COMMISSION STAFF WORKING DOCUMENT Bosnia and Herzegovina 2010 Progress Report    accompanying the  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL  Enlargement Strategy and Main Challenges 2010-2011
Date: 2010-11-09
Institutions: European Commission
Subjects: North Macedonia, accession to the European Union, enlargement of the Union, pre-accession strategy, report

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 9.11.2010 
SEC(2010) 1331 final 

COMMISSION STAFF WORKING DOCUMENT 

BOSNIA AND HERZEGOVINA 2010 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2010-2011 

{COM(2010) 660 final} 

EN 

   EN 

 
 
 
  
 
 
 
 
 
 
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 .................................................................................... 8 

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

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

Economic criteria ....................................................................................................... 25 

The existence of a functioning market economy ....................................................... 25 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 31 

4. 

European standards .................................................................................................... 33 

4.1. 

Internal market ........................................................................................................... 33 

4.1.1.  Free movement of goods............................................................................................ 33 

4.1.2.  Movement of persons, services and right of establishment ....................................... 35 

4.1.3.  Free movement of capital........................................................................................... 37 

4.1.4.  Customs and taxation ................................................................................................. 37 

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

4.1.6.  Public procurement .................................................................................................... 39 

4.1.7. 

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

4.1.8.  Employment and social policies, public health policy............................................... 41 

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

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

4.2. 

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

4.2.1. 

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

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

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

4.2.4.  Transport policy ......................................................................................................... 48 

EN 

2 

   EN 

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

4.2.6. 

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

4.2.7.  Financial control......................................................................................................... 52 

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

4.3. 

Justice, freedom and security ..................................................................................... 54 

4.3.1.  Visa, border management, asylum and migration...................................................... 54 

4.3.2.  Money laundering ...................................................................................................... 56 

4.3.3.  Drugs .......................................................................................................................... 57 

4.3.4.  Police.......................................................................................................................... 58 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 59 

4.3.6.  Protection of personal data......................................................................................... 60 

Statistical Annex ...................................................................................................................... 61 

EN 

3 

   EN 

 
COMMISSION STAFF WORKING DOCUMENT 

2010 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  mid-September  2009  to  the  end  of  September  2010. 
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  has  drawn  detailed 
conclusions  regarding  Bosnia  and  Herzegovina,  which  it  is  publishing  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 

1 
2 

The rapporteur for Bosnia and Herzegovina is Ms Doris Pack. 
Enlargement Strategy and Main Challenges 2010-2011 (COM (2010) 660 of 09.11.2010)  

EN 

4 

   EN 

 
                                                 
June 2008. The Interim Agreement, which focuses on the trade-related areas of the SAA, has 
been in force since July 2008. However, progress on EU-related reforms has been limited.  

An international presence under UN auspices — the Office of the High Representative (OHR) 
—  has  been  in  place  in  Bosnia  and  Herzegovina  since  1995.  Making  progress  towards 
meeting  the  conditions  which  have  been  set  for  the  closure  of  the  Office  of  the  High 
Representative  (OHR)3  by  the  Peace  Implementation  Council  Steering  Board  remains 
essential. The country has made very little progress towards meeting the requirements for the 
closure of the OHR.  

There  is  little  domestic  consensus  on  the  main  EU  related  reform  priorities,  such  as  the 
harmonisation  of  the  Constitution  with  the  European  Convention  on  human  rights  and  on 
establishing  a  single  economic  space.  A  shared  vision  of  the  direction  to  be  taken  by  the 
country  remains  necessary  for  smoothly  operating  institutions,  for  creating  more  functional 
and efficient State structures and for speaking with one voice on EU and international matters. 
The EU has continued preparations to further coordinate and reinforce the EU presence and 
implement the EU agenda.  

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

that 

The process for constitutional reform, which followed two high-level meetings in Butmir in 
October  2009,  produced  no  tangible  results.  In  December  2009,  the  European  Court  of 
Human  Rights  (ECtHR)  issued  a  legally-binding  decision  (Sejdic-Finci  vs.  Bosnia  and 
for  election 
Herzegovina  case) 
"…incompatible with the general principles of the European Convention for the protection of 
Human Rights and Fundamental Freedoms".4 Discriminatory provisions that prevent citizens 
who do not identify themselves as belonging to the three constituent peoples from standing as 
candidates  for  the  Presidency  and  the  House  of  Peoples  of  the  Parliamentary  Assembly 
remained  in  the  Constitution  and  the  Electoral  Law  when  the  general  elections  held  in 
October 2010 were called. 

found  ethnicity-based 

ineligibility 

to  stand 

1.3. 

Relations between the EU and Bosnia and Herzegovina  

Bosnia  and  Herzegovina  participates  in  the  Stabilisation  and  Association  Process.  The 
Interim Agreement (IA) has been in place since July 2008. The Stabilisation and Association 

3 

4 

These cover five objectives: 1) Acceptable and sustainable resolution of the issue of apportionment of 
property  between  State  and  other  levels  of  government;  2)  Acceptable  and  sustainable  resolution  of 
defence  property;  3)  Completion  of  the  Brcko  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. 
ECtHR decision, application no. 27996/06 and 34836/06, Para 21. 

EN 

5 

   EN 

 
                                                 
Agreement (SAA) has been ratified by 25 EU Member States thus far. Implementation of the 
Interim  Agreement  (IA)  by  Bosnia  and  Herzegovina  has  been  uneven.  The  country  is  in 
breach of the IA due to non-compliance with the European Convention on Human Rights and 
due to the absence of a state aid authority. Moreover, in February, Bosnia and Herzegovina 
unilaterally  changed  most-favoured  nation  (MFN)  duties  for  a  number  of agricultural  and 
industrial  products  by  adopting  Amendments  on  the  Law  on  Customs  Tariffs.  No  prior 
consultation with the European Commission took place, which goes against the provisions of 
the  Interim  Agreement.  Efforts  to  address  obligations  under  the  IA,  which  is  a  European 
Partnership priority, need to be considerably stepped up. 

The EU provides guidance to the authorities of Bosnia and Herzegovina on reform priorities 
as part of the European Partnership.5 Progress on these reform priorities is encouraged and 
monitored  by  the  bodies  established  by  the  Interim  Agreement.  Six  Interim  Sub-Committee 
meetings  and  two  Interim  Committee  meetings  were  held  during  the  reporting  period. 
Furthermore,  the  multilateral  economic  dialogue  between  the  Commission,  EU  Member 
States and potential candidate countries in the context of the pre-accession fiscal surveillance 
took place in an expert meeting in June 2010. 

The  regular  meeting  between  Members  of  the  European  Parliament  and  Members  of  the 
Bosnia and Herzegovina Parliamentary Assembly took place in February 2010.  

The EU has continued to deploy considerable resources in Bosnia and Herzegovina under the 
Common Foreign and Security Policy and the Common Security and Defence Policy. The EU 
Special  Representative  (EUSR)  continues  to  promote  overall  political  coordination  and  to 
offer the EU’s advice and facilitation. The mandate of the EUSR has been extended until 31 
August 2011.  

The mandate of the EU Police Mission (EUPM) focuses on the fight against organised crime 
and  corruption.  The  EUPM  has  continued  to  monitor  and  assess  implementation  of  police 
reform,  accountability  and  provide  training.  The  mission  currently  has  280  officers  and  its 
mandate has been extended until 31 December 2011. 

The  EUFOR/ALTHEA  military  operation  contributed  to  maintaining  a  safe  and  secure 
environment  in  the  country.  EUFOR  forces  currently  number  about  1,900  troops.  In 
November  2009,  the  UN  Security  Council  extended  EUFOR’s  mandate  once  again  for  one 
more  year.  In  January  2010,  the  Foreign  Affairs  Council  concluded  that  the  executive 
mandate  of  Operation  Althea  will  last  until  at  least  November  2010  and  expressed  the 
readiness  of  the  EU,  should  the  situation  require,  to  maintain  a  military  executive  beyond 
2010,  under  a  UN  mandate.  Particular  emphasis  has  been  placed  on  providing  capacity-
building and training.  

In  the  framework  of  the  visa  liberalisation  dialogue,  Bosnia  and  Herzegovina  has  made 
important  progress  in  the  different  areas  of  the  roadmaps.  The  Commission  therefore 
presented a proposal on lifting the visa obligation for citizens of Bosnia and Herzegovina on 
27 May 2010, which was subject to the fulfilment of some outstanding criteria. The proposal 
on visa liberalisation was adopted by the European Parliament on 7 October and the Council 

5 

Council  Decision  of  18  February  2008  on  the  principles,  priorities  and  conditions  contained  in  the 
European Partnership with Bosnia and Herzegovina (2008/211/EC). 

EN 

6 

   EN 

 
                                                 
on  8  November,  following  the  successful  completion  of  outstanding  requirements.  A 
readmission agreement with Bosnia and Herzegovina has been implemented since 2008. 

As a potential candidate for EU membership, Bosnia and Herzegovina aligned itself with 67 
CFSP  declarations  out  of  a  total  of  74  relevant  declarations  adopted  by  the  EU  during  the 
reporting period (91%). 

Bosnia and Herzegovina receives financial assistance under the Instrument for Pre-accession 
Assistance  (IPA).  The  EU  Delegation  to  Bosnia  and  Herzegovina  is  responsible  for  the 
implementation  of  financial  assistance  in  the  country.  Little  progress  has  been  made  by  the 
country's  authorities 
the  necessary  structure  for  decentralised 
management  of  EU  funds.  The  competent  accrediting  officer,  the  national  IPA  coordinator 
and the national authorising officer were appointed. However, the legal basis for the operating 
structure,  appointment  of  the  necessary  programme  officers  and  adoption  of  the  roadmap 
towards a decentralised implementation system are still pending.  

towards  establishing 

Following  the  delayed  signature  of  the  2007  and  2008  IPA  Financing  Agreements  by  the 
authorities of Bosnia and Herzegovina, implementation is still ongoing. An assessment of the 
Multi-annual Indicative Planning Document (MIPD) for the period 2009-2011 concluded that 
the overall objectives and strategic choices remain valid, as they are based on the EU strategic 
documents and lessons learned from programming and implementation of EU assistance.  

With a total allocation of €98.3 million, the IPA 2010 programme focuses on political criteria, 
namely  social  inclusion,  cultural  heritage,  law  enforcement,  anti-corruption  measures,  the 
judiciary  and  public  administration  reform.  In  addition,  it  focuses  on  water  infrastructure, 
customs,  rural  development  and  eradication  of  animal  diseases.  Bosnia  and  Herzegovina 
participates  in  the  IPA  multi-beneficiary  programmes,  including  an  IPA  crisis  response 
package developed in 2008 in response to the financial crisis.  

Development of civil society in Bosnia and Herzegovina continues to be supported under the 
Civil  Society  Facility,  with  an  emphasis  on  anti-corruption  measures,  environmental 
protection, local democracy and networks of civil society organisations.  

The  cross-border  cooperation  programmes  between  Bosnia  and  Herzegovina  and  its 
neighbours  Croatia,  Montenegro  and  Serbia  were  revised  to  include  the  additional  financial 
allocation  for  the  period  2010-2011.  Implementation  of  the  2007-2009  cross-border 
programmes is continuing.  

Bosnia  and  Herzegovina  is  a  full  member  of  the  7th  Framework  Programme  for  research, 
technological development and demonstration activities (FP7) and participates in COST and 
the EUREKA network. Bosnia and Herzegovina also participates in the Tempus and Erasmus 
Mundus  programmes.  Preparations  for  participation  in  the  Culture  2007-2013  programme 
have advanced.  

2. 

POLITICAL CRITERIA 

This  section  examines  the  progress  made  by  Bosnia  and  Herzegovina  towards  meeting  the 
Copenhagen political criteria, which require stability of institutions guaranteeing democracy, 

EN 

7 

   EN 

 
the  rule  of  law,  human  rights  and  respect  for  and  protection  of  minorities.  It  also  monitors 
regional  cooperation,  good  neighbourly  relations  with  enlargement  countries  and  Member 
States  and  compliance  with  international  obligations,  such  as  cooperation  with  the 
International Criminal Tribunal for the former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law 

Constitution  

The  Dayton/Paris  Peace  Agreement  (DPA)  put  an  end  to  the  1992-1995  war  and  brought 
peace  and  stability  to  Bosnia  and  Herzegovina.  However,  Bosnia  and  Herzegovina’s 
Constitution, which is contained in Annex IV to the DPA, established a complex institutional 
architecture, which remains inefficient and is misused. No steps have been  taken to address 
the problem of legislation relevant for EU integration being blocked. The repeated misuse of 
rules  on  quorums  complicate  the  decision-making  process,  delay  reforms  and  reduce  the 
country’s capacity to make progress towards the EU.  

There are particular problems in the Federation, where competences of the Entity, the Cantons 
and  the  municipalities  overlap.  Failure  to  harmonise  legislation  at  the  different  levels, 
particularly in the smaller Cantons, adds to the arrangement's complexity.  

In  autumn  2009,  an  EU-US  initiative  to  facilitate  constitutional  changes  put  forward  a 
proposal to provide the State government with the competences and authority needed to meet 
the  minimum  requirements  of  the  EU  accession  process.  It  also  contained  proposals  to 
improve  the  functionality  of  the  State  and  to  align  the  Constitution  with  the  European 
Convention on Human Rights (ECHR). No agreement on a way forward emerged.  

The Constitution of Bosnia and Herzegovina prevents citizens who do not identify themselves 
as belonging to one of the three constituent peoples (Bosniak, Croat or Serb) from standing as 
candidates  for  the  Presidency  and  the  House  of  Peoples  of  the  Parliamentary  Assembly.  In 
December, the European Court of Human Rights (ECtHR) issued a legally-binding decision 
(Sejdic-Finci  vs.  Bosnia  and  Herzegovina  case)  that  found  ethnicity-based  ineligibility  to 
stand for election "…incompatible with the general principles..." of the ECHR.6 Furthermore, 
by  ratifying  the  SAA  with  the  European  Union  in  2008,  Bosnia  and  Herzegovina  made  a 
commitment to ensure full compliance with the ECHR, which is also a European Partnership 
priority.  

In March, the Council of Ministers adopted an action plan for implementation of the ECtHR 
decision and set up an inter-institutional working group. The working group failed to reach an 
agreement. 

The  prospect  of  elections  in  October  2010  reinforced  the  tendency  of  political  parties  and 
government  officials  on  all  sides  to  engage  in  nationalistic  rhetoric.  During  the  pre-election 
period, politicians from Republika Srpska frequently challenged the territorial integrity of the 
country.  Meanwhile,  some  political  leaders  from  the  Federation  linked  the  establishment  of 
Republika  Srpska  to  war-time  massacres.  Leaders  in  Republika  Srpska  frequently  criticised 
State institutions, competences and laws. They remained opposed to strengthening State-level 
competences,  including  in  the  context  of  the  Interim  Agreement  (IA),  in  particular  by 
delaying  the  establishment  of  a  State  aid  authority.  Politicians  from  the  Cantons  in  the 

6 

ECtHR decision, application no. 27996/06 and 34836/06, Para 21. 

EN 

8 

   EN 

 
                                                 
Federation  of  Bosnia  and  Herzegovina  also  continued  to  delay  reforms  needed  to  establish 
State-level competences as part of the IA.  

On the basis of the Dayton/Paris Peace Agreement, the international community continued to 
maintain  a  significant  presence  in  Bosnia  and  Herzegovina.  Very  little  progress  was  made 
towards  meeting  the  requirements  set  by  the  Peace  Implementation  Council  Steering  Board 
for the closure of the Office of the High Representative (OHR). No agreement was reached on 
apportioning State property between the State  and other levels of government. There  is still 
disagreement  between  political  leaders  on  the  method  for  registration  of  State  and  defence 
property. The authorities did not make use of the inventory of State property compiled by the 
OHR  in  December.  The  competent  authorities,  except  Brčko  District,  have  not  completed 
their assessments of which property would be needed for them to fulfil their constitutional and 
legal  responsibilities.  In  September,  the  Republika  Srpska  National  Assembly  unilaterally 
adopted  its  own  state  property  law,  which  further  undermines  prospects  for  a  sustainable 
agreement on state property. The issue of immovable defence property remains unresolved. 

Due to political difficulties and challenges posed to the DPA, the HR decided to use the Bonn 
Powers on several  occasions, including in relation to the law on the electricity transmission 
company,  the  fulfillment  of  the  Brčko  Final  Award  and  the  mayor  of  Mostar  City.  He  also 
extended  the  mandates  of  international  judges  and  prosecutors  working  on  war  crimes  and 
rehabilitated several dismissed officials.  

The  Entities  have  not  made  their  Constitutions  compliant  with  the  2006  ruling  of  the 
Constitutional Court of Bosnia and Herzegovina regarding the Entity coats of arms, flags and 
anthems, which are not in line with the State-level Constitution. 

Overall, there has been little progress on addressing the European Partnership priority, which 
requires  measures  to  achieve  more  functional  and  sustainable  institutional  structures  and 
better respect for human rights and fundamental freedoms, including by adopting changes to 
the Constitution. 

Parliament  

On 3  October, general elections were held  for the Presidency and the lower chamber of the 
Parliamentary Assembly of Bosnia and Herzegovina (the 'House of Representatives'). Voters 
in  the  Federation  elected  98  deputies  in  the  Entity's  House  of  Representatives,  ten  cantonal 
assemblies and two representatives (one Bosniak, one Croat) to the tripartite state Presidency. 
Voters from Republika Srpska elected 83 deputies to the Entity's National Assembly and one 
representative to the tripartite state Presidency, one Entity President and two vice-presidents.  

The elections were assessed by the OSCE/ODIHR as being generally in line with international 
standards  for  democratic  elections  and  as  representing  further  progress  for  Bosnia  and 
Herzegovina.  However,  they  were  once  again  held  with  ethnicity  and  residency-based 
limitations  to  suffrage  rights  due  to  provisions  established  by  the  Dayton/Paris  Peace 
Agreement.  

Steps  were  taken  to  provide  the  Parliamentary  Assembly  of  Bosnia  and  Herzegovina  with 
sufficient  administrative  resources  and  personnel.  Its  budget  was  increased,  enabling  the 
parliament’s secretariat to recruit  new  staff.  Of  the  181  posts in the  2006 staffing  plan,  148 
have been filled. Parliament prepared a new three-year work plan and adopted an IT strategy 
for 2010-13.  

EN 

9 

   EN 

 
On occasion, "entity voting"7 prevented the adoption of laws addressing European Partnership 
priorities. These included proposed laws on the promotion of SMEs, contractual obligations, 
witness  protection  and  public  procurement.  Regarding  the  law  on  the  population  and 
household  census,  it  was  blocked  in  the  House  of  Representatives  by  the  Federation  in 
January 2010 and later boycotted by Republika Srpska in the House of Peoples in July. The 
legislative  work  of  parliament,  including  the  various  parliamentary  committees,  proceeded 
slowly and was characterised by inter-ethnic divergences.  

Cooperation between the Council of Ministers and parliament was insufficient. In some cases, 
laws  adopted  by  the  Council  of  Ministers  were  later  blocked  in  parliament  by  the  same 
political actors from the government coalition. In addition, no proper mechanism exists in the 
legislative process for coordination between the State parliament and the Entity parliaments.  

Overall,  the  administrative  resources  for  the  Parliamentary  Assembly  of  Bosnia  and 
Herzegovina have increased. Lack of coordination between State and Entity parliaments and 
political discord between the Entities has continued to hamper the work of the Parliamentary 
Assembly.  

Government  

The  Presidency  of  Bosnia  and  Herzegovina  conducts  foreign  policy  and  defence  policy  and 
proposes  the  State  budget.  The  Presidency  held  fourteen  regular  and  fourteen  emergency 
sessions  in  the  twelve  months  up  to  September.  The  Presidency  adopted  the  annual 
programme on intelligence-security policy and on bilateral agreements. However, individual 
Presidency members often presented their own party positions in international fora. Foreign 
policy  coordination  remained  difficult,  particularly  since  January  2010,  when  Bosnia  and 
Herzegovina began a two year term as a non-permanent member of the UN Security Council. 
The  Chair  of  the  tripartite  Presidency  rotates  every  eight  months  and  consensus-building 
between  the  three  members  is  weak,  which  restricts  effective  policy  formulation  and 
implementation.  

The  Council  of  Ministers  adopted  the  review  of  the  action  plan  for  meeting  the  European 
Partnership priorities and the action plan for  implementation of the Interim Agreement (IA) 
for 2010-11.  The Directorate for European Integration (DEI) issues an opinion on all State-
level draft laws related to EU integration before they are put on the agenda of the Council of 
Ministers. However, the capacity of the DEI to assess compliance with the IA remains weak. 
Furthermore, draft laws of the Entities and Brčko District do not require an opinion from the 
DEI.  

The new Director of the DEI was appointed after a gap of eight months. Staffing levels at the 
DEI  reached  82,  including  17  new  recruits.  However,  the  DEI  has  not  yet  been  given  the 
authority  necessary  to  drive  the  EU  integration  process  forward  and  is  not  empowered  to 
coordinate EU-related legislation. 

The  Directorate  for  Economic  Planning  completed  the  country  development  strategy  and 
social inclusion strategy. However, they are yet to be adopted. Policy planning in Bosnia and 
Herzegovina  as  a  whole  is  impeded  by  the  lack  of  an  up-to-date  population  and  household 

7 

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

EN 

10 

   EN 

 
                                                 
census. The House of Peoples failed to adopt the Law on the population and household census 
in September 2010.  

The government of Republika Srpska has established an EU Integration Unit in each ministry, 
except  for  the  Ministry  of  Justice.  The  government  and  National  Assembly  of  Republika 
Srpska  continued  to  harmonise  legislation  with  EU  standards.  However,  there  was  little 
coordination  with  the  Council  of  Ministers  and  the  Federation  government.  The  Federation 
government  has  established  an  EU  Integration  Unit  in  some  ministries  but  not  all.  The 
Federation’s  Constitution  entails  complex  and  expensive  governance  structures  with 
overlapping  competences  between  the  Federation,  the  Cantons  and  the  municipalities. 
Divergent ethnic interests adversely affected governance within the Federation.  

Both Entities have legislation that is largely in line with the European Charter for Local Self-
Government.  Some  Cantons  in  the  Federation  have  started  to  adopt  local  self-government 
legislation. In some cases, the Federation Constitutional Court had to issue rulings regarding 
breaches of the European Charter by Cantons.  

Overall, only limited progress has been made by Bosnia and Herzegovina on improving the 
functionality  and  efficiency  of  the  State-level  government  structures.  Tensions  between 
Entities, inadequate resources and a lack of political dialogue delayed reform. The duplication 
of  competences  added  to  administrative  costs.  The  efficiency  of  the  State-level  government 
was hampered by fragmented policy-making between the State and the Entities.  

Public administration  

Little  progress  was  made  in  the  area  of  public  administration  reform  (PAR),  a  European 
Partnership priority.  

A new PAR coordinator was appointed. Resources for monitoring the implementation of the 
PAR  strategy,  a  European  Partnership  priority,  have  improved.  Resources  at  Entity  and 
Cantonal  level  for  PAR  implementation  are  insufficient,  except  in  Brčko  District. 
Furthermore,  the  ability  of  the  State  office  to  influence  the  process  is  constrained.  Stronger 
political will and increased resources are crucial for the future success of PAR.  

The  administrative  capacity  of  Bosnia  and  Herzegovina  to  implement  SAA  and  IA 
commitments is slowly being strengthened. However, the country’s administrative structures 
are  still  not  capable  of  responding  effectively  to  the  requirements  of  EU  integration.  They 
remain  cumbersome,  fragmented  and  with  an  unclear  division  of  powers  across  the  various 
levels of government. 

Only  limited  progress  can  be  reported  concerning  the  civil  service.  State-level  institutions 
have  adopted  a  uniform  human  resources  management  information  system.  Several 
appointments  that  had  been  delayed  for  political  reasons  were  finally  decided.  However, 
further key appointments to State-level bodies, such as to the Indirect Taxation Authority, the 
Communications  Regulatory  Agency,  the  electricity  transmission  company  TRANSCO  and 
the  State  Electricity  Regulatory  Commission  (See  Chapter  4.1  –  Internal  market),  are  still 
pending.  Overall,  the  civil  service  remains  highly  politicised.  It  is  in  need  of  transparent 
recruitment  procedures  based  on  merit,  a  system  of  modern  career  development  and 
professionalisation. No progress has been made towards limiting the role played by political 
affiliation in public administration. 

EN 

11 

   EN 

 
Some limited progress on civil service management can be reported especially in Republika 
Srpska, where performance management has started. However, there have been no attempts to 
harmonise  the  divergent  civil  service  legislation  across  the  country.  In  the  Federation, 
attempts were made to politicise the civil service. A ruling by the Federation's Constitutional 
Court opened the  door for the establishment of separate, Cantonal civil services.  This would 
draw further on the Federation's budget and delay the implementation of the PAR strategy.  

