Commission staff working document - Bosnia and Herzegovina 2009 progress report accompanying the Communication from the Commission to the European Parliament and the Council - Enlargement Strategy and Main Challenges 2009-2010 {COM(2009) 533 final}
Date: 2009-10-14
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, 14.10.2009 
SEC(2009) 1338 

COMMISSION STAFF WORKING DOCUMENT 

BOSNIA AND HERZEGOVINA 2009 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2009-2010 

{COM(2009) 533 final} 

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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
.................................................................................................................................... 29 

4. 

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

4.1. 

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

4.1.1.  Free movement of goods............................................................................................ 31 

4.1.2.  Movement of persons, services and right of establishment ....................................... 33 

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

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

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

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

4.1.7. 

Intellectual property law ............................................................................................ 40 

4.1.8.  Social policies, employment and public health policy............................................... 41 

4.1.9.  Education and research .............................................................................................. 43 

4.1.10.  WTO issues ................................................................................................................ 44 

4.2. 

Sectoral Policies ......................................................................................................... 44 

4.2.1. 

Industry and SMEs..................................................................................................... 44 

4.2.2.  Agriculture and fisheries ............................................................................................ 45 

4.2.3.  Environment............................................................................................................... 47 

4.2.4.  Transport policy ......................................................................................................... 49 

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4.2.5.  Energy ........................................................................................................................ 50 

4.2.6. 

Information society and media................................................................................... 51 

4.2.7.  Financial control......................................................................................................... 53 

4.2.8.  Statistics ..................................................................................................................... 53 

4.3. 

Justice, freedom and security ..................................................................................... 55 

4.3.1.  Visa, border management, asylum and migration...................................................... 55 

4.3.2.  Money laundering ...................................................................................................... 58 

4.3.3.  Drugs .......................................................................................................................... 58 

4.3.4.  Police.......................................................................................................................... 59 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 60 

4.3.6.  Protection of personal data......................................................................................... 62 

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COMMISSION STAFF WORKING DOCUMENT 

Bosnia and Herzegovina 2009 PROGRESS REPORT 

1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and Parliament on 
progress made by the countries of the Western Balkans region. This progress report broadly 
follows the same structure as in previous years. The report: 

–  briefly describes relations between 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  the 
Stabilisation and Association Agreement and the European Partnership priorities.  

This report covers the period from early October 2008 to mid- September 2009. 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  EU  Member  States,  reports  by  the 
European  Parliament1  and  information  from  various  international  and  non-governmental 
organisations.  

From  the  technical  analysis  contained  in  this  report,  the  Commission  draws  detailed 
conclusions  regarding  Bosnia  and  Herzegovina.  It  is  publishing  those  conclusions  in  a 
separate communication on enlargement2. 

1.2. 

Context 

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

1 
2 

The rapporteur for Bosnia and Herzegovina is Ms. Doris Pack. 
Enlargement Strategy and Main Challenges 2009-2010 (COM (2009) 533 of 14.10.2009) 

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consensus on the main reform priorities, and there have been attempts to reverse previously 
agreed  reforms.  A  shared  vision  on  the  direction  of  the  country  remains  necessary  for  the 
smooth  operation  of  institutions,  for  creating  more  functional  and  efficient  State  structures, 
and for speaking with one voice on EU and international matters. In this regard, the country's 
political leaders have engaged in a joint EU/US-led initiative, started on 8/9 October 2009 in 
Sarajevo. This now needs to be converted into concrete results that will unblock Bosnia and 
Herzegovina's  progress  towards  the  EU  through  constitutional  changes  and  a  renewed 
domestic consensus. 

An international presence under UN auspices — the Office of the High Representative, OHR 
—  has  been  in  place  in  Bosnia  and  Herzegovina  since  1995.  Its  possible  closure  is  being 
considered  by  the  international  community,  but  a  decision  depends  on  Bosnia  and 
Herzegovina’s  progress  in  meeting  specific  objectives  and  conditions,  which  have  been 
determined  by  the  Peace  Implementation  Council  Steering  Board3.  The  EU  has  started 
preparations to strengthen its engagement in the country upon the closure of the OHR. 

1.3. 

Relations between the EU and Bosnia and Herzegovina  

Bosnia  and  Herzegovina  is  participating  in  the Stabilisation  and  Association  Process.  The 
Stabilisation and Association Agreement (SAA) has been ratified by fourteen Member States 
so far. The implementation of the Interim Agreement (IA) has been satisfactory overall in its 
first year, though efforts to prepare for forthcoming obligations under the IA/SAA – which is 
a European Partnership priority - need to intensify. 

The EU provides guidance to the authorities of Bosnia and Herzegovina on reform priorities 
as  part  of  the  European  Partnership.  Progress  on  these  reform  priorities  is  encouraged  and 
monitored by Reform Process Monitoring (RPM) meetings and by the bodies established by 
the Interim Agreement. One Plenary RPM meeting, six sectoral RPM meetings, five Interim 
Sub-Committee  meetings  and  one  Interim  Committee  meeting  have  been  held  over  the 
reporting period. 

The  regular  meeting  between  Members  of  the  European  Parliament  and  Members  of  the 
Bosnia  and  Herzegovina  Parliamentary  Assembly  took  place  in  January  2009.  A  political 
dialogue  meeting  at  the  level  of  foreign  ministers  was  held  in  September  2009.  Three 
coordination  meetings  on  EU-related  matters  between  high-level  representatives  of  the 
government  and  parliament  of  Bosnia  and  Herzegovina  and  representatives  of  the 
Commission’s Delegation and the EUSR took place in the reporting period.  

In addition to Community support, the EU has 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.  A  new  High  Representative/EU  Special 
Representative was appointed in March 2009. The mandate of the EU Special Representative 
is, inter alia, to promote overall political coordination and offer EU advice and facilitation to 

3 

These cover five objectives: (1) Acceptable and sustainable resolution of the issue of apportionment of 
property between the State and other levels of government; (2) Acceptable and sustainable resolution of 
defence property; (3) Completion of the Brčko final awards; (4) Fiscal sustainability (promoted by an 
agreement  on  a  permanent  ITA  coefficient  methodology  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), as well as 
two specific conditions: (1) signing of the SAA and (2) a stable political situation.  

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Bosnia  and  Herzegovina  to  help  the  country  meet  requirements  for  European  Union 
membership.  

The  EU  Police  Mission  (EUPM)  has  continued  to  concentrate  its  efforts  on  supporting  the 
fight against organised crime. EUPM continued to monitor and assess the implementation of 
police  reform.  Its  mandate  will  expire  at  the  end  of  2009  and  discussions  about  the 
establishment of a follow-on mission until 2011 are in the final phase.  

The  EUFOR/ALTHEA  military  mission  contributed  to  maintaining  a  safe  and  secure 
environment in the country. Local law-enforcement agencies proved able to deal with public 
unrest issues. In November 2008, the UN Security Council extended EUFOR’s mandate for 
one year. EUFOR forces currently amount to some 2,000 troops in the country, backed up by 
‘Over  the  Horizon’  reserves  —  in  total  four  battalions,  shared  with  NATO.  Mutual  tactical 
reserve  arrangements  are  also  in  place  with  KFOR.  Any  future  reconfiguration  of 
EUFOR/ALTHEA  will  be  decided  taking  into  account  the  overall  political  situation  and 
developments in Bosnia and Herzegovina. 

The  visa  facilitation  and  readmission  agreements  between  Bosnia  and  Herzegovina  and  the 
European  Community  continued  to  be  implemented.  In  the  framework  of  the  visa 
liberalisation dialogue process, Bosnia and Herzegovina has made good progress in the areas 
of  justice,  freedom  and  security,  but  has  not  met  all  the  benchmarks  set  in  the  roadmap. 
Bosnia  and  Herzegovina  is  encouraged  to  continue  its  efforts,  in  particular  in  the  areas  of 
biometric  passports,  border  and  migration  management  and  the  fight  against  corruption  and 
organised crime.  

As a potential candidate for EU membership, Bosnia and Herzegovina aligned itself with 100 
CFSP  declarations  from  a  total  of  128  relevant  declarations  adopted  by  the  EU  during  the 
reporting period. 

As  regards  pre-accession  financial  assistance,  the  2009-2011  Multi-Annual  Indicative 
Planning  Document  (MIPD)  for  Bosnia  and  Herzegovina  was  adopted  in  July  2009.  The 
European Commission (EC) allocated to the country a total of € 89.1 million under the 2009 
Instrument for Pre-accession Assistance (IPA) programme. The main areas of assistance are: 
public  administration,  constitutional  reform,  rule  of  law,  civil  society,  culture,  SME 
development,  labour  market  and  acquis  approximation.  The  2009  Programme  also  aims  to 
alleviate the impact of the financial and economic crisis in Bosnia and Herzegovina.  

IPA  —  and  the  remaining  CARDS  assistance  —  is  implemented  by  the  Commission’s 
Delegation  in  Sarajevo.  Little  progress  was  made  towards  decentralised  management  of  aid 
during  the  reporting  period.  The  National  Fund  and  the  Central  Financial  and  Contracting 
Unit  (CFCU)  in  the  Ministry  of  Finance  and  Treasury  (MoFT)  are  only  partially  staffed. 
Decentralised management remains a medium-term objective for Bosnia and Herzegovina. It 
is an indispensable step  in order to accede  to all components  of  the IPA programme and to 
prepare for the future management of structural funds.  

The  complex  institutional  and  political  environment  in  the  country,  significant  delays  in 
ratifying the 2007 and 2008 IPA Financing Agreements, as well as difficulties in appointing a 
National IPA Coordinator, have seriously delayed the implementation of IPA programmes.  

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In the framework of the Civil Society Facility, the 2009 IPA programme will provide € 3.0 
million  to  support  civil  society  development  with  a  focus  on  strengthening  civil  society 
networks and enhancing the role of civil society in the fight against corruption.  

In response to the economic crisis, an IPA crisis package has been created, comprising €200 
million for the Western Balkan region which are expected to leverage investments of at least 
€1  billion,  co-financed  by  the  partner  financial  institutions.  The  country  will  benefit  from  a 
share  of  multi-beneficiary  funds  for  competitiveness,  SMEs,  energy  efficiency  and  banking 
sector  regulation.  In  addition,  national  IPA  funds  were  programmed  in  response  to  crisis. 
They will provide financing in amount of €39 million, including via the Infrastructure Project 
Facility,  to  support  the  development  of  small  and  medium  sized  enterprises  and  provide 
significant  investment  in  infrastructure  in  the  transport,  environment,  and  energy  sectors. 
Funding  will  be  granted also to  the  Deposit Insurance Agency to enable it to cope  with the 
negative impact of the financial crisis on the deposit outflows.  

Bosnia  and  Herzegovina  joined  its  first  Community  programme  -  the  7th  Framework 
Programme for research, technological development and demonstration activities (FP7). The 
Memorandum of Understanding for its participation in the FP7 was signed in November 2008 
and entered into force in January 2009.  

Bosnia and Herzegovina became a full member of the Union for the Mediterranean and has 
submitted a number of projects which are undergoing evaluation.  

2. 

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  International 
Criminal Tribunal for the former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law 

Constitution 

The  Dayton/Paris  Peace  Agreement  (DPA)  put  an  end  to  the  1992-1995  war  and  brought 
peace  and  stability  to  Bosnia  and  Herzegovina.  However,  Bosnia  and  Herzegovina’s 
Constitution, which is contained in Annex IV to the DPA, establishes a complex institutional 
architecture. While progress has been made under the current constitutional structure, it still 
offers too many possibilities for political obstructionism. The misuse of provisions such the 
"entity voting"4 and complex rules on quorums prevents swift decision-making and, therefore, 
hinders  reform  and  the  country's  capacity  to  make  rapid  progress  towards  the  EU.  Among 
other things, the problem of blockages due to the entity voting rules needs to be addressed, and 
a stricter definition of the vital national clause in the Constitution is necessary.  

Nationalist  rhetoric  from  all  political  leaders  challenging  the  DPA  and,  by  implication,  the 
constitutional  order  remained  commonplace.  Certain  politicians  from  the  Federation 

4 

Article IV 4 d) of the Constitution of Bosnia and Herzegovina. 

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continued  to  question  the  existence  of  Republika  Srpska,  claiming  that  it  is  the  result  of 
institutions,  and  State 
genocide.  Republika  Srpska  frequently  challenged 
competencies  and  laws.  It  continued  to  claim  the  right  of  self-determination  and  remained 
systematically opposed to the transfer of new competencies to the State level, including in the 
context  of  the  SAA.  Moreover,  it  requested  unilaterally  –  without  the  consent  of  the  State 
level and the Federation - the return of competencies transferred to the State in recent years.  

the  State 

In  the  framework  of  the  Prud  Agreement  of  November  2008,  the  leaders  of  the  three  main 
political parties committed themselves to initiate the process of constitutional reform and to 
introduce  measures  to  harmonise  the  Constitution  of  Bosnia  and  Herzegovina  with  the 
European Convention on Human Rights (ECHR). However, the meetings of the Prud leaders 
soon showed diverging views on the future organisation of the country. The overall political 
climate has deteriorated in recent months and the process has been discontinued. 

The  Parliamentary  Assembly  adopted  an  amendment  to  the  Constitution  of  Bosnia  and 
Herzegovina  that  establishes  the  Brčko  District  as  a  unit  of  local  self-governance.  This  has 
been  a  major  development  and  step  forward,  which  opens  the  way  to  the  termination  of 
supervision over the District once all conditions are met. According to the amendment, Brčko 
remains  under  the  sovereignty  of  Bosnia  and  Herzegovina  in  the  areas  falling  within  the 
competencies  of  the  institutions  of  Bosnia  and  Herzegovina,  while  its  territory  is  a  shared 
property of the Entities. The constitutional amendment on Brčko is one of the five objectives 
set  by  the  Peace  Implementation  Council  (PIC)  for  the  closure  of  the  Office  of  the  High 
Representative.  

No  agreement  on  a  comprehensive  reform  of  the  Constitution  has  been  reached.  Elections 
therefore  would  continue  to  be  conducted  under  provisions  that  are  in  violation  of  the 
European Convention on Human Rights (ECHR). The exclusion of citizens not belonging to 
the three constituent peoples from the election to the House of Peoples and the Presidency is 
incompatible with Protocols 1 and 12 of the ECHR  

On  the  basis  of  the  Dayton/Paris  Agreement,  the  international  community  continues  to 
maintain  a  significant  presence  in  Bosnia  and  Herzegovina.  The  OHR/EUSR’s  office  has 
worked closely with the European Commission on issues related to European integration. The 
High  Representative  (HR)  has  continued  to  play  a  key  role  in  facilitating  reform  and 
governance  issues.  The  High  Representative  used  the  Bonn  Powers  on  several  occasions. 
Amongst  other,  the  HR  imposed  two  decisions  related  to  ICTY  cooperation  and  issued  a 
decision  to  remove  two  police  officers  for  anti-Dayton  activities.  The  High  Representative 
also  used  Bonn  powers  to  annul  the  conclusions  adopted  in  May  by  the  Republika  Srpska 
National  Assembly  challenging  the  competencies  of  State-level  institutions  He  also  used 
Bonn Powers to extend the period of temporary financing of the City of Mostar, to de-block 
developments  related  to  the  Brcko  District  and  to  prevent  the  collapse  of  the  electricity 
transmission company TRANSCO.  

Some  progress  has  been  made  towards  meeting  the  requirements  set  by  the  Peace 
Implementation Council Steering Board (PIC) for the transition from the OHR to a reinforced 
EU presence, notably as regards the objectives of completing the Brčko District final award, 
improving fiscal sustainability and entrenching the rule of law. However, the process has been 
hindered by insufficient political commitment. The resolution of State and defence property 
and  a  positive  assessment  of  the  political  situation  in  Bosnia  and  Herzegovina  by  the  PIC 
Steering  Board  based  on  full  compliance  with  the  Dayton  Peace  Agreement  remain 
outstanding  requirements  for  the  transition.  These  issues  need  to  be  urgently  addressed  in 

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order for Bosnia and Herzegovina to make further progress on its European Integration path. 
The proper implementation of the other objectives needs also to be ensured. 

The Entities have not yet finished making their Constitutions compliant with the March 2006 
ruling  of  the  Constitutional  Court  of  Bosnia  and  Herzegovina  that  the  Entity  coats  of  arms, 
flags and anthems are not in line with the State-level Constitution of Bosnia and Herzegovina.  

Overall, there has been little progress in addressing the key European partnership priority of 
more  functional  and  sustainable  state  structures  and  better  respect  for  human  rights  and 
fundamental  freedoms,  including  by  agreeing  and  adopting  the  necessary  constitutional 
changes.  Constitutional  reform  has  been  limited  to  the  amendment  concerning  the  Brčko 
District.  

Parliament  

The  Parliamentary  Assembly’s  legislative  work  has  continued  to  be  adversely  affected  by 
intransigent  and  ethnically  oriented  positions  taken  by  the  country’s  political  leaders. 
Obstructions  towards  State-level  laws,  including  European  Partnership  requirements,  in 
particular by members from the Republika Srpska, remained. 

The Chairmanship of the Parliamentary Assembly continues, in line with the Constitution of 
Bosnia  and  Herzegovina,  to  rotate  on  an  eight-monthly  basis  which  hinders  efficiency.  The 
Assembly  is  still  hampered  by  inadequate  technical  and  human  resources.  Cooperation 
between  the  Parliamentary  Assembly  and  the  Council  of  Ministers  remained  weak.  Lack  of 
coordination  in  the  legislative  process,  in  particular  between  the  State  and  the  Entity 
parliaments,  also  continued  to  be  a  problem.  The  work  of  the  various  Parliamentary 
committees has been affected by inter-ethnic divergences. Entity voting has often prevented 
swift adoption of legislation. 

Overall, the work of the Parliamentary Assembly of Bosnia and Herzegovina continued to be 
adversely affected by the unstable political climate 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. 

Members of the Presidency have continued to show their first allegiance to their Entity and 
their  constituent  people.  They  have  invoked  the  ‘vital  national  interest’  on  a  number  of 
occasions  and  have  generally  shown  little  capacity  to  find  common  positions.  Presidency 
members  have  continued  to  represent  individual  positions  in  international  fora  which  often 
did  not  reflect  the  policy  of  Bosnia  and  Herzegovina  as  a  whole.  Lack  of  political  will  and 
perceived diverging national interests in the government and parliament continued to delay the 
adoption  of  legislation.  The  State  institutions  made  limited  progress  as  regards  EU-related 
reforms.  The  work  of  the  Council  of  Ministers  is  also  hindered  by  the  limited  powers  of  its 
Chairman. There have been delays with appointments to key positions. The post of Minister 
of Security has been vacant for several weeks.  

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The Directorate for European Integration (DEI) could not fully play its role due to the absence 
of a Director for most of the reporting period. Its work has also been hampered by the difficult 
political climate.  

The Directorate for Economic Planning has continued to play its role as the primary source of 
policy  guidelines  and  in  setting  the  macroeconomic  framework.  Nonetheless,  the  Country 
Development  Strategy  and  Social  Inclusion  Strategy  have  not  been  adopted  yet.  These 
documents  are  to  replace  the  Medium-Term  Development  Strategy  which  expired  in  2007. 
The staffing of the General Secretariat of the Council of Ministers has improved. However, it 
does not yet have the sufficient capacity for planning and policy coordination.  

The  general  secretariats  of  the  governments  at  the  State  and  Entity  level  and  in  the  Brčko 
District  have  signed  a  memorandum  of  understanding  on  mutual  cooperation  which  should 
contribute  to  the  European  Partnership  priority  of  enhancing  coordination  at  political,  legal 
and  technical  level.  However,  fragmented  policy-making  between  the  State  and  the  Entities 
remains the main obstacle to efficient work by the State government. The Coordination Board 
for Economic Development and European 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  has  been  minimal.  The  Council  of 
Ministers  has  held  specific  sessions  on  European  integration  matters.  Due  to  its  limited 
powers  the  Council  of  Ministers  has  occasionally  been  left  out  of  negotiations  on  reforms, 
which have been conducted by political party leaders.  

A serious handicap for policy planning in Bosnia and Herzegovina as a whole is the lack of 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.  Some  progress  has  been  made  as  regards 
technical  preparations  for  the  2011  population  census.  However  the  necessary  legal 
framework has not yet been adopted. 

The  Republika  Srpska  government  has  continued  to  adopt  legislation  often  without 
coordination  with  the  Council  of  Ministers  or  the  Federation  government.  The  Republika 
Srpska  government  remains  opposed  to  the  transfer  of  competencies  to  the  State  level  and 
often  threatened  to  reverse  previous  transfers.  The  Federation  government  has  been  less 
efficient in adopting and implementing legislation, mainly due to the fragmented institutional 
structures.  This  complex  organisation  encourages  diverging  ethnic  interests  and  makes  it 
particularly difficult to achieve smooth governance.  

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

The Mostar City Council has failed to elect a new mayor in accordance with the requirement 
of  the  statute  of  the  City  of  Mostar,  due  to  a  power  struggle  between  ethnic  groups.  The 
failure  to  elect  a  mayor  meant  that  the  city  risked  serious  financial  difficulties,  since  the 
annual  budget  could  not  be  adopted  and  the  city’s  temporary  financing  expired  in  March 
2009. The High Representative issued a decision extending the period of temporary financing 
of the City of Mostar until the end of September 2009.  

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Overall, Bosnia and Herzegovina has made very limited progress on making the State-level 
government  structures  more  functional  and  efficient.  Lack  of  coordination,  ethnic  tensions 
and lack of resources continue to delay reform. Fragmented policy-making between the State 
and  the  Entities  remains  the  main  obstacle  to  efficient  work  by  the  State  government.  The 
frequent duplication of competencies leads to increased administrative costs. 

Public administration  

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

The  Public  Administration  Reform  (PAR)  Coordination  Office  has  maintained  its  increased 
staffing levels and can be considered to have sufficient human and material resources to carry 
out  its  task  of  coordinating  and  monitoring  implementation  of  the  PAR  Strategy  and  the 
accompanying  Action  Plan.  The  implementation  rate  of  the  Strategy  and  the  Action  Plan 
reached  36%  as  of  July  2009.  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  is  satisfactory.  Management  of  the  fund 
established to support public administration reform has been good. Almost two thirds of the 
resources  have  been  committed  and  several  projects  deployed.  All  the  implementing 
legislation  for  the  fund  is  in  place.  Donor  coordination  is  also  fully  managed  by  the  PAR 
Coordination Office.  

However,  Bosnia  and  Herzegovina's  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. 
Further  efforts  are  needed  to  make  the  recruitment  procedures  for  civil  servants  more 
efficient. Civil service laws at all levels have been amended or replaced by new legislation. 
This  should  bring  some  improvements  as  regards  efficiency  of  the  public  administration. 
However,  consultation  of  stakeholders  in  the  process  of  preparation  of  the  amendments  has 
been insufficient. Lack of convergence of the legislation at the different levels so as to enable 
better mobility of civil servants from one level of administration to another is of concern.  

The civil service is still highly politicised and in need of professionalisation, transparent and 
efficient  recruitment  procedures  and  modern  career  development.  Little  progress  has  been 
made in preventing political  interference and limiting  the  role  played  by  ethnic  identity  and 
party  membership  in  public  administration,  as  demonstrated  during  the  harsh  and  lengthy 
processes to appoint new directors in a number of key institutions (Directorate for European 
Integration,  Indirect  Taxation  Authority,  Communications  Regulatory  Authority,  etc).  Little 
progress  has  also  been  made  in  modernising  procedures  and  in  ensuring  closer  cooperation 
between the various administrations within the country.  

Action by Bosnia and Herzegovina towards finding an acceptable and sustainable resolution 
of the State property apportionment issue has been very limited. In view of the considerable 
delays incurred in the preparation of a comprehensive inventory of State property, the High 
Representative decided in August that his office will prepare such inventory. 

The new State Ombudsmen have, after long delays, been appointed. However, the delays in 
phasing  out  the  Entity  Ombudsman  offices  hamper  full  implementation  of  the  2006 
Ombudsman Law. These delays have been due, in particular, to the outstanding adoption of 
legislation closing down the Ombudsman’s office in Republika Srpska  

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Overall,  there  has  been  some  progress  in  the  area  of  public  administration  in  terms  of 
coordination and capacity. However, the reform efforts need to be intensified. 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  committee  of  the  Parliamentary  Assembly  of  Bosnia  and  Herzegovina  in  charge  of 
overseeing  the  Intelligence-Security  Agency  (OSA)  continued  its  practice  of  inspecting  the 
OSA’s regional centres, which is a positive element. The amendments to the Law on the OSA 
and  the  amendments  to  the  Law  on  Protection  of  Secret  Data  came  into  force  in  February 
2009. The former contributed to enhancing the planning and reporting obligations between the 
OSA  and  the  State’s  executive  and  parliamentary  bodies.  The  amendments  to  the  Law  on 
Protection of Secret Data broadened the scope of data protection in Bosnia and Herzegovina 
with  regulations  on  industrial  security  that  were  also  in  line  with  NATO  standards.  The 
process  of  Bosnia  and  Herzegovina's  accession  to  NATO  will  further  reinforce  civilian 
oversight of the country's security forces. 

