Commission staff working document - Bosnia and Herzegovina - 2008 progress report accompanying the Communication from the Commission to the European Parliament and the Council - Enlargement strategy and main challenges 2008-2009 {COM(2008) 674}
Date: 2008-11-05
Institutions: European Commission
Subjects: Bosnia and Herzegovina, accession to the European Union, enlargement of the Union, pre-accession strategy, report

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 5.11.2008 
SEC(2008) 2693 

COMMISSION STAFF WORKING DOCUMENT 

BOSNIA AND HERZEGOVINA 2008 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2008-2009 

{COM(2008) 674}

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

Introduction .................................................................................................................. 4 

Preface.......................................................................................................................... 4 

Context ......................................................................................................................... 4 

Relations between the EU and Bosnia and Herzegovina ............................................. 5 

Political criteria ............................................................................................................ 7 

Democracy and the rule of law .................................................................................... 7 

Human rights and the protection of minorities .......................................................... 15 

Regional issues and international obligations ............................................................ 21 

Economic criteria ....................................................................................................... 24 

The existence of a functioning market economy ....................................................... 24 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 30 

4. 

European standards .................................................................................................... 32 

4.1. 

Internal market ........................................................................................................... 32 

4.1.1.  Free movement of goods............................................................................................ 32 

4.1.2.  Movement of persons, services and right of establishment ....................................... 34 

4.1.3.  Free movement of capital........................................................................................... 35 

4.1.4.  Customs and taxation ................................................................................................. 36 

4.1.5.  Competition................................................................................................................ 38 

4.1.6.  Public procurement .................................................................................................... 38 

4.1.7. 

Intellectual property law ............................................................................................ 39 

4.1.8.  Employment and social policies................................................................................. 40 

4.1.9.  Education and research .............................................................................................. 42 

4.1.10.  WTO issues ................................................................................................................ 43 

4.2. 

Sectoral policies ......................................................................................................... 43 

4.2.1. 

Industry and SMEs..................................................................................................... 43 

4.2.2.  Agriculture and fisheries ............................................................................................ 44 

4.2.3.  Environment............................................................................................................... 45 

4.2.4.  Transport policy ......................................................................................................... 47 

4.2.5.  Energy ........................................................................................................................ 48 

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4.2.6. 

Information society and media................................................................................... 50 

4.2.7.  Financial control......................................................................................................... 51 

4.2.8.  Statistics ..................................................................................................................... 51 

4.3. 

Justice, freedom and security ..................................................................................... 52 

4.3.1.  Visa, border, control, asylum and migration.............................................................. 52 

4.3.2.  Money laundering ...................................................................................................... 55 

4.3.3.  Drugs .......................................................................................................................... 56 

4.3.4.  Police.......................................................................................................................... 56 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 57 

4.3.6.  Protection of personal data......................................................................................... 58 

STATISTICAL ANNEX 

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COMMISSION STAFF WORKING DOCUMENT 

BOSNIA AND HERZEGOVINA 2008 Progress Report 

1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and the Parliament 
on progress made by the countries of the Western Balkan region.  

This progress report broadly follows the same structure as in previous years. The report: 

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

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

membership; 

–  analyses the situation in Bosnia and Herzegovina on the basis of the economic criteria for 

membership; 

–  reviews  Bosnia  and  Herzegovina's  capacity  to  implement  European  standards,  i.e.  to 
gradually  approximate  its  legislation  and  policies  with  the  acquis,  in  line  with  a 
Stabilisation and Association Agreement and the European Partnership priorities.  

This  report  covers  the  period  from  1  October  2007  to  early  October  2008.  Progress  is 
measured on the basis of decisions taken, legislation adopted and measures implemented. As a 
rule,  legislation  or  measures  which  are  being  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  usual,  these  include  contributions  from  the 
government  of  Bosnia  and  Herzegovina  and  from  the  Member  States,  European  Parliament 
report1 and information from various international and non-governmental organisations.  

The Commission draws detailed conclusions regarding Bosnia and Herzegovina in its separate 
communication on enlargement2, based on the technical analysis contained in this report. 

1.2. 

Context 

Bosnia  and  Herzegovina  is  a  potential  candidate  for  EU  membership.  The  Stabilisation  and 
Association  Agreement  (SAA)  between  Bosnia  and  Herzegovina  and  the  EU  was  signed  in 
June  2008.  The  Interim  Agreement,  which  focuses  on  trade-related  areas,  has  been  in  force 
since  July  2008.  However,  constitutional  elements  established  by  the  Dayton/Paris  peace 
agreement have been frequently challenged by key political leaders in both Entities, and EU-

1 
2 

The rapporteur for Bosnia and Herzegovina is Ms Doris Pack. 
Enlargement Strategy and Main Challenges 2008-2009. 

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related reforms have stagnated in recent months. There has been little consensus on the main 
reform  priorities.  A  shared  vision  on  the  direction  of  the  country  remains  necessary  for  a 
smooth  operation  of  institutions,  for  creating  more  functional  and  efficient  state  structures, 
and for speaking with one voice on EU and international matters.  

Bosnia and Herzegovina has continued to benefit from autonomous trade measures granted by 
the EU.  

An  international  presence  under  UN  auspices  has  been  in  place  in  Bosnia  and  Herzegovina 
since 1995. It will be terminated once the Office of the High Representative (OHR) is phased 
out.  However,  the  closure  of  the  OHR  depends  on  Bosnia  and  Herzegovina's  progress  in 
addressing  specific  objectives  and  conditions,  which  have  been  determined  by  the  Peace 
Implementation Council. In addition to substantial Community support, the EU has continued 
to  deploy  considerable  resources  in  Bosnia  and  Herzegovina  in  the  framework  of  the 
Common Foreign and Security Policy (CFSP) and the European Security and Defence Policy 
(ESDP). It has expressed its intention to reinforce its engagement in Bosnia and Herzegovina 
upon the closure of the OHR. 

1.3. 

Relations between the EU and Bosnia and Herzegovina 

Bosnia and Herzegovina is participating in the Stabilisation and Association Process (SAP).  

Following progress in four key areas3 which the Commission and the Council set in 2005 as a 
condition  for  concluding  negotiations  on  the  Stabilisation  and  Association  Agreement 
(SAA),  the  agreement  was  signed  in  June  2008,  together  with  an  Interim  Agreement  which 
focuses on trade and trade-related areas. The Interim Agreement entered into force on 1 July 
2008.  Bosnia  and  Herzegovina  has  developed  an  Action  Plan  and  established  joint  bodies 
between the State level and Entity institutions for implementation of the SAA and the Interim 
Agreement. The implementation of customs-related provisions following the entry into force 
of the Interim Agreement has generally been satisfactory.  

The EU provides guidance to the authorities of Bosnia and Herzegovina on reform priorities 
as  part  of  the  European  Partnership.  Following  a  proposal  from  the  Commission,  the 
Council  adopted  an  updated  European  Partnership  for  Bosnia  and  Herzegovina  in  February 
2008.  Progress  on  these  reform  priorities  is  encouraged  and  monitored  by  Reform  Process 
Monitoring (RPM) meetings and following the signing of the SAA, also by the bodies set up 
by the Interim Agreement. Eight RPM meetings have been held since the last progress report 
was published, including two Economic Dialogue meetings. The first meeting of the Interim 
Committee was held in October 2008.  

The  regular  meeting  between  Members  of  the  European  Parliament  and  Members  of  the 
Bosnia  and  Herzegovina  Parliamentary  Assembly  took  place  in  February  2008.  A  first  EU-
Bosnia  and  Herzegovina  troika  at  political  directors'  level  was  held  in  February  2008.  A 
political dialogue meeting at foreign minister level followed in September 2008.  

3 

1)  Implementation  of  police  reform  in  compliance  with  the  October  2005  agreement  on  police 
restructuring;  2)  full  co-operation  with  the  ICTY;  3)  adoption  and  implementation  of  all  necessary 
public  broadcasting  legislation;  and  4)  development  of  the  legislative  framework  and  administrative 
capacity to allow for proper implementation of the SAA 

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In addition to Community support, the EU has continued to deploy considerable resources in 
Bosnia and Herzegovina in the framework of the Common Foreign and Security Policy and 
the  European  Security  and  Defence  Policy.  The  mandate  of  the  EU  Special  Representative, 
who  promotes  overall  political  coordination  and  offers  the  EU's  advice  and  facilitation  to 
Bosnia  and  Herzegovina,  has  been  extended  until  February  2009.  The  mandate  of  the  EU 
Police Mission (EUPM) has been extended for a further two years (until the end of 2009). The 
EUPM  will  continue  to  mentor,  monitor  and  inspect  the  police  forces  in  Bosnia  and 
Herzegovina. The EUFOR/Althea mission, which numbers some 2 500 troops on the ground, 
has  continued  to  maintain  a  safe  and  secure  environment.  In  June  2008,  the  Council 
concluded that the EU-led military presence would remain in Bosnia and Herzegovina for as 
long  as  necessary.  The  EU  Monitoring  Mission,  with  its  headquarters  in  Bosnia  and 
Herzegovina, closed by the end of 2007.  

The  visa  facilitation  and  readmission  agreements  between  the  EU  and  Bosnia  and 
Herzegovina entered into force on 1 January 2008. The first Joint Committee meetings on the 
Visa  Facilitation  Agreement  and  the  Readmission  Agreement  between  the  European 
Commission  and  Bosnia  and  Herzegovina  were  held  in  June  2008.  In  May  2008,  the  EU 
launched a visa liberalisation dialogue with Bosnia and Herzegovina, which should gradually 
lead  to  abolition  of  visas  for  citizens  of  Bosnia  and  Herzegovina  travelling  to  the  EU.  A 
detailed road map setting clear benchmarks to be met by Bosnia and Herzegovina for lifting 
the visa regime was presented in June 2008. Bosnia and Herzegovina adopted an Action-Plan 
for implementing the visa road map in August 2008.  

As  regards  pre-accession  financial  assistance,  the  2008-2010  Multi-Annual  Indicative 
Planning  Document  (MIPD)  for  Bosnia  and  Herzegovina  was  adopted  in  September  2008. 
The  EC  allocated  a  total  of  €74.8  million  to  Bosnia  and  Herzegovina  under  the  2008 
Instrument for pre-accession assistance (IPA) programme. The main areas of intervention are: 
strengthening  the  rule  of  law  and  public  administration  structures,  economic  and  social 
development and democratic stabilisation, including support for civil society. In addition, €5.7 
million has been provided from Community funds to support the budget of the Office of the 
High Representative until June 2009.  

IPA  and  remaining  CARDS  assistance  is  implemented  by  the  EC  Delegation  in  Sarajevo. 
Decentralised  management  of  aid  remains  a  medium-term  objective  for  Bosnia  and 
Herzegovina.  Preparations  for  decentralised  implementation  have  advanced  slightly.  The 
National  Fund  and  the  Central  Financial  and  Contracting  Unit  (CFCU)  in  the  Ministry  of 
Finance and Treasury (MoFT) have been partly staffed and further recruitment is in progress. 
The complex institutional and political environment, including significant delays in ratifying 
the  IPA  Framework  Agreement  and  the  2007  IPA  Financing  Agreement,  as  well  as 
difficulties  in  appointing  a  National  IPA  Coordinator,  has  delayed  the  start  of  the 
implementation  of  IPA.  In  accordance  with  the  IPA  Framework  Agreement,  Bosnia  and 
Herzegovina needs to ensure that Community assistance is exempt from VAT. 

Regarding  financial  assistance  to  civil  society,  the  2008  IPA  programme  will  provide 
€3.5 million to support civil society development.  

The  framework  agreement  for  Bosnia  and  Herzegovina's  participation  in  Community 
Programmes entered into force in January 2007. To date, no memorandum of understanding 
for participation in specific Community programmes has been concluded. 

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2. 

POLITICAL CRITERIA 

This  section  examines  progress  made  by  Bosnia  and  Herzegovina  towards  meeting  the 
Copenhagen political criteria, which require stability of institutions guaranteeing democracy, 
the  rule  of  law,  human  rights  and  respect  for  and  protection  of  minorities.  It  also  monitors 
regional  cooperation,  good  neighbourly  relations  with  enlargement  countries  and  Member 
States, and respect for international obligations, such as cooperation with the UN International 
Criminal Tribunal for the former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law 

Constitution  

Bosnia and  Herzegovina's  constitution,  which  is contained in Annex IV to the Dayton/Paris 
Peace  Agreement  (DPA),  establishes  a  complex  institutional  architecture.  The  DPA  put  an 
end to the war and brought peace and stability to Bosnia and Herzegovina. Although progress 
has  been  made  under  the  current  constitutional  structure,  it  still  prevents  swift  decision-
making and therefore hinders reform and the capacity to make rapid progress towards the EU.  

Since  the  Bosnia  and  Herzegovina  Parliamentary  Assembly  rejected  a  package  of  proposed 
constitutional amendments in April 2006, no further attempts have been made to amend the 
constitution.  Consequently,  there  has  been  little  progress  in  addressing  the  key  European 
Partnership  priority,  requesting  Bosnia  and  Herzegovina  to  establish  more  functional  and 
sustainable  institutional  structures.  There  remains  wide  disagreement  between  the  political 
parties on the scope of the future constitutional reform.  

Nationalist  rhetoric  from  political  leaders  from  all  the  constituent  peoples,  challenging  the 
Dayton/Paris  Peace  Agreement  and,  thus,  the  constitutional  order,  remained  commonplace. 
The  most  frequent  challenges  came  from  the  political  leadership  of  Republika  Srpska,  who 
have  continued  to  claim  the  right  of  self-determination  for  the  Entity.  Following  Kosovo's4 
declaration  of  independence,  the  Republika  Srpska  National  Assembly  adopted  a  resolution 
that  condemned  Kosovo's  declaration  and  stated  that  the  Republika  Srpska  authorities  may 
seek  a  referendum  of  independence  if  a  majority  of  EU  and  UN  Member  States  recognised 
Kosovo's independence. This resolution was widely rejected by the international community.  

As a result of the failure to reform the constitution, elections continue to be conducted under 
provisions that are in violation of the European Convention on Human Rights (ECHR). The 
election of Bosnia and Herzegovina's tripartite Presidency continues to be in contravention of 
Protocol 12 of the ECHR, as it does not allow citizens not belonging to the three constituent 
peoples to stand as candidates and it determines the ethnicity of each candidate elected from 
the Entities. 

On  the  basis  of  the  Dayton/Paris  Agreement,  the  international  community  continues  to 
maintain  a  significant  presence  in  Bosnia  and  Herzegovina.  The  Office  of  the  High 
Representative (OHR) and the EU Special Representative's office have been working closely 
with  the  European  Commission  on  issues  related  to  European  integration.  The  High 
Representative has continued to play a key role in facilitating reform and governance issues. 
The  High  Representative's  use  of  his  executive  powers  has  remained  low,  and  he  has  not 
enacted any new legislation in the reporting period. 

4 

Under UN Security Council Resolution 1244 

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In  October  2007,  the  European  Court  of  Human  Rights  ruled  as  inadmissible  a  number  of 
applications lodged against the decision of the High Representative to remove the applicants 
from public office and to bar them from running for election. The Court considered that the 
High Representative was exercising lawfully delegated powers of the United Nations Security 
Council.  

Due to the concerns over political stability in Bosnia and Herzegovina and in the region, the 
closure of the OHR has been further postponed. In February 2008, the Peace Implementation 
Council  decided  to  make  the  closure  conditional  on  Bosnia  and  Herzegovina's  progress  on 
addressing  five  specific  objectives5  and  two  specific  conditions  (signing  of  the  SAA  and  a 
stable political situation). Of the five objectives, there has been little progress on addressing 
the issues related to State property and the Brčko final award.  

The Entities have not yet finished bringing their constitutions into line with the March 2006 
ruling by the Constitutional Court of Bosnia and Herzegovina that the Entity coats of arms, 
flags  and  anthems  were  not  in  line  with  the  State-level  constitution  of  Bosnia  and 
Herzegovina.  Republika  Srpska  has  adopted  a  temporary  emblem  and  issued  a  call  for 
proposals  for  a  new  coat  of  arms.  The  Federation  of  Bosnia  and  Herzegovina  is  also  still 
considering proposals for the Entity symbols.  

Overall,  nationalist  rhetoric  has  prevailed  and  Bosnia  and  Herzegovina's  leaders  have  made 
no  progress  towards  creating,  through  the  reform  of  the  constitutional  framework,  more 
functional and affordable State structures which support the process of European integration.  

Parliament  

Bosnia and Herzegovina has a bicameral State-level parliament, along with parliaments at the 
level of the Entities (the Federation of Bosnia and Herzegovina and Republika Srpska), Brčko 
District and Cantons.  

Following  the  High  Representative's  recommendations  to  Bosnia  and  Herzegovina's 
Parliamentary  Assembly  to  adopt  measures  to  improve  its  efficiency,  the  House  of 
Representatives  and  the  House  of  Peoples  each  adopted  amendments  to  their  rulebooks  in 
December 2007. These reduced the quorum necessary for holding a session in the House of 
Representatives  and  changed  the  decision-making  mechanisms  in  both  Houses.  These 
decisions were designed to make the Bosnia and Herzegovina Parliamentary Assembly more 
functional  and  will  reduce  the  possibility  of  boycotts  undermining  the  performance  of  the 
Parliamentary Assembly.  

Following  the  adoption  of  new  rules  and  procedures,  and  reflecting  the  improved  political 
climate  which  followed  the  initialling  of  the  Stabilisation  and  Association  Agreement,  the 
Parliamentary  Assembly  adopted  a  number  of  important  laws  based  on  the  European 
Partnership,  including  legislation  concerning  the  police  reform.  The  Joint  Colleges  of  the 
Parliamentary  Assembly  also  adopted  a  Strategic  Plan  for  2008-2010,  which  provides  for 
increases in staffing.  

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1) Acceptable and sustainable resolution of the issue of apportionment of property between State and 
other  levels  of  government;  2)  Acceptable  and  sustainable  resolution  of  defence  property;  3) 
Completion  of  the  Brčko  final  award;  4)  Fiscal  sustainability  (promoted  by  an  agreement  on  a 
permanent  coefficient  methodology  on  distribution  taxation  revenues  and  establishment  of  a  National 
Fiscal Council); and 5) Entrenchment of the rule of law (demonstrated by adoption of a National War 
Crimes Strategy, of a Law on aliens and asylum and of a National Justice Sector Reform Strategy). 

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However,  overall  the  Parliamentary  Assembly's  legislative  work  has  continued  to  be 
adversely  affected  by  the  intransigent  and  ethnically  oriented  position  of  the  country's 
political leaders. Members of Parliament generally continue to vote along ethnic lines and the 
Parliamentary  Assembly's  work  is  affected  by  the  general  political  environment.  The  High 
Representative's  recommendations  to  the  Parliamentary  Assembly  in  October  2007  to 
improve  efficiency  resulted  in  threats  from  Bosnian  Serb  representatives  to  boycott  the 
legislative  work.  As  a  result,  the  Parliamentary  Assembly  met  infrequently  up  to  February 
2008.  

The  chairmanship  of  the  Parliamentary  Assembly  continues  to  rotate  on  an  eight-monthly 
basis,  which  hinders  efficiency.  It  is  still  hampered  by  inadequate  technical  and  human 
resources.  Cooperation  with  the  Council  of  Ministers  remains  weak,  and  there  is  little 
coordination  of  legislative  agendas  between  the  State  and  Entity  parliaments,  even  though 
initial  discussions  have  been  held  in  the  context  of  European  integration.  Owing  to  the  still 
complicated  decision-making  procedures  which  provide  guarantees  for  the  constituent 
peoples, parliamentary activities have continued to proceed slowly. Committee work has also 
been affected  by  inter-ethnic  divergences and the general lack of resources. The Committee 
for European Integration does not yet deal with specific legislative issues related to European 
integration.  

Overall,  there  has  been  some  progress  on  improving  the  efficiency  of  the  Parliamentary 
Assembly  of  Bosnia  and  Herzegovina.  However,  its  work  is  still  adversely  affected  by  the 
unstable political climate, systematic voting along ethnic lines and insufficient administrative 
resources.  

Government 

The Presidency of Bosnia and Herzegovina is responsible for foreign policy, proposing annual 
budgets and representing Bosnia and Herzegovina in international organisations. In line with 
the Constitution of Bosnia and Herzegovina, the Presidency members continue to rotate on an 
eight-monthly basis, which hampers efficiency and continuity.  

The  Presidency  has  met  regularly.  However,  some  of  the  members  have  continued  to  show 
first  allegiance  to  their  Entity  and  their  constituent  people.  The  Presidency  members  have 
invoked  "vital  entity  interest"  on  a  number  of  occasions  and  have  generally  shown  little 
capacity  to  find  common  positions.  They  have  continued  to  show  their  differences  publicly 
when representing Bosnia and Herzegovina officially in international meetings.  

In October 2007, the High Representative issued a decision amending the Law on the Council 
of  Ministers  in  Bosnia  and  Herzegovina.  This  introduced  changes  to  the  obligatory  quorum 
for holding government sessions and to the decision-making mechanisms. The decision also 
stipulated that the Council of Ministers needed to hold sessions on a weekly basis. The aim 
was to make the Council of Ministers more efficient and functional. Following these changes, 
and supported by a more favourable political climate in the first half of 2008, the Council of 
Ministers  has  met  regularly.  It  has  adopted  a  number  of  laws  based  on  the  European 
Partnership and held specific sessions on the European integration matters.  

Following the High Representative's decision to amend the Law on the Council of Ministers, 
the  political  leadership  from  Republika  Srpska  considered  the  measures  imposed  to  be 
unconstitutional  and  threatened  to  boycott  the  State-level  institutions.  As  a  result,  the 
Chairman of the Council of Ministers (Prime Minister) resigned in November 2007. After the 

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Prime  Minister's  resignation,  the  Council  of  Ministers  met  with  a  technical  mandate  until 
February 2008, when it was reconstituted with the same membership as before.  

Overall, the Council of Ministers has continued to experience internal tensions, even though 
consensus on European integration has helped move the legislative agenda forward. Capacity 
problems, lack of political will, and diverging national interests in government and parliament 
nevertheless continue to delay adoption of legislation. The work of the Council of Ministers is 
also suffering from the limited powers of the Prime Minister. 

The  Directorate  for  European  Integration  (DEI)  is  directly  attached  to  the  Council  of 
Ministers. It has continued to play an important role as Bosnia and Herzegovina's focal point 
for programming EU assistance. Units for European integration have been established in each 
ministry in the Council of Ministers. However, the DEI has continued to be adversely affected 
by  limited  resources  for  personnel  and  the  difficult  political  climate.  The  adoption  of  the 
action plan for implementation of the European Partnership priorities, which was prepared by 
DEI,  was  significantly  delayed  as  a  result  of  Republika  Srpska's  challenges  to  the 
competences of the State-level in a number of areas.  

The  Directorate  for  Economic  Planning  (DEP),  which  is  also  linked  to  the  Council  of 
Ministers,  has  been  strengthened  through  the  appointment  of  a  permanent  Director  and  the 
consolidation of its role of coordinating the country development strategy process, as assigned 
by the Coordination Board for Economic Development and European Integration.  

The staffing of the General Secretariat of the Council of Ministers has been improved, but it 
does  not  yet  have  the  capacity  for  planning  and  policy  coordination.  Currently,  policy 
coordination, including the process of preparing the annual work programme for the Council 
of Ministers, is carried out by the Office of the Chairman of the Council  of Ministers. This 
division  of  tasks  between  the  General  Secretariat  and  the  Office  of  the  Chairman  is  not 
optimal.  The  staffing  of  the  Legislative  Office  has  improved,  but  the  quality  of  draft 
legislation still remains unsatisfactory.  

Fragmented  policy-making  between  the  State  and  the  Entities  remains  the  main  obstacle  to 
efficient work by the State Government. The Coordination Board for Economic Development 
and European Integration, which is designed to harmonise State and Entity agendas, does not 
play an effective role and has met only infrequently. Coordination between the different levels 
of authority is minimal and depends largely on personal and party interests. Due to its limited 
powers  the  Council  of  Ministers  has  occasionally  been  left  out  of  negotiations  on  reforms, 
which  have  been  conducted  by  the  political  parties.  Another  serious  handicap  for  policy 
planning in Bosnia and Herzegovina as a whole is the lack of proper statistics, including an 
up-to-date population census. Major reforms are still based on the 1991 census, which does 
not reflect the current situation on the ground.  

The  Republika  Srpska  Government  has  continued  to  be  efficient  in  adopting  legislation. 
However, it has maintained its policy of strengthening its own legal framework, often without 
coordination  with  the  Council  of  Ministers  or  with  the  government  of  the  Federation.  It 
remains generally opposed to the transfer of powers to State level and has often threatened to 
reverse previous transfers. The Federation Government has been less efficient in adopting and 
implementing legislation, mainly owing to the difficult political climate and diverging party 
and ethnic interests in the governing coalition.  