During  the  reporting  period,  the  Entities’  Ombudsman’s  Offices  were  merged  into  a  State-
level  Ombudsman,  which  is  functioning.  The  Ombudsman  issued  several  recommendations 
on  public  administration  appointments,  tenders  and  anti-discrimination  to  institutions 
operating at each of the four administrative levels (State, Entity, Cantonal and municipal), but 
they  were  not  implemented.  The  functioning  of  the  Ombudsman’s  Office  was  hampered  by 
budgetary  constraints  and  requires  further  financial  support.  Enforcement  capacity  and 
political will to implement the Ombudsman's recommendations remain weak. 

Overall, little progress was achieved in the area of public administration reform. A State-level 
Ombudsman is now operational. Significant further efforts are needed towards developing a 
professional,  accountable,  transparent  and  efficient  civil  service  based  on  merit  and 
competence at all levels of government. The country’s complex and cumbersome institutional 
structure continues to undermine efficiency.  

Civilian oversight of the security forces 

Civilian  oversight  of  the  security  forces  is  largely  ensured.  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. The 
OSA carries out its tasks professionally without political pressure. However, an amendment to 
the Law on protection of secret data, which ensures that the law is in line with the relevant EU 
standards and provides for implementation of the bilateral security agreement, remains to be 
adopted.  

Judicial system 

Limited progress has been made in the area of judicial reform.  

The State-level High Judicial and Prosecutorial Council (HJPC) supervised the establishment 
of a country-wide court information technology (CIT) system. A time management system for 
prosecutors  and  a  case  management  system  now  exist  in  all  courts  and  all  Prosecutor’s 
Offices.  This  facilitates  distribution,  management  and  monitoring  of  cases.  The  HJPC  also 
supervised additional development of the judicial documentation centre. Users now have on-
line access to over 3,600 court decisions and many legal opinions.  

The reconstruction of the Sarajevo municipal court, the largest in the country, was completed 
in  December  2009,  thus  increasing  its  efficiency  and  effectiveness.  Republika  Srpska  also 
renovated several courts. In the Federation, a review of the court system and of the number of 
court branches is ongoing.  

The  parliament  of  Bosnia  and  Herzegovina  adopted  amendments  to  the  Criminal  Procedure 
Code,  which  is  expected  to  facilitate  the  transfer  of  war  crime  proceedings  from  State  to 
Entity-level. The board overseeing implementation of the national war crimes strategy proved 
an effective monitoring system.  

EN 

12 

   EN 

 
However,  the  complexities  arising  from  the  four  separate  judicial  systems  (State-level, 
Republika Srpska, Federation and Brčko District) pose serious challenges to the functioning 
of  the  judicial  system.  There  is  no  single  body  comparable  to  a  supreme  court  that  can 
guarantee uniform application of the law. The presence of 14 budgetary authorities affects the 
independence of the judiciary. In addition, budgetary measures have led to posts in State-level 
judicial institutions being frozen for two years. 

Political pressure on the judiciary continued. The authority of the HJPC, the State Court and 
the Prosecutor's Office have often been questioned by political leaders. The role of the HJPC 
in appointing new judges was also challenged when the President of the Federation delayed 
three  appointments  to  the  Entity  Constitutional  Court,  thus  undermining  the  proper 
functioning of the court. The State-level prosecutor's office faced cases of internal corruption 
and frequent leaks of information. The impartiality of courts is not always guaranteed. 

The backlog of cases remained one of the most acute problems facing the judiciary and court 
proceedings  are  generally  lengthy.  The  HJPC  took  several  measures  to  reduce  the  backlog, 
including  quarterly  reporting  by  all  courts,  a  new  quota  system  for  judges,  more  judges  in 
critical  courts,  new  specialised  software  and  training  for  bailiffs.  Despite  these  reforms,  the 
backlog  still  stands  at  over  2.1  million  cases  country-wide.  Many  of  these  are  claims  for 
unpaid utility bills.  

A  general  lack  of  political  will  meant  that  few  steps  were  taken  to  implement  the  Justice 
Sector  Reform  Strategy  for  2009-13.  In  particular,  authorities  at  Entity  and  Cantonal  levels 
failed  to  integrate  the  strategy  into  their  work  plans.  Limited  human  resources  and  poor 
coordination  hampered  implementation.  The  work  of  the  five  working  groups  for 
implementation of the strategy has been undermined by the lack of a quorum.  

Specialisation  within  courts  and  prosecution  services  has  started  on  administrative  and 
commercial cases, but without strategic planning or harmonised measures. To speed up case 
adjudication in commercial disputes and to facilitate business registration, Republika Srpska 
established six new commercial courts, including a second instance commercial court. In the 
Federation, a system of commercial courts has not yet been established. 

The physical condition of a number of courts and Prosecutor’s Offices throughout the country 
remains  inadequate.  A  comprehensive  country-wide  approach  to  improving  courts  and 
Prosecutor’s  Offices  is  lacking.  The  two  Entity-level  judicial  and  prosecutorial  training 
centres continue to face staffing problems. Further specialised staff are needed. International 
cooperation  needs  to  be  improved.  The  State-level  Law  on  international  legal  assistance  in 
criminal matters is implemented unevenly.  

Little  progress  was  made  in  the  area  of  juvenile  justice.  The  State-level  juvenile  offence 
strategy  is  under  review.  Implementation  of  the  strategy  remained  uneven  due  to  a  lack  of 
resources. Republika Srpska adopted a new law which includes alternative sanctions. A new 
Department for Juveniles was opened in the Federation’s Ministry of Justice.  

Implementation  of  the  national  war  crimes  strategy  was  severely  delayed  and  remained 
minimal.  A  caseload  database  outlining  the  types,  numbers  and  perpetrators  of  cases  was 
compiled  after  a  delay  of  18  months.  A  comprehensive  approach  to  implementation  of  the 
strategy  is  needed.  Prosecution  of  war  crimes  by  the  State  Court  has  continued  to  be 
satisfactory.  In  December  2009,  the  High  Representative  decided  to  extend  the  mandate  of 
international  judges  and  prosecutors  dealing  with  war  crimes  at  the  State-level  court  and  in 

EN 

13 

   EN 

 
the Prosecutor’s Office, after parliament failed to adopt the related legislation. Delays to those 
appointments  had  repercussions  for  the  planning  of  operations  in  both  the  court  and  the 
Prosecutor’s Office and for the processing of cases.  

War crimes trials at Cantonal and District courts advanced slowly. Progress was hindered by a 
lack  of  capacity  in  the  Prosecutor's  Offices,  inadequate  facilities  and  a  lack  of  appropriate 
witness  protection  and  support  services.  Bosnia  and  Herzegovina  has  signed  bilateral 
agreements with Croatia, Serbia and Montenegro on mutual recognition and enforcement of 
court rulings in criminal matters to prevent people with dual citizenship convicted of a crime 
in one country avoiding prison by fleeing to the other. (See Chapter 2.3 – Regional issues and 
international obligations). 

The  number  of  prosecuted  war  crimes  involving  cases  of  sexual  violence  remained  low. 
Sustained efforts are needed to guarantee successful investigations and prosecution, as well as 
adequate witness protection and psychological support for victims. 

Overall,  development  of  an  independent  and  effective  judiciary  in  line  with  European 
standards remains at an early stage. Significant efforts are needed to ensure implementation of 
the  justice  sector  reform  strategy  and  of  the  national  war  crimes  strategy,  including  by 
securing  adequate  financial  resources.  The  fragmented  legal  framework  across  the  country 
and  the  absence  of  a  single  budget  restrict  effectiveness.  The  backlog  of  cases  and  political 
pressure on the judicial system continue to be causes for concern. 

Anti-corruption policy 

Bosnia  and  Herzegovina  has  made  limited  progress  in  tackling  corruption,  which  is 
widespread throughout the public and private sectors, affecting the judiciary, tax and customs 
administrations, public procurement, and privatisation. Implementation of the 2009-2014 anti-
corruption strategy has started and the Law establishing the Anti-Corruption Agency has been 
adopted.  

Bosnia  and  Herzegovina  ratified  the  additional  protocol  to  the  Council  of  Europe  Criminal 
Law  Convention  on  Corruption.  The  country  does  not  yet  fulfil  the  requirements  for 
participation in the working group on bribery in international business transactions, which is a 
precondition  for  accession  to  the  OECD  Convention  on  combating  bribery.  Regarding  the 
report  of  the  Group  of  States  against  Corruption  (GRECO),  4  out  of  16  recommendations 
have been addressed. Bosnia and Herzegovina has amended provisions of the Criminal Code 
relating to the management of confiscated assets (See Chapter 4.3.2 – Money laundering).  

Parliament  adopted  a  Law  establishing  the  Agency  for  Prevention  and  Coordination  of  the 
Fight against Corruption. The law has entered into force and provides for the establishment of 
an  independent  agency,  thus  meeting  one  of  the  GRECO  recommendations.  An  acting 
director  was  appointed,  pending  selection  of  a  permanent  director.  A  first  draft  of  the 
agency’s  rulebook  has  been  produced.  Premises  for  the  agency  were  identified,  but  staffing 
levels have not been finalised.  

A State-level code of conduct for civil servants, regulating both prevention and detection of 
corruption,  has  not  been  adopted.  Amendments  to  the  code  of  conduct  for  civil  servants  in 
Republika  Srpska  were  adopted  to  regulate  the  movement  of  public  officials  to  the  private 
sector  and  to  prevent  conflict  of  interest.  In  the  Federation,  the  code  of  conduct  for  civil 

EN 

14 

   EN 

 
servants was amended to introduce priorities regarding the risk of corruption and the concept 
of ethics. 

Bosnia and Herzegovina has a Law on conflicts of interest in place. However, country-wide 
implementation of the law is uneven. In the twelve months to September 2010, the CEC found 
2 violations  of  the State law  on conflict of interest and 15 violations of the  Federation law. 
Republika Srpska has its own commission for determining conflict of interest, which found 1 
violation.  

The  House  of  Peoples  adopted  amendments  to  the  Law  on  financing  of  political  parties  to 
raise  the  threshold  for  individual  donations.  The  Central  Electoral  Commission  (CEC)  has 
started to monitor asset declarations, conflicts of interest and reports on financing of political 
parties.  It  has  imposed  financial  and  administrative  sanctions  in  18  cases.  However,  asset 
declarations by political parties remain voluntary. The Public Procurement Law largely meets 
basic  standards  regarding  transparency,  but  its  provisions  for  preventing  or  detecting 
irregularities are not applied consistently.  

There  is  no  effective  investigation,  prosecution  and  conviction  of  high-level  corruption. 
Corruption  is  mainly  prosecuted  under  the  rules  on  abuse  of  office  and  at  Entity-level.  A 
number  of  high-level  cases  involving  senior  politicians  and  civil  servants  are  at  the 
prosecution stage. One high-level case of abuse of office resulted in an acquittal. The judicial 
follow-up of cases of corruption remains slow and although special investigative measures are 
available to police and prosecutors, they are rarely used in corruption cases. Staff working on 
corruption are insufficiently trained to conduct financial investigations. Cooperation between 
police and prosecutors needs to be improved in order to make the investigation of corruption 
cases more effective.  

Overall, Bosnia and Herzegovina has started to tackle corruption by adopting an updated anti-
corruption  strategy  and  action  plan  and  by  appointing  an  acting  director  who  is  overseeing 
their  implementation  and  the  establishment  of  the  anti-corruption  agency.  Some  measures 
have  been  taken  to  prevent  corruption  (e.g.  on  awareness-raising,  education  and  training). 
However, corruption is prevalent in many areas and remains a serious problem throughout the 
public  and  private  sectors.  Anti-corruption  policies  and  measures  are  not  adequately 
implemented. Investigation and prosecution of corruption remain weak. 

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law 

As regards ratification of human rights instruments, Bosnia and Herzegovina has ratified the 
major UN and international human rights conventions. During the reporting period it ratified 
the UN Convention on the Rights of Persons with Disabilities. However, implementation of 
the  human  rights  conventions  remained  uneven  and  delays  in  meeting  reporting  obligations 
continued.  

There  were  several  cases  of  non-enforcement  of  decisions  of  the  Constitutional  Court  of 
Bosnia  and  Herzegovina,  which  led  to  cases  being  lodged  before  the  European  Court  of 
Human Rights (ECtHR). Between September 2009 and September 2010 the ECtHR issued 20 
judgements  finding  that  Bosnia  and  Herzegovina  had  violated  the  European  Convention  on 
Human  Rights  (ECHR).  A  total  of  673  new  applications  were  made  to  the  ECtHR  since 
October  2009.  As  of  September  2010,  some  1,216  cases  were  pending  before  the  Court, 

EN 

15 

   EN 

 
approximately  300  of  which  related  to  ‘old’  foreign-currency  savings  in  banks  based  in 
Bosnia and Herzegovina.  

Little  progress  was  made  on  the  promotion  and  enforcement  of  human  rights.  Effective 
monitoring  has  not  been  ensured  in  every  area  related  to  human  rights.  Bosnia  and 
Herzegovina’s  Constitution  has  not  been  amended  to  remove  incompatibilities  with  the 
ECHR, despite a legally-binding decision by the ECtHR (See Chapter 2.1 – Constitution).  

Following  the  demise  of  the  Human  Rights  Chamber  (HRCh)  and  the  Human  Rights 
Commission (HRCom),8 the State-level Constitutional Court was confirmed as the competent 
body to review the proper implementation of their outstanding decisions. This is the first step 
towards  ensuring  that  there  is  an  independent  body  in  charge  of  monitoring  and  assessing 
implementation of HRCh and HRCom decisions by the Entities.  

Overall,  the  main  elements  of  international  human  rights  law  have  been  incorporated  into 
Bosnia and Herzegovina’s legal system. However, little progress took place on enforcement 
of  human  rights  legislation  and  on  enforcing  these  instruments  and  complying  with  the 
ECtHR rulings. Full compliance with the ECHR remains essential.  

Civil and political rights 

With regard to torture and ill-treatment, the Council of Europe Committee on the Prevention 
of  Torture  (CPT)  found  several  deficiencies  in  the  treatment  of  detainees  and  convicted 
criminals.  Areas  of  concern  included  ill-treatment,  intimidation  and  poor  health  services, 
particularly  for  vulnerable  prisoners.  Bosnia  and  Herzegovina  has  still  not  appointed  a 
representative  to  the  CPT.  Very  little  was  done  to  improve  the  procedures  for  investigating 
cases of alleged torture and ill-treatment.  

Adequate safeguards are lacking for people facing deportation after being refused citizenship 
and who are at serious risk of persecution, including torture and ill-treatment, upon return. 

The  death  penalty  is  prohibited  by  the  Constitution  of  Bosnia  and  Herzegovina  and  by  the 
Constitution  of  the  Federation.  However,  the  death  penalty  provision  in  the  Constitution  of 
Republika Srpska has not been repealed. 

Some  progress  was  made  on  access  to  justice  in  civil  and  criminal  trials.  However,  the 
adoption  of  the  framework  Law  on  free  legal  aid  needed  to  comply  with  the  ECHR  is  still 
pending.  Equality  before  the  law  is  formally  guaranteed.  In  practice  the  presumption  of 
innocence  and  equal  treatment  are  not  always  ensured  during  legal  proceedings.  Republika 
Srpska has legal aid centres in five locations. The Federation has no comprehensive system of 
legal  aid,  but  three  of  the  ten  Cantons  have  established  offices.  The  Brčko  District  Judicial 
Commission also operates a legal aid office. Legal aid in civil cases continues to be provided 
on a mainly ad hoc basis by privately funded NGOs.  

8 

The  Human  Rights  Chamber  (HRCh)  was  established  by  Annex  6  to  the  Dayton/Paris  Peace 
Agreement, as a judicial body dealing with complaints concerning violation of basic human rights and 
freedoms  envisaged  under  the  European  Convention  on  Human  Rights.  The  mandate  of  the  HRCh 
expired on 31.12.2003, without having resolved all the cases it received (15,191). In order to resolve all 
the  cases,  the  State  and  Entities  agreed  to  create  the  Human  Rights  Commission  within  the 
Constitutional Court of BiH (HRCom). 

EN 

16 

   EN 

 
                                                 
Some  progress  was  made  regarding  the  prison  system.  A  new  section  for  juveniles  was 
opened  in  Tuzla  prison,  but  lacks  rehabilitation  services.  Republika  Srpska  adopted  several 
laws, including the amended Law on the execution of criminal sanctions, the Law on a special 
regime for enforcement of imprisonment and the Law on protection and treatment of juveniles 
in criminal proceedings. The Federation lacks some of this legislation. As a result, the legal 
framework is not harmonised and criminal sanctions are not uniform across the country.  

Prison conditions improved somewhat. In both Entities prison accommodation was expanded 
with  new  or  upgraded  buildings.  A  pool  of  social  workers  specialising  in  human  rights, 
including  in  the  treatment  of  vulnerable  groups,  was  established.  Construction  of  a  new 
psychiatric unit in Sokolac has begun. However, construction of a high-security State prison 
has incurred serious delays and has not started yet affecting the country's capacity to deal with 
high-security prisoners.  

Overcrowding  remains  of  concern  and  is  particularly  acute  in  the  Federation,  where  over 
1,000 convicted criminals have not started to serve their prison sentences. Estimates suggest 
that  an  average  of  five  years  pass  between  a  final  conviction  and  actual  imprisonment, 
particularly  in  the  Federation.  Efforts  are  underway  to  increase  prison  capacity  and  to 
introduce a system of electronic bracelets for house arrests. Both Entities amended their laws 
on  execution  of  criminal  sanctions  in  an  effort  to  reduce  overcrowding.  The  scope  for 
applying alternative sanctions has been broadened, in particular in Republika Srpska, but they 
are still not widely applied.  

Proper  medical  facilities,  segregation  of  vulnerable  groups  and  prison  inspections  remained 
insufficient.  Coordination  between  the  15  prison  administrations  in  the  country  remained  a 
serious concern.  

Bosnia and Herzegovina's Constitution provides for the freedom of expression, but a growing 
number of journalists and editors are subject to physical violence and intimidation, including 
death  threats.  Political  pressure  on  the  media  increased  and  the  independence  of  the 
Communications  Regulatory  Agency  continued  to  be  undermined.  In  certain  cases,  public 
bodies  continued  to  deny  access  to  information,  even  after  the  Ombudsman  issued  a 
recommendation to provide access. An increasing number of complaints about news reporting 
and  Press  Code  violations  have  been  filed  with  the  Press  Council.  However,  the  self-
regulating Press Council has not been sufficiently active in enforcing professional standards. 

Implementation of the Freedom of Access to Information Act remains insufficient. Journalists 
investigating  corruption  have  faced  intimidation.  (See  Chapter  4.2.6  –  Information  society 
and media).  

Freedom of assembly and association are enshrined  in the country's Constitution. However, 
further  cases  of  violence  and  threats  against  human  rights  advocates  and  civil  society 
organisations  have  been  reported,  mostly  involving  activists  investigating  suspected 
corruption.  

The  governments  of  both  Entities  and  of  Brčko  District  as  well  as  many  municipalities 
adopted cooperation agreements with civil society organisations. At State-level, the office for 
NGO  Cooperation  within  the  Council  of  Ministers  has  not  been  established  as  envisaged  in 
the  cooperation  agreement  between  civil  society  and  the  Council  of  Ministers.  The 
administrative capacity of the department for cooperation with civil society at the Ministry of 
Justice is weak. Resources for the Civil Society Board remain inadequate and funds allocated 

EN 

17 

   EN 

 
to  human  rights  and  environmental  organisations  are  insufficient.  The  development  of  civil 
society  in  Bosnia  and  Herzegovina  requires  further  support  and  more  transparency  in  the 
allocation of funding. 

The  constitutional  and  legal  guarantees  of  freedom  of  religion  are  somewhat  compromised. 
Discrimination  on  religious  grounds  is  often  intertwined  with  discrimination  on  ethnic 
grounds.  Consequently,  inter-ethnic  tensions  tend  to  perpetuate  religious  intolerance.  There 
were  a  number  of  cases  of  religious  buildings  being  vandalised  and  of  religious  officials  or 
believers  being  subjected  to  violence,  particularly  in  the  case  of  those  who  constitute  a 
religious minority in certain communities. 

Overall,  Bosnia  and  Herzegovina  has  made  no  further  progress  in  the  area  of  civil  and 
political rights. Efforts to address torture and ill-treatment failed to meet European standards. 
Access  to  justice  and  equality  before  the  law  are  not  guaranteed.  Prison  conditions  have 
improved somewhat, but a comprehensive reform of the prison system has not started. In the 
areas of freedom of expression, freedom of assembly and freedom of religion, there was little 
progress.  Political  pressure  on  the  media  has  increased.  The  continuing  challenges  to  the 
independence of the Communications Regulatory Authority are a serious cause for concern. 
Further efforts are needed to support the development and funding of the civil society sector. 

Economic and social rights 

Little progress has been made in the field of women’s rights. The 2009-11 State-level strategy 
for  preventing  and  combating  domestic  violence  was  adopted.  The  Law  on  gender  equality 
was  amended  in  line  with  the  recommendations  of  the  Council  of  Europe  and  the  UN 
Committee  for  the  Convention  on  elimination  of  discrimination  against  women  (CEDAW). 
The amendments set a quota of 40% for women within the public administration, but this is 
not implemented in practice. The State report on elimination of discrimination against women 
was  presented  after  consultations  with  NGOs.  At  Entity-level,  collection  of  gender-
disaggregated data was  improved  with the cooperation of the statistical  institutes. However, 
harmonisation of the Entity and Cantonal laws with the gender equality law proceeded very 
slowly.  

War crimes involving sexual violence have not yet been recognised in the Criminal Code in 
accordance  with  international  standards.  Domestic  violence  against  women  remains 
widespread and under-reported. Bosnia and Herzegovina continues to be primarily a country 
of origin but also a transit and destination country for trafficking in women and girls. Political 
representation of women at all levels has increased somewhat, but remain low. There are few 
women in senior decision-making positions and they are under represented in economic life.  

The  main  mechanisms  for  ensuring  gender  equality  are  adequately  funded  but  still  do  not 
monitor sufficiently implementation of the gender law and gender action plans. Cooperation 
between ministries and agencies, including the Ombudsman’s Office, remains weak. Victim 
support mechanisms for women are insufficient.  

Little progress was made in the area of children’s rights. Protection of children was improved 
by  an  amendment  to  the  State-level  Criminal  Code,  which  introduced  penal  sanctions  for 
trafficking and prostitution of children. A common, nine year core curriculum was introduced 
in  most  schools  throughout  the  country  and  the  number  of  ‘divided  schools’  (two  schools 
under one roof) was reduced from 83 to 19. However, at the same time, the number of mono-
ethnic schools has grown, making longer term integration more difficult. Children who form 

EN 

18 

   EN 

 
part  of  an  ethnic  minority  in  school  sometimes  suffer  discrimination.  At  Entity  and  Canton 
levels the costs of introducing universal pre-school education were analysed, but insufficient 
resources  were  made  available  for  implementation.  Children  continued  to  suffer  from 
domestic violence and trafficking. 

Very  little  progress  was  made  in  improving  conditions  for  socially  vulnerable  people  and 
people with disabilities. The UN Convention on the Rights of Persons with Disabilities was 
ratified,  but  implementation  has  not  started.  The  Federation  adopted  a  Law  on  professional 
rehabilitation,  training  and  employment  of  disabled  people.  However,  the  social  inclusion 
strategy  was  not  adopted.  The  Entities  adopted  framework  legislation  to  reform  their  social 
protection  systems  towards  a  needs-based  approach  for  social  benefits,  including  veterans’ 
benefits. Disparities between the social protection systems of the Entities and Cantons remain. 
The Council for Disabled Persons has still not been established.  

As  regards  labour  rights  and  trade  unions,  legislation  is  not  harmonised  between  the  two 
Entities,  nor  between  the  Cantons.  A  State-level  Economic  and  Social  Council  has  still  not 
been  established.  Individual  trade  unions  belonging  to  the  Confederation  of  Trade  Unions 
(KSBiH)  are  able  to  function  satisfactorily.  However,  the  KSBiH  itself  has  still  not  been 
registered  at  State-level,  because  of  divergences  between  the  State-level  Ministry  of  Justice 
and  a  trade  union  from  the  Federation.  Employees  continued  to  have  difficulty  obtaining 
social  benefits,  particularly  during  maternity  leave.  The  legislative  framework  for  social 
benefits and pensions remained fragmented (See Chapter 4.1.8 – Social policies, employment 
and public health). 

With regard to anti-discrimination policies, no steps were taken to remedy the shortcomings 
of the Anti-Discrimination Law, notably the failure to include age and disability and the broad 
scope of the exceptions. Social discrimination against lesbian, gay, bisexual and transgender 
(LGBT) people remained common. Physical attacks and harassment against these groups have 
continued. There has been no official condemnation of such acts by government authorities. 
Implementation of anti-discrimination remains weak. 

In  the  field  of  property  rights,  the  vast  majority  of  cases  of  property  repossession  requests 
have been resolved. However, the work of the Commission for Property Claims of Displaced 
Persons and Refugees on the remaining requests was interrupted after the mandate of its seven 
members expired in December 2009. A new three-member commission was appointed in June 
2010. The database regarding outstanding claims is not available and funding is insufficient. 
Property registers are largely unreliable. The Ministry for Human Rights and Refugees has no 
power to enforce the commission’s decisions. 