Judicial system 

Progress in the area of judicial reform has been limited on the whole.  

Positive  developments  have  taken  place  as  regards  development  of  Information  and 
Communication  Technology in courts  and prosecutor’s offices. Almost all courts and a  few 
prosecutors' offices in Bosnia and Herzegovina are connected to a nationwide area network. 
Training  courses  have  been  provided  to  facilitate  the  usage  of  the  new  Case  Management 
System supported by this network. Local area networks have been installed in all courts and 
prosecutor’s  offices.  This  should  contribute  to  further  improving  the  efficiency  and 
transparency of the work of the courts and prosecutor’s offices in Bosnia and Herzegovina. 

The  Judicial  and  Prosecutorial  Training  Centres  in  the  Entities  continued  their  training 
activities in line with the training strategy. Nonetheless, the staffing of the Centres needs to be 
reinforced in order to ensure sustained and adequate implementation.  

Regarding  the  backlog  of  court  cases,  various  projects  are  underway  with  the  aim  of 
introducing systemic solutions. There has been some improvement in this regard, even though 
a high number of cases are still to be resolved and further efforts are necessary.  

However, the complex structure of the judiciary and the absence of a single budget continue 
to be a major obstacle to reform. No progress has been made towards establishing a Supreme 
Court that could harmonise application of legislation across the four internal jurisdictions: the 
State  level,  the  Federation  of  Bosnia  and  Herzegovina,  Republika  Srpska  and  the  Brčko 
District. Bosnia and Herzegovina has been unable to agree on the prolongation of the mandate 
of international judges and prosecutors. Political interference in the judicial system continues 
to be a cause for concern. The challenges to the jurisdiction and the competences of the State-
level  judicial  agencies  by  the  Republika  Srpska  government  are  unacceptable  and  deeply 
worrying. Political interference during the process of appointing new judges at the Federation 
Constitutional Court has also been of concern. 

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Implementation of the Justice Sector Reform Strategy has not progressed in accordance with 
the agreed timelines. This was due mainly to the complicated structure of the judicial system 
and  the  limited  contribution  by  the  Entity  Ministries  of  Justice  to  the  work  of  the 
implementation  working  groups.  Material  conditions  for  the  improvement  of  judicial 
capacities remained very limited. 

Limited progress has been made in the area of juvenile justice. One of the main priority areas 
for  the  implementation  of  the  Juvenile  Justice Strategy  is  the  adoption of  a  Juvenile  Justice 
Law in line with international standards. However, a State-level Juvenile Justice Law has not 
been  adopted.  Republika  Srpska  has  prepared  a  Juvenile  Code.  However,  there  is  no  such 
initiative in the Federation and the Brčko District. As regards support for legal provisions on 
the application of alternative measures, which is another priority area for the implementation 
of  the  Juvenile  Justice  Strategy,  a  by-law  on  such  measures  has  been  adopted  by  the 
Federation.  However,  only  limited  steps  have  been  taken  for  its  implementation.  Despite 
some improvements, there  continues to be a  lack  of  appropriate  and  well-regulated juvenile 
correctional facilities.  

Protection  of  child  witnesses  in  legal  proceedings  and  child  victims  is  insufficient.  The 
awareness of judges and prosecutors about children’s rights remains lacking, and priority to 
hearing juvenile cases in order to reduce the detention periods is not ensured.  

As  regards  local  prosecution  of  war  crimes,  both  the  War  Crimes  Chamber  of  the  Court  of 
Bosnia  and  Herzegovina  and  the  Special  Department  for  War  Crimes  of  the  Prosecutor’s 
Office  of  Bosnia  and  Herzegovina  continued  to  operate  with  efficiency  and  in  compliance 
with  internationally  recognised  fair  trial  standards.  Strategies  on  public  information  and 
outreach of the Court of Bosnia and Herzegovina have been adopted. However, despite some 
improvements,  the  outreach  of  the  Court  continues  to  be  insufficient.  Raising  the  currently 
low  level  of  public  awareness  is  important  also  because  lack  of  knowledge  about  the  War 
Crimes chamber has undermined public confidence in its work.  

Some limited progress has been registered as regards prosecution of cases before cantonal and 
district  courts,  especially  in  the  Federation.  However,  the  lack  of  witness  protection 
capabilities  and  witness  support,  insufficient  staffing  and  lack  of  specialisation  among 
cantonal  and  district  prosecutors  continue  to  be  major  obstacles  to  effective  prosecution  of 
war crimes. The lack of harmonisation of the legal codes used in war crime trials at State and 
Entity level, and in particular the fact that the Criminal Code of former Yugoslavia can still be 
applied at the Entity level, is of concern. The cooperation between prosecutors and police and 
between police across Entity lines needs to be stepped up.  

The  number  of  prosecuted  war  crime  cases  involving  sexual  violence  remains  low.  More 
efforts  are  needed  to  investigate  and  prosecute  such  cases  and  to  provide  witnesses  with 
sufficient protection and psychological support.  

A  National  War  Crimes  Strategy,  providing  for  a  systematic  approach  for  dealing  with  the 
large  volume  of  war  crimes  cases,  was  adopted  in  December  2008.  However,  only  limited 
progress  has  been  made  in  its  implementation,  mainly  due  to  insufficient  coordination 
between the various justice sector institutions at the State level, in the Entities and the Brčko 
District.  Sufficient  funds  need  also  to  be  made  available  for  the  implementation  of  the 
strategy. The substantial reduction of the budget of the State Court for 2009 is of concern, as 
it  may  put  its  functioning  under  considerable  strain.  The  workflow  on  the  processing  of 
serious  war  crime  and  organised  crime  cases  as  undertaken  by  the  office  of  the  Chief 

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Prosecutor and the Court President has been negatively affected by the delays in clarifying the 
position for an extension of the international presence in State judicial institutions after 2009.  

Overall,  preparations  by  Bosnia  and  Herzegovina  to  develop  an  effective  and  efficient 
judiciary remain at an early stage. Significant efforts are needed to ensure implementation of 
the  Justice  Sector  Reform  Strategy  and  the  National  War  Crimes  Strategy,  including  by 
ensuring adequate financial resources. The fragmented legal and structural framework across 
the country and the absence of a single budget impede efficiency. Political interference in the 
judicial system continues to be a cause for concern. 

Anti-corruption policy  

Bosnia  and  Herzegovina  has  made  little  progress  in  fighting  corruption.  A  positive 
development has been the adoption of a new Strategy for fight against corruption 2009-2014 
and the related Action Plan. Furthermore, a draft Law on Agency for prevention of corruption 
and on cooperation in fight against corruption has been prepared and is under adoption. 

However,  considerable  further  efforts  remain  necessary  in  this  area.  The  implementation  of 
the corruption-related aspects of the 2006-2009 Strategy for the fight against organised crime 
and  corruption  has  shown  very  limited  results.  Insufficient  implementation  of  the  legal 
framework and problems in coordination between the Entities constitute an issue of concern.  

Bosnia and Herzegovina has not yet signed the Additional Protocol to the Council of Europe 
Criminal Law Convention on Corruption and the OECD Convention on Combating Bribery of 
Foreign Public Officials in International Business Transactions. It still needs to harmonise its 
legislation with the Council of Europe Civil Law Convention on Corruption. Implementation 
of  the  Group  of  States  against  Corruption  (GRECO)  recommendations,  among  others  as 
regards the management of confiscated assets, remains incomplete. 

Following  the  rejection  of  the  amendments  to  the  State-level  Law  on  Financing  of  Political 
Parties aimed at increasing transparency, no new proposal has been presented. Elected public 
officials  at  State  and  Entity  level  and  their  relatives  are  required  to  submit  information  on 
their  involvement  in  other  institutions.  However,  there  is  no  effective  monitoring  of 
declarations of assets and no effective sanctions are provided for.  

Implementation  of  the  Freedom  of  Access  to  Information  Act  is  insufficient  with  respect  to 
anti-corruption.  Threats 
investigating 
corruption  cases  continued.  Adequate  legal  provisions  for  the  protection  of  civil  servants 
reporting corruption are not in place.  

to  non-governmental  organisations  and  media 

There is no effective investigation, prosecution and conviction of suspects of high-level cases 
of  corruption.  Weak  coordination  of  anti-corruption  efforts  at  the  State  level  remains  a 
problem. No overall survey and analysis of statistics on anti-corruption cases is available. The 
special  investigative  means  applicable  for  corruption  cases  are  not  effectively  used,  and 
cooperation between police and prosecutors needs to be strengthened. The judicial follow-up 
of cases of corruption is slow. The persistent lack of final convictions is a matter of serious 
concern. In some cases, it was attributed to the low quality of evidence presented before the 
court. 

Overall, corruption in Bosnia and Herzegovina is prevalent in many areas and continues to be 
a serious problem, especially within government and other State and Entity structures, linked 

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to public procurement, business licensing, in the health, energy, transportation infrastructure 
and  education  sectors.  Private  sector  corruption  is  also  prevalent.  The  establishment  of  an 
anti-corruption body, the implementation of the updated Strategy and Action Plan, as well as 
consequent investigation and prosecution of corruption cases, need to be ensured. 

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law 

As regards ratification of human rights instruments, Bosnia and Herzegovina has ratified 
the  major  UN  and  international  human  rights  conventions.  In  2008  it  ratified  the  Optional 
Protocol to the Convention against Torture (OPCAT). The Constitution includes most of the 
principles  of  the  human  rights  conventions  and  guarantees  that  they  supersede  national 
legislation.  However,  implementation  remains  uneven  and  delays  in  meeting  reporting 
obligations have continued. Further steps need to be taken to improve the implementation of 
these conventions. 

There have still been several cases where enforcement of the decisions of the Constitutional 
Court  of  Bosnia  and  Herzegovina  has  not  been  ensured.  This  has  led  to  cases  being  lodged 
before  the  European  Court  of  Human  Rights  (ECtHR).  During  the  reporting  period,  the 
ECtHR  issued  three  judgments  finding  that  Bosnia  and  Herzegovina  had  violated  the 
European Convention on Human Rights (ECHR). A total of 634 new applications were made 
to the ECtHR since October 2008. As of September 2009, nearly 2000 cases against Bosnia 
and  Herzegovina  were  pending  before  the  Court.  Most  of  these  cases  relate  to  old  foreign-
currency  savings.  Around  15%  of  these  cases  relate  to  non-enforcement  of  judgments 
ordering the payment of war-related damages.  

Limited  progress  has  been  made  as  regards  the  promotion  and  enforcement  of  human 
rights.  The  competence  to  monitor  the  implementation  of  legal  provisions  on  human  rights 
lies within the Ministry of Human  Rights and  Refugees. However, effective  monitoring  has 
not  been  ensured  in  all  human  rights-related  areas.  The  mechanisms  to  provide  a  safe 
environment for human rights activists also need to be improved. 

Incompatibilities between Bosnia and Herzegovina's constitutional framework and the ECHR 
need  to  be  addressed  in  order  to  ensure  improved  elections  in  2010  elections  and  full 
compliance with the SAA requirements. 

Following a decision of the US Supreme Court, five of the six citizens and residents of Bosnia 
and  Herzegovina  who  were  held  in  Guantanamo  Bay  have  been  released.  Three  of  the  five 
released returned to Bosnia and Herzegovina. Bosnia and Herzegovina needs to take action to 
have the remaining person released and accept responsibility for the return of these persons.  

Overall,  the  main  elements  of  international  human  rights  law  are  part  of  Bosnia  and 
Herzegovina's  legal  system,  but  implementation  and  enforcement  needs  to  improve.  Full 
compliance with the ECHR is necessary.  

Civil and political rights 

Civil and political rights are broadly respected, but there is room for improvement.  

Torture and ill-treatment are prohibited by the State and Entity Constitutions. Bosnia and 
Herzegovina  is  a  party  to  the  Council  of  Europe  Convention  for  the  Prevention  of  Torture. 

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However, it has repeatedly failed to appoint a representative in the Anti-Torture Committee. 
Ill treatment of detainees continues to be a matter of concern. Little progress has been made to 
improve the mechanisms for investigation of cases of alleged torture and ill-treatment.  

Bosnia  and  Herzegovina  still  did  not  provide  adequate  safeguards  so  that  people  facing 
deportation following a negative citizenship review are protected from persecution, including 
torture and ill-treatment, upon return. 

The  death  penalty  is  prohibited  by  the  Constitution  of  Bosnia  and  Herzegovina  and  by  the 
Constitution  of  the  Federation.  However,  Republika  Srpska  has  not  yet  repealed  the  death 
penalty provisions from its Constitution.  

Limited progress has been made to enhance access to justice in civil and criminal trials and to 
ensure that equality before the law is guaranteed. A State-level law on legal aid in criminal 
proceedings  has  been  adopted.  However,  legal  aid  in  civil  cases  continues  to  be  primarily 
provided  on  an  ad  hoc  basis  by  privately  funded NGOs.  The  budget of the  defence counsel 
continues to fall short of the needs. Equality before the law is formally guaranteed. In practice 
the  presumption  of  innocence  and  equal  treatment  are  not  always  ensured  during  the  legal 
proceedings.  The  right  to  a  fair  trial  is  incorporated  in  the  five  criminal  procedure  codes  of 
Bosnia  and  Herzegovina.  However,  court  proceedings  remain  generally  long,  especially  for 
appeal cases, and the case backlog reduction programmes launched in a number of district and 
cantonal courts are yet to produce tangible results. 

Limited  progress  has  been  made  to  improve  the prison system in Bosnia and Herzegovina. 
Prison capacity has been increased, in particular by opening a new prison in Tuzla in line with 
European  standards  and  refurbishing  a  number  of  existing  prison  facilities.  However,  the 
overall  standard  of  prison  facilities  remains  low.  Limited  progress  has  been  made  in 
addressing  the  problem  of  overcrowding,  poor  living  conditions  and  inadequate  medical 
treatment.  Ad  hoc  solutions  in  this  regard  prevent  the  rapid  imprisonment  of  individuals 
convicted  by  serious  cases.  The  lack  of  special  correctional/reform  institutions  for  women, 
juveniles,  persons  with  mental  health  problems,  persons  with  disabilities  and  seniors 
continues to be a problem. A new juvenile prison was opened in East Sarajevo, but staff does 
not have sufficient training and experience. There have  been training  programmes,  but  staff 
awareness of human rights and treatment of vulnerable groups such as women, juveniles and 
psychiatric  inmates  needs  to  improve  further.  Adequate  medical  facilities,  separation  of 
vulnerable groups and prison inspections remain insufficient. 

The State prison construction project has continued to experience delays, thereby running the 
risk that some bilateral funding could be lost. The Bosnia and Herzegovina Ministry of Justice 
continues  to  oversee  the  project,  including  the  ongoing  technical  review  needed  by  the 
Council of Europe Development Bank before confirming its final approval for the loan. 

The absence of a harmonised legislative framework and the fragmented management system 
remain the key obstacles to progress. There is no enforcement administration unit in the State 
Ministry of Justice. The lack of unified practice for criminal sanctions still remains a problem. 
The  15  competent  prison  administrations  face  challenges  in  coordination.  Cases  of 
mismanagement, combined with inappropriate provisions in the Criminal Procedure Code of 
Bosnia and Herzegovina, have led to the escape of individuals imprisoned for serious crimes, 
including war crimes. On the other hand, the use of appropriate alternative sanctions remains 
low.  Conditional  release  for  low-risk  detainees  is  gradually  being  introduced  in  a  small 
number of cases.  

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All  the  country's  Constitutions  provide  for  freedom  of  expression.  However,  this 
constitutional right has not always been fully implemented. The number of cases of physical 
violence  and  threats  to  journalists  and  editors  continued  to  increase,  which  is  a  matter  of 
serious concern. The action taken by law enforcement and judicial authorities to investigate 
and prosecute these cases has been insufficient. Ethnic orientation of media is increasing. 

The  attempts  to  undermine  the  independence  of  the  Communications  Regulatory  Authority 
are worrying. Although the mandate of the existing Board of the Communications Regulatory 
Authority has long expired, the authorities of Bosnia and Herzegovina have repeatedly failed 
to proceed with the appointment of a new Board and a new Director General, thus hampering 
the Authority’s day-to-day functioning and its performance in supporting the communication 
and broadcasting sector. 

The  reform  of  Bosnia  and  Herzegovina’s  public  broadcasting  sector  progresses  slowly.  The 
Federation’s Law on the Public Broadcasting Service is not yet fully aligned with the Public 
Broadcasting  System  Law  of  Bosnia  and  Herzegovina.  Proper  implementation  of  the  whole 
legal  framework  for  public  broadcasting  is  not  yet  ensured.  The  relevant  key  European 
Partnership priority has not been fully met. 

Freedom  of  assembly  and  association  are  entrenched  in  the  Constitution  of  Bosnia  and 
Herzegovina. However, problems remain with actual implementation. The increasing number 
of  cases  of  intimidation  and  violence  against  human  rights  defenders  and  civil  society 
organisations  are  of  serious  concern.  The  police  needs  to  respond  promptly  in  such  cases, 
providing protection and bringing to justice those responsible for such threats and violence. 
Action is also needed to ensure freedom of assembly and association for lesbian, gay, bisexual 
and transgender (LGBT) communities.  

As regards civil society organisations, very limited progress has been made in implementing 
the Agreement on cooperation between the civil society sector and the Council of Ministers of 
Bosnia  and  Herzegovina.  As  a  result,  the  role  of  the  Civil  Society  Board  has  been  rather 
limited. There continues to be a lack of transparency in the allocation of State funds to civil 
society organisations. 

The Constitution of Bosnia and Herzegovina provides for freedom of religion, and a State-
level law on freedom of confession and providing an appropriate legal status for churches and 
religious  communities  is  in  place. However,  religious  intolerance  continues  to  be  present  in 
the  country  and  there  have  been  a  number  of  cases  of  physical  attacks  against  places  of 
worship.  Police  investigations  in  such  cases  have  been  launched,  but  some  perpetrators  of 
these attacks still continue to escape justice. 

Overall,  Bosnia  and  Herzegovina  has  made  very  limited  additional  progress  in  the  area  of 
civil  and  political  rights.  A  State-level  law  on  legal  aid  in  criminal  proceedings  has  been 
adopted  but  access  to  justice  remains  a  matter  of  concern.  The  prison  capacity  has  slightly 
increased. However, overcrowding, poor living conditions and inadequate medical treatment 
in  prisons  remain  a  problem.  The  absence  of  a  harmonised  legislative  framework  and  the 
fragmented  management  system  need  to  be  addressed.  The  increasing  number  of  cases  of 
physical violence and threats against journalists and editors, the continuing challenges to the 
independence  of  the  Communications  Regulatory  Authority  and  the  slow  pace  in  the 
implementation of the public broadcasting reform are matters of serious concern. 

Economic and social rights 

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Little  additional  progress  has  been  achieved  in  the  field  of  women’s  rights.  Laws  on 
protection  against  domestic  violence  have  been  adopted.  However,  there  is  a  lack  of 
harmonisation of legislation for combating family violence at Entity and State level, as well as 
between  existing  laws  and  action  plans.  This  results  in  differing  judicial  interpretations  and 
inconsistent application of penalties. Despite some progress, there continue to be gaps in anti-
discrimination  policy  in  relation  to  the  alignment  of  State  labour  laws,  health  policies  and 
other relevant laws with the gender equality law. Implementation of the 2006 Gender Action 
Plan needs to improve. The Gender Equality Agency of Bosnia and Herzegovina has not yet 
been equipped with the financial and human resources necessary to effectively supervise and 
monitor  implementation  of  the  Gender  Action  Plan.  The  Agency  has  failed  to  carry  out 
quality  assessments  of  the  legislative  and  regulatory  measures  adopted  by  the  Council  of 
Ministers, as envisaged in its role.  

Domestic  violence  against  women  remains  widespread  and  under-reported.  Bosnia  and 
Herzegovina  continues  to  be  a  country  of  origin,  transit  and  destination  for  trafficking  in 
women  and  girls.  Women  continue  to  be  underrepresented  in  political  and  economic  life. 
They are still excluded from high-ranking and decision making positions. Their representation 
in  the  Parliament  is  about  14%.  The  collection  of  gender-disaggregated  data  and  gender 
analysis needs to improve in order to facilitate evidence-based policy making, with a view to 
incorporating  gender  in  budget  processes  and  supporting  the  implementation  of  gender-
relevant policies. 

Very  limited  progress  has  been  made  in  the  area  of  children’s  rights.  Some  improvements 
have occurred in securing housing for single parents but a systematic approach is still lacking. 
A  Framework  Law  mandating  one  year  of  pre-school  education  for  every  child  has  been 
adopted  and  is  being  gradually  endorsed  by  Entities  and  the  Cantons.  Implementation  is 
constrained  by  a  lack  of  resources.  An  Action  Plan  for  children  is  in  place  and  pending 
revision.  However,  problems  due  to  insufficient  State  action  in  the  fields  of  health,  social 
protection,  education  and  domestic  violence  against  children  remain.  Divisions  in  the 
education system through continuous development of mono-ethnic schools in both entities are 
still a matter of concern and result in de facto segregation of pupils from the very beginning of 
their  schooling.  As  regards  early  childhood  development,  the  declining  immunisation  rates 
constitute a threat to current and future public health. Pre-school attendance, at 6%, is among 
the  lowest  in  Europe.  Little  has  been  done  to  improve  the  implementation  of  the  2006 
Strategy  on  combating  violence  against  children.  Statistics  on  child  victims  of  violence  is 
lacking.  Institutional  care  is  often  preferred  over  alternative  community-based  options  for 
children without parental care or with special needs.  

Little  additional  progress  has  been  made  as  regards  discrimination  against  socially 
vulnerable people and people with disabilities. The legal framework is in place. A positive 
development  has  been  the  signature  of  the  UN  Convention  on  the  Rights  of  Persons  with 
Disabilities,  which  now  needs  to  be  ratified.  However,  the  fragmented  legal  and  financial 
framework does not provide the same social protection for all citizens throughout the country. 
Many groups of the population continue to be excluded from social protection and assistance 
benefits.  The  preferential  treatment  of  war  veterans  in  terms  of  social  benefits  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.  The  inadequacies  in  the  social 
welfare  systems  continue  to  adversely  affect  the  conditions  of  the  persons  with  disabilities, 
including  the  mentally  ill,  who  remain  particularly  vulnerable  to  social  exclusion.  The 
Council for Disabled Persons has not yet been established.  

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As  regards  labour  rights  and  trade  unions,  the  complex  system  of  government  and  the 
fragmentation  of  legislation  continue  to  hamper  social  dialogue  across  the  country.  The 
ratification of the revised European Social Charter was a positive step but the legislation of 
Bosnia and Herzegovina has not been yet fully aligned with the Charter. Limited progress has 
been made in clarifying the rules for registration and recognition of trade unions. No progress 
has been made 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.  Republika  Srpska 
continued to hinder the establishment of a country-wide Economic and  Social Council. The 
practice  of  disregarding  employees’  entitlement  to  social  security,  in  particular  during 
maternity  leave  for  employed  mothers  and  maternity  for  the  unemployed,  has  remained 
widespread. No steps have been taken to harmonise the legislative frameworks. The lack of a 
unified pension structure continued to be a problem. 

With  regard  to  anti-discrimination  policies,  the  State  and  Entity  Constitutions  guarantee 
equal treatment of all people, and anti-discrimination provisions are included in several laws. 
After long delays, a comprehensive State-level anti-discrimination law has been adopted. The 
law  represents  a  positive  step  towards  uniform  protection  across  Bosnia  and  Herzegovina. 
However, it exempts religious groups and provides only limited protection to several groups 
of  vulnerable  individuals.  Social  discrimination  and  exclusion  of  lesbian,  gay  bisexual  and 
transgender  (LGBT)  people  remain  widespread.  Physical  attacks,  ill-treatment  and  acts  of 
intimidation against these groups have continued. There has been no official condemnation of 
such  acts  by  government  authorities.  Effective  investigation  and  prosecution  need  to  be 
ensured.  

Bosnia and Herzegovina has continued its good progress in relation to property rights. The 
vast  majority  of  cases  of  property  repossession  requests  have  been  resolved.  The  remaining 
cases  are  either  being  dealt  with  by  the  relevant  courts  or  still  pending,  mainly  due  to  the 
unclear  status  of  possession.  The  mandate  of  the  Commission  for  Property  Claims  of 
Displaced Persons and Refugees has been extended. 

