  organisations and media investigating 
corruption cases continued. Adequate legal provi sions for the protection of civil servants 
reporting corruption are not in place.  
There is no effective investiga tion, prosecution and c onviction of suspects of high-level cases 
of corruption. Weak coordinati on of anti-corruption efforts at the State level remains a 
problem. No overall survey and analysis of stat istics on anti-corruption cases is available. The 
special investigative means applicable for co rruption cases are not effectively used, and 
cooperation between police and pr osecutors needs to be streng thened. The judicial follow-up 
of cases of corruption is slow. The persistent lack of final c onvictions is a matter of serious 
concern. In some cases, it was attributed to the low quality of evidence presented before the 
court. 
Overall , corruption in Bosnia and Herzegovina is pr evalent in many areas and continues to be 
a serious problem, especially within government and other State and Entity structures, linked 
 
EN 15   EN to public procurement, business licensing, in the health, energy, transp ortation infrastructure 
and education sectors. Private sector corruption is also prevalent. The establishment of an 
anti-corruption body, the implementation of the updated Strategy and Action Plan, as well as 
consequent investigation and prosecution of  corruption cases, need to be ensured. 
2.2. Human rights and the protection of minorities 
Observance of international human rights law As regards ratification of human rights instruments , Bosnia and Herzegovina has ratified 
the major UN and international human rights conventions. In 2008 it ratified the Optional 
Protocol to the Conventi on against Torture (OPCAT).  The Constitution includes most of the 
principles of the human righ ts conventions and guarantees that they supersede national 
legislation. However, implementation remain s uneven and delays in  meeting reporting 
obligations have continued. Further steps need to be taken to improve the implementation of 
these conventions. 
There have still been several cases where enfo rcement of the decisions of the Constitutional 
Court of Bosnia and Herzegovina has not been  ensured. This has led to cases being lodged 
before the European Court of Human Rights  (ECtHR). During the reporting period, the 
ECtHR issued three judgments finding that Bosnia and Herzegovina  had violated the 
European Convention on Human Rights (ECHR). A total of 634 new applications were made 
to the ECtHR since October 2008. As of Sept ember 2009, nearly 2000 cases against Bosnia 
and Herzegovina were pending befo re the Court. Most of these cases relate to old foreign-
currency savings. Around 15% of these cases relate to non-enforcement of judgments 
ordering the payment of war-related damages.  
Limited progress has been made as regards the promotion and enforcement of human 
rights . The competence to monitor the implemen tation of legal provisions on human rights 
lies within the Ministry of Human Rights and Refugees. Howe ver, effective monitoring has 
not been ensured in all human rights-related areas. The mechanisms to provide a safe 
environment for human rights activis ts also need to be improved. 
Incompatibilities between Bosnia and Herze govina's constitutional framework and the ECHR 
need to be addressed in or der to ensure impr oved elections in 20 10 elections and full 
compliance with the SAA requirements. 
Following a decision of the US Supreme Court, five  of the six citizens and residents of Bosnia 
and Herzegovina who were held in Guantanamo Bay have been released. Three of the five 
released returned to Bo snia and Herzegovina. Bosnia and He rzegovina needs to  take action to 
have the remaining person released and accept res ponsibility for the return of these persons.  
Overall,  the main elements of international human rights law are part of Bosnia and 
Herzegovina's legal system, but implementatio n and enforcement needs to improve. Full 
compliance with the ECHR is necessary.  
Civil and political rights 
Civil and political rights are broadly respected, but there is room for improvement .  
Torture and ill-treatment  are prohibited by the State and Entity Constitutions. Bosnia and 
Herzegovina is a party to the Council of Eur ope Convention for the Prevention of Torture. 
 
EN 16   EN However, it has repeatedly failed to appoint a representative in the Anti-Torture Committee. 
Ill treatment of detainees continues to be a matte r of concern. Little pr ogress has been made to 
improve the mechanisms for investigation of cas es of alleged torture and ill-treatment.  
Bosnia and Herzegovina still did not provide ade quate safeguards so that people facing 
deportation following a negative ci tizenship review are protecte d from 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, Republika Srpska has not yet repealed the death penalty provisions from its Constitution.  
Limited progress has been made to enhance access to justice  in civil and criminal trials and to 
ensure that equality befo re the law is guaranteed.  A State-level law on legal aid in criminal 
proceedings has been adopted. However, legal ai d in civil cases continues to be primarily 
provided on an ad hoc basis by privately f unded NGOs. The budget of the defence counsel 
continues to fall short of the needs. Equality befo re the law is formally guaranteed. In practice 
the presumption of innocence and equal treatme nt are not always ensured during the legal 
proceedings. The right to a fair trial is incorpor ated in the five criminal procedure codes of 
Bosnia and Herzegovina. Howeve r, court proceedings remain generally long, es pecially for 
appeal cases, and the case backlog reduction progra mmes launched in a number of district and 
cantonal courts are yet to produce tangible results. 
Limited progress has been made to improve the prison system  in Bosnia and Herzegovina. 
Prison capacity has been increased, in particular by opening a new prison in Tuzla in line with 
European standards and refurbishing a number of existing prison facilities. However, the overall standard of prison facilities remain s low. Limited progress has been made in 
addressing the problem of overcrowding, poor living conditions and inadequate medical 
treatment. Ad hoc solutions in this regard prevent the rapid impris onment of individuals 
convicted by serious cases. The lack of speci al correctional/reform institutions for women, 
juveniles, persons with mental health probl ems, persons with disabilities and seniors 
continues to be a problem. A ne w juvenile prison was opened in  East Sarajevo, but staff does 
not have sufficient training a nd experience. There have been training programmes, but staff 
awareness of human rights and treatment of vul nerable groups such as women, juveniles and 
psychiatric inmates needs to improve further.  Adequate medical fac ilities, separation of 
vulnerable groups and prison inspections remain insufficient. 
The State prison construction project has contin ued to experience delays, thereby running the 
risk that some bilatera l funding could be lost. The Bosnia an d Herzegovina Ministry of Justice 
continues to oversee the project, includi ng the ongoing technical re view needed by the 
Council of Europe Development Bank before confirming its final approval for the loan. 
The absence of a harmonised legislative fram ework and the fragmented management system 
remain the key obstacles to progress. There is  no enforcement administration unit in the State 
Ministry of Justice. The lack of unified practice for criminal sanctions still remains a problem. 
The 15 competent prison administrations face challenges in coordination. Cases of mismanagement, combined with inappropriate pr ovisions in the Criminal Procedure Code of 
Bosnia and Herzegovina, have led to the escape of individuals imprisoned for serious crimes, 
including war crimes. On the other hand, the use of appropriate alternative sanctions remains 
low. Conditional release for lo w-risk detainees is graduall y being introduced in a small 
number of cases.  
 
EN 17   EN All the country's Constitutions provide for freedom of expression . However, this 
constitutional right has not al ways been fully implemented. Th e number of cases of physical 
violence and threats to journa lists and editors continued to increase, which is a matter of 
serious concern. The action taken by law enforcem ent and judicial authorities to investigate 
and prosecute these cases has b een insufficient. Ethnic orient ation of media is increasing. 
The attempts to undermine the independence of the Communications Regulatory Authority 
are worrying. Although the mandate  of the existing Bo ard of the Communications Regulatory 
Authority has long expired, the authorities of Bo snia and Herzegovina have repeatedly failed 
to proceed with the appointment of a new Boar d and a new Director General, thus hampering 
the Authority’s day-to-day functioning and it s performance in suppor ting the communication 
and broadcasting sector. 
The reform of Bosnia and Herzegovina’s public  broadcasting sector progresses slowly. The 
Federation’s Law on the Public Broadcasting Servi ce is not yet fully aligned with the Public 
Broadcasting System Law of Bosnia and Herz egovina. Proper implementation of the whole 
legal framework for public broadcasting is no t yet ensured. The relevant key European 
Partnership priority ha s not been fully met. 
Freedom of assembly and association  are entrenched in the Constitution of Bosnia and 
Herzegovina. However, problems remain with actual implementation. The increasing number 
of cases of intimidation and violence agains t human rights defenders and civil society 
organisations are of serious concern. The polic e needs to respond promp tly in such cases, 
providing protection and bringing to justice thos e responsible for such threats and violence. 
Action is also needed to ensure freedom of assembly and association for lesbian, gay, bisexual and transgender (LGBT) communities.  
As regards civil society organisations , very limited progress has been made in implementing 
the Agreement on cooperation between the civil so ciety sector and the C ouncil of Ministers of 
Bosnia and Herzegovina. As a result, the role of the Civil Society Bo ard has been rather 
limited. There continues to be a lack of transparency in the allocation of State funds to civil society organisations. 
The Constitution of Bosnia and Herzegovina provides for freedom of religion , and a State-
level law on freedom of confessi on and providing an appropriate legal status for churches and 
religious communities is in place . However, religious intolerance continues to be present in 
the country and there have been a number of cases of physical attacks against places of 
worship. Police investigations in  such cases have been launched, but some perpetrators of 
these attacks still continue to escape justice. 
Overall,  Bosnia and Herzegovina has made very limited additional progress in the area of 
civil and political rights.  A State-level law on legal aid in criminal proceedings has been 
adopted but access to justice remains a matter of concern. The prison capacity has slightly 
increased. However, overcrowding, poor living c onditions and inadequate medical treatment 
in prisons remain a problem. The absence of  a harmonised legislative framework and the 
fragmented management system need to be addressed. The increasing number of cases of 
physical violence and threats agai nst journalists and editors, the continuing challenges to the 
independence of the Communications Regulator y Authority and the slow pace in the 
implementation of the public broadcasting reform are matters of serious concern.  
Economic and social rights 
 
EN 18   EN Little additional progress has b een achieved in the field of women’s rights . Laws on 
protection against domestic violence have been  adopted. However, there is a lack of 
harmonisation of legislation for combating family violence at Entity and State level, as well as 
between existing laws and action plans. This results in differing judicial interpretations and inconsistent application of penalties. Despite some progress, there continue to be gaps in anti-discrimination policy in relation to the alignm ent of State labour laws, health policies and 
other relevant laws with the gender equality law. Implemen tation of the 2006 Gender Action 
Plan needs to improve. The Gender Equality Ag ency of Bosnia and Herzegovina has not yet 
been equipped with the financ ial and human resources necessary to effectively supervise and 
monitor implementation of the Gender Action Plan. The Agency has failed to carry out 
quality assessments of the legislative and regulatory measures adopted by the Council of 
Ministers, as envisa ged in its role.  
Domestic violence against women remains widespread and under-reported. Bosnia and 
Herzegovina continues to be a country of orig in, transit and destination for trafficking in 
women and girls. Women continue to be unde rrepresented in politic al and economic life. 
They are still excluded from high-ranking and decision making positions . Their representation 
in the Parliament is about 14%. The collec tion of gender-disaggregated data and gender 
analysis needs to improve in or der to facilitate ev idence-based policy ma king, with a view to 
incorporating gender in budge t processes and supporting the implementation of gender-
relevant policies. 
Very limited progress has b een made in the area of children’s rights . Some improvements 
have occurred in securing housing for single parent s but a systematic approach is still lacking. 
A Framework Law mandating one year of pre- school education for ev ery child has been 
adopted and is being gradually endorsed by Entities and the Cantons. Implementation is 
constrained by a lack of res ources. An Action Plan for children is in place and pending 
revision. However, problems due to insufficient State action in the fiel ds of health, social 
protection, education and domes tic violence against children remain. Divisions in the 
education system through continuous development of mono-ethnic schools in both entities are 
still a matter of concern and result in de facto segregation of pupils from the very beginning of 
their schooling. As regards ear ly childhood development, the declining immunisation rates 
constitute a threat to current and future public health. Pre-school  attendance, at 6%, is among 
the lowest in Europe. Little has been done  to improve the implementation of the 2006 
Strategy on combating violence against childre n. Statistics on child victims of violence is 
lacking. Institutional care is of ten preferred over alternativ e community-based options for 
children without parental care or with special needs.  
Little additional progress has been ma de as regards discrimination against socially 
vulnerable people and  people with disabilities . The legal framework is in place. A positive 
development has been the signature of the UN Convention on the Rights of Persons with 
Disabilities, which now needs to  be ratified. However, the fr agmented legal and financial 
framework does not provide the same social pr otection for all citizen s throughout the country. 
Many groups of the population continue to be ex cluded from social prot ection and assistance 
benefits. The preferential treatm ent of war veterans in terms of  social benefits continued to 
have adverse effects on other socially vulnera ble persons and persons with disabilities, who 
often lack access to health pr otection and the labour market. Th e inadequacies in the social 
welfare systems continue to adversely affect th e conditions of the persons with disabilities, 
including the mentally ill, who remain partic ularly vulnerable to social exclusion. The 
Council for Disabled Persons ha s not yet been established.  
 
EN 19   EN As regards labour rights and trade unions , the complex system of government and the 
fragmentation of legislation continue to ha mper social dialogue across the country. The 
ratification of the revised European Social Charter was a positive step but the legislation of Bosnia and Herzegovina has not been yet fully aligned with the Charter. Limited progress has 
been made in clarifying the rules for registra tion and recognition of trade unions. No progress 
has been made in establishing th e trade union confederation (KSB iH) at State level, and as a 
result the trade unions continue to be based on the Entity structure. Republika Srpska continued to hinder the estab lishment of a country-wide Ec onomic and Social Council. The 
practice of disregarding employees’ entitlemen t to social security, in particular during 
maternity leave for employed mothers and ma ternity for the unemployed, has remained 
widespread. No steps have been taken to harmon ise the legislative fram eworks. The lack of a 
unified pension structure c ontinued to be a problem. 
With regard to anti-discrimination policies , the State and Entity Constitutions guarantee 
equal treatment of all people, and anti-discrimination provisions are include d in several laws. 
After long delays, a comprehensive State-level anti-discrimination law has been adopted. The 
law represents a positive step towards unifo rm protection across Bo snia and Herzegovina. 
However, it exempts religious groups and prov ides only limited protec tion to several groups 
of vulnerable individuals. Social discriminati on and exclusion of lesbian, gay bisexual and 
transgender (LGBT) people remain widespread. P hysical attacks, ill-treatment and acts of 
intimidation against these groups have continued. There has been no official condemnation of 
such acts by government authorities. Effectiv e investigation and prosecution need to be 
ensured.  
Bosnia and Herzegovina has contin ued its good progress in relation to property rights . The 
vast majority of cases of property repossession requests have been resolved. The remaining cases are either being dealt with by the relevant  courts or still pending, mainly due to the 
unclear status of possession. The mandate of the Commission for Property Claims of 
Displaced Persons and Refugees has been extended. 
Overall,  little progress has been made in the area of economic and social rights. Bosnia and 
Herzegovina has acceded to the UN Convention on the Rights of Persons with Disabilities. A 
comprehensive State-level anti-discrimination law has been adopted. However, its scope is 
rather limited. Implementation of legal provi sions needs to improve. Domestic violence 
remains a serious concern. The protection of wome n against all forms of violence needs to be 
considerably strengthened. More  decisive steps are required as regards discrimination of 
vulnerable persons and persons wi th disabilities and to secure  rights of children. Labour 
rights, the role of trade unions  and the mechanisms for social dialogue need to be enhanced. 
Minority rights, cultural ri ghts and protection of minorities
5 
As regards minority rights, cultural rights  and the protection of minorities, the legal 
framework is largely in place but implementatio n needs to improve. Bosnia and Herzegovina 
is party to the Council of Europe Framework Convention fo r National Minorities. Despite 
some steps, the ratification of the European Charter for Regional or Minority Languages is 
still pending. A National Minori ty Council is operational at State level and in Republika 
                                                 
5 According to the Law on the Protection of Rights of Persons Belonging to Nati onal Minorities, there are 
17 national minorities in Bosnia and Herzegovina. The three constituent peoples – Bosniaks, Croats and 
Serbs – do not constitute national minorities. 
 
EN 20   EN Srpska. In the Federation, a Na tional Minority Council has been  established but is not yet 
fully operational. The implementation of the laws on national minorities at the State and 
Entity level needs to improve further, in partic ular to ensure better access to education and 
employment for national minorities. 
No progress has been made on reforming the Bosnia and Herzegovina Constitution, and 
minorities therefore continue to be excluded fr om the House of Peoples and the tripartite 
Presidency. As regards political  participation of national minor ities, the 2008 amendments to 
the Election Law have given the opportunity to national minorities to have their own list of 
representatives. However, the amendments were adopted rather late an d less than one quarter 
of municipalities adapted their statute to the amended election law on time. National minorities remain under-represented at local level.  
Some progress has been made in preventing pr ejudice against the Roma and other minorities. 
The Communications Regulatory Authority adopted the Code of  Good Practice for Television 
Broadcasters. However, implementation of the Law on Protection of National Minorities 
concerning the presentation and representation of national minorities in the media remains uneven and minority issues sti ll receive little coverage. 
Some limited progress has been made as regards refugees and internally displaced persons . 
The revised strategy for the implementation of Annex VII of th e Dayton/Paris Peace 
Agreement, covering the period until 2014, has not been adopted yet. Officially, there are still 
some 125,000 persons who wish to return to thei r original place of residence. Despite some 
improvements, the supply of reconstructed hous ing falls short of the demand. The distribution 
of assistance to refugees and displaced pe rsons lacks transparency and accountability. 
Returnees still face discrimination in employment , access to health care , education, pensions 
and social rights — especially wh en returning to areas where they are in a minority position. 
This remains the biggest obstacle to a sustainable return. 
The process of de-mining in Bosnia and Herzegovina continued.  De-mining is important to 
facilitate the return of re fugees and displaced persons and is a precondition for the 
development of a number of sectors of the econom y, such as transport, agriculture, forestry or 
water management. The Strategy for Anti-mine  Action for 2009-2019 was being implemented 
but the lack of funds remains th e main obstacle to faster progress with de-mining. As regards 
missing persons, the operations of the Bosnia an d Herzegovina Institute  for Missing Persons 
are still affected by the lack  of support from the authorities of Republika Srpska.  
A review of citizenship granted during and af ter the war was carried out during the reporting 
period. The State Commission for the Review of Decisions on Naturalisation of Foreign 
Nationals in Bosnia and Herzegovina contin ued its work until February 2009, when its 
mandate expired. The conducting of citizenship re views has been transferred to the Ministry 
of Civil Affairs of Bosnia and Herzegovina. 
There has been some progress as regards the Roma minority . The financial resources for 
implementing the Roma Strategy in the contex t of the Decade for Roma Inclusion were 
increased considerably. These f unds have been earmarked in pa rticular for implementing the 
Action plan on housing, health and employme nt. The 2004 Action plan on the educational 
needs of Roma and members of other nationa l minorities is under revision. The revision needs 
to be finalised without dela y. Coordination between all the administrative bodies involved 
needs to be improved and sufficient financial re sources secured for effective implementation 
of this action plan. The situati on is particularly serious in employment with extremely low 
 