Overall,  little  progress  was  made  in  the  area  of  economic  and  social  rights.  The  Law  on 
gender  equality  was  adopted  and  a  common  nine  year  core  curriculum  was  established  in 
most schools throughout the country. However, domestic violence remains a serious problem. 
Protection  of  women  against  all  forms  of  violence  needs  to  be  strengthened.  No  steps  were 
taken to remedy the shortcomings of the Anti-Discrimination Law. More efforts are required 
on  discrimination  against  vulnerable  people  and  to  safeguard  the  rights  of  children.  Social 
inclusion  policies  that  effectively  promote  social  cohesion  and  national  reconciliation  are 
needed. Labour rights, the role of trade unions and the mechanisms for social dialogue need to 
be strengthened. 

EN 

19 

   EN 

 
Respect for and protection of minorities and cultural rights9 

As regards respect for and protection of minorities and cultural rights, the legal framework is 
largely in place, but little progress was made towards implementation. In terms of inter-ethnic 
relations, the National Minority Councils at State and Entity levels are operational. However, 
they only have an advisory role in parliament and a limited influence over policy formulation.  

The  European  Charter  for  Regional  or  Minority  Languages  was  ratified  in  September. 
Representation  of  minorities  in  the  media  is  limited,  despite  provisions  in  the  Law  on 
protection of national minorities.  

As  the  Constitution  has  not  been  amended  to  comply  with  the  ECtHR  ruling,  minorities 
continue to be excluded from representation in the House of Representatives and the tripartite 
Presidency (See Chapter 2.1 – Constitution). The lack of relevant, up-to-date information on 
minorities  precludes  revision  of  the  statutes  of  the  municipalities  in  accordance  with  the 
Electoral Law. 

No progress has been made towards nominating the members from Bosnia and Herzegovina 
on the Council of Europe Advisory Committee for the Framework Convention for Protection 
of  National  Minorities.  Communication  and  cooperation  between  the  different  levels  of 
authority are inadequate and the political will to implement the Law on national minorities is 
lacking.  

Some  progress  was  achieved  with  regard  to  refugees  and  internally  displaced  persons.  In 
2009  there  were  117,000  internally  displaced  persons,  including  7,500  living  in  collective 
centres.  The  revised  strategy  for  implementation  of  Annex  VII  to  the  Dayton/Paris  Peace 
Agreement  was  adopted  in  June.  It  includes  plans  for  material  assistance  and  reforms  to 
improve  access  to  rights.  State-level  funding  was  allocated  for  the  return  fund.  However, 
appropriate procedures for allocating assistance are lacking and the transparency of the return 
fund  remains  poor.  Problems  with  economic  reintegration  and  access  to  health  care,  social 
protection  and  pensions  remained  the  main  obstacles  to  sustainable  return  and  local 
integration. One particularly sensitive issue is the employment of returnees who are members 
of a minority. Such returnees continued to face discrimination in access to employment.  

Regarding  landmines  from  the  war,  some  areas  have  still  not  been  cleared.  In  the  twelve 
months to September 2010, 9 people were killed and 17 injured in 16 landmine accidents and 
others  injured.  There  has  been  some  progress  with  implementing  the  mine  action  strategy. 
However,  the  Law  on  anti-mine  actions  remains  to  be  adopted.  Shortage  of  financing  has 
slowed  down  the  implementation  of  the  strategy  and  cast  doubt  on  the  goal  of  clearing  the 
entire country of mines by 2019.  

Some progress can be reported concerning protection of the Roma minority. Implementation 
of  the  Roma  action  plans  on  health,  employment  and  housing  has  improved.  The  State 
earmarked a further €1.5 million for reconstruction of houses, for small projects to generate 
income  and  employment  and  for  immunisation  of  Roma  children.  The  Roma  population  is 

9 

According to the Law on the protection of rights of persons belonging to national minorities, there are 
17  national  minorities  in  Bosnia  and  Herzegovina  (Albanians,  Montenegrin,  Czechs,  Italians,  Jews, 
Hungarian, Macedonians, Germans, Poles, Romas, Romanians, Russians, Rusins, Slovaks, Slovenians, 
Turks and Ukrainians). The three constituent peoples – Bosniaks, Croats and Serbs – do not constitute 
national minorities. 

EN 

20 

   EN 

 
                                                 
identified  as  a  priority  group  to  be  targeted  in  the  Bosnia  and  Herzegovina  social  inclusion 
strategy  for  2008-13,  which  remains  to  be  adopted.  The  revised  2004  action  plan  on 
educational needs of Roma and other minorities was adopted by the Council of Ministers, but 
financial  resources  for  implementation  are  still  pending.  More  efforts  are  needed  on  birth 
registration  and  on  the  provision  of  free  legal  aid  for  civil  registration.  The  proportion  of 
Roma children enrolled in primary schools varies  between municipalities.  The  effectiveness 
and efficiency of measures addressing the Roma have not improved. The Roma continue to be 
the most vulnerable minority.  

The  administrative  capacity  of  the  Ministry  for  Human  Rights  and  Refugees  to  steer  the 
implementation  of  the  Roma  strategy  remains  weak.  The  coordination  board  for  monitoring 
implementation  of  the  Roma  action  plans  at  State-level  has  no  link  to  the  bodies  at  lower 
levels (Entities, Cantons and municipalities). Inter-agency coordination remains insufficient.  

Overall,  some  progress  was  achieved  in  the  areas  of  minority  rights,  cultural  rights  and 
protection of minorities. The revised strategy for implementation of Annex VII was adopted 
and  includes  plans  for  material  assistance  for  refugees  and  internally  displaced  persons. 
However,  the  difficulties  facing  returnees,  particularly  in  finding  employment  and  securing 
access 
issues  of  concern. 
Implementation  of  the  legislation  guaranteeing  protection  of  minority  rights  remains  weak. 
Progress was made towards implementing the Roma action plans, but insufficient priority was 
given  to  improving  coordination  and  to  establishing  monitoring  mechanisms.  The  Roma 
continue to face very difficult living conditions and discrimination. 

to  health  care,  social  protection  and  pensions,  remain 

2.3. 

Regional issues and international obligations 

Implementation of the Dayton/Paris Peace Agreement has continued, but narrow nationalistic 
rhetoric by political leaders challenging the Agreement and the constitutional order remained 
frequent  (See  Chapter  2.1  –  Constitution).  During  the  pre-election  period,  politicians  in 
Republika  Srpska  frequently  challenged  the  territorial  integrity  of  the  country.  Furthermore, 
statements  by  Republika  Srpska's  political  leadership  denying  the  gravity  of  war-time 
massacres involving the civilian population have continued.  

Cooperation  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY),  a 
European  Partnership  priority,  continued  to  be  satisfactory.  Cooperation  between  the  ICTY 
and  the  State-level  and  Entity  authorities  was  adequate  at  operational  level  and  access  to 
witnesses  and  archives  remained  good.  The  Bosnia  and  Herzegovina  Council  of  Ministers 
extended the interim measures for freezing funds and economic means of people indicted by 
the  ICTY  until  October  2011.  However,  continued  efforts  are  needed  to  find  the  remaining 
fugitives. Ratko Mladić and Goran Hadžić remain at large. Radovan Stanković escaped from 
prison  in  2007  and  remains  at  large.  In  March  2010  the  State  Court  sentenced,  in  a  first-
instance judgement, his brother to two years in prison for assisting his escape.  

Local prosecution of war crime cases continued. All but one case transferred from the ICTY 
to  the  special  war  crimes  chamber  of  the  State  Court10  have  been  completed.  A  significant 
number of other war crimes indictments and trials have also been launched by prosecutors in 
Bosnia and Herzegovina. In September 2010, 87 war crimes cases were under way, of which 
50 were at State-level, 20 in the Federation, 13 in Republika Srpska and 4 in Brčko District. 

10 

Cases transferred by the ICTY for local prosecution. 

EN 

21 

   EN 

 
                                                 
Nevertheless, the estimated total  number of untried  cases remains high  (over 10,000). Little 
has been done to implement the 2008 National War Crimes Strategy to reduce the backlog of 
cases  and  witness  protection  mechanisms  are  insufficient.  Further  steps  are  needed  to 
strengthen  the  capacity  to  deal  with  war  crimes  cases,  in  particular  by  improving  the 
functioning  of  cantonal  and  district  courts  and  to  ensure  adequate  financial  resources. 
Regional cooperation and the provision of adequate victim and witness protection will be key 
in this regard.  

Cooperation  between  the  courts  and  prosecutors  from  Bosnia  and  Herzegovina,  Croatia  and 
Serbia  improved.  Bilateral  agreements  were  signed  on  mutual  execution  of  sentences  in 
criminal matters and enforcement of court rulings. This is a positive development. However, 
considerable legal obstacles to extradition continue to exist in the criminal procedure code.  

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

The  Parliamentary  Assembly  of  the  Council  of  Europe  (CoE)  frequently  monitors  the 
the  obligations  and 
progress  made  by  Bosnia  and  Herzegovina 
commitments  relating  to  its  membership  of  the  CoE.  Bosnia  and  Herzegovina  has  made  no 
progress in appointing members to several CoE monitoring mechanisms and advisory bodies. 
Implementation of requirements stemming from the CoE Conventions remains inadequate.  

towards  fulfilling 

Bosnia  and  Herzegovina  became  a  non-permanent  member  of  the  UN  Security  Council  in 
January 2010 for a two-year term. 

Fresh  impetus  was  given  to  the  Sarajevo  declaration  process  following  the  Ministerial 
meeting held in Belgrade in March 2010. The Sarajevo Process was initially launched through 
the Sarajevo Declaration of 31 January 2005. Bosnia and Herzegovina, Croatia, Montenegro 
and Serbia cooperate within this process to find solutions for refugees and other people who 
were displaced as a result of the 1991-1995 armed conflicts in ex-Yugoslavia. The ministerial 
meeting in March 2010 brought together the countries, all of which agreed to work together in 
order to clarify refugee statistics. They also committed themselves to work towards solutions 
to  a  number  of  outstanding  issues  by  the  end  of  2010.  However,  there  are  a  number  of 
difficult issues, in particular that of occupancy and tenancy rights, which still need a mutually 
acceptable  solution.  In  June  2010,  there  were  6,941  registered  refugees  from  Croatia  in 
Bosnia  and  Herzegovina,  the  vast  majority  in  Republika  Srpska,  and  approximately  1,300 
refugees from Kosovo.11  

As regards missing persons, in August 2010 there were still 14,631 persons missing from the 
conflicts  in  the  region.  Of  these,  10,402  cases  were  related  to  the  conflict  in  Bosnia  and 
Herzegovina, 2,392 to the conflict in Croatia and 1,837 to the conflict in Kosovo according to 
figures  provided  by  the  International  Committee  of  the  Red  Cross  (ICRC).  During  the 
reporting  period,  almost  900  cases  of  missing  persons  were  solved  in  Bosnia  and 
Herzegovina,  mostly  related  to  Srebrenica.  The  process  for  solving  these  cases  has  been 
obstructed  by  the  lack  of  cooperation  between  the  authorities  of  the  Federation  and  of 
Republika Srpska. Approximately 3,000 human remains are still unidentified and the modest 

11 

Under UNSCR 1244/1999. 

EN 

22 

   EN 

 
                                                 
number of exhumed and identified Serb victims is a concern. Working towards the resolution 
of  the  remaining  cases  within  a  reasonable  time  frame  is  essential  for  the  reconciliation 
process.  

The  implementation  of  the  Law  on  missing  persons  advanced  but  the  database  of  missing 
persons  and  the  Fund  to  support  families  remain  to  be  established.  The  State-level  Missing 
Persons Institute (MPI) continued to account for persons missing from the 1992-95 conflict. 
As MPI's co-founder, the Council of Ministers allocated sufficient funds for the work of the 
MPI. However, the authorities of Republika Srpska support an entity-level body with similar 
responsibilities  to  MPI  and  have  remained critical  of  the  MPI's  operations.  Politicisation  of 
this issue has impeded the work of the MPI.  

Regional  cooperation  and  good  neighbourly  relations  form  an  essential  part  of  Bosnia  and 
Herzegovina’s  process  of  moving  towards  the  European  Union.  Bosnia  and  Herzegovina 
continued to be an active participant in regional initiatives, including 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 Area Agreement. The country hosts the RCC Secretariat, which organised 
many regional  activities.  However, difficulties for  holders  of  Kosovo  passports  in  obtaining 
visas to attend regional meetings in Bosnia and Herzegovina persist. The Council of Ministers 
issued a decision that facilitated participation in RCC events for holders of Kosovo passports. 
For participants in other regional cooperation events, the visa procedure remains cumbersome.  

Bosnia and Herzegovina has been implementing the CEFTA. A law that protected domestic 
agricultural and related products by reintroducing customs duties, contrary to the CEFTA and 
to  the  Interim  Agreement,  was  abolished,  following  a  ruling  by  the  Constitutional  Court. 
Bosnia  and  Herzegovina  is  still  behind  in  meeting  its  obligations  under  the  Energy 
Community  Treaty.  Bosnia  and  Herzegovina  participated  in  the  EU-Western  Balkans  High-
Level Meeting, held in Sarajevo on 2 June 2010. 

In  May  2010,  Bosnia  and  Herzegovina  hosted  a  summit  of  the  Igman  initiative  on  regional 
reconciliation,  with  the  participation  of  the  Chair  of  the  Presidency  of  Bosnia  and 
Herzegovina and the Presidents of Croatia, Serbia and Montenegro. This year marked the 10th 
anniversary  of  the  initiative,  involving  more  than  140  NGOs  from  the  region  and  aimed  at 
promoting and facilitating local and regional cooperation.  

Bilateral  relations  with  other  enlargement  countries  developed  further.  Judicial  cooperation 
in penal matters has improved between Bosnia and Herzegovina, Croatia and Serbia. Bosnia 
and  Herzegovina  signed  an  agreement  with  Croatia  and  Serbia  in  February  and  with 
Montenegro  in  July  on  mutual  recognition  and  enforcement  of  court  rulings  in  criminal 
matters. Under the new agreements, a person convicted of a crime in one country who flees to 
a neighbouring country can be required to serve their sentence in the country to which they 
fled.  Good  progress  was  made  in  cross-border  cooperation  to  fight  organised  crime, 
trafficking and smuggling, but little progress was made towards resolving outstanding issues, 
including  border  issues,  and  contributing  to  reconciliation,  which  is  a  European  Partnership 
priority. All heads of  state from neighbouring countries attended the 15th anniversary of the 
Srebrenica commemoration.  

Relations  with  Albania  have  expanded.  Several  bilateral  agreements  on  the  fight  against 
crime, in particular regarding terrorism, illegal drug trafficking and organized crime, entered 
into  force.  A  number  of  agreements  were  ratified  in  areas  such  as  readmission,  investment, 

EN 

23 

   EN 

 
international  passenger  and  freight  transport  and  visa  facilitation.  Albania  has  opened  an 
embassy in Sarajevo. 

Relations  with  Croatia  intensified.  The  Croatian  President  visited  Bosnia  and  Herzegovina 
three  times  between  February  and  June.  He  visited  war  crime  sites  commemorating  victims 
from  all  three  ethnic  groups.  A  joint  session  of  the  Bosnia  and  Herzegovina  Council  of 
Ministers  and  the  government  of  Croatia  was  held  in  June.  A  bilateral  agreement  on  police 
cooperation  was  signed  in  September.  Some  progress  was  made  on  border  issues  with  the 
Inter-state  Commission  for  Borders  meeting  in  July  for  the  first  time  in  several  years.  No 
progress took place on border demarcation and agreement on some parts of the land and river 
borders  remains  outstanding.  Use  of  the  Port  of  Ploče  and  Croatia’s  plans  to  construct  a 
bridge connecting the Pelješac peninsula with the Croatian mainland have been put on hold. 
Other  unresolved  issues  include  property  and  refugee  return,  and  the  lack  of  ratification  by 
Bosnia and Herzegovina of the agreement on dual citizenship.  

Relations  with  the  former  Yugoslav  Republic  of  Macedonia  continued  to  be  good.  A  new 
readmission  agreement  and  an  agreement  on  cooperation  in  fighting  organised  crime  and 
terrorism were ratified. An agreement on cooperation on health matters has been signed, but 
not yet ratified. A declaration on the Srebrenica genocide was adopted by the Parliament. 

Relations  with  Montenegro  further  intensified.  Agreements  on  education,  culture  and 
readmission were ratified. Several other agreements have been signed, but not yet ratified, in 
areas  such  as  science  and  technology,  joint  border  patrols,  cross-border  traffic  and  crossing 
points, international passenger and freight road transport and on legal aid in civil and criminal 
matters.  Inter-parliamentary  cooperation  was  stepped  up,  with  a  specific  focus  on  EU 
integration.  The  Inter-State  Border  Cooperation  Commission  met  on  several  occasions 
regarding  the  delimitation  of  the  border  with  Montenegro.  However,  a  full  agreement  on 
border delimitation is not yet in place.  

Relations  with  Serbia  improved  overall.  Serbia’s  parliament  adopted  a  declaration  on 
Srebrenica, which was welcomed as a significant step towards reconciliation. The President of 
Serbia attended the 15th commemoration of the genocide in Srebrenica. The Speaker of the 
Bosnia and Herzegovina House of Peoples met the President of Serbia in Belgrade in June. 
An ambassador from Bosnia and Herzegovina to Serbia was accredited by Serbia in March, 
after  a  three-year  delay.  A  bilateral  agreement  on  police  cooperation  in  areas  such  as 
organised crime and terrorism was signed in September. Two protocols intended to strengthen 
cooperation  on  integrated  border  management  were  ratified.  An  agreement  on  culture  and 
sport was signed. After an interruption of four years, the Inter-State Cooperation Council for 
the  border  between  the  two  countries  met.  The  Economic  Cooperation  Agreement  between 
Bosnia and Herzegovina and Serbia entered into force in April. Republika Srpska continued 
to cooperate closely with Serbia on the basis of the Special Parallel Relations Agreement and 
the related Protocol on Cooperation.  

There are no official relations with Kosovo,12 as Bosnia and Herzegovina has not recognised 
Kosovo as an independent state. The country has not recognised Kosovo passports and little 
progress  has  been  made  to  set  up  procedures  for  citizens  of  Kosovo  to  obtain  visas 
comparable to those issued by EU Member States that have not recognised Kosovo. Bosnia 
and Herzegovina does not recognise the Kosovo customs stamps. 

12 

Under UNSCR 1244/1999. 

EN 

24 

   EN 

 
                                                 
Relations intensified with Turkey, through trilateral meetings, which took place in 2009 and 
2010  between  Turkey,  Serbia  and  Bosnia  and  Herzegovina,  as  well  as  Turkey,  Croatia  and 
Bosnia and Herzegovina. In April 2010, the heads of state of Serbia and Turkey, and the Chair 
of the Presidency of Bosnia and Herzegovina signed a Declaration in Istanbul re-confirming 
the  territorial  integrity,  sovereignty  and  legal  personality  of  Bosnia  and  Herzegovina.  In 
September,  the  President  of  Turkey  paid  a  State  visit  to  Bosnia  and  Herzegovina.  An 
agreement  on  cooperation  in  science  and  technology  between  Turkey  and  Bosnia  and 
Herzegovina was signed.  

Overall,  Bosnia  and  Herzegovina’s  cooperation  with  the  ICTY  has  remained  good  but  its 
capacity to deal with war crime cases needs to be strengthened. The country has continued to 
participate  actively  in  regional  cooperation.  Good  neighbourly  relations  have  prevailed,  but 
there  has  been  limited  progress  in  addressing  outstanding  issues,  notably  settling  border 
disputes,  property  issues  and  removing  legal  obstacles  to  extradition  with  neighbouring 
countries. 

3. 

ECONOMIC CRITERIA 

In  examining  the  economic  developments  in  Bosnia  and  Herzegovina,  the  Commission’s 
approach  was  guided  by  the  conclusions  of  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  2010  the  authorities  submitted  their  fourth  Economic  and  Fiscal  Programme  for 
2010-12. The macroeconomic framework presented is more realistic than in the previous year, 
but  still  on  the  optimistic  side.  The  programme  remains  fragmented  and  does  not  reveal  a 
coherent formulation of economic and fiscal policies. It is not fully integrated into budgetary 
procedures  and  its  objectives  are  not  adequately  quantified  or  backed  by  concrete  policy 
measures.  The  implementation  of  fiscal  adjustment  and  structural  reform  measures  agreed 
with the International Monetary Fund in the 2009-12 Stand-By Arrangement has been broadly 
satisfactory. The conclusions of both the first and the second programme review were delayed 
due  to  the  slow  implementation  of  structural  benchmarks,  in  particular  in  the  Federation  of 
Bosnia  and  Herzegovina.  In  April  2010  the  World  Bank  approved  a  Development  Policy 
Loan  to  the  country  that  is  linked  inter  alia  to  transformation  of  the  predominantly  rights-
based system of social benefits into an increasingly needs-based system. The Fiscal Council 
failed to adopt the global fiscal framework 2011-13 within the deadlines prescribed by law, 
reflecting  the  lack  of  consensus  between  the  entities  and  the  state  on  economic  and  fiscal 
policy. Fiscal surveillance mechanisms based on fiscal rules, a European Partnership priority, 
are not well implemented. The Fiscal Council has not met for several months. No progress has 
been  made  in  the  development  of  fiscal  surveillance  mechanisms  based  on  fiscal  rules,  a 
European Partnership priority. The quality of public spending has remained low. Overall, the 
commitment  to  structural  reforms  and  sound  public  finances  remained  uneven  across  the 
country.  Some  fiscal  and  structural  reform  measures  have  been  enacted  recently  under  the 
pressure of budgetary imbalances and the international support programmes.  

EN 

25 

   EN 

 
Macroeconomic stability 

industrial  production  decreased 

In 2009, the country endured recession with real GDP dropping by 2.9% after a 5.7% increase 
in  2008.  The  economic  downturn  was  mainly  caused  by  a  drop  in  private  domestic 
consumption,  falling  investments  and  a  contraction  of  external  demand.  Trade  slowed 
drastically,  construction  activity  and 
in  2009  and 
unemployment picked up. Per capita income, measured in purchasing power standards (PPS), 
was 30% of the EU-27 average in 2009, unchanged from  a  year  earlier.  As sufficient fiscal 
space  had  not  been  created  in  the  years  prior  to  the  crisis  and  high  spending  commitments 
prevailed,  public  finances  came  under  severe  stress  when  revenues  declined  in  2009  as  a 
result  of  the  economic  contraction,  so  that  the  Bosnian  authorities  had  to  resort  to  the 
international community for external support. The fiscal adjustment measures agreed with the 
IMF  and  the  World  Bank  for  the  2009  and  2010  budgets  contributed  to  a  consolidation  of 
public finances, while some important structural reforms have been advanced. In 2010 some 
signs of economic recovery can be noted as the volume of industrial production grew by 1.1% 
year-on-year  in  the  first  eight  months  and  that  of  exports  by  28.8%.  Overall,  available 
indicators suggest a mild recovery of the economy in 2010 after the recession of 2009. 

The current account deficit fell from 14.4% of GDP in 2008 to 6.8% in 2009, driven mainly 
by a significant improvement  of the trade  balance due to a contraction of  domestic demand 
which  outpaced  the  contraction  of  external  demand.  Hence,  the  trade  deficit  fell  by  29%, 
shrinking  from  38.2%  of  GDP  in  2008  to  27.8%  in  2009  (goods  only).  While  exports  fell 
annually by 17.6%, the drop in imports was even steeper at 24.2%. The surpluses in the other 
components  of  the  current  account  all  declined.  Remittances  dropped  by  around  20%  but, 
nevertheless, transfers still represent the major offset to trade within the current account. The 
current account deficit was mainly financed by new loans from abroad and, to a lesser extent, 
by foreign direct investment. 

The trade balance continued its improvement in 2010 and the deficit fell by 10% year-on-year 
(January-August). Unlike in 2009, this development was driven by exports, which soared by 
28.8% y/y, while imports increased moderately by 7.7%. However, the trend of an improving 
trade balance was  reversed  in recent months when the trade gap  widened  again for the first 
time  in  20  months.  Agriculture  and  manufacturing  were  the  main  sectors  recording  export 
growth. As a result, the current account deficit fell by 37.3% year-on-year in the first half of 
2010. Bosnia and Herzegovina’s external public debt increased by 22.6% in 2009, mainly due 
to  the  disbursements  made  in  the  context  of  the  IMF  programme  and  the  activation  of  an 
optional  debt  to  the  London  Club  in  December  2009.  In  terms  of  GDP  it  increased  from 
17.2%  to  21.8%.  In  the  first  half  of  2010,  public  foreign  debt  rose  by  another  13%.  Public 
international  creditors  account  for  88%  of  the  country’s  foreign  debt.  The  largest  creditor 
remains the World Bank group. Official foreign exchange reserves have remained relatively 
stable  since  the  last  quarter  2009,  covering  around  six  months  of  imports.  Overall,  external 
imbalances have continued to adjust, characterised by a significant narrowing of the current 
account deficit towards a more sustainable level. 