Overall, little progress has been made in the area of economic and social rights. Bosnia and 
Herzegovina has acceded to the UN Convention on the Rights of Persons with Disabilities. A 
comprehensive  State-level  anti-discrimination  law  has  been  adopted.  However,  its  scope  is 
rather  limited.  Implementation  of  legal  provisions  needs  to  improve.  Domestic  violence 
remains a serious concern. The protection of women against all forms of violence needs to be 
considerably  strengthened.  More  decisive  steps  are  required  as  regards  discrimination  of 
vulnerable  persons  and  persons  with  disabilities  and  to  secure  rights  of  children.  Labour 
rights, the role of trade unions and the mechanisms for social dialogue need to be enhanced. 

Minority rights, cultural rights and protection of minorities5 

As  regards  minority  rights,  cultural  rights  and  the  protection  of  minorities,  the  legal 
framework is largely in place but implementation needs to improve. Bosnia and Herzegovina 
is  party  to  the  Council  of  Europe  Framework  Convention  for  National  Minorities.  Despite 
some  steps,  the  ratification  of  the  European  Charter  for  Regional  or  Minority  Languages  is 
still  pending.  A  National  Minority  Council  is  operational  at  State  level  and  in  Republika 

5 

According to the Law on the Protection of Rights of Persons Belonging to National Minorities, there are 
17 national minorities in Bosnia and Herzegovina. The three constituent peoples – Bosniaks, Croats and 
Serbs – do not constitute national minorities. 

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Srpska.  In  the  Federation,  a  National  Minority  Council  has  been  established  but  is  not  yet 
fully  operational.  The  implementation  of  the  laws  on  national  minorities  at  the  State  and 
Entity  level  needs  to  improve  further,  in  particular  to  ensure  better  access  to  education  and 
employment for national minorities. 

No  progress  has  been  made  on  reforming  the  Bosnia  and  Herzegovina  Constitution,  and 
minorities  therefore  continue  to  be  excluded  from  the  House  of  Peoples  and  the  tripartite 
Presidency. As regards political participation of national minorities, the 2008 amendments to 
the Election Law have given the opportunity to national minorities to have their own list of 
representatives. However, the amendments were adopted rather late and less than one quarter 
of  municipalities  adapted  their  statute  to  the  amended  election  law  on  time.  National 
minorities remain under-represented at local level.  

Some progress has been made in preventing prejudice against the Roma and other minorities. 
The Communications Regulatory Authority adopted the Code of Good Practice for Television 
Broadcasters.  However,  implementation  of  the  Law  on  Protection  of  National  Minorities 
concerning  the  presentation  and  representation  of  national  minorities  in  the  media  remains 
uneven and minority issues still receive little coverage. 

Some limited progress has been made as regards refugees and internally displaced persons. 
The  revised  strategy  for  the  implementation  of  Annex  VII  of  the  Dayton/Paris  Peace 
Agreement, covering the period until 2014, has not been adopted yet. Officially, there are still 
some 125,000 persons who wish to return to their original place of residence. Despite some 
improvements, the supply of reconstructed housing falls short of the demand. The distribution 
of  assistance  to  refugees  and  displaced  persons  lacks  transparency  and  accountability. 
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  continued.  De-mining  is  important  to 
facilitate  the  return  of  refugees  and  displaced  persons  and  is  a  precondition  for  the 
development of a number of sectors of the economy, such as transport, agriculture, forestry or 
water management. The Strategy for Anti-mine Action for 2009-2019 was being implemented 
but the lack of funds remains the main obstacle to faster progress with de-mining. As regards 
missing persons, the operations of the Bosnia and Herzegovina Institute for Missing Persons 
are still affected by the lack of support from the authorities of Republika Srpska.  

A review of citizenship granted during and 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  continued  its  work  until  February  2009,  when  its 
mandate expired. The conducting of citizenship reviews has been transferred to the Ministry 
of Civil Affairs of Bosnia and Herzegovina. 

There  has  been  some  progress  as  regards  the  Roma  minority.  The  financial  resources  for 
implementing  the  Roma  Strategy  in  the  context  of  the  Decade  for  Roma  Inclusion  were 
increased considerably. These funds have been earmarked in particular for implementing the 
Action  plan  on  housing,  health  and  employment.  The  2004  Action  plan  on  the  educational 
needs of Roma and members of other national minorities is under revision. The revision needs 
to  be  finalised  without  delay.  Coordination  between  all  the  administrative  bodies  involved 
needs to be improved and sufficient financial resources secured for effective implementation 
of  this  action  plan.  The  situation  is  particularly  serious  in  employment  with  extremely  low 

EN 

20 

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figures of employed Roma. The enrolment of Roma children in school is slowly increasing as 
a result of positive measures. However, the drop out rate from the education system of Roma 
children, particularly girls, remains very high. The preparation of a Roma census is a positive 
step. The census should address the problem of the lack of civil registration of Roma, which 
results in the fact that many Roma families have no health insurance and cannot benefit from 
social  services.  However,  despite  these  efforts  Roma  continue  to  be  the  most  vulnerable 
minority.  

Overall,  there  has  been  some  progress  in  the  area  of  minority  rights,  cultural  rights  and 
protection  of  minorities.  However,  implementation  of  the  laws  on  national  minorities  at  the 
State  and  Entity  level  needs  to  improve.  National  minorities  remain  under-represented  in 
political  life.  The  revised  strategy  to  address  sustainable  return  of  refugees  has  not  been 
adopted  yet.  Returnees  continue  to  face  serious  difficulties  in  employment,  access  to  health 
care, education, pensions and social rights. The financial resources for the implementation of 
the Roma Strategy have been significantly increased. However, Roma still face very difficult 
living conditions and discrimination. 

2.3. 

Regional issues and international obligations 

Implementation  of  the  Dayton/Paris  Peace  Agreement  has  continued,  but  nationalistic 
rhetoric by political leaders challenging the Agreement and the constitutional order remained 
frequent (see also section 2.1 Constitution for further details). 

Bosnia  and  Herzegovina’s  cooperation  with  the  International  Criminal  Tribunal  for  the 
former Yugoslavia (ICTY), which is a key European Partnership priority, has continued to 
be  satisfactory.  Cooperation  between  ICTY  and  the  State-level  and  Entity  authorities  is 
adequate at operational level, and access to witnesses and archives remains good. However, 
Bosnia and Herzegovina needs to further step up its efforts and take the necessary measures 
against  persons  engaged  in  helping  the  remaining  fugitives  evade  justice  or  otherwise 
obstructing the effective implementation of ICTY’s mandate. The arrest of Ratko Mladić and 
Goran  Hadžić  remains  the  Tribunal’s  priority.  The  authorities  of  Republika  Srpska  have 
repeatedly  failed  to  take  appropriate  action  to  have  Radovan  Stanković  re-arrested  after  his 
escape from prison there in 2007 and to establish responsibility for his escape. Statements by 
Republika  Srpska's  political  leadership  challenging  the  veracity  of  war-time  massacres 
involving civilian population are unacceptable and deeply worrying. 

The  number  of  untried  war  crimes  cases  remains  high,  with  estimates  varying  between 
10,000  and  16,000  cases.  The  adoption  of  a  National  War  Crimes  Strategy,  providing  a 
systematic  approach  for  dealing  with  the  large  volume  of  war  crimes  cases,  has  been  a 
positive  step.  Efforts  need  to  focus  on  its  implementation,  including  by  ensuring  adequate 
financial resources 

The State Court has continued to perform its duties well. Ten accused have been transferred 
from The Hague to the Special War Crimes Chamber of the State Court under the 11bis6 rule, 
and  six  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. As of 
August 2009, there were 80 ongoing war crimes cases, of which 46 were at State level, 16 in 
the Federation, 17 in Republika Srpska and one in the Brčko District. 

6 

These are cases transferred by the ICTY for local prosecution. 

EN 

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However, the authorities of Bosnia and Herzegovina failed to enact a change to the Criminal 
Procedural  Code  of  Bosnia  and  Herzegovina  regulating  the  duration  of  custody  for  persons 
convicted  of  war  crimes.  Such  an  amendment  was  therefore  adopted  through  a  Decision  by 
the  High  Representative.  The  High  Representative  also  acted  to  stop  the  practice  in  the 
Federation prisons whereby war criminals convicted by the Court of Bosnia and Herzegovina 
were granted unsupervised leave from prison.  

There has been improved cooperation on the exchange of evidence and the transfer of some 
war crimes cases between the prosecutors from Bosnia and Herzegovina, Croatia and Serbia. 
However, obstacles to the extradition  of suspects in cases of war crimes and crimes against 
humanity between the countries of the region continue to exist. This exacerbates the problem 
of  impunity,  as  has  been  demonstrated  in  one  high-profile  case  where  a  convicted  war 
criminal was able to escape from Croatia to Bosnia and Herzegovina on the basis of having 
previously acquired citizenship of the latter, from where he cannot be extradited. As regards 
the possibility of serving the sentence in Bosnia and Herzegovina, the existing agreement on 
mutual recognition of sentences requires the convicted person’s consent for the sentencing to 
be served in the other countries. Bosnia and Herzegovina, together with its neighbours, should 
address the regional impunity gap, including by taking steps towards extradition agreements 
covering war crimes cases. 

Bosnia  and  Herzegovina  still  maintains  the  2003  bilateral  immunity  agreement  with  the 
United  States  granting  exemptions  from  the  jurisdiction  of  the  International  Criminal 
Court.  This  does  not  comply  with  the  EU  Common  Positions  on  the  integrity  of  the  Rome 
Statute  or  the  related  EU  guiding  principles  on  bilateral  immunity  agreements.  Bosnia  and 
Herzegovina needs to align with the EU position. 

Bosnia  and  Herzegovina  is  still  subject  to  the  monitoring  procedure  of  the  Parliamentary 
Assembly  of  the  Council  of  Europe  (CoE)  on  verifying  the  obligations  and  commitments 
relating  to  its  membership  of  the  Council  of  Europe.  There  has  been  no  improvement  in 
addressing the outstanding issues. Bosnia and Herzegovina has made no progress as regards 
the  appointment  of  members  or  candidates  to  several  Council  of  Europe  monitoring 
mechanisms and advisory bodies. Overall, implementation of Council of Europe Conventions 
and related requirements is weak.  

There  has  been  little  progress  in  the  Sarajevo  Declaration  process  which  aimed  to  finalise 
the  regional  refugee  return  process  by  the  end  of  2006.  While  Bosnia  and  Herzegovina 
continued  to  work  to  a  greater  or  lesser  extent  on  its  roadmap,  there  has  been  limited 
discussion on implementation issues on either a bilateral or a regional basis. More than 7,000 
refugees, primarily from the Republic of Croatia, and some 1,500 refugees from Kosovo7 are 
still  residing  in  the  territory  of  Bosnia  and  Herzegovina.  Moreover,  no  progress  has  been 
made to resolve the issue of compensation claims for those who lost occupancy and tenancy 
rights.  

Regional  cooperation  and  good  neighbourly  relations  are  an  essential  part  of  Bosnia  and 
Herzegovina's progress towards the European Union. Bosnia and Herzegovina continues to be 
an  active  participant  in  regional  initiatives,  such  as  the  South  East  European  Cooperation 
Process (SEECP), the Regional Cooperation Council (RCC), the Central European Free Trade 
Agreement  (CEFTA),  the  Energy  Community  Treaty  and  the  European  Common  Aviation 

7 

Under UNSCR 1244/1999. 

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Area Agreement (ECAAA). Sarajevo hosts the RCC Secretariat. However, only after pressure 
by the international community did the Council of Ministers of Bosnia and Herzegovina adopt 
a decision to allow the granting, on a case-by-case basis, of visas to Kosovans travelling with 
Kosovo passports in order to participate in RCC meetings. A permanent solution, that would 
also address participation in other international meetings, needs to be found. 

Bosnia  and  Herzegovina  has  been  implementing  CEFTA.  However,  a  law  protecting  the 
domestic  production  of  agricultural  and  related  products  through  the  reintroduction  of 
customs duties — contrary to CEFTA and to provisions of the Stabilisation and Association 
Agreement  (SAA)  —  was  adopted  in  June  2009.  It  is  currently  suspended  until  the 
Constitutional  Court  rules  on  it.  This  law,  if  implemented,  risks  damaging  relations  with 
Croatia and Serbia, and would represent a breach of the SAA once it enters into force. 

In  the  first  half  of  2009,  Bosnia  and  Herzegovina  held  the  Presidency  of  the  Energy 
Community.  However,  Bosnia  and  Herzegovina  continues  to  lag  behind  in  meeting  its 
obligations under the Treaty, especially in the gas sector. 

Bilateral relations with other enlargement countries have continued to be stable. However, 
there  has  been  very  little  progress  in  resolving  outstanding  issues  and  in  promoting 
reconciliation, which is a key European Partnership priority. The adoption of a new Law on 
international  agreements,  which  will  make  the  procedure  for  conducting  bilateral  or 
multilateral agreements clearer and more efficient, has been a positive development.  

Relations  with  Albania  have  intensified.  Agreements  on  cooperation  in  fighting  organised 
crime, corruption, illegal migration and drugs trafficking and in the area of customs have been 
concluded.  An  agreement  facilitating  travel  and  a  readmission  agreement  have  also  been 
signed. 

Relations with Croatia have remained stable, although they were strained due to various trade 
disputes,  in  particular  following  the  imposition  by  Bosnia  and  Herzegovina  of  import 
restrictions  on  agricultural  products  which  are  contrary  to  CEFTA  regulations  The  four 
protocols  linked  to  the  implementation  of  the  2007  Agreement  on  Border  Control  between 
Bosnia and Herzegovina and Croatia have been ratified. However, there has been no progress 
on addressing the open border issues with 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 progress has been made 
regarding the agreement on use of the Port of Ploče and Croatia’s plans to construct a bridge 
on  the  Peljesac  peninsula.  Other  unresolved  issues  include  property  and  refugees.  The 
Interstate Cooperation Council has not met over the reporting period. Bosnia and Herzegovina 
has not yet ratified the agreement on dual citizenship. 

Relations with the former Yugoslav Republic of Macedonia remained good. An Agreement on 
cooperation in security matters and a new readmission agreement were ratified. 

Relations  with  Montenegro  have  further  intensified.  An  Agreement  on  joint  border  patrols, 
regular meetings between border police and on joint border controls and joint border crossings 
was concluded in March 2009. Agreements on cooperation in the areas of culture, education 
and science as well as a readmission agreement have been signed.  

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Relations with Serbia have remained stable overall. The provision of assistance by Serbia to 
Bosnia  and  Herzegovina  during  the  gas  crisis  and  the  high-level  visits  by  Serbian  officials 
have been positive. However, no meetings of the Interstate Cooperation Council have taken 
place and no progress on addressing issues related to property has been registered. No border 
agreement between Bosnia and Herzegovina and Serbia has been signed yet. In the meantime, 
Republika Srpska has continued to cooperate closely with Serbia on the basis of the Special 
Parallel  Relations  Agreement  and  the  related  Protocol  on  Cooperation.  An  Agreement  on 
economic cooperation between Serbia and Republika Srpska has been signed. As part of the 
implementation  of  the  2008  Protocol  on  inter-parliamentary  cooperation,  a  delegation  from 
the Serbian Parliament visited Republika Srpska in April 2009.  

Relations  with  Turkey  have  remained  good.  A  readmission  agreement  has  not  been  signed, 
despite repeated requests by Bosnia and Herzegovina.  

Overall, Bosnia and Herzegovina's cooperation with ICTY has  remained good. The  country 
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 and property.  

3. 

ECONOMIC CRITERIA 

In  examining  the  economic  developments  in  Bosnia  and  Herzegovina,  the  Commission’s 
approach  was  guided  by  the  conclusions  of  the  European  Council  in  Copenhagen  in  June 
1993,  which  stated  that  membership  of  the  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  January  2009  the  authorities  submitted  their  third  Economic  and  Fiscal  Programme  for 
2009-2011. However, in view of large uncertainties concerning the global economic situation 
and  its  impact  on  Bosnia  and  Herzegovina  at  the  time  of  drafting,  it  retains  only  limited 
relevance  as  a  core  document  for  economic  policy  making.  Faced  with  the  economic  crisis 
and  the  legacy  of  poor  fiscal  policies,  the  authorities,  represented  by  the  National  Fiscal 
Council, concluded in early May 2009 negotiations with the International Monetary Fund on a 
Stand-By  Arrangement  that  comprised  commitments  to  a  number  of  structural  reforms  and 
fiscal adjustment measures. Subsequently, the National Fiscal Council approved a three-year 
budget  framework  for  2009-2012  in  June.  Following  the  fulfilment  of  further  agreed  prior 
actions, the IMF board approved in July 2009 the € 1.15 billion loan for a three-year period. 
In general, differences between the entities on economic and fiscal policy essentials continue 
to exist. The commitment to pursue structural reforms has remained weak, particularly in the 
Federation.  The  quality  of  public  spending  has  deteriorated  in  both  entities.  Overall,  the 
commitment  to  structural  reforms  and  sound  public  finances  remained  uneven  across  the 
country.  The  coordinating  and  decision-making  role  of  the  National  Fiscal  Council  was 
however somewhat strengthened and the general consensus on a market-based economy was 
kept.  

Macroeconomic stability 

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In  2008,  real  GDP  growth  fell  to  5.4%  from  6.8%  recorded  in  2007.  The  recovery  of  the 
electricity sector contributed largely to growth. The country's growth model was characterised 
by  high  domestic  demand,  fed  by  rapid  credit  growth,  external  financing  and  expansionary 
fiscal  policies  that  fuelled  macroeconomic  imbalances,  not  least  a  widening  current  account 
deficit.  The  global  economic  and  financial  crisis  started  to  reveal  its  impact  on  Bosnia  and 
Herzegovina  in  the  last  quarter  2008.  Economic  activity  decelerated  and  unemployment 
picked  up.  Trade  dynamics  slowed  drastically  because  of  reduced  demand  and  financial 
stability was threatened in October 2008 when more than 6% of deposits were withdrawn. Per 
capita  income,  measured  in  purchasing  power  standards  (PPS),  was  30%  of  the  EU-27 
average  in  2008,  up  by  one  percentage  point  compared  to  the  previous  year.  While  the 
situation in the domestic financial market stabilised quickly due to an appropriate, quick and 
flexible reaction of the Central Bank, the slowdown of economic activity continued in 2009 as 
a result of lower domestic and external demand, reduced financing and falling foreign direct 
investments. The Federation registered a drop of industrial production of 10.5% annually in 
the  first  eight  months.  In  Republika  Srpska,  however,  it  increased  by  16.7%  which  is  to  a 
large  extent  due  to  the  re-opening  of  an  oil  refinery  in  December  2008.  In  an  attempt  to 
mitigate  the  effects  of  the  economic  crisis  on  the  budgets,  the  National  Fiscal  Council 
unblocked  some  €  90  million  in  the  first  quarter  of  2009  from  succession  funds  of  former 
Yugoslavia's assets. Nonetheless, this proved to be insufficient as public finances increasingly 
came  under  stress  as  the  result  of  falling  revenues  and  high  spending  commitments. 
Therefore,  the  authorities  finally  turned  to  the  IMF  for  external  support.  Overall,  with  the 
crisis unfurling economic growth declined towards the end of 2008 and this trend continued in 
2009, leading the country into recession. 

The current account deficit widened to 14.7% of GDP in 2008, up from 12.7% in 2007, driven 
by  worsening  terms  of  trade  and  developments  of  global  prices  and  internal  demand  during 
the first half of 2008. It was financed more or less equally by foreign direct investments and 
drawings of new loans from abroad. The already very high trade deficit still slightly grew to 
38.1% of GDP in 2008 (goods only), up from  37.4% of GDP in 2007. The development of 
other  components  of  the  current  account  showed  reversing  trends  as  compared  to  previous 
years: The income balance increased by only 3.5% (24% in 2007) and current transfers fell by 
6.7%  (after  an  increase  of  11.3%  in  2007),  mainly  because  of  remittances  falling  by  4%. 
Nevertheless, transfers still represent the major offset to trade within the current account. The 
monthly trade deficit improved for the first time in more than two years in November 2008. 
This trend continued as in the first half of 2009 the drop in imports (25.3%) exceeded that in 
exports (23.4%), resulting in an improvement of the trade deficit by 26.7% year-on-year. The 
current  account  deficit  more  than  halved  year-on-year  in  the  first  quarter.  This  drop  was 
mainly  due  to  developments  in  trade,  but  also  a  slightly  rising  current  transfer  balance 
contributed  to  it.  Bosnia  and  Herzegovina's  external  public  debt  increased  by  5.5%  in  2008 
and  by  a  further  1.4%  in  the  first  half  of  2009,  but  still  stands  at  a  relatively  low  level  of 
17.5%  of  estimated  GDP.  Private  external  debt  reached  27.4%  of  GDP  in  2008.  Official 
foreign exchange reserves declined by 16.8% up to June 2009 from their peak in September 
2008,  before  they  recovered  again  as  a  result  of  the  first  tranche  of  the  IMF  support  being 
disbursed in July. They cover more than five months of imports. Overall, external imbalances 
are  adjusting  in  the  context  of  the  crisis,  characterised  by  a  rapid  narrowing  of  the  current 
account deficit towards a more sustainable level. 

The already high rate of registered unemployment further increased in the first half of 2009 to 
41.6%  in  June  from  40.6%  at  end-2008.  Sectors  with  the  highest  annual  growth  of 
employment were financial intermediation, public administration, health and education, while 

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employment  decreased  in  manufacturing,  mining,  agriculture  and  trade.  According  to  the 
Labour Force Survey following ILO methodology, unemployment increased to 24.1% in 2009 
from 23.4% in 2008. The discrepancy between the two measurement methods points to a high 
importance  of  informal  activities.  Slow  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 – continue to hamper job creation and 
labour  market  participation.  The  corresponding  key  European  Partnership  priority  has  not 
been addressed. Overall, unemployment remains very high and slight improvements recorded 
throughout 2008 have started to be offset by negative developments since the beginning of the 
economic downturn. 

Annual  inflation  became  negative  in  May  2009  and  stood  at  -1.2%  in  July,  down  from  its 
peak of nearly 10% a year earlier. The 12-month moving average inflation rate fell to 2.9% in 
July,  compared  to  7.4%  in  2008.  The  monetary  policy  of  the  Central  Bank  continued  to  be 
conducted  under  a  currency  board  arrangement,  with  the  euro  as  the  anchor  currency.  In 
response  to  the  turmoil  on  financial  markets  in  the  fourth  quarter  2008  the  Central  Bank 
increased  the  liquidity  of  the  banking  system  in  several  consecutive  steps  by  lowering  the 
minimum reserve requirement rate, with the aim of strengthening and restoring confidence in 
national financial markets and of stimulating credit activities. As of November 2008 all new 
credit  lines  from  abroad  by  commercial  banks  ceased  to  enter  into  the  basis  for  required 
reserves  calculation  and  the  minimum  rate  was  set  at  14%,  down  from  18%.  As  of  January 
2009, the required reserve ratio on term deposits with a remaining maturity of more than one 
year  was  further  lowered  to  10%  and  to  7%  in  April.  In  line  with  reduced  demand,  the 
monetary aggregate M28 declined by 6.7% between September 2008 and July 2009, showing 
positive trends in recent months. Overall, the currency board has continued to function well 
and proved its stability under difficult circumstances. 

The share of general government in GDP remains high with 2008 revenues at 46% of GDP 
and expenditures at 50% of GDP, thus creating a budget deficit of 4% of GDP in 2008, down 
from  near-balance  in  2007.  Revenue  weakened  in  2008,  while  expenditure  rose  sharply, 
driven by increases in wages and social benefits. The increase in the public sector wage bill – 
which  stood  at  12%  of  GDP  in  2008  on  a  consolidated  basis  –  was  high,  particularly  in 
Republika Srpska where it reached 36.4% in 2008 (16.4% in the Federation). Social benefits 
increased  by  26.5%  in  Republika  Srpska  and  30.4%  in  the  Federation  and  stood  at  a 
consolidated 10% of GDP in 2008. In the Federation, transfers to households almost doubled 
in nominal terms. Bosnia and Herzegovina spends a very high share of 4% of GDP on non-
insurance  social  protection  cash  transfers.  At  the  same  time,  there  was  a  slowdown  of 
investment expenditure to 6% of GDP in 2008 from 6.7% in 2007. The Federation introduced 
a  10%  flat  personal  income  tax  rate  as  of  1  January  2009.  In  the  context  of  the  IMF 
programme, some excise taxes were increased as of 1 July 2009. The system of generous non-
targeted  benefits  for  war  veterans,  demobilised  soldiers  and  other  social  groups  and  their 
wide-spread misuse continued to be a drag on the budget, especially in the Federation where 
they absorb approximately one third of the  budget. In  the context  of the  IMF  programme it 
was  agreed  to  replace  this  highly  inefficient  system  by  a  means-tested  scheme  over  the 
medium-term. The lack of progress with the privatisation agenda in the Federation – receipts 
amounted to only € 1.5 million in 2008 and € 0.6 million in the first half of 2009 – further 
undermined the entity's financial health. In April 2009, the Federation rebalanced the budget 

8 

M2 comprises currency outside banks and demand and time and savings deposits in both domestic and 
foreign currency.  