EN 21   EN figures of employed Roma. The enrolment of Roma  children in school is slowly increasing as 
a result of positive measures. However, the drop out rate from the education system of Roma 
children, particularly girls, remains very high. The preparation of a Roma census is a positive 
step. The census should address the problem of the lack of  civil registration of Roma, which 
results in the fact that many Roma families ha ve no health insurance and cannot benefit from 
social services. However, despite these effort s Roma continue to be the most vulnerable 
minority.  
Overall,  there has been some progress in the ar ea of minority rights, cultural rights and 
protection of minorities. However, implementati on of the laws on national minorities at the 
State and Entity level needs to improve. Na tional minorities remain under-represented in 
political life. The revised strategy to address sustainable return of refugees has not been 
adopted yet. Returnees continue  to face serious difficulties in  employment, access to health 
care, education, pensions and social rights. Th e financial resources for the implementation of 
the Roma Strategy have been significantly in creased. However, Roma still face very difficult 
living conditions and discrimination. 
2.3. Regional issues and international obligations 
Implementation of the Dayton/Paris Peace Agreement has continued, but nationalistic 
rhetoric by political leaders challenging the Ag reement and the constitu tional order remained 
frequent (see also section 2.1 Consti tution for further details) . 
Bosnia and Herzegovina’s cooperation with the International Criminal Tribunal for the 
former Yugoslavia (ICTY) , which is a key European Partnership priority, has continued to 
be satisfactory. Cooperation between ICTY and the State-level and Entity authorities is 
adequate at operational level,  and access to witnesses and archives remains good. However, 
Bosnia and Herzegovina needs to further step up  its efforts and take the necessary measures 
against persons engaged in he lping the remaining fugitives evade justice or otherwise 
obstructing the effective implementation of IC TY’s mandate. The arrest of Ratko Mladi ć and 
Goran Hadži ć remains the Tribunal’s priority. The authorities of Republika Srpska have 
repeatedly failed to take appropri ate action to have Radovan Stankovi ć re-arrested after his 
escape from prison there in 2007 and to establis h responsibility for his escape. Statements by 
Republika Srpska's political leadership challenging the veracity of war-time massacres involving civilian population are unacceptable and deeply worrying. 
The number of untried war crimes  cases remains high, with estimates varying between 
10,000 and 16,000 cases. The adoption of a Nati onal War Crimes Strategy, providing a 
systematic approach for dealing with the la rge volume of war crimes cases, has been a 
positive step. Efforts need to focus on its implementation, including by ensuring adequate financial resources 
The State Court has continued to perform its duties well. Ten accused have been transferred 
from The Hague to the Special War Crimes Chamber of the State Court under the 11bis
6 rule, 
and six of these trials have  been completed. A significant  number of other war crimes 
indictments and trials have been launched by pr osecutors in Bosnia and Herzegovina. As of 
August 2009, there were 80 ongoing war crimes cases , of which 46 were at  State level, 16 in 
the Federation, 17 in Republika Srpska and one in the Br čko District. 
                                                 
6 These are cases transferred by the ICTY for local prosecution. 
 
EN 22   EN However, the authorities of Bosnia and Herzegov ina failed to enact a change to the Criminal 
Procedural Code of Bosnia an d Herzegovina regulating the dur ation of custody for persons 
convicted of war crimes. Such an amendmen t was therefore adopted through a Decision by 
the High Representative. The High Representative also acted to stop the practice in the Federation prisons whereby war criminals convict ed by the Court of Bosnia and Herzegovina 
were granted unsupervised leave from prison.  
There has been improved cooperation on the excha nge of evidence and the transfer of some 
war crimes cases between the prosecutors from  Bosnia and Herzegovina, Croatia and Serbia. 
However, obstacles to the extradition of suspect s in cases of war crimes and crimes against 
humanity between the countries of  the region continue to exist.  This exacerba tes the problem 
of impunity, as has been demonstrated in one high-profile case where a convicted war 
criminal was able to escape from Croatia to Bosnia and Herzegovina on the basis of having 
previously acquired citizenship of  the latter, from wh ere he cannot be extradited. As regards 
the possibility of serving the sentence in Bosnia and Herzegovi na, the existing agreement on 
mutual recognition of sentences requires the convicted person’s consent for the sentencing to be served in the other countries. Bosnia and Herzegovina, together with its neighbours, should 
address the regional impunity gap,  including by taking steps towards extradition agreements 
covering war crimes cases. 
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 Comm on 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. 
Bosnia and Herzegovina is still subject to the monitoring procedure of the Parliamentary 
Assembly of the Council of Europe (CoE) on verifying the obligations and commitments 
relating to its membership of the Council of  Europe. There has been no improvement in 
addressing the outstanding issues. Bosnia and Herzegovina has made no progress as regards 
the appointment of members or candidates to several Council of Europe monitoring 
mechanisms and advisory bodies. Overall, impl ementation of Council of Europe Conventions 
and related requirements is weak.  
There has been little progress in the  Sarajevo Declaration process  which aimed to finalise 
the regional refugee return process by the end of 2006 . While Bosnia and Herzegovina 
continued to work to a greater or lesser extent on its roadmap, there has been limited 
discussion on implementation issues on either a bilateral or a regional basis. More than 7,000 
refugees, primarily from the Republic of Cr oatia, and some 1,500 refugees from Kosovo
7 are 
still residing in the territory of Bosnia and Herzegovina. Moreover,  no progress has been 
made to resolve the issue of compensation clai ms for those who lost occupancy and tenancy 
rights.  
Regional cooperation  and good neighbourly relations are an  essential part of Bosnia and 
Herzegovina's progress towards the European Un ion. Bosnia and Herzegovina continues to be 
an active participant in regiona l initiatives, such as the Sout h East European Cooperation 
Process (SEECP), the Regional Cooperation C ouncil (RCC), the Central European Free Trade 
Agreement (CEFTA), the Energy Community Treaty and the European Common Aviation 
                                                 
7 Under UNSCR 1244/1999. 
 
EN 23   EN Area Agreement (ECAAA). Sarajevo hosts the RCC S ecretariat. However, only after pressure 
by the international comm unity did the Council of Ministers of Bosnia and Herzegovina adopt 
a decision to allow the granting, on a case-by-case  basis, of visas to Ko sovans travelling with 
Kosovo passports in order to participate in RCC meetings. A permanent solution, that would 
also address participation in other in ternational meetings , needs to be found.  
Bosnia and Herzegovina has been implemen ting CEFTA. However, a law protecting the 
domestic production of agricultural and re lated products through the reintroduction of 
customs duties — contrary to CEFTA and to pr ovisions of the Stabilis ation and Association 
Agreement (SAA) — was adopted in June 2009. It is currently suspended until the 
Constitutional Court rules on it. This law, if  implemented, risks damaging relations with 
Croatia and Serbia, and would represent a br each of the SAA once it enters into force. 
In the first half of 2009, Bosnia and Herze govina held the Presidency of the Energy 
Community. However, Bosnia and Herzegovina continues to  lag behind in meeting its 
obligations under the Treaty, esp ecially in the gas sector. 
Bilateral relations with ot her enlargement countries  have continued to be stable. However, 
there has been very little progress in reso lving outstanding issues and in promoting 
reconciliation, which is a key European Partne rship priority. The adoption of a new Law on 
international agreements, which will make the procedure for conducting bilateral or 
multilateral agreements clearer and more e fficient, has been a positive development.   
Relations with Albania  have intensified. Agreements on cooperation in fi ghting organised 
crime, corruption, illegal migrati on and drugs trafficking and in th e area of customs have been 
concluded. An agreement facil itating travel and a readmission agreement have also been 
signed.  
Relations with Croatia  have remained stable, although they were strained due to various trade 
disputes, in particular following the impos ition by Bosnia and Herzegovina of import 
restrictions on agricultural products which are contrary to  CEFTA regulations The four 
protocols linked to the implementation of the 2007 Agreement on Border Control between Bosnia and Herzegovina and Croatia have been  ratified. However, there has been no progress 
on addressing the open border issues with Cr oatia. The 2005 Agreement between Bosnia and 
Herzegovina and Croatia on Demarcation of th e Land and River Borders has not yet been 
ratified. Moreover, the disput e over two islands — Veliki Skoj and Mali Skoj — remains 
unresolved, as does the issue of  the border along the River Una.  No progress has been made 
regarding the agreement on use of the Port of Plo če and Croatia’s plans to construct a bridge 
on the Peljesac peninsula. Other unresolved issues include property and refugees. The 
Interstate Cooperation Council has not met over the reporting period. Bo snia and Herzegovina 
has not yet ratified the ag reement on dual citizenship. 
Relations with the former Yugoslav Republic of Macedonia  remained good. An Agreement on 
cooperation in security matters and a new readmission agreement were ratified . 
Relations with Montenegro  have further intensified. An Ag reement on joint border patrols, 
regular meetings between border police and on jo int border controls and joint border crossings 
was concluded in March 2009. Agreements on coope ration in the areas of culture, education 
and science as well as a readmission agreement have been signed.  
 
EN 24   EN Relations with Serbia  have remained stable overall. The provision of assist ance by Serbia to 
Bosnia and Herzegovina during the gas crisis and the high-level visits by Serbian officials 
have been positive. However, no meetings of  the Interstate Coopera tion Council have taken 
place and no progress on addressing issues rela ted to property has been  registered. No border 
agreement between Bosnia and Herzegovina and Se rbia has been signed yet. In the meantime, 
Republika Srpska has continued to cooperate clos ely with Serbia on the basis of the Special 
Parallel Relations Agreement and the relate d Protocol on Cooperation. An Agreement on 
economic cooperation between Serbia and Republik a Srpska has been signed. As part of the 
implementation of the 2008 Protocol on inter-p arliamentary cooperation, a delegation from 
the Serbian Parliament visited Republika Srpska in April 2009.  
Relations with Turkey  have remained good. A readmission agreement has not been signed, 
despite repeated requests by Bosnia and Herzegovina.  
Overall , Bosnia and Herzegovina's cooperation w ith ICTY has remained good. The country 
has continued to partic ipate actively in regional cooperati on. Good neighbourly relations have 
prevailed, but there has been little progress on  addressing the outstanding issues, notably 
relating to the settlement of border disputes and property.  
3. ECONOMIC CRITERIA  
In examining the economic developments in Bosnia and Herzegovina, the Commission’s 
approach was guided by the conclusions of the European Council in Copenhagen in June 
1993, which stated that membership of the 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 2009 the authorities submitted their third Economic and Fiscal Programme for 
2009-2011. However, in view of large uncertain ties concerning the global economic situation 
and its impact on Bosnia and Herzegovina at  the time of drafting, it retains only limited 
relevance as a core document for economic pol icy making. Faced with the economic crisis 
and the legacy of poor fiscal po licies, the authoritie s, represented by th e National Fiscal 
Council, concluded in early May 2009 negotiation s with the International Monetary Fund on a 
Stand-By Arrangement that comprised commitme nts to a number of structural reforms and 
fiscal adjustment measures. S ubsequently, the National Fiscal Council approved a three-year 
budget framework for 2009-2012 in June. Following the fulfilment of further agreed prior 
actions, the IMF board approved in July 2009 the € 1.15 billion loan for a three-year period. In general, differences between the entities on economic and fiscal policy essentials continue 
to exist. The commitment to pursue structural reforms has remained weak, particularly in the 
Federation. The quality of public spending has deteriorated in both entities. Overall,  the 
commitment to structural reforms and sound public finances remained uneven across the country. The coordinating and de cision-making role of the National Fiscal Council was 
however somewhat strengthened and the genera l consensus on a market-based economy was 
kept.  
Macroeconomic stability 
 
EN 25   EN In 2008, real GDP growth fell to  5.4% from 6.8% recorded in  2007. The recovery of the 
electricity sector contributed la rgely to growth. The country's growth model was characterised 
by high domestic demand, fed by rapid credit growth, external financing and expansionary 
fiscal policies that fuelled macroeconomic im balances, not least a widening current account 
deficit. The global economic and financial crisis started to reveal its impact on Bosnia and 
Herzegovina in the last quarter 2008. Econo mic activity decelerated and unemployment 
picked up. Trade dynamics slowed drasticall y because of reduced demand and financial 
stability was threatened in October 2008 when mo re than 6% of deposits were withdrawn. Per 
capita income, measured in purchasing power standards (PPS), was 30% of the EU-27 
average in 2008, up by one percentage point co mpared to the previous year. While the 
situation in the domestic financial market stabi lised quickly due to an appropriate, quick and 
flexible reaction of the Centra l Bank, the slowdown of economic  activity continued in 2009 as 
a result of lower domestic and external demand,  reduced financing and falling foreign direct 
investments. The Federation registered a drop of industrial production of 10.5% annually in 
the first eight months. In Republika Srpska, ho wever, it increased by 16.7% which is to a 
large extent due to the re-opening of an oil refinery in December 2008. In an attempt to mitigate the effects of the economic crisis  on the budgets, the National Fiscal Council 
unblocked some € 90 million in the first quart er of 2009 from succession funds of former 
Yugoslavia's assets. Nonetheless, this proved to be insufficient as public finances increasingly 
came under stress as the result of falling revenues and high spending commitments. 
Therefore, the authorities finally turn ed to the IMF for external support. Overall , with the 
crisis unfurling economic growth declined toward s the end of 2008 and this trend continued in 
2009, leading the country into recession. 
The current account deficit widened to 14.7% of  GDP in 2008, up from 12.7% in 2007, driven 
by worsening terms of trade a nd developments of global pri ces and internal demand during 
the first half of 2008. It was fina nced more or less equally by foreign direct investments and 
drawings of new loans from abroad. The already very high trade deficit st ill slightly grew to 
38.1% of GDP in 2008 (goods only), up from 37.4% of GDP in 2007. The development of 
other components of the current account showed reversing trends as compared to previous 
years: The income balance increased by only 3.5% (24% in 2007) and curr ent transfers fell by 
6.7% (after an increase of 11.3% in 2007), ma inly because of remittances falling by 4%. 
Nevertheless, transfers still represent the major offset to trade within the current account. The 
monthly trade deficit improved for the first tim e in more than two years in November 2008. 
This trend continued as in the first half of 2009 the drop in imports (25.3%) exceeded that in 
exports (23.4%), resulting in an improvement of the trade deficit by 26.7% year-on-year. The 
current account deficit more th an halved year-on-year in th e first quarter. This drop was 
mainly due to developments in trade, but al so a slightly rising current transfer balance 
contributed to it. Bosnia and Herzegovina's external public debt increased by 5.5% in 2008 
and by a further 1.4% in the first half of 2009, but still stands at a relatively low level of 
17.5% of estimated GDP. Private external de bt reached 27.4% of GDP in 2008. Official 
foreign exchange reserves declined by 16.8% up to June 2009 from their peak in September 
2008, before they recovered again as a result of  the first tranche of the IMF support being 
disbursed in July. They cover more  than five months of imports. Overall , external imbalances 
are adjusting in the context of the crisis, ch aracterised by a rapid narrowing of the current 
account deficit towards a more sustainable level. 
The already high rate of register ed unemployment further increased  in the first half of 2009 to 
41.6% in June from 40.6% at end-2008. Sector s with the highest annual growth of 
employment were financial intermediation, publ ic administration, health  and education, while 
 
EN 26   EN employment decreased in manufacturing, mining, agriculture and trade. According to the 
Labour Force Survey following ILO methodol ogy, unemployment increased to 24.1% in 2009 
from 23.4% in 2008. The discrepancy between the two measurement methods points to a high 
importance of informal activities. Slow expans ion of productive capaci ties and structural 
rigidities – high rates of soci al contributions, distorted wage-setting mechanisms, high and 
poorly targeted social transfers and low labour m obility – continue to hamper job creation and 
labour market participation. The corresponding key European Partners hip priority has not 
been addressed. Overall , unemployment remains very high and slight improvements recorded 
throughout 2008 have started to be offset by nega tive developments since the beginning of the 
economic downturn. 
Annual inflation became negative in May 2009 and stood at -1.2% in July, down from its 
peak of nearly 10% a year earlier. The 12-mont h moving average inflatio n rate fell to 2.9% in 
July, compared to 7.4% in 2008. The monetary policy of the Central Bank continued to be 
conducted under a currency board arrangement, with the euro as the anchor currency. In 
response to the turmoil on financial markets in  the fourth quarter 2008 the Central Bank 
increased the liquidity of th e banking system in several consecutive steps by lowering the 
minimum reserve requirement rate, with the ai m of strengthening and restoring confidence in 
national financial markets and of stimulating cr edit activities. As of November 2008 all new 
credit lines from abroad by commercial bank s ceased to enter into the basis for required 
reserves calculation and the minimum rate wa s set at 14%, down from 18%. As of January 
2009, the required reserve ratio on term deposits w ith a remaining maturity of more than one 
year was further lowered to 10% and to 7% in April. In line with reduced demand, the 
monetary aggregate M28 declined by 6.7% between Sept ember 2008 and July 2009, showing 
positive trends in recent months. Overall , the currency board has c ontinued to function well 
and proved its stability under difficult circumstances. 
The share of general government in GDP re mains high with 2008 revenues at 46% of GDP 
and expenditures at 50% of GDP , thus creating a budget defic it of 4% of GDP in 2008, down 
from near-balance in 2007. Revenue weakened  in 2008, while expenditure rose sharply, 
driven by increases in wages and social benefits . The increase in the publi c sector wage bill – 
which stood at 12% of GDP in 2008 on a cons olidated basis – was high, particularly in 
Republika Srpska where it reached 36.4% in 2008 (16.4% in the Federation). Social benefits 
increased by 26.5% in Republika Srpska an d 30.4% in the Federation and stood at a 
consolidated 10% of GDP in 2008. In the Fede ration, transfers to households almost doubled 
in nominal terms. Bosnia and Herzegovina sp ends a very high share of 4% of GDP on non-
insurance social protection cas h transfers. At the same tim e, there was a slowdown of 
investment expenditure to 6% of GDP in 2008 from 6.7% in 2007. The Federation introduced 
a 10% flat personal income tax rate as of 1 January 2009. In the context of the IMF programme, some excise taxes were increased as of 1 July 2009. The system of generous non-
targeted benefits for war veterans, demobilised  soldiers and other social groups and their 
wide-spread misuse continued to be a drag on the budget, especially in the Federation where 
they absorb approximately one third of the budget. In the context of the IMF programme it 
was agreed to replace this highly inefficient system by a means-tested scheme over the medium-term. The lack of progress with the priv atisation agenda in the Federation – receipts 
amounted to only € 1.5 million in 2008 and € 0.6 m illion in the first half of 2009 – further 
undermined the entity's financial health. In  April 2009, the Federation rebalanced the budget 
                                                