The  average  unemployment  rate  in  2009  was  very  high  at  24.1%.  According  to  the  Labour 
Force Survey conducted annually in May, unemployment significantly increased to 27.2% in 
2010 from 24.1% in 2009. Measured according to the national registry, the rate was 43.2% in 
July 2010. It was particularly high among the young population (48.7% for people between 15 
and  24).  The  sector  most  affected  by  rising  unemployment  in  2010  was  the  processing 
industry.  On  the  other  hand,  the  highest  growth  of  employment  was  registered  in  financial 
intermediation  and  transport.  Workers  were  laid  off  mainly  in  the  private  sector  while  the 

EN 

26 

   EN 

 
number  of  employees  in  the  public  administration  increased  by  1.6%  year-on-year  in  2010 
(January-July).  After  the  very  high  wage  increases  of  previous  years,  nominal  gross  wages 
still  rose  by  3.4%  in  2009,  but  then  decreased  by  0.5%  in  2010  (until  July).  Structural 
rigidities  such  as  the  high  rates  of  social  contributions  and  low  labour  mobility  continue  to 
hamper job creation and labour market participation. High and poorly targeted social transfers 
reduce the propensity to work, further highlighting the need for reform of the social benefits 
system. Overall, labour market conditions remained fragmented and rigid. 

Annual  inflation  was  negative  in  2009,  reaching  -0.4%,  down  from  7.4%  in  2008.  The 
disinflationary  trend  was  mainly  driven  by  falls  in  transport,  energy  and  food  prices.  This 
downward  pressure  was,  however,  reversed  in  early  2010.  Annual  inflation  rose  to  1.7%  in 
August, bringing the 12-month moving average inflation rate up to a moderate 1%. Inflation 
in 2010 is driven by a hike in excise duties on tobacco and alcohol, as well as transport and 
communication costs following international price developments. The monetary policy of the 
Central Bank continued to be conducted under a currency board arrangement, with the euro as 
the anchor currency. Monetary policy settings have remained unchanged since May 2009 after 
minimum reserve requirements had been lowered in several steps from October 2008 in order 
to  boost  the  liquidity  of  the  banking  sector  during  the  financial  turmoil.  The  monetary 
aggregate M2 increased by 9.5% y/y in August. Overall, the currency board has continued to 
function well and monetary and financial stability have been preserved while inflation slowly 
picks up. 

The fiscal situation of Bosnia and Herzegovina worsened significantly in 2009. The share of 
general  government  in  GDP  remains  high,  with  2009  revenues  at  43.1%  of  GDP  and 
expenditures (including net lending) at 47.6%, thus creating a budget deficit of 4.4% of GDP 
in 2009 (2.2% in 2008). Following the agreement on a Stand-by Arrangement with the IMF 
earlier in the year, the Federation revised its budget three times in 2009 and Republika Srpska 
twice.  The  2010  budgets  were  dominated  by  a  further  need  for  fiscal  consolidation,  mainly 
through a reduction of current expenditures. Substantial savings were envisaged in the public 
sector wage bill and in transfers due to the elimination of special unemployment benefits for 
demobilised  soldiers,  the  implementation  of  eligibility  audits  for  civil  and  war  benefit 
recipients and strict control over pensions provided on favourable terms. The state level froze 
wages  in  2010.  After  initial  delays,  the  Federation  advanced  the  reform  agenda  over  the 
summer: The parliament adopted a new civil service wage law at the end of July rationalising 
the wage bill by inter alia consolidating a large number of allowances into the base wage. The 
government  approved  a  pension  reform  strategy  which  however  was  later  withdrawn  from 
parliamentary  procedure.  Eligibility  audits  of  privileged  pension  and  war  disability  benefit 
recipients  started  in  July,  albeit  slowly.  The  Federation  also  rebalanced  its  budget  in 
September  2010  in  order  to  apply  with  IMF  requirements  and  to  account  for  increased 
revenues. In Republika Srpska wages in public administration were cut by 10% (and 15% for 
the  highest  paid  employees).  An  eligibility  audit  for  social  transfers  was  conducted  in 
Republika Srpska, reducing the number of beneficiaries.  

In  the  first  half  of  2010,  deficits  remained  below  those  targeted  in  the  IMF  programme, 
mainly  due  to  improved  revenue  collection  (increasing  by  2.9%  year-on-year).  As  regards 
indirect  taxes,  this  increase  resulted  mainly from the growth  of revenues from  excise duties 
and  road  tolls,  which  had  both  been  increased  in  the  context  of  the  IMF  programme. 
Collection  was  nevertheless  still  lower  than  in  the  pre-crisis  period  (first  half  of  2008), 
especially VAT, where there has been no change of taxation policy. As regards direct taxes, 
the highest increase was registered in corporate profits tax. Expenses increased by 3.1% year-
on-year  in  the  first  half  of  2010.  Current  spending  dominates  the  budgets  with  wages 

EN 

27 

   EN 

 
accounting for 29% of overall expenditure and social benefits for 38%, both marginally lower 
in relative terms than in 2009. While the wage cuts resulted in a decrease of the nominal wage 
bill by 2.2%, social benefits were still rising by 2%. An agreement on a permanent formula 
for the allocation of indirect tax revenues to the state, the entities and the Brčko District is still 
pending.  The  Fiscal  Council  failed  to  adopt  the  global  fiscal  framework  for  2011-13  within 
the deadlines prescribed by law. Overall, budgets are still not self-sustaining and depend on 
international support, especially in the Federation, even though the state of public finances is 
improving.  The pace  of implementation of fiscal adjustment and structural reform measures 
agreed in the context of the intervention by the international community is uneven. 

General government debt, both domestic and foreign, stood at approximately 35% of GDP in 
2009,  up  from  28%  in  2008.  The  total  amount  of  domestic  public  debt  is  still  subject  to 
verifications related to old foreign currency savings and wartime claims. Nevertheless, it was 
estimated  at  around  13%  of  GDP  in  2009  (up  from  11%  in  2008).  Domestic  public  debt  is 
managed and served by the entities (50.7% Federation, 47.1% Republika Srpska, 2.2% Brčko 
District).  Both  Republika  Srpska  and  the  Federation  continued  issuing  bonds  in  2009  and 
2010 to service the debt. The government of the Federation amended the debt law allowing 
local authorities to issue municipal bonds as already practised in Republika Srpksa. Overall, 
even though the debt-to-GDP ratio is still relatively moderate, its recent growing trend needs 
to be monitored carefully. 

The  sharp  economic  downturn  of  2009  revealed  the  vulnerabilities  of  the  country’s  growth 
model  relying  on  externally  financed  consumption,  thus  creating  large  external  imbalances. 
The  productive  capacity  and  the  competitiveness  of  the  economy  remain  weak  as  domestic 
sources of growth are not adequately exploited and national saving is too low. The currency 
board  arrangement  enjoys  a  high  level  of  confidence  and  credibility,  while  fiscal  policy 
decisions remain erratic, in particular in the Federation, which undermines their reliability and 
predictability,  despite  adjustments  and  reforms  pursued  under  the  international  support 
programmes.  Overall,  the  viability  of  macroeconomic  policies  suffered  from  the  structural 
weaknesses of public finances, even though external imbalances have improved and financial 
and monetary stability has been preserved. 

Interplay of market forces 

The private sector’s share in GDP is estimated to have remained stable at around 60% of GDP 
in 2009. In Republika Srpska around 69% of the initial stock of state-owned capital intended 
for privatisation had been sold by May 2010, practically unchanged from a year earlier. After 
a  series  of  failed  privatisation  deals  the  privatisation  agency  of  the  Federation  developed  a 
revised action plan for 2009-10, including the privatisation of the entire public share in eight 
companies. However, the main public enterprises in the Federation, including the two telecom 
operators, are not covered. Progress on the plan is very slow and several auctions have failed 
as they did not attract interested parties. The privatisation of an 88% share in the aluminium 
company Aluminij d.d. Mostar, one of the largest enterprises in the country and a key source 
of export revenue, which had been pending for more than three years, was declared to have 
failed.  The  value  of  the  state’s  capital  in  public  enterprises  in  the  Federation  has  fallen  in 
recent years, as many were inefficiently managed, recorded losses and are indebted towards 
the entity’s budget, which also limits the scope for successfully privatising them. Most prices 
are  liberalised  even  though  a  number  of  administered  prices  remains.  Overall,  the 
privatisation process did not advance for a second consecutive year. 

Market entry and exit 

EN 

28 

   EN 

 
During  2009  the  court  registration  process  for  companies  registering  for  the  first  time  was 
shortened  from  5-45  days  to  5-20  days;  an  electronic  application  form  for  company 
registration was made available on the web pages of some courts. However, companies must 
still register in both entities if they want to do business in the whole country, and procedures 
remain different. The law on foreign investment policy was amended in order to shorten the 
lengthy  procedure  for  starting  a  foreign-owned  business  (on  average  83  days  in  2009).  The 
requirement to register foreign direct investment with the State Ministry of Foreign Trade and 
Economic  Relations  has  been  removed;  only  registration  with  local  courts  is  now  required. 
Republika  Srpska  established  five  specialised  commercial  courts  responsible  for  resolving 
commercial  lawsuits,  bankruptcy  and  insolvency  procedures,  and  registration  of  companies. 
The  transfer  of  numerous  cases  from  the  municipal  courts  to  these  newly  established 
commercial courts is expected to speed up and harmonise business-related legal proceedings. 
Republika Srpska reduced the time for the completion of bankruptcy proceedings to one year 
for  companies  with  assets  of  less  than  €2.5  million,  and  to  two  years  for  larger  companies. 
The respective legislative amendments also increased the threshold for the appointment of a 
bankruptcy  administrator  to  €2.5  million,  compared  to  €0.5  million  before.  The  ‘legislative 
guillotine’ project to reduce administrative burdens has been completed in Republika Srpska. 
In the Federation, the parliament amended 34 laws in July 2010 initiating the second stage of 
this  regulatory  reform,  simplifying  and  streamlining  35  priority  administrative  procedures. 
Businesses nevertheless continue to suffer from political instability, the high tax burden, and 
slow contract enforcement and business registration procedures. Overall, some improvements 
in  the  business  environment  can  be  recorded,  particularly  in  Republika  Srpska,  but  reforms 
are not sufficient to substantially foster private sector developments. 

The legal system 

No  material  improvements  can  be  recorded  as  regards  the  complex  and  challenging  legal 
environment  in  Bosnia  and  Herzegovina.  While  in  some  areas  the  standard  of  legislation  is 
relatively high, the practical implementation and application of laws is often poor due to the 
weak  enforcement  capacity  of  key  institutions.  A  law  on  commercial  arbitration  does  not 
exist. The rule of law is weak, notably the judicial system often does not function efficiently, 
is subject to obstruction by the parties and does not cover commercial activities adequately. 
Property registers are largely unreliable. Overall, weak rule of law, prevalent corruption and 
unreliable contract enforcement continue to hamper the business environment. 

Financial sector development  

The financial sector in Bosnia and Herzegovina is dominated by banks that mainly engage in 
traditional credit and savings activities. The share of claims to the private sector in relation to 
GDP stood at around 58% in mid-2010, up from 54% a year earlier. 30 banks operate in the 
country, of which 21 are in foreign ownership, seven in domestic private ownership and two 
majority state-owned, unchanged from a year earlier. The concentration of the banking sector 
remained at nearly the same level as in 2008; the five largest banks controlled almost 60% of 
total assets of the banking sector. Banks with foreign ownership accounted for more than 90% 
of the total banking system assets in 2009, even though they reduced their exposure towards 
Bosnia  and  Herzegovina  by  9%,  experiencing  some  difficulties  in  maintaining  their 
commitments under the European Banking Coordination Initiative13 due to the lack of credit 

13 

Bosnia and Herzegovina was included in the European Banking Coordination Initiative, coordinated by 
the EBRD, the IMF and the European Commission, in mid-2009. Foreign banks active in the country 

EN 

29 

   EN 

 
                                                 
demand  and  of  available  instruments  to  invest  excess  liquidity  (e.g.  lack  of  government 
treasury  bills  and  bonds).  Banking  sector  assets  increased  somewhat  in  2010,  by  2.6% 
(August compared to December 2009). The capital adequacy ratio fell from 16.1% at the end 
of 2009 to 15.1% in the second quarter 2010, still comfortably above the legal minimum of 
12%, which itself is significantly higher than the 8% required in the Basel II accord.  

The  aggregated  net  profit  of  the  banking  sector  declined  by  70%  in  2009.  Nine  banks 
recorded losses. Following the economic downturn with a lag, the quality of the loan portfolio 
is deteriorating: The share of non-performing loans to total loans more than doubled from 4% 
in mid-2009 to 8.7% in the second quarter 2010, the highest level since 2004. However, this is 
not  only  due  to  an  increasing  volume  of  non-performing  loans,  but  also  to  the  decreasing 
volume  of  total  loans.  Banking  profitability  indicators  have  also  worsened:  The  return  on 
average equity turned negative in the second quarter 2010, decreasing from 1.3% in mid-2009 
to -2.9%, its lowest level since 2002. The return on average assets fell from 0.1% to -0.3%. 
Liquidity indicators remained relatively stable with the rate of liquid to total assets rising from 
28.5%  at  mid-2009  to  29.5%  in  the  second  quarter  2010,  and  liquid  assets  to  short-term 
financial liabilities marginally falling from 49.5% to 49.3%. The situation was worse in the 
micro-finance sector, where the proportion of poor quality loans had risen to 20% as it was – 
contrary  to  its  traditional  role  –  heavily  engaged  in  consumer  lending.  To  improve  the 
oversight  of  this  sector,  it  has  been  brought  under  the  supervision  of  the  Banking  Agencies 
and the credit register. A Standing Committee for Financial Stability, comprising the Central 
Bank, the Banking Agencies and the Ministries of Finance, was established in the context of 
the  IMF  programme  and  had  its  first  meeting  in  May  2010.  The  limit  on  guaranteed  bank 
deposits  was  further  increased  to  around  €18,000  (from  around  €10,000)  as  of  April  2010. 
Overall,  despite  an  interruption  of  banking  sector  growth,  lower  profitability  and  a 
deterioration in asset quality, financial stability was safeguarded. 

Annual credit growth turned slightly positive again reaching 0.6% in August after it had been 
negative  since  September  2009,  confirming  the  upward  trend  of  recent  months.  Loans  to 
households  continued  to  drop  (by  3%),  though  at  a  decreasing  pace,  but  those  to  private 
enterprises were growing by 2.2%. Deposits recovered in an annual comparison, growing by 
6.5%  in  August,  a  clear  sign  of  the  return  of  confidence  in  the  banking  sector.  This 
development  is  mainly  due  to  private  households,  which  increased  their  savings  by  14.1%, 
while  the  corporate  sector  increased  its  deposits  by  8.6%.  As  a  consequence  of  these 
developments, the loans-to-deposit ratio declined from 118.7% in September 2009 to 111.4% 
in  August  2010.  The  spread  between  average  loan  and  deposit  interest  rates  of  commercial 
banks  increased  by  26  basis  points  in  the  first  quarter  2010  to  a  level  of  7.96  percentage 
points, due to lower deposit rates. This level points to still high intermediation costs. Overall, 
the difficult economic environment has caused market agents to become more risk-averse.  

Local  stock  markets  continued  to  decline.  The  main  index  of  the  Sarajevo  Stock  Exchange 
lost  15%  in  the  first  three  quarters  of  2010;  that  of  the  Banja  Luka  Stock  Exchange  fell  by 
13.5%.  The  cumulated  turnover  at  Sarajevo  fell  by  47%  in  the  first  three  quarters  of  2010 
compared  to  the  same  period  in  2009;  at  Banja  Luka  the  drop  was  far  less  pronounced  at 
1.3%,  but  this  figure  is  blurred  by  one  major  emission  in  July.  The  combined  market 
capitalisation declined to around 44% of GDP from rates at around 50% in 2009 and 100% in 
2008. The insurance sector remained small and relatively weak. Its growth lost pace in 2009 

committed — on a voluntary and non-legally binding basis — to maintain their exposure at the level of 
December 2008 throughout the duration of the IMF programme.  

EN 

30 

   EN 

 
                                                                                                                                                         
when it decelerated to 1.35% (annual growth of premiums). The market was dominated by the 
non-life insurance segment, which accounted for 85% of the total. 26 companies were active 
on the market in 2009, two more than in the previous year. Overall, financial intermediation 
by the non-banking sector remained shallow. 

3.2. 

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

Existence of a functioning market economy 

While external imbalances have been decreasing, fiscal imbalances are still high despite short-
term adjustment measures undertaken in the context of the international support programmes. 
The  reform  of  the  system  of  social  benefits  contributes  to  fiscal  consolidation  and  better 
targeting  of  benefits  to  those  really  in  need.  However,  its  sluggish  implementation,  the  still 
slow  pace  of  economic  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 and a strengthening of 
domestic sources of growth. Progress towards creating one single economic space within the 
country, a key European Partnership priority, has been limited. Coordination on economic and 
fiscal policies has been insufficient. Overall, the functioning of market mechanisms remained 
hampered by distortions, an excessive role of the state and lack of competition.  

Human and physical capital  

Information  on  the  endowment  of  human  capital  remains  scarce.  The  law  on  vocational 
education has been adopted, but not yet implemented. So far, cooperation between vocational 
education schools and employers is only pro forma and the profile and number of graduates 
coming out of the vocational and educational training system often does not correspond to the 
employers’  needs.  A  curriculum  for  a  nine-year  education  in  all  primary  and  secondary 
schools  country-wide  was  implemented  as  of  the  school  year  2009/10.  Overall,  structural 
rigidities and the weak performance of the education system, in particular delays in reforms of 
vocational  education,  continue  to  contribute  to  the  skills  mismatch,  hampering  the  proper 
functioning of the labour market. 

The ratio of investment to GDP dropped significantly from 24.4% in 2008 to 19.1% in 2009. 
Investment  in  road  and  rail  infrastructure  continued,  in  particular  on  corridor  Vc.  The 
‘Railway  Package  II’  directives  on  rail  safety  have  been  partly  implemented  through  the 
issuance  of  safety  instructions  by  the  Bosnia  and  Herzegovina  Railways  Regulatory  Board. 
The  railway  companies  of  the  Federation  and  Republika  Srpska  joined  those  of  Slovenia, 
Croatia and Serbia establishing a regional railway alliance. The reform in accordance with the 
Addendum  to  the  Memorandum  of  Understanding  on  the  development  of  the  South-East 
Europe  Core  Regional  Transport  network  for  a  South-East  European  railway  transport  area 
has not been completed. Net foreign direct investment (FDI) flows dropped by more than 70% 
in  2009,  falling  to  1.4%  of  GDP.  There  were  considerable  outflows  of  FDI  in  the  financial 
sector. Manufacturing and trade accounted for more than 80% of FDI inflows. In the first half 
2010  net  FDI  actually  turned  negative.  Overall,  the  upgrading  of  physical  infrastructure 
continued, though at a slow pace. 

Sector and enterprise structure 

EN 

31 

   EN 

 
The planned restructuring and liquidation of socially-owned enterprises has made only slow 
progress. The entry of foreign investors has completed the privatisation and liberalisation of 
the oil derivatives market.  

Electricity  and  gas  utilities  continue  to  be  public  stock  companies.  Their  unbundling  and 
restructuring  has  not  been  completed  yet.  In  the  Federation,  the  country’s  biggest  power 
utility company merged with seven coal mines in 2009. It now needs to inject capital into the 
mines for their modernisation and restructuring. Market liberalisation remains insufficient as 
most utility providers still do not apply market prices.  Although the market  was  opened for 
non-household  consumers,  they  have  little  incentive  to  change  suppliers  as  regulated  tariffs 
remain below market prices.  

As  for  unbundling  of  the  electricity  networks,  progress  has  been  uneven  across  entities. 
Republika Srpska completed unbundling of generation from distribution and supply in 2008, 
but  has  not  yet  unbundled  the  latter  two  activities.  In  the  Federation  no  unbundling  has 
occurred so far.  

Progress towards a competitive telecommunications market has been limited. The incumbent 
operators  continue  to  act  as  de  facto  monopolies  in  their  respective  fixed-line  market 
segments and as oligopolists in the mobile segment. As a result, new entrants have not gained 
traction. Overall, little progress was achieved in the liberalisation of network industries. 

As a consequence of the economic crisis a small shift in the sectoral structure of the economy 
towards  services  could  be  discerned  in  2009,  in  particular  at  the  expense  of  industrial 
production.  Services  accounted  for  65%  of  gross  value  added  (up  from  63.7%  in  2008), 
industry  and  construction  for  26.2%  (27.5%)  and  agriculture  for  8.9%  (8.8%).  The 
contribution  of  public  administration,  education  and  health,  already  at  a  high  level,  further 
increased to 22%. The informal sector, fuelled by weaknesses in tax and expenditure policies, 
as  well  as  in  law  enforcement,  including  the  fight  against  corruption  and  organised  crime, 
remains large. It reduces the tax base and the efficiency of economic policies. Overall, there 
have  been  no  major  changes  in  the  structure  of  the  economy.  The  informal  sector  is  an 
important challenge. 

State influence on competitiveness 

The large public sector absorbs significant parts of the labour force and continues to act as a 
wage  setter.  However,  while  in  previous  years  high  wage  increases  hampered  the 
competitiveness  of  the  Bosnian  economy,  the  recent  reductions  in  public  sector  wages  can 
have a reverse effect. In 2009, direct budget subsidies to industry and agriculture increased to 
a consolidated 1.7% of GDP from 1.5% in 2008. In the first half of 2010, they increased by 
16.8% annually. Indirect subsidies continue to be sizeable. Bosnia and Herzegovina has still 
not  established  a  state  aid  authority  as  required  by  Article  36  of  the  Interim  Agreement. 
Overall, state influence on competitiveness remains high.  

Economic integration with the EU 

Bosnia and Herzegovina remains an open economy even though total trade (added volume of 
exports and imports) declined significantly in 2009, falling from around 94% of GDP in 2008 
to  approximately  76%,  mainly  due  to  the  steep  drop  in  imports.  In  2009,  the  real  effective 
exchange rate based on the country’s 20 largest trading partners depreciated marginally. The 
EU  continues  to  be  the  largest  trading  partner,  with  shares  of  54.5%  of  total  exports  and 

EN 

32 

   EN 

 
45.9%  of  total  imports  in  the  first  eight  months  of  2010  (goods  only).  While  the  share  of 
exports to the EU has increased slightly, the share of imports has decreased slightly. The other 
main  trading  partners  remain  the  countries  of  the  CEFTA  region,  accounting  for  33.9%  of 
exports  and  26.9%  of  imports.  The  share  of  net  FDI  inflows  from  the  EU  to  total  net  FDI 
inflows decreased to 24% in 2009 from 55% in 2008, mainly due to net FDI outflows in the 
financial sector caused by constraints in the home markets of some parent banks. Overall, the 
level of integration of trade with the EU remained fairly high. 

4. 

EUROPEAN STANDARDS 

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

4.1. 

Internal market 

4.1.1.  Free movement of goods 

There has been some progress in the area of free movement of goods. 

Some  progress  can  be  reported  in  the  field  of  standardisation.  The  Institute  for 
Standardisation of Bosnia and Herzegovina (BAS) adopted 2.053 European standards (ENs) 
as  national  standards,  bringing  the  total  to  11.279  ENs.  Altogether  there  are  50  technical 
committees. The BAS increased its human resources. It was certified in accordance with the 
EN  ISO  9001:2009  standard.  The  BAS  signed  agreements  on  professional  and  technical 
cooperation with the Turkish Standardisation Institute and the Croatian Standards Institute.  

There  has  been  little  progress  in  the  area  of  conformity  assessment.  Five  New  Approach 
Directives,  including  the  relevant  conformity  assessment  procedures,  have  been  transposed. 
However,  conformity  assessment  is  not  being  performed  on  all  locally  manufactured  or 
imported products before they are released onto the market. There is no coherent system for 
verifying product conformity. Appropriate designation procedures for conformity assessment 
bodies  remain  to  be  established.  Preparations  to  set  up  a  homologation  system  for  vehicles 
have been launched; nevertheless, the continuous ban on the import of used motor vehicles is 
contrary to the Interim Agreement and needs to be removed. 

Some progress can be reported in the field of accreditation. The Institute for Accreditation of 
Bosnia and Herzegovina (BATA) granted four further accreditations for testing laboratories, 
resulting in a total number of 39 accredited bodies. The BATA's application to sign bilateral 
agreements with the European co-operation for Accreditation (EA) for testing and calibration 
laboratories  and  inspection  bodies  was  accepted.  In  addition,  the  BATA  signed  bilateral 
cooperation  agreements  with  the  accreditation  bodies  of  Hungary  and  the  former  Yugoslav 
Republic  of  Macedonia.  However,  the  BATA  does  not  have  sufficient  staff  to  develop 
accreditation  schemes  in  areas  where  it  is  not  active.  The  further  conditions  for  future 
international  recognition  of  testing  and  calibration  results  and  certification  remain  to  be 
fulfilled.  