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upward,  increasing  its  volume  by  19%  in  order  to  reflect  the  planned  borrowing  for  the 
coverage  of  the  2008  budget  deficit.  A  second  rebalance  in  July  included  the  adjustment 
measures  agreed  with  the  IMF,  such  as  the  Intervention  Law  cutting  wages  and  social 
transfers  by  10%.  Following  the  agreement  with  the  IMF,  Republika  Srpska  rebalanced  its 
budget  and  lowered  its  volume  by  4.2%.  In  the  first  half  of  2009  consolidated  revenues  of 
entities and state level decreased by 9.8% compared to the same period of the previous year, 
mainly  as  the  result  of  falling  custom  duties  and  VAT  revenues.  Despite  the  agreements 
reached on coefficients for re-distribution, the allocation of indirect tax revenues to the state, 
entities  and  the  Brčko  District  remains  a  controversial  issue.  Overall,  the  quality  and 
sustainability of public finances has further deteriorated, especially in the Federation. 

General  government  debt  comprising  all  levels  of  government  stood  at  27.8%  of  GDP  in 
2008,  down  from  29.8%  in  2007.  In  the  course  of  2009,  public  debt  has  increased 
substantially due to significant budget deficits and the loan agreement with the IMF. In 2008 
internal public debt managed and served by the entities amounted to about 11% of GDP. Both 
entities and the Brčko District have issued bonds in order to repay these claims. With the Law 
on Debt, Borrowing and Guarantees in the Federation the legal framework has improved and 
the limitation of debt service in relation to revenues in the Federation contributes to the long-
term sustainability of public finances, similar to provisions in place in Republika Srpska and 
at  state  level.  However,  the  institutional  capacity  for  debt  management  remains  weak. 
Overall,  while  public  debt  remained  at  acceptable  levels  and  even  decreased  in  2008  it  has 
substantially increased in 2009.  

Improvements in the overall macroeconomic policy mix are still needed. On the one hand, the 
currency board arrangement enjoys a high level of confidence and credibility. In addition, the 
economic downturn has resulted in the necessary adjustments of external imbalances. On the 
other hand, the actual fiscal situation has worsened and adjustment efforts are uneven across 
the country. Overall, the viability of macroeconomic policies suffered from worsening public 
finances  which  finally  led  to  the  need  for  an  IMF  programme,  even  though  external 
imbalances have started to improve in the context of the global economic crisis and financial 
and monetary stability has been preserved. 

Interplay of market forces 

The  private  sector's  share  in  GDP  remained  stable  at  around  60%  in  2008.  After  the  large 
privatisations in Republika Srpska in 2007, the pace slowed and only ten smaller enterprises 
and one strategic enterprise were privatised between April 2008 and May 2009 in this entity. 
So  far,  around  69%  of  the  initial  stock  of  state-owned  capital  intended  for  privatisation  has 
been sold, one percentage point up compared to the previous year. The privatisation process 
in  the  Federation  continues  to  proceed  very  slowly  as  the  privatisation  strategy  of  the 
government  has  still  not  been  fully  adopted.  The  sale  of  the  aluminium  company  Aluminij 
d.d. Mostar, one of the largest enterprises in the country and a key source of export revenue, 
remains blocked because of the inability of the Federation government and the winning bidder 
to  agree  on  a  long-term  electricity  price  contract.  Also  the  Federation's  two  telecom 
companies still await their privatisation. Overall, the privatisation process did not advance.  

Market entry and exit 

Bosnia  and  Herzegovina  has  undertaken  some  limited  reforms  in  order  to  improve  the 
business  environment.  Obtaining  a  construction  permit  was  simplified  by  facilitating  the 
registration of new buildings in the land and property registries, reducing the average time to 

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obtain  a  permit  from  296  to  255  days.  Transferring  property  also  became  more  efficient 
thanks  to  the  computerisation  of  the  land  registry.  Despite  some  improvements  in  court 
registration the average time to start a business remained at 60 days. A new Law on Business 
Companies  came  into  effect  in  Republika  Srpska  on  1  July  2009,  simplifying  the  business 
start-up process, whereby certain inspections are now conducted after the business has started 
its  operations.  Concerning  the  closure  of  businesses,  professional  requirements  for  trustees 
were  tightened,  reducing  the  time  needed  in  bankruptcy  procedures.  The  "Legislative 
Guillotine" project to reduce administrative burdens is completed in Republika Srpska. In the 
Federation,  it  was  launched  in  mid-2009.  Businesses  continue  to  suffer  from  political 
instability,  the  high  tax  burden,  and  slow  contract  enforcement  and  business  registration 
procedures.  Overall,  some  limited  improvements  in  the  business  environment  can  be 
recorded, but reforms are not sufficient to substantially foster private sector developments. 

The legal system 

The  poor  quality  of  public  services  and  prevalent  corruption  negatively  affect  the  business 
climate  and  the  attractiveness  of  Bosnia  and  Herzegovina  for  investors.  The  large  informal 
sector is fuelled by weaknesses in tax and expenditure policies, as well as in law enforcement, 
including  the  fight  against  corruption  and  organised  crime.  The  backlog  of  cases  remains  a 
major  problem  for  judiciary.  Various  activities  aimed  at  introducing  systemic  solutions  for 
reducing  delays  in  courts  are  underway,  and  a  database  has  been  created  at  the  Sarajevo 
municipal  court,  where  the  vast  majority  of  the  backlog  exists.  Almost  all  courts  in  the 
country  have  now  been  connected  to  a  nation-wide  area  network  and  the  new  Case 
Management  System  has  been  introduced.  Overall,  the  operation  of  the  judicial  system  has 
slightly  improved;  however,  the  existing  backlog  of  unsolved  cases,  unreliable  contract 
enforcement  and  slow  processing  times  are  hampering  the  business  environment.  The 
informal sector remains an important challenge, as it reduces the tax base and the efficiency 
of economic policies. 

Financial sector development  

Tensions on the  global financial markets  spilled over to the country and resulted in a "mini 
bank-run"  in  October  when  some  €420  million  of  deposits  (some  6.4%  of  the  stock  of 
deposits)  were  withdrawn.  Foreign  parent  banks  injected  liquidity  to  their  local  subsidiaries 
and  the  Central  Bank  of  Bosnia  and  Herzegovina  reacted  firmly  and  adequately  so  that  the 
situation stabilised quickly. The limit on guaranteed bank deposits was almost tripled in a first 
step  to  around  €  10,000  in  early  2009.  In  the  context  of  the  IMF  programme,  the  six  EU 
parent  banks  that  have  subsidiaries  in  Bosnia  and  Herzegovina  have  committed  to  keep  the 
level of their exposures to the country at least at the level of 31 December 2008. 

Despite  the  repercussions  of  the  global  financial  crisis  on  Bosnia  and  Herzegovina,  the 
financial  sector  remained  sound  and  well-capitalised  and  its  liquidity  position  was  not 
seriously undermined. The sector is dominated by banks which  are based on  a conservative 
business  model.  The  share  of  claims  to  the  private  sector  in  relation  to  GDP  remained 
relatively  constant  between  2008  and  early  2009  at  about  54%.  30  banks  operate  in  the 
country,  one  less  than  in  the  previous  year,  of  which  21  are  in  foreign  ownership,  seven  in 
domestic  private  ownership  and  two  are  majority  state-owned.  The  capital  adequacy  ratio 
stood at 16.3%, around one percentage point lower than in the previous year, but significantly 
higher  than  the  legal  minimum  of  12%,  which  itself  is  significantly  higher  than  the  8% 
required  in  the  Basel  II  accord.  The  share  of  non-performing  loans  to  total  loans  increased 
from 3.1% at end-2008 to 4% at the end of the first half 2009. The return on average equity 

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halved  in  2008  to  4.4%  and  decreased  further  to  1.3%  at  the  end  of  the  first  half  2009,  the 
return  on  average  assets  declined  to  0.4%  and  further  to  0.1%.  Liquidity  indicators 
deteriorated with the rate of liquid to total assets falling from 32.2% at mid-2008 to 28.5% a 
year later, and liquid assets to short-term financial liabilities from 53.5% to 49.5%. However, 
the  liquidity  situation  of  banks  remained  overall  favourable.  Financial  market  supervision 
remains mostly in the competence of the entities. In early 2009, Republika Srpska established 
a  system  to  improve  coordination  between  its  own  supervisory  agencies.  The  analytical 
capacity  of  the  Central  Bank  was  further  strengthened  and  it  carried  out  stress  tests  for  the 
banking sector in spring 2009. Overall, the expansion of financial intermediation has slowed 
down and the banks' profitability has suffered, but the financial sector has weathered well the 
impact of the global crisis and the stability of the financial system remains satisfactory. 

Credit growth has come down significantly from the excessive annual rates of between 25% 
and 30% recorded until July 2008. Since September 2008 the stock of loans has been virtually 
unchanged. Restrictions came from both the demand and supply side. Deposits decreased by 
9.8% from their peak in September 2008 until June 2009, and slightly picked up after that. As 
a consequence, the loans to deposit ratio increased from 110% in September to 119% in July. 
After  it  had  followed  a  downward  trend  over  the  period  2004-2007,  the  spread  between 
average loan and deposit interest rates of commercial banks increased and amounted to 7.81 
percentage points at the end of the first quarter 2009. The widening of the spread was mainly 
caused by rising interest rates on loans, reflecting the higher uncertainty and risk faced by the 
financial  sector.  Overall,  the  difficult  economic  environment  has  caused  market  agents  to 
become  more  risk-averse,  but  the  fears  of a  massive  bank-run  and  major liquidity problems 
emerging in autumn 2008 did not materialise.  

After  their  major  correction  throughout  2007  and  2008,  stock  market  indices  continued  to 
decline  in  the  first  quarter  2009,  but  afterwards  picked  up  again.  The  main  index  of  the 
Sarajevo  Stock  Exchange  lost  12.8%  in  2009  until  mid-September;  that  of  the  Banja  Luka 
Stock  Exchange  fell  by  3.3%.  Monthly  average  turnover  at  Sarajevo  plummeted  by  60%  in 
the first half 2009 compared to 2008; at Banja Luka the drop was 45%. The combined market 
capitalisation  declined  to  below  50%  of  GDP  from  rates  at  around  100%  in  2008.  The 
insurance sector remained small and relatively weak. Its growth lost pace in the first half of 
2009  when  it  decelerated  to  3.3%  in  the  Federation  and  2.6%  in  Republika  Srpska  (annual 
growth  of  premiums).  Non-life  insurance  dominates  the  market.  There  are  24  insurance 
companies active in the country. Overall, financial intermediation by the non-banking sector 
remained shallow and stock markets experienced significant losses. 

3.2. 

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

Existence of a functioning market economy 

In  the  context  of  the  crisis,  external  imbalances  are  decreasing,  while  fiscal  imbalances  are 
rising. The adjustment process is harsh and accompanied by rising unemployment. The slow 
pace  of  economic  restructuring,  especially  in  the  Federation,  prevailing  obstacles  to  private 
sector development and the excessive influence of the public sector in the economy continue 
to  undermine  a  more  growth-oriented  allocation  of  resources.  Overall,  the  functioning  of 
market mechanisms remained hampered by distortions, excessive state intervention and lack 
of competition. Progress towards creating a single economic space within the country – a key 
European Partnership priority – has been limited. 

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Human and physical capital  

In general, information on the endowment of human capital remains scarce. Enrolment rates 
in  higher  education  are  slightly  increasing.  A  curriculum  for  a  nine-year  education  in  all 
schools  is  to  be  implemented  as  of  the  school  year  2009-2010.  However,  the  proper 
implementation  of  framework  laws  for  higher,  pre-school  and  vocational  education  has  not 
been ensured. Participation in the labour market is poor. Overall, structural rigidities and the 
weak  performance  of  the  education  system  continue  to  contribute  to  the  skills  mismatch 
hampering the proper functioning of the labour market.  

The  level  of  investment  decreased  slightly  in  2008  to  24.4%  of  GDP,  down  from  25%  in 
2007. Some projects of upgrading road and railway infrastructure are ongoing. Foreign direct 
investments (FDI) accounted for 5.5% of GDP in 2008, declining sharply (by 55%) compared 
to 2007, mainly as a result of the high base due to major privatisation deals implemented in 
2007.  46%  of  FDI  were  directed  towards  industrial  production  and  21%  to  transport  and 
communications.  In  the  first  half  of  2009,  FDI  shrank  by  32%  year-on-year  as  a  result  of 
worsened investors' sentiments in the context of the global economic crisis. Overall, the pace 
of upgrading of physical infrastructure slowed down. 

Sectoral and enterprise structure 

The  restructuring  and  liquidation  of  socially-owned  enterprises  (SOEs)  has  made  only  slow 
progress.  In  the  communication  sector,  few  new  entrants  have  become  operational  since 
liberalisation and only one new licence for fixed telephony services has been granted. So far 
two  licences  have  been  issued  to  internet  service  providers,  two  to  network  operators  and 
three  for  Universal  Mobile  Telecommunications  Services  (UMTS).  New  rules  on  the 
compensation  for  licences  of  mobile  telecommunications  operators  have  been  adopted.  The 
utility sector remains exempted from privatisation. In May, the government of the Federation 
approved  the  merger  of  the  country's  biggest  power  utility  company  with  seven  local  coal 
mining firms, but the deal is yet to be completed. Shortcomings in administration, technology 
and metering continue to hinder the development of the electricity market. Consumers have 
little incentive to change suppliers due to persisting differences between regulated and market 
prices. Overall, little progress was achieved in the liberalisation of network industries. 

There  were  no  major  shifts  in  the  sectoral  structure  of  the  economy  in  2008.  Services 
accounted  for  54%  of  GDP,  industry  for  23%  and  agriculture  for  7%.  The  contribution  of 
public  administration,  education  and  health  to  gross  value  added  in  the  economy  remains 
fairly  large  at  18%.  Small  and  medium-sized  enterprises  (SMEs)  further  consolidated  their 
contribution to employment and economic growth and the first countrywide SME strategy has 
been adopted by the Council of Ministers. Overall, there have been no major changes in the 
structure of the economy. 

State influence on competitiveness 

Limited  progress  has  been  made  in  reducing  state  influence  in  the  economy.  Legislation  to 
ensure the transparent monitoring of state aid has not been adopted and the establishment of 
an  operationally  independent,  public  state  aid  authority  –  as  required  by  the  Interim 
Agreement  to  the  SAA  –  is  pending.  In  2008,  direct  budget  subsidies  to  industry  and 
agriculture slightly declined to a consolidated 1.5% of GDP from 1.6% in 2007. They are still 
mainly  allocated  to  loss-making  SOEs  in  an  ad-hoc  and  non-transparent  manner.  Overall, 

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state  intervention  in  the  economy  is  still  high  and  initiatives  to  improve  transparency  are 
blocked in the complex decision-making procedures of the country.  

Economic integration with the EU 

Bosnia  and  Herzegovina  is  an  open  economy  with  total  trade  equivalent  to  around  94%  of 
GDP  in  2008  (93%  in  2007).  The  country  has  constantly  gained  market  shares  in  the  EU 
during  the  past  decade,  not  the  least  benefitting  from  a  relatively  stable  CPI-based  real 
effective  exchange  rate  (REER)  over  that  period.  However,  due  to  the  high  wage  increases 
above  productivity  gains  of  recent  years,  both  in  the  public  and  private  sector,  Bosnia  and 
Herzegovina  has  lost  competitiveness  since 2007,  as  signalled  by  an  increasing  unit-labour-
cost-based REER. The EU continues  to  be the  largest trading partner with shares of around 
55%  of  total  exports  and  49%  of  total  imports  in  the  first  half  of  2009.  While  the  share  of 
exports to the EU has slightly decreased, the share of imports has slightly increased. The other 
main  trading  partners  remain  the  countries  of  the  CEFTA  region,  accounting  for  36%  of 
exports and 26% of imports in the first half of 2009. The share of FDI inflows from the EU to 
total FDI inflows increased in 2008 as compared to 2007, when it was exceptionally low due 
to  the  major  privatisations  in  Republika  Srpska  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 in the areas of 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.  

Some  progress  has  been  made  as  regards  standardisation.  So  far,  the  Institute  for 
Standardisation  of  Bosnia  and  Herzegovina  (BAS)  has  adopted  9,653  European  standards 
(ENs)  as  national  standards.  Of  these  9,653  standards,  4,177  are  harmonised  European 
standards  in  the  fields  of  the  New  Approach  acquis.  The  Institute  has  45  Technical 
Committees  in  which  some  600  experts  are  involved.  In  December  2008,  the  Council  for 
Standardisation  was  formed  as  an  expert  advisory  body  for  standards  work.  It  has  signed 
agreements  on  professional  and  technical  cooperation  with  the  Institutes  for  Standardisation 
of  Montenegro,  Serbia  and  the  former  Yugoslav  Republic  of  Macedonia.  The  Institute  has 
increased its human resources and now has 32 employees. 

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

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assessment  infrastructure  (testing  and  calibration  laboratories,  certification  and  inspection 
bodies) is not yet in place. 

Limited progress has been made as regards accreditation. The accreditation system in Bosnia 
and Herzegovina is based on the principles and requirements of the European standards EN 
45000  and  ISO/IEC  17000  series  as  well  as  on  the  recommendations  and  guidelines  of 
European  Cooperation  for  Accreditation  (EA),  the  International  Accreditation  Forum  (IAF) 
and  the  International  Laboratory  Accreditation  Cooperation  (ILAC).  The  Institute  for 
Accreditation  of  Bosnia  and  Herzegovina  (BATA)  has  so  far  granted  35  accreditations:  16 
testing laboratories, 6 calibration laboratories, 2 certification bodies and 11 inspection bodies 
have been accredited. The accreditation process is carried out by assessors who are selected 
and  appointed  in  accordance  with  EU  requirements.  50  assessors  and  technical  experts  are 
currently  available  in  Bosnia  and  Herzegovina.  Further  human  resources  are  necessary  to 
enable BATA to respond to future policies and to develop accreditation schemes in the areas 
where BATA is not yet active.  

Bosnia  and  Herzegovina  needs  to  further  establish  the  conditions  for  future  international 
recognition  of  its  tests,  calibration  results  and  certifications  and  prepare  the  country’s 
Accreditation Institute for signing multilateral agreements with the European cooperation for 
Accreditation.  

Limited progress has been made as regards metrology. The Institute for Metrology of Bosnia 
and  Herzegovina  has  increased  the  number  of  its  staff  to  44.  In  May  2009,  the  Institute 
became an associate member of European Cooperation in Legal Metrology (WELMEC). The 
planned  strategy  for  the  development  of  the  metrology  system  has  however  not  yet  been 
adopted.  The  metrology  infrastructure  has  to  be  further  developed  and  the  legislation 
harmonised with the European standards. . Increased cooperation and coordination is needed 
between the Institute for Metrology of Bosnia and Herzegovina and the Metrology Institutes 
of the Entities in order to avoid duplication of efforts and costs, and to create a harmonised 
approach to the competence criteria for laboratories dealing with verifications.  

There has been some progress in the area of market surveillance. The Council of Ministers 
has adopted decisions on the content of notices for magnetic toys and on the form and content 
of notifications of harmful products for non-food consumer products. The market surveillance 
system in Bosnia and Herzegovina is ensured by the State-level Market Surveillance Agency 
and by inspectorates and other administrative bodies of the Federation, Republika Srpska and 
Brčko District. The Entity-level bodies carry out actual market surveillance activities. Three 
main  inspectorates  exist  in  Bosnia  and  Herzegovina:  the  Inspectorate  of  the  Federation 
(includes  10  cantonal  inspection  bodies),  the  Inspectorate  of  Republika  Srpska  (includes  5 
regional inspection bodies) and the Inspectorate of Brčko District. Administrative capacity of 
the  Market  Surveillance  Agency  has  been  strengthened  to  the  current  17  employees.  In 
November  2008,  the  Market  Surveillance  Agency  became  a  full  member  of  PROSAFE 
(Product Safety Enforcement Forum of Europe). 

The market surveillance system still remains largely based on mandatory standards and pre-
market control. Further development of a proper market surveillance system is needed, based 
on  appropriate  horizontal  and  product-specific  legislation,  and  on  adequate  administrative 
capacities.  

No  progress  has  been  made  as  regards  either  the  New  or  the  Old  Approach  acquis.  The 
Ministry of Foreign Trade and Economic Relations (MoFTER) established in May 2009 the 

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Department  of  Technical  Regulations  in  order  to  increase  the  efficiency  of  transposition  of 
EU  technical  regulations.  In  addition,  strengthening  the  administrative  capacity  of  the 
ministries  and  institutions  involved  in  this  task,  and  especially  reinforcements  of  staff,  is 
essential.  A  proper  mechanism  is  needed  for  internal  consultation  and  notification  of  new 
technical regulations prior to adoption of measures with an impact on trade. 

As  regards  consumer  protection,  some  progress  has  been  made.  The  Council  of  Ministers 
adopted  the  2009  State  annual  programme  on  protection  of  consumers.  The  aim  of  this 
programme  is  to  create  a  consumer  protection  policy  that  clearly  identifies  priorities  and 
provides  guidance  for  their  implementation.  It  includes  more  than  100  measures  to  be 
implemented by competent State, Entity and Brčko District bodies. The programme provides, 
among  other  things,  for  the  amendment  of  current  regulations,  the  improvement  of 
information  instruments  on  consumers’  rights  and  measures  for  the  adoption  and 
implementation of EU standards in the area. 

The Office of the State Ombudsman for Consumer Protection enacted criteria and instructions 
on  decision-making  procedures  and  the  handling  of  disputes.  In  April  2009,  guidelines  and 
recommendations  were  issued  in  the  consumer  credit  sector.  The  Office  adopted  its  annual 
report in May 2009. The efficiency of the Ombudsman’s office increased in comparison with 
previous years due to an increase in its staff. In 2008 the Office dealt with 147 cases and 138 
were resolved. 

Overall, Bosnia and Herzegovina’s preparations in the fields of standardisation, accreditation, 
conformity  assessment,  metrology,  market  surveillance  and  consumer  protection  are 
advancing slowly and remain at a rather early stage. The Office of the Consumer Ombudsman 
has been set up and needs strengthening. Continued efforts are necessary in order to further 
approximate  the  legal  framework  to  the  Community  legislation  on  free  movement  of  goods 
and  to  implement  and  enforce  it  effectively.  The  product-specific  acquis  needs  to  be 
progressively  transposed.  Further  strengthening  of  institutional  and  administrative  capacity 
and closer cooperation and coordination between the relevant institutions is necessary in order 
to create conditions favourable to the internal market and to foreign trade.  

4.1.2.  Movement of persons, services and right of establishment 

Little progress has been made regarding movement of persons. In January 2009 the Council 
of Ministers decided on an annual quota of work permits for the employment of foreigners. 
However,  movement  of  persons  within  the  country  still  remains  constrained  by  the 
fragmented  nature  of  the  internal  labour  legislation  and  the  social  security  systems.  The 
country is lagging behind in the field of movement of persons. 

Limited progress has been made in institutional, legislative and administrative reform of the 
social security system and its coordination between Entities. Inequities amongst Entities are 
made  worse  in  the  Federation,  by  inequities  amongst  cantons  and  amongst  municipalities 
within  cantons.  Nevertheless,  in  the  Federation  the  Law  on  a  single  system  of  registration, 
collection  and  control  of  contributions  in  social  security  was  adopted.  No  steps  have  been 
taken  towards  granting  social  security  benefits  for  resident  family  members  of  foreign 
nationals  working  in  Bosnia  and  Herzegovina.  Bilateral  agreements  on  social  insurance  and 
social  security  have  been  signed  with  Austria,  Turkey,  Croatia,  Serbia,  Slovenia,  Belgium, 
Hungary and the former Yugoslav Republic of Macedonia.  

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Concerning  provision  of  services,  limited  progress  has  been  made.  No  work  has  been 
undertaken with regard to establishing a clear distinction between the regime applicable to the 
cross-border  provision  of  services  by  EU  operators  and  the  rules  applicable  to  service 
providers established in the country. 