 
8 M2 comprises currency outside banks and demand and time and savings deposits in both domestic and 
foreign currency.  
 
EN 27   EN upward, increasing its volume by 19% in order to reflect the planned borrowing for the 
coverage of the 2008 budget deficit. A second rebalance in July included the adjustment 
measures agreed with the IMF, such as the Intervention Law cutting wages and social transfers by 10%. Following the agreement with  the IMF, Republika Srpska rebalanced its 
budget and lowered its volume by 4.2%. In the fi rst half of 2009 consolidated revenues of 
entities and state level decreased by 9.8% compared to the sa me period of the previous year, 
mainly as the result of falling custom duties and VAT revenues. Despite the agreements reached on coefficients for re-dis tribution, the allocation of indir ect tax revenues to the state, 
entities and the Br čko District remains a controversial issue. Overall , the quality and 
sustainability of public finances has further deteriorated, especial ly in the Federation. 
General government debt comprising all leve ls of government stood at 27.8% of GDP in 
2008, down from 29.8% in 2007. In the cour se of 2009, public debt has increased 
substantially due to significant budget deficits and the loan agr eement with the IMF. In 2008 
internal public debt managed and served by the entities amounted to a bout 11% of GDP. Both 
entities and the Br čko District have issued bonds in order to repay these claims. With the Law 
on Debt, Borrowing and Guarantees in the Fede ration the legal framework has improved and 
the limitation of debt service in relation to revenues in the Federation contributes to the long-
term sustainability of public finances, similar to provisions in place in Republika Srpska and 
at state level. However, the institutional capacity for debt management remains weak. Overall , while public debt remained at acceptable levels and even decreased in 2008 it has 
substantially increased in 2009.  
Improvements in the overall macroeconomic polic y mix are still neede d. On the one hand, the 
currency board arrangement enjoys a high level of confidence and credib ility. In addition, the 
economic downturn has resulted in the necessary  adjustments of external imbalances. On the 
other hand, the actual fiscal situation has wors ened and adjustment efforts are uneven across 
the country. Overall,  the viability of macroeconomic po licies suffered from worsening public 
finances which finally led to the need fo r an IMF programme, even though external 
imbalances have started to improve in the cont ext of the global economic crisis and financial 
and monetary stability has been preserved. 
Interplay of market forces 
The private sector's share in GDP remained stable at around 60% in 2008. After the large 
privatisations in Republika Srpska in 2007, the pace slowed and only ten smaller enterprises 
and one strategic enterprise were privatised between April 2008 and May 2009 in this entity. So far, around 69% of the initial stock of stat e-owned capital intended for privatisation has 
been sold, one percentage point up compared to the previous year. The privatisation process in the Federation continues to proceed very sl owly as the privatisation strategy of the 
government has still not been fully adopted. Th e sale of the aluminium company Aluminij 
d.d. Mostar, one of the largest enterprises in the country and a key source of export revenue, 
remains blocked because of the inability of th e Federation government and the winning bidder 
to agree on a long-term elect ricity price contract. Also the Federation's two telecom 
companies still await their privatisation . Overall , the privatisation pro cess did not advance.  
Market entry and exit 
Bosnia and Herzegovina has undertaken some limited reforms in order to improve the 
business environment. Obtaining a constructi on permit was simplified by facilitating the 
registration of new buildings in the land and property registries, reducing the average time to 
 
EN 28   EN obtain a permit from 296 to 255 days. Transfe rring property also became more efficient 
thanks to the computerisation of the land re gistry. Despite some improvements in court 
registration the average time to start a busines s remained at 60 days. A new Law on Business 
Companies came into effect in Republika Srpska on 1 July 2009, simplifying the business 
start-up process, whereby certain inspections are now conducted after th e business has started 
its operations. Concerning the clos ure of businesses, professiona l requirements for trustees 
were tightened, reducing the time needed in  bankruptcy procedures. The "Legislative 
Guillotine" project to reduce administrative burden s is completed in Republika Srpska. In the 
Federation, it was launched in mid-2009. Busine sses continue to suffer from political 
instability, the high tax burden, and slow cont ract enforcement and business registration 
procedures. Overall,  some limited improvements in the business environment can be 
recorded, but reforms are not sufficient to subs tantially foster private sector developments. 
The legal system 
The poor quality of public serv ices and prevalent corruption negatively affect the business 
climate and the attractiveness of Bosnia and Herzegovina for investors. The large informal sector is fuelled by weaknesses in tax and expend iture policies, as well as in law enforcement, 
including the fight agai nst corruption and organised crime.  The backlog of cases remains a 
major problem for judiciary. Va rious activities aimed at introducing systemic solutions for 
reducing delays in courts are underway, and a database has been created at the Sarajevo 
municipal court, where the vast majority of the backlog exists. Almost all courts in the 
country have now been connected to a na tion-wide area networ k and the new Case 
Management System has been introduced. Overall,  the operation of the judicial system has 
slightly improved; however, the existing back log of unsolved cases, unreliable contract 
enforcement and slow processing times are hampering the business environment. The informal sector remains an important challenge, as it reduces the tax base and the efficiency of economic policies. 
Financial sector development  
Tensions on the global financial markets spille d over to the country an d resulted in a "mini 
bank-run" in October when some €420 million of deposits (some 6.4% of the stock of 
deposits) were withdrawn. Foreign parent banks in jected liquidity to their local subsidiaries 
and the Central Bank of Bosnia and Herzegovina reacted firmly and adequately so that the 
situation stabilised quickly. The limit on guaranteed bank deposits was almost tripled in a first step to around € 10,000 in earl y 2009. In the contex t of the IMF programme, the six EU 
parent banks that have subsidiaries in Bosn ia and Herzegovina have committed to keep the 
level of their exposures to the country at least at the level of 31 December 2008. 
Despite the repercussions of the global financial crisis on Bosnia and Herzegovina, the 
financial sector remained sound and well-cap italised and its liquidi ty position was not 
seriously undermined. The sector is dominate d by banks which are based on a conservative 
business model. The share of claims to the private sector in relation to GDP remained 
relatively constant between 2008 and early 2 009 at about 54%. 30 banks operate in the 
country, one less than in the previous year, of  which 21 are in foreign ownership, seven in 
domestic private ownership and two are major ity state-owned. The capital adequacy ratio 
stood at 16.3%, around one percentage  point lower than in the prev ious year, but significantly 
higher than the legal minimum of 12%, which itself is significantly higher than the 8% 
required in the Basel II accord. The share of non-performing loans to total loans increased 
from 3.1% at end-2008 to 4% at the end of th e first half 2009. The retu rn on average equity 
 
EN 29   EN halved in 2008 to 4.4% and decr eased further to 1.3% at the end of the first half 2009, the 
return on average assets declined to 0.4% and further to 0.1%. Li quidity indicators 
deteriorated with the rate of liquid to tota l assets falling from 32.2% at mid-2008 to 28.5% a 
year later, and liquid assets to short-term fi nancial liabilities from 53.5% to 49.5%. However, 
the liquidity situation of banks remained ove rall favourable. Financia l market supervision 
remains mostly in the competen ce of the entities. In early 2009, Republika Srpska established 
a system to improve coordination between its  own supervisory agencies. The analytical 
capacity of the Central Bank was further strength ened and it carried out stress tests for the 
banking sector in spring 2009. Overall , the expansion of financial intermediation has slowed 
down and the banks' profitability has suffered, but  the financial sector has weathered well the 
impact of the global crisis and the stability of the financial system  remains satisfactory. 
Credit growth has come down significantly fr om the excessive annual rates of between 25% 
and 30% recorded until July 2008. Since Septembe r 2008 the stock of loan s has been virtually 
unchanged. Restrictions came from both the de mand and supply side. Deposits decreased by 
9.8% from their peak in September 2008 until Ju ne 2009, and slightly picked up after that. As 
a consequence, the loans to deposit ratio incr eased from 110% in September to 119% in July. 
After it had followed a downward trend ove r the period 2004-2007, the spread between 
average loan and deposit interest  rates of commercial banks increased and amounted to 7.81 
percentage points at the end of  the first quarter 2009. The wideni ng of the spread was mainly 
caused by rising interest rates on loans, reflec ting the higher uncertainty  and risk faced by the 
financial sector. Overall , the difficult economic environmen t has caused market agents to 
become more risk-averse, but the fears of a massive bank-run and ma jor liquidity problems 
emerging in autumn 2008 did not materialise.  
After their major correction throughout 2007 and 2008, stock mark et indices continued to 
decline in the first quarter 2009, but afterwards picked up again. The main index of the 
Sarajevo Stock Exchange lost 12.8% in 2009 until mid-Septembe r; that of the Banja Luka 
Stock Exchange fell by 3.3%. Monthly average turnover at Sarajevo plummeted by 60% in 
the first half 2009 compared to 2008; at Banja Luka the drop was 45%. The combined market 
capitalisation declined to below 50% of GDP from rates at around 100% in 2008. The 
insurance sector remained small and relatively wea k. Its growth lost pace in the first half of 
2009 when it decelerated to 3.3% in the Federa tion and 2.6% in Republika Srpska (annual 
growth of premiums). Non-lif e insurance dominates the market. There are 24 insurance 
companies active in the country. Overall,  financial intermediati on by the non-banking sector 
remained shallow and stock markets experienced significant losses. 
3.2. The capacity to cope with competitiv e pressure and market forces within the 
Union 
Existence of a functioning market economy In the context of the crisis, external imbalan ces are decreasing, while fiscal imbalances are 
rising. The adjustment process is harsh and accompanied by rising unemployment. The slow 
pace of economic restructuring, especially in th e Federation, prevailing obstacles to private 
sector development and the excessive influence of the public sector in the economy continue 
to undermine a more growth-ori ented allocation of resources. Overall , the functioning of 
market mechanisms remained hampered by distor tions, excessive state in tervention and lack 
of competition. Progress towards creating a single economic space within the country – a key 
European Partnership priority – has been limited. 
 
EN 30   EN Human and physical capital  
In general, information on the endowment of human capital remains scarce. Enrolment rates 
in higher education are slightly  increasing. A curriculum for a nine-year education in all 
schools is to be implemented as of th e school year 2009-2010. However, the proper 
implementation of framework laws for higher,  pre-school and vocatio nal education has not 
been ensured. Participation in  the labour market is poor. Overall,  structural rigidities and the 
weak performance of the education system con tinue to contribute to the skills mismatch 
hampering the proper functioning of the labour market.  
The level of investment decr eased slightly in 2008 to 24.4 % of GDP, down from 25% in 
2007. Some projects of upgrading road and railway infrastructu re are ongoing. Foreign direct 
investments (FDI) accounted for 5.5% of GDP in 2008, declining sharply (by 55%) compared to 2007, mainly as a result of the high base due to major privatisation deals implemented in 
2007. 46% of FDI were directed towards industrial producti on and 21% to transport and 
communications. In the first half of 2009, FDI shrank by 32% year-on-year as a result of 
worsened investors' sentiments in the context of the global economic crisis. Overall,  the pace 
of upgrading of physical infrastructure slowed down. 
Sectoral and enterprise structure 
The restructuring and liquidation of socially-own ed enterprises (SOEs) has made only slow 
progress. In the communication sector, few new entrants ha ve become operational since 
liberalisation and only one new licence for fixe d telephony services has been granted. So far 
two licences have been issued to internet se rvice providers, two to  network operators and 
three for Universal Mobile Telecommunica tions Services (UMTS). New rules on the 
compensation for licences of mobile telecomm unications operators ha ve been adopted. The 
utility sector remains exempted  from privatisation. In May, th e government of the Federation 
approved the merger of the count ry's biggest power utility co mpany with seven local coal 
mining firms, but the deal is yet to be comp leted. Shortcomings in administration, technology 
and metering continue to hinder the developmen t of the electricity market. Consumers have 
little incentive to change suppliers due to pers isting differences between regulated and market 
prices. Overall,  little progress was achieved in the liberalisation of network industries. 
There were no major shifts in  the sectoral structure of  the economy in 2008. Services 
accounted for 54% of GDP, industry for 23% a nd agriculture for 7%. The contribution of 
public administration, education and health to  gross value added in the economy remains 
fairly large at 18%. Small and medium-sized en terprises (SMEs) further consolidated their 
contribution to employment and economic growth  and the first countrywide SME strategy has 
been adopted by the Council of Ministers. Overall , there have been no major changes in the 
structure of the economy. 
State influence on competitiveness 
Limited progress has been made in reducing st ate influence in the economy. Legislation to 
ensure the transparent monitori ng of state aid has not been a dopted and the establishment of 
an operationally independent, public state ai d authority – as required by the Interim 
Agreement to the SAA – is pending. In 2008, direct budget subsid ies to industry and 
agriculture slightly declined to a consolidated  1.5% of GDP from 1.6%  in 2007. They are still 
mainly allocated to loss-making SOEs in  an ad-hoc and non-transparent manner. Overall,  
 
EN 31   EN state intervention in the economy is still high and in itiatives to improve transparency are 
blocked in the complex decision-ma king procedures of the country.  
Economic integration with the EU 
Bosnia and Herzegovina is an open economy wi th total trade equivale nt to around 94% of 
GDP in 2008 (93% in 2007). The country has cons tantly gained market shares in the EU 
during the past decade, not the least benefitti ng from a relatively stable CPI-based real 
effective exchange rate (REER) over that peri od. However, due to the high wage increases 
above productivity gains of recent years, both in the public and private sector, Bosnia and Herzegovina has lost competitiveness since 2007, as signalled by an increasing unit-labour-
cost-based REER. The EU continues to be the largest trading partner with shares of around 
55% of total exports and 49% of total imports in the first half of 2009. While the share of 
exports to the EU has s lightly decreased, the share of imports  has slightly increased. The other 
main trading partners remain the countries  of the CEFTA region, accounting for 36% of 
exports and 26% of imports in the first half of  2009. The share of FDI inflows from the EU to 
total FDI inflows increased in 2008 as compar ed to 2007, when it was exceptionally low due 
to the major privatisations in Re publika Srpska with non-EU buyers. Overall,  the level of 
integration of trade and investment with the EU remained fairly high. 
4. E
UROPEAN STANDARDS  
This section examines Bosnia and Herzegov ina’s capacity graduall y to approximate its 
legislation and policies to the acquis  in the areas of the internal  market, sectoral policies and 
justice, freedom and security, in line with th e Stabilisation and Association Agreement and 
the European Partnership prioriti es. It also analyses Bosnia a nd Herzegovina’s administrative 
capacity. In each sector, the Commission’s assessment covers progress achieved during the reporting period, and summarises the country ’s overall level of preparations. 
4.1. Internal market 
4.1.1.  Free movement of goods 
Limited progress has been made in the area of free movement of goods.  
Some progress has been made as regards standardisation . So far, the Institute for 
Standardisation of Bosnia and Herzegovina (BAS) has adopted 9,653 European standards 
(ENs) as national standards. Of these 9,653  standards, 4,177 are harmonised European 
standards in the fields of the New Approach acquis . The Institute has 45 Technical 
Committees in which some 600 experts are involved. In December 2008, the Council for 
Standardisation was formed as an expert ad visory body for standard s work. It has signed 
agreements on professional and technical cooperation with the In stitutes for Standardisation 
of Montenegro, Serbia and the former Yugos lav Republic of Macedonia. The Institute has 
increased its human resources and now has 32 employees. 
No progress has been made on conformity assessment . With a few exceptions, conformity 
assessment procedures are not performed on e ither locally manufactured  or imported products 
before they are released onto the market. There is no clear and coherent system for verifying 
the conformity of products. No technical regulations based on the product-specific acquis , 
including relevant conformity assessment pro cedures, have been adopted. Proper conformity 
 
EN 32   EN assessment infrastructure (testing and calibration laboratories, certification and inspection 
bodies) is not yet in place.  
Limited progress has been made as regards accreditation . The accreditation system in Bosnia 
and Herzegovina is based on the principles an d requirements of the European standards EN 
45000 and ISO/IEC 17000 series as  well as on the recommenda tions and guidelines of 
European Cooperation for Accred itation (EA), the Internati onal Accreditati on Forum (IAF) 
and the International Laboratory Accreditat ion Cooperation (ILAC). The Institute for 
Accreditation of Bosnia and Herzegovina (B ATA) has so far granted 35 accreditations: 16 
testing laboratories, 6 calibration laboratories , 2 certification bodies a nd 11 inspection bodies 
have been accredited. The accreditation process is carried out by assess ors who are selected 
and appointed in accordance w ith EU requirements. 50 assesso rs and technical experts are 
currently available in Bosnia  and Herzegovina. Further huma n resources are necessary to 
enable BATA to respond to future policies an d to develop accreditati on schemes in the areas 
where BATA is not yet active.  
Bosnia and Herzegovina needs to further establish the conditions for future international 
recognition of its tests, calibration results and certifications and prepare the country’s 
Accreditation Institute for sign ing multilateral agreements with  the European cooperation for 
Accreditation.  
Limited progress has been made as regards metrology . The Institute for Metrology of Bosnia 
and Herzegovina has increased the number of  its staff to 44. In May 2009, the Institute 
became an associate member of European Cooperation in Legal Metrology (WELMEC). The 
planned strategy for the development of the metrology system has however not yet been 
adopted. The metrology infrastructure has to  be further developed and the legislation 
harmonised with the European standards. . Increased cooperation and coordination is needed 
between the Institute for Metrology of Bosnia and Herzegovina and th e Metrology Institutes 
of the Entities in order to avoid duplication of efforts and costs, and to create a harmonised 
approach to the competence criteria for laboratories deal ing with verifications.  
There has been some pr ogress in the area of market surveillance . The Council of Ministers 
has adopted decisions on the c ontent of notices for magnetic toys and on the form and content 
of notifications of harmful products for non-f ood consumer products. The market surveillance 
system in Bosnia and Herzegovina is ensured by  the State-level Market Surveillance Agency 
and by inspectorates and other administrative b odies of the Federation, Republika Srpska and 
Brčko District. The Entity-level bodies carry out actual market surveillance activities. Three 
main inspectorates exist in Bosnia and Her zegovina: the Inspectorate  of the Federation 
(includes 10 cantonal in spection bodies), the Inspectorate of Republika Srpska (includes 5 
regional inspection bodies) an d the Inspectorate of Br čko District. Administrative capacity of 
the Market Surveillance Agency has been strengthened to the current 17 employees. In November 2008, the Market Surveillance Agen cy became a full member of PROSAFE 
(Product Safety Enforcement Forum of Europe). 
The market surveillance system still remains largely based on mandatory standards and pre-
market control. Further development of a prope r market surveillance system is needed, based 
on appropriate horizontal and product-specific le gislation, and on ade quate administrative 
capacities.  
No progress has been made  as regards either the New or the  Old Approach  acquis . The 
Ministry of Foreign Trade and Economic Re lations (MoFTER) establ ished in May 2009 the 
 
EN 33   EN Department of Technical Regulations in order to increase the efficiency of transposition of 
EU technical regulations. In addition, strengthening the admi nistrative capacity of the 
ministries and institutions involved in this tas k, and especially reinforcements of staff, is 
essential. A proper mechanism is needed for internal consultation and notification of new 
technical regulations prior to adoption of measures with an impact on trade. 
As regards consumer protection , some progress has been ma de. The Council of Ministers 
adopted the 2009 State annual programme on pr otection of consumers. The aim of this 
programme is to create a consumer protection policy that clearly identifies priorities and 
provides guidance for their implementation. It  includes more than 100 measures to be 
implemented by competent State, Entity and Br čko District bodies. The programme provides, 
among other things, for the amendment of current regulations, the improvement of 
information instruments on consumers’ ri ghts and measures for the adoption and 
implementation of EU standards in the area. 
The Office of the State Ombudsman for Consumer Protection enacted crite ria and instructions 
on decision-making procedures and the handlin g of disputes. In April 2009, guidelines and 
recommendations were issued in  the consumer credit sector. The Office adopted its annual 
report in May 2009. The efficiency of the Ombu dsman’s office increased in comparison with 
previous years due to an increase in its sta ff. In 2008 the Office dealt with 147 cases and 138 
were resolved. 
Overall,  Bosnia and Herzegovina’s preparations in the fields of standardisation, accreditation, 
conformity assessment, metrology, market surveillance and consumer protection are 
advancing slowly and remain at a rather earl y stage. The Office of the Consumer Ombudsman 
has been set up and needs strengthening. Continued efforts are necessary in order to further approximate the legal framework to the Comm unity legislation on free movement of goods 
and to implement and enforce it e ffectively. The product-specific acquis  needs to be 
progressively transposed. Further strengthenin g of institutional and administrative capacity 
and closer cooperation and coordination between th e relevant institutions is necessary in order 
to create conditions favourable to the in ternal market and to foreign trade.  
4.1.2.  Movement of persons, services  and right of establishment 
Little progress has be en made regarding movement of persons . In January 2009 the Council 
of Ministers decided on an annual quota of work  permits for the employment of foreigners. 
However, movement of persons within th e country still remains constrained by the 
fragmented nature of the internal labour legi slation and the social security systems. The 
country is lagging behind in the field of movement of persons. 
Limited progress has been made in institutional,  legislative and administrative reform of the 
social security  system and its coordination  between Entities. Inequities amongst Entities are 
made worse in the Federation, by inequities amongst cantons and amongst municipalities 
within cantons. Nevertheless, in  the Federation the Law on a single system of registration, 
collection and control of contri butions in social security wa s adopted. No steps have been 
taken towards granting social security benefits for resident family members of foreign nationals working in Bosnia and Herzegovina. Bilateral agreements on social insurance and social security have been signed with Austri a, Turkey, Croatia, Serbia, Slovenia, Belgium, 
Hungary and the former Yugos lav Republic of Macedonia.  
 