EN 

33 

   EN 

 
Some progress has been made in the area of metrology. The State-level Institute of Metrology 
was  granted  full  membership  of  the  European  Association  of  National  Metrology  Institutes 
(EURAMET).  The  Institute  signed  a  memorandum  of  understanding  with  the  International 
Association of Assay Offices and bilateral agreements with the national metrology institutes 
of Germany and Austria. Despite a staff increase the Institute needs further human resources 
to  fulfil  its  tasks.  It  was  certified  in  accordance  with  the  EN  ISO  9001:2008  standard. 
However,  legislation  needs  to  be  harmonised  with  the  acquis.  The  procurement  of  new 
equipment  to  upgrade  the  metrology  infrastructure  remains  to  be  finalised.  The  strategy  for 
the development of the metrology system remains to be adopted. There is still no cooperation 
and  coordination  between  the  State-level  Institute  of  Metrology  and  metrology  institutes  of 
the Entities which would help create harmonised competence criteria for laboratories dealing 
with verifications.  

Little progress has been made on market surveillance. A law on general product safety and a 
law  amending  the  law  on  market  surveillance  as  well  as  implementing  decisions  restricting 
the placing on the market of products containing the biocide dimethylfumarate were adopted. 
The  structure  of  the  market  surveillance  system  of  the  State-level  Market  Surveillance 
Agency  remained  unchanged;  the  number  of  staff  increased  but  remained  well  below  the 
required level. The Market Surveillance Agency became an authorised publisher of RAPEX 
notifications  in  the  official  languages  of  Bosnia  and  Herzegovina.  However,  the  framework 
legislation  is  not  yet  based  on  the  horizontal  acquis  for  harmonised  products.  Despite  the 
progress made, the market surveillance system remains largely based on mandatory standards 
and pre-market control. Coordination among the relevant bodies is inadequate. Further efforts 
need  to  be  made  regarding  institutional  and  administrative  capacities  to  ensure  efficient 
market surveillance. Additional measures are needed for further alignment with the acquis.  

Little  progress  has  been  made  regarding  the  New  and  the  Old  Approach  acquis.  New 
Approach  Directives  on  low  voltage  equipment,  electromagnetic  compatibility,  machinery, 
lifts  and  personal  protective  equipment  have  been  transposed.  However,  the  division  of 
responsibilities for transposing the Old Approach acquis remains to be further clarified to start 
approximation  of  legislation.  Line  ministries  and  institutions  involved  in  transposing  and 
implementing  directives  do  not  have  sufficient  capacity  to  perform  these  tasks.  A  suitable 
mechanism  is  needed  for  internal  consultation  before  the  adoption  of  new  technical 
regulations that have an impact on trade. 

There has been some progress in the area of consumer protection. The Ombudsman’s office 
was  sufficiently  strengthened  to  fulfil  the  duties  laid  down  by  the  consumer  protection  law. 
The efficiency and the output of the office increased. In 2009 the Ombudsman handled 241 
cases, of which 229 were resolved, compared with 147 and 138 respectively in 2008. In 2009, 
the  Ombudsman  delivered  34  expert  opinions,  provided  620  items  of  legal  advice  and 
answered 1,764 requests for information. The Consumer Protection Council adopted the 2010 
State-level  annual  consumer  protection  programme.  However,  the  ministry  allocated  no 
budget for the implementation of the programme.  

Overall,  preparations  in  the  fields  of  standardisation,  accreditation,  conformity  assessment, 
metrology,  market  surveillance  and  consumer  protection  are  moderately  advanced.  The 
creation  of  favourable  conditions  for  the  internal  market  and  foreign  trade,  further 
strengthening  of  institutional  and  administrative  capacity  as  well  as  closer  cooperation  and 
coordination  among  the  relevant  ministries  and  institutions  are  essential.  Further  efforts 
remain  to  be  undertaken  to  achieve  a  fully  functional,  single  economic  space,  which  is  a 
European Partnership priority. 

EN 

34 

   EN 

 
4.1.2.  Movement of persons, services and right of establishment 

No progress has been made in the area of movement of persons. The fragmented nature of 
internal  labour  legislation  and  social  security  systems,  which  differ  between  the  Entities  as 
well  as  among  cantons,  continues  to  hamper  the  movement  of  workers  within  the  country. 
Alignment with European standards remains at an early stage. 

No progress has been made in reforming the coordination of social security systems between 
the Entities and among cantons.  

Little progress was achieved in the provision of services. Preparations have not yet started for 
transposing  the  Services  Directive.  In  terms  of  cross-border  services,  there  is  no  distinction 
between  the  treatment  of  EU  operators  providing  cross-border  services  and  those  providing 
services through a permanent establishment in the country.  

Little  progress  can  be  reported  in  the  area  of  financial  services.  The  State-level  Law  on 
deposit  insurance  was  amended  to  increase  further  the  amount  of  guaranteed  deposits.  This 
law  remains  to  be  transposed  at  Entity-level.  The  Entities  proceeded  separately  and  at  a 
different  pace  with  the  adoption  of  the  Basel  II  capital  measurement  rules  and  capital 
standards. The Federation of Bosnia and Herzegovina Banking Agency adopted implementing 
legislation  on  market  risk.  Republika  Srpska  adopted  decisions  on  operational  and  market 
risk.  Temporary  measures  on  loan  repayments  were  adopted  by  the  Entities’  banking 
supervisory  agencies  to  address  the  increase  in  non-performing  loans  resulting  from  the 
economic  crisis.  To  improve  coordination  of  banking  supervision,  the  Central  Bank  and 
Entity  supervisors  established  a  standing  committee  for  financial  stability.  However,  no 
further steps were taken to transpose the acquis or to establish a single State-level agency for 
banking  supervision.  Memorandums  of  understanding  with  supervisors  of  foreign  banks 
present in the country were not signed.  

There  has  been  little  progress  towards  creating  a  single  economic  space  for  insurance 
services.  An  insurance  company  registered  in  one  Entity  can  operate  in  the  other  only  if  it 
establishes  a  branch  there.  There  are  currently  26  insurance  companies  operating  in  Bosnia 
and Herzegovina. Of the 15 insurance companies registered in the Federation, 9 have branch 
offices  in  Republika  Srpska  and  5  of  the  11  insurance  companies  registered  in  Republika 
Srpska have branches in the Federation.  

The  Federation  amended  the  law  on  intermediation  in  private  insurance  and  the  transitional 
provisions  of  the  law  on  insurance  companies  in  private  insurance.  The  Republika  Srpska 
amended  the  legislation  on  intermediation  in  insurance  and  on  insurance  companies.  The 
legislation is partially harmonised with the acquis and between the entities. Various pieces of 
implementing legislation in the field of insurance have been adopted. The Republika Srpska 
Insurance Ombudsman’s office is functional. In the Federation, the insurance agency is acting 
as  Insurance  Ombudsman  as  stipulated  by  the  consumer  protection  law.  However,  no 
insurance ombudsman’s office is envisaged at the State-level.  

In  coordination  with  Entity  insurance  agencies  and  with  international  support,  the  State 
Insurance  Agency  completed  an  insurance  supervision  self-assessment  for  the  sector.  The 
management board of the Agency adopted a decision regulating the submission of statistical 
data  by  the  Entity  insurance  supervision  agencies.  Implementation  of  the  decision  will 
facilitate compilation of insurance statistics at the State-level. Nonetheless, the Agency’s role 
remains  limited  as  the  responsibility  for  licensing  and  supervision  lies  with  the  Entity 

EN 

35 

   EN 

 
agencies. Supervisory enforcement improved moderately, resulting in one insurance company 
in  the  Federation  being  placed  under  temporary  administration.  The  agencies  in  the  Entities 
increased  their  on-site  inspections  and  recommendations,  and  pressed  a  number  of  charges 
against insurance operators. In Republika Srpska the licence of one company was revoked.  

Little progress can be reported in the field of leasing services, which are regulated at Entity-
level.  The  two  Entity  laws  have  been  harmonised.  However,  divergences  remain  in  the 
implementing legislations. A leasing operator registered in one Entity is required to establish 
a branch in the other to provide services. Differences in regulations impose additional costs on 
operators.  

There  has  been  little  progress  in  the  area  of  capital  markets.  Republika  Srpska  amended  its 
legislation  on  acquisition  of  shareholding  companies,  and  both  entities  have  adopted  some 
implementing legislation. Regulatory authority and oversight remain fragmented between the 
Entity-level securities commissions. A harmonised approach throughout the country towards 
developing  the  sector  is  needed.  Institutional  arrangements  for  coordination  of  policies  and 
regulations between the Entities remain to be established.  

Little progress can be reported in the field of postal services. Current provisions provide for 
an  unclear  definition  of  the  de  jure  monopoly  and,  among  others,  include  express  services 
within the scope of the statutory monopoly. In Republika Srpska a new law on postal services 
was  adopted.  It  reserves  a  significant  share  of  postal  services  for  the  universal  service 
provider, whilst otherwise following the main principles of the postal acquis. Several licences 
for courier services were issued in both Entities. However, Entity-level licensing remains an 
additional  and  unnecessary  administrative  burden  for  postal  service  providers  and  runs 
counter to the goal of a single economic space. Effective monitoring mechanisms need to be 
put in place. The issue of the scope of the reserved areas remains to be solved, as under the 
current  legislation  it  is  not  always  clear  what  services  may  be  reserved  under  the  statutory 
monopoly. 

No  progress  has  been  made  in  the  area  of  the  right  of  establishment.  Administrative 
procedures for  licensing and obtaining permits for both foreign and domestic companies, as 
well  as  the  self-employed,  need  to  be  streamlined.  The  absence  of  a  single  company 
registration  system  for  the  entire  country  continues  to  hamper  business  activity.  Bosnia  and 
Herzegovina made no progress towards recognition of EU professional qualifications.  

Little progress has been made in the area of company law. Amendments to Entity company 
laws  were  adopted  to  improve  inspection  and  permit  processes.  However,  coordination  is 
lacking.  Bosnia  and  Herzegovina  needs  to  implement  systematic  company  registration 
procedures.  Some  procedures  have  been  harmonised,  but  there  is  no  system  of  data  sharing 
among different company registers. The legislation on accounting and auditing remains to be 
further harmonised with the acquis.  

Overall, preparations in the area of movement of persons, services and right of establishment 
are at an early stage. Little progress was made in simplifying the business environment and 
ensuring a harmonised framework across the country in the area of company law, accounting 
and  auditing.  More  efforts  remain  to  be  undertaken  to  establish  the  legal  framework  for 
providing  universal  postal  services  across  the  whole  country.  Further  simplification  of 
company registration and court procedures would attract new investments. Few efforts have 
been made towards ensuring a single economic space, a European Partnership priority. 

EN 

36 

   EN 

 
4.1.3.  Free movement of capital 

There has been some progress in the area of free movement of capital.  

Bosnia  and  Herzegovina  continues  to  apply  relatively  liberal  rules  on  inward  capital  flows. 
Restrictions  remain  on  outward  transfers  by  residents.  Residents  may  hold  accounts  abroad, 
but  the  amounts  that  may  be  transferred  are  limited.  The  Federation  adopted  a  new  law  on 
foreign  currency  operations.  The  Republika  Srpska  amended  its  existing  law.  However,  in 
both  Entities  the  new  legislation  limits  the  amount  that  non-residents  may  transfer. 
Throughout the country, coordination in designing and implementing legal reform in this area 
is  lacking  and  the  legal  framework  is  not  harmonised.  Capital  markets  in  Bosnia  and 
Herzegovina are not fully functional.  

The  State-level  Law  on  foreign  investment  policy  was  amended.  The  procedures  for 
registration  of  foreign  direct  investment  were  streamlined;  companies  are  now  required  to 
register only with district courts. However, restrictions on foreign direct investment continue 
to apply in the media sector, where a 49% limitation on foreign capital exists. Privatisation of 
state enterprises continues to be slow. Overall levels of foreign investment have decreased.  

Within  the  Central  Bank,  Bosnia  and  Herzegovina  has  a  modern  payment  system  for  giro 
clearing and real-time gross settlement operations. In 2009 giro clearing and real-time gross 
settlement operations represented 31% of the number of transactions and 42% of the value of 
internal traffic in  the country.  Within the commercial bank system they represented 69% of 
the number of transactions and 58% of the value of transactions between clients with accounts 
in the same bank.  

Overall,  preparations  in  the  area  of  free  movement  of  capital  are  moderately  advanced. 
Further  legislative  initiatives  are  required  in  order  to  align  the  legal  framework  with  the 
acquis and to ensure country-wide harmonisation and the creation of single economic space. 

4.1.4.  Customs and taxation 

Progress  has  been  limited  in  the  field  of  customs.  The  customs  tariff  was  fully  harmonised 
with the EU Combined Nomenclature 2010, which Bosnia and Herzegovina applies. Rules on 
origin are used in accordance with the Interim Agreement, and operational instructions have 
been  prepared.  However,  the  customs  law  has  yet  to  be  revised  regarding  issues  such  as 
paperless environment, security and trade facilitation.  

The  regime  on  free  zones  remains  to  be  aligned  with  the  acquis,  since  it  provides  for  an 
exemption from duties on equipment intended for production activities in the free zones.  

The  TIR  procedure  is  fully  operational,  and  Bosnia  and  Herzegovina  has  acceded  to  the 
Istanbul Convention on temporary admission of goods. However, the use of the ATA carnet is 
not  yet  implemented.  Laws  on  intellectual  property  rights  (IPR)  have  been  adopted  and  the 
first results are visible. A law to clarify the role of the customs services in implementing and 
enforcing IPR remains to be agreed.  

The  capacity  of  the  customs  authority  to  apply  simplified  procedures  for  export  and  import 
has improved. However, the number of traders applying for authorisation is relatively small. 
Customs  controls  remain  too  frequent  and  not  well  targeted  owing  to  the  lack  of  a  risk 
analysis system. Enforcement of intellectual property rights remains weak. 

EN 

37 

   EN 

 
Some  progress  can  be  reported  in  the  area  of  taxation.  Double  taxation  agreements  were 
signed with Ireland, Spain and the Czech Republic. Direct taxation remains in the exclusive 
jurisdiction of the Entities and Brčko District. The direct taxation systems of the Entities were 
partly  harmonised.  The  Federation's  law  on  income  tax  and  implementing  legislation  were 
amended. However, discrepancies with regard to double taxation persist between tax laws of 
the  Entities  on  the  one  hand  and  the  Brčko  District  on  the  other.  A  permanent  formula  for 
allocation of indirect tax revenue among the State, Entities and the Brčko District remains to 
be agreed. Further alignment with EU VAT rules needs to be ensured. In the area of business 
taxation, some measures do not comply with the Code of Conduct.  

As  regards  administrative  and  operational  capacity,  the  ITA’s  organisational  structure 
needs  strengthening  to  address  present  and  future  challenges.  Some  progress  was  made  on 
enforcing  legislation,  but  further  steps  are  essential.  A  substantial  number  of  junior 
professionals  have  been  recruited.  However,  the  appointment  of  a  director-general  remains 
pending and a formal staffing plan is not in place. 

The 2010 investment plan provides for improvement of office premises and investment in the 
maintenance of technical equipment. The ITA adopted business and IT strategies in the past 
but  these  are  outdated  and  do  not  reflect  EU  standards.  Furthermore,  implementation  of 
strategies  continues  to  be  delayed  owing  to  a  lack  of  resources.  A  training  unit  was 
established, but the training facility needs to be set up, and a training strategy to be developed. 
Advanced training on risk analysis and IPR enforcement as well as training for the customs 
laboratory remains to be delivered. 

Cooperation  and  coordination  within  the  ITA  and  with  other  authorities  remain  weak.  The 
ITA  is  not  sharing  data  with  the  Agency  for  Statistics  of  Bosnia  and  Herzegovina.  The 
effectiveness of border crossing checks needs to be improved. The functionalities of customs 
laboratories  remain  limited.  The  IT  system  cannot  cope  with  the  necessary  changes  in 
customs and tax administration, such as simplification, risk analysis, integrated enforcement, 
local clearance, the guarantee procedure and e-government.  

Overall, preparations in the areas of customs and taxation are not very advanced. Substantial 
efforts are required to further align customs legislation with the acquis and to ensure effective 
implementation  of  legislation  and  the  Interim  Agreement.  Positive  developments  are  the 
improved  knowledge  and  use  of  the  use  of  rules  of  origin,  the  implementation  of  the  TIR 
Convention  and  the  accession  to  the  ATA  Convention.  However,  the  regime  on  free  zones 
needs to be aligned with the acquis. The effectiveness of customs controls has to be improved. 
Further  efforts  will  be  needed  to  enforce  the  recently  enacted  IPR  legislation.  Further 
harmonisation regarding the VAT legislation is essential. The ITA’s administrative capacity 
needs  to  be  reinforced.  Improved  communication  and  cooperation  is  essential,  particularly 
between the ITA and the Agency for Statistics of Bosnia and Herzegovina.  

4.1.5.  Competition 

Some  progress  can  be  reported  in  the  field  of  anti-trust.  The  six-year  mandate  of  the 
Competition  Council  members  expired  on  1  July  2010.  The  Council  of  Ministers  has 
appointed  three  new  members,  the  Federation  two  and  the  Republika  Srpska  one.  The  new 
Council is operational. 

There  has  been  some  progress  regarding  the  enforcement  of  competition  rules.  The 
Competition  Council’s  activities  continued  to  focus  on  mergers  and  abuse  of  dominant 

EN 

38 

   EN 

 
positions.  The  Competition  Council  initiated  12  procedures  and  issued  20  decisions.  It 
collected  approximately  € 100,000  in  fines  from  economic  operators  that  breached  the 
competition  law.  However,  the  administrative  capacity  of  the  Competition  Council  remains 
insufficient. 

No progress  can  be reported on  state aid. The state aid legal framework needs to be put in 
place.  Legislative  alignment  remains  to  be  started.  A  State-level,  operationally  independent 
authority for the control of state aid in line with the Interim Agreement was not established by 
1 July 2010. Transparency of all aid granted in Bosnia and Herzegovina is not ensured.  

Overall,  preparations  in  the  areas  of  anti-trust  and  mergers  are  moderately  advanced. 
Substantial further efforts are needed to remedy the absence of state aid control.  

4.1.6.  Public procurement 

Limited progress has been made in the area of public procurement. The legal framework for 
fighting corruption in public procurement has improved with the enactment of anti-corruption 
legislation.  However,  its  implementation  awaits  the  establishment  of  the  anti-corruption 
agency.  The  Public  Procurement  Agency  prepared  a  Strategy  for  development  of  the  public 
procurement system in Bosnia and Herzegovina, covering the period 2010-2015. The overall 
legislative alignment needs to advance. Many provisions of the new EU Directives remain to 
be  transposed;  simplified  procedures  for  low-value  procurement  have  not  been  introduced. 
Contract  notices  are  not  systematically  published  in  electronic  form  on  the  website  of  the 
Public Procurement Agency (PPA).  

The  system  for  awarding  concessions  is  fragmented  because  of  the  different  legislation  at 
State,  Entity,  cantonal  and  Brčko  District  levels.  Most  concessions  and  public-private 
partnership  contracts  continue  to  be  awarded  through  the  ‘unsolicited  proposals’  procedure 
without  a  transparent  and  competitive  process.  An  independent  review  of  the  concessions 
award  procedure  does  not  exist.  The  Brčko  District  enacted  a  law  on  public-private 
partnerships without coordinating with other levels, which resulted in further fragmentation of 
the procurement framework. Overlapping competences, high administrative costs and the lack 
of formal cooperation between commissions needs to be tackled.  

Domestic preferential treatment remains in force until 2015, except for the electricity sector.  

The PPA now employs 21 people, 10 short of the 31 posts to be filled by 2012. Its move to 
larger premises allows for further staff increases.  

The  Public  Procurement  Review  Body  (PRB)  adopted  a  rulebook  on  internal  organisation 
which  provides  for  a  staff  increase.  The  PRB  operates  efficiently  and  was  able  to  address 
most of the complaints it received. No specific measures have been undertaken to enhance the 
transparency  of  remedial  decisions.  The  PRB’s  decisions  are  not  published,  despite  a  legal 
requirement to do so. This makes it impossible to assess their quality. 

Monitoring  of  public  procurement  procedures  across  the  country  improved.  However,  the 
capacity of the contracting authorities to apply the law is not sufficient. The weak support of 
the central public procurement institutions for contracting authorities and economic operators 
hampers the effective implementation of legislation. The provisions concerning public-private 
partnerships,  as  well  as  services  and  works  concessions  at  all  levels,  do  not  guarantee 
competitive and transparent procedures in line with the acquis. 

EN 

39 

   EN 

 
There has been no progress regarding the building of a single economic space in the field of 
public procurement. As regards concessions and public-private partnership contracts, different 
provisions apply to companies based in the Entity other than that of the contracting authority. 
This does not make for equal treatment in tender procedures. 

Overall,  preparations  in  the  field  of  public  procurement  remain  at  an  early  stage.  The  new 
public  procurement  law  taking  into  account  the  new  acquis  remains  to  be  adopted.  The 
coordination  mechanisms  and  administrative  capacities  of  the  main  stakeholders  need 
strengthening  to  improve  the  coherence  of  public  procurement  policy  and  to  reduce 
corruption.  

4.1.7. 

Intellectual property law 

Some progress has been made in the area of intellectual, industrial and commercial property 
rights (IPR).  

Bosnia  and  Herzegovina  ratified  the  Agreement  concerning  the  International  Patent 
Classification,  the  World  Intellectual  Property  Organisation  (WIPO)  Copyright  Treaty  and 
the WIPO Performances and Phonograms Treaty.  

State-level  laws  were  adopted  on  patents,  trademarks,  topographies  of  integrated  circuits, 
geographical  indications,  industrial  design,  copyright  and  related  rights,  and  collective 
management of copyright. The legislation has been further approximated with the Agreement 
on  Trade  Related  Aspects  of  Intellectual  Property  Rights  and  the  acquis.  However,  Bosnia 
and Herzegovina needs to align its IPR-related policies and laws in the audiovisual field. 

The level of staffing of the Institute for Intellectual Property increased. Further measures were 
taken to improve the institute’s functioning and to disseminate information about intellectual 
property.  However,  another  20  posts  remain  to  be  filled,  and  the  administrative  and 
operational capacity of the institute is not sufficient to perform its tasks. 

As  regards  industrial  property  rights,  the  number  of  patent  applications  increased.  The 
Institute  for  Intellectual  Property  received  654  patent  applications  and  186  applications  for 
extending  a  European  patent  to  Bosnia  and  Herzegovina;  it  processed  280  applications, 
including some from previous years. The average time taken to process a patent application 
was reduced from five to two years, and trademark applications from four to two and a half 
years. However, no applications for protection  of geographical indications and topographies 
of integrated circuits have been filed. 

The  regulatory  framework  for  the  collective  management  organisations  is  inadequate. 
Awareness-raising is lacking among rights holders and users of protected subject matter.  

Enforcement  remains  to  be  improved.  The  Indirect  Taxation  Authority  referred  files  to  the 
Prosecutor’s Office and seized counterfeit goods valued at approximately €622,500. However, 
high levels of counterfeiting and piracy persist. The country remains a point of distribution to 
the rest of Europe. No significant awareness-raising activities took place. The action plan for 
capacity building remains to be prepared. Coordination among enforcement bodies at various 
levels remains inadequate.  

Overall, preparations in the area of intellectual, industrial and commercial property rights are 
advanced.  Progress  was  made  in  adopting  IPR-related  laws.  Further  efforts  are  required  to 
strengthen  the  administrative  and  enforcement  capacity  of  the  Institute  for  Intellectual 

EN 

40 

   EN 

 
Property. Cooperation among law enforcement bodies and among relevant stakeholders needs 
further strengthening. 

4.1.8.  Employment and social policies, public health policy 

Some  progress  has  been  made  in  alignment  with  European  standards  in  the  area  of 
employment  policy.  The  adoption  of  the  State-level  employment  strategy  2010-2014  is  a 
significant  step.  However,  at  Entity-level,  major  policy  documents  are  awaiting  final 
adoption. In Republika Srpska and the Brčko District employment strategies are not in place. 
In the Federation, the action plan for the implementation of the employment strategy remains 
to be finalised.  

Unemployment remains very high; nearly half of the younger age group is unemployed. The 
labour  market  participation  of  women  is  low.  Moreover,  the  lack  of  reliable  labour  market 
data  remains  a  serious  obstacle  to  developing  labour  market  policy.  (See  Chapter  3.1  — 
Macroeconomic stability). 

Republika  Srpska  adopted  a  law  on  mediation  in  employment  and  entitlements  during 
unemployment.  In  the  Federation,  a  similar  law  aimed  at  streamlining  cantonal  and  Entity-
level employment services is not in place. 

Most  resources  allocated  to  assisting  the  unemployed  are  spent  on  passive  labour  market 
measures. However, effective active labour market programmes are needed to help the long-
term unemployed and curb long-term unemployment.  