As  regards  financial  services,  the  banking  sector  has  remained  central  to  the  country’s 
economy.  However,  no  progress  has  been  made  with  regard  to  approximation  with  the  EU 
banking acquis and the establishment of a single State-level agency for banking. The system 
of host supervision for branches is being applied between both Entities. The Law amending 
the  Law  on  Deposit  Insurance  in  Banks  in  Bosnia  and  Herzegovina  increased  the  insured 
deposit in banks almost by three, to approximately € 10,000. The Entities’ banking agencies 
adopted a strategy and set up a technical group for progressively adopting the Basel II capital 
measurement rules and capital standards, and work has started. However, implementation of 
this strategy, scheduled throughout a long period (2009-2018), will be carried out separately 
by the Entities, with capital requirements imposed by the banking supervisors of the Entities. 
Cooperation with home banking sector supervisors of foreign banks operating in the country 
has improved, but a Memorandum of Understanding with Austria — the major stakeholder in 
the sector — is missing.  

In various non-banking fields, the Entities have moved unilaterally and at different speeds to 
develop their regulatory frameworks. The State Insurance Agency has observer status in the 
International  Association  of  Insurance  Supervisors  (IASA)  and  is  a  member  of  the 
International Insurance Foundation (IIF). However, the role of the agency is still 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 is in place, but results 
are still to be seen. The Insurance Ombudsman has been appointed, but the legal framework 
for his activities is still to be finalised.  

As regards leasing, a new law was passed by the Federation and the respective laws of both 
Entities  have  been  harmonised.  Nonetheless,  Entity  legislation  continues  to  regulate  the 
sector,  and  it  is  uncertain  whether  identical  methods  and  provisions  will  be  applied.  All 
operations  of  the  micro-credit  sector  are  supervised  by  the  existing  banking  supervision 
agencies. State-level legislation on obligations has not been adopted. 

As  far  as  capital  markets  are  concerned,  both  Entities  have  continued  to  develop  their  legal 
and procedural framework through new laws, by-laws and administrative procedures, but little 
has  been  done  to  ensure  that  the  sector’s  development  proceeds  in  a  harmonised  way 
throughout  the  whole  country.  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.  

The creation of a ‘single economic space’ in the financial sector is, in addition, hampered by 
the fact that financial sector companies registered in one Entity can only operate in the other 
by establishing a branch there. This constitutes a major additional administrative burden and 
requires very close cooperation between the supervisory authorities. 

There  has  been  limited  progress  with  respect  to  postal  services  and  there  continues  to  be  a 
discrimination against foreign operators, as the new State-level Law on Post Offices, which is 
expected to contribute to the liberalisation of the market in postal services in the country, has 
not yet been adopted. 

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According to the current legislative framework, postal services are organised at Entity level, 
and separate licences for the provision of postal services are required for each Entity, which 
represents  a  major  administrative  burden  for  postal  service  providers.  At  the  same  time  the 
scope  of  the  monopoly  (reserved  area)  is  very  broad,  and  there  are  only  limited  moves  to 
further,  gradually  open  up  the  market.  The  current  legal  framework  does  not  provide 
sufficient  legal  certainty  for  the  provision  of  express  postal  services  in  a  free  competitive 
environment.  Even  if  these  services  differ  significantly  from  universal  postal  services,  they 
remain subject to the monopoly reservation. 

No significant developments have been reported in relation to the right of establishment for 
companies. EU companies can establish their operations in Bosnia and Herzegovina with the 
same rights and obligations as local firms. Nevertheless, local and foreign businesses and self-
employed  individuals  continue  to  be  burdened  with  rather  cumbersome  administrative 
procedures for licensing and business permits. Companies wishing to operate in both Entities 
need to register in each Entity. A single registration valid for the whole country does not exist. 
As regards the recognition of EU professional qualifications by Bosnia and Herzegovina, no 
progress can be reported. 

Limited  progress  can  be  noted  on  developing  company  law.  Further  work  to  fully  meet 
international accounting and audit standards and to ensure a harmonised framework across the 
country  is  necessary.  The  current  State  and  Entity  level  accounting  and  auditing  laws  are 
based on the International Financial Reporting Standards (IFRS) and International Standards 
of  Auditing  (ISA).  Both  Entities  have  recently  adopted  new  legislation.  However,  further 
harmonisation to fully meet international accounting and audit standards is still required. Co-
ordination and harmonisation between Entities needs to be strengthened.  

Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  area  of  services,  establishment  and 
company law remain at an early stage. Little efforts have been made towards ensuring a single 
economic space within the country. An increased role of the State level and improved inter-
Entity coordination are necessary. 

4.1.3.  Free movement of capital 

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

Bosnia  and  Herzegovina  has  continued  to  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  the  holding  of  foreign  accounts  by  resident  entities.  In  Republika  Srpska,  the 
National Assembly adopted the Law amending the Law on Foreign Currency Operations with 
a view to liberalising current and capital transactions with foreign countries. The Federation is 
drafting a new Law on Foreign Currency Operations. There is a need to ensure that legislation 
concerning foreign currency operations is compatible with EU legislation and is arrived at in a 
coordinated manner between Entities.  

Restrictions  on  foreign  direct  investment  continue  to  apply  to  the  armament  and  media 
sectors, where the foreign capital stake is limited to 49%. Transfers and repatriation of profits 
and  remittances,  along  with  foreign  currency  transfers  by  domestic  and  foreign  companies, 
are liberalised. The Law on the Central Bank of Bosnia and Herzegovina stipulates that the 
authorities must not set any restrictions on payments and international transactions unless this 
is necessary in the light of possible international obligations.  

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There is no restriction to free movement of capital between the Entities. 

With regard to payment systems, Bosnia and Herzegovina has a modern payment system for 
giro  clearing  and  real-time  gross  settlement  operations.  This  system  is  placed  within  the 
Payment Systems Department of the Central Bank of Bosnia and Herzegovina. Giro clearing 
and  real-time  gross  settlement  operations  represent  31%  of  the  number  of  transactions  and 
42%  of  the  value  of  internal  traffic  in  the  country.  They  represent  69%  of  the  number  of 
transactions and 58% of the value within commercial banks’ transactions between clients that 
have accounts in the same bank. 

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

4.1.4.  Customs and taxation 

Bosnia and Herzegovina has made some progress in the field of customs. The implementation 
of  customs-related  provisions  following  the  entry  into  force  of  the  SAA  Interim  Agreement 
(IA)  on  1  July  2008  has  been  overall  adequate.  However,  the  current  ban  on  the  import  of 
used motor vehicles is contrary to the IA and needs to be removed.  

Bosnia and Herzegovina’s nomenclature for the classification of goods has been aligned with 
the  EU  Combined  Nomenclature.  Regular  updating  has  now  to  be  ensured.  The  customs 
valuation rules are in line with WTO rules and reference prices are no longer used. The rules 
of origin as provided for in the IA are respected, including the no-drawback rule.  

Four free trade zones exist in Bosnia and Herzegovina and operational surveillance of these 
zones  falls  under  the  competence  of  the  Indirect  Taxation  Authority’s  (ITA)  Customs 
Department.  Bosnia  and  Herzegovina  has  signed  the  Convention  on  the  International 
Transport  of  Goods  under  cover  of  TIR  carnets.  The  convention  is  now  operational.  No 
progress  has  been  made  on  accession  to  the  Istanbul  Convention  on  the  ATA  carnet  for 
temporary admission of goods.  

Some  progress  has  been  made  on  cooperation  with  economic  operators  in  the  country.  The 
ITA  has  issued  two  new  instructions  on  simplified  customs  procedures,  subject  to  pre-
authorisation  audits:  local  clearance  at  export;  and  incomplete  declarations.  Approved 
exporter status has been introduced, eliminating the need to request EUR.1 certificates from 
customs  offices  under  certain  circumstances.  Furthermore  ITA  has  started  with  issuing 
authorisations for simplified procedure for local export customs clearance.  

Little  progress  has  been  made  with  regard  to  protection  of  intellectual  property  rights.  The 
enforcement of customs rules is still weak, therefore progress needs to be made on producing 
appropriate operational guidelines.  

Preparations in the field of customs have been advancing, but significant efforts are needed on 
approximation  to  ensure  the  correct  implementation  of  the  IA  obligations  and  further 
alignment to the EU standards and practices. Administrative and operational capacity needs to 
be significantly strengthened.  

Some  progress  can  be  reported  in  the  area  of  taxation.  The  country’s  VAT  legislation  is 
largely  in  line  with  the  acquis.  A  working  group  has  been  established  to  further  align 

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legislation with the relevant EU Directives. Future legislative amendments in this area should 
not  undermine  the  achievements  made  so  far.  To  ensure  proper  VAT  enforcement,  ITA  is 
currently  using  a  risk  analysis  system,  based  on  which  the  selection  of  taxpayers  is  made. 
However,  the  VAT  registration  system  (single  indirect  taxpayer  register)  requires  modern 
information technologies in order to be effective.  

A new Law on Excise Duties was adopted in June 2009. This law constitutes a positive step in 
terms of approximation to the acquis, even if full alignment has not been achieved.  

Tax policy is being coordinated through the Fiscal Council. Redistribution to the Entities and 
Brčko District of revenue collected has been working well and has proven to be an element of 
stability, even though the system has been occasionally challenged by political actors. 

The Ministry of Finance has signed an agreement on avoidance of double taxation and income 
tax evasion with the following countries: Albania, Kuwait, Austria, Algeria and Lithuania. 

In  the  area  of  direct  taxation,  the  Federation  of  Bosnia  and  Herzegovina  has  adopted  the 
Personal  Income  Tax  Law,  which  is  now  in  force.  The  law  significantly  simplifies  the 
taxation  of  personal  income.  In  Republika  Srpska,  the  Law  on  Personal  Income  Tax  was 
amended and income tax was reduced from 10% to 8%. Harmonisation between the Entities 
in the area of implementing rules for the direct taxation is incomplete and closer coordination 
is  necessary.  Furthermore,  discrepancies  with  regard  to  double  taxation  persist  between  the 
tax laws of Republika Srpska and the Federation on the one hand, and Brčko District on the 
other. 

In the area of business taxation, a gap analysis was carried out to identify existing measures 
that  might  be  contrary  to  the  Code  of  Conduct  for  Business  Taxation.  In  line  with  the 
subsequent  report,  some  measures  harmful  for  competition  have  been  removed.  However, 
further  follow-up  of  the  report’s  findings  is  necessary.  For  example,  companies  in  the 
Federation  that  earn  more  than  30%  of  their  revenue  from  exports  remain  exempted  from 
corporate income tax. This is not in compliance with the Code of Conduct. 

Regarding  administrative  and  operational  capacity,  ITA’s  training  unit  has  been  created. 
Progress has been very slow, however, in developing a training strategy and a training centre. 
The  head  of  the  training  unit  has  been  appointed  along  with  some  of  the  required  officers. 
There is also a need for additional advanced training on VAT and risk analysis. Besides this 
development, the staffing of ITA in general has not been sufficiently reinforced. The lack of 
staff to work on new projects is a factor that weakens the administration. The communication 
within ITA  needs to be improved. In  addition, many border  crossing points need upgrading 
and the efficiency of checks needs to be enhanced. Although a customs laboratory exists, its 
functionalities  are  limited  and  therefore  only  a small  number  of  controls  can  be  covered.  A 
laboratory equipped with more functions is needed to allow more and better controls. 

At  present  the  IT  system  in  Bosnia  and  Herzegovina  is  hampered  by  outdated  software, 
outdated  hardware  platforms, 
inadequate 
information 
equipment. Information technology modernisation is needed. 

infrastructure  and 

inadequate 

Efforts to improve ITA’s capacity to implement customs and tax legislation and, together with 
other law enforcement bodies, to make it more effective in fighting corruption, cross-border 
crime and tax evasion, need to continue.  

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An overall training strategy is yet to be presented and an IT strategy is yet to be defined. A 
business strategy and an investment plan are also needed. 

Overall,  preparations  in  the  areas  of  customs  and  taxation  are  progressing.  Bosnia  and 
Herzegovina  needs  to  continue  its  efforts  to  align  its  customs  legislation  with  the  acquis, 
especially with respect to the EU Customs Code. Proper enforcement of legislation needs to 
be  ensured.  Further  efforts  to  strengthen  ITA’s  administrative  capacity  are  necessary,  in 
particular as regards internal audit, risk analysis and intelligence/investigation. Furthermore, a 
customs  strategy  dealing  with  business,  human  resources  management,  information 
technology  and  training  has  to  be  developed.  The  performance  and  efficiency  of  controls 
needs to be improved.  

The country’s tax legislation is aligned to a large extent with the acquis, especially in the field 
of VAT. It is necessary to ensure that any possible amendments to existing legislation remain 
in line with EU provisions. Significant efforts are also needed to reinforce the administrative 
capacity  of  ITA.  The  Authority’s  capacities  to  collect  tax,  reduce  the  size  of  the  informal 
economy, fight corruption, and carry out risk analyses and internal audits needs to be further 
improved.  

A sound and sustainable human resources management strategy as well as a training strategy 
needs to be developed. 

4.1.5.  Competition 

Progress in the field of antitrust has continued and preparations in this area are moderately 
advanced.  The  Competition  Council,  currently  with  a  total  of  25  employees,  has  taken  the 
initiative  of  amending  the  Competition  Law  by  introducing  amendments  that  have  been 
adopted by the Council of Ministers.  

The  Competition  Council’s  activities  have  mainly  focused  on  mergers,  concentrations  of 
business and abuse of dominant positions. So far, the Competition Council has initiated 118 
procedures and has issued 50 opinions. It collected around € 360,000 in fines from economic 
entities that were not acting in accordance with the Competition Law.  

Regarding  State  aid,  no  progress  has  been  made.  State-level  legislation  has  been  prepared, 
but  has  not  been  adopted.  The  establishment  of  a  State-level,  operationally  independent, 
public State aid authority is pending. Preparations need to be speeded up in order for Bosnia 
and  Herzegovina  to  be  able  to  respond  to  the  requirements  of  the  Stabilisation  and 
Association Agreement.  

Overall, Bosnia and Herzegovina’s preparations in the area of antitrust continue to advance. 
No progress has been made as regards State aid. Preparations in the latter area remain at an 
early stage. Particular attention needs to be paid to the adoption of State aid legislation at the 
State level and the establishment of an operationally independent public State aid authority, 
also at the State level.  

4.1.6.  Public procurement 

Limited progress has been made in the area of public procurement. The basic structure of the 
current  public  procurement  law  is  sound  but  its  operation  in  daily  practice  needs  to  be 
improved. Simplified procedures for low-value procurement would considerably increase the 
efficiency  of  the  system,  as  would  publication  of  contract  notices  in  electronic  form  on  the 

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website of the Public Procurement Agency (PPA). There has been no major progress in terms 
of  legislative  alignment.  The  current  procurement  law  is  modelled  on  the  previous  EC 
directives and many of the provisions of the new EC directives have not yet been transposed. 
The legal framework to fight corruption in public procurement remains unclear. A new law on 
public procurement has been prepared,  but  has been rejected by  the State  Parliament. Some 
efforts have been made to increase the publicity given to notices.  

The award of concessions by competent authorities is regulated by altogether 14 concessions 
laws  and  accompanying  laws  and  decrees  in  force  at  State,  Entity  and  cantonal  levels.  The 
vast  majority  of  concessions  and  public-private  partnership  contracts  have  been  awarded 
through  the  ‘unsolicited  proposals’  procedure  without  applying  an  open,  transparent  and 
competitive  process.  Award  procedures  fail  to  meet  the  basic  principles  of  the  acquis.  No 
formal cooperation has been established between the Concessions Commissions at the various 
levels of government. The administrative cost of the system is high and the competences of 
the different institutions tend to overlap.  

Domestic preferential treatment remains in force, except for the electricity sector. Due to an 
extension adopted during 2009, such preferential treatment will not expire until 2015.  

The Public Procurement Agency (PPA) now employs 19 people, 4 more than in 2008 but 12 
short of the 31 posts that are to be filled by 2012.  

Since  May  2009,  the  Public  Procurement  Review  Body  (PRB)  has  the  full  quorum  of  six 
members and employs two full-time and three fixed-time employees. No further civil servants 
have been recruited. the filling of vacant positions at the PRB are hampering the approval of 
the Body’s rulebook on internal organisation. Nonetheless, the PRB was able to address 1,515 
complaints, which included all incoming complaints for 2008 and the backlog of cases which 
had built up in 2006, due to the said lack of a quorum.  

The  PPA  and  the  PRB  have  established  cooperation  with  EU  Member  States,  but  further 
improvements are needed to increase the administrative capacity of both institutions. 

Proper  implementation  of  public  procurement  procedures  across  the  country  needs  to  be 
consistently monitored. The administrative capacity of contracting authorities and their ability 
to  implement  the  public  procurement  legislation  needs  to  be  ensured  and  improved.  The 
provisions concerning public-private partnerships as well as services and works concessions 
need to be amended, uniformly for the whole country, in order to introduce competitive and 
transparent procedures and practice taking due account of the acquis and good international 
practices.  

As  regards  the  building  of  a  single  economic  space  in  the  field  of  public  procurement, 
companies  from  the  Entity  other  than  that  of  the  contracting  authority  are  not  formally 
discriminated  against.  Their  chances  of  obtaining  contracts  are,  however,  reduced  because 
other provisions (such as tax or social insurance provisions) are not harmonised. 

Coordination mechanisms and administrative capacity of the main stakeholders in the public 
procurement  system  still  need  further  strengthening,  in  particular  to  reduce  the  scope  for 
corruption. 

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Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  field  of  public  procurement  are 
continuing  but  greater  support  for  strengthening  the  system  has  to  be  ensured.  Procurement 
legislation needs to be amended to meet European standards. 

4.1.7. 

Intellectual property law 

Limited  progress  has  been  made  with  regard  to  intellectual,  industrial  and  commercial 
property rights (IPR).  

Bosnia  and  Herzegovina  has  ratified  the  Protocol  relating  to  the  Madrid  Agreement 
concerning the International Registration of Marks, the Budapest Treaty on the International 
Recognition  of  the  Deposit  of  Microorganisms  for  the  Purposes  of  Patent  Procedure,  the 
International  Classification  of  Patents  Treaty,  the  Hague  Agreement  concerning  the 
International  Deposit  of  Industrial  Designs,  the  Geneva  Convention  for  the  Protection  of 
Producers  of  Phonograms  against  Unauthorised  Duplication  of  their  Phonograms,  and  the 
Rome  Convention  for  the  Protection  of  Performers,  Producers  of  Phonograms  and 
Broadcasting Organisations. Attention will have to be focused on the actual implementation 
of these Conventions and Agreements. Bosnia and Herzegovina still needs to ratify the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms Treaty.  

The  Institute  for  Intellectual  Property  has  increased  its  staff  from  32  to  42  employees,  with 
staff  working  in  Mostar  headquarters  and  in  Sarajevo  and  Banja  Luka  branch  offices.  A 
number  of  measures  have  been  taken  to  improve  the  functioning  of  the  Institute  and  to 
disseminate intellectual property-related information. Some training actions have been carried 
out. However, the administrative and operational capacity of the central and regional offices 
needs  to  be  improved  and  further  training  has  to  be  provided.  In  July  2009  Bosnia  and 
Herzegovina  adopted  the  Strategy  on  Development  of  the  Institute  for  Intellectual  Property 
(2008-2015). 

The  draft  Law  on  Copyright  and  Related  Rights  and  the  draft  Law  on  the  Collective 
Management  of  Copyright  and  Related  Rights  are  still  pending  adoption.  The  overall 
alignment of the current legal system with the TRIPS Agreement and with the acquis is rather 
moderate but is improving.  

No significant development has taken place concerning industrial property rights. According 
to  the  current  legislation,  the  Institute  for  Intellectual  Property  grants  patents  without  prior 
substantive examination of applications, shifting the burden of proof of the validity of such a 
patent  to  the  patent  holder.  However,  this  patent-granting  system  currently  reveals  certain 
systemic problems resulting from deficiencies in the current legislation and the Institute’s lack 
of capacities. As a consequence, there are currently 1,660 patent applications being processed 
or  waiting  to  be  processed.  Because  of  this,  almost  five  years  are  needed  to  conclude  the 
procedure,  a  period  which  can  be  considered  as  excessive,  bearing  in  mind  that  patents  are 
granted without prior substantive examination. 

Trademarks  and  designs  are  granted  on  the  basis  of  prior  substantive  examination  of 
applications.  The  constant  growth  in  trademark  applications  and  the  limited  capacity  of  the 
Institute have resulted in an extremely long waiting time, four years on average. 

The current waiting time for design applications is, on the contrary, rather short (on average 
one  year)  even  though  the  design  protection  is  granted  after  an  in-depth  examination  of  the 
application.  However,  this  is  possible  due  to  the  relatively  small  number  of  design 

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applications  and  the  limited  documentary  base  for  examination  —  only  prior  domestic 
applications and granted rights. 

As  regards  geographical  indications  and  topographies  of  integrated  circuits,  no  applications 
for the protection of these subject matters have yet been filed with the Institute. 

Little progress can be reported on enforcement. The Indirect Taxation Authority, in charge of 
IPR  enforcement,  referred  seven  files  to  the  Prosecutor’s  Office  and  some  items  were 
confiscated. However, high levels of counterfeiting and piracy persist and the country remains 
a  point  of  distribution  to  the  rest  of  Europe.  The  comprehensive  action  plan  on  capacity 
building has not been adopted yet. No significant action has been taken in terms of awareness-
raising. Coordination is severely lacking between enforcement bodies at various levels.  

Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  field  of  intellectual  property  law 
remain  at  an  early  stage.  A  number  of  initiatives  have  been  launched  but  nothing  definitive 
can be reported yet, not least as far as the improvement of the legislation is concerned. The 
strengthening  of  the  administrative  capacity  of  the  IP  Institute  and  its  new  branch  offices 
remains a priority, as well as awareness-raising campaigns and improved cooperation among 
the  law  enforcement  bodies  and  between  all  relevant  stakeholders  with  the  aim  of 
strengthening enforcement. 

4.1.8. 

Social policies, employment and public health policy 

Limited progress has been made in this area. 

As  regards  social  policies  little  progress  has  been  achieved.  There  has  been  no  progress  in 
approximating labour law, which exists only at Entity and cantonal level. Although there is a 
certain degree of coordination at Entity level, further fragmentation appears at cantonal level, 
where local provisions regulate labour matters.  

Little  progress  has  been  made  regarding  health  and  safety  at  work,  which  falls  under  the 
competence  of  the  Entities.  Their  legislation  has  been  further  approximated  to  the  EU 
requirements,  even  though  not  substantially.  However,  not  all  the  cantons  of  the  Federation 
have adopted the relevant legislation. The Ministry of Civil Affairs has not yet concluded the 
analysis of compliance with ILO conventions and the acquis.  

Little  has  been  achieved  in  the  area  of  social  dialogue  at  State  level.  Outstanding 
shortcomings remain the non-recognition of trade unions at State level, the inability to adopt 
the Law on Social Partners’ Representativeness and the fact that there is no State-level Social 
and Economic Council. In the meantime, Republika Srpska has established its own Social and 
Economic  Council.  Bosnia  and  Herzegovina  became  a  full  member  of  the  European 
Committee of Social Rights, since it ratified the European Social Charter.  

Regarding  social  inclusion  and  anti-discrimination  there  has  been  some  progress.  A  new 
comprehensive  anti-discrimination  law  has  been  adopted.  It  covers  a  wide  range  of  sectors 
(employment,  social  security,  education,  goods  and  services,  housing).  However,  several 
aspects of the law remain unclear or not fully in line with the acquis, in particular as regards 
the grounds covered (age and disability are not covered) and the broad scope of exceptions to 
discrimination. Six strategic goals of the social inclusion strategy — relating to employment, 
health,  education,  the  pension  system,  disabled  persons  and  the  protection  of  families  with 
children — have been adopted. Nonetheless, the strategy is not yet finalised. The potential for 

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fighting  poverty  and  promoting  social  inclusion  for  the  national  reconciliation  needs  to  be 
fully recognised. The UN Convention on the Rights of Disabled Persons has been signed.  

There  is  limited  progress  in  relation  to  social  protection,  especially  with  regard  to  securing 
equal social rights for different marginalised groups. Public expenditure in the area of social 
protection of children and social sector reform needs to be more efficient and better targeted. 
The  role  of  municipalities  in  this  regard  needs  to  be  strengthened.  Some  municipalities, 
however,  report  increased  investment  in  the  social  protection  sector  due  to  concerns  over 
social  unrest  in  the  context  of  the  economic  crisis.  However,  in  general,  the  ‘needs-based 
approach’  applicable  to  EU  public  welfare  systems  is  not  yet  sufficiently  included  in  the 
social protection system of Bosnia and Herzegovina. Abuse of social benefits is still frequent. 
As  far  as  employment  policy  is  concerned,  no  progress  has  been  registered.  Registered 
unemployment remained very high (see item 3.1 Macroeconomic stability for further details). 
Unemployment  concentrates  at  both  ends  of  the  skills  spectrum  (people  with  third-level 
education and unskilled workers). Women represent half of the unemployed. Job creation is 
not  sufficient  to  absorb  the  labour  force.  Increasing  demand  for  social  security  and  public 
health benefits by unemployed persons could cause further difficulties for Entities’ budgets. 
The  economic  crisis  is  underlining  the  deficiencies  of  the  labour  market,  especially  its 
fragmentation and the lack of countrywide coordination.  