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Both Entities have local self-government 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 resources of the municipalities remains an 
issue both in the Federation and in Republika Srpska. Harmonisation of Cantonal legislation 
within the Federation has been uneven. The State-level authorities have no powers over local 
self-government, which complicates compliance with Bosnia and Herzegovina's international 
obligations in this area.  

Municipal  elections  took  place  in  October  2008.  They  were  held  in  accordance  with 
international  standards.  Considering  the  sensitivity  of  the  balance  of  power  within  the 
Srebrenica  local  government,  the  Bosnia  and  Herzegovina  Parliamentary  Assembly  agreed 
exceptionally to allow all 1991 residents to vote in the municipal elections for Srebrenica and 
not for their current place of residence, if they so chose. 

Overall,  Bosnia  and  Herzegovina  has  made  limited  progress  on  making  the  State-level 
government structures more functional and efficient to address their commitments regarding 
European  integration.  Lack  of  resources,  lack  of  coordination,  ethnic  tensions,  and  internal 
conflicts  continue  to  delay  reform.  Fragmented  policy-making  between  the  State  and  the 
Entities  remains  the  main  obstacle  to  efficient  work  by  the  State  Government.  There  have 
been discrepancies between the Entities in the efficiency of the adoption and implementation 
of legislation.  

Public administration 

There  has  been  some  progress  in  the  area  of  public  administration  reform,  which  is  a  key 
European Partnership priority.  

The Public Administration Reform (PAR) Coordination Office has made significant progress 
in terms of staffing. The number of employees is 35. Implementation of the PAR Strategy and 
its  accompanying  Action  Plan  has  been  continuously  monitored:  by  September  2008  the 
implementation  rate  had  reached  28%.  Operational  cooperation  with  the  coordinators  for 
public  administration  reform  appointed  for  the  Federation  Government,  the  Government  of 
Republika Srpska and the Government of the Brčko District has been improved, but further 
efforts are needed. The PAR Coordination Office has strengthened its capacity, primarily for 
managing the Public Administration Reform Fund and coordinating various donor initiatives. 
The  Public  Administration  Reform  Fund  has  become  operational  and  the  first  proposals  for 
projects  have  been  adopted,  committing  one  third  of  total  available  funds.  Tendering  and 
contracting procedures have started.  

Despite  these  developments,  the  administrative  structures  remain  cumbersome,  and  in  some 
cases  fragmented,  and  prone  to  duplication  and  unclear  division  of  powers,  both  between 
institutions at the same level and vertically, between different levels of government. Although 
recruitment  by  the  State  Civil  Service  Agency  has  improved,  further  efforts  are  needed  to 
reinforce its staffing and to make the recruitment procedures more efficient. The State Civil 
Service Agency has remained active in organising and providing training on different topics 
for all civil servants. Coordination between the State- and Entity-level Civil Service Agencies 
has  improved,  with  joint  involvement  in  several  large-scale  training  schemes.  However, 
harmonisation of the three Civil Service Laws, in particular to allow transfers of civil servants 
between government levels, is still pending.  

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The  accommodation  of  State-level  institutions  remains  a  problem.  The  move  to  the  newly 
reconstructed building of the Council of Ministers has taken place after considerable delays, 
but  this  building  cannot  accommodate  all  the  employees  of  State  ministries  and  standing 
bodies of the Council of Ministers.  

No progress has been made on regulating ownership rights to State property. As a result, the 
High  Representative  has  extended  the  temporary  prohibition  of  disposal  of  State  property 
beyond 30 June 2008.  

The  civil  service  is  in  need  of  professionalisation,  transparent  and  efficient  recruitment 
procedures  and  modern  career  development.  Sustained  efforts  remain  necessary  to  prevent 
political interference and to limit the role played by ethnic identity and party membership in 
public  administration.  The  administration  would  benefit  from  modernisation  of  procedures 
and processes and from closer cooperation with other parts of the country.  

The implementation of the Ombudsman Law, which was adopted in March 2006 and which 
provides  for  merging  the  three  Ombudsmen  Institutions,  is  awaiting  the  appointment  of  the 
Ombudspersons.  The  appointment  process  was  re-launched  in  2008  and  a  parliamentary 
committee  was  established  for  the  selection  process.  However,  due  to  blockages  in  the 
appointment  process,  no  agreement  has  been  reached.  Further  delays  pose  a  risk  of 
undermining the credibility of the State Ombudsman's Office.  

Overall, there has been some progress in the area of public administration. However, Bosnia 
and Herzegovina is still in an early phase of the public administration reform, which needs to 
be  accelerated.  The  country's  complex  and  cumbersome  institutional  structure  continues  to 
undermine  efficiency.  Significant  further  efforts  towards  an  efficient,  professional,  stable, 
accountable and transparent civil service are needed at all levels of government.  

Civilian oversight of the security forces  

The  Joint  Parliamentary  Committees  for  Defence  and  Security  and  the  Intelligence  and 
Security  Committee  have  continued  to  perform  their  duties  efficiently,  with  the  latter 
commencing  both  announced  and  unannounced  inspections  of  the  Intelligence  Security 
Agency.  As  regards  the  defence  reform,  the  issue  of  transferring  responsibility  for  military 
weapons,  ammunition,  explosives  and  certain  other  movable  defence  property  from  the 
Entities to the State level was resolved in March 2008, when the Council of Ministers and the 
Entity Governments signed an agreement on this subject, which is now being implemented. 
The agreement will also allow the destruction of old and dangerous ammunition. The issue of 
transferring  immovable  defence  property  to  the  State  remains  unresolved.  EUFOR  handed 
over responsibility to Bosnia and Herzegovina for control of military movements of arms and 
ammunition in March 2008.  

Bosnia and Herzegovina's progress on addressing the defence reform resulted in an invitation 
from  NATO  to  start  the  "Intensified  Dialogue". This  signifies  that  contacts  between  Bosnia 
and  Herzegovina  and  NATO  will  increase  in  order  to  prepare  the  country  for  an  eventual 
Membership Action Plan, which is the last step before NATO accession.  

Judicial system 

Consolidation  of  the  judicial  system  continued  to  make  progress,  but  in  a  difficult 
environment.  One  ongoing  major  problem  was  the  lack  of  a  Supreme  Court  that  could 
harmonise application of legislation across the four internal jurisdictions: the State level, the 

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Federation  of  Bosnia  and  Herzegovina,  Republika  Srpska  and  the  Brčko  District.  Another 
continuing structural problem was the absence of a single budget for the judiciary. Having 14 
Ministries  of  Justice  each  preparing  judicial  budgets  has  been  detrimental  to  judicial 
independence and overall implementation of the judicial reform. Political interference in the 
judicial system remains a cause for concern. In the parliamentary and executive branches of 
the  governments,  attempts  are  being  made  to  reverse  reforms  already  implemented  so  as  to 
allow greater political influence in the work of prosecutors and judges. The jurisdiction and 
the  competences  of  the  State-level  judicial  agencies  to  operate  freely  in  Republika  Srpska 
have  been  challenged  by  the  Republika  Srpska  government,  which  is  a  serious  cause  for 
concern.  

At State-level, the system consists of a Ministry of Justice with limited powers and staff, the 
State  Court  and  the  State  Prosecutor's  Office  with  a  common  international  registry  and  the 
High  Judicial  and  Prosecutorial  Council  (HJPC),  which  substantially  guides  the  judicial 
reform, but has only limited resources. The HJPC, as an independent and autonomous body, 
has  continued  to  play  an  important  role  in  improving  the  situation  of  the  judiciary.  It  has 
contributed to increased professionalism, resources and  efficiency.  Cooperation between  the 
HJPC and the ministries has been upgraded, in that it is now more common for budget drafts 
and  budget  proposals  to  be  submitted  to  the  HJPC  for  comments.  However,  these 
improvements need to be taken further if the HJPC's position is to be made more secure. The 
presence  of  international  judges  and  prosecutors  within  the  State  judicial  institutions  was 
maintained.  Despite  some  improvements  owing  to  international  donor  funds,  material 
conditions remain an obstacle to the judicial reform, in particular funding for suitable judicial 
premises  and  adequate  financial  means  for  the  daily  operation  of  courts  and  prosecutors' 
offices.  

The  Judicial  and  Prosecutorial  Training  Centres  in  the  Entities  implemented  educational 
programmes  for  judges  and  prosecutors  across  the  country  and  were  relocated  to  better 
premises. A training strategy for the two centres was adopted and the training budgets were 
increased. Two legal documentation centres have been developed. However, there is a need to 
increase the staffing of the Centres.  

includes  provisions  aiming  at  further  strengthening 

The  National  Strategy  for  Development  of  the  Justice  Sector  for  2008-2012  was  adopted  in 
June  2008.  The  Strategy 
the 
independence,  accountability,  efficiency,  professionalism  and  harmonisation  of  the  judicial 
system  and  at  advancing  the  system  of  international  legal  assistance  and  the  processes  to 
guarantee  equal  access  to  justice.  Owing  to  the  lack  of  consensus,  however,  the  Strategy 
makes  no  provision  for  establishing  a  Supreme  Court  of  Bosnia  and  Herzegovina,  a  single 
judicial budget and a single criminal law.  

Bosnia  and  Herzegovina  has  made  some  efforts  to  reduce  the  backlog  of  court  cases.  The 
Backlog Reduction Project, formalised by the signing of a memorandum of understanding in 
January  2008,  is  one  positive  step.  However,  the  total  number  of  pending  court  cases 
exceeded 2 million, of which approximately 1.2 million were cases of unpaid utility bills.  

There  has  been  progress  with  restructuring  the  minor  offence  courts.  Consolidation  of  the 
minor offence courts into the regular first instance courts has been completed, in line with the 
European Convention on Human Rights. The influx of minor offence cases before the courts 
has been reduced; the collection rate for fines imposed has increased and resolution of minor 
offence cases has been speeded up.  

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Cooperation  between  police  officers  and  prosecutors  remains  weak.  The  majority  of 
prosecutors and police officers still have difficulties understanding and applying the different 
substantive criminal codes which are in force. Progress in the area of harmonisation of State 
and Entity criminal legislation has been limited. Problems persist, especially with prosecution 
of war crimes and organised crime.  

Some  progress  has  been  made  in  the  area  of  juvenile  justice.  The  Strategy  against  Juvenile 
Offences,  which  was  adopted  in  July  2006,  did  not  enter  into  force  until  February  2008.  In 
May  2008,  a  coordination  body  was  set  up  at  State  level  to  monitor  implementation  of  the 
Strategy and held its first meeting. However, proper implementation of the Strategy and the 
Action Plan has not yet started. Lack of appropriate and well-regulated juvenile correctional 
facilities  and  alternative  measures  for  juvenile  offenders  continued  to  seriously  hinder  the 
establishment of an effective system to address juvenile delinquency.  

Local prosecution of war crimes has continued. At State level, trials have generally been held 
within  a  reasonable  time  and  in  compliance  with  internationally  recognised  fair  trial 
standards. One of the main challenges facing the State Prosecutor's Office and the State Court 
is  the  large  volume  of  war  crimes  cases.  A  strategy  is  needed  to  map  and  prioritise  these 
cases.  Furthermore,  the  Court  needs  to  make  more  efforts  on  its  outreach  activities.  Trials 
have also continued to be conducted more effectively before cantonal and district courts in the 
Entities,  but  there  are  several  remaining  major  obstacles  to  be  addressed.  In  particular, 
effective  action  needs  to  be  taken  to  address  the  lack  of  witness  protection  and  witness 
support,  insufficient  staffing  and  lack  of  specialisation  among  cantonal  and  district 
prosecutors, plus the lack of harmonisation of the legal codes used in war crimes trials at State 
and Entity levels. A clear and concrete national strategy dealing with war crimes issues has 
still to be adopted.  

Overall, preparations by Bosnia and Herzegovina to develop an effective and efficient judicial 
system  have  been  advancing.  The  adoption  of  the  Strategy  for  Development  of  the  Justice 
Sector  for  2008-2012  is  a  positive  development.  However,  fragmentation  and  disparities 
across  the  judicial  frameworks  continue  to  impair  the  efficiency  of  the  judicial  system. 
Sustained  efforts  are  needed  in  order  to  improve  efficiency  and  to  ensure  the  independence 
and the accountability of the judicial system. 

Anti-corruption policy  

Bosnia  and  Herzegovina  is  a  party  to  the  UN  Convention  on  Fighting  Corruption  (Mérida 
Convention),  but  has  not  signed  the  Additional  Protocol  to  the  Council  of  Europe  Criminal 
Law  Convention  on  Corruption.  Bosnia  and  Herzegovina  still  needs  to  harmonise  its 
legislation with the Council of Europe Civil Law Convention on corruption. No progress has 
been  made  towards  ensuring  proper  implementation  of  the  2006  National  Anti-Corruption 
Strategy  and  the  associated  Action  Plan.  There  has  been  some  progress  on  addressing  the 
recommendations  made  by  the  second  evaluation  report  adopted  by  the  Council  of  Europe 
Group of States against Corruption (GRECO) in December 2006, namely to enforce the legal 
framework  and  to  improve  coordination  and  training  of  the  agencies  involved  in  fighting 
corruption and seizure of the instruments and proceeds of crime. The Bosnia and Herzegovina 
Central  Election  Commission  was  active  in  implementing  the  Law  on  conflicts  of  interest. 
However, some of its decisions have not been properly implemented.  

As  regards  anti-corruption  legislation,  the  amendments  to  the  Law  on  financing  of  political 
parties are in the parliamentary procedure. Under the terms of these amendments the amount 

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that political parties may receive via grants and donations from legal and physical entities is 
doubled, which is designed to increase transparency of financing of political parties. 

There are no legal measures in place to ensure confidentiality and protection of civil servants 
reporting corruption. The amendments to the Law on conflicts of interest adopted in July 2008 
reduce the scope of the law in terms of the persons to whom it applies and of the situations 
that  are  regarded  as  conflicts  of  interest.  No  independent  anti-corruption  agency  has  been 
established. Convictions for corruption remain very limited. There is lack of political will to 
implement  actions  to  combat  corruption  in  line  with  the  2006  strategy  and  action  plan.  The 
judiciary  also  faced  difficulties  in  gathering  evidence  and  mastering  all  aspects  of  the  legal 
framework.  The  judicial  and  prosecutorial  training  centres  need  to  create  targeted  training 
programmes dedicated to the prosecution of criminal offences of corruption, economic crime 
and  organised  crime.  Transparency  of  public  activities  is  hampered  by  political  pressure  on 
public external audit institutions and by limited implementation of the Freedom of Access to 
Information Act.  

Media  accusations  and  pressure  from  the  Republika  Srpska  authorities  against  a  corruption 
watchdog,  which  led  to  the  temporary  suspension  of  the  operations  of  Transparency 
International in Bosnia and Herzegovina, are a serious concern.  

Overall, Bosnia and Herzegovina has made very little progress on improving its tools to fight 
corruption.  Corruption  is  widespread  and  remains  a  serious  problem,  especially  within 
government. Bosnia and Herzegovina needs to improve its anti-corruption legislation. Proper 
implementation of the National Anti-Corruption Strategy needs to be ensured. More vigorous 
investigation and prosecution are necessary.  

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law  

As regards ratification of human rights instruments, Bosnia and Herzegovina has ratified 
the  major  UN  and  international  human  rights  conventions,  including  the  European 
Convention  for  the  Protection  of  Human  Rights  and  Fundamental  Freedoms.  Bosnia  and 
Herzegovina  also  ratified  the  revised  European  Social  Charter  in  July  2008.  Delays  in 
fulfilling  reporting  obligations  have  continued.  The  constitution  includes  most  of  the 
principles  of  the  human  rights  conventions  and  guarantees  that  they  supersede  national 
legislation.  Although  the  conventions  are  directly  applicable,  implementation  needs  to 
improve. 

In  a  number  of  cases,  the  decisions  of  the  Human  Rights  Commission  of  the  Constitutional 
Court of Bosnia and Herzegovina were not properly implemented. This has led to cases being 
lodged before the European Court of Human Rights (ECtHR). During the reporting period, 
the  Court  delivered  five  judgments  finding  that  Bosnia  and  Herzegovina  had  violated  the 
European  Convention  on  Human  Rights  (ECHR).  A  total  of  1  020  new  applications  to  the 
ECtHR were made during the reporting period. As of August 2008 the total number of cases 
pending  before  the  Court  regarding  Bosnia  and  Herzegovina  was  about  800,  around  500  of 
which concerned the applicants' inability to withdraw their old foreign currency savings.  

As regards promotion and enforcement of human rights, the enforcement of the decisions 
of  the  Human  Rights  Commission  remains  unsatisfactory.  In  several  cases,  criminal 
proceedings have been instituted because of failure to enforce such decisions. Enforcement of 
decisions  relating  to  amendments  to  laws  and  other  regulations  is  particularly  slow,  as  it 

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requires more coordination between various institutions. Enforcement of decisions pertaining 
to  financial  compensation  has  been  comparably  faster.  No  progress  has  been  made  on 
addressing  the  question  of  the  citizens  and  residents  of  Bosnia  and  Herzegovina  who  were 
sent to Guantanamo Bay in a breach of the Human Rights Commission's decision. This case 
has been referred to the European Court of Human Rights. Bosnia and Herzegovina needs to 
take determined action to have its citizens released. 

Overall,  Bosnia  and  Herzegovina  has  made  limited  additional  progress  on  improving 
observance of international  human  rights law. Implementation of international human rights 
conventions needs to improve. Efforts to ensure proper enforcement of human rights need to 
increase.  

Civil and political rights  

As regards prevention of torture and ill-treatment and the fight against impunity, State 
and Entity constitutions prohibit torture and ill-treatment. Bosnia and Herzegovina is party to 
the  Council  of  Europe  Convention  for  the  Prevention  of  Torture.  However,  it  has  failed  to 
appoint  a  member  to  the  Anti-Torture  Committee.  Recent  assessment  of  the  situation  in 
prisons  and  in  police  detention  has  revealed  a  number  of  allegations  of  ill  treatment  of 
prisoners and detainees by the police or prison guards. In 2008, the European Court of Human 
Rights issued two decisions against Bosnia and Herzegovina in this regard. First, in May, the 
Court  decided  that  the  human  rights  of  four  applicants  had  been  violated  by  not  preventing 
violence  and  intimidation  against  them  by  other  inmates.  Then,  in  July,  the  Court  issued  a 
decision concerning the ill-treatment of prisoners in the psychiatric wing of Zenica prison and 
ordered Bosnia and Herzegovina to pay compensation to the applicants. There remains a need 
to improve the mechanisms for investigation of cases of alleged torture and ill-treatment by 
the  police.  In  practice,  units  responsible  for  dealing  with  complaints  are  often  composed  of 
the  same  officers  who  are  alleged  to  have  perpetrated  the  ill-treatment.  Their  work  is  not 
supervised. 

Bosnia and Herzegovina also needs to ensure adequate safeguards to ensure that people facing 
deportation following a negative citizenship review are protected from persecution, including 
torture  and  ill-treatment,  upon  return.  There  are  still  obstacles  to  the  transfer  of  cases  and 
extradition  of  suspects  in  cases  of  war  crimes  and  crimes  against  humanity  between  Bosnia 
and Herzegovina, Croatia, Montenegro and Serbia. This is conducive to impunity.  

The  death  penalty  is  prohibited  by  the  constitution  of  Bosnia  and  Herzegovina  and  by  the 
constitution  of  the  Federation.  Republika  Srpska  has  taken  steps  to  repeal  the  death  penalty 
provisions from its constitution, but the process has not yet been completed.  

Access to justice in civil and criminal trials remains a matter of concern, and equality before 
the  law  is  not  always  guaranteed.  Further  efforts  are  needed  to  increase  the  budget  of  the 
defence counsel and to establish a nationwide legal aid scheme  for  criminal and civil trials. 
Legal aid in civil cases is primarily provided on an ad hoc basis by privately funded NGOs. 
The right to a fair trial is formally incorporated in the five criminal procedure codes of Bosnia 
and Herzegovina. However, the time from initiation of proceedings to a final decision remains 
very  long.  This  is  mainly  due  to  a  large  backlog  inherited  by  the  courts  and  to  excessive 
referral of cases to first instance courts by district and cantonal courts in appellate procedures. 
Furthermore,  in  lower  level  courts,  judges  have  tended  to  neglect  the  presumption  of 
innocence.  

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Responsibility for the prison system remains divided between two entities and management 
of  penitentiary  institutions  is  split  between  the  State  and  the  Entities.  There  is  no  unified 
practice  of  criminal  sanctions.  The  lack  of  coordination  between  the  15  different  competent 
prison  administrations  and  the  absence  of  a  harmonised  legislative  framework  are  major 
obstacles to improvement of the country's capacity to manage its prisoners. Some progress has 
been  made  with  construction  of  a  prison  facility  at  State  level.  The  Law  on  founding  the 
institute  for  execution  of  criminal  sanctions,  detention  and  other  measures,  adopted  in 
February 2008, provides the legal framework for construction of the State prison. The funds 
needed for construction have been secured and the preparatory works for the building started.  

No  progress  has  been  made  on  addressing  the  problems  of  overcrowding,  poor  living 
conditions,  inadequate  medical  treatment  and  physical  abuse  by  prison  guards.  The  lack  of 
prison  inspections,  especially  in  the  Federation,  is  a  concern.  The  lack  of  special 
correctional/reform  institutions  for  women,  juveniles,  persons  with  mental  health  problems, 
persons  with  disabilities  and  seniors  needs  to  be  addressed.  The  conditions  under  which 
persons  in  need  of  psychiatric  treatment  serve  their  sentences  are  a  cause  of  particular 
concern. There is still a lack of acceptance of alternative penalties in the form of community 
work.  

All  the  constitutions  provide  for  freedom  of  expression.  Proper  implementation  of  the 
relevant legislation is required. Following the Federation Constitutional Court's rejection of a 
complaint that the draft public broadcasting law adversely affected the vital national interest 
of the Croat people in the Federation, the Federation Parliament adopted the law in July 2008. 
In line with the relevant key European Partnership priority, it is now necessary to ensure that 
all State and Entity-level legislation is harmonised, as well as full implementation, including 
the  establishment  of  the  Bosnia  and  Herzegovina  Corporation  of  the  Public  Broadcasting 
Services.  

The cases of physical attacks against journalists and editors have increased. Cases of physical 
violence against journalists and editors need to be prosecuted vigorously. The withholding of 
financial  resources  from  certain  media  by  the  authorities,  including  the  public  broadcasting 
system, as a result of political pressure, is a matter of serious concern. A number of politicians 
have  also  encouraged  the  population  not  to  pay  the  TV  licence  fee.  The  challenges  to  the 
independence of the Communications Regulatory Authority have increased, in particular as a 
result of the new Law on wages and allowances and the unresolved issue of the appointment 
of the authority's Director-General.  

The  constitutional  framework  of  Bosnia  and  Herzegovina  includes  the  right  to  freedom  of 
assembly  and  association.  However,  there  have  been  an  increasing  number  of  cases  of 
intimidation against NGOs and civil society organisations. Harassment of certain collectives 
because of their sexual orientation has also occurred. 

Some progress has been made as regards civil society organisations. A Civil Society Board 
was established in October 2007 in accordance with the Agreement on cooperation between 
the  NGO  sector  and  the  Council  of  Ministers  of  Bosnia  and  Herzegovina.  Even  though  the 
Board  does  not  represent  the  whole  of  civil  society,  it  has  31  sub-sectors,  making  it  the 
strongest forum for NGOs in the country. However, more efforts by the authorities are needed 
in  order  to  establish  regular  and  systematic  communication  with  civil  society  and  to 
encourage its participation in policy-making.  

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The  constitution  of  Bosnia  and  Herzegovina  provides  for  freedom  of  religion,  and  a  State 
Law on freedom of confession and the legal status of churches and religious communities is in 
place. However, religious intolerance is still present in the country, including physical attacks 
on  religious  facilities.  Cases  of  physical  attacks  against  places  of  worship  need  to  be 
prosecuted  vigorously.  Leaders  of  the  religious  communities  have  continued  to  intervene  in 
political issues and they often play a divisive role in society.  

Overall, Bosnia and Herzegovina has made limited progress in the area of civil and political 
rights.  Some  steps  have  been  taken  to  support  civil  society  development,  but  the  sector 
remains weak overall. Some progress has been made with construction of a prison facility at 
State level, but the management of penitentiary institutions continues to be split between the 
State  and  the  Entities.  No  progress  has  been  made  on  fostering  freedom  of  expression  and 
freedom of assembly.  