The large number of labour and employment institutions at State, Entity and canton levels and 
the  lack  of  coordination  among  them  remain  a  matter  of  concern.  Unified  standards  and 
methodologies  for  data  collection  are  lacking.  Institutions  at  different  levels  are  unequally 
equipped to offer effective services. The capacity of employment services across the country 
is a matter of particular concern. The registration system for the public employment services 
remains to be reviewed to achieve a greater focus on providing support and services to job-
seekers. 

Links between employment and education policy are weak. The State-level Law on vocational 
education  and  training  is  not  being  fully  implemented.  Neither  the  Entities  nor  the  Brčko 
District have a life-long learning concept. Measures to develop skills, in particular for women, 
remain to be developed.  

No progress can be reported in the area of social policies. Republika Srpska adopted a law on 
peaceful resolution of labour disputes. The Republika Srpska Agency for Mediation became 
operational. However, no steps were taken to harmonise the labour laws of the Entities and 
Brčko  District  with  the  acquis.  A  labour  law  at  the  State-level  remains  to  be  adopted. 
Provisions  regulating  labour  matters  at  cantonal-level  are  not  aligned  with  the  acquis  and 
make for further fragmentation in the Federation.  

There  was  little  progress  in  the  area  of  health  and  safety  at  work.  The  cantons  agreed  to 
transfer responsibility for this area to the Entity-level. Republika Srpska adopted amendments 
to  the  Law  on  Safety  at  Work  and  implementing  legislation  to  reinforce  the  capacity  for 
monitoring  health  and  safety  at  work.  The  Brčko  District  adopted  similar  legislation. 
However, the Federation needs to adopt a law on safety at work. The State-level Ministry for 
Civil Affairs needs to complete the analysis of compliance with the ILO Conventions and the 

EN 

41 

   EN 

 
acquis. Labour inspectorates are understaffed and unable to monitor fully the implementation 
of health and safety at work standards. Reliable data on accidents at work are not available. 
There is a particular problem in the Federation, where records are held at cantonal level. 

There has been no progress in the area of social dialogue. Republika Srpska adopted a new 
general  collective  agreement.  Basic  steps  were  taken  to  establish  a  country-wide  Economic 
and Social Council. However, no agreement has been reached on the membership criteria for 
the social partners. The non-recognition of trade unions at State-level remains an outstanding 
issue. The legal framework is not in place and the rules for the recognition and registration of 
social partners need to be clarified. The Law on social partners’ representativeness remains to 
be adopted. (See Chapter 2.2 – Human rights and the protection of minorities) In general, the 
complex system of government and the fragmentation of legislation continue to hamper social 
dialogue across the country. 

Little progress can be reported in the area of social inclusion and anti-discrimination. The UN 
Convention on the Rights of Disabled Persons was ratified. The Federation adopted a law on 
the  professional  rehabilitation,  training  and  employment  of  disabled  people.  However,  no 
steps  were  taken  to  remedy  the  shortcomings  of  the  anti-discrimination  law,  not  least  the 
absence  of  age  and  disability  and  the  broad  scope  of  exceptions.  The  State-level  social 
inclusion strategy remains to be adopted.  

There has been some progress in the area of social protection. The economic crisis increased 
the risks faced by vulnerable groups and public expenditure levels on social protection were 
kept  high.  Both  Entities  adopted  framework  legislation  to  reform  their  social  protection 
systems  by  moving  towards  a  needs-based  approach.  Means-testing  for  social  benefits, 
including  veterans’  benefits,  was  introduced.  However,  Republika  Srpska  needs  to  put  in 
place implementing legislation on means-testing as of 2011, and in the Federation, objections 
from veterans prompted the government to dilute the corresponding implementing legislation. 
Social  assistance  and  entitlement  still  varies  considerably  across  the  country.  Some 
groups continue to have privileged access to several social protection and assistance schemes 
based  on  their  status,  thus  going  against  the  needs  based  approach.  The  pension  systems 
remain fragmented (See Chapter 2.2 – Human rights and the protection of minorities).  

Little  progress  can  be  reported  in  the  field  of  public  health.  The  Entities  finalised  their 
strategies  for  healthcare  reform.  They  served  as  a  basis  for  the  State-level  strategy  for 
healthcare reform, which was rejected by the Republika Srpska Ministry for Health and Social 
Welfare,  on  the  ground  that  health  care  is  an  Entity  responsibility..  The  Federation  adopted 
laws  on  blood  and  blood  components,  organ  transplantation  and  tissues  for  the  purpose  of 
medical  treatment.  The  Federation  adopted  the  Law  on  health  protection,  the  Law  on  the 
rights,  duties  and  responsibilities  of  patients  and  the  Law  on  pharmaceutical  activities. 
Republika Srpska enacted laws on transplantation of human organs, transplantation of human 
tissues  and  cells,  protection  against  contagious  diseases  and  health  care  as  well  as 
implementing 
transfusion  medicine.  Republika  Srpska  also  adopted 
amendments to laws on the use and advertising of tobacco products. However, there is no plan 
to align laws with the acquis at the State-level.  

legislation  on 

The  conference  of  health  ministers  meets  regularly.  The  health  ministers  adopted  the  2008 
roadmap for EU integration of the sector. Harmonisation of reform activities between Entities 
needs to be improved and the coordinating role of the Ministry for Civil Affairs remains to be 
strengthened. The institutional and legislative framework remains fragmented. No steps were 

EN 

42 

   EN 

 
taken to address problems of inadequate coverage of health insurance and non-transferability 
of health funds. Little was done to improve the quality of healthcare services.  

The  Agency  for  Medicines  and  Medical  Devices  is  only  partly  functional.  The  institutional 
capacity  to  produce  reliable  statistical  data  on  health  is  insufficient.  Data  need  to  be 
harmonised with European standards.  

Implementation  of  International Health Regulations  (IHR)  is  slow.  Country  mechanisms  for 
reporting and exchanging information on communicable diseases remain to be developed. An 
action  plan  for  meeting  core  capacity  requirements  in  the  event  of  outbreaks  of  diseases 
remains to be adopted. 

There has been some progress in the area of mental health. The South-Eastern Europe Health 
Network  accepted  the  application  of  the  Ministry  for  Civil  Affairs  to  establish  the  regional 
centre  for  cooperation  and  development  in  the  area  of  mental  health  for  South-Eastern 
Europe. The regional centre is operational. Both Entities adopted mental health strategies and 
new  mental  health  centres  were  opened.  However,  establishment  of  community-based 
services, provision of aid to dependent persons and mental health care for children and young 
people need further attention.  

Overall, the country's preparations regarding social policies and employment policy remain at 
an  early  stage.  Sustained  efforts  are  essential  to  establish  a  country-wide  social  dialogue, 
which  is  a  European  Partnership  priority.  The  fragmentation  of  legislative  and  institutional 
frameworks hampers progress in developing public health policy.  

4.1.9.  Education and research 

Some progress has been made in the field of education. The number of divided schools was 
reduced, but the separation of children within schools along ethnic lines and the existence of 
mono-ethnic  schools  remain  issues  of  concern.  (See  Chapter  2.2  —  Economic  and  social 
rights).  Coordination  mechanisms  at  the  State-level  became  more  effective.  A  nine-year 
curriculum is being implemented in most schools country-wide. The Agency for Development 
of  Higher  Education  and  Quality  Assurance  is  an  associate  member  of  the  European 
Association  for  Quality  Assurance  in  Higher  Education.  Some  provisions  of  the  higher 
education qualifications framework are being implemented. An initial national qualifications 
framework  for  life-long  learning  was  completed.  A  department  of  statistics  and  informatics 
was  established  within  the  Ministry  for  Civil  Affairs,  with  the  task  of  contributing  to 
statistical reporting on education in line with Eurostat standards.  

In  the  Federation,  harmonisation  of  cantonal  laws  with  the  framework  laws  has  advanced. 
Some  cantons  adopted  laws  on  pre-school  education  and  vocational  education.  Eight  out  of 
ten  cantons  adopted  a  higher  education  law.  The  Republika  Srpska  adopted  a  law  on  adult 
education  and  a  law  on  higher  education  institutions,  which  is  not  fully  in  line  with  the 
framework law and provides for Entity agencies to be set up in parallel with State institutions.  

However, pre-school attendance is very low. State-level agencies (Centre for Information and 
Recognition  of  Documents  in  the  Field  of  Higher  Education,  Agency  for  Development  of 
Higher Education and Quality Assurance and Agency for Pre-school, Primary and Secondary 
Education) are not entirely functional. The State-level strategies and framework laws are not 
fully  implemented.  In  the  Federation,  harmonising  laws  with  the  State-level  framework 
legislation is advancing slowly. There are no State-level laws on recognition of qualifications 

EN 

43 

   EN 

 
and adult education. Almost all cantons insist on the exact equivalence of diplomas which has 
led  to  the  non-recognition  of  many  qualifications  obtained  abroad.  The  issue  of  education 
meeting the needs of the labour market remains to be addressed.  

There  has  been  some  progress  towards  alignment  with  European  standards  in  the  area  of 
culture.  The  establishment  of  a  cultural  contact  point  promoting  the  Culture  programme 
throughout  the  country  was  a  significant  step  towards  participation  in  the  programme. 
Negotiations  on  the  Memorandum  of  Understanding  regarding  the  country's  participation  in 
the  programme  as  of  2011  were  completed.  Republika  Srpska  adopted  its  cultural 
development  strategy  which  was  based  on  the  State-level  strategy  on  cultural  policy. 
However, there is no law on cultural heritage. The Federation reduced its allocation. 

Further  progress  has  been  made  in  the  area  of research.  The  number  of  successful  projects 
under  the  7th  Research  Framework  programme  (FP7)  has  increased  and  the  administrative 
capacity  was  strengthened.  A  country-wide  network  of  national  contact  points  to  provide 
information  on  research  cooperation  in  FP7  and  other  research  programmes  (Cost,  Eureka) 
has  been  established  and  nominations  in  the  FP7  Committees  made.  Further  actions  are 
essential,  particularly  regarding  the  involvement  of  the  private  sector  and  SMEs  and  the 
mobility of scientists. The Framework Law on scientific and research activities was adopted, 
improving coordination of Entity-level research actions with the State-level research strategy. 
A  science  and  development  strategy  for  2010-2015  and  an  action  plan  were  adopted.  The 
Science  Council  was  appointed  to  assist  the  Ministry  for  Civil  Affairs  in  the  strategic 
development of science, research and innovation policy. 

However,  investment  in  research  is  very  limited.  Statistics  on  research  and  development 
activities are lacking. No data exist on business, foreign and private non-profit funding. The 
Entities  and  cantons  fund  their  specific  policies  through  their  own  budgets.  This  makes  it 
difficult  to  streamline  research  policies  and  avoid  fragmentation,  one  of  the  key  European 
Research Area (ERA) objectives.  

Overall, alignment with European standards in the areas of education and culture is advanced. 
The main challenges are divided schools, the full implementation of strategies and framework 
laws, and the adoption of the initial national qualifications framework. In addition, State-level 
agencies for education and quality assurance structures need further strengthening. In the area 
of research and development, preparations for future integration into the ERA are on track but 
closely monitoring and follow-up is very important.  

4.1.10.  WTO issues 

Some  progress  has  been  made  in  the  accession  negotiations  with  the  World  Trade 
Organisation  (WTO).  The  WTO  working  party  met  for  a  seventh  time.  Bosnia  and 
Herzegovina  has  brought  more  legislation  into  line  with  WTO  requirements.  The  country 
proceeded in its bilateral negotiations, in particular on market access for goods and services, 
and in multilateral negotiations on domestic support to agriculture and export subsidies.  

4.2. 

Sectoral Policies 

4.2.1. 

Industry and SMEs 

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

EN 

44 

   EN 

 
There has been some progress in the area of industrial policy. The strategies for development 
and  for  social  inclusion  include  industrial  policy  elements.  However,  a  country-wide 
industrial  strategy  remains  to  be  developed.  The  Entities  prepared  industrial  policies  and 
action  plans.  The  industrial  policy  framework  remains  inconsistent.  Cooperation  and 
harmonisation of measures to boost competitiveness and restructuring of the major industrial 
sectors  remain  insufficient.  Harmonised  statistics  are  needed  for  effective  industrial  policy 
planning.  

Little progress has been made in the area of SMEs. Bosnia and Herzegovina is participating 
in  the  European  Enterprise  Network.  The  European  Charter  for  Small  Enterprises  is  being 
implemented slowly and unevenly and preparations for implementing the Small Business Act 
are  at  an  early  stage.  The  State-level  SME  development  strategy  needs  to  be  implemented. 
The  law  on  promotion  of  SMEs  and  entrepreneurship,  which  was  needed  to  implement  the 
SME development strategy, remains to be adopted.  

The  Entities  took  some  initiatives  to  support  SMEs.  However,  SMEs  continue  to  operate 
under different conditions across the country.  

A single registration system for the whole country which would simplify conducting business 
in  both  Entities  remains  to  be  established.  Inter-Entity  investment  flows  are  small.  The  e-
government  strategy  to  provide  on-line  public  services  to  businesses  remains  to  be  fully 
implemented and a systematic approach to business education is lacking.  

An  export  promotion  strategy  does  not  exist  and  the  institutional  framework  remains  weak. 
The  Export  Promotion  Agency  is  operational  but  the  related  department  in  the  Ministry  of 
Foreign Trade and Economic Relations and the Export Council are not. 

Overall, preparations in the area of industry and SMEs remain at an early stage. Bosnia and 
Herzegovina has to develop a comprehensive industrial strategy and to implement the State-
level strategy for SMEs. Further improvements in the business environment are essential for 
the expansion of business and trade.  

4.2.2.  Agriculture and fisheries 

There  has  been  little  progress  in  alignment  with  European  standards  in  the  field  of 
agriculture and rural development.  

A State-level strategic plan and operational programme for harmonisation of agriculture, food 
and rural development are in place. However, implementation has not started. The Republika 
Srpska rural development strategy and action plan and the Federation operational programme 
for harmonisation of agriculture, food and rural development need to be harmonised with the 
State-level framework.  

Some  legislation  implementing  the  Framework  Law  on  agriculture,  food  and  rural 
development and the law on tobacco were adopted. However, the law on wine remains to be 
adopted.  An  overall  lack  of  implementing  legislation  impedes  coordination  of  harmonised 
strategies and legislation in this area throughout the country.  

There has been no progress towards establishing a State-level Ministry of Agriculture, Food 
and  Rural  Development.  The  Ministry  of  Foreign  Trade  and  Economic  Relations  appointed 
working  groups  on  the  payment  agency  and  managing  authority  for  IPA  rural  development 
structures.  The  Entities  increased  their  staffing  and  continued  to  build  up  paying  agencies, 

EN 

45 

   EN 

 
particularly Republika Srpska. The Council of Ministers adopted a decision on the location of 
the Office for Payment Harmonisation and allocated budget for additional staff. However, the 
office is not operational. Coordination of rural development policy is weak. At the State-level 
the sector for agriculture, food, forestry and rural development did not increase staffing.  

The  Advisory  Council  for  agriculture,  food  and  rural  development  is  operational.  However, 
inter-sectoral  coordination  and  participation  by  the  non-governmental  sector  remain  weak. 
The Entities did not increase their overall support for agriculture and rural development, but a 
larger proportion of this support was allocated to rural development measures. The lack of an 
efficient  administration  and  effective  rural  credit  schemes  impede  the  competitiveness  of 
farmers and the agri-processing industry.  

Limited  progress  was  made  towards  improving  agricultural  statistics.  An  action  plan  for 
developing  a  Farm  Accountancy  Data  Network  in  selected  municipalities  was  agreed. 
Preparations  have  started  for  the  agricultural  census,  which  will  be  carried  out  after  the 
population  and  household  census.  The  population  and  household  census  will  only  provide 
data  on  agricultural  holdings  (See  Chapter  4.2.8  –  Statistics).  However,  the  2009  report  on 
agricultural  statistics  remains  to  be  published.  The  lack  of  reliable  statistics  hampers  the 
development of agricultural policy. 

A  decision  on  establishing  a  State-level  monitoring  and  evaluation  system  for  agriculture, 
food and rural development was adopted. The information system for the integrated register 
of  agricultural  holdings  is  being  tested.  However,  land  registration  systems  have  not  been 
harmonised and land management needs to be improved. 

Overall, preparations in agriculture and rural development are at an early stage and stronger 
coordination  between  the  State  and  the  Entities  in  aligning  with  the  acquis  in  the  field  of 
agriculture and rural development is required. 

There has been little progress in the field of food safety. Implementing legislation has been 
adopted.  The  assessment  of  food  laboratories  was  completed  and  training  of  inspectors 
intensified.  However,  a  national  food  laboratory  plan  remains  to  be  drawn  up.  Reference 
laboratories have yet to be designated and testing capacity to be upgraded. Implementation of 
existing  legislation  remains  weak.  An  overlap  in  competences  between  the  veterinary  and 
food  safety  sectors  persists.  No  steps  were  taken  to  upgrade  agri-food  establishments. 
Enforcement capacity of inspection services and laboratories remains weak. 

Overall,  closer  coordination  between  the  State  and  the  Entities  is  essential  for  an  effective 
administrative system and for food control legislation. The lack of progress in the food safety 
sector has a negative impact on trade in agricultural products. 

Some progress can be reported in the field of veterinary and phytosanitary policies. In the 
veterinary  sector,  implementing  legislation  on  animal  health  and  welfare  was  adopted. 
Conditions  were  established  for  placing  certain  imported  products  on  the  market. 
Amendments to the rules governing the examination  of animals for slaughter were adopted. 
However,  the  State  veterinary  law  remains  to  be  amended  to  allow  for  alignment  with  the 
acquis  and  harmonisation  of  legislation  at  Entity-level.  Because  of  budgetary  restrictions 
there  were  no  further  staff  increases  within  the  State-level  administration  for  food  safety, 
veterinary  and  plant  health.  The  division  of  competences  within  the  administration 
responsible for food safety, veterinary and phytosanitary policies remains unclear.  There has 
been no progress towards accreditation of veterinary diagnostic laboratories. 

EN 

46 

   EN 

 
An amended decision on animal identification and movement control provided the legal basis 
for  identification  of  small  ruminants  and  pigs.  An  IT  system  for  comprehensive  national 
animal  identification  is  being  prepared.  A  vaccination  campaign  against  brucellosis  has 
produced the first positive results, and a control strategy is being drafted.  

Veterinary health control at borders has improved.  

In the phytosanitary sector, implementing legislation was published which paved the way for 
the  potato  monitoring  programme  and  enhanced  Bosnia  and  Herzegovina’s  export  capacity. 
Amendments to the legislation on plant protection products were adopted. The national list of 
varieties  was  adopted.  Bosnia  and  Herzegovina  began  to  implement  the  Rotterdam 
Convention by nominating the Plant Health Agency to be the designated national authority. 

State-level legislation that transposes the fisheries acquis remains to be drafted. In terms of 
quantity  and  value,  imports  of  fish  and  fishery  products  from  the  EU  to  Bosnia  and 
Herzegovina decreased. There was an increase in exports of these products to the EU.  

Overall,  preparations  in  the  fields  of  agriculture  and  rural  development,  food  safety, 
veterinary  and  phytosanitary  policy  and  fisheries  remain  at  an  early  stage.  Bosnia  and 
Herzegovina lacks a comprehensive strategy for aligning with the acquis on agriculture and 
rural  development.  State-level  capacity  for  policy  formulation  is  weak.  There  is  no 
coordination between State and Entity levels, which hampers the harmonised implementation 
of  legislation.  No  structures  have  been  set  up  to  implement  the  IPA  rural  development 
component.  Limited 
the  State-level  veterinary,  food  safety  and 
phytosanitary legislation is preventing agri-food establishments from making more substantial 
progress towards meeting EU standards. Official control capacities, the laboratory system for 
food safety as well as the veterinary and phytosanitary fields need strengthening. 

implementation  of 

4.2.3.  Environment 

Progress in the field of environment remained limited.  

There has been some progress in horizontal legislation. Bosnia and Herzegovina ratified the 
Espoo  Convention  on  Environmental  Impact  Assessment  in  a  Transboundary  Context. 
Implementation  of  Bosnia  and  Herzegovina’s  international  obligations,  in  particular  of  the 
Aarhus  and  Espoo  Conventions,  remains  at  an  early  stage.  The  directive  on  Strategic 
Environmental  Assessment  has  been  transposed  by  the  Federation.  However,  it  was  not 
transposed  by 
the  State,  Republika  Srpska  and  Brčko  District.  Transposition  and 
implementation of the acquis in the area of horizontal legislation requires further efforts. 

Little  progress  can  be  reported  on  air  quality.  The  Stockholm  Convention  on  Persistent 
Organic Pollutants was ratified. The Federation adopted legislation transposing the directives 
on air quality, and legislation on ambient air quality.  

There has been little progress in the area of waste management. Bosnia and Herzegovina has 
started  to  address  infrastructure  needs  by  constructing  sanitary  landfills.  Use  of  resources 
available  for  waste  management  measures  has  improved.  However,  no  concrete  steps  were 
taken  to  establish  systems  for  recycling  and  recovering  priority  waste  streams,  such  as 
packaging,  electrical  and  electronic  equipment,  hazardous  substances,  motor  oil  and  tyres. 
Management of waste streams of animal origin requires improvement.  

EN 

47 

   EN 

 
There has been little progress in the area of water quality. The Federation established water 
councils  to  oversee  public  consultation  procedures  for  river  basin  management  planning.  It 
also  adopted  implementing  legislation  on  identifying  and  monitoring  areas  sensitive  to 
eutrophication  and  nitrates.  Republika  Srpska  established  water  agencies.  However,  a  large 
amount  of  legislation  transposing  the  acquis  is  not  in  place.  There  is  a  lack  of  harmonised 
implementation  of  water  laws,  monitoring  and  river  basin  planning  between  the  Entities. 
Untreated discharges of wastewater, access to drinking water and flood management remain 
key challenges. 

No  progress  has  been  made  on  nature  protection.  The  percentage  of  designated  protected 
areas remains at 2.2%. Alignment with the Habitats and Birds Directives is at an early stage. 
No  developments  have  taken  place  in  the  fields  of  industrial  pollution  control  and  risk 
management, chemicals and noise. 

There has been some progress in  the  area of genetically  modified organisms (GMO). The 
GMO Council was appointed and national GMO laboratories were designated. 

In  the  field  of  climate  change,  the  plan  to  phase  out  ozone-depleting  substances  (ODS)  is 
being  implemented.  Licences,  annual  quotas  and  permits  for  importing  and  exporting  ODS 
are  being  issued  in  accordance  with  the  existing  Entity  and  State-level  legislation 
implementing the Montreal Protocol. Consequently, Bosnia and Herzegovina phased out the 
use  of  ODS  and  banned  imports,  except  hydrochlorofluorocarbons.  The  country  associated 
itself  with  the  Copenhagen  Accord.  Bosnia  and  Herzegovina  submitted  its  first  national 
communication  under  the  United  Nations  Framework  Convention  on  Climate  Change, 
covering  only  the  greenhouse  gas  inventory.  However,  despite  progress  made  towards  the 
establishment  of  a  designated  national  authority  (DNA),  a  final  decision  to  set  it  up  is  still 
outstanding. Participation in the international climate negotiations was limited.  

Bosnia and Herzegovina’s administrative capacity in the environment sector remains overall 
weak. The Federation’s environment fund was established, and its director and management 
board were nominated. Republika Srpska’s environment fund is fully operational. However, 
sources  for  the  Entity  funds  are  limited  to  vehicle  registration  and  water  fees.  A  State-level 
environmental law providing for harmonised environmental protection and an adequate legal 
and  institutional  framework  were  not  adopted.  A  State-level  Environmental  Protection 
Agency,  which  is  a  European  Partnership  priority,  needs  to  be  established.  Environmental 
institutions  do  not  have  the  capacity  to  implement  and  enforce  legislation  at  Entity,  Canton 
and local levels. Integration of environmental concerns in other sectors remains weak.  

Overall, preparations in the field of environment remain at an early stage. Establishment of a 
harmonised  legal  framework  for  environmental  protection,  of  the  State  Environmental 
Protection Agency and of a functioning environmental monitoring system remain priorities. 

4.2.4.  Transport policy 

Some progress can be reported in the field of trans-European transport networks. Bosnia 
and Herzegovina is actively participating in implementing the memorandum of understanding 
on  the  development  of  the  South-East  Europe  Core  Regional  Transport  Network.  It  is  also 
taking  part  in  the  South-East  Europe  Transport  Observatory  (SEETO)  by  updating  and 
implementing the multi-annual plan for 2010-2014.  

EN 

48 

   EN 

 
In  the  Pan-European  Corridor  Vc  upgrading  of  the  road  continued,  with  the  building  of 
additional  stretches  of  motorway.  Repair  and  overhaul  of  the  rail  track  and  signalling 
continued. However, the bottleneck at Ivan tunnel and Bradina ramp has yet to be tackled, and 
overhaul and repair designs for the remaining railway sections have not been drawn up. Nor 
has a comprehensive study on safety and capacity requirements been prepared.  