The  State  level  remains  powerless  in  the  field  of  employment  policy.  There  is  no  State 
database  for  employment  and  labour.  A  State-level  employment  strategy  based  on  the 
benchmarks described in the EU Employment Guidelines has not been prepared. Employment 
strategies  and  projects  for  active  employment  measures  have  been  developed  by  the  two 
Entities and Brčko District. However, as yet there is little coordination between them. Active 
labour  market  programmes  remain  fragmented.  They  reflect  the  arrangements  made  with 
donors in specific areas, and do not form part of a coherent and comprehensive policy. The 
Federation adopted an employment strategy which has also been steered through parliament 
but Republika Srpska did not adopt its own strategy. Little progress has been made as regards 
public  health  policy.  The  Conference  of  Health  Ministers  meets  quite  regularly  and  has 
arranged  for  some  coordination  among  the  various  Ministries  of  Health.  There  have  been 
some attempts to improve cooperation between the Conference of Ministers and international 
organisations  through  exchange  of  information.  However,  no  real  step  was  made  regarding 
strategic development. The relevant road map drafted in 2008 has not yet been adopted and 
the State-level strategic plan for the development of health has not been drafted. The Entities 
are still finalising their strategic plans meant to be used as a basis for the State strategy. The 
fragmentation of the institutional and legislative framework, the non-transferability of health 
funds  and  the  inadequate  coverage  of  health  insurance  are  still  of  particular  concern.  The 
quality of the health care services has to be improved.  

The Agency for Medicines and Medical Devices has become operational, after the adoption of 
its 2009 budget. The State-level strategy for drug control and the prevention of use and abuse 
of narcotics has been adopted.  

Regarding  international  obligations,  some  small  steps  have  been  taken.  The  State-level 
commission for implementing WHO International Health Regulations was established, but the 
implementation of the regulations remains problematic. The WHO Framework Convention on 
Tobacco Control (FCTC) was ratified by the in March 2009. 

The State Regulatory Agency for radiation protection and nuclear safety has been established.  

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Bosnia  and  Herzegovina  has  not  yet  advanced  in  de-institutionalisation,  establishing 
community-based  services and providing aid to dependent persons, including  in  the field of 
mental health. Specific focus is needed on mental health care fo children and young people. 
Institutional capacity to produce reliable statistical data harmonised with European standards 
in this area has not yet been developed. A Declaration on along-term programme for regional 
collaboration  and  development  on  on  mental  health  was  signed  by  the  SEE  Ministers  of 
Health. Among other things, it provides for the establishment in Bosnia and Herzegovina of a 
Regional  Centre  for  Cooperation  in  the  field  of  mental  health,  which  has  not  been  yet 
operational.  

Overall,  Bosnia  and  Herzegovina’s  preparations  regarding  social  policies,  employment  and 
public health policy remain at an early stage and are undermined by the fragmentation of the 
relevant legislative and institutional frameworks. 

4.1.9.  Education and research 

Some  progress  has  been  made  in  the  field  of  education.  The  Conference  of  Ministers  of 
Education has met on regular basis and coordination has improved. It adopted an agreement 
on  the  establishment  of  the  Council  for  General  Education  and  an  agreement  on  a  common 
core curriculum for pre-school education. At institutional level, the members of the steering 
board  of  the  Centre  for  Information  and  Documentation  Recognition  in  Higher  Education 
have been appointed, as well as the Directors of (1) the Agency for Development of Higher 
Education and Quality Assurance, (2) the Agency for Pre-school, Elementary and Secondary 
Education,  and  (3)  the  Centre  for  Diploma  Recognition.  Nevertheless,  State  education 
institutions face understaffing and limited funding. 

The  nine-year  curriculum  for  primary  education  has  not  been  implemented  in  a  number  of 
cantons.  Countrywide  implementation  is  expected  during  the  2009-2010  school  year.  The 
Law on Amendments to the Framework Law on higher education in Bosnia and Herzegovina 
was adopted. As part of the implementation of the Framework Law on Vocational Education 
and Training, a ‘Rulebook on the establishment and organisation of a network of vocational 
schools in Bosnia and Herzegovina’ and a ‘Rulebook on the rules and methods for registration 
of secondary vocational school associations in Bosnia and Herzegovina’ have been adopted. 
A common educational textbook for children from Bosnia and Herzegovina living abroad for 
the  early  years  of  primary  education  was  prepared  and  distributed.  However,  the 
harmonisation of framework laws for higher education, pre-school education and vocational 
education  has  not  been  completed  at  the  cantonal  level.  The  implementation  of  these 
framework laws is proceeding, but slowly. There has been limited progress towards resolving 
the ‘two schools under one roof’ issue, which has already created tension at community level. 
There is little progress in statistical reporting according to international requirements. 

Bosnia and Herzegovina needs to continue its efforts, in particular for the full implementation 
of  the  Framework  Laws,  establishing  a  National  Qualification  Framework  and  developing 
quality assurance, addressing the issue of education meeting the needs of the labour market, 
and developing the lifelong learning concept. 

As regards culture, Bosnia and Herzegovina ratified the 2005 UNESCO Convention on the 
Protection  and  Promotion  of  the  Diversity  of  Cultural  Expressions  in  January  2009.  It  also 
approved its first State-level strategy on cultural policy together with the statistical annex, but 
without providing budgetary support. The Entities reduced drastically the funds allocated for 
culture in their 2009 budget, with a possible effect on the implementation of the strategy. The 

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Law on Cultural Heritage is still pending, because of its political implications and especially 
its institutional chapter. Bosnia and Herzegovina participates in the efforts for the creation of 
a regional strategy for culture in the framework of the Euro-Mediterranean Partnership. Talks 
for the participation of Bosnia and Herzegovina in the Community's Culture programme have 
been initiated.  

There has been some progress on research. Bosnia and Herzegovina signed the Memorandum 
of  Understanding  for  the  7th  Framework  Programme  for  Research  and  Development  (FP7) 
and  in  January  2009  became  an  associated  country  and  eligible  to  fully  participate  in  the 
programme. An FP7 national coordinator was appointed and the FP7 national contact points 
have improved their work and output. Bosnia and Herzegovina is a full member of the COST 
programme and has National Information Point status in Eureka. The State Framework Law 
on Scientific and Research Activities, which includes the establishment of a Science Council 
and  a  strategy  for  development  of  science,  has  been  adopted  but  the  Law  on  Science  and 
Technology  is  still  pending.  There  is  no  integrated  research  policy  and  relevant  budget 
allocations are very limited. Research policy is still designed and implemented at Entity level, 
with no real coordination.  

Overall, preparations in the area of education and research have started, but progress is slow 
and needs to be stepped up. Some progress has been made in the field of culture. 

4.1.10.  WTO issues 

Bosnia and Herzegovina has made good progress in bringing its trade relevant legislation in 
line with the WTO requirements. A WTO working party meeting on the country's accession 
took place in March 2009. To meet its accession target, Bosnia and Herzegovina will have to 
intensify  its  market  access  negotiations,  in  particular  in  the  agricultural  sector,  while 
continuing to bring its legislation into conformity with WTO requirements. 

4.2. 

Sectoral Policies 

4.2.1. 

Industry and SMEs 

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

As regards industrial policy, no comprehensive industrial strategy has been drawn up. Little 
has  been  done  as  regards  the  harmonisation  of  Entity  regulations,  and  the  corporate 
governance environment remains incoherent. No corporate governance code applicable across 
the whole country has been developed. 

Some  progress  has  been  made  in  the  area  of  SMEs.  Bosnia  and  Herzegovina  continued  to 
implement the European Charter for Small Enterprises, but progress was slow at the national 
level  and  was  made  on  ad  hoc  basis.  In  April  2009,  a  countrywide  strategy  for  SMEs  was 
adopted.  The  strategy  includes  the  establishment  of  the  Council  for  Entrepreneurship  but  it 
does not include a State-level SME agency and an SME fund. According to the strategy, the 
functions of the SME agency will be incorporated within a sector in the Ministry for Foreign 
Trade and Economic Relations. However, no plan was presented on how this will be put into 
practice  and  how  the  conflict  of  responsibilities  on  elaborating  the  SME  policy  and 
implementing it by the same body will be resolved.  

Progress has been made in engaging the range of education actors at all levels of governance 
within Bosnia and Herzegovina into perspective building on lifelong entrepreneurial learning. 

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More attention is required to address entrepreneurship particularly in early education. Lack of 
systematic data and more developed intelligence on enterprise skills hampers effectiveness of 
policy and training investment. 

Action  towards  a  simplified  and  more  efficient  business  registration  continued,  but  a  single 
registration  valid  for  the  whole  country  is  not  yet  operational.  Some  initiatives  have  been 
taken  at  Entity  level  to  support  SMEs,  including  amendments  to  their  respective  company 
laws  and  steps  towards  improving  the  inspection  and  permit  processes.  However,  lack  of 
coordination between the various initiatives remains an issue. Reforms have not yet caught up 
with  the  difficulties  faced  by  businesses  in  the  country  and  further  efforts  are  required  to 
improve the business environment.  

The institutional framework for export promotion has been strengthened through the Export 
Promotion Council. However, its recommendations for 2008 have not been implemented, and 
the Council of Ministers has not yet adopted recommendations for 2009. As a consequence, 
the country still lacks an export promotion strategy. The institutional framework remains in 
the fledging stage in terms of human resources and quality infrastructure. 

In  February  2009,  a  consortium  of  five  institutions  from  Bosnia  and  Herzegovina  became 
partners of the Enterprise Europe Network on non-funding basis. 

Overall, preparations in the area of industry and SMEs remain at an early stage. Bosnia and 
Herzegovina  needs  to  develop  a  comprehensive  industrial  strategy  and  properly  implement 
the State-level strategy for SMEs. 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.  The 
strategic plan for the harmonisation of agriculture, food and rural development was adopted in 
January  2009  together  with  an  operational  programme  for  the  period  2008-2011  with  the 
objective of improving the competitiveness of the agricultural and food processing sectors and 
harmonising  and  implementing  rural  development  measures  throughout  the  country.  The 
decision on the establishment of an Office for Payment Harmonisation was adopted in June 
2009, providing the legal basis for the development of a State-level institutional structure for 
the harmonisation of the Entity-level support measures and gradual alignment with the acquis. 

However,  the  2008  Framework  Law  on  Agriculture,  Food  and  Rural  Development  has  not 
been implemented in the absence of the necessary implementing legislation. There is a need 
for  a  mechanism  to  ensure  the  implementation  and  enforcement  of  adopted  legislation.  No 
progress  has  been  made  towards  establishing  the  Ministry  of  Agriculture,  Food  and  Rural 
Development at the State level. 

A  revised  rulebook  of  the  State-level  sector  for  agriculture,  food,  forestry  and  rural 
development  was  adopted  in  April  2009,  which  provides  for  additional  posts,  improves  the 
coordination  of  policies  and  prepares  the  ground  for  new  administrative  structures  and 
international cooperation. Staffing at Entity level has further increased. 

No  countrywide  harmonised  farm  and  clients'  register  has  been  established  although 
preparations  have  started.  No  progress  has  been  made  in  harmonising  land  registration 

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systems  in  order  to  improve  land  management.  There  has  been  no  increase  in  government 
support for agriculture and rural development. 

Some progress has been made in improving the agriculture statistics system. A committee for 
coordination of agricultural information has been established in order to create systems for the 
provision  of  accurate  and  standardised  agricultural  statistics  and  market  information.  The 
agriculture report for 2008 has been adopted. However, due to the lack of agricultural data, it 
allows only limited analysis in comparison to the previous year. Collection and processing of 
agricultural data remains weak and the lack of reliable statistics hampers the development of 
agricultural policy. Preparations for the agriculture census commenced within the framework 
of the preparation of the housing and population census. 

The  lack  of  administrative  reform,  the  absence  of  affordable  rural  credit  schemes  and  the 
limited effectiveness of government support prevent farmers and the agri-processing industry 
increasing  their  competitiveness  through  restructuring  and  modernisation.  An  advisory 
council  for  agriculture,  food  and  rural  development  was  established  in  April  2009  with  the 
aim of involving the non-government sector in policy-making. No decision has been taken as 
regards the future IPA rural development structures in Bosnia and Herzegovina.  

Overall, there is a need for a stronger coordination mechanism between the State level and the 
Entities  for  the  acquis  approximation  process  in  the  field  of  agriculture  and  rural 
development. 

Limited  progress  has  been  made  as  regards  the  adoption  of  legislation  in  the  area  of  food 
safety.  The  Law  on  Genetically  Modified  Organisms  and  several  pieces  of  implementing 
legislation  in  the  areas  of  control  of  contaminants  and  nitrates  in  foodstuffs  and  control  of 
honey  and  other  bee  products  have  been  adopted.  Conditions  were  adopted  which  testing 
laboratories  must  fulfil  in  order  to  be  included  in  the  national  network  of  authorised 
laboratories  for  food  control.  To  improve  official  control  in  the  food  safety  area,  the  Food 
Safety  Agency  signed  an  agreement  with  the  Entities  and  local  inspection  services  on 
implementing  the  first  national  food  monitoring  programme.  However,  the  implementing 
legislation on food hygiene and official control is not yet adopted and therefore enforcement 
capacity  remains  weak  and  not  in  line  with  EU  standards.  No  progress  can  be  reported  as 
regards the upgrading of agri-food establishments. 

Overall,  improved  coordination  mechanisms  between  the  State  level  and  the  Entities  are 
necessary to allow progress towards creating an effective legislative and administrative food 
control system. The lack of progress in the food safety sector has a negative impact on trade 
in agricultural products. 

The  number  of  staff  of  the  Food  Safety  Agency  has  not  increased.  The  representatives  of 
Bosnia  and  Herzegovina  on  the  panel  of  high-level  experts  for  food  safety  in  the  Food  and 
Agriculture Organisation (FAO) have been appointed. 

Limited progress has been made in the field of veterinary and phytosanitary policies. The 
Law on Animal Welfare was adopted in February 2009 but the State Veterinary Law has not 
yet  been  revised,  which  hampers  further  harmonisation  with  the  acquis.  Implementing 
legislation on the maximum level of residues in foodstuffs of animal origin and measures for 
the control of brucellosis have been adopted together with a number of bylaws in the area of 
animal  welfare  and  animal  disease  control.  The  number  of  staff  in  the  State  veterinary 
administration has been increased but all vacancies are not yet filled. 

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There is no functional national animal identification scheme, which limits the effectiveness of 
the  brucellosis  control  programme  that  has  been  launched.  No  progress  has  been  made  on 
national  accreditation  of  the  veterinary  diagnostic  laboratories  according  to  ISO  17025 
standards. 

The  State  Plant  Health  Agency  has  become  operational  with  the  recruitment  of  six  civil 
servants.  Implementing  legislation  to  prevent  the  spreading  of  harmful  organisms  has  been 
adopted. Implementing legislation on mineral fertilisers and the rulebook on seed marketing 
have  also  been  adopted,  providing  the  plant  health  administration  with  reinforced 
competencies. 

The  division  of  competences  between  State  and  Entity  administrations  in  the  field  of  food 
safety  and  veterinary  and  phytosanitary  policy  impedes  the  proper  functioning  of  border 
inspection posts. 

As  regards  the  acquis  in  fisheries,  Bosnia  and  Herzegovina  started  exporting  fish  from 
aquaculture to the European Union. However, there is a general lack of legislation at the State 
level in the field of fishery acquis. 

Overall,  Bosnia  and  Herzegovina  is  still  at  an  early  stage  of  approximation  with  the  EU 
acquis  in  the  fields  of  agriculture  and  rural  development,  food  safety,  veterinary  and 
phytosanitary policy, and fisheries. Preparations are slowly proceeding. The strengthening of 
State-level  capacities  in  the  field  of  agriculture  and  rural  development  continues  to  be 
necessary. Preparations towards setting up structures to implement the IPA rural development 
component need to be intensified. Strengthening of the laboratory and inspection capacities in 
the food safety, veterinary and phytosanitary sectors remains necessary. 

4.2.3.  Environment 

Progress in the field of the environment has continued to be limited. 

Some progress has been made as regards horizontal legislation. Bosnia and Herzegovina has 
ratified  the  following  agreements:  the  Cartagena  Protocol  on  Biosafety,  along  with  the  UN 
Convention on Biodiversity, the Convention on International Trade in Endangered Species of 
Wild  Fauna  and  Flora  (CITES),  the  Bern  Convention  on  Conservation  of  European  Wild 
Species and Habitats, the Aarhus Convention on Access to Information, Public Participation 
in  Decision-making  and  Access  to  Justice  in  Environmental  Matters.  Efforts  are  now 
necessary  to  ensure  proper  implementation.  Ratification  of  the  Espoo  Convention  on 
transboundary environmental impact assessment and the Stockholm Convention on Persistent 
Organic  Pollutants  has  not  yet been  completed.  Although  no  further  progress  is  to  be  noted 
since  the  last  report,  the  Directive  on  Environmental  Impact  Assessments  (EIA)  is  almost 
completely transposed into Entities’ laws, but attention has to be given to the transboundary 
dimension  of  this  issue.  No  progress  has  been  made  as  regards  the  transposition  of  the 
Directive on Strategic Environment Assessment (SEA). Transposition and implementation of 
the acquis in the field of horizontal legislation requires considerable improvement.  

No developments can be reported with regard to air quality. Entity-level legislation has been 
prepared, but has not yet been adopted.  

Regarding waste management, some progress has been made in the establishment of sanitary 
landfills throughout Bosnia and Herzegovina, and regulations on medical waste management 

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have  been  enacted.  However,  no  progress  has  been  made  in  relation  to  rules  or  regulations 
governing the system of recycling and recovery of priority waste streams, such as packaging, 
motor oil and tyres. Further efforts are still required to initiate management of waste streams 
of  animal  origin.  Bosnia  and  Herzegovina  is  at  an  early  stage  of  investment  in  solid  waste 
management. Further efforts are required to prioritise and coordinate investment programmes, 
as financial resources are scarce.  

Limited  progress  can  be  reported  on  water  quality.  Bosnia  and  Herzegovina  continues  to 
implement the requirements of the Water Framework Directive by means of the Entity Water 
Laws. The Water Agencies are operational in the Federation and ensuring coordination with 
the relevant Ministries. The establishment of Water Agencies in Republika Srpska is still in 
progress. The Agency for the Sava River Basin area has been set up. Further efforts are still 
required  to  ensure  uniform  river  basin  planning,  proper  public  consultation  and  monitoring 
between  the  Entities.  Implementing  legislation  has  been  adopted  for  water  laws,  water 
charges,  and  for  harmful  and  dangerous  substances  and  their  maximum  levels  in  surface 
waters. 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,  and  access  to  drinking  water  as  well  as  wastewater  treatment 
infrastructure requires more investments.  

Apart from the national strategy and action plan for protection of the biological and landscape 
diversity of Bosnia and Herzegovina, no significant further progress has been made in relation 
to  nature  protection.  No  new  developments  have  taken  place  in  the  field  of  industrial 
pollution control and risk management. 

No progress can be reported in terms of approximation to the acquis as regards chemicals and 
noise. Some progress has been made in relation to genetically modified organisms (GMOs) 
through the adoption of a law on GMOs and a number of related bylaws. 

Bosnia and Herzegovina’s administrative capacity in the environment sector remains weak 
overall.  A  State-level  Environmental  Law  ensuring  harmonised  countrywide  environmental 
protection has not been adopted yet, and no State Environment Agency has been established. 
The current draft Law does not provide for the establishment of such an agency, and restricts 
itself  to  reinforcing  the  environment  sector  at  the  Ministry  of  Foreign  Trade  and  Economic 
Relations. During the reporting period, this Ministry was not able to play any significant role 
due  to  the  lack  of  an  adequate  legal  or  institutional  framework.  Implementation  of  the 
environmental  legislation  remains  a  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. As 
regards  investments,  no  significant  developments  have  taken  place.  Environment-related 
infrastructure  needs  much  improvement.  Efforts  to  prioritise  and  coordinate  investment 
programmes  have  been  insufficient.  The  Federation’s  Environment  Fund  is  not  yet 
operational. 

Overall, Bosnia and Herzegovina’s preparations in the field of the environment remain at an 
early  stage.  Bosnia  and  Herzegovina  needs  to  strengthen  its  environmental  protection 
institutions, in particular at 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. 

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4.2.4.  Transport policy 

There  has  been  slow,  but  continued  progress  on  the  development  of  the  trans-European 
transport  networks.  Bosnia  and  Herzegovina  has  continued  to  actively  participate  in  the 
implementation of the 2004 Memorandum of Understanding on the development of the South 
East  Europe  Core  Regional  Transport  Network,  and  in  the  South  East  Europe  Transport 
Observatory  (SEETO)  particularly  by  updating  and  implementing  the  Multi-annual  Plan 
2009-2013. 

Upgrading of pan-European road corridor V-c is continuing. In 2009, works on the Sarajevo 
motorway  bypass  continued  and  the  toll  motorway  extended  to  Kakanj,  40  km  north  of 
Sarajevo.  Designs  for  the  Kakanj-Zenica  section,  the  Zenica,  Doboj  and  Mostar  bypass  and 
the Mostar–Croatian border section have been prepared. The financing for a further 65 km of 
the four sections of the highway has been ensured.  

Some  progress  can  be  reported  in  the  area  of  road  transport.  Bosnia  and  Herzegovina  is 
granting  unrestricted  access  through  its  territory  to  Community  transit  traffic.  Progress  has 
been  made  towards  the  establishment  of  the  TIR  carnet  system  and  the  implementation  of 
digital tachographs. Safety measures such as stricter technical inspections of vehicles or fixed 
speed  control  radars  in  the  Federation  have  been  undertaken.  Republika  Srpska  adopted  the 
Law on Road Transport and the programme for transport safety on Republika Srpska roads. 
There  are  ongoing  activities  on  the  improvement  of  road  network  maintenance  and  the 
reconstruction  of  roads;  however,  significant  investments  are  required  to  achieve  sufficient 
levels of safety and efficiency.  

There  has  been  limited  progress  in  the  area  of  rail  transport.  Railway  companies  are  still 
vertically  integrated  and  the  infrastructure  managers  are  not  independent  from  the  ailways 
undertakings  —  as  required  by  the  acquis.  The  Railway  Regulatory  Board  (RBB)  has 
completed  its  recruitment  and  training.  The  ‘Railway  Package  II’  Directives  on  rail  safety 
remain to be implemented. The need persists to accelerate rail reform in accordance with the 
‘Addendum  to  the  Memorandum  of  Understanding  on  the  development  of  the  South-East 
Europe Core Regional Transport Network for a South-East European railway transport area’. 

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

Little progress has been made in the area of inland waterways. Preparatory activities for the 
re-establishment of navigation on the Sava River are in progress.  

No progress has been made in the area of combined transport. 

Progress has been made in the area of air transport. Bosnia and Herzegovina became a full 
member  of  the  Joint  Aviation  Authorities  (JAA).  Relations  with  the  European  Air  Security 
Agency  (EASA)  have  been  put  on  a  formal  footing  by  a  working  arrangement  signed  on  7 
July  2009.  The  final  organisational  set-ups  of  the  air  navigation  provider  and  of  the  civil 
aviation authority have been adopted and their headquarters have been established. After the 
ratification  of  the  European  Common  Aviation  Agreement  (ECAA),  administrative  burdens 
and unnecessary delays should not limit the efficiency and effectiveness of its application. An 
action plan for the transposition and implementation of the ECAA has been drawn up. Further 
efforts  are  necessary  to  complete  the  first  transitional  phase  of  the  ECAA,  including 

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amendments to the Aviation Law — as suggested in the ECAA Assessment Report of 2008 to 
establish an independent civil aviation accident investigation body and to ensure appropriate 
occurrence  reporting  in  civil  aviation.  Substantial  efforts  have  been  made  in  the  area  of  air 
traffic  management  but  further  efforts  are  still  required.  As  a  member  of  the  ECAA 
agreement,  Bosnia-Herzegovina  participates  to  Single  European  Sky  Committee  (SSC) 
sessions  with  observer  status.  The  European  Commission  has  put  in  place  the  ISIS9 
Programme to assist South Eastern States to transpose EU legislation, to set up the required 
structures and to ensure the appropriate training of national staff. It is essential for Bosnia and 
Herzegovina  to  make  best  use  of  ISIS  that  should  be  a  suitable  instrument  in  support  to  its 
current  efforts.  Further  alignment  with  European  standards  in  the  areas  of  aviation  safety, 
security and air traffic management as well as further efforts in staff training are needed.  