Economic and social rights  

Overall  the  framework  for  women's  rights  is  satisfactory,  but  there  has  been  limited 
additional  progress,  especially  on  effective  implementation.  One  positive  development  has 
been  the  revision  of  the  Law  on  protection  from  domestic  violence  in  Republika  Srpska. 
Under the revised law, the entity and local authorities are responsible for funding safe houses 
for  victims  of  domestic  violence.  The  Gender  Agency  of  Bosnia  and  Herzegovina  has 
established  a  Working  Group  on  work,  employment  and  access  to  all  economic  resources 
which has made recommendations for implementation of the Law on gender equality. Overall, 
structures  to  support  gender  equality  are  in  place,  but  there  still  is  a  general  need  to  make 
mandates  clearer  and  increase  financial  and  human  resources  to  ensure  that  these  structures 
can  function  efficiently.  Clear  priorities  are  also  needed  for  the  effective  implementation  of 
the country's gender Action plan.  

Trafficking  in  women  and  domestic  violence  remain  causes  for  concern.  Bosnia  and 
Herzegovina  has  continued  to  be  a  country  of  origin,  transit  and  destination  for  trafficking 
women  and  girls.  The  incidence  of  domestic  violence  has  remained  high.  Criminal  acts  of 
violence  in  the  family  recorded  by  the  authorities  rose  by  more  than  50  percent  in  2007 
compared  to  2006.  Shelters  for  victims  of  domestic  violence  lack  financial  resources  and 
sometimes  depend  on  foreign  donors.  Many  women  are  not  covered  by  health  insurance. 
Women  continue  to  be  under-represented  in  politics  and  in  the  official  authorities  (see  also 
section 4.1.8, Employment and social policies).  

There has been only very limited progress in the field of children's rights. An Action Plan 
for  children  has  been  adopted,  but  problems  due  to  insufficient  State  action  in  the  fields  of 
health,  social  protection,  education  and  domestic  violence  against  children  remain.  Entity 
governments have adopted a policy on children without parental care and families at risk of 
separation.  Children's  attendance  of  early  childhood  education  programmes  is  still  low. 
Children  with  disabilities  still  lack  sufficient  medical  care  and  adequate  educational 
opportunities.  

Discrimination against socially vulnerable people and people with disabilities is prohibited 
by  the  legislation  of  both  Entities.  However,  the  fragmented  legal  and  financial  framework 
does not provide the same social protection for all citizens throughout the country. Legislation 
on the professional rehabilitation and employment of persons with disabilities exists only in 
Republika  Srpska.  Many  groups  of  the  population  are  excluded  from  social  protection  and 
assistance  benefits.  The  preferential  treatment  of  war  veterans  in  terms  of  social  benefits 

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continued  to  have  adverse  effects  on  other  socially  vulnerable  persons  and  persons  with 
disabilities,  who  often  lack  access  to  health  protection  and  the  labour  market.  Accessibility 
legislation is not being implemented and effective policies need to be put in place. Bosnia and 
Herzegovina  has  not  signed  the  UN  Convention  on  the  Rights  of  Persons  with  Disabilities. 
The inadequacies in the social welfare systems adversely affect the conditions of the persons 
with disabilities, including the mentally ill. The latter remain particularly vulnerable to social 
exclusion.  A  study  to  analyse  and  evaluate  the  services  for  mental  health  protection  in  the 
whole  country  has  been  launched,  but  little  progress  has  been  made  in  terms  of 
deinstitutionalisation. The Council for Disabled Persons has not yet been established.  

Regarding  labour  rights  and  trade  unions,  the  ratification  of  the  revised  European  Social 
Charter  is  a  progress,  but  the  complex  system  of  government  and  the  fragmentation  of 
legislation  continue  to  hamper  social  dialogue  across  the  country.  There  has  been  no 
development  in  establishing  the  trade  union  confederation  (KSBiH)  at  State  level,  and  as  a 
result  the  trade  unions  continue  to  be  based  on  the  Entity  structure.  No  country-wide 
Economic and Social Council has been established, due to opposition from Republika Srpska. 
The  lack  of  clarity  regarding  trade  union  recognition  has  blocked  further  progress  towards 
establishing  collective  bargaining  and  moving  towards  voluntary  collective  bargaining.  The 
practice  of  disregarding  employees'  entitlement  to  social  security,  in  particular  during 
maternity leave for employed mothers and maternity for the unemployed, has been common. 
No  steps  have  been  taken  to  harmonise  the  legislative  frameworks.  The  lack  of  a  unified 
pension  structure  is  also  a  problem,  which  has  been  recognised  by  the  European  Court  of 
Human Rights in a decision issued in November 2007.  

With  regard  to  anti-discrimination  policies,  the  State  and  Entity  constitutions  guarantee 
equal  treatment  of  all  people.  A  comprehensive  anti-discrimination  law  has  not  yet  been 
adopted. Anti-discrimination legislation exists in several areas, but implementation has been 
deficient.  Social  discrimination  and  exclusion  of  people  belonging  to  the  lesbian,  gay, 
bisexual,  transgender  (LGBT)  community  is  widespread.  Acts  of  intimidation  against  these 
groups have occurred. This is exacerbated by the State’s informal and formal support to such 
attitudes and the lack of a proper anti-discrimination legislation and implementing measures 
regarding sexual orientation and gender identity. 

Progress has continued in the areas of property rights and land administration reform. The 
mandate  of  the  Commission  for  Property  Claims  of  Displaced  Persons  and  Refugees  was 
extended until the end of 2008 to address residual property repossession cases. Improvements 
to legal security of transactions were noted after notaries took office in Republika Srpska in 
March 2008 and in the Federation in May 2008. A new technical regulation on management 
of real estate cadastre information came into force in April 2008 in the Federation. However, 
the law on property rights is not yet in place in Republika Srpska.  

Overall, little progress has been made in the area of economic and social rights. Progress on 
property rights has continued. Introduction and implementation of legal provisions to prevent 
discrimination and to protect the rights of women, children, disabled and socially vulnerable 
persons, as well as LGBT people, has been poor overall. There have been no improvements in 
the area of labour rights and trade unions.  

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Minority rights, cultural rights and protection of minorities 

As  regards  minority  rights,  cultural  rights  and  the  protection  of  minorities,  there  are  17 
officially  recognised  minorities  in  Bosnia  and  Herzegovina.  The  three  constituent  peoples  – 
Bosniaks, Croats and Serbs – do not constitute minorities.  

Bosnia  and  Herzegovina  is  party  to  the  Council  of  Europe  Framework  Convention  for 
National  Minorities,  but  ratification  of  the  European  Charter  for  Regional  or  Minority 
Languages is still pending. The Council of National Minorities at State level, which performs 
an  advisory  function  to  the  Parliamentary  Assembly,  was  established  in  February  2008.  A 
National  Minorities  Council  is  functioning  in  Republika  Srpska,  but  has  not  yet  been 
established in the Federation.  

Bosnia  and  Herzegovina's  legislation  provides  free  broadcasting  time  for  minorities. 
However, greater emphasis on capacity-building is necessary in order to allow minorities to 
exercise their rights to media representation. Access to education and employment continues 
to be difficult for disadvantaged and marginalized groups, such as ethnic minorities.  

No  progress  has  been  made  on  reforming  the  Bosnia  and  Herzegovina  constitution,  and 
minorities  therefore  continue  to  be  excluded  from  the  House  of  Peoples  and  the  tripartite 
Presidency.  

Despite  further  improvements  in  the  security  situation,  further  progress  on  improving  the 
socio-economic  integration  of  refugees  and  internally  displaced  persons  has  been  slight. 
The revision of the Strategy of Bosnia and Herzegovina for implementation of Annex VII to 
the Dayton Peace Agreement can be considered a significant effort on the part of the State and 
Entities to finalise the process of return. The number of returnees has substantially declined in 
recent years, but the process has not yet been completed. There are still some 125 000 persons 
who  wish  to  return  to  their  original  place  of  residence.  However,  this  is  not  matched  by  an 
adequate supply of reconstructed housing. Returnees still face discrimination in employment, 
access  to  health  care,  education,  pensions  and  social  rights  -  especially  when  returning  to 
areas where they are in a minority position. This remains the biggest obstacle to a sustainable 
return.  

The  process  of  de-mining  in  Bosnia  and  Herzegovina  is  continuing.  In  April  2008,  the 
Council  of  Ministers  adopted  a  Strategy  for  Anti-mine  Action  for  2009-2019.  De-mining  is 
important to facilitating the return of refugees and displaced persons and is a precondition for 
development of a number of sectors of the economy, such as transport, agriculture or water 
management. Insufficient funds remain the main obstacle to faster progress with de-mining. 
As regards missing persons, the Bosnia and Herzegovina Institute for Missing Persons came 
into operation in December 2007. The main precondition before it could begin its work was 
the  transfer  of  authority  from  the  Entity  commissions  to  the  State  level.  Nevertheless,  the 
institute's operations remain affected by the lack of support from the authorities of Republika 
Srpska.  

A review of citizenship granted during and after 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  has  proposed  to  revoke  the  citizenship  of  over  650 
persons. The State Commission is continuing its work.  

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As regards Roma, Bosnia and Herzegovina joined the Decade for Roma inclusion 2005-2015 
in  September  2008.  At  the  same  time,  the  Council  of  Ministers  adopted  an  Action  Plan  on 
Roma housing, health and employment and a Decision establishing a Coordination Board to 
monitor  its  implementation.  It  is  important  that  sufficient  financial  resources  are  earmarked 
for implementation of this Action Plan. 

However,  despite  these  efforts,  Roma  continue  to  be  the  most  vulnerable  minority.  Lack  of 
civil registration of Roma continues to be problematic: many Roma families have no health 
insurance  and  cannot  benefit  from  social  services.  No  systematic  housing  assistance  is 
provided to Roma. The 2004 Action Plan on the Educational Needs of Roma and Members of 
Other National Minorities is poorly implemented due to lack of financial resources and non-
allocation  of  specific  responsibilities  for  its  implementation.  The  rates  of  school  attendance 
and Roma refugee return remain much lower than for other citizens, with extreme poverty as 
one  of  the  main  causes  of  exclusion  from  education.  Despite  allocation  of  funds  for  the 
purchase and distribution of textbooks to Roma and other vulnerable pupils in the school year 
2007/2008, some cantonal and municipal authorities reportedly failed to distribute the books.  

Overall, Bosnia and Herzegovina's progress in the area of minority rights, cultural rights and 
protection  of  minorities  has  been  limited.  One  positive  development  has  been  the 
establishment of the Council of National Minorities at State level. However, enforcement of 
provisions regarding minorities is weak. Bosnia and Herzegovina needs to take further steps 
and ensure sufficient financial resources to support the Roma population which continues to 
face  very  difficult  living  conditions  and  discrimination.  Efforts  to  address  the  problems  of 
returned  refugees  and  internally  displaced  persons  with  access  to  employment,  health  care, 
education, pensions and social rights need to be stepped up. 

2.3. 

Regional issues and international obligations 

Implementation  of  the  Dayton/Paris  Peace  Agreement  has  continued,  but  nationalist 
rhetoric by political leaders from all constituent  peoples challenging the Agreement and the 
constitutional order has been frequent (see also section 2.1 Constitution - for further details).  

Bosnia  and  Herzegovina  is  still  subject  to  the  monitoring  procedure  of  the  Parliamentary 
Assembly  of  the  Council  of  Europe  (CoE)  on  verifying  the  obligations  and  commitments 
relating  to  its  membership  in  the  Council  of  Europe.  There  has  been  no  significant 
improvement  in  addressing  the  outstanding  issues.  Bosnia  and  Herzegovina  has  failed  to 
appoint  members  or  candidates  to  several  Council  of  Europe  monitoring  mechanisms  and 
advisory bodies.  

Bosnia  and  Herzegovina's  cooperation  with  the  International  Criminal  Tribunal  for  the 
former Yugoslavia (ICTY), which is a key European Partnership priority, has continued to 
improve  and  has  reached  a  generally  satisfactory  level.  Cooperation  between  ICTY  and  the 
State level and Entity authorities is adequate at an operational level, and access to witnesses 
and  archives  has  been  good.  In  Republika  Srpska,  an  Action-Plan  on  cooperation  with  the 
ICTY  was  drawn  up  in  March  2008  and  a  coordination  team  for  war  crimes  investigations 
was established. The arrests of Radovan Karadzic and Stojan Zupljanin in Serbia, indicted for 
war crimes committed in Bosnia and Herzegovina, is also a positive development. In January 
2008, the Council of Ministers adopted a decision on provisional measures freezing the funds 
and  economic  assets  of  the  fugitive  ICTY  indictees.  In  2008,  38  proceedings  against  41 
individuals  were  initiated.  In  March  2008,  the  Council  of  Ministers  aligned  itself  with  the 

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relevant  EU  Joint  Action  and  issued  a  decision  tightening  controls  on  people  banned  from 
entering or transiting through Bosnia and Herzegovina.  

However,  Bosnia  and  Herzegovina  needs  to  step  up  its  efforts  to  combat  the  networks 
supporting  indicted  war  criminals.  According  to  the  ICTY,  Republika  Srpska  has  failed  to 
take  appropriate  action  to  have  Radovan  Stankovic  re-arrested  after  his  escape  from  prison 
there in 2007.  

As regards war crimes, the State Court has continued to perform its duties well. Ten accused 
have  been  transferred  from  The  Hague  to  the  Special  War  Crimes  Chamber  in  Bosnia  and 
Herzegovina  under  rule  11  bis,  and  four  of  these  trials  have  been  completed.  A  significant 
number  of  other  war  crimes  indictments  and  trials  have  been  launched  by  prosecutors  in 
Bosnia  and  Herzegovina.  In  September  2008,  there  were  61  ongoing  war  crimes  cases,  of 
which  23  were  at  State  level,  23  in  the  Federation,  13  in  Republika  Srpska  and  two  in  the 
Brčko District. 

Further  funding  will  be  required  for  the  War  Crimes  Department  in  the  Office  of  the 
Prosecutor  of  Bosnia  and  Herzegovina  to  secure  continuity  in  the  prosecution  of  war 
criminals.  The  number  of  untried  war  crimes  cases  remains  high,  with  estimates  varying 
between 10,000 and 16,000. The different courts in Bosnia and Herzegovina continue to use 
different  criminal  codes  for  trying  war  crimes.  This  practice  leads  to  differences  in  the 
sentences imposed and does not make for a consistent system of justice. There is also a lack 
of  witness  protection  and  witness  support,  combined  with  insufficient  cooperation  between 
prosecutors and police.  

In  July  2008,  Bosnia  and  Herzegovina  ratified  the  European  Convention  on  the  Non-
Applicability of Statutory Limitation to Crimes against Humanity and War Crimes.  

As regards the International Criminal Court (ICC), Bosnia and Herzegovina still maintains 
the  bilateral  immunity  agreement  with  the  United  States  of  America  granting  exemptions 
from ICC jurisdiction which does not comply with the EU Common Positions on the integrity 
of  the  Rome  Statute,  as  well  as  related  EU  guiding  principles  on  bilateral  immunity 
agreements. It needs to align with the EU position.  

No  significant  progress  has  been  made  by  the  countries  of  the  region  on  implementing  the 
Sarajevo Declaration, the aim of which was to complete the regional refugee return process 
by the end of 2006. A working group meeting, held in October 2007, reached agreement on a 
number of issues concerning regional cooperation on refugee return. However, there has been 
no  progress  on  resolving  the  issues  related  to  compensation  claims  from  those  who  lost 
occupancy and tenancy rights (OTRs).  

Regional cooperation and good neighbourly relations form an essential part of the process of 
Bosnia and Herzegovina moving towards the European Union. 

Bosnia  and  Herzegovina  continues  to  be  an  active  participant  in  regional  cooperation 
initiatives,  such  as  the  transition  from  the  Stability  Pact  to  a  more  regionally-owned 
framework  with  the  South-East  European  Cooperation  Process  (SEECP)  and  the  Regional 
Cooperation  Council  (RCC),  the  Central  European  Initiative,  the  Adriatic-Ionian  Initiative 
and  the  Danube  Cooperation  Process.  The  RCC,  with  its  headquarters  in  Bosnia  and 
Herzegovina,  was  officially  inaugurated  in  February  2008.  Bosnia  and  Herzegovina  ratified 
the Host Country Agreement in April 2008.  

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In  May  2008,  Bosnia  and  Herzegovina,  Croatia  and  Montenegro  signed  a  Declaration  on 
cross-border cooperation in the event of natural and other disasters and in the area of natural 
resources  management.  Furthermore,  the  "Neum  Initiative"  has  been  established  between 
neighbouring municipalities in Bosnia and Herzegovina, Croatia and Montenegro. The main 
focus  of  this  initiative  is  to  promote  cooperation  between  local  communities  in  the  areas  of 
transport  and  water  supply 
tourism,  environmental  protection  and  development  of 
infrastructure.  

Bosnia and Herzegovina has been implementing the Central European Free Trade Agreement 
(CEFTA)  and  the  European  Common  Aviation  Area  (ECAA)  agreement.  Bosnia  and 
Herzegovina is party to the Energy Community Treaty but, due to opposition from Republika 
Srpska,  continues  to  lag  behind  in  meeting  its  obligations  under  the  Treaty,  especially  in 
relation to the gas sector.  

Bosnia and Herzegovina acceded to the Union for the Mediterranean/the Barcelona Process in 
July 2008.  

As regards peaceful settlement of border disputes, there has been no progress on addressing 
the open border issues with Croatia. The 2005 Agreement between Bosnia and Herzegovina 
and Croatia on demarcation of the land and river borders has not yet been ratified. Moreover, 
the dispute over two islands – Veliki Skoj and Mali Skoj – remains unresolved, as does the 
issue  of  the  border  along  the  River  Una.  No  border  agreement  between  Bosnia  and 
Herzegovina  and  Serbia  has  been  signed  yet.  There  are  no  open  border  issues  with 
Montenegro.  

On  the  whole,  bilateral  relations  with  other  enlargement  countries  have  continued  to  be 
good. However, there has been very little progress in resolving outstanding issues, which is a 
key European Partnership priority.  

Relations with Croatia have remained stable. An agreement on police cooperation has been 
concluded.  However,  there  has  been  no  progress  on  addressing  other  outstanding  issues. 
Bosnia  and  Herzegovina  has  not  yet  ratified  the  agreement  on  dual  citizenship.  There  have 
been no developments on the agreement on use of the Port of Ploče. Bosnia and Herzegovina 
objects  to  Croatia's  plans  to  construct  a  bridge  on  the  Peljesac  peninsula,  which  it  claims 
could  restrict  Bosnia  and  Herzegovina's  access  to  the  sea.  Other  unresolved  issues  include 
property and refugees.  

Relations  with  Serbia  have  remained  stable.  However,  no  meetings  of  the  Interstate 
Cooperation  Council  have  taken  place  and  there  has  been  no  progress  on  addressing  issues 
related  to  property.  The  Serbian  political  leadership  assessed  the  High  Representative's 
decisions concerning the decision-making procedures in the Bosnia and Herzegovina Council 
of Ministers and in the Parliamentary Assembly as a violation of the Dayton/Paris Agreement. 
This  led  to  exchanges  of  sharp  statements  between  Bosnia  and  Herzegovina  and  Serbia. 
Despite Serbia's progress in complying with the International Court of Justice's 2007 ruling on 
the case concerning the application of the Convention on the Prevention and Punishment of 
the Crime of Genocide, opinions about the implementation of that ruling continue to differ.  

Republika Srpska has continued to cooperate closely with Serbia on the basis of the Special 
Parallel Relations Agreement. In January 2008, the Republika Srpska National Assembly and 
the Serbian parliament signed a Protocol on Cooperation.  

Bosnia and Herzegovina has not recognised Kosovo's declaration of independence. 

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Relations with Montenegro are good and have further intensified. Agreements on cooperation 
in the area of defence, police cooperation, civil protection and cross-border cooperation have 
been signed.  

Relation with the former Yugoslav Republic of Macedonia are good, both in the bilateral and 
the regional context. Agreements on readmission, police cooperation and civil protection have 
been concluded. 

Relations with Albania have intensified, and Bosnia and Herzegovina has decided to open an 
Embassy in Tirana.  

Relations with Turkey have remained good.  

Bilateral  relations  with  the  EU  Member  States  remain  good.  The  EU  is  Bosnia  and 
Herzegovina's main trading partner, in particular Germany, Italy, Austria and Slovenia.  

Overall,  Bosnia  and  Herzegovina  has  continued  to  implement  the  Dayton/Paris  Peace 
Agreement,  although  political  statements  challenging  it  have  become  more  frequent.  The 
country has made progress on cooperation with the ICTY.  

Bosnia and Herzegovina has continued to participate actively in regional cooperation. Good 
neighbourly  relations  have  prevailed,  but  there  has  been  little  progress  on  addressing  the 
outstanding  issues,  notably  relating  to  the  settlement  of  border  disputes,  property  and 
refugees. 

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  Union  requires  the  existence  of  a  functioning 
market economy and the capacity to cope with competitive pressure and market forces within 
the Union. 

3.1. 

The existence of a functioning market economy 

Economic policy essentials 

In December 2007, the government submitted its second Economic and Fiscal Programme for 
2008-2010, which aims to consolidate the fiscal position and to improve the quality of public 
finances,  inter  alia  by  reducing  the  share  of  public  spending  in  GDP.  To  a  large  extent, 
however, the objectives are not backed by concrete policy measures and the budgets adopted 
for  2008  do  not  fully  reflect  the  scenario  described  above.  Progress  was  made  by  reaching 
consensus on the fundamentals of economic policy and inter-entity cooperation in a number 
of  important  areas.  In  particular,  a  commitment  was  made  to  improve  fiscal  coordination 
through  the  adoption  of  the  law  on  the  National  Fiscal  Council  and  the  inauguration  of  the 
Council  in  early  September.  Also,  the  Governing  Board  of  the  Indirect  Taxation  Authority 
agreed  on  a  methodology  for  the  coefficient  to  determine  the  allocation  of  indirect  tax 
revenues.  Direct  taxes  were  reduced  and  legislative  measures  were  taken  to  avoid  double 
taxation in Bosnia and Herzegovina (BiH), albeit the latter remains an issue with regards to 
the  Brčko  District.  On  the  other  hand,  in  the  Federation  of  Bosnia  and  Herzegovina 
(Federation) the commitment to pursue structural reforms has remained weak and the quality 

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of  public  spending  has  actually  deteriorated.  Overall,  political  consensus  on  market-based 
economic policy  was maintained.  Inter-entity consensus  on cooperation in  certain economic 
policy  areas  improved,  but  the  commitment  to  structural  reforms  and  sound  public  finances 
remained uneven across the country. 

Macroeconomic stability 

Real  GDP  growth  remained  high  at  6.8%  in  2007,  close  to  the  6.7%  recorded  in  2006. 
Economic growth in 2007 was driven by a strong increase in domestic demand, as evidenced 
inter  alia  by  a  widening  of  the  current  account  deficit  and  a  pick-up  in  core  inflation 
(excluding food and energy prices). The acceleration of domestic lending together with fiscal 
relaxation  fuelled  economic  growth  by  stimulating  both  consumption  and  investment.  The 
good  economic  performance  was  achieved  against  a  background  of  unfavourable  domestic 
and external conditions, namely: a drought that affected agricultural output and the production 
of electricity from hydro-power plants, the evolving international financial crisis, the increase 
in international energy and food prices and volatility of the price of aluminium. As a result, 
gross  value  added  was  almost  flat  in  real  terms  in  the  agriculture  and  utilities  sectors, 
detracting  from  the  double-digit  growth  rates  recorded  in  financial  intermediation, 
construction and manufacturing.  

Growth in industrial output more than halved in 2007 compared to 2006 in the entire country 
and was close to stagnation in the Republika Srpska (RS). The growth of industrial production 
in the Federation slowed from 10.4% in 2006 to 8.6% and declined significantly to 1.4% in 
the RS following a record level of 19.1% in 2006. The slowdown in the RS was primarily due 
to the overhaul of production capacities in the mining and oil industry and declining output in 
the  utilities  sector,  while  the  manufacturing  sector  moved  ahead  by  4.1%.  Also  in  the 
Federation,  utilities  underperformed  in  2007,  but  output  growth  rates  in  manufacturing  and 
mining  were  strong  at  11.7%  and  5.6%,  respectively.  In  the  first  eight  months  of  2008,  the 
year-on-year growth of industrial production stood at 5.4% in the Federation and 8.4% in the 
RS.  In  both  entities,  energy  production  recovered  and  even  outstripped  the  processing 
industry whose output increased by only 5.6% in the Federation and 2.6% in the RS. The shift 
towards higher value-added activities remains sluggish in both entities. There has been only a 
modest improvement in the quality of statistical information. The per capita income of Bosnia 
and  Herzegovina,  measured  in  purchasing  power  standards  (PPS),  was  26%  of  the  EU-27 
average in 2006 and increased by around two percentage points in 2007. Overall, economic 
growth in 2007 remained fairly high. 