Uneven  progress  can  be  reported  in  the  field  of  road  transport.  Bosnia  and  Herzegovina 
introduced  unrestricted  transit  traffic  in  land  transport,  one  of  its  commitments  under  the 
Interim Agreement. It also started to implement the TIR carnet system (See Chapter 4.1.4 – 
Customs  and  taxation).  Maintenance  and  upgrading  of  roads  continued.  The  Law  on  digital 
tachographs  was  adopted.  However,  delays  in  implementation  of  the  digital  tachograph  to 
meet  international  obligations  remain  an  issue.  The  Law  on  transport  of  dangerous  goods 
remains to be adopted.  

Uneven progress can be reported in the area of rail transport. Steps were taken to create the 
conditions  for  competition  on  the  rail  network,  including  regulatory  and  safety  institutions. 
However, no implementation has taken place so far. The separation of operational functions 
from infrastructure management in the two vertically integrated companies, the Railways of 
the  Federation  and  the  Railways  of  Republika  Srpska,  still  needs  to  be  implemented.  The 
opening of the rail market is at an early stage. 

The  Bosnia  and  Herzegovina  Railways  Regulatory  Body  issued  a  set  of  safety  instructions 
which  partly  implemented  the  ‘Railway  Package  II’  Directives.  The  railways  of  the 
Federation published their network statement and the template contracts for access by railway 
undertakings.  The  condition  of  the  rolling  stock  has  improved.  However,  many  aspects  of 
railway  safety  remain  to  be  addressed.  The  reform  envisaged  in  the  addendum  to  the 
memorandum  of  understanding  on  development  of  the  South-East  Europe  Core  Regional 
Transport network for a South-East European railway transport area remains to be completed.  

No progress has been made on maritime transport. Bosnia and Herzegovina is not a party to 
the  International  Convention  for  the  Safety  of  Life  at  Sea  nor  to  the  International  Ship  and 
Port Facility Security Code. Some progress has been made in the area of inland waterways. 
Demining and rehabilitating the River Sava waterway remain a priority. No progress has been 
made in the area of combined transport.  

Progress has been made in air transport. The laws on the civil aviation authority and the air 
navigation  services-provider  were  adopted,  and  the  sector  was  restructured.  The  Civil 
Aviation  Directorate  remains  responsible  for  regulatory  issues.  The  air  navigation  services 
provider was established. Bosnia and Herzegovina completed the first transitional phase of the 
European  Common  Aviation  Area  Agreement.  However,  further  efforts  are  needed  to 
transpose  and  implement  the  single  European  sky  regulations,  in  particular  with  regard  to  a 
national supervisory authority.  

Bosnia and Herzegovina needs to adopt the transport policy document; the transport strategy 
and an action plan remain to be approved by the Government. 

Overall,  preparations  in  the  area  of  transport  are  at  an  early  stage.  Transport  infrastructure 
strategies remain to be prepared and the legal framework to be completed. Upgrading of the 
transport infrastructure has barely started.  

EN 

49 

   EN 

 
4.2.5.  Energy 

There  has  been  uneven  progress  with  oil  stocks  and  security  of  supply.  Republika  Srpska 
passed a law to transpose the directives on mitigation measures and 90-day stocks. However, 
no official figures are available on the country's level of oil stocks. The Energy Community 
acquis on security of gas and electricity supply remains to be implemented. There is no State-
level energy strategy.  

Little  progress  has  been  made  regarding  the  internal  energy  market.  There  has  been  no 
progress  in  transposing  the  electricity  acquis  as  applicable  under  the  Energy  Community 
Treaty.  Issues  such  as  tendering  procedures  for  new  generation  capacity  have  not  been 
addressed. The lack of implementation of legislation remains a problem. The situation of the 
State-level transmission company (TRANSCO/Elektroprijenos) has not improved. A working 
group  set  up  by  the  Entities’  Prime  Ministers  has  been  unable  to  resolve  the  continuing 
stalemate.  No  business  or  investment  plans  have  been  approved  by  TRANSCO.  The 
company's  management  operates  in  an  acting  capacity  only.  Only  technical  operations  and 
minor  maintenance  tasks  are  being  carried  out.  There  has  been  no  improvement  in 
communication  with  the  independent  system  operator  (ISO/NOS).  Cross-border  capacity  is 
allocated  on  an  ad  hoc  basis  rather  than  according  to  open  competition.  The  viability  of 
TRANSCO  as  a  country-wide  enterprise  and  the  fragmentation  of  the  electricity  market  are 
issues  of  concern  and  would  represent  an  obstacle  the  full  implementation  of  the  Energy 
Community Treaty. Moreover, the 2009 amendments to the electricity legislative framework 
need  to  be  reviewed  in  order to  comply  with  the  objective  of  a  competitive  and  transparent 
electricity market as required by the Energy Community Treaty. 

The  independence  of  the  regulatory  commissions  is  not  ensured.  The  Republika  Srpska 
regulator  revised  tariffs.  The State  Electricity  Regulatory  Commission  (SERC)  issued  new 
tariffs  for  transmission  services,  for  the  independent  system  operator,  and  for  ancillary 
services.  Since  the  market  was  opened  up  for  non-household  customers,  two  industrial 
companies have purchased part of their electricity on the market. Consumers have little reason 
to change suppliers, as regulated tariffs remain below market prices. 

No  progress  can  be  reported  in  the  gas  sector.  There  is  no  State-level  gas  law  and 
transposition  of  the  gas  acquis  is  missing,  including  a  number  of  basic  network  access 
elements. 

There  has  been  little  progress  on  energy  efficiency  and  renewable  energy.  Regulators 
provide for some feed-in tariffs and lower network connection fees. Entities plan to develop 
hydropower  plants  and  wind  parks  over  the  next  10  years.  However,  there  is  no 
comprehensive  strategy,  and  the  Entities  have  not  coordinated  their  plans.  Commitments 
made under the Energy Community Treaty regarding the promotion of renewable energy and 
biofuels have not been fulfilled. The development of an energy efficiency action plan to meet 
obligations under the Energy Community Treaty is behind schedule. 

Some progress can be reported in the area of nuclear safety and radiation protection. Three 
international  conventions  on  nuclear  safety  (Convention  on  Nuclear  Safety,  Convention  on 
Early  Notification  of  a  Nuclear  Accident  and  Convention  on  Assistance  in  the  Case  of  a 
Nuclear  Accident  or  Radiological  Emergency)  have  been  ratified.  A  new  director  was 
appointed  for  the  State  Regulatory  Agency  for  Radiation  and  Nuclear  Safety.  However,  the 
law on radiation and nuclear safety remains to be implemented. The existing regulations are 
not in line with the acquis. In addition, the structure, mandate and operation of the Regulatory 

EN 

50 

   EN 

 
Agency  have  not  been  specified.  A  national  emergency  plan  and  a  strategy  for  radioactive 
waste management need to be developed. 

Administrative  capacity  within  the  Ministry  of  Foreign  Trade  and  Economic  Relations  on 
energy issues remains low. 

Overall, preparations in the field of energy are not very advanced. Further efforts are needed 
for  the  country  to  meet  requirements  under  the  Energy  Community  Treaty.  The  lack  of 
cooperation  and  coordination  between  the  Entities  hampers  development  of  a  functioning 
energy  market  and  compromises  improvements  in  the  security  of  supply.  Bosnia  and 
Herzegovina lacks a fully functioning transmission company and remains at the early stages 
in implementing the acquis on the internal gas and electricity market. The development of a 
comprehensive  energy  strategy,  including  promotion  of  energy  efficiency  and  renewable 
energy sources, remains essential. Further efforts are needed on oil stocks. The transposition 
of the nuclear safety and radiation protection acquis has not started.  

4.2.6. 

Information society and media 

Little  progress  can  be reported in the area of electronic communications and information 
technologies.  The  three  incumbent  operators  kept  a  market  share  of  99%  in  the  fixed-line 
segment.  They  operate  as  de  facto  monopolies  in  their  geographical  areas.  Other  operators 
have a larger share of the international calls market. Operators with significant market power 
published  their  reference  unbundling  offers.  Three  contracts  were  signed  between  an 
incumbent  and  an  alternative  operator.  Implementation  of  competitive  safeguards  is 
proceeding  slowly  which  means  that  even  though  there  is  liberalisation,  there  is  no  healthy 
competitive  market.  Six  operators  offer  carrier  selection  services  and  only  one  carrier  pre-
select  services.  New  licences  were  granted  for  internet  service  providers  and  network 
operators.  

The Communications Regulatory Agency (CRA) has developed guidelines for mobile virtual 
network operators, which provided for competition in the mobile telephony sector. The CRA 
took a decision on fixed-to-mobile termination tariffs, halving the wholesale tariff. This is a 
positive  development.  However,  price  squeezes  still  exist.  Steps  to  rebalance  tariffs,  a  key 
element for creating a competitive market, are at an early stage. 

The level of broadband internet access is fairly low, with the incumbent operators dominating 
xDSL  provision  (more  than  90%),  although  cable  broadband  offers  a  strong  competitive 
alternative. 

The challenges to the CRA’s independence have intensified (See Chapter 2.2 – Human rights 
and  the  protection  of  minorities).  The  law  on  ministries  and  administrative  bodies  was 
amended to include the CRA. This is not in line with the relevant EU provisions and specific 
national  legislation,  since  the  independence  of  the  CRA  is  enshrined  in  the  law  on 
communications. The CRA has been without a director-general since 2007. No decision was 
taken on the nomination of the CRA Council members whose mandate ended in April 2009. 
Payment of compensation to the CRA Council, suspended in 2009, was resumed but cut by 
half. The overall situation in the CRA hampers its administrative capacity. The administrative 
capacity of the Ministry of Transport and Communications remains weak.  

Little  progress  has  been  made  in  the  area  of  information  society  services.  The  pace  of 
developments  regarding  information  society  varies  across  the  country.  However,  the  State-

EN 

51 

   EN 

 
level  law  on  development  of  the  information  society  was  not  adopted,  and  the  State-level 
agency  not  established.  The  E-commerce  Directive  needs  to  be  transposed  in  national 
legislation. Implementation of the 2006 e-signature law is slow. Implementing legislation on 
conditional access services remains to be adopted.  

There  has  been  some  progress  as  regards  audiovisual  policy  and  media.  Bosnia  and 
Herzegovina has ratified the European Convention on Legal Protection of Conditional Access 
Services.  Implementing  legislation  and  the  strategy  for  transfer  from  analogue  to  digital 
terrestrial broadcasting were adopted. All existing radio and television stations were granted 
new licences.  

However,  the  Public  Broadcasting  System  (PBS)  Board  of  Governors  failed  to  adopt  the 
statutes  of  the  PBS  corporation  due  to  disagreements  over  ownership  of  equipment  and 
revenue-sharing. Since its statutes have not been adopted, the PBS corporation could not be 
registered, which delayed the reform of the public broadcasting sector. The Entities’ laws on 
public broadcasting services are not aligned with the State-level law.  

Overall, Bosnia and Herzegovina’s preparations in the field of information society and media 
are  advancing  slowly.  Implementation  of  the  public  broadcasting  legal  framework  is 
necessary for reforms in this sector, a European Partnership priority. Ensuring the functional 
independence  of  the  CRA  remains  a  top  priority.  Continued  challenges  to  the  CRA’s 
independence are having a negative impact on the development of competition. 

4.2.7.  Financial control 

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

Further steps have been taken to introduce Public Internal Financial Control (PIFC). Laws 
on internal audit continued to be implemented at State and Entity level and the administrative 
capacity is slowly being strengthened to ensure sound management of public funds. However, 
the number of skilled internal auditors remains very low.  

The  State-level  Council  of  Ministers  and  the  governments  of  Republika  Srpska  and  the 
Federation adopted their PIFC policy papers. In the Federation and Republika Srpska internal 
audit units are being established. Central Harmonisation Units (CHUs) exist in the Ministries 
of Finance of the State and Republika Srpska. However, the Federation has not yet recruited 
managers  for  its  CHU.  Lack  of  staff  is  an  impediment  to  further  development  of  PIFC. 
Adequate  financial  management  and  control  systems  need  to  be  developed.  A  coordination 
board  to  ensure  a  harmonised  approach  to  PIFC  across  all  three  CHUs  remains  to  be 
established. 

As  regards  external  audits,  the  four  supreme  audit  institutions  (SAIs)  (State,  Entities  and 
Brčko District) are performing well, but have no impact on public financial management. In 
the Entities SAIs are not subject to administrative and civil service laws. The State-level SAI 
is not entirely independent from the Council of Ministers. The audit offices at State and Entity 
level  are  building  capacity  for  performance  audits.  Cooperation  among  SAIs  through  the 
Coordination  Board  continued.  The  Coordination  Board  issued  guidelines  for  performance 
audits and a human resource development strategy. The establishment of parliamentary audit 
committees  increased  the  capacity  of  all  three  parliaments  to  deal  with  audit  reports.  As  a 
result,  based  on  audit  reports,  the  audit  committee  of  the  Bosnia  and  Herzegovina 
Parliamentary Assembly recommended budget changes.  

EN 

52 

   EN 

 
Overall, in the area of financial control Bosnia and Herzegovina has partly met its objectives 
regarding  PIFC  legislation,  regulations  and  re-organisation.  Internal  auditing  is  being 
introduced.  Financial  management  and  control  systems  need  to  be  further  developed.  The 
issue of the independence of external auditors remains to be addressed.  

4.2.8. 

Statistics 

Limited progress has been made in the area of statistics. 

Very  little  progress  has  been  made  on  statistical  infrastructure.  The  staff  number  of  the 
Agency  for  Statistics  of  Bosnia  and  Herzegovina  (BHAS)  increased.  However,  cooperation 
between the BHAS and the Entities institutes for statistics needs to be considerably improved. 
Different  interpretations  of  the  existing  legislation  persist.  Neither  the  State-level  statistics 
law  nor  the  Agreement  on  cooperation  and  coordination  in  the  area  of  statistics  are  being 
correctly implemented.  

Cooperation between the BHAS and the Indirect Taxation Authority (ITA) is poor. The ITA 
does  not  provide  administrative  data  to  the  BHAS  in  a  sufficient  way.  The  results  are  low-
quality business, macro-economic and external trade statistics (See Chapter 4.1.4 – Customs 
and taxation).  

Some progress has been made regarding classifications and registers. The statistical business 
register  is  operational,  but  the  lack  of  data  from  certain  administrative  sources  negatively 
affects its quality.  Approximation to the NACE Rev. 2 statistical classification of economic 
activities is moderately advanced.  

Some progress has been made on sector statistics. Technical preparations for the population 
and household census are advanced. Entities are at different stages of preparation of maps for 
census  enumeration  areas.  However,  the  State-level  law  on  the  population  and  household 
census  was  not  adopted.  Political  agreement  could  not  be  reached  on  the  use  of  the  census 
results for the composition of public bodies. In the absence of a census law, no pilot census 
has taken place.  

In the area of social statistics, the 2010 extended Labour Force Survey (LFS) has been carried 
out and first results were published.  

Limited progress has been made on macro-economic statistics. The annual GDP estimate for 
2009  was  published.  However,  the  Republika  Srpska  Statistical  Office  does  not  fully 
implement  the  multi-annual  master  plan  for  developing  national  accounts.  Therefore, 
quarterly national accounts cannot be developed.  

The  quality  of  short-term  statistics,  construction  industry  statistics  and  structural  business 
statistics  improved.  Quarterly  surveys  are  being  conducted  on  input  prices  in  agriculture. 
Preparations for an agriculture census started (See Chapter 4.2.2 – Agriculture and fisheries). 
A pilot farm structure survey was carried out. Progress has been made on energy statistics.  

Overall,  preparations  in  the  field  of  statistics  are  moderately  advanced.  National  accounts, 
business and agricultural statistics remain to be improved. The BHAS development plan has 
to be implemented to ensure necessary capacity. Technical preparations for the population and 
household census are advanced. The Law on the population and household census remains to 
be  adopted.  Closer  cooperation  between  the  BHAS  and  Entity  statistical  offices  as  well  as 
between the BHAS and State agencies remains essential.  

EN 

53 

   EN 

 
4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration 

Progress  has  been  made  in  the  field  of  visa  policy  and  in  the  framework  of  the  visa 
liberalisation  dialogue.  The  visa  facilitation  agreement  between  the  EU  and  Bosnia  and 
Herzegovina  is  being  implemented.  The  number  of  visas  issued  at  the  border  was  further 
reduced from 684 in 2008 to 345 in 2009. However in the first half of 2010, 145 visas were 
issued  which  is  an  increase  of  20%  compared  to  the  same  period  of  2009.  At  the  moment, 
positive and negative lists are not fully harmonised with the EU visa list.  

Biometric passports started to be issued. The Agency for identification documents, registers 
and data exchange (IDDEEA) finished verifying all registers and entering data into the central 
database. As of end September 2010, a total of 329,400 biometric passports had been issued. 

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

Good progress has been made in the area of border management. Legislation implementing 
the Law on border control has been adopted, with the exception of the by-law on demarcation 
of  the  borderline.  An  agreement  on  mutual  cooperation  between  the  institutions  involved  in 
integrated  border  management  (IBM)  was  signed,  providing  a  general  framework  for  inter-
agency cooperation. The IBM joint risk analysis centre has become operational. However, the 
connection  between  the  centre  and  the  databases  of  the  agencies  involved  remains  to  be 
established.  Revision  of  the  IBM  strategy  and  action  plan  is  pending.  The  Council  of 
Ministers appointed a new director and deputy director of the border police. 

Infrastructure  at  existing  border  crossing  points  has  been  further  improved,  in  particular 
surveillance  and  equipment.  All  border  crossing  points  are  connected  to  the  I-24/7  Interpol 
system. Two new, fully equipped border crossing points have been constructed on the border 
with  Montenegro  in  Klobuk  and  Zupci.  The  majority  of  border  crossing  points  for 
international  traffic  are  equipped  with  biometric  passport  readers  and  are  connected  to  the 
integrated  system  of  control  of  State  border  crossings  (CSBC).  CSBC  is  one  of  the  four 
modules of the migration information system, which allows automatic registration of border 
crossings,  entry  refusals  and  access  to  relevant  databases.  Installation  of  IT  access  and 
equipment at border crossing points needs to continue.  

Responsibility for management and maintenance of border crossings has been assigned to the 
indirect  taxation  authority  (ITA).  ITA  prepared  an  amendment  to  its  internal  rulebook 
foreseeing  an  increase  in  the  number  of  posts  for  management  and  maintenance  of  border 
crossings.  However,  the  adoption  of  this  amendment  by  the  ITA  governing  board  is 
outstanding.  The  border  police  has  adopted  development,  human  resources  and  information 
management strategies for 2010-14.  

Border demarcation has advanced. Along the green border with Croatia, the remaining illegal 
crossings for vehicles have been physically blocked with the necessary infrastructure and are 
monitored by the border police. On the border with Montenegro, illegal crossings have also 
been  identified  and  blocked.  More  efforts  are  needed  to  close  unauthorised  border  crossing 
points  with  Serbia.  Bosnia  and  Herzegovina  and  Croatia  are  reviewing  the  relevant  border 
agreements, including the number of crossing points. Agreements with Montenegro on border 
crossing  points  and  local  cross  border  traffic  have  been  signed  in  October  2010. 

EN 

54 

   EN 

 
Implementation  of  the  working  arrangement  with  Frontex  is  well  on  track  and  Bosnia  and 
Herzegovina participates in the Western Balkans risk analysis network. 

Overall,  Bosnia  and  Herzegovina’s  preparations  in  the  area  of  border  management  have 
advanced but need to be intensified. Efforts need to focus on strengthening the infrastructure 
at border crossing points, settling unresolved border demarcation issues and reinforcing staff.  

There has been some progress in the area of asylum. Bosnia and Herzegovina has adopted all 
the legislation necessary for implementing the 2008 Law on aliens and asylum. The asylum 
and  migration  action  plan  is  being  fully  implemented.  Training  has  been  provided  for  staff 
employed in the asylum sector. The number of asylum applications in 2009 decreased to 32 
(71 people) in comparison with 49 applications (95 people) in 2008. In 2009 the Ministry of 
Security (MoS) granted asylum status to one person and denied it for twenty nine. 

All  asylum-seekers  from  Kosovo,  whose  temporary  protection  status  expired  in  2007, 
received first instance decisions from the Sector for Asylum. The sector issued 279 negative 
decisions.  Of  this  number,  205  people  have  appeals  pending.  A  further  163  former  asylum-
seekers from Kosovo have received final binding negative decisions on their asylum claims. 
Others are being resettled or voluntarily repatriated. 

The Sector for Asylum in the MoS has 16 of the 17 employees provided for by the ministry’s 
rulebook.  The  asylum  module  of  the  migration  information  system  (MIS)  is  being  fully 
utilised. The  Ministry  for  Human Rights and Refugees has been connected to the MIS. The 
temporary asylum centre in Rakovica has 12 employees and 86 occupants. Work has begun 
on a permanent asylum centre in Trnovo with 150 beds.  

Overall, the asylum and international protection system in Bosnia and Herzegovina has come 
into operation and has been further enhanced. 

Good progress has been achieved on migration. The permanent reception centre for irregular 
migrants has been upgraded and meets EU standards. Its total capacity has been increased to 
120 beds and it employs 53 professional staff. The State has assumed full responsibility for 
the  centre's  financing  and  management.  In  2009,  191  irregular  migrants  passed  through  the 
centre. In 2010, 116 foreign nationals were accommodated, 93 of whom were returned.  

In 2009, the number of readmitted persons has decreased to 311 (from 459 in 2008), of whom 
122  were  foreign  nationals  and  189  citizens  of  Bosnia  and  Herzegovina.  Bosnia  and 
Herzegovina  continues  to  readmit  the  largest  number  of  individuals  under  the  readmission 
agreement  with  Croatia.  In  accordance  with  the  EU  readmission  agreement,  Bosnia  and 
Herzegovina accepted 173 of its citizens in 2009 (20 in 2008). A strategy for the reintegration 
of  returnees  is  being  implemented.  Bosnia  and  Herzegovina  has  continued  its  efforts  to 
conclude readmission agreements with non-EU countries, but no new readmission agreements 
were signed. 

There has been a significant decrease in the number of people intercepted whilst attempting to 
cross  the  border  unlawfully.  In  2009,  381  people  were  intercepted  when  trying  to  enter  or 
leave the country.  

The Service for Foreigners Affairs (SFA) in the MoS continued to improve its administrative 
capacity. Despite budgetary constraints, the SFA hired new professional staff. It increased the 
level  of  cooperation  with  other  law  enforcement  agencies.  The  SFA  regularly  accessed  the 

EN 

55 

   EN 

 
MIS.  Access  has  been  granted  to  the  relevant  agencies  at  both  central  and  local  levels.  In 
2009, the SFA  issued 7,512  permits for  temporary stays,  an  increase of 29% in comparison 
with  2008.  In  2009,  359  permits  for  permanent  stays  were  issued,  an  increase  of  67% 
compared with 2008. The SFA issued 474 expulsion decisions in 2009, a decrease of 40% on 
2008. 

All legislation implementing the Law on movements and stays of aliens and asylum-seekers 
entered  into  force.  The  migration  action  plan  is  being  implemented.  The  coordination  body 
established  to  implement  the  asylum  and  migration  strategy  and  action  plan  has  improved 
inter-agency  cooperation.  An  administrative  structure  for  monitoring  migration  flows,  with 
regular updates, has been established. The first migration profile of Bosnia and Herzegovina 
was  adopted  by  the  Council  of  Ministers.  The  MIS  now  provides  statistical  reports  for  the 
migration profile.  

Overall,  the  country’s  preparations  in  the  area  of  migration  are  advanced.  Monitoring  of 
migration flows and inter-agency cooperation have improved.  

4.3.2.  Money laundering 

Limited  progress  has  been  made  in  the  fight  against  money  laundering.  The  rulebook  for 
implementation  of  the  Law  on  prevention  of  money  laundering  and  financing  of  terrorist 
activities was adopted, as well as a by-law implementing this law for insurance supervisory 
agencies in the country. 

The third round Moneyval Mutual Evaluation Report concluded that Bosnia and Herzegovina 
achieved  minimum  level  of  compliance  with  international  and  European  standards  on 
combating  money  laundering  and  financing  of  terrorism.  However,  the  evaluation  report 
identified shortcomings in the legislation and in the functioning of the Financial Intelligence 
Department (FID). At present the FID is within the State Investigation and Protection Agency. 
The FID is understaffed, in particular the investigation section, and does not have sufficiently 
trained staff to fully perform its functions.  

The  FID  tends  to  operate  in  isolation  from  other  law  enforcement  agencies  as  inter-agency 
cooperation  regarding  the  FID’s  activities  remains  weak.  Financial  intelligence  gathered  by 
the  FID  is  not  requested  by  or  disseminated  to  other  law  enforcement  agencies  for 
investigations into predicate offences or money laundering at the Entity-level and in the Brčko 
District.  

The Ministry of Security established a multi-agency working group to prepare amendments to 
the  Law  on  prevention  of  money  laundering  and  financing  of  terrorist  activities,  including 
measures  to  ensure  the  institutional  independence  of  the  FID.  Draft  amendments  to  the  law 
were submitted to the Council of Ministers. 