Overall, Bosnia and Herzegovina’s preparations in the transport sector are advancing, albeit 
slowly. Efforts need to be stepped up, in particular as regards the road and railway sector. The 
upgrading of transport infrastructure remains necessary. 

4.2.5.  Energy 

There have been no developments on oil stocks and security of supply. The country receives 
all of its gas from Russia through Ukraine, Hungary and Serbia. Oil stocks remain below the 
90-day level. 

Concerning  the  internal  energy  market,  the  country  is  not  yet  fulfilling  the  obligations 
deriving  from  the  Energy  Community  Treaty.  The  acquis  on  the  internal  electricity  market 
has  been  partially  transposed,  but  issues  such  as  tendering  procedures  for  new  generating 
capacity  remain  to  be  addressed.  The  main  problem  continues  to  be  the  lack  of 
implementation  of  legislation.  The  State  level  transmission  company's  (TRANSCO) 
operability is at high risk due to missing political compromise of the two Entities as the only 
shareholders  on  the  company's  dealings.  This  has  led  to  a  continued  blockage  of  any 
investment for more than one year. Maintenance operation cannot be carried out. This might 
put  at  risk  the  security  of  electricity  supply.  The  effective  continuity  of  the  business 
operations  of  this  important  Sate  level  company  needs  to  remain  ensured.  Generation 
investment planning is also hampered by the lack of  coordination  between the two Entities. 
Since  January  2008  there  has  been  market  opening  for  all  non-household  customers. 
However,  consumers  have  little  incentive  to  change  suppliers  as  regulated  tariffs  remain 
below market prices.  

The  State  Electricity  Regulatory  Commission  (SERC)  has  issued  new  tariff  rates  for  the 
independent system operator and ancillary services for 2009. The tariff rates adopted by the 
Entity  regulatory  commissions  (FERC  and  RSERC)  in  2007  remain  in  force  to  date.  The 
independence  of  the  regulatory  commissions  needs  to  be  improved,  not  least  in  relation  to 
tariff setting.  

No progress has been made in the gas sector. Republika Srpska and the Federation of Bosnia 
and Herzegovina have had their own legislation since 2007, but neither a countrywide legal 
framework  nor  a  national  regulator  has  yet  been  developed  due  to  the  lack  of  agreement 
between the Entities.  

9 

Implementation of Single European Sky In South Eastern Europe 

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There  has  been  limited  progress  on  energy  efficiency  and  renewable  energy.  Bosnia  and 
Herzegovina  has  not  developed  any  comprehensive  energy  strategy.  There  is  no  strategic 
planning for the promotion of energy efficiency and the use of renewable energy sources. In 
December 2008 a 50% connection fee was stipulated for facilities that use renewable energy 
sources  for  electricity  generation  (which  does  not  apply  to  hydro  power  plants  of  over  10 
MW). 

As regards nuclear safety and radiation protection, the country has signed the Convention 
on  Early  Notification  of  a  Nuclear  Accident,  the  Convention  on  Physical  Protection  of 
Nuclear  Material  and  the  Convention  on  Assistance  in  the  Case  of  a  Nuclear  Accident  or 
Radiological Emergency. However, the Law on Radiation and Nuclear Safety in Bosnia and 
Herzegovina  of  2007  is  not  yet  implemented.  In  addition  full  compliance  of  the  national 
legislation and regulations in the nuclear field with the acquis is far from being achieved. The 
State Regulatory Agency for Radiation Safety and Nuclear Safety hardly started its work in 
2009, following the appointment of a director and a regional deputy director.  

Overall, Bosnia and Herzegovina’s preparations to meet EU standards in the area of energy 
have  started,  but  remain  at  an  early  stage.  There  has  been  little  progress  over  the  reporting 
period,  and  the  country  is  lagging  behind  in  meeting  the  requirements  of  the  Energy 
Community  Treaty.  The  lack  of  cooperation  and  coordination  between  the  two  Entities  is 
hampering  the  development  of  a  functioning  energy  market  and  is  compromising  the 
improvement  of  security  of  supply.  The  development  of  a  comprehensive  energy  strategy, 
including the promotion of energy efficiency and renewable energy sources, is crucial. 

4.2.6. 

Information society and media 

Bosnia and Herzegovina has made limited progress in this area. 

Regarding  electronic  communications  and  information  technologies,  the  regulatory 
framework  on  Electronic  Communications  needs  further  reform.  The  telecommunications 
sector policy (2008-2012) was approved in December 2008, with a one-year delay. The new 
policy provides for the future transition to an authorisation framework and the amendment of 
Reference  Interconnection  Offers  (RIOs)  to  enable  market  entry  of  mobile  virtual  network 
operators (MVNOs) by the end of 2010. Since the sector policy determines the priorities and 
specific  regulatory  objectives,  important  regulatory  decisions  —  such  as  on  3G  licences, 
number portability and local loop unbundling — were delayed until its adoption, even if the 
Communications Regulatory Agency (CRA) had already adopted rules in 2008. 

Few  new  entrant  operators  have  become  operational  since  the  liberalisation  of  the  market. 
With a total of around 15 interconnection agreements in place, many of the licensed operators 
or service providers are not in a position to effectively compete with the incumbent operators. 
The  three  incumbent  operators  still  have  close  to  100%  market  share.  Very  few  operators 
offer  carrier  selection  services.  In  the  reporting  period,  a  new  licence  for  fixed  telephony 
services, two additional  licences for internet service providers and two licences for network 
operators  have  been  granted.  The  CRA  issued  three  licences  for  Universal  Mobile 
Telecommunications System (UMTS) to incumbent operators without a tender procedure.  

Tariff rebalancing — a key element for creating a competitive market — is still at an early 
stage. The CRA adopted in March 2009 a model for the rebalancing of tariffs for telephony 
services until 2012, which is due to be applied as of January 2010. 

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The  challenges  to  the  CRA’s  independence  have  increased  over  the  reporting  period.  The 
dialogue between the CRA and the Council of Ministers (CoM) has remained difficult. After 
a two-year delay, a new director general of the CRA has not been appointed. The nomination 
of  CRA  Council  members,  which  was  due  to  be  finalised  in  April  2009,  also  remains 
unresolved. 

Since the start of the debate on the procedure for appointing the CRA’s director general, and 
in  the  absence  of  a  sector  policy,  the  adoption  of  several  decisions  on  broadcasting  and 
telecommunications  prepared  by  the  CRA  has  been  delayed  by  the  executive.  This  affects 
negatively the dynamics of competitive development, and it is not a good signal to the sector 
and to consumers. The overall situation at the CRA also hampers its administrative capacity. 
The CRA needs a duly appointed director general and Council, as well as additional human 
resources and expertise, to continue to perform its tasks and responsibilities and to be able to 
proactively  support  the  development  of  the  communications  and  broadcasting  market.  The 
Ministry in charge of communications also needs to strengthen its administrative capacity. 

Little progress has been made in the area of information society services. With regard to the 
status  of  the  citizen  identification  protection  system  (CIPS),  the  Law  on  the  Agency  for 
Identification  Documents,  Registers  and  Data  Exchange  (IDDEEA)  provides  for  the 
establishment  of  an  agency,  which  has  been  recently  set  up.  The  IDDEEA  Agency  is 
takingover the tasks of the CIPS Directorate and other responsibilities, such as the provision 
of  technical  support  for  an  ID  document  system  at  the  State  level  (central  registers,  data 
exchange, e-signature in the ID document area, central personalisation of ID documents).  

The State-level law for the development of the information society has not been adopted, and 
no State-level agency has been established. In the meantime, Republika Srpska has set up its 
own  information  society  agency  following  the  understanding  that  the  constitution  indicates 
that 'information technologies' are an entity competence. 

The  overall  implementation  of  the  rules  laid  down  by  the  e-Signature  Law  —  adopted  in 
November 2006 — is slow. No progress has been made in adopting legislation on conditional 
access  services.  Bylaws  for  the  e-Business  Law  have  not  been  adopted.  Republika  Srpska 
adopted its law on electronic business and developed a strategy for e-government.  

Limited progress has been made on audiovisual policy and media.  

The  Unesco  Convention  on  the  Protection  and  Promotion  of  the  Diversity  of  Cultural 
Expressions  has  been  ratified.  Rules  on  conditions  for  the  provision  and  distribution  of 
audiovisual media services and RTV programmes have been adopted and implementation has 
started.  Preparations  for  the  introduction  of  Digital  Terrestrial  Television  (DTT)  have  seen 
some progress.  

However,  a  deterioration  of  media  freedoms  in  Bosnia  and  Herzegovina  has  been  observed 
during  the  reporting  period.  Since  January,  the  Free  Media  Helpline  of  the  Bosnia  and 
Herzegovina’s  Union  of  Journalists  has  registered  16  verbal  assaults  and  direct  physical 
attacks, death threats and other violations of journalists’ rights. This represents an increase of 
20% compared to 2008. The country is ranked in 115th place on the list of Reporters without 
Borders evaluating press freedom in 173 countries. There has been little cooperation between 
local  media  organisations  responsible  for  media  freedoms.  In  April  the  RTRS  —  the 
Republika  Srpska  public  broadcaster  —  and  the  Republika  Srpska  daily  newspaper  Glas 

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Srpski walked out of the association Journalists of Bosnia and Herzegovina, announcing the 
establishment of a separate, Republika Srpska only, association of journalists. 

The  reform  of  Bosnia  and  Herzegovina’s  public  broadcasting  sector  progresses  slowly.  The 
Federation  of  Bosnia  and  Herzegovina  only  appointed  the  Federation’s  TV  management 
board  in  June  2009.  Due  to  these  delays,  the  Bosnia  and  Herzegovina  Public  Broadcasting 
Corporation,  responsible  for  streamlining  and  modernising  the  activities  of  all  three  public 
broadcasters  in  the  system,  has  not  yet  been  registered.  Moreover,  the  Federation’s  Law  on 
the Public Broadcasting Service is not yet fully aligned with the Public Broadcasting System 
Law of Bosnia and Herzegovina. The public broadcasting reform is seriously delayed.  

Overall, Bosnia and Herzegovina’s preparations in the field of the information society and the 
media  are  advancing,  albeit  slowly.  Particular  efforts  are  necessary  to  implement  the  legal 
framework  in  the  area  of  public  broadcasting,  to  carry  out  the  reform  of  this  sector  and  to 
ensure the functional 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 steps have been taken in the area of Public Internal Financial Control (PIFC). Laws 
on internal audit are being implemented at State and Entity level, but administrative capacity 
must  be  strengthened  to  ensure  the  sound  management  of  public  funds.  A  working  group 
comprising representatives from all levels of government has drafted PIFC policy papers for 
the State-level and the two Entities. After the approval of the three policy papers, the reform 
will  need  to  concentrate  on  developing  effective  managerial  arrangements  and  a  financial 
management  and  control  (FMC)  structure.  Central  Harmonisation  Units  (CHUs)  have  been 
created at the State level and in Republika Srpska, but are insufficiently staffed. The CHU in 
the Federation remains to be established.  

As regards external audits, the four supreme audit institutions (SAIs) in the country — State, 
Entities  (2)  and  Brčko  District  —  continued  to  implement  their  common  strategic 
development for 2007-2012 on the basis of the external audit laws. SAIs have diversified their 
activities  to  exercise  performance  audits,  in  addition  to  regular  financial  audits.  Their 
cooperation through the Coordination Board has proved to be efficient. The parliaments have 
improved  their  capacity  to  deal  with  audit  reports,  but  follow-up  to  the  SAIs’  reports  and 
recommendations remains insufficient. The independence of the SAIs remains to be anchored 
more credibly to comply with international standards.  

Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  area  of  financial  control  are 
progressing,  but  slowly.  Stronger  efforts  are  necessary  to  improve  public  internal  financial 
control and the follow-up of audit reports. 

4.2.8. 

Statistics 

Some progress has been made in the area of statistics. 

As  regards  statistical  infrastructure,  a  new  work  plan  2009-2012  has  been  adopted.  It 
provides  for  the  development  and  expansion  of  the  State  Agency  for  Statistics  (BHAS). 
Currently, it has 64 employees and aims to have 198 by 2015. However, cooperation between 
the BHAS and the Institutes for Statistics in the Entities needs further improvement. Different 
interpretations of the existing legislation persist. Neither the Law on Statistics of Bosnia and 

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Herzegovina nor the Agreement on cooperation and coordination in the area of statistics have 
been  properly  implemented.  The  issue  of  provision  of  VAT  and  other  data  by  the  Indirect 
Taxation Authority to the BHAS remains open. The Federation’s Institute of Statistics (FIS) 
has  not  been  able  to  fund  important  surveys.  All  these  elements  are  detrimental  to  the 
production and development of country-wide and accurate statistics.  

Regarding  classifications  and  registers,  a  business  register  has  been  created  but  it  is  not  yet 
fully  operational.  The  BHAS  has  also  initiated  its  work  on  approximation  to  NACE  rev.  2 
(Statistical Classification of Economic Activities in the European Community).  

Some  progress  has  been  made  on  sector  statistics.  Preparations  for  a  census  in  2011  have 
started.  The  dates  for  the  population  and  housing  census  (1  April  2011)  and  for  the  pilot 
census  (1  April  2010)  have  been  fixed.  Various  working  groups  have  been  set  up  for  the 
census  preparations  and  Bosnia  and  Herzegovina  has  requested  international  monitoring  of 
the  preparation  and  conduct  of  the  census.  A  number  of  methodological  documents  for  the 
census have been drafted. The preparation of maps for census enumeration areas is ongoing in 
discussions  with  the  geodetic  institutes  in  the  Entities.  A  Census  law  has  been  approved  by 
the Council of Ministers and is now in Parliamentary procedure. 

In the field of social statistics, a Labour Force Survey (LFS) was conducted in 2008 and the 
results  of  the  2007  LFS  were  published.  The  provisional  results  of  the  2009  LFS  have  also 
been  published.  The  BHAS  has  taken  initial  steps  towards  the  development  of  education 
statistics.  For  other  social  statistical  domains,  such  as  health  statistics,  progress  has  been 
limited. 

Limited progress has been made in the area of macroeconomic statistics. An analysis of 2007 
data  on  household  consumption  in  Bosnia  and  Herzegovina  was  finalised.  This  provided 
useful  information  on  the  scope  and  structure  of  consumption  and  relative  and  absolute 
poverty in the country. The multi-annual master plan for development of national accounts is 
ready,  but  is  not  applied  by  the  Statistical  Office  of  Republika  Srpska.  Quarterly  national 
accounts statistics do not yet exist.  

Some action has been taken to improve the quality of business statistics, primarily concerning 
industrial  statistics,  statistics  on  the  construction  industry  and  structural  business  statistics. 
The preparations for a census of agriculture have started. The population census questionnaire 
will  contain  additional  questions  in  order  to  identify  agricultural  households.  In  the  area  of 
energy statistics, questionnaires have been designed and harmonised for both Entities in order 
to collect data on the balance of electrical energy and heat. Also, pilot research is under way 
regarding the production of coal in both Entities as an initial step towards the establishment of 
an energy balance for coal.  

Overall, Bosnia and Herzegovina's preparations in the field of statistics are slowly advancing. 
Some  progress  has  been  made,  including  as  regards  technical  preparations  for  the  census. 
However, national accounts and business and agricultural statistics need to be improved. The 
plan for the development of the BHAS needs to be implemented to ensure sufficient capacity. 
Better cooperation between the Entities and the BHAS remains essential. 

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4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration 

Progress  has  been  made  by  Bosnia  and  Herzegovina  with  regard  to  visa  policy  and  in  the 
wider framework of the visa liberalisation dialogue. 

A  number  of  bylaws  were  adopted  to  specify  the  procedures  for  the  issuance  of  all  four 
categories  of  visas  provided  for  in  the  Schengen  acquis  (A,  B,  C  and  D).  Currently,  the 
positive  and  negative  lists  are  not  fully  harmonised  with  the  EU  visa  list.  Bosnia  and 
Herzegovina  maintains  a  visa-free  regime  for  citizens  of  Serbia,  Montenegro,  the  former 
Yugoslav Republic of Macedonia and Turkey. In March 2009, a visa liberalisation agreement 
was signed with Albania.  

The  decrease  in  the  number  of  visas  issued  at  border  crossings  continued,  with  684  visas 
issued  at  the  border  in  2008  compared  to  735  in  2007.  From  January  to  August  2009,  169 
visas have been issued. 

The migration information system, including the visa module for electronic data storage and 
transfer between consular offices and the central administration in Bosnia and Herzegovina, 
became  fully  operational  in  September.  The  connection  of  border  crossing  points  to  the 
migration information system remains to be completed. 

The issuance of biometric passports in line with the relevant EC and ICAO standards has only 
started  in  a  test  phase  since  July  2009  and  is  scheduled  to  be  fully  operational  in  October 
2009. To ensure the integrity of the personalisation of passports and other identity documents, 
the Agency for Identification Documents, Data Registers and Data Exchange of Bosnia and 
Herzegovina (IDDEEA) has taken over exclusive competence for the electronic storage and 
maintenance of central registers and the personalisation of identification documents, including 
identity cards, conventional passports and the new biometric passports. Secure and effective 
management  of  breeder  documents  requires  the  completion  of  verification  of  all  registry 
books and the entry of data into the central database managed by IDDEEA.  

Overall, Bosnia and Herzegovina has started to address its priorities in the field of visa policy. 

Bosnia  and  Herzegovina  has  made  limited  progress  in  the  area  of  border  management.  In 
December  2008,  a  Memorandum  of  Understanding  establishing  the  Integrated  Border 
Management (IBM) Joint Risk Analysis Centre was signed between the Ministry of Security, 
Border  Police,  Indirect  Taxation  Authority,  State  Veterinary  Office,  State  Plant  Health 
Protection  Agency  and  Service  for  Foreigners’  Affairs.  Once  fully  operational,  the  Centre 
should  promote  collection  and  exchange  of  information  and  risk  analysis  between  the 
agencies concerned.  

A  Law  on  Border  Control  laying  down  competences,  procedures  and  measures  to  do  with 
crossing  and  control  of  the  borderline  was  adopted  in  June  2009.  The  responsibility  for 
management  of  border  crossing  points  remains  to  be  allocated.  A  national  Coordinator  for 
IBM was appointed in the Ministry of Security, in charge of overseeing the implementation of 
the IBM action plan. The Coordinator reports to the IBM Commission on implementation of 
the  action  plan.  The  State  Border  Commission  has  made  little  progress  in  addressing 
unresolved border demarcation issues.  

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55 

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The  closure  of  illegal  State  border  crossing  points  with  Croatia  has  made  some  progress.  A 
total of 67 illegal crossing points passable for vehicles, along the green borderline of Bosnia 
and Herzegovina towards Croatia have been physically blocked on the Bosnian territory side. 
Nonetheless,  the  high  number  of  border  crossing  points  is  an  obstacle  to  an  effective 
allocation of Border Police staff.  

Infrastructure at border crossing points (BCPs) requires further improvement, in particular as 
regards  their  delimitation,  surveillance  and  equipment.  An  internal  IT  system  for  electronic 
transfer of data and access to central databases needs to be generalised across BCPs. 

The  four  protocols  on  implementing  the  2007  agreement  on  border  control  between  Bosnia 
and Herzegovina and Croatia have entered into force. 

In March 2009, Bosnia and Herzegovina signed protocols with Serbia on joint border patrols 
and  regular  meetings  of  border  police.  With  Montenegro,  a  protocol  on  joint  border  patrols 
and an agreement on joint border controls were concluded in March 2009.  

In April 2009 a working arrangement between the Ministry of Security and FRONTEX was 
signed.  

Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  area  of  border  management  are 
advancing slowly and need to be intensified. Efforts need to focus, in particular, on addressing 
the  infrastructural  deficiencies  of  border  crossing  points,  the  gaps  in  staffing  levels  and  the 
still unresolved border demarcation issues. 

Good  progress  has  been  made  as  regards  asylum.  The  number  of  asylum  applications  fell 
from 149 in 2007 to 49 in 2008. In 2008, the sector for asylum within the Ministry of Security 
made 1 positive and 64 negative decisions concerning asylum requests.  

The adoption of the necessary implementing legislation regarding the law on Movement and 
Stay  of  Aliens  and  Asylum  is  proceeding.  A  national  asylum  and  migration  strategy  and 
action plan for 2008-2011 were adopted in November 2008. As regards the implementation of 
the strategy and action plan, a coordination body was appointed by the Council of Ministers. 

Investments  by  Bosnia  and  Herzegovina  in  the  asylum  system  have  continued,  and  the 
institutional  capacity  of  the  asylum  sector  of  the  Ministry  of  Security  and  the  Ministry  of 
Human Rights and Refugees is now sufficient to handle the current caseload. There is close 
cooperation  between  the  Ministry  of  Security  and  the  Ministry  of  Human  Rights  and 
Refugees. Training activities have been organised by both institutions, in cooperation with the 
UNHCR, local NGOs and other relevant authorities such as the Border Police. Progress has 
been  made  towards  assuming  full  responsibility  for  managing  and  financing  the  existing 
asylum centres. The migration information system, including its asylum module, became fully 
operational in September. However, the Ministry of Human Rights and Refugees remains to 
be connected to system At the end of 2007, temporary protection status was withdrawn from 
around  3,100  persons  from  Kosovo.  Around  870  of  them  applied  for  asylum  in  Bosnia  and 
Herzegovina.  Most  of  the  applications  have  been  rejected,  while  a  small  number  received 
subsidiary protection status. 

A temporary asylum centre located in Rakovica is operational and can accommodate over a 
hundred refugees. The construction of a significantly improved, permanent centre in Trnovo 
is in preparation. The centre is expected to be operational in 2011. 

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Overall, the asylum and international protection system in Bosnia and Herzegovina is largely 
in line with EU and international standards.  

Some progress has been made on migration. A reception centre for irregular migrants with 40 
available  beds  is  fully  operational.  Between  July  2008  and  June  2009,  some  280  illegal 
migrants  were  accommodated.  An  additional  permanent  reception  centre  with  a  maximum 
capacity of 80 people is under construction, and it should be operational by 2010. 

The Readmission Agreement between the European Community and Bosnia and Herzegovina 
which  entered  into  force  in  January  2008  continued  to  be  implemented.  The  second  Joint 
Committee meeting on implementation of the agreement was held in December 2008. Bosnia 
and Herzegovina has continued its efforts to establish readmission agreements with non-EU 
countries.  At  the  moment  six  readmission  agreements  with  non-EU  countries  are  in  place. 
Other agreements, including with Russia and Ukraine, are in preparation. No difficulties have 
been observed in handling cases concerning readmission of third-country nationals or citizens 
of  Bosnia  and  Herzegovina.  A  strategy  for  returnee  reintegration  pursuant  to  the 
implementation  of  readmission  agreements  has  been  adopted.  The  number  of  readmitted 
persons  increased:  459  in  2008,  of  which  211  were  citizens  of  Bosnia  and  Herzegovina, 
compared with 240 in 2007, out of which 196 were nationals. 

There  has  been  a  steady  significant  decline  in  the  number  of  interceptions  of  people 
attempting to cross the border unlawfully. In 2008, 543 persons were intercepted when trying 
to enter or leave the territory of Bosnia and Herzegovina (851 in 2007).  

Progress  continued  on  the  Service  for  Foreigners’  Affairs  (SFA)  under  the  Ministry  of 
Security,  but  the  lack  of  human  resources  and  budgetary  problems  risk  hampering  the  full 
implementation of its tasks. The service has 182 employees out of the planned 320. The offer 
of training activities for SFA staff remains incomplete. In 2008, 3,420 requests for temporary 
stay and 3,435 requests for extension of temporary stay were submitted to the SFA. The total 
number of requests, i.e. 6,855, represents an increase of 10.4% in comparison to 2007. In this 
period  272  requests  for  permanent  stay  were  also  presented.  The  Service  for  Foreigners’ 
Affairs  issued  787  expulsion  decisions  in  2008;  among  these,  172  persons  were  forcefully 
removed, that is an increase of 28.7% in comparison with 2007.  

Seven out of eight bylaws to the new Law on Movement and Stay of Aliens and Asylum are 
already  in  force.  The  rulebook  on  internal  organisation  of  the  Ministry  of  Security  was 
adopted, reinforcing the migration sector with staff assigned to monitoring migration flows in 
Bosnia and Herzegovina and presenting the country’s migration profile. A national migration 
strategy has been adopted. 

The migration information system became fully operational in September. Its full functioning 
should  result  in  significant  improvements  in  monitoring  of  migration  flows  in  Bosnia  and 
Herzegovina.  Inter-agency cooperation and the clarification of competences, in particular as 
regards illegal migration, need to improve.  