After  narrowing  temporarily  to  8.4%  of  GDP  in  2006,  the  current  account  deficit  widened 
again to 12.7% of GDP in 2007. This development reflects the adverse effect of global food 
and  energy  prices  on  BiH's  imports  and  the  large  swings  in  import  and  export  patterns 
following  the  introduction  of  VAT  in  January  2006.  As  a  result,  the  trade  deficit  widened 
from 35% of GDP in 2006 to around 37% of GDP in 2007, as imports rose by around 19% 
year-on-year,  outperforming  the  15%  growth  of  exports.  The  positive  balances  of  services, 
income  and  current  transfers  declined  as  a  percentage  of  GDP  from  2006  to  2007, 
compounding the deterioration of the trade deficit. During the first half of 2008, the current 
account deficit widened notably by almost 60% compared to the same period a year earlier. 
This deterioration was due to the expansion in the trade deficit by 24.1% year-on-year, as the 
value of imported goods rose by 19.6% year-on-year, exceeding the corresponding increase in 
exports  by  5.6pp.  A  number  of  branches,  such  as  mining  and  manufacturing  of  wood 
products, base metals and motor vehicles, showed signs of slowing down. Other components 
of  the  current  account  improved  in  an  annual  comparison  with  the  first  half  of  2007:  The 

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services balance rose by 19.9% on the back of well performing tourism and transport sectors, 
while  the  income  balance  increased  by  24.3%.  In  conclusion,  despite  a  temporary 
improvement in 2006 external imbalances widened again in 2007 and 2008. 

In  2007,  the  current  account  deficit  was  fully  financed  from  net  FDI,  as  the  major 
privatisations  of  Telekom  Srpska  and  the  RS  refineries  contributed  to  a  surge  in  net  FDI  to 
13.3% of GDP, thus replacing, albeit temporarily, the financial sector as the traditional main 
destination  for  FDI.  Together  with  other  strong  financial  inflows,  such  as  private  sector 
remittances  that  accounted  for  around  17%  of  GDP,  net  FDI  led  to  an  annual  increase  of 
around 23% in official foreign exchange reserves at the end of 2007. In the first six months of 
2008, however, net FDI declined strongly compared to the same period in the previous year 
and  covered  only  24%  of  the  current  account  deficit,  highlighting  its  overdependence  on 
privatisations and insufficient green-field investment and revealing potential vulnerabilities in 
the context of global financial turmoil. As a result, it was mainly financed through portfolio 
investments, a drawdown of the commercial banks' foreign assets, new external trade credits 
and a marginal fall in the central bank's official foreign exchange reserves. Total external debt 
is estimated at  around  50%  of  GDP.  So far, the international  financial crisis has had only a 
limited  direct  impact  on  the  economy  although  it  may  have  contributed  to  declining  FDI 
inflows and decreasing external loans. Moreover, the widening current account deficit creates 
additional external financing needs rendering the economy vulnerable to possible disruptions 
in  capital  flows.  The  risk  of  a  sudden  stop  or  reversal  of  capital  flows  seems  limited,  but 
higher risk premiums and refinancing costs could put further pressure on the external side.  

The  results  of  the  Labour  Force  Survey  (ILO  standards)  of  May  2008  show  the 
unemployment  rate  in  BiH  falling  to  23.4%  of  the  labour  force,  from  29%  a  year  earlier. 
Labour force participation remains very low, at about 44% of the total working age population 
and  informal  employment  is  still  high.  Informal  economic  activities  are  fuelled  by  a  poor 
regulatory  framework,  inappropriate  tax  and  expenditure  policies  and  weaknesses  in  law 
enforcement. Labour market indicators continue to be somewhat more favourable in the RS, 
where  the  activity  rate  remained  around  47%  against  42.4%  in  the  Federation,  while  the 
unemployment  rate  declined  to  20.5%  and  to  25%  in  the  Federation.  Starting  in  the  second 
half of 2007 and continuing in 2008, registered labour data show employment growing faster 
in  the  Federation.  However,  the  increase  in  registered  unemployment  in  2007,  largely  as  a 
result of the Law on Demobilised Soldiers and Their Families, prevented the unemployment 
rate falling even more. Slow expansion of productive capacities and structural rigidities - high 
rates  of  social  contributions,  distorted  wage-setting  mechanisms,  high  and  poorly  targeted 
social  transfers  and  low  labour  mobility  -  hamper  job  creation  and  labour  market 
participation. On the other hand, the setup of a pension reserve fund and the drafting of the 
law  on  voluntary  pension  funds  sets  off  the  reform  of  the  pension  system  towards 
individualised savings plans in the  RS. Overall,  unemployment  remains very high,  although 
improvements can be noted. 

The monetary policy of the Central Bank of Bosnia and Herzegovina (CBBH) continued to be 
conducted under a currency board arrangement, with the euro as the anchor currency. As of 
January  2008,  the  CBBH  increased  the  reserve  requirements  rate  from  15%  to  18%,  with  a 
view to slowing down credit growth, which had accelerated from an annual 23.4% at the end 
of 2006 to 28.5% at the end of 2007. The measure was successful in the sense that the credit 
growth rate did not continue this upward trend but stabilised at around 29% during the first 
half of 2008, though the trend could also not be reversed. Credit growth was also influenced 
by  the  relaxation  of  the  banking  prudential  regulations  on  liquidity  risk  management,  rising 
input  prices  translating  into  a  higher  demand  for  working  capital  loans  and  greater  overall 

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credit availability through the operation of the RS Investment-Development Bank. The annual 
growth of broad money slowed from around 25% at the end of 2006 to 14% at the end of June 
2008. Its coverage by foreign exchange reserves declined marginally, but remained sufficient 
at around 84% at the end of June 2008. Inflation started to pick up in the second half of 2007, 
driven by an increase in the prices of food, energy and transport and reached an annual rate of 
4.9% in December. It further accelerated to 9.9% in July 2008, before coming down to 9.5% 
in  August.  The  annual  average  inflation  of  the  first  eight  months  of  2008  stood  at  8.0%  in 
BiH, after 1.5% in 2007. In conclusion, the currency board arrangement continued to function 
smoothly, despite a relative acceleration in the growth of domestic lending. 

The  large  increase  in  public  spending  that  was  initiated  in  2006  in  the  context  of  the  fiscal 
space created by the introduction of VAT continued in 2007 and 2008. From 2005 to 2007, 
public spending in BiH increased by 4.5% of GDP from an already high level. In 2007, the 
good performance of budget revenues growing by around 15% from 2006 could not prevent a 
deterioration  of  the  fiscal  position.  Moreover,  collection  of  indirect  revenues  is  projected  to 
decelerate  in  2008,  following  trade  liberalisation  under  the  Stabilisation  and  Association 
Agreement  (SAA)  and  increasing  VAT  refunds,  even  though  for  the  first  half  of  2008  an 
annual  increase  of  8%  can  be  registered.  As  a  result,  the  surplus  of  close  to  3%  of  GDP 
recorded in 2006 which declined to 1.3% of GDP in 2007 may turn into a deficit in 2008. In 
2007,  public  spending  grew  strongly  in  both  entities  and  less  so  at  the  State  level.  In  the 
Federation,  the  quality  of  public  spending  worsened,  as  the  increase  in  expenditures  was 
mostly accounted for by higher government consumption and higher social transfers fuelling 
private  spending.  Following  the  adoption  of  the  laws  on  demobilised  soldiers  and  civilians 
with  disabilities,  social  transfers  surged  at  an  annual  rate  of  close  to  30%  in  2007. 
Expenditures rose further in 2008 and led to liquidity problems in May. In 2008, total public 
spending in the Federation is projected to increase by another 3% of GDP. At the same time, 
there was an acceleration of public investment in both entities, which is necessary in order to 
make up for the declining number of donor-financed projects. However, only in the RS did it 
account for a large part of the overall increase in spending, reaching almost 6% of GDP last 
year. The public sector wage bill rose sharply in 2007, by around 19% in the RS and 15% in 
the  Federation.  In  the  RS,  there  was  a  further  acceleration  in  the  growth  of  public  sector 
salaries in 2008, as they are gradually catching up with those at State and Federation levels. In 
general,  slippage 
the 
in  public  sector  wages  and  social 
competitiveness of the private sector and fiscal sustainability. 

is  undermining 

transfers 

The  reform  of  direct  taxation  continued  its  progress  as  the  Federation  followed  up  on  the 
changes initiated last year by the RS and reduced the corporate income tax rate from 30% to 
10%,  aligning  it  with  the  rates  in  the  RS  and  Brčko  District.  The  law  also  avoids  double 
taxation within BiH. In addition, the Federation simplified the personal income tax system by 
introducing a 10% income tax rate on overall income as of 1 January 2009. The Federation 
enacted changes to the social security legislation, but the reduction of the overall rate of social 
contributions  does  not  address  sufficiently  the  issue  of  the  high  labour  tax  wedge.  The 
adoption of the law on salaries in the BiH institutions and the reform of public wages in the 
RS simplified the wage structure and consolidated some allowances with wages. At the same 
time, the reforms are expected to increase the wage bills further in 2008 (this is already being 
seen  in  the  RS)  and  also  to  establish  a  wage  indexation  mechanism  at  State  level,  with 
negative  fiscal  spill-over  effects  beyond  2008.  The  establishment  of  the  National  Fiscal 
Council  should  contribute  to  better  fiscal  coordination  and  discipline  in  the  country.  In 
conclusion,  there  has  been  continued  fiscal  slippage  in  2007  and  2008,  accompanied  by  a 
deterioration in the quality of public spending in the Federation.  

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The external public debt of Bosnia and Herzegovina continued to decline, from around 21% 
of GDP at the end of 2006 to 18% at the end of 2007, and it further decreased by 2.1% during 
the first half of 2008. Domestic public debt, on the other hand, accumulated further as both 
entities  are  implementing  the  legislation  on  the  settlement  of  liabilities  from  frozen  foreign 
currency deposits and from war damages. It is estimated at around 12% of the entity's 2007 
GDP in the Federation and 24% in the RS. Total public debt is estimated to have increased 
from 22% of GDP in 2006 to 30.5% of GDP in 2007. In addition, the bill on restitution, which 
has  not  yet  been  adopted,  may  jeopardise  fiscal  sustainability  if  it  fails  to  align  financial 
compensation  with  the  budget’s  long-term  ability  to  pay.  Finally,  the  issue  of  quasi-fiscal 
deficits stemming from the accumulation of budget arrears and other liabilities by state-owned 
enterprises (SOEs) in respect of employees and suppliers remains largely unaddressed in the 
Federation,  which  further  adds  to  the  fiscal  risks.  Debt  management  improved  as  the 
Federation adopted a new Debt Law which limits government borrowing, similar to the laws 
passed in the RS and at State level. In conclusion, progress has been made in settling domestic 
claims, which will gradually increase the current level of indebtedness. 

The macroeconomic policy mix worsened in 2007 and in the first half of 2008. Fiscal risks are 
mounting, in particular in the Federation, where large commitments on social spending were 
made in a context of decelerating budget revenues. In addition, the public sector wage policy 
has  been  relaxed  at  all  government  levels  through  wage  increases  and  wage  indexation 
mechanisms  that  weaken  fiscal  sustainability  and  external  competitiveness.  The  monetary 
policy was aimed at tightening credit conditions, but was not fully coordinated with decisions 
in  the  area  of  banking  prudential  regulations.  Overall,  the  macroeconomic  policy  mix 
worsened  as  the  fiscal  policy  became  strongly  expansionary,  fuelling  inflationary  pressures 
and the widening of the current account deficit. 

Interplay of market forces 

After the large privatisations in 2007, RS continued to make progress in privatisation, and so 
far around 68% of the initial stock of state-owned capital slated for privatisation has been sold 
and about 15% of the same stock was transferred into public funds for pension insurance and 
restitution.  Apart  from  the  successful  sale  of  strategic  enterprises,  the  process  was  slowed 
somewhat  by  changes  in  the  legal  framework,  which  transferred  privatisation  sales  and 
management  competences  to  the  RS  Investment-Development  Bank.  In  2007,  around  18 
companies were privatised, while in the period from January to September 2008, 13 additional 
companies were sold. In July, the new Law on Takeover of Shareholding Companies in the 
RS  entered  into  force.  The  privatisation  process  almost  came  to  a  halt  in  the  Federation  in 
2007  and  the  first  half  of  2008,  mainly  due  to  the  conflicting  interests  involved,  a  complex 
decision-making structure and sizable social and financial obligations accrued  by the SOEs. 
Between October 2007 and June 2008, the Federation sold stakes in only five companies and 
the privatised capital remained at around 41% of the initial stock slated for privatisation. The 
cancelled tenders for some strategic companies (e.g. Energoinvest and Hidrogradnja) were not 
reissued and the sale of Aluminij d.d. Mostar remains in limbo due to negotiations over the 
subsidised power price. The Federation government submitted a new privatisation strategy to 
the  Parliament,  which  –  if  approved  –  should  unblock  the  privatisation  process,  also  by 
defining  options  for  the  sale  of  the  telecom  operators.  Neither  entity  yet  has  any  concrete 
plans  regarding  the  privatisation  of  the  utilities  sector.  The  share  of  the  private  sector  as  a 
percentage  of  GDP  rose  to  approximately  60%  in  2007.  In  conclusion,  progress  in 
privatisation continued to be uneven across the country. 

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Market entry and exit 

The implementation of a single business registration system has largely been completed and 
the number of days and the procedural requirements to register a business have been reduced. 
Courts  in  the  BiH,  the  fiscal  administration  offices  and  the  statistics  agencies  have  been 
networked.  The  regulatory  impact  analysis  aimed  at  reducing  red  tape,  known  as  the 
"guillotine  process",  was  completed  in  the  RS,  while  the  Federation  started  it.  Bankruptcy 
procedures  have  improved  and  the  number  of  cases  initiated  and  closed  by  the  courts  has 
gradually increased. The RS has amended the Law on Bankruptcy Procedure, which includes 
limiting the bankruptcy procedure to a maximum of one year. Over one hundred non-viable 
SOEs  are  in  bankruptcy  procedures  in  the  RS.  It  is  also  now  quicker  and  easier  to  obtain 
construction  permits  and  to  register  property.  At  the  same  time,  only  limited  progress  was 
made  in  improving  the  procedures  for  obtaining  licences,  enforcing  contracts,  employing 
workers or paying taxes – all of which make doing business rather difficult. Overall, company 
and property  registration,  and dealing with construction licences and bankruptcy procedures 
have improved, but market exit remains ineffective, in particular for insolvent SOEs. Further 
efforts are needed to improve the business environment. 

The legal system 

The  functioning  of  the  judicial  system  improved  slowly  and  the  courts  processed  a  higher 
number of cases than those submitted in 2007. Even so, a total backlog of about 1.9 million 
cases was recorded at the end of 2007 (including approximately 1.2 million cases of unpaid 
utility  bills).  A  Backlog  Reduction  Project  has  been  launched  and  concrete  results  are 
expected  in  particular  with  regard  to  utility  bills  and  minor  offence  cases.  A  Case 
Management System has been gradually introduced into courts, leading to an improvement in 
the management of cases. The authorities have not yet established commercial courts. Closing 
a business and enforcing contracts has become somewhat easier as a result of improvements 
in  bankruptcy  legislation.  Widespread  corruption,  and  also  criminal  activities,  affect  the 
business  climate  and  have  a  negative  impact  on  the  quality  of  public  services.  Overall,  the 
judicial system has slowly improved; however, the existing backlog of unsolved cases and the 
slow processing times are hampering the enforcement of creditor and property rights.  

Development of the financial sector 

Banks continue to dominate the financial sector and their assets surged to around 93% of GDP 
in 2007, up from around 77% in 2006, triggered by the acceleration in the growth of domestic 
credit and a significant increase in short-term foreign assets on the basis of the funds received 
from  the  privatisation  of  RS  Telecom.  There  were  31  banks  operating  at  the  end  of  2007 
(compared to 55 in 2000), with foreign capital controlling about 83% of the total bank capital. 
Only three banks remain in public hands, and all three are under provisional administration. 
The five largest banks held around 57% of the total assets of the banking system at the end of 
2007, slightly less than in 2006. Together with the narrowing of interest spreads, this shows 
that bank consolidation is not obstructing competition in the market.  

The  non-bank  financial  sector  is  expanding  rapidly.  Four  new  leasing  companies  began 
operating  last  year,  bringing  the  total  number  of  companies  to  ten.  Leasing  contracts  worth 
approximately  €  380  million  (3.6%  of  GDP)  were  concluded  in  2007;  this  figure  was  62% 
higher than in 2006. At the end of 2007, there were 12 microcredit organisations active in the 
Federation and six in the RS. The sector originated some € 500 million in new loans (4.6% of 
GDP)  -  a  61%  increase  over  2006.  In  the  insurance  sector,  25  active  companies  collected 

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around € 200 million in insurance premiums (1.9% of GDP) in 2007, which was 12% more 
than  in  2006.  The  adoption  of  new  bylaws  on  financial  reporting  and  solvency  margins  in 
2007 is expected to enable the uniform functioning of the insurance sector in the country. The 
stock markets have undergone a major correction since the second half of 2007 and the main 
indices have lost around 60% of their value since October 2007. Nonetheless, total turnover at 
both the Sarajevo and Banja Luka Stock Exchanges in 2007 increased by more than 90% over 
2006. Their combined market capitalisation increased to 111% of GDP in 2007 from 99% of 
GDP in 2006, but declined in 2008. The bond market started to develop through the issuance 
of government securities, municipal and corporate bonds. In conclusion, the financial sector 
develops rapidly. 

Financial  stability  indicators  continued  to  strengthen  in  2007,  as  they  too  were  influenced 
favourably in the short-term by the high rate of credit expansion. Non-performing loans as a 
percentage of total loans fell to 1.8% in 2007 from 2.5% in 2006. The capital adequacy ratio 
was 17.1% at the end of 2007, i.e. marginally higher than the previous year and well above 
the legal minimum of 12%. At the end of 2007, the average return on equity increased further 
to 8.9%, indicating an improvement in profitability. However, profitability indicators strongly 
deteriorated  in  the  first  quarter  of  2008  compared  to  the  first  quarter  2007.  The  liquidity 
situation  of  banks  also  tightened,  even  though  it  could  still  be  considered  as  good  with  the 
financial sector being able to meet its obligations. The authorities strengthened certain areas 
of financial supervision with a view to increasing the stability of the financial system. Overall, 
despite the volatility in international financial markets and the rapid expansion of the financial 
sector, financial stability has largely been maintained and the financial sector so far remained 
relatively immune from first-wave effects of the global financial crisis. 

3.2. 

The  capacity  to  cope  with  competitive  pressure  and  market  forces  within  the 
Union 

Existence of a functioning market economy 

Macroeconomic stability has weakened and economic operators need to be able to deal with 
increased  risks  stemming  from  expansionary  fiscal  policies,  higher  inflation  and  widening 
external  imbalances.  Structural  reforms  advanced  in  some  areas  and  the  consensus  on 
economic  reforms  and  coordination  of  policies  strengthened.  However,  the  continuing 
excessive influence of the public sector in the economy, in particular slow privatisation and 
restructuring  or  liquidation  of  insolvent  SOEs  in  the  Federation,  is  hampering  the  efficient 
allocation of resources by market mechanisms.  

Human and physical capital  

Enrolment rates for secondary and higher education, including graduation rates, remain fairly 
low. The Law on Vocational Education Training has been adopted, but implementation of the 
Higher  Education  Law  has  been  slow.  Coordination  between  the  14  ministries  of  education 
has  improved  somewhat.  In  general,  the  education  reform  has  been  lagging  behind. 
Participation in the labour market remains very poor. Active labour market programmes are 
being implemented, some of which focus on training and improving the skills of job-seekers. 
However, only limited progress has been made in removing structural rigidities and building 
up  the  productive  capacity.  Overall,  the  weak  performance  of  the  education  system 
contributes to the skills mismatch that hampers the proper functioning of the labour market.  

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Investment  increased  to  around  26%  of  GDP  in  2007,  of  which  about  half  was  allocated  to 
machinery  and  equipment  and  some  45%  to  construction  works  in  the  Federation.  The 
increase of FDI inflows into Bosnia and Herzegovina in 2007 brought the total stock of FDI 
per  capita  to  around  €  1,150.  Upgrading  of  the  telecommunications  and  transport 
infrastructure,  and  particularly  of  local  roads,  has  continued.  The  penetration  of  landline 
telephones, mobile connections and internet usage has increased further. However, the growth 
of  the  local  IT  market  of  13.4%  in  2007  was  moderate  considering  the  very  low  base. 
Contracts  have  been  signed  for  several  large  investments  in  energy  and  infrastructure.  In 
2007, there was a strong acceleration in public investments, primarily in the RS, where they 
more  than  doubled  in  nominal  terms  compared  to  the  previous  year.  In  conclusion,  the 
upgrading  of  physical  capital  continued  at  a  faster  pace,  based  on  FDI  inflows  and  higher 
public spending. 

Sectoral and enterprise structure 

The  restructuring  and  liquidation  of  SOEs  has  made  very  slow  progress.  This  process  has 
been  hampered  by  the  SOE's  accumulated  unsettled  arrears  against  the  budget,  employees, 
utilities  and  suppliers  and  by  the  vested  interests  of  enterprise  managers,  trade  unions  and 
decision-makers.  In  the  RS,  more  than  a  hundred  SOEs  are  in  liquidation,  and  the  RS 
Investment-Development Bank has been carrying out financial restructuring programmes for 
those  enterprises  being  privatised.  The  Federation  has  similar  enabling  legislation  in  place, 
but instead has come forward with plans to financially consolidate the loss-making mines and 
provide them with debt relief from the budget and from the electricity companies with whom 
they are subsequently to be merged. This has significant fiscal implications and may actually 
hold  back  the  process  of  enterprise  restructuring.  Liberalisation  of  network  industries  has 
continued at a slow pace. As of 1 January 2008, the electricity market was liberalised for all 
buyers,  except  for  households.  Furthermore,  the  unbundling  in  the  energy  sector  has  been 
further  complicated  by  the  Federation's  plan  to  merge  the  mines  with  the  electricity 
companies. Little progress has been made as regards the gas sector. Current plans to privatise 
the  two  telecom  companies  in  the  Federation  may  facilitate  the  further  liberalisation  of  the 
telecommunications sector. To conclude, progress in the restructuring and liquidation of SOEs 
has been slow and uneven across the country. Liberalisation of network industries continued 
at a slow pace.  

There was a further shift in the sectoral structure of the economy towards services, i.e. retail 
and  wholesale  trade,  financial  intermediation  and  real  estate.  At  the  same  time,  the 
contribution  of  public  administration,  education  and  health  to  gross  value  added  in  the 
economy remains fairly large, given that they have not displayed enough of an improvement. 
Exports and industrial production reveal a gradual but slow shift towards higher value-added 
goods.  The  small  and  medium-sized  enterprises  (SME)  sector  is  growing,  and  enjoys 
increased access to financing from private, public or EU funds. Lending by microcredit and 
leasing companies grew by around 60% in 2007. In addition, in the RS some of the proceeds 
of privatisation are being channelled to SMEs through the RS Investment-Development Bank, 
with  the  Federation  following  suit  by  establishing  its  own  development  bank  through  the 
transformation of the previous Investment Bank. Improvements in the business environment 
are primarily benefitting the SME sector, mainly in the shape of improved access to finance. 
The  informal  sector  remains  large.  Overall,  structural  shifts  in  the  economy  are  slow  and 
SMEs continue to operate in a complex business environment.  

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State influence on competitiveness 

After an initial State aid inventory for 2004-2006 was carried out in 2007, no further progress 
on  improving  the  transparency  of  state-aid  was  made.  The  inventory  showed  that  State  aid 
was increasing. In 2007, budget subsidies increased slightly as a share of GDP and are largely 
allocated to loss-making SOEs in an ad-hoc and non-transparent manner. In addition, quasi-
fiscal  deficits  continue  to  accumulate  through  the  build-up  of  arrears  to  the  budget,  state-
owned utilities or employees. Overall, State intervention in the economy is still too high.  

Economic integration with the EU 

Bosnia  and  Herzegovina  is  an  open  economy  with  total  trade  equivalent  to  around  95%  of 
GDP in 2007, up from about 87% of GDP in 2006. The real effective exchange rate declined 
by 1.7pp from  June 2007 to  June 2008. The  EU  continues to be the most important trading 
partner with shares of around 57% of Bosnia and Herzegovina's total exports and of 48% of 
its total imports in 2007, although its weight is slightly declining. This decline should be seen 
in the context of the price increases for energy, commodities and food and of deeper regional 
trade integration through CEFTA. At the same time, the signing of the SAA and the entry into 
force  of  the  Interim  Agreement  are  likely  to  deepen  this  relationship  and  expand  trade 
integration with the EU. The share of FDI inflows from the EU declined temporarily in 2007, 
after the major privatisations in the RS with non-EU buyers. Overall, the level of integration 
of trade and investment with the EU remained fairly high. 

4. 

EUROPEAN STANDARDS 

This  section  examines  Bosnia  and  Herzegovina’s  capacity  gradually  to  approximate  its 
legislation  and  policies  to  the  acquis  related  to  the  internal  market,  sectoral  policies  and 
justice,  freedom  and  security,  in  line  with  the  Stabilisation  and  Association  Agreement  and 
the European Partnership priorities. It also analyses Bosnia and Herzegovina’s administrative 
capacity.  In  each  sector,  the  Commission's  assessment  covers  progress  achieved  during  the 
reporting period, and summarises the country's overall level of preparations.  