EN 34   EN Concerning provision of services , limited progress has been made. No work has been 
undertaken with regard to establ ishing a clear distinction between the regime applicable to the 
cross-border provision of serv ices by EU operators and the rules applicable to service 
providers established in the country. 
As regards financial services, the banking sector has remain ed central to the country’s 
economy. However, no progress has been made w ith regard to approximation with the EU 
banking acquis  and the establishment of a single Stat e-level agency for banking. The system 
of host supervision for branches is being a pplied between both Entities. The Law amending 
the Law on Deposit Insurance in Banks in Bosn ia and Herzegovina increased the insured 
deposit in banks almost by three, to approxima tely € 10,000. The Entities’ banking agencies 
adopted a strategy and set up a technical group for progressively  adopting the Basel II capital 
measurement rules and capital standards, and work has started. However, implementation of 
this strategy, scheduled throughout a long period  (2009-2018), will be carried out separately 
by the Entities, with capital requirements imposed by the banking supervisors of the Entities. Cooperation with home banking sector supervisor s of foreign banks operating in the country 
has improved, but a Memorandum of Understandi ng with Austria — the major stakeholder in 
the sector — is missing.  
In various non-banking fields, the Entities have moved unilatera lly and at different speeds to 
develop their regulatory  frameworks. The State Insurance Ag ency has observer status in the 
International Association of Insurance S upervisors (IASA) and is a member of the 
International Insurance Foundation (I IF). However, the role of the agency is stil l limited, with 
licensing and supervision remaining the responsibili ty of the Entity agenci es. Little action has 
been taken to upgrade the supervisory enforcem ent capacity in this se ctor. A working group 
for the harmonisation of the Entities’ and Br čko District insurance laws is in place, but results 
are still to be seen. The In surance Ombudsman has been appoi nted, but the legal framework 
for his activities is still to be finalised.  
As regards leasing, a new law was passed by the Federation and the respective laws of both 
Entities have been harmonised. Nonetheless, En tity legislation continues to regulate the 
sector, and it is uncertain whether identical  methods and provisions will be applied. All 
operations of the micro-credit sector are supervised by the existing banking  supervision 
agencies. State-level legislation on obligations has not been adopted. 
As far as capital markets are concerned, both En tities have continued to develop their legal 
and procedural framework through new laws, by-la ws and administrative pr ocedures, but little 
has been done to ensure that the sector’s development proceeds in a harmonised way throughout the whole country. Over sight remains fragmented between the two Entity-level 
securities commissions. The institutional arrang ements for coordination of capital markets 
policies and regulation between th e two Entities are not in place.  
The creation of a ‘single economic space’ in the financial sector is, in addition, hampered by 
the fact that financial sector companies registered in one Entity can only operate in the other 
by establishing a branch there. This constitute s a major additional administrative burden and 
requires very close cooperation betw een the supervisory authorities. 
There has been limited pr ogress with respect to postal services  and there continues to be a 
discrimination against foreign operators, as the  new State-level Law on Post Offices, which is 
expected to contribute to the lib eralisation of the market in pos tal services in the country, has 
not yet been adopted. 
 
EN 35   EN According to the current legislative framework, pos tal services are organised at Entity level, 
and separate licences for the provision of posta l services are required for each Entity, which 
represents a major administrative burden for po stal service providers. At the same time the 
scope of the monopoly (reserved area) is very broad, and ther e are only limited moves to 
further, gradually open up the market. The current legal framework does not provide 
sufficient legal certainty for the provision of express postal services in a free competitive environment. Even if these services differ si gnificantly from universal postal services, they 
remain subject to the monopoly reservation. 
No significant developments have been reported in relation to the right of establishment for 
companies. EU companies can establish their op erations in Bosnia and Herzegovina with the 
same rights and obligations as lo cal firms. Nevertheless, local and foreign businesses and self-
employed individuals continue to be burdened with rather cumbersome administrative 
procedures for licensing and business permits. Companies wishing to operate in both Entities need to register in each Entity. A single regist ration valid for the whole country does not exist. 
As regards the recognition of EU professional qualifications by Bosnia  and Herzegovina, no 
progress can be reported. 
Limited progress can be noted on developing company law . Further work to fully meet 
international accounting and audit standards and to ensure a harmonised framework across the 
country is necessary. The current State and Entity level accounting and auditing laws are 
based on the International Fina ncial Reporting Standards (IFRS)  and International Standards 
of Auditing (ISA). Both Entities have recently  adopted new legislation. However, further 
harmonisation to fully meet international accounti ng and audit standards is still required. Co-
ordination and harmonisation between En tities needs to be strengthened.  
Overall , Bosnia and Herzegovina’s preparations in  the area of services, establishment and 
company law remain at an early stage. Little e fforts have been made towards ensuring a single 
economic space within the country. An increased role of the State le vel and improved inter-
Entity coordination are necessary. 
4.1.3.  Free movement of capital 
There have been no significant developments in the area of movement of capital . 
Bosnia and Herzegovina has continued to ap ply relatively liberal rules on inward capital 
flows. However, no further steps have been taken to remove the existing restrictions on 
outward transfers by individual re sidents and non-residents. Rest rictions also remain with 
regard to the holding of foreign accounts by resident entities. In Republika Srpska, the 
National Assembly adopted the Law amending th e Law on Foreign Currency Operations with 
a view to liberalising current a nd capital transactions with foreign countries. The Federation is 
drafting a new Law on Foreign Currency Operations.  There is a need to en sure that legislation 
concerning foreign currency operations is compatible  with EU legislation and is arrived at in a 
coordinated manner between Entities.  
Restrictions on foreign direct investment continue to apply to the armament and media 
sectors, where the foreign capital stake is limited to 49%. Transfers and repatriation of profits and remittances, along with foreign currency tr ansfers by domestic and foreign companies, 
are liberalised. The Law on the Central Bank of Bosnia and Herzegovina stipulates that the 
authorities must not set any restrictions on paym ents and international transactions unless this 
is necessary in the light of po ssible international obligations.  
 
EN 36   EN There is no restriction to free moveme nt of capital between the Entities. 
With regard to payment systems , Bosnia and Herzegovina has a modern payment system for 
giro clearing and real-time gross settlement operations. This system is placed within the 
Payment Systems Department of the Ce ntral Bank of Bosnia and Herzegovina.  Giro clearing 
and real-time gross settlement operations repr esent 31% of the number of transactions and 
42% of the value of internal traffic in the country. They represent 69% of the number of 
transactions and 58% of the valu e within commercial banks’ tran sactions between clients that 
have accounts in the same bank. 
Overall,  Bosnia and Herzegovina’s preparations in the area of free movement of capital 
remain on track. However, further legislative in itiatives are needed in order to approximate 
the legal framework to the acquis , to ensure countrywide harmonisation and to achieve further 
liberalisation. 
4.1.4.  Customs and taxation 
Bosnia and Herzegovina has made some progress in the field of customs . The implementation 
of customs-related provisions following the entry into force of the SAA Interim Agreement (IA) on 1 July 2008 has been over all adequate. However, the current ban on the import of 
used motor vehicles is contrary to  the IA and needs to be removed.  
Bosnia and Herzegovina’s nomenclature for the classification of goods ha s been aligned with 
the EU Combined Nomenclature. Regular up dating has now to be ensured. The customs 
valuation rules are in line with WTO rules a nd reference prices are no longer used. The rules 
of origin as provided for in the IA are respected, including th e no-drawback rule.  
Four free trade zones exist in Bosnia and He rzegovina and operational surveillance of these 
zones falls under the competence of the Indi rect Taxation Authority’s (ITA) Customs 
Department. Bosnia and Herzegovina has si gned the Convention on the International 
Transport of Goods under cover of TIR carne ts. The convention is now operational. No 
progress has been made on accession to the Istanbul Convention on the ATA carnet for 
temporary admission of goods.  
Some progress has been made on cooperation with economic ope rators in the country. The 
ITA has issued two new instru ctions on simplified customs procedures, subject to pre-
authorisation audits: local clearance at expo rt; and incomplete declarations. Approved 
exporter status has been introdu ced, eliminating the need to re quest EUR.1 certificates from 
customs offices under certain circumstances. Furthermore ITA has started with issuing 
authorisations for simplified procedur e for local export customs clearance.  
Little progress has been made with regard to  protection of intellectual property rights. The 
enforcement of customs rules is  still weak, therefore progress needs to be made on producing 
appropriate operational guidelines.  
Preparations in the field of cu stoms have been advancing, but si gnificant efforts are needed on 
approximation to ensure the correct implemen tation of the IA oblig ations and further 
alignment to the EU standards and practices. Ad ministrative and operationa l capacity needs to 
be significantly strengthened.  
Some progress can be re ported in the area of taxation . The country’s VAT legislation is 
largely in line with the acquis.  A working group has been es tablished to further align 
 
EN 37   EN legislation with the relevant EU Directives. Fu ture legislative amendments in this area should 
not undermine the achievements made so far. To ensure proper VAT enforcement, ITA is 
currently using a risk analysis  system, based on which the selection of taxpayers is made. 
However, the VAT registration system (single indirect taxpayer regist er) requires modern 
information technologies in order to be effective.  
A new Law on Excise Duties was adopted in June 2009. This law constitutes a positive step in 
terms of approximation to the acquis , even if full alignment has not been achieved.  
Tax policy is being coordinated through the Fisc al Council. Redistribution to the Entities and 
Brčko District of revenue collected has been work ing well and has proven to be an element of 
stability, even though the system has been occasionally challenged by political actors. 
The Ministry of Finance has signed an agreem ent on avoidance of double taxation and income 
tax evasion with the following countries: Albania, Kuwait, Austria, Algeria and Lithuania. 
In the area of direct taxation, the Federation of Bosnia and Herzegovina has adopted the 
Personal Income Tax Law, which is now in force. The law significantly simplifies the 
taxation of personal income. In Republika Srpska, the Law on Personal Income Tax was 
amended and income tax was reduced from 10 % to 8%. Harmonisation between the Entities 
in the area of implementing rules for the direct taxation is incomplete an d closer coordination 
is necessary. Furthermore, discrepancies with regard to double taxation persist between the 
tax laws of Republika Srpska and the Federation on the one hand, and Br čko District on the 
other. 
In the area of business taxation, a gap analysis was carried out to iden tify existing measures 
that might be contrary to the Code of C onduct for Business Taxa tion. In line with the 
subsequent report, some measures harmful for competition have been removed. However, further follow-up of the report’s findings is necessary. For example, companies in the Federation that earn more than  30% of their revenue from e xports remain exempted from 
corporate income tax. This is not in compliance with the Code of Conduct. 
Regarding administrative and operational capacity , ITA’s training unit has been created. 
Progress has been very slow, how ever, in developing a training st rategy and a training centre. 
The head of the training unit has been appointed  along with some of the required officers. 
There is also a need for additional advanced training on VAT and risk analysis. Besides this 
development, the staffing of ITA in general has not been sufficiently reinforced. The lack of 
staff to work on new projects is a factor that  weakens the administration. The communication 
within ITA needs to be improved. In addition, many border crossing points need upgrading 
and the efficiency of checks needs to be enha nced. Although a customs laboratory exists, its 
functionalities are limited and therefore only a small number of controls can be covered. A 
laboratory equipped with more functions is needed to allow more  and better controls. 
At present the IT system in Bosnia and He rzegovina is hampered  by outdated software, 
outdated hardware platforms, inadequate in formation infrastructure and inadequate 
equipment. Information technology modernisation is needed. 
Efforts to improve ITA’s capacity to implement customs and tax legislation and, together with 
other law enforcement bodies, to make it more  effective in fighting corruption, cross-border 
crime and tax evasion, need to continue.  
 
EN 38   EN An overall training strategy is ye t to be presented and an IT st rategy is yet to be defined. A 
business strategy and an invest ment plan are also needed. 
Overall,  preparations in the areas  of customs and taxation are progressing. Bosnia and 
Herzegovina needs to continue its efforts to align its customs legislation with the acquis, 
especially with respect to the EU Customs Co de. Proper enforcement of legislation needs to 
be ensured. Further efforts to strengthen ITA’s administra tive capacity are necessary, in 
particular as regards internal a udit, risk analysis and intellig ence/investigation. Furthermore, a 
customs strategy dealing with business, human resources management, information 
technology and training has to be developed. The performance and efficiency of controls 
needs to be improved.  
The country’s tax legislation is al igned to a large extent with the acquis , especially in the field 
of VAT. It is necessary to ensure that any po ssible amendments to existing legislation remain 
in line with EU provisions. Si gnificant efforts are also needed to reinforce the administrative 
capacity of ITA. The Authority’s capacities to  collect tax, reduce the size of the informal 
economy, fight corruption, and carry out risk analyses and internal  audits needs to be further 
improved.  
A sound and sustainable human resources manageme nt strategy as well as a training strategy 
needs to be developed. 
4.1.5.  Competition 
Progress in the field of antitrust  has continued and preparations  in this area are moderately 
advanced. The Competition Council, currently w ith a total of 25 employees, has taken the 
initiative of amending the Competition Law by introducing amendments that have been adopted by the Council of Ministers.  
The Competition Council’s activ ities have mainly focused on mergers, concentrations of 
business and abuse of dominant positions. So far, the Competition Council has initiated 118 
procedures and has issued 50 opinions. It collected around € 360,000 in fines from economic 
entities that were not ac ting in accordance with the Competition Law.  
Regarding State aid , no progress has been made. State-le vel legislation has been prepared, 
but has not been adopted. The establishment of a State-level, ope rationally independent, 
public State aid authority is pendi ng. Preparations need to be sp eeded up in order for Bosnia 
and Herzegovina to be able to respond to the requirements of the Stabilisation and 
Association Agreement.  
Overall,  Bosnia and Herzegovina’s preparations in the area of antitrust continue to advance. 
No progress has been made as re gards State aid. Preparations in the latter area remain at an 
early stage. Particular attention needs to be paid  to the adoption of Stat e aid legislation at the 
State level and the establishment of an operati onally independent public  State aid authority, 
also at the State level.  
4.1.6.  Public procurement 
Limited progress has been made in the area of p ublic procurement. The basic structure of the 
current public procurement law is sound but its operation in daily practice needs to be 
improved. Simplified procedures for low-value procurement would considerably increase the 
efficiency of the system, as would publication of contract notices in electronic form on the 
 
EN 39   EN website of the Public Procurement Agency (PPA ). There has been no major progress in terms 
of legislative alignment. The current proc urement law is modelled on the previous EC 
directives and many of th e provisions of the new EC directives have not yet been transposed. 
The legal framework to fight corruption in publ ic procurement remains unclear. A new law on 
public procurement has been prepared, but has been rejected by the State Parliament. Some 
efforts have been made to increa se the publicity given to notices.  
The award of concessions by competent authorities  is regulated by altoge ther 14 concessions 
laws and accompanying laws and decrees in force at State, Entity and cantonal levels. The vast majority of concessions and public-priva te partnership contracts have been awarded 
through the ‘unsolicited proposal s’ procedure without applyi ng an open, transparent and 
competitive process. Award procedures fail to meet the basic principles of the acquis . No 
formal cooperation has been established betwee n the Concessions Commissions at the various 
levels of government. The administrative cost of the system is high and the competences of 
the different institutions tend to overlap.  
Domestic preferential treatment remains in forc e, except for the electricity sector. Due to an 
extension adopted during 2009, such preferen tial treatment will not expire until 2015.  
The Public Procurement Agency (PPA) now employs 19 people, 4 more than in 2008 but 12 
short of the 31 posts that are to be filled by 2012.  
Since May 2009, the Public Procurement Revi ew Body (PRB) has the full quorum of six 
members and employs two full-time and three fixe d-time employees. No further civil servants 
have been recruited. the filling of vacant posit ions at the PRB are hampering the approval of 
the Body’s rulebook on internal organisation. None theless, the PRB was able to address 1,515 
complaints, which included all incoming complaints for 2008 and the backlog of cases which had built up in 2006, due to the said lack of a quorum.  
The PPA and the PRB have established coopera tion with EU Member States, but further 
improvements are needed to increase the administrative capacity of both institutions. 
Proper implementation of public procurement procedures across the country needs to be 
consistently monitored. The administrative capacity  of contracting authorities and their ability 
to implement the public procurement legislat ion needs to be ensured and improved. The 
provisions concerning public-priva te partnerships as well as services and works concessions 
need to be amended, uniformly for the whole country, in order to introduce competitive and transparent procedures and pr actice taking due account of the acquis  and good international 
practices.  
As regards the building of a single economic space in the field of public procurement, 
companies from the Entity other than that of the contracting authority are not formally 
discriminated against. Their chances of obtai ning contracts are, how ever, reduced because 
other provisions (such as tax or social  insurance provisions) are not harmonised. 
Coordination mechanisms and ad ministrative capacity of the ma in stakeholders in the public 
procurement system still need further strength ening, in particular to reduce the scope for 
corruption. 
 