At  the  end  of  2008  Bosnia  and  Herzegovina,  Albania,  Croatia,  Montenegro,  the  former 
Yugoslav  Republic  of  Macedonia  and  Serbia  signed  a  Memorandum  of  Understanding  on 
setting  up  a  system  for  sharing  statistical  data  on  illegal  migration  and  participating  in  the 
regional system of advance notification.  

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Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  area  of  migration  are  moderately 
advanced. Improved monitoring of migration flows and intensified inter-agency cooperation 
are necessary. 

4.3.2.  Money laundering 

Some  progress  can  be  reported  in  the  field  of  anti-money  laundering.  A  new  Law  against 
Money Laundering and Financing of Terrorist Activities was adopted in June 2009, with the 
aim  of  harmonising  Bosnia  and  Herzegovina’s  legislation  with  the  Financial  Action  Task 
Force  (FATF)  recommendations  on  money  laundering  and  terrorism  financing,  as  well  as 
with other EU and international standards. A national strategy for the prevention and fighting 
of  money  laundering  and  financing  of  terrorist  activities  and  the  corresponding  action  plan 
have been adopted.  

The Financial Intelligence Department (FID) of the State Intelligence and Protection Agency 
(SIPA) is not duly staffed yet, in particular as regards police officials. An electronic system 
for banks to report suspicious transactions is in place, although non-banking institutions that 
are required to report to the FID are not yet connected to the system. The number of reports of 
suspicious  transactions  increased  slightly  in  2008,  but  still  remains  relatively  low.  Some 
training  activities  were  organised,  but  further  focus  is  needed  on  enforcement  capacity,  in 
particular special investigative techniques, use of equipment and information tools. Domestic 
cooperation  between  the  FID  and  Entity-level  law  enforcement  agencies  needs  to  be 
improved.  Regarding  international  cooperation,  the  number  of  reported  exchanges  via  the 
EGMONT system decreased slightly in 2008 compared to 2007. 

In 2008 no final convictions for money laundering have been reported, although a number of 
investigations  have  been  completed.  No  case  was  filed  on  the  financing  of  terrorism. 
Preventive  and  supervisory  measures  still  have  to  be  implemented  and  extended  to  non-
banking financial institutions and intermediaries.  

Bosnia  and  Herzegovina  needs  to  complete  the  harmonisation  of  its  legislation  with  the 
Council  of  Europe  Convention  on  Laundering,  Search,  Seizure  and  Confiscation  of  the 
Proceeds of Crime and on the Financing of Terrorism. The management of confiscated assets 
is still not harmonised within the country. Legislation differs between the State and Entities, 
and remains to be aligned to international standards.  

Overall,  Bosnia  and  Herzegovina  is  making  continued  progress  in  the  area  of  money 
laundering, but further considerable efforts are needed. Strengthening administrative capacity, 
effective implementation of the legal framework and awareness-raising on money laundering 
all need to be pursued with determination. 

4.3.3.  Drugs 

Bosnia and Herzegovina is at the crossroads of regional drug trafficking. Drugs-related illegal 
activities are still one of the most widespread forms of organised crime. Local consumption is 
rising, but still remains relatively low compared to other European countries.  

There  has  been  progress  in  the  fight  against  drugs.  The  national  strategy  for  drug  control, 
suppression  and  prevention  2009-2013  was  adopted  in  March  2009  by  the  Council  of 
Ministers and parliament, and an action plan was adopted.  

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The  Council  of  Ministers  established  a  Commission  for  the  destruction  of  narcotics.  In 
accordance  with  the  Bosnia  and  Herzegovina  Law  on  Narcotics,  permits  for  importing 
psychotropic  substances,  narcotics,  precursors  and  narcotic  plants  are  now  issued  at  State 
level  by  the  Bosnia  and  Herzegovina  Ministry  of  Civil  Affairs  and  the  Ministry  of  Foreign 
Trade and Economic Relations.  

Operational police units have received new inspection equipment. Bilateral police cooperation 
with countries of the region in the fight against drugs has improved. Bosnia and Herzegovina 
law  enforcement  has  performed  a  number  of  operations,  including  via  international 
cooperation, aimed at disrupting drugs trafficking as well as production and sales. However, 
compared  to  its  importance  as  a  transit  country,  the  quantity  of  drugs  seized  at  the  border 
remained  low.  Domestic  inter-agency  information  exchange  and  cooperation  in  the  fight 
against  drugs  needs  to  be  stepped  up.  Specialised  law  enforcement  units  are  in  need  of 
training and equipment to make the fight against drug trafficking more effective. 

A  new  information  system  monitoring  the  flow  of  goods  considered  as  narcotics  has  been 
established.  No  progress  was  made  towards  the  availability  of  drug-related  information  at 
border  crossing  points.  A  public  awareness  campaign  was  carried  out  aimed  at  preventing 
drug abuse among young people. 

Activities  aimed  at  improving  international  cooperation  on  drugs-related  information  with 
regard  to  the  abuse  of  narcotics,  and  on  preventive  measures,  have  been  intensified.  Bosnia 
and Herzegovina is actively cooperating with the INCB and the UNODC, thus improving the 
control of international trade in psychotropic substances and precursors. 

The  introduction  of  standards  for  information  collection  set  by  the  European  Monitoring 
Centre for Drugs and Drug Addiction still needs to be completed.  

Overall, Bosnia and Herzegovina’s preparations in the field of drugs are advancing. However, 
the  fragmented  structure  of  the  police  and  the  judiciary  continues  to  provide  a  favourable 
environment for drugs trafficking and related violations. 

4.3.4.  Police 

Limited  progress  has  been  made  in  the  area  of  the  police.  The  fragmentation  of  the  police 
forces  and  the  lack  of  systematic  cooperation  and  information  exchange  remain  a  serious 
issue. The completion of the police restructuring process depends on the reform of the current 
constitutional framework, which is stalling. An investigation of Republika Srpska government 
officials led by the State Prosecutors and carried out by SIPA marked a high point in tension 
within the Bosnia and Herzegovina law enforcement community.  

The implementation of the police reform laws adopted in 2008 has been slow. The Council of 
Ministers has  decided on the headquarters  of the agencies and budgets have been allocated. 
The appointment of the agencies’ directors and deputy directors has made some progress, but 
has  not  yet  been  completed.  It  has  been  necessary  to  re-launch  a  number  of  selection 
procedures. The directorate for the coordination of police activity in Bosnia and Herzegovina 
still needs to be established.  

An agreement on cooperation in data exchange from police and prosecutor's records has been 
adopted.  Its  implementation  should  contribute  to  improving  cooperation  and  exchange  of 
information among police bodies which remains a problem.  

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59 

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Moderate progress in cooperation with police forces of other countries has been registered. In 
March 2009, the Ministry of Security and Europol signed a memorandum on a mutual secure 
link to enable confidential information to be shared. However, the secure communication link, 
which  is  part  of  Europol’s  ‘NEUS’  network,  is  not  yet  operational.  Progress  towards  the 
conclusion of an operational agreement with Europol has continued, albeit slowly. Effective 
implementation of the strategic agreement with Europol needs to be ensured.  

Small arms and light weapons as well as explosives and remnants of war remain an important 
issue in Bosnia and Herzegovina. A Council of Ministers Decision was adopted in June 2009 
mandating  the  harmonisation  of  Entity-level  regulations  on  arms  and  entrusting  the 
development  of  a  solution  for  data  exchange  on  arms/weapons  to  the  inter-departmental 
working  group  of  the  Bosnia  and  Herzegovina  Council  of  Ministers  in  charge  of  finding  a 
solution for the exchange of information between police bodies.  

Overall, Bosnia and Herzegovina’s preparations in the police field are advancing slowly and 
remain  in  the  preliminary  phases,  hindering  effective  police  work.  As  part  of  the  police 
reform process, a key priority of the European Partnership, particular efforts are necessary to 
fully  implement  the  police  legislation  adopted  in  2008  and  to  strengthen  cooperation  and 
information exchange among police agencies. Police reform is a key process which needs to 
be  continued  until  completion,  through  the  constructive  involvement  of  all  levels  of 
government in Bosnia and Herzegovina. 

4.3.5.  Fighting organised crime and terrorism 

There  has  been  progress  with  regard  to  the  implementation  of  the  UN  Convention  on 
Transnational Organised Crime and its three protocols including the Protocol against Illicit 
Manufacturing and Trafficking of Firearms. Bosnia and Herzegovina is still not a party to the 
Council  of  Europe  Convention  on  the  International  Validity  of  Criminal  Judgments  and  the 
additional  protocol  to  the  Council  of  Europe  Convention  on  the  Transfer  of  Sentenced 
Persons.  Parliament  adopted  the  Law  on  Control  of  Movement  of  Weapons  and  Military 
Equipment,  the  Law  on  Weapons,  and  the  Law  on  International  Legal  Aid  in  Criminal 
Matters. A revised Strategy to fight organised crime (2009-2012) has been adopted.  

In  a  gap  analysis,  adopted  in  December  2008,  implementation  of  the  strategy  to  combat 
organised  crime  and  corruption  2006-2009  was  negatively  assessed  by  the  Council  of 
Ministers. In April 2009 the Council of Ministers adopted a decision to establish a working 
group in order to prepare an analysis of threats of organised crime in Bosnia and Herzegovina 
and to draft the new strategy.  

No new amendments to the Criminal Procedure Code relating to the fight against organised 
crime have been adopted.  

Institutional fragmentation of the police, the lack of common threat assessments, and the lack 
of joint strategic planning among different police bodies remain a major obstacle to the fight 
against  organised  crime.  Further  institutional  reform  is  necessary.  The  exchange  of 
operational  data  and  the  implementation  of  joint  actions  need  to  be  improved.  No  progress 
was made in improving national statistical instruments for measuring crime rates. 

Overall, Bosnia and Herzegovina has started to address its organised crime-related priorities. 
However,  organised  crime  remains  a  matter  of  serious  concern.  Sustained  efforts  and  more 

EN 

60 

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determination  to  fight  organised  crime  are  needed.  In  particular,  harmonised  legislation  and 
increased cooperation of relevant actors throughout the country is necessary.  

Some  progress  has  been  made  in  the  area  of  trafficking  of  human  beings  (THB),  but 
sustained efforts remain necessary to ensure proper investigation and prosecution of criminal 
activities in this area.  

Bosnia  and  Herzegovina  has  started  implementing  the  national  action  plan  for  combating 
trafficking  in  human  beings  for  2008-2012.  Offences  involving  trafficking  of  human  beings 
are regulated by the Criminal Code of Bosnia and Herzegovina, which is harmonised with the 
relevant  international  documents  ratified  by  Bosnia  and  Herzegovina.  However,  Entity  and 
Brčko  District  criminal  codes  are  not  harmonised  with  the  State  criminal  code,  which 
undermines proper prosecution.  

The office of the national coordinator for the fight against trafficking in human beings within 
the Ministry of Security has been provided with sufficient financial resources to operate. Four 
inter-agency  THB  teams  with  geographical  competence  have  been  created,  with  the  aim  of 
enhancing information collection and exchange among different law enforcement and judicial 
bodies. 

The  total  number  of  identified  victims  of  human  trafficking  continued  to  decrease  in  2008, 
mainly  due  to  a  reduction  in  the  number  of  foreign  victims.  However,  internal  trafficking 
continued  to  increase  in  2008,  with  a  majority  of  the  victims  being  children,  in  particular 
Roma children. 

The  national  Coordinator’s  office  has  continued  to  implement  several  comprehensive  anti-
trafficking prevention campaigns and published various information materials. A database on 
victims  of  human  trafficking  within  the  Ministry  of  Human  Rights  and  Refuges  has  been 
established  and  updated.  However,  more  needs  to  be  done  in  terms  of  investigation  and 
prosecution of THB-related offences. The necessary amendments to the Law on the Witness 
Protection Programme have not yet been adopted. Witness protection remains inadequate. In 
addition, there is a need to take steps to reduce the number of suspended sentences given to 
convicted traffickers. 

Overall, Bosnia and Herzegovina is at an early stage of progress in this area and efforts need 
to be stepped up, the issue of witness protection in particular. 

There  has  been  some  progress  in  the  fight  against  terrorism.  Amendments  to  the  Criminal 
Code of Bosnia and Herzegovina have been adopted for its harmonisation with the Council of 
Europe Convention on the Prevention of Terrorism, which entered into force in May 2008 . 
Bosnia  and  Herzegovina  still  needs  to  harmonise  its  legislation  with  the  Council  of  Europe 
Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime and on 
the Financing of Terrorism. 

Staffing  of  counter-terrorism  bodies  is  still  largely  incomplete.  A  plan  for  civilian-military 
cooperation  in  case  of  terrorist  attack  has  been  launched  and  envisages  training  activities 
devoted to inter-agency operations and information exchange. 

Overall,  Bosnia  and  Herzegovina  is  still  at  the  beginning  of  its  efforts  to  fight  terrorism.  A 
new  strategy  for  the  fight  against  terrorism  (2009-2012)  needs  to  be  adopted  and 
implemented. 

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4.3.6.  Protection of personal data 

Limited  progress  can  be  reported  with  regard  to  establishment  of  the  Agency  for  Personal 
Data Protection as an independent public authority.  

The Agency’s powers are to supervise enforcement of the Law on Personal Data Protection as 
well  as  other  regulations  on  personal  data  processing;  to  deal  with  complaints;  to  submit 
reports  to  the  Parliamentary  Assembly  on  personal  data  protection  and  to  follow  up  the 
conditions of personal data protection. The Agency was established and its Director appointed 
in June 2008 by decision of the Council of Ministers. It recently moved into new premises. 
However,  it  still  needs  to  become  completely  independent  and  adequately  staffed:  at  the 
moment only 15 staff are employed out of 45 planned. 

The existing provisions of the law on personal data protection require all public institutions to 
adopt sub-legal regulations in order to enforce the law and to establish a plan for personal data 
security.  The  level  of  actual  compliance  is  still  low,  in  particular  with  regard  to  law 
enforcement agencies. 

Overall,  preparations  for  the  protection  of  personal  data  have  started,  but  continued  efforts 
remain necessary. 

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STATISTICAL ANNEX 

STATISTICAL DATA (as of 14 September 2009) 
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-27=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-27=100) 
Gross value added by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

Final consumption expenditure, 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) 
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) 

Note

Note

Note

Note
1) 

Note

1999 
2008 
3 843 
3 689 
51 209  51 209 51 209 51 209 51 209 51 209 51 209 51 209 51 209  51 209 

2002 
3 813 

2004 
3 837 

2005 
3 843 

2000 
3 753 

2001 
3 790 

2003 
3 830 

2006 
3 843 

2007 
3 844 

1999 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 

2007 

2006 

2003 

2001 

2005 

2002 

6 424 
1 691 
: 
: 

7 067 
1 846 
: 
: 

2000 
2008 
2004 
11 689 12 565 13 821 14 505 15 786 16 927 19 121 21 759  24 716 
9 777  11 125  12 637 
8 071 
5 977 
3 290 
2 896 
2 544 
2 103 
1 581 
: 
: 
: 
: 
: 
30.0 
29.0 
27.0 
: 
: 
5.4 
6.0 
6.9 
6.3 
: 
: 
: 
: 
: 
: 
: 
7.9 
-1.4 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

8 655 
2 252 
: 
25.0 
3.9 
: 
: 
: 
: 

7 416 
1 935 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 

: 
: 
: 
: 

11.6 
19.2 
6.9 
62.3 
: 
: 
: 
: 
: 

11.4 
19.0 
6.2 
63.4 
: 
: 
: 
: 
: 

10.9 
18.0 
5.6 
65.6 
: 
: 
: 
: 
: 

9.7 
19.2 
5.2 
65.9 
: 
: 
: 
: 
: 

10.5 
19.4 
4.9 
65.2 
111.9 
24.2 
2.9 
27.8 
66.9 

10.3 
19.3 
5.0 
65.4 
111.0 
25.1 
0.1 
28.6 
64.8 

10.2 
19.2 
5.0 
65.6 
105.4 
22.5 
-0.9 
33.1 
60.0 

9.7 
20.4 
5.9 
63.9 
100.6 
29.8 
1.6 
36.7 
68.7 

8.8 
21.1 
6.4 
63.6 
: 
: 
: 
36.1 
69.4 

1999 
: 

2000 
100.0 

2001 
105.3 

2002 
112.4 

2003 
118.0 

2004 
132.8 

2005 
144.7 

2006 
159.3 

2007 
170.4 

2008 
187.3 

1999 
: 

2000 
4.8 

2001 
3.1 

2002 
0.4 

2003 
0.6 

2004 
0.4 

2005 
3.8 

2006 
6.1 

2007 
1.5 

2008 
7.4 

1999 
-471 
-3 095 
168 
683 
1 773 
458 

2000 
-429 
-3 000 
203 
641 
1 727 
339 

2001 
-834 
-3 308 
254 
595 
1 626 
450 

2002 
-1 253 
-3 524 
232 
539 
1 499 
347 

2003 
-1 439 
-3 671 
297 
473 
1 462 
298 

2004 
-1 319 
-3 678 
347 
408 
1 604 
261 

2005 
-1 499 
-3 962 
447 
377 
1 639 
251 

2006 
-763 
-3 406 
535 
332 
1 775 
237 

2007 
-1 145 
-4 142 
627 
395 
1 976 
191 

2008 
-1 871 
-4 819 
695 
409 
1 844 
169 

EN 

63 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries 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 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: all goods, all partners (million euro) 
Terms of trade (export price index / import price index, 1998=100) 
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) 
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) 

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 (%) 

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 
(%) 

166 
0 
: 
166 
: 

1999 
: 
: 

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

1999 
: 
: 
: 
: 
: 
: 

1999 
3.7 
10.2 
70.5 
75.9 

1999 
: 
: 
: 
: 

159 
0 
: 
159 
: 

2000 
: 
37.9 

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

2000 
: 
: 
: 
: 
: 
: 

2000 
2.4 
9.7 
71.3 
76.7 

2000 
: 
: 
: 
: 

133 
0 
: 
133 
: 

2001 
: 
35.2 

2001 
: 
: 
1 377 
2 387 
: 
1 707 
: 
: 
: 
1.956 
: 
1 385 

2001 
: 
: 
: 
: 
: 
: 

2001 
1.9 
7.6 
71.3 
76.7 

2001 
: 
: 
: 
: 

282 
0 
: 
282 
: 

2002 
: 
31.3 

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

2002 
: 
: 
: 
: 
: 
: 

2002 
1.5 
9.4 
71.3 
76.7 

2002 
: 
: 
: 
: 

338 
0 
: 
338 
: 

2003 
0.7 
27.7 

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

566 
-1 
: 
567 
340 

2004 
1.6 
25.6 

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

493 
0 
: 
493 
410 

2005 
2.4 
25.7 

2005 
: 
: 
2 098 
4 129 
: 
3 858 
: 
9.6 
0.7 
1.956 
: 
2 160 

2003 
2 928 
908 
-2 019 
: 
53.4 
58.5 

2004 
3 966 
1 299 
-2 667 
: 
54.2 
53.0 

2005 
5 670 
1 920 
-3 750 
: 
53.8 
51.9 

2003 
0.9 
7.6 
71.3 
76.7 

2003 
: 
: 
: 
: 

2004 
0.6 
7.2 
71.3 
76.7 

2004 
: 
: 
: 
: 

2005 
0.1 
6.7 
72.1 
77.5 

2005 
: 
: 
: 
: 

569 
-3 
: 
572 
422 

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 

2006 
51.3 
35.0 
46.1 
24.0 

1 529 
-17 
: 
1 546 
551 

2007 
1.3 
18.3 

2007 
: 
: 
3 149 
6 263 
: 
6 110 
: 
7.2 
0.4 
1.956 
: 
3 425 

2007 
: 
: 
: 
: 
: 
: 

2007 
-0.3 
6.8 
72.1 
77.5 

2007 
52.2 
36.8 
48.7 
25.0 

690 
0 
: 
690 
: 

2008 
: 
16.8 

2008 
: 
: 
3 065 
6 532 
: 
7 439 
: 
7.0 
0.4 
1.956 
: 
3 219 

2008 
: 
: 
: 
: 
: 
: 

2008 
: 
5.1 
: 
: 

2008 
53.5 
40.7 
52.9 
28.7 

Note 

Note 

2) 
3) 

4) 

Note 

Note 

Note 

5) 

: 

: 

: 

: 

: 

: 

: 

30.6 

31.9 

34.4 

EN 

64 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 2004) 
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) (%) 

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) 

6) 

7) 

7) 

Note 
8) 

Note 
9) 

Note 

Note 

Note 

Note 

: 
: 
: 
: 
39.4 
: 
: 
: 
: 

: 
: 
: 
: 
39.7 
: 
: 
: 
: 

: 
: 
: 
: 
40.0 
: 
: 
: 
: 

: 
: 
: 
: 
41.1 
: 
: 
: 
: 

: 
: 
: 
: 
41.6 
: 
: 
: 
: 

: 
: 
: 
: 
41.8 
: 
: 
: 
: 

19.6 
21.4 
4.9 
54.1 
43.9 
: 
: 
: 
: 

20.6 
30.7 
: 
48.7 
31.1 
28.9 
34.9 
62.3 
28.4 

19.8 
32.6 
: 
47.5 
29.0 
26.7 
32.9 
58.4 
26.4 

20.6 
32.5 
: 
47.0 
23.4 
21.4 
26.8 
47.5 
24.3 

2000 

2005 
2002 
1999 
343.0  372.0  408.0  446.0  484.0  505.0  538.0 
: 

2004 

2003 

2001 

: 

: 

: 

: 

: 

: 

2006 
: 
: 

2007 
: 
: 

2008 
: 
: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

1999 
: 
: 

1999 
: 
: 

1999 
: 
: 
: 

1999 
: 
: 
: 
: 

1999 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
49,6 

2000 
: 
: 

2000 
: 
: 
: 

2000 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
92,6 

2001 
: 
: 

2001 
: 
: 
: 

2001 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 
: 

2002 
: 

2008 
2007 
2006 
2005 
168.4  177.4  184.5 
: 
176,2  271.8  344.2  412.5  489.0  637.4  757.1 

2004 
: 

2003 
: 

2002 
19.7 
: 

2002 
: 
: 
: 

2002 
: 
: 
: 
: 

2002 
: 
: 
: 
: 
: 
: 
: 

2003 
21.5 
: 

2003 
: 
: 
: 

2003 
: 
: 
: 
: 

2003 
: 
: 
214 
: 
369 
: 
: 

2004 
21.5 
: 

2004 
: 
: 
6.6 

2004 
: 
: 
: 
: 

2004 
: 
: 
211 
: 
478 
: 
: 

2005 
21.5 
0.0 

2005 
: 
: 
: 

2005 
: 
: 
: 
: 

2005 
: 
: 
230 
: 
627 
: 
: 

2006 
21.5 
0.0 

2006 
: 
: 
: 

2006 
: 
: 
: 
: 

2006 
: 
: 
: 
: 
681 
: 
: 

2007 
20.3 
0.0 

2007 
: 
: 
: 

2007 
: 
: 
: 
: 

2007 
: 
: 
: 
: 
: 
: 
: 

2008 
20.3 
0.0 

2008 
: 
: 
: 

2008 
: 
: 
: 
: 

2008 
: 
: 
: 
: 
: 
: 
: 

EN 

65 

EN 

 
  
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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) 

Note 

10) 

1999 
: 
: 
: 
: 
: 
: 
1 369 
: 
279 

2000 
: 
: 
: 
: 
: 
: 
930 
: 
176 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
: 

2006 
: 

2007 
: 

2008 
: 

: 
: 
: 
: 

: 
: 
: 
: 

2 126  2 122  2 192  2 196  2 187  2 194  2 139  2 107 
459 
468 
515 
453 
502 
535 
712 
596 
1 005  1 033  1 031 
893 
580 
737 
724 
662 
1 439  1 350  1 341  1 000  1 329 
: 
297 

: 
: 
: 
: 
793 
: 
204 

460 
654 
903 
629 

1 139  1 309 

: 
190 

: 
254 

: 
276 

: 
281 

: 
247 

: 
257 

SI = Structural Indicator 
: = not available 
p = provisional 
e = estimate 
b = break in series 
1) 
2) 
3) 
4) 
5) 
6) 
7) 
8) 
9) 
Ministry of Civil Affairs (passenger cars only). 

Until 2006, the growth rate of retail prices is presented; from 2006 onwards growth rate of 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. 
For 2006-2007, population aged between 50 and 64. 
For 2006-2008, including construction (sections F).
From 2005 onwards, figures include data from Brcko District. 2006 and 2007 data refer to unemployed from 24 to 59 months. 
From 2005 onwards, figures include data from Brcko District.  
Data refer to the Federation of Bosnia and Herzegovina only and includes total vehicle fleet (official data for the state level are not available); official data for state level delivered by the 

10) 

Excluding goats. 

EN 

66 

EN