4.1. 

Internal market 

4.1.1.  Free movement of goods 

Limited progress has been made in the area of free movement of goods.  

There  have  been  some  developments  in  the  area  of  standardisation.  The  Institute  for 
Standardisation  (BAS)  has  increased  its  human  resources  and  currently  has  a  staff  of  27. 
Progress  in  adopting  European  standards  (ENs)  has  continued;  the  Institute  has  adopted 
approximately 13,000 national standards, out of which around 8,000 are European standards. 
BAS has become an affiliate member of the European Committee for Standardisation (CEN). 
As  part  of  regional  cooperation,  in  November  2007  BAS  signed  the  Agreement  on 
Professional and Technical Cooperation with the Standardisation Institute of Montenegro. 

No  progress  has  been  made  on  conformity  assessment.  With  a  few  exceptions,  conformity 
assessment  procedures  are  not  performed  on  locally  manufactured  and  imported  products 
before they are released onto the market. There is no clear and coherent system for verifying 
the  conformity  of  products.  Enforcement  of  existing  regulations  is  weak.  No  technical 
regulations  based  on  the  product-specific  acquis,  including  relevant  conformity  assessment 

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procedures, have been adopted. There is a lack of proper conformity assessment infrastructure 
(testing and calibration laboratories, certification and inspection bodies).  

Some  progress  has  been  made  as  regards  accreditation.  The  Institute  for  Accreditation 
(BATA)  has  so  far  granted  32  accreditations.  Fourteen  testing  laboratories,  five  calibration 
laboratories,  two  certification  bodies  and  eleven  inspection  bodies  have  been  accredited. 
Currently, there are a total of 40 assessors and technical experts in addition to the permanent 
staff  of  11.  Further  human  resources  are  necessary  to  enable  BATA  to  respond  to  future 
needs, e.g. to establish technical committees, to update the quality system documentation and 
policies  and  to  develop  accreditation  schemes  in  the  areas  where  BATA  is  not  yet  active. 
Action is also necessary to prepare the Institute for future international recognition of Bosnia 
and  Herzegovina's  conformity  assessment  results  and  for  the  signature  of  multilateral 
agreements with European co-operation for Accreditation (EA).  

Limited progress has been made in the area of metrology. Three additional civil servants have 
joined  the  Institute  for  Metrology  (IMBiH),  bringing  the  number  of  staff  to  38  out  of  a 
planned  total  of  72.  The  Council  of  Ministers  appointed  15  members  to  the  Bosnia  and 
Herzegovina  Metrology  Council  in  July  2008.  A  memorandum  of  understanding  fostering 
scientific and technical cooperation was signed in May 2008 between IMBiH and the Office 
of  Metrology  of  the  Republic  of  Slovenia.  Efforts  to  establish  the  necessary  metrology 
infrastructure, including laboratories, have continued. However, the legislation on metrology 
is  not  harmonised  with  the  EU  requirements:  separation  between  legal,  scientific  and 
industrial metrology is lacking, and the legal framework is not harmonised within the country. 
Cooperation and coordination is needed between the IMBiH and the Metrology Institutes of 
the Entities in order to avoid duplication of efforts and to create a harmonised approach to the 
competence criteria for laboratories dealing with verifications. 

There  has  been  some  progress  in  the  area  of  market  surveillance.  The  market  surveillance 
system  comprises  the  State-level  Market  Surveillance  Agency  as  an  umbrella/coordination 
body  and  the  market  surveillance  authorities  of  the Entities and  Brčko District,  which carry 
out  the  actual  surveillance  activities.  The  Agency's  administrative  capacity  has  been 
strengthened with 8 additional staff, bringing it up to a total of 11 employees. The European 
Commission  Decision  laying  down  guidelines  for  the  notification  of  dangerous  consumer 
products by producers and distributors has been transposed, but has yet to be implemented. In 
March 2008, the Agency signed a memorandum of understanding with the Indirect Taxation 
Authority,  laying  down  cooperation  methods  for  exchanges  of  data  on  dangerous  products. 
Nonetheless, Bosnia and Herzegovina's market surveillance system remains largely based on 
mandatory  standards  and  pre-market  control.  Further  development  of  the  system  based  on 
adequate horizontal legislation and appropriate product-specific legislation is needed in order 
to enforce the legislation on free movement of goods efficiently. 

Limited  progress  has  been  made  on  technical  regulations  transposing  the  new  and  old 
approach  directives  into  national  legislation.  The  Council  of  Ministers  adopted  a  decision 
establishing  coordination  at  decision-making  level  in  the  field  of  quality  infrastructure. 
However,  no  technical  regulations  transposing  the  acquis  have  been  adopted  yet  and  no 
internal  consultation  and  notification  mechanisms  have  been  established.  No  progress  has 
been  achieved  as  regards  the  old  approach  directives.  Administrative  capacity  requires 
strengthening. 

The  Law  on  pharmaceuticals  and  medical  devices  was  adopted  in  June  2008.  This  law  will 
contribute towards achieving a single internal market within Bosnia and Herzegovina in this 

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sector. A set of by-laws for the proper implementation of this Law is still needed. In line with 
the  Law,  the  Council  of  Ministers  adopted  a  Decision  on  the  beginning  of  the  work  of  the 
Agency for Pharmaceuticals and Medical Devices, which has an official seat in Banja Luka.  

As regards consumer protection, some progress has been made. The Council for Consumer 
Protection  convened  its  first  constitutional  session  in  February  2008.  For  the  first  time,  the 
country's  consumer  protection  associations  have  been  granted  the  possibility  to  apply  for 
funds from the State Budget. However, the State Annual Programme for Consumer Protection 
in Bosnia and Herzegovina for the period 2008 to 2011 has not yet been adopted. 

Overall, Bosnia and Herzegovina's preparations in the fields of standardisation, accreditation, 
conformity assessment, metrology, market surveillance and consumer protection remain at an 
early  stage.  Continued  efforts  are  necessary  in  order  to  further  approximate  the  legal 
framework  to  the  Community  legislation  on  free  movement  of  goods  and  to  efficiently 
implement  and  enforce  it.  Progressive  transposition  of  product-specific  acquis  needs  to  be 
ensured.  Further  strengthening  of  institutional  and  administrative  capacity  and  increasing 
cooperation  between  the  relevant  institutions  is  necessary  in  order  to  create  conditions 
favourable to the internal market and trade.  

4.1.2.  Movement of persons, services and right of establishment 

Little  progress  has  been  made  regarding  movement  of  persons.  Bilateral  agreements  on 
social insurance and social security have been signed with Hungary and Montenegro. Bosnia 
and  Herzegovina  has  also  concluded  agreements  with  the  employment  agencies  of  Croatia 
and  Slovenia.  However,  movement  of  persons  within  the  country  remains  constrained  by 
fragmented internal labour legislation and social security systems. There is no portability of 
pensions within the country. In November 2007, the European Court for Human Rights issued 
a decision on this subject against Bosnia and Herzegovina. No steps have been taken towards 
granting social security benefits for resident family members of foreign nationals working in 
Bosnia and Herzegovina.  

Bosnia  and  Herzegovina  is  lagging  behind  with  preparations  in  the  field  of  movement  of 
persons. 

Concerning  freedom  to  provide  services,  limited  progress  has  been  made.  The  rules  on 
operators  from  EU-Member  States  who  provide  cross-border  services  and  those  who  are 
permanently established in the country are not transparent. The banking sector has continued 
to develop and to contribute to economic growth. Some progress can be reported with regard 
to information sharing between the Central Bank and the banking supervision agencies, as a 
memorandum  of  understanding  was  signed  in  June  2008.  However,  no  progress  has  been 
made towards approximation with the EU banking acquis nor towards the establishment of a 
single State-level supervisory agency for banking. Separate banking legislation at Entity level 
still  prevails,  and  banks  continue  to  be  licensed  and  supervised  by  two  separate  Entity 
agencies.  The  capacity  of  banking  regulators  and  supervisors  needs  to  be  reinforced. 
Immunity from legal prosecution, in line with the "Basel principles", has not been introduced 
for the staff of the Republika Srpska Banking Agency. The cooperation with home banking 
sector supervisors of foreign banks operating in the country is still not satisfactory.  

Some progress has been made as regards insurance. All the requisite implementing legislation 
affecting  market  access,  including  that  on  solvency  margins,  has  been  adopted  in  both 
Entities. This has opened the way for companies from one Entity to operate in the other, even 

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though  administrative  procedures  remain  cumbersome.  The  State  Insurance  Agency  became 
observer in the International Association of Insurance Supervisors (IASA) and member of the 
International  Insurance  Foundation  (IIF):  However,  the  role  of  the  agency  remains  limited, 
with  licensing  and  supervision  remaining  the  responsibility  of  the  Entity  agencies.  Little 
action  has  been  taken  to  upgrade  the  supervisory  enforcement  capacity  in  this  sector.  A 
working  group  for  the  harmonisation  of  the  Entities  and  Brčko  District  insurance  laws  has 
been established. Sectoral statistics have been prepared. The Insurance Ombudsman has been 
appointed, but the legal framework for his activities has not yet been finalised. 

No  progress  has  been  made  with  regard  to  the  adoption  of  the  State-level  legislation  on 
leasing and obligations, in particular due to the opposition of Republika Srpska. Instead, the 
Entities  have  moved  unilaterally  to  develop  their  regulatory  frameworks  on  leasing,  with 
Republika  Srpska  adopting  the  legislation  and  establishing  leasing  supervision  under  the 
auspices of its Banking Supervision Agency. There has been progress in the supervision of the 
micro-credit sector, with all operators integrated under the supervision of the existing banking 
supervision agencies. 

The  Entity  securities  markets  still  lack  a  coherent  legislative  and  regulatory  framework. 
Oversight  remains  fragmented  between  the  two  Entity-level  securities  commissions.  The 
institutional arrangements for coordination of capital markets policies and regulation between 
the two Entities are not in place. 

There  has  been  limited  progress  with  respect  to  postal  services.  A  Bosnia  and  Herzegovina 
postal  agency  was  established  in  2006  and  is  now  operational.  Nonetheless,  there  are 
impediments  to  the  proper  functioning  of  this  sector.  Legislation  governing  these  services 
remains inconsistent between the State and the Entities.  

As  regards  the  right  of  establishment  for  companies,  there  has  been  progress  towards 
establishment  of  a  simplified  and  more  efficient  business  registration  system.  Court 
registration time has been shortened. However, the overall time needed to register a business 
is  still  above  the  average.  Bosnia  and  Herzegovina  remains  one  of  the  most  difficult  and 
costly places in the region for setting up businesses. Continued action is necessary to further 
facilitate  business  registration  and  to  simplify  administrative  procedures  for  companies  and 
the  self-employed.  No  progress  can  be  reported  in  the  area  of  mutual  recognition  of 
professional qualifications. 

No progress has been made on developing State-level company law.  

Bosnia  and  Herzegovina's  preparations  in  the  area  of  services,  establishment  and  company 
law remain at an early stage. 

4.1.3.  Free movement of capital 

There have been no significant developments in the area of movement of capital. 

Bosnia  and  Herzegovina  has  continued  to  apply  relatively  liberal  rules  on  inward  capital 
flows.  However,  no  further  steps  have  been  taken  to  remove  the  existing  restrictions  on 
outward  transfers  by  individual  residents  and  non-residents.  Restrictions  also  remain  with 
regard  to  holding  of  foreign  accounts  by  resident  entities.  There  is  a  need  to  ensure  that 
legislation  concerning  foreign  currency  operations  is  harmonised  across  the  country  in  line 
with EU legislation. 

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Restrictions  on  foreign  direct  investment  apply  only  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  transfers  by  domestic  and  foreign  companies  have 
been liberalised. The Law on the Central Bank of Bosnia and Herzegovina stipulates that the 
authorities must not set any restrictions on payments and international transactions unless this 
is necessary in the light of possible international obligations.  

Bosnia and Herzegovina has a modern payment system for giro clearing and real-time gross 
settlement operations. The clearing platform for international payments between Bosnia and 
Herzegovina and Serbia came into operation in February 2008, making transactions through 
the payment system between the two countries cheaper and faster. Commercial banks will use 
this platform to execute payment orders for their clients.  

Overall,  Bosnia  and  Herzegovina's  preparations  are  on  track.  However,  further  legislative 
initiatives  are  needed  with  regard  to  movement of capital, in order to approximate the legal 
framework  to  the  acquis,  to  ensure  countrywide  harmonisation  and  to  achieve  further 
liberalisation. 

4.1.4.  Customs and taxation 

Bosnia  and  Herzegovina  has  made  good  progress  in  the  field  of  customs  and  has  been 
addressing  its  priorities.  The  implementation  of  customs-related  provisions  following  the 
entry into force of the SAA Interim Agreement on 1 July 2008 has been adequate. As regards 
verification of the origin of goods, the Indirect Taxation Authority (ITA) became the single 
authority  in  Bosnia  and  Herzegovina  authorised  to  request  and  verify  EUR  1  movement 
certificates  for  trade  with  the  EU  and  CEFTA.  A  number  of  training  sessions  on 
implementation of rules of origin have been organised for ITA staff, the business community 
and the Chambers of Commerce. Nevertheless, there is a need for specialised training on rules 
of origin (diagonal cumulation). Bosnia and Herzegovina's nomenclature for the classification 
of  goods  has  been  aligned  with  the  EU  Combined  Nomenclature.  Regular  updates  are  now 
necessary. 

The instructions regarding the minimum valuation price list for imports of certain goods have 
been  abolished,  and  GATT-compliant  instructions  on  valuation  have  been  issued.  However, 
additional  efforts,  including  clearer  instructions  and  training  of  customs  officers,  remain 
necessary to ensure harmonised implementation of the valuation rules across the country. 

Five  free-trade zones exist in Bosnia and Herzegovina and operational surveillance of these 
zones  comes  under  the  authority  of  the  ITA  Customs  Department.  It  is  important  that 
legislation  applicable  in  free  zones  is  compatible  with  the  acquis  and  that  adequate 
supervision is performed in these areas. 

The  compliance  with  the  Interim  Agreement  of  Bosnia  and  Herzegovina's  regime  for  the 
import of used cars needs to be determined.  

In  accordance  with  the  SAA,  since  1  July  2008  Bosnia  and  Herzegovina  has  not  been 
applying any charges having an equivalent effect to customs duties on products originating in 
the EU. 

ITA's Law Enforcement Unit has achieved significant results. Compared with 2006, the value 
of  temporarily  seized  goods  increased  by  146%  in  2007  and  totalled  approximately 
€7.0 million. The number of reports submitted to the Prosecutor's offices increased by 17%. 

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The  memorandum  of  understanding  on  cooperation  between  ITA  and  the  border  police  is 
operational. ITA has been involved in joint operations against organised crime, resulting, for 
instance, in the discovery of an illegal cigarette factory and confiscation of cigarette-making 
machinery, including several tonnes of tobacco and of counterfeit excise banderols.  

ITA is carrying out a gap needs assessment and formulating a long-term strategy paper on the 
basis  of  the  EU  customs  blueprints.  In  2008,  ITA  became  member  of  the  World  Customs 
Organisation (WCO).  

Overall,  preparations  in  the  area  of  customs,  both  as  regards  legislative  alignment  and 
administrative capacity, are advancing. However, Bosnia and Herzegovina needs to continue 
its  efforts  to  align  its  customs  legislation  with  the  acquis.  Problems  of  enforcing  the 
legislation  properly  remain;  operational  instructions  are  to  be  drafted  and  agreed.  Particular 
efforts  are  necessary  to  enforce  intellectual,  industrial  and  commercial  property  rights. 
Furthermore,  a  customs  strategy  on  business,  human  resources  management,  information 
technology and training has to be developed. 

Some  progress  can  be  reported  as  regards  taxation.  In  January  2008,  ITA  established  the 
Single Indirect Taxpayers Register. This covers value-added tax (VAT) taxpayers, excise duty 
products, registration for foreign trade exchange and international forwarding registration.  

VAT collection improved in 2008 as a result of increasing economic activity and the growing 
number of registered VAT taxpayers. The VAT legislation is largely in line with the acquis. 
Attempts  to  introduce  a  0%  or  reduced  VAT  rate  on  certain  goods  have  been  unsuccessful. 
Bosnia  and  Herzegovina  needs  to  ensure  that  any  amendments  made  in  this  area  do  not 
undermine the achievements so far in terms of approximation to EU legislation. It also needs 
to  develop  computerised  management  and  analysis  tools,  together  with  a  risk  management 
system, so as to ensure proper VAT enforcement. 

The Law on excises has been implemented, but is not yet fully in line with the acquis. Any 
new  legislation  on  excises  must  refrain  from  introducing  discriminatory  elements  against 
imports, as this would be contrary to WTO rules and the SAA. 

In July 2008, the Law on the National Fiscal Council was adopted. The Council, a permanent 
body in charge of overall fiscal policy coordination in the country, was inaugurated in early 
September. In June 2008, the methodology for allocation of indirect tax revenues to the State, 
Entities and Brčko District was agreed. Smooth implementation of this methodology is now 
essential. The State-level Minister of Finance and treasury has also taken over the function as 
the Chairman of the ITA Governing Board.  

In  relation  to  direct  taxation,  in  December  2007  the  Federation  adopted  a  new  Corporate 
Income Tax Law, which came into force in January 2008. This law harmonised the applicable 
tax rate of 10% with those in the Republika Srpska and Brčko District. It adopted the Personal 
Income Tax Law, which significantly simplified personal income taxation. The law will enter 
into force on 1 January 2009.  

A  gap  analysis  on  business  taxation  has  been  carried  out  to  identify  existing  measures  that 
might be contrary to the Code of Conduct for Business Taxation. However, no follow-up to 
the report and the proposed  measures has been carried out by the authorities. Companies in 
the  Federation  that  earn  in  revenue  more  than  30%  from  exports  remain  exempted  from 
corporate  income  tax,  which  is  not  in  compliance  with  the  Code  of  Conduct.  Discrepancies 

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with  regard  to  double  taxation  persist  between  the  tax  laws  of  Republika  Srpska  and  the 
Federation on the one hand, and Brčko District on the other. 

As  regards  administrative  and  operational  capacity,  the  staffing  of  ITA  has  not  been 
reinforced, but its overall performance has been good. In 2007, it collected about €2.7 billion, 
comprising  VAT,  customs  duties  and  excise  taxes,  which  is  an  increase  of  18%  over  2006. 
Efforts need to continue to improve ITA's administrative capacity to implement customs and 
tax legislation and, together with other law enforcement bodies, to make it more effective in 
fighting  corruption,  cross-border  crime  and  fiscal  evasion.  There  is  a  need  for  additional 
advanced  training  with  regard  to  complicated  VAT  areas  and  risk  analyses.  An  overall 
training strategy is to be presented and an IT strategy is to be defined. 

ITA became a member of the Intra European Organisation of Tax Administration. 

Overall,  Bosnia's  preparations  in  the  area  of  taxation  are  progressing.  Its  tax  legislation  is 
aligned with the EU acquis to a large extent, especially in the field of VAT. It is necessary to 
ensure  that  amendments  to  the  existing  legislation  remain  in  line  with  EU  provisions. 
Significant efforts are also needed to reinforce the administrative capacity and to fight against 
corruption, in order to improve tax collection and reduce the size of the informal economy. 

4.1.5.  Competition 

Progress in the field of anti-trust control has continued, even though no action has been taken 
to bring the Competition Law closer to the acquis. The Competition Council has increased its 
staff  to  26.  Its  activities  have  focused  mostly  on  mergers  and  abuses  of  dominant  position. 
During the reporting period, the Competition Council started 42 procedures and concluded 28. 
Nine opinions were issued. It collected around €350,000 of penalties from economic entities 
which were not acting in accordance with the Competition Law. It signed a memorandum of 
understanding on competition policy and relevant market legislation with its counterparts in 
the former Yugoslav Republic of Macedonia and Bulgaria. 

Overall,  Bosnia  and  Herzegovina's  preparations  in  the  area  of  anti-trust  are  moderately 
advanced. No progress has been made as regards State aid. Preparations in this area remain at 
an early stage.  

4.1.6.  Public procurement 

Limited progress has been made in the area of public procurement.  

The  Public  Procurement  Agency  employs  15  people.  A  new  rulebook  on  the  internal 
organisation of the Agency was adopted in April 2008. It provides for 31 posts to be filled in 
the next four years. A number of training activities have taken place. A new website of the 
Agency and the Procurement Review Body has been set up.  

There  has  been  no  major  progress  in  terms  of  legislative  alignment.  In  early  2008  the 
Parliamentary  Assembly  of  Bosnia  and  Herzegovina  overruled  an  attempt  to  modernise  the 
current primary law and the Public Procurement Agency was tasked to draft a new law by the 
summer  2008.  This  has  not  been  done.  Domestic  preferential  treatment  remains  in  force, 
except for the electricity sector. The current legislation provides for the phasing out of such 
preferential treatment by 2011.  

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Efforts  necessary  to  enhance  the  administrative  capacity  of  the  Public  Procurement  Agency 
and  the  Procurement  Review  Body  have  been  limited.  Insufficient  staffing  continues  to 
hamper the performance of the Procurement Review Body (PRB). Nevertheless, the PRB was 
able to address all complaints received in 2007, as well as some of the backlog of cases which 
had built up in 2006 as a result of the lack of a quorum to take decisions.  

Proper  implementation  of  public  procurement  procedures  across  the  country  is  not  yet 
ensured.  Although  some  training  was  provided,  the  overall  administrative  capacity  of 
contracting authorities and their level of knowledge of public procurement legislation is low, 
which has negative effects in terms of law implementation and enforcement.  

Overall,  Bosnia  and  Herzegovina's  preparations  in  the  field  of  public  procurement  have 
started,  but  further  efforts  remain  necessary.  Public  awareness  and  accountability  in  public 
expenditure needs to be further consolidated.  

4.1.7. 

Intellectual property law 

Little  progress  has  been  made  with  regard  to  intellectual,  industrial  and  commercial 
property rights (IPR). No steps were taken to draft a comprehensive strategy to enhance the 
legislative framework, administrative capacity and enforcement of IPR. 

Bosnia and Herzegovina has ratified the Washington Agreement on Intellectual Property and 
Integrated Circuits, the  Hague  Agreement concerning  the International  Deposit  of Industrial 
Designs,  the  Strasbourg  Agreement  concerning  the  International  Patent  Classification,  the 
Convention for the Protection of Producers of Phonograms against Unauthorized Duplication 
of  their  Phonograms,  the  Protocol  to  the  Madrid  Agreement  concerning  the  International 
Registration  of  Marks  and  the  International  Convention  for  the  Protection  of  Performers, 
Producers  of  Phonograms  and  Broadcasting  Organizations.  The  implementation  of  these 
Conventions and Agreements should now proceed.  

The  Institute  for  Intellectual  Property  has  32  employees,  with  staff  working  in  the  Mostar 
headquarters and in the Sarajevo branch office. Office space for the Banja Luka branch has 
been provided, but staff still have to be recruited. A number of measures have been taken to 
improve  the  Institute's  operation,  including  enhancing  existing  databases  (on  patents, 
trademarks  and  industrial  designs).  New  databases  on  geographical  indications  have  been 
established. The Complaints Commission has been set up. The new Law on wine, spirits, and 
other grape and wine products aims at responding to the obligations imposed by the TRIPS 
Agreement and the acquis. However, overall alignment with the TRIPS Agreement and with 
the acquis is still at an early stage. 

No progress has been made in relation to administrative procedures on copyrights and related 
rights.  The  regulatory  framework  for  the  collective  management  organisations  operating  in 
the country is inadequate and needs to be improved in line with experience and best practice 
in the region and in the EU. Awareness-raising among right-holders and users of the protected 
subject-matter is also necessary. 

No  significant  development  has  taken  place  concerning  industrial  property  rights.  Under 
the  current  legislation,  the  Institute  grants  patents  without  prior  substantive  examination  of 
applications,  shifting  the  burden  of  proof  of  the  validity  of  such  patents  on  to  the  patent-
holder.  Application  of  this  model  for  granting  patents  is  hampered  by  deficiencies  in  the 
legislation  and  the  lack  of  capacity  in  the  Institute.  As  a  result,  a  total  of  1 660  patent 
applications have still to be processed. The waiting time for applications is almost five years.  

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Trademarks  and  designs  are  granted  on  the  basis  of  prior  substantive  examination  of 
applications. The constant increase in trademark applications and the limited capacity of the 
Institute have resulted in an extremely long waiting time - four years on average. The waiting 
time for design applications averages one year, but this is due to the relatively small number 
of  design  applications  and  the  limited  document  base  to  be  examined  (only  prior  domestic 
applications  and  granted  rights).  No  applications  for  protection  of  geographical  indications 
and topographies of integrated circuits have yet been filed with the Institute. 