EN 40   EN Overall,  Bosnia and Herzegovina’s preparations in the field of public procurement are 
continuing but greater support fo r strengthening the system has to be ensured. Procurement 
legislation needs to be amended to meet European standards. 
4.1.7.  Intellectual property law 
Limited progress has been made with regard to intellectual, industrial and commercial 
property rights (IPR) .  
Bosnia and Herzegovina has ratified the Pr otocol relating to the Madrid Agreement 
concerning the International Registration of Mark s, the Budapest Treaty on the International 
Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, the International Classification of Patents Tr eaty, the Hague Agreement concerning the 
International Deposit of Industr ial Designs, the Geneva Convention for the Protection of 
Producers of Phonograms against Unauthorised Duplication of their Phonograms, and the 
Rome Convention for the Protection of Performers, Producers of Phonograms and 
Broadcasting Organisations. Atte ntion will have to be focused on the actual implementation 
of these Conventions and Agreements. Bosnia an d Herzegovina still need s to ratify the WIPO 
Copyright Treaty and the WIPO Pe rformances and Phonograms Treaty.  
The Institute for Intellectual Property has increa sed its staff from 32 to 42 employees, with 
staff working in Mostar headquarters and in Sarajevo and Banja Luka branch offices. A 
number of measures have been taken to im prove the functioning of the Institute and to 
disseminate intellectual property-related informa tion. Some training actions have been carried 
out. However, the administrative and operationa l capacity of the centra l and regional offices 
needs to be improved and further training ha s to be provided. In July 2009 Bosnia and 
Herzegovina adopted the Strategy on Developmen t of the Institute for Intellectual Property 
(2008-2015). 
The draft Law on Copyright and Related Ri ghts and the draft La w on the Collective 
Management of Copyright and Related Righ ts are still pending adoption. The overall 
alignment of the current legal system with the TRIPS Agreement and with the acquis  is rather 
moderate but is improving.  
No significant development has taken place con cerning industrial property rights. According 
to the current legislation, the In stitute for Intellectual Property grants patents without prior 
substantive examination of appli cations, shifting the burden of pr oof of the validity of such a 
patent to the patent holder. However, this pa tent-granting system currently reveals certain 
systemic problems resulting from deficiencies in the current legislation an d the Institute’s lack 
of capacities. As a consequence, there are curr ently 1,660 patent applicat ions being processed 
or waiting to be processed. Because of this, a lmost five years are ne eded to conclude the 
procedure, a period which can be considered as  excessive, bearing in mind that patents are 
granted without prior substantive examination. 
Trademarks and designs are granted on the ba sis of prior substantive examination of 
applications. The constant growth in trademark applications and the limited capacity of the Institute have resulted in an extremely long waiting time, four years on average. 
The current waiting time for design applications is, on the contrary, rath er short (on average 
one year) even though the design pr otection is granted after an in-depth examination of the 
application. However, this is possible due to the relatively small number of design 
 
EN 41   EN applications and the limited documentary base for examination — only prior domestic 
applications and granted rights. 
As regards geographical indications and topographi es of integrated circuits, no applications 
for the protection of these subject matters have yet been filed with the Institute. 
Little progress can be reported on enforcement. The Indirect  Taxation Authority, in charge of 
IPR enforcement, referred seven files to th e Prosecutor’s Office and some items were 
confiscated. However, high levels of counterfei ting and piracy persist and the country remains 
a point of distribution to the rest of Eur ope. The comprehensive action plan on capacity 
building has not been adopted yet. No significan t action has been taken in terms of awareness-
raising. Coordination is severe ly lacking between enforcemen t bodies at various levels.  
Overall , Bosnia and Herzegovina’s preparations in  the field of intellectual property law 
remain at an early stage. A number of initia tives have been launched but nothing definitive 
can be reported yet, not least as far as the improvement of the legislation is concerned. The 
strengthening of the administrative capacity of the IP Institute and its new branch offices 
remains a priority, as well as  awareness-raising campaigns and improved cooperation among 
the law enforcement bodies an d between all relevant stak eholders with the aim of 
strengthening enforcement. 
4.1.8.  Social policies, employment  and public health policy 
Limited progress has been made in this area. 
As regards  social policies  little progress has been achieved.  There has been no progress in 
approximating labour law , which exists only at Entity and cantonal level. Although there is a 
certain degree of coordination at Entity level, further fragmentation appears at cantonal level, where local provisions re gulate labour matters.  
Little progress has been made regarding health and safety at work , which falls under the 
competence of the Entities. Their legislatio n has been further approximated to the EU 
requirements, even though not substantially. Ho wever, not all the cantons of the Federation 
have adopted the relevant legisl ation. The Ministry of Civil Af fairs has not yet concluded the 
analysis of compliance with  ILO conventions and the acquis .  
Little has been achieved in the area of social dialogue  at State level. Outstanding 
shortcomings remain the non-recognition of trade unions at State level, the inability to adopt 
the Law on Social Partners’ Repres entativeness and the fact that there is no State-level Social 
and Economic Council. In the meantime, Republika Srpska has establishe d its own Social and 
Economic Council. Bosnia and Herzegovina became a full member of the European 
Committee of Social Rights, since it rati fied the European Social Charter.  
Regarding social inclusion and anti-discrimination  there has been some progress. A new 
comprehensive anti-discrimination law has been adopted. It covers a wi de range of sectors 
(employment, social security, education, good s and services, housing) . However, several 
aspects of the law remain unclear or not fully in line with the acquis , in particular as regards 
the grounds covered (age and disa bility are not covered) and th e broad scope of exceptions to 
discrimination. Six strategic goal s of the social inclusion stra tegy — relating to employment, 
health, education, the pension sy stem, disabled persons and th e protection of families with 
children — have been adopted. Nonetheless, the strategy is not yet finalised. The potential for 
 
EN 42   EN fighting poverty and promoting so cial inclusion for the nationa l reconciliation needs to be 
fully recognised. The UN Convention on the Right s of Disabled Persons has been signed.  
There is limited progress in relation to social protection , especially with regard to securing 
equal social rights for different marginalised gr oups. Public expenditure in the area of social 
protection of children and social sector reform needs to be more  efficient and better targeted. 
The role of municipalities in this regard n eeds to be strengthened. Some municipalities, 
however, report increased investment in the soci al protection sector due to concerns over 
social unrest in the context of  the economic crisis. However, in general, the ‘needs-based 
approach’ applicable to EU public welfare systems is not yet sufficiently included in the social protection system of Bosn ia and Herzegovina. Abuse of soci al benefits is still frequent. 
As far as employment policy is concerned, no progress has been registered. Registered 
unemployment remained very high (see item 3.1 Macroeconomic stab ility for further details). 
Unemployment concentrates at both ends of the skills spectrum (people with third-level education and unskilled worker s). Women represent half of the unemployed. Job creation is 
not sufficient to absorb the labour force. In creasing demand for social security and public 
health benefits by unemployed persons could cause further difficulties for Entities’ budgets. 
The economic crisis is underlin ing the deficiencies of the labour market, es pecially its 
fragmentation and the lack of  countrywide coordination.  
The State level remains powerless in the fi eld of employment policy. There is no State 
database for employment and labour. A St ate-level employment strategy based on the 
benchmarks described in the EU Employment Gu idelines has not been prepared. Employment 
strategies and projects for ac tive employment measures have been developed by the two 
Entities and Br čko District. However, as yet there is little coordination between them. Active 
labour market programmes remain fragmented. They reflect the arrangements made with 
donors in specific areas, and do not form part of a cohe rent and comprehensive policy. The 
Federation adopted an employment strategy whic h has also been steered through parliament 
but Republika Srpska did not adopt its own strate gy. Little progress has been made as regards 
public health policy . The Conference of Health Minist ers meets quite regularly and has 
arranged for some coordination among the various  Ministries of Health. There have been 
some attempts to improve cooperation between the Conference of Minist ers and international 
organisations through exchange of information. However, no real step  was made regarding 
strategic development. The rele vant road map drafted in 2008 has not yet been adopted and 
the State-level strategic plan fo r the development of health ha s not been drafted. The Entities 
are still finalising their strategi c plans meant to be used as a basis for the State strategy. The 
fragmentation of the institutional and legislativ e framework, the non-transferability of health 
funds and the inadequate covera ge of health insurance are st ill of particular concern. The 
quality of the health care services has to be improved.  
The Agency for Medicines and Medical Devices has become operational, after the adoption of 
its 2009 budget. The State-level strategy for drug control and the prevention of use and abuse 
of narcotics has been adopted.  
Regarding international obligations, some sm all steps have been taken. The State-level 
commission for implementing WHO International H ealth Regulations was established, but the 
implementation of the regulations remains problematic. The WHO Framework Convention on 
Tobacco Control (FCTC) was ratified by the in March 2009. 
The State Regulatory Agency for radiation protec tion and nuclear safety has been established.  
 
EN 43   EN Bosnia and Herzegovina has not yet advanced  in de-institutionalis ation, establishing 
community-based services and providing aid to dependent persons, including in the field of 
mental health . Specific focus is needed on mental he alth care fo chil dren and young people. 
Institutional capacity to produce reliable statistical data harmoni sed with European standards 
in this area has not yet been developed. A D eclaration on along-term pr ogramme for regional 
collaboration and development on on mental health was signed by the SEE Ministers of 
Health. Among other things, it prov ides for the establishment in Bosnia and Herzegovina of a 
Regional Centre for Cooperation in the field of mental health, which has not been yet 
operational.  
Overall , Bosnia and Herzegovina’s preparations re garding social policies, employment and 
public health policy remain at an early stage and are undermined by the fragmentation of the 
relevant legislative and institutional frameworks. 
4.1.9.  Education and research 
Some progress has been made in the field of education . The Conference of Ministers of 
Education has met on regular basis and coordi nation has improved. It adopted an agreement 
on the establishment of the Council for Gene ral Education and an agreement on a common 
core curriculum for pre-school education. At in stitutional level, the members of the steering 
board of the Centre for Information and Do cumentation Recognition in Higher Education 
have been appointed, as well as  the Directors of (1) the Agen cy for Development of Higher 
Education and Quality Assurance, (2) the Agen cy for Pre-school, Elementary and Secondary 
Education, and (3) the Centre for Diploma Recognition. Nevertheless, State education 
institutions face understaffing and limited funding. 
The nine-year curriculum for primary educatio n has not been implemented in a number of 
cantons. Countrywide implementation is e xpected during the 2009-2010 school year. The 
Law on Amendments to the Framework Law on hi gher education in Bosnia and Herzegovina 
was adopted. As part of the implementation of the Framework Law on Vocational Education 
and Training, a ‘Rulebook on th e establishment and organisati on of a network of vocational 
schools in Bosnia and Herzegovina’ and a ‘Rul ebook on the rules and methods for registration 
of secondary vocational school a ssociations in Bosnia and He rzegovina’ have been adopted. 
A common educational textbook for children from Bosnia and He rzegovina living abroad for 
the early years of primary education was prepared and distributed. However, the 
harmonisation of framework laws for higher ed ucation, pre-school education and vocational 
education has not been completed at the can tonal level. The implementation of these 
framework laws is proceeding, but slowly. Ther e has been limited progress towards resolving 
the ‘two schools under one roof’ issue, which ha s already created tension at community level. 
There is little progress in st atistical reporting according to international requirements. 
Bosnia and Herzegovina needs to continue its efforts, in partic ular for the full implementation 
of the Framework Laws, establishing a Nati onal Qualification Framework and developing 
quality assurance, addressing the issue of edu cation meeting the needs of the labour market, 
and developing the lifelong learning concept. 
As regards culture , Bosnia and Herzegovina ratified the 2005 UNESCO Convention on the 
Protection and Promotion of the Diversity of Cultural Expressions in January 2009. It also 
approved its first State-level stra tegy on cultural policy together with the statistical annex, but 
without providing budgetary support. The Entities reduced drastically the funds allocated for 
culture in their 2009 budget, with  a possible effect on the implementation of the strategy. The 
 
EN 44   EN Law on Cultural Heritage is sti ll pending, because of its political  implications and especially 
its institutional chap ter. Bosnia and Herzegovina participat es in the efforts for the creation of 
a regional strategy for culture in the framewor k of the Euro-Mediterranean Partnership. Talks 
for the participation of Bosnia and Herzegovina  in the Community's Culture programme have 
been initiated.  
There has been some progress on research . Bosnia and Herzegovina signed the Memorandum 
of Understanding for the 7th Framework Progr amme for Research a nd Development (FP7) 
and in January 2009 became an associated country and eligible to fully participate in the programme. An FP7 national coordinator was a ppointed and the FP7 na tional contact points 
have improved their work and output. Bosnia a nd Herzegovina is a full member of the COST 
programme and has National Info rmation Point status in Eure ka. The State Framework Law 
on Scientific and Research Activities, which includes the establishment of a Science Council 
and a strategy for development of science, has been adopted but the Law on Science and 
Technology is still pending. Th ere is no integrated resear ch policy and relevant budget 
allocations are very limited. Research policy is still designed and implemented at Entity level, 
with no real coordination.  
Overall , preparations in the area of education and research have started, but progress is slow 
and needs to be stepped up. Some progress has been made in the field of culture. 
4.1.10.  WTO issues 
Bosnia and Herzegovina has made good progress in bringing its trade relevant legislation in 
line with the WTO requirements. A WTO work ing party meeting on th e country's accession 
took place in March 2009. To meet its accession target, Bosnia and Herzegovina will have to 
intensify its market access negotiations, in particular in the agricultural sector, while 
continuing to bring its le gislation into conformity with WTO requirements. 
4.2. Sectoral Policies 
4.2.1.  Industry and SMEs 
Limited progress has been made in the area of industry and SMEs. 
As regards industrial policy , no comprehensive industrial stra tegy has been drawn up. Little 
has been done as regards the harmonisation of Entity regulations, and the corporate governance environment remains incoherent. No corporate governance code applicable across 
the whole country has been developed. 
Some progress has been made in the area of SMEs . Bosnia and Herzegovina continued to 
implement the European Charter for Small Enterp rises, but progress was slow at the national 
level and was made on ad hoc basis. In April 2009, a countrywide strategy for SMEs was 
adopted. The strategy includes th e establishment of the Council for Entrepreneurship but it 
does not include a State-level SME agency and an SME fund. According to the strategy, the 
functions of the SME agency will be incorporated within a sector in the Ministry for Foreign Trade and Economic Relations. However, no plan was presented on how this will be put into 
practice and how the conflict of responsib ilities on elaborating the SME policy and 
implementing it by the same body will be resolved.  
Progress has been made in engaging the range of education actors at al l levels of governance 
within Bosnia and Herzegovina into perspec tive building on lifelong entrepreneurial learning. 
 
EN 45   EN More attention is required to ad dress entrepreneurship particular ly in early education. Lack of 
systematic data and more developed intelligence on enterprise skills hampers effectiveness of policy and training investment. 
Action towards a simplified and more efficien t business registration continued, but a single 
registration valid for the whole country is not yet operational. Some initiatives have been 
taken at Entity level to support SMEs, includi ng amendments to their respective company 
laws and steps towards improving the inspection and permit processes. However, lack of coordination between the various initiatives rema ins an issue. Reforms have not yet caught up 
with the difficulties faced by businesses in the count ry and further efforts are required to 
improve the business environment.  
The institutional framework for export promo tion has been strengthened through the Export 
Promotion Council. However, its recommendations  for 2008 have not been implemented, and 
the Council of Ministers has not yet adopted recommendations for 2009. As a consequence, 
the country still lacks an export promotion st rategy. The institutional framework remains in 
the fledging stage in terms of human resources and quality infrastructure. 
In February 2009, a consortium of five institu tions from Bosnia and Herzegovina became 
partners of the Enterprise Eu rope Network on non-funding basis. 
Overall,  preparations in the area of  industry and SMEs remain at an early stage. Bosnia and 
Herzegovina needs to develop a comprehensiv e industrial strategy and properly implement 
the State-level strategy for SMEs. Further impr ovements in the business environment remain 
crucial for facilitating business and trade. 
4.2.2.  Agriculture and fisheries 
Some progress has been made in the field of agriculture and rural development . The 
strategic plan for the harmonisa tion of agriculture, food and rura l development was adopted in 
January 2009 together with an operationa l programme for the period 2008-2011 with the 
objective of improving the compe titiveness of the agricultural a nd food processing sectors and 
harmonising and implementing rural developm ent measures throughout the country. The 
decision on the establishment of an Office fo r Payment Harmonisation was adopted in June 
2009, providing the legal basis for the development of a State-level institutional structure for 
the harmonisation of the Entity-level support measures and gradual alignment with the acquis . 
However, the 2008 Framework Law on Agriculture, Food and Rural Development has not 
been implemented in the absence of the necessa ry implementing legislation. There is a need 
for a mechanism to ensure the implementation and enforcement of adopted legislation. No 
progress has been made towards establishing th e Ministry of Agriculture, Food and Rural 
Development at the State level. 
A revised rulebook of the State-level sector for agriculture, food, forestry and rural 
development was adopted in April 2009, which provides for additional posts, improves the coordination of policies and prepares the gr ound for new administra tive structures and 
international cooperation. Staffing at  Entity level has further increased. 
No countrywide harmonised farm and clients'  register has been established although 
preparations have started. No progress has been made in harmonising land registration 
 
EN 46   EN systems in order to improve land management . There has been no in crease in government 
support for agriculture and rural development. 
Some progress has been made in improving the agriculture statistics system. A committee for 
coordination of agricultural information has been  established in order to create systems for the 
provision of accurate and standardised agricult ural statistics and market information. The 
agriculture report for 2008 has b een adopted. However, due to th e lack of agricultural data, it 
allows only limited analysis in comparison to th e previous year. Collection and processing of 
agricultural data remains weak and the lack of  reliable statistics hampers the development of 
agricultural policy. Preparations for the agricu lture census commenced within the framework 
of the preparation of the housing and population census. 
The lack of administrative reform, the absenc e of affordable rural credit schemes and the 
limited effectiveness of government support prev ent farmers and the agri-processing industry 
increasing their competitiveness through restru cturing and modernisa tion. An advisory 
council for agriculture, food and rural development was established in April 2009 with the 
aim of involving the non-government sector in policy-making. No decision has been taken as 
regards the future IPA rural development structures in Bosnia and Herzegovina.  
Overall, there is a need for a stronger coordi nation mechanism between the State level and the 
Entities for the acquis  approximation process in the fi eld of agriculture and rural 
development. 
Limited progress has been made as regards th e adoption of legislat ion in the area of food 
safety . The Law on Genetically Modified Organi sms and several pieces of implementing 
legislation in the areas of control of contamin ants and nitrates in foodstuffs and control of 
honey and other bee products have been adop ted. Conditions were adopted which testing 
laboratories must fulfil in order to be incl uded in the national ne twork of authorised 
laboratories for food control. To  improve official control in the food safety area, the Food 
Safety Agency signed an agreement with th e Entities and local inspection services on 
implementing the first national food monito ring programme. However, the implementing 
legislation on food hygiene and o fficial control is not yet adopt ed and therefore enforcement 
capacity remains weak and not in line with EU  standards. No progress can be reported as 
regards the upgrading of agri-food establishments. 
Overall, improved coordination mechanisms be tween the State level and the Entities are 
necessary to allow progress towards creating an effective legislative and administrative food 
control system. The lack of progress in the f ood safety sector has a negative impact on trade 
in agricultural products. 
The number of staff of the Food Safety Agency  has not increased. The representatives of 
Bosnia and Herzegovina on the panel of high-le vel experts for food safety in the Food and 
Agriculture Organisation (F AO) have been appointed.  
Limited progress has been made in the field of veterinary and phytosanitary policies . The 
Law on Animal Welfare was adopted in Februa ry 2009 but the State Veterinary Law has not 
yet been revised, which hampers further harmonisation with the acquis . Implementing 
legislation on the maximum level of residues in foodstuffs of animal origin and measures for 
the control of brucellosis have been adopted to gether with a number of bylaws in the area of 
animal welfare and animal disease control. The number of staff in the State veterinary 
administration has been increased but all vacancies are not yet filled. 
 