Reports  of  suspicious  transactions  increased,  with  most  originating  from  the  banking  sector 
and a few from the insurance and securities sectors. However, the quality of reporting requires 
improvement. The electronic reporting system does not include the non-banking sector and its 
operational scope and capacity do not support the FID.  

There  have  been  convictions  for  money  laundering  and  two  cases  on  financing  of  terrorism 
were  filed.  However,  the  overall  statistics  on  money  laundering,  the  financing  of  terrorist 
activities  and  on  predicate  offences  are  still  incomplete  and  do  not  provide  sufficient 

EN 

56 

   EN 

 
information  for  preventive  measures.  Furthermore,  there  is  a  lack  of  information  exchange 
between the authorities responsible for combating money laundering.  

The provisions on confiscation in the Criminal Code have been amended to harmonise them 
with the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of 
the Proceeds from Crime and on the Financing of Terrorism. However, the legal framework 
for confiscation of proceeds from crime is not applied adequately. Procedures for managing 
seized and confiscated assets have not been set up. 

Overall, in the fight against money laundering, Bosnia and Herzegovina has started to address 
its objectives. Further efforts are needed regarding administrative structures, enforcement of 
legal provisions and awareness-raising on money laundering. 

4.3.3.  Drugs 

There has been some progress in the fight against drugs. Bosnia and Herzegovina remains a 
transit country for heroin and synthetic drugs along one of the main Balkan routes to Western 
Europe. Drug-related illegal activities remain one of the most widespread forms of organised 
crime. 

Amendments  to  the  Law  on  prevention  and  suppression  of  abuse  of  narcotic  drugs  were 
adopted. They establish the State-level office for drugs envisaged in the strategy  and  action 
plan and improve control over precursors. A rulebook for destruction of confiscated drugs has 
been  adopted.  Bosnia  and  Herzegovina  has  improved  its  cooperation  with  the  International 
Narcotics  Control  Board.  Implementation  of  the  action  plan  for  the  prevention  and 
suppression  of  drug  abuse  is  not  very  advanced.  The  overall  institutional  situation  of  the 
country  does  not  facilitate  the  establishment  of  the  coordination  mechanism  and  the 
implementation  of  the  measures  announced  in  the  national  action  plan  on  drugs.  Specific 
budgetary allocation for data collection would facilitate the implementation of the strategy. 

Some  progress  was  achieved  on  inter-agency  exchanges  of  information.  The  Ministry  of 
Security established a database on perpetrators of drug-related offences which is accessible at 
most border crossing points. The State Investigation and Protection Agency, the border police, 
Brčko  police  and  the  Federation  police  regularly  submit  data  to  this  database.  Nonetheless, 
Inter- and intra-agency cooperation in this area is insufficient. 

Narcotics control capabilities have improved. Action by the police and prosecutors leading to 
seizures  and  arrests  has  increased  considerably  as  a  result  of  improved  cooperation  with 
neighbouring  countries  and  EU  Member  States.  There  has  been  some  improvement  in 
international  cooperation  as  the  country  began  implementation  of  the  Police  Cooperation 
Convention for South-East Europe. However, effective judicial follow-up is lacking.  

Some  progress  has  been  made  on  collection  of  information  in  line  with  the  European 
Monitoring  Centre  for  Drugs  and  Drug  Addiction  (EMCDDA)  standards.  Notably,  a 
European School Survey Project on Alcohol and Other Drugs (ESPAD) was implemented in 
the  two  entities,  and  a  first  country  overview  and  an  information  map  were  produced.  A 
situation  analysis  has  been  conducted  and  a  standardised  registration  form  for  drug  users  at 
rehabilitations  centres  was  introduced.  However,  the  institutional  cooperation  with  the 
EMCDDA  is  still  at  a  preliminary  stage,  and  its  further  progress  is  likely  to  depend  on  the 
consolidation of the cooperation mechanisms between the State and the entities. 

EN 

57 

   EN 

 
Overall,  preparations  in  the  area  of  fight  against  drug  trafficking  are  at  an  early  stage. 
Information  collection  and  exchange,  narcotics  control  capabilities  and  international 
cooperation have improved. Further efforts are needed regarding the lack of inter- and intra-
agency cooperation within law enforcement and effective judicial follow-up.  

4.3.4.  Police 

Uneven  progress  has  been  made  on  police  matters.  Implementation  of  legislation  on  police 
reform, which is a European Partnership priority, continued. All institutions established under 
the  police  reform  laws  have  had  directors  and  deputies  appointed.  Rulebooks  have  been 
adopted  for  the  agencies  of  forensic  examinations,  of  education  and  training  and  of  police 
support. 

The  2010  budget  allocations  for  the  State-level  Ministry  of  Security  and  a  number  of  law 
enforcement  agencies  increased.  The  budget  of  the  Directorate  for  coordination  of  police 
bodies  was  approved  and  its  rulebook  adopted.  The  independent  board  that  supervises  the 
police has been established and is operational. The Directorate received the responsibility and 
staff for international police cooperation (including Europol and Interpol) and VIP protection. 
Initial  preparations  for  the  electronic  data  exchange  system  between  police  and  prosecution 
services advanced. Within the law enforcement sector, the police have the necessary resources 
to  develop  its  capacity  and  joint  capability.  However,  the  Directorate  for  coordination  of 
police bodies is not staffed with police officers.  

The  State  Investigation  and  Protection  Agency  (SIPA)  has  reached  a  staffing  level  of  70%. 
Not enough qualified candidates could be found to fill all the vacancies. The laws on the SIPA 
and border police were brought into line with the new police reform laws.  

Laws  on  police  officials  have  been  harmonised  and  further  improved  across  Cantons,  the 
Entities and the State. Some progress has been made on exchange of information between the 
police  and  prosecution  bodies.  Regulations  regarding  record-keeping  were  harmonised. 
Records  will  be  exchanged  through  an  electronic  data  exchange  system.  No  progress  was 
made on harmonising Entity-level regulations on arms. 

The strategic agreement with Europol is being implemented, including a gap analysis with a 
view  to  preparing  the  operational  agreement.  Bosnia  and  Herzegovina  regularly  submitted 
strategic information. The office for cooperation with Interpol has a secure data link to all law 
enforcement  agencies.  However,  the  level  of  security  in  the  Interpol  office  needs  to  be 
improved and the communication link with Europol is still not operational. Both the Interpol 
and  Europol  offices  are  staffed  with  civilians,  not  police  officers,  making  effective  police 
work difficult.  

Some progress has been made on operational cooperation between law enforcement agencies 
in  the  fight  against  organised  crime,  including  sharing  of  intelligence  and  joint  action. 
However,  formal  coordination  and  exchange  of  information,  particularly  of  intelligence, 
remains  weak.  SIPA's  cooperation  with  other  police  bodies  was  poor.  A  coordination 
mechanism has been set up between police directors, the chief prosecutor and the Ministry of 
Security.  Results  of  police  operations  have  not  been  adequately  converted  into  successful 
prosecutions and convictions.  

Overall, Bosnia and Herzegovina’s preparations in the police field remain at an early stage. 
As  part  of  the  police  reform,  particular  efforts  are  necessary  to  strengthen  cooperation  and 

EN 

58 

   EN 

 
exchange of information between police agencies. The successful completion of police reform 
requires the constructive involvement of all levels of government in Bosnia and Herzegovina. 

4.3.5.  Fighting organised crime and terrorism 

There  has  been  some  progress  in  fighting  organised  crime.  However,  the  presence  of 
organised criminal networks and their attempts to infiltrate the legal economy remain a major 
cause for concern. The structure and high number of different law enforcement bodies within 
the country is problematic and reduces effectiveness.  

The  Criminal  Code  of  Bosnia  and  Herzegovina  was  further  harmonised  with  the  UN 
Convention against transnational organised crime. It was also harmonised with the Council of 
Europe  Conventions  on  combating  organised  crime,  on  the  prevention  of  terrorism  and  on 
action against trafficking in human beings. The Entities and Brčko District have harmonised 
their criminal codes accordingly. An updated action plan for the fight against organised crime 
was adopted in February 2010. 

Republika Srpska adopted a new Law on confiscation, which provides for the establishment 
of  a  specialised  agency  for  asset  recovery. However,  a  comprehensive  legal  framework  and 
structures for managing confiscated assets have not been established throughout the country. 

Bosnia  and  Herzegovina  is  not  a  party  to  the  Council  of  Europe  Convention  on  the 
International Validity of Criminal Judgments nor to the additional protocol to the Council of 
Europe Convention on the Transfer of Sentenced Persons. Mutual legal assistance agreements 
have been concluded with Croatia and Serbia. They enable fugitives to serve sentences passed 
in  Bosnia  and  Herzegovina  in  those  countries  and  vice  versa.  In  October  2010,  an 
agreement establishing  a  regional  office  in  Belgrade  for  improving  cooperation  in  the  fight 
against organised  crime  was  signed  with  Albania,  Croatia,  Montenegro,  former  Yugoslav 
Republic  of  Macedonia  and  Serbia. New  action  plans  for  the  fight  against  organised  crime 
have been adopted. However, Bosnia and Herzegovina has not negotiated an agreement with 
Eurojust.  The  country  has  not  harmonised  its  legislation  with  the  Council  of  Europe 
Convention on cybercrime. 

The  State  Investigation  and  Protection  Agency  (SIPA)  has  been  involved  in  investigations 
into  prominent  organised  crime  groups.  In  majority  of  cases,  the  investigations  have  not 
resulted  in  convictions.  Inter-agency  joint  investigation  teams,  acting  on  the  instructions  of 
prosecutors,  became  more  frequent.  Special  investigative  measures  increased.  Cooperation 
with neighbouring and EU countries improved. 

The lack of transparent and reliable crime statistics remains a cause for concern and impacts 
upon joint strategic operational planning and threat assessments.  

Overall,  Bosnia  and  Herzegovina  has  started  to  address  its  priorities  related  to  organised 
crime.  The  issue  remains  a  serious  concern  and  affects  the  rule  of  law  and  the  business 
environment. Recurring challenges such as the lack of intra- and inter-agency cooperation, of 
an adequate legal framework and of modern investigative practices persist. 

Some  progress  has  been  made  on  combating  the  trafficking  of  human  beings.  Bosnia  and 
Herzegovina  continued  to  implement  the  national  action  plan  for  combating  trafficking  of 
human beings. Offences related to trafficking of human beings are regulated by the Criminal 

EN 

59 

   EN 

 
Code  of  Bosnia  and  Herzegovina.  The  Entity  and  Brčko  District  criminal  codes  have  been 
harmonised with the latest amendments to the State criminal code.  

The  number  of  identified  victims  and  investigations  related  to  human  trafficking  increased, 
against  the  decreasing  regional  trend.  Bosnia  and  Herzegovina  continues  to  be  a  country  of 
origin,  of  transit  and  a  destination  for  trafficking  in  women  and  girls.  Most  of  the  victims 
were women from Bosnia and Herzegovina.  

The national coordinator’s office continued to coordinate a campaign targeting young people 
seeking  employment  abroad.  It  was  renamed  the  Department  for  Combating  Trafficking  in 
Human  Beings  and  given  additional  funding  for  planning  and  monitoring.  However,  the 
department remains understaffed and not fully operational.  

The State-level government secured funds for victim ‘safe houses’. A database of traffickers 
has  been  established  within  SIPA.  The  necessary  amendments  to  the  Law  on  witness 
protection have not been adopted. Witness protection remains insufficient.  

Overall,  Bosnia  and  Herzegovina  continues  to  be  at  an  early  stage  in  the  fight  against 
trafficking of human beings. Some progress was made regarding the identification of victims. 
The provision of victim support and witness protection requires improvement.  

There  has  been  some  progress  in  the  fight  against  terrorism.  Operational  capacities  of  the 
Entity-level  police  forces  and  cooperation  with  SIPA  on  terrorism  issues  improved. 
International  cooperation  on  terrorism  was  good.  A  strategy  for  preventing  and  combating 
terrorism for 2010-13 was adopted. An action plan for civil-military cooperation in the event 
of a terrorist attack was adopted but its implementation needs to start. However, the lack of an 
effective  system  for  freezing  funds  used  for  financing  terrorism  is  an  issue  of  concern.  The 
existing legislation is overlapping and incomplete. The Counter-Terrorism Unit in the SIPA is 
sufficiently staffed, but its capacity remains limited.  

Overall, Bosnia and Herzegovina remains at an early stage in the fight against terrorism. The 
strategy for 2010-2013 was adopted. Effective implementation needs to be ensured.  

4.3.6.  Protection of personal data 

Progress can be reported on personal data protection. Regulations and instructions on record-
keeping in the law enforcement sector have been harmonised with the Law on personal data 
protection. The Agency for Personal Data Protection is operational. Its Inspection Department 
has carried out inspections and issued recommendations. As the national supervisory authority 
for  hardware  and  software,  the  agency  has  set  up  a  central  register  for  all  data  protection 
systems.  The  director  of  the  agency  acts  independently  of  other  state  authorities.  However, 
complete  independence  remains  to  be  achieved.  Its  independence  is  crucial  for  cooperation 
with  Europol  and  Eurojust.  Most  public  institutions  have  neither  adopted  regulations  to 
enforce the Law on personal data protection nor established a plan for personal data security.  

Overall, preparations for protection of personal data remain at an early stage. In particular, the 
independence of the Agency for Personal Data Protection is not ensured.  

EN 

60 

   EN 

 
Statistical Annex 

STATISTICAL DATA (as of 14 October 2010) 
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) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Agriculture and fisheries 
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) 

Note

Note

Note

2001 

2000 
2005 
2008 
2009 
3 844  3 844p 
3 753e  3 790e 3 813e 3 830e  3 837e  3 843e 
51 209  51 209 51 209 51 209  51 209  51 209  51 209 51 209 51 209  51 209 

2006 
3 843 

2007 
3 844 

2002 

2004 

2003 

2008 

2007 

2003 

2001 

2006 

2005 

2004 

2002 

2000 
2009 
11 689  12 565 13 821 14 505  15 786  17 127  19 252 21 760 24 702  23 994 
9 844  11 126 12 630  12 268 
5 977  6 424  7 067 
8 757 
2 279 
1 581  1 691  1 846 
3 192 
2 561 
2 896 
5 500.0 6 400.0 7 200.0 7 900.0  7 200.0 
: 
28.9 
: 
6.2 
2.0 
: 
: 
7.9 
: 
: 
: 
: 
: 

7 416 
1 935 
: 
: 
3.8 
: 
: 
: 
: 

8 071 
2 103 
: 
: 
6.3 
: 
: 
: 
: 

30.5 
-2.9 
: 
8.0 
: 
: 

27.0 
6.1 
: 
-1.4 
: 
: 

31.5 
5.7 
: 
7.5 
: 
: 

24.4 
3.9 
: 
: 
: 
: 

: 
: 
4.9 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

3 287 

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 
112.0 
24.2 
2.9 
27.8 
66.9 

10.2 
20.5 
5.2 
64.2 
111.8 
26.7 
0.1 
30.4 
68.9 

10.3 
20.2 
5.3 
64.3 
105.0 
22.3 
-0.9 
32.9 
59.2 

9.8 
20.4 
5.9 
63.9 
100.5 
26.1 
1.3 
32.9 
60.8 

8.9 
21.0 
6.5 
63.7 
100.6 
26.8 
1.4 
32.4 
61.1 

8.8 
20.0 
6.2 
65.0 
: 
: 
: 
: 
: 

2009 
2000 
100.0  105.3e 112.4e 118.0e  132.8e  144.7e  162.7e 173.4e 186.2e  188.9e 

2002 

2004 

2005 

2006 

2001 

2003 

2007 

2008 

Inflation rate 
Annual average inflation rate (CPI, % change on previous year) 

Note
1) 

2000 
4.8 

2001 
3.1 

2002 
0.4 

2003 
0.6 

2004 
0.4 

2005 
3.8 

2006 
6.1b 

2007 
1.5 

2008 
7.4 

2009 
-0.4 

EN 

61 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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) 
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 (%) 
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) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Note

2) 

2) 

Note

Note

3) 
4) 

5) 

Note

2002 
2001 
2000 
-833 
-1 253
-429 
-3 308 -3 524
-3 000 
232 
255 
203 
641 
540 
595 
1 727  1 626  1 500 
347 
450 
338 
282 
133 
159 
0 
0 
0 
: 
: 
: 
282 
133 
159 
: 
: 
: 

2000 
: 
37.9 

2001 
: 
35.2 

2002 
: 
31.3 

: 

2001 
: 
: 

2002 
: 
: 

2000 
: 
: 
717 
1 377  1 538 
1 262  2 387  2 593 
: 
1 543  1 707  2 189 
: 
: 
: 
1.956  1.956  1.956 
: 

: 
12.6 
1.4 

: 
: 
: 

: 

: 

1 385  1 270 

: 
525 

2003 
-1 439 
-3 671 
297 
473 
1 462 
298 
338 
0 
: 
338 
: 

2003 
0.7 
27.7 

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

2004 
-1 319 
-3 678 
347 
408 
1 604 
261 
566 
-1 
: 
567 
340 

2004 
1.6 
25.5 

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

2005 
-1 500 
-3 962 
446 
377 
1 639 
251 
493 
0 
: 
493 
410 

2005 
2.4 
25.3 

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

2000 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2002 
: 
: 
: 
: 
: 
: 

2003 

2005 
2004 
2 927.8 3 965.8 5 669.8
1 298.6 1 919.8
908.3 
-2 019.5 -2 667.2 -3 749.9
: 
54.2 
53.0 

: 
53.8 
51.9 

: 
53.4 
58.5 

2006 
-783 
-3 406 
534 
312 
1 775 
237 
608 
-3 
: 
611 
448 

2007 
-1 191 
-4 142 
639 
336 
1 976 
193 
1 499 
-20 
: 
1 520 
531 

2008 
-1 819 
-4 823 
643 
431 
1 930 
186 
627 
-9 
: 
636 
348 

2009 
-840 
-3 406 
549 
385 
1 633 
147 
184 
7 
: 
177 
43 

2006 
2.9 
21.1 

2006 
: 
: 
2 593 
5 129 
: 
4 759 
: 
8.0 
0.5 
1.956 
: 
2 787 

2006 
: 
: 
: 
: 
: 
: 

2007 
1.2 
18.2 

2007 
: 
: 
3 149 
6 244 
: 
6 110 
: 
7.2 
0.4 
1.956 
: 
3 425 

2007 
: 
: 
: 
: 
: 
: 

2008 
-2.2 
17.2 

2008 
: 
: 
3 063 
6 493 
: 
7 442 
: 
7.0 
0.4 
1.956 
: 
3 219 

2008 
: 
: 
: 
: 
: 
: 

2009 
-4.4 
21.8 

2009 
: 
: 
3 011 
6 648 
: 
7 209 
: 
7.9 
0.3 
1.956 
: 
3 176 

2009 
: 
: 
: 
: 
: 
: 

EN 

62 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (%) 
Employment rate (15-64): share of population aged 15-64 that is in employment (%) 

Employment rate male (15-64) (%) 
Employment rate female (15-64) (%) 

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

Agriculture 
Industry 
Construction 
Services 

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 (%) 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%) 

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) 
Early school leavers - Share of population aged 18-24 with at most lower secondary education and not in 
further education or training (%) 

Standard of living 
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 
Spending on human resources (public expenditure on education in % of GDP) 
Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Note

Note

Note
6) 

Note

Note

Note

2000 
2.4 
9.7 
71.3 
76.7 

2000 
: 
: 
: 
: 
: 

: 
: 
: 
: 
39.7 
: 
: 
: 
: 

2001 
1.9 
7.6 
71.3 
76.7 

2001 
: 
: 
: 
: 
: 

: 
: 
: 
: 
40.0 
: 
: 
: 
: 

2002 
1.5 
9.4 
71.3 
76.7 

2002 
: 
: 
: 
: 
: 

: 
: 
: 
: 
41.1 
: 
: 
: 
: 

2003 
0.9 
7.6 
71.3 
76.7 

2003 
: 
: 
: 
: 
: 

18.1 
24.8 
10.6 
46.5 
41.6 
: 
: 
: 
: 

2004 
0.6 
7.2 
71.3 
76.7 

2004 
: 
: 
: 
: 
: 

19.4 
24.2 
10.5 
45.9 
41.8 
: 
: 
: 
: 

2005 
0.1 
6.7 
72.1 
77.5 

2005 
: 
: 
: 
: 
: 

19.6 
21.4 
4.9 
54.1 
43.9 
: 
: 
: 
: 

2006 
0.2 
7.5 
72.1 
77.5 

2006 
51.3 
35.0 
46.1 
24.0 
30.6 

20.6 
30.7 
: 
48.7 
31.1 
28.9 
34.9 
62.3 
26.7 

2007 
-0.3 
6.8 
72.1 
77.5 

2007 
52.2 
36.8 
48.7 
25.0 
31.9 

19.8 
32.6 
: 
47.5 
29.0 
26.7 
32.9 
58.4 
25.0 

2008 
0.0 
6.9 
72.4 
77.7 

2008 
53.5 
40.7 
52.9 
28.7 
34.4 

20.6 
32.5 
: 
47.0 
23.4 
21.4 
26.8 
47.5 
20.2 

2009 
0.0p 
6.5 
72.4e 
77.7e 

2009 
53.2 
40.1 
51.2 
29.3 
34.0 

21.2 
31.4 
: 
47.3 
24.1 
23.1 
25.6 
48.7 
20.0 

2000 
2002 
2001 
372.0  408.0  446.0 
: 

: 

: 

2003 
484.0 
: 

2004 
505.0 
: 

2005 
538.0 
: 

2006 
: 
: 

2007 
: 
: 

2008 
: 
: 

2009 
: 
: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

: 

2000 
: 
49.6 

2000 
: 
: 

2000 
: 
: 
: 

2001 
: 
92.6 

2001 
: 
: 

2001 
: 
: 
: 

2002 
: 
176.2 

2003 
: 
271.8 

2004 
: 
344.2 

2005 
: 
412.5 

2006 
162.6 
489.0 

2007 
171.7 
637.4 

2008 
178.7 
770.8 

2009 
180.5 
831.8 

2002 
19.7 
: 

2002 
: 
: 
: 

2003 
18.2 
: 

2003 
: 
: 
: 

2004 
20.3 
: 

2004 
: 
: 
6.6 

2005 
20.1 
0.0 

2005 
: 
: 
: 

2006 
20.1 
0.0 

2006 
: 
: 
: 

2007 
19.9 
0.0 

2007 
: 
: 
: 

2008 
19.9 
0.0 

2008 
: 
: 
: 

2009 
19.9 
0.0 

2009 
: 
: 
: 

EN 

63 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Environment 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

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

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

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 

Note

Note

Note

2000 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
930 
: 
176 

2001 
: 
: 
: 
51.0 

2001 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2002 
: 
: 
: 
52.0 

2002 
: 
: 
: 
: 
: 
: 
: 

2002 
: 
1 697 
: 
: 
: 
: 

1 139  1 309 

: 
190 

: 
247 

2003 
: 
: 
: 
53.0 

2003 
: 
: 
214 
: 
369 
: 
: 

2003 
: 
1 722 
: 
: 
: 
: 
793 
: 
204 

2004 
: 
: 
: 
53.0 

2004 
: 
: 
211 
: 
478 
: 
: 

2004 
: 
1 722 
453 
596 
965 
583 
1 439 
: 
276 

2005 
: 
: 
: 
43.0 

2005 
: 
: 
230 
: 
627 
: 
: 

2005 
: 
1 712 
460 
654 
976 
629 
1 350 
: 
257 

2006 
: 
: 
: 
54.0 

2006 
: 
: 
: 
: 
681 
: 
: 

2006 
: 
1 722 
515 
712 
1 081 
662 
1 341 
: 
297 

2007 
: 
: 
: 
62.0 

2007 
: 
: 
: 
: 
: 
: 
13.0 

2007 
: 
1 670 
468 
535 
1 104 
724 
1 001 
: 
254 

2008 
: 
: 
: 
60.0 

2008 
: 
: 
: 
: 
: 
: 
14.8 

2008 
: 
1 679 
459 
502 
1 101 
737 
1 375 
: 
282 

2009 
: 
: 
: 
63.0 

2009 
: 
: 
: 
: 
: 
: 
: 

2009 
: 
1 656 
458 
529 
1 125 
734 
1 343 
: 
280 

: = not available 
p = provisional value 
e = estimated value 
1) Until 2005, the growth rate of retail prices is presented; from 2006 onwards growth rate of the consumer price index (CPI) is used. 
2) The balance of payments sign conventions are used. For FDI abroad a minus sign means investment abroad by the reporting economy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, while a minus sign 
indicates that disinvestment exceeded investment. 
3) Short-term lending rates in national currency to private enterprises and cooperatives (weighted average). 
4) Demand deposit rates in national currency to households (weighted average). 
5) As of 31 December; since 2009 gold has been included in reserve assets. 
6) For 1998-2004, net salary; for 2005, including data from Brcko District. 

EN 

64 

EN