Administrative  enforcement  of  IPR  by  various  inspectorates  is  the  responsibility  of  the 
Entities, Cantons and Brčko District, while the State level is responsible for enforcement of 
criminal  law.  IPR  enforcement  remains  weak.  Bosnia  and  Herzegovina  is  not  yet  able  to 
implement  and  enforce  its  legislation  and  its  international  obligations  in  this  field.  The 
performance  of  the  Indirect  Taxation  Authority,  responsible  for  implementation  of  border 
measures  for  IPR  protection,  is  hampered  by  the  lack  of  expertise  and  deficiencies  in  the 
legislation on this subject. Awareness among rights-holders and users is very low. No unified 
track record of enforcement measures is being kept. High levels of counterfeiting and piracy 
persist and the country remains a point of distribution to the rest of Europe. 

Bosnia and Herzegovina's preparations in the field of intellectual property law  remain  at an 
early  stage.  In  order  to  accelerate  preparations,  rapid  action  is  necessary  to  develop  a 
comprehensive IPR strategy, to strengthen the capacity of the Institute and law enforcement 
agencies,  to  provide  additional  training  to  the  various  stakeholders  and  to  implement  broad 
awareness-raising campaigns. 

4.1.8.  Employment and social policies 

Limited progress has been made in this area. 

The fact that there are no powers at State level in the field of employment and social policies 
remains an obstacle to the development of a countrywide strategy for employment. Based on 
constitutional arguments, Republika Srpska systematically objects to giving a role to the State 
level  in  internal  labour  market  issues.  Employment  strategies  and  projects  for  active 
employment measures have been developed by the two Entities and Brčko District. However, 
there is little coordination between them. 

There has been some progress as regards the labour market. According to the Labour Force 
Survey (LFS), the employment rate increased by 1.7% (from 35% in 2006 to 36.7% in 2007). 
However,  job  creation  cannot  absorb  the  growing  labour  force  and  informal  employment 
remains high.  

The  causes  behind  persisting  high  unemployment  in  Bosnia  and  Herzegovina,  estimated  at 
around  30%,  have  not  changed.  The  labour  market  still  suffers  from  significant  structural 
rigidities in the form of wage-setting mechanisms and high taxation of labour. The complex 
institutional and administrative structure and extreme fragmentation of the market are major 
obstacles to improving its functioning. Substantial, persistent deficiencies in the employment 
administration,  regulatory  framework  and  labour  market  institutions  do  not  allow  effective 
development of employment policies.  

Active  labour  market  programmes  are  still  being  implemented,  some  of  which  focus  on 
training and improving the skills of job-seekers, but resources are lacking to develop the latter 
on a wide scale. Development and implementation of these programmes remain fragmented. 
In the Federation, unemployment cash benefits paid to demobilised soldiers are stretching the 

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budgets  of  employment  services  and  making  further  financing  of  active  labour  market 
programmes difficult.  

As  regards  social  policies,  no  progress  has  been  made  on  either  policy  development  or 
implementation.  Labour  legislation  has  not  yet  been  harmonised  across  the  country.  Little 
action has been taken to comply with EU provisions on health and safety at work. The revised 
European  Social  Charter  has  been  ratified  but,  apart  from  this,  little  has  been  achieved  in 
terms  of  social  dialogue.  The  Trade  Union  Confederation  (KSBiH)  has  not  been  able  to 
register  at  State  level  and  no  specific  measures  have  been  taken  to  clarify  the  rules  on 
recognition of trade unions. The complex social organisation in the country continues to affect 
dialogue  between  social  partners  and  solutions  do  not  seem  immediate.  No  countrywide 
Economic and Social Council has been established. 

Limited progress has been made on social inclusion and anti-discrimination. Social inclusion 
of vulnerable categories, including returnees, remains a challenge. Monitoring, in particular of 
severe  poverty,  needs  to  be  given  priority  with  a  view  to  promoting  social  cohesion  and 
reconciliation within the country. Poverty and social exclusion indicators and analyses in line 
with  EU  standards  are  necessary.  Discrimination  against  the  Roma  population  remains  an 
issue,  as  well  as  discrimination  in  employment  on  the  basis  of  ethnicity  and  sexual 
orientation.  

There has been no significant progress as regards social protection. The existing system does 
not provide equal access to social protection services. Key shortages in the reform of social 
protection are related to the lack of a clear vision of the scope and content of the reform and 
the non-existence of a policy at State level. The diversity of social security systems acts as an 
obstacle to workers' mobility within the country.  

As  regards  equal  opportunities,  no  serious  measures  have  been  undertaken  to  address  the 
problems  related  to  women's  access  to  labour  market.  As  a  consequence,  discrimination  of 
workers on the basis of gender remains widespread, women continue to be under-represented 
in business and politics, and their salaries are generally lower than those of men.  

The diverse social security systems in Bosnia and Herzegovina continue to have an adverse 
effect  on  workers  and  citizens  in  general.  Rights  to  health  insurance  and  other  social 
protection,  including  unemployment  benefits,  continue  to  depend  on  which  Entity  and,  to 
some  extent,  which  Canton  the  claimants  live  in.  There  is  no  political  consensus  on 
establishing a harmonised social security system, with Entities and Cantons maintaining their 
constitutional rights to set policy and deliver services. 

Decision-making and coordination in the public health sector have improved. A "Conference 
of Health Ministers of Bosnia and Herzegovina" has been established and meets regularly. A 
Strategic Plan for development of the health sector for 2008-2013 was adopted by the Council 
of Ministers. 

There  has  been  some  progress  on  statistical  reporting.  Relevant  stakeholders  have  been 
trained and reports on the national health accounts were produced for 2005, 2006 and 2007. 
Republika Srpska has adopted a health information system strategy, but no such document has 
been  developed  in  the  Federation.  A  Supplemental  Immunisation  Activities  (SIA)  Expert 
Committee has been established and handed the task of preparing a situation analysis, a SIA 
strategy  (including  social  mobilisation  plan),  a  detailed  operational  plan  and  a  training 
programme.  Bosnia  and  Herzegovina's  annual  polio  information  update  for  the  European 

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Regional  Certification  Commission  (ERCC)  for  2007  is  not  yet  finalised,  but  activities  to 
maintain  polio-free  status  are  being  implemented.  Some  steps  have  been  taken  towards 
implementing  the  WHO  Framework  Convention  on  Tobacco  Control  (FCTC)  and  the 
International  Health  Regulations  (IHR).  However,  further  efforts  are  necessary  in  order  to 
achieve  implementation.  Mental  health  policies have  been  adopted  at  Entity  level,  based  on 
the  principle  of  protection  in  communities  of  those  who  depend  on  assistance,  and  on  the 
principle of non-discrimination. Action Plans, which follow these principles, are carried out. 
Deinstitutionalisation  at  State  level  has  made  almost  no  progress;  only  an  analysis  of  the 
situation and evaluation of services for mental health protection in Bosnia and Herzegovina as 
a  whole  has  been  launched  as  preliminary  phase  for  the  establishment  of  a  coherent  Action 
Plan for the whole country. 

Bosnia and Herzegovina's overall preparations regarding employment and social policies are 
at  a  very  early  stage  and  are  undermined  by  the  extreme  fragmentation  of  the  relevant 
institutional and legislative frameworks. 

4.1.9.  Education and research 

Some progress has been made in the area of education.  

Coordination  between  the  fourteen  Ministries  of  Education  has  improved  as  a  result  of  the 
establishment  of  the  Conference  of  Ministers  chaired  by  the  Minister  of  Civil  Affairs.  The 
Law on vocational education and training has been adopted. A strategy paper on the reform of 
the  education  sector,  entitled  "Directions  for  Education  Development  in  Bosnia  and 
Herzegovina 2008-2015", has been adopted. As regards higher education, a set of documents 
relevant  for  the  implementation  of  the  Bologna  process  have  been  adopted.  The  Council  of 
Ministers  has  taken  a  decision  to  join  the  European  Quality  Assurance  Register  for  Higher 
Education.  An  acting  Director  for  the  Agency  for  development  of  higher  education  and 
quality  control  was  appointed  in  June  2008.  Some  additional  progress  has  been  made  in 
eliminating divisive and discriminatory symbolism from schools. 

Nonetheless,  a  number  of  shortcomings  remain.  Harmonisation  of  legislation  at  Entity  and 
Canton  level  was  not  completed  by  the  end  of  April  2008,  as  provided  for  by  the  Higher 
Education Law, and equal implementation throughout the country is not being ensured. The 
planned  integration  of  universities  is  making  slow  progress.  The  2003  Framework  Law  on 
primary  and  secondary  education,  which  gave  a  mandate  for  the  introduction  of  nine-year 
primary education in schools, is not yet fully implemented in certain Cantons. Establishment 
of  State-level  agencies  responsible  for  standards  and  assessment,  quality  assurance, 
curriculum development and accreditation in education needs to be completed. Separation of 
pupils  in  schools  ("two  schools  under  one  roof")  remains  a  serious  issue  in  the  Federation, 
despite reported improvements in the Zenica-Doboj Canton.  

No  measures  have  been  taken  to  improve  the  efficiency  of  public  spending  in  education. 
There is no systematic approach to improving education outcomes.  

Concerning  culture,  Bosnia  and  Herzegovina  has  ratified  the  UNESCO  Convention  for  the 
safeguarding  of the intangible cultural heritage, as well  as  the UNESCO  Convention  on  the 
Protection and Promotion of the Diversity of Cultural Expressions. The Council of Ministers 
has taken a decision to establish a State-level Agency for anti-doping in sports.  

As  regards  research,  Bosnia  and  Herzegovina  has  requested  to  become  associated  to  the 
Seventh Research Framework Programme (FP7) and expects full participation as from 2009. 

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Until  then,  Bosnia  and  Herzegovina  is  participating  under  FP7  as  a  third  country  partner. 
Compared  to  the  previous  year  there  is  a  slight  improvement  in  the  success  of  cooperation 
with EU partners under FP7. 

There has  been  some  progress  in the  work, organisation and output  of the National Contact 
Points. However, there is no integrated research policy and budgetary allocations to support 
research are very limited. Research policy is still designed and implemented at Entity level, 
with  no  real  coordination.  No  progress  has  been  made  on  preparing  a  country-wide  policy. 
The research infrastructure remains poor. 

Preparations  have  started  in  the  area  of  education  and  research.  Sustained  efforts  remain 
necessary. 

4.1.10.  WTO issues 

Some progress has been made recently in the negotiations for the WTO accession. To meet its 
accession  target,  Bosnia  and  Herzegovina  will  have  to  intensify  its  market  access 
negotiations,  while  continuing 
into  conformity  with  WTO 
its 
requirements. 

legislation 

to  bring 

4.2. 

Sectoral Policies 

4.2.1. 

Industry and SMEs 

Limited progress has been made in the area of industry and SMEs. 

As regards industry, no countrywide industrial policy strategy has been established. At local 
level,  a  large  number  of  municipalities  have  adopted  their  own  economic  development 
strategies.  Little  has  been  done  as  regards  the  harmonisation  of  Entity  regulations,  and  the 
corporate  governance  environment  remains  incoherent.  No  corporate  governance  code 
applicable across the whole country has been developed. 

The  institutional  framework  for  export  promotion  has  been  strengthened  and  the  Export 
Promotion  Council  has  continued  to  be  active.  The  Council  of  Ministers  has  adopted  the 
Council's  recommendations,  inter  alia  on  incentives  for  exporters  and  on  the  process  for 
preparing  an  export  promotion  strategy.  The  Export  Promotion  Agency  has  improved  its 
corporate  image  and  has  organised  a  number  of  promotional  events.  However,  no  country-
wide export promotion strategy has been developed. Exporters would benefit from improved 
information channels. The institutional framework for export development and promotion is 
relatively  young  and  both  human  resources  and  quality  infrastructure  need  to  be  further 
developed. 

Limited progress has been made in the area of SMEs. The sector has enjoyed increased access 
to financing. 

Bosnia  and  Herzegovina  has  continued  to  implement  the  European  Charter  for  Small 
Enterprises,  even  though  the  non-harmonised  legal  and  institutional  framework  for  SMEs, 
combined with the persisting lack of capacity at State level, are still hampering the country's 
capacity to meet the requirements of the Charter and to better support the development of the 
sector. A State-level strategy for SMEs development remains necessary. 

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Overall, preparations in the area of industry and SMEs are at an early stage. The adoption of 
country-wide strategies for industry and SMEs, together with the creation of robust capacity 
at  State  level  to  conduct  and  coordinate  policies  on  SMEs,  industry,  competitiveness  and 
innovation  would  be  significant  steps  forward.  Further  improvements  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 policy. The 
State-level Law on wine was adopted in February 2008 and the important Framework Law on 
agriculture,  food  and  rural  development,  defining  the  competencies  and  responsibilities 
among institutions of the sector, was adopted in May 2008. Despite the adoption of this Law, 
no  progress  has  been  made  in  establishing  the  Ministry  of  Agriculture,  Food  and  Rural 
Development  at  the  State  level.  There  has  been  no  progress  on  adoption  of  the  State-level 
agriculture  strategy.  The  Strategic  Plan  for  Harmonisation  of  Agriculture,  Food  and  Rural 
Development for 2008-2010 and its operating programme have not yet been adopted by the 
Council of Ministers. 

The staffing of the Agriculture, Food, Forestry and Rural Development Sector in the Ministry 
of  Foreign  Trade  and  Economic  Relations  has  been 
the 
recommendations made in the functional review of the agriculture sector, there has also been 
a notable increase in staffing in the Entity-level ministries with the aim of improving policy 
formulation and implementation capacities. In line with the State-level decision on farm and 
client registers, Entity-level regulations on farm registers were harmonised in order to ensure 
application of unified farm registration procedures in Bosnia and Herzegovina. 

increased.  Following 

In order to improve coordination of all aspects of agriculture, a ministerial-level task force for 
agriculture  was  set  up  in  March  2008  within  the  overall  coordination  body  for  quality 
infrastructure. 

The support earmarked for agriculture and rural development in 2008 totalled €73 million, an 
increase of 35% as compared to 2007." While the structure of the support is gradually shifting 
from production-linked support to capital investment and rural development, the capacity for 
monitoring  and  evaluating  the  impact  of  support  is  still  limited.  Weaknesses  persist  in  the 
areas  of  land  ownership,  land  use,  market  access  and  market  restructuring,  hampering  the 
productivity and economic potential of the sector. 

Collection  and  processing  of  agricultural  data  still  remain  weak.  Although  the  first 
Agriculture Report (for 2007) was adopted, in the absence of accurate and standardised data 
collection,  it  gives  no  more  than  an  indication  of  the  main  trends  and  opportunities  for 
development of the agri-food sector in Bosnia and Herzegovina. Overall, the lack of reliable 
and comprehensive statistics is hampering the development of agricultural policy.  

Some progress has been made on food safety. The Food Safety Agency has further increased 
its staff. 

To enhance implementation of the 2004 Food Safety Law, implementing legislation has been 
adopted  in  nine  areas  (alcoholic  drinks,  labelling  of  packaged  foods,  labelling  of  nutritional 
values,  use  of  food  additives,  use  of  colours  in  food,  use  of  sweeteners,  use  of  other  food 
additives,  fruit  juices  and  non-alcoholic  drinks).  However,  the  comprehensive  Action  Plan 
required for implementing the Food Safety Law has still not been adopted. The enforcement 
capacity  remains  weak  in  the  absence  of  implementing  legislation  on  food  hygiene  and 

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official  control.  Overall  responsibilities  along  the  food  safety  control  chain  remain  to  be 
clarified,  in  particular  those  of  the  inspection  services  and  authorised  testing  and  reference 
laboratories.  Upgrading  of  agri-food  establishments  has  not  advanced.  Bosnia  and 
Herzegovina is on the list of third countries for the export of fishery products to the EU, but 
no establishment intending to export fishery products to the EU has so far obtained approval. 
Progress  has  been  made  on  international  cooperation,  as  Bosnia  and  Herzegovina  is  now  a 
member of the Codex Alimentarius Commission. 

There has been limited progress in the field of veterinary and phytosanitary policies. The 
staffing of the State Veterinary Office has increased significantly under the new management. 
No progress has been made with revision of State-level legislation. The Entity legislation has 
been revised, but further legal harmonisation, in the form of a new State Veterinary Law, is 
necessary.  The  quality  of  enforcement  of  legislation  has  improved  and  two  veterinary 
diagnostic laboratories have been accredited by the State-level accreditation body (BATA) in 
accordance with the ISO 17025 standard.  

There has been no progress in the field of animal health. There is no strategy for the control of 
animal  diseases.  This  prevents  efficient  implementation  of  the  existing  animal  disease 
programmes.  Some  efforts  have  been  made,  but  the  animal  identification  and  movement 
control scheme is not yet operational. Some progress has been achieved regarding the control 
of residues, as the residue monitoring plan for fishery products has been approved by the EU. 
Overall, inspection capacity remains weak. 

There has been no progress in the phytosanitary sector. The State Plant Health Agency has not 
been fully operational, even though it was established in 2006. Only temporary employment 
contracts were concluded  and  the process of selecting  and employing  civil  servants  is in its 
initial  phase.  No  implementing  legislation  has  been  adopted.  Due  to  weak  veterinary  and 
phytosanitary  standards,  Bosnia  and  Herzegovina  is  not  able  to  use  the  export  potential 
offered to them by the EU, including through the SAA Interim Agreement. 

Overall,  Bosnia  and  Herzegovina's  preparations  in  the  area  of  agriculture  are  advancing 
slowly,  although  the  adoption  of  a  State-level  legal  framework  will  facilitate  gradual 
approximation  to  the  acquis.  The  adoption  of  a  countrywide  strategic  plan  for  the 
development of the agricultural and rural development remains urgent. Progress in the field of 
veterinary  and  phytosanitary  policies  has  been  slow,  and  overall  preparations  remain  at  an 
early stage. 

4.2.3.  Environment 

There has been limited progress in the field of the environment. 

Limited  progress  has  been  made  as  regards  horizontal  legislation.  Transposition  and 
implementation  of  the  acquis  in  this  field  requires  further  improvement,  and  shortcomings 
need to be dealt with. Environmental impact assessment needs particular attention including 
for projects with possible trans-boundary effects. Bosnia and Herzegovina ratified the Aarhus 
Convention in July 2008. However, further efforts are needed to ratify and implement other 
relevant international conventions, notably the Espoo Convention.  

No developments can be reported with regard to air quality.  

Regarding  waste  management,  there  has  been  little  progress  on  construction  of  regional 
sanitary landfills and on rehabilitation and closure of unregulated landfills. Some progress has 

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been made on adoption of implementing regulations on waste products that can no longer be 
disposed  of  in  landfills  if  untreated,  such  as  medical  waste.  Further  efforts  are  required  to 
initiate  management  of  waste  streams  of  animal  origin.  No  progress  has  been  made  on 
legislative  support  for  recycling  and  recovery  of  priority  waste  streams,  such  as  packaging, 
motor oil and tyres. 

Some  progress  can  be  reported  on  water  quality.  Bosnia  and  Herzegovina  has  started  to 
implement the requirements of the Water Framework Directive by means of the Entity Water 
Laws.  Water  agencies  have  been  in  operation  in  the  Federation  since  January  2008. 
Establishment  of  water  agencies  in  Republika  Srpska  is  in  progress.  Further  efforts  are 
required to ensure uniform river basin planning, public consultation and monitoring between 
the Entities. Implementing legislation for water laws, water fees and harmful and dangerous 
substances and their maximum levels in surface water have been adopted. However, much of 
the implementing legislation still needs to be put in place in order to ensure further alignment 
with the acquis. Untreated discharges of waste water remain a key environmental challenge.  

There has been limited progress in the field of nature protection. Bosnia and  Herzegovina 
has  drafted  a  biodiversity  strategy  and  Action  Plan,  as  required  by  the  Convention  on 
Biological Diversity. The Convention on the Conservation of European Wildlife and Natural 
Habitats was ratified in August 2008. As regards declaration of protected areas, the Federation 
has  adopted  the  Law  on  the  Una  national  park,  making  this  the  first  national  park  in  the 
Federation.  Transposition  of  the  Habitats  and  Wild  Birds  Directives,  including  aspects 
required under the Energy Community Treaty, is at an early stage. 

In  the  field  of  industrial  pollution  control  and  risk  management,  some  progress  can  be 
reported.  Transposition  of  the  Integrated  Pollution  Prevention  and  Control  Directive  is 
relatively advanced. The implementing legislation on establishment of polluter and pollutant 
registries, adoption of best available techniques and eco-labels is in place. The Federation has 
initiated a public campaign on the issuing of environmental permits to raise the awareness of 
relevant operators.  

No  progress  can  be  reported  in  terms  of  approximation  to  the  acquis  as  regards  chemicals, 
genetically modified organisms (GMOs) and noise.  

Bosnia  and  Herzegovina  suffers  from  weak  administrative  capacity  in  the  environment 
sector.  A  State-level  Environmental  Law  ensuring  harmonised  nationwide  environmental 
protection  has  not  been  adopted,  and  no  State  Environment  Agency  has  been  established. 
Comprehensive  monitoring  is  difficult  in  the  absence  of  this  State-level  agency.  The 
administrative capacity of the Ministry of Foreign Trade and Economic Relations to act, in the 
meantime, as the national authority in this field is also undermined by the lack of an adequate 
legal  or  institutional  framework.  Implementation  of  the  environmental  legislation  remains  a 
concern.  The  human  and  technical  capacity  of  the  inspectorates  to  ensure  compliance  with 
environmental  legislation  at  Entity,  Canton  and  local  levels  is  insufficient.  Integration  of 
environmental concerns in other sectors remains weak. 

Bosnia  and  Herzegovina  is  at  an  early  stage  of  investment  in  solid  waste  management, 
drinking  water  and  wastewater  infrastructure.  Further  efforts  are  required  to  prioritise  and 
coordinate investment programmes, as financial resources are scarce. Some progress has been 
made with the Entity-level Environment Funds. The Republika Srpska Environment Fund is 
operational, but there have been delays in establishing the Federation Fund. 

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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 State 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 forward. Bosnia and Herzegovina needs to step up its efforts with 
regard to its obligations under international conventions. 

4.2.4.  Transport policy 

There has been good progress on development of the trans-European transport networks. 
Bosnia  and  Herzegovina  has  continued  to  actively  participate  in  the  implementation  of  the 
2004  Memorandum  of  Understanding  for  the  development  of  the  core  regional  transport 
network.  It  has  also  been  active  as  regards  the  South-East  Europe  Transport  Observatory 
(SEETO),  in  particular  through  the  updating  and  implementation  of  the  multi-annual  plan 
2008-2012. 

The upgrading of Pan-European Corridor V-c is continuing. In 2008, a new 10 km section of 
the  motorway  from  Sarajevo  to  the  north  has  been  opened.  Work  has  also  started  on  the 
bypass road of Sarajevo and funding has been secured for another 30 km motorway section. 
Tenders have been launched for reconstruction of an additional 170 km of priority railway in 
the  SEETO  core  network.  Bosnia  and  Herzegovina  and  Montenegro  have  signed  a 
memorandum  of  understanding  on  preparatory  action  for  construction  of  the  railway  link 
between the two countries. Financing has been ensured for electrification of the Doboj-Tuzla 
Zvornik  and  Brčko-Banovici  sections,  contributing  to  better  efficiency  and  environmental 
protection.  The  total  volume  of  freight  transport  has  been  substantially  increased  (2  billion 
℮tkm in 2007, 1.2 billion ℮tkm in first half of 2008). 

Some progress can be reported in the area of road transport. Since the entry into force of the 
SAA  Interim  Agreement,  on  1  July  2008,  Bosnia  and  Herzegovina  is  granting  unrestricted 
access through its territory to Community transit traffic. The State Law on public roads and 
the legislation on digital tachographs have been adopted. However, the impact of the Law on 
road safety is limited by the poor road infrastructure. Significant investments are required in 
order to achieve sufficient levels of safety and efficiency.  

There has been limited progress in the area of rail transport. Network statements, providing 
train  operators  with  a  single  information  source  on  rail  infrastructure,  have  been  prepared. 
Some  legislative  steps  have  been  carried  out  by  Republika  Srpska.  However,  railway 
companies  do  not  yet  meet  the  preconditions  for  functioning  as  vertically  integrated  -  in 
accordance  with  the  acquis  -  since  independent  audits  for  effective  separation  between 
infrastructure  managers  and  railway  undertakings  have  not  been  performed.  The  Railway 
Regulatory  Board  (RBB)  has  yet  to  complete  its  recruitment  and  training.  In  order  for  the 
RBB  to  function  toits  full  capacity,  the  railway  technical  and  safety  regulations  need  to  be 
aligned with  the acquis, and the Railway Package II Directives remains to be implemented. 
Furthermore,  there  is  a  need  to  accelerate  coordinated  harmonisation  of  legislation  at  State 
level  in  order  to  achieve  full  interoperability,  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".  