EN 47   EN There is no functional national animal identificat ion scheme, which limits the effectiveness of 
the brucellosis control program me that has been launched. No progress has been made on 
national accreditation of the veterinary di agnostic laboratories according to ISO 17025 
standards. 
The State Plant Health Agency has become ope rational with the recruitment of six civil 
servants. Implementing legislation to prevent the spreading of harmfu l organisms has been 
adopted. Implementing legislation on mineral fe rtilisers and the rule book on seed marketing 
have also been adopted, prov iding the plant health admi nistration with reinforced 
competencies. 
The division of competences between State and Entity administrations in the field of food 
safety and veterinary and phytosanitary po licy impedes the proper functioning of border 
inspection posts. 
As regards the acquis in fisheries , Bosnia and Herzegovina st arted exporting fish from 
aquaculture to the European Union. However, there is a general lack of le gislation at the State 
level in the field of fishery acquis . 
Overall,  Bosnia and Herzegovina is still at an early stage of approxi mation with the EU 
acquis  in the fields of agriculture and rural development, food safety, veterinary and 
phytosanitary policy, and fisheries. Preparations  are slowly proceeding. The strengthening of 
State-level capacities in the field of agricultu re and rural development continues to be 
necessary. Preparations towards setting up struct ures to implement the IPA rural development 
component need to be intensified. Strengthenin g of the laboratory and in spection capacities in 
the food safety, veterinary and phytos anitary sectors remains necessary. 
4.2.3.  Environment 
Progress in the field of the envir onment has continued to be limited.  
Some progress has been made as regards horizontal legislation . Bosnia and Herzegovina has 
ratified the following agreements: the Cartagen a Protocol on Biosafety, along with the UN 
Convention on Biodiversity, the Convention on Inte rnational Trade in Endangered Species of 
Wild Fauna and Flora (CITES), the Bern C onvention on Conservation of European Wild 
Species and Habitats, the Aarhus Convention on  Access to Information, Public Participation 
in Decision-making and Access to Justice in  Environmental Matters. Efforts are now 
necessary to ensure proper implementati on. Ratification of the Espoo Convention on 
transboundary environmental impact assessmen t and the Stockholm Convention on Persistent 
Organic Pollutants has not yet been completed. Although no furt her progress is to be noted 
since the last report, the Dir ective on Environmental Impact Assessments (EIA) is almost 
completely transposed into Enti ties’ laws, but attention has to  be given to the transboundary 
dimension of this issue. No progress has been  made as regards the transposition of the 
Directive on Strategic Environment Assessment (SEA). Transposition and implementation of 
the acquis  in the field of horizontal legislati on requires considerable improvement.  
No developments can be reported with regard to air quality . Entity-level legislation has been 
prepared, but has not yet been adopted.  
Regarding waste management , some progress has been made in  the establishment of sanitary 
landfills throughout Bosnia and Herzegovina, a nd regulations on medical waste management 
 
EN 48   EN have been enacted. However, no progress has been  made in relation to rules or regulations 
governing the system of recycling and recovery of  priority waste streams, such as packaging, 
motor oil and tyres. Further efforts are still requi red to initiate management of waste streams 
of animal origin. Bosnia and Herzegovina is at  an early stage of investment in solid waste 
management. Further efforts are required to pr ioritise and coordinate investment programmes, 
as financial resources are scarce.  
Limited progress can be reported on water quality . Bosnia and Herzegovina continues to 
implement the requirements of the Water Framework Directive by means of the Entity Water Laws. The Water Agencies are operational in the Federation and ensuring coordination with 
the relevant Ministries. The esta blishment of Water Agencies in  Republika Srpska is still in 
progress. The Agency for the Sa va River Basin area has been set up. Further efforts are still 
required to ensure uniform river basin plan ning, proper public cons ultation and monitoring 
between the Entities. Implemen ting legislation has been adopted for water laws, water 
charges, and for harmful and dangerous substa nces and their maximum levels in surface 
waters. However, much of the implementing legisl ation still needs to be put in place in order 
to ensure further alignment with the acquis . Untreated discharges of waste water remain a key 
environmental challenge, and access to drinki ng water as well as wastewater treatment 
infrastructure requires more investments.  
Apart from the national strategy and action plan for protection of the biological and landscape 
diversity of Bosnia and Herzegovina, no significant  further progress has been made in relation 
to nature protection . No new developments have taken place in the field of industrial 
pollution control and risk management . 
No progress can be reported in terms of approximation to the acquis  as regards chemicals  and 
noise . Some progress has been made in relation to genetically modified organisms (GMOs)  
through the adoption of a law on GMOs and a number of related bylaws. 
Bosnia and Herzegovina’s administrative capacity  in the environment sector remains weak 
overall. A State-level Environmental Law en suring harmonised countrywide environmental 
protection has not been adopted yet, and no Stat e Environment Agency has been established. 
The current draft Law does not provide for the es tablishment of such an agency, and restricts 
itself to reinforcing the environment sector at  the Ministry of Foreign Trade and Economic 
Relations. During the reporting period, this Ministry  was not able to play  any significant role 
due to the lack of an adequate legal or institutional framework. Implementation of the 
environmental legislation remains a concer n. The human and technical capacity of the 
inspectorates to ensure complia nce with environmental legislat ion at Entity, canton and local 
levels is insufficient. Integration of environmen tal concerns in other sectors remains weak. As 
regards investments, no significant developmen ts have taken place.  Environment-related 
infrastructure needs much improvement. Effort s to prioritise and coordinate investment 
programmes have been insufficient. The Federation’s Environment Fund is not yet 
operational. 
Overall,  Bosnia and Herzegovina’s preparations in the field of the environment remain at an 
early stage. Bosnia and Herzegovina needs to strengthen its environmental protection 
institutions, in particular at St ate level. It also needs to mainstream environmental concerns in 
other sectors. Establishment of a harmonised legal framework for environmental protection, 
of the State Environmental Agency and of a functioning environmental monitoring system 
would be significant steps forwar d. Bosnia and Herzegovina needs to step up its efforts with 
regard to its obligations unde r internationa l conventions. 
 
EN 49   EN 4.2.4.  Transport policy 
There has been slow, but continued progress on the development of the trans-European 
transport networks.  Bosnia and Herzegovina has contin ued to actively pa rticipate in the 
implementation of the 2004 Memorandum of Unde rstanding on the development of the South 
East Europe Core Regional Transport Network,  and in the South East Europe Transport 
Observatory (SEETO) particular ly by updating and implementi ng the Multi-annual Plan 
2009-2013 . 
Upgrading of pan-European road corridor V-c is continuing. In 2009, works on the Sarajevo 
motorway bypass continued and the toll motorway extended to Kakanj, 40 km north of 
Sarajevo. Designs for the Kakanj-Zenica section, the Zenica, Doboj and Mostar bypass and the Mostar–Croatian border sec tion have been prepared. The fi nancing for a further 65 km of 
the four sections of the highway has been ensured.  
Some progress can be re ported in the area of road transport . Bosnia and Herzegovina is 
granting unrestricted access through  its territory to Community transit traffic. Progress has 
been made towards the establishment of the TIR carnet system and the implementation of digital tachographs. Safety measures such as stri cter technical inspections  of vehicles or fixed 
speed control radars in the Federation have been undertaken. Republika Srpska adopted the 
Law on Road Transport and the programme for tr ansport safety on Republika Srpska roads. 
There are ongoing activities on the improvement  of road network maintenance and the 
reconstruction of roads; however , significant investments are required to achieve sufficient 
levels of safety and efficiency.  
There has been limited pr ogress in the area of rail transport . Railway companies are still 
vertically integrated and the infrastructure managers are not independent from the ailways 
undertakings — as required by the acquis.  The Railway Regulatory Board (RBB) has 
completed its recruitment and training. The ‘Ra ilway Package II’ Dire ctives on rail safety 
remain to be implemented. The need persists to  accelerate rail reform  in accordance with the 
‘Addendum to the Memorandum of  Understanding on the development of the South-East 
Europe Core Regional Transport Network for a South-East European railway transport area’. 
As regards maritime transport , Bosnia and Herzegovina is not  yet a party either to the 
SOLAS Convention (International C onvention for the Safety of Li fe at Sea) or to the ISPS 
Code (International Ship and Po rt Facility Security Code). 
Little progress has been made in the area of inland waterways . Preparatory activities for the 
re-establishment of navigation on th e Sava River are in progress.  
No progress has been made in the area of combined transport . 
Progress has been made in the area of air transport . Bosnia and Herzegovina became a full 
member of the Joint Aviation Authorities (JAA).  Relations with the European Air Security 
Agency (EASA) have been put on a formal  footing by a working arrangement signed on 7 
July 2009. The final organisational set-ups of the air navigation provider and of the civil 
aviation authority have been adopted and their headquarters have been established. After the 
ratification of the European Common Aviatio n Agreement (ECAA), administrative burdens 
and unnecessary delays should not limit the efficiency and effec tiveness of its application. An 
action plan for the transposition and implementa tion of the ECAA has been drawn up. Further 
efforts are necessary to complete the firs t transitional phase of the ECAA, including 
 
EN 50   EN amendments to the Aviation Law — as suggested in the ECAA Assessment Report of 2008 to 
establish an independent civil aviation accident  investigation body and to ensure appropriate 
occurrence reporting in civil avia tion. Substantial efforts have b een made in the area of air 
traffic management but further efforts are still required. As a member of the ECAA agreement, Bosnia-Herzegovina participates  to Single European Sky Committee (SSC) 
sessions with observer status. The Europ ean Commission has put in place the ISIS
9 
Programme to assist South East ern States to transpose EU le gislation, to set up the required 
structures and to ensure the appropriate training of  national staff. It is essential for Bosnia and 
Herzegovina to make best use of ISIS that shou ld be a suitable instru ment in support to its 
current efforts. Further alignment with Europe an standards in the ar eas of aviation safety, 
security and air traffic management as well as further efforts in staff training are needed.  
Overall , Bosnia and Herzegovina’s preparations in the transport sector are advancing, albeit 
slowly. Efforts need to be stepped up, in partic ular as regards the road  and railway sector. The 
upgrading of transport infrastructure remains necessary. 
4.2.5.  Energy 
There have been no developments on oil stocks and security of supply . The country receives 
all of its gas from Russia through Ukraine, Hung ary and Serbia. Oil stocks remain below the 
90-day level. 
Concerning the internal energy market , the country is not yet fulfilling the obligations 
deriving from the Energy Community Treaty. The acquis  on the internal electricity market 
has been partially transposed, but issues such  as tendering procedur es for new generating 
capacity remain to be addressed. The main  problem continues to be the lack of 
implementation of legislation. The State level transmission company's (TRANSCO) 
operability is at high risk due to missing political compromise of the two Entities as the only 
shareholders on the company's dealings. This  has led to a conti nued blockage of any 
investment for more than one year. Maintena nce operation cannot be carried out. This might 
put at risk the security of electricity supp ly. The effective continuity of the business 
operations of this important Sate level co mpany needs to remain ensured. Generation 
investment planning is also hampered by the la ck of coordination betw een the two Entities. 
Since January 2008 there has been market  opening for all non-household customers. 
However, consumers have little incentive to ch ange suppliers as regulated tariffs remain 
below market prices.  
The State Electricity Regulatory Commission (S ERC) has issued new tariff rates for the 
independent system operator and ancillary serv ices for 2009. The tariff rates adopted by the 
Entity regulatory commissions (FERC and RSERC)  in 2007 remain in force to date. The 
independence of the regulatory commissions need s to be improved, not least in relation to 
tariff setting.  
No progress has been made in the gas sector. Republika Srpska and the Federation of Bosnia 
and Herzegovina have had their own legislat ion since 2007, but neither a countrywide legal 
framework nor a national regulator has yet been  developed due to the lack of agreement 
between the Entities.  
                                                 
9 Implementation of Single European Sky In South Eastern Europe 
 
EN 51   EN There has been limited progress on energy efficiency and renewable energy . Bosnia and 
Herzegovina has not developed any comprehens ive energy strategy. Th ere is no strategic 
planning for the promotion of energy efficien cy and the use of rene wable energy sources. In 
December 2008 a 50% connection fee was stipulated  for facilities that use renewable energy 
sources for electricity generation (which doe s not apply to hydro power plants of over 10 
MW). 
As regards nuclear safety and radiation protection , the country has signed the Convention 
on Early Notification of a Nuclear Accident , the Convention on Physical Protection of 
Nuclear Material and the Conve ntion on Assistance in the Case  of a Nuclear Accident or 
Radiological Emergency. However, the Law on Ra diation and Nuclear Safety in Bosnia and 
Herzegovina of 2007 is not yet implemented. In addition full compliance of the national 
legislation and regulations in th e nuclear field with the acquis is far from being achieved. The 
State Regulatory Agency for Radiation Safety a nd Nuclear Safety hardly  started its work in 
2009, following the appointment of a direct or and a regional deputy director.  
Overall , Bosnia and Herzegovina’s preparations to meet EU standards in the area of energy 
have started, but remain at an early stage. There has been little progress over the reporting 
period, and the country is lagging behind in  meeting the requireme nts of the Energy 
Community Treaty. The lack of cooperation a nd coordination between the two Entities is 
hampering the development of a functioning  energy market and is compromising the 
improvement of security of supply. The deve lopment of a comprehe nsive energy strategy, 
including the promotion of energy efficiency and renewable energy s ources, is crucial. 
4.2.6.  Information society and media 
Bosnia and Herzegovina has made limited progress in this area. 
Regarding electronic communications and information technologies , the regulatory 
framework on Electronic Commun ications needs further reform. The telecommunications 
sector policy (2008-2012) was approved in De cember 2008, with a one-year delay. The new 
policy provides for the future transition to an authorisation framework and the amendment of 
Reference Interconnection Offers (RIOs) to enab le market entry of m obile virtual network 
operators (MVNOs) by the end of 2010. Since the s ector policy determines the priorities and 
specific regulatory objectives, important regul atory decisions — such as on 3G licences, 
number portability and local loop unbundling — were delayed until its adoption, even if the 
Communications Regulatory Agency (CRA ) had already adopted rules in 2008. 
Few new entrant operators have become operati onal since the liberalisation of the market. 
With a total of around 15 interconnection agreemen ts in place, many of the licensed operators 
or service providers are not in a position to effectively compet e with the incumbent operators. 
The three incumbent operators still have clos e to 100% market share. Very few operators 
offer carrier selection services. In the re porting period, a new licence for fixed telephony 
services, two additional licences for internet service provi ders and two licences for network 
operators have been granted. The CRA issued three licences for Universal Mobile Telecommunications System (UMTS) to incumb ent operators without a tender procedure.  
Tariff rebalancing — a key element for creating a competitive market — is still at an early 
stage. The CRA adopted in March 2009 a model for the rebalancing of tariffs for telephony 
services until 2012, which is due to be applied as of January 2010. 
 
EN 52   EN The challenges to the CRA’s independence have increased over the reporting period. The 
dialogue between the CRA and th e Council of Ministers (CoM) ha s remained difficult. After 
a two-year delay, a new director general of the CRA has not been appointed. The nomination 
of CRA Council members, which was due to be finalised in April 2009, also remains 
unresolved. 
Since the start of the debate on the procedure for appointing the CRA’s director general, and 
in the absence of a sector policy, the adoption of severa l decisions on broadcasting and 
telecommunications prepared by the CRA has been delayed by the executive. This affects 
negatively the dynamics of competitive development, and it is not a good signal to the sector and to consumers. The overall situation at th e CRA also hampers its administrative capacity. 
The CRA needs a duly appointed director gene ral and Council, as well as additional human 
resources and expertise, to continue to perform its tasks and responsibilities and to be able to 
proactively support the development of the communications and broadcasting market. The 
Ministry in charge of communi cations also needs to strengthe n its administrative capacity. 
Little progress has been  made in the area of information society services . With regard to the 
status of the citizen identif ication protection system (CIP S), the Law on the Agency for 
Identification Documents, Registers and Data Exchange (IDDEEA) provides for the 
establishment of an agency, which has been recently set up. The IDDEEA Agency is 
takingover the tasks of the CIPS Directorate and other responsibilities, such as the provision 
of technical support for an ID document system at the State level (central registers, data 
exchange, e-signature in the ID document area, central personalisation of ID documents).  
The State-level law for the development of the information society has not been adopted, and 
no State-level agency has been established. In the meantime, Republika Srpska has set up its own information society agency following the understanding that the constitution indicates 
that 'information technologies' are an entity competence. 
The overall implementation of the rules laid  down by the e-Signature  Law — adopted in 
November 2006 — is slow. No progress has been  made in adopting legislation on conditional 
access services. Bylaws for the e-Business La w have not been adopted. Republika Srpska 
adopted its law on electronic business and developed a strategy for e-government.  
Limited progress has been made on audiovisual policy and media.  
The Unesco Convention on the Protection and Promotion of the Diversity of Cultural 
Expressions has been ratified. Rules on condi tions for the provision  and distribution of 
audiovisual media services and RTV programme s have been adopted and implementation has 
started. Preparations for the introduction of Di gital Terrestrial Televi sion (DTT) have seen 
some progress.  
However, a deterioration of media freedoms in  Bosnia and Herzegovina has been observed 
during the reporting period. Sin ce January, the Free Media Helpline of the Bosnia and 
Herzegovina’s Union of Journalists has regist ered 16 verbal assaults and direct physical 
attacks, death threats and other violations of jour nalists’ rights. This represents an increase of 
20% compared to 2008. The countr y is ranked in 115th place on th e list of Reporters without 
Borders evaluating press freedom in 173 countri es. There has been little cooperation between 
local media organisations responsible for media freedoms. In April the RTRS — the 
Republika Srpska public broadcaster — and th e Republika Srpska daily newspaper Glas 
 