Some  progress  has  been  made  in  the  area  of  inland  waterways.  A  feasibility  study  for 
rehabilitation  and  re-establishment  of  navigability  on  the  River  Sava  has  been  presented  by 

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the  Sava  River  Commission.  In  addition,  under  the  same  Commission,  a  number  of  acquis-
compliant  rules for water transport, including  on navigation and  transport/traffic safety, and 
on the marking of the navigation route on the Sava, have been adopted. Application of these 
rules is mandatory for all the countries along the Sava. A study was produced on the market 
and demand for inland waterway transport, paying particular attention to the Sava route.  

As  regards  maritime  transport,  Bosnia  and  Herzegovina  is  not  a  yet  party  either  to  the 
SOLAS  Convention  (International  Convention  for  the  Safety  of  Life  at  Sea)  or  to  the  ISPS 
Code (International Ship and Port Facility Security Code). 

Some progress has been made in the area of combined transport. Bosnia and Herzegovina 
finalised  a  study  on  inter-modal  transport,  which  confirmed  the  potential  of  this  transport 
mode and identified ways to meet possible demand for capacity and quality of services.  

Good progress can be reported in the area of  air transport. The market  for commercial air 
carriers  has  been  opened  following  ratification  of  the  European  Common  Aviation  Area 
(ECAA)  Agreement,  even  though  administrative  burdens  and  unnecessary  delays  still  limit 
the  efficiency  and  effectiveness  of  its  application.  The  final  organisational  set-up  of  the  air 
navigation provider and civil aviation authority has been adopted and their seats established. 
An  action  plan  was  drawn  up  for  the  transposition  and  implementation  of  the  ECAA 
Agreement.  Implementation  of  the  air  traffic management  strategy  has  started  and  contracts 
have  been  concluded  with  the  supplier  of  the  equipment.  Privatisation  of  B&H  Airlines, 
owned  by  the  Federation,  is  ongoing.  In  the  meantime,  Republika  Srpska  established 
"SkySrpska".  Alignment  to  aviation  acquis  under  ECAA  is  still  needed  in  the  areas  of 
aviation safety, security and air traffic management, and further efforts are necessary in terms 
of staff training.  

Overall,  Bosnia  and  Herzegovina's  preparations  in  the  transport  sector  are  advancing.  The 
country  has  made  steady  progress  both  on  strengthening  its  institutional  set-up  and  on 
adjusting  the  regulatory  framework.  However,  further  efforts  are  needed  to  complete  the 
transformation  of  the  country's  institutional  set-up  and  to  meet  the  conditions  for  opening 
every sector of the transport market.  

4.2.5.  Energy 

Overall, progress in reforming the energy sector has stalled. 

There have been no new developments as regards oil stocks and security of supply. Bosnia 
and Herzegovina still does not provide for the 90 days reserve of oil stocks. 

Bosnia  and  Herzegovina  is  a  Party  to  the  Treaty  Establishing  the  Energy  Community  in 
Southeast Europe. As such, it was bound to apply the relevant energy-related acquis as from 1 
July  2007,  with  the  exception  of  the  provisions  on  market  opening  to  which  a  specific 
timetable applies. This deadline was extended to July 2008, but has not been met. As a result, 
Bosnia and Herzegovina is significantly lagging behind in a number of energy-related areas. 

Over the years, there has been good progress on the roadmap for electricity, but still none on 
the roadmap  for the gas sector. Since a country-wide  legal  framework  for  gas  has  yet  to  be 
developed (the State-level law does not yet exist), no national regulator has been established. 
Instead, separate Entity legislation has been put in place to establish operators and regulatory 
functions in the Entities. In Republika Srpska, the regulatory powers over the gas sector have 

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been  given  to  the  electricity  regulator,  whereas  in  the  Federation  these  powers  lie  with  the 
Ministry. Preparations in this area are lagging behind.  

Regarding  the  internal  energy  market,  the  independent  system  operator  (ISO)  and  the 
transmission company (Transco) for the electricity sector have been operating in compliance 
with the legal framework. Cooperation between Transco and the ISO remains to be improved. 
A  proposal  by  Republika  Srpska  to  split  the  company  along  Entity  lines  could  have 
jeopardized  the  progress  achieved  in  the  electricity  sector.  Instead,  efforts  need  to  focus  on 
identifying and addressing the company's possible shortcomings.  

There has been no progress as regards the generation plan. Coordination between the Entities 
on  investment  planning  has  not  improved  and  there  is  still  a  lack  of  data  for  finalising  the 
plan. The procedure for providing the ISO with the data needed remains unresolved, as does 
the  procedure  for  ranking  proposed  investment  projects.  Transco's  investment  planning  for 
development of the transmission network depends on this definitive generation plan.  

As  regards  the  opening  of  the  electricity  market,  from  January  2008  all  consumers  (except 
households)  can  become  eligible  consumers.  However,  the  benefits  of  a  more  open  market 
continued to be watered down by system, technology or metering  barriers. Consumers have 
little incentive to change suppliers due to persisting differences between regulated and market 
prices  (regulated  tariffs  remain  below  the  costs  of  generation).  Full  opening  for  major 
industrial customers has been delayed until 2009. 

Regarding  regulation  of  the  electricity  market,  the  State  Electricity  Regulatory  Commission 
(SERC) and the two Entity regulators have adopted new tariffs for the current year, as well as 
key  rulebooks  on  market  opening.  Regarding  connection  to  the  grid,  only  the  Republika 
Srpska  regulator  has  announced  the  general  conditions  for  electricity  supply  (regulating 
connection  to  the  distribution  grid),  while  the  Federation  regulator  is  still  finalising  such 
implementing legislation. New draft legislation is putting regulatory independence at risk in 
the  Federation.  There  have  been  continued  attempts  by  the  authorities  to  influence  the 
regulators,  notably  in  relation  to  tariff  setting.  Furthermore,  the  new  Law  on  Wages  and 
Allowances poses an additional potential threat to the independence of regulators.  

Bosnia  and  Herzegovina  has  not  developed  any  comprehensive  energy  strategy.  A  study  on 
the energy sector in Bosnia and Herzegovina, which should provide a basis for the strategy, 
was  finalised  in  May  2008.  Little  progress  has  been  made  as  regards  the  diversification  of 
energy sources. No progress has been made on energy efficiency and renewable energy. 

On  nuclear  safety  and  radiation  protection,  a  new  Law  on  radiation  was  adopted  in 
November  2007.  Rapid  establishment  of  an  efficient  national  regulatory  agency  (NRA)  is 
required. The NRA's seat will be in Sarajevo. The acting director of the NRA was appointed 
by  the  Council  of  Ministers  in  June  2008  and  deputy  directors  are  planned  for  the  NRA 
regional offices in Banja Luka and Mostar. 

Radiological  issues  in  Bosnia  and  Herzegovina  are  dominated  by  management  of  sealed 
radioactive sources. In the absence of specific legislation, particular efforts need to be made to 
ensure that these sources are under proper regulatory control. Prevention of illicit trafficking 
of  nuclear  and  other  radioactive  materials  is  an  important  issue.  In  this  respect,  portal 
monitors have been installed at some of the main border crossing points of the country. 

Overall, Bosnia and Herzegovina's preparations to meet EU standards in the field of energy 
have started, but remain at an early stage.  

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4.2.6. 

Information society and media 

Overall, Bosnia and Herzegovina has made some progress in this area. 

Progress  as  regards  electronic  communications  and  information  technologies,  however, 
has been limited. Few new entrants have become operational since liberalisation of the sector 
and no new licences for fixed telephony services have been granted in the reporting period. So 
far,  13  interconnection  agreements  have  been  concluded  between  new  and  incumbent 
operators. Four operators offer carrier selection services. The rules on number portability and 
local  loop  unbundling  were  adopted  in  2008  by  the  Communications  Regulatory  Authority 
(CRA),  but  the  timeframe  for  implementation  has  not  been  decided  by  the  Council  of 
Ministers, pending the adoption of the new sector policy. Tariff rebalancing - a key element 
for creating a competitive market - is ongoing, but still at an early stage. 

The  CRA  has  improved  its  administrative  capacity  by  acquiring  new  spectrum  monitoring 
equipment.  However,  further  human,  financial  and  technical  resources  are  needed  to  enable 
the  CRA  to  support  the  development  of  the  sector,  including  on  market  regulation  and 
creating a competitive market.  

The challenges to  the  CRA's independence have increased over the reporting  period, due to 
the  adoption  of  a  new  Law  on  wages  and  allowances  and  the  unresolved  issue  of  the 
nomination of the CRA's Director-General. All stakeholders in Bosnia and Herzegovina need 
to  work  constructively  to  solve  the  outstanding  issues  and  to  guarantee  the  CRA's 
independence. In the meantime, CRA decisions submitted to the Council of Ministers need to 
be properly dealt with. 

Little  progress  has  been  made  in  the  area  of  information  society  services.  Bosnia  and 
Herzegovina has ratified the e-SEE Agenda Plus for the development of information society 
in  South-East  Europe  2007-2012,  which  is  implemented  under  the  umbrella  of  the  regional 
cooperation  council  (RCC).  With  regard  to  the  status  of  the  citizen  identification  protection 
system  (CIPS),  the  Law  on  the  Agency  for  Identification  Documents,  Record-keeping  and 
Exchange of Bosnia and Herzegovina came into force in July 2008. This Law provides for the 
establishment  of  an  agency  which  will  take  over  the  tasks  of  the  CIPS  Directorate.  Rules 
implementing  the  e-signature  law  of  November  2006  are  still  pending.  Legislation  on 
conditional access services has not yet been adopted. The legislation to establish a State-level 
Information  Agency  in  charge  of  implementing  the  information  society  strategy  throughout 
the country has not yet been adopted. 

Progress has been made on audiovisual policy and media. The CRA adopted several codes 
and decisions: the Broadcasting Code of Practice, the rules on licences for audiovisual media 
services providers and the establishment of the Digital Terrestrial Television (DTT) forum. In 
particular,  the  Broadcasting  Code  of  Practice  is  an  important  step  towards  harmonisation  of 
the legislation with the European Convention on Transfrontier Television and the Audiovisual 
Media Services Directive. The Code was adopted after wide public consultation and includes 
provisions  on  promotion  of  European  works,  protection  of  minors,  protection  of  privacy, 
reporting  on  criminal  trials,  trials  involving  minors,  dangerous  behaviour,  erotic  and 
pornographic  programmes,  the  obligation  to  inform  viewers  about  programme  content  and 
stricter  rules  on  the  watershed  (restricting  programmes  unsuitable  for  minors  to  the  night-
time). 

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The Constitutional Court of the Federation ruled against the claims that the proposed public 
broadcasting  law  was  contrary  to  the  national  interest  of  one  of  the  country's  constituent 
peoples.  As  a  result,  the  Federation  Parliamentary  Assembly  adopted  the  Law  on  Public 
Broadcasting Service, which formally completed the legal framework for public broadcasting 
in Bosnia and Herzegovina. The Federation's Law on Public Broadcasting Service still needs 
to  be  fully  aligned  with  the  Public  Broadcasting  System  Law  of  Bosnia  and  Herzegovina. 
Proper  implementation  of  the  whole  legal  framework  for  public  broadcasting  will  be 
necessary to meet the relevant key priority of the European Partnership. 

Bosnia and Herzegovina's preparations in the field of the information society and media are 
advancing.  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 
independence of the Communications Regulatory Authority. 

4.2.7.  Financial control 

Bosnia and Herzegovina has made limited progress in the area of financial control. 

Some  developments  have  been  reported  in  the  area  of  Public  Internal  Financial  Control 
(PIFC). Internal audit laws have been adopted by the State and the Entities. A working group 
has  been  established  to  draft  comprehensive  PIFC  policy  papers  to  guarantee  balanced 
development of control and audit systems. However, no tangible results have been produced 
so far. No Central Harmonisation Unit for PIFC has been established.  

As  regards  external  audits,  the  three  supreme  audit  institutions  (SAIs)  in  the  country  are 
continuing to implement their common strategic development plan for 2007-2012 on the basis 
of the three External Audit Laws. The three SAIs cooperate via a Coordination Board. After a 
two-year  delay,  the  State  level  Auditor-General  was  appointed  in  June  2008.  The  State 
Auditor  has  34  staff.  The  follow-up  to  the  SAIs'  reports  and  recommendations  remains 
insufficient. The existence and independence of the SAIs have not yet been anchored in the 
constitutions of Bosnia and Herzegovina. 

Overall, Bosnia and Herzegovina's preparations in the area of financial control remain at an 
early stage. The introduction of comprehensive PIFC policies is still awaiting the outcome of 
the  PIFC  Policy  Working  Group.  Further  work  relating  to  the  status  of  the  SAIs  and  of  the 
quality of external audit is needed. 

4.2.8. 

Statistics 

Some progress has been made in the area of statistics. 

As  regards  statistical  infrastructure,  cooperation  between  the  State  Agency  for  Statistics 
(BHAS) and the Institute for Statistics in the Federation has improved considerably. However, 
further  efforts  are  necessary  to  improve  coordination  with  the  Republika  Srpska  statistical 
office.  BHAS  has  developed  a  new  organisation  chart  which  provides  for  a  significant 
increase  in  staff  and  coverage  of  more  sectors.  Similar  organisation  charts  are  being 
developed  for  the  Entity  statistical  institutes.  Capacity-building  throughout  the  statistical 
sector in Bosnia and Herzegovina is paramount and should remain a priority. 

The Law on statistics and the 2005 Agreement to strengthen the coordinating role of BHAS in 
harmonising  methodologies  and  disseminating  State  level  data  have  not  been  properly 

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implemented. A protocol between BHAS and the Indirect Taxation Authority (ITA) regarding 
exchange of external trade data has been signed; however, implementation is still pending. 

Some progress has been made on classifications and registers. The classification of products 
by  activity  (CPA)  has  been  harmonised  with  the  European  CPA  2002  classification.  The 
classification of individual consumption by purpose (COICOP) has been finalised and a high 
degree of harmonisation with international standards has been achieved. The development of 
a statistical business register is advancing. 

Some progress has been made on sectoral statistics, including statistical research In the area 
of demographic and social statistics, initial steps have been taken to prepare a population and 
housing census. However, the political decision confirming that the census will be conducted 
in 2011 is still pending. BHAS produced a countrywide publication on gender issues. 

Regarding labour statistics, the 2007 Labour Force Survey (LFS) was the first conducted by 
BHAS  in  cooperation  with  the  two  Entity  statistical  institutes.  Preparations  for  the  2008 
Labour Force Survey are under way. A Household Budget Survey (HBS) was also conducted 
in 2007 on a sample of 7 600 households. The publication of quarterly and semi-annual data 
on salaries, employment and unemployment began in August 2008. 

BHAS  has  initiated  regular  monthly  publication  of  tourism  statistics.  The  methodology  still 
needs to be brought fully into line with EU recommendations.  

Some progress has been made in the area of macro-economic statistics. A draft master plan 
for  development  of  national  accounts  has  been  prepared,  although  not  yet  approved  by  the 
Statistical Office of Republika Srpska. For the first time, GDP figures from the expenditure 
side  in  current  and  constant  prices  for  2006  were  published.  Quarterly  national  accounts 
statistics do not yet exist.  

Some action has been taken to improve the quality of business statistics, primarily concerning 
industrial  statistics,  statistics  on  the  construction  industry  and  structural  business  statistics. 
BHAS has started to publish monthly  data on  external  trade,  based on data provided by the 
Indirect  Taxation  Authority.  As  regards  agricultural  statistics,  several  pilot  surveys  on 
agricultural prices have been conducted. However, continued efforts are necessary: structural 
business statistics are still not based on business registers, and almost no transport and energy 
statistics are available at State level.  

Bosnia and Herzegovina's preparations in the field of statistics are advancing, but remain at an 
initial stage. Therefore, it is essential to strengthen the administrative capacity of the BHAS 
and the cooperation with the institutes in the Entities.  

4.3. 

Justice, freedom and security 

4.3.1.  Visa, border, control, asylum and migration 

Progress  in  the  field  of  visa  management  has  continued.  The  Visa  Facilitation  Agreement 
between  the  EC  and  Bosnia  and  Herzegovina  entered  into  force  in  January  2008.  The  first 
meeting of the Joint Committee on implementation of the agreement took place in June 2008. 
In July 2008, bilateral agreements on visa facilitation were signed with Denmark and Norway. 
The  visa  liberalisation  dialogue  was  launched  in  May  2008  and  a  roadmap  towards  visa 
liberalisation  for  Bosnia  and  Herzegovina  was  presented  to  the  authorities  in  June  2008.  In 

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May  2008,  the  Council  of  Ministers  appointed  an  Inter-Agency  working  group  for  the 
dialogue on visa liberalisation.  

Further  steps  have  been  taken  towards  introduction  of  biometric  passports.  Following 
adoption  of  the  amendments  to  the  Law  on  travel  documents,  in  May  2007  the  Council  of 
Ministers  adopted  a  decision  to  introduce  biometric  passports  during  2009.  Secure  and 
effective management of the CIPS would benefit from the establishment of an improved legal 
framework placed under State-level authority.  

The number of visas issued at the border has been further reduced from 927 in 2006 to 735 in 
2007.  The  new  Law  on  movement  and  stay  of  aliens  and  asylum,  adopted  in  April  2008, 
includes  transition  to  and  introduction  of  the  four  categories  of  visas  provided  for  in  the 
Schengen acquis. Bosnia and Herzegovina's visa lists have not yet been aligned with the EU 
visa lists.  

The migration information system, including the visa module for electronic data storage and 
transfer between consular offices and the central administration in Bosnia and Herzegovina, 
came  into  operation  in  September  2007.  However,  the  authorities  are  not  adequately 
supporting  the  wide  use  of  this  new  system.  Full  and  proper  use  of  the  system  by  all  the 
institutions concerned is needed so that the system can be used to its full capacity.  

Overall, progress in the field of visa management has continued, but Bosnia and Herzegovina 
needs to make further efforts to align with EU standards and to use the migration information 
system to its full capacity. 

Bosnia  and  Herzegovina  has  continued  to  make  progress  in  the  area  of  border  control. 
Cooperation and information-sharing between the border police and the ITA have improved. 
The number  of  joint training activities and joint operations at the border has increased. The 
border police and the ITA have taken steps towards harmonising collection and registration of 
data  at  border  crossing  points  in  order  to  avoid  duplication.  Contacts  have  been  established 
with Frontex with a view to concluding a working arrangement. 

Further action needs to be taken to improve cooperation with the State Veterinary Office and 
the State Plant Health Agency. The agencies involved in border management have agreed on 
common  risk  analysis  documents  and  a  border  control  model.  The  border  police  needs 
effectively to address the high number of vacancies. 

A  revised  integrated  border  management  (IBM)  strategy  was  adopted  in  July  2008.  The 
strategy  and  the  Action  Plan  that  forms  an  integral  part  of  the  strategy  define  the  central 
coordinating  roles  in  relation  to  border  management  issues  and  include  a  financial 
implementation  framework.  The  Decision  establishing  a  Commission  for  Integrated  Border 
Management,  in  charge  of  IBM  coordination  and  implementation  of  the  strategy,  the  action 
plan and the implementation of border crossing agreements, was adopted in July 2008. A draft 
Law  on  border  control  clarifying,  inter  alia,  responsibility  for  management  of  border  posts 
has not yet been adopted..  

Bosnia  and  Herzegovina  still  has  a  number  of  unresolved  border  demarcation  issues  which 
continue  adversely  to  affect  control  of  the  green  border.  A  decision  establishing  the  State 
Border  Commission,  responsible  for  identification  and  demarcation  of  the  border  line,  was 
adopted in June 2008, filling the vacuum left after the mandate of the previous State Border 
Commission  expired  in  July  2007.  Four  protocols  implementing  the  2007  Agreement  on 
border  control  between  Bosnia  and  Herzegovina  and  Croatia  were  signed  in  June  2008, 

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covering  the  following  fields:  cooperation  and  official  transit  over  State  territory; 
establishment of joint task forces for crime prevention; mixed patrols; and liaison officers. 

Delays in adopting the IBM strategy, lack of definition of tasks and responsibilities between 
the main stakeholders for border management, incomplete land expropriation, reclassification 
of  border  crossing  points  (BCPs)  and  insufficient  political  attention  have  been  obstacles  to 
sustained  improvement  of  the  country's  BCPs.  These  factors  reduced  the  efficiency  of  EU 
financial assistance and led to the cancellation of a number of projects.  

Overall,  Bosnia  and  Herzegovina  has  made  progress  in  the  area  of  border  management. 
Further efforts are needed, in particular to address the unresolved border demarcation issues 
and the improvement of border crossing points.  

Asylum  procedures  in  Bosnia  and  Herzegovina  are  largely  in  line  with  international 
standards.  The  number  of  asylum  applications  has  increased  substantially  compared  with 
2006,  mainly  as  a  consequence  of  refugees  from  Kosovo  losing  their  temporary  admission 
status in September 2007.  

A new Law on movement and stay of aliens and asylum entered into force in May 2008. The 
necessary implementing legislation remains to be adopted. The roles and tasks of the Ministry 
of Security and the Ministry for Human Rights and Refugees, both of which are responsible 
for dealing with asylum-seekers and refugees, have been clarified. As regards improving the 
capacity  to  manage  evidence  of  persons  with  recognised  refugee  status  or  other  forms  of 
international  protection,  greater  efforts  are  needed  to  develop  software  requirement 
specifications  for  a  database  which  will  be  part  of  the  migration  management  project.  The 
Ministry  for  Human  Rights  and  Refugees  is  to  be  connected  to  the  migration  information 
system.  The  use  of  the  asylum  module  of  the  migration  information  system  needs  to  be 
enhanced.  The  capacity  of  the  Ministry  will  need  to  be  upgraded  in  order  to  implement  the 
new legal framework adequately.  

Bosnia  and  Herzegovina  still  lacks  an  appropriate  permanent  asylum  reception  centre. 
However,  a  temporary  centre  was  opened  in  May  2008.  The  design  for  a  new  permanent 
centre  has  been  completed  and  the  construction  project  is  in  its  final  stage.  The  centre  is 
expected to become fully operational in 2011. However, Bosnia and Herzegovina has not yet 
assumed full responsibility for managing and financing the existing asylum centres.  

Overall, some progress has been made in the field of asylum. 

Some  progress  has  been  made  on  migration.  Construction  and  equipment  of  the  temporary 
reception centre for irregular migrants has been completed and the centre was opened in May 
2008.  All  staff  members  recruited  for  the  temporary  reception  centre  have  received  the 
required training. 

The Readmission Agreement between the EC and Bosnia and Herzegovina entered into force 
in  January  2008.  The  first  meeting  of  the  Joint  Committee  on  implementation  of  the 
Agreement  took  place  in  June  2008.  Bosnia  and  Herzegovina  has  continued  its  efforts  to 
establish readmission agreements with non-EU countries. No difficulties have been observed 
in handling cases concerning readmission of third-country nationals, mainly from Croatia and 
Albania.  Bosnia  and  Herzegovina  has  continued  to  readmit  its  own  nationals  even  when  no 
readmission agreement is in place. The number of readmitted persons increased (240 in 2007 
compared with 174 in 2006). 

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There  has  been  a  significant  decrease  in  interceptions  during  attempts  to  cross  the  border 
unlawfully. In 2007, 851 persons were intercepted when trying to enter or leave the territory 
of Bosnia and Herzegovina (1 289 in 2006) and, in the first half of 2008, 231 persons were 
intercepted at the borders. The number of nationals deported back to Bosnia and Herzegovina 
decreased  (to  1 117  in  2007,  from  1 350  in  2006).  Border  control  activities  in  combating 
illegal migration need to be stepped up. 

Out  of  the  approximately  3 000  refugees  originating  from  Kosovo  whose  temporary 
admission  status  was  withdrawn  in  September  2007,  870  persons  submitted  an  asylum 
request.  The  Foreigners  Affairs  Service  of  Bosnia  and  Herzegovina  has  taken  measures  to 
finalise the status of those still residing on the territory of Bosnia and Herzegovina. 

There  has  been  good  progress  on  the  Service  for  Foreigners'  Affairs  under  the  State-level 
Ministry  of  Security.  The  legal  basis  for  operation  of  the  Service  has  been  adopted  and  the 
transfer of staff from the previous Departments for Aliens completed. Nevertheless, the staff 
levels need to be further reinforced and more training courses need to be conducted. The legal 
basis requires some clarification. 

The National Migration Strategy has not been adopted. The staffing of the Migration Sector at 
the  Ministry  of  Security  has  improved,  but  further  efforts  in  this  regard  are  needed.  The 
legislation in the area of migration to implement the new Law on movement and stay of aliens 
and asylum has still to be adopted. Use of the migration module of the migration information 
system needs to be enhanced. 

Overall, some progress has been made in the area of migration. 

4.3.2.  Money laundering 

Limited  additional  progress  can  be  reported  on  implementation  of  anti-money  laundering 
measures.  The  Financial  Intelligence  Unit  (FIU)  in  the  State  Investigation  and  Protection 
Agency  has  not  been  significantly  reinforced  in  terms  of  staff.  There  have  been  limited 
improvements  in  cooperation  between  the  FIU  and  other  law  enforcement  agencies  and 
prosecutors'  offices  by  means  of  joint  training  and  joint  investigations.  A  multi-agency 
Working Group for Prevention of Money Laundering and Funding of Terrorist Activities has 
recently  been  set  up,  in  order  to  better  coordinate  the  investigative  and  regulatory  bodies 
dealing  with  money  laundering  and  terrorism.  However,  Strategy  and  Action  Plan  for  this 
Working Group have not yet been adopted. Cooperation at international level has improved, 
with  the  aid  of  EGMONT  but  also  of  the  relevant  provisions  in  bilateral  conventions  with 
Member  States.  The  Council  of  Europe  Convention  on  laundering,  search,  seizure  and 
confiscation of proceeds of crime and financing of terrorism entered into force in May 2008. 
Bosnia and Herzegovina needs to harmonise its legislation with this Convention. 

Political  disagreements  between  the  State  level  and  the  Entities  persist  with  regard  to  legal 
solutions in respect of confiscation of illegally acquired property. The Law on confiscation of 
illegally acquired property has not yet been adopted. As a result, confiscation continues to be 
regulated  in  a  non-harmonised  manner  by  the  State  and  Entities'  criminal  procedure  codes. 
Money laundering and tax evasion remain among the most common criminal cases handled 
by  the  State  Court.  Weak  preventive  measures  for  supervision  of  non-banking  financial 
institutions and intermediaries make it easier for such offences to be committed.  

Further  efforts  are  needed  in  order  to  reinforce  the  administrative  capacity  to  fight  money 
laundering  Bosnia  and  Herzegovina  needs  to  improve  its  legislation  against  money 

EN 

55 

   EN 

laundering,  including  in  relation  to  implementation  and  enforcement.  Following  analysis  of 
the  existing  framework,  this  should  be  carried  out  as  part  of  a  State-level  strategy  for 
preventing and fighting money laundering and financing of terrorism. 

Overall, Bosnia and Herzegovina has taken a number of steps in this area, but efforts need to 
be increased. Money laundering continues to be a serious problem. 

4.3.3.  Drugs 

Bosnia and Herzegovina remains primarily a transit country for drug trafficking, with rising 
local consumption. This trend has led to an increase in violent drug-related crime, mainly in 
urban centres even though such incidents remain relatively rare.  

There has been some progress in the fight against drugs. The Commission on Narcotic Drugs 
was established in October 2007. The Ministry of Civil Affairs has been designated national 
contact  point  for  the  European  information  network  on  drugs  and  drug  addiction.  A  joint 
campaign  by  the  Ministry  of  Security  and  the  EU  police  mission  is  aiming  to  raise  public 
awareness  of  the  dangers  of  drugs.  Moreover,  telephone  hotlines  and  local  press  coverage 
have focused public attention on issues related to smuggling of drugs. 

However,  no  State-level  strategy  on  illicit  drugs  and  Action  Plan  has  been  adopted.  Bosnia 
and Herzegovina needs to implement standards for information collection set by the European 
Monitoring  Centre  for  Drugs  and  Drug  Addiction.  The  State-level  coordination  on  the  fight 
against drugs remains understaffed and weak. 

As  regards  enforcement,  Bosnia  and  Herzegovina's  law  enforcement  bodies  are  not 
adequately equipped to fight trafficking. Inter-agency and international cooperation needs to 
be enhanced. Border controls have improved, but the overall measures against narcotics trade 
are often below EU standards. 

Overall,  Bosnia  and  Herzegovina  has  made  some  progress  in  the  field  of  drugs,  mainly  as 
regards  awareness-raising,  but  drug  trafficking  remains  a  serious  concern.  Sustained  efforts 
are required. 

4.3.4.  Police 

There  has  been  some  progress  in  reforming  the  police  forces  in  Bosnia  and  Herzegovina, 
although the fragmentation of the police has not been addressed. Cooperation and information 
exchange  between  law  enforcement  agencies  remain  weak.  Following  a  political  agreement 
between  the  political  leaders  in  November  2007  (Mostar  agreement),  and  in  line  with  the 
relevant key European Partnership priority, the Law on independent and supervisory bodies of 
the  police  structure  of  Bosnia  and  Herzegovina  and  the  Law  on  the  Directorate  for 
Coordination  of  Police  Bodies  and  Agencies  in  Bosnia  and  Herzegovina  were  adopted  in 
April 2008.  

These  laws  provide  for  establishment  of  seven  new  agencies  at  State  level.  Given  that  no 
agreement was reached on a transfer of policing powers, the new bodies have no coordination 
role  vis-à-vis  the  Entities',  cantonal  and  Brčko  District  police  forces.  However,  the  new 
institutions have generated forward momentum for closer cooperation on police matters and 
may become a platform for streamlining the overall police structure in the years ahead. In this 
context, transitional provisions in the laws stipulate that future steps will be considered after 
the constitutional reform. This approach is essential to ensuring full compliance with the three 

EN 

56 

   EN 

European  Union  principles  on  policing.  These  laws  now  need  to  be  implemented  and  the 
directors of the new agencies need to be appointed.  

In terms of operational policing, some steps have been taken to facilitate the work of the State 
Investigation and Protection Agency. Its director has been appointed, and new and adequate 
premises are under construction. However, there have been some attempts by the authorities 
of  Republika  Srpska  to  undermine  the  proper  functioning  of  the  State  Investigation  and 
Protection Agency. The issues relating to the fragmentation of telecommunications systems, 
databases,  computer-based  investigation,  criminal  analysis  systems  and  forensics  are  not 
addressed by the police reform laws.  

Police  cooperation  agreements  with  Bulgaria,  Montenegro  and  Romania  were  ratified  in 
February  2008.  Some  reinforcement  of  the  staff  of  the  State  Investigation  and  Protection 
Agency took place. Bosnia and Herzegovina has started implementing the strategic agreement 
with Europol and took steps towards conclusion of an operational agreement. 

Despite  some  progress  having  been  made,  small  arms  and  light  weapons,  as  well  as 
explosives  and  remnants  of  war,  remain  a  serious  problem  in  Bosnia  and  Herzegovina.  In 
particular, illicit arms possession is widespread, leading to rising levels of crime and private 
violence; legislation in this regard is still not sufficiently developed. 

Contrary  to  the  opinion  of  the  United  Nations  Security  Council  and  the  Council  of  Europe, 
decertified police officers are still prevented from applying for vacant jobs in the Bosnia and 
Herzegovina police forces.  

Overall,  Bosnia  and  Herzegovina's  preparations  in  the  police  field  are  advancing.  Particular 
efforts are now necessary to implement the new policing legislation fully and to continue with 
the police reform. 

4.3.5.  Fighting organised crime and terrorism 

There  has  been  limited  progress  on  fighting  organised  crime.  In  April  2008,  Bosnia  and 
Herzegovina  acceded  to  the  UN  Protocol  against  illicit  manufacturing  and  trafficking  of 
firearms. The Ministry of Security has started to prepare its contribution to the common threat 
assessment for the South-East Europe region. 

No additional Action Plans, except the one on the fight against vehicle-related crimes, have 
been developed to implement the national strategy to combat organised crime and corruption. 
The responsible sector within the Ministry of Security is assessing and revising the strategy. 
Some  cases  of  corruption  in  the  field  of  economic  crime  and  of  tax  evasion  and  other 
obligations were discovered and processed in Republika Srpska, but few of them have been 
completed. 

No amendments to the Criminal Code have been adopted. Difficulties in applying the criminal 
procedure  based  on  the  accusatorial  system  persist,  resulting  in  inadequacies  in  the 
cooperation between police and prosecutors and inconsistencies in the implementation of the 
codes. 

Bosnia and Herzegovina has not yet signed the additional protocol to the Council of Europe 
Convention  on  mutual  legal  assistance  in  criminal  matters.  Bosnia  and  Herzegovina  is  also 
not  yet  party  to  the  Council  of  Europe  Convention  on  the  international  validity  of  criminal 

EN 

57 

   EN 

judgements and the additional protocol to the Council of Europe Convention on the transfer of 
sentenced persons. 

The  State  Investigation  and  Protection  Agency  has  successfully  conducted  investigations, 
which  have  ended  the  activities  of  several  organised  crime  groups  operating  in  the  country. 
The  most  common  examples  of  organised  crime  were  underrated  taxation,  smuggling  of 
persons  and  money  laundering.  However,  the  national  statistical  instruments  for  measuring 
crime rates need to be improved. 

Some  progress  has  been  made  in  the  area  of  trafficking  in  human  beings.  The  Council  of 
Europe  Convention  against  Trafficking  in  Human  Beings  entered  into  force  in  May  2008. 
Bosnia and Herzegovina has undertaken further efforts to implement the national action plan 
for  combating  trafficking  in  human  beings  for  2005-2007.  The  Action  Plan  for  2008-2012 
was adopted by the Council of Ministers in May 2008. The number of related investigations, 
indictments and convictions has decreased. One major case of prostitution and pandering of 
minors  was  solved.  Sufficient  financial  resources  need  to  be  secured  for  the  office  of  the 
national coordinator for the fight against trafficking in human beings. 

With regard to protection of witnesses and victims of trafficking, the necessary amendments 
to the Law on the witness protection programme have not yet been adopted. A handbook on 
universal  procedures  for  different  professions  in  the  protection  and  treatment  of  victims  of 
trafficking was issued. The Ministry of Security has concluded  protocols on  cooperation on 
provision of assistance for victims of trafficking with several non-governmental organisations 
which run safe houses. The Ministry of Security finances these safe houses from its budget. 
The  cooperation  is  based  on  referral  mechanisms,  which  stipulate  that  law  enforcement 
agencies accommodate victims in safe houses.  

There  has  been  some  progress  in  the  fight  against  terrorism.  Bosnia  and  Herzegovina  has 
ratified the Council of Europe Convention on the Prevention of Terrorism, and it entered into 
force in May 2008. The capacity of the State Investigation and Protection Agency to collect 
and  analyse  information,  to  conduct  investigations  and  to  assess  possible  targets  has  been 
enhanced.  There  have  also  been  some  improvements  in  information  sharing  with  the  police 
bodies  of  the  Entities.  Nevertheless,  the  staffing  of  the  SIPA  Criminal  Investigation  Unit 
needs to be further reinforced. 

Little follow-up has been given to the 2006 anti-terrorism strategy. A number of Action Plans 
remain  to  be  adopted,  including  on  protection  of  civil  aviation  and  on  civil-military 
cooperation in the event of a terrorist attack.  

Overall,  some  progress  has  been  made  in  the  fight  against  organised  crime,  trafficking  in 
human beings and terrorism. 

4.3.6.  Protection of personal data 

Limited  progress  has  been  made  in  this  area.  The  Director  of  the  future  Data  Protection 
Agency of Bosnia and Herzegovina was appointed in June 2008. Despite some progress, the 
administrative  framework  for  establishing  the  agency  needs  to  be  completed,  including 
adequate staffing. The agency needs to become operational, and proper implementation of the 
rules for protection of personal data needs to be ensured. 

EN 

58 

   EN 

STATISTICAL ANNEX 

STATISTICAL DATA (as of 29 September 2008) 
Bosnia and Herzegovina 

Basic data 
Population (thousand) 
Total area of the country (km²) 

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
SI: GDP (in PPS per capita, EU-25=100) 
SI: Growth rate of GDP (national currency, at constant prices, % change on previous year) 
SI: Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
SI: Unit labour cost growth (national accounts, % change on previous year) 
SI: Labour productivity (GDP in PPS per person employed, EU-25=100) 
Gross value added by main sectors (%) 

Note 
1) 

Note 
2) 
2) 
2) 

2002 
2000 
1998 
3 550 
3 813 
3 753 
51 209  51 209  51 209  51 209  51 209 

2001 
3 790 

1999 
3 689 

2003 
3 830 
51 209 

2006 
2005 
2004 
3 837 
3 843 
3 843 
51 209  51 209  51 209 

2007 
3 844 
51 209 

1998 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

1999 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2007 

2006 

2005 

2004 

2003 

2001 

2002 

2000 
10 713  11 599  12 829  14505b  15 786  16 927  19 121  21 641p 
11 065p 
5 477 
2 880p 
1 449 
: 
: 
: 
: 
6.8p 
: 
: 
: 
: 
: 
: 
: 
: 
: 

7416b 
1935b 
: 
: 
: 
: 
: 
: 
: 

5 930 
1 561 
: 
: 
: 
: 
: 
: 
: 

6 559 
1 714 
: 
: 
: 
: 
: 
: 
: 

8 071 
2 103 
: 
: 
6.3 
: 
: 
: 
: 

8 655 
2 252 
: 
: 
3.9 
: 
: 
: 
: 

9 777 
2 544 
: 
: 
6.7 
: 
: 
: 
: 

Agriculture 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Households and NPISH, as a share of GDP (%) 
General government, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

Inflation rate 
SI: Consumer price index (CPI), (total, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 

: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

11.8 
20.3 
5.2 
62.8 
: 
: 
: 
: 
: 
: 
: 

11.5 
20.0 
4.7 
63.8 
: 
: 
: 
: 
: 
: 
: 

10.8 
18.7 
4.6 
65.9 
: 
: 
: 
: 
: 
: 
: 

9.7 
19.2 
5.2 
65.9 
: 
: 
: 
: 
: 
: 
: 

10.5 
19.4 
4.9 
65.2 
113.7 
92.2 
21.5 
24.6 
2.9 
29.4 
70.7 

10.3 
19.3 
5.0 
65.4 
113.4 
93.0 
20.4 
25.4 
0.1 
30.7 
69.6 

10.2 
19.2 
5.0 
65.6 
107.8 
88.2 
19.6 
23.0 
-0.9 
36.6 
66.4 

9.5p 
19.6p 
5.8p 
65.2p 
: 
: 
: 
: 
: 
: 
: 

Note 

1998 
: 

Note 
3) 

1998 
: 

1999 
: 

1999 
: 

2000 
100.0 

2002 
2001 
105.3e  112.4e 

2003 
118.0e 

2006 
2005 
2004 
132.8e  144.7e  159.3e 

2007 
170.4e 

2000 
4.8 

2001 
3.1 

2002 
0.4 

2003 
0.6 

2004 
0.4 

2005 
3.8 

2006 
6.1b 

2007 
1.5 

Note 

1998 
-311 
-2 803 

1999 
-471 
-3 095 

2000 
-429 
-3 000 

2001 
-834 
-3 308 

2002 
-1 253 
-3 524 

2003 
-1 439 
-3 671 

2004 
-1 319 
-3 678 

2005 
-1 555 
-3 962 

2006 
-817 
-3 406 

2007 
-1 401 
-4 142 

EN 

59 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments current account: exports of goods (million euro) 
Balance of payments current account: imports of goods (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 

Foreign Direct Investment (FDI) in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
SI: General government debt, relative to GDP (%) 

Financial indicators 
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) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
Interest rates: day-to-day money rate, per annum (%) 
Lending interest rate (one year), per annum (%) 
Deposit interest rate (one year), per annum (%) 
euro exchange rates: average of period - 1 euro = … national currency 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Trade balance: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Value of imports: all goods, all partners (million euro) 
Terms of trade (export price index / import price index) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Net migration rate: immigrants minus emigrants (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

EN 

597 
3 400 
171 
728 
1 594 
393 
60 

1998 
: 
: 

1998 
: 
: 
159 
791 
: 
1 496 
: 
: 
: 
1.969 
: 
145 

1998 
: 
: 
: 
: 
: 
: 

1998 
4.4 
: 
11.0 
70.5 
75.9 

781 
3 875 
168 
683 
1 773 
458 
166 

1999 
: 
: 

1999 
: 
: 
562 
1 107 
: 
1 422 
: 
: 
: 
1.956 
: 
443 

1999 
: 
: 
: 
: 
: 
: 

1999 
3.7 
: 
10.1 
70.5 
75.9 

1 226 
4 227 
203 
641 
1 727 
339 
159 

2000 
: 
37.9 

2000 
: 
: 
717 
1 262 
: 
1 543 
: 
: 
: 
1.956 
: 
525 

2000 
: 
: 
: 
: 
: 
: 

2000 
2.4 
: 
9.7 
71.3 
76.7 

1 268 
4 577 
254 
595 
1 626 
450 
133 

2001 
: 
38.1 

2001 
: 
: 
1377b 
2387b 
: 
1 707 
: 
: 
: 
1.956 
: 
1 385 

2001 
: 
: 
: 
: 
: 
: 

2001 
1.9 
: 
7.6 
71.3 
76.7 

1 169 
4 692 
232 
539 
1 499 
347 
282 

2002 
: 
33.4 

2002 
: 
: 
1 538 
2 593 
: 
2 189 
: 
12.6 
1.4 
1.956 
: 
1 270 

2002 
: 
: 
: 
: 
: 
: 

2002 
1.5 
: 
9.2 
71.3 
76.7 

1 303 
4 974 
297 
473 
1 462 
298 
338 

2003 
0.7 
27.7 

2003 
: 
: 
1 592 
2 810 
: 
2 619 
: 
10.9 
1.1 
1.956 
: 
1 428 

2003 
-2 019 
908 
2 928 
: 
53.4 
58.5 

2003 
0.9 
: 
7.6 
71.3 
76.7 

1 677 
5 355 
347 
408 
1 604 
261 
567 

2004 
1.6 
25.5 

2004 
: 
: 
1 808 
3 493 
: 
3 031 
: 
10.3 
0.9 
1.956 
: 
1 779 

2004 
-2 667 
1 299 
3 966 
: 
54.2 
53.0 

2004 
0.6 
: 
7.4 
71.3 
76.7 

2 060 
6 022 
402 
378 
1 628 
251 
478 

2005 
2.4 
25.6 

2005 
: 
: 
2 098 
4 129 
: 
3 857 
: 
9.6 
0.7 
1.956 
: 
2 160 

2005 
-3 750 
1 920 
5 670 
: 
53.8 
51.9 

2005 
0.1 
: 
6.7 
72.1 
77.5 

2 687 
6 093 
501 
326 
1 762 
237 
564 

2006 
2.9 
21.3 

2006 
: 
: 
2 593 
5 150 
: 
4 759 
: 
8.0 
0.5 
1.956 
: 
2 787 

2006 
: 
: 
: 
: 
: 
: 

2006 
0.2 
: 
7.5 
72.1 
77.5 

3 092 
7 234 
548 
340 
1 853 
186 
1 478 

2007 
1.3 
18.3 

2007 
: 
: 
3 149 
6 263 
: 
6 117 
: 
7.2 
0.4 
1.956 
: 
3 393 

2007 
: 
: 
: 
: 
: 
: 

2007 
-0.2 
: 
: 
72.1 
77.5 

Note 

Note 

4) 
5) 

6) 

Note 

Note 
1) 

60 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Labour market 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
SI: Employment rate (15-64): share of population aged 15-64 that is in employment (%) 

Note 

Share of male population aged 15-64 that is in employment (%) 
Share of female population aged 15-64 that is in employment (%) 

SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in 
employment (%) 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

SI: Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed 
(%) 
SI: Long-term unemployment rate: share of labour force that is long-term unemployed (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries 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 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
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 (%) 

Environment 
SI: Total greenhouse gases emissions, CO2 equivalent (tons, 1990=100) 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
SI: Share of renewable energy in electricity consumption (%) 
SI: Road freight transport as a share of total inland freight transport (modal split of freight 
transport) (%) 

EN 

1998 
: 
: 
: 
: 

1999 
: 
: 
: 
: 

2000 
: 
: 
: 
: 

2001 
: 
: 
: 
: 

2002 
: 
: 
: 
: 

2003 
: 
: 
: 
: 

2004 
: 
: 
: 
: 

7) 

8) 

9) 

: 

: 
: 
: 
: 
: 
: 
: 

: 

: 

: 

: 

: 

: 

: 

: 

: 
: 
: 
: 
39.4 
: 
: 

: 

: 

: 
: 
: 
: 
39.7 
: 
: 

: 

: 

: 
: 
: 
: 
40.0 
: 
: 

: 

: 

: 
: 
: 
: 
41.1 
: 
: 

: 

: 

: 
: 
: 
: 
41.6 
: 
: 

: 

: 

: 
: 
: 
: 
41.8 
: 
: 

: 

: 

2005 
: 
: 
: 
: 

: 

19.6 
21.4 
4.9 
54.1 
43.9 
: 
: 

: 

: 

2006 
51.3 
35.0 
46.1 
24.0 

30.6 

20.6b 
30.7b 
: 
48.7b 
31.1b 
28.9 
34.9 

: 

2007 
52.2 
36.8 
48.7 
25.0 

31.9 

19.9 
32.6 
: 
47.5 
29.0 
26.7 
32.9 

: 

28.4 

26.4 

Note 
10) 

1998 
296.0 

1999 
343.0 

2000 
372.0 

2001 
408.0 

2002 
446.0 

2003 
484.0 

2004 
505.0 

2005 
538.0b 

2006 
: 

2007 
: 

: 

: 

1998 
: 
7.1 

1998 
: 
: 

1998 
: 
: 
: 

1998 
: 
: 
: 

: 

: 

1999 
: 
: 

1999 
: 
: 

1999 
: 
: 
: 

1999 
: 
: 
: 

: 

: 

2000 
: 
: 

2000 
: 
: 

2000 
: 
: 
: 

2000 
: 
: 
: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

2001 
: 
117.3 

2002 
116.4 
196.4 

2003 
112.1 
274.1 

2004 
116.3 
: 

2005 
117.2 
: 

2001 
: 
: 

2001 
: 
: 
: 

2001 
: 
: 
: 

2002 
: 
: 

2002 
: 
: 
: 

2002 
: 
: 
: 

2003 
: 
: 

2003 
: 
: 
: 

2003 
: 
: 
: 

2004 
20.1 
: 

2004 
: 
: 
6.6 

2004 
: 
: 
: 

2005 
20.1 
: 

2005 
: 
: 
: 

2005 
: 
: 
: 

: 

: 

: 

: 

: 

: 

: 

: 

Note 
11) 

Note 

Note 

Note 

61 

: 

: 

2006 
: 
: 

2006 
20.1 
: 

2006 
: 
: 
: 

2006 
: 
: 
: 

: 

: 

: 

2007 
114.5b 
: 

2007 
20.1 
: 

2007 
: 
: 
: 

2007 
: 
: 
: 

: 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 

1998 
: 
: 
: 
: 
: 
: 
: 

1999 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 
: 

2002 
: 
: 
: 
: 
: 
: 
: 

2003 
: 
: 
: 
: 
: 
: 
: 

2004 
: 
: 
: 
: 
: 
: 
: 

2005 
: 
: 
: 
: 
: 
: 
: 

2006 
: 
: 
: 
: 
: 
: 
: 

2007 
: 
: 
: 
: 
: 
: 
: 

Note 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

12) 

: 

: 

: 
: 
: 
: 
: 
1 184 
: 
274 

: 
: 
: 
: 
: 
1 369 
: 
279 

: 

: 
: 
: 
: 
: 
930 
: 
176 

: 

: 

: 

: 

: 

: 

: 

2 126 
: 
: 
: 
: 
1 139 
: 
190 

2 122 
: 
: 
: 
: 
1 309 
: 
247 

2 192 
: 
: 
: 
: 
793 
: 
204 

2 196 
453 
596 
893 
580 
1 439 
: 
276 

2 187 
460 
654 
903 
629 
1 350 
: 
257 

2 194 
515 
712 
1 005 
662 
1 341 
: 
297 

2 139 
468 
535 
1 103 
724 
1 000 
: 
254 

Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
Primary production of natural gas (thousand TOE) 

Net imports of all energy products (thousand TOE) 
Gross inland energy consumption (thousand TOE) 
Electricity generation (thousand GWh) 

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous 
year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 
SI: Structural Indicator  
e : estimate  
f : forecast  
p : provisional  
b : break in series  
Source: Eurostat. 
1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 
10. 

For 2000-2002, the value of non-observed economic activities is not included, thus values are estimated.  
Until 2006, the growth rate of retail prices is presented, from 2006 onwards growth rate if the consumer price index (CPI) is used. 
Short-term lending rates in national currency to private enterprises and cooperatives (weighted average). 
Demand deposit rates in national currency to households (weighted average). 
Data as of 31 December; reserve assets do not include gold. 
Population aged between 50 and 64. 
Before 2006 data based on administrative sources, from 2006 onwards data based on the labour force survey. 
Unemployed for 24-59 months. 
For 1998 to 2004 net salaries; 2005 including data from Brcko District. 
2002 to 2005 data refer to the Federation of Bosnia and Herzegovina only and considers the total vehicle fleet (official data for the state level are not available). 2007 data contain only passenger cars and are official 
data delivered by Ministry of Civil Affairs Excluding goats. 

EN 

62 

EN