EN 53   EN Srpski walked out of the asso ciation Journalists of  Bosnia and Herzegovina, announcing the 
establishment of a separate, Republika Sr pska only, association of journalists. 
The reform of Bosnia and Herzegovina’s public  broadcasting sector progresses slowly. The 
Federation of Bosnia and Herzegovina only a ppointed the Federation’s TV management 
board in June 2009. Due to these delays, the Bo snia and Herzegovina Public Broadcasting 
Corporation, responsible for streamlining and modernising the activitie s of all three public 
broadcasters in the system, has not yet been  registered. Moreover, the Federation’s Law on 
the Public Broadcasting Service is not yet fully aligned with the Public Broadcasting System 
Law of Bosnia and Herzegovina. The public br oadcasting reform is seriously delayed.  
Overall , Bosnia and Herzegovina’s preparations in the field of the information society and the 
media are advancing, albeit slowly. Particular efforts are necessary to implement the legal 
framework in the area of public broadcasting, to carry out the reform of this sector and to 
ensure the functional inde pendence of the Communicati ons Regulatory Authority. 
4.2.7.  Financial control 
Bosnia and Herzegovina has made limited pr ogress in the area of financial control. 
Some steps have been taken in the area of Public Internal Financial Control (PIFC) . Laws 
on internal audit are being implemented at Stat e and Entity level, but administrative capacity 
must be strengthened to ensure the sound ma nagement of public funds. A working group 
comprising representatives from all levels of government has drafted PIFC policy papers for 
the State-level and the two Entities. After the approval of the three policy papers, the reform will need to concentrate on developing effective managerial arrangements and a financial management and control (FMC) structure. Ce ntral Harmonisation Units (CHUs) have been 
created at the State level and in Republika Sr pska, but are insufficien tly staffed. The CHU in 
the Federation remains to be established.  
As regards external audits , the four supreme audit institutions  (SAIs) in the country — State, 
Entities (2) and Br čko District — continued to implement their common strategic 
development for 2007-2012 on the basis of the extern al audit laws. SAIs have diversified their 
activities to exercise performance audits, in  addition to regular fi nancial audits. Their 
cooperation through the Coordination  Board has proved to be efficient. The parliaments have 
improved their capacity to deal with audit re ports, but follow-up to the SAIs’ reports and 
recommendations remains insufficient. The indepe ndence of the SAIs rema ins to be anchored 
more credibly to comply with international standards.  
Overall,  Bosnia and Herzegovina’s preparations  in the area of financial control are 
progressing, but slowly. Stronger efforts are ne cessary to improve public internal financial 
control and the follow-up of audit reports. 
4.2.8.  Statistics 
Some progress has been made in the area of statistics. 
As regards statistical infrastructure , a new work plan 2009-2012 has been adopted. It 
provides for the development and expansion of  the State Agency for Statistics (BHAS). 
Currently, it has 64 employees and aims to have 198 by 2015. However,  cooperation between 
the BHAS and the Institutes for Statistics in the Entities needs further improvement. Different 
interpretations of the existing legislation persis t. Neither the Law on Statistics of Bosnia and 
 
EN 54   EN Herzegovina nor the Agreement on cooperation and coordination in the area of statistics have 
been properly implemented. The issue of provi sion of VAT and other data by the Indirect 
Taxation Authority to the BHAS remains open. Th e Federation’s Institute of Statistics (FIS) 
has not been able to fund important surveys.  All these elements are detrimental to the 
production and development of countr y-wide and accurate statistics.  
Regarding classifications and regi sters, a business register has b een created but it is not yet 
fully operational. The BHAS has also initiated  its work on approx imation to NACE rev. 2 
(Statistical Classification of Economic Activities in the European Community).  
Some progress has been made on sector statistics . Preparations for a census in 2011 have 
started. The dates for the population and housing census (1 April 2011) and for the pilot census (1 April 2010) have been fixed. Variou s working groups have been set up for the 
census preparations and Bosnia and Herzegovina  has requested international monitoring of 
the preparation and conduct of the census. A number of methodological documents for the 
census have been drafted. The preparation of maps for census enumera tion areas is ongoing in 
discussions with the geodetic institutes in th e Entities. A Census la w has been approved by 
the Council of Ministers and is now  in Parliamentary procedure. 
In the field of social statis tics, a Labour Force Survey (LFS ) was conducted in 2008 and the 
results of the 2007 LFS were published. The pr ovisional results of th e 2009 LFS have also 
been published. The BHAS has taken initial st eps towards the development of education 
statistics. For other social statistical domains, such as health statis tics, progress has been 
limited. 
Limited progress has been made in the area of macroeconomic statistics.  An analysis of 2007 
data on household consumption in Bosnia an d Herzegovina was fina lised. This provided 
useful information on the scope and structure of consumption and relative and absolute 
poverty in the country. The multi-annual master plan for development of national accounts is 
ready, but is not applied by the Statistical Office of Republika Srpska. Quarterly national 
accounts statistics do not yet exist.  
Some action has been taken to improve the qual ity of business statistics, primarily concerning 
industrial statistics, statistics on the construction industry and structural business statistics. 
The preparations for a census of agriculture have started. The populat ion census questionnaire 
will contain additional questions in order to identify agricultural households. In the area of 
energy statistics, que stionnaires have been de signed and harmonised for both Entities in order 
to collect data on the balance of electrical en ergy and heat. Also, pilo t research is under way 
regarding the production of coal in both Entities as  an initial step toward s the establishment of 
an energy balance for coal.  
Overall , Bosnia and Herzegovina's preparations in th e field of statistics are slowly advancing. 
Some progress has been made, including as rega rds technical preparations for the census. 
However, national accounts and bu siness and agricultural statisti cs need to be improved. The 
plan for the development of the BHAS needs to  be implemented to ensure sufficient capacity. 
Better cooperation between the Entities  and the BHAS remains essential. 
 
EN 55   EN 4.3. Justice, freedom and security 
4.3.1.  Visa, border management, asylum and migration 
Progress has been made by Bosnia and Herzegovina with regard to visa policy  and in the 
wider framework of the visa  liberalisation dialogue. 
A number of bylaws were  adopted to specify the procedures for the issuance of all four 
categories of visas provided for in the Schengen acquis  (A, B, C and D). Currently, the 
positive and negative lists are not fully harmonised with the EU visa list. Bosnia and Herzegovina maintains a visa-free regime for citizens of Serbia, Montenegro, the former 
Yugoslav Republic of Macedonia and Turkey. In March 2009, a visa liberalisation agreement 
was signed with Albania.  
The decrease in the number of visas issued at border crossings continued, with 684 visas 
issued at the border in 2008 compared to  735 in 2007. From January to August 2009, 169 
visas have been issued. 
The migration information system, including the visa module for electronic data storage and 
transfer between consular offices and the cent ral administration in Bo snia and Herzegovina, 
became fully operational in September. The connection of border crossing points to the 
migration information system remains to be completed. 
The issuance of biometric passpor ts in line with the relevant EC and ICAO standards has only 
started in a test phase since Ju ly 2009 and is scheduled to be  fully operational in October 
2009. To ensure the integrity of the personalisa tion of passports and other identity documents, 
the Agency for Identification Documents, Data Registers and Data Exchange of Bosnia and 
Herzegovina (IDDEEA) has taken over exclusiv e competence for the electronic storage and 
maintenance of central registers and the persona lisation of identificati on documents, including 
identity cards, conventional pa ssports and the new biometric pa ssports. Secure and effective 
management of breeder documents requires th e completion of verification of all registry 
books and the entry of data into the central database managed by IDDEEA.  
Overall, Bosnia and Herzegovina has started to ad dress its priorities in the field of visa policy. 
Bosnia and Herzegovina has made limited progress in the area of border management . In 
December 2008, a Memorandum of Understanding establishing the Integrated Border 
Management (IBM) Joint Risk Analysis Centre was signed between the Ministry of Security, 
Border Police, Indirect Taxation Authority, St ate Veterinary Office, State Plant Health 
Protection Agency and Service for Foreigners’ Affairs. Once fully operational, the Centre 
should promote collection and exchange of in formation and risk an alysis between the 
agencies concerned.  
A Law on Border Control layi ng down competences, procedures  and measures to do with 
crossing and control of the borderline was adopted  in June 2009. The re sponsibility for 
management of border crossing points remains to be allocated. A national Coordinator for 
IBM was appointed in the Ministry of Security, in charge of overseeing the implementation of 
the IBM action plan. The Coordinator reports to the IBM Commission on implementation of 
the action plan. The State Bord er Commission has made litt le progress in addressing 
unresolved border demarcation issues.  
 
EN 56   EN The closure of illegal State bor der crossing points w ith Croatia has made some progress. A 
total of 67 illegal crossing points passable for vehicles, along the green borderline of Bosnia and Herzegovina towards Croatia have been phys ically blocked on the Bosnian territory side. 
Nonetheless, the high number of border cros sing points is an obstacle to an effective 
allocation of Border Police staff.  
Infrastructure at border crossing  points (BCPs) requires further improvement, in particular as 
regards their delimitation, survei llance and equipment. An internal IT system for electronic 
transfer of data and access to central databases needs to  be generalised across BCPs. 
The four protocols on implementing the 2007 ag reement on border control between Bosnia 
and Herzegovina and Croatia have entered into force. 
In March 2009, Bosnia and Herzegovina signed pr otocols with Serbia on joint border patrols 
and regular meetings of border police. With M ontenegro, a protocol on joint border patrols 
and an agreement on joint border contro ls were concluded in March 2009.  
In April 2009 a working arrangement between the Ministry of Security and FRONTEX was 
signed.  
Overall, Bosnia and Herzegovina’s prepara tions in the area of border management are 
advancing slowly and need to be intensified. Effo rts need to focus, in particular, on addressing 
the infrastructural deficiencies of border crossing points, the gaps in staffing levels and the 
still unresolved border demarcation issues. 
Good progress has been made as regards asylum . The number of asylum applications fell 
from 149 in 2007 to 49 in 2008. In 2008, the sector for asylum within the Ministry of Security 
made 1 positive and 64 negative decisions concerning asylum requests.  
The adoption of the necessary implementing le gislation regarding the law on Movement and 
Stay of Aliens and Asylum is proceeding. A national asylum and migration strategy and 
action plan for 2008-2011 were adopted in Nove mber 2008. As regards the implementation of 
the strategy and action plan, a coordination body was appointed by the Council of Ministers. 
Investments by Bosnia and Herzegovina in th e asylum system have continued, and the 
institutional capacity of the asylum sector of the Ministry of Security and the Ministry of 
Human Rights and Refugees is now sufficient to  handle the current caseload. There is close 
cooperation between the Ministry of Securi ty and the Ministry of Human Rights and 
Refugees. Training activities have been organi sed by both institutions, in cooperation with the 
UNHCR, local NGOs and other rele vant authorities su ch as the Border Police. Progress has 
been made towards assuming full responsibil ity for managing and financing the existing 
asylum centres. The migration information syst em, including its asylum module, became fully 
operational in September. However, the Minist ry of Human Rights and Refugees remains to 
be connected to system At the end of 2007, te mporary protection status  was withdrawn from 
around 3,100 persons from Kosovo. Around 870 of th em applied for asylum in Bosnia and 
Herzegovina. Most of the applications have been rejected, while a small number received 
subsidiary protection status. 
A temporary asylum centre located in Rakovica  is operational and can accommodate over a 
hundred refugees. The construction of a signi ficantly improved, permanent centre in Trnovo 
is in preparation. The centre is expected to be operational in 2011. 
 
EN 57   EN Overall, the asylum and internat ional protection system in Bosn ia and Herzegovina is largely 
in line with EU and international standards.  
Some progress has been made on migration . A reception centre for irregular migrants with 40 
available beds is fully operational. Betw een July 2008 and June 2009, some 280 illegal 
migrants were accommodated. An additional permanent reception centre with a maximum capacity of 80 people is under construc tion, and it should be operational by 2010. 
The Readmission Agreement between the European Community and Bosnia and Herzegovina 
which entered into force in January 2008 cont inued to be implemented. The second Joint 
Committee meeting on implementation of the ag reement was held in December 2008. Bosnia 
and Herzegovina has continued its efforts to establish readmission agreements with non-EU 
countries. At the moment six readmission agreem ents with non-EU countries are in place. 
Other agreements, including with Russia and Ukra ine, are in preparation. No difficulties have 
been observed in handling cases concerning read mission of third-country nationals or citizens 
of Bosnia and Herzegovina. A strategy fo r returnee reintegra tion pursuant to the 
implementation of readmission agreements ha s been adopted. The number of readmitted 
persons increased: 459 in 2008, of which 211 we re citizens of Bosnia and Herzegovina, 
compared with 240 in 2007, out of which 196 were nationals. 
There has been a steady significant decline in the number of interceptions of people 
attempting to cross the border unlawfully. In 2008, 543 persons were intercepted when trying 
to enter or leave the te rritory of Bosnia and Herzegovina (851 in 2007).  
Progress continued on the Service for Foreig ners’ Affairs (SFA) under the Ministry of 
Security, but the lack of human resources and budgetary problems risk hampering the full implementation of its tasks. The service has 182 employees out  of the planned 320. The offer 
of training activities for SFA  staff remains incomplete. In 2008, 3,420 requests for temporary 
stay and 3,435 requests for extension of temporary stay were submitted to the SFA. The total number of requests, i.e. 6,855, represents an in crease of 10.4% in comparison to 2007. In this 
period 272 requests for permanent stay were also presented. The Service for Foreigners’ 
Affairs issued 787 expulsion d ecisions in 2008; among these, 172 persons were forcefully 
removed, that is an increase of 28.7% in comparison with 2007.  
Seven out of eight bylaws to the new Law on M ovement and Stay of Aliens and Asylum are 
already in force. The rulebook on internal or ganisation of the Ministry of Security was 
adopted, reinforcing the migration sector with staff assigned to monitoring migration flows in 
Bosnia and Herzegovina and pr esenting the country’s migrati on profile. A national migration 
strategy has been adopted. 
The migration information system became fully ope rational in September. Its full functioning 
should result in significant improvements in monitoring of migration flows in Bosnia and 
Herzegovina. Inter-agency coopera tion and the clarificat ion of competences, in particular as 
regards illegal migration, need to improve.  
At the end of 2008 Bosnia and Herzegovina, Albania, Croatia, Montenegro, the former 
Yugoslav Republic of Macedonia and Serbia signed a Memorandum of  Understanding on 
setting up a system for sharing statistical data on illegal migration and participating in the regional system of a dvance notification.  
 
EN 58   EN Overall, Bosnia and Herzegovina’s preparations  in the area of migration are moderately 
advanced. Improved monitoring of  migration flows and intensif ied inter-agency cooperation 
are necessary. 
4.3.2.  Money laundering 
Some progress can be reported in the fiel d of anti-money laundering. A new Law against 
Money Laundering and Financing of  Terrorist Activities was adopted in June 2009, with the 
aim of harmonising Bosnia and Herzegovina’s legislation with the Financial Action Task 
Force (FATF) recommendations on money launde ring and terrorism financing, as well as 
with other EU and international standards. A national strategy for the prevention and fighting 
of money laundering and financing of terrorist  activities and the co rresponding action plan 
have been adopted.  
The Financial Intelligence Department (FID) of the State Intelligence and Protection Agency 
(SIPA) is not duly staffed yet, in particular as regards police officials. An electronic system 
for banks to report suspicious transactions is in place, although non-banking institutions that 
are required to report to the FID are not yet conne cted to the system. The number of reports of 
suspicious transactions increased slightly in  2008, but still remains relatively low. Some 
training activities were organi sed, but further focus is needed on enforcement capacity, in 
particular special investigative techniques, use of equipment and information tools. Domestic 
cooperation between the FID and Entity-level law enforcement agencies needs to be improved. Regarding international cooperation, the number of reported exchanges via the 
EGMONT system decreased sli ghtly in 2008 compared to 2007. 
In 2008 no final convictions for money launderin g have been reported, although a number of 
investigations have been completed. No cas e was filed on the financing of terrorism. 
Preventive and supervisory measures still have to be implemented and extended to non-
banking financial institutions  and intermediaries.  
Bosnia and Herzegovina needs to complete th e harmonisation of its legislation with the 
Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the 
Proceeds of Crime and on the Financing of Terro rism. The management of confiscated assets 
is still not harmonised within the country. Legi slation differs between the State and Entities, 
and remains to be aligned to international standards.  
Overall,  Bosnia and Herzegovina is making con tinued progress in the area of money 
laundering, but further considerab le efforts are needed. Streng thening administrative capacity, 
effective implementation of the legal framew ork and awareness-raising on money laundering 
all need to be pursued with determination. 
4.3.3.  Drugs 
Bosnia and Herzegovina is at the crossroads of regional drug trafficking. Drugs-related illegal 
activities are still one of the most widespread forms of organised crime. Local consumption is 
rising, but still remains relatively low co mpared to other European countries.  
There has been progress in th e fight against drugs. The nationa l strategy for drug control, 
suppression and prevention 2009-2013 was a dopted in March 2009 by the Council of 
Ministers and parliament, and an action plan was adopted.  
 
EN 59   EN The Council of Ministers esta blished a Commission for the de struction of na rcotics. In 
accordance with the Bosnia and Herzegovina  Law on Narcotics, permits for importing 
psychotropic substances, narcotics, precursors a nd narcotic plants are now issued at State 
level by the Bosnia and Herzegovi na Ministry of Civil Affairs and the Ministry of Foreign 
Trade and Economic Relations.  
Operational police units have received new insp ection equipment. Bilateral police cooperation 
with countries of the region in the fight agai nst drugs has improved. Bosnia and Herzegovina 
law enforcement has performed a number of  operations, including via international 
cooperation, aimed at disrupting drugs traffickin g as well as production and sales. However, 
compared to its importance as a transit country , the quantity of drugs seized at the border 
remained low. Domestic inter-agency information exchange and cooperation in the fight against drugs needs to be stepped up. Specialis ed law enforcement units are in need of 
training and equipment to make the fight against drug trafficking more effective. 
A new information system monitoring the flow of goods considered as  narcotics has been 
established. No progress was ma de towards the availability of  drug-related information at 
border crossing points. A public  awareness campaign was carried out aimed at preventing 
drug abuse among young people. 
Activities aimed at improving international coop eration on drugs-related information with 
regard to the abuse of narcot ics, and on preventive measures, have been intensified. Bosnia 
and Herzegovina is actively cooperating with  the INCB and the UNODC , thus improving the 
control of international trade in ps ychotropic substances and precursors. 
The introduction of standards for informati on collection set by the European Monitoring 
Centre for Drugs and Drug Addictio n still needs to be completed.  
Overall,  Bosnia and Herzegovina’s preparations in the field of drugs are advancing. However, 
the fragmented structure of the police and th e judiciary continues to  provide a favourable 
environment for drugs trafficking and related violations. 
4.3.4.  Police 
Limited progress has been made in the area of  the police. The fragmentation of the police 
forces and the lack of systematic cooperati on and information exchange remain a serious 
issue. The completion of the police restructurin g process depends on the reform of the current 
constitutional framework, which is stalling. An investigation of Republik a Srpska government 
officials led by the State Prosecutors and carried  out by SIPA marked a high point in tension 
within the Bosnia and Herzegovina law enforcement community.  
The implementation of the police reform laws adopted in 2008 has been slow. The Council of 
Ministers has decided on the headquarters of the agencies and budgets have been allocated. 
The appointment of the agencies’ directors and deputy directors has made some progress, but 
has not yet been completed. It has been nece ssary to re-launch a number of selection 
procedures. The directorate for the coordination of police activity in Bosnia and Herzegovina 
still needs to be established.  
An agreement on cooperation in data exchange from police and prosecutor's records has been 
adopted. Its implementation should contribute  to improving cooperation and exchange of 
information among police bodies which remains a problem.  
 
EN 60   EN Moderate progress in cooperation wi th police forces of other count ries has been registered. In 
March 2009, the Ministry of Security and Eu ropol signed a memorandum on a mutual secure 
link to enable confidential information to be shared. However, the secure communication link, 
which is part of Europol’s ‘NEUS’ network, is not yet operational. Progress towards the 
conclusion of an operational agreement with Eu ropol has continued, albeit slowly. Effective 
implementation of the strategic agreemen t with Europol needs to be ensured.  
Small arms and light weapons as well as explosives and remnants of war remain an important 
issue in Bosnia and Herzegovina. A Council of Ministers Decision was adopted in June 2009 
mandating the harmonisation of Entity-level regulations on arms and entrusting the development of a solution for data exchange  on arms/weapons to th e inter-departmental 
working group of the Bosnia and Herzegovina Council of Ministers in  charge of finding a 
solution for the exchange of info rmation between police bodies.  
Overall, Bosnia and Herzegovina ’s preparations in the police field are advancing slowly and 
remain in the preliminary phases, hindering e ffective police work. As part of the police 
reform process, a key priority of the European Partnership, particular efforts are necessary to 
fully implement the police legislation adopt ed in 2008 and to strengthen cooperation and 
information exchange among police agencies. Police reform is a key process which needs to 
be continued until completion, through the constructive involvement of all levels of 
government in Bosnia and Herzegovina. 
4.3.5.  Fighting organised crime and terrorism 
There has been progress with regard to the implementation of the UN Convention on 
Transnational Organised Crime  and its three protocols includi ng the Protocol against Illicit 
Manufacturing and Trafficking of Firearms. Bosnia  and Herzegovina is still not a party to the 
Council of Europe Convention on the Internati onal Validity of Criminal Judgments and the 
additional protocol to the Council of Eur ope Convention on the Transfer of Sentenced 
Persons. Parliament adopted the Law on Contro l of Movement of W eapons and Military 
Equipment, the Law on Weapons, and the Law on International Legal Aid in Criminal Matters. A revised Strategy to fight organised crime ( 2009-2012) has been adopted.  
In a gap analysis, adopted in  December 2008, implementation of the strategy to combat 
organised crime and corrupt ion 2006-2009 was negatively assessed by the Council of 
Ministers. In April 2009 the C ouncil of Ministers a dopted a decision to establish a working 
group in order to prepare an anal ysis of threats of organised cr ime in Bosnia and Herzegovina 
and to draft the new strategy.  
No new amendments to the Criminal Procedure Code relating to the fight against organised  
crime  have been adopted.  
Institutional fragmentation of th e police, the lack of common thre at assessments, and the lack 
of joint strategic planning among different poli ce bodies remain a major obstacle to the fight 
against organised crime. Further instituti onal reform is necessary. The exchange of 
operational data and the implementation of join t actions need to be improved. No progress 
was made in improving national statistical instruments for meas uring crime rates. 
Overall, Bosnia and Herzegovina has started to address its organised cr ime-related priorities. 
However, organised crime remains a matter of serious concern. Sustained efforts and more 
 
EN 61   EN determination to fight organised crime are need ed. In particular, harmonised legislation and 
increased cooperation of relevant actors  throughout the coun try is necessary.  
Some progress has been made in the area of trafficking of human beings  (THB), but 
sustained efforts remain necessary to ensure pr oper investigation and pr osecution of criminal 
activities in this area.  
Bosnia and Herzegovina has started implemen ting the national action plan for combating 
trafficking in human beings for 2008-2012. Offe nces involving traffick ing of human beings 
are regulated by the Criminal Code of Bosnia and Herzegovina, which is harmonised with the 
relevant international documents ratified by Bosnia and Herzegovina. However, Entity and Brčko District criminal codes are not harmonis ed with the State criminal code, which 
undermines proper prosecution.  
The office of the national coordina tor for the fight against trafficking in human beings within 
the Ministry of Security has b een provided with sufficient financial resources to operate. Four 
inter-agency THB teams with geographical comp etence have been created, with the aim of 
enhancing information collection and exchange among different law enforcement and judicial 
bodies. 
The total number of identified victims of hu man trafficking continued to decrease in 2008, 
mainly due to a reduction in the number of fo reign victims. However, internal trafficking 
continued to increase in 2008, with a majority of the victims being ch ildren, in particular 
Roma children. 
The national Coordinator’s office has continue d to implement several comprehensive anti-
trafficking prevention campaigns and published va rious information mate rials. A database on 
victims of human trafficking within the Ministry of Huma n Rights and Refuges has been 
established and updated. However, more needs to be done in terms of investigation and 
prosecution of THB-related offences. The neces sary amendments to the Law on the Witness 
Protection Programme have not yet been adopte d. Witness protection remains inadequate. In 
addition, there is a need to take steps to re duce the number of suspended sentences given to 
convicted traffickers. 
Overall, Bosnia and Herzegovina is  at an early stage of progress in this area a nd efforts need 
to be stepped up, the issue of w itness protection in particular. 
There has been some progress in the fight against terrorism. Amendments to the Criminal 
Code of Bosnia and Herzegovina have been ad opted for its harmonisati on with the Council of 
Europe Convention on the Prevention of Terro rism, which entered into force in May 2008 . 
Bosnia and Herzegovina still needs to harmonise  its legislation with the Council of Europe 
Convention on Laundering, Search, Seizure and Conf iscation of the Proceeds of Crime and on 
the Financing of Terrorism. 
Staffing of counter-terrorism bodies is still la rgely incomplete. A plan for civilian-military 
cooperation in case of terrorist  attack has been launched a nd envisages training activities 
devoted to inter-agency operations and information exchange. 
Overall,  Bosnia and Herzegovina is still at the beginning of its efforts to fight terrorism. A 
new strategy for the fight against terrori sm (2009-2012) needs to be adopted and 
implemented. 
 
EN 62   EN 4.3.6.  Protection of personal data 
Limited progress can be reported with regard to establishment of the Agency for Personal 
Data Protection as an inde pendent public authority.  
The Agency’s powers are to supervise enforcem ent of the Law on Personal Data Protection as 
well as other regulations on personal data processing; to deal with complaints; to submit reports to the Parliamentary Assembly on pe rsonal data protection and to follow up the 
conditions of personal data protection. The Agency  was established and its  Director appointed 
in June 2008 by decision of the Council of Mini sters. It recently moved into new premises. 
However, it still needs to become completely independent and adequately staffed: at the moment only 15 staff are em ployed out of 45 planned. 
The existing provisions of the law on personal data protection re quire all public institutions to 
adopt sub-legal regulations in order to enforce th e law and to establish a plan for personal data 
security. The level of actual compliance is stil l low, in particular with regard to law 
enforcement agencies. 
Overall, preparations for the protection of pe rsonal data have started, but continued efforts 
remain necessary. 
 
EN 63   EN STATISTICAL ANNEX  
STATISTICAL DATA (as of 14 September 2009)            
Bosnia and Herzegovina            
            
Basic data Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Population (thousand)  3 689 3 753 3 790 3 813 3 830 3 837 3 843 3 843 3 844 3 843 
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 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Gross domestic product (GDP) (million national currency)  : 11 689 12 565 13 821 14 505 15 786 16 927 19 121 21 759 24 716 
GDP (million euro)  : 5 977 6 424 7 067 7 416 8 071 8 655 9 777 11 125 12 637 
GDP (euro per capita)  : 1 581 1 691 1 846 1 935 2 103 2 252 2 544 2 896 3 290 
GDP (in Purchasing Power Standards (PPS)  per capita)  : : : : : : : : : : 
SI: GDP (in PPS per capita, EU-27=100)  : : : : : : 25.0 27.0 29.0 30.0 
SI: Growth rate of GDP (national currency, at constant prices , % change on previous year)  : :       6.3 3.9 6.9 6.0 5.4 
SI: Employment growth (national accounts, % change on previous year)  : : : : : : : : : : 
Labour productivity growth: GDP growth per person employed (% change on previous year)  : : : : : : : -1.4 7.9 : 
SI: Unit labour cost growth (national accounts, % change on previous year)  : : : : : : : : : : 
SI: Labour productivity (GDP in PPS per person employed, EU-27=100)  : : : : : : : : : : 
Gross value added by main sectors (%)                      
Agriculture  : 11.6 11.4 10.9 9.7 10.5 10.3 10.2 9.7 8.8 
Industry  : 19.2 19.0 18.0 19.2 19.4 19.3 19.2 20.4 21.1 
Construction  : 6.9 6.2 5.6 5.2 4.9 5.0 5.0 5.9 6.4 
Services  : 62.3 63.4 65.6 65.9 65.2 65.4 65.6 63.9 63.6 
Final consumption expenditure , as a share of GDP (%)  : : : : : 111.9 111.0 105.4 100.6 : 
Gross fixed capital formation, as a share of GDP (%)  : : : : : 24.2 25.1 22.5 29.8 : 
Changes in inventories, as a share of GDP (%)  : : : : : 2.9 0.1 -0.9 1.6 : 
Exports of goods and services, relative to GDP (%)  : : : : : 27.8 28.6 33.1 36.7 36.1 
Imports of goods and services, relative to GDP (%)  : : : : : 66.9 64.8 60.0 68.7 69.4 
            
Industry Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Industrial production volume index (2000=100)  : 100.0 105.3 112.4 118.0 132.8 144.7 159.3 170.4 187.3 
            
Inflation rate Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
SI: Consumer price index (CPI), (tot al, % change on previous year) 1) : 4.8 3.1 0.4 0.6 0.4 3.8 6.1 1.5 7.4 
            
Balance of payments Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Balance of payments: current account total (million euro)  -471 -429 -834 -1 253 -1 439 -1 319 -1 499 -763 -1 145 -1 871 
Balance of payments current account: trade balance (million euro)  -3 095 -3 000 -3 308 -3 524 -3 671 -3 678 -3 962 -3 406 -4 1 42 -4 819 
Balance of payments current account: net services (million euro)  168 203 254 232 297 347 447 535 627 695 
Balance of payments current account: net income (million euro)  683 641 595 539 473 408 377 332 395 409 
Balance of payments current account: net current transfers  (million euro)  1 773 1 727 1 626 1 499 1 462 1 604 1 639 1 775 1 97 6 1 844 
of which government transfers (million euro)  458 339 450 347 298 261 251 237 191 169 
 
EN 64   EN Net foreign direct investment (FDI) (million euro)  166 159 133 282 338 566 493 569 1 529 690 
Foreign direct investment (FDI) abroad (million euro)  0 0 0 0 0 -1 0 -3 -17 0 
of which FDI of the reporting economy in EU- 27 countries (million euro)  : : : : : : : : : : 
Foreign direct investment (FDI) in the reporting economy (million euro)  166 159 133 282 338 567 493 572 1 546 690 
of which FDI of EU-27 countries in the report ing economy (million euro)  : : : : : 340 410 422 551 : 
            
Public finance Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
General government deficit/surplus, relative to GDP (%)  : : : : 0.7 1.6 2.4 2.9 1.3 : 
SI: General government debt, relative to GDP (%)  : 37.9 35.2 31.3 27.7 25.6 25.7 21.3 18.3 16.8 
            
Financial indicators Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
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)  562 717 1 377 1 538 1 592 1 808 2 098 2 593 3 149 3 065 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro)  1 107 1 262 2 387 2 593 2 810 3 493 4 129 5 15 0 6 263 6 532 
Money supply: M3 (M2 plus marketable instruments, million euro)  : : : : : : : : : : 
Total credit by monetary financial institutions to resident s (consolidated) (million euro)  1 422 1 543 1 707 2 189 2 619 3 031  3 858 4 759 6 110 7 439 
Interest rates: day-to-day money rate, per annum (%)  : : : : : : : : : : 
Lending interest rate (one year), per annum (%) 2) : : : 12.6 10.9 10.3 9.6 8.0 7.2 7.0 
Deposit interest rate (one year), per annum (%) 3) : : : 1.4 1.1 0.9 0.7 0.5 0.4 0.4 
euro exchange rates: average of period - 1 euro = … nati onal 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 (incl uding gold) (million euro) 4) 443 525 1 385 1 270 1 428 1 779 2 160 2 787 3 425 3 219 
            
External trade Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Value of imports: all goods, all partners (million euro)  : : : : 2 928 3 966 5 670 : : : 
Value of exports: all goods, all partners (million euro)  : : : : 908 1 299 1 920 : : : 
Trade balance: all goods, all partners (million euro)  : : : : -2 019 -2 667 -3 750 : : : 
Terms of trade (export price index / import pr ice index, 1998=100)  : : : : : : : : : : 
Share of exports to EU-27 countries in value of total exports (%)  : : : : 53.4 54.2 53.8 : : : 
Share of imports from EU-27 countries in value of total imports (%)  : : : : 58.5 53.0 51.9 : : : 
            
Demography Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Natural growth rate: natural change (births minus deaths) (p er 1000 inhabitants)  3.7 2.4 1.9 1.5 0.9 0.6 0.1 0.2 -0.3 : 
Infant mortality rate: deaths of children under one year of age per 1000 live births  10.2 9.7 7.6 9.4 7.6 7.2 6.7 7.5 6.8 5.1 
Life expectancy at birth: male (years)  70.5 71.3 71.3 71.3 71.3 71.3 72.1 72.1 72.1 : 
Life expectancy at birth: female (years)  75.9 76.7 76.7 76.7 76.7 76.7 77.5 77.5 77.5 : 
            
Labour market Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Economic activity rate (15-64): share of  population aged 15-64 that is economically active (%)  : : : : : : : 51.3 52.2 53.5 
SI: Employment rate (15-64): share of population aged 15-64 that is in employment (%)  : : : : : : : 35.0 36.8 40.7 
Share of male population aged 15-64 that is in employment (%)  : : : : : : : 46.1 48.7 52.9 
Share of female population aged 15-64 that is in employment (%)  : : : : : : : 24.0 25.0 28.7 
SI: Employment rate of older workers (55-64): shar e of population aged 55-64 that is in employment 
(%) 5) : : : : : : : 30.6 31.9 34.4 
 
EN 65   EN Employment by main sectors (%)                      
Agriculture  : : : : : : 19.6 20.6 19.8 20.6 
Industry 6) : : : : : : 21.4 30.7 32.6 32.5 
Construction  : : : : : : 4.9 : : : 
Services  : : : : : : 54.1 48.7 47.5 47.0 
SI: Unemployment rate: share of labour force that is unemployed (%) 7) 39.4 39.7 40.0 41.1 41.6 41.8 43.9 31.1 29.0 23.4 
Share of male labour force that is unemployed (%)  : : : : : : : 28.9 26.7 21.4 
Share of female labour force that is unemployed (%)  : : : : : : : 34.9 32.9 26.8 
Unemployment rate of persons < 25 years: share of labour forc e aged <25 that is unemployed (%)  : : : : : : : 62.3 58.4 47.5 
SI: Long-term unemployment rate: share of labour force that is long-term unemployed (%) 7) : : : : : : : 28.4 26.4 24.3 
            
Social cohesion Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Average nominal monthly wages and sala ries (national currency) 8) 343.0 372.0 408.0 446.0 484.0 505.0 538.0 : : : 
Index of real wages and salaries (index of nominal wages and sa laries divided by the CPI) (2000=100)  : : : : : : : : : : 
SI: Early school-leavers: share of population aged 18-24 having not completed upper secondary education 
and not currently in education or training (%)  : : : : : : : : : : 
            
Standard of living Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Number of passenger cars per 1000 population 9) : : : : : : : 168.4 177.4 184.5 
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 63 7.4 757.1 
            
Infrastructure Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Density of railway network (lines in operation, per 1000 km²)  : : : 19.7 21.5 21.5 21.5 21.5 20.3 20.3 
Length of motorways (thousand km)  : : : : : : 0.0 0.0 0.0 0.0 
            
Innovation and research Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
SI: Spending on human resources (public expenditure on education) relative to GDP (%)  : : : : : : : : : : 
SI: Gross domestic expenditure on research & development, relative to GDP (%)  : : : : : : : : : : 
SI: Percentage of households who have Internet access at home (%)  : : : : : 6.6 : : : : 
            
Environment Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
SI: Total greenhouse gases emissions, CO2 equi valent (tons, 1990=100)  : : : : : : : : : : 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP 2004)  : : : : : : : : : : 
SI: Share of renewable energy in electric ity consumption (%)  : : : : : : : : : : 
SI: Road freight transport as a share of total inland freight tr ansport (modal split of freight transport) (%)  : : : : : : : :  : : 
            
Energy Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
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)  : : : : : : : : : : 
 
EN 66   EN  
SI = Structural Indicator 
: = not available p = provisional 
e = estimate 
b = break in series 1) Until 2006, the growth rate of retail prices is presented; fr om 2006 onwards growth rate of the consumer price index (CPI) i s used. 
2) Short-term lending rates in national currency to private enterprises and cooper atives (weighted average). 
3) Demand deposit rates in national cu rrency to households (weighted average). 
4) Data as of 31 December; reserve assets do not include gold. 
5) For 2006-2007, population aged between 50 and 64. 
6) For 2006-2008, including construction (s ections F).
7) From 2005 onwards, figures include data from Brcko Dist rict. 2006 and 2007 data refer to unemployed from 24 to 59 months. 
8) From 2005 onwards, figures include data from Brcko District.  
9) Data refer to the Federation of Bosnia and Herzegovina only and includes total vehicle fleet (o fficial data for the state le vel are not available); official data for state level delivered by the 
Ministry of Civil Affairs (passenger cars only). 
10) Excluding goats.
             
Agriculture Note 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
Agricultural production volume index of goods and services (producer  prices, previous year=100)  : : : : : : : : : : 
Total utilised agricultural area (thousand hectare)  : : 2 126 2 122 2 192 2 196 2 187 2 194 2 139 2 107 
Livestock: cattle (thousand heads, end of period)  : : : : : 453 460 515 468 459 
Livestock: pigs (thousand heads, end of period)  : : : : : 596 654 712 535 502 
Livestock: sheep and goats (thousand heads, end of period) 10) : : : : : 893 903 1 005 1 033 1 031 
Production and utilisation of milk on the farm (total  whole milk, thousand tonnes)  : : : : : 580 629 662 724 737 
Crop production: cereals (including ri ce) (thousand tonnes, harvested production)  1 369 930 1 139 1 309 793 1 439 1 350 1 341 1 000 1 329 
Crop production: sugar beet (thousand tonnes, har vested production)  : : : : : : : : : : 
Crop production: vegetables (thou sand tonnes, harvested production)  279 176 190 247 204 276 257 297 